REGULATIONS ON THE VALUATION OF LIABILITIES OF AN ACTUARIAL NATURE

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1 co re LA COLLECTIVE DE PRÉVOYANCE DEPUIS 1974 REGULATIONS ON THE VALUATION OF LIABILITIES OF AN ACTUARIAL NATURE copré February 2017

2 REGULATIONS ON THE VALUATION OF LIABILITIES OF AN ACTUARIAL NATURE / 8 TABLE OF CONTENTS I PURPOSE... 3 II DEFINITIONS AND PRINCIPLES... 3 III TECHNICAL BASES... 3 IV PENSION CAPITAL OF ACTIVE INSURED AND PENSION RECIPIENTS... 4 V NATURE OF THE TECHNICAL PROVISIONS... 5 VI PROVISION FOR LONGEVITY... 5 VII PrOVISION FOR NON-ACTUARIAL RATE OF CONVERSION... 5 VIII PROVISION FOR FLUCTUATION OF RISKS... 6 IX PROVISION FOR FUTURE ADAPTATION OF PENSIONS... 6 X EMPLOYERS DISPOSABLE FUNDS TO BE ALLOCATED... 6 X1 DEGREE OF COVER PER PENSION 7 A. Global degree of cover of the Foundation... 7 B. Individual degree of cover of each pension fund... 7 C. Technical balance sheet per pension fund... 8 XII ENTRY INTO FORCE... 8

3 REGULATIONS ON THE VALUATION OF LIABILITIES OF AN ACTUARIAL NATURE / 8 I PURPOSE The present regulations, prepared in application of articles 65b LOB and 48e OPP2, are intended to define the principles applied by the Collective Pension Fund «Copré» (hereinafter: the Foundation) with respect to determining the liabilities of an actuarial nature. They comply with the accounting standard RPC 26 and respect the principle of permanence. II DEFINITIONS AND PRINCIPLES 1. The Foundation s liabilities of an actuarial nature are composed of: a. the pension capital of the active insured; b. the pension capital of the pension recipients; c. the technical provisions. The reserve for securities fluctuations is defined in the investment regulations. 2. The pension capital of the active insured refers to the amount of the rights acquired by the active insured, namely the amount of the vested benefits (or exit benefits) determined by the Foundation in a manner compliant with the law and the regulations. 3. The pension capital of the pension recipients refers to the amount of the rights acquired by the pension recipients, namely the cover capital of the ongoing pensions determined according to calculation rules recognised actuarially and to generally accepted technical bases, as well as the savings accounts of the beneficiaries of temporary disability pensions. 4. The technical provision refers to any amount posted on the liabilities of the Foundation s balance sheet to cover a certain or probable (more probable than improbable) commitment that has an impact on its financial equilibrium and is a result of events known at the date of the balance. A technical provision is constituted independently of the Foundation s financial situation. It is taken into account in the calculation of the degree of cover according to article 44 OPP2 (Ordinance on Professional Providence Funds), in the same way as the pension capital. 5. In identifying the commitments and risks of an actuarial nature, the general principles of accounting and the RPC 26 standard are applicable by analogy, in particular: a. their valuation is based on recognised criteria; b. the constitution and dissolution of the provisions is recorded through the operating account; c. any modification made to the principles applied shall be mentioned in the attachment to the accounts. 6. The degree of cover specified in the attachment to article 44 OPP2 corresponds to the relation between the net assets of the Foundation and the sum of the pension capital of the active insured, the pension capital of the pension recipients, and the technical provisions defined in the present regulations. III TECHNICAL BASES 1. The technical bases of the Foundation are used for the calculation of the pension capital of pension beneficiaries and of the technical provisions. They are composed of actuarial tables and technical rates.

