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28/02/2017
GOVERNMENT PENSION FUND GLOBALANNUAL REPORT 2016
PRESS CONFERENCEOSLO, 28 FEBRUARY 2017
Highlights
The return was 6.9 percent in 2016• Equity 8.7 percent• Fixed income 4.3 percent• Real estate 0.8 percent
The return on equity and fixed-income investments was 0.15 percentage point higher than the return on the benchmark index
The market value of the fund grew by 35 billion kroner to 7,510 billion kroner
Asset allocation at the end of the year:• Equity 62.5 percent• Fixed income 34.3 percent• Real estate 3.2 percent
2
28/02/2017
GOVERNMENT PENSION FUND GLOBALANNUAL REPORT 2016
PRESS CONFERENCEOSLO, 28 FEBRUARY 2017
7,510 billion kroner in the fundAs at 31.12.2016. Billions of kroner
4
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Fixed-incomeinvestmentsReal estateinvestments
Equityinvestments
Value Percentage share
Equity investments 4,692 62.5
Fixed-income investments 2,577 34.3
Real estate investments 242 3.2
Source: Norges Bank Investment Management
7,510
First year of outflowBillions of kroner
5
-200
-100
0
100
200
300
400
-200
-100
0
100
200
300
400
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Inflow/outflow
Average inflowsince 1998
171
-105
Source: Norges Bank Investment Management
3,123 billion kroner returnAccumulated market value as at 31.12.2016. Billions of kroner
6
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Krone rate
Return
Inflow (aftermanagement costs)
Source: Norges Bank Investment Management
3,123
1,025
3,363
4 out of 5 kroner of return past five yearsAccumulated return as at 31.12.2016. Billions of kroner
7
-500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
-500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Source: Norges Bank Investment Management
3,123
Total returnBillions of kroner
8
3,123
2,606
2,019
-500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
-500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
98 00 02 04 06 08 10 12 14 16
Actualreturn
4% realreturn
3% realreturn
Source: Norges Bank Investment Management
Stronger krone reduced the market valueAnnual change in market value. Billions of kroner
9
Source: Norges Bank Investment Management
-1,000
-500
0
500
1,000
1,500
-1,000
-500
0
500
1,000
1,500
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Krone rate
Return
Inflow
Total
3,000
4,000
5,000
6,000
7,000
8,000
9,000
300
400
500
600
700
800
900
Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16
USD (left axis)
EUR (left axis)
NOK (right axis)
Change in market value in different currenciesNOK, USD and EUR. Billion currency units
10
NOK (mill.)
USD(mill.)
EUR (mill.)
31.12.2016 7,510 873 82731.12.2015 7,475 845 77731.12.2014 6,431 858 709Change 2016 0 % 3 % 6 %
Source: Norges Bank Investment Management
6.9 percent returnAnnual return. Percent
11
-30
-20
-10
0
10
20
30
-30
-20
-10
0
10
20
30
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Annual return
Accumulatedannualised returnsince 1998
6.9 %
Source: Norges Bank Investment Management
4Q 2016 2.2 %
2016 6.9 %
Last 10 years 5.2 %
Since 1998 5.7 %
5.7 %
Positive return in all asset classesMeasured in the fund’s currency basket. Percent
12
Source: Norges Bank Investment Management
-50
-40
-30
-20
-10
0
10
20
30
40
-50
-40
-30
-20
-10
0
10
20
30
40
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Equityinvestments
Fixed-incomeinvestments
Real estateinvestments
2016 2015Equity investments 8.7 % 3.8 %Fixed-income investments 4.3 % 0.3 %Real estate investments 0.8 % 10.0 %Total 6.9 % 2.7 %
Good return on the fund
2016 Past 5 years Past 10 years Since 1.1.1998
Return on fund 6.92 9.22 5.25 5.70
Annual inflation 1.52 1.31 1.77 1.76
Annual management fees 0.05 0.06 0.08 0.09
Annual net real return 5.27 7.74 3.33 3.79
Key figures measured in the currency basket. Annualised. Percent
13
