Information from the Commission - Financial statements of the European Coal and Steel Community at 31 December 1998
25. 8. 1999 EN Official Journal of the European Communities C 240/3 FINANCIAL STATEMENTS OF THE EUROPEAN COAL AND STEEL COMMUNITY AT 31 DECEMBER 1998 (1999/C 240/03) In accordance with undertakings given by the Commission on behalf of the ECSC with regard to its borrowing activities, the following financial statements, drawn up in conformity with Article 45c of the Treaty establishing the ECSC, have been published: - the balance sheet of the European Coal and Steel Community at 31 December 1998, - the profit-and-loss accounts for the year ending 31 December 1998, - the allocation of the surplus for the year ending 31 December 1998, - the notes relating to the financial statements at 31 December 1998. These financial statements are accompanied by the report of the Court of Auditors, as provided for under Article 45c of the ECSC Treaty. ECSC financial statements at 31 December 1998 (Amounts in ecus) - Before allocation of surplus - ASSETS Balances with central banks (Note 3) Loans and advances - repayable on demand - with agreed maturity dates or periods of notice (Note 4. 1) - loans (Note 4. 2) 31 December 1998 31 December 1997 27 373 555 027 5 687 189 6 355 643 400 672 394 1 249 393 642 367 368 554 1 746 786 240 Loans and advances to customers (Note 5) - loans - levy - fines - credit Financial assets (Note 6) - issued by public bodies - issued by other borrowers Shares and similar securities Tangible and intangible assets (Note 7) Other assets (Note 8) Prepayments and accrued income (Note 9) TOTAL ASSETS Off-balance-sheet commitments (Note 26) Total 1 655 753 225 2 120 510 437 1 583 902 933 732 880 90 001 060 6 039 382 1 836 139 393 2 141 909 72 785 575 14 927 351 Total 1 680 676 255 1 925 994 228 1 133 982 993 390 437 998 34 770 301 1 302 095 776 321 410 542 - Total 1 559 191 292 1 623 506 318 1 293 461 8 083 389 121 505 439 5 026 530 434 2 623 844 87 399 574 169 427 311 5 930 016 739 372 924 076 590 786 635 C 240/4 EN Official Journal of the European Communities 25. 8. 1999 - Before allocation of surplus - LIABILITIES 31 December 1998 31 December 1997 244 - - 45 239 1 847 546 788 2 277 664 834 Total 1 847 547 032 LIABILITIES VIS-À-VIS THIRD PARTIES Amounts owed to credit institutions - repayable on demand - with agreed maturity dates or periods of notice - borrowings (Note 10) Debts evidenced by certificates (Note 11) Other liabilities (Note 12) Accruals and deferred income (Note 13) Provisions for liabilities and charges (Note 14) Commitments for the ECSC operating budget (Note 15) TOTAL LIABILITIES VIS-À-VIS THIRD PARTIES NET POSITION for financing the ECSC operating Provisions budget (Note 16) Provisions for major exposures (Note 17) Reserves (Note 18): - Guarantee Fund - Special Reserve - Former Pension Fund Value adjustment reserve Surplus brought forward Surplus for the financial year (Note 19) NET TOTAL 530 000 000 176 055 284 71 285 439 Total TOTAL LIABILITIES Off-balance-sheet commitments (Note 26) 958 179 659 29 591 303 93 919 208 122 906 181 695 662 822 3 747 806 205 476 042 442 23 000 000 777 340 723 - 1 195 230 1 145 834 1 278 724 229 5 026 530 434 500 000 000 176 055 284 69 622 926 2 277 710 073 1 359 610 749 12 788 060 121 190 289 87 376 377 853 779 193 4 712 454 741 441 712 926 27 000 000 745 678 210 313 119 537 606 2 320 137 1 217 561 998 5 930 016 739 497 605 519 712 444 915 25. 8. 1999 EN Official Journal of the European Communities C 240/5 CHARGES Profit-and-loss account for the year ending 31 December 1998 (Amounts in ecus) 1998 financial year 1997 financial year 31 292 1 622 062 14 278 026 372 189 8 818 500 Interest payable and similar charges (Note 20) Commissions payable Net losses on financial operations - foreign-exchange losses - losses on financial assets - value adjustments in respect of financial assets (Note 6) Total Administrative expenditure (Note 21) Value adjustments in respect of tangible assets (Note 7) Other operating charges (Note 22) 171 17 752 113 55 704 738 Value adjustments: loans, advances, provisions: - value adjustments for loans and advances - allocation to the provision for liabilities and charges (Note 14) 32 334 370 30 102 913 Total TOTAL OPERATING CHARGES Extraordinary charges Conversion difference Legal commitments for the financial year (Note 15) Allocation to the provisions for financing the ECSC operating budget (Note 16) Allocation to the Guarantee Fund (Note 18) Surplus for the financial year (Note 19) TOTAL CHARGES Total 232 061 730 561 449 73 457 022 5 000 000 407 994 267 708 62 437 283 374 193 186 137 845 2 735 343 153 992 955 26 000 000 30 000 000 587 059 329 1 145 834 588 205 163 331 419 509 844 743 15 931 380 5 000 000 573 251 382 650 9 190 689 363 342 222 580 380 746 892 180 869 553 274 000 000 31 256 356 850 795 403 2 320 137 853 115 540 C 240/6 EN Official Journal of the European Communities 25. 