4 REGULATIONS ON THE VALUATION OF LIABILITIES OF AN ACTUARIAL NATURE / 8 2. The actuarial tables used are the latest LOB actuarial tables published. 3. The technical interest rate is defined in a long-term perspective (20 years), with a reasonable margin of security (at least 0.5 %) in relation to the expected average annual profitability of the Foundation. 4. The actuarial tables and technical interest rate are different for three groups of participants: a). for pension beneficiaries attached to an affiliated employer, i.e. who would leave with this employer in the event of termination of the affiliation, the actuarial tables used are periodic. At the tables used are the 2015 actuarial tables (reference year for mortality: 2015). b) the technical rate is in principle 0.5% lower than the objective of remuneration capital of the active insured, to finance the evolution of longevity. This rate is 2.5% at c) for pension beneficiaries not attached to an affiliated employer, a.. the actuarial tables used are generational. At the tables used are the 2015 generational actuarial tables. b.. the technical rate corresponds to the average rate resulting from the rates used when taking in these pensioners. At this rate is 1.40%. 5. The Board of Trustees is authorised to modify the technical bases with the agreement of the approved expert. The change in the actuarial tables must be re-examined at least once every ten years. 6. The evolution of these technical bases since is shown under point X111, Entry into Force. IV PENSION CAPITAL OF ACTIVE INSURED AND PENSION RECIPIENTS 1. The Foundation determines each year the pension capital of the active insured that is submitted for verification to the auditing body, and that of the pension recipients which is verified by the approved expert, taking into consideration the legal and regulatory provisions, the Foundation s technical bases as well as generally accepted rules of calculation. 2. The pension capital of the active insured corresponds to the vested benefits determined according to the Foundation s pension regulations. It corresponds to the highest of the following three amounts: a. the regulatory old-age pension capital constituted; b. the minimum exit benefits according to article 17 para. 2 LFLP; c. the old-age capital according to article 15 LOB (article 18 LFLP). 3. The pension capital of the pension recipients corresponds to the current value of the pensions paid out and the expectations of regulatory insured pensions in the event of the death of the beneficiary as well as the sum of the savings accounts of the beneficiaries of temporary disability pensions. It does not take into consideration the future adaptation of the pensions and future expectations as to the evolution of inflation.

5 REGULATIONS ON THE VALUATION OF LIABILITIES OF AN ACTUARIAL NATURE / 8 V NATURE OF THE TECHNICAL PROVISIONS 1. The Foundation constitutes the following technical provisions: a. Provision for longevity; b. Provision for non-actuarial conversion rate; c. Provision for fluctuation of risks; d. Provision for future adaptation of pensions; e. Provision for specific events f. Employers disposable funds to be allocated. 2. The technical provisions must be endowed in such a way as to achieve the objectives according to the methods and in the timeframes established in the present regulations. The annual endowment of the technical provisions takes place in the order in which these provisions are defined in the current regulations. They can only be dissolved when the reason for the provision becomes obsolete. The expert is obliged to give his opinion prior to dissolution. 3. The approved expert makes recommendations to the Foundation with respect to the determination of pension capital and the technical provisions. VI PROVISION FOR LONGEVITY 1. The provision for longevity is intended to take into account the future increase in life expectancy which is measured at each change of actuarial tables (period tables). It serves to finance the increase in the pension capital of the pension recipients due to a change in the actuarial tables. 2. The provision for longevity is set at the end of each year in percentage of the pension capital of the pension recipients, after deduction of the pension capital for children s and orphans pensions. It is equal to 0.5% of this capital, per year since the year of publication of the technical bases. VII PROVISION FOR NON-ACTUARIAL RATE OF CONVERSION 1. In order to maintain the rate of conversion as stable as possible over time and ensure the best possible equality of treatment between the generations of insured, the Foundation constitutes a provision for improvement of the conversion rate which is intended to finance, when opening an old-age pension, the additional pension capital required to guarantee the difference between the pension effectively paid and the pension that would be paid if the conversion rate applied was determined actuarially. 2. The provision for improving the conversion rate is established at the end of each year by the approved expert. The determination of the appropriate amount of the provision at the end of each year in question is made on the basis of an evaluation of the possible cases of retirement over the following five years, while considering, in order to take into account retirement pensions taken in the form of capital, 75 % of the additional pension capital required for the cases indicated.

