RESTRICTED  
  
WT/L/ 1009  
12 July  2017 
(17-3747) Page: 1/30 
 
 
 WTO PENSION PLAN   
ANNUAL REPORT AND FINANCIAL STATEMENTS   
FOR THE YEAR ENDING  
31 DECEMBER  2016  WT/L/1009  
 
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  CONTENTS  
 
CONTENTS  ................................ ................................ ................................ ........................  2 
MESSAGE FROM THE  CHAIRMAN OF THE MANA GEMENT BOARD  ................................ ....... 3 
1   HIGHLIGHTS  ................................ ................................ ................................ ...............  4 
1.1   Investment return  ................................ ................................ ................................ ....... 4 
1.2   Asset allocation  ................................ ................................ ................................ ...........  4 
1.3   Participants and beneficiaries 2016  ................................ ................................ ................  5 
2   SUMMARY OF MANAGEMEN T BOARD ACTIVITIES  ................................ ........................  6 
3   REVIEW OF THE INVEST MENT STRATEGY  ................................ ................................ .... 7 
4   ACTUARIAL POSITION O F THE PLAN  ................................ ................................ ...........  8 
5   ORGANIZATION AND STR UCTURE OF THE PENSIO N PLAN ON 
31 DECEMBER  2016  ................................ ................................ ................................ ..........  8 
6   ACCOUNTS  ................................ ................................ ................................ ................  10 
7   IPSAS ACCRUED LIABIL ITIES OF THE PLAN  ................................ ..............................  10 
8   EXTERNAL AUDITOR  ................................ ................................ ................................ .. 11 
OPINION OF THE EXTER NAL AUDITOR  ................................ ................................ ...........  11 
9   FINANCIAL STATEMENTS  ................................ ................................ ..........................  13 
9.1   Management letter of representation  ................................ ................................ ............ 13 
9.2   Statement 1: Income and expenditur e statement  ................................ ........................... 14 
9.3   Statement 2: Balance sheet  ................................ ................................ ......................... 15 
9.4   Schedule A: Source and application of funds  ................................ ................................ ..16 
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 performan ce history from inception to 31  December  2016 ............. 21 
9.10   Schedule G: Exchange rates used for closing on 31  December  2016................................ 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: Gl ossary 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/1009  
 
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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 2 016 Annual Report. 2016 was a 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 return of 6.8% (versus 7.2% for  the benchmark). As Swiss inflation for 2016 was 0%  (zero) , 
the portfolio's real return was the same as the nominal return for the year . This is somewhat 
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 e conomic 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 are challenging for investors and 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 details on the allocation of assets can be found in the report and i ts annexes.  
 
The triennial actuarial valuation was concluded and no action was recommended at this point. 
However, the consulting actuary reco mmended that the Board continue  to monitor the situation 
closely over the coming years.  
 
 
The work of the Manageme nt Board in 2016 included  a revision of the Administrative Rules and of 
the Rules of Procedure of the Plan. The revised set of R ules addressed mainly medical -related 
issues (i.e. medical exams for new participants and enhanced governance of incapacity revi ew 
processes). These revisions were approved by the General Council at its meeting on 7 December 
2016.  
 
Upon a recommendation of the Management Board, the WTO Director General approved the re -
appointment of the WTOPP Secretary for a further two -year term.  
 
The Management Board 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  2016 to 31  December  2016 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.  
 
 
 
 
 
 
  
 
 
 
 
Johannes, Rühl, Chair of the Management Board  
 
 
 WT/L/1009  
 
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1  HIGHLIGHTS  
1.1  Investment return   
Table 1 Net i nvestment return  
 Nominal  Real 
2014  8.1%  8.4%  
2015  -0.1% 1.2% 
2016  6.8% 6.8% 
 
Figure 1 Historical returns net of inflation and fees 
-40%-30%-20%-10%0%10%20%30%
1999 2000 2001 2002 2003 2004 2004 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
 
 
1.2  Asset allocation   
Figure 2 Asset allocation as of 31 December 2016 , actual vs. strategy1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                
1 In the first quarter of each year the WTOPP rebalances its portfolio to realign the allocation with the 
strategy. See reference to rebalancing in the Glossary and Annex 2 for more information on  this approach.  WT/L/1009  
 
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Figure 3 Detailed asset allocation 2016  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.3  Parti cipants  and beneficiaries 201 6   
Figure 4 Plan membership by type 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
a         Including deferred retirement benefits . 
 
