RESTRICTED  
  
WT/L/1037  
17 July 2018 
(18-4116) Page: 1/30 
 
 
 WTO PENSION PLAN   
ANNUAL REPORT AND FINANCIAL STATEMENTS   
FOR THE YEAR ENDING  
31 DECEMBER  2017 
 
 
 
 
 WT/L/1037 
 
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  CONTENTS  
 
MESSAGE FROM THE CHA IRMAN OF THE MANAGEM ENT BOARD  ................................ ....... 3 
1   HIGHLIGHTS  ................................ ................................ ................................ ...............  4 
1.1   Investment return  ................................ ................................ ................................ ....... 4 
1.2   Asset allocation  ................................ ................................ ................................ ...........  5 
1.3   Participants and beneficiaries 2017  ................................ ................................ ................  6 
2   SUMMARY OF MANAGEMEN T BOARD ACTIVITIES  ................................ ........................  7 
3   REVIEW OF THE WTOPP INVESTMENT PERFORMAN CE ................................ ................  8 
4   ACTUARIAL POSITION O F THE PLAN  ................................ ................................ ...........  8 
5   IPSAS ACCRUED LIABIL ITIES OF THE PLAN  ................................ ................................  9 
6   ORGANIZATION AND STR UCTURE OF THE PENSIO N PLAN ON 
31 DECEMBER  2017  ................................ ................................ ................................ ........  10 
7   ACCOUNTS  ................................ ................................ ................................ ................  11 
8   EXTERNAL AUDITOR  ................................ ................................ ................................ .. 12 
OPINION OF THE EXTER NAL AUDITOR  ................................ ................................ ...........  12 
Identification of the financial statements  ................................ ................................ ............... 12 
9   FINANCIAL STATEMENTS  ................................ ................................ ..........................  14 
9.1   Management letter of representation  ................................ ................................ ............ 14 
9.2   Statement 1: Income an d 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  2017 ............. 21 
9.10   Schedule G: Exchange ra tes used for closing on 31  December  2017................................ 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 
ANNEX 1 NOTES TO THE  FINANCIAL STATEMENTS  ................................ .........................  26 
ANNEX 2 INVESTMENT P RINCIPLES OF THE PEN SION PLAN  ................................ ..........  28 
 WT/L/1037 
 
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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 7 Annual Report. 201 7 was an even  more rewarding year for financial 
markets than the previous year , and the returns of the WTOPP investment portfolio reflect this. 
The Management Board's investment strategy slightly underperformed its benchmark and 
delivered a nominal rate of retur n of 11.2% (versus 11.9% for the benchmark). As Swiss inflation 
for 201 7 was 0.8%, the portfolio's real return was 10.4% for the year . This is well above 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 often 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.   
 
Nonetheless, 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 even 
benefit from, this short-term volatility. More information on the investment philosophy of the 
Management Board and deta ils 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, the consulting actuary  continu es to  
recommend that the Board monitor the situatio n closely over the coming years,  particularly with 
regard to any long -term changes in staffing policies.  
 
The work of the Management Board in 201 7 included  a revision of the Regulations of the Plan 
aimed a t aligning the definition of spouse used by the Pension Plan with the definition used by the 
WTO in its Staff Rules. This revision was approved by the General Council at its meeting on 26 July 
2017.  The Pension Plan definition of spouse is no longer limited to married couples but includes 
also domestic partnership, as defined in the Staff Rules. The Management Board also made a small 
technical change in the reference period for calculation of cost of living adjustments . Pensions in 
Swiss francs are now adjusted based on the annual change in September Swiss Consumer Price 
Index (CPI) , whereas the previous reference series was that of the December CPI . This enables the 
Secretariat to advance the calculat ion of adjusted pensions by a couple of months, and to manage 
its annual workflow wit h more flexibility with respect  to deliverables due during the first quarter of 
each year . The change has no material impact on pension  benefits paid.   
 
The Management Boa rd is fully 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  2017 to 31  December  2017 has been prepared 
by the Management Board in accordance with Article 5 of the Regulations of the Plan for 
presentation to the General Council and to Plan participants and beneficiaries.  
 
