FINANCIAL STATEMENTS 31 DECEMBER 2014

Transcription

1 2014 FINANCIAL STATEMENTS 31 DECEMBER 2014 University Properties of Finland Ltd Business ID

2 Contents CEO s review... 1 University Properties of Finland Ltd - Annual Report... 2 Consolidated income statement... 8 Consolidated balance sheet, assets... 9 Consolidated balance sheet, liabilities and equity Consolidated cash flow statement Accounting principles applied to the preparation of the consolidated and parent company financial statements Notes to the consolidated financial statements Calculation formulae for key figures Parent company income statement Parent company balance sheet, assets Parent company balance sheet, liabilities and equity Parent company cash flow statement Notes to the parent company s financial statements Signatures Auditor s note List of accounting books used... 29

3 1 CEO S REVIEW The year 2014 was the company s fifth year of operations. The company s first strategy period is nearing its end, and the results have been good. Investments in learning environments and the management of premises risk has seen the company rise to the European league of campus developers. Our strong focus on developing learning environments and campuses has produced concrete results, and our level of competence has improved significantly. The only way to develop is to develop operations. Together with our partner universities, we have invested in new environments with an innovative, researchoriented and experimental approach. Our competence has also received international attention. All of this is based on our current strategy, which was set for the period In 2015, an entire pilot building, named Kampusareena, will be completed on the campus of the Tampere University of Technology. It represents the campus building of the future at its best. The building will house services such as the Campus Club, a new kind of bridge between businesses and the university. The Campus Club will allow businesses to easily integrate into the university environment, and it also provides a flexible environment for RDI. In the Campus Club, the focus is on collaboration between the university and the business sector, not the premises themselves. We will continue to develop campuses in cooperation with our Nordic partners in the Campus Retrofit programme, and we are also aiming to engage in campus development cooperation at the European level. The future of campuses is international, and we want to be part of that future. We make resource-efficient investments Many of our ongoing projects involve multi-user environments that make resource-efficient use of the same infrastructure and services between many different operators. This approach is based on the sustainable use of economic, natural and knowledge resources, which have been created through these projects by sharing space, without requiring broader organisational restructuring by the parties involved. We have significant ongoing investments in research and teaching environments in the field of medicine in Turku, Tampere and Oulu. These projects also include other operators, such as the Hospital District of Southwest Finland, the City of Oulu, the National Institute for Health and Welfare, and the business sector. Universities are closely involved in these projects. Further evidence of the resource-efficient approach is that a growing number of units of universities of applied sciences have found their way to university campuses to share premises, resources and services. Building on good customer satisfaction According to the results of our 2014 customer satisfaction survey, nearly all of the respondents (97%) are prepared to recommend University Properties of Finland Ltd to their colleagues based on their experiences with the company. Just over a quarter of the respondents indicated that the operations of University Properties of Finland Ltd have improved, as a whole, over the past year. The majority of the respondents (70%) indicated that the quality of the company s operations has remained the same. Based on the results, University Properties of Finland Ltd s overall customer satisfaction is at a good level. The direction we have chosen in the past few years has been the correct one, and the measures we have implemented have had the desired impact. Positive results have been achieved particularly in developing innovative learning environments, but more work remains to be done. A company with a strong financial position University Properties of Finland Ltd is perceived as a strong and secure operator in the property industry, which is reflected in the results of the company s recent financing rounds. The financial strategy is to secure competitive financing for investments in the long run through measures such as maintaining a strong hedging level. Towards the next strategy period In 2015, we will prepare our strategy for the period This work has already begun at the time of writing this review and the task is very interesting, in view of the rapid rate of change in the near future. There are also several national themes that may affect campuses. Back when a significant number of Finland s university buildings were built, the state s goal was: a changing and open society, and changing and open university campuses. This has been, and still is, a wise strategy that will continue to be pursued. Mauno Sievänen, Chief Executive Officer

