Net international reserves are Norges Bank’s main assets, apart from the Government Pension Fund – Global, which does not affect the Bank’s results. Norges Bank has liabilities in the form of notes and coins in circulation and domestic deposits from the central government and banks. This balance sheet composition will normally generate a positive return over time. This is mainly because the Bank has substantial capital, as well as liabilities in the form of notes and coins in circulation. The Bank’s assets primarily consist of investments that generate a return. The assets are largely invested in foreign exchange, and the liabilities are in NOK, which implies a considerable foreign exchange risk and that substantial capital is required.

The main items in Norges Bank’s profit and loss account are interest and any net exchange gains or losses on the foreign exchange reserves. Exchange and capital gains are derived from exchange rate fluctuations, changes in equity prices and interest rate changes that affect bond prices. Norges Bank’s results will depend on developments in these variables, which may cause wide annual fluctuations in the Bank’s results.

Interest income and dividends from foreign investments amounted to NOK 13.0 billion in 2006, which is NOK 3.8 billion more than in 2005. The rise in prices in international securities markets in 2006 resulted in a gain of NOK 6.6 billion, compared with a gain of NOK 11.0 billion in 2005. Due to the appreciation of NOK, foreign exchange reserves translated into NOK show exchange losses of NOK 5.0 billion in 2006, compared with exchange gains of NOK 8.1 billion in 2005. Exchange losses due to the appreciation of the krone have no effect on the international purchasing power of the foreign exchange reserves.

At the end of 2006, Norges Bank’s international reserves amounted to NOK 254.6 billion at market value when account is taken of repurchase agreements and deposits. This is NOK 2.6 billion less than at end-2005. The decline is due largely to the appreciation of NOK.

After the year’s allocations, the Adjustment Fund amounts to NOK 73.0 billion. As there are no funds in the Transfer Fund, no transfer will be made to the Treasury.