RESTRICTED  
  
WT/L/1094  
28 September  2020 
(20-5969) Page: 1/25 
General Council  
13-14 October 2020  Original:  English  
 
  
WTO PENSION PLAN  
 
REPORT OF THE INDEPENDENT EXTERNAL AUDITOR  ON THE AUDIT OF THE FINANCIAL  
STATEMENTS OF THE WORLD TRADE ORGANIZATION PENSION PLAN (WTOPP)  
FOR THE YEAR ENDED 31 DECEMBER 201 9 
The R eport of the Independent External Auditor  on the Audit of  the F inancial Statements of the 
WTO Pension Plan for 2019 is attached.  "The Auditor's Report includes 1 6 pages (excluding this 
cover note) plus  an Annex "List of Recommendations".  WT/L/1094  
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  REPORT OF THE INDEPENDENT EXTERNAL AUDITOR  
ON THE AUDIT OF THE FINANCIAL STATEMENTS  
OF THE WORLD TRADE ORGANIZATION  
PENSION PLAN (WTOPP)  
FOR THE YEAR ENDED 31 DECEMBER 2019  
Chapter  Title  Paragraph/s  
1 Executive Summary  1 – 9 
2 Scope and Approach of the Audit  10 – 17 
2.1 Scope of the Audit  10 – 13 
2.2 Audit Objective and Approach  14 – 17 
2.3 Audit Conclusion  18 
3 Comments / Audit Findings  19 – 72 
3.1 General Overview  19 – 33 
3.2 Investment Policy and Breakdown of Assets  34 – 37 
3.3 Losses from Hedging  38 – 46 
3.4 Cash and Cash Equivalents  47 – 53 
3.5 Withholding Taxes  54 – 59 
3.6 Administrative Costs  60 – 62 
3.7 Early Retirement  63 – 72 
3.8 Internal Auditor’s Comment  73 
4 Acknowledgement  74 
 Annex / List of Recommendations   WT/L/1094  
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  1 Executive Summary  
My team and I have 
audited the financial 
statements of the 
WTO Pension Plan 
remotely.  1. My team and I have audited the financial statements of the World 
Trade Organization (hereinafter “WTO”) Pension Plan for the financial 
period from 1  January to 31  December  2019. I conducted the audit 
remotely due to the special circumstances of COVID -19. 
Responsibility of 
Management  2. The Management Board of the WTO Pension P lan is responsible for 
preparing the financial statements in accordance with the Financial 
Regulations of the Plan.  
Responsibility of the 
External Auditor  3. My responsibility is to express an opinion on these financial 
statements based on my audit.  
Scope of the audit  4. The audit included the examination of evidence supporting the 
amounts and disclosures in the financial statements. It also included an 
assessment of the underlying accounting principles and significant 
estimates made by the Management Board.  
I conducted my audit 
in conformity with the 
International 
Standards on 
Auditing.  5. I conducted my audit in conformity with the International Standards 
on Auditing (ISAs) as adopted and amended by the International 
Organization of Supreme Audit Institutions (INTOSAI) and issued as 
International Standards for Supreme Audit Institutions (IS SAI). These 
standards oblige me to comply with ethical requirements and to plan 
and carry out the audit to obtain reasonable assurance that the financial 
statements are free from material misstatement.  
The financial 
statements present 
fairly the financia l 
position.  6. As a result of my audit, I am of the opinion that the financial 
statements present fairly, in all material respects, the financial position 
as of 31  December  2019.  
I placed an 
unqualified opinion on 
the financial 
statements.  7. The audit revealed no weaknesses or errors which I considered 
material to the accuracy, completeness and validity of the financial 
statements as a whole. I have placed an unqualified audit opinion on 
the financial statements of the WTO Pension Plan for the year ende d 
31 December  2019.  
Areas covered by this 
report  8. My report includes observations and recommendations intended to 
contribute to the improvement of financial management. For 2019, my 
audit work has mainly covered the areas described in the following 
paragra phs. 
Acknowledgement  9. I wish to convey my appreciation for the cooperation and assistance 
extended by the Management Board, Management and staff of the 
Secretariat. I am very grateful for their assistance during the entire 
external audit process.  
 
  WT/L/1094  
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  2 Scope and Approach of the Audit  
2.1 Scope of the Audit  
Principles governing 
my audit  10. My staff and I have audited the financial statements of the 
WTO  Pension Plan for the financial period from 1  January to 
31 December  2019.  
Responsibility of 
Management  11. The Management Board of the WTO Pension Plan is responsible 
for the preparation and fair presentation of these financial statements in 
accordance with the Financial Regulations of the Plan, and with such 
internal controls as Management determine s are necessary to permit the 
preparation of financial statements that are free from material 
misstatement, whether due to fraud or error.  WT/L/1094  
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  Responsibility of the 
External Auditor  12. My objectives are to obtain reasonable assurance as to whether the 
financial statements as a whole are free from material misstatements, 
whether due to fraud or error, and to issue an auditor’s report with audit 
opinion. Reasonable assurance is a high level of assurance, but is not a 
guarantee that an audit conducted in accordance with ISAs will always 
detect each and every material misstatement. Misstatements can arise 
from fraud or error and are considered material if, individually or in the 
aggregate, they could reasonably be expected to influence the 
economic decisions of users taken on the basis of these financial 
statements.  
As part of an audit in accordance with ISAs, I exercise professional 
judgement and maintain professional scepticism throughout the audit.  
I also:  
• identify and assess the risks of material misstatement of the 
financial statements, whether due to fraud or error, design and 
perform audit procedures responsive to those risks, and obtain 
audit evidence that is sufficient and appropriate to provide a 
basis for our opinion. The risk of not detecting a material 
misstatement resulting from fraud is higher than for one 
resulting from error, as fraud may involve collusion, forgery, 
intentional omissions, misrepresentations, or the override of 
internal control;  
• obtain an understanding of internal control relevant to the audit 
in order to design audit procedures that are appropriate in the 
circumstances, but not for the purpose of expressing an opinion 
on the effectiveness of the WTO Pension Plan’s internal contr ol; 
• evaluate the appropriateness of underlying accounting policies 
and the reasonableness of accounting estimates and related 
disclosures made by Management;  
• evaluate the overall presentation, structure and content of the 
financial statements, including t he disclosures, and whether the 
financial statements represent the underlying transactions and 
events in conformity with the principles of fair presentation.  
My team communicated with those charged with governance the planned 
scope and timing of the audit  and significant audit findings, including 
any significant deficiencies in internal control that we identify during our 
audit.  
Audit of the financial 
statements  13. The financial statements of the WTO Pension Plan, together with 
my audit report and the audit opinion, were discussed with the 
Management Board. The Board took note of the contents of my report.  
 
