1. 1 Sovereign Wealth Funds and financial market stability Oslo, 20 May 2008 Martin Skancke Director General Asset Management Department

2. Norwegian Ministry of Finance 2 The petroleum sector in relation to the Norwegian economy Source: Statistics Norway, Ministry of Finance 25 % 38 % 24 % 51 % The petroleum sectors share of GDP The petroleum sectors share of state revenues The petroleum sectors share of total investments The petroleum sectors share of total exports

3. Norwegian Ministry of Finance 3 PFG is among the largest (and fastest growing) funds in the world - The Funds market value. Billion USD, year end. Source: Ministry of Finance The Norwegian fund, USD 375bn and growing, a tool for: long-term petroleum wealth management short and medium term stabilization The Norwegian petroleum fund model: integrated with fiscal budget invested only abroad transparency

4. Norwegian Ministry of Finance 4 Strong increase in pension expenditure is a challenge for public finances Calls for a cautious fiscal policy over the next decades Pensions Expected real return of the Fund Pension expenditure and expected real return on the Fund as share of mainland GDP Source: Statistics Norway, Ministry of Finance

5. Norwegian Ministry of Finance 5 Return on fund investments Fund Transfer to finance non-oil budget deficit Revenues Expenditures State Budget The Fund mechanism – integrated with fiscal policy Fiscal policy guideline (over time spend real return of the fund, estimated at 4%) Petroleum revenues

6. Norwegian Ministry of Finance 6 Pension Fund - Global Governance Structure Ministry of Finance Regulations Performance reports Central Bank (NBIM) Norwegian Parliament Pension Fund Act Performance reports and strategic changes reported in National Budgets and National Accounts Legislator Principal Manager Management agreement Office of the Auditor General Norges Bank Audit Advisors Advisory / consultancy agreement Founded on Act, regulations and separate contracts

7. Norwegian Ministry of Finance 7 Norways fund: Key features Aim: Maximize financial returns Financial investor with non-strategic holdings Separation of roles between owner and operational manager High degree of transparency Ethical guidelines that are transparent and predictable, based on internationally recognized standards

8. Norwegian Ministry of Finance 8 The value of SWFs Free capital movements Allow capital exporters to - decouple consumption and current revenues - improve risk/return ratio on savings Allow capital importers to - decouple investments and domestic savings - improve productivity through productive investments Misguided regulation and protectionism is detrimental to us all SWFs may contribute to increased stability in financial markets Long time-horizon No liabilities Little or no need for liquidity in the short term

9. Norwegian Ministry of Finance 9 Our rebalancing strategy means that we buy in falling markets Source: Norges Bank

10. Norwegian Ministry of Finance 10 Norways position in the debate on SWF We support the cooperative effort, facilitated by the IMF, of identifying and drafting a set of voluntary, generally accepted principles and practices for SWF. transparency a key issue Furthermore, we support the OECDs work on providing guidance to recipient countries on SWF investments. openness to investment and equal treatment of investors a fundamental principle legitimate concerns related to national security We see no cause for regulations that would restrict the present investment activities of our Fund, or any regulation imposing restrictions on SWF over and above those applying to non-SWF investors