3

		The cost of capital varies between different countries and business units due to country-specific factors such as interest rates, risk premiums and tax rates. 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. 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.
4.3.		Certain amountsThe years 2000-2003 have been reclassified for comparison purposes due to the disclosure of discontinued operations.
5.4.		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 and 19992000 was SEK –222m, SEK –168m–222 million and SEK –168m,–168 million, respectively.
6.5.		Under SFAS 144, each of the following 2003 and 2002 divestments are accounted for as 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 2926 to the consolidated financial statements.
7.6.		Weighted average number of shares outstanding was 298,314,025 shares for 2004; 313,270,489 shares for 2003; 327,093,373 shares for 2002; 340,064,997 shares for 2001; and 359,083,955 shares for 2000; and 366,169,580 shares for 1999.2000. The decreases in weighted average number of shares outstanding for these periods reflect open market repurchases of shares by Electrolux.Electrolux and the redemption of shares in 2004.
8.7.		Dividends are set forth in the above table under the year to which they relate. In accordance with general practice in Sweden, the dividends are declared and paid in the year following the financial period. The 2004 dividend is subject to approval at the AGM to be held on April 20, 2005.
9.8.		Amounts in U.S. dollars are presented for convenience only and are based on the noon buying rate for cable transfers in SEK as certified for customs purposes by the Federal Reserve Bank of New York at each of the respective payment dates.dates, except for the U.S. dollar amount in 2004, which is based on the noon buying rate for SEK at December 31, 2004 of $1 = SEK 6.67.

     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 June 21, 2004April 6, 2005 the noon buying rate for SEK was USD 1.00=SEK 7.5510.7.1145.

4

     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 with the 1986 acquisition of the U.S. company Poulan/Weed Eater and the 1989 acquisition of the outdoor power products business of the Roper Corporation.

     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 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:

	•		continuedcontinuing reduction of costs and the complexity of the organization;
	•	accelerating consolidation and relocation of production;
	acceleration of•	accelerating the rate of product renewal based on consumer needs; and
	•		increasedincreasing 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 operatesproducts are classified in two areas: Consumer Durables and Professional Products. These areas form the following three business areas:basis for the Group’s primary segment information.

	•		Consumer Durables;Durables comprises mainly major appliances (including refrigerators, freezers, cookers, dryers, washing machines, dishwashers, room air-conditioners and microwave ovens), as well as floor-care products and garden equipment;

12

1.   As a percentage of net sales.      Consumer Durables      The Consumer Durables business area comprisescomprise mainly white goods (i.e.,major appliances (namely refrigerators, freezers, cookers, dryers, washing machines, and dishwashers), and other appliances such asdishwashers, room air-conditioners and 11 microwave ovens,ovens), as well as floor-care products and consumer outdoorgarden equipment. In 2003, white goods and other2004, major appliances accounted for approximately 77%76% (76) of sales, while outdoor products accounted for this business area,17% (16) and floor-care products for 7% (8). Electrolux has leading market positions in core appliances, floor-care products and consumer outdoor products represented 8%garden equipment in both Europe and 15%, respectively. ElectroluxNorth America. The Group is the leading white goods companyappliances producer in Europe and Australia, and has a substantial market shareshares in each of the United States,this product category in Brazil and India, as well as a significant market presence in China. The Group is the world’s largest producer of 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 comprisesincludes products for both indoor and outdoor use. Operations within Indoor Products comprise food-service equipment and laundry equipment. Products in food-services equipment are targeted atfor hotels, restaurants and institutions. Electrolux manufacturesinstitutions, as well as laundry equipment for apartment-house laundry rooms, in apartment buildings, launderettes, and hotels and for other professional users. The Group divested a 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 one of the leaders in the global market for laundry equipment. ProfessionalOperations within Outdoor Products      The Professional Outdoor Products business area comprises comprise mainly high-performance chainsaws, clearing saws and lawn 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 Industrial Products, Dimas and Diamant Boart which encompasses power cutters, diamond tools and related equipment for the cutting of, hard surfaces such as cementfor example, concrete 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. Manufacturing      Electrolux has manufacturing facilities in 9796 locations in 25 countries around the world. Electrolux’s manufacturing operations consist mainly of thecomprise assembly of components and processing of standard raw materials sourced from various third-party manufacturers. The manufacturing process includesmade by suppliers. Other processes include metalworking, molding of plastics, painting, enameling and, to some degree, theextent, 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 and increasing 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 research and development, or 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). 13      For a discussion of Electrolux’s manufacturing facilities, see “Item 4B—4.B — Environmental and Other Government Regulation—ISO Certification”Environmental impact and risk during manufacturing” and “Item 4D—4.D — Property, Plants and Equipment.” 12      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 20032004 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.      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.categories of its Indoor Products. The aim is to have thethat Electrolux brandsingle or double branded products shall 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 bewas introduced in the United States during 2004. In 2004 double-branding was implemented for REX, the market leader in Italy, as well as for Zanussi and Juno in Germany. In 2004, the three brands, Chef, Dishlex and Kelvinator in Australia, were double-branded with Electrolux. As of 2005 all products sold under the AEG brand will be double-branded, as will products from Husqvarna and Voss. 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.           Product Category   Major Brands / Trademarks   Market Position Consumer Durables         White goods Core appliances   Electrolux AEGAEG** Frigidaire* Kelvinator*Frigidaire Zanussi* REX*   White goodsCore appliances Market leader in Europe and Australia, third largest producer in U.S.the United States Floor-care products   Electrolux Eureka AEG AEG**   Floor-care products World leader, largestLargest producer in Europe, secondthird largest in U.S.the United States Outdoor products   Electrolux Husqvarna Flymo* Weed Eater Poulan*Poulan Poulan Pro Partner* McCulloch* (not in North America)   Consumer outdoorOutdoor products The world’s largest producer of lawn mowers, garden tractors and other portable petrol-driven garden equipmentLeading position * Double-branded with Electrolux 1314           Product Category   Major Brands / Trademarks   Market Position Professional Indoor Products         Food-service equipment   Electrolux Molteni Zanussi Professional Dito*   Food-service equipment Market-leaderLeading position in Europe, third largest producer in the world Laundry equipment Electrolux Wascator Laundry equipment One of the world’s leading producers Professional Outdoor Products         Laundry equipment Electrolux Laundry equipment Largest producer in Europe, one of the leaders in the world market Chainsaws   Husqvarna Jonsered   Professional Outdoor ProductsChainsaws World’s largest producerGlobal market share of chainsaws about 40% in the professional segment Diamond Lawn and garden equipment Husqvarna Jonsered Lawn and garden equipment Operations mainly in North America, global market share less than 10% Power cutters and diamond tools   Diamant Boart Dimas Partner Industrial Products   DiamondPower cutters and diamond tools One of the world’s largest producers of diamond tools and related equipment for the construction and stone industries * Double-branded with Electrolux 2004 ** Double-branded with Electrolux as of 2005      Intellectual Property      Electrolux has adopted a comprehensive approach with respect to its intellectual property and actively manages a range of patents, trademarks, copyrights and design in its intellectual property portfolio.      Electrolux seeks to develop most of the technologies used in its products through its internal research and product development group. As a result, Electrolux’s intellectual property portfolio includes thousands of patents and patent applications covering a wide range of technologies. Electrolux undertakes its research and development activities in a number of locations around the world and typically applies for initial patent protection in the jurisdiction where a new technology was developed. Additional patent protection is then sought in jurisdictions where Electrolux expects to sell products incorporating the new technology or where Electrolux has active competitors (most often,(for example, the United States, Europe and Europe)China).      Electrolux both sourcesdevelops itself the technologies used in its products, as well as itself maintainingmaintains a portfolio of licensed technologies. Electrolux relies on technologies licensed from third parties only to a limited extent with respect to the products that it manufactures. Similarly, Electrolux does not extensively license its proprietary technology to third parties.      Electrolux owns the rights to many well-recognized trademarks, including Electrolux, Frigidaire, Eureka, Husqvarna and Zanussi. Electrolux has registered these and hundreds of other trademarks around the world. In May 2000, the Group acquired the right to the Electrolux brand and corporate name in Canada and the United States from Aerus LLC (formerly Electrolux LLC). Aerus LLC had thecontinues to have a limited right by license to use the Electrolux brand onin connection with repair and replacement part activities relating to floor-care products sold by Aerus LLC in North America untilprior to December 1, 2003. In June 2004, the Group acquired the 15 right to the AEG brand and corporate name worldwide. For a discussion regarding certain of Electrolux’s trademarks, see “Item 4.B—4.B¾Business Overview—Overview¾Sales and Marketing”.      Electrolux also protects its new and specific design developments by using the protections available in different jurisdictions around the world.      Electrolux takes a pro-active approach towards preventing the infringement of any of its intellectual property.property as well as towards avoiding the infringement of third party rights. 14Environmental and other Government Regulation      Environmental performance is a central element of the Group’s overall business strategy. It impacts all phases of Group operations, from product development and manufacturing to marketing and consumer communication.      Electrolux has a long history of continuously improving environmental performance of products, for example, by reducing water and energy consumption, and by designing products with due consideration for efficient recycling. Because improved environmental performance also means lower lifetime operating costs for consumers, it plays a key role in marketing and product development, and is a source of competitive advantage.      A proactive approach to environmental challenges reduces risk, enhances positive brand awareness, strengthens employee satisfaction and ensures good relations with local communities in which the Group operates. Environmental Strategy And Policy      The Electrolux environmental strategy is based on a lifecycle approach. The Group recognizes three basic drivers for its strategy of developing and marketing products with outstanding environmental performance: regulations, consumer demand and resource efficiency. •   The most important trends in legislation and regulation involve energy efficiency, recycling and restrictions on the use of potentially hazardous substances. •   Consumers are increasingly aware of the direct relationship between higher efficiency and lower lifecycle costs. •   The continuous pursuit of cost savings leads to more efficient use of material and energy resources in manufacturing. The Electrolux Environmental Policy      We want our products, services and production to be part of a sustainable society. We are committed to: •   Designing products to reduce their adverse environmental impact in production, use and disposal. •   Reducing resource consumption, waste and pollution in our operations. •   Taking a proactive approach regarding environmental legislation that affects our business. •   Encouraging suppliers, subcontractors, retailers and recyclers of our products to adopt the same environmental principles as Electrolux. •   Giving appropriate weight to this environmental policy when making future planning and investment decisions. •   Setting targets and objectives, within the scope of the environmental management system, to achieve continual improvement and a sustainable development.      This environmental policy has been formally adopted by Electrolux Group Management. For more information, see www.electrolux.com/environment. 16 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 RegulationSummary of environmental issues for which regulations affect the Group’s business areas Affected products and Issue Regulation operations Energy efficiency Mandatory energy consumption criteria for certain products in EU, United States, other markets, voluntary industry commitments on some products in EU Consumer Durables Professional Products Energy labeling Mandatory labeling in EU, North America, Mexico, Japan, Australia, China, voluntary labeling in Hong Kong, Brazil Consumer Durables Professional Products Producer responsibility WEEE Directive in EU, state/provincial legislation in North America All electrical products sold in EU, products sold on certain markets in North America Eco-design requirements EuP Directive in EU, eco-design requirements in product development All products Emissions from combustion engines EU and United States. Canada to introduce U.S. harmonized regulation in 2005. Outdoor Products Air and waterborne emissions, solid waste EU, United States, other markets All plants Greenhouse effect Kyoto Protocol, national implementation Consumer Durables Ozone depletion Montreal Protocol, national implementation Refrigerators, freezers, air conditioners Hazardous substances RoHS Directive in EU, and similar legislation in China. REACH in EU, state/provincial legislation in North America All products and plants      In particular, Electrolux is subject to environmental laws and regulations that may affect itsoperates 96 manufacturing facilities in 25 countries around the world. Manufacturing operations and facilities. Electrolux manufacturing operationsmainly comprise mainly assembly of components made by suppliers. Other processes include metalworking, molding of plastics, painting, and enameling and, to a limitedsome extent, casting.casting of parts. Chemicals, such as lubricants and cleaning fluids, are used as process aids in the manufacturing process. Chemicals are alsoand chemicals used in products include insulation materials, paint and enamel for the products.enamel. 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 11% of the total value of the Group’s production.Sweden. Permits are required by Swedish authorities for eight of these plants. Six plants while six are required to submit notification. The permits relate to, among other things,cover, for example, thresholds or maximum permissible values for air and water-bornewaterborne emissions and for noise. No significant non-compliance with Swedish environmental legislation was reported in 2003.2004.      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 both 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 nodid not disclose any significant items of significance during the year 2003.2004. 17      Electrolux products are affected by legislation in various markets, which principally involveinvolving limits onfor energy consumption (white goods) and emissions (outdoor products powered by gasoline). Electrolux continuously monitors regulatory changes in legislation, and product development and manufacturing are adjusted well in advance to reflect these changes.      Environmental Impact And Risk During Manufacturing      Environmental regulations for manufacturing facilities vary between countries and regions, and so do their application by authorities. Group units comply with local regulations, and exercise caution in light of the long-term nature of operations.      In connection with acquisitions of companies and plants, an assessment is made of potential environmental risks and the investment that might be required to modify production. When necessary, an analysis based on standardized routines is performed to determine possible contamination of soil and ground water. The assessment is integrated in the acquisition process. This process is regulated by law in many regions, particularly in North America.      The Group works continuously to reduce consumption of energy and water at production sites, and to achieve high use-rates for purchased material and components.      Electrolux shows above-average environmental performance in comparison with the durable goods manufacturing industry as a whole. This has been confirmed by investigations conducted for the Dow Jones Sustainability Index, FTSE4Good, Oekom Research and several other business-analysis organizations. Environmental management systems in production      The Electrolux Environmental Management System (EMS) is a vital tool for achieving and maintaining high standards for clean manufacturing. The Group intends to implement EMS for the entire operation in each business sector. The Group’s policy stipulates that all manufacturing units with at least 50 employees shall be certified to ISO 14001. Newly acquired units shall complete the certification process within three years after acquisition. By the end of 2004, 92% of the Group’s total manufacturing area was certified to ISO 14001, corresponding to 71 production units, or 90% of the total number of units requiring certification. In addition, 7 non-manufacturing units have received ISO 14001 certification. Energy Directives and Product Labeling      Energy-efficiency and product labeling are core issues for the Group, and for the appliance industry as a whole. In the Group’s major markets in Europe and North America, regulations require that every appliance product bears a label indicating the product’s energy consumption. Environmental impact and electricity costs are thus displayed to the consumer and become factors in purchasing decisions. Similar labeling regulations are also applied in Mexico, Japan, India, China and Australia. In Hong Kong and Brazil, labeling is currently voluntary but may be mandatory in the future.      Energy labeling of products has contributed greatly to increased demand for energy-efficient products, and the Group’s focus on meeting this demand has resulted in a significant increase in profitability. The most efficient products have a higher share of gross profit, reflecting consumer awareness that life-cycle savings from lower electricity costs offset higher purchase prices.      The Group’s appliance products are well within all regulatory limits and are well represented in the highest energy-efficiency classes as defined by the EU’s Energy + scheme and the U.S. Environmental Protection Agency’s Energy Star program. In addition, Electrolux and the other major manufacturers in Europe are committed to voluntary agreements on improving energy-efficiency for washing machines and dishwashers, which are not covered by Energy +. The European Commission has endorsed these voluntary agreements.      