THE WORLD BANK GROUP ARCHIVES

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Folder Title: General Development Project - Norway - Loan 0115 - P037467 - Negotiations - Volume 2

Folder ID: 1705802

Project ID: P037467

Dates: 3/31/1955 – 4/19/1955

Fonds: Records of the Europe and Central Asia Regional Vice Presidency

ISAD Reference Code: WB IBRD/IDA ECA

Digitized: 7/19/2018

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© International Bank for Reconstruction and Development / International Development Association or The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org

II -NQRWA.Y - Negotiations (l.l.~NO)-

~~ 1H1 11111111111111rm1rn mrn1111r ~~· 1705802 General Development Pr . Al 995-063 Other #· 4 DECLASSIFIED Negotiations - Volum e 2 o1ect- Norway- Loan 011.5 - P037467Box# _ 1709718 WITH RESTRICTIONS WBG Archives • s

t •

.. C 0 • p y

April 15, 1955

Dear Mro Perouse: I refer to our discussion this afternoon about para­ graph 31 of the President's Report and RecOlllll.endations on the proposed loan of $25 million to the Kingdom of Norway. As I mentioned then, Mr. Brinch has stated that the use of the words "further assurances" might be taken as implying that the Norwegian Government has already given the assur­ ances r.eferred to, mch he denies. We all agreed this afternoon that the reference to "further assurances" was made as a quotation from Mr. Hoppenot•s memorandum to Mr. Black dated March 24, 1955 and that in ao doing the Bank did not endorse the meorandum or any particu­ lar implication that the words used in it might carry.

I an sending a copy of this letter to Mr. Brinch. Yours sincere~,

s.R. Cope Assistant Director of Operations Europe, Africa and Aua~ralisia

Mro Maurice Perouse Alternate Executive Director for France International Bank for Reconstruction and Developnent Washington, n.c.

CC: Mr. Christian Brinch

SRCope:eed FO ,H-1 No. 59 (3 .49) CROSS REFERENCE SHEET

COMMUNICATION: Letter Acknowledging letter. April 201 1955

DA TED: April 14, 1955

TO: Mro Vo Umbricht

FROM: Swiss Bank Corporation, Basle - Dr. Tttrler

SUMMARY: Acknowledging personal letter. Discusses Norway loan.

FILED UNDER: Switzerland - General

CROSS REFERENCE: Norway - Loan ll5 Negotiationso N~- \l~•a> •

April 12., 1955

MEH>RANDUM OF THINGS TO BE DONE

PROPOSED WAN TO KI GDOM OF NORWil

/ I. On the date of signature of Loan Agreement (April 19):

• Six copies of Loan Agreement are to be signed for the Kingdom ot

Norwq by • Brinch; for the Bank., by Mr. Black or Mr. Hoar.

• The following documents are to be delivered to the Bank:

l. Certificate of Mr. Nielsen., to which are attached copies of

Storting resolution., royal resolution and order of the Ministry

of Commerce. Note: Two copies of the certificate are in the

Bank• possession., but • Brinch., pursuant to authorization,

is to date the certificate the date of signature of the I.oan Agreement.

2. Opinion of the Minister of Justice. Note: Mr. Brinch has a

signed but undated copy ot the opinion. He must have authori­

zation from the Minister of Justice to date the opinion the

date of signature of the Loan .Agreement and to deliver it to

the Bank. o. The Bank will deliver to the Kingdom of Norwa.y certified copies of resolution of the ard of Executiv Directors of the Bank authorizing signature of the Loan Agreement together with certi.fied copies of wan

Regulations No. 3 dated February 15, 1955. I I . en the date or delivery of bonds of the public issue (April 26): / A. The authorized representative or the Kingdom must date and deliver

to the Bank certificate signed by Mr. Brinch concerning the amount of the •

unus d authorization remaining under Storting resolution adopted J'Wle 21,

1954. :tbt~: 01_that date t~ authorized representa~ive 0£ the Kingdom must receive a cable from Mr. Brinch substantiall,y as follows: "YOU

ARE AUTHORIZED TO DATE MY· CERT.lli'ICATE UNUSED WAN AUTHORIZMIO AS OF

CLC6ING DATE AND DELIVER COPIES TO INrBAF1W> AND UNDERWRITERS • rt

Kingdom by letter signed by its authorized representative must notify the Bank: l . That the execution and delivecy or the Loan geement on be­

half oft~ Kin~<:J.om has been .duly _authorized or ratitied by all necessar.r governmental action.

2 . That the Kingdo has duly delivered and received pqment for

the $15., 000., 000 aggreg ;te principal ount of' bonds of the public bond issue.

Notes draft letter or notification has been handed to Mr. Brinch. c. When all the abov: action h been taken., th Bank will deliver to

Harriman Ripley- Co ., Incorporated cow ot ~ cabled notification to the Ministry of C<:>mmerce in_~~o to the _e££ect that_the 25 ., 000., 000 loan be­ ( c~s effective on the closing date. A draft cable to the Kingdom and . . draft letter to Harriman Ripley a.re attache~. : .Arrangements must

be made so that the c le can b sent trom the office where the closing is hel

D. letter concerning disbursements, signed on behalf' 0£ International

ank., i .to be countersigned by the autmrized representative of the KingdODJ•

co: • ·Brinch • Stevenson Mt-. Hoar • King ~ Patera n

• DRAFr CAB

STRY OF co~:MMBRC!

S EVIDENCE FU IS UND S

ECTIVE T , L

A.s.o. DRAP'l - latter to be · delivered to Harrillan Ripley co., DlCOrpora1. Q. on closing date.

Co . , orpor

Yolic tl n:

T h tod notified ~-Q turnished to it, by the K1ngdo ot rwq und r Section 9. OJ of' Lo • ) da ed ruary 15, 1955. Accordi Jy., t il 19., 19.55 do or rw d Int -

tio ank for constructio

A eopy o the Bank' cab:11' to this t.tect 1 attac d. incerely your ,

s. • ar Director of r tions Ewt"On,e., Af'ric and Austral ia nclo ure ' '--~~-k FOR M No . 58 ( 5- 48 ) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT , .. - -- J OFFICE MEMORANDUM .. TO: FILES DATE: April 12, 1955 FROM: S. R. Cope

SUBJECT: Loan to Norway - Use of Borrowed sterling

Mr . Flett called me this morning to say that London had given a generally favorable reaction to the points I had raised with him earlier; namely, the absence of any reference to competitive bidding in the documents dealing with the loan and the use by the Bank of the remainder of its bor­ rowed sterling for the loan. As yet he had no final instructions, but he did not expect any difficulty. He added that London expressed the hope that we were not counting on coming back to the London market in the immediate future for a further sterling issue: if the question were raised, the Chancellor's answer might be different than it would have been had condi­ tions been the same as they were last year. I said that while, of course, we would want to come back to the London market sooner or later, I recog­ nized that the situation at the present time made a loan out of the question. -' cc: Mr. Hoar Mr. Riley , Mr. le j eune Mr. King April 12t 1955

rro sterling

e ;ye ago Is ke to • l tt or our intention to se batant~ all our re ing borro aterlin for the

ect Mr. Iloar • le7 Mr. Lejeune

SRCopeaeed • t • I • I al.80. the date ot t tor the bo ubllc issue 1n re ' loan. I t and to • t.e tor bia co • 11'. 70ura,

• V?t!Jrsey/ p ill you ple :till in the :te

1ii the rand . attached and also g1 ve the .AIR MAIL April ll, 195.5

• Carsten elsen ,-&1 rwegian M1.nistry of Co re no. ansens pl. 4 o, rv ar • elsena I was delight d to learn th the opinion or t nister of Just.ice has b en d:tsp tcbed to Mr. Brinch. Th you tor I I torwm/icling the caw to • inc rely your ,

I I V?fbrser/rrDp I I ' INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (NOT FOR PUBLIC USE}

FOR D CONFIDENTIAL EXECUTIVE R-870 WBGARCHI DIRECTORS' (For consideration by the MEETING Executive Directors on April 18, 1955.)

FROM : The Acting Secretary April 8, 1955

PROPOSED LOAN TO THE KilJGOOM OF NORY!AY

The proposed loan to the Kingdom of Norway will be considered at a Special Meeting of the Executive Directors at J:00 p. m. , Monday, April 18, 1955. There are ·attached:

1. President's Report and Recommendations 2. Draft Loan Agreement 3. Statutory Loan Committee Report 4. Current Economic Position and Prospects of Norway 5. Draft Resolution

Attachments

Distribution: Executive Directors and Alternates President Vice President Assistant to President Department Heads

Sec. 9-198 Archives Record Removal Notice & Records Management

File Title Barcode No. General Development Project - Norway - Loan 0115 - P037467 - Negotiations - Volume 2 1705802

Document Date Document Type April 8, 1955 Board Record Correspondents / Participants

Subject / Title

Approval of Loan to Kingdom of Norway

Exception(s)

Additional Comments Declassification review of this record may be initiated upon request. The item(s) identified above has/have been removed in accordance with The World Bank Policy on Access to Information or other disclosure policies of the World Bank Group.

Withdrawn by Date Vlada Alekankina April 02, 2018

Archives 01 (March 2017) N~-~~ FORM No . 57 (5- 48) INTERNATIONAL BANK FOR RECONSTRUCTION AND DE VELOPMENT OFFICE MEMORANDUM

TO: Files D A T E : April 7, 1955

FROM : S. R. Cope

SUBJECT: Norway - Use of Borrowed Sterling

Mr , Flett tele~d me yesterday about my memorandum. to the files dated April 1 , 1955. He said that after reading it he felt that he might have given the impression that the United Kingdom were particularly concerned with the availability of sterling for Uruguay and he wanted me to know that he had mentioned Uruguay merely as an example, and that Uruguay had no special claim on sterling resources.

I told Mr. Flett that he had in fact made it clear that Uruguay was only a typical case and not the only one , but that I would see that there was no misunderstanding in the Bank on this point.

~-

cc: Mr . Flett Mr . Hoar Mr . Riley

SRCope:eed FORM NO . 57 ~,-k,,. (5. 48) INTERNATIONAL BANK FOR RECONSTRUCTION AND DE VELOPMENT E MEMORANDUM

TO: Files DATE: April 11 19.5.5

FROM: N. J . Paterso

SUBJECT: Norway: Proposed Second Loan

I telephoned Mr . Eriksen this morning to recommend that the side letter about disbursement be signed on the effective date of the loan by

the same person who signed for the delivery of bonds. This would not

be possible if the letter were sent to Oslo, as Mr . Eriksen had suggested. Mro Eriksen realised that his suggestion would cause some delay in

disbursement as well as inconvenience, and therefore agreed to our recommendation.

cc: Mro Hoar Mr. King Miss Morsey FORM No. 57 (5. 48) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT OFF CE MEMORANDUM

TO: Files DA TE: April 7, 19.55

FROM: N. Jo

SUBJECT: Norway:

This morning I discussed with Miss Morsey and with Mr. Doucet' s office documentation on the above loan for distribution to the Executive Directors. It was agreed that: 1. The President's Report and Reconunendations_be dated April 7.

2. There was no objection to mentioning in the President's Report (para.12) that •as a matter of administrative convenience, disbursement -w:,uld be made against payments for ships" even though disbursement letter would not be distributed to the Executive Directors. 3. No side letters would be circulated to the Board.

4. Miss Morsey wuld send to Mr. Doucett s office Loan Agreement (Appendix I to Presidentts Report), Statutory Loan Committee Report (Appendix II) and draft Resolution of Executive Directors. We would send President's Report; the Economic Report (Appendix. III) was already in Mr. Doucet' s office. Mr. Doucet would then prepare covering note and distribute documents to Executive Directors for meeting about April 18.

cc: Mr o Doucet Miss Morsey

FORM No. 6\ (3.54) • INTERNATIONAL BAN K FOR RECONSTRUCTION AND DEVELOPMENT CONFIDENTIAL STAFF LOAN COMMITTEE r· ' '

\

• •

a

,. From Mr. Christian Brinch f\;

HALLVARD HILLESTAD 2 WALL STREET NEW YORK S , N . Y.

W O RTH 2- 3980

REPRESENTATI V E OF April 4, 1955 BANK OF NORW

Mr . A. S . '" Ho Internatio 1 Bank for Reconstru~ tio and Tovelopm.ent 1818 H Street,N.W. Washington 25, D. C.

Toar Stanley: /

I have given further thoughts to what might happen in the very hypothetical situation which we discussed on the telephone Friday afternoon.

You will know that I am fully aware of the fact that the Rem1t: for a long time has thought in terms of a total amount of 30 to 35 million dollars for Norway ' s two loan operations and that your agreeing to 4o has the character of a concession t o our views.

On your side you are aware that since we approached you in April 1953 • .our Cp'Ilful'n has been to seek to borrow the equivalent of 25 million doll~ from the bank in 1954, 25 million dollars in 1955, and then plan for w~ QpriJ project loan at some later stage• ~ut we have at all t :µn.es made it clear that our borrowing program goes beyond this.

The Kingdom of Norway has raised money in the New York market many times since 1914, and also in the Swedish, Swiss and London markets, and we have in the post-war years carefully studied what possibilities there might be in all these markets.

In 1947 we took up a loan in New York,µi 1951 in London, and in 1953 and 1954 in Stockholm. It was alwaays our intention to finance our investment program through foreign loans within reasonable limits and provided t hat they could be had on acceptable terms and that program has also been approved not only by the political parties in Norway , but also by the Inter­ national Institutions of which we are a member. I do not think there is any doubt that Norway after having raised 4b million dollars in Washington and New York in 1955 would still be in a basical sound position to engage in further borrowing, and as in fact you corlfirmed last Friday, the 1Je.nk would have no objection if we should succeed in raising loans in European markets later in the year. That being so I frankly see no reason why the bank should actually prevent ,Js from making a total joint operation of 45 million dollars now if it should be possible to increase the New York loans from 15 to 20 . As I have pointed out to you, I take: a rather gloomy view of our possibilities in Europe in the near future . Mr . A. s. G. Hoar - 2- April 4, 1955 International Bank for Reconstruction and Developm.ent

IlicwoiilB. be a very good thing if we could cover the greater part of our estimated needs here and now.

I would like you to bear also another point in mind. We know already now that a substantial part of the New York loan will be taken up from Europe. We do not particularly like this but we recognize that we can do little about it - but that fact is in my opinion a strong argument in favor of our getting 45 in all if New York can take more than we thought possible.

Until Monday last week I have succeeded in avoiding mentioning what the World Bank loan to Norway in 1955 is likely to be - but when you told me last Monday after your talk with President Black and Mr . Garner, I felt it safe to inform my Govermnent and it is now known at least in official circles in Norway that the bank loan will be 2, million dollars. To Norwegian eyes it would seem odd if we should have to announce that the World Bank loan ,. ;l,_1:~ not exceed 20 . In Norway a traditional loan in Newy~ is looked upon as a separate matter in spite of the fact that it is made possible through a joint operation.

In conclusion I would like to mention that the Economic Report which you so kindly have made available to me, as far as I can see contains absolutely nothing to the fact that a total operation of 45 million dollars would be less justifiable than ~ of 40.

With kindest regards,

Yours very sincerely, -~~·L-4~ CB:MID

) FORM No . 57 (5. 48) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT OFFICE MEMORANDUM

TO: Files D ATE: April 4, 1955

FROM: A. S. G. Hoar

SUBJECT: Norway: Proposed Second Loan

1. Mr. Brinch telephoned ma this morning from New~. Up to that time he had not received my letter to him of April 1 and I read it to him over the telephone. He told me that he had written a letter to me, which he had posted this morning, giving the best arguments he could muster in favor of, if possible, a combined total operation of $45 million. I said that we would give full attention to his letter when it arrived but that I could hold out no hope that the Management would change its mind. Mr. Brinch then asked whether it would be possible for him to see Mr . Black or Mr. Garner and I said that no doubt it could be arranged. We agreed, however, that before making any definite arrange­ ments I would await the arrival of his letter.

2. Mr. Brinch then told me that the source of the rumor which had reached him on Friday, about the possibility of an increase in the mar­ ket operation, had come from a member of the Bank's staff. I expressed great surprise about this and said I would make investigations. J. Unfortunately these investigations revealed that, owing to a slip of the tongue, one member of the staff had not been properly advised of the necessity to keep Mr. Woodall's speculations about the market away from Mr. Brinch. The circumstances in which the member of the staff concerned mentioned the matter to Mr. Brinch were quite normal, but it is unfortunate that somebody on the operating side was not advised of Mr . Brinch' s evident surprise when the information reached him. 4. There being, therefore, no help for it, I telephoned Mr. Woodall to tell him that the rumor had reached Mr . Brinch from a member of the staff of the Bank. I said that we were dread:t'ully sorry and tendered our apologies. He was very nice about it but evidently has been con­ siderably embarrassed. He explained that the idea of an increase to $20 million was purely his own and that he had not as yet mentioned it to any of his partners in the deal. 5. Mr. Woodall went on to say that the more he thought about it the more he felt that it might after all be advisable to limit the market operation to $15 million. I told him that if this· was so it was import­ ant that he should make it clear that the limitation of $15 million was a market judgment and not as a result of any representations from Mr. Brinch.

cc - Messrs. Cope King

ASGHoar:dbs FORM No . 26 ( 1.50) INTERNATIONAL BANK FOR RECONSTRUCTION ANO DEVELOPMENT INCOMING WIRE

DATE OF WIRE: A:P.RIL 3, 1955 ROUTING

TO: INTERNATIONAL BANK FOR RECONSTRUCTION ACTION COPY TO MR )e'AR AND DEVELOPMENT FROM: NEW JORK INFORMATION COPY TO Decoded By

TEXT:

\..... FOR HOAR WILL CALL YOU ON TELEPHONE MONDAY MORNING REGARDING HYPOTHETICAL SITUATION DISCUSSES FRIDAY AFTERNOON BRINCH

ORIGINAL

•

u l; l ''

• ,

• • c. oodall, V. P. , arriman R1 7 Co., Inc. SRCope/ASGHoar/i ct ~~· t-~ \ FORM No, 57 (5. 48) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELO PMENT OFFICE MEMORANDUM

TO: Files DATE: April 1, 1955

FROM: B. B., King ~ ~

S UBJECT: Norway ~

On the afternoon of Tuesday, March 29, Mr. Hoar informed Mr . Brinch that he had discussed 'With Mr. Black Mr . Brinch1s presen­ tation of the case for a total amount of borrowing from the Bank and the market of $40 milliono The management would be prepared to increase the amount of the loan they would recommend to the Executive Directors from $20 million to $25 million (assuming a market issue of $15 million), but would propose that the additional $5 million be amortized in equal semi-annual payments during the sixth and seventh year. '!he remain­ ing $20 million would be amortized as before., Mr. Brinch raised the question of reducing the interest rate, but Mr . Hoar pointed out that the normal Bank loan was amortized over the whole life except for a few years' grace, and the proposed amorti­ zation schedule was, on the whole, analogous. There did not appear to be any justification for departing from our normal interest rate policy in this case. If the six and seven year maturities were sold, it was to be expected that Norway would t hen benefit from a lower interest rate. Mr. Brinch said he would like to give his answer to the Bank's proposal the next day. On March 30th Mr. Brinch expressed his willing­ to accept the proposed arrangement, provi ded he could be given an oral assurance that the six and seven year maturities would not be sold on the European market o

cc: Mr. Hoar Mro ;Faterson Miss Morsey FORM No. 57 (5- 48) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT OFFICE MEMORANDUM

TO: Files DATE: April 1, 1955

F ROM : A. S. G. Hoar

SUBJ ECT: Norway: Proposed Second Loan

1. When I was speaking with Mr. Woodall over the telephone this morn­ ing, on another matter, he mentioned to me that the market seemed to be warming up and that there was a possibility that he might be able to raise the public operation for Norway from $15 million to $20 milliono He said he supposed that.if he could do that, the Bank would wish to drop its loan from $25 million to .20 milliono

2. I thanked Mr. Woodall for his news which I said was very gratify­ ing. I confirmed that if the market operation were raised from $15 million to $20 million, it was practically certain that we would wish to drop our loan from $25 million to $20 million, but said that I would consult with the Managemento

Jo Mr . Woodall asked me to be careful not to say anything to Mr . Brinch about this because he was by no means certain yet that the market would go as far as he hoped and he did not want to raise hopes with the Nor­ wegians that might not be fulfilled.

4. Immediately after cutting off from Mr . Woodall, I had a word with Mr. Black who was emphatic that if the market operation came up $5 million, we would drop our Bank loan by the same amount. He welcomed the possibility of an increase in the market operation, which he had all along felt would be possibleo

5o T.11lillediately after lunch I telephoned Mr. Woodall again and told him of Mro Black's reactiono I asked when he thought he would be able to let me know definitely about the market operation as we would have to know this before going to the Staff Loan Committee on Wednesday. He said that he would let me know as soon as possible but that it was hardly likely that he could know before Wednesdayo He reiterated his warning against passing anything on to Brinch at this stageo

6. Less than an hour after I had spoken to Mr . Woodall, I had a call from Mr . Brinch who told me that "a rumor" had reached him that the Mar­ ket operation might be raised to $20 million. I expressed gratified surprise at this news. Mr . Brinch then gently worked his way round to the question of the Bank loan and again I said that,from what I knew of the Management's thinking, the Bank loan would have to be reduced to $20 milliono Mr . Brinch argued on this a good dealo I insisted that it would be a great advantage to the Norwegians to have the market issue raised and said I could see no harm to them at all in a reduction of the Bank loan so long as the total of the two combined remained the sameo Mr . Brinch went on to argue and finally I said that I would let him have confirmation of the Management 's via16over the weekend. -2-

7 . I thereupon wrote a letter to Mr . Brinch and checked it with Mr. Black over the telephoneo ¥.r. Black was most emphatic that he would not contemplate a combined operation of more than $40 million. The letter of April 1 was then sent off to Mr . Brinch, with a copy to Mr . Woodall .

ASGHoar/mct

cc Mr . Cope Mr. King FOP!.' l,IQ . 57 ( 5-48) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT OFFICE MEMORANDUM

TO: Files DATE: April 1, 1955

FROM: s. R. Cope

SUBJECT: Norway - Use of Borrowed Sterling

1. Following my conversation with Lord Harcourt on the above subject yesterday, ¥..r . Flett came to see me today. He referred to the hope expressed by the Chancellor of the Exchequer when the Bank 's most recent sterling issue in London was under consideration that as much as possible of the issue would be used for new orders, and he asked me about the basis on which disbursements for the pro­ posed Norwegian loan would be made. 2. I explained that we would probably use payments in respect of ships aa a basis for disbursement but that the real justification f or the loan was Norway 's need for foreign exchange for general in­ vestment needs. The use of ships was, in fact, nothing more than a convenient device. It was proposed to get certificates monthly from Norges Bank showing what payments had been made abroad during the preceding month and to disburse in respect of these payments up to a total amount more or less arbitrarily determined in order to spread disbursement over three to five months. Part of the loan would be disbursed in dollars, part in sterling a."'ld part in Dutch guilders. Exactly what the propo~tions were to be had still to be determined (indeed the amount of the loan had not yet been fixed), but we pro­ posed to use the major part of the balance of our sterling issue equivaler-t to between $9 and $10 million. 3o Mr. Flett said that while he understood the nature of the Norwegian loan, he felt that London might not like our using all the Bank 's available borrowed sterling for it. London were inter­ ested in the possibility of British orders being obtained in Uru­ guay and might prefer to see part of the loan reserved for this purpose. In discussing this view I made the following points:

(a) While Norway could carry some additional dollar debt, we would like as much as possible of the loan to be in non-dollar currencieso was (b) The sterling which we were proposing to use/covered by Norwegian orders placed in the U. K., and was thus earmarked for British exports.

(c) If borrowed funds or 18% releases were to be used solely for new orders, they were not much good because disbursements in most cases were for orders already placed when the loan contract vra.s signed. -2-

(d) The Bank had been losing money by holding sterling idle and was anxious to use it up as soon as possible.

(e) It was not reasonable to expect the Bank to hold sterling funds idle in the hope of their being used f or orders which had not yet been placed in the U.K. under a loan which had not yet been made . 4. Mr . Flett asked what we would do about the Uruguayan :J_oan if all the Bank's borrowed sterling had been used for the Norwegian loan and the U.K. secured some of the Uruguayan orders. I assured him that the first thing we would do would be to ask for a r elease of 18% sterling. If this sterling were not forthcoming we would consider using any other non-dollar curr ency we had available: if we had guilders, we would probably use them. But we could not say now what non-dollar curr encies we would have in the future or which of them we would want to use. 5. Asked about the timing, I told Mr . Flett that we were proposing to go to the Executive Directors with the Norwegian loan on April 18 and that it would be signed the following day. The public issue would be on April 20~

•"

CC: Mr . Hoar Mr. Riley Mr . Flett

SRCope:ms tr~ CONFIDENTIAL Form No. 60 International :Bank for Reqonstruction and Development (6-54) ST ~~ 1-~ ia- ECL sv1ED AFF LOAN COMMITTEE R \ 9 10 S i/1/' WBG ARCHIVES

FROM: Office of the Secretary DN?E: Secretary, Staff Loan CoIIDD.ittee • :NOTICE OF MEF.rillG

A meetine of the Staff Loan CoIIDD.1 ttee will be held on at , in Room 1005.

AGDDA

•

•

DISTRIBUTION

President General Couns,el ( 2) Vice President Director, Economic Staff (2) Aasiatant to President Treasurer (2) Director, Department of Operations - Director, Technical Aaaistanoe Asia and Middle East (2) and Liaison Staff Director, Department of Operations - Europe, .Af'rica and Australasia (3) Secretary Director, Department of Operations - Director, I 1ublic Relations Western Hemisphere (2) Special Rep,resentatiTe 1n Europe Director, Department of Technical Operations (2) Files CONFIDENTIAL MAR 1 9 2018 SLC/0/760 WBG ARCIDVES April 1, 19.55

STAFF LOAN COMMITTEE Memorandum from Department of Operations Europe, Africa and Australasia

NORWAY: PROPOSED LOAN AND PUBLIC ISSUE

Timing l. It may be useful for the Committee to know the schedule which it is intended to follow: Thursda;y, April 7th Formal filing of Registration Statement Monday, April 11th Distribution of documents to the Executive Directors Monday, April 18th Executive Directors' meeting to consider the loan

Tuesday, April 19th Signing of the Loan Agreement and of the contract between the underwriters and the Uorwegian Government. Wednesday, April 20th Public offering of the bonds.

Delivery of the bonds and payment for them would take place about a week after the public offering.

Economic Report

2. The Economic Report is not being distributed again to the Committee. The changes made in the .version considered by the Committee on March 4th are not material.

A. S. G. Roar D 1 f'LA~S I D MAR 1 9 2018 DRAFT CONFIDENT!.-£ WBG A Re 'HI 'f~~

INTERNATIONAL BAl1X FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND BEOOMME..'TIDATIONS OF THE PRESIDENT

'IO TEE EXECUTIVE DIRECTORS ON

A LOAN TO THE KDliGIOM OF NORWAY

April 1, 19.5.5 REPORT AND RECOMMEl1"D.ATI0lfS OF THE PRESIDE}TT TO THE EXECUTIVE DIRECTORS ON A lOA.N TO Tilll KUTGOOM OF lTORWAY

1. I submit the following report and recommendations on the application of the Kingdom of Norwa,y for a a 1 loan of $25 million.

PART I - HISTORICAL 2. Following a mission to Norway in October 1953, the Bank made a loan of $25 million to the Kingdom of Uorwa,y on April 8, 19.54. The purpose of the loan was to maintain productive investment during 1954. The loan was fully disbursed by September 1954. J. During discussion of this loan. the Norwegian Government expressed its intention of approaching the Bank at a later date for a loan to main­ tain productive investment during 1955. In the fall of 19.54 the government invited the Bank to send. another mission. and a mission went to !forwa,y in November.

4. In the meantime. certain New York investment houses had expressed their readiness to underwrite a public issue of bonds of the Kingdom of Norwa,y on the market provided that the issue would be synchronized and associated with a loan from the Banlc 1 and it was agreed to try to work out e combined operation on this basis. 5. Having consider~d the mission's findings, the Bank invited the Norwegian Governme!lt in March 195.5 to send a delegation to 'fashington to negotiate a loan. 1'T€gotiations 'between the Bank and the i.Torwegian Government were competed on April 1st. 6. The underwriters and the lforwegia.n Government have agreed that the amount of the public issue should be $1.5 million. The total amount of the ]ank loan and the public issue would t herefore be $40 million. PART II - THE PUBLIC BOND ISSUE

7. The issue of bonds by the Kingdom of Norwa,y is expected to take place around the end of April. The prin' ipal amount of $15 million would. consist of $2.5 million of three-year bonds, $2.5 million of four-year bonds. $2 •.5 million of five-year bonds, and $7.5 million of ten-year sinking fund bonds. The issue would be registered with the Securities and Exchange Commission. PART III - DESCRIPTION OF PROPOSED LOAN

The Borrower $ : 8. The Borrower would 'be the Kingdom of Morw~ • a member of the llank •

.Amount 9. The amount would be the equivalent in various currencies of $25 million. - 2 -

Terms

10. The loan would be for 20 years. The first $5 million of the loan would be amortized by four equal semi-annual payments during the sixth and seventh years and the remaining $20 million by 20 increasing semi-annual :payments, starting in the eleventh year a.nd calculated to retire the loan by maturity. 11. The loan would bear interest, including 1% commission, at the rate of 4-3/4% per annum. There would be a conuni tment charge · of J/~1i per annum. Purpose of the Loan 12. The purpose of the loan would be to make possible the import of capital equipment needed for the maintenance of a high level of productive investment. It would be disbursed in 1955 against p~ments for imported capital goods. It is expected that, as a matter of administrative con­ venience, disbursement would be made against payments for ships.

