Air Canada 2007 Annual Report Download - page 112
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2007 Air Canada Annual Report
112
Domestic Registered Plans
For the Domestic Registered Plans, the investments conform to the Statement of Investment Policy and Objectives of the
Air Canada Pension Master Trust Fund. The investment return objective of the fund is to achieve a total annualized rate of
return that exceeds infl ation by at least 3.75% over the long term.
In addition to the broad asset allocation, as summarized in the asset allocation section above, the following policies apply
to individual asset classes:
■ Equity investments can include convertible securities, and are required to be diversifi ed among industries and economic
sectors. Foreign equities can comprise 37% to 43% of the total market value of the trust. Limitations are placed on
the overall allocation to any individual security at both cost and market value. Derivatives are permitted to the extent
they are not used for speculative purposes or to create leverage.
■ Bond and Mortgage investments are oriented toward risk averse, long term, investment grade securities rated “A” or
higher. With the exception of Government of Canada securities or a province thereof, in which the plan may invest
the entire fi xed income allocation, these investments are required to be diversifi ed among individual securities and
sectors. The target return is comprised of 40% of the total return of the Scotia Capital Universe Bond Index and 60%
of the total return of the Scotia Capital Long Term Bond Index.
Similar investment policies are established for the other pension plans sponsored by the Corporation.
The Corporation’s expected long-term rate of return on assets assumption is selected based on the facts and circumstances
that exist as of the measurement date, and the specifi c portfolio mix of plan assets. Management reviewed anticipated
future long-term performance of individual asset categories and considered the asset allocation strategy adopted by the
Corporation, including the longer duration in its bond portfolio in comparison to other pension plans. These factors are used
to determine the average rate of expected return on the funds invested to provide for the pension plan benefi ts. While the
review considers recent fund performance and historical returns, the assumption is primarily a long-term, prospective rate.
Defi ned Contribution Plans
The Corporation’s management, administrative and certain unionized employees may participate in defi ned contribution
plans. Contributions range from 3% to 6% for those employees in Canada and 3% - 7% for those participants in the
United Kingdom. The Corporation contributes an equal amount. The Corporation’s expense for defi ned contribution plans
amounted to $4 for the year ended December 31, 2007 (2006 - $7).