Fleet-average energy-efficiency for various categories of appliances sold in Europe showed a continued improvement in 2004, most notably for dishwashers. This is largely due to the development of the Group’s dishwashers on a single global platform and the replacement of mechanical controls with electronics. 18 Restricted materials in products      The Montreal Protocol was adopted by the United Nations in 1986 and calls for phase-out of ozone-depleting substances. The use of chlorofluorocarbon (CFC) as refrigerant and insulation material is prohibited in most markets including the EU and the United States, and the Group’s products in these markets have been free of CFCs for several years. The Group has been a leader in the phase-out of both CFC and HCFC in new markets such as China and Brazil. Restricted Materials List      The Electrolux Group has introduced a Restricted Materials List (RML), aimed at ensuring that Electrolux products meet the highest expectations for user health and safety and environmental protection. Substances used in the Group’s products must always be harmless to end-users, be in line with market expectation and should not adversely affect “end of life” properties.      The purpose of the RML is to avoid materials that do not comply with these requirements. RML is designed to facilitate compliance with the trend toward increased regulation of chemicals in markets worldwide. By tracking applications where substances are considered even potentially hazardous, the Group is prepared to act swiftly when questions are raised by new scientific findings or regulations.      Suppliers of materials, parts and products to the Electrolux Group are required to comply with the RML by reporting the presence of listed substances in any materials, parts or products intended for use in products, including packaging, to be sold under any Electrolux brand.      Further information may be found at www.electrolux.com/rml. Recent Environmental Developments Implementation of the WEEE Directive      In December 2002, the European Union adopted the WEEE (Waste Electrical and Electronic Equipment) Directive, introducingwhich stipulates that as of August 2005, producers are responsible for the management and financing of treatment, recycling and disposal of waste electrical and electronic products deposited at collection facilities. The Directive should have been integrated in national legislations not later than August 2004, but by the end of January 2005 most EU countries had not done so. Historical and future waste      Cost for 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 (individual producer responsibility). The Directive also requires that the industry jointly share the recycling obligations ofrefers to products sold before August 13, 2005 based on current(historical waste), as well as products sold after August 2005 (future waste). For historical waste, manufacturers and importers are collectively responsible for treatment, recycling and disposal in proportion to their market share,share. This is known as collective producer responsibility.      For future waste, the Directive stipulates that manufacturers and importers must each finance treatment, recycling and disposal with respect to their own products, which is known as individual producer responsibility. For household appliances these costs are normally payable 12 to 15 years after actual sale according to studies by the European Commission. Therefore, financial guarantees must be provided to ensure that sufficient funds are available even if a producer or importer should withdraw from the market or go bankrupt. Cost of compliance      Annual sales of Electrolux include approximately 20 million products that are covered by the WEEE Directive. These products include large and small household appliances, floor-care equipment and electrical outdoor equipment. Electrolux will incur costs for managing and recycling historical waste equipment, and also intends to make provisions for costs related to future waste. The extent of the cost will depend on a collective basis (collective producer responsibility). Members states must implement the WEEE Directive in domestic legislation before August 13, 2004 and replace or modify existing nationalnumber of factors which at present cannot be accurately quantified. These factors include administration, recycling systems. Collection systems must be operational, and treatment costs, including the market price of scrap metal, disposal costs for non-recyclable material and financing systems must be in place by August 13, 2005. Initial collection and treatment targets are to be 1519 attained by December 2006. components of equipment as well as collection costs per unit and collection rates, which may vary for different countries.      The Group has actively advocated individual producer responsibility, as it will create conditions for fair competition and encourages producersfollowing assumptions have been made in order to invest in environmental design. Individual producer responsibility, as opposed to a systemenable preliminary calculations of shared financial responsibility, means that Group investments in product design aimed at lowering end-of-life disposal costs will directly benefit Electrolux.      Recyclingannual costs for Electrolux’s electrical products currently are inElectrolux, despite uncertainty regarding the rangebasic factors. Preliminary estimates 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 involve the following assumptions: •   The producers’ responsibility for management of waste starts at collection facilities. •   The average collection rates in EU member states are 70% for refrigerators and freezers, and 50% for other large household appliances. However, these rates are highly uncertain. •   Projected future fees for recycling, including transportation from collection facilities, are based on internal estimates derived from information supplied by waste management companies.      On the basis of these assumptions, the WEEEestimated annual cost of historical waste for Electrolux when the Directive partly because it is not known how many productsfully implemented will be returned (this depends on collection targets set in national legislation as well as sales in the past and the ambition of the consumerapproximately SEK 600 million. The Directive does not require producers to return products). The obligationprovide financial guarantees for historical waste. No provisions related to recycling of historical products (products putwaste are made in the balance sheet.      Electrolux intends to make provisions for the anticipated cost of future waste on the basis of estimates of future recycling costs, discounted over anticipated product life-cycles. Using the same assumptions as for historical waste, and assuming an average lifetime of 12 years and a discount rate corresponding to prevailing market before August 13, 2005)interest rates, the estimated annual cost for future waste will be shared among manufacturers based on their present market shares. For waste of products soldapproximately SEK 600 million.      The above cost estimates are highly uncertain and could vary considerably. Electrolux participates in the European Recycling Platform and thus has access to more efficient recycling systems, which is expected to reduce these costs. Product development that enables more efficient recycling will also contribute to cost reductions. Compensation for WEEE-related costs      Electrolux intends to achieve full compensation for costs incurred under the WEEE Directive. Costs related to recycling of both historical and future (products putwaste will be added to the price of products. The Directive allows producers to show the recycling cost for historical waste separately as a visible fee. It is expected that this will improve the potential for off-setting the cost.      Experience of the introduction in Sweden in 2001, of a similar requirement of producer responsibility, shows that there was no effect on overall demand or the market after August 13, 2005), the responsibilityprofitability for recycling is individual for each manufacturer and Electrolux will haveproducts. Consumers did not appear to establish financial guaranteesforego purchases in response to price increases intended to compensate for the costs of recycling, starting August 13, 2005.      Compliance withincrease in cost. However, it is too early to tell whether consumer and purchasing patterns across 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 transpositionEU member states after implementation of the Directive by EU Member States may changewill resemble those in Sweden in 2001. Implementation of the requirements finally placed as products.RoHS Directive      In December of 2002 theThe European Union also has adopted the RoHS (Restriction“Directive on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment) directiveEquipment”, known as the RoHS Directive. This Directive, which has not yet been implemented in the national legislation of several Member States, will ban placement in the placing on theEU market of productselectrical or electronic equipment containing lead, mercury, cadmium, hexavalent chromium and two typesgroups of brominated flame retardants (PBB and PBDE) in components or materials from July 1, 2006.2006, with a limited number of exceptions.      Almost all Electrolux is currently conducting aelectrical products must be modified to some extent to fulfill the RoHS Directive, as some of the banned substances are commonly used at present. Electrolux continues its comprehensive program to identify all parts,cost-effective alternative components and materialsmanufacturing methods in order to comply with the RoHS Directive. The Group’s suppliers have been informed and phase-out programs are in place. Electrolux will not accept deliveries containing these substances. A phase outany of thesethe RoHS substances in supplied materials and components is scheduled forafter 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 has been used as a foam-blowing agent for refrigerators and freezers. In March 2004, Electrolux finalized the phase out of HCFC-141b and has now changed over to HFC-245fa in all operations in the United States.20 ISO Certification      Environmental management systems are implemented at most of the Group’s manufacturing facilities. The Group’s policy mandates that all manufacturing plants with at least 50 employees are required to be certified according to ISO 14001. Newly acquired facilities must complete the certification process within three years after acquisition. During 2003, 17 plants were certified according to ISO 14001, and at year-end 2003 a total of 74 plants, representing 95% of the required factory workshop area, were certified according to ISO 14001. 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 2829 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, 2003,2004, Electrolux occupied a total of 5858.6 million square feet of property, of which 1416.5 million were leased. Approximately 61%62% of the property portfolio is located in Europe.      The manufacturing operations of Electrolux were carried out at 9796 locations in 25 countries. The aggregate size of these factories, including warehouses and offices at the factory sites, was 36 million square feet. The factories are, with very few exceptions, owned by Electrolux. Most of the manufacturing facilities are 16 located in Europe, while Electrolux’s largest manufacturing facilities are located in the United States.Europe. Electrolux operates 14 plants in Sweden, which account for approximately 11% of the total value of its production.Sweden. 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 20032004 and Electrolux believes they will be adequate for the foreseeable future.      In addition to manufacturing facilities, Electrolux uses 2023 million square feet of administrative offices, warehouses, distribution facilities and sales branch offices. The majority of these buildings are leased. About 1.5 million square feet (of which approximately 20% were owned) were dedicated to division and country administrative headquarters.      �� Electrolux has plans to investIn 2003 and 2004 investments were authorized for a new plant in twoMexico and six new plants in Eastern Europe one new plant in Thailand and Mexico, and increase capacity of an existing plant in Poland.Asia. The following table provides details of these facilities.facilities:                                   Increase             New plant   New plant   capacity   New plant   New plant     in Hungary   in Russia   in Poland   in Mexico   in Thailand Product   Refrigerators/   Washing machines   Dryers   Refrigerators   Washing machines     freezers                 Annual capacity   560,000   150,000   From 200,000 to   1,600,000   200,000         (Phase 1)   800,000         Investment   SEK 600m   SEK 80m   SEK 270m   SEK 1,100m   SEK 80m Start of production   2005   2004   2006   2005   2003                                           Product   Country   Annual Capacity (units)   Investment, SEKm     Start of Production Refrigerators   Mexico   1,600,000         1,200     2005-2006 Refrigerators/freezers   Hungary   560,000     600     2005 Washing machines   Russia   150,000     80     2005 Tumble dryers   Poland1   600,000     270     2006 Washing machines   Poland   600,000     500     2005-2006 Dishwashers   Poland   400,000     275     2005-2006 Washing machines   Thailand   200,000     80     2003 Hobs/hoods   China   680,000     54     2005 (1) Expansion of capacity at existing plant      See “Item 3.D—3.D¾Risk Factors — Factors—Electrolux is subject to risks relating to the relocation of manufacturing capacity to lower cost jurisdictions.capacity” and “Item 5.B – Liquid Funds and Capital Resources – Capital Expenditure.” 1721 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS GENERALGeneral      With net sales of SEK 124.1120.7 billion in 2003,2004, Electrolux believes it is the world’s largest producer of appliances and equipment for kitchen, cleaning and outdoor use combined, with operations in approximately 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 operatedproducts are classified in two areas: Consumer Durables and Professional Products. These areas form the following three business areas:basis for the Group’s primary segment information.   • Consumer Durables, consisting of comprises mainly major appliances (including refrigerators, freezers, cookers, dryers, washing machines, dishwashers, room air-conditioners and microwave ovens,ovens), as well as floor-care products and garden equipment and light-duty chainsaws;equipment;     • Professional Products includes products for both indoor and outdoor use. Operations within Indoor Products, consisting of comprise food-service equipment for hotels, restaurants and institutions, as well as laundry equipment for apartment-house laundry rooms, launderettes, hotels and other professional users. We divested our components product line in August 2003; and • ProfessionalOperations within Outdoor Products, consisting of comprise mainly high-performance chainsaws, clearing saws turf-care equipment,and lawn and garden equipment. The majority of these products are sold under the Husqvarna brand. This business area also includes power cutters, diamond tools and related equipment for cutting of, materials such as cementfor example, concrete and stone. Changes in segment reporting in 2004      As of January 1, 2004, the Group’s garden equipment for the consumer market will bewas reported in a new Outdoor Products segment within Consumer durables.Durables. The new Outdoor Products segment will also includeincludes consumer outdoor products sold under the Husqvarna brand, previously reported within Professional Outdoor Products. The new2004 reporting structure reflects thean organizational change within outdoor products in which all consumer and professional outdoor products have beenwere combined under one management. See “Change Changes in Segment Reportingsegment reporting in 2004” below.2005 SIGNIFICANT ACTIONS AND TRANSACTIONS AFFECTING RESULTS AND FINANCIAL CONDITION     As of 2005, the Group’s reporting structure will be changed to comprise Indoor Products and Outdoor Products instead of Consumer Durables and Professional Products, as previously. Indoor Products comprise operations in appliances and floor-care products, as well as the professional operations in foodservice equipment and laundry equipment. Outdoor Products comprise garden equipment for the consumer market and professional outdoor products. There will be no changes of the individual segments other than for the “Rest of the world” segment which will be divided into Latin America and Asia/Pacific.      The table below shows financial key data, excluding items affecting comparability for 2004, 2003 and 2002 in accordance with the new reporting structure established on January 1, 2005: 22                                           Operations, by business area   SEK million, unless otherwise stated   2004     Change, %     2003     Change, %     2002     Indoor Products                                         Europe                                         Net sales     42,703       -3.5       44,267       -1.9       45,128   Operating income1)     3,124       -5.0       3,289       4.9       3,136   Margin, %     7.3               7.4               6.9   Asia/Pacific                                         Net sales     9,139       0.3       9,112       -18.2       11,142   Operating income1)     -294       -191       -101       -731.3       16   Margin, %     -3.2               -1.1               0.1   North America                                         Net sales     30,767       -4.6       32,247       -8.5       35,245   Operating income1)     1,106       -30.1       1,583       -21.9       2,027   Margin, %     3.6               4.9               5.8   Latin America                                         Net sales     4,340       26.5       3,432       -6.1       3,654   Operating income1)     135       33.7       101       159.0       39   Margin, %     3.1               2.9               1.1   Professional Products                                         Net sales     6,440       -20.6       8,113       -25.5       10,887   Operating income1)     442       -20.5       556       -26.2       753   Margin, %     6.9               6.9               6.9     Total Indoor Products                                         Net sales     93,389       -3.9       97,171       -8.4       106,056   Operating income1)     4,513       -16.9       5,428       -9.1       5,971   Margin, %     4.8               5.6               5.6                                             Outdoor Products                                         Consumer Products                                         Net sales     17,579       2.1       17,223       -5.5       18,229   Operating income1)     1,552       4.0       1,493       3.3       1,445   Margin, %     8.8               8.7               7.9   Professional Products                                         Net sales     9,623       0.3       9,596       10.1       8,719   Operating income1)     1,479       1.2       1,462       2.2       1,431   Margin, %     15.4               15.2               16.4     Total Outdoor Products                                         Net sales     27,202       1.4       26,819       -0.5       26,948   Operating income1)     3,031       2.6       2,955       2.7       2,876   Margin, %     11.1               11.0               10.7   (1)        Operating income by business area is presented after excluding items affecting comparability because this is a measure which management uses to manage the operations of the Group. It is not, however, a measure under Swedish GAAP or U.S. GAAP. For more information on the use of non-GAAP measures and items affecting comparability, please see “Presentation of Information” and Note 7 to the consolidated financial statements. Significant Actions and Transactions affecting Results and Financial Condition      The following review of certain actions undertaken and transactions completed during the three year period 20012002 through 20032004 is significant for an understanding of the review of Electrolux’s results of operations and financial condition.      Acquisitions      Electrolux engageshas in acquisitions as part of its overall growth strategythe past, and may in the future, engage in acquisitions. It 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 markets where access to products that are manufactured locally and adapted to local requirements is vital, particularly for household appliances. 