RESTRICTEDWORLD TRADE
ORGANIZATIONWT/GC/W/426
27 November 2000
(00-5200)
General Council
7 and 8 December
WTO PENSION PLAN
MANAGEMENT BOARD
ANNUAL REPORT1
1999
                                                     
1 This Annual Report is published in accordance with Article 5 of the Regulations of the Plan.WT/GC/W/426
Page 2
TABLE OF CONTENTS
PAGE
Introduction 3
Structure of the Pension Plan 3
Meetings of the Management Board 4Participation in the Pension Plan 7
Accounts 8
Opinion of the External Auditors on the Accounts of the WTO Pension Plan 9
for the Financial Year Ended 31 December 1999
ANNEXES
Annex 1: Structure of the WTO Pension Plan 10
Annex 2: Income and Expenditure Statement for the period 1.1.1999 - 31.12.1999 11
Annex 3: Surplus Account as at 31.12.1999 12Annex 4: Balance Sheet as at 31.12.1999 13
Annex 5: Source and Application of Funds for the Period 1.1.1999 - 31.12.1999 14
Annex 6: Glossary of terms 15Annex 7: Report of the External Auditor on the Accounts of the WTO Pension Plan
for the Year Ended 31 December 1999 16WT/GC/W/426
Page 3
INTRODUCTION
1. The WTO Pension Plan was established on 1 January 1999 following the decision by the General
Council on 16 October 1998 (WT/L/282) to terminate the membership of ICITO in the United NationsJoint Staff Pension Fund on 31 December 1998 and to adopt the Regulations and Administrative Rulesof the Plan.
2. The Management Board of the Plan was duly constituted by the General Council in accordance with
Article 4 of the Plan Regulations on 26 March 1999.
3. The present report for the period up to 31 December 1999 has been prepared by the Management Board
in accordance with Article 5 of the Regulations of the Plan for presentation to the General Council and
to the Plan participants.  The Management Board will ensure that future annual reports are made
available in a more timely manner.  Individual statements of account will be made available to allparticipants together with the Annual Report.
STRUCTURE OF THE PENSION PLAN
4. (a) Management Board
Ambassador Kamel Morjane, Chairman
Amb. Anthony Hill2Mr. Jacques Chabert
Mr. Mark Linscott Mr. Hector Millan
Mr. Michael Stone Mr. Anthony Mistri
Mr. Peter van der GaastMembers elected by
the General Council
Mr. Paul RolianMembers appointed by the
Director-General
Mr. Hakki Akil Ms. Monette David
Mr. Andrew Johnston Mr. Zdenek Drabek
Mr. Patrick Krappie Mr. Jean-Pierre Lapalme
Ms. Laurence WiedmerAlternates elected
by the General
Council
Mr. Jan-Eirik SørensenAlternates appointed by the
Director-General
(b) Secretary
R. Luther
- Support services
J.-P. Helary
C. Dresti
(c) Consulting Actuary
Richard Leblond (Prasa Hewitt S.A.) (pending completion of a competition bidding procedure
for this position)
                                                     
2 Resigned on 27 September 1999.WT/GC/W/426
Page 4
(d) External Auditor
Mr. Ad J.E. Havermans, Member of the Board of the Netherlands Court of Audit
(e) Other Advisers
ECOFIN Investment Consulting AG (for investment matters)
Lenz & Staehelin (for legal matters)
5. An organizational chart is reproduced in Annex 1.
MEETINGS OF THE MANAGEMENT BOARD
6. The Management Board held eleven meetings in 1999.  The agendas comprised several recurring
items, including the investment strategy for the Plan, the selection of a global custodian and fundmanagers, the draft rules of procedure, the selection of a consulting actuary and the outsourcing of the
Plan's administrative services.  These items are dealt with in greater detail below.
7. Regular progress reports on the work of the Management Board were made available both to the
participants and to the WTO Members.
Investment Strategy
8. Prior to the establishment of the Management Board and with a view to expediting the launch of the
investment strategy, a joint internal working group conducted a search among firms specializing in the
provision of investment advisory services.  As a result of that search, ECOFIN, a consulting firm based
in Zürich, was selected to advise on the development of an investment strategy for the Plan.
