·. EA - 15a RESTRICTED This report i. restricted to use within the Bank. INTERNA TIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT SECOND LOAN ADMINISTRATION REPORT on THE LOAN TO THE KINGDOM OF THE NEThERLANDS- of August 7, 1947 THE LOANS TO DUTCH SHIPPING COMPANIES of July 15, 194~ THE LOAN TO THE HERSTELBANK of July 26, 1949 and THE LOAN TO KLM of March 20, 1952 May 20, 1953 Department of Operations Europe, Africa and Australasia .. f CONVERSION RATES FOR DUTCH CURRENCY U. S. $1 - f 3.8 f 1 : 26.3 U. S. cents f 1,000,000 - U. S. $263,158 . , '. ' NETHERLANDS BALANCE OF PAYMENTS ON CURRENT ACCOUNT (BILLIONS OF GUILDERS) o 2 4 8 10 1950 I TOTAL NET INVISIBLES RECEIPTS PAYMENTS U. S. DOLLAR ACCOUNT RECEIPTS PAYMENTS 1951 TOTAL RECEIPTS PAYMENTS U.S. DOLLAR ACCOUNT RECEIPTS PAYMENTS '952 TOTAL RECEIPTS PAYMENTS U.S.DOLLAR ACCOUNT RECEIPTS PAYMENTS USE OF RESOURCES (BILL IONS OF GUILDERS) +20~----------- YEARLY + I O~------I +10 +5 t----==:n +5 RESOURCES IMPORTED (NET) RESOURCES EXPORTED (NET) -5~---------~ ~------~~------~--------~--------~------~-5 1938 1948 1949 1950 1951 1952 5/29/53 No.502 IBRD - Economic Staff NETHERLANDS TOTAL EXTERNAL TRADE (BILLIONS OF U.S. DOLLARS) 4.--- r--------, YEARLY TOTALS .3 ,.-, '" - - .,._--__ .,,.-11' -~,.~ - .2 ~ 7..., ~ _-~ - .......IIIIIIII ~ -- -." ~ .I MONTHLY - Scale is 1/12, of annual scale I o I I I· I I I I I I I I I • I I I • I I o EXTERNAL TRADE WITH U. S. (MIl.LlONS OF U.S. DOLLARS) 600 , ~--------~---------~--------~------~50 YEARLY TOTALS MONTHLY - Scale is 1/12 of annual scale 40 IMPORTS ~, 400 ~----------+---~~--~~~~------~---------~30 ~~~~----~~#-----~~----~~~~+---------~20 200 ~-+"~~~~~~~~~-=~-------~IO o '~~~·~~~'~~~~"~"~~O TRADE BALANCES WITH SELECTED AREAS --~r~~~~'~~--~J'~~----------~+IO o -.~--~~~~~~~~~~~~~~+---------~O I4PII!3.",...--::&-..;.~--=-i-=-.---r...~~-Ir~rf--'e1-------+--YlI~--------; -H) -200 ~'~~~'~~~.JA~~--I~-~-~~~-~------~-20 -30 -400 L---------r---ib'A\--/r-----.!.--------'--------' ----1-40 wu~~~~LWww~~~~~~~~~~~~~~~-50 -600 *ExCluding sterling area countries. VOLUME OF TRADE (INDEX, 1938 =100) 200 ~----------------~-------~-------~--,------~200 MONTHLY ----~~~~~~~-+--------~IOO o TERMS OF TRADE ** =100) (INDEX, 1938 120 r----------~--------~----------~--------~120 YEARLY MONTHLY 100 I----------+-------~-r--------~--------~IOO 80 wu~~ww~~LLuw~~~~~~~~~~wu~~D80 1938 '47 '49 '51 '530 J D J D J D J 5/29/53 1950 1951 1952 1953 .. Ii hu int!lAY nf IInit unlllA nf imnnrtc: .. . .. , NETHERLANDS GOLD AND FOREIGN EXCHANGE RESERVES OF THE NET~'~ERLANDS BANK (BILLIONS OF U.S.DOLLARS) I. 2 ~"""""I'""""T"-.-r-~r-r-r--.-,---r-,.-...--r-T--r-r-r-T'""...--r-'1r--r-T--r-r--r-r-T""""r-.r-r-T'''''T''""T'"''T'''T""""T"""'T''''''I--,.--r-r-T''"'l I. 2 1.0 ~--------~----------~--------~~~----~1.0 .8 ~------·~~----------~----~4Y~~------~.8 .6 -+----------+-~~~~~~~----~.6 .4 .2 a ~~~~~~~~~~~~~~~~~o 1938 '47 '49 ' 51 '53 D J D J 0 J D J D 1950 1951 1952 1953 INDUSTRIAL PRODUCTION (VOLUME INDEXES, 1938 =100) 180 , . - - - - - - - - - - - - - - 1 160 YEARLY r QUARTERLY 160 1------------ INDU STRIAL 160 PROD UCTION~ -/ (Excl. building) ~ 140 1 - - - - - - - . " ...-::-----1 ~ ~ ~ ............... i40 ---./' 12 01------#---------1 120 I 00~+-------4 100 80 1 - # - - - - - - - - - - - - - - 1 80 I I I I I I I I I I I I 60 WHOLESALE PRICES AND MONEY SUPPLY (INDEX, 1948:: 100) 200 YEARLY I I QUARTERLY 200 150 ,,,.. ... WHOL.ESALE PRICES\ ~,. _...-_---_. '--- ..... _-_. 150 ~" I ./ ...... --~ ... -- -' - iOO 100 ------ ,. MONEY SUPPLY,! 50 50 a '46 I I '48 t I '50 I I '52 I II I III IV I II I III I IV I II I III I IV I I I a II '" IV 1950 1951 1952 1953 5/29/53 .. . NETHERLANDS GOVERNMENT REVENUES AND EXPENDITURES (BILLIONS OF GUILDERS) o 2 3 4 5 6 EXPENDITURES 1950 REVENUES 1951 EXPENDITURES ~88~~~888&~~2888~~~88~ESm] REVENUES EXPENDITURES 1952 REVENUES E XPE NO I T URE S FV\1V',,-V'>lVV"0?'lty")(~VV")(),(")'{)()"~V'X,)()(,:"()()66<"X:>(,)()(,:><"J: 1953 REVENUES EXPENDITURES 1954 REVENUES 5/29/53 No.505 IBRD - Economic Stoff ~nd Loan Administration Report on the Loans to the Netherlands Table of Content~ Part I - The Bank and the Netherlands ~ General 1 The relations 'with the Netherlands 2 The political situation 2 The economic review - Introduction 3 The overall balance of payments 3 The regional pattern of payment~ 4 The eA~ernal debt 6 The internal. financial situation 6 The use of resources 8 The outlook 9 The importance of Bank loans to economy 10 Part II .... The indivj~dual loans The loan to. the Kingdom of the Netherlands 11 The loans to the shipping companies 11 The loan to the Herstelbank 11 The loan to KLM 12 Annex I - Finrulcial position of the shipping companies Annex II ~ stQ,teroont of income of the shipping companies Annex III - Condensed internal b~ance sheets of the Herste1bank Annex IV - Condensed j"nternal balance sheet of Iq,M B\Rl' I - THE BANK AND THE: &TEl' HERIAIIDS General 1. This report, follows the first loan administration" report on the Bank's loans to the Netherlanda (Loan 109 B dated December 20, 1950) and, except for the economic review, covers the past tiiVQ and one~half years. The economic review covers the period since the beginning of 1952; an analysis of the Dutch economic position in 1951 was contained in the raport on the creditvro,rthiness of the Netherlands (E 203 A dated February 1,. 1952) which was part of the documentation on the KIM loan. 2.. The nine loans made by the Bank to the Netherlands are listed belovl. Loans to the corporate borrowers are guaranteed by the Netherlands Government. Bond Repay-U Date of Last Sales ~nts'" ~orrOVier Amount Interest Agree1D9nt Maturity to __ 20, 1953 (in $' , ( in $' millions) million=:;) Kingdom of the August 7, October 1, Netherlands 1947 1972 N.V.Stoomvaazi:, Maat schappij "Nederland" J'lQ,y 15, Jul¥ 15, (two loans) 4 3-9/16 1948 1958 4.0 1.8 N. V. Vere~nigde Nederlandsche J~ JS, Ju4r 15, Scheepvaartmaatschapp~j 2 3-9/16 1948 1958 N. V. Nederlandsch - Amerikaansche stoonwaart Maatschappij "Holland~ J~ 15, Jul¥ 15, Ameri.l{a Lijn U 2 3-9/16 1948 1958 2.0 0.9 N. V. Koninklijke Rotterdamsche Lloyd Jl: l¥. 