2.2 Audit Objective and Approach  
Objective of financial 
audit:  
Forming the audit 
opinion  14. The objective of the audit was to enable me to form an opinion on 
whether the expenditures recorded for the year had been incurred for 
the purposes approved, whether expenses were properly categorized 
and recorded in accordance with Financial Regulations; and whether WT/L/1094  
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  the financial statements present fairly the financial position as of 
31 December  2019.  
Testing convinced me 
of the correctness of 
the financial 
statements.  15. My audit opinion is based on the testing of transactions recorded 
in the financial statements. The examination was carried out to ensure 
that the financial statements accurately reflect the accounting records 
and present fairly the financial situation of the WTO Pension Plan.  
I conducted the audit 
remotely due to the 
special 
circumstances of 
COVID -19.  16. On 11 March 2020, the World Health Organization (WHO) 
declared the outbreak of COVID -19 a global pandemic. Since mid -
March WTO staff, including the WTO Pension Plan Secretariat, was 
requested to work from home. WTO Pension Plan Secretariat staff 
accessed WTO premises at least on a weekly basis to collect and 
process physical mail. The Secretary and most Secretariat staff were 
back in office on voluntary basis and part time since mid -May. 
Subsequently, I cancelled our planned  presence for the audit on the 
WTO Pension Plan in April and May 2020. I conducted the audit 
remotely based on requested documents and information provided by 
the WTO Pension Plan as well as numerous calls and 
videoconferences. Further, my team held a numb er of videoconferences 
and calls with WTO Pension Plan Secretariat staff to discuss significant 
transactions, processes, evaluations as well as interpretations more 
detailed and to verify evidence. In addition, WTO provided the audit 
team with IT equipment  which enables my team directly access to the 
WTO ERP system and intranet as well as to a share drive to exchange 
confidential documents and information needed.  
I conducted the audit 
without major 
restrictions or delays.  17. My audit on the WTO Pension Plan 2019 financial statements 
took longer than originally planned because of the COVID -19 
restrictions at WTO Geneva and remote audit activities. However, 
despite these special circumstances, I conducted the audit without 
major restrictions or delays.  
 
2.3 Audit Conclusion  
I found no material 
weaknesses. I placed 
an unqualified opinion 
on the financial 
statements.  18. Notwithstanding the observations in this report, my examination 
revealed no weaknesses or errors which I considered material to the 
accuracy, comp leteness and validity of the financial statements as a 
whole. In accordance with normal practice, my team reported 
additional findings to the Management of the Secretariat in the course 
of the audit. I have placed an unqualified audit opinion on the financ ial 
statements of the WTO Pension Plan for the year ended 
31 December  2019.  WT/L/1094  
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  3 Comments / Audit Findings  
3.1 General Overview of the Plan´s Financial Situation  
The result of income 
over expenditure as at 
31 December  2019 is 
a profit of 
CHF  72.5 million.  19. The Income and Expenditure Statement shows a profit (result of 
income over expenditure) of CHF  72.5 million as at 31  December  2019 
(2018: CHF -31.3 million), thus an increase of CHF  103.8  million.  
Investment income 
totalled CHF 71.9 
million in 2019.  20. This is a result of significant profits on securities of 
CHF  71.9 million in 2019.  
Total income 
increased to 
CHF  102.8 million in 
2019.  21. The total income (investments, contributions and refunds from 
insurances) increased to CHF 102.8 million (2018: CHF -3.6 million), 
an increase of CHF 106.4 million.  
Income from 
contributions 
increased to 
CHF  30.6 million.  22. The income from contributions slightly increased to 
CHF  30.6 million (+  CHF  0.5 million). The regular contributions by 
the organization and by participants amounted to CHF  29.1 million 
(2018: CHF 28.7  million).  
WTO paid additional 
contributions of 
CHF  1.5 million for 
early retirement.  23. In 2019, WTO paid additional contributions of CHF 1.5 million to 
the WTO Pension Plan as com pensation for the impact of early 
retirement.  
Periodic benefits in 
2019: 
CHF  24.2 million.  24. Benefits paid out consisted of periodic benefits and totalled 
CHF  24.2 million in 2019; this amount included benefits for retirement 
of CHF  14.2 million (58.7  per c ent), early retirement benefits of 
CHF  7.5 million (31.0 per cent), disability benefits of CHF 1.5 million 
(6.2 per cent) and surviving spouse and child benefits of 
CHF  1.0 million (4.1 per cent).  
Lump sum benefits in 
2019:  
CHF 4.0 million.  25. In addition, the WTO Pension Plan paid out lump sum benefits 
amounting to CHF  4.0 million in 2019; commutations of CHF 3.7 
million (2018: CHF 2.4 million) and withdrawal settlements of CHF 
0.3 million (2018: CHF 0.8 million).  
Total expenditure 
increased t o 
CHF  30.4 million.  26. Total expenditure in 2019 increased to CHF  30.4 million (2018: 
CHF  27.9 million) and was almost covered by the yearly contributions 
(2019: CHF  29.1 million).  
Negative interests 
totalled CHF  104,237 
in 2019.  27. CHF  104,237 (2018: CHF  96,631) losses on investment incurred 
due to negative credit interests, owing to the policy of the Swiss 
National Bank (SNB). In 2019 , negative interests slightly increased 
because of higher cash balances.  
Administrative 
expenses slightly 
increased to 
CHF  897,808.  28. Investment and other administrative expenses increased to a total 
of CHF  897,808 (2018: CHF  836,280), mostly because of higher 
management fees (CHF 49,443) and actuarial expenses (CHF 23,000).  
 WT/L/1094  
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  Securities increased 
by CHF  66.3 million.  29. Total assets increased from CHF  564.8  million (as at 
31 December  2018) to CHF  637.3  million (as at 31  December  2019), 
mainly due to the increase in securities by CHF  66.3 million and 
increased refunds of withholding taxes by CHF 1.4 milli on. 
As at 
31 December  2019, 
the Pension Plan 
served 393 
beneficiaries.  30. As at 31  December  2019, the Pension Plan served 393 
beneficiaries (2018: 369) and accounted for 718 active participants 
(2018: 702).  
 31. These 393 beneficiaries comprise 175 retirees (44 .5 per  cent), 
126 persons who took early retirement (32.1  per cent), 27 beneficiaries 
of deferred retirements (6.9  per cent), 24 beneficiaries of survivor’s 
pensions (6.1  per cent), 19 children of beneficiaries and orphans 
(4.8 per cent), and 22 persons re ceiving partial or total disability 
benefits (5.6  per cent).  
Audit findings and 
recommendations.  32. The following paragraphs contain audit findings and 
recommendations and provide further background information.  
Actuarial rate of 
return:  
12.4%  per cent.  33. The actuarial rate of return on investment, net of inflation 
(12.4%  per cent) was positive.  
 
