RESTRICTED  
  
WT/L/1060  
 
14 June 2019 
(19-3968) Page: 1/29 
General Council  
23-24 July 2019  
 
 WTO PENSION PLAN   
ANNUAL REPORT AND FINANCIAL STATEMENTS   
FOR THE YEAR ENDING  
31 DECEMBER  2018 
 
 
 
 
 WT/L/1060  
 
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  CONTENTS  
 
CONTENTS  ................................ ................................ ................................ ........................  2 
MESSAGE FROM THE CHA IRMAN OF THE MANAGEM ENT BOARD  ................................ ....... 3 
1   HIGHLIGHTS  ................................ ................................ ................................ ...............  4 
1.1   Investment ret urn ................................ ................................ ................................ ....... 4 
1.2   Asset allocation  ................................ ................................ ................................ ...........  5 
1.3   Participants and beneficiaries 2018  ................................ ................................ ................  6 
2   SUMMARY OF MANAG EMENT BOARD ACTIVITI ES ................................ ........................  7 
3   REVIEW OF THE WT OPP INVESTMENT PERFO RMANCE  ................................ ................  8 
4   ACTUARIAL POSITI ON OF THE PLAN  ................................ ................................ ...........  8 
5   IPSAS ACCRUED LI ABILITIES OF THE PLA N ................................ ................................  9 
6   ORGANIZATION AND  STRUCTURE OF THE PE NSION PLAN ON 
31 DECEMBER  2018  ................................ ................................ ................................ ........  10 
7   ACCOUNTS  ................................ ................................ ................................ ................  11 
8   EXTERNAL AUDITOR  ................................ ................................ ................................ .. 12 
OPINION OF THE EXTER NAL AUDITOR  ................................ ................................ ...........  12 
Identification of the financial statements  ................................ ................................ .......12 
9   FINANCIAL STATEM ENTS  ................................ ................................ ..........................  14 
9.1   Management letter of representation  ................................ ................................ ............ 14 
9.2   Statement 1: Income and expenditure statement  ................................ ........................... 15 
9.3   Statement 2: Balance sheet  ................................ ................................ ......................... 16 
9.4   Schedule A: Source and application of funds  ................................ ................................ ..17 
9.5   Schedule B: Breakdown of expenditures  ................................ ................................ ........ 17 
9.6   Schedule C: Investment mandate overview  ................................ ................................ ...18 
9.7   Schedule D: Asset allocation  ................................ ................................ ........................ 19 
9.8   Schedule E: Investment performance  ................................ ................................ ............ 20 
9.9   Schedule F: Investment performance history from inception to 31  December  2018 ............. 21 
9.10   Schedule G: Exchange rates used for closing on 31  December  2018................................ 21 
9.11   Schedule H: Participation in the Pension Plan  ................................ ............................... 22 
9.12   Schedule I: Structure of the WTO Pension Plan  ................................ ............................. 23 
9.13   Schedule J: Glossary of terms  ................................ ................................ .................... 23 
ANNEXES  ................................ ................................ ................................ ........................  26 
 WT/L/1060  
 
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  MESSAGE FROM THE CHA IRMAN OF THE MANAGEM ENT BOARD  
The Management Board of the World Trade Organization Pension Plan (WTOPP) is pleased to 
present to you its 201 8 Annual Report. While the moving 5 -year average returns continue to 
exceed the long-term target rate of return, 2018 was a  much more difficult  year for investors  than 
previous year s, and the returns of the WTOPP investment portfolio over the course of 2018  reflect 
this.  
 
The Management Board's investment strategy slightly underperformed its benchmark and 
delivered a nominal rate of return of -5.8% (versus -5.6% for the benchmark). As Swiss inflation 
for 201 8 was 0.7%, the portfolio's real return was -6.5% for the year . This is below  the long-term 
target rate of return used in the actuarial assumptions, but not unexpected due to normal volatility  
in market prices. It is important to understand that price volatility as measured by the value of the 
portfolio on 31  December of each year is usually  not a good indicator of the underlying economic 
potential of the investments. It is normal that in some years the return will be above the expected 
level and in others it will be below.   
 
Current economic circumstances remain  challenging for investors and  are likely to remain so for 
some time. However, as a long-term investor the WTOPP can tolerate, and eve n benefit from, this 
short-term volatility. More information on the investment philosophy of the Management Board 
and details on the allocation of assets can be found in the report and its annexes.  
 
The updated actuarial valuation was completed and, as is typical in a roll -forward valuation year,  
no action was recommended at this point. However, next year will be a full periodic valuation year 
(completed once every 3 years) and the consulting actuary  recommends that preparation be made 
to review key assumpt ions in advance of the next valuation.  The consulting actuary also  continues 
to recommend that the Board monitor the situatio n closely over the coming years, particularly 
regarding  any long -term changes in staffing  patterns . 
 
The work of the Management Board in 201 8 included  a successfully completed procurement 
exercise for the provision of Actuarial Services to the Pension Plan  helping to ensure good value for 
money in this key advisory role . The Board also maintained three working groups targeting: ris k 
management; Environmental Social and Governance issues in investment; and disability process 
management. It is expected that recommendations will emerge from all of these working groups 
for consideration by the Board in 2019.  
 
The Management Board is ful ly engaged in ensuring the continued good governance of the WTO 
Pension Plan and is pleased to share this annual report with you.  
 
The present report for the period from 1  January  2018 to 31  December  2018 has been prepared 
by the Management Board in accord ance with Article 5 of the Regulations of the Plan for 
presentation to the General Council and to Plan participants and beneficiaries.  
 
 
 
 
 
 
  
 
 
 
 
Robert Prochazka , Chair of the Management Board  
 
 
 WT/L/1060  
 
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  1  HIGHLIGHTS  
1.1  Investment return   
Figure 1 Historical returns net of inflation and fees 
-40%-30%-20%-10%0%10%20%30%
Target rate: 3.5%
Moving average: previous five years
  
 
1. The Plan's investment gains are  ultimately  driven by the portfolio's underlying economic 
potential in the long run. In this respect, the Management Board focuses on monitoring the 
portfolio's long-term return against its 3.5% target rate set for actuarial purposes rather than  
fluctuations in  annua l investment performance . From this point of view , the 2018 investment 
return caused a decrease of the five -year average annual investment return  to a more realistic 
3.9%, f ollowing a six -year period where investment performances were consistently  inflated  by 
market valuations  that exceeded actual economic performance of the underlying assets . 
 
