During the third quarter, the Government Petroleum Fund recorded a return of -3.6 per cent measured in terms of the currency basket of the benchmark portfolio for the Petroleum Fund.

The weak return is due to the sharp fall in equity prices on international stock markets in August and September. In the third quarter, the return on the equity portfolio was -15.6 per cent measured in terms of the currency basket of the benchmark. At the same time, declining interest rates contributed to a return of 4.6 per cent on the bond portfolio, which is substantially higher than the return in the first two quarters of the year.

In the first nine months of 1998, the Petroleum Fund recorded a return of 2.1 per cent measured in terms of the currency basket of the benchmark. The bond portfolio showed a return of 8.9 per cent while the return on the equity portfolio was -3.8 per cent. Measured in Norwegian kroner, the Petroleum Fund recorded a return of 5.1 per cent for the first nine months. Since changes in the Norwegian krone exchange rate do not affect the Petroleum Fund's international purchasing power, it is most relevant to evaluate the return in terms of international currencies.

In the third quarter, the return on the Petroleum Fund was 0.23 percentage point lower than the return on the benchmark portfolio defined by the Ministry of Finance. The underperformance is due to a lower return on the bond portfolio than on the bond portion of the benchmark portfolio, and to a slight excess of equities in a period when the return on equities was substantially lower than that on bonds. Norges Bank achieved an outperformance of 0.20 percentage point for the first three quarters of the year.

Following the transfer of NOK 10.0 billion to the Petroleum Fund on 30 September, the market value of the Fund was NOK 140.5 billion at the end of the third quarter.

Norges Bank has selected five organisations to conduct active management of portions of the Petroleum Fund's equity portfolio. Mercury Asset Management has been awarded a mandate for a British equity portfolio. Capital International Limited, Gartmore Investment Management and Storebrand Kapitalforvaltning have been awarded mandates for European equities excluding the UK. Fidelity Pensions Management is to manage an equity portfolio for the Pacific area excluding Japan. Further work is in progress to select equity managers for stock markets in the US and Japan.

Further information can be obtained from: Norges Bank Investment Management, tel. +47 22 31 62 71