Information from the Commission - Financial statements of the European Coal and Steel Community at 31 December 1998
Date: 1999-08-25
Institutions: European Commission
Subjects: ECSC, balance sheet, financial management, financial year

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:

(cid:151) the balance sheet of the European Coal and Steel Community at 31 December 1998,
(cid:151) the profit-and-loss accounts for the year ending 31 December 1998,
(cid:151) the allocation of the surplus for the year ending 31 December 1998,
(cid:151) 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)
(cid:151) Before allocation of surplus (cid:151)

ASSETS

Balances with central banks
(Note 3)

Loans and advances
(cid:151) repayable on demand
(cid:151) with agreed maturity dates or periods of

notice
(Note 4.1)

(cid:151) 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)
(cid:151) loans
(cid:151) levy
(cid:151) fines
(cid:151) credit

Financial assets
(Note 6)
(cid:151) issued by public bodies
(cid:151) 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
(cid:151)

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

(cid:151) Before allocation of surplus (cid:151)

LIABILITIES

31 December 1998

31 December 1997

244

(cid:151)

(cid:151)

45 239

1 847 546 788

2 277 664 834

Total

1 847 547 032

LIABILITIES VIS-(cid:192)-VIS THIRD PARTIES

Amounts owed to credit institutions

(cid:151) repayable on demand
(cid:151) with agreed maturity dates or periods of

notice
(cid:151) 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-(cid:192)-VIS THIRD PARTIES

NET POSITION

for

financing the ECSC operating

Provisions
budget
(Note 16)

Provisions for major exposures
(Note 17)

Reserves
(Note 18):

(cid:151) Guarantee Fund
(cid:151) Special Reserve
(cid:151) 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

(cid:151)

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
(cid:151) foreign-exchange losses
(cid:151) losses on financial assets
(cid:151) 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:
(cid:151) value adjustments for loans and advances
(cid:151) 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

(cid:151) foreign-exchange profits

(cid:151) profits on financial assets

(cid:151) 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:

(cid:151) withdrawal of value adjustments in respect of

loans and advances

(cid:151) 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

(cid:151)

TOTAL INCOME

588 205 163

46 198 844

22 507 685

(cid:151)

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 (cid:145)Loans and advances to credit institutions(cid:146)
(see Note 4).

The other loans break down as follows:

1. Loans disbursed from borrowed funds

(cid:151) amounts outstanding

(cid:151) value adjustments

31.12.1998

31.12.1997

(ECU)

1 648 424 166

1 943 860 811

(cid:150) 129 626 942

(cid:150) 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

(cid:151) 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

(cid:150) 2 195 917

(cid:150) 1 963 347

(cid:150) 4 159 264

1 112 053 117

1 302 095 776

22 028 111

89 033 938

(cid:150) 9 686 918

(cid:150) 98 235

(cid:150) 9 785 153

21 929 876

79 248 785

390 861 607

242 495 366

90 000

(cid:150) 423 609

(cid:150) 333 609

390 437 998

242 161 757

1 526 906 182

1 637 784 344

(cid:150) 11 792 835

(cid:150) 2 485 191

(cid:150) 14 278 026

1 524 420 991

1 623 506 318

90 385 039

55 614 738

(cid:150) 55 614 738

34 770 301

0

0

0

1 617 291 221

1 637 784 344

43 821 903

(cid:150) 58 099 929

(cid:150) 14 278 026

1 559 191 292

1 623 506 318

(a) Bonds:

ISSUED BY PUBLIC BODIES:

(cid:151) Gross value

(cid:151) Value adjustments

(cid:151) Net value

OWN-DEBT SECURITIES:

(cid:151) Gross value

(cid:151) Value adjustments

(cid:151) Net value

ISSUED BY OTHER BORROWERS:

(cid:151) Gross value

(cid:151) Value adjustments

(cid:151) Net value

TOTAL BONDS:

(cid:151) Gross value

(cid:151) Value adjustments

(cid:151) Net value

(b) Shares and similar securities (1):

(cid:151) Gross value

(cid:151) Value adjustments

(cid:151) Net value

GRAND TOTAL:

(cid:151) Gross value

(cid:151) Value adjustments

(cid:151) 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):

(cid:151) Issued by public bodies:

(cid:151) Own-debt securities:

(cid:151) 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):

(cid:151) Issued by public bodies:

(cid:151) Own-debt securities:

(cid:151) 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

(cid:151) Lisbon

(cid:151) Canberra

(cid:151) 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

(cid:151) Lease on Milan building

1986

879 882

239 972

Total tangible and intangible
assets

2 623 844

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

224 892

815 183

922 389

(cid:151)

48 546

74 568

0

298 294

922 389

348 006

1 113 477

(cid:151)

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)

(cid:151) Portfolio taxes and VAT to be reclaimed

(cid:151) Loans to officials

(cid:151) Miscellaneous

(1) See Note 12

9.

