CPP Investment Board

CPP Investment Board

May 17, 2006 08:37 ET

CPP fund grows to $98 billion, mostly on the strength of 15.5 per cent investment returns

TORONTO, ONTARIO--(CCNMatthews - May 17, 2006) - The CPP fund, which includes investment earnings and contributions not needed to pay current benefits, grew to $98 billion in the year ending March 31, 2006, an increase of $16.7 billion from $81.3 billion the previous year.

This increase included $13.1 billion in investment gains as well as $3.6 billion in additional contributions. The rate of return earned by the fund was 15.5 per cent which compares to the 14.9 per cent median return for Canadian pension plans(1) over this same period and the fund's return of 8.5 per cent for the previous year.

Equity markets performed exceptionally well in fiscal 2006 accounting for approximately 85 per cent of the fund's gains. Canadian public markets were strong in all sectors, especially the energy and financial services sectors and as a result, Canadian equity holdings generated an overall rate of return of 29.9 per cent.

Beginning in fiscal 2006, the near-term asset-mix target of the CPP Investment Board was refined to 60 per cent equity, 30 per cent fixed income and 10 per cent real return assets. At the end of the fiscal year, the CPP fund had made good progress in achieving this near-term asset mix.

At March 31, 2006, equities totalled $61.7 billion or 63 per cent of the CPP fund. This consisted of publicly traded stocks valued at $57.3 billion or 58.5 per cent of the total fund plus private equity valued at $4.4 billion or 4.5 per cent of the total fund. The fixed income component was comprised of government bonds and money market securities totalling $27.8 billion or 28.3 per cent of the fund. Real return assets represented $8.5 billion or 8.7 per cent. This consisted of real estate valued at $4.2 billion or 4.3 per cent of the fund, inflation-linked bonds valued at $4 billion or 4 per cent of the fund and infrastructure investments valued at $350 million or 0.4 per cent of the fund.

"Our key investment goal this year was to further diversify the portfolio by risk/return attributes and geography," said David Denison, President and CEO, CPP Investment Board. "As a result we increased our investments in real estate, inflation-linked bonds and infrastructure to $8.5 billion or 8.7 per cent of the overall portfolio from just $1 billion or 1.2 per cent at the beginning of the year."

"With regard to geographical diversification, given that we have $63 billion invested in Canada, we will continue to seek additional international investments because they help reduce concentration risk and over-dependence of the CPP on the domestic economy."

Based on actuarial projections, CPP contributions are expected to exceed benefits until 2022, providing a 16-year period before a portion of the investment income is needed to help pay CPP benefits.

The CPP Investment Board invests the funds not needed by the Canada Pension Plan to pay current benefits. With a mandate from the federal and provincial governments, the CPP Investment Board is accountable to Parliament, to the federal and provincial finance ministers who serve as the stewards of the CPP and reports to 16 million contributors and beneficiaries. Based in Toronto, the CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm's length from governments. Its fiscal year is from April 1 to March 31. For more information about the CPP Investment Board, visit www.cppib.ca.

A teleconference has been scheduled for May 17, at 11 a.m. EDT to discuss these results. Journalists who wish to participate please contact Jennifer Ross at 416-868-4682 or jross@cppib.ca. The teleconference will also be webcast live at www.cppib.ca.

(1) According to a survey by RBC Dexia Investors Services, the median performance of Canadian pension plans is 14.9 per cent for the 12 months ending March 2006.

Portfolio Summary

Corporate Profile

The Canada Pension Plan Investment Board is a Crown corporation created by an Act of Parliament in December 1997. Its long-term goal is to contribute to the financial strength of the Canada Pension Plan by investing on behalf of 16 million CPP contributors and beneficiaries and by maximizing returns without undue risk of loss.

The CPP Investment Board invests the funds not needed by the CPP to pay current benefits. It is not expected to be required to contribute investment earnings to the CPP to help pay pensions until 2022. In order to build a diversified portfolio of CPP assets, the CPP Investment Board is currently investing cash flows in publicly traded stocks, private equities, real estate, inflation-linked bonds and infrastructure to balance the legacy government bond portfolio.

Our disclosure policy states that: "Canadians have the right to know why, how and where we invest their Canada Pension Plan money, who makes the investment decisions, what assets are owned on their behalf and how the investments are performing."

By increasing the long-term value of funds available to the CPP, the CPP Investment Board will help the plan to keep its pension promise to Canadians.

With a mandate from the federal and provincial governments, the CPP Investment Board is accountable to Parliament and to the federal and provincial finance ministers who serve as the stewards of the CPP. Based in Toronto, the CPP Investment Board is governed and managed independently of the CPP and at arm's length from governments.

For more information on the CPP Investment Board, visit our website at www.cppib.ca.



FINANCIAL HIGHLIGHTS

CPP Fund

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FINANCIAL OVERVIEW
For the year ended
March 31 ($ billions) 2006 2005
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Assets $ 98.0 $ 81.3
Net contributions 3.6 4.5
Investment income 13.1 6.3
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INVESTMENT PERFORMANCE (%) 2006 2005
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Annual 15.5 8.5
Five-year average
rate of return 8.6 7.0

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2006 2005
ASSETS ($ bil- (% of ($ bil- (% of
lions) total) lions) total)
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Public equities $ 57.3 58.5% $ 45.7 56.2%
Private equities 4.4 4.5 2.9 3.6
Bonds 27.2 27.7 28.6 35.3
Real estate 4.2(1) 4.3 0.8 1.0
Inflation-linked bonds 4.0 4.0 -- --
Infrastructure 0.3 0.4 0.2 0.2
Cash and money market
securities 0.6 0.6 3.1 3.7
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$ 98.0 100% $ 81.3 100.0%
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(1) Net of mortgage debt on real estate properties


CPP FUND ASSET MIX

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CPP FUND INVESTMENT RETURNS

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SEVEN-YEAR REVIEW

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For the year ended
March 31 ($ billions) 2006 2005 2004 2003 2002 2001 2000
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CHANGE IN NET ASSETS
Income
Investment income 13.1 6.3 10.3 (1.1) 2.3 3.0 1.1
Net contributions 3.6 4.5 4.6 3.1 2.6 1.2 (1.3)
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Increase in net assets 16.7 10.8 14.9 2.0 4.9 4.2 (0.2)
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As at March 31
($ billions) 2006 2005 2004 2003 2002 2001 2000
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NET ASSETS
Equities
Canada 29.1 27.7 22.6 11.7 10.0 5.0 2.0
Non-Canada 32.6 20.9 9.3 5.4 4.1 2.1 0.4
Real return assets
Real estate 4.2 0.8 0.7 0.3 0.1 -- --
Infrastructure 0.3 0.2 -- -- -- -- --
Inflation-linked bonds 4.0 -- -- -- -- -- --
Nominal fixed income
Bonds 27.2 28.6 30.2 31.0 32.6 35.3 35.8
Money market securities 0.6 3.1 7.7 7.2 6.8 6.3 6.3
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Net assets 98.0 81.3 70.5 55.6 53.6 48.7 44.5
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PERFORMANCE (%)
Rate of return (annual) 15.5% 8.5% 17.6% (1.5)% 4.0% 7.0% 3.2%


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