 
 
 
 
 WT/L/1009  
 
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Table 2 Plan membership   
Memb ership  2015 2016 
Number of Participants  712 703 
Number of Beneficiaries  284 328 
 
Table 3 Types of benefits   
Types of benefits  Total number  Average monthly benefit  
Year 
2015 Year 
2016 Year 
2015 Year 
2016 
Retirement benefits  131 149  CHF 6,000  CHF 6, 600 
Early retirement benefits  88 107  CHF 5,000  CHF 4,800  
Disability benefits  19 21  CHF 5,000  CHF 5,400  
Surviving spouse's benefits  10 10  CHF 3,800  CHF 3,8 00 
Child's benefits  19 20  CHF 430  CHF 430  
Deferred retirement benefits  17 21 - - 
     
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 MANAGEMEN T BOARD ACTIVITIES   
 
1. The Management Board held five meetings in 2016 : these took place on February 27th, 
April 22nd, June 24th, September  30th and November  25th. As ongoing items , the agendas for all 
these meetings included the presentation of the investment situation and a report by the 
Secretariat on matters arisi ng since the previous meeting of the Management Board. Outside the 
formal Management Board meetings , Working Groups of the Management Board met nine times to 
address specific points on governance , investment and actuarial matters . 
 
2. On 19 May, members of th e Management Board appointed by the Director General invited 
all staff members to a presentation on the Plan 's investment strategy and asset allocation  
approach . The audience was very appreciative of the clear presentation and expert explanations 
received from the Plan's investment adviser.  WT/L/1009  
 
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  3. Following several sessions of the Working Group on Governance and its subsequent 
recommendations, t he Management Board undertook  a revision  of the Administrative Rules and of 
the Rules of Procedu re of the Plan . The propo sed revisions were adopt ed by the General Council  on 
7 December  2016.  The changes address the medical examination of new Plan participants by 
clarifying and codifying the current practice of the WTO Occupational Health Service in this regard. 
The changes a lso enhance the governance of incapacity  review processes and  clarify th e respective 
roles of the WTO medical adviser and a separate WTOPP medical adviser.  
 
4. In the framework of a restructuring programme at the WTO, a series of voluntary 
separations were ap proved by the WTO management. This resulted in a financial compensation 
being paid to the WTOPP due to  the actuarial cost of these early separations.  
 
5. Upon recommendation of the Board,  the WTO Director General  approved the re-appointment 
of the WTOPP Secretary for a further two -year term .  
 
 
Working Groups  
  
6. The Management Board working groups met nine times in 2016 : two meetings on 
governance issues , three  on investment issues and  four on actuarial issues.  
 
7. The governance meeting s focused on revising the Administrative Rules and Rules of 
Procedure.  Substantive changes were proposed in Sections C and H of the Administrative Rules 
and Section D of the Rules of Procedure. These amendments were effective on  7 December  2016, 
following  approval by the General Co uncil. 
 
8. The investment working group focused on developing  investment recommendations . These 
comprised t ransferring assets within the emerging market debt portfolio (from an active fund 
managed by HSBC to an indexed fund managed by BlackRock ) and c hanging the emerging market 
equity manager (from an active fund managed by  Comgest to an indexed fund managed by 
Pictet ).  
 
9. The Actuarial Study Working  Group (ASWG) was re -activated to review the actuarial 
assumptions in preparation f or the upcoming full actuarial  valuation with 31 December 2016 data  
(see Section 4 below) . Following the  Working Group 's, recommendations , the Board decided to 
maintain the actuarial assumptions as used for the previous valuation and to continue to monitor 
them closely .  
 
 
3  REVIEW OF TH E INVESTMENT STRATEG Y  
 
10. The investment portfolio had a nominal return of +6. 8% in 2016, compared to +7. 2% for 
the Pension Plan's ben chmark. Swiss inflation for  2016 was 0% (zero) . Hence, the portfolio's real 
return was the same as the nominal return for t he year, i.e. 3.3% above the plan's target  (Swiss 
inflation +3.5%) . Except  for cash, all assets in portfolio generated positive nominal returns in 
2016.  
11. The Plan's portfolio made annual gains of +4.8% and +6.5% in nominal terms, respectively , 
over the last  three and five years. The five-year return is 3.4% above the Plan's targe t return .  
12. A portion of the high returns achieved by the Plan since 2011 are due to higher asset 
valuations. These valuations  might revert to more normal levels in the future, thus r educing future 
expected returns. Even in the absence of such normalization , the portfolio returns in the coming  
five years are  unlikely to match those achieved in the last few years.  
13. The Plan's portfolio benefited from positive returns on real estate  and equities as well as 
emerging market bonds and senior loans.  
14. Equity investments, which represent 40% of the Pension Plan's target asset allocation, had a 
return of +8.2% against +8.7% for the benchmarks. The underperformance came from the 
emerging market por tion of the portfolio, which underperformed its benchmark by 1.7%.  The 
Comgest Emerging Market fund was replaced by the Pictet Emerging Market Index fund in May WT/L/1009  
 
