WT/L/1093  
28 September 2020  
(20-5974) Page: 1/31 
General Council  
13-14 October 2020   
 
 WTO PENSION PLAN   
ANNUAL REPORT AND FINANCIAL STATEMENTS   
FOR THE YEAR ENDING  
31 DECEMBER  2019 
 
 
 
 
   WT/L/1093  
 
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  CONTENTS  
CONTENTS  ................................ ................................ ................................ ........................  2 
MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD  ................................ ....... 3 
1   HIGHLIGHTS  ................................ ................................ ................................ ...............  4 
1.1   Investment ret urn ................................ ................................ ................................ ....... 4 
1.2   Asset allocation  ................................ ................................ ................................ ...........  5 
1.3   Participants and beneficiaries 2019  ................................ ................................ ................  6 
2   SUMMARY OF MANAGEMENT BOARD ACTIVITIES  ................................ ........................  7 
3   REVIEW OF THE WTOPP INVESTMENT PERFORMANCE  ................................ ................  8 
4   ACTUARIAL POSITION OF THE PLAN  ................................ ................................ ...........  9 
5   IPSAS ACCRUED LIABILITIES OF THE PLAN  ................................ ................................  9 
6   ORGANIZATION AND STRUCTURE OF THE PENSION PLAN ON 31  DECEMBER  2019  ... 10 
7   ACCOUNTS  ................................ ................................ ................................ ................  11 
8   EXTERNAL AUDITOR  ................................ ................................ ................................ .. 12 
OPINION OF THE EXTERNAL AUDITOR  ................................ ................................ ...........  12 
Identification of the financial statements  ................................ ................................ .......12 
9   FINANCIAL STATEMENTS  ................................ ................................ ..........................  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  2019 ............. 21 
9.10   Schedule G: Exchange rates used for closing on 31  December  2019................................ 21 
9.11   Schedule H: Participation in the Pension Plan  ................................ ............................... 23 
9.12   Schedule I: Structure of the WTO Pension Plan  ................................ ............................. 24 
9.13   Schedule J: Glossary of terms  ................................ ................................ .................... 24 
ANNEXES  ................................ ................................ ................................ ........................  27 
   WT/L/1093  
 
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  MESSAGE FROM THE CHAIRMAN OF THE MANAGEMENT BOARD  
The Management Board of the World Trade Organization Pension Plan (WTOPP) is pleased to present 
to the General Council and to Plan participants and beneficiaries its 2019 Annual Report prepared in 
accordance with Article 5 of the Regulations of the Plan.  
 
This year's Annual Report and External Audit Opinion are issued unusually late, in autumn, mainly 
due to travel restrictions associated with the COVID -19 pandemic, which have led to a delay in the 
ability of the external auditors to play their role.  Ther e were hopes they would be able to complete 
their audit with physical visits over the summer, but ultimately this was not possible, and the audit 
had to be completed remotely.  This proceed ed without major issues except for the provision of 
information whi ch only exists on paper files and required extra effort to be made available.  The 
COVID -19 pandemic has otherwise not materially affected operations of the Pension Plan nor the 
Board's ability to govern, through the successful organization of meetings usi ng videoconference 
tools. While most operations have taken place on schedule, the triennial full actuarial valuation of 
the Pension Plan based on the 2019 year -end data was however slightly slowed down and its results 
will be shared later this year .  
 
The spread of the COVID -19 pandemic has created sharp movements in financial markets since 
February 2020. Fortunately, the WTOPP portfolio is designed to withstand a certain amount of 
volatility. As a long -term investor the WTOPP can tolerate, and even benefit  from, volatility, through 
a rebalancing discipline of buying new assets at better relative prices. However, potentially adverse  
longer -term consequences of the economic impacts of the global pandemic cannot be ignored. The 
Board and Secretariat continue t o monitor the situation as it evolves.  
 
In 2019, which is the period covered by this report, financial markets were unexpectedly strong and 
the return of the WTOPP investments portfolio at end -2019 reflects this. The Management Board's 
investment strategy delivered a nominal return of 12.6% (versus 14.2% for the benchmark). As 
Swiss inflation for 2019 was 0.2%, the portfolio's real return was 12.4% for the year. This is 
significantly  above the target rate of return used in the actuarial assumptions, but not  unexpected 
due to price volatility experienced on markets in 2019. As was illustrated subsequently  in 2020, 
price volatility as measured by the value of the portfolio on 31 December of each year is often not 
a good indicator of the underlying economic pot ential of the investments. Current economic 
circumstances remain challenging for investors and are likely to remain so for some time. 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 work of the Management Board in 2019 included adopting a Risk Management Policy for the 
Plan, as well as a revised set of Investment Guidelines which integrates Environmental, Social and 
Governance (ESG) criteria in inv estment decision -making. The Board has also maintained working 
groups focused on investment opportunities in a low yield environment, disability matters and the 
actuarial assumptions used in the long -term actuarial valuation. Recommendations from these 
working groups have been implemented or are expected to be implemented in 2020.  
 