23      Electrolux made no major acquisitions during 2004. The following major acquisitions were effected during the last three years:2002 and 2003:                   Acquisitions   Business Area (Product Line)   Date   Purchase Price             (SEKm)(SEK million) 40% of Electrolux Home Appliances Co. Ltd, China   Consumer Durables (White Goods,(Core Appliances, Rest of the world)   December 29, 2003     35   Diamant Boart   Professional Outdoor (Construction Products)   July 1, 2002     1,700   Marazzini Ernesto S.p.A. Consumer Durables (Garden Equipment) July 1, 2001 145 Email Ltd. Consumer Durables (White Goods) February 1, 2001 2,270 18      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, 26 non-core operations have been divested representing total annual sales of almost SEK 34 billion and 35,000 employees. During 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 had total sales of approximately SEK 4,200 million and approximately 5,200 employees in 2002. The divestment of the compressor operation generated a capital loss of SEK 85 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 2003.      Electrolux effected no major dispositions during 2004. The following major dispositions were effected during the last three years:2002 and 2003:                     Approximate                           External   No. of   External   Approximate No. of Divestments   Business Area (Product Line)   Date   Sales1   Employees   Business Area (Product Line)   Date   Sales1   Employees           (SEKm)           (SEK million)   Compressor operation   Professional Indoor (Components)   August 1, 2003     2,800       4,100     Professional Indoor (Components)   August 1, 2003     2,800       4,100   50% interest in Vestfrost A/S.   Consumer Durables (White Goods, Europe)   August 1, 2003     1,400       1,100                           50% interest in Vestfrost A/S   Consumer Durables (Core Appliances, Europe)   August 1, 2003     1,400       1,100                           Zanussi Metallurgica   Professional Indoor (Components)   July 1, 2002     600       640     Professional Indoor (Components)   July 1, 2002     600       640                           European motor operation   Professional Indoor (Components)   April 1, 2002     950       1,950     Professional Indoor (Components)   April 1, 2002     950       1,950                           Mexican compressor plant   Professional Indoor (Components)   April 1, 2002     180       240     Professional Indoor (Components)   April 1, 2002     180       240                           European home comfort operation   Consumer Durables (Home Comfort)   January 1, 2002     850       280     Consumer Durables (Home Comfort)   January 1, 2002     850       280                           Remainder of leisure appliance product line   Consumer Durables (Leisure Appliance)   January 1, 2002     1,300       1,400     Consumer Durables (Leisure Appliance)   January 1, 2002     1,300       1,400   FHP Elmotor   Professional Indoor (Components)   November 30, 2001     265       265   Electrolux Baking S.A.   Professional Indoor (Food-Service)   October 1, 2001     315       230   Major portion of leisure-appliances product line2   Consumer Durables (Leisure Appliance)   July 31, 2001     4,200       2,200   Majority interests in Veneta Factoring S.p.A   Group Treasury   April 26, 2001     —       30   1.   Represents external sales of the divested operations for the full fiscal year preceding the year of divestiture. 2. This disposition generated a capital gain in 2001 of approximately SEK 3,120 million and the disposition of the remaining part of the leisure-appliances product line generated a capital gain of SEK 1,800 million when it was divested in January 2002. Spin-off of Outdoor Products      The Board intends to spin-off the Group’s Outdoor Products operation as a separate unit to create the best possible framework for continued profitable growth for this operation, as well as to create value for shareholders. The aim is to achieve a spin-off in a cost-efficient way, which is expected to be finalized no later than mid-2006. In 2004, the Outdoor Products operation (both consumer and professional outdoor products) had total sales of approximately SEK 27 billion, an operating income of approximately SEK 3 billion and about 11,500 employees.      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 24 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.cost-savings.” The costs of the restructuring programs are included in “items affecting comparability” as set forth below. 192004 Restructuring Program      In January 2004, it was decided that the refrigerator plant in Greenville, Michigan, USA, would be closed during 2005. Most of production in Greenville will be transferred to a new plant which is being built in Mexico. The Company will invest SEK 1,200 million in the Mexico plant, which will have an annual capacity of 1,600,000 units. Start-up of production is planned for in 2005. The Greenville plant has approximately 2,700 employees. The cost of closing the plant is estimated at SEK 1,100 million, of which SEK 979 million was charged against operating income in the first quarter of 2004 within items affecting comparability. Approximately half of the cost refers to write-downs on assets.      In May 2004, it was decided that the Group’s vacuum cleaner plant in Västervik, Sweden, would be closed during the first quarter of 2005. Production was gradually transferred during the year to the Group’s plant in Hungary. The Västervik plant had approximately 500 employees. The cost for closing the plant amounted to SEK 220 million, of which SEK 167 million and SEK 20 million were charged against operating income in the second and third quarter respectively, within items affecting comparability. The remaining part was taken in operating income for Consumer Durables Europe in the fourth quarter of 2004.      In July 2004, a restructuring program was initiated to improve profitability in the Group’s vacuum-cleaner operation in the United States. The cost of the program amounted to approximately SEK 153 million, which was charged against operating income in the third quarter within items affecting comparability. The program includes closure of a plant in El Paso, Texas and transfer of production to the Group’s plant in Mexico, as well as outsourcing of components manufactured at the Mexican plant. The program was largely finalized during the fourth quarter and affected about 850 employees.      In the course of the year restructuring measures were also implemented within the Australian appliance operation, including production shutdowns at the cooker-hood plant in Dudley Park, Adelaide, the small refrigerator and freezer plant in Orange, the motor plant in Adelaide and the cooker plant in New Zealand, as well as divestment of the tooling business. The cost of these measures amounted to SEK 205 million, of which SEK 103 million was taken as a charge against operating income in the third quarter within items affecting comparability. The remaining part was taken in operating income in the third and fourth quarter within Consumer Durables Rest of the world. The changes affect about 550 employees.      In November 2004 it was decided that the cooker plant in Reims, France would be closed at the end of the first quarter of 2005. The plant has approximately 240 employees. The cost of the closure, including write-down of assets and other related costs, was SEK 289 million, which was charged against operating income in the fourth quarter within items affecting comparability.      In December 2004, it was decided that the factory for tumble-dryers in Tommerup, Denmark would be closed. Production at this plant is mainly for the professional market. Production will gradually be transferred to a new plant in Thailand and to a plant in Sweden. The transfer will start at the beginning of 2006 and is scheduled for completion at the end of 2006, when all production at Tommerup will be discontinued. The cost of the closure amounts to SEK 49 million which was charged against operating income in the fourth quarter within items affecting comparability. Approximately 180 employees will be affected. Restructuring To Finalize Most Relocation By 2008      In order to strengthen the Group’s long-term competitiveness and secure its position as a leader in appliances, the Group will accelerate the ongoing process of consolidation and relocation of production.      The measures are intended to be implemented in 2005-2008 and are expected to involve costs of approximately SEK 8-10 billion, which will be charged on an on-going basis. About two-thirds of the costs will relate to cash items, and the rest to write-downs on assets. 25      Savings will be generated gradually and are estimated to amount to approximately SEK 2.5-3.5 billion on an annual basis from 2009.      The intention is to finalize most relocation by 2008 and that measures thereafter will refer mainly to normal efficiency improvements.      During 2004, the Group decided to close four plants within appliances and two within floor-care products. After these plants have been closed, Electrolux will operate a total of 43 production units within appliances and floor-care products, of which 16 are in low-cost countries. It is estimated that about half of the remaining plants in high-cost countries are at risk and may need to be relocated.      2002 Restructuring Program      The restructuring measures announced in December 2002 (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 1,338 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. As of December 31, 2003, approximately SEK 1,241 million had been utilized with employee layoffs of 4,946. Annual savings resulting from these measures were 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 estimates future annual savings from these measures of an additional SEK 112 million in 2004. Total savings are estimated at approximately SEK 340 million on an annual basis from 2005.layoffs.      The following table sets forth the results of our 2002 Restructuring Program:                                                               Estimated             Utilized as of           additional             December 31,   Savings   savings     Total cost   2003   2003   2004     (SEK millions) Major appliances, Rest of the world     613       560       84       28   Major appliances, North America     396       396       100       45   Major appliances, Europe     177       133       46       39                                     Total major appliances     1,186       1,089       230       112   Compressors     152       152       16       —                                     Total     1,338 (1)     1,241       246       112   1. SEK 567 million of the total cost referred to write-downs of assets. 2001 Restructuring Program      The restructuring measures announced in the third and fourth quarters of 2001 (the “2001 Restructuring Program”) are proceeding as planned and were substantially completed during 2003. The 2001 Restructuring Program focused on operations in components and white goods, and included 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 4,549 employees to date. Approximately 50% of the 2001 Restructuring Program (SEK 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 3,261 million was recorded against operating income in 2001 with respect to the 2001 Restructuring Program. Of this amount, approximately SEK 3,050 million had been utilized as of December 31, 2003. The remaining part of the provision refers mainly to redundancy payments. Annual savings resulting from the 2001 Restructuring Program amounted to approximately SEK 897 million in 2002 and approximately SEK 1,089 million in 2003. 20      Other Factors Affecting Results      Impairment of Assets      All long-lived assets, including goodwill, are evaluated for impairment yearly or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to its 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 impairment charges have been recorded when this information indicated that the carrying amount of an asset was not recoverable. In the majority of cases, however, market value has not been available, and the fair value has been estimated by using the discounted cash flow method based on expected future results. Significant differences in the estimation of expected future results and the discount rates used could have resulted in different asset valuations. No major impairment charges were made as a result of the annual test performed in December 2004. In 2003, there was a write-down of assets in Nordwaggon. Nordwaggon is a Swedish-based railcar operator that is owned 50% by Electrolux and 50% by the Swedish-state-owned Swecarrier. Nordwaggon has made a write-down and taken a provision referring to railcars. The Group’s participation has therefore been written down in the amount of SEK 85 million.      Outside of the restructuring programs, write-downs of assets were made following impairment tests at year-end 2002 in the amount of SEK 1,006 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 2004, changes in exchange rates compared to the previous year had a negative impact of approximately SEK -84 million on operating income. Approximately SEK -214 million of this amount referred to translation of income statements in subsidiaries, resulting mainly from the strengthening of the Swedish krona against the U.S. dollar. Transaction effects, net of hedging contracts, amounted to approximately SEK 130 million and referred largely to the strengthening of the British pound against the euro. The effect of changes in exchange rates on income after financial items amounted to approximately SEK -87 million. 26      During 2003, changes in exchange rates had a net negative impact on operating income of approximately SEK –930 million (-216).million. 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 wasTransaction effects, net of hedging contracts, amounted to approximately SEK –320 million (20) and refersreferred 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 –216 million (641), and on income after financial items of approximately SEK –100 million (566). Of the latter amount, approximately SEK –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.million.      Seasonality      Demand for certain of Electrolux’s products is affected by seasonality. Generally, market demand in the outdoors products segment and for room air conditioners is lower during the winter season. As a result, Electrolux’s outdoor products and room air conditioners product line experience most of their sales volume and profitability in the first seven months of the year. On a year-to-year basis, market demand for lawn movers,mowers, trimmers and air conditioners is also affected by the weather. Electrolux expects this seasonality to continue in the future. ITEMS AFFECTING COMPARABILITYItems Affecting Comparability      In accordance with Swedish GAAP, companies are required to disclose information in their financial statements as to events and transactions with effects on income that are of significance when income from the period is compared with that of other periods. Electrolux reports these events and transactions on the line-item “Items affecting comparability” which appears separately on the face of the income statement and in the notes to the financial statements.      Items affecting comparability included in operating income amounted to SEK –463–1,960 million in 2004, consisting of costs for the closure of the following plants: the vacuum-cleaner plant in El Paso, USA; the refrigerator plant in Greenville, USA; the vacuum-cleaner plant in Västervik, Sweden; the cooker plant in Reims, France; and the tumble dryer factory in Tommerup, Denmark. Items affecting comparability also includes costs relating to restructuring measures implemented within the Australian appliances operations, the settlement of a vacuum-cleaner lawsuit in the United States as well as reversals of unused amounts from previous restructuring programs. Items affecting comparability included in operating income amounted to SEK -463 million in 2003 (consisting of a capital loss on its compressor product line of SEK –85-85 million, provision for loan guarantees of SEK –293-293 million and impairment charges of SEK –85-85 million), and SEK –434-434 million in 2002 (consisting of capital gains on the sale of leisure appliances of SEK 1,800 million and other capital gains of SEK 110 million, offset by restructuring and impairment charges of SEK 2,344 million) and SEK –141 million in 2001 (consisting of capital gains on the sale of leisure appliances of SEK 3,120 million, offset by restructuring and impairment charges of SEK 3,261 million). These numbers include the capital gains and 2127 losses                               Items affecting comparability(1)                   SEK million   2004     2003     2002     Restructuring provisions and write-downs                         Refrigerator plant in Greenville, USA (Q1 2004)     -979                   Vacuum-cleaner plant in Västervik, Sweden (Q3, Q2 2004)     -187                   Floor-care products, North America (Q3 2004)     -153                   Appliances, Australia (Q3 2004)     -103                   Cooker factory in Reims, France (Q4 2004)     -289                   Tumble dryer plant, Denmark (Q4 2004)     -49                   Reversal of unused restructuring provisions (Q4 2004)     39                   Major appliances, mainly outside Europe, and compressors                     -1,338   Write-down of assets within compressors and other underperforming operations                     -1,006   Write-down of participation in Nordwaggon (Q4 2003)             -85           Capital gains and losses on divestments                         Compressor operation (Q3 2003)             -85           Leisure-appliance operation                     1,800   European home-comfort operation                     85   Zanussi Metallurgica and other                     25   Other                         Settlement in vacuum-cleaner lawsuit in USA (Q2 2004)     -239                   Provision for German launderette operators (Q3 2003)             -293             Total     -1,960       -463       -434   A.Operating Results      The following table sets out selected income statement data for the years ended December 31, 2004, 2003 and 2002:                           Consolidated Income Statement Data   2004     2003     2002               (SEK million)           Net Sales     120,651       124,077       133,150   Operating Income     4,714       7,175       7,731   Income After Financial Items     4,359       7,006       7,545   Net Income     3,148       4,778       5,095   Results of Operations For 2004 as Compared to 2003 Consolidated Results Consolidated Net Sales      Net sales for the Electrolux Group in 2004 amounted to SEK 120,651 million, as compared to SEK 124,077 million in 2003. The decline refers to changes in exchange rates and divestments, while changes in volume/price/mix had a positive effect.      In terms of business areas, net sales for Consumer Durables declined by 1.6% to SEK 104,528 million (106,281) and net sales for Professional Products by 9.3% to SEK 16,063 million (17,709). The decline for Consumer Durables was mainly due to changes in exchange rates, related primarily to the weakening of the U.S. dollar against the Swedish krona. The decline for Professional Products referred to divestments and changes in exchange rates.      In comparable currencies, sales for Consumer Durables increased by 2.6%, while sales for Professional Products declined by 7.0%. 28      The following table sets forth details of changes in Group net sales in 2004 and 2003:                       2004     2003       %     %   Changes in Group structure(1)     -2.0       -0.9   Changes in exchange rates     -4.0       -9.2   Changes in volume/price/mix     3.2       3.3                 Total     -2.8       -6.8   1. For further details of changes in the Group structure, see “¾Significant Actions and Transactions Affecting Results and Financial Condition” above Consolidated Operating Income      The Group’s operating income for 2004 decreased by 34.3% to SEK 4,714 million (7,175), corresponding to 3.9% (5.8) of net sales. The decline relates mainly to costs for restructuring within Consumer Durables, which amounted to SEK 1,711 million in 2004. See “Item 5—Operating and Financial Review and Prospects—Items affecting comparability”. Depreciation and amortization in 2004 amounted to SEK 3,178 million (3,353), of which SEK 155 million (182) referred to goodwill.      