Financial risk management Millicom regularly performs risk management assessments and reviews to identify its major risks and to take the necessary steps to mitigate such risks. The principal market risks to which we are exposed are interest rate risk, foreign currency exchange risk and non-repatriation. Each year, the Millicom Group Treasury function, revisits and presents to the Audit Committee updated Treasury and Financial Risks Management policies ("Group Treasury Policy"). The Millicom Group analyzes each of these financial risks individually as well as on an interconnected basis and defines and implements strategies to manage the economic impact on the Millicom Group’s performance in line with its Group Treasury Policy. This policy was last reviewed in October 2022. As part of the annual review of the above mentioned risks, the Millicom Group targets a strategy with respect to the use of derivatives and natural hedging instruments ranging from raising debt in local currency (where the Company targets to maintain 40% of debt in local currency) to maintaining at least a 75/25% mix between fixed and floating rate debt or agreeing to cover up to six months forward of operating costs and capex denominated in non-functional currencies through a rolling and layering strategy. Millicom’s risk management strategies may include the use of derivatives to the extent a market would exist in the jurisdictions where the Millicom Group operates. Millicom’s policy prohibits the use of such derivatives in the context of speculative trading. 120 On December 31, 2022 and 2021, the fair value of derivatives held by the Millicom Group may be summarized as follows: 2022 2021 (US$ millions) Derivatives Cash flow hedge derivatives - asset 19 21 Cash flow hedge derivatives - liability (53) (1) Net derivative asset (liability) (34) 20 Interest rate risk Debt and financing issued at floating interest rates expose the Millicom Group to cash flow interest rate risk. Debt and financing issued at fixed rates expose the Millicom Group to fair value interest rate risk. The Millicom Group’s exposure to risk of changes in market interest rates relate to both of the above. To manage this risk, the Millicom Group’s policy is to maintain a combination of fixed and floating rate debt with a target that more than 75% of the debt be at fixed rates. The Millicom Group actively monitors borrowings against this target. The target mix between fixed and floating rate debt is reviewed periodically. The purpose of Millicom’s policy is to achieve an optimal balance between cost of funding and volatility of financial results, while taking into account market conditions as well as our overall business strategy. At December 31, 2022, approximately 82% of the Millicom Group’s borrowings are at a fixed rate of interest or for which variable rates have been swapped for fixed rates with interest rate swaps (2021: 64%). The table below summarizes, as at December 31, 2022, our fixed rate debt and floating rate debt: Amounts due within 1 year 1–2 years 2–3 years 3–4 years 4–5 years >5 years Total (US$ millions) Financing at December 31, 2022 Fixed rate financing 131 383 501 376 718 3,466 5,574 Weighted average nominal interest rate 5.27 % 5.63 % 5.33 % 5.28 % 5.73 % 5.16 % 5.29 % Floating rate financing 49 12 63 402 404 300 1,230 Weighted average nominal interest rate 14.14 % 8.45 % 12.31 % 9.50 % 7.85 % 14.19 % 10.42 % Total 180 394 564 777 1,122 3,766 6,804 Weighted average nominal interest rate 7.68 % 5.71 % 6.11 % 7.46 % 6.49 % 5.88 % 6.22 % The table below summarizes, as at December 31, 2021, our fixed rate debt and floating rate debt: Amounts due within 1 year 1–2 years 2–3 years 3–4 years 4–5 years >5 years Total (US$ millions) Financing at December 31, 2021 Fixed rate financing 91 151 460 662 372 3,219 4,956 Weighted average nominal interest rate 5.32 % 5.04 % 5.44 % 5.69 % 5.29 % 5.27 % 5.34 % Floating rate financing 1,750 55 26 181 386 391 2,789 Weighted average nominal interest rate 1.75 % 8.55 % 6.08 % 6.48 % 4.95 % 5.94 % 5.94 % Total 1,840 206 487 843 758 3,610 7,744 Weighted average nominal interest rate 1.93 % 5.97 % 5.47 % 5.86 % 5.11 % 5.34 % 5.55 % 121 A 100 basis point fall or rise in market floating interest rates for all currencies in which the Group had borrowings at December 31, 2022 would increase or reduce profit before tax from continuing operations for the year by approximately US$12 million (2021: US$28 million). From time to time, Millicom enters into currency and interest rate swap contracts to manage its exposure to fluctuations in interest rates and currency fluctuations in accordance with its Group Treasury policy. Details of these arrangements are provided below. Interest rate and currency swaps on SEK denominated debt MIC S.A. entered into swap contracts in order to hedge the foreign currency and interest rate risks in relation to the 2024 SEK 2 billion senior unsecured sustainability bond and the foreign currency risk in relation to the 2027 SEK 2.2 billion senior unsecured sustainability bond (approximately $207.6 million and $252.3 million, respectively, using the exchange rate at the time of the issuance of each bond, issued in May 2019 and January 2022, respectively). These swaps are accounted for as cash flow hedges as the timing and amounts of the cash flows under the swap agreements match the cash flows under the SEK bonds. Their maturity dates are May 2024 and January 2027, respectively . The hedging relationships are highly effective and related fluctuations are recorded through other comprehensive income. At