Second Quarter Report

Canadian General Investments Ld 10 August 2000 June 30, 2000 SECOND QUARTER REPORT Report to Shareholders CGI's portfolio made a strong showing in the six month period ended June 30, 2000. Net asset value appreciation in the half year was 11.6% or 12.3% with common share dividends added back. Net asset value growth was 21.7% for the twelve-month period to June 30. Basic net asset value per share was $18.38 or $16.73 fully diluted at June 30, up from $15.12 and $14.06, respectively, twelve months ago. Corresponding values at year-end 1999 were $16.49 and $15.20. Total net assets increased to $346,108,000 at June 30 from $310,127,000 at the beginning of the year. This spectacular growth has been achieved despite the extreme volatility of the market. A surge of close to 30% during the first quarter before the big correction in new technologies stocks in the second quarter served to cushion our results. Total portfolio assets have ranged through the half-year from £361 to $465 million, closing out the period at just over $408 million. The traditional comparison with the TSE 300 Composite Index seems less relevant than in prior periods. The six-month Index advance of 21.2% included 10% attributable entirely to the continuing strength of Nortel, which is now well above 30% of the weighting in the index. At quarter-end, CGI held an 8.4% position in Nortel at cost, 14.4% at market value. A 10% weighting at cost for any one security is the maximum allowed for CGI to maintain investment corporation status. As a further comparative, the overall average return for the six month period for Canadian diversified mutual funds as reported in the National Post was 12.4%. Total investment income of $2,213,000 for the first six months of 2000 was considerably lower than the $3,078,000 recorded in the corresponding period in 1999, following the trend that began in the first quarter of this year. As the growth emphasis in the portfolio has shown success in the creation of value on the capital side, it has been partially responsible for a decline on the income side. PORTFOLIO FEATURES We sold the long-term holding in BCE, Inc., after the company spun out most of its shares in Nortel Networks Corporation to its shareholders. Technology, broadly defined, continues to be by far the strongest single theme in the portfolio at approximately 37.9%. We believe that Canadian world leaders in engineering sciences such as Bombardier Inc., Ballard Power Systems Inc. and BAE Systems Canada Inc. are appropriate as constituents under this theme. Our most overweight sector relative to TSE 300 weightings is oil and gas at 14.0% versus 8.3% within the index at June 30th. This group has shown strong appreciation. In financial services we are close to market weighting at 13.8% versus 15.2%. We have strengthened our positions in banks, insurance companies and financial managers. We continue overweight in communications and media. The net realized gain on investments at June 30 stood at $14,155,000 compared to $5,561,000 at the same time last year. Consideration of capital gains dividends is at the discretion of the Board of Directors and may be influenced by performance and market factors. CGI WARRANTS The first opportunity for warrant holders to convert their warrants to shares occurred on June 30 this year. Holders exercised 17,761 warrants on a one for one basis at an exercise price of $8.42 resulting in proceeds of $149,000. This increased the common shares outstanding to 18,830,378 and reduced warrants outstanding to 3,744,584. The remaining warrants are exercisable on June 30 of each year until their expiration date