  WT/L/1094  
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  Table 1: Calculation of the actuarial rate of return, net of inflation (in CHF)  
Actuar ial rate of 
return  2015  2016  2017  2018  2019  
a. Value of assets 
as of 1°January  486,697,204  495,898,233  535,529,801  596,165,379  564,847,436  
b. Value of 
assets as of 
31 Decem ber 495,898,233  535,529,801  596,165,379  564,847,436  637,325,896  
i. Adjusted1 
Investment 
income -930,196  33,792,675  59,947,702  -35,026,625  71,161,636  
Avera ge assets 
= (a+b-i)/2 491,762,817  498,817,680  535,873,739  598,019,720  565,505,848  
Actuarial rate of 
return  in nominal 
terms = 
i/average  assets -0.19%  6.77%  11.19%  -5.86%  12.58%  
Consumer Price 
Index  for 
Switzerland2 -1.30%  0.00%  0.80%  0.70%  0.20%  
Actuarial  rate 
of return,  net of 
inflation 1.11%  6.77%  10.39%  -6.56%  12.38%  
Source: External Auditor, on the basis of information provided by the WTO Pension Plan Secretariat.  
Table 2: Trend in actuarial rates of return in nominal terms (%)  
2010  2011  2012  2013  2014  2015  2016  2017  2018  2019  
+3.52%  -1.10%  +9.70%  +8.33%  +8.19%  -0.19%  +6.77%  +11.19%  -5.86%   
+12.58%  
Source:  External  Auditor, on the basis of information provided by the WTO Pension Plan  Secretariat. 
 
  
 
1 Investment income according to the Income and Expenditure Statement - including negative interests 
and currency revaluation - minus management fees and bank charges.  
2 Rate of variation in the Consumer Price Index (CPI) for December compared to December o f the 
previous year, as reported by the Swiss Federal Office of Statistics  (+0.2%) . WT/L/1094  
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  3.2 Investment Policy and Breakdown of Assets  
 
 
  Management Board 
defined an investment 
policy for asset 
allocation.  34. Asset allocation is the main source of portfolio returns. Therefore, 
the WTO Pension Plan’s Management Board defined and implemented 
an inves tment policy for the Plan. The WTO Pension Plan assigned an 
advisor to give monthly performance reports about the funds. In the 
financial statements, the WTO Pension Plan gives only a brief 
overview of the performance of the classes of assets.  
Asset allo cation: 
equities, CHF bonds, 
real estate and cash.  35. The Management Board of the WTO Pension Plan adopted the 
following portfolio breakdown:  
• equities: 40  per cent (of which 32  per cent in developed market 
securities and 8  per cent in emerging market securities);  
• CHF bonds: 31  per cent (bonds hedged in CHF);  
• real estate: 20  per cent;  
• other investments (insurance linked securities) 5.0 per cent  
• cash: 4 per  cent.  
Asset allocation as of 
31 December  2019 is 
close to the targets.  36. The asset allocation as of  31 December  2019 of the Plan’s 
portfolio is close to the targets:  
• 41.2 per cent in equities (of which 33.4  per cent in developed 
markets and 7.8  per cent in emerging markets);  
• 30.6 per cent in CHF bonds;  
• 19.0 per cent in real estate;  
• 4.8 per cent insurance linked securities, and  
• 4.3 per cent in cash.  WT/L/1094  
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  Table 3: Breakdown of assets and investment performance  
(in nominal terms) of the classes of assets in 2019  
Assets  Value  of 
assets end of 
2018  
(CHF 
millions)  Value  of 
assets end of 
2019  
(CHF 
millions)  Asset 
allocation  
(strategy)  Performance  
(in nominal 
terms over  
1 year ) Performance  
(in nominal 
terms over  
3 years ) 
Equities  214.3 
(38.0%)  261.4 
(41.2%)  40%  22.1%  10.1%  
Developed 
markets  173.6 (30.8%)  212.0 (33.4%)  32% 23.7%   
Emerging 
markets  40.7 (7.2%)  49.4 (7.8%)  8% 15.6%   
CHF bonds3  211.7 
(37.6%)  194.4 
(30.6%)  31%  7.9%  2.3%  
Investment 
grade bonds 
USD 86.1 (15.3%)  57.8 (9.1%)  9% 6.8%   
Emerging 
countries 
bonds  80.6 (14.3%)  89.0 (14.0%)  14% 10.9%   
Senior loans  45.0 (8.0%)  47.6 (7.5%)  8% 3.8%   
Real estate  114.4 
(20.3%)  120.4 
(19.0%)  20%  5.9%  3.8%  
      