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  2016. It should be noted that the Comgest fund outperformed its benchmark by 12.3% during the 
entire holding period, from January 2011 to May 2016.  
15. Fixed income investments (40% of the Pension Plan's target asset allocation) returned 
+5.7% in 2016  compared with  +4.6% for the Plan's benchmark. The outperformance is explained 
by the GMO Emerging Marke t Debt fund which outperformed its benchmark by 3.8%. All in all, 
emerging market bonds and senior loans generated returns of +9.3% and +6.7% , respectively . 
The Plan's fixed income return was well above that achieved by Swiss Government bonds which 
was clo se to zero in 2016. The yield offered to investors by Swiss Government bonds is still 
negative 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.  
16. Real Estate Funds represent 20% of the target asset allocation. The return on this portion of 
the portfolio was +7.2% in 2016. The Swiss r eal estate fund had a return of +4.2% in 2016 while 
the SXI index, which tracks the return of Swiss publicly traded real estate funds, had a return of 
+6.8%.  
17. International real estate funds, which include the Plan's investment in the Warburg 
Henderson fun d and that in PRISA LP, had a consolidated return of +10.4 %. 
4  ACTUARIAL POSITION O F THE PLAN  
18. Effective 31 December 2016, the consulting actuary completed a formal actuarial valuatio n 
which took i nto account the changes to the R egulations made in 2015.2 While the current 
contribution rate is 23.7% of pensionable remuneration  (corresponding to 7.9% by participants 
and 15.8% by the organization) the long-term cost of the Plan expressed in terms of the 
contribution rate is estimated to be 24.2 % (for an assumed population of 700 active participants). 
This compares with 24.1% at 31 December 2015 and 24.9% at the last formal valuation at 
31 December  2013. Although a gap of -0.5%  remains, th at 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 re viewed in future actuarial valuations where the long-term contribution rate is 
assessed against actual experience regarding investment performance, demographic evolutions 
and th e Plan's other characteristics to see if any trends begin to emerge.  
19. The valuation found that actuarially , benefits are expected to exceed contributions for the 
first time in 2017 .3 This is three  years earlier than the expected date at the previous valuati on at 
31 December 2013. The main reasons for this shift are the slightly lower number of active 
participants (which decreased expected contributions) , the salary freeze of the past three  years 
(which reduced the volume of contributions compared to the expe cted), a slightly higher number 
of retirees than assumed and , lastly,  the maximum  lump sum commutation  that can be claimed 
which increased  from 1/3 to 1/2 of the full pension entitlement  under the changes to the 
Regulations in 2015 . The higher lump sum commutation  results in benefits being paid out sooner, 
but also r educes future liabilities. The P lan continues to be in a net inflow4 position and is expected 
to remain so for many years.  
20. In light of the  full actuarial valuation report and pursuant to  Article 9 of the Regulations of 
the Plan, the consulting actuary did not recommend that any further action be taken at this point . 
The Board should nevertheless continue monitoring the validity of the key assumptions and the 
sustainability of the current contrib ution rate .   
5  ORGANIZATION AND STR UCTURE OF THE PENSIO N PLAN ON 31  DECEMBER  2016  
21. 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.  
                                                
2 See table 4 in last year 's Annual Report.  
3 The actual cash flow experienced by the Plan may be different from what is actuarially forecast.  
4 Net inflow : the inflow (sum of contributions + expected investment return) covers the outflow 
(benefits + administrative expenses).  WT/L/1009  
 
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  22. The Regulations and Administrati ve Rules of the WTO Pension Plan were adopted by the 
General Council on 16 October 1998 (WT/L/282). The General Council approved the Rul es of 
Procedure of the Management Board on 8 May 2001 (WT/L/402).  The Regulations of the WTO 
Pension Plan were amended b y the General Council on 1 December 2005, on 28 July 200 9, on 
26 October 2011 and on 30 November  2015.  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.  
23. Key compon ents of the governance and administrative structure of the Pension Plan included 
the following on 31 December 2016.  
 
 
 Mr. Johannes Rühl , Chairman  
Ms. Alicia Goujon  
Members elected 
by the General 
Council  Ms. Victoria Donaldson  
Members  appointed 
by the Direct or-
General  Ms. Eleni Patibouli  Mr. Pablo Jenkins  
Mr. Robert  Prochazka  Ms. Paulette Planchette  
Mr. Christopher Wilson   Mr. Antony Taubman  
Ms. Eunice Huang  
Alternates elected 
by the General 
Council  Ms. Antonia Carzaniga  
Alternates appointed 
by the  Director -
General  Mr. Ian Medcalf  Mr. Evan Rogerson  
Mr. Rodolfo Rivas  Mr. Raymundo Valdes  
Ms. Junko Ueno  Mr. Thomas Verbeet  
Mr. Robert Luther  Observer on behalf of the beneficiaries  
Mr. Paul Rolian  Alternate o bserver on behalf of the beneficiar ies  
Secretariat  John Breckenridge, Secretary  
Yann Marcus, Pensions Officer  
Corine Becker, Pension Specialist  
Outsourced support services  Trianon S.A., Renens Lausanne  
Consulting Actuary  Cameron Hannah (Mercer HR Consulting S.A.)  
Medical Adviser  Clinique Corela  
Investment Analyst/Consultant  MBS Capital Advice SA  
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 i n 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 por tfolios (global equities and emerging 
markets))  
Prisa LP (US Real Estate portfolio)  
Vanguard (USD government bonds)  
Warburg Henderson (European real estate portfolio)  
External Auditor  Bundesrechnungshof  
Supreme Audit Institution of Germany  WT/L/1009  
 
