Annual Report 2017 Simply better April 2018 TABLE OF CONTENTS 1. MANAGEMENT REPORT 6 1.1. Corporate Principles 7 1.2. About the Company 8 1.2.1. Company info 8 1.2.2. Ownership 8 1.2.3. Management 8 1.2.4. Directors 8 1.2.5. Supervisory board 8 1.2.6. Changes in the Management in 2017 8 1.3. Employees 9 1.4. Social Responsibility 9 1.5. Selected Performance Indicators 10 1.5.1. Analysis of the Profit and Loss Statement 10 1.5.2. Analysis of the Balance Sheet 11 1.6. Transactions with Related Parties 12 1.7. Risk Exposure 12 1.7.1. Regulatory Risks 12 1.7.2. Credit Risk 13 1.7.3. Interest Rate Risk 14 1.7.4. Currency Risk 14 1.7.5. Liquidity Risk 14 1.8. Plans for the Future 15 1.9. Governance Statement 16 1.9.1. Governance Code 16 1.9.2. Work of the General Meeting 16 1.9.3. Management and Supervisory Board 16 Description of the Main Characteristics of the Company’s Internal Control and Risk Management 1.9.4. 16 Systems Relevant for the Financial Reporting Procedure 2. FINANCIAL REPORT 17 2.1. GENERAL DISCLOSURES 18 2.1.1. About A1 Slovenia 18 2.1.1.1. Company's registered seat, legal form, and country of registration 18 2.1.1.2. Nature of operations and core activities 18 2.1.1.3. Information about the controlling company 18 2.1.1.4. Data on Employees 19 2.1.2. Statement of Management Responsibility 20 2.2. INDEPENDENT AUDITORS' REPORT 21 2.3. FINANCIAL STATEMENTS OF A1 SLOVENIJA, D. D. 22 2.3.1. Balance Sheet 22 2.3.2. Profit and loss statement 24 2.3.3. Other comprehensive income 24 2.3.4. Cash flow statement 26 2.3.5. Statement of Changes in Equity 27 2.4. NOTES TO THE AUDITED FINANCIAL STATEMENTS 28 2.4.1. Framework for preparing the statements and significant accounting policies 28 2.4.1.1. Declaration of compliance 28 2.4.1.2. Functional and Presentation Currency and Rounding Off 28 2.4.1.3. The Grounds for Measurement 28 2.4.1.4. Foreign currencies 28 2.4.1.5. Significance 29 2.4.1.6. Segment reporting 29 2.4.1.7. Changes to accounting policies, estimates and error corrections 29 2.4.1.8. Significant Accounting Policies 33 2.5. EXPLANATIONS AND NOTES ON FINANCIAL STATEMENTS 43 2.5.1. Commercial Mergers 43 2.5.2. Balance Sheet 44 2.5.1.1. Intangible assets 44 2.5.1.2. Property, Plant and Equipment 46 2.5.1.3. Long-term Financial Assets 47 2.5.1.4. Long-term operating receivables 48 2.5.1.5. Deferred Tax Assets 49 2.5.1.6. Inventories 50 2.5.1.7. Short-term operating receivables due from customers 50 2.5.1.8. Short-term trade receivables from group companies 51 2.5.1.9. Tax assets from the income tax 51 2.5.1.10. Other operating receivables 51 2.5.1.11. Cash and cash equivalents 51 2.5.1.12. Other short-term assets 52 2.5.1.13. Equity 52 2.5.1.14. Provisions for Post-Employment Benefits and Other Long-Term Provisions 53 2.5.1.15. Long-term deferred revenue 54 2.5.1.16. Long-term financial liabilities 55 2.5.1.17. Long-term operating liabilities 55 2.5.1.18. Short-term financial liabilities 55 2.5.1.19. Short-term operating liabilities to suppliers 56 2.5.1.20. Short-term operating liabilities towards group companies 56 2.5.1.21. Other operating liabilities 56 2.5.1.22. Short-term deferred revenue and short-term provisions and accrued costs 56 2.5.1.23. Contingent Liabilites 57 2.5.1.24. Contingent Liabilities from Issued Guarantees 57 2.5.3. Profit and Loss Statement 58 2.5.4.1. Net sales revenue 58 2.5.4.2. Other operating revenue 59 2.5.4.3. Costs of goods, materials and services 59 2.5.4.4. Labor cost 60 2.5.4.5. Amortization and depreciation 61 2.5.4.6. Other operating expenses 61 2.5.4.7. Financial Revenue and Expenses 61 2.5.4.8. Income tax 61 2.5.4.9. Related party transcations 62 2.5.4. Income of Members of Management and Supervisory Bodies 65 2.5.5. Financial Instruments and Risk Management 65 2.5.5.1. Liquidity risk 65 2.5.5.2. Credit Risk 66 2.5.5.3. Interest rate risk 68 2.5.5.4. Currency risk 68 2.5.6. Capital Management 69 2.5.7. Carrying Amounts and Fair Values of Financial Instruments 69 2.6. OTHER DISCLOSURES 70 2.6.1. The auditor’s fee 70 2.6.2. Liabilities and receivables for operating leases 70 2.6.1.1. Company as the leaseholder 70 2.6.1.2. Company as the lessor 71 2.6.3. Business Events After the Balance Sheet Date 71 Magamenet Report 1.1. Corporate Principles We put the customer in the center of our operations. We strive to be a reliable, thoughtful and lively