Excluding items affecting comparability, operating income for Consumer Durables declined by 11.7% as a result of lower volumes in some product categories and markets, downward pressure on prices, higher investments in brand building and R&D, as well as higher costs for materials and components. The margin for Consumer Durables were lower than in the previous year. Operating income for Professional Products, excluding items affecting comparability, declined by 4.8% to SEK 1,921 million (2,018), due to divestments and changes in exchange rates. Margin improved over the previous year.      In comparable currencies, operating income for Consumer Durables decreased by 8.4% and for Professional Products by 3.7%. Income After Financial Items      Income after financial items decreased by 37.8% to SEK 4,359 million (7,006) corresponding to 3.6% (5.6) of net sales. Net financial items declined to SEK –355 million (–169), mainly due to higher costs for hedging the Group’s net investments in foreign subsidiaries following the decline in Swedish interest rates. Increased interest rates on borrowings in U.S. dollar, and lower interest income as a result of lower Swedish and Euro interest rates also had a negative impact. Taxes      Total taxes in 2004 amounted to SEK 1,210 million (2,226), corresponding to 27.8% (31.8) of income after financial items. The effective tax rate (excluding items affecting comparability) in 2004 was 29,8%, as compared to 29.8% in 2003. Consolidated Results Excluding Items Affecting Comparability      As discussed above, Swedish GAAP requires companies to disclose information in their financial statements as to events and transactions with effects on income that are of significance when income from divestituresthe period is compared with that of operationsother periods. Electrolux reports these events and costs relating to restructuringtransactions on the line-item “Items affecting comparability” which appears separately on the face of the income statement and impairment. Please refer toin Note 7 to the consolidated financial statements set forth elsewhere herein. The above income figures for a description of the items. CHANGES IN SEGMENT REPORTING IN 2004      As of January 1, 2004 the Group’s garden equipment for the consumer market will be reported in a new Outdoor Products segment within Consumer Durables. The new Outdoor Products segment will also include consumer outdoor products sold under the Husqvarna brand, previously reported within Professional Outdoor Products. The new reporting structure reflects the organizational change within outdoor products in which all consumer and professional outdoor products have been combined under one management. The tables below show financial key data, excluding items affecting comparability in the amount of SEK -1,960 million (-463). Excluding items affecting comparability, operating income for 2003, 2002 and 20012004 declined by 12.6% to SEK 6,674 million (7,638), which represents 5.5% (6.2) of net sales. Income after financial items decreased by 15.4% to SEK 6,319 million (7,469), which corresponds to 5.2% (6.0) of net sales. Net income declined by 15.4% to SEK 4,435 million (5,241), corresponding to a decline of 11.1% in accordance with the new reporting structure.net income per share to SEK 14.87 (16.73). Excluding items affecting Consumer Durables                               2003   2002   2001     (SEKm, unless otherwise stated) Europe                         Net sales     44,267       45,128       44,694   Operating income1     3,289       3,136       2,569   Operating margin, %2     7.4       6.9       5.7   Net assets3     5,873       6,613       8,239   Average net assets4     7,139       7,606       9,319   Return on net assets, %5     46.1       41.2       27.6   Capital expenditure     1,202       1,273       1,200   Average number of employees     27,788       29,837       30,533                             North America                         Net sales     32,247       35,245       32,752   Operating income1     1,583       2,027       807   Operating margin, %2     4.9       5.8       2.5   Net assets3     7,683       8,678       10,055   Average net assets4     8,404       9,933       9,766   Return on net assets, %5     18.8       20.4       8.3   Capital expenditure     618       477       922   Average number of employees     15,249       15,101       13,544                             22                               2003   2002   2001     (SEKm, unless otherwise stated) Rest of the world                         Net sales     12,544       14,796       14,932   Operating income1     0       55       317   Operating margin, %2     0.0       0.4       2.1   Net assets3     4,420       4,114       6,639   Average net assets4     4,265       5,252       6,255   Return on net assets, %5     0.0       1.0       5.1   Capital expenditure     470       406       335   Average number of employees     15,389       17,484       18,830                             Outdoor Products                         Net sales     17,223       18,229       18,541   Operating income1     1,493       1,445       952   Operating margin, %2     8.7       7.9       5.1   Net assets3     4,498       5,068       5,850   Average net assets4     5,838       6,349       6,986   Return on net assets, %5     25.6       22.8       13.6   Capital expenditure     560       566       655   Average number of employees     5,633       4,415       4,269                             Professional Products                               2003   2002   2001     (SEKm, unless otherwise stated) Professional Indoor Products                         Net sales     8,113       10,887       17,073   Operating income1     556       753       1,070   Operating margin, %2     6.9       6.9       6.3   Net assets3     974       1,630       4,771   Average net assets4     1,451       3,425       6,817   Return on net assets, %5     38.3       22.0       15.7   Capital expenditure     278       295       657   Average number of employees     6,126       7,995       14,429                             Professional Outdoor Products                         Net sales     9,596       8,719       7,523   Operating income1     1,462       1,431       1,297   Operating margin, %2     15.2       16.4       17.2   Net assets3     4,117       3,746       2,626   Average net assets4     4,183       2,921       2,856   Return on net assets, %5     35.0       49.0       45.4   Capital expenditure     283       227       209   Average number of employees     5,759       5,781       4,057                             2329 comparability, the effective tax rate was 29.8% (29.8). The return on equity was 17.9% (18.9) and the return on net assets was 21.7% (23.7).                                               Key data excluding items affecting comparability(1)                               SEK million, unless otherwise stated   2004       Change   2003       Change   2002     Net sales     120,651       -2.8 %     124,077       -6.8 %     133,150   Operating income     6,674       -13 %     7,638       -6.5 %     8,165   Margin, %     5.5               6.2               6.1   Income after financial items     6,319       -15 %     7,469       -6.4 %     7,979   Net income     4,435       -15 %     5,241       -5.1 %     5,521   Net income per share, SEK2     14.87       -11 %     16.73       -0.9 %     16.88     Dividend per share, SEK     7.00 3)     7.7 %     6.50       8.3 %     6.00   Return on equity, %     17.9               18.9               18.6   Return on net assets, %     21.7               23.7               22.6   Value creation     2,978       -471     3,449       -12     3,461   Net debt/equity ratio     0.05               0.00               0.05   Operating cash flow     3,224       13 %     2,866       -63 %     7,665   Capital expenditure     4,515       30 %     3,463       3.8 %     3,335   Average number of employees     72,382       -6.2 %     77,140       -5.9 %     81,971     1. For key data, including items affecting comparability, see “Item 3.A—Key Information—Selected Financial Data”. 2. Basic. 3. Proposed by the Board of Directors.      OtherValue Creation      Value creation is a performance 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 not a measure determined in accordance with GAAP. Electrolux believes however that its definition links operating income and asset efficiency with the cost of the capital employed in operations. Value creation should not be considered as an alternative measure of performance and may not be comparable to similar measures disclosed by other companies because value creation is not uniformly defined.      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:                                               2004     2003     2002     2001     2000               (SEK millions, except percentages)           Operating Income     4,714       7,175       7,731       6,281       7,602                                             Excluding items affecting comparability     1,960       463       434       141       448                                         6,674       7,638       8,165       6,422       8,050   Less asset capital charge     3,696       4,189       4,704       6,160       5,627                                                                             Value Creation     2,978       3,449       3,461       262       2,423                                                                             Weighted Average Cost of Capital x     12%       13%       13%       14%       14%                                   Average net assets =     30,797       32,226       36,182       44,002       40,194                                   Asset capital charge     3,696       4,189       4,704       6,160       5,627                                        The cost of capital varies between different countries and business units due to country-specific factors such as interest rates, risk premiums and tax rates. 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. Net assets are total assets exclusive of liquid funds (short-term investments and cash and bank balances), interest-bearing 30 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.      Total value created in 2004 amounted to SEK 2,978 million (3,449). The decline refers mainly to the decrease in operating income, which was partly offset by a decline in average net assets. The capital turnover rate was 3.92, as against 3.85 in the previous year. The WACC rate for 2004 was computed at 12%, as compared against 13% for 2003. The change in the WACC rate had a positive impact of SEK 308 million on value created in 2004. Results of Operations by Business Area      Electrolux products are classified in two areas: Consumer Durables and Professional Products. These areas form the basis for the Group’s primary segment information. •   Consumer Durables comprises mainly major appliances, (including refrigerators, freezers, cookers, dryers, washing machines, dishwashers, room air-conditioners and microwave ovens), as well as floor-care products and garden equipment; •   Professional Products includes products for both indoor and outdoor use. Operations within Indoor Products comprise food-service equipment for hotels, restaurants and institutions, as well as laundry equipment for apartment-house laundry rooms, launderettes, hotels and other professional users. Operations within Outdoor Products comprise mainly high-performance chainsaws, clearing saws and lawn and garden equipment. The majority of these products are sold under the Husqvarna brand. This business area also includes power cutters, diamond tools and related equipment for cutting of, for example, concrete and stone.      Within Consumer Durables, the white-goods operation is managed regionally, while floor-care products is managed globally. Consumer Outdoor Products is, together with Professional Outdoor Products, managed globally. In the Group’s external financial reporting, floor-care products is reported together with white goods within the respective geographical regions, since these products are sold in the same markets and to a large extent to the same retailers, and are therefore exposed to similar risks. Consumer Outdoor Products is reported separately within Consumer Durables.      The following tables set out certain information regarding Electrolux’s net sales and operating income by business area.                                                   Net Sales by Business Area   2004     20032     20033       SEK million     %1     SEK million     %1     SEK million     %1   Consumer Durables     104,528       86.6       106,281       85.6       105,021       84.7   Professional Products     16,063       13.3       17,709       14.3       18,969       15.2   Other     60       0.1       87       0.1       87       0.1                                         Total consolidated amounts     120,651       100.0       124,077       100.0       124,077       100.0                                         1. As a percentage of total consolidated net sales. 2. Based on 2004 segmental reporting structure. See “Changes in Segment Reporting in 2004” above. 3. Based on 2003 segmental reporting structure. 31                                                                                     Operating Income by Business Area (Excluding Items Affecting Comparability)   2004     20033     20034     SEK million     %2     SEK million     %2     SEK million     %2   Consumer Durables1     5,623       74.5       6,365       75.9       6,250       74.6   Professional Products1     1,921       25.5       2,018       24.1       2,132       25.4   Common Group costs, etc.     -870       —       -745       —       -744       —   Items affecting comparability     -1,960       —       -463       —       -463       —                                         Total Operating Income     4,714       —       7,175       —       7,175       —                                         1. Operating income by business area is presented after excluding items affecting comparability because this is a measure which management uses to manage the operations of the Group. It is not, however, a measure under Swedish GAAP or U.S. GAAP. For more information on the use of non-GAAP measures and items affecting comparability, please see “Presentation of Information” and Note 7 to the consolidated financial statements. 2. As a percentage of total operating income, excluding items affecting comparability and common group costs. 3. Based on 2004 segmental reporting structure. See “Changes in Segment Reporting in 2004” above. 4. Based on 2003 segmental reporting structure. The following discussion includes statements about operating income and operating margin with respect to the Consumer Durables and Professional Products business areas. Both operating income and operating margin for these business areas are presented excluding items affecting comparability. These financial measures are not measures under Swedish GAAP or U.S. GAAP. For more information on non-GAAP financial measures and items affecting comparability and U.S. GAAP, see “Presentation of Information” and Note 30 to the consolidated financial statements. Consumer Durables                 Consumer Durables by Region   2004   2003                             (SEK million, except percentage     2003   2002   2001   amounts and employee numbers)   Europe     (SEKm, unless otherwise stated)   Net sales   87   146   288     42,703   44,267   Operating income6   -1,208   -1,116   -731   Net assets7   -1,143   -1,933   -1,018   Average net assets8   -1,209   -511   -2   Operating income(1)   3,124   3,289   Operating margin, %(2)   7.3   7.4   Net assets(3)   6,121   5,873   Return on net assets, %(4)   46.1   46.1   Capital expenditure   52   91   217     1,561   1,202   Average number of employees   1,196   1,358   1,477     26,146   27,788                   North America     Net sales   30,767   32,247   Operating income(1)   1,106   1,583   Operating margin, %(2)   3.6   4.9   Net assets(3)   6,619   7,683   Return on net assets, %(4)   14.3   18.8   Capital expenditure   1,439   618   Average number of employees   16,329   15,249   32                   Consumer Durables by Region   2004     2003       (SEK million, except percentage       amounts and employee numbers)   Rest of the world                                   Net sales     13,479       12,544   Operating income(1)     -159       0   Operating margin, %(2)     -1.2       0.0   Net assets(3)     5,062       4,420   Return on net assets, %(4)     -3.5       0.0   Capital expenditure     438       470   Average number of employees     13,547       15,389                     Consumer Outdoor Products                                   Net sales     17,579       17,223   Operating income(1)     1,552       1,493   Operating margin, %(2)     8.8       8.7   Net assets(3)     4,578       4,498   Return on net assets, %(4)     26.8       25.6   Capital expenditure     517       560   Average number of employees     6,041       5,633   1.   Excludes items affecting comparability.   2.   Defined as operating income excluding items affecting comparability expressed as a percentage of net sales.   3.   Defined as total assets exclusive of liquid funds, interest bearing financial receivables, as well as non-interest-bearing liabilities and excluding items affecting comparability.   4.   CalculatedDefined as (Opening balance 1stoperating income as a percentage of January + Closing balance 31st of March * 2 + Closing balance 30th of June * 2 + Closing balance 30th of September * 2 + Closing balance 31st of December)/8.average net assets, excluding items affecting comparability. Operations in Europe Major Appliances. Total industry shipments of core appliances in Europe in 2004 increased in volume by approximately 3.8% over 2003. Western Europe showed an increase of about 2%, while the increase in Eastern Europe was almost 9%. A total of 78.1 (73.1) million units of appliances (excluding microwave ovens) were estimated to have been shipped in the European market during 2004. Of these, a total of 56.4 (55.0) million units referred to Western Europe.      Group sales of appliances in Europe for the full year were somewhat lower than in 2003, mainly as a result of the divestment of Vestfrost in 2003, and lower volumes in Western Europe, particularly in Germany. Sales in Eastern Europe showed a continued positive trend. Operating income and margin declined as a result of lower volumes, higher investments in brand-building and increased costs for materials, particularly in the fourth quarter. Floor-care. Market demand for floor-care products in Europe rose by approximately 8% in 2004. The increase in demand referred primarily to the low-price segments. Group sales declined in comparison with the previous year. Operating income and margin declined as a result of lower volumes and downward pressure on prices. Costs related to transfer of production from Sweden to Hungary also had a negative impact. Operations in North America Major Appliances. In the United States, industry shipments of core appliances in 2004 increased in volume by approximately 8%, while shipments of major appliances (including room air-conditioners and microwave ovens) rose by approximately 6%. Total industry shipments in 2004 amounted to 47.1 (43.5) million units, excluding room air-conditioners and microwave ovens. 33      Group sales of core appliances in North America showed good growth in U.S. dollars, but declined in SEK. Operating income for the full year in U.S. dollars was in line with 2003, despite higher costs for materials and increased investments in product innovations and brand building. Sales in the fourth quarter were particularly strong and showed a significant increase in SEK. Operating income in the fourth quarter increased substantially and margin improved, as a result of higher volumes, improved productivity and a positive pricing trend. Floor-care Products. The market for floor-care products in the United States increased by approximately 4% in volume over the previous year. Group sales showed a marked decline. Operating income was substantially lower than in 2003 as a result of downward pressure on prices and lower volumes particularly in the lower price segments. Income in the fourth quarter was positive, following two weak quarters, as a result of implemented restructuring. Operations in Rest of the World Brazil.The market for core appliances in Brazil showed a strong upturn for the year as a whole. Group sales of appliances rose substantially on the basis of strong demand, increased prices and new product launches. Operating income improved and was positive. India and China.Group sales of appliances in India increased in comparison with the previous year, mainly within air-conditioners and microwave ovens, which have been added to the product offering. Operating income for the Indian operation improved substantially, but was still negative.      