 
 
 
 
 
  
 
 
 
 
Robert Prochazka , Chair of the Management Board  
 
 
 WT/L/1037 
 
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  1  HIGHLIGHTS  
1.1  Investment return   
Table 1 Net i nvestment return  
 Nominal  Real 
2015  -0.1% 1.2% 
2016  6.8% 6.8% 
2017  11.2% 10.4% 
 
1. The Pension Plan's portfolio delivered a nominal rate of return of 11.2%. As Swiss inflation 
for 2017 was 0.8%, the portfolio's real return was a sizeable 10. 4% for the year. As in recent 
years, much of this increase was due to price volatility in financial markets, which can result in 
sharp valuation increases and decreases over the short term . The Plan's investment gains are 
driven by the portfolio's underlyin g economic potential in the long run. In this respect, the 
Management Board is more concerned with monitoring the portfolio's long-term return against its 
3.5% target rate set for actuarial purposes rather than  fluctuations in  annual investment 
performance . 
Figure 1 Historical returns net of inflation and fees 
-40%-30%-20%-10%0%10%20%30%
992000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 162017target rate: 3.5%
Moving average: previous five years
 
 WT/L/1037 
 
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  1.2  Asset allocation  
Figure 2 Asset allocation as of 31 December 201 7, actual vs. strategy  
0%5%10%15%20%25%30%35%40%45%
Global Equities CHF Bonds Real Estate CashAllocation
Strategy
 
 
2. The WTOPP rebalances its portfolio i n 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 expensive 
and buy ing assets that hav e become relatively cheaper.  
Figure 3 Detailed asset allocation 201 7 
International 
Equities
33.7%
Emerging Markets 
Equities
8.8%
US  bonds
12.8%Emerging 
Countries Bonds
13.5%Senior Loans
7.4%Euro Real Estate
3.6%Prisa Lp
5.3%Swiss Real Estate
9.1%Cash
5.8%
 
 
                                                
1 See reference to rebalancing in the Glossary and Annex 2 for more information on th is approach.  WT/L/1037 
 
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  1.3  Parti cipants  and beneficiaries 201 7 Figure 4 Plan membership by type 
 
a including deferred retirement benefits.  
 
 
3. The number of participants has remained largely stable. On 31 December 2017, there were 
699 participants, down from 703 on 31 December 2016.  On the other hand, the number of 
beneficiaries is steadily growing and increased from 328 to 352 over the same period.  
Table 2 Plan membership   
Membership  2016 2017 
Number of Participants  703 699 
Number of Beneficiaries  328 352 
Table 3 Types of benefits   
Types of benefits  Total number  Average monthly benefit  
Year 
2016 Year 
2017 Year 
2016 Year 
2017 
Retirement benefits  149 154 CHF 6,600   CHF   6,800  
Early retirement benefits  107 118 CHF 4,800   CHF   4,900  
Disability benefits  21 22 CHF 5,400   CHF   5,500  
Surviving spouse's benefits  10 15 CHF 3,800   CHF   3,500  
Child's benefitsa 20 18 CHF 600  CHF      600  
Deferred retirement benefits  21 25 - - 
a The monthly child's benefit was revised from about CHF 4 00 to CHF 6 00 in 2017 with retroactive 
application to 2016 . This was due to a revision of the child allowance  payable to WTO staff , which is 
one of the main determinants of the child benefit (see A rticle 30 of the Plan's Regulations) . 
 
4. As the number of beneficiaries continues to increase, so does the amount of benefits paid 
out annually by the Plan. Periodic benefits and lump sum benefits amounted to CHF 27.4 million in 
2017, which is still slightly  less than the total amou nt of contributions received (CHF 29.0 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 generat e positive net 
cash inflows for more than  forty years without having to sell assets  to pay benefits . 
Participants
68%29%Disability
2%Surviving 
spouses
1%
RetireesaWT/L/1037 
 
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  Figure 5 Contribution income and benefit expenditure  
04,0008,00012,00016,00020,00024,00028,00032,000
19992000 010203040506070809101112131415162017Thousands
of Swiss Francs
Periodic Benefits Lump sum payments Contributions received a b
 
2  SUMMARY OF MANAGEMEN T BOARD ACTIVITIES  
5. The Management Board held five meetings in 201 7: these took place on February 1st, 
April 28th, June 21st, September  22nd and November  24th. 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. Outside the 
formal Management Board meetings , Working Groups of the Management Board met 6 times to 
addres s specific points on actuarial, governance and investment matters . 
 
6. 2017 was notable for the evolution in membership of the Board.  Several Board me mbers 
announced their departure  from Geneva , and renewal of all Board positions for new 3 year terms 
occurred during the year.  The result was the largest class of new Board members in recent 
memory . Fully half the Board members (including the Chair) changed during the course of the 
year. In parallel to the proc ess of renewing the Board, the Board worked in collaboration with the 
Chair of the General Council to develop guidelines for the election to the Management Board by the 
General Council.  These will make the process more transparent  for WTO Members less fam iliar 
with the work of the Management Board.  
 
