PENSION FUND

The Governing Board of the Pension Fund held its first three meetings of the year on 2 February, 2 March and 13 April.

At the first of these meetings the Board first heard a presentation by Mrs H. Richmond of JP Morgan on the results of the currency overlay programme applied to the Fund's assets. Thanks to the policy pursued by this company, volatility, i.e. portfolio risk for assets denominated in currencies other than the Swiss franc, has been reduced. However, despite the fact that JP Morgan has considerable expertise in this field, no gain has been achieved over the past year. The Governing Board heard a report by the Investment Committee Chairman G. Maurin on the meetings of 21-22 and 28 January at which the Pension Fund's various fund managers had been interviewed on their results. Decisions were taken on benchmarks aimed at optimising management and on the terms of reference of the Internal Management Unit. It was also decided to place two fund managers on a watching list and to request them to make every effort to improve their performance by the next round of interviews. Regarding asset allocation, the Fund's strategy advisor continued to recommend a very cautious approach with respect to equity markets, which were considered to be overvalued. Consequently, the Committee decided not to increase the proportion of equities in the portfolio for the time being. Finally, under the same item of the agenda, the Governing Board decided to extend the terms of office of C. Bovet as member of the Investment Committee and Mrs M.-J Simon as expert advisor.

At the start of the meeting on 2 March, the Chairman of the Governing Board welcomed the Director-General, who, following a general presentation of the Pension Fund given by the Chairman, stressed that the Fund was an essential feature of the Organisation, and expressed the wish that during his term of office a good spirit of collaboration would be established between the Fund, its committees and the CERN Management. The Governing Board then heard a presentation from P. Why brow of State Street Bank, global custodian of the Fund, on the performance of the fund managers over the past year. The Board approved the appointment of Steve Myers as observer to the Investment Committee with a view to succeeding C. Bovet upon the latter's retirement. The Organisation's Legal Advisor, reporting on the working group on pension guarantees, said that the withdrawal of one or several Member States raised complex questions of international law and that the report of the three experts whom the group had decided to consult in this context would only be available by the summer at the earliest. The issues of health insurance and pension adjustments in the event of the dissolution of the Organisation would also require careful consideration, and the working group had thus availed itself of the services of two Swiss experts - Mrs D. Siebold-Bujard, Director of the Caisse cantonale genevoise de Compensation, and ProfessorP.-Y. Greber. Finally, the Governing Board approved a recommendation from the working group on incapacity, which confirmed the practice applied by the Fund for calculating pensions in cases of partial incapacity combined with early retirement. The Governing Board at the same time accepted the principle of single payments and recommended that in the future the Fund's Administration pay incapacity benefit and early retirement pension as a single amount.

At its meeting on 13 April, the Governing Board first heard a presentation by M. Kritzman, of Widman Capital in association with State Street, on building efficient portfolios and the notion of risk. The other items on the agenda were the appropriation of the result for 1998, the approval of the Fund's draft annual report and a matter relating to the European Southern Observatory (ESO), whose staff are covered by the CERN Pension Fund. Under the first item, the Governing Board decided to allocate the 126 MCHF result for the year to the Fund's capital together with an amount of 154 MCHF from the reserves to take account of the results of the latest actuarial review and the conclusions of the Fund's consulting actuary with respect to the most probable model. Thus, at the end of 1998, the Fund's capital amounted to 3347 MCHF, against 2981 MCHF at the end of the previous year. The Fund's total assets, comprising capital and reserves, rose from 3330 MCHF to 3612 MCHF, including 105.3 MCHF deriving from the debt. Excluding the latter, that amounted to a performance of 6% over the whole of 1998. The draft annual reports was examined and approved and will be submitted to the CERN Council for approval at its June meeting.

Most of the session was devoted to a matter relating to ESO, which was discussed in the presence of the Director-General. The Chairman of the Governing Board reminded the Board that in 1998 ESO's Director of Administration had invited CERN's Director of Administration to enter into discussions on ways of reducing the amount of contributions ESO paid to the Fund, which ESO considered to be too high given its demographic structure and personnel policy. In March1999, ESO took the unilateral decision to reduce its contributions to the Pension Fund by 20%, without giving the Fund prior notice. As no formal procedure had been initiated, CERN's Director-General, supported by several Governing Board members, expressed the view that the first priority was to establish a mechanism for opening up discussions with a view to arriving at as atisfactory solution for both parties, given their respective requirements. Summarising the discussion, the Chairman of the Governing Board underlined that the withholding of 20% of ESO's contributions was not an option and that it was now incumbent upon the latter to resume payment of its contribution.

The Governing Board noted the exchange of views that had taken place at the first meeting of the working group on information technology in the Pension Fund, set up as a result of a report by the Internal Audit Service. The group's task is to make a proposal to the Governing Board on computer support and to determine the scope of services that should be out sourced. To the latter end, specifications are to be drawn up. Finally, the Governing Board approved a request from the Administration of the Fund to defer the dispatch of the individual breakdowns of pension rights, which are sent to the Fund members once a year for information, until August.

The Governing Board noted, with regret, the deaths since its meeting on 1.12.98 of beneficiaries C. Taylor, H. Nozet, L. Kubly, M. Desroziers, F. Thouvenel and P. Gerdil.