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  6  ACCOUNTS  
24. 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 t he financial position of the 
Plan. 
25. The income and expenditure statement for the period 1 January – 31 December 2016 is 
reproduced in Statement 1.  
26. The balance sheet as at 31  December  2016 is reproduced in Statement 2.  
27. The source and application of funds for  the period 1  January -31 December  2016 is 
reproduced in Schedule A.  
28. Details of the exchange rates used for closing the accounts on 31  December  2016 and the 
currency breakdown as of 31  December  2016, after hedging, are provided in Schedule G.  
29. A glossary of terms to facilitate an understanding of the tables is reproduced in Schedule J.  
30. Explanations of significant events in the 2016 accounts can be found in the notes in 
Annex  1. 
7  IPSAS ACCRUED LIABIL ITIES OF THE PLAN  
31. Since 2012, the WTO has reported based on In ternational Public Sector Accounting 
Standards (IPSAS). To conform to these standards the Organization is obligated to report on its 
actuarially estimated accrued liabilities for employee benefits. The most significant among these 
are for the Pension Plan and for After -Service Health Insurance. The WTO Pension Plan also 
produces an actuarially derived estimate of its long -term obligations and funding costs , which is 
described in Section  4, above . As a result , there are two different actuarial reports, based  on 
different key assumptions.  
32. The purpose s of these two valuations are different. The purpose of the IPSAS valuation is to 
create a set of numbers for disclosure purposes in the accounts of the WTO that estimate the 
accrued liabilities of the Plan at 31  December of each year based on a closed group (only current 
participants and retirees). The specific actuarial method and assumption setting process are 
dictated by IPSAS 25 , and more detail about the IPSAS valuations can be found in the Annual 
Report of th e WTO.  
33. 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 , unlike the IPSAS version , takes into consideration pa st and future service accrual and 
assumes an open group , i.e. t hat 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 st rategy adopted by the Plan in setting the long -term assumed rate 
of return (for setting the discount rate).  
34. It is principally the different discount rates, closed versus open group, and past versus 
future service assumptions that explain the different resu lting valuations. Both valuations are 
reported together with the balance sheet, in Statement 2 .  
 WT/L/1009  
 
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  8  EXTERNAL AUDITOR  
35. The report of the External Auditor on the Accounts of the WTO Pension Plan for the Year 
Ended 31 December 201 6 is produced separately from t he Annual Report .  
OPINION OF THE EXTER NAL AUDITOR  
Identification o f 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  2016, compri sing 
 the income and expenditure statement,  
 the surplus account,  
 the balance sheet,  
 and supporting notes and annexes to the Financial Statements.  
 
Basis of Opinion   
 
I conducted my audit in conformity with International Standards on Auditing (ISA s) as adopt ed 
and expanded by the International Organization of Supreme Audit Institutions (INTOSAI) and 
issued as International Standards for Supreme Audit Institutions (ISSAIs). These standards require 
that I plan and perform the audit to obtain reasonable assuranc e about whether the financial 
statements 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 respo nsibilities in 
accordance with these requirements.  
 
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for 
my opinion.  
 
Responsibilities of Management  
 
In accordance with WTOPP´s Rules and Regulations, the Management Board is responsible for the 
preparation and fair presentation of the financial statements in accordance with IPSAS and for 
such internal control as the Management Board determines necessary to enable the preparation of 
financial statements that  are free from material misstatement, whether due to fraud or error.  
 
Auditor´s Responsibilities  
 
My objectives are to obtain reasonable assurance about whether the financial statements as a 
whole are free from material misstatements, whether due to fraud  or error, and to issue an 
auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is 
not a guarantee that an audit conducted in accordance with ISAs will always detect each and every  
material misstatement. Misstat ements can arise from fraud or error and are considered material if, 
individually or in the aggregate, they could reasonably be expected to influence the economic 
decisions of users taken on the basis of these financial statements.  
 
As part of an audit in  accordance with ISAs, I exercise professional judgment and maintain 
professional scepticism  throughout the audit.  
 
I also:  
 
• identify and assess the risks of material misstatement of the financial statements, whether 
due to fraud or error, design and p erform 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/1009  
 
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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 the appropriateness of underlying accounting policies and the reasonableness of 
accounting estimates and related disclosur es made by management ;  
 
• evaluate the overall presentation, structure and content of the financial statements, 
including the disclosures, and whether the financial statements represent the underlying 
transactions and events in conformity with the princip les 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 2016, 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 2016.  
 