2. In 2018 t he Pension Plan's portfolio delivered a nominal rate of return of -5.8%. As Swiss 
inflation for 2018 was close to 0.7%, the portfolio's real return was -6.5% for the year. Much of 
this decline was due to price volatility in financial markets at the end of the year, which can result 
in sharp valuation decreases (or increases) over the short term. These swings in year -end 
valuation are not unexpected.  WT/L/1060  
 
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  Table 1 Net i nvestment return  
 Nominal  Real 
2016  6.8%  6.8%  
2017  11.2%  10.4%  
2018  -5.8%  -6.5%  
 
1.2  Asset allocation   
Figure 2 Asset allocation as of 31 December 201 8, actual vs. strategy  
0%5%10%15%20%25%30%35%40%45%
Global Equities CHF Bonds Real Estate CashAllocation
Strategy
 
 
3. The WTOPP rebalances its portfolio in the first quarter of each year, by re -aligning t he 
allocation to  each asset class with the strategy.1 This mechanism takes advantage of volatility in 
financial markets as it consists of selling securities that have become relatively more expen sive 
and buy ing assets that have become relatively cheaper.  
                                                
1 See reference to rebalancing in the Glossary and Annex 2 for more information on this approach.  WT/L/1060  
 
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  Figure 3 Detailed asset allocation 201 8 
International 
Equities
30.8%
Emerging Markets 
Equities
7.2%
US  bonds
15.3%Emerging Countries 
Bonds
14.3%Senior Loans
8.0%Euro Real Estate
3.9%Prisa Lp
6.1%Swiss Real Estate
10.3%Cash
4.1%
 
 
1.3  Parti cipants  and beneficiaries 201 8   
Figure 4 Plan membership by type 
Participants
67%29%Disability
2%Surviving 
spouses
2%
Retirees a
 
a including deferred retirement benefits.  
 
 
4. The number of participants has remained largely stable. On 31 December 201 8, there were 
702 participants, up from 699  on 31 December 201 7. On the other hand, the number of 
beneficiaries is steadily growing and increased from 352  to 369  over the same period.  WT/L/1060  
 
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Table 2 Plan membership   
Membership  2017 2018 
Number of Participants  699 702 
Number of Beneficiaries  352 369 
 
Table 3 Types of benefits   
Types of benefits  Total number  Average monthly benefit  
Year 
2017 Year 
2018 Year 
2017 Year 
2018 
Retirement benefits  154 164 CHF   6,800  CHF   6, 800 
Early retirement benefits  118 119 CHF   4,900  CHF   4,900  
Disability benefits  22 23 CHF   5,500  CHF   5, 500 
Surviving spouse's benefits  15 18 CHF   3,500  CHF   3, 700 
Child's benefits  18 20 CHF      600  CHF      400  
Deferred retirement benefits  25 25 - - 
 
5. As the  number of beneficiaries continues to increase, so does the amount of benefits paid  
annually by the Plan. Periodic benefits and lump sum benefits amounted to CHF 25.7 million in 
2018, which is still less than the total amou nt of contributions received (CHF 30.1 million). 
According to the latest actuarial valuation, benefits are expected to exceed contributions in 2019 . 
Nonetheless, thanks to investment returns, t he WTOPP is still projected to generate positive net 
cash inflows for more than  forty years without having to sell assets  to pay benefits.  
Figure 5 Contri bution income and benefit expenditure  
04,0008,00012,00016,00020,00024,00028,00032,000
19992000 01020304050607080910111213141516172018Thousands
of Swiss Francs
Periodic Benefits Lump sum payments Contributions received a b
 
a Including transfer values paid to other Organizations.  
b Including transfer values received from other Organizations.  
 
2  SUMMARY OF MANAGEMEN T BOARD ACTIVITIES   
 
6. The Management Board held six meetings in 201 8: these took place on February 9th, 
April 27th, June 20st, July 24th (Special Session),  September  24th and November  29th. As ongoing 
items , the agendas for all these meetings included the presentation of the investment situation 
and a report by the Secretariat on matters arising since the previous meeting of the Management 
Board.  WT/L/1060  
 
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  7. Outside the formal Management Board meetings , Working Groups of the Management Board 
met nine times to addres s specific points . They included two on Actuarial issues (focused on the 
procurement exercise  – see below ), three on Investment (focused on ESG -Environment and Social 
Governance) and four on Governance issues (focused on Disabilities and Risk Management). These 
working groups require an important commitment of time and energy by the members of the 
Management Board and where much of the technical information needed by the Board is initially 
collected and digested.  
 
8. Disability determinations and reviews are one of the most sensit ive, challenging  and time -
consuming  responsibilities of the Management Board. They were particularly complicated in 2018 
as the Clinique Corela, which was previously advising the Plan, was administratively closed for 
misconduct . None of the WTO Pension Pla n's disability cases w as affected by irregularities . 
Nonetheless  the Management Board had to quickly  identify a suitable  new medical adviser ( the 
Centre d’Expertise Médicale de Lancy - CEML) .  
 
9. Another significant accomplishment by the Management Board and  the Secretariat was the 
completion of a tendering exercise for its Consulting Actuary. The successful bidder has been 
chosen and a new contract has been signed with Mercer Financial Services. The Management 
Board also continued its communication effort an d published two newsletters in 2018.  
 
3  REVIEW OF THE WTOPP INVESTMENT  PERFORMANCE   
10. The investment portfolio had a nominal return of -5.8% in 2018, compared to -5.6% for the 
Pension Plan's benchmark. Swiss inflation for 2018 was close to 0.7%. Hence, the portfolio's real 
return was -6.5% for the year, significantly below the plan's +3.5% target. Except for 
International Real Estate, all assets in portfolio generated negative returns in 2018.  
11. The Plan's portfolio generated annual returns of +3.8% and +3.9% in nominal terms, 
respectively over the last three and five years. The five year return exceeds the Plan's target 
return by 0.4  points .  
12. In 2018, the Plan's portfolio suffered from negative return returns on equities, investment 
grade bonds as well as emerging market bonds and Senior Loans.  Equity investments, which 
represent 40% of the P ension Plan's target asset allocation, had a return of -10.0% equal to the 
benchmarks. Fixed income investments (36% of the Pension Plan's target asset allocation) 
returned -4.4% in 2018 vs. -4.2% for the Plan's benchmark. The slight underperformance can b e 
explained by the Senior Loans funds which have underperformed their benchmark by -0.9%.   
13. Following the positive returns of 2018, the yield offered to investors by Swiss Government 
bonds is closer to zero and guarantees mediocre returns in the medium term . The portfolio has no  
exposure to this asset class. In general, safe haven fixed income investments are likely to see 
modest returns in the future. Their yields remain low or even negative in the case of Swiss 
government bonds with maturities shorter than  12 years.  
14. Real Estate investments represent 20% of the target asset allocation. The return on this 
portion of the portfolio was -0.9% in 2018. The Swiss real estate fund had a return of -5.9% in 
2018 while the SXI index, which tracks the return of Swiss publicly tra ded real estate funds, had a 
return of -5.3%. International real estate funds, which include the Plan's investments in Warburg 
Henderson fund, PRISA LP and since December 2018 CBRE Fund, had a consolidated return of 
+4.7%.  
4  ACTUARIAL POSITION O F THE PLAN  
15. Effective 31 December 201 8, the consulting actuary completed an other  interim actuarial 
valuation which is an update of the periodic formal valuation using new data but  retaining the 
same assumptions. While the current contribution rate is 23.7% of pensionable remuneration 
(corresponding to 7.9% by participants and 15.8% by the organization) , the long -term cost of the 
Plan expressed in terms of the contribution rate is estimated to be 24. 1% (for an assumed 
population of 70 2 active participants). This  compares with 24. 0% at 31 December 201 7 and 
24.2% at the previous formal valuation at 31 December 201 6. Although a gap of -0.4% remains, 
that gap is considered to be within the normal margin of actuarial sensitivity, and no action is WT/L/1060  
 