In closing, I would like to thank the members of the Management Board for the engagement and 
valuable contributions to matters concerning the Plan. On behalf of the Management Bo ard, I would  
like to thank WTOPP Secretariat staff for their support and service.  The Management Board and the 
Plan's Secretariat are fully engaged in ensuring the continued good governance of the WTO Pension 
Plan and are pleased to share this annual repor t with you.  
 
 
Jean-Marc van Dril, Chair of the Management Board  
   WT/L/1093  
 
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  1  HIGHLIGHTS  
1.1  Investment return   
Figure 1 Historical returns net of inflation and fees  
 
 
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 2019 investment return caused an 
increase in the five -year average annual investment return of  4.7%. While above -average  expected 
returns are generally welcome, over the past several years investment p erformances have been 
consistently inflated by market valuations that exceeded actual economic performance of the 
underlying assets. This increases the likelihood of below target returns in the coming years.  
 
2. In 201 9 the Pension Plan's portfolio delivered a nominal rate of return of 12.6%. As Swiss 
inflation for 201 9 was 0. 2%, the portfolio's real return was 12.4% for the year.  -40%-30%-20%-10%0%10%20%30%
target rate: 3.5%
Moving average: previous five years  WT/L/1093  
 
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  Table 1 Net investment return  
 Nominal  Real 
2017  11.2%  10.4%  
2018  -5.8%  -6.5%  
2019  12.6% 12.4% 
 
1.2  Asset allocation   
Figure 2 Asset allocation as of 31 December 201 9, actual vs. strategy  
 
 
3. The Plan's portfolio includes a new asset class since this year as the Management Board 
decided to reallocate some of its bonds portfolio to Insurance Linked Securities for more 
diversification and an improved risk/return profile (see section 2 below ). 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 becom e relatively more expensive 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.  0%5%10%15%20%25%30%35%40%45%
Global Equities CHF Bonds Real Estate Insurance Linked
SecuritiesCashAllocation
Strategy  WT/L/1093  
 
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  Figure 3 Detailed asset allocation 201 9 
 
 
1.3  Parti cipants  and beneficiaries 201 9   
Figure 4 Plan membership by type 
 
a including deferred retirement benefits.  
 
4. The number of participants has remained largely stable. On 31 December 201 9, there were 
718 participants, up from 702 on 31 December 201 8. On the other hand, the number of beneficiaries 
increas ed from 369 to 393 over the same period.  
International 
Equities
33.4%
Emerging Markets 
Equities
7.8%
US  bonds
9.1%Emerging 
Countries Bonds
14.0%Senior Loans
7.5%Euro Real Estate
3.6%Prisa Lp
5.6%Swiss Real Estate
9.8%Insurance Linked 
Securities
4.8%Cash
4.3%
Participants
66%30%Disability
2%Surviving 
spouses
2%
Retirees a  WT/L/1093  
 
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Table 2 Plan membership   
Membership  2018  2019 
Number of Participants  702 718 
Number of Beneficiaries  369 393 
 
Table 3 Types of benefits   
Types of benefits  Total number  Average monthly benefit  
Year 
2018 Year 
2019 Year 
2018 Year 
2019 
Retirement benefits  164 175 CHF   6,800   CHF 7,000  
Early retirement benefits  119 126 CHF   4,900   CHF 5,000  
Disability benefits  23 22 CHF   5,500   CHF 5,600  
Surviving spouse's benefits  18 24 CHF   3,700   CHF 4,000  
Child's benefits  20 19 CHF      400   CHF 400  
Deferred retirement benefits  25 27 -   -    
 
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 2 8.3 million in 201 9, 
which increased by CHF 2.5 million compared to the year before, however these have not yet 
exceeded the received contributions (CHF 30.6 milli on), as predicted in the previous actuarial 
valuation . Pension benefits will exceed the amount of pension contributions  in the near future,  but 
the balance will continue to be positive thanks to investment returns . 
Figure 5 Contribution income and benefit expenditure  
 
a Including transfer values paid to other Organizations.  
b Including transfer values received from other Organizations.  
 
2  SUMMARY OF MANAGEMENT BOARD ACTIVITIES   
 
6. The Management Board held five meetings in 201 9: these took place on February 8th, 
April 29th, June 19st, September  18th and November  22th. 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. Additionally, the Board's 04,0008,00012,00016,00020,00024,00028,00032,000
19992000 0102030405060708091011121314151617182019Thousands
of Swiss Francs
Periodic Benefits Lump sum payments Contributions receiveda b  WT/L/1093  
 
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  agenda includes recurring items such as the approval of the Plan's Annual Report and Financial 
Statements for submission to the General Council and review of the Plan's actuarial position.  
 
