NORWAY S SOVEREIGN WEALTH FUND

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1 GOVERNMENT PENSION FUND GLOBAL NORWAY S SOVEREIGN WEALTH FUND AGE BAKKER, CHIEF OPERATING OFFICER REGIONAL NETWORK NORTH TROMSØ,

2 OUR MISSION IS TO SAFEGUARD AND BUILD FINANCIAL WEALTH FOR FUTURE GENERATIONS

3 From natural resources to financial wealth 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% CONTINENTAL SHELF THE FUND Source: Facts Norwegian Petroleum Sector The graph shows smoothed proportion of the remaining value on the Norwegian continental shelf and the real value of the fund. Historical and estimated. Source: Ministry of Finance and Norges Bank Investment Management

4 The fund mechanism Petroleum revenues and return on investments Transfer to finance non-oil budget deficit Non-oil revenues Statens pensjonsfond Pension utland Fund Global Government Pension Fund Global Statsbudsjettet Fiscal budget Fiscal policy guideline (real return of the fund spent over time, estimated at 4 %) Expenditures 4

5 Large annual inflows Government revenue from exploration, billions of kroner Projection Other SDØE Petroleum taxes Source: Facts Norwegian Petroleum Sector 2014; Ministry of Finance (50)

6 A fund owned by the Norwegian people Governance model Stortinget Norwegian Parliament Government Pension Fund Act Annual white paper. National budget and accounts Stortinget Ministry of Finance Management mandate and ethical guidelines Quarterly and annual reports. Advice on investment strategy Stortinget 6

7 THE RESULTS

8 A large fund Billion dollars. Percent of Norwegian GDP THE FUNDS MARKET VALUE 250 Percent of GDP (right axis) NOK USD 840 BILLION Source: Norges Bank Investment Management

9 Accumulated change in market value Billions of kroner Return Krone rate Inflows Source: Norges Bank Investment Management

10 Inflows Billions of kroner Quarterly inflow Average inflow since Source: Norges Bank Investment Management

11 Quarterly return Percent Return 1Q % Last ten years 6.2 % Annually since % Quarterly return Accumulated annualised return Source: Norges Bank Investment Management

12 Excess return Percentage points 2,5 2,0 1,5 1,0 0,5 Excess return 1Q 0.01 % Last 10 years 0.2 % Annually since % 2,5 2,0 1,5 1,0 0,5 Quarterly Excess Return Accumulated annualised excess return 0,0 0,0-0,5-0,5-1,0-1,0-1,5-1,5-2,0-2,0-2, ,5 12 Source: Norges Bank Investment Management

13 Accumulated annualised return Annualised nominal (real) return since Percent USD (nominal returns) Currency basket (nominal returns) Currency basket (real returns, net of operating costs) Source: Norges Bank Investment Management

14 Changes in value since 1996 Billions of kroner 31/03/2014 Market value of the fund 5,110 Gross inflow of new capital 3,344 Management costs 25 Changes due to fluctuations in krone -86 Accumulated return 1,877 14

15 INVESTMENT STRATEGY

16 Management objectives OBJECTIVE HIGHEST POSSIBLE LONG-TERM RETURN SUBJECT TO Acceptable risk Responsible investments Effecient organisation Transparent 16

17 Investment strategy Invest globally Protect international purchasing power and take part in global value creation Diversify investments Diversify risk and return by global investments across asset classes Exploit the fund s characteristics Create excess return by exploting the fund s long-term perspective and large size 17

18 Global investments 82 countries and 44 currencies 45 % EUROPE 33 % NORTH AMERICA 17 % ASIA AND OSEANIA 2,5 % REST OF THE WORLD 18

19 Market development Starting point for the fund s asset allocation Bonds Equities US Bills ,1 0, Source: Norges Bank Investment Management, Dimson, Marsh og Staunton

20 Asset allocation STRATEGIC ALLOCATION AS OF 31/03/ % EQUITY % FIXED INCOME 0-5 % REAL ESTATE 20

21 Allocation Billions of kroner ASSET CLASS MARKET VALUE Real estate Real estate 59 Fixed income Fixed income Equity Equity Source: Norges Bank Investment Management