Source: Norges Bank Investment Management
199 billion in cash flow in 2016Fund income. Accrued. Annual. Billions of kroner
14
0
25
50
75
100
125
150
175
200
0
25
50
75
100
125
150
175
200
98 00 02 04 06 08 10 12 14 16
Net rental income
Dividends
Coupon interest
2016 Since 1997
Dividends 119 662Coupon interest 73 741Net rental income 8 19Total 199 1 462
Source: Norges Bank Investment Management
Cash flow and share of fund valueBillions of kroner (left axis) and percent of fund (right axis)
15
0.0 %
1.0 %
2.0 %
3.0 %
4.0 %
5.0 %
6.0 %
7.0 %
8.0 %
9.0 %
10.0 %
0
20
40
60
80
100
120
140
160
180
200
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Cash flow frominvestments
Percentage shareof the fund
Source: Norges Bank Investment Management
GPFGdividends,
couponinterest,
rental income
Crude oil Natural gas Fish, etc(SITC 03)
Machineryand transport
equipment(SITC 7)
Sea andcoastal water
transport(Maritimetransport)
Financialservices
Metals andmanufactures
of metals(SITC 67-69)
Chemicals(SITC 5)
NOK 199 186 160 89 89 75 70 62 49
0
50
100
150
200
250
0
50
100
150
200
250
Balance of payments and fund incomeExport 2016.*) Billions of kroner
16Source: Statistics Norway, Norges Bank Investment Management
* Export of services 4Q 2015- 3Q 2016
Positive relative returnAnnual relative return of the fund. Percentage points
17
-5
-4
-3
-2
-1
0
1
2
3
4
5
-5
-4
-3
-2
-1
0
1
2
3
4
5
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Annual relativereturn
Accumulatedannualisedrelative return
0,15
Source: Norges Bank Investment Management
4Q 2016 0.28 %
2016 0.15 %
Past 10 years 0.06 %
Since 1998 0.26 %
0,26 %
Contributions to relative return2016. Contribution. Percentage points
18
Source: Norges Bank Investment Management
Strategy Equity Fixed income
Cross-assetallocation Total
Fund allocation -0.04 -0.04 -0.02 -0.10
Security selection -0.02 -0.03 -0.06
Asset management 0.16 0.13 0.02 0.31
Total 0.10 0.05 0.00 0.15
Contributions to relative return2013-2016. Contribution. Annualised. Percentage points
19
Source: Norges Bank Investment Management
Strategy Equity Fixed income
Cross-assetallocation Total
Fund allocation -0.03 -0.14 0.04 -0.13
Security selection 0.07 0.00 0.07
Asset management 0.17 0.08 0.00 0.25
Total 0.21 -0.06 0.04 0.20
Expected relative volatility of investment strategies31.12.2016. Each strategy measured stand-alone. Basis points
20
Source: Norges Bank Investment Management
Strategy Equity Fixed income
Cross-assetallocation Total
Fund allocation 16 13 1 18
Security selection 17 3 17
Asset management 6 5 3 7
Total 24 16 4 28
Large fund – large expected value fluctuationsExpected volatility. Billion kroner (left axis) and percent (right axis)
21
Source: Norges Bank Investment Management
530
780 800
8.2
10.4 10.6
0
2
4
6
8
10
12
14
16
0
100
200
300
400
500
600
700
800
900
31. dec. 14 31. dec. 15 31. dec. 16
Riskmeasured inkroner
Riskmeasured inpercent
Large fund – large expected value fluctuationsBillion kroner (left axis) and percent (right axis)
22
Source:, Norges Bank Investment Management
800
10.6
0
10
20
30
40
50
60
70
80
90
0
100
200
300
400
500
600
700
800
900
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Risk measured inkroner (left axis)
Risk measuren inpercent (right axis)
FINANCIAL MARKETS IN 2016
23
Equity markets in 2016Measured in USD (Stoxx in EUR). Indexed (31.12.2015 = 100)
24
80
85
90
95
100
105
110
115
120
80
85
90
95
100
105
110
115
120
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
FTSE Global AllCap (global)Stoxx Europe 600(Europe)MSCI Asia Pacific(Asia)S&P 500 (USA)
FTSE Global All
Cap (global)
S&P 500
(USA)
StoxxEurope 600
(Europe)
MSCI Asia Pacific (Asia)
4Q 2016 1 % 4 % 6 % -3 %
2016 9 % 12 % 2 % 5 %
Source: Bloomberg
Equity markets in the US, China and BrazilMeasured in local currency. Indexed total return (31.12.2015 = 100)
25
70
80
90
100
110
120
130