Legal Instruments and Authority lJ. T'nere is attached as Appendix I a draft Loan Agreement between the 'Bank and the Kingdom of Norway.

14. The Loan Agreement incorpora tes Loan Regulation.s No. 3 dated Febru­ ary 15, 1955 and follows the general pattern of the :Bank's loan agreements in all important respects, except that:

a.) As in the previous loan to Uorway, the so-called negative pl edge has been modified to avoid constitutional problems arising from its application to political subdivisions and their agencies. If the Nor~egian Government, for constitu­ tional reasons, should be unable to make the negative pledge effective with respect to t hese political s~bdivisions and their agencies, it would, as :preYiously, grant to the J3ank an equivalent lien satisfactory to the :Bank. An exception to the negative pledge exempts certain liens given by poli­ tical subdiYisions an~ t heir af encies if the liens do not result in priority in the allocation or realization of foreign exchange. (Section 5.03) b) ~ne Loan Agreement would not becom~ effective until the Borrower had delivered and received payment for the bonds issued under the public bond issue. (Section 7.01) 15. Th~re is attached as Appendix II the Report of the Committee pro­ vided for in Article III, Section 4(iii) of the Articles of Agreement of the Bank. - 3 -

PART IV - APPRAISAL OF THE WAN The Norwegian Econom.y

16. There is attached hereto as Appendix III a report anti tled 11 Current Economic Position and Prospects of Norway 11 (EA 49-a) dated March 31, 19.55. 17. Ever since the end of the war, a very high rate of investment has been maintained in Norway; in most years it has been the highest in Europe. Much of this investment has been devoted to the replacement of assets lost during the war, when half the merchant marine was sllllk and many buildings and much industrial plant were destroyed.

18. It is now several years since the lost assets were replaced and recently Norway has greatly expanded her stock of capital equipment over what she had before the war. The merchant marine, which is the mos~ im­ portant earner of foreign exc~ge, now stands at 7 million gross register tons compared with 5 million in 1939, and it is a more modern fleet. The capacity of the country's power plants, which produce electricity at rates among the cheapest in the world, has been doubled. More than 200,000 d'l:'ell­ ing units have been built and the shortage of housing is confined to a few large cities. Industrial production is now 80;'6 above the level of 1938. 19. During the first five postwar years, from 1946 to 1950, about two- thirds of net investment was financed 'by means of domestic savings. The remaining third was fina.'ll.ced in two ways: first by drawing on the foreign exchange reserves amassed as a result of the wartime earnings of the fleet and of the insurance payments on losses; and subsequently by means of Ameri­ can ass istance programs. The very high earnings during the Korean boom which followed enabled Horwey to finance almost all her investment out of hei- own savings during 1951 and 1952. 20. During the last t wo years, 1953 and 1954, the t erms of trade have fallen from the favorable l evel of t he Korean boom. As Norway has kept up a high rate of investment, she has again had to turn for help abroad. In each of t he last two years one-quarter of net investment has been financed by foreign borrowing; in part from the European PaJ71D.ents Union and ·in part as long-term debt.

21. There is nothing new about Norway 1 s role as a capital importer. Many shipowners have relied on loans from abroad to finance the purchase of their ships. Other expensive a ssets such as power plants have been financed by long-term loans. In other cases the connection between in­ vestments undertaken and the consequential need for external finance ha.s been less direct.

22. During the last two years, the lforwegian Government has come to the conclusion that the present rate oif deficit is too high, and that invest­ ments undertaken have been insuffic ently directed towards the export sec­ tors which provi de the foreign e~ .a.nge needed to repay foreign debt and to support a rising standard of .y.i..7ving. I / / L Jfr, - 4 -

23. Some measures were taken during 1954 to bring the deficit down to more manageable proportions and to curb the inflationary pressures that had been appearing in the economy. Still more stringent measures are pro­ posed for 1955. The spearhead is monetary policy. Drastic measures have been proposed and some have already been put into effect to reduce the liquidity of the banks. Under the leadership of the central bank, interest rates have hardened appreciably; this represents a significant departure from the policy of "cheap money" pursued consistently since the war. Other measures include schemes to promote internal savings and a budget proposal for 1955/56 which will impose severer fiscal constraint on the economy. 24. The Norwegian Government expects that, in spite of these measures, it will be able to adhere to its twin objectives of full employment and rising production and that, as a result of them, it will be able to reduce the deficit in 1955 to about half what it was in 1954. Precisely how mu~h it will achieve in reducing the deficit depends as much on external markets as it does on the energy with which internal measures are pushed forward. If the recent improvement in freight markets turns out to be more than a seasonal phenomenon, the government may well achieve its goal; otherwise, it could fall short. In any case, the measures presently proposed consti­ tute a realistic attempt to cope with the problems of the economy. 25. The Norwegian economy is thus passing through a period of adjustment. That this adjustment comes to Norway later than to most other European coun­ tries and is, perhaps, somewhat more severe, is due to a large extent to the effect on the economy of the Korean boom. During the Korean boom, the terms of trade turned against most other European countries, but at a time when they were still receiving substantial a.mounts of U.S. aid in one form or another. On the other hand, the terms of trade turned in favor of Norway and so counterbalanced t he gradual curtailment of U.S. aid during the latter part of t he period of reconstruction.

26. Since the end of the boom, the Norwegian Government has taken and is taking steps to adapt the economy to the new circumstances. The process of adaptation consists very largely of a gradual reduction in the rate of investment. A sharper process of adaptation would very likely have undesir­ able consequences (for example, unemployment), or would neces~itate undesir­ able measures (restrictions on internationa.l trade, for example). During the interim period, Mor ,,ay requires extel'nal ca.pi tal in ad.di tion to her own savings to pay for her investment, capital which should be long-term to meet long-term needs. Since, however, the need for capital, though long-term, is an immediate one, it could not be appropriately met by a loan for a particu­ lar projec~ which would have to be disbursed over a relatively long period. The propo<:ied operation is designed to meet the requirements of this particular situation. Prospects for Repayment of the Loan

27. Norway has the resources for further development . .An outsta.~ding one is water power, which owing to the conformation of the land is naturally cheap to harness; only a fifth of the full potential has so far been used. Electricity is the basis for the electro-metallurgical and electro-chemical - 5 - industries, which produce largely for export. Aluminum production is already expanding. Because aluminum is among the metals with the fastest-growing world demand and because available cheap power sites near deepwater ports in other countries are being used up, the prospects for Norwegian industry should be excellent. Production of ne..,.,er metals such as magnesiUJ!l and titanium is a possible prospect for the future.

28. Norway should also maintain her share of a growing world merchant fleet. Norwegian shipowners have always shown ingenuity and initiative in adapting their fleet and their traffic to changing conditions; they are regarded as among the most efficient operators. However, most Uorwegian ships are engaged in cross-trade and it has to be admitted that their pros­ pects are somewhat clouded by the unfortunate tendency, which has been accentunted in recent years, towards economic nationalism in the shipping business. But unless this tendency is carried to unreasonable lengths, it is unlikely to inflict serious damage on the Norwegian fleet.

29. Norway shares with numerous other countries the vulnerability to swings in world markets that goes with vole.tile export prices and a heavy dependence on foreign trade. The Norwegian econorey has, however, continued to weather difficulties of this kind over a long period, though not always without some strain. The government has again shown its determination to carry out the adjustments dictated by the pressure of events. Though rather low foreign exchange reserves leave it with little room to manoeuver at the present time, there is no reason to expect any faltering from the excellent past record. Norway has always paid her obligations promptly.

JO. As I mentioned in my Report and Recommendations on the last loan to 1'Torwey (P-66), there is a long-standing dispute between the lil'orwegian Govern­ ment and the Association Nationale des Porteurs Francais de Valeurs Mobilieres, epresentin holders of certain Nor~egian bonds issued between 1885 and .1909. The French co lain appears o e of'o !rs "" , since 1. 3 ~. the deb'"tors have paid t bonds g.n the basis. of ... the various c~-,;eh 1.1. es in wh;om:"• 'tl}ey were exp re sse franc t er1 ing, .~a crowns) and~Jl.o,t on ne ~ 1/s 'of gold'; seconcily, that e debt ~ have, di~.et11~inated a.ga:lrnst''~ rench lie!d.ers by payin~ 'ed'.lsh ers in edish Wlls -:, i,t,hg_.1..1.t o eci,ng ~q\µ'\l'.aJ.ell.-t ~..tr~a. . ent to Fren9h . ers. Tlie As sociation i..e put forward certain proposals and~ suggested that failing agreement, the dispute should be submitted to t.he Arbitral Tr! - bunal of the International Cban;ber of Commerce. ->"'-t r-t .(i, ~ ,.._;.. ~ ,,_. lti.c, j>-.~at-....t-•

Jl, More recently the Fren,9.h Government llMt addresse., an aide-memoire to the Nor~egi~t"Go ernmen,t, .-pro osing that~ the~~1:1,_te· oe submit ed to the Internati

PART V - COMPLIANCE WITH ARTICLES OF AGREEMENT

33. I am satisfied ·that the proposed loan complies with the Articles of Agreement of the Bank.

Ice, PART VI - RECOMMENDATIONS

34./ I recommend that the :Sank make a loan in the amount of $2.5 million, orf equivalent in currencies other than dollars, for a term of 20 years, with interest, including commission, at 4-3/l¥fo per annum, and on such other terms as are specified in the form of Loan Agreement attached hereto.

Washington, D.C. Eugene R. Black .CL AR 19 2018 DRAFT WBGARCHlVE CONFIDENT~

INTERNATIONAL BA}'!X R>R RECONSTRUCTION AND DEVELOPMENT

BEFORT AND RECOMMENDATIONS OF TEE PRESIDENT

TO THE EXECUTIVE DIRECTORS ON

A LOAN TO TEE KiliTGIX>M OF MORWAY

April 1, 1955 REPORT ~ID RECOMMEl\'!DATIONS OF THE PRESIDEl''!T TO THE EXECUTIVE DIRECTORS ON A IO.AN TO THE KIMGOOM OF }TORWAY l. I submit the following report and recommendations on the application of the Kingdom of Norwa3" for a second loan of $25 million.

PART I - HISTORICAL

2. Following a mission to Norway in October 1953, the Ban..~ made a loan of $25 million to the Kingdom of Norway on April 8, 1954. The purpose of the loan was to maintain productive investment during 1954. Tl1e loan was fully disbursed by September l954. J. During discussion of this loan, the Norwegian Government expressed its intention of approaching the :Bank at a later da.te for a loan to main­ tain ~roductive investment during 1955. In the fall of 1954 the government invited the :Bank to send another mission, and a mission went to Norway in November. 4. In the meantime, certain New York investment houses had expressed their readiness to underwrite a public issue of bonds of the Kingdom of Norway on the market provided that the issue would be synchronized and associated with a loan from the Ba.nk, and it was agreed to tey to work out a combined operation on this basis. 5. Having considered the mission's findings, the Bank invited the Norwegian Governme!l.t in March 1955 to send a delegation to ~fashington to negotiate a loan. negotiations between the :Bank and the Norwegian Government were completed on April 1st.

6. The u.-'11derwri ters and tl+e Norwegian Government have a.greed that the amount of the public issue should be $15 million. The total amount of the :Bank loan and the public issue would t herefore be $4o million.

PART II - THE PUBLIC :BOND ISSUE

7. The issue of bonds by the Kingdom of Morwa;v is expected to take place around the end of April. The prin· ipal amount of $15 million would consist of $2.5 million of three-year bonds, $2.5 million of four-year bonds, $2.5 million of five-year bonds, and $7,5 million of ten-year sinking fund bonds. The issue would be registered with the Securities and Exchange Commission.

PART III - DESCRIPTION OF PROPOSED LOAN

The l3orro~er 8. The :Borrower would be the Kingdom of Morw~, a member of the Bank. Amount

9. The a.mount would be the equivalent in various currencies of $25 million. - 2 -

Terms

10. The loan would be for 20 years. The first $5 million of the loan would be amortized by four equal semi-annual payments during the sixth and seventh years and the remaining $20 million by 20 increasing semi-annual payments, starting in the eleventh year and calculated to retire the loan by ma turi t;}r.

11. The loan would bear intere6t, including 1% commission, at the rate of 4-3/4% per annum. There would be a commitment charge of 3/1.p.%per annum. Purpose of the Loan

12. The purpose of the loan would be to ma..l{e possible the import of capital equipment needed for the maintenance of a high level of productive investment. It would be disbursed in 1955 against P8¥ments for imported capital goods. It is expected that, as a matter of administrative con­ venience, disbursement would be made against payments for ships. Legal Instrwnents and Authority 13. T'nere is attached as Appendix I a draft Loan Agreement between the :Bank and the Kingdom of Morway.

14. The Loan Agreement incorpora tes Loan Regulations No. 3 dated Febru­ ary 15, 1955 and follows the general pattern of the Bank's loan agreements in all important respects, except that:

a) As in the previous loan to Uorway, the so-called negative pl edge has been modified to avoid constitutional problems arising from its application to political subdivisions and their agencies. If the Norwegian Government, for constitu­ tional reasons, should be unable to make the negative pledge effective with r espect to t hese political s~bdivisione and their a encies, it woul d, as previously, grant to the Bank an equivalent lien satisfactory to the Bank. An exception to the negative pledge exempts certain liens given by poli­ tical subdivisions and their ar encies if the liens do not result in priorit~r in the allocation or realization of foreign exchange. (Section 5.03) b) The Loan Agreement would not becom~ effective until the Borrower had delivered. and received payment for the bonds issued under the public bond issue, (Section 7.01) 15. Thtire is attached as Appendix II t he Report of the Committee :pro­ vided for in Article III, Section 4(111) of the Articles of Agreement of the Bank. - 3 -

PART IV - APPRAISAL OF TgE LOAN The Norwe8ian Econoey 16. There is attached hereto as Appendix III a report entitled "Current Economic Pos1 tion and PI'ospects of lTorw~ 11 (EA 49-a) dated March 31, 1955~ 17. Ever since the end of the war, a very high rate of investment has been maintained in Norway; 1n most years it has been the highest in Europe. Much of this investment has been devoted to the replacement of assets lost during the war, when half the merchant marine was sunk and many buildings and much industrial plant were destroyed. 18. It is now several years since the lost assets were replaced and recently Uorw~ has greatly expanded her stock of capital equipment over what she had before the war. The merchant marine, which is the mos~ im­ portant earner of foreign exchange, now stands at 7 million gross register tons compared with S million in 1939, and it is a more modern fleet. The capacity of the country's power plants, which produce electricity at rates among the cheapest in the world, has been doubled. More than 200,000 d~ell­ ing units have been built and the shortage of housing is confined to a few large cities. Industrial production is now 80% above the level of 1938. 19. During the first five postwar years, from 1946 to 1950, about two- thirds of net investment was financed by means of domestic savings. The remaining third was financed in two w~s: first by drawing on the foreign exchange reserves amassed as a result of the wartime earnings of the fleet and of the insurance payments on losses; and subsequently by means of .Allleri­ can assistance programs. The very high earnings during the Korean boom which followed enabled Norw~ to finance almost all her inveetment out of her own savings during 1951 and 1952. 20. During the last t ,.,o years, 1953 and 1954, the terms of trade have fallen from the favorable l evel of the Korean boom. As Morw~ has kept up a high r ate of investment, she has again had to turn for help abroad. In each of the last two years one-g_uarter of net investment has been financed by foreign borrowing; in part from the European Payments Union and in part as long-term debt.

21. There is nothing new about Norwa_v 1 s role as a capital importer. Many shipowners have relied on loans from abroad to finance the purchase of their ships. Other expensive assets such as power plants have been financed by long-term loans. In other cases the connection between in­ vestments undertaken and the consequential need for external fina..~ce has been less direct. 22. During the last two years, the Norwegian Government has come to the conclusion that the :present rate of deficit is too high, and that invest­ ments underta...~en have bee~ insufficiently directed towards the export sec­ tors which :provide the foreign exchange needed to repay foreign debt and to su;pport a rising standard of living. - 4 -

2J. Some measures were taken during 1954 to bring the deficit down to more manageable proportions and to curb the inflationary pressures that had been appearing in the economy. Still more stringent measures are pro­ posed for 1955. The spearhead is monetary policy. Drastic measures have been proposed and some have already been put into effect to reduce the liquidity of the banks. Under the leadership of the central bank, interest rates have hardened appreciably; this represents a significant departure from the policy of "cheap money" pursued consistently since the war. Other measures include schemes to promote internal savings and a budget proposal for 1955/56 which will impose severer fiscal constraint on the economy. 24. The Norwegian Government expects that, in spite of these measures, it will be able to adhere to its twin objectives of full employment and rising production and that, as a result of them, it will be able to reduce the deficit in 1955 to about half what it was in 1954. Precisely how mu9h it will achieve in reducing the deficit depends as much on external markets as it does on the energy with which internal measures are pushed forward. If the recent improvement in freight markets turns out to be more than a seasonal phenomenon, the government may well achieve its goal; otherwise, it could fall short. In any case, the measures presently proposed consti­ tute a realistic attempt to cope with the problems of the economy. 25. The Norwegian economy is thus passing through a period of adjustment. That this adjustment comes to Norw~ later than to most other European coun­ tries and is, perhaps, somewhat more severe, is due to a large extent to the effect on the economy of the Korean boom. During the Korean boom, the terms of trade turned against most other European countries, but at a time ~hen they were still receiving substantial amounts of U.S. aid in one form or another. On the other hand, the terms of trade turned in favor of Norway and so counterbalancea the gradual curtailment of U.S. aid during the latter part of t he period of reconstruction.

26. Since the end of the boom, the Norwegian Government has taken and is taking steps to adapt the economy to the new circumstances. The process of adaptation consists very largely of a gradual reduction in the rate of investment. A sharper process of adaptation would very likely have undesir­ able consequences (for example, unemployment), or would necessitate undesir­ able measures (restrictions on international trade, for example). During the interim period, Norway requires external capital in addition to her own savings to pay for her investment, capital which should be long-term to meet long-term needs. Since, however, the need for capital, though long-term, is an immediate one, it could not be appropriately met by a loan for a particu­ lar project which would have to be disbursed over a relatively long period. The propoqed operation is designed to meet the requirements of this particular situation. Prospects for Repayment of the Loan

27. Norway has the resources for further development. An outstanding one is water power, which owing to the conformation of the land is naturally cheap to harness; only a fifth of the full potential has so far been used. Electricity is the basis for the electro-metallurgical and electro-chemical - 5 - industries, which produce largely f or export. Aluminum production is already expanding. Because aluminum is among the metals with the fastest-growing world demand and because available cheap power sites near deepwater ports in other countries are being used up, the prospects for Norwegian industry should be excellent. Production of newer metals such as magnesium. and titanium is a possible prospect for the future.

28. Norwtcy" should also maintain her share of a growing world merchant fleet. }forwegia.n shipowners have alwtcy"s shown ingenuity and initiative in adapting their fleet and their traffic to changing conditions; they are regarded as among the most efficient operators. However, most 1Torwegian ships are engaged in cross-trade and it has to be admitted that their pros­ pects are somewhat clouded by the unfortunate tendency, which has been accentuated in recent years, towards economic nationalism in the shipping business. But unless this tendency is carried to unreasonable lengths, it is unlikely to inflict serious damage on the Norwegian fleet.

29. Norway shares with numerous other countries the vulnerability to swings in world markets that goes with volatile export prices and a heavy dependence on foreign trade. The Norwegian economy has, however, continued to weather difficulties of this kind over a long period, though not alwtcy"s without some strain. The government has again shown its determination to carry out the adjustments dictated by the pressure of events. Though rather low foreign exchange reserves leave it with little room to manoeuver at the present time, there is no reason to expect any faltering from the excellent past record. Norway has always paid her obligations promptly.

30. As I mentioned in my Report and P.ecommendations on the last loan to Norwtcy" (P-66), t here is a long-standing dispute between the lfo rwegian Govern­ ment and the Association lfationale des Porteurs Francais de Valeurs Mobilieres, representing holders of certain Forwegian bonds issued between 1885 and 1909. The French complaint appears to be twofold: first that,since 1931, the debtors have paid the bonds on the basis of the various currencies in which they were expressed (francs, sterling, and crowns) and not on the basis of gold; seconcily, that the debtors have discriminated against French holders by paying Swedish holders in S edish crowns without offering equivalent treatment to French holders. The Association has put forward certain proposals and has suggested that failing agreement, the disput~ should be submitted to the Arbitral Tri­ bunal of the International Chamber of Commerce. 31. More recently the French Government has ad.dressed an aide-memoire to the Norwegian Government, proposing that the dispute be submitted to the Internatior..al Court of Justice at the Hague . The Norwegian Government has replied that it is its view that the case should first be heard in a Nor­ wegian court.

32, In view of the complicated legal position and the nature of the issues involved, I feel that the Bank should still not attempt to judge the merits of the case. - 6 -

PART V - COMPLIANCE ~HTH ARTICLES OF AGREEMENT

33. I am satisfied ·that the proposed loan complies with the Articles of Agreement of the J3ank.

PART VI - RECOMMENDATIONS

34. I recommend that the Bank make a loan in the amount of $25 million, or equivalent in currencies other than dollars, for a term of 20 years, with interest, including commieston, at 4-3/1¥/c per annum, and on such other terms as are specified in the form of Loan Agreement attached hereto.

Washington, D.C. Eugene R. Black ,CLA~ CONFIDENTIAL DRAFI' (Subject to Change) MAR f 9 201 3/31/55 loan Number NO WBGARCHIY. ,

LOAN AGREEMENI'

between

KINGDOM OF NORWAY

and

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

Dated April 1 1955 3/31/55

LOAN AGREEMENT

AGREEM3:NT., dated April ., 195~., between KINGDOM OF NORWAY (hereinafter called the Borrower) and INI'ERNATIONAL BANK FOR RECONS'£RUCTION AND DEVELOP..

MEN!' (he.reinafter called the Bank).

WHF:RE.AS the Borrower desires assistance in financing Norway's economic develop.rent; and

WHEREAS the Borrower intends to sell an i ssue of its bonds in the

aggregate principal amount of $15.,ooo,ooo in the markets of the United States of A.~rica; and

WHEREAS the Bank has agreed to supply an additional amount of the funds needed by too Borrower cu making the wan provided for herein;

NCM THEREFORE it is hereby agreed as follows: -2- 3/31/55

.ARTICIE I

Loan Regulations; Special Definition

Section 1.01. The parties to this wan Agreement accept all the provisions of wan Regulations No. 3 of the Bank dated February 15, 1955, subject, however, to the modifications thereof set forth in Schedule 2 to this Agreement (said Loan Regulations No. 3 as so modified being hereinafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein.

Section 1.02. EKcept .here the context otherwise requires, the fol­ lowing term shall have the following meaning wherever used in this Agree­ ment or acy Schedule to this Agreement:

The term "public bond issue" means the issue intended to be

sold by the Borrower of its bonds in the aggregate principal amount of $15,ooo.,ooo in the markets of tm United States of .America.

• - 3 - 3/31/5S

ARTICIE II

The !Dan

Section 2.01. The Bank agrees to lend to the Borrower, on the terms and condl..tions in this Agreezoont set forth or referred to, an amount in various cUITencies equivalent to twenty-five million dollars ($25,000,000).

Section 2.02. The Bank shall open a wan Account on its books in the name of the Borrower arrl shall credit to such Account the amount of the wano The amount of the wan may be withdrawn from the Loan Account as provided in, and subject to the rights of cancellation and suspension set forth in, the :Wan Regulations.

Section 2.03. The BorTower shall pay to the Bank a connnitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not so withdrawn from time to tine. Section 2.04. The Borrower shall pay interest at the rate of ------per cent ( %) per annum on the principal ruwunt of the !Dan so withdrawn and outstanding from time to time.

Section 2a05. Interest and other cha:-ges shall be payable semi­ annually on May 15 and November 1S in each year.

Section 2.06. The Borrower shall repay the principal of the wan in accordance with the amortization schedule set forth in Schedule 1 to this

Agreement.

• ·- 4 - 3/31/55

ARTICIE III Use of Proceeds of the :Wan

Section 3.01. The purpose of the wan is to make possible the acquisition and importation into Norway of capital equipment required for the development of the Norwegian econonzy-. The Borrower shall c~.use the proceeds of the Loan to be applied exclusively to the foreign exchange costs of goods required for this purpose, The specific goods to which the proceeds of the Loan a.re to be applied shall be determined by agreement between the Borrower and the Bank.

• - 5 - 3/31/55

ARr ICI.E 'IV Bonds

Section 4.01. The Borrower shall execute and deliver bonds repre­ senting the principal amount of the It>an as provided in the loan Regulations.

Section 4.02; The Minister of Conunerce of the Borrow-er and such per­ son or persons as he shall appoint in 'Writing are designated as aut,horized representatives of the BoITower for the purposes of Section 6.12 of the loan Regulations.

• -6- 3/31/55

ARTICIE V Particular Covenants

Section 5.01. The Borrower shall maintain or cause to be maintained records adequate to identify tl'e goods to which the proceeds of the Ioan are applied and to disclose the use thereof; shall enable the Bank I s repre­ sentatives to inspect the goods and any relevant records and documents; and shall furnish to the Bank all such informm.ion as the Bank shall reasonably reqrest concerning the expenditure of the proceeds of the Loan and the goods. Section 5.02. (a) The Borrower and tl'e Bank shall cooperate fully to assure that the purposes of the !£>an will be accomplished. To that end, each of them shall furnish to the other all such information as it shall reasonably request with regard to the general status or the Loan.

On tre part of the Borrower., such information shall include infonnation w.i.th respect to financial and economic conditions in the territories of the Borrower and the international balance of paynents position of the

Borrower.

(b) The Borrower and the Bank shall .from time to time exchange views through their representatives with regard to matters relating to the pur­ poses 0£ the IJ::>an and the maintenance of the service thereof. The Borrower shall promptly inform the Bank of arv condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the IJ::>an or the maintenance of the service thereof.

• • 'I •

(c) The Borrower shall afford all reasonable opportunity for accredited representatives of the Bank to visit a.ri..y part of the territories of the Bor­ rower for purposes related to the Loan. Section 5.03. It is the mutual intention of the Borrower and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on governmental assets or by way of priority in the ·allocation

or realization of foreign exctange. To that end, the Borrower undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any assets of the Borrower, or of any of its political subdivisions or of any agency of the Borrower or of any such political subdivision, as

security for any external debt, such lien will igso facto equally and

rat ably secure the payment of the principal of, and interest and other

charges on, the Loan and the Bonds, and that in the creation of any such

lien express provision will be made to that effect. If the Borrower, for

constitutional reasons, s hall be unable to make the foregoing undertaking

effective with respect to any lien on assets of a political subdivision or

agency of a political subdivision, the Borrower shall grant to the Bank an

equivalent lien satisfactor-j to the Bank. The foregoing provisions of this

Section shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase

price of such property; (ii) any lien on coI!ll1lercial goods to secure a debt maturing not more than one year after the date on which it is orig'i.nally

incurred and to be pai<;i out of the proceeds of sale of such commercial

goods; (iii) any lien arising in the ordinary course of banking transactions

.. - 8 - to secure a debt maturing not more than one year after the date on which it is origin uly incurred; or (iv) any lien upo~ real estate, property in

Norway or re,;enues or receipts in currency of the Borrower, if such lien is given by a rolitical subdivision or by an agency of a political subdivi­ sion of the Bccrower under arrangements or circumstances which would not result in pr5.o·:ity in the allocation or realization of forej_gn exchange.

Section ;;.04. The principal of, ~.nd interest and other charges on, the Loan and the Bonds shall be paid without deduction for, and free from, any taxes o:· fees imposed under the laws of the Borrower or laws in effect in its territories; provided, however., that the provisions of this Section shall not apply to taxation of, or fees upon, payments under any Bond to a holder thereof other than the Bank when such Bond is benefici ally owned by an individual or corporate resident of the Borrower. Section S.0$. The Loan Agreement and the Bonds shall be free from any taxes or fees t hat shall be im;iosed under the laws of t he Borrower or laws in effect in its territories on or in connection with the execution, issue, delivery or registration thereof and the Borrower shall pay all such taxes and fees, if any, imposed under the laws of the cotmtry or countries in whose currency the Loan and the Bonds are paya"t:i2.e or laws in effect in the territories of such country or countries. Section 5.o6. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid free from all restri ctions imposed under the laws of the Borrower or laws in effect in its territories. - 9 -

ARTICLE VI

Remedies of the Bank

Section 6.01. (i) If any event specif ied in paragraph (a) or paragraph (b) of Section 5.02 of the wan Regulations shall occur and shall continue for a period of thirty days, or (ii) if any event specified in paragraph (c) of Section 5.02 of the Loan Regulations shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower, then at any subsequent t i me during the continuance thereof, the Bank, at its option, may declare the principal of the wan and of all the Bonds then out standing to be due and payable immediately, and upon any such declaration such principal shall become due and payable immediately, anything in this Agreement or in the Bonds to the contrary notwithstanding.

