ECSC FINANCIAL STATEMENTS AT 31 DECEMBER 1996 (97/C 242/05)

Balance sheets at 31 December 1996

(amounts in ecus)

- before allocation of surplus -

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- before allocation of surplus -

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Profit-and-loss accounts for the year ending 31 December 1996

(amounts in ecus)

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Allocation of the surplus for the year ending 31 December 1996

(amounts in ecus)

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NOTES RELATING TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 1996

(amounts in ecus)

1. PRESENTATION OF THE FINANCIAL STATEMENTS

1.1. 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. Most of the ECSC's funds come from the levy, the net profit from its financial activity, borrowings raised on the financial markets and direct bank loans.

1.2. The ECSC's financial statements at 31 December 1996 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 (OJ No L 222, 14. 8. 1978 and OJ No L 372, 31. 12. 1986).

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:

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1.4. At 31 December 1996 the various currencies listed in 1.3, together with the ecu, made up the ECSC's balance sheet as follows:

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2. ACCOUNTING PRINCIPLES AND METHODS

2.1. The financial statements are drawn up in accordance with generally recognised accounting principles.

2.2. Charges and income for the financial year are entered in national currency and converted to ecus at the monthly accounting rate in force on the day of the transaction.

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 time to maturity of these loans is as follows:

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4.2. Loans

The breakdown of the time to maturity of these loans is as follows:

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5. LOANS AND ADVANCES TO CUSTOMERS

5.1. Loans

The loans granted to credit institutions are shown under 'Loans and advances to credit institutions` (see Note 4).

The other loans break down as follows:

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5.2. Levy

Before value adjustment, this item amounts to ECU 8 171 552 at 31 December 1996 (ECU 6 355 018 at 31 December 1995). It comprises in particular ECU 6 042 902 subject to legal proceedings (ECU 6 110 892 at 31 December 1995) and ECU 414 223 relating to temporary deferment in respect of coal in stock (ECU 416 014 at 31 December 1995).

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 set out in the Treaty.

After value adjustment it amounts to ECU 68 565 376 (ECU 64 703 179 at 31 December 1995).

The main component in this item is fines totalling ECU 104 364 350 that the Commission imposed on steel companies for infringing the rules on competition in the marketing 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.

5.4. Interest subsidies to be recovered

This item comprises claims on companies in receipt of a subsidized loan which the Commission has been obliged to ask to reimburse all or part of the interest subsidy already paid.

6. BONDS AND OTHER FIXED-INCOME SECURITIES

6.1. Valuation

Bonds and other fixed-income securities are valued at average purchase price or market value at 31 December 1996, whichever is the lower.

This principle is not applied in the case of securities considered as financial fixed assets (see note 6.5).

6.2. Composition

Bonds and other fixed-income securities break down as follows:

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6.3. Maturities in 1997

Securities in the portfolio reaching final maturity during 1997 represent the following amounts (ECU):

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6.4. Listed/unlisted securities

The securities portfolio comprises ECU 1 393 595 584 of securities with a stock-exchange listing, the balance of ECU 53 794 188 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 exceeds the average purchase price by a total of ECU 540 274.

6.5.3. Financial fixed assets are made up as follows (ECU):

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7. TANGIBLE AND INTANGIBLE ASSETS

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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 the 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 buildings in New York and Marseille was completed in 1996.

For the ECSC, this transaction generated a capital gain of ECU 741 225, this being the difference between the transfer price (ECU 1 848 062) and the net book value (ECU 1 106 837) at the date of the transfer.

As regards the other buildings, pending the completion of 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 5 444 293 (Note 12).

8. OTHER ASSETS

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9. PREPAYMENTS AND ACCRUED INCOME

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10. AMOUNTS OWED TO CREDIT INSTITUTIONS

The time to maturity on these operations is as follows:

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11. DEBTS EVIDENCED BY CERTIFICATES

Part of the borrowings outstandig at 31 December 1996 will reach maturity during the 1997 financial year. These borrowings amount to ECU 900 334 738.

12. OTHER LIABILITIES

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13. ACCRUALS AND DEFERRED INCOME

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14. PROVISION FOR LIABILITIES AND CHARGES

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15. COMMITMENTS FOR THE ECSC OPERATING BUDGET

In 1996, commitments for the ECSC operating budget were as follows:

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16. PROVISION FOR FINANCING THE ECSC OPERATING BUDGET

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17. PROVISION FOR LARGE 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 1996 and according to a procedure recommended by a firm of international experts, totalled ECU 36 million.

18. RESERVES

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The Guarantee Fund is intended to cover lending and borrowing operations. After allocation of the 1996 instalment of new Member States' contributions (ECU 14 429 322) and the transfer of ECU 19 million, the Guarantee Fund totalled ECU 468 743 644 at 31 December 1996. This reinforcing of the Guarantee Fund is connected with the forthcoming expiry of the ECSC Treaty.

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 Guarantee Fund must be gradually increased to approximately ECU 700 million (including any specific value adjustments).

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 %-16 % range laid down during the period of continous operation and move towards 100 %.

The ECSC's solvency ratio thus increased from 16 % at 31 December 1995 to 21 % at 31 December 1996.

The special reserve is used to grant loans from ECSC own funds to finance subsidized housing.

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.

As regards the new Member States' contributions, Protocol No 5 annexed to the Treaty of Accession of Austria, Finland and Sweden dated 24 June 1994 makes provision for a contribution of ECU 44 100 000 to ECSC reserves payable in two equal interest-free instalments, the first on 1 January 1995 and the second on 1 January 1996.

The first 1996 payment of ECU 22 050 000 was distributed between the Guarantee Fund, the Special Reserve and the former Pension Fund.

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

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19.2. Out-turn of the ECSC operating budget

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19.3. Result for the financial year

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20. INTEREST AND OTHER CHARGES

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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

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23. INTEREST RECEIVED AND SIMILAR INCOME

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24. OTHER OPERATING INCOME

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25. INCOME RELATING TO THE OPERATING BUDGET

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26. OFF-BALANCE-SHEET COMMITMENTS

26.1. Commitments received

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26.2. Commitments given

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27. CHANGES IN THE FINANCIAL SITUATION FOR THE YEAR ENDING 31 DECEMBER 1996

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(1) OJ No L 116, 6. 5. 1994.