CPP Fund Grows to $116.6 billion and Reports a 12.9 per cent Investment Rate of Return

May 24, 2007 TORONTO, ON (May 24, 2007): The CPP Fund ended the fiscal 2007 year on March 31, 2007 at $116.6 billion, an increase of $18.6 billion from $98 billion at the close of the previous year. 

Of the $18.6 billion growth, a 12.9 per cent investment rate of return for the year contributed $13.1 billion in investment earnings, while inflows of CPP contributions not needed to pay current pension benefits added an additional $5.5 billion. 

“In earning 12.9 per cent, our investment team outperformed its benchmark by adding 2.5 per cent or approximately $2.4 billion in added value to the portfolio above the 10.4 per cent benchmark return,” said David Denison, President and CEO, CPP Investment Board. The 12.9 per cent investment rate of return in 2007 compares to a return of 15.5 per cent in fiscal 2006, 8.5 per cent in 2005 and 17.6 per cent in 2004. 

“During the fiscal 12-month period ended March 31, 2007 a key factor in the CPP investment portfolio’s return was strong equity market performance in the first nine months of the fiscal year, followed by a degree of volatility in the first three months of 2007, including a sharp downturn in equity markets in February,” said Mr. Denison. “Our decision to diversify our investments into a wider range of asset classes including infrastructure and real estate significantly contributed to our value-added results this year. We also added value through our active programs in public markets and through strong performance within our private equity and real estate holdings.”  
Fiscal 2007 Portfolio Performance 

Private Investments experienced a very strong year. Private equities earned a return of 35.3 per cent and contributed $1.9 billion in net investment income, up from 17.7 per cent or $572 million in fiscal 2006. Contributing factors included strong valuation gains from fund investments and the realizations of some of our principal investments. Infrastructure investments also performed very well, earning 18.4 per cent or $150 million in net investment income, up from -2.1 per cent or -$8 million in 2006. 

Real Estate Investments delivered an exceptionally strong year in fiscal 2007, partially due to $133 million of income from the sale of Trizec Canada and Trizec Properties REIT. Real estate assets in the portfolio generated a return of 31.4 per cent amounting to $1.3 billion in net investment income, up from 19.7 per cent or $481 million in fiscal 2006. 

In Public Market Investments, public equities generated a solid return of 13.1 per cent or $8.1 billion in net investment income, down from 23 per cent or $10.6 billion in fiscal 2006. This was partly a function of the downturn in equity markets in the last quarter of fiscal 2007, ended March 31. 

 Asset Growth 
Real estate assets grew by $1.5 billion in fiscal 2007 to $5.7 billion, up from $4.2 billion in fiscal 2006. Most of those assets were added in Continental Europe, the United States and the United Kingdom. Private equities grew by $3.7 billion to $8.1 billion and included, among other principal investments, a $228 million investment in Freescale Semiconductor, Inc. Infrastructure assets grew from $0.3 billion in fiscal 2006 to $2.2 billion by the end of fiscal 2007 and included the $1.1 billion purchase of a one-third interest in AWG Plc, parent of a U.K.-based water utility and the $364 million acquisition of a 27 per cent ownership position in HQI Transelec Chile S.A., Chile’s largest electricity transmission company. Public equities grew by $10.2 billion in fiscal 2007 to $67.5 billion, up from $57.3 billion in fiscal 2006. 

 Asset Mix 
At March 31, 2007, equities represented 64.8 per cent of the fund or $75.6 billion. That amount consisted of 57.8 per cent public equities valued at $67.5 billion and 7 per cent private equities valued at $8.1 billion. Bonds represented 25 per cent of the portfolio or $29.2 billion. Inflation-sensitive assets represented 10.1 per cent or $11.7 billion. Of those assets, 4.9 per cent consisted of real estate valued at $5.7 billion, 3.3 per cent was inflation-linked bonds valued at $3.8 billion and 1.9 per cent was infrastructure valued at $2.2 billion. The final 0.1 per cent of the portfolio or $0.1 billion was held in money market securities. 

Four-year Review 
“The CPP Fund’s annualized investment rate of return of 13.6 per cent over the past four years indicates that we are on track to meet our multi-generational goal of helping to sustain the pensions of the 16 million participants in the CPP,” said Mr. Denison. 