.. • lO - 3/31/S5

ARTICIE vn Effective Date; Termination

Section 7.01. The following event is specified as an additional condition to the effectiveress of this Agreement within the meaning of

Section 9.01 (a) (ii) of the Loan Regulations: The Borrower shall have duly delivered and received payment for the $15,000,000 aggregate prin­ cipal amount of bon~ of the public bond issue.

Section 7. 02. A date sixty days after the date of this Agreement is hereby specified for the purposes of Section 9.04 of the 1';,an Regulations. - · 11 • 3/31/55

ARTICLE VIll

Mi~cellaneous

Section 8.01. The Closing Date shall be December 31, 1955.

Section 8.02. The following addresses are specified for the purposes of Section 8.01 of the L:>an Regulations:

For the Borrower:

Royal :tbrwegian Ministry of Commerce Fr. Nansens pl. 4 Oslo, Norway

For the Bank:

International Bank for Reconstruction and Developroont 1818 H Street, N. w. Washington 25, D. c. United States of America

Section 8.03. The Director of the Foreign Exchange Department of the

Royal Norwegian Ministry of Commerce of the Borrower is designated for the purposes of Section 8.03 of the Loan Regulations.

IN WITNESS WHEREOF, the parties hereto, acting through their repre­ sentatives thereunto duly autmrized, have caused t his Loan Agreement to be signed in their respective names and delivered in The City of New York,

State of New York, United States of America, as of the day and year first above written. KINGDOM OF NORWAY

by Authorized Representative

INrERNATION.AL BANK FOR RECONSTRUCTION Al'ID DEVELOPME:tn'

by President

• - 12 - 3/31/55

SCHEDUIE 1 .Amortization Schedule Principal Amount outstanding After Each Payment Peyment of Principal (expressed in Date Payment Due (expressed in dollars)* dollars)*

May 15, 1960 $25,000,000 November 15, 1960 $1,250.,000 23,750,000 Mey 15, 1961 1.,250,000 22,500,000 November 15., 1961 1,250,000 21,250,000 May 15, 1962 1,250,000 20,000,000 November 15, 1962 20,000,000 May 15, 1963 20,000,000 November 15, 1963 20,000,000 May 15., 1964 20.,000,000 November 15, 1964 20,000,000 Ma;v 15, 1965 20,000,000 November 15, 1965 793,000 19,201,000 May 15, 1966 812 ,000 18,395,000 November 1.5, 1966 831,000 17,564,000 Ma;y 15, 1967 851.,000 16,713,000 November 15, 1()6 7 871.,000 1.5,842,000 May 15, 1968 892.,000 14,950,000 November 15, 1968 913.,000 J.4,037.,000 May 15, 1969 934,000 13.,103,000 November 15, 1969 957,000 12,146,000 May 15., 1970 979.,000 11,161,000 November 15., 1970 1,003,000 10,164,000 Mey 15, 1971 1,026,000 9.,138,000 November 15., 1971 1.,051.,000 8,087.,000 Mey 15, 1972 1,016,000 7.,011,000 November 1S., 1972 1,101.,000 S,910.,000 Mey 15, 1973 1,121,000 4.,783,000 November 15., 1973 1.,154,000 3,629,000 Mey 15, 1974 1,182,000 2,447,000 November 15., 1974 1,209,000 1,238,000 May 1.5, 1975 1.,238,000

* To the extent that any part of t he Loan ts repeyable in a currency other than dollars ( see Loan Regulations, Section 3. 02 ) , the figures in these columns represent dollar equivalents detennined as for pu...l"J)oses of with­ drawal. - 13 .. 3/31/55

Premiums on Prepayment and Redemption

The following percentages are specified as the premiums payable on repayment in advance of maturity of any part of the principal amount of the wan pursuant to Section 2.05 (b) of too wan Regulations or on the redemption of arry Bond prior to its maturity pursuant to Section 6.16 of the wan Regulations:

Time of Pre-payment or Redemption Premium

Not more than 5 years before maturity • • • 1/2 of~ More than 5 years but not more than 10

years before maturity • • • • • • • • 1% More than 10 years but not more than 15

years before maturity •••••••• l 3/4% More than 15 years before maturity •••• 2 1/2% - 14 - 3/24/55

SCHEDUIE 2

Modifications of Loan Regulations No..!.-J

For purposes of this Agreement the provisions of Loan Regulations No. 3 of the Bank, dated February 15, 1955, shall be deera:id to be modified as follows:

(a) Paragraph 12 of Section 10.01 shall be deleted and the following shall be substituted:

1112. The term 'goods' means equipment, supplies and services

which are required for the economic development of the Borrower. •

Wherever reference is made to the cost of a.izy- goods, such cost shall

be deemed to include the cost of i.n;)orting such goods into the terri­

tories of the BoITower." DRAFT 3/31/55

/_Dat~.7 Royal Norwegian Ministr"J of Commerce Fr. Nans <'ms pl. 4 Oslo, No:."'Way

Gentlemer .:

We refer to provisions concerning disburseme., :. of the loan in the wan Agrenrn.ent of even date herewith between us.

Whilf- j_t is the purpose of the loan to finance the import of capital

equipment :·.. a general, we understand that, as a matter of administrative

convenience .~or you, it would be most satisfactory to apply the proceeds

of the loar 1gainst payments for ships. We agree trerefore that the

specific g ,c ls to which the proceeds of the loan are to be applied shall

be ocean-going vessels (including tanlcers) for use in commercial cargo

and passfmger traffic as part of the Norwegian merchant fleet. Withdrawals

from the loan account may be made only on account of pay:ments in foreign exchange made after March 1, 1955 in respect of the cost of vessels now

or hereafter scheduled to be delivered during 195.5 and 1956. A maximum

of i5,ooo,ooo equivalent may be withdrawn before the 31st of May, 1955,

provided that the loan has become effective by that date, and an additional

$5,000,000 equivalent may be withdra,m during ea(·': calendar month there­

after until the entire amount of the loan has been withdrawn. Docuroonta­ tion covering payments in excess of ~i5.,ooo,ooo equivalent in any one dis­

bursement period ma;y be carried over to subsequent periods. If at any

time it seems probable that you will be unable to submit doc11100nts cover­

ing payrnents equivalent to $5.,ooo,ooo in aizy- such disbursement period, we shall be glad to consult with you concerning possible additions to the

types of goods to which the proceeds of the loan are to be applied. - 2 -

You have advised us that most of the p ayments for which reimbursement will be requested will have been made in European currencies. I t is the intention of the Bank to make disbursements of European currencies required by you in respect of the cost of goods to the extent that it has these currencies available from 18% capital subscriptions or from borrowed funds.

It would be the Bank ' s normal practice to provide the remainder of the cur­ rencies by purchasing tmm with another currency such as U. S. dollars.

In the present case the Bank intends to cover the greater portion of this balance by making disbursements to you in dollars or in Netherlands guilders.

But in consultation with you the Bank may wish to follow its normal practice of disbursing the currencies requ:ired by you which have been purchased with other currencies.

Please indicate your agreement with the foregoing by signing and re­ turning the enclosed copy of this letter.

Very truly yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENI'

By

Confirned: KINGDOM OF NOffivAY

By DRAFT 3/Jl/55

Royal Norwegian Ministry of Commerce Fr. Nansens pl. 4 Oslo, Nc,rway

Gentlemen:

We refer to provisions concerning disbursement of the loan in the

wan Agreeroont of even date herewith between us.

While it is the purpose of the loan to finance the import of capital equipment in general, we understand that, as a matter of administrative

convenience for you, it would be most satisfactory to apply the proceeds

of the loan against payments for ships. We agree t~refore that the

specific goods to which the proceeds of the loan are to be applied shall

be ocean-gcing vessels (including tankers) for use in commercial cargo

and passenger traffic as part of the Norwegian merchant fleet. Withdrawals

from the loan account may be made only on account of pa;yments in foreign

exchange made after March 1, 1955 in respect of the cost of vessels now or hereafter scheduled to be delivered during 1955 and 1956. A maximum

of $5,000,000 equivalent may be withdrawn before the 31st of May, 1955,

provided that the loan has become effective by that date, and an additional

$5,000,000 equivalent may be withdrawn during each calendar month there­

after until the entire amount of the loan has been withdrawn. Docun~nta­ tion covering payioonts in excess of t5,ooo,ooo equivalent in any one dis­

bursement period may- be carried over to subsequent periods. If at any

ti.Im it seems probable that you will be unable to submit docuroonts cover­

ing payments equivalent to $5,000,000 in any such disbursement period, we

shaJ.l be glad to consult with you concerning possible additions to the

types of goods to which the proceeds of the loan are to be applied. - 2 -

Ycu have advised us that most of the payments for which reimbursement

'Will be requested will have been made in European currencies. It is the intention of the Bank to make disburse~nts of European currencies required by you in respect of the cost of goods to the extent that it ha.s these currencies available from 18% capital subscriptions or i'rom borrowed funds.

It would be the Bank's normal practice to provide the remainder of the cur­ rencies by purchasing them with another currency such as u. S. dollars.

In the present case the Bank intends to cover the greater portion of this balance by making disbursements to you in dollars or in Netherlands guilders.

But in consultation with you the Bank may wish to follow its normal practice

of disbursing the currencies required by you which have been purchased with other currencies.

Please indicate your agreement with the foregoing by signing and re­

turning the enclosed copy of this letter.

Very tr~ yours, INI'ERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENI'

Confir~d: KINGDOM OF NORWAY

By NORWAY

TENTATIVE TIMl!l TABLE

Thursd.ey, March 31 Informal filing of Registration Statement

Thursday, April? a.m. - Staff Loan Committee {~ J p.m. - Formal filing Registration Statement

Monday, April 11 Documents . distributed to Executive Directors Mond.q, April 18 Decision by Executive Directors Tuesday, .April 19 Loan signature Wednes~, April 20 Public offering J/()-L,v Iv

Statement by Mr . Black to Board on March 31, 1955, on a Loan to Norway

"Negotiations with the Norwegian Government are well advanced for a joint operation of $40 million by the Bank and a U. S. underwriting group headed by Harriman Ripley & Co . Inc. The Bank loan would be for $25 million in U.S. dollars and European currencies. The public issue of dollar bonds would be for the remaining $15 million. The public issue would consist of 3, 4 and 5 year bonds and of 10 year sinking fund bonds. The Bank loan would be for 20 years and would be amortized by four semi-annual payments of 1. 25 million each during the sixth and seventh years and by twenty increasing semi-annual payments, starting in the eleventh year, calculated to retire the remaining $20 million of the loan by maturity. The purpose of the loan would be to make possible the import of capital equipment needed for the maintenance of a high level of productive investment. In a sense it would be the sequel to the Bank ' s 25 millionloan of April 8, 1954. The loan would be disbursed in 1955 against payments for imported capital goods.

"It is expected that the Registration Statement for the public issue will be formally filed with the S.E. C. on or about April 7 at which tinB it will become public knowledge that the Bank proposes to lend. It is expected that all documents will be distributed to the Executive Directors about April 11. On this basis and unless any un­ expected difficulties should arise, the loan would be laid before the Executive Directors on or about April 18 and, if it were approved, the public issue would be made the following day. "

,:c~a.£ ~J 1 ~ ~ ~ ,J!,,_, ~ ~£. D . )

- -... -.. - -.. -...

• -

..

11 /1/0 -- l- A/ I /.J /1/1/1.ltll» PROSPECTUS $15,000,000 Kingdom of Norway EXTERNAL LOAN BONDS OF 1955 $2,500,000 THREE YEAR 3% % BONDS DUE APRIL 15, 1958 $2,500,000 FOUR YEAR 3Y4 % BONDS DUE APRIL 15, 1959 $2,500,000 FIVE YEAR 3%% BONDS DUE APRIL 15, 1960 $7,500,000 TEN YEAR 4 Y4 % SINKING FUND BONDS DUE APRIL 15, 1965 Bonds dated April 15, 1955. Interest payable October 15 and April 15 in New York City.

Sinking Fund payments for the Ten Year Sinking Fund Bonds semi-annually commencing in the fall of 1960 payable in such Bonds or in cash to be applied to the purchase or redemption of Ten Year Sinking Fund Bonds, to retire 100 % of the issue by maturity.

Redeemable, at the option of the Kingdom of Norway, at any time, in whole or in part, on 30 days' notice, at the principal amount and accrued interest plus !/i of 1 % for each 12 months or fraction thereof from the redemption date to the respective maturity dates. The Ten Year Sinking Fund Bonds are also redeemable through operation of the sinking fund on any interest payment date, on like notice, at the principal amount and accrued interest.

Concurrently with the sale of these Bonds the International Bank for Recon struction and D evelopment is agreeing to lend to the Kingdom of Norway up to $25,000,000 or the equivalent thereof in other currencies, repayable as to $5,000,000 from 1960 through 1962 and as to $20,000,000 from 1965 through 1975, at an interest rate of 4 Y4 %.

The Kingdom of Norway will make application to list the Ten Year Sinking Fund Bonds on the New York Stock Exchange.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PRICE 100 % AND ACCRUED INTEREST

Underwriting Price to Discounts or Proceeds to Public(}) Commissions ( 2) the Kingdom (1) (3) Three Year, Four Year and Five Year Bonds Total ...... $7,500,000 $112,500 $7,387,500 Per Unit ...... 100 % 1.5 % 98.5 % Ten Year Sinking Fund Bonds Total ...... $7,500,000 $192,450 $7,307,550 Per Unit 100 % 2.566 % 97.434 % ( I ) Plus accrued interest. (2) Norway has agreed to indemnify the several Underwriters against certain liabilities. (3) Before deducting expenses of the Kingdom e stimated a t $ 5 0 ,74 0 . Subject to prior sale these Bonds are offered when, as and if issued, and accepted by the Under­ writers named herein, and subject to the approval of certain legal matters by Sullivan & Cromwell and Messrs. Heyerdahl, Corneliussen, Thommessen, Karlsrud and Heyerdahl Jr., counsel for the Under­ writers, and the Honorable Jens Christian Hauge, Minister of Justice of the Kingdom of Norway. It is expected that delivery of Bonds will be made at the office of The First National City Bank of New York on or about April 2 6, 19 5 5, against payment therefor in New York funds.

Kuhn, Loeb & Co. Harriman Ripley & Co. Lazard Freres & Co. Smith, Barney & Co. Incorporated

The date of this Prospectus is April 19, 1955. No dealer, salesman or other person has been authorized to give any information or to make any repre­ sentations other than those contained in this Prospectus in connection with the offering made by this Prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized by the Kingdom of Norway or by the several Underwriters. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Kingdom of Norway since the date hereof. TABLE OF CONTENTS Page Application of Proceeds 3 Description of Bonds 3 Public Documents 5 The Kingdom of Norway ...... 5 Location and Population ...... 5 Constitution and Government ...... 5 United Nations and North Atlantic Treaty Organization ...... 6 Organization for European Economic Cooperation and European Payments Union 7 Scandinavian Regional Cooperation ...... 7 Norwegian Economy ...... 8 General ...... 8 Shipping ...... 9 Manufacturing and Mining ...... 10 Agriculture, Forestry, Fishing and Whaling ...... 11 Water Power ...... 12 State Enterprises ...... 12 State Investments in Industrial Companies ...... 15 Principal Taxes ...... 16 Social Legislation ...... 16 Labor Unions ...... 17 Monetary System ...... 17 Bank of Norway ...... I 7 Other Banks ...... 18 Interest Rates and Dividends 19 Price Levels ...... 19 Balance of International Payments and Foreign Exchange ...... 20 Foreign Trade ...... 20 Balance of Payments ...... •...... 23 Foreign Exchange Rates ...... 26 Foreign Exchange Control and Reserves ...... 27 Membership in International Bank for Reconstruction and Development and in International Monetary Fund ...... 28 Revenues, Expenditures and Budgets ...... 29 Summary of Revenues and Expenditures ...... 30 The National Budget for 1 9 5 5 and Comments of Minister of Finance ...... 31 Public Debt ...... 34 Summary of Public Debt ...... 34 Debt Record ...... 34 Underwriters 37 Legal Opinions ...... 3 8 Authorized Agent in the United States ...... 38 Tables and Supplementary Information ...... 39 Revenues and Expenditures ...... 39 Public Debt of the Kingdom of Norway ...... 43 Balance Sheet of Bank of Norway at December 31, 1954 ...... 49 Further Information ...... 49 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES HEREBY OFFERED AND OF ANY OTHER BONDS OF THE KINGDOM PAYABLE IN UNITED STATES DOLLARS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREY AIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZ­ ING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 2 In this Prospectus, all amounts are expressed in Norwegian kroner except as otherwise specified. On September 18, 1949, parity of the Norwegian krone was established at 7.14286 kroner to the U. S. Dollar or 14 U.S. cents to the krone. On April 15, 1955, the reported demand rate for the krone in New York City was 14.02 cents.

APPLICATION OF PROCEEDS

The Kingdom of Norway (hereinafter sometimes referred to as the "Kingdom" or the "State") is issuing and offers hereby $15,000,000 principal amount of its External Loan Bonds of 1955, dated April 15, 1955, consisting of $2,500,000 of Three Year 3% % External Loan Bonds of 1955 (the "Three Year Bonds"), due April 15, 1958, $2,500,000 of Four Year 3 Y4 % External Loan Bonds of 1 9 5 5 ( the "Four Year Bonds"), due April 1 5, 1 9 5 9, $2,500,000 of Five Year 3Vs % External Loan Bonds of 1955 (the "Five Year Bonds"), due April 15, 1960, and $7,500,000 of Ten Year 4Y4 % Sinking Fund External Loan Bonds of 1955 (the "Ten Year Bonds"), due April 15, 1965. Such External Loan Bonds of 1955 are hereinafter sometimes collectively referred to as the Bonds.

Concurrently with the sale of the Bonds, the International Bank for Reconstruction and Development (hereinafter sometimes referred to as the "World Bank") is agreeing to lend to the Kingdom up to $25,000,000 or the equivalent thereof in other currencies, repayable as to $5,000,000 from 1960 through 1962 and as to $20,000,000 from 1965 through 1975 and bearing interest at a rate of 4 Y4 % , which includes an amount to be allocated to the Bank's Special Reserve (presently 1 % per annum), such loan being hereinafter sometimes referred to as the World Bank Loan.

The proceeds of the Bonds will, in the first instance, be added to the foreign exchange reserves of the Kingdom. It is the present intention of the Kingdom that such proceeds will be applied to the acquisition and importation of capital equipment required for the development of the Norwegian economy. The proceeds of the World Bank Loan will be applied to the foreign exchange costs of capital equipment required for the same purpose. The specific goods to which the proceeds of the World Bank Loan are to be applied are to be determined by agreement between the Kingdom and the World Bank.

DESCRIPTION OF BONDS

The Bonds are to be issued in the aggregate principal amount of $15,000,000, and are to be dated April 1 5, 1 9 5 5. The Three Year Bonds are to mature April 1 5, 1 9 5 8; the Four Year Bonds, April 15, 1959; the Five Year Bonds, April 15, 1960; and the Ten Year Bonds, April 15, 1965. Interest on the Bonds will be payable semi-annually on April 15 and October 15 of each year at the rate of 3 Ya per cent per annum on the Three Year Bonds; 3 Y4 per cent per annum on the Four Year Bonds; 3 Vs per cent per annum on the Five Year Bonds; and 4 Y4 per cent per annum on the Ten Year Bonds. The Bonds, which are to be issued in the denomination of $1,000 each, will be direct, uncon­ ditional and general obligations of the Kingdom and will rank pari passu, without any preference one above the other by reason of priority of date of issue or otherwise, with all other loan indebtedness of the Kingdom; and the full faith and credit of the Kingdom will be pledged for the due and punctual payment thereof and for the performance of all obligations of the Kingdom with respect thereto; and the Kingdom will agree therein that if it shall, in the future, secure any loan, debt, guarantee or other obligation, now or hereafter existing, by any lien, pledge or other charge upon any of its present or future assets or revenues, the Bonds shall ipso facto share in and be secured by such lien, pledge or other charge equally and ratably with such other loan, debt, guarantee or other obligation. Interest on, and principal and redemption price, if any, in respect of, the Bonds will be payable in such coin or currency of the United States of America as at the time of payment is legal tender for

3 the payment of public and private debts therein, at the corporate trust office in the Borough of Manhattan, City and State of New York, of The First National City Bank of New York, Fiscal Agent, or its successor, (herein called the "Fiscal Agent"). Except as provided below with respect to credit for Bonds deliv ered, sinking fund payments in respect of the Ten Year Bonds shall be payable in like coin o r currency of the United States of America. Interest on, and principal and redemption price, if any, in respect of, the Bond s will be payable without deduction for or on account of any present or future taxes or duties, of whatsoever n atur e, of the Kingdom of Norway or of any district, municipality or other political subdivision or taxing authority therein or thereof, except when the bearer or registered owner is subject to taxation or duties thereon otherwise than by reason of his holding or ownership of Bonds or the receipt of income therefrom. The Kingdom will agree to maintain an office or agency in the Borough of Manhattan, 5=ity of New York, for the purpose of payment of the interest on, and principal and redemption price, if any, in respect of, the Bonds. In case of default in the payment of interest or principal on any of the Bonds, or the making of a sinking fund payment in respect of any of the Ten Year Bonds, and continuance thereof for a period of 90 days, each Bond of the same maturity will become due and payable, at the option of the Bondholder and upon written notice to the Fiscal Agent, unless prior to the receipt of such notice all defaults shall have been cured. The Bonds will be in bearer form, with interest coupons attached, and registrable as to principal at the head office of the Fiscal Agent. The Three Year, Four Year and Five Year Bonds are to be issued in definitive form; and the Ten Year Bonds are to be issued in temporary form. Temporary Ten Year Bonds will be exchangeable without cost to the holders for definitive Ten Year Bonds when prepared at the corporate trust office of The First National City Bank of New York. The Kingdom will agree to pay to the Fiscal Agent, at least ten days prior to each interest payment date, an amount (in such coin or currency of the United States of America as shall then be legal tender for the payment of public and private debts) sufficient to pay the interest becoming due on all the Bonds on such interest payment date. Redemption The Bonds will be redeemable as a whole or in part by lot at the option of the Kingdom at any time, upon at least 30 days' published notice, at the principal amount and accrued interest plus Yi of 1 % for each period of twelve months or fraction thereof from the date fixed for redemption to the date on which such Bond matures in accordance with its terms. The Ten Year Bonds will also be redeemable, for the purpose of the sinking fund described below, on October 15, 1960, and any interest payment date thereafter, upon at least 30 days' published notice, at 1 00 % of their principal amount, together with accrued interest. Sinking Fund The Kingdom will pay semi-annually to the Fiscal Agent on or before each March 1, and September 1, beginning with September 1, 1960, sums in cash sufficient to redeem, at the par value thereof, on the next succeeding interest payment date principal amounts of Ten Year Bonds as follows: $660,000 on October 15, 1960; $680,000 on April 15, 1961; $700,000 on October 15, 1961; $720,000 on April 15, 1962; $740,000 on October 15, 1962; $760,000 on April 15, 1963; $780,000 on October 15, 1963; $800,000 on April 15, 1964; $820,000 on October 15, 1964; and $840,000 on April 15, 1965; provided that in lieu of making all or any part of any sµch sinking fund installment payment in cash, the Kingdom may deliver to the Fiscal Agent for surrender to the sinking fund and cancellation Ten Year Bonds with all coupons maturing on and after the next interest payment date, and such delivery shall be treated as equivalent to the payment by the Kingdom in cash for sinking fund purposes of an amount equal to the principal amount of the Ten Year Bonds so delivered. Cash on hand in the sinking fund, provided it amounts to $25,000 or more on any such March 1 or September 1, shall be applied by the Fiscal Agent to the redemption of Ten Year Bonds on the next ensuing interest payment date, except that any sinking fund monies on hand after October 15, 1964, will be applied to payment of the Ten Year Bonds at maturity. In the event that the amount of cash on hand in the sinking fund 4 on any such March 1 or September 1 shall be less than $25,000, the Fiscal Agent shall retain such cash in the sinking fund and apply the same, whenever the amount in the sinking fund shall equal or exceed $25,000, to the redemption of Ten Year Bonds in the manner above provided.

The foregoing statements include brief summaries of some of the provisions of the forms of Bonds and the Fiscal Agency Agreement, copies of which are filed as exhibits to the Registration Statement. Such statements do not purport to be complete and are qualified in their entirety by reference to such exhibits.

PUBLIC DOCUMENTS Various information set forth in this Prospectus has been compiled or extracted from public official documents of the Norwegian Government, including ~konomisk Utsyn Over Aret 1954, published by the Central Bureau of Statistics (hereinafter referred to as "Economic Survey 1954"); Nasjonalregnskap 19 38 og 1948-19 5 3, published by the Central Bureau of Statistics (hereinafter referred to as "National Accounts 1938 and 1948-1953"); Statistisk Arbok for Norge 1953 and the same document for 1954, published by the Central Bureau of Statistics (hereinafter referred to as "Statistical Yearbook" for the respective years); Statsregnskapet for Budsjett-Terminen 1951-1952 and the same document for 1952-1953 and 1953-1954, all published by the Ministry of Finance (hereinafter referred to as "Closed Accounts" for the respective years); Budsjett­ lnnstilling S.II B ( 1954), published by the Storting (hereinafter referred to as "Final Budget Recommendation 1954"); St.prp.nr. 1 ( 1950), Statsbudsjettet for Budsjett-Terminen 1950-1951 and the same document for 1951-1952, 1952-1953, 1953-1954, 1954-1955 and 1955-1956, all published by the Ministry of Finance (hereinafter referred to as "Budget Proposal" for the respec­ tive fiscal years); St. meld.nr. 20 ( 1955) Budsjettregnskapet for 1. halvar 1954-55, published by the Ministry of Finance (hereinafter referred to as "Budget Accounts for the first half of the fiscal year ending June 30, 1955"); St. meld. nr. 1. ( 1955) Nasjonalbudsjett 1955, published by the Ministry of Finance (hereinafter referred to as "National Budget 1955"); Budsjettinnst-St.nr.231 ( 1954) , Svalbard-Budsjettet, published by the Storting (hereinafter referred to as "Svalbard Final Budget Recommendation 1954"); and St.prp.nr. l ( 1955) Svalbardbudsjettet 1955-1956, published by the Ministry of Industries, Handicraft and Shipping (hereinafter referred to as "Svalbard Budget Proposal for 1 9 5 5-1 9 5 6") ; Norges Handel 1 9 5 2, published by the Central Bureau of Statistics (hereinafter referred to as "Foreign Trade of Norway 1952"); Statistiske Meidinger, published by the Central Bureau of Statistics (hereinafter referred to as "Monthly Bulletin") ; Manedsoppgaver Over Vareomsetningen Med Utlandet, published by the Central Bureau of Statistics (hereinafter referred to as "Monthly Bulletin of External Trade") ; and Aktuell Statistikk, published by the Central Bureau of Statistics (hereinafter referred to as "Current Statistics"). THE KINGDOM OF NORWAY Location and Population Norway forms the Western and Northern part of the Scandinavian Peninsula and is bordered on the North, West and South by the Arctic Ocean, the Atlantic Ocean and the North Sea. The length of the land frontier is 1,588 miles of which 1,021 miles border Sweden, 445 miles Finland and 122 miles Russia. Norway's area is 125,065 square miles and the population, based upon the census of December 1, 1950, is 3,278,546. It is estimated that by the end of 1954 the population had increased to approximately 3,408,000. The island group of Svalbard (including Spitzbergen) in the Arctic Ocean, Jan Mayen Island in the North Atlantic Ocean, Queen Maud Land on the Antarctic Continent, Bouvet Island in the South Atlantic Ocean, and Peter I Island near the Antarctic Continent are under the sovereignty of Norway.

