Notes to the consolidated annual financial statements

Ina Invest Holding Ltd (the Company) is a Swiss company domiciled at Thurgauerstrasse 101A, Glattpark (Opfikon), Switzerland. The Company’s consolidated financial statements cover the Company and its subsidiaries (referred to collectively as “the Group” or “Ina Invest”). The individual companies are to be considered group companies.

The Group’s business activities comprise developing and building of real estate and construction projects of all kinds, planning and completion of new buildings and conversions of real estate held by Ina Invest, as well as holding, managing, renting and brokering of real estate.

The consolidated financial statements were prepared in accordance with the full Accounting and Reporting Recommendations (Swiss GAAP FER), including Swiss GAAP FER 31 “Complementary recommendations for listed companies” and provides a true and fair view of the Group’s assets, financial situation and earnings. The consolidated financial statements comply with the provisions of Swiss law. The Group discloses the additional information for real estate companies as required by the Swiss stock exchange (SIX Swiss Exchange) (Article 17 of the Directive on Financial Reporting of SIX Swiss Exchange).

The consolidated financial statements have been prepared under the assumption of going concern for the Group’s business. Valuations in the consolidated financial statements are based on historical acquisition or production costs, unless a standard prescribes another valuation basis for an item in the financial statements, or another value was used based on an accounting policy choice. This is the case for the investment properties presented in note 2.2, which were valued at fair value.

The consolidated financial statements are presented in Swiss francs (CHF), the Company’s functional currency. Unless otherwise stated, all financial information is presented in Swiss francs, rounded to the nearest thousand.

The consolidated financial statements are based on the stand-alone financial statements prepared in accordance with consistent principles as at 31 December 2022 by all group companies in which the Company directly or indirectly holds more than 50% of voting rights or which it controls in another way.

In addition to the Company, the subsidiaries included in the scope of consolidation are:

All companies in the scope of consolidation operate in the real estate sector.

Implenia Ltd holds the remaining voting rights and shares in Ina Invest Ltd (42.5%; 31 December 2021: 42.5%). The minority interests in Ina Invest Development Ltd are distributed among various third-party investors, of whom none can exercise any significant influence.

Subsidiaries are included in the consolidated financial statements from the date on which control is assumed and excluded from the date on which control is relinquished. These dates do not necessarily coincide with the contractually agreed acquisition or disposal date respectively. Capital consolidation is performed according to the purchase method. This involves the group companies’ equity being offset against the carrying amount of the parent company’s investment at the time when it is purchased or, if appropriate, at the date of incorporation. Assets and liabilities of the group company are measured at fair value as at this date in accordance with principles that are consistent throughout the Group. The difference between the acquisition cost and the remeasured net assets is reported as goodwill or negative goodwill (“badwill”), which is offset against equity. Transaction costs are recognised as part of the acquisition cost.

Using the full consolidation method, the assets and liabilities of the consolidated companies were recognised in full in the consolidated annual financial statements. Intragroup assets and liabilities are eliminated, as are intragroup income and expenses. Minority interests in group companies are disclosed within equity, however, separately from equity that is attributable to the shareholders of Ina Invest Holding Ltd. Minority interests in profit or loss are disclosed as part of consolidated income statement.

As of 21 January 2022, 100% of the shares in CERES Group Holding Ltd were acquired by the indirectly controlled group company Ina Invest Development AG. The core of the CERES Group Holding Ltd real estate portfolio is the Buss site at Pratteln railway station with the development project “Bredella”. With a surface area of 82,600 m² and a viable floor space of 172,500 m², the site is to be transformed into a lively central district with 70% residential space (more than 1,000 apartments) and 30% commercial space in the next 20 years.

Prior to the acquisition, Ina Invest Development Ltd performed a capital increase, in which external investors were involved in addition to Ina Invest Ltd. Part of the purchase price was settled with shares of the Company. For this purpose, an authorized capital increase was performed. For further information please refer to note 3.5.

The acquired net assets of CERES Group Holding Ltd and its subsidiaries Buss Immobilien und Services Ltd and Bredella Ltd (hereinafter referred to as “CERES Group”), measured at fair value, comprise of:

The advance payment made was recognised in other non-current assets as of 31 December 2021. The deferred purchase price payment is reported in non-current financial liabilities. The goodwill of CHF 337 thousand resulting from the acquisition was offset pro rata against the equity of the Company’s shareholders and the equity share of the minorities at the date of acquisition.

In order to prepare the consolidated financial statements in accordance with Swiss GAAP FER, management has to make estimates, assessments and assumptions that impact the application of the accounting and valuation methods as well as the presentation and reported amounts of assets, liabilities, income and expenses. The estimates and assumptions are based on experience and various other factors that are considered relevant in the prevailing circumstances. The actual results may deviate from these estimates.

Estimates and assumptions are reviewed regularly. Changes in estimates may be necessary if the circumstances on which the estimated values are based have changed or if there is new information or additional insights. Such changes are recognised in the reporting period in which the estimate is adjusted.

