PRIVATE PENSION PLAN | ( 20 ) PRIVATE PENSION PLAN The subsidiaries sponsor supplementary retirement and pension plans for their employees. The main characteristics of these plans are as follows: 20.1 Characteristics CPFL Paulista The plan currently in force for the employees of the subsidiary CPFL Paulista through FUNCESP is a Mixed Benefit Plan, with the following characteristics: i. Defined Benefit Plan (“BD”) – in force until October 31, 1997 – a defined benefit plan, which grants a Proportional Supplementary Defined Benefit (“BSPS”), in the form of a lifetime income convertible into a pension, to participants enrolled prior to October 31, 1997, the amount being defined in proportion to the accumulated past service time up to that date, based on compliance with the regulatory requirements for granting. The total responsibility for coverage of actuarial deficits of this plan falls to the subsidiary. ii. Mixed model, as from November 1, 1997, which covers: . benefits for risk (disability and death), under a defined benefit plan, in which the subsidiary assumes responsibility for Plan’s actuarial deficit, and . scheduled retirement, under a variable contribution plan, consisting of a benefit plan, which is a defined contribution plan up to the granting of the income, and does not generate any actuarial liability for the subsidiary CPFL Paulista. The benefit plan only becomes a defined benefit plan, consequently generating actuarial responsibility for the subsidiary, after the granting of a lifetime income, convertible or not into a pension. Additionally, the subsidiary’s Managers may opt for a Free Benefit Generator Plan – “PGBL” (defined contribution), operated by either Banco do Brasil or Bradesco. CPFL Piratininga As a result of the spin-off of Bandeirante Energia S.A. (subsidiary’s predecessor), the subsidiary CPFL Piratininga assumed the responsibility for the actuarial liabilities of that company’s employees retired and terminated until the date of spin-off, as well as for the obligations relating to the active employees transferred to CPFL Piratininga. On April 2, 1998, the Secretariat of Pension Plans – “SPC” approved the restructuring of the retirement plan previously maintained by Bandeirante, creating a "Proportional Supplementary Defined Benefit Plan – BSPS”, and a "Mixed Benefit Plan", with the following characteristics: i. Defined Benefit Plan (“BD”) - in force until March 31, 1998 – a defined benefit plan, which grants a Proportional Supplementary Defined Benefit (BSPS), in the form of a lifetime income convertible into a pension to participants enrolled until March 31, 1998, in an amount calculated in proportion to the accumulated past service time up to that date, based on compliance with the regulatory requirements for granting. In the event of death while working or the onset of a disability, the benefits incorporate the entire past service time. CPFL Piratininga has full responsibility for covering the actuarial deficits of this Plan. ii. Defined Benefit Plan - in force after March 31, 1998 – defined-benefit type plan, which grants a lifetime income convertible into a pension based on the past service time accumulated after March 31, 1998, based on 70% of the average actual monthly salary for the last 36 months of active service. In the event of death while working or the onset of a disability, the benefits incorporate the entire past service time. The responsibility for covering the actuarial deficits of this Plan is equally divided between CPFL Piratininga and the participants. iii. Variable Contribution Plan – implemented together with the Defined Benefit plan effective after March 31, 1998. This is a defined-contribution type pension plan up to the granting of the income, and generates no actuarial liability for CPFL Piratininga. The pension plan only becomes