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  recommended at this p oint. The estimate will be constantly reviewed in future actuarial valuations 
where the long -term contribution rate is assessed against actual experience regarding investment 
performance, demographic evolutions and the Plan's other characteristics to see i f any trends 
persist . 
16. The valuation found that , actuarially, benefits are expected to exceed contributions for the 
first time in 2019. This is consistent with the expect ation at the previous valuation at 31  December 
2017. 
17. Considering  the 201 8 actuarial val uation update report corresponding to 201 8 data and 
pursuant to Article 9 of the Regulations of the Plan, the consulting actuary did not recommend that 
any further action be taken at this point. The actuary does recommend the establishment of a 
working gro up to review assumptions in anticipation of next year's period formal valuation.  
5  IPSAS ACCRUED LIABIL ITIES OF THE PLAN  
18. The WTO's financial statements include an actuarial estimate of pension benefits that differs 
in scope and method from the WTOPP's actua rial valuation discussed in Section 4 above. In line 
with the International Public Sector Accounting Standards (IPSAS), this estimate is produced for 
reporting on the WTO's accrued liabilities for employee benefits  as at 31 December of each year , 
which inc ludes mainly pensions and After -Service Health Insurance.  
19. The IPSAS estimate of the pension liability represents the hypothetical liability of the 
Organization to cover all its current employees' and retirees' acquired pension entitlements as at 
31 December 201 8. Unlike the Plan's actuarial valuation discussed in Section 4 above, it does not 
consider future pension contributions receivable from current and future staff and  uses a different 
methodology for setting the discount rate.  
20. The purpose of th e valuation prepared for the WTOPP Management Board is to assess the 
long-term cost of the Plan. This valuation is fully reviewed and updated at least once every three 
years and takes into consideration past and future service accrual and assumes an open g roup, i.e. 
that new entrants will come into the Plan to replace those who depart due to retirement, death in 
service, permanent disability or termination. It also takes into consideration the investment 
strategy adopted by the Plan in setting the long -term assumed rate of return (for setting the 
discount rate).  
21. It is principally the different discount rates, closed versus open group, and past versus 
future service assumptions that explain the different resulting valuations. Both valuations are 
reported toge ther with the balance sheet, in Statement 2  of the financial statements .  WT/L/1060  
 
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  6  ORGANIZATION AND STR UCTURE OF THE PENSIO N PLAN ON 31  DECEMBE R 2018 
22. The Management Board of the Plan was duly constituted by the General Council in 
accordance with Art icle 4 of the R egulations on 26  March 1999.  
23. The Regulations and Administrative Rules of the WTO Pension Plan were adopted by the 
General Council on 16 October 1998 (WT/L/282). The General Council approved the Rules of 
Procedure of the Management Board on 8 May 2001 (WT/L /402). The Regulations of the WTO 
Pension Plan were amended by the General Council on 1 December 2005, on 28 July 200 9, on 
26 October 2011, on 30 November  2015 and on 26 July 2017 . The Administrative Rules were 
amended on 23  September  2005 and on 7  December  2016, and the Rules of Procedure were 
amended on 7  December  2016.  
24. Key components of the governance and administrative structure of the Pension Plan included 
the following on 31 D ecember 201 8. 
 
 Mr. Robert Prochazka, Chairperson  
Ms. Alicia Goujon  
Members elected 
by the General 
Council  Ms. Antonia Carzaniga  
Members  appointed 
by the Director -
General  Ms. Claudia Hernández 
Vetsch  Mr. Christian Dahoui  
Mr. Christopher Wilson  Mr. Rainer Lanz  
Ms. Darija Sinjeri  Mr. Thomas Verbeet  
Mr. Faisal Al -Nabhani  
Alternates elected 
by the General 
Council  Ms. Kerry Allbeury  
Alternates appointed 
by the Director -
General  Mr. Jean -Marc van Dril  Ms. Laura Monnet  
Mr. Paula Chiung -Fang Hsu Ms. Nthisana Phillips  
Mr. Rodolfo Rivas  Ms. Zheng Wang  
Mr. Robert Luther  Observer on behalf of the beneficiaries  
Mr. Paul Rolian  Alternate o bserver on behalf of the beneficiaries   
Secretariat  John Breckenridge, Secretary  
Yann Marcus, Pensions Officer  
Corine Becker, Pension Specialist  
Dário Muhamudo, Pension Specialist  
Outsourced support services  Trianon S.A.  
Consulting Actuary  Cameron Hannah (Mercer HR Consulting S.A.)  
Medical Adviser  Centre d'expertise médicale Lancy (CEML)  
Investment Analyst/Consultant  MBS Capital Advice S .A. 
Global Custodians  The Northern Trust Company   
Pictet Asset Services  
Fund Managers   Babson Capital (senior loans portfolio hedged in CHF)  
Blackrock (emerging market bonds portfolio hedged in CHF)  
Crédit Suisse (Swiss real estate portfolio and senior loans 
portfolio hedged in CHF)  
GMO (emerging market bonds portfolio hedged in CHF)  
MFS (emerging market bonds portfolio hedged in CHF)  
NN (senior loans portfolio hedged in CHF)  
Pictet (Equity portfolios  (global equities and emerging 
markets))  
Prisa LP (US Real Estate portfolio)  
Vanguard (USD government bonds)  
Warburg Henderson (European real estate portfolio)  
CBRE (European real estate portfolio)  
External Auditor  Bundesrechnungshof  
Supreme Audit Institution of Germany  WT/L/1060  
 
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  7  ACCOUNTS  
25. The financial statements and schedules are presented in Section 9 of this Report. The notes 
to the financial statements found in Annex 1 include important  additional explanations about the 
accounts. These not es are integral to understanding the accounts and the financial position of the 
Plan. 
26. The income and expenditure statement for the period 1 January – 31 December 201 8 is 
reproduced in Statement 1.  
27. The balance sheet as at 31  December  2018 is reproduced in S tatement 2.  
28. The source and application of funds for the period 1  January -31 December  2018 are 
reproduced in Schedule A.  
29. Details of the exchange rates used for closing the accounts on 31  December  2018 and the 
currency breakdown as of 31  December  2018, after  hedging, are provided in Schedule G.  
30. A glossary of terms to facilitate an understanding of the tables is reproduced in Schedule J.  
31. Explanations of significant events in the 201 8 accounts can be found in the notes in ANNEX 
1. 
 WT/L/1060  
 
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  8  EXTERNAL  AUDITOR  
32. The report of the External Auditor on the Accounts of the WTO Pension Plan for the Year 
ended 31 December 201 8 is produced separately from the Annual Report.  
OPINION OF THE EXTER NAL AUDITOR  
Identification of the financial statements  
I have audited the financial statements of the World Trade Organization Pension Plan (hereinafter 
''WTOPP'') for the financial year ended 31  December  2018, comprising  
• the income and expenditure statement,  
• the surplus account,  
• the balance sheet,  
• and supporting not es and annexes to the Financial Statements.  
 