7. In light of the significant inflow of new members, the Secretariat developed a new 
orientation welcome pack to help new members quickly become familiar with their roles. In 
addition, informal educational sessio ns were organized for interested Board members on both 
actuarial and investment matters.  
 
8. Actuarial matters formed a central part of the work of the Board in 2017.  The Board had to 
review and recommend key assumptions for the scheduled triennial actuarial  valuation that was 
issued during 2017.  This involved working closely with the consulting actuary and the Plan's 
investment advisor.  The results of this valuation are detailed later in this report.  In addition, the 
Board agreed to undertake a procurement exercise for the position of its consulting actuary , 
consistent with good practice in this area .  To this end, it identified a  former Board member and 
government actuary who was willing to serve in the capacity of a Friend of the Board providing 
technical input on the review process.  
 
9. Other actions of the Board included aligning the definition of spouse used by the Pension 
Plan with the definition used by the WTO in its Staff Rules, changing the reference period for 
calculation of cost of living adjustments  to facilitate administrative efficiency, and deciding to add a 
new international real estate manager to the portfolio  (although actual investment in the fund will 
only take place in 2018) .  WT/L/1037 
 
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  3  REVIEW OF THE WTOPP INVESTMENT  PERFORMANCE  
10. The investment portfol io had a nominal return of +11.2% in 2017, compared to +11.9% for 
the Pension Plan's benchmark. Swiss inflation for 2017 was close to 0.8%. Hence, the portfolio's 
real return was 10.4% for the year, nearly 7.0% above the plan's target. Except for Swiss Rea l 
Estate and cash, all assets in portfolio generated positive nominal returns in 2017.  
11. The Plan's portfolio generated annual returns of +5.9% and +6.7% in nominal terms, 
respectively over the last three and five years. The 5 -year return is 2.4% above the Plan's target 
return (Swiss inflation + 3.5%).  A portion of the high returns achieved by the Plan since 2011 is 
due to higher asset valuations. These more elevated valuation s might revert to more normal levels 
in the future, thus reducing future expected returns. Even in the absence of such a normalization, 
the portfolio returns in the coming 5 years are unlikely to match those achieved in the last few 
years.  
12. The Plan's portfolio benefited from positive retur ns on international real estate and  equities , 
as well as emerging market bonds and Senior Loans.  
13. Equity investments, which represent 40% of the Pension Plan's target asset allocation, had a 
return of +21.3% a gainst +21.5% for the benchmark . The slight underperformance, due to the 
cost of managing the assets, came from both developed and emerging  market  equities.  
14. Fixed income investments (40% of the Pension Plan's target asset allocation) returned 
+3.8% in 2017 vs. +3.6% for the Plan's benchmark. The slight outperformance can be explained 
by the GMO Emerging Market Debt fund which outperformed its benchmark by 2.2% . The return 
was well above that achieved by Swiss Government bonds which reported a negative return 
of -0.4% for the year. The performance of Swiss government bond s was -0.4% in 2017. The yield 
offered to investors by Swiss Government bonds is still close  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.  
15. Real Estate investments represent 20% of the target asset allocation. The return on this 
portion of the portfolio was +6.5% in 2017. The Swiss real estate fund had a return of -0.2% in 
2017 while the SXI index, which tracks the return of Swiss publicly traded real estate funds, had a 
return of +6.6%.  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. International real estate funds, which include the Plan's investment in Warburg Henderson 
fund and that in PRISA LP, had a consolidated return of +13.7%. Currency appreciation 
contributed 1.6% of the total return.   
4  ACTUARIAL POSITION O F THE PLAN  
16. Effecti ve 31 December 2017, the consulting actuary completed an interim actuarial valuation 
which is an update of the formal valuation using new data, but the same assumptions. While the 
current contribution rate is 23.7% of pensionable remuneration (correspondin g 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 24.0% (for an assumed population of 700 active 
participants). This compares with 24.2% at 31 December 20 16 and 24.9% at the previous formal 
valuation at 31 December 2013. Although a gap of -0.3% remains, that gap is considered to be 
within the normal margin of actuarial sensitivity, and no action is recommended at this point. 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 if any trends begin to emerge.  
17. The valu ation found that , actuarially, benefits are expected to exceed contributions for the 
first time in 2019. This is slightly improved from the expected date at the previous valuation at 
31 December 2016.  
18. In light of the 2017 actuarial valuation update report corresponding to 2017 data and 
pursuant to Article 9 of the Regulations of the Plan, the consulting actuary did not recommend that WT/L/1037 
 