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for 
my opinion.  
 
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, 06 June 2017  
 
 
 
 
 WT/L/1009  
 
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  9  FINANCIAL STATEMENTS  
9.1  Management letter of representation  
36. The Management Board of the WTO Pension Plan is responsible for these financial 
statements, w hich 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.  
37. The Management Board is respo nsible 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 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 reasonabl e 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 a ll misstatements.  
38. 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  2016.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(signed)  
____________________  (signed)  
______ ______________  
Johannes Rühl  
Chairman  
WTOPP Management Board  John Breckenridge  
Secretary  
WTO Pension Plan  WT/L/1009  
 
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  9.2  Statement 1: Income and expenditure statement  
INCOME AND EXPENDITURE STATEMENT (expressed in Swiss Francs)  
  2016 2015 
Income      
Investment i ncome      
Profit on securities  34,226,515  492,023  
Currency revaluation  80,419  - 
Credit interest s - - 
 34,306,934  492,023  
Contributions      
Organization, regular contributions  19,109,549  19,337,667  
Organization, additional contributions  2,015,800  2,279,100  
Participants, regular contributions  9,554,779  9,668,837  
Interest s on validations  354 351 
Restorations    33,251  
Interest s on restorations    665 
Transfer s from other organizations  - - 
  30,680,482  31,319,871  
Dissolution of reserve for operatin g cost    250,000  
Other income  474 - 
Total income  64,987,890  32,061,894  
Expenditure      
Periodic benefits      
Retirement benefit s  (Art.23)  11,426,965  10,054,647  
Early retirement benefit s  (Art.24)  5,865,895  5,097,378  
Disability benefits – (Art. 28)  1,286,523  1,072,232  
Surviving Spouse benefit s (Art. 29)   462,059  430,408  
Child benefit s (Art. 30)  115,147  89,143  
  19,156,589  16,743,808  
Lump s um benefits      
Withdrawal settlement s  (Art. 26)  382,604  876,510  
Commutation s  (Articles 23c), 24d), and 25c))  3,914,514  2,116,629  
  4,297,118  2,993,139  
Participants' death and disability coverage  1,052,620  1,064,971  
Loss on investment      
Currency revaluation  -  906,774  
Negative credit interest  87,510  135,538  
  87,510  1,042,312  
Investment and other  administrative expenses      
Management fees  409,881  364,388  
Trianon and other administrative costs  200,636  213,289  
Consultancy fees  120,000  120,000  
Actuarial expenses  35,000  35,000  
Legal fees    4,021  
Bank charges  16,868 15,519  
  782,3 85 752,217  
Total expenditure  25,376, 222 22,596,447  
Profit for the period  39,611, 668 9,465,447  
 
 
 
 WT/L/1009  
 
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  9.3  Statement 2: Balance sheet 
Balance sheet  
(expressed in Swiss Francs)  
Assets  At 
31.12.2016  At 
31.12.2015  Liabilities  At 
31.12.2016  At 
31.12.2015  
Investments      Curren t liabilities     
Securities  511,601,543  468,725,778  Accrued expenses  160,813  148,913  
Cash and cash 
equivalents  23,312,596  24,330,784    160,813  148,913  
  534,914,139  493,056,562      
Current Assets     Reserves     
Withholding taxes 
to be recovered  615,66 2 552,573  Unrecoverable 
withholding taxes  396,000  388,000  
Accrued income  - 9,998    396,000  388,000  
Receivable 
additional 
contributions  - 2,279,100  Capital     
  615,662  2,841,671  Capital as at 1 
January  495,361,320  485,895,873  
     Profit / Loss ( -) 39,611,668  9,465,447  
       534,972,988  495,361,320  
        
Total assets  535,529,801  495,898,233  Total liabilities  535,529,801  495,898,233  
 
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  982 million according 
to IPSAS accounting rules. If the Pension Plan's asset value of CHF  535 million is deducted from 
this amount , the result  is an estimated  net accrued liability for employee benefits of 
CHF 447 million. This net value represents the hypothetical liability of the Organization to cover all 
its current employees ' and retirees' acquire d pension entitlements as at 31 December 2016.  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. Thi s model estimates the present value of future benefits at 
CHF 1,323  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/1009  
 
- 16 - 
 
  9.4  Schedule A: Source and application of funds  
Source and application of funds  
(expressed in Swiss Francs)  
 2016  2015 
Funds as at 1 January  495,898,233  486,697,204  
Plus:   
Source    
Receipt of contributions  30,680,482  31,319,871                       
Investment income  34,219,424  - 
Increase i n current liabilities  11,900  - 
Change  in reserves  8,000  - 
Other income  474 250,000  
Total 64,920,280  31,569,871  
Less :    
Application    
Loss on investment  - 550,289  
Settlement of benefits  23,453,707     19,736,947  
Participants' death and disability coverage  1,052,620  1,064,971  
Investment and other administrative 
expenses  782,385  752,217  
Reduction in current  liabilities  - 23,418  
Change  in reserves  - 241,000  
Total 25,288,712  22,368,842  
Funds as at 31 December  535,529,801  495,898,233                   
 