Group sales of appliances in China declined from the previous year. Operating income for the Chinese operation showed a substantial downturn in the fourth quarter and the operating loss for the full year was larger than in 2003. The negative trend in income in the fourth quarter was mainly due to an increase of the provision for warranties related to prior years. Lower volumes and downward pressure on prices also had a negative impact on operating income for the full year. Australia.The market for appliances in Australia increased in volume. Sales for the Group’s Australian operation were largely unchanged for the year as a whole. Operating income showed a substantial downturn for the full year, but improved considerably in the fourth quarter as a result of implemented restructuring and new product launches. Operating income was negatively impacted by costs for restructuring in the amount of approximately SEK 100 million. This in addition to the restructuring charge of SEK 103 million that was reported in the third quarter within items affecting comparability. Consumer Outdoor Products      Demand for consumer outdoor products in Europe in 2004 is estimated to have increased somewhat over the previous year. Sales for the Group’s European operation showed good growth. Operating income and margin improved considerably as a result of higher sales of products imported from the Group’s U.S. operation, an improved product mix and lower operating costs. Both sales and operating income for the Group’s North American operation increased somewhat in U.S. dollars but declined in SEK. Operating margin was largely unchanged in comparison with 2003. Professional Products                   Professional Indoor Products   2004     2003       (SEK million, except percentage       amounts and employee numbers)   Net sales     6,440       8,113   Operating income(1)     442       556   Operating margin, %(2)     6.9       6.9   Net assets(3)     1,018       974   Return on net assets, %(4)     41.7       38.3   Capital expenditure     144       278   Average number of employees     3,595       6,126   34                   Professional Outdoor Products   2004     2003       (SEK million, except percentage       amounts and employee numbers)   Net sales     9,623       9,596   Operating income(1)     1,479       1,462   Operating margin, %(2)     15.4       15.2   Net assets(3)     3,869       4,117   Return on net assets, %(4)     35.6       35.0   Capital expenditure     393       283   Average number of employees     5,616       5,759   1. Excludes items affecting comparability.   5.2. Defined as operating income excluding items affecting comparability expressed as a percentage of net sales. 3. Defined as total assets exclusive of liquid funds, interest bearing financial receivables, as well as non-interest-bearing liabilities and excluding items affecting comparability. 4.   Defined as operating income as a percentage of average net assets, excluding items affecting comparability. 6. Other operating income including items affecting comparability. 7. Other net assets including items affecting comparability. 8. Other average net assets including items affecting comparability. A. OPERATING RESULTS      The following table sets out selectedProfessional Indoor Products      Overall, sales of Professional Indoor Products were in line with the previous year, after adjustment for divestments. Operating income statement dataand margin improved somewhat for comparable units. Food-service equipment.Demand for food-service equipment in 2004 is estimated to have been somewhat lower than in the previous year. Group sales for the years ended December 31,year were largely unchanged. Operating income declined slightly, mainly due to the costs of entering the U.S. market. Laundry equipment.Group sales of laundry equipment in local currency were in line with the previous year. Operating income improved somewhat on the basis of implemented price increases and lower production costs, despite the negative impact of changes in exchange rates. Professional Outdoor Products      Demand for professional chainsaws in 2004 is estimated to have increased in most major markets. Group sales showed strong growth over the previous year.      Group sales of commercial lawn and garden equipment declined for the full year, mainly due to lower pre-season sales than in 2003. Overall, sales of construction equipment in local currency were in line with the previous year, showing an increase in North America and a decrease in Europe, Asia and Australia.      Total sales of Professional Outdoor Products increased in local currency. Operating income and margin were largely unchanged. Margin was negatively impacted by changes in exchange rates. Results of Operations For 2003 as Compared to 2002 and 2001:                           Consolidated Income Statement Data   2003   2002   2001     (SEK m) Net Sales     124,077       133,150       135,803   Operating Income     7,175       7,731       6,281   Income After Financial Items     7,006       7,545       5,215   Net Income     4,778       5,095       3,870   RESULTS OF OPERATIONS FOR 2003 AS COMPARED TO 2002      Consolidated Results      Consolidated Net Sales      Net sales for the Electrolux Group in 2003 amounted to SEK 124,077 million, as compared to SEK 133,150 million in 2002. This decrease primarily reflects changes in exchange rates. Net sales were also affected by divestments in certain operations, including the European compressor operation and Vestfrost A/S, which businesses generated aggregate sales of SEK 4,200 million in 2002.      In terms of business areas, net sales for Consumer Durables decreased by 5.8% to SEK 105,021 million (111,520). Aggregate net sales for Professional Products declined by 11.7% to SEK 18,969 million (21,484). 35      The decline for Consumer Durables is principally due to changes in exchange rates, and the decline for Professional Products is primarily due to divestments. 24      The following table sets forth details of changes in Group net sales in 2003 and 2002:                                           2003   2002   2001   2003   2002     %   %   %   Changes in Group structure1   -0.9   -3.4   2.4   Changes in Group structure(1)   -0.9   -3.4   Changes in exchange rates   -9.2   -4.1   9.1     -9.2   -4.1   Changes in volume/price/mix   3.3   5.5   -2.4     3.3   5.5                           Total     (6.8 )     (2.0 )   9.1     -6.8   -2.0   1.   For further details of changes in the Group structure, see “—“¾Significant Actions and Transactions Affecting Results and Financial Condition” above      Consolidated Operating Income      The Group’s operating income for 2003 decreased by 7.2% to SEK 7,175 million (7,731), which correspondscorresponding to 5.8% (5.8) of net sales. The decrease relates mainly to changes in exchange rates. Operating      Excluding items affecting comparability, operating income for Consumer Durables decreased by 5.1% to SEK 6,250 million (6,587). Aggregate operatingOperating income for the Professional Products, business areasexcluding items affecting comparability, decreased by 5.7% to SEK 2,132 million (2,261) due principally to changes in exchange rates. Depreciation and amortization in 2003 amounted to SEK 3,353 million (3,854) of which SEK 182 million (230) related to goodwill.      In comparable currencies, operating income for Consumer Durables increased by 3.4% and operating income for Professional Products declined by 1.9%. Income After Financial Items      Income after financial items decreased by 7.1% to SEK 7,006 million (7,545) representingcorresponding to 5.6% (5.7) of net sales. Net financial items amounted to SEK –169 million (–186 million),the. The improvement is due mainly to reduction in net borrowings. Total financial income amounted to SEK 794 million (947 million), while total financial expenses amounted to SEK –963 million (–1,133 million).      Taxes      Total taxes for 2003 amounted to SEK 2,226 million (2,459), corresponding to 31.8% (32.6) of income after financial items. The effective tax rate (excluding items affecting comparability) in 2003 was 29.8%, as compared to 30.9% in 2002.      Consolidated Results Excluding Items Affecting Comparability      As discussed above, Swedish GAAP requires companies to disclose information in their financial statements as to events and transactions with effects on income that are of significance when income from the period is compared with that of other periods. Electrolux reports these events and transactions on the line-item “Items affecting comparability” which appears separately on the face of the income statement and in Note 7 to the consolidated financial statements set forth elsewhere herein. During 2003, items affecting comparability amounted to SEK –463 million (–434). Excluding items affecting comparability, operating income decreased by 6.5% to SEK 7,638 million (8,165), representing 6.2% (6.1) of net sales, incomesales. Income after financial items declined by 6.4% to SEK 7,469 million (7,979), corresponding to 6.0% (6.0) of net sales, netsales. Net income decreased by 5.1% to SEK 5,241 million (5,521), and net income per share declined by 0.9% to SEK 16.75 (16.90). Also excludingExcluding such items affecting comparability, the effective tax rate was 29.8% (30.9%), the return on equity was 18.9% (18.6) and the return on net assets was 23.7% (22.6). 36      Value Creation      See “Results of Operations for 2004 as compared to 2003 – Value creation is a performance 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 not a measure 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 an alternative measure of performance and may not be comparable to similar measures disclosed by other companies because value creation is not uniformly defined. 25      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:                                               2003   2002   2001   2000   1999     (SEK millions, except percentages) Operating Income     7,175       7,731       6,281       7,602       7,204   Excluding items affecting comparability     463       434       141       448       216                                                   7,638       8,165       6,422       8,050       7,420   Less asset capital charge     4,189       4,704       6,160       5,627       5,638                                             Value Creation     3,449       3,461       262       2,423       1,782                                             Weighted Average Cost of Capital x     13 %     13 %     14 %     14 %     14 %                                           Average net assets =     32,226       36,182       44,002       40,194       40,270                                             Asset capital charge     4,189       4,704       6,160       5,627       5,638                                                  The cost of capital varies between different countries and business units due to country-specific factors such as interest rates, risk premiums and tax rates. 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. 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.Creation” above.      Total value created in 2003 amounted to SEK 3,449 million compared with SEK 3,461 million in the previous year. Value created was positively impacted by lower average net assets, excluding items affecting comparability, which declined to SEK 32,226 million (36,182). The decline in net assets was mainly due to changes in exchange rates and divestments, partially offset by an increase in working capital.      Results of Operations by Business Area      Electrolux operates 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 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. The following tables set out certain information regarding Electrolux’s net sales and operating income by business area.                                 2003   2002                                                     SEK   SEK       Net Sales by Business Area   2003   2002   2001   million   %1   million   %1     SEKm   %1   SEKm   %1   SEKm %1 Consumer Durables   105,021   84.7   111,520   83.7   108,990   80.3     105,021   84.7   111,520   83.8   Professional Indoor   8,113   6.5   10,887   8.2   17,073   12.6   Professional Outdoor   10,856   8.7   10,597   8.0   9,452   6.9   Professional Products   18,969   15.2   21,484   16.1   Other   87   0.1   146   0.1   288   0.2     87   0.1   146   0.1                                               Total consolidated amounts   124,077   100.0   133,150   100.0   135,803   100.0     124,077   100.0   133,150   100.0                                               1.   As a percentage of total consolidated net sales. 26                                                 2003     2002   Operating Income by Business Area (Excluding Items Affecting   SEK             SEK         Comparability)   million     %2     million     %2   Consumer Durables1     6,250       74.6       6,587       74.4   Professional Products1     2,132       25.4       2,261       25.6   Common Group costs, etc.     -744       —       -683       —   Items affecting comparability     -463       —       -434       —                             Total Operating Income     7,175       —       7,731       —                                                                               Operating Income by Business             Area (Excluding Items Affecting             Comparability)   2003   2002   2001     SEKm   %2   SEKm   %2   SEKm   %2                           Consumer Durables1     6,250       74.6       6,587       74.4       4,629       66.0   Professional Indoor1     556       6.6       753       8.5       1,070       15.3   Professional Outdoor1     1,576       18.8       1,508       17.1       1,313       18.7                                                     Common Group costs, etc.     -744       —       -683       —       -590       —   Items affecting comparability     -463       —       -434       —       -141       —                                                     Total Operating Income     7,175       —       7,731       —       6,281       —                                                     1.   Operating income by business area is presented after excluding items affecting comparability because this is a measure which management uses to manage the operations of the Group. It is not, however, a measure under Swedish GAAP or U.S. GAAP. For more information on the use of non-GAAP measures and items affecting comparability, please see “Presentation of Information” and Note 7 to the consolidated financial statements.   2.   As a percentage of total operating income, excluding items affecting comparability and common group costs.      Demand increased during 2003 in most of the Group’s product areas in both Europe and North America. Market conditions in Asia and Australia improved, while demand in Brazil showed a significant downturn.      The strengthening of the Swedish krona against most currencies during the year had a negative impact on sales and income, particularly for Consumer Durables in North America and Professional Outdoor Products.      The markets for Consumer Durables in both Europe and the USUnited States were characterized by an increased downward pressure on prices. This was offset, however, by improved manufacturing efficiencies, savings from restructuring and lower costs for materials and components.      Sales and operating income for Consumer Durables increased in comparable currencies, but declined in Swedish krona. Operating margin was largely unchanged compared with the previous year. 37      Sales for Professional Products declined, mainly as a result of the divestment of the compressor and motor operations within Indoor Products. Operating income was lower than in the previous year, but margin improved.      The following discussion includes statements about operating income and operating margin with respect to the Consumer Durables and Professional Products business areas. Both operating income and operating margin for these business areas are presented excluding items affecting comparability. These financial measures are not measures under Swedish GAAP or U.S. GAAP. For more information on non-GAAP financial measures and items affecting comparability and U.S. GAAP, see “Presentation of Information” and Note 2930 to the consolidated financial statements.      Consumer Durables                                         Consumer Durables By Region   2003   2002   2001   2003   2002     (SEKm, except percentage amounts and employee numbers)   (SEK million, except percentage ��   amounts and employee numbers)   Europe       Net Sales   47,312   48,250   47,200     47,312   48,250   Operating Income1.   3,382   3,265   2,528   Operating Margin, %2.   7.1   6.8   5.4   Net Assets3   6,977   7,576   9,426   Average net assets4   8,379   8,802   10,846   Return on net assets, %5   40.4   37.1   23.3   Operating Income(1)   3,382   3,265   Operating Margin, %(2)   7.1   6.8   Net Assets(3)   6,977   7,576   Return on net assets, %(4)   40.4   37.1   Capital Expenditure   1,269   1,328   1,244     1,269   1,328   Average number of employees   28,755   30,837   31,462     28,755   30,837                   North America     Net Sales   45,063   48,450   Operating Income(1)   2,866   3,271   Operating Margin, %(2)   6.4   6.8   Net Assets(3)   10,724   12,874   Return on net assets, %(4)   22.8   21.8   Capital Expenditure   1,089   984   Average number of employees   19,602   18,318     Rest of the world     Net Sales   12,646   14,820   Operating Income(1)   2   51   Operating Margin, %(2)   —   0.3   Net Assets(3)   4,461   3,913   Return on net assets, %(4)   —   0.3   Capital Expenditure   470   406   Average number of employees   15,418   17,518   27                           Consumer Durables By Region   2003   2002   2001     (SEKm, except percentage amounts and employee numbers) North America                         Net Sales     45,063       48,450       46,814   Operating Income1.     2,866       3,271       1,814   Operating Margin, %2     6.4       6.8       3.9   Net Assets3     10,724       12,874       14,330   Average net assets4     12,544       14,980       14,758   Return on net assets, %5     22.8       21.8       12.3   Capital Expenditure     1,089       984       1,530   Average number of employees     19,602       18,318       16,704                             Rest of the world                         Net Sales     12,646       14,820       14,976   Operating Income1     2       51       287   Operating Margin, %2     —       0.3       1.9   Net Assets3     4,461       3,913       6,754   Average net assets4     4,301       5,056       6,238   Return on net assets, %5     —       0.3       4.6   Capital Expenditure     470       406       334   Average number of employees     15,418       17,518       18,866                             1.   Excludes items affecting comparability.   2.   Defined as operating income excluding items affecting comparability expressed as a percentage of net sales.   3.   Defined as total assets exclusive of liquid funds, interest bearing financial receivables, as well as non-interest-bearing liabilities and excluding items affecting comparability.   4.   Calculated as (Opening balance 1st of January + Closing balance 31st of March * 2 + Closing balance 30th of June * 2 + Closing balance 30th of September * 2 + Closing balance 31st of December)/8. 5. Defined as operating income as a percentage of average net assets, excluding items affecting comparability.      Operations in Europe      White GoodsMajor Appliances. Industry shipments of core appliances in Europe increased in volume by approximately 4% during 2003 as compared with 2002. This industry-wide growth relates primarily to Eastern Europe with industry shipments increasing by approximately 10% during 2003 compared with 2002. Industry shipments of white goods in Western Europe increased by approximately 3%. A total of 72.6 (69.6) million units of appliances (excluding microwave ovens) were estimated to have been shipped in the European market 38 during 2003. Of these, a total of 55.0 (53.6) million units were estimated to have been shipped in Western Europe.      Group sales of appliances in Europe increased in volume, with growth particularly in Eastern Europe, Spain and the United Kingdom. Group operating income and margin was in line with the previous year.      Floor-care . The general market for floor-care products in Europe grew in volume terms, particularly in the lower price segments where Electrolux does not compete. Group sales for floor-care products declined compared with 2002, due principally to lower sales volumes. Operating income improved, principally as a result of a better product mix and implemented restructuring.      