ANNUAL REPORT CPH City & Port Development Nordre Toldbod 7, DK Copenhagen Central Business Register (CBR) no.

Transcription

1 ANNUAL REPORT 2015 CPH City & Port Development Nordre Toldbod 7, DK Copenhagen Central Business Register (CBR) no The Annual Report was presented and approved at the company s ordinary partnership meeting on 19th of April 2016 Chairman Britta Køster

2 Bilag-16-R01.1 Dagsordenspunkt 5.a 30. marts 2016 CPH City & Port Development CVR no Annual Report

3 Content Management Report Page 1. THE YEAR IN BRIEF CORPORATE MATTERS LAND DEVELOPMENT... 6 Ørestad... 7 Ørestad Syd... 7 Arena quarter... 8 Ørestad City... 8 Amager Fælled quarter... 8 Ørestad Nord... 8 Copenhagen Inner Harbour - Christiansholm... 9 Sydhavnen... 9 Nordhavn Århusgade quarter Sundmolen The next phase of urban development of Nordhavn LEASING PARKING PORT OPERATIONS CORPORATE SOCIAL RESPONSIBILITY (CSR) ORGANISATION AND EMPLOYEES CORPORATE GOVERNANCE The composition of the company's management bodies Control and risk management Risks associated with financial reporting RISK FACTORS Risk conditions for business areas Financial risks Other risks FINANCIAL REVIEW Results Balance sheet Outlook for 2016 and future years Events after the end of the financial year ACCOUNTING POLICIES General information on calculation and measurement Balance sheet MANAGEMENT REPORT THE INDEPENDENT AUDITOR S STATEMENT ENDORSEMENT OF THE ANNUAL ACCOUNTS MANAGEMENT'S RESPONSIBILITY FOR THE ANNUAL ACCOUNTS AUDITOR'S RESPONSIBILITY CONCLUSION STATEMENT CONCERNING THE MANAGEMENT REPORT

4 Management report 1. The year in brief At the beginning of the year, the agreement in principle from the spring of 2014 between CPH City & Port Development s owners, the Danish State and the City of Copenhagen, became law. The adoption of Act no. 156, "Act amending the Act on Cityring and the Act on the Metro Company and CPH City & Port Development" of 18 February 2015 has implications for the company's ownership, finances and the ongoing development of Nordhavn and Sydhavnen. The amendment means that the ownership has changed so that the City of Copenhagen today owns 95 per cent of the company and the Danish State 5 per cent. The agreement in principle means that the legal basis is now in place for the urban development of Nordhavn to continue with up to 2 million square metres of building, in addition to the metro at Nordhavn being extended to include more stations and the Nordhavn tunnel being given the go-ahead. The adoption of the agreement in principle also means that a metro line with five metro stations to Sydhavnen and on to Ny Ellebjerg becomes a reality. Thus the city will be even better served by public transport. It has been decided that CPH City & Port Development is to contribute DKK 1.7 billion for the construction of the metro to Sydhavnen was a good year for CPH City & Port Development. Overall profit before fair value adjustment of debt was DKK 473 million. Seen in isolation from the value adjustment of investment properties, the overall profit was DKK 77 million, the best result since the company was founded. Despite the positive result, the company's equity declined in 2015 as a result of the payment of some DKK 1,718 million to the owners to be used to establish the metro to Sydhavnen. The payment was made in accordance with the aforementioned change in the law. Equity at year-end amounted to DKK -4,070 million. The company's ownership and ownership structure mean that the negative equity does not affect the company's continued operations. In 2015, a local plan was prepared for a 120,000 square metre residential area in Ørestad Syd. The local plan was adopted at the beginning of 2016 and the first land is being sold. In Ørestad City the final space was closed in the rows of houses around the city park where Skanska is building 300 rental units. A milestone was reached in the Århusgade quarter in spring 2015, when the very first residents at 2150 Nordhavn were received. At year end there were more than 300 residents in the Århusgade quarter and, over the next few years, the population will increase to about 3,000. Also at Marmormolen the first residents moved into the Marmorbyen homes. While the Århusgade quarter is entering its final stages, the development of Sundmolen, Århusgade quarter's northern neighbour commenced. The local plan was adopted in the summer of Copenhageners and tourists are frequent users of the harbour all year-round. In 2015, Copenhagen harbour acquired a new set of regulations that expand opportunities for swimming and fishing. In nine selected areas of the harbour, the new regulations make it possible for private and public quay owners to set up unattended, sheltered bathing zones to complement the staffed bathing facilities. The potential bathing zones are located south of Langebro and at Søndre Frihavn. Recreational fishing has been allowed in much of the northern and southern part of the harbour, which has expanded angling opportunities by several kilometres. 3

5 Financial highlights 4

6 2. Corporate matters CPH City & Port Development was founded on 26 October 2007 with accounting effective as of 1 January 2007 in accordance with the Danish Act on Metroselskabet I/S and Arealudviklingsselskabet I/S, which was adopted in June 2007 with subsequent amendments most recently by Act no. 156 of 18 February The company is a partnership, owned by the City of Copenhagen (95 per cent) and the Danish State (5 per cent). The stakeholders are jointly and severally liable for the company's liabilities. The purpose of the company is, on a commercial basis, to develop areas in Ørestad and Copenhagen Harbour and manage operations at Copenhagen Harbour. The operational element of the harbour management is handled by Copenhagen Malmö Port AB (CMP), which is a Swedish limited company in which CPH City & Port Development has a 50 per cent interest. The rest is owned by the City of Malmö and a number of private shareholders. CPH City & Port Development also has interests in the following companies: UN-City P/S with associated general partner company. UN City P/S is owned 100 per cent by CPH City & Port Development. The company s objective is to build the UN- City Campus 1 at Marmormolen. Byggemodningsselskabet Marmormolen P/S and associated general partner company. The company is 100 per cent owned by CPH City & Port Development. The company s objective is to develop Marmormolen. Since the company has nearly fulfilled its objective, it will be wound up at year-end. Projektselskabet Marmorbyen P/S and associated general partner company. The company is owned 49.99% by CPH City & Port Development I/S and 50.01% by Pensam. The company was established in 2013 and the object is to own and lease homes at Marmormolen. Kommanditaktieselskabet DanLink-Udvikling P/S and associated general partner company. CPH City & Port Development and TK Development each own 50% of the limited partnership. The object of the company is to develop Amerika Plads. Amerika Plads C P/S and associated general partner company. The company is owned 50 per cent by Kommanditaktieselskabet DanLink-Udvikling and 50 per cent by AP Pension. The company was established in January 2015 and its objective is to develop housing at Amerika Plads. Ørestad Down Town P/S and associated general partner company. The company is owned 40% by CPH City & Port Development and 60% by NCC Property Development A/S. The purpose of the company, which was established in 2011, is to develop the Ørestad Down Town area. RetReal NSF Nordhavn 1 P/S and associated general partner company. The company is owned 40 per cent by CPH City & Port Development and 60 per cent by RetReal NSF Nordhavn ApS. The company, which was established in September 2015, aims to develop the Århusgade retail quarter. Harbour P/S and associated general partner company. The company is owned 8.5 per cent by CPH City & Port Development, per cent by ATP Ejendomme and per cent by PensionDanmark. The company, which was established in 2011, aims to own and lease the UN City and develop areas at Marmormolen and Langelinie. 5

7 Company structure at 31 December 2015 As a result of the aforementioned change to the law of 18 February 2015, an extraordinary partnership meeting was held on 20 February 2015, when both the amended partnership agreement and the articles of association were approved so that these reflect the concluded agreement in principle. In addition to the annual partnership meeting, another extraordinary partnership meeting was held on 1 December 2015 for approval of the company's business strategy, cf. the company s statutory provisions. The revised business strategy is applicable from Land development Table 1. Key figures for land development DKK million Net turnover Value adjustment of investment property Other income 1 1 Total income Expenses Operating profit Balance sheet Investments Fixed assets 8,235 7,592 Liabilities 14,470 13,572 As a major landowner in Copenhagen and urban development company, CPH City & Port Development recognises its unique position in the market. The decisions the company takes 6

8 are with a view to several decades into the future. As a consequence, CPH City & Port Development operates from a vision to create vibrant neighbourhoods of international status. The company aims to incorporate sustainability in urban development areas in relation to environmental, social and economic perspectives. The intention is for the company's areas to achieve a balanced mix of residential and commercial, diversity in housing size and ownership, access to shops and staple foods in particular, access to schools and day institutions, environmentally efficient energy solutions, green and recreational areas plus a range of culture and sport. The chart below shows a breakdown of the company's sales of development rights divided into residential and commercial Salg af byggeretter, etm Bolig Erhverv Note: Salg af byggeretter means sale of development rights, bolig means residential and erhverv means commercial Ørestad The sale of development rights in 2015 was again characterised by the fact that no major areas were released for sale. However, a sales process has started for approximately 120,000 square metres in Ørestad Syd, which is covered by a new local plan for the area. In total there are approximately 320,000 square metres of homes in the plan. This process is expected to be completed in the second quarter of 2016, when all agreements are expected to be finalised. Ørestad Syd Nearly all the sales agreements in Ørestad Syd cover housing of a size range from terraced houses to multi-storey buildings. However, there is also an agreement on the development of a project involving about 25,000 square metres, which will include shops, a playground, storage facilities and housing. At zone 4, the southernmost area between Richard Mortensens Vej and Else Alfelts Vej, an agreement has been entered into to sell the northernmost part of some 12,500 square metres. This is conditional, among other things, on a new local plan which permits housing. Thus, the entire building zone 4 is to be sold. Based on the competition for a new master plan for 320,000 square metres of primarily residential building in the central part of Ørestad Syd, which was implemented in 2014, the planning process has been undertaken for a new local plan, which is expected to be finally adopted by the City Council in early

