Financial situation
The first three quarters of 2016 closed with pleasing positive rates of return. We have consistently referred to the fact that a low interest rate environment is the main driving force behind good profits. This is not a result of income from interest, but from the appreciation in the value of bonds because of interest rates staying at a lower level. The trend reversed in the fourth quarter and interest rates increased. The rate of return fell correspondingly. At the end of September it still stood at 5.88%, but by the middle of December it was 3.20%.

The actuarial coverage ratio before interest on retirement assets is 104.6%. The rise in interest rates in the fourth quarter, on the other hand, is having a positive effect on the economic coverage ratio. Since September this has increased from 87.9% to 89.9%. The economic coverage ratio is the most important key performance indicator for the management of pension funds. This is because it best displays the actual financial situation of the pension fund.

Interest in 2016 and interest rate during the course of 2017
The market-consistent valuation of pension capital and low investment risks are having a positive effect on the interest on the retirement assets of those currently insured. This situation enables the Foundation Board to set an interest rate of 1.5% for retirement assets. This also corresponds to an interest rate of 1.5% on pension capital and it is above the 1.25% minimum rate of the OPA (Occupational Pensions Act).

The interest rate is 0.5% for such events as withdrawals and retirements during the course of 2017.

New portfolio strategy approved
The Investment Committee has brought in experts to examine asset & liability management (ALM). This is a question of a periodic examination to ensure that the fixed assets meet the obligations of the pension fund in the medium and long term. The results of this have been introduced into an updated portfolio strategy. The Foundation Board is bringing the new portfolio strategy into force as at 1 January 2017. This means the portfolio structure has been significantly simplified with the risk remaining low.

Election of the Foundation Board for the 2017 - 2020 period of office
The Foundation Board starts its new period of office with the membership unchanged. The Board of Directors of RUAG Holding has confirmed the previous employer representatives, namely Dr.  Christian Ferber, Urs Kiener, Benoît Macherel and Peter Scherrer. For employee representation, the Employee Representative Presidents' Conference of RUAG Switzerland has confirmed the previous employee representatives Sabina Bieri, Hugo Gerber, Peter Probst and Eric Wiesmann beer in a tacit election. 

New Regulations with effect from 1 January 2017
The new Pension Fund Regulations apply with effect from 1 January 2017. As advised at various times, including by personal letter on 15 February 2016, various new arrangements are coming into force. In particular, commutation rates are being reduced and savings contributions increased. All of these new arrangements can be viewed at: www.vorsorgeruag.ch. The effects on benefits can be seen from the insurance certificate that will be sent out in January 2017.

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The offices of Vorsorge RUAG will be closed from 24 December 2016 to 2 January 2017 inclusive.

Merry Christmas and a Happy New Year!

Voluntary contributions may be made twice a year in order to increase retirement assets and insurance benefits. The application (Form E2) must be submitted by 20 December 2016. A deposit slip will be issued once the application has been checked and approved.

The contribution must be paid by 29 December 2016 so that the deposit can be entered on this year’s books and included in the 2016 tax return.

It is illegal for us to issue a tax credit certificate for 2016 in respect of payments received after 31 December 2016!

Financial situation
As at the end of August 2016, at first glance things are looking very pleasing indeed: the rate of return achieved now stands at a respectable 5.73%. The actuarial coverage ratio has increased since the beginning of the year from 102.9% to 107.7%. However, an analysis of the rate of return indicates that the low interest rate environment has been the main driving force for good profits. This is not a result of income from interest, but far more from the appreciation in value of bonds because of interest rates staying at a lower level.

This is confirmed by the development of the economic coverage ratio. Since the beginning of the year, this fell from 90.7% to 88.6%. The economic coverage ratio is the most important key performance indicator for the management of pension funds. This is because it best displays the actual financial situation of the pension fund.

Low revenue from capital employed and an extremely low level of interest rates remain a reality – and there is no sign of this trend changing. There remain two options open for pension funds in this "Catch 22" situation. They buy into the hope of higher income with higher risks. Or, as Vorsorge RUAG has done previously, they approach the interest rate for the pension obligations to the low market interest rate.