Constitution and Government The Kingdom of Norway is a constitutional monarchy, the Government of which operates under a constitution originally adopted in 1 8 1 4 and from time to time amended. 5

• The executive power of the Government is vested in the King, who exercises his authority through a cabinet, known as the Council of State, presently composed of a Prime Minister and twelve Ministers. The Ministers are the heads of the following executive departments: Foreign Affairs; Ecclesiastical Affairs and Education; Justice; Local Government and Labor; Social Affairs; Commerce; Industries, Handicraft and Shipping; Fisheries; Agriculture; Transport; Finance; and Defense. The Ministers are appointed by the King who, in practice, selects them in accordance with the will of the Storting (parliament). The legislative power is vested in the Storting, which consists of the Odelsting and the Lagting. The members of the Storting are elected for a term of four years through general elections at which all qualified citizens over twenty-one years of age are entitled to vote. The Storting has one hundred and fifty members who elect thirty-eight of their number to constitute the Lagting, while the balance constitute the Odelsting. The Storting cannot be dissolved by the King. All bills which affect or regulate the legal position of Norwegian citizens are acted upon m separate sittings, first by the Odelsting and then by the Lagting whereupon they are sent to the King for the Royal Assent. The King's veto can be overriden by appropriate action of two subsequent, consecutive Stortings. All other matters, such as financial and economic matters, the budget, organizational questions, political questions and constitutional amendments, are presented to the Storting, sitting in plenary session, as resolutions and are not enacted as laws. At the general elections held on October 8, 1945, the Labor Party, which had come into office in 1935 with the aid of the Farmers' Party and led a coalition government during World War II, obtained a majority of the seats in the Storting. As a result of such election, the new coali­ tion government which had been formed following the liberation resigned and was succeeded by a Labor Government. Labor Governments have continued in office since that date. The results of the Storting elections in 1945, 1949 and 1953 were as follows: 1945 1949 1953 Labor Party 76 85 77 Conservative Party 25 23 27 Liberal Party 20 21 15 Farmers' Party 10 12 14 Christian People's Party 8 9 14 Communists . 11 3 Total 150 150 An electoral reform carried into effect in 1 9 5 2 was intended to give the minority parties a representation in the Storting more proportionate to the popular vote.

United Nations and North Atlantic Treaty Organization Norway has been a member of the United Nations since 1945 and of the North Atlantic Treaty Organization (N.A.T.O.) since 1949. Under the provisions of the North Atlantic Treaty, which was ratified by the Norwegian Government on April 4, 1949, Norway and the other members of N.A.T.O., including the United States, agreed that an armed attack against one or more of them in Europe or North America should be considered as attack against them all, and that if such attack occurred, each of them would assist the party or parties attacked by taking such action as it deemed necessary, including the use of ar~ed force, to restore the security of the North Atlantic area, reporting the attack and all measures taken to the Security Council of the United Nations. Norway's membership in N.A.T.O. has to a very large extent increased her military prepared­ ness, but the build-up of her defense forces in cooperation with the other members of N.A.T.O. has imposed a heavy burden on her economy, including defense appropriations of over five billion kroner in the seven fiscal years ending June 30, 1955. Since becoming a member of N.A.T.O. Norway has entered into extensive mutual defense assistance arrangements with the United States and has received over two and a half billion kroner in military equipment pursuant to these arrange­ ments. 6 Organization for European Economic Cooperation and European Payments Union Norway has been a member since 1948 of the Organization for European Economic Coopera­ tion (O.E.E.C.). The O.E.E.C. is an international organization having for its principal objective the r estoration of the prosperity of Europe by close economic cooperation among its members. The convention establishing the O.E.E.C. (O.E.E.C. Convention) was signed by Norway along with other beneficiaries of the Marshall Plan on April 1 6, 1948, and ratified by the Norwegian Government on July 9, 1948. Pursuant to the recommendation of the Council of the O.E.E.C., all the members signed an agreement (E.P.U. Agreement) on September 19, 1950, ratified by the Norwegian Government on January 12, 1951, establishing a European Payments Union (E.P.U.). The principal purpose of the E.P.U. is to facilitate by means of a multilateral system of payments, the settlement of transactions among the contracting parties. The central banks of the member countries may clear their reciprocal indebtedness through the E.P.U. each month rather than attempting to balance their accounts individually with each other. The monthly settlements are made by payments in gold, United States dollars, or, in certain special circumstances in other currencies, and in certain stipulated proportions and, within the parties' quotas, on the basis of credits to the parties by the E.P. U. or to the E.P. U. by the parties. The settlement provisions of the original E.P.U. Agreement expired June 30, 1952, and they have been extended on a year-to-year basis. As of the date of this Prospectus no final agreement to extend these provisions beyond June 30, 195 5, had been reach ed by the members. However, on January 14, 1955, the Council of the O.E.E.C. agreed to continue the operation of the E.P.U. for a further year after June 30, 1955, and instructed the managing Board of the E.P.U. to report to the Council on the conditions on which the settlement provisions of the E.P.U. Agreement should remain in force from July 1, 1955. Under the provisions of the O.E.E.C. Convention the members are obligated to develop the maximum possible interchange of goods and services and to cooperate in relaxing restrictions on trade. By way of defining this obligation the O.E.E.C. Council adopted a Code of Liberalization on July 20, 1951, which has been amended from time to time. In accordance with the Code a large majority of the member countries (including Norway) have now abolished restrictions to the extent that, as a minimum, 75 % (calculated on the basis of 1948 imports) of their total imports for private account from other O.E.E.C. countries are not subject to quota restrictions. On January 1 4, 19 5 5, the Council decided that 90 % of the total imports for private account among member countries should be free from quota restrictions. As of the date of this Prospectus this decision has not been given effect as an operative limitation on the member countries. Scandinavian Regional Cooperation Scandinavian economic cooperation in the period between the two World Wars was primarily concerned with such problems as the avoidance of unnecessary competition in foreign markets and maintaining established markets within the Scandinavian area. Following World War II, two concrete manifestations of continued Scandinavian economic cooperation were the formation in 1951 of the Scandinavian Airlines System (S.A .S.), a joint air transport operating agency based on a contractual arrangement between the Norwegian, Danish and Swedish parent companies with the rights and obligations thereunder being shared by the respective companies in the proportion of two-sevenths, two-sevenths, and three-sevenths, respec­ tively, and the establishment as of July 1, 1954, of a common labor market among Norway, Finland, Sweden and Denmark permitting the free movement of labor across national boundaries with full opportunity to obtain employment wherever offered. For a number of years Swedish, Danish and Norwegian unemployment insurance benefits have been available to workers from all three countries, and credits earned in one country are transferab.le to the others. A Nordic Council, composed of Denmark, Iceland, Norway and Sweden, was established in 1 9 5 2 as an organization in which representatives of the legislatures and cabinets of these countries might discuss problems of Nordic regional cooperation and make appropriate recommendations to the respective Governments. The first meeting of the Council was held in 1953, and at the

7 1954 meeting held in Oslo in August 1954 the Council made a number of recom mendations to the respective governments, including the establishment of a common Nordic market covering as wide an area as possible. At a meeting of cabinet ministers of Norway, Sweden and Denmark, held in Harpsund, Sweden, in October 1954 a joint proposal was drawn up recommending that a survey of Sca nd i­ navian regional trade should be made with a view to determining those areas in which conditions were propitious for the rapid realization of a common market and that an investigation o f the possi­ bilities of developing new industrial production through joint efforts be undertaken. The Govern­ ments of Denmark, Sweden and Norway agreed with the proposal and the recommendations are being carried out. NORWEGIAN ECONOMY General In the post-war years the Norwegian economy has been expanding and the total national production of goods and services has increased in every year from 194 8 to 195 4 . This increa se in production has been accompanied by a steady increase in consumption and inv estment. In the process of rebuilding and expanding the productive base of its national economy, Norway has throughout the period covered by the following tables maintained its level of investment at slightly above one-third of gross national product. This high rate of investment has not been matched b y correspondingly high public and private savings, the rate of total consumption havin g remained practically constant. The excess of total investment and consumption over total production has been reflected in the deficits in Norway's current international balance of goods and services which have occurred in every year from 1948 through 1954, except 1951 . The following table sets forth the estimated gross national product at current market p rices in the respective years, and the expenditure thereof ( expressed both in kroner and a s a p ercentage of the total) through investment, consumption and an export surplus, if any. In the y ea rs in which the export surplus is shown as a negative figure there was an import surplus, and total investm ent and consumption were that amount or that percentage in excess of gross national p roduct. The following tables and all other statistical information set forth in respect of the "Norwegian Econ­ omy" should be considered in the light of the price indexes set forth herein und er "Price Levels." Gross National Product (In millions of kroner) 1948 1949 1950 195 1(1) 1952 (1 ) 1953( 1 ) 1954(1 ) Gross national product 14,092 15 ,015 16,647 20,706 22,782 23, 13 6 24,805 Gross investment 5,099 5,593 5,640 7,004 7, 680 8,080 8,809 Fixed assets 4,621 5,193 5,565 6,254 7,430 8,230 8,859 Inventories 478 400 75 750 250 -1 50 - 50 Public consumption 1,338 1,434 1,532 1,863 2,286 2, 58 5 2, 846 Civilian 1,031 I, 103 I, 179 1,289 1,472 1,626 1,754 Military 307 331 353 574 814 959 1,092 Private consumption 8,396 9,174 I 0,275 11,581 12,834 13,45 1 14,250 Surplus of Exports over Im- ports(2) -741 -1, 186 -800 258 -18 - 980 - 1, 100 Exports(2) 4,430 4,625 5,964 9,045 8,967 8, 181 8,900 lmports(2) ...... 5, 171 5,811 6,764 8,787 8,985 9, 161 10,000 (Percentages of Gross National Product) Gross national product 100 100 100 100 100 100 100 Gross investment .. 36.2 37.2 33.9 33.8 33.7 34.9 35.5 Public consumption 9.5 9.6 9.2 9.0 10.1 11.2 11.5 Private consumption 59.6 61.1 61.7 55.9 56.3 58. 1 5 7.4 Surplus of Exports ove r Imports ...... -5.3 -7.9 -4.8 1.3 - 0. 1 -4.2 -4.4 Exports ...... 31.4 30.8 35 .8 43.7 39.3 35.4 35.9 Imports ... 36. 7 38. 7 40.6 42.4 39.4 39.6 40.3 Source: Extracted from the Statistical Year Book 1954 and the Economic Survey 1954, except the percentage fi gures for 1952-54 which were computed by the Ministry of Commerce. ( I ) Provisional figures. (2) These totals reflect all the items included in the balance of goods and services and not just commodity exports and imports. Figures are identical with those in the balance of goods and services shown in the Balance of Payments table in this Prospectus except the 1954 fi gures in which certain revisions, based on more recent information, have been made in the Balance of Payments table. 8

• Because of the large investment requirements of its shipping and export industries and the small population on which it has to rely to generate the requisite savings, Norway has traditionally relied in part on foreign capital to finance its investments. For economic measur es p roposed by the Government with a view to reducing current investment demand see the caption · ·The National Budget for 19 5 5 and Comments of the Minister of Finance." Apart from the service industries, the production of the Norwegian economy is heavily concen­ trated in the mining and manufacturing and shipping industries. T h e following table sets forth the estimated gross production of the principal Norwegian industries in the years 194 8 through 1954, together with the percentages of Norway's gross national product in 1954 produced by the various industries: Production of Principal Industries { In millions of kroner) 1954 (as per• 1948 1949 1950 1951 1952 1953 1954 centage) Agriculture I, 10 1 1, 189 1,240 1,250 1,314 1,449 1,560 6.3 Forestry ...... 442 516 433 651 924 751 755 3.0 Fishing and Hunting ...... 3 14 329 35 4 502 521 481 513 2. 1 Whaling ...... - ...... 283 238 25 5 279 226 178 211 0.8 Manufacturing and Mining 4,331 4,439 5,085 6,4 10 6,735 6,846 7, 460 30.1 Construction ...... 984 1,086 1,162 1,258 1, 464 1, 6 71 1,864 7.5 Electricity, Gas and Water ...... 312 3 76 425 45 7 5 12 541 591 2.4 Wholesale and Retail Trade 1,74 7 1,936 2,241 2,964 3,556 3,742 3,981 16.0 Shipping 1,3 2 1 1, 437 1,751 2,817 2,883 2,450 2,478 10.0 O ther Tra nsport and Communications 73 5 805 875 963 1, 10 2 1, 156 1,204 4.9 Other 2,522 2,6 64 2,826 3,1 55 3,545 3,871 4,188 16.9 T otal Gross National P roduct . . . . 14,092 15,015 16,647 20,706 22,782 23, 136 24,805 100.0

Source: Extracted from the National Accounts 1938 and 1948-53 and the National Budget 1955, except the percentage fi gures for the yea r 1954 which were computed by the Ministry of Commerce.

Except where otherwise indicated all statements in this Prospectus in respect of percentages are based on kroner value rather than quantitative volume.

Shipping

The shipping industry, founded on the traditional seafaring skill of the Norwegian people, plays an extremely important part in Norway's economic life in terms of national income and balance of payments. Its net contribution to foreign exchange receipts averaged 863 million kroner annually for the period 1 9 4 7 through 19 5 4.

Before World War II, Norway's merchant fleet with its approximately 4.8 million gross tons ranked fourth in the world. In 1940 the 80 % of the fleet which had evaded enem y control was requisitioned by the Norwegian Government and put under the management of the Norwegian Ship­ ping and Trade Mission (Nortraship). About half of the fleet was lost during the war, and the remaining vessels were redelivered to their owners on October 1, 1945. Rebuilding the fleet became one of Norway's principal post war objectives. At the end of I 9 5 4 the fleet had passed 7 million gross tons and ranked third in the world in total tonnage. At that time the . Norwegian merchant fleet constituted about 7 % o f total world tonnage, the ta n ker fleet comprising about I 5 % o f the w orld tanker tonna ge and the dry cargo fleet about 4 % of world dry cargo tonnage.

The following table shows the growth of the fleet by years. The last column shows the merchant fleet's net contribution to foreign exchange receipts in the yea rs 1 94 7 through 19 5 4 (net freight earnings, including insurance recoveries, plus receipts for ships sold abroad less pay­ ments for ships purchased or contracted for abroad and for repairs).

9 Merchant Fleet (In thousands of gross tons) Tankers(2) Net contribution Motor- Steam- Sailing included to foreign End of vessels vessels vessels Total(l) in total exchange receipts (In millions of kroner) 1938 ...... 2,897 1,853 6 4,756 1,993 1946 ...... 2,338 1,096 3 3,437 1,604 1947 ...... 2,677 1,495 2 4,174 1,718 400 1948 ...... 3,062 1,615 2 4,679 1,968 317 1949 ...... 3,659 1,640 1 5,300 2,272 228 1950 ...... 4,100 1,579 2 5,681 2,631 598 1951 ...... 4,527 1,448 5,975(3) 2,990 1,517 1952 ...... 4,883 1,366 6,249 (3) 3,245 1,615 1953 ..... 5,304 1,332 6,636(3) 3,550 l, 181 1954(4) . 5,780 1,300 7,080(3) 3,800 1,052

Source: Extracted from the Statistical Year Book 1954 except the preliminary fi gures for 1954 which were compiled by the Central Bureau of Statistics and the final column which was prepared by the Ministry of Commerce based on balance of payments information compiled by it. ( 1) The figures for the merchant fleet refer only to motor and steam vessels of 25 gross tons and above and sailing vessels of 5 0 gross tons and above. (2) Including floating whaling factories, which are classified as tankers for statistical purposes. (3) Excluding sailing vessels. { 4) Preliminary figures.

The rebuilding of the merchant marine since World War II has provided Norway with one of the most modern of fleets. At the end of 1954, approximately 43 % of the total tonnage was under 5 years of age, and about 5 8 % of the tanker fleet was less than 5 years old. Because of Norway 's limited shipbuilding facilities most of the contracts for new ships had to be placed abroad. The bulk of the orders went to Great Britain and Sweden but from 1 9 5 1 sizeable orders have also been placed with Western Germany. According to the National Budget 1955, as of January 1, 1955, 2,235,000 gross tons of new ships were on order with deliveries scheduled mainly in 1 9 5 5, 1 9 5 6 and 1 9 5 7. It is estimated that about one million gross tons of these new ships will constitute replacements for ships sold abroad or scrapped during the same period. The building abroad has meant heavy expenditures of foreign currency, but it has also been possible to arrange extensive financing abroad, principally through mortgages on the ships. As a temporary measure for the purpose of reducing the volume of Norway's imports and investments, a new tax of 10 % has been imposed on the cost of ships of over 2,500 gross tons contracted for after February 13, 1955. The earnings of the fleet are to a large extent dependent on the freight market and may v ary considerably from year to year. However, long time-charters tend to minimize the fluctuations. As of January 1 , 1 9 5 5, about 7 0 % of the tanker fleet was sailing on long time-charters, and many of the tankers still building have already been chartered on a long-term basis. Only about 5 % of the total merchant fleet is engaged in the coastal trade off Norway. Of the rest approximately 1 5 % is employed on routes between Norway and abroad and 80 % between foreign ports exclusively. Of the tankers, about 9 5 % are exclusively employed on routes between foreign ports. Thus, free competition in the world freight markets is very important to Norwegian shipping. The member countries of the O.E.E.C. have liberalized restrictions on the carriage of their foreign trade. However, in other areas discriminatory measures ( especially as regards the liner trade) which are detrimental to the free circulation of international shipping and consequently to Norwegian shipping have become more widespread since World War II.

Manufacturing and Mining Manufacturing and mining have played an increasingly important part in the Norwegian economy. In 1954 they employed approximately 26 % of the working population and accounted for about 30 % of gross national product. The export industries, the most important of which are the mining industry, the pulp and paper industry, the electro-metallurgical and the electro-chemical

10 industries, the canning industry and the fats and oils industry, account for about one-third of total production of the manufacturing and mining industries and provide about 75 % of Norway's total exports of goods. Norway, in addition to being the only source of molybdenum ore in Europe, has sizeable copper, pyrites and iron ore reserves. These ores are mined and processed largely for export. In addition, there are large deposits of feldspar, dolomite, quartz, graphite, limestone, talc and soapstone. Norway has coal reserves in Spitzbergen which provide about one-fourth of domestic requirements. Norway's large forest area and low-cost and abundant hydro-electric power supply give the pulp and paper industry an established competitive position in world markets, and it achieved record levels of production in 1954: 640,000 metric tons of mechanical wood pulp, 590,000 metric tons of chemical pulp and 570,000 metric tons of paper and paperboard. Exports amounted to approximately 24 % of Norway's total exports of goods in 1954. The electro-metallurgical is another industry in which low-cost electric power gives Norway a competitive advantage. The industry produces a great variety of metals and alloys, including aluminum, zinc, nickel, copper and ferro-alloys. While most of the raw materials processed must be imported, the products are largely exported. Almost all of the production of ferro-alloys and about four-fifths of the aluminum products are sold abroad. The p rincipal markets are in Europe and to a lesser extent in the United States and Canada. Exports of this industry in 1954 amounted to approximately 15 % of the country's total commodity exports. During 1954 the output of alumi­ num exceeded 60,000 metric tons, compared with 55,600 tons in 1953, the increase being attribut­ able to the operation since April 19 5 4 of the new Sunndalsjllra plant ( described herein under "State Investments in Industrial Companies"). It is estimated that if Sunndalsjllra attains full production by June 1955 Norway's output of aluminum in 1955 should reach approximately 75,000 tons or about 3 % of world and 1 5 % of European production. Norway's output of steel rolling-mill products will be increased from approximately 110,000 metric tons to 280,000 metric tons per year when the A / S Norsk J ernverk plant ( described herein under "State Investments in Industrial Companies") reaches its estimated annual production of 170,000 tons per year. Domestic consumption of steel rolling-mill products at the present time amounts to approximately 500,000 metric tons per year. The electro-chemical industry also utilizes to advantage Norway's low-cost electric power. Main export products are calcium carbide, chemical fertilizers and other nitrogen products. During 19 5 4 there was an overall increase in production in the industry of approximately 1 5 % over 19 5 3. This was due in large measure to increased nitrogen production by Norsk Hydro ( described herein under ''State Investments in Industrial Companies"). The fats and oils industry, which processes principally whale and fish products, accounted for about 7 % of total commodity exports in 1954. The metal fabricating industry, the textile and clothing industries, and the foodstuffs and related industries ( except for the canning industry, which exports most of its production) produce primarily for the local market and import a large percentage of the raw materials they require.

Agriculture, Forestry, Fishing and Whaling Despite the trend in recent years away from agriculture, forestry, fishing and whaling and into the expanding manufacturing and mining industries, the so-called primary industries still employed approximately 26 % of the total population in 1954, while accounting for only slightly more than 1 2 % of gross national product. Two-thirds of the total area of Norway is mountainous, and the remaining one-third consists largely of forests and highland pastures. Less than 5 % of the total area is arable land and, for the most part, farmers' holdings are small, with more than 80 % of all farms consisting of less than 1 0 acres of arable land. Virtually all agricultural products are sold in the home market. The country is self-sufficient in dairy products, meat and eggs, but about 50 % of grain requirements

11 and 25 % of fruit and vegetable requirements, as well as all sugar and coffee, are imported. Sub­ sidies paid by the State in respect of the price of farm products (both domestic and imported) and to assist farmers in purchasing concentrates and fertilizers amounted to about 1 2 % of current State expenditures in the fiscal year ending June 30, 1954. Norway has one of the largest forest areas in Europe compnsmg about one-fourth of its total land area. The total growing stock is estimated at about 11,900 million cubic feet. Annual cut is about 350 million cubic feet of which 250 million is used for industrial purposes. However, certain areas have suffered from over-cutting and a reduction in the annual cut of timber may be necessary to avoid excessive depletion. To prevent such reduction, large areas which have been depleted are being reforested and roads are being planned to reach the many areas now inaccessible. Forestry's principal contribution to Norway's exports is providing the raw material for the paper and pulp industry. Lumber, wood products and wood derivatives other than pulp and paper con­ stituted less than 2 % of Norway's total exports of goods in 19 54.

Norway ranks among the great fishing countries with herring and cod as the main catches. While coastal fishing is the main part of the industry, extensive ocean fishing has also been developed. Fish and fish products have an important place in Norway's foreign trade. It is estimated that about 9 0 % of the total catch is exported and that more than I 5 % of Norway's total exports of goods are accounted for by fish and fish products ( excluding fats and oils derived from fish). Whaling, which is carried out mainly in the Antarctic by floating factories, contributed approxi­ mately 107 million kroner of net foreign exchange earnings in 1954. At the end of 1954, Norway possessed nine floating factories, aggregating about 132,000 gross tons, and 133 catchers, aggre­ gating about 65,000 gross tons. The total amount of money invested in rebuilding and expanding the whaling fleet and facilities from 1946 through 1954 amounted to a pproximately 785 million kroner. Because of the danger of excessive depletion of the stock of whales Norway and the other principal whaling countries have by international agreement limited the annual total catch of whales by such countries. The limit in the 1955 whaling season, which ended March 19, was 15,500 blue whale units.

Water Power One of Norway's most important natural resources is its water power, through the use of which almost all the electricity generated is produced. Hydro-electric power capable of economic development is estimated at about 1 7 million kilowatts, and the corresponding annual output of power at 1 20 billion kilowatt hours. The total maximum capacity of generators actually installed was in excess of 3.8 million kilowatts at the end of 1954, an increase of slightly more than 1.3 million kilowatts over installed capacity in I 946. It is estimated that the increase of facilities in 195 5 will provide an additional 580,000 kilowatts of installed capacity. Total output of power in 1954 was about 21.9 billion kilowatt hours or 6,400 kilowatt hours per capita, the greatest per capita in the world. Power resources are well distributed throughout the country, and cost of production is low because waterfalls are high and numerous lakes enable the plants to adjust to seasonal variations m demand. Approxim~tely 63 % of total consumption of electric power was absorbed by industry in 195 3, about 42 % by the electro-chemical and electro-metallurgical industries and approximately 9 % by the pulp and paper industry. General public use accounted for the 3 7 % not consumed by industry. At the end of 1 9 5 4 about 9 3 % of the populatio~ was provided with electricity.

State Enterprises The State Enterprises include principally public utilities and monopolies which have been owned and operated by the State for many years and w'hose net profits or losses are taken into

12 the State's accounts. The accounts of certain of these enterprises are charged with interest, at the rate of 3 % since July 1, 1947, on the State's inv ested capital.

Stale Railroads. The great distances and the many valleys, mountain rang es and highland plateaus create special problems for the Norwegian transportation system. Large sections of the country are very sparsely populated and do not provide an adequate economic basis for a highly developed transport system.

The internal network of transportation facilities consists of railways, coastal shipping and roads. Despite recent increases in the volume of road transport, particularly since World War II, the railways are the principal means of internal transportation, connecting all parts of the country, except Troms and Finnmark in North Norway, in a system of regular service which is also con­ nected w ith the continent through Sweden. In 1954, total freight traffic amounted to about 868,- 000, 000 ton miles, and passenger traffic, to approximately 953,000,000 passenger miles.

The Norwegian State Railroads had, at June 30, 1954, a length of track of 2,722 miles comprising 98.6 % of the total railway track mileage of the country. They generally have operated at a deficit, which is largely attributable to the policy of the Government of providing transportation for all parts of the country even though in many districts the traffic is insufficient to provide revenues proportionate to the investment involved. As of June 30, 1954, the capital invested by the State aggregated 2,167,603,954 kroner. In computing the operating deficit shown in the table below no charge has been made in respect of interest on the State's invested capital.

Since World War II, the Norwegian State Railroads have been engaged in a process of electrification and modernization. Approximately 28 % of the total track length is electrified as against about 1 0 % in 1 9 3 7. The need for modern equipment and rebuilding the stations is still very great.

Internal Communications. In addition to its ordinary functions the Norwegian Postal Service operates a post office savings bank and a postal checking service. On June 30, 19 54, the invested capital on which the Service pays interest to the State amounted to 46,617,502 kroner.

Of the total of 554,422 telephones in Norway on June 30, 1954, 492,623 were connected to telephone stations operated by the State's Telegraph and Telephone System, the number of telephones connected to privately-owned stations having declined to 61,799 from 90,483 on January 1, 1938. All telegraph services are State operated. As of June 30, 1954, the invested capital on which the Telegraph and Telephone System pays interest to the State was 532,713, l 36 kroner.

The Norwegian Broadcasting Corporation, established by Act of the Starting of June 24, 1933, has the exclusive right to build radio transmission stations and plants and to carry on broad­ casting in Norway. The State has no capital investment in the Corporation. The Corporation is re­ quired to pay all its expenditures, including a fixed annual payment of 200,000 kroner to the State, out of funds derived from an annual license fee on listeners of 25 kroner and a 10 % purchase tax on radio sets. The number of licensed listeners was approximately 920,000 in 1954.

Monopolies. The State Grain Monopoly, established in 1928, offers to purchase at prices in excess of market prices all domestic grain offered for sale providing it is fit for human consump­ tion and has the exclusive right to import into Norway wheat, rye, barley, oats and related products. Annual imports ordinarily amount to approximately 450,000 tons of grain. The Monopoly is run on a non-profit basis and it is intended that sales prices will- be sufficient to permit the Monopoly to pay its expenses and allow a profit sufficient to carry out its purposes. However, because of the low sales prices fixed by the Government the Monopoly would have shown net operating deficits in recent years except for subsidies received from the State. The State is not considered to have any invested capital in the Monopoly and no interest is paid. The State Concentrates Monopoly,

13 estahlished in 1952, has the sole right to import and market at wholesale forage grain and all kinds of feed concentrates. It is administered by the Grain Monopoly. The State W ine Monopoly, established in 1931, has the exclusive right to import, produce, sell and export all wines, spirits, distilled liquors and other alcoholic beverages except beer. The Monopoly was originally established w ith a capital of 20,000,000 kroner, all shares belonging to the State, but this amount has been reduced to 100,000 kroner through capital repayments. The net profits of the Monopoly go to the State. Taxes on the production and sale of alcoholic beverages by the Monopoly, together with the dividends on its outstanding shares and its undis­ tributed net profits, for the fiscal years ended June 30, 1952, 1953 and 1954 aggregated 314,818,000 kroner, 315,305,000 kroner and 316,707,000 kroner, respectively. Its net profits are not aggregated in the Statement of Revenues and Expenditures appearing later in this Prospectus with those of the other State Enterprises shown in the following table but are included to the extent distributed in the "Dividends and Interests" item a nd to the extent not distributed under Taxes as "Surplus Profits from Wine Monopoly."

Hydro-electric Power Stations. The State Electrical Enterprises operate ten major hydro­ electric power plants with a maximum installed generator capacity of about 850,000 kilowatts. The' total output of these plants in 1954 was 5 billion kilowatt hours. The aggregate capital invested in these plants on which interest is paid to the State was 732,128,242 kroner on June 30, 1954.

