Assembly Agenda Item 5c)

the Treasurer

Antwerpen, 30 September 2010

Impact of the Level of Subscriptions on the Reserves

(All amounts in €)

  1. Mission

The Treasurer has been asked to “prepare a note and graph to be submitted to the Assembly at BA highlighting that the substantial reserves will be eroded over time if the reduced subs and early bird discounts approved at the Rotterdam Assembly are maintained for the foreseeable future

(Final Report of the virtual ExCo meeting of March 2010 at para 2)

  1. Purpose and Scope of Decision making

This paper is to support decision making with respect to the budget 2011, in particular the amount of the subscriptions for 2011. The graphs show developments on the long run, but the decision to take at this Assembly meeting is only to determine the subscriptions for 2011. The long term analysis is only to enable a decision that is consistent on the long run, but any decision on the subscriptions is to be taken on a yearly basis, on the basis of yearly updated figures.

  1. Brief Answer

Although the 2010 subscription level significantly reduces the income of the CMI, it does not appear that this level will erode the reserves significantly within the next few years. A 40% reduction of the 2010 subscription level along with a 20% early bird discount would visibly reduce the reserves, and necessitate to double the subscriptions once the reserves have reached a level that should not be further reduced, say around 2017. The question is whether the MLA’s will then be able to amend their financial policy and be able to face a level of subscriptions that is twice the amount charged over the last years. To avoid this development and difficulties, a one time skip of the subscriptions in 2011 would enable to reduce the reserves visibly, while maintaining them on a level sufficient to cover several years of expenditures, to improve the cash position of the MLA’s without them getting acquainted financially to a level of CMI subscriptions which covers only half of the needs of the CMI.

  1. Analysis

4.1. The Present: Reserves as of 31 December 2009(980,915) exceed four years of Expenses

As per 31 December 2009, the CMI reserves amounted to 980,915. This exceeds four years of expenses. On the assumption of there being no fresh revenue and unchanged expenses, the reserves would therefore be depletedsometime in the first half of 2015.

4.2.The Past:Development of the Subscriptions over the past 18 years: a reduction of 42% in real terms

4.2.1.In nominal terms (i.e. without accounting for inflation)

(if 1993 is 100)

The subscriptions dropped in nominal terms (this is without accounting for inflation) with approximately 19% since 1993, and with 45% since 2001. This is without accounting for inflation.

(amounts see Annex 1 left schedule)

4.2.2.The erosion of the value of money by the effect of inflation : 27.83% from 1993 to 2010

(In Belgium,

Inflation eroded the value of money of the Belgian currency (Francs, then EUR) up to 27.83% between 1993 and 2010. 47% of the CMI expenses are subject to Belgian inflation.

(see annex 1, centre schedule)

4.2.3.Subscriptions(net of early bird) in real term : - 42% since 1993

(accounting for inflation)

If inflation is accounted for, the subscriptions decreased with 42% since 1993 and 51% since 2001.

(supporting figures: see annex 1, left schedule)

4.3. The near Future: Effect of the 2010 subscription level on the reserves. Short term.

A non significant drop: 1.72%


It is estimated that the 2010 level of subscription along with the 20% early bird discount would result in 2010 ina deficit of 16,834 causing the reserves to go down from 980,915 (31 December 2009) to 964,081 (31 December 2010), i.e. 1.72%.


a/Net Subscriptions:from 234,696 in 2008 to 145,064 in 2010

The total of subscriptions as approved by the R’dam Assembly for 2010 (and retroactively applied to 2009) amounts to 201,000 , whichis 27,699 or 11.56% lower than in 2008

The average of unpaid subscription amounts to 22,241. This is the sum of the written off and provisioned claims for unpaid subscriptions over the years 2003 to 2009, which I believe is a representative period for this purpose. However, on the assumption that the number of defaults remain stable, the amount in defaults should at least drop proportionally to the drop of the invoiced subscription. . The unpaid subscriptions are therefore estimated to 22,241 - 11.56% = 19,670.

So the subscription amount net of unpaid is estimated to 201,000 – 19,670 = 181,330.

The R’dam Assembly approved an early bird discount of 20% for 2010. If we apply the early bird to the total amount of net subscriptions net , i.e. 181,330.06, as shown above, the effective cost of this early bird cantherefore be estimated to 36,266.

The R’dam Assembly also decided to suppress the Titulary Members fees of, 18,238 (2009 figure).

All together the 2008 subscriptions (238,699) plus titulary membership (18,238) fees minus the unpaid subs (22,241) caused a revenue of 234,696. For 2010, this is estimated to drop to 145,064, i.e. 201,000 minus estimated unpaid claims of 19,669.94 and minus 36,266 early bird discount.

b/ Other income (30,000)

We assume the revenue out of investments will be lower than 2009 because the interest rates on the market further dropped. We estimate it to 30,000 for 2010.

Other income are either negligeable, or uncertain, or their realisation is not a priority (such as conference surplus), so that any such other income is not accounted for.

c/ Total income

The total income is so estimated to 145,064 + 30,000 = 175,064 in stead of 225,325 in 2009 and 277,380in 2008.

4.3.3.Expenses (from 225,325 to 175,064)

In the near future, and not accounting for possible new projects the expenses are likely to be in line with the 2009 expenses adding up 2,12% per year for inflation, as shown in the draft budget.


The revised budget for 2010 shows a deficit of 16,834 and the budget for 2011, if we keep the subscriptions on the 2010 level, with the 20% early bird, estimates a deficit of 17,191 still leaving 964,081 of reserves, to cover more than 4 years of expenses.

As noted above, the reserves asper31 December 2009 amounted to 980,915 and are estimated to be reduced by 16.834 at the end of 2010 and by another 17,191 at the end of 2011 if subscriptions and early bird discount remain unchanged.

4.4. The remote future: Long term effect of the 2010 subscription level on the reserves.

Reserves in 2021 = 2 years of expenses

We have seen that predictions on the short run may not come true. Predictions on the long run are even less reliable. This graph should not be the basis for a long term policy, but it may be helpful to determine a position for next year or the next few years, provided, the exercise is updated every year and decisions revised.

4.4.1.Effect of Subscription and early bird (20%) at 2010 Level

The below graph is based on the following assumptions

-2010 Subscription level;

-20% early bird;

-2.12% inflation.

The anticipation is a drop of the reserves to 458,203 at the start of 2021. The below graphic also shows that the decrease is slow at start but speeds up as the years go by, the downward curb becomes steeper. (The deficits shown on the below graphic are the deficits of the year, not the accumulated deficits).One can see an increase of the deficit, resulting from the accumulation of lost value by inflation and reduction of the income out of investments, for the investment declines as the reserves do.

4.4.2.Effect of 2010 Subscription minus 20% and early bird at 10%

Would cause the CMI to hold two years of expenses as a reserve in 2019.

4.4.3.Effect of 2010 Subscription level minus 40% and 10 % early bird

The reserves would turn into debts half way 2019.

4.4.4.Effect of 2010 Subscription level minus 20% and 20% early bird

The Reserves would turn into debts in 2021.

4.4.5.Effect of 2010 Subscription level minus 40% and 20% early bird

In the first months of 2019 the reserves would dry up. If one would decide to keep up the revenue and the expenses in equilibrium, as from 2015, then it would be necessary to double the subscription amount.

4.4.6.Effect of 2010 Subscription level and 20% early bird and one skip of subscriptions in 2011

The below graph is based on the same assumptions as above but as if no subscriptions would be charged in 2011.

It shows that the reserves would

-still be very safe to start 2012: 773,445;

- there would be no disappearance of the reserves on the very short run;

- 2012 would start with reserves in the amount of approximately one year of expenses

(by then approximately quarter million).

Impact of the Level of Subscription on the Reserves

Report to to Buenos Aires 2010 Assembly

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