9 The project for the planning and design of streets, squares, promenades and green areas started in mid-2015 in anticipation of regulatory approval in the spring of Prequalification of the lead contractor has been conducted for the parking facilities at Ejler Billes Allé. Furthermore, architectural work has begun in order to determine the design of its facade. Byfælleden Vest was put out for tender and Holbøll have been contracted to undertake the terrain changes and carry out the landscape rendering and establishment of an amphibian pond at Kalvebod Fælled. This has been delayed by cabling work on Hannemanns Allé and is planned to finish in Arena quarter In the Arena quarter, an agreement has been entered to sell the remainder of the Skov quarter, about 19,000 square metres of housing, to Tetris. Furthermore, an agreement has been entered for the sale of approximately 8,000 square metres of property in the Kanal quarter. This means that only a very limited range of development rights for housing remain and they are located in the Hannemanns quarter. Following on from the sales processes, 10 block plans have been approved by the City of Copenhagen. In addition, architectural approval has been notified for one construction project, namely Kalvebod Fælled Skole. The remaining projects for the layout and design of streets, squares and green areas have also been approved by the City of Copenhagen, so that the entire infrastructure can be established. Construction at the Royal Arena has been delayed for about five months due in part to a roof structure, which has meant a delay to parts of the arena. This has also led to delays in relation to the surrounding buildings. However, Robert Jakobsens Vej north of Ejler Billes Allé was commissioned at the end of The first residents have already moved in. Moreover, the Arena quarter s final phase was offered up in the main contract, and contracted with M. J. Eriksson. Ørestad City In Ørestad City, building zone 4D at the city park, which has been inactive for several years following a bankruptcy, has been sold to Skanska. This means that the building zone around the city park is finally going ahead. In March 2015, a turnkey contract was signed with Barslund on Hannemanns Allé and work commenced in mid Cabling works have been difficult, delaying the entire project by about 3½ months. This is in line with the surrounding projects. In order to ensure a better link across the Øresund fixed link at Fields, a footbridge has been built across the area. Barslund has the main construction contract and work is progressing according to schedule. The footbridge is expected to open in April-May 2016 for the benefit of pedestrians and cyclists. Amager Fælled quarter Given the high demand for residential development rights in Ørestad, the development of the district's last urban quarter, Amager Fælled, was launched in 2015 for the establishment of approximately 260,000 square metres of primarily residential housing. An approved planning basis is expected to be available in early Ørestad Nord In Ørestad Nord, work is ongoing on a housing conversion of IT-grunden, which faces Amager Fælledvej between Kaj Munks Vej and Rued Langgaards Vej. A conditional declaration of intent has been signed with Tetris A/S and Boligselskabet FSB to develop a mixed general and private project for youth accommodation. This is the final residential 8

10 development opportunity in Ørestad Nord, and there then remains only the sale of the rest of the commercial construction zones in August Schade quarter. In August Schade quarter, south of DR-Byen a consultancy tender was implemented and Sweco, who prepare tender documents for major infrastructure work, have been contracted. Prequalification of lead contractors has also been conducted. Copenhagen Inner Harbour - Christiansholm In the second half of 2015, there was a competition for a master plan for Christiansholm for 45,000 square metres of construction with an expected allocation of 35,000 square metres for housing and 10,000 square metres for public buildings, of which about 4,000 square metres will be for swimming facilities. The competition was won by COBE in co-operation with the companies, Inside Outside, Via Trafik Rådgivning and Transsolar Energitechnik. The winning project "Københavns Haller" encapsulates the project vision a balance between "home life and urban life". The project offers a development consisting of ground floors with a hall-like structure for informal public functions and with upper floors for homes in a varied architectural style, based on the harbour s warehouses and pitched roofs. The public buildings will be constructed as stand-alone buildings that embrace the same architectural concept. The project has two key urban spaces a blue surround, in a grand vision that creates living options close to the water on all sides, and a single green urban space, with its location being more protected from the elements. The planning process will go forward based on the master plan so that a local plan can be adopted at the beginning of After this the island development will begin. Sydhavn On Teglholmen work progressed on an agreement to utilise the last development zone for a mix of general and private buildings. The agreement is expected to be concluded in early 2016 subject to a supplementary local plan. Furthermore, option agreements relating to the use of quays were signed. Following this, all development rights on Teglholmen have been allocated, and only the necessary construction work for the establishment of infrastructure remains. In 2015, Teglholmen s infrastructure and cabling works were completed and all conduits apart from waste water and the pumping station were transferred to HOFOR. In addition, the detailed planning of bridges and roads and quays was completed. The local plan for Enghave Brygge was adopted by the City Council in late 2014 and finally published in Development of the CPH City & Port Development-owned 110,000 square metre development rights for primarily housing is awaiting the establishment of the metro to Sydhavnen, with commissioning expected in The necessary cabling work has, however, begun with HOFOR, Energinet.DK and DONG, so that it can be completed prior to the metro s start in October EIA screening for the full cabling relocations in territorial waters has been implemented. CPH City & Port Development has also assisted the City of Copenhagen with technical support in connection with the siting of a bridge between Enghave Brygge and Teglholmen over Frederiksholmsløbet. 9

11 Nordhavn Århusgade quarter In the Århusgade quarter, a joint retail company RetReal NSF Nordhavn 1 P/S with Nordic Real Estate Partners (NREP) has been set up. This is an implementation of the ambitious strategy to develop retail business and support a vibrant district, and was completed prior to the first sales in the area. The joint retail company is to take over the parts of the existing properties in the area (Den Røde By), which faces Århusgade. In this regard master plans for the utilisation of these construction zones have been prepared, which allow the final residential areas in the Århusgade quarter to be made available during CPH City & Port Development also assisted with the provision of base capital to find the developer for social housing in the Århusgade quarter. Domea København won this tender and will begin construction of a mixed complex of public housing, service housing, day-care facilities and retail space in the second half of Kronløbsøen was tendered in a model where the same contractor constructs the parking facilities for CPH City & Port Development and acquires all of the associated building rights and develops these. The result, however, was not economically satisfactory, and therefore at the end of 2015 work began on completing the project in a model where CPH City & Port Development, in part, is the developer of the entire project. Planning of new tenders for Kronløbsøen started in mid-2015 and a design contest for about 33,000 square metres of mainly housing on Kronløbsøen and a building project at Fortkaj was tendered in January 2016 with a view to housing and around 1,000 underground parking spaces being completed by mid In the Århusgade quarter, sales procedures were followed up by the announcement of architectural approval of three construction projects and the choice of materials and details of a number of projects in progress. Based on the initial positive experiences with the development of Den Røde By in the Århusgade quarter with projects in the Frikvarteret, CPH City & Port Development commissioned a number of volume studies. Entasis architects have designed a new build project for a design studio and housing and within this framework developed a master plan for a building zone to identify the most obvious building and rebuilding opportunities in Den Røde By. It is expected that all or parts of Den Røde By will be sold within a short time frame. The project for the planning and design of streets, squares, promenades and green areas on Redmolen was launched in mid-2015 in order that the infrastructure can be established in time for PFA which has acquired the development rights on Redmolen to exploit them. The public urban space will be designed along similar lines to the rest of the Århusgade quarter with well-known maritime materials such as concrete tiles and fixtures in Corten steel. In terms of installations, there are minor contract works outstanding in the Århusgade quarter, including the three squares that have been delayed because of building activity. At the end of 2015 they were 90 per cent complete. The Lüders parking facilities on Lüdersvej are under construction and are about half finished and are expected to be opened at the end of August Sundmolen The local plan for Sundmolen, which allows for 41,000 square metres of new housing and the construction/design of up to 25,000 square metres of commercial space, primarily in existing buildings, was adopted by the City Council in June Following the sale to CASA in 2015 one construction project was approved. The project for the planning and design of streets, squares, promenades and green areas in the western part of Sundmolen was approved by the City of Copenhagen's Technical and 10

12 Environmental Administration in July The infrastructure at Sundmolen is a central sequence of public gardens, bound together by a continuous row of poplar trees and squares on the south side of the quay, where it is possible to access the water. The western canal between Metro and Pakhus 54 (Stage 1) has been delivered. Moreover, a contract has been signed with M. J. Eriksson for Stage 2 that includes infrastructure work at Sundmolen Vest. CPH City & Port Development has also assisted Copenhagen International School with certain consultancy services, and has established temporary water, electricity and waste water facilities. There is a declaration of intent for the sale of a single building zone at Sundmolen in addition to the three already allocated. There remains just one building zone that can be utilised in the period up to when the container terminal is moved from its current location. The next phase of urban development of Nordhavn The adoption of the "Act amending the Act on Cityring and the Act on the Metro Company and CPH City & Port Development " has made it possible for the urban development of Nordhavn to continue with up to 2 million square metres of development. Also, the metro in Nordhavn can be extended with additional stations and the Nordhavn Tunnel project can go ahead. On this basis, an investigation on the metro, Nordhavn Tunnel, the relocation of the container terminal and the replacement harbour started in mid CPH City & Port Development is a member of various committees during this work. The locations of the future stations for the metro are expected to be clarified in early 2016 in collaboration between Metroselskabet, the City of Copenhagen and CPH City & Port Development. CPH City & Port Development has been obtaining soil for the expansion of Nordhavn since July In this connection, the company operates in partnership with KMC Nordhavn which receives the contaminated soil while CPH City and Port Development handles the clean soil. The soil comes from construction projects in the metropolitan area, including the establishment of the metro. In 2015, more than 3.2 million tonnes soil was delivered, out of which 1.8 million was clean and 1.4 million was contaminated. Over the course of 2015, soil was delivered by more than 100,000 lorries, equivalent to nearly 400 a day. CPH City & Port Development had a turnover of DKK 147 million from the receipt of clean soil in Leasing Table 2. Key figures for leasing DKK million Net turnover Value adjustment of investment property Other income 0 0 Total income Expenses Operating profit Balance sheet Investments Fixed assets 2,496 2,510 Liabilities 1,460 1,677 CPH City & Port has 706 building, land and water area leases, most of which are located in Nordhavn. In 2015, the rental income was DKK 216 million, which is DKK 9 million more than in The vacancy rate for office space fell below the market level over 2015, among other things as a result of new lettings of 1,800 square metres at Pakhus 48 and 1,924 square metres at Pakhus 54 at Sundmolen. The vacancy rate for storage leases also dropped below the 11