The following table ( extracted, except for the final totals, from Government Closed Accounts for the various years) sets forth the gross income, gross expenditures, and n et profits or losses during fiscal years ended June 30, 1952 to 1954, inclusive, of the State Enterprises whose net profits or losses are taken together into current revenues or expenditures of the State: ( In thousands of kroner) 1952 1953 1954 Gross Gross Gross Gross Gross Gross Fiscal Year ended June 30 Income Expenditures Net Income Expenditures Net Income Expenditures Net State Railroads .. 358,448 417,635 59,187 381,740 462,019 80,279 383,829 477,492 93,66;, Communications : Postal Service ...... 111,384 109,544 + 1,840 125,029 124,787 + 242 132,5 30 128,297 + 4,233 Telegraph and Telephone 147,094 145,036 2,058 162,449 168,3 28 5,879 176,306 183,749 7,443 Industrial Enterprises: + Hydro-Electric Plants 33,344 29,481 + 3,863 37,009 31,823 + 5, 186 38,230 36,065 + 2,165 Kongsberg Silver Mine 2,733 3,081 348 3,205 2, 743 + 462 2,856 2,322 + 534 The Royal Mint ... 6,133 2,335 + 3,798 3,564 2,223 + 1,341 6,054 2,037 + 4,017 Refrigeration Plants( I) 14,527 14,527 11,484 11,484 13,341 13,341 Vak.sdal Flour Mill (2) 10, I 04 10,104 I 0,507 10,3 77 130 10,542 10,442 100 National Defense: + + Military Repair Shops(3) 39,863 39,863 37,592 37,592 30,326 30,326 Agriculture and Fores ls: Government F oresls 15,951 12,279 + 3,672 20,3 46 15,093 + 5,253 17,355 14,696 + 2,6_ Stale Grain Monopoly(4) 345,072 345,072 363,304 363,304 356,681 356,681 State Concentrates Mo- nopoly(5) 163,201 163,201 268,177 268, 177 259,775 259,775 Norwegian Broadcasting(6) 21,616 2 1,616 21,938 2 1, 938 22,808 22,808 Various Government Enter- prises . 16,666 16,719 53 16, I 71 16, 102 + 69 19,186 17,572 + 1,614 Total of Net Profits 15,231 12,683 15,322 Total of Net Losses 59,588 86,158 101,106

Net losses of Stale Enterprises (taken together) 44,357 73,475 85,784 ( 1 ) Operating deficits in 19 5 2 through 19 54 amounted to 231,827, I, 141,647 and 658,118 kroner, respectively, which were offset by taking into Gross Income part of the State"s invested capital and an appropriation of 658, 118 kroner to be included in the Budget for the fiscal year ending June 3 0, 19 5 6. (2) An allocation to reserves of 30,440 kroner is included in Gross Expenditures for 1952. (3) The Military Repair Shops are run on a non-profit basis and charge other military agencies at cost for goods delivered and services rendered. (4) Included in Gross Income for 195 2 through 19 5 4 are the followin g amounts of price subsidies in respect of food grains: 128,430,000, 138,000,000 and 120,000,000 kroner, respectively. (5) Included in Gross Income for 1952 through 1954 are the following amounts of price subsidies with respect to concentrates: 35,360,672, 49,023,216 and 45,502,757 kroner, respectively. (6) Included in Gross Expenditures for 1952 through 1954 are the following allocations to capital: 4,164,321, 3,614,427 ar 3,457,923 kroner, respectively. 14 State Investments in Industrial Companies The State has from time to time invested or otherwise acquired interests in a number of industrial enterprises organized as private companies, generally with private investment partici­ pation. The operations of these companies are reflected in the State' s revenues and expenditures only through capital expenditures at the time investments are made and in current revenues to the extent interest and dividends are paid. Norsk Hydro-Elektrisk K vrelstofaktieselskab ( "Norsk Hydro"), a Norwegian company founded in I 9 0 5, is Norway's largest industrial enterprise in terms of both total assets and total revenues. Before World War II about 65 % of the outstanding share capital of 104,300,000 kroner was held by French shareholders, 25 % by a German group and the balance by other private interests. During the German occupation the capital was increased to 156,450,060 kroner and the German group acquired a majority of the shares. Following the war, the Norwegian Di­ rectorate of Enemy Property vested the German-held shares. Certain of these shares in which a French interest was established were returned to their former owners and the balance acquired by the State, which now owns approximately 48 % of the outstanding share capital. The funded debt of Norsk Hydro, all privately held, amounted to 184,038,000 kroner as of June 30, 1954. Norsk Hydro produces at its own plants, principally in Southern Norway, nitrogen and other chemical products, employing hydro-electric power mainly produced at its own hydro­ electric plants. In its fiscal year ended June 30, 1954, Norsk Hydro produced 192,000 tons of nitrogen and its estimated production in the current fiscal year is 205,000 tons. Its principal nitrogen products are nitrate of lime, nitrate of ammonia, urea and fertilizer. Other chemical products produced include h eavy water, various rare gasses, chlorine products, magnesium metal, soda ash and caustic soda. Total sales in the fiscal year ended June 30, 1954, amounted to 364 million kroner, of which 300 million kroner was export sales. Net earnings after taxes in the same period amounted to 14,058,000 kroner, of which 5,377,050 kroner was distributed to the State as dividends on its share capital. A / S Ardal og Sunndal Verk ("Ardal") a Norwegian company, was formed in 1946 to take over the aluminum plant u nder construction at Ardal in Western Norway by A/S Nordag, a company established by the Germans during World War II, and subsequently liquidated. Ardal has a share capital of 115,000,000 kroner, of which the State owns 114,982,000 kroner. In addi­ tion the State has granted Ardal loans o f 200 million kroner, on which 750,000 kroner in interest was paid in 1954. Ardal also has outstanding 18 million kroner in funded debt which is privately held. No dividends have been paid since the formation of the Company. The plant in Ardal produced 2 5, 61 9 tons of refined aluminum and 31,940 tons of electrolytic pig iron in 1954. Ardal's new aluminum plant at Sunndalsf:lra, with an estimated annual capacity of 40,000 tons of aluminum, was placed in production on a limited basis in April 1954 and pro­ duced 7, 162 tons of aluminum that year. The State received on the basis of the Sunndalsf:lra project, which cost approximately 242 million kroner to complete, two United States economic aid loans of approximately the equivalent in various currencies of $24,000,000. The larger of these loans, of $22,200,000 principal amount, is repayable as to both principal and interest in aluminum, which will be bought by the State from Ardal; pursuant to the terms of the loan, the first delivery, amounting to 750 tons of aluminum, took place in January 1955. A / S Norsk Jernverk, a Norwegian company established in 1946, has a share capital of 125,000,000 honer, of which 124,982,000 kroner is owned by the State. The State has also contributed I 30 million kroner by direct grant and has guaranteed funded loans out­ standing as of December 31, 1954, in the aggregate amount of 185 million kroner. The Com­ pany's plant, located in North Norway where it is accessible to iron ore and inexpensive hydro­ electric power, consists of a pig iron plant with three electric smelters, a steel plant with two Bessemer converters, two electric arc furnaces, a rolling mill, and a rod mill. The plant went into production in April 1 9 5 5 and its estimated productive capacity with its present equipment is 1 70,000 metric tons of steel products.

15 A / S Sydvaranger is a Norwegian mining company which was established in 1906 to produce iron ore concentrates. The concentrating plant was completely destroyed during World War II but has been reconstructed and was placed in operation in 1 9 5 2. The present share capital is 15,000,000 kroner of which 9,365,200 kroner (62 % ) is owned by the State. The funded debt amounted to 125,813,000 kroner as of December 31, 1954, of which 55,000,000 kroner was held by the State and the balance guaranteed by the State. Interest payments to the State in 1 9 5 4 amounted to 750,000 kroner. In the year ended December 31, 1954, net earnings after taxes were 921,000 kroner of which 374,608 kroner was paid to the State in dividends. Total production in 1954 amounted to 724,000 tons of iron ore concentrates, over 90 % of which was exported.

Principal Taxes The principal direct taxes levied in Norway include taxes on mcome and capital, inheritance taxes and social security taxes. The rates for the State's tax on capital and income are determined annually by the Storting. The capital tax rate for domestic corporations is 0.2 % and the income tax rate is 30 % of total income plus 1 0 % of undistributed income less allocations to legal reserves. Subject to various exemptions, allowances and credits ( the most important of which is an income tax credit ranging from 400 kroner for a single person to 3,500 kroner for a person with seven de­ pen dents), indiv iduals pay capital and income taxes at progressive rates, ranging, in the case of the capital tax, from 0.25 % on the first 20,000 kroner to 1.75 % on the amount in excess of 500,000 kroner and, in the case of the income tax, from 10 % on the first 12,000 kroner of income to 65 % on income exceeding 170,000 kroner. Old-age and war pension taxes are imposed on both individuals and domestic corporations at the uniform rate of 1 . 6 % of income. In addition to the State's taxation, capital and income are subject to taxa tion by the municipality of residence in the case of an individual taxpayer and the m un icipality where the principal office is situated in the case of a domestic corporation, as follows: Subject to certain deductions and exemptions, the most important of which are income tax exemptions for ind ivid uals (which in Oslo, for example, range from 1,300 kroner for a single person to 12,500 kroner for a person with seven dependents), a capital tax is imposed on both individuals and corporations at a single rate, which is generally 0.4 % , and an income tax at a single rate which in the case of most municipalities varies from 15 to 18 % . Taxpayers having a taxable income in excess of 20,000 kroner per year are also subject to an additional tax ranging from 3 % on that portion of taxable income in excess of 20,000 kroner to 5 % on that portion of taxable income in excess of 70,000 kroner. Where the total tax payable to both the State and a municipality in respect of income and capital (including old-age and war pension taxes) exceeds 85 % of total income, the State income tax may be reduced on application to limit the total tax to 85 % . The capital tax may also be reduced if necessary to bring the total tax within the 85 % limit but not by more than 50 % . Inheritance taxes are levied at progressive rates varying according to the relationship between the heirs and the decedent and, in the case of heirs with more than 25,000 kroner of capital, in accordance with the size of the heir's capital. The State levies various indirect taxes, of which the most important is the general sales tax of 1 0 % which applies to practically all retail sales of goods.

Social Legislation Norway has a comprehensive system of social legislation, including unemployment insurance, health insurance, accident insurance, old age pensions, allowances to families supporting more than one child, aid to the blind and the crippled, special pension programs for State employees, seamen, forest workers and pharmaceutical workers, war risk pensions for both civilian and mili­ tary personnel, a disability pension program for members of the armed forces and public assistance. The State makes varying contributions to these different programs, the total State ex penditures for this purpose in the fiscal y ear ending June 30, 1954, having a ggregated 16 Under the Act of April 23, 1892, as amended, governing the operations of the Bank of Norway (the "Bank Act") the Bank of Norway may issue notes amounting to the value of its gold reserve, which is defined for the purpose of the law as only including gold in the Bank of Norway's possession or deposited for its account with the Royal Mint, plus 425 million kroner. A decree of the Royal Norwegian Government in England dated July 6, 1940, issued for the purpose of valuing the gold held by the Bank of Norway against its note issue, authorized such gold to be carried at 4,960 kroner per kilogram of fine gold. In case of extraordinary circumstances, such as war, danger of war or a serious financial crisis, the King may, subject to the subsequent approval of the Storting, authorize the Bank to issue additional notes up to an amount stated in the special authorization. The present amount of the fiduciary issue, i.e. the 425 million kroner, was established by Act of May 12, 1939. Amendment of the law covering the Bank of Norway note issue was taken up for consideration by the Storting in the autumn of 19 39 and spring of 1940, but no action had been taken prior to the German invasion of Norway. During the war the German occupying authorities required the Bank of Norway to issue notes in an amount greatly in excess of the statutory limit. Subsequent to World War II, this prewar statutory limit was not in keeping with the monetary conditions in Norway and the Government did not regard it as an operative limitation on the note issue outstanding; the value of the Bank of Norway's gold stock for the purpose of the Bank Act was not defined. This situation was similar to that faced by many other European countries in the post war years. To recommend amendments in legislation relating to the monetary and banking system, including revision of the provisions of the Bank Act with respect to the note issue, a special committee was appointed in 1950 and the committee's recommendations are under consider­ ation by the Government. In view of the extraordinary circumstances the Ministry of Finance has waived the Government's right to collect any tax which the Bank should pay to the Treasury on the amount of the note· issue not within the formal requirements of the Bank Act. The Bank of Norway owns substantially all of Norway's gold holdings. The location as of March 24, 1955, of the gold stock and foreign exchange reserves temporarily invested in gold of the Bank of Norway, showing the quantity in ounces of fine gold, calculated at the price of $35.00 per ounce, is set forth below: Location Dollars United States of America (Federal Reserve Bank of New York) 588,267.735 20,589,370.72 Canada (Bank of Cana da, Ottawa) . ... 634.125.849 22.194,404.72 England (Bank of England, London) 35, 128.329 1,229,491.51 International Monetary Fund, Washington, D. C. 369.864 12,945.24 (held in the Federal R eserve Bank of New York)

Total 1,257,891.777 44,026,212. 19

A balance sheet of the Bank of Norway as of December 31, 1954, appears later in this Prospectus in the Tables and Supplementary Information.

Other Banks The principal components of the Norwegian banking system, apart from the Bank of Norway, are 79 joint stock or private commercial banks, 604 private savings banks and a number of State owned or guaranteed bank and credit institutions, the most important of which grant credit against mortgages with funds obtained from the issue of State-guaranteed bonds. While the number of the private commercial and savings banks is relatively large in comparison to the size and population of the country, as of December 31, 1954, the ten largest private joint stock banks (seven of which are situated in Oslo) accounted for about 7 3 % of the total capital and surplus of all priv?,te joint stock banks, 72 % of their deposits from the general public and 71 % of their total loans and advances outstanding. The obligations guaranteed by the Kingdom of the State banks and institutions are set forth in the Table of Indebtedness Guaranteed by the Kingdom of Norway. In the case of certain of the State banks and institutions the State also pays the administration expenses and also makes good

18 any difference between the amount of interest payable by them on their obligations and the interest received on loans granted by them.

Interest Rates and Dividends The discount rate of the Bank of Norway was raised to 3!/z %, effective February 14, 1955, from 2 Yz % where it had remained since January 9, 1946. Shortly thereafter, the private commercial and savings banks, under the leadership of the Oslo banks, also raised their com­ mercial and deposit rates one per cent from the rates which they had generally charged since 1946. Their present rates are 4 % to 5 % on mortgage loans, 3 Yz % to 4 % on promissory notes, 4 % % on overdrafts, 3 % on six months deposits and 2 Yz % on three months deposits. No interest is paid on demand deposits. The Norwegian State Housing Bank and the Norwegian State Bank for Small Property Owners, which in 1954 accounted for about two-thirds of the total credit extended by the State banks and credit institutions, have maintained their rate for mortgage loans at 2 Yz % since 1946 with amortization periods of seventy-five years for wooden buildings and one hundred years for fireproof buildings. The effective rate to borrowers has been about 2 % since interest is normally only charged on 80 % of the outstanding amount of the loans. According to the Statistical Yearbook 195 4, the average yield at the time of issuance of bearer bonds pay able in Norwegia n kroner w as 3.06 % in 1952 and 3.30 % in 1953, while corporate dividends for a number of selected corporations averaged 6. 4 % of their nominal share capital in 1951 a nd 6 .3 % in 1952. Since 1947, corporations with a nominal share capital exceeding 25,000 kroner (increased to 200,000 kroner in 1954) have not been permitted to pay dividends in excess of 5 % of their nominal share capital ( excluding surplus and reserves) without the consent of the Price Directorate, an administrative agency under the Ministry of Finance. Under the Price Control Act of 1953, however, the Government may permit a corporation to distribute a higher rate of dividends over a ten year period where it is considered in the public interest to do so. Under that Act the Storting ( and not the Price Directorate as had previously been the case) fixes the general dividend rate. In practice, the Price Directorate on application normally permits divi­ dends up to 3 Yz % of actual capital (nominal capital plus surplus, subject to certain special limitations and definitions).

Price Levels The following table sets forth the general index of wholesale prices and the cost of living index for a workingman's family in cities and industrial centers during the years 19 38, and 194 7 through 1954, inclusive, and at the fifteenth day of various months from January 1954 to March 1955: Wholesale Cost of Living Price Index Index Average in: 1938 ...... 54 63

1947 ...... 95 I 01 1948 ...... 98 100 1949 100 100 1950 114 105 1951 ...... 140 122 1952 150 133 1953 150 136 1954 ...... 152 142 Jan. 1954 . . 150 137 June 1954 . . 153 141 Oct. 1954 ...... 152 143 Dec. 1954 ...... 153 144 Jan. 1955 . 152 143 Feb. 1955 ...... 151 142 Mar. 1955 ...... 151 142

Source: Extracted from the Statistical Year Book 1954 and vario.us issues of the Monthly Bulletin except the wholesale price index which was computed by the Ministry of Commerce from information contained in these publications. 19 Throughout the German occupation and in the early postwar years strict price controls were maintained on almost all goods and services of importance to the consumer. However, beginning in 195 0, the scope of price control activities was gradually reduced, and at the present time price ceilings are imposed on relatively few items, the most important of which are rents, certain transportation tariffs, building materials and subsidized commodities such as bread and milk. Until January 1, 1954, price controls were authorized by temporary legislation. The P rice Control Act of 1953, which became effective on January 1, 1954, authorizes the Government to fix minimum and maximum prices at all levels of production and marketing, to control profit margins, to make other decisions in respect of prices and terms of business and to regulate private agreements restricting competition. With respect to the Government's present policy in respect of price controls reference is made to "The National Budget for 1 9 5 5 and Comments of the Minister of Finance" herein. The direct subsidies paid by the State in the fiscal year ended June 30, 1954, in respect of the price of milk and milk products, food grains and other consumers' products, aggregated 4 0 9 million kroner. In addition, subsidies with respect to concentrates and fertilizers amounted to approximately 11 0 million kroner.

BALANCE OF INTERNATIONAL PAYMENTS AND FOREIGN EXCHANGE

Foreign Trade Foreign trade plays a vital role in the economy of Norway. In the eight years ended 1954, commodity exports and imports (including ships and excluding whale oil and certain other items not passing through the Norwegian Customs) constituted approximately 1 7 % and approximately 28 % , respectively, of the gross national product. Commodity exports and the overseas earnings of Norway's shipping fleet are the two principal credit items in Norway's balance of international payments.

The following table sets forth information with respect to Norwegian foreign trade and should be considered in the light of the price changes discussed below. In this table and in all other tables and information under the caption "Foreign Trade" Svalbard is treated as a " foreign" country in the years 1947 through 1950.

Foreign Trade

( In mlllions of kroner)

Commodity Commodity Imports (1) Exports (1) Excess of Exports as (c.l.f.) (f.o.b. ) Imports % of Impor ts 1947 ...... 3,820 1,820 2,000 47.6 % 1948 ...... 3,721 2,061 1,660 55.4 o/o 1949 ...... 4,221 2,136 2,085 50.6 % 1950 ...... 4,846 2,789 2,057 57.6 % 1951 ...... 6,266 4,427 1,839 70.7 % 1952 ...... 6,239 4,03 9 2,200 64.7 % 1953 ...... 6,514 3,633 2,881 55.8 % 1954 ...... '. 7,276 4,163 3,113 57.2%

Source: Extracted from various issues of the Monthly Bulletin and of the Monthly Bulletin of Ex ternal Trade except the "Excess of Imports" and "Exports as o/o of Imports" which were computed by the Ministry of Commerce. ( 1) Including ships and excluding whale oil and certain other items not passing through the Norwegian Customs.

20

• The following table shows the fluctuations in export and import prices, in the volume of imports and exports and in the terms of trade (i.e., the relationship between the prices of exported articles and of imported articles) by indices based on 1949 = 100.

Commodity Imports (1) Commodity Exports (1) Terms of Volume Price Volume Price Trade 1947 IOI 90 96 92 102 1948 85 103 96 103 100 1949 100 100 100 100 100 1950 103 110 132 102 93 195 I I 13 132 146 142 108 1952 109 136 135 141 104 1953 120 129 138 123 95 1954 137 126 159 122 97

Source: Extracted from various issues of the Monthly Bulletin and of the Monthly Bulletin of Ex ternal Trade. ( I ) Including ships and excludin g whale oil a nd certain othe r items not passing through the Norwegian Customs.

The increase in both export and import prices in 1 9 5 1 and 1 9 5 2 reflected the boom conditions accompanying the Korean war. The volume of both exports and imports reached an all time high in 1954.

Norway depends upon foreign sources of supply for capital goods such as machinery and parts (including industrial and electrical machinery and transport equipment), ships, iron and steel and other base metals and semi-finished metal products, foodstuffs (principally cereals, coffee, sugar and fruit), coal and fuel, clothing, and raw materials for the textile industry. The following table, sets forth the principal classes of Norway's imports:

Composition of Imports (Percentage of Total Imports) 1954 1947 1949 1951 1952 1953 (Preliminary) Imports: Ma chinery and Parts, Vehicles ...... I 0.7 13 .3 I 3.3 I 7.6 18.2 18.5 Ships ...... 19.6 19.8 14.4 10.5 13 .6 17.4 Metals, Raw and Semi-Finished Products .. . . 8. I 12.5 10.5 13.4 I 1.8 11.3 ~~~~ ...... 11.5 10.6 10.8 I 2.8 I 2.9 I I. I Beverages a nd Tobacco ...... I .4 I. I 0.9 I. I I. I 1.0 Coal and Fuel ...... 9.8 9.7 I 0.7 10.1 9.6 8.3 Clothing ...... 10.9 6.7 7.5 8.0 8.0 7.2 Textile Products ...... 4.2 5.7 7.3 4.0 4.2 3.9 Chemicals, including Fertilizers ...... 3.9 4.1 3.8 3.3 3.2 3.4 Products of Non-Precious Metals ...... 3.5 3.3 2.9 3.3 3.2 3.2 P a pe r ...... ) 2.7 1.6 3.9 3.3 1.7 2.9 Wood and Cork ...... J Animal Fats and· Vegetable Oils ...... 2.0 2.3 3.8 2.5 2.6 2.5 Ores ...... 1.9 2.4 3. I 3.0 2.4 1.7 Non-Metallic Minerals and Products ...... 2.4 2.2 1.8 2. I 2.2 2. I Hides a nd Leathe r ...... 1.2 f..) I. I 0.5 0.9 0.8 Other Merchandise ...... 6.2 3.6 4.2 4.5 4.4 4.7 Total ...... 100.0% 100.0o/o 100.0% 100.0 % 100.0% 100.0 %

Source: Computed by the Ministry of Commerce from information contained in the Monthly Bulletin of Ex te rnal Trade.

21

• The products of the pulp and paper industry, the metal industry (principally the electro• metallurgical industry as far as exports are concerned), the fish industry and the fats and oils industry account for approximately two-thirds of Norway' s exports. The following table sets forth the principal classes of Norway's exports: Composition of Exports (Percentage of Total Exports) 1954 1947 1949 1951 1952 1953 (Preliminary) Exports: Pulp 7.5 12. 1 14.0 14.3 12.9 12.3 Paper ...... 18.5 13.1 15 .3 I 0.7 9.9 11.0 Metals, Raw and Semi-Finished Products ...... 10.9 13 .9 13 .6 18.0 19.5 16.7 fuh ·· · · ·· · · · ·· · · 17.8 15. 2 10.2 13.7 I 1. 7 12.0 Canned Fish ...... 6.2 4.7 3.3 2.7 3.3 3.7 Fats and Oils ...... 14 . 1 17 .0 I 1.3 7.3 6.6 7.5 Fertilizers ...... 5.4 6.9 5.1 5.9 7.0 6.4 Ships ...... 5.0 2.2 I 0.2 6.7 4.6 4.9 Ores ...... 1.8 2. 1 1.8 3.8 4.7 4. 1 Chemicals, excluding Fertilizers ...... 2.0 1.5 1.6 1. 7 2.2 2.5 Wood and Wood Products ...... , .. 1.3 1.6 1.8 1.6 2.6 I. 7 Hides and Furs ...... 2.0 1.0 1.2 1.6 1.6 1.5 Non-Metallic Minerals and Products thereof .. 1.4 1.4 1.4 1.5 1.2 1.4 Other ...... 6. 1 7.3 9.2 10.5 12 .2 14 .3 Total ...... I 00.0 o/o I 00.0 o/o I 00.0 o/o 100.0 o/o I 00.0 % I 00.0 o/o Source: Computed by Ministry of Commerce from information contained in various issues of the Monthly Bulletin of External Trade. Norway trades principally with Western Europe. The United Kingdom and Sweden, and in the last two years, Western Germany, have been the largest individual foreign markets and sources of supply. The members of the E.P.U. taken together supplied 71.5 % of Norway's imports and took 62 % of her exports in 1954. Since 1947 the percentage of imports from the United States has declined. The percentage of exports to the United States increased in the years 194 7 through 1953 but declined in 1954. The following table sets forth the percentage of Norway's com­ modity imports and exports (including ships and excluding whale oil and certain other items not passing through the Norwegian Customs) from and to other countries. Export figures indicate countries of consumption and import figures countries of origin.

Geographic Distribution of Foreign Trade 1947 1949 1951 1953 1954 Imports Exports Imports Exports Imports Exports Imports Exports Imports ~ - Europe ...... 59.2 75.9 72.6 76.3 69.4 69.4 76.0 71.5 77.7 73.6 Belgium and Luxembourg 6.4 0.1 6.5 3. 1 5.2 3.6 4.3 3.8 3.6 3.3 Denmark ...... 4.8 5.4 4.3 7.0 3.6 5.3 3.2 6.4 3.4 6.5 Germany (East) 1 2.7 f 0.7 0.8 0. 7 1.0 0.5 1.3 1.0 1.3 Germany (West) 5 1.8 l 3.2 6.4 6.8 7.7 16.0 9.1 15 .3 I 0.2 Great Britain and Ireland 19.3 14.5 21.3 18. 1 23.0 19.8 21.0 19.5 20.3 19.1 France ...... 4.0 7.8 5.1 6.1 4.6 5.2 3.4 3. 7 3.2 4.1 Italy ...... 3.0 6.3 2.4 2.2 1.8 4.8 1.3 2.3 1.5 2.8 Netherlands ...... 3.1 3.3 3.7 3.9 4.4 4.3 4.5 3.4 5.9 3.7 Soviet Union ...... 1.4 5. 1 2.9 5.4 1. I 2.0 1.9 3.0 1.3 4.2 Spain ...... 0.6 3.4 1.0 1.6 1. I 1. I 1.5 2.0 1.2 1. 7 Sweden ...... 8.4 10.6 14. I 9. 1 12.1 8.4 13 . I 9.4 15.7 9.5 Africa ...... 1.3 3.0 1.6 3. 1 3.3 4.7 2.2 4. 7 2.2 5.6 North and Central America 30.3 7.9 19.0 8.2 18.3 11.8 14 .8 13 .6 14.0 I 0.5 Canada ...... 2.6 1.3 2.7 0.3 3.6 0.5 4.3 0.5 3.9 0.3 United States 24.9 4.9 13 . 1 7.0 12.5 7. 1 8.5 11.4 8.4 8.6 South America ...... 5.6 5.7 2. 2 3. 1 3.3 5.4 3.8 3.2 3.5 4.4 Argentina . ' ' ...... 4.2 2.5 0.6 0.6 0.8 1.3 0.4 0.2 0.3 0.3 Asia ...... 3.1 5.4 3.9 6.7 4.5 4.8 2.6 5.4 2.3 3.3 Australia and other Pacific countries ... .. 0.5 2. 1 0.7 2.6 1.2 3.9 0.6 1.6 0.3 2.6 I 00.0 % I 00.0 % I 00.0 % I 00.0 % I 00.0 o/o I 00.0 o/o 100.0 o/o I 00.0 % I 00.0 o/o 100.0 o/o Source: Extracted from the Foreign Trade of Norway, 1952, except the percentages for 1953 and 1954 which were computed by the Ministry of Commerce from information contained in various issues of the Monthly Bulletin of External Trade.

22 Balance of Payments Norway showed a deficit in the balance of goods and services during the eight years ended December 31, 1954, in all years except 1951. The following table of balance of payments with all countries shows that the principal credit items in this balance are commodity exports and the overseas earnings of the shipping fleet, while the principal debit items are commodity imports and imports of ships. Earnings from commodity exports and the shipping fleet reached a peak during 1951 and 1952 when the boom in both commodity prices and demand for shipping, which accompanied the Korean War, were at a peak. Since those years the value of merchandise exports and shipping earnings, while somewhat lower, have not declined markedly. However, since 1948, the value of commodity imports, particularly from other E.P.U. countries, has increased every year.

In the years 1 9 48 through 1 9 5 4 Norway received substantial direct and indirect economic aid grants from the United States, aggregating approximately 2,451 million kroner net and N.A.T.O. contributions to its military preparedness program, aggregating 253 million kroner. As a result, there were much smaller deficits in the total balance on current account than there were in goods and services, and the years 1 9 5 0 and 1 9 5 2 showed a surplus instead of a deficit. The total deficit on current account in the eight-year period ending December 31, 19 54, was 3,625 million kroner.

During this period Norway made amortization payments on its funded external debt ( exclusive of its debt to E .P.U. consolidated June 30, 1954) aggregating 1,197 million kroner.

The deficits- in current account and amortization of Norway's debt have been met by public borrowings abroad of approximately 1, 1 7 5 million kroner during this eight-year period, by United States economic aid loans in the aggregate amount of 206 million kroner, by an aggregate net increase, principally in the last two years, of Norway's debtor position with the E.P.U. to 777 million kroner, by other capital receipts (principally private borrowing) amounting to 2,032 million kroner, including 1, 107 million kroner representing net borrowing on ship imports, and by drawing on Norway's foreign exchange reserves in the aggregate amount of 634 million kroner.