8. 1999 INCOME 1998 financial year 1997 financial year Interest receivable and similar income (Note 23) (including interest on fixed-income securities: 78 459 620 in 1998 and 84 157 839 in 1997) Net profit on financial operations - foreign-exchange profits - profits on financial assets - withdrawal of value adjustments in respect of financial assets (Note 6) 346 079 959 420 240 962 257 775 12 386 190 11 882 835 36 600 10 665 375 2 533 921 Total 24 526 800 13 235 896 Withdrawal of value adjustments in respect of loans and advances and provisions: - withdrawal of value adjustments in respect of loans and advances - withdrawal exposures (Note 17) from the provision for major Total Other operating income (Note 24) Extraordinary income TOTAL OPERATING INCOME Withdrawal from the value adjustment reserve Income relating to the ECSC operating budget (Note 25) Withdrawal from the provision for financing the ECSC operating budget (Note 16) 63 963 378 37 198 844 4 000 000 9 000 000 67 963 378 2 729 291 22 262 441 321 690 313 119 146 570 354 - TOTAL INCOME 588 205 163 46 198 844 22 507 685 - 502 183 387 746 892 301 054 072 49 131 189 853 115 540 25. 8. 1999 EN Official Journal of the European Communities C 240/7 Allocation of the surplus for the year ending 31 December 1998 (Amountsin ecus) Surplus not allocated at 1 January Surplus for the year to be allocated Allocation to the former pension fund (Note 18) Surplus not allocated at 31 December 1998 financial year 1997 financial year 1 195 230 1 145 834 2 341 064 1 674 223 666 841 537 606 2 320 137 2 857 743 1 662 513 1 195 230 Total C 240/8 EN Official Journal of the European Communities 25. 8. 1999 1. 1. 1. NOTES RELATING TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 1998 (Amounts in ecus) PRESENTATION OF THE FINANCIAL STATEMENTS The European Coal and Steel Community (ECSC) was established by the Treaty of 18 April 1951. According to the Treaty, the task of the ECSC is to contribute to the economic expansion of the Member States through the establishment of a common market for coal and steel. Since the ECSC Treaty is due to expire on 23 July 2002, the rate of the ECSC levy was reduced to zero in 1998 (Commission Decision of 23 December 1997), and the ECSC lending activity has been virtually discontinued since July 1997 (Commission Decision of 22 June 1994). Thus most of the ECSC’s funds now come from the net balance achieved in the management of the various reserves and provisions. 1. 2. The ECSC’s financial statements at 31 December 1998 are presented in accordance with Council Directives 78/660/EEC and 86/635/EEC on the annual accounts and consolidated accounts of banks and other financial institutions (1). 1. 3. ECSC accounts are kept in the various currencies used for its financial activity. The financial statements are expressed in ecus. The following rates have been used for converting year-end balance-sheet amounts expressed in national currency into ecus: 31. 12. 1998 31. 12. 1997 Belgian and Luxembourg francs Danish krone German mark Greek drachma Portuguese escudo French franc Finnish markka Dutch guilder Irish pound Italian lira Austrian schilling Spanish peseta Swedish krona Pound sterling Canadian dollar Swiss franc United States dollar Japanese yen 40,3399 7,44878 1,95583 329,689 200,482 6,55957 5,94573 2,20371 0,787564 1 936,27 13,76030 166,386 9,48803 0,705455 1,80613 1,60778 1,16675 132,800 40,7675 7,52797 1,97632 312,039 202,137 6,61214 5,98726 2,22742 0,771961 1 942,03 13,9020 167,388 8,73234 0,666755 1,58256 1,60553 1,10421 143,680 (1) OJ L 222, 14. 8. 1978 and OJ L 372, 31. 12. 1986. 25. 8. 1999 EN Official Journal of the European Communities C 240/9 1. 4. At 31 December 1998 the various currencies listed above, together with the ecu, made up the ECSC’s balance sheet as follows: Currency Assets Liabilities (ECU) 1 167 020 649 1 863 091 129 126 164 697 959 419 309 141 684 725 800 737 451 870 878 61 469 282 966 793 129 182 221 300 108 832 44 034 166 121 479 377 77 171 989 807 585 927 140 586 054 574 589 511 0 5 106 708 0 120 294 732 264 812 940 3 702 982 78 212 738 Sub-total 3 853 138 380 3 935 154 710 696 352 1 166 651 259 227 811 867 016 5 286 193 269 209 931 84 906 684 0 2 002 0 727 005 212 5 281 416 274 206 946 84 880 148 Total 5 026 530 434 5 026 530 434 Ecu Belgian franc German mark Portuguese escudo French franc Finnish markka Dutch guilder Irish pound Luxembourg franc Italian lira Austrian schilling Spanish peseta Danish krone Greek drachma Swedish krona Pound sterling Swiss franc United States dollar Japanese yen NOTES: The ecu has a much larger place in the ECSC’s accounts than suggested by the above table. This is explained by certain accounting operations, mainly the offsetting of accounts receivable and payable relating to currency swaps. The offsetting of these items on the assetts and liabilities sides is designed to prevent artificial inflation of the balance sheet. This accounting operation is carried out in ecus and involved a total of ECU 169 388 841 in 1998. The real weight of the ecu in the ECSC’s accounts can therefore be assessed more accurately if this amount is added both to the assets and to the liabilities sides of the balance sheet. 