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November 13, 2001

The total invested assets available to the Canada Pension Plan held their value in the first six months of the current fiscal year despite the deterioration in equity markets.

On a consolidated basis, the total fixed income and equity assets available to the Canada Pension Plan had an estimated 1.4% rate of return in the first half of the fiscal year ended September 30, 2001 to produce an investment gain of approximately $200 million.

The fixed-income assets had a market value of approximately $40 billion on September 30, 2001, generated an estimated positive return of 3.9% and investment income of approximately $1.6 billion. These assets consist of federal and provincial bonds and an operating cash reserve. They are directly owned by the Canada Pension Plan and administered by the Department of Finance Canada.

The equity assets had a negative 8.9% rate of return, or a $1.4 billion loss, in the first half of fiscal 2002, reflecting lower corporate earnings and market reaction to the events of September 11. The market value of these assets totalled $12.0 billion on September 30, 2001, compared with $7.2 billion at fiscal year end on March 31, 2001.

The equities, primarily in the form of index funds, are managed by the CPP Investment Board and represented 23% of the consolidated assets available to the Canada Pension Plan.

The negative 8.9% rate of return on equities compared with a negative 10.1% for the total portfolio benchmark, which measures the markets in which the CPP Investment Board invests.

Approximately 70% of assets at market value were invested in Canadian equities, which lost 8.0%, compared with minus 9.4% for the Toronto Stock Exchange 300 Composite Index. The CPP Investment Board’s Canadian portfolio did better than the market primarily because of the risk management policy of capping exposure to any single issuer.

The 30% of assets at market value invested in foreign equities had a negative 11.4% return versus minus 11.8% for the benchmark (a blend of the S&P 500 Index for U.S. equities and the MSCI EAFE Index for international equities). The foreign portfolio did better than the benchmark due to declines in prices while funds received from the Canada Pension Plan were being invested in the market.



Equity markets declined steadily from May until the end of September, with a steep decline occurring in reaction to the events of September 11, commented CPP Investment Board President and Chief Executive Officer John A. MacNaughton. “The markets anticipated in September the lower corporate earnings that were reported in recent weeks.”

As assets grow to exceed $130 billion within 10 years “we will see wide swings in quarterly gains and losses,” Mr. MacNaughton said. “However, current markets continue to represent favourable buying opportunities for us. First, our annual cash flows are large and we can buy equities at lower prices than they were a year or so ago and lower than they will likely be in a few years time. Second, these large positive cash flows will continue for many years so we have a very long investment horizon.”

Mr. MacNaughton explained that it is not possible to predict how equity markets will perform in the short term. Consequently, the CPP Investment Board does not attempt to time the market. “What we do know is that market corrections are always followed by market recoveries.”

The CPP Investment Board invests exclusively in equities because of the large fixed-income portfolio owned by the Canada Pension Plan and because it believes equities will produce superior long-term returns for the risks incurred.

Based on the actuarial assumptions for the Canada Pension Plan, contributions are expected to exceed benefit payments until 2021, providing a 20-year period before investment income is needed to help pay pensions.

The CPP Investment Board is a crown corporation created by an Act of Parliament in December 1997. It invests in capital markets funds not needed by the Canada Pension Plan to pay current pensions. Cash flows are currently invested only in equities to balance the cash and bonds owned by the Canada Pension Plan. By increasing the long-term value of funds, the CPP Investment Board will help the Canada Pension Plan to keep its pension promise to Canadians. The CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm’s length from governments.       

For further information contact:

John A. MacNaughton

President and Chief Executive Officer

(416) 868-4077

November 13, 2001

The total invested assets available to the Canada Pension Plan held their value in the first six months of the current fiscal year despite the deterioration in equity markets.

On a consolidated basis, the total fixed income and equity assets available to the Canada Pension Plan had an estimated 1.4% rate of return in the first half of the fiscal year ended September 30, 2001 to produce an investment gain of approximately $200 million.

The fixed-income assets had a market value of approximately $40 billion on September 30, 2001, generated an estimated positive return of 3.9% and investment income of approximately $1.6 billion. These assets consist of federal and provincial bonds and an operating cash reserve. They are directly owned by the Canada Pension Plan and administered by the Department of Finance Canada.

The equity assets had a negative 8.9% rate of return, or a $1.4 billion loss, in the first half of fiscal 2002, reflecting lower corporate earnings and market reaction to the events of September 11. The market value of these assets totalled $12.0 billion on September 30, 2001, compared with $7.2 billion at fiscal year end on March 31, 2001.

The equities, primarily in the form of index funds, are managed by the CPP Investment Board and represented 23% of the consolidated assets available to the Canada Pension Plan.

The negative 8.9% rate of return on equities compared with a negative 10.1% for the total portfolio benchmark, which measures the markets in which the CPP Investment Board invests.

Approximately 70% of assets at market value were invested in Canadian equities, which lost 8.0%, compared with minus 9.4% for the Toronto Stock Exchange 300 Composite Index. The CPP Investment Board's Canadian portfolio did better than the market primarily because of the risk management policy of capping exposure to any single issuer.

The 30% of assets at market value invested in foreign equities had a negative 11.4% return versus minus 11.8% for the benchmark (a blend of the S&P 500 Index for U.S. equities and the MSCI EAFE Index for international equities). The foreign portfolio did better than the benchmark due to declines in prices while funds received from the Canada Pension Plan were being invested in the market.



Equity markets declined steadily from May until the end of September, with a steep decline occurring in reaction to the events of September 11, commented CPP Investment Board President and Chief Executive Officer John A. MacNaughton. "The markets anticipated in September the lower corporate earnings that were reported in recent weeks."

As assets grow to exceed $130 billion within 10 years "we will see wide swings in quarterly gains and losses," Mr. MacNaughton said. "However, current markets continue to represent favourable buying opportunities for us. First, our annual cash flows are large and we can buy equities at lower prices than they were a year or so ago and lower than they will likely be in a few years time. Second, these large positive cash flows will continue for many years so we have a very long investment horizon."

Mr. MacNaughton explained that it is not possible to predict how equity markets will perform in the short term. Consequently, the CPP Investment Board does not attempt to time the market. "What we do know is that market corrections are always followed by market recoveries."

The CPP Investment Board invests exclusively in equities because of the large fixed-income portfolio owned by the Canada Pension Plan and because it believes equities will produce superior long-term returns for the risks incurred.

Based on the actuarial assumptions for the Canada Pension Plan, contributions are expected to exceed benefit payments until 2021, providing a 20-year period before investment income is needed to help pay pensions.

The CPP Investment Board is a crown corporation created by an Act of Parliament in December 1997. It invests in capital markets funds not needed by the Canada Pension Plan to pay current pensions. Cash flows are currently invested only in equities to balance the cash and bonds owned by the Canada Pension Plan. By increasing the long-term value of funds, the CPP Investment Board will help the Canada Pension Plan to keep its pension promise to Canadians. The CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm's length from governments.       

For further information contact:

John A. MacNaughton

President and Chief Executive Officer

(416) 868-4077

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