Management estimates and assumptions applied in Swiss GAAP FER that may have a significant impact on the consolidated financial statements or involve a high risk of adjustment in the following year are explained in the subsequent notes:

Promotional properties include projects involving condominium apartments intended for sale at a later date.

In particular, the change in the carrying amount of the projects under development was affected by the transfer of the project Lokstadt Rocket in Winterthur in the amount of CHF 34,917 thousand to the balance sheet item investment properties. For further information please refer to note 2.2. The decrease in the carrying amount of the projects under construction is mainly attributable to the sale of 8 condominiums apartments of the project Ernst-Jung-Gasse 18 (Lokstadt Tender) in Winterthur.

The plots of land on which the projects are being built are completely owned by Ina Invest at the beginning of a project. Ina Invest develops the plots of land until it receives a building permit for them and then makes them ready to be built on. Construction begins as soon as most of the condominium apartments have been reserved. The projects, Ernst-Jung-Gasse 18 (Lokstadt Tender) in Winterthur and Auf der Höhe 12-18 (Am Schwinbach) in Arlesheim have Implenia Group acting as general contractor. In terms of risks and rewards, a distinction is made between sold and unsold projects under construction as well as completed projects being sold:

 

• Projects under construction: During the construction phase, Ina Invest, as the owner of the plots of land, bears the material risks and rewards from the development and implementation until the units are sold to an end customer. Accordingly, acquisition cost for the plot of land and part of development costs attributable to the unsold units are recognised in promotional properties. When units are sold, Ina Invest transfers the relevant portion of the fully developed land to the buyer, who concludes or has already concluded an agreement with a general contractor to build the unit. Ina Invest no longer bears any risks or rewards for these units after their sale, which is why the acquisition cost for the plot of land and development cost for this unit is de-recognised at the time of the transaction and no further development costs are recognised. Investment commitments towards the general contractor for the realisation of yet unsold units are disclosed in note 3.3.  
• Projects in sale: For unsold units, the cost of work performed by the general contractor is transferred to Ina Invest after construction is completed. Ina Invest is obliged to accept the work provided during the construction phase. Ina Invest sells units not yet sold by the end of the construction as turnkey units to the end customers. Ina Invest bears the material risks and rewards concerning the condominium apartments between the end of construction until the sale, therefore acting as seller of the portion of the plot of land and the respective development cost share.

The following table shows the change in the number of the projects’ condominium apartments included in the promotional properties.

In 2021, the additions of projects under development result from the change in use of the project Avenue des Grandes-Communes (Les Tattes) at Onex.

Results from the sale of promotional properties

Income from the sale of promotional properties is attributable to 8 condominium units in the project Lokstadt Tender at Ernst-Jung-Gasse 18 in Winterthur, which were sold during the reporting period (2021: 27 condominium units).

Accounting policies
In promotional properties, each unit is measured at the lower of acquisition cost and fair value less cost to sell. Any impairment to the lower fair value less cost to sell is recognised in the relevant category of the item promotional properties. Any value adjustments to the lower fair value less cost to sell as well as value recoveries on promotional properties are recognised in the result for the period.

The Projects under development category includes plots of land already owned by Ina Invest or down payments on notarised land purchases as well as any directly attributable accrued development costs if construction has not yet been started.

The capitalised acquisition costs for projects are reclassified to the Projects under construction category when construction starts. This category contains plots of land or parts thereof that have not yet been sold and that contain properties whose construction has not yet been completed.

The capitalised acquisition costs of condominium apartments not yet sold include the plot of land on which they stand, the directly attributable development costs and the accrued costs assumed under the contract for the construction work and services performed up to that point.

Unsold condominium apartments whose construction has been completed are reported under Projects in sale. Ina Invest is obliged to take over the work that the general contractor has performed under its contract for work and services. The capitalised costs comprise the plot of land, the directly attributable development costs and the costs assumed under the contract for work and services. Ina Invest sells these as turnkey units to end customers, assuming the price and sales risk for unsold units but also receiving the economic benefit from their sale.

Income from the sale of promotional properties usually is the selling price. Units sold from projects under construction generally correspond to the price attributable to the portion of the plot of land, while income from the sale of turnkey units is recognised as the selling price for the unit’s land and development cost. Proceeds resulting from the sale of plots of land or subplots as well as completed condominium apartments generally are recognised once the risks and rewards have been transferred to the buyer. This date is defined in the sales agreement (generally this is the date of transfer of ownership).

Transfers from the balance sheet item promotional properties to investment properties are recognised at acquisition cost at the date of transfer. The date of transfer is the date on which the Investment Committee formally decided to change the long-term strategy of the property.   

Investment properties comprise plots of land and properties that are expected to be held and managed over a longer period of time. This item includes properties under development, properties under construction and portfolio properties held for rent.