2. ACCOUNTING PRINCIPLES AND METHODS The financial statements are drawn up in accordance with generally recognised accounting prin- ciples. Charges and income for the financial year are converted to ecus at the monthy accounting rate in force on the day of the transaction. C 240/10 EN Official Journal of the European Communities 25. 8. 1999 3. BALANCES WITH CENTRAL BANKS This item represents the ECSC’s balances with the central banks of certain Member States. 4. LOANS AND ADVANCES TO CREDIT INSTITUTIONS 4. 1. With agreed maturity dates or periods of notice The breakdown of the remaining time to maturity of these operations is as follows: Up to three months Three months to one year 31. 12. 1998 31. 12. 1997 390 192 760 10 479 634 361 076 698 6 291 856 Total 400 672 394 367 368 554 4. 2. Loans The breakdown of the remaining time to maturity of these operations is as follows: Up to three months Three months to one year One to five years Over five years 31. 12. 1998 31. 12. 1997 54 614 003 275 119 394 172 233 077 324 131 965 827 990 889 1 149 308 488 91 669 356 101 112 710 Total 1 249 393 642 1 746 786 240 (ECU) (ECU) 25. 8. 1999 EN Official Journal of the European Communities C 240/11 5. LOANS AND ADVANCES TO CUSTOMERS 5. 1. Loans The loans granted to credit institutions are shown under Loans and advances to credit institutionsí (see Note 4). The other loans break down as follows: 1. Loans disbursed from borrowed funds - amounts outstanding - value adjustments 31. 12. 1998 31. 12. 1997 (ECU) 1 648 424 166 1 943 860 811 - 129 626 942 - 170 220 655 Sub-total 1 518 797 224 1 773 640 156 2. Loans from the special reserve and other own funds for financing subsidised housing 23 693 878 20 235 203 The breakdown of these loans by time remaining to maturity is as follows at 31 December Interim total 1 542 491 102 1 793 875 359 Up to three months Three months to one year One to five years Over five years 1998 1997 19 462 330 90 966 387 84 129 143 55 848 217 1 074 090 693 1 007 507 068 487 598 634 816 611 585 3. Loans paid from the former pension fund to officials of the European Communities for housing construction 41 160 654 41 539 969 4. Loan repayments overdue and interest on arrears - amounts outstanding NB. Loans are generally guaranteed by Member States, banks or businesses or by mortgages. 251 177 724 065 Grand total 1 583 902 933 1 836 139 393 5. 2. Levy The 1998 levy rate was 0 %, so the claims at 31 December 1998 therefore refer to previous years. item amounted to ECU 7 488 192 at 31 December 1998 Before value adjustment, (ECU 9 165 606 at 31 December 1997). It comprises in particular ECU 5 958 532 subject to legal proceedings (ECU 6 342 867 at 31 December 1997) and ECU 42 261 relating to temporary deferment in respect of coal in stock (ECU 282 491 at 31 December 1997). this Payment of the levy in respect of coal in stock is temporarily deferred under a general decision taken in 1972. 5. 3. Fines This item contains the Commission’s claims on companies fined in accordance with the rules et out in the Treaty. After value adjustment it amounts to ECU 90 001 060 (ECU 72 785 575 at 31 December 1997). C 240/12 EN Official Journal of the European Communities 25. 8. 1999 This item has two main components. A fine totalling ECU 104 364 350 that the Commission imposed on steel companies for infringing the rules on competition in the marekting of steel beams (Decision 94/215/ECSC (1) of 16 February 1994). ECU 32 151 350 has been paid in fines under this Decision, against which appeals have been lodged with the Court of First Instance by virtually all the companies concerned. A fine totalling ECU 27 380 000 was imposed by the Commission (Decision 98/247/ECSC (2) of 21 January 1998) under Article 65 of the Treaty on steel companies for concerted agreement on the formula for calculating the alloy surcharge. Payments totalling ECU 14 740 000 have been received, while two-thirds of the companies affected by the decision have lodged appeals with the Court of First Instance. 5. 