Other 
Investments   30.6 (4.8%)  5% -0.5%  n/a 
      
Cash  23.1 (4.1%)  27.5 (4.3%)  4% n/a n/a 
Total  563.5 (100%)  634.2 (100%)  100%  12.6%  5.7%  
Source: External Auditor, on the basis of information provided by the WTO Pension Plan Secretariat.   
Note: Numbers may not add precisely to totals provided due to rounding.  
 
 
 
 
 
3 Bonds h edged in CHF.  WTO Pension Plan 
may show more 
information to 
individual 
investments.  37. To improve transparency, I would appreciate more information on 
the performance of the individual investments (performance of funds). 
At least the WTO Pension Plan may show the opening and ending 
balances as well as the yearly inflows and outflows (in total) for all 
funds invested, as recognized in the asset accounts.  WT/L/1094  
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  3.3 Losses from Hedging  
 
4 MBS Capital Advi ce. WTO Pension Plan 
realized losses of 
CHF  5.6 million from 
currency hedging in 
its portfolio.  38. The WTO Pension Plan realized losses because of currency 
hedging of its bond  portfolio managed by Northern Trust (WTO 08 and 
WTO 11) and Pictet (WTO 02). The realized loss as of 
31 December  2019 totalled CHF  5,6 million (2018: CHF  5.1 million).  
WTO Pension Plan is 
hedging 80  per cent of 
its non -CHF debt 
investments: 
USD  143.1 mill ion.  39. The WTO Pension Plan was assigning Northern Trust and Pictet 
to hedge USD against CHF on a quarterly basis to minimize foreign 
exchange risks for its bond portfolio (US Bonds, Emerging Market 
Bonds). At the end of the FY 2019 the amount hedged by the  
WTO  Pension Plan totalled USD 143.1 million. WTO Pension Plan is 
hedging 80  per cent of its non -CHF fixed income investments.  
WTO Pension Plan 
reviewed the hedging 
process based on its 
long-term investment 
strategy.  40. The WTO Pension Plan has reviewed the hedging strategy in 
collaboration with its investment adviser4 as recommended in our last 
report. As a result, the WTO Pension  Plan is confident that the 
implemented hedging strategy is effective as well as efficient to avoid 
currency losses from investments in USD and compliant with the long -
term investment strategy of the Plan.  
 41. In the past, the return of the USD bonds net of hedging cost was 
expected to be higher than the CHF bonds return with comparable risk 
profiles. Reducing volatility is a goal of hedging international bonds. 
Over the medium to long term, hedging has the effect to equalise 
returns across markets.  
In 2020,  the WTO 
Pension Plan is 
reducing its 
investments in USD.  42. Currently, the WTO Pension Plan is significantly reducing its 
investments in USD bonds because the yield spreads have dropped 
below the level where they provide more attractive returns than 
compara ble CHF bonds.  
 43. In its Statement I: Income and expenditure statement 2019, the 
WTO Pension Plan stated profits on securities of CHF 71.9 million 
under the position “Income” (as at 31 December 2018, WTO Pension 
Plan stated losses on securities  of CHF -34.2 million under the position 
“Expenditure”). Whereas, WTO Pension Plan stated losses on currency 
revaluation of CHF 133,446 (2018: CHF 268,024) under the position 
“Expenditure”.  
WTO Pension Plan 
did not state cost from 
hedging separately.  44. The WTO Pension Plan did not state any cost from hedging 
separately. Moreover, WTO Pension Plan did not recognize any “not 
hedged” losses from investments in USD under currency revaluation 
(20 per cent of non -CHF fixed income investments). The WTO Pension 
Plan has  recorded these losses under the position “Income” ( profit on 
securities).  
 45. I note that the WTO Pension Plan should state profits and losses 
on securities, currency revaluation or other income from its WT/L/1094  
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3.4 Cash and Cash Equivalents  investments under the position “Investment income” to  ensure better 
comparability and to show  the effective return on investments.  
I recommend that the 
WTO Pension Plan 
create a note due to its 
hedging activities.  46. I recommend that the WTO Pension Plan create a note about all 
investments with foreign exchange risks hedged. The WTO Pension 
Plan should explain in this note the total amount hedged, the cost of 
hedging and the impact of hedging to its long -term investments.  
Overall cash situation 
with a total of CHF 
27.5 million is 
sufficient.  47. The overall cash situation of the WTO Pension Plan is sufficient. 
Compared to the balance in the previous years, total cash and cash 
equivalents increased by CHF 4.5 million from CHF 2 3 million in 2018 
to CHF 27.5 million as at 31 December 2019. This cash situation 
enables the Pension Plan to cover more than 90 per cent of the yearly 
payments to beneficiaries as well as investment (management and 
consultancy fees) and administration exp enditures.  
Cash at bank 
accounted: 
CHF  22,3 million.  48. As at 31 December 2019, the WTO Pension Plan showed CHF 
22.3 million of cash at own bank accounts and CHF 5.2 million of cash 
balances in invested funds. The WTO Pension Plan has direct access 
only for its own bank accounts. The cash balance in investments shows 
the total cash balances of 13 invested funds as at 31 December 2019.  
 49. Credit Suisse is the main bank of the WTO Pension Plan and 
managing almost all payments of the Pension Plan. The WTO Pen sion 
Plan maintains accounts in CHF, in EUR , and in USD. The bank 
account in CHF is used for payments to beneficiaries and all 
investments in CHF. The bank accounts in EUR and USD are used for 
payments to beneficiaries as well as for investments in EUR and USD.  
 