13 market level during This is due to both new leases and the conversion of warehouse space for office and showroom. The company handles operations and design. In 2015, two major conversion projects were initiated. At Pakhus 48 on Sundmolen, 1,800 square metres of offices were fitted out for the speaker company, Libratone A/S, while Pakhus 54 was converted from warehouse space to 1,924 square metres of new office space for the architectural firm, Gottlieb Paludan. Both leases will become operational during Parking Table 3. Key figures for Parking DKK million Net turnover Value adjustments Other income 0 0 Total income Expenses Operating profit/loss Balance sheet Investments 64 4 Fixed assets 1,480 1,399 Liabilities 1,719 1,443 CPH City & Port Development builds, operates and maintains parking facilities in Ørestad City, Ørestad Syd, Nordre Toldbod, Søndre Frihavn, Marmormolen and Nordhavn. The company is responsible for about 6,150 spaces either in the multi-storey car parks or at ground level. There are around 3,750 spaces in the multi-storey facilities and around 2,400 spaces at ground level. CPH City & Port Development owns the parking facilities. In addition, operation of the parking spaces is handled mainly by the company itself. CPH City & Port Development also operates a parking facility at Amerika Plads with more than 800 spaces. This facility is owned by DanLink-Udvikling, which is jointly owned by TK Development. In 2015, the revenue from parking was DKK 57 million, which is DKK 8 million higher than in The increase in revenue is due to the fact that CPH City & Port Development took over the underground car park at Marmormolen with effect from 1 October 2015 as well as an increase in the corporate segment during the year. Operating profit fell by DKK 171 million. The loss is solely due to a value adjustment of investment property. Excluding value adjustment, operating profit would be DKK 40 million. The public car park at Marmormolen opened on 1 October The underground parking has two levels with approximately 300 spaces on each level. The UN occupies the majority of the lower level. In addition, there is a new ground level car park with spaces at the bottom of Nordbassinet in Nordhavn with access via Marmorvej. The car park is expected to be paved over in In order to service residents and visitors of Ørestad, CPH City & Port Development has developed an app for mobile phones, which indicates the nearest available parking space in Ørestad. 12

14 6. Port operations Table 4. Key figures for port operations DKK million Net turnover Value adjustment of investment property Other income 14 0 Total income Expenses Operating profit Balance sheet Investments Fixed assets 1,165 1,188 Liabilities The majority of CPH City & Port Development s port facilities for commercial port operations are leased to the 50 per cent-owned joint venture Copenhagen Malmö Port AB (CMP). The rest of CMP is owned by the City of Malmö and by private investors. Similarly, CMP leases port facilities in Malmö from the City of Malmö. The lease agreements in both Copenhagen and Malmö run to Table 5. CMP turnover and result for (SEK million) Turnover Operating profit The fixed port facilities in Copenhagen, leased to CMP, consist primarily of a container terminal in Nordhavn, an oil and bulk terminal at Prøvestenen and quays and reception facilities for ferry and cruise traffic. At Prøvestenen, which is a hub for the handling of dry and liquid bulk in Copenhagen, CMP's potential to handle cargo increased in New locations, which offer the potential for a doubling of cargo over time, are in operation. The development of cruise traffic remains positive, although the number of stopovers and passengers stagnated in From 2016, traffic growth is expected again, and CMP is working to maintain Copenhagen as the main cruise destination in northern Europe. CMP will strengthen its position in the cruise industry over the years ahead through a lease agreement for a cruise terminal in Visby on Gotland. The establishment of the new terminal at Visby began in 2015 and, from 2018, CMP will also offer Visby to shipping companies as a destination. Container traffic, which rose slightly during 2015, is handled in Copenhagen from the terminal at Levantkaj. Due to urban development in Copenhagen, it will prove necessary to move the terminal from the Levantkaj in a few years time. CMP and CPH City & Port Development have started analysing where the most suitable location for a new container terminal should be. The most obvious choice is to move the terminal to the newly reclaimed area at Nordhavn, but other alternatives are also being studied. A decision is expected during CPH City & Port Development s operating profit from port operations in 2015 was almost DKK 35 million. This is an increase of nearly DKK 17 million, of which DKK 14 million, however, can be attributed to an extraordinary income item in the form of a reversed provision. The remainder of the increase is attributable to increased rental income from CMP. 13

15 In 2015, the profit share from CMP amounted to almost DKK 20 million, which is a decrease of approximately DKK 5 million from the previous year. 7. Corporate Social Responsibility (CSR) CPH City & Port Development has been a member of the UN Global Compact s Communications on Progress (COP) since 2010 and will publish its fifth progress report in March CPH City & Port Development s COP report is available on the CPH City & Port Development website: City life CPH City & Port Development s city life activities reflect the company's overall mission to take co-responsibility for long-term sustainable urban development, including creating a foundation for a vibrant and attractive urban environment in Copenhagen's new neighbourhoods. These are initiatives that the market does not automatically deliver at an early stage, including activities to help kick-start city life in the new urban areas. CPH City & Port Development has been actively working from the outset to generate life in the new urban development areas based on each site and its basic qualities. The methods vary from district to district in line with the site s development. It can be anything from starting associations and building traditions to the development of physical meeting places, sports and cultural projects, etc. The projects are always developed and realised with the city's users who will eventually take over the projects themselves. In Nordhavn, an entirely new tradition was started in August 2015 when the district became part of the annual Kulturhavn, organised by, among others, the City of Copenhagen. Along with Østerbro Lokaludvalg, certain cultural players and local associations planned and held CPH City & Port Development s Kulturhavn programme for Nordhavn, which focused, in particular, on activities on and near the water. The event was well attended by Copenhageners of all ages. Later in the year the company embarked on a collaboration with the art ship M/S BIBIANA that called at Nordhavn in the autumn with a floating art exhibition of award-winning children's book illustrations from around the world. There were also supporting events and initiatives such as parachuting over the harbour and Christiansborg Rundt. CPH City & Port Development is also involved in launching special projects that can help to support urban specificity and kick-start urban life through physical venues and facilities. Color Run by night in Ørestad Syd was a major event that CPH City and Port Development supported in September The event highlighted Ørestad s identity as a district with space to move and play. CPH City & Port Development also carried on the positive experience from the Plug n Play facility to the new local plan area in Ørestad Syd with a view to giving the district a special profile characterised by an active outdoor life. The winning proposal for the master plan competition created opportunities for this in the form of the future active main street, Asger Jorns Allé, where the district s upcoming sports and cultural activities will be focused. The company undertook a classification of the future facilities and functions through a workshop process in 2015 in which a wide range of stakeholders and experts contributed, including users of the temporary Plug n Play facility. In Ørestad City, CPH City & Port Development, together with the landowner association and the Ministry of Housing, Urban and Rural Affairs conducted an open competition for a smallscale transformation of the area at Ørestad Library in Residents in the area, parents of children at the school and library users needed a venue that could form a basis for daily interaction and community in the district. The competition was launched as part of The City s next stage, which the company worked on with the landowner association and which previously resulted in the successful islands on the canals in Ørestad City. The winner of the competition was The Green Passage created by Tegnstuen Duevej. 14

16 Nordhavn will become one of the first activity and movement venues on the roof of the first car park in the Århusgade quarter. CPH City & Port Development is working with DGI Greater Copenhagen on the development of activities to create life on the roof. The theme is run, crossfit and play and the space is expected to be commissioned in CPH City & Port Development s exhibition, Sea & Sky in the Århusgade quarter was set up in order to signify urban development at Nordhavn by giving residents and visitors an insight into the plans and vision for the district as well as being the focal point of a five-year startup period while the city is under development. In April 2015, the first residents moved into the Århusgade quarter and CPH City & Port Development prepared a welcome pack and launched the Ask Britta function, which gives residents the opportunity to ask questions about their new area. Also in 2015, a wellattended series of "Meet your neighbour" events were held as part of the exhibition s programme of activities. Visitors formed a mixed audience, including stakeholders in the area s apartments, neighbours and groups with an interest in urban development. Environment As the key player in urban development in Copenhagen, CPH City & Port Development also contributes to promoting environmental sustainability in the company's development areas. As a result, it collaborates with relevant partners in projects that can contribute to the development of sustainable solutions for future urban development. In addition, the company is also focused on the qualities of nature and recreation in the areas adjacent to the urban areas in green Ørestad and blue Nordhavn. CPH City & Port Development was involved with a number of environmental initiatives aimed at a sustainable optimisation of the company s activities during The four-year research project, EnergyLab Nordhavn, started in April In collaboration with DTU (Technical University of Denmark), Dong, HOFOR (Greater Copenhagen Utility) and a number of industrial partners, the company is aiming to demonstrate sustainable energy technologies and energy infrastructure of the future based in the buildings of Nordhavn. The research project brings Nordhavn to the forefront in relation to the implementation of the latest technologies for energy optimisation in buildings and utility networks. Positive discussions are currently being held with certain developers about taking part in the project. Three demonstration projects expected to be installed in the parking facilities at Helsinkigade, where CPH City & Port Development itself is the developer. The good public transport facilities in Ørestad were part of the "Green Living" theme when Ørestad Culture Days was held for the eighth time in 2015 with support from the CPH City & Port Development. The theme emphasises how the company is working to strengthen sustainable solutions in Ørestad in the form of good cycle paths, easy access to the metro and a green environment. Naturpark Amager, where CPH City & Port Development is a collaborative partner, was awarded the Danish Outdoor Council quality mark "Danish Nature Parks," in This is given to larger extended areas of outstanding natural, scenic beauty and cultural value. A think tank set up at the initiative of the Ministry of Environment, with the participation of project partners and a number of foundations discussed the development potential of the nature park in the spring of Based on these consultations, the partnership members are in discussion with three foundations to support the development of "Main Entrances, "Blue support points" and "Social dimension". The company is particularly involved in the project on the development of the main entrances to Naturpark Amager from Ørestad Syd. Internally CPH City & Port Development continues to work actively on efforts to strengthen the labour market. Through temporary recruitment such as interns and student placements as well as wage subsidies the company ensures an active upskilling of the workforce. In 2015 there 15