in 2007. BOARD OF DIRECTORS A change in the Board of Directors took place in the latest quarter with the resignation for personal reasons of Mr. Mark D. Mickleborough who served on the Board with distinction for nearly seven years. OUTLOOK Canada continues to be one of the world's best performing stock markets, greatly aided by the massive influence of Nortel but seemingly justified by low inflation, healthy economic growth, strong creation of employment opportunities and high consumer confidence. This reinforces our belief that CGI's common shares trading recently above a 30% discount to asset value, represents an excellent opportunity for investing in the Canadian equities market. E. Louise Morgan Michael A. Smedley Chairman President STATEMENT OF NET ASSETS (Unaudited) As at June 30, 2000 1999 (000's) Assets Investments $ 407,167 $ 329,740 Cash and short-term investments 2,313 2,763 Receivable on securities sold - 5,247 Accrued interest and dividends 347 552 Income taxes recoverable - 9,000 Deferred financing charge 1,080 1,412 410,907 348,714 Liabilities Payable on securities purchased 1,431 4,020 Accounts payable and accrued liabilities 63 85 Accrued dividends on preference shares 133 133 Income taxes payable 3,172 - Preference shares 60,000 60,000 64,799 64,238 Net Assets $ 346,108 $ 284,476 Shareholders' Equity Common shares $ 100,810 $ 95,122 Unrealized gain on investments 107,542 58,210 Retained earnings 137,756 131,144 $ 346,108 $ 284,476 Number of common shares outstanding 18,830,378 18,812,617 Number of warrants outstanding 3,744,584 3,762,345 Net asset value per common share - basic $ 18.38 $ 15.12 Net asset value per common share - fully diluted for warrants $ 16.73 $ 14.06 STATEMENT OF NET GAIN ON INVESTMENTS (Unaudited) Six months ended June 30, 2000 1999 (000's) Proceeds from disposition of investments $ 156,426 $ 82,092 Investments at cost, beginning of period 278,617 262,876 Investments purchased during the period 157,210 82,492 Investments at cost, end of period (299,625) (271,530) Cost of investments disposed of during the period 136,202 73,838 Realized gain on disposition of investments before income taxes 20,224 8,254 Income taxes on realized net taxable capital gains 6,069 2,693 Net realized gain on investments 14,155 5,561 Change in unrealized appreciation of investments 24,764 9,532 Net gain on investments $ 38,919 $ 15,093 STATEMENT OF OPERATIONS (Unaudited) Six months ended June 30, 2000 1999 (000's) Investment income Dividends $ 2,001 $ 2,747 Interest 186 305 Other 26 26 2,213 3,078 Expenses Management fees 2,099 1,702 Dividends on preference shares 1,611 1,611 Amortization of deferred financing charge 166 166 Directors' fees 57 58 Other 205 266 4,138 3,803 Investment loss before income taxes (1,925) (725) Income tax recovery 1,007 810 Net investment income (loss) (918) 85 Realized and unrealized gain (loss) on investments Net realized gain on investments 14,155 5,561 Change in unrealized appreciation of investments 24,764 9,532 Net gains on investments 38,919 15,093 Increase in net assets resulting from operations $ 38,001 $ 15,178 STATEMENT OF CHANGES IN NET ASSETS (Unaudited) Six months ended June 30, 2000 1999 (000's) Increase in net assets resulting from operations $ 38,001 $ 15,178 Distributions to common shareholders From net investment income (loss) (2,257) (1,383) From net realized gain on investments - (1,383) (2,257) (2,766) Income taxes recoverable on distributions from net realized gain on investments - 451 Net decrease in refundable dividend tax on hand 88 45 (2,169) (2,270) Capital share transactions Shares issued on exercise of warrants 149 - Increase in net