Sovereign Brands Survey 2010

May 2010

Key Findings

SOVEREIGN BRANDS SURVEY 2010

Welcome to the inaugural Sovereign Brands Survey 2010, a global study into the attitudes of national elites

1 towards sovereign wealth funds (SWFs) and their countries of origin.

With a combined wealth of more than $3,500billion2 in assets, SWFs are a key source of global

investment, yet comparatively little is known about them. At a time of great volatility and uncertainty, sovereign wealth funds represent an extremely important source of capital for the global economy. Despite this importance, many nations appear to view these funds with caution, and no matter how large the pool of funds on offer, some SWFs could find their path to the most attractive investments blocked.

Conducted by Hill & Knowlton and Penn Schoen Berland - two of the world’s pre-eminent communications and research strategy consultants - the Sovereign Brands Survey 2010 is the most comprehensive study ever conducted into attitudes toward sovereign wealth as a concept, individual sovereign wealth funds (SWFs), and the reputation of their host nations.

The study, conducted between 15 January and 1 February this year, covered elite attitudes in seven countries (US, UK, Germany, Egypt, Brazil, India and China) towards 19 SWFs in Norway; Singapore; Hong Kong; Malaysia; Abu Dhabi; Dubai; Kuwait; Qatar; China; Bahrain; Oman; Mexico; Russia; Libya; Kazakhstan; Brunei; Algeria; Nigeria and Botswana.

1 A socio-economic

research group commonly used within political campaigns as a proxy for a country’s decision-makers

2 According to The 2010 Preqin Sovereign Wealth Fund review

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CONTENT

1. Executive summary

2. Familiarity and favourability towards sovereign wealth

3. Attitudes towards sovereign wealth funds

4. Approval of sovereign wealth fund investment by industry

5. Sovereign wealth in the current economic climate

6. Country reputation and impact on sovereign wealth funds

7. Sovereign wealth fund reputational metrics

8. Sovereign wealth fund league table

9. Implications

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1. EXECUTIVE SUMMARY

THE MAIN FINDINGS OF THE SOVEREIGN BRANDS SURVEY 2010 INCLUDE:

LOW FAMILIARITY DRIVES LOW FAVOURABILITY OF SWFS

A broad correlation was seen between lower familiarity and lower favourability towards sovereign wealth funds (SWFs). This may have protected SWFs from elites’ worries about the effects of volatile investments as SWFs were seen as being less likely to cause market turmoil than most other forms of investment.

DOUBTS CAST OVER RELIABILITY OF SWFS COMPARED TO OTHER SOURCES OF INVESTMENT

Low levels of familiarity and favourability towards sovereign wealth is reflected in low trust towards it as a source of investment. There was a clear sign that elites are wary of SWF investments with half saying they would have some level of increased concern about SWFs making investments in their home country. SWFs were generally considered by elites to be less reliable and trustworthy than other sources of investment with the exception of respondents from Germany. There was some suspicion that SWF investment could have political motivations, especially from larger countries.

SWFS MISTRUSTED WITH DEFENCE ASSETS BUT WELCOMED INTO OTHER SECTORS

Where sovereign wealth was once viewed with suspicion, elites regarded it as a more acceptable source of finance, with elites more favourable to SWF investment in the technology, construction and energy sectors. However, all elites were adverse to SWFs investing in defence assets.

ECONOMIC RECOVERY LIKELY TO ACCELERATE INTEREST IN SWFS

The investment activity of sovereign wealth was considered one of the least likely to have contributed to market turmoil compared to other sources of investment. At the same time, the impact of the economic downturn and prospect of a recovery was found to have spurred interest in SWF investment in certain markets, especially in the emerging economies of Brazil, India and China. Most elites viewed SWFs as investing for the long term.

