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Document DEVICE REPORTelectrolux-annual-report-2007-part2-english
Annual Report 2007 | Financial review
Would you like to know more about our financial performance?
Latin America showed its best results ever in 2007. Track the financial performance in 2008 at www.electrolux.com/ir

Contents

CEO statement

2

Board of Directors Report 5

Notes to the financial

statements

28

Definitions

67

Proposed distribution of

earnings

68

Audit Report

69

Eleven-year review

70

Quarterly information

72

New Built-In Kitchen

74

Electrolux shares

76

Risk

80

Sustainability

83

Corporate governance

report

88

Board of Directors and

Auditors

92

Group Management

95

Annual General Meeting 99

I n 2007, we accelerated our on-going work of transforming Electrolux into a leading consumer-oriented company. We are implementing our strategy for developing innovative products, strengthening the Electrolux brand and cutting costs in the long term through restructuring.

CEO statement, page 2.

Mkr 125 000

N et sales increased by 4% in compar1a0b0le000 currency in 2007 compared to the previous year and margin rose to 4.6%, excluding ite7m5s000

affecting comparability. 50 000
Operating income rose across all business

areas except for appliances in Europe.

25 000

%

10

Nettoomsättn

Rörelsemargi 8

6

4

2

Board of Directors Report, page 5.

0

0

03 04 05 06 07

Index

450
F ollowing a strong re4s0u0lt for the fourth quarter in 2006, the trad3i5n0g price of Electrolux
B-shares rose sharply a3t0t0he start of 2007. During the second half of the y2e5a0r, the trading price was

adversely affected by20th0e generally turbulent

stock-exchange climate and concern about the company's exposure to1t5h0e weak US market.

The Board of Directors proposes a dividend

for 2007 of SEK 4.25 pe1r00sh0a3re

04

05

06

Elextrolux shares, page 76.Electrolux B

SIX-Return Index

Antal, miljoner

120 80 40

07

08

Omsatt antal aktier

Contacts
Peter Nyquist
Vice President, Investor Relations and Financial Information
Investor Relations

Tel. +46 8 738 67 63
Tel. +46 8 738 60 03 Fax +46 8 738 74 61 E-mail [email protected]

The cover was created by Frank Bruzelius, Art Director with Electrolux since 1989. Concept, text and production by Electrolux Investor Relations and Solberg.

Highlights of the year

· Net sales increased to SEK 104,732m (103,848)
· Operating income rose by 5.7% in 2007, excluding items affecting comparability
· Operating income improved for all operations except for appliances in Europe
· Extra costs for new products launched adversely affected income for appliances in Europe

· Best results ever for appliances in Latin America · Strong performance by floor-care operations worldwide · Good growth in Asia/Pacific and strong improvement
in results · Solid performance by appliances in North America and
Professional Products · Proposed dividend is SEK 4.25 (4.00) per share

Key data1)

SEKm, EURm, USDm, unless otherwise stated

2007

Net sales

104,732

Operating income

4,837

Margin, %

4.6

Income after financial items

4,397

Earnings per share, SEK, EUR, USD 11.66

Dividend per share, SEK, EUR, USD 4.252)

Return on net assets, %

20.9

Value creation

2,053

Average number of employees

56,898

Net debt/equity ratio

0.29

Return on equity, %

22.7

1) Excluding items affecting comparability. 2) Proposed by the Board of Directors.

2006 103,848
4,575 4.4
4,367 10.89
4.00 21.2 2,202 55,471 ­0.02 21.1

2007 EURm 11,326
523
475 1.26 0.46
222

2007 USDm 15,539
718
652 1.73 0.63
305

Net sales and employees in 10 largest countries

USA Brazil Germany Italy France UK Canada Australia Sweden Spain Other Total

SEKm
29,571 7,158 7,020 5,109 4,957 4 950 4,577 4,488 3,814 2,927
30,161 104,732

Employees
10,648 6,754 2,147 8,036 1,466 1,122 1,420 2,144 3,025 892
19,244 56,898

Net sales1)
SEKm
140,000

Operating income1)
SEKm
7,500

105,000 70,000 35,000

5,000 2,500

0 03 04 05 06 07

0 03 04 05 06 07

1) Continuing operations, excluding items affecting comparability.
2) Earnings per share for 2006 and 2007 refer to continuing operations, excluding items affecting comparability.
3) Average number of employees for continuing operations.

Earnings per share2)
SEK
20.00

Number of employees3)
No
100,000

15.00

75,000

10.00

50,000

5.00

25,000

0 03 04 05 06 07

0 03 04 05 06 07

ceo statement

CEO Hans Stråberg's comments on the 2007 results
In 2007, we accelerated our on-going work of transforming Electrolux into a leading consumer-oriented company. We are implementing our strategy for developing innovative products, strengthening the Electrolux brand and cutting costs in the long term through restructuring.

During the year, we launched a record number of new products worldwide. We invested over SEK 2 billion in development of new products, an increase of 10% over 2006. Investment in brands also rose in 2007, and we are approaching our goal for this investment to correspond to 2% of Group sales. The Electrolux brand has been strengthened, particularly in Europe. Our research shows that many more consumers prefer the Electrolux brand than in last year. We also continued our work on making production more competitive by relocating to low-cost countries. We now have approximately 50% of our production in such countries, which means that we are quickly approaching our goal of 60% by 2010. In addition, we achieved organic growth of 4% in 2007, which is in line with our target.
Except for the result for appliances in Europe, I can report that all our other operations achieved higher income in 2007. In North America, sales rose by 2% while the market declined by almost 6%. This is a fantastic effort by our people in North America, which gives me great expectations for our launch under the Electrolux brand during 2008.
The global operation in floor-care equipment had a successful year, with greater market shares and improved profitability. This is a good example of the benefits generated by offering innovative products to consumers.
Our operation in Latin America reported the best performance ever, which is another example of what can be achieved through

a strategy of a strong brand, exciting new products and low costs. In Australia, after a number of tough years we reinforced our market position and achieved considerably higher profitability. In addition, income was higher for our products for professional kitchens and laundries, despite rising prices for raw materials and a weaker dollar.
However, the performance by Electrolux appliances in Europe was a disappointment. As our new products were well-received by the market, our average prices were higher in all product categories and virtually every country, and the Electrolux brand was strengthened considerably, we had expected a better financial outcome. The marketing campaign and the product launch were the most comprehensive in our history. In order to deliver our products to retailers according to plan, we were forced to prioritize time ahead of cost. This meant that costs for many products were higher than the original targets.
We are working on solving these problems, and we are striving to get costs down to the planned level during the second half of 2008. During the last two years, we have been working hard to reduce complexity in the European appliances operation. As a result, we are now, among other things, initiating a comprehensive program this spring to reduce the number of employees by about 400. This program will generate savings yearly of SEK 350­400 million, for a cost amounting to approximately SEK 400 million that will affect results in the first quarter of 2008. We are also going to implement a review of our refrigerator production in Italy in the interest of making it more competitive.

2

We see a great uncertainty about the global economic trend. It is very difficult to forecast Electrolux operating income for 2008. We face a number of major challenges. We have to cut costs for the products we sell in Europe. In North America, we are going to launch a completely new and very impressive product offering in the premium segment under the Electrolux brand. At the same time, we are expecting a tough start in 2008 as launch costs in the US of about SEK 100 million and the cost for the reduction of employees in Europe amounting to approximately SEK 400 million will impact the first quarter result negatively.
Provided that market demand for appliances in Europe shows a slow growth in 2008 and that market demand for appliances in North America shows a slightly negative development, our outlook for 2008 is that operating income is expected to be in-line with 2007, excluding items affecting comparability.
Stockholm, February 6, 2008
Hans Stråberg President and Chief Executive Officer

" Except for the result for appliances in Europe, I can report that all our other operations achieved higher income in 2007.

3

strategy

The Electrolux strategy
Electrolux is working hard to improve profitability. A competitive production system, innovative products based on consumer insight and a strong global brand is the strategy that will generate long-term margins on a level with the best in the industry. The Group's strategy is thoroughly described in the section Organization and strategy on page 22.

Cost efficiency

Brand dePverolodpumctent

Growth

Improved operating
margin

During the past decade, product offerings in the market for household appliances have been transformed from simple, basic equipment to more innovative products with attractive design. Electrolux has been transformed from a production-oriented industrial company to an innovative consumer-oriented company with operations based on insight into consumer behavior. The number of new products generated through consumer-focused development is increasing rapidly, and is leading to improved product offerings and a greater number of successful launches.

The Group is implementing a restructuring program which involves relocating more than half of production to low-cost countries.
The task of building the Electrolux brand into a strong, global leader is continuing on the basis of large investments in marketing as well as launches of new Electrolux-branded products in the Group's major markets in Europe and North America.
Innovative products, lower costs and a strong brand enable Electrolux to create a foundation for improved profitability and growth.

"Thinking of you" sums up the Electrolux offering ­ always put the users first and foremost, whether it's a question of product development, design, production, marketing, logistics or service. By offering products and services that consumers prefer, that benefit both people and the environment, and for which consumers are willing to pay a higher price, Electrolux can achieve profitable growth.

reg. no. 556009-4178

board of directors report

Report by the Board of Directors for 2007

· Net sales for continuing operations increased to SEK 104,732m (103,848) and income for the period was SEK 2,925m (2,648), corresponding to SEK 10.41 (9.17) per share
· Net sales increased on the basis of growth in volume and improved product mix
· Operating income rose by 5.7% in 2007, excluding items affecting comparability
· Increase in operating income resulted from good growth in volume, an improved product mix and savings from restructuring
· Operating income rose across all business areas except for appliances in Europe
· Extra costs for new products launched adversely affected income for appliances in Europe
· Increase in costs for raw materials · Increased investments in product development and brand building · The Board proposes a dividend of SEK 4.25 (4.00) per share

Key data1) SEKm

2007

Change

2006

Continuing operations Net sales Operating income1) Margin, % Operating income, excluding items affecting comparability Margin, % Income after financial items Income for the period Earnings per share, SEK2) Value creation Return on net assets, % Operating cash flow Capital expenditure Average number of employees

104,732 4,475 4.3
4,837 4.6
4,035 2,925 10.41 2,053
21.7 1,277 3,430 56,898

0.9% 11%
5.7%
5.5% 10.5%
­149
167 278 1,427

103,848 4,033 3.9
4,575 4.4
3,825 2,648
9.17 2,202
23.2 1,110 3,152 55,471

Total, including discontinued operations3) Income for the period Earnings per share, SEK2) Dividend per share, SEK Return on equity, % Net debt/equity ratio

2,925 10.41 4.254)
20.3 0.29

3,847 13.32
4.00 18.7 ­0.02

1) Including items affecting comparability, unless otherwise stated. For key data, excluding items affecting comparability, see page 9.
2) Basic. For information on earnings per share after dilution, see page 7. 3) Discontinued operations refer to the former Outdoor Products operations and include the period
January­May for 2006. 4) Proposed by the Board of Directors.

For definitions, see Note 31 on page 67.

Contents

page

Net sales and income

6

Consolidated income statement

7

Financial position

10

Consolidated balance sheet

11

Change in consolidated equity

13

Cash flow

14

Consolidated cash flow statement

15

Operations by business area

16

Share capital and ownership

20

Distribution of funds to shareholders 21

Risk management

22

Employees

23

Other facts

25

Parent Company

26

Notes

28

Outlook ­ for the full year 2008 In 2008, the Group will introduce Electrolux as a major appliance brand in North America. The plan with the launch is to gain a significant long-term presence in the premium segment. However, we expect the launch to have a negative impact on 2008 results as it initially includes a considerable investment in marketing.
Furthermore, the European appliance operations will be negatively impacted by higher than anticipated costs for the product launches and the planned cost reduction program.
The significant uncertainty in the overall global economy makes it difficult to predict the development in 2008.
Provided that market demand for appliances in Europe shows a slow growth in 2008 and that market demand for appliances in North America shows a slightly negative development, our outlook for 2008 is that operating income is expected to be in-line with 2007, excluding items affecting comparability.

5

board of directors report
Net sales and income

The Group's former Outdoor Products operations were distributed under the name of Husqvarna to the Electrolux shareholders in June 2006. Husqvarna is reported as discontinued operations for 2006. For information on Electrolux accounting and valuation principles, see Note 1 on page 29.
The comments in this Annual Report refer to continuing operations.
Net sales Net sales for the Electrolux Group in 2007 amounted to SEK 104,732m, as against SEK 103,848m in the previous year. Sales were positively impacted by changes in volume/price/mix, while changes in exchange rates had a negative impact.
Operating income The Group's operating income for 2007 improved to SEK 4,475m (4,033), corresponding to 4.3% (3.9) of net sales. Operating income includes items affecting comparability amounting to SEK ­362m (­542), see page 8. Excluding items affecting comparability, operating income improved by 5.7% to SEK 4,837m (4,575) and margin rose to 4.6% (4.4).
Operating income improved over the previous year, mainly on the basis of strong income for appliances in Asia/Pacific, Latin America and for floor-care operations as well as good performance by professional products and appliances in North America. Income was positively affected by growth in volume, an improved product mix and more efficient production. Lower income for appliances in Europe due to costs related to new products launched had an adverse effect on operating income.
Depreciation and amortization Depreciation and amortization in 2007 amounted to SEK 2,738m (2,758).

· Net sales rose by 4.0% in comparable currencies
· Operating income rose by 5.7% to SEK 4,837m (4,575), excluding items affecting comparability
· Operating margin rose to 4.6% (4.4), excluding items affecting comparability, on the basis of growth in sales, an improved product mix and restructuring savings
· Income for the period rose to SEK 2,925m (2,648)
· Earnings per share amounted to SEK 10.41 (9.17)
Income after financial items Income after financial items increased to SEK 4,035m (3,825), corresponding to 3.9% (3.7) of net sales.
Taxes Total taxes in 2007 amounted to SEK ­1,110m (­1,177), corresponding to 27.5% (30.8) of income after financial items.
For additional information on taxes, see Note 10 on page 42.

Financial net Net financial items increased to SEK ­440m (­208). The increase is mainly due to higher net borrowings.
For additional information regarding financial items, see Note 9 on page 42.

Change in net sales

Net sales and operating margin

%

2007

Changes in Group structure

0.0

Changes in exchange rates

­3.1

Changes in volume/price/mix

4.0

Total

0.9

Sales of appliances grew across all regions except for North America. Sales of appliances in Latin America and Asia/Pacific as well as for floor-care products were particularly strong.

SEKm 125,000 100,000
75,000
50,000 25,000

%

10

Net sales

Operating margin, excluding

8

items affecting comparability

6 Net sales increased by 0.9% in 2007 compared to
4 the previous year and margin rose to 4.6%,
2 excluding items affecting comparability.

0

0

03 04 05 06 07

6

Consolidated income statement

SEKm Net sales Cost of goods sold Gross operating income
Selling expenses Administrative expenses Other operating income Other operating expenses Items affecting comparability Operating income
Financial income Financial expenses Financial items, net Income after financial items
Taxes Income for the period from continuing operations Income for the period from discontinued operations Income for the period Attributable to: Equity holders of the Parent Company Minority interests in income for the period

Note 3, 4
5 6 7 3, 4, 8 9 9
10 30

Earnings per share for continuing operations, SEK

20

Basic

Diluted

Average number of shares, million

20

Basic

Diluted

2007 104,732 ­85,466
19,266
­10,219 ­4,417 253 ­46 ­362 4,475
182 ­622 ­440 4,035
­1,110 2,925 -- 2,925
2,925 --
2,925
10.41 10.33
281.0 283.3

2006 103,848 ­84,003
19,845
­10,955 ­4,467 185 ­33 ­542 4,033
538 ­746 ­208 3,825
­1,177 2,648 1,199 3,847
3,847 --
3,847
9.17 9.14
288.8 289.8

7

board of directors report

Effects of changes in exchange rates Changes in exchange rates in comparison with the previous year, including both translation and transaction effects, had a negative effect of SEK ­61m on operating income.
Transaction effects net of hedging contracts amounted to SEK 26m. Translation of income statements in subsidiaries had an effect of SEK ­87m, mainly due to the strengthening of the Swedish krona against the US dollar.
The effect of changes in exchange rates on income after financial items amounted to SEK ­74m.
For additional information on effects of changes in exchange rates, see the section on foreign exchange risk in Note 2 on page 36.
Income for the period and earnings per share Income for the period amounted to SEK 2,925m (2,648), corresponding to SEK 10.41 (9.17) in earnings per share before dilution.
Value created Value creation is the primary financial performance indicator for measuring and evaluating financial performance within the Group. The model links operating income and asset efficiency with the cost of the capital employed in operations. The model measures and evaluates profitability, by business area, product line, region or operation.
Total value created in 2007 decreased over the previous year to SEK 2,053m (2,202). Value created was positively affected by the improvements in income, while the change in WACC rate and increased average net assets had a negative affect. The WACC rate for 2007 was computed at 12% as compared to 11% for 2006. The capital-turnover rate was 4.50 as against 4.81 in 2006.
For the definition of value created, see Note 31 on page 67.

Items affecting comparability Operating income for 2007 includes items affecting comparability in the amount of SEK ­362m (­542). These items include charges for restructuring for plant closures.
Structural changes Investigation of manufacturing in Italy In February 2008, Electrolux decided to launch an investigation into how manufacturing of refrigerators can be maintained and become competitive in Italy. Electrolux manufacturing footprint for refrigeration products in Italy today includes two factories, one in Susegana and one in Scandicci. Electrolux will together with trade unions immediately start the investigation, which is expected to be concluded during the second quarter of 2008.
Relocation of manufacturing, items affecting comparability In December 2007, it was decided that the cooker plant in Spennymoor, UK, would be closed. The plant produces freestanding and built-in cookers for the UK and Irish markets and has approximately 500 employees. To improve competitiveness, some production will be phased out altogether, while remaining production will be moved to the Electrolux plant in Swidnica, Poland. Production at the plant is expected to continue throughout 2008. Costs for the closure amounting to SEK 317m, were charged against operating income within items affecting comparability in the fourth quarter of 2007.
In April 2007, a decision was taken to close the cooker plant in Fredericia, Denmark. Production in Fredericia was discontinued by year-end and production has been relocated to other plants in Europe. Approximately 150 employees were affected by the closure. It involved a cost of approximately SEK 45m, which was taken as a charge against operating income during 2007, within items affecting comparability.

Share of sales, by currency

Items affecting comparability

USD EUR CAD GBP SEK Other Total
8

Share of net sales, %
30 30
4 5 4 27 100

Average exchange rate 2007
6.74 9.25 6.30 13.48
-- --

Average exchange rate 2006
7.38 9.26 6.52 13.58
-- --

SEKm Restructuring provisions and write-downs1) Appliances plant in Spennymoor, UK Appliances plant in Fredericia, Denmark Appliances plant in Torsvik, Sweden Appliances plant in Nuremberg, Germany Appliances plants in Adelaide, Australia Reversal of unused restructuring provisions

Capital gains/losses on divestments2) Divestment of Electrolux Financial Corp., USA Divestment of 50% stake in Nordwaggon AB, Sweden Total
1) Deducted from cost of goods sold. 2) Deducted from other operating income and expenses.

2007 2006

­317 ­45 -- -- -- --
­362

-- -- ­43 ­145 ­302 60 ­430

-- -- ­362

61 ­173 ­542

Key data excluding items affecting comparability

SEKm Continuing operations Net sales Operating income Margin, % Income after financial items Income for the period Earnings per share, SEK1) Value creation Return on net assets, % Operating cash flow Capital expenditure

2007 Change

2006

104,732 4,837 4.6 4,397 3,276 11.66 2,053 20.9 1,277 3,430

0.9% 103,848 5.7% 4,575
4.4 0.7% 4,367 4.2% 3,145
10.89 ­149 2,202
21.2 167 1,110 278 3,152

1) Basic. For information on earnings per share, see Note 20 on page 52.

Excluding the above items affecting comparability, the Group's operating income for 2007 rose by 5.7% to SEK 4,837m (4,575), which corresponds to 4.6% (4.4) of net sales. Income after financial items improved by 0.7% to SEK 4,397m (4,367), which corresponds to 4.2% (4.2) of net sales. The tax rate was 25.5% (28.0). Income for the period increased by 4.2% to SEK 3,276m (3,145), corresponding to earnings per share of SEK 11.66 (10.89). Return on net assets was 20.9% (21.2).

Launch of premium products in North America 2008 At the beginning of 2008, the Group will introduce Electrolux as a major appliance brand in North America. The plan with the launch is to gain a significant long-term presence in the premium segment, which shows considerably higher profitability than the mass market segment where the Group holds a strong position today. However, the launch is expected to have a negative impact on 2008 operating income as it initially includes a considerable investment in marketing. The launch cost is expected to have a negative impact on operating income of SEK 100m in the first quarter. The launch is expected to have a positive impact on operating income in 2009.
Discontinued operations 2006 Discontinued operations refer to the former Outdoor Products operations, Husqvarna, which was distributed to Electrolux shareholders in June 2006. For information on accounting principles for discontinued operations, see Note 1 on page 29 and Note 30 on page 66.

Program to reduce costs within appliances in Europe Reduced complexity following brand consolidation and increased pan-European coordination enable cost efficiencies for appliances in Europe.
In February 2008, it was decided to launch a program which is expected to result in a staff reduction of approximately 400 people within appliances in Europe during 2008. The savings are expected to amount to SEK 350­400m on a yearly basis. The program will incur costs of approximately SEK 400m, which will be charged to operating income before items affecting comparability in the first quarter of 2008.

Earnings per share1)
SEK 20 16 12
8 4 0
03 04 05 06 07

Excluding items affecting comparability
Including items affecting comparability
Earnings per share increased to SEK 11.66 (10.89) in 2007, excluding items affecting comparability.
1) Earnings per share for 2006 and 2007 refer to continuing operations

9

board of directors report
Financial position

In order to adapt the Group's capital structure and thus to contribute to an increase in shareholder value, an Extraordinary General Meeting in December 2006 decided on a mandatory redemption procedure of shares totaling SEK 5,582m as a distribution of capital to Electrolux shareholders. The redemption procedure was implemented at the end of January 2007.

Working capital and net assets

SEKm

% of Dec. 31, annualized
2007 net sales

% of Dec. 31, annualized
2006 net sales

Inventories

12,398 11.1 12,041 11.0

Trade receivables

20,379 18.3 20,905 19.1

Accounts payable

­14,788 13.3 ­15,320 14.0

Provisions

­11,382

­12,476

Prepaid and accrued income and expenses

­6,445

­6,020

Taxes and other assets and liabilities

­2,291

­1,743

Working capital

­2,129 ­1.9 ­2,613 ­2.4

Property, plant and equipment

15,205

14,209

Goodwill

2,024

1,981

Other non-current assets

4,437

3,551

Deferred tax assets and liabilities

1,206

1,012

Net assets

20,743 18.6 18,140 16.5

Average net assets

20,644 19.7 17,352 16.7

Return on net assets, %

21.7

23.2

Return on net assets, excluding

items affecting comparability, %

20.9

21.2

Value creation

2,053

2,202

Working capital Working capital at year-end amounted to SEK ­2,129 (­2,613), corresponding to ­1.9% (­2.4) of annualized net sales.

· Equity/assets ratio was 26.9% (22.7)
· Return on equity was 20.3% (18.7)
· Average net assets increased to SEK 20,644m (17,352)

Adjusted for items affecting comparability, net assets amounted to SEK 23,099m (21,527) and average net assets amounted to SEK 23,196m (21,571), corresponding to 22.1% (20.8) of net sales. Items affecting comparability refers to restructuring provisions and provision for post-employment benefits due to the IFRS transition.
The return on net assets was 21.7% (23.2), and 20.9% (21.2), excluding items affecting comparability.

Net borrowings Net borrowings at year-end increased to SEK 4,703m (­304). Compared to the previous year, net borrowings have been affected by the capital distribution to shareholders at the beginning of 2007 and the positive cash flow from operations and investments.

Net borrowings SEKm Borrowings Liquid funds Net borrowings

Dec. 31, 2007 Dec. 31, 2006

11,163

7,495

­6,460

­7,799

4,703

­304

Net assets and return on net assets Net assets as of December 31, 2007, amounted to SEK 20,743m (18,140). Average net assets for the year increased to SEK 20,644m (17,352), mainly as a result of increased capital expenditure and higher inventories related to the large product launch in Europe.

Change in net assets
SEKm January 1, 2007 Change in restructuring provisions Write-down of assets Other items affecting comparability Changes in exchange rates Capital expenditure Depreciation Changes in working capital, etc. December 31, 2007
10

Net assets

Net assets 18,140 581 ­39

SEKm 25,000
20,000

%

25

As % of net sales

Net assets 20

425

490 15,000

15

3,430 ­2,738
454 20,743

20,000 5,000

10 Net assets as of December 31, 2007, amounted
5 to SEK 20,743m, corresponding to 18.6% of

0

0 annualized net sales.

03 04 05 06 07

Consolidated balance sheet

SEKm

Note

ASSETS

Non-current assets

Property, plant and equipment

12

Goodwill

11

Other intangible assets

11

Investments in associates

29

Deferred tax assets

10

Financial assets

13

Total non-current assets

Current assets

Inventories

14

Trade receivables

16

Tax assets

Derivatives

17

Other current assets

15

Short-term investments

17

Cash and cash equivalents

17

Total current assets

Total assets

EQUITY AND LIABILITIES

Equity attributable to equity holders of the Parent Company

Share capital

20

Other paid-in capital

Other reserves

18

Retained earnings

Minority interests Total equity

Non-current liabilities

Long-term borrowings

17

Derivatives

17

Deferred tax liabilities

10

Provisions for post-employment benefits

22

Other provisions

23

Total non-current liabilities

Current liabilities

Accounts payable

Tax liabilities

Share redemption

Other liabilities

24

Short-term borrowings

17

Derivatives

17

Other provisions

23

Total current liabilities

Total liabilities

Total equity and liabilities

Pledged assets

19

Contingent liabilities

25

board of directors report

December 31, 2007

December 31, 2006

15,205 2,024 2,121 32 2,141 2,284
23,807
12,398 20,379
391 411 2,992 165 5,546 42,282 66,089

14,209 1,981 1,780 80 2,216 1,692
21,958
12,041 20,905
461 318 3,248 1,643 5,475 44,091 66,049

1,545 2,905
837 10,752 16,039
1 16,040
4,887 --
935 6,266 3,813 15,901
14,788 2,027 --
10,049 5,701 280 1,303
34,148 50,049 66,089
76 1,016

1,545 2,905
­11 8,754 13,193
1 13,194
4,502 --
1,205 6,586 4,258 16,551
15,320 1,651 5,579 9,293 2,582 247 1,632
36,304 52,855 66,049
93 1,022

11

board of directors report

Liquid funds Liquid funds at year-end amounted to SEK 6,460m (7,799). This corresponds to 5.8% (7.1) of annualized net sales.

Rating Electrolux has investment-grade ratings from Standard & Poor's, which remained unchanged during the year.

Liquidity profile SEKm Liquid funds % of annualized net sales Net liquidity Fixed interest term, days Effective annual yield, %

Dec. 31, 2007 Dec. 31, 2006

6,460

7,799

5.8

7.1

184

4,806

12

39

4.5

3.7

For additional information on the liquidity profile, see Note 17 on page 47.

Borrowings At year-end, the Group's borrowings amounted to SEK 11,163m (7,495), of which SEK 7,801m (4,502) referred to long-term borrowings, including long-term borrowings with maturities within 12 months, with average maturities of 2.3 years (1.7). A significant portion of long-term borrowings is raised in the Euro and Swedish bond market.
The Group's goal for long-term borrowings includes an average time to maturity of at least two years, an even spread of maturities, and an average interest-fixing period of six months. At year-end, the average interest-fixing period for long-term borrowings was 0.2 years (0,5 years).
At year-end, the average interest rate for the Group's total interest-bearing borrowings was 5.8% (6.0).

Rating

Long-term debt

Standard & Poor's

BBB+

Outlook Stable

Short-term debt,

Short-term debt

Sweden

A -2

K-1

Net debt/equity and equity/assets ratios The net debt/equity ratio increased to 0.29 (-0.02). The equity/ assets ratio increased to 26.9% (22.7).

Equity and return on equity Group equity as of December 31, 2007, amounted to SEK 16,040m (13,194), which corresponds to SEK 56.95 (47.30) per share. Return on equity was 20.3% (18.7). Excluding items affecting comparability, return on equity was 22.7% (21.1).

Long-term borrowings, by maturity

Net debt/equity ratio

SEKm 3,000 2,400 1,800
1,200 600

No long-term borrowings

1.0

matured or were

amortized in 2007. For

0.8

additional information on

borrowings, see Note 17

0.6

on page 47.

0.4

0.2

%

50

Equity/assets ratio

Net debt/equity ratio 40
Net debt/equity ratio 30 increased during the year
mainly as a result of distri20 bution of capital to share-
holders.

10

0 08 09 10 11 12 13-
12

0

0

98 99 00 01 02 03 04 05 06 07

Change in consolidated equity

SEKm Opening balance, January 1, 2006 Available for sale instruments Gain/loss taken to equity Transferred to income statement on sale

Share capital 1,545
-- --

Attributable to equity holders of the company

Other paid-in capital

Other reserves

Retained earnings

2,905

1,660

19,777

Total 25,887

--

42

--

­12

--

42

--

­12

Cash-flow hedges Gain/loss taken to equity Transferred to income statement

--

--

­11

--

­11

--

--

­23

--

­23

Exchange differences on translation of foreign operations

Net-investment hedge

--

Translation differences

--

--

421

--

­2,081

--

421

--

­2,081

Income for the period recognized directly in equity Income for the period Total recognized income and expenses for the period Share-based payment Repurchase and sale of shares Dividend SEK 7.50 per share Distribution of Husqvarna shares Redemption of shares Total transactions with equity holders Closing balance, December 31, 2006

-- -- -- -- -- -- -- -- -- 1,545

-- -- -- -- -- -- -- -- -- 2,905

­1,664 --
­1,664 -- -- -- -- -- -- ­4

-- 3,847 3,847
86 ­1,463 ­2,222 ­5,696 ­5,582 ­14,877
8,747

­1,664 3,847 2,183
86 ­1,463 ­2,222 ­5,696 ­5,582 ­14,877 13,193

Available for sale instruments Gain/loss taken to equity Transferred to income statement on sale

--

--

259

--

259

--

--

­11

--

­11

Cash-flow hedges Gain/loss taken to equity Transferred to income statement

--

--

61

--

61

--

--

11

--

11

Exchange differences on translation of foreign operations

Net-investment hedge

--

Translation differences

--

--

31

--

497

--

31

--

497

Income for the period recognized directly in equity

--

--

848

Income for the period

--

--

--

Total recognized income and expenses for the period

--

--

848

Share-based payment

--

--

--

Repurchase and sale of shares

--

--

--

Dividend SEK 4.00 per share

--

--

--

Total transactions with equity holders

--

--

--

Closing balance, December 31, 2007

1,545

2,905

844

For more information about share capital, number of shares and earnings per share, see Note 20 on page 52. For more information about other reserves in equity, see Note 18 on page 52.

-- 2,925 2,925
72 127 ­1,126 ­927 10,745

848 2,925 3,773
72 127 ­1,126 ­927 16,039

Minority interest
1
-- --

Total equity 25,888
42 ­12

--

­11

--

­23

--

421

--

­2,081

--

­1,664

--

3,847

--

2,183

--

86

--

­1,463

--

­2,222

--

­5,696

--

­5,582

-- ­14,877

1

13,194

--

259

--

­11

--

61

--

11

--

31

--

497

--

848

--

2,925

--

3,773

--

72

--

127

--

­1,126

--

­927

1

16,040

13

board of directors report
Cash flow

Operating cash flow Cash flow from operations and investments decreased in 2007 over the previous year. Cash flow in 2006 was, however, positively affected by the proceeds from divestment of the operations in Electrolux Financial Corporation in the US. Excluding the divestment in 2006, cash flow for 2007 showed an improvement.
The positive cash flow from operations amounted to SEK 1,277m and was primarily generated by income from operations. Changes in operating assets and liabilities amounted to SEK ­152m. Changes in accounts receivable and accounts payable were traceable mainly to lower sales and lower production that reflected the declining markets in North America and Europe towards the end of the year.
Cash flow was negatively affected by increased capital expenditure and capitalization of product development as described below.

Cash flow SEKm Cash flow from operations, excluding change in operating assets and liabilities Change in operating assets and liabilities Capital expenditure Other Operating cash flow Divestment of operations Cash flow from operations and investments

2007
5,498 ­152 ­3,430 ­639 1,277
-- 1,277

2006
5,263 ­703 ­3,152 ­298 1,110 1,064 2,174

Capital expenditure Capital expenditure in property, plant and equipment in 2007 increased to SEK 3,430m (3,152). Capital expenditure corresponded to 3.3% (3.0) of net sales. The increase over the previous year referred mainly to investments in appliances in North America and the new plant for front-loaded washing machines in Juarez, Mexico, and appliances in Latin America and in Asia/ Pacific.

· Operating cash flow increased to SEK 1,277m (1,110), mainly due to improvements in operating assets and liabilities
· Capital expenditure rose to SEK 3,430m, as against SEK 3,152 in 2006
· R&D costs increased by 10.1% to SEK 2,017m (1,832)
Approximately 25% of total capital expenditure referred to expansion of capacity and new plants, mainly in connection with relocation. Most of this referred to investments in the new plant in Mexico, the three new Polish appliance plants, in which production started during 2007, and expansion of capacity in the plants in Brazil.
A large part of total capital expenditure in 2007 referred to investments in plants for new products. Major projects included an entire range of new premium Electrolux-branded products for the North American market, as well as new products in Europe.
Costs for R&D Costs for research and development in 2007, including capitalization of SEK 520m (439), amounted to SEK 2,017m (1,832), corresponding to 1.9% (1.8) of net sales. R&D projects during the year referred mainly to development of new products and design projects within appliances, including development of new platforms. Major projects included development of new products in North America, Europe and Brazil.
For definitions, see Note 31 on page 67.

Capital expenditure, by business area

Capital expenditure

SEKm Consumer Durables Europe % of net sales North America % of net sales Latin America % of net sales Asia/Pacific and Rest of world % of net sales Professional Products % of net sales Other Total % of net sales
14

2007
1,325 2.9
1,471 4.4 282 3.1 229 2.5 96 1.4 27
3,430 3.2

2006 SEKm

%

1,698 3.8 922 2.5 170 2.2 184 2.1

4,000 3,200 2,400 1,600
800

5

As % of net sales

Capital expenditure 4
Capital expenditure 3 increased during 2007
compared to 2006 mainly 2 as a result of higher
investments in new 1 products.

151

0

0

03 04 05 06 07

2.2

27

3,152

3.0

Consolidated cash flow statement

SEKm Operations Income after financial items Depreciation and amortization Capital gain/loss included in operating income Restructuring provisions Share-based compensation Change in accrued and prepaid interest Taxes paid Cash flow from operations, excluding change in operating assets and liabilities
Change in operating assets and liabilities Change in inventories Change in trade receivables Change in other current assets Change in accounts payable Change in operating liabilities and provisions Cash flow from change in operating assets and liabilities Cash flow from operations
Investments Divestment of operations Capital expenditure in property, plant and equipment Capitalization of product development Other Cash flow from investments
Cash flow from operations and investments
Financing Change in short-term investments Change in short-term borrowings New long-term borrowings Amortization of long-term borrowings Dividend Redemption of shares Repurchase and sale of shares Cash flow from financing
Cash flow from continuing operations
Cash flow from discontinued operations Cash flow from operations Cash flow from investments Cash flow from financing Cash flow from discontinued operations
Total cash flow Cash and cash equivalents at beginning of year Exchange-rate differences referring to cash and cash equivalents Cash and cash equivalents at year-end
Change in net borrowings Total cash flow, excluding change in loans and other short-term investments Net borrowings at beginning of year Exchange-rate differences referring to net borrowings Net borrowings at year-end

Note
26 12 11

2007
4,035 2,738
-- ­701
72 169 ­815
5,498

2006
3,825 2,758
112 ­737
86 ­38 ­743
5,263

­206 993
40 ­885
­94 ­152 5,346

­748 ­856 ­354 1,779 ­524 ­703 4,560

-- ­3,430
­520 ­119 ­4,069
1,277

1,064 ­3,152
­439 141 ­2,386
2,174

1,463 670
3,257 --
­1,126 ­5,582
127 ­1,191
86

­805 ­356 583 ­1,635 ­2,222
-- ­1,463 ­5,898
­3,724

-- -- -- --
86 5,475
­15 5,546

­2,446 ­727 8,504 5,331
1,607 4,420 ­552 5,475

­5,304 304 297
­4,703

3,820 ­2,974
­542 304

15

board of directors report
Operations by business area

The Group's operations include products for consumers as well as professional users. Products for consumers comprise major appliances, i.e., refrigerators, freezers, cookers, dryers, washing machines, dishwashers, room air-conditioners and microwave ovens, as well as floor-care products. Professional products comprise food-service equipment for hotels, restaurants and institutions, as well as laundry equipment for apartment-house laundry rooms, launderettes, hotels and other professional users.
In 2007, appliances accounted for 85% (85) of sales, professional products for 7% (7) and floor-care products for 8% (8).

Consumer Durables, Europe
SEKm1) Net sales Operating income Operating margin, % Net assets Return on net assets, % Capital expenditure Average number of employees
1) Excluding items affecting comparability.

2007 45,472
2,067 4.5
9,158 22.4
1,325 25,382

2006 44,233
2,678 6.1
7,075 41.6
1,698 25,029

Major appliances Total industry shipments of major appliances in Europe in 2007 increased in volume by 1% over 2006. Shipments increased by 9% in Eastern Europe and declined by 1% in Western Europe. A total of 97.8 (96.7) million units (excluding microwave owens) were estimated to have been shipped in the European market during 2007, of which 73.5 (74.4) million units in Western Europe.
Group sales of appliances in Europe rose during the year, on the basis of an improved product mix and higher volumes. Operating income declined substantially from the previous year as a result of temporarily higher costs related to the comprehensive product launch. The new products have achieved good market acceptance, which have supported average Electrolux sales prices in most of the Group's markets, and the brand has been strengthened. Certain costs for new products have risen more than was expected, which together with lower demand in major markets such as Germany, the UK and Spain had an adverse effect on income.

· Good market growth across all regions except for North America and some key markets in Europe
· Substantial increase in sales and operating income for appliances in Latin America
· Strong performance by floor-care operations worldwide
· Good growth for appliances in Asia/Pacific, strong improvement in operating income
· Solid performance and improved margin for appliances in North America
· Largest product launch ever of new appliances in Europe
· Extra costs for products launched adversely affected income for appliances in Europe
· Higher operating income and margin for Professional Products
Floor-care products The market for vacuum cleaners in Europe showed higher demand in 2007, rising by approximately 6% over the previous year. Group sales for the full year increased considerably on the basis of strong sales volume growth compared to the previous year. Operating income improved as a result of higher volumes as well as lower costs for the Group's own production and externally sourced products.

Operating income and margin per quarter for the Group

Consumer Durables, Europe Net sales and operating margin

SEKm

%

SEKm

%

2,500 2,000 1,500 1,000
500 0

2005

2006

2007

10 The fourth quarter is
8 the most important profit making period of
6 the year. Operating
4 income and margin for the fourth quarter of
2 2007 improved to SEK
0 2,007m and 7.3%.

50,000 40,000 30,000 20,000 10,000
0 05 06

10 8 6 4 2 0 07

Operating income
Operating margin 16

Net sales Operating margin

Restructuring and relocation of production In 2007, the Board of Directors decided to close the cooker plant in Fredericia, Denmark. By year-end, production in Fredericia was discontinued and relocated to other plants in Europe. The Board also decided to close the cooker factory in Spennymoor, UK, and relocate some production to the Electrolux plant in Swidnica, Poland. Production at the plant is expected to continue throughout 2008.

Investigation of manufacturing in Italy In February 2008, Electrolux decided to launch an investigation into how manufacturing of refrigerators can be maintained and become competitive in Italy.
For additional information on costs for restructuring, see page 8.