4. Interest subsidies to be recovered This item comprises claims on companies in receipt of a subsidised loan which the Commission has been obliged to ask to reimburse all or part of the interest subsidy already paid. 6. FINANCIAL ASSETS The ECSC internal rules imposing the obligation to exercise due caution stipulate that portfolio investments are to be confined to securities issued by first-ranking entities. However, in 1998, by way of exception, the ECSC acquired shares and other variable-income securities from a private- sector company under an agreement to restructure the debt of a defaulting debtor. 6. 1. Valuation Bonds, other fixed-income securities and shares and similar securities are valued at the average purchase price or the market value obtaining at the end of the financial year, whichever is the lower. This principle is not applied in the case of securities considered as financial fixed assets (see Note 6. 5). (1) OJ L 116, 6. 5. 1994. (2) OJ L 100, 1. 4. 1998. 25. 8. 1999 EN Official Journal of the European Communities C 240/13 6. 2. Composition Bonds and other fixed-income securities break down as follows: (ECU) Value adjustments on bonds/shares and similar securities allo- cation (withdrawal) 31. 12. 1998 31. 12. 1997 1 114 016 464 1 306 255 040 - 2 195 917 - 1 963 347 - 4 159 264 1 112 053 117 1 302 095 776 22 028 111 89 033 938 - 9 686 918 - 98 235 - 9 785 153 21 929 876 79 248 785 390 861 607 242 495 366 90 000 - 423 609 - 333 609 390 437 998 242 161 757 1 526 906 182 1 637 784 344 - 11 792 835 - 2 485 191 - 14 278 026 1 524 420 991 1 623 506 318 90 385 039 55 614 738 - 55 614 738 34 770 301 0 0 0 1 617 291 221 1 637 784 344 43 821 903 - 58 099 929 - 14 278 026 1 559 191 292 1 623 506 318 (a) Bonds: ISSUED BY PUBLIC BODIES: - Gross value - Value adjustments - Net value OWN-DEBT SECURITIES: - Gross value - Value adjustments - Net value ISSUED BY OTHER BORROWERS: - Gross value - Value adjustments - Net value TOTAL BONDS: - Gross value - Value adjustments - Net value (b) Shares and similar securities (1): - Gross value - Value adjustments - Net value GRAND TOTAL: - Gross value - Value adjustments - Net value (1) These shares and securities were received by the ECSC on signing a plan to restructure the debt of a defaulting debtor. C 240/14 EN Official Journal of the European Communities 25. 8. 1999 6. 3. Maturities in 1999 Securities in the portfolio reaching final maturity during 1998 represent the following amounts (ECU): - Issued by public bodies: - Own-debt securities: - Issued by other borrowers: 515 733 748 1 737 802 58 014 123 Total 575 485 673 6. 4. Listed/unlisted securities The securities portfolio comprises ECU 1 455 715 767 of securities with a stock-exchange listing, the balance of ECU 103 475 525 being unlisted securities. 6. 5. Financial fixed assets 6. 5. 1. Financial fixed assets are defined as securities that will remain in the portfolio until their final maturity. They comprise mainly short-term paper and own-debt securities repurchased for servicing ECSC borrowings. 6. 5. 2. Financial fixed assets are valued at average purchase price or redemption value, whichever is the lower. The redemption value of these securities is less than the average purchase price by a total of ECU 911 682. 6. 5. 3. Financial fixed assets are made up as follows (ECU): - Issued by public bodies: - Own-debt securities: - Issued by other borrowers: 76 276 763 19 660 077 25 672 081 Total 121 608 921 7. TANGIBLE AND INTANGIBLE ASSETS Year of acquisition Acquisition price 31. 12. 1997 Net value Acquisitions Net book value of disposals Amortisation Operations during the year (ECU) 31. 12. 1998 Net value Tangible assets - Lisbon - Canberra - Windhoek Intangible assets 1986-1993 2 670 796 1 040 075 1987 1992 2 511 059 802 172 970 935 372 862 2 383 872 - Lease on Milan building 1986 879 882 239 972 Total tangible and intangible assets 2 623 844 - - - - - - - 224 892 815 183 922 389 - 48 546 74 568 0 298 294 922 389 348 006 1 113 477 - 59 988 179 984 922 389 407 994 1 293 461 25. 8. 1999 EN Official Journal of the European Communities C 240/15 The various buildings owned by the ECSC were originally leased to the European Community. The rent paid on such leases provided a return on the funds invested by he ECSC. Under the terms of the leases, in 1994 and 1995, the Commission repaid the outstanding principal due to the ECSC with a view to transferring ownership officially from the ECSC to the European Community. The transfer of ownership of the building in Canberra was completed in 1998. For the ECSC, this transaction generated a capital gain of ECU 954 130, this being the difference between the transfer price (ECU 1 876 519) and the net book value (ECU 922 389) at the date of transfer. As regards the other buildings, pending the completion of the legal formalities for the transfer of ownership that are currently being conducted with the competent authorities, the advances received from the European Community feature on the liabilities side of the balance sheet for a total of ECU 3 191 060 (Note 12). 