17 were two interns, two student placements and one member of staff employed on a wage subsidy basis. The wage subsidy appointment led to permanent employment. In addition, two students/trainees and one employee were assigned flex jobs. Efforts in relation to upskilling the labour market were over and above the company s agreed target in In all relevant building, construction and service tenders, CPH City & Port Development requires the employment of apprentices/trainees (social clause) and the safeguarding of wage and working conditions (labour clause). In order to increase safety, particularly in construction projects, CPH City & Port Development, has agreed a voluntary developer partnership with Arbejdstilsynet, the Danish Working Environment Authority, on the working environment. Regular meetings are held between contractors and, in the tender phase, the consultants. Arbejdstilsynet puts forward comments and recommendations at these meetings, which are subsequently incorporated into the project. The aim is to increase safety in general. The company supports the TrygFonden campaign for more defibrillators. The company has three, one of which is publicly available and has registered the TrygFonden defibrillator app. 8. Organisation and employees CPH City & Port Development is a knowledge company, where the company's employees have extensive insight into the company s many activities and are therefore one of the company's key resources. A high level of knowledge sharing is important as it ensures balanced and efficient procedures. In 2015, a new document and records management system was implemented. This supports the company's commitments to Offentlighedslov (Denmark s Freedom of Information Act), but the system's purpose is also to support knowledge sharing in the company. The system s structure is based in the company's organisation and business processes, and affords the company greater transparency and a relevant insight into matters across the company. At the end of 2015, CPH City & Port Development had 113 employees, 43 women and 70 men, with an average age of 48. In the company s management group, consisting of 11 people, there are five men and six women. Employee groups comprise 86 salaried staff and 27 specialist staff. The salaried staff include economists, lawyers, town planners, engineers, maritime employees, property inspectors and office staff. The specialist staff perform operation and maintenance in the company's development areas and in the Copenhagen harbour. It is one of the company's staff policy objectives that staff have a high level of job satisfaction and engagement in their daily work. There are ongoing efforts to ensure a good physical and psychological working environment. A staff seminar was held in 2015, where the purpose, among other things, was to strengthen the good relations between employees with a view to high job satisfaction, efficient procedures and innovative urban development. The theme of the seminar was health promotion with the aim of providing inspiration and specific tools for all employees' daily health in their leisure time and at work. The Working Environment Committee actively promotes a good physical and psychological working environment, including through action points in the company s Action Plan for the current APV (workplace assessment). The spotlight has been trained on various physical initiatives, mainly conflict handling and management and staff development. A support service has been established for any possible instances of abuse. Staff have also been offered stop-smoking support courses and individual ergonomic advice. Efforts have also been targeted at the company's absenteeism through discussions with employees and the works council and ongoing highlighting of absenteeism. In 2015, the 16

18 average rate of absenteeism was 3.5 per cent, which is slightly above the company's target. Absenteeism increased during the period due to more long-term sick employees. As regards long-term illness, emphasis is on ongoing dialogue with the individual in question as CPH City & Port Development wishes to contribute to retaining the job market. 9. Corporate Governance Code for corporate governance CPH City & Port Development generally complies with the recommendations of the Committee on Corporate Governance. The company continues to conduct its business in accordance with the recommendations and there is an updated overview of the company's compliance with all recommendations. The review is available on the company's website and gives an account of each of the recommendations that the Committee on Corporate Governance makes, to what extent the company complies with the recommendation and a brief comment/explanation of some of the recommendations. Moreover, it can be generally stated that the company complies with the majority of the recommendations, but there are those where it has either opted out or it cannot comply by virtue of its special structure and ownership, etc. Since CPH City & Port Development is a publicly owned partnership with its own establishment legislation, a number of the recommendations are not relevant to the company and therefore cannot be followed. This applies to recommendations concerning, for example, remuneration policy, considerations relating to the appointment and composition of the Board of Directors and its independence, the term of office for board members and the appointment of auditors. The composition of the company's management bodies No committee or similar was set up during the financial year. The Board of Directors acted in accordance with the company's entire business area; and no members were assigned special responsibility in the financial year. The Board of Directors Audit Committee, consisting of the entire board, with its Vice-Chairman as Chairman, held two meetings in 2015 with the participation of the company's auditors, where, among other things, the audit plan, accounting policies and audit reports were handled. The Audit Committee s terms of reference can be found at The company's Board of Directors comprises eight members: currently six male and two female. The board members are appointed in accordance with the Articles of Association for a four-year period, and this runs from 2014 to Four members are appointed by the City of Copenhagen and two by the Danish State. Furthermore, two members are employee elected representatives. The election procedure for this is set out on the company's website With regard to the gender composition of the Board, the company has not drawn up a policy for this in that six out of eight board members are appointed by the company's owners, and the remaining two elected directly by employees and also, since the company s establishment the Board has had a gender balance. The Board of Directors held six board meetings in 2015 and one written vote was held. In addition, there was one case where the Chairman gave approval and subsequently reported to the Board of Directors. 17

19 The Board meetings and meetings of the Audit Committee are determined before the start of the year. Board remuneration is determined at the annual partnership meeting of the company's owners. Remuneration for 2015 amounted to: Chairman 400,000 Vice-Chairman 300,000 Ordinary board members 125,000 There is no remuneration for the Audit Committee. As was the case in previous years, a board evaluation was carried out. This is undertaken by the individual members completing a questionnaire anonymously where they express, among other things, their opinion of the Board of Directors as well as the Audit Committee meetings and their format, the methods of the Board and the Audit Committee, follow-up and implementation of the decisions taken, the Chairman s work, cooperation between the Board, the Audit Committee and Executive Board etc. The rules of procedure of the evaluation are also reviewed. The Board, which also comprises the overall Audit Committee, has the following composition: Carsten Koch - Director (Chairman of the Board of Directors) Management positions: Chairman of the Copenhagen Port Pension Fund, Arealudviklingsselskabet Fredericia C P/S, Arealudviklingsselskabet NærHeden P/S, Forca A/S, Vækstfonden and Professionshøjskolen UCC. Vice-Chairman of Sund & Bælt Holding A/S, Femern A/S and AS3. Board member of Øresundsbro Konsortiet I/S, Investeringsforeningen Maj Invest and Copenhagen Malmö Port AB. Also, Chairman of the Employment Council and President of the Chairmanship of the University Colleges Denmark. Born Appointed in 2008, re-appointed in 2010 and 2014 Mads Lebech - CEO, Danish Industry Foundation (Vice-Chairman of the Board, Chairman of the Audit Committee) Management positions: Chairman of the Tourism Growth Council and Ordrupgaards Advisory Board. Vice-Chairman of Tivoli A/S and Copenhagen Malmö Port AB as well as a board member of Nordea Invest Associations, the FrederiksbergFonden and Claus Meyer s Melting Pot Foundation. Born 1967 Appointed 2010, re-appointed 2014 Lars Berg Dueholm - Lawyer Management positions: Member of Copenhagen City Council for Liberal Alliance Born 1977 Appointed 2014 Morten Kabell Mayor for Technical and Environmental Affairs Management positions: Member of Copenhagen City Council for the Red-Green Alliance, Chairman of The Metropolitan Copenhagen Heating Transmission Company and board member of Gate 21 18

20 Born 1970 Appointed 2015 Dorte Krak CEO of Arp-Hansen Hotel Group Management positions: Chair of the Government's growth team for Tourism & the Creative Industries Economy. Board member of Danske Færger A/S, Rheumatoid Arthritis Society and Ruths Hotel A/S, member of Nordea Bank Council Copenhagen North, Zonta Copenhagen I, Tourist Growth Council and Copenhagen Trade Council Born 1967 Appointed 2014 John Becher Krommes (employee representative) Specialist worker Management positions: Shop Steward 3F Born 1964 Elected in 2008, re-elected in 2010 and 2014 Ida Lysbech Madsen (employee representative) Project Manager Born 1983 Elected 2015 Lars Weiss Vice Chairman of the City Council Management positions: Member of the City of Copenhagen's City Council for the Social Democrats, board member of ARC I/S and Copenhagen Malmö Port AB and Wonderful Copenhagen. Born 1971 Appointed September 2011, reappointed 2014 The company's Executive Board consists of: Jens Kramer Mikkelsen CEO Management positions: Chairman of Danish Fitness & Health Organisation, Sankt Annæ Gymnasium, Copenhagen Goodwill Ambassadors Corps, Fonden til Vitskøl Klosters Bevarelse, Copenhagen Airports Growth Committee, FN-Byen P/S and Komplementarselskabet FN-Byen ApS. Board member of Port of Copenhagen s Pension Fund and DGI- Byen Born Control and risk management CPH City & Port Development takes an active approach to the risks associated with its activities, and to prioritising the actions that the company can take to minimise them. Some risks may be affected by the company s own decisions. Others will mainly be caused by external factors and the company is only able to influence or reduce the effects of these to a limited extent. These risks include both those linked to the company's business areas, and other risks. Identification and prioritisation of action on risks occurs at an overall level with regard to the Board s strategy work. At Board level, there is also a special focus on business risks, financial risks and insurance issues. The Executive Board has established processes and procedures to ensure that the identification and 19

21 prioritisation of risks is incorporated into the daily organisation of work in the company. The risk factors are further described in Section 10. In addition to the risk areas above, the Board considers specific risks associated with financial reporting. Risks associated with financial reporting CPH City & Port Development's risk management and internal controls relating to financial reporting are designed to minimise the risks of material errors or irregularities in the accounts and to ensure that the presentation of external annual and interim reports is made in accordance with the Danish Financial Statements Act. Prior to the financial reporting, the most important items, processes and procedures related to financial reporting are reviewed in order to identify risks. The most significant risks at CPH City & Port Development relate to individual items in the financial statements related to valuing the investment properties as well as the company's debt portfolio. On the recommendation of the Executive Board, the Board of Directors approves the principles for the valuation of the company's investment properties. The principles are presented at least once a year. In addition, the Board of Directors can monitor from the regular reporting on the sale of investment properties whether the valuation of specific property is in accordance with market trends. The Board has further decided that external assessments of the value of the investment properties must be obtained approximately every 5 years. These are to be obtained from an independent party to support the valuation in the annual accounts. The Board approves a financial strategy on an annual basis within which the daily management of the debt portfolio is handled and reported. The debt portfolio is managed by an external party, which has considerable expertise and experience in the field. A special declaration is received from the external party s auditor on the practical implementation of the financial management. This demonstrates that the established procedures and internal controls are sound, and that the risks of material errors or irregularities in the accounts are minimised as a result. Specific controls, established for accounting entries relating to the debt portfolio, are received from the portfolio manager. In addition, the risks identified in financial reporting are countered by incorporating a set of management-approved policies and other governance documents such as business procedures, certification rules, controls and reporting instructions. The management's approach to good risk management and internal controls are expressed and communicated through these documents, which are available through the company's internal information systems. The purpose is, among other things, to ensure that the employees know their responsibilities and authority in the organisation. The company's financial progress is monitored closely by the Board of Directors, the Executive Board and management in general. Quarterly accounts are drawn up, which are presented to the Board of Directors for approval, together with an internal review comparing the earnings performance with the company s Boardapproved budget. Monthly reports on financial developments are drawn up for the Executive Board and other management. The reports cover operating and investment activities. A process has been established for the preparation of annual and interim reports with, among other things, checklists for ensuring the provision of correct 20