Program to reduce costs within appliances in Europe 2008 Reduced complexity following brand consolidation and increased pan-European coordination enable cost efficiencies for appliances in Europe. In February 2008, it was decided to launch a program which is expected to result in a staff reduction of approximately 400 people within appliances in Europe during 2008. The savings are expected to amount to SEK 350­400m on a yearly basis. The program will incur costs of approximately SEK 400m, which will be charged to operating income before items affecting comparability in the first quarter of 2008.

Consumer Durables, North America
SEKm1) Net sales Operating income Operating margin, % Net assets Return on net assets, % Capital expenditure Average number of employees
1) Excluding items affecting comparability.

2007 33,728
1,711 5.1
8,404 21.2
1,471 15,204

2006 36,171
1,462 4.0
8,187 19.3 922
15,148

Major appliances Industry shipments of core appliances in the US decreased in volume by approximately 6% compared with the previous year. The US market for core appliances (exclusive of microwave ovens and room air-conditioners) consists of industry shipments from domestic producers plus imports, and amounted to 68.5 million units in 2007. Shipments of major appliances, i.e., including microwave ovens and room air-conditioners, decreased by approximately 6%.
Group sales of appliances in the North American market rose by almost 2% in comparable currencies, on the basis of higher sales volumes. The Group's market share increased. Operating income and margin improved as a result of favorable price increases, an improved product mix, higher sales volumes and lower costs. Limited sales exposure to the weak housing market in the US and a shift of consumer demand toward the mass segment contributed to the Group's good performance in the North American market.

Floor-care products Market demand for vacuum cleaners in the US declined by approximately 5% during the year in comparison with 2006. Sales for the Group's operations in North America decreased due to lower sales volumes. Operating income increased, however, on the basis of an improved product mix and lower production costs.

Consumer Durables, Latin America
SEKm1) Net sales Operating income Operating margin, % Net assets Return on net assets, % Capital expenditure Average number of employees
1) Excluding items affecting comparability.

2007 9,243
514 5.6 3,114 14.7 282 7,303

2006 7,766
339 4.4 3,565 13.3 170 5,770

Consumer Durables, North America Net sales and operating margin

Consumer Durables, Latin America Net sales and operating margin

SEKm

%

SEKm

%

50,000

10

10,000

10

40,000

8

8,000

8

30,000

6

6,000

6

20,000

4

4,000

4

10,000

2

2,000

2

0

0

05 06 07

0

0

05 06 07

Net sales Operating margin

Net sales
Operating margin 17

board of directors report

Industry shipments of appliances in Brazil during 2007 showed strong growth, rising by 17% over the previous year. Sales volumes for Electrolux rose by 23%. Brazil is the Group's largest market in Latin America.
Group sales in comparable currencies for the full year in Latin America rose by 19%, mainly on the basis of strong market growth. Market shares increased and sales were higher for most product categories. Operating income improved, primarily as a result of higher sales volumes, an improved product mix, and higher productivity in manufacturing. Operating income in 2007 for the operations in Latin America was the highest in the Group's history.

Consumer Durables, Asia/Pacific and Rest of world

SEKm1) Net sales Operating income Operating margin, % Net assets Return on net assets, % Capital expenditure Average number of employees

2007 9,167
330 3.6 2,618 13.5 229 4,979

2006 8,636
163 1.9 2,740 6.0 184 5,346

1) Excluding items affecting comparability.

Australia and New Zealand Market demand for appliances in Australia rose during the year in comparison with 2006. Group sales rose in comparable currencies, mainly as a result of market growth. Operating income for the full year improved considerably on the basis of lower costs resulting from previous restructuring as well as lower costs for outsourced products. The restructuring program, which includes closure of the washer and dishwasher plants in Adelaide, is proceeding according to plan and will be completed during the spring of 2008.

China and South East Asia Statistics for shipments of appliances in China indicate strong growth for the full year. Group sales in comparable currencies rose somewhat during the second half of the year, following a longer period of decline after Electrolux exited from parts of the low-price segment. However, the operation in China is still unprofitable. Group sales and operating income rose throughout the entire South East Asia region.

Professional Products
SEKm1) Net sales Operating income Operating margin, % Net assets Return on net assets, % Capital expenditure Average number of employees
1) Excluding items affecting comparability.

2007 7,102
584 8.2 1,324 43.9 96 3,200

2006 6,941
535 7.7 1,394 40.2 151 3,316

Food-service equipment Group sales of food-service equipment in 2007 rose as a result of higher sales prices and volumes. Operating income improved on the basis of more efficient production as well as price increases that offset higher costs for raw materials, primarily for stainless steel.

Laundry equipment Group sales of laundry equipment in 2007 were largely unchanged in comparison with the previous year. Operating income declined, however, as a result of lower volumes and the effect of the weaker dollar on income from sales in the US market.

Consumer Durables, Asia/Pacific and Rest of world PNreotfseaslseisonaanldPoropderuacttisng margin

SEKm

%

10,000

5

8,000

4

6,000

3

4,000

2

2,000

1

0

0

05 06 07

Net sales
Operating margin 18

Professional Products CNheat nsgaeleisn annetdsoapleesrantidngopmearartgining income 2007 compared to 20061)

SEKm 10,000
8,000 6,000 4,000 2,000
0

% 10
8
6
4
2 0 05 06 07 Net sales Operating margin

Operations, by business area
SEKm1)
Consumer Durables, Europe Net sales Operating income Margin, %
Consumer Durables, North America Net sales Operating income Margin, %
Consumer Durables, Latin America Net sales Operating income Margin, %
Consumer Durables, Asia/Pacific and Rest of world Net sales Operating income Margin, %
Professional Products Net sales Operating income Margin, %
Other Net sales Operating income, common group costs, etc. Total net sales Operating income Margin, % 1) Excluding items affecting comparability.

2007
45,472 2,067 4.5
33,728 1,711 5.1
9,243 514 5.6
9,167 330 3.6
7,102 584 8.2
20 ­369 104,732 4,837
4.6

Net sales and operating income 2007 compared to 20061)

Change, year-over-year, %
Consumer Durables Europe North America Latin America Asia/Pacific and Rest of world Professional Products Total change
1) Excluding items affecting comparability.

comparable

Operating Net sales

Net sales in comparable
currency

2.8

2.9

­6.8

1.4

19.0

18.6

6.1

8.0

2.3

3.6

0.9

4.0

income
­22.8 17.0 51.6 102.5
9.2 5.7

2006
44,233 2,678 6.1
36,171 1,462 4.0
7,766 339 4.4
8,636 163 1.9
6,941 535 7.7
101 ­602 103,848 4,575
4.4
Operating income in currency
­23.3 27.3 53.0 100.0
9.2 7.8

19

board of directors report
Share capital and ownership

Share capital and ownership As of February 1, 2008 the share capital in AB Electrolux amounted to SEK 1,545m, corresponding to 308,920,308 shares. The share capital of Electrolux consists of A-shares and B-shares. An A-share entitles the holder to one vote and a B-share to one-tenth of a vote. All shares entitle the holder to the same proportion of assets and earnings and carry equal rights in terms of dividends. In accordance with the Swedish Companies Act, the Articles of Association of AB Electrolux also provide for specific rights of priority for holders of different types of shares, in the event that the company issues new shares or certain other instruments.
According to the register of the Swedish Central Securities Depository (Värdepapperscentralen AB), there were approximately 52,700 shareholders in AB Electrolux as of December 31, 2007. Investor AB is the largest shareholder, owning 11.9% of the share capital and 28.2% of the voting rights. For additional information on shareholders in AB Electrolux, see the Corporate Governance report on page 88. Information on the shareholder structure is updated quarterly at www.electrolux.com/IR.
The Group's pension fund owned 300,000 B-shares in AB Electrolux as of February 1, 2008.

Articles of Association AB Electrolux Articles of Association stipulate that the AGM shall always resolve on the appointment of the members of the Board of Directors. Apart from that, the articles do not include any provisions for appointing or dismissing members of the Board of Directors or for changing the articles.
A shareholder participating in the AGM is entitled to vote for the full number of shares which he/she owns or represents. Outstanding shares in the company may be freely transferred, without restrictions under law or the company's Articles of Association. Electrolux is not aware of any agreements between shareholders, which limit the right to transfer shares. The full Articles of Association can be downloaded at www.electrolux.com
Effect of significant changes in ownership structure on long-term financing Part of the Group's long-term financing is subject to conditions which stipulate that a lender may request premature repayment in the event of significant changes in the ownership of the company. Such significant change could result from a public bid to acquire Electrolux shares. It has been deemed necessary to accept these conditions to obtain financing on otherwise acceptable terms.

Number of shares
Number of shares as of January 1, 2007 Shares sold under the terms of the employee stock option programs Shares alloted under the Performance Share Program 2004 Total number of shares as of December 31, 2007 Total number of shares as of February 1, 2008
20

Outstanding A-shares
9,502,275 -- --
9,502,275 9,502,275

Outstanding B-shares
299,418,033 -- --
299,418,033 299,418,033

Shares held by Electrolux 29,986,756 ­1,526,122 ­1,178,743 27,281,891 27,281,891

Shares held by other
shareholders
278,933,552 1,526,122 1,178,743
281,638,417
281,638,417

Distribution of funds to shareholders

Proposed dividend The Board of Directors proposes a dividend for 2007 amounting to SEK 4.25 (4.00) per share, for a total dividend payment of SEK 1,197m (1,126). The proposed dividend corresponds to 36.5% of income for the period, excluding items affecting comparability. Friday, April 4, 2008 is proposed as record date for the dividend.
The Group's goal is for the dividend to correspond to at least 30% of income for the period, excluding items affecting comparability.
Repurchase and transfer of shares The Group has for the last few years, on the basis of authorizations by the Annual General Meetings, acquired and transferred own shares. The purpose of the repurchase programs has been to adapt the Group's capital structure, thus contributing to increased shareholder value. The mandate has enabled Electrolux to purchase up to 10% of the total number of outstanding shares.
During 2006, several structural measures were carried out to adapt the capital structure of the Group on the basis of the strong balance sheet after the spin-off of Husqvarna. Own shares were repurchased and by the end of 2006, Electrolux held 9.7% of the total number of outstanding shares.

In January 2007, capital was distributed to shareholders through a redemption of shares at SEK 20 per share, corresponding to a total amount of SEK 5,582m. The Group has after the capital distribution a capital structure that provides the flexibility that is necessary to implement its strategy, which includes investments in product development, building the Electrolux brand and conducting restructuring measures as well as growth through possible acquisitions.
The Annual General Meeting 2007 authorized the Board of Directors to transfer own shares for the purpose of financing potential company acquisitions and for the Group's incentive programs. The Board of Directors did not request any mandate from the AGM to issue new shares or to repurchase additional shares in the company.
In 2007, senior managers purchased 1,526,122 B-shares from Electrolux under the terms of the employee stock option programs and 1,178,743 B-shares were alloted to senior managers under the Performance Share Program 2004. As of December 31, 2007, Electrolux held 27,281,891 B-shares, corresponding to 8.8% of the total number of outstanding shares. There has been no change as of February 1, 2008.

Repurchase of own shares
Number of shares repurchased Total amount paid, SEKm Price per share, SEK Number of shares held by Electrolux at year-end % of outstanding shares 1) After cancellation of shares.

2007 -- -- --
27,281,891 8.8

2006 19,400,000
2,194 113
29,986,756 9.7

2005 -- -- --
15,821,239 5.1

2004 750,000
114 152 17,739,400 5.7

2003 11,331,828
1,688 149
17,000,0001) 5.2

Total distribution to shareholders

SEKm 7,000

Redemption of shares

6,000

Repurchase of shares

5,000

Dividend

4,000 3,000

The Board of Directors proposes a cash dividend for 2007 amounting to SEK 4.25 per share, for a total dividend payment of SEK 1,197m.

2,000 1,000

At the beginning of 2007, SEK 5,582m was distributed to shareholders through a redemption program.

0

21

98 99 00 01 02 03 04 05 06 07

board of directors report
Risk management

Risks in connection with the Group's operations can, in general, be divided into operational risks related to business operations and those related to financial operations. Operational risks are normally managed by the operative units within the Group, and financial risks by the Group's treasury department.
Operational risks Electrolux is exposed to risks in connection with its business operations. Electrolux operates in competitive markets, most of which are relatively mature. Demand for appliances can vary with overall economic conditions and price competition is strong in most product categories. Electrolux ability to improve profitability and increase shareholder value is largely dependent on success in development of new, innovative products and in maintaining cost-efficient production. Managing fluctuations in the prices of raw materials and components and restructuring are vital for maintaining and increasing the Group's competitiveness.
Financial risk management The Group is exposed to a number of risks related to for example liquid funds, trade receivables, customer financing receivables, payables, borrowings, commodities and derivative instruments. The risks are, primarily:
· Interest-rate risks on liquid funds and borrowings · Financing risks related to the Group's capital requirements · Foreign-exchange risks on earnings and net investments in for-
eign subsidiaries · Commodity-price risks affecting expenditure on raw materials
and components to be used in production · Credit risk related to financial and commercial activities

The Board of Directors of Electrolux has approved a financial policy and a credit policy for the Group in order to manage and control these risks. Each business sector has specific financial and credit policies approved by the sector board. The above-mentioned risks are, amongst others, managed by the use of derivative financial instruments according to the limitations stated in the financial policy. The financial policy also describes management of risks related to pension-fund assets.
Management of financial risks has largely been centralized to Group Treasury in Stockholm, Sweden. Measurement of risk in Group Treasury is performed by a separate risk controlling function on a daily basis. Furthermore, the Group's policies and procedures include guidelines for managing operating risks related to financial instruments through, e.g., segregation of duties and power of attorney.
Proprietary trading in currencies, commodities and interestbearing instruments is permitted within the framework of the financial policy. This trading is aimed primarily at maintaining a high quality of information flow and market knowledge in order to contribute to proactive management of the Group's financial risks.
The Group's credit policy ensures that the management process for customer credits includes customer ratings, credit limits, decision levels and management of bad debts.
For detailed information on:
· Accounting principles for financial instruments, see Note 1 on page 29.
· Financial risk management, see Note 2 on page 36.
· Financial instruments, see Note 17 on page 47.

Sensitivity analysis

Raw materials exposure

Pre-tax earnings

Risk

Change

impact, SEKm

Raw materials

Steel

10%

+/­

1,000

Plastics

10%

+/­

500

Currencies¹) and interest rates

GBP/SEK

­10%

­

353

CAD/SEK

­10%

­

243

AUD/SEK

­10%

­

206

USD/SEK

­10%

+

373

EUR/SEK

­10%

+

409

Interest rate

1 percentage point

+/­

60

22

1) Includes translation and transaction effects.

Carbon steel, 39% Stainless steel, 10% Copper and aluminium, 13% Plastics, 22% Other, 16%
In 2007, Electrolux purchased raw materials for approximately SEK 23 billion. Purchases of steel accounted for the largest cost.

Employees

Talent management Talent management is a strategic priority for Electrolux, especially at a time when the Group is transforming to a more market- and consumer-oriented company. Over the past years, Electrolux has established processes and tools that develop and ensure the Group of access to competence. Active leadership development, international career opportunities and a result-oriented corporate culture are vital for successful development of human resources within the Group. Talent management, which comprises processes and tools for attracting, developing and securing access to future leaders, plays a central role. This process reviews more than 2,300 employees each year and is designed to identify internal competence within the Group's global operations.
Electrolux People Process The Group has established the Electrolux People Process, which provides support at Group level for managers with regard to recruitment and development of employees. The process also aims at ensuring that individuals are treated fairly by the company.
The Group has a Code of Conduct that defines high employment standards for all Electrolux employees in all countries and business sectors. It incorporates issues such as child and forced labor, health and safety, workers' rights and environmental compliance.

Proposal for remuneration guidelines for Group Management The proposed guidelines for remuneration in 2008 are essentially in accordance with the existing guidelines, which were approved by the AGM in 2007.
The Board of Directors will present a proposal for remuneration guidelines for Group Management at the AGM in 2008. These guidelines are described below.
Electrolux shall strive to offer total remuneration that is fair and competitive in relation to the home country or region of each Group Management member. The remuneration terms shall emphasize "pay for performance", and vary with the performance of the individual and the Group. The total remuneration for Group Management can comprise the components as are set forth hereafter.
The guidelines shall apply to the remuneration and other terms of employment for the President and CEO and other members of Group Management.
Remuneration for Group Management is resolved upon by the Board of Directors, based on the recommendation of the Remuneration Committee. The Remuneration Committee makes proposals to the Board of Directors regarding targets for variable salary, the relationship between fixed and variable salary, changes in fixed or variable salary, criteria for assessment of variable compensation, long-term incentives, pension terms and other benefi ts.

Number of employees The average number of employees in 2007 was 56,898 (55,471), of whom 3,025 (3,080) were in Sweden. At year-end, the total number of employees was 56,930 (59,491).
Salaries and remuneration in 2007 amounted to SEK 12,612m (12,849), of which SEK 1,128m (1,146) refers to Sweden.

For a detailed description on remuneration to Group Management and related costs, see Note 27 on page 61.
Fixed compensation Annual Base Salary (ABS) shall be the foundation of the overall remuneration package of Group Management. The salary shall be competitive relative to the relevant country market and reflect the scope of the job responsibilities. Salary levels shall be reviewed periodically to ensure continued competitiveness and to recognize individual performance.

Number of employees
Average number of employees in 2006 Number of employees in divested operations Restructuring programs Other changes Average number of employees in 2007

Employees

55,471 --
­650 2,077 56,898

75,000 60,000 45,000

30,000

15,000

SEKm 2.0 1.6 1.2 0.8 0.4

Net sales per employee
Average number of employees
The average number of employees increased to 56,898 in 2007.

0

0

03 04 05 06 07

23

board of directors report

Variable compensation Following the "pay for performance" principle, variable compensation shall represent a significant portion of the total compensation opportunity for Group Management. Variable compensation can be offered both with short-term performance targets, up to one year, and long-term performance targets, three years or longer.
Performance may be measured against both financial and nonfinancial targets. The financial targets may comprise value creation on Group level as well as other financial measures. Non-financial targets shall focus on elements in line with Electrolux strategic plans. The targets shall be specific, clear, measurable and time bound and be determined by the Board of Directors from year to year.

Extraordinary arrangements In addition to STI and LTI, variable compensation may be approved by the Board of Directors in extraordinary circumstances, under the conditions that such extraordinary arrangement shall be made for recruitment or retention purposes.
Insurable benefits Old-age pension, disability benefits and medical benefits shall be designed to reflect home-country practices and requirements. When possible, pension plans shall be based on defined contribution. In individual cases, depending on tax and/or social security legislation to which the individual is subject, other schemes and mechanisms for pension benefits may be approved by the Board of Directors.

Short Term Incentive Group Management members shall participate in a Short Term Incentive (STI) plan under which they may receive variable compensation in addition to the fixed salary. The main objectives in the STI plan shall be on financial targets. These shall be set based on annual financial performance of the Group and, for the Sector Heads, of the sector for which the Group Management member is responsible. In addition, non-financial targets in line with Electrolux strategic plans may be used to create focus on issues of particular interest at Group, sector or the individual functional level.
Long Term Incentive Each year, the Board of Directors will evaluate whether or not a Long Term Incentive (LTI) program shall be proposed to the AGM and, if affirmative, whether the proposed LTI program shall involve the transfer of company shares.
In 2007, the AGM of Electrolux approved a performance share plan based on value-creation targets for the Group as established by the Board of Directors. The plan involves an allocation of shares if the targets have been reached or exceeded after a three-year period. Allocation of shares under the program is determined on the basis of three levels of value creation; entry, target and stretch. Stretch is the maximum level for allocation and may not be exceeded regardless of the value creation created during the period. The number of shares allocated at stretch is 50% higher than target.
For a detailed description of all previous programs and related costs, see Note 22 on page 53 and Note 27 on page 61.
Proposal for a performance-based long-term share program in 2008 The Board of Directors will present a proposal to the AGM in 2008 for a performance-based long-term share program in 2008, similar to the LTI program described above. The proposal will include performance targets for average annual growth in earnings per share (EPS) and include up to 160 senior managers and key employees. The estimated maximum cost will be similar to the cost in previous years. Details of the program will be included in the information for the AGM 2008.

Other benefits Other benefits may be provided on individual level or to the entire Group Management. These benefits shall not constitute a material portion of total remuneration.
Notice of termination and severance pay The notice period shall be twelve months if the company takes the initiative and six months if the Group Management member takes the initiative. In individual cases, the Board of Directors may approve severance arrangements in addition to the notice periods.
Severance arrangements may only be payable upon Electrolux termination of the employment arrangement or when a Group Management member gives notice as the result of an important change in his/her working situation, because of which he/she can no longer perform to standard. This may be the case in, e.g., the event of a substantial change in ownership of Electrolux in combination with a change in reporting line and/or job scope.
Severance arrangements may provide as a benefit to the individual the continuation of the ABS for a period of up to twelve months following termination of the employment agreement; no other benefits shall be included. These payments shall be reduced with the equivalent value of any income that the individual earns during that period of up to twelve months from other sources, whether from employment or independent activities.
Deviations from the guidelines The Board of Directors shall be entitled to deviate from these guidelines if special reasons for doing so exist in any individual case.

24

Other facts

Deregistration from the U.S. Securities and Exchange Commission During the third quarter 2007, Electrolux applied for deregistration with the U.S. Securities and Exchange Commission (SEC). Deregistration became effective during the fourth quarter of 2007. Electrolux is no longer required to file certain reports and forms with the SEC, including the 20-F and 6-K.
In 2005, Electrolux de-listed its American Depositary Receipts (ADRs) from Nasdaq in response to the internationalization of capital markets and the increase in international ownership of shares on the Stockholm and London stock exchanges. The ADR facility, which trades in the US over-the-counter market, has not been terminated.
Electrolux shares are listed on the stock exchanges in Stockholm and London.
Asbestos litigation in the US Litigation and claims related to asbestos are pending against the Group in the US. Almost all of the cases refer to externally supplied components used in industrial products manufactured by discontinued operations prior to the early 1970s. Some of the cases involve multiple plaintiffs who have made identical allegations against many other defendants who are not part of the Electrolux Group.
As of December 31, 2007, the Group had a total of 1,998 (1,688) cases pending, representing approximately 2,600 (approximately 7,700) plaintiffs. During 2007, 1,041 new cases with approximately 1,050 plaintiffs were filed and 731 pending cases with approximately 6,140 plaintiffs were resolved. Approximately 310 of the plaintiffs relate to cases pending in the state of Mississippi.
The Group has reached an agreement with many of the insurance carriers that issued general liability insurance to certain predecessors of the Group who manufactured industrial products, some of which are alleged to have contained asbestos. Under this agreement the insurance carriers have agreed to reimburse the Group for a portion of the past and future costs incurred in connection with asbestos-related lawsuits for such products. The term of the agreement is indefinite but subject to termination upon 60 days notice. If terminated, all parties would be restored to all of their rights and obligations under the affected insurance policies.
Additional lawsuits may be filed against Electrolux in the future. It is not possible to predict either the number of future claims or the number of plaintiffs that any future claims may represent. In addition, the outcome of asbestos claims is inherently uncertain and always difficult to predict and Electrolux cannot provide any assurances that the resolution of these types of claims will not have a material adverse effect on its business or on results of operations in the future.
The WEEE directive The EU directive on Waste Electrical and Electronic Equipment (WEEE) defines producer responsibility for collection, treatment and disposal of electrical and electronic products.
The directive stipulates that producers and importers have producer responsibility for products put on the market. The target for material recovery is 80% for large household appliances and 70% for small appliances. As of 2007, all member states, as well as

Norway and Croatia, have transposed the directive. In Switzerland, WEEE related legislation is also in place. Electrolux is compliant in all these countries.
In order to manage recycling in large-volume countries costefficiently, Electrolux organizes its producer responsibility through a jointly owned company, European Recycling Platform, in eight states. In other countries, the Group works through national compliance schemes initiated by industry associations.
Producer responsibility for Electrolux currently covers products representing a volume of 480,000 tons. The volume of returned products will increase in 2008 as a result of full implementation in Italy and the UK.
The cost of recycling for Electrolux in 2007 was almost entirely recovered through visible fees that have been charged to the price of products. The estimated annual cost for Electrolux will be approximately SEK 600m, when all countries have fully implemented the directive.
Environmental activities In 2007, Electrolux operated 54 manufacturing facilities in 19 countries. Manufacturing comprises mainly assembly of components made by suppliers. Other processes include metalworking, molding of plastics, painting, enameling and to some extent casting of parts.
Chemicals such as lubricants and cleaning fluids are used as process aids. Chemicals used in Group products include insulation materials, paint and enamel. Production processes generate an environmental impact in the form of water and airborne emissions, solid waste and noise.
Studies of the total environmental effect of the Group's products during their entire lifetime, i.e., from production and use to recycling, indicate that the greatest environmental impact is generated when the products are used. The stated Electrolux strategy is to develop and actively promote increased sales of products with lower environmental impact.
Mandatory permits and notification in Sweden and elsewhere Electrolux operates four plants in Sweden. Permits are required by Swedish authorities for all of these plants, which account for approximately 4% of the total value of the Group's production. Two of these plants are required to submit notification only. The permits cover, e.g., thresholds or maximum permissible values for air and waterborne emissions and noise. No significant non-compliance with Swedish environmental legislation was reported in 2007.
Manufacturing units in other countries adjust their operations, apply for necessary permits and report to the authorities in accordance with local legislation. The Group follows a precautionary policy with reference to both acquisitions of new plants and continuous operations. Potential non-compliance, disputes or items that pose a material financial risk are reported to Group level in accordance with Group policy. No such significant item was reported in 2007.
Electrolux products are affected by legislation in various markets, principally involving limits for energy consumption. Electrolux continuously monitors changes in legislation, and both product development and manufacturing are adjusted well in advance to reflect these changes.

25

board of directors report

Parent Company
The Parent Company comprises the functions of the Group's headoffice, as well as five companies operating on a commission basis for AB Electrolux.
Net sales for the Parent Company in 2007 amounted to SEK 6,092m (6,204), of which SEK 3,060m (3,248) referred to sales to Group companies and SEK 3,032m (2,956) to external customers. After appropriations of SEK 18m (14) and taxes of SEK 28m (58), income for the period amounted to SEK 1,682m (10,768).
Non-restricted equity in the Parent Company at year-end amounted to SEK 9,846m.
Net financial exchange-rate differences during the year amounted to SEK 218m (294).
These differences in Group income do not normally generate any effect, as exchange-rate differences are offset against translation differences, i.e., the change in equity arising from the translation of net assets in foreign subsidiaries to SEK at year-end rates.
Group contributions in 2007 amounted to SEK 124m (224). Group contributions net of taxes amounted to SEK 89m (162) and are reported in retained earnings. See "Change in equity" on the next page.
For information on the number of employees as well as salaries and remuneration, see Note 22 on page 53. For information on shareholdings, net and participations, see Note 29 on page 65.

INCOME STATEMENT SEKm Net sales Cost of goods sold Gross operating income
Selling expenses Administrative expenses Other operating income Other operating expenses Operating income
Financial income Financial expenses Financial items, net Income after financial items Appropriations Income before taxes Taxes Income for the period
BALANCE SHEET
SEKm ASSETS Non-current assets Intangible assets Property, plant and equipment Financial assets Total non-current assets

Current assets Inventories Receivables from subsidiaries Trade receivables Derivatives with subsidiaries Derivatives Other receivables Prepaid expenses and accrued income Short-term investments Cash and bank Total current assets Total assets

Note

2007

6,092

­5,207

885

­608

­441

5

57

6

­519

­626

9

3,201

9

­939

2,262

1,636

21

18

1,654

10

28

1,682

2006 6,204 ­5,428
776
­693 ­558 171 ­704 ­1,008
12,867 ­1,163 11,704 10,696
14 10,710
58 10,768

December 31,

Note

2007

December 31, 2006

11

777

12

438

13

24,810

26,025

14

361

11,203

438

512

396

80

70 5
2,880 15,945 41,970

594 459 23,080 24,133
417 6,910
470 516 314
90
105 1,130 3,150 13,102 37,235

26

EQUITY AND LIABILITIES
SEKm Equity Restricted equity Share capital Statutory reserve

December 31,

Note

2007

20

1,545

3,017

4,562

Non-restricted equity Retained earnings Income for the period
Total equity Untaxed reserves

8,164

1,682

9,846

14,408

21

724

Provisions Provisions for pensions and similar commitments Other provisions Total provisions

22

312

23

209

521

Non-current liabilities Payable to subsidiaries Bond loans Other non-current loans Total non-current liabilities

435 3,679
693 4,807

Current liabilities

Payable to subsidiaries

Accounts payable

Share redemption

Other liabilities

Short-term borrowings

Derivatives with subsidiaries

Derivatives

Accrued expenses and

prepaid income

24

Total current liabilities

Total liabilities and provisions

Total liabilities, provisions and equity

Pledged assets

19

Contingent liabilities

25

15,505 390 -- 71
3,883 588 254
819 21,510 26,838 41,970
8 1,365

December 31, 2006
1,545 3,017 4,562
­2,100 10,768
8,668 13,230
742
311 284 595
474 3,823
185 4,482
10,582 411
5,579 79 --
465 240
830 18,186 23,263 37,235
5 1,341

CASH FLOW STATEMENT SEKm Operations Income after financial items Non-cash dividend Depreciation and amortization Capital gain/loss included in operating income Taxes paid Cash flow from operations, excluding change in operating assets and liabilities
Change in operating assets and liabilities Change in inventories Change in trade receivables Change in current intra-group balances Change in other current assets Change in other current liabilities and provisions Cash flow from operating assets and liabilities Cash flow from operations
Investments Change in shares and participations Capital expenditure in intangible assets Capital expenditure in property, plant and equipment Other Cash flow from investments Total cash flow from operations and investments
Financing Change in short-term investments Change in short-term borrowings Change in intra-group borrowings New long-term borrowings Amortization of long-term borrowings Dividend Repurchase and sale of shares Redemption of shares, including costs Cash flow from financing Total cash flow Liquid funds at beginning of year Liquid funds at year-end

2007
1,636 --
158 473
­7

2006
10,696 ­2,681
153 648
­3

2,260

8,813

56 32 ­4,095 ­37
­97
­4,141 ­1,881

­28 ­125 4,127 203
­170
4,007 12,820

­789 ­241
­65 ­1,180 ­2,275
­4,156

­4,610 ­3
­90 1,836 ­2,867
9,953

1,125 997
4,937 3,250
-- ­1,126
285 ­5,582 3,886
­270 3,150 2,880

­1,125 1,015 ­2,053
-- ­2,670 ­2,222 ­1,463
-- ­8,518 1,435 1,715 3,150

CHANGE IN EQUITY

SEKm

Share capital

Restricted reserves

Nonrestricted
equity

Total

Opening balance, January 1, 2006

1,545

3,017 14,495 19,057

Share-based payments

--

--

20

20

Revaluation of external shares

--

--

30

30

Income for the period

--

-- 10,768 10,768

Dividend payment

--

-- ­2,222 ­2,222

Dividend of Husqvarna AB

--

-- ­7,540 ­7,540

Redemption of shares, including costs --

-- ­5,582 ­5,582

Repurchase and sale of shares

--

-- ­1,463 ­1,463

Group contribution

--

--

162

162

Closing balance, December 31, 2006

1,545

3,017 8,668 13,230

Share-based payments

--

--

25

25

Revaluation of external shares

--

--

248

248

Income for the period

--

-- 1,682 1,682

Dividend payment

--

-- ­1,126 ­1,126

Repurchase and sale of shares

--

--

260

260

Group contribution

--

--

89

89

Closing balance,

December 31, 2007

1,545

3,017 9,846 14,408

27

notes, all amounts in SEKm unless otherwise stated

Notes

Note

Page

Note 1 Accounting and valuation principles

29

Note 2 Financial risk management

36

Note 3 Segment information

39

Note 4 Net sales and operating income

40

Note 5 Other operating income

41

Note 6 Other operating expenses

41

Note 7 Items affecting comparability

41

Note 8 Leasing

41

Note 9 Financial income and financial expenses

42

Note 10 Taxes

42

Note 11 Goodwill and other intangible assets

44

Note 12 Property, plant and equipment

45

Note 13 Financial assets

46

Note 14 Inventories

46

Note 15 Other current assets

46

Note 16 Trade receivables

47

Note 17 Financial instruments

47

Note 18 Other reserves in equity

52

Note 19 Assets pledged for liabilities to credit institutions 52

Note 20 Share capital, number of shares

and earnings per share

52

Note 21 Untaxed reserves, Parent Company

53

Note 22 Employees and employee benefits

53

Note 23 Other provisions

60

Note 24 Other liabilities

60

Note 25 Contingent liabilities

60

Note 26 Acquired and divested operations

61

Note 27 Remuneration to the Board of Directors, the

President and other members of Group

Management

61

Note 28 Fees to auditors

64

Note 29 Shares and participations

65

Note 30 Discontinued operations

66

Note 31 Definitions

67

Proposed distribution of earnings

68

Audit report

69

28

notes,naollteasm, aolluanmtsouinntSsEinKSmEKumnleusnsleossthoethrweriwseisestsatatetedd

Notes

Note 1 Accounting and valuation principles
Basis of preparation The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The consolidated financial statements have been prepared under the historical cost convention, as modified by revaluation of available-for-sale financial assets and financial assets and liabilities (including derivative instruments) at fair value through profit or loss. Some additional information is disclosed based on the standard RR 30:06 from the Swedish Financial Accounting Standards Council and the Swedish Annual Accounts Act. As required by IAS 1, Electrolux companies apply uniform accounting rules, irrespective of national legislation, as defined in the Electrolux Accounting Manual, which is fully compliant with IFRSs. The policies set out below have been consistently applied to all years presented.
The Parent Company applies the same accounting principles as the Group, except in the cases specified below in the section entitled "Parent Company accounting principles".
The financial statements were authorized for issue by the Board of Directors on February 5, 2008. The balance sheets and income statements are subject to approval by the Annual General Meeting of shareholders on April 1, 2008.
Principles applied for consolidation The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group, whereby the assets and liabilities and contingent liabilities assumed in a subsidiary on the date of acquisition are recognized and measured to determine the acquisition value to the Group.
The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.
If the cost of the business combination exceeds the fair value of the identifiable assets, liabilities and contingent liabilities, the difference is recognized as goodwill.
If the fair value of the acquired net assets exceeds the cost of the business combination, the acquirer must reassess the identification and measurement of the acquired assets. Any excess remaining after that reassessment must be recognized immediately in profit or loss. The consolidated financial statements for the Group includes the financial statements for the Parent Company and the direct and indirect owned subsidiaries after:
· elimination of intra-group transactions, balances and unrealized intra-group profits
· depreciation and amortization of acquired surplus values.
Definition of Group companies The consolidated financial statements include AB Electrolux and all companies in which the Parent Company has the power to govern the financial and operating policies, generally accompanying a shareholding of more than 50% of the voting rights referring to all shares and participations.

The following applies to acquisitions and divestments during the year:
· Companies acquired during the year have been included in the consolidated income statement as of the date when Electrolux gains control.
· Companies divested during the year have been included in the consolidated income statement up to and including the date when Electrolux loses control.
At year-end 2007, the Group comprised 250 (257) operating units, and 183 (209) companies.
Associated companies Associates are all companies over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associated companies have been reported according to the equity method. This means that the Group's share of income after taxes in an associated company is reported as part of the Group's income. Investments in such a company are reported initially at cost, increased, or decreased to recognize the Group's share of the profit or loss of the associated company after the date of acquisition. When the Group's share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate. Gains or losses on transactions with associated companies, if any, have been recognized to the extent of unrelated investors' interests in the associate.
Related party transactions All transactions with related parties are carried out on an armslength basis.
Foreign currency translations Foreign-currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currency are valued at year-end exchange rates and the exchange-rate differences are included in the income statement, except when deferred in equity for the effective part of qualifying netinvestment hedges.
The consolidated financial statements are presented in Swedish krona (SEK), which is the Parent Company's functional and presentation currency.
The balance sheets of foreign subsidiaries have been translated into SEK at year-end rates. The income statements have been translated at the average rates for the year. Translation differences thus arising have been taken directly to equity.
The Group uses foreign-exchange derivative contracts and loans in foreign currencies in hedging certain net investments in foreign operations. The effective portion of the exchange-rate differences related to these contracts and loans have been charged to Group equity.
When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognized in the income statement as part of the gain or loss on sales.

29

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
Segment reporting The Group's primary segments, business areas, follow the internal management of the Group, which are the basis for identifying the predominant source and nature of risks and differing rates of return facing the entity, and are based on the different business models for end-customers and indoor users. The secondary segments are based on the Group's consolidated sales per geographical market, geographical areas.
The segments are responsible for the operating results and the net assets used in their businesses, whereas financial net and taxes as well as net borrowings and equity are not reported per segment. The operating results and net assets of the segments are consolidated using the same principles as for the total Group. The segments consist of separate legal units as well as divisions in multi-segment legal units where some allocations of costs and net assets are made. Operating costs not included in the segments are shown under Group common costs which refer to common Group services including corporate functions.
Sales between segments are made on market conditions with arms-length principles.
Revenue recognition Sales are recorded net of value-added tax, specific sales taxes, returns, and trade discounts. Revenues arise from sales of finished products and services. Sales are recognized when the significant risks and rewards connected with ownership of the goods have been transferred to the buyer and the Group retains neither a continuing right to dispose of the goods, nor effective control of those goods and when the amount of revenue can be measured reliably. This means that sales are recorded when goods have been put at the disposal of the customers in accordance with agreed terms of delivery. Revenues from services are recorded when the service, such as installation or repair of products, has been performed.
Items-affecting comparability This item includes events and transactions with significant effects, which are relevant for understanding the financial performance when comparing income for the current period with previous periods, including:
· Capital gains and losses from divestments of product groups or major units
· Close-down or significant down-sizing of major units or activities
· Restructuring initiatives with a set of activities aimed at reshaping a major structure or process
· Significant impairment
· Other major non-recurring costs or income

liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred taxes are calculated using enacted or substantially enacted tax rates by the balance sheet date. Taxes incurred by the Electrolux Group are affected by appropriations and other taxable or taxrelated transactions in the individual Group companies. They are also affected by utilization of tax losses carried forward referring to previous years or to acquired companies. This applies to both Swedish and foreign Group companies. Deferred tax assets on tax losses and temporary differences are recognized to the extent it is probable that they will be utilized in future periods. Deferred tax assets and deferred tax liabilities are shown net when they refer to the same taxation authority and when a company or a group of companies, through tax consolidation schemes, etc., have a legally enforceable right to set off tax assets against tax liabilities.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not be reversed in the foreseeable future.
Intangible fixed assets Goodwill Goodwill is reported as an indefinite life intangible asset at cost less accumulated impairment losses.
Trademarks Trademarks are shown at historical cost. The Electrolux trademark in North America, acquired in May 2000, is regarded as an indefinite life intangible asset and is not amortized. One of the Group's key strategies is to develop Electrolux into the leading global brand within the Group's product categories. This acquisition has given Electrolux the right to use the Electrolux brand worldwide, whereas it previously could be used only outside of North America. All other trademarks are amortized over their useful lives, estimated to 10 years, using the straight-line method.
Product development expenses Electrolux capitalizes expenses for certain own development of new products provided that the level of certainty of their future economic benefits and useful life is high. The intangible asset is only recognized if the product is sellable on existing markets and that resources exist to complete the development. Only expenditures, which are directly attributable to the new product's development, are recognized. Capitalized development costs are amortized over their useful lives, between 3 and 5 years, using the straight-line method. The assets are tested for impairment annually and whenever there is an indication that the intangible asset may be impaired.

Borrowing costs Borrowing costs are recognized as an expense in the period in which they are incurred.
Taxes Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and

Computer software Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over useful lives, between 3 and 5 years, using the straight-line method. Computer software is tested for impairment annually and whenever there is an indication that the intangible asset may be impaired.