4 2 UNIVERSITY PROPERTIES OF FINLAND LTD - ANNUAL REPORT University Properties of Finland Ltd was established in Since 2010, the company has leased and developed premises primarily for universities and higher education institutions outside the Greater Helsinki region. The company is owned by 10 universities outside Greater Helsinki (University of Eastern Finland, University of Jyväskylä, University of Lapland, Lappeenranta University of Technology, University of Oulu, University of Tampere, Tampere University of Technology, University of Turku, University of Vaasa and Åbo Akademi University) and the Finnish government. The company offers universities suitable and reasonably priced premises and also develops its property assets for use by others. The aim is to turn campuses into attractive and sustainable learning and innovation environments that support the success of universities, even by international standards. The company has a strong focus on research and development in order to support the competitiveness of the owner universities by providing high-quality premises and solutions. In 2014, the company continued the long-term planning and implementation of its operations in line with its strategy. In the organisational restructuring implemented in summer 2014, the sales of vacated premises, concept development, customer relationship management and campus development were combined to clarify common processes identified in these functions. The change also clarified the organisation s internal interfaces. The company s progress towards the targets and promises outlined in its strategy has been very good. The company has found a clear direction that the entire organisation is committed to working towards. The company s operations are in excellent order, with key risks under control and operations running smoothly. After extensive background analysis, the company has begun preparing its new strategy period of Customer satisfaction has developed favourably. The overall score for University Properties of Finland Ltd s operations was 3.7 in the most recent customer satisfaction survey conducted by Innolink Research Oy, and 97% of the respondents indicated they would recommend University Properties of Finland Ltd to their colleagues. Campus vision development serves as the foundation for campus development. Construction and renovation projects have been carried out in accordance with customer needs. In 2014, the company continued its property development operations on a broad front, continued the practical implementation of the RYM SHOK research programme, invested heavily in repairs and renovation projects as well as the management of risks related to indoor air quality, and improved the energy management of its properties. Even at a time of substantial investments, the company s finances have developed favourably, with the operating profit at the planned level and the equity ratio relatively high for the industry. The increase in cash flow from new leases was significant. The company has further expanded its corporate responsibility reporting for The most relevant themes for University Properties of Finland Ltd s corporate responsibility were identified by stakeholder analysis and an evaluation of the company s own operations. The reporting is based on the GRI framework. BUSINESS OPERATIONS In 2014, the Group s revenue grew by EUR 2.0 million compared to the previous year. The key reasons behind the increase in revenue (1.5%) were the completion of repairs and renovations of premises as well as index adjustments to rental levels. In 2014, impairment was recorded for a total of EUR 4.3 million for two buildings due to the expected yields of the buildings having permanently changed to an amount substantially lower than the undepreciated acquisition cost. The company continued to make substantial investments in maintenance and annual repair work to improve the condition and quality of its properties. A financing agreement with the Nordic Investment Bank (NIB) was signed in early Following the agreement with NIB, the company s debt portfolio is divided between five key financing partners.

5 3 Key figures, in millions of euros Group 2014 Group 2013 Group 2012 Parent company 2014 Parent company 2013 Parent company 2012 Revenue Operating profit Result for the period Equity on 31 December Balance sheet total on 31 1, , , , December Equity ratio, % 52.1% 56.4% 58.2% 52.0% 56.3% 58.0% Return on capital employed, % 3.2% 3.1% 3.8% 3.2% 3.0% 3.8% Return on equity, % 3.4% 3.3% 4.4% 3.6% 3.3% 4.6% CUSTOMER RELATIONS, CAMPUS DEVELOPMENT AND COMMUNICATIONS partners. The aim of the project is to develop a model for using communications to facilitate the return of operations to buildings that have been under renovation due to indoor air quality issues. The company s strategy for the period is based on an operating model aimed at meeting customer expectations. The implementation of the strategy is divided into four separate strategic projects. The goal is to contribute to the success of universities in intensifying international competition. The company s vision, customer promise and mission: VISION: Europe s most respected campus developer OUR PROMISE: We support the success of universities by developing our properties into attractive campuses MISSION: We will ensure the solvency of the universities through the responsible development of our property portfolio Our work on creating campus visions began in 2014 and will continue until The goal is to engage in an interactive process to develop a campus vision for each university that is in line with both University Properties of Finland Ltd s strategy and the strategies of the respective universities. This process involves working in partnership with each customer to develop spatial solutions that support future learning and research. In the area of communications, in late 2014 the company began the implementation of University Communications 2.0, a project that will continue throughout 2015, with the University of Lapland and the Finnish Work Environment Fund as RENTAL OPERATIONS The occupancy rate remained nearly at the previous year s level and stood at 96.7% at the end of The average length of leases increased to eight years. The total amount of new and renewed leases in 2014 was 18, corresponding to 74,700 m 2 in leasable area. Eight of the leases were signed with universities. The average rental level of the new leases was EUR per m 2 per month. The total cash flow over the life of the leases is EUR 204 million, of which universities account for EUR million. At the end of 2014, approximately 39,750 m 2 of space (3.7% of the total property portfolio) was vacant for various reasons. Key figures for rental operations: Rental margin, % of revenue Average rental income, EUR/m 2 /month Average occupancy rate, % Average lease length, years Proportion of premises producing rental income, % Total leasable area, millions of m 2 Value of leases, million Several significant leases were signed in 2014 for newly constructed buildings, such as the new Faculty of Dentistry building in Oulu (key operators: University of Oulu, Oulu University of Applied Sciences and the City of Oulu), the newly