The additions through changes in the consolidation scope result from the acquisition of CERES Group. For further information please refer to note 1.3.

The contractual agreements with Implenia Group as a partner for the development of investment properties include a performance-based development fee for the services rendered (see note 4.3). This contractual arrangement applies to all investment properties in the portfolio as at the balance sheet date. The performance-based development fee corresponds to 20% of the project result between the market values and the investment acquisition costs before settlement of the performance-based development fee. For Ina Invest, this contractual mechanism can lead to an increase or also a reduction of the development costs recognised on the basis of other contractual elements. Generally, the performance-based development fee is settled after completion of the development project. Thereafter, the development partner Implenia Group has no further share of a potential increase or reduction in the value of the investment property. The performance-based development fee recognised as at balance sheet date resulted in non-current receivables from and non-current liabilities to the developer (see note 2.6). Without the contractually agreed performance-based development fee, the gains from change in fair value would amount to CHF 30,703 thousand (31 December 2021: CHF 24,885 thousand) and the losses from change in fair value to CHF 13,726 thousand (31 December 2021: CHF 4,452 thousand). The net result from change in fair value would be CHF 4,140 thousand higher than presented in the income statement as at the balance sheet date (31 December 2021: CHF 4,145 thousand higher).

In the reporting period, investments in investment properties resulted in a cash outflow of CHF 108,661 thousand (31 December 2021: CHF 36,560 thousand). The cash outflows from ordinary additions amounted to CHF 97,885 thousand (31 December 2021: CHF 36,560 thousand). The remainder of CHF 10,776 thousand are cash outflows from payments of the performance-based development fee, payments of capitalized lease incentives as well as payments of liabilities for development services assumed as part of the CERES acquisition.

The category properties under construction includes the Lokstadt Bestandeshallen property on Zürcherstrasse in Winterthur, which has a negative market value of CHF 12,370 thousand as at 31 December 2022 due to cross­site uses (e.g. kindergarten) (31 December 2021: negative market value of CHF 21,440 thousand). These cross-site use increases the attractiveness of the surrounding properties. Therefore, as part of the spin-off transaction in April 2020, Implenia Group has contractually agreed to assume an obligation of 40% of the cost of the work supplied by the general contractor up to a maximum of nominal CHF 27,000 thousand plus VAT. This assumption of costs is subject to conditions regarding timing and specific use and requires a contract for work and services. The current carrying amount of the investment property – when considering Implenia Group’s future cost contributions – amounts to CHF 6,791 thousand as of 31 December 2022 (31 December 2021: CHF 3,756 thousand).

Valuation methods

Property valuations are carried out by Wüest Partner Ltd, Zurich, an external, independent and qualified valuation expert. The properties are valued in accordance with the discounted cash flow method (DCF method), whereby the fair value of a property is determined by the sum of the entire estimated future net income discounted to the present value. The net income (EBITDA) for each property is discounted individually taking into account property-specific risks and rewards, as well as market conditions and risks. For properties under development or under construction, the value of the project is determined in three steps:

• Valuation of the property at the time of its completion, taking into account the current occupancy rate, market and cost estimates as at the cut-off date;
• Determination of the market value as at balance sheet date, in light of the forecasted future investments;
• Estimation of the risk, taking into account the separate cash flow of a cost item.

The discount rates, market rents and vacancy rates have been identified as material non-observable input factors. The values used are summarised below.

Non-observable input factors used as at 31 December 2022

The average discount rate of the Ina Portfolio was 2.73% while the average discount rate of the CERES Portfolio was 2.72% (31 December 2021: 2.79% for the Ina Portfolio). As at acquisition date (21 January 2022) the average discount rate of the CERES Portfolio was 2.73%.

Compared to the previous period, there was a significant change in the bandwidth of expected achievable market rents for portfolio properties. This change is mainly caused by the acquisition of the CERES Portfolio which includes old buildings and portfolio properties in areas with lower market rents than those of the Ina Portfolio.

Non-observable input factors used as at 31 December 2021

Beyond that, uncertainties regarding future investments remain. Details on the valuation methods and assumptions are stated in the report by the valuation expert.

Additions/ transfers/ sales in the reporting period

The following additions from acquisitions, changes in use as well as transfers between categories took place during the reporting period:

Encumbered investment properties

As at 31 December 2022, 11 collaterals for mortgage notes on investment property used for project financing were issued (31 December 2021: 5 collaterals). The recognised fair value of these properties amounts to CHF 732,647 thousand as at 31 December 2022 (31 December 2021: CHF 196,190 thousand). For further information refer to note 3.1.

Significant Management assumptions and estimates

The investment properties have been valued at fair value, which correspond to the expected income, respectively cash flow discounted by applying a risk-adjusted discount rate. The valuations are based on different significant estimates and assumptions, such as the achievable market rents, the expected vacancy rates and the discount rate. Projects under development also require estimates and assumptions regarding future investments, permits and project timelines. Changes in these estimates and assumptions may cause material changes in the values recognised in the balance sheet.