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notes, all amounts in SEKm unless otherwise stated

Property, plant and equipment Property, plant, and equipment are stated at historical cost less straight-line accumulated depreciation, adjusted for any impairment charges. Historical cost includes expenditures that are directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and are of material value. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item are depreciated separately. This applies mainly to components for machinery. All other repairs and maintenance are charged to the income statement during the period in which they are incurred. Land is not depreciated as it is considered to have an endless useful period, but otherwise depreciation is calculated using the straight-line method and is based on the following estimated useful lives:

Buildings and land improvements Machinery and technical installations Other equipment

10­40 years 3­15 years 3­10 years

Impairment of non-current assets At each balance sheet date, the Group assesses whether there is any indication that any of the company's non-current assets are impaired. If any such indication exists, the company estimates the recoverable amount of the asset. The recoverable amount is the higher of an asset's fair value less cost to sell and value in use. An impairment loss is recognized by the amount of which the carrying amount of an asset exceeds its recoverable amount. The discount rates used reflect the cost of capital and other financial parameters in the country or region where the asset is in use. For the purposes of assessing impairment, assets are grouped in cash-generating units, which are the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
The value of goodwill and other intangible assets with indefinite life is continuously monitored, and is tested for yearly impairment or more often if there is indication that the asset might be impaired. Goodwill is allocated to the cash generating units that are expected to benefit from the combination.

Classification of financial assets The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss; loans and receivables; held-to-maturity investments; and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition.

Financial assets at fair value through profit or loss This category has two sub-categories: financial assets held-fortrading, and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorized as held-for-trading, presented under derivatives in the balance sheet, unless they are designated as hedges. Assets in this category are classified as current assets if they either are held-for-trading or are expected to be realized within 12 months of the balance-sheet date.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet.
Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has the positive intention and ability to hold to maturity. During the year and last year, the Group did not hold any investments in this category.
Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets as financial assets unless management intends to dispose of the investment within 12 months of the balance-sheet date.
Recognition and measurement of financial assets Regular purchases and sales of investments, financial assets, are recognized on trade-date, the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Investments are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Availablefor-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans, receivables, and held-to-maturity investments are carried at amortized cost using the effective interest method. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are included in the income statement in the period in which they arise and reported as cost of goods sold. Unrealized gains and losses arising from changes in the fair value of financial assets classified as availablefor-sale are recognized in equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair-value adjustments are included in the income statement as gains and losses from investment securities and reported as operating result.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active, the Group establishes fair value by using valuation techniques. These include the use of recent arm's-length transactions, reference to other instruments that are substantially the same, discounted cash-flow analysis, and option-pricing models refined to reflect the issuer's specific circumstances.
The Group assesses at each balance-sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. If any such evidence exists for available-forsale financial assets, the cumulative loss is removed from equity and recognized in the income statement. Impairment losses recognized in the income statement are not reversed through the income statement.

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Assets held-for-sale and discontinued operations The Group classifies a non-current asset or disposal group as held-for-sale if its carrying amount will be recovered principally through a sale. For classification as held-for-sale the asset or disposal group must be available for immediate sale in its present condition and its sale must be highly probable.
A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held-for-sale, if earlier. A disposal group that is to be abandoned may also qualify.
Immediately before classification as held-for-sale, the measurement of the assets and all assets and liabilities in a disposal group is brought up-to-date in accordance with applicable IFRSs. Then, on initial classification as held-for-sale, non-current assets and disposal groups are recognized at the lower of carrying amount and fair value less costs to sell.
Leasing A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred. An operating lease is a lease other than a finance lease. Assets under financial leases in which the Group is a lessee are recognized in the balance sheet and the future leasing payments are recognized as a loan. Expenses for the period correspond to depreciation of the leased asset and interest cost for the loan. The Group's activities as a lessor are not significant.
The Group generally owns its production facilities. The Group rents some warehouse and office premises under leasing agreements and has also leasing contracts for certain office equipment. Most leasing agreements in the Group are operational leases and the costs recognized directly in the income statement in the corresponding period. Financial leases are capitalized at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments.
The leased assets are depreciated over its useful lifetime. If there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the assets are fully depreciated over the shorter of the lease term and its useful life.
Inventories Inventories and work in progress are valued at the lower of acquisition cost and net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale at market value. The cost of inventories is assigned by using the weighted average cost formula. Appropriate provisions have been made for obsolescence.
Trade receivables Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the

provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The change in amount of the provision is recognized in the income statement.
Cash and cash equivalents Cash and cash equivalents consist of cash on hand, bank deposits and other short-term highly liquid investments with a maturity of three months or less.
Provisions Provisions are recognized when the Group has a present obligation as a result of a past event, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized, as a provision is the best estimate of the expenditure required to settle the present obligation at the balance sheet date. Where the effect of time value of money is material, the amount recognized is the present value of the estimated expenditures.
Provisions for warranty are recognized at the date of sale of the products covered by the warranty and are calculated based on historical data for similar products.
Restructuring provisions are recognized when the Group has both adopted a detailed formal plan for the restructuring and has, either started the plan implementation, or communicated its main features to those affected by the restructuring.
Post-employment benefits Post-employment benefit plans are classified as either defined contribution or defined benefit plans.
Under a defined contribution plan, the company pays fixed contributions into a separate entity and will have no legal obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits. Contributions are expensed when they are due.
All other post-employment benefit plans are defined benefit plans. The Projected Unit Credit Method is used to measure the present value of the obligations and costs. The calculations are made annually using actuarial assumptions determined at the balance sheet date. Changes in the present value of the obligations due to revised actuarial assumptions are treated as actuarial gains or losses and are amortized over the employees' expected average remaining working lifetime in accordance with the corridor approach. Differences between expected and actual return on plan assets are treated as actuarial gains or losses. The portion of the cumulative unrecognized gains and losses in each plan that exceeds 10% of the greater of the defined benefit obligation and the plan asset is recognized in profit and loss over the expected average remaining working lifetime of the employees participating in the plans.
Net provisions for post-employment benefits in the balance sheet represent the present value of the Group's obligations at year-end less market value of plan assets, unrecognized actuarial gains and losses and unrecognized past-service costs.
Past-service costs are recognized immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortized on a straight-line basis over the vesting period.

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notes, all amounts in SEKm unless otherwise stated

Borrowings Borrowings are initially recognized at fair value net of transaction costs incurred. After initial recognition, borrowings are valued at amortized cost using the effective interest method.
Derivative financial instruments and hedging activities Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: hedges of the fair value of recognized assets or liabilities or a firm commitment (fairvalue hedges); hedges of highly probable forecast transactions (cash-flow hedges); or hedges of net investments in foreign operations.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
The fair values of various derivative instruments used for hedging purposes are disclosed in Note 17 on page 47. Movements on the hedging reserve in shareholder's equity are shown in the consolidated statement of changes in equity.
Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded as financial items in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The Group applies fair-value hedge accounting only for hedging fixed interest risk on borrowings. The gain or loss relating to changes in the fair value of interest-rate swaps hedging fixed rate borrowings is recognized in the income statement as financial expense. Changes in the fair value of the hedged fixed rate borrowings attributable to interest-rate risk are recognized in the income statement as financial expence.
If the hedge no longer meets the criteria for hedge accounting or are de-designated, the adjustment to the carrying amount of a hedged item for which the effective interest method is used, is amortized in the profit and loss statement as financial expense over the period of maturity.
Cash flow hedge The effective portion of change in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in equity. The gain or loss relating to the ineffective portion is recognized immediately in the income statement as financial items.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss, for instance, when the forecast sale that is hedged takes place. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset, for example inventory or a liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised; when the hedge no longer meets the criteria for hedge accounting; when the forecast transaction is no longer expected to occur; or when the entity revokes the designation. When any of these occur, the cumulative gains or losses that had been recognized directly in equity are recognized in profit or loss within financial items.
Net investment hedge Hedges of net investments in foreign operations are accounted for similarly to cash-flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognized in equity; the gain or loss relating to the ineffective portion is recognized immediately in the income statement as financial items.
Gains and losses accumulated in equity are included in the income statement when the foreign operation is disposed of, or when a partial disposal occurs.
Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognized immediately in the income statement as financial items.
Share-based compensation IFRS 2 is applied for share-based compensation programs granted after November 7, 2002, and that had not vested on January 1, 2005. The instruments granted are either share options or shares, depending on the program. An estimated cost for the granted instruments, based on the instruments' fair value at grant date, and the number of instruments expected to vest is charged to the income statement over the vesting period. The fair value of share options is calculated using a valuation technique, which is consistent with generally accepted valuation methodologies for pricing financial instruments and takes into consideration factors that knowledgeable, willing market participants would consider in setting the price. The fair value of shares is the market value at grant date, adjusted for the discounted value of future dividends which employees will not receive. For Electrolux, the share-based compensation programs are classified as equity-settled transactions, which means that the cost of the granted instrument's fair value at grant date is recognized over the vesting period 3 years. At each balance-sheet date, the Group revises the estimates to the number of shares that are expected to vest. Electrolux recognizes the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
In addition, the Group provides for employer contributions expected to be paid in connection with the share-based compensation programs. The costs are charged to the income statement over the vesting period. The provision is periodically revalued based on the fair value of the instruments at each closing date. For details of the share-based compensation programs, please refer to Note 22 on page 53.
Government grants Government grants relate to financial grants from governments, public authorities, and similar local, national, or international bodies. These are recognized when there is a reasonable assur-

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ance that the Group will comply with the conditions attaching to them, and that the grants will be received. Government grants related to assets are included in the balance sheet as deferred income and recognized as income over the useful life of the assets.
New or amended accounting standards (IAS/IFRS) The new or amended standards issued by IASB (The International Accounting Standards Board) relates to presentation or disclosures and have no impact on Electrolux financial result or position.
IFRS 7 Financial Instruments: Disclosures. This standard supersedes IAS 30, Disclosures in the Financial Statements of Banks and Similar Financial Institutions, and states principles for presenting financial assets and liabilities that complement those included in IAS 32, Financial Instruments: Presentation and IAS 39, Financial Instruments: Recognition and Measurement. IFRS 7 was effective for annual periods beginning on or after January 1, 2007.
Amendment to IAS 1 Capital Disclosures requires that an entity shall disclose information that enables users of its financial statement to evaluate the entity's objectives, policies, and processes for managing capital. This amendment was effective for annual periods beginning on or after January 1, 2007.

was not hyperinflationary in the prior period. This interpretation is effective for annual periods beginning on or after March 1, 2006.
IFRIC 8 Scope of IFRS 2, which states that the entity shall measure unidentifiable goods or services received as consideration for equity instruments of the entity as the difference between the fair value of the share-based payment and the fair value of any identifiable goods or services received. This interpretation is effective for annual periods beginning on or after May 1, 2006.
IFRIC 9 Reassessment of Embedded Derivatives, which states that an entity shall assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract and that subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly moves the cash flows that otherwise would be required under the contract, in which case reassessment is required. This interpretation is effective for annual periods beginning on or after June 1, 2006.
IFRIC 10 Interim Financial Reporting and Impairment. This interpretation states that an entity shall not reverse an impairment loss recognized in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost. This interpretation is effective for annual periods beginning on or after November 1, 2006.

The following standards or amendments shall be applied as from January 1, 2009. None of the new standards are expected to have a significant impact on neither financial result nor position.
IFRS 8 Operating Segments. This standard replaces IAS 14, Segment Reporting, and prescribes measurement and presentation of segments. The standard is effective for annual periods beginning on or after January 1, 2009.

The following IFRICs shall be applied as from January 1, 2008.
IFRIC 11 IFRS 2, Group and Treasury Share Transactions. This interpretation clarifies the treatment and classification of sharebased transactions where the company use repurchased shares to settle the obligation and the accounting for option programs in subsidiaries applying IFRS. This interpretation is effective for annual periods beginning on or after March 1, 2007.

IAS 1 Presentation of Financial Statements (Revised)*). The revision of the standard aims at improving the usage of financial statements. The standard is effective for annual periods beginning on or after January 1, 2009.
IAS 23 Borrowing Cost (Revised)*). The main change from the previous version is the removal of the option of immediately recognizing as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. An entity is, therefore, required to capitalize borrowing costs as part of the cost of such assets. The standard is effective for annual periods beginning on or after January 1, 2009.

IFRIC 14 IAS 19, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction*). IFRIC 14 addresses three issues: how entities should determine the limit placed by IAS 19, Employee Benefits, on the amount of a surplus in a pension plan they can recognize as an asset; how a minimum funding requirement affects that limit; when a minimum funding requirement creates an onerous obligation that should be recognized as a liability in addition to that otherwise recognized under IAS 19. This interpretation is effective for annual periods beginning on or after January 1, 2008.
*) These standards and interpretations are not adopted by the EU at the writing date.

New interpretations of accounting standards (IFRICs) None of the new interpretations by IFRIC (International Financial Reporting Interpretation Committee), which are applicable to Electrolux, have, or are expected to have, a significant impact on neither financial result nor position.
IFRIC 7 Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies, which provides guidance on how to apply the requirements of IAS 29 in a reporting period in which an entity identifies the existence of hyperinflation in the economy of its functional currency, when that economy

Critical accounting policies and key sources of estimation uncertainty Use of estimates Management of the Group has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from these estimates.
The discussion and analysis of the Group's results of operations and financial condition are based on the consolidated financial statements, which have been prepared in accordance with

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notes, all amounts in SEKm unless otherwise stated

International Financial Reporting Standards (IFRS), as adopted by the EU. The preparation of these financial statements requires management to apply certain accounting methods and policies that may be based on difficult, complex or subjective judgments by management or on estimates based on experience and assumptions determined to be reasonable and realistic based on the related circumstances. The application of these estimates and assumptions affects the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance-sheet date and the reported amounts of net sales and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions. Electrolux has summarized below the accounting policies that require more subjective judgment of the management in making assumptions or estimates regarding the effects of matters that are inherently uncertain.
Asset impairment All non-current assets, including goodwill, are evaluated for impairment yearly or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to its recoverable amount based on the best information available. Different methods have been used for this evaluation, depending on the availability of information. When available, market value has been used and impairment charges have been recorded when this information indicated that the carrying amount of an asset was not recoverable. In the majority of cases, however, market value has not been available, and the fair value has been estimated by using the discounted cash-flow method based on expected future results. Differences in the estimation of expected future results and the discount rates used could have resulted in different asset valuations.
Non-current assets, including property, plant and equipment, are depreciated on a straight-line basis over their estimated useful lives. Useful lives for property, plant and equipment are estimated between 10 and 40 years for buildings and land improvements, 3 and 15 years for machinery and technical installations and 3 and 10 years for other equipment. The carrying amount for property, plant and equipment at year-end 2007 amounted to SEK 15,205m. The carrying amount for goodwill at year-end 2007 amounted to SEK 2,024m. Management regularly reassesses the useful life of all significant assets. Management believes that any reasonably possible change in the key assumptions on which the asset's recoverable amounts are based would not cause their carrying amounts to exceed their recoverable amounts.
Deferred taxes In the preparation of the financial statements, Electrolux estimates the income taxes in each of the taxing jurisdictions in which the Group operates as well as any deferred taxes based on temporary differences. Deferred tax assets relating mainly to tax loss carry-forwards and temporary differences are recognized in those cases when future taxable income is expected to permit the recovery of those tax assets. Changes in assumptions in the projection of future taxable income as well as changes in tax rates could result in significant differences in the valuation of deferred taxes. As of December 31, 2007, Electrolux had a net amount of SEK 1,206m recognized as deferred tax assets in excess of deferred tax liabilities. As of December 31, 2007, the Group had tax loss carry-forwards and other deductible temporary differ-

ences of SEK 4,497m, which have not been included in computation of deferred tax assets.
Trade receivables Receivables are reported net of allowances for doubtful receivables. The net value reflects the amounts that are expected to be collected, based on circumstances known at the balance-sheet date. Changes in circumstances such as higher than expected defaults or changes in the financial situation of a significant customer could lead to significantly different valuations. At year-end 2007, trade receivables, net of provisions for doubtful accounts, amounted to SEK 20,379m. The total provision for doubtful accounts at year-end 2007 was SEK 571m.
Post-employment benefits Electrolux sponsors defined benefit pension plans for some of its employees in certain countries. The pension calculations are based on assumptions about expected return on assets, discount rates and future salary increases. Changes in assumptions affect directly the service cost, interest cost and expected return on assets components of the expense. Gains and losses which result when actual returns on assets differ from expected returns, and when actuarial liabilities are adjusted due to experienced changes in assumptions, are subject to amortization over the expected average remaining working life of the employees using the corridor approach. Expected return on assets used in 2007 was 6.3% based on historical results. A reduction by one percentage point would have increased the net pension cost in 2007 by approximately SEK 140m. The discount rate used to estimate liabilities at the end of 2006 and the calculation of expenses during 2007 was 4.9%. A decrease of such rate by 0.5 percentage point would have increased the service-cost component of expense by approximately SEK 30m.
Restructuring Restructuring charges include required write-downs of assets and other non-cash items, as well as estimated costs for personnel reductions. The charges are calculated based on detailed plans for activities that are expected to improve the Group's cost structure and productivity. In general, the outcome of similar historical events in previous plans are used as a guideline to minimize these uncertainties. The restructuring programs announced during 2007 had a total charge against operating income of SEK 362m.
Warranties As is customary in the industry in which Electrolux operates, many of the products sold are covered by an original warranty, which is included in the price and which extends for a predetermined period of time. Reserves for this original warranty are estimated based on historical data regarding service rates, cost of repairs, etc. Additional reserves are created to cover goodwill warranty and extended warranty. While changes in these assumptions would result in different valuations, such changes are unlikely to have a material impact on the Group's results or financial situation. As of December 31, 2007, Electrolux had a provision for warranty commitments amounting to SEK 1,682 m. Revenues from extended warranty is recognized on a linear basis over the contract period unless there is evidence that some other method better represents the stage of completion.

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Accrued expenses ­ Long-term incentive programs Electrolux records a provision for the expected employer contributions, social security charges, arising when the employees exercise their options under the 2001­2003 Employee Option Programs or receive shares under the 2005­2007 Performance Share Programs. Employer contributions are paid based on the benefit obtained by the employee when exercising the options or receiving shares. The establishment of the provision requires the estimation of the expected future benefit to the employees. Electrolux bases these calculations on a valuation made using the Black & Scholes model, which requires a number of estimates that are inherently uncertain. The uncertainty is due to the unknown share price at the time when options are exercised and when shares in the performance share programs are distributed and because the liability is marked-to-market it is remeasured every balance-sheet day.
Disputes Electrolux is involved in disputes in the ordinary course of business. The disputes concern, among other things, product liability, alleged defects in delivery of goods and services, patent rights and other rights and other issues on rights and obligations in connection with Electrolux operations. Such disputes may prove costly and time consuming and may disrupt normal operations. In addition, the outcome of complicated disputes is difficult to foresee. It cannot be ruled out that a disadvantageous outcome of a dispute may prove to have a material adverse effect on the Group's earnings and financial position.
Parent Company accounting principles The Parent Company has prepared its Annual Report in compliance with Swedish Annual Accounts Act (1995:1554) and recommendation RR 32:06, Accounting for Legal Entities of the Swedish Financial Accounting Standards Council. RR 32:06 prescribes that the Parent Company in the Annual Report of a legal entity shall apply all International Financial Reporting Standards and interpretations approved by the EU as far as this is possible within the framework of the Annual Accounts Act, and taking into account the connection between reporting and taxation. The recommendation states what exceptions from IFRS and additions shall be made. The Parent Company applies IAS 39, Financial Instruments.
Subsidiaries Holdings in subsidiaries are recognized in the Parent Company financial statements according to the cost method of accounting. The value of subsidiaries are tested for impairment when there is an indication of a decline in the value.
Anticipated dividends Dividends from subsidiaries are recognized in the income statement when received. Anticipated dividends from subsidiaries are recognized in cases where the Parent Company has exclusive rights to decide on the size of the dividend and the Parent Company has made a decision on the size of the dividend before the Parent Company has published its financial reports.

Taxes The Parent Company financial statements recognize untaxed reserves including deferred tax liability. The consolidated financial statements, however, reclassify untaxed reserves to deferred tax liability and equity.
Group contribution Group contributions provided or received by the Parent Company, and its current tax effects are recognized in retained earnings. Shareholder contributions provided by the Parent Company are recognized in shares and participations, provided that a writedown is not necessary.
Pensions The Parent Company reports pensions in the financial statements in accordance with the recommendation FAR 4, Accounting for pension liability and pension cost, from the Swedish Institute of Authorized Public Accountants. According to RR 32:06, IAS 19 shall be adopted regarding supplementary disclosures when applicable.
Property, plant and equipment The Parent Company reports additional fiscal depreciation, permitted by Swedish tax law, as appropriations in the income statement. In the balance sheet, these are included in untaxed reserves.
Financial statement presentation The Parent Company presents the income and balance sheet statements in compliance with the Swedish Annual Accounts Act (1995:1554) and recommendation RR 32:06.
Other A few terms in the income and balance sheet and cash flow statements have been changed compared to last year. In connection with this, minor reclassifications have been made and corresponding comparative figures have been changed.
Note 2 Financial risk management
Financial risk management The Group is exposed to a number of risks relating to, for example, liquid funds, trade receivables, customer financing receivables, payables, borrowings, commodities and derivative instruments. The risks are primarily: · Interest-rate risk on liquid funds and borrowings · Financing risk in relation to the Group's capital requirements · Foreign-exchange risk on earnings and net investments in
foreign subsidiaries · Commodity-price risk affecting the expenditure on raw
materials and components for goods produced · Credit risk relating to financial and commercial activities
The Board of Directors of Electrolux has approved a financial policy as well as a credit policy for the Group to manage and con-

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notes, all amounts in SEKm unless otherwise stated

trol these risks. Each business sector has specific financial and credit policies approved by each sector-board (hereinafter all policies are referred to as the Financial Policy). These risks are to be managed by, amongst others, the use of derivative financial instruments according to the limitations stated in the Financial Policy. The Financial Policy also describes the management of risks relating to pension fund assets.
The management of financial risks has largely been centralized to Group Treasury in Stockholm. Local financial issues are mainly managed by three regional treasury centers located in Europe, North America and Latin America. Measurement of risk in Group Treasury is performed by a separate risk controlling function on a daily basis. The method used for measuring risk in the financial position is parametric Value-at-Risk (VaR). The method shows the maximum potential loss in one day with a probability of 97.5% and is based on the statistical behavior of the FX spot and interestrate markets the last 150 business days. To emphasize recent movements in the market, the weight of the rates decrease further away from the valuation date. By measuring the VaR risk, Group Treasury is able to monitor and follow up on the Group's risks across a wide variety of currencies and markets. The main limitation of the method is that events not showing in the statistical data will not be reflected in the risk value. Also, due to the confidence level, there is a 2.5% risk that the loss will be larger than indicated by the risk figure. Furthermore, there are guidelines in the Group's policies and procedures for managing operational risk relating to financial instruments by, e.g., segregation of duties and power of attorney.
Proprietary trading in currency, commodities, and interestbearing instruments is permitted within the framework of the Financial Policy. This trading is primarily aimed at maintaining a high quality of information flow and market knowledge to contribute to the proactive management of the Group's financial risks.
Interest-rate risk on liquid funds and borrowings Interest-rate risk refers to the adverse effects of changes in interest rates on the Group's income. The main factors determining this risk include the interest-fixing period.
Liquid funds Liquid funds as defined by the Group consist of cash and cash equivalent, short-term investments, derivatives and prepaid interest expenses and accrued interest income. Electrolux goal is that the level of liquid funds including unutilized committed short-term credit facilities shall correspond to at least 2.5% of annualized net sales. In addition, net liquid funds defined as liquid funds less short-term borrowings shall exceed zero, taking into account fluctuations arising from acquisitions, divestments, and seasonal variations. Investment of liquid funds is mainly made in interestbearing instruments with high liquidity and with issuers with a long-term rating of at least A- as defined by Standard & Poor's or similar.
Interest-rate risk in liquid funds Group Treasury manages the interest-rate risk of the investments in relation to a benchmark position defined as a one-day holding period. Any deviation from the benchmark is limited by a risk mandate. Derivative financial instruments like futures and forward-rate agreements are used to manage the interest-rate risk. The holding

periods of investments are mainly short-term. The major portion of the investments is made with maturities between 0 and three months. A downward shift in the yield curves of one-percentage point would reduce the Group's interest income by approximately SEK 55m (60). For more information, see Note 17 on page 47.

Borrowings The debt financing of the Group is managed by Group Treasury in order to ensure efficiency and risk control. Debt is primarily taken up at the parent company level and transferred to subsidiaries as internal loans or capital injections. In this process, various swap instruments are used to convert the funds to the required currency. Short-term financing is also undertaken locally in subsidiaries where there are capital restrictions. The Group's borrowings contain no terms, financial triggers, for premature cancellation based on rating. For more information, see Note 17 on page 47.

Interest-rate risk in borrowings The Financial Policy stipulates that the benchmark for the longterm loan portfolio is an average interest-fixing period of six months. Group Treasury can choose to deviate from this benchmark on the basis of a risk mandate established by the Board of Directors. However, the maximum average interest-fixing period is three years. Derivatives, such as interest-rate swap agreements, are used to manage the interest-rate risk by changing the interest from fixed to floating or vice versa. On the basis of 2007 long term interest-bearing borrowings with an interest fixing of 0.2 (0.5) years, a one-percentage point shift in interest rates would impact the Group's interest expenses by approximately SEK +/­60m (40) in 2007. This calculation is based on a parallel shift of all yield curves simultaneously by one-percentage point. Electrolux acknowledges that the calculation is an approximation and does not take into consideration the fact that the interest rates on different maturities and different currencies might change differently.

Capital structure and credit rating The Group defines its capital as equity stated in the balance sheet including minority interest. In 2007, the Group's capital was SEK 16,040m (13,194). The Group's objective is to have a capital structure resulting in an efficient weighted cost of capital and sufficient credit worthiness where operating needs and the needs for potential acquisitions are considered. To achieve and keep an efficient capital structure the Financial Policy states that the Group's long-term ambition is to maintain a long-term rating within a safe margin from a non-investment grade. In 2007, Electrolux has Investment Grade ratings of BBB+ from Standard & Poor's which has remained unchanged during the year.

Rating Standard & Poor's

Long-term debt
BBB+

Short-term

Outlook

debt

Stable

A-2

Short-term debt, Sweden
K-1

When monitoring the capital structure, the Group uses different key numbers which are consistent to methodologies used by rating agencies and banks. The Group manages the capital

37

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

structure and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.
Financing risk Financing risk refers to the risk that financing of the Group's capital requirements and refinancing of existing loans could become more difficult or more costly. This risk can be decreased by ensuring that maturity dates are evenly distributed over time, and that total short-term borrowings do not exceed liquidity levels. The net borrowings, i.e., total borrowing less liquid funds, excluding seasonal variances, shall be long-term according to the Financial Policy. The Group's goals for long-term borrowings include an average time to maturity of at least two years, and an evenly spread of maturities. A maximum of 25% of the borrowings are normally allowed to mature in a 12-month period. Exceptions are made when the net borrowing position of the Group is small. For more information, see Note 17 on page 47.
Foreign-exchange risk Foreign-exchange risk refers to the adverse effects of changes in foreign-exchange rates on the Group's income and equity. In order to manage such effects, the Group covers these risks within the framework of the Financial Policy. The Group's overall currency exposure is managed centrally.
Transaction exposure from commercial flows The Financial Policy stipulates the hedging of forecasted sales in foreign currencies, taking into consideration the price-fixing periods and the competitive environment. The business sectors within Electrolux have varying policies for hedging depending on their commercial circumstances. The sectors define a hedging horizon between 6 and up to 12 months of forecasted flows. Hedging horizons outside this period are subject to approval from Group Treasury. The Financial Policy permits the operating units to hedge invoiced and forecasted flows from 75% to 100%. The maximum hedging horizon is up to 18 months. Group subsidiaries cover their risks in commercial currency flows mainly through the Group's three regional treasury centers. Group Treasury thus assumes the currency risks and covers such risks externally by the use of currency derivatives.
The Group's geographically widespread production reduces the effects of changes in exchange rates. The remaining transaction exposure is mainly related to internal sales from producing entities to sales companies. To a lesser extent, there are also external exposures from purchasing of components and input material for the production paid in foreign currency. These external imports are often priced in US dollar. The global presence of the Group, however, leads to a significant netting of the transaction exposures. For more information on exposures and hedging, see Note 17 on page 47.

Translation exposure from consolidation of entities outside Sweden Changes in exchange rates also affect the Group's income in connection with translation of income statements of foreign subsidiaries into Swedish krona. Electrolux does not hedge such exposure. The translation exposures arising from income statements of foreign subsidiaries are included in the sensitivity analysis mentioned below.

Foreign-exchange sensitivity from transaction and translation exposure The major currencies that Electrolux is exposed to are the US dollar, the euro, the Canadian dollar, and the British pound. Other significant exposures are, for example, the Danish krona, the Australian dollar, the Hungarian forint and the Brazilian real. These currencies represent the majority of the exposures of the Group, but are, however, largely offsetting each other as different currencies represent net inflows and outflows. Taking into account all currencies of the Group, a change up or down by 10% in the value of each currency against the Swedish krona would affect the Group's profit and loss for one year by approximately SEK +/­ 500m (375), as a static calculation. The model assumes the distribution of earnings and costs effective at yearend 2007 and does not include any dynamic effects, such as changes in competitiveness or consumer behavior arising from such changes in exchange rates.

Sensitivity analysis of major currencies

Risk Currency GBP/SEK CAD/SEK AUD/SEK BRL/SEK DKK/SEK CZK/SEK HUF/SEK USD/SEK EUR/SEK

Change
­10% ­10% ­10% ­10% ­10% ­10% ­10% ­10% ­10%

Profit or loss impact , SEKm

­

353

­

243

­

206

­

138

­

107

­

105

+

167

+

373

+

409

Exposure from net investments (balance sheet exposure) The net of assets and liabilities in foreign subsidiaries constitute a net investment in foreign currency, which generates a translation difference in connection with consolidation. This exposure can have an impact on the Group's equity, and on the capital structure, and is hedged according to the Financial Policy. The Financial Policy stipulates the extent to which the net investments can be hedged and also sets the benchmark for risk measurement. The benchmark is to hedge only net investments with an equity capitalization exceeding 60%, unless the exposure of any other currency is considered too high by the Group, in which case this also should be hedged. The result of this change is that only a limited number of currencies are hedged on a continuous basis. Group Treasury is allowed to deviate from the benchmark under a

38

notes, all amounts in SEKm unless otherwise stated

given risk mandate. Hedging of the Group's net investments is implemented within the Parent Company in Sweden.
Changes in valuation of all financial instruments used for hedging net investment of the Group due to a change up or down by 10% in the value of each currency against the Swedish krona would affect the Group's equity by approximately SEK +/­ 200m (130), as a static calculation at year-end 2007.
Commodity-price risks Commodity-price risk is the risk that the cost of direct and indirect materials could increase as underlying commodity prices rise in global markets. The Group is exposed to fluctuations in commodity prices through agreements with suppliers, whereby the price is linked to the raw-material price on the world market. This exposure can be divided into direct commodity exposure, which refers to pure commodity exposures, and indirect commodity exposures, which is defined as exposure arising from only part of a component. Commodity-price risk is mainly managed through contracts with the suppliers. A change up or down by 10% in steel would affect the Group's profit or loss with approximately SEK +/­ 1,000m (1,000) and in plastics with SEK +/­ 500m (500), based on volumes in 2007.
Credit risk Credit risk in financial activities Exposure to credit risks arises from the investment of liquid funds, and as counterpart risks related to derivatives. In order to limit exposure to credit risk, a counterpart list has been established, which specifies the maximum permissible exposure in relation to each counterpart. The Group strives for arranging master netting agreements (ISDA) with the counterparts for derivative transactions and has established such agreements with the majority of the counterparts, i.e., if counterparty will default assets and liabilities will be netted.
Credit risk in trade receivables Electrolux sells to a substantial number of customers in the form of large retailers, buying groups, independent stores, and professional users. Sales are made on the basis of normal delivery and payment terms, if they are not included in customer financing operations in the Group. Customer financing solutions are also arranged outside the Group. The credit policy of the Group ensures that the management process for customer credits includes customer rating, credit limits, decision levels and management of bad debts. The Board of Directors decides on customer credit limits that exceed SEK 300m. There is a concentration of credit exposures on a number of customers in, primarily, USA and Europe. For more information, see Note 16 on page 47.
Note 3 Segment information
The segment reporting is divided into primary and secondary segments, where the five business areas serve as primary segments and geographical areas as secondary segments. Financial information for the Parent Company is divided into geographical segments since IAS 14 does not apply.

Primary reporting format ­ Business areas

The Group has operations in appliances, floor-care products and

professional operations in food-service equipment and laundry

equipment. The operations are classified in five business seg-

ments. Products for the consumer durables market, i.e., appli-

ances and floor-care products, are reported in four geographical

segments: Europe; North America; Latin America and Asia/

Pacific, while professional products are reported separately.

Operations within appliances comprise mainly major appliances,

i.e., refrigerators, freezers, cookers, dryers, washing machines,

dishwashers, room air-conditioners and microwave ovens.

The Outdoor Products operations of the Group were distributed

to the Electrolux shareholders in June 2006, under the name of

Husqvarna AB, as explained in Note 30 on page 66.

Financial information related to the business areas is reported

below.

Net sales

Operating income

2007

2006

2007

2006

Consumer Durables

Europe

45,472 44,233 2,067 2,678

North America

33,728 36,171 1,711 1,462

Latin America

9,243 7,766

514 339

Asia/Pacific

9,167 8,636

330 163

Professional Products

7,102 6,941

584 535

Total

104,712 103,747 5,206 5,177

Group common costs

20

101 ­369 ­602

Items affecting comparability

--

-- ­362 ­542

Total

104,732 103,848 4,475 4,033

In the internal management reporting, items affecting comparability is not included in the segments. The table specifies the segments to which they correspond.

Items affecting comparability

Impairment/ restructuring

2007 2006

Consumer Durables

Europe

­362 ­143

North America

--

10

Latin America

--

--

Asia/Pasific

-- ­297

Professional Products --

--

Total

­362 ­430

Other 2007 2006
-- ­173 -- 61 -- -- -- -- -- -- -- ­112

Total

2007

2006

­362 -- -- -- --
­362

­316 71 --
­297 --
­542

Inter-segment sales exist with the following split:

Consumer Durables Europe North America Latin America Asia/Pacific Eliminations

2007

2006

1,514 787 3 86
­2,390

1,161 985 38 71
­2,255

39

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

The segments are responsible for the management of the operational assets and their performance is measured at the same level, while the financing is managed by Group Treasury at group or country level. Consequently, liquid funds, interest-bearing receivables, interest-bearing liabilities, liability for share redemption and equity are not allocated to the business segments.

Assets December 31,

Equity and
liabilities December 31,

Net assets December 31,

2007 2006

2007

2006 2007 2006

Consumer Durables

Europe

28,119 26,353 18,961 19,278 9,158 7,075

North America

13,575 14,171 5,171 5,984 8,404 8,187

Latin America

5,743 5,562 2,629 1,997 3,114 3,565

Asia/Pacific

4,676 4,667 2,058 1,927 2,618 2,740

Professional Products

3,515 3,672 2,191 2,278 1,324 1,394

Other1)

2,658 1,956 4,177 3,390 ­1,519 ­1,434

Items affecting comparability

1,343 1,540 3,699 4,927 ­2,356 ­3,387

59,629 57,921 38,886 39,781 20,743 18,140

Liquid funds

6,460 7,799

--

--

--

--

Interest-bearing receivables

-- 329

--

--

--

--

Interest-bearing liabilities

--

-- 11,163 7,495

--

--

Share redemption

--

--

-- 5,579

--

--

Equity

--

-- 16,040 13,194

--

--

Total

66,089 66,049 66,089 66,049

--

--

1) Includes common Group services.

Consumer Durables Europe North America Latin America Asia/Pacific Professional Products Other2) Items affecting comparability Financial items Taxes paid Total

Capital expenditure

2007

2006

1,325 1,471
282 229
96 27 -- -- -- 3,430

1,698 922 170 184 151 27 -- -- --
3,152

1) Cash flow from operations and investments. 2) Includes common Group services.

Cash flow1)

2007

2006

351 1,069
814 589 695 ­91 ­1,063 ­272 ­815 1,277

1,951 1,850 ­160
603 347 ­1,437
9 ­246 ­743 2,174

Secondary reporting format ­ Geographical areas The Group's business segments operate in four geographical areas of the world: Europe; North America; Latin America; and Asia/Pacific. Net sales by market are presented below and show the Group's consolidated sales by geographical area, regardless of where the goods were produced.

Net sales, by geographical area
Europe North America Latin America Asia/Pacific Total
Assets, by geographical area
Europe North America Latin America Asia/Pacific Total
Capital expenditure, by geographical area
Europe North America Latin America Asia/Pacific Total
Net sales, Parent Company
Europe North America Latin America Asia/Pacific Total

2007

2006

50,815 49,576

34,148 36,427

9,651 8,355

10,118 9,490

104,732 103,848

December 31,

2007

2006

37,238 36,040

14,309 15,779

9,232 8,738

5,310 5,492

66,089 66,049

2007 1,423
801 967 235 3,426

2006 1,809
626 478 239 3,152

2007 6,092
-- -- -- 6,092

2006 6,204
-- -- -- 6,204

Note 4 Net sales and operating income
The Group's net sales in Sweden amounted to SEK 3,987m (3,769). Exports from Sweden during the year amounted to SEK 3,955m (4,700), of which SEK 3,281m (4,121) was to Group subsidiaries. The vast majority of the Group's revenues consisted of product sales. Revenue from service activities amounted to SEK 1,469m (1,461).
Operating income included net exchange-rate differences in the amount of SEK 179m (-76). The Group's Swedish factories accounted for 3.7% (4.1) of the total value of production. Costs for research and development amounted to SEK 1,497m (1,393) and are included in Cost of goods sold.
The Group's depreciation and amortization charge for the year amounted to SEK 2,738m (2,758). Salaries, remunerations and employer contributions amounted to SEK 16,857m (16,924) and expenses for post-employment benefits amounted to SEK 882m (820).
Government grants relating to expenses have been deducted in the related expenses by SEK 60m (116). Government grants related to assets have been recognized as deferred income in the balance sheet and will be recognized as income over the useful life of the assets. In 2007, these grants amounted to SEK 10m (11).

40

notes, all amounts in SEKm unless otherwise stated

Note 5 Other operating income

Note 8 Leasing

Gain on sale of: Property, plant and equipment Operations and shares Other Total

Group

2007

2006

Parent Company

2007

2006

242

167

11

12

--

6

253

185

30

--

11 171

16

--

57 171

Note 6 Other operating expenses

Loss on sale of: Property, plant and equipment Operations and shares Total

Group

2007

2006

Parent Company

2007

2006

­46

­29

­21

--

--

­4 ­498 ­704

­46

­33 ­519 ­704

Note 7 Items affecting comparability

Restructuring and impairment Divestment of Electrolux Financial Corp., USA Divestment of 50% stake in Nordwaggon AB, Sweden Unused restructuring provisions reversed Total

Group

2007

2006

­362 ­490

--

61

-- ­173

--

60

­362 ­542

Classification by function in the income statement
Cost of goods sold Selling expenses Administrative expenses Other operating income and other operating expenses Total

Group

2007

2006

­334 ­430

­1

--

­14

--

­13 ­112

­362 ­542

Items affecting comparability in 2007 relates to the closure of the cooker plant in Fredericia, Denmark, and the cooker plant in Spennymoor, UK. The closure of the Fredericia plant was decided in April 2007 and production discontinued at the end of the year. The decision to close the factory in Spennymoor, UK, was taken in December 2007. The production will be phased out during 2008.
Items affecting comparability in 2006 includes costs for the closure of the following plants: the compact appliance plant in Torsvik, Sweden, and the washer/dryer and dishwasher plants in Adelaide, Australia. After finalized union negotiations, an additional cost was recognized for the Nuremberg appliance plant in Germany. On June 30, 2006, the customer financing operation in the US was divested to Textron Financial Corporation. On July 17, 2006, the Group divested its 50% stake in Nordwaggon AB in Sweden to Transwaggon AB. In 2006, unused amounts from previous restructuring programs have been reversed.
The items are further described in the Report by the Board of Directors.