6 4 constructed Arvo2 building (key operator: University of Tampere) and the Medisiina D building (key operators: University of Turku, Turku University of Applied Sciences, the Hospital District of Southwest Finland and the National Institute for Health and Welfare). MAINTENANCE OPERATIONS The key focal areas of maintenance operations were energy management, annual repair programmes revised and implemented based on extensive condition assessments, ensuring that operations are in line with the operating models for maintenance activities, and the development of the operations of the service network. Guidelines for quality assurance in the delivery and implementation stages of technical systems were published and adopted. The aim of quality assurance is to minimise investigations after delivery as well as to minimise the defective or inadequate operation of systems. Key figures for maintenance operations: *heating consumption data is weather-adjusted Average maintenance costs, EUR/m 2 /month Maintenance repairs, EUR million Heating energy consumption*, kwh/gross m 2 (-6%) Water consumption, dm 3 /gross m 2 (+1.7%) Electricity consumption, kwh/gross m 2 (1.7%) INVESTMENTS In 2014, the company s investments totalled EUR million. On the date of closing the books, the company had 124 investment projects in the preparatory and planning stages (EUR 332 million) and 51 projects in the investment phase (EUR 208 million). Project planning and construction have progressed for the projects approved by University Properties of Finland Ltd s Annual General Meetings on 15 May 2014 and 15 May Over EUR 30 million Medisiina D Multi-user building, Turku Construction stage 1, renovation Lappeenranta University of Technology Arvo2, a newly constructed building for the School of Medicine University of Tampere Newly constructed building in Mattilanniemi University of Jyväskylä Kampusareena Multi-user building, Tampere New Faculty of Dentistry building Multi-user building, Oulu Over EUR 20 million Renovation of the Teacher Training School of the University of Turku University of Turku Renovation of Natural Sciences Building 2 University of Turku Ruusupuisto, new building University of Jyväskylä estimate d start estimated completio n Annual General Meeting open open estimate d start estimated completio n Annual General Meeting Other significant projects in the construction or planning phase at the end of 2014 were: - Renovation of the F wing at the University of Lapland - Renovation and alterations to the premises of the Faculty of Science at the University of Oulu - Renovation of the Futura Building at the Joensuu campus of the University of Eastern Finland

7 5 - Renovation of the old section of the Metria building at the Joensuu campus of the University of Eastern Finland - Indoor air quality and kitchen renovation of the Philologica-Lozzi building at the University of Jyväskylä - Indoor air quality renovation in Main Building C of the University of Jyväskylä - Renovation of the Calonia building at the University of Turku The most significant renovation and new construction projects completed in 2014 were: - Renovation of the T Building at the University of Jyväskylä - Renovation of the R Building at the Tampere University of Technology, Phase 2 - Cleanroom project at Tampere University of Technology RESEARCH AND DEVELOPMENT ACTIVITIES The company s research and development investments totalled EUR 1.2 million in 2014 (2013: EUR 1.0 million). The company received EUR 0.4 million in grants or funding from external partners for research projects in Research activities are conducted in close cooperation with the owner universities and selected partner enterprises with the aim of developing the attractiveness and functionality of campuses. Premises are developed to support learning and the creation of new knowledge. The company s key development areas are research and learning environments as well as the development of energy efficiency, indoor air quality and conditions as well as services. The most strategically significant research project is entitled Premises for Learning and Creating New Knowledge and is part of the Indoor Environment research programme coordinated by the Strategic Centre for Science, Technology and Innovation of the Built Environment (RYM SHOK). The four-year project began on 1 May 2011 and has a total scope of EUR 10 million. The Premises for Learning and Creating New Knowledge project includes 16 organisations and is divided into 28 sub-projects. The company has the lead in the Premises for Learning and Creating New Knowledge project In the programme, the company is working with six corporate partners and eight research partners to study how the requirements for premises are changing in the area of learning and creating new knowledge, and what the effects are on premises needs and concepts, user-based design processes and solutions, user experiences and services, and solutions that support sustainable development. Various pilot projects have been launched based on the research, with small-scale demos implemented within the year having proved most useful from a research standpoint. The project vision is that university campuses are open, inspiring and international meeting places for talented multidisciplinary people. At these innovative campuses, new knowledge is created and learned effectively, while skills and competencies are quickly utilised in new business ventures for greater competitiveness and general prosperity. SUSTAINABLE DEVELOPMENT The efficiency of the use of space at the company s properties also takes into consideration the temporal efficiency of the utilisation of space as well as the versatility and shared use of premises. The company develops properties to make them increasingly energy-efficient and ecological. In its investments, it focuses on finding environmentally friendly and long-term solutions. The company s long-term goal is to comply with the EU energy directive that entered into force in summer The action programme for premises (TETS) under the framework of the Finnish energy efficiency agreement system, which is very comprehensive even by international standards, is a tool that facilitates property owners participation in the achievement of national energy efficiency targets. Based on current information, the energy efficiency targets set by the TETS programme will be achieved through energy management measures. FINANCING The goal of the company s financing operations is to create a long-term and cost-effective financing base in line with the company s financing policy. This will create a stable financial operating environment for property maintenance and development. The most significant measure taken by the company in the area of financing in 2014 was an extensive financing agreement signed with the Nordic Investment Bank in January 2014 with a value of EUR 75 million. The agreement helps secure the company s financial requirements during the ongoing period of substantial

