CEO statement	2
Electrolux business	4
Consumer Durables	5
Kitchen	5
Laundry	8
Floor-care	10
Europe	12
North America	13
Latin America	14
Asia/Pacifi c	15
Professional Products	16

Electrolux launch in North America 20

Strategy	22
Product development	23
Brand	26
New products	28
Growth	30
Cost effi ciency	32
Brazil	34

Our people	36
Remuneration	37

Financial review	38
Electrolux story	40
Sustainability	42

Board of Directors	44
Group Management	46

During 2007, our comprehensive launches areas. This resulted in a stronger position for the Electrolux brand in Europe. The launch of Electrolux branded products for the high-price segment in North America will be one of the major events during 2008.

See CEO statement, page 2.

During 2007, Electrolux sold more than 40 million products. Approximately 50% of them were sold under the global Electrolux brand. The Group's products are sold on more than 150 markets and the largest markets are in Europe and North America.

See Electrolux business, page 4.

Electrolux is working hard to improve profi tability. 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.

See Electrolux strategy, page 22.

Contacts

Peter Nyquist Tel. +46 8 738 67 63 Vice President Investor Relations and

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

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

Electrolux – a global leader with a customer focus

Electrolux is a global leader in household appliances and appliances for professional use, selling more than 40 million products to customers on more than

The company focuses on innovations that are thoughtfully designed, based on extensive consumer insight, sionals. Electrolux products include refrigerators, Electrolux, AEG-Electrolux, Eureka and Frigidaire.

In 2007, Electrolux had sales of SEK 105 billion and

Share of Group net sales

33%

Electrolux market presence

Electrolux product offering

Electrolux business areas

Products		Share of sales	Share of EBIT	Development 2007
CONSUMER DURABLES For household kitchens throughout the world Electrolux sells cookers, refrigerators, freezers, dishwashers, hoods and small appliances. The increasing role of the kitchen as a meeting place for family and friends gives Electrolux a unique display area for consumers.	Total Group Consumer Durables Europe	104.7 SEK billion 42%	4.8 SEK billion 43%	Group sales of appliances in Europe rose during the year, on the basis of an improved product mix and higher volumes. Extra costs for new products adversely affected income and operating income declined compared to 2006.
Washing machines and tumble dryers are the core of the Electrolux product offering for cleaning and care of textiles. Innovations and a growing preference for higher capacity and user-friendliness are driv	Consumer Durables North America	31%	35%	Group sales of appliances in North America rose in compa rable currencies during 2007, on the basis of higher sales vol umes. Market shares increased in a declining market. Operat ing income and margin improved.
ing demand for Electrolux products. Electrolux vacuum cleaners and accessories are sold to consumers	Consumer Durables Latin America	9%	11%	Group sales in Latin America rose strongly mainly on the basis of good market growth. Operating income in 2007 for the operations in Latin America was the highest in the Group's history.
worldwide. A strong global distribution network and an attractive product offering have enabled Electrolux to increase its market share. Production is located exclusively in low-cost countries. PROFESSIONAL PRODUCTS	Consumer Durables Asia/Pacific and Rest of world	9%	7%	Good sales growth for appliances in Asia/Pacific. Operating income in Australia and New Zealand as well as in the entire South East Asia region showed an improvement on the basis of previous restructuring.
Electrolux sells a range of products for professional kitchens and laundries. High productivity, maximum utilization of resources and an extensive service network are key factors for purchases by profes sionals. Electrolux has a global presence, and is largest in Europe.	Professional Products	7%	12%	Operating income and margin in 2007 for Professional Prod ucts improved over the previous year, as a result of more effi cient production and price increases. Price increases offset higher costs for raw materials, primarily for stainless steel.

Highlights of 2007

Almost 50% of the products are sold under the Electrolux brand.

Investment in product development corresponded to about 2% of sales.

Almost 50% of Electrolux production is now located in low-cost countries.

Global sales growth for Electrolux was 4%.

Despite lower income in Europe, operating income rose by 6%, mainly as a result of an improved product mix and higher sales volumes.

Totally, SEK 6.8 billion was distributed to Electrolux shareholders.

A good foundation for continuing change

During 2007, our comprehensive launches of innovative products continued in all areas. This has resulted in a stronger position for the Electrolux brand in Europe. The launch of Electroluxbranded products for the premium segment in North America will be one of the major events during 2008. Our initiatives with new appliances in Europe and North America comprise a foundation that will enable us to reach a profi tability in line with the industry average of 6%.

Our strategy has been in place since 2002. On the basis of consumer insight, we shall increase the rate of product renewal, increase our investment in brands, and continue to make production more effi cient. This takes time, but we can already see the results. Our successful turnarounds of the operation in Brazil and the entire operation in fl oor-care equipment show clearly that we are on the right track. The next two major challenges are in Europe and North America. The product launch in Europe in 2007 and in North America in 2008 are the largest ever for Electrolux, and will generate a better product mix as well as higher margins in the long term.

Strong trends drive growth

The primary factors for our growth are replacement of worn-out household appliances, renovation of homes, and greater market penetration, particularly in growth markets. From the perspective of a business cycle, the market shows the same rate of growth as the global economy, i.e., 3–4%.

The market shows a number of strong trends which Electrolux has to make good use of, and which will enable a rate of growth above the market level:

Households are increasing their spending on the home, especially in the kitchen, which has become the most important area in the home.
Increasing interest in design and home decorating infl uences the consumers' choice of appliances.
Changing lifestyles lead many consumers to prefer products that make tasks such as preparing and storing food both simpler and healthier.
A high rate of innovation within the industry generates greater demand. New functions and new design stimulate many consumers to replace their appliances at an increasingly faster rate.
A greater commitment to the environment is steadily becoming a more important factor for consumers' purchasing decisions.

More effi cient products

Environmental issues have always been very important for Electrolux. Each new generation of appliances that we launch is more energyeffi cient than its predecessor, and in comparison with the Group's product offering ten years ago, today's appliances consume 50% less energy. The fact is that if European households replaced all appliances that are more than ten years old with the most effi cient products on today's market, total European emissions of carbon dioxide would be reduced by 18 million tons. This corresponds to 6% of the European Union's goal according to the Kyoto Agreement.

We are accelerating

Our process for consumer-oriented product development generates new products at a faster rate and enables successful launches. Today, everyone in our organization thinks in terms of a focus on the consumer – and on innovation. We think "Electrolux" in everything we do. No one can have failed to notice our efforts to build Electrolux as a strong, leading brand in the global market. Our retailers and our partners are aware of this, and naturally our customers. That is why we are now ready to increase the rate of launches of innovative Electrolux-branded products.

Biggest-ever launch in Europe

We started in Europe in 2007. Approximately 40% of our existing offering was replaced by innovative products. This launch was very comprehensive. Identical offerings were launched at the same time in 36 countries.

Despite some problems related to higher product costs, which are not unusual in the initial phase of a launch, the new products achieved successful market acceptance. We notice that our European customers appreciate our offering. The average sales prices of our products are rising, and the mix is improving. In addition, ability than the medium-price segment. The launch is scheduled for the spring of 2008, in close cooperation with major retailers. This gives us a fi rm foundation and increases the probability that the launch, our biggest ever in North America, will be successful. When the North American appliance market recovers after a prolonged decline, growth is expected primarily in the high-price segment. This can provide leverage for our sales.

A good foundation

The year 2007 was an eventful one for Electrolux. With the exception of appliances in Europe, we achieved higher income in all business areas. The operation in fl oor-care was again successful, with greater market shares. The operation in Latin America showed record-high income. In Australia, after several tough years, we strengthened our market position and achieved considerably higher profi tability. We also achieved higher income for products for professional kitchens and laundries, despite rising

surveys show that increasing numbers of consumers have started to think of Electrolux as the preferred brand for purchases of new appliances. The Electrolux brand has strengthened its position in the higher price segments in the European market.

Biggest-ever launch in North America

The challenge in North America is not the same as in Europe. Today, Electrolux has a strong position in the medium-price segment of the North American appliance market through the Frigidaire brand. The Electrolux brand represents only a limited offering of exclusive products at the high end of the appliance market.

We are now preparing for a comprehensive launch of new Electrolux-branded products in the high-price segment, which is of interest in the long term. It accounts for annual sales of approximately USD 8 billion a year and shows considerably higher profi tprices for raw materials and a weaker dollar. In Europe, our success in terms of higher average prices, a stronger Electrolux brand and a better mix has convinced me that our strategy works.

This gives us a good foundation for continuing to work on transforming Electrolux into an innovative, consumer-focused and even more profi table player in the global appliance industry.

Stockholm, March 2008

Hans Stråberg President and Chief Executive Offi cer

Electrolux business

"Thinking of you" sums up the Electrolux offering — always put the users first and foremost, whether it is a question of product development, design, production, marketing, logistics or service. By offering products and services that consumers prefer, which benefit both people and the environment, and for which consumers are willing to pay higher prices, Electrolux can achieve profitable growth. Innovative products, lower costs and a strong brand enable Electrolux to create a foundation for improved profitability.

PRODUCT CATEGORIES — what we sell

Share of sales

In 2007, Electrolux sold more than 40 million products. Approximately 50% of them were sold

under the global Electrolux brand. Consumer Durables comprises appliances for kitchens, fabric care and cleaning. Professional

40 million products sold

Products comprises corresponding products for professional users such as industrial kitchens,

BUSINESS AREAS — how we report

Share of sales

The Group's products are sold on more than 150 markets and the largest markets are in

Europe and North America. Operations are divided in five business areas. Consumer Durables includes four

regional business areas, while Professional Products is a single global business area.

Konsumentprodukter Consumer Durables

Electrolux köksprodukter Electrolux kitchen products

Cummy non henisi blamet, venibh ent nim quipis ecte del ut volore velesenis augait vullam at ilissequisi blaore min exerit vel ut wisl doloree tuercipit in hendiat. Tue dolore-Electrolux has a comprehensive range of kitchen appliances as well as strong market positions in most parts of the world. Cookers and ovens are among the Group's most profi table kitchen products.

The market

iscin hent ipis nostio odolore tio dignibh euit adipsusci. Stable demand

In 2007, global demand for kitchen products rose. The rate of growth in demand in Western Europe and North America has been rather stable over many years, irrespective of the business cycle. One important reason is that kitchen appliances are replaced immediately when they break down. Although quality and thus product lifetimes have improved continuously, there is a trend that appliances are being replaced at an increasingly faster rate. This is because consumers prefer the new and more innovative products that are being launched continuously. In emerging markets, demand is growing as more people can afford modern kitchen appliances.

Growth in premium and low-end products

In recent years, growth has been greatest in the premium and low-end market segments. The increased importance of the kitchen in the home has stimulated demand for premium products. Greater global competition between appliance manufacturers and retail chains has led to an increase in sales of low-end products to a steadily expanding customer base.

Profi table built-in products

Kitchen appliances are either stand-alone or built-in. The trend to built-in appliances is increasing and shows strong growth particularly in Europe and Australia. Manufacturers of kitchens for households are selling them with all appliances included. Sales of built-in units often involve higher prices and profi tability for producers of kitchen appliances.

etue tem veliquisim euipsum dio dolorpero duisi. Liquis nim vel el ulla consed er aliqu-Consumer trends

The kitchen is one of the most important areas in the home, and also the most used. It is not simply a place for preparing food, but for all forms of socializing, which requires appliances with low noise levels. Today's kitchen is also intended to refl ect the owners' lifestyle and has become a room that is willingly displayed to visitors.
Preparing food is no longer simply a weekday chore, but has become a hobby that calls for special equipment. This leads to greater emphasis on design, user-friendliness and fl exibility. Consumers also want appliances with functions that can be used logically and intuitively, without the need for consulting a manual.
Strong worldwide trends for health and wellness have affected demand for modern kitchens, which have to be easy to clean and ergonomically designed. Vegetables and other perishables must be kept fresh, and prepared so that nutrients are preserved.
Environmental considerations are growing in importance for consumers. In addition to appliances with low water and energy consumption, consumers are demanding climatesmart options, e.g., products that preserve foodstuffs so that nothing has to be thrown away, as well as alternatives to bottled, carbonated water.

The Electrolux brand

Approximately half of the Group's sales of kitchen appliances is under the Electrolux brand. In Asia and Latin America, these appliances are sold only under the Electrolux brand. In Europe, appliances are sold mainly under the Electrolux, AEG-Electrolux and Zanussi brands. In the North American market, kitchen products are sold mainly under the Frigidaire brand. Electrolux also produces appliances that are sold by retail chains under their own brands.

Strong global position

Electrolux has substantial market shares for all major kitchen appliances. The strongest positions are in cookers and hobs. Products manufactured in Asia still have limited positions in the European and North American markets, but have gained ground in recent years within certain product categories.

Kitchen appliances

Refrigerators and freezers

A large share of sales of Electrolux kitchen products refers to refrigerators and freezers. Competition is severe within this category, and profi tability is generally lower than in other categories. On the other hand, innovative products such as frost-free freezers and side-by-side refrigerators are showing strong growth and profi tability. Refrigerators and freezers are relatively heavy and bulky, and are not suitable for transport over long distances. Consequently, production plants are located close to the market.

Cookers and ovens

Electrolux has strong market positions for stand-alone cookers and ovens, as well as for hobs, both electric and gas. These product categories are among the most profi table within kitchen appliances.

Almost all households in mature as well as emerging markets now have cookers and ovens. These products feature relatively advanced technology, which enables greater opportunities for differentiation. Innovations are driving strong growth in specifi c market segments such as induction hobs. Induction hobs offer the most energy-effi cient technology for preparing food.

Dishwashers

Electrolux produces dishwashers that are designed and adapted for all types of kitchens and households. Consumers appreciate features such as low noise levels, tailored dishwashing programs, automatic sensoring of the required washing cycle, and low energy consumption.

There is still a large potential for growth in the dishwasher segment, e.g., in Western Europe, where only half of the households have dishwashers.

Small household appliances

Electrolux also sells small household appliances such as toasters, coffee-makers and mixers. These contribute to strengthening the brand.

Energy and water effi cient appliances

Electrolux has a long tradition of continuously reducing water and energy consumption of the products. For large household appliances like refrigerators, more than 80% of their total environmental impact occurs when the products are in operation. Improved environmental performance also means lower lifetime operating costs for consumers. Offering products with outstanding environmental performance therefore provides competitive benefi ts.

Effi ciency has been steadily improving since the mid-1990's. On average, the Group's appliances now consume 50% less energy than their ten year-old counterparts. Appliances also consume considerably less water compared to washing dishes and clothes by hand. Water-effi cient appliances help reduce energy consumption by cutting the energy used to treat, pump and heat water. That is why water effi ciency is also a cornerstone for Electrolux product development.

Electrolux products are strongly represented in sales of the highest energy effi ciency classes. In proportion to our total market share, sales for cold products are over-represented in energy class A++, and 99% of the Electrolux dishwashers sold in Europe are energy class A labeled. In 2008, a green range of products with the best environmental performance will be introduced in all business areas including Professional Products. For additional information on Electrolux approach to sustainability issues, see page 42 and page 83 in the section Financial review.

Emissions of carbon dioxide from the refrigerator Electrolux Source

2,000 1,600 1,200

800 400 0

Disposal, 5kg In use during 13 years, 1,500kg Manufacturing, 159kg

Emissions of carbon dioxide from appliances mainly occur during use. When Electrolux develops energy-effi cient appliances, the cost for the consumer is reduced thanks to lower water and electricity consumption.

The coming launch in North America is supported by strong digital marketing efforts. Please visit www.electroluxappliances.com to get a glimpse of the new appliances! The campaign site above shows Electrolux Built-In Kitchen that was launched in Europe in 2007. coming launch

Electrolux laundry products

Electrolux is a leading producer of washing machines and tumble dryers with low energy and water consumption. The Group is one of the world's largest producers of front-loaded washers.

The market

Virtually all households have washers

Demand for laundry products shows a pattern similar to that for kitchen appliances. Today, virtually every household in developed countries has access to a washing machine, but only a few to a tumble dryer.

Rapid growth for front-loaded washers

Washing machines are either front-loaded or top-loaded. Toploaded machines have traditionally been dominant in North America and Australia, but are being replaced to a growing extent by front-loaded units. Sales of front-loaded washers in the US grew during 2007 by approximately 6% compared to the previous year. In Europe, front-loaded machines dominate the market.

Consumer trends

Consumers expect washing machines and tumble dryers to be practical and user-friendly. Consumers are also demanding washers with greater capacity and fl exible programs that can be adapted to available washing times.
Design is important for washers and dryers, although it is not as decisive as for kitchen appliances. Washers and dryers are often purchased simultaneously in order to achieve a uniform design in the laundry room.
Consumers prefer washers and dryers that are energy-effi cient. Environmental considerations comprise one reason why demand for front-loaded machines is growing much faster

Litres

than for top-loaded units, particularly in regions where access to water is limited. Front-loaded washers consume less energy and water, and offer better washing performance.

The Electrolux brand

In Europe, the Group's laundry products are sold mainly under the Electrolux, AEG-Electrolux and Zanussi brands. In Asia and Latin America, they are sold only under the Electrolux brand. In North America, these products are sold mainly under the Frigidaire brand. In Australia, laundry products are sold under the brands Electrolux, Westinghouse and Simpson.

A leader in front-loaded washers

Electrolux is a leading producer of both washing machines and tumble dryers. The largest global market share is for front-loaded washers.

An environmental leader

Electrolux is a leading producer of washers and dryers that feature low consumption of energy and water. The Group has also developed and launched a number of innovative washers and dryers that simplify and improve the laundry process.

Depending on country and household conditions, laundry products are installed in either the laundry room, the bathroom or the kitchen. Electrolux therefore offers a number of different options, including compact solutions for bathrooms and built-in units for kitchens.

Share of front-loaded washers

Laundry products, share of Group sales

20%

Water Energy

97 97 07 07

0.1 0

kilo laundry is 46% lower than in an average washer sold 1997 in Sweden. Similarly, energy consumption has decreased by 32% from 0.25 kWh per kg laundry to 0.17 kWh.

The traffi c to Electrolux websites has more than doubled the last couple of years. These two campaigns for the washing machine Time Manager and the tumble dryer Iron Aid were launched in over 15 countries during 2007 and were visited by more than 700,000 people. These

Electrolux fl oor-care products

Electrolux is one of the world's largest producers of vacuum cleaners and accessories. Most of the Group's fl oor-care products are developed and sold globally and all production is located in low-cost countries.

The market

A global product

Vacuum cleaners are suitable for transport over long distances, as the transport cost per product is relatively low. Globalization has therefore advanced further in the vacuum-cleaner industry than for, e.g., products for kitchens and laundry rooms. In contrast to appliances, vacuum cleaners are sold largely in supermarkets. They are produced to a great extent on the basis of global platforms.

Innovation drives growth

At the start of the 21st century, the market for vacuum cleaners featured declining prices and a growing volume of low-price products. Today, these trends have been interrupted, and growth is driven primarily by innovations and increasing awareness of factors affecting health. In 2007, the global market for vacuum cleaners grew slightly.

Regional differences

Despite globalization, the market shows considerable regional differences. In North America and the UK, many consumers use upright vacuum cleaners, in contrast to the rest of Europe as well as Asia, where canisters are dominant.

The market is also divided in terms of vacuum cleaners with and without dust bags. The share of bagless canisters is growing in almost all markets.

Consumer trends

• Vacuum cleaning daily instead of once a week is becoming more common. Many consumers therefore prefer to have

more than one vacuum cleaner, i.e., a cordless unit for fast, limited cleaning and a larger cleaner with more capacity for cleaning the entire home.

The increase in daily cleaning means that the vacuum cleaner is often left in sight. Design, therefore, becomes more important.
Consumers are continuously looking for improvements in capacity, fi ltering, noise levels and ergonomy.
A greater awareness of health factors among consumers means that they are willing to pay for a product with better cleaning performance.
Demand for environment-friendly vacuum cleaners is increasing.

The Electrolux brand

In Asia and Latin America, all vacuum cleaners sold by the Group are branded Electrolux. In Europe, 68% are Electrolux-branded, while the rest are sold under the Volta, Tornado, Progress and Zanussi brands. In the US, the Eureka brand accounts for 58% of sales, but the share sold under the Electrolux brand is growing.

The Group is the market leader in the central vacuum system segment. Electrolux is committed to continuous market introductions of innovative products for which consumers are willing to pay premium prices. Most of the Group's vacuum cleaners are developed and sold globally, which makes Electrolux unique compared to the Group's competitors.

All production of Electrolux vacuum cleaners is located in lowcost countries. About two-thirds are supplied by producers in China, with whom Electrolux has been cooperating for many years to ensure quality products.

2006

2005

2007

These campaigns were used to promote the launches of two design products, Ergorapido and Ultrasilencer. Both campaigns were featured on many design blogs.

Consumer Durables Europe

Electrolux has strong positions throughout Europe for appliances and vacuum cleaners. The share of sales in Eastern Europe and through kitchen specialists is growing rapidly.

Consumer Durables Europe's share of sales and operating income 2007

Group sales of appliances in Europe rose during the year, on the basis of an improved product mix and higher volumes. Extra costs for new products adversely affected income and operating income declined compared to 2006.

High growth rate in Eastern Europe

The European market for appliances amounts to approximately SEK 246 billion annually, of which Eastern Europe accounts for approximately one fourth. Growth in Western Europe is driven by innovation and design as well as an increase in the number of households due to demographic changes. Growth in Eastern Europe, which has been vigorous in recent years, is driven primarily by an improving standard of living. For Europe as a whole, demand in 2007 for core appliances and vacuum cleaners grew by 1.3% and 2.6%, respectively.

Virtually all households in Europe have access to refrigerators and cookers, and many to washing machines. The share of households with freezers, dishwashers and tumble dryers is considerably lower in Eastern than in Western Europe. Since the European market comprises many countries and language areas, there are still many different producers and brands. Large variations in consumer behavior as well as a low level of consolidation among retailers have led to price pressure, despite rising costs for raw materials.

Increasing share for kitchen specialists

The European market is dominated by many small, local and independent retail chains that focus on electrical and electronic products as well as kitchen fi xtures. Consolidation of retailers for household appliances is ongoing.

The share of sales by kitchen specialists in Western Europe has grown over the past ten years and is now approximately 25% of the market in value. In Germany and Italy, the corresponding fi gure is approximately 40%. Sales over the Internet also show rapid growth. Most retail chains offer Internet service to their customers, while new players who sell only on the web are entering the market. Electrolux products are sold largely through retail chains and kitchen manufacturers, but the share sold by kitchen specialists is increasing.

Strong positions throughout Europe

Electrolux has strong positions for appliances and vacuum cleaners throughout Europe, with the Italian, UK and German markets showing the highest levels of sales. Approximately 23% of the Group's sales of major appliances and approximately 30% of sales of vacuum cleaners are in Eastern Europe. These shares are increasing on the basis of rapid market growth as well as the Group's strong positions in production and distribution within this region. For additional information about Electrolux growth in Eastern Europe, see page 31.

Net sales and operating margin Facts

in Europe, excl. Turkey

Growth of shipments of core appliances

appliances in Europe increased by 1% in 2007 in comparison with the previous year. Demand in Eastern Europe rised by 8%, while demand in Western Europe declined by 1%. Group sales of appliances in Europe rose during the year, on the basis of an improved product mix and higher volumes.

CORE APPLIANCES

Major markets

• Germany • UK • Italy

Major competitors

Bosch-Siemens
Indesit
Whirlpool

VACUUM CLEANERS

Major markets

• Germany

• UK

• France

Major competitors

Bosch-Siemens • Dyson
Miele

Consumer Durables North America

Electrolux has a leading position in appliances and vacuum cleaners in both the US and Canada. The three largest producers of appliances in the US account for 90% of the market.

Consumer Durables North America's share of sales and operating income 2007

Group sales of appliances in North America rose in comparable currencies during 2007, on the basis of higher sales volumes. Market shares increased in a declining market. Operating income and margin improved.

Dominated by mass market and premium segments

The North American market for household appliances amounts to approximately SEK 141 billion, or approximately USD 22 billion, annually. Virtually every household has a refrigerator, a freezer, a cooker, a washing machine and a tumble dryer. The share of households with dishwashers is lower. Growth is driven by the replacement of worn-out products as well as a growing interest in design, innovation and the environment. The US market is divided into four segments, i.e., low-price, mass market, premium and super-premium. See page 26. The mass-market and premium segments are dominant. The Group's Frigidaire brand is positioned in the mass market. Whirlpool and General Electric are the leaders in the premium segment.

The three largest producers in the US account for 90% of the market volume. The weak housing market in the US had an adverse effect on demand for household appliances in 2007. Shipments of core appliances from producers to retailers declined by 5.6%.

Consolidation of retailers

Almost all appliances in the US are sold by four major retailers, Lowe's, Sears, Home Depot and Best Buy. Sears and Home Depot also have strong positions in Canada. Vacuum cleaners are sold mainly in supermarkets. Consolidation of retailers has been in progress for some time. A large share of sales by retailers is driven by campaigns.

Kitchen specialists like those in Europe have a small part of the US market. Instead, kitchens are normally built on-site by construction fi rms, which also purchase appliances. Electrolux products are sold largely through the major retail chains.

Aims for growth in premium segment

Electrolux has leading positions for appliances and vacuum cleaners in both the US and Canada. The Electrolux brand for appliances is relatively new in the US. It was launched to a limited extent in 2004, through the Electrolux ICON series at the high-end segment. The Group's appliances are currently sold mainly under the Frigidaire brand, while vacuum cleaners are sold largely under the Eureka brand. The fi rst Electrolux-branded vacuum cleaners were launched in 2003. More extensive launches of Electrolux– branded innovative appliances for the high-end segment is scheduled for the second quarter 2008.

Net sales and operating margin Facts

Growth of shipments of core appliances in the US

appliances in the US declined by 6% in 2007 in comparison with the previous year. Group sales of appliances in the North American market rose by almost 2% in comparable currencies, on the basis of higher sales volumes.

CORE APPLIANCES

Market shares floor-care products Major retailers

Market shares • Home Depot • Lowe's

core appliances • Sears

Major competitors

General Electric • Whirlpool

VACUUM CLEANERS

Major retailers

Lowe's • Sears
Wal-Mart

Major competitors

Bissel • Dyson
Royal

Consumer Durables Latin America

Electrolux sales in Latin America have grown rapidly in recent years. Brazil is the Group's largest market in Latin America, and Electrolux is one of the largest producers in Brazil. The Electrolux brand has strong positions in all segments.

Consumer Durables Latin America's share of sales and operating income 2007

Group sales in Latin America rose strongly during the year mainly on the basis of good market growth. Operating income in 2007 for the operations in Latin America was the highest in the Group's history.

Fast market growth

The Latin American market for household appliances amounts to approximately SEK 61 billion annually. Brazil and Mexico account for approximately 40% and 20% of this market, respectively, while Argentina, the third largest market, accounts for less than 10%. In recent years, Latin America has shown high economic growth rates and greater household purchasing power. In 2007, Brazil showed a GDP growth of approximately 5%, which contributed to a strong increase in demand for appliances.