7. Outside the formal Board meetings , the Management Board Working Groups met twelve  times 
in 2019 . The working groups were very active in 2019 compared to 9 meetings in 2018,  and 6 in 
2017. The meetings included four on the topic of  investment ( specifically ESG-Environment and 
Social Governance as well as the  re-allocation within the fixed income portfolio ), three on disabilities  
and five on  actuarial issues (focused on the review of the actuarial assumptions in view of the full 
valuation on 31/12/2019).  
 
8. The Board has approved the Risk Management Policy and a Risk Register for the WTOPP 
prepared by the Governance Working Group  as a part of t he internal control system . The policy itself 
will be reviewed every three to five years.   
 
9. In consultation with the legal counsel and the medical advisor , the Board adopted 
an administrative guideline  on the sharing of provisional medical findings gathere d in the context of 
disability reviews.  
 
10. Following five Investment Working Group Sessions on the Environment, Social 
and Governance (ESG), which started in  2018 and included meetings with experts on this topic, 
the Management Board has adopted a revised set of the Investment Guidelines  proposed by the 
Working Group , which i ntegrate s new ESG guidelines , considered in the Board's investment strategy 
and decision -making .  
 
11. The Board  decided  to reallocate 5% of the portfolio from CHF -hedged investment grade bonds 
to CAT Bonds, a type of Insurance -Linked Securities . These investment vehicles are in line with the 
Plan's investment principles and a beneficial addition to the portfolio, given their comparatively good 
risk/return profile. The  investments in Insurance Linked Securities were initiated in December 2019.  
 
3  REVIEW OF THE WTOPP INVESTMENT  PERFORMANCE   
12. The investment portfolio had a nominal return of 12.6% in 2019, compared to 14.2% for the 
Pension Plan's benchmark. Swiss inflation for 2019 was close to 0.2%. Hence, the portfolio's real 
return was 12.4% for the year, nearly 9% above the plan's target. All investment categories 
generated positive returns  for the year.  
13. The Plan's portfolio generated annual returns of +5.7% an d +4.7% in nominal terms, 
respectively , over the last three and five years. The 5 -year return exceeds the Plan's target return 
(Swiss inflation + 3.5%) by 1.1%.   
 
14. In 2019, the Plan's portfolio benefitted from lower rates and rising valuations across all a sset 
classes. Equity investments, which represent 40% of the Pension Plan's target asset allocation, had 
a return of 22.1% , i.e. close to the benchmark (22.5%). Fixed income investments (31% of the 
Pension Plan's target asset allocation) returned 7.9% in 2 019 vs. 7.5% for the Plan's benchmark. 
CHF denominated bonds returned 3.0% during the year.  
15. Following the positive returns of 2019, the yield offered to investors by Swiss Government 
bonds is well below zero and guarantees mediocre returns in the medium t erm. 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. The only exception is U S government bonds.  
16. Real Estate investments represent 20% of the target asset allocation. The return on this 
portion of the portfolio was 5.9% for the year. The Swiss real estate fund had a return of 9.8% in 
2019 while the SXI index, which tracks the retur n of Swiss publicly traded real estate funds, had a 
return of 20.7%.  This apparent underperformance is merely due to the fact that WTOPP's Swiss real 
estate fund is less volatile than its index because it is only open to investment by pension funds.  
Intern ational 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 +2.1%.      WT/L/1093  
 
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  4  ACTUARIAL POSITION OF THE PLAN   
17. A full actuarial valuation based on data at 31 Dece mber 2019 is currently still in progress . The 
exercise was delayed due to the Covid -19 pandemic , as well as being a technically more complex 
process than previous exercises . Following an in-depth review of the model's assumptions and actual 
experience  in past years, the Management Board has indeed updated a number of key assumptions 
used in the model . The actuarial valuation results will be shared later this year. They are expected 
to show increasing costs f or the plan due mainly to updated assumptions about future investment 
returns and demographic and behavioural changes in the Plan participants.  
 
5  IPSAS ACCRUED LIABILITIES OF THE PLAN  
18. The WTO's financial statements include an actuarial estimate of pension b enefits that differs 
in scope and method from the WTOPP's actuarial 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 include s 
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 employe es' and retirees' acquired pension entitlements as at 31 
December 201 9. 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 the 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 considerat ion past and future service accrual and assumes an open group, 
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 
together with the balance sheet, in Statement 2  of the financial statements .    WT/L/1093  
 
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  6  ORGANIZATION AND STRUCTURE OF THE PENSION PLAN ON 31  DECEMBER  2019 
22. The Management Board of the Plan was duly constituted by the General Council in accordance 
with Art icle 4 of the Regulations 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 Gener al 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 December 201 9. 
 Mr. Robert Prochazka, Chairperson  
Mr. Rob Cook  
Members elected 
by the General 
Council  Ms. Antonia Carzaniga  
Members appointed 
by the Director -
General  Ms. Alicia Goujon  Mr. Christian Dahoui  
Ms. Kelly K. Milton  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  
Ms. 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 observer 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 po rtfolio 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)  
Scor (Insur ance Linked Securities)  
Gam ( Insurance Linked Securities)  
External Auditor  Bundesrechnungshof  
Supreme Audit Institution of Germany    WT/L/1093  
 