Table 4: Breakdown of bank accounts Credit Suisse  
 
Credit Suisse  31/12/2019  
(base currency)  31/12/2019  
(in CHF)  
CHF  17,508,543.42  17,508,543.42  
EUR    4,316,277.13    4,696,843.28  
USD         54,941.22         54,226.98  
Total at Bank  n/a 22,297,812.53  
 
  
 50. Besides, the WTO Pension Plan maintains an additional account at 
Post Finance (31.12.2019: CHF 38,288.85). This account is of minor 
importance and currently used to reduce negative interests and monthly 
payments to one beneficiary.  WT/L/1094  
- 14 - 
   
 
3.5 Withholding Taxes  WTO Pension Plan 
was charged with  a 
total of  negative 
interests: CHF 
104,237.  51. In 2019 , the WTO Pension Plan paid a total of negative interests 
amounting to CHF 104,237 (2018: CHF 96,631).  
I recommend that the 
WTO Pension Plan 
state cash at bank and 
cash in investments 
separately.  52. I recommend that the WTO Pension Plan state its cash at own 
bank accounts and cash in investments separately.  
Further, I recommend 
that the WTO Pension 
Plan crea te a note 
showing its cash 
situation in detail.  53. Further, I recommend that the WTO Pension Plan create a note to 
explain the cash balances in detail due to every single bank account as 
well as the cash balances in all single investments as at 31  December.  
WTO/WTO Pension 
Plan tax status.  54. Due to the Marrakech agreement establishing WTO 
(Article  VIII, Status of WTO), WTO is as a Specialized Agency 
exempt from most direct taxes. Therefore, WTO as well as the 
WTO  Pension Plan - as its related Pension Plan - should not pay any 
income taxes and are generally entitled to reclaim all taxes paid.  
Withholding taxes not 
yet refunded: 
CHF  2.5 million  55. The WTO Pension Plan generates income from investments in 
various coun tries. Due to the national tax regulations the WTO 
Pension Plan has paid withholding taxes in a number of these 
countries. These withholding taxes are recoverable because of the tax 
exempted status of WTO/WTO Pension Plan. In its financial 
statements as at  31 December 2019, the WTO Pension Plan stated 
CHF 2.5 million of “Withholding taxes to be recovered” under the 
position “Current Assets”. CHF 1.4 million of the total amount relate 
to recoverable withholding taxes in Switzerland; CHF 1.1 million 
relate to  recoverable withholding taxes in other countries.  
Refunds for previous 
years.  56. In most cases, the Pension Plan already has applied for a refund 
of the paid withholding taxes and has recognized the correspondent 
reimbursement claims as receivables “Withholding Taxes to be 
recovered”. A portion of these receivables (CHF 0.6 million) relates 
to (withholding) tax payments in 2014, 2015, 2016, and 2017.  
 57. In its tax regimes most countries have implemented deadline 
regulations  as to the reimb ursement of withholding taxes. Hence, the 
WTO Pension Plan should check earlier reimbursement claims due to 
their intrinsic value and correct its receivables accordingly.  
WTO Pension Plan 
adjusted the   58. In 2019, the Plan´s Secretariat has reviewed the process for 
monitoring of withholding taxes paid. As a result, the WTO Pension WT/L/1094  
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3.6 Administrative Costs  
 monitoring of 
withholding taxes 
paid and the 
corresp ondent 
reimbursements.  Plan adjusted the relevant procedures starting in 2020. Now, all 
withholding taxes paid are separately r ecorded by a service provider 
outside the accounting. The application for a reimbursement is noted 
in each individual case. This seems to be an appropriate way for 
monitoring and managing reimbursements of withholding taxes.  
I recommend that the 
WTO Pens ion Plan 
revalue its earlier 
reimbursement 
claims.  59. I recommend that the WTO Pension Plan check its earlier 
reimbursement claims from withholding taxes paid and revalue the 
applicable receivables regarding their true value and recoverability.  
Expenditure for 
investment and other 
administrative 
expenses: 
CHF  897,808.  60. In the income and expenditure statement, the WTO Pension Plan 
stated the following costs under investment and other administrative 
expenses: management fees: CH F 492,175 (2018: 442,732); cost for 
the accounting company TRIANON and other administrative cost: 
CHF  208,134 (2018: CHF 199,780); consultancy fees: CHF  120,000 
(2018: CHF 120,000); actuarial expenses: CHF 53,000 (2018: 
CHF  30,000); and bank charges: CHF 2 4,499 (2018: CHF  24,492). 
According to the WTO Pension Plan, the administrative cost incurred 
in the general administration of the Pension Plan.  
Costs incurred by the 
WTO in providing a 
Secretariat in support 
of the Plan shall be 
excluded.  61. They do not include the costs for the Plan’s Secretariat, which are 
borne by WTO (Article 5  (f) of the Plan Regulations). Pursuant to 
Article 5 (f) of the Regulations, the costs incurred by WTO in 
providing a Secretariat in support of the Plan are excluded. This 
treatment of costs was clarified in an amendment to the Regulations in 
November 2015. All other expenses incurred in administering the Plan, 
investing Plan assets, and employing the services of provisional 
advisers shall be borne by the Plan. Each element of th ese expenses 
borne by the Plan shall be identified separately in the annual report.  
In 2019 the costs of 
providing a Secretariat 
totalled CHF 623,725.  62. In 2019, WTO funded 3.5 staff positions to manage the Pension 
Plan and to provide client services to staff and retirees of WTO as well 
as to supervise external service providers and consultants supporting 
the Pension Plan in accounting, advisory and actuary services. The 
remunerations (salaries and entitlements) for these 3.5 staff, including 
the employer charges, totalled CHF  596,557 in 2019. In addition, the 
WTO Pension Plan estimated the cost for office space, equipment, 
trainings and other support with CHF 27,168 based on the WTO cost 
accounting methodology. We consider these costs to be ad ditional 
contributions from WTO to the Pension Plan, which also have an 
impact on the performance evaluation of the Plan and its long -term 
returns. All costs borne by the Plan’s Secretariat should be reported 
separately by WTO and the Pension Plan on an an nual basis.  WT/L/1094  
- 16 - 
   