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  any further action be taken at this point. The Board should nevertheless continue monitoring the 
validity of the key assumpti ons and the sustainability of the current contribution rate.  
5  IPSAS ACCRUED LIABIL ITIES OF THE PLAN  
19. The WTO's financial statements include an actuarial estimate of pension benefits that differs 
in scope and method from the WTOPP's actuarial valuation discus sed in Section 4 above. In line 
with the International Pu blic Sector Accounting Standards (IPSAS ), this estimate is produced for 
the purpose of report ing 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.   
20. 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 20 17. 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.   
21. The purpose of the valuatio n 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 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 r ate of return (for setting the 
discount rate).  
22. 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.  WT/L/1037 
 
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  6  ORGANIZATION AND STR UCTURE OF THE PENSIO N PLAN ON 31  DECEMBER  2017 
23. 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.  
24. 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.  
25. Key components of the governance and administrative structure of the Pension Plan included 
the following on 31 December 201 7. 
 
 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  
Ms. Eleni Patibouli  Mr. Rainer Lanz  
Mr. Christopher Wilson  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. Ian Medcalf  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  Clinique Corela  
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 p ortfolio)  
External Auditor  Bundesrechnungshof  
Supreme Audit Institution of Germany  WT/L/1037 
 
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  7  ACCOUNTS  
26. 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 and the financial position of the 
Plan. 
27. The income and expenditure statement for the period 1 January – 31 December 201 7 is 
reproduced in Statement 1.  
28. The b alance sheet as at 31  December  2017 is reproduced in Statement 2.  
29. The source and application of funds for the period 1  January -31 December  2017 is 
reproduced in Schedule A.  
30. Details of the exchange rates used for closing the accounts on 31  December  2017 and the 
currency breakdown as of 31  December  2017, after hedging, are provided in Schedule G.  
31. A glossary of terms to facilitate an understanding of the tables is reproduced in Schedule J.  
32. Explanations of significant events in the 201 7 accounts can be found in  the notes in 
Annex  1. WT/L/1037 
 
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  8  EXTERNAL AUDITOR  
33. The report of the External Auditor on the Accounts of the WTO Pension Plan for the Year 
Ended 31 December 201 7 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  2017, comprising : 
 the income and expenditure statement,  
 the surplus account,  
 the bal ance sheet,  
 and supporting notes 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 Inst itutions (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 misstat ement.  
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 these requirements.  
I believe that the a udit 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 level of assurance, but is 
not a guarantee that an audit conducted in accordance with ISAs will always detect each and e very 
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 s tatements.  
 
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 highe r than for 
one resulting from error, as fraud may involve collusion, forgery, intentional omissions, 
misrepresentations, or the override of internal control ;  
 WT/L/1037 
 
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  • obtain an understanding of internal control relevant to the audit in order to design audit 
proce dures that are appropriate in the circumstances, but not for the purpose of 
expressing an opinion on the effectiveness of WTOPP’s internal control ;  
 
• evaluate the appropriateness of underlying accounting policies  and the reasonableness of 
accounting estim ates 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 con formity with the principles of fair presentation .  
 
My team communicated with those charged with governance the planned scope and timing of the 
audit and significant audit findings, including any significant deficiencies in internal control that we 
identify during our audit.  
 
Audit 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 2017, 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 unqualified audit opinion on the Financial Statements of WTO´s Pension Plan for 
the year ended 31 December 2017.  
 
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 June 2018  
 
 
 
 
 WT/L/1037 
 
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  9  FINANCIAL STATEMENTS  
9.1  Management letter of representation  
34. 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 
financia l disclosures in this report are intended to fairly present the Plan's financial results in a 
manner that is complete and understandable.  
35. The Management Board is responsible for establishing and maintaining adequate internal 
control over financial reportin g so as to provide reasonable assurance regarding the reliability of 
these financial statements for external purposes. This includes policies 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 Rules 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 controls 
may not prevent or detect all misstatements.  
36. 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  2017. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(signed)  
____________________  (signed)  
____________________  
Robert Prochazka   
Chair 
WTOPP Management Board  John Breckenridge  
Secretary  
WTO Pension Plan  WT/L/1037 
 