22 information and documentation for compliance with the Danish Financial Statements Act. 10. Risk factors Risk conditions for business areas Area development The fixed assets used for land development activities totalled DKK 8,235 million at 31 December 2015 and thus constitute the major proportion (62 per cent) of CPH City & Port Development's total tangible assets and earnings basis in the long term. CPH City & Port Development s sale of land (building rights) in urban development areas for residential and commercial purposes depends on the demand for homes or for commercial purposes. Demand depends primarily on the economic climate, but is also affected by competition with other urban development areas and demographic trends in Copenhagen. The property market's dependence on the economic cycle involves large fluctuations in sales from year to year, because the business cycle also affects pricing. Business cycles will therefore have a major effect on the basis of value creation in the company in both the short and long term. The company's time horizon is very long term, since the existing land holdings are expected to be allocated over the next approximately 50 years. Over such a long period of time there will naturally be periods of low and high sales figures, depending on the business cycle. After limited sales in the years following the financial crisis, there have been satisfactory sales in line with expectations since The extent to which conditional sale agreements have been entered indicates that sales levels in the next two to three years will be at a similar level. It follows that there is greater uncertainty about sales volumes in subsequent years. The company's strategy is to continue the development of new urban areas, so that demand can be met when it is present. The strategy is also, as far as possible, to have a varied offer of land available for the market in the company's development areas in order to minimise fluctuations in the rate of sales. CPH City & Port Development thus offers land for both residential and commercial purposes in various parts of the city, while areas with differing characteristics and different price levels are also offered. The pace of development is continuously adapted to anticipated market trends so that new investments in urban development are adjusted to the rate of sales. An essential prerequisite for the development of areas in line with the market demand is that the necessary planning basis uses assumptions that respond to the needs of the market. This naturally helps to reduce the risk of falling sales. Work is ongoing to gather knowledge and develop urban areas in line with this, and the company regularly has a close and constructive dialogue with the City of Copenhagen on the subject. Amagaer Fælled Vest and Ydre Nordhavn are among the areas that are scheduled to be made ready for sale. Leasing The value of rental assets at 31 December 2015 amounted to DKK 2,499 million, which corresponds to 19 per cent of CPH City & Port Development s tangible fixed assets. The greatest risk to CPH City & Port Development's turnover and earnings from rental activities is economic slowdown. The risk is that the market rent 21

23 falls, the vacancy rate increases or there is the emergence of outright losses on leases due to non-payment. The whole portfolio consists of almost 700 different leases representing a wide range of different leases, which helps to reduce the risk of being hit by falling demand for certain types of leases. The leases are distributed in income terms in the following areas: Type Buildings, office Buildings, warehouse/showroom Land Other Total investment property Other rental income Total Annual rental income DKK 27 m 68 m 58 m 15 m 169 m 26 m 195 m Other includes rental to restaurants, shops and housing. Other rental income comprises rental of water areas and rentals for port purposes excl. rent from CMP, c.f. section on port operations. Water area rental comprises rent to sailing clubs etc. The value of these leases is not included as investment properties in the financial statements, but are included at cost price. Building leases comprise both old warehouses that are still used for storage, older buildings that have been renovated for modern office purposes, as well as newer buildings. The vacancy rate for office space at 31 December 2015 amounted to 10.4 per cent while warehouse leases amounted to 3.8 per cent. The trend in the vacancy rate for the company's building leases roughly follows the market trend in the Greater Copenhagen area. The vacancy rate for the company s building leases are generally highest for those with a low market rent. Maintenance plans have been drawn up for each building. The rental properties are improved on an ongoing basis, but major improvement works are initiated only when entering into a lease agreement that can finance the costs in the long term. Land leases relate primarily to land in Nordhavn and Sydhavn. On some of the land, the lessees have invested in their own buildings and facilities, which helps to reduce the risk of termination. The company is working actively to reduce the risk of vacancies going forward primarily by entering lease agreements with relatively long non-termination periods. Credit assessment of major new tenants is undertaken, and the collection of prepaid rent (deposit) reduces the risk of direct losses. In previous years, direct losses on debtors from leases were very limited compared to the company's rental income (less than 1 per cent of rental income). Parking The value of CPH City & Port Development s parking facilities at 31 December 2015 amounted to over DKK 1,479 million, corresponding to approximately 11 per cent of CPH City & Port Development s tangible fixed assets. The facilities are located in Ørestad, at Marmormolen and at Indre Nordhavn. The greatest risk of losses within the parking segment is that urban development is spread over wide areas, and that it thus becomes difficult to 22

24 exploit parking capacity efficiently. Furthermore, the economics of the parking facilities are reliant upon the local area being built for both residential and commercial purposes. A double use of the parking spaces for both residential and commercial property will increase capacity utilisation, which is essential for a sufficient return on the investment in parking facilities. Investment in new parking facilities is aligned with the expansion rate of the new urban development areas. In these areas, the investment is initially in temporary car parks at ground level, while major investment in construction of parking facilities is conducted only when demand is sufficient. The demand for parking spaces in the various areas is influenced primarily by the number of homes and jobs in the surrounding area, as well as by the price levels for parking, while general economic conditions only affect parking revenues to a limited extent. CPH City & Port Development owns and operates more than 5,600 parking spaces at parking facilities or at ground level. In addition, there are 800 parking spaces at Kommanditakieselskabet DanLink Udvikling. There is an agreement on a fixed subscription payment with some 4,100 customers, of which nearly 2,700 are corporate clients and over 1,500 are for private use. The subscription customers account for approximately 81 per cent of revenue. The remainder is made up of cash paying customers. The result for the parking segment depends to a very limited extent on individual car parks or on individual customers. In a number of areas, the company's parking facilities are exposed to competition from similar facilities or from free on-street parking. All other things being equal, the general trend in parking with higher payment rates for parking in urban areas benefits the company s parking activities. The parking area s financial performance may be affected by the overall competition between different modes of transport, but it is estimated that major changes can only affect the level of earnings in the very long term. Port operations The value of the fixed assets used for port operations was DKK 1,164 million, corresponding to approximately 9 per cent of the total tangible fixed assets. The fixed assets consist primarily of buildings, wharfs, quays and other port facilities used in the commercial port operations. The majority of the facilities are leased to the 50 per cent-owned CMP joint venture which handles the company's port operations in Copenhagen. Similarly, CMP handles the operation of the commercial port in Malmö. The total rental payment from CMP to CPH City & Port Development in 2015 was about DKK 53 million. According to the agreement with CMP, the rent will increase in the coming years. In addition to the rent, CPH City & Port Development shares in the profits from CMP, which amounted to about DKK 21 million in The value of the stake in CMP using the equity method is recognised at DKK 165 million. Port operations are influenced by general economic conditions and CMP's turnover and profit have also been affected by the economic downturn that followed the financial crisis. CMP's activities are spread over several business areas and are distributed between activities in Malmö and Copenhagen, which do not necessarily have the same cycle. CMP's turnover is split between many different customers, many of which have a relatively strong financial background. The overall port operations therefore have a balanced risk profile. This has helped to reduce the fall in revenue during the financial crisis. 23

25 A proportion of CMP s revenue is earned in SEK. CPH City & Port Development does not cover the currency risk arising as a result of this because, in the long term, this is deemed to be limited relative to the company s overall earnings. CPH City & Port Development invests in new port facilities when developments in port revenue or urban development makes this necessary. The primary port facilities are leased to CMP, and new investments in port facilities are usually initiated only if there is an agreement reached with CMP on rent payment. Over the coming year, investments are expected to be made on Prøvestenen and possibly a new container terminal at Ydre Nordhavn. Financial risks Financial risk is a significant risk area for CPH City & Port Development. By the end of 2015, CPH City & Port Development's total liabilities were DKK 19.4 billion at fair value (DKK 16.9 billion at 31 December 2014). With the current expectations for operating earnings, sales and investments, debt is expected to see a slight decline over the next four to five years. This assessment does not take into account that the company may have to pay a further contribution to the metro to Sydhavnen. Under the legislative amendment passed by the Danish Parliament at the beginning of 2015, the company is required to cover Metroselskabet s possible drawing on a budget reserve of DKK 1,630 million (2014 prices). According to the special foundation act for the company (Act on Metroselskabet I/S and Arealudviklingsselskabet I/S), the company can finance its activities through government loans, thereby gaining favourable terms. The company's borrowing is regulated by a tripartite agreement between Danmarks Nationalbank, the Ministry of Finance and the Ministry of Transport. The agreement contains guidelines for the types of financial instruments and loan agreements the company may include in its loan portfolio. The loans are typically recorded as re-lending from the Nationalbanken with the use of, among other things, interest rate swaps that are restructured where possible so as to achieve the desired risk profile with regard to type of interest rate and maturity. The objective for the financial management is to achieve the lowest possible real financing costs over a longer time period, which takes into account an acceptable level of fluctuation between the results for each year. For the coming strategy period, , the goal is for real financing costs to be kept below 1.5 per cent per annum. 24

26 Pct. p.a. 6,0% Finansieringsudgifter i pct. 5,0% 4,0% 3,0% 2,0% 1,0% 0,0% Finansieringsudgifter, exkl. Markedsværdiregulering Reale finansieringsudgifter (realrenten) Note: finansieringsudgifter means financing expenses %, finansieringsudgifter ekskl. Markedsværdiregulering means financing expenses excl. market value adjustment Reale finansieringsudgifter (realrenten) means real financing expenses (real interest rate) The framework for the company's financial operations is determined annually by the Board of Directors with the adoption of a financial strategy and funding instructions. The overall risk is low. In 2016, refinancing will be approximately DKK 3,100 million. Currency risk According to the terms of the tripartite agreement and the financial strategy adopted by the Board of Directors, the company's loan portfolio is ultimately only exposed to DKK and EUR. Based on the historically low fluctuations between the two currencies, the EUR exposure is not expected to pose a significant financial risk. The apportionment between the two currencies will depend on the relative interest rate developments of the currencies. At 31 December 2015, 78 per cent of the gross debt was in DKK and 22 per cent in EUR. The currency risk from a 1 per cent change in the EUR exchange rate is DKK 36 million. It is expected that the EUR share will be increased during Interest rate risk The distribution of the overall debt portfolio across different types of interest rates (fixed, variable or real-interest rate loans) is laid down in the financial strategy, but is also considered on an ongoing basis depending on developments in the financial markets. The determination of the allocation of debt also involves the link between developments in financing expenses (liabilities) and the company's earnings (assets). Analyses have indicated that, in relation to the overall risk picture, the company can use all three types of debt in its portfolio. In the financial strategy, it is determined that nominal fixed rate loans should make up per cent of the total debt, while the variable interest loans should be between 0-40% and real interest-based loans should be per cent. 25