 
 
 
 
 
 
 
 
 
 WT/L/1009  
 
- 17 - 
 
  9.5  Schedule B: Breakdown of expenditures  
Expenditures  
(expressed in Swiss Francs)  
 2016  2015 
Investment M anagement fees    
Lombard Odier  - 12,383  
MFS 155,339  142,031  
Northern Trust 45,623  61,818  
Pictet – Emerging Markets  62,97 4 - 
Pictet - International equities  128,455  139,905  
Pictet – Senior loans  11,073  7,376  
Pictet – US real estate PRISA LP  6,417  875 
Total   409,881  364,388  
Consultancy fees    
MBS Capital Advice  120,000  120,000  
Actuarial expenses    
Mercer  35,000  35,000  
Legal  fees   
Akin Gump  - 4,021  
Administrative costs    
Trianon and other administrative costs  200,636  213,289  
Other expenses    
(bank charges and external audit)  16,868  15,519  
Total  782,385  752,217  
Note:  Management fees for mutual fund investment vehicle s are frequently embedded in the 
reported value of the holdings. These fees are not presented separately in the statement of 
expenditure and total CHF  1,275,495 for 201 6. 
 
 
 
 
 WT/L/1009  
 
- 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  Indexe d 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  - Februar y 
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/1009  
 
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  9.7  Schedule D: Asset allocation  
Asset Allocation  
as of 31  December  2016  
Assets  MCHF  Current  
weightings  Strategy  Deviation from  
the strategy  
Global e quities  223.6  41.8%  40.0%  1.8%  
Developed markets  177.6  33.2%  32.0%  1.2%  
Emerging Markets  46.0 8.6%  8.0%  0.6%  
CHF bondsa  182.9  34.1%  36.0%  -1.9%  
Investment grade bonds USD  66.6 12.4%  14.0%  -1.6%  
Emerging countries bonds 74.4 13.9%  14.0%  -0.1%  
Senior loansb    41.7 7.8%  8.0%  -0.2%  
Real estate  105.2  19.7%  20.0%  -0.3%  
Warburg Henderson  23.6 4.4%  5.0%  -0.6%  
PRISA LP  30.8 5.8%  5.0%  0.8%  
Credit Suisse  50.8 9.5%  10.0%  -0.5%  
Cashc 23.3 4.4%  4.0%  0.4%  
Total  535.0     
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.  
c Held in lieu of Swiss Bonds due to negative interest rates.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 WT/L/1009  
 
- 20 - 
 
  9.8  Schedule E: Investment performance  
Investment Performance as of 31  December  2016 
(expressed in nominal terms)  
 
Over  
1 year p.a.  Over  
3 years p.a.  Since  
inception p.a.  TEa IRb 
TOTAL       
Consolidated securities  6.80% 4.90% 2.1%c   0.95%  0.2 
Added value  -0.40% 0.20% 0.30%     
EQUITY          
Consolidated equities  8.20%  6.70%  1.7%c   1.02%  0.55 
Added value  -0.50%  0.60%  0.00%     
Develope d markets  7.40%          
Added value  -0.3%        
Emerging markets  11.20%          
Added value  -1.70%        
FIXED INCOME            
Consolidated fixed incomed   5.70%  2.10%  3.2%c   1.12%  0.29 
Added value  1.10%  0.30%  0.00%      
Emerging countries bonds  9.30%        
Added value  1.70%          
Senior loans  6.70%        
Added value  -1.30%          
Investment grade bonds USDe   1.50%        
Added value  0.40%          
REAL ESTATE          
Consolidated real estate  7.20% 7.10% 2.2%f   --- --- 
Added valueg           
Warburg Henderson  12.50% 6.90% 1.5%h   --- --- 
Added valueg           
Prisai   7.70%  --- --- --- --- 
Added value          
Credit Suisse  4.20%  7.40%  6.8%j   --- --- 
Added valuek  -2.60%  -1.20%  -0.80%     
      
a TE = tracking error over 3 years  
b IR = information ratio over 3 years  
c Inception in  August  1999.  
d In addition to the bonds' performance, the consolidated fixed income performance also includes the 
interest paid on the Plan's cash . 
e Inception in  June 2015.  
f Inception in  February  2005.  
g There is no formal benchmark for this investment.  
h Inception in  December  2006. Euro investment not hedged in CHF. Performance in euro is 4.6%  p.a. 
since inception.  
i The first investment was done in Q1 2015.  
j Inception in  November  2008.  
k Benchmark: SXI  Real Estate Funds Index.  WT/L/1009  
 