3.7 Early Retirement  
 
WTO Pension Plan 
stated 126 
beneficiaries in early 
retirement.  63. In 2019, the WTO Pension Plan stated nine new beneficiaries in 
early retirement; this included two deferred benefits that commenced 
being paid in 2019. In total, the WTO Pension Plan shows the number 
of 126 beneficiaries in early retirement as at 31 December 2019. This 
represents 38.4 per cent of the retired WTO staff5. Between 2015 and 
2018 the Pension Plan stated 46 new early retirement cases (average 
11.5 beneficiaries per year).  
WTO Pension Plan 
received 
CHF  1.5 million from 
WTO as 
compensation for 
early retirement.  64. In 2019, the WTO Pension Plan received addition al contributions 
of CHF 1.5 million from WTO to compensate the impact from early 
retirement of five WTO staff members (beneficiaries). These early 
retirement cases were combined with the separation of a select group of 
WTO staff effective 31 December 2019.  The impact for the Pension 
Plan was calculated by an actuary.  
 65. For the remaining four cases on early retirement the WTO Pension 
Plan did not calculate the impact on the Pension Plan and did not 
receive any compensation from WTO.   
 66. I also detected in fo rmer years additional payments by WTO to the 
Pension Plan as compensations due to early retirement6. In all these 
years WTO paid compensations only for a part of the early retirement 
cases.  
WTO management 
finally decide s on 
compensation 
payments due to early 
retirement.  67. The decision to compensate any impact of early retirement was 
based on “a long -established practice agreed between the Management 
Board of WTO Pension Plan and WTO Directors General”. In this 
context WTO has agreed to compensate the Pensi on Plan when it takes 
management decisions artificially elevating the rate of early 
retirements. The final decision to compensate is exclusively reserved to 
WTO management.  
 68. The WTO Pension Plan argued: “If actual early retirements 
remain relatively clos e to assumed probabilities the Pension Plan will 
remain in actuarial balance. However, if the level of early retirements is 
artificially elevated through the actions of WTO management to 
incentivize early retirement, there is a material risk of disrupting the 
Pension Plan´s actuarial balance. Therefore, it seems appropriate for 
these unanticipated elevated costs to be factored into the decision 
making of the Organization and compensated when such decisions are 
implemented.”  
I note that early 
retirement always has 69. I note that all cases of early retirement have an impact on the 
actuarial balance of the Pension Plan. Therefore, the WTO Pension 
 
5 At 31 December, 328 retired WTO staff members were stated: thereof normal retirement 
175 beneficiaries, early retirement 126 beneficiaries, and deferred retirement 27 beneficiaries.  
6 2015: CHF 2.3 million; 2016: CHF 2 million; 2017: CHF 0.2 million.  WT/L/1094  
- 17 - 
  an impact on the 
actuarial balance of 
the WTO Pension 
Plan.  Plan should review the ef fective impact of early retirement for the last 
years based on actuarial calculations by case. This allows the WTO 
Pension Plan an applicable estimation for compensation payments 
needed.  
I note that there is no 
formal arrangement in 
place for 
compensation  
payments due to early 
retirement.  70. Further, I note that there is no formal arrangement in place for 
compensation payments by WTO due to early retirement. But a formal 
arrangement is essential to determine acceptable terms, obligations and 
justifications fo r compensation payments and an applicable calculation 
method as well as the process itself, including requests, responsibilities, 
timelines and documentation.  
I recommend that the 
WTO Pension Plan 
review the impact of 
early retirement to the 
Plan.  71. I recommend that the WTO Pension Plan review the impact of 
early retirement on the Pension Plan for all cases based on an actuarial 
calculation.  
I recommend that the 
WTO Pension Plan 
enter into an 
arrangement with 
WTO due to the 
impact of early 
retirement . 72. In addition, I recommend that the WTO Pension Plan enter into a 
separate arrangement with WTO due to compensation payments for 
early retirement.  
 
 
3.8 Internal Auditor’s Comment  
 
No internal auditor’s 
comments in 2019.  73. WTO’s internal audit service has not conducted an audit of the 
WTO Pension Plan in 2019.  
 