COUNTRY REPUTATION DETERMINES SWF IMAGE

The reputation of a country was found to be a major influence on the reputation of its sovereign wealth fund with elites seeing almost no difference between the two. It helped a SWF if its country of origin was seen as being politically stable; having economic strength and stability; and committed to the rule of law and international standards. These attributes were most important to elites. Countries such as Norway, Singapore and Hong Kong rated highly across these factors and Libya, Algeria, Botswana and Nigeria were regarded less favourably.

TRANSPARENCY AND ACCOUNTABILITY KEY CONSIDERATIONS FOR SWF APPROVAL

While sentiment towards SWFs had generally improved, there remained some concerns around SWFs making investments into home countries. A SWF’s transparency, accountability, good governance and strong management skills were seen as key factors in gaining elites’ approval. Lack of transparency may be the cause of mistrust amongst elites that SWF investment could be used to exert political influence and acquire strategic assets.

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SOME SWFS MORE SOUGHT AFTER THAN OTHERS

The ability of SWFs to communicate their attributes affected how they were perceived by the elites interviewed and ultimately the investment opportunities available to them. Overall SWFs from Norway, Singapore and Hong Kong were most sought after, and African SWFs (Algeria, Botswana and Nigeria) least sought after.

THE COMPETITIVE CHALLENGE SWFs will face greater competition both from each other – and other sources of investment. Concern over behavior may see SWFs facing resistance, and protectionism. The pace of their adoption of global standards of corporate accountability – and their ability to communicate progress – will be a factor in both of these issues. THE COMMUNICATIONS IMPLICATIONS These business implications in turn give rise to a number communications challenges;

SWF’s increasing importance will drive greater scrutiny and they will be held to higher standards and behaviours.

To maintain the proverbial licence to operate, SWFs will need to demonstrate acceptance of their larger role in the new economy and adopt best practice in communication, transparency, accountability and governance.

We believe the adoption of global standards and more effective communication will enable SWFs also to be more competitive.

A more open approach will benefit domestic stakeholders by reassuring them of the responsibility of their funds and managers.

To counter concern over the acquisition of foreign assets, SWFs need to ensure sufficient groundwork has been undertaken with key stakeholders and endorsers.

Notwithstanding the underlying realities of a SWF’s performance against key attributes, country image can yet bring down reputation or provide a signal of quality that can drive preference.

Detailed data relating to specific countries and SWFs is available on request or by logging onto www.hillandknowlton.com/sovereignbrands from the 27th May 2010.

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2. FAMILIARITY AND FAVOURABILITY TOWARDS SOVEREIGN WEALTH

FAMILIARITY DRIVES FAVOURABILITY

Elites were less familiar with sovereign wealth than they were with other forms of wealth or funds (see

chart 1).

57% of elites were familiar with sovereign wealth

66% of elites were familiar with family wealth

82% of elites were familiar with insurance funds

This lower familiarity is likely in part to be driving lower favourability for sovereign wealth compared to

other forms of investment as there is a clear correlation between the two.

19% of elites were favourable towards sovereign wealth

24% of elites were favourable towards family wealth

33% of elites were favourable towards insurance funds

CHART 1: CORRELATION BETWEEN FAMILIARITY AND FAVOURABILITY WITH WEALTH AND FUNDS

R² *=0.8861

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FAMILIARITY DRIVES FAVOURABILITY BY COUNTRY

Of the countries surveyed, the US, the UK and India were least familiar and least favourable to sovereign wealth fund investment, whilst Egypt, Germany, Brazil and China were most familiar and most favourable (see chart 2).

CHART 2: FAMILIARITY DRIVES FAVOURABILITY

Market Familiarity Favourability

UK 36 6

US 36 9

India 37 9

China 64 25

Egypt 72 23

Germany 74 19

Brazil 75 43

Q. In general how favourable are you to the following sources of investment? (% Very favourable) /Q. How familiar are you with

the following as sources of investment? (% Very/somewhat familiar)

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3. ATTITUDES TOWARDS SOVEREIGN WEALTH FUNDS

CONCERNS ABOUT SWFS

Elites were clearly wary of sovereign wealth funds. As you can see in chart 3, half of all respondents

were more concerned about sovereign wealth funds investing in their country compared with other

forms of finance.

