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Novo Annual Review 2016
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financial
investments
delivers healthy return by investing in non-health care assets, novo
a/s ensures diversification, which provides a healthy relationship between risk and return on the novo nordisk foundation?s capital. the financial investments are also to a large extent liquid, which is important for novo a/s in order to finance the grant-giving activities of the novo nordisk foundation and to be able to support novo nordisk or novozymes financially, if the need should arise. at the end of 2016, the value of our financial portfolio (including the novo nordisk foundation?s share) was dkk 38.8 billion. since equities comprise the vast majority of the financial portfolio, the return on financial investments is closely linked to the performance of global equity markets. during 2016, financial markets had another strong year, resulting in a return of 8.1% on the liquid part of financial investments. financial investments has delivered a return of approximately dkk 15 billion since its inception and a highly attractive time-weighted rate of return (twr) of 11% and 8% has been realized over a five- and 10-year period. in 2016, we raised our ownership stake in the danish engineering company, flsmidth a/s and in the private danish real estate company, dades a/s. investment criteria and csr novo a/s carries out extensive due diligence when we invest in new companies
. in addition to financial, legal, scientific and business-related issues, our due diligence efforts establish whether a company operates according to values and principles that correspond to those of the novo group. a bioethical perspective helps to evaluate whether the relevant companies ? in connection with clinical trials and potential use of biological material ? comply with ethical standards and international conventions. please turn to page 54 to see the 2016 csr report. as of yet, novo a/s? board of directors has no female members. in 2016, the board decided to set out the target that by 2020 the board will consist of at least one member of each gender. to achieve this goal, the board will work to identify suitable candidates. governance novo a/s puts great emphasis on representative ownership. we strive to have board representation in the companies in which we invest, and, through this, to contribute to the major strategic initiatives that our portfolio companies take. we also take an active interest in the composition of the board and the executive leadership team in the companies, and keep close track of their performance. however, when it comes to daily management and more operational issues, we rely on and entrust the company?s management and board. we are keen that the companies in our portfolio observe the value-based standards defined in the charter for companies in the novo group. strategy our guiding strategy is based on the commercial objectives of the novo nordisk foundation. novo a/s will continue to be a strong owner of the companies in the novo group and will invest its capital in the life science sector to optimise value creation and to support development in the industry in general. due to our extensive experience and expertise, we are particularly well positioned to play an active role in the life sciences. we invest across the entire spectrum of life science companies, from early seed investments through to traditional venture investments and investments in large, established companies. we have a flexible investment approach enabling us to take both minority and majority ownership stakes. in the years to come, novo a/s plans to further increase investments in life science companies, with a focus on us and european markets. it is also our aim to maintain an adequate liquidity reserve, which we allocate to more traditional portfolio investments, primarily in global equities. knowledge resources novo a/s relies on highly specialised expertise, particularly within the areas of life sciences and investments. for this reason, the professional competences of our employees are of great strategic importance. we focus on training and education to allow the individual employee to increase his or her value to novo a/s and the labour market in general. to serve our portfolio companies with the best combination of competences, our life science teams include individuals whose professional experience has been gained inside as well as outside the novo group. financial investments dkk billion 2016 2015 value at the end of the year 38.8 37.9 unrealised and realised gains/ losses during the year 2.8 2.9 seed investments dkk million 2016 2015 value at the end of the year 291 250 investments during the year 149 75 cash proceeds during the year 26 129 unrealised and realised gains/ losses during the year -81 56 14 novo a/s 2016
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