8. OTHER ASSETS Exchange value in ecus of the difference between currency receivable and payable under currency exchange operations (swaps) (1) - Portfolio taxes and VAT to be reclaimed - Loans to officials - Miscellaneous (1) See Note 12 9. PREPAYMENTS AND ACCRUED INCOME 31. 12. 1998 31. 12. 1997 (ECU) - 79 710 355 2 619 620 5 423 399 40 370 2 890 676 4 777 265 21 278 Total 8 083 389 87 399 574 Interest accrued on loans and swaps Interest accrued on deposits and securities portfolio Levy declared for current and previous years, but payable after 31 December (Note 25) Issuing costs and redemption premiums Cumulative value adjustments 31. 12. 1998 31. 12. 1997 (ECU) 78 722 077 39 676 408 - 6 897 774 88 543 207 45 429 135 26 209 470 9 245 499 125 296 259 169 427 311 - 3 790 820 - Total 121 505 439 169 427 311 C 240/16 EN Official Journal of the European Communities 25. 8. 1999 10. AMOUNTS OWED TO CREDIT INSTITUTIONS The remaining time to maturity on these operations is as follows: Repayable on demand Up to three months Three months to one year One to five years Over five years 31. 12. 1998 31. 12. 1997 244 (ECU) - 154 270 850 147 072 173 329 368 744 246 407 737 1 326 792 455 1 831 349 202 37 114 739 52 880 961 Total 1 847 547 032 2 277 710 073 11. DEBTS EVIDENCED BY CERTIFICATES Part of the borrowings outstanding at 31 December 1998 will reach maturity during the 1999 financial year. These borrowings total ECU 5 336 981. 12. OTHER LIABILITIES the difference between currency Exchange value in ecus of receivable and payable under currency exchange operations (swaps) (1) Current account, ECSC operating budget Advance payments for transfer of buildings (2) Other 31. 12. 1998 31. 12. 1997 (ECU) 14 945 315 7 276 488 3 191 060 4 178 440 - 3 572 400 5 067 579 4 148 081 (1) See Note 8. (2) In accordance with the possibility offered under the decision of 11 June 1992, in the course of 1994 and 1995 the Commission had made advance payments in respct of the transfer of the buildings leased to it by the ECSC (Note 7). Total 29 591 303 12 788 060 13. ACCRUALS AND DEFERRED INCOME Interest on borrowings and credit lines Commissions on loans Issuing premiums 31. 12. 1998 31. 12. 1997 (ECU) 87 650 053 111 943 954 189 976 6 079 179 233 001 9 013 334 Total 93 919 208 121 190 289 25. 8. 1999 EN Official Journal of the European Communities C 240/17 14. PROVISION FOR LIABILITIES AND CHARGES Operations in 1998 31. 12. 1997 Allocation Withdrawal Provision for withholding tax to be paid (1) Provision for interest-rate risk (2) 6 125 674 43 254 269 274 402 28 278 573 Provision for special costs relating to banking activities (3) 200 000 - Provision for appeal against Decision 94/215/ECSC (4) 37 796 434 1 332 875 Provision for appeal against Decision 98/247/ECSC (5) - 8 287 062 Total 87 376 377 38 172 912 - - - - - - (ECU) Exchange-rate movement 65 667 - 2 708 775 - - - 31. 12. 1998 6 465 743 68 824 067 200 000 39 129 309 8 287 062 - 2 643 108 122 906 181 (1) This provision was created to allow the ECSC to meet its obligations in respect of a securities transaction on which there is a difference of interpretation regarding the applicability of withholding tax. (2) Following the default of one borrower, long-term securities issued by the ECSC (i. e. with a maturity date after 2002) are no longer paired with asset items bearing an equivalent interest rate. Under the principle of caution and in view of the expiry of the ECSC Treaty in 2002, a provision has been constituted to fully cover interest-rate risks. (3) This provision was created to cover any legal costs and other unforeseen expenditure. The risk in question is primarily in the legal field because the ECSC has less recourse, for its operations, to national agents who bear all expenditure relating to loan operations. (4) This provision was created from the fines paid under Decision 94/215/ECSC of 16 February 1994 to cover the possible reimbursement of the amounts received should the Court of First Instance rule in favour of the companies which have appealed against this Decision (Note 5. 3). (5) This provision was created from the fines paid under Decision 98/247/ECSC of 21 January 1998 to cover the possible reimbursement of the amounts received should the Court of First Instance rule in favour of the companies which have appealed against this Decision (Note 5. 3). 15. COMMITMENTS FOR THE ECSC OPERATING BUDGET In 1998, commitments for the ECSC operating budget were as follows: Redeployment Research Interest subsidies (Article 54) Interest subsidies (Article 56) Social measures steel industry Social measures (Rechar) coal industry Commitments at 31. 12. 1997 263 072 660 186 545 883 3 521 399 210 127 154 111 130 244 New legal commitments Payments Cancellations (ECU) Commitments at 31. 12. 