17.	Retirement benefit plan

The Company participates in a collective foundation covering all of its employees including its executive officers. In addition to retirement benefits, the plan provides death or long-term disability benefits.

Contributions paid to the plan are computed as a percentage of salary, adjusted for the age of the employee and shared approximately 47% and 53% by employee and employer, respectively.

This plan is governed by the Swiss Law on Occupational Retirement, Survivors and Disability Pension Plans (BVG), which requires contributions to be made to a separately administered fund. The fund has the legal form of a foundation and it is governed by the board of trustees, which consists of an equal number of employer’s and employee’s representatives. The board of trustees is responsible for the administration of the plan assets and for the definition of the investment strategy.

The collective foundation is governed by a foundation board. The board is made up of an equal number of employee and employer representatives of the different affiliated companies. The Company has no direct influence on the investment strategy of the foundation board.

The assets are invested by the pension plan, to which many companies contribute, in a diversified portfolio that respects the requirements of the Swiss BVG. Therefore disaggregation of the pension assets and presentation of plan assets in classes that distinguish the nature and risks of those assets is not possible. Under the Plan, both the Company and the employee share the costs equally. The structure of the plan and the legal provisions of the BVG mean that the employer is exposed to actuarial risks. The main risks are investment risk, interest risk, disability risk and the life expectancy of pensioners. Through our affiliation with the pension plan, the Company has minimized these risks, since they are shared between a much greater number of participants. On leaving the Company, a departing employee’s retirement savings are transferred to the pension institution of the new employer or to a vested benefits institution. This transfer mechanism may result in pension payments varying considerably from year to year.

The pension plan is exposed to Swiss inflation, interest rate risks and changes in the life expectancy for pensioners.

For accounting purposes under IFRS, the plan is treated as a defined benefit plan. Liabilities are calculated annually by an independent actuary. Plan assets have been estimated at their fair market value and liabilities have been calculated according to the “Projected Unit Credit” method.

The following table sets forth the status of the defined benefit pension plan and the amount that should be recognized in the balance sheet:

	For the Years Ended December 31,
in CHF thousands	2017		2016		2015
Defined benefit obligation	(14,278	)	(11,596	)		(9,439	)
Fair value of plan assets	9,352		7,798			6,652
Total liability	(4,926	)	(3,798	)		(2,787	)

The following amounts have been recorded as net pension cost in the statement of income:

	For the Years Ended December 31,
in CHF thousands	2017			2016			2015
Service cost		912			742			641
Interest cost		81			75			101
Interest income		(55	)		(56	)		(76	)
Impact of plan amendment		-			-			(584	)
Net pension cost		938			761			82

The changes in defined benefit obligation, fair value of plan assets and unrecognized (gains) / losses are as follows:

A.	Change in defined benefit obligation

in CHF thousands	2017			2016			2015
Defined benefit obligation as of January 1		(11,596	)		(9,439	)		(8,091	)
Service cost		(912	)		(742	)		(641	)
Interest cost		(81	)		(75	)		(101	)
Change in demographic assumptions		—			(389	)		—
Change in financial assumptions		—			(26	)		(591	)
Other actuarial gains / (losses)		(735	)		(378	)		(176	)
Plan amendment		—			—			584
Benefit payments		(426	)		(111	)		(48	)
Employees’ contributions		(528	)		(436	)		(375	)
Defined benefit obligation as of December 31		(14,278	)		(11,596	)		(9,439	)

B.	Change in fair value of plan assets

in CHF thousands	2017			2016		2015
Fair value of plan assets as of January 1		7,798			6,652		5,681
Interest income		55			56		76
Employees’ contributions		528			436		375
Employer’s contributions		590			511		441
Benefits payments		426			111		48
Plan assets gains/(losses)		(45	)		32		31
Fair value of plan assets as of December 31		9,352			7,798		6,652

Employer’s contribution to the pension plan for the financial year 2018 are estimated to be CHF 630 thousand.

C.	Change in net defined benefit liability

in CHF thousands	2017			2016			2015
Net defined benefit liabilities as of January 1		3,798			2,787			2,410
Net pension cost through statement of income		938			761			82
Re-measurement through other comprehensive income		780			761			736
Employer’s contribution		(590	)		(511	)		(441	)
Net defined benefit liabilities as of December 31		4,926			3,798			2,787

The fair value of the plan assets is the cash surrender value of the insurance with AXA. The investment strategy defined by the board of trustees follows a conservative profile.

The plan assets are primarily held within instruments with quoted market prices in an active market, with the exception of real estate and mortgages.

The weighted average duration of the defined benefit obligation is 20.5 years as of December 31, 2017.

The actuarial assumptions used for the calculation of the pension cost and the defined benefit obligation of the defined benefit pension plan for the year 2017, 2016 and 2015 are as follows:

	For the Years Ended December 31,
	2017			2016			2015
Discount rate		0.70	%		0.70	%		1.25	%
Rate of future increase in compensations		1.50	%		1.50	%		1.50	%
Rate of future increase in current pensions		0.50	%		0.50	%		0.50	%
Mortality and disability rates	BVG 2015G			BVG 2015G			BVG 2010G

In defining the benefits, the minimum requirements of the Swiss Law on Occupational Retirement, Survivors and Disability Pension Plans (BVG) and its implementing provisions must be observed. The BVG defines the minimum pensionable salary and the minimum retirement credits.

A quantitative sensitivity analysis for significant assumption as of December 31, 2017 is as shown below:

		Discount rate				Future salary increase					Future pension cost
Assumptions		+0.5% increase	-0.5% decrease			+0.5% increase			-0.5% decrease		+0.5% increase			-0.5% decrease
	in CHF thousands
Defined benefit obligation		12,707		15,849			14,449			14,121		14,989			13,564
Impact on the net defined benefit obligation		1,571		(1,571	)		(171	)		157		(711	)		714

The sensitivity analyses above is subject to limitations and has been determined based on a method that extrapolates the impact on net defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.