At December 31, 2007, the Group's financial leases, recognized

as tangible assets, consist of:

December 31,

2007

2006

Acquisition costs

Buildings

55 317

Machinery and other equipment

8

7

Closing balance, December 31

63 324

Accumulated depreciation Buildings Machinery and other equipment Closing balance, December 31 Net carrying amount, December 31

21 136

3

2

24 138

39 186

The future amount of minimum lease-payment obligations are dis-

tributed as follows:
Operating leases

Financial leases

Present value of future financial
lease payments

2008

691

2

2

2009­2012

1,403

3

3

2013­

330

--

--

Total

2,424

5

5

Expenses in 2007 for rental payments (minimum leasing fees) amounted to SEK 803m (724).

Operating leases Among the Group's operating leases there are no material contingent expenses, nor any restrictions.

Financial leases Within the Group there are no financial non-cancellable contracts that are being subleased. There are no contingent expenses in the period's results, nor any restrictions in the contracts related to leasing of facilities. The financial leases of facilities contain purchase options by the end of the contractual time. The present value of the future lease payments is SEK 5m.

41

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

Note 9 Financial income and financial expenses

Financial income Interest income
From subsidiaries From others Dividends from subsidiaries Other financial income Total financial income
Financial expenses Interest expenses
To subsidiaries To others Exchange-rate differences On loans and forward contracts as hedges for foreign net investments On other loans and borrowings, net Other financial expenses Total financial expenses

Group

2007

2006

--

--

175

534

--

--

7

4

182

538

-- ­650

-- ­788

-- 53 ­25 ­622

-- 46 ­4 ­746

Parent Company

2007

2006

924 52
2,218 7
3,201

1,125 250
11,486 6
12,867

­744 ­402

­983 ­469

31 187 ­11 ­939

421 ­126
­6 ­1,163

Interest expenses to others, for the Group and the Parent Company, include premiums on forward contracts used as hedges for foreign net investments in the amount of SEK ­75m (­236). Interest income from others, for the Group and the Parent Company, include gains and losses on financial instruments held for trading. Interest expenses to others, for the Group and the Parent Company, include gains and losses on derivatives used for managing the Groups's interest fixing and loans.

Specification of gains and losses on fair value hedges

2007

2006

Fair value hedges net

­1

­1

whereof interest-rate derivatives

­63

­49

whereof fair-value adjustment on borrowings

62

48

Net gain/loss, income and expense on financial instruments reported in the finance net

Financial assets and liabilities at fair value through profit and loss Derivatives for which hedge accounting is not applied, i.e., held-for-trading Interest-related derivatives for which fair value hedge accounting is applied, i.e., fair value hedges Currency derivatives related to commercial exposure where hedge accounting is applied, i.e., cash flow hedges Net investment hedges where hedge accounting is applied Other financial assets carried at fair value Held-to-maturity investments Loans and receivables Other assets Available-for-sale financial assets Other shares and participations Other financial liabilities Other financial liabilities for which hedge accounting is not applied Other financial liabilities for which hedge accounting is applied Total net gain/loss, income and expense

Gain/loss 369 404
­63
12
-- 16 -- ­397 ­397 -- -- 51 ­11 62 23

2007 Income
14 --
--
--
-- 14 -- 151 151 -- -- -- -- -- 165

Expense ­59 --
16
--
­75 -- -- -- -- -- --
­569 ­307 ­262 ­628

Gain/loss 531 677
­49
­7
-- ­90
-- ­520 ­520
-- -- 56 8 48 67

2006 Income
78 --
--
--
-- 78 -- 412 412 -- -- -- -- -- 490

Expense ­207 --
29
--
­236 -- -- -- -- -- --
­557 ­359 ­198 ­764

Note 10 Taxes
Current taxes Deferred taxes Total

Group

2007

2006

­1,371 ­1,088

261

­89

­1,110 ­1,177

Parent Company

2007

2006

28

58

--

--

28

58

Current taxes include reduction of costs of SEK 97m (27) related to previous years. Deferred taxes include an effect of SEK 40m (­11) due to changes in tax rates.
The deferred tax assets in the Parent Company amounted to SEK 0m (0). The Group accounts include deferred tax liabilities of SEK 217m (222) related to untaxed reserves in the Parent Company.

42

notes, all amounts in SEKm unless otherwise stated

Theoretical and actual tax rates % Theoretical tax rate Losses for which deductions have not been made Utilized tax loss carry-forwards Non-taxable/non-deductible income statement items, net Changes in estimates relating to deferred tax Withholding tax Other Actual tax rate

2007 32.8
5.3 ­0.9

2006 33.3
8.5 ­2.6

­2.1

2.8

­2.3

1.7

0.4

0.3

­5.7 ­13.2

27.5 30.8

The theoretical tax rate for the Group is calculated on the basis of the weighted total Group net sales per country, multiplied by the local statutory tax rates. There were no major changes in statutory tax rates during 2007.

Tax loss carry-forwards As of December 31, 2007, the Group had tax loss carry-forwards and other deductible temporary differences of SEK 4,497m (4,718),

which have not been included in computation of deferred tax assets. Tax loss carry-forwards will expire as follows:

2008 2009 2010 2011 2012 And thereafter Without time limit Total

December 31, 2007 313 251 259 360 424 171
2,719 4,497

Changes in deferred tax assets and liabilities The table below shows net deferred tax assets and liabilities. Deferred tax assets and deferred tax liabilities amount to the net deferred tax assets and liabilities in the balance sheet. Deferred tax income and deferred tax costs recognized in the income statement, in the equity, discontinued operations and exchange differences are also shown net.

Net deferred tax assets and liabilities

Excess of depreciation

Opening balance, January 1, 2006 Recognized in the

­582

income statement

139

Discontinued operations

­70

Exchange differences

­51

Closing balance, December 31, 2006

­564

Of which deferred tax assets

404

Of which deferred tax liabilities ­968

Provision for warranty
204
­27 -- ­6
171 195 ­24

Provision Provision for for pension restructuring

Obsolescense allowance

Unrealized
profit in stock

Recognized
unused tax
losses

Total deferred tax assets
and Other liabilities

Set-off tax

Net deferred tax assets and liabilties

1,407

112

­49

33 263 145 1,533

--

1,533

­248 ­79 ­36

48

43

55 ­193

94

­89

--

­89

--

92

-- ­10 ­185 ­252

--

­252

­8

­3

­3

­2 ­72 ­181

--

­181

1,044

152

1,132

205

­88

­53

83

85

58 ­18 1,011

--

1,011

90

91

58 1,035 3,210 ­994

2,216

­7

­6

-- ­1,053 ­2,199 994 ­1,205

Opening balance, January 1, 2007 Recognized in the income statement Exchange differences Closing balance, December 31, 2007 Of which deferred tax assets Of which deferred tax liabilities

­564
53 ­16
­527 233 ­760

171

1,044

77

­138

­3

­12

245

894

268

978

­23

­84

152

83

85

58 ­18 1,011

--

1,011

­46

­10

2 133 190 261

--

261

­1

­1

­2

­2 ­29

­66

--

­66

105

72

85 189 143 1,206

--

1,206

105

82 112 189 1,129 3,096 ­955

2,141

--

­10 ­27

-- ­986 ­1,890 955

­935

Deferred tax assets amounted to SEK 2,141m (2,216), whereof 720m (966) will be recovered within 12 months. Deferred tax liabilities amounted to SEK 935m (1,205), whereof 202m (500) will be recovered within 12 months.

43

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

Note 11 Goodwill and other intangible assets

Acquisition costs Opening balance, January 1, 2006 Acquired during the year Development Reclassification Sold during the year Discontinued operations Fully amortized Exchange-rate differences Closing balance, December 31, 2006 Acquired during the year Development Reclassification Sold during the year Fully amortized Write-off Exchange-rate differences Closing balance, December 31, 2007

Goodwill
3,872 -- -- -- --
­1,728 --
­163 1,981
-- -- -- -- -- -- 43 2,024

Product development

Group Other intangible assets

Program software

Other

Total other intangible assets

1,520 --
439 -- --
­372 ­4
­113 1,470
-- 520
­6 -- -- ­2 16 1,998

415

1,234

--

42

6

--

--

--

--

--

­10

­263

--

­12

­32

­39

379

962

--

7

229

--

--

6

--

--

­19

­45

--

­6

5

21

594

945

3,169 42
445 -- --
­645 ­16
­184 2,811
7 749
-- -- ­64 ­8 42 3,537

Parent Company
Trademarks, etc.
815 -- 3 ­1 -- -- -- --
817 34
207 -- -- -- -- --
1,058

Accumulated amortization Opening balance, January 1, 2006 Amortization for the year Sold and acquired during the year Discontinued operations Fully amortized Impairment (+) / reversal of impairment (­) Exchange-rate differences Closing balance, December 31, 2006 Amortization for the year Sold and acquired during the year Fully amortized Impairment (+) / reversal of impairment (­) Exchange-rate differences Closing balance, December 31, 2007 Carrying amount, December 31, 2006 Carrying amount, December 31, 2007

--

417

113

411

941

175

--

263

61

41

365

48

--

--

--

--

--

--

--

­106

­7

­97

­210

--

--

­4

--

­12

­16

--

--

1

--

15

16

--

--

­29

­16

­20

­65

--

--

542

151

338

1,031

223

--

318

58

40

416

58

--

--

--

--

--

--

--

--

­19

­45

­64

--

--

--

--

­1

­1

--

--

16

­1

19

34

--

--

876

189

351

1,416

281

1,981

928

228

624

1,780

594

2,024

1,122

405

594

2,121

777

Included in Other are trademarks of SEK 510m (525) and patents, licenses etc. amounting to SEK 84m (99). Amortization of intangible assets are included within cost of goods sold with SEK 274m (103), administrative expenses with SEK 141m (260) and selling expenses with SEK 1m (2) in the income statement.

Intangible assets with indefinite useful lives Goodwill as at December 31, 2007 has a total carrying value of SEK 2,024m. In addition, the right to use the Electrolux trademark in North America, acquired in May 2000, has been assigned indefinite useful life. The total carrying amount for the right is SEK 410m, included in Other above. The allocation, for impairment-testing purposes, on cash-generating units of the significant amounts is shown in the table belove. The carrying amounts of goodwill allocated to Consumer Durables in North America, Europe and Asia/ Pacific are significant in comparison with the total carrying amount of goodwill.
All intangible assets with indefinite useful lives are tested for impairment at least once every year and single assets can be tested more often in case there are indications of impairment. The recoverable amounts of the operations have been determined based on value in use calculations.

Value in use is estimated using the discounted cash-flow model on the strategic plans that are established for each cash-generating unit covering the coming three years. For the impairment tests for 2007, the plans for 2008 to 2010 have been used.
The strategic plans are built up from the strategic plans of the units within each business sector. The consolidated strategic plans of the business sectors are reviewed by Group Management and consolidated to a total strategic plan for Electrolux that is finally approved by the Board of Directors of Electrolux. The preparation of the strategic plans requires a number of key assumptions such as volume, price, product mix, which will create a basis for future growth and gross margin. These figures are set in relation to historic figures and external reports on market growth. The compound average revenue growth over the period amounts to 3%. The gross margins are assumed to be somewhat higher than reported levels of 2007. The same cash flow as for the

44

notes, all amounts in SEKm unless otherwise stated

third year is used for the fourth year and onwards in perpetuity. The discount rates used are, amongst other things, based on the individual countries´ inflation, interest rates and country risk. The pre-tax discount rates used in 2007 were for the main part within a range of 11­12%. For Latin America, which is included in Other in the table below, the average pre-tax discount rate is 18%.
Management believes that any reasonably possible adverse change in the key assumptions would not reduce the recoverable amount below its carrying amount.

Goodwill, value of trademark and discount rate

Weighted Goodwill

Electrolux trademark

Europe

384

--

North America

353

410

Asia/Pacific

1,198

--

Other

89

--

Total

2,024

410

discount rate, % 11.0 12.0 12.0
11.0­18.0 11.0­18.0

Note 12 Property, plant and equipment

Group Acquisition costs Opening balance, January 1, 2006 Acquired during the year Transfer of work in progress and advances Sales, scrapping, etc. Discontinued operations Exchange-rate differences Closing balance, December 31, 2006 Acquired during the year Transfer of work in progress and advances Sales, scrapping, etc. Exchange-rate differences Closing balance, December 31, 2007

Land and land improvements
1,573 28 9
­36 ­155
­75 1,344
5 ­14 ­387 39 987

Machinery and technical
Buildings installations

Other Plants under equipment construction

Total

10,110 283 372
­236 ­1,810
­657 8,062
129 159 ­887 147 7,610

34,996 1,265 1,291
­1,109 ­6,527 ­2,052 27,864
850 1,207 ­2,805
352 27,468

2,374 152 ­28
­188 ­324
­96 1,890
116 20
­245 40
1,821

2,394 1,424 ­1,644
­17 ­583 ­191 1,383 2,330 ­1,372
­6 ­16 2,319

51,447 3,152 --
­1,586 ­9,399 ­3,071 40,543
3,430 --
­4,330 562
40,205

Accumulated depreciation Opening balance, January 1, 2006 Depreciation for the year Sales, scrapping, etc. Impairment Discontinued operations Exchange-rate differences Closing balance, December 31, 2006 Depreciation for the year Transfer of work in progress and advances Sales, scrapping, etc. Impairment Exchange-rate differences Closing balance, December 31, 2007 Net carrying amount, December 31, 2006 Net carrying amount, December 31, 2007

370 9 ­1 --
­23 ­20 335
20 ­8 ­204
2 8 153 1,009 834

5,080 255 ­108 ­1 ­654 ­419
4,153 256 11 ­896 -- 38
3,562 3,909 4,048

25,548 1,931 ­1,046 131 ­4,629 ­1,561
20,374 1,892 ­18 ­2,678 37 237
19,844 7,490 7,624

1,827 198 ­227 -- ­247 ­79
1,472 154 15 ­228 -- 30
1,443 418 378

-- -- -- -- -- -- -- -- -- ­2 -- -- ­2 1,383 2,321

32,825 2,393 ­1,382 130 ­5,553 ­2,079
26,334 2,322 -- ­4,008 39 313
25,000 14,209 15,205

Property, plant and equipment in operations within appliances in Europe were impaired in 2007. Accumulated impairments at year-end was SEK 129m (671) on buildings and land and SEK 260m (1,010) on machinery and other equipment, whereof SEK 39m related to restructuring costs for Fredericia and Spennymoor. The carrying amount for land was SEK 725m (892). The tax assessment value for Swedish Group companies for buildings was SEK 120m (108), and land SEK 23m (24). The corresponding carrying amounts for buildings were SEK 37m (38), and land SEK 12m (12).

45

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

Parent Company
Acquisition costs Opening balance, January 1, 2006 Acquired during the year Transfer of work in progress and advances Sales, scrapping, discontinued operations etc. Closing balance, December 31, 2006 Acquired during the year Transfer of work in progress and advances Sales, scrapping, etc. Closing balance, December 31, 2007

Land and land

improvements

Buildings

Machinery and

technical

Other Plants under

installations equipment construction

Total

6

58

1,110

342

62 1,578

--

--

72

15

3

90

--

--

29

2

­31

--

--

­1

­44

­8

--

­53

6

57

1,167

351

34 1,615

--

--

81

10

4

95

--

--

15

--

-15

0

--

--

­132

­1

--

­133

6

57

1,131

360

23 1,577

Accumulated depreciation Opening balance, January 1, 2006 Depreciation for the year Sales, scrapping, discontinued operations etc. Closing balance, December 31, 2006 Depreciation for the year Sales, scrapping, etc. Closing balance, December 31, 2007 Net carrying amount, December 31, 2006 Net carrying amount, December 31, 2007

2

53

840

205

-- 1,100

--

1

71

33

--

105

--

­1

­39

­9

--

­49

2

53

872

229

-- 1,156

--

--

69

31

--

100

--

--

­116

­1

--

­117

2

53

825

259

-- 1,139

4

4

295

122

34

459

4

4

306

101

23

438

Tax assessment value for buildings within the Parent Company was SEK 77m (78), and land SEK 6m (12). The corresponding carrying amounts for buildings were SEK 4m (4), and land SEK 4m (4). Underdepreciated write-ups on buildings and land were SEK 2m (2).

Note 13 Financial assets

Note 14 Inventories

Group December 31,

2007

2006

Shares in subsidiaries

--

--

Participations in other companies

--

--

Long-term receivables in subsidiaries --

--

Long-term holdings in securities classified as:

Available for sale1)

481

239

Financial assets at fair value through profit or loss

231

162

Other receivables

1,145

955

Pension assets2)

427

336

Total

2,284 1,692

Parent Company December 31,

2007

2006

21,417 21,357

535 293

2,837 1,408

--

--

-- 21 -- 24,810

-- 22 -- 23,080

1) Changes in the fair value of financial available-for-sale assets recognized in equity amounts to SEK 248m (30).
2) Pension assets are related to Sweden and Switzerland.

Raw materials Products in progress Finished products Advances to suppliers Total

Group December 31,

2007

2006

3,131 3,416

172

268

9,048 8,302

47

55

12,398 12,041

Parent Company December 31,

2007

2006

124 117

3

91

234 209

--

--

361 417

The cost of inventories are recognized as expense and included in cost of goods sold. Provisions for obsolescence are included in the value for inventory.

Note 15 Other current assets

Interest-bearing receivables Miscellaneous short-term receivables Provision for doubtful accounts Prepaid expenses and accrued income Prepaid interest expenses and accrued interest income Total

Group December 31,

2007

2006

-- 328

1,994 1,731

-36

­36

696 862

338 363

2,992 3,248

Miscellaneous short-term receivables include VAT and other items.

46

notes, all amounts in SEKm unless otherwise stated

Note 16 Trade receivables
Trade receivables Provision for impairment of receivables Trade receivables, net Provisions in relation to trade receivables, %

2007 20,950
571 20,379
2.7

2006 21,488
584 20,905
2.7

As of December 31, provisions for impairment of trade receivables amounted to SEK 571m (584). The Group's policy is to reserve 50% of trade receivables that are 6 months past due but less than 12 months and to reserve 100% of receivables that are 12 months past due and more. If the provision is considered insufficient due to individual consideration such as bankruptcy, officially known insolvency, etc., the provision should be extended to cover the extra anticipated losses. It was assessed based on the history of actual losses that a portion of the impaired receivables will be recovered.

Provisions for impairment of receivables
Provisions, January 1 New provisions Actual credit losses Exchange-rate differences and other changes1) Provisions, December 31

2007 584
84 ­120
23 571

1) Includes changes in provisions from discontinued operations.

2006 683
75 ­56 ­118 584

Timing analysis of trade receivables past due
Less than 2 months 2 ­ 6 months 6 ­ 12 months More than 1 year Total trade receivables past due Past due in relation to trade receivables, %

2007 1,490
251 149 393 2,283 10.9

2006 1,392
289 110 386 2,177 10.1

The fair value of trade receivables equals their carrying amount as the impact of discounting is not significant. The maximum possible exposure to customer defaults is equal to the net amount in the balance sheet. Electrolux has a significant concentration on a number of major customers primarily in the US and Europe. Receivables concentrated to customers with credit limits amounting to SEK 300m (300) or more represent 24.9% (31.0) of the total trade receivables. The creation and usage of provisions for impaired receivables have been included in selling expenses in the income statement.

Note 17 Financial instruments
Additional and complementary information is presented in the following notes to the Annual Report: Note 1, Accounting and valuation principles, discloses the accounting and valuation policies adopted. Note 2, Financial risk management, describes the Group's risk policies in general and regarding the principal financial instruments of Electrolux in more detail. Note 16, Trade receivables, describes the trade receivables and related credit risks.

The information in this note highlights and describes the principal financial instruments of the Group regarding specific major terms and conditions when applicable, and the exposure to risk and the fair values at year-end.

Net borrowings At year-end 2007, the Group's net borrowings amounted to SEK 4,703m (­304). The table below presents how the Group calculates net borrowings and what they consist of.

December 31,

2007

2006

Short-term loans

2,286 1,616

Short-term part of long-term loans

2,914

--

Trade receivables with recourse

501 966

Short-term borrowings

5,701 2,582

Derivatives

280 247

Accrued interest expenses and prepaid interest income 1) 295

164

Total short-term borrowings

6,276 2,993

Long-term borrowings

4,887 4,502

Total borrowings

11,163 7,495

Cash and cash equivalents Short-term investments Derivatives Prepaid interest expenses and accrued interest income 2) Liquid funds Net borrowings Revolving credit facility (EUR 500m)3)

5,546 165 411 338
6,460 4,703 4,725

5,475 1,643
318 363 7,799 ­304 4,526

1) See Note 24 on page 60. 2) See Note 15 on page 46. 3) The revolving credit facility of EUR 500m is not included in net borrowings, but
can, however, be used for short-term and long-term funding.

Liquid funds Liquid funds as defined by the Group consist of cash and cash equivalent, short-term investments, derivatives and prepaid interest expenses and accrued interest income. The table below presents the key data of liquid funds. The carrying amount of liquid funds is approximately equal to fair value.

Liquidity profile
Cash and cash equivalents Short-term investments Derivatives Prepaid interest expenses and accrued interest income Liquid funds % of annualized net sales1) Net liquidity Fixed-interest term, days Effective yield, % (average per annum)

December 31,

2007

2006

5,546 5,475

165 1,643

411 318

338 6,460
10.0 184
12 4.5

363 7,799
11.2 4,806
39 3.7

1) Liquid funds plus an unused revolving credit facility of EUR 500m divided by annualized net sales.

For 2007, liquid funds, including an unused revolving credit facility of EUR 500m, amounted to 10.0% (11.2) of annualized net sales. The net liquidity is calculated by deducting short-term borrowings from liquid funds.

47

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

Interest-bearing liabilities At year-end 2007, the Group's total interest-bearing liabilities amounted to SEK 10,087m (6,118), of which SEK 7,801m (4,502) referred to long-term borrowings including maturities within 12 months. Long-term borrowings with maturities within 12 months amount to SEK 2,914m (0). A significant portion of the outstanding long-term borrowings has been made under the Electrolux global medium-term note program and the Swedish medium-term note program. The majority of total long-term borrowings, SEK 7,286m (4,008), are taken up at the parent company level. In addition to the long-term borrowings, AB Electrolux has a committed bilateral loan of SEK 1,000m intended to be drawn in the first quarter of 2008. As from 2005, Electrolux has a negotiated committed credit facility of EUR 500m, which can be used as either a longterm or short-term back-up facility. However, Electrolux expects

to meet any future requirements for short-term borrowings through bilateral bank facilities and capital-market programs such as commercial-paper programs.
At year-end 2007, the average interest-fixing period for long-term borrowings was 0.2 years (0.5). The calculation of the average interest-fixing period includes the effect of interest-rate derivatives used to manage the interest-rate risk of the debt portfolio. The average interest rate at year-end for the total borrowings was 5.8% (6.0).
The fair value of the interest-bearing borrowings was SEK 10,251m. The fair value including swap transactions used to manage the interest fixing was approximately SEK 10,278m. The borrowings and the interest-rate swaps are valued marked-to-market in order to calculate the fair value. When valuating the borrowings, the Electrolux credit rating is taken into consideration.
The table below sets out the carrying amount of the Group's borrowings.

Borrowings

Issue/maturity date Bond loans1) 2007­2012 2007­2011 2007­2009 2007­2009 2005­2010 2005­2009 2001­2008 2001­2008 1998­2008 Total bond loans

Description of loan
SEK MTN Program SEK MTN Program SEK MTN Program SEK MTN Program SEK MTN Program SEK MTN Program Global MTN Program Global MTN Program SEK MTN Program

Interest rate, %
4.500 5.250 Floating 4.980 3.650 3.400 6.000 6.000 4.600

Currency

Nominal value
(in currency)

SEK

2,000

SEK

250

SEK

300

SEK

200

SEK

500

SEK

500

EUR

268

EUR

32

SEK

85

--

Other long-term loans
2007­2013 2007­2010 2005­2010 Other floating rate loans Total other long-term loans Long-term borrowings

Fixed rate loans in Germany Long-term bank loans in Sweden Long-term bank loans in Sweden Long-term bank loans in Sweden

7.870

EUR

44

Floating

SEK

300

Floating

SEK

200

Floating

EUR

20

--

--

--

Short-term part of long-term loans2)

2001­2008

Global MTN Program

2001­2008

Global MTN Program

1998­2008

SEK MTN Program

Total short-term part of long-term loans

6.000

EUR

268

6.000

EUR

32

4.700

SEK

85

--

Other short-term loans

Commercial paper program

Fixed/Floating

Short-term bank loans in Brazil

Floating

Short-term bank loans in Brazil

Fixed/Floating

Short-term bank loan in China

Fixed/Floating

Short-term bank loans in Romania

Fixed/Floating

Short-term bank loan in Thailand

Fixed/Floating

Short-term bank loans in Turkey

Fixed/Floating

Other bank borrowings and commercial papers

Total other short-term loans

Trade receivables with recourse

Short-term borrowings

Fair value of derivative liabilities

Accrued interest expenses and prepaid interest income

Total borrowings

SEK BRL USD CNY EUR THB TRY

985 9 --
222 15
1,960 64 -- -- -- -- -- -- --

1) The interest-rate fixing profile of the borrowings has been adjusted from fixed to floating with interest-rate swaps. 2) Long-term borrowings with maturities within 12 months are classified as short-term borrowings in the Group's balance sheet.

Carrying

amount,

December 31,

2007

2006

1,945 248 300 200 491 495 -- -- --
3,679

-- -- -- -- 493 495 2,460 290 85 3,823

406 300 200 193 109 1,208 4,887

395 -- --
185 99
679 4,502

2,527

--

302

--

85

--

2,914

--

969 32 --
195 140 374 352 224 2,286 501 5,701 280 295 11,163

-- 77 230 490 -- 356 162 301 1,616 966 2,582 247 164 7,495

48

notes, all amounts in SEKm unless otherwise stated

The average maturity of the Group's long-term borrowings including long-term borrowings with maturities within 12 months was 2.3 years (1.7), at the end of 2007. No long-term borrowings matured,

or were amortized during the year. Short-term borrowings pertain primarily to countries with capital restrictions. The table below presents the repayment schedule of long-term borrowings.

Repayment schedule of long-term borrowings, December 31

2008

2009

2010

2011

2012

2013--

Total

Debenture and bond loans

--

995

491

248

1,945

--

3,679

Bank and other loans

--

57

414

12

19

706

1,208

Short-term part of long-term loans

2,914

--

--

--

--

--

2,914

Total

2,914

1,052

905

260

1,964

706

7,801

Other interest-bearing investments Interest-bearing receivables from customer financing amounting to SEK 182m (180) are included in the item Trade receivables in the Group's balance sheet. The Group's customer financing activities are performed in order to provide sales support and are directed mainly to independent retailers in Scandinavia. The majority of the financing is shorter than 12 months. There is no major concentration of credit risk related to customer financing. Collaterals and the right to repossess the inventory also reduce the credit risk in the financing operations. The income from customer financing is subject to interest-rate risk. This risk is immaterial to the Group.

Commercial flows The table below shows the forecasted transaction flows, imports and exports, for the 12-month period of 2008 and hedges at yearend 2007.
The hedged amounts are dependent on the hedging policy for each flow considering the existing risk exposure. There were no hedges above 12 months at year-end. The effect of hedging on operating income during 2007 amounted to SEK ­141m (­100). At year-end 2007, unrealized exchange-rate gains on forward contracts charged against equity, amounted to SEK 61m (­11), all of which will mature in 2008.

Forecasted transaction flows and hedges

GBP

Inflow of currency, long position

3,460

Outflow of currency, short position

­40

Gross transaction flow

3,420

Hedges

­1,690

Net transaction flow

1,730

CAD 2,390 ­490 1,900 ­910
990

AUD 1,930 ­240 1,690 ­720
970

CZK 1,030
-- 1,030 ­560
470

BRL 1,030
-- 1,030
­60 970

DKK 1,040
­10 1,030 ­460
570

PLN 2,130 ­3,130 ­1,000
460 ­540

HUF 2,140 ­4,530 ­2,390 1,370 ­1,020

USD

EUR

1,540 8,490

­6,310 ­14,100

­4,770 ­5,610

1,710 1,760

­3,060 ­3,850

Other Total

7,490 32,670

­3,820 ­32,670

3,670

--

­900

--

2,770

--

Derivative financial instruments The tables below present the fair value and nominal amounts of the Group's derivative financial instruments for managing of financial risk and proprietary trading.

Derivates at market value

Interest-rate swaps Cash flow hedges Fair value hedges Held-for-trading Cross currency interest-rate swaps Cash flow hedges Fair value hedges Held-for-trading Forward-rate agreements and futures Cash flow hedges Fair value hedges Held-for-trading Forward foreign-exchange contracts Cash flow hedges Net investment hedges Held-for-trading Commodity derivatives Cash flow hedges Fair value hedges Held-for-trading Total derivatives

Assets

December 31, 2007

Liabilities

74

51

--

--

2

51

72

--

12

20

--

--

--

--

12

20

3

3

--

--

--

--

3

3

321

201

180

110

31

47

110

44

1

5

--

--

--

--

1

5

411

280

December 31, 2006

Assets

Liabilities

73

3

--

--

59

--

14

3

7

4

--

--

--

--

7

4

4

--

--

--

--

--

4

--

234

239

154

131

24

63

56

45

--

1

--

--

--

--

--

1

318

247

49

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

Valuation of derivative financial instruments at market value is done at the most accurate market prices available. This means that instruments, which are quoted on the market, such as, for instance, the major bond and interest-rate future markets, are all marked-tomarket with the current price. The foreign-exchange spot rate is then used to convert the value into SEK. For instruments where no reliable price is available on the market, cash flows are discounted using the deposit/swap curve of the cash-flow currency. In the event that no proper cash-flow schedule is available, for instance, as in the case with forward-rate agreements, the underlying schedule is used for valuation purposes. To the extent option instruments are used, the valuation is based on the Black & Scholes formula.

Maturity profile financial liabilities The table below presents the undiscounted cash flows of the Group's contractual liabilities related to financial instruments based on the remaining period at the balance sheet to the contractual maturity date. Floating interest cash flows with future fixing dates are estimated using the forward-forward interest rates at year-end. Any cash flow in foreign currency is converted to local currency using the FX spot rates at year-end.

Maturity profile financial liabilities
Loans Net settled derivatives Gross settled derivatives
Outflow Inflow Accounts payable Total

1 year ­4,298
47 -- ­32,782 32,884 ­14,788 ­18,937

> 1 year < 2 years > 2 years < 5 years

­1,203

­3,524

­3

­20

--

--

--

­31

--

30

--

--

­1,206

­3,545

> 5 years ­317 -- -- -- -- -- ­317

Total ­9,342
24 -- ­32,813 32,914 ­14,788 ­24,005

Net gain/loss on financial instruments
Financial assets and liabilities at fair value through profit and loss Derivatives for which hedge accounting is not applied, i.e., held-for-trading Interest-related derivatives for which fair value hedge accounting is applied, i.e., fair value hedges Currency derivatives related to commercial exposure where hedge accounting is applied, i.e., cash flow hedges Net investment hedges where hedge accounting is applied Other financial assets carried at fair value Held-to-maturity investments Not applicable Loans and receivables Trade receivables/payables Other assets Available-for-sale financial assets Other shares and participations Other financial liabilities Financial liabilities for which hedge accounting is not applied Financial liabilities for which hedge accounting is applied Total net gain/loss

Gain/loss in profit and loss

2007
Gain/loss in equity

Gain/loss in profit and loss

2006

Gain/loss in equity

216 404
­63
­141 -- 16

103

438

387

--

677

--

--

­49

--

72

­100

­34

31

--

421

--

­90

--

-- ­76 321 ­397
11 11 51 ­11 62 202

--

--

--

--

­496

--

--

24

--

--

­520

--

248

12

30

248

12

30

--

56

--

--

8

--

--

48

--

351

10

417

50

notes, all amounts in SEKm unless otherwise stated

Fair value and carrying amount on financial assets and liabilities
Financial assets Financial assets2) Financial assets at fair value through profit and loss Available for sale Trade receivables Loans and receivables Derivatives Financial assets at fair value through profit and loss: Derivatives for which hedge accounting is not applied, i.e., held for trading Interest-related derivatives for which fair value hedge accounting is applied, i.e., fair value hedges Currency derivatives related to commercial exposure where hedge accounting is applied, i.e., cash flow hedges Net investment hedges where hedge accounting is applied Short-term investments Financial assets at fair value through profit and loss Loans and receivables Cash and cash equivalents Financial assets at fair value through profit and loss Loans and receivables Cash Financial assets total
Financial liabilities Long-term borrowings Financial liabilities measured at amortized cost Financial liabilities measured at amortized cost for which hedge accounting is applied Accounts payable Financial liabilities at amortized cost Short-term borrowings Financial liabilities measured at amortized cost Derivatives Financial liabilities at fair value through profit and loss: Derivatives for which hedge accounting is not applied, i.e., held for trading Interest-related derivatives for which fair value hedge accounting is applied, i.e., fair value hedges Currency derivatives related to commercial exposure where hedge accounting is applied, i.e., cash flow hedges Net investment hedges where hedge accounting is applied Financial liabilities total
Per category Financial assets at fair value through profit and loss Available for sale Loans and receivables Cash Financial assets total Financial liabilities at fair value through profit and loss Financial liabilities measured at amortized cost Financial liabilities total
1) There has not been any reclassification between categories. 2) Financial assets in the consolidated balance sheet amounting to SEK 2,284m (1,692)
includes non-financial instruments to the amount of SEK 1,572m (1,291).

Fair value

20071) Carrying amount

712 231 481 20,379 20,379 411

712 231 481 20,379 20,379 411

198
2
180 31
165 5
160 5,546
634 2,327 2,585 27,213

198
2
180 31
165 5
160 5,546
634 2,327 2,585 27,213

4,906 1,977 2,929 14,788 14,788 5,846 5,846
280

4,887 1,957 2,930 14,788 14,788 5,701 5,701
280

72

72

51

51

110 47
25,820

110 47
25,656

Fair value

20071) Carrying amount

1,281 481
22,866 2,585
27,213 280
25,540 25,820

1,281 481
22,866 2,585
27,213 280
25,376 25,656

20061) Fair value Carrying amount

401 162 239 20,905 20,905 318

401 162 239 20,905 20,905 318

81
59
154 24
1,643 1,130
513 5,475 1,858 1,677 1,940 28,742

81
59
154 24
1,643 1,130
513 5,475 1,858 1,677 1,940 28,742

4,672 2,863 1,809 15,320 15,320 2,582 2,582
247
53

4,502 2,776 1,726 15,320 15,320 2,582 2,582
247
53

131 63
22,821

131 63
22,651

20061) Fair value Carrying amount

3,468 239
23,095 1,940
28,742 247
22,574 22,821

3,468 239
23,095 1,940
28,742 247
22,404 22,651

51

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

Note 18 Other reserves in equity
for-sale
Opening balance, January 1, 2006 Available-for-sale instruments Gain/loss taken to equity Transferred to profit and loss Cash flow hedges Gain/loss taken to equity Transferred to profit and loss Exchange differences on translation of foreign operations Net investment hedge Translation difference Total recognized income and expenses for the period Closing balance, December 31, 2006 Available-for-sale instruments Gain/loss taken to equity Transferred to profit and loss Cash flow hedges Gain/loss taken to equity Transferred to profit and loss Exchange differences on translation of foreign operations Net investment hedge Translation difference Total recognized income and expenses for the period Closing balance, December 31, 2007

Availableinstruments
24
42 ­12
-- --
-- -- 30 54
259 ­11
-- --
-- 248 302

Other reserves Hedging reserve 23
-- --
­11 ­23
-- -- ­34 ­11
-- --
61 11
-- 72 61

Currency translation
reserve 1,613
-- --
-- --
421 ­2,081 ­1,660
­47
-- --
-- --
31 497 528 481

Total other reserves 1,660
42 ­12
­11 ­23
421 ­2,081 ­1,664
­4
259 ­11
61 11
31 497 848 844

Note 19 Assets pledged for liabilities to credit institutions

Real-estate mortgages Other Total

Group December 31,

2007

2006

62

82

14

11

76

93

Parent Company December 31,

2007

2006

--

--

8

5

8

5

The major part of real-estate mortgages is related to Brazil. In the process of finalizing the tax amounts to be paid, in some cases, buildings are pledged for estimated liabilities to the Brazilian tax authorities.

Note 20 Share capital, number of shares and earnings per share

On December 31, 2007, and December 31, 2006, the share capital comprised of:
9,502,275 A-shares, with a quota value of SEK 5 299,418,033 B-shares, with a quota value of SEK 5 Total

Quota value
48 1,497 1,545

Number of shares

Owned by Electrolux

Shares, December 31, 2006

A-shares

--

B-shares

29,986,756

Repurchased shares

A-shares

--

B-shares

--

Cancelled shares

A-shares

--

B-shares

--

Sold shares

A-shares

--

B-shares

­2,704,865

Shares, December 31, 2007

A-shares

--

B-shares

27,281,891

Owned by other shareholders

Total

9,502,275 9,502,275 269,431,277 299,418,033

--

--

--

--

--

--

--

--

--

--

2,704,865

--

9,502,275 9,502,275 272,136,142 299,418,033

The share capital of AB Electrolux consists of A-shares and B-shares. An A-share entitles the holder to one vote and a B-share to one-tenth of a vote. All shares entitle the holder to the same proportion of assets and earnings, and carry equal rights in terms of dividends.

52

notes, all amounts in SEKm unless otherwise stated

Earnings per share
Income for the period, SEKm Earnings per share, SEK Basic Diluted Average number of shares Basic Diluted

Total 2007 2,925
10.41 10.33
281.0 283.3

Total 2006 3,847
13.32 13.27
288.8 289.8

Continuing operations
2007 2,925
10.41 10.33
281.0 283.3

Continuing operations
2006 2,648
9.17 9.14
288.8 289.8

Discontinued operations 2007 --
-- --
-- --

Discontinued operations 2006 1,199
4.15 4.13
288.8 289.8

Basic earnings per share is calculated by dividing the income for the period with the average number of shares. The average number of shares is the weighted average number of shares outstanding during the year, after repurchase of own shares.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For the share options, a calculation is done to determine the number of shares that could have been acquired at fair value based on the monetary value of the subscription rights attached to outstanding share options. Performance share programs are included in the dilutive potential ordinary shares as from when a program has reached its entry level. The dilution from Electrolux incentive programs is primarily a consequence of the 2005 performance share program and the remaining employee stock options. The performance share programs of 2006 and 2007 have had no dilutive effect so far.

As of December 31, 2007, Electrolux had sold and distributed a total of 2,704,865 (5,234,483) B-shares, with a total par value of SEK 14m (26), to the participants in Electrolux long-term incentive programs. The average number of shares during the year has been 281,033,169 (288,790,128) and the average number of shares diluted has been 283,281,764 (289,790,196).

Note 21 Untaxed reserves, Parent Company

December 31, 2007

Accumulated depreciation in excess of plan on

Brands

516

Machinery and equipment

204

Buildings

3

Other

1

Total

724

Appropriations
­14 ­1 ­1 ­2
­18

December 31, 2006
530 205
4 3 742

Note 22 Employees and employee benefits

In 2007, the average number of employees was 56,898 (55,471), of whom 36,817 (36,041) were men and 20,081 (19,430) women.
A detailed specification of the average number of employees by country has been submitted to the Swedish Companies Registration Office and is available on request from AB Electrolux, Investor Relations and Financial Information. See also Electrolux website www.electrolux.com/ir, Company overview.