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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 notes are integral to understanding the accounts an d the financial position of the 
Plan. 
26. The income and expenditure statement for the period 1 January – 31 December 201 9 
is reproduced in Statement 1.  
27. The balance sheet as at 31  December  2019 is reproduced in Statement 2.  
28. The source and application of funds for the period 1  January  – 31 December  2019 
are reproduced in Schedule A.  
29. Details of the exchange rates used for closing the accounts on 31  December  2019 and the 
currency breakdown as of 31  December  2019, 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 9 accounts can be found in the notes in ANNEX 1. 
   WT/L/1093  
 
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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 9 is produced separately from the Annual Report.  
OPINION OF THE EXTERNAL 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  2019, comprising  
• the income and expenditure statement,  
• the surplus account,  
• the balance sheet,  
• and supporting notes and annex es to the Financial Statements.  
I conducted the audit remotely due to the special circumstances of COVID -19.   
 
Basis of Opinion   
 
I conducted my audit in conformity with International Standards on Auditing (ISAs) as adopted and 
expanded by the Internation al 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 stat ements are 
free from material misstatement.  
I am independent of the 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 thes e 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 misstat ements, whether due to fraud or error, and to issue an auditor’s report 
that includes my 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 ma terial 
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 statemen ts. 
 
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 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;  
   WT/L/1093  
 
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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 internal control;  
 
• evaluate t he 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 disclosure s, 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 signifi cant 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 fin ancial position as at 31 December 201 9, 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 Procedure.  
 
I have placed an u nqualified audit opinion on the Financial Statements of WTO´s Pension Plan for 
the year ended 31 December 201 9. 
 
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, 7 September 2020 
 
   WT/L/1093  
 
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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 Ma nagement 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 policies an d 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 Rules a nd 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 controls 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 performance as of 31  December  2019. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
____________________  ____________________  
Jean-Marc van Dril  
Chair 
WTOPP Management Board  John Breckenridge  
Secretary  
WTO Pension Plan    WT/L/1093  
 
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  9.2  Statement 1: Income and expenditure statement  
INCOME AND EXPENDITURE STATEMENT (expressed in Swiss Francs)   
2019  2018  
Income     
Investment income       
Profit on securities  71,915,993   -    
 71,915,993  -    
Contributions    
Organization, regular contributions   19,360,684  19,151,092  
Organization, additional contributions   1,543,138  -    
Participants, regular contributions   9,680,348  9,575,550  
Interests on validations   345  199 
Restorations   11,887  20,440  
Transfers from other organizations   13,094  1,200,307  
Interests on transfers  - 165,275  
  30,609,496  30,112,863  
Reimbursements claims under the death and disability 
insurance  322,2 59 715,763  
Total income  102,847,748  30,828,626  
Expenditure    
Periodic benefits    
Retirement benefits (Art. 23)  14,179,112  13,068,481  
Early retirement benefits (Art. 24)   7,481,849  6,977,591  
Disability benefits – (Art. 28)   1,512,441  1,457,736  
Surviving Spouse benefits (Art. 29)    939,585  747,439  
Child benefits (Art. 30)   100,430  93,335  
  24,213,417  22,344,582  
Lump sum benefits    
Withdrawal settlements (Art. 26)   291,684  781,336  
Commutations (Articles 23c), 24d), and 25c))   3,751,593  2,374,496  
Transfers to other organizations   -    224,143  
Interests on transfers   -    17,219  
  4,043,277  3,397,194  
Participants' death and disability coverage  992,115  983,800  
Loss on investment    
Loss on securities   -    34,194,746  
Currency revaluation    133,446  268,024  
Negative credit interest   104,237  96,631  
  237,683  34,559,401  
Investment and other administrative expenses    
Management fees   492,175  442,732  
Trianon and other administrative costs   208,134  199,780  
Consultancy fees   120,000  120,000  
Actuarial expenses   53,000  30,000  
Legal fees   -    19,276  
Bank charges   24,499  24,492  
 897,808  836,280  
Total expenditure  30,384,300  62,121,257  
Profit / Loss ( -) for the period  72,463,448  -31,292,631  
 
 
 
   WT/L/1093  
 
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  9.3  Statement 2: Balance sheet   
Balance sheet  
(expressed in Swiss Francs)  
Assets  At 
31.12.2019  At 
31.12.2018  Liabilities  At 
31.12.2019  At 
31.12.2018  
Investments     Current liabilities     
Securities   606,736,638   540,464,930  Accrued expenses  175,837  160,825  
Cash and cash 
equivalentsa 27,509,141   23,035,085    175,837  160,825  
  634,245,779   563,500,015  Capital    
Current Assets    Capital as at 1 
January  564,686,611  595,979,242  
Withholding 
taxes to be 
recovered  2,498,785  1,084,854  Profit / Loss ( -)  72,463,448  -31,292,631  
Accrued income  322,337  262,567    637,150,059  564,686,611  
Receivable 
additional 
contributions  258,995  -     
  3,080,117  1,347,421     
Total assets  637,325,896  564,847,436  Total liabilities  637,325,896  564,847,436  
a Cash and cash equivalents include cash on bank accounts and cash held on investment accounts with 
custodian banks, which amount to CHF 22,297,813 and CHF 5,211,329 respectively.  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 shelter operating cash from negative interests.  
 