15, July 15" (two loans) 4 3-9/16 1948 1958 4,0 1.8 Maat SCh8.ppij tot Financiering van het Nationaa1 Herstel NV July 26, Jl.me 1, (Herst e1bank) 1949 1964 0.6 Koninklijke Luchtvaart Iviaat schappij N. V • March 20, July 1, (KLM) 7 4-1/8 1952 1958 229 1/ including redemptio~ of bonds sold y. reduced to $7.9.3 million through cancella:tion 31 participation of Chase Nationa~ Bank of the City of New York ~ $4.4 IQillion of bonds were sold without guarantee; the paTticipation in the KLM loan is without recourse. -2- All payments on the loan $' were made as due~ The Bank's present investment in the Netherlands (incl\1ding contingent liability) amounts to $207 ~3 million. Thj.s represents 25% of the long-term public externa.l debt of' the Netherlands. - The Relations with the Netherlands 3. Relations betw'een the Bank and the Netherlands Government have been good. Close and useful contact was maintained with the Office of the Financial Counselor to the Netherlands Embassy in Washington. Informatiop on economic and financial conditions in the NetherUu1ds h~s been made avail- able to the Bank by yarious services of the Gover:nlOOnt and, whenever necessar,y,vi~TS have been exchanged on questions of. mutual interest. 4. Following the request of the Netherlands and Surinam GoveI'l'llmnts, the Bank sent a general survey mission to Surinam in November 1951, The report containing the findings and recommendations of this mis sion was trans- mitted to the two Governments by the President of the Bank in May 1952. " Through the cooperation of the Netherlands Bureau of Technical Assistance, the Bank has been able to enlist the services of Dutch experts for some of its other general survey missions. " The Political Situation 5.' Elections to both Houses of Parliament took place on June 25 and 26, 1952 and brought about small changes in the compOSition of the legis- lllent coalition. In the Upper House the Communist Party lature and the govel'n.. lost one seat to the Catholic People's Party. In the Lov:er House the Labor Party increased its seats from twenty-seven to thirty; the Catholic repre- sentation declined from thirty-two to thirty and the Comrmmists lost two of their eight seats. The Communist vote was about tyro-thirds of that recorded in 1946. 6. After a protracted govenunent crisia which, hOffever, did not affect the smooth administration of the country, "')(r. Drees, leader of the Labor Party and Prime Minister since August -1948, organized a new Govam- IOOnt on September 1, 1952. This Government, a coa1it~on of the Labor, Catholic, and Anti-Revolutionary Parties and the Christian-Historical Union, controls eighty-one votes Ll'l the Lower House composed of one hundred members. Three of the coalition parties had participa.ted in Air. Drees r previous four- party cabinet; the Anti-Revolutionary Party, a conservative Calvinist group, replaced the liberal Party for Freedom and Democracy. The portfolios of Social Affairs and Industrial Organization were assigned to the leaders of the Socia~ist and the Catholic trade unions '" 7. The Netherlands-Indonesian Union, proclaimed at the end of 1949, has not fulfilled. expectations. Press comment indicates that ~t may be replaced by a bilateral agreement betl"reen the Netherlands and the Rep.lblic of the United States of Indonesia. The political status of Dutch New Guinea has been a :major cause of argument. Indtlnesia consistently reiterates its claim to sovereignty over that territory, whereas the lJetherlands Government takes the position that it must promote the developmant of New Guinea until it s people can decide their political future. -3- 8. The Netherlands has become one of the leading supporters of the political and economic unification of Europe. Constitutiona.l amendinents have been enacted t.o provide that the Netherlands Government can entrust legislative, executive and judicial authority to supra-national organizationS. The Netr..erlands participates in the rearmament effort of the North AtlJ..nt~c Treaty Organization, ~s a member of the European Coal and Steel Community, and has signed the treaty setting up the European Defense Organization. Plans for a European customs union and a cow~on market in agricultural products are being sponsored activeJ¥ by the Netherlands Government. 9. .. The high degree of freedom from tariffs and quantitative re- strictions, achieved in the past three cUld one-half years under the regime of the Benelux pre~'Wlion, has great:q increased the exchan~ of goods between the Netherlands and the Be1go-Luxembour~ Economic Union, each becoming the other I s major trading partner. However, little progress has been made tcwfards full economic union with Belgium and Luxembourg. The most powerful opposition to it comes from Belgian farmers demand:ing conttnued protection against imports of agricultural products from the Netherlands. The recent ex~sion :in Dut,ch industrial exports to Belgium has caused additional difficulties and prompt,ed~ Belgian consumer goods industries to invoke protection against putch industr,y, which since the war has operated with lower wages and costs. The Economic ReviEWI - Introduction 10. The report on the creditlfrorthiness of the Netherlands prepared :in earl¥ 1952 recorded the postwar progress of the Netherlands t~ra.rds external equilibrium and the'; internal financial measures taken by the Government in 1950/1951. In 1952, inflation was brought to an end, :internal financial stability restored and eA"tarnal accounts balanced. With rearrna.mant added to the other claims oil Dutch resources and the heavy task of maintaining the high standard of liv:ing, this was a remarkable achievement. It was ma:in~ due to the sound policy of the Government and the hard 'Work and patriotic discipline of the Dutch people. The Over-all Balance of Payments 11. In 1952 the external position of the Net.. herlands improved spec- tacularly as ShO"V'n1 in the foll~1ing table: 1950 1951 1952 (in billion guilders) Receipts frc~J exports goods 4.7 6.S 7.1 servj,ces Payment s for imports --- 2.0 6.7 2.6 9.1 3.1 10.2 goods 6.8 8.2 7.0 services .l:.!Q 1.2 1.3 7.8 9.4 8.3 Balance of payments on current account -1.1 -0.3 1'1.9 -4- The improvement was reflected in the change in net gold and foreign exchange reserves of the Netherlands Bank, which in6·reased from