8 6 investment, increasing both cost-efficiency and stability. The company also refinanced its existing loans to take advantage of the favourable market conditions by increasing the overall hedging rate and the interest-bearing period. This provides added stability and cost-efficiency in the company s finances as well as its rental levels. Key figures for financing operations: Total loan amount, million Average loan maturity, years Average financing interest, % Interest-bearing period, years Hedge level of loan capital, % Interest cover ratio Liquidity on 31 December, million ANNUAL GENERAL MEETING The Annual General Meeting of University Properties of Finland Ltd was held at Hotel Tammer in Tampere on 15 May All shareholders were represented at the Annual General Meeting. The Annual General Meeting confirmed the financial statements for 2013 and discharged the members of the Board of Directors and the Chief Executive Officer from liability. The Annual General Meeting confirmed the number of members of the Board of Directors as six (6). The Annual General Meeting re-elected the following as members of the Board of Directors: Petri Lintunen (University of Tampere) as Chairman, Juha Lemström (Senate Properties Ltd) as Deputy Chairman and Matti Paavonsalo (University of Eastern Finland), Pirjo Kytösalmi (University of Oulu) and Kalervo Väänänen (University of Turku) as ordinary members. Director-General Päivi Laajala (Ministry of Finance) was elected as a new member. The Board of Directors met 10 times in Authorised Public Accountants KPMG Oy were elected the company s auditors, with APA Hannu Paunikallio as the responsible auditor. The Annual General Meeting decided to maintain the remuneration of Board members and auditors at the current level. The Annual General Meeting decided on the company s investment programme for major projects (valued at over EUR 30 million). The Annual General Meeting adopted the Board s proposal for a dividend of EUR 6.27 per share to be paid for the 2013 financial year, corresponding to a total of EUR 15,800,000. PERSONNEL The Chief Executive Officer of University Properties of Finland Ltd is Mauno Sievänen. In 2014, the company had an average of 34 employees in functions including customer relations, campus and concept development, property development and maintenance, finance, administration and rental operations. The company s operating principle is based on a flat organisational structure that is close to the customer. The average age of our youthful personnel is 46.7 years. We strengthened our organisation during the year by recruiting four new employees. The company has implemented an incentive scheme with targets based on the company s strategic objectives. In the event that the remuneration under the incentive scheme is paid out in full, the cost effect of the incentive scheme will be EUR 0.2 million, or approximately 7% of personnel expenses. Key figures for personnel: Average number of personnel Number of personnel at the end of the period Personnel expenses, million OPERATIONAL RISKS The company s operational risks are mainly related to property asset risks, financial risks, maintenance operations and the project risks of renovation and new construction projects. Further risks that can be identified include risks related to the indoor air quality of buildings, the vacating of premises, and the re-leasing of premises. Key risks have been identified and analysed and plans have been prepared for their prevention. In 2014, the company carried out an extensive risk assessment and prepared action and contingency