No pension increase in 2017
By virtue of the current actuarial coverage ratio of 107.7% and the limited risk-carrying capacity, the prerequisites for guaranteeing an inflation adjustment for old-age, disability, spouses' as well as children's pensions as at 1 January 2017 are not in place.

Pursuant to Article 37 of the Insurance Regulations, the Foundation Board is elected for a term of 4 years. Elections must therefore be held for the new term beginning on 1 January 2017. The employers' representatives will be elected by RUAG Holding Ltd. The employees' representatives will be elected on Election Office proposal by the RUAG Presidential Conference for employees' representatives. The election date has been set as 31 October 2016.

The following employees' representatives are standing for office:

• Sabina Bieri (1987), hitherto
  Communication Specialist
  RUAG Schweiz AG, Division RUAG Defence
• Hugo Gerber (1955), hitherto
  as representative of the employee’s association
• Peter Probst (1960), hitherto
  Senior Logistics Engineer F/A-18
  RUAG Schweiz AG, Division RUAG Aviation
• Eric Wiesmann (1978), hitherto
  Manager Sales BU Mechanisms,
  RUAG Schweiz AG, Division RUAG Space

The Foundation Board supports the election of the above-mentioned candidates. The Foundation Board members who have been in office hitherto have gained important practical experience during the expiring terms of office through their work, specialised training and participation in Foundation Board meetings. They are well-prepared to exercise their responsibility in Vorsorge RUAG.  

Further candidates may be proposed to stand for election to the Election Office until 30 September 2016. You can get information about this from Managing Director, Corrado Tedeschi, 031 330 21 11, corrado.tedeschi@ruag.com. 

On behalf of the Election Office:

Carmen Schmidhalter, Election Office President

Corrado Tedeschi, Managing Director

Financial situation
Up to 31 May 2016, Vorsorge RUAG achieved a rate of return of 3.56% with its assets. The coverage ratio increased from 102.9% at the end of 2015 to 106.0% as at 31 May 2016. Monthly rates of return and coverage ratios are continuously updated on our website.

2015 Annual Report
The 2015 Vorsorge RUAG Annual Report is available on our website. For insured parties that have requested a printed version, these will be posted out in the next days.

Internal Control System (ICS): no measures are required
In order to safeguard effectiveness of comprehensive checks of Vorsorge RUAG as a whole, a self-assessment is carried out annually in the second quarter on the basis of a detailed and extensive catalogue of questions. This resulted in no findings that would have necessitated corrective measures.

Compliance
Compliance refers to compliance with all relevant laws, regulations and standards to prevent legal sanctions, financial losses and damage to our reputation. At least once a year, the Executive Board provides the Foundation Board with a report: from this it can be established that all necessary fundamentals are in place and that appropriate regulations have been complied with.

2016 Elections to the Foundation Board
The current period of office of the Foundation Board ends on 31 December 2016. Therefore, once again this year elections to the Foundation Board for the period of office from 1 January 2017 to 31 December 2020 must be held. The four employer representatives will be elected by the Board of Directors of RUAG Holding Ltd at the request of the Corporate Board. The four employee representatives will be elected by the Employee Representative Presidents' Conference.
The Foundation Board has set 31 October 2016 as the election day and nominated the election office: Carmen Schmidhalter, RUAG Corporate Services Ltd, Solicitor; Manuela Gröning, RUAG Corporate Services Ltd, Corporate Treasurer; Corrado Tedeschi, Managing Director Vorsorge RUAG (official). Insured parties will be informed at the latest by the end of August of the election procedure.

Company holidays
The offices of Vorsorge RUAG will be closed from 27 June to 10 July 2016. We would be delighted to receive any enquiries during this period by e-mail to: info@vorsorgeruag.ch, but they will not be answered until on or after 11 July.

For years we have been drawing attention to the various problems facing occupational pensions and provided information on the solutions implemented by Vorsorge RUAG. The Board of Trustees has now decided on more steps aimed at the sustainable financial and structural stability of Vorsorge RUAG.

With effect from 1 January 2017 the following changes, amongst others, will come into force: lowering of conversion rates, increase in savings contributions, equal financing of contributions for the risks of invalidity and death, and dispensing with bridging pensions financed by the employer in the event of premature retirement.

In the next few days, the insured parties will be informed in detail by personal letter about the concrete measures being taken, the reasons and effects.