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  1,287  million according to 
IPSAS accounting rules. If the Pension Plan's asset value of CHF  637 million is deducted from this 
amount, the result is an estimated net accrued liability for employee benefits of CHF  650 million.  
This net valu e represents the hypothetical liability of the Organization to cover all its current 
employees' and retirees' acquired pension entitlements as at 31 December 201 9. It differs from the 
long-term valuation used in managing the Plan mainly 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 per Article 9 of the 
Regulations takes into acc ount future pension contributions and benefits for an open group of 
participants, and a projected real return rate based on expected return of the strategic portfolio 
allocation (see Schedule D). Its purpose is to produce best, yet conservative, estimates of future 
benefits, pension contributions and the investment returns. As mentioned in Section 4 of the Annual 
Report, the Management Board has conducted an in -depth revision of the model's assumptions to 
estimate the present value of future benefits for th e purpose of the 2019 full actuarial valuation. The 
analysis is still in progress and is expected to show increasing costs for the plan due to updated 
assumptions about future investment returns and demographic and behavioural changes in the Plan 
participa nts. Final results are not available at this time and will be shared later this year.  
 
 
 
 
 
 
 
 
 
 
   WT/L/1093  
 
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  9.4  Schedule A: Source and application of funds  
Source and application of funds  
(expressed in Swiss Francs)   
2019 2018  
Funds as at 1 January  564,847,436  596,165,379  
Plus:   
Source    
Receipt of contributions   30,609,496  30,112,863  
Investment income     71,678,310  - 
Reimbursements of death and disability insurance claims   322,2 59  715,763  
Increase in current liabilities   15,012  - 
Total 102,625,077  30,828,626  
Less:    
Application    
Loss on Investments  - 34,559,401  
Settlement of benefits   28,256,694  25,741,776  
Participants' death and disability coverage   992,115  983,800  
Investment and other administrative expenses   897,808  836,280  
Reduction in current  liabilities  - 25,312  
Total 30,146,617  62,146,569  
Funds as at 31 December  637,325,896  564,847,436  
 
9.5  Schedule B: Breakdown of expenditures  
Expenditures  
(expressed in Swiss Francs)  
 2019  2018  
Investment Management fees    
Crédit Suisse - Swiss Real Estate  - 732 
MFS 172,372  161,031  
Northern Trust  44,964  47,423  
Pictet – Emerging Markets bonds  56,355  58,232  
Pictet  – Emerging Markets equities  30,97 5 31,038  
Pictet - International equities  166,669  126,830  
Pictet – Senior loans  9,754  11,444  
Pictet – Real estate  10,364  6,001  
Pictet – Insurance linked securities  722 - 
Total   492,175  442,732  
Consultancy fees    
MBS Capital Advice  120,000  120,000  
Actuarial expenses    
Mercer  53,000  30,000  
Legal fees    
Akin Gump  - 19,276  
Administrative costs    
Trianon and other administrative costs  208,134  199,780  
Other expenses    
(bank charges and external audit)  24,499  24,492  
Total  897,808  836,280  
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 to CHF  1,225,831 for 201 9. 
Costs related to the WTOPP Secre tariat are borne by the WTO and are not reflected in the Plan's 
Financial Statements (see paragraph 9 of Annex 1).    WT/L/1093  
 
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  9.6  Schedule C: Investment mandate overview  
Investment mandate overview  
Asset  
class  Fund  
Manager  Benchmark  Ex-ante 
trackin
g 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  BlackRock  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.co
m 
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 -henders
on.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  
Insurance 
Linked 
Securities  Scor 
 Swiss Re Global 
CAT bond 
Hedged CHF  - December  
2019 Paris,  
France  scor.com  
Insurance 
Linked 
Securities  Gam Swiss Re Global 
CAT bond 
Hedged CHF  - December  
2019 Connecticut,  
USA gam.com/fr/man
agers/fermat -
capital -
management    WT/L/1093  
 