Average number of employees, by geographical area

Europe North America Rest of world Total

2007 28,855 12,068 15,975 56,898

Group 2006
28,695 12,373 14,403 55,471

Salaries, other remuneration and employer contributions

Parent Company (whereof pension costs) Subsidiaries (whereof pension costs) Group total (whereof pension costs)

Salaries and remuneration
904
11,708
12,612

1) Includes SEK 6m (10), referring to the President and his predecessors.

2007
Employer contributions
510 (204)1) 3,735 (678) 4,245 (882)

Total 1,414 (204)1) 15,443 (678) 16,857 (882)

Salaries and remuneration
971
11,878
12,849

2006
Employer contributions
499 (198)1) 3,576 (622) 4,075 (820)

Total 1,470 (198)1) 15,454 (622) 16,924 (820)

53

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

Salaries and remuneration by geographical area for Board members, senior managers and other employees

2007

Board members and senior managers

Other employees

Sweden

Parent Company

39

865

Other

4

220

Total Sweden

43

1,085

EU, excluding Sweden

106

5,794

Rest of Europe

11

728

North America

29

3,080

Latin America

29

787

Asia

24

314

Pacific

2

560

Africa

3

17

Total outside Sweden

204

11,280

Group total

247

12,365

Total

Board members and senior managers

2006
Other employees

904 224 1,128 5,900 739 3,109 816 338 562
20 11,484 12,612

46

925

4

171

50

1,096

91

6,093

19

614

17

3,404

29

634

30

304

2

445

--

21

188

11,515

238

12,611

Total
971 175 1,146 6,184 633 3,421 663 334 447
21 11,703 12,849

Of the Board members and senior managers in the Group, 233 were men and 33 women, of whom 8 men and 5 women in the Parent Company.

Employee absence due to illness
% Absence due to illness, as a percentage of total normal working hours of which 60 days or more Absence due to illness, by category1) Women Men 29 years or younger 30­49 years 50 years or older 1) % of total normal working hours within each category, respectively.

2007

Employees in the All employees

Parent Company

in Sweden

6.9

6.5

56.7

57.0

10.1

9.5

5.1

5.0

4.8

4.5

7.4

6.9

7.1

6.8

2006

Employees in the All employees

Parent Company

in Sweden

7.5

7.1

62.9

68.4

11.6

10.9

5.3

5.3

4.7

4.6

8.1

7.9

7.4

7.1

In accordance with the regulations in the Swedish Annual Accounts Act, in effect as of July 1, 2003, absence due to illness for employees in the Parent Company and the Group in Sweden is reported in the table above. The Parent Company comprises the Group's headoffice as well as a number of units and plants, and employs approximately 77% of the Group's workforce in Sweden.
Post-employment benefits The Group sponsors pension plans in many of the countries in which it has significant activities. Pension plans can be defined contribution or defined benefit plans or a combination of both. Under defined benefit pension plans, the company enters into a commitment to provide post-employment benefits based upon one or several parameters for which the outcome is not known at present. For example, benefits can be based on final salary, on career average salary or on a fixed amount of money per year of employment. Under defined contribution plans, the company's commitment is to make periodic payments to independent authorities or investment plans and the level of benefits depends on the actual return on those investments. Some plans combine the promise to make periodic payments with a promise of a guaranteed minimum return on the investments. These plans are also defined benefit plans.

In some countries, the companies make provisions for compulsory severance payments. These provisions cover the Group's commitment to pay employees a lump sum upon reaching retirement age, or upon the employees' dismissal or resignation. These plans are listed below as Other post-employment benefits.
In addition to providing pension benefits and compulsory severance payments, the Group provides healthcare benefits, for some of its employees in certain countries, mainly in the US.
The Group's major defined benefit plans cover employees in the US, UK, Switzerland, Germany, France, Italy and Sweden. The German, Italian and French plans are unfunded and the plans in the US, UK, Switzerland and Sweden are funded.
A small number of the Group's employees in Sweden is covered by a multi-employer defined benefit pension plan administered by Alecta. It has not been possible to obtain the necessary information for the accounting of this plan as a defined benefit plan, and therefore, it has been accounted for as a defined contribution plan.
Below are set out schedules which show the obligations of the plans in the Electrolux Group, the assumptions used to determine these obligations and the assets relating to the benefit plans, as well as the amounts recognized in the income statement and balance sheet. The schedules also include a reconciliation of changes in net provisions during the year, a reconciliation of changes in the

54

notes, all amounts in SEKm unless otherwise stated

present value of the obligation during the year and a reconciliation of the changes in the fair value of plan assets.
The provisions for post-employment benefits amounted to SEK 5,839m (6,250). The major changes were that the present value of the obligation for funded and unfunded plans decreased

with SEK 1,286m and that the unrecognized actuarial losses in the plans for post-employment benefits decreased with SEK 852m to SEK 753m (1,605). The decrease in unrecognized actuarial losses is mainly due to higher discount rates which decrease the present value of the future obligations with SEK 685m.

Amounts recognized in the balance sheet
Present value of funded obligations Fair value of plan assets Surplus/deficit Present value of unfunded obligations Unrecognized actuarial losses (gains) Unrecognized past-service cost Effect of limit on assets Net provisions for post-employment benefits Whereof reported as
Prepaid pension cost in financial assets Provisions for post-employment benefits

Pension benefits 14,429 ­14,008
421 3,051 ­739
­47 20 2,706

December 31, 2007

Other post-

Healthcare employment

benefits

benefits

--

--

--

--

--

--

2,273

844

9

­23

47

­17

--

--

2,329

804

Total 14,429 ­14,008
421 6,168 ­753
­17 20
5,839

Pension benefits 14,960 ­14,007
953 3,225 ­1,248
­56 --
2,874

December 31, 2006

Other post-

Healthcare employment

benefits

benefits

3

--

­3

--

--

--

2,661

1,034

­169

­188

56

­18

--

--

2,548

828

Total 14,963 ­14,010
953 6,920 ­1,605
­18 --
6,250

427 3,160

--

--

427

336

--

778

2,328

6,266

3,210

2,548

--

336

828 6,586

Reconciliation of changes in net provisions for post-employment benefits
Net provision for post-employment benefits, January 1, 20061) Expenses for defined post-employment benefits Contributions by employer Discontinued operations Exchange differences Net provision for post-employment benefits, December 31, 2006 Expenses for defined post-employment benefits Contributions by employer Exchange differences Net provision for post-employment benefits, December 31, 2007 1) Including Outdoor products.

Pension benefits 3,817
423 ­979 ­245 ­142 2,874
369 ­640
100 2,703

Other post-

Healthcare employment

benefits

benefits

3,108

948

26

170

­167

­219

­23

­39

­396

­32

2,548

828

129

62

­189

­117

­159

34

2,329

807

Total 7,873
619 ­1,365
­307 ­570 6,250 560 ­946
­25 5,839

Amounts recognized in the income statement for continuing operations

December 31, 2007

Pension benefits

Other post-

Healthcare employment

benefits

benefits

Current service cost

256

1

14

Interest cost

853

138

45

Expected return on plan assets

­924

--

--

Amortization of actuarial losses (gains)

44

--

--

Amortization of past-service cost

6

­11

2

Losses (gains) on curtailments and settlements

113

--

3

Effect of limit on assets

20

--

--

Total expenses for defined postemployment benefits

368

128

64

Expenses for defined contribution plans

--

--

--

Total expenses for post-employment benefits

--

--

--

Actual return on plan assets

--

--

--

Total 271 1,036 ­924
44 ­3 116 20
560 322 882 ­885

Pension benefits
324 814 ­828 326 ­174 ­39
--

December 31, 2006

Other post-

Healthcare employment

benefits

benefits

1

98

151

39

--

--

--

--

­62

33

­64

--

--

--

423

26

170

--

--

--

--

--

--

--

--

--

Total 423 1,004 ­828 326 ­203 ­103
--
619 201 820 ­949

For the Group, total expenses for pensions, healthcare and other post-employment benefits have been recognized as operating expenses and classified as cost of goods sold, selling expenses or administrative expenses depending on the function of the employee. In the Parent Company a similar classification has been made.

55

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

Reconciliation of change in the present value of the defined benefit obligation for funded and unfunded obligations

2007

Pension benefits

Other post-

Healthcare employment

benefits

benefits

Opening balance, January 1

18,185

2,664

1,034

Current service cost

256

1

14

Interest cost

853

138

45

Contributions by plan participants

49

29

--

Actuarial losses (gains)

­457

­177

­51

Past-service cost

--

­4

--

Curtailments/special termination benefit cost

98

3

­116

Liabilities extinguished on settlements

­2

--

--

Liabilities adhering to discontinued operations

--

--

--

Exchange differences on foreign plans

­515

­161

39

Benefits paid

­990

­221

­117

Closing balance, December 31

17,477

2,272

848

Total 21,883
271 1,036
78 ­685
­4 ­15
­2 -- ­637 ­1,328 20,597

Pension benefits 22,186
324 814
50 ­724 ­174
­47 --
­1,800 ­1,418 ­1,026 18,185

2006

Other post-

Healthcare employment

benefits

benefits

3,469

1,078

1

98

151

39

36

--

­161

99

­62

33

--

--

--

--

­78

­55

­441

­39

­251

­219

2,664

1,034

Total 26,733
423 1,004
86 ­786 ­203
­47 --
­1,933 ­1,898 ­1,496 21,883

Reconciliation of change in the fair value of plan assets

Opening balance, January 1 Expected return on plan assets Actuarial gains (losses) Settlements Contributions by employer Contributions by plan participants Discontinued operations Exchange differences on foreign plans Benefits paid Other Closing balance, December 31

Pension benefits 14,007
924 ­39
­2 640
48 -- ­578 ­990 ­2 14,008

2007

Other post-

Healthcare employment

benefits

benefits

3

--

--

--

--

--

--

--

189

117

29

--

--

--

--

--

­221

­117

--

--

--

--

Total 14,010
924 ­39
­2 946
77 -- ­578 ­1,328 ­2 14,008

Pension benefits 15,548
828 120
-- 979
50 ­1,296 ­1,196 ­1,026
-- 14,007

2006

Other post-

Healthcare employment

benefits

benefits

54

--

--

--

1

--

--

--

167

219

36

--

--

--

­4

--

­251

­219

--

--

3

--

Total 15,602
828 121
-- 1,365
86 ­1,296 ­1,200 ­1,496
-- 14,010

The pension plan assets include ordinary shares issued by AB Electrolux with a fair value of SEK 33m (41). In 2008, the Group expects to pay the total of SEK 817m in contributions by employer and benefits paid directly by the company. In 2007, this amounted to SEK 946m of which SEK 668m were contributions to the Group's pension funds.

Major categories of plan assets as a percentage of the total plan assets
% European equities North American equities Other equities European bonds North American bonds Alternative investments1) Property Cash and cash equivalents Total
1) Includes hedge funds and infrastructure investments.

December 31,

2007

2006

12

11

16

24

10

8

26

25

22

20

9

7

2

3

3

2

100 100

Principal actuarial assumptions at the balance-sheet date expressed as a weighted average

December 31,

%

2007

2006

Discount rate

5.5

4.9

Expected long-term return on assets

6.9

6.3

Expected salary increases

3.8

3.7

Annual increase of healthcare costs

9.6 10.0

· When determining the discount rate, the Group uses AA-rated corporate bond indexes which match the duration of the pension obligations. If no corporate bond is available, government bonds are used to determine the discount rate.
· Expected long-term return on assets is calculated by assuming that fixed-income holdings are expected to have the same return as ten-year corporate bonds. Equity holdings are assumed to return an equity-risk premium of 5% over ten-year government bonds. Hedge funds are assumed to return 4% over threemonth treasury bills annually. Other alternative asset classes such as infrastructure or real estate are expected to return what could be considered reasonable given historical performance and current market conditions. The benchmark allocation for the assets is used when calculating the expected return, as this represents the long-term actual allocation.
· Expected salary increases are based on local conditions in each country.
· Assumed healthcare costs trend rate has a significant effect on the amounts recognized in the profit or loss. A one percentage point change in the assumed medical cost trend rate would have the following effects:

56

notes, all amounts in SEKm unless otherwise stated

Healthcare benefits sensitivity analysis
Effect on the aggregate of the service cost and the interest cost Effect on defined benefit obligation

2007

One percentage point increase

One percentage point decrease

14

­12

146

­229

2006
One percentage point increase 15 384

One percentage point decrease
­13
­102

Amounts for the annual periods
Defined benefit obligation Plan assets Surplus/deficit Experience adjustments on plan liabilities Experience adjustments on plan assets

December 31,

2007

2006

2005

­20,597 ­21,883 ­26,733

14,008 14,010 15,602

­6,589 ­7,873 ­11,131

­221

221 ­152

­38

121 513

Parent Company According to Swedish accounting principles adopted by the Parent Company, defined benefit liabilities are calculated based upon officially provided assumptions, which differ from the assumptions used in the Group under IFRS. The pension benefits are secured by contributions to a separate fund or recorded as a liability in the balance sheet. The accounting principles used in the Parent Company's separate financial statements differ from the IFRS principles, mainly in the following:
· The pension liability calculated according to Swedish accounting principles does not take into account future salary increases.
· The discount rate used in the Swedish calculations is set by PRI and is the same for all companies in Sweden.
· Changes in the discount rate and other actuarial assumptions are recognized immediately in the profit or loss and the balance sheet.
· Deficit must be either immediately settled in cash or recognized as a liability in the balance sheet.
· Surplus cannot be recognized as an asset but may in some cases be refunded to the company to offset pension costs.

Change in the present value of the defined benefit pension obligation for funded and unfunded obligations

Funded Unfunded

Opening balance, January 1, 2006

1,003

292

Current service cost

37

27

Interest cost

43

13

Other increase of the present value

--

--

Benefits paid

­26

­21

Closing balance, December 31, 2006

1,057

311

Current service cost

43

25

Interest cost

48

13

Other decrease of the present value

--

­12

Benefits paid

­30

­25

Closing balance, December 31, 2007

1,118

312

Total 1,295
64 56 -- ­47 1,368 68 61 ­12 ­55 1,430

Change in the fair value of plan assets
Opening balance, January 1, 2006 Actual return on plan assets Contributions and compensation to/from the fund Closing balance, December 31, 2006 Actual return on plan assets Contributions and compensation to/from the fund Closing balance, December 31, 2007
Amounts recognized in the balance sheet
Present value of pension obligations Fair value of plan assets Surplus/deficit Limitation on assets in accordance with Swedish accounting principles Net provisions for pension obligations Whereof reported as provisions for pensions
Amounts recognized in the income statement
Current service cost Interest cost Total expenses for defined benefit pension plans Insurance premiums Total expenses for defined contribution plans Special employer's contribution tax Cost for credit insurance FPG Total pension expenses Compensation from the pension fund Total recognized pension expenses

Funded 1,191
41 61 1,293 43 54 1,390

December 31,

2007

2006

­1,430 ­1,368

1,390 1,293

­40

­75

­272 ­312 ­312

­236 ­311 ­311

2007 68 61

2006 64 56

129 120

34

29

34

29

39

42

1

1

203 192

--

--

203 192

57

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

The Swedish pension foundation The pension liabilities of the Group's Swedish defined benefit pension plan (PRI pensions) are funded through a pension foundation established in 1998. The market value of the assets of the foundation amounted at December 31, 2007 to SEK 1,648m (1,532) and the pension commitments to SEK 1,330m (1,256). The Swedish Group companies recorded a liability to the pension fund as per December 31, 2007 in the amount of SEK 74m (64) which will be paid to the pension foundation during the first quarter of 2008. Contributions to the pension foundation during 2007 amounted to SEK 64m (92) regarding the pension liability at December 31, 2006 and December 31, 2005, respectively. No contributions have been made from the pension foundation to the Swedish Group companies during 2007 or 2006.
Share-based compensation Over the years, Electrolux has implemented several long-term incentive programs (LTI) for senior managers. These programs are intended to attract, motivate, and retain the participating managers by providing long-term incentives through benefits linked to the company's share price. They have been designed to align management incentives with shareholder interests. All programs are equity-settled. A detailed presentation of the different programs is given below.

2001, 2002 and 2003 option programs In 2001, a stock option plan for employee stock options was introduced for less than 200 senior managers. The options can be used to purchase Electrolux B-shares at an exercise price that is 10% above the average closing price of the Electrolux B-shares on the OMX Nordic Exchange in Stockholm during a limited period prior to allotment. The options were granted free of consideration. Annual programs based on this plan were also launched in 2002 and 2003.
Each of the 2001­2003 programs has had a vesting period of three years, where one third of the options are vested each year. If a program participant leaves his or her employment with the Electrolux Group, options may, under the general rule, be exercised within a twelve months' period thereafter. However, if the termination is due to, among other things, the ordinary retirement of the employee or the divestiture of the participant's employing company, the employee will have the opportunity to exercise such options for the remaining duration of the plan.

Option programs 2001­2003

Program 2001 2002 2003

Grant date May 10, 2001 May 6, 2002 May 8, 2003

Total number of options at
grant date
2,460,000
2,865,000
2,745,000

Number of options per lot1) 3)
15,000
15,000
15,000

Fair value of options at grant date
39
48
27

Exercise price SEK 4)
82.01 (96.10) 88.50 (103.70)
75.99 (89.00)

Expiration date
May 10, 2008 May 6, 2009 May 8, 2010

Vesting period,
year
3 2)
3 2)
3 2)

1) In 2001­2003, the President and CEO was granted 4 lots, Group Management members 2 lots and all other senior managers 1 lot. 2) For the 2001­2003 option programs, one third vests after 12 months, one third after 24 months and the final one third after 36 months. 3) Re-calculation of the stock option programs, in accordance with the stock option plan document due to the spin-off of Husqvarna and the
January 2007 share redemption. Each stock option entitles the option holder to purchase 2.17 shares. 4) Exercise prices for stock option programs 2001­2003 were re-calculated due to the share redemption in January 2007. Pre-redemption exercise prices are pre-
sented in parentheses.

Change in number of options per program

Number of options 2006

Program January 1, 2006 Exercised Forfeited1) Expired3)

2001

1,436,250 1,223,603

--

--

2002

2,196,863 1,557,059 15,000

--

2003

2,027,029 1,222,828 50,000 150,000

December 31, 2006 212,647 624,804 604,201

Exercised2) 67,843
352,274 280,399

Number of options 2007

Forfeited1)

Expired

--

--

15,000

--

10,000

--

December 31, 2007 144,804 257,530 313,802

1) Options expire when they are not exercised post vesting period, e.g., due to expiration at the end of the term of the options or earlier, because of termination of employment after vesting. Forfeiture is when the employees fail to satisfy the vesting condition, e.g., termination of employment before vesting period. Forfeiture is governed by the provisions of the option plan.
2) The weighted average share price for exercised options is SEK 162.10. 3) All Husqvarna stock option participants exercised their vested stock options before the spin-off was completed. Their rights for the unvested portion of the 2003
stock option program were voluntary waived in exchange for the intrinsic value of those stock options. This corresponds to the 150,000 expired stock options. The total cost for releasing Husqvarna participants from the option programs was SEK 13.5m (excluding cost for social expenses).

58

notes, all amounts in SEKm unless otherwise stated

Performance share program 2005, 2006 and 2007 The Annual General Meeting in 2007 approved an annual longterm incentive program. This program was first introduced after the Annual General Meeting in 2004.
The program is based on value creation targets for the Group that is established by the Board of Directors, and involves an allocation of shares if these targets are achieved or exceeded after a three-year period. The program comprises B-shares.
The program is in line with the Group's principles for remuneration based on performance, and is an integral part of the total compensation for Group Management and other senior managers. Electrolux shareholders benefit from this program since it facilitates recruitment and retention of competent executives and aligns management interest with shareholder interest.
Allocation of shares under the program is determined on the basis of three levels of value creation, calculated according to the Group's previously adopted definition of this concept. The three levels are Entry, Target, and Stretch. Entry is the minimum level

that must be reached to enable allocation. Stretch, is the maximum level for allocation and may not be exceeded regardless of the value created during the period. The number of shares allocated at Stretch is 50% greater than at Target. The shares will be allocated after the three-year period free of charge. Participants are permitted to sell the allocated shares to cover personal income tax, but the remaining shares must be held for another two years.
If a participant's employment is terminated during the performance period, the right to be received shares will be forfeited in full. In the event of death, divestiture or leave of absence for more than six months, this will result in a reduced award for the affected participant.
The program covers almost 160 senior managers and key employees in about 20 countries. Participants in the program comprise five groups, i.e., the President, other members of Group Management, and three groups of other senior managers.

Number of shares distributed per individual performance target

2007 Target number of
B-shares 1)

2006 Target number of
B-shares 1)

President and CEO

14,405

28,310

Other members of Group Management

7,203

14,156

Other senior managers, cat. C

5,402

10,616

Other senior managers, cat. B

3,602

7,078

Other senior managers, cat. A

2,701

5,308

2005 Target number of
B-shares 1)
38,623 19,313
8,094 9,657 7,242

2007 Target value,
SEK 2)
2,400,000 1,200,000
900,000 600,000 450,000

2006 Target value,
SEK 3)
2,400,000 1,200,000
900,000 600,000 450,000

2005 Target value,
SEK 4)
2,400,000 1,200,000
900,000 600,000 450,000

1) Each target value is subsequently converted into a number of shares. The number of shares is based on a share price of SEK 132.36 for 2005, SEK 180.58 for 2006 and SEK 166,62 for 2007, calculated as the average closing price of the Electrolux B-share on the OMX Nordic Exchange in Stockholm during a period of ten trading days before the day participants were invited to participate in the program, adjusted for net present value of dividends for the period until shares are allocated. The recalculated weighted average fair value of shares at grant for the 2005, 2006 and 2007 programs is SEK 88.41 per share. The target number of B-shares in the 2005 and 2006 programs have been adjusted with a multiplier of 2.13 after a re-calculation of the performance share programs in accordance with the plan document due to the spin-off of Husqvarna and the share redemption in January 2007.
2) Total target value for all participants at grant is SEK 96m. 3) Total target value for all participants at grant is SEK 96m. 4) Total target value for all participants at grant is SEK 97m.

If the Target level is attained, the total cost for the 2007 performance share program over a three-year period is estimated at SEK 120m, including costs for employer contributions and the financing cost for the repurchased shares. If the maximum level, Stretch, is attained, the cost is estimated at a maximum of SEK 180m. If the Entry level for the program is not reached, the minimum cost will amount to SEK 11m, i.e., the financing cost for the repurchased shares. The distribution of shares under this program will result in an estimated maximum increase of 0.33% in the number of outstanding shares.
Accounting principles According to the transition rules stated in IFRS 2, Share-based compensation, Electrolux applies IFRS 2 for the accounting of share-based compensation programs granted after November 7, 2002, and that had not vested on January 1, 2005. The information below refers, therefore, to two thirds of the 2003 option program and the share programs granted in 2005, 2006 and 2007.
The Group accounts for the employer contributions that are expected to be paid when the options are exercised or the shares distributed. The total cost charged to the income statement for 2007 amounted to SEK 65m (142), whereof 3m (68) refers to employer contribution. The cost for employer contribution according to IFRS 2 is based on time value of the instrument.

The total provision for employer contribution in the balance sheet amounted to 61m (87).
Repurchased shares for the LTI programs The company uses repurchased Electrolux B-shares to meet the company's obligations under the stock option and share programs. The shares will be sold to option holders who wish to exercise their rights under the option agreement(s) and if performance targets are met, will be distributed to share-program participants. Electrolux intends to sell additional shares on the market in connection with the exercise of options or distribution of shares under the share program in order to cover the payment of employer contributions.
Delivery of shares for the 2004 program After a three-year performance period, the particpants in the 2004 performance share program have received B-shares. The number of B-shares delivered equals 95.95% of the target number of B-shares. The selling of the B-shares is restricted until December 31, 2008, with the exception that partcipants have had the right to sell shares to cover for personal taxes in connection with the delivery.

59

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

Note 23 Other provisions

Provisions for restructuring

Opening balance, January 1, 2006

2,587

Provisions made

457

Provisions used

­1,237

Discontinued operations

­31

Unused amounts reversed

­109

Exchange-rate differences

­106

Closing balance, December 31, 2006

1,561

Of which current provisions

797

Of which non-current provisions

764

Group

Warranty commitments

Claims

1,832 1,029 ­1,004 ­152
7 ­127

987 53 ­36 -- --
­110

1,585

894

617

85

968

809

Opening balance, January 1, 2007 Provisions made Provisions used Unused amounts reversed Exchange-rate differences Closing balance, December 31, 2007 Of which current provisions Of which non-current provisions

1,561 231
­993 -- 22
821 502 319

1,585 1,085 ­987
­41 40
1,682 634
1,048

894 211 ­260
­2 ­48
795 4
791

Other
1,977 714 ­606 ­108 ­25 ­102
1,850 133
1,717

Total

Provisions for restructuring

Parent Company

Warranty commitments

Other

7,383

130

2,253

55

­2,883

­63

­291

--

­127

­5

­445

--

78

37

95

69

­81

­28

--

--

--

­3

--

--

5,890

117

1,632

35

4,258

82

92

75

25

--

67

75

1,850 404
­420 ­112
96
1,818 163
1,655

5,890 1,931 ­2,660 ­155
110
5,116 1,303 3,813

117

92

75

--

120

8

­63

­100

­40

--

--

--

--

--

--

54

112

43

10

25

--

44

87

43

Total
245 219 ­172
-- ­8 --
284 60
224
284 128 ­203
-- --
209 35
174

Provisions for restructuring represent the expected costs to be incurred as a consequence of the Group's decision to close some factories, rationalize production and reduce personnel, both for newly acquired and previously owned companies. The provisions for restructuring are only recognized when Electrolux has both a detailed formal plan for restructuring and has made an announcement of the plan to those affected by it at the balance-sheet date. The amounts are based on management's best estimates and are adjusted when changes to these estimates are known. The larger part of the restructuring provisions as per December 31, 2007 will be used during 2008. Provisions for warranty commitments are recognized as a consequence of the Group's policy to cover the cost of repair of defective products. Warranty is normally granted for one to two years after the sale. Provison for claims refer to the Group's captive insurance companies. Other provisions include mainly provisions for tax, environmental liabilities, asbestos claims or other liabilities, none of which is material to the Group.

Note 24 Other liabilities

Accrued holiday pay Other accrued payroll costs Accrued interest expenses Prepaid income Other accrued expenses Other operating liabilities Total

Group December 31,

2007

2006

863

861

1,421 1,129

295

164

145

166

4,712 4,726

2,613 2,247

10,049 9,293

Parent Company December 31,

2007

2006

166 151

146 163

188 158

--

--

319 358

--

--

819 830

Other accrued expenses include accruals for fees, advertising and sales promotion, bonuses, extended warranty, and other items.

Note 25 Contingent liabilities

Trade receivables, with recourse
Guarantees and other commitments
On behalf of subsidiaries
On behalf of external counterparties Employee benefits in excess of reported liabilities Total

Group December 31,

2007

2006

9

--

Parent Company December 31,

2007

2006

--

--

-- 1,007

-- 1,022

1,187 164

1,168 157

-- 1,016

--

14

16

1,022 1,365 1,341

As from 2006, trade receivables with recourse are recognized in the balance sheet.
The main part of the total amount of guarantees and other commitments on behalf of external counterparties is related to US sales to dealers financed through external finance companies with a regulated buy-back obligation of the products in case of dealer's bankruptcy.
In addition to the above contingent liabilities, guarantees for fulfillment of contractual undertakings are given as part of the Group's normal course of business. There was no indication at year-end that payment will be required in connection with any contractual guarantees.

Asbestos litigation in the US Litigation and claims related to asbestos are pending against the Group in the US. Almost all of the cases refer to externally supplied components used in industrial products manufactured by discontinued operations prior to the early 1970s. Some of the cases involve multiple plaintiffs who have made identical allegations against many other defendants who are not part of the Electrolux Group.

60

notes, all amounts in SEKm unless otherwise stated

As of December 31, 2007, the Group had a total of 1,998 (1,688) cases pending, representing approximately 2,600 (approximately 7,700) plaintiffs. During 2007, 1,041 new cases with approximately 1,050 plaintiffs were filed and 731 pending cases with approximately 6,140 plaintiffs were resolved. Approximately 310 of the plaintiffs relate to cases pending in the state of Mississippi.
The Group has reached an agreement with many of the insurance carriers that issued general liability insurance to certain predecessors of the Group who manufactured industrial products, some of which are alleged to have contained asbestos. Under this agreement, the insurance carriers have agreed to reimburse the Group for a portion of the past and future costs incurred in connection with asbestos-related lawsuits for such products. The term of the agreement is indefinite but subject to termination upon 60 days notice. If terminated, all parties would be restored to all of their rights and obligations under the affected insurance policies.
Additional lawsuits may be filed against Electrolux in the future. It is not possible to predict either the number of future claims or the number of plaintiffs that any future claims may represent. In addition, the outcome of asbestos claims is inherently uncertain and always difficult to predict and Electrolux cannot provide any assurances that the resolution of these types of claims will not have a material adverse effect on its business or on results of operations in the future.
Major agreement with Husqvarna after the spin-off In June 2006, Electrolux effectuated the spin-off of the Group's Outdoor Products operations, "Outdoor Products", by way of a dividend of all shares in Husqvarna AB, being the parent of the Outdoor Products group, to the shareholders of Electrolux. In order to govern the creation of Outdoor Products operations as a separate legal entity, as well as govern the relationship in certain aspects between Electrolux and Outdoor Products operations following the separation, Electrolux and Husqvarna AB and some of their respective subsidiaries have entered into a Master Separation Agreement and related agreements, the "Separation Agreements".
Under the Separation Agreements, Electrolux has retained certain potential liabilities with respect to the spin-off and Outdoor Products. These potential liabilities include certain liabilities of the Outdoor Products operations which cannot be transferred or which have been considered too difficult to transfer. Losses pursuant to these liabilities are reimbursable pursuant to indemnity undertakings from Husqvarna. In the event that Husqvarna is unable to meet its indemnity obligations should they arise, Electrolux would not be reimbursed for the related loss and this could have a material adverse effect on Electrolux results of operations and financial condition.

ruling was based, Electrolux could not rely on the ruling. Additionally, future events that may or may not be within the control of Electrolux or Husqvarna, including purchases by third parties of Husqvarna stock or Electrolux stock, could cause the distribution of Husqvarna stock and the US corporate restructurings that preceded the distribution not to qualify as tax-free to Electrolux and/ or US holders of Electrolux stock. An example of such event is if one or more persons were to acquire a 50% or greater interest in Husqvarna stock or Electrolux stock.
Electrolux has ­ as one of the Separation Agreements ­ concluded a Tax Sharing and Indemnity Agreement with Husqvarna. Pursuant to the tax sharing agreement, Husqvarna and two of its US subsidiaries have undertaken to indemnify Electrolux and its group companies for US tax cost liabilities in certain circumstances. If the distribution of the shares in Husqvarna or the US corporate restructurings that preceded the distribution would entail US tax cost liabilities, and Husqvarna would not be obliged to indemnify such liabilities or would not be able to meet its indemnity undertakings, this could have a material adverse effect on Electrolux results of operations and financial condition.

Note 26 Acquired and divested operations

Fixed assets Inventories Receivables Other current assets Liquid funds Loans Other liabilities and provisions Net assets Purchase price Net borrowings in acquired/divested operations Effect on Group cash and cash equivalents

Divestments

2007

2006

--

­20

--

--

-- ­796

-- ­432

--

--

--

--

--

72

-- ­1,176

-- 1,064

--

--

-- 1,064

No operations were acquired or divested in 2007. In 2006, the assets and liabilities of Electrolux Financial Corpo-
ration in the US were divested. Also the Group's participation in the associated company Nordwaggon has been sold. The capital loss of the divested operations is SEK 112m.

Note 27 Remuneration to the Board of Directors, the President and other members of Group Management

Tax effects of the distribution Electrolux has received a private letter ruling from the US Internal Revenue Service (IRS) with regard to the distribution of the shares in Husqvarna and the US corporate restructurings that preceded the distribution. The ruling confirms that these transactions will not entail any US tax consequences for Electrolux, its US subsidiaries or US shareholders of Electrolux. In the event that any facts and circumstances upon which the IRS private ruling has been based is found to be incorrect or incomplete in a material respect or if the facts at the time of separation were, or at any relevant point in time are, materially different from the facts upon which the

Compensation to the Board of Directors The Annual General Meeting (AGM) determines the total compensation to the Board of Directors for a period of one year until the next AGM. The compensation is distributed between the Chairman, Deputy Chairman, other Board Members and remuneration for committee work. The Board decides the distribution of the committee fee between the committee members. Compensation is paid out in advance each quarter. Compensation paid in 2007 refers to 1/4 of the compensation authorized by the AGM in 2006, and 3/4 of the compensation authorized by the AGM in 2007. Total compensation paid in 2007 amounted to SEK 4,931,250, of which

61

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

SEK 4,406,250 referred to ordinary compensation and SEK 525,000 to committee work. For distribution of compensation by Board member, see table below.

Compensation to Board members 2007

'000 SEK Marcus Wallenberg, Chairman (as from the AGM) Peggy Bruzelius, Deputy Chairman Michael Treschow (Chairman up to the AGM) Louis R. Hughes John S. Lupo (as from the AGM) Johan Molin (as from the AGM) Hans Stråberg Caroline Sundewall
Torben Ballegaard Sørensen (as from the AGM) Barbara Milian Thoralfsson Ulf Carlsson Gunilla Brandt Ola Bertilsson Total

Ordinary compen-
sation
1,234 500 375
438 328 328
-- 438 328
438 -- -- --
4,406

Compensation for committee
work
50 175
33
50 -- -- -- 75 50
92 -- -- -- 525

Total compen-
sation
1,284 675 408
488 328 328
-- 513 378
529 -- -- --
4,931

Remuneration Committee The working procedures of the Board of Directors stipulate that remuneration to Group Management be proposed by a Remuneration Committee. The Committee comprises the Chairman of the Board and two additional Directors. During 2007, the Committee members were Michael Treschow (Chairman) Marcus Wallenberg and Louis R. Hughes up to the AGM and Barbara Milian Thoralfsson, Marcus Wallenberg and Louis R. Hughes after the AGM.
The Remuneration Committee establishes principles for remuneration for the President and the other members of Group Management, subject to subsequent approval by the AGM. Proposals submitted by the Remuneration Committee to the Board of Directors include targets for variable compensation, the relationship between fixed and variable salary, changes in fixed or variable salary, criteria for assessment of long-term variable salary, pensions and other benefits.
A minimum of two meetings is convened each year and additional meetings are held when needed. 10 meetings were held during 2007.

Remuneration Guidelines for Group Management The AGM in 2007 approved the proposed Remuneration Guidelines. These guidelines and the compensation to Group Management during 2007, are described below.
The overall principles for compensation within Electrolux are tied strongly to the position held, individual as well as team performance, and competitive compensation in the country or region of employment.
The overall compensation package for higher-level management comprises fixed salary, variable salary, based on short-term and long-term performance targets and benefits such as pensions and insurance.
Electrolux strives to offer fair and competitive total compensation with an emphasis on "pay for performance". Variable com-

pensation represents a significant proportion of total compensation for higher-level management. Total compensation is lower if targets are not achieved.
In 2003, the Group introduced a uniform program for variable salary for management and other key positions. Variable salary is based on financial targets for value creation as well as non-financial targets. Each job level is linked to a target and a stretch level for variable salary, and the program is capped.
In 2004, Electrolux introduced a new long-term performance share program that replaced the option program for less than 200 senior managers of the Group. The performance share program is linked to targets for the Group's value creation over a three-year period.
The vesting and exercise rights of the option programs launched up till 2003 will continue as scheduled.
Compensation and Terms of employment for the President and CEO The compensation package for the President comprises fixed salary, variable salary based on annual targets, a long-term performance share program and other benefits such as pensions and insurance.
Base salary is revised annually per January 1. The annualized base salary for 2007, was SEK 8,300,000 (8,300,000), i.e., unchanged. Salary increased by 5.73% in 2006.
The variable salary is based on an annual target for value created within the Group. The variable salary is 70% of the annual base salary at target level, and capped at 110%. Variable salary earned in 2007 was SEK 4,892,327 (5,303,490).
The President participates in the Group's long-term performance programs, that comprise the performance share program introduced in 2004, as well as previous option programs. For more information on these programs, see Note 22 on page 53.
The notice period for the company is 12 months, and for the President six months. The President is entitled to 12 months severance pay based on base salary. Severance pay is applicable if the employment is terminated by the company. It is also applicable if the employment is terminated by the President provided serious breach of contract on the company's behalf or if there has been a major change in ownership structure in combination with changes in management and changed individual accountability. The President is not eligible for fringe benefits such as a company car or housing.
Pensions for the President and CEO The President is covered by the Group's pension policy. Retirement age for the President is 60.
The President is covered by an alternative ITP plan that is a defined contribution plan in which the contribution increases with age. In addition, he is covered by two supplementary plans. Contribution to the first plan equals 15% of pensionable salary and contributions to the second plan equals 20% on pensionable salary above 30 income base amounts. Pensionable salary is calculated as the current fixed salary including vacation pay plus the average actual variable salary for the last three years. The pension costs in 2007 amount to SEK 6,219,377 (6,178,740). The cost amounts to 44.9% of pensionable salary.
The retirement benefit in the supplementary plans is payable for life or a shorter period of not less than five years. The President determines the payment period at the time of retirement. Accrued

62

notes, all amounts in SEKm unless otherwise stated

capital is subject to a real rate of return of 3.5% per annum according to plan rules.
The company will finalize outstanding contributions to the alternative ITP plan and one of the supplementary plans, provided that the President retains his position until age 60.
In addition to the retirement contribution, Electrolux provides disability benefits equal to 70% of pensionable salary, including credit for other disability benefits. Electrolux also provides survivor benefits equal to the highest of the accumulated capital for retirement or 250 (250) Swedish income base amounts, as defined by the Swedish National Insurance Act. The survivor benefit is payable over a minimum five-year period.

The capital value of pension commitments for the current President, prior Presidents, and survivors is SEK 113m (148).
Share-based compensation for the President and other members of Group Management Over the years, Electrolux has implemented several long-term share-based programs (LTI) for senior managers. These programs are intended to attract, motivate and retain the participating managers by providing long-term incentives through benefits linked to the company's share price. They have been designed to align management long-term performance programs with shareholder interests. A detailed presentation of the different programs is given in Note 22 on page 53.

Options provided to Group Management
President and CEO Other members of Group Management Total

Beginning of 2007 120,000 250,724 370,724

Number of options Expired1) -- -- --

Exercised 30,000
165,784 195,784

End of 2007 90,000 84,940
174,940

Number of shares offered to Group Management on target performance

2007 Target number
of B-shares1)

2006 Target number
of B-shares1)

President and CEO

14,405

28,310

Other members of Group Management

7,203

14,156

2005 Target number
of B-shares1)
38,623
19,313

2007 Target value,
SEK
2,400,000
1,200,000

2006 Target value,
SEK
2,400,000
1,200,000

2005 Target value
SEK
2,400,000
1,200,000

1) Each target value is subsequently converted into a number of shares. The number of shares is based on a share price of SEK 132.36 for 2005, SEK 180.58 for 2006 and SEK 166,62 for 2007, calculated as the average closing price of the Electrolux B-share on the Stockholm Stock Exchange during a period of ten trading days before the day participants were invited to participate in the program, adjusted for net present value of dividends for the period until shares are allocated. The recalculated weighted average fair value of shares at grant for the 2005, 2006 and 2007 programs is SEK 88.41 per share. The target number of B-shares in the 2005 and 2006 programs have been adjusted with a multiplier of 2.13 after a re-calculation of the performance share programs in accordance with the plan document due to the spin-off of Husqvarna and the redemption in January 2007.