Accounting policies

The initial recognition is at acquisition cost including directly attributable costs. Acquisition costs include an estimate of the recognised part of the performance-based development fee to which the developer is contractually entitled or for which he has a contractual refund obligation. The property valuations prepared by the independent valuation expert form the basis of the estimate. Borrowing costs that are directly attributable to the investment properties under construction are recognised in financial expenses. Investments for replacements and expansions are capitalised if they are likely to generate future economic benefits for Ina Invest. This is generally the case if the market value or the value in use increases substantially or if the useful life is significantly extended.

Investment properties are subsequently measured at fair value, provided the value can be determined reliably. As a rule, this will be the case as soon as a specific project exists. If the fair value of a property cannot be determined reliably, it is recognised in the balance sheet at acquisition cost less any impairment. Changes in the fair value are recognised through profit or loss. The net result from changes in fair value of the investment properties is attributable to changes in their market values.

Properties under development comprise undeveloped plots of land and properties where comprehensive work is planned. Construction, renovation or repurposing plans are prepared for these properties. The Properties under construction category consists of properties where a building permit has been granted and construction has already begun. Properties are reclassified to this category once construction starts. When a building is (partially) opened, it is transferred to the “Portfolio properties” category. Portfolio properties consists of properties which are held rented over a longer period of time or which development is planned for the long-term.   

The additions to intangible assets in the amount of CHF 240 thousand (31 December 2021: CHF 275 thousand) led to a cash outflow of CHF 240 thousand as at 31 December 2022 (31 December 2021: CHF 155 thousand).

As at 31 December 2022 and 31 December 2021, intangible assets included the purchase rights for plots of land located at Rue du Château in Préverenges (plot size: 2,763 m2). The execution of the purchase right shall take place when the neighbourhood plan becomes legally effective, but no later than 28 February 2025.

Purchase rights disclosed as intangible assets correspond to acquisition costs for purchase rights or purchase commitments. The nominal amount of non-recognisable commitments arising from purchase commitments amounts to a total of CHF 5,007 thousand (31 December 2021: CHF 5,007 thousand).

 

Accounting policies

Intangible assets are identifiable, non-monetary assets without physical existence. Intangible assets are recognised in the balance sheet at acquisition or production costs less accumulated amortisation and impairment.

The purchase rights reported in the reporting periods presented were transferred to Ina Invest on 1 April 2020 in the course of the asset transfer. These purchase rights entitle Ina Invest to acquire property items. They were recognised at fair value at the time of the asset transfer, which represented the acquisition costs at that time. They are not amortised subsequently as the purchase rights are not used during the useful life and as the underlying land parcels are not subject to wear and tear.

Intangible assets are subject to an impairment test at each sheet date. If there is an indication that intangible assets could be impaired, the recoverable amount is determined. The recoverable amount is the higher of the net selling price and the value in use. Should the carrying value of the asset exceed the recoverable amount, an impairment is recorded in the result for the period. Reversal of past impairment losses are recognised in the result for the period.

Accounting policies
Other current receivables and liabilities are recognised and measured at nominal value.

The prepaid expenses from costs directly attributable to financial liabilities include a portion in the amount of CHF 573 thousand (31 December 2021: CHF 352 thousand) which will be realised in more than 12 months from balance sheet date. These prepaid expenses are considered as current items since they are realisable within the operating life cycle of Ina Invest.

Accounting policies
Accrued income and prepaid expenses as well as accrued expenses and deferred income are recognised and measured at nominal value.

Receivables and payables from the performance-based development fee have resulted from the contractually agreed variable development fee of Implenia Group depending on project results (positive or negative). For further information, please refer to notes 2.2 and 4.3.

 

Accounting policies

Receivables and payables from the performance-based development fee are measured at the estimated fair value. Other non-current receivables and liabilities are recognised and measured at nominal value.

The two real estate portfolios, for which the Board of Directors and the Executive Board are provided separate reports for the purposes of corporate management, are regarded as segments of the Group.

Ina Portfolio
This segment comprises of the real estate portfolio of the group company Ina Invest Ltd, including promotional and investment properties in the areas of Zürich/Winterthur, central, north-western, and western Switzerland.

CERES Portfolio
This segment comprises of the real estate portfolio and service business of CERES Group, which was acquired by the group company Ina Invest Development Ltd in the current reporting period. The real estate portfolio essentially consists of the Buss site at Pratteln train station with the “Bredella” development project. For further information on the acquisition of CERES Group refer to note 1.3.

Group functions
The segment includes income and expenses that cannot be allocated to any segment. This segment essentially relates to the activities of the group management.

Until the acquisition of CERES Group, the Group’s real estate portfolio was managed as a single segment by the Board of Directors and the Executive Board. In accordance with Swiss GAAP FER 31, the Group thus had a single segment until the acquisition of CERES Group on 21 January 2022. For this reason, no segment information is disclosed for comparative period.

