On the right track It is worth repeating: Electrolux is on the right track, as our results for 2006 clearly demonstrate. By developing new, innovative products and building a strong and global brand, we will have in the space of a couple of years achieved margins on a par with the industry average. But this is not enough. I am convinced that the organization we have today is capable of making Electrolux one of the most protable companies in the industry. I can therefore promise that we have an exciting period ahead of us.

Stockholm, March 2007

Hans Strberg President and Chief Executive Ofcer

Electrolux operations

The Electrolux Groups operations are divided into Consumer Durables and Professional Products. Consumer Durables account for 93 percent of Group sales and comprise appliances for kitchens, fabric care and oor care. In 2006, Electrolux sold approximately 40 million products in 150 countries. The products are sold under several brands and some 50 percent are sold under the global brand Electrolux. The Groups largest markets are in Europe and North America. Professional Products account for approximately 7 percent of Group sales and comprise products for professional users in, e.g., industrial kitchens, restaurants and laundries. The strongest market positions are in Europe, and the major share of products are sold under the Electrolux brand.
consumer durables / kitchen
Electrolux in the kitchen
Refrigerators, freezers, cookers, hobs, dishwashers, hoods and small appliances are products for the kitchen. Electrolux range of kitchen products is extensive with a strong position in most markets in the world.
Market The rate of growth in demand for kitchen appliances in Western Europe and North America has been relatively stable for many years, independently of the business cycle. An important factor is that these appliances are replaced immediately when they break down. Despite continuous improvements in the quality and thus the life cycle of these products, the rate of replacement is accelerating. One reason is that consumers often prefer the new and more innovative products that are being continuously launched. In growth countries, demand is increasing as more people can afford modern kitchen appliances. In recent years, growth has been in the premium and low-price market segments. Increased global competition between both appliance producers and retail chains has generated a growing customer base for low-price products. Demand for premium products has risen as the kitchen has come to play a more important role in the home. Most kitchen appliances can be categorized as either freestanding or built-in. The popularity of having built-in products is increasing, particularly in Europe and Australia. Producers of kitchen furnishings often sell complete kitchens inclusive of appliances. Sales of built-in appliances often involve higher prices and improved protability for producers of household appliances. Trends Perceptions of the kitchen are changing. Instead of being a place for preparing food, the kitchen has become the part of the home where the most time is spent. The kitchen is where family, friends and guests meet and socialize. It has also become a room that is shown to visitors. The kitchen normally contains a number of different products, which makes it a unique area for displaying brands. With reference to smaller appliances such as toasters, coffee-makers and mixers, the display area is even greater. Preparing food is no longer simply a daily chore, but a hobby that calls for special equipment. This has involved greater consumer emphasis on design, user-friendliness and exibility. Consumers also want to be able to use appliances logically and intuitively, without having to consult a manual. Not least, kitchen appliances must have a capability for preparing traditional foods as well as more advanced and international cuisine. Strong world-wide trends for health and wellness have affected demand for modern kitchens. The kitchen has to be easy to clean and ergonomically designed. Vegetables and other perishables have to be kept fresh, and prepared so that they preserve their nutritional value, using as little fat as possible. Consumers are demanding features such as ice-cube makers and dispensers for carbonated water, and are willing to pay for them. Brands Approximately 50 percent of Group sales of kitchen appliances are sold under the Electrolux brand. In the North American market, most of these appliances are sold under the Frigidaire brand. Electrolux also manufactures products which are sold by retail chains under own brands.