a Defined Benefit type plan after the granting of the lifetime income, convertible (or not) into a pension, and accordingly starts to generate actuarial liabilities for the subsidiary. Additionally, the subsidiary’s Managers may opt for a Free Benefit Generator Plan – PGBL (defined contribution), operated by either Banco do Brasil or Bradesco. RGE Sul (RGE) The subsidiary RGE has retirement and pension plans for its employees and former employees managed by Fundação Famíllia Previdência, former Fundação CEEE, comprising: (i) “Plan 1” (“Plano Único RGE”): A “defined benefit” plan with benefit level equal to 100% of the inflation adjusted average of the last salaries, deducting the presumed benefit from the Social Security, with a Segregated Net Asset. that is closed to new participants since 1997. This plan was recorded at the dissolved Rio Grande Energia S.A. until the merger of the distribution companies approved on December 31, 2018, as mentioned in note 15.4; and (ii) “Plan 2” (“Plano Único RGE”): A “defined benefit” plan that is closed to new participants since February 2011. The subsidiary’s contribution matches the contribution from the benefitted employees, in the proportion of one for one, including as regards the Fundação’s administrative funding plan. For employees hired after the closing of the plans of Fundação Família Previdência, “defined contribution” private pension plans were implemented, being Bradesco Vida e Previdência for employees hired between 1997 and 2018 by the dissolved Rio Grande Energia S.A., and Itauprev for employees hired by RGE as from 2011, as well as for new employees to be hired after the event of merger of the distribution companies. CPFL Santa Cruz With the 2017 merger event, the company’s official plan is the CMSPREV, managed by IHPREV Fundo de Pensão. The same plan was maintained for employees that had the benefits plan managed by BB Previdência - Fundo de Pensão from Banco do Brasil. CPFL Geração The employees of the subsidiary CPFL Geração participate in the same pension plan as CPFL Paulista. In addition, managers may opt for a Free Benefit Generator Plan – PGBL (defined contribution), operated by either Banco do Brasil or Bradesco. 20.2 Changes in the defined benefit plans December 31, 2019 CPFL CPFL Piratininga CPFL RGE Sul (RGE) Total Plan 1 Plan 2 Present value of actuarial obligations 6,164,035 1,773,089 152,254 464,335 681,363 9,235,076 Fair value of plan's assets (4,517,265) (1,353,050) (105,914) (466,390) (503,867) (6,946,486) Present value of net obligations (fair value of assets) 1,646,770 420,039 46,340 (2,055) 177,496 2,288,590 Effect of asset ceiling 74,849 - - 2,055 - 76,904 Net actuarial liability recognized in the statement of financial position 1,721,619 420,039 46,340 - 177,496 2,365,494 December 31, 2018 CPFL CPFL Piratininga CPFL RGE RGE Sul (RGE) Total Plan 1 Plan 2 Present value of net obligations (fair value of assets) 5,123,238 1,416,391 119,964 382,993 553,493 7,596,079 Fair value of plan's assets (4,215,431) (1,205,647) (98,836) (413,043) (463,571) (6,396,529) Net actuarial liability recognized in the statement of financial position 907,807 210,744 21,129 (30,050) 89,922 1,199,550 Effect of asset ceiling - - - 30,050 - 30,050 Net actuarial liability recognized in the statement of financial position 907,807 210,744 21,129 - 89,922 1,229,600 The changes in the present value of the actuarial obligations and the fair value of the plan’s assets are as follows: CPFL Paulista CPFL Piratininga CPFL Geração RGE Sul (RGE) Total Plan 1 (*) Plan 2 Present value of actuarial obligations at December 31, 2016 4,524,008 1,202,596 108,486 352,879 480,081 6,668,050 Gross current service cost 707 3,153 73 270 2,153 6,356 Interest on actuarial obligations 476,613 127,561 11,431 37,395 50,927 703,927 Participants' contributions