To see a summary of the financial highlights, please visit the 2007 Portfolio Summary. FOR THE YEAR ENDED MARCH 31 ($ billions) 2007 2006 2005 2004 CHANGE IN NET ASSETS         Income           Net Contributions 5.5 3.6 4.5 4.6   Investment Income 13.1 13.1 6.3 10.3 Increase in net assets 18.6 16.7 10.8 14.9   AS AT MARCH 31 ($ billion) 2007 2006 2005 2004 NET ASSETS         Equities           Canada 29.2 29.1 27.7 22.6   Foreign 46.4 32.6 20.9 9.3 Nominal fixed income           Bonds 29.2 27.2 28.6 30.2   Money market securities 0.1 0.6 3.1 7.7 Inflation-sensitive assets           Real estate 5.7 4.2 0.8 0.7   Inflation-linked bonds 3.8 4.0 - -   Infrastructure 2.2 0.3 0.2 - Net assets 116.6 98.0 81.3 70.5   PERFORMANCE (%)         Rate of return (annual) * 12.9% 15.5% 8.5% 17.6%   *Commencing in fiscal 2007, the rate of return reflects the performance of the CPP Fund which excludes the short-term cash required to pay current benefits. CPP contributions are expected to exceed annual benefits paid until 2022, providing a 15-year period before a portion of the investment income is needed to help pay CPP benefits. The Chief Actuary of Canada estimates that the CPP Fund will grow to approximately $250 billion within the next 10 years, making it one of the largest single purpose pools of investment capital in the world, thereby helping to secure the CPP for the long term. The CPP Investment Board’s 2007 Annual Report will available on this Web site on June 1, 2007. For further information contact: May Chong Director, Communications (416) 868-8657 mchong@cppib.ca FOR THE YEAR ENDED MARCH 31 ($ billions) 2007 2006 2005 2004 CHANGE IN NET ASSETS         Income           Net Contributions 5.5 3.6 4.5 4.6   Investment Income 13.1 13.1 6.3 10.3 Increase in net assets 18.6 16.7 10.8 14.9   AS AT MARCH 31 ($ billion) 2007 2006 2005 2004 NET ASSETS         Equities           Canada 29.2 29.1 27.7 22.6   Foreign 46.4 32.6 20.9 9.3 Nominal fixed income           Bonds 29.2 27.2 28.6 30.2   Money market securities 0.1 0.6 3.1 7.7 Inflation-sensitive assets           Real estate 5.7 4.2 0.8 0.7   Inflation-linked bonds 3.8 4.0 - -   Infrastructure 2.2 0.3 0.2 - Net assets 116.6 98.0 81.3 70.5   PERFORMANCE (%)         Rate of return (annual) * 12.9% 15.5% 8.5% 17.6%   *Commencing in fiscal 2007, the rate of return reflects the performance of the CPP Fund which excludes the short-term cash required to pay current benefits.   FOR THE YEAR ENDED MARCH 31 ($ billions) 2007 2006 2005 2004 CHANGE IN NET ASSETS         Income           Net Contributions 5.5 3.6 4.5 4.6   Investment Income 13.1 13.1 6.3 10.3 Increase in net assets 18.6 16.7 10.8 14.9   AS AT MARCH 31 ($ billion) 2007 2006 2005 2004 NET ASSETS         Equities           Canada 29.2 29.1 27.7 22.6   Foreign 46.4 32.6 20.9 9.3 Nominal fixed income           Bonds 29.2 27.2 28.6 30.2   Money market securities 0.1 0.6 3.1 7.7 Inflation-sensitive assets           Real estate 5.7 4.2 0.8 0.7   Inflation-linked bonds 3.8 4.0 - -   Infrastructure 2.2 0.3 0.2 - Net assets 116.6 98.0 81.3 70.5   PERFORMANCE (%)         Rate of return (annual) * 12.9% 15.5% 8.5% 17.6%   *Commencing in fiscal 2007, the rate of return reflects the performance of the CPP Fund which excludes the short-term cash required to pay current benefits.