STRATEGIC MARKET PLAN IDENTIFICATION OF CONSUMER OPPORTUNITIES PRIMARY DEVELOPMENT CONCEPT DEVELOPMENT PRODUCT DEVELOPMENT COMMERCIAL LAUNCH PREP-ARATION LAUNCH OF ERGORAPIDO RANGE MANAGEMENT PHASE-OUT
A. Comprehensive surveys showed a change in consumer behavior, cleaning a little every day instead of cleaning the entire home once a week. The handheld vacuum cleaners on the market were underpowered, too noisy, broke down frequently and had lters that were difcult to clean.
B. A design process was started in Sweden, production facilities in China were surveyed, and work on developing a packaging design was started. C. After a study of 1,500 households, a prototype was created. Consumer price sensitivity was studied.
D. The new product was named Ergorapido and was launched in more than 40 markets. It was priced about 40 percent higher than conventional handheld vacuum cleaners, and at the same time the market position of Electrolux was strengthened. Ergorapido was an overnight suc-cess, despite the high price.
.now we continue with core appliances
In recent years there has been a strong increase in the proportion of successful launches of Electrolux vacuum cleaners. Half of the cleaners sold today were launched during the past two years, and more than 40 percent are sold under the Electrolux brand, including doublebranding. In the second half of 2006, protability rose to the same level as before the 30 slump in 2002. Lower production costs, a global process for both product development and marketing, and investments in the Electrolux brand have payed off. On the basis of the successful transformation of the oor-care operation, the Group is now implementing a similar strategy for core appliances. Production is being moved to low-cost countries. The current restructuring program involves moving half of production in high-cost countries. When this program is completed in 2009, about 60 percent of the Groups production will be located in low-cost countries. Manufacture of large, complex products will remain close to consumers in order to avoid excessive transportation costs. On the other hand, the share of components purchased

Present

Hungary, but the greater part of production has been outsourced to companies in China. The transfer of the Groups production to low-cost countries has reduced both costs and tied-up capital. Moving production from Germany to Hungary has cut costs in Europe by more than 20 percent. Labor costs have been drastically reduced, while transportation costs have increased somewhat. The capital tied up in the oor-care product operation has been reduced on the basis of fewer own plants and a greater share of outsourced
production. Fixed assets have been halved since 2002. The price of vacuum cleaners has declined on average by approximately 20 percent since 2002. Price levels have stabilized in recent years and a slow upturn in prices has begun. In Europe, the average price is rising as demand for bagless vacuum cleaners increases and consumers tend to prioritize quality over low price. In order to shorten the time required to develop new products that respond to consumer needs, Electrolux has invested heavily in improving the internal process

Finished products (incl. packaging) Waste to landll (non-hazardous) Hazardous waste Emission to air Emission to water Total incoming material
91.74 0.83 0.17 0.025 0.003 100
92.28 6.54 0.97 0.19 0.020 0.003 100
91.41 7.25 1.10 0.20 0.034 0.003 100
90.89 7.91 0.95 0.19 0.046 0.006 100
90.12 8.53 1.08 0.24 0.020 0.009 100
External material and energy recycling 7.24
Utilization of material in production decreased in 2006, while hazardous waste and waste to landll were reduced.
Energy directives and product labeling Energy efciency and product labeling are core issues for the Group, and for the appliance industry as a whole. In the Groups major markets, Europe and North America, regulations require that most products in the Electrolux portfolio bear a label indicating the products energy efciency 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 Groups products are within all regulatory limits and are represented in the highest energy efciency classes. Electrolux is prepared for upcoming, more stringent Energy Star and energy efciency standards in the EU and the US. Electrolux expects to qualify for recently enacted 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. Electrolux and other leading manufacturers have agreed on unilateral industry commitments to improve energy efciency for most large household appliances. The European Commission has endorsed these agreements. 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 Groups ongoing efforts to reduce energy consumption of products, factories and services.

Social responsibility

Electrolux is committed to conducting operations in a manner that is in accordance with the evolving role of business in society. Workplace Code of Conduct The Group has established policies and guidelines as well as management procedures aimed at guaranteeing fair business practices and consistent monitoring of related performance.
Workplace Code of Conduct The Electrolux Workplace Code of Conduct denes 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.