transferred during the year 37 2,044 - 302 990 3,373 Actuarial loss: effect of changes in demographic assumptions 225 328 14 326 16,490 17,383 Actuarial loss: effect of changes in financial assumptions (6,993) (3,586) (372) (45) 8,153 (2,843) Benefits paid during the year (379,536) (84,634) (8,831) (25,203) (34,501) (532,705) Present value of actuarial obligations at December 31, 2017 4,615,061 1,247,462 110,801 365,924 524,293 6,863,541 Gross current service cost 835 4,365 78 175 2,790 8,243 Interest on actuarial obligations 421,083 114,628 10,109 33,552 48,218 627,590 Participants' contributions transferred during the year 24 2,078 - 395 842 3,339 Actuarial loss: effect of changes in demographic assumptions - - - - 345 345 Actuarial loss: effect of changes in financial assumptions 485,142 135,540 8,409 8,921 12,774 650,786 Benefits paid during the year (398,907) (87,682) (9,433) (25,974) (35,769) (557,765) Present value of actuarial obligations at December 31, 2018 5,123,238 1,416,391 119,964 382,993 553,493 7,596,079 Gross current service cost 925 5,449 84 185 2,352 8,995 Interest on actuarial obligations 449,173 125,059 10,507 34,342 48,796 667,877 Participants' contributions transferred during the year - 1,886 - 620 1,136 3,642 Actuarial loss: effect of changes in demographic assumptions (2,900) (77) (165) - - (3,142) Actuarial loss: effect of changes in financial assumptions 1,037,048 321,011 31,516 73,759 113,836 1,577,170 Benefits paid during the year (443,449) (96,628) (9,652) (27,564) (38,250) (615,543) Present value of actuarial obligations at December 31, 2019 6,164,035 1,773,089 152,254 464,335 681,363 9,235,076 CPFL Paulista CPFL Piratininga CPFL Geração RGE Sul (RGE) Total Plan 1 (*) Plan 2 Fair value of actuarial assets at December 31, 2016 (3,723,563) (1,062,638) (89,533) (347,906) (405,251) (5,628,892) Expected return during the year (392,819) (113,470) (9,437) (37,412) (43,258) (596,396) Participants' contributions transferred during the year (37) (2,044) - (302) (990) (3,373) Sponsors' contributions (50,308) (17,296) (753) (7,296) (6,169) (81,822) Actuarial loss (gain): return on assets (137,870) 5,076 (3,486) (19,610) (25,503) (181,393) Benefits paid during the year 379,536 84,634 8,831 25,203 34,501 532,705 Fair value of actuarial assets at December 31, 2017 (3,925,061) (1,105,738) (94,378) (387,322) (446,670) (5,959,170) Expected return during the year (359,588) (102,621) (8,634) (35,950) (41,166) (547,959) Participants' contributions transferred during the year (24) (2,078) - (395) (842) (3,339) Sponsors' contributions (65,096) (25,460) (1,027) (7,643) (6,712) (105,938) Actuarial loss (gain): return on assets (264,569) (57,432) (4,230) (7,707) (3,950) (337,888) Benefits paid during the year 398,907 87,682 9,433 25,974 35,769 557,765 Fair value of actuarial assets at December 31, 2018 (4,215,431) (1,205,647) (98,836) (413,043) (463,571) (6,396,529) Expected return during the year (372,121) (107,795) (8,699) (37,500) (40,947) (567,063) Participants' contributions transferred during the year - (1,886) - (620) (1,136) (3,643) Sponsors' contributions (92,756) (34,444) (1,604) (7,748) (6,959) (143,512) Actuarial loss (gain): return on assets (280,404) (99,905) (6,426) (35,042) (29,504) (451,281) Benefits paid during the year 443,449 96,628 9,652 27,564 38,250 615,543 Fair value of actuarial assets at December 31, 2019 (4,517,265) (1,353,050) (105,914) (466,390) (503,867) (6,946,486) (*) Plan 1 was recorded at the dissolved RGE until the merger of the distribution companies. 