4 Acknowledgement  
I am grateful for the 
support received 
during the audit.  74. I wish to express my appreciation for the cooperation and 
assistance extended by the Secretariat of the Pension  Plan, the 
Management and staff of WTO/WTO Pension Plan. I am very grateful 
for their assistance during the entire external audit process.    
  WT/L/1094  
- 18 - 
 
Annex : 
List of Recommendations  
No. Issue  Reference: 
Chapter, 
Year  Recommendation  WTO’s Comment / Implementation  Status  
1 Value of 
pension 
commitments  3.2 / 2014  I recommend that the financial statements of the 
WTOPP include the value of pension 
commitments (liabilities) as this is an essential 
element in assessing the situation of a pension 
plan.  The WTOPP Secretariat accepted the 
recommendation and amended the notes 
and added a footnote.  Closed  
2 Reserve / 
provision for 
operating costs  3.3 / 2014  I recommend that some further detail on the 
WTO  costs be provided and a more up-to-date 
estimate be made. Further more , I recommend that 
the regulations be reviewed with the intention of 
clarifying the situation and, if necessary, 
specifying a procedure for settlement or waiver.  In November 2015, the General Council 
adopted revised regulations for the Pension 
Plan. According to the regulations, the 
expenses borne by the Plan exclude "costs 
incurred by the WTO in providing a 
Secretariat in support of the Plan".  Closed  
3 Reimbursement 
of withholding 
tax 3.4 / 2014 and 
3.4 / 2015  I reiterate the recommendation that the Secretariat 
make further efforts to recover debts related to 
withholding tax not reimbursed by the tax 
authorities of the countries concerned.  Efforts to recover withholding taxes are on -
going.  
A follow -up table of the  process for 
recovering such taxes is available.  
In recent years, the Plan’s investments 
have not been subject to further 
unrecoverable withholding taxes. 
However, all withholding taxes considered 
unrecoverable refer to taxes paid prior to Overtaken by 
events  
Also see my 
findings and 
recommendations 
No. 10 & 11 
(2018  report 
No. 3.5.)   
  WT/L/1094  
- 19 - 
 
No. Issue  Reference: 
Chapter, 
Year  Recommendation  WTO’s Comment / Implementation  Status  
2011 and chances  to obtain a refund are 
very limited.   
4 Market value / 
securities  3.3 / 2015  We noted that the current market value of one 
position was approx. CHF  0.5 million higher than 
stated.  
The Secretariat agreed and amended the financial 
statements during our audit.  
I recommend reviewing and aligning the reporting 
and documenting process of WTO and funds to 
avoid misunderstandings or different results 
conc erning market value of positions in the 
financial statements.  The financial statements were corrected to 
consider the most recent valuation of the 
position concerned. Most of the other 
WTOPP assets are invested in funds for 
which market valuations are prom ptly 
available at year -end: They are less likely 
to be affected by similar discrepancies.  
Nonetheless, the Secretariat will reinforce 
reviewing reports prepared by the 
WTOPP’s service providers against 
reports received directly from fund 
managers.  Closed    
  WT/L/1094  
- 20 - 
 
No. Issue  Reference: 
Chapter, 
Year  Recommendation  WTO’s Comment / Implementation  Status  
5 Withholding 
taxes  3.3 / 2016  The 2016 financial statements of the WTO 
Pension Plan include a position “Withholding 
taxes to be recorded” with an amount of 
CHF  615,662 as “Current Assets”. On the liability 
side, WTOPP states as “Reserves” a positi on 
“Unrecoverable withholding taxes” with an 
amount of CHF 396,000.  
Related to my recommendation concerning 
withholding taxes, I recommend writing off the 
positions “Withholding taxes to be recorded” and 
“Unrecoverable withholding taxes” with the same 
amou nt of CHF 396,000. Possible tax refunds by 
political means or other agreements sh ould be 
considered as miscellaneous income in the 
respective year of the effective payment.  The WTOPP Secretariat accepted the 
recommendation and implemented it in its 
2017 financial statements.  Closed  
6 Withdrawal 
settlement  3.3 / 2017  I recommend that the WTO review its Pension 
Plan Regulations regarding the withdrawal 
settlement for staff not entitled to benefit from the 
Pension Plan (less than five years). In this c ontext, 
the WTOPP should compare the regulations 
regarding all repayments from the Pension Plan as 
part of a benchmarking.  The WTOPP Secretariat looked at similar 
provision schemes of the OECD, the EU 
institutions, the IMF and the BIS and 
found that in all  cases the withdrawal 
settlement was significantly higher than 
the participant’s own contributions.  
The Management Board reviewed the 
audit recommendation as well as the 
Secretariat’s survey results and confirmed Closed    
  WT/L/1094  
- 21 - 
 
No. Issue  Reference: 
Chapter, 
Year  Recommendation  WTO’s Comment / Implementation  Status  
that the withdrawal settlement calculation 
was deliberately discussed when 
designing the Plan.  
7 Investment 
Policy and 
Breakdown of 
Assets 3.2 / 2018  I recommend that the WTOPP state the 
breakdown of its main assets in a more detailed 
way. In this context, WTOPP should state the 
value and the performance of each invested fund . The Management Board monitor s the 
performance of individual investments but 
is of the view that the publication of 
investment performance by asset class 
rather than individual investment vehicles 
is the appropriate level of detail in the 
context of reporting to the general public 
through the annual report. The investment 
strategy is based on  asset classes , and the 
performance of individual investments, 
taken out of context, can be easily 
misinterpreted.  Ongoing  
I reiterate my 
recommendation to 
state a breakdown 
of the main 
investment assets. 
This enables better 
comparability over 
years and a general 
risk disclosure as 
well as a better 
understanding of 
the investment 
decisions by the 
investment 
management and 
the Board. At least 
WTOPP should 
state the opening 
and ending 
balances as well as 
the yearly inflows   
  WT/L/1094  
- 22 - 
 
