Government pension fund Act (No. 123 of 20 December 2005)

Section 1 The Government Pension Fund shall support central government saving to finance the National Insurance Scheme’s expenditure on pensions and long-term considerations in the application of petroleum revenues.

Section 2 The Government Pension Fund is managed by the Ministry of Finance. The Fund comprises the Government Pension Fund – Global and the Government Pension Fund – Norway.

The foreign portion is deposited in an account at Norges Bank. The countervalue is managed under further rules laid down by the ministry, see section 7.

The domestic portion is placed as a capital contribution to Folketrygdfondet. The countervalue is managed under further rules laid down by the ministry, see section 7.

Section 3 Income of the Government Pension Fund – Global consists of the cash flow from petroleum activities, which is transferred from the central government budget, the return on the Fund’s capital, and the net results of financial transactions associated with petroleum activities.

The cash flow is the sum of

• total tax revenues and royalty deriving from petroleum activities collected pursuant to Petroleum Taxation Act (no. 35 of 13 June 1975) and the Petroleum Activities Act (no. 72 of 29 November 1996),

• revenues deriving from tax on CO₂ emissions due to petroleum activities on the continental shelf,

• revenues deriving from the State’s Direct Financial Interest in petroleum activities, defined as operating income and other income less operating expenses and other direct expenses,

• central government revenues from net surplus agreements associated with certain production licences,

• dividends from Statoil ASA,

• transfers from the Petroleum Insurance Fund,

• central government revenues deriving from the removal or alternative use of installations on the continental shelf

• any government sale of stakes representing the State’s Direct Financial Interest in petroleum activities,

• less

• central government direct investments in petroleum activities,

• central government expenses in connection with the Petroleum Insurance Fund,

• central government expenses in connection with the removal or alternative use of installations on the continental shelf

• any government purchase of stakes as part of the State’s Direct Financial Interest in petroleum activities.

Net financial transactions associated with petroleum activities are the sum of:

• gross revenues from government sale of shares in Statoil ASA,

less

Regulations on management of The Government Pension Fund – Global and The Government Pension Fund – Norway

Regulations on Management of the Government Pension Fund – Global

Laid down by the Ministry of Finance on 22 December 2005 pursuant to the Government Pension Fund Act (no. 123 of 20 December 2005).

Section 1 Management of the Government Pension Fund – Global

Norges Bank manages the Government Pension Fund – Global (hereafter termed “the Fund”) on behalf of the Ministry of Finance. The Bank may use other managers.

Norges Bank shall prepare an annual report and quarterly reports for the Fund. The reports shall be public.

Section 2 Investment of the Fund

The Fund shall be placed on separate account in the form of krone deposits with Norges Bank. Norges Bank shall invest this capital in its own name in financial instruments and cash deposits denominated in foreign currency.

The actual portfolio shall be composed through extensive use of diversification.

Norges Bank shall seek to achieve the highest possible return on the investments in foreign currency within the investment limits set out in these regulations and guidelines issued under these regulations.

Section 3 Accounting return

The value of the Fund"s krone account shall be equivalent to the value of the portfolio of financial instruments and cash deposits in foreign currency. Norges Bank"s book return on the portfolio, less remuneration to Norges Bank, shall be added to the Fund"s krone account on 31 December each year.

Section 4 Investment universe

The Fund shall be invested in accordance with the following asset allocation:

• Fixed income instruments 50 – 70%

• Equity instruments 30 – 50%

Financial instruments, including derivatives, which are naturally related to asset classes as mentioned in the first paragraph may be utilised. Commodity-based contracts and fund units are also eligible. Commodity-based instruments shall not be taken into account when calculating the asset allocation under the first paragraph.

The portfolio of fixed income instruments shall be invested in accordance with the following currency and regional distribution

• Europe 50 – 70%

• The Americas and Africa 25 – 45%

• Asia and Oceania 0 – 15%

The portfolio of fixed income instruments may be invested in any currency of the following countries:

• Europe: Austria, Belgium, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, Netherlands, Poland, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

• The Americas: Canada, Mexico and the United States.

• Africa: South Africa.

• Asia and Oceania: Australia, Hong Kong, Japan, New Zealand, Singapore and South Korea.

The portfolio of equity instruments shall be invested in accordance with the following currency and regional distribution:

• Europe 40 – 60%

• The Americas and Africa 25 – 45%

• Asia and Oceania 5 – 25%

The portfolio may be invested in equity instruments quoted on a regulated and recognised market in the following countries:

• Europe: Austria, Belgium, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Luxembourg, Netherlands, Poland, Portugal, Spain, Sweden, Switzerland, Turkey and the United Kingdom.

• The Americas: Brazil, Canada, Chile, Mexico and the United States.

• Africa: South Africa.

• Asia and Oceania: Australia, China, Hong Kong, India, Indonesia, Israel, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan and Thailand.

Investments in securities issued by Norwegian enterprises are not permitted. “Norwegian enterprises” means any enterprise whose head office is in Norway.

Section 5 Benchmark portfolio and tracking error

The Ministry of Finance establishes a benchmark portfolio for the Fund.

The expected difference in return between the actual portfolio and the benchmark portfolio measured by tracking error on an annualised basis shall not exceed 1.5 percentage points.

Section 6 Equity holdings

The investments may not be placed such that the Fund attains a holding of more than five per cent of the shares of a single company that confer voting rights.

Norges Bank shall exercise voting rights for the Fund. The Ministry of Finance may issue supplementary guidelines for Norges Bank’s exercise of ownership. The overall goal of exercise of ownership is to safeguard the Fund’s financial interests.

Section 7 Risk systems and risk management

Norges Bank shall ensure that satisfactory risk systems and control routines are in place in regard to instruments used in the management of the Fund. The same applies in regard to the handling of counterparty risk and operational risk.

Section 8 Screening and exclusion

The Ministry of Finance establishes Ethical Guidelines for the Fund and decides whether specific issuers shall be excluded from the Fund’s investment universe. An ethics council shall be appointed to advise on whether investment opportunities in financial instruments issued by specified issuers are contrary to the Ethical Guidelines.

The Ministry of Finance may lay down further rules for the ethics council, its activities and organisation.

Section 9 Commencement

These regulations shall come into force on 1 January 2006. Regulations no. 1488 of 19 November 2004 on Management of the Government Petroleum Fund shall be revoked on the same date.

Regulations relating to the Management of the Government Pension Fund – Norway

Regulations No. 1419 of 15 December 2006 relating to the management of the Government Pension Fund – Norway. Laid down by the Ministry of Finance pursuant to Section 7 of Act No. 123 of 21 December 2005 on the Government Pension Fund.

Section 1 The management of the Government Pension Fund – Norway

Folketrygdfondet manages the Government Pension Fund – Norway (hereinafter referred to as the «Fund») on behalf of the Ministry of Finance.

Section 2 Investment of the Fund

The Fund is a capital contribution for Folketrygdfondet. Folketrygdfondet shall reinvest, in its own name, this contribution in financial instruments and cash deposits.

The Executive Board is responsible for ensuring that the capital of the Fund is invested with a view to achieving the best possible return over time in Norwegian kroner, with due regard to ensuring satisfactory security and the required liquidity. The Executive Board shall ensure that the management of the Fund is subject to satisfactory risk management.

The Executive Board shall appoint the internal auditors of Folketrygdfondet. The Executive Board shall approve the resources and plans of the internal auditors on an annual basis. The internal auditors shall report to the Executive Board.

Section 3 Return for accounting purposes

The value of the Fund shall be equal to the value of portfolio of financial instruments and cash deposits held by Folketrygdfondet. The income and gains generated through the management efforts of Folketrygdfondet shall be added to the capital as per 31 December each year.

Section 4 Investment limits

The capital of the Fund may be invested in equities, primary capital certificates, bonds, commercial paper, and as deposits with commercial and savings banks.

Within a limit of 50 percent of the capital of the Fund, as measured at acquisition cost, the capital may be invested in equities and primary capital certificates listed on a Norwegian exchange or an exchange in Denmark, Finland or Sweden, in listed convertible bonds, listed bonds with call options on equities of Norwegian companies and, with the approval of the Ministry of Finance, in other equities of Norwegian companies, provided that such equities are subject to regular and organised trading. Investments in equities listed on exchanges in Denmark, Finland or Sweden shall, in aggregate, not exceed 20 percent of the equity investment limit of the Fund. The capital of the Fund may, within the equity investment limit, be invested in non-listed equities of Norwegian companies that have applied for, or have specifically planned to apply for, an exchange listing. Investment in this type of equities shall not exceed 5 percent of the equity investment limit.

Up to 10 percent of the capital of the Fund as measured at acquisition cost may be invested in bonds and commercial paper from issuers domiciled in Denmark, Finland or Sweden.

Sub-section 2 shall not prevent Folketrygdfondet from retaining equities of Norwegian companies that change their status to become foreign companies in connection with acquisitions, mergers, etc.

Folketrygdfondet may hold shares representing up to 15 percent of the overall share capital or primary capital of any one single company in Norway. Folketrygdfondet may hold shares representing up to 5 percent of the overall share capital of any one single company in Denmark, Finland and Sweden.

Folketrygdfondet shall exercise the ownership rights of the Fund. The overall objective of the corporate governance effort is to safeguard the financial interests of the Fund.

Folketrygdfondet may, pursuant to more detailed guidelines laid down by the Ministry of Finance, form sale and repurchase agreements relating to equity instruments and interest-bearing instruments, whereby which the acquiror of the instruments have a duty under the agreement to return these to the seller.

Folketrygdfondet may utilise interest rate and currency derivatives in its management of the fixed-income securities portfolio.

Section 5 Composition of the Executive Board

The Executive Board shall comprise nine members, who shall be appointed, together with their personal alternates, by the King for four years at a time, until the accounts have been closed for the fourth year to elapse after their appointment was made.

If members or alternates are incapacitated or die during the term of their appointment, a new member or alternate shall be appointed for the remaining term.

The King appoints the chairperson of the Executive Board. The Executive Board appoints its deputy chairperson from amongst its members.

The Executive Board shall be based in Oslo.

Section 6 Board meetings

Board meetings shall be held when requested by the chairperson or by one of the other members of the Executive Board. The chairperson shall ensure that meetings are convened with no less than 8 days’ notice.

The Executive Board has a quorum when at least one half of its members or their alternates are in attendance, hereunder the chairperson or deputy chairperson.

The Board members and alternates shall receive a remuneration determined by the Ministry of Finance. They shall receive travel and subsistence allowance at the rates applicable to civil servants during travels.

Section 7 The administrative staff of Folketrygdfondet

The administrative staff of Folketrygdfondet shall be responsible for preparing and presenting the matters to be deliberated by the Executive Board, and shall also be responsible for the administrative handling of the investment activities, unless otherwise determined by the Executive Board.

Expenses incurred in the management of the Government Pension Fund – Norway shall be paid out of the capital of the Fund.

The head of the administrative staff of Folketrygdfondet shall be appointed by the King in the Council of State. The Executive Board may render its comments prior to such appointment being made, cf. Royal Decree of 11 December 1983.

The other personnel shall be employed pursuant to the rules set of in the personnel regulations of the Fund, cf. Act No. 3 of 4 March 1983 on Central Government Employees, Etc. Their salaries and employment terms shall be determined by the Executive Board, and shall be notified to the Ministry of Finance.

The Executive Board is responsible for stipulating more detailed instructions for the head of the administrative staff.

Section 8 Annual accounts, annual report and semi-annual report

The Executive Board shall ensure the preparation, every calendar year, of annual accounts and an annual report in accordance with generally agreed accounting principles, and that Folke­trygdfondet adheres to good accounting practise. The annual accounts and annual report shall be finalised no later than 15 March. The Executive Board shall also ensure the preparation, within 15 August, of a semi-annual report.

The annual accounts, annual report and semi-annual report are available to the general public.

Section 9 Auditing

The Office of the Auditor General shall be responsible for the auditing of the Government Pension Fund – Norway.

The Executive Board shall as soon as possible, and no later than 15 March, send the annual report and the annual accounts to the Ministry of Finance, which shall notify the Storting.

Section 10 Confidentiality obligation

Any person participating in the fund management activities pursuant to these rules shall be under a confidentiality obligation pursuant to Sections 13 to 13e of the Public Administration Act.

Section 11 Supplementary rules

The Ministry of Finance may render more detailed provisions to supplement and implement the rules. The Ministry of Finance may, in special cases, grant exemptions from the provisions of Section 4.

Section 12 Effective date

The Regulations shall enter into effect on 1 January 2007. Rules on the administration of Folketrygdfondet and on the management of its capital, auditing, etc., laid down by the Storting on 20 June 1997, as most recently amended on 15 December 2004, shall be repealed as from the effective date of the new rules.

Chapter 3

Guidelines for management of the Government Pension Fund – Global

These guidelines lay down supplementary provisions to the Government Pension Fund Act and the Regulations on Management of the Government Pension Fund – Global (“the regulations”).

Contents:

1. Benchmark portfolio – section 5 of the regulations

1.1 The strategic benchmark portfolio

The composition of the strategic benchmark portfolio is 60 per cent fixed income and 40 per cent equities.

1.2 Benchmark portfolio for fixed income instruments

The strategic benchmark portfolio for fixed income instruments has the following composition:

• 60 per cent of the portfolio shall consist of Lehman Global Aggregate (LGA) and Lehman Global Real (LGR) in Europe except for Norwegian kroner (NOK) and with the addition of domestic government bonds that are included in Lehman Swiss Franc Aggregate.

• This section of the benchmark portfolio consists of the following currencies: Euro, British pound, Swiss franc, Swedish krona and Danish krone.

• 35 per cent of the portfolio shall consist of LGA and LGR in the United States and Canada with the share of mortgage-backed and asset-backed securities in US dollars downweighted to 25 per cent in relation to a pure market-value weighted index. Domestic government bonds (nominal and inflation indexed), other government related bonds (“LGA Government related”) except for unsecured bonds issued by public institutions (“Agencies”) and corporate bonds (“LGA Corporates”) in US dollars are correspondingly upweighted in relation to their market value. This section of the benchmark portfolio consists of the following currencies: Canadian dollar and US dollar.

• 5 per cent of the portfolio shall consist of domestic government bonds from developed markets in LGA and LGR in Asia/Oceania (Australia, Japan, New Zealand and Singapore). Japan’s share is calculated based on a factor of 25 per cent of the market capitalisation value of Japanese bonds.

This section of the benchmark portfolio consists of the following currencies: Australian dollar, Japanese yen, New Zealand dollar and Singapore dollar.

At each month-end the composition of the benchmark portfolio is revised in line with the changes in composition carried out by Lehman Brothers.

If new currencies that otherwise form part of the benchmark portfolio are included in LGR, such instruments shall be included in the benchmark portfolio as from the date decided by the Ministry of Finance.

1.3 Benchmark portfolio for equity instruments

The strategic benchmark portfolio for equity instruments is based on tax-adjusted FTSE All-World indices (large and medium-size companies) and shall have the following composition:

• 50 per cent FTSE All-World Europe in which the following countries are included: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal, Sweden, Spain, Switzerland and United Kingdom.

• 35 per cent FTSE All-World Americas/FTSE All-World Africa in which the following countries are included: Brazil, Canada, Mexico, South Africa and United States.

• 15 per cent FTSE All-World Asia Pacific in which the following countries are included: Australia, Hong Kong, Japan, New Zealand, Singapore, South Korea, and Taiwan.

The distributions within each region are determined on the basis of market capitalisation weights with daily rebalancing of country weights within each region.

2 Rebalancing of the benchmark portfolio – section 5 of the regulations

This item is exempt from the public domain.

3 Tracking error and additional restrictions – sections 4 to 6 of the regulations

3.1 Limit on tracking error

A general requirement is that expected (ex ante) tracking error shall be calculated using a system which models risk associated with the most important financial instruments in which the Fund invests. In cases where the system does not model financial instruments in which the Fund invests, the approach shall employ conservative estimates and methods making it more likely that expected tracking error will be overestimated than underestimated in relation to actual tracking error. The system shall aggregate risk across asset classes and financial instruments in a satisfactory manner.

An important objective for the risk system is that risk attending financial instruments should be calculated in such a way as to ensure that, over time, estimated risk in the Fund deviates as little as possible from actual risk. Moreover, some degree of stability in the choice of system for calculating risk is appropriate.

3.2 Fixed income securities issued by the public sector in another country’s currency

Section 4, third paragraph, of the regulations prescribes which countries’ currencies the Fund’s portfolio of fixed income instruments can be invested in. In the case of bonds issued by the public sector [LGA Government related, Government index/linked and Treasury] in other countries, but in a currency belonging to one of the countries or areas specified in section 4, third paragraph, of the regulations, separate rules apply. The Fund’s capital can be invested in such fixed income instruments provided the security’s credit rating meets a minimum requirement corresponding to “investment grade” from a recognised credit rating agency. Up to 0.5 per cent of the fixed income portfolio’s market value can derive from such securities having BB/Ba/BB as their highest long-term credit rating from a recognised credit rating agency. Norges Bank sets further rules for liquidation of holdings in cases where such securities are downgraded to below the approved minimum requirement. Should a fixed income security fail to meet these requirements yet is included in the Fund’s benchmark portfolio, investment in that security is none the less permitted.

3.3 Calculation of holdings

If a stock exchange listed company does not employ the term “share capital” or the like, the holding shall be calculated based on the company’s market capitalisation, i.e. the total number of issued shares multiplied by the share’s market value.

4 Requirements on valuation, measurement of return and management and control of risk – section 7 of the regulations

Valuation, measurement of return and management and control of risk shall comply with internationally recognised standards and methods. The Fund cannot invest in markets, asset classes or instruments if these requirements cannot be met. See also 3.1.

4.1 Valuation and measurement of return

The method used to establish the value of financial instruments shall be verifiable and shall indicate with reasonable assurance the true value of the Fund’s assets at the time of measurement. Valuation shall take place at least monthly and shall be based on market prices or, in cases where market prices cannot be observed, on recognised price models.

4.2 Management, measurement and control of risk

4.2.1 Market risk

Market risk shall be measured in such a way that compliance with the limit on relative risk in the Pension Fund can be documented. Best practice in the area shall be employed in regard to measuring methods, decomposition and measurement frequency.

4.2.2 Counterparty risk

Norges Bank shall have satisfactory routines and systems for selecting and evaluating counterparties. The monitoring system and measurement frequency employed for control of counterparty risk, including requirements on minimum credit rating and exposure limits, shall follow best practice in the area.

Counterparties for unsecured deposits and trading in unlisted derivatives shall have a long-term credit rating of at least A-/A3/A- from at least one of the following three agencies: Fitch, Moody’s or Standard & Poor’s. Norges Bank may make exemption from this minimum requirement in regard to a central counterparty. When such exemption is granted, the Ministry of Finance shall be informed thereafter.

Norges Bank must lay down such supplementary requirements on credit rating, provision of security and exposure limits as are appropriate in the operative management, and shall measure overall exposure to counterparties using internationally recognised methods that meet necessary requirements as to verifiability and accuracy.

Norwegian banks can be used as counterparties in currency trading and when making bank deposits, provided the currency involved is included in the investment universe.

4.2.3 Operational risk

Identification and measurement methods shall comply with internationally recognised standards for the various dimensions of operational risk. Operational risk shall be identified and shall be measurable and controllable before new activities (e.g. investments in new countries, instruments, asset classes, counterparties, external service providers, IT systems etc) are started.

4.3 Reporting

Annual reports prepared by Norges Bank under section 1 of the regulations shall contain:

• Norges Bank’s strategic plan and the investment strategy for the Fund

• A list of all significant external service providers, including a complete list of external managers

• An account of the standards employed by Norges Bank for the purpose of valuation (accounts), measurement of return, along with management, measurement and control of identified risk factors (market risk, counterparty risk and operational risk)

• A report on the Fund’s return, including absolute and relative return measured in Norwegian kroner and the Fund’s currency basket, real return, decomposition of return on asset class and internal/external management

• A report on costs related to the phasing in of new capital, exclusion of companies and other changes resulting from any decision by the Ministry of Finance to change the Fund’s benchmark portfolio

• A report on the Fund’s absolute and relative market risk (volatility), monthly figures – in the aggregate and distributed on asset classes

• The composition of the fixed income portfolio by main categories of credit rating grade

• An overview of new countries, currencies and instruments in which the portfolio has been invested

• An overview of the Fund’s investments in relation to the regulations’ quantitative provisions

• An account of the exercise of ownership rights in accordance with the ministry’s Ethical Guidelines, see 5.3.2

• A list of companies that are excluded from the investment universe

• A report on the accounts in accordance with Norges Bank’s accounting principles

• A complete list of equities and bonds as of 31 December

• An account of the organisation and operating expenses of Norges Bank Investment Management

Quarterly reports prepared by Norges Bank shall contain:

• A report on the Fund’s return, including absolute and relative return in Norwegian kroner and the Fund’s currency basket, real return, and a description of important contributions to relative return

• A report on the Fund’s absolute and relative market risk (volatility), monthly figures – in the aggregate and distributed on asset classes

• The composition of the fixed income portfolio by main categories of credit rating grade

• An overview of the Fund’s investments in relation to the regulations’ quantitative provisions

• A list of companies that are excluded from the investment universe

• A report on the accounts in accordance with Norges Bank’s accounting principles

Any breach of the regulations’ cap on maximum holdings that is reversed within 10 trading days does not constitute a formal breach of the regulations and shall not be reported to the ministry.

5 Ethical guidelines – section 8 of the regulations

5.1 Basis

The Fund’s Ethical Guidelines are based on two premises:

• The Fund is an instrument for ensuring that a reasonable portion of the country’s petroleum wealth benefits future generations. The financial wealth must be managed with a view to generating a sound return in the long term, which is contingent on sustainable development in the economic, environmental and social sense. The Fund’s financial interests should be consolidated by using the Fund’s ownership positions to promote sustainable development.

• The Fund should not make investments that entail an unacceptable risk that Fund is contributing to unethical acts or emissions, serious violations of fundamental humanitarian principles, gross violations of human rights, gross corruption or severe environmental degradation.

5.2 Mechanisms

The ethical basis for the Fund shall be promoted using the following three mechanisms:

• Exercise of ownership rights to promote long-term financial returns based on the United Nations Global Compact and the OECD Guidelines for Corporate Governance and for Multinational Enterprises

• Negative screening from the investment universe of companies which, themselves or through companies they control, produce weapons whose normal violates fundamental humanitarian principles

• Exclusion of companies from the investment universe where there is deemed to exist a considerable risk of contributing to:

  • Gross or systematic violations of human rights, such as murder, torture, deprivation of liberty, forced labour, the worst forms of child labour and other child exploitation

  • Gross violations of individual rights in war or conflict situations

  • Severe environmental degradation

  • Gross corruption

  • Other particularly serious violations of fundamental ethical norms.

5.3 Exercise of ownership rights

5.3.1

The primary objective of Norges Bank’s exercise of ownership rights for the Fund is to safeguard the Fund’s financial interests. The exercise of ownership rights shall be based on a long horizon for the Fund’s investments, and broad investment diversification in the markets that are included in the investment universe. The exercise of ownership rights shall primarily be based on the United Nations Global Compact and the OECD Guidelines for Corporate Governance and for Multinational Enterprises. Norges Bank’s internal guidelines for the exercise of ownership rights shall stipulate how these priniciples are to be integrated in the exercise of ownership rights.

5.3.2

Norges Bank shall report on its exercise of ownership rights in connection with its ordinary annual reporting. An account shall be provided of how the Bank has acted as owner representative – including including a description of the work to promote special interests relating to the long-term horizon and diversification of investments in accordance with section 5.3.1.

5.3.3

Norges Bank may delegate the exercise of ownership rights to external managers in accordance with these guidelines.

5.4 Negative screening and exclusion

5.4.1

The Ministry of Finance shall make decisions on negative screening and exclusion of companies from the investment universe based on the recommendations of the Fund’s Advisory Council on Ethics. The recommendations and decisions are to be made public. The ministry may in certain cases postpone the time of public disclosure if this is deemed necessary in order to ensure a financially sound implementation of the exclusion of the company concerned.

5.4.2

The Fund’s Advisory Council on Ethics shall be composed of five members. The Council shall have its own secretariat. The Council shall submit an annual report on its activities to the Ministry of Finance.

5.4.3

The Council shall issue recommendations at the request of the Ministry of Finance on whether an investment may be in violation of Norway’s obligations under international law.

5.4.4

The Council shall issue recommendations on negative screening of one or more companies on the basis of the production of weapons whose normal use is in violation of fundamental humanitarian principles. The Council shall issue recommendations on the exclusion of one or more companies from the investment universe where there is deemed to exist a considerable risk of contributing to actions or omissions that involve:

• Gross or systematic violation of human rights, such as murder, torture, deprivation of liberty, forced labour, the worst forms of child labour and other forms of child exploitation

• Gross violations of individual rights in war or conflict situations

• Severe environmental degradation

• Gross corruption

• Other particularly serious violations of fundamental ethical norms

The Council shall raise matters under this section on its own initiative or at the request of the Ministry of Finance.

5.4.5

The Council shall gather the necessary information on an independent basis and ensure that a matter is elucidated as fully as possible before a recommendation concerning screening or exclusion from the investment universe is issued. The Council can request Norges Bank to provide information as to how specific companies are dealt with in the exercise of ownership rights. All enquiries to such companies shall be channelled through Norges Bank. If the Council is considering an exclusion recommendation, the draft recommendation, and the grounds for it, shall be submitted to the company for comment.

5.4.6

The Council shall review on a regular basis whether the grounds for exclusion still apply and can on receipt of new information recommend that the Ministry of Finance reverse the exclusion decision.

5.4.7

Norges Bank shall receive immediate notification of the decisions made by the Ministry of Finance in connection with the Council’s recommendations. The Ministry of Finance can request that Norges Bank inform the companies concerned of the decision taken by the Ministry of Finance and the reasons for the decision.

5.5 Exclusion of individual companies

Companies that are excluded from the investment universe of the Government Pension Fund – Global

Alliant Techsystems Inc.

EADS Co (European Aeronautic Defence and Space Company)

EADS Finance BV

General Dynamics Corporation

L3 Communications Holdings Inc.

Lockheed Martin Corp.

Raytheon Co.

Thales SA.

Singapore Tehnologies Engineering

BAE Systems Plc.

Boeing Co.

Finmeccanica Sp. A.

Honeywell International Inc.

Northrop Grumman Corp.

United Technologies Corp.

Safran SA

Wal-Mart Stores Inc.

Wal-Mart de Mexico SA de CV

Freeport McMoRan Copper&Gold Inc.

Poongsan Corp.

DRDGOLD Ltd.

Chapter 4 management agreement between the Ministry of Finance and Norges Bank

1. The contents of the agreement etc.

The State, represented by the Ministry of Finance, has delegated responsibility for the operational management of the Government Pension Fund – Global (“the Fund”) to Norges Bank. The management of the Fund is subject to the Government Pension Fund Act (no. 36 of 20 December 2005), Regulations on the Government Pension Fund – Global and guidelines with supplementary provisions that have been or may be adopted by the Ministry of Finance. This Agreement, together with the Act and Regulations regulations mentioned, governs the relationship between the Ministry of Finance and Norges Bank in connection with the management of the Fund.

All communication referring to this agreement shall be in writing and shall be signed. Such communication shall be sent to Norges Bank Investment Management and to the Economic Policy Department of the Ministry of Finance.

2. Norges Bank’s obligations

2.1 Norges Bank’s responsibilities

Norges Bank shall manage the Fund in accordance with the law, the Regulations for Financial Management in the Government Administration, regulations and other decisions and guidelines that apply to the Fund (cf. Clauses 1 and 3.1). Matters of special importance shall be submitted to the Ministry of Finance.

Quarterly and annual reports on the management of the Fund which are issued by Norges Bank (see section 1 of the regulations), shall be certified by Central Bank Audit. Norges Bank shall without undue delay notify the Ministry of significant changes or expected significant changes in the value of the Fund. Norges Bank shall provide the Ministry of Finance with information as requested by the Ministry, including information in machine-readable form to companies that assist the Ministry in evaluating Norges Bank’s management of the Government Pension Fund – Global.

Norges Bank is liable to pay damages to the State for losses arising as a result of negligence or intent on the part of the Bank, external managers or external service providers with whom the Bank has entered into an agreement (see Clause 2.2 first paragraph of the Agreement).

2.2 Management of the Fund

Norges Bank may use external managers and external service providers in the management of the Fund. Such managers must have satisfactory internal Ethical Guidelines for their activity. Norges Bank is party to agreements with such service providers, and shall oversee their activity on behalf of the Fund.

The Ministry of Finance shall be informed of the choice of external service providers that are of major importance to management and of the grounds for the choice. The Ministry shall receive copies of the annexes relating to remuneration in new management agreements entered into by Norges Bank with external managers in connection with the management of the Fund. Remuneration to external managers shall be such that the Fund retains the major part of the increase in excess return. The Ministry of Finance may require Norges Bank to submit to the Ministry all contracts entered into in connection with the management of the Fund.

2.3 Amendments to regulations, guidelines etc.

At the request of the Ministry of Finance, Norges Bank shall provide the Ministry with advice regarding amendments to the framework conditions for management, including regulations, decisions and guidelines laid down by the Ministry. Norges Bank may also submit its own proposals for changes in the framework conditions if the Bank considers it appropriate.

2.4 Exclusion and screening of financial instruments

At the request of the Ministry of Finance or the Fund’s Advisory Council on Ethics, Norges Bank shall obtain information from specified issuers and give this information to the Council.

If the Ministry of Finance decides to exclude particular financial instruments from the investment universe of the Fund, Norges Bank shall normally be allowed a period of eight weeks in which to complete the sale of these instruments.

Norges Bank shall notify the Ministry of Finance when a sale has been completed. The Ministry of Finance shall consider whether to announce the assessments of the Council and the Ministry of Finance on a case-by-case basis (cf. the Royal Decree of 19 November 2004). If management considerations so indicate, the Ministry shall endeavour to postpone announcement until after it has been notified that a sale has been completed.

2.5 Information

Norges Bank shall, within the framework of the Freedom of Information Act and the Public Administration Act, and in accordance with further guidelines issued by the Ministry of Finance, provide information to the public concerning the performance of the management assignment.

3. The obligations of the Ministry of Finance

3.1 Regulations, guidelines, etc.

Norges Bank shall have the opportunity to express its view before any changes are made to regulations, decisions or guidelines on management, and shall be given reasonable notice to make changes in the portfolio.

3.2 Remuneration

Remuneration shall be in compliance with Annex 1 to this Agreement. Up to 1 December each year both parties may request changes in the method of calculating remuneration for the subsequent calendar year.

Remuneration shall be deducted from the Fund’s gross return before the net return is transferred to the Fund’s krone account on 31 December each year. Norges Bank shall submit its remuneration calculations to the Ministry of Finance as early as possible and no later than one week before finalising the accounts.

3.3 Crediting

The Ministry of Finance shall make any transfers of capital from the Treasury to the Fund’s krone account in Norges Bank. The deadline for notifying Norges Bank and the final krone amount to be credited shall be in accordance with the prevailing “Guidelines for rebalancing the Fund”.

3.4 Debiting

The Ministry of Finance shall notify Norges Bank in due time before making any deductions from the Fund to allow the Bank to make portfolio adjustments. The Ministry of Finance shall notify Norges Bank of the account to which the transfer is to be credited.

3.5 Tax issues

The Ministry of Finance shall contribute to providing the documentation necessary to clarify the tax position of the Fund’s investments abroad.

4. Amendments and termination

4.1 Amendments

The Agreement shall be amended when changes in laws or regulations, decisions or guidelines so indicate. This Agreement and the annex thereto shall not otherwise be amended without written approval from both parties.

4.2 Termination etc.

If neither party has given written notification by 31 December in a given year that the agreement is to be terminated as from 31 December of the following year, the agreement will continue to apply for a further year at a time until such notification is given.

The Ministry of Finance will lay down further rules and instructions regarding termination of the management assignment, including severance pay and other remuneration to Norges Bank in connection with the termination. Clause 3.1 shall apply to a corresponding extent.

Oslo, 22 December 2005

For the Ministry of Finance

For Norges Bank

Annex 1:

Remuneration for management of the Government Pension Fund – Global