Equifax 2007 Annual Report Download - page 79

EQUIFAX | 2007 ANNUAL REPORT 77
The Plans, in an effort to meet their asset allocation objectives,
utilize a variety of asset classes which have historically produced
returns which are relatively uncorrelated to those of the S&P 500.
Asset classes included in this category are alternative assets (hedge
fund-of-funds), venture capital (including secondary private equity)
and real estate. The primary benefi ts to the Plans of using these
types of asset classes are: (1) their non-correlated returns reduce
the overall volatility of the Plans’ portfolio of assets, and (2) they
produce superior risk-adjusted returns. Additionally, the Plans allow
certain of their managers, subject to specifi c risk constraints, to
utilize derivative instruments, in order to enhance asset return, reduce
volatility or both. Derivatives are primarily employed by the Plans
in their fi xed income portfolios and in the hedge fund-of-funds area.
The Plans are prohibited from investing additional amounts
in Equifax stock once the market value of stock held by each plan
exceeds 10% of the total market value of each plan. At both
December 31, 2007 and 2006, the USRIP’s assets included
0.9 million shares of Equifax common stock, with a market value
of $33.6 million and $37.5 million, respectively. At December 31,
2007 and 2006, the EIPP’s assets included 0.1 million shares of
Equifax common stock for both periods, with a market value
of $3.9 million and $4.3 million, respectively. Not more than 5%
of the portfolio (at cost) shall be invested in the securities of any
one issuer, with the exceptions of Equifax common stock, and
U.S. Treasury and government agency securities.
During 2007, the Equifax Master Trust entered into certain
allowed derivative arrangements in order to minimize potential
losses in the Plans’ assets. The Company bears no responsibility
or liability under these arrangements.
The following USRIP and EIPP asset allocation ranges and
actual allocations were in effect as of December 31, 2007 and 2006:
Actual
USRIP Range 2007 2006
Large-Cap Equity 15%–35% 20.6% 23.3%
Mid-Cap Equity 2%–10% 7.3% 8.0%
Small-Cap Equity 2%–10% 5.8% 6.7%
International Equity 10%–30% 17.5% 20.7%
Private Equity 2%–8% 6.2% 6.4%
Hedge Funds 15%–30% 19.4% 19.1%
Real Assets 2%–10% 1.7% 2.5%
Fixed Income 10%–25% 12.3% 11.4%
Cash 0%–15% 9.2% 1.9%
EIPP
Large-Cap Equity 15%–35% 26.6% 25.3%
Mid-Cap Equity 3%–10% 3.0% 13.9%
Small-Cap Equity 2%–10% 3.3% 7.4%
International Equity 10%–30% 20.7% 15.4%
Private Equity 2%–10% 3.0% 2.9%
Hedge Funds 15%–25% 14.3% 14.4%
Real Assets 5%–15% 11.7% 13.0%
Fixed Income 5%–20% 6.1% 6.8%
Cash 0%–15% 11.3% 0.9%
CRIP Investment and Asset Allocation Strategies.
The Pension Committee of the CRIP has retained an investment
manager who has the discretion to invest in various asset classes
with the care, skill, and diligence expected of professional prudence.
The CRIP has a separate custodian of those assets, which are
held in various segregated pooled funds. The Pension Committee
maintains an investment policy for the CRIP, which imposes certain
limitations and restrictions regarding allowable types of investments.
The current investment policy imposes those restrictions on
investments or transactions such as (1) Equifax common stock
or securities, except as might be incidental to any pooled funds
which the plan may have, (2) commodities or loans, (3) short sales
and the use of margin accounts, (4) put and call options, (5) private
placements, and (6) transactions which are “related-party” in nature
as specifi ed by the Canadian Pension Benefi ts Standards Act and
its regulations.
Each pooled fund is associated with an asset classifi cation, which
has a primary investment objective. The objective for each asset
class is related to a standard investment index and to a period of
four-years. The following includes the objectives for each of the
current fi ve asset classes:
Asset Class Four-Year Objective
Canadian Equities S&P/TSX Composite Total Return
Index plus 1.5%
U.S. Equities S&P 500 Total Return Index plus 1.5%
(Canadian $)
International Equities MSCI EAFE Total Return Index plus 1.5%
(Canadian $)
Fixed Income Scotia Capital Universe Bond Index plus 0.5%
Money Market Scotia Capital 91-Day Treasury Bill
Index plus 0.3%
The plan’s manager derives its investment return projections
using several criteria. The determination of projected infl ation is
necessary to apply the premium to compute the nominal return
for each asset class. The risk premium is based on historical studies
of capital markets. The real return expectations for the various
asset classes are based on historical relationships that acknowledge
the risk premium inherent among the various asset classes. The
nominal return, computed as described above, is then adjusted
for various market and economic factors, including the status of
the economic cycle, currency issues, the direction of interest rates,
and price/earnings multiples. Next, specifi c time-weighted return
targets are set for the total fund, based on a benchmark portfolio
return. The Pension Committee expects the investment manager
to exceed that return by a predetermined value over a certain period.