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  9.2  Statement 1: Income and expenditure statement  
INCOME AND EXPENDITURE STATEMENT (expressed in Swiss Francs)  
  2017  2016 
Income     
Investment i ncome     
Profit on securities  60,052,462  34,226,515  
Currency revaluation              475,167  80,419  
 60,527,629  34,306,934  
Contributions     
Organization, regular contributions              19,04 2,000  19,109,549  
Organization, additional contributions                    241,300  2,015,800  
Participants, regular contributions                9,521, 209  9,554,779  
Interest s on validations                        1,099  354 
Restorations                        5,118    
Interest s on restorations                               -      
Transfer s from other organizations                    165,947  - 
Interest s on transfers                        4,052   
              28,980,398  30,680,482  
Reimbursements claims under the death and disability insurance  803,813    
Other income   474 
Total income  90,311,840 64,987,890  
Expenditure     
Periodic benefits     
Retirement benefit s  (Art. 23) 12,405,732  11,426,965  
Early retirement benefit s  (Art. 24) 6,681,123  5,865,895  
Disability benefits – (Art. 28)  1,720,178  1,286,523  
Surviving Spouse benefit s (Art. 29)   518,389  462,059  
Child benefit s (Art. 30)  184,830  115,147  
  21,510,252  19,156,589  
Lump s um benefits     
Withdrawal settlement s  (Art. 26)  853,410  382,604  
Commutation s  (Articles 23c), 24 d), and 25c))  4,784,375  3,914,514  
Transfer s to other organizations  210,115  - 
Interest s on transfers  17,364  - 
                5,865,264  4,297,118  
Participants' death and disability coverage  983,161  1,052,620  
Loss on investment     
Negative credit interest  106,247 87,510  
  106,247  87,510  
Investment and other administrative expenses     
Management fees                    453,919  409,881  
Trianon and other administrative costs                    206,382  200,636  
Consultancy fees                    120,000  120,000  
Actuarial expenses                      40,600  35,000  
Bank charges                    19,761 16,868  
                    840,662 782,385  
Total e xpenditure  29,305,586  25,376,222  
Profit for the period  61,006,254 39,611,668  
 
 
 
 WT/L/1037 
 
- 16 - 
 
  9.3  Statement 2: Balance sheet  
Balance sheet  
(expressed in Swiss Francs)  
Assets  At 
31.12.2017  At 
31.12.2016  Liabilities  At 
31.12.2017  At 
31.12.2016  
Investments      Current liabilities     
Securities  560,959,814  511,601,543  Accrued expenses  186,137  160,813  
Cash and cash 
equivalents  34,446,048  23,312,596    186,137  160,813  
  595,405,862  534,914,139      
Current Assets    Reserves    
Withholding taxes 
to be recovered   307,856  615,662  Unrecoverable 
withholding taxes    - 396,000  
Accrued income  210,361  -   - 396,000  
Receivable 
additional 
contributions  241,300  - Capital    
  759,517  615,662  Capital as at 1 
January  534,972,988  495,361,320  
    Profit / Loss ( -) 61,006,254  39,611,668  
      595,979,242 534,972,988  
       
Total assets  596,165,379 535,529,801  Total liabilities  596,165,379  535,529,801  
 
 
1.  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  1,035  million 
according to IPSAS accounting rules. If the Pension Plan's asset value of CHF  596 million is 
deducted from this amount , the result  is an estimated  net accrued liability for employee benefits 
of CHF  439 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 
2017. 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.  
2.  On the other hand, the actuarial model used in managing the Plan takes into account future 
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 presen t value of future benefits at 
CHF 1,346 million , which will be met over the long run by future staff's pension contributions and 
the Plan's assets and their future returns.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 WT/L/1037 
 
- 17 - 
 
  9.4  Schedule A: Source and application of funds  
Source and application of funds  
(expressed in Swiss Francs)  
 2017  2016  
Funds as at 1 January  535,529,801  495,898,233  
Plus:   
Source    
Receipt of contributions  28,980,398 30,680,482  
Investment income  60,421,382 34,219,424  
Reimbursements of death and disability 
insurance claims  803,813   
Increase in current liabilities  25,324  11,900  
Change  in reserves  - 8,000  
Other income  - 474 
Total 90,230,917 64,920,280  
Less :    
Application    
Settlement of benefits  27,375,516  23,453,707  
Participants' death and disability  coverage  983,161  1,052,620  
Investment and other administrative 
expenses  840,662 782,385  
Reduction in current  liabilities  - - 
Change  in reserves  396,000  - 
Total 29,595,339 25,288,712  
Funds as at 31 December  596,165,379 535,529,801  
 