20.3 Changes in the recognized assets and liabilities The changes in net liability are as follows: CPFL Paulista CPFL Piratininga CPFL Geração RGE RGE Sul (RGE) Total Plan 1 Plan 2 Net actuarial liability at December 31, 2016 800,445 139,958 18,954 4,972 74,830 1,039,158 Expenses (income) recognized in the statement of profit or loss 84,501 17,244 2,067 253 9,822 113,887 Sponsors' contributions transferred during the year (50,308) (17,296) (753) (7,296) (6,169) (81,822) Actuarial loss (gain): effect of changes in demographic assumptions 225 328 14 326 16,490 17,383 Actuarial loss (gain): effect of changes in financial assumptions (6,993) (3,586) (372) (45) 8,153 (2,843) Actuarial loss (gain): return on assets (137,870) 5,076 (3,486) (19,610) (25,503) (181,393) Effect of asset ceiling - - - 21,399 - 21,399 Net actuarial liability at December 31, 2017 690,000 141,724 16,424 - 77,623 925,770 Other contributions 15,391 Total liability 941,160 Current 60,801 Noncurrent 880,360 CPFL Paulista CPFL Piratininga CPFL Geração RGE RGE Sul (RGE) Total Plan 1 Plan 2 Net actuarial liability at December 31, 2017 690,000 141,724 16,424 - 77,623 925,770 Expenses (income) recognized in the statement of profit or loss 62,330 16,372 1,553 (188) 9,842 89,909 Sponsors' contributions transferred during the year (65,096) (25,460) (1,027) (7,643) (6,712) (105,938) Actuarial loss (gain): effect of changes in demographic assumptions - - - - 345 345 Actuarial loss (gain): effect of changes in financial assumptions 485,142 135,540 8,409 8,921 12,774 650,786 Actuarial loss (gain): return on assets (264,569) (57,432) (4,230) (7,707) (3,950) (337,888) Effect of asset ceiling - - - 6,617 - 6,617 Net actuarial liability at December 31, 2018 907,807 210,744 21,129 - 89,922 1,229,600 Other contributions 13,662 Total liability 1,243,263 Current 86,623 Noncurrent 1,156,639 CPFL Paulista CPFL Piratininga CPFL Geração RGE Sul (RGE) Total Plan 1 (*) Plan 2 Net actuarial liability at December 31, 2018 907,807 210,744 21,129 - 89,922 1,229,600 Expenses (income) recognized in the statement of profit or loss 77,977 22,711 1,892 (178) 10,201 112,602 Sponsors' contributions transferred during the year (92,756) (34,444) (1,604) (7,748) (6,959) (143,512) Actuarial loss (gain): effect of changes in demographic assumptions (2,900) (77) (165) - - (3,143) Actuarial loss (gain): effect of changes in financial assumptions 1,037,048 321,011 31,516 73,759 113,836 1,577,170 Actuarial loss (gain): return on actuarial assets (280,404) (99,905) (6,426) (35,042) (29,504) (451,281) Effect of asset ceiling 74,849 - - (30,791) - 44,058 Net actuarial liability at December 31, 2019 1,721,619 420,039 46,340 - 177,496 2,365,494 Other contributions 12,683 Total liability 2,378,178 Current 224,851 Noncurrent 2,153,327 (*) Plan 1 was recorded at the dissolved RGE until the merger of the distribution companies. 20.4Expected contributions and benefits The expected contributions to the plans for 2020 are shown below: 2020 CPFL Paulista 121,055 CPFL Piratininga 40,263 CPFL Geração 2,481 RGE Sul (RGE) - Plan 1 7,393 RGE Sul (RGE) - Plan 2 6,102 Total 177,294 The expected benefits to be paid in the next 10 years are shown below: 2020 2021 2022 2023 2024 to 2029 Total CPFL Paulista 436,163 448,553 460,445 471,438 3,017,325 4,833,924 CPFL Piratininga 99,957 104,651 108,695 113,023 774,546 1,200,872 CPFL Geração 10,728 10,992 11,238 11,494 73,016 117,468 RGE Sul (RGE) - Plan 1 28,695 29,642 30,980 32,025 213,150 334,492 RGE Sul (RGE) - Plan 2 38,642 40,078 41,785 43,447 293,489 457,441 Total 614,185 633,916 653,143 671,427 4,371,526 6,944,197 At December 31, 2019, the average duration of the defined benefit obligation was 10.3 years for CPFL Paulista, 12.5 years for CPFL Piratininga, 10.7 years for CPFL Geração, 11.3 years for plan 1 for RGE and 12.5 years for plan 2 for RGE. 20.5 Private pension plan income and expense Supported by on the opinion of external actuarial, the Group’s management presents the estimate of the expenses (income) to be recognized in 2020 and the expense (income) recognized in 2019, 2018 and 2017 is as follows: 2020 Estimated CPFL