9. The Management Board subsequently determined the investment strategy for the Plan using advice
provided by ECOFIN.  The objective was to have an asset allocation which would fund the liabilities ofthe Plan with a balance being drawn between maximising returns on the Plan's assets and maintaining a
reasonable level of risk.  A stochastic study of the assets and liabilities of the Plan and the different
investment strategies played an important role in the Board's deliberations.  That study was based onthe premise that the Plan should achieve a long-term rate of return of 3.5%, net of price inflation,consistent with the assumptions on which the establishment and contribution rates of a scheme hadbeen assessed.
10. The asset-liability study demonstrated the impact of liabilities for the pensioners having been retained
by the UNJSPF.  The Plan is expected to enjoy gr eater freedom in its investment strategy over the
medium term.  Its contributions are expected to ex ceed benefit payments over that period.  The study
also concluded that the objectives could be enhanced by investing in foreign as well as Swiss assets.The Board decided the following breakdown of assets would be appropriate:
0% - 15% in Swiss bonds
15% - 20% in foreign bonds10% - 15% in Swiss equities50% - 70% in foreign equitiesWT/GC/W/426
Page 5
11. The Management Board decided to adopt the following investment strategy which will be reviewed at
regular intervals:
Bonds
CHBonds
GlobalEquities
CHEquities
Global
including EuropeEquities
Europe
Relative allocation 16% 16% 13% 42% 13%
Absolute allocation
(in million CHF) 25 25 20 65 20
Active mandate --- 2 -
Passive mandate 111 - 1
Selection of Global Custodian and Fund Managers
12. The Management Board approved a competitive tendering procedure for the selection of, on the one
hand, the global custodian responsible for the centr alized safekeeping of the assets and execution of
transactions and, on the other hand, the passive3 and active4 fund managers to take charge of the
portfolios listed in paragraph 10, above.
13. The Northern Trust Company was selected as a candidate for the position of global custodian subject to
the negotiation of a satisfactory contract.  Those negotiations were entrusted to a negotiating team
designated by the Management Board.5  The team sought expert legal advice on specific issues arising
in the course of these negotiations.
14. Barclays Global Investors (BGI), a leader in passive fund management, was selected as the manager of
four passive portfolios with a total initial value of SFR 90 million broken down as follows:
- Swiss bonds (SFR 25 million)
- global bonds ex-Switzerland (SFR 25 million)
- Swiss equities (SFR 20 million)
- European equities ex-Switzerland (SFR 20 million).
15. The negotiation of the contract with BGI was completed and the four passive portfolios launched by the
end of August 1999.
16. Again as a result of a competitive tendering process, ING Investment Management and Wellington
Management International were selected as the managers of two active portfolios comprising globalequities ex-Switzerland, each for an initial value of SFR 32.5 million.
                                                     
3 A "passive" fund manager manages a portfolio by linking the investments to a given index so that the
portfolio value moves with that index.
4 An "active" fund manager manages a portfolio by selecting investments in a manner designed to
achieve outperformance of a benchmark over time.
5 These negotiations were successfully completed and the global custody and active mandates launched
on 19 April 2000.WT/GC/W/426
Page 6
17. Contract negotiations with the custodian and active managers were still in progress at the end of 1999
(see footnote 5).
Management of the Assets and Performance
18. The transfer of the proportionate share of the total assets of the United Nations Joint Staff Pension Fund
payable to the WTO following the withdrawal of ICITO from the Fund on 31 December 1998 tookplace in three stages.
19. A first payment of US$ 93.6 millio n was received on 14 January 1999, followed by further payments of
US$ 11.5 million and US$ 13900 on 14 August 1999 and 22 February 2000, respectively.  The total
assets recovered from the UNJSPF in respect of the 435 participants who opted to transfer their
accumulated rights to the WTO Pension Plan thus amounted to US$ 105.1 million.
20. Pending the definition and launching of the investment strategy as described above, the assets were
held on short-term deposit in Euro, Swiss francs and United States dollars.  The interest rate rangedfrom 0.77 per cent to 1.19 per cent for the Swiss franc, from 2.63 per cent to 3.05 per cent for the Euro
and from 4.88 per cent to 5.82 per cent for the United States dollar.
21. Accumulated contributions were also held initially on short-term deposit and then swept regularly into
the BGI passive mandates once these had been set up at the end of August 1999.