The following tables show the principal items in Norway's balance of payments with all foreign countries and with the Dollar area for the years 1947 through 1954. All economic transac­ tions are included. Transactions which did not result in monetary transfers through the banking system are included in the years through 195 1 on the basis of information compiled by the Central Bureau of Statistics and in the years 1 9 5 2 through 1 9 5 4 on the basis of estimates by the Ministry of Commerce. In the case of transactions involving goods and services, values have been com­ puted as though all payments had actually been made in cash, while in the case of current financial and capital transactions only a ctual payments and receipts are included. The figures for com­ modity exports and imports in the balance of payments with foreign countries do not correspond exactly with the trade statistics set forth herein under "Foreign Trade," because the trade statistics only include commodities covered by import declarations and export forms filed with the Norwegian Customs. The principal items not included in the trade statistics, but included in the balances of payments, are whale oil and other whale products delivered from the whaling grounds, exports and imports of floating timber from Sweden and imports of defense equipment.

In all tables and information under the caption "Balance of Payments" Svalbard is treated as a part of Norway.

23

• Balance of Payments with all Countries (In millions of kroner) I. CURRENT ACCOUNT Goods and Services 1947 1948 1949 1950 Debits Commodity imports c.j.f, ...... , ...... , 3,139 3,096 3,400 4,030 5,460 5,684 5,702 6,094 Imports of ships ...... 746 688 836 845 901 654 886 1,263 Shippin~ opera~ing expenses abroad ...... 891 1,074 I, 153 1,424 1,808 2,003 1,928 2,010 Norwegian tourists ...... 110 105 160 175 200 220 220 270 Other services ...... 169 208 262 i90 418 424 425 405

Total Debits ...... • , , 5,055 5,171 5,811 6,764 8,787 8,985 9,161 10,042 Credits Commodity exports f.o.b •...... , 1,822 2,130 2,134 2,799 4,151 3,935 3,639 4,107 Exports of ships ...... 90 47 47 120 448 270 167 205 N.A.T.O. contributions ...... 53 65 135 Gross freight earnings of shipping in foreign trade ...... 1,606 1,929 2,057 2,605 3,956 4,105 3,650 3,760 Foreign tourists ...... 80 90 100 125 110 140 170 200 Other services ...... 217 234 287 315 380 464 490 525

Total Credits ...... 3,815 4,430 4,625 5,964 9,045 8,967 8,181 8,932 Surplus or Deficit m Goods and Services ...... -1,240 -741 -1,186 -800 +258 -18 -980 -1,110 Current Financial Transactions Payments Interest and dividends ...... 73 86 79 93 107 100 100 120 U. S. portion of local currency counterpart . 10 33 54 20 5 8 7 Drawing rights of other countries under the European Recovery Program ...... 26 42 Other ...... 38 34 29 36 42 44 55 57

Total 111 130 167 225 169 149 163 184 Receipts Interest and dividends ...... 26 23 20 26 30 42 41 60 U . S . economic aid grants (both direct and indirect aid in form of drawing rights on other countries) ...... , . 198 689 I, 133 392 90 87 67 Other ...... 75 80 59 61 57 63 85 86

Total ...... I 01 301 768 1,220 479 195 213 213 Surplus or Deficit in Current Finan· cial Transactions ...... -10 +171 +601 +995 +310 +46 +50 +29 Total Surplus or Deficit on Current Account ...... -1,250 -570 -585 +195 +568 +28 -930 -1,081 II. CAPITAL ACCOUNT Payments Amortization ...... 100 106 73 205 289 165 114 14 Repayments of shipping loans (net) ...... 86 113 Repayments of consolidated E.P.U. debt (2) 10 Other items (net) ...... 45 133 4

Total 100 151 73 338 379 278 114 253 Receipts U. S. economic aid loans ...... 70 106 30 Public borrowing ...... 179 224 40 3 23 (3) 94 68 247 Shipping loans (net) ...... 314 103 121 140 224 404 E.P.U. credits ...... 7 132 49 453 244 Other items (net) ...... 162 110 378 231 226

Total 655 397 377 470 226 457 976 I, 121 Total Surplus or Deficit on Capital Account ...... +555 +246 +304 +132 -153 +179 +862 +868 Net increase or decrease in foreign exchange re- serves ...... -695 -324 -281 +327 +415 +207 -68 -213

Source: Extracted from the Statistical Year Book 1953, Statistical Year· Book 1954, the National Budget 1955, and Current Statistics of January 22, 1955, except that Capital Account items for 1947 through 1951 were compiled by the Ministry of Com­ merce based on information received from the Bank of Norway. (I) Information concerning the balance of payments for the years 1951 through 1954 is not yet complete, and may be revised from time to time as additional information is received by the Central Bureau of Statistics and the Ministry of Commerce. (2) Debt to E.P.U. consolidated as of June 30, 1954. (3) Debt to E .P.U. countries consolidated as of June 30, 1950. 24 Norway has shown a surplus in the balance of goods and services with the dollar area in every year since 19 5 2. This surplus has been partly due to increased exports and partly to reduced imports of merchandise as certain goods, particularly foodstuffs and machinery, became more readily available to Norway on more favorable terms from non-dollar sources. Norway has throughout the six-year period ended December 31 , 1954, showed surpluses in the total balance on current account. United States economic aid grants and dollar N.A.T.O. contributions aggre­ gated 1 , 5 4 7 million kroner during this period. Norway has since 1950 incurred sizeable deficits in the E.P.U. and since January 1953 has paid m dollars the portion of these deficits which under the provisions of the E.P. U. A greement are requir ed to be paid rather than debited. As a result Norway's dollar reserves have not increased as much as they otherwise would have and they were actually reduced by 60 million kroner in 1954. Balance of Payments with the Dollar Area (In millions of kroner) 1947 1948 1949 1950 I. CURRENT ACCOUNT Goods and Services Debits Commodity imports c.i.f...... 750 609 703 743 1,097 1,067 939 1,011 Imports of ships ...... 358 97 12 10 II Shipping operating expenses abroad 250 340 300 280 380 470 440 440 Norwegian tourists ...... 10 7 7 7 8 II 13 13 Other services ...... 17 28 44 74 77 73 94 90

Total Debits 1,385 1,081 1,066 I, 104 1,562 1,631 1,497 1,554 Credits Commodit y exports f.o.b...... 141 186 172 305 366 3 71 467 413 Exports of ships ...... 20 2 4 21 97 68 56 51 N.A .T.O. contributions ...... 34 50 100 Gross freight earnings of shipping in foreign tra de ...... 580 590 630 690 970 1,020 940 920 Foreign tourists II 6 8 14 12 27 41 44 Other se rvices 35 36 48 85 89 115 135 135 Total Cre dits 787 820 862 I, 115 1,534 1,635 1,689 1,663 Surplus or Deficit m Goods and Services ...... -598 -261 -204 +11 - 28 +4 +192 +109 Current Financial Transactions Payments Interest a nd dividends ...... 29 26 41 42 39 45 42 52 U. S . portion of local currency counterpart . 10 33 54 20 5 8 7 Other ...... 10 10 9 6 8 9 9 8

Total 39 46 83 102 67 59 59 67 Receipt Interest and dividends ...... 26 9 9 13 16 25 27 42 U. S. direct economic aid grants ...... 137 289 530 300 90 87 67 Other ...... 22 19 19 28 26 25 40 39 Total ...... 48 165 317 5 71 342 140 154 148 Surplus or Deficit in Financial Trans- actions ...... + 9 +119 +234 + 469 +275 +81 + 95 + 81 Total Surplus or Deficit on Cur- r ent Account ...... -589 -142 +30 + 480 +247 +85 + 287 +190 II. CAPIT AL ACCOUNT Payments Amortization ...... 24 69 43 88 I 21 67 47 99 R epayme nts of shipping loans {net) ... 9 133 160 79 100 Payments to E.P.U. {including repayments of consolidated E.P.U. debt) ...... 190 335 Payments on clearing agreements {net) . . . . 4 10 13 39 42 1 7 20 10 Other items {net) ...... IO I 29 36 42 Total ...... 129 117 189 323 242 184 299 444 Receipts . U. S . economic aid loans ...... 70 106 30 Public borrowing ...... 179 201 40 17 9 Shipping loans {net) ...... 197 72 7 Other items {net) ...... 16 65 219 8

Total ...... 376 271 162 0 65 249 72 194 Total Surplus or Deficit on Capital Account . .... +247 +154 -27 -323 -177 +65 - 227 -250 N et increase or decrease in dollar reserves -342 +12 +3 +157 +70 +150 + 60 -60 Source: Pre pared b y t he Ministry of Commerce based on infor mation received from the Central Bureau of Statistics and the Bank of Norway. ( 1) Information concernin g the balance of payments for the y e ars 1951 through 1954 is not yet complete, and may be revised from time to time as additional information is received. 25 Foreign Exchange Rates The unit of the Norwegian currency is the krone. On September 18, 1949, Norway, as a mem­ ber of the International Monetary Fund, established the value of the krone at 0. 124414 grams of fin~ gold, with a parity of 7.14286 kroner to the U. S. dollar or 14 U. S. cents to the krone.

When Norway left the gold standard in 19 31, the Norwegian krone was "pegged" to the pound sterling. From September 1933 to the outbreak of World War II this rate was fixed in principle at 19.90 kroner to the pound sterling. With the outbreak of World War II in 1939, the British Exchange Control ceased to maintain the previously established rate of exchange between the pound and the U. S. dollar, and the value of the pound began to fall. At a meeting of the Scandinavian Central Banks held in Stockholm on August 2 7, 1939, it was agreed, that in order to avoid a disturbance of domestic price levels in the Scandinavian countries, it would not be advis­ able to continue to have their currencies "pegged" to sterling. Therefore, on August 29, 19 39, the Norwegian krone was "pegged" to the U. S. dollar at a fixed rate of 4.40 kroner per dollar, which rate was maintained in Oslo throughout the war in figuring payments expressed in dollars even though actual dollar exchange was not available in Norway after the United States entered the war.

New exchange rates between the krone and sterling were temporarily fixed after the close of hostilities in Europe on May 16, 1945, the rate being established at 20.05 kroner, selling, and 19. 95 kroner, buying, for the pound sterling, which would correspond to approximately 4. 9 7 kroner to the U. S. dollar. By payment agreement with Great Britain, dated November 8, 1945, this sterling rate was confirmed for the sterling area.

Since May 22, 1946, the Bank of Norway has maintained a stable exchange rate in respect of the pound sterling. The selling rate has been 20.02 kroner and the buying rate 19. 98 kroner to the pound.

As a member of the International Monetary Fund, Norway established on December 18, 1945, a par value of the Norwegian krone of 0. 1 79067 grams of fine gold, or 20. 1500 U. S. cents, per krone. As a result of the devaluation of the pound sterling the present parity was established on September 18, 1949.

The following table shows the quarterly average quotations from 194 7 to 19 5 4, inclusive, both in Oslo ( as published by the Bank of Norway) and in New York ( the New York rates being the average buying rates for cable transfers published by the Federal Reserve Bulletin) :

Norwegian kroner Cents per krone per dollar In Oslo: In New York 1947: first quarter 4.97 20.161 second .. 4.97 20. 160 third 4.97 20. 159 fourth .. 4.97 20.159

1948: first 4.97 20.160 second .. 4.97 20.159 third 4.97 20.158 fourth .. 4.97 20.158

1949:· first 4.97 20.158 second " ...... 4.97 20.158 July ...... 4.97 20.158 August ...... 4.97 20.158 September ( I ) ...... 5.84°2 17.572 fourth quarter ...... 7.15 14.015 1950 to 1954: all quarters ...... 7.15 14.015

(I) The par value of the krone was changed on September 18, 1949.

26 Foreign Exchange Control and Reserves The information under this caption is stated on the authority of John Lahlum, Director of the Foreign Exchange Department of the Bank of Norway.

The main purpose of the postwar exchange control, which is administered by the Ministry of Commerce and the Bank of Norway pursuant to a law passed by the Storting on July 19, 1946, has been to insure that available foreign exchange should be devoted to reconstruction of the Norwegian economy after the heavy losses suffered during World War 11. Consequently, payments to foreign countries were closely regulated during the immediate postwar years. Since 1950, however, restrictions have gradually been relaxed. A very substantial part of the imports from Western European countries is now completely free, and an increasing number of imports from the dollar area have been freed on an administrative basis. The present status of the foreign exchange control may be summarized as follows:

( 1 ) Dollar area: All dollar receipts may be freely accepted except dollars for investment m Norwegian undertakings which require prior approval. Payments for licensed dollar imports and all other current dollar transactions may be made with dollar exchange acquired at the official rate from authorized banks or with dollars held in authorized private accounts.

(2) E.P.U. area: All receipts in E.P.U. currency may be freely accepted except for receipts for investment in Norwegian undertakings which require prior approval. Payments for imports on the free list and imports which have been licensed and for all other current transactions may be made with E.P.U. exchange acquired at the official rate from authorized banks or with currencies held in authorized private accounts. All payments to and receipts from E.P.U. countries are cleared monthly through the E.P.U.

( 3) Other countries: Other countries include principally certain Latin American countries, the Soviet Union and other Eastern European countries, Spain and Israel. Payments to and receipts from these countries are governed by bilateral payments and clearing agreements, which generally contemplate balanced bilateral trade between the parties. In the case of all countries, payments connected with contractual amortization and interest are freely permitted, and most payments of other invisibles are free with the exception of certain capital transactions. Investment by Norwegian residents in foreign enterprises or securities of foreign issuers requires prior approval of the Bank of Norway. Norwegian residents holding foreign currency securities of foreign issuers may reinvest any sales proceeds in foreign currency securities of foreign issuers; redemption proceeds of such securities may be reinvested with the approval of the Bank of Norway. Residents holding foreign currency securities of Norwegian issuers, including the Kingdom, may only sell such securities to other Norwegian residents ( for kroner), unless the Bank of Norway specifically appr~ves other transactions, and must deposit foreign currency redemption proceeds with the Bank of Norway in exchange for kroner at the current rate for such foreign currency. Norway and eight other Western European countries are taking part in a system for multi­ lateral arbitrage between their exchange markets. Authorized banks in the countries concerned are permitted to deal in foreign exchange directly with one another in order to cover authorized transactions in any of the nine countries. The system has resulted in removal of certain admini­ strative restrictions on transactions and the adoption of common market practices.

27 The following table shows the net foreign exchange holdings (including foreign exchange reserves temporarily invested in gold) of the Bank of Norway at various dates since 1947.

Foreign Exchange Reserves of Bank of Norway

(In millions of kroner at exc hange rates in effect on respective dates)

December 31 Gold and dollars ( 1) E.P.U. currencies Other currencies (2) Total 1947 ...... 180 455 -21 614 1948 ...... 215 367 -53 529 1949 230 103 -39 294 1950 ...... 429 104 -57 476 1951 ...... 422 195 21 638 1952 ...... 533 105 58 696 1953 ...... 557 87 -47 597 1954 ...... 536 21 -119 438 (I) Excludes gold stock. (2) The foreign exchange balances under " Other currencies" cover net balances resulting from payments and cle aring a g reements outside the dollar and E .P .U. areas.

In addition to the amounts shown in the table, substantial sums of foreign exchange are held by private banks, shipping companies and insurance companies. At the end of 1954 they were estimated at more than 600 million kroner. The foreign exchange reserves of the Bank of Norway increased steadily from 1949 until the beginning of I 9 5 3 in spite of the cost of imports necessary to carry out the post-war recovery and reconstruction program. This improvement in the reserve position was due mainly to the aid Norway received under the European Recovery Program, both in the form of direct aid from the United States and in the form of indirect aid through several European countries. Another important factor was the credit facilities granted to Norway through the E.P.U. The reserves of the Bank of Norway declined during 19 5 3 and 19 5 4 and it is estimated that they had declined to 337 million kroner as of March 31, 1955. As of March 31, 1955, the remaining E.P.U. credit available to Norway amounted to the equivalent of 145 million kroner. With respect to the measures proposed by the Government to reduce the deficit in the balance of payments and ease the drain on the foreign exchange reserves see "The National Budget for I 9 5 5 and Comments of the Minister of Finance."

Membership in International Bank for Reconstruction and Development and in International Monetary Fund Norway is one of the original members of the International Bank for Reconstruction and Development and the International Monetary Fund. The Norwegian Government ratified the Articles of Agreement of these two international organizations on December 2 7, 1945, and accepted the obligations imposed thereby. Norway's subscription to the capital of the Bank is $50,000,000 of which 20 % was paid in the fiscal year ended June 30, 194 7. Of this 20 % , the 2 % ($1,000,000) required to be paid in gold or United States dollars was paid in United States dollars; of the remaining I 8 % ($9,000,000) payable in Norwegian kroner or notes, as of December 31, 1954, $370,000 had been paid in Norwegian kroner and $8,630,000 by delivery of non-negotiable, non-interest bearing promissory notes payable on demand in Norwegian kroner. The 80 % balance is callable by the Bank if required to meet its obligations in respect of funds borrowed or indebtedness guaranteed by the Bank and is payable at Norw ay's option either in gold, in United States dollars or in the currency required to discharge the obligations of the Bank fo.r the purpose of which the call is made. Norway obtained a loan from the World Bank in 1954 amounting to $25,000,000. Norway's capital subscription to the Fund has also been fixed at $50,000,000, of which, in the fiscal year ended June 30, 1947, 25 % or $12,500,000 was paid in gold and 75% or $37,500,000 was paid in Norwegian kroner. In 1948 Norway purchased United States dollars

28 and Belgian francs equivalent to $9,600,000 against payment in Norwegian kroner. In 1951 Norway repurchased Norwegian kroner equivalent to $9,600,000 against payment in United States dollars, reducing the Fund's holdings of Norwegian kroner to the original 7 5 % quota.

REVENUES, EXPENDITURES AND BUDGETS

The State's budget is divided into current and capital accounts. Current revenues and expenditures are so termed, irrespective of whether they are regularly recurrent or not. For example, expenditures for all civil and military construction and equipment, except to the extent reflected in investments in State Enterprises or industrial companies, are included among current expenditures. The fiscal year of the State is from July I to June 30. Early in the calendar year, generally in January, the Minister of Finance presents to the Storting the budget for the fiscal year beginning on the following July I. This budget is termed the Fiscal Budget. He also submits, usually at the same time as the Fiscal Budget, an estimate, called the National Budget, of the state of the Norwegian economy for the calendar year then beginning and the economic policy which the Government proposes to follow. The Fiscal Budget is adopted as a resolution of the Storting and not as a statutory enactment. Under the provisions of the Norwegian Constitution, the State's accounts are subject to audit and control by the Board of State Auditors appointed by the Storting. The Closed Accounts, before being published by the Ministry of Finance, have been audited by the Office of the State Auditors. On the basis of this technical audit and a further comprehensive audit of the underlying books of account and records, the Board of Auditors or the Odelsting { the major subdivision of the Storting) decides whether or not to discharge the Government in respect of the utilization of the appropriations made by the Storting in the Fiscal Budget. Under the accounting system of the State, all State accounts are incorporated into the budget, except loans to State owned and guaranteed banks and institutions and State borrowing to the extent not required to be so incorporated to offset budget deficits. In any given year the surplus or deficit resulting from the difference between current revenues and capital revenues, including the proceeds of loans to the extent taken into the State accounts in that year, on the one hand, and current expen­ ditures and capital expenditures, on the other hand, is carried over into the next fiscal year. Any surplus thus carried over is applied to the reduction of the funds proposed to be raised by loans during the fiscal year to which the surplus is transferred while a deficit so carried over must be provided for by the revenues of the following fiscal year. Accounts are closed at the end of each fiscal year. The budget is set up on the principle of showing gross revenues and expenditures. The prin­ cipal exceptions are certain special funds and N.A.T.O. contributions, which are shown on a net basis, and the State Enterprises, whose operations are reflected in the State's Revenues and Expenditures to the extent set forth herein under "State Enterprises." The following table ( extracted from the Closed Accounts for the various years) sets forth total revenues and expenditures of Norway ( exclusive of Svalbard) during the fiscal years ended June 30, 194 7, to June 30, 1954, inclusive: (In millions of kroner) Current Capital Total Surplus ( + ) June 30 Revenues Expenditures Revenues (I) Expenditures or Deficit(-) 1947 ...... 2,269.8 2,302.8 16.8 633.4 -649.6 1948 2,415.3 2,261.3 14.0 294.5 -126.5 1949 ...... 2,769.1 2,700.7 13 .3 278.7 -197.0 1950 ...... 2,726.6 2,555.8 198.8 486.0 -116.4 1951 ...... 3,091.7 2,547.5 32.4 380.9 +195.7 1952 ...... 3,778.3 2,974.0 43.4 568.7 +279.0 1953 4,368.0 3,698.3 18.5 574.8 +113.4 1954 ...... 4,314.7 4,055.4 15.4 567.7 -293.0 ( 1) Exclusive of proceeds of loans.

29 The following table is a summary (prepared by the Ministry of Commerce) of the detailed tables of Revenues and Expenditures appearing herein under "Tables and Supplementary Informa­ tion. On June 24, 1954 the Storting approved the budget for the fiscal year ending June 30, 1955. The budget for the fiscal year ending June 30, 1956, was submitted to the Storting on January 13, 1955.

Summary of Revenues and Expenditures ( In thousands of kroner) Fiscal Year Ending June 30 1955 1956 (Approved (Proposed 1952 1953 1954 Budget) Budget) Current Revenues Tax Revenue : Income and Property Taxes I, 152,350 1,379,062 1,251,063 1,313,382 1,342,560 Taxes on Goods and Services 2,283,439 2,527,442 2,571,476 2,511, I 85 2,776,990

Total Tax Revenue 3,435,789 3,906,504 3,822,539 3,824,567 4,119,550 Fees and Licenses .. 24,092 20,505 19,021 16,300 18,385 Repayments by Political Subdivisions and Others ...... 30,750 38,394 43,887 47,914 50,988 Re venues from State Institutions under Ministries 85,930 77,999 77,705 78,025 78,749 Interest and Dividends 38,866 36,670 50,288 55,471 79,555 From Funds and Reserves 22,033 18,280 32,272 29,494 29,040 Other Revenues 140,880 269,586 268,946 77,066 77,783

Total Current Revenues .... 3,778,340 4,367,938 4,314,658 4,128,837 4,454,050

Capital Revenues Repayments of Loans Granted by the State and Sale of State Property 43,381 18,516 15,431 17,797 16,950 Proce eds of Loans(!) 293,041 291,160

Total Capital Revenues 43,381 18,516 308,472 308,957 16,950

Grand Total Revenues 3,821,721 4,386,454 4,623,130 4,437,794 4,471,000

Current Expenditures Ordinary Expenditures: Ecclesiastical Affairs and Educa - tion 209,423 240,428 290,360 279,498 306,993 Local Government and Labor 157,128 180,769 220,139 223,999 215,794 Social Affairs . .. 451,202 523,865 586,188 603,818 688,640 National Defense 31 9,064 546,542 615,231 718,484 748,280 Interest External Funded Debt ( 2) 67,520 80,295 81 ,515 85,314 99,983 Internal Funded Debt 76.187 70,948 68,985 64,870 75,936 Other Interest 25,268 28,543 39,182 69,200 94,000

Total Interest 168,975 179,786 189,682 219,384 269,919 Less Interest Charged to State Enterprises 25,311 27,774 31,983 36,330 40,978

Total Net Interest 143,664 152,012 157,699 183,054 228,941 Other Ordinary Expenditures 759,458 934,5 I 7 926,592 1,005,144 935,692

Total Ordinary E x penditures 2,039,939 2,578,133 2,796,209 3,013,997 3,124,340 Net Loss on State Enterprises . . .. 44,357 73,475 85,784 65,845 62,491 Price Subsidies 412,452 479,253 518,975 540,000 540,000 Extraordinary Defense Preparedness 374,017 509,193 596, 158 283,372 173,975 Extraordinary Expenditures North Norway ...... I 03,208 58,208 58,253

Total Current Ex penditures .. 2,9 73,973 3,698,262 4,055,379 3,903,214 3,900,806

30 (In thousands of kroner) Fiscal Year Ending June 30 1955 1956 (Approved (Prd,osed 1952 1953 1954 Budget) Bu get) Capital Expenditures Investments in State Enterprises and Industrial Companies 261,886 317,687 310,125 267,238 238,091 Public Debt Retirement 306,834 257,100 257,626 267,342 332, I 03

Total Capital Expenditures . 568,720 574,787 567,751 534,580 570,194

Grand Total Expenditures 3,542,693 4,273,049 4,623, I 30 4,437,794 4,471,000

Current Budget Surplus ( +) .. +804,367 +669,676 +259,279 +225,623 +553,244 Capital Budget ( exclusive of loan pro- ceeds) Deficit (-) . . -525,339 -556,271 -552,320 -516,783 -553,244 Total Budgetary Surplus ( +) or Deficit ( - ) (exclusive of loan proceeds) ...... +279,028 +113,405 -293,041 -291,160

(I) This item does not reflect gross proceeds of loan operations but only such loan proceeds as are taken into the corresponding accounts of the respective year. (2) In the State accounts retirements of external debt are included under "Capital Expenditures" and are taken at the exchange rates in effect at the respective dates of issue. The additional expenditures necessary to cover the actual cost in kroner of these retirements at the exchange rates then in effect are included in the item "Interest: External Funded Debt" under the heading " Current Expenditures" as follows: 1952 - 25,972; 1953-29,675; 1954-30,363; 1955-31,890;and 1956-35,860.

According to the Budget Accounts for the first half of the fiscal year ending June 30, 1955, current revenues for the six months period ended December 31, 1954, were 2,244,334,505 kroner, and current expenditures 1,981,555,905 kroner, while capital expenditures were 286,780,245 kroner, of which 136,376,963 kroner were invested in State Enterprises and industrial companies and 150,403,282 represented retirements of public debt. Capital revenues, which did not include the proceeds of any loans, were 10,373,077 kroner. The budgetary deficit for the six months period was 13,628,568 kroner. These figures are preliminary and have not been audited.

The revenues and expenditures for Svalbard, which are separately stated, are set forth herein under "Tables and Supplementary Information."

The National Budget for 1955 and Comments of the Minister of Finance The following is a summary of statements included in the National Budget for 1955, approved by the King in Council on January 7, 1 9 5 5. The general goals of the Government's economic policy will continue to be: ( 1 ) to insure full and efficient employment, ( 2) to establish the necessary conditions for a steady increase in production and productivity, and ( 3) to insure a reasonable distribution of the available supply of goods and services among the various economic sectors, social groups and parts of the country.

The principal economic problems for the year are considered to be the continued increase in the investment level, the large deficit in current international transactions and the trend of internal prices.

The general policies to be followed in meeting these problems based on certain assumptions, including an increase in the export of Norwegian goods and services and continuation of terms of trade favorable to Norway, will be: 1. A sharp reduction in the deficit in current international transactions.

2. A reduction in private investments, particularly in building and construction and in enterprises requiring substantial imports; but despite the reduction in total investments, investments in roads, agriculture, forestry, schools and hospitals are to be permitted to increase.

31 3. Restrictions on public investment, including the defense construction program.

4. Prevention of further price increases.

5. The anticipated increase in private consumption to be channelled into goods with a low import content.

6. A limited mcrease m public consumption, largely due to increased expenditures for health and education.

The proposed economic measures to carry out these policies include balancing the Fiscal Budget for the year ending June 30, 1956, on a cash basis, extending the 10 % national sales tax to construction projects other than home building, increasing the tax on automobiles, a more restrictive monetary and credit policy, stimulation of private savings, some increase in interest rates, and a reduction in the imports of goods which Norway is not prevented from regulating by its O.E.E .C. or G .A.T.T. obligations. Ceiling prices will not be established unless necessary.

On January 21 , 1955, Prime Minister Oscar Torp resigned, and a new Cabinet was formed by Einar Gerhardsen with 6 new Ministers, including new Ministers of Commerce and Finance.

On January 24, 1955, Prime Minister Gerhardsen made the following statement in the Storting:

"The change of government which has taken place is not the result of a new parliamentary situation in the Storting. The new Government originates from the same Party as the Torp Government and will follow the same political main course as the latter. It (the Government) makes the Royal Address, the Fiscal Budget and the National Budget submitted by the former Government its own.

"The Government emphasizes that it will follow the same course in foreign and defense policy as the Torp Government.

"The Government wishes to stress that, like its predecessor, it considers it to be one of the main tasks of the economic policy in 1955 to lessen the strain on our balance of payments with other countries, prices and the labor market. As it {the Government) bases its work on the preliminary work of the former Government, the new Government will effect the measures it believes to be necessary in order to meet this main task . . . "

The following is a summary of certain comments made by the new Minister of Finance in speaking to the Storting on February 14, 1955:

The Government has endorsed its predecessor's National and Fiscal Budget proposals and intends to introduce the additional measures necessary to reduce the pressures on the external economy, on prices and on the labor market.

The high level of economic development and investment in almost all sectors of the Norwegian economy has led to severe pressure on the international balance of payments and con­ tributed to a rise in the price level. A curtailment of investment demand is essential and the economic measures proposed by the Government are directed to achieving that end but in such a way that full e~ployment is safeguarded.