PREPAYMENTS AND ACCRUED INCOME

31.12.1998

31.12.1997

(ECU)

(cid:151)

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

(cid:151)

6 897 774

88 543 207

45 429 135

26 209 470

9 245 499

125 296 259

169 427 311

(cid:150) 3 790 820

(cid:151)

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)

(cid:151)

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

(cid:151)

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

(cid:151)

Provision for appeal against Decision 94/215/ECSC (4)

37 796 434

1 332 875

Provision for appeal against Decision 98/247/ECSC (5)

(cid:151)

8 287 062

Total

87 376 377

38 172 912

(cid:151)
(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(ECU)

Exchange-rate
movement

65 667
(cid:150) 2 708 775

(cid:151)

(cid:151)

(cid:151)

31.12.1998

6 465 743
68 824 067

200 000

39 129 309

8 287 062

(cid:150) 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

(cid:151)

(cid:151)

(cid:151)

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

(cid:151)

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

(cid:151)

(cid:151)

(cid:151)

(cid:151)

8 885 969

Total

441 712 926

(cid:151)

80 000 000

26 000 000

300 000 000

26 000 000

17 215 485

(cid:151)

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

(cid:151)

(cid:151)

176 055 284

71 285 439

(cid:151)

(cid:151)

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 (cid:151) investment (cid:151) 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
(cid:151) Lending/borrowing operations
(cid:151) Interest on bank accounts
(cid:151) Transactions concerning portfolio securities
(cid:151) Miscellaneous

15 129 889
17 797 802
32 845 995
(cid:150) 2 044 464

(cid:150) 3 029 327
28 622 820
81 422 198
(cid:150) 1 499 987

Total

63 729 222

105 515 704

NET CHANGES IN PROVISIONS
(cid:151) Provision for liabilities and charges (1)
(cid:151) Provision for major exposures (2)
(cid:151) Reserve for exchange differences (3)
(cid:151) Value adjustments in respect of loans and advances

(cid:150) 30 102 913
4 000 000
313 118
31 629 008

(cid:150) 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)

(cid:150) 38 422 601

(cid:150) 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
(cid:151) Administrative expenditure (Note 21)
(cid:151) Legal commitments (Note 15)
(cid:151) Financing of future operating budgets

Revenue (net amounts)
(cid:151) Levy (Note 25)
(cid:151) Fines (Note 25)
(cid:151) Interest subsidies (Note 25)
(cid:151) Miscellaneous (Note 25)
(cid:151) Cancellations of legal commitments (Note 25)
(cid:151) Surplus from the previous budget (Note 16)
(cid:151) 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)

(cid:150) 30 000 000

(cid:150) 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

(cid:151) Notional capital commitments relating to interest-rate swaps

203 535 235

243 048 695

(cid:151) 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

(cid:151) Loans from borrowed funds signed but not yet disbursed

109 708 164

182 293 126

(cid:151) Loans from own funds signed but not yet disbursed

(cid:151)

19 039 158

(b) Commitments arising from swaps

(cid:151) Notional capital commitments relating to interest-rate

swaps

203 535 235

243 048 695

(cid:151) 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

(cid:151) Amortisation of issuing costs and redemption premiums

(cid:151) Value adjustments in respect of financial assets

(cid:151) Value adjustments in respect of tangible assets

(cid:151) Value adjustments in respect of loans and advances, net (withdrawal)

(cid:151) Decrease in (cid:145)Provision for legal commitments(cid:146)

(cid:151) Increase in (cid:145)Provision for financing the ECSC operating budget(cid:146)

(cid:151) Increase (decrease) in accruals and deferred payments

(cid:151) Decrease in accruals and deferred income and issuing costs/

redemption premiums

(cid:151) Increase (decrease) in (cid:145)Other liabilities(cid:146)

(cid:151) Increase in (cid:145)Other assets(cid:146)

(cid:151) Allocation to the provisions for liabilities and charges

(cid:151) Withdrawal from the provision for major exposures

(cid:151) Withdrawal from the provision for changes in the ecu rate

(cid:151) Exchange-rate adjustments in respect of borrowings and loans

(cid:151) Allocation to the Guarantee Fund/Special Reserve

TOTAL FUNDS

Other resources

(cid:151) Proceeds from borrowings

(cid:151) Loan repayments

(cid:151) Disposals of buildings

(cid:151) Decreases in bank balances and securities portfolio

1,1

2,3

43,8

0,4

(cid:150) 36,8

(cid:150) 158,1

34,3

(cid:150) 27,3

41,8

16,8

178,5

35,5

(cid:150) 4,0

(cid:150) 0,3

(cid:150) 17,5

30,0

140,5

0

690,6

0,9

(cid:151)

2,3

0,4

11,7

0,6

23,4

(cid:150) 206,1

234,1

(cid:150) 38,6

41,5

(cid:150) 65,5

(cid:150) 109,0

12,2

(cid:150) 9,0

(cid:150) 0,7

(cid:150) 26,9

31,3

(cid:150) 98,3

473,8

1 661,0

0,2

116,3

TOTAL RESOURCES

832,0

2 153,0

Use of funds

(cid:151) Loan disbursements

(cid:151) Redemption of borrowings

(cid:151) Increase in bank balances and securities portfolio

23,2

797,2

11,6

832,0

546,9

1 606,1

(cid:151)

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