Paulista CPFL Piratininga CPFL Geração RGE Sul (RGE) Total Plan 1 Plan 2 Service cost 1,533 9,135 124 (308) 2,244 12,728 Interest on actuarial obligations 441,784 128,027 10,914 33,434 49,190 663,349 Expected return on plan assets (323,926) (98,386) (7,563) (33,885) (36,272) (500,032) Effect of asset ceiling 5,561 - - 153 - 5,714 Total expense (income) 124,952 38,776 3,475 (606) 15,162 181,759 2019 Actual CPFL Paulista CPFL Piratininga CPFL Geração RGE Sul (RGE) Total Plan 1 (*) Plan 2 Service cost 925 5,449 84 185 2,352 8,993 Interest on actuarial obligations 449,173 125,059 10,507 34,342 48,796 667,877 Expected return on plan assets (372,121) (107,795) (8,699) (37,500) (40,947) (567,062) Effect of asset ceiling - - - 2,795 - 2,795 Total expense (income) 77,977 22,711 1,892 (178) 10,201 112,603 2018 Actual CPFL Paulista CPFL Piratininga CPFL Geração RGE RGE Sul (RGE) Total Plan 1 Plan 2 Service cost 835 4,365 78 175 2,790 8,243 Interest on actuarial obligations 421,083 114,628 10,109 33,552 48,218 627,590 Expected return on plan assets (359,587) (102,622) (8,634) (35,950) (41,166) (547,959) Effect of asset ceiling - - - 2,035 - 2,035 Total expense (income) 62,330 16,372 1,553 (188) 9,842 89,909 2017 Actual CPFL Paulista CPFL Piratininga CPFL Geração RGE RGE Sul (RGE) Total Plan 1 Plan 2* Service cost 707 3,153 73 270 2,153 6,356 Interest on actuarial obligations 476,613 127,561 11,431 37,395 50,927 703,927 Expected return on plan assets (392,819) (113,470) (9,437) (37,412) (43,258) (596,396) Total expense (income) 84,501 17,244 2,067 253 9,822 113,887 The main assumptions taken into consideration in the actuarial calculation at the end of the reporting period were as follows: 20.6 Plan assets The following tables show the allocation (by asset segment) of the assets of the CPFL´s Group pension plans, at December 31, 2019 and 2018 managed by Fundações CESP and Família Previdência. The tables also show the distribution of the guarantee resources established as target for 2020, obtained in light of the macroeconomic scenario in December 2019. Assets managed by the plans are as follows: CPFL Paulista, CPFL Geração and CPFL Piratininga RGE (Plans 1 and 2) Dec. 31, 2019 Dec. 31, 2018 Dec. 31, 2017 Dec. 31, 2019 Dec. 31, 2018 Dec. 31, 2017 Nominal discount rate for actuarial liabilities: 7.43% p.a. 9.10% p.a. 9.51% p.a. 7.43% p.a. 9.10% p.a. 9.51% p.a. Nominal Return Rate on Assets: 7.43% p.a. 9.10% p.a. 9.51% p.a. 7.43% p.a. 9.10% p.a. 9.51% p.a. Estimated Rate of nominal salary increase: 5.56% p.a.(*) 5.56% p.a.(*) 6.08% p.a.(*) 5.97% p.a.(**) 5.97% p.a.(**) 6.10% p.a. (**) Estimated Rate of nominal benefits increase: 4.00% p.a. 4.00% p.a. 4.00% p.a. 4.00% p.a. 4.00% p.a. 4.00% p.a. Estimated long-term inflation rate (basis for determining the nominal rates above) 4.00% p.a. 4.00% p.a. 4.00% p.a. 4.00% p.a. 4.00% p.a. 4.00% p.a. General biometric mortality table: AT-2000 (-10) AT-2000 (-10) AT-2000 (-10) BR-EMS sb v.2015 BR-EMS sb v.2015 BR-EMS sb v.2015 Biometric table for the onset of disability: Low Light (-30) Low Light (-30) Low Light (-30) Medium Light Medium Light Medium Light Expected turnover table: ExpR_2012 ExpR_2012 ExpR_2012 Null Null Null Likelihood of reaching retirement age: After 15 years of membership and 35 years of service for men and 30 years for women After 15 years of membership and 35 years of service for men and 30 years for women After 15 years of membership and 35 years of service for men and 30 years for women 100% on first eligibility to a full retirement benefit 100% on first eligibility to a full retirement benefit 100% on first eligibility to a full retirement benefit (*) Estimated rate of nominal salary increase for CPFL Piratininga was 6.39% on December 31, 2019, 2018 and 2017. (**) Estimated rate of nominal salary increase for RGE (plan 1) was 5.15% on