6 REGULATIONS ON THE VALUATION OF LIABILITIES OF AN ACTUARIAL NATURE / 8 VIII PROVISION FOR FLUCTUATION OF RISKS 1. In order to achieve its providence fund objective, the Foundation is obliged, in application of article 43 OPP2, to take the appropriate security measures to cover the risks in the event of disability or death when the approved expert considers this necessary. These measures can take the form of the constitution of an adequate technical provision or a reinsurance solution coupled, if need be, with the constitution of a technical provision. 2. The provision for fluctuation of risks is intended to alleviate in the short term unfavourable fluctuations of the risks of disability and death with respect to active insured, taking into consideration, if appropriate, the existing reinsurance cover. The provision for fluctuation of risks is only necessary when the Foundation waives any reinsurance cover or when it concludes a partial reinsurance contract (stop loss for example). 3. The objective for the amount of the provision for fluctuation of risks is determined each year by the approved expert, taking into account the claim rate observed and, if need be, the existing reinsurance solution, in such a way as to enable the Foundation to withstand, with a probability of 97.5 %, two consecutive years of exceptional claim rates. 4. The amount of the provision is equal to at least one fifth of the sums of potential claims related to ongoing cases disability more than 90 days. IX PROVISION FOR FUTURE ADAPTATION OF PENSIONS 1. In function of the results of the financial period as well as the level attained by the technical provisions and the reserve for securities fluctuations, the Fund may decide to pay interest in addition to the pension capital of the active insured, to adapt the pensions or add to them, if appropriate, by a single payment. 2. In compliance with article 36, para. 2 LOB, the Fund may, if decided by the Board of Trustees, create a provision for future adaptation of the pensions, to finance the cost of revaluation in the event of inflation. The amount of the provision for future adaptation of pensions corresponds to the mathematical reserve needed to finance the adaptation to inflation or the single payment. X AFFILIATES DISPOSABLE FUNDS TO BE ALLOCATED 1. The account of affiliates disposable funds to be allocated is intended for the accounting of the disposable funds attributed to the different funds managed by the Foundation but not yet allocated by them. The Foundation holds separate accounts of the disposable funds already allocated to each fund and those not yet allocated. The total of the amounts posted corresponds to the total amount of members disposable funds still to be allocated. 2. This account of the disposable funds of the affiliates of the funds is supplied every year in function of the result of the financial period achieved by each fund considered separately from the disposable funds attributed by the Foundation. 3. When a fund decides to allocate disposable funds that have been attributed to it, the corresponding amount is deducted on the account of the disposable funds of the funds. The allocation of these disposable funds can only be made in favour of the active insured or of pension recipients.

7 REGULATIONS ON THE VALUATION OF LIABILITIES OF AN ACTUARIAL NATURE / 8 4. When the account of the disposable funds of the affiliates attains or exceeds 2% of the pension capital of the active insured and pension recipients, the Foundation imposes on the different funds holding disposable funds not yet allocated an allocation of these to the extent of at least half. XI DEGREE OF COVER PER PENSION FUND A. Global degree of cover of the Foundation The global degree of cover of the Foundation is obtained as follows: total assets current liabilities - employer contribution reserves without waiver of - each companie' s unallocated disposable funds DC PF = pension liabilities + technical provisions This degree of cover is decreased by the disposable funds allocated to the member companies, as the latter do not belong to the Foundation strictly speaking. This is why the global degree of cover is lower than the weighted average of the individual degrees of cover of each pension fund. use B. Individual degree of cover of each pension fund The individual degree of cover of each pension fund is calculated as follows: Pension beneficiaries attached to an affiliated employer Pension beneficiaries not attached to an affiliated employer From LOB 2010 (2010) at 4.0% LOB 2010 (2010) at 4.0% From LOB 2010 (2010) at 3.5% LOB 2010 (2010) at 3.5% From LOB 2010 (2010) at 3.0% LOB 2010 (2010) at 3.0% From LOB 2010 (2010) at 2.5% LOB 2010 (2010) at 2.5% From LOB 2010 (2010) at 2.5% LOB 2010 generational at 2.0% From LOB 2015 (2015) at 2.5% LOB 2015 generational at 1.4% DC PP = pension liabilities + technical + provisions + disposable funds of the pension fund share in the Foundation's disposable funds pension liabilities + technical provisions

8 REGULATIONS ON THE VALUATION OF LIABILITIES OF AN ACTUARIAL NATURE / 8 The share in the disposable funds of the Foundation is equal to: pension liabilities of the pension fund ( DC PF 100)x + technical provisions of the pension fund Thus the difference between the pension funds is due to the disposable funds already allocated to a company and not distributed. C. Technical balance sheet per pension fund If one wishes to establish a technical balance sheet per pension fund, this can be presented as follows: Assets Fortune Liabilities Pension commitments Technical provisions Disposable funds Fortune = pension commitments + technical provisions + disposable funds of the pension fund + share in the disposable funds of the Foundation (calculated as under point 2). XII ENTRY INTO FORCE The present regulations enter into force as follows for the technical bases The regulations are brought to the attention of the surveillance authority, the auditing body and the approved expert. The Board of Trustees Chairperson Vice-Chairman Carouge, February 3rd, 2017

A CLEAR VISION FOR OVER 40 YEARS. co re LA COLLECTIVE DE PRÉVOYANCE SINCE 1974

A CLEAR VISION FOR OVER 40 YEARS co re LA COLLECTIVE DE PRÉVOYANCE SINCE 1974 FOR OVER 40 YEARS WE HAVE BEEN KEEPING A CLOSE EYE ON YOUR PENSION SCHEME. IN BRIEF The organisation has existed since 1974.