(ii)

PRESENTATION OF INFORMATION

     Unless the context indicates otherwise, the “Company”, “Electrolux” or the “Group” refers to AB Electrolux, a company organized under the laws of Sweden, and its consolidated subsidiaries. The Company is not affiliated with, and should not be confused with, Aerus LLC (formerly known as Electrolux LLC) that sellssold vacuum cleaners under the Electrolux brand in the United States and Canada.Canada prior to December 1, 2003. Whenever the “Electrolux” brand name is used in this report, the reference excludes floor care products sold previously by Aerus LLC in North America.

     Unless otherwise indicated, all amounts herein are expressed in Swedish Kronor (“krona”, “kronor” or “SEK”). References to “U.S. dollar”, “U.S.$”, “USD”, “dollar” or “$” are to the lawful currency of the United States. Unless otherwise stated herein translations of kronor into U.S. dollars have been made at the rate of $1.00 = SEK 8.6950,7.1950, the noon buying rate for cable transfers in SEK as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2002.2003. On June 21, 2004, the noon buying rate was $1.00 = SEK 7.5510.

     At times, this report presents financial and other information for a specific year that is immediately followed by an amount within (brackets). The amount within (brackets) represents the corresponding amount for the previous year.

     Electrolux prepares its consolidated financial statements in accordance with Swedish generally accepted accounting principles (“Swedish GAAP”). In addition, consolidated net income and stockholders’ equity are reported as reconciled to United States generally accepted accounting principles (“U.S. GAAP”). Unless otherwise indicated, all amounts and percentages presented herein are based on Swedish GAAP. Swedish GAAP as applied by the Company differs in certain significant respects from U.S. GAAP. For a discussion of the significant differences between Swedish GAAP and U.S. GAAP affecting Electrolux’s consolidated financials statements and a reconciliation to U.S. GAAP of consolidated stockholders’ equity and consolidated net income as of and for the years ended December 31, 2003, 2002 2001 and 2000,2001, see Note 2629 to the consolidated financial statements.

     This report also contains certain financial and performance measures where indicated that are not calculated in accordance with Swedish GAAP or U.S. GAAP, but which are disclosed herein in compliance with Item 10 of Regulation GS-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These non-GAAP financial and performance measures are used extensively by management to evaluate the financial performance and results of operations of Electrolux. In particular, Electrolux’s management considers “value creation” to be an important non-GAAP financialperformance measure. The non-GAAP financial and performance measures are included herein to assist the reader in understanding Electrolux’s operating results and financial condition from management’s point of view. Non-GAAP financial and performance measures, however, should not be considered alternatives to the amounts reported in accordance with Swedish or U.S. GAAP. Furthermore, the non-GAAP financial and performance measures included herein may not be comparable to similarly titled measures presented by other companies.

     Certain information presented in this Annual Report on Form 20-F relating to the markets in which Electrolux operates, such as the size of the particular market and the market share of Electrolux within such markets, has been obtained by Electrolux from market research reports, analysts’ reports and other publicly available information, as well as from internally developed market data. While Electrolux has no reason to believe that the third-party sourced information is not reliable, such information has not been independently verified. Accordingly, the accuracy or completeness of this information cannot be guaranteed.

FORWARD LOOKING STATEMENTS

     This annual report includes “forward-looking” statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements do not relate strictly to historical or current facts; instead, such statements are often based on assumptions about future market conditions, operations and results. The words “believe”, “expect”, “anticipate”, “intend”, “may”, “could”, “plan”, “possible”, “potential” and similar expressions are intended to identify these statements. Forward-looking statements appear in a number of places in this report including, without limitation, “Item 3.D—Risk Factors”, “Item 4—Information on the Company” and “Item 5—Operating and Financial Review and Prospects”, and include, among others, statements regarding:

	•		the financial goals or targets of Electrolux for future periods;
	•		future business and financial plans;
	•		the growth in demand for Electrolux’s products;
	•		the economic outlook and industry trends;
	•		developments of Electrolux’s markets and competition;
	•		the impact of regulatory initiatives and pending and future litigation;
	•		research and development expenditures;
	•		plans to launch new products and services; and
	•		the expected cost savings from Electrolux’s various restructuring measures.

     While Electrolux believes that the expectations reflected in these and other forward-looking statements are reasonable, actual results may differ materially from the expectations reflected in those statements due to a variety of factors, including, among others, the following:

	•		Electrolux’s success in developing new products and marketing initiatives;
	•		the progress in achieving operational and capital efficiency goals, including the success of reducing the number of product platforms;
	•		the success in identifying growth opportunities and acquisition candidates, and the integration of any acquired businesses with existing businesses;
	•		the success and progress in achieving structural and supply-chain reorganization goals;
	•		the ability of Electrolux to outsource production to lower-cost countries;
	•		competitive pressures to reduce prices;
	•		significant loss of business from major retailers;
	•		consumer demand and the success of Electrolux’s global strategy to develop brand differentiation and brand loyalty;
	•		the effects of exchange rate fluctuations;
	•		the social, economic, regulatory and political volatility in the markets in which Electrolux operates;
	•		the effect of local economies on product demand;

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•

Electrolux’s ability to recruit and retain highly qualified management and other employees;

	•		the results of pending and future litigation;
	•		general economic conditions in the markets in which Electrolux operates, and its ability to adapt to rapid changes in market conditions; and
	•		political, economic and regulatory developments in the markets in which Electrolux operates.

     Certain of these factors are discussed in more detail elsewhere in this annual report, including under “Item 3.D—Risk Factors”, “Item 4—Information on the Company” and “Item 5—Operating and Financial Review and Prospects”. Electrolux undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law or stock exchange regulation. It is not possible to foresee or identify all factors that could cause future results to differ from expected or historic results. Therefore, investors should not consider the foregoing factors to be an exhaustive statement of all risks, uncertainties or factors that could potentially cause actual results to differ from projections in this report.

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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

     Not applicable.

1

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

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ITEM 3. KEY INFORMATION

A.   SELECTED FINANCIAL DATA

A.

SELECTED FINANCIAL DATA

     The following table sets out selected financial data as of and for the years ended December 31, 2003, 2002, 2001, 2000 1999 and 1998:

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4.		Calculated as adjusted equity (equity including minority interests) as a percentage of adjusted total assets (total assets less cash and bank balances and short-term investments).
5.		Calculated on the basis of net borrowings (total interest-bearing liabilities less liquid funds (short-term investments and cash and bank balances)) in relation to adjusted equity (equity including minority interests).
6.		Value creation is a financialperformance measure extensively used by Electrolux for internal reporting purposes, as a management tool for measuring and evaluating financial performance within the Group as well as a basis for remuneration.
		Value creation is calculated onnot a consolidated basismeasure determined in accordance with GAAP. We believe however that our definition links operating income and asset efficiency with the cost of the capital employed in operations. Value creation should not be considered as operating incomean alternative measure of performance and may not be comparable to similar measures disclosed by other companies because value creation is not uniformly defined.

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Value creation is measured excluding items affecting comparability and defined as operating income less the weighted average cost of capital (WACC) on average net assets during a specific period.

Value creation is reconciled to operating income as follows:

		The cost of capital (“WACC”) (an expected rate of return) on average net assets excluding items affecting comparability or expressedvaries between different countries and business units due to country-specific factors such as a formula: (Net sales – operating costs = operating income) – (WACC x Average net assets).interest rates, risk premiums and tax rates. WACC is calculated annually by Electrolux to apply for the following year on the basis of agreed parameters aimed at determining the Group’s cost of capital. For 2002, an expected rate of return, or WACC, of 13% before tax was used for the value creation calculation. For the years 1998 – 2001, a WACC of 14% was used. Net assets are total assets exclusive of liquid funds (short-term investments and cash and bank balances), interest-bearing financial receivables, as well as non-interest-bearing liabilities and provisions and excluding items affecting comparability. A higher return on net assets than the WACC implies that the Group creates value.
7.4.		Certain amounts have been reclassified for comparison purposes due to the disclosure of discontinued operations.
5.		Upon adoption of SFAS 142 on January 1, 2002, Electrolux ceased amortization of goodwill and indefinite-lived intangible assets for U.S. GAAP reporting purposes. Amortization expense on goodwill and indefinite-lived intangible assets on a U.S. GAAP basis for the years ended December 31, 2001, 2000 1999 and 19981999 was SEK –222m, SEK –168m SEK –168m and SEK –181m,–168m, respectively.
8.		Certain amounts have been reclassified for comparison purposes due to the disclosure of discontinued operations.
9.6.		Under SFAS 144, each of the following 2003 and 2002 divestments are accounted for as a discontinued operations: Vestfrost A/S, the compressor operation, Zanussi Metallurgica, the European motor operation, the Mexican compressor plant, the European home comfort operation and the remainder of the leisure appliance product line. Please see Note 2629 to the consolidated financial statements.
10.		Stockholder’s equity for 2001 and 2000 has been restated as described in Note 26 to the consolidated financial statements.
11.		Total assets for 2001 and 2000 has been restated as described in Note 26 to the consolidated financial statements.
12.7.		Weighted average number of shares outstanding was 313,270,489 shares for 2003; 327,093,373 shares for 2002; 340,064,997 shares for 2001; 359,083,955 shares for 2000; and 366,169,580 shares for 1998 through 1999. The decreases in weighted average number of shares outstanding for these periods reflect open market repurchases of shares by Electrolux.
13.8.		Dividends are set forth in the above table under the year to which they relate rather thanrelate. In accordance with general practice in Sweden, the dividends are declared and paid in the year in which they were paid.following the financial period.
14.9.		Amounts in U.S. dollars are presented for convenience only, and are based on the noon buying rate for SEK at each of the respective payment dates.

