June 17, 2002

News Release: Number of Millionaires in Canada Grew in 2001

MERRILL LYNCH ("MER-BHDNPX3;MLC-T")

World Wealth of HNWIs Rose 3% to US$26.2 Trillion, Reports Merrill Lynch and Cap Gemini Ernst & Young

There were 165,000 high net worth individuals in Canada at the end of 2001, up slightly compared to the previous year, according to Cap Gemini Ernst & Young and Merrill Lynch, which today published the 2002 World Wealth Report. "The number of HNWIs in North America rose 1.8% to 2.22 million individuals over the past year," said James Greene, global head of financial services at Cap Gemini Ernst & Young. (HNWIs are people with financial assets of at least C$1.59 million or US$1 million, excluding real estate. Ultra-HNWIs have financial assets of more than C$47m.)

Mr. Greene said: "The value of their combined wealth grew 1.7% to C$12 trillion (US$7.6 trillion), in contrast to the 11.9% drop in the value of the Standard & Poor's 500 index over 2001."

"In the region with the highest proportion of its wealth in equities anywhere in the world, a stock market decline of this magnitude was bound to retard the upward trend of HNWI wealth."

He added: "North American HNWIs accounted for 29% of global HNWI wealth in 2001. Their wealth has grown 313% since 1986, and is forecast to rise to US$11.2 trillion by the end of 2006."

World-wide, the Number of HNWIs and Their Wealth Grew

Globally, despite the volatile financial markets and wide-spread economic downturn that gripped many countries, just under 200,000 people around the world joined the ranks of high net worth individuals (HNWIs) last year.

The almost 3% increase takes the number of HNWIs to 7.1 million people around the globe, according to the benchmark report.

The report found their combined wealth rose approximately 3% to an estimated C$41.7 trillion or US$26.2 trillion.

"This rise is the slowest wealth growth reported in the World Wealth Report since it was first published in 1997," said Michael Marks, chairman of Merrill Lynch's International Private Client group and Merrill Lynch Investment Managers. "However, given the extremely difficult financial market conditions, this growth highlights the underlying strength of this market segment."

"The wealth of ultra high-net worth individuals also increased 3% to an estimated US$8.37 trillion," added Mr. Marks. "The number of UHNWIs rose 2.6% to just over 57,000 people at the end of last year."

He attributed: "a major reason for this increase, despite increasingly volatile markets, was that many wealthy investors acted wisely in 2001, taking advice and appropriate measures to protect their capital. This growth demonstrates that appropriate asset allocation and sound professional financial advice can make a difference," he said today.

GDP and Stockmarkets Down

The World Wealth Report found: "The tough economic conditions of 2001 had a predictably adverse impact on wealth creation around the globe. Gross domestic product (GDP) expansion, which had begun to fall off in the second half of 2000, continued to diminish in 2001. Many countries' economies went quiet. The U.S. slid into recession as early as March, while Europe managed only tepid growth. According to International Monetary Fund estimates, real global GDP labored to 2.5%, just over half the 4.7% achieved the year before."

"Declining stock markets also did their share of damage to HNWI wealth in 2001. The combined capitalization of major stock exchanges worldwide dropped by over 13%. With a few exceptions, such as South Korea and Thailand, the world's equity indices ended the year significantly depressed. The impact of September 11 dealt a further blow to already battered stock markets around the world. Markets fell and became dangerously volatile, with many investors quickly selling out to cut their losses," the report found.

Stealth Bull Market

Underneath this volatility, some analysts identified a "stealth bull market". The report noted that in several markets, a significant number of stock values rose substantially, but were eclipsed by the spectacular losses suffered by large-cap stocks, especially in the technology sector. For example, in the United States although the S&P500 index dropped 11.9% in 2001, over 40% of the index's stocks rose in value. Smaller-cap stocks fared relatively well as a group, with the S&P index of 600 smaller stocks up 5.7% at year-end.

Mr. Marks said: "Anecdotal evidence suggests that HNWIs were among the first to recognize and benefit from this "stealth bull market."

The report noted: "The 3% growth in global HNWI wealth, only half the 6% of 2000 and a long way from the 18% registered in 1999, indicates that a significant minority of HNWIs remained too heavily invested in equities for too long, particularly in high-risk "growth" stocks."

"The events of the past year had a sobering effect on the world's investors, but the panic selling some predicted never materialized. The turmoil of 2001 caused many HNWIs to seek expert advice and more frequent personal contact with their professional financial advisors," it said.

Wealth Forecast to Continue to Grow

As for the future, Merrill Lynch's Mr. Marks forecast: "We expect modest economic recovery through 2003, and that HNWI wealth will rise by an average of 8% a year, reaching $38.5 trillion by the end of 2006. These growth rate projections reflect the belief that, despite a difficult time, global GDP and the stock markets have exhibited significant underlying powers of recovery.

As that strength re-emerges, HNWIs will once again invest more confidently in these higher risk, higher yielding financial assets, fuelling their wealth growth over the longer term."

Mr. Greene added: "As global wealth continues to expand, individuals with complex financial needs require innovative solutions. Wealth managers will have to develop solutions that combine global resources with local expertise and experience to satisfy clients' needs," he said today.


Growth in High Net Worth Wealth by Region


Region Growth during 2001 Market share

Asia 7.1% 20%
Europe 0% 32%
Latin America 8.0% 13%
Middle East 0% 3.8%
North America 1.7% 29%

The Cap Gemini Ernst & Young Group is one of the largest management and IT consulting organisations in the world. The company offers management and IT consulting services, systems integration, and technology development, design and outsourcing capabilities on a global scale to help businesses continue to implement growth strategies and leverage technology. In early 2002, the organisation employed more than 56,500 people world-wide and reported 2001 global revenues of more than 8.4 billion euros. More information about individual service lines, offices and research is available at www.cgey.com.

Merrill Lynch's International Private Client group is one of the world's pre-eminent private wealth management and advisory services. Its financial consultants combine world-class global resources with local expertise and experience to add value to their clients' wealth management. This individual approach provides clients with personalized financial strategies, innovative products and exceptional client service.

Merrill Lynch (NYSE: MER) is one of the world's leading financial management and advisory companies with offices in 38 countries and total client assets of approximately $1.4 trillion. As an investment bank, it is a leading global underwriter of debt and equity securities and strategic advisor to corporations, governments, institutions, and individuals worldwide. Through Merrill Lynch Investment Managers, the company is one of the world's largest managers of financial assets. For more information on Merrill Lynch, please visit www.ml.com. TEL: 212/449-3987 or 917/859-3558 Guy McKanna, Merrill Lynch Email: This email address is being protected from spambots. You need JavaScript enabled to view it. TEL: 416/941 1819

Carolyn Rouse, Cap Gemini Ernst & Young Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

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