9.5  Schedule B: Breakdown of expenditures  
Expenditures  
(expressed in Swiss Francs)  
 2017  2016  
Investment Management fees    
MFS 155,939  155,339  
Northern Trust  45,041  45,623  
Pictet – Emerging Markets  bonds  49,311  43,508  
Pictet – Emerging Markets  equities  32,066  19,467  
Pictet - International equities  153,284  128,455  
Pictet – Senior loans  10,690  11,073  
Pictet – US real estate PRISA LP  7,588  6,417  
Total   453,919  409,881  
Consultancy fees    
MBS Capital Advice  120,000  120,000  
Actuarial expenses    
Mercer  40,600  35,000  
Legal fees    
Akin Gump  - - 
Administrative costs    
Trianon and other administrative costs  206,382  200,636  
Other expenses    
(bank charges and external audit)  19,761 16,868  
Total  840,662 782,385  
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  1,158,941 for 201 7. 
 WT/L/1037 
 
- 18 - 
 
  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  Babson 
Capital  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  
European 
Real 
Estate  Warburg 
Henderson  6.5% p.a.  - December  
2006 Hamburg, 
Germany  warburg -henderso
n.com  
US 
Real 
Estate  PRISA LP  NCREIF Fund 
Index ODCE  - February  
2015 Madison,  
United States  pramericarei.com  
Swiss Real 
Estate  Credit 
Suisse  SXI Real Estate 
Fund Index  - November  
2008 Zürich, 
Switzerland  credit -suisse.com  
 WT/L/1037 
 
- 19 - 
 
  9.7  Schedule D: Asset allocation  
Asset Allocation  
as of 31  December  2017 
Assets  MCHF  Current  
weightings  Strategy  Deviation from  
the strategy  
Global equities  253.1  42.5% 40.0%  2.5% 
Developed markets  200.5  33.7% 32.0%  1.7% 
Emerging Markets  52.6 8.8% 8.0%  0.8% 
CHF bondsa  200.5  33.7% 36.0%  -2.3% 
Investment grade bonds USD  76.3 12.8%  14.0%  -1.2%  
Emerging countries bonds  80.2 13.5% 14.0%  -0.5% 
Senior loansb    44.1 7.4%  8.0%  -0.6%  
Real estate  107.2  18.0%  20.0%  -2.0%  
Warburg Henderson  21.5 3.6%  5.0%  -1.4%  
PRISA LP  31.4 5.3%  5.0%  0.3%  
Credit Suisse  54.3 9.1%  10.0%  -0.9%  
Cash  34.6 5.8%  4.0%  1.8%  
Total  595.4    
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/1037 
 
- 20 - 
 
  9.8  Schedule E: Investment performance  
Investment Performance as of 31  December  2017 
(expressed in nominal terms)  
 Over  
1 year p.a.  Over  
3 years p.a.  Since  
inception p.a.  TEa IRb 
TOTAL            
Consolidated securities  11.20%  5.90%  2.5%c   0.95%  0.12 
Added value  -0.64%  0.11%  0.11%      
EQUITY          
Consolidated equities  21.30%  8.80%  2.7%c   0.87%  0.10 
Added value  -0.23%  0.08%  -0.03%     
Developed markets  18.80%          
Added value  -0.20%        
Emerging markets  31.30%          
Added value  -0.30%        
FIXED INCOME            
Consolidated fixed incomed   3.80%  2.10%  3.2%c   1.16%  0.4 
Added value  0.27%  0.47%  0.02%      
Emerging countries bonds  7.90%        
Added value  0.20%          
Senior loans  1.30%        
Added value  -0.80%          
Investment grade bonds USDe   1.10%        
Added value  -0.50%          
REAL ESTATE          
Consolidated real estate  6.50%  7.80%  2.6%f   --- --- 
Added valueg           
Warburg Henderson  29.60%  15.40%  3.7%h   --- --- 
Added valueg           
Prisai   3.00%  --- 9.5%i  --- --- 
Added valuej -0.10%   -2.30%     
Credit Suisse  -0.20%  5.60%  6.0%k   --- --- 
Added valuel -6.80%  -0.30%  -1.40%     
            
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' performance, the consolidated fixed 
income performance also includes the in terest 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: NCR EIF Fund Index.  
k Inception in  November  2008.  
l Benchmark: SXI Real Estate Funds Index.  WT/L/1037 
 
- 21 - 
 
  
5060708090100110120130140150160170Total PortfolioTotal Portfolio Benchmark
5060708090100110120130140150160170EquitiesEquities Benchmark
5060708090100110120130140150160170180190Fixed IncomeFixed income Benchmark
5060708090100110120130140150160170180190200Real EstateReal Estate9.9  Schedule F: Investment performance history from  inception to 31  December  2017 
 