Consumer Durables, Europe Net sales Operating income Margin, % Consumer Durables, North America Net sales Operating income Margin, % Consumer Durables, Latin America Net sales Operating income Margin, % Consumer Durables, Asia/Pacic and Rest of world Net sales Operating income Margin, % Professional Products Net sales 6,7.602 103,848 4,575 4.4 6,6.621 100,701 4,024 4.0 Operating income Margin, % Other Net sales Operating income, common group costs, etc. Total Net sales Operating income, excluding items affecting comparability Margin, %
44,233 2,678 6.1 36,171 1,462 4.0 7,4.4
43,755 2,602 5.9 35,134 1,444 4.1 5,2.1
Professional Products SEKm 2006 2005

6,7.7 1,394 40.3,316

6,6.9 1,290 40.3,401
Demand in Europe for both food-service equipment and laundry equipment is estimated to have increased for the full year as well as the fourth quarter of 2006 in comparison with the previous year. Food-service equipment Group sales of food-service equipment increased in 2006 for both the full year and the fourth quarter. Operating income and margin improved signicantly, mainly due to higher volumes of own-manufactured products and lower costs for marketing and administration. Higher prices for raw materials, mainly referring to stainless steel, were offset by higher sales prices.
Change in net sales and operating income 2006 compared to 2005 1)
Operating Net sales in income in comparable Operating comparable Net sales currency income currency

Change year-over-year, %

Consumer Durables Europe North America Latin America Asia/Pacic, Rest of world Professional Products Total

1.1 3.0 33.5 6.9 3.8 3.1

1.2 4.0 19.6 5.4 4.2 3.0
2.9 1.2 175.6 N/A 15.6 13.7
1.0 8.0 130.6 N/A 15.8 14.1

Risk management

Risks in connection with the Groups operations can in general be divided into operational risks related to business operations and those related to nancial operations. Operational risks are normally managed by the operative units within the Group, and nancial risks by the Groups treasury department. Operational risks Electrolux is exposed to risks in connection with its business operations. The Groups ability to improve protability and increase shareholder value is largely dependent on success in development of new, innovative products and in maintaining cost-efcient production. Managing uctuations in the prices of raw materials and components and restructuring are vital for maintaining and increasing the Groups competitiveness. Financial risk management The Group is exposed to a number of risks related to for example liquid funds, trade receivables, customer 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 Groups 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 risks related to nancial and commercial activities The Board of Directors of Electrolux has approved a nancial policy and a credit policy for the Group in order to manage and control these risks. Each business sector has specic nancial and credit policies approved by the sector board. The above-mentioned risks are, amongst others, managed by the use of derivative nancial instruments according to the limitations stated in the Financial Policy. The Financial Policy also describes management of risks related to pension-fund assets. Management of 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 Groups policies and procedures include guidelines for managing operating risks related to 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 Financial Policy. This trading is aimed primarily at maintaining a high quality of information ow and market knowledge in order to contribute to proactive management of the Groups nancial risks. The Groups Credit Policy ensures that the management process for customer credits includes customer ratings, credit limits, decision levels and management of bad debts. For more detailed information on: Accounting principles for nancial instruments, see Note 1 on page 72. Financial risk management, see Note 2 on page 79. Financial instruments, see Note 17 on page 88. For more information, see section on Risk factors on page 129.

Closing balance, December 31, 2004 Restatement of IAS 39
13,13,24 1,997 2,1,145 14,30 10,768 2,222 7,540 5,582 1,8,668
17,17,24 1,997 2,1,145 19,30 10,768 2,222 7,540 5,582 1,13,230
Restated opening balance, 1,545 January 1, 2005 Share-based payments Revaluation of external shares Income for the period Dividend payment Repurchase and sale of shares Group contribution Closing balance, December 31, 2005 1,545 Share-based payments Revaluation of external shares Income for the period Dividend payment Dividend of Husqvarna AB Redemption of shares, including costs Repurchase and sale of shares Group contribution Closing balance, December 31, 2006 1,545

