18 Pension fund obligation

Repower operates defined benefit plans, with the two main plans established in Switzerland. On the balance sheet date, employees in Switzerland were members of the legally independent pension funds PKE Pensionskasse Energie Genossenschaft or PKE Vorsorgestiftung Energie. Both are pension funds within the meaning of the Federal Law on Occupational Pensions for Old Age, Survivors and Disability (BVG). The law governs the benefits employees are entitled to as well as the organisation and financing of pension funds. Both funds aim to provide occupational pensions for employees of the affiliated companies and their family members and survivors that cover the economic consequences of old age, disability and death. PKE Pensionskasse Energie Genossenschaft is a defined benefit plan and PKE Vorsorgestiftung a defined contribution plan in Switzerland in accordance with the BVG. Under the defined benefit plan, benefits paid out in the case of an insured event are defined in advance based on the insured's insured salary. Under the defined contribution plan, the benefits paid out in the case of an insured event are based on the insured's contributions plus interest.

An equal number of employer and employee representatives make up the governing bodies of the two funds. The Board of Directors or Board of Trustees of the respective fund defines each fund's goals and principles as well as regulates and monitors investments (investment strategy, investment policy, investment guidelines). The financial interests of the insureds assume top priority in the management of fund assets. Assets must be managed in accordance with the respective investment regulations so as to guarantee the timely payment of benefits and compliance with the fund's investment risk limits.

In the event of any necessary restructuring measures, the companies determine the interest rate and shortfall contributions to be paid together with their insureds. The contribution of the companies must be at least as high as the sum of the contributions of the insureds. Both the defined benefit and defined contribution plans within the meaning of the BVG represent defined benefit plans under IFRS. The probability and scope of any restructuring measures as a result of a plan shortfall can be reduced in the defined contribution plan (in accordance with BVG) by lowering the interest rate applied to the capital accrued by beneficiaries. This is not possible, however, under a defined benefit plan (in accordance with BVG). The underperformance of fund assets is detrimental to the pension fund and hence its contribution margin.

Repower is exposed to various risks in connection with defined benefit plans, with longevity risk, interest rate risk, capital market/investment risk playing a key role.

The defined contribution plan operated by PKE Vorsorgestiftung Energie will pay out pensions in two parts with effect from 1 January 2014: 90 per cent of the pension will be guaranteed as a basic pension and 10 per cent as a variable pension, depending on PKE's coverage ratio. If the coverage ratio is below 90 per cent, only the basic pension will be paid out. If the coverage ratio is higher than 120 per cent, the target pension will be increased by a maximum of 10 per cent. The variable component will be redefined each year and be valid for an entire year. This rule makes it possible for future retirees to also contribute to eliminating a potential coverage shortfall. They can, however, also participate in a positive development.

Changes to the plans adopted in the 2013 financial year resulted in income from past service costs (gain due to plan changes) in the amount of TCHF 12,313, which had to be recognised directly in profit or loss. The shift from the defined benefit pension plan with PKE Pensionskasse Energie Genossenschaft to the defined contribution pension plan with PKE Vorsorgestiftung Energie gives rise to gains totalling TCHF 10,512 due to pension plan changes. The reduction in the conversion rates applied to defined contribution plans results in gains due to pension plan changes totalling TCHF 1,801.

The following table provides an overview of the balances recognised in relation to the pension plans in the consolidated financial statements:

The present value of the defined benefit obligation of the Swiss pension plans is broken down as follows into the individual groups of pension beneficiaries:

All pension commitments are vested.

The weighted average term of the defined benefit pension obligation under the defined benefit and defined contribution plans total 13.9 years (previous year 16.3 years) at 31 December 2013.

The investment strategy is based on the results of an asset & liability analysis. The following table provides a breakdown of the plan assets and strategy of the investment portfolio:

Fluctuations in pension provisions with separate reconciliation statements for the plan assets and the present value of the defined benefit obligation are shown in the table below:

The key actuarial assumptions are as follows:

The average retirement age is 63.

An increase or decline in the key actuarial parameters would affect the present value of the defined benefit obligation at 31 December 2013 as follows:

Employer contributions of TCHF 4,104 (previous year: TCHF 3,997) are expected for the 2014 financial year.