- 19 - 
 
   
9.7  Schedule D: Asset allocation  
Asset Allocation  
as of 31  December  2019  
Assets  MCHF  Current  
weightings  Strategy  Deviation from  
the strategy  
Global equities  261.4  41.2%  40.0%  1.2%  
Developed markets  212.0  33.4%  32.0%  1.4%  
Emerging Markets  49.4 7.8%  8.0%  -0.2%  
CHF bondsa 194.4  30.6% 31.0%  -0.4% 
Investment grade bonds USD  57.8 9.1%  9.0%  0.1%  
Emerging countries bonds  89.0 14.0%  14.0%  0.0%  
Senior loansb 47.6 7.5%  8.0%  -0.5%  
Real Estate  120.4  19.0%  20.0%  -1.0%  
European Real Estate  22.9 3.6%  5.0%  -1.4%  
U.S. Real Estate  35.2 5.6%  5.0%  0.6%  
Swiss Real Estate  62.3 9.8%  10.0%  -0.2%  
Other Investments  30.6 4.8%  5.0%  -0.2%  
Insurance Linked Securitie sa 30.6 4.8%  5.0%  -0.2%  
Cash  27.5 4.3%  4.0%  0.3%  
Total  634.2    
Note:  Numbers may not add precisely to totals provided due to rounding.  
a   Hedged in CHF . The Plan hedges 80% of foreign bonds and ILS  investments  renewed quarterly, which 
accounted for USD 143. 1 million at end -2019.  
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 a nd are secured by the 
assets of the borrowing company.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   WT/L/1093  
 
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  9.8  Schedule E: Investment performance  
Investment Performance as of 31  December  2019  
(expressed in nominal terms)  
 Over  
1 year p.a.  Over  
3 years p.a.  Since  
inception p.a.  TEa IRb 
TOTAL       
Consolidated securities  12.6%  5.7%  5.4%c   0.87%  -0.88 
Added value  -1.6%  -0.7%  -0.1%    
EQUITY       
Consolidated equities  22.1%  10.1%  8.2%c   0.17%  -1.42 
Added value  -0.4%  -0.2%  0.4%    
Developed markets  23.7%      
Added value  -0.3%      
Emerging markets  15.6%      
Added value  -0.7%      
FIXED INCOMEd      
Consolidated fixed incomee   7.9%  2.3%  3.3%c   1.16%  0.10 
Added value  0.4%  0.1%  0.2%    
Emerging countries bonds  10.9%      
Added value  -0.3%      
Senior loans  3.8%      
Added value  -1.2%      
Investment grade bonds USDf   6.8%      
Added value  -0.3%      
REAL ESTATE       
Consolidated real estate  5.9%  3.8%  4.4%g   ‑‑‑ ‑‑‑ 
Added valueh        
Warburg Henderson  -0.9%  8.1%  5.0%i   ‑‑‑ ‑‑‑ 
Added valueh        
CBRE  2.2%      
Added valueh        
Prisai   3.2%  4.6%  6.3%  ‑‑‑ ‑‑‑ 
Added valuek -0.3%  -0.8%  -3.5%    
Credit Suisse  9.8%  1.0%  4.3%l   ‑‑‑ ‑‑‑ 
Added valuem -10.9%  -5.8%  -1.9%    
OTHER INVESTMENTSd      
Insurance linked Securitiesn -0.5%      
Added value  -0.7%      
Note:  Performances are presented net of fees and costs . Consolidated performances are calculated 
taking into account previous investment vehicles , which were liquidated prior to this reporting 
exercise and do not appear separately  in the table.  
a TE = tracking error over 3 years  
b IR = information ratio over 3 years  
c Inception in  August  1999.  
d In line with its investment principles, the Plan minim izes currency risk on its f ixed income and ILS 
investments by investing in CHF -denominated instruments , or by hedging investments denominated 
in currencies other than CHF . In the latter case, the hedging instruments' gains, losses, and costs 
are embedded i n the asset class ' performance , which is consistent with the fact that the return 
target expected out of these instruments is being considered in CHF terms  when making investment 
decision s. For example, in 2019, the Plan's consolidated fixed income portfol io returned 9.7% before 
hedging operations undertaken by the Secretariat as a protection against currency risk. The hedging 
instruments covering these investments against currency volatility reduced  this performance to 
7.9%,  which is  shown in this table as  the asset class'  net annual performance.  This compares 
favourabl y to returns that would have been achieved had the Plan instead invested in Swiss bonds 
(SBI AAA -BBB), i.e. 3.0% in 2019.    WT/L/1093  
 
- 21 - 
 
  e In addition to the bonds' performance, the consolidated fixed incom e performance also includes the 
interest paid on the Plan's cash.   
f Inception in  June 2015.   
g Inception in  February  2005.  
h There is no formal benchmark for this investment.  
i Inception in  December  2006.  
j The first investment was done on Q1 2015.  
k Benchmark: NCREIF Fund Index.  
l Inception in  November  2008.  
m Benchmark: SXI Real Estate Funds Index.  
n Inception in December 2019.  
 