- 21 - 
 
  
5060708090100110120130140150Total PortfolioTotal Portfolio Benchmark
5060708090100110120130140150EquitiesEquities Benchmark
5060708090100110120130140150160170180190Fixed IncomeFixed income Benchmark
5060708090100110120130140150160170180190200Real EstateReal Estate9.9  Schedule F: Investment performance history from  inception to 31  December  2016 
 
9.10  Schedule G: Exchange rates used for closing on 31  December  2016  
Currency  Exchange rates  
CHF per 1 EUR  1.0720  
CHF per 1 USD  1.0164  
CHF per 1 JPYa 0.0087  
CHF per 1 GBP  1.2559  
a        JPY per 1 CHF: 114.7587  
 
 
Figure 6: Currency breakdown , after hedging  
 
 
 WT/L/1009  
 
- 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 6. 
Number of participants and beneficiaries on 31 December 2016 
 2015 2016 
Active members  712 703 
Beneficiaries  284 328 
 
Participants in the Pension Plan in 201 6 
Total number on 31  December  2015  712 
  
Movements in 2016   
  
- Entries  75 
- of which re -entries under the terms of Art.  15(b) of the Regulations  19 
- Separations  84 
  
  
Total number on 31  December  2016 703 
  
Breakdown of separations in 201 6  
  
- retirement  18 
- early retirement  18 
- deferred retirement  1 
- withdrawal settlement  19 
- transfer out  0 
- deferment of decision  26 
- death  0 
- disability  2 
  
Total separations  84 
 
Benefits paid by the Pension Plan  
Type of benefit  At 31 
December 
2015  New benefits  
in 201 6 Benefits ended  
 in 201 6 At 31 
Decemb er 
2016 
Retirement  131 18  0 149 
Early retirement  88 19a  0 107 
Deferred retirementb 17 5c -1 21 
Surviving spouse's benefit  10 0 0 10 
Partial /total disability benefit  19 2 0 21 
Child’s benefit  19 5 -4 20 
Total benefits  284 49 -5 328 
a        Includes one deferred benefit that commenced being paid in 2016.  
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 re late to separations before 2016, wh ere the beneficiaries  
opted for a deferred benefit in the course of 2016.  WT/L/1009  
 
- 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 portfolio management whereby the portfolio 
manager invests the ass ets 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 participant, into a lump sum not e xceeding 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.  
Contributions  refer to sums payable for r estoration, validation and benefit a s detailed in Art. 20 
of WTOPP R egulations.  
Contributions receivable  refers to contributions due in respect of contributory service in the 
accounting year but received after 31  December of the accounting year.  
Currency r evaluation  represents the adjustment of foreign currency -denominated bank account 
balances at 31  December  2016 to the exchange rate for that day. This adjustment reflects the  
INVESTMENT 
ANALYST/CONSULTANT  
 
ASSET MANAGEMENT 
SERVICES   
DIRECTO R-GENERAL   
PARTICIPANTS  
 
EXTERNAL AUDITOR   
ADMINISTRATIVE 
SERVICES  
 
CONSULTING ACTUARY  
 
MEDICAL ADVISER   
MANAGEMENT BOARD   
GENERAL  COUNCIL  WT/L/1009  
 
- 24 - 
 
  variation in the exchange rate applicable to foreign currency -denominated bank ac count 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 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. G enerally, any ratio over 0.30 is thought of as demonstrat ing skill. IR refers to the 
information ratio over three  years.  
Interest on validations  refers to interest payments made under Article 20(d) of the Plan 
Regulations.  
Management fees  include fees paid  for the management of WTO portfolios.  
Operating costs  (dissolution of reserve for)  referred to a former reserve established until 
2015 to cover some operating costs which had in practice not been charged to the Plan. This 
reserve was dissolved in 2015 following the  November  2015 revision of the Plan Regulations, 
which codified the coverage by the WTO of the Plan Secretariat's costs.  
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 a nd interest received on investments;  
 revaluation of securities at their market price at 31  December  2016 (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 annu al 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 aspects (e.g. timing) of r ebalancing 
actions. The rules are approved by the Board and applied automatically. This m echanism 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 Decem ber 2005, on 28  July 2009, on 26  October  2011, on 30 November  2015 and on  
7 December  2016. 
Restoration  refers to the inclusion in contributory service of the prior contributory service of a 
former participant who again becomes a participant.  
Senior loans  are floating rate fixed income instruments, granted to sub investment grade 
borrowers, have the highest level of seniority in the capital structure of corporate issuers and are 
secured by the assets of the borrowing company.  WT/L/1009  
 
- 25 - 
 
  Time -weighted return  is a measur e 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 portfolio versus its 
benchmark. This measure should not be confused with absolute risk; even though a po rtfolio has a 
very low tracking error, it can still be very risky due to the underlying nature of the market in 
which it invests. For an indexed management mandate, the tracking error  would usually be less 
than 0.8. Anything above this would be 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.  
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 a mounts of withholding tax levied by national tax 
authorities and subject to recovery after 31  December  2016. Recoverable withholding tax reflects 
the Plan's recognition as a tax -exempt entity due to its connection to the WTO. As an International 
Organizati on, the WTO is exempted from most national taxes such  as value -added tax (VAT), 
federal stamp duty and tax on the interest earned on investments. Annually the Plan files tax 
reimbursement claims to the Swiss and other authorities. Occasionally the Plan's t ax-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/1009  
 