140
150
70
80
90
100
110
120
130
140
150
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
S&P 500
Shanghai StockExchange CompositeIndex
Hong Kong HangSeng Index
Ibovespa Brasil SaoPaulo StockExchange Index
Source: Bloomberg
S&P 500 Shanghai Hong Kong São Paulo4Q 2016 4 % 3 % -5 % 3 %
2016 12 % -10 % 4 % 39 %
Emerging equity markets in 2016Measured in USD. Indexed total return (31.12.2015 = 100)
26
80
85
90
95
100
105
110
115
120
125
80
85
90
95
100
105
110
115
120
125
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
FTSE All Cap
FTSE EM
Source: Bloomberg
FTSE All Cap FTSE EM
4Q 2016 1 % -3 %
2016 9 % 13 %
Emerging equity markets last 5 yearsMeasured in USD. Indexed total return (31.12.2011 = 100)
27
60
70
80
90
100
110
120
130
140
150
160
170
60
70
80
90
100
110
120
130
140
150
160
170
Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
FTSE All Cap
FTSE EM
Source: Bloomberg
FTSE All Cap FTSE EMLast 5 years (annualised) 10 % 2 %
2016 9 % 13 %
80
90
100
110
120
130
140
80
90
100
110
120
130
140
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
Health care
Basic materials
Oil and gas
Utilities
Different stock sectors in 2016Measured in USD. Indexed total return (31.12.2015 = 100)
28
Source: FTSE
Health care
Basic materials
Oil and gas Utilities
4Q 2016 -6 % 4 % 7% -3 %
2016 -6 % 25 % 28 % 9 %
40
60
80
100
120
140
160
180
200
220
240
40
60
80
100
120
140
160
180
200
220
240
Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
Health care
Basic materials
Oil and gas
Utilities
Different stock sectors last 5 yearsMeasured in USD. Indexed total return (31.12.2011 = 100)
29
Source: FTSE
Health care
Basic materials
Oil and gas Utilities
Last 5 years (annualised) 14 % 1 % 0% 6 %
2016 -6 % 25 % 28 % 9 %
-0.5
0
0.5
1
1.5
2
2.5
3
-0.5
0
0.5
1
1.5
2
2.5
3
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
US
Italy
UK
Germany
Japan
Low 10-year interest rates10-year government bonds. Percent
30
Source: Bloomberg
US Italy UK Germany Japan
31.12.2016 2.4 % 1.8 % 1.2 % 0.2 % 0.0 %
30.06.2016 1.5 % 1.3 % 0.9 % -0.1 % -0.2 %
31.12.2015 2.3 % 1.6 % 2.0 % 0.6 % 0.3 %
Negative two-year interest ratesInterest rates on two year government bonds. Percent
31
-1.0
-0.5
0.0
0.5
1.0
1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
US
Germany
Japan
UK
Source: Bloomberg
US Germany Japan UK
31.12.2016 1.2 % -0.8 % -0.2 % 0.0 %
30.06.2016 0.6 % -0.7 % -0.3 % 0.1 %
31.12.2015 1.0 % -0.3 % -0.0 % 0.6 %
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
Dec-14 Jun-15 Dec-15 Jun-16 Dec-16
US
Germany
UK
Negative real interest ratesInflation-linked government bonds. 10 years to maturity. Percent
32
US Germany UK31.12.2016 0.5 % -1.1 % -1.9 %30.06.2016 0.0 % -1.0 % -1.5 %31.12.2015 0.7 % -0.4 % -0.6 %
Source: Bloomberg
0%
5%
10%
15%
20%
25%
0%
5%
10%
15%
20%
25%
Jan-15 Jul-15 Jan-16 Jul-16 Jan-17
Large holdings with negative ratesPercent of fixed-income investments
33
Source: Norges Bank Investment Management
70
80
90
100
110
120
130
70
80
90
100
110
120
130
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16
EUR
GBP
JPY
Currency markets in 2016Measured against USD. Indexed (31.12.2015 = 100)*
34
EUR GBP JPY
4Q 2016 -6 % -5 % -13 %2016 -3 % -16 % 3 %
* Declining curve indicates weaker exchange rate against USD Source: Bloomberg
70
80
90
100
110
120
130
70
80
90
100
110
120
130
Dec-15 Mar-16 Jun-16 Sep-16
Brazil
Russia
Mexico
China
Turkey
Currency markets in 2016Emerging markets. Measured against USD. Indexed (31.12.2015 = 100)*
35
BRL RUB MXN CNY TRY
4Q 2016 0 % 3 % -6 % -4 % -15 %2016 22 % 20 % -16 % -6 % -17 %
* Declining curve indicates weaker exchange rate against USD Source: WM Reuters
New real estate investments in 2016
Two properties in Oxford Street, London, UK• 355-361 Oxford St, London • 73-89 Oxford St, London
One property in Washington, D.C., US• Constitution Square, Washington, D.C.