assets 35,981 12,908 Net assets - Beginning of period 310,127 271,568 Net assets - End of period $ 346,108 $ 284,476 Distributions per common share Regular $ 0.120 $ 0.075 Capital gains - 0.075 $ 0.120 $ 0.150 CANADIAN GENERAL INVESTMENTS, LIMITED CORPORATE INFORMATION OFFICE OF THE CANADIAN REGISTRAR COMPANY AND TRANSFER AGENT 110 Yonge Street, Montreal Trust Company Suite 1601, Toronto, of Canada Ontario, Canada, M5C 1T4 151 Front Street W. Telephone (416)366-2931 8th Floor 1-800-207-0067 Toronto, Ontario, Canada Fax (416)366-2729 M5J 2N1 e-mail: Tel: (416)981-9633 cgifund@mmainvestments.com Fax: (416)981-9800 website: e-mail: www.mmainvestments.com mmamail@montrealtrust.com STOCK EXCHANGE U.K. TRANSFER AGENT LISTINGS CIBC Mellon Trust Company The Toronto Stock Exchange Trading Symbols: Balfour House Common shares CGI 390 High Road Preferred shares CGI.PR.A Ilford, Essex Warrants CGI.WT IG1 1NQ Tel: 020 8478 1888 The London Stock Exchange Reuters Symbols: To change your address, Common shares CGIq.L eliminate multiple mailings, or Warrants CGIwsq.L for other shareholder account inquiries, please contact Representative U.K. Broker: transfer agent as applicable. Teather & Greenwood Limited The Corporation calculates The Corporation will provide and releases its net asset a list of its weekly top 10 value per share (NAV) on a portfolio holdings (priced at daily basis. The NAV is pub- market), together with lished in various media in current discount and market Canada, the United States return information to any and the United Kingdom. interested party upon request. DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN This Plan offers a unique low-cost opportunity for shareholders to increase their holdings in the Corporation, one of Canada's largest closed-end funds. Please contact the Plan administrator Montreal Trust Company of Canada for details. STATEMENT OF INVESTMENTS June 30, 2000 NUMBER OF SHARES OR MARKET PAR VALUE COST VALUE (000's) Communications & Media 125,000 Astral Communications Inc. A* $ 4,254 $ 4,438 50,000 Cogeco Cable Inc. 1,544 1,800 125,000 Le Groupe Videotron Ltee* 4,429 4,300 130,000 Quebecor Inc. B+ 4,407 5,590 100,000 Rogers Communications Inc. B 2,675 4,195 100,000 The Seagram Company Ltd.+ 4,006 8,700 200,000 SHAW Communications Inc. B 1,122 7,300 60,000 The Thomson Corporation* 3,048 3,039 ----------------------- 25,485 39,362 ----------------------- Consumer Products 40,000 Biovail Corporation 3,111 3,306 70,000 Corby Distilleries Limited B 4,416 3,605 207,900 Forbes Medi-Tech Inc. 3,621 1,996 115,000 The Molson Companies Limited A* 3,250 3,329 ---------------------- 14,398 12,236 ---------------------- Financial Services 80,000 Bank of Montreal* 4,827 5,000 106,000 Bissett & Associates Investment Management Ltd.+ 1,835 1,829 150,000 C.I. Fund Management Inc.* 3,538 4,207 300,000 Canada Life Financial Corporation 6,115 9,030 200,000 Desjardins-Laurentian Financial Corporation A 4,786 3,470 404,300 Guardian Capital Group Ltd A* 2,890 2,951 100,000 Mackenzie Financial Corporation* 2,237 2,225 100,000 Royal Bank of Canada+ 5,973 7,575 300,000 Sun Life Financial Services of Canada Inc.* 4,598 7,485 150,000 TD Waterhouse Group, Inc. 4,825 3,925 240,000 The Toronto Dominion Bank 6,895 8,640 ---------------------- 48,519 56,337 ---------------------- Forest Products 250,000 Domtar Inc.+ 4,517 3,437 100,000 Smurfit-Stone Container Corporation* 2,090 1,905 --------------------- 6,607 5,342 --------------------- Golds & Precious Metals 98,850 Dia Met Minerals Ltd A 1,265 1,769 214,600 Dia Met Minerals Ltd B 4,466 4,292 38,000 Franco-Nevada Mining Corporation Limited wts 87 314 --------------------- 5,818 6,375 --------------------- Industrial Products 30,000 724 Solutions Inc. 2,992 1,953 200,000 ATI Technologies Inc.