historical average for the fund. expected tracking error then increased gradually through 2008. towards the end of the year, observations were at the highest levels in the history of the fund. at the end of october 2008, expected tracking error exceeded the limit set by the ministry of finance. this relative increase in market risk occurred at a time of wide daily market fluctuations. it was not the result of new active risk positions. although new investments were of course suspended, there were no fire sales either under the prevailing conditions. market risk has subsequently decreased considerably. in conclusion : the fund is a long - term savings plan and capable of riding out large swings in the markets. this is the very foundation of the investment strategy with its high allocation to equities. our ability to adhere to this strategy in a critical phase – even if this should last some time – is crucial if the fund is to deliver the returns we expect in the longer term. in 2008 norges bank ’ s management results were weak in both absolute and relative terms. relative returns in 2008 were significantly worse than might have been expected based on the investment strategy chosen. in the management of the fixed income portfolio, the crisis in the financial system revealed that risk exposure in the various mandates was not sufficiently independent. the executive board has reinforced its oversight of the bank ’ s investment management. it has issued a new mandate to nbim that delegates investment management responsibility and introduces additional limits in the risk profile for investment management. as with the fund ’ s long - term investment strategy, the results of our operational management of the fund need to be measured over time. i am confident that the operation we have built up will deliver good results in the long term. thank you for your attention! governance model ministry of finance on behalf of government storting ( norwegian parliament ) norges bank ’ s executive board norges bank ’ s supervisory council central bank audit management structure of norges bank norges bank ’ s executive board and executive management audit committee executive board ’ s investment management advisory board norges bank ’ s investment management internal audit unit long - term o wnership 1. 50 % 1. 50 % europe americas 1. 25 % 1. 25 % asia and oceania 1. 00 % 1. 00 % 0. 75 % 0. 75 % 0. 50 % 0. 50 % 0. 25 % 0. 25 % 0. 00 % 0. 00 % sources : ftse and norges bank government assets fall in market value in 2008.

on average risen by 9 per cent annually between 1995 and 2002. house prices have also increased considerably in other countries. a sharp and sustained rise in house prices might contribute to high credit growth even after prices have levelled off. since only a portion of the housing stock is sold each year, some dwellings will be sold at a higher price than when they were last sold for a long period. this has contributed to sustaining the high level of growth in credit to households in norway even after the rise in house prices moderated through 2002 and into 2003. it is easiest to sell dwellings in the largest cities and some specific areas are particularly attractive. residential property is now a fairly liquid and attractive investment. a persistently high rate of increase in house prices may in isolation engender expectations of a further rise and may thus prove to be selfreinforcing for a period. moreover, there now seems to be a tendency towards investing in property and incurring loans at a more mature age so that younger generations not only inherit dwellings, but debt as well. both debt and wealth are on the rise for these more mature age groups. sharp increases in asset prices and debt accumulation may pose a risk to economic stability. with a view to mitigating this risk, it will be appropriate in some situations to apply a somewhat longer - thannormal time horizon than two years to attain the inflation target. however, at present debt accumulation is high only in the household sector. there is little borrowing activity in the enterprise sector. house prices are rising, but non - residential property prices are stable. prices for office premises are, however, stable. the analyses in the inflation reports indicate that inflation will remain low this year, picking up thereafter. the krone depreciation since january 2003 is expected to push up prices for imported consumer goods. overall, mainland gdp growth is projected to pick up markedly this year and remain relatively high in 2005 and 2006. gdp growth is projected to reach 3¼ per cent in 2004 and 2005, followed by a slight decline to 2¾ per cent in 2006. with this path for total output, the output gap, as measured here, will shift to slightly positive in 2005 and 2006 from slightly negative this year. projections are based on the technical assumption that the interest rate will move in line with forward rates. the assumption implies that the interest rate will be somewhat lower in the near term, but that it will rise gradually from the summer, largely in parallel with the increase in interest rates