Other direct operating income

In the reporting period, other direct operating income from third parties mainly consists of services provided by the BUSS industrial park. The entire portion of other direct operating income in the comparative period resulted from the release of a provision in connection with the investment property Lokstadt Bestandeshallen in Winterthur.

During the reporting period, Ina Invest generated rental income from investment properties amounting to CHF 11,304 thousand (31 December 2021: CHF 2,772 thousand). This rental income is mainly attributable to the three investment properties Bredella Mid and East in Pratteln, Chemin des Olliquettes 10 in Petit-Lancy and Rue du Grand-Pré 54 in Geneva (31 December 2021: Chemin des Olliquettes 10 in Petit-Lancy, Rue du Valais 7 in Geneva, Schaffhauserstrasse 220-224 in Zurich).

 

Maturity of long-term rental agreements

This maturity schedule shows the terms of commercial rental agreements (e.g., for hotels, commercial and industrial uses). Rental income from residential properties is not included as these agreements may be terminated on a short-term notice.

 

Most important tenants

The rental income of the following five most important tenants accounts for 37.4% of the entire target rental income during the reporting period (31 December 2021: 75.6%).

 

Rental losses due to vacancies

Rental losses due to vacancies in portfolio properties amounted to CHF 1,710 thousand during the reporting period (31 December 2021: CHF 149 thousand), which corresponds to a vacancy rate (comparing vacancies to target rental income) of 13.4% (31 December 2021: 5.1%). The increase in rental losses due to vacancies compared to the comparative period was mainly due to the acquisition of CERES portfolio. Vacancies are partly due to the current development status of certain projects where vacancies were deliberately accepted (e.g. planned termination of leases in portfolio properties).

Accounting policies

Rental income from the letting of properties represents net rental income, i.e., target rental income less rental losses and vacancy losses.

Rental agreements are operating leases. Rental income is recognised in the income statement on an accrual basis over the lease term. If tenants are granted significant rent incentives (e.g., rent-free periods), the equivalent value of the incentive is recognised on a straight-line basis over the entire term of the lease as an adjustment to income from rentals.

 

As at 31 December 2022 Ina Invest has nine framework credit agreements (31 December 2021: six) at the following terms and conditions:

As part of the acquisition of CERES Group, interest rate swaps with negative replacement value in the amount of CHF 12,562 thousand were recognised. The income from unwinding of interest rate swaps in the reporting period in the amount of CHF 8,505 thousand resulted solely from the positive effect of market interest rate movements on the replacement values recognised as liabilities. All swaps were terminated in the reporting period, resulting in a cash outflow of CHF 4,057 thousand.

As at 31 December 2022, the Group has off-balance sheet commitments arising from agreements concluded with Implenia Group in relation to future developments and construction investments amounting to CHF 9,917 thousand (31 December 2021: CHF 36,337 thousand).

Furthermore, Ina Invest has non-recognisable commitments for leases amounting to CHF 6,226 thousand as at 31 December 2022 (31 December 2021: CHF 6,358 thousand) arising from building leases with a residual term to maturity of around 44 years (31 December 2021: 45 years). CHF 5,542 thousand (31 December 2021: 5,684 thousand) of which are due in more than five years. Additional building lease contracts exist for which the future cash outflows cannot be determined because they are dependent on the development plans and building permits for the respective building areas.

Accounting policies

In the case of an agreement to use the plots for which building leases interest is paid, the entity assesses whether the agreements are classified as operating lease or finance lease. Payments made for an operating lease are recognised in the income statement for the duration of the lease or the leasehold.

Each financial year, Implenia Group may sell up to 5% of its investment in Ina Invest Ltd to Ina Invest Holding Ltd (put option). In doing so, the Company may decide whether it prefers cash or Ina Invest Holding shares in consideration. If Implenia Group exercises the put option, the sales price will equal the implicit market value of Ina Invest Ltd. The implicit market value will be determined based on the share price of Ina Invest Holding Ltd. The value of the associated contingent liability is estimated at CHF 141,628 thousand as at 31 December 2022 (31 December 2021: CHF 122,416 thousand).

Accounting policies

Payment commitments to minority shareholders arising from their put options for the corresponding minority interests are equivalent to contingent liabilities and are therefore not recognised in the balance sheet.

Share capital

The share capital of the parent Company, Ina Invest Holding Ltd, amounts to CHF 292,596 as at 31 December 2022 (31 December 2021: CHF 265,997) and consists of 9,753,216 registered shares with a nominal value of CHF 0.03 each (31 December 2021: 8,866,560 registered shares with a nominal value of CHF 0.03 each). A capital increase from authorised capital was carried out on 19 January 2022, in course of which 886,656 shares with a nominal value of CHF 0.03 each were issued.

Shareholders are entitled to receive the fixed dividends as well as one vote per share at the Company’s Annual General Meeting.

