Financial statements of the European Coal and Steel Community at 31 December 2000

(2001/C 185/02)

The ECSC's balance sheet, profit-and-loss account and statement of the allocation of profit for the year ending 31 December 2000 were submitted to the Commission for approval under written procedure No E/306/2001 of 20 June 2001 and are shown in this financial report as approved by the Commission.

ECSC financial statements at 31 December 2000

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Profit-and-loss account for the year ending 31 December 2000

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Allocation of the surplus for the year ending 31 December 2000

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NOTES RELATING TO THE FINANCIAL STATEMENTS AT 31 DECEMBER 2000

(Amounts in euro)

A. THE ECSC

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'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.

All ECSC assets and liabilities will be transferred to the European Community after 23 July 2002. The net value will be regarded as funds (referred to as the assets of the "ECSC in liquidation") intended for research in the sectors connected with the coal and steel industry.

B. ACCOUNTING PRINCIPLES AND METHODS

1. Presentation of the financial statements

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

The accounting principles and evaluation methods used for the items in the financial statements take account of the constraints imposed on and resolutions applicable to the ECSC under the Treaties and other ECSC-related decisions adopted by the institutions of the European Communities.

The accounting methods used also take account of the fact that the ECSC will not operate after 23 July 2002, when the ECSC Treaty expires.

They are presented in accordance with Council Directives 78/660/EEC and 86/635/EEC(1) on the annual accounts and consolidated accounts of banks and other financial institutions wherever these are applicable and subject to the abovementioned necessary adjustments.

2. Conversion of foreign currency

The currency used by the ECSC for its annual accounts is the euro (EUR).

All foreign currency transactions carried out by the ECSC are converted into euro at the monthly rate communicated by the European Central Bank.

The value of non-financial assets/liabilities is converted into euro at the monthly rate applicable on the date on which they were acquired or on which their value was last adjusted.

On the balance sheet date, financial assets/liabilities are converted into euro at the monthly rate applicable on that date. Negative differences are entered under "charges" in the profit-and-loss account, while positive differences are deferred and entered under "accruals and deferred income" on the liabilities side.

2.1. Conversion rates

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

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2.2. At 31 December 2000, the various currencies listed above, together with the euro, made up the ECSC's balance sheet as follows:

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3. Treasury investment and valuation of bonds and other securities

The ECSC's internal prudential rules stipulate that portfolio investments are to be confined to securities issued by first-ranking entities. However in 1998, under an agreement to restructure the debt of a defaulting debtor, the ECSC exceptionally acquired shares and other variable-income securities from a private-sector company.

Bonds and other fixed-income securities and shares and other variable-income 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, which are valued at the average purchase price or the redemption value, whichever is the lower.

4. ECSC operating budget

Part of the ECSC's funds are made available to the ECSC operating budget, which is adopted annually by the Commission after informing the Council and consulting the European Parliament.

The commitments entered into by the operating budget vis-à-vis third parties and the provisions for financing the operating budget are shown under the heading "ECSC operating budget" (see Note C.13).

5. Fines and interest subsidies

Fines and interest subsidies whose repayment has been requested are not regarded as ECSC resources until they have actually been paid. Fines imposed but not yet paid and interest subsidies whose repayment has been requested are therefore allocated to provisions (see Note C.14.3.a).

6. Presentation of comparative figures for 1999

Following a change in the presentation of the 2000 financial statements, the 1999 figures have been reprocessed to make them comparable.

C. EXPLANATORY NOTES TO THE HEADINGS IN THE BALANCE SHEET AND THE PROFIT-AND-LOSS ACCOUNTS

1. Balances with central banks

This item represents the ECSC's balances with central banks of certain Member States.

2. Loans and advances to credit institutions

2.1. With agreed maturity dates or periods of notice

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

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2.2. Loans

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

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3. Loans and advances to customers

3.1. Loans

The loans granted to credit institutions are shown under "Loans and advances to credit institutions" (see Note C.2).

The other loans break down as follows:

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NB.

Loans are generally guaranteed by Member States, banks or businesses or by mortgages.

3.2. Levy

The 1998, 1999 and 2000 levy rate was 0 %, so the claims at 31 December 2000 therefore relate to previous years.

This item breaks down as follows:

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It includes in particular EUR 5551715 subject to legal proceedings (EUR 5281288 at 31 December 1999).

3.3. 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 38950716 (EUR 37195283 at 31 December 1999).

This item has two main components.