CHART 3: CONCERNS ABOUT SOVEREIGN WEALTH FUNDS INVESTING INTO THEIR COUNTRIES VERSUS OTHER

FORMS OF FINANCE

Q. How concerned, if at all, would you be if a sovereign wealth fund were to invest in your country compared with other forms of

finance?

RELIABILITY OF SWF INVESTMENT

Sovereign wealth was generally seen as a more reliable source of investment than private equity and significantly more reliable than hedge funds, while insurance funds, investment banks and family wealth were considered more reliable (see chart 4). CHART 4: COMPARATIVE RELIABILITY OF INVESTMENT SOURCES

Q. How reliable do you consider the following sources of investment compared to other sources of investment? (Much more reliable)

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TRUST IN SWFS

Where it concerns trustworthiness, investment sources were generally perceived in a positive light. Yet again, sovereign wealth was seen as less trustworthy than other investment sources, with hedge funds being the only source seen as less trustworthy (see chart 5).

There is a correlation between views on reliability and trustworthiness. Germany considered sovereign wealth to be significantly more reliable and trustworthy than all other forms of investment, whereas the UK, the US and India considered SWFs less reliable and less trustworthy.

CHART 5: TRUSTWORTHINESS OF INVESTMENT SOURCES

Q. How trustworthy do you consider the following sources of investment to be?(Very/somewhat trustworthy)

SWF INVESTMENT MOTIVATED BY POLITICAL OBJECTIVES

All countries’ SWFs (with the exception of Singapore and Norway) were considered likely to be

motivated by political objectives. As chart 6 illustrates, larger countries were seen as more likely to

have political motivations than smaller countries and micro-states.

SWF investments from Russia (87%) and China (84%) were considered most likely to be

influenced by political objectives

SWFs from Botswana (55%), Singapore (50%) and Norway (43%) were seen as least likely to be

motivated by political objectives

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CHART 6: PERCEIVED LIKELIHOOD OF POLITICAL OBJECTIVES INFLUENCING INVESTMENT DECISION

Q. In your opinion, how likely is it that the sovereign wealth funds indicated have a political objectives that might influence their

investment decisions?

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4. APPROVAL OF SOVEREIGN WEALTH FUNDS INVESTMENT BY INDUSTRY

SWF INVESTMENT BY INDUSTRY

Elites were found to be open to sovereign wealth fund investment in most industries, with particularly high approval in technology, construction, energy and healthcare (see chart 7). All elites were adverse to SWFs investing in their defence sectors (45% approval overall), this view felt most strongly by elites in the UK and Germany. Elites in Brazil, India, China and Egypt were particularly keen for investment into their finance sector.

CHART 7: APPROVAL RATINGS FOR SWF INVESTMENTS BY INDUSTRY

Q: To what extent do you approve or disapprove of sovereign wealth funds investing in the following sectors of your country’s

economy? (Strongly/somewhat approve)

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5. SOVEREIGN WEALTH IN THE CURRENT ECONOMIC CLIMATE

CONTRIBUTION TO MARKET TURMOIL

Sovereign wealth funds were blamed less for market turmoil than some other forms of investment, such as hedge funds and investment banks, as illustrated by chart 8.

CHART 8: CONTRIBUTION TO MARKET TURMOIL COMPARED TO OTHER FORMS OF INVESTMENT

Q. Based on your impressions, to what extent do you agree or disagree that the investment activities of the sources of investment below

contribute more to market turmoil and uncertainty than other forms of investment? (Strongly/somewhat agree)

EFFECT OF GLOBAL DOWNTURN ON INTEREST IN SWFS

The global downturn has spurred interest in SWF investment with more than half (51%) of elites saying they were somewhat or much more favourable towards SWFs since the downturn (see chart 9). This view was felt most strongly in the emerging economies of Brazil, India and China.