9 7 plans that will be followed at all levels of the organisation. The company s financial risks are primarily related to interest and liquidity risks. The identified financial risks are managed by maintaining liquidity reserves and interest rate hedging in line with the company s financing policy. The company s asset and operational risks are insured with If Insurance Company Ltd. The company has defined its key objectives and procedures for the management of financial risks in its financing policy. The aim of the company is to create a financing base that is extensively hedged against interest rate risk. The company s target is an interest rate hedging level of 70-90% and an interest-bearing period of 3-5 years. CHANGES IN GROUP STRUCTURE IN 2014 In addition to direct property ownership, University Properties of Finland Ltd owns shares in six different companies. Of these, the Group s subsidiaries and affiliated companies are included in the consolidated financial statements of University Properties of Finland Ltd. There were no changes in group structure in COMPANY SHARES company will also focus on further developing its property business during the year. The company will carefully monitor the process of the Finnish state selling its shares in University Properties of Finland Ltd (current holding 33.3% of the company s share capital), which began in early Potential share transactions may affect the company s existing financing covenants. PROPOSAL ON THE USE OF THE PROFIT AND DISTRIBUTABLE FUNDS The distributable funds of the parent company total EUR 299,985,922.29, of which the result for the financial year accounts for EUR 20,320, The Board of Directors proposes that the profit for the period is transferred to retained earnings and that the distributable funds are used as follows: - a total dividend of EUR 12,300,000, equal to EUR 4.88 per share - the remaining distributable funds will be retained in equity. There have been no significant changes in the company s financial position after the end of the financial period. The company s liquidity is good and the Board of Directors estimates that the proposed distribution of earnings will not compromise the company s solvency. The company has one share class and the share capital is divided as follows: vote / share 2,520,000 shares 2,520,000 shares All shares have equal entitlement to dividends and company assets. Shares are governed by a redemption clause specified in Section 11 of the company s Articles of Association. OUTLOOK FOR 2015 The company expects its operating environment to remain stable and revenue to increase compared to the previous year. The development of the company s result is expected to be at the same level as in previous years. In 2015, we will continue to deepen our cooperation with customers and key service providers. This will ensure that the entire partner network will work towards the company s strategic goals. The outlook for 2015 is positive as progress will be made in several significant investments. The

10 8 University Properties of Finland Ltd CONSOLIDATED INCOME STATEMENT Note 1 Jan 31 Dec Jan 31 Dec 2013 REVENUE 1) , ,61 Other operating income 2) , ,00 Personnel expenses Salaries and remuneration 3) , ,51 Other personnel expenses Pension expenses , ,05 Other personnel-related costs , , , ,43 Depreciation and impairment 9), 10) Planned depreciation , ,64 Impairment of fixed assets , , , ,73 Other operating expenses 5) , ,14 Share of profit (loss) of associated companies 11) , ,64 OPERATING PROFIT , ,67 Financial income and expenses 7) Interest and financial income Interest income , ,77 Other interest revenue , ,67 Financial charges , ,20 Interest and financial expenses Interest expenses , ,77 Other interest and financial expenses , , , ,19 PROFIT (LOSS) BEFORE APPROPRIATIONS AND TAXES , ,48 Income taxes 8) , ,39 Minority interest , ,22 PROFIT (LOSS) FOR THE PERIOD , ,87

11 9 University Properties of Finland Ltd CONSOLIDATED BALANCE SHEET, ASSETS NON-CURRENT ASSETS Note Intangible assets 9) Intangible rights 1 080, ,00 Other capitalised expenditure , , , ,69 Tangible assets 10) Land and water areas , ,60 Buildings and structures , ,67 Machinery and equipment , ,13 Other tangible assets , ,35 Prepayments and incomplete acquisitions , , , ,37 Investments 11) Holdings in associated companies , ,03 Other investments , , , ,13 Non-current assets total , ,19 CURRENT ASSETS Short-term receivables 12) Receivables from property income 9 654, ,19 Accrued income , ,02 Other receivables , , , ,31 Cash and cash equivalents , ,87 Current assets total , ,18 ASSETS TOTAL , ,37

12 10 University Properties of Finland Ltd CONSOLIDATED BALANCE SHEET, LIABILITIES AND EQUITY Note EQUITY Share capital , ,00 Invested unrestricted equity fund , ,78 Retained earnings , ,44 Profit/loss for the period , ,87 Total equity 13) , ,09 MINORITY INTEREST , ,41 LIABILITIES Long-term liabilities 14) Loans from financial institutions , ,87 Other debts , , , ,87 Short-term liabilities 14) Debts to associated companies 0, ,87 Loans from financial institutions , ,50 Deferred tax liability 15) , ,32 Prepayments received , ,05 Trade payables , ,78 Other debts , ,98 Accrued expenses , , , ,00 Total liabilities , ,87 TOTAL LIABILITIES AND EQUITY , ,37

