FC 92/5(c)ii ![]() |
Ninety-second Session |
Rome, 3 - 7 May 1999 |
Report on Investments - 1998 |
Compensation Plan Reserve Fund |
1. This document is submitted to the Finance Committee for information, in accordance with Financial Regulation IX, which provides, in part, as follows: "The Director-General may invest moneys not needed for immediate requirements seeking, wherever practicable, the advice of the United Nations Investments Committee. At least once a year the Director-General shall include in the financial statements submitted to the Finance Committee a statement of the investments currently held".
2. The Staff Compensation Plan, which was introduced on 1 January 1956, provides compensation benefits for staff members (and/or their dependants) in case of injury, illness, or death, attributable to the performance of official duties. The Organization's liability under the Plan is funded, currently at 0.129% of payroll for Regular Programme and other Headquarters Staff and 0.266% for Field Staff. These rates were confirmed by the Finance Committee at its Seventy-seventh Session (21-30 September 1993).
3. The Committee will recall that at its Ninetieth Session held in September 1998, the Finance Committee was advised of the proposed changes to the oversight function including the strengthening of the external Advisory Committee on Investments (ACI) through the increase in its membership from three to five members. The criteria for the appointment of additional members are based on the basis of expertise in financial markets and/or direct portfolio management background. The terms of reference of this Committee and that of the internal Investment Committe have been revised and shown in Appendix A.
4. The Committee will also recall the measures outlined for the restructuring of the internal Investment Committee by combining the Credit Committee and the Investment Committee into one. This Committee assumes the functions previously performed by the United Nations Investment Committee (UNIC) with respect to the management of the Organization's asssets. In addition to the restructured role and composition of the Committee, the appointment of an independent investment consulting firm ensures that the Committee is provided with expert advice on Treasury and Investment Operations.
5. While the management of the day-to-day trading activities are carried out by professional portfolio managers, they would operate under financial guidelines and policies approved by both the internal and external Investments Committees and the Director-General.
6. The Committee will note that the above revised arrangements provide a greatly enhanced framework for the supervision and monitoring of the Organization's assets, bringing in outside expertise to ensure an independent appraisal on the policies, operations and performance relating to investments.
7. The balance in accordance with the terms of the funding arrangements amounted to US$ 38,805,445 on 31 December 1998. The cash resources set aside to cover this liability are invested in internationally diversified equities and bonds, in order to produce income and provide capital growth.
8. Following extensive discussions with the investment adviser, Fiduciary Trust Company International (FTCI), a more defined benchmark was established in 1998. The asset allocation of 65% in equities reflected both the actuarial position of both funds and the general tone of the UNIC asset allocation guidelines. For this portion of the fund, the MSCI All Countries Index ("MSCI All Country") was chosen as the most comprehensive index covering all investible countries. For the bond section of 35%, the JP Morgan World Government Broad Index was chosen for the same reason. This combination replaced the narrower market indices previously used as a reference which were the MSCI World and the Salomon World Government Bond index. This benchmark combination provides a yardstick for performance measurement consistent with the aims of achieving both growth and income from a portfolio of internationally diversified stocks and bonds.
9. During 1998, the asset allocation was kept in a relatively defensive posture for most of the year with a marginally underweight position in equities, given the uncertain outlook for corporate profits. In terms of currency, the fund had a US Dollar bias for the year. US Treasuries and Gilts were consistently overweighted, since the yields were high compared with that of the Euro bloc and Japan. The Yen was also underweighted on interest rate and economic grounds versus the US Dollar.
10. The performance of the Fund over one, three and five years respectively are shown in Appendix B. The results show consistent outperformance against the benchmark.
11. Appendix C hereto contains a Summary of Investments held at 31 December 1998, with information provided on both cost and market value for each category of investment.
APPENDIX A
APPENDIX B
FOOD AND AGRICULTRUE ORGANIZATION OF THE UNITED NATIONS - Performance |
1 Year |
3 Years |
5 Years | |
FAO - CPRF |
20.8 |
15.2 |
13.3 |
Benchmark |
19.4 |
12.8 |
12.1 |
APPENDIX C
COMPENSATION PLAN RESERVE FUND
SUMMARY OF INVESTMENTS TO 31 DECEMBER 1998 |
COST |
MARKET |
INCOME RECEIVED 1998 | ||||
31-Dec-98 |
31-Dec-98 |
|||||
USD |
% |
USD |
% |
USD |
% | |
EQUITIES USD NON-USD |
$9,489,050 $11,316,465 |
24.45% 29.16% |
$17,936,277 $14,370,532 |
35.04% 28.07% |
$191,533 $187,352 |
13.22% 12.93% |
SUB-TOTAL |
$20,805,514 |
53.61% |
$32,306,808 |
63.11% |
$378,885 |
26.16% |
BONDS USD NON-USD |
$6,937,780 $9,716,228 |
17.88% 25.04% |
$7,196,957 $10,380,442 |
14.06% 20.28% |
$451,504 $561,311 |
31.17% 38.75% |
SUB-TOTAL |
$16,654,008 |
42.92% |
$17,577,398 |
34.33% |
$1,012,815 |
69.93% |
TEMPORARY INVESTMENTS |
$1,345,923 |
3.47% |
$1,309,728 |
2.56% |
$56,720 |
3.92% |
GRAND TOTAL |
$38,805,445 |
100.00% |
$51,193,935 |
100.00% |
$1,448,4201 |
100.00% |