CPF INVESTMENT SCHEME-ORDINARY ACCOUNT: REALISED PROFIT/LOSS FOR THE YEAR ENDED 30 SEPTEMBER 2002

News Release by: Central Provident Fund Board 23 January 2003 --

In the year 1 October 2001 to 30 September 2002, 148,000 CPF members or 22% of all CPF members who invested their CPF under the CPF Investment Scheme-Ordinary Account (CPFIS-OA) made net realised profits after deducting interest which they would have earned in their CPF accounts. Of these members, 142,000 made less than $5,000 each. About 23,000 members (3% of total CPF investors) broke even on their investments after deducting CPF interest. Another 284,000 members (42% of total CPF investors) made realised profits but these profits were less than the CPF interest they would have earned in their CPF accounts. 225,000 members (33% of total CPF investors) incurred realised losses even before offsetting the CPF interest. Of these, 151,000 made realised losses of less than $1,000. Please see Annex 2 for the details. This is the final year that CPF members are allowed to withdraw their investment profits after deducting the CPF interest they would have earned in their CPF accounts. The net realised profit figures are conservative indicators of how members fared under the CPFIS. This is because the CPF interest that members would have earned had they not used their CPF for investment is computed based on the total amount of CPF savings withdrawn, and not only on investments that have been sold. The Government had announced in August 2000 that profit withdrawals for investments under the CPFIS would be phased out as follows: Schedule of Profit Withdrawal Realised Profit Accumulated for Financial Year (including profit carried over from previous years) Percentage of Profit Withdrawal Allowed Deadline to Withdraw Profit 1 Oct 2000 to 30 Sept 2001 100% By 30 Sept 2002 1 Oct 2001 to 30 Sept 2002 50% * By 30 Sept 2003 From 1 Oct 2002 (no more computation of profit/loss) Nil Not applicable * The 50% withdrawal percentage will also apply to profits realised in previous financial years which are not withdrawn by 30 September 2002. This is to help preserve members’ CPF savings. If profits are withdrawn, even profitable investments would not result in any enhancement of a member’s CPF savings. For the year ended 30 September 2002, 50% of the net realised profits can be withdrawn at any time until 30 September 2003. Profits which are not withdrawn by 30 September 2003 will be retained in the members’ Ordinary Accounts. CPF members who wish to invest their CPF savings should study their investments carefully in order to understand the risks and prospects of their proposed investments. They should adopt a long-term view and exercise prudence and care when they invest their CPF savings to ensure their financial well being in retirement. CPF members who prefer a guaranteed return without any investment risk can always keep their savings with the CPF Board, which provides a guaranteed risk-free interest return. Annex 1 HOW THE CPF INTEREST IS CALCULATED Interest you would have earned in your CPF Account had you not used your CPF for investment would be restored to your CPF Account after you have sold your investments. The restored interest belongs to you. It goes back into your account and becomes part of your CPF savings. You can use it as you would any other CPF savings, for example, housing and other approved CPF schemes. This principle of re-instating CPF interest is also adopted for the other CPF schemes like housing. It is calculated in the same way as for funds left in the member's CPF Ordinary Account. The comparative table below illustrates how the restored interest affects the withdrawable profit. Example 1 shows the position of a CPF member who did not invest his CPF. Examples 2 and 3 show the member investing his CPF under the CPF Investment Scheme-Ordinary Account. COMPARATIVE TABLE PERIOD: 1 OCTOBER 2001 to 30 SEPTEMBER 2002     Example 1 Example 2 Example 3 1 Savings in CPF Account $100,000 Nil Nil 2 CPF invested Nil $100,000 $100,000             Add:       3. Profit realised note 1 Nil $5,000 $2,000 4. CPF interest earned for period 1 October 2001 to 30 September 2002 $2,512 note 2 NA NA     $102,512 $105,000 $102,000   Less:       5 CPF to be kept for retirement and other CPF benefits:-         a CPF Savings $102,512 $100,000 $100,000   b Interest you would have earned in your CPF Account had you not used your CPF for investment NA $2,512 note 2 $2,512 note 2     $102,512 $102,512 $102,512 6. Net profit/(loss) Nil $2,488 ($512) 7. Withdrawable net profit (50% of net profit) Nil $1,244 Nil Note 1 The realised profit figure is after expenses such as investment transaction charges and agent banks' service charges. Note 2 a. CPF interest is computed monthly and compounded annually, and is calculated based on 2.5% per annum, which was the prevailing CPF interest rate between 1 October 2001 to 30 September 2002. b. CPF interest is applied to the net amount of CPF savings withdrawn for investments, which includes investment instruments which were still being held as at 30 September 2002 (eg. endowment insurance policies and bank deposits which have not reached maturity, and stocks and unit trusts which have not been sold).