Basis of Opinion   
 
I conducted my audit in conformity with International Standards on Auditing (ISAs) as adopted 
and expanded by the International Organization of Supreme Audit Institutions (INTOSAI) and 
issued as International Standards for Supreme Audit Institutions (ISSAIs). These standards require 
that I plan and perform the audit to obtain reasonable assurance about whether the financial 
statements are free from material misstatement.  
I am independent of th e WTOPP in accordance with the ethical requirements that are relevant to 
my audit of the financial statements and I have fulfilled all other ethical responsibilities in 
accordance with these requirements.  
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for 
my opinion.  
 
Responsibilities of Management  
 
In accordance with WTOPP´s Rules and Regulations, the Management Board is responsible for the 
preparation and fair presentation of the financial statements in accordance with IPSAS and for 
such internal control as the Management Board determines necessary to enable the preparation of 
financial statements that are free from material misstatement, whether due to fraud or error.  
 
Auditor´s Responsibilities  
 
My objectives are to obtain reasonable assurance about 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 that includes my opinion. Reasonable assurance is a high l evel 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 judgment 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 appropri ate 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;  
 WT/L/1060  
 
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  • 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 WTOPP’s interna l control;  
 
• 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 the 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 o f the 
audit and significant audit findings, including any significant deficiencies in internal control that we 
identify during our audit.  
 
Audit Opinion  
 
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 at 31 December 201 8, that they have been prepared 
according to WTOPP´s stated accounting policies, and that the transactions have been in 
accordance with the Regulations of the Pension Plan and its Rules of Proc edure.  
 
I have placed an unqualified audit opinion on the Financial Statements of WTO´s Pension Plan for 
the year ended 31 December 201 8. 
 
Report Reference  
 
I have also prepared a long -form report on the WTOPP’s financial statements.  
 
__________________  
Kay Scheller  
President of the Bundesrechnungshof  
Supreme Audit Institution of Germany  
External Auditor  
 
 
 
 
Bonn, 5 June 201 9 
 
 
 
 
 WT/L/1060  
 
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  9  FINANCIAL STATEMENTS  
9.1  Management letter of representation  
33. The Management Board of the WTO Pension Plan is responsible for these financial 
statements, which have been prepared in accordance with the Plan's Regulations and Rules. The 
financial disclosures in this report are intended to fairly present the Plan's financial results in a 
manner that is complete and understandable.  
34. The Management Board is responsible for establishing and maintaining adequate internal 
control over financial reporting so as to provide reasonable assurance regarding the reliability of 
these financial statements for external purposes. This includes polic ies and procedures that 
1) provide for the maintenance of records that accurately and fairly reflect the transactions of the 
Plan, 2) provide reasonable assurance that transactions are authorized and recorded in compliance 
with the Plan's Regulations and R ules and 3) provide reasonable assurance regarding the 
prevention or timely detection of unauthorized acquisition, use or disposition of the Plan's assets. 
However, due to the inherent limitations of internal control over financial reporting, these control s 
may not prevent or detect all misstatements.  
35. Based on the above, the Management Board has concluded that these financial statements 
present fairly the Plan's financial position and pe rformance as of 31  December  2018. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(signed)  
____________________  (signed)  
____________________  
Robert Prochazka   
Chair 
WTOPP Management Board  John Breckenridge  
Secretary  
WTO Pension Plan  WT/L/1060  
 
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  9.2  Statement 1: Income and expenditure statement  
INCOME AND EXPENDITURE STATEMENT (expressed in Swiss Francs)  
  2018 2017 
Income     
Investment i ncome     
Profit on securities  - 60,052,462  
Currency revaluation  - 475,167  
 - 60,527,629  
Contributions    
Organization, regular contributions  19,151,092  19,04 2,000  
Organization, additional contributions  - 241,300  
Participants, regular contributions  9,575,550  9,521, 209  
Interest s on validations  199 1,099  
Restorations  20,440  5,118  
Transfer s from other organizations  1,200,307  165,620  
Interest s on transfers  165,275  4,052  
  30,112,863  28,980,398  
Reimbursements claims under the death and disability insurance  715,763  803,813  
Total income  30,828,626 90,311,840  
Expenditure    
Periodic benefits    
Retirement benefit s (Art. 23)          13,068,481  12,405,732  
Early retirement benefit s (Art. 24)            6,977,591  6,681,123  
Disability benefits – (Art. 28)             1,457,736  1,720,178  
Surviving Spouse benefit s (Art. 29)                 747,439  518,389  
Child benefit s (Art. 30)                  93,335  184,830  
  22,344,582  21,510,252  
Lump s um benefits    
Withdrawal settlement s (Art. 26)                781,336  853,410  
Commutation s (Articles 23c), 24 d), and 25c))             2,374,496  4,784,375  
Transfer s to other organizations                224,143  210,115  
Interest s on transfers                  17,219  17,364  
  3,397,194 5,865,264  
Participants' death and disability coverage  983,800 983,161  
Loss on investment    
Loss on securities           34,194,746  - 
Currency revaluation                268,024  - 
Negative credit interest                  96,631  106,247 
  34,559,401  106,247  
Investment and other administrative expenses    
Management fees                442,732  453,919  
Trianon and other administrative costs                199,780  206,382  
Consultancy fees                120,000  120,000  
Actuarial expenses                  30,000  40,600  
Legal fees                  19,276  - 
Bank charges                  24,492  19,761 
 836,280  840,662  
Total e xpenditure  62,121,257  29,305,586  
Profit / Loss (-) for the period   -31,292,631  61,006,254 
 
 
 
 WT/L/1060  
 
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  9.3  Statement 2: Balance sheet  
Balance sheet  
(expressed in Swiss Francs)  
Assets  At 
31.12.2018  At 
31.12.2017  Liabilities  At 
31.12.2018  At 
31.12.2017  
Investments      Current liabilities     
Securities  540,464,930  560,959,814  Accrued expenses  160,825  186,137  
Cash and cash 
equivalents  23,035,085  34,446,048    160,825  186,137  
  563,500,015  595,405,862  Capital    
Current Assets    Capital as at 1 
January  595,979,242  534,972,988  
Withholding taxes 
to be recovered  1,084,854  307,856  Profit / Loss ( -) -31,292,631  61,006,254  
Accrued income  262,567 210,361    564,686,611  595,979,242  
Receivable 
additional 
contributions  - 241,300     
  1,347,42 1 759,517     
Total assets  564,847,43 6 596,165,379  Total liabilities  564,847,436  596,165,379  
 