Consumer Outdoor Products . Demand for Group consumer outdoor products in Europe was weaker in 2003 than in 2002, mainly due to unfavorable weather. Group sales in Europe declined, although Group operating income improved.      Operations in North America      White GoodsMajor Appliances. In the United States, industry shipments of core appliances increased by approximately 4% from 2002. Industry shipments of major appliances (i.e., inclusive of room air-conditioners and microwave ovens) rose by approximately 8%. 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 43.5 (41.7) million units in 2003. 28      Group sales of appliances in North America grew in U.S. dollar terms. Operating income and margin increased in 2003 as a result of higher volumes, lower costs for materials and improved manufacturing efficiency.      Floor-care Products. Demand for floor-care products in the United States grew in 2003 compared with 2002, despite significant price erosion in the market. Sales for the Group’s American operation declined in local currency. Operating income showed a considerable downturn, mainly as a result of an unfavorable product mix and downward pressure on prices.      Consumer Outdoor Products. Demand for garden equipment in North America also improved. The Group achieved sales growth in U.S. dollar terms. Operating income increased substantially as a result of higher volumes and improved manufacturing efficiency.      Operations in Rest of the World      Brazil.The market for appliances in Brazil showed a considerable downturn for 2003. However, shipments in the fourth quarter of 2003 were largely unchanged compared with the same period in 2002. The market for appliances in Australia showed an upturn in volume in 2003 compared with the previous year. In Brazil, sales of appliances grew in local currency, but declined following translation into SEK. Operating income improved from the previous year, but was still negative. India and China. In India and China, sales of appliances were substantially lower in 2003 compared with 2002 as a result of implemented restructuring and focusing of operations on core areas. Income for both operations remained negative in 2003, but improved from 2002, mainly in the fourth quarter. In China, production of refrigerators was consolidated from two plants to one. In India, production was discontinued at both compressor plants and at one of the three refrigerator plants. Capacity was reduced in the remaining refrigerator plants. In addition, as Asia is becoming an important base for sourcing, a new purchasing office was established in the region in 2003. Both the Indian and Chinese operations are being increasingly integrated into the Group, participating in global products councils, and benefiting from other supporting Group processes in purchasing, talent management, branding and improved manufacturing efficiency.      Australia.The Australian operation, which was acquired at the beginning of 2001, showed a decline in both sales and operating income, although operating margin in 2003 was in line with 2002. The Australian operation markets appliances under eight different brands. During the year, a process was initiated to reduce the 39 number of brands to three and at the same time introduce the Electrolux brand. The Group is also strengthening the product portfolio in Australia with a substantial number of new products in 2004.      Professional Products                           Professional Products   2003   2002   2001     (SEKm, except percentage amounts and employee numbers) Outdoor Products                         Net Sales     10,856       10,597       9,452   Operating Income1.     1,576       1,508       1,313   Operating Margin, %2     14.5       14.2       13.9   Net Assets3     4,429       3,866       2,901   Average net assets4     4,605       3,223       3,340   Return on net assets, %5     34.2       46.9       39.5   Capital Expenditure     305       229       213   Average number of employees     6,043       5,945       4,201                                               Professional Products   2003     2002       (SEK million, except percentage       amounts and employee numbers)   Professional Outdoor Products                 Net Sales     10,856       10,597   Operating Income(1)     1,576       1,508   Operating Margin, %(2)     14.5       14.2   Net Assets(3)     4,429       3,866   Return on net assets, %(4)     34.2       46.9   Capital Expenditure     305       229   Average number of employees     6,043       5,945                     Professional Indoor Products                                   Net Sales     8,113       10,887   Operating Income(1)     556       753   Operating Margin, %(2)     6.9       6.9   Net Assets(3)     974       1,621   Return on net assets, %(4)     38.3       22.0   Capital Expenditure     278       295   Average number of employees     6,126       7,995   29                           Professional Products   2003   2002   2001     (SEKm, except percentage amounts and employee numbers) Indoor Products                         Net Sales     8,113       10,887       17,073   Operating Income1     556       753       1,070   Operating Margin, %2     6.9       6.9       6.3   Net Assets3     974       1,621       4,769   Average net assets4     1,451       3,425       6,817   Return on net assets, %5     38.3       22.0       15.7   Capital Expenditure     278       295       657   Average number of employees     6,126       7,995       14,429                             1.   Excludes items affecting comparability.   2.   Defined as operating income excluding items affecting comparability expressed as a percentage of net sales.   3.   Defined as total assets exclusive of liquid funds, interest bearing financial receivables, as well as non-interest-bearing liabilities and excluding items affecting comparability.   4.   Calculated as (Opening balance 1st of January + Closing balance 31st of March * 2 + Closing balance 30th of June * 2 + Closing balance 30th of September * 2 + Closing balance 31st of December)/8. 5. Defined as operating income as a percentage of average net assets, excluding items affecting comparability.      Professional Indoor Products      Total sales for Professional Indoor Products were lower in 2003 compared to 2002 mainly as a result of the divestment of the compressor operation. Operating income declined, but with an unchanged margin.      Food-Service Equipment . Demand for food-service equipment was considerably lower in 2003 compared to 2002 particularly in some key markets in Southern Europe and the Nordic region. Sales declined as operating income showed a substantial downturn.      Laundry Equipment. Group sales of laundry equipment declined slightly in 2003 due to lower demand in the United States and Japan. Group sales increased for comparable units. Operating income decreased, mainly as a result of changes in exchange rates. Operating margin was somewhat lower than in the previous year.      Components. As of August 1, 2003, the Group divested its compressor operation, which had external sales of approximately SEK 2,800 million in 2002, and about 4,100 employees. The sale generated a capital loss of SEK 85 million.      During 2002, the Group divested Zanussi Metallurgica, its European motor operation and its Mexican compressor plant. These operations had aggregate annual sales of approximately SEK 1,730m.1,730 million. For a discussion of these dispositions, see “Item 5—Factors Affecting Results—Dispositions”. 40      Professional Outdoor Products      Demand for professional chainsaws showed some growth in 2003, in both North America and Europe, however, mainly referring to lower-specified products. Group sales of chainsaws increased in volume during 2003. Group sales of professional lawn and garden products showed good growth. Sales of diamond tools and power cutters for comparable units declined, as a result of continued weak market demand.      Overall, sales for Professional Outdoor Products were higher than in the previous year. Operating income improved somewhat and margin was largely unchanged. 30 RESULTS OF OPERATIONS FOR 2002 AS COMPARED TO 2001 Consolidated Results Consolidated Net Sales      Net sales for Electrolux in 2002 amounted to SEK 133,150 million, as compared to SEK 135,803 million in 2001. This marginal decrease primarily reflects divestments of certain operations, including the remainder of the leisure appliance product line, the European home comfort operations, the European motor operations and Zanussi Metallurgica, which businesses generated aggregate sales of SEK 3,880 million in 2001. Net sales were also negatively affected in 2002 by changes in foreign exchange rates. In terms of business areas, net sales for Consumer Durables increased by 2.3% to SEK 111,520 million (108,990). Aggregate net sales for Professional Products, however, declined by 19% to SEK 21,484 million (26,525) due to the aforementioned divestments, all of which were in the Professional Products business areas except for the European home comfort operations. Consolidated Operating Income      The Group’s operating income for 2002 increased by 23% to SEK 7,731 million (6,281), which corresponds to 5.8% (4.6) of net sales. The increase relates mainly to higher volumes and lower costs of materials, as well as savings from implemented restructuring measures. Operating income for Consumer Durables (excluding items affecting comparability) increased by 42% to SEK 6,587 million (4,629), while aggregate operating income for the Professional Products business areas (excluding items affecting comparability) declined by 5% to SEK 2,261 million (2,383) due principally to the divestitures discussed above. In 2001, operating income was negatively impacted by costs of approximately SEK 1,050 million relating to the start-up and phase-in of a new generation of refrigerator products in the United States. Depreciation and amortization in 2002 amounted to SEK 3,854 million (4,277), of which SEK 230 million (257) related to goodwill. Income After Financial Items      Income after financial items increased by 45% to SEK 7,545 million (5,215) representing 5.7% (3.8) of net sales. Net financial items amounted to SEK –186 million (–1,066). The improvement in income after financial items is due mainly to lower interest rates and a significant reduction in net borrowings. Total financial income amounted to SEK 947 million (973 million), while total financial expenses amounted to SEK –1,133 million (–2,039 million). Taxes      Total taxes for 2002 amounted to SEK 2,459 million (1,477), corresponding to 32.6% (28.3) of income after financial items. The effective tax rate (excluding items affecting comparability) in 2002 was 30.9%, as compared to 32.0% in 2001. Consolidated Results Excluding Items Affecting Comparability      As discussed above, Swedish GAAP requires companies to disclose information in their financial statements as to events and transactions with effects on income that are of significance when income from the period is compared with that of other periods. Electrolux reports these events and transactions on the line-item “Items affecting comparability” which appears separately on the face of the income statement and in the notes to the consolidated financial statements set forth elsewhere herein. During 2002, items affecting comparability amounted to SEK –434m (–141m). Excluding items affecting comparability, operating income increased by 27% to SEK 8,165m (6,422m), representing 6.1% (4.7%) of net sales, income after financial items rose by 49% to SEK 7,979m (5,356m), corresponding to 6.0% (3.9%) of net sales, net income increased by 46% to SEK 5,521m (3,774m), and net income per share rose by 52% to SEK 16.90 (11.10). Also excluding such items affecting comparability, the effective tax rate was 30.9% (32.0%). Value Creation      Total value created in 2002 amounted to SEK 3,461 million compared with SEK 262 million in the previous year. The improvement refers mainly to an increase in operating margin (excluding items affecting 31 comparability) to 6.1% (4.7) as a result of higher sales volumes in Consumer Durables in the United States and Europe, restructuring measures and lower costs of materials. Value created also improved as a result of a decrease in average net assets (excluding items affecting comparability) to SEK 36,182 million (44,002) mainly due to divestments and a reduction in fixed assets and working capital. Changes in exchange rates significantly reduced average net assets and also had a negative impact on operating income. Results of Operations by Business Area      There was a positive trend in demand during the year in most of the Group’s product areas in North America, Eastern Europe and Australia. Market conditions weakened in Western Europe, however. The markets for appliances in Brazil, India and China showed low growth during the first quarters, but improved in the latter part of the year. The following discussion includes statements about operating income and operating margin with respect to the Consumer Durables and Professional Products business areas. Both operating income and operating margin for these business areas are presented excluding items affecting comparability. These financial measures are not measures under Swedish GAAP or U.S. GAAP. For more information on non-GAAP financial measures and items affecting comparability, see “Presentation of Information” and Note 7 to the consolidated financial statements. Consumer Durables Consumer White Goods      Net sales of white goods in 2002 increased to SEK 85,929 million (82,732). Net sales of white goods in Europe and North America accounted for approximately 50% and 40%, respectively, of all net sales of white goods. The remainder relates mainly to Australia, Brazil and China. Overall, operating income for the appliance operation outside Europe and North America showed a marked downturn, particularly in the fourth quarter, and was negative for the full year. Operations in Europe      Sales of appliances in Europe increased in 2002 over 2001, particularly in Eastern Europe and with respect to key customer accounts. Electrolux strengthened its market share in both Western and Eastern Europe. Operating income showed a substantial improvement in 2002 from 2001, with a higher margin. The improvement resulted principally from higher volumes, lower costs of materials, improved internal efficiencies as well as the effects of restructuring measures. Operations in the United States      Sales of appliances in North America were substantially higher in 2002 than in 2001, particularly for refrigerators and cooker products. Both operating income and margin increased in 2002, but from a relatively low level in 2001. Operating income for 2001 was negatively impacted by costs of approximately SEK 1,050m associated with the start-up and phase-in of a new generation of refrigerators. Sales of room air-conditioners were lower in 2002 than in the previous year. Operating income for the home-comfort product area declined in 2002 and was negative, principally reflecting decreasing sales as a result of weather conditions. Operations in Latin America, Asia and Australia      Sales of appliances increased in local currency but declined following translation into SEK as a result of the strengthening of the Swedish krona. Operating income decreased and was negative, mainly due to higher costs for materials and lower exports to Argentina. Operating income for the fourth quarter showed a substantial improvement, however, and was positive.      In China, sales of appliances showed good growth in 2002 compared with 2001. Operating income for the Chinese operation showed a marked decline and was negative as a result of downward pressure on prices, higher marketing costs and a less favorable product mix.      In India, sales of appliances increased somewhat in local currency, but following translation into SEK operating income declined and was negative. 32      The Australian operation, which was acquired at the beginning of 2001, showed positive trends in both sales and operating income, and an improved operating margin. Operating income was positively impacted by synergies from the integration of the Group’s supplier network as well as the implementation of Group processes in quality and other areas. During the second half of the year, a new line of built-in, European-style appliances was launched under the Electrolux brand. Floor-Care Products      The European market showed a continued positive trend. Sales for the floor-care product line were lower than in the previous year. Operating income declined and operating margin was unchanged, mainly as a result of an unfavorable product mix and downward pressure on prices, particularly in the United States beginning in the second half of 2002. Consumer Outdoor Products      The European operation reported strong growth in sales. Operating income showed a marked upturn, although from a low level in 2002. Net sales in North America increased in local currency, but were largely unchanged after translation into SEK. Operating income and margin for the North America operation improved over the previous year. Professional Products Professional Indoor Products      Professional Indoor Products consists of two product lines: food-service equipment, laundry equipment and components such as compressors. Food-Service Equipment      Group sales declined in 2002 from 2001 mainly due to divestments and reduced market demand. Operating income and operating margin improved as a result of structural changes and intensified product development which resulted in a more favorable product mix. Laundry Equipment      Group sales of laundry equipment declined in 2002 from 2001 due to weaker demand in several European markets, as well as in Japan. Operating income and operating margin improved as a result of higher productivity and the launch of new dryers in North America. Professional Outdoor Products      Demand for professional chainsaws declined in 2002, particularly in North America and Western Europe. Sales of chainsaws increased in volume, mainly on the basis of new distribution channels in North America. Sales of professional lawn and garden products showed good growth, also as a result of new distribution channels. Sales of diamond tools for comparable units declined, however, due to lower demand in the construction industry. The integration of the newly acquired Diamant Boart operation proceeded according to plan.      Overall, sales for Professional Outdoor Products were higher in 2002 than in 2001, mainly as a result of the acquisition of Diamant Boart. Operating income and operating margin improved, even excluding the acquired operations. B. LIQUID FUNDS AND CAPITAL RESOURCES B.Liquid Funds and Capital Resources      Operating cash flow is the Group’s primary source of liquid funds. Electrolux also utilizes long-term and short-term borrowings as a source of liquid funds. The Group’s liquid funds and capital resources are managed by the Group’s treasury operations in accordance with the Electrolux internal financing policy. For additional discussion regarding liquid funds and capital resources, please see “Item 11—11¾Quantitative and Qualitative Disclosures About Market Risk—Financing Risks”Risk”. 33      Liquid Funds      Electrolux’s goal is that the level of liquid funds corresponds to at least 2.5% of net sales. The Group’s aim is such that net liquid funds (defined as liquid funds less short-term borrowings) shall exceed zero, taking into account fluctuations arising from acquisitions, divestments and seasonal variations. Investment of liquid funds is mainly made in interest-bearing instruments with high liquidity and with issuers with a long-term rating of at least A-defined by Standards & Poor’s or similar, as stated in the Financial Policy.      Liquid funds consist of short-term investments (less than one year) and cash equivalents. The table below presents the key data of liquid funds. The book value of liquid funds is approximately equal to fair value.      The Group’s goal is to ensure that the level of liquid funds corresponds to at least 2.5% of annualized net sales. This means that liquid funds less short-term borrowings shall exceed zero, taking into account fluctuations referring to acquisitions, divestments and seasonal variations.      As shown in the table below, liquid funds as a percentage of annualized net sales have considerably exceeded the Group’s minimum criterion in recent years, primarily as a result of positive operating cash flow and divestment of operations.                                                 