f 1,666 million ($h4o million) on December 31, 1951 to f 3,660 ($960 million) on December 31, 1952 and to about r 4 billion (ever $1 billion) in. March 19.53; of the r 4 billion, :r 2.8 billion ($740 miUion) was in gold and dollars. The gold and foreign exchange holdings of the Netherlands are now little less than the yalue or half-yearly imports; before the war, hOivever, they vre:oe roughly equal to average annual merchandise import s • 12 • The improvement in the balance of payments resl,llted mainly from the improvement in foreign trade. According to trade data (available on c.i.f. basis and~therefore different from actual payments as shown in the balance" of payments), IOOrchandise imports declined by a.bout 12% between 19,1 and 1952, while exports increased by 8%. As a re sult, the ratio of exports to imports stood at 94% in 19.52 compared vrith 77% in 1951. SinOe the fall in import prices corresponded closely to that in export prices, there was practically ~o change in the Netherlands terms of trade in 1952. l3. Contrary to what took place in several other O.tE.E.C •.countries, the substantial decline in the volume of imports was bi-ought about in the N~therland$ not by drastic import restrictions but mainly by domestic financial policies and 'jjhe tapering off of the commodity boom. Actually the Netherlands raised the percentage of liberalized trade among OeE.E.C. ~ountries to 71% in November 1951 and to 15% ih March 1952. On the 6ther hand, the Government's credit and fiscal measures, adopted in 1950/1951, and the dowr.wlard trend of conunodity prices, caused bu~inessl1len to liquidate stocks of imported goods built up in the fifteen months followinG the outbreak of war :in Korea. In 1952 the Netherlands was thus living off previousl¥ accumulated supplies., 14. The foreign trade deficit of the Netherlands ilas traditionall¥ been covered by inco~ from services'rendered to other countries. Transport (ocean and inland 1taterways shipping, railways and Airlines) and tourism, foreign investment, commercial and banking services, and remittances from Dutchmen abroad are the important sources of invisible revenue. As:in 1951, services contributed again about f 400 million to the improvement in the balance ot payments in 1952. The.Regional P.attern of Payments ( - 15. The reversal of the Du.tch payments position with the O.E.E.C. area wa.s largely responsible for the improvement in the balance of payments in 1952. The cumulative accounting deficit of the Netnerlands in the Europe~ Payments Union reached $267 million in July :).951. By the begilming of 1952, the deficit was, con.verted into a surplus which in March 1953 was slightly above the Dutch quota of (;3.55 million~ After losing ~;75 million in gold (or dollars) to ERr, the Netherlands recovered it before the end of 1951, and in 1952 earned from EPU ~1l3 million in gqld (or dollars) Md accumulated a credit equivalent to ~~183 million·. By the end of March 1953, the Netherlands earned a further $30 million from EPU and had a credit equivalent to $214 million. 16. 0.$ .E.C. countries buy fibout two-thirds of the Nether landS exports a.nd provide half its imports·. Two-thirds of the exchange of goods with the O.E.E.C. metropolitan area are with the three leading trade partners of the -s- N'etherlands: the Belgo-Luxembourg Economic;: Union j the Federal Republic of Germany and the United Kingdom. This heavy concentration of trade with the highly industrialized neighboring countries arises largely from the quali- tative cbmposition c;>f Dutch exports of which over 40% consist s of agri- cult ural, oft en perishable, product s • 17. Vvithin the O.E.E.C. ll'etropolitan area the most significant change occurred in 1952 in the trade relations with the Belgo-.Luxembourg Economic Unibn. Dutch exports to the B .LeE.U. rose by 15% and imports from it fell bt 18%, so that the Dutch trade deficit decreased by no less than 70%. In fact, the exch~ge of goods betweet'l the two partners was practically in equilibrium in the third quarter of 1952, and the competition of Dutch textiles, shoes, furniture, and tobacco products , was causing bitter complaints in Belgium. 18. For 1952 as a whole, changes in trade with the sterling area were not very g-reat but they turned the 1951 trade surplus jn favor of ·the Netherlands into a small deficit. This yras due to a sub&tantial drop in Dutch exports to the United Kingdom in t.he second half of 1952 caused by the tighten- ing of British restrictions on imports from O.E.E.C. countries. 19. The pa~nt s surplus with Indonesia was another factor in the ilnprovement in the Dutch balance of F":3.yments in 1952. A substantial decline in :Lmports from Indonesia accompanieciby a moderate increase in Dutch exports made it impossible for Indonesia to pay for services'with iihe proceeds of IOOrchandise exports to the Netherlands. Furthermore, Indonesia I s trade with the O.E.E .. C. area deteriorated substantially in 1952 and the Netherlands had an additit>na1 claim on Indonesia by virtue of settling her EPU accounts. As a re su1t, Indonesia had to use dollars to mal-ce payments -t,o the Netherlands; Dutch dollar earnings from Indonesia amounted to about ~?120 I1rl:.llion in 1952 til " 20. The development of Dutch payments with the d6l1~ area, charac- terized in 1952 by i..'1creased exports and reduced imports, is shown in the follOWing table. The reduction in payments for"merchandise imports resulted from purchases of dollar goods against sterling, under the British commodity arbitrage scheme of autumn 1952. 