Equifax 2003 Annual Report Download - page 61

NOTES TO CONSOLIDATED FINANCIAL STATEM ENTS
58 EQUIFAX. INFORMATION THAT EMPOWERS.
Asset Class Five-Year Objective
Canadian
Equities S&P/TSX Composite Total Return Index +1.5%
U.S. Equities S&P 500 Total Return Index +1.5%
(in Canadian $)
International
Equities M SCI EAFE Total Return Index +1.5%
(in Canadian $)
Fixed Income Scotia Capital Universe Bond Index +0.5%
Money Market Scotia Capital 91-Day Treasury Bill Index +0.3%
MBL derives its investment return projections using several crite-
ria. The determination of projected inflation is a key in arriving at
the nominal return for each asset class. Once the inflation figure is
determined, the risk premium is applied to calculate the nominal
return. The risk premium is based on long-standing historical studies
of capital markets, such as the work conducted by Ibbotson and
Sinquefield. The real return expectations for the various asset
classes are based on historical relationships that acknowledge
the risk premium inherent in one asset class versus another.
The “simple” nominal return (derived by adding the risk premium
to the projected rate of inflation) is then adjusted to take into con-
sideration a number of market and economic factors which are
expected to affect returns. Among the more important factors are
the status of the economic cycle, currency issues, the direction of
interest rates for the entire yield curve, and price/earnings multi-
ples. Specific time-weighted return targets have been set for the
total fund. These are based on a benchmark portfolio return, which
the investment manager is expected to exceed by a predetermined
amount over various time frames. The following CRIP asset allo-
cation ranges, targets and actual allocations were in effect at
December 31, 2003 and 2002:
Actual
Target Range 2003 2002
Large Cap equity
Canada 40.0% 30-50% 42.5% 42.9%
Large Cap Equity
U.S. 19.0% 9%-29% 17.8% 8.5%
International
Equity 9.0% 0%-19% 10.5% 21.2%
Real Estate see Note N/A 0.0% 0.5%
Fixed Income 30.0% 20%-40% 28.5% 26.1%
Cash 2.0% 0%-10% 0.7% 0.8%
Note: CRIP asset allocation guidelines put into place during 2002,
real estate w as phased out during 2003 as an asset class.
The investment manager is expected to manage asset mix within
these set ranges. Any deviation outside the minimum and maxi-
mum should be temporary. Protracted deviations must be reported
to the Pension Plan Committee in writing, with an explanation. The
total fund return, calculated on a time-weighted basis, will be
compared, in Canadian dollars, with the composite return of the
benchmark allocation. The allocation in effect as of December 31,
2003 is as follows:
• 40.0% of the S&P/TSX Composite Total Return Index
• 19.0% of the Standard & Poor’s 500 Total Return Index (Cdn. $)
• 9.0% of the Morgan Stanley Capital International EAFE Total
Return Index (Cdn. $)
• 30.0% of the Scotia Capital Universe Bond Index
• 2.0% of the Scotia Capital 91-Day T-Bill lndex
The CRIP’s investment goal is to achieve the composite return
calculated based on the benchmark allocation, plus 1% over rolling
four-year periods. An additional objective is to provide a real rate of
return of 3.0% when compared with the Canadian Consumer Price
Index, also over rolling four-year periods.
The actual investment return on USRIP pension plan assets in
2003 was 19.1%, based on a compounding of the return for the four
calendar quarters of that year. The corresponding 2003 return for
the CRIP was 14.8%. The asset returns in 2001 and 2002, and lower
discount rates, negatively impacted the funded status of our pension
plans, requiring us to recognize a minimum pension liability. The
liability was recorded in 2002 as a non-cash $112.4 million after-
tax reduction to Shareholders’ equity as part of accumulated other
comprehensive income (loss). This equity reduction did not impact
our net income or cash flow in 2003, and has no impact on com-
pliance with debt covenants.
While the interest rate environment has negatively impacted
the funded status of our plans, we do not currently have minimum
funding requirements, as set forth in ERISA and federal tax laws.
Although no minimum funding was required for either the USRIP or
the CRIP, we voluntarily contributed $20.0 million to the USRIP on
January 3, 2003, and $20.0 million to the USRIP on January 2, 2004.
The Company does not expect to make any other deposits to either
plan during 2004.
Foreign Retirement Plans We also maintain defined contri-
bution plans for certain employees in the United Kingdom. For the
years ended December 31, 2003 and 2002, our expenses related
to these plans were $0.7 and $1.2 million for each year, respectively.
Employee Retirement Savings Plans Our retirement savings
plans provide for annual contributions, within specified ranges,
determined at the discretion of the Board of Directors for the bene-
fit of eligible employees in the form of cash or shares of common