December 31, 2019 and 2018 and 6.13%¨on December 31, 2017. Assets managed by FUNCESP Assets managed by Fundação Família Previdência CEEE CPFL Paulista and CPFL Geração CPFL Piratininga RGE Sul (RGE) Plan 1 Plan 2 2019 2018 2019 2018 2019 2018 2019 2018 Fixed rate 75% 77% 76% 81% 76% 78% 74% 77% Federal governament bonds 61% 55% 58% 53% 66% 68% 64% 67% Corporate bonds (financial institutions) 1% 3% 2% 5% 5% 5% 5% 5% Corporate bonds (non financial institutions) 0% 1% 0% 1% 2% 3% 3% 3% Multimarket funds 4% 4% 4% 4% 2% 2% 2% 2% Other fixed income investments 9% 15% 12% 18% - - - - Variable income 17% 15% 17% 13% 21% 18% 21% 18% Investiment funds - shares 17% 15% 17% 13% 21% 18% 21% 18% Structured investments 4% 2% 4% 2% - 1% 1% 1% Equity funds - - - - - 0% 0% 1% Real estate funds - - - - - 1% 1% 1% Multimarket fund 4% 2% 4% 2% - - - - Total quoted in an active market 96% 94% 97% 97% 96% 96% 96% 96% Real estate 3% 3% 2% 2% 2% 2% 2% 2% Transactions with participants 1% 1% 1% 2% 1% 2% 2% 2% Other investments 0% 1% - - - - - - Escrow deposits and others 0% 1% - - - - - - Total not quoted in an active market 4% 6% 3% 3% 4% 4% 4% 4% The plan assets do not hold any properties occupied or assets used by the Company. Target for 2020 Fundação CESP Fundação Família Previdência CPFL Paulista and CPFL Geração CPFL Piratininga RGE Sul (RGE) Plan 1 Plan 2 Fixed income investments 61.3% 51.6% 76.0% 76.0% Variable income investments 24.9% 35.5% 9.0% 11.0% Real estate 3.6% 1.8% 2.0% 3.0% Transactions with participants 1.9% 2.7% 2.0% 2.0% Structured investments - - 11.0% 8.0% Investments abroad 8.4% 8.4% - - Total 100% 100% 100% 100% The allocation target for 2020 was based on the recommendations for allocation of assets made at the end of 2019 by Fundações CESP e Família Previdência, in their Investment Policy. This target may change at any time during 2020, in light of changes in the macroeconomic situation or in the return on assets, among other factors. The asset management aims at maximizing the return on investments, but always seeking to minimize the risks of actuarial deficit. Accordingly, investments are always made considering the liability that they must honor. The two main studies for Fundações CESP e Família Previdência to achieve the investment management objectives are the Asset Liability Management – ALM and the Technical Study of Compliance and Appropriateness of the Real Interest Rate, both conducted at least once a year, taking into consideration the projected flow of benefit payments (liability flow) of the pension plans managed by the Foundations. The ALM study is used as a base to define the strategic allocation of assets, which comprises the target participations in the asset classes of interest, from the identification of efficient combinations of assets, considering the existence of liabilities and the need for return, immunization and liquidity of each plan, considering projections of risk and return. The simulations generated by the ALM studies assist in the definition of the minimum and maximum limits of allocation in the different asset classes, defined in the plans’ Investment Policy, which is also used as a risk control mechanism. The Technical Study of Compliance and Appropriateness of the Real Interest Rate aims at proving the appropriateness and compliance of the annual real interest rate to be adopted in the actuarial valuation of the plans and the projected annual real rate of return of the investments, considering their projected flows of revenues and expenses. These studies are used as a base to determine the assumptions of estimated real return of the pension plans’ investments for short-term and long-term horizons and assist in the analysis of their liquidity, since they consider the flow of benefit payments against the assets considered liquid. The main assumptions considered in the studies are, in addition to the liability flow projections, the macroeconomic and asset price projections, through which estimates of the expected short-term and long-term profitability are obtained, taking into account the current portfolios of the benefit plans. 