Financial risk management

Kinnevik's management of financial risks is centralized within Kinnevik’s finance function and is conducted based on a Finance Policy established by the Board of Directors. The policy is reviewed continuously by the finance function and updated when appropriate in discussion with the Audit Committee and as approved by the Board of Directors. Kinnevik has a model for risk management that aims to identify, control and reduce risks. The output of the model is reported to Kinnevik's Risk, Compliance & Sustainability Committee and Board of Directors on a regular basis.

Kinnevik is mainly exposed to financial risks in respect of:

• Valuation risk, in relation to negative changes in the value of the portfolio

• Liquidity and financing risk, in relation to increased cost of financing, and difficulties in refinancing maturing loans and facilities, ultimately leading to payment obligations not being met

• Foreign exchange rate risk, in relation to transaction and translation currency exposure

• Interest rate risk, having an adverse impact on financing costs

Valuation risk

Kinnevik is invested in both listed and unlisted investee companies where valuations can fluctuate due to a wide array of different factors.

On 31 December 2020, 84% (83%) of Kinnevik's Portfolio Value was invested in listed investee companies and 16% (17%) in unlisted investee companies.

Kinnevik is a long-term shareholder and therefore has the flexibility not to have a general strategy for managing short-term fluctuations in the share prices of its listed investee companies. The share price risk associated with Kinnevik's listed investee companies can be illustrated by stating that a 10% change in the prices of all listed shareholdings at 31 December 2020 would have affected the Group's earnings and shareholders' equity by SEK 9.0bn (6.2bn).

The value of Kinnevik's investments in unlisted investee companies may increase or decrease due to a number of factors, of which changes in public equity markets is one. In the process of valuing its unlisted holdings, Kinnevik makes a large number of considerations, including in relation to relative valuations of comparable publicly traded companies, operational and financial performance of the respective investee company, and valuations reflected in transactions in the respective investee company's shares. Any changes in these considerations bear impact on the value of Kinnevik's investments in unlisted investee companies. For the companies that are valued based on multiples an increase in the multiple by 10% would have increased the aggregate assessed fair value by SEK 1.6bn. Similarly, a decrease in the multiple by 10% would have decreased the aggregate assessed fair value by SEK 1.6bn.

Liquidity and financing risk

Kinnevik's liquidity and financing risk is limited considering listed securities account for a large part of Portfolio Value. Kinnevik relies in part on dividends received from Tele2 to finance its operations and maintain recent years' investment momentum. Without dividends from Tele2, Kinnevik would rely on capital re-allocation and/or debt financing to secure the funding of its operations and maintain its targeted financial position. On 31 December 2020, Kinnevik had cash and cash equivalents amounting to SEK 3,711m (3,887m) and committed but not utilized, or reserved in any other way, credit facilities amounting to SEK 6,000m (5,170m).

Financing risk covers the eventuality that Kinnevik is not be able to obtain financing, or that financing can only be obtained at considerable cost. Kinnevik's financing risk is limited in consideration of its substantial net cash position, and since its operations are financed from different sources. Debt financing is sourced from a number of different credit institutions with diversified maturities, and Kinnevik strives to refinance all facilities at least six months prior to maturity. On 31 December 2020, the total amount of committed financing was SEK 9,030m (9,020m) with an average remaining facility duration of 2.3 (1.8) years. For further details, please refer to Note 10 for the Group.

Foreign exchange rate risk

Foreign exchange rate risk comprises transaction and translation currency exposure. Transaction exposure arises from cash flows denominated in foreign currencies. Kinnevik's debt funding and cash position is primarily denominated in SEK. Excluding investments and divestments, Kinnevik does not have any material cash flows in foreign currencies.

Translation exposure arises from the translation of balance sheet items denominated in foreign currencies into SEK. Kinnevik's balance sheet is mainly exposed to foreign exchange risk through investments denominated in either EUR or USD. On 31 December 2020, 53% (45%) of Kinnevik's Portfolio Value, corresponding to a value of SEK 57.4bn (33.5bn), pertained to investments denominated in EUR.

Kinnevik is also exposed to indirect translation exposure, as several of its investee companies operate internationally, whereby foreign currencies have an indirect effect on the value of these investments.

Interest rate risk

Kinnevik's interest rate risk pertains to the risk that the value of interest- bearing receivables and liabilities will change negatively due to chan- ges in market interest rates. On 31 December 2020, none of Kinnevik's interest bearing liabilities, SEK 2.9bn (4.8bn), were exposed to interest rate changes. SEK 2.65bn (2.4bn) out of Kinnevik's SEK 2.9bn (3.9bn) in outstanding bonds were originally exposed to interest rate risk with floating rates (3 months STIBOR). This interest rate risk was hedged by entering into interest rate swaps maturing on the same dates as the re- levant bonds. On 31 December 2020, these swaps had a market value of SEK 17m (negative 2.9m).

In connection with refinancing of current bonds and credit facilities, or if Kinnevik would increase its receivables or liabilities materially, the interest rate risk may change materially.