9.9  Schedule F: Investment performance history from  inception to 31  December  2019 
 
 
  
  
 
9.10  Schedule G: Exchange rates used for closing on 31  December  2019  
Currency  Exchange rates  
CHF per 1 EUR  1.0870  
CHF per 1 USD  0.9684  
CHF per 1 JPYa 0.0089  
CHF per 1 GBP  1.2828  
a  JPY per 1 CHF: 112.2270 5060708090100110120130140150160170180Total Portfolio Total Portfolio
Benchmark
5060708090100110120130140150160170180190Equities Equities
Benchmark
5060708090100110120130140150160170180190200Fixed IncomeFixed income
Benchmark
5060708090100110120130140150160170180190200Real EstateReal Estate  WT/L/1093  
 
- 22 - 
 
  Figure 6 : Currency breakdown as of 31 December 201 9 after hedging  
 
 
 
 
 
 
 
 
  WT/L/1093  
 
- 23 - 
 
  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 9. 
Number of participants and beneficiaries on 31 December 2019 
 2018  2019 
Active members  702 718 
Beneficiaries  369 393 
Participants in the Pension Plan in 201 9 
Total number on 31  December  2018 702   
Movements in 201 9  
  
- Entries  104 
- of which re -entries under the terms of Art.  15(b) of the Regulations  25 
- Separations  88  
   
Total number on 31  December  2019 718   
Breakdown of separations in 201 9    
- retirement  13 
- early retirement  7 
- deferred retirement  4 
- withdrawal settlement  21 
- transfer out  0 
- deferment of decision  42 
- death  1 
- disability  0  
 
Total separations  88 
Benefits paid by the Pension Plan  
Type of benefit  At 31 
December  
2018  New benefits  
in 201 9 Benefits ended  
in 201 9 At 31 
December 
2019 
Retirementa 164 13 -2 175 
Early retirementb 119 9 -2 126 
Deferred retirementc 25 4 -2 27 
Surviving spouse's benefit  18 6 0 24 
Partial /total disability benefit  23 0 -1 22 
Child’s benefit  20 2 -3 19 
Total benefits  369 34 -10 393 
a  Includes deferred benefits that commenced being paid, as applicable.  
b  Includes two deferred benefits that commenced being paid in 2019.  
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 re tirement or early retirement benefits.  
   WT/L/1093  
 
- 24 - 
 
  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 
do 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 t he accounting year.  
Currency hedging . In line with the Plan's investment principles, the Plan seeks to limit exposure 
to currency risk on debt instruments because they bear a currency risk that is theoretically not 
 
INVESTMENT 
ANALYST/CONSULTANT  
 
ASSET MANAGEMENT 
SERVICES  
 
DIRECTOR -GENERAL  
 
PARTICIPANTS  
 
EXTERNAL AUDITOR  
 
ADMINISTRATIVE 
SERVICES  
 
CONSULTING ACTUARY  
 
MEDICAL ADVISER  
 
MANAGEMENT BOARD  
 
GENERAL  COUNCIL    WT/L/1093  
 
- 25 - 
 
  compensated in the long term, and because  they play a stabilizing role to regulate the portfolio's 
short term volatility and allow rebalancing gains. When investing in debt assets denominated in 
currencies other than CHF, the Plan therefore hedges the currency risk. Technically, this involves 
the use of forward contracts, in which two parties agree to exchange a set amount of one currency 
for another at a predetermined exchange rate at some future date.  If the currency of the investment 
depreciates causing losses on the portfolio, the  hedging instruments will offset some of these losses. 
Hedging can have a cost , largely based on differences between lending and borrowing interest rates 
of the respective currencies.  
Currency revaluation  represents the adjustment of foreign currency -denom inated bank account 
balances at 31  December  2019 to the exchange rate for that day. This adjustment reflects the 
variation in the exchange rate applicable to foreign currency -denominated bank account balances at 
the beginning of the year and in the exchang e 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 management 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 Infor mation 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.  
Insurance Link Securities (ILS)  are financial instruments whose values are driven by insurance 
premiums and loss events. ILS enable re/insurance companies to enter into a risk transfer contract 
with investors in the capital markets,  where the investor puts a collateral in exchange for a  premium. 
Depending on whether the risk happens, the collateral will be drawn or returned to the investor, and 
the premium adjusted for the next term.  
Interest on val idations  and interest on restorations  refer to interest payments made under 
Articles 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 add itional 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 the 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 
consumer 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 t erm 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 allocation of the Plan's portfolio with its strategy. A 
predefined process identifies the triggers and other operat ional aspects (e.g. timing) of r ebalancin g 
actions. The rules are approved by the Board and applied automatically. This mechanism takes 
advantage of the inevitable excesses of financial markets.    WT/L/1093  
 
- 26 - 
 
  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 p rior 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 measure 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.  
TE or Tracking 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 portfol io 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 man date, the tracking error  would usually be less than 0.8. Anything 
above this would be considered 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 recovered  includes amounts of withholding tax levied by national tax 
authorities and subject to recovery after 31  December  2019. Recoverable withho lding 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 earn ed on investments. Annually the Plan files tax reimbursement 
claims to the Swiss and other authorities. Occasionally 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/1093  
 