22. The performance of the BGI passive portfolios over the period ending 31 December 1999 may be
summarized as follows:
Investment category Benchmark
- BGIAnnualized Performance
in SFR
6
Swiss bonds Swiss domestic bond index
- BGI Swiss bond index fund- 0.34%
+ 0.04%
Global bonds ex-Switzerland Lehmann Brothers Government
Bond Index/Non-U.S. World
Government Bond Index
- BGI global bond ex-Switzerlandfund+ 6.01%
+ 5.74%
Swiss equities MSCI Switzerland
- BGI Swiss equity index fund+ 8.75%
+ 8.30%
European equities ex-Switzerland MSCI Europe ex-Switzerland
- BGI Europe ex-Switzerland index
fund+ 24.61%
+ 24.24%
23. The Plan achieved a real rate of return of 3.62% in 1999, to be compared with the long-term target of
3.5% quoted in paragraph 9, above.
Rules of Procedure
24. Article 5(c) of the Regulations of the Pension Plan states that the duties and authority of the
Management Board as well as rules for the auditing of accounts shall be laid down in rules ofprocedure which shall be approved by the General Council.
25. The Management Board discussed a set of draft rules of procedure at four separate meetings in 1999.
Further consideration of the matter was postponed pending finalization of the investment strategy and
other, more urgent, matters.
                                                     
6 Figures provided by BGI.WT/GC/W/426
Page 7
Selection of a Consulting Actuary
26. The Management Board decided to initiate a competitive tendering process for the selection of a
consulting actuary, as required under Article 7 of the Regulations of the Pension Plan.  Terms ofreference were drawn up and an advertisement placed in the press.  The nine firms replying wereinvited to submit detailed bids which were subsequently examined by a working group consisting of
members of the Management Board.  A short list of three firms
 was invited to make presentations to
the Board in 2000.  Pending a final decision on the choice of actuary, Mr. Richard Leblond of Prasa
Hewitt S.A., who had previously been advising the WTO, acted as the consulting actuary of the
Pension Plan .7
Outsourcing of the Pension Pl an's Administrative Services
27. The Management Board decided to examine the feasibility of outsourcing the administrative services to
be provided to the Plan.  These services include th e maintenance of individual, historized records, the
calculation of benefits and estimates, the maintenance of accounts and the monthly downloading to theWTO of a complete database in electronic format.  The Management Board agreed that it was essentialto maintain an in-house service so that a participant or beneficiary could at any time have full and
immediate access through the Secretary to his or her pension record.  It was also agreed that the
confidentiality of the records should not be compromi sed by any decision to outsource those services.
28. A call for tenders was issued in the course of 1999 to which twelve firms responded.  The analysis of
those replies was still in progress at the end of the year.
8
PARTICIPATION IN THE PENSION PLAN
29. The following table shows the trends in the numbers of participants in the Pension Plan in the course of
1999:
Participants in the Pension Plan in 1999
Total number on 1 January 1999 509
Movements in 1999
-   entries
-   separations
Total number on 31 December 199963
20
552
Breakdown of separations in 1999
-   retirement-   early retirement
-   withdrawal settlement
-   deferment of decision1
3
13
3
                                                     
7 William M. Mercer S.A. was subsequently selected as the consulting actuary, subject to the
negotiation of a satisfactory contract .
8 A final decision has not yet been taken on the outsourcing of administrative services.WT/GC/W/426
Page 8
The average age of the participants in the Pension Plan was 44 years 3 months for men and 42 years 7 months
for women on 31 December 1999.  The age distribution is shown in the following graph:
ACCOUNTS
30. Pursuant to Article 15(a) of the Regulations of the Pension Plan, the unit of account of the Pension Plan
is the Swiss franc.  For practical reasons, the current United Nations operational rate of exchange is
used for the conversion of other currencies into the Swiss franc.
31. The accounting year is 1 January to 31 December.
32. Unrealized exchange rate gains and losses are placed in the currency revaluation reserve fund.
33. The value of securities recorded in the accounts corresponds to the lower of the purchase price or
market value.
34. The income and expenditure statement for the period 1.1.1999 - 31.12.1999 and surplus account as at
31.12.1999 are reproduced in Annexes 2 and 3, respectively.