Compensation and Terms of employment for other members of Group Management Like the President, other members of Group Management receive a compensation package that comprises fixed salary, variable salary based on annual targets, long-term performance share programs and other benefits such as pensions and insurance.
Base salary is revised annually per January 1. The average base salary increase in 2007 was 4.8%.
Variable salary for sector heads in 2007 is based on both financial and non-financial targets. The financial targets comprise, e.g., the value created on sector and Group level. The non-financial targets are focused on performance objectives within respective sector.
The target for variable salary for sector heads is 50% of annual base salary. The stretch level is 100%, which is also the cap. Corresponding figures for the US-based sector head are 100% and 150%.
Group staff heads receive variable salary based on value created for the Group and on performance objectives within their functions. The target variable salary is 40­45% of annual base salary. The stretch level is 80­90%, which is also the cap.
Individual members of Group Management are entitled to variable retention compensation arrangements due in 2009 and 2010 provided the fullfilment of defined performance objectives and continued employment within the Group. These payments are maximized to SEK 10.1m in 2009 and SEK 21.9m in 2010. For 2007, SEK 10.1m has been paid as variable retention compensation.

Individual members of Group Management are entitled to conditional recruitment compensation arrangements. The compensation shall be due in parts provided the member is still employed until the end of 2007, 2008 and 2009. These payments are maximized to SEK 1.7m in 2008 and SEK 1.1m in 2009. For 2007 SEK 1.1m has been paid as recruitment compensation.
The members of Group Management participate in the Group's long-term performance programs. These programs comprise the performance share program introduced in 2004 as well as previous option programs. For more information on these programs, see note 22 on page 53.
The Swedish members of Group Management are entitled to 12 months severance pay based on base salary. Severance pay is applicable if the employment is terminated by the company. It is also applicable if the employment is terminated by the Group Management member provided serious breach of contract on the company's behalf or if there has been a major change in ownership structure in combination with changes in management and changed individual accountability.
The Swedish members of Group Management are not eligible for fringe benefits such as company cars. For members of Group Management employed outside of Sweden, varying fringe benefits and conditions may apply, depending upon the country of employment.

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Pensions for other members of Group Management The members of Group Management are covered by the Group's pension policy.
The retirement age is 60 for the members of Group Management. Swedish members of Group Management are covered by the Alternative ITP plan, as well as a supplementary plan.
The retirement benefit from the supplementary plan is payable for life or a shorter period of not less than five years. Accrued capital is subject to a real rate of return of 3,5% per annum according to plan rules. The participant determines the payment period at the time of retirement.
For members of Group Management employed outside of Sweden, varying pension terms and conditions apply, depending upon the country of employment. The earliest retirement age is 60.
The alternative ITP plan is a defined contribution plan where the contribution increases with age. The contribution is between 20%

and 35% of pensionable salary, between 7.5 and 30 income base amounts. The pensionable salary is calculated as the current fixed salary including vacation pay plus the average variable salary for the last three years.
The Swedish members are also covered by a supplementary plan. In 2004, the plan was revised retroactively from 2002. Following the revision, the contribution equals 35% of the pensionable salary. In addition, three members are covered by individual additional contributions as a consequence of the switch of plans in 2001. In addition to the retirement contribution, Electrolux provides disability benefits equal to 70% of pensionable salary including credit for other disability benefits. Electrolux also provides survivor benefits equal to the highest of the accumulated capital for retirement or 250 (250) Swedish income base amounts, as defined by the Swedish National Insurance Act. The survivor benefit is payable over a minimum five-year period.

Compensation to Group Management
'000 SEK unless otherwise stated President and CEO Other members of Group Management6) Total

Annual fixed
salary1)
8,863

Variable salary
earned 20072)
4,892

30,801 20,758 39,664 25,650

2007

Total salary

Long-
term PSP
(value awarded)3)

13,755 6,397

51,559 23,989 65,314 30,386

Total pension
cost4)
6,219

Annual fixed salary
8,7185)

Variable salary
earned 20062)
5,303

16,583 22,802

28,7235) 14,9327) 37,4415) 20,235

2006
Total salary 14,021

Longterm PSP
(value awarded)3)
--

Total pension
cost4)
6,179

43,655 57,676

-- 20,029 -- 26,208

1) During 2007 salaries for Swedish employees were generally increased by 0.5 % as negotiated compensation given instead of a right to reduce working hours. 2) The actual variable salary for 2007 is set in early 2008 and may differ from the expensed amount. 3) The pre-tax value delivered to participants is calculated as the number of shares delivered times the share price at the time of delivery. The B-shares delivered are
restricted until December 31, 2008. 4) Total pension cost is calculated according to IFRS as from 2007. The cost for 2006 was previously based on local GAAP and has been restated. 5) Including vacation salary, paid vacation days and travel allowance. 6) In 2007, other members of Group Management comprised of 8 people up to July 31; 7 people up to September 1; 8 people up to November 13, when the Group
comprised of 9 members. In 2006, other members of Group Management comprised of 8 people after the spinn-off of Husqvarna and 9 members before. 7) Includes contractual "sign-on" bonus.

Note 28 Fees to auditors

PricewaterhouseCoopers (PwC) are appointed auditors for the period until the 2010 Annual General Meeting.

PwC Audit fees1) Audit-related fees2) Tax fees3) Total fees to PwC Audit fees to other audit firms Total fees to auditors

Group

Parent Company

2007

2006 2007

2006

58

86

9

15

1

4

--

4

7

6

1

2

66

96 10

21

2

2

--

--

68

98 10

21

1) Audit fees consist of fees billed for the annual audit services engagement and other audit services, which are those services that only the external auditors reasonably can provide, and include the Company audit; statutory audits; comfort letters and consents and attest services.
2) Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company's financial statements or that are traditionally performed by the external auditors, and include consultations concerning financial accounting and reporting standards; internal control reviews; and employee benefit plan audits.
3) Tax fees include fees billed for tax compliance services, including the preparation of original and amended tax returns and claims for refund; tax consultations; tax advice related to mergers and acquisitions; transfer pricing; requests for rulings or tecnhical advice from taxing authorities; tax planning services; and expatriate tax planning and services.

64

notes, all amounts in SEKm unless otherwise stated

Note 29 Shares and participations

Participation in associated companies

2007

Opening balance, January 1

80

Acquisitions

--

Operating result

­1

Dividend

--

Tax

--

Divestment

--

Discontinued operations

--

Other

­47

Exchange difference

--

Closing balance, December 31

32

In the item Participation in associated companies is at December 31, 2007, goodwill included with the amount of SEK 2m (2).
2006 124
-- 5 ­13 -- ­16 ­9 -- ­11 80

The Group's share of the associated companies, which all, except for Atlas Eléctrica (Costa Rica) are unlisted, were at December 31, 2006, as follows:

Associated companies
Atlas Eléctrica, Costa Rica Sidème, France Viking Financial Services, USA European Recycling Platform, ERP, France e2 Home, Sweden Total 1) Seen from Electrolux perspective.

Participation,
% 18.9 39.3 50.0
25.0 50.0
--

Carrying amount
47 16 15
2 -- 80

2006 Relation to Electrolux1)

Receivables -- 75 --

Liabilities 2 1
--

Sales --
304 --

Purchases 12 2 --

1

49

--

11

--

--

--

--

76

52 304

25

Income statement

Income 826 642 6

Net results
40 2 2

24

8

--

--

1,498

52

Balance sheet

Total assets

Total liabilities

566

367

200

165

36

6

11

2

--

--

813

540

The Group's share of the associated companies, which all are unlisted, were at December 31, 2007, as follows:

2007

Relation to Electrolux1)

Income statement

Participation,
%

Carrying amount

Receivables

Liabilities

Sales

Purchases

Income Net results

Sidème, France

39.3

16

52

-- 265

--

539

­3

Viking Financial Services, USA

50.0

15

--

--

--

--

3

3

European Recycling Platform,

ERP, France

25.0

1

--

15

--

83

142

­6

Total

--

32

52

15 265

83

684

­6

1) Seen from Electrolux perspective.

Balance sheet

Total assets

Total liabilities

248

215

32

2

102

99

382

316

Atlas Eléctrica in Costa Rica is not considered an associated company as Electrolux no longer has a significant influence in the company.

Other companies

Holding, %

Videcon Industries Ltd., India

4.6

Atlas Eléctrica S.A., Costa Rica

18.9

Banca Popolare Friuladria S.p.A., Italy

0.0

Business Partners B.V., The Netherlands

0.7

Other

--

Total

Carrying amount, SEKm 481 47 3 3 4 538

65

nnootetes,sa, lal allmaomuonutsnitnsSinEKSmEKumnleusnsloetshserowtihserswtaisteedstated

Subsidiaries

Holding, %

Major Group companies

Australia

Electrolux Home Products Pty. Ltd

100

Austria

Electrolux Hausgeräte G.m.b.H.

100

Electrolux Austria G.m.b.H.

100

Belgium

Electrolux Home Products Corp. N.V.

100

Electrolux Belgium N.V.

100

Brazil

Electrolux do Brasil S.A.

100

Canada

Electrolux Canada Corp.

100

China

Electrolux Home Appliances (Hangzhou) Co. Ltd

100

Electrolux (China) Home Appliance Co. Ltd

100

Electrolux (Changsha) Appliance Co. Ltd

100

Denmark

Electrolux Home Products Denmark A/S

100

Finland

Oy Electrolux Ab Electrolux Kotitalouskoneet

100

France

Electrolux France SAS

100

Electrolux Home Products France SAS

100

Electrolux Professionnel SAS

100

Germany

Electrolux Deutschland GmbH

100

AEG Hausgeräte GmbH

100

Hungary

Electrolux Lehel Hütögépgyár Kft

100

Italy

Electrolux Zanussi Italia S.p.A.

100

Electrolux Professional S.p.A.

100

Electrolux Italia S.p.A.

100

Electrolux Home Products Italy S.p.A.

100

Luxembourg Electrolux Luxembourg S.à r.l.

100

Mexico

Electrolux de Mexico, S.A. de CV

100

The Netherlands Electrolux Associated Company B.V.

100

Electrolux Home Products (Nederland) B.V.

100

Norway

Electrolux Home Products Norway AS

100

Poland

Electrolux Poland Spolka Z.o.o.

100

Spain

Electrolux Home Products España S.A.

100

Electrolux Home Products Operations España S.L. 100

Sweden

Electrolux Laundry Systems Sweden AB

100

Electrolux HemProdukter AB

100

Electrolux Professional AB

100

Electrolux Floor Care and Light Appliances AB

100

Switzerland Electrolux AG

100

United Kingdom Electrolux Plc

100

Electrolux Professional Ltd

100

USA

Electrolux Home Products Inc.

100

Electrolux Holdings Inc.

100

Electrolux Professional Inc.

100

A detailed specification of Group companies has been submitted to the Swedish Companies Registration Office and is available on request from AB Electrolux, Investor Relations and Financial Information.

Note 30 Discontinued operations

The Outdoor Products operations of the Group were distributed to the Electrolux shareholders in June, 2006 under the name of Husqvarna AB. Before September 2005, Husqvarna AB did not legally own any of the subsidiaries within the Outdoor Products segment. During the period September 2005-May 2006, the Outdoor Products operations were transferred to Husqvarna AB at book values. The Outdoor Products operations have been consolidated in the Electrolux Group accounts up to May 31, 2006.
In accordance with IFRS 5, Non-current Assets held for sale and Discontinued Operations, the net results for the distributed Outdoor Products operations are reported in the Group's income statement under the item "Income for the period from discontinued operations". This means that the figures for the former Outdoor Products operations are excluded from the sales and expenses reported in the income statement for 2006. Similarly, Outdoor Products operations are reported in the cash-flow statement under "Cash flow from discontinued operations".
For a more detailed description of the treatment of the Outdoor Products in the 2006 accounts, please refer to the Annual Report 2006.

The combined income statements prepared for the Outdoor Products operations

Net sales Cost of goods sold Gross operating income Selling expenses Administrative expenses Other operating income Other operating expenses Operating income Financial income Financial expenses Financial items, net Income after financial items Taxes Income for the period
Earnings per share for discontinued operations, SEK Basic Diluted
Average number of shares, million Basic Diluted

2007 -- -- -- -- -- -- -- -- -- -- -- -- -- --
Note 20 -- --
Note 20 -- --

January­May 2006
16,988 ­12,890
4,098 ­1,787
­411 5 --
1,905 25
­189 ­164 1,741 ­542 1,199
4.15 4.13
288.8 289.8

66

notes, all amounts in SEKm unless otherwise stated

Note 31 Definitions

Capital indicators Annualized net sales In computation of key ratios where capital is related to net sales, the latter are annualized and converted at year-end exchange rates and adjusted for acquired and divested operations.
Net assets Total assets exclusive of liquid funds and interest-bearing financial receivables less operating liabilities, non-interest-bearing provisions and deferred tax liabilities.
Working capital Current assets exclusive of liquid funds and interest-bearing financial receivables less operating liabilities and non-interest-bearing provisions.
Liquid funds Liquid funds consist of cash on hand, bank deposits, fair-value derivatives, prepaid interest expenses and accrued interest income and other short-term investments, of which the majority has original maturity of three months or less.

EBITDA margin Operating income before depreciation and amortization expressed as a percentage of net sales.
Operating cash flow Total cash flow from operations and investments, excluding acquisitions and divestment of operations.
Operating margin Profit for the period expressed as a percentage of net sales.
Return on equity Net income expressed as a percentage of average equity.
Return on net assets Operating income expressed as a percentage of average net assets.
Interest coverage ratio Operating income plus interest income in relation to total interest expense.

Interest-bearing liabilities Interest-bearing liabilities consist of short-term and long-term bor-

Capital turnover rate

rowings. Please refer to Note 17 on page 47.

Net sales divided by average net assets.

Total borrowings Total borrowings consist of interest-bearing liabilities, fair-value derivatives, accrued interest expenses and prepaid interest income, and trade receivables with recourse.
Net liquidity Liquid funds less short-term borrowings, fair-value derivatives, accrued interest expenses and prepaid interest income and trade receivables with recourse. Please refer to Note 17 on page 47.
Net borrowings Total borrowings less liquid funds.
Net debt/equity ratio Net borrowings in relation to equity.

Value creation Value creation is the primary financial performance indicator for measuring and evaluating financial performance within the Group. The model links operating income and asset efficiency with the cost of the capital employed in operations. The model measures and evaluates profitability by region, business area, product line, or operation.
Value created is measured excluding items affecting comparability and defined as operating income less the weighted average cost of capital (WACC) on average net assets during a specific period. The cost of capital varies between different countries and business units due to country-specific factors such as interest rates, risk premiums, and tax rates.
A higher return on net assets than the weighted average cost of capital implies that the Group or the unit creates value.

Equity/assets ratio Equity as a percentage of total assets less liquid funds.
Earnings per share Earnings per share Profit for the period divided by the average number of shares after buy-backs.
Other key ratios Organic growth Sales growth, adjusted for acquisitions, divestments and changes in exchange rates.

Electrolux Value Creation model Net sales ­ Cost of goods sold ­ Selling and administration expenses +/­ Other operating income and expenses = Operating income, EBIT1) ­ WACC x Average net assets1) = Value creation
EBIT = Earnings before interest and taxes, excluding items affecting comparability. WACC = Weighted Average Cost of Capital. The WACC rate before tax for 2007 is calculated at 12% compared to 11% for 2006 and 12% for 2005 and 2004.
1) Excluding items affecting comparability.

67

proposed distribution of earnings

Proposed distribution of earnings

The Board of Directors and the President propose that net income for the year and retained earnings Total be distributed as follows: A dividend to the shareholders of SEK 4.25 per share1), totaling

Thousands of kronor 1,681,685 8,164,427 9,846,112
1,196,963

To be carried forward Total

8,649,149 9,846,112

1) Calculated on the number of outstanding shares as per February 1, 2008. Currently, the company holds 27,281,891 shares as treasury shares. The number of repurchased shares may decrease if employees exercise their options, which would increase the total dividend payment. The Board of Directors and the President propose April 4, 2008 as record day for the right to dividend.

The Board of Directors has proposed that the Annual General Meeting 2008 resolves on an appropriation of profits involving a dividend to the shareholders of SEK 4.25 per share. With reference to the Board of Directors' proposed distribution of earnings above, the Board of Directors hereby makes the following statement according to Chapter 18 Section 4 of the Swedish Companies Act (2005:551).
The retained earnings from the previous years amount to SEK 8,668,516 thousand and the net income for the year amounts to SEK 1,681,685 thousand. Provided that the Annual General Meeting 2008 resolves to allocate the results in accordance with the Board of Directors' proposal, SEK 8,649,149 thousand will be carried forward. After distribution of the proposed dividend, there will be full coverage for the restricted equity of the Company.
It is the Board of Directors' assessment that after distribution of the proposed dividend, the equity of the Company and the Group will be sufficient with respect to the kind, extent, and risks of the operations. The Board of Directors has hereby considered, among other things, the Company's and the Group's historical development, the budgeted development and the state of the market. If financial instruments currently valued at actual value in accordance with Chapter 4 Section 14a of the Swedish Annual Accounts Act (1995:1554) instead had been valued according to the lower of cost or net realizable value, including cumulative revaluation of external shares, the equity of the company would decrease by SEK 343,906 thousand.
The Board of Directors has made an assessment of the financial position of the Company and the Group as well as the possibilities of the Company and the Group to comply with its obligations in a short-term and long-term perspective. After the dividend, the debt/equity ratio of the Company and the Group is assessed to continue to be high in relation to the industry in which the Group is operating.
The proposed dividend will not affect the ability of the Company and the Group to comply with its payment obligations. The company and the Group has sufficient access to long-term, as well as short-term, credit facilities, which can be used by short notice. The Board of Directors, therefore, finds that the Company and the Group are well prepared to handle any changes in respect of liquidity, as well as unexpected events.

The Board of Directors is of the opinion that the Company and the Group have the ability to take future business risks and also cope with potential losses. The proposed dividend will not negatively affect the Company's and the Group's ability to make further commercially motivated investments in accordance with the strategy of the Board of Directors.
The Board of Directors and the President and Chief Executive Officer declare that the consolidated financial statements have been prepared in accordance with IFRS as adopted by the EU and give a true and fair view of the Group's financial position and results of operations. The financial statements of the Parent Company have been prepared in accordance with generally accepted accounting principles in Sweden and give a true and fair view of the Parent Company's financial position and results of operations.
The statutory Administration Report of the Group and the Parent Company provides a fair review of the development of the Group's and the Parent Company's operations, financial position and results of operations and describes material risks and uncertainties facing the Parent Company and the companies included in the Group.
Stockholm, February 5, 2008

Marcus Wallenberg Chairman of the Board of Directors

Peggy Bruzelius Deputy Chairman of the Board of Directors

Louis R. Hughes

John Lupo

Johan Molin

Caroline Sundewal

Torben Ballegaard Sørensen Barbara Milian Thoralfsson

Ola Bertilsson Gunilla Brandt Ulf Carlsson

Hans Stråberg President and Chief Executive Officer

68

audit report

Audit report

To the Annual General Meeting of the shareholders of
AB Electrolux (publ) Corporate identity number 556009-4178
We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of Directors and the President of AB Electrolux for the year 2007. The company's annual accounts are included in the printed version on pages 5-68. The Board of Directors and the President are responsible for these accounts and the administration of the company as well as for the application of the Annual Accounts Act when preparing the annual accounts and the application of international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the Board of Directors and the President and significant estimates made by the Board of Directors and the President when preparing the annual accounts and

consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any Board member or the President. We also examined whether any Board member or the President has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below.
The annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the company's financial position and results of operations in accordance with generally accepted accounting principles in Sweden. The consolidated accounts have been prepared in accordance with international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act and give a true and fair view of the Group's financial position and results of operations. The statutory administration report is consistent with the other parts of the annual accounts and the consolidated accounts.
We recommend to the Annual General Meeting of shareholders that the income statements and balance sheets of the Parent Company and the Group be adopted, that the profit of the Parent Company be dealt with in accordance with the proposal in the administration report and that the members of the Board of Directors and the President be discharged from liability for the financial year.

Stockholm, February 25, 2008 PricewaterhouseCoopers AB
Peter Clemedtson Authorized Public Accountant

69

eleven­year summary, all amounts in SEKm unless otherwise stated
Eleven­year review
The information below for 2007, 2006 and 2005 in the first three columns, refers to continuing operations exclusive of outdoor products, Husqvarna, which was distributed to the Electrolux shareholders in June 2006.

SEKm Net sales and income Net sales Organic growth, % Depreciation and amortization Items affecting comparability Operating income Income after financial items Income for the period Cash flow EBITDA2) Cash flow from operations excluding change in operating assets and liabilities Changes in operating assets and liabilities Cash flow from operations Cash flow from investments
of which capital expenditures Cash flow from operations and investments Operating cash flow Dividend, redemption and repurchase of shares Capital expenditure as % of net sales Margins2) Operating margin, % Income after financial items as % of net sales EBITDA margin, % Financial position Total assets Net assets Working capital Trade receivables Inventories Accounts payable Equity Interest-bearing liabilities Data per share, SEK Income for the period Equity Dividend3) Trading price of B-shares at year-end Key ratios Value creation Return on equity, % Return on net assets, % Net assets as % of net sales4) Trade receivables as % of net sales4) Inventories as % of net sales4) Net debt/equity ratio Interest coverage ratio Dividend as % of equity Other data Average number of employees Salaries and remuneration Number of shareholders Average number of shares after buy-backs Shares at year end after buy-backs

20071)
104,732 4.0
2,738 ­362 4,475 4,035 2,925
7,575
5,498 ­152 5,346 ­4,069 ­3,430 1,277 1,277 -6,708
3.3
4.6 4.2 7.2
66,089 20,743 ­2,129 20,379 12,398 14,788 16,040 11,163
10.41 57
4.25 108.50
2,053 20.3 21.7 18.6 18.3 11.1 0.29 7.49 7.5
56,898 12,612 52,700
281.0 281.6

20061)
103,848 3.3
2,758 ­542 4,033 3,825 2,648
7,333
5,263 ­703 4,560 ­2,386 ­3,152 2,174 1,110 ­4,416
3.0
4.4 4.2 7.1
66,049 18,140 ­2,613 20,905 12,041 15,320 13,194
7,495
9.17 47
4.00 137.00
2,202 18.7 23.2 16.5 19.1 11.0
­0.02 6.13
8.5
55,471 12,849 59,500
288.8 278.9

20051)
100,701 4.5
2,583 ­2,980 1,044
494 ­142
6,607
5,266 ­1 804
3,462 ­4,485 ­3,654 ­1,023
-653 ­2,038
3.6
4.0 3.4 6.6
17,942 ­3,799 20,944 12,342 14,576
­0.49
7.50
1,305
5.4 15.7 18.3 10.8
57,842 13,987 60,900
291.4 293.1

2005
129,469 4.3
3,410 ­3,020 3,942
3,215 1,763
10,372
8,428 ­1 888
6,540 ­5,827 ­4,765
713 1,083 ­2,038
3.7
5.4 4.8 8.0
82,558 28,165
­31 24,269 18,606 18,798 25,888
8,914
6.05 88
7.50 206.50
2,913 7.0
13.0 21.0 18.1 13.9 0.11 4.32
8.5
69,523 17,033 60,900
291.4 293.1

2004
120,651 3.2
3,038 ­1,960 4,807
4,452 3,259
9,805
7,140 1 442 8,582 ­5,358 ­4,515 3,224 3,224 ­5,147
3.7
5.6 5.3 8.1
75,096 23,988
­383 20,627 15,742 16,550 23,636
9,843
10.92 81
7.00 152.00
3,054 13.1 17.5 21.2 18.2 13.9 0.05 5.75 8.6
72,382 17,014 63,800
298.3 291.2

1) Continuing operations.

2) As of 1997, items affecting comparability are excluded.

3) 2007: Proposed by the Board.

70

4) Net sales are annualized.

2003
124,077 3.3
3,353 ­463 7,175 7,006 4,778
10,991
7,150 ­857 6,293 ­2,570 ­3,463 3,723 2,866 ­3,563
2.8
6.2 6.0 8.9
77,028 26,422
4,068 21,172 14,945 14,857 27,462 12,501
15.25 89
6.50 158.00
3,449 17.3 23.9 23.6 18.9 13.4 0.00 8.28 7.3
77,140 17,154 60,400
313.3 307.1

2002
133,150 5.5
3,854 ­434 7,731 7,545 5,095
12,019
9,051 1,854 10,905 ­1,011 ­3,335 9,894 7,665 ­3,186
2.5
6.1 6.0 9.0
85,424 27,916
2,216 22,484 15,614 16,223 27,629 15,698
15.58 87
6.00 137.50
3,461 17.2 22.1 23.1 18.6 12.9 0.05 7.66 6.9
81,971 19,408 59,300
327.1 318.3

2001
135,803 ­2.4
4,277 ­141 6,281 5,215 3,870
10,699
5,848 3,634 9,482 1,213 ­4,195 10,695 5,834 ­3,117
3.1
4.7 3.9 7.9
94,447 37,162
6,659 24,189 17,001 17,304 28,864 23,183
11.35 88
4.50 156.50
262 13.2 15.0 29.3 19.1 13.4 0.37 3.80
5.1
87,139 20,330 58,600
340.1 329.6

2000
124,493 3.7
3,810 -448 7,602 6,530 4,457
11,860
8,639 ­2,540
6,099 ­3,367 ­4,423 2,732
2,552 ­4,475
3.6
6.5 5.6 9.5
87,289 39,026
9,368 23,214 16,880 12,975 26,324 25,398
12.40 77
4.00 122.50
2,423 17.0 19.6 30.4 18.1 13.1 0.63 4.34 5.2
87,128 17,241 61,400
359.1 341.1

1999
119,550 4.1
3,905 -216 7,204 6,142 4,175
11,325
7,595 1,065 8,660 ­3,137 ­4,439 5,523 3,821 ­1,099
3.7
6.2 5.3 9.5
81,644 36,121
8,070 21,513 16,549 11,132 25,781 23,735
11.40 70
3.50 214.00
1,782 17.1 18.3 30.6 18.2 14.0 0.50 4.55 5.0
92,916 17,812 52,600

1998
117,524 4.0
4,125 964
7,028 5,850 3,975
10,189
5,754 ­1,056
4,698 ­776 ­3,756 3,922 1,817 ­915
3.2
5.2 4.2 8.7
83,289 39,986 12,101 21,859 17,325 10,476 24,480 29,353
10.85 67
3.00 139.50
437 18.2 17.5 33.3 18.2 14.4 0.71 3.46
4.5
99,322 18,506 50,500

1997
113,000 5.0
4,255 ­1 896 2,654
1,232 352
8,805
4,718 584
5,302 ­4,344 ­4,329
958 865 ­915 3.8
4.0 2.8 7.8
79,640 38,740 10,960 21,184 16,454
9,879 20,565 29,993
0.95 56
2.50 110.20
1.7 6.4 34.0 18.6 14.4 0.94 1.42 4.4
105,950 19,883 45,660

Compound annual growth rate, %

5 years

10 years

­4.7

­0.8

­10.4

5.4

­11.8

12.6

­10.5

23.6

­8.8

­1.5

­9.5

1.5

­13.3

0.1

0.6

­2.3

­30.1

4.0

16.1

22.0

­5.0

­1.8

­5.8

­6.1

­1.9

­0.4

­4.5

­2.8

­1.8

4.1

­10.3

­2.5

­6.6

­9.4

­7.8

27.0

­8.1

0.2

­6.7

5.4

­4.6

­0.2

­7.0

­6.0

­8.3

­4.5

­2.3

1.4

71

quarterly information, all amounts in SEKm unless otherwise stated

Quarterly information

Net sales and income SEKm Net sales Operating income
Income after financial items
Income for the period, continuing operations Earnings per share, continuing operations²) Value creation, continuing operations

2007 2006 2007 Margin, % 2007¹) Margin, % 2006 Margin, % 2006¹) Margin, % 2007 Margin, % 2007¹) Margin, % 2006 Margin, % 2006¹) Margin, % 2007 2006 2007 2007¹) 2006 2006¹) 2007 2006

Income for the period Earnings per share, SEK²)

2007 2006 2007 2007¹) 2006 2006¹)

1) Excluding items affecting comparability. 2) Before dilution, based on average number of shares after buy-backs.

Q1 24,930 24,553
757 3.0 757 3.0 455 1.9 600 2.4 670 2.7 670 2.7 387 1.6 532 2.2 492 232 1.76 1.76 0.79 1.28 86 ­23
492 807 1.76 1.76 2.78 3.27

Q2 25,785 25,322
890 3.5 921 3.6 862 3.4 844 3.3 752 2.9 783 3.0 783 3.1 765 3.0 545 541 1.94 2.05 1.83 1.85 210 256
545 1,165
1.94 2.05 3.95 3.97

Q3 26,374 26,087
1,152 4.4
1,152 4.4 685 2.6
1,136 4.4
1,037 3.9
1,037 3.9 684 2.6
1,135 4.4 762 440
2.71 2.71 1.54 2.81 443 565
762 440 2.71 2.71 1.54 2.81

Q4 27,643 27,886
1,676 6.1
2,007 7.3
2,031 7.3
1,995 7.2
1,576 5.7
1,907 6.9
1,971 7.1
1,935 6.9
1,126 1,435
4.00 5.14 5.01 4.95 1,314 1,404
1,126 1,435
4.00 5.14 5.05 4.99

Full year 104,732 103,848
4,475 4.3
4,837 4.6
4,033 3.9
4.575 4.4
4,035 3.9
4,397 4.2
3,825 3.7
4,367 4.2
2,925 2,648 10.41 11.66
9.17 10.89 2,053 2,202
2,925 3,847 10.41 11.66 13.32 15.04

Number of shares before dilution Number of shares after buy-backs, million Average number of shares after buy-backs, million
Items affecting comparability Restructuring provisions, write-downs and capital gains/losses

2007 2006 2007 2006
2007 2006

281.4 295.6
279.7 294.0

281.5 290.3
281.5 295.0

281.6 281.8
280.9 291.6

281.6 278.9
281.6 280.4

281.6 278.9
281.0 288.8

--

­31

--

­331

­145

18

­451

36

­362 ­542

72

Net sales, by business area SEKm Consumer Durables, Europe Consumer Durables, North America Consumer Durables, Latin America Consumer Durables, Asia/Pacific and Rest of the world Professional Products
Operating income, by business area SEKm Consumer Durables, Europe
Consumer Durables, North America
Consumer Durables, Latin America
Consumer Durables, Asia/Pacific and Rest of world
Professional Products
Common Group costs, etc. Total Group, excluding items affecting comparability
Items affecting comparability Total Group, including items affecting comparability

2007 2006 2007 2006 2007 2006
2007 2006 2007 2006

Q1 10,554
9,999 8,622 9,097 1,983 1,769
2,076 2,094 1,688 1,588

Q2 10,496 10,336
9,043 9,287 2,161 1,697
2,314 2,196 1,767 1,749

2007 Margin, % 2006 Margin, % 2007 Margin, % 2006 Margin, % 2007 Margin, % 2006 Margin, % 2007 Margin, % 2006 Margin, % 2007 Margin, % 2006 Margin, % 2007 2006 2007 Margin, % 2006 Margin, % 2007 2006 2007 Margin, % 2006 Margin, %

Q1 470 4.5 405 4.1 258 3.0 213 2.3
82 4.1 77 4.4
2 0.1 ­47 ­2.2 103 6.1 83 5.2 ­158 ­131 757 3.0 600 2.4 -- ­145 757 3.0 455 1.9

Q2 299 2.8 376 3.6 422 4.7 383 4.1 103 4.8
76 4.5 47 2.0 54 2.5 140 7.9 143 8.2 ­90 ­188 921 3.6 844 3.3 ­31 18 890 3.5 862 3.4

Q3 11,624 11,226
8,589 9,216 2,107 1,913
2,332 2,101 1,717 1,605

Q4 12,798 12,672
7,474 8,571 2,992 2,387
2,445 2,245 1,930 1,999

Full year 45,472 44,233 33,728 36,171
9,243 7,766
9,167 8,636 7,102 6,941

Q3 514 4.4 672 6.0 385 4.5 333 3.6 111 5.3
83 4.3 97 4.2 58 2.8 126 7.3 127 7.9 ­81 ­137 1,152 4.4 1,136 4.4 -- ­451 1,152 4.4 685 2.6

Q4 784 6.1 1,225 9.7 646 8.6 533 6.2 218 7.3 103 4.3 184 7.5
98 4.4 215 11.1 182 9.1 ­40 ­146 2,007 7.3 1,995 7.2 ­331 36 1,676 6.1 2,031 7.3

Full year 2,067 4.5 2,678 6.1 1,711 5.1 1,462 4.0 514 5.6 339 4.4 330 3.6 163 1.9 584 8.2 535 7.7 ­369 ­602 4,837 4.6 4,575 4.4 ­362 ­542 4,475 4.3 4,033 3.9

73

In 2007, the new Electrolux Built-In Kitchen was launched in Europe. The new built-in appliances were well-received by the market and resulted in higher average prices in all product categories and virtually all countries. The Electrolux brand was also strengthened considerably.
One of the most striking elements on the built-in appliances is the thin, white, illuminated line across the products. The line personalizes the kitchens, extensive consumer studies revealed, and is something consumers appreciate. As consumers are prepared to pay higher prices for innovative appliances with exciting design, Electrolux margin improves.
74

75

electrolux shares

Electrolux shares

Following a strong result in the fourth quarter of 2006, the trading price of Electrolux B-shares rose sharply at the start of 2007 and continued to increase through the second quarter. During the second half of the year, the trading price was adversely affected by the generally turbulent stock-exchange climate and concern about the company's exposure to the weak US market. At year-end 2007, the closing price for B-shares was approximately 7% lower than at year-end 2006. Total return on Electrolux B-shares in 2007 amounted to approximately ­5%.

The business magazine Affärsvärlden's General Index for the Nordic Exchange in Stockholm (OMX Nordic Exchange Stockholm) declined by approximately 7% in 2007.
The market capitalization of Electrolux shares at year-end 2007 was approximately SEK 34 (39) billion, which corresponded to 0.8% (0.9) of the total market capitalization of the Nordic Exchange in Stockholm.
The highest closing price for Electrolux B-shares during the year was SEK 190 on April 23, and the lowest SEK 102 on December 20.
Deregistration from the SEC Electrolux deregistration from the U.S. Securities and Exchange Commission (SEC) became effective in the fourth quarter of 2007. As a consequence, Electrolux obligation to file certain reports and forms with the SEC, including the 20-F and 6-K, has been suspended. Electrolux has not terminated its American Depositary Receipt (ADR) facility.
Trading volume In 2007, 889.9 (679.1) million Electrolux shares were traded on the Nordic Exchange in Stockholm at a value of SEK 131.0 (82.7) billion. Electrolux shares thus accounted for 2.0% (1.5) of the total trading volume of SEK 6,524 (5,521) billion in 2007. The average value of the Electrolux A- and B-shares traded daily was SEK 524 (334) million, corresponding to 3.6 million shares.
A total of 1.2 million Electrolux shares were traded on the London Stock Exchange, while the total issue/cancel of ADRs

was 0.6 (2.3) million. At year-end, 629,269 (810,048) depository receipts were outstanding.
Effective yield The effective yield indicates the actual profitability of an investment in shares, and comprises dividends received plus the change in trading price.
The average annual effective yield on an investment in Electrolux shares over the past ten years was 16.3%. The corresponding figure for the Nordic Exchange in Stockholm was 13.8%.

Share listings1) Number of shares Number of shares after repurchase Trading lot High and low for B-shares in 2007 Market capitalization at year-end 2007 Beta value2) GICS code3) Ticker codes

Stockholm, London 308,920,308 281,638,417 100 SEK 190­102 SEK 34 billion 1.07 25201040
Reuters ELUXb.ST Bloomberg ELUXB SS

1) The trading of Electrolux ADRs was tranferred from Nasdaq to the US Over-the-Counter market as of March 31, 2005. One ADR corresponds to two B-shares.
2) The beta value indicates the volatility of the trading price of a share relative to the general market trend, measured against the Stockholm All Share Index for the last four years.
3) MSCI's Global Industry Classification Standard (used for securities).

Total return of Electrolux B-shares and trading volume on the Nordic Exchange in Stockholm, 2003 ­ January 2008

Average daily trading value of Electrolux shares on the Nordic Exchange in Stockholm

Index
450 400 350 300
250

Number, million

SEK thousand A-shares B-shares Total

2007 47
523,817 523,864

2006 259 333,658 333,917

2005 59
365,074 365,133

2004 34
316,424 316,458

2003 33
299,139 299,172

200

120 In 2007, on average 3.6 million Elec-

trolux shares were traded daily on the

150

80 Nordic Exchange in Stockholm.

40

100

03

04

05

06

07

08

76

Electrolux B

SIX-Return Index

Trading volume

Repurchase of shares
Number of shares as of January 1 Redemption/cancellation of shares Number of shares as of December 31 Number of shares bought back Total amount paid, SEKm Price per share, SEK Number of shares sold under the terms of the employee stock option programs Number of shares alloted under the Performance Share Program 2004 Number of shares held by Electrolux, at year-end % of outstanding shares
1) Redemption of shares. 2) After cancellation of shares.

2007 308,920,308
-- 308,920,308
-- -- --
1,526,122
1,178,743
27,281,891 8.8

2006 308,920,308
-- 308,920,308
19,400,000 2,193 113
5,234,483
--
29,986,756 9.7

2005 308,920,308
-- 308,920,308
-- -- --
1,918,161
--
15,821,239 5.1

2004 324,100,000 ­15,179,6921) 308,920,308
750,000 114 152
10,600
--
17,739,400 5.7

2003 338,712,580 ­14,612,580 324,100,000
11,331,828 1,688 149
113,300
--
17,000,0002) 5.2

Distribution of capital through redemption of shares In January 2007, approximately SEK 5.6 billion was distributed to shareholders through redemption of shares at SEK 20 each, in accordance with authorization by an Extraordinary General Meeting in 2006. The redemption resulted from the review of the Group's over-capitalized balance sheet following the spin-off of Husqvarna in June 2006.
Repurchase of own shares For several years, Electrolux has had an annual mandate from the AGM to repurchase own shares in order to adjust the Group's capital structure and to finance possible acquisitions as well as long-term incentive programs. The mandate has enabled Electrolux to purchase up to 10% of the total number of outstanding shares. In 2006, the company utilized the mandate to virtually the fullest extent. The Board did not apply for any mandate from the 2007 AGM. Since 2000, Electrolux has repurchased shares for SEK 10.5 billion.
At year-end 2007, the company owned 27,281,891 B-shares, corresponding to 8.8% of the total number of outstanding shares.
Dividends and dividend policy The Board of Directors has decided to propose a dividend for 2007 of SEK 4.25 (4.00) per share to the AGM, corresponding to 36% (35) of income per share, excluding items affecting comparability.

Electrolux goal is for the dividend to correspond to at least 30% of income for the year, excluding items affecting comparability.
Share capital The share capital of AB Electrolux as of December 31, 2007, consisted of 9,502,275 A-shares and 299,418,033 B-shares, totalling 308,920,308 shares. A-shares carry one vote and B-shares onetenth of a vote. Each share has a quota value of SEK 5. In general, 100% of the shares are considered to be free-floating.
Shareholders and changes in ownership structure At year-end 2007, about 54% of the total share capital was owned by Swedish institutions and mutual funds, about 38% by foreign investors, and about 8% by private Swedish investors. Most of the shares owned by foreign investors are held through foreign banks or other trustees. This means that the actual owners are not displayed in the share register held by the Swedish Central Securities Depositary & Clearing Organization. Purchases of shares by foreign investors increased during the second and third quarters, but declined toward the end of the year to the same level as at its beginning.
In 2007, Barclays Global Investors purchased a large number of B-shares, and at year-end was the second largest owner. Investor increased its holding somewhat, and remained the largest owner.

Total distribution to shareholders

SEKm 7,000 6,000 5,000 4,000 3,000 2,000 1,000
0 98 99 00 01 02 03 04 05 06 07

Redemption of shares Repurchase of shares Dividend
The Board of Directors proposes a dividend for 2007 amounting to SEK 4.25 per share, for a total dividend payment of SEK 1,197m.