20.7 Sensitivity analysis The significant actuarial assumptions for determining the defined benefit obligation are discount rate and mortality. The following sensitivity analyses were based on reasonably possible changes in the assumptions at the end of the reporting period, with the other assumptions remaining constant. Furthermore, in the presentation of the sensitivity analysis, the present value of the defined benefit obligation was calculated using the projected unit credit method at the end of the reporting period, the same method used to calculate the defined benefit obligation recognized in the statement of financial position, according to IAS 19. See below the effects on the defined benefit obligation if the discount rate were 0.25 percentage points lower (higher) and if life expectancy were to decrease (increase) in one year: RGE Sul (RGE) Increase (Decrease) CPFL Paulista CPFL Piratininga CPFL Geração Plan 1 Plan 2 Total Nominal discount (p.a.)* -0.25 p.p. 160,456 56,441 4,116 13,297 21,548 255,858 +0.25 p.p. (153,552) (53,580) (3,928) (12,683) (20,456) (244,199) General biometric mortality table** +1 year (169,890) (40,984) (4,005) (11,057) (15,957) (241,893) -1 year 169,223 40,473 3,993 10,917 15,743 240,349 * The Company´s assumption based on the actuarial report for the nominal discount rate was 7.43% p.a.. The projected rates are increased or decreased by 0.25 p.p. to 7.18% p.a. and 7.68% p.a.. ** The Company´s assumption based on in the actuarial report for the mortality table was AT-2000 (-10) for Fundação CESP and BREMS sb v.2015 for Fundação Família Previdência. The projections were performed with 1 year of aggravation or softening on the respective mortality tables. 20.8 Investment risk The major part of the resources of the Company’s benefit plans is invested in the fixed income segment and, within this segment, the greater part of the funds is invested in federal government bonds, indexed to the IGP-M, IPCA and SELIC, which are the indexes for adjustment of the actuarial liabilities of the Company’s plans (defined benefit plans), representing the matching between assets and liabilities. Management of the Company’s benefit plans is monitored by the Investment and Pension Plan Management Committee, which includes representatives of active and retired employees, as well as members appointed by the Company. Among the duties of the Committee are the analysis and approval of investment recommendations made by investment managers of Fundação CESP, which occurs at least quarterly. Fundações CESP and Família Pervidência use the following tools to control market risks in the fixed income and variable income segments: VaR, Traking Risk, Tracking Error and Stress Test. Fundação Família Previdência also uses Sharpe, Generalized Sharpe and Drawn Down. In addition, to assess the market risk exposure of the plans' portfolios, the Base EBA Year Exposure is calculated and Stress Simulations are performed. The EBA consists of a metric that expresses the risk exposure of the portfolio as a percentage of equity, considering the sum of the exposures generated by each asset, based on the definition of increase/decrease of the respective risk factors. Fundações CESP and Família Previdência Investment Policies determine additional restrictions that, along with those already established by law, define the percentages of diversification for investments and establish the strategy of the plans, including the limit of credit risk in assets issued or co-obligation of the same legal entity to be adopted internally. |