13 11 University Properties of Finland Ltd CONSOLIDATED CASH FLOW STATEMENT 1 Jan 31 Dec Jan 31 Dec 2013 Operating cash flow Operating profit , ,67 Planned depreciation and impairment , ,73 Other adjustments without payment transactions , ,64 Change in working capital 1) , ,04 Interest received , ,64 Interest paid , ,41 Other financial items , ,06 Taxes paid , ,28 Operating cash flow total , ,97 Investment cash flow total Investments in tangible and intangible assets , ,87 Investment cash flow total , ,87 Financing cash flow total Withdrawals/repayments of long-term loans , ,15 Withdrawals/repayments of short-term loans , ,49 Dividends paid , ,00 Financing cash flow total , ,66 Change in cash and cash equivalents , ,76 Cash and cash equivalents at the start of the period , ,11 Cash and cash equivalents at the end of the period , ,87 Notes to the cash flow statement 1) Itemisation of working capital adjustment Adjustment of short-term receivables , ,98 Adjustment of short-term non-interest bearing debts , , , ,04

14 12 University Properties of Finland Ltd ACCOUNTING PRINCIPLES APPLIED TO THE PREPARATION OF THE CONSOLIDATED AND PARENT COMPANY FINANCIAL STATEMENTS Basic information about the company University Properties of Finland Ltd manages, develops and leases properties and business premises in its ownership primarily for research and education purposes, as well as for related supporting business activities in order to secure the long-term operation of universities. The Group s parent company is University Properties of Finland Ltd, which is a Finnish listed company domiciled in Tampere. The address of University Properties of Finland Ltd is Uimalankatu 1, Tampere. Basis of preparation of the financial statements The consolidated and parent company financial statements of University Properties of Finland have been prepared in accordance with the Finnish Accounting Act and Ordinance, as well as the Finnish Limited Liability Companies Act. The financial period under review is the sixth financial period of the parent company and the Group. The company started its actual operations in Group relations University Properties of Finland Ltd was part of the Senate Properties group of companies until 31 December As of the beginning of 2010, University Properties of Finland Ltd has been an associated company of Senate Properties, after the Finnish government transferred two thirds of the shares in the company to 10 universities outside the Greater Helsinki region. University Properties of Finland Ltd is the Group s parent company. The Group includes three subsidiaries and one associated company. These subsidiaries and the associated company were first included in the consolidated financial statements of University Properties of Finland on 31 December KiOY Turun Kasarmialue, a wholly-owned subsidiary of University Properties of Finland, was merged with the parent company on 30 September Accounting principles applied in the preparation of the consolidated financial statements The consolidated financial statements have been prepared using the acquisition cost method. The difference between the acquisition cost of subsidiaries and the equity corresponding to the acquired proportion has been attributed entirely to buildings. The proportions attributed to buildings are depreciated according to the depreciation plan for the fixed asset class in question. Intra-group transactions, receivables, debts and profit distribution have been eliminated. Minority interests are recognised separately from the Group s equity and result. The associated company has been included in the consolidated financial statements using the equity method. Valuation and timing principles Revenue Revenue consists primarily of rental income for premises, usage reimbursements and other service income. Income is recorded after the performance has been released. Valuation of fixed assets Intangible and tangible assets are valued at their original acquisition cost and depreciated over their useful lives according to a depreciation plan. Depreciation is presented in the income statement as planned depreciation. The useful lives used for depreciation are as follows: Intangible rights Other capitalised expenditure Buildings Structures Machinery and equipment Other tangible assets 3 years 5 years years 15 years 7 10 years 10 years

15 13 Investments The parent company s investments include shares in subsidiaries and associated companies and loans to Group companies. Investments are valued at acquisition cost on the balance sheet. Research and development costs Research costs are recorded as annual expenditure. Construction project costs similar to development costs are capitalised when the technical implementation of the project is confirmed and the project is deemed to provide income for several years. Development costs are otherwise entered as annual expenditure. Financial assets and liabilities and derivative contracts Financial assets and non-interest bearing debt are recognised at acquisition cost. Interest-bearing debt is measured at amortised cost using the effective interest rate method. Interest rate swap contracts made to hedge the risk exposure associated with long-term loans are not entered on the balance sheet but instead are listed in the notes to the financial statements Currency derivatives have been used to hedge the currency risk of loans denominated in SEK and GBP. The currency risk is fully hedged. Loans denominated in foreign currencies have been recognised in the financial statements at the contract exchange rate or the exchange rate at the time of repayment rather than the exchange rate on the date of closing the books. Income taxes Direct income taxes for the period have been amortised and recognised in the income statement. A deferred tax liability has been entered in the consolidated financial statements from the accrued depreciation difference of the parent company and subsidiaries. A deferred tax asset based on the postponed depreciation in the taxation of the subsidiaries has not been recognised due to their future utilisation being uncertain. Other accounting principles The Group has arranged statutory pension insurance for its personnel with a pension insurance company. The pension costs are entered as an expense in proportion to salaries.