1998 43 148 955 84 000 000 - - - 53 406 909 60 336 616 909 477 26 389 880 13 183 228 41 511 742 3 567 314 211 302 964 206 641 953 - 2 611 922 56 127 021 18 021 517 127 610 253 79 925 499 79 381 853 26 844 000 23 639 478 15 016 144 67 570 231 Total 853 779 193 153 992 955 177 865 588 134 243 738 695 662 822 C 240/18 EN Official Journal of the European Communities 25. 8. 1999 16. PROVISION FOR FINANCING THE ECSC OPERATING BUDGET Provisions at 31. 12. 1997 Operations during the year Withdrawal Allocation (ECU) Provisions at 31. 12. 1998 Budgetary contingency reserve (1) Provision for financing future operating budgets (2) Impact on the result Provision for late-payment fines and surcharges to be paid subsequently (3) Provision for subsidies to be recovered (3) 80 000 000 274 000 000 72 785 575 14 927 351 - - - - 8 885 969 Total 441 712 926 - 80 000 000 26 000 000 300 000 000 26 000 000 17 215 485 - 90 001 060 6 041 382 476 042 442 (1) This reserve is intended to cover any differences between expenditure committed and income generated by activities during the budget period. The provision has been increased in view of the abolition of the levy and the expiry of the ECSC Treaty in 2002. (2) This provision was constituted as a precautionary measure from the 1997 budget period onwards. It was prompted by the reduction of the levy to 0 % from 1998 and the need to plan for the regular financing of future operational budgets until 2002. (3) Fines and interest subsidies whose repayment has been requested are considered as ECSC resources only when they have actually been paid. Fines imposed but not yet paid and interest subsidies whose repayment has been requested are therefore allocated to provisions. 17. PROVISIONS FOR MAJOR EXPOSURES Against the background of the expiry of the ECSC Treaty in 2002 and the gradual reduction in outstanding loans, exposure is becoming increasingly concentrated on a limited number of large loans (these large exposures are defined in accordance with Directive 92/121/EEC of 21 December 1992 on the monitoring and control of large exposures). The provision for large exposures concerns loans exceeding 25 % of the ECSC’s own funds which are not covered by first-rate guarantees. It is intended to provide cover specifically for this concentration of risk and enable the ECSC to weather any major default. The provision, calculated on the basis of outstanding large exposures at 31 December 1998 and according to a procedure recommended by a firm of international experts, totals ECU 23 million. 18. RESERVES Reserves at 31. 12. 1997 after allocation Allocation (withdrawal) Reserves at 31. 12. 1998 before allocation Allocations at 31. 12. 1998 (ECU) Reserves at 31. 12. 1998 after allocation Guarantee fund Special reserve Former pension fund 500 000 000 30 000 000 530 000 000 176 055 284 71 285 439 - - 176 055 284 71 285 439 - - 530 000 000 176 055 284 1 674 223 72 959 662 Total 747 340 723 30 000 000 777 340 723 1 674 223 779 014 946 The Guarantee Fund is intended to cover lending and borrowing operations. After allocation of ECU 30 million, the Guarantee Fund totalled ECU 530 million at 31 December 1998. This rein- forcing of the Guarantee Fund is connected with he forthcoming expiry of the ECSC Treaty. 25. 8. 1999 EN Official Journal of the European Communities C 240/19 On 11 September 1996 the Commission confirmed its intention of maintaining reserves to cover 100 % of those loans outstanding after 23 July 2002 which are not guaranteed by the government of a Member State. This means that the reserves (Guarantee Fund and provisions) must be gradually increased to approximately ECU 730 million. In view of (a) the regular decrease in the amounts outstanding up to and after 23 July 2002 and (b) the increase in the Guarantee Fund, the solvency ratio can be expected to depart from the 14 to 16 % range laid down during the period of continuous operation and move towards 100 %. The ECSC’s solvency ratio thus increased from 28 % at 31 December 1997 to 33 % at 31 December 1998. The Special Reserve is used to grant loans from ECSC own funds to finance subsidised housing. Lastly, the former Pension Fund originally represented the ECSC’s total pension obligations prior to 5 March 1968. Since that date, the Member States have assumed responsibility, via the general budget, for the payment of staff pensions. This fund is used to finance housing loans for officials of the European Communities and has also been used to grant special loans to the coal and steel industries. 19. ANALYSIS OF THE RESULT FOR THE FINANCIAL YEAR Overall ECSC performance is influenced by both the result of non-budgetary operations (lending/ borrowing - investment - exchange-rate variations) and the out-turn of the ECSC operating budget. 19. 1. Non-budgetary operations Result 31. 12. 1998 31. 12. 