1950 1951 1952 (in million dollars) Receipts from export s goods 87 129 169 services 129 115_ 172 216 244 341 Payments for imports goods 267 340 319 services 63 76 67 330 416 386 Balance of payments on current account -114 -112 -45 U. S. GOvernment assistance to the Netherlands amcunted to about (,80 million in 1952, con3isting mainly of part of the 1951/52 MSA allocation (which included a loan of ~'16 million) and paJ-ments on off':'Ehor$, orders for naval craft. About ~?22 million accrued to the Ee-therlands through the liquidation -6- of dollar securities, and ~/3.8 million was vdthdralm under the Bank's loan to mI. These rece~pt,s Vlere near~ sufficient to cover the dollar deficit on current account and take care of the repayroont of $48 million at the dollar debt and of the payment of ~~27 million to the International Monetary Fund in connection vdth the rep.lrchase of an equivalent amount of guilders., 21. It is difficult to support with figures the explanation how the Netherlands has in 1952 covered its deficit with the dollar area and increased by ~~270 million its gold and dollar holdings. Dollar earnings of about $230 million from EPU and Indonesia were not sufficient to explain 6ompleteJ¥ the favorable development of the dollar position. As often before, the Dutch shov.red in 1952 their traditional cOlmnercia1 and financial skill in finding ways and means of earning hard currencies. Transit trade and commodity switch tra.'1sactions contributed largely to the payments results on dollar ~LcCOunt. It is probable that sub st ant ia1 amotUlt s of dollars Were earned in supplying the u. S. forces in Germany. It is also possible that American investlOOnt i..~ Dutch industry and PJ.rchases of Royal Dutch shares represented in 1952 a ~ourc~ of dollar income. The External Debt 22. In 1952 the long-term Plblic external debt of the Net.herland::{ (including the debt of Indonesia guaranteed by the Netherlands) declined by ove~ ~;40 million to less than $900 million equivalent. Total repayments were ~)65 million. Amortization of U. S. and Canadian dollar debt anwunted to ~48 million but sinc~ the Netherlands bOrrOYfed U. s. ~~23 million from MSA and the B~~ in 1952, the dollar debt decreased by only ~;)25 ~i'illiono The currency composition" of th~ direct and guaranteed long~term public external debt as of December 31, 1952, is shown below expressed in million U, S. dollal"s: U. S. dollar debt 584 Canadian dollar debt 128 sterling debt 102 Belgian franc debt 39 Swiss franc debt 20 Australian pound debt 18 891 Several significant developments -cook place in April 1953. The U .• 5. Govern- ment released the Net.herlands from its guarantee for the surplus property credit to Indone sia, of which iJ>60.4 million was out sto.ncling at the end of 1952, thus reducing the long~term public external obligations of the Netherlands to $8)0 million. The Netherlands Government announc~d that it will prepay"1n May the $15 million loan from Chase National Ba.nk due, in equal instalments, on June 30 and December 31, 19$3. Further, the Netherlands paid ¥;48 million to the International Monetary Fund in repurchasing an equivalent amount of guilders and complete~ redeeming its obligation to the Fund. ------------- The Internal Financial Situation . 23. Under the influence of the favorable development of external pay- ment s, L'1 part offset by decline in credit to "the :r:ublic sector of th~ ecollonw, the money supp~ expanded L~ 1952 from f 7.3 billion to f 8.1 billion, as shown in the following table: -7- Factors increasing the money supply (in million guilders) , Increase in gold and foreign exchange reserves 1,929 Increase in credit to business 9 Miscellaneous 190 2,128 Factors decreasing the money supp~ Decrease in credit to Government 745 Decrease in credit to local governments 207 Increase in time deposits 174 Payments into U. S. aid counterpart account 231 1,357 Increase in money supp~ 771 The expansion of money suppl¥ took the form of a rise in deposits; currency in circulation remained stable around the level of f 3 billion until the end of September and subsequently increased to :r 3.2 billion partly due -to seasonal influences. The ratio of money suPPJ¥ to national income averaged 38% :in 1952, compared with 46% in 1938 and over 50% in the immediate postwar years. 24. The two main objectives of the Government I s budget policy in 1952 were to protide for rearmarilent and to ensure internal financial equilibrium. In addition, measures to check unemp1oymetlt, and provision of education and other services for the gror.i.ng population, found in the budget their f'inahcial expression. The budget estimate for 1952 is sho'Vi.TJl in the follovdng table, together with the 1953 estimate and the results for 1950 and 1951: 1950 1951 1952 1953 prov~siona1 proViSional revised estIiiiate results results estimate (in billion guilders) Current budget revenue 4.9 5.5 5.1 4.8 Current budget expenditure 4.0 4.3 4.9 4.7 1.2 0.2 Surl?lus Cap~tal budget revenue g~ 0.3 0 •.3 0.1 0.3 Capital budget expenditure 1.0 1.3 1.1 0.9 Deficit 0.6 1.0 0.8 0.6 Total budget surplus or deficit,tO.3 {I:J.2 -0.6 -0.5 (recent- ly ra.isai to 1.2) In compliance w~th the f 6 billion- 4-ye~ rearmament program which the Nether- lands Government undertook in 1951, the estimated expenditure for 1952 included a defense appropriation of f 1.5 billion (~400 million). The ratio of total budget expenditure t,O national income equalled 30%, compared vd.th 19% in 1938 and over 40% in the immediate po stwar years. 25. NotWithstanding the budget deficit, the cash position of the Treasury improved substantially during the fiscal (i.e ~ calendar) year 1952. That the cash results were in 1952 so much better than t~ budget estimate Vlas -8- mainly due to two reasons: tax rece1.pts exceeded e&timates, because of the effective collection of tax arrears, and payments on defense o~ders lagged behind appropriations. Consequently, as shovm in paragraph 23, there was a reduction in credit extended to the Government. It is unlikely that such performance could be repeated in 1953. Even if the repair of flood damage, suffered by the south-western provinces in February 1953, could be financed 'with long-term loans (the f 200 million government bond issue of March 1953 was t;v~'ice over-subseribed '~i.thin a few hours) and releases from U. S. aid counterpart account, the eX];ected decline in tax receipts and the acceler- ation of paymeI;lts on defense orders TfOu1d put considerable strain on the cash position of the Treasury. 26. Liquidity charactef'ized the money market in 1952. Due main~y to the liquidation of inventories, demand deposits wIth commercial banks expanded from f 3~8 billion to f 4.5 billion. As demonstrated by the figures in para- graph 23, creclit to business remained practicall¥ unchanged and local govern- ments were paying back short-term credits incul"red in 1951 with th~ proceeds of long-term bond issues. Credit restrictions, introduced in 1951, were sus- pended in April 1952 and the Netherla.nds Bank discount rat.e was lowered in two steps to 3% by August 1952. In April 1953 it was further reduced to 2~% in spite of an expanding tendency of bank credit, which became noticeable late in 1952. 