Conditional share capital

In accordance with the Company’s Articles of Association, the conditional share capital can be increased by a maximum of CHF 13,299.84 by issuing up to 443,328 registered shares with a nominal value of CHF 0.03 each, which are to be fully paid up. Such an increase is to be carried out by exercising option rights granted to employees or members of the Board of Directors of the Company or group companies.

Capital reserves and minority interests in equity
The capital reserves correspond to the difference between, on the one hand, the monetary contributions and contributions in kind made by shareholders as valued in accordance with the provisions of Swiss GAAP FER and, on the other hand, the nominal values of the shares received associated with the respective stages of contribution. Moreover, in accordance Swiss GAAP FER, share-based compensations (see note 4.2), transaction costs from equity transactions as well as impacts from transactions with treasury shares are recognised in capital reserves. Due to valuation differences the capital reserves reported in the consolidated balance sheet are not identical to the capital reserves in accordance with the Company’s separate statutory financial statements.
The effect of the capital increase of 19 January 2022 on the Company’s equity is presented below:

For information on the acquisition of CERES Group Holding Ltd, please refer to note 1.3.
On 21 January 2022, a capital increase was executed by Ina Invest Development Ltd, in which external investors participated as minority shareholders. As part of the capital increase, Ina Invest Ltd’s voting and capital share in Ina Invest Development Ltd was reduced from 100% to 69.1%. The effect of the transaction on the Group’s equity is presented below:

 

The capital contributions did not fully match the new shareholding ratios, which resulted in a re-allocation.

Treasury shares

The purchase and sale prices of treasury shares always corresponded to market prices. In the reporting period, the average purchase price per share was CHF 19.45 (31 December 2021: CHF 18.66). The average transaction price on the sale of treasury shares was CHF 18.38 per share. The transfer of vested shares was recognised at historical costs, which amounted to CHF 18.62 per share (31 December 2021: CHF 17.25).

Effects of the theoretical capitalization of goodwill
Goodwill from the acquisition of CERES Group amounting to CHF 377 thousand (refer to note 1.3) was offset with retained earnings at acquisition date and proportionally allocated to the shareholders of the Company and minority shareholders. Goodwill theoretically capitalised at the acquisition date would have been charged to the income statement of the period immediately after the acquisition through a one-off impairment and would therefore be fully written-off as at 31 December 2022. The theoretically capitalised goodwill would not be recoverable, as the material cash flows of the cash-generating unit were already fully taken into account in the market valuation of the acquired portfolio and thus accounted for. The equity as at 31 December 2022 would therefore be identical to the amount reported on this balance sheet date in case of a theoretical goodwill capitalisation, while the profit for the reporting period would be CHF 377 thousand lower.

Non-distributable, statutory or legal reserves
As at 31 December 2022 reserves of Ina Invest Group comprise of a non-distributable amount (legal reserves) of CHF 3,000 thousand (31 December 2021: CHF 154 thousand).

Accounting policies
Directly attributable transaction costs from equity transactions such as capital increases are recognised in equity as a reduction in capital reserves after deducting the associated income tax.
Treasury shares are recognised at acquisition cost at the date of acquisition. The allocation as well as the resale are each valued at cost using the FIFO method. Gain or loss from resale is directly attributed to the capital reserves.

 

 

 

NAV is calculated as follows:

Earnings per share are calculated as follows:

In the current reporting period, the Company’s share capital has been increased. For information on the capital increase, please refer to note 3.5.

Income tax expenses

Income tax expenses are composed of the following:

Based on the applicable tax rate of Ina Invest Holding Ltd the reasons for the deviation from the effective tax burden are as follows:

A major part of the effect taxes at other rates results from gains from change in fair value of investment properties which are mostly subject to property gains tax.

The average applicable tax rate based on the ordinary result is 18.3% (31 December 2021: 18.4%). The reduction results from changes in the scope of consolidation.

 

Deferred tax liabilities and deferred tax assets

If a revaluation in the consolidated balance sheet in comparison to the tax values involved recoverable write-offs, the taxes were segregated for each property after deducting any property gains tax and considered separately. For this, income tax rates ranged between 6.5% and 20% (31 December 2021: 11% to 20%).

Two different taxation systems are used if revaluations exceed the recoverable write-offs. In cantons that do not foresee any special taxation, the taxes are also calculated with the tax rates mentioned above. Other cantons levy separate property gains tax ranging from 20% to 40% depending on the duration of ownership plus direct federal taxes of 7.83% (31 December 2021: 20% to 40% plus direct federal taxes of 7.83%).

Ina Invest generally expects the duration of ownership to be at least 20 years, which is why no speculation surcharges have been considered. In the case of promotional property, the actual holding period up to the date of sale is considered.