36. Please note that this balance sheet shows neither the present value of future benefits (the 
pension liability) on the liability  side, nor the capitalized future contributions on the asset side. In 
the WTO's financial statements, the pension liabilities are estimated at CHF  1,072 million according 
to IPSAS accounting rules. If the Pension Plan's asset value of CHF  565 million is deducted from 
this amount , the result  is an estimated  net accrued liability for employee benefits of 
CHF 507 million. This net value represents the hypothetical liability of the Organization to cover all 
its current employees ' and retirees' acquired pension entitlements as at 31 December 201 8. It 
differs from the long -term valuation used in managing the Plan main ly in that it does not consider 
future pension contributions receivable from current and future staff,  and uses a different 
methodology for setting the discount rate.  
37. On the other hand, the actuarial model used in managing the Plan takes into account futur e 
pension contributions and benefits for an open group of participants, and a projected real return 
rate of 3.5% for the Plan's assets. This model estimates the present value of future benefits at 
CHF 1,383 million , which will be met over the long run by f uture staff's pension contributions and 
the Plan's assets and their future returns.   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 WT/L/1060  
 
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  9.4  Schedule A: Source and application of funds  
Source and application of funds  
(expressed in Swiss Francs)   
2018  2017  
Funds as at 1 January  596,165,379  535,529,801  
Plus:   
Source    
Receipt of contributions            30,112,863  28,980,398  
Investment income                           -    60,421,382  
Reimbursements of death and disability insurance claims                715,763  803,813  
Increase in current liabilities  - 25,324  
Total 30,828,626  90,230,917  
Less:    
Application    
Loss on Investments  34,559,401  - 
Settlement of benefits  25,741,776  27,375,516  
Participants' death and disability coverage  983,800  983,161  
Investment and other administrative expenses  836,280  840,662  
Reduction in current  liabilities                  25,312  - 
Change  in reserves                           -    396,000  
Total 62,146,569  29,595,339  
Funds as at 31 December  564,847,436  596,165,379  
 
9.5  Schedule B: Breakdown of expenditures  
Expenditures  
(expressed in Swiss Francs)   
2018  2017  
Investment Management fees    
Crédit Suisse - Swiss Real Estate  732 - 
MFS 161,031  155,939  
Northern Trust  47,423  45,041  
Pictet – Emerging Markets  bonds  58,232  49,311  
Pictet – Emerging Markets  equities  31,038  32,066  
Pictet - International equities  126,830  153,284  
Pictet – Senior loans  11,444  10,690  
Pictet – US real estate PRISA LP  6,001  7,588  
Total   442,732  453,919  
Consultancy fees    
MBS Capital Advice  120,000  120,000  
Actuarial expenses    
Mercer  30,000  40,600  
Legal fees    
Akin Gump  19,276  - 
Administrative costs    
Trianon and other administrative costs  199,780  206,382  
Other expenses    
(bank charges and external audit)  24,492  19,761  
Total  836,280  840,662  
Note:  Management fees for mutual fund investment vehicles are frequently embedded in the 
reported value of the holdings. These fees are not presented separately in the statement of 
expenditure and total CHF  1,087,950 for 201 8. 
 WT/L/1060  
 
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  9.6  Schedule C: Investment mandate overview  
Investment mandate overview  
Asset  
class  Fund  
Manager  Benchmark  Ex-ante 
tracking 
error  Inception  Location  Website  
Global 
Equities  Pictet & Cie  40% MSCI Europe,  
40% MSCI 
North  America, 
20% MSCI Pacific  Indexed  January  
2011 Geneva, 
Switzerland  pictet.com  
Emerging 
Markets 
Equities  Pictet & Cie  MSCI Emerging 
Markets Free  Indexed  May 
2016 Geneva, 
Switzerland  pictet.com  
Inv. Grade 
Bonds  USD Vanguard  Barc.US 5 -10 Y 
Gov/Cdt  Indexed  May 
2015 Valley Forge , 
United States  Vanguard.com  
Emerging 
Market 
Bonds  Black Rock JP Morgan EMBI 
hedged in CHF  Indexed  January  
2016 New York, 
United States  blackrock.com  
Emerging 
Market 
Bonds  MFS JP Morgan EMBI 
hedged in CHF  2%-3% January  
2011 Boston, 
United  States  mfs.com  
Emerging 
Market 
Bonds  GMO JP Morgan EMBI 
hedged in CHF  3%-5% January  
2011 Boston, 
United  States  gmo.com  
Senior 
Loans  Barings CS Loans index 
hedged in CHF  3%-5% October  
2012 New York, 
United  States  babsoncapital.com  
Senior 
Loans  Credit 
Suisse  CS Loans index 
hedged in CHF  2%-4% October  
2012 New York, 
United  States  credit -suisse.com  
Senior 
Loans  NN CS Loans index 
hedged in CHF  2%-4% October  
2012 Phoenix, 
United  States  Inginvestment.com  
US 
Real 
Estate  PRISA LP  NCREIF Fund 
Index ODCE  - February  
2015 Madison,  
United States  pramericarei.com  
European 
Real 
Estate  Warburg 
Henderson  6.5% p.a.  - December  
2006 Hamburg, 
Germany  warburg -henderso
n.com  
European 
Real 
Estate  CBRE  - - December 
2018 London, 
United 
Kingdom  cbre.com  
Swiss Real 
Estate  Credit 
Suisse  SXI Real Estate 
Fund Index  - November  
2008 Zürich, 
Switzerland  credit -suisse.com  
 
 WT/L/1060  
 
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  9.7  Schedule D: Asset allocation  
Asset Allocation  
as of 31  December  2018 
Assets  MCHF  Current  
weightings  Strategy  Deviation from  
the strategy  
Global equities  214.3 38.0% 40.0%  -2.0% 
Developed markets  173.6  30.8%  32.0%  -1.2%  
Emerging Markets  40.7 7.2% 8.0%  -0.8%  
CHF bondsa  211.7  37.6% 36.0%  1.6% 
Investment grade bonds USD  86.0 15.3% 14.0%  1.3% 
Emerging countries bonds  80.6 14.3% 14.0%  0.3% 
Senior loansb    45.0 8.0%  8.0%  0.0% 
Real Estate  114.4  20.3% 20.0%  0.3% 
European Real Estate  22.1 3.9% 5.0%  -1.1% 
U.S. Real Estate  34.1 6.1% 5.0%  1.1% 
Swiss Real Estate  58.2 10.3% 10.0%  0.3% 
Cash  23.1 4.1% 4.0%  0.1% 
Total  563.6    
a      Bonds hedged in CHF.  
b   Senior loans are floating rate fixed income instruments, granted to sub -investment grade borrowers, 
have the highest level of seniority in the capital structure of corporate issuers and are secured by the 
assets of the borrowing company.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 WT/L/1060  
 