21. As the liquidation of inventories proceeded, time and savings deposits continued to grow. In the capital market, local government s enjoyed in 1952 a virtual monopoly. The Gov"ernment restricted its operations and private enterprise remained completely 1.11 the backgrou..lld. The demand for capital on the part of local ~jovernments was primarily for housing. War-tiJre destruction and backlog, coupled with the high postwar rate of IX>pulation gravith, make large-scale residential construction indisr..ensable for the maintenance of the st.andard of living. 28. vvnolesale price s fell by about 4% during 1952. The cost of living increased slightl¥. Hour10r wages were raised by 2.5% on Jul;y" 1 to comp3nsate the workef"s for their contributions to the unemploy"ment insurance scheme. Q.:. the whole, 1952 was a year of remarkable financial stability. The Use of Resources 29. In 1952 the harvest was good. In industry, however, the decline in activity which had started i..~ 1951 continued during the first ha.lf of 1952 CI Most affected were the labor-intensive ma...'l1ufacturil1g industries, primarily te:-ctile, lea:'Gher and paper ~oods. Although there was no substantial reduction in the employed labor force~ the" grovvth of population was reflected :in higher unemployment. In June 1952, 112,000 were vlithout work; t,hts was axactly twice the number of June 1951. In the third quarter of the year, indu strial pro"" duction was again on the upgl.. .ade and, on afl annual baSis, its volume VIas slightq higher in 1952 than :in 1951. Unemploymel'lt, '~hich at the end of December 1952 was still 22,000 more than a year before, declined sharpJ.¥ in the first quarter of 1953. 30. The follQ1lt1ing table illustrates the use of available resources: -9- ~ 1951 !&'>1 (in billion guilders) National product at market prices 17.7 19.6 20.3 Current external balance ... 1.1 - 0.3 t 1.9 Available resources 18.8 19.9 18.4 Private consumption Government consumption Net investment in fixed assets 12.6 2.8 1.9 13.6 3.2 2.0 13~6 1.2 3., Net investment in inventories 1.S 1.1 - 0.6 Influenced by the dov~nward trend of prices, the national income at, factor cost increased by 3% in 1952 compared with 9% in 1951. Personal consumption remained about the same. GcWernment consumpt,iotl was higher in 1952 than :in 1951. Het capital formation, on the other hand, declined by 60% from f 3.1 billion in 1951 to :f 1.3 billion in 1952, the amount of the decline correspond- ing roughl;y' to that of the increase in gold and foreign exchang-e reserves of the country during 1952. 31. Liquidation of stocks was responsible for the largest part, of the reduction in net dOi"ilest,ic invest~nt. In the course of the year inventories fell by f 600 million compared vvith an increase of f 1.1 billion in 1951. Net investment in fixed assetis was on~ slightJ¥ below the 1951 figure but there was a significant change in its COElPO sit ion • In 1952 investment in housing by public authorities apr:;eared to have absorbed a rel.ative~ larger share than in 1951 at the expense of more jirectJ¥ productive forms of" :investment. The Outlook 32 tJ The general economic fX)sition will probab4r be less favorable in 1953. Some int;rease in stocks will be needed, rearmament will continue to be a heavt burden, and a high rate of industrial investment v\i.ll have to be main- ta:Ll'led, both to provide additional employment opportunities for the rapidly grmving population and to increase productivity_ ~ 33. A further claim, estimated at f 1 billion, on Dutch resources arises from the damage caused in the southv.festern provinces by the~ flood. of FebruarJ 1953. About 12% of the country's arable land tv-as flooded, mostl¥ 'with salt water". T~1is included 11..% of land 1inder grain, 42% of land plante6 with sugar beet, Cllld 48% of potato land. 25,000 cattle a...'l1d thousands of hogs and poultry were droymed. Of the 1,100 km. of dykes and dunes sheltering "c,h.::> area, 500 km. Vias severely dama.ged. About 10,000 houses f{ere destroyed or damaged and considerable losse& were suffered by railways, roads and communi- cations. Fortunately, hcnrfever, industrial plant YlaS practically untouched a .34. Apart from the physical damage and loss from di sruption of' pro- ductive activity, the effect of the flo~ on future farm output is of great impo:rtance. It may ta'ce from one to two years befo:re production is fully restored. MeaY'lwhile, exports of dairy products and potatoes vall be srnaller, more wheat will have to be imported, and additional feedstuffs may be ne~ded to replace domestic sugar beet pulp. -10- 35. The external financial positiOn may 2~SO deteriorate somewhat because of the same reasons. Dollar-wise, U. S. Government aid has tapered off. The Netherlands Government renounced in January 1953 a small MSl\. allocation for 1952/53, and off-shore purchases and othet forms of B.ssistance are estimated at only· $35 million for 1953. Furthermore, it seems unlikeJ¥ that Dutch dollar earnings from EPU and" Indonesia will be as high in 1953 as they were last year. On the other hand, the Dutch gold and dollar assets noW" represent a sUbstantial reserve. 36. The structural dollar problem, pointed out in previOUS reports, still remains. 'rrade with Indonesia is unlikely to result in consistent dollar earnings since the ~;120 million earned in 1952 must be considered excel~ional. Unless larger no~-dollar supplies of bread and coarse grains, cotton a.nd fuel can be secured, the Netherlands will have to sell substantial- ly more to the dollar area to cover a structural deficit estimated by Dutch sources at ~)lOO-l50 million per annum. . 37. The debt service burden of the Netherlands reached a peal-~ in the 1951-53 period, during vihich atmua1 amortization and int~erest payments averaged about $65 willion. After 1953, the burden will decrease substantially to about ~p40 million or 15% of average receipts from ej~rx>rt, s to the dollar area in the past three years. 