9.10  Schedule G: Exchange rates used for closing on 31  December  2017  
Currency  Exchange rates  
CHF per 1 EUR  1.1702  
CHF per 1 USD  0.9745  
CHF per 1 JPYa 0.0087  
CHF per 1 GBP  1.3183  
a JPY per 1 CHF: 115.5977  
 
Figure 6: Currency breakdown , after hedging  
 WT/L/1037 
 
- 22 - 
 
  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 7. 
Number of participants and beneficiaries on 31 December 2017 
 2016  2017  
Active members  703 699 
Beneficiaries  328 352 
 
Participants in the Pension Plan in 201 7 
Total number on 31  December  2016 703 
  
Movements in 201 7  
  
- Entries  86 
- of which re -entries under the terms of Art.  15(b) of the Regulations  14 
- Separations  90 
  
  
Total number on 31  December  2017 699 
  
Breakdown of separations in 201 7  
  
- retirement  7 
- early retirement  11 
- deferred retirement  5 
- withdrawal settlement  31 
- transfer out  0 
- deferment of decision  35 
- death  0 
- disability  1 
  
Total separations  90 
 
Benefits paid by the Pension Plan  
Type of benefit  At 31 
December 
2016  New benefits  
in 201 7 Benefits ended  
 in 201 7 At 31 
December 
2017 
Retirement  149 8 -3 154 
Early retirementa 107 13 -2 118 
Deferred retirementb,c 21 5 -1 25 
Surviving spouse's benefit  10 5 0 15 
Partial /total disability benefit  21 2 -1 22 
Child’s benefit  20 5 -7 18 
Total benefits  328 38 -14 352 
a        Includes one deferred benefit that commenced being paid in 201 7. 
b  Includes only deferred pens ion benefits not yet in payment . Deferred pensions in payment are  
classified as retirement or early retirement benefits.  
c  Includes four deferred retirements that relate to separations before 201 7, where the beneficiaries  
opted for a deferred benefit in the course of 201 7. WT/L/1037 
 
- 23 - 
 
  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 po rtfolio management whereby the portfolio 
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 fee s, 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 administ ration 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 participant, into a lump sum not exceeding 1/2 of the 
actuarial equivalent of the benefit or the amount of the participant's own contr ibutions, whichever 
is the larger.  
Consultancy fees  include the fees charged by the investment analyst/consultant.  
Contributions  refer to sums payable for restoration, validation and benefit a s detailed in Art. 20 
of WTOPP R egulations.  
Contributions receiv able 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  2017 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/1037 
 
- 24 - 
 
  variation in the exchange rate applicable to foreign 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 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 Information Ratio  is defined as the outperf ormance 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 rat io 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  2017 (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 retu rn 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 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 allocation of the Plan's portfolio with its strategy. A 
predefined process identifies the triggers and other operat ional a spects (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 inclus ion 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 i n 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 invest ment managers and their 
respective benchmarks. The time -weighted return is very similar to the geometric mean return.  WT/L/1037 
 
- 25 - 
 
  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 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 in vests. For an indexed management mandate, the tracking error  would usually be less 
than 0.8. Anything above this would be considered active. TE is over 3 years.  
Unrecoverable tax es reports primarily on situations where the Plan has had trouble having its 
tax-exempt status recognized and continues to pursue the recovery of withholding tax on Plan 
investments but the deadline for recovery may have passed. For example, in the cases of Canada 
and Italy, where, despite continuing efforts by the Secretariat, significant amounts still remained 
to be recovered and the deadline for recovery of certain sums had already passed , some amounts 
may not be recovered.  Following a recommendation from the Externa l Auditor, t he reserve for 
unrecoverable withholding taxes (CHF 396,000 at 31 December 2016 ) was written off in 2017, and 
the balance sheet's asset position for "withholding taxes to be recovered" was reduced by the 
same amount.  Efforts to recov er these amounts are still ongoing and reimbursements will be 
recorded as miscellaneous income when they are recovered.  
Validation  is defined in Art. 2(v) of WTOPP R egulations, as the inclusion in contributory service of 
a period of non -contributory servic e 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  2017. 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. Annu ally 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/1037 
 
