November 10, 2011
TORONTO, ON (November 10, 2011): The CPP Fund ended the second quarter of fiscal 2012 on September 30, 2011 at $152.3 billion compared to $153.2 billion at the end of the first quarter on June 30, 2011. ??The $0.9 billion decrease in net assets resulted from an investment loss of $1.2 billion, or a negative 0.8% rate of return, partially offset by inflows of CPP contributions of $0.4 billion during the quarter.??For the six month fiscal year-to-date period, the CPP Fund increased by $4.1 billion from $148.2 billion at March 31, 2011. This increase in net assets is comprised of $0.1 billion in investment income, representing a 0.1% rate of return, and contributions of $4.2 billion. ??“Despite major equity market indices declining approximately 11% on average, the Fund’s overall quarterly performance benefitted from our active management programs and private market holdings,” said David Denison, President and CEO, CPP Investment Board. “We remain an active and disciplined investor in these challenging market conditions and are prepared to act when the right opportunities arise.” ? ?Five and 10-Year Returns??For the five-year period ended September 30, 2011, the CPP Fund generated an annualized investment rate of return of 3.1% or $19.6 billion of investment income. For the 10-year period ended September 30, 2011, the Fund generated $51.7 billion of investment income reflecting an annualized rate of return of 5.9%.
Investment Portfolio Update??We announced a number of investments during the quarter, including:
• Acquisition of interests in two premier shopping centres in St. Louis, Missouri alongside General Growth Properties:
45% interest in Plaza Frontenac, a 482,000-square-foot shopping centre anchored by Saks Fifth Avenue and Neiman Marcus.
26% interest in Saint Louis Galleria, one of St. Louis’ top shopping destinations with more than 165 specialty stores.
• $244 million equity investment in a joint venture with Global Logistic Properties to develop and hold modern logistics facilities in Japan.
• Over $290 million equity investment in several multi-family assets in the Boston, Washington, D.C., Los Angeles, San Jose and Seattle areas. These represent CPPIB’s first direct entry into the U.S. multi-family real estate sector.
• Acquisition of a 45% interest in 1255 23rd Street, a 340,000-square-foot Class A office property in Washington, D.C. This $29 million equity investment is a joint venture with locally-based Carr Properties and MetLife Real Estate Investments.
• Acquisition of a 32% interest in a joint venture owning two Manhattan properties:
655 Fifth Avenue – a 49,300-square-foot retail/office property located in Manhattan’s premier retail corridor.
100 Broadway – a 394,600-square-foot office building located in lower Manhattan
• A $292 million investment in a joint venture with Grosvenor Fund Management to invest in office properties in the West End and Midtown areas of London.
We also announced several significant investments following quarter end:
• TMX Group Inc. and Maple Group Acquisition Corporation announced on October 30, 2011 that they have entered into a support agreement in respect of Maple’s proposed acquisition of all the outstanding TMX Group shares pursuant to an integrated two-step transaction valued at approximately $3.8 billion. CPPIB is one of 13 investors in Maple Group which is comprised of leading financial institutions and pension funds.
• On October 28, 2011, shareholders of Kinetic Concepts, Inc. (KCI), a leading global medical technology company, approved the previously-announced acquisition of KCI by a consortium comprised of CPPIB, Apax Partners and PSP Investments for US$68.50 per common share in cash or a total value of approximately $6.2 billion including KCI’s debt. This transaction was completed on November 4, 2011.
• Entered into a definitive agreement alongside Ares Management to acquire dollar discount chain, 99 Cents Only Stores, for US$22.00 per share in cash. 99 Cents Only Stores has a strong market position and attractive store economics in a growing retail sector.
• Announced a 50/50 joint venture with Oxford Properties for the development of RBC WaterPark Place, a 930,000-square-foot Class AAA LEED Gold office tower in downtown Toronto. The development will add a major state-of-the-art office tower to CPPIB’s Canadian real estate portfolio and will house the head office of RBC’s Canadian banking business.
Long-term sustainability??The Chief Actuary of Canada conducts a financial review of the Canada Pension Plan every three years. In the latest triennial review completed in November 2010, the Chief Actuary reaffirmed that the CPP remains sustainable at the current contribution rate of 9.9% throughout the 75-year period of his report. The report also indicates that CPP contributions are expected to exceed annual benefits paid until 2021, providing a 10-year period before a portion of the investment income from the CPPIB will be needed to help pay pensions. ??Asset Mix
• Equities represented $75.6 billion or 49.6% of the investment portfolio. That amount consisted of public equities valued at $50.3 billion or 33.0% and private equities valued at $25.3 billion or 16.6%.
• Fixed income, which includes bonds, money market securities, other debt and debt financing liabilities, represented $50.0 billion or 32.8%.
• Inflation-sensitive assets represented $26.8 billion or 17.6%. Those assets consisted of:
◦ Real estate valued at $13.9 billion or 9.1%
◦ Infrastructure assets valued at $8.7 billion or 5.7%
◦ Inflation-linked bonds valued at $4.2 billion or 2.8%.
CPP Investment Board ?The CPP Investment Board is a professional investment management organization that invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, the CPP Investment Board invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in London and Hong Kong, the CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At September 30, 2011, the CPP Fund totaled $152.3 billion. For more information about the CPP Investment Board, please visit www.cppib.ca.
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