The share of households with refrigerators and cookers is high in Latin America. In recent years, sales of other major appliances have shown strong growth. The Latin American market is relatively consolidated, and the three largest producers account for approximately 75% of sales in Brazil. Whirlpool is the overall leader in the region on the basis of strong positions in the three leading countries.

Rapid consolidation

Regional and local retailers are being consolidated rapidly. Electrolux products are sold in Brazil through the major chains, including the market leader Casas Bahia.

Almost 80% of sales in Brazil

The Brazilian market accounts for almost 80% of Electrolux sales in Latin America. Sales in Brazil have grown rapidly in recent years on the basis of innovative Electrolux-branded products. Electrolux is now the second largest producer in the country, and the Electrolux-brand has strong positions in all segments. In other major markets such as Mexico and Argentina, Electrolux sales are low, but increasing. For additional information about the Group's operations in Brazil, see page 34.

Growth of shipments of major appliances in Brazil Net sales and operating margin Facts

Industry shipments of appliances in Brazil during 2007 rose by 17% over the previous year. Sales volumes for Electrolux rose by 23%.

CORE APPLIANCES Major market

• Brazil

Major retailer • Casas Bahia

• Mabe • Whirlpool

Major competitors • General Electric

VACUUM CLEANERS

Major market • Brazil

Major retailer • Casas Bahia

Major competitor • SEB Group

Consumer Durables Asia/Pacifi c

Australia is Electrolux largest market for household appliances in the Asia/Pacifi c region. In Southeast Asia, the Group is leveraging the leading position in front-loaded washing machines in order to expand operations in kitchen appliances.

Consumer Durables Asia/Pacifi c and Rest of world's share of sales and operating income 2007

Good sales growth for appliances in Asia/Pacifi c. Operating income in Australia and New Zealand as well as the entire South East Asia region showed an improvement, mainly on the basics of previous restructuring.

Three different markets

In 2007, the market for household appliances in the Asia/Pacifi c region amounted to approximately SEK 270 billion. The market is divided into three areas: Mature markets such as Japan, South Korea and Australia, large and rapidly growing markets such as China and India, and relatively small and rapidly growing markets such as Vietnam and Thailand. The Japanese market is the largest, with sales amounting to approximately SEK 51 billion annually. The Australian market for appliances amounted to approximately SEK 19 billion in 2007 and shows a high penetration for most appliances. Growth in Australia is driven by increasing interest in innovations, the environment and design.

There is no defi nite market leader in the Asia/Pacifi c region. In China, the domestic company Haier is the largest producer, with approximately 27% of the market, followed by several domestic and international producers with relatively small market shares. In Australia, Electrolux and Fischer & Paykel are the market leaders, with market shares of approximately 38% and 17%, respectively. LG of South Korea is the third largest manufacturer with a market share of approximately 10%.

2 1 0

Increasing consolidation

There is no retail chain that covers the entire region. On the other hand, there is a trend to increasing consolidation of retailers in various countries. In China, the market is dominated by two large domestic chains that specialize in electronics. International retail chains still have a limited presence in China. In Australia, fi ve large chains account for approximately 90% of the market.

Strong position in Australia

More than half of the Group's sales in Asia/Pacifi c is generated in Australia, where the Group has a leading position in appliances. The Electrolux brand is positioned in the premium segment. The Group's other brands in Australia, Westinghouse and Simpson, have strong positions, as well as Kelvinator within air conditioning. For additional information about the Group's operations in Australia, see page 33.

In Southeast Asia, Electrolux is the market leader for frontloaded washers in Thailand, Vietnam, The Philippines, Indonesia and Malaysia. This position is currently being leveraged to expand into kitchen appliances. In China, Electrolux is one of a group of international brands in the premium segment, while the other segments are dominated by domestic producers.

In 2005, Electrolux changed its business model in India. The agreement with Videocon, one of India's largest industrial groups, includes a license to use the Electrolux brand until 2010.

Net sales and operating margin Facts

Growth of shipments of core appliances in Australia

5 Million units 4 3

02 03 04 05 06 07

during the year in comparison with 2006. Group sales rose in comparable currencies, mainly as a result of market growth.

Market demand for appliances in Australia rose

CORE APPLIANCES

Major markets

• Australia • China

Major competitors

Fischer & Paykel

• Samsung

• LG

VACUUM CLEANERS

Major markets

• Australia • South Korea

Major competitors

Dyson
LG
Samsung

Professional Products

Electrolux is a world leading supplier of total solutions of professional food-service and laundry equipment. The Group's strongest position is for food-service equipment in Europe.

Professional food-service equipment

Global opportunities

The market for professional food-service equipment amounts to approximately SEK 125 billion annually. Global growth is approximately 3–4% annually, the fastest rate of increase being in Asia, Latin America and Eastern Europe. About 50% of all food-service equipment is sold in the North American market, which is twice as big as the European.

In the US, large restaurant chains are accounting for increasing market shares, and US-based chains are also expanding rapidly in growth markets such as China and Eastern Europe. In China, restaurant chains still have a small market share, with only 7,000 out of a total of 3.5 million establishments. This involves substantial growth opportunities for producers of food-service equipment that sell to restaurant chains. In recent years, Electrolux has established strong relations to major fast-food chains in the US to take advantage of opportunities both in the US and on growth markets.

The structure of the market in Europe is more complex and is dominated by smaller, independent restaurants. Producers are also more fragmented and often specialize in one product or sector. Ongoing harmonization of legislation and regulation across the European Union benefi t larger producers, which easier can adapt to tougher standards.

Demand depends on regional trends

Structurally, demand is driven by regional trends, e.g., an increase in the number of visits to restaurants. Eating out has become more common as disposable income rises and the number of restaurants increases. Buyers of food-service equipment has widely varying demands. This means that producers must offer a high level of fl exibility. Buyers are focusing increasingly on criteria for hygiene and energy-effi ciency as well as on access to a comprehensive service network. Design is steadily becoming more important, as many restaurant kitchens are on display to guests.

Complete solutions

Electrolux supplies restaurants and industrial kitchens with complete solutions of equipment and services, including ovens, dishwashers, refrigerators, cookers and hoods.

Sales through dealers increase

The greatest share of sales of Electrolux food-service equipment is through dealers. This strategy has proved to be more successful and cost-effi cient than direct sales due to the complexity of the customer structure.

Electrolux brand

The Group's products for professional kitchens are sold mainly under two brands, Electrolux and Zanussi Professional. In addition, Molteni is a niche brand for exclusive cooking ranges. The number of brands has been purposely reduced in recent years, in accordance with the Group's strategy for more effi cient utilization of economies of scale in production and marketing.

Professional laundry equipment

Growth in emerging markets

The global market for professional laundry equipment amounts to approximately SEK 20 billion annually. The global market shows annual growth of 2–3%. Emerging markets show the fastest

Opportunities within professional products

North America, Europe and Japan account for approximately 80% of total sales of professional products. Growth is mainly concentrated to growth regions, with an annual growth rate of approximately 4–6%. The total market value is approximately SEK 145 billion annually.

An example of an especially successful coordination between consumer durables and professional products is the 2007 campaign in Australia in which Electrolux consumer and professional products were marketed simultaneously.

growth, approximately 5–6%. About 40% of this equipment is sold in North America, and 30% in Europe. The largest customer category comprises healthcare and apartment house laundries. The market for laundry equipment is not as fragmented as for professional food-service equipment. The fi ve largest producers have a combined market share of approximately 45%.

Demand driven by population growth

Demand for professional laundry equipment is not as sensitive to the business cycle as food-service equipment, but shows a strong link to population growth. Customers are interested in innovations that enable lower costs through lower consumption of energy and water.

Large share of direct sales

The share of direct sales is larger for professional laundry equipment than for food-service equipment, although there is a similar trend to greater reliance on dealers. The greater share of Electrolux laundry equipment is sold through dealers in Europe, Asia and North America.

Electrolux brand and product offering

Professional laundry equipment is sold exclusively under the Electrolux brand, except in the US where the Wascomat brand is used. The product offering includes washing machines, tumble dryers and equipment for fi nishing and ironing.

Professional Products' share of Group sales and operating income 2007

Operating income and margin in 2007 for Professional Products improved over the previous year, as a result of more effi cient production and price increases. Price increases offset higher costs for raw materials, primarily for stainless steel.

High rate of innovation and extensive service network

In order to maintain a high rate of innovation, the equivalent of about 4% of net sales for Professional Products is invested in continuous product development. The Group has more than 200 patents for professional food-service and laundry equipment. Electrolux also has the industry's most extensive service network, which is a vital competitive advantage.

Own production increasing

Labor costs are normally less than 10% of the total costs for professional products, which means that production can be located close to the end-user market. Equipment is often bulky and complex, so that it is costly to transport over long distances. Competition from producers in low-cost countries is limited.

The share of own-produced equipment in total Group sales has increased in recent years. Just as for consumer products, the production system for professional products is being streamlined to a smaller number of product platforms.

Mutually benefi cial transfers

The Group's comprehensive experience and expertise in Professional Products pays dividends for operations within Consumer Durables, and vice versa. Consumers are inspired by visits to restaurants with open kitchens and are looking for products with a professional appearance for their own kitchens. Innovative solutions developed within Professional Products are transferred to Consumer Durables. In addition, some raw materials are purchased jointly.

FOOD-SERVICE EQUIPMENT

Major markets
Scandinavia
Italy
France

Major competitors

Ali Group
Enodis
ITW/Hobart

LAUNDRY EQUIPMENT

Major markets

• Scandinavia

• Japan

• USA

Major competitors
Alliance
Girbau • Miele

During the second quarter of 2008, a completely new product offering will be launched in North America in the premium segment under the Electrolux brand. This will be the biggest launch in the Group's history in North America. The plan is to gain a signifi cant long-term presence in the premium segment, which shows a considerably higher profi tability than the mass market, where the Group holds a strong position today.

The new Electrolux-branded appliances represent a great value proposition. They offer an exciting combination of industry-fi rst features, looks and quality.

The Electrolux strategy

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 profi tability and growth.

"Thinking of you" sums up the Electrolux offering – always put the users fi rst 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 benefi t both people and the environment, and for which consumers are willing to pay a higher price,

Electrolux can achieve profi table growth.

Growing number of new products

Products that are generated by the Electrolux process for consumer-focused development account for a rapidly growing share of Group sales. This in turn leads to an improved product mix as well as higher long-term profi tability.

In 2007, a record number of new products were launched worldwide. Research also shows that many more consumers prefer the Electrolux brand than in last year. The increased investment in product development based on consumer insight is clearly starting to give results.

Interviews and visits to households

Insight into consumer behavior is the basis for all product development within the Group. Interviews and visits to households on a large scale in recent years have enabled Electrolux to identify a number of global trends in society and consumer preferences to which products can be adapted. The common denominators of all products launched by Electrolux are ease of use, high quality and exciting design as well as user- and environment-friendliness.

Global trends and processes

The goal of the Group's product development is to generate products that can be sold worldwide on the basis of common global needs, as well as products that are tailored to local requirements. Identifying trends for various customer and consumer segments enables Electrolux to offer products with relevant functions and attractive design. Global products also contribute to more effi cient production, as the number of production platforms can be reduced.

Continued high investment level

In 2007, over SEK 2 billion was invested in development of new products, an increase of 10% over the previous year. This investment is expected to remain at the same high level in coming years. Electrolux is committed to developing products for profi table segments as well as markets that show strong growth. The Group's common product development process based on consumer insight is expected to stimulate greater market demand.

Success story: Market Fresh for Asian kitchens

During 2007, Electrolux successfully launched a new

Early in the development, a clear mes-

Developing products based on consumer insight

Electrolux product development process, Product Management Flow (PMF), is a holistic process for managing products – from cradle to grave. PMF is now applied to all products developed within the Group, both for consumers and professional users.

Launch execution

Range management Phase-out

Focus is now moved forward in the process, to launch execution and range management to ensure consumers are familiar with Electrolux products.

Continous updates prolong the life of a product. Electrolux Market Fresh, which was presented on the former spread, became a great success. Later on Market Fresh was supplemented with a three-door variant.

Electrolux brand is growing

All market communication aims at creating a strong image of Electrolux, for all products and markets. Marketing plans are integrated at an early stage in the product development process and activities are coordinated to achieve best impact.

For a consumer-goods company like Electrolux, the brand is one of the most important assets. Since consumers do not purchase household appliances often, they have limited knowledge of the products that have been introduced since their last purchase. A leading brand that stands for quality, thoughtfulness and innovative products is, therefore, important for both consumers and retailers.

"Thinking of you"

"Thinking of you" highlights the Group's intensive focus on consumer insight for development of new products. Communication profi les Electrolux as the "Thoughtful Design Innovator". Marketing plans are integrated in the product development process at an early stage.

Marketing activities are coordinated in order to achieve greater effi ciency and impact. Investments are aimed at countries with the greatest potential, and cost-effi cient media such as PR and the Internet are being used more frequently.

Increased investment in the Electrolux brand

Investment in brand communication in 2007 amounted to 1.8% of net sales. During the next few years, this investment will rise to more than 2% of sales in connection with major product launches, e.g., in North America.

The focus on the Electrolux brand enables more effi cient use of resources. Among the double brands, investment is directed mainly to AEG-Electrolux in Europe. Investments are also made in other local brands such as Zanussi in Europe and Frigidaire in North America.

Strengthening of the Electrolux brand in different regions

Sales of Electrolux-branded products, including double brands, have risen from 18% in 2000 to approximately 50% in 2007. In Southeast Asia and Latin America, all Group appliances and vacuum cleaners are sold under the Electrolux brand. The share of Electrolux-branded appliances in Europe is approximately 52%, and approximately 1.5% in North America. In all regions, continuous investment programs are aimed at strengthening the Electrolux brand through launches of innovative products in the high-price segments.

More of Electrolux in USA in 2008

Sales in the US under the Electrolux brand comprise vacuum cleaners and high-end appliances. In 2008, a new line of appliances will be launched under the Electrolux brand in the premium segment. The goal is over time to achieve a substantial share in the high end of the North American market in order to improve the product mix.

Electrolux brand's share of total sales

for the Electrolux brand's relatively low the US. Most of the US are under the Frigidaire brand.

Estimated value segments on the US market

Mass market, 44% Premium segment, 38% Super-premium segment, 9%

and Electrolux ICON. To expand the

Australian fashion designer Alex Perry was amazed at the result when he fi rst used the tumble dryer Electrolux Iron Aid. Now he is sharing his expertise of delicate fabrics with Electrolux as fabric care ambassador. result

Strengthening the Electrolux brand in Europe

The Group's largest ever product launch in Europe was in 2007. This launch was also one of the largest ever by Electrolux anywhere, and comprised new appliances for built-in with consistent design and innovative features. The launch is vital for improving the product mix in the European market. In the course of the year, products corresponding to approximately 40% of Electrolux sales in European markets was replaced by innovative Electrolux-branded products.

Electrolux on-line

The Internet is an important tool for marketing, sales and support of the Group's products. Electrolux is committed to build thoughtful, innovative and attractive on-line solutions that assist consumers in all phases of their path to purchase.

The ways in which people use the Internet change rapidly and vary with age, regions and cultures. It is hence essential for Electrolux to go where the consumers are and create a relevant presence on communities, portals, search engines and not least our own consumer web-sites.

Swedish designer Pia Wallén's white version of Electrolux Ultrasilencer was inspired by the silent vacuum cleaner. She associated the silence with the sound of falling snow; white, peaceful and quiet. The vacuum cleaner is produced in a limited edition and is sold by selected retailers.

Success story: Brand transition in France

French market have been double-branded as Arthur Martin Electrolux. The brand transition was completed in 2007, as Arthur Martin was discontinued. "Desormais Arthur Martin préfère qu'on l'appelle Electrolux" (Arthur Martin wants to be called Electrolux ) was the Arthur Martin, which has offered innovative kitchen 1854, is now part of the Electrolux brand. It is no coin-French consumers can continue to purchase innovative products, and Electrolux marketing activities can be concentrated to one single brand.

Innovative products and marketing

Generation 4000

Electrolux new series of professional laundry products combines elegant design and cutting-edge technology with energy-efficiency and user-friendliness. Generation 4000 includes a wide range of washing machines, tumble dryers and flatwork ironers.

All units feature Compass Control for easy, efficient selection of washing programs. Generation 4000 was launched in Europe and Asia in 2007.

Antarctica project

A new guest has arrived in the fragile Antarctic environment – the world's first zero emissions polar station. Powered by wind turbines and solar panels, the Princess Elisabeth station will house scientists who will probe the subcontinent's ice layer for answers to climate change.

Electrolux is supporting the effort with its energy-efficient appliances to meet the daily needs of scientists and researchers working in a tough environment. For information, visit www.electrolux.com/antarctica

Intelligent oven Inspiro

Inspiro is an intelligent oven with a new auto-sensor system, which chooses the correct temperature, time and oven function for any type of meal.

This built-in oven was launched in France in January 2008, and will be launched in other European markets during the spring.

Electrolux Design Lab, established in 2003, is an annual global design competition open to industrial design students. The challenge for the 2007 edition was to create eco-friendly, sustainable household appliances and solutions for 2020. The brief was to go above and beyond water and energy efficiency and suggest ways to fost sustainable behavior and product use.

Hundreds of students from 42 countries participated in the competition and the jury selected eight finalists. The winning concept was e-Wash, a compact washing machine that uses soap nuts from nature instead of detergent. For information, visit www.electrolux.com/designlab

Design awards

Elextrolux has received several design awards. Products are perceived as having new and good design.

Luxury cooking is being taken to new hights as Electrolux introduces the Illuminated Induction Cooktop. This thoughtfully designed cooktop stands proud from the benchtop for a stunning effect.

The cooktop combines the precision and innovation of Electrolux induction technology with an elegant design, creating a unique cooktop that is both powerful and easy to use. It features touch controls and white perimeter lightning that radiates when the cooktop is turned on.

Illuminated Induction Cooktop is made from stylish white corian and ceramic glass and is scheduled for launch in April 2008 in Australia and Japan.

The vacuum cleaner Ultrasilencer Green

The environment-sound Ultrasilencer Green consumes much less energy than competing vacuum cleaners but offers equivalent cleaning performance. Recycled plastic accounts for more than half of the plastics used in Ultrasilencer Green, and 90% of the unit can be recycled after disposal. Like all vacuum cleaners in the Ultrasilencer series, it is silent.

Strategy for growth

The Electrolux strategy for growth involves improving the Group's offering to the market by identifying specifi c elements – product categories, regions and sales channels – that can drive profi table growth.

The total market for household appliances is growing at about the same rate as the global economy, i.e., by 3–5% over the course of a business cycle. Although growth in the total market may be limited in terms of value, a number of defi nite, strong market trends are driving vigorous growth in specifi c product categories, regions and sales channels.

Higher penetration and faster replacement rate

Sales of household appliances are growing rapidly in Eastern Europe, Latin America and Asia. Household purchasing power is increasing, which leads to higher demand for such products as cookers, refrigerators and washing machines. In Western Europe and North America, the rate of replacement for appliances is accelerating despite an improvement in product quality. This trend is driven by innovative products featuring attractive design, useful features and environmental benefi ts.

Number of households rising

Although the populations of Europe and the US are not growing, the number of households is increasing. In Western Europe, the number of households has risen by approximately 1.5 million annually over the past ten years. More single-adult households and longer life expectancy are the factors that explain this trend.

Sales of household appliances are strongly correlated to the increase in the number of households.

Growth in premium and low-price segments

Growth in the market for appliances is currently shown in the premium and low-price segments. Strong interests in the home and in design together with rising disposable incomes are generating greater demand for expensive, sophisticated products. New producers from low-cost countries and a growing number of large, global retailers who focus on low price is leading to greater demand for basic low-end products.

Growth in new product categories

The new products launched by Electrolux have all been generated by the Group's process for consumer-oriented product development. This increases the probability that these products will receive good market acceptance. New products are also being aimed to a greater extent than previously at consumers in the premium segment, which gives the Group an improved product mix.

Electrolux works continuously to identify product categories with a potential for rapid and profi table growth. The Group's position as an environmental leader is based on launching products that consume less water and energy than previous product generations.

Electrolux enviromental -friendly products, green range

Sales through kitchen specialists and the Internet

In 2007, green range, i.e., the

In 2008, the green range appli-

Kitchen specialists/Internet Consumer electronic retailers

The value share of sales for kitchen Western Europe, approximately 26%

Source: GfK, 2006.

Electrolux Design Centre in Shanghai, China Electrolux showroom in Shanghai will host events for the Chinese design community. The aim is to establish Electrolux as a design authority and to encourage an exchange of ideas between the Chinese and European design communities.

Careful monitoring of sales and profi tability for products in the green range, i.e., those with superior energy-effi ciency, indicates more favorable trends than for the Group's total product offering.

In addition, some product categories are currently limited but can generate strong growth in the future. Small, innovative appliances may lead to higher total sales for the Group and simultaneously strengthen the brand.

Expansion in growth regions

The Electrolux strategy for profi table growth involves monitoring growth in developed markets in order to selectively expand operations in specifi c product categories and to increase sales in emerging markets. In terms of sales and production, the Group has a strong presence in such growth markets as Eastern Europe, Latin America and a large part of Asia. Demand for modern household appliances is showing strong growth in emerging markets as disposable income rises. The Group's local presence and extensive experience of growth markets create opportunities for continued expansion.

Higher sales through kitchen specialists and the Internet

Kitchen specialists in Europe and Australia are accounting for a growing share of the retail network. Electrolux can increase sales through these channels on the basis of a strong, stable brand and the ability to offer innovative products.

Prior to a purchase, the Internet is often a consumer's fi rst contact with the product. New products are presented in campaign areas on the Group's consumer web sites where detailed product information is available. Electrolux has a strong presence on the Internet, and it is being reinforced by continuous efforts.

Growth through complementary acquisitions

In addition to organic growth, Electrolux can also grow through acquisitions. Priority is assigned to complementary technology, products or brands that can help the Group achieve greater market share in the premium segment.

Success story: Strong growth in Eastern Europe

Since 1991, Electrolux has experienced rapid growth in Eastern Europe. Electrolux now has an 15% share of market leader in Hungary, the Czech Republic and the Baltics. Electrolux is among the top three in the other

Electrolux sales in Eastern Europe have shown strong growth from the start, and have accelerated in recent years. In 2007, Electrolux sales of appliances in Eastern Europe rose by more than 17%, which is also invest in entirely new kitchen appliances. This is leading to higher demand for built-in products, for which Electrolux is among the leaders. The improved

Innovative Electrolux products such as the tumble drier Iron Aid and the Electrolux Built-In Kitchen are in Increasing market shares in Eastern Europe

Made by Electrolux

In order to create long-term competitiveness, Electrolux is implementing a comprehensive cost-cutting program for both production and purchasing that involves relocating production to low-cost countries and increasing purchases from them.

The appliances industry is undergoing major changes. Whereas plants were previously located close to end-users in Europe and North America, a large share of production is being moved to lowcost countries. The basic driver for the change is consumer demand for better products at lower prices.

Competitive production footprint as of 2010

The restructuring program initiated in 2004 is aimed at making the Group's production competitive in the long term. The costs of the program are estimated at approximately SEK 8 billion. When it is fully implemented in 2010, more than half of production of appliances will be located in low-cost countries in Eastern Europe, Asia and Latin America. Savings will amount to approximately

SEK 3 billion annually. Relocation of the Group's production of vacuum cleaners has already been completed.

Every decision regarding relocation of production is preceded by careful analyses of a number of factors, including current and future cost levels, conditions for transport, access to suppliers, and proximity to future growth markets. Such analyses have been the basis for establishing new plants in Poland, Hungary, Mexico, China and Thailand.

More than half of the restructuring program has now been completed. Today, approximately 50% of production is located in lowcost countries, which means that the Group is quickly approaching the goal of 60% by 2010. The cost of the program to date amounts to approximately SEK 6 billion. Savings are in accordance with plans, and amount to date to approximately SEK 1.5 billion.

Electrolux is continuing to work on increasing efficiency, but it is not expected that a program on the scale of the one being currently implemented will be required within the foreseeable future.

Program for greater production efficiency

While production is being relocated, the Group is implementing the Electrolux Manufacturing System (EMS), a global program for more efficient production. The EMS was launched in 2005 and is based on a number of tested methods for improving production efficiency that have been developed both within and outside the Group. Production safety and working environment are improving and product quality is rising. The EMS has been introduced with great success in virtually all Electrolux plants.

Plant closures and cutbacks
Torsvik	Sweden	Compact appliances
Fredericia	Denmark	Cookers
Nuremberg	Germany	Dishwashers, washing machines and dryers
Adelaide	Australia	Dishwashers
New plants
Juarez	Mexico	Washing machines
Authorized restructuring
Spennymoor	UK	Cookers

Restructuring 2007 Electrolux manufacturing footprint by 2010

LCC, 60%

Why keep plants in HCC? No net-present value case Efficient and profitable plant Declining demand HCC 40%

The remaining 40% will be in high-cost countries (HCC) due to economical

Electrolux manufacturing foot-print

Smarter purchasing and increased purchases from low-cost countries

The largest costs for production refer to purchases of materials, which account for more than half of total Group costs. Materials and components from more than 4,000 suppliers are delivered annually to the Group's global production network. Electrolux has

been able to make this complex fl ow of goods more effi cient.

Within the Group's purchasing function, a number of activities are aimed at lowering costs related to materials. Better global coordination

of purchasing and close cooperation with selected suppliers are among the measures that lead to results. All purchasing decisions above a certain level are made by the Group's global Purchasing Council. Priority is also assigned to coupling the purchasing function to

the process of product development. Electrolux works closely with suppliers, who must always comply with the Electrolux Environmental Policy as well as the Workplace Code of Conduct.

In 2007, savings related to Group purchasing amounted to approximately SEK 1.7 billion.

Group purchases from suppliers in low-cost countries are being increased in order to achieve additional cost reductions. The share of such purchases has increased from approximately 30% of total purchases in 2004 to approximately 48% in 2007, and is expected to amount to approximately 50% in 2008.

Lower energy consumption

Electrolux works continuously to achieve more effi cient energy consumption in production facilities in order to limit emissions of carbon dioxide and to cut costs as well. The Group's goal is to

reduce overall energy consumption by 15% between 2005 and 2009. This is expected to generate savings of approximately SEK 100m annually. The Group has about 50 plants worldwide, and they are expected to generate approximately 95% of the reduction in energy consumption.

Electrolux Manufacturing System (EMS), a global program for more effi cient production, has been implemented in virtually all Electrolux plants. The picture is from the well organized cooker plant in Rothenburg, Germany.

Success story: Restructuring in Australia

Zealand were under investigation as part of the ongoing restructuring program. The goal was to coordieffi cient.

has been divested. Sales and marketing have also been made more effi cient. More than 1,000 employ-SEK 500m.

for Electrolux business in Australia improved strongly over the previous year.

Appliances plants in Australia

Success story in Brazil

Electrolux entered the Brazilian appliance market in 1996 by acquiring Refripar, one of the largest appliance producers in the country. The acquisition involved a number of challenges. Refripar's products were positioned in the low-price segment, and the company had high production costs as well as an ineffi cient distribution network. In addition, the Brazilian economy entered a serious crisis a few years after the acquisition. Today, Electrolux is one of the leading appliance brands in Brazil, with a high rate of growth and good profi tability. What is the explanation for this success story?

Priority was assigned to four areas soon after the start of the Electrolux operation in Brazil:

Develop innovative products
Build the Electrolux brand
Market products effectively
Reduce costs

Development of innovative products Development of innovative products has been an important factor for success in the transformation of the Electrolux operation in Brazil. Refripar's product range was soon replaced by innovative products, all of them branded Electrolux. In terms of value, the Group's market share has grown rapidly in recent years. In 2007, products which had been launched within the past two years accounted for approximately 62% of Electrolux sales in Brazil.

The Electrolux operation in Brazil was one of the Group's forerunners in terms of developing products based on consumer insight. Visits to households and discussions with consumers generate comprehensive insight into consumer behavior for product developers and marketing personnel. Ideas are later tested in clinics to which small groups of consumers are invited to discuss the features of specifi c products.

The frost-free refrigerator Celebrate and the cooker Revolux are just two examples of products that have been successfully launched. Electrolux has also launched Celebrate Glass, the fi rst cooker in the Brazilian market to offer a double oven, and also the fi rst with a glass hob.

Focusing on the Electrolux brand Building the Electrolux brand was an essential component of the transformation of the Brazilian operation. As of 1997, all Group appliances and vacuum cleaners sold in Brazil are Electrolux-branded. These products are successful in all segments and are clearly differentiated in terms of name, design and size.

Marketing at points-of-sale

Electrolux applies a strategy of marketing products mainly at points-of-sale, where consumers make purchasing decisions. This strategy has proved to be successful. It involves cooperating and growing with domestic retail chains such as Casas Bahia, Ponto Frio, Casas Pernambucanas and Insinuante, the market leaders. Comprehensive training programs have been implemented to ensure that the Group's own sales personnel know their products, and positioning the products in the shop is carefully planned. Comments by consumers to salespeople are systematically collected and provide input for product development and marketing.

More effi cient production

Refripar have been modernized and upgraded to ISO 14001, and the Electrolux Manufacturing System (EMS) is in place at all the plants. Prothe entire Latin American market with Electrolux ances, after Whirlpool.

Large and growing market

With a population of approximately 190 million, Brazil is the leading economy in Latin America and accounts for approximately 50% of regional GDP. Stable economic growth in recent years has made Brazil one of the leading global economies. About 25 million Brazilians currently have incomes that are equal to or higher than the European average.

Sales and market shares, appliances in Brazil 2003–2007

0.5 0.4 0.3 0.2 0.1 Market share Since 2003, Electrolux from 20.6% to 25.5%.

Improved productivity

in plants

Sustainability a key strategic component

Sustainability has high priority throughout the Electrolux operation in Brazil. Brazil features high energy prices and limited access to Continuous efforts to reduce consumption of ful transformation of the Brazilian operation.

Success through diversity

Diversity among employees and managers, a group-wide leadership program and a clearly defi ned approach to work with a focus on the consumer are priority areas for increasing the competitiveness of Electrolux. Transforming Electrolux into a more consumer-oriented company involves high criteria for having the right employees and managers.

Prioritizing diversity

Electrolux is a global company. Senior management is strongly convinced that diversity among employees makes the Group better equipped to satisfy the demands of different markets and customer needs. Cultural diversity is essential, to refl ect local consumer needs.

Increasing the proportion of women at all levels of the Group is also prioritized. Electrolux works actively to ensure that women are always included among candidates for managerial posts. Approximately 140 positions were fi lled in 2007, and women were appointed to approximately one third of them. About 29% of the participants in the Group's leadership programs during 2007 were women.

Electrolux cooperates globally with AIESEC, a leading student organization for development of young managers. This has provided the Group with young talent and enhanced cultural diversity. In 2007, more than half of the AIESEC trainees were offered permanent jobs with Electrolux, out of which two thirds were females.

Development of global leaders

Electrolux invests in internal leadership development in order to create a common perception of leadership irrespective of cultural differences. To date, the group-wide leadership program has been uniformly implemented in 14 countries and 14 different languages. Since 2003, totally 1,657 managers have participated in the leadership programs. In 2008, the program is planned to be implemented in even more countries.

In order to ensure that all internal talent is utilized, the Group maintains a talent management process in which more than 3,000 employees are evaluated annually. Approximately 50 top-level job openings were announced in 2007 and approximately 75% of them were fi lled internally, as against 56% in 2004. The Open Labor Market (OLM) is the Group's most important channel for announcing openings and has also contributed to the increase in internal recruiting.

Dialogue with employees

The Employee Attitude Survey (EAS) is a web-based tool that gives employees an opportunity for year-round anonymous feedback on various issues related to development within their own teams. The results are evaluated, analyzed, and used as input for continued development work. EAS 2007 was the most comprehensive survey to date, with more than 10,000 employees contributing their points of view. For the fi rst time, all offi ce workers in Asia participated in the EAS during 2007.

Distribution of employees Gender distribution

Group-wide Men 65% Senior managers Group Management Men 73% Board of Directors

Men 67%

Men 88%

Remuneration to Senior Management

Below Remuneration Committee Chairman Barbara Milian Thoralfsson presents the company's approach to remuneration for senior management.

"Offering competitive salaries to senior management is a prerequisite for attracting personnel and stimulating them to make the strong commitment that is required in the tough international competition that Electrolux faces. The Group also aims at offering competitive total remuneration, based on performance.

Advice from independent consultants

In order to determine appropriate total remuneration in connection with recruiting someone for a specifi c position and retaining him/ her, Electrolux requests advice from external consultants. They evaluate the leading management positions and compare remuneration with other Swedish and European companies, including Electrolux leading competitors.

More than fi xed salary

Remuneration to management in Electrolux consists of a fi xed salary, a variable salary based on annual targets, a long-term sharerelated salary, and pension benefi ts. Remuneration other than fi xed salary has symbolic importance. If the company does not perform well, the shareholders are not the only ones affected. And since many others in the company have performance-based salar ies, it would be inappropriate for senior management to receive only a fi xed salary.

Important variable component

The variable salary is based on clearly defi ned targets for each member of senior management. The Board devotes a good deal of time to defi ning these targets, since they are an important part of the work of running the company. The targets include fi nancial goals for value creation as well as non-fi nancial goals. Variable salary is paid only if the targets are reached, and maximum as well as minimum levels are defi ned for each position. The maximum level may not be exceeded.

Performance share program

In addition to fi xed and variable remuneration, there is a long-term share-related component. For a large listed company like Electrolux, with tens of thousands of shareholders, it is important that in their daily activities the President and senior management are moving in the same direction as the owners, who do not participate in daily operations. The Electrolux incentive program is linked to the Groups' fi nancial development and is maximized at a defi ned level, and covers about 160 persons. The Board of Directors will propose a share program in 2008 based on earnings per share.

Over time, the fi xed component corresponds to about half of total remuneration, and the variable and share-based components each correspond to about 25%.

Pension benefi ts

Pension benefi ts are based on allocations during the period in which the individual is employed by the company. This premium-based system enables the Group to have continuous control of costs."

Value creation is the Group's primary fi nancial performance indicator for measuring and evaluating fi nancial performance. For more information, see Note 31 on page 67 in section Financial review.

For the Board's proposal on remuneration guidelines to the Annual General Meeting 2008, see page 23 in section Financial review. For additional information on remuneration guidelines and processes for senior management, see Note 22 on page 53 and Note 27 on page 61 in section Financial review .

Success story: Program for improving consumer insight

project for establishing a working method to improve group-wide and interdisciplinary, and is aimed at

Financial review 2007 in brief

This is a short description of the fi nancial performance of 2007. For a thorough review of the 2007 results, see Board of Directors Report on page 5 in the section Financial review.

Market growth

Demand for appliances increased during the year in several of the Group's markets. The strongest rises were in Latin America and Eastern Europe. On the other hand, demand in Western Europe declined in a number of major markets such as Germany, the UK and Spain. The sharpest downturn came toward the end of the year. Demand in the US market showed a decline throughout the year.

Sales rise by 4%

Net sales for Electrolux in 2007 increased by 4% in comparable currencies. Sales were favorably affected by higher sales volumes, an improved product mix and higher sales prices. The decline in the US dollar rate had an adverse effect on sales in Swedish crowns.

Operating income improved by 6%

Operating income 2007 rose by almost 6%, excluding items affecting comparability, and operating margin increased to 4.6%. All Group operations except appliances in Europe reported improvements. The appliance operation in Latin America achieved record high income, and in North America both operating income and market share increased despite lower market demand. In Australia, appliances showed increased profi tability after a number of tough years. The fl oor-care operation showed improved profi tability in all regions. Income from sales of professional laundry and food-service equipment continued to show stable growth despite rising prices for raw materials and the weaker dollar.

The Group's costs for raw materials increased by approximately SEK 2 billion in 2007.

Key data, SEKm	2007	Change	2006
Net sales	104,732	0.9%	103,848
Operating income1)	4,837	5.7%	4,575
Margin, %	4.6		4.4
Income after fi nancial items1)	4,397	0.7%	4,367
Income for the period1)	3,276	4.2%	3,145
Earnings per share, SEK1) 2)	11.66		10.89

Operating cash fl ow	1,277	167	1,110
Capital expenditure	3,430	278	3,152
Total assets	66,089	40	66,049
Total equity	16,040	2,846	13,194
Net borrowings	4,703	5,007	–304
Return on equity, %	20.3		18.7
Net debt/equity ratio	0.29		–0.02
Dividend per share, SEK	4.253)		4.00
Average number of employees	56,898	1,427	55,471

1) Excluding tems affecting comparability.

2) Basic. 3) Proposed by the Board of Directors.

Largest product launch ever implemented in Europe

The largest product launch in the history of Electrolux was implemented in 2007. About 40% of the Group's offering in the European market was replaced by innovative products for the premium segment. The Group invested more than SEK 2 billion during the year in development of new products, an increase of 10% over the previous year. Investment in brands also increased, corresponding to 1.8% of Group sales. The goal for this investment is 2% of sales.

For more information on the Group's strategy for product development and brands, see pages 23 and 26.

Net sales and operating margin Net sales and employees

125,000 10 8 6 4 2 0 100,000 75,000 50,000 25,000 03 04 05 06 07 SEKm %

Net sales

Net sales in 2007 increased by 0.9% compared to the previous year comparability.

10 largest countries	SEKm	Employees
USA	29,571	10,648
Brazil	7,158	6,754
Germany	7,020	2,147
Italy	5,109	8,036
France	4,957	1,466
UK	4,950	1,122
Canada	4,577	1,420
Australia	4,488	2,144
Sweden	3,814	3,025
Spain	2,927	892
Other	30,161	19,244
Total	104,732	56,898

Restructuring aimed at improved competitiveness

In 2007, the Group continued to work on restructuring in order to make production more competitive, by relocating manufacture to low-cost countries. Approximately 50% of production is now located in such countries. The goal is 60% by 2010. Operating income for 2007 includes costs related to closure of cooker plants in Spennymoor in the UK and Fredericia in Denmark. Costs for the closures, amounting to SEK 362m, is reported within operating income as items affecting comparability.

For more information on the Group's strategy for improved cost efficiency, see page 32.

Adjustment of capital structure

In the interest of adjusting the capital structure following the spinoff of Husqvarna in June 2006, an Extraordinary General Meeting 2006 authorized distribution of SEK 20 per share through a redemption procedure. The payment was made early in 2007 and amounted to a total of SEK 5,582m.

Net borrowings at year-end 2007 amounted to SEK 4,703m, and the debt/equity ratio increased to 0.29. Interest-bearing liabilities amounted to SEK 10,087m at year-end, of which SEK 7,801m referred to long-term borrowings with an average maturity of 2.3 years. Average interest on the Group's interest-bearing loans was 5.8% at year-end. The equity/assets ratio was 26.9%.

Consumer Durables in Europe

Income for appliances in Europe was affected by extraordinary costs for the new products launched during the year, and operating income showed a considerable decline from 2006. Launches and marketing of the new products were very comprehensive, on the largest scale ever. In order to deliver to retailers according to plan many products involved higher costs than the original targets.

Sales for the floor-care operation in Europe showed a substantial increase during the year on the basis of strong growth, and operating income improved.

Consumer Durables in North America

Group sales of appliances in North America rose during the year on the basis of higher sales volumes, and market share increased. Operating income and margin improved as a result of a favorable price increases, an improved product mix, higher sales volumes and lower costs.

Market demand for vacuum cleaners in the US was lower than in 2006, and sales for the Group's operation in North America declined. However, operating income increased on the basis of an improved product mix and lower production costs.

Consumer Durables in Latin America

Sales of appliances in Latin America showed strong growth in 2007, mainly as a result of strong market growth in Brazil. Operating income improved on the basis of higher sales volumes, an improved product mix and higher production efficiency. Operating income for the Latin American operation was the highest in the Group's history.

Consumer Durables in Asia/Pacific

Operating income in Australia improved considerably mainly as a result of cost savings generated by previous restructuring. Sales and operating income rose throughout the entire South East Asia region. The operation in China is still unprofitable.

Professional Products

The operation in Professional Products showed stable performance in 2007. Operating income and margin increased. Greater production efficiency and higher prices compensated for increases in the costs of raw materials.

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.

Net debt/equity and equity/assets ratios Operating income by business area

SEKm	2007	2006
Consumer Durables, Europe	2,067	2,678
Margin, %	4.5	6.1
Consumer Durables, North America	1,711	1,462
Margin, %	5.1	4.0
Consumer Durables, Latin America	514	339
Margin, %	5.6	4.4
Consumer Durables, Asia/Pacific and Rest of world	330	163
Margin, %	3.6	1.9
Professional Products	584	535
Margin, %	8.2	7.7
Common Group costs, etc.	–369	–602
Operating income, excluding items affecting comparability 4,837		4,575
Margin, %	4.6	4.4

The story of Electrolux

Axel Wenner-Gren, the founding father of Electrolux, established the principles by which the company still thrives. He was a visionary who helped to develop products of the future by understanding the needs of people and not submitting to challenges. His dream to improve quality of life has had fundamental impact on homes around the world. His vision, which began in 1910, has flourished to become the basis of Electrolux today.

The story of Vision

Axel Wenner-Gren barely noticed the stores as he walked down the biggest shopping street in Vienna. The year was 1908, Wenner-Gren was on his way to a meeting and his broad steps and freshly pressed suit signalled a sense of purpose. That is, however, until something caught

his eye, brought him to a stop, and pulled him to a shop window for a closer look.

Propped on display was a machine that must have weighed 20 kilos with a price tag that could suck up the savings of almost any wealthy household. Window shoppers either smirked at or ignored the industrial display, but Wenner-Gren couldn't take his eyes away from it. In his mind the machine became smaller, lighter, sleeker and less expensive. He envisioned women gliding small cleaners around their houses. He would bring convenience to houses around the world.

Electrolux today

"Thinking of you" sums up the Electrolux offering – always put the users first and foremost. Trilobite, the world's first automatic vacuum cleaner, frees up time so consumers can do the things that really matter, like spending time with family and

friends. It uses radar just like a bat to navigate under beds, tables and furniture. When the batteries run low, it returns by itself to the charging station to recharge.

The story of Insight Axel Wenner-Gren unfolded a sketch made during a board room meeting for a team of Electrolux engineers to examine. On the page was a drawing of a vacuum cleaner. Rather than standing like the traditionally shaped bucket, however, Wenner-Gren had sketched the vacuum

cleaner laying on its side, with rounded edges and sled-like runners attached to the base. "This will be our next model," Wenner-Gren explained.

The idea had come to him a few days earlier when a young salesman visited his office to report that a customer was having a difficult time with her vacuum cleaner. The lady had told the salesman that her vacuum cleaned well, but that she found it tiring to lift and carry the machine throughout the house.

From that moment, Wenner-Gren was resolute on making the vacuum cleaner move easier.

Electrolux today

Insight into consumer behavior is the basis for all product development within the Group. Electrolux developed Ergorapido, a cordless vacuum cleaner, for people who want the vacuum cleaner easily available. Sleek in design and lightweight, Ergorapido is too good looking not to be left in sight.

"The Electrolux Spirit acknowledges no obstacles and submits to no defeats. It is a combination of enthusiasm, loyalty, aggressiveness and belief, which is inspired by confi dence in our organization and product, and faith in our success and our future."

Axel Wenner-Gren, Founder

The story of Innovation

"This task is not an easy one, but one that will transform homes around the world", Axel Wenner-Gren said to the team of engineers and scientists sitting before him. Next to Wenner-Gren was a basic prototype of an absorption refrigerator created by two young

engineers, Baltzar von Platen and Carl Munters, for a University degree project.

Wenner-Gren's decision to acquire the patent for the absorption refrigeration technology, which used electricity, gas or kerosene to circulate water and safely turn heat into cold, was his fi rst step towards diversifying Electrolux. It was a bold step, for not only had Electrolux secured its spot as the world leader in vacuum cleaners, but absorption refrigeration was a concept that was far from fully developed.

"We now know that you can create cold through heat with water," Wenner-Gren said to the engineers. "But a problem with this technology is that not every household has running water and every household from China to America will need a refrigeration machine," Wenner-Gren paused, and looked at each member of the team. "That is why we are going to cool with air, because we all have access to that."

Electrolux today

One of the main consumer problems associated with freezers, extensive research shows, is defrosting. Electrolux Glacier is, like most of the Group's freezers, frostfree. It is also the fi rst freezer to combine European standard dimensions with a built-in icemaker. The user always has access to ice-cubes without having to remember fi lling the container with water.

The story of Design Axel Wenner-Gren had visited Electrolux showrooms in around thirty countries, and was always amazed by how active people would get, even though nothing was actually for sale. The atmosphere in the showroom on this day was different, however. The crowd was still, hushed, and gath-

ered around the latest addition to the Electrolux collection: the Model xxx vacuum cleaner.

The Model xxx, shaped by the internationally renowned industrial designer Lurelle Guild, was the one of the fi rst vacuum cleaners in history to be created with aesthetic appeal in mind. As cars and trains had become streamlined, Wenner-Gren saw the value in bringing a similar sleek elegance to home appliances. In fact, he had personally tracked down the headlining industrial designers, so that life for Electrolux customers would not only be cleaner and easier, but also more attractive.

Looking at the Model xxx vacuum cleaner, Wenner-Gren said to Guild: "You have given Electrolux products attractive design and perfect form."

Electrolux today

Electrolux Design Centre in Shanghai, China, was inaugurated in 2007. The Design Centre hosts an exhibition space, fl exible meeting areas, and a functional working kitchen with exclusive Electrolux appliances with attractive design.

A key element of the

Centre is the Design Library, which offers thousands of books and magazines on design. The Design Library is an initiative taken by the Italian Association of Industrial Designers (ADI). This cooperation establishes the one and only ADI Design Library located outside of Milan.

Focus on sustainability generates growth

Sustainability is about creating value for Electrolux and the people who come into contact with the Group's products and operations.

Focusing on sustainability generates business opportunities and enhances positive brand awareness for Electrolux. It contributes to employee satisfaction and ensures good relations with stakeholders. It is also vital for effective management of potential non-fi nancial risks.

Electrolux is, for example, a preferred supplier among retailers like Wal-Mart, Sears, Migros and IKEA, in part, because of the Group's environmental and social performance.

The Group's approach to sustainability includes the processes for designing, producing and marketing products and ensuring the integrity of business practices. In order to achieve this, Electrolux expects the same level of excellence among both employee and supplier.

Four key issues affect the Group's performance in terms of sustainability. These relate to the Group's contribution to tackling climate change; maintaining universal ethical, social and environment standards throughout operations and in the supply chain; and managing restructuring processes responsibly.

Climate change

Climate change is an important concern for key interest groups; including consumers. Awareness of its implications affects consumer purchasing decisions and raises stakeholder expectations

Sustainable Energy Europe Award

The European Commission has bestowed Electrolux with its Sustainable Energy Europe Award, in the Corporate Commitment Category. The award recognizes the Group's ongoing efforts to reduce energy consumption of products, factories and services.

on companies to take action. Electrolux has developed a program to help reduce CO2 emissions that comprises products, own operations and communication with stakeholders.

A product-led approach

There are both environmental and business advantages in developing effi cient products that consume less energy and water. Effi ciency has been steadily improving since the mid-1990s. On average, the Group's appliances now consume 50% less energy than at the start of this period.

Direct economic value Life-cycle impact

Operating costs, 77%

Material supply, 22% Manufacturing, 2% Most of a product's impact on

Products with superior environmental performance also have a higher profi t margin, accounting for approximately 17% of total units sold and generating approximately 22% of gross profi t. These products are playing an increasingly important role in the Electrolux offering.

Improving energy-effi ciency in the Group's operations

Electrolux is committed to reducing energy consumption across all operations, which simultaneously lowers CO2 emissions and cuts costs. Electrolux has set a 15% reduction target for Group energy consumption by year-end 2009 (in relation to energy use in 2005). Achieving this goal is expected to enable a CO2 reduction of 100,000 tons and generate an estimated saving in operational costs of approximately SEK 100m annually.

Communicating the role of energy-effi cient appliances

Through media, Electrolux is active in communicating to consumers as well as to policy makers, the role of energy-effi cient ap pliances in tackling climate change. One in three appliances in operation in Europe — or an estimated 188 million products — are over ten years old. Replacing these energy-thirsty products with the highest effi ciency models has the potential to reduce CO2 emissions by approximately 18 million tons a year.

United Nations Global Compact

Electrolux supports the United Nations Global Compact and its ten principles, which cover human rights, labor standards, business ethics and the environment.

Ethical employer and business partner

A proactive approach to sustainability lends trust and credibility to the Electrolux brand. The Group's corporate governance structure therefore emphasizes ethical and environmental priorities, as well as the health and safety of its employees. The Electrolux Code of Ethics, Code of Conduct and Environmental Policy permeate operations on all levels, from Group management to the practices of individual employees. Electrolux conducts training and continuous monitoring of compliance to the codes. Employees, customers, investors and other stakeholders are also engaged in dialogue to help Electrolux in measuring its performance and identifying areas of improvement.

Responsible sourcing

All suppliers must comply with the Electrolux Code of Conduct and Environmental Policy. Supplier transparency also helps assure that the Group's products are manufactured with respect for human rights, health and safety, and the environment. These criteria are integrated in Electrolux purchasing policies and are among the key factors that determine choice of suppliers. The Group has a global, risk-based approach to monitoring the supply chain.

Restructuring

In order to maintain competitiveness and ensure access to new markets, Electrolux is relocating some production from countries with a higher cost base to those offering lower costs. A decision to close factories or downsize production affects both individuals and communities. Responsible management of such changes can minimize negative impact through transparent procedures that are adapted to local needs. This also involves consulting a wide range of stakeholders, including labor representatives, politicians at local, regional and national levels, as well as public authorities.

Setting up operations in emerging economies also generates positive changes to local communities. It creates indirect impacts by prioritizing local suppliers and transferring cutting-edge technologies to these markets.

Success story: IKEA — a relationship built on sustainable values

product portfolio is not only a litmus test of the

good business practices. The Group endorses the

Board of Directors and Auditors

Marcus Wallenberg

Chairman

Born 1956. B. Sc. Elected 2005. Member of the Electrolux Remuneration Committee.

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, 1999–2005. Executive Vice-President of Investor AB, 1993–1999.

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. Chairman of the Electrolux Audit Committee. 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, 1997–1998. President and CEO of ABB Financial Services AB, 1991–1997. Holdings in AB Electrolux: 6,500 B-shares.

Louis R. Hughes

Born 1949. B.S., Mech. Eng., M.B.A. Elected 2005. Member of the Electrolux Remuneration Committee. 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, 1992–2000. 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, 1998–2000. Chief Operating Offi cer of Wal-Mart International, 1996–1998. Senior Vice-President Merchandising of Wal-Mart Stores Inc., 1990–1996. 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 Nilfi sk-Advance, 2001– 2005. President of Industrial Air Division, Atlas Copco Airpower, Belgium, 1998–2001. Management positions in Atlas Copco, 1983–2001.

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. Member of the Electrolux Audit Committee. 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 Exchange-listed Companies.

Previous positions: Business commentator at Finanstidningen, 1999–2001. Managing editor of the business desk section at Sydsvenska Dagbladet, 1992–1999. Business controller at Ratos AB, 1989–1992. Holdings in AB Electrolux through company: 2,000 B-shares.

Torben Ballegaard Sørensen Born 1951. M.B.A. Elected 2007. Member of the Electrolux Audit Committee.

Board Member of Egmont Fonden and LEGO A/S, Denmark.

Previous positions: President and CEO of Bang & Olufsen a/s, 2001-2008. Executive Vice-President of LEGO System, 1999–2001. Divisional Director of LEGO System, 1996–1999. Managing Director of CCI Europe, 1988–1996. Managing Director of AA S Grafi k, 1983–1988.

Holdings in AB Electrolux: 0 shares.

Barbara Milian Thoralfsson

Born 1959. M.B.A., B.A. Elected 2003. Chairman of the Electrolux Remuneration Committee. 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, 2001–2005. President of Midelfart & Co, 1995–2001, and on positions within marketing and sales, 1988–1995. Holdings in AB Electrolux through company: 4,000 B-shares.

Employee representatives

Ola Bertilsson

Born 1955. Representative of the Swedish Confederation of Trade Unions. Elected 2006. 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.

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

Deputy Members

Gerd Almlöf

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

Secretary of the Board

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 Karlsson Born 1965. Representative of the Swedish Confederation of Trade Unions. Elected 2006. 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.

Auditors

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

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.

Holdings in AB Electrolux as of December 31, 2007. For additional information on the Board of Directors, see page 92 in section Financial review.

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 Offi cer 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.

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), 1989–1998. Vice-President Human Resources of ABB AB, 1998–2003. Senior Vice-President Human Resources of Sandvik AB, 2003–2007. 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.

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, 1978–1984, President, 1985–1991. Headed the Swedish "Yes to the EU Foundation" campaign for the referendum that determined Sweden's membership in the EU, 1992–1994. Joined Electrolux in 1995 as Senior Vice-President of Communications and Public Affairs.

Holdings in AB Electrolux: 8,323 B-shares, 19,902 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, 1980–1987. Senior management positions within Coca-Cola Company, 1987–2000. 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.

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, 1983–1986. President and CEO of J.I. Case Brazil, 1990–1994. President and CEO of Bunge Foods, 1994–1997. Senior Vice-President of Bunge International Ltd., USA, 1997– 1998. 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.

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, 1981–2003. Vice-President and General Manager of DuPont Nonwovens, 2000–2003, and of DuPont Corian, 1997–2000. 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, 2004–2007.

Board Member of Briggs & Stratton Corp.

Holdings in AB Electrolux: 11,427 B-shares, 0 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, 1980–1989, and GMO AG, 1989–1992. 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, 1983–2005. President of Sony Ericsson Mobile Communications (China) Co. Ltd. and Corporate Vice-President of Sony Ericsson Mobile Communications AB, 2005–2007. 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. Appointed 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.

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, 1988–1995. 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.

Cecilia Vieweg

General Councel, Senior Vice-President Born 1955. B. of Law. In Group Management since 1999. Attorney with Berglund & Co Advokatbyrå, 1987–1990. Corporate Legal Counsel of AB Volvo, 1990–1992. General Counsel of Volvo Car Corporation, 1992–1997. Attorney and partner in Wahlin Advokatbyrå, 1998. Joined Electrolux in 1999 as Senior Vice-President and General Counsel, with responsibility 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.

Changes in Group Management

Gunilla Nordström joined Electrolux in August 2007 as Head of Major Appliances Asia/Pacific.

Carina Malmgren Heander joined Electrolux in November 2007 as Head of Group Staff Human Resources and Organizational Development. She succeeded Harry de Vos who left the Group in July 2007.

Ruy Hirschheimer, Head of Major Appliances Latin America, joined Group Management in January 2008.

Holdings in AB Electrolux as of December 31, 2007. For additional information on Group Management and Group structure, see page 95 in section Financial review.

www.electrolux.com/ir

On the 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.

Financial reports in 2008
Consolidated results Interim report January–March Interim report April–June Interim report July–September	February 6 April 28 July 17 October 27
Major events in 2008
Annual report	Beginning of March
Annual General Meeting Contacts	April 1
Investor Relations	Tel. +46 8 738 60 03 E-mail: [email protected]

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

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			599 14 14-13/6

Would you like to know more about our financial performance?

Annual Report 2007 | Financial review

Latin America showed its best results ever in 2007. Track the financial performance in 2008 at www.electrolux.com/ir

CEO statement 2

Board of Directors Report	5
Notes to the fi nancial
statements	28
Defi nitions	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 conour strategy for developing innovative products, strengthening the Electrolux brand and cutting

CEO statement, page 2.

100 000 75 000 Net sales increased by 4% in comparable currency in 2007 compared to the previous year and margin rose to 4.6%, excluding items affecting compar ability.

Operating income rose across all business

Board of Directors Report, page 5.

300 150 Following a strong result for the fourth quarter in 2006, the trading price of Electrolux B-shares rose sharply at the start of 2007. During the second half of the year, the trading price was stock-exchange climate and concern about the

100 The Board of Directors proposes a dividend for 2007 of SEK 4.25 per share

Elextrolux shares, page 76.

Nettoomsättning Rörelsemarginal

Contacts

Peter Nyquist Tel. +46 8 738 67 63 Vice President, Investor Relations and Financial Information

Investor Relations Tel. +46 8 738 60 03 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	2006	2007 EURm	2007 USDm
Net sales	104,732	103,848	11,326	15,539
Operating income	4,837	4,575	523	718
Margin, %	4.6	4.4
Income after fi nancial items	4,397	4,367	475	652
Earnings per share, SEK, EUR, USD	11.66	10.89	1.26	1.73
Dividend per share, SEK, EUR, USD	4.252)	4.00	0.46	0.63
Return on net assets, %	20.9	21.2
Value creation	2,053	2,202	222	305
Average number of employees	56,898	55,471
Net debt/equity ratio	0.29	–0.02
Return on equity, %	22.7	21.1

Net sales and employees in 10 largest countries

	SEKm	Employees
USA	29,571	10,648
Brazil	7,158	6,754
Germany	7,020	2,147
Italy	5,109	8,036
France	4,957	1,466
UK	4 950	1,122
Canada	4,577	1,420
Australia	4,488	2,144
Sweden	3,814	3,025
Spain	2,927	892
Other	30,161	19,244
Total	104,732	56,898

1) Excluding items affecting comparability.

2) Proposed by the Board of Directors.

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.

5.00 10.00 15.00 20.00 100,000 No

Number of employees3)

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 350–400 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.

We see a great uncertainty about the global economic trend. It is very diffi cult 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 fi rst quarter result negatively.

Stockholm, February 6, 2008

Hans Stråberg President and Chief Executive Offi cer

The Electrolux strategy

The Group is implementing a restructuring program which involves relocating more than half of production to low-cost countries.

Innovative products, lower costs and a strong brand enable Electrolux to create a foundation for improved profi tability and growth.

Electrolux can achieve profi table growth.

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	104,732	0.9%	103,848
Operating income1)	4,475	11%	4,033
Margin, %	4.3		3.9
Operating income, excluding items affecting comparability	4,837	5.7%	4,575
Margin, %	4.6		4.4
Income after fi nancial items	4,035	5.5%	3,825
Income for the period	2,925	10.5%	2,648
Earnings per share, SEK2)	10.41		9.17
Value creation	2,053	–149	2,202
Return on net assets, %	21.7		23.2
Operating cash fl ow	1,277	167	1,110
Capital expenditure	3,430	278	3,152
Average number of employees	56,898	1,427	55,471
Total, including discontinued operations3)
Income for the period	2,925		3,847
Earnings per share, SEK2)	10.41		13.32
Dividend per share, SEK	4.254)		4.00
Return on equity, %	20.3		18.7
Net debt/equity ratio	0.29		–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 January–May for 2006.

4) Proposed by the Board of Directors.

For defi nitions, 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 fl ow	14
Consolidated cash fl ow 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 signifi cant 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 signifi cant uncertainty in the overall global economy makes it diffi cult to predict the development in 2008.

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/Pacifi c, Latin America and for fl oor-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 effi cient 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).

Financial net

Net fi nancial items increased to SEK –440m (–208). The increase is mainly due to higher net borrowings.

For additional information regarding fi nancial items, see Note 9 on page 42.

Net sales rose by 4.0% in comparable
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 fi nancial items

Income after fi nancial 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 fi nancial items.

For additional information on taxes, see Note 10 on page 42.

Change in net sales Net sales and operating margin

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

Consolidated income statement

SEKm	Note	2007	2006
Net sales	3, 4	104,732	103,848
Cost of goods sold		–85,466	–84,003
Gross operating income		19,266	19,845

Selling expenses		–10,219	–10,955
Administrative expenses		–4,417	–4,467
Other operating income	5	253	185
Other operating expenses	6	–46	–33
Items affecting comparability	7	–362	–542
Operating income	3, 4, 8	4,475	4,033

Financial income	9	182	538
Financial expenses	9	–622	–746
Financial items, net		–440	–208
Income after fi nancial items		4,035	3,825
Taxes	10	–1,110	–1,177
Income for the period from continuing operations		2,925	2,648
Income for the period from discontinued operations	30	—	1,199
Income for the period		2,925	3,847
Attributable to:
Equity holders of the Parent Company		2,925	3,847
Minority interests in income for the period		—	—
		2,925	3,847

Earnings per share for continuing operations, SEK	20
Basic		10.41	9.17
Diluted		10.33	9.14
Average number of shares, million
	20
Basic		281.0	288.8
Diluted		283.3	289.8

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 fi nancial 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 fi nancial performance indicator for measuring and evaluating fi nancial performance within the Group. The model links operating income and asset effi ciency with the cost of the capital employed in operations. The model measures and evaluates profi tability, 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 defi nition 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

	Share of net sales, %	Average exchange rate 2007	Average exchange rate 2006
USD	30	6.74	7.38
EUR	30	9.25	9.26
CAD	4	6.30	6.52
GBP	5	13.48	13.58
SEK	4	—	—
Other	27	—	—
Total	100

SEKm	2007	2006
Restructuring provisions and write-downs1)
Appliances plant in Spennymoor, UK	–317	—
Appliances plant in Fredericia, Denmark	–45	—
Appliances plant in Torsvik, Sweden	—	–43
Appliances plant in Nuremberg, Germany	—	–145
Appliances plants in Adelaide, Australia	—	–302
Reversal of unused restructuring provisions	—	60
	–362	–430
Capital gains/losses on divestments2)
Divestment of Electrolux Financial Corp., USA	—	61
Divestment of 50% stake in Nordwaggon AB, Sweden	—	–173
Total	–362	–542

1) Deducted from cost of goods sold.

2) Deducted from other operating income and expenses.

Key data excluding items affecting comparability

2007	Change	2006

104,732		0.9% 103,848
4,837	5.7%	4,575
4.6		4.4
4,397	0.7%	4,367
3,276	4.2%	3,145
11.66		10.89
2,053	–149	2,202
20.9		21.2
1,277	167	1,110
3,430	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).

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 350–400m 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.

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.

Earnings per share1)

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

		% of		% of
		Dec. 31, annualized		Dec. 31, annualized
SEKm	2007	net sales		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.

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.

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 benefi ts 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 fl ow from operations and investments.

Net borrowings

SEKm		Dec. 31, 2007 Dec. 31, 2006
Borrowings	11,163	7,495
Liquid funds	–6,460	–7,799
Net borrowings	4,703	–304

Change in net assets

SEKm	Net assets
January 1, 2007	18,140
Change in restructuring provisions	581
Write-down of assets	–39
Other items affecting comparability	425
Changes in exchange rates	490
Capital expenditure	3,430
Depreciation	–2,738
Changes in working capital, etc.	454
December 31, 2007	20,743

Consolidated balance sheet

SEKm	Note	December 31, 2007	December 31, 2006
ASSETS
Non-current assets
Property, plant and equipment	12	15,205	14,209
Goodwill	11	2,024	1,981
Other intangible assets	11	2,121	1,780
Investments in associates	29	32	80
Deferred tax assets	10	2,141	2,216
Financial assets	13	2,284	1,692
Total non-current assets		23,807	21,958
Current assets
Inventories	14	12,398	12,041
Trade receivables	16	20,379	20,905
Tax assets		391	461
Derivatives	17	411	318

Other current assets	15	2,992	3,248
Short-term investments	17	165	1,643
Cash and cash equivalents	17	5,546	5,475
Total current assets		42,282	44,091
Total assets		66,089	66,049
EQUITY AND LIABILITIES
Equity attributable to equity holders of the Parent Company
Share capital	20	1,545	1,545
Other paid-in capital		2,905	2,905
Other reserves	18	837	–11
Retained earnings		10,752	8,754
		16,039	13,193
Minority interests		1	1
Total equity		16,040	13,194
Non-current liabilities
Long-term borrowings	17	4,887	4,502
Derivatives	17	—	—
Deferred tax liabilities	10	935	1,205
Provisions for post-employment benefi ts	22	6,266	6,586
Other provisions	23	3,813	4,258
Total non-current liabilities		15,901	16,551

Current liabilities
Accounts payable		14,788	15,320
Tax liabilities		2,027	1,651
Share redemption		—	5,579
Other liabilities	24	10,049	9,293
Short-term borrowings	17	5,701	2,582
Derivatives	17	280	247
Other provisions	23	1,303	1,632
Total current liabilities		34,148	36,304
Total liabilities		50,049	52,855
Total equity and liabilities		66,089	66,049

Pledged assets	19	76	93
Contingent liabilities	25	1,016	1,022

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.

Liquidity profi le

SEKm		Dec. 31, 2007 Dec. 31, 2006
Liquid funds	6,460	7,799
% of annualized net sales	5.8	7.1
Net liquidity	184	4,806
Fixed interest term, days	12	39
Effective annual yield, %	4.5	3.7

For additional information on the liquidity profi le, 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 signifi cant 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-fi xing period of six months. At year-end, the average interest-fi xing 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

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

Rating

	Long-term debt	Outlook	Short-term debt	Short-term debt, Sweden
Standard & Poor's	BBB+	Stable	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

Change in consolidated equity

				Attributable to equity holders of the company
SEKm	Share capital	Other paid-in capital	Other reserves	Retained earnings	Total	Minority interest	Total equity
Opening balance, January 1, 2006	1,545	2,905	1,660	19,777	25,887	1	25,888
Available for sale instruments
Gain/loss taken to equity	—	—	42	—	42	—	42
Transferred to income statement on sale	—	—	–12	—	–12	—	–12

Cash-fl ow hedges
Gain/loss taken to equity	—	—	–11	—	–11	—	–11
Transferred to income statement	—	—	–23	—	–23	—	–23
Exchange differences on translation of foreign operations
Net-investment hedge	—	—	421	—	421	—	421
Translation differences	—	—	–2,081	—	–2,081	—	–2,081
Income for the period recognized directly in equity	—	—	–1,664	—	–1,664	—	–1,664
Income for the period	—	—	—	3,847	3,847	—	3,847
Total recognized income and expenses for the period	—	—	–1,664	3,847	2,183	—	2,183
Share-based payment	—	—	—	86	86	—	86
Repurchase and sale of shares	—	—	—	–1,463	–1,463	—	–1,463
Dividend SEK 7.50 per share	—	—	—	–2,222	–2,222	—	–2,222
Distribution of Husqvarna shares	—	—	—	–5,696	–5,696	—	–5,696
Redemption of shares	—	—	—	–5,582	–5,582	—	–5,582
Total transactions with equity holders	—	—	—	–14,877	–14,877	—	–14,877
Closing balance, December 31, 2006	1,545	2,905	–4	8,747	13,193	1	13,194

Available for sale instruments
Gain/loss taken to equity	—	—	259	—	259	—	259
Transferred to income statement on sale	—	—	–11	—	–11	—	–11
Cash-fl ow hedges
Gain/loss taken to equity	—	—	61	—	61	—	61
Transferred to income statement	—	—	11	—	11	—	11
Exchange differences on translation of foreign operations
Net-investment hedge	—	—	31	—	31	—	31
Translation differences	—	—	497	—	497	—	497
Income for the period recognized directly in equity	—	—	848	—	848	—	848
Income for the period	—	—	—	2,925	2,925	—	2,925
Total recognized income and expenses for the period	—	—	848	2,925	3,773	—	3,773
Share-based payment	—	—	—	72	72	—	72
Repurchase and sale of shares	—	—	—	127	127	—	127
Dividend SEK 4.00 per share	—	—	—	–1,126	–1,126	—	–1,126
Total transactions with equity holders	—	—	—	–927	–927	—	–927
Closing balance, December 31, 2007	1,545	2,905	844	10,745	16,039	1	16,040

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.

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	2007	2006
Cash flow from operations, excluding change in operating assets and liabilities	5,498	5,263
Change in operating assets and liabilities	–152	–703
Capital expenditure	–3,430	–3,152
Other	–639	–298
Operating cash flow	1,277	1,110
Divestment of operations	—	1,064
Cash flow from operations and investments	1,277	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	2007	2006
Consumer Durables
Europe	1,325	1,698
% of net sales	2.9	3.8
North America	1,471	922
% of net sales	4.4	2.5
Latin America	282	170
% of net sales	3.1	2.2
Asia/Pacific and Rest of world	229	184
% of net sales	2.5	2.1
Professional Products	96	151
% of net sales	1.4	2.2
Other	27	27
Total	3,430	3,152
% of net sales	3.2	3.0

Consolidated cash fl ow statement

SEKm	Note	2007	2006
Operations
Income after fi nancial items		4,035	3,825
Depreciation and amortization		2,738	2,758
Capital gain/loss included in operating income		—	112
Restructuring provisions		–701	–737
Share-based compensation		72	86
Change in accrued and prepaid interest		169	–38
Taxes paid		–815	–743
Cash fl ow from operations, excluding change in operating assets and liabilities		5,498	5,263

Change in operating assets and liabilities
Change in inventories		–206	–748
Change in trade receivables		993	–856
Change in other current assets		40	–354
Change in accounts payable		–885	1,779
Change in operating liabilities and provisions		–94	–524
Cash fl ow from change in operating assets and liabilities		–152	–703
Cash fl ow from operations		5,346	4,560
Investments
Divestment of operations	26	—	1,064
Capital expenditure in property, plant and equipment	12	–3,430	–3,152
Capitalization of product development	11	–520	–439
Other		–119	141
Cash fl ow from investments		–4,069	–2,386

Cash fl ow from operations and investments		1,277	2,174
Financing
Change in short-term investments		1,463	–805
Change in short-term borrowings		670	–356
New long-term borrowings		3,257	583
Amortization of long-term borrowings		—	–1,635
Dividend		–1,126	–2,222
Redemption of shares		–5,582	—
Repurchase and sale of shares		127	–1,463
Cash fl ow from fi nancing		–1,191	–5,898

Cash fl ow from continuing operations		86	–3,724
Cash fl ow from discontinued operations
Cash fl ow from operations		—	–2,446
Cash fl ow from investments		—	–727

Cash fl ow from fi nancing		—	8,504
Cash fl ow from discontinued operations		—	5,331
Total cash fl ow		86	1,607
Cash and cash equivalents at beginning of year		5,475	4,420
Exchange-rate differences referring to cash and cash equivalents		–15	–552
Cash and cash equivalents at year-end		5,546	5,475
Change in net borrowings
Total cash fl ow, excluding change in loans and other short-term investments		–5,304	3,820
Net borrowings at beginning of year		304	–2,974
Exchange-rate differences referring to net borrowings		297	–542
Net borrowings at year-end		–4,703	304

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)	2007	2006
Net sales	45,472	44,233
Operating income	2,067	2,678
Operating margin, %	4.5	6.1
Net assets	9,158	7,075
Return on net assets, %	22.4	41.6
Capital expenditure	1,325	1,698
Average number of employees	25,382	25,029

1) Excluding items affecting comparability.

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

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 effi ciencies 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 350–400m 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 fi rst quarter of 2008.

Consumer Durables, North America

SEKm1)	2007	2006
Net sales	33,728	36,171
Operating income	1,711	1,462
Operating margin, %	5.1	4.0
Net assets	8,404	8,187
Return on net assets, %	21.2	19.3
Capital expenditure	1,471	922
Average number of employees	15,204	15,148

1) Excluding items affecting comparability.

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)	2007	2006
Net sales	9,243	7,766
Operating income	514	339
Operating margin, %	5.6	4.4
Net assets	3,114	3,565
Return on net assets, %	14.7	13.3
Capital expenditure	282	170
Average number of employees	7,303	5,770

1) Excluding items affecting comparability.

Consumer Durables, North America Net sales and operating margin

Consumer Durables, Latin America Net sales and operating margin

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/Pacifi c and Rest of world

SEKm1)	2007	2006
Net sales	9,167	8,636
Operating income	330	163
Operating margin, %	3.6	1.9
Net assets	2,618	2,740
Return on net assets, %	13.5	6.0
Capital expenditure	229	184
Average number of employees	4,979	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)	2007	2006
Net sales	7,102	6,941
Operating income	584	535
Operating margin, %	8.2	7.7
Net assets	1,324	1,394
Return on net assets, %	43.9	40.2
Capital expenditure	96	151
Average number of employees	3,200	3,316

1) Excluding items affecting comparability.

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 effi cient 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.

Professional Products Change in net sales and operating income 2007 compared to 20061) Consumer Durables, Asia/Pacifi c and Rest of world Net sales and operating margin

Professional Products Net sales and operating margin

Operations, by business area

SEKm1)	2007	2006
Consumer Durables, Europe
Net sales	45,472	44,233
Operating income	2,067	2,678
Margin, %	4.5	6.1
Consumer Durables, North America
Net sales	33,728	36,171
Operating income	1,711	1,462
Margin, %	5.1	4.0
Consumer Durables, Latin America
Net sales	9,243	7,766
Operating income	514	339
Margin, %	5.6	4.4
Consumer Durables, Asia/Pacifi c and Rest of world
Net sales	9,167	8,636
Operating income	330	163
Margin, %	3.6	1.9
Professional Products
Net sales	7,102	6,941
Operating income	584	535
Margin, %	8.2	7.7
Other
Net sales	20	101
Operating income, common group costs, etc.	–369	–602
Total net sales	104,732	103,848
Operating income	4,837	4,575
Margin, %	4.6	4.4

1) Excluding items affecting comparability.

Net sales and operating income 2007 compared to 20061)

		Net sales in			Operating income in
Change, year-over-year, %	comparable	Operating Net sales	comparable currency	income	currency
Consumer Durables
Europe		2.8	2.9	–22.8	–23.3
North America		–6.8	1.4	17.0	27.3
Latin America		19.0	18.6	51.6	53.0
Asia/Pacifi c and Rest of world		6.1	8.0	102.5	100.0
Professional Products		2.3	3.6	9.2	9.2
Total change		0.9	4.0	5.7	7.8

1) Excluding items affecting comparability.

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

	Outstanding A-shares	Outstanding B-shares	Shares held by Electrolux	Shares held by other shareholders
Number of shares as of January 1, 2007	9,502,275	299,418,033	29,986,756	278,933,552
Shares sold under the terms of the employee stock option programs	—	—	–1,526,122	1,526,122
Shares alloted under the Performance Share Program 2004	—	—	–1,178,743	1,178,743
Total number of shares as of December 31, 2007	9,502,275	299,418,033	27,281,891	281,638,417
Total number of shares as of February 1, 2008	9,502,275	299,418,033	27,281,891	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 fl exibility 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 fi nancing 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

	2007	2006	2005	2004	2003
Number of shares repurchased	—	19,400,000	—	750,000	11,331,828
Total amount paid, SEKm	—	2,194	—	114	1,688
Price per share, SEK	—	113	—	152	149
Number of shares held by Electrolux at year-end	27,281,891	29,986,756	15,821,239	17,739,400	17,000,0001)
% of outstanding shares	8.8	9.7	5.1	5.7	5.2

1) After cancellation of shares.

Total distribution to shareholders

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.

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

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 fi nancial operations. Operational risks are normally managed by the operative units within the Group, and fi nancial 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 profi tability and increase shareholder value is largely dependent on success in development of new, innovative products and in maintaining cost-effi cient production. Managing fl uctuations 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 fi nancing 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 foreign subsidiaries
Commodity-price risks affecting expenditure on raw materials and components to be used in production
Credit risk related to fi nancial and commercial activities

The Board of Directors of Electrolux has approved a fi nancial policy and a credit policy for the Group in order to manage and control these risks. Each business sector has specifi c fi nancial and credit policies approved by the sector board. The above-mentioned risks are, amongst others, managed by the use of derivative fi nancial instruments according to the limitations stated in the fi nancial policy. The fi nancial policy also describes management of risks related to pension-fund assets.

Management of fi nancial 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 fi nancial 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 fi nancial policy. This trading is aimed primarily at maintaining a high quality of information fl ow and market knowledge in order to contribute to proactive management of the Group's fi nancial 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 fi nancial 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

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 defi nes 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.

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.

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 fi xed and variable salary, changes in fi xed or variable salary, criteria for assessment of variable compensation, long-term incentives, pension terms and other benefi ts.

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 refl ect the scope of the job responsibilities. Salary levels shall be reviewed periodically to ensure continued competitiveness and to recognize individual performance.

03 04 05 06 07

Number of employees Employees

Variable compensation

Following the "pay for performance" principle, variable compensation shall represent a signifi cant 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 fi nancial and nonfi nancial targets. The fi nancial targets may comprise value creation on Group level as well as other fi nancial measures. Non-fi nancial targets shall focus on elements in line with Electrolux strategic plans. The targets shall be specifi c, clear, measurable and time bound and be determined by the Board of Directors from year to year.

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 fi xed salary. The main objectives in the STI plan shall be on fi nancial targets. These shall be set based on annual fi nancial performance of the Group and, for the Sector Heads, of the sector for which the Group Management member is responsible. In addition, non-fi nancial 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 affi rmative, 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.

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 benefi ts

Old-age pension, disability benefi ts and medical benefi ts shall be designed to refl ect home-country practices and requirements. When possible, pension plans shall be based on defi ned contribution. In individual cases, depending on tax and/or social security legislation to which the individual is subject, other schemes and mechanisms for pension benefi ts may be approved by the Board of Directors.

Other benefi ts

Other benefi ts may be provided on individual level or to the entire Group Management. These benefi ts 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 benefi t to the individual the continuation of the ABS for a period of up to twelve months following termination of the employment agreement; no other benefi ts 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.

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). De registration became effective during the fourth quarter of 2007. Electrolux is no longer required to fi le 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 fi led 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 indefi nite 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 fi led 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 diffi cult 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) defi nes 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 costeffi ciently, 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 fl uids 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 notifi cation 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 notifi cation only. The permits cover, e.g., thresholds or maximum permissible values for air and waterborne emissions and noise. No signifi cant 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 fi nancial risk are reported to Group level in accordance with Group policy. No such signifi cant 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 refl ect these changes.

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	Note	2007	2006
Net sales		6,092	6,204
Cost of goods sold		–5,207	–5,428
Gross operating income		885	776

Selling expenses		–608	–693
Administrative expenses		–441	–558
Other operating income	5	57	171
Other operating expenses	6	–519	–704
Operating income		–626	–1,008

Financial income	9	3,201	12,867
Financial expenses	9	–939	–1,163
Financial items, net		2,262	11,704
Income after financial items		1,636	10,696
Appropriations	21	18	14
Income before taxes		1,654	10,710
Taxes	10	28	58
Income for the period		1,682	10,768

BALANCE SHEET

SEKm	Note	December 31, 2007	December 31, 2006
ASSETS
Non-current assets
Intangible assets	11	777	594
Property, plant and equipment	12	438	459
Financial assets	13	24,810	23,080
Total non-current assets		26,025	24,133

Current assets
Inventories	14	361	417
Receivables from subsidiaries		11,203	6,910
Trade receivables		438	470
Derivatives with subsidiaries		512	516
Derivatives		396	314
Other receivables		80	90
Prepaid expenses and
accrued income		70	105
Short-term investments		5	1,130
Cash and bank		2,880	3,150
Total current assets		15,945	13,102
Total assets		41,970	37,235

EQUITY AND LIABILITIES

		December 31,	December 31,
SEKm	Note	2007	2006
Equity
Restricted equity
Share capital	20	1,545	1,545
Statutory reserve		3,017	3,017
		4,562	4,562
Non-restricted equity
Retained earnings		8,164	–2,100
Income for the period		1,682	10,768
		9,846	8,668
Total equity		14,408	13,230
Untaxed reserves	21	724	742
Provisions
Provisions for pensions and
similar commitments	22	312	311
Other provisions	23	209	284
Total provisions		521	595
Non-current liabilities
Payable to subsidiaries		435	474
Bond loans		3,679	3,823
Other non-current loans		693	185
Total non-current liabilities		4,807	4,482
Current liabilities
Payable to subsidiaries		15,505	10,582
Accounts payable		390	411
Share redemption		—	5,579
Other liabilities		71	79
Short-term borrowings		3,883	—
Derivatives with subsidiaries		588	465
Derivatives		254	240
Accrued expenses and prepaid income	24	819	830
Total current liabilities		21,510	18,186
Total liabilities and provisions		26,838	23,263
Total liabilities, provisions and equity		41,970	37,235
Pledged assets	19	8	5
Contingent liabilities	25	1,365	1,341

Operations
Income after fi nancial items	1,636	10,696
Non-cash dividend	—	–2,681
Depreciation and amortization	158	153
Capital gain/loss included in operating income	473	648
Taxes paid	–7	–3
Cash fl ow from operations, excluding change in operating assets and liabilities	2,260	8,813
Change in operating assets and liabilities
Change in inventories	56	–28
Change in trade receivables	32	–125
Change in current intra-group balances	–4,095	4,127
Change in other current assets	–37	203
Change in other current
liabilities and provisions	–97	–170
Cash fl ow from operating assets
and liabilities	–4,141	4,007
Cash fl ow from operations	–1,881	12,820
Investments
Change in shares and participations	–789	–4,610
Capital expenditure in intangible assets	–241	–3
Capital expenditure in property, plant and equipment	–65	–90
Other	–1,180	1,836
Cash fl ow from investments	–2,275	–2,867
Total cash fl ow from operations and investments	–4,156	9,953
Financing
Change in short-term investments	1,125	–1,125
Change in short-term borrowings	997	1,015
Change in intra-group borrowings	4,937	–2,053
New long-term borrowings	3,250	—
Amortization of long-term borrowings	—	–2,670
Dividend	–1,126	–2,222
Repurchase and sale of shares	285	–1,463
Redemption of shares, including costs	–5,582	—
Cash fl ow from fi nancing	3,886	–8,518
Total cash fl ow	–270	1,435
Liquid funds at beginning of year	3,150	1,715
Liquid funds at year-end	2,880	3,150

SEKm 2007 2006

CASH FLOW STATEMENT

CHANGE IN EQUITY

SEKm	Share capital	Restricted reserves	Non restricted 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

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 fi nancial 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 benefi ts	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	Defi nitions	67
	Proposed distribution of earnings	68
	Audit report	69

Notes

Note 1 Accounting and valuation principles

Basis of preparation

The consolidated fi nancial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The consolidated fi nancial statements have been prepared under the historical cost convention, as modifi ed by revaluation of available-for-sale fi nancial assets and fi nancial assets and liabilities (including derivative instruments) at fair value through profi t 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 defi ned 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 specifi ed below in the section entitled "Parent Company accounting principles".

The fi nancial 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 identifi able 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 identifi cation and measurement of the acquired assets. Any excess remaining after that reassessment must be recognized immediately in profi t or loss. The consolidated fi nancial statements for the Group includes the fi nancial statements for the Parent Company and the direct and indirect owned subsidiaries after:

elimination of intra-group transactions, balances and unrealized intra-group profi ts
depreciation and amortization of acquired surplus values.

Defi nition of Group companies

The consolidated fi nancial statements include AB Electrolux and all companies in which the Parent Company has the power to govern the fi nancial 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 signifi cant infl uence 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 profi t 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 fi nancial 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.

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 fi nancial 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, specifi c sales taxes, returns, and trade discounts. Revenues arise from sales of fi nished products and services. Sales are recognized when the signifi cant 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 signifi cant effects, which are relevant for understanding the fi nancial 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 signifi cant down-sizing of major units or activities
Restructuring initiatives with a set of activities aimed at reshaping a major structure or process
Signifi cant impairment
Other major non-recurring costs or income

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 liabilities and their carrying amounts in the consolidated fi nancial 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 profi t 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 fi xed assets

Goodwill

Goodwill is reported as an indefi nite 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 indefi nite 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 benefi ts 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.

Computer software

Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specifi c 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.

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 benefi ts associated with the item will fl ow to the Group and are of material value. Each part of an item of property, plant and equipment with a cost that is signifi cant 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 other wise depreciation is calculated using the straight-line method and is based on the following estimated useful lives:

Buildings and land improvements	10–40 years
Machinery and technical installations	3–15 years
Other equipment	3–10 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 refl ect the cost of capital and other fi nancial 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 identifi able groups of assets that generate cash infl ows that are largely independent of the cash infl ows from other assets or groups of assets.

The value of goodwill and other intangible assets with indefi nite 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 benefi t from the combination.

Classifi cation of fi nancial assets

The Group classifi es its fi nancial assets in the following categories: fi nancial assets at fair value through profi t or loss; loans and receivables; held-to-maturity investments; and available-for-sale fi nancial assets. The classifi cation depends on the purpose for which the investments were acquired. Management determines the classifi cation of its investments at initial recognition.

Financial assets at fair value through profi t or loss

This category has two sub-categories: fi nancial assets held-fortrading, and those designated at fair value through profi t or loss at inception. A fi nancial asset is classifi ed 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 classifi ed 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 fi nancial assets with fi xed 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 classifi ed 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 fi nancial assets with fi xed or determinable payments and fi xed 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 fi nancial assets

Available-for-sale fi nancial assets are non-derivatives that are either designated in this category or not classifi ed in any of the other categories. They are included in non-current assets as fi nancial assets unless management intends to dispose of the investment within 12 months of the balance-sheet date.

Recognition and measurement of fi nancial assets

Regular purchases and sales of investments, fi nancial 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 fi nancial assets not carried at fair value through profi t or loss. Investments are derecognized when the rights to receive cash fl ows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Availablefor-sale fi nancial assets and fi nancial assets at fair value through profi t 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 fi nancial assets at fair value through profi t 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 fi nancial assets classifi ed as availablefor-sale are recognized in equity. When securities classifi ed 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 fi nancial 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-fl ow analysis, and option-pricing models refi ned to refl ect the issuer's specifi c circumstances.

The Group assesses at each balance-sheet date whether there is objective evidence that a fi nancial asset or a group of fi nancial assets is impaired. If any such evidence exists for available-forsale fi nancial 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.

Assets held-for-sale and discontinued operations

The Group classifi es a non-current asset or disposal group as held-for-sale if its carrying amount will be recovered principally through a sale. For classifi cation 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.

Classifi cation as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classifi ed as held-for-sale, if earlier. A disposal group that is to be abandoned may also qualify.

Immediately before classifi cation 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 classifi cation 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 fi nance 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 fi nance lease. Assets under fi nancial 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 signifi cant.

The Group generally owns its production facilities. The Group rents some warehouse and offi ce premises under leasing agreements and has also leasing contracts for certain offi ce 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 defi ned 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 fl ows, 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 outfl ow 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 benefi ts

Post-employment benefi t plans are classifi ed as either defi ned contribution or defi ned benefi t plans.

Under a defi ned contribution plan, the company pays fi xed contributions into a separate entity and will have no legal obligation to pay further contributions if the fund does not hold suffi cient assets to pay all employee benefi ts. Contributions are expensed when they are due.

All other post-employment benefi t plans are defi ned benefi t 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 defi ned benefi t obligation and the plan asset is recognized in profi t and loss over the expected average remaining working lifetime of the employees participating in the plans.

Net provisions for post-employment benefi ts 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 specifi ed period of time (the vesting period). In this case, the past-service costs are amortized on a straight-line basis over the vesting period.

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 fi nancial 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 fi rm commitment (fairvalue hedges); hedges of highly probable forecast transactions (cash-fl ow 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 fl ows 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 fi nancial 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 fi xed interest risk on borrowings. The gain or loss relating to changes in the fair value of interest-rate swaps hedging fi xed rate borrowings is recognized in the income statement as fi nancial expense. Changes in the fair value of the hedged fi xed rate borrowings attributable to interest-rate risk are recognized in the income statement as fi nancial 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 profi t and loss statement as fi nancial expense over the period of maturity.

Cash fl ow hedge

The effective portion of change in the fair value of derivatives that are designated and qualify as cash fl ow hedges are recognized in equity. The gain or loss relating to the ineffective portion is recognized immediately in the income statement as fi nancial items.

Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profi t 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-fi nancial 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 profi t or loss within fi nancial items.

Net investment hedge

Hedges of net investments in foreign operations are accounted for similarly to cash-fl ow 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 fi nancial 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 fi nancial 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 fi nancial 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 classifi ed 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 fi nancial grants from governments, public authorities, and similar local, national, or international bodies. These are recognized when there is a reasonable assurance 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 fi nancial 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 fi nancial 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 fi nancial 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.

The following standards or amendments shall be applied as from January 1, 2009. None of the new standards are expected to have a signifi cant impact on neither fi nancial 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.

IAS 1 Presentation of Financial Statements (Revised)*). The revision of the standard aims at improving the usage of fi nancial 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.

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 signifi cant impact on neither fi nancial result nor position.

IFRIC 7 Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinfl ationary Economies, which provides guidance on how to apply the requirements of IAS 29 in a reporting period in which an entity identifi es the existence of hyperinfl ation in the economy of its functional currency, when that economy was not hyperinfl ationary 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 unidentifi able 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 identifi able 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 fi rst becomes a party to the contract and that subsequent reassessment is prohibited unless there is a change in the terms of the contract that signifi cantly moves the cash fl ows 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 fi nancial asset carried at cost. This interpretation is effective for annual periods beginning on or after November 1, 2006.

The following IFRICs shall be applied as from January 1, 2008.

IFRIC 11 IFRS 2, Group and Treasury Share Transactions. This interpretation clarifi es the treatment and classifi cation 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.

IFRIC 14 IAS 19, The Limit on a Defi ned Benefi t Asset, Minimum Funding Requirements and their Interaction*). IFRIC 14 addresses three issues: how entities should determine the limit placed by IAS 19, Employee Benefi ts, 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.

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 fi nancial 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 fi nancial condition are based on the consolidated fi nancial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU. The preparation of these fi nancial statements requires management to apply certain accounting methods and policies that may be based on diffi cult, 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-fl ow 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 signifi cant 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 fi nancial 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 signifi cant 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 differences 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 refl ects 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 fi nancial situation of a signifi cant customer could lead to signifi cantly 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 benefi ts

Electrolux sponsors defi ned benefi t 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 fi nancial 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.

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 2001–2003 Employee Option Programs or receive shares under the 2005–2007 Performance Share Programs. Employer contributions are paid based on the benefi t obtained by the employee when exercising the options or receiving shares. The establishment of the provision requires the estimation of the expected future benefi t 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 diffi cult 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 fi nancial 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 fi nancial 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 fi nancial reports.

Taxes

The Parent Company fi nancial statements recognize untaxed reserves including deferred tax liability. The consolidated fi nancial 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 fi nancial 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 fi scal 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 fl ow statements have been changed compared to last year. In connection with this, minor reclassifi cations have been made and corresponding comparative fi gures 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 fi nancing 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 fi nancial and commercial activities

The Board of Directors of Electrolux has approved a fi nancial policy as well as a credit policy for the Group to manage and control these risks. Each business sector has specifi c fi nancial 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 fi nancial 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 fi nancial risks has largely been centralized to Group Treasury in Stockholm. Local fi nancial 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 fi nancial 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 refl ected in the risk value. Also, due to the confi dence level, there is a 2.5% risk that the loss will be larger than indicated by the risk fi gure. Furthermore, there are guidelines in the Group's policies and procedures for managing operational risk relating to fi nancial 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 fl ow and market knowledge to contribute to the proactive management of the Group's fi nancial 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-fi xing period.

Liquid funds

Liquid funds as defi ned 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 defi ned as liquid funds less short-term borrowings shall exceed zero, taking into account fl uctuations 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 defi ned 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 defi ned as a one-day holding period. Any deviation from the benchmark is limited by a risk mandate. Derivative fi nancial 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 fi nancing of the Group is managed by Group Treasury in order to ensure effi ciency 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 fi nancing is also undertaken locally in subsidiaries where there are capital restrictions. The Group's borrowings contain no terms, fi nancial 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-fi xing 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-fi xing period is three years. Derivatives, such as interest-rate swap agreements, are used to manage the interest-rate risk by changing the interest from fi xed to fl oating or vice versa. On the basis of 2007 long term interest-bearing borrowings with an interest fi xing 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 defi nes 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 effi cient weighted cost of capital and suffi cient credit worthiness where operating needs and the needs for potential acquisitions are considered. To achieve and keep an effi cient 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

	Long-term debt	Outlook	Short-term debt	Short-term debt, Sweden
Standard & Poor's	BBB+	Stable	A-2	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 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 fi nancing of the Group's capital requirements and refi nancing of existing loans could become more diffi cult 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 fl ows

The Financial Policy stipulates the hedging of forecasted sales in foreign currencies, taking into consideration the price-fi xing periods and the competitive environment. The business sectors within Electrolux have varying policies for hedging depending on their commercial circumstances. The sectors defi ne a hedging horizon between 6 and up to 12 months of forecasted fl ows. Hedging horizons outside this period are subject to approval from Group Treasury. The Financial Policy permits the operating units to hedge invoiced and forecasted fl ows from 75% to 100%. The maximum hedging horizon is up to 18 months. Group subsidiaries cover their risks in commercial currency fl ows 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 signifi cant 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 signifi cant 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 infl ows and outfl ows. 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 profi t 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	Change		Profi t or loss impact , SEKm
Currency
GBP/SEK	–10%	–	353
CAD/SEK	–10%	–	243
AUD/SEK	–10%	–	206
BRL/SEK	–10%	–	138
DKK/SEK	–10%	–	107
CZK/SEK	–10%	–	105
HUF/SEK	–10%	+	167
USD/SEK	–10%	+	373
EUR/SEK	–10%	+	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 given risk mandate. Hedging of the Group's net investments is implemented within the Parent Company in Sweden.

Changes in valuation of all fi nancial 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 fl uctuations 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 defi ned 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 profi t 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 fi nancial 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 specifi es 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 fi nancing operations in the Group. Customer fi nancing 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 fi ve 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, fl oor-care products and professional operations in food-service equipment and laundry equipment. The operations are classifi ed in fi ve business segments. Products for the consumer durables market, i.e., appliances and fl oor-care products, are reported in four geographical segments: Europe; North America; Latin America and Asia/ Pacifi c, 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/Pacifi c	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 specifi es the segments to which they correspond.

Items affecting comparability

		Impairment/ restructuring		Other		Total
	2007	2006	2007	2006	2007	2006
Consumer Durables
Europe	–362	–143		— –173	–362	–316
North America	—	10	—	61	—	71
Latin America	—	—	—	—	—	—
Asia/Pasifi c	—	–297	—	—	—	–297
Professional Products	—	—	—	—	—	—
Total	–362	–430		— –112	–362	–542

Inter-segment sales exist with the following split:

	2007	2006
Consumer Durables
Europe	1,514	1,161
North America	787	985
Latin America	3	38
Asia/Pacifi c	86	71
Eliminations	–2,390	–2,255

The segments are responsible for the management of the operational assets and their performance is measured at the same level, while the fi nancing 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/Pacifi c	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.

		Capital expenditure	Cash fl ow1)
	2007	2006	2007	2006
Consumer Durables
Europe	1,325	1,698	351	1,951
North America	1,471	922	1,069	1,850
Latin America	282	170	814	–160
Asia/Pacifi c	229	184	589	603
Professional Products	96	151	695	347
Other2)	27	27	–91	–1,437
Items affecting comparability	—	—	–1,063	9
Financial items	—	—	–272	–246
Taxes paid	—	—	–815	–743
Total	3,430	3,152	1,277	2,174

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

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/Pacifi c. 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

	2007	2006
Europe	50,815	49,576
North America	34,148	36,427
Latin America	9,651	8,355
Asia/Pacifi c	10,118	9,490
Total	104,732 103,848

Assets, by geographical area

	December 31,
	2007	2006
Europe	37,238	36,040
North America	14,309	15,779
Latin America	9,232	8,738
Asia/Pacifi c	5,310	5,492
Total	66,089	66,049

Capital expenditure, by geographical area

	2007	2006
Europe	1,423	1,809
North America	801	626
Latin America	967	478
Asia/Pacifi c	235	239
Total	3,426	3,152

Net sales, Parent Company

	2007	2006
Europe	6,092	6,204
North America	—	—
Latin America	—	—
Asia/Pacifi c	—	—
Total	6,092	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 benefi ts 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 10 m (11).

Note 5 Other operating income

	Group		Parent Company
	2007	2006	2007	2006
Gain on sale of:
Property, plant and equipment	242	167	30	—
Operations and shares	11	12	11	171
Other	—	6	16	—
Total	253	185	57	171

Note 6 Other operating expenses

		Group	Parent Company
	2007	2006	2007	2006
Loss on sale of:
Property, plant and equipment	–46	–29	–21	—
Operations and shares	—	–4	–498	–704
Total	–46	–33	–519	–704

Note 7 Items affecting comparability

		Group
	2007	2006
Restructuring and impairment	–362	–490
Divestment of Electrolux Financial Corp., USA	—	61
Divestment of 50% stake in Nordwaggon AB, Sweden	—	–173
Unused restructuring provisions reversed	—	60
Total	–362	–542

Classification by function in the income statement

	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.

Note 8 Leasing

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	21	136
Machinery and other equipment	3	2
Closing balance, December 31	24	138
Net carrying amount, December 31	39	186

The future amount of minimum lease-payment obligations are distributed as follows:

	Operating leases	Financial leases	Present value of future financial lease payments
2008	691	2	2
2009–2012	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.

Note 9 Financial income and financial expenses

		Group	Parent Company
	2007	2006	2007	2006
Financial income
Interest income
From subsidiaries	—	—	924	1,125
From others	175	534	52	250
Dividends from subsidiaries	—	—	2,218	11,486
Other financial income	7	4	7	6
Total financial income	182	538	3,201	12,867
Financial expenses
Interest expenses
To subsidiaries	—	—	–744	–983
To others	–650	–788	–402	–469
Exchange-rate differences
On loans and forward contracts as
hedges for foreign net investments	—	—	31	421
On other loans and borrowings, net	53	46	187	–126
Other financial expenses	–25	–4	–11	–6
Total financial expenses	–622	–746	–939	–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

	2007
	Gain/loss	Income	Expense	Gain/loss	Income	Expense
Financial assets and liabilities at fair value through profit and loss	369	14	–59	531	78	–207
Derivatives for which hedge accounting is not applied, i.e., held-for-trading	404	—	—	677	—	—
Interest-related derivatives for which fair value hedge accounting is applied, i.e., fair value hedges	–63	—	16	–49	—	29
Currency derivatives related to commercial exposure where hedge accounting is applied, i.e., cash flow hedges	12	—	—	–7	—	—
Net investment hedges where hedge accounting is applied	—	—	–75	—	—	–236
Other financial assets carried at fair value	16	14	—	–90	78	—
Held-to-maturity investments	—	—	—	—	—	—
Loans and receivables	–397	151	—	–520	412	—
Other assets	–397	151	—	–520	412	—
Available-for-sale financial assets	—	—	—	—	—	—
Other shares and participations	—	—	—	—	—	—
Other financial liabilities	51	—	–569	56	—	–557
Other financial liabilities for which hedge accounting is not applied	–11	—	–307	8	—	–359
Other financial liabilities for which hedge accounting is applied	62	—	–262	48	—	–198
Total net gain/loss, income and expense	23	165	–628	67	490	–764

Note 10 Taxes

		Group	Parent Company
	2007	2006	2007	2006
Current taxes	–1,371	–1,088	28	58
Deferred taxes	261	–89	—	—
Total	–1,110	–1,177	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.

Theoretical and actual tax rates

%	2007	2006
Theoretical tax rate	32.8	33.3
Losses for which deductions have not been made	5.3	8.5
Utilized tax loss carry-forwards	–0.9	–2.6
Non-taxable/non-deductible
income statement items, net	–2.1	2.8
Changes in estimates relating to deferred tax	–2.3	1.7
Withholding tax	0.4	0.3
Other	–5.7	–13.2
Actual tax rate	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:

	December 31, 2007
2008	313
2009	251
2010	259
2011	360
2012	424
And thereafter	171
Without time limit	2,719
Total	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

					Obsole-	Unrea- lized	Recog- nized unused		Total deferred tax assets		Net deferred
	Excess of depreciation	Provision for warranty	Provision for pension	Provision for restructuring	scense allowance	profit in stock	tax losses	Other	and liabilities	Set-off tax	tax assets and liabilties
Opening balance, January 1, 2006	–582	204	1,407	112	–49	33	263	145	1,533	—	1,533
Recognized in the
income statement	139	–27	–248	48	43	55	–193	94	–89	—	–89
Discontinued operations	–70	—	–79	—	92	—	–10	–185	–252	—	–252
Exchange differences	–51	–6	–36	–8	–3	–3	–2	–72	–181	—	–181
Closing balance, December 31, 2006	–564	171	1,044	152	83	85	58	–18	1,011	—	1,011
Of which deferred tax assets	404	195	1,132	205	90	91	58	1,035	3,210	–994	2,216
Of which deferred tax liabilities	–968	–24	–88	–53	–7	–6	—	–1,053	–2,199	994	–1,205

Opening balance, January 1, 2007	–564	171	1,044	152	83	85	58	–18	1,011	—	1,011
Recognized in the
income statement	53	77	–138	–46	–10	2	133	190	261	—	261
Exchange differences	–16	–3	–12	–1	–1	–2	–2	–29	–66	—	–66
Closing balance, December 31, 2007	–527	245	894	105	72	85	189	143	1,206	—	1,206
Of which deferred tax assets	233	268	978	105	82	112	189	1,129	3,096	–955	2,141
Of which deferred tax liabilities	–760	–23	–84	—	–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.

Note 11 Goodwill and other intangible assets

				Group Other intangible assets		Parent Company
	Goodwill	Product development	Program software	Other	Total other intangible assets	Trade marks, etc.
Acquisition costs
Opening balance, January 1, 2006	3,872	1,520	415	1,234	3,169	815
Acquired during the year	—	—	—	42	42	—
Development	—	439	6	—	445	3
Reclassifi cation	—	—	—	—	—	–1
Sold during the year	—	—	—	—	—	—
Discontinued operations	–1,728	–372	–10	–263	–645	—
Fully amortized	—	–4	—	–12	–16	—
Exchange-rate differences	–163	–113	–32	–39	–184	—
Closing balance, December 31, 2006	1,981	1,470	379	962	2,811	817
Acquired during the year	—	—	—	7	7	34
Development	—	520	229	—	749	207
Reclassifi cation	—	–6	—	6	—	—
Sold during the year	—	—	—	—	—	—
Fully amortized	—	—	–19	–45	–64	—
Write-off	—	–2	—	–6	–8	—
Exchange-rate differences	43	16	5	21	42	—
Closing balance, December 31, 2007	2,024	1,998	594	945	3,537	1,058
Accumulated amortization
Opening balance, January 1, 2006	—	417	113	411	941	175
Amortization for the year	—	263	61	41	365	48
Sold and acquired during the year	—	—	—	—	—	—
Discontinued operations	—	–106	–7	–97	–210	—
Fully amortized	—	–4	—	–12	–16	—
Impairment (+) / reversal of impairment (–)	—	1	—	15	16	—
Exchange-rate differences	—	–29	–16	–20	–65	—
Closing balance, December 31, 2006	—	542	151	338	1,031	223
Amortization for the year	—	318	58	40	416	58
Sold and acquired during the year	—	—	—	—	—	—
Fully amortized	—	—	–19	–45	–64	—
Impairment (+) / reversal of impairment (–)	—	—	—	–1	–1	—
Exchange-rate differences	—	16	–1	19	34	—
Closing balance, December 31, 2007	—	876	189	351	1,416	281
Carrying amount, December 31, 2006	1,981	928	228	624	1,780	594
Carrying amount, December 31, 2007	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 indefi nite 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 indefi nite 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 signifi cant amounts is shown in the table belove. The carrying amounts of goodwill allocated to Consumer Durables in North America, Europe and Asia/ Pacifi c are signifi cant in comparison with the total carrying amount of goodwill.

All intangible assets with indefi nite 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-fl ow 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 fi nally 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 fi gures are set in relation to historic fi gures 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 fl ow as for the 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´ infl ation, interest rates and country risk. The pre-tax discount rates used in 2007 were for the main part within a range of 11–12%. 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	discount rate, %
Europe	384	—	11.0
North America	353	410	12.0
Asia/Pacifi c	1,198	—	12.0
Other	89	—	11.0–18.0
Total	2,024	410	11.0–18.0

Note 12 Property, plant and equipment

			Machinery and
Group	Land and land improvements	Buildings	technical installations	Other equipment	Plants under construction	Total
Acquisition costs
Opening balance, January 1, 2006	1,573	10,110	34,996	2,374	2,394	51,447
Acquired during the year	28	283	1,265	152	1,424	3,152
Transfer of work in progress and advances	9	372	1,291	–28	–1,644	—
Sales, scrapping, etc.	–36	–236	–1,109	–188	–17	–1,586
Discontinued operations	–155	–1,810	–6,527	–324	–583	–9,399
Exchange-rate differences	–75	–657	–2,052	–96	–191	–3,071
Closing balance, December 31, 2006	1,344	8,062	27,864	1,890	1,383	40,543
Acquired during the year	5	129	850	116	2,330	3,430
Transfer of work in progress and advances	–14	159	1,207	20	–1,372	—
Sales, scrapping, etc.	–387	–887	–2,805	–245	–6	–4,330
Exchange-rate differences	39	147	352	40	–16	562
Closing balance, December 31, 2007	987	7,610	27,468	1,821	2,319	40,205
Accumulated depreciation
Opening balance, January 1, 2006	370	5,080	25,548	1,827	—	32,825
Depreciation for the year	9	255	1,931	198	—	2,393
Sales, scrapping, etc.	–1	–108	–1,046	–227	—	–1,382
Impairment	—	–1	131	—	—	130
Discontinued operations	–23	–654	–4,629	–247	—	–5,553
Exchange-rate differences	–20	–419	–1,561	–79	—	–2,079
Closing balance, December 31, 2006	335	4,153	20,374	1,472	—	26,334
Depreciation for the year	20	256	1,892	154	—	2,322
Transfer of work in progress and advances	–8	11	–18	15	—	—
Sales, scrapping, etc.	–204	–896	–2,678	–228	–2	–4,008
Impairment	2	—	37	—	—	39
Exchange-rate differences	8	38	237	30	—	313
Closing balance, December 31, 2007	153	3,562	19,844	1,443	–2	25,000
Net carrying amount, December 31, 2006	1,009	3,909	7,490	418	1,383	14,209
Net carrying amount, December 31, 2007	834	4,048	7,624	378	2,321	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).

Parent Company

				Machinery and
	Land and land			technical	Other	Plants under
	improvements	Buildings	installations	equipment		construction	Total
Acquisition costs
Opening balance, January 1, 2006		6	58	1,110	342	62	1,578
Acquired during the year		—	—	72	15	3	90
Transfer of work in progress and advances		—	—	29	2	–31	—
Sales, scrapping, discontinued operations etc.		—	–1	–44	–8	—	–53
Closing balance, December 31, 2006		6	57	1,167	351	34	1,615
Acquired during the year		—	—	81	10	4	95
Transfer of work in progress and advances		—	—	15	—	-15	0
Sales, scrapping, etc.		—	—	–132	–1	—	–133
Closing balance, December 31, 2007		6	57	1,131	360	23	1,577
Accumulated depreciation
Opening balance, January 1, 2006		2	53	840	205	—	1,100
Depreciation for the year		—	1	71	33	—	105
Sales, scrapping, discontinued operations etc.		—	–1	–39	–9	—	–49
Closing balance, December 31, 2006		2	53	872	229	—	1,156
Depreciation for the year		—	—	69	31	—	100
Sales, scrapping, etc.		—	—	–116	–1	—	–117
Closing balance, December 31, 2007		2	53	825	259	—	1,139
Net carrying amount, December 31, 2006		4	4	295	122	34	459
Net carrying amount, December 31, 2007		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

	Group December 31,			Parent Company December 31,
	2007	2006	2007	2006
Shares in subsidiaries	—	—	21,417	21,357
Participations in other companies	—	—	535	293
Long-term receivables in subsidiaries	—	—	2,837	1,408
Long-term holdings in securities classifi ed as:
Available for sale1)	481	239	—	—
Financial assets at fair value through profi t or loss	231	162	—	—
Other receivables	1,145	955	21	22
Pension assets2)	427	336	—	—
Total	2,284	1,692	24,810	23,080

1) Changes in the fair value of fi nancial available-for-sale assets recognized in equity amounts to SEK 248m (30).

2) Pension assets are related to Sweden and Switzerland.

Note 14 Inventories

		Group December 31,	Parent Company December 31,
	2007	2006	2007	2006
Raw materials	3,131	3,416	124	117
Products in progress	172	268	3	91
Finished products	9,048	8,302	234	209
Advances to suppliers	47	55	—	—
Total	12,398	12,041	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

		Group December 31,
	2007	2006
Interest-bearing receivables	—	328
Miscellaneous short-term receivables	1,994	1,731
Provision for doubtful accounts	-36	–36
Prepaid expenses and accrued income	696	862
Prepaid interest expenses and accrued interest income	338	363
Total	2,992	3,248

Miscellaneous short-term receivables include VAT and other items.

Note 16 Trade receivables

	2007	2006
Trade receivables	20,950	21,488
Provision for impairment of receivables	571	584
Trade receivables, net	20,379	20,905
Provisions in relation to trade receivables, %	2.7	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 insuffi cient due to individual consideration such as bankruptcy, offi cially 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

	2007	2006
Provisions, January 1	584	683
New provisions	84	75
Actual credit losses	–120	–56
Exchange-rate differences and other changes1)	23	–118
Provisions, December 31	571	584

1) Includes changes in provisions from discontinued operations.

Timing analysis of trade receivables past due

	2007	2006
Less than 2 months	1,490	1,392
2 – 6 months	251	289
6 – 12 months	149	110
More than 1 year	393	386
Total trade receivables past due	2,283	2,177
Past due in relation to trade receivables, %	10.9	10.1

The fair value of trade receivables equals their carrying amount as the impact of discounting is not signifi cant. The maximum possible exposure to customer defaults is equal to the net amount in the balance sheet. Electrolux has a signifi cant 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 fi nancial 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 fi nancial instruments of the Group regarding specifi c 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	5,546	5,475
Short-term investments	165	1,643
Derivatives	411	318
Prepaid interest expenses and accrued interest income 2)	338	363
Liquid funds	6,460	7,799
Net borrowings	4,703	–304
Revolving credit facility (EUR 500m)3)	4,725	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 defi ned 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 profi le

		December 31,
	2007	2006
Cash and cash equivalents	5,546	5,475
Short-term investments	165	1,643
Derivatives	411	318
Prepaid interest expenses and accrued interest income	338	363
Liquid funds	6,460	7,799
% of annualized net sales1)	10.0	11.2
Net liquidity	184	4,806
Fixed-interest term, days	12	39
Effective yield, % (average per annum)	4.5	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.

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 signifi cant 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 fi rst 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-fi xing period for long-term borrowings was 0.2 years (0.5). The calculation of the average interest-fi xing 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 fi xing 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

				Nominal		Carrying amount,
		Interest		value		December 31,
Issue/maturity date	Description of loan	rate, %	Currency	(in currency)	2007	2006
Bond loans1)
2007–2012	SEK MTN Program	4.500	SEK	2,000	1,945	—
2007–2011	SEK MTN Program	5.250	SEK	250	248	—
2007–2009	SEK MTN Program	Floating	SEK	300	300	—
2007–2009	SEK MTN Program	4.980	SEK	200	200	—
2005–2010	SEK MTN Program	3.650	SEK	500	491	493
2005–2009	SEK MTN Program	3.400	SEK	500	495	495
2001–2008	Global MTN Program	6.000	EUR	268	—	2,460
2001–2008	Global MTN Program	6.000	EUR	32	—	290
1998–2008	SEK MTN Program	4.600	SEK	85	—	85
Total bond loans				—	3,679	3,823
Other long-term loans
	Fixed rate loans in Germany	7.870	EUR	44	406	395
2007–2013	Long-term bank loans in Sweden	Floating	SEK	300	300	—
2007–2010	Long-term bank loans in Sweden	Floating	SEK	200	200	—
2005–2010	Long-term bank loans in Sweden	Floating	EUR	20	193	185
Other fl oating rate loans				—	109	99
Total other long-term loans				—	1,208	679
Long-term borrowings				—	4,887	4,502
Short-term part of long-term loans2)
2001–2008	Global MTN Program	6.000	EUR	268	2,527	—
2001–2008	Global MTN Program	6.000	EUR	32	302	—
1998–2008	SEK MTN Program	4.700	SEK	85	85	—
Total short-term part of long-term loans				—	2,914	—
Other short-term loans
	Commercial paper program	Fixed/Floating	SEK	985	969	—
	Short-term bank loans in Brazil	Floating	BRL	9	32	77
	Short-term bank loans in Brazil	Fixed/Floating	USD	—	—	230
	Short-term bank loan in China	Fixed/Floating	CNY	222	195	490
	Short-term bank loans in Romania	Fixed/Floating	EUR	15	140	—
	Short-term bank loan in Thailand	Fixed/Floating	THB	1,960	374	356
	Short-term bank loans in Turkey	Fixed/Floating	TRY	64	352	162
	Other bank borrowings and commercial papers			—	224	301
Total other short-term loans				—	2,286	1,616
Trade receivables with recourse				—	501	966
Short-term borrowings				—	5,701	2,582
Fair value of derivative liabilities				—	280	247
Accrued interest expenses and prepaid interest income				—	295	164
Total borrowings				—	11,163	7,495

1) The interest-rate fi xing profi le of the borrowings has been adjusted from fi xed to fl oating with interest-rate swaps.

2) Long-term borrowings with maturities within 12 months are classifi ed as short-term borrowings in the Group's balance sheet.

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

Commercial fl ows

The table below shows the forecasted transaction fl ows, 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 fl ow 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 fl ows and hedges

	GBP	CAD	AUD	CZK	BRL	DKK	PLN	HUF	USD	EUR	Other	Total
Infl ow of currency, long position	3,460	2,390	1,930	1,030	1,030	1,040	2,130	2,140	1,540	8,490		7,490 32,670
Outfl ow of currency, short position	–40	–490	–240	—	—					–10 –3,130 –4,530 –6,310 –14,100 –3,820 –32,670
Gross transaction fl ow	3,420	1,900	1,690	1,030	1,030			1,030 –1,000 –2,390 –4,770 –5,610			3,670	—
Hedges	–1,690	–910	–720	–560	–60	–460	460	1,370	1,710	1,760	–900	—
Net transaction fl ow	1,730	990	970	470	970	570		–540 –1,020 –3,060 –3,850			2,770	—

Derivative fi nancial instruments

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

Derivates at market value

			December 31, 2007		December 31, 2006
	Assets		Liabilities	Assets	Liabilities
Interest-rate swaps		74	51	73	3
Cash fl ow hedges		—	—	—	—
Fair value hedges		2	51	59	—
Held-for-trading		72	—	14	3
Cross currency interest-rate swaps		12	20	7	4
Cash fl ow hedges		—	—	—	—
Fair value hedges		—	—	—	—
Held-for-trading		12	20	7	4
Forward-rate agreements and futures		3	3	4	—
Cash fl ow hedges		—	—	—	—
Fair value hedges		—	—	—	—
Held-for-trading		3	3	4	—
Forward foreign-exchange contracts		321	201	234	239
Cash fl ow hedges		180	110	154	131
Net investment hedges		31	47	24	63
Held-for-trading		110	44	56	45
Commodity derivatives		1	5	—	1
Cash fl ow hedges		—	—	—	—
Fair value hedges		—	—	—	—
Held-for-trading		1	5	—	1
Total derivatives		411	280	318	247

Valuation of derivative fi nancial 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 fl ows are discounted using the deposit/swap curve of the cash-fl ow currency. In the event that no proper cash-fl ow 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 profi le fi nancial liabilities

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

Maturity profi le fi nancial liabilities

1 year			> 5 years	Total
–4,298	–1,203	–3,524	–317	–9,342
47	–3	–20	—	24
—	—	—	—	—
–32,782	—	–31	—	–32,813
32,884	—	30	—	32,914
–14,788	—	—	—	–14,788
–18,937	–1,206	–3,545	–317	–24,005
			> 1 year < 2 years > 2 years < 5 years

Net gain/loss on fi nancial instruments

		2007	2006 Gain/loss Gain/loss in equity in profi t and loss 103 438 — 677
	Gain/loss in profi t and loss			Gain/loss in equity

Financial assets and liabilities at fair value through profi t and loss	216			387
Derivatives for which hedge accounting is not applied, i.e., held-for-trading	404			—
Interest-related derivatives for which fair value hedge accounting is applied, i.e., fair value hedges	–63	—	–49	—
Currency derivatives related to commercial exposure where hedge accounting is applied, i.e., cash fl ow hedges	–141	72	–100	–34
Net investment hedges where hedge accounting is applied	—	31	—	421
Other fi nancial assets carried at fair value	16	—	–90	—
Held-to-maturity investments
Not applicable	—	—	—	—
Loans and receivables	–76	—	–496	—
Trade receivables/payables	321	—	24	—
Other assets	–397	—	–520	—
Available-for-sale fi nancial assets	11	248	12	30
Other shares and participations	11	248	12	30
Other fi nancial liabilities	51	—	56	—
Financial liabilities for which hedge accounting is not applied	–11	—	8	—
Financial liabilities for which hedge accounting is applied	62	—	48	—
Total net gain/loss	202	351	10	417

Fair value and carrying amount on fi nancial assets and liabilities

	20071)			20061)
	Fair value	Carrying amount	Fair value	Carrying amount
Financial assets
Financial assets2)	712	712	401	401
Financial assets at fair value through profi t and loss	231	231	162	162
Available for sale	481	481	239	239
Trade receivables	20,379	20,379	20,905	20,905
Loans and receivables	20,379	20,379	20,905	20,905
Derivatives	411	411	318	318
Financial assets at fair value through profi t and loss:
Derivatives for which hedge accounting is not applied, i.e., held for trading	198	198	81	81
Interest-related derivatives for which fair value hedge accounting is applied, i.e., fair value hedges	2	2	59	59
Currency derivatives related to commercial exposure where hedge accounting is applied, i.e., cash fl ow hedges	180	180	154	154
Net investment hedges where hedge accounting is applied	31	31	24	24
Short-term investments	165	165	1,643	1,643
Financial assets at fair value through profi t and loss	5	5	1,130	1,130
Loans and receivables	160	160	513	513
Cash and cash equivalents	5,546	5,546	5,475	5,475
Financial assets at fair value through profi t and loss	634	634	1,858	1,858
Loans and receivables	2,327	2,327	1,677	1,677
Cash	2,585	2,585	1,940	1,940
Financial assets total	27,213	27,213	28,742	28,742
Financial liabilities
Long-term borrowings	4,906	4,887	4,672	4,502
Financial liabilities measured at amortized cost	1,977	1,957	2,863	2,776
Financial liabilities measured at amortized cost for which hedge accounting is applied	2,929	2,930	1,809	1,726
Accounts payable	14,788	14,788	15,320	15,320
Financial liabilities at amortized cost	14,788	14,788	15,320	15,320
Short-term borrowings	5,846	5,701	2,582	2,582
Financial liabilities measured at amortized cost	5,846	5,701	2,582	2,582
Derivatives	280	280	247	247
Financial liabilities at fair value through profi t and loss:
Derivatives for which hedge accounting is not applied, i.e., held for trading	72	72	53	53
Interest-related derivatives for which fair value hedge accounting is applied, i.e., fair value hedges	51	51
Currency derivatives related to commercial exposure where
hedge accounting is applied, i.e., cash fl ow hedges	110	110	131	131
Net investment hedges where hedge accounting is applied	47	47	63	63
Financial liabilities total	25,820	25,656	22,821	22,651

	20071)			20061)
	Fair value	Carrying amount	Fair value	Carrying amount
Per category
Financial assets at fair value through profi t and loss	1,281	1,281	3,468	3,468
Available for sale	481	481	239	239
Loans and receivables	22,866	22,866	23,095	23,095
Cash	2,585	2,585	1,940	1,940
Financial assets total	27,213	27,213	28,742	28,742
Financial liabilities at fair value through profi t and loss	280	280	247	247
Financial liabilities measured at amortized cost	25,540	25,376	22,574	22,404
Financial liabilities total	25,820	25,656	22,821	22,651

1) There has not been any reclassifi cation between categories.

2) Financial assets in the consolidated balance sheet amounting to SEK 2,284m (1,692)

includes non-fi nancial instruments to the amount of SEK 1,572m (1,291).

Note 18 Other reserves in equity

			Other reserves
		Available-		Currency
	for-sale	instruments	Hedging reserve	translation reserve	Total other reserves
Opening balance, January 1, 2006		24	23	1,613	1,660
Available-for-sale instruments
Gain/loss taken to equity		42	—	—	42
Transferred to profi t and loss		–12	—	—	–12
Cash fl ow hedges
Gain/loss taken to equity		—	–11	—	–11
Transferred to profi t and loss		—	–23	—	–23
Exchange differences on translation of foreign operations
Net investment hedge		—	—	421	421
Translation difference		—	—	–2,081	–2,081
Total recognized income and expenses for the period		30	–34	–1,660	–1,664
Closing balance, December 31, 2006		54	–11	–47	–4
Available-for-sale instruments
Gain/loss taken to equity		259	—	—	259
Transferred to profi t and loss		–11	—	—	–11
Cash fl ow hedges
Gain/loss taken to equity		—	61	—	61
Transferred to profi t and loss		—	11	—	11
Exchange differences on translation of foreign operations
Net investment hedge				31	31
Translation difference		—	—	497	497
Total recognized income and expenses for the period		248	72	528	848
Closing balance, December 31, 2007		302	61	481	844

Note 19 Assets pledged for liabilities to credit institutions

	Group December 31,		Parent Company December 31,
	2007	2006	2007	2006
Real-estate mortgages	62	82	—	—
Other	14	11	8	5
Total	76	93	8	5

The major part of real-estate mortgages is related to Brazil. In the process of fi nalizing 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

	Quota value
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	48
299,418,033 B-shares, with a quota value of SEK 5	1,497
Total	1,545

Number of shares

	Owned by Electrolux	Owned by other shareholders	Total
Shares, December 31, 2006
A-shares	—	9,502,275	9,502,275
B-shares	29,986,756		269,431,277 299,418,033
Repurchased shares
A-shares	—	—	—
B-shares	—	—	—
Cancelled shares
A-shares	—	—	—
B-shares	—	—	—
Sold shares
A-shares	—	—	—
B-shares	–2,704,865	2,704,865	—
Shares, December 31, 2007
A-shares	—	9,502,275	9,502,275
B-shares	27,281,891		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.

Earnings per share

	Total 2007	Total 2006	Continuing operations 2007	Continuing operations 2006	Discontinued operations 2007	Discontinued operations 2006
Income for the period, SEKm	2,925	3,847	2,925	2,648	—	1,199
Earnings per share, SEK
Basic	10.41	13.32	10.41	9.17	—	4.15
Diluted	10.33	13.27	10.33	9.14	—	4.13
Average number of shares
Basic	281.0	288.8	281.0	288.8	—	288.8
Diluted	283.3	289.8	283.3	289.8	—	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.

Note 22 Employees and employee benefi ts

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 specifi cation of the average number of employees by country has been submitted to the Swedish Companies Registration Offi ce and is available on request from AB Electrolux, Investor Relations and Financial Information. See also Electrolux website www.electrolux.com/ir, Company overview.

Salaries, other remuneration and employer contributions

	2007				2006
	Salaries and remuneration	Employer contributions	Total	Salaries and remuneration	Employer contributions	Total
Parent Company	904	510	1,414	971	499	1,470
(whereof pension costs)		(204)1)	(204)1)		(198)1)	(198)1)
Subsidiaries	11,708	3,735	15,443	11,878	3,576	15,454
(whereof pension costs)		(678)	(678)		(622)	(622)
Group total	12,612	4,245	16,857	12,849	4,075	16,924
(whereof pension costs)		(882)	(882)		(820)	(820)

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

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	Appropriations	December 31, 2006
Accumulated depreciation in excess of plan on
Brands	516	–14	530
Machinery and equipment	204	–1	205
Buildings	3	–1	4
Other	1	–2	3
Total	724	–18	742

Average number of employees, by geographical area

	Group
	2007	2006
Europe	28,855	28,695
North America	12,068	12,373
Rest of world	15,975	14,403
Total	56,898	55,471

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

	2007			2006
	Board members and senior managers	Other employees	Total	Board members and senior managers	Other employees	Total
Sweden
Parent Company	39	865	904	46	925	971
Other	4	220	224	4	171	175
Total Sweden	43	1,085	1,128	50	1,096	1,146
EU, excluding Sweden	106	5,794	5,900	91	6,093	6,184
Rest of Europe	11	728	739	19	614	633
North America	29	3,080	3,109	17	3,404	3,421
Latin America	29	787	816	29	634	663
Asia	24	314	338	30	304	334
Pacifi c	2	560	562	2	445	447
Africa	3	17	20	—	21	21
Total outside Sweden	204	11,280	11,484	188	11,515	11,703
Group total	247	12,365	12,612	238	12,611	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

		2007		2006
%	Employees in the Parent Company	All employees in Sweden	Employees in the Parent Company	All employees in Sweden
Absence due to illness, as a percentage of total normal working hours	6.9	6.5	7.5	7.1
of which 60 days or more	56.7	57.0	62.9	68.4
Absence due to illness, by category1)
Women	10.1	9.5	11.6	10.9
Men	5.1	5.0	5.3	5.3
29 years or younger	4.8	4.5	4.7	4.6
30–49 years	7.4	6.9	8.1	7.9
50 years or older	7.1	6.8	7.4	7.1

1) % of total normal working hours within each category, respectively.

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 headoffi ce as well as a number of units and plants, and employs approximately 77% of the Group's workforce in Sweden.

Post-employment benefi ts

The Group sponsors pension plans in many of the countries in which it has signifi cant activities. Pension plans can be defi ned contribution or defi ned benefi t plans or a combination of both. Under defi ned benefi t pension plans, the company enters into a commitment to provide post-employment benefi ts based upon one or several parameters for which the outcome is not known at present. For example, benefi ts can be based on fi nal salary, on career average salary or on a fi xed amount of money per year of employment. Under defi ned contribution plans, the company's commitment is to make periodic payments to independent authorities or investment plans and the level of benefi ts 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 defi ned benefi t 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 benefi ts.

In addition to providing pension benefi ts and compulsory severance payments, the Group provides healthcare benefi ts, for some of its employees in certain countries, mainly in the US.

The Group's major defi ned benefi t 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 defi ned benefi t pension plan administered by Alecta. It has not been possible to obtain the necessary information for the accounting of this plan as a defi ned benefi t plan, and therefore, it has been accounted for as a defi ned 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 benefi t 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 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 benefi ts 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 benefi ts 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

		December 31, 2007					December 31, 2006
	Pension benefi ts	benefi ts	Other post- Healthcare employment benefi ts	Total	Pension benefi ts	benefi ts	Other post Healthcare employment benefi ts	Total
Present value of funded obligations	14,429	—	—	14,429	14,960	3	—	14,963
Fair value of plan assets	–14,008	—	—	–14,008	–14,007	–3	—	–14,010
Surplus/defi cit	421	—	—	421	953	—	—	953
Present value of unfunded obligations	3,051	2,273	844	6,168	3,225	2,661	1,034	6,920
Unrecognized actuarial losses (gains)	–739	9	–23	–753	–1,248	–169	–188	–1,605
Unrecognized past-service cost	–47	47	–17	–17	–56	56	–18	–18
Effect of limit on assets	20	—	—	20	—	—	—	—
Net provisions for post-employment benefi ts	2,706	2,329	804	5,839	2,874	2,548	828	6,250
Whereof reported as
Prepaid pension cost in fi nancial assets	427	—	—	427	336	—	—	336
Provisions for post-employment benefi ts	3,160	778	2,328	6,266	3,210	2,548	828	6,586

Reconciliation of changes in net provisions for post-employment benefi ts

	Pension benefi ts	benefi ts	Other post- Healthcare employment benefi ts	Total
Net provision for post-employment benefi ts, January 1, 20061)	3,817	3,108	948	7,873
Expenses for defi ned post-employment benefi ts	423	26	170	619
Contributions by employer	–979	–167	–219	–1,365
Discontinued operations	–245	–23	–39	–307
Exchange differences	–142	–396	–32	–570
Net provision for post-employment benefi ts, December 31, 2006	2,874	2,548	828	6,250
Expenses for defi ned post-employment benefi ts	369	129	62	560
Contributions by employer	–640	–189	–117	–946
Exchange differences	100	–159	34	–25
Net provision for post-employment benefi ts, December 31, 2007	2,703	2,329	807	5,839

1) Including Outdoor products.

Amounts recognized in the income statement for continuing operations

		December 31, 2007				December 31, 2006
	Pension benefi ts	benefi ts	Other post- Healthcare employment benefi ts	Total	Pension benefi ts	benefi ts	Other post Healthcare employment benefi ts	Total
Current service cost	256	1	14	271	324	1	98	423
Interest cost	853	138	45	1,036	814	151	39	1,004
Expected return on plan assets	–924	—	—	–924	–828	—	—	–828
Amortization of actuarial losses (gains)	44	—	—	44	326	—	—	326
Amortization of past-service cost	6	–11	2	–3	–174	–62	33	–203
Losses (gains) on curtailments and settlements	113	—	3	116	–39	–64	—	–103
Effect of limit on assets	20	—	—	20	—	—	—	—
Total expenses for defi ned post employment benefi ts	368	128	64	560	423	26	170	619
Expenses for defi ned contribution plans	—	—	—	322	—	—	—	201
Total expenses for post-employment benefi ts	—	—	—	882	—	—	—	820
Actual return on plan assets	—	—	—	–885	—	—	—	–949

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

Reconciliation of change in the present value of the defi ned benefi t obligation for funded and unfunded obligations

			2007			2006
	Pension benefi ts	benefi ts	Other post- Healthcare employment benefi ts	Total	Pension benefi ts	benefi ts	Other post- Healthcare employment benefi ts	Total
Opening balance, January 1	18,185	2,664	1,034	21,883	22,186	3,469	1,078	26,733
Current service cost	256	1	14	271	324	1	98	423
Interest cost	853	138	45	1,036	814	151	39	1,004
Contributions by plan participants	49	29	—	78	50	36	—	86
Actuarial losses (gains)	–457	–177	–51	–685	–724	–161	99	–786
Past-service cost	—	–4	—	–4	–174	–62	33	–203
Curtailments/special termination benefi t cost	98	3	–116	–15	–47	—	—	–47
Liabilities extinguished on settlements	–2	—	—	–2	—	—	—	—
Liabilities adhering to discontinued operations	—	—	—	—	–1,800	–78	–55	–1,933
Exchange differences on foreign plans	–515	–161	39	–637	–1,418	–441	–39	–1,898
Benefi ts paid	–990	–221	–117	–1,328	–1,026	–251	–219	–1,496
Closing balance, December 31	17,477	2,272	848	20,597	18,185	2,664	1,034	21,883

Reconciliation of change in the fair value of plan assets

	2007				2006
	Pension benefi ts	benefi ts	Other post- Healthcare employment benefi ts	Total	Pension benefi ts	benefi ts	Other post Healthcare employment benefi ts	Total
Opening balance, January 1	14,007	3	—	14,010	15,548	54	—	15,602
Expected return on plan assets	924	—	—	924	828	—	—	828
Actuarial gains (losses)	–39	—	—	–39	120	1	—	121
Settlements	–2	—	—	–2	—	—	—	—
Contributions by employer	640	189	117	946	979	167	219	1,365
Contributions by plan participants	48	29	—	77	50	36	—	86
Discontinued operations	—	—	—	—	–1,296	—	—	–1,296
Exchange differences on foreign plans	–578	—	—	–578	–1,196	–4	—	–1,200
Benefi ts paid	–990	–221	–117	–1,328	–1,026	–251	–219	–1,496
Other	–2	—	—	–2	—	—	—	—
Closing balance, December 31	14,008	—	—	14,008	14,007	3	—	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 benefi ts 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

		December 31,
%	2007	2006
European equities	12	11
North American equities	16	24
Other equities	10	8
European bonds	26	25
North American bonds	22	20
Alternative investments1)	9	7
Property	2	3
Cash and cash equivalents	3	2
Total	100	100

1) Includes hedge funds and infrastructure investments.

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 fi xed-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 signifi cant effect on the amounts recognized in the profi t or loss. A one percentage point change in the assumed medical cost trend rate would have the following effects:

Healthcare benefi ts sensitivity analysis

	2007		2006
	One percentage point increase	One percentage point decrease	One percentage point increase	One percentage point decrease
Effect on the aggregate of the service cost and the interest cost	14	–12	15	–13
Effect on defi ned benefi t obligation	146	–229	384	–102

Amounts for the annual periods

	December 31,
	2007	2006	2005
Defi ned benefi t obligation		–20,597 –21,883 –26,733
Plan assets	14,008	14,010	15,602
Surplus/defi cit	–6,589		–7,873 –11,131
Experience adjustments on plan liabilities	–221	221	–152
Experience adjustments on plan assets	–38	121	513

Parent Company

According to Swedish accounting principles adopted by the Parent Company, defi ned benefi t liabilities are calculated based upon offi cially provided assumptions, which differ from the assumptions used in the Group under IFRS. The pension benefi ts 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 fi nancial 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 profi t or loss and the balance sheet.
Defi cit 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 defi ned benefi t pension obligation for funded and unfunded obligations

	Funded	Unfunded	Total
Opening balance, January 1, 2006	1,003	292	1,295
Current service cost	37	27	64
Interest cost	43	13	56
Other increase of the present value	—	—	—
Benefi ts paid	–26	–21	–47
Closing balance, December 31, 2006	1,057	311	1,368
Current service cost	43	25	68
Interest cost	48	13	61
Other decrease of the present value	—	–12	–12
Benefi ts paid	–30	–25	–55
Closing balance, December 31, 2007	1,118	312	1,430

Change in the fair value of plan assets

	Funded
Opening balance, January 1, 2006	1,191
Actual return on plan assets	41
Contributions and compensation to/from the fund	61
Closing balance, December 31, 2006	1,293
Actual return on plan assets	43
Contributions and compensation to/from the fund	54
Closing balance, December 31, 2007	1,390

Amounts recognized in the balance sheet

		December 31,
	2007	2006
Present value of pension obligations	–1,430	–1,368
Fair value of plan assets	1,390	1,293
Surplus/defi cit	–40	–75
Limitation on assets in accordance with Swedish accounting principles	–272	–236
Net provisions for pension obligations	–312	–311
Whereof reported as provisions for pensions	–312	–311

Amounts recognized in the income statement

	2007	2006
Current service cost	68	64
Interest cost	61	56
Total expenses for defi ned benefi t pension plans	129	120
Insurance premiums	34	29
Total expenses for defi ned contribution plans	34	29
Special employer's contribution tax	39	42
Cost for credit insurance FPG	1	1
Total pension expenses	203	192
Compensation from the pension fund	—	—
Total recognized pension expenses	203	192

The Swedish pension foundation

The pension liabilities of the Group's Swedish defi ned benefi t 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 fi rst 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 benefi ts 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 2001–2003 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 2001–2003

Program	Grant date	Total number of options at grant date	Number of options per lot1) 3)	Fair value of options at grant date	Exercise price SEK 4)	Expiration date	Vesting period, year
2001	May 10, 2001	2,460,000	15,000	39	82.01 (96.10)	May 10, 2008	3 2)
2002	May 6, 2002	2,865,000	15,000	48	88.50 (103.70)	May 6, 2009	3 2)
2003	May 8, 2003	2,745,000	15,000	27	75.99 (89.00)	May 8, 2010	3 2)

1) In 2001–2003, the President and CEO was granted 4 lots, Group Management members 2 lots and all other senior managers 1 lot.

2) For the 2001–2003 option programs, one third vests after 12 months, one third after 24 months and the fi nal 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 2001–2003 were re-calculated due to the share redemption in January 2007. Pre-redemption exercise prices are presented in parentheses.

Change in number of options per program

			Number of options 2006			Number of options 2007
Program	January 1, 2006	Exercised	Forfeited1)	Expired 3)	December 31, 2006	Exercised2)	Forfeited1)	Expired	December 31, 2007
2001		1,436,250 1,223,603	—	—	212,647	67,843	—	—	144,804
2002		2,196,863 1,557,059	15,000	—	624,804	352,274	15,000	—	257,530
2003		2,027,029 1,222,828		50,000 150,000	604,201	280,399	10,000	—	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).

Performance share program 2005, 2006 and 2007

The Annual General Meeting in 2007 approved an annual longterm incentive program. This program was fi rst 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 benefi t 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 defi nition 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 fi ve 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)	2005 Target number of B-shares 1)	2007 Target value, SEK 2)	2006 Target value, SEK 3)	2005 Target value, SEK 4)
President and CEO	14,405	28,310	38,623	2,400,000	2,400,000	2,400,000
Other members of Group Management	7,203	14,156	19,313	1,200,000	1,200,000	1,200,000
Other senior managers, cat. C	5,402	10,616	8,094	900,000	900,000	900,000
Other senior managers, cat. B	3,602	7,078	9,657	600,000	600,000	600,000
Other senior managers, cat. A	2,701	5,308	7,242	450,000	450,000	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 fi nancing 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 fi nancing 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.

Note 23 Other provisions

			Group				Parent Company
	Provisions for restructuring	Warranty commitments	Claims	Other	Total	Provisions for restructuring	Warranty commitments	Other	Total
Opening balance, January 1, 2006	2,587	1,832	987	1,977	7,383	130	78	37	245
Provisions made	457	1,029	53	714	2,253	55	95	69	219
Provisions used	–1,237	–1,004	–36	–606	–2,883	–63	–81	–28	–172
Discontinued operations	–31	–152	—	–108	–291	—	—	—	—
Unused amounts reversed	–109	7	—	–25	–127	–5	—	–3	–8
Exchange-rate differences	–106	–127	–110	–102	–445	—	—	—	—
Closing balance, December 31, 2006	1,561	1,585	894	1,850	5,890	117	92	75	284
Of which current provisions	797	617	85	133	1,632	35	25	—	60
Of which non-current provisions	764	968	809	1,717	4,258	82	67	75	224
Opening balance, January 1, 2007	1,561	1,585	894	1,850	5,890	117	92	75	284
Provisions made	231	1,085	211	404	1,931	—	120	8	128
Provisions used	–993	–987	–260	–420	–2,660	–63	–100	–40	–203
Unused amounts reversed	—	–41	–2	–112	–155	—	—	—	—
Exchange-rate differences	22	40	–48	96	110	—	—	—	—
Closing balance, December 31, 2007	821	1,682	795	1,818	5,116	54	112	43	209
Of which current provisions	502	634	4	163	1,303	10	25	—	35
Of which non-current provisions	319	1,048	791	1,655	3,813	44	87	43	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

		Group December 31,		Parent Company December 31,
	2007	2006	2007	2006
Accrued holiday pay	863	861	166	151
Other accrued payroll costs	1,421	1,129	146	163
Accrued interest expenses	295	164	188	158
Prepaid income	145	166	—	—
Other accrued expenses	4,712	4,726	319	358
Other operating liabilities	2,613	2,247	—	—
Total	10,049	9,293	819	830

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

Note 25 Contingent liabilities

		Group December 31,		Parent Company December 31,
	2007	2006	2007	2006
Trade receivables, with recourse	9	—	—	—
Guarantees and other commitments
On behalf of subsidiaries	—	—	1,187	1,168
On behalf of external counterparties	1,007	1,022	164	157
Employee benefits in excess of reported liabilities	—	—	14	16
Total	1,016	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

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 indefi nite 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.

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 diffi cult 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 fi nancial condition.

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 confi rms 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 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 fi nancial condition.

Note 26 Acquired and divested operations

		Divestments

	2007	2006
Fixed assets	—	–20
Inventories	—	—
Receivables	—	–796
Other current assets	—	–432
Liquid funds	—	—
Loans	—	—
Other liabilities and provisions	—	72
Net assets	—	–1,176
Purchase price	—	1,064
Net borrowings in acquired/divested operations	—	—
Effect on Group cash and cash equivalents	—	1,064

No operations were acquired or divested in 2007.

In 2006, the assets and liabilities of Electrolux Financial Corporation 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

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 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

	Ordinary	Compen sation for	Total
	compen-	committee	compen-
'000 SEK	sation	work	sation
Marcus Wallenberg, Chairman (as from the AGM)	1,234	50	1,284
Peggy Bruzelius, Deputy Chairman	500	175	675
Michael Treschow (Chairman up to the AGM)	375	33	408
Louis R. Hughes	438	50	488
John S. Lupo (as from the AGM)	328	—	328
Johan Molin (as from the AGM)	328	—	328
Hans Stråberg	—	—	—
Caroline Sundewall	438	75	513
Torben Ballegaard Sørensen (as from the AGM)	328	50	378
Barbara Milian Thoralfsson	438	92	529
Ulf Carlsson	—	—	—
Gunilla Brandt	—	—	—
Ola Bertilsson	—	—	—
Total	4,406	525	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 fi xed and variable salary, changes in fi xed or variable salary, criteria for assessment of long-term variable salary, pensions and other benefi ts.

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 fi xed salary, variable salary, based on short-term and long-term performance targets and benefi ts such as pensions and insurance.

Electrolux strives to offer fair and competitive total compensation with an emphasis on "pay for performance". Variable compensation represents a signifi cant 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 fi nancial targets for value creation as well as non-fi nancial 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 fi xed salary, variable salary based on annual targets, a long-term performance share program and other benefi ts 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 benefi ts 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 defi ned contribution plan in which the contribution increases with age. In addition, he is covered by two supplementary plans. Contribution to the fi rst 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 fi xed 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 benefi t in the supplementary plans is payable for life or a shorter period of not less than fi ve years. The President determines the payment period at the time of retirement. Accrued 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

	Number of options
	Beginning of 2007	Expired1)	Exercised	End of 2007
President and CEO	120,000	—	30,000	90,000
Other members of Group Management	250,724	—	165,784	84,940
Total	370,724	—	195,784	174,940

Number of shares offered to Group Management on target performance

	2007	2006	2005	2007	2006	2005
	Target number of B-shares1)	Target number of B-shares1)	Target number of B-shares1)	Target value, SEK	Target value, SEK	Target value SEK
President and CEO	14,405	28,310	38,623	2,400,000	2,400,000	2,400,000
Other members of Group Management	7,203	14,156	19,313	1,200,000	1,200,000	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 40–45% of annual base salary. The stretch level is 80–90%, 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.

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 benefi t from the supplementary plan is payable for life or a shorter period of not less than fi ve 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 defi ned 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 fi xed 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 benefi ts equal to 70% of pensionable salary including credit for other disability benefi ts. Electrolux also provides survivor benefi ts equal to the highest of the accumulated capital for retirement or 250 (250) Swedish income base amounts, as defi ned by the Swedish National Insurance Act. The survivor benefi t is payable over a minimum fi ve-year period.

Compensation to Group Management

			2007					2006
'000 SEK unless otherwise stated	Annual fi xed salary1)	Variable salary earned 20072)	Total	Long- term PSP (value salary awarded)3)	Total pension cost4)	Annual fi xed salary	Variable salary earned 20062)	Total salary	Long- term PSP (value awarded)3)	Total pension cost4)
President and CEO	8,863	4,892	13,755	6,397	6,219	8,7185)	5,303	14,021	—	6,179
Other members of Group Management6)	30,801	20,758	51,559	23,989	16,583	28,7235)	14,9327)	43,655	—	20,029
Total	39,664	25,650	65,314	30,386	22,802	37,4415)	20,235	57,676	—	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.

		Group	Parent Company
	2007	2006	2007	2006
PwC
Audit fees1)	58	86	9	15
Audit-related fees2)	1	4	—	4
Tax fees3)	7	6	1	2
Total fees to PwC	66	96	10	21
Audit fees to other audit fi rms	2	2	—	—
Total fees to auditors	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 fi nancial statements or that are traditionally performed by the external auditors, and include consultations concerning fi nancial accounting and reporting standards; internal control reviews; and employee benefi t 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.

Note 29 Shares and participations

Participation in associated companies
	2007	2006
Opening balance, January 1	80	124
Acquisitions	—	—
Operating result	–1	5
Dividend	—	–13
Tax	—	—
Divestment	—	–16
Discontinued operations	—	–9
Other	–47	—
Exchange difference	—	–11
Closing balance, December 31	32	80

In the item Participation in associated companies is at December 31, 2007, goodwill included with the amount of SEK 2m (2).

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

		2006
		Relation to Electrolux1) Income statement								Balance sheet
	Partici- pation, %	Carrying amount	Receiv- ables	Liabilities	Sales	Purchases	Income	Net results	Total assets	Total liabi- lities
Atlas Eléctrica, Costa Rica	18.9	47	—	2	—	12	826	40	566	367
Sidème, France	39.3	16	75	1	304	2	642	2	200	165
Viking Financial Services, USA	50.0	15	—	—	—	—	6	2	36	6
European Recycling Platform, ERP, France	25.0	2	1	49	—	11	24	8	11	2
e2 Home, Sweden	50.0	—	—	—	—	—	—	—	—	—
Total	—	80	76	52	304	25	1,498	52	813	540

1) Seen from Electrolux perspective.

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		Balance sheet
	Partici- pation' %	Carrying amount	Receiv- ables	Liabilities	Sales	Purchases		Income Net results	Total assets	Total liabi- lities
Sidème, France	39.3	16	52	—	265	—	539	–3	248	215
Viking Financial Services, USA	50.0	15	—	—	—	—	3	3	32	2
European Recycling Platform,
ERP, France	25.0	1	—	15	—	83	142	–6	102	99
Total	—	32	52	15	265	83	684	–6	382	316

1) Seen from Electrolux perspective.

Atlas Eléctrica in Costa Rica is not considered an associated company as Electrolux no longer has a signifi cant infl uence in the company.

Other companies

	Holding, %	Carrying amount, SEKm
Videcon Industries Ltd., India	4.6	481
Atlas Eléctrica S.A., Costa Rica	18.9	47
Banca Popolare Friuladria S.p.A., Italy	0.0	3
Business Partners B.V., The Netherlands	0.7	3
Other	—	4
Total		538

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 specifi cation of Group companies has been submitted to the Swedish Companies Registration Offi ce 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 fi gures 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-fl ow statement under "Cash fl ow 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

		January–May
	2007	2006
Net sales	—	16,988
Cost of goods sold	—	–12,890
Gross operating income	—	4,098
Selling expenses	—	–1,787
Administrative expenses	—	–411
Other operating income	—	5
Other operating expenses	—	—
Operating income	—	1,905
Financial income	—	25
Financial expenses	—	–189
Financial items, net	—	–164
Income after fi nancial items	—	1,741
Taxes	—	–542
Income for the period	—	1,199

Earnings per share for discontinued operations, SEK	Note 20
Basic	—	4.15
Diluted	—	4.13

Average number of shares, million	Note 20
Basic	—	288.8
Diluted	—	289.8

Note 31 Defi nitions

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 fi nancial receivables less operating liabilities, non-interest-bearing provisions and deferred tax liabilities.

Working capital

Current assets exclusive of liquid funds and interest-bearing fi nancial 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.

Interest-bearing liabilities

Interest-bearing liabilities consist of short-term and long-term borrowings. Please refer to Note 17 on page 47.

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.

Equity/assets ratio

Equity as a percentage of total assets less liquid funds.

Earnings per share

Profi t 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.

EBITDA margin

Operating income before depreciation and amortization expressed as a percentage of net sales.

Operating cash fl ow

Total cash fl ow from operations and investments, excluding acquisitions and divestment of operations.

Operating margin

Profi t 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.

Capital turnover rate

Net sales divided by average net assets.

Value creation

Value creation is the primary fi nancial performance indicator for measuring and evaluating fi nancial performance within the Group. The model links operating income and asset effi ciency with the cost of the capital employed in operations. The model measures and evaluates profi tability by region, business area, product line, or operation.

Value created is measured excluding items affecting comparability and defi ned as operating income less the weighted average cost of capital (WACC) on average net assets during a specifi c period. The cost of capital varies between different countries and business units due to country-specifi c 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.

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.

Proposed distribution of earnings

	Thousands of kronor
The Board of Directors and the President propose that net income for the year	1,681,685
and retained earnings	8,164,427
Total	9,846,112
be distributed as follows:
A dividend to the shareholders of SEK 4.25 per share1), totaling	1,196,963

To be carried forward	8,649,149
Total	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 profi ts 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 suffi cient 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 fi nancial 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 fi nancial 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 suffi cient access to long-term, as well as short-term, credit facilities, which can be used by short notice. The Board of Directors, therefore, fi nds 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 Offi cer declare that the consolidated fi nancial statements have been prepared in accordance with IFRS as adopted by the EU and give a true and fair view of the Group's fi nancial position and results of operations. The fi nancial 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 fi nancial 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, fi nancial 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 Offi cer

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 fi nancial 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 signifi cant 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 signifi cant 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 fi nancial position and results of operations in accordance with generally accepted accounting principles in Sweden. The consolidated accounts have been prepared in accordance with international fi nancial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act and give a true and fair view of the Group's fi nancial 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 profi t 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 fi nancial year.

Stockholm, February 25, 2008 PricewaterhouseCoopers AB

Peter Clemedtson Authorized Public Accountant

Eleven–year review

The information below for 2007, 2006 and 2005 in the fi rst three columns, refers to continuing operations exclusive of outdoor products, Husqvarna, which was distributed to the Electrolux shareholders in June 2006.

SEKm	20071)	20061)	20051)	2005	2004
Net sales and income
Net sales	104,732	103,848	100,701	129,469	120,651
Organic growth, %	4.0	3.3	4.5	4.3	3.2
Depreciation and amortization	2,738	2,758	2,583	3,410	3,038
Items affecting comparability	–362	–542	–2,980	–3,020	–1,960
Operating income	4,475	4,033	1,044	3,942	4,807
Income after fi nancial items	4,035	3,825	494	3,215	4,452
Income for the period	2,925	2,648	–142	1,763	3,259
Cash fl ow
EBITDA2)	7,575	7,333	6,607	10,372	9,805
Cash fl ow from operations excluding
change in operating assets and liabilities	5,498	5,263	5,266	8,428	7,140
Changes in operating assets and liabilities	–152	–703	–1 804	–1 888	1 442
Cash fl ow from operations	5,346	4,560	3,462	6,540	8,582
Cash fl ow from investments	–4,069	–2,386	–4,485	–5,827	–5,358
of which capital expenditures	–3,430	–3,152	–3,654	–4,765	–4,515

Cash fl ow from operations and investments	1,277	2,174	–1,023	713	3,224
Operating cash fl ow	1,277	1,110	-653	1,083	3,224
Dividend, redemption and repurchase of shares	-6,708	–4,416	–2,038	–2,038	–5,147
Capital expenditure as % of net sales	3.3	3.0	3.6	3.7	3.7
Margins2)
Operating margin, %	4.6	4.4	4.0	5.4	5.6
Income after fi nancial items as % of net sales	4.2	4.2	3.4	4.8	5.3
EBITDA margin, %	7.2	7.1	6.6	8.0	8.1
Financial position
Total assets	66,089	66,049		82,558	75,096
Net assets	20,743	18,140	17,942	28,165	23,988
Working capital	–2,129	–2,613	–3,799	–31	–383
Trade receivables	20,379	20,905	20,944	24,269	20,627
Inventories	12,398	12,041	12,342	18,606	15,742
Accounts payable	14,788	15,320	14,576	18,798	16,550
Equity	16,040	13,194		25,888	23,636
Interest-bearing liabilities	11,163	7,495		8,914	9,843
Data per share, SEK
Income for the period	10.41	9.17	–0.49	6.05	10.92
Equity	57	47		88	81
Dividend3)	4.25	4.00	7.50	7.50	7.00
Trading price of B-shares at year-end	108.50	137.00		206.50	152.00
Key ratios
Value creation	2,053	2,202	1,305	2,913	3,054
Return on equity, %	20.3	18.7		7.0	13.1

Return on net assets, %	21.7	23.2	5.4	13.0	17.5
Net assets as % of net sales4)	18.6	16.5	15.7	21.0	21.2
Trade receivables as % of net sales4)	18.3	19.1	18.3	18.1	18.2
Inventories as % of net sales4)	11.1	11.0	10.8	13.9	13.9
Net debt/equity ratio	0.29	–0.02		0.11	0.05
Interest coverage ratio	7.49	6.13		4.32	5.75
Dividend as % of equity	7.5	8.5		8.5	8.6
Other data
Average number of employees	56,898	55,471	57,842	69,523	72,382
Salaries and remuneration	12,612	12,849	13,987	17,033	17,014
Number of shareholders	52,700	59,500	60,900	60,900	63,800
Average number of shares after buy-backs	281.0	288.8	291.4	291.4	298.3
Shares at year end after buy-backs	281.6	278.9	293.1	293.1	291.2

1) Continuing operations. 2) As of 1997, items affecting comparability are excluded. 3) 2007: Proposed by the Board.

4) Net sales are annualized.

Compound

								annual growth rate, %
2004	2003	2002	2001	2000	1999	1998	1997	5 years	10 years

	124,077	133,150	135,803	124,493	119,550	117,524	113,000	–4.7	–0.8
	3.3	5.5	–2.4	3.7	4.1	4.0	5.0
	3,353	3,854	4,277	3,810	3,905	4,125	4,255
	–463	–434	–141	-448	-216	964	–1 896
	7,175	7,731	6,281	7,602	7,204	7,028	2,654	–10.4	5.4
	7,006	7,545	5,215	6,530	6,142	5,850	1,232	–11.8	12.6
	4,778	5,095	3,870	4,457	4,175	3,975	352	–10.5	23.6
									–1.5
	10,991	12,019	10,699	11,860	11,325	10,189	8,805	–8.8
	7,150	9,051	5,848	8,639	7,595	5,754	4,718	–9.5	1.5
	–857	1,854	3,634	–2,540	1,065	–1,056	584
	6,293	10,905	9,482	6,099	8,660	4,698	5,302	–13.3	0.1
	–2,570	–1,011	1,213	–3,367	–3,137	–776	–4,344
	–3,463	–3,335	–4,195	–4,423	–4,439	–3,756	–4,329	0.6	–2.3
	3,723	9,894	10,695	2,732	5,523	3,922	958
	2,866	7,665	5,834	2,552	3,821	1,817	865	–30.1
	–3,563	–3,186	–3,117	–4,475	–1,099	–915	–915	16.1
	2.8	2.5	3.1	3.6	3.7	3.2	3.8

	6.2	6.1	4.7	6.5	6.2	5.2	4.0
	6.0	6.0	3.9	5.6	5.3	4.2	2.8
	8.9	9.0	7.9	9.5	9.5	8.7	7.8
	77,028	85,424	94,447	87,289	81,644	83,289	79,640	–5.0
	26,422	27,916	37,162	39,026	36,121	39,986	38,740	–5.8
	4,068	2,216	6,659	9,368	8,070	12,101	10,960
	21,172	22,484	24,189	23,214	21,513	21,859	21,184	–1.9
	14,945	15,614	17,001	16,880	16,549	17,325	16,454	–4.5
	14,857	16,223	17,304	12,975	11,132	10,476	9,879	–1.8
	27,462	27,629	28,864	26,324	25,781	24,480	20,565	–10.3
	12,501	15,698	23,183	25,398	23,735	29,353	29,993	–6.6
	15.25	15.58	11.35	12.40	11.40	10.85	0.95	–7.8
	89	87	88	77	70	67	56	–8.1
	6.50	6.00	4.50	4.00	3.50	3.00	2.50	–6.7
	158.00	137.50	156.50	122.50	214.00	139.50	110.20	–4.6

	3,449	3,461	262	2,423	1,782	437
	17.3	17.2	13.2	17.0	17.1	18.2	1.7
	23.9	22.1	15.0	19.6	18.3	17.5	6.4
	23.6	23.1	29.3	30.4	30.6	33.3	34.0
	18.9	18.6	19.1	18.1	18.2	18.2	18.6
	13.4	12.9	13.4	13.1	14.0	14.4	14.4
	0.00	0.05	0.37	0.63	0.50	0.71	0.94
	8.28	7.66	3.80	4.34	4.55	3.46	1.42
	7.3	6.9	5.1	5.2	5.0	4.5	4.4
	77,140	81,971	87,139	87,128	92,916	99,322	105,950	–7.0
	17,154	19,408	20,330	17,241	17,812	18,506	19,883	–8.3
	60,400	59,300	58,600	61,400	52,600	50,500	45,660	–2.3
	313.3	327.1	340.1	359.1
	307.1	318.3	329.6	341.1

Quarterly information

Net sales and income

SEKm		Q1	Q2	Q3	Q4	Full year
Net sales	2007	24,930	25,785	26,374	27,643	104,732
	2006	24,553	25,322	26,087	27,886	103,848
Operating income	2007	757	890	1,152	1,676	4,475
	Margin, %	3.0	3.5	4.4	6.1	4.3
	2007¹)	757	921	1,152	2,007	4,837
	Margin, %	3.0	3.6	4.4	7.3	4.6
	2006	455	862	685	2,031	4,033
	Margin, %	1.9	3.4	2.6	7.3	3.9
	2006¹)	600	844	1,136	1,995	4.575
	Margin, %	2.4	3.3	4.4	7.2	4.4
Income after fi nancial items	2007	670	752	1,037	1,576	4,035
	Margin, %	2.7	2.9	3.9	5.7	3.9
	2007¹)	670	783	1,037	1,907	4,397
	Margin, %	2.7	3.0	3.9	6.9	4.2
	2006	387	783	684	1,971	3,825
	Margin, %	1.6	3.1	2.6	7.1	3.7
	2006¹)	532	765	1,135	1,935	4,367
	Margin, %	2.2	3.0	4.4	6.9	4.2
Income for the period, continuing operations	2007	492	545	762	1,126	2,925
	2006	232	541	440	1,435	2,648
Earnings per share, continuing operations²)	2007	1.76	1.94	2.71	4.00	10.41
	2007¹)	1.76	2.05	2.71	5.14	11.66
	2006	0.79	1.83	1.54	5.01	9.17
	2006¹)	1.28	1.85	2.81	4.95	10.89
Value creation, continuing operations	2007	86	210	443	1,314	2,053
	2006	–23	256	565	1,404	2,202

Income for the period	2007	492	545	762	1,126	2,925
	2006	807	1,165	440	1,435	3,847
Earnings per share, SEK²)	2007	1.76	1.94	2.71	4.00	10.41
	2007¹)	1.76	2.05	2.71	5.14	11.66
	2006	2.78	3.95	1.54	5.05	13.32
	2006¹)	3.27	3.97	2.81	4.99	15.04

1) Excluding items affecting comparability.

2) Before dilution, based on average number of shares after buy-backs.

Number of shares before dilution

Number of shares after buy-backs, million	2007	281.4	281.5	281.6	281.6	281.6
	2006	295.6	290.3	281.8	278.9	278.9
Average number of shares after
buy-backs, million	2007	279.7	281.5	280.9	281.6	281.0
	2006	294.0	295.0	291.6	280.4	288.8

Items affecting comparability

Restructuring provisions, write-downs
and capital gains/losses	2007	—	–31	—	–331	–362
	2006	–145	18	–451	36	–542

Net sales, by business area

SEKm		Q1	Q2	Q3	Q4	Full year
Consumer Durables, Europe	2007	10,554	10,496	11,624	12,798	45,472
	2006	9,999	10,336	11,226	12,672	44,233
Consumer Durables, North America	2007	8,622	9,043	8,589	7,474	33,728
	2006	9,097	9,287	9,216	8,571	36,171
Consumer Durables, Latin America	2007	1,983	2,161	2,107	2,992	9,243
	2006	1,769	1,697	1,913	2,387	7,766
Consumer Durables, Asia/Pacifi c
and Rest of the world	2007	2,076	2,314	2,332	2,445	9,167
	2006	2,094	2,196	2,101	2,245	8,636
Professional Products	2007	1,688	1,767	1,717	1,930	7,102
	2006	1,588	1,749	1,605	1,999	6,941

Operating income, by business area

SEKm		Q1	Q2	Q3	Q4	Full year
Consumer Durables, Europe	2007	470	299	514	784	2,067
	Margin, %	4.5	2.8	4.4	6.1	4.5
	2006	405	376	672	1,225	2,678
	Margin, %	4.1	3.6	6.0	9.7	6.1
Consumer Durables, North America	2007	258	422	385	646	1,711
	Margin, %	3.0	4.7	4.5	8.6	5.1
	2006	213	383	333	533	1,462
	Margin, %	2.3	4.1	3.6	6.2	4.0
Consumer Durables, Latin America	2007	82	103	111	218	514
	Margin, %	4.1	4.8	5.3	7.3	5.6
	2006	77	76	83	103	339
	Margin, %	4.4	4.5	4.3	4.3	4.4
Consumer Durables, Asia/Pacifi c and Rest of world	2007	2	47	97	184	330
	Margin, %	0.1	2.0	4.2	7.5	3.6
	2006	–47	54	58	98	163
	Margin, %	–2.2	2.5	2.8	4.4	1.9
Professional Products	2007	103	140	126	215	584
	Margin, %	6.1	7.9	7.3	11.1	8.2
	2006	83	143	127	182	535
	Margin, %	5.2	8.2	7.9	9.1	7.7
Common Group costs, etc.	2007	–158	–90	–81	–40	–369
	2006	–131	–188	–137	–146	–602
Total Group, excluding items affecting comparability	2007	757	921	1,152	2,007	4,837
	Margin, %	3.0	3.6	4.4	7.3	4.6
	2006	600	844	1,136	1,995	4,575
	Margin, %	2.4	3.3	4.4	7.2	4.4
Items affecting comparability	2007	—	–31	—	–331	–362
	2006	–145	18	–451	36	–542
Total Group, including items affecting comparability	2007	757	890	1,152	1,676	4,475
	Margin, %	3.0	3.5	4.4	6.1	4.3
	2006	455	862	685	2,031	4,033
	Margin, %	1.9	3.4	2.6	7.3	3.9

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.

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)	Stockholm, London
Number of shares	308,920,308
Number of shares after repurchase	281,638,417
Trading lot	100
High and low for B-shares in 2007	SEK 190–102
Market capitalization at year-end 2007	SEK 34 billion
Beta value2)	1.07
GICS code3)	25201040
Ticker codes	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

SEK thousand	2007	2006	2005	2004	2003
A-shares	47	259	59	34	33
B-shares	523,817	333,658	365,074	316,424	299,139
Total	523,864	333,917	365,133	316,458	299,172

In 2007, on average 3.6 million Electrolux shares were traded daily on the Nordic Exchange in Stockholm.

Repurchase of shares

	2007	2006	2005	2004	2003
Number of shares as of January 1	308,920,308	308,920,308	308,920,308	324,100,000	338,712,580
Redemption/cancellation of shares	—	—	—	–15,179,6921)	–14,612,580
Number of shares as of December 31	308,920,308	308,920,308	308,920,308	308,920,308	324,100,000
Number of shares bought back	—	19,400,000	—	750,000	11,331,828
Total amount paid, SEKm	—	2,193	—	114	1,688
Price per share, SEK	—	113	—	152	149
Number of shares sold under the terms of the employee stock option programs	1,526,122	5,234,483	1,918,161	10,600	113,300
Number of shares alloted under the Performance Share Program 2004	1,178,743	—	—	—	—
Number of shares held by Electrolux, at year-end	27,281,891	29,986,756	15,821,239	17,739,400	17,000,0002)
% of outstanding shares	8.8	9.7	5.1	5.7	5.2

1) Redemption of shares.

2) After cancellation of shares.

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 fi nance 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-fl oating.

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

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

P/E ratio, excluding items affecting comparability

Dividend yield, %

At year-end 2007, the P/E ratio for Electrolux B-shares was 9.3, excluding items affecting comparability. The dividend yield was 3.9%, based on the dividend proposal for 2007.

Major shareholders

	Number of A-shares	Number of B-shares	Total number of shares	Share capital, %	Voting rights, %
Investor AB	8,270,771	28,394,300	36,665,071	11.9	28.2
Barclays Global Investors		30,853,832	30,853,832	10.0	7.8
Alecta Pension Insurance	500,000	23,470,000	23,970,000	7.8	7.2
Swedbank Robur Funds		9,102,902	9,102,902	2.9	2.3
Fourth Swedish National Pension Fund		5,500,540	5,500,540	1.8	1.4
Second Swedish National Pension Fund		5,093,707	5,093,707	1.6	1.3
Didner & Gerge Mutual Fund		4,687,000	4,687,000	1.5	1.2
AMF Pension		4,500,000	4,500,000	1.5	1.1
SEB Funds		4,339,553	4,339,553	1.4	1.1
Handelsbanken/SPP Investment Funds		4,148,249	4,148,249	1.3	1.1
Other shareholders	731,504	180,699,487	181,430,991	49.5	47.3
External shareholders	9,502,275	272,136,142	281,638,417	91.2	100
AB Electrolux		27,281,891	27,281,891	8.8	0.0
Total	9,502,275	299,418,033	308,920,308	100	100

Source: SIS Ägarservice as of December 31, 2007.

The fi gures have been rounded off.

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 fi xed 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	Ownership, %	Number of shareholders	As % of shareholders
1–1,000	3.8	46,581	88.5
1,001–10,000	4.5	5,283	10.0
10,001–20,000	1.0	226	0.4
20,001–	90.7	577	1.1
Total	100	52,667	100

Source: SIS Ägarservice as of December 31, 2007.

USA, 22% UK, 4% Other, 12%

Sweden, 62%

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

	2007	2006 9)	2005	2004	2003	2002	2001	2000	1999	1998
Year-end trading price, B-shares, SEK1)	108.50	116.90	89.50	65.90	67.60	58.80	66.90	52.40	91.50	59.60
Year-end trading price, B-shares, SEK	108.50	137.00	206.50	152.00	158.00	137.50	156.50	122.50	214.00	139.50
Change in price during the year, %	–7 1)	311)	36	–4	15	–12	28	–43	53	27
Equity per share, SEK	57	47	88	81	89	87	88	77	70	67
Trading price/equity, %	191	247 1)	234	187	178	158	178	159	304	209
Dividend, SEK	4.25 2)	4.00	7.50	7.00	6.50	6.00	4.50	4.00	3.50	3.00
Payout ratio, % 3) 4)	36 2)	373)	50	46	39	36	41	30	31	34
Dividend yield, % 5)	3.92)	3.41)	3.6	4.6	4.1	4.4	2.9	3.3	1.6	2.2
Earnings per share, SEK	10.41	9.17	6.05	10.92	15.25	15.58	11.35	12.40	11.40	10.85
Earnings per share, SEK 4)	11.66	10.89	15.82	15.24	16.73	16.90	11.10	13.25	11.45	8.85
Cash fl ow, SEK 6)	4.54	7.53	2.45	10.81	9.15	23.14	15.55	4.67	11.53	2.57
EV/EBIT multiple 7)	7.9	8.01)	16.1	9.5	6.8	5.9	10	8.1	12.9	10
EV/EBIT multiple 4) 7)	7.3	7.11)	9.1	6.7	6.3	5.6	9.8	7.7	12.5	11.5
P/E ratio 4) 8)	9.3	10.71)	13.1	10	9.4	8.1	14.1	9.2	18.7	15.8
P/E ratio 8)	10.4	12.81)	34.4	14.4	10.4	8.8	13.8	9.9	18.8	12.9
Number of shareholders	52,700	59,500	60,900	63,800	60,400	59,300	58,600	61,400	52,600	50,500

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.

6) Cash fl ow 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.

January 25	Electrolux share redemption is fi nalized	May 31	Nomination Committee for Electrolux Annual
February 2	Electrolux awarded EU sustainable energy		General Meeting 2008
February 13	award Nomination Committee proposes Marcus Wallenberg to be elected new Chairman of	June 5	Carina Malmgren Heander new head of Electrolux Group Staff Human Resources and Organizational Development
	Electrolux	June 20	Gunilla Nordström appointed head
February 14	Consolidated results 2006		of Electrolux Major Appliances Asia Pacifi c
	Comments from the President and CEO on the year-end 2006 report	July 17	Half-yearly Report 2007 Comments from the President and CEO
March 9	John Lupo, Johan Molin and Torben Balle gaard Sørensen proposed new Board mem		Hans Stråberg on the second quarter results 2007
	bers of Electrolux	September 4	Electrolux to apply for deregistration with the
March 12	Notice convening the Annual General Meet		U.S. Securities and Exchange Commission
	ing of AB Electrolux	September 21	Electrolux tackles sustainability issues profi tably
March 23	Electrolux Annual Report 2006 now on the	October 11	Electrolux launches investigation of UK factory
	Group's web site	October 22	Interim Report January – September 2007
April 17	Bulletin from AB Electrolux Annual General Meeting 2007		Comments from the President and CEO Hans Stråberg on the third quarter results
April 26	Interim Report January – March 2007		2007
	Income continues to improve	December 14	Electrolux decides to discontinue production
May 11	Electrolux Design Lab 2007 – Electrolux is looking into green solutions for the year 2020		at factory in Spennymoor, UK

	of Electrolux Group Staff Human Resources
	and Organizational Development
June 20	Gunilla Nordström appointed head of Electrolux Major Appliances Asia Pacifi c
July 17	Half-yearly Report 2007 Comments from the President and CEO

September 4 Electrolux to apply for deregistration with the U.S. Securities and Exchange Commission
September 21 Electrolux tackles sustainability issues profi tably

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 fi nancial operations. Operational risks are normally managed by the Group's operative units, and fi nancial risks by the Group's Treasury department.

Pension policy

Sensitivity analysis Cost structure 2007

Risk	Change		Pre-tax earnings 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
	1) Includes translation and transaction effects.

Cost item	% of total cost
Personell	16
Depreciation	3
Fixed costs	19
Raw materials and components	47
Product development	2
Transport	6
Brand investment	2
Variable costs	57
Other	24
Total	100

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

Operational risks

The ability of Electrolux to increase profi tability and dividends to shareholders is largely dependent on how well the Group succeeds in developing new products and in maintaining cost-effi cient production. Management of changes in commodity prices and components as well as managing restructuring are also vital factors for maintaining and increasing profi tability.

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.

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

In 2007, Electrolux purchased raw materials for approximately SEK 23 billion. Purchases of steel accounted for

Plastics, 22% Other, 16%

the largest cost.

Electrolux has enough fl exibility to meet variations in demand, as the proportion of fi xed 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 specifi c quarter. During relocation, Electrolux is also dependent on cost-effi cient deliveries of components and half-fi nished 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 fi nancial 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 signifi cant 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

Financial risks and commitmens

The Group's fi nancial risks are managed within the framework of the fi nancial 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 fi nancial 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 fi nancial 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 profi ts and losses on net assets and hedges are taken directly to equity. Costs related to hedging are reported under net fi nancial 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-fi xing period at year-end was 0.2 years. On the basis of the volume of borrowings and the interestfi xing 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 benefi ts 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 defi ned pensions and benefi ts 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-effi cient 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	Net fl ow	Hedges	Net
EUR	–5,610	1,760	–3,850
USD	–4,770	1,710	–3,060
GBP	3,420	–1,690	1,730
HUF	–2,390	1,370	1,020
CAD	1,900	–910	990
AUD	1,690	–720	970
Other	5,760	–1,520	4,240

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 effi ciency 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 refl ect 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 identifi cation 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 refl ect 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 effi ciency during use. For this reason, Electrolux develops and promotes products with outstanding environmental performance. The Group focuses on resource effi ciency 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 Life-cycle impact Life-cycle cost

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 effi cient 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 effi ciency of appliances currently used by households and those that are available on the market. Together with a responsible recycling program, this benefi ts the environment and also generates value for the Group. The most effi cient products sold in Europe account for a higher share of gross profi t.

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 scientifi c fi ndings 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 certifi ed according to ISO 14001. Newly acquired units must complete the certifi cation 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 defi ned 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 CO2 emissions 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 CO2 reduction of 100,000 tons. It is based on Group consumption levels of approximately 1.8 TWh of energy (2005 consumption data). Benefi ts 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.

2003 2004 2005 2006 2007 Dishwashers Refrigerators/ freezers Washing machines 100 80 60 40 20 0 % The reduction in energy consumption for products sold in Europe, with energy index set at 100% in the year 2002.

Fleet average ISO 14001 certifi cation

Share of factories with more than 50 employees that have certifi ed ISO 14001 environmental management systems.

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 fl ame 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) defi nes 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 effi ciently, 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.

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 fi nished 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 offi ce to effectively manage the implementation of the REACH legislation.

Energy legislation and product labeling

Energy effi ciency 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 effi ciency 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-effi ciency classes. Electrolux is prepared for upcoming, more stringent Energy Star and energyeffi ciency standards in the EU and the US.

Electrolux qualifi ed 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

Data from 53 manufacturing units, %	2007	2006	2005	2004	2003
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
Waste to landfi ll (non-hazardous)	0.82	0.83	0.97	1.1	0.95
Hazardous waste	0.15	0.17	0.19	0.2	0.19
Emission to air	0.016	0.025	0.02	0.034	0.046
Emission to water	0.001	0.003	0.003	0.003	0.006
Total incoming material	100	100	100	100	100

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

98 99 00 01 02 03 04 05 06 07

Manufacturing data covers 98% of the majority-owned production facilitites world-wide, 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 defi ned as the difference between total production cost and the cost of direct material.

Workplace Code of Conduct

The Electrolux Workplace Code of Conduct defi nes 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/Pacifi c, 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.

Treated water/added value CO2

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 defi ned 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

added value

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.

0.5 m3 /kSEK 0.4 0.3 0.2 0.1 0 98 99 00 01 02 03 04 05 06 07 45 40 35 30 25 20 98 99 00 01 02 03 04 05 06 07 kg/kSEK 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 fi nished 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 qualifi cation 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

	Sent to	Responses
Production units	54	54
Offi ces/warehouses	89	89
Total	143	143

Includes all factories and warehouses with more than 30 employees.

	2007	2006
Number of work-related injuries¹)	17.7	13.9
Number of workdays lost due to occupational injuries¹)	251	275
Number of work-related fatalities2)	1	0

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.

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

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 offi ce 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

	Share capital, %	Voting rights, %
Investor AB	11.9	28.2
Barclays Global Investors	10.0	7.8
Alecta Pension Insurance	7.8	7.2
Swedbank Robur Funds	2.9	2.3
Fourth Swedish National Pension Fund	1.8	1.4
Second Swedish National Pension Fund	1.6	1.3
Didner & Gerge Mutual Fund	1.5	1.2
AMF Pension	1.5	1.1
SEB Funds	1.4	1.1
Handelsbanken/SPP Investment Funds	1.3	1.1
Total, ten largest shareholders	41.7	52.7
Board of Directors and Group Management, collectively	0.05	0.04

Source: SIS Ägarservice as of December 31, 2007.

The fi gures have been rounded off.

Voting rights

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 fi rst 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 fi ndings.

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 notifi cation 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 ADRs or similar certifi cates. Holders of such certifi cates are advised to contact the ADR depositary bank, the fund manager or the issuer of the certifi cate 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 specifi c 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 fi rst 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 fi nancing, 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 fi nancial reporting

The working procedures determined annually by the Board include detailed instructions on what type of fi nancial 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 fi nancial 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 fi nancial 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 fi nancial 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.

Composition of the Board1)

		Indepen-	Audit	Remuneration	Total remu-	Participation 2007
	Nationality	dence2)	Committee	Committee	neration, SEK3)	Board meetings	Committee meetings
Marcus Wallenberg
Chairman of the Board	SE	No		•	1,550,000	100%	100%
Peggy Bruzelius
Deputy Chairman of the Board	SE	Yes	•		675,000	100%	100%
Louis R. Hughes	US	Yes		•	487,500	100%	90%
John S. Lupo	US	Yes			437,500	100%
Johan Molin	SE	Yes			437,500	88%
Hans Stråberg
President and CEO	SE	No			—	100%
Caroline Sundewall	SE	Yes	•		512,500	100%	100%
Torben Ballegaard Sørensen	DK	Yes	•		512,500	88%	100%
Barbara Milian Thoralfsson	US	Yes		•	537,500	100%	100%
Ola Bertilsson
Employee representative	SE	—			—	100%
Gunilla Brandt
Employee representative	SE	—			—	100%
Ulf Carlsson
Employee representative	SE	—			—	100%
Total					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.

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 signifi cant 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.

Board of Directors

Marcus Wallenberg, Chairman

Born 1956. B. Sc. Elected 2005.

Previous positions: President and CEO of Investor AB, 1999–2005. Executive Vice-President of Investor AB, 1993–1999.

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, 1997–1998. President and CEO of ABB Financial Services AB, 1991–1997.

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, 1992–2000.

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.

Employee representatives, members

Ola Bertilsson

Born 1955. Representative of the Swedish Confederation of Trade Unions. Elected 2006. 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.

Ulf Carlsson

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

Secretary of the Board

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.

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 Nilfi sk-Advance, 2001–2005. President of Industrial Air Division, Atlas Copco Airpower, Belgium, 1998–2001. Management positions in Atlas Copco, 1983–2001.

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, 1992–1999. Business controller at Ratos AB, 1989–1992. 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, 2001–2008. Executive Vice-President of LEGO System, 1999–2001. Divisional Director of LEGO System, 1996–1999. Managing Director of CCI Europe, 1988–1996. Managing Director of AA S Grafi k, 1983–1988. 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, 2001–2005. President of Midelfart & Co, 1995–2001, and on positions within marketing and sales, 1988–1995.

Holdings in AB Electrolux through company: 4,000 B-shares.

Employee representatives, deputy members

Gerd Almlöf

Born 1959. Representative of the Federation of Salaried Employees in Industry and Services. Elected 2007. 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.

Bengt Liwång

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

Auditors

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.

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 fi nancial 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

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 specifi c issues to the committees.

The Board has also decided that issues may be referred to ad hoc committees that deal with specifi c 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 fi xed and variable salary
Changes in fi xed and variable salary
Criteria for assessment of variable salary, long-term incentives, pension terms and other benefi ts

The Committee comprises three Board members, se page 91. At least two meetings are convened annually. Additional meetings are held as needed.

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 benefi ts 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 fi nancial reporting processes, including the effectiveness of disclosure controls and procedures
Assist the Board in overseeing the adequacy and effectiveness in internal control of fi nancial reporting

The Audit Committee also assists the Board of Directors in:

Overseeing the audit of the fi nancial 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.

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, staffi ng, 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 fi ve scheduled meetings and one extra meeting. Electrolux managers have also had regular contacts with the Committee Chairman between meetings regarding specifi c issues. The Group's Chief Financial Offi cer 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 specifi c issues. Cecilia Vieweg, Head of Group Staff Legal Affairs, was the secretary at all meetings.

Group Management

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 effi cient processes to ensure that all operations create long-term value for shareholders and other stakeholders. This involves maintaining an effi cient 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 effi ciency and the internal control, and to ensure uniform implementation of operational procedures, the Group has defi ned six core processes within strategically important areas. These processes are common to the entire Group and comprise purchasing, people, brand, product development, demand fl ow 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/Pacifi c 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 Offi cer. 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 profi tability and long-term development of their respective product lines.

In terms of external reporting structure, Group operations are divided into fi ve business areas. Operations in Consumer Durables comprise four geographical areas, i.e., Europe, North America, Latin America as well as Asia/Pacifi c and Rest of world. Professional Products is the fi fth business area.

Group Management

Hans Stråberg

President and CEO

Born 1957. M. Eng. In Group Management since 1998.

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, 1980–1987. Senior management positions within Coca-Cola Company, 1987–2000. 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), 1989–1998. Vice-President Human Resources of ABB AB, 1998–2003. Senior Vice-President Human Resources of Sandvik AB, 2003–2007. 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, 1983–1986. President and CEO of J.I. Case Brazil, 1990–1994. President and CEO of Bunge Foods, 1994–1997. Senior Vice-President of Bunge International Ltd., USA, 1997–1998. 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.

Holdings in AB Electrolux: 8,323 B-shares, 19,902 options.

Keith R. McLoughlin

Head of Major Appliances North America, Executive Vice-President

Born 1956. B.S. Eng. In Group Management since 2003.

Board Member of Briggs & Stratton Corp.

Holdings in AB Electrolux: 11,427 B-shares, 0 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, 1980–1989, and GMO AG, 1989–1992. FAG Bearings AG, 1993– 1998, as Chief Operating Offi cer 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/Pacifi c, Executive Vice-President Born 1959. M. Sc. In Group Management since 2007.

Holdings in AB Electrolux: 0 shares, 0 options.

Fredrik Rystedt

Chief Financial Offi cer

Born 1963. M. Econ. In Group Management since 2001.

Joined Electrolux Treasury Department in 1989. Subsequently held several positions within the Group's fi nancial operations. Head of Mergers and Acquisitions, 1996. Head of Business Development of Sapa AB, 1998, Chief Financial Offi cer, 2000. Rejoined Electrolux in 2001 as Chief Administrative Offi cer, responsible for Controlling, Accounting, Taxes and Auditing. Chief Financial Offi cer 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, 1987–1990. Corporate Legal Counsel of AB Volvo, 1990–1992. General Counsel of Volvo Car Corporation, 1992–1997. 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, 1988–1995. 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.

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 fi xed 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 benefi ts such as insurance. Variable compensation is based on both fi nancial and non-fi nancial targets. Value created is the most important fi nancial indicator.

For detailed information on remuneration, remuneration guidelines, long-term incentive programs and pension benefi ts, see Note 22 on page 53 and Note 27 on page 61.

Value creation

The Group uses a model for value creation to measure profi tability by business area, sector, product line and region. The model links operating income and asset effi ciency 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 defi ned 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 effi cient operations, compliance with relevant laws and regulations, and reliable fi nancial reporting. For information on internal control of fi nancial reporting, see "Internal control of fi nancial 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, fi nancial 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 identifi ed risk and the results of a cost-benefi t 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. Certifi ed public accountant Peter Clemedtson is the auditor in charge of Electrolux.

PwC provides an audit opinion on AB Electrolux, the fi nancial statements of its subsidiaries, the consolidated fi nancial 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 fi nancial 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.

^Contro^l ^environmen^t

Internal control of fi nancial reporting or trol and risk managem ent reporting is designed to

The Electrolux process for internal con-

trol and risk management related to fi nancial

reporting is designed to provide reasonable assur-

ance regarding the reliability of fi nancial reporting and the preparation of fi nancial statements for external purposes in accordance with applicable laws and regulations, generally accepted accounting principles and other requirements for listed companies. The process is based on the control environment and comprises four main activities: Risk assessment, control activities, information and communication, and monitoring, as defi ned in the framework for internal control issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Control environment

The Board has overall responsibility for establishing an effective system of internal control and risk management. The Board has determined its working procedures, which include the allocation of tasks to Board members. The Board has established an Audit Committee, which assists the Board in overseeing relevant manuals, policies and important accounting principles applied by the Group in fi nancial reporting, as well as changes in these principles.

Responsibility for maintaining an effective control environment and operating the system for risk management and internal control of fi nancial reporting is delegated to the President. Management at various levels has operational responsibility within their respective areas.

The Group's operations are organized in six business sectors and four Group staff units. Group Management includes the President, the six sector heads and the four Group staff heads. The sector heads have responsibility for results and balance sheets in their respective sectors. The overall management of the sectors is

the responsibility of sector boards. A number of internal boards and councils have been established within the Group for specifi c areas such as risk management, treasury, audit, IT, taxes, brands, products, purchasing and human respo nu coun Gro management, purch

resources. The Group's Disclosure Committee contributes to considering the materiality of information relating to Electrolux and ensuring that such information is properly communicated to the market on a timely basis. The Disclosure Committee comprises the Head of Group Staff Legal Affairs, the Chief Financial Offi cer, the Head of Group Staff Communications and Branding, and the Head of Investor Relations and Financial Information.

The Group has established six group processes within strategically important areas such as purchasing, people, brand, product development, demand fl ow, and business support in order to ensure, among other things, a systematic approach to improving internal control. The Electrolux People Process provides support to managers within the Group in the form of tools and checklists to ensure effi cient recruitment processes and continuous development of employees.

The limits of responsibilities and authorities are given in instructions for delegation of authority, manuals, policies and procedures, and codes, including the Electrolux Code of Ethics, the Electrolux Workplace Code of Conduct, and the Electrolux Policy on Countering Bribery and Corruption, as well as in policies for information, fi nance and credit, and in the accounting manual. In addition, minimum requirements have been set for internal control of fi nancial reporting on the basis of the Group's internal processes. Together with laws and external regulations, these internal guidelines form the control environment, which is the foundation of the internal control and risk management process. All employees, including process, risk, and control owners, are accountable for compliance with these guidelines.

Risk assessment

Risk assessment includes identifying, measuring and sourcing risks. The major risks affecting internal control of fi nancial reporting are defi ned 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 fulfi ll the fundamental criteria for fi nancial 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 fulfi ll the control objectives identifi ed in risk assessment are implemented and documented at four levels: Group, business sector, unit, and process. Documentation comprises both fl owcharts 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 fi nancial 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 fi nancial reporting.

The Group maintains a representation process in which Group Management signs an annual representation letter stating its opinion regarding internal control of fi nancial 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 fi nal 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 fi nancial 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 fi nancial reporting.

Management Assurance & Special Assignments, the Group's internal audit function, has since 2005 been creating and maintaining test plans for specifi c key control activities on the basis of documented fl owcharts 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 fi nancial 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 fi nancial 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 fi nancial 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 fi nancial 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, investors 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 fi nancial analysts and investors worldwide

All reports, presentations and press releases are published simultaneously at www.electrolux.com/ir.

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

meaning of the US Private Securities Litigation Reform Act of 1995. Such statements include, among others, the fi nancial goals and targets of Electrolux for future periods and future business and fi nancial plans. These statements are based on iety 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 operreduce prices, signifi cant loss of business from major retailers, tives, developments in product liability litigation, progress in achieving operational and capital effi ciency 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

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.

Financial reports in 2008
Consolidated results Interim report January–March Interim report April–June	February 6 April 28 July 17
Interim report July–September Major events in 2008	October 27
Annual report Annual General Meeting Contacts	Beginning of March April 1
Investor Relations	Tel. +46 8 738 60 03 E-mail: [email protected]

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

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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AI assistant

Electrolux — Annual Report 2007

2907_10-k_2008-03-05_fa00c823-2cef-460a-ae30-78ef47729c89.pdf

Contents

Electrolux launch in North America 20

Contacts

Electrolux – a global leader with a customer focus

Electrolux product offering

Electrolux business areas

Highlights of 2007

A good foundation for continuing change

Strong trends drive growth

More effi cient products

We are accelerating

Biggest-ever launch in Europe

A good foundation

Biggest-ever launch in North America

Electrolux business

PRODUCT CATEGORIES — what we sell

In 2007, Electrolux sold more than 40 million products. Approximately 50% of them were sold

BUSINESS AREAS — how we report

Konsumentprodukter Consumer Durables

Electrolux köksprodukter Electrolux kitchen products

The market

iscin hent ipis nostio odolore tio dignibh euit adipsusci. Stable demand

Growth in premium and low-end products

Profi table built-in products

etue tem veliquisim euipsum dio dolorpero duisi. Liquis nim vel el ulla consed er aliqu-Consumer trends

The Electrolux brand

Strong global position

Kitchen appliances

Refrigerators and freezers

Cookers and ovens

Dishwashers

Small household appliances

Energy and water effi cient appliances

Emissions of carbon dioxide from the refrigerator Electrolux Source

Disposal, 5kg In use during 13 years, 1,500kg Manufacturing, 159kg

Electrolux laundry products

The market

Virtually all households have washers

Rapid growth for front-loaded washers

Consumer trends

The Electrolux brand

A leader in front-loaded washers

An environmental leader

Laundry products, share of Group sales

Electrolux fl oor-care products

The market

A global product

Innovation drives growth

Regional differences

Consumer trends

The Electrolux brand

Consumer Durables Europe

Consumer Durables Europe's share of sales and operating income 2007

High growth rate in Eastern Europe

Increasing share for kitchen specialists

Strong positions throughout Europe

CORE APPLIANCES

Major markets

Major competitors

VACUUM CLEANERS

Major competitors

Consumer Durables North America

Consumer Durables North America's share of sales and operating income 2007

Dominated by mass market and premium segments

Consolidation of retailers

Aims for growth in premium segment

Net sales and operating margin Facts

Growth of shipments of core appliances in the US

CORE APPLIANCES

Market shares floor-care products Major retailers

core appliances • Sears

Major competitors

VACUUM CLEANERS

Major retailers

Major competitors

Consumer Durables Latin America

Consumer Durables Latin America's share of sales and operating income 2007

Electrolux Annual Report 2007