22 Equity investments 82 COUNTRIES 8,213 COMPANIES 1.3 % OF GLOBAL LISTED COMPANIES 2.5 % OF EUROPEAN LISTED COMPANIES 22

23 23 Large global companies

24 Ownership in global equities The fund s holdings in equity markets. Percent of FTSE Global All Cap Index 2,00 2,00 Developed markets 1,50 1,50 Emerging markets Total 1,00 1,00 0,50 0,50 0, ,00 24 Source: FTSE, Norges Bank Investment Management

25 External managers 3.6 % of the fund s assets. 67 mandates, 59 managers as of MEXICO CITY, MEXICO BOGOTA, COLOMBIA NEW YORK, USA OSLO, NORWAY TALLIN, ESTONIA MOSKVA, RUSSIA STOCKHOLM, SWEDEN LONDON, GB WARSAW, POLAND PARIS, FRANCE FRANKFURT, GERMANY BUDAPEST, HUNGARY MADRID, SPAIN MILAN, ITALY ISTANBUL, TURKEY CAIRO, EGYPT RIYADH, SAUDI ARABIA DUBAI, UAE MUMBAI, INDIA KUALA LUMPUR, MALAYSIA HO CHI MIN, VIETNAM BEIJING, CHINA SEOUL, SOUTH KOREA TOKYO, JAPAN SHANGHAI, CHINA HONG KONG BANGKOK, THAILAND MANILA, FILIPPINENE JAKARTA, INDONESIA SANTIAGO, CHILE RIO DE JANEIRO, BRASIL SAO PAULO, BRASIL CAPE TOWN, SOUTH AFRIKA SYDNEY, AUSTRALIA 25

26 Fixed income investments Currency distribution. Percent 1, ,3 12,1 3,9 13, ,7 9,3 9,0 7,4 7,6 5,2 5, , Emerging markets Other emerging JPY GBP 40 38,4 37,5 40 USD 20 46,0 27,8 27,0 20 EUR 0 Dec-10 Dec-13 March Source: Norges Bank Investment Management

27 Real estate investments SAN FRANSISCO SHEFFIELD LONDON BOSTON NEW YORK BERLIN FRANKFURT MUNICH ZURICH PARIS WASHINGTON DC 27 NOK 10 bn or more NOK 5 10 bn NOK 1 5 bn NOK 0 1 bn No investment *As of Countries marked with colour, but not named, represent countries where we only have investments in logistics.

28 RESPONSIBLE INVESTMENT

29 Responsible investment PRINCIPLES International standards Principles and expetations Research and dialogue with other investors COMPANY DIALOUGE Voting Company dialouge Board contact FUND SURVEILANCE Risk assessment and surveilance Focus areas and sector analysis Divestment Enviromental related investments 29

30 Responsible investor INVESTOR CHARACTERISTICS Long-term horizon FOCUS AREAS LONG-TERM RISKS Children s rights Climate change Water management Financial investor MARKETS Well-functioning financial markets Minority shareholder CORPORATE GOVERNANCE Equal treatment of shareholders Shareholder influence and board accountability 30

31 ORGANISATION

32 A global organisation OSLO LONDON NEW YORK SHANGHAI SINGAPORE 386 EMPLOYEES 29 NATIONS 32 AS OF 31 MARCH 2014

33 Low-cost fund management Basis points of total assets under management Total cost Cost excluding performance-based fees CEM comparison group bps Source: Norges Bank Investment Management, CEM 0

34 Transparency The funds market value updated continuously at nbim.no Complete annual holding lists Voting records published one day after general meetings Annual and quarterly reports including full IFRS financial reporting Governing documents, correspondence and research on website 34

NORGES BANK INVESTMENT MANAGEMENT NIRI SAN FRANCISCO CHAPTER PRESENTATION TUESDAY 13TH MAY 2014 SPEAKER: HUGO SANDERS- HEAD OF CORPORATE ACCESS

NORGES BANK INVESTMENT MANAGEMENT NIRI SAN FRANCISCO CHAPTER PRESENTATION TUESDAY 13TH MAY 2014 SPEAKER: HUGO SANDERS- HEAD OF CORPORATE ACCESS Safeguarding financial wealth From natural resource to financial