Pension Plans

We maintain

three

defined benefit pension plans:

one

for the UK employees,

one

for German employees, and

one

for Philippine employees. We deposit funds for the UK and Philippine plans with financial institutions and make payments to former German employees directly. We accrue for the unfunded portion of the obligations. The measurement date for projected benefit obligations and plan assets is

March 31.

The UK and German plans have been curtailed. As such, the plans are closed to new entrants and

credit is provided for additional periods of service.

Net Period Pension Cost

The net periodic pension expense includes the following components (in thousands):

	Year Ended March 31,
	2017			2016			2015
Service cost	$	109		$	101		$	104
Interest cost on projected benefit obligation		1,313			1,450			1,803
Expected return on plan assets		(1,183	)		(1,721	)		(1,910	)
Recognized actuarial loss		387			438			179
Net periodic pension expense	$	626		$	268		$	176

Net Amount Recognized (in thousands)

	Year Ended March 31,
	2017			2016
Change in projected benefit obligation:
Projected benefit obligation at the beginning of the year	$	45,021		$	47,346
Service cost		109			101
Interest cost		1,313			1,450
Actuarial (gain) loss		3,356			(1,549	)
Benefits paid		(1,543	)		(1,830	)
Foreign currency adjustment		(5,073	)		(497	)
Projected benefit obligation at year end	$	43,183		$	45,021

Change in plan assets:
Fair value of plan assets at the beginning of the year	$	28,714		$	30,114
Actual return (loss) on plan assets		3,526			(156	)
Employer contribution		993			1,009
Benefits paid from assets		(1,083	)		(1,388	)
Foreign currency adjustment		(3,868	)		(865	)
Plan assets at fair value at year end	$	28,282		$	28,714
Unfunded status of the plan at year end	$	14,901		$	16,307

Pension liability recognized on the balance sheet due after one year	$	14,901		$	16,307

Plans with projected benefit obligation and accumulated benefit obligation in excess of plan assets:
Projected benefit obligation at year end	$	43,183		$	45,021
Accumulated benefit obligation at year end	$	42,652		$	44,509
Plan assets at fair value at year end	$	28,282		$	28,714

Amounts recognized in accumulated other comprehensive income (loss):
Unrecognized actuarial loss, before tax	$	(11,457	)	$	(12,140	)
Amount recognized as component of stockholders’ equity – pretax	$	(11,457	)	$	(12,140	)
Accumulated benefit obligation at year end	$	42,652		$	44,509

Weighted average actuarial assumptions used to determine benefit obligations for the plans were as follows:

	Year End March 31,
	2017				2016
Discount rate		1.9	-	5.2%		1.9	-	4.6%
Expected long term rate of return on assets		3.8	-	6.0%		4.4	-	7.0%
Salary scale			5.0%				5.0%

Information on Plan Assets

We report and measure the plan assets of our defined benefit pension plans at fair value. The table below sets forth the fair value of our plan assets as of

March 31, 2017

and

2016,

using the same

three

-level hierarchy of fair-value inputs described in Note

“Fair Value” (in thousands):

	March 31, 2017						March 31, 2016
Description	Level 1		Level 2		Total		Level 1		Level 2		Total
Cash and cash funds	$	136	$	-	$	136	$	121	$	-	$	121
Equity		314		-		314		351		-		351
Fixed interest		1,203		58		1,261		1,225		96		1,321
Mutual funds		13,181		13,390		26,571		13,527		13,394		26,921
Total	$	14,834	$	13,448	$	28,282	$	15,224	$	13,490	$	28,714

The expected long term rate of return on assets is a weighted average of the returns expected for the underlying broad asset classes. The expected returns for each asset class are estimated in light of the market conditions on the accounting date and the past performance of the asset classes generally.

The amount of accumulated other comprehensive income expected to be recognized in net periodic pension cost in fiscal

2018

includes amortization of actuarial loss of

$397,000.

Approximately

73%

of the accrued pension liability relates to the German plan and

25%

to the UK plan. The accrued pension liability related to the Philippine plan is immaterial.

The investment policies and strategies for the UK plan assets are determined by the respective plan’s trustees in consultation with independent investment consultants and the employer. Our practice is to fund these plans in amounts at least sufficient to meet the minimum requirements of local laws and regulations. The trustees are aware that the nature of the liabilities of the plans will evolve as the age profile and life expectancy of the membership changes. These changing liability profiles lead to consultations about the appropriate balance of investment assets to be used by the plans (equity, debt, other), as well as timescales, within which required adjustments should be implemented. The plan assets in the UK are held in pooled investment funds operated by Fidelity Worldwide Investments. Our plan assets do

not

include direct holdings of our securities. The investment managers have discretion to vary the balance of investments of the scheme according to prevailing investment conditions and the trustees regularly monitor all investment decisions affecting the scheme and the overall investment performance. At

March 31, 2017,

approximately

50%

of the assets of the UK fund were invested in a diversified growth fund, which

may

invest in securities, collective investment schemes, money market instruments and cash and deposits, while

50%

were in debt securities. The investments in debt securities are made in government index-linked bonds and investment grade corporate bonds. The target allocation of the UK plan assets that we control is

50%

diversified growth fund and

50%

debt securities.

The German plan was held by a separate legal entity. As of

March 31, 2017,

the German defined benefit plan was completely unfunded and we accrued for its obligations.

For our Philippine plan, the local law requires us to appoint a trustee for the fund. We have appointed Bank of the Philippine Islands, or BPI, as the trustee of the plan. The plan assets are fully invested with BPI. The main role of the trustee is to manage the fund according to the mandate given by the retirement committee of our Philippine entity and to pay the covered/eligible employees in accordance with the plan. BPI Asset Management and Trust Group, an independent unit of BPI, provides investment management services to the trustee. At

March 31, 2017,

approximately

75%

of the assets of the fund were invested in fixed income securities,

19%

in equity securities and

in cash. The target allocation for the Philippine fund was

75%

to fixed income securities,

20%

to equities and

to cash and cash equivalents.

We expect to make contributions to the plans of approximately

$948,000

in the fiscal year ending

March 31, 2018.

This contribution is primary contractual.

We expect to pay benefits in each of the next

five

fiscal years and in the aggregate for the

five

fiscal years thereafter of approximately the following (in thousands):

Fiscal Year Ended:	Benefit Payment
March 31, 2018	$	1,525
March 31, 2019		1,561
March 31, 2020		1,632
March 31, 2021		1,660
March 31, 2022		1,611
Five fiscal years ended March 31, 2027		9,449
Total benefit payments for the ten fiscal years ended March 31, 2027	$	17,438