- 27 - 
 
  ANNEXES  
ANNEX 1 NOTES TO THE FINANCIAL STATEMENTS  
1.  Pursuant to Article 14(a) of the Regulations of the Pension Plan, the unit of accoun t of the Pe nsion 
Plan is the Swiss franc. For practical reasons, the current United Nations operational rates 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 financial 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 Pension Plan registered a profit on securities of CHF 71.9 million, which was the main source 
of income in 2019.   This represented a 12.6% nominal investment return and  taking Swiss inflation 
into account  12.4% in real terms . The investment return exceeded the Plan's long -term target 
of 3.5% and has increased significantly compared to the year before. Notwithstanding this good 
performance, current economic circumstances remain challenging and there is a strong sentiment 
among investment professionals that earning high returns in the current low interest rate 
environment will be more difficult in the next few years.  
6.  Regular contributions received from the Organization and the participants amounted to 
CHF 29.1 million, which was slightly more than the previous year. Further , in 2019 the Organization 
has paid CHF 1.5 million of additional contributions, which represent the actuarial cost generated by 
early separation of part icipants in the context of a restructuring exercise . Transfers from other 
organizations have decreased, however these can fluctuate each year as they  represent assets 
brought by new participants transferring their pension rights from another organization .  
7.  Total contributions into the Plan still exceeded the sum of periodic benefit and lump sum benefit 
payments in 201 9. However, the benefits paid in 2019 were about CHF 2.5 million higher than the 
year before. Periodic benefits amounted to CHF 24.2 million a nd lump sum benefits amounted to 
CHF 4.0 million . 
8.  The Plan received CHF 0.3 million as reimbursements of claims under its death and disability 
insurance coverage. The  premium paid for the same insurance remained at CHF 1 .0 million in 2019. 
Investment and  other administrative expenses have slightly increased to about CHF 0.9 million .  
9.  Investment and other administrative expenses are presented in further detail in Schedule B 
"Breakdown of Expenditures". The costs of providing  a Secretariat for the Pension Plan are borne by 
the WTO and not reflected as a cost to the Plan. The Secretariat consists of a part -time Secretary 
and three full -time staff. In 2019, staff costs amounted to CHF 596,557 including salaries and 
benefits.  Ad ditionally, the Secretariat does not pay rent for office space and computers or phone 
services.  These are estimated to be CHF 27,168 based on the WTO cost accounting methodology.  
Balance sheet  
 
10.  The value of assets increased mainly due to investment gains registered in 2019. Cash and cash 
equivalents, which represent cash held for managing the operations of the Plan, increased to CHF 
27.5 million in 2019 , up from CHF 23.0 million in 2018 . This increase in mainly due to the constitution 
of a reserve to fulfil pending capital commitments in the new European real estate fund vehicle held 
by the Plan.    WT/L/1093  
 
- 28 - 
 
 
  11.  Withholding taxes to be recovered amounted to CHF 2.5 million in 2019 , a marked increase 
compared with CHF 1.1 million registered in 2018 . This was mainly due to the identification and 
reclassification of withholding taxes paid on the international market that were previously considered 
foregone, following the Plan's 2018 external audit.  The Pension Plan Secretariat will pursue the 
recovery of  these withholding tax es, but it is unlikely that the full amount due will be recovered.    WT/L/1093  
 
- 29 - 
 
 
  ANNEX 2 INVESTMENT PRINCIPLES 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 after 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 the 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 rate options. Leverage and net short positions are not allowed.  
3.  In 2013 the Management Board approved a consolidated se t of investment guidelines to 
articulate more precisely the Plan's approach to investment. A summary of these guidelines was 
shared with Plan participants and beneficiaries 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 behavior  
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 anal ysis – 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 negligible.  
6.  Cognizant of the unreliable nature of short - or medium -term forecasts and the potential losses 
they may cause, the Management Boa rd will not engage in "timing" short -term market fluctuations. 
Bets on the short - or medium -term evolution of financial 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 
honor  its debt will not only permanently impair capital but also its capacity to generate future 
earnings.  
8.  Price vol atility 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 example, if a company's share price quickly fal ls 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 p rice 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 valuatio n 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/1093  
 
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  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 class may be assessed on the basis 
of these appropriate factors.  
13.  The WTOPP wi ll 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 allocation are only 
warranted when justified by significant changes in the measurabl e 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 predominantly through 
indexed vehicles 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 co stly. 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, active management risk, unwanted credit risk 
and legal structure risk.  
Rebalan cing 
 
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 t o 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 investors. 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/1093  
 
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  choosi ng 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 investment 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.  
__________  
 
 
 
2 Such arrangements are unfair for investors because of the asymmetry of  risk and reward