CHART 9: RECESSION’S IMPACT ON SWF FAVOURABILITY

Q. How, if at all, has your favourability towards sovereign wealth funds changed since the global downturn?

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EFFECT OF ECONOMIC RECOVERY ON INTEREST IN SWFS

The economic recovery has spurred interest in SWFs, with 58% of elites questioned saying they were more favourable towards this type of investment as the global economy improves, compared to 7% who were less favourable, and 35% whose views haven’t changed (see chart 10).

Brazil, India and China were more favourable than the UK, the US, Egypt and Germany, and their interest is likely to accelerate as the global economic outlook improves. Brazil, India and China were also the most cautious about SWFs investing in their countries with China (97%) and India (60%) expressing this view most strongly.

CHART 10: RECOVERY’S IMPACT ON SWF FAVOURABILITY

Q. How, if at all, has your favourability towards sovereign wealth funds changed since the global downturn?

LONG-TERM INVESTORS

Sovereign wealth funds were perceived as investing for the long term when compared with other

investment vehicles, with nearly seven out of ten (68%) having this view.

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6. COUNTRY REPUTATION AND IMPACT ON SOVEREIGN WEALTH FUNDS

COUNTRY REPUTATION AND SWF REPUTATION

A country’s reputation is a strong driver of the perception of its SWF with 98% of all elites interviewed believing this to be somewhat / very important. The reputation of a country and the reputation of its sovereign wealth fund are closely linked – as chart 11 illustrates.

It helps a sovereign wealth fund if its country of origin is seen as politically stable; having economic strength and stability; and committed to the rule of law and international standards.

Elites saw almost no difference between a country and its sovereign wealth fund, with minor statistical significance only seen in political stability, adherence to international regulatory standards and strong economic potential.

CHART 11: COUNTRY REPUTATION AND SWF REPUTATION

Q. How important are the following attributes of a country in terms how much it influences your view of that country? (% Very

Important)

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PREFERRED HOST COUNTRIES

The countries that were as seen as being politically stable; having economic strength and stability; and committed to the rule of law and international standards, were also the preferred host countries from which SWF investment would be most approved (see chart 12). Countries such as Norway, Singapore and Hong Kong rated highly across these factors and would be most welcomed, and Libya, Algeria, Botswana and Nigeria were regarded less favourably.

CHART 12: HOST COUNTRIES FROM WHICH SWF INVESTMENT WOULD BE MOST APPROVED

88%83% 83%

74% 73% 72%69% 69%

63% 62% 62% 62% 61%

44% 42%

35% 33% 33%30%

Q. To what extent do you approve or disapprove of sovereign wealth funds from the following countries investing in your

country? (Strongly/somewhat approve)

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7. SOVEREIGN WEALTH FUND REPUTATIONAL METRICS

SWF REPUTATIONAL FACTORS

In addition to the importance of the host country’s reputation, SWF reputations are also built on their

own attributes. As chart 13 illustrates, transparency, accountability, good governance and strong

management skills were seen as key factors in gaining elites’ approval for a sovereign wealth fund to

invest in their home country.

CHART 13: REPUTATIONAL FACTORS

Q. How important to you are the following factors in deciding whether you would approve or disapprove of a sovereign wealth

fund investing in your country and industries? (Very important)

REPUTATIONAL FACTORS FOR SPECIFIC SOVEREIGN WEALTH FUNDS

Norway, Singapore and Hong Kong’s SWFs best demonstrated the attributes considered to be key by

elites, as illustrated by chart 14.

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CHART 14: REPUTATIONAL FACTORS FOR SPECIFIC SOVEREIGN WEALTH FUNDS

Q. To the best of your knowledge, which of these factors do you think apply to the following country sovereign funds? (%

Applies)

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8. SOVEREIGN WEALTH FUND LEAGUE TABLE

APPROVAL OF SOVEREIGN WEALTH FUND INVESTMENT FROM DIFFERENT COUNTRIES

Unsurprisingly, there is a correlation between how SWFs were rated in terms of key reputational metrics such as transparency, accountability and good governance, with the degree to which their investments would be met with approval or disapproval. Overall SWFs from Norway, Singapore and Hong Kong were most sought after amongst the elites interviewed, and African SWFs (Algeria, Botswana and Nigeria) the least – as chart 15 illustrates.

CHART 15: APPROVAL OF SOVEREIGN WEALTH FUND INVESTMENT FROM DIFFERENT COUNTRIES

Q To what extent do you approve or disapprove of sovereign wealth funds from the following countries investing in your country? (% strongly/somewhat approve)

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9. IMPLICATIONS

THE COMPETITIVE CHALLENGE

Drawing on the many insights revealed by the Sovereign Brands Study 2010, and put against the

backdrop of the trends within the global business environment, there are a number of conclusions

about the business implications facing SWFs which can be drawn. Key amongst these are that:

1. SWFs are set to face greater competition both from each other – as well as other sources of

investment – for the best assets and investments;

2. SWFs may face resistance, and in some cases protectionism, founded on continuing

concerns over their behavior; and

3. The pace of their adoption of global standards of corporate accountability – and their ability

to communicate progress – will be a factor in both of the above

THE COMMUNICATIONS IMPLICATIONS

These business implications in turn give rise to a number communications challenges:

1. EXPECTATIONS WILL INCREASE WITH IMPORTANCE

Inevitably their increasing importance in the global financial system will drive curiosity and scrutiny of SWFs, as it did with hedge funds a decade or so ago. In our view expectations of global standards of transparency and communication will similarly increase. As more visible global players in the world economy they will be expected to act – and be seen to act – in line with global standards of corporate behaviour. In addition, as scrutiny grows, so will their profile – and differences will become more apparent, individually and collectively; if they do not tell their story and communicate their positions, others may fill the gap with harmful speculation

2. NEED TO ACT TO COMBAT PROTECTIONISM.

In order to rebut criticism and avoid protectionism, SWF’s will need to demonstrate acceptance of their larger role in the new economy. This will most effectively be done through adopting best practice in communication as well as transparency, accountability and governance.

3. COMPETITION FOR ASSETS WILL BECOME KEENER

In our view adoption of global standards and more effective communication will also enable SWF’s to compete more effectively in the global marketplace as a recognised set of investors. Over time SWF’s may differentiate themselves individually based on their individual strengths and strategies to more actively compete amongst each other

4. TRUST AT HOME

Adopting a more open approach will have the benefit of building trust with domestic stakeholders in a SWF’s home market, by reassuring them of the responsibility and effectiveness of their funds and managers.

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5. TRUST ABROAD

Much of the resistance to SWFs in recent years has been centred on their acquisition of foreign assets, often considered of a strategic nature. SWFs need to ensure acquisitions are progressed only after sufficient preparations laying the groundwork have been undertaken with key stakeholders and endorsers.

6. COUNTRY IMAGE CAN BE A BUSINESS PROBLEM OR COMPETITIVE ADVANTAGE

Notwithstanding the underlying realities of a SWF’s performance in key attributes, its reputation can still be brought down where a host country has a poor image. Where host country reputation is strong it provides a signal of quality and may drive SWF preference.

TOWARDS BEST PRACTICE – PRACTICAL STRATEGIES FOR SOVEREIGN WEALTH FUNDS

In seeking to overcome some or all of the communications implications listed above, there are a

number of practical communications strategies which SWFs can implement. However, as we have

seen from the findings, it should be recognized that the broad approach set out below is just that, and

each SWF will need to have a more bespoke approach befitting its circumstances and the perceptions

of its stakeholders in its key markets.

1. ADOPT INTERNATIONAL STANDARDS OF CORPORATE BEHAVIOUR

There is much that SWFs can learn from studying international standards of corporate

communication. For SWFs this means, ideally going beyond the Santiago Principles and some

current communications best practice includes:

a) Web sites (Norway, Singapore, China, Abu Dhabi)

b) Senior management media interviews (Mubadala, UAE)

c) Annual reports (Singapore, Norway and soon Abu Dhabi)

2. OPEN A REAL DIALOGUE

Use greater and more effective communications to educate investors and commentators and so

drive familiarity, which will increase favourability. (See Norway & Singapore for current best

practice). However, this must be a two-way communication where listening and acting is crucial.

3. REPUTATION IN THE ROUND

While the survey results show that trust will be founded on transparency, governance and

accountability, the strongest reputations will be those that are also based on leadership, credible

strategy and performance.

4. FOCUS ON OR BUILD STRENGTHS

Where SWF’s host nation has a generally unfavourable image, the focus should be on upholding

and communicating its adherence to the highest levels of governance – particularly in the areas

identified as most important to stakeholders. SWFs should also encourage their host government

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to lead a coalition of interests to improve its country image – particularly in the areas of stability,

the rule of law and adoption of international standards

5. LEADERS EXCEED SOCIETAL EXPECTATIONS

Those larger funds which have already made strides in these areas should begin to think about

the next stage in global corporate behaviour – providing leadership by actively participating in,

and contributing to the development of global economic policy.

6. THE RIGHT FOCUS

When making acquisitions, SWFs should ensure that the groundwork covers effective

communications preparation and at the very least includes:

research to understand the perceptions, drivers and motivations of key stakeholders

towards investment in specific asset classes;

prior engagement to build a cadre of supporters and advocates who can be called on at

the appropriate time to provide endorsement; and

genuine efforts to be – and be seen as – true ‘partners’ to all relevant stakeholders.

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FOR FURTHER INFORMATION:

POPPY NAGRA

Global PR Manager

Hill & Knowlton

Tel. +44 207 413 3021

Mob. +44 7956 169209

Email: pnagra@hillandknowlton.com

RYAN GAWN

Director

Penn Schoen Berland

Tel. +44 207 300 6230

Mob. +44 7909 881031

Email: rgawn@ps-b.com

NOTES TO EDITORS:

METHODOLOGY

• PSB conducted 1064 interviews among broad elites in 7 markets* (c.150 interviews in each market) between 15

January 2010 and 1 February 2010.

• Interviews were conducted online in the UK, US, Brazil, Germany, China and India. Interviews in Egypt were conducted face to face.

• Broad elites are defined as influential members of society who are university educated, earning in excess of £50k or local market equivalent and with an active interest in national and international affairs in the both politics and business. This group is commonly used as a proxy for decision makers and their influencers.

All UK US Brazil Germany China India Egypt

1064 150 151 150 150 153 152 158

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Markets where research was conducted:

UK

US

Egypt

Brazil

Germany

China

India

Host countries with SWFs:

Norway

Singapore

Hong Kong

Malaysia

Abu Dhabi

Dubai

Kuwait

Qatar

China

Bahrain

Oman

Mexico

Russia

Libya

Kazakhstan

Brunei

Algeria

Nigeria

Botswana

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ABOUT HILL & KNOWLTON

Hill & Knowlton, Inc. is a leading international communications consultancy, providing services to local, multinational and global clients. The firm is headquartered in New York, with 79 offices in 44 countries, as well as an extensive associate network. The agency is part of WPP, one of the world's largest communications services groups.

ABOUT PENN SCHOEN BERLAND

Penn Schoen Berland, a unit of the WPP Group (NASDAQ: WPPGY), is a global research-based consultancy that specializes in messaging and communications strategy for blue-chip political, corporate and entertainment clients. We have over 30 years of experience in leveraging unique insights about consumer opinion to provide clients with a competitive advantage - what we call Winning Knowledge™. PSB executes polling and message testing services for Fortune 100 corporations and has helped elect more than 30 presidents and prime ministers around the world. More information is available at www.psbresearch.com.