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  9.8  Schedule E: Investment performance  
Investment Performance as of 31  December  2018 
(expressed in nominal terms)  
 Over  
1 year  p.a. Over  
3 years p.a.  Since  
inception p.a.  TEa IRb 
TOTAL            
Consolidated securities  -5.81% 3.82% 2.2%c   0.91% -0.41 
Added value  -0.17% -0.37% 0.10%     
EQUITY          
Consolidated equities  -10.03 % 5.69% 2.1%c   0.79% -0.33 
Added value  -0.08% -0.26% -0.03%     
Developed markets  -9.20%          
Added value  -0.20%        
Emerging markets  -13.70%          
Added value  -0.10%        
FIXED INCOME            
Consolidated fixed incomed   -4.36%  1.62%  2.96% c 1.20%  0.31 
Added value  -0.19%  0.37%  0.01%    
Emerging countries bonds  -7.30%      
Added value  0.10%      
Senior loans  -2.90%      
Added value  -0.90%      
Investment grade bonds USDe   -2.40%      
Added value  0.80%      
REAL ESTATE          
Consolidated real estate  -0.92%  4.21%  2.32%f   --- --- 
Added valueg          
Warburg Henderson  -1.55%  12.93%  3.3%h   --- --- 
Added valueg          
Prisai   8.70%  6.1 6.9%i  --- --- 
Added valuej -0.10%  -0.70%  -3.60%     
Credit Suisse  -5.90%  -0.70%  4.8%k   --- --- 
Added valuel 0.50%  -3.20%  -1.30%     
            
a TE = tracking error over 3 years  
b IR = information ratio over 3 years  
c Inception in  August  1999.  
d The consolidated Fixed Income performance is calculated taking into account the performance of 
Euro Government Bonds investments, which do not appear as a separate entry in the table because 
they were liquidated in  May 2015. In addition to the bonds' performa nce, the consolidated fixed 
income performance also includes the interest paid on the Plan's cash.  
e Inception in  June 2015.  
f Inception in  February  2005.  
g There is no formal benchmark for this investment.  
h Inception in  December  2006. Euro investment not  hedged in CHF. Performance in euro is 4.6%  p.a. 
since inception.  
i The first investment was done on Q1 2015.  
J Benchmark: NCREIF Fund Index.  
k Inception in  November  2008.  
l Benchmark: SXI Real Estate Funds Index.  WT/L/1060  
 
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9.9  Schedule F: Investment performance history from  inception to 31  December  2018 
 
 
 
 
 
 
9.10  Schedule G: Exchange rates used for closing on 31  December  2018  
Currency  Exchange rates  
CHF per 1 EUR  1.1269  
CHF per 1 USD  0.9858  
CHF per 1 JPYa 0.0090  
CHF per 1 GBP  1.2555  
a  JPY per 1 CHF: 11 1.2954 
Figure 6 : Currency breakdown  as of 31 December 2018  after hedging  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 WT/L/1060  
 
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  9.11  Schedule H: Participation in the Pension Plan  
The following table s show  the trends in the numbers of participants and beneficiaries in the 
Pension Plan in the course of 201 8. 
Number of participants and beneficiaries on 31 December 2018 
 2017 2018 
Active members  699 702 
Beneficiaries  352 369 
Participants in the Pension Plan in 201 8 
Total number on 31  December  2017 699   
Movements in 201 8  
  
- Entries  85 
- of which re -entries under the terms of Art.  15(b) of the Regulations  21 
- Separations  82   
  
Total number on 31  December  2018 702   
Breakdown of separations in 201 8  
  
- retirement  10 
- early retirement  2 
- deferred retirement  1 
- withdrawal settlement  35 
- transfer out  0 
- deferment of decision  33 
- death  0 
- disability  1   
Total separations  82 
Benefits paid by the Pension Plan  
Type of benefit  At 31 
December  
2017  New benefits  
in 201 8 Benefits ended  
in 201 8 At 31 
December 
2018 
Retirement  a 154 11 -1 164 
Early retirement b 118 4 -3 119 
Deferred retirement c  25 3 -3 25 
Surviving spouse's benefit  15 3 - 18 
Partial /total disability benefit  22 1 - 23 
Child’s benefit  18 5 -3 20 
Total benefits  352 27 -10 369 
a        Includes one deferred benefit that commenced being paid in 201 8. 
b  Includes two deferred benefit s that commenced being paid in 2018.  
c  Includes only deferred pension benefits not yet in payments, for former staff members who made 
that choice on their separation and those who made the choice later, after initially deferring their 
decision. Deferred pensions in payments are classified as retirement or ea rly retirement benefits.  
 WT/L/1060  
 
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  9.12  Schedule I: Structure of the WTO Pension Plan  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9.13  Schedule J: Glossary of terms  
Accrued expenses  include expenses incurred but not paid in the current accounting year.  
Accrued income include s income which has been earned but not yet received in the current 
accounting year.  
Active investment management  is a form of portfolio management whereby the por tfolio 
manager invests the assets in a manner different from the benchmark in an attempt to produce 
higher returns than the benchmark. The disadvantages of such a management style are 
characterized by higher management fees, higher trading costs as well as  the risk of significantly 
underperforming . 
Actuarial expenses  include expenses charged by the consulting actuary for the provision of 
actuarial services.  
Administrative costs  include costs incurred in the general administration of the Pension Plan.  
They d o not include the costs for the Plan's Secretariat , which  are borne by the WTO  (Article 5(f) 
of the Plan Regulations) . 
Commutation  refers to retirement benefits, early retirement benefits and deferred retirement 
benefits commuted at the request of the part icipant, into a lump sum not exceeding 1/2 of the 
actuarial equivalent of the benefit or the amount of the participant's own contributions, whichever 
is the larger.  
Consultancy fees  include the fees charged by the investment analyst/consultant.  
Contributio ns refer to sums payable for restoration, validation and benefit a s detailed in Art. 20 
of WTOPP R egulations.  
Contributions receivable  refers to contributions due in respect of contributory service in the 
accounting year but received after 31  December of the accounting year.  
Currency revaluation  represents the adjustment of foreign currency -denominated bank account 
balances at 31  December  2018 to the exchange rate for that day. This adjustment reflects the  
INVESTMENT 
ANALYST/CONSULTANT  
 