Large acquisition in Paris, France• 9 Place Vendôme / 368-374 rue Saint-Honoré, Paris
Two properties in San Francisco, US• 100 First St, San Francisco / 303 Second St, San Francisco
10 logistics properties in Europe
36
11 15 20
3846
1911
25
52
131
181 191
0
50
100
150
200
0
50
100
150
200
2011 2012 2013 2014 2015 2016
Investments
Market value atyear end
Unlisted real estate investmentsBillions of kroner
37
Source: Norges Bank Investment Management
0
50
100
150
200
250
0
50
100
150
200
250
2011 2012 2013 2014 2015 2016
Listed realestateinvestments
Unlisted realestateinvestments
242
1125
52
141
235
Real estate investmentsMarket value at year end in billion kroner
38
Source: Norges Bank Investment Management
New framework for real estate investments Financing real estate investments
39
Equity share in the benchmark
40
55.0 %
57.5 %
60.0 %
62.5 %
65.0 %
67.5 %
55.0 %
57.5 %
60.0 %
62.5 %
65.0 %
67.5 %
Oct-16 Nov-16 Dec-16 Jan-17 Feb-17
Equity share instrategicbenchmark index
Equity share in the benchmark
41
27.02.201764.6%
55.0 %
57.5 %
60.0 %
62.5 %
65.0 %
67.5 %
55.0 %
57.5 %
60.0 %
62.5 %
65.0 %
67.5 %
Oct-16 Nov-16 Dec-16 Jan-17 Feb-17
Equity share inactual benchmarkindex
Equity share instrategicbenchmark index
Responsible investments 2016
Standard setting• New expectations documents on human rights
Ownership• We voted at 11,294 shareholder meetings• We voted on 112,210 resolutions
Risk management• Non-financial data
42
43
Exclusions based on the coal criterion
59 companies excluded
11 companies put under observation
Several public announcements
Market value of excluded companies
27 billion kroner
Guidelines for observation and exclusion
Decreasing management costsManagement costs. Basis points
44
Source: Norges Bank Investment Management
4.0
3.4
0
1
2
3
4
5
6
7
8
0
1
2
3
4
5
6
7
8
03 05 07 09 11 13 15 17
Internalmanagement costs
Internalmanagement costsexcl. real estate
Low costs compared with peersCEM Benchmarking costs. Basis points
45
0
5
10
15
20
25
0
5
10
15
20
25
98 00 02 04 06 08 10 12 14 16
Total costs
Benchmark cost
Global organisationEmployees by office. Number as at 31.12.2016*
46
Source: Norges Bank Investment Management*Excluding subsidiaries
300
147
75
379
0
100
200
300
400
500
600
0
100
200
300
400
500
600
98 00 02 04 06 08 10 12 14 16
Shanghai
Singapore
New York
London
Oslo
Strategy 2017 - 2019Established by the Executive Board on 8 February 2017
47
Large, global investor
Long-term owner
Safeguarding assets
Efficient execution
New publications in 2016
48
Published on website 28 February 2017
Holding lists
GIPS – report
Monthly returns
Main external service providers
Overview of external managers
Detailed tables on return and risk
www.nbim.no
49
Public information available on our website
Submissions to the Ministry of Finance• Investment advice
Discussion notes• Analyses that may form the basis for the fund’s
investment strategy and advice to the Ministry of Finance
Asset manager perspectives• The fund’s views and reflections on issues topical for
the financial industry
Expectations documents• The fund’s expectations to companies regarding specific
focus areas
Position papers The fund’s position on specific ownership topics
Public reports
www.nbim.no
50
Upcoming press seminars
7 March : additional information on responsible investments 2016
14 March : additional information on real estate investments 2016
21 March : additional information on return and risk 2016
7 April: preliminary results first quarter 2017
51
Highlights
The return was 6.9 percent in 2016• Equity 8.7 percent• Fixed income 4.3 percent• Real estate 0.8 percent
The return on equity and fixed-income investments was 0.15 percentage point higher than the return on the benchmark index
The market value of the fund grew by 35 billion kroner to 7,510 billion kroner
Asset allocation at the end of the year:• Equity 62.5 percent• Fixed income 34.3 percent• Real estate 3.2 percent
52
28/02/2017
GOVERNMENT PENSION FUND GLOBALANNUAL REPORT 2016
PRESS CONFERENCEOSLO, 28 FEBRUARY 2017
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