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(2) of 16 February 1994). In its judgement 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 judgement of the Court of First Instance.

A fine totalling EUR 27380000 was imposed by the Commission (Decision 98/247/ECSC(3) 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 EUR 14740000 have been received, while two-thirds of the companies affected by the decision have lodged appeals with the Court of First Instance.

3.4. 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.

4. Bonds and other fixed-income securities

4.1. Composition

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

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4.2. Maturities in 2001

Securities in the portfolio reaching final maturity during 2001 represent the following amounts:

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4.3. Financial fixed assets (see Note B.3)

Financial fixed assets are defined as securities that will remain in the portfolio until their final maturity. They comprise mainly short- or meduim-term paper and own-debt securities repurchased for servicing ECSC borrowings.

At 31 December 2000, financial fixed assets totalled EUR 48519675.

The redemption value of these securities is EUR 1548471 less than the average acquisition price.

4.4. Return on investment

Treasury investments take account of the maturity dates and liquidity requirements applicable to ECSC financial operations. They are subject to strict criteria with regard to the financial standing of the counterparty.

The return on investment (calculated by the method of the Association of Investment Management and Research) was 4,72 % in 2000.

5. Shares and other variable-income securities

Shares and other variable-income securities break down as follows:

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These shares and other variable-income securities were received by the ECSC as part of the restructuring plan of a defaulting debtor (see Note B.3).

A part of one of these securities, representing a net value of EUR 8287500, was the subject of a loan contract with a credit institution (maturity date 1 July 2004 with call option 1 July 2002).

6. Land and buildings

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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 Lisbon and Milan was completed in 2000.

For the ECSC, this transaction generated a capital gain of EUR 1987121, this being the difference between the transfer price (EUR 2531228) and the net book value (EUR 544107) at the date of transfer entered under "other operating income" in the profit-and-loss account.

7. Other assets

Other assets break down as follows:

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8. Prepayments and accrued income

Prepayments and accrued income break down as follows:

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9. Amounts owed to credit institutions

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

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10. Debts evidenced by certificates

This item comprises loan securities.

EUR 240430841 of the borrowings outstanding at 31 December 2000 is due to reach maturity during the 2001 financial year.

11. Other liabilities

Other liabilities break down as follows:

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12. Accruals and deferred income

Accruals and deferred income break down as follows:

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13. ECSC operating budget

This item comprises commitments for the operating budget totalling EUR 434516282 (EUR 556154370 at 31 December 1999) and provisions associated with financing the operating budget totalling EUR 401000000 (EUR 393000000 at 31 December 1999).

In 2000, commitments for the ECSC operating budget were as follows:

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The provision for financing future operating budgets and the provision for budgetary contingencies were as follows:

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14. Provision for liabilities and charges

14.1. Guarantee Fund

The Guarantee Fund is intended to cover lending and borrowing operations. After allocation of EUR 12 million, the Guarantee Fund totalled EUR 565 million at 31 December 2000. 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 EUR 572 million (calculated at the conversion rate applicable on 31 December 2000). At 31 December 2000, this coverage was 98,8 % on condition that there is no default on the loans due to mature before 23 July 2002.

The Guarantee Fund increased as follows:

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14.2. Provision 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 2000 according to a procedure recommended by a firm of international experts, totals EUR 17 million (EUR 18 million at 31 December 1999).

14.3. Other provisions

This item comprises provisions for fines and interest subsidies repayable totalling EUR 42272249 (EUR 41735261 at 31 December 1999) and other provisions totalling EUR 116391098 (EUR 113461382 at 31 December 1999).

(a) Provisions for fines and interest subsidies repayable (Note B.5):

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(b) Other provisions:

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15. Reserves

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

16. Analysis of the result for the financial year

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

16.1. Non-budgetary operations

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16.2. Out-turn of the ECSC operating budget

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16.3. Result for the financial year

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17. Interest and similar charges

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18. Administrative overheads

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.

19. Other operating charges

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20. Interest received and other income

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21. Other operating income

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22. Income relating to the operating budget

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23. Off-balance-sheet commitments

23.1. Commitments received

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23.2. Commitments given

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The ECSC has always been keen to meet the commitments it has entered into and therefore has traditionally honoured coupons even after they have lapsed.

24. Changes in the financial situation for the year ending 31 December 2000

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(1) OJ L 222, 14.8.1978 and OJ L 372, 31.12.1986.

(2) OJ L 116, 6.5.1994.

(3) OJ L 100, 1.4.1998.