Financial statements of the European Coal and Steel Community at 31 December 1999

(2000/C 281/03)

In accordance with undertakings given by the Commission on behalf of the ECSC with regard to its borrowing activities, the following financial statements, drawn up in conformity with Article 45c of the Treaty establishing the ECSC, have been published:

- the balance sheet of the European Coal and Steel Community at 31 December 1999,

- the profit and loss accounts for the year ending 31 December 1999,

- the allocation of the surplus for the year ending 31 December 1999,

- the notes relating to the financial statements at 31 December 1999.

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 1999

Balance sheets at 31 December 1999

(Amounts in EUR) - before allocation of surplus

ASSETS

>TABLE>

Balance sheets at 31 December 1999

(Amounts in EUR) before allocation of surplus

LIABILITIES

>TABLE>

Profit and loss account for the year ending 31 December 1999

CHARGES

>TABLE>

Profit and loss account for the year ending 31 December 1999

INCOME

>TABLE>

Allocation of the surplus for the year ending 31 December 1999

>TABLE>

NOTES RELATING TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 1999

(Amounts in EUR)

1. PRESENTATION OF THE FINANCIAL STATEMENTS

The European Coal and Steel Community (ECSC) was establishing 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's 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 obtained in the management of the various reserves and provisions.

The ECSC's financial statements at 31 December 1999 are presented in accordance with Council Directives 78/660/EEC(1) and 86/635/EEC(2) on the annual accounts and consolidated accounts of banks and other financial institutions.

ECSC accounts are kept in the various currencies used for its financial activity. The financial statements are expressed in EUR.

The following rates have been used for converting year-end balance-sheet amounts expressed in national currency into EUR:

>TABLE>

>TABLE>

1.1. At 31 December 1999, the various currencies listed above, together with the euro, made up the ECSC's balance sheet as follows:

>TABLE>

2. ACCOUNTING PRINCIPLES AND METHODS

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

Charges and income for the financial year are converted to euro 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 remaining time to maturity of these operations is as follows:

>TABLE>

4.2. Loans

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

>TABLE>

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:

>TABLE>

5.2. Levy

The 1998 and 1999 levy rate was 0 %, so the claims at 31 December 1999 therefore relate to previous years.

Before value adjustment, this item amounted to EUR 6061793 at 31 December 1999 (EUR 7488192 at 31 December 1998). It comprises in particular EUR 5281288 subject to legal proceedings (EUR 5958532 at 31 December 1998) and EUR 40833 relating to temporary deferment in respect of coal in stock (EUR 42261 at 31 December 1998).

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 EUR 37195283 (EUR 90001060 at 31 December 1998).

This item has two main componentes.

A fine totalling EUR 104364350 that the Commission imposed on steel companies for infringing the rules on competition in the marketing of steel beams (Decision 94/215/ECSC(3) of 16 February 1994). In its judgment of 11 March 1999, the Court of First Instance reduced the total fines by EUR 24774000 to EUR 79590350. EUR 50631350 had been paid in fines by 31 December 1999. Seven companies have lodged appeals against the judgment of the Court of First Instance.

A fine totalling EUR 27380000 was imposed by the Commission (Decision 98/247/ECSC(4) of 21 January 1998) under Article 65 of the ECSC Treaty on steel companies for concerted agreement on the formula for calculating the alloy surcharge. Payments totalling EUR 14740000 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 subsidised loans which the Commission has been obliged to ask to reimburse all or part of the interest subsidy already paid.

6. FINANCIAL ASSETS

The ECSC's 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, exceptionally, 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.).

6.2. Composition

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

>TABLE>

6.3. Marturities in 2000

Securities in the portfolio reaching final maturity during 2000 represent the following amounts (in EUR):

>TABLE>

6.4. Listed/unlisted securities

The securities portfolio comprises 1690290303 of securities with a stock-exchange listing, the balance of 77938790 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 1651618.

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

>TABLE>

7. TANGIBLE AND INTANGIBLE ASSETS

>TABLE>

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 building in Windhoek was completed in 1999.

For the ECSC, this transaction generated a capital gain of EUR 405036, this being the difference between the transfer price (EUR 659832) and the net book value (EUR 254796) 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 EUR 2531228 (note 12).

8. OTHER ASSETS

>TABLE>

9. PREPAYMENTS AND ACCRUED INCOME

>TABLE>

10. AMOUNTS OWED TO CREDIT INSTITUTIONS

The remaining time to maturity on these operations is as follows:

>TABLE>

11. DEBTS EVIDENCED BY CERTIFICATES

No such borrowings are due to reach maturity in 2000.

12. OTHER LIABILITIES

>TABLE>

13. ACCRUALS AND DEFERRED INCOME

>TABLE>

14. PROVISION FOR LIABILITIES AND CHARGES

>TABLE>

15. COMMITMENTS FOR THE ECSC OPERATING BUDGET

In 1999, commitments for the ECSC operating budget were as follows:

>TABLE>

16. PROVISION FOR FINANCING THE ECSC OPERATING BUDGET

>TABLE>

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 major 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 to enable the ECSC to weather any major default.

The provision, calculated on the basis of outstanding major exposures at 31 December 1999 according to a procedure recommended by a firm of international experts, totals EUR 18 million.

18. RESERVES

>TABLE>

The Guarantee Fund is intended to cover lending and borrowing operations. After allocation of EUR 23 million, the Guarantee Fund totalled EUR 553 million at 31 December 1999. 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 a Member State. This means that the reserves (Guarantee Fund and provisions) must be gradually increased to approximately EUR 720 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 33 % at 31 December 1998 to 38 % at 31 December 1999.

The Special Reserve is used to grant loans from ECSC own funds to finance subsidised housing.

Lastly, the former Pension Fund originally represented the ECSC's total pension obligations prior to 5 March 1968. Since that date, the Member States have assumed responsibility, via the general budget, for the payment of staff pensions. This fund is used to finance housing loans for officials of the European Communities and has also been used to grant special loans to the coal and steel industries.

19. ANALYSIS OF THE RESULT FOR THE FINANCIAL YEAR

Overall ECSC performance is influenced by both the result of non-budgetary operations (lending/borrowing, investment, exchange-rate variations) and the outturn of the ECSC operating budget.

19.1. Non-budgetary operations

>TABLE>

19.2. Out-turn of the ECSC operating budget

>TABLE>

19.3. Result for the financial year

>TABLE>

20. INTEREST AND SIMILAR CHARGES

>TABLE>

21. ADMINISTRATIVE EXPENDITURE

The ECSC paid a lump sum of EUR 5 million to the general budget of the Commission of the European Communities to cover its administrative expenditure.

22. OTHER OPERATING CHARGES

>TABLE>

23. INTEREST RECEIVED AND OTHER INCOME

>TABLE>

24. OTHER OPERATING INCOME

>TABLE>

25. INCOME RELATING TO THE OPERATING BUDGET

>TABLE>

26. OFF-BALANCE-SHEET COMMITMENTS

26.1. Commitments received

>TABLE>

26.2. Commitments given

>TABLE>

27. CHANGES IN THE FINANCIAL SITUATION FOR THE YEAR ENDING 31 DECEMBER 1999

>TABLE>

OUTTURN OF THE ECSC OPERATING BUDGET FOR FINANCIAL YEAR 1999

>TABLE>

>TABLE>

(1) OJ L 222, 14.8.1978, p. 11.

(2) OJ L 372, 31.12.1986, p. 1.

(3) OJ L 116, 6.5.1994, p. 1.

(4) OJ L 100, 1.4.1998, p. 55.