December 31, 2022, the fair values of the swaps amounted to a liability of $53 million (December 31, 2021: an asset of $6 million). Interest rate and currency swaps in Colombia and interest rate swaps in El Salvador Colombia and El Salvador operations have also entered into several swap agreements in order to hedge foreign currency and interest rate risks on certain long-term debts. These swaps are accounted for as cash flow hedges and related fair value changes are recorded through other comprehensive income. At December 31, 2022, the fair value of El Salvador swap amounted to a liability of nil (December 31, 2021: a liability of 1 million) and the fair value of Colombia swaps amounted to an asset of $19 million (December 31, 2021: an asset of $15 million). On January 19, 2022, a portion of the cross-currency swaps with Bancolombia and JP Morgan were settled in cash in favor of Colombia for $8 million. Other Interest rate and currency swaps No other financial instruments have a significant fair value at December 31, 2022. Foreign currency risk The Millicom Group is exposed to foreign exchange risk arising from various currency exposures in the countries in which it operates. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. In the years ended December 31, 2022, 2021 and 2020, foreign currency exchange rate fluctuations resulted in a loss of $84 million, $42 million and $69 million, respectively. Millicom seeks to reduce its foreign currency exposure through a policy of matching, as far as possible, assets and liabilities denominated in foreign currencies, or entering into agreements that limit the risk of exposure to currency fluctuations against the U.S. dollar reporting currency. In some cases, Millicom may also borrow in U.S. dollars where it is either commercially more advantageous for joint ventures and subsidiaries to incur debt obligations in U.S. dollars or where U.S. dollar denominated borrowing is the only funding source available to a joint venture or subsidiary. In these circumstances, Millicom accepts the remaining currency risk associated with financing its joint ventures and subsidiaries, principally because of the relatively high cost of forward cover, when available, in the currencies in which the Millicom Group operates. The following table summarizes debt denominated in U.S. dollars and other currencies at December 31, 2022 and 2021. 122 2022 2021 (US$ millions) December 31 Debt denominated in U.S. dollars 4,100 4,827 Debt denominated in currencies of the following countries: Guatemala 595 605 Colombia 605 699 Tanzania — 38 Bolivia 260 310 Paraguay 171 195 El Salvador(i) 173 99 Panama(i) 773 846 Luxembourg (SEK denominated) 30 36 Costa Rica 96 88 Total debt denominated in other currencies 2,704 2,917 Total debt 6,804 7,744 (i) El Salvador's official unit of currency is the U.S. dollar, while Panama uses the U.S. dollar as legal tender. Our local debt in both countries is therefore denominated in U.S. dollars but presented as local currency (LCY). At December 31, 2022, if the U.S. dollar had weakened/strengthened by 10% against the other functional currencies of our operations and all other variables held constant, then profit before tax from continuing operations would have increased/decreased by $20 million (2021: $38 million). This increase/decrease in profit before tax would have mainly been as a result of the conversion of the USD-denominated net debts in our operations with functional currencies other than the U.S. dollar. Non-repatriation risk Millicom’s operating subsidiaries and joint ventures generate most of the revenue of the Millicom Group and in the currency of the countries in which they operate. Millicom is therefore dependent on the ability of its subsidiaries and joint venture operations to transfer funds to the Company. Although foreign exchange controls exist in some of the countries in which Millicom Group companies operate, none of these controls currently significantly restricts the ability of these operations to pay interest, dividends, technical service fees, royalties or repay loans by exporting cash, instruments of credit or securities in foreign currencies. However, existing foreign exchange controls may be strengthened in countries where the Millicom Group operates, or foreign exchange controls may be introduced in countries where the Millicom Group operates that do not currently impose such restrictions. If such events were to occur, the Company’s ability to receive funds from the operations could be subsequently restricted, which would impact the Company’s ability to make payments on its interest and loans and, or pay dividends to its shareholders. As a policy, all operations which do not face restrictions to deposit funds offshore and in hard currencies should do so for the surplus cash generated on a weekly basis. The Company and its subsidiaries make use of physical cash pooling arrangements in hard currencies to the extent permitted. In addition, in some countries it may be difficult to convert large amounts of local currency into foreign currency because of limited foreign exchange markets. The practical effects of this may be time delays in accumulating significant amounts of foreign currency and exchange risk, which could have an adverse effect on the Millicom Group. This is a relatively rare case for the countries in which the Millicom Group operates. Lastly, repatriation most often gives rise to taxation, which is evidenced in the amount of taxes paid by the Millicom Group relative to the Corporate Income Tax reported in its statement of income. 123