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GOVERNMENT PENSION FUND GLOBALANNUAL REPORT 2015
PRESS CONFERENCEOSLO, 9 MARCH 2016
Market valueAs at 31.12.2015. Billions of kroner
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
Real estateinvestments
Fixed-incomeinvestment
Equityinvestments
Value Percentage share
Equity investments 4,572 61.2
Fixed-income investments 2,668 35.7
Real estate investments 235 3.1
7,475
Source: Norges Bank Investment Management
2
InflowsBillions of kroner
0
100
200
300
400
500
0
100
200
300
400
500
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Inflow
Average inflowsince 1998
Source: Norges Bank Investment Management
187
42
3
Inflows and returnBillions of kroner
-800
-400
0
400
800
1,200
-800
-400
0
400
800
1,200
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Return
Inflows42
Source: Norges Bank Investment Management
334
4
Accumulated returnAs at 31.12.2015. Billions of kroner
-500
0
500
1,000
1,500
2,000
2,500
3,000
-500
0
500
1,000
1,500
2,000
2,500
3,000
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Return
Source: Norges Bank Investment Management
2,676
5
-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
Krone rate
Return
Inflows
Total
Annual change in market valueBillions of kroner
Source: Norges Bank Investment Management
6
Accumulated market valueAs at 31.12.2015. Billions of kroner
-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
Return
Krone rate
Inflow (aftermanagement costs)
Source: Norges Bank Investment Management
1,331
2,676
3,468
7
Annual returnPercent
-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
Annual return
Accumulatedannualised returnsince 1998
5.6%
Source: Norges Bank Investment Management
4Q 2015 3.6 %
2015 2.7 %
Last 10 years 5.3 %
Since 1998 5.6 %
2.7%
8
Historical key figures
2015 Last ten years Since 1.1.1998
Gross annual return 2.74 5.34 5.64
Annual inflation 0.86 1.84 1.78
Annual management costs 0.06 0.09 0.09
Annual net real return 1.80 3.35 3.70
Measured in the fund’s currency basket. Percent
Source: Norges Bank Investment Management
9
Relative returnPercentage points
0.45
-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
Annual relativereturn
Accumulatedannualisedrelative return
Source: Norges Bank Investment Management
4Q 2015 0.11 %
2015 0.45 %
Last 10 years 0.06 %
Since 1998 0.26 %
10
Decomposition of relative return
Total 0.45
Equity investments 0.52
Fixed-income investments -0.10
2015. Contributions. Percentage points
Source: Norges Bank Investment Management
11
Contributions to relative return31.12.2015. Strategies measured stand alone. Percentage points
Source: Norges Bank Investment Management
Strategy Equity Fixed-income
Cross Asset Allocation Total
Internal Reference Portfolio 0.05 -0.17 0.00 -0.12
Allocation 0.10 0.01 0.04 0.15
Securities Selection 0.21 0.03 0.24
Asset Management 0.17 0.03 -0.01 0.18
Total 0.52 -0.10 0.02 0.45
12
527
776
8.2
10.4
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
0
100
200
300
400
500
600
700
800
900
31. dec. 14 31. dec. 15
Riskmeasured inkroner
Riskmeasured inpercent
Expected absolute volatilityBillions of kroner (left axis) and percent (right axis)
Source: Norges Bank Investment Management
13
FINANCIAL MARKETS IN 2015
14