38. The losses and changes of the paErt decade have left the Nether- lands in a roore vulJ.1erable position than the count~J had ever Imovm before the second ·l.'iorld War. How'ever, the Dutch have a tra.dition of good govern- nent and have demonstrated time and again the ability to take appropriate measures to remedy economic and financial difficulties. The debt record of the Netherlands is excellent and the Du·tch people can be relied on to keep it unblemished. The Importance of Bank Loans to EconoII\Y 39. It is very difficult to assess the precise effect of e:;..ternal loans on a high~ developed and complex econo~ having diversified financial cormections with the outside y.,rorld. In the first loan adminis'tration report. such an assessment was made in res~ct of the loan to the Ki..l1gdom of the Net-be:··.. lands., Imports financed unde~ this loan were estimated at 12% of total DutC:l itllports during the disbursement ~riod and at 15% of net investraent :41 the t~1j'J years 1947~48. The timing of the lean was of particular significance: largr:;.l,y owi..TlE to the assistance of the Bank" the level of economic acti,rity was main- tained during the period just before the Economic Recovery Program beean. 40. A part of the loan to the Kingdom of the Netherlands w'as used for tne pu1'chase of ships. Together with the loans to the shipping companies and to KIM, the Bank contributed about $70 million to the expansion and modern- ization of transport fctcilities Yfhich are a veI"-J importaflt source of external income of the Netherlands. Throo.gh the Herste1bank ioan, the Bank helped in the re-equipment of several mai'1ufacturing industries, improving their competi- tive position in the world market. The Bank I s operations' in the Netherlands have thus helped to prevent a setback in posti\"-rar recovery, to in~rease foreign exchange receipt s from services and to expand exports of industTial products. -n- BOO II - THE nJJIVIJ) UAL LOANS The Loa"1 to the Kingdom of the Netherlands 41. This loan, made in 1941"'to help in the rehabilitation of Du.tch tra.nsport, industry and agri cult ure, was fully disbursed in the middle of 1948. In March 1953 the Bank agreed to the sale of another ship purchased u..rlder the loan, this tire to a British buyer against payment in pounds sterling. Proceeds of the sale are being invested in a new modern vessel. The Loans to the Shi1)ping Companies 42. The four private shipping companies, t.o v{hom six loans tota~ling ~)l2 million w~re made in 1948 for the purchase of six cargo ve ssels in the United states, are financially in a strong position. The results of their operations in 1950 and 1951 (19$2 figures are not yet available) were very satisfactorYe The attached financla1 and incolOO sta.tements (Annexes I and II) provide a testimonial of soundness, liquidity and profitability. At present ~6.6 million is out standing under the loans. ~. The Bank has maintained regular contact Yrith the four companies, receiving required information on their fin~~cial position and on the oper- ation of Bank fincmced ships. !art of this information is being mada avail- able to the holders of the Serial Mort gage Notes evidencing the loan, which were sold"by the Bank with its guarantee in 1948 and 1949. As security for the 10&,s, the Banl~ holds mort gages on six ships ovmed by the companies. l1:!riodic checks show that the corn[x.mies adhere to the provisions of the Loan Agreements and the I:Iortgage Deeds: the mortgaged sl'..ips are properly registered under the Dutch flag, maintained in the highe st classification and kept free from any registered liens in favor of third parties. The insurance policies received by the Bank shmy that the ships are i.l1~ured in dollars for at least the amount of Notes outstanding. In some cases, the difference between the amount of dollar insurance and t.he full commercial value of -the ships is insured in E:uilders. 44. Quarterly voyage accounts supplied to the Bank indicate that the ships which it financed are engaged principa.J.ly in liner service betwe en Europe and Indonesia and bet1;reen the United States and the Far East. The net operating results of the individual voyages (except the earliest ones for which no accounts were received) show that since coming into sel"","ice the ships earned f 23.2 million (~)6.1 million) before d.epreciation. The ships being enga[;ed in liner service, the fall i.11. freight rates in 1952 did not substantia)·" ly affect their pro~fi-t,ability. The Loan to the Herstelbank 45. iI Originally, the loan to the Herstelbank (an industria~ credit crgan- ization, wh1ch also administers war and flood da.mage compensation) amounted to ~as million and was to finance import s of U. S., Sv[iss, Belgian and German equipment for Dutch llk'inufacturing industries. In 1950, malW enterprises changed their investment plana because of currency devaluations, greater availability of European equipment, and nevf payments arrangements v!ith Belgium and Germany. Consequently, the loan was reduced to ~~;8.8 million and its proceeds are being -12- used to pay for purchases in the United States c9.nd Sl:itzerland only. A further reduction to $7.9 million took place in 1952. To date, ~~7 million of the loan has been withdrawn, roughly hall' in dollars and half in ~7iss francs. 1.1.6. The currencies l"rithdra.vm from the loan account are being sold by the Herstelbank against [;llilders to twenty-three industrial enterprises and the guilder equivalent is credited to a special account at the Nether- lands Treasury. When repayments are due, the Herstelbank draws on this accqunt and buys dolL'3XS and ~'Iiss francs from the NetherL.1.!lds Bank. Interest payments are financed 1J,J the Treasury and the exchange risk has been assumed by the Netherlands Government. Since the role of the Herstelbank is thus mainly that of an agent and" since the service of the loan is in fact assured by the Netherlands Treasury, the Bank has on~ a limited :interest:. in the . operations of the borrower. The condensed annual balance sheet s for 1950, 1951 and 1952 shown in Annex III illustrate the development of the financial pos~tion of the Herstelbank. 