16 14 University Properties of Finland Ltd NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Notes to the income statement 1 Jan 31 Dec Jan 31 Dec ) Revenue Rental expenses , ,47 Usage reimbursements , ,17 Other property income , ,97 Total , ,61 Geographically, the Group s revenue is produced in Finland. 2) Other operating income , ,00 Other operating income consists of research project grants awarded during the period. 3) Personnel expenses and number of personnel Salaries and remuneration , ,51 Pension expenses , ,05 Other personnel-related costs , ,87 Total , ,43 Salaries and remuneration to members of the Board of Directors and the Chief Executive Officer during , ,65 Average number of personnel during the period Number of personnel at the end of the period ) Depreciation and impairment Described in more detail in notes 9 and 10 5) Other operating expenses Administration , ,22 Use and maintenance , ,48 Maintenance of outdoor areas , ,32 Cleaning , ,84 Heating , ,95 Water and sewage , ,74 Gas and electricity , ,65 Waste management , ,10 Liability insurance , ,68 Rental expenses , ,00 Property taxes , ,24 Repairs , ,07 Other maintenance costs , ,43 Total , ,86 6) Auditors fees Authorised Public Accountants KPMG Oy Auditors fees , ,22 Tax advice , ,97 Other expert fees 8 224, ,43 Total , ,62 Authorised Public Accountants Ernst & Young Oy Other expert fees , ,00 Total , ,00 7) Financial income and expenses Interest income , ,77 Other interest revenue , ,67 Financial charges , ,20 Total , ,64 Interest expenses , ,77 Other interest and financial expenses , ,06 Total , ,83 Total amount of financial income and expenses , ,19 8) Income taxes Income taxes for the period , ,36 Change in deferred taxes , ,97 Total , ,39

17 15 Notes on balance sheet assets 9) Intangible assets Other 2014 Intangible capitalised rights expenditure Total Acquisition cost 1 January , , ,99 Increases during the period 0, , , , , ,81 Accumulated depreciation 1 January , , ,30 Depreciation during the period 0, , ,52 Accumulated depreciation 31 December , , ,82 Carrying amount 31 December , , ,99 Other 2013 Intangible capitalised rights expenditure Total Acquisition cost 1 January , , ,99 Increases during the period 0,00 0,00 0, , , ,99 Accumulated depreciation 1 January , , ,02 Depreciation during the period -179, , ,28 Accumulated depreciation 31 December , , ,30 Carrying amount 31 December , , ,69 10) Tangible assets Land and Buildings and Machinery and Other tangible Incomplete 2014 water areas structures equipment assets acquisitions Total Acquisition cost 1 January , , , , , ,67 Increases during the period , , , , , ,85 Disposals during the period 0, ,37 0,00 0, , ,79 Acquisition cost 31 December , , , , , ,73 Accumulated depreciation 1 January 2 0, , , ,00 0, ,30 Depreciation during the period 0, , , ,83 0, ,24 Impairment 0, ,74 0,00 0,00 0, ,74 Accumulated depreciation 31 Decemb 0, , , ,83 0, ,28 Carrying amount 31 December , , , , , ,45 Land and Buildings and Machinery and Other tangible Incomplete 2013 water areas structures equipment assets acquisitions Total Acquisition cost 1 January , , , , , ,80 Increases during the period , , , , , ,69 Disposals during the period 0,00 0,00 0,00 0, , ,82 Acquisition cost 31 December , , , , , ,67 Accumulated depreciation 1 January 2 0, , , ,62 0, ,85 Depreciation during the period 0, , , ,38 0, ,36 Impairment 0, ,09 0,00 0,00 0, ,09 Accumulated depreciation 31 Decemb 0, , , ,00 0, ,30 Carrying amount 31 December , , , , , ,37 11) Investments Holdings in 2014 associated Other Total companies investments Acquisition cost 1 January , , ,13 Share of profit for the period ,49 0, ,49 Acquisition cost 31 December , , ,64 Impairment 0,00 0,00 0,00 Accumulated depreciation 31 December ,00 0,00 0,00 Carrying amount 31 December , , ,64