In order for Norway's products to compete with those of other countries, a stable level of prices and costs must be maintained, and accordingly the Government regards as its most urgent task a reduction in the cost of living to avoid a further round in the price and wage spiral. Volun­ tary price cuts with respect to coffee, certain vegetables and rubber footwear have been achieved. Unless industry actively cooperates in price cuts where justifiable, the Government will be com­ pelled to fix maximum prices in certain fields and possibly also to control earnings and profits.

32 The Government regards it as of decisive importance that the proposed balance in the Fiscal Budget for the coming period ( fiscal year beginning July 1 , 19 5 5) be achieved.

The main objective of monetary credit policy in 1955 will be to prevent a continued expan­ sion of credit financed investment and imports. The Government will endeavor to contract the joint stock and savings banks' loan activities and tighten the credit extended by insurance com­ panies and other credit institutions. Joint stock and savings banks are being required to maintain minimum deposit reserves in the Bank of Norway.

To reduce liquidity and obtain the necessary funds for State banks, the Government will float considerable State loans in 1 9 5 5 at a somewhat higher rate than previously.

The rediscount rate of the Bank of Norway has been raised from 2 Yz % to 3 Yz %, but since other interest rates have already been raised this will have a correspondingly reduced effect on the general interest level. The raising of the rediscount rate is expected to effect a reduction in industrial inventories and in the total commercial credits established abroad by Norwegian im­ porters as well as the facilities extended by Norwegian exporters to overseas customers. The Bank of Norway in authorizing the issuance of non-governmental bonds will consider not only loan conditions but also the purpose for which the loan is sought.

The Government will appeal to all local authorities to show restraint in their expenditures, particularly in investment expenditures, which are estimated to have risen 18 % in the current fiscal year.

To encourage private savings a premium bond loan will be issued.

A reduction in regulated commodity imports is distributed over a long list of commodities but will apply primarily to private cars and delivery vans for which the global quota has been cut from 5,000 in 1954 to 2,500 in 1955 and taxis for which the quota has been cut from 1,000 to 500. The Government has endeavored to avoid cuts which will adversely affect the export industries or undermine the competitive standing of enterprises competing with free-list goods.

The Government has proposed to the Storting certain temporary taxes for the purpose of limiting investment: a 10 % tax on contracts for ships ov er 2, 500 gross tons effective February 14, and a 10 % tax on the value of imported motor vehicles and tractors. The purpose of these taxes is not fiscal and the revenue resulting therefrom will be placed in separate accounts with the Bank of Norway.

The Government also proposes to introduce a general sales tax on construction initiated after January 13, 1955, other than home or farm building and certain repairs. Increases in the tax on motor vehicles sufficient to produce 30 million kroner, though not the 55 million kroner included in the Fiscal Budget (for the year ending June 30, 195 6) , are contemplated. Amendments liberalizing the regulations permitting income tax deductions for funds set aside for subsequent purchase of equipment will be proposed in order to persuade industry to postpone investment.

33

• PUBLIC DEBT Summary of Public Debt The following table (prepared by the Ministry of Commerce and extracted, except for the figures for the Funded External and the Floating Debt on December 31, 1954, from Annexes E and F to the Budget Proposals for the fiscal years ending June 3 0, 1 9 5 1 through 1 9 5 6) sets forth the direct funded and floating debt of the Kingdom of Norway outstanding at December 3 1 in each of the years from 1949 to 1954, inclusive: (In thousands of kroner) Funded Dec. 31 Internal External (1) Total Floating Total

1949 ...... 3,259,275 1,362,805 4,622,080 1,032,159 5,654,239 1950 ...... 3,290, I 14 1,489,806 4,779,920 455,152 5,235,072 1951 ...... 3,241 ,954 1,609,252 4,851,206 457,720 5,308,926 1952 ...... 3,032,577 1,626, I I 5 4,658,692 956,042 5,614,734 1953 ...... 2,830,898 1,694,361 4,525,259 1,377,007 5,902,266 1954 ...... 3,182,269 1,836,081 (2) 5,018,350 1,141,264(3) 6,159,614 ( 1) Conversion of amounts in foreign currencies to amounts in Norwegian kroner are made at exchange rates in effect at the end of November in each year. (2) Annex F to the Budget Proposal for the fiscal year ending June 30, 1956, shows 1,835,406,000 based on the exchange rates in effect on November 30, 19 54. The above figure 1,836,081,000 is based on the exchange rates in effect on December 31, 1954. See "Funded Debt" in "Tables and Supplementary Information" herein. (3) Annex F to the Budget Proposal for the fiscal year ending June 30, 1956, shows 1,141,034,000 which includes the outstanding principal amount of Savings Bonds as of September 30, 1954, N.kr. 28,614,450. The above figure l, 141,264,000 includes the outstanding principal amount of such Bonds as of December 31, 1954, N.kr. 28,844,600. See "Floating Debt" in "Tables and Supplementary Information" herein. The figures for the funded internal debt do not include intra-governmental indebtedness result­ ing from the issuance by the Kingdom to State-owned banks and credit institutions of bonds to provide them with capital funds. The amount of such capital fund bonds, which are held by the respective banks or institutions, outstanding on December 31, 1954, was 132,700,000 kroner. The United States and the Kingdom of Norway, by agreement of February 24, 1948, settled the amount of the Kingdom's indebtedness to the United States for Lend Lease deliveries and services, civilian supplies furnished under the military relief program and other financial claims arising out of World War 11 at $5,900,000 or 42,142,857 kroner,"' to be paid in kroner and property. As of December 31, 1954, the debt had been reduced to $5,775,090 or 41,250,643 kroner."' On April 15, 1955, the Kingdom issued an internal 4 % twenty-year bond loan of 400 million kroner. On April 1 5, 1 9 5 5, the Kingdom issued an internal premium bond loan of 7 5 million kroner (on which tax-free premiums amounting to 3.5 % per annum of the principal amount of the loan will be paid). In addition to the direct public debt, the Kingdom of Norway has guaranteed the principal and interest upon various obligations amounting to 2,540,551,000 kroner at June 30, 1954. For more detailed information concerning the direct public debt of the Kingdom of Norway, guaranteed obligations, additional contingent liabilities, and certain miscellaneous liabilities, see "Tables and Supplementary Information" herein. Debt Record During the past twenty years, the Kingdom of Norway has paid when due the full currency face amount of principal, interest, and amortization requirements upon its direct and indirect external obligations, funded and floating, in accordance with what it has considered the proper interpretation of the obligations, except as prevented by wartime disruption or restrictions and subject to certain special circumstances as follows: ( 1 ) Enemy-interest restrictions. Payment of principal, interest and amortization requirements on the Kingdom's direct and indirect external indebtedness was subject during World War 11 and thereafter to various restrictions in respect of payment to "enemy-interests." All such restrictions imposed by the Kingdom had been removed by July 1951.

• At the par value between the two currencies established by the International Monetary Fund as stipulated in the Agreement. 34

• (2) Bonds of the multiple currency loan issues of the Kingdom of Norway, dated from 1886 through 1905, inclusive. Bonds of these issues were drawn for redemption in Oslo during the period of German occupation according to the respective loan contracts, but the lists of bonds so drawn were not used by the Norwegian Government in London so far as allied countries were concerned, and therefore no redemption of these bonds took place outside of German occupied and neutral countries. The Norwegian Government in London, however, paid interest on all bonds of these issues outstanding in allied countries and continued to do so after the liberation until such times in 1945 and 1946 as the bonds, drawn for redemption during the war, could be redeemed. At the present time, all principal, interest, and amortization requirements with respect to the bonds of these issues have been fully satisfied in accordance with the interpretation b y the Norwegian Government of its obligations with regard to its multiple currency issues. These issues are set forth under the caption "External Debt" in Tables and Supplementary Information herein, except for the Norwegian 3 Yz % State Loan of 1894, Norwegian 3 % State Loan of 1896, Norwegian 3 % Government Bonds of 1899, Norwegian 3 Yz % State Loan of 1900, and Norwegian 3 % State Loan of 1903, which issues had been retired prior to December 31, 1954. (3) K ingdom of Nor way 3 % Loan of 19 38, payable in Swiss fran cs. During World War II, amor­ tization payments were fulfilled by the Norwegian Government in London through the purchase of bonds, while all interest payments were made subject to restrictions in respect of "enemy-in ter­ ests." Approximately 1,800,000 Swiss francs in interest became payable on June 1, 1946, on the removal of "enemy-interest" restrictions in respect of French, Dutch and Belgian citizens resident in former German occupied territory. In order to make such payment, the Norwegian Government requested the Swiss National Bank to accept dollars in exchange for Sw iss francs. Howev er, the Swiss National Bank refused to do so. The Payments Agreement, of July 15, 194 7, between Norway and Switzerland made available to Norway sufficient Swiss francs to make such payments, and payment was actually made upon presentation of the coupons from November 17, 1947. ( 4) Norwegian State 3Yz % Bond Issues of 1935 and 1936, payable in Swedish kronor. During the period 1945 to 1951 holders of these bonds (subsequently retired) not domiciled in Sweden received interest and amortization payments in Norwegian kroner at the current rate for Swedish kronor. (5) American dollar bonds expressed in terms of gold. Since the Congress of the United States in 1933 declared "gold clauses" in respect of dollar obligations against public policy and that such obligations should be discharged by payment, dollar for d ollar, in legal ten der, the Kingdom's direct and indirect guaranteed indebtedness payable in dollars expressed in terms of gold have been paid at the dollar face amount of such obligations. A Norwegian savings bank and two insurance companies brought suit in Norway against the Norwegian Government for payment in gold of certain coupons and drawn bonds of certain American dollar issues. The final decision of the Supreme Court of Norway, rendered in 193 7, in these actions, upheld the position of the Norwegian Govern­ ment. The only such dollar indebtedness currently outstanding is the dollar indebtedness of the Municipalities Bank of Norway set forth in "Indebtedness Guaranteed by the Kingdom of Norway" in Tables and Supplementary Information herein. n (6) Indebtedn ess Guaranteed by the Kingdom. During World War II inter est on external in­ debtedness guaranteed by the Kingdom of Norway was paid in sterling by the Norwegian Govern­ ment in London when coupons were presented to it for payment. The Norwegian Finance Adminis­ tration in Oslo .effected such payments in kroner where this was possible under the conditions of the German occupation. Amortization requirements on the guaranteed external indebtedness of The Agricultural Properties Bank of Norway, the Mortgage Bank of the Kingdom of Norway and the Municipalities Bank of Norway were, to a large extent, not fulfilled during the war, but the Nor­ wegian Government on behalf of these institutions either purchased bonds or made foreign exchange available so that drawings could subsequently be effected to the extent necessary for the fulfillment of such amortization requirements. Since the liberation, the bonds so purchased and the foreign exchange so allocated, have been employed for this purpose; and all principal, interest, and amorti­ zation requirements with respect to the external indebtedness guaranteed by the Kingdom have been

3 5 fully satisfied in accordance with the interpretation by the Norwegian Gov ernment of the respective obligations. Certain o f the issues referred to in paragraph ( 2) as well as certain of the indebtedness guaranteed by the Kingdom, in addition to being payable in various other currencies, are payable in "kroner" in Oslo, Stockholm and Copenhagen. The Norwegian Government has always maintained and maintains today that the reference to "kroner" is to Norwegian kroner only and that payment in Stockholm and Copenhagen of principal and interest on these bonds shall be effected in Norwegian kroner or in Swedish or in Danish kroner at the current rate of exchange for Norwegian kroner. Nevertheless, in practice and as an accommodation to Swedish and Danish holders of such obligations (issued when Norway, Sweden and Denmark were members of the Scandinavian Currency Union and their respective currencies were legal tender throughout the Union) the Norwegian Government has, since 191 7, consented to pay ing in Stockholm or Copenhagen the full face kroner amount of the obligation in Swedish or Danish kroner, as the case may be, but only to Swedish or Danish citizens. Under the terms of the law of July. 6, 1933, as amended, in the case of multiple currency obligations, Norwegian citizens resident in Norway, holding direct or indirect external obligations of the Kingdom, can only receive the Norwegian kroner face amount of the obligation. Certain of the issues referred to in paragraph ( 2) as well as certain of the indebtedness guaranteed by the Kingdom in addition to calling for payment in multiple currencies, including kroner, contain a gold clause. The Kingdom has maintained that the reference to " gold" in the obligations in question applies only to Norwegian kroner and not to any oth er currencies mentioned in the obligations. Since, under the terms of the Norwegian law of December 15, 1923, a s amended, payment in gold of Norwegian kroner obligations may not be required w h ile N orway is no t on a gold standar d , Norway, since it left the gold stand ard in 19 3 1, h as o nly m ade p ayment of the full currency face amount of the obligations. The Kingdom's interpretation of some of the direct and indirect obligations of the Kingdom calling for foreign currency payment or payment in terms of gold has not been universally agreed to by all creditors. In 1932 a dispute arose between the Kingdom of Norway and the A msterdam Stock Exchange with regard to the manner of payment of the Norwegian 3 Yz % State Loans of 1904 and 1905 which the Stock Exchange claimed should be serviced in gold. In accorda n ce w ith its position as abov e set forth the Kingdom refused to recognize this claim and insisted that the French term "monnaie d' or" appearing on the face of the bonds in question referred only to Norwegian k r oner to which currency the law of December 15, 1923, re ferred to abov e, w a s applicable. The Stock Exchange, however, refused to agree to this position and insisted on quoting the bonds of the abov e loans as "being in default." A gainst this action of th e Stock E xchange the Norw egian Government strongly protested to the N etherlan d s Government. No corrective action w as taken p rior to the outbreak of World War II, b ut since 194 9 , when the bonds w ere again quoted on the Amsterdam Stock Exchange, they have been quoted without reference to any such alleged default. Prior to World War II the "Association Nationale des Porteurs Franr;ais de Valeurs Mobilieres" ("French National Bondholders' Association"), supported on several occasions b y the French Gov ernment, protested against the failure of French holders of certain of the loans of the Kingdom", of the Mortgage Bank of the Kingdom of Norway and of The Agricultural Properties Bank of Norway, issued before World War I, to receive payment in gold or its equivalent. An exchang e of correspondence took place between the French and Norwegian Governments in which the Norwegian Government maintained the position in respect of the gold clause set forth above. The exchange of correspondence terminated before World War II. Following the war the French National Bondholders' Association renewed its complaints and the French Gov ernment in 1 9 5 3 urged that settlement in respect of the loans be made on a gold basis or at least (in accordance with the formula used in settling the prewar German ex ternal debt

36 in the London Agreement of February 2 7, 19 5 3) on the basis of the value in U . S . dollars calculated at the exchange rate in effect at the date of issuance of the loans. In reply to these proposals the Norwegian Government maintained the same position as that set forth above. The Norwegian Government also pointed out that the London Agreement with respect to German external debts dealt with an entirely different complex of rights and obligations and could not be applied either directly or by analogy to the dispute with the French National Bondholders' Association. In conversations in Oslo in May 1954, with respect to renewal of the commercial agre·ement between Norway and F ranee, the French Government proposed the designation by the two Govern­ ments of an arbitrator to whom the contested points could be submitted. By aide-memoire of January 2 7, 1955, the French Government proposed to the Norwegian Government that the dispute be submitted to the International Court of Justice in the Hague. The Norwegian Govern­ ment on February 1, 1 9 5 5, advised the French Government that it could not accept the proposal to submit the dispute to the International Court of Justice and that the normal and regular pro­ cedure would be for the bondholders to initiate proceedings in the competent Norwegian tribunals and that the Norwegian Government saw no reason for making any exception to the general rule of public international law that an international claim cannot be brought until local remedies have been exhausted. The French Government, furthermore, protested prior to World War II at the inability of French citizens to obtain payment in Swedish or Danish kroner upon loans of the Mortgage Bank of the Kingdom of Norway payable in Sweden and Denmark in "kroner," and in 1946 as to their inability to obtain payment on the basis of the Swedish kronor value of such loans, but the Norwegian Government has maintained the position set forth above that such obligations referred to Norwegian kroner only and that the privilege accorded Danish and Sw edish citizens with respect to their own currencies is an act of grace and not an obligation of the Kingdom of Norway. On March 29, 1954, a French holder of certain multiple currency bonds of the Mortgage Bank of the Kingdom of Norway, called for redemption on January 1, 1947, instituted proceed­ ings in F ranee against three French banks, including two fiscal agents for such bonds, seeking to prevent the transfer to the Mortgage Bank of any funds of the Mortgage Bank which they then had or might have. The Mortgage Bank did not then have and does not now have any funds on deposit with these banks. On April 2, 1954, he brought suit against the Mortgage Bank, itself, claiming the redemption value on his bonds plus interest from July 1, 194 7, to January 1. 1954, or an aggregate amount of 6,225 francs which he claimed should be paid in gold francs. The Norwegian Government has suggested that the Mortgage Bank as an agency of the Kingdom is under established principles of public international law entitled to sovereign immunity and requested that the French court dismiss the complaint against the Mortgage Bank on jurisdictional grounds. A hearing before the court is scheduled for May 5, 19 5 5.

UNDERWRITERS The Underwriters named below have severally agreed, subject to the terms and conditions of the Purchase Agreement, a copy of which is filed as an exhibit to the Registration Statement, to purchase from the Kingdom the respective principal amounts of Bonds of the Kingdom, set forth below. The total of Three, Four and Five Year Bonds for each Underwriter show.n below includes equal amounts of each of the 1958, 1959 and 1960 maturities. Principa l Amount Three Year, Four Year, Principal and Amount Five Year T en Year Name Address Bonds Bonds Kuhn, Loeb & Co. 5 2 Willia m Street, New York 5, N. Y. $6 I 5,000 $6 I 5,000 Harriman Ripley & Co., Incorporated 63 Wall Street, New York 5, N. Y. $6 I 5,000 $6 I 5,000 Lazard Freres & Co. 44 Wall Street, New York 5, N. Y. $6 I 5,000 $6 I 5,000 Smith, Barney & Co. I 4 Wall Street, New York 5, N. Y. $6 I 5,000 $6 I 5,000 Ball, Bur ge & Kraus I 790 Union Commerce Building $ 60,000 $· 60,000 Cleveland I 4, Ohio Bell, Gouinlock & Company, Incorporated 64 Wall Street, New York 5, N. Y. $ 60,000 $ 60,000 William Blair & Company I 35 South La Salle St., Chicago 3, III . $ I 50,000 $ 150,000 37 Principal Amount Three Year, Four Year, Principal and Amount Five Year Ten Year Name ~ Bonds Bonds Blyth & Co., Inc. 14 Wall Street, New York 5, N. Y. $300,000 $300,000 Caldwell Phillips Co. E-13 1 0 First National Bank Building $ 60,000 $ 60,000 St. Paul 1, Minnesota Central Republic Company (Incorporated) 209 So. La Salle Street, Chicago 90, Ill. $150,000 $150,000 Julien Collins & Company 105 South La Salle St., Chicago 3, Ill. $ 60,000 $ 60,000 Dillon, Read & Co. Inc. 46 William Street, New York 5, N. Y. $360,000 $360,000 The Dominion Securities Corporation 40 Exchange Place, New York 5, N. Y. $300,000 $300,000 Drexel & Co. 1500 Walnut Street, Philadelphia 1, Pa. $300,000 $300,000 Eastman, Dillon & Co. 15 Broad Street, New York 5, N. Y. $300,000 $300,000 Estabrook & Co. 15 State Street, Boston 9, Mass. $180,000 $180,000 The First Boston Corporation I 00 Broadway, New York 5, N. Y. $360,000 $360,000 Robert Garrett & Sons South and Redwood Streets $ 60,000 $ 60,000 Baltimore 3, Maryland Hallgarten & Co. 44 Wall Street, New York 5, N. Y. $255,000 $255,000 Hayden, Miller & Co. Union Commerce Bldg. $ 60,000 $ 60,000 Cleveland 14, Ohio Kidder, Peabody & Co. 17 Wall Street, New York 5, N. Y. $300,000 $300,000 Ladenburg, Thalmann & Co. 25 Broad Street, New York 4, N. Y. $300,000 $300,000 Morgan Stanley & Co. 2 Wall Street, New York 5, N. Y. $360,000 $360,000 Piper, Jaffray & Hopwood 11 5 South Seventh Street $ 75,000 $ 75,000 Minneapolis 2, Minnesota R. W. Pressprich & Co. 48 Wall Street, New York 5, N. Y. $150,000 $150,000 Schoellkopf, Hutton & Pomeroy, Inc. 63 Wall Street, New York 5, N. Y. $ 75,000 $ 75,000 Swiss American Corporation 25 Pine Street, New York 5, N. Y. $150,000 $150,000 White, Weld & Co. 40 Wall Street, New York 5, N. Y. $300,000 $300,000 Harold E. Wood & Company First National Bank Building $ 60,000 $ 60,00 '.J St. Paul 1, Minnesota Wood, Gundy & Co., Inc. 14 Wall Street, New York 5, N. Y. $255,000 $255,000 Total ...... $7,500,000 $7,500,000 After the initial public offering of the Bonds covered hereby, the public offering price and other selling terms may be varied by the Underwriters. The nature of the underwriting commit­ ments is such that the Underwriters are required to purchase all of the Bonds if they are required to purchase any of the Bonds. The Underwriters have advised the Kingdom that they propose to offer part of the Bonds offered hereby directly to the public at the public offering price set forth on the cover page hereof and part to certain dealers at prices which represents a concession of Yz % of the principal amount in the case of the Three, Four and Five Year Bonds and of I Y4 % in the case of the Ten Year Bonds under the public offering price. The Underwriters may allow and such dealers may reallow a discount, not in excess of Y4 % of the principal amount in the case of the Three, Four and Five Year Bonds and not in excess of Yz % in the case of the Ten Year Bonds, to dealers. LEGAL OPINIONS With respect to the Bonds being offered hereby, on behalf of the Kingdom legal matters are being passed upon by the Honorable Jens Christian Hauge, Minister of Justice of the Kingdom of Norway, Oslo, Norway, and on behalf of the Underwriters legal matters are being passed upon by Messrs. Sullivan & Cromwell, of New York, N. Y. ( who may rely as to all matters of Norwegian law upon the opinions of the Honorable Jens Christian Hauge and Messrs. Heyerdahl. Corneliussen, Tliommessen, Karlsrud and Heyerdahl Jr., of Oslo, Norway). All statements in the Prospectus with respect to matters of Norwegian law have been passed upon by the Honorable Jens Christian Hauge and Messrs. Heyerdahl, Corneliussen,_ Thommessen, Karlsrud and Heyer­ dahl Jr. AUTHORIZED AGENT IN THE UNITED STATES The authorized agent of the Kingdom of Norway in the United States is: His Excellency the Hon. Wilhelm Morgenstierne, Ambassador Extraordinary and Pleni­ potentiary of the Kingdom of Norway to the United States of America, 3401 Massachusetts Avenue, Washington, D. C. 38 TABLES AND SUPPLEMENTARY INFORMATION KINGDOM OF NORWAY Revenues and Expenditures Table I-Statement of Revenues

Fiscal Year Endin&' June 30 1955 1956 (Approved (Propos ed 1952 1953 1954 Bud&'et) Bud&'et) ( In thousands of kroner) Current Revenues Taxes: Income and Property Taxes: Ordinary Income and Property Tax ...... 958,986 I, 183,842 1,051,261 1,070,000 1,070,000 Social Insurance Taxes ...... 124,917 141,896 151,761 186, 183 225, I 66 Extraordinary Income and Prop- erty Taxes ...... 51,074 37,392 29,108 41, (99 30,394 Inheritance Taxes ...... 17,373 15,932 18,933 16,000 17,000

Total Income and Property Taxes ..... 1.152,350 1,379,062 1,251,063 1.313,382 1,342,560

Taxes on Goods and Se rvices : Custom Receipts and Loading and Lighthouse Fees ...... 272, I 28 332,760 322,446 314,500 345,000 General Sales Tax ...... 985,694 I, (06, 145 1,185, I 5 I 1,200,000 1,350,000 Taxes on Spirits, Wines and Beer 367,695 358,563 364,622 350,100 365,600 Surplus Profits from Wine Mo- nopoly ...... 26,000 28,700 26, IOO 25,000 20,000 Tobacco Stamp Duty ...... 192,550 201,270 201,765 (90,000 200,000 Tax on Chocolate and Confec- tionery ...... 120,634 111,951 106,347 95,000 85,000 Sales Tax on Carbonated Drinks and Fruit Wines ...... 11,009 11,402 12,876 11,000 12,000 Tax on Matches ...... 11,004 9,254 9,901 9,000 I 0,000 Tax on Ice Cream .. . 3,686 3,489 4,038 3,500 3,500 Sales Tax on Certain Goods 36,761 32,916 30,254 28,000 28,000 Tax on Motor Vehicles ... 6,727 9,438 12,731 11,000 55,000 Taxes on Gasoline, Tires and Special Vehicles ...... 158,545 181,682 203,712 195,300 225,000 Tax on Electric Energy 7,549 19,924 19,382 20,500 22,500 Tax on Entertainment Tickets I 7,137 18,392 17,253 15,000 17,000 Tax on Lotteries and Horse Racing 18,794 19,514 19,765 19,200 21,200 Taxes on Pharmacies and Special Pharmaceutic Products ...... 4,333 2,545 2,938 2,585 2,890 Stamp Duty on Documents and Playing Cards ...... 12,498 I 2,185 13,390 12,500 13,500 Export Tax on Fish Products 400 400 1,000 1,000 800 Tax on Shipping Tonnage and Freight ...... 30,284 66,912 17,799 8,000 Miscellaneous ...... II 6

Total Taxes on Goods and Services ...... 2,283,439 2,527,442 2,571,476 2,511 , 185 2,776,990 Total Tax Revenues 3,435,789 3,906,504 3,822,539 3,824,567 4, 119,550

Fees and Licenses Court Fees ...... 6,613 6,561 7,074 5,500 6,500 Patent Fees ...... 1,540 1,666 1,964 1,931 2,175 Import and Export Licenses ...... 10,078 6,587 5,012 4,900 5,000 Other Fees to Certain Administrative Departments ...... 5,861 5,691 4,971 3,969 4,710 Total Fees and Licenses 24,092 20,505 19,021 16,300 18,385 Repayments by Political Subdivisions and Others 30,750 38,394 43,887 47,914 50,988

39 Table I-Statement of Revenues (Continued)

Fiscal Year Ending June 30 1955 1956 (Approved (Proposed 1952 1953 1954 Budget) Budg.!!l_ ( In thousands of kroner) Revenues from State Institutions under Ministry of Ecclesiastical Affairs and Education 12,265 10,987 10,703 10,580 10,908 Ministry of Justice 6,380 6,937 7,552 6,933 6,367 Ministry of Local Government and Labor ...... 14,604 5,239 2,755 2,646 1,664 Ministry of Social Affairs 32,362 32,914 31,735 33,824 34,747 Ministry of Commerce 123 2 Ministry of Industries, Handicraft and Shipping 2,439 2,702 2,506 2,244 1,942 Ministry of Fisheries 1,331 1,443 1,370 1,143 1,188 Ministry of Agriculture 6,456 6,820 8,450 9,329 10,269 Ministry of Transport 4,388 4,392 5,024 4,535 5,139 Ministry of Finance 1.101 1,105 1,217 990 1,031 Ministry of Defense 4,481 5,458 6,393 5,801 5,494

Total Revenues from State Institutions 85,930 77,999 77,705 78,025 78,749

Interest and Dividends Interest on Subscribed Capital in State Banks ...... 3,295 3,745 4,120 5,120 5,120 Interest on Loans to State Banks and Others 29,668 27,476 39,427 44,750 68,000 Dividends from Corporations and other Entities ...... 5,903 5,449 6,741 5,601 6,435

Total Interest and Dividends 38,866 36,670 50,288 55,471 79,555 From Funds and Reserves 22,033 18,280 32,272 29,494 29,040

Other Revenues N.A.T.0. Contributions to Military Construction ...... (8,749) 46,706 73,396 15,000 25,000 From U.S.A. Aid Counterpart Funds for Certain Extraordinary Defense Preparedness Expenditures 67,113 123,293 50,000 34,500 From Reserves for North Norway Development Program . . . . 3,208 22,059 34.403 6,640 From U.S.A. Aid Counterpart Funds for North Norway Deve lopment Program 36,150 10,088 From U .S.A. Aid Counterpart Funds for Productivity Aims 28,562 From Surplus in State Accounts Fiscal Year Ending June 30, 1951 100,000 Miscellaneous 46,421 68,996 27,766 12,066 11,643 Total Other Revenues 140,880 269,586 268,946 77,066 77,783 Total Current Revenues 3,778,340 4,367,938 4,314,658 4,128,837 4,454,050

Capital Revenues Repayments of L:oans Granted by the Government and Sale of Govern­ ment Property 43,381 18,516 15,431 17,797 16,950 Proceeds of Loans 293,041 291,160 Total Capital Revenues 43,381 18,516 308,472 308,957 16,950 Grand Total Revenues 3,821,721 4,386,454 4,623, 130 4,437,794 4,471,000

40 Table II - Statement of Expenditures

Fiscal Year Ending June 30 1955 1956 {Approved {Proposed 1952 1953 1954 Budget) Budget) {In thousands of kroner) Current Expenditures Ordinary Expenditures: The Royal Household ...... 2,808 2,867 2,674 2,836 2,650 Government and Cabine t Office 28,016 31,971 32,412 33,502 34,595 Parliament and State Audit Office 10,060 11,343 12,516 11,647 14 ,576 Supreme Court 594 728 730 735 801 Foreign Affairs ...... 42,063 54,215 68,065 47,4 76 48,025 Ecclesiastical Affairs and Education 209,423 240,428 290,360 279,498 306,993 Other Courts, Police and P risons 121,974 132,880 141,323 136,539 159,215 Local Governme nt and L abor 157, I 28 180,769 220,139 223,999 215,794 Social Affairs . . . .. 451,202 523,865 586.188 603,818 688,640 Commerce ( excepting external debt service) 9,464 53,343 10,970 3,512 3,733 Industries, Handicraft and Shipping 85,429 131,098 96,887 85,767 54,045 Fisheries 18,964 16,100 50,651 57,408 60,701 Agriculture ...... 98,468 113,337 127,719 126,630 139,716 Transport ... . 186,618 222,214 238,966 262,889 275,163 Finance ( excepting internal debt service) 77,010 86,432 84,071 92,799 80,358 National Defense 319,064 546,542 615,231 718,484 748,280 Interest: External Funded D ebt ( 1 ) 67,520 80,295 81,515 85,314 99,983 Internal Funded Debt 76, I 87 70,948 68,985 64,870 75,936 Other Interest 25,268 28,543 39,182 69,200 94,000 Total Interest 168,975 179,786 189,682 219,384 269,919 Less Interest Charged to State Enterprises ... 25,311 27,774 31,983 36,330 40,978 Total Net Interest 143,664 152,012 157,699 183,054 228,941 Other Ordinary Expenditures: Cost of Living Allowances to Pensioners 55,054 75,238 54,527 84,000 54,750 Miscellane ous ...... 22,936 2,751 5,081 59,404 7,364 Total Other Expenditures 77,990 77,989 ~608 143,404 62, 1 I 4 Total Ordinary Expendi­ tures 2,039,939 2,578,133 2,796,209 3,013,997 3,124,340 Net Loss of State Enterprises (taken to- gether) ...... 44,357 73,475 85,784 65,845 62,491 Price Subsidies 412,452 479,253 518,975 540,000 54 0,000 Extraordinary Defense Preparedness 374,017 509,193 596,158 283,372 173,975 Extraordinary Expe nditures North Norway Development Program ...... I 03 ,208 58,208 58,253 Total Curre nt Expenditures 2,973,973 3,698,262 4,055,379 3,903,214 3,900,806 Capital Expenditures Investment: State Railways 77,117 91,645 90,754 96,000 85,000 Telephone and Telegraph 39,969 51,455 49,276 50,500 50,000 Hydro-Electric Plants 83,779 118,254 106,873 81,916 65,000 Other 61,021 56,333 63,222 38,822 38,091 Total Investments 261,886 317,687 310,125 267,238 238,091 Retirements: Retirement of External D e bt 51,926 56,561 55,039 78,707 99,988 Retirement of Internal Debt 253,808 199,639 201,687 187,935 231,215 Retirement of Statutory Fund not Paid Up in State Banks I, 100 900 900 700 900 Total R e tirements 306,834 257,100 257,626 267,342 - rr2.To1 Total Capital Expenditures 568,720 574,787 ~751 534,580 570,1 94 Grand Tota l Expenditures 3,542,693 ;r;-2)};-049- 4,623-:Tio 4-;-4T7J94 4,471,000

( I ) In the State Accounts retirements of external debt are included under "Capital Expenditures" and are taken at the exchan ge rates in effect at the respective dates of issue. The additional expenditures neces­ sary to cover the actual cost in krone r of these retirements at the exchange rates then in effect are included in the item "Interest: External Funded Debt" under the heading "Current Expenditures" as follows: 1952 -25,972; 1953-29,675; 1954-30,363; 1955-31,890 and 1956-35,860.