35. The balance sheet as at 31.12.1999 is reproduced in Annex 4.
36. The source and application of funds for the period 1.1.1999 - 31.12.1999 is reproduced in Annex 5.
37. A glossary of terms to facilitate an understanding of the tables is reproduced in Annex 6.D is trib u tio n  b y  a g e  o f th e  p a rtic ip a n ts  in  th e  W T O  P e n s io n  P la n
020406080100120
20-30 30-35 35-40 40-45 45-50 50-55 55-60 + 60
Age
MEN WOMENWT/GC/W/426
Page 9
OPINION OF THE EXTERNAL AUDITOR ON THE ACCOUNTS OF THE WTO PENSION PLAN
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 19999
I have examined the appended Financial Statements of the WTO Pension Plan for the year ended
31 December 1999.  The examination included a general review of the accounting procedures and such tests of
the accounting records and other supporting evidence as cons idered necessary in the circumstances.  As a result
of the examination, the opinion is given that these statements present fairly the financial position of the WTOPension Plan as at 31 December 1999 and the operations for 1999.
14 November 2000
Ad J.E. Havermans
Member of the Board of the Netherlands Court of Audit
                                                     
9 The report of the External Auditor on the accounts of the WTO Pension Plan for the year ended
31 December 1999 is attached as Annex 7.WT/GC/W/426
Page 10Annex 1
STRUCTURE OF THE WTO PENSION PLAN
MANAGEMENT BOARDPARTICIPANTS GENERAL COUNCIL
EXTERNAL AUDITORS
INVESTMENT ADVISORY
SERVICESADMINISTRATIVE
SERVICES
Secretariat
Consulting Actuary
Medical Adviser
ASSET MANAGEMENT SERVICESWT/GC/W/426
Page 11Benefits Contributions
Lump sum Participants 5,189,136          
Withdrawal settlement - Art 27 313,299             Organization 10,378,271        
Commutation - Art 24( c) & Art 25( c) 812,408             15,567,407              
1,125,707                
Periodic benefits
Retirement benefit - Art 24 15,304               
Early retirement benefit - Art 25 93,132               
108,436                   
Investment and Other Administrative Expenses Investment Income
- Bank charges 653                    
- Audit fees 29,000               Interest on current accounts 4,873                 
- Management fees 35,209               Interest on deposit accounts 3,431,594          
- Fees for investment advice 145,349             Income on pooled trust funds 1,493,113          
- Actuarial expenses 39,432               Foreign exchange difference 732                    
- Administrative costs 5,749                 Unrealized exchange rate gains 7,157,273          
255,392                   12,087,585              
Excess income over expenditure 26,165,457              
27,654,992              27,654,992              Income and Ex penditure Statement 
Expenditure IncomeAnnex 2
for the period
1.1.1999 - 31.12.1999
(expressed in Swiss francs )WT/GC/W/426
Page 12
Provision for currency revaluation 7,157,273                Excess income over expenditure 26,165,457              
Surplus 1999 19,008,184              
26,165,457              26,165,457              Surplus AccountAnnex 3
as at
31.12.1999
(expressed in Swiss francs )
Debit CreditWT/GC/W/426
Page 13Securities 101,439,036      Capital  14.1.1999 (see Annex 5) 145,495,959            
Deposit 67,902,618        
Current accounts 1,433,679          
170,775,333            
Current assets Current liabilities
Withholding taxes to be recovered 250,350             Accrued expenses 162,122          
Receivable from the UNJSPF 22,101               Currency revaluation reserve fund 7,157,273          
Accrued interest 682,856             7,319,395             
Contributions receivable 92,898               
1,048,205             Surplus 1999 19,008,184              
171,823,538        171,823,538        Balance Sheet
as at Annex 4
Assets Liabilities31.12.1999
(expressed in Swiss francs )WT/GC/W/426
Page 14
Source
Funds as at 14.1.19991128,286,189
Receivable from UNJSPF 17,209,770     
145,495,959  
Receipt of contributions 15,567,407     
Return on investments 4,930,312       
Increase in current liabilities 7,319,395       
173,313,073        
less:Application
Settlement of benefits 1,234,143       
1999 Expenditure 255,392          
1,489,535             
Funds as at 31.12.1999 171,823,538         
1  See paragraph 19 of the Annual Report1.1.1999  -  31.12.1999
(expressed in Swiss francs )for the periodAnnex 5
Source and A pplication of Funds WT/GC/W/426
Page 15
Annex 6
GLOSSARY OF TERMS
Accrued expenses  includes benefits due and expenses incurred but not paid in the current financial
year.
Accrued interest  refers to interest earned on deposit accounts.
Actuarial expenses  includes expenses charged by the consulting actuary for the provision of actuarial
services.
Administrative costs  includes costs incurred in the general administration of the Pension Plan.
Audit fees  includes fees charged by the External Auditor in connection with the audit of the 1999
accounts.