companion, and that is why we strive to provide the best user experience in the Slovenian market fit for the modern digital lifestyle. We are committed to creating useful communication services. We use technology to create the space and opportunities for genuine closeness. We operate with care, responsibly and prudently, always thinking of our customers’ satisfaction. Our guiding principle is to connect people, places and things. We create solutions that enrich how our users experience work, life and fun. We provide advanced, simple and worry-free solutions. They are tailored to our customers’ wishes and needs. We want the endless possibilities offered by modern technology to work to their advantage. We want to help our customers overcome the challenges they are facing, and make their day-to-day life and quality of living in this digital world better. We are creating a unique experience in the digital world. We want our innovations to support progress, and we want to develop new services and products that will bring added value to our users. A1 Slovenija promotes diversity and sees it as strength. We respect different opinions and help each other out not only at work, but also outside the office. We want to make it possible for our colleagues as well as customers to create the experience they want to have. We build our business of the foundations of ethic and responsibility – towards ourselves and everyone else. That is why we are especially focused on establishing an organizational culture that promotes integrity, mitigates risks, and improves our reputation. We are aware that the organizational culture has a huge impact on the implementation of our strategy, so we continue strengthening it and promoting its development. Every day we create work conditions that encourage innovative thinking and creativity in the development of new products and services. We believe that responsibility boosts the company’s growth. We want to have a positive impact on the society and the environment we operate in by acting socially responsibly. We strengthen our loyal customers’ trust by operating transparently, and with hard and diligent work. We respect our customers and treat them the way we want others to treat us. ANNUAL REPORT A1 2017 7 MANAGEMENT REPORT 1.2.1. COMPANY INFO Name A1 Slovenija, telekomunikacijske storitve, d. d. Registered office Šmartinska 134b, SI-1000 Ljubljana Phone +386 (0)40 40 40 40 E-mail for residential users [email protected] E-mail for business users [email protected] Website www.a1.si Main activity 61.200 – Wireless telecommunications activities Activity code J61.200 Founded in 1998 ID for VAT SI 60595256 Company registration number 1196332000 SRG 1/29430/00 Ljubljana Share capital EUR 38,781,000. 1.2.2. 1.2.2. OWNERSHIP About the A1 Slovenija, d. d. is fully owned by Mobilkom Beteiligungsgesellschaft mbH. Mobilkom Beteiligungsgesellschaft mbH is part of the American Movil Group. America Movil, S.A.B. de C.V., Mexico, is the ultimate final company (more Company information at www.americamovil.com). 1.2.3. MANAGEMENT Dejan Turk CEO 1 . 2 . 4 . D I R E C T O R S Andrej Špik Senior General Affairs Director Lovro Peterlin Senior Sales and Customer Services Director Larisa Grizilo Senior HR and Corporate Communications Director Ivo Radaković Senior Marketing Director Natali Delić Senior Technical Director Milan Zaletel Senior Finance Director 1.2.5. SUPERVISORY BOARD Alejandro Douglass Plater Chairman Siegfried Mayrhofer Member Bernd Schmutterer Member 1.2.6. CHANGES IN THE MANAGEMENT IN 2017 CHANGES IN THE MANAGEMENT There were no changes to the management team in 2017. CHANGES IN THE SUPERVISORY BOARD There were no changes to the Supervisory Board in 2017. ANNUAL REPORT A1 2017 8 MANAGEMENT REPORT 1.3. Employees The share of women among A1 Slovenija’s employees on their hearts to fill with joy for a moment. In 2017 we also 31 December 2017 was 43.96%, and the average age of helped the Slovenian Association of Friends of Youth by our employees was 36.62 years. The vast majority of our donating them 12 perfectly functioning used phones, we employees have at least secondary school education, and gave 5 computers with displays to the Janez Levec Training 47% have a higher education degree. Center, and set up a Wi-Fi hotspot with free data transfer The company does not have a diversity policy.