- 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 i nto 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 o f 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 Regu lations 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 
("Addi tional 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  34.2 million, w as the main source of income for 
the Plan in 2016 . This represented a 6.8% investment return in 2016 , which is 3. 3% above the 
Plan's target. Notwithstanding this good performance , there is a strong sentiment among 
investment professionals that earning high returns in the current low intere st rate 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.  Regular contributions received from the Organizat ion and the participants amounted to 
CHF 28.7 million, which was slightly less than the previous year. However, the Plan also received 
CHF 2.0 million in additional contributions from the Organization as a compensation for the 
actuarial cost generated by t he early separation of participants in the context of a restructuring 
exercise.  
7.  As a particularly large number of partic ipants retired in the course of 2016 , the periodic benefit 
payments rose to CHF  19.2 million, up from CHF 16.7 million in 2015. Lump su m benefits paid by 
the Plan amounted to CHF  4.3 million. The value of these benefits varies unpredictably from one 
year to another depending on staff movements out of the Organization and retiring staff's personal 
preferences.  
8.  Insurance premiums are paid for a "death and disability" insurance policy taken out jointly by 
the Plan and the WTO in 2010 to cover serving staff. The premium expense reported only concerns 
the Plan's share of the total premium.  
9.  Consultancy fees in 2016  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 6 figure 
includes a flat fee of CHF  30,000 plus additional serv ices provided by Mercer in the context of 
assessing the cost of a voluntary separation programme by the Organization.  
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 disability reviews.  
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 fr om or to another 
organization with which the Plan has a transfer agreement. The fluctuation in amounts represents WT/L/1009  
 
- 27 - 
 
  years of service associated with the specific transfers in any given year as well as the number of 
transfers. No transfer was completed in 201 6. 
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 
2016, the amount is higher than is normal ly the case,  mainly because it also includes the cash 
previously held on a Postfinance account in lieu of Swiss government bonds. The high amount is 
also due to an accumulation of positive cash inflows at the end of the year in anticipation o f the 
annual portfolio rebalancing exercise conducted in the first quarter of 2017.  
15.  The Plan continues to pursue the recovery of withholding tax on Plan investments from 
national tax authorities. In 201 6, the reserve for "unrecoverable withholding taxes" i ncreased 
slightly as a result of the currency revaluation of these liabilities. This reserve is not shown under 
the position "Capital" as it is highly unsure whether this amount will be refunded to the WTOPP. 
See the glossary for further explanations.  
 
 
 
 
 
 
 WT/L/1009  
 
- 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 Rules of 
Procedure, the Management Board shall be responsible for the secure investment of all Plan 
assets, the formula tion 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 th e 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 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 
behav ior 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 finan cial 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 b orrower 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 threat 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, th e risk for 
investors has been greatly reduced, not increased. Thus, investors should focus on the long-term 
perspective not on market driven price volatility.  
9.  The valuation of an asset affects its future returns. Therefore, the valuation of assets is a ris k 
that can produce damages similar to permanent capital loss. This is why it should be monitored on 
an on -going basis.  
10.  Monitoring the valuation does not constitute an attempt to predict the short-term evolution of 
market prices, but to appraise the long-term potential profitability of an investment given its 
current characteristics.  
 
 
 WT/L/1009  
 
- 29 - 
 
  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 "st rategic asset allocation".  
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 retur n potential of each asset class may be assessed on the 
basis of these appropriate factors.  
13.  The WTOPP will maintain adequate diversification because expected returns on asset classes 
may take a long time to materialize and because the correlation of differe nt 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 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. Chan ges in asset allocation 
are only warranted when justified by significant changes in the measurable characteristics of the 
Plan's investments allocated to an asset category or by fundamental changes in the Plan's 
liabilities or structure.  
 
Style of manageme nt  
 
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 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 t ime, 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 fea sible or when 
tangible and clearly identifiable reasons lead to believe 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.  
Rebalancing  
 
21.  The WTOPP adopts a counter -cyclical approach through a systematic annual rebalancing 
mechanism whose function is to maintain the weight of the assets aligne d 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 t he investment strategy. Costs should be maintained as 
low as possible without hindering the Plan's capacity to achieve its targets.  
                                                
1 Indexed vehicles aim to generate returns that are equal to those of a market index.  WT/L/1009  
 
- 30 - 
 
  24.  The supply of investment services or products is primarily driven by the financial interests of 
providers rather than by inv estors. The Management Board will therefore be particularly vigilant in 
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 inves tment 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.