During the reporting period, no deferred tax assets were reversed as tax losses carried forward from the previous period were used (31 December 2021: CHF 1,133 thousand). For tax losses carried forward amounting to CHF 3,634 thousand (31 December 2021: CHF 0), deferred taxes assets were recognised. For the remaining tax losses carried forward amounting to CHF 3,274 thousand (31 December 2021: CHF 7,177 thousand) no deferred tax assets were recognised as it is not considered likely that they can be charged against future taxable profits. Existing tax losses carried forward in the amount of CHF 6,009 thousand will expire within 7 years and CHF 889 thousand will expire within 4 to 6 years (31 December 2021: CHF 7,117 thousand within 6 years).

 

Significant Management assumptions and estimates

In certain cantons, the taxation of profits from the sale of a property is subject to a special property gains tax. The level of the relevant tax rate depends on the property’s holding period and may vary significantly. Should the actual holding period for the properties differ from the expected holding period, this will result in a tax burden that diverges from the accrued deferred tax liabilities once the sale has been completed.

Accounting policies

Income taxes include all current and deferred income taxes. Current year income taxes are determined based on the taxable results. Deferred income taxes are calculated based on the temporary differences between Swiss GAAP FER balance sheet items and the values indicated in the tax balance sheet, i.e., the view depends on the balance sheet. Deferred taxes are calculated using the expected tax rates applicable and the property gains tax on properties sold.

Deferred tax credits for temporary differences which may be deducted, and tax losses carried forward are only recognised to the extent that it is probable that future taxable profit will make such a claim possible. Deferred tax assets are reviewed on every balance sheet date and reduced to the point where it is no longer probable that the relevant tax benefit can be realised.

Current year and deferred income tax liabilities and assets are netted if they are levied by the same tax authorities and pertain to the same taxable entity.

 

 

Personnel expenses and pension schemes

 

For Group's employees, there are pension plans with Implenia Vorsorge and Helvetia Sammelstiftung für Personalvorsorge, which are legally independent of Ina Invest. The pension plans provide benefits in the event of retirement, death and disability. They are financed through contributions from the employer and the employee. These contributions are calculated as a percentage of the insured salary.

• The most current available funded status of the pension fund, Implenia Vorsorge, amounted to 135.1% as at 31 December 2021 (31 December 2020: 121.9%). As at this cut-off date, the pension plan was overfunded. As at the balance sheet date, Ina Invest has not recognised an economic benefit or an economic obligation (31 December 2021: No economic benefit and no economic obligation).
• Helvetia Sammelstiftung für Personalvorsorge has fully reinsured the risks arising from the regulatory benefits with Helvetia Lebensversicherungsgesellschaft Ltd. Therefore, in principle, neither an economic benefit nor an economic obligation can arise from this pension plan.

The pension expenses shown in the table above concerning the reporting as well as the comparative period fully comprise contributions made by the employer that were accrued in the respective period. In 2022, pension expenses amounting to CHF 136 thousand were recognised for Implenia Vorsorge and CHF 91 thousand for Helvetia Sammelstiftung für Personalvorsorge (2021: CHF 85 thousand for Implenia Vorsorge).

 

Share-based payments

The members of the Company’s Board of Directors receive an annual lump-sum compensation for their services, depending on their function. The Board of Directors’ remuneration is paid to two-thirds in cash and to one-third in restricted shares of Ina Invest Holding Ltd. The shares allocated to Board members remain restricted for three years after they have been allocated. However, they are endowed with voting rights and the right to receive dividends. In order to calculate the number of shares to be allocated to each Board member, the Company takes the average Ina Invest Holding Ltd. share price in the month of December of the relevant year in office. The allocation of a total of 9,500 shares took place on 3 January 2023 (prior year: allocation of a total of 9,815 shares on 3 January 2022).

The remuneration of Management (CEO and CFO) consists of a base salary in cash and a performance-related variable component from the Short-Term Incentive Plan (STIP). 50% of the STIP payment is paid in cash and 50% in Restricted Share Units (RSU). These are usually allocated in February of the calendar year after the reporting period. For each RSU the holder is granted one registered share in Ina Invest Holding Ltd on the third anniversary of the granting. A CEO/CFO leaving the Company between the grant date and the third anniversary is entitled to receive a pro rata number of RSU. In order to calculate the number of allocated RSU as at the balance sheet date, the prevailing average Ina Invest Holding Ltd share price is taken for the month of December prior to the balance sheet date. The assumed allocation of 6,185 RSU for the CEO and 3,956 RSU for the CFO (31 December 2021: CEO: 6,903 RSU) is an estimate of the remuneration for the purpose of the accounting based on the relevant average share price as at 31 December 2022.

The lump-sum payment of the Board of Directors in shares and the STIP portion for the CEO and the CFO which is paid in RSUs are equity-settled share-based payments. Expenses related to the share-based payments are recognised over the vesting period. In the case of a Board member, this is one year of service. Expenses related to STIP of the CEO and the CFO are recognised over a period beginning with the start of the business year when the services were rendered and ending on the third anniversary after the RSUs have been granted.

 

Accounting policies

Personnel expenses are recognised in the period, in which the services were rendered.