3,017 3,017 3,017

CASH FLOW STATEMENT
Operations Income after nancial items Non-cash dividend Depreciation and amortization Capital gain/loss included in operating income Taxes paid Cash ow from operations, excluding change in operating assets and liabilities Change in operating assets and liabilities Change in inventories Change in accounts receivable Change in current intra-Group balances Change in other current assets Change in other current liabilities and provisions Cash ow from operating assets and liabilities Cash ow from operations Investments Change in shares and participations Capital expenditure in property, plant and equipment Divestment of brands Other Cash ow from investments Total cash ow from operations and investments Financing Change in short-term borrowings Change in long-term borrowings Dividend Repurchase and sale of shares Cash ow from nancing Total cash ow Liquid funds at beginning of year Liquid funds at year-end Change in net borrowings Total cash ow, excluding change in loans Net borrowings at beginning of year Net borrowings at year-end

10,696 2,648 3

1,1,320 17
8,125 4,41 3,759 12,572 4,1,836 2,867 9,705 1,422 2,840 2,222 1,463 7,947 1,758 2,522 4,280
18 5,10 -4,964 4,158 1,416 2,420 3,2,628 3,026 2,1,308 2,184 4,706 2,522

6,020 16,448 10,428

2,582 13,866 16,448
notes, all amounts in SEKm unless otherwise stated
Note Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 Note 8 Note 9 Note 10 Note 11 Note 12 Note 13 Note 14 Note 15 Note 16 Note 17 Note 18 Note 19 Note 20 Note 21 Note 22 Note 23 Note 24 Note 25 Note 26 Note 27 Accounting and valuation principles Financial risk management Segment information Net sales and operating income Other operating income Other operating expenses Items affecting comparability Leasing Financial income and nancial expenses Taxes Goodwill and other intangible assets Property, plant and equipment Financial assets Inventories Other current assets Trade receivables Financial instruments Other reserves in equity Assets pledged for liabilities to credit institutions Share capital, number of shares and earnings per share Untaxed reserves, Parent Company Employees and employee benets Provisions Other liabilities Contingent liabilities Acquired and divested operations Remuneration to the Board of Directors, the President and other members of Group Management Fees to auditors Shares and participations Discontinued operations Denitions Proposed distribution of earnings Audit report Page 100 101

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-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 excluding goodwill and intangble assets with indenite lives 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 2006 amounted to SEK 14,209m. The carrying amount for goodwill at year-end 2006 amounted to SEK 1,981m. Management regularly reassesses the useful life of all signicant assets. Management believes that any reasonably possible change in the key assumptions on which the assets recoverable amounts are based would not cause their carrying amounts to exceed their recoverable amounts. Deferred taxes In the preparation of the 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 signicant differences in the valuation of deferred taxes. As of December 31, 2006, Electrolux had a net amount of SEK 1,011m recognized as deferred tax assets in excess of deferred tax liabilities. As of December 31, 2006, the Group had tax loss carry-forwards and other deductible temporary differences of SEK 4,718m, 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 reects 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 nancial situation of a signicant customer could lead to signicantly different valuations. At year-end 2006, trade receivables, net of provisions for doubtful accounts, amounted to SEK 20,905m. The total provision for doubtful accounts at year-end 2006 was SEK 584m. Post-employment benets Electrolux sponsors dened benet 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 2006 was 6.3% based on historical results. A reduction by one per78

the Groups operating income for one year by approximately SEK +/375m, as a static calculation. The model assumes the distribution of earnings and costs effective at year-end 2006 and does not include any dynamic effects, such as changes in competitiveness or consumer behavior arising from such changes in exchange rates. 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 Groups 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 was changed at the end of 2006 and only investments with an equity capitalization exceeding 60% are hedged unless the exposure is considered too high by the Group. 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 Groups net investments is implemented within the Parent Company in Sweden. 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 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 dened as exposure arising from only part of a component. Commodity-price risk is managed through contracts with the suppliers. Credit risk Credit risk in 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 species the maximum permissible exposure in relation to each counterpart. The Group strives for arranging master netting agreements (ISDA) with the counterparts for derivative transactions and has established such agreements with the majority of the counterparts, i.e., if counterparty will default assets and liabilities will be netted. Credit risk in trade receivables Electrolux sells to a substantial number of customers in the form of large retailers, buying groups, independent stores, and professional users. Sales are made on the basis of normal delivery and payment terms, if they are not included in Customer Financing operations in the Group. Customer Financing solutions are also arranged outside the Group. The Credit Policy of the Group ensures that the management process for customer credits includes customer rating, credit limits, decision levels and management of bad debts. The Board of Directors decides on customer credit limits that exceed SEK 300m. There is a concentration of credit exposures on a number of customers in, primarily, USA and Europe. For more information, see Note 16 on page 87.