Liquidity profile   2003   2002   2001   2004   2003   2002     (SEKm)   (SEK million)   Investments with maturities over three months   3,783   7,602   892     265   3,783   7,602   Investments with maturities up to three months   8,207   6,698   11,482   Investments and deposits with maturities up to three months   7,675   8,207   6,698   Fair value derivative assets included in short-term investments   612   —   —     762   612   —                         Total Liquid funds   12,602   14,300   12,374     Liquid funds   8,702   12,602   14,300   % of annualized net sales   11.3   11.8   9.8     7.7   11.3   11.8   Net liquidity1   8,593   12,682   7,118   Net liquidity   2,799   8,593   12,682   Fixed-interest term, days   64   48   32     61   64   48   Effective yield, % (average per annum)   4.4   4.4   4.7     2.4   4.4   4.4                         1. The net liquidity calculation in 2003 includes long-term borrowings with maturities within 12 months.      For 2004, liquid funds amounted to SEK 8,702 million (12,602), corresponding to 7.7% (11.3) of annualized net sales for 2003, liquid funds amounted to 11.3% (11.8%) of annualized net sales. For 2003, liquid funds amounted to 11.3% (11.8%) of annualized net sales, thereby exceeding the Group’s minimum criterion, primarily due to positive operatingsales. The net liquidity is calculated by deducting short-term loans from liquid funds. As from year 2003, long-term borrowings maturing within 12 months are included in short-term loans. Cash Flow from Operations      Total cash flow from operations and divestments of operationsinvestments decreased to 3,224 million in recent years.      On June 16, 2004 an Extraordinary General Meeting approved the redemption of 497,725 A Shares(3,723). Cash flow in 2004 was negatively impacted by a decline in income, increased capital expenditure, and 14,681,967 B Shares, representing approximately 4.7% of the total number of shares, for a total considerationpayment of approximately SEK 3 billion. The consideration is scheduled300 million relating to be paid to shareholders around June 30, 2004.the U.S. pension fund, as well as lower proceeds from divestments and acquisitions. Cash flow was positively impacted by lower working capital with an increase in accounts payable and a decrease in accounts receivable. Lower spending on restructuring also had a positive impact. Cash Flow From Operations41      Total cash flow from operations and investments decreased to SEK 3,723 million in 2003 (9,894 million). The decline in cash flow is mainly due to an increase in working capital, largely relating to accounts receivable. Working capital at year-end 2002 was at a historically low level, largely due to high accounts payable. Higher taxes paid, higher utilization of restructuring provisions, lower proceeds from divestments and acquisitions, as well as changes in exchange rates also had a negative impact on operating cash flow in 2003.                           Cash flow   2004     2003     2002       (SEK million)   Cash flow from operations excluding change in operating assets and liabilities     7,140       7,150       9,051   Change in operating assets and liabilities     1,442       -857       1,854   Capital expenditures in tangible fixed assets     -4,515       -3,463       -3,335   Other     -843       36       95   Net proceeds from divestment and acquisition of operations     —       857       2,229                       Total cash flow from operations and investments     3,224       3,723       9,894        Total cash flow from operations and investments decreasedWorking Capital      Working capital at year-end 2004 amounted to SEK 9,894–436 million (4,068), corresponding to -0.4% (3.6) of annualized net sales. The substantial decline is due mainly to an increase of SEK 1,693 million in 2002 (10,695 million). The decreaseaccounts payable and a net adjustment of pension assets and liabilities in cash flow was mainly duethe amount of SEK 2,773m in the opening balance for 2004, following implementation of the new accounting standard for employee benefits.      Inventories in 2004 amounted to lower proceeds from divestmentsSEK 15,742 million (14,945) at year-end, and acquisitions. Cash flow was also negatively impacted by the final paymentaccounts receivable to SEK 20,627 million (21,172), corresponding to 13.9% (13.4) and 18.2% (18.9) of USD 94 million relatedannualized net sales, respectively. Accounts payable in 2004 amounted to the PBGC Pension Settlement.                           Cash flow   2003   2002   2001     (SEKm) Cash flow from operations excluding change in operating assets and liabilities     7,124       9,100       5,848   Change in operating assets and liabilities     -831       1,805       3,634   Capital expenditures     -3,463       -3,335       -4,195   Other     36       95       547   Net proceeds from divestment and acquisition of operations     857       2,229       4,861                             Total cash flow from operations and investments     3,723       9,894       10,695   SEK 16,550m (14,857), corresponding to 14.6% (13.3) of annualized net sales. 3442                           Working capital   2004     2003     2002       (SEK million)   Inventories     15,742       14,945       15,614   Accounts receivable     20,627       21,172       22,484   Accounts payable     -16,550       -14,857       -16,223   Provisions     -12,813       -9,786       -11,279   Prepaid and accrued income and expenses     -6,874       -6,787       -7,224   Tax and other assets and liabilities     -568       -619       -1,156                       Working capital     -436       4,068       2,216   % of annualized net sales     -0.4       3.6       1.8        We believe that cash flow generated from our operations, together with existing cash balances, should be sufficient to fund our working capital needs, anticipated capital expenditures and other operating needs for the foreseeable future.      Interest-bearing liabilitiesNet Borrowings      Net borrowings at year-end 2004 rose to SEK 1,141million (-101) as a result of the share redemption program, corresponding to a value of over SEK 3 billion. See “Item 16E – Purchases of Equity Securities by the Issuer and Affiliated Purchasers”. A positive cash-flow from operations and investments and changes in exchange rates had a positive effect on net borrowings.                           Net borrowings   2004     2003     2002       (SEK million)   Interest-bearing liabilities     9,843       12,501       15,698   Liquid funds     8,702       12,602       14,300                       Net borrowings     1,141       -101       1,398   Interest Bearing Liabilities      At year-end 2003,2004, the Group’s total interest-bearing liabilities including interest-bearing pension liabilities amounted to SEK 12,5019,843 million (15,698 million)(12,501), of which SEK 8,1733,940 million (13,759 million)(8,173) referred to long-term loans. AsAverage maturities of December 31, 2003, long-term loans including maturities within 12 months were 2.2 years (2.7). Long-term loans with maturities within 12 months, SEK 2,4143,896 million, are reported as short-term loans in the Group’s balance sheet. A significant portion of the total of outstanding long-term borrowings has been made under Electrolux’sElectrolux global medium term note program. This program allows for borrowings of up to EUR 2,000 million in the aggregate.million. As of December 31, 2003,2004, Electrolux utilized approximately EUR 630627 million (680 million)(630) of the capacity of the program.      The majority of total long-term borrowings, SEK 7,3317,187 million, are taken up in Sweden at the parent company level. Given the strong liquidity, Electrolux does not currently maintain any committed credit facilities for short-term borrowings, other than as back-up facility for the European commercial papercommercial-paper program, which amounts to EUR 150 million. Electrolux expects to meet any future requirements for short-term borrowings through bilateral bank facilities and capital marketcapital-market programs such as commercial papercommercial-paper programs.      The Group’s goal for long-term borrowing includes an average time to maturity of at least two years, an even spread of maturities and an average interest-fixing period of one year. At year-end 2003,2004, the average interest-fixing period for long-term borrowings was 1.11.3 years (0.9)(1.1). The calculation of the average interest-fixing period includes the effect of interest-rate derivatives used to manage the interest-rate risk of the debt portfolio. The interest-rateinterest rate at year-end for the total borrowings was 4.9% (4.2%)(4.9).      The fair value of the interest-bearing loans including swap transactions used to manage the interest fixing was approximately SEK 12,65010,127 million. The loans and the interest-rate swaps are valued marked-to-market in order to calculate the fair value. 3543      The following table sets out the carrying amount of the Group’s interest-bearing liabilities that are exposed to fixed and floating interest-rate risk.                                                 Interest-bearing liabilities       Total Book Value   Total Book Value     Nominal value   31 December   Nominal value     Dec. 31,   Issue/maturity dates   Description of loan   Interest rate %   Currency   (in Currency)   2003   2002   Description of loan   Interest rate   Currency   (in currency)   2004   2003     (SEK million)   (SEK m)   Bond Loans                                         Fixed rate1                                         Bond loans                                 Fixed rate(1)                                 2001-2008   Global MTN Program   6.0000   EUR   268     2,400       2,416   2001-2008   Global MTN Program   6.0000   EUR   32     288       290   1998-2008   SEK MTN Program   4.2303   SEK   85     85       85   2000-2005   Global MTN Program     6.1250     EUR     300       2712       2735     Global MTN Program(2)   6.1250   EUR   300     —       2,712   2000-2008   Global MTN Program     6.0000     EUR     268       2416       2437   1996-2004   Bond Loan FRF 1,000million2     6.5000     FRF     690       —       959   2000-2008   Global MTN Program     6.0000     EUR     32       290       293   1998-2008   Global MTN Program     6.5000     NOK     400       —       503   2001-2005   SEK MTN Program     5.3000     SEK     200       200       200     SEK MTN Program(2)   5.3000   SEK   200     —       200   2001-2004   SEK MTN Program2     3.3820     SEK     170       —       170   2001-2008   SEK MTN Program     4.2303     SEK     85       85       85   1996-2003   SEK MTN Program     8.7000     SEK     —       —       100   Floating Rate                                         Floating rate                                 1998-2005   Global MTN Program   Floating   USD     25       181       220     Global MTN Program   Floating   USD   25     —       181   1997-2027   Industrial Development Revenue Bonds   Floating   USD     10       73       88     Industrial Development Revenue Bonds   Floating   USD   10     66       73                                                                   Total bond loans         —     —     —       5957       7790         —   —   —     2,839       5,957   Other long-term loans   Fixed Rate Loans     —     —     —       1,901       1642     Fixed Rate Loans   —   —   —     457       1,901     Floating Rate Loans2     —     —     —       315       4327     Floating Rate Loans   —   —   —     644       315                                                                   Total other long-term loans Total other long-term loans     —     —     —       2216       5969         —   —   —     1,101       2,216                                                                   Total long-term loans         —     —     —       8173       13759         —   —   —     3,940       8,173   Short-term loans                                                                         Short-term part of Long-term Loans                                     Short-term part of long-term loans                                 2000-2005   Global MTN Program(2)   6.1250   EUR   300     2,695       —   2001-2005   SEK MTN Program(2)   5.3000   SEK   200     200       —   1998-2005   Global MTN Program(2)   Floating   USD   25     165       —   2001-2004   SEK MTN Program2     3.3820     SEK     170       170     —   SEK MTN Program   3.3820   SEK   170     —       170   1996-2004   Bond Loan FRF 1,000 million2     6.5000     FRF     690       952     —   Bond Loan FRF 1,000 million   6.5000   FRF   690     —       952     Other long-term loans2     —     —     —       1292     —   Other long-term loans   —   —   —     836       1,292   Other short-term loans Other short-term loans                                                                       Bank Borrowings & Commercial Papers     —     —     —       1316       1618     Bank borrowings and commercial papers   —   —   —     1,643       1,316     Fair Value of Derivative Liabilities     —     —     —       279       0     Fair value of derivative liabilities   —   —   —     364       279                                                                   Total short-term loans Total short-term loans     —     —     —       4009       1618         —   —   —     5,903       4,009                                                                   Interest-bearing pensions Interest-bearing pensions                         319       321         —   —   —     —       319                                                                   Total interest-bearing liabilities Total interest-bearing liabilities     —     —     —       12501       15698         —   —   —     9,843       12,501                                                                   1.(1)   The interest-rate fixing profile of the loans above has been adjusted from fixed to floating with interest-rate swaps.   2.(2)   Long-term loans in the table above with maturities within 12 months are classified as short-term loans in the Group’s balance sheet as of December 31, 2003.sheet.      The average maturity of the Group’s long-term borrowings (including long-term loans with maturities within 12 months) was 2.72.2 years (3.3)(2.7) at the end of 2003.2004. As a result of the Group’s positive cash flow, no additional long-term funding was undertaken in 2003, apart from SEK 100 million to fund the operations in Brazil.2004. A net total of SEK 1,4901,836 million in loans, originating essentially from long-term loans, matured or were amortized. Short-term loans pertain primarily to countries with capital restrictions. The table below presents the repayment schedule of long-term borrowings. Repayment Scheduleschedule of Long-term Borrowings,long-term borrowings, as at December 31 December (SEKm)                                                                                                     2004   2005   2006   2007   2008   2009   2010-   Total   2005   2006   2007   2008   2009   2010   2011-   Total   Debenture and bond loans   —   3,093   —   —   2,791   —   73   5,957     —   —   —   2,773   —   —   66   2,839   Bank and other loans   —   964   416   29   21   —   786   2,216     —   410   36   16   24   4   611   1,101   Short-term part of long-term loans   2,414   —   —   —   —   —   —   2,414     3,896   —   —   —   —   —   —   3,896                                                                       Total   3,896   410   36   2,789   24   4   677   7,836     2,414   4,057   416   29   2,812   —   859   10,587                                                                       36      Electrolux has Investment Grade ratings from Moody’s and Standard & Poor’s. The long-term ratings from both rating institutions wereremained unchanged during the year. Standard and Poor’s changed the long-term outlook from positive to stable. 44                                   Short-term debt, Rating Agency   Long-term debt   Outlook   Short-term debt Rating Agency   Long-term debt Outlook Short-term debt Sweden Moody’s   Baa1   Stable   P -2 P-2     Standard & Poor’s   BBB+   Stable   A-2   K-1      Capital ExpendituresExpenditure      Capital expendituresexpenditure in tangible fixed assets in 2004 increased to SEK 4,515 million (3,463), of which SEK 297 million (373) refers to Sweden. Capital expenditure corresponded to 3.7% (2.8) of net sales. The increase compared to the previous year referred to Consumer Durables and investments in new plants within appliances in North America and Europe. Capital expenditure within Professional Products referred mainly to professional outdoor products and investments to improve production efficiency and development of environmental efficient products. Capital expenditure in tangible fixed assets in 2003 amounted to SEK 3,463 million, as compared to SEK 3,335 million in 2002 and SEK 4,195 million in 2001.2002. Capital expenditures corresponded to 2.8%, and 2.5% and 3.1%, respectively, of net sales during each of these periods. The increase in capital expenditures for 2003 primarily reflects expenditures in Consumer Durables and Professional Outdoor Products. Capital expenditures within Consumer Durables referred mainly to appliances in North America, Asia and Australia. Capital expenditures within Professional Outdoor Products referred mainly to the development of environmentally efficient products. During 2003, capital expenditures in Sweden amounted to SEK 373 million, compared to SEK 295 million in 20022002.      Approximately 45% of total capital expenditure in 2004 referred to new products. Major projects included development of new products within the washing and SEK 282 millioncooking product areas in 2001. North America and Europe. Another major project was development of a new platform for tractors within consumer outdoor products in North America. Approximately 40% of total capital expenditures during 2003 related to new products. Major projects included the development of product platforms and new products within the cooking, refrigeration, dishwashing and washing product areas in Europe. Projects in North America included new products within the cooking and refrigeration product categories.      Approximately 20% of total capital expenditure was attributable to rationalization and replacement of existing production equipment. About 15% referred to expansion of capacity within the appliance operation, in Eastern Europe and Asia. Approximately 25% of total 2003 capital expenditures were attributable to rationalization and replacement of existing production equipment. Approximately 10% of total capital expenditures relate to the expansion of capacity within the appliance operation in Eastern Europe and Asia. Investments in IT accounted for approximately 5% of total capital expenditures.                                                   Capital Expenditures by Business Area   2003   2002   2001     SEKm   %1   SEKm   %1   SEKm   %1 Consumer Durables                                                 Europe     1,269       2.7       1,328       2.8       1,244       2.6   North America     1,089       2.4       984       2.0       1,530       3.3   Rest of the World     470       3.7       406       2.7       334       2.2   Professional Products                                                 Professional Indoor     278       3.4       295       2.7       657       3.8   Professional Outdoor     305       2.8       229       2.2       213       2.3   Other     52       —       93       —       217       —                                                     Total     3,463       2.8       3,335       2.5       4,195       3.1                                                     45 1. As a percentage of net sales.                           Capital expenditure, by business area   2004     2003     2002       (SEK million)   Consumer Durables                         Europe     1,561       1,202       1,273   % of netsales     3.7       2.7       2.8   North America     1,439       618       477   % of net sales     4.7       1.9       1.4   Rest of the world     438       470       406   % of net sales     3.2       3.7       2.7   Consumer Outdoor     517       560       566   % of net sales     2.9       3.3       3.1     Professional Products                         Indoor     144       278       295   % of net sales     2.2       3.4       2.7   Outdoor     393       283       227   % of net sales     4.1       2.9       2.6   Other     23       52       91                       Total     4,515       3,463       3,335   % of net sales     3.7       2.8       2.5        We are currently investing in new, efficient plants in low-cost countries and in new products. Accordingly,Therefore, Group capital expenditure is expected to riseincrease from the current level of approximately SEK 3.54.5 billion to a level of approximately SEK 4-54.5-5.5 billion during 2004.2005. We have funded, and expect to continue funding, such capital investments from cash generated from our business operations. C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC C.Research and Development, Patents and Licenses, etc      Electrolux believes that product renewal and innovation are key drivers in achieving growth and higher profit margins. During 2003,Costs for research and development costs amounted to SEK 1,628 million (1,797 in 2002 and 1,793 in 2001),2004, including the capitalization of SEK 344486 million of research(344), increased to SEK 2,052 million (1,628 in 2003 and development expense. This corresponds1,797 in 2002), corresponding to 1.3% of net sales for1.7% (1.3 in 2003 (1.3% in 2002 and 1.3% in 2001). 