+ 3,052 2,500 84,240 Alcatel Networks Corporation exch. shares 4,744 8,243 250,000 BAE Systems Canada Inc. 3,829 5,250 80,000 Ballard Power Systems Inc.+ 5,740 10,720 80,000 BCE Emergis Inc. 1,735 7,224 250,000 Bombardier Inc B 2,549 10,050 350,000 Burntsand Inc. 4,482 2,362 70,000 C-MAC Industries Inc.* 5,008 4,900 124,000 Celestica Inc. 6,273 8,940 95,400 Certicom Corporation 3,586 4,808 100,000 Cognos, Inc. 4,309 6,120 60,000 Creo Products Inc. 3,847 2,040 88,000 DuPont Canada Inc. A 3,211 4,101 40,000 Hummingbird Communications Ltd 3,215 2,320 100,000 Intertape Polymer Group Inc. 3,400 2,575 100,000 JDS Uniphase Canada Ltd. exch. shares 4,658 17,710 569,112 Nortel Networks Corporation+ 25,133 58,448 328,500 OnX Incorporated* 3,449 1,741 50,000 PMC-Sierra, Inc+ 7,634 13,143 55,000 Potash Corporation of Saskatchewan Inc. 5,401 4,455 107,500 Ritchie Bros. Auctioneers Inc. 4,162 3,807 2,000,000 itemus inc.* 4,543 3,100 --------------------- 116,952 186,510 --------------------- Merchandising 108,900 Sears Canada Inc. 4,052 3,730 --------------------- 4,052 3,730 Metals & Minerals 75,000 Alcan Aluminium Limited 3,434 3,450 150,000 Cominco Ltd 4,090 3,052 200,000 Falconbridge Limited 3,680 3,650 61,750 Inco Limited pfd. series E 3,826 3,398 220,000 Labrador Iron Ore Royalty Income Fund 2,246 2,475 1,000,000 Teck Corporation due April 30, 2024 exch. deb. 1,000 903 ---------------------- 18,276 16,928 ---------------------- Oil & Gas 350,000 Baytex Energy Ltd A 2,318 4,900 65,300 Bonavista Petroleum Ltd* 1,630 1,698 130,000 Canadian Occidental Petroleum Ltd+ 3,029 5,219 60,000 Crestar Energy, Inc.* 1,495 1,353 500,000 Genesis Exploration Ltd* 4,060 5,500 90,000 Imperial Oil Limited 1,457 3,253 225,000 PanCanadian Petroleum Ltd. 3,629 7,200 80,000 Penn West Petroleum Ltd 2,599 2,928 200,000 Petro-Canada 3,153 5,530 325,000 Prudential Steel Ltd 3,028 7,053 160,000 Rio Alto Exploration Ltd 1,955 4,336 230,000 Suncor Energy, Inc. 2,386 7,866 ------------------------ 30,739 56,836 ======================= Pipelines 110,000 Enbridge Inc. 3,532 3,415 263,000 TransCanada Pipelines Limited 6,603 2,972 ---------------------- 10,135 6,387 ---------------------- Transportation & Environment 200,000 Air Canada* 4,007 3,900 ---------------------- 4,007 3,900 ---------------------- Utilities 100,000 Canadian Utilities Limited A 2,342 4,190 100,000 Telesystem International Wireless Inc.+ 5,160 2,710 125,000 TransAlta Corporation 2,591 1,969 ---------------------- 10,093 8,869 ---------------------- Preferred Shares 155,000 Falconbridge Limited pfd. series 2 3,404 3,255 36,400 Gentra Inc. pfd. series G 741 531 175,000 Gulf Canada Resources Limited pfd. series A 399 569 ---------------------- 4,544 4,355 ---------------------- Total Investments - June 30, 2000 $ 299,625 $ 407,167 ====================== Total Investments - June 30, 1999 $ 271,530 $ 329,740 ====================== Changes from March 31, 2000 * New Holdings + Increased Holdings INVESTMENT PORTFOLIO TEN LARGEST INVESTMENTS June 30, 2000 Company Market % of market Value Value of Total (000's) Investment Portfolio Nortel Networks Corporation $ 58,448 14.4 JDS Uniphase Canada Ltd 17,710 4.3 PMC-Sierra, Inc. 13,143 3.2 Ballard Power Systems Inc. 10,720 2.6 Bombardier Inc. 10,050 2.5 Canada Life Financial Corporation 9,030 2.2 Celestica Inc. 8,940 2.2 The Seagram Company Ltd 8,700 2.1 The Toronto Dominion Bank 8,640 2.1 Alcatel Networks Corporation 8,243 2.0 Totals $ 153,624 37.6

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