ASSET MANAGEMENT 
SERVICES   
DIRECTOR -GENERAL   
PARTICIPANTS  
 
EXTERNAL AUDITOR   
ADMINISTRATIVE 
SERVICES  
 
CONSULTING ACTUARY  
 
MEDICAL ADVISER   
MANAGEMENT BOARD   
GENERAL  COUNCIL  WT/L/1060  
 
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  variation in the exchange rate applicable to forei gn currency -denominated bank account balances 
at the beginning of the year and in the exchange rates applicable to movements in the same 
accounts during the year, at the time each transaction took place.  
Indexed management  is a form of portfolio managemen t that attempts to deliver the returns of 
the underlying benchmark by replicating exactly or by getting as close as possible to the 
composition of the benchmark at any point in time. It differs from active management in that it is 
significantly less costly  and does not reflect the views, forecasts or opinions of the investment 
manager.  
IR or Information Ratio  is defined as the outperformance of the investment manager above the 
index divided by the portfolio's tracking error. The information ratio is used to  represent a 
manager's skill. Generally, any ratio over 0.30 is thought of as demonstrat ing skill. IR refers to the 
information ratio over three  years.  
Interest on validations  and interest on restorations  refer to interest payments made under 
Article s 20(d) and 20(e) of the Plan Regulations.    
Management fees  include fees paid for the management of WTO portfolios.  
Organization, additional contributions  refers to the additional contributions paid by the 
Organization to compensate for the additional actuarial  cost generated by the early separation of 
participants in the context of restructuring exercises.  
Profit/loss on securities  is the result of:  
• capital gain/loss realized on securities;  
• profit arising from the distribution of dividends and interest received  on investments;  
• revaluation of securities at their market price at 31  December  (unrealized profit or loss).  
Rate of return  is the percentage of change in value of the portfolio over a specified period, taking 
into account both the investment income and th e change in the market value of the portfolio. It is 
expressed as an equivalent annual rate. The nominal rate of return  is the financial return of the 
assets and is before correction for inflation (measured on the basis of the annual movement of the 
consum er price index in Switzerland). The real rate of return  is calculated by subtracting the 
change in the Swiss CPI from the nominal rate of return. The term gross means that the return is 
calculated before the deduction of investment related costs while the term net refers to the return 
including all investment related expenses. The target real rate of return  is the long-term real rate 
of return that the Plan needs to achieve in order to meet its liabilities.  
Rebalancing  refers to the realignment of the alloc ation of the Plan's portfolio with its strategy. A 
predefined process identifies the triggers and other operat ional aspects (e.g. timing) of r ebalancing 
actions. The rules are approved by the Board and applied automatically. This mechanism takes 
advantage of the inevitable excesses of financial markets.  
Regulations and Administrative Rules  refer to the Regulations and Administrative Rules 
adopted by the General Council on 16  October  1998, as amended by the General Council on 
1 December  2005, on 28  July 2009, on 26  October  2011, on 30 November  2015, on 
7 December  2016 and on 26 July 2017 . 
Restoration  refers to the inclusion in contributory service of the prior contributory service of a 
former participant who again becomes a participant.  
Senior loans  are floating rate fixed income instruments, granted to sub investment grade 
borrowers, have the highest level of seniority in the capital structure of corporate issuers and are 
secured by the assets of the borrowing company.  
Time -weighted return  is a meas ure of compound return. It reduces the distorting effect of 
inflows and outflows and is used to compare the returns of investment managers and their 
respective benchmarks. The time -weighted return is very similar to the geometric mean return.  WT/L/1060  
 
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  TE or Trackin g error  is defined as the standard deviation of the portfolio's outperformance 
versus the benchmark. It is used as a measure to determine the risk of the portfolio versus its 
benchmark. This measure should not be confused with absolute risk; even though a portfolio has a 
very low tracking error, it can still be very risky due to the underlying nature of the market in 
which it invests. For an indexed management mandate, the tracking error  would usually be less 
than 0.8. Anything above this would be considere d active. TE is over 3 years.  
Validation  is defined in Art. 2(v) of WTOPP R egulations, as the inclusion in contributory service of 
a period of non -contributory service which occurred prior to the commencement of participation .  
Withholding taxes to be reco vered  includes amounts of withholding tax levied by national tax 
authorities and subject to recovery after 31  December  2018. Recoverable withholding tax reflects 
the Plan's recognition as a tax -exempt entity due to its connection to the WTO. As an International 
Organization, the WTO is exempted from most national taxes such as value -added tax (VAT), 
federal stamp duty and tax on the interest earned on investments. Annually the Plan files tax 
reimbursement claims to the Swiss and other authorities. O ccasionally the Plan's tax -exempt 
status is not automatically recognized by some national jurisdictions , in which case significant 
administrative and political intervention is often required to have this status fully recognized.  
 
_______________  
 
 WT/L/1060  
 
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  ANNEXES  
ANNEX 1 NOTES TO THE FINANCIAL STATEMENTS  
1.  Pursuant to Article 14(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 r ates 
of exchange are used for the conversion of other currencies into the Swiss franc, except in the 
case of the investment portfolios where the rates shown in Schedule G were used for valuation  
purposes.  
2.  The accounting year is 1  January to 31  December.  
3.  Pursuant to Article 13 of the Regulations of the Plan and Rule A.8 of the Rules of Procedure, the 
Management Board shall be responsible for the financial security and probity of the Plan and, in 
particular, the maintenance of its actuarial balance and of f inancial controls and  accounts.  
4.  Pursuant  to Article 5(e) of the Regulations of the Plan and Rule C.1 of the Rules of Procedure, 
an audit of the accounts of the Plan shall be made annually by the External Auditor, namely the 
External Auditor of the WTO.  The provisions of Chapter XI ("External Audit") and the Appendix 
("Additional terms of reference governing external audit") of the WTO Financial Regulations shall 
apply mutatis mutandis to the  audit.  
Statement of income and expenditure  
 
5.  The Plan's investment registered a CHF 34.6 million loss on 31 December 2018 compared to 
one year earlier. This represented a -5.8% nominal loss, or, taking Swiss inflation into account, 
-6.5% in real terms. This decline constitutes a correction of the gap between the real econ omic 
value of assets and security prices on investor markets, which had significantly widened in recent 
years, and gave rise to abnormally large investment returns. As cautioned in previous reports, the 
portfolio returns in the coming five years are still unlikely to match those achieved in the years 
2012 - 2017.  
6.  Contributions received from the Organization and the participants were the main source of 
income for the Plan, amounting to CHF 30.1 million in 2018. Of these, transfers from other 
organizations we re particularly high, at CHF 1.2 million, compared with CHF 0.2 million in 2017. 
They represent assets brought into the Plan by new participants transferring their pension rights 
from another organization, which fluctuate depending on the years of service associated with the 
specific transfers in any given year as well as the number of transfers. Total contributions into the 
Plan still exceeded the total of periodic benefit and lump sum benefit payments in 2018, which 
amounted respectively to CHF 22.3 milli on and CHF 3.4 million.  
7.  The Plan also received CHF 0.7 million as reimbursements of claims under its death and 
disability insurance coverage and paid a total CHF 1.0 million premium in 2018. Investment and 
other administrative expenses remained at a level similar to last year, at about CHF 0.8 million.  
8.  Investment and other administrative expenses are presented in further detail in Schedule B 
"Breakdown of Expenditures".   
Balance sheet 
 
