board ’ s external members. the committee serves as a preparatory body for the executive board on matters relating to risk management and internal control. in 2008, the executive board issued a new job description and investment mandate for the executive director of nbim. the organisation of nbim is based on the executive director ’ s responsibility and authority as general manager of nbim, which includes reporting directly to the executive board and regular supervision by the governor of norges bank on behalf of the executive board. this virtually eliminates the possibility of one person holding a double role as both general manager and as chair of the executive board. the executive director ’ s investment mandate sets rules for the fund ’ s choice of investments and risk limits for nbim ’ s investment management. the financial crisis revealed that the risk measures used previously, and which were based on what was regarded as best international practice, were inadequate. the executive board has therefore also set supplementary risk limits, for example for the size of the percentage deviation between the actual portfolio and the benchmark portfolio, the degree of leveraging and liquidity requirements for the fund ’ s investments. the mandate is also intended to ensure that active risk positions are taken in a balanced manner and to avoid active strategies with a considerably skewed outcome set. nbim ’ s monthly and quarterly reports to the executive board are to reflect the guidelines in the investment mandate. the results for 2008 were influenced by the global financial crisis. the total return on the fund was a negative 23 per cent, the weakest in the fund ’ s history. there was a negative return of 41 per cent on the equity portfolio, while the return on the fixed income portfolio was close to zero. the real rate of return after costs has been one per cent since 1998. international stock exchanges lost more of their value in 2008 than in any other single year in recent history. absolute results, especially with regard to equities, were highly abnormal. an investor such as the government pension fund – global will earn more in the long term because of wide fluctuations in equity values. many investors have suffered losses on equities. as a result of this experience, required returns will be higher in the future. under the fund ’ s investment strategy, more equities are purchased when equity prices fall and fewer when prices rise. thus, the fund purchased a large volume of equities in the period 2001 - 2003 and is buying a considerable volume now. of the equities now

in billions of nok government pension fund – nor way - 30 government direct o wnership1 - 230 government share of subsea petroleum reserves2 government pension fund – global3 - 2 200 - 130 ( - 630 ) household housing wealth 4 - 400 1 ) decrease in value adjusted for dividends. companies listed on the stock exchange 2 ) fall in value of the govern ment share of subsea petroleum reserves with a decline in the price of oil fro m nok 500 to nok 300 per barrel. the oil price was approxi mately nok 500 per barrel at the beginning of 2008 q4 and has varied bet ween nok 260 and nok 350 per barrel in 2009 3 ) negative return in nok. negative return measured in international currency in brackets 4 ) fall in housing wealth fro m august 2007 to 2008 q4 ( no minal ter ms ) sources : ministry of finance, ministry of trade and industry, folketrygdfondet and norges bank return 1998 - 2008 benchmark portfolio and actual portfolio. indexed, 31 dec1997 = 100 benchmark portfolio actual portfolio return on equities1998 - 2008 benchmark portfolio and actual portfolio. indexed, 31 dec1997 = 100 benchmark portfolio actual portfolio return on fixed income instruments 1998 - 2008 benchmark portfolio and actual portfolio. indexed, 31 dec1997 = 100 benchmark portfolio actual portfolio credit ratings, fixed income portfolio1 ) government pension fund - global. per cent as at 31 dec 2008 aaa aa a baa ba lower no rating risk premiums for corporate bonds total premiums liquidity uncertainty regarding future losses credit risk source : bank of england inflation report, february 2009 risk – expected tracking error ( relative volatility )