47. Because of the changes in investment plans and sources of equip- ment, the projects f:inanced by the Bank have been modified many times and considerable delays have occurred in th~ir execution. Thirty-five projects are now inc1t'ided in the loan and thirteen of these are the responsibility of Staat smijnen, the lar f::.;e government-owned chemical combine. Eighteen of the projects were completed by the end of 19$2; s:i.xteen are scheduled for completion during 1953,and bne late in 1954. According to the annual report of the Her5telbank for 1952, the enterprises financed under the Bank's loan have improved their competit,ive position in foreign markets. 48. The textile industry ~bsorbed about one-ha.lf of the loan, and the chemieal industry" about one-third, t.he rest being divided among firms in the metal, electrical, glass and paper industries. Export s of Dutch textile fabrics vrere in 1952 twice as high as in 1949 when the loan was signed. Thus the depres sion in the Euro[.ean teA-tile industry affected the Netherlands less than most other Western European cowltries. Si.l1ce its domestic market expand.s with the growth of population and its a.bility to compete in foreign markets has been strengthened by re-equipnent, the Dutch textile industry may be able to safeguard. in the future its relatively favorable position. The Dutch chemical industry has doubled its output and nearly doubled its exports since 1949. Its remarkable performance has been due mainly to intensive reseaJ.'ch and investment. The Loan to KLM 49. The Bank's loan to K.UiI, in which Chase National Bank of the City of New York participates to the extent, of 50%, is being applied to the cost of a re-equipment program amotUlting to $,)33.4 million. The program cotlsists mainly of the rurchase in the United state s of seven Douglas DC-6 B' s, nine Lockheed 1049-0 Constellations, one Douglas Liftmaster freight plane and six No. ,40 C:onvairs, all with the necessary spare parts. As security for the loan, the Bank and Chase National Bank will jointly receive a chattel mortgage covering five of the Constellations and the Liftrn.aster. -13 - 50. Relations between the Bank and KIM have been satisfactory. Detailed information on the Company's financial status J on its operations and on the composition of its air fleet is being currently supplied to the Bank which in turn keeps Chase National Bank informed of all important rnatters relating to the loan. Evidence subnutted shows that KIM adheres to insurance practices af;Teed to by the Ba.;"k at the time of the negotiation of the loan. An exchange of vievvs between the Bank and KIA! preceded the conclusion by KIA~ in autumn 1952 of a contrac·t with the Pension Fund of Royal Dutch/Shell by which the latter pla~ed at the disposal of KIM, under the guarantee of the Netherlands Government, f 28 million (~; 7.4 million) to be utilized in 1953 and 1954 and repaid over twenty years beginning 1964. The Bank is satisfied that this transaction vall not infringe on the debt limitation provisions of the Loan Agreement • 51. Kil/l's operations in l.952 have sh6wn satisfactory results. Despite the adverse effect of the loss of two planes, the delayed deliver,y of the DC-6 B's and the gasoline restrictions of Spring 1952, actual achievements were close to estiJ--nates prese1'lted to the Bank durL"1g the negotiation of the loan. New routes were open~d, to Sydney and Tokyo in the East and to Santiago and Mexico City :in the West, marking ~'"1 important expansion in the Company's inter-continenta1 network. In the first nine months of 1952, gross traffic revenue increased from f 169 ndllion to f 19.3 million and net income before taxes from f 1l.2 million to f 15.4 million, a.s compared with the correspond- ing period of 1951. Up to the middle of 1952, traffic revenue had risen faster than operating expenses. This trend, however, was reversed in the third quarter of the year because of a substantial rise in the cost of oil and gasoline and in the expenditure on sales and publicity. 52 II Because it s fleet is comp6sed excl-usively of U. S. aircraft and dollars are required for re-equipment, KIM is intent on earning substantial amounts of hard currencies. A net hard currency loss of ~11. 7 million for the first nine months of 1951 gave place to a net profit of ~)O.7 million in the same period of 1952. This improvement was mainly attributable to the results of the trGU:s-At1antic tourist traffic and also to a selective sales policy aiming at hard currency earnings. 53. A condensed balance sheet of KLM as of December 31, 1951 and September 30, 1952 appears as Annex IV. The main changes reflect final pay- ments on the seven Dc-6 B's and 50% dmm-payments on newly ordered aircraft. Depreciation of the airf1eet conforms to sound accounting practice. 54. The delivery of the planes included in the program has been delayed. The DC-6 B' s were delivered between May and September 1952 and approximately ~3.8 million of the loan was witl1drav~jn in October 1952. Of this" amount, ~;3.5 million was ctdvanced by ChAse National Bank. The Const.ellations, scheduled for the first half of 1953, are to be delivered between June and September 1953. This implies that the loan 'will be disbursed more slOl'1rly than expected and that the dates on which five of the Constellations Viil1 be subjected to mortgage '\IIri11 be postponed. The delivery of the Convairs, originally scheduled during the second half of 1953, has been shifted to the period September 1953- January 1954. 55. In a . :.ldition to the twenty-three planes included in the program, KIM has placed orders vrith U. S. manufact,urers for the purchase of four 1042 E -14- Constellations and a second DOuglas Liftma.ster. Three of the Const ellat. ions , due for delivert in June 1954, are to release some olde:r aircraft for the transport of 12,000 Dutch emigrcmts per annum to Canada, Australia and Hew Zealand under a 5-year contract with the Netherlands Government. The fourth Const.ellation and the Liftmaster will replace tuo planes (one 749 Constella- tion and one Douglas DC-6) which crashed in March 19.52. 