Option programs 20002003

Total number of options at grant date Number of options per lot 1) 3) Fair value of options at grant date Exercise price SEK 4) Expiration date Vesting period, year

Program

Grant date

2002 2003

Feb. 26, 2001 May 10, 2001 May 6, 2002 May 8, 2003
595,800 2,460,000 2,865,000 2,745,000
6,500 15,000 15,000 15,000
167.40 96.10 (174.30) 103.70 (188.10) 89 (161.50)
Feb. 26, 2006 May 10, 2008 May 6, 2009 May 8, 2010

2) 3 2) 3 2)

1) In 20002003, the President and CEO was granted 4 lots, Group Management members 2 lots and all other senior managers 1 lot. 2) For the 20012003 option programs, one third vests after 12 months, one third after 24 months and the 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. Each stock option entitles the option holder to purchase 1.85 shares. 4) Exercise prices for stock option programs 20012003 were re-calculated due to the spin-off of Husqvarna. Pre spin-off exercise prices are presented in parentheses.
Change in number of options per program
Number of options 2005 Program January 1, 2005 Exercised Forfeited
Number of options 2006 December 31, 2005 Exercised

Forfeited

Expired
426,800 2,215,000 2,670,000 2,670,000
290,300 668,750 263,137 527,971
52,000 110,000 210,000 160,000
84,500 1,436,250 2,196,863 1,982,029
84,500 1,223,603 3) 1,557,059 3) 1,372,828 3)

15,000 55,000

150,000 3)

212,647 624,804 404,201

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 178. 3) All Husqvarna stock option participants exercised their vested stock options before the spin-off was completed. Their rights to the unvested portion of the 2003 stock option program were voluntary waived in exchange for which the intrinsic value for those stock options was received. This corresponds to now expired 150,000 stock options. The total payment for releasing Husqvarna participants from the option program was SEK 13.5m, excluding cost for social security, whereof SEK 4.6 m was charged to the income statement.
Performance share program 2004, 2005 and 2006 The Annual General Meeting in 2006 approved an annual longterm incentive program. This program was 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 Groups principles for remuneration based on performance, and is an integral part of the total compensation for Group Management and other senior managers. Electrolux shareholders benet 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 Groups previously adopted denition of this concept. The three levels are Entry, Target, and Stretch. Entry is the minimum level

Note 27 Remuneration to the Board of Directors, the President and other members of Group Management
The amounts disclosed in this note have not been adjusted for the distribution of the Outdoor Products operations.
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 in accordance with a new payment model. Compensation paid in 2006 refers to 2/4 of the compensation authorized by the AGM in 2005, and 2/4 of the compensation authorized by the AGM in 2006. Total compensation paid in 2006 amounted to SEK 5,450,000, of which SEK 4,837,500 referred to ordinary compensation and SEK 612,500 to committee work. For distribution of compensation by Board member, see table below.
Compensation to the Board members 2006
000 SEK Ordinary compensation
Compensation for committee work

Total compensation

Michael Treschow, Chairman Peggy Bruzelius, Deputy Chairman Barbara Milian Thoralfsson Aina Nilsson Strm (up to the AGM) Karel Vuursteen (up to the AGM) Caroline Sundewall Marcus Wallenberg Louis R. Hughes Tom Johnstone (up to the AGM) Hans Strberg Ulf Carlsson Gunilla Brandt Ola Bertilsson Total