1997 (ECU) GROSS OPERATING MARGIN BEFORE CHANGES IN PROVISIONS - Lending/borrowing operations - Interest on bank accounts - Transactions concerning portfolio securities - Miscellaneous 15 129 889 17 797 802 32 845 995 - 2 044 464 - 3 029 327 28 622 820 81 422 198 - 1 499 987 Total 63 729 222 105 515 704 NET CHANGES IN PROVISIONS - Provision for liabilities and charges (1) - Provision for major exposures (2) - Reserve for exchange differences (3) - Value adjustments in respect of loans and advances - 30 102 913 4 000 000 313 118 31 629 008 - 8 818 500 9 000 000 746 892 36 826 654 Result of non-budgetary operations 69 568 435 143 270 750 Amount allocated to financing the operating budget (4) - 38 422 601 - 109 694 257 Result after deducting the net balance allocated to the operating budget 31 145 834 33 576 493 (1) See Note 14. (2) See Note 17. (3) During 1998, changes in exchange rates led to an exchange loss of ECU 2 735 343, which was offset by a withdrawal from the value adjustment reserve (ECU 313 118). (4) In accordance with the change of accounting method on 31 December 1992, income received during the 1998 financial year has been allocated to financing the 1998 operating budget (net balance as in Note 19. 2). C 240/20 EN Official Journal of the European Communities 25. 8. 1999 19. 2. Out-turn of the ECSC operating budget OUT-TURN OF THE BUDGET Expenditure - Administrative expenditure (Note 21) - Legal commitments (Note 15) - Financing of future operating budgets Revenue (net amounts) - Levy (Note 25) - Fines (Note 25) - Interest subsidies (Note 25) - Miscellaneous (Note 25) - Cancellations of legal commitments (Note 25) - Surplus from the previous budget (Note 16) - Net balance for the year (Note 19. 1) 31. 12. 1998 31. 12. 1997 (ECU) 5 000 000 153 992 955 26 000 000 5 000 000 180 869 553 274 000 000 Total 184 992 955 459 869 553 0 6 686 169 4 808 477 831 970 134 243 738 0 38 422 601 101 640 567 0 4 168 145 0 195 235 395 49 131 189 109 694 257 Total 184 992 955 459 869 553 BUDGET OUT-TURN 0 0 19. 3. Result for the financial year 31. 12. 1998 31. 12. 1997 (ECU) Result from non-budgetary operations after deducting the net balance allocated to the operating budget (Note 19. 1) Out-turn of the budget (Note 19. 2) 31 145 834 33 576 493 0 0 Allocation to provisions for financing the operating budget/budgetary contingencies (Note 16) 0 0 Allocation to the Guarantee Fund (Note 18) - 30 000 000 - 31 256 356 Total 31 145 834 33 576 493 RESULT BEFORE ALLOCATION 1 145 834 2 320 137 20. INTEREST AND SIMILAR CHARGES Interest on loans and swaps Bank interest Issuing costs and redemption premiums (ECU) 31. 12. 1998 31. 12. 1997 229 569 814 329 439 704 15 769 2 476 147 36 150 1 943 655 Total 232 061 730 331 419 509 25. 8. 1999 EN Official Journal of the European Communities C 240/21 21. ADMINISTRATIVE EXPENDITURE The ECSC paid a lump sum of ECU 5 million to the general budget of the Commission of the European Communities to cover its administrative expenditure. 22. OTHER OPERATING CHARGES Borrowing costs Swift/Reuters charges Other 23. INTEREST RECEIVED AND SIMILAR INCOME Interest on loans and swaps Payment and redemption premiums Bank interest Interest on financial assets 24. OTHER OPERATING INCOME Lapsed coupons and bonds Other income from lending activities Miscellaneous 31. 12. 1998 31. 12. 1997 (ECU) 27 159 205 013 35 536 Total 267 708 90 620 173 665 118 365 382 650 (ECU) 31. 12. 1998 31. 12. 1997 242 206 441 305 580 385 3 809 968 17 997 505 82 066 045 1 657 860 28 844 878 84 157 839 Total 346 079 959 420 240 962 (ECU) 31. 12. 1998 31. 12. 1997 27 964 1 744 517 956 810 36 351 22 124 702 346 632 Total 2 729 291 22 507 685 C 240/22 EN Official Journal of the European Communities 25. 8. 1999 25. INCOME RELATING TO THE OPERATING BUDGET Levy (1) Fines (2) Miscellaneous (ECU) 31. 12. 1998 31. 12. 1997 0 101 650 532 6 686 169 831 970 0 0 Cancellation of legal commitments (Note 15) 134 243 738 195 235 395 Repayment of interest subsidies (Note 5. 4 and 16) (3) 4 808 477 4 168 145 Total 146 570 354 301 054 072 (1) The ECSC is authorised under the Treaty to impose a levy on coal and steel produced by undertakings in the Community. The levy is calculated on the basis of the average values in the Community of the various products concerned. The levy rate was 0,31 % for the years 1980 to 1990, 0,29 % for 1991, 0,27 % for 1992, 0,25 % for 1993, 0,23 % for 1994, 0,21 % for 1995, 0,19 % for 1996 and 0,17 % for 1997. On 23 December 1997, the European Commission decided to set the levy rate for the 1998 financial year at 0 %. (2) This item comprises the revenue from fines imposed by the Commission in accordance with Articles 58 and 65 of the ECSC Treaty, together with surcharges for late payment. (3) This item comprises the revenue from the repayments of interest subsidies which the Commission was obliged to demand. 