Financial statements

NOTE 7



INVESTMENTS

The movements under this heading in 2017 were as follows:

(Amounts in euros) Opening balance at 01/01/2017 Additions Disposals Transfers Change in value Balance at 31/12/17
a) Subsidiaries and associates
Equity investments: ANSEAC 30.000 0 0 0 30.000
Equity investments: AVATEL & WIKIKER TELECOM, S.L. 0 16.488.373 0 0 16.488.373
Non-current public debt 27.068.454 18.199.420 0 -6.313.454 38.954.420
Public sector debt (interest accrued and not paid) 45.195 26.261 0 -60.839 10.617
Long-term loan to ANSEAC 228.293 0 0 -22.380 205.912
b) Other companies
Equity investments 10.800.197 0 -10.500.012 0 0 300.185
Investment funds 44.168.622 0 0 0 659.527 44.828.149
Deposits and guarantees 91.699 0 -1.105 0 90.594
TOTAL 82.432.460 34.714.054 -10.501.117 -6.396.674 659.527 100.908.251

a) Investments in subsidiaries and associates

The Company has a 50% interest in the share capital of the company ANSEAC, S.A.

ANSEAC, S.A., Andorrana de Serveis d Atenció al Client, S.A., with registered office at La Massana, Avinguda Sant Antoni number 32, Edifici Els Arcs, has as its corporate purpose the provision of customer care services in the national and international market.

The Company was incorporated in 2015 and started its operations in 2016 through the ESPIC business.

Its share capital, reserves and results for the last year are as follows:

ANSEAC, S.A. (Amounts in euros) 31/12/17 31/12/16
Share capital 60.000 60.000
Reserves (prior year profit/loss) 47.668 -1.491
Profit/loss for the year 286.953 49.158

The carrying amount of the investment is 30,000 euros. The society is not listed on any stock exchange or any secondary market.

On 9 November 2017 the Company acquired 37.3% of the shares of AVATEL & WIKIKER S.L.

(Avatel Telecom), a telecoms provider that operates in Spanish coastal areas. It has its own fibre optic network and offers internet, telephony and television services around Cadiz, Alicante and Malaga.

This acquisition involved an investment of 16 million euros, comprising the purchase of a 25.07% stake (16,926 shares) from AVANT TELECOM & URBOTIC, SL. for 9 million euros, and the subscription to all the 13,165 shares issued in a capital increase for 7 million euros.

At 31 December 2017 the payment of 1,35 million euros to AVANT TELECOM & URBOTIC, SL. was outstanding. This amount was deposited in an escrow account with an Andorran bank and will be released in accordance with the terms of the sale agreement.

Under the terms of the sale agreement, Andorra Telecom has a five-year option to acquire 12.7% of the share capital of AVATEL & WIKIKER S.L for 5.45 million euros. Exercising this option would increase its holding to 50%. During this five year period, or until the option is exercised, whichever occurs first, Andorra Telecom will only be entitled to dividends in financial years when Avatel Telecom’s profits exceed 563 thousand euros.

Expenses of 488 thousand euros which are directly attributable to the purchase of said shares were added to the cost of the investment, in accordance with current legislation.

The financial statements of AVATEL & WIKIKER S.L for the financial year ended 31 December 2017 were not available at the date on which these financial statements were prepared, and are not therefore included in these notes to the financial statements.

Non-current public debt

The Company subscribed to government debt securities issued by the government of Andorra during the year. The value and main conditions applicable to the issues are detailed below:

Issue Cash amount subscribed Maturity Annual yield Interest accrued and not paid Valuation
Issue 5- year bonds 29/05/2017 1.016.000 29/05/2022 1,75% 10.522 1.026.522
Issue 3-year bonds 19/12/2016 20.755.000 19/12/2019 1,15% 7.847 20.762.847
Issue 18-month bonds 01/12/2017 17.183.420 01/06/2019 0,75% 10.617 17.194.037
TOTAL NON-CURRENT GOVERNMENT DEBT 38.954.420 28.986 38.983.406

The interest accrued on the five-year bonds issued on 29 May 2017 amounting to 10,522 euros and on the three-year bonds issued on 19 December 2016 amounting to 7,847 euros is classified under current receivables as it falls due in May and December 2018, respectively.

Long-term loan to ANSEAC

On 1 March 2016 the Company granted a loan of 250,000 euros to the investee ANSEAC, S.A., repayable in ten years and bearing interest at a fixed interest rate of 3.10%, to fund its financing and cash requirements.

At 31 December 2017 the amount of 228,293 euros was pending repayment, of which 205,912 euros was classified as a non-current receivable and 22,380 euros as current, as it falls due in March 2018.

b) Investments in other companies

Equity investments

The Company’s investments in other private Andorran companies at 31 December 2017 are as follows:

(Amounts in euros) Cost Provision Carrying amount % ownership
SEMTEE, S.A. 300.185 0 300.185 1,06%
Total 300.185 0 300.185

SEMTEE, S.A. operates natural hot water springs in the municipality of Escaldes Engordany, with two thermal spas, Caldea and Innú. In 2017 the Company received 4,460 euros for dividends earned in 2016.

In the second half of 2017, the company sold 537,085 shares it held in MASMOVIL S.A., having acquired said shares via the capital increase carried out by MASMOVIL IBERCOM, S.A. in July 2016, representing 2.69% of the company's share capital.

Investment funds

At 31 December 2017 the carrying amount of the portfolio was as follows:

(Amounts in euros) Opening balance at 01/01/2017 Additions Change in value Balance at 31/12/2017
Investment funds Andorran banks 44.168.622 0 659.527 44.828.149
TOTAL INVESTMENTS 44.168.622 0 659.527 44.828.149

The contract and maturity dates of the items in the portfolio are:

Financial institution Instrument Contract date (*) Maturity
Andbanc Fons mixtel 5/10/2006 Unlimited
Banc Sabadell IQ-STA 4/4/2007 Medium-long term
Crèdit Andorrà Crèdit fons mixt 17/5/2005 Indefinite
BIBM Privat 1-S 5/7/2006 Indefinite
Banca Privada d'Andorra Euromix moderat 23/7/2008 Indefinite

(*) The date on which the investment funds were constituted by Servei de Telecomunicacions d’Andorra. These funds were subsequently transferred to the Company.

The Company intends to hold all the items in the investment fund portfolio for at least one year.