NETHERLANDS - The €3.4bn pension fund PNO Media is considering a full merger with the €12.5bn scheme for the printing industry PGB.

Considerable spending cuts and decreasing turnovers within the media sector have made PNO examine the possibility of co-operation with other schemes in the industry, it said in its annual report - also revealing its returns would have only been 0.1% were it not for an interest rate hedge.

PGB has repeatedly indicated it would welcome pension funds from the media sector joining its pension plan, and at least six pension funds have merged with the pension fund for the printing industry so far.

Whereas PNO has a coverage ratio of 91.2% at the end of March, PGB's was 99.6% at the time.

Following a previous announcement by PNO that it would implement 5.9% rights cuts if its financial position did not improve by the end of 2012, it today unveiled additional recovery measures.

It said it has decided to raise the 2.4% recovery levy on the contribution by another 1%, with the change remaining in place until funding has reached the required minimum of 105%. Its contribution rate was 18.5% at the salary on average at year-end.

Additionally, the media scheme will not grant any indexation, as long as its funding falls short of 115%, and said that it will refrain from compensating for any past indexation cuts as long as its coverage is under 140%.

Currently, its participants have missed out on up to 10% of inflation compensation, it said.

PNO Media reported a result of 6.3% over 2011, which was almost entirely thanks to its 49.5% interest hedge on its liabilities through interest swaps, adding that its return on investments was no more than 0.1%.

It said that its 20% holdings in alternatives was the best performing asset class, returning 6.9% in total, with private equity generating 22.8%.

The scheme's 40% fixed income portfolio delivered 3.1%, with government bonds of emerging markets returning 12.4%.

In contrast, European inflation-linked bonds (ILB) resulted in a loss of 9.3%. PNO said it divested its ILBs last year, in favour of transforming its Dutch government paper portfolio into a long-duration portfolio as part of its strategic interest hedge.

The media scheme reported a 6.1% loss on its equity holdings, with emerging markets yielding -14.4%, but US small caps returned 38.5%.

It further said that it lost 9.1% on its 4% commodities derivatives portfolio, since diviesting from the asset class and ploughing the funds into fixed income.

PNO Media has 14,090 active participants, 15,380 deferred members and 7,000 pensioners affiliated with 375 participating employers.