     Exchange Rate Information

     The following table presents information with respect to the exchange rate for Swedish kronor per USD 1.00, based on the noon buying rate for cable transfers in SEK as certified for customs purposes by the Federal Reserve Bank of New York. On May 30, 2003June 21, 2004 the noon buying rate for SEK was USD 1.00=SEK 7.7654.

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     Fluctuations in the exchange rate between the Swedish kronor and the dollar may affect the dollar equivalent of the Swedish kronor price of the Electrolux B Shares traded on the Stockholm Exchange and, as a

3

result, are likely to affect the price of ADSs in the United States. Such fluctuations will also affect the dollar amounts received by holders of ADSs on conversion by the Depositary of cash dividends paid in kronor on the Electrolux B Shares represented by ADSs. For a discussion of the effects of currency fluctuations on Electrolux’s business, please see “Item 5—Operating and Financial Review and Prospects” and “Item 11—Quantitative and Qualitative Disclosures About Market Risk”.

B.   CAPITALIZATION AND INDEBTEDNESS

B.

CAPITALIZATION AND INDEBTEDNESS

     Not applicable.

C.   REASONS FOR THE OFFER AND USE OF PROCEEDS

C.

REASONS FOR THE OFFER AND USE OF PROCEEDS

     Not applicable.

D.   RISK FACTORS

D.

RISK FACTORS

     You should carefully consider all of the information in this Annual Report and, in particular, the risks outlined below.

     Electrolux’s business is affected by global economic conditions.

     Current conditions in many of the economies in which Electrolux operates and the global economy remain very uncertain. As a result, it is difficult to estimate the global and regional economic development for the foreseeable future. In addition, the business environment and the economic condition of Electrolux’s markets are also influenced by political uncertainties, including the current political situation in the Middle East. A lengthy recession or sustained loss of consumer confidence in the markets in which Electrolux operates could trigger a significant industry-wide decline in sales and could also lead to slower economic growth and a corresponding significant reduction in demand. Electrolux generates a substantial portion of its net sales from North America and Europe, both of which have continued to experienceexperienced a slow economy in the past few years. More recently, North America has demonstrated a rebound in its economy. Similarly, continued economic decline in Asia could delay Electrolux’s strategic expansion into emerging Asian markets.Recent years’ terrorist attacks have had a negative impact also on tourism, which has negatively affected the performance of our Professional Indoor business operations. These global and regional conditions could have an adverse impact on the operations of Electrolux, with a resulting material adverse effect on results of operations and financial condition.

     Electrolux’s markets are highly competitive and subject to price pressure.

     The markets for Electrolux’s products are highly competitive and there is considerable pressure to reduce prices, especially when faced with an economic downturn and possible reductions in consumer demand. The effects of competition and price pressure are particularly apparent for floor-care products in the United States and in Europe (in particular, in the U.K. and Germany), small appliances generally and for consumer outdoor products in Western Europe. Electrolux faces strong competitors, someand the likely emergence of whichnew competitors, particularly from Asia and Eastern Europe, who may prove to have greater resources in a given business area. Some industries in which Electrolux operates are undergoing consolidation which may result in stronger competitors and a change in Electrolux’s relative market position. There is also a trend, particularly in Europe, towards globalization among Electrolux’s customers in the retail sector, which means fewer, bigger and more international retail chains. As these retailers are consolidating their supplier base, the competition among suppliers may increase. In response to an increasingly competitive environment, Electrolux and other manufacturers may be forced to increase efficiency by further reducing costs along the value chain, including their suppliers. The development of alternative distribution channels, such as the Internet, could also contribute to further price pressure within Electrolux’s markets. There can be no assurances that Electrolux will be able to adapt to these changes and increase or maintain its market share.

     Consolidation of retail chains has resulted in increased dependence on a number of large customers.

     Due to the ongoing consolidation of retail chains, major customers account for a large and increasing part of Electrolux’s sales. This trend is particularly significant in the Consumer Durables business area, as most products in this business area are sold through major retail chains. This trend towards consolidation has resulted in greater commercial and credit exposures. If Electrolux were to lose one of its major customers or experience a material reduction in orders or

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become unable to collect fully its accounts receivable from a major customer, its net sales and financial results would suffer.

4

     Electrolux’s operating results may be affected by seasonality.

     Demand for certain of Electrolux’s products is affected by seasonality and factors that are hard to predict such as the weather. For example, market demand for lawn mowers, trimmers and room air conditioners is generally lower during the winter season. As a result, Electrolux’s outdoor products and room air conditioners product linelines experience most of their sales volume and profitability in the first seven months of the year. Electrolux expectexpects this seasonality to continue in the future.

     Electrolux’s future success depends on its ability to develop new and innovative products.

     Product innovation and development are critical factors in maintaining market share in all of Electrolux’s product lines. The markets in which Electrolux operates,,particularly the Consumer Durables business area, experience rapid and significant changes due to the introduction of new technologies. To meet Electrolux’s customers’ needs in these businesses, Electrolux must continuously design new, and update existing, products and services and invest in and develop new technologies. Product development is also driven by criteria for better environmental performance and lower cost of use. Introducing new products requires significant management time and a high level of financial and other commitments to research and development, which may not result in success. During 2002,2003, Electrolux invested SEK 1,797m1,628 million in research and development, primarily related to product development in the Consumer Durables business area. Electrolux’s sales and net income may suffer if investments are made in technologies that do not function as expected or are not accepted in the marketplace.

     Electrolux may experience difficulties relating to its strategy for business acquisitions and dispositions.

     Electrolux’s core strategy is based on achieving and increasing significant market positions in its product areas through internal growth and acquisitions and by improving operational efficiencies. Political and economic developments in recent years in Eastern Europe, Asia and Latin America have created a potential for expansion in those growth markets. However, expansion through acquisitions is inherently risky due to the difficulties of integrating people, operations, technologies and products. Electrolux may incur significant acquisition, administrative and other costs in connection with these transactions, including costs related to integration of acquired or restructured businesses. There can be no assurances that Electrolux will be able to successfully integrate the businesses it acquires into existing operations or that they will perform according to expectations once integrated. Similarly, Electrolux’s dispositions of certain non-core assets may prove more costly than anticipated and may affect its net sales and resultresults of operations.

     Electrolux may not be able to successfully implement planned cost-reduction measures and generate the expected cost-savings indicated herein.

     Since 2000,In 2001 and 2002, Electrolux has implemented restructuring programs on an annual basis in an effort to improve operating efficiencies and the Group’s profitability. These restructuring measures have included the divestitures of unprofitable non-core operations, layoffs of employees, consolidation of manufacturing operations and other cost-cutting measures. Electrolux has also put substantial effort into driving down costs and complexity throughout the supply chain by improving integration of the supply chain and demand flow management. There can be no assurances that these measures will generate the level of cost savings that Electrolux has estimated going forward.

     Electrolux is dependent on third party suppliers to deliver key components and materials for its products.

     Electrolux’s manufacturing process depends on the availability and timely supply of components and raw materials, generally from third party suppliers. While supply delays can affect the performance of most of Electrolux’s business sectors, Electrolux is particularly sensitive to supply problems related to electronic components.components, compressors, steel, aluminium and copper. Electrolux works closely with its suppliers to avoid supply-related problems and is increasing its supply of sourced finished products, but there can be no assurances that it will not experience problems in the future. Such problems could have material adverse effects on the business, results of operations or financial condition of Electrolux. In addition, unanticipated increases in the

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price of components or raw materials due to market shortages could also adversely affect the financial results of certain of Electrolux’s business groups.businesses.

     Electrolux is subject to risks related to changes in commodity prices.

     Electrolux is subject to risks related to changes in commodity prices as the ability to recover increased cost through higher pricing may be limited by the competitive environment in which Electrolux operates. In particular, steel prices have increased in 2004 in all markets. Electrolux

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uses commodity futures to hedge immaterial amounts of commodity purchases, primarily related to copper and aluminum. For more details regarding commodity price risk, please see Item 11 “Quantitative and Qualitative Disclosures About Market Risk.”

     Electrolux is exposed to foreign exchange risks and interest rate risk.

     Electrolux operates in overapproximately 60 countries around the world and as a result is subject to the risks associated with cross-border transactions. In particular, Electrolux is exposed to foreign currency exchange rate risks and risks relating to delayed payments from customers in certain countries or difficulties in the collection of receivables generally. Electrolux is also subject to risks arising from translation of balance sheets and income statements of foreign subsidiaries. The major currencies that Electrolux is exposed to are the U.S. dollar (including currencies correlating with the dollar), the Euro and the British pound. While Electrolux’s geographically widespread production and its hedging transactions reduce the effects of changes in exchange rates, there can be no assurances that these measures will be sufficient.

     In addition, Electrolux holds assets and liabilities to manage the liquidity and cash needs of its day-to-day operations. These interest rate sensitive assets and liabilities are subject to interest rate risk. While these interest rate exposures are minimized to some extent by the use of derivative financial instruments, there can be no assurances that these hedging activities will be effective or sufficient.

     For more details regarding currency risks and interest rate risks, please see “Item 11—Quantitative and Qualitative Disclosure About Market Risk.”

     Electrolux is dependent upon hiring and retaining highly qualified management and technical personnel.

     Having the right people—in the right positions—is key for realizing opportunities in the competitive environment in which Electrolux operates. Competition for highly qualified management and technical personnel remains intense. Electrolux’s future success depends in part on its continued ability to hire, develop, motivate and retain qualified personnel. Electrolux has identified talent management as a strategic priority and has established a structured talent-review process. However, there can be no assurances that Electrolux will continue to be successful in attracting and retaining highly qualified employees in the future, and the failure to do so could have a material adverse effect on the business, results of operations and financial condition of Electrolux.

     Electrolux is subject to regulatory risks associated with its international operations.

     As a result of its worldwide operations, Electrolux is subject to a wide variety of complex laws, regulations and controls, and various non-binding treaties and guidelines, including those related to employee safety, employee relations, product safety and exchange controls. Electrolux expects that sales to and manufacturing in emerging markets, in particular in China, Southeast Asia and Eastern Europe, will continue to be an increasing portion of its total operations. Changes in regulatory requirements, economic and political instability, tariffs and other trade barriers and price or exchange controls could limit its operations in these countries and make the repatriation of profits difficult. In addition, the uncertainty of the legal environment in certain of the countries in which it operates could limit Electrolux’s ability to enforce effectively its rights in those markets. Electrolux products are also affected by environmental legislation in various markets, which principally involves limits for energy consumption (which relate to certain of its white goods products) and emissions (which relate to certain of its outdoor products that are powered by gasoline) as well as the obligation to recycle waste of electrical products.

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Electrolux is subject to risks relating to the relocation of manufacturing capacity.

     As part of its strategy of continued reduction of costs and rationalization of its production activities, Electrolux has in the past, and will in the future, relocate some of its manufacturing capacity to lower cost jurisdictions. For example, in January 2004 Electrolux decided to relocate its production of refrigerators in Greenville, Michigan, to a new facility which will be built in Mexico. See “Item 5.D.—Trend Information — Closure of refrigerator plant in Greenville, USA.” The transfer of production from one facility to another is costly and presents the possibility of additional disruptions and delays during the transition period. Electrolux might not be able to successfully transition production to different facilities. Any prolonged disruption in the operations of any of its manufacturing facilities or any unforeseen delay in shifting manufacturing operations to new facilities, whether due to technical or labor difficulties or delays in regulatory approvals, could result in delays in shipments of products to Electrolux’s customers, increased costs and reduced revenues.

     Electrolux is subject to certain environmental risks.

     Electrolux may also be subject to environmental risks in connection with the operation of its manufacturing plants. With respect to such environmental risks, Electrolux maintains liability insurance at levels that management believes are appropriate and in accordance with industry practice. However, many of such risks are not insurable and there can be no assurances that (i) Electrolux will not incur environmental losses beyond the limits, or outside the coverage, of suchany insurance or that any such losses would not have a material adverse effect on the results of its operations or financial condition, or (ii) Electrolux’s provisions for environmental remediation will be sufficient to cover the ultimate loss or expenditure.

6Compliance cost associated with the EU Waste and Electrical and Electronic Equipment Directive could have a material adverse effect on Electrolux’s income, financial position and cash flow.

     Recycling costs for Electrolux’s electrical products currently are in the range of 1 to 20 euro per appliance. The WEEE Directive will affect approximately 20 million Electrolux products sold each year in Europe. The compliance with the WEEE Directive could have a potential material adverse effect on the Electrolux’s income, financial position and cash flow. Estimates of the cost remain highly uncertain, as total volumes to be collected are, as yet, unknown. Furthermore, treatment costs cannot be predicted until contracts are in place, and transposition of the Directive by EU Member States may change the requirements finally placed on producers.

     For more details regarding the WEEE Directive, see “Item 4.B—Business Overview—Environmental and Other Government Regulation.”

     Lawsuits in the United States claiming asbestos-related personal injuries are pending against the Electrolux Group.

     Certain of Electrolux’s U.S. subsidiaries have been named as defendants in lawsuitsLitigation and claims related to asbestos are pending against the Group in the United States claiming various asbestos-related personal injuries, allegedly as a result of exposure to products manufactured by Electrolux with components containing asbestos.States. Almost all of the cases relate to externally supplied components used in industrial products manufactured by discontinued operations of Electrolux prior to the early 1970s. In addition, almost allMany of the cases involve multiple plaintiffs who have made identical allegations against many other defendants who are not affiliated with Electrolux.part of the Electrolux Group.

     As of December 31, 2002,2003, there were 218 (95)584 (216) lawsuits pending against Electrolux entities representing approximately 14,00021,000 (approximately 3,500)14,000) plaintiffs. During 2003, 497 new cases were filed and 129 pending cases were resolved. Approximately 13,40020,000 of the plaintiffs relate to cases pending in the State of Mississippi.

     Electrolux believes its predecessor companies may have had insurance coverage applicable to some of the cases during some of the relevant years. Electrolux is currently in the process of determining the extent of itsdiscussions with those insurance coverage and has made a provision of less than $9 million in respect of currently pending claims. The amount of this provision, however, does not reflectcarriers.

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     Additional lawsuits that may be filed against Electrolux in the future as itfuture. It is difficultnot possible to predict botheither the number of future claims andor the number of plaintiffs that theseany future claims may represent. In addition, the outcome of asbestos claims is inherently uncertain and always difficult to predict and Electrolux cannot provide any assurances that the resolution of these types of claims will not have a material adverse effect on its business or results of operations in the future.

     If Electrolux were to experience unexpected quality problems in the development or production of its products, it may incur higher than expected warranty expenses and its results of operations and financial condition may be adversely affected.

     Electrolux’s value chain comprises all the steps in its operations, from research and development, to production to marketing and sales. Operational failures in its value chain processes could result in quality problems or potential product, labor safety, regulatory or environmental risks. Such risks are particularly present in relation to Electrolux’s production facilities which are located all over the world and have a high degree of organizational and technological complexity. Unforeseen product quality problems in the development and production of new and existing products could result in loss of market share and higher warranty expense, any of which could have a material adverse effect on Electrolux’s results of operations and financial condition.

     Electrolux may be subject to significant product recalls or product liability actions that could adversely affect its results of operations.

     Under laws in many countries regulating consumer products, Electrolux may be forced to recall or repurchase some of its products under certain circumstances, and more restrictive laws and regulations may be adopted in the future. For example, as a manufacturer and distributor of consumer products in the United States, Electrolux is subject to the U.S. Consumer Products Safety Act, which empowers the U.S. Consumer Products Safety Commission to exclude products from the U.S. market that are found to be unsafe or hazardous. Under certain circumstances, the U.S. Consumer Products Safety Commission could require Electrolux to repurchase or recall one or more of its products. Any repurchase or recall of products could be costly to Electrolux and could damage its reputation. If Electrolux was required to remove, or it voluntarily removed, its products from the market, Electrolux’s reputation could be tarnished and it might have large quantities of finished products that could not be sold. Accordingly, there can be no assurances that product recalls would not have a material adverse affect on Electrolux’s business, results of operations and financial condition.

     Electrolux also faces exposure to product liability claims in the event that one of its products is alleged to have resulted in property damage, bodily injury or other adverse effects. Electrolux has become implicated in certain lawsuits in the ordinary course of its business, including suits involving allegations of improper delivery of goods or services, product liability and product defects and quality problems. Electrolux is largely self-insured for product liability matters expected to occur in the normal course of business and funds these risks, for the most part, through wholly-owned insurance subsidiaries. Electrolux accrues for such self-insured claims and litigation risks when it is probable that an obligation has been incurred and the amount can be reasonably estimated. In addition, for large catastrophic losses, Electrolux maintains excess product liability insurance with third-party carriers in amounts that it believes are reasonable. However, there can be no assurances that product liability claims will not have a material adverse affect on Electrolux’s business, results of operations or financial condition.

7

Electrolux is subject to risks related to its insurance coverage

     Electrolux maintains third-party insurance coverage and self-insures through wholly-owned insurance subsidiaries for a variety of exposures and risks, such as property damage, business interruption, environmental risks asbestos claims and product liability claims. However, while Electrolux believes it has adequate insurance coverage for all relevant exposures in line with industry standards, there can be no assurances that (i) Electrolux will be able to maintain such insurance on acceptable terms, if at all, at all times in the future or that claims will not exceed, or fall outside of, its third-party or captive insurance coverage, or (ii) its provisions for uninsured or uncovered losses will be sufficient to cover its ultimate loss or expenditure.

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ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

A.

HISTORY AND DEVELOPMENT OF THE COMPANY

     Aktiebolaget Electrolux (publ) is a limited liability company organized under the laws of the Kingdom of Sweden. The address of the Company’s registered office is S:t Göransgatan 143, S-105 45 Stockholm, Sweden, and its telephone number at such address is +46 8 738 60 00. Electrolux’s web site is www.electrolux.com. This web site address is not an active hyperlink to the web site, and the web site does not form part of this document.

     Electrolux was incorporated in 1910 as Elektromekaniska AB. Through the merger in 1919 between Elektromekaniska AB and another Swedish company, AB Lux, Aktiebolaget Electrolux was established. Electrolux led the development of the modern canister-type vacuum cleaner as well as the absorption refrigerator during the early part of the 20th century.

     In 1928, Electrolux was introduced on the London Stock Exchange. At such time, the Group had five plants, approximately twenty subsidiaries and 250 offices throughout the world, and its worldwide turnover was approximately SEK 70 million. In 1930, Electrolux was listed on the Stockholm Stock Exchange. Three years later, vacuum cleaner production began in Old Greenwich, Connecticut, USA, and the first air-cooled refrigerator was produced.

     In the late 1960’s, Electrolux initiated the restructuring of the fragmented Western European white-goods industry. In 1968, the minority interest (39%) in Electrolux Corp., USA was sold to Consolidated Food for almost SEK 300 million. The cash generated from this transaction provided Electrolux with the key to future expansion.

     The acquisition of the Italian company Zanussi in 1984, including its subsidiaries in Spain, made Electrolux a leader in the European market for household appliances. The Zanussi purchase also made the Group a leader in food service equipment. The third largest white goods company in the USA, White Consolidated Inc., with brands such as Frigidaire, Gibson, Kelvinator and White Westinghouse, was acquired in 1986. The Outdoor Products business area expanded following new acquisitions, includingwith the 1986 acquisition of the U.S. company Poulan/Weed Eater. The Group’s total annual sales in 1986 had grown to SEK 53 billion.Eater and the 1989 acquisition of the outdoor power products business of the Roper Corporation.

     TheSince the mid-1990s, the Group has periodically implemented a number of restructuring programs and other measures aimed at improving profitability. For example, the Group initiated a two-year restructuring program in 1997, with the purpose of improving profitability. Streamlining of Grouppursuant to which operations beganwere streamlined, beginning with the divestment of the industrial products sector, as well as the divestment of the production of sewing machines, agricultural implements and interior decoration equipment. Further restructuring measures were implemented in 2001 and 2002. See “Item 5—Operating and Financial Review and Prospects—Restructuring Programs.”

     A new branding strategy was adopted in 1998 to focus resources on a smaller number of large and well-defined brands. The core business at such time comprised Household Appliances, Professional Appliances and Outdoor Products. Annual Group sales in 1998 had grown to SEK 117 billion.

     In May 2000, an agreement was entered into for the acquisition of the trademark and company name “Electrolux” in North America. As a result, Electrolux gained full global control of the company name and the Group’s most important brand.

     Today, Electrolux is one of Sweden’s largest industrial enterprises with 299284 subsidiaries in overapproximately 60 countries as of December 31, 2002.2003. For more information on the Group’s recent acquisitions and divestitures, please see “Item 5—Operating and Financial Review and Prospects—Significant Actions and Transactions Affecting Results and Financial Condition”. For a discussion of Electrolux’s principal capital expenditures during the past three years, please see “Item 5.B—Liquidity and Capital Resources”.

B. BUSINESS OVERVIEW

B.

BUSINESS OVERVIEW

     With sales of SEK 133.2124.1 billion in 2002,2003, Electrolux believes it is the world’s largest producer of appliances and equipment for kitchen, cleaning and outdoor use.use combined. Electrolux sold more than 55 million consumer products in 2002,2003, including products such as refrigerators, cookers, washing machines, chainsaws, lawnmowers and garden tractors. Electrolux’s products are targeted at both professionals and retail consumers.

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     Electrolux conducts operations in overapproximately 60 countries. The following table provides a breakdown of Electrolux’s net sales by region for each of the last three years:

     Strategy

     Electrolux aims to be a global leader in the market for consumer durables for indoor and outdoor use. To this end, while significant volumes and economies of scale are of utmost importance, Electrolux’s key strategies are to be one of the three most significant suppliers to the main retailers and to be recognized as a leading brand and manufacturer among customers.

     Electrolux intends to continue to develop into a market-driven company that is ahead of the competition in addressing consumer needs. To achieve this objective, Electrolux is implementing the following measures:

	•		continued reduction of costs and the complexity of the organization;
	•		acceleration of the rate of product renewal based on consumer needs; and
	•		increased marketing and brand building focusing on fewer and stronger brands, with particular focus on Electrolux as a global brand for the Group.

     Electrolux Business Areas

     Electrolux operates in the following three business areas:

	•		Consumer Durables;
	•		Professional Indoor Products; and
	•		Professional Outdoor Products.

     The following table sets forth the net sales for each of these business areas in each of the last three years.

     Consumer Durables

     The Consumer Durables business area comprises mainly white goods (i.e., refrigerators, freezers, cookers, dryers, washing machines and dishwashers), and other appliances such as room air-conditioners and

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microwave ovens, as well as floor-care products and consumer outdoor products.equipment. In 2002,2003, white goods and other appliances accounted for

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approximately 77% of sales for this business area, and floor-care products and consumer outdoor products represented 8% and 15%, respectively. Electrolux is the leading white goods company in Europe and Australia and has a substantial market share in each of the United States, Brazil and India.India as well as a significant market presence in China. The Group is the world’s largest producer of floor-care products, lawn mowers, garden tractors, and other portable petrol-driven garden equipment such as chainsaws and trimmers. The Group is a world leader in floor-care products and the largest producer in Europe and the second largest producer in the United States.

     Professional Products

     Professional Indoor Products

     The Professional Indoor Products business area comprises food-service equipment and laundry equipment and components such as compressors.equipment. Products in food-services equipment are targeted at hotels, restaurants and institutions. Electrolux manufactures laundry equipment for laundry rooms in apartment buildings, launderettes and hotels, and for other professional users. Its components operations consist primarily of a European compressor operation which sells products to other Group companies and to external customers. The Group divested thea significant portion of its operations in leisure appliances in 2001 and the remaining operations as of January 1, 2002. In addition, the Group divested its compressor operation on August 1, 2003.

     Electrolux is the world’s third largest producer of food-service equipment, with a leading position in the European market, and is a leaderone of the leaders in the global market for laundry equipment. The Group is also one of the world’s largest producers of compressors for refrigerators and freezers and the largest in Europe in this product area.

     Professional Outdoor Products

     The Professional Outdoor Products business area comprises mainly high-performance chainsaws, clearing saws and turf-carelawn and garden equipment. The majority of these products are sold under the Husqvarna brand. The Husqvarna and Jonsered brands, both of which are owned by Electrolux, are among the top three worldwide brands for professional chainsaws with a combined global market share of about 40% in the professional segment. This business area also includes the brands Partner industrialIndustrial Products, Dimas and Dimas product linesDiamant Boart which encompasses power cutters, diamond tools and related equipment for the cutting of hard surfaces such as cement and stone.

     Following the 2002 acquisition of Diamant Boart, the Group is one of the world’s largest producer of diamond tools and related equipment for the construction and stone industries, with annual sales of approximately SEK 3.5 billion. The Group is one of the world’s largest producers of power cutters.industries.

     Manufacturing

     Electrolux has manufacturing facilities in 11197 locations in 2625 countries around the world. Electrolux’s manufacturing operations consist mainly of the assembly of components and processing of standard raw materials sourced from various third-party manufacturers. The manufacturing process includes metalworking, molding of plastics, painting, enameling and, to some degree, the casting of parts.

     The strategy for purchasing of both components and raw materials is to avoid single sourcing. The risk of dependency of a single supplier is thereby reduced and the negative consequence of a supplier failing to meet agreed requirements can be limited. A significant part of the purchasing volumes is consolidated on a group level and allocated to global suppliers. These supplier relations are often characterized by close cooperation within areas such as R&D, product design and manufacturing.

     Electrolux is exposed to the price volatility that exists in raw material markets. This volatility is partly reduced by applying long-term agreements with fixed prices for longer time-periods. Volatility within the metal markets can also be reduced, if considered appropriate, by hedging part of the requirements through the use of commodity futures (mainly for copper and aluminum).

     For a discussion of Electrolux’s manufacturing facilities, see “Item 4B—Environmental Policies—and Other Government Regulation—ISO Certification” and “Item 4D—Property, PlantPlants and Equipment.”

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     Sales and Marketing

     Last year, Electrolux sold more than 55 million consumer products in 150 different countries. Electrolux sells its products to distributors and retailers. Many of the retailers that sell Electrolux’s products are part of retail chains. Many of these retail chains have been consolidating in recent years and an increasing number of Electrolux’s products, in particular products in the Consumer Durables business area, are being sold through very large retail chains. As a result, an increasing percentage of Electrolux’s sales in 20022003 was attributable to its ten largest customers. The trend towards consolidation is particularly apparent in the market for major appliances in the United States, where the three largest retail chains account for more than 50% of the total sales of major appliances for all manufacturers. In Europe, there is a similar trend towards consolidation of the retail chains, but the structure of Electrolux’s customer base varies from country to country. Electrolux works closely with its distributors to enhance production planning so as to be better aligned with targeted sales.

     In Sweden, there are approximately 100 Electrolux Home stores that market Electrolux’s products directly to consumers. Electrolux Home stores sell products in the Consumer Durables business area, primarily kitchen and home products. The Electrolux Home stores are owned and operated as franchises.

Electrolux currently markets its products under a number of different brands. Electrolux has decided to reduce the number of brands in the Group and focus on “Electrolux” as a global brand across product categories. The aim is to have the Electrolux brand account for two-thirds of Electrolux’s sales in 2007. During 2002, all consumer operations began implementing plans for brand transition. Double-branding was initiated during 2002 in several countries, such as the United Kingdom and the United States. During 2003, Electrolux was double-branded with strong local brands in eight additional countries in Europe. In November 2003, the Electrolux-brand was introduced for floor-care products in the United States, and was very well received. A new range of high-end Electrolux-branded appliances is expected to be introduced in the United States during 2004. It is anticipated that building Electrolux as a global brand will increase the costs for marketing and advertising.

     The table below sets forth, for each business area, the principal product categories and the major brands and registered trademarks, and provides an indication of the market position of the relevant products. Information about market position is based on internal Group market share analysis.

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     Environmental and Other Government Regulation

     Electrolux is subject to government regulation in Sweden and other countries in which it conducts its operations. The Group continuously monitors its compliance with applicable regulations and adjusts its operations and applies for necessary permits in accordance with local laws and regulations.

     Environmental Regulation

     In particular, Electrolux is subject to environmental laws and regulations that may affect its operations and facilities. Electrolux manufacturing operations comprise mainly assembly of components made by suppliers. Other processes include metalworking, molding of plastics, painting and enameling, and, to a limited extent, casting. Chemicals such as lubricants and cleaning fluids are used as process aids in the manufacturing process. Chemicals are also used in insulation materials, paint and enamel for the products. The production processes generate an environmental impact in the form of energy consumption, water and airborne emissions, solid waste, and noise.

     Electrolux exercises a high degree of caution in both production and product development. Environmental issues are integrated in the product development process and relevant personnel are offered environmental training. In connection with acquisitions of companies and plants, an assessment is made of potential environmental risks and the investment that might be required to adapt production. When necessary, an analysis is performed to determine possible contamination of soil and ground water. This assessment is integrated in the acquisition process and is performed according to standardized routines. This process is regulated by law in many regions, particularly in North America.

     Studies of the total effect of Electrolux’s products during their entire lifetimes,i.e., through production and use to disposal, demonstrate that the greatest environmental impact is generated when the products are used. Limits on energy consumption and energy labeling of products are core issues for Electrolux, as they are for the appliance industry as a whole. In Electrolux’s major markets in Europe and North America, energy and emission labels are mandatory for many products. In addition, Electrolux and the other major manufacturers in Europe have committed to voluntary agreements on energy efficiency improvements for washing machines and dishwashers. The European Commission has endorsed these voluntary agreements. It is Electrolux’s policy to develop and actively promote increased sales of products with lower environmental impact and to comply with applicable environmental regulations.

     Electrolux operates 14 plants in Sweden, which account for approximately 7%11% of the total value of the Group’s production. Permits are required by Swedish authorities for eight of these plants, while six are required to submit notification. The permits relate to, among other things, thresholds or maximum permissible values for air and water-borne emissions and for noise. No significant non-compliance with Swedish environmental legislation was reported in 2002.2003.

     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, both with reference to acquisitions of new plants and continuous operations. Potential non-compliance, disputes or items that pose a material financial risk are reported to the Group in accordance with the Group policy. These routines have disclosed no items of significance during the year 2002.2003. Electrolux products are affected by legislation in various markets, which principally involve limits on energy consumption (white goods) and emissions (outdoor products powered by gasoline). Electrolux continuously monitors regulatory changes, and product development and manufacturing are adjusted well in advance to reflect these changes.

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     Recent Developments

     In December 2002, the European Union adopted the WEEE (Waste Electrical and Electronic Equipment) Directive, introducing producer responsibility for the cost of recycling and waste disposal of electrical products. The new directive requires that each importer and manufacturer finance the recycling of the electrical products it will place on the EU market after August 13, 2005 (an individual(individual producer responsibility). The directiveDirective also requires that the industry shall handle wastejointly share the recycling obligations of products sold before August 13, 2005 based on current market share, on a collective basis. Memberbasis (collective producer responsibility). Members states must implement the WEEE Directive in domestic legislation before August 13, 2004 and replace or modify existing national recycling systems. Collection systems must be operational, and treatment and financing systems must be in place by August 13, 2005. Initial collection and treatment targets are to be

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attained by December 2006. The Group has actively advocated individual producer responsibility, as it will create conditions for fair competition and encourages producers to invest in environmental design. Individual producer responsibility, as opposed to a system of shared financial responsibility, means that Group investments in product design aimed at lowering end-of-life disposal costs will directly benefit Electrolux.

     Recycling costcosts for Electrolux’s electrical products currently isare in the range of 1 to 20 euro per appliance. The WEEE Directive will affect approximately 20 million of Electrolux’s products sold in Europe annually (based on 2001 production). It is not yet possible to accurately estimate the annual cost for Electrolux of the WEEE Directive.Directive partly because it is not known how many products will be returned (this depends on collection targets set in national legislation as well as sales in the past and the ambition of the consumer to return products). The costobligation for recycling of historical products (products put on the market before August 13, 2005) will be shared among manufacturers based on their present market shares. For waste of products sold in the future waste (products put on the market after August 13, 2005), the responsibility for recycling is individual for each manufacturer and Electrolux will have to establish financial guarantees for the costs of recycling, starting August 13, 2005.

     Compliance with the WEEE Directive could have a potential material adverse effect on the Group’s income, financial position and cash flow. Estimates of the cost remain highly uncertain, as total volumes to be collected are, as yet, unknown. Furthermore, treatment costs cannot be predicted until contracts are in place, and transposition of the Directive by EU Member States may change the requirements finally placed as products.

In December of 2002 the European Union also adopted the RoHS (Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment) Directivedirective which will ban the placing on the market of products containing lead, mercury, cadmium, hexavalent chromium, and two types of brominated flame retardants (PBB and PBDE) in components or materials from July 1, 2006. Electrolux is currently conducting a program to identify all parts, components and materials containing these substances, and a completesubstances. A phase out of these substances in supplied materials and components is scheduled for July 1, 2005.

     As of January 1, 2003, as part of new regulation of ozone-depleting substances in the United States, chemical producers are required by the U.S. Environmental Protection Agency to stop production of HCFC-141b. HCFC-141b ishas been used as a foam-blowing agent for refrigerators and freezers. End-product manufacturers will be changing over to new chemicals in 2003.In March 2004, Electrolux expects to changefinalized the phase out of HCFC-141b and has now changed over to HFC-245fa during 2003.in all operations in the United States.

     ISO Certification

     Environmental management systems are gradually being implemented at most of the Group’s manufacturing facilities. The Group’s policy mandates that all manufacturing plants with at least 50 employees shouldare required to be certified according to ISO 14001. Newly acquired facilities must complete the certification process within three years after acquisition. During 2002, 132003, 17 plants were certified according to ISO 14001, and at year-end 20022003 a total of 6174 plants, representing 73%95% of the Group’s totalrequired factory floorworkshop area, were certified according to ISO 14001. In Europe, at year-end 2002, 47 plants were certified according to ISO 14001, corresponding to 81% of the total number of European manufacturing plants, and representing 90% of the Group’s European factory floor area.

C. ORGANIZATIONAL STRUCTURE

C.

ORGANIZATIONAL STRUCTURE

     AB Electrolux is a corporation organized under the laws of the Kingdom of Sweden and the parent company of the various subsidiaries that conduct their business on a worldwide basis.

     Please see Note 2528 to the consolidated financial statements for a listing of Electrolux’s significant subsidiaries.

D. PROPERTY, PLANTS AND EQUIPMENT

D.

PROPERTY, PLANTS AND EQUIPMENT

     As of December 31, 2002,2003, Electrolux occupied a total of 6458 million square feet of property, of which 14 million were leased. Approximately 63%61% of the property portfolio is located in Europe.

     The manufacturing operations of Electrolux were carried out at 11197 locations in 2625 countries. The aggregate size of these factories, including warehouses and offices at the factory sites, was 4436 million square feet. The factories are, with very few exceptions, owned by Electrolux. Most of the manufacturing facilities are

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located in Europe, while Electrolux’s four largest manufacturing facilities are located in the United States. In 2002, these four factories manufactured products representing 23% of the total value of Electrolux’s production. Electrolux

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operates 14 plants in Sweden, which account for approximately 7%11% of the total value of its production. In general, all Electrolux’s manufacturing facilities are well maintained, suitably equipped and in good operating condition. The facilities were adequate for production requirements during 20022003 and Electrolux believes they will be adequate for the foreseeable future.

     In addition to manufacturing facilities, Electrolux uses 20 million square feet of administrative offices, warehouses, distribution facilities and sales branch offices. The majority of these buildings are leased. About 11.5 million square feet (of which approximately 10%20% were owned) were dedicated to division and country administrative headquarters.

16   �� Electrolux has plans to invest in two new plants in Eastern Europe, one new plant in Thailand and Mexico, and increase capacity of an existing plant in Poland. The following table provides details of these facilities.

     See “Item 3.D—Risk Factors — Electrolux is subject to risks relating to the relocation of manufacturing capacity to lower cost jurisdictions.”

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

GENERAL

     With net sales of SEK 133.2124.1 billion in 2002,2003, Electrolux believes it is the world’s largest producer of appliances and equipment for kitchen, cleaning and outdoor use combined, with operations in more thanapproximately 60 countries around the world. Electrolux sold more than 55 million products last year, including products such as refrigerators, cookers, washing machines, vacuum cleaners, chainsaws, lawnmowers and garden tractors. Electrolux’s products are targeted at both professionals and retail consumers.

     Through 2003, Electrolux operatesoperated in the following three business areas:

	•		Consumer Durables, consisting of refrigerators, freezers, cookers, washing machines, dishwashers, room air-conditioners, microwave ovens, floor-care products, garden equipment and light-duty chainsaws;
	•		Professional Indoor Products, consisting of food-service equipment for hotels, restaurants and institutions, as well as laundry equipment for apartment-house laundry rooms, launderettes, hotels and other professional users. We divested our components such as compressors;product line in August 2003; and
	•		Professional Outdoor Products, consisting of high-performance chainsaws, clearing saws, turf-care equipment, power cutters, diamond tools and related equipment for cutting of materials such as cement and stone.

MARKET CONDITIONS

     Overall, there was a positive trend in demand during 2002 in most     As of January 1, 2004, the Group’s business areasgarden equipment for the consumer market will be reported in North America, Eastern Europe and Australia. Market conditions weakened in Western Europe, however.a new Outdoor Products segment within Consumer durables. The following is a discussion of the general market conditions during 2002 in the markets in which Electrolux operates.

Consumer Durables

White Goods

     Industry shipments of core appliances in Europe increased in volume by almost 1% during 2002 as compared with 2001. This growth relates primarily to Russia, Turkey, Hungary and other parts of Eastern Europe. Shipments of white goods in Western Europe declined by almost 2%, decreasing by 3% in Germany and 1% in the United Kingdom. A total of 68.9 (68.4) million units of appliances (excluding microwave ovens and room-air conditioners) were estimated to have been shipped in the European market during 2002. Of these, a total of 53.4 (54.2) million units were estimated to have been shipped in Western Europe.

     In the United States, industry shipments of core appliances increased by almost 7% from 2001. Shipments of major appliances (i.e., inclusive of room air-conditioners and microwave ovens) rose by approximately 5%. The U.S. market for core appliances (exclusive of microwave ovens and room air-conditioners), which consists of industry shipments from domestic producers plus imports, amounted to 41.7 (39.1) million units in 2002.

     The market for appliances in Brazil showed overall improvement, but declined in the refrigerator and freezer product areas. The market for appliances in Australia increased in volume in 2002 compared with the previous year.

Floor-Care and Consumernew Outdoor Products

     Demand for floor-care products declined slightly in the United States for 2002. Demand for segment will also include consumer outdoor products was largely unchanged in both Europe andsold under the United States.

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Professional Products

Professional Indoor Products

     Overall market demand for food-service equipment in Europe was lower in 2002 than in 2001. Market demand for laundry equipment declined in several European markets as well as in Japan. Demand for compressors in Europe was higher in 2002 than in the previous year.

Husqvarna brand, previously reported within Professional Outdoor Products

     Demand for professional chainsaws declined, particularlyProducts. The new reporting structure reflects the organizational change within outdoor products in North Americawhich all consumer and Western Europe. Lower demand in the construction industry also negatively impacted the market for professional outdoor products.products have been combined under one management. See “Change in Segment Reporting in 2004” below.

SIGNIFICANT ACTIONS AND TRANSACTIONS AFFECTING RESULTS AND FINANCIAL CONDITION

     The following review of certain actions undertaken and transactions completed during the three year period 20002001 through 20022003 is significant for an understanding of the review of Electrolux’s results of operations and financial condition.

     Acquisitions

     Electrolux regularly engages in acquisitions as part of its overall growth strategy and has made in excess of 200 acquisitions during the last three decades. These acquisitions have enabled Electrolux to achieve strong market positions in Western Europe, North America and Australia. Political and economic developments in recent years in Eastern Europe, Asia and Latin America have created a potential for expansion in those growth markets where access to products that are manufactured locally and adapted to local requirements is vital, particularly for household appliances.

     The following major acquisitions were effected during the last three years and are significant for an understanding of Electrolux’s results of operations and financial position during the period.

Diamant Boart International. As of July 1, 2002, the Group acquired Diamant Boart International, a world-leading manufacturer and distributor of diamond tools and related equipment for the construction and stone industry. The purchase price was SEK 1,700m on a debt-free basis. In 2001, Diamant Boart had sales of approximately SEK 2,500m (of which SEK 1,300m related to power-cutting and diamond tools) and approximately 2,000 employees. The financial results attributable to Diamant Boart’s operations from and after July 1, 2002 are included in Electrolux’s consolidated financial statements for 2002 with sales of SEK 1,184m.

Marazzini Ernesto S.p.A. As of July 1, 2001, the Group acquired Marazzini Ernesto S.p.A. in Italy for a purchase price of 145m. Marazzini primarily manufactures lawn mowers and other outdoor products for the consumer market.

Email Ltd. As of February 1, 2001, the Group acquired the household appliances division of Email Ltd in Australia. The purchase price was approximately SEK 2,270m. The purpose of the acquisition was to strengthen the Group’s market position in Oceania, which in 2000 accounted for less than 1% of total sales, with an operation comprising mainly floor-care products and outdoor products. Email also provides the Group with in-house production capacity in the region.

Electrolux Brand. In June 2000, the Group acquired the right to the Electrolux brand and corporate name in Canada and the United States from Aerus LLC (formerly known as Electrolux LLC), an American company engaged in direct sales of floor-care products. The purchase price was approximately SEK 450m.

     Dispositions

     Electrolux disposes of companies and businesses in the ordinary course of business in an effort to focus on core operations and to maximize efficiencies and the overall profitability of the Group. Since 1997, 2426 non-core operations have been divested representing total annual sales of almost SEK 3034 billion and 25,00035,000 employees. A number of recent dispositions were undertaken in connection with its restructuring efforts. During 2002,2003, the Group divested its compressor operation and its 50% shareholding in Vestfrost A/S, a Danish producer of refrigerators and freezers. These divested businesses that had total sales of approximately SEK 3,880m4,200 million and approximately 4,5005,200 employees in 2001.2002. The majority of these divested operations were partdivestment of the Group’s components operation. These divestmentscompressor operation generated totala capital gainsloss of SEK 1,910m85 million, and the divestment of the shareholding in Vestfrost generated a capital gain of SEK 7 million, which are included in the consolidated financial statements for the year 2002.2003.

     The following major dispositions were effected during the last three years and are significant for an understanding of Electrolux’s business, results of operations and financial position during the period.

Zanussi Metallurgica. As of July 1, 2002, the Group divested the operations of Zanussi Metallurgica. Zanussi Metallurgica had 640 employees and manufactured components for the Professional Indoor Products business area. Zanussi Metallurgica had sales of approximately SEK 600m in 2001. The disposition generated a capital gain of approximately SEK 58m for the Group.

European Motor Operations. As of April 1, 2002, the Group divested all of its European motor operations in the Consumer Durables business area. The European motor operation for consumer durables had sales of SEK 950m in 2001 and 1,950 employees. The disposition generated a capital loss of approximately SEK 21m for the Group.

Mexican Compressor Plant. As of April 1, 2002 the Group divested its Mexican compressor plant which was providing components for the Professional Indoor Products business area. The plant generated sales of SEK 180m in 2001 and had 240 employees. The disposition generated a capital loss of approximately SEK 12m for the Group.

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European Home Comfort Operations. As of January 1, 2002 the Group divested its European home comfort operations (which formed part of the Consumer Durables business area). The European home comfort operations generated SEK 850m in sales in 2001 and had 280 employees. The disposition generated a capital gain of approximately SEK 85m for the Group.

FHP Elmotor. As of November 30, 2001, the Group divested FHP Elmotor in Ankarsrum, Sweden. FHP Elmotor produced electric motors and was part of the components product line in the Professional Indoor Products business area. The company had sales in 2000 of approximately SEK 265m and approximately 265 employees. The divestment generated a capital loss of approximately SEK 50m, which was included in the Group’s charge for restructuring in the third quarter of 2001.

Electrolux Baking S.A. As of October 1, 2001, the Group divested Electrolux Baking S.A. in France, which manufactured baking equipment for the professional market and was part of the food-service equipment product line in the Professional Indoor Products business area. This operation had sales in 2000 of SEK 315m, and approximately 230 employees. The divestment generated a capital loss of approximately SEK 100m, which is included in the Group’s charge for restructuring in the third quarter of 2001.

Leisure Appliance Product Line. As of July 31, 2001, the Group divested the major part of its leisure-appliances product line which had sales in 2000 of approximately SEK 4,200m and approximately 2,200 employees. The disposition generated a capital gain in 2001 of approximately SEK 3,120m. The remaining part of the leisure-appliances product line, which had sales in 2001 of approximately SEK 1,300m and about 1,400 employees, was divested as of January 1, 2002. This disposition generated a capital gain of approximately SEK 1,800m, which was included in Electrolux’s consolidated financial statements for 2002.

Veneta Factoring S.p.A. As of April 26, 2001, the Group sold 90% of its shareholdings in Veneta Factoring S.p.A., a wholly-owned Italian finance company. The sale of Veneta reduced the Group’s net borrowings by SEK 2,641m.

Professional RefrigerationAs of January 31, 2000, the Group divested its Professional Refrigeration Equipment product line, which was part of the Professional Indoor Products business area. The Professional Refrigeration product line had sales of approximately SEK 2,300m in 1999 and approximately 2,000 employees. This disposition generated a capital gain of approximately SEK 241m for the Group.

     Restructuring Programs

     Certain statements in this section, in particular in relation to the cost-savings that Electrolux expects to generate from its restructuring programs and other measures, are forward-looking statements and actual results may differ materially from those described below. See “Forward-Looking Statements” and “Item 3.D—Risk Factors—Electrolux may not be able to successfully implement planned cost-reduction measures and generate the expected cost-savings indicated herein.” The costs of the restructuring programs are included in “items affecting comparability” as set forth below.

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     2002 Restructuring Program

     InThe restructuring measures announced in December 2002 Electrolux announced a new restructuring program (the “2002 Restructuring Program”). are proceeding as planned. The 2002 Restructuring Program focuses on improving under-performing operations, such as air-conditioners in the United States and appliances in China and India. The program is aimed at improving productivity and adjusting the cost structure, and includes the consolidation of production operations, rationalization of sales and marketing activities, asset write-downs and employee layoffs. For example, the Group consolidated its product platforms and changed the production structure to a few master plants and a number of smaller manufacturing units within its white goods operations in Europe and closed certain plants within its white goods operations in North America. With respect to its white goods operations in Latin America, Asia and Australia, the Group also rationalized its refrigeration production and sales and marketing activities in China, while in India it consolidated its structure and laid off employees and wrote-down assets.

     A charge of SEK 1,338m1,338 million was recorded against operating income during the fourth quarter of 2002 in respect of the 2002 Restructuring Program. Slightly more than half of the amount relates to items other than asset write-downs, mainly layoffs of 5,091 employees. SavingsAs of December 31, 2003, approximately SEK 1,241 million had been utilized with employee layoffs of 4,946. Annual savings resulting from these measures are estimated bywere SEK 246 million in 2003. Measures taken during 2003 included the closure of one plant for air conditioners in North America and one for refrigerators in India. Electrolux to be SEK 283m in 2003,estimates future annual savings from these measures of an additional SEK 97m112 million in 2004 and a further SEK 9m in 2005, with the full effect of SEK 389m from the end of 2005 and each year thereafter.

     A discussion of how the 2002 Restructuring Program impacts each business segment is set forth below.

20

Consumer Durables

White Goods Operations in Europe. The Group recorded a charge of SEK 177m against operating income in 2002 in connection with restructuring efforts related to the European appliance operation. These restructuring efforts included the consolidation of product platforms and changes in the production structure to a few master plants and a number of smaller manufacturing units. Changes in production structure included transfer to Romania of parts of cooker production in Motala, Sweden, Forli, Italy, and Rothenburg, Germany. A part of the cooker hood production in Motala was also outsourced to third party manufacturers. Part of the refrigerator production in Fuenmayor, Spain, is expected to be transferred during 2003 to a refrigerator plant in Hungary. These restructuring efforts will involve layoffs of approximately 340 employees and2004. Total savings are expected to generate savings ofestimated at approximately SEK 40m in 2003, approximately SEK 86m in 2004 and approximately SEK 95m annually beginning as of year-end 2005.

White Goods Operations in North America. A charge of SEK 396m was recorded against operating income in 2002 relating to the unprofitable room air-conditioner operations in the United States. Electrolux has also decided to close its air-conditioner manufacturing plant in New Jersey during 2003. The closure of the plant will involve layoffs of approximately 1,350 employees. Electrolux estimates cost-savings from this action to be approximately SEK 94m in 2003 and approximately the same amount340 million on an annual basis thereafter.from 2005.

White Goods Operations in Latin America, Asia and Australia. A charge     The following table sets forth the results of SEK 613m was recorded against operating income inour 2002 for restructuring relating mainly to the appliance operations in China and India. Approximately half of this amount relates to cash items, and the remainder to write-downs of assets. In China, changes include the rationalization of refrigerator production and sales and marketing activities. Changes in India relate to consolidation of the Group structure and include employee layoffs and write-downs of assets. Electrolux also divested a manufacturing plant for appliance components in Australia. These measures will involve total layoffs of approximately 2,665 employees, and are expected to generate cost-savings of approximately SEK 106m in 2003 and approximately SEK 141m annually thereafter beginning as of year-end 2005.Restructuring Program:

Professional Indoor Products

Components. A charge of SEK 152m was recorded against operating income in 2002 for restructuring of the Spanish and Indian compressor operations. This will involve layoffs of approximately 730 employees and Electrolux expects to generate cost-savings of approximately SEK 43m in 2003 and approximately SEK 58m annually beginning as of year-end 2005.

     2001 Restructuring Program

     The restructuring measures announced in the third and fourth quarters of 2001 (the “2001 Restructuring Program”) are proceeding according to plan.as planned and were substantially completed during 2003. The 2001 Restructuring Program focusesfocused on operations in components and white goods, and includesincluded plant shutdowns and the rationalization of sales and administrative activities. For example, the Group closed a refrigeration manufacturing plant in Germany and a manufacturing plant for cookers in Norway during 2002 within its white goods operations in Europe. It also consolidated certain floor-care product production lines in Europe. Within professional indoor products, the Group divested a baking equipment operation in France and closed a plant in Germany while, within components, the Group undertook a restructuring of the components product line (including a write-down of assets), the closure of a compressor plant in the United States, a divestment of a Mexican compressor plant, a reduction of capacity in Italy and Spain, and the write-down of assets in joint venture in Egypt and China. Restructuring measures have resulted in layoffs of approximately 3,6004,549 employees to date. Approximately 50% of the 2001 Restructuring Program (SEK 1,700m)1,700 million) related to write-downs of assets which were reflected in the consolidated financial statements for 2001.

     The total charge of approximately SEK 3,261m3,261 million was recorded against operating income in 2001 with respect to the 2001 Restructuring Program. Of this amount, approximately SEK 2,595m3,050 million had been utilized as of December 31, 2002. Savings2003. The remaining part of the provision refers mainly to redundancy payments. Annual savings resulting from the 2001 Restructuring Program amounted to approximately SEK 897m897 million in 2002. Electrolux believes that aggregate cost savings in 2003 resulting from the 2001 Restructuring Program will be2002 and approximately SEK 1,295 m.1,089 million in 2003.

 ��   A discussion of how the 2001 Restructuring Program has impacted and will continue to impact results of operations by business segment is set forth below.20

Consumer Durables

White Goods Operations in Europe. A charge of SEK 997m was recorded against operating income in 2001 for restructuring within the European appliance operation. As of December 31, 2002, SEK 436m of this amount had been utilized and the employee headcount had been reduced by about 600 employees. Savings in 2003 resulting from the 2001 Restructuring Program are expected to amount to approximately SEK 573m. These

21

Other Factors Affecting Results

restructuring efforts includedImpairment of Assets

     All long-lived assets, including goodwill, are evaluated for impairment yearly or whenever events or changes in circumstances indicate that the closurecarrying amount of one refrigerator manufacturing plant in Germanyan asset may not be recoverable. An impaired asset is written down to its estimated fair market value 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 a manufacturing plant for cookers in Norway during 2002. Electrolux also expectsimpairment charges have been recorded when this information indicated that the closurecarrying amount of a manufacturing plant for hobs in Germany to occur in 2003.

White Goods Operations in North America. A restructuring chargean asset was not recoverable. In the majority of SEK 114m was recorded in 2001 for the rationalization of sales and administrative activities, including layoffs of about 325 employees. These restructuring measures generated savings of approximately SEK 116m in 2002 and are expected to generate savings of approximately SEK 116m in 2003.

White Goods Operations in Latin America, Asia and Australia. A restructuring charge of SEK 40m was recorded in 2001 for employee layoffs in Brazilcases, however, market value has not been available, and the relocation of one plant in India. These measures involved layoffs of approximately 740 employees. SEK 31m offair value has been estimated by using the charge was utilized as of December 31, 2002. These measures generated savings of SEK 43m in 2002 and arediscounted cash flow method based on expected to generate savings of approximately SEK 42m in 2003.

Floor-Care Products. A restructuring charge of SEK 19m was made in 2001 for consolidation of production linesfuture results. Significant differences in the Group’s plantestimation of expected future results and the discount rates used could have resulted in Sweden, all of which had been utilized as of December 31, 2002. These measures generated savings of SEK 4m in 2002 and are expected to generate savings of approximately SEK 17m in 2003.

Consumer Outdoor Products. A restructuring charge of SEK 157mdifferent asset valuations. In 2003, there was made in 2001, mainly for the consolidation of production and logistics in Europe. These measures involved personnel cutbacks of approximately 185 employees. As of December 31, 2002, 124m of this charge had been utilized. These measures generated savings of SEK 69m in 2002 and are expected to generate savings of approximately SEK 86m in 2003.

Professional Indoor Products

Food-Service Equipment. A restructuring charge of SEK 168m was made in 2001 for the restructuring of the Food-Service Equipment product line. Of this amount, approximately SEK 100m related to the capital loss incurred by the divestment of the baking equipment operation in France. Other changes included the closure of a plant in Germany as well as rationalization relating to implementation of a new business model. These measures involved layoffs of approximately 350 employees. SEK 167m of this charge had been utilized as of December 31, 2002. These measures generated savings of approximately SEK 84m in 2002 and are expected to generate savings of approximately SEK 89m in 2003.

Components. In 2001, a charge of SEK 1,710m was recorded against operating income for the restructuring of the components product line in the Professional Indoor Products business area. Of this amount, approximately 80% related to write-downs of assets. As of December 31, 2002, SEK 1,668m of this charge had been utilized. These restructuring projects included the closure of a compressor plant in the United States, the divestment of a Mexican compressor plant, reduction of capacity in Italy and Spain, and the write-down of assets in joint ventures in EgyptNordwaggon. Nordwaggon is a Swedish-based railcar operator that is owned 50% by Electrolux and China. These restructuring projects resulted in50% by the Swedish-state-owned Swecarrier. Nordwaggon has made a reductionwrite-down and taken a provision referring to railcars. The Group’s participation has therefore been written down in the workforce of approximately 1,150 employees and generated cost-savingsamount of SEK 291m in 2002. The program is expected to generate savings of SEK 334m in 2003.

Other. A total charge of SEK 56m was made for restructuring in other operations in 2001. During 2002, a total of SEK 41m of this reserve was utilized, and savings of SEK 33m were recorded. In 2003, savings are estimated to be SEK 38m.

2000 Restructuring Program

     In 2000, Electrolux made a charge of SEK 883m in connection with restructuring efforts (the “2000 Restructuring Program”). These restructuring efforts related to structural changes and cost adjustments within the white goods and floor-care product lines. As of December 31, 2002, a total of SEK 679m of this charge had been utilized. The 2000 Restructuring Program generated cost-savings of SEK 639m in 2002. Although certain projects are still underway, most of the restructuring measures under the 2000 Restructuring Program had been implemented as of December 31, 2002.

22

Other Factors Affecting Results

Impairment of Assets85 million.

     Outside of the restructuring programs, write-downs of assets were made following impairment tests at year-end 2002 in the amount of SEK 1,006m. In accordance with Swedish GAAP, impairment tests are performed on a yearly basis for all long-lived assets, including goodwill, so that assets are valued at the lower of acquisition cost and current value (in the majority of cases measured on the basis of future expected cash flows).1,006 million. The write-downs in 2002 relate to the components product line, as well as certain assets in other under-performing operations. Affected assets included tangible fixed assets and intangible assets in the form of goodwill.

     Foreign Exchange Effects

     During 2003, changes in exchange rates had a net negative impact on operating income of approximately SEK –930 million (-216). Approximately SEK –610 million (-236) of that amount refers to translation of income statements in subsidiaries and was mainly due to the strengthening of the Swedish krona against the U.S. dollar. The transaction effect was approximately SEK –320 million (20) and refers largely to the weakening of the British pound against the euro. The transaction amount includes a positive impact of approximately SEK 69 million (112) from hedging. The effect of changes in exchange rates on income after financial items amounted to approximately SEK –855 million
(-100).

     During 2002, changes in exchange rates had a net negative impact on operating income of approximately SEK –216m (641m)–216 million (641), and on income after financial items of approximately SEK –100m (566m)–100 million (566). Of the latter amount, approximately SEK –137m (479m)–137 million (479) related to translation of income statements in subsidiaries, mainly due to the strengthening of the Swedish krona against the U.S. dollar.