18 16 Holdings in 2013 associated Other Total companies investments Acquisition cost 1 January , , ,77 Share of profit for the period ,64 0, ,64 Acquisition cost 31 December , , ,13 Impairment 0,00 0,00 0,00 Accumulated depreciation 31 December ,00 0,00 0,00 Carrying amount 31 December , , ,13 Holdings in Group companies 31 December 2014 Share % Kiinteistö Oy Bioteknia 71,49 % Kiinteistö Oy Kuopion Studentia 56,23 % Kiinteistö Oy Arctic Centre 50 % All Group companies are included in the consolidated financial statements. Shares in associated companies 31 December 2014 Share % Kiinteistö Oy F-Medi 24,66 % The associated company is included in the consolidated financial statements. Other investments on 31 December 2014 The most significant other investments are in two real estate companies Share % Kiinteistö Oy Kuopion Teknia 18,42 % Kiinteistö Oy Palosaaren laboratoriot 12,98 % 1 Jan 31 Dec Jan 31 Dec ) Short-term receivables Receivables from property income 9 654, ,19 Accrued income , ,02 Other receivables , ,10 Total , ,31 Notable accrued income Income taxes , ,92 Other , ,10 Total , ,02 Notes on balance sheet liabilities and equity 13) Itemisation of equity Share capital , ,00 Invested unrestricted equity fund , ,78 Retained earnings 1 January , ,44 Dividend paid by the parent company , ,00 Profit for the period , ,87 Retained earnings 31 December , ,31 Minority interest 1 January , ,19 Minority share of profit for the period , ,22 Minority interest 31 December , ,41 Total equity , ,50 14) Liabilities Long-term liabilities Loans from financial institutions , ,87 Other debts , ,00 Total , ,87 Loans maturing after more than five years Loans from financial institutions , ,00 Total , ,00

19 17 Short-term liabilities Short-term interest-bearing debt Loans from financial institutions , ,50 Total , ,50 Short-term non-interest bearing debt Debts to associated companies 0, ,87 Prepayments received , ,05 Trade payables , ,78 Other short-term debts , ,98 Accrued expenses , ,50 Total , ,18 Total short-term debt , ,68 Notable accrued expenses Interest and financial items , ,36 Other , ,14 Total , ,50 Credit limits Checking account limits , ,00 Unwithdrawn proportion of checking account limits , ,00 Unwithdrawn binding credit limits , ,00 Maturity distribution of loans from financial institution Maturing year of loans , , , , , , , , , ,40 Currency distribution of loans from financial institutio ) Deferred tax liabilities and assets EUR ,40 SEK , ,40 Deferred tax liability recorded on the consolidated balance sheet Accumulated depreciation , ,32 16) Derivative contracts 1 Jan 31 Dec Jan 31 Dec 2013 Interest derivatives Interest rate swaps, notional value , ,00 Interest rate swaps, fair value , ,70 Interest and currency derivatives Interest and currency swaps, notional value , ,00 Interest and currency swaps, fair value , ,00 Interest rate swap contracts made to hedge the risk exposure associated with long-term loans are not entered on the balance sheet, but instead are listed in the notes to the financial statements. Currency derivatives have been used to hedge the currency risk of loans denominated in SEK and GBP. The currency risk is fully hedged. Loans denominated in foreign currencies are recognised in the financial statements at the contract exchange rate or the exchange rate at the time of repayment rather than the exchange rate on the date of closing the books. 17) Collateral and contingent liabilities Debts secured by real estate mortgages Loans from financial institutions , ,87 Mortgages , ,00 Other debts , ,00 Lease liabilities Due in the next year , ,18 Due later , , , ,03

20 18 The Group s key loan terms and covenants The key covenants of the company s loans from financial institutions are linked to the Group s total liabilities and significant changes in the ownership structure. Other liabilities VAT review liability on property investments VAT deductions on basic improvement investments, liabilities pursuant to Section 120 of the Finnish Value Added Tax Act: 10-year review period Total , , , , , , ,15 Conservation responsibility The real estate assets acquired for university operations in the company s capital contribution and trading arrangement include buildings and areas that are protected under the Finnish Nature Conservation Act (1096/1996) or the Decree on the Protection of State-owned Buildings (480/85) or the protection of which has otherwise been agreed upon. The company is committed to complying with legislation, decrees, decisions and agreements on the protection of each property or conservation area.

21 19 University Properties of Finland Ltd CALCULATION FORMULAE FOR KEY FIGURES Equity ratio, % Return on investment, % (ROI) Return on equity, % (ROE) Occupancy rate, % Interest cover ratio = = = = = 100 x 100 x 100 x 100 x Equity Balance sheet total - advances received Result for the period + financial expenses Balance sheet total - non-interest bearing debt (average of the beginning of the period and the end of the period) Result for the period Equity (average of the beginning of the period and the end of the period) Area rented out Total leasable area Operating margin (operating profit + planned depreciation + impairment) Accrual-based interest expenses When calculating key figures for the parent company, accumulated depreciation difference and the change in depreciation difference are divided into equity / profit for the period and deferred tax liabilities.