Whether a pension scheme has an over- or underfunding is determined from its annual financial statements prepared in accordance with Swiss GAAP FER 26. An economic obligation is recognised as a liability if the conditions of provision accounting are fulfilled. An economic benefit is capitalised if Ina Invest can use it for future pension plan contributions. Personnel expenses comprise the employer contributions accrued for the period as well as any effects due to changes in any economic benefits or economic obligations.

Share-based payments paid with equity instruments are valued at their fair value prevailing on the day of the grant and recognised as personnel expenses and in equity over the vesting period. The grant date fair value is determined using valuation models based on the stock exchange prices of the Company’s registered shares at the grant date.

 

Besides the Company’s Board of Directors and Management, Implenia Ltd and organisations controlled by it (jointly known as “Implenia Group”) are deemed to be related parties.

Ina Invest maintains a strategic partnership with Implenia Group and has concluded several long-term agreements with Implenia Group ending on 31 December 2030. These agreements refer to the investment of the Ina Invest Group, financing, the development portfolio as well as the development and construction projects of Ina Invest.

 

List of the most important agreements with related parties

 

As is regulated by the master agreement mentioned above, Implenia Group generally has the right to “first call” the general contractor service contracts with the respective group company at defined target costs. Target costs are determined by an independent third-party expert, taking into consideration the targeted yield defined by the group company. By signing a general contractor agreement, Implenia Group grants the group company the right to total transparency of its construction cost accounts. Should Implenia Group waive its right to conclude a general contractor agreement at the price stipulated or if the group company’s Board of Directors can credibly demonstrate legitimate corporate interest that another company should do it, the construction agreement is tendered.

Transactions with related parties

At the extraordinary General Assembly of Ina Invest Ltd on 12 December 2022, the distribution of an extraordinary dividend from capital reserves amounting to CHF 20,200 thousand was resolved. The due date of the extraordinary dividend was set at 3 January 2023. The interest of minority shareholder Implenia Ltd. amounting to CHF 8,585 thousand was recognised as current financial liability towards related parties as at 31 December 2022 refer to note 3.1. For further information on events after the balance sheet date in connection with the dividend claim of Implenia Ltd., please refer to note 4.5.

The following list shows the amounts included in balance sheet held towards related parties. The balances resulted from services under the portfolio management service agreement, the master agreement for development cooperation and realisation and project specific agreements.

 

 

Promotional properties, investment properties and intangible assets arising from the development cooperation were capitalised. The amounts disclosed below correspond with the amounts capitalised in the reporting periods presented. The amounts disclosed for promotional properties in the following table were reduced by the de-recognised acquisition costs that arose in connection with sales of promotional properties. Transfers between balance sheet items represent the entire capitalised amount of the balance sheet item in which the property is disclosed as at the balance sheet date.

 

The following list shows the expenses included in the income statement resulting from transactions with related parties. They resulted from services under the portfolio management service agreement.

Accounting policies

Related parties are deemed to be those who could have a significant influence on financial and/or operating decisions of Ina Invest. This is true for board members, members of management, significant shareholders with voting rights above 20% as well as pension plan schemes. Transactions executed at conditions that are not at arms’ length are disclosed separately in the consolidated financial statements. This could include transactions without a price, such as making available know-how or transferring results of research and development.

Cash and cash equivalents
Cash and cash equivalents include bank balances with a residual term of a maximum of 90 days. These are measured and recognised at nominal value.

Trade account receivables and other non-current assets
Trade accounts receivables and other non-current assets are recognised in the balance sheet at nominal value less impairments. Material receivables are valued individually. An impairment is made for the remaining receivables based on historic data.

Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories includes all direct and indirect costs of bringing the inventories to their present location and condition (full cost).

Tangible fixed assets
Tangible fixed assets are recognised at acquisition or production cost. Subsequently, tangible assets held for use are measured at cost less accumulated depreciation and impairment losses. Depreciation is calculated using the straight-line method over the useful life of the asset.

Trade accounts payable and advance payments for promotional properties
Trade accounts payable and advance payments for promotional properties are recognised and measured at nominal value.

 

The Board of Directors approved the consolidated financial statements on 27 February 2023, subject to the approval of the general assembly on 29 March 2023.

Loan granted by Implenia Ltd
The minority shareholder Implenia Ltd, which holds a 42.5% stake in Ina Invest Ltd, granted a long-term loan amounting to CHF 14,418 thousand to Ina Invest Ltd on 3 January 2023. Part of the loan amount was offset against the financial liability from the extraordinary dividend distribution of CHF 8,585 thousand (refer to note 4.3). The remaining amount of CHF 5,833 thousand was paid by Implenia Ltd on 3 January 2023. The loan bears interest of 0.25% p.a. and matures on 31 December 2025 at the latest. The loan is subject to a subordination agreement.

Ina Invest is not aware of any other events after the balance sheet date that have a material impact on the consolidated financial statements.