- 26 - 
 
  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 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 accoun ting 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 mainte nance 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, name ly 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.  Investment income, which amounted to CHF  60.5 million, was the main source of income for 
the Plan in 2017. This represented a 11.2% nominal investment return in 2017, which, taking into 
account Swiss inflation, is about 6.9% above the Plan 's target. Notwithstanding this good 
performance, there is a strong sentiment among investment professionals that earning high 
returns in the current environment will be more difficult in the next few years. As explained in 
Section 3, above, the portfolio returns in the coming five years are unlikely to match those 
achieved in the last few years.  
6.  The total amount of pension contributions was CHF 29.0 million , including CHF 28. 6 million 
regular contributions from participants and the Organization, which is comparable to the previous 
year. The Organization conducted a restructuring exercise in 2016, for which it compensated the 
Plan an additional CHF 2.0 million. As this exercise was not renewed at the same scale, the 
amount of additional contributions droppe d to 0.2 million in 2017.  
7.  The Plan received CHF 0.8 million as reimbursements of claims under its death and disability 
insurance coverage  in 2017. This is the first reimbursement since 2010, when the Plan took out 
the insurance coverage jointly with the WTO. It refers to claims made in respect of disability 
benefits paid between 2015 and 2017 , and further reimbursements will be received in 2018 and 
after for the same disability pensions . As a comparison, the premium paid by the Plan in 2017 for 
the death and disability insurance coverage was CHF 1.0 million.  
8.  The Plan's periodic benefit payments amounted to CHF  21.5 million in 2017, a 12.3% increase 
compared with 2016 . Lump sum benefits amounted to CHF  5.9 million. The value of these benefits 
varies unpredi ctably from one year to another depending on staff movements out of the 
Organization and retiring staff's personal preferences.  
9.  Consultancy fees in 201 7 are solely those paid by the Plan to its investment advisor, MBS 
Capital , which receives an annual fee of CHF  120,000 for its services.  
10.  Actuarial fees are those paid by the Plan to its consulting actuary, Mercer. The 201 7 figure 
includes a flat fee of CHF  40,000 plus CHF 600 additional services provided by Mercer in the 
contex t of additional analysis requested by the Plan .  
11.  Administrative fees are primarily those paid by the Plan to its service provider, Trianon S.A. 
for administrative and accounting services. They also reflect fees paid to medical experts in the 
framework of d isability reviews.  WT/L/1037 
 
- 27 - 
 
  12.  Transfers to and from other organizations reflect the flow of assets into and out of the Plan 
when new and departing Plan participants transfer their pension rights from or to another 
organization with which the Plan has a transfer agree ment. The fluctuation in amounts represents 
years of service associated with the specific transfers in any given year as well as the number of 
transfers.  
13.  Investment and other administrative expenses are presented in further detail in Schedule  B 
"Breakdown of Expenditures".  
Balance sheet 
 
14.  Cash and cash equivalents represent cash held for managing the operations of the Plan. In 
2017, the amount is higher than is normal ly the case,  mainly because of an accumulation of 
positive cash inflows at the end of the year in anticipation of  a new investment in international real 
estate and  the annual portfolio rebalancing exercise conducted in the first quarter of 2018. 
15.  The Plan continues to pursue the recover y of withholding tax on Plan investments from 
national tax authorities. In 201 7, the reserve for "unrecoverable withholding taxes" was written off 
on the advice of the External Auditor due to the highly uncertain nature of any recovery and the 
age of the c laims. If amounts are recovered in the future, they will be reported as miscellaneous  
income.  See the glossary for further explanations.  
 
 
 
 
 
 
 WT/L/1037 
 
- 28 - 
 
  ANNEX 2 INVESTMENT P RINCIPLES OF THE PEN SION PLAN  
1.  Pursuant to Article 13 of the Regulations of the Pension Plan and Rule A.9 of the R ules 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 pol icy. 
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 co nsolidated set of investment guidelines to more 
precisely articulate the Plan's approach to investment. A summary of these guidelines was shared 
with Plan 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 
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 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 efficiently deploy its time 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 Board 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.  
Invest ment 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 volatility is commonly considered as a measure of investment risk. However, volatility 
fails to measure long-term investment risk and is only a thre at to long -term investors if they 
misread its significance. For example, 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 g reatly 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 simi lar 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 a n 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/1037 
 
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  12.  Each a sset 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 m ay 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 correlation of different assets helps dampen 
volatility  and hence help avoid unconsidered 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 p roducts 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 measurable characteristics of the 
Plan's investments allocated to an asset categor y 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 r isks. 
17.  The Management Board implements the WTOPP's strategic allocation predominately 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 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 believe that active management represents a 
better path.  
20.  Overall, the Plan will striv e 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.  
Rebalancing  
 
21.  The WTOPP adopts a counter -cyclical approach thro ugh 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 inve stment 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/1037 
 
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  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 fee2. 
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.