56. The KIM fleet at pre $ent n:umbers seventy pl~'1es. Twenty-one new planes are on order and some of the old ones will be sold. KIM consistently follows the policy of modernizing its fleet'to meet the requirements of iHcreased and diversified t.raffic. In 1952, KL1\:1's attention was focussed on tourist operations. About 15,700 tourist passengers flew KIM bn the Arnst erdam- Ne~t York route; raising the total number of passengers from 21,600 in 19.51 to 32,800 in 1952, i.e. by 52%. Some of the new DC-6 Bt s were converted on delivery to high-density traffic and p1t on the North Atlantic run to meet the tourist boom. Five tourist flights a week were operated in addition to seven first class flights. Tourist services in Europe and to the Near East 'Vlere introduced in April 1953 and 1idll be eAtended to Asia atld South Africa. later in the year. ~ In the field of scheduled freight traffic ~ where KIM has~ always been a leader, plans have been made for further expansion. At present, freight accounts for about 15% of gross traffic revenue and for as much as 25% of the overall"traffic on the p..frican and Asiatic routes. The r.urcha.se of two Lift- masters, scheduled for delivery in July 1953 and January 1954, will considerably strengthen the freight capacity of the trans-s'ltlantic service of KIM. Financial Position of the Shipnia~ Comnanies (in million guilders) N. V~ Nederlandsch N. V. Konink1ijke N. v. stoomvaart N. V. Vereenigde Amerikaansche stoom- Rotterdamsche Llold Maatschappij "Neder- Nederlandsche Scheap- vaart Maatschappij la-»~_ - - --- "l§,lJ,rtJllaa t s cha-p-p 1.t "Holland-Amerika Li,lnll W2 !22Q liS! !2..4..2 1950 1.921 1949 1950 1951 1949 1950 1951 Current a.ssets .59.5 66.2 8.5.6 77.3 83.6 87".8 102.2 84.3 91.2 46.8 53 •.5 83.8 Current liabili·ties ~ ~ 68.5 ~ .1L1 27.2 49.6 28.1 12.3 29.0 18.0 51 ..1 Net working capital 6.3 6.5 17.1 46.6 51.9 60.6 .52.6 56.2 58.9 17.8 15.5 30.5 Fleet & other fixed assets Original value 135.7 145.6 154.2 133.2 134.2 144.5 156.4 158.1 165.6 88.S 100.7 107.6 Deprflciation 93.1 99.3 104.9 70.7 8,.7 102.5 105.6 94.3 99.1 ~ 10.5 17.7 Depreciation value of fixed assets 42.6 46.3 49.3 62.5 50.5 42.0 SO.8 63.8 66.3 59.2 70.2 69.9 6.8 ~ Work under construction g8.~ 6.1 2 ..1 4.2 Othera8se~8 18.8 61.4 4. g3.2 2.5 69.3 ...1..& 58.3 -'bJ. 49~·3 sH 5 .4 690.9 ~ 75.8 8.6 72.3 74,.1 Participations 7.4 8.2 8.4 8.7 9.4 9.3 10.7 11.2 8 ..3' 0.3 1.2 1.1 Non-marketable securities 1.4 1.5 1.5 13.3 17.1 20.0 Legal & tru.st.e deposits 1.3 .6 .6 0.4 0.4 0.4 Ship replacement claims ~ .!h2 25.6 !i",2 25.8 10.1 19.0 10.4 19.8 lO.~ 19.7 ~ ~ 35.8 ~ 35.8 - 0.7 1.6 - 1.5 - 24.7 35.1 Bet working capital and fixed and other assets 92.4 96.7 10,.4 134.9 130.0 129.6 144.1 161.9 170.5 87.1 89.4 106.1 Funded debt 6.8 6.1 5.3 13.7 12.2 10.6 13.7 16,9 14.4 8.9 8.0 7.0 Specific reserves 23.8 26.1 23.1 27.7 29.1 26.2 22.6 31·3 34.1 ...14 14.2 20.2 Shareholders' equity 61G8 64.5 76.8 93.5 88.7 92.8 107.8 111.7 122.0 75.0 67.2 78.9 Made up as follows: Share capital 29.5 31.0 32.6 36.7 36.8 ,6,,8 45.0 45.0 45.0 26.0 26.0 27.3 Reserves 32.3 33.5 44.2 56.8 51.9 ,56.0 62.8 66.7 77.0 49.0 41.2 51.6 A..-rmEX I statement of Income of the Shippin~ Comn~ 'in million guilders( N.V. Nederlandsch N. V. Koninklijke N.v. sto·omvaart N. V. Vereenigde Amerikaansche Stoom- Rotterdamsche Lloyd Maa,tschappij "N·eder- Nederlandsche Seheep- vaart Maatschappij 1a,ndlf vaartmaatschappij "Ho11and-Amerika Ll.1n" ~ !22! 1950 !2S! lli.Q 1951 1950 122l Oper.ating .income !J lV 27.9 3~.2 20.5 33·3 23.4 33.3 12.0 22.9 Depreciation charges 5.4 5. 7 13.7 19.7 5.3 6.2 6.1 7.4 Taxe. - - - - ..b2 ..zJt ~ 4 •. 1 - - Bet operating income 22.5 28.5 3.9 6.. 2 16.1 23.0 5.9 15.5 Other income ~ ~ J..t.l ~ ~ -L1 ~ 2.1 ~ Net income 23.4 29.6 4.3 7.0 17.8 26.3 8.0 16 •. 1 Pension fund allocations and bonus to staff 1.0 .6 1.:3 3.0 3.8 6.7 ... Allocation to free reserves 19.4 24.4 .-:3 9.9 14.0 6.3 10.0 Dividend and management ....1& 4.6 1.0 ...1:1 4.1 ~..i& ....L1. 6.1 AI Amount. of gross operating receipts and operating expenditures a.re not available to the Bank. 'W After taxes in the case of N. V. Neder1andsch Ameril,taansche stoomvaart Maatscha.ppij "Ho11and-Amerika Lijntl and: N. V. Vereenigde Nede:r1andsche Scheepvaartmaatschappijl before taxes in the case of N. V. Koninklijke Rotterdamsche Lloyd and N. V. stoomvaart Maatschappij "Nederland ft • s:J Moe·tly from investments. ANNEX II Annex III --- Condensed Internal Balanoe Sheets of the Herste1bank (in million guiIdersl 1950 1951 1952 Assets Cash and Netherlands Treasury 47.7 75.1 96.2 Treaau:ry bills a.nd bank accaptanoes 40.2 30.1 30.1 War damage aocounts with government agencies and banks 110.7 49.9 13.,6 Credits 215.9 236.3 233.3 Holdings in enterprises and. crad!1;s to those enterprises 37.6 62.3 101.6 Netherlands Treas-q,ry - ~ecial aocount {coWlterpart of IERn loan} 10.8 17.4 21.8 G~~vernment guarantees 5.5 6.5 Other a.ss~ts 33.2 _35.7 37.1 , 496.~ 512.3 540(12 Liab:i.1i ties - ~ Cap:tta1 anq, reserves 311.6 318.6 325.5 Undistributed prof:f.ts 12.3 13.2 12.3 Long-term loan of f 75 million 8.0 46.0 International Bank 10.8 17.4 21.3 Government guarantees 5.2 11.0 Deposits (including those of government agencies and war risk insurance . -, compam. e$) 143.0 116.6 90.0 Other liabilities 18.4 ,.2~ _llt..2 496.1 512.3 540 .2 Annex ry Condensed Internal Bal&lCe Sheet of KU~ --- (in million ~~ilders) -- Assets Flight equipment (depreciated value) 8005!1 127.5!1 Fixed assets (depreciated value) 33.8 34.3 Participation and securities 17.7 17.4,,1 Invest~d insurance reserve 10.3 10.6~ Sundry stores S.6 7.1 Accounts receivable 43.0 53.Q Prepaid expenses 4.6 5.S Cash on hand and in ba.nks 65.2 43.4 260=:7 299.6 Aircraft on order 86.0'2.1 65.411 Liabilities Capital and reserves 153.0 174.0 Insurance reserve (own risk) 13.9 15.1 Long term debts 11.2 11.1 Redeemable bonds 5.0 5.0 Sundr.y creditors and provisions Ss.) 65.3 Revenue relJeived in adv~}:,:lce 19.3 29.1 260.7 299 .. 6 Obligations in respect of aircraft 86.Ctil 6S.4J.l ~I Includes prepayments on aircraft on order in the amounts of fl. 30.3 million on December 31, 1951 and fl. 50.6 million on September 30, 1952. ~I Short-term dollar seourities held in a special account with Chase Na'tional Bank. II Balance after prepayments.