41 SVALBARD ( including Spitz bergen) Revenues and Expenditures

Fiscal Year Ending June 30 1955 1956 (Approved (Proposed 1952 1953 1954 Budget) Budget) (In thousands of kroner) Revenues ...... , ...... 1,606 1,008 684 1,270(1) 1, 196(2) Expenditures ...... 723 1,070 1,247 1,270 l, 196 Budgetary Surplus ( +) Budgetary Deficit ( - ) ...... +883 -62 -563 (I) Includes surplus from prior years taken in to the extent of 139,800 kroner. (2) Includes surplus from prior years proposed to be taken in to the extent of 57,800 kroner.

The statements of revenues and expenditures appearing in the foregoing Tables for the Kingdom of Norway and for Svalbard, respectively, for the years ended June 30, 1952, 1953 and 1 9 5 4 have been prepared by the Ministry of Commerce from Closed Accounts for the respective years, all the figures except certain subtotals having been extracted from such Closed Accounts. The statements appearing in the foregoing Tables of the Kingdom of Norway's Approved Budget for the fiscal year ending June 3 0, 19 5 5, and Proposed Budget for the fiscal year ending June 30, 1956, have been prepared by such Ministry from the Final Budget Recommendation 1 9 5 4 and the Budget Proposal for 1 9 5 5-1 9 5 6, all the figures except certain subtotals having been extracted from such documents, and the statements appearing in the foregoing Tables of Svalbard's Approved Budget for the year ending June 30, 1955, and Proposed Budget for the year ending June 30, 1956, have been prepared by such Ministry from the Svalbard Final Budget Recommendation 1954 and the Svalbard Budget Proposal for 1955-1956, all the figures having been extracted from such documents.

The following Tables of the Kingdom of Norway's Direct Debt have been prepared by the Ministry of Commerce from the Budget Proposal for 19 5 5-1 9 5 6. All the figures have been extracted from Annex F of said document except those relating to the External Debt, which is computed in that Annex at exchange rates in effect November 30, 1954, rather than December 31, 1954, and the amount of Savings Bonds outstanding which is given in that Annex as of September 30, 1954.

42 PUBLIC DEBT OF THE KINGDOM OF NORWAY

(A) DIRECT DEBT

I. Funded Debt as of December 31, 1954 (a) Internal Debt (Payable in Norwegian Kroner)

(In thousands of kroner) Principal Amount Principal Outstanding Amortization or Amount of December Sinking Fund Title and Interest Rate Date of Issue Maturity Original Issue 31,1954 Provisions ~nnuities 1818-1821 (3, 4 and 4Yzo/o) 1818-1821 Perpetual kr. 52 kr. 52 None 3 Yz o/o Loan of 1942, Series I ( Interest rate now 2 Yz o/o) • April I, 1942 April I, 1982 200,000 174,858 ( 1 ) 3 Yz o/o Loan of 1942, Series II ( Interest rate now 2 Yz % ) • Nov. 15, 1942 Nov. 15, 1982 225,000 198,850 ( I) 3!/z % Loan of 1944, Series II (Interest rate now 2 Yz % ) ,. July I, 1944 July I, 1984 300,000 275,957 ( 1) 3 Yz o/o Loan of 1945 (Interest rate now 2 Yz o/o),. Feb. I, 1945 Feb. I, 1985 300,000 278,452 (I) 3 % Loan of 1946 April I, 1946 April I, 1986 32,500 30,555 ( 1) 2 Yz o/o Loan of 1946, Series I April I, 1946 April 1, 1961 70,000 35,533 ( 1) 2 Yz o/o Loan of 19 4 6, Series II May I, 1946 May I, 1966 112,000 73,974 ( I) 2 Yz o/o Loan of 19 4 6, Series III June 15, 1946 June 15, 1976 99,000 88,552 (I) 2 Yz o/o Loan of 1946, Series IV July I, 1946 July I, 1976 74,500 67,812 (I) 2 Yz o/o Loan of 1946, Series V Aug. I, 1946 Aug. l, 1976 96,000 87,373 (I) 2 Yz o/o Loan of I 9 4 6, Series VI Oct. l, 1946 Oct. l, 1976 120,500 109,671 (I) 2Yz o/o Loan of 1946, Series VII Dec. 15, 1946 Dec. 15, 1976 240,000 218,433 (I) 2 Yz o/o Loan of 1946, Series VIII Oct. l, 1946 Oct. I, 1976 180,000 168,205 ( I) 2 % Loan of 1947 Jan. 15, 1947 Jan. 15, 1957 160,000 81,990 ( 1) 2Yz % Loan of 1947 Feb. l, 1947 Feb. I, 1977 300,000 277,672 ( 1 ) 2!/.i o/o Loan of 1947 May 15, 1947 May 15, 1967 75,000 52,841 (I) 1~% Loan of 1947 May 15, 1947 May 15, 1957 275,000 140,495 ( 1) IY4% Loan of 1948 March I, 1948 March 1, 1960 79,000 45,150 ( 1) IY4 % Loan of 1950 Jan. I, 1950 Jan. I, 1962 50,000 38,301 ( 1) 2Yz o/o Loan of 1950 Jan. I, 1950 Jan. I, 1980 50,000 50,000 ( 1) Premium Bond Loan of 1950"" June I, 1950 July I, 1962 30,000 30,000 None 2!/z % Loan of 1952 July 15, 1952 July 15, 1962 100,000 100,000 (2) I 34 % Loan of 1954 Dec. I, 1954 Dec. I, 1957 100,000 100,000 None 2 % Loan of 1954 June 15, 1954 June 15, 1961 33,000 30,643 (2) 2!/z o/o Loan of 1954, I Feb. 1, 1954 Feb. 1, 1964 120,000 114,000 (2) 2Yz o/o Loan of 1954, II June 15, 1954 June 15, 1964 37,000 35,150 (2) 3 % Loan of 1954, I May I, 1954 May I, 1974 50,000 48,750 (2) 3 % Loan of 1954, II Nov. I, 1954 Nov. I, 1974 50,000 50,000 (2) 3 Yz o/o Loan of 1954, I Feb. I, 1954 Feb. I, 1994 80,000 79,000 (2) 3 Yz % Loan of 1954, II May I, 1954 May l, 1994 80,000 79,000 (2) 3 Yz % Loan of 1954, III Oct. 1, 1954 Oct. I, 1994 21,000 21,000 (2) Total direct internal funded debt kr.3, 182,269

,. By law dated June 28, 1946 and an administrative decision given in joint session of the Storting on the same date, outstanding loans issued during the German occupation from 1941 to 1945, inclusive, were confirmed as far as the principal amount of the loans is concerned. However, the contracts in accordance with which these loans were issued were not confirmed in regard to their amortization terms and the Ministry of Finance was authorized to call them at any time on three months' notice. It was also empowered to reduce their interest rates. By Royal Decree of June 28, 1946, the interest rates on those loans bearing 3 Yz % per annum wer,e reduced to 2 Yz o/o per annum, for interest accruing after July 1, 1946, so that all of these loans now bear interest at 2 Yz o/o per annum. ,.,. Bonds carry no interest but numbers are drawn by lot semi-annually to receive premiums. Premiums amount to I Y4 o/o per annum on principal amount of loan and are tax free. (I) Semi-annual cumulative amortization calculated to retire entire issue by maturity. (2) Semi-annual amortization in equal installments calculated to retire entire issue by maturity.

43 (b) External Debt ( Payable in Foreign Currencies )

Principal Principal Amount Amount of Outstanding Date of Original Title and Interest Rate Issue December 31, Maturity Issue 1954 Kingdom of Norway Twenty-Year 4 !/i o/o Sinking Fund E x ternal Loan Coupon Bonds ...... Mar. I, 1936 Mar. I, 1956 $ 17,000,000 $ 2,254,000 Kingdom of Norway Twenty-Nine-Year 4 !4 % Sinking Fund External Loan Bonds ...... April I, 1936 Apr. I, 1965 $ 31,500,000 $ 19,172,000 Kingdom of Norway Twe nty-Six-Year 4 % Sinking Fund External Loan Coupon Bonds ...... Feb. I, 1937 Feb. I, 1963 $ 29,000,000 $ I 3,189,000 Kingdom of Norway Ten-Year 3 J/i% Sinking Fund External Loan Bonds Apr. I, 1947 Apr. I, 1957 $ I 0,000,000 $ 7,600,000 3% Loan-Export-Import Bank of the United States ...... Mar. 13, 1947 Dec. 31, 1966 $ 50,000,000 $• 31,944,444 2 !/i % Loan-Economic Cooperation Ad- ministration .. Oct. 29, 1948 Dec. 31, 1983 $ 35,000,000 $ 35,000,000 2 o/o Loan-Mutual Security Agency .. Yi May 23, 1952 Dec. 31, 1986 $· 2,400,000 $ 2,400,000 2 o/o Loan-Mutual Security Agency .. Yi June 30, 1952 Dec. 31, 1964 $ 1,800,000 $ 1,800,000 ~ 2 Ys % Debt to the United States Gov- ~ ernment ...... June 18, 1946 July I, 1976 $ 4,590,790 $ 1,525,878 3 % Debt to the United Sta tea Govern- m e nt ...... Oct. 27, 1947 Ja n. I, 1963 $ 600,090 $ 244,610 4 Y,. % Loan-1.B.R.D...... Apr. 8, 1954 Apr. 15, 1974 $ 25 ,000,000 $ 25,000,000 $140,129,932 Debt to E .P.U.-lnitial Credit Balance Allotted {For Interest Rate see Note 4) ...... Sept. 19, 1950 (4) E.P.U.u/ a• I 0,000,000 E.P.U.u/ a• I 0,000,000 June 25, 1945 2 Y,. % Debt to the Canadian Govern- and ment ...... June 6, 1946 June 25, 1959 Can. $ 23,656,985 Can. $ I 0,515,063 Norwegian 3 % (formerly 3!/i % ) State Loan of 1886 ...... Oct. I, Nov. 1886 I, 1961 £ 1,700,000(6) £ 402, I 00 Norwegian 3 % State Loan of 1888 .. Aug. I, 1888 Aug. I, 1963 £ 3,560,000(6) £ 940,760 Norwegian 3 !/i % State Loan of 1902 Apr. I, 1902 Apr. I, 1962 £ 2,005,868(7) £ 539,183 Norwegian 3 !/i % State Loan of 1904 Dec. 15, 1904 Dec. 15, 1964 £ 2,268,098(7) £ 765,566 Norwegian 3 !/i o/o State Loan of 1905 June 15, 1905 Dec. 15 , 1964 £ 2,294,083 ( 7) £ 774,446 Kingdom of Norway {Shipping) Sterling Registered Stock 4 J4 % Feb. 2, 1951 Dec. 15, 1966 £ 5,000,000 £ 5,000,000

£ 8,422,055 3 o/o Debt to the Swedish Government Feb. 24, 1950 Dec. 31, 1979 S.kr.•• 125,000,000 S.kr.•• 125,000,000 N.kr. 172,500 (I) Norwegian State Loan 4 Y2 o/o of 19 53 Aug. 25, 1953 Feb. 25, 1961 S.kr. 50,000,000 S.kr. 50,000,000 69,000 (I) Norwegian State Loan 4 Yi o/o of 1954 Apr. 28, 1954 Apr. 28, 1969 S.kr. 50,000,000 S.kr. 50,000,000 69,000 (I)

S.kr. 225,000,000 N.kr. 310,500 Kingdom of Norway 3 o/o Loan of 19 3 8 June I 0, 1938 June I, 1971 S.frs.••• 46,500,000 S.fra.••• 29,380,500 N.kr. 48,096 (I) 2 Y2 o/o Loan-Economic Cooperation Ad- ministration ...... July 25, 1951 End of 1964 (8) (8) N.kr. 157,654 (5) Total Direct External Funded Debt N.kr. 1,836,081

Total Direct Internal Funded Debt N.kr. 3,182,269 Total Direct Funded Debt .. . .. N.kr. 5,018,350

• E.P.U. units of account of 0.88867088 grams of fine gold. •• Swedish kronor. • "" Swiss francs.

Notes: (I) Semi-annual or annual cumulative sinking fund or amortization calculated to retire entire issue by maturity. (2) Semi-annual sinking fund calculated to retire $3,400,000 principal amount prior to maturity. ( 3) Annual amortization in equal installments calculated to retire entire issue by maturity, p ayable in U. S. dollars or in Norwegian kroner at the option of the U. S. Government. Additional amortization in kroner has been effected. ( 4) Interest rate as of December 31, 1954 is 3 J/s o/o per annum. Under the provisions of the E.P.U. Agreement, upon liquidation of the E.P.U., the debt will be converted into various European currencies and consolidated; it will bear an interest at the rate of 3 o/o per annum and will be amortized over a 1 2 year period commencing as of the beginning of the third year following the liquidation. (5) Principal to be repaid by deliveries of aluminum over a ten year period beginning in 1954 or 1955. (6) Also expressed in kroner, reichsmarks and francs at conversion rates fixed in the Loan Agreement:£ l=N.kr. 18. 13!,S=RM 20.40=Fr. 25.20. ( 7) Also expressed in kroner in gold or in francs at conversion r ates fixed in the Loan Agreement: i 19-6-5=N.kr. 360=Fr. 500. ( 8) The outstanding amount in Norwegian kroner represents the following amounts: 200,000 U. S. dollars; 31,500,000 German marks; 6,200,000 Danish kroner; 11,250,000 Austrian achillings; 627,590-15-7 pounds sterling and 71,350,000 Norwegian kroner, plus accrued interest in each case calculated to July I, 1954. ( 9 ) Conversion of amounts in foreign currencies to amounts in Norwegian kroner in this table a re m ade at exchange rates in effect on December 31, 19 54, which rates were as follows: I U . S. $ = 7. 15 N.kr., 1 Can. $=7.405 N.kr., I £= 20.02 N.kr., 1 Swedish krona=l.38 N.kr., I Swiss franc= l.637 N.kr. and 1 E.P.U. unit of account=7.14286 N.kr. II. Floating Debt as of December 31, 1954

Internal Debt (Payable in Norwegian Kroner) (In thousands of kroner)

Interest or Principal Amount Discount Outstanding Title Rate Maturity December 31, 1954 Savings Bonds Issue of 1947 Registered bonds payable at any time at (maximum amount I 00 increasing premiums during the lifetime million kroner) of bonds, calculated to yield an average of 3.53 per cent when held for eight years. N.kr. 28,845

Discount rate: Treasury Bills Yzo/o 3 months' bills N.kr. 32,000 ~% 6 months' bills N.kr. 24,000 I % 9 months' bills N.kr. 12,000 I ~% 12 months' bills N.kr. 86,500 IYzo/o 18 months' bills N.kr. 93,350 Total Treasury Bills N.kr. 247,850

Interest rate: Repayable: Deposits with the Treasury 2Yio/o Time deposits N.kr. 542,046 1Yi% on 3 months' notice N.kr. 274,705 I % on I months' notice N.kr. 31,818 Yi% on seven days' notice N.kr. 16,000 Total Deposits with the Treasury N.kr. 864,569

Total Internal Floating Debt N.kr. I, 141,264

Recapitulation of Direct Debt: Total Direct Internal Funded Debt N.kr. 3,182,269 Total Direct External Funded Debt N.kr. 1,836,081 Total Direct Floating Debt N.kr. I, 141,264

Total Direct Debt N.kr. 6,159,614

This total of the Kingdom of Norway's Direct Debt does not include 132,700,000 kroner of intra-governmental debt resulting from the issuance by the Kingdom from time to time of bonds constituting its direct obligations to certain State-owned banks and credit institutions in order to provide them with capital funds. These bonds, known as "capital fund bonds," are held by the bank or institution to which issued, and the interest paid by the Kingdom thereon is taken into the revenues of the respective banks or institutions.

46 (B) INDEBTEDNESS GUARANTEED BY THE KINGDOM OF NORWAY The principal amount outstanding on June 30, 1954, of indebtedness guaranteed by the Kingdom of Norway is shown in the table below: (In thousands of kroner) Funded Debt Floating Debt Internal (Payable in Norwegian kroner) Mortgage Bank of the Kingdom of Norway ...... 307,649 146 The Agriculture Properties Bank of Norway .. . 508 The Norwegian State Bank for Small Property Owners .. .. 92,353 107,529 The Norwegian State Fisheries Bank ...... 72,144 4,011 Municipalities Bank of Norway ...... 322,118 68,304 The Norwegian Industrial Bank Ltd...... 206,913 90 Operating Credit Fund for Agriculture ...... 20,000 The Norwegian State Housing Bank ...... 410,536 40,000 Students" Loan Fund ...... 42,500 Norway's Postal Savings Bank ...... 207,307 A / S Sydvaranger (mining and concentrating company) ...... 66,750 Elektrokemisk A / S (mining company) ...... 12,505 A / S Norsk Jernverk (iron works) ...... 185,000 8,000 The Norwegian Air Lines ...... 15,000 Store Norske Spitsbergen Kullkompani A / S ( coal mining company) . 6,323 Her0ya Elektrokjemiske Fabrikker A / S (electro-chemical manufacturing company) ...... 5,000 The Norwegian Central Clearing Office ...... 7,500 The Norwegian Credit Institution for Export ...... 12,047 Kongsberg Vapenfabrikk (arms manufacturing company) ...... 9,000 Raufoss Ammunisjonsfabrikker (ammunition manufacturing company) 20,000 Norwegian Naval Dockyard ...... 18,000 Shipbuilding for Coastal Trade ...... 29,038 Purchase of Goods for North Norway ...... 5,808 Purchase of Goods for Economic Defense Preparedness ...... 39,538 Loans to Dairies ...... 6,244 Loans to Hotels ...... 14,434 Loans in connection with the Cod Fisheries ...... 30,020 Miscellaneous Loans ...... 54,433

Total Internal Guaranteed Debt 1. 794,448 652,300 External ( 1 ) (Payable in U . S. dollars) Municipalities Bank of Norway ($2,705,000) 19,341 Purchase of Ships ($3,721,560) ...... 26,609 (Payable in Pound Sterling) The Agriculture Properties Bank of Norway (£ 160) ...... 3 (Payable in Swedish kronor) Mortgage Bank of the Kingdom of Norway (S.kr. 16,701,000) 23,043 4 The Agriculture Bank Properties Bank of Norway (S.kr. 10,000) 14 Municipalities Bank of Norway (S.kr. 13,653,000) 18,841 (Payable in Norwegian kroner) The Agriculture Properties Bank of Norway (N.kr. 528,480) (2) 528 Mortgage Bank of the Kingdom of Norway (N.kr. 5,420, I 20) (3) 5,420

Total External Guaranteed Debt ...... 87,834 5,969

Total Guaranteed Debt ...... 1,882,282 658,269

( 1) Conversions of amounts in foreign currencies to amounts in Norwegian kroner in this table are made at exchange rates in effect December 31, 1954 which rates were as follows: I U.S. $= 7.15 Norwegian kroner, 1 £ = 20.02 Norwegian kroner and 1 Swedish krona= 1.38 Norwegian krone. (2) Also expressed in francs and reichsmarks at conversion rates fixed in the loan agreement: 500 francs = 405 reichsmarks = 360 kroner in gold. (3) Partly also expressed in francs and reichsmarks at conversion rates fixed in the loan agreement: 500 francs = 405 reichsmarks = 360 kroner in gold; partly also expressed in reichsmarks at conversion rates: 4 ,500 reichsmarks = 4,000 kroner in gold. The total amount of indebtedness guaranteed by the Kingdom of Norway on June 30, 1954, was 2,540,551,000 Norwegian kroner. 47 (C) ADDITIONAL CONTINGENT LIABILITIES

Since the establishment of the European Payments Union, effective July I, 1950, the transac­ tions between Norway and other members of the E.P.U. have resulted in a net indebtedness of Norway (acting through the Bank of Norway) to the E.P.U. of 98,831,000 E.P.U. units of account as of December 31, 1954, or 705,935,997 kroner at the exchange rate then in effect, in addition to the Kingdom's debt to the E.P. U. representing its initial credit balance of I 0,000,000 E.P.U. units of account, or 71,429,000 Norwegian kroner, shown in the preceding Table of Direct Funded External Debt. Pursuant to the E.P.U. Agreement, the Kingdom was also obligated on the basis of the December 31, 1954, settlement with the E.P.U. to pay in January to the E.P.U. 4,671,000 units of account, or the equivalent of 33,364,299 kroner. Norway has through bilateral agreements with four other members of the Union agreed to repay by July I, 1963, in equal monthly installments, 35,786,000 E.P.U. units of account, or the equivalent of 255,614,388 kroner, of its net E.P.U. indebtedness as of December 31, 1954. In the event of the liquidation of the E.P.U., which will occur on June 30, 1955, if the E.P.U. agreement is not extended, Norway will be obliged to repay its then balance, if any, in accordance with the provisions of the E.P.U. Agreement and the provisions of the bilateral agreements referred to above. Reference is made to the information set forth under "Social Legislation," "Bank of Norway," "Other Banks," and "Membership in International Bank for Reconstruction and Development and in International Monetary Fund" herein.

( D) MISCELLANEOUS LIABILITIES

The United States and the Kingdom of Norway, by agreement of February 24, 1948, have settled the amount of the Kingdom's indebtedness to the United States for Lend Lease deliveries and services, civilian supplies furnished under the military relief program and other financial claims arising out of World War II at $5,900,000 or 42,142,857 kronero\t, to be paid in kroner and property. As of December 31, 1954, the outstanding amount of this debt was $5,775,090 or 41,250,643 kroner. o\t No fixed time for repayment is stipulated in such agreement. As of December 31, 1954, the liability of the Kingdom on called bonds and coupons not presented for payment was as follows: Internal N.kr. 198,697 External (payable in pounds sterling) N.kr. 1,624, I 83.,.e.,.e

Total .. N.kr. 1,822,880

• At the par value between the two currencies established by the In­ ternational Monetary Fund as stipulated in the Agreement. "'" At the exchange rate in effect on December 31, 1954, 1 £=20.02 Norwegian kroner.

48 BANK OF NORWAY Balance Sheet at December 31, 1954 ASSETS Gold Stock ...... kr. 184,750,377.60 Balances Held Abroad and Short-term Foreign Investments .. . . kr. 548,881,282. 10 Foreign Securities .. 106,328,902.54 Temporarily Invested in Gold ... 18.138,5 20.55 Balances Held Under Clearing Agreements 11,097,808.49 684,446,513.68 Norwegian Securities ...... 38,072,325.53 Domestic Bills, etc. . .. . 12,454,393.04 Current Drawing Accounts ...... 41,722,290. 12 Divisionary Coins ...... 1,546,286. 16 Occupation Account ...... " 5,546,136,413.36 Sundry ...... 54,949,969.33 Total Assets kr. 6,564,078,568.82 LIABILITIES Share Capital ...... kr. 35,000,000.00 Reserve Fund .... . 15,950,000.00 Contingency Fund 15,000,000.00 Securities Adjustments Fund 39,000,000.00 Buildings Fund ...... 17,778,820.92 Notes in Circulation ...... " 3,315,096,050.00 Divisionary Notes in Circulation ...... 5,801,952.50 Sight Deposits: State: Regulation Account ...... kr. 38,132,815.02 Account for Loans to Government Banks 4,000,000.00 Counterpart Funds of FOA-grants " 147,826,802.54 Counterpart Funds of FOA-credits I 7,142,863.98 Counterpart Funds of EPU-credits 71,428,600.00 Counterpart Funds of !BRO-credits " I 78,571,500.00 Other Government Deposits " 468,276,587.88 kr. 925,379, 169.42 Other Public Accounts .. . . " 479, I 54,158.22 Domestic Banks . ... . " 557,330,360.20 Other Norwegian ...... 29,024,066.3 5 Foreign ...... 38,943,764.55 " 2,029,831,518.74 Checks Outstanding ...... 6,782,862. 88 Due to Foreign Banks ...... kr. 136,572,899. 17 Liabilities Under Clearing Agreements 130,604,685.74 267, 177,584.91 Due to EPU"' 672,571,697.60 Sundry . . .. 144,088,081.27 Total Liabilities kr. 6,564,078,568.82

• Does not reflect December deficit with E.P.U. amounting to 56,678,594 kroner, which is included in "Due to Foreign Banks," and interest July I to December 31, 1954, to E.P.U. amounting to I 0,050,004 kroner. FURTHER INFORMATION In giving the foregoing information, the Kingdom of Norway has referred in certain instances to programs and policies which project into the future. Such statements express the existing views and policies of the Government of the Kingdom. However, future policy is subject to legislative as well as executive determination and to the exigencies which the Government of the Kingdom may have to meet. Further inf?rmation concerning these securities and their issuer is to be found in the Registra­ tion Statement on file with the Securities and Exchange Commission. The undersigned, Minister of Commerce of the Kingdom of Norway, has supplied, in his official capacity as such Minister, duly authorized thereto, the information set forth herein except the information appearing under "Underwriters" and "Foreign Exchange Control and Reserves." All the information so supplied is stated herein on his authority.

KINGDOM OF NORWAY By Arne Skaug Minister of Commerce 49