No. Issue  Reference: 
Chapter, 
Year  Recommendation  WTO’s Comment / Implementation  Status  
and outflows (in 
total), as 
recognized in the 
asset accounts.  
8 Gains and 
Losses  3.3 / 2018  I recommend that WTOPP state profits and losses 
on securities, cu rrency evaluation or other income 
from its investments under the position 
“Investment income”.  In the interest of reporting consistency, 
the Management Board would prefer not 
to change the general recording principle 
in place for many years in the income and 
expenditure statements in the last year of 
the auditor's mandate. Under this 
approach, investment profits are recorded 
in the income section, and losses are 
recorded as expenditure. Investment 
performance reports showing gain and 
loss analysis are avai lable in other 
sections of the report, such as schedule E 
and F of the financial statements.  
For consistency of presentation over time, 
we maintain the presentation this year and 
we will discuss with the next Auditor in 
the context of a broader review of t he 
presentation of our financial statements.  Ongoing  
I state the 
recommendation 
as under 
implementation.    
  WT/L/1094  
- 23 - 
 
No. Issue  Reference: 
Chapter, 
Year  Recommendation  WTO’s Comment / Implementation  Status  
9 Commission 
Fees 3.4 / 2018  I recommend that the WTOPP negotiate special 
conditions with Credit Suisse to avoid normal fees 
on Credit Suisse investment funds.  Further discussions with Credit Suisse 
clarified that the "Commission Suisse" 
relates to brokerage fee s that are more 
favour able for Credit Suisse own funds 
than other funds. We are further 
discussing and exploring ways to reduce 
fees paid to Credit Suisse in relation to 
payment traffic and expect to reduce this 
amount by about CHF 5000 per year.  Closed  
10 Withholding 
Taxes  3.5 / 2018  I recommend that the WTOPP promptly recognize 
and reclaim all withholding taxes paid for recent 
years (as much as possible). A limitation of claims 
should be avoided.  The WTOPP Secretariat accepted the 
recommendation and engag ed an in -depth 
review with its custodian bank on the 
status of all withholding tax claimable per 
country. The Secretariat considers to take 
actions commensurate to the claimable 
amount, such as resorting to the services 
of local lawyers when appropriate.  
 Closed  
11 Withholding 
Taxes  3.5 / 2018  I recommend that the WTO Pension Plan 
implement an effective monitoring of all realized 
income subject to tax and all withholding taxes 
paid by country. WTO Pension Plan should 
ensure that all taxes paid will be completely 
claimed in time (full tax recover y).  The WTOPP Secretariat accepted the 
recommendation.  
See No. 10 above.  
 Closed    
  WT/L/1094  
- 24 - 
 
No. Issue  Reference: 
Chapter, 
Year  Recommendation  WTO’s Comment / Implementation  Status  
 
12 Administrative 
Costs  3.6 / 2018  I recommend that WTOPP additionally report the 
activities and costs of the Pension Plan Secretariat 
on an annual basis.  The Management Board accepts the 
recommendation and proposes to include 
an estimate of the costs of the Pension 
Plan Secretariat in the  notes to the 
financial statements even though it is not a 
direct cost to the Pension Plan.  Closed  
13 Losses from 
Hedging  3.3/2019  I recommend that the WTO Pension Plan create a 
note about all investments with foreign exchange 
risks hedged. WTO Pension Plan should explain 
in this note the total amount hedged, the cost of 
hedging and the impact of hedging to its long -
term investments.  The WTOPP agrees to put an explanation 
in the glossary of terms ("currency 
hedging") and as footnotes to schedule D 
and schedule E.   
14 Cash and Cash 
Equivalents  3.4/2019  I recommend that the WTO Pension Plan state its 
cash at own bank accounts and cash in 
investments separately.  The WTOPP agrees to add a footnote to 
the balance sheet showing that 
information.   
15 Cash and Cash 
Equivalents  3.4/2019  I recommend that the WTO Pension Plan create a 
note to explain the cash balances in detail due to 
every single bank account as well as the cash 
balances in all single investments as at 31 
December.  The WTOPP proposes to provide the 
following elaboration which has been 
included in the above -mentioned footnote:  
"Cash held on investment accounts for 
extended periods of time is normally 
immaterial. However, since 2019 the Plan 
has started to use investment accounts to    
  WT/L/1094  
- 25 - 
 
No. Issue  Reference: 
Chapter, 
Year  Recommendation  WTO’s Comment / Implementation  Status  
shelter operating cash from negative 
interests."  
16 Withholding 
Taxes  3.5/2019  I recommend that the WTO Pension Plan check 
its earlier reimbursement claims from withholding 
taxes paid and revalue the applicable receivables 
regarding their true value and recoverability.  The WTOPP agrees to review the 
situation with its custodian during 2020 
and write off as relevant in next year's 
financial statements.   
17 Early 
Retirement  3.7/2019  I recommend that the  WTO Pension Plan review 
the impact of early retirement to the Pension Plan 
for all cases based on an actuarial calculation.  The WTOPP agrees to include a detailed 
review of the impact of early retirement in 
the context of the next formal actuarial 
valuation.   
18 Early 
Retirement  3.7/2019  I recommend that the WTO Pension Plan enter 
into a separate arrangement with WTO due to 
compensation payments for early retirement.  The WTOPP agrees to explore potential 
conditions for a separate agreemen t.  
 
 
__________