1,175 4,837

1,175 5,450
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 2006 was SEK 5,303,490 (6,594,381). The President participates in the Groups long-term performance programs, that comprise the new performance share program introduced in 2004, as well as previous option programs. For more information on these programs, see Note 22 on page 92. The notice period for the company is 12 months, and for the President six months. There is no agreement for special severance compensation. The President is not eligible for fringe benets such as a company car or housing. Pensions for the President and CEO The President is covered by the Groups pension policy. Retirement age for the President is 60. The President is covered by an alternative ITP plan that is a dened contribution plan in which the contribution increases with age. In addition, he is covered by two supplementary dened contribution plans. Pensionable salary is calculated as the current xed salary including vacation pay plus the average actual variable salary for the last three years. The pension costs in 2006 amount to SEK 4,989,958 (5,000,801). The cost amounts to 41.1% of pensionable salary.

Stockholm, March 9, 2007 PricewaterhouseCoopers AB
Peter Clemedtson Authorized Public Accountant Partner in charge
Dennis Svensson Authorized Public Accountant
elevenyear summary, all amounts in SEKm unless otherwise stated

Elevenyear review

The information below for 2006 and 2005 in the two rst columns, refers to continuing operations exclusive of outdoor operations, Husqvarna, which was distributed to the Electrolux shareholders in June 2006.
Amounts in SEKm unless otherwise stated Net sales and income Net sales, % Organic growth, % Depreciation and amortization Items affecting comparability Operating income Income after nancial items Income for the period Cash ow EBITDA 2) Cash ow from operations excluding change in operating assets and liabilities Changes in operating assets and liabilities Cash ow from operations Cash ow from investments of which capital expenditures Cash ow from operations and investments Operating cash ow Dividend and repurchase of shares Capital expenditure as % of net sales Margins 2) Operating margin, % Income after nancial items as % of net sales EBITDA margin, % Financial position Total assets Net assets Working capital Trade receivables Inventories Accounts payable Equity Interest-bearing liabilities Data per share, SEK Income for the period Equity Dividend 3) Trading price of B-shares at year-end Key ratios Value creation Return on equity,% Return on net assets,% Net assets as % of net sales 4) Trade receivables as % of net sales 4) Inventories as % of net sales 4) Net debt/equity ratio Interest coverage ratio Dividend as % of equity Other data Average number of employees Salaries and remuneration Number of shareholders Average number of shares after buy-backs Shares at year end after buy-backs
1) Continuing operations. 2) As of 1997, items affecting comparability are excluded. 3) 2006: Proposed by the Board. 4) Net sales are annualized.
2006 1) 103,848 3.3 2,4,033 3,825 2,648 7,333 5,4,560 2,386 3,152 2,174 1,110 4,416 3.0 4.4 4.2 7.1 66,049 18,140 2,613 20,905 12,041 15,320 13,194 7,495 9.4.00 137.00 2,202 18.7 23.2 16.5 19.1 11.0 0.02 6.13 8.5 55,471 12,849 59,500 288.8 278.9

Evaluation of the Boards activities
The Board determines its working procedures each year and reviews them when necessary. The working procedures include allocation of tasks between Board members. The Chairmans special role and tasks are described, 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 Chair-
The Board evaluates its activities annually with regard to working procedures and the working climate, as well as the alignment of the Boards work. The evaluation also focuses on access to and requirements for special competence. This evaluation provides input for the nomination procedures by which the Nomination Committee decides on matters such as the Boards composition and remuneration to members. The Deputy Chairman of the Board also manages a separate annual evaluation of the Chairmans work.

Composition of the Board

The Electrolux Board of Directors consists of seven 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 and CEO, the members of the Board are non-executives. Two of the seven members are not Swedish citizens. Three of the members are women. For information on Board members, see www.electrolux.com and page 124.

Independence

Hans Strberg has been considered independent in relation to the major shareholders of Electrolux, but not in his capacity as President and CEO in relation to the Company and the management of the Company. With the exception of the President and CEO Hans Strberg, the members of the Board are not Group executives. The President and CEO has no major shareholdings nor is he a partowner in companies that have signicant business relations with Electrolux.
Remuneration to Board members
The Board is considered to be in compliance with the requirements for independence stipulated by the Stockholm Stock Exchange and the Swedish Code of Corporate Governance. All Directors elected by the AGM 2006, with the exception of Michael Treschow, Marcus Wallenberg and Hans Strberg, have been considered independent by the Nomination Committee prior to the AGM 2006, both in relation to the major shareholders of Electrolux and in relation to the Company and the management of the Company. Michael Treschow has been considered independent in relation to the major shareholders, but not in relation to the Company and the management of the Company, since he was President and CEO of Electrolux during the years 19972002. 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, i.a., the Chairman of the Board of Directors of SEB, Skandinaviska Enskilda Banken, with which bank Electrolux has extensive business relations.

Description of internal control of nancial reporting The Electrolux process for internal control and risk management related to nancial reporting is designed to provide reasonable assurance regarding the reliability of nancial reporting and the preparation of 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 dened in the framework for internal control issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Control environment

ing Bribery and Corruption, as well as in policies for information, nance and credit, and in the accounting manual. In addition, minimum requirements have been set for internal control of nancial reporting on the basis of the Groups 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

The Board has the 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 nancial reporting, as well as major changes in these principles. Responsibility for maintaining an effective control environment and operating the system for risk management and internal control of nancial reporting is delegated to the President and CEO. Management at various levels has operational responsibility within their respective areas. The Groups operations are organized in ve business sectors and four Group staff units. Group Management includes the President and CEO, the ve 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 specic areas such as risk management, treasury, audit, IT, taxes, brands, products, purchasing and human resources. The Groups 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 Group has established six group processes within strategically important areas such as purchasing, people, brand, product development, demand 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 efcient 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 Counter-

Compliance with the Sarbanes-Oxley Act
the Group for effective compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. The work is being led by Management Assurance & Special Assignments, the Groups Internal Audit function. In 2005 and 2006, extensive work was performed to document, evaluate and test Electrolux internal controls over nancial reporting. Financial reporting and disclosure 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 nancial position. A disclosure policy in accordance with the Sarbanes-Oxley Act of 2002 was adopted by the Audit Committee in 2003. Electrolux complies with the requirements for an information policy that was introduced in 2004 by the Stockholm Stock Exchange in listing agreements.
Financial information is issued regularly in the form of:
Interim reports, published as press releases. The Annual Report. An annual report on Form 20-F and interim reports on Form 6-K, each of which are led with the US Securities and Exchange Commission (SEC). Press releases on all important 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 release of important news. Meetings with nancial analysts and investors world-wide. All reports and press releases are published simultaneously at www.electrolux.com/ir. Disclosure Committee Electrolux has a Disclosure Committee. This 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 Ofcer, the Head of Group Staff Communications and Branding, and the Head of Investor Relations and Financial Information.
Section 404 of the Sarbanes-Oxley Act stipulates that companies subject to SEC reporting requirements, such as Electrolux, must submit annual reports in a Form 20-F that include a report from the President and CFO on the effectiveness of the companys internal controls over nancial reporting. The Groups external auditors are required to issue an attestation report regarding managements assessment of the effectiveness of these controls, as well as an auditors independent assessment of the effectiveness of the Groups internal control over nancial reporting. This attestation report must also be included in the Form 20-F. Electrolux and its external auditors must comply with these requirements starting with the Groups Form 20-F report for the scal year ending December 31, 2006. In the course of 2004, extensive efforts were made to develop a method within the Group for documenting, evaluating and testing Electrolux internal controls over nancial reporting, and work on documentation was started. This work also included comprehensive staff training in order to secure the required competence within