Contributions receivable  refers to contributions due in respect of contributory service in 1999 but
received after 31.12.1999.
Fees for investment advice  includes fees paid to external advisers for assistance with respect to the
establishment of the investment strategy.
Foreign exchan ge difference  refers to a realized exchange rate gain.
Income on pooled trust funds  refers to investment income from the BGI passive mandates.
Management fees  includes fees paid to fund managers for the management of WTO portfolios.
Receivable from the UNJSPF  refers to assets to be transferred from the UNJSPF.
Withholding taxes to be recovered  includes amounts of withholding tax levied by the Swiss
authorities and subject to recovery after 31.12.1999.WT/GC/W/426
Page 16
Annex 7
REPORT OF THE EXTERNAL AUDITOR ON TH E ACCOUNTS OF THE WTO PENSION PLAN
FOR THE YEAR ENDED 31 DECEMBER 1999
GENERAL
1. The WTO Pension Plan was established on 1 January 1999 by withdrawing from the United Nations
Joint Staff Pension Fund (UNJSPF).  The starting capital of the Pension Plan was formed by thepayment of the UNJSPF to the Pension Plan of US $ 104 735 145.
FINANCIAL MANAGEMENT
2. Rules of procedure
In Article 5 (c) of the Regulations of the WTO Pension Plan it is mentioned that the duties and
authority of the Management Board of the Pension Plan as well as rules for the auditing of accounts
shall be laid down in Rules of procedure which shall be approved by the General Council of the WTO.In 1999 the Management Board discussed drafts of these rules. At its twelfth meeting on17 February 2000, the Management Board decided to postpone further discussion of the Rules ofprocedure until the contracts with the global custodian and active investment managers had beenfinalized. As these contracts have been realised in April 2000, it is recommended to give attention to
the Rules of procedure again and present a final version to be approved by the General Council.
3. Attestation de vita
In 1999 there was only a small number of beneficiaries in the Pension Plan. This number certainly will
increase in future. To be sure that payments to beneficiaries are regular, it is necessary to develop interalia a system of Attestation de vita by which life certificates can be received.
4. Income 1999
The Management Board decided to appoint external investment managers to implement the investment
strategy of the Plan. The first one, Barclays Global Investors, USA, was appointed in August 1999.The other two, Wellington Management Company, USA and ING Asset Management, the Netherlandswere not appointed until April 2000. As a consequence, the Pension Plan invested its assets during1999 largely in deposit accounts. At the end of 1999 about 40 per cent of the assets was formed by
current and deposit accounts. The average yield of the deposit accounts was about 3 per cent (annual
rate between minimum 0.79 and maximum 5.82%). This had an unfavourable influence on theperformance of the Plan as a whole in 1999.  Nevertheless, the real rate of return for 1999 was abovethe target of 3.5%.  It is mentioned that meanwhile the situation has changed after appointing the othertwo investors in April 2000.
5. Operating costs
Part of the operating costs is formed by the salaries of the staff involved in managing the Plan and by
office and related costs. Until now these costs have  been carried by the Secretariat of the WTO. As
basically these costs are costs of the Pension Plan, we would advise that the present situation be
reconsidered.WT/GC/W/426
Page 17
Annex 7 (Cont'd)
ACTUARIAL POSITION
6. Presentation in the annual report of the Pension Plan
According to Article 9 (a) of the Regulations of the Pension Plan the Management Board shall have an
actuarial valuation made of the Plan at least once every three years.  The auditors were informed that itis not the intention to present the outcome of this valuation in the Balance Sheet of the Pension Plan.  Itis recommended to insert a chapter in the annual report of the Pension Plan giving the latest available
information concerning the actuarial position of the Plan.
7. Interest rate
According to Article 8 (a) of the Regulations of the Pension Plan the Management Board shall decide
upon the rates of interest to be used in the periodi c actuarial valuation of the Plan and for other actuarial
calculations.  In its fifth meeting on 18 June 1999 the Management Board agreed that the rate ofinterest to be used for the calculation of the actuarial equivalent of benefits taken in the form of a lumpsum should be set at 4.5 per cent.  It is noted that the Management Board has not yet decided on theinterest rate to be used in the periodical actuarial valuation of the Plan.
8. The representatives of the Netherlands Court of Audit wish to record their appreciation of the willing
cooperation given by the officers of the Pension Plan during the audit.
__________