37      Historically, Electrolux has spent less on research and development as a percentage2002) of net sales than its competitors. Duesales.      R&D projects during the year mainly referred to Electrolux’s size, however, this difference has been relatively small in absolute terms. Electrolux expects that the level of researchnew products and development spending as a percentage of net sales will gradually increase in the future. Even at current spending levels, however, Electrolux believes that its research and development activities would have a greater impact in the future due to the reduction in the number of its product platforms and brands.      A new Swedish accounting standard, RR15 Intangible Assets, came into effect as of January 1, 2002. According to this standard, costs fordesign projects within appliances including development of new platforms. Major projects were new products within cooking and software are required to be capitalized if certain conditions are met. Development costs of SEK 344 million have been capitalized. Capitalization of development costs has been made only for projects with a high level of certainty regarding future economic benefitswashing in North America and useful life.new products within the floor-care operation. D. TREND INFORMATION D.Trend Information      The followingDemand for appliances in 2005 is a discussion of recent trends in Electrolux’s business and the markets in which it operates. For further discussion of trends affecting Electrolux’s business, please see “Item 5—Operating and Financial Review and Prospects” and “Item 3.D—Risk Factors”. Market Conditions      There was a positive trend in demand in most of the Group’s product areas in North America, Eastern Europe and Australia during 2003 and the first quarter of 2004, with increased volumes recorded across most product areas, in particular consumer durables. Market conditions in Western Europe strengthened in 2003, and improved in the first quarter of 2004. There is considerable uncertainty regarding market conditions for the rest of 2004. At present, Electrolux expects overall demand for its productsexpected to grow in line with GDP during 2004show some growth in both Europe and the United States.States as compared to 2004. Higher costs for materials and components will have an adverse effect on the Group’s operating income. Efforts to strengthen the Group’s competitive position through investments in product development and in building the Electrolux is also experiencing price pressure across product areas and geographic regions, in particular for small appliances and floor-care products. Notwithstanding these price pressures, Electrolux has been gaining market share in most product areas in its major markets, Europe and the United States, during 2004 with the exception of professional indoor products and professional outdoor productsbrand will continue. Operating income for the construction and stone industry. Reducing Costs      In the current market environment, characterized by price pressure on virtually all products, Electrolux is required to continuously consider new ways to reduce costs. Sourcing      As other manufacturers, Electrolux is focusing more on outsourcingfull year of manufacturing and production activities to sub-contractors in lower-cost countries such as Mexico, China and parts2005, exclusive of Eastern Europe. Sourcing arrangements are especially important in the market for small appliances and floor-care products that are easy to ship from a low-cost producer to the markets in Europe and the United States. The trend is less apparent in the market for professional products where customers are willing to pay a premium for quality products and where brand-identity is more important. Production Efficiencies      In order to make production more efficient, Electrolux will continue to reduce the number of its product platforms. Electrolux expects that the number of its product platforms in the European production of appliances will be more than halved in the next few years. This will reduce the number of product variants and make production less complex. Fewer platforms also mean less committed capital, lower R&D costs and shorter time to market for new products. It will also facilitate sourcing arrangements.      Electrolux is also implementing changes to its manufacturing network, particularly in Europe. Manufacturing will be concentrated in a few master plants and a number of smaller manufacturing units, thereby reducing the complexity of Electrolux’s manufacturing organization. 38 2002 Restructuring Program      The 2002 Restructuring Program was substantially completed in 2003, although some measures will continue in 2004.      Of the total charge against operating income of SEK 1,338 million in 2002, approximately SEK 1,245 million had been utilized as of March, 31, 2004. The remaining part of the provision refers mainly to redundancy payments.      The 2002 Restructuring Program involves total personnel cutbacks of 5,091 and savings are estimated at approximately SEK 340 million on an annual basis for 2005. As of March 31, 2004, total annual savings since the start of the 2002 Restructuring Program amounted to SEK 249 million and personnel cutbacks numbered 4,960, of which savings during the first quarter of 2004 amounted to SEK 49 million and personnel cutbacks numbered 14. Closure of refrigerator plant in Greenville, USA      In January 2004, Electrolux decided to discontinue production of refrigerators at the factory in Greenville, Michigan, in the United States. Production of the majority of products currently in Greenville will be moved to a new factory, which will be built in Mexico. The investment in Mexicoitems affecting comparability, is expected to be approximately US$ 150 million over the coming two years. The Greenville factory, which has approximately 2,700 employees, will continue to operate into 2005. The closure of the Greenville factory will incur a total cost of approximately SEK 1,100 million, the majority of which has been taken as a charge against operating income for the first quarter ofsomewhat lower than in 2004. Approximately half of the cost refers to write-down of assets. Closure of vacuum-cleaner plant in Sweden      In May 2004, Electrolux decided to close its vacuum cleaner plant in Västervik, Sweden, and move production to its plant in Hungary. Production at Västervik will continue during 2004, and is expected to end in the first quarter of 2005. The Västervik plant has approximately 500 employees and manufactures vacuum cleaners primarily for the European market. The closure will incur a total cost of approximately SEK 200 million, the majority of which will be taken as a charge against operating income in the second quarter of 2004. Litigation in the U.S. relating to vacuum cleaners      Electrolux had, until recently, a pending lawsuit in the United States relating to the design of the upright, cyclonic vacuum cleaners manufactured and sold by the Group’s floor-care operation. The plaintiff, John North, had claimed that the Group had wrongfully used certain trade secrets when designing the cyclonic products, and sought a judgment against the Group in the amount of approximately US$90 million.      In May 2004, Electrolux and the plaintiff reached a settlement agreement pursuant to which Electrolux will pay the plaintiff US$30 million in return for the plaintiff agreeing to drop all claims, including future claims, in the matter. As a result, the case will not be decided by a jury in El Paso, Texas and the matter is now concluded. No further details of the settlement are available.      Electrolux entered into the settlement because it brought the matter to an end with a known outcome rather than the uncertainty of a jury decision. Electrolux maintains that there was no merit to the charges. E. OFF-BALANCE SHEET ARRANGEMENTS E.Off-Balance Sheet Arrangements      Electrolux is party to only a limited amount of off-balance sheet arrangements. As of December 31, 2003,2004, the aggregate amount of Electrolux off-balance sheet arrangements was approximately SEK 1,0981,323 million. The principal component of these arrangements are guarantees in the amount of SEK 728855 million issued on behalf of third parties, and receivables sold with recourse, in an aggregate amount of SEK 370468 million. Electrolux has, jointly with the state-owned company AB Swedecarrier, issued letters of support for loans and leasing agreements totaling SEK 1,4921,412 million in the associated company Nordwaggon AB.      These off-balance sheet arrangements do not, and are not reasonably likely to have, a current or future effect on Electrolux financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to Electrolux shareholders. 3946 F. AGGREGATE CONTRACTUAL OBLIGATIONS F.Aggregate Contractual Obligations      Future obligations and commitments to make future payments under contracts are as follows:                                                                         Future payment obligations   Total   2004   2005-2008   2009   Total   2005   2006-2007   2008-2009   2010 -     (SEKm)   (SEK million)   Long-Term Debt   10,587   2,414   7,314   859     7,836   3,896   446   2,813   681   Capital Lease Obligations.   105   47   54   4   Capital Lease Obligations   148   55   30   16   47   Operating Leases   3,062   844   1589   629     3,445   896   1,150   710   689                                           Total   13,754   3,305   8,957   1,492     11,429   4,847   1,626   3,539   1,417                                                Other commercial commitments as at December 31, 20032004 include guarantees and other commitments, as disclosed in Note 25 of the consolidated financial statements, in the amount of SEK 728855 million. Guarantees for fulfillment of contractual undertakings are provided in the ordinary course of business. Commitments for the purchase of goods and services do not exceed the projected requirements of use in the normal course of business. CRITICAL ACCOUNTING POLICIES AND ESTIMATESCritical Accounting Policies and Estimates      The discussion and analysis of our results of operations and financial condition are based on our consolidated financial statements which have been prepared in accordance with Swedish GAAP. The preparation of these financial statements requires management to apply certain accounting methods and policies that may be based on difficult, complex or subjective judgments by management or on estimates based on past experience and assumptions determined to be reasonable and realistic based on the related circumstances. The application of these estimates and assumptions affects the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of net sales and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions. We have summarized below our accounting policies that require more subjective judgment of our management in making assumptions or estimates regarding the effects of matters that are inherently uncertain.      Asset Impairment      All long-lived assets, including goodwill, are evaluated for impairment yearly or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to its 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 impairment charges have been recorded when this information indicated that the carrying amount of an asset was not recoverable. In the majority of cases, however, market value has not been available, and the fair value has been estimated by using the discounted cash flow method based on expected future results. Significant differences in the estimation of expected future results and the discount rates used could have resulted in different asset valuations.      Long-lived assets, including goodwill, are depreciated on a straight-line basis over their estimated useful lives. Useful lives for tangible fixed assets are estimated between 10-40 years for buildings, 3-15 years for machinery and technical installations and 3-10 year for other equipment. The net book value for tangible fixed assets in 20032004 amounted to SEK 15,63816,033 million. Useful life for goodwill is generally 10-20 years except for strategic acquisitions that can be 20-40 years. Electrolux applies an amortization period of 40 years for the strategic acquisitions of Zanussi, White Consolidated Industries, American Yard Products and Email. Amortization of goodwill for these four acquisitions in 20032004 amounted to SEK 105101 million. The net book value for goodwill at year-end amounted to SEK 3,160 million. The Group also applies an amortization period of 40 years for the acquisition of the Electrolux brand in North America acquired in May 2000.Management2000. Management regularly reassesses the useful life of all significant assets. The net book value for goodwill at year-end amounted to SEK 3,500 million. 4047      Deferred Taxes      In the preparation of the financial statements, Electrolux estimates the income taxes in each of the taxing jurisdictions in which the Group operates as well as any deferred taxes based on temporary differences. Deferred tax assets relating mainly to tax loss carry-forwards and temporary differences are recognized in those cases when future taxable income is expected to permit the recovery of those tax assets. Changes in assumptions in the projection of future taxable income could result in significant differences in the valuation of deferred taxes. As of December 31,2003,31, 2004, Electrolux had a net amount of SEK 6581,686 million recognized as deferred taxes. The Group had tax loss carry-forwards and other deductible temporary differences of SEK 1,7414,245 million, which have not been included in computation of deferred tax assets.      Current Receivables      Receivables are reported net of allowances for doubtful accounts. A reserve for doubtful accounts is calculated based on an aging of the receivables and historical losses. For receivables that are over 6 months past due the reserve is set to 50% of their value, and reserve for receivables that are over 12 months past due is set to 100%. Additionally, when circumstances indicate that there is risk that a customer will not be able to meet its financial obligations, receivables are written down to the amount that is expected to be collected. Changes in circumstances such as higher than expected defaults or changes in the financial situation of a significant customer could lead to significantly different valuations. At year-end, accounts receivable, net of provisions for doubtful accounts, amounted to SEK 21,17220,627 million. The total provision for bad debts at year-end was SEK 1,012730 million.      Pensions and Other Provisions      Pensions      Electrolux sponsors defined benefit pension plans for some of its employees in certain countries. The consolidated accounts pension costs and liabilities are calculated according to local rules. The largest defined benefit pension plans correspond to the U.S. operations and are calculated and accounted according to U.S. GAAP. The pension calculations are based on assumptions about expected return on assets, discount rate and future salary increases. Changes in assumptions affect directly the service cost, interest cost and expected return on assets components of 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 20032004 was 8.5%7% based on historical results. A reduction by 1% would have increased the net pension cost in 20032004 by approximately SEK 70120 million. The discount rate used to estimate liabilities at the end of 20022003 and the calculation of expenses during 20032004 was 6.75%5.5%. A decrease of such rate by 1%0.5% would have increased the service cost component of expense by approximately SEK 2025 million.      Restructuring Provisions      Restructuring charges include required write-downs of assets and other non-cash items, as well as estimated costs for personnel reductions. The charges are calculated based on detailed plans for activities that are expected to improve the Group’s cost structure and productivity. The restructuring activities are planned based on certain expectations about future capacity needs and different expectations would have resulted in materially different charges. The restructuring programprograms announced in December 2002during 2004 had a total charge against operating income of SEK 1,3381,760 million. Of the total charge, approximately SEK 1,241 million had been utilized as of December 31, 2003. The restructuring measures announced in 2001 were almost completed during 2003. At year-end approximately SEK 3,050 million of the charge of SEK 3,261 million had been utilized.      Warranties      As it is customary in Electrolux’s industry, many of the products sold are covered by an original warranty which is included in the price and which extends for a predetermined period of time. Reserves for this original warranty are estimated based on historical data regarding service rates, cost of repairs etc. Additional reserves are created to cover goodwill warranty and extended warranty. While changes in these assumptions would result in different valuations, such changes are unlikely to have a material impact on the Group’s results 41 or financial situation. At year-endAs of December 31, 2004, Electrolux had a provision for warranty commitments amounting to SEK 1,5621,550 million. 48      Accrued Expenses – Employee OptionsLong Term Incentive Programs      Electrolux records a provision for the expected employer contributions (social security charges) arising when the employees exercise their options.options under the 1999 – 2003 Employee Option Programs or receive shares under the 2004 Performance Share Program. Employer contributions are paid based on the benefit obtained by the employee when exercising the options.options or receiving shares. The establishment of the provision requires the estimation of the expected future benefit to the employees. Electrolux bases these calculations on a valuation of the options using the Black & Scholes model, which requires a number of estimates that are inherently uncertain. The total provision as per December 31, 2003, for all option programs was SEK 120 million.      U.S. GAAP Reconciliation      The above description of critical accounting policies applies also for the U.S. GAAP information included in Note 2930 to the consolidated financial statements, with the following exceptions:      Long-lived Assets      For U.S. GAAP reconciliation purposes, acquisition goodwill is not amortized but is tested for impairment. The impairment testAn impaired asset is written down to its estimated fair market value based on the best information available. Fair value has been estimated by using the cash flow method based on expected future results. ExpectedSignificant differences in the estimation of expected future results are based on management’s best estimates but are inherently uncertain. Different expectations could leadhave resulted in different asset valuations. At year-end the net book value for goodwill amounted to different goodwill valuations.SEK 3,129 million. The Electrolux brand name in North America, acquired in May 2000, has been assigned an indefinite life and is not amortized. At present, management does not foresee any event that could limit the economic useful life of this brand name. At year-end the net book value for goodwill amounted to SEK 3,870 million. Pensions      For U.S. GAAP reconciliation purposes, defined benefit pension plans in Sweden, the United Kingdom and Germany are also calculated according to SFAS 87. A 1% reduction in expected return on assets would have resulted in an increase in periodic cost of approximately SEK 100 million (including the SEK 70 million as mentioned above under “Pensions and Other Provisions”).      Employee Stock Options      Provisions for employer contributions (social security charges) on employees’ future benefits from option programs are not established according to U.S. GAAP. CHANGES IN FINANCIAL REPORTING AND ACCOUNTING POLICIESChