Management agreement

1. Contents of the agreement

Norges Bank has been assigned responsibility for the operational management of the Government Petroleum Insurance Fund, and for maintaining separate accounts for the Fund on behalf of the Government, represented by the Ministry of Petroleum and Energy. The management and accounts of the Fund are subject to Act no. 23 of 30 May 1986 on the Government Petroleum Fund with the appurtenant regulation, as well as other decisions and guidelines that have been or may be adopted by the Ministry of Petroleum and Energy and Norges Bank in connection with the administration and management of the Fund. This agreement, together with the regulations and decisions mentioned, governs the relationship between the Ministry of Petroleum and Energy and Norges Bank in the management of the Fund.

All notifications that affect this agreement shall be in writing and signed. Such notifications shall be communicated to Norges Bank Investment Management and to the Oil and Gas Department of the Ministry of Petroleum and Energy. Norges Bank and the Ministry of Petroleum and Energy shall each draw up and maintain a list of contacts associated with the management and with the payment of claims for damages.

2. Norges Bank’s obligations

2.1 General

Norges Bank shall manage the Fund in accordance with law, regulations and other decisions and guidelines that apply to the Fund (cf Clauses 1 and 3.2).

Matters of special importance shall be submitted to the Ministry of Petroleum and Energy.

Norges Bank shall without undue delay notify the Ministry of significant changes or expected significant changes in the Fund’s assets. Norges Bank undertakes to provide the Ministry of Petroleum and Energy with the information requested by the Ministry.

Norges Bank is liable for damages vis-à-vis the State for losses arising as a result of negligence or intent on the part of the Bank or external service providers operating under an agreement with the Bank.

2.2 Investment of the Fund’s assets

Norges Bank is responsible for the investment of the Fund’s assets, and shall seek to achieve the highest possible return, pursuant to the act, regulations, decisions and guidelines applying to the Fund.

Norges Bank may use external managers in the management of the Fund, and may also in other respects use external service providers in connection with the management of the Fund’s assets. Norges Bank is party to agreements with such service providers, and shall supervise their activity on behalf of the Fund. The Ministry of Petroleum and Energy shall be informed before external service providers are selected.

2.3 Payment of claims for damages

Norges Bank shall make payment for claims for damages from the Fund at the request of the Ministry of Petroleum and Energy. Norges Bank shall have sufficient time to realise assets that are not deposited in Norges Bank’s krone account.

2.4 Accounts and audit

Norges Bank maintains separate accounts for the Government Petroleum Insurance Fund, in accordance with Section 1 of the Regulation.

All disbursements in a particular year shall be specified in a separate note to the annual accounts.

The annual accounts shall first be audited by Norges Bank’s Auditing Department, pursuant to an agreement between the Office of the Auditor General and Norges Bank of March 1997. This office shall perform a final audit based on the work carried out by Norges Bank's Auditing Department.

The annual accounts shall be sent to the Ministry once the Auditor General’s Office has performed a final audit.

2.5 Reports on performance, information

Norges Bank shall delivery quarterly reports on the Petroleum Insurance Fund’s performance, currency distribution, duration and book values, and comments on market developments. The return shall be measured against a benchmark portfolio defined by the Ministry of Petroleum and Energy. An account shall be provided concerning deviations between the return achieved and the return on the benchmark portfolio.

In calculating returns, adjustments shall be made for the costs of any liquidation of investments in connection with payment of damages claims.

Once the revised annual accounts are available, Norges Bank shall prepare an annual report on market developments for the Fund in the previous year. The performance through the year shall be compared with that of the benchmark portfolio. This report is published in addition to the report for the fourth quarter.

Norges Bank shall send an audited annual report for the Fund and the annual report on market developments to the Oil and Gas Department of the Ministry of Petroleum and Energy.

Norges Bank shall provide information concerning the Fund's management to the public, in accordance with the Public Information Act and the Public Administration Act and the relevant guidelines issued by the Ministry of Petroleum and Energy.

3. Duties of the Ministry of Petroleum and Energy

3.1 General

At the end of each year (and more frequently if required), meetings shall be held between the Ministry of Petroleum and Energy and Norges Bank concerning performance, accounts, routines, composition of the benchmark portfolio etc.

3.2 Regulations, decisions, 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 notified in due time to allow changes to be made in the portfolio.

3.3 Processing of claims for damages/Debiting

When a claim for damages is approved, the Ministry of Petroleum and Energy shall send a letter to Norges Bank ordering a withdrawal from the Fund’s account, and stating to which account the transfer is to be credited. In the event of a claim for damages, Norges Bank shall receive the letter at least one day before the payment deadline. When large amounts are to be paid which cannot be covered by way of the krone account, Norges Bank shall be informed at least 3 banking days before the payment deadline. The payment order shall be signed by two persons with special authorisation (cf. the enclosed copy of Annex 1 of the signature card with a list of the civil servants and staff who are authorised to draw on the account. Changes in the authorisation are to be sent to Norges Bank.

3.4 Crediting

The Ministry of Petroleum and Energy shall make annual transfers of capital from the Treasury to the Fund’s krone account in Norges Bank by 1 July of the individual appropriation year. Norges Bank shall be notified in due time with respect to the exact time of the transfer.

3.5 Remuneration

Remuneration shall take place pursuant to Annex 2 to this agreement. Remuneration is determined on the basis of the principle of full coverage of expenses incurred by Norges Bank. An evaluation of the remuneration shall be carried out each year. Changes in the method for calculating remuneration for the following calendar year may be requested by either party before 1 December of each year.

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

The Ministry of Petroleum and Energy shall approve in advance those clauses of the agreements between Norges Bank and Norges Bank’s managers that have a direct influence on the remuneration paid by the Ministry of Petroleum and Energy to Norges Bank.

3.6 Taxation

The Ministry of Petroleum and Energy shall contribute to providing the documentation necessary to clarify the tax position of capital from the Fund that has been invested abroad.

4. Amendments and entry into force, etc.

4.1 Amendments

The agreement shall be revised when amendments to laws or regulations, decisions or guidelines so require. This agreement and the annex thereto may not otherwise be amended without the written approval of both parties.

4.2 Entry into force and termination, etc.

This agreement with annex enters into force on 4 March 1999, albeit such that Annex 2 to this agreement applies in full from 1 January 1999. If neither of the parties 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 one year at a time until such notification is given.

The Ministry of Petroleum and Energy issues further specified rules and instructions in connection with the termination of the management assignment, including severance pay and other remuneration to Norges Bank in connection with the termination. Clause 3.2 applies accordingly.

Oslo, …………… 1999

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For Norges Bank For the Ministry of Petroleum and Energy