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Investor Presentaiton

159 139 ANNUAL INTEGRATED REPORT 2021 | AXTEL to thousands of Mexican pesos at the closing exchange rate as of December 31, 2021, 2020 and 2019. MXP) 2020 USD (converted to thousands of USD (converted to thousands of MXP) 2021 USD (converted to thousands of MXP) 2019 Financial assets $ Financial liabilities 714,540 (10,971,150) $ 3,075,425 (12,217,941) $ 701,548 (11,019,701) Foreign exchange $ (9,142,516) monetary position $ (10,256,610) $ (10,318,153) During 2021, 2020 and 2019, Axtel contracted several derivative financial instruments, mainly forwards, to hedge this risk. These derivatives have been designated at fair value with changes through profit or loss for accounting purposes as explained in the next section of this note. Based on the financial positions in foreign currency maintained by the Company, a hypothetical variation of 10% in the MXN/USD exchange rate and keeping all other variables constant, would result in an effect of $1,025,661 on the consolidated statement of income and consequently on the stockholders' equity. Financial instruments and derivative financial instruments Financial instruments As of December 31, 2019, the Company had Over the Counter (OTC) transaction agreements with Bank of America Merrill Lynch (BAML), denominated "Zero Strike Call" or options, at a price closely resembling zero. The asset underlying these instruments is the market value of Axtel's CPOs. The contracts signed prior to October 2016 can only be settled in cash. As from that date, the term of the contracts yet to be settled was extended and as a result of this negotiation, the settlement method can be in cash or in shares, as decided by the Company. The original term of these contracts is 6 months and can be extended by mutual agreement between the parties; however, as this is an American type option, the Company can exercise it at any given time prior to the date of maturity. According to the contracts, in case of deciding for payment in cash, the amount to be settled will be calculated as per the following formula: Number of options per option right per (reference price - exercise price). Where: Number of options = defined in the contract Right of option = defined as 1 "share" per option, defining "share" as Bloomberg Code Axtel CPO MM. Reference price = "The price per share that GBM receives upon settling the position of the hedges thereof, under commercially reasonable terms, discounting commissions and taxes". Exercise price = 0.000001 pesos The Company determined the classification and measurement of these contracts as financial assets at fair value with changes through profit or loss. As of December 31, 2020 and 2019, the lending position of the options represents the maximum amount of its credit exposure, as showed below: =
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