P/E ratio and dividend yield

%

25

5

P/E ratio, excluding

items affecting

20

4

comparability

15

Dividend yield, % 3

At year-end 2007, the P/E

10

2 ratio for Electrolux

B-shares was 9.3, exclud-

5

1 ing items affecting com-

parability. The dividend

0

0 yield was 3.9%, based on

98 99 00 01 02 03 04 05 06 07

the dividend proposal for

2007.

77

electrolux shares

Major shareholders
Investor AB Barclays Global Investors Alecta Pension Insurance Swedbank Robur Funds Fourth Swedish National Pension Fund Second Swedish National Pension Fund Didner & Gerge Mutual Fund AMF Pension SEB Funds Handelsbanken/SPP Investment Funds Other shareholders External shareholders AB Electrolux Total

Number of A-shares 8,270,771 500,000
731,504 9,502,275 9,502,275

Source: SIS Ägarservice as of December 31, 2007. The figures have been rounded off.

Number of B-shares 28,394,300 30,853,832 23,470,000 9,102,902 5,500,540 5,093,707 4,687,000 4,500,000 4,339,553 4,148,249
180,699,487 272,136,142
27,281,891 299,418,033

Total number of shares 36,665,071 30,853,832 23,970,000 9,102,902 5,500,540 5,093,707 4,687,000 4,500,000 4,339,553 4,148,249
181,430,991 281,638,417
27,281,891 308,920,308

Share capital, % 11.9 10.0 7.8 2.9 1.8 1.6 1.5 1.5 1.4 1.3 49.5 91.2 8.8 100

Voting rights, % 28.2 7.8 7.2 2.3 1.4 1.3 1.2 1.1 1.1 1.1 47.3 100 0.0 100

Incentive programs Electrolux has several long-term incentive programs for senior managers. Since 2004, performance-related share programs have been introduced, mainly based on targets for value creation within the Group over a three-year period. Under these programs, Electrolux B-shares will be distributed to the participants after the end of the period on the basis of the targets achieved. The Board of Directors will present a proposal at the Annual General Meeting for a share program in 2008, corresponding to the previous share programs.
Previous programs entitled an allotment of options that can be redeemed for shares at a fixed price. The value of the options is linked to the trading price of the Electrolux B-shares.
During 2007, senior managers in Electrolux purchased 1,526,122 B-shares under the terms of the employee stock option programs, and 1,178,743 B-shares were allotted under the Performance Share Program 2004. At year-end 2007, the incentive programs corresponded to a maximum dilution of 1.5% of the total number of shares, or 4,311,553 B-shares.
For additional information on the incentive programs, see Note 22 on page 53.

In recognition of performance As the only household appliance manufacturer to qualify, Electrolux is a constituent of the prestigious Dow Jones Sustainability World Index (DJSI). Electrolux is thereby among the top 10% of the 2,500 companies included in the Dow Jones Global Indexes when evaluated in relation to long-term economic, environmental and social performance.
SAM Sustainable Asset Management, which conducts research for the DJSI, recognizes Electrolux as a SAM Gold Class company, SAM Sector Mover as well as Sector Leader.
Electrolux has been ranked high in several other indices of social responsibility, including: · FTSE4Good Series, UK
· Oekom Research, Germany
· Global Climate 100 Index, KLD Research and Analytics, USA

Distribution of shareholdings

Shareholders by country

Shareholding 1­1,000 1,001­10,000 10,001­20,000 20,001­ Total

Ownership, % 3.8 4.5 1.0
90.7 100

Number of shareholders
46,581 5,283 226 577
52,667

Source: SIS Ägarservice as of December 31, 2007.

As % of shareholders
88.5 10.0
0.4 1.1 100

78

Sweden, 62% USA, 22% UK, 4% Other, 12%
As of December 31, 2007, approximately 38% of the total share capital was owned by foreign investors.
Source: SIS Ägarservice as of December 31, 2007.

Per-share data
Year-end trading price, B-shares, SEK1) Year-end trading price, B-shares, SEK Change in price during the year, % Equity per share, SEK Trading price/equity, % Dividend, SEK Payout ratio, %3) 4) Dividend yield, %5) Earnings per share, SEK Earnings per share, SEK4) Cash flow, SEK6) EV/EBIT multiple7) EV/EBIT multiple4) 7) P/E ratio4) 8) P/E ratio8) Number of shareholders

2007 108.50 108.50
­7 1) 57 191 4.25 2) 36 2) 3.92) 10.41 11.66 4.54 7.9 7.3 9.3 10.4 52,700

2006 9) 116.90 137.00
311) 47 247 1) 4.00 373) 3.41) 9.17 10.89 7.53 8.01) 7.11) 10.71) 12.81) 59,500

2005 89.50 206.50
36 88 234 7.50 50 3.6 6.05 15.82 2.45 16.1 9.1 13.1 34.4 60,900

1) Adjusted for distribution of Husqvarna in June 2006, and for redemption in January 2007.
2) Proposed by the Board. 3) As percent of income for the period. 4) Excluding items affecting comparability. 5) Dividend per share divided by trading price at year-end.

2004 65.90 152.00
­4 81 187 7.00 46 4.6 10.92 15.24 10.81 9.5 6.7 10 14.4 63,800

2003 67.60 158.00
15 89 178 6.50 39 4.1 15.25 16.73 9.15 6.8 6.3 9.4 10.4 60,400

2002 58.80 137.50
­12 87
158 6.00
36 4.4 15.58 16.90 23.14 5.9 5.6 8.1 8.8 59,300

2001 66.90 156.50
28 88 178 4.50 41 2.9 11.35 11.10 15.55 10 9.8 14.1 13.8 58,600

2000 52.40 122.50
­43 77
159 4.00
30 3.3 12.40 13.25 4.67 8.1 7.7 9.2 9.9 61,400

1999 91.50 214.00
53 70 304 3.50 31 1.6 11.40 11.45 11.53 12.9 12.5 18.7 18.8 52,600

1998 59.60 139.50
27 67 209 3.00 34 2.2 10.85 8.85 2.57 10 11.5 15.8 12.9 50,500

6) Cash flow from operations less capital expenditure, divided by the average number of shares after buy-backs.
7) Market capitalization excluding buy-backs, plus net borrowings and minority interests, divided by operating income.
8) Trading price in relation to earnings per share after full dilution. 9) Continuing operations.

Press releases 2007

January 25

Electrolux share redemption is finalized

February 2

Electrolux awarded EU sustainable energy award

February 13

Nomination Committee proposes Marcus Wallenberg to be elected new Chairman of Electrolux

February 14

Consolidated results 2006 Comments from the President and CEO on the year-end 2006 report

March 9

John Lupo, Johan Molin and Torben Ballegaard Sørensen proposed new Board members of Electrolux

March 12

Notice convening the Annual General Meeting of AB Electrolux

March 23

Electrolux Annual Report 2006 now on the Group's web site

April 17

Bulletin from AB Electrolux Annual General Meeting 2007

April 26

Interim Report January ­ March 2007 Income continues to improve

May 11

Electrolux Design Lab 2007 ­ Electrolux is looking into green solutions for the year 2020

May 31 June 5
June 20 July 17
September 4 September 21 October 11 October 22
December 14

Nomination Committee for Electrolux Annual General Meeting 2008
Carina Malmgren Heander new head of Electrolux Group Staff Human Resources and Organizational Development
Gunilla Nordström appointed head of Electrolux Major Appliances Asia Pacific
Half-yearly Report 2007 Comments from the President and CEO Hans Stråberg on the second quarter results 2007
Electrolux to apply for deregistration with the U.S. Securities and Exchange Commission
Electrolux tackles sustainability issues profitably
Electrolux launches investigation of UK factory
Interim Report January ­ September 2007 Comments from the President and CEO Hans Stråberg on the third quarter results 2007
Electrolux decides to discontinue production at factory in Spennymoor, UK

79

risk

Managing risk to maximize returns
Electrolux is exposed to risks in the course of daily operations. Limiting and controlling risks enable business opportunities to be realized in the interest of maximizing returns. The Group is exposed to two main types of risks: Risks related to business operations and risks related to financial operations. Operational risks are normally managed by the Group's operative units, and financial risks by the Group's Treasury department.

Operational risks
· Price competition · Customer exposure · Restructuring · Commodity prices

Financial risks and commitments
· Foreign-exchange risks · Interest-rate risks · Pension commitments

Other risks
· Regulatory risks

Examples of management of risks

· Financial policy · Credit policy · Pension policy

· Code of Ethics · Environmental policy

Sensitivity analysis

Cost structure 2007

Risk Raw materials Steel Plastics

Change
10% 10%

Pre-tax earnings impact, SEKm

+/­

1,000

+/­

500

Cost item Personell Depreciation Fixed costs

% of total cost 16 3 19

Raw materials and components account for almost half of total Group costs.

Currencies¹) and interest rates

Raw materials and components

47

GBP/SEK

­10%

­

353

Product development

2

CAD/SEK

­10%

­

243

Transport

6

AUD/SEK

­10%

­

206

Brand investment

2

USD/SEK

­10%

+

373

Variable costs

57

EUR/SEK

­10%

+

409

Other

24

Interest rate

1 percentage point

+/­

60

Total

100

80

1) Includes translation and transaction effects.

Operational risks The ability of Electrolux to increase profitability and dividends to shareholders is largely dependent on how well the Group succeeds in developing new products and in maintaining cost-efficient production. Management of changes in commodity prices and components as well as managing restructuring are also vital factors for maintaining and increasing profitability.
A highly competitive market Electrolux operates in competitive markets, most of which are relatively mature. This means that demand is relatively stable, but price competition is strong in most product categories. In 2007, price competition was most apparent in the European market, largely because it is fragmented and features a large number of competitors. Price competition was also present in the North American market despite the much more consolidated structure of the market. Electrolux strategy is based on product innovation and brandbuilding, and one of its goals is to minimize and counteract price competition for the products it sells.
Customer exposure Consolidation among the Group's major customers, e.g., homeelectronics chains, has given retailers a stronger negotiating position, at the same time creating opportunities for higher growth. Sales to global and national retail chains have made a strong contribution to the growth of Electrolux, especially in the North American market. Consolidation of retailers has led to greater dependence on individual customers, leading to greater risk in terms of trade receivable and customer credit.

Electrolux has enough flexibility to meet variations in demand, as the proportion of fixed costs is relatively low, accounting for around 20% of total costs. The largest single cost item is purchases of materials and components.
An intensive phase of restructuring A large share of the Group's production is being relocated from high-cost countries to countries with lower cost levels. This is a complex process that requires managing a number of different activities and risks. Higher costs in connection with relocation may affect the income trend in a specific quarter. During relocation, Electrolux is also dependent on cost-efficient deliveries of components and half-finished goods from suppliers.
Commodities and components comprise the biggest cost In 2007, Electrolux purchased components and raw materials for approximately SEK 49 billion. Costs for raw materials amounted to approximately SEK 23 billion. The Group's raw materials exposure refers mainly to steel, plastics, copper and aluminum. Electrolux does not use financial instruments to hedge the purchase prices of raw materials. However, the price risk is managed in bilateral agreements with suppliers. A minor part of raw-material purchases are done at spot prices. The costs of raw materials rose by a total of approximately SEK 2 billion in 2007.
The Group has experienced significant increases in raw material costs over the last years. Those increases have mainly been compensated for through savings but also through higher sales prices.

Raw materials exposure

Price trend for steel

Carbon steel, 39% Stainless steel, 10% Copper and aluminium, 13%

EUR/1,000 kg 5,000
4,000

Carbon steel Stainless steel

Plastics, 22%
Other, 16%
In 2007, Electrolux purchased raw materials for approximately SEK 23 billion. Purchases of steel accounted for the largest cost.

3,000 2,000 1,000

Steel prices in Germany. The price on stainless steel has increased strongly during the past years.

0 03 04 05 06 07
81

risk

Financial risks and commitmens The Group's financial risks are managed within the framework of the financial and credit policies determined by the Board of Directors. Management of these risks is largely centralized to the Group's Treasury department and is based to a great extent on financial instruments. Accounting principles, risk management and risk exposure are described in greater detail in Notes 1, 2 and 17.
Exchange-rate exposure Operations in a number of countries throughout the world expose Electrolux to the effects of changes in exchange rates. These affect Group income through translation of income statements in foreign subsidiaries to SEK, i.e., translation exposure, as well as through exports of products and sales outside the country of manufacture, i.e., transaction exposure.
Translation exposure is related mainly to EUR and USD. Transaction exposure is greatest in EUR, USD, GBP and HUF. The Group's global presence and widespread production and sales enable exchange-rate effects to be balanced. A change by 10% in the value of each currency against SEK would have an affect on Group income in one year by appoximately SEK +/­ 500m. Changes in ex-change rates also affect Group equity. The difference between assets and liabilities in foreign currencies is subject to these exchange-rate changes and comprises a net foreign investment. At year-end 2007, the largest foreign net assets were in USD, EUR and HUF.
Foreign-exchange hedging The Group uses currency derivatives to hedge the exchange-rate exposure that arises. The estimated exchange-rate exposure is normally hedged for a period of six to twelve months. Exchangerate exposure arising from translation of results in foreign subsidiaries is not hedged. At year-end 2007, the market value of the Group's exchange-rate hedges related to transaction exposure amounted to SEK 61m.
In accordance with the Group's financial policy, a portion of foreign assets can also be hedged through borrowings in the currencies of the countries concerned, and through the use of currency derivatives. Exchange-rate profits and losses on net assets and hedges are taken directly to equity. Costs related to hedging are reported under net financial income. In 2007, costs for hedging foreign net assets amounted to SEK 75m.

Interest-rate risks At year-end 2007, external borrowings by Electrolux amounted to SEK 11,163m. The majority of these borrowings were in EUR and SEK. The average rate of interest on external borrowings at year-end was 5.8%. The average interest-fixing period at year-end was 0.2 years. On the basis of the volume of borrowings and the interestfixing period in 2007, a change of one percentage point in interest rates would have an impact of SEK +/-60m on Group income.
Pension commitments At year-end 2007, Electrolux commitments for pensions and employee benefits amounted to approximately SEK 21 billion. The Group manages pension funds in the amount of approximately SEK 14 billion. At year-end 2007, approximately 38% of these funds were placed in shares, 48% in bonds and 14% in other assets.
Changes in the value of assets and commitments year-on-year depend primarily on trends in the interest rates and stock markets. Changes in assumptions regarding average life expectancy and the costs of health care are also factors that affect commitments. Costs reported in the income statement for defined pensions and benefits amounted to approximately SEK 900m in 2007. During the year, approximately SEK 900m was paid in to the Group's pension funds.
Management of the Group's pension commitments is centralized to the Group's Treasury department in the interest of adequate control and cost-efficient management. The Group uses interest-rate derivatives to hedge a portion of risks related to pensions.
Other risks Changes in regulations and directives The EU directive effective from 2005 regarding electrical and electronic waste (WEEE) makes producers and importers responsible for recycling and treatment of such waste in connection with disposal.
Annual costs related to WEEE, when the directive is fully implemented in 2008, are estimated at approximately SEK 600m. This estimate is based on the Group's commitment to implementation of the directive and on the share of recycling in individual countries. A higher degree of recycling entails higher costs for WEEE, and vice versa. Electrolux has compensated for a large share of the costs by visibly including a surcharge in the price of the products concerned. In most European countries, a surcharge is permissible until 2011 for small appliances and until 2013 for large appliances. Surcharges will not be permitted after these dates.

Foreign-exchange transaction exposure, forecast 2008

SEKm EUR USD GBP HUF CAD AUD Other

Net flow ­5,610 ­4,770
3,420 ­2,390 1,900 1,690 5,760

Hedges 1,760 1,710
­1,690 1,370 ­910 ­720 ­1,520

Net ­3,850 ­3,060
1,730 1,020
990 970 4,240

82

sustainability

Sustainability ­ Policies, practices and performance

An important part of conducting business is to meet and exceed environmental and social expectations and maintain high standards of ethical conduct. Responsibility for achieving this is integrated in all aspects of Group operations ­ including product development, manufacturing, purchasing, consumer communication and dialogue with stakeholders.

Priorities include energy efficiency and material use, both in operations and products, as well as ensuring a responsible approach to managing employees, the supply chain and restructuring.
Policies and organization The Electrolux Code of Ethics encompasses rules of conduct for the Group's relations with employees, shareholders, business partners and other stakeholders.
Elements of the Electrolux Code of Ethics are described in greater detail in the Workplace Code of Conduct, the Policy on Countering Corruption and Bribery and the Electrolux Environmental Policy. All of the above are based on universal standards of business practice, including the International Labor Organization and the OECD Guidelines for Multinational Enterprises. They also reflect the Electrolux commitment to the ten principles of the United Nations Global Compact. All of the above policies have been endorsed by Group management.
Each business sector is responsible for the implementation of Group policies. Suppliers are expected to comply with the Environmental Policy and Workplace Code of Conduct. Electrolux applies a risk-based approach to the assessment of the Group's own operations and suppliers. The overall objective is to ensure that Electrolux products are manufactured under acceptable working conditions, both within and outside the Group.

Group Sustainability Affairs supports business sectors with expertise, training, issue identification and monitoring. It is organized under Group Staff Communications and Branding.
To compensate for changes in structure during 2007, and to enable comparisons over time, data from previous years have been revised to reflect the current structure of the Electrolux Group.
Environmental activities Based on a life cycle analysis, the greatest potential for Electrolux to contribute to the environment lies in improving product efficiency during use. For this reason, Electrolux develops and promotes products with outstanding environmental performance. The Group focuses on resource efficiency in manufacturing and also responds promptly to proposed legislation as well as changes in existing laws.
Environmental policy The Electrolux Environmental Policy outlines the Group's commitment to improve environmental performance in production, product use and disposal. The policy prescribes a proactive approach to legislation.

Direct economic value

SEKm Revenues

2007

2006

105,167 104,571

Economic value distributed Operating costs Employee wages and benefits Payments to providers of capital¹) Payments to government Community investments Economic value retained

80,915 80,318 16,857 16,924
1,748 2,968 1,110 1,177 Not collated on Group level 4,537 3,184

1) In addition, redemption of shares.

5,582 2,194

The direct economic value is defined as the net sales plus revenues from financial investments and sales of assets.

Life-cycle impact

Life-cycle cost

Material supply, 22% Manufacturing, 2% Transportation, 0.2% Energy supply, 72% Water supply, 4%

Material supply, 22%

PuTrhcheapsuercohsats,e39p%rice

Manufacturing, 2%

Enotehfratgenynh(auacslfecoopfuhtnahtsesetf)oo, t2ra4lel%lsifse

Transportation, 0.2%

Wcatyecrle(ucsoespth. aEsffiec),ie3n7t%

Energy supply, 72%

appliances generate both economic and

Water supply, 4%

environmental savings.

The diagrams are based

on data from washing

Purchase cost, 39%

machines sold in Europe. Source: Öko-Institut e.V. eco-

Energy (use phase), 24% efficiency analysis of washing machines (2004).
Water (use phase), 37%

83

sustainability

Environmental performance of products Electrolux has a long tradition of continuously reducing water and energy consumption in the use phase. Improved environmental performance also means lower lifetime operating costs for consumers and thus plays a role in marketing and product development (see graphs "Life-cycle impact" and "Life-cycle cost").
Today, a typical new washing machine uses 40% less energy and 60% less water than 1990' models. A refrigerator uses up to 60% less energy. The German research organization Öko Institut contends that it is environmentally advantageous to replace an old refrigerator with a more efficient alternative already after three years.
One of the Group's objectives is to accelerate the replacement of old products. Due to long product life-cycles, there is a gap between the energy efficiency of appliances currently used by households and those that are available on the market. Together with a responsible recycling program, this benefits the environment and also generates value for the Group. The most efficient products sold in Europe account for a higher share of gross profit.
Materials restricted for use in products Substances used in Electrolux products shall not be hazardous to employees in production nor to end-users, and shall not harm the environment. Products must be in line with market expectations and shall not adversely affect "end-of-life" properties.
The purpose of the Electrolux Restricted Materials List (RML) is to avoid substances in products that do not comply with the above criteria. The requirements outlined in the RML apply to both suppliers and Group production facilities.
The RML is designed to accommodate the trend toward increased regulation of chemicals in markets worldwide. These include the EU Directive on the Restriction of the use of certain Hazardous Substances in electrical and electronic equipment (RoHS) and EU regulation on the Registration and Evaluation of Chemical substances (REACH).

Tracking applications of substances considered potentially hazardous enables the Group to respond to new scientific findings or regulations.
Environment in operations The Group works continuously to reduce consumption of energy and water at production sites, and to achieve high rates of utilization of purchased material and components.
Group Management has stipulated that an environment management system is to be implemented for each business sector's entire operation. All manufacturing units with at least 50 employees are mandated to be certified according to ISO 14001. Newly acquired units must complete the certification process within three years after acquisition.
Manufacturing data covers 98% of the majority-owned production facilities worldwide, unless otherwise indicated. Since the degree of environmental impact is dependent on the volume of production, some indicators are calculated in relation to added value, which is defined as the difference between total production cost and the cost of direct material.
The Group is stepping up efforts to improve energy use within its own operations, thereby saving measurable CO emissions
2
and operational costs. Electrolux has set a target to cut energy use by 15% group-wide by year-end 2009.
The three-year target equates to a CO reduction of 100,000 2
tons. It is based on Group consumption levels of approximately 1.8 TWh of energy (2005 consumption data). Benefits of meeting this target extend beyond cutting carbon emissions. It also has a savings potential of approximately SEK 100m per year.
Environmental legislation Environmental legislation in Europe often sets precedents for other markets, especially regarding the use of hazardous substances and producer responsibility.

Fleet average

ISO 14001 certification

%

%

100

2003

100

Share of factories with more

2004

than 50 employees that have

80

80

certified ISO 14001 environ-

2005

mental management systems.

60

2006

60

2007

40

40

The reduction in energy con-

20

sumption for products sold in

20

Europe, with energy index set

0

at 100% in the year 2002.

0

Refrigerators/ Dish-

Washing

97 98 99 00 01 02 03 04 05 06 07

84

freezers

washers machines

Use of hazardous substances (RoHS Directive) The EU Directive on Restriction of Hazardous Substances (RoHS) bans placement on the European market of electrical or electronic equipment containing lead, mercury, cadmium, hexavalent chromium and two groups of brominated flame retardants (PBB and PBDE), with a limited number of exceptions. The Directive has been introduced at the national level by EU member states as well as by Norway and Iceland.
Electrolux has adopted a stringent interpretation of the Directive. A comprehensive group-wide program has been in place since 2003 to identify cost-effective alternative components and manufacturing methods. A monitoring program also helps ensure supplier compliance.
Producer responsibility (WEEE Directive) The EU Directive on Waste Electrical and Electronic Equipment (WEEE) defines producer responsibility for collection from collection points, treatment and disposal of electrical and electronic products.
The Directive stipulates that producers and importers have producer responsibility for products put on the market. The target for material recovery is 80% for large household appliances and 70% for small appliances. As of 2007, all member states, as well as Norway and Croatia have transposed the Directive. In Switzerland, WEEE-related legislation is also in place. Electrolux is compliant in all these countries.
In order to manage recycling in large volume countries cost efficiently, Electrolux organizes its producer responsibility through a jointly owned company, European Recycling Platform, in eight states in 2007. In other countries, the Group works through national compliance schemes initiated by industry associations.
Producer responsibility for Electrolux currently covers products representing a volume of 480,000 tons. The volume of returned products will increase in 2008 as a result of full implementation in Italy and the UK.

The cost of recycling for Electrolux in 2007 was almost entirely recovered through visible fees that have been charged with the price of products. The estimated annual cost for Electrolux will be approximately SEK 600m, when all countries have fully implemented the Directive.
Registration of chemicals (REACH) The new EU regulation on Registration of Chemicals (REACH) and their safe use entered into force in June 2007.
Manufacturers and importers of finished products are required to gather information on the substances used in their products, as well as information that will help them manage chemicals safely. This data must also be registered in a central database.
In 2007, Electrolux in Europe established a central chemical office to effectively manage the implementation of the REACH legislation.
Energy legislation and product labeling Energy efficiency and product labeling are core issues for the Group, and for the appliance industry as a whole. In the Group's major markets, Europe and North America, regulations require that most products in the Electrolux portfolio bear a label indicating the product's energy efficiency and consumption levels. By communicating this to the consumer, it becomes a relevant factor in purchasing decisions. Similar labeling regulations exist in Australia, Brazil, China, India, Japan and Mexico.
The Group's products are within regulatory limits and are represented in the highest energy-efficiency classes. Electrolux is prepared for upcoming, more stringent Energy Star and energyefficiency standards in the EU and the US.
Electrolux qualified for US energy-tax credits for the sale of Energy Star appliances. The credits are available for Energy Star appliances made in the US in 2006 and 2007.

Direct material balance

Total energy/added value

kWh/kSEK

Data from 53 manufacturing units, %

2007

2006

2005

2004

2003

150

Manufacturing data covers 98% of

Finished products (incl. packaging) 91.92 91.74 92.28 91.41 90.89

Material and energy recycling (external) 7.09

7.24

6.54

7.25

7.91

130

Waste to landfill (non-hazardous) Hazardous waste

0.82 0.83 0.97 0.15 0.17 0.19

1.1 0.95 110
0.2 0.19

the majority-owned production facilitites world-wide, unless otherwise indicated. Since the degree of environmental impact is dependent on the volume of

Emission to air Emission to water Total incoming material

0.016 0.025 0.02 0.034 0.046 90
0.001 0.003 0.003 0.003 0.006

100 100 100 100 100

70

production, some indicators are calculated in relation to added value, which is defined as the difference between total production

In 2007, the high utilization of material in production was maintained.

50 98 99 00 01 02 03 04 05 06 07

cost and the cost of direct material.

85

sustainability

Workplace Code of Conduct The Electrolux Workplace Code of Conduct defines high employment standards for all Electrolux employees in all countries and business sectors as well as for all subcontractors. The Code incorporates issues such as child and forced labor, health and safety, workers' rights and environmental compliance.
Ethical employer and business partner The Group has established policies and procedures aimed at guaranteeing fair business practices and consistent monitoring of related performance in regard to social responsibility.
Workplace Code of Conduct In 2007, Code of Conduct training was conducted for human resource, purchasing and other managers in Asia/Pacific, Poland and Brazil. Electrolux Brazil also initiated a local program to inform all Electrolux employees in the country about the global standards in the Code.
The process of reviewing internal Code of Conduct performance continued in 2007. Units in Thailand and China have been audited on-site by internal specialists. In addition, audits in Mexico and Romania were conducted by third parties.
Internal communication and monitoring The Group has developed an electronic assessment tool, Awareness-Learning-Feedback-Assessment (ALFA), in order to support internal implementation of the Workplace Code of Conduct and to continuously monitor Electrolux units regarding compliance.
In 2007, the ALFA tool was deployed in all Electrolux business sectors to measure how units have progressed in their work with the Code. Business sectors receive feedback as well as suggestions for areas of improvement.

Health and safety Individual business sectors are responsible for ensuring that health and safety is effectively managed. Local units are responsible for taking action and reporting data in accordance with local laws.
The performance of individual units is monitored and evaluated at Group level in several ways. The ALFA tool is used to assess the current status of health and safety as well as related management practices.
At Electrolux factory facilities, health and safety is monitored through the Electrolux Manufacturing System (EMS).
Responsible sourcing The Electrolux Responsible Sourcing Program helps ensure that suppliers live up to the values defined in the Electrolux Code of Conduct and Environmental Policy. In 2007, the program placed particular focus on activities in Asia. Follow-up audits were carried out with all active Chinese suppliers that were audited in 2005 and 2006. A reduction in the number of non-conformances was recorded in 2007. Training of purchasers and commodity managers was also conducted in China, Thailand and Sweden. The program in Asia will be extended to Latin America and Eastern Europe in 2008.
Restructuring To stay competitive and access new markets, Electrolux is shifting location of production. A decision to close factories or downsize production affects individuals and communities. Responsibly managing the consequences of these decisions is an Electrolux priority.
When a factory restructuring is under evaluation, a procedure is followed, adapted to local needs and priorities. A wide range of stakeholders are consulted, including labor union representatives, local, regional and national politicians and government authorities.

Treated water/added value
m3/kSEK 0.5 0.4 0.3
0.2 0.1
0 98 99 00 01 02 03 04 05 06 07
86

CO added value 2

kg/kSEK 45 40 35 30 25 20
98 99 00 01 02 03 04 05 06 07

The Group's CO2 emissions per added value decreased
slightly between 2006 and
2007.

During 2007, factory closures were announced for Fredericia (Denmark) and Spennymoor (United Kingdom). In addition, Electrolux has completed the closure of facilities in Nuremberg (Germany), Adelaide (Australia) and Torsvik (Sweden), that was announced in 2006. Approximately 650 employees were affected. The restructuring procedure was applied at all decisions. Employees were offered pre-retirement schemes, training programs and career coaching that were tailored to their situations.
Setting up operations in emerging economies brings positive changes to local communities. It creates indirect impacts by prioritizing local suppliers, encouraging global suppliers to establish a presence, and by transfering cutting edge technologies to new markets.
Consumer safety and quality assurance Both consumer safety and quality assurance are included in procedures for evaluating suppliers, product design, selecting materials, testing finished products and monitoring product performance.
The Group has a comprehensive system for collecting information on all safety-related incidents and analyzing them to identify root causes and effects. The majority of these incidents do not represent any risk for the consumer.
Analyses of safety-related incidents have provided the Group with an understanding of how accidents occur. This expertise is integrated in all product development. If analysis reveals a potential problem, the matter is brought to a Sector Product Safety Advisory Committee for evaluation and advice on corrective measures, if needed.
In order to qualify for use, components and products sourced from external suppliers are subject to a 20 step procedure.
Before a product designed by Electrolux goes into production it is subject to a number of qualification tests and quality assurance

activities. It is systematically tested throughout production to ensure that it complies with safety and quality criteria. The customer's experience with the product is followed up through the Electrolux Quality Evaluation System. Knowledge gained is fed back into design and production processes.
Sustainability on the web · Electrolux 2007 Sustainability Report (May, 2008) · Complete formulations of Electrolux codes and policies · Communication on Progress, a report on how Electrolux applies
the ten principles of the UN Global Compact · Global Reporting Initiative (GRI) cross-reference (May, 2008) · Environmental and social responsibility performance indicators · Restricted Materials List (RML) · Environmental legislation affecting the Group's operations
www.electrolux.com/sustainability

ALFA evaluations group-wide

Health and safety

Production units Offices/warehouses Total

Sent to 54 89
143

Responses 54 89
143

Number of work-related injuries¹) Number of workdays lost due to occupational injuries¹) Number of work-related fatalities2)

2007 17.7 251
1

2006 13.9 275
0

Includes all factories and warehouses with more than 30 employees.

1) Per million hours worked. 2) A maintenance worker fatality occured on July 19, 2007, in Nyíregyhaza,
Hungary.

The table illustrates key health and safety data for the Group´s operations. In 2007, data was collected covering 53 production facilities and 22 warehouses corresponding to 44,552 employees. The total number of work-related injuries was 1,386 during 2007.
87

corporate governance report
Corporate governance report 2007

The governance of Electrolux is based on the Swedish Companies Act and the regulatory system of the OMX Nordic Exchange Stockholm, including the Code of Corporate Governance (the "code"), as well as other relevant Swedish and foreign laws and regulations.
Electrolux applies the code. This corporate governance report is drawn up as a part of the application. The report has not been audited by the Group's external auditors.
Electrolux does not report any deviations from the code in 2007, except as regards the composition of the Board's Remuneration Committee, see page 91 for additional information.

Highlights of 2007
· Three new members in Group Management.
· Electrolux deregistered from the U.S. Securities and Exchange Commission (SEC). The ADR facility remains.
· Following deregistration from the SEC, work on internal control is continuing in the form of Electrolux Control System (ECS).
· The Annual General Meeting elected Marcus Wallenberg as new Chairman of the Board.
· Capital was distributed to shareholders by redemption of shares.

Governance structure

Shareholders by General Meetings

External Audit

Board of Directors

President and Group Management

Risk Management Board Treasury Board Audit Board IT Board Tax Board

Internal Boards

Brand Leadership Group Global Product Councils Purchasing Board Human Resources Executive Board Disclosure Committee

Business Sector Boards

88

Nomination procedure
Audit Committee Remuneration Committee Ad hoc committees

Internal Audit

Major external regulations affecting governance of Electrolux · Swedish Companies Act · Listing agreement with OMX Nordic Exchange Stockholm · Swedish Code of Corporate Governance · Listing agreement with London Stock Exchange
Internal policies and codes include · Board of Directors' working procedures · Electrolux Code of Ethics · Electrolux Policy on Countering Bribery and Corruption · Electrolux Workplace Code of Conduct · Policies for information, finance, credit, accounting manual, etc. · Processes for internal control and risk management

The Electrolux Group comprises more than 180 companies with operations in over 50 countries worldwide. The parent company of the Group is AB Electrolux, a Swedish limited liability company, registration number 556009-4178. The registered office of the Board of Directors is in Stockholm, Sweden, and the registered address of the company is S:t Göransgatan 143, SE-105 45 Stockholm.

Ownership structure Electrolux shares are registered in the share register kept by the Swedish Central Securities Depository & Clearing Organization (VPC AB). According to the share register at year-end 2007, the Group had a total of approximately 52,700 shareholders.
Investor AB is the largest shareholder, with 11.9% of the share capital and 28.2% of the voting rights. Most of the shares owned by foreign investors are held through foreign banks or other trustees. This means that the actual owners are not displayed in the share register held by VPC.
Swedish institutions and mutual funds, 54% Foreign investors, 38% Private Swedish investors, 8%
At year-end, about 38% of the total share capital was owned by foreign investors.
Source: SIS Ägarservice as of December 31, 2007.
The total number of Electrolux shareholders in Sweden at yearend was approximately 49,800.
Information on shareholders and their holdings is updated quarterly at the Group's web site, www.electrolux.com/corpgov.

Major shareholders
Investor AB Barclays Global Investors Alecta Pension Insurance Swedbank Robur Funds Fourth Swedish National Pension Fund Second Swedish National Pension Fund Didner & Gerge Mutual Fund AMF Pension SEB Funds Handelsbanken/SPP Investment Funds Total, ten largest shareholders Board of Directors and Group Management, collectively

Share capital, % 11.9 10.0 7.8 2.9 1.8 1.6 1.5 1.5 1.4 1.3 41.7
0.05

Source: SIS Ägarservice as of December 31, 2007. The figures have been rounded off.

Voting rights, % 28.2 7.8 7.2 2.3 1.4 1.3 1.2 1.1 1.1 1.1 52.7
0.04

Voting rights The share capital of AB Electrolux consists of A-shares and B-shares. An A-share entitles the holder to one vote and a B-share to one-tenth of a vote. All shares entitle the holder to the same proportion of assets and earnings and carry equal rights in terms of dividends.
Nomination procedure for election of Board members and auditors The nomination process for members of the Board of Directors involves appointing a Nomination Committee consisting of six members. The Committee should consist of one representative of each of the four largest shareholders in the company with regard

to the number of votes held who wish to appoint such representatives, together with the Chairman of the Board (who should convene the first meeting) and one additional director. The additional director shall be appointed by the Board among the directors who are independent in relation to the company.
The Nomination Committee shall be composed based on shareholder statistics from VPC as of the last banking day in April in the year prior to the AGM and other reliable shareholder information, which has been provided to the company at such time. The names of the representatives and the names of the shareholders they represent shall be announced as soon as they have been appointed. If the shareholder structure changes during the nomination process, the composition of the Nomination Committee may be adjusted accordingly.
The Nomination Committee's tasks include preparing a proposal for the next AGM regarding the following issues: · Chairman of the AGM · Board members · Chairman of the Board · Remuneration of individual Board members · Remuneration for committee work · Nomination Committee for the next year
The Nomination Committee is also entrusted with submitting proposals to the AGM on the election of auditors and auditors' fees, when these matters are to be decided by the following AGM. The Nomination Committee is assisted in this regard by the Audit Committee, which evaluates the auditors' work and informs the Nomination Committee of its findings.
The Nomination Committee's proposals as well as a report on how the Nomination Committee has conducted its work will be publicly announced no later than the date of notification of the AGM. Shareholders may submit proposals for nominees to the Nomination Committee.
Nomination Committee for the AGM 2008 The Nomination Committee for the AGM in 2008 was composed on the basis of the share register as of April 30, 2007, and was announced in a press release on May 31, 2007.
The Nomination Committee members are: · Petra Hedengran, Investor AB, Chairman · Ramsay J. Brufer, Alecta Pension Insurance · Marianne Nilsson, Swedbank Robur Funds · Rune Andersson, Mellby Gård AB · Marcus Wallenberg, Chairman of Electrolux · Peggy Bruzelius, Deputy Chairman of Electrolux
As of February 5, 2008, no changes in the composition of the Committee had occurred. Shareholders who wish to submit proposals to the Nomination Committee should send an e-mail to [email protected].
General Meetings of shareholders The decision-making rights of shareholders in AB Electrolux are exercised at General Meetings of shareholders.
Participation in decision-making requires the shareholder's presence at the meeting, either personally or through a proxy. In addition, the shareholder must be registered in the share register as of a prescribed date prior to the meeting and must provide notice of participation in due course. Additional requirements for participation apply for shareholders with holdings in the form of

89

corporate governance report

ADRs or similar certificates. Holders of such certificates are advised to contact the ADR depositary bank, the fund manager or the issuer of the certificate in good time before the meeting in order to obtain additional information.
Decisions at the meeting are normally made by simple majority. However, for some matters the Swedish Companies Act stipulates that a proposal must be approved by a higher proportion of the shares and votes represented at the meeting.
Individual shareholders who wish to have a specific issue included in the agenda of a shareholders' meeting can request the Electrolux Board to do so in good time prior to the meeting by mail to an address that is posted at the Group's web site.
The AGM is held annually in Stockholm, Sweden, during the first half of the year. The meeting decides on adoption of the annual report, dividend, remuneration to Board members and auditors, election of Board members and auditors, if applicable, guidelines for remuneration to Group Management and other important matters.
The AGM on April 16, 2007, was attended by shareholders representing 39.2% of the share capital and 52.0% of the voting rights in the Company. The minutes of the AGM are available at www.electrolux.com/corpgov. The AGM decided, inter alia, to adopt the Board's proposal for a dividend of SEK 4 per share and to approve the Nomination Committee's proposal for Marcus Wallenberg as new Charirman. All Board members as well as the Group's auditor in charge were present at the meeting.
Extraordinary General Meetings (EGM) may be held at the discretion of the Board of Directors or, if requested, by the auditors or by shareholders owning at least 10% of the shares.
The Board of Directors The Board's tasks The main task of the Electrolux Board of Directors is to manage the Group's affairs in such a way as to satisfy the owners that their interests in terms of a long-term good return on capital are being met in the best possible way. The Board's work is governed by rules and regulations that include the Swedish Companies Act, the Articles of Association, the code, and the working procedures established by the Board.
The Board decides on issues related to the Group's main goals, strategic orientation and major policies, as well as important issues related to financing, investments, acquisitions and divestments. The Board monitors and deals with, inter alia, follow-up and control of Group operations, Group communication, and organization, including evaluation of the Group's operative management. The Board has responsibility for the appointment and, if necessary, dismissal of the President. The Board also has overall responsibility for establishing an effective system of internal control and risk management.
Working procedures and meetings The Board determines its working procedures each year and reviews them when necessary. The working procedures describe the Chairman's special role and tasks, as well as the responsibilities delegated to the committees appointed by the Board. In accordance with the procedures, the Chairman shall ensure that the Board functions effectively and discharges its duties. The Chairman shall also organize and distribute the Board's work, and ensure that the Board's decisions are implemented effectively and that the Board evaluates its work annually.

The working procedures for the Board of Directors also include detailed instructions to the President and other corporate functions regarding issues that require the Board's approval. Among other things, these instructions specify the maximum amounts that various decision-making functions within the Group are authorized to approve regarding credit limits, capital expenditure and other outlays.
The working procedures stipulate that the meeting for formal constitution of the Board shall be held directly after the AGM. Decisions at this meeting include election of Deputy Chairman and authorization to sign for the Company. The Board normally holds six other ordinary meetings during the year. Four of these meetings are held in connection with publication of the Group's annual and interim reports. One or two meetings are held in connection with visits to Group operations. Additional meetings, including telephone conferences, are held when necessary.
Ensuring quality in financial reporting The working procedures determined annually by the Board include detailed instructions on what type of financial reports and similar information are to be submitted to the Board. In addition to interim reports and the annual report, the Board reviews and evaluates comprehensive financial information regarding the Group as a whole and the entities it comprises.
The Board also reviews, primarily through the Group's Audit Committee, the most important accounting principles applied by the Group in financial reporting, as well as major changes in these principles. The tasks of the Audit Committee also include reviewing reports regarding internal control and processes for financial reporting, as well as internal audit reports submitted by the internal audit function, Management Assurance & Special Assignments.
The Group's external auditors report to the Board as necessary, but at least once a year. At least one of these meetings is held without the presence of the President or any other member of Group Management. The external auditors also attend meetings of the Audit Committee.
The Audit Committee reports to the Board after all its meetings. Minutes are taken at all meetings of the Audit Committee and are made available to all Board members and the auditors.
Evaluation of the Board's activities The Board evaluates its activities annually with regard to working procedures and the working climate, as well as the alignment of the Board's work. The evaluation also focuses on access to and requirements for special competence. The evaluation is a tool for the development of the Board's work and also serves as input for the Nomination Committee's nomination process.
The Deputy Chairman of the Board also manages a separate annual evaluation of the Chairman's work.
Composition of the Board The Electrolux Board of Directors consists of nine members without deputies, who are elected by the Annual General Meeting for a period of one year. Three additional members, with deputies, are appointed by the Swedish employee organizations, in accordance with Swedish labor laws.
With the exception of the President, the members of the Board are non-executives. Four of the nine members are not Swedish citizens.

For additional information on Board members, see www.electrolux.com/board_of_directors.aspx and page 92.

90

Composition of the Board1)
Marcus Wallenberg Chairman of the Board Peggy Bruzelius Deputy Chairman of the Board Louis R. Hughes John S. Lupo Johan Molin Hans Stråberg President and CEO Caroline Sundewall Torben Ballegaard Sørensen Barbara Milian Thoralfsson Ola Bertilsson Employee representative Gunilla Brandt Employee representative Ulf Carlsson Employee representative Total

Nationality
SE
SE US US SE

Independence2)
No
Yes Yes Yes Yes

Audit

Remuneration

Total remu-

Committee Committee

neration, SEK3)

·

1,550,000

· ·

675,000 487,500 437,500 437,500

SE

No

SE

Yes

DK

Yes

US

Yes

SE

--

· ·
·

-- 512,500 512,500 537,500
--

SE

--

--

SE

--

-- 5,150,000

· Chairman · Member
1) For the period from the AGM 2007 to the AGM 2008. 2) According to the Nomination Committee prior to the AGM 2007. For more information, see Independence below. 3) For more information, see Remuneration to Board members below.

Participation 2007 Board meetings Committee meetings

100%

100%

100% 100% 100%
88%

100% 90%

100% 100%
88% 100%

100% 100% 100%

100%

100%

100%

Independence The Board is considered to be in compliance with the requirements for independence stipulated by the OMX Nordic Exchange Stockholm and the Swedish Code of Corporate Governance. All directors elected by the AGM, with the exception of Marcus Wallenberg (Chairman) and Hans Stråberg (President), have been considered independent by the Nomination Committee prior to the AGM 2007, both in relation to major shareholders of Electrolux and in relation to Electrolux and the management of the company.
Marcus Wallenberg has not been considered independent, neither in relation to the major shareholders in Electrolux, nor in relation to the company or the management of the company. Marcus Wallenberg is, inter alia, Chairman of the Board of Directors of SEB, Skandinaviska Enskilda Banken, with which bank Electrolux has extensive business relations.
Hans Stråberg has been considered independent in relation to major shareholders of Electrolux, but not, in his capacity as President and CEO, in relation to the Company and the management of the Company. Hans Stråberg has no major shareholdings, nor is he a part-owner in companies that have significant business relations with Electrolux. As already mentioned, Hans Stråberg is the only member of Group Management with a seat on the Board.
Remuneration to Board members Remuneration to Board members is authorized by the AGM and distributed to the Board members who are not employed by the Group. Remuneration to Board members in accordance with the decision of the AGM on April 16, 2007, is as follows:
· Chairman of the Board: SEK 1,500,000 · Deputy Chairman of the Board: SEK 500,000 · Director: SEK 437,500

· Chairman of the Audit Committee: SEK 175,000 · Member of the Audit Committee: SEK 75,000 · Chairman of the Remuneration Committee: SEK 100,000 · Member of the Remuneration Committee: SEK 50,000
Remuneration to the President is proposed by the Remuneration Committee and authorized by the Board of Directors. Board members who are not employed by Electrolux are not invited to participate in the Group's long-term incentive programs, nor in any outstanding share or share-price incentive schemes.
The Board of Directors adopted after the AGM in 2006, upon the recommendation of the Nomination Committee, a policy according to which the members of the Board of Directors each year shall use 25% of the remuneration, net of taxes, for purchase of shares in Electrolux. The intention is that shares that are acquired for part of the director's remuneration shall be kept for as long as the Board member remains a member of the Board. This policy remained in place in 2007.
For additional information on remuneration to Board members, see Note 27 on page 61.
Changes in the Board in 2007 · The AGM in April 2007 elected Marcus Wallenberg as new
Chairman of the Board after Michael Treschow's decision to decline re-election. · John S. Lupo, Johan Molin and Torben Ballegaard Sørensen were elected as new directors. · The meeting for formal constitution of the Board re-elected Peggy Bruzelius as Deputy Chairman. · Barbara Milian Thoralfsson was elected as Chairman of the Remuneration Committee. · On the Audit Committee, Torben Ballegaard Sørensen joined as a new member.

91

corporate governance report

Board of Directors

Marcus Wallenberg, Chairman Born 1956. B. Sc. Elected 2005. Board Chairman of SEB, Skandinaviska Enskilda Banken AB, Saab AB and ICC (International Chamber of Commerce). Deputy Chairman of Telefonaktiebolaget LM Ericsson. Board Member of AstraZeneca Plc, Stora Enso Oyj, Foundation Asset Management AB and The Knut and Alice Wallenberg Foundation. Previous positions: President and CEO of Investor AB, 1999­2005. Executive Vice-President of Investor AB, 1993­1999. Holdings in AB Electrolux: 20,000 B-shares. Related party: 1,500 B-shares.
Peggy Bruzelius, Deputy Chairman Born 1949. M. Econ. Hon. Doc. in Econ. Elected 1996. Board Chairman of Lancelot Asset Management AB and Swedish National Agency for Higher Education. Board Member of Axfood AB, Industry and Commerce Stock Exchange Committee, Axel Johnson AB, Akzo Nobel nv, Scania AB, Husqvarna AB, Syngenta AG and The Association of the Stockholm School of Economics. Previous positions: Executive Vice-President of SEB, Skandinaviska Enskilda Banken AB, 1997­1998. President and CEO of ABB Financial Services AB, 1991­1997. Holdings in AB Electrolux: 6,500 B-shares.
Louis R. Hughes Born 1949. B.S., Mech. Eng., M.B.A. Elected 2005. Board Chairman and CEO of GBS Laboratories, USA. Non-executive Chairman of Maxager Technology. Board Member of ABB Ltd, AkzoNobel nv, and Sulzer AG. Member of the Supervisory Board of MTU Aero Engines Holding AG. Board Member of AB Electrolux 1996 until 2004, when he was appointed Chief of Staff for a group of senior US government advisors to the Afghanistan government. Member of the British Telecom US Advisory Council. Previous positions: Executive Vice-President of General Motors Corporation, 1992­2000. Holdings in AB Electrolux: 1,260 ADRs.
John S. Lupo Born 1946. B.Sc. Elected 2007. Principal of Renaissance Partners, USA, since 2000. Board Member of Spectrum Brands Inc., Citi Trends Inc. and Cobra Electronics. Previous positions: Executive Vice-President of Basset Furniture, 1998­2000. Chief Operating Officer of Wal-Mart International, 1996­1998. Senior Vice-President Merchandising of Wal-Mart Stores Inc., 1990­1996. Holdings in AB Electrolux: 200 ADRs.

Johan Molin Born 1959. B.Sc. in Econ. Elected 2007. President and CEO of ASSA ABLOY AB since 2005. Board Member of ASSA ABLOY AB. Previous positions: CEO of Nilfisk-Advance, 2001­2005. President of Industrial Air Division, Atlas Copco Airpower, Belgium, 1998­2001. Management positions in Atlas Copco, 1983­2001. Holdings in AB Electrolux: 1,000 B-shares.
Hans Stråberg, President and CEO Born 1957. M. Eng. Elected 2002. President and CEO of AB Electrolux since 2002. Board Member of The Association of Swedish Engineering Industries, AB Ph. Nederman & Co., Nederman Holding AB and Roxtec AB. Previous positions: Joined Electrolux in 1983. Management positions in the Group until appointed President and CEO. Holdings in AB Electrolux: 39,590 B-shares, 90,000 options.
Caroline Sundewall Born 1958. M.B.A. Elected 2005. Independent Business consultant since 2001. Board Member of Swedbank AB, TeliaSonera AB, Haldex AB, Lifco AB, Pågengruppen AB, Ahlsell AB, Getupdated AB and The Association of Exchangelisted Companies. Previous positions: Business commentator at Finanstidningen, 1999­ 2001. Managing editor of the business desk section at Sydsvenska Dagbladet, 1992­1999. Business controller at Ratos AB, 1989­1992. Holdings in AB Electrolux through company: 2,000 B-shares.
Torben Ballegaard Sørensen Born 1951. M.B.A. Elected 2007. Board Member of Egmont Fonden and LEGO A/S, Denmark. Previous positions: President and CEO of Bang & Olufsen a/s, 2001­2008. Executive Vice-President of LEGO System, 1999­2001. Divisional Director of LEGO System, 1996­1999. Managing Director of CCI Europe, 1988­1996. Managing Director of AA S Grafik, 1983­1988. Holdings in AB Electrolux: 0 shares.
Barbara Milian Thoralfsson Born 1959. M.B.A., B.A. Elected 2003. Director of Fleming Invest AS, Norway, since 2005. Board Member of SCA AB, Storebrand ASA, Tandberg ASA, Rieber & Søn ASA, Fleming Invest AS, Stokke AS and Norfolier AS. Previous positions: President of TeliaSonera Norway, 2001­2005. President of Midelfart & Co, 1995­2001, and on positions within marketing and sales, 1988­1995. Holdings in AB Electrolux through company: 4,000 B-shares.

Employee representatives, members

Employee representatives, deputy members

Ola Bertilsson Born 1955. Representative of the Swedish Confederation of Trade Unions. Elected 2006. Holdings in AB Electrolux: 0 shares.

Gerd Almlöf Born 1959. Representative of the Federation of Salaried Employees in Industry and Services. Elected 2007. Holdings in AB Electrolux: 0 shares.

Gunilla Brandt Born 1953. Representative of the Federation of Salaried Employees in Industry and Services. Elected 2006. Holdings in AB Electrolux: 0 shares.

Peter Karlsson Born 1965. Representative of the Swedish Confederation of Trade Unions. Elected 2006. Holdings in AB Electrolux: 0 shares.

Ulf Carlsson Born 1958. Representative of the Swedish Confederation of Trade Unions. Elected 2001. Holdings in AB Electrolux: 0 shares.

Bengt Liwång Born 1945. Representative of the Federation of Salaried Employees in Industry and Services. Elected 2005. Holdings in AB Electrolux: 0 shares.

Secretary of the Board

Auditors

Cecilia Vieweg Born 1955. B. of Law. General Councel of AB Electrolux. Secretary of the Electrolux Board since 1999. Holdings in AB Electrolux: 7,823 B-shares, 15,294 options.

Peter Clemedtson PricewaterhouseCoopers AB Born 1956. Authorized Public Accountant. Partner in Charge. Other audit assignments: Telefonaktiebolaget LM Ericsson and SEB, Skandinaviska Enskilda Banken AB. Holdings in AB Electrolux: 0 shares.

At the Annual General Meeting in 2006, PricewaterhouseCoopers (PwC) was re-elected as auditors for a four-year period until the Annual General Meeting in 2010.

Holdings in AB Electrolux as of December 31, 2007. 92

The Board's work in 2007 During the year, the Board held eight scheduled and one extraordinary meeting. In addition, three per capsulam meetings were held to decide on urgent matters. Seven of the scheduled meetings were held in Stockholm and one in Poland. In connection with the latter, the Board visited one of Electrolux plants in Poland, as well as several retailers.
Each scheduled Board meeting includes a review of the Group's results and financial position as well as the outlook for the following quarters, which is presented by the President and CEO. The meetings also deal with investments and the establishment of new operations, as well as acquisitions and divestments. The Board decides on all investments that exceed SEK 50m, and receives reports on all investments between SEK 10m and SEK 50m. Normally, the head of a sector also reviews a current strategic issue at the meeting.
The Group's auditors attended the Board meeting held in February 2007, which approved the Annual Report for 2006. All Board meetings during the year followed an approved agenda, which together with documentation for each item was sent to all Board members in advance of the meeting. Cecilia Vieweg, Head of Group Staff Legal Affairs, was the secretary at all Board meetings.
Major Board topics in 2007 Major topics dealt with by the Board in 2007 comprised: · Development of the Group's strategy and organization · Restructuring, primarily in terms of relocation of production · Deregistration from the SEC · Clearer integration of sustainability considerations in
operations · Product development and brand strategy

As mentioned above, it was determined that the Committee member Marcus Wallenberg was not considered independent of the company and company management as required. However, the Electrolux Board is of the opinion that the business relations with Marcus Wallenberg do not affect his tasks in the Remuneration Committee, and that the company benefits from Marcus Wallenberg's expertise in terms of his work on this committee.
The Remuneration Committee held six ordinary meetings and four extra meetings in 2007. Major issues considered during the year included suggestion to a long-term incentive program.
The Head of Group Staff Human Resources and Organizational Development participated in the meetings and was responsible for preparations.
Audit Committee The primary tasks of the Audit Committee is to: · Assist the Board in overseeing the accounting and financial
reporting processes, including the effectiveness of disclosure controls and procedures · Assist the Board in overseeing the adequacy and effectiveness in internal control of financial reporting
The Audit Committee also assists the Board of Directors in: · Overseeing the audit of the financial statements including
related disclosures · Pre-approving audit and non-audit services to be provided by
the external auditors · Reviewing the objectivity and independence of the external
auditors · Overseeing the work of the external auditors, evaluating the
external auditors' performance and, if necessary, recommending their replacement.

Committees The Board has established a Remuneration Committee and an Audit Committee. The main tasks of the committees are preparatory and advisory. In addition, the Board may delegate decisionmaking powers on specific issues to the committees.
The Board has also decided that issues may be referred to ad hoc committees that deal with specific matters.
Remuneration Committee The main task of the Remuneration Committee is to propose guidelines for remuneration to members of Group Management. The Remuneration Committee proposes such guidelines in terms of: · Targets and principles for calculating variable compensation · The relationship between fixed and variable salary · Changes in fixed and variable salary · Criteria for assessment of variable salary, long-term incentives,
pension terms and other benefits
The Committee comprises three Board members, se page 91. At least two meetings are convened annually. Additional meetings are held as needed.

In addition, the Audit Committee is tasked with supporting the Nomination Committee in preparing proposals to them regarding external auditors and auditors' fees. The Audit Committee also reviews the Group's internal audit function, Management Assurance & Special Assignments, in terms of organization, staffing, budget, plans, results, and reports prepared by this function. During the year, the Committee worked on preparations for Electrolux deregistration from the SEC.
The Audit Committee comprises three Board members, see page 91. The external auditors report to the Committee at each ordinary meeting. At least three meetings are held annually. Additional meetings are held as needed.
In 2007, the Audit Committee held five scheduled meetings and one extra meeting. Electrolux managers have also had regular contacts with the Committee Chairman between meetings regarding specific issues. The Group's Chief Financial Officer Fredrik Rystedt and the Head of Internal Audit participated in most of the Audit Committee's meetings. Other Electrolux managers also participated in relation to specific issues. Cecilia Vieweg, Head of Group Staff Legal Affairs, was the secretary at all meetings.

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corporate governance report

Group Management

President and CEO Hans Stråberg

Chief Financial Officer Fredrik Rystedt

Legal Affairs Cecilia Vieweg

Communications and Branding Lars Göran Johansson

Human Resources and Organizational Development Carina Malmgren Heander

Major Appliances Europe
Magnus Yngen

Major Appliances North America
Keith R. McLoughlin

Major Appliances Latin America Ruy Hirschheimer

Major Appliances Asia/Pacific
Gunilla Nordström

Floor Care and Small Appliances Morten Falkenberg

Professional Products
Detlef Münchow

Management and company structure Electrolux operations are organized in six business sectors that include a total of 25 product lines. There are four Group staff units. The Group has a decentralized corporate structure in which overall management of operative activities is largely performed by sector boards.
Group policies and guidelines Electrolux aims at implementing strict norms and efficient processes to ensure that all operations create long-term value for shareholders and other stakeholders. This involves maintaining an efficient organizational structure, systems for internal control and risk management and transparent internal and external reporting.
In order to ensure a systematic approach to improving operational efficiency and the internal control, and to ensure uniform implementation of operational procedures, the Group has defined six core processes within strategically important areas. These processes are common to the entire Group and comprise purchasing, people, brand, product development, demand flow and business support.
Electrolux has determined that the performance of operations shall be environmentally compatible as well as socially and ethically responsible. A proactive approach in this regard reduces risks, strengthens the brand, increases the motivation of personnel and ensures good relations with the societies in which the Group operates. Key policies in this context include the Electrolux Code of Ethics, the Electrolux Workplace Code of Conduct, and the Electrolux Policy on Countering Corruption and Bribery.
The Group has a well-established Electrolux People Process, which provides support at Group level for managers with regard to recruitment and development of employees. The process also aims at ensuring that individuals are treated fairly by the company.
For additional information on the Electrolux People Process, see page 23.

Group Management In addition to the President, Group Management includes the six sector heads and the four Group staff heads. The President is appointed by and receives instructions from the Board. The President in turn appoints other members of Group Management and is responsible for ongoing management of the Group in accordance with the Board's guidelines and instructions.
Group Management holds monthly meetings to review the previous month's results, update forecasts and plans, and discuss strategic issues.
Changes in Group Management Three new members joined Group Management: · Gunilla Nordström was employed as Head of Major
Appliances Asia/Pacific in August 2007. · Carina Malmgren Heander was employed as Head of
Group Staff Human Resources and Organizational Development in November 2007. She succeeded Harry de Vos. · Ruy Hirschheimer, Head of Major Appliances Latin America, joined Group Management in January 2008.
Business sectors The sector heads have responsibility for the income statement and balance sheets of their respective sectors. The overall management of the sectors is the responsibility of sector boards, which meet quarterly. The President is the Chairman of all sector boards. The sector board meetings are attended by the President, the management of the respective sectors and the Chief Financial Officer. The sector boards are responsible for monitoring on-going operations, establishing strategies, determining sector budgets and making decisions on major investments. The product-line managers are responsible for the profitability and long-term development of their respective product lines.
In terms of external reporting structure, Group operations are divided into five business areas. Operations in Consumer Durables comprise four geographical areas, i.e., Europe, North America, Latin America as well as Asia/Pacific and Rest of world. Professional Products is the fifth business area.

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Group Management

Hans Stråberg President and CEO Born 1957. M. Eng. In Group Management since 1998. Joined Electrolux in 1983. Head of product area Dishwashers and Washing Machines, 1987. Head of product division Floor Care Products, 1992. Executive Vice-President of Frigidaire Home Products, USA, 1995. Head of Floor Care Products and Small Appliances and Executive Vice-President of AB Electrolux, 1998. Chief Operating Officer of AB Electrolux, 2001. President and CEO, 2002. Board Member of The Association of Swedish Engineering Industries, AB Ph. Nederman & Co., Nederman Holding AB and Roxtec AB. Holdings in AB Electrolux: 39,590 B-shares, 90,000 options.
Morten Falkenberg Head of Floor Care and Small Appliances, Executive Vice-President Born 1958. B. Econ. In Group Management since 2006. Sales/marketing positions in Carlsberg Group, Denmark, 1980­1987. Senior management positions within Coca-Cola Company, 1987­2000. Senior Vice-President of Alliances/Partnerships for TDC Mobile, 2001­ 2003. Joined Electrolux in 2003 as Head of Floor Care and Small Appliances Europe. Head of Floor Care and Small Appliances and Executive Vice-President of AB Electrolux, 2006. Holdings in AB Electrolux: 5,868 B-shares, 0 options.
Carina Malmgren Heander Head of Group Staff Human Resources and Organizational Development, Senior Vice-President Born 1959. B. Econ. In Group Management since 2007. Project Director at Adtranz Signal (Bombardier), 1989­1998. Vice-President Human Resources of ABB AB, 1998­2003. Senior Vice-President Human Resources of Sandvik AB, 2003­2007. Joined Electrolux in 2007 as Senior-Vice President of Group Staff Human Resources and Organizational Development. Board Member of Seco Tools AB, Cardo AB and IFL at the Stockholm School of Economics. Holdings in AB Electrolux: 0 shares, 0 options.
Ruy Hirschheimer Head of Major Appliances Latin America, Executive Vice-President Born 1948. M.B.A. Doctoral Program in Business Administration. In Group Management since 2008. Executive Vice-President of Alcoa Aluminum, Brazil, 1983­1986. President and CEO of J.I. Case Brazil, 1990­1994. President and CEO of Bunge Foods, 1994­1997. Senior Vice-President of Bunge International Ltd., USA, 1997­1998. Joined Electrolux in 1998 as Head of Brazilian Major Appliances operations. Head of Major Appliances Latin America, 2002. Executive Vice-President of AB Electrolux, 2008. Holdings in AB Electrolux: 13,972 B-shares, 5,000 options.
Lars Göran Johansson Head of Group Staff Communications and Branding, Senior Vice-President Born 1954. M. Econ. In Group Management since 1997. Account Executive of KREAB Communications Consultancy, 1978­1984, President, 1985­1991. Headed the Swedish "Yes to the EU Foundation" campaign for the referendum that determined Sweden's membership in the EU, 1992­1994. Joined Electrolux in 1995 as Senior Vice-President of Communications and Public Affairs. Holdings in AB Electrolux: 8,323 B-shares, 19,902 options.

Detlef Münchow Head of Professional Products, Executive Vice-President Born 1952. M.B.A. PhD Econ. In Group Management since 1999. Member of senior management of Knight Wendling/Wegenstein AG, Germany, 1980­1989, and GMO AG, 1989­1992. FAG Bearings AG, 1993­ 1998, as Chief Operating Officer of FAG Bearings Corporation, USA. Joined Electrolux in 1999 as Head of Professional Indoor Products and Executive Vice-President of AB Electrolux. Holdings in AB Electrolux: 18,627 B-shares, 0 options.
Gunilla Nordström Head of Major Appliances Asia/Pacific, Executive Vice-President Born 1959. M. Sc. In Group Management since 2007. Senior management positions with Telefonaktiebolaget LM Ericsson and Sony Ericsson in Europe, Latin America and Asia, 1983­2005. President of Sony Ericsson Mobile Communications (China) Co. Ltd. and Corporate Vice-President of Sony Ericsson Mobile Communications AB, 2005­2007. Joined Electrolux in 2007 as Head of Major Appliances Asia/Pacific and Executive Vice-President of AB Electrolux. Holdings in AB Electrolux: 0 shares, 0 options.
Fredrik Rystedt Chief Financial Officer Born 1963. M. Econ. In Group Management since 2001. Joined Electrolux Treasury Department in 1989. Subsequently held several positions within the Group's financial operations. Head of Mergers and Acquisitions, 1996. Head of Business Development of Sapa AB, 1998, Chief Financial Officer, 2000. Rejoined Electrolux in 2001 as Chief Administrative Officer, responsible for Controlling, Accounting, Taxes and Auditing. Chief Financial Officer and responsible also for Group Treasury, 2004, and for IT, 2005. Holdings in AB Electrolux: 13,156 B-shares, 28,960 options.
Cecilia Vieweg General Councel, Senior Vice-President Born 1955. B. of Law. In Group Management since 1999. Attorney with Berglund & Co Advokatbyrå, 1987­1990. Corporate Legal Counsel of AB Volvo, 1990­1992. General Counsel of Volvo Car Corporation, 1992­1997. Attorney and partner in Wahlin Advokatbyrå, 1998. Joined Electrolux in 1999 as Senior-Vice President and General Counsel, responsible for legal, intellectual property, risk management and security matters. Board Member of Haldex AB. Holdings in AB Electrolux: 7,823 B-shares, 15,294 options.
Magnus Yngen Head of Major Appliances Europe, Executive Vice-President Born 1958. M. Eng. Lic. Tech. In Group Management since 2002. International sales and marketing positions, 1988­1995. Joined Electrolux in 1995 as Technical Director in the direct sales operation LUX. Head of Floor Care International operations, 1999. Head of Floor Care Europe, 2001. Head of Floor Care and Small Appliances and Executive Vice-President of AB Electrolux, 2002. Head of Major Appliances Europe, 2006. Holdings in AB Electrolux: 7,823 B-shares, 20,783 options.
Holdings in AB Electrolux as of December 31, 2007.

Keith R. McLoughlin Head of Major Appliances North America, Executive Vice-President Born 1956. B.S. Eng. In Group Management since 2003. Senior management positions with DuPont, USA, 1981­2003. Vice-President and General Manager of DuPont Nonwovens, 2000­2003, and of DuPont Corian, 1997­2000. Joined Electrolux in 2003 as Head of Major Appliances North America and Executive Vice-President of AB Electrolux. Also Head of Major Appliances Latin America, 2004­2007. Board Member of Briggs & Stratton Corp. Holdings in AB Electrolux: 11,427 B-shares, 0 options.

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corporate governance report

Remuneration to Group Management Remuneration guidelines for Group Management are decided by the AGM based on the proposal from the Board of Directors. Remuneration to the President and other members of Group Management is then resolved upon by the Board, based on proposals from the Remuneration Committee.
Electrolux strives to offer a total remuneration that is fair and competitive in relation to the home country or region of each Group Management member. Remuneration terms shall emphasize "pay for performance" and vary with the performance of the individual and the Group.
Remuneration may comprise fixed compensation, variable compensation in the form of short-term performance targets (up to 1 year) and long-term performance targets (3 years or longer), pension terms and benefits such as insurance. Variable compensation is based on both financial and non-financial targets. Value created is the most important financial indicator.
For detailed information on remuneration, remuneration guidelines, long-term incentive programs and pension benefits, see Note 22 on page 53 and Note 27 on page 61.
Value creation The Group uses a model for value creation to measure profitability by business area, sector, product line and region. The model links operating income and asset efficiency with the cost of the capital employed in operations. Value created is also the basis for incentive systems for managers and employees in the Group.
Value created is defined as operating income excluding items affecting comparability, less the weighted average cost of capital (WACC) on average net assets, excluding items affecting comparability.
For details of the value-creation concept, see Note 31 on page 67.
Internal control and risk management The process of internal control and risk management has been developed to provide reasonable assurance that the Group's goals are met in terms of efficient operations, compliance with relevant laws and regulations, and reliable financial reporting. For information on internal control of financial reporting, see "Internal control of financial reporting" below.
The Electrolux process for internal control and risk management is based on the control environment and comprises four main activities: Risk assessment, control activities, information and communication, and monitoring.
Risk assessment includes identifying, sourcing and measuring business risks, such as strategic, operational, commercial, financial and compliance risks, including non-compliance with laws, other external regulations, and internal guidelines. Assessing risks also includes identifying opportunities that ensure long-term value creation.
The choice of control activities depends on the nature of the identified risk and the results of a cost-benefit analysis, within the guidelines set by the Group. Control activities for managing risks may include insuring, outsourcing, hedging, prohibiting, divesting, reducing risk through detective and preventative internal controls, accepting, exploiting, reorganizing and redesigning.
The process for internal control and risk management generates valuable information regarding business objectives, risks and control activities. Communicating on a timely basis throughout the

Group contributes to ensuring that the right business decisions are made.
The effectiveness of risk assessment and execution of control activities are monitored continuously. Various tools including selfassessments and risk surveys are also used within the Group.
The Internal Audit function Management Assurance & Special Assignments is responsible for independent objective assurance, in order to systematically evaluate and propose improvements for more effective governance, internal control and risk management processes.
External auditors The AGM in 2006 re-elected PricewaterhouseCoopers (PwC) as the Group's external auditors for a four-year period, until the AGM in 2010. Certified public accountant Peter Clemedtson is the auditor in charge of Electrolux.
PwC provides an audit opinion on AB Electrolux, the financial statements of its subsidiaries, the consolidated financial statements for the Electrolux Group, and the administration of AB Electrolux.
The audit is conducted in accordance with the Swedish Companies Act and the generally accepted Swedish auditing standards issued by FAR, which is the institute for the accountancy profession in Sweden (Swedish GAAS). The auditing standards issued by FAR are based on international auditing standards issued by the International Federation of Accountants (IFAC GAAS).
Audits of local statutory financial statements for legal entities outside of Sweden are performed as required by laws or applicable regulations in the respective countries, and as required by IFAC GAAS, including issuance of audit opinions for the various legal entities.
For additional information on the Group's auditor in charge and his other audit assignments, see page 92. For information on fees paid to the auditors and their non-audit assignments in the Group, see Note 28 on page 64.

96

TtrrehopeloaErntleidncgrtirsiosklnudmsxeiabspnirglaiotngyceedmsostoff sector

nternal control and risk management
Risk assessment

I

Information

Improvement

and

communication

Control activities

Monitoring

Control environment

the responsibility of sector

Internal control

boards. A number of internal

of financial reporting

boards and councils have been estab-

The Electrolux process for internal con-

lished within the Group for specific areas

trol and risk management related to financial

such as risk management, treasury, audit, IT,

reporting is designed to provide reasonable assur-

taxes, brands, products, purchasing and human

ance regarding the reliability of financial reporting and the prepa- resources.

ration of financial statements for external purposes in accordance The Group's Disclosure Committee contributes to considering

with applicable laws and regulations, generally accepted account- the materiality of information relating to Electrolux and ensuring

ing principles and other requirements for listed companies. The that such information is properly communicated to the market on

process is based on the control environment and comprises four a timely basis. The Disclosure Committee comprises the Head of

main activities: Risk assessment, control activities, information Group Staff Legal Affairs, the Chief Financial Officer, the Head of

and communication, and monitoring, as defined in the framework Group Staff Communications and Branding, and the Head of

for internal control issued by the Committee of Sponsoring Orga- Investor Relations and Financial Information.

nizations of the Treadway Commission (COSO).

The Group has established six group processes within strategi-

cally important areas such as purchasing, people, brand, product

Control environment

development, demand flow, and business support in order to

The Board has overall responsibility for establishing an effective ensure, among other things, a systematic approach to improving

system of internal control and risk management. The Board has internal control. The Electrolux People Process provides support

determined its working procedures, which include the allocation to managers within the Group in the form of tools and checklists

of tasks to Board members. The Board has established an Audit to ensure efficient recruitment processes and continuous devel-

Committee, which assists the Board in overseeing relevant manu- opment of employees.

als, policies and important accounting principles applied by the The limits of responsibilities and authorities are given in instruc-

Group in financial reporting, as well as changes in these princi- tions for delegation of authority, manuals, policies and proce-

ples.

dures, and codes, including the Electrolux Code of Ethics, the

Responsibility for maintaining an effective control environment Electrolux Workplace Code of Conduct, and the Electrolux Policy

and operating the system for risk management and internal con- on Countering Bribery and Corruption, as well as in policies for

trol of financial reporting is delegated to the President. Manage- information, finance and credit, and in the accounting manual. In

ment at various levels has operational responsibility within their addition, minimum requirements have been set for internal control

respective areas.

of financial reporting on the basis of the Group's internal pro-

The Group's operations are organized in six business sectors cesses. Together with laws and external regulations, these inter-

and four Group staff units. Group Management includes the Pres- nal guidelines form the control environment, which is the founda-

ident, the six sector heads and the four Group staff heads. The tion of the internal control and risk management process. All

sector heads have responsibility for results and balance sheets in employees, including process, risk, and control owners, are

their respective sectors. The overall management of the sectors is accountable for compliance with these guidelines.

97

corporate governance report

Risk assessment Risk assessment includes identifying, measuring and sourcing risks. The major risks affecting internal control of financial reporting are defined at four levels: Group, business sector, unit and process. Assessment of risk includes risks related to irregularities and undue favorable treatment of a third party at the Group's expense, as well as the risk of loss or misappropriation of assets. Assessment of risk generates control objectives that fulfill the fundamental criteria for financial reporting.
Control activities Control activities include both general and detailed controls aimed at preventing, detecting and correcting errors and irregularities. These activities include manual controls, application controls built into IT systems, and controls in the underlying IT environment, known as IT General Controls.
Control activities that fulfill the control objectives identified in risk assessment are implemented and documented at four levels: Group, business sector, unit, and process. Documentation comprises both flowcharts and detailed descriptions of the control activities. The documented activities are quality-assured by the responsible employees in terms of completeness and accuracy, according to group-wide procedures, at Group, business sector, unit, and process levels.
Information and communication Guidelines for financial reporting are communicated to employees, e.g., by ensuring that all manuals, policies and codes are published and accessible through the group-wide Intranet. Information is provided periodically to relevant parties regarding monitoring of the effectiveness of internal control of financial reporting.
The Group maintains a representation process in which Group Management signs an annual representation letter stating its opinion regarding internal control of financial reporting as well as disclosure controls and procedures, and compliance with other internal guidelines.
Monitoring The effectiveness of the process for assessing risks and the execution of control activities are monitored continuously at four levels: Group, business sector, unit, and process. Monitoring involves both formal and informal procedures applied by management and owners of processes, risks, and controls, including reviews of results in comparison with budgets and plans, analytical procedures, and key performance indicators.
In addition, various tools for monitoring including self-assessment are used within the Group. Reporting units use these tools for, e.g., evaluation of the security of information as well as processes for business transactions, reporting and final accounts.
In the course of 2004, comprehensive efforts were made to develop a method within the Group for documenting, evaluating and testing Electrolux internal control of financial reporting, and work on documentation was started. This work also included comprehensive staff training in order to secure the competence required within the Group for effective compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. In 2005 and 2006, a comprehensive program was implemented for documenting, evaluating and testing internal controls of financial reporting.

Management Assurance & Special Assignments, the Group's internal audit function, has since 2005 been creating and maintaining test plans for specific key control activities on the basis of documented flowcharts and detailed descriptions of control activities. These key control activities are tested for operational effectiveness by employees who are independent of those performing the controls. The test results are documented in an IT system that has been implemented solely for this purpose.
Following deregistration from the U.S. Securities and Exchange Commission (SEC), which became effective during the fourth quarter 2007, Electrolux is no longer required to comply with the requirements of Section 404 of the Sarbanes-Oxley Act. However, work on internal control of financial reporting is continuing in the form of the Electrolux Control System (ECS) under the direction of the Internal Audit function.
The Group's Internal Audit function is responsible for performing independent assurance activities, in order to systematically evaluate and propose improvements to the effectiveness of the governance, of financial reporting in the internal control and risk management processes. In addition, this function proactively proposes improvements to the control environment. The head of the Internal Audit function has dual reporting lines: To the President and the Audit Committee for assurance activities, and to the CFO for other activities.
The Audit Committee reviews reports regarding internal control and processes for financial reporting, as well as internal audit reports submitted by the Internal Audit function. The external auditors report to the Audit Committee at each ordinary meeting.
Financial reporting and information Electrolux routines and systems for information and communication aim at providing the market with relevant, reliable, correct and vital information about the development of the Group and its financial position. Electrolux has a communications policy that meets the requirements for a listed company.
Financial information is issued regularly in the form of: · Interim reports, published as press releases · The Annual Report · Press releases on all matters which could materially affect the
share price · Presentations and telephone conferences for analysts, inves-
tors and media representatives on the day of publication of quarterly and full-year results, and in connection with the release of important news · Meetings with financial analysts and investors worldwide
All reports, presentations and press releases are published simultaneously at www.electrolux.com/ir.

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annual general meeting

Annual General Meeting

The Annual General Meeting will be held at 5 pm on Tuesday, April 1, 2008, at the Berwald Hall, Dag Hammarskjölds väg 3, Stockholm, Sweden.
Participation Shareholders who intend to participate in the Annual General Meeting must · be registered in the share register kept by VPC AB (Swedish
Central Securities Depository & Clearing Organization) on Wednesday, March 26, 2008, and · give notice of intent to participate, thereby stating the number of assistants attending, to Electrolux no later than 4 pm on Wednesday, March 26, 2008.
Notice of participation Notice of intent to participate can be given · by mail to AB Electrolux, C-J, SE-105 45 Stockholm, Sweden · by telephone +46 8 738 64 10 · by fax +46 8 738 63 35 · on the Internet on the Group's website,
www.electrolux.com/agm

Notice should include the shareholder's name, registration number, if any, address and telephone number. Information provided together with the notice will be made subject to computer processing and will be used solely for the Annual General Meeting. Shareholders may vote by proxy, in which case a power of attorney should be submitted to Electrolux prior to the Annual General Meeting.
Shareholders who so wish may order proxy forms from Electrolux under the same address and telephone number as for notice of participation.
Shares registered by trustee Shareholders, whose shares are registered through banks or other trustees, must have their shares temporarily registered in their own names on Wednesday, March 26, 2008, in order to participate in the Annual General Meeting.
Dividend The Board has proposed a cash dividend of SEK 4.25 per share and Friday, April 4, 2008, as record day for the dividend. With this record date, it is expected that dividends will be paid from VPC on Wednesday, April 9, 2008, and the last day for trading in Electrolux shares including the right to dividend for 2007 will be Tuesday, April 1, 2008.

Factors affecting forward-looking statements

This report contains "forward-looking" statements within the meaning of the US Private Securities Litigation Reform Act of 1995. Such statements include, among others, the financial goals and targets of Electrolux for future periods and future business and financial plans. These statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially due to a variety of factors. These factors include, but may not be limited to the following; consumer demand and market conditions in the geographical areas and industries in which Electrolux oper-

ates, effects of currency fluctuations, competitive pressures to reduce prices, significant loss of business from major retailers, the success in developing new products and marketing initiatives, developments in product liability litigation, progress in achieving operational and capital efficiency goals, the success in identifying growth opportunities and acquisition candidates and the integration of these opportunities with existing businesses, progress in achieving structural and supply-chain reorganization goals.

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www.electrolux.com/ir
On Electrolux website www.electrolux.com/ir you will find additional and up-dated information about, for instance, the Electrolux shares, financial statistics and corporate governance. On the website you can also read more about our brands as well as about our sustainability work.

About Electrolux operations
Our brands

Sustainability
Corporate governance Annual General Meeting

Financial statistics
Share development Dividend Ownership structure
Shareholder information

Latest press releases
Latest interim report
Current share price

Financial reports in 2008 Consolidated results Interim report January­March Interim report April­June Interim report July­September
Major events in 2008 Annual report Annual General Meeting
Contacts Investor Relations

February 6 April 28 July 17 October 27

Electrolux Annual Report 2007 consists of two parts: "Operations and strategy" and "Financial review".

Beginning of March April 1

Tel. +46 8 738 60 03 E-mail: [email protected]

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AB Electrolux (publ)
Mailing address SE-105 45 Stockholm, Sweden Visiting address S:t Göransgatan 143, Stockholm Telephone: +46 8 738 60 00 Telefax: +46 8 738 74 61 Website: www.electrolux.com

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