26. OFF-BALANCE-SHEET COMMITMENTS 26. 1. Commitments received 31. 12. 1998 31. 12. 1997 (ECU) Commitments arising from swaps - Notional capital commitments relating to interest-rate swaps 203 535 235 243 048 695 - Capital commitments relating to interest-rate and currency 169 388 841 347 737 940 swaps Total 372 924 076 590 786 635 26. 2. Commitments given 31. 12. 1998 31. 12. 1997 (ECU) (a) Loans granted - Loans from borrowed funds signed but not yet disbursed 109 708 164 182 293 126 - Loans from own funds signed but not yet disbursed - 19 039 158 (b) Commitments arising from swaps - Notional capital commitments relating to interest-rate swaps 203 535 235 243 048 695 - Capital commitments relating to interest-rate and currency swaps 184 334 156 268 027 585 (c) Receipts from lapsed coupons and bonds 27 964 36 351 Total 497 605 519 712 444 915 25. 8. 1999 EN Official Journal of the European Communities C 240/23 27. CHANGES IN THE FINANCIAL SITUATION FOR THE YEAR ENDING 31 DECEMBER 1998 (ECU million) 1998 1997 Origin of funds Balance of profit-and-loss account Items not involving a movement of funds - Amortisation of issuing costs and redemption premiums - Value adjustments in respect of financial assets - Value adjustments in respect of tangible assets - Value adjustments in respect of loans and advances, net (withdrawal) - Decrease in Provision for legal commitmentsí - Increase in Provision for financing the ECSC operating budgetí - Increase (decrease) in accruals and deferred payments - Decrease in accruals and deferred income and issuing costs/ redemption premiums - Increase (decrease) in Other liabilitiesí - Increase in Other assetsí - Allocation to the provisions for liabilities and charges - Withdrawal from the provision for major exposures - Withdrawal from the provision for changes in the ecu rate - Exchange-rate adjustments in respect of borrowings and loans - Allocation to the Guarantee Fund/Special Reserve TOTAL FUNDS Other resources - Proceeds from borrowings - Loan repayments - Disposals of buildings - Decreases in bank balances and securities portfolio 1,1 2,3 43,8 0,4 - 36,8 - 158,1 34,3 - 27,3 41,8 16,8 178,5 35,5 - 4,0 - 0,3 - 17,5 30,0 140,5 0 690,6 0,9 - 2,3 0,4 11,7 0,6 23,4 - 206,1 234,1 - 38,6 41,5 - 65,5 - 109,0 12,2 - 9,0 - 0,7 - 26,9 31,3 - 98,3 473,8 1 661,0 0,2 116,3 TOTAL RESOURCES 832,0 2 153,0 Use of funds - Loan disbursements - Redemption of borrowings - Increase in bank balances and securities portfolio 23,2 797,2 11,6 832,0 546,9 1 606,1 - 2 153,0 TOTAL USES C 240/24 EN Official Journal of the European Communities 25. 8. 1999 OUT-TURN OF THE ECSC OPERATING BUDGET FOR 1998 Requirements Resources (ECU million) Forecast Out-turn Resources for the financial year Forecast Out-turn Operations to be financed from current resources (not reimbursable) 1. Administrative expenditure 2. Aid for redeployment (Article 56) 3. Aid for research (Article 55) 3. 1. Steel research 3. 2. Coal research 3. 3. Social research 56,0 28,0 t. e. 4. Aid for conversion (Article 95) 5. 6. 7. Social measures 56) (steel) (Article Social measures (coal) (Article 56) Provision for budgets financing future TOTAL BUDGET 56,0 28,0 0,0 5,0 70,0 84,0 30 t. e. 30,0 0,0 219,0 5,0 1. Current resources 43,1 84,0 1. 1. Yield from levy at 0,00 % 1. 2. Net balance 1. 3. Fines and surcharges for late payment 1. 4. Miscellaneous 2. Cancellation of commitments 3. Unused resources carried over from 1997 4. Withdrawal from the provision ECSC the for financing operating budget 5. Extraordinary resources 0,0 0,0 26,8 26,0 184,9 0,0 55,0 t. e. 5,0 84,0 t. e. 75 t. e. 0,0 38,4 6,7 5,6 134,2 0,0 0,0 0,0 TOTAL BUDGET 219,0 184,9 REPORT OF THE EUROPEAN COURT OF AUDITORS on the financial statements of the European Coal and Steel Community at 31 December 1998 This report concerns the reliability of the accounts drawn up by the Commission in accordance with 1. Article 45c of the Treaty establishing the European Coal and Steel Community. The Court has audited the accounts and financial statements of 2. the European Coal and Steel Community at 31 December 1998 in accordance with generally accepted auditing standards and carried out such checks as it considered necessary. 3. In the Court’s opinion, the attached financial statements (balance sheet at 31 December 1998, profit and loss account, statement of the allocation of surplus and notes to the financial statements), which have been drawn up in accordance with generally accepted accounting principles, give a true and fair view of the assets and financial situation of the European Coal and Steel Community at 31 December 1998 and of the result of its operations for the year then ended. Luxembourg, 30 June 1999. Bernhard FRIEDMANN Acting President Armindo de SOUSA RIBEIRO Member of the Court