9.  The value of assets decreased mainly due to the investment loss registered at end 2018, which 
was however slightly attenuated by the excess of pension contributions over benefit payments 
(see above).  
10.  Withholding taxes to be recovered amounted to CHF 1.1 million in 2018, which is unusually 
high. This was due to a techni cal issue within the Swiss administration which delayed 
reimbursements of the 2017 withholding  taxes. The situation should revert to normal in the course 
of 2019 and the amount should decrease accordingly.  
 WT/L/1060  
 
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  ANNEX 2 INVESTMENT PRINC IPLES OF THE PENSION PLAN  
1.  Pursuant to Article 13 of the Regulations of the Pension Plan and Rule A.9 of the Rules of 
Procedure, the Management Board shall be responsible for the secure investment of all Plan 
assets, the formulation of investment policies a fter taking appropriate professional advice, and the 
appointment of investment managers to implement that policy.  
2.  Derivatives may be used within the global hedged fixed income mandate for hedging purposes, 
where they provide the opportunities to achieve th e objective of the Plan more efficiently than 
would be the case through the direct dealing in underlying securities. Derivative instruments for 
this mandate are restricted to forward foreign currency contracts, futures, covered bond options 
and interest ra te options. Leverage and net short positions are not allowed.  
3.  In 2013 the Management Board approved a consolidated set of investment guidelines to 
articulate more precisely the Plan's approach to investment. A summary of these guidelines was 
shared with Pl an participants and benefi ciaries and can be found below.  
Summary of the WTO Pension Plan's approach to investment  
 
Long -term  investing  
 
4.  The WTOPP is a long-term investor because its commitments are long-term and because 
behavio ur and decisions made with a long-term view are more likely to succeed. The long-term 
focus is rooted in the belief – supported by historical analysis – that in the long run, market 
returns will tend to reflect the assets' economic achievements.  
5.  This long -term orientation enables the Management Board to deploy its time efficiently by 
focusing on investment decisions with significant impact on portfolio returns while avoiding time 
spent on issues where the outcome is random or where the long-term impact is neg ligible.  
6.  Cognizant of the unreliable nature of short - or medium -term forecasts and the potential losses 
they may cause, the Management Board will not engage in "timing" short -term market 
fluctuations. Bets on the short - or medium -term evolution of financia l markets may convert 
temporary losses into permanent impairment of capital.  
Investment risk 
 
7.  The WTOPP should be concerned with permanent capital impairment. Non -recoverable loss 
permanently reduces future earning power. For example, money lent to a borrower that cannot 
fully honour its debt will not only permanently impair capital but also its ca pacity to generate 
future earnings.  
8.  Price volatility is commonly considered as a measure of investment risk. However, volatility 
fails to measure long-term investment risk and is only a threat to long -term investors if they 
misread its significance. For ex ample, if a company's share price quickly falls by 50%, its volatility 
will skyrocket. However, if the long-term perspective of the company has not changed, the risk for 
investors has been greatly reduced, not increased. Thus, investors should focus on the  long-term 
perspective not on market driven price volatility.  
9.  The valuation of an asset affects its future returns. Therefore, the valuation of assets is a risk 
that can produce damages similar to permanent capital loss. This is why it should be monitored on 
an on -going basis.  
10.  Monitoring the valuation does not constitute an attempt to predict the short-term evolution of 
market prices, but to appraise the long-term potential profitability of an investment given its 
current characteristics.  
Allocation of assets 
 
11.  Asset allocation is the main source of portfolio returns. Particular attention will therefore be 
paid to the definition and implementation of WTOPP's "strategic asset allocation".  WT/L/1060  
 
- 28 - 
 
  12.  Each asset class in the portfolio must generate a measurable income and must contribute to 
increasing the value of the WTOPP's assets. This increase must be driven by reliable, identifiable 
economic factors. The prospective return potential of each asset c lass may be assessed on the 
basis of these appropriate factors.  
13.  The WTOPP will maintain adequate diversification because expected returns on asset classes 
may take a long time to materialize and because the non-correlation  of different assets helps 
dampen volatility and hence help avoid ill considered decisions.  
14.  Asset classes and financial structures that do not produce income, lack transparency or use 
significant leverage are not appropriate for WTOPP. Commodities, hedge funds, venture capital, as 
well as structured products are therefore excluded from WTOPP's investment universe.  
15.  The WTOPP seeks to avoid changes in asset allocation based on short-term views and 
forecasts: all too often such changes only result in increasing costs. Changes in asset allocati on 
are only warranted when justified by significant changes in the measurable characteristics of the 
Plan's investments allocated to an asset category or by fundamental changes in the Plan's 
liabilities or structure.  
Style of management  
 
16.  The objective of the implementation process is to execute the investment strategy as closely 
as possible while minimizing costs and avoiding unwanted implementation risks.  
17.  The Management Board implements the WTOPP's strategic allocation predomina ntly through 
indexed vehicl es or portfolios .1 Indices will be selected with utmost care, so that they truly 
represent the asset class in which the WTOPP's strategy intended to invest.  
18.  The choice of passive management is motivated by the observation that, over time, active 
management  has performed less well, is less diversified, less predictable and more costly. 
Moreover, active management tends to be based, in most cases, on short -term views.  
19.  The WTOPP may use active management when passive management is not feasible or when 
tangible  and clearly identifiable reasons lead to the belief that active management represents a 
better path.  
20.  Overall, the Plan will strive to minimize risks related to the implementation of the investment 
strategy. These risks include, but are not limited to, act ive management risk, unwanted credit risk 
and legal structure risk.  
Rebalancing  
 
21.  The WTOPP adopts a counter -cyclical approach through a systematic annual rebalancing 
mechanism whose function is to maintain the weight of the assets aligned with the strategic 
allocation.  
22.  The systematic rebalancing is an effective way for the Plan to maintain a stable exposure to 
the market while taking advantage of market volatility.  
Cost and  conflicts of interest  
 
23.  Cost sensitivity is an integral part of the investment strategy. Costs should be maintained as 
low as possible without hindering the Plan's capacity to achieve its targets.  
24.  The supply of investment services or products is primarily driven by the financial interests of 
providers rather than by invest ors. The Management Board will therefore be particularly vigilant in 
                                                
1 Indexed vehicles aim to generate returns that are equal to those of a market index.  
 WT/L/1060  
 
- 29 - 
 
  choosing investment solutions that fit in its strategy and targets. The WTOPP will avoid investment 
vehicles in which the investment manager is paid a performance -based  fee.2 
25.  The investme nt guidelines adopted by the Management Board are intended to generate 
sustainable returns over time and promote sound decisions even in times of economic stress and 
uncertainty. The guidelines are periodically reviewed to ensure they remain appropriate to  the 
structure and circumstances of the Plan.  
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2 Such arrangements are unfair for investors because of the asymmetry of risk and reward