Price developments in equity marketsMeasured in USD (Stoxx in EUR). Indexed (31.12.2014 = 100)
80
85
90
95
100
105
110
115
120
125
80
85
90
95
100
105
110
115
120
125
Dec-14 Mar-15 Jun-15 Sep-15 Dec-15
FTSE Global All Cap(global)
Stoxx Europe 600(Europe)
MSCI Asia Pacific(Asia)
S&P 500 (US)FTSE
Global All Cap (global)
S&P 500
(USA)
StoxxEurope 600
(Europe)
MSCI Asia Pacific (Asia)
4Q 2015 5 % 6 % 5 % 7 %
2015 -4 % -1 % 7 % -4 %
Source: Bloomberg
15
75
80
85
90
95
100
105
110
115
75
80
85
90
95
100
105
110
115
Dec-14 Mar-15 Jun-15 Sep-15 Dec-15
FTSE EM
S&P 500
Price developments in emerging equity marketsMeasured in USD. Indexed (31.12.2014 = 100)
Source: Bloomberg
S&P 500 FTSE EM
4Q 2015 6 % 0 %
2015 -1 % -18 %
16
50
75
100
125
150
175
50
75
100
125
150
175
Dec-14 Mar-15 Jun-15 Sep-15 Dec-15
Shanghai StockExchangeComposite Index
Hong Kong HangSeng Index
Ibovespa BrasilSao Paulo StockExchange Index
Equity markets in China and BrazilMeasured in local currency. Indexed (31.12.2014 = 100)
Source: Bloomberg
Shanghai Hong Kong São Paulo
4Q 2015 16 % 5 % -4 %
2015 9 % -7 % -13 %
17
70
80
90
100
110
120
130
70
80
90
100
110
120
130
Dec-14 Mar-15 Jun-15 Sep-15 Dec-15
Health
Consumer goods
Materials
Oil and gas
Technology
Utilities
Price development in stock sectorsMeasured in USD. Indexed (31.12.2014 = 100)
Source: FTSE
Health Consumer goods
Materials Oil and gas
Technology Utilities
4Q 2015 7 % 6 % 3 % 0% 8 % 1 %
2015 8 % 5 % -17 % -22 % 3 % -7 %
18
-1
0
1
2
3
4
5
-1
0
1
2
3
4
5
Dec-14 Mar-15 Jun-15 Sep-15 Dec-15
Germany
US
Japan
UK
Spain
Italy
Low interest rates10-year government bonds. Percent
Source: Bloomberg
Germany US Japan UK Spain Italy
31.12.2015 0.6 % 2.3 % 0.3 % 2.0 % 1.8 % 1.6 %
30.09.2015 0.6 % 2.0 % 0.4 % 1.8 % 1.9 % 1.6 %
31.12.2014 0.5 % 2.2 % 0.3 % 1.8 % 1.6 % 1.9 %
19
Two year government bond yieldsIncreasing in the US, decreasing in Germany. Percent
-0.75
-0.50
-0.25
0.00
0.25
0.50
0.75
1.00
1.25
-0.75
-0.50
-0.25
0.00
0.25
0.50
0.75
1.00
1.25
Dec-14 Mar-15 Jun-15 Sep-15 Dec-15
US
Germany
Japan
Source: Bloomberg
20
Price developments for fixed-income sectorsMeasured in USD. Indexed (31.12.2014 = 100)
90
95
100
105
90
95
100
105
Dec-14 Mar-15 Jun-15 Sep-15 Dec-15
Governmentbonds
Governmentrelated bonds
Inflation-linked bonds
Securitiseddebt
Corporatebonds
Government bonds
Governmentrelated bonds
Corporate bonds
Inflation-linked bonds
Securitiseddebt
4Q 2015 -1 % -1 % -1 % -2 % -1 %
2015 -3 % -5 % -4 % -5 % -1 %
Source: Barclays
21
Currency developmentWeaker EUR, CHF and CNY in 2015
6.0
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
7.00.9
1.0
1.1
1.2
1.3
Dec-14 Mar-15 Jun-15 Sep-15 Dec-15
USD/EUR (left axis)
CHF/EUR (left axis)
CNY/USD (right axis)
Source: Bloomberg
22
50
75
100
125
150
50
75
100
125
150
Dec-14 Mar-15 Jun-15 Sep-15 Dec-15
Brazil
India
Turkey
China
Russia
Currency development emerging marketsMeasured against USD. Indexed (31.12.2014 = 100)*
BRL RUB INR TRY CNY
4Q 2015 1 % -10 % -1 % 4 % -2 %2015 -33 % -18 % -5 % -20 % -4 %
*Falling curve implies a weaker currency measured against USD
Source: Bloomberg23
New real estate investments in 2015
US• 7 transactions
• Total value 36,5 bn NOK.
UK• 2 transactions
• Total value 5,9 bn NOK .
Europe• 1 transaction
• Total value 1,3 bn NOK.