27 As at 31 December 2015, 33 per cent was fixed-rate debt, 30 per cent was real interest-rate based and 37 per cent was variable-rate. The fixed-rate share of the portfolio is expected to be increased during Therefore, the current low level of interest rates will be used to hedge part of the interest rate risk. Table 6. Debt comparison divided on interest rate type at 31 December 2014 and 2015 plus the financial strategy framework for 2015 (per cent) Financial strategy framework for 2015 Variable rate Fixed rate Real rate (index) Total The debt portfolio duration is put at 7.4 years at 31 December 2015, which is the combined weight of a duration of 5.1 years for the nominal debt-based part and 11.7 years for the real interest-based debt portion. Price sensitivity is put at DKK 13 million in the case of a change in the interest-rate curve of 1 basis point (0.01 percentage points). Credit risks Financial credit risk lies in the fact that counterparties do not fulfil their obligations to CPH City & Port Development, either in relation to derivative financial instruments or investment of excess liquidity. Interest rate and currency swaps are only entered into with the most creditworthy Danish and foreign institutions and in accordance with the guidelines of the tripartite agreement between Nationalbanken, the Ministry of Finance and the Ministry of Transport. The objective is to limit the counterparty risk as far as possible. Counterparty risks are managed and monitored on an ongoing basis in a special line and limit system that lays down the principles for assessing these risks, as well as a maximum for how high are the risks acceptable for each counterparty. The latter is meted out in proportion to the counterparty's rating in the international ratings agencies. The company enters into agreements with counterparties only if there is an agreement about proposed collateral (CSAagreement). Credit risk associated with these agreements is estimated at 0. The company has periods of surplus liquidity, which is placed at the bank until the expected disposal. At the end of 2015 the liquidity reserve was DKK 0 million. Surplus liquidity in the parent company with maturities of up to six months is placed only in banks with a rating of at least A+/A1. Surplus liquidity of up to DKK 100 million that is to be used for ongoing operations may, however, be placed on a day-to-day basis with counterparties with a rating lower than A+/A1, but within the A category. Liquidity risk CPH City & Port Development has a very limited liquidity risk since the company, through the Act on Metroselskabet I/S and Arealudviklingsselskabet I/S, as well as the tripartite agreement between the Nationalbanken, the Ministry of Finance and the Ministry of Transport, has access to loans from the Nationalbanken to finance the company's activities. Loans can be raised at very short notice. In addition, the company, together with its subsidiaries, has 26

28 drawing rights (overdraft facility) from its principal bankers. By the end of 2015, the entire drawing rights had been exercised. Other risks Insurance CPH City & Port Development has taken out a number of insurance policies concerning the company s tangible fixed assets to cover against possible damage. These include insurance for buildings, equipment, motor vehicles and movable property. Management responsibility includes adopting an active approach to damage arising and considering measures to prevent damage so that the company s total risk costs are reduced over time. Insurance policies have also been taken out against liability matters, including professional liability and Board and Executive Board liability and contract insurance for major construction projects. The Board of Directors adopts an insurance strategy annually and reviews the company s current insurance cover. Environment CPH City & Port Development has no activities that can cause significant environmental damage in themselves. However, the activities of some of the company's tenants may affect the environment to a certain extent. Every lease includes a requirement that the tenant must clean the premises when vacating them. Alternatively, it can be agreed that the tenant pays an amount equivalent to the cost of cleaning when moving out. CPH City & Port Development therefore accepts the responsibility to clean the areas when required. On entering a lease agreement tenants also pay a deposit, which includes covering the costs of cleaning up pollution in the case of a bankruptcy situation. Some of the company's land to be sold may be contaminated. In connection with the sale of land (building rights) an open process is conducted with purchasers with respect to risk of pollution. As a general rule, the sales agreements set out who should cover additional costs for clean-up in connection with the use of the land. This eliminates the risk of legal dispute. The only area where CPH City & Port Development expects to cover costs related to the sales agreements, is the Århusgade district and at Redmolen in Indre Nordhavn. An oil terminal was previously located in the area. The distribution of total pollution costs between the purchaser and CPH City & Port has been definitively quantified in eight cases with a total sales value of up to DKK 500 million. CPH City & Port Development covered DKK 8 million in cleanup costs in these cases. In cases where the distribution of the contamination risk between the buyer and CPH City & Port Development has not yet been fully quantified, CPH City & Port Development s risk has been recognised in the annual accounts. A comprehensive mapping of the extent of pollution does not exist, but it is not expected that the degree of pollution and thus the cost level for CPH City & Port Development with regard to future sales in the area will be significantly higher than previously experienced. Where required, clean-up costs are taken into account in the assessment of the value of the company's investment properties. As at 31 December 2015, DKK 19 million was set aside for any future environmental liabilities. 27

29 Law The company s main legal risks are associated with the conclusion of lease agreements and sales contracts. Standard lease contracts have been drawn up for all leases. The leases are reviewed regularly to ensure that they reflect current legislation and practice. The company has historically had few legal disputes with tenants. Sale contracts are also standardised to an extent, but need to be adapted to specific circumstances in many cases. The company has its own legal experts, but calls in external legal assistance in any major property deals in order to minimise the risk of subsequent legal disputes. Construction contracts The company invests relatively large amounts in port facilities, parking facilities and general infrastructure on a continuous basis. There is an ongoing risk that construction projects do not stay within budget or are not completed on time. The company has its own staff with extensive experience in the relevant areas, and uses external expertise as necessary to control the largest and most complex projects. Insurance contracts are taken out for all major investment projects and cover includes the requirement that contractors provide guarantees for completing the work. 11. Financial Review Results The profit for the year before fair value adjustment of debt is DKK 473 million against DKK 722 million in The decline is attributable to value adjustments of investment properties that are DKK 366 million lower in 2015 than the previous year. In most other respects, the 2015 accounts show an increase compared to Including fair value adjustment of debt, the annual profit amounts to DKK 1,001 million. Net turnover in 2015 amounted to DKK 479 million, which is a rise of DKK 37 million compared to the previous year. The rise can primarily be attributed to increased revenues from receipt of soil in Nordhavn, but revenue from leasing, including port facilities to CMP, and from parking, also contributed to the rise. For 2015, the value adjustment of investment property amounted to DKK 395 million against DKK 761 million in The year s value adjustments are divided between DKK 29 million from realised gains from the sale of building rights and DKK 366 million from unrealised value adjustments. The unrealised value adjustments are broken down into DKK 260 million from development property and DKK 106 million from rental property. The value adjustment of development property is lower than the previous year, which is primarily to due to a writedown of the value of Ydre Nordhavn. Despite increasing turnover, staff costs and other external costs were reduced by DKK 3 million compared to the previous year to DKK 177 million. In 2015, depreciation amounted to DKK 126 million, which is an increase of DKK 3 million compared to the previous year. Of the total depreciation, DKK 92 million can be attributed to depreciation on the facility for receiving soil at Nordhavn (DKK 83 million in 2014). Depreciation of the port installations amounts to DKK 24 million while deprecation on the buildings not included in the accounts as investment property as well as operating equipment amount to DKK 10 million. 28

30 Operating profit was DKK 586 million against DKK 902 million in Operating profit excluding value adjustment of investment property totals DKK 191 million (DKK 141 million in 2014) which is the best since the company s inception in In 2015, cash flow from primary operations (EBITDA) was DKK 264 million. Thus for the first time since the company s inception, cash flow from primary operations was higher than the net interest expenses from the company's debt, which amounted to DKK 232 million (DKK 326 million in 2013). The reason why it has been possible to reach this milestone is, in addition to the improvement in operating profit, due to declining interest rates in that the level of debt remained largely unchanged throughout the year. The low inflation in 2014 also helped to limit interest expenses since around one third of the total debt is placed in real rate debt. In 2014, average financing expenses were 1.8 per cent whereas in 2013 the figure was 2.5 per cent. In 2015, cash flow from primary operations (EBITDA) was DKK 317 million (DKK 264 in 2014). Once again in 2015, cash flow from primary operations was higher than the net interest expenses from the company's debt, which is an important control target for the company. In 2015, interest expenses amounted to DKK 237 million (DKK 234 million in 2014). The reason why it has been possible to reach this milestone is, in addition to the improvement in operating profit, due to low interest rates in that the level of debt remained largely unchanged throughout the year. The low inflation in 2015 also helped to limit interest expenses since around one third of the total debt is placed in real rate debt. In 2015, average financing expenses were 1.8 per cent corresponding to the previous year. Note: Cash flow from primary operations and interest expenses, net (DKK million), cash flow fra primær drift means cash flow from primary operations, renteudgifter, netto means interest expenses, net The share of profits from the company s subsidiaries was almost DKK 69 million in 2015 compared to DKK 30 million in Byggemodningsselskabet Marmormolen P/S, which undertook land development at Marmormolen and participated in the project development of residential properties through an associated company, contributed DKK 85 million. Of this, DKK 25 million relates to the project development of the residential properties while the rest relates to the land development itself. The land development is nearing completion at Marmormolen, and the company was therefore liquidated at the end of On liquidation, CPH City & Port Development took over the company s assets and liabilities. 29

31 FN-Byen P/S posted a result of DKK 16 million in The result reflects the necessity of having to allocate a larger sum to rectify deficiency work than it expected to be able to recover through the contract guarantee. It proved necessary for the company to draw on the guarantee, because the contractor went bankrupt before the contract s completion. In 2015, overall profits from joint ventures etc. totalled DKK 56 million, of which DKK 21 million relates to Copenhagen Malmö Port AB (CMP) while the remainder relates to DLU. CMP s result was slightly down on the year as a result of increased rental payments to the port owners. The share of profits in DLU can be attributed to the capitalisation of the company s last two building sites. As a result of the slightly rising interest rate level at the end of 2015 compared to 2014, the fair value of the company s debt was reduced by DKK 528 million. Since the company s inception, the total fair value adjustment of debt, which has impacted the result, amounted to DKK 1,594 million. Balance sheet At the end of 2015, the total balance sheet was DKK 15,631 million (DKK 13,912 million in 2014). Tangible fixed assets amounted to DKK 12,444 million, which is an increase of DKK 352 million on the year. The increase can primarily be attributed to investment property, which despite sales of DKK 493 million increased by DKK 507 million. The increase is largely on account of receipts from investments primarily in infrastructure in the company s development areas, including underground parking facilities acquired from the subsidiary, Byggemodningsselskabet Marmormolen P/S and from positive value adjustments of the remaining properties. The value of port facilities amounted to DKK 1,025 million, which is a decrease of DKK 105 million. This is attributable to depreciation of the facility for receiving soil at Nordhavn, which is depreciated as the capacity for receiving soil is utilised. At the end of 2015, financial assets amount to DKK 933 million, which is DKK 333 million higher than in The increase is primarily attributable to additions in the form of investments in Projektselskabet Marmorbyen P/S at a value of DKK 215 million, which was acquired from the subsidiary Byggemodningsselskabet Marmormolen P/S during liquidation. In addition, there is an increased value of investments in the subsidiaries and joint ventures due to the results received in 2015, albeit adjusted for the dividend payment of DKK 27 million from CMP. Finally, there is a receivable from DLU according to the agreement that was fulfilled in During 2015, receivables decreased by DKK 164 million, which is primarily attributable to receivables from the sale of property. The majority of receivables from the sale of property are secured through guarantees. Non-current liabilities, including the current portion of the long-term debt, amounts to DKK 19,288 million measured at fair value. This is a rise of DKK 2,384 million compared to last year. The rise can primarily be attributed to the payment of DKK 1,718 million to the owners in respect of the change in the regulations and the raising of loans for purchasing German government bonds to use for collateral at DKK 1,194 million. Finally, the value of the debt during 2015 was adjusted downwards by DKK 528 million for determining fair value. Current debt increased by DKK 60 million primarily in the form of increased drawings on the company s overdraft facilities. The nominal value of the long-term debt totals DKK 17,341 million against DKK 14,363 million at the end of Equity after the transferred result for 2015 amounted to DKK -4,070 million. This is a decrease compared to the previous year of DKK 700 million, corresponding to the difference 30

32 between the disbursed owner contribution and net income plus exchange rate and fair value adjustment of financial instruments in the companies where CPH City Port & Development has ownership interests. Outlook for 2016 and future years In terms of its financial management, the company s management focuses closely on longterm value creation in the company. Since the company s inception in 2007, the economic conditions, particularly the conditions in the property market, have been unfavourable for the company. At the same time, two legislative amendments to VAT legislation and to property taxation have affected the value of CPH City & Port Development s properties and thus the profit and equity by an estimated DKK -1,400 million Egenkapital By & Havn Mio. kr , primo Egenkapital exkl. særlige effekter Fjernelse af fradrag for grundforbedring Markedsværdiregulering, gæld Boligmoms Udbetaling til Interessenter (Sydhavnsmetro) Note: egenkapital ekskl. særlige effekter means equity excluding fair value adjustment and the effect of property tax and the removal of land improvement relief. Fjernelse af fradrag for grundforbedring means removal of land improvement relief. Markedsværdigregulering, gæld means fair value adjustment. Boligmoms means property tax. Udbetaling til interessenter (Sydhavnsmetro) means payment to stakeholders (Sydhavnsmetro) was the first year that broke a number of years negative results, which were strengthened further in 2014 and Excluding the payment of DKK 1.7 billion to the owners at the beginning of 2015 to partly finance the metro to Sydhavnen, it has been possible to improve equity by more than DKK 1,500 million since For the company's upcoming strategy period until 2019, the objective is to improve equity by an additional DKK 1 billion albeit excluding the impact on equity of the company's contribution to the establishment of the Nordhavn Tunnel. 31

33 Another objective for the strategy period is for the company to strengthen its operating earnings measured in proportion to the interest payments on the company s debt. The objective will be achieved through the sale of building rights totalling DKK 3.7 billion during the strategy period. Development in the longer term in both equity and debt are dependent on the economic situation in the years ahead. The type of company and its ownership mean that the negative equity has no consequence for the company s continuing operations. The company s capital requirements will be covered by loans from Nationalbanken under existing agreements. The company s liquidity risk is therefore very low and the annual report has been prepared on the assumption of continued operations. Events after the end of the financial year Byggemodningsselskabet Marmormolen P/S with its associate company was liquidated on 31 December The final General Meeting was held on 8 February The liquidation proceeds of DKK 119 million were paid by the liquidators to CPH City & Port Development in connection with the General Meeting. As a result of the liquidation, CPH City & Port Development has acquired the company's assets and liabilities. The liquidation means that the remaining land development works at Marmormolen that will be initiated when buyers have been found for the remaining building plots at Marmormolen implemented under the auspices of CPH City & Port Development. Accounting policies 12. Accounting Policies General As a partnership, CPH City & Port Development is covered by the provisions of the Danish Financial Statements Act governing the presentation of annual reports for accounting class A enterprises. In order to enhance the transparency and information value of the annual report, CPH City & Port Development has decided, as in previous years, that the preparation of the annual report shall follow the rules of reporting for class D enterprises (state-owned public companies). Since enterprises covered by accounting class A are not subject to the requirement to prepare group accounts, CPH City & Port Development has opted not to prepare group accounts. General information on calculation and measurement All income is recognised in the income statement as it is earned based on the following criteria: 1) delivery has taken place before the end of the accounting period 2) there is a binding sale agreement 3) the sale price has been established, and 4) at the time of sale, payment has been received or may with reasonable certainty be expected to be received. Fair value adjustments of investment property, financial assets and liabilities are also included in the income statement. Also included are any costs incurred to achieve the period s earnings, including depreciation, write-downs and provisions and carry-backs as a result of amended accounting assessment of amounts that have previously been recognised in the income statement. 32

34 The assets are included in the balance when, as a consequence of an earlier event, it is likely that future financial advantages will accrue to the partnership and the asset s value can be reliably measured. Liabilities are included in the balance sheet when the partnership, as a consequence of an earlier event, has a statutory or actual liability and it is likely that future financial advantages will flow from the partnership and the value of the liability can be measured reliably. On first recognition, assets and liabilities are measured at cost. Assets and liabilities are subsequently measured as described below for each item. When implementing recognition and measurement, predictable losses and risks arising prior to presentation of the annual report that confirm or invalidate conditions that exist on the balance sheet date, are taken into account. Treatment of investments in subsidiaries, joint ventures and associated companies in the parent company Investments in subsidiaries, joint ventures and associated companies are recognised and measured in accordance with the equity method. The relative share of the net profit for the year, less write-down of goodwill is recognised under the items Income from investments in joint ventures and subsidiaries and Income from investments in associated companies. In the balance sheet, under the items Investment in subsidiaries and Investment in joint ventures and Investment in associated companies, the proportionate ownership share of the companies net asset value is calculated in line with the parent company's accounting policies plus any goodwill. Foreign currency translation During the period, transactions in foreign currency are converted to the exchange rate prevailing on the date of the transaction. Gains and losses arising between the exchange rate prevailing on the date of the transaction and the exchange rate on the date of payment are recognised as a financial item in the income statement. Receivables, liabilities and other monetary items in foreign currency that are not settled on the balance sheet date are converted to the exchange rate prevailing on the balance sheet date. The difference between the exchange rate prevailing on the balance sheet date and the exchange rate prevailing on the transaction date is recognised as a financial item in the income statement. If the partnership s foreign subsidiaries, associated companies and joint ventures are independent units, the income statement is converted to average exchange rates, while the balance sheet items are converted to the exchange rate prevailing on the balance sheet date. Exchange rate adjustments arising in connection with the conversion of independent foreign companies equity capital at the beginning of the year, and exchange rate adjustments arising as a result of conversion of independent foreign companies income statements at average exchange rates, are recognised directly in the equity. Segment information Information is provided for net turnover, operating profit before financial income and expenses, and assets and liabilities broken down into the business segments Land Development, Leasing, Parking and Port Operations. The business segments coincide with the segments for which part accounts are drawn up in accordance with Article 7(1) of the 33

35 Accounting Regulations for competitive activities, non-competitive activities and the financial area in CPH City and Port Development. Information on business segments is based on the partnership s return and risks and on internal financial management. Land development consists of: Income from the sale of properties, including value adjustment of investment properties intended for development Activities broadly connected with land development, including costs for promoting the recreational use of the partnership s properties and income from the soil reception. CPH City and Port Development s share of the items in subsidiaries, joint ventures and associated companies relating to the land development Other items not covered by the other business segments. Leasing consists of: Income from the leasing of building, land and water area leases Income from the sale of rental properties, including value adjustment of rental properties Costs of operation and maintenance of CPH City and Port Development buildings and land that are leased or expected to be leased Depreciation of the fixed installations relating to leasing. Port operations consist of: CPH City and Port Development s share of the items in the joint venture (Copenhagen Malmö Port AB) CPH City and Port Development s income from leasing fixed installations to joint venture (Copenhagen Malmö Port AB) Depreciation of fixed installations leased to joint venture (Copenhagen Malmö Port AB) Port income in CPH City and Port Development and the associated costs. Parking consists of: Income from parking at CPH City and Port Development's parking facilities Costs of operation and maintenance of CPH City & Port Development s parking facilities Operation and administration of parking facilities for DanLink-Udvikling P/S. There is only one geographic segment. Items recognised in the net profit for the period up to and including the profit before net financials are broken down. Assets in the segment comprise assets used directly in the operation of the segment. Segment liabilities include non-interest-bearing liabilities derived from the segment s operation, including suppliers of goods and services and other debts. Income statement Income Net turnover includes port income, rental income, parking revenues, income from soil reception and other revenue. Turnover is recognised in the income statement when delivery and risk transfer to the buyer has taken place before the end of the accounting period. Turnover is recognised ex. VAT and less discounts in connection with the sale. 34

36 Rental income is stated exclusive of cost reimbursements from tenants in respect of heating because this amount outstanding is recognised in the balance sheet. Income from soil reception is recognised as the soil is received from customers. Value adjustments of investment property comprise realised proceeds from property sales and the period s calculated value adjustments. For a calculation of the value adjustments, see the section on investment property. Proceeds from the sale of investment property include gains on the estimated market value for properties considered to be sold at the time of contract. Other operating income comprises income of a secondary nature relative to the partnership s main activity. Profits or losses on disposal of tangible fixed assets stated as the difference between a possible sales sum and the booked value are included under other operating income or other operating expenses. Expenses Staff expenses include wages and salaries, fees, pension contributions and other staff expenses for the partnership's employees, including the Executive Board and Board of Directors. Other external expenses include the repair and maintenance of fixed installations and machinery, cleaning of fixed installations and buildings, insurances, property taxes, administration costs, etc. Depreciation Tangible fixed assets are depreciated on a straight-line basis over the expected useful life. The expected useful lives are as follows: Bridges, quays and other port facilities... up to 67 years Buildings etc...up to 40 years Leased fixed assets...30 years Floating operating machinery years Other plant and equipment years The depreciation basis is the purchase price less any scrap value. Land and investment properties are not depreciated. Investment property is recognised at present value, cf. below. Net financials Net financials comprise interest income and expenses relating to corporate debt bonds, cash at bank and in hand as well as liabilities and are recognised with the amount concerning the financial year. Balance sheet Tangible fixed assets Tangible fixed assets are valued according to the following principles. Investment property Investment property is defined as property not used in the partnership s operations, and which is owned with a view to achieving rental income and/or capital gains on sale. 35

37 Investment property is measured at fair value in accordance with the models which, with the involvement of external professional valuers, were adopted at the time of the partnership's inception, taking account of the properties specific characteristics: The fair value of the rental properties is measured at the capitalised value of the net rental for the individual rental properties. The capitalised value is calculated using a current market-based yield requirement. The present value of development areas is measured at the discounted-back value of expected sales value for the individual development areas using a current marketbased yield requirement for the areas in question. Principles, calculation methods and assumptions for the management's estimate of the properties' fair values are set out in the note "Tangible fixed assets". Value adjustments of investment property are recognised in the income statement. Other tangible fixed assets Other tangible fixed assets comprise land and buildings, port facilities, operating equipment and fixtures and fittings. The book value comprises the purchase price of the assets less depreciation and amortisation. Value enhancing main renovations and other major renovation work are capitalised as improvements. Depreciation assessment of tangible fixed assets The accounting value of tangible fixed assets that are not continuously measured at fair value is assessed periodically to determine whether there is an indication of impairment beyond what is expressed with normal depreciation. If this is the case, depreciation is carried out at the asset s lower recovery value. The recovery value for the asset is stated as the highest value of the net sales value and the capital value. If it is not possible to determine the recovery value for the individual asset, impairment is assessed for the smallest group of assets where a reliable recovery value can be determined in an overall assessment. Head office properties and other assets where it is not possible to state a capital value because of the fact that the asset in itself is not generating future cash flows, are assessed for impairment together with the group of assets to which they can be attributed. Financial fixed assets For investments, refer to the description above in the section "Treatment of investments in subsidiaries, joint ventures and associated companies in the parent company. Accounts receivable under financial fixed assets are measured at amortised cost, which is usually equivalent to nominal value less write-downs to meet expected losses. Receivables Receivables are valued at amortised cost, which largely corresponds to the nominal value or a lower net realisable value, which corresponds to the nominal value less write-down for loss in value. Write-downs for losses are stated on the basis of an individual assessment of the individual receivables and for trade receivables together with a general write down based on the partnership s experience. Other provisions Other provisions comprise estimated costs for environmental measures relating to pollution liabilities. Other provisions are recognised when, as a result of an event which occurred 36

38 before or on the balance sheet date, the partnership has a legal or actual liability and it is probable that financial advantage will have to be surrendered to settle the liability. Non-current liabilities and derivative financial instruments Debt to financial institutions and issued corporate bonds are measured at the time of raising the loans at cost, corresponding to the received proceeds less transaction costs incurred. After first recognition, issued corporate bonds and debt to financial institutions are measured at fair value. Changes in fair value are recorded in the income statement. Derivative financial instruments entered into for hedging future cash flows in the form of variable interest payments are measured at fair value. Changes in fair value are recognised in the income statement. The short-term portion of non-current liabilities is recognised under current liabilities as Short-term portion of total non-current liabilities. Prepayments and accrued income Prepayments and accrued income comprise costs incurred relating to the subsequent accounting period. Prepayments received from customers Prepayments received from customers listed as liabilities mainly comprise recoveries relating to income in the subsequent accounting periods. Other financial liabilities Other financial liabilities, which include bank debt, creditors and other debt, are measured at the amortised cost, which is usually equivalent to nominal value. Cash flow statement The cash flow statement shows the partnership s cash flow for the period broken down into operating, investment and financing activity, changes to the period s cash funds and the partnership's liquidity at the beginning and end of the period. Cash flow from operations Cash flow from operations is stated according to the indirect method as the period s primary operations adjusted for non-cash profit items such as depreciation and amortisation, provisions and changes in working capital and interest payments received and made. Working capital comprises current assets minus current liabilities apart from "Short-term portion of non-current liabilities" excluding the items included in cash funds. Cash flow from investment activities Cash flow from investment activities comprises cash flows from the purchase and sale of fixed assets and financial assets. Cash flows from financing activities Cash flow from financing activities comprises cash flows from the raising and repayment of non-current liabilities and cash flow to and from the owners. Cash and cash equivalents Cash funds comprise the items cash at bank and in hand and short-term bank debt. The cash flow statement cannot be derived directly from the income statement and balance sheet. 37

39 Financial ratios The financial ratios given in the key figures and financial ratios summary have been calculated as follows: Operating profit = Rate of return = Solvency ratio = Return on equity = Operating profit x 100 Total income Operating profit x 100 Average assets Equity x 100 Total equity and liabilities Profit after tax x 100 Average equity 38

40 13. Management report The Board of Directors and the Executive Board have discussed and adopted the annual report for the financial year 1 January to 31 December 2015 for CPH City & Port Development I/S covering the management s report, income statement, balance sheet, cash flow statement, equity statement, notes and accounting policies. The annual report is presented in accordance with the Danish Financial Statements Act, accounting class A. CPH City & Port Development has also chosen to adopt recognition and measurement criteria and notes etc. in accordance with the provisions for accounting class D enterprises for non-listed State-owned companies. This is done to achieve greater transparency and information value compared to the requirements for accounting class A enterprises. It is our opinion that the chosen accounting policies are appropriate, that the company s internal controls relevant for compiling and presenting annual reports are adequate, and that the annual report therefore provides a true and fair picture of the company s assets, liabilities and financial position as at 31 December 2015 and of the result of the company s activities and cash flow for the financial year 1 January to 31 December It is also our opinion that the management report contains a true and fair account of the matters with which the report deals. The annual report is presented for the partnership s approval on 19 April The Board of Directors recommends that no dividend be paid. Copenhagen, 30 March 2016 Executive Board Jens Kramer Mikkelsen CEO Board of Directors Carsten Koch Mads Lebech Lars Berg Dueholm Chairman Vice-Chairman Morten Kabell Dorte Krak John Becher Krommes Ida Lysbeck Madsen Lars Weiss 39

41 14. The independent auditor s statement To the stakeholders in CPH City & Port Development Endorsement of the annual accounts We have audited the annual accounts for CPH City & Port Development for the period 1 January 31 December 2015 comprising the accounting policies, income statement, balance sheet, equity statement, cash flow statement and notes. The annual accounts have been drawn up in accordance with the provisions of the Danish Financial Statements Act for class A enterprises. Management's responsibility for the annual accounts The management is responsible for preparing annual accounts that give a true and fair view in accordance with the Danish Financial Statements Act. The management is also responsible for the internal controls that the management deems necessary to prepare annual accounts without material misstatement, irrespective of whether this is due to fraud or error, and the choice and use of appropriate accounting practice and the exercise of accounting estimates that are reasonable in the circumstances. In addition, it is also the responsibility of the management to ensure that the dispositions covered by the annual accounts are in accordance with legislation and other provisions as well as with contracts entered into and customary practice. Auditor's responsibility Our responsibility is to express an opinion on the annual accounts on the basis of our audit. We have conducted the audit in accordance with international standards on auditing and additional requirements according to Danish audit legislation and good public auditing practice cf. the Act on the Auditing of State accounts, etc. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the annual accounts are free from material misstatement. An audit involves performing audit procedures to obtain audit evidence concerning the amounts and disclosures in the annual accounts. The audit procedures selected depend on the auditor's assessment, including the assessment of the risk of material misstatement in the annual accounts, irrespective of whether such misstatement is a result of fraud or error. In respect of risk assessment, the auditor considers whether the internal controls, which are relevant to CPH City & Port Development's preparation of annual accounts, give a true and fair picture. The purpose is to design audit procedures that are appropriate in the circumstances, but not to express an opinion on the effectiveness of CPH City & Port Development's internal control. An audit also includes assessing whether the management's choice of accounting policies is appropriate, whether the management's accounting estimates are reasonable and the overall presentation of the annual accounts. The audit also involves an assessment of whether the enterprise has established business procedures and internal controls that ensure that the dispositions covered by the annual accounts are in accordance with legislation and other provisions as well as contracts entered into and customary practice. It is our opinion that the audit evidence obtained is sufficient and is suitable for the basis of our conclusion. Our audit has not given rise to any qualifications. 40

42 Conclusion It is our opinion that the annual accounts give a true and fair view of CPH City & Port Development s assets, equity and liabilities and financial position at 31st December 2015 and of the result of CPH City & Port Development s activities and cash flows for the accounting year 1 January-31 December 2015 in accordance with the Danish Financial Statements Act. It is also our opinion that the enterprise has established business procedures and internal controls that ensure that the dispositions covered by the annual accounts are in accordance with legislation and other provisions as well as contracts entered into and customary practice. Emphasis of matter relating to the Annual Accounts Without this having influenced our opinion, we refer to note 13 of the accounts where the management describes the significant uncertainty associated with the valuation of the company's investment properties. Statement concerning the Management Report We have reviewed the management report in accordance with the Danish Financial Statements Act. We have not performed any procedures in addition to the audit of the annual accounts. On this basis, we are of the opinion that the information in the Management Report is in accordance with the annual accounts. Copenhagen, 30 March 2016 The National Audit Office of Denmark CVR: Lone Strøm Auditor General Morten Brædstrup-Holm Director Deloitte CVR: Lynge Skovgaard State Authorised Accountant Ulrik Benedict Vassing State Authorised Accountant 41

43 CPH City & Port Development, Nordre Toldbod Copenhagen Tel info@byoghavn.dk