10 transactions in total
Source: Norges Bank Investment Management
24
0
50
100
150
200
250
0
50
100
150
200
250
2011 2012 2013 2014 2015
Listed real estateinvestments
Unlisted realestateinvestments
1125
52
141
235
Real estate investmentsMarket value at year end in billion kroner
Source: Norges Bank Investment Management
25
Real estate portfolio as at 31.12.2015Currency and sector distribution
Office48.0 %
Retail9.4 %
Logistics18.8 %
Other*0.8 %
Listed real estate investments23.0 %
USD44.3 %
GBP27.6 %
EUR21.8 %
CHF3.8 %
Other2.1 % SEK
0.2 %
* Bank deposits and other claimsSource: Norges Bank Investment Management
26
Responsible investment 2015
We worked on standard setting
We voted at 11,562 general meetings
We had 3,520 meetings with companies
27
Observation and exclusions in 2015
Exclusions• Daewoo International Corp
• POSCO
• Genting Berhad
• IJM Corporation
• ZTE Corp
Observation• PT Astra International Tbk
Changes from 31.12.2014 to 31.12.2015
28
Risk-based divestments
Main category Theme 2015 2014 and earlier
GHG-emissions
Oil sandsCoal extraction towards electricity productionCement productionCoal-fired power generationOther
0118
167
514
210
DeforestationPalm oil production in Malaysia and IndonesiaCoal mining in IndonesiaCoal mining in IndiaPulp and paper
2014
271150
WaterGold miningGeneral mining and precious metalsMountain-top removal
090
1617
2
Social and governanceHeavy constructionCorruptionOther
951
00
14
73 114
Source: Norges Bank Investment Management
29
Environment-related mandatesInvestments in 224 companies
Main category Sub-groups Number of companies
Total(billion NOK)
Low-emission energy & alternative fuels
Renewable energyLow-emission energyLow-emission fuels
541914
6.710.9
1.5
Clean energy & efficiency technology
Electricity productionTransportBuildingsIndustry
310
945
1.23.55.48.2
Natural resource management
WaterWaste management and emissions reductionSustainable agriculture
359
7
8.83.6
2.5
Other 19 1.5*
224 53.8
*Includes cashSource: Norges Bank Investment Management
30
Management costsBasis points
0
2
4
6
8
10
12
14
16
0
2
4
6
8
10
12
14
16
03 04 05 06 07 08 09 10 11 12 13 14 15
Managementcosts
Managementcosts excludingperformance-based fees4.8
5.7
Source: Norges Bank Investment Management
31
Market value and management costsFees in million currency units
Market valueNOK
CostsNOK
CostsUSD
Change 2014-2015 29 % 23 % -4 %
* Average market value in respective yearSource: Norges Bank Investment Management
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
0
100
200
300
400
500
600
700
800
03 04 05 06 07 08 09 10 11 12 13 14 15
Market value* (bnNOK,right axis)
Costs (millNOK,right axis)
Costs (millUSD,left axis)
32
0
100
200
300
400
500
600
0
100
200
300
400
500
600
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Shanghai
Singapore
New York
London
Oslo
518
Number of employees by officeNumber as at 31.12.2015*
Source: Norges Bank Investment ManagementExcl employees in subsidiaries
33
Number of employees
0
100
200
300
400
500
600
0
100
200
300
400
500
600
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Norges BankReal EstateManagement
Norges BankInvestmentManagement
Number as at 31.12.2015*
104
414
Source: Norges Bank Investment ManagementExcl employees in subsidiaries
34
Submissions, documents and reports
Submissions to the Ministry of Finance• Advice on the fund’s investments
Discussion notes• Analysis which may form relevant background for
investment strategy and advice to asset owner
Asset manager perspective• Views and reflections on issues topical for the financial
industry
Expectation documents• The fund’s expectations to companies within focus areas
Position papers• The fund’s view on special topics within our ownership
work
Public reports
Categories
35
Reports
Annual report – press conference 9 March 2016
Report on performance and risk – press seminar 16 March 2016
Report on unlisted real estate investments – press seminar 13 April 2016
36
Main points
The return was 2.7 percent in 2015• Equity 3.8 percent• Fixed income 0.3 percent• Real estate 10.0 percent
The return on equity and fixed-income investments was 0.5 percentage point higher than the return on the reference indices
The market value of the fund grew by 1,044 billion kroner to 7,475 billion kroner
Asset allocation at the end of the year:• Equity 61.2 percent• Fixed income 35.7 percent• Real estate 3.1 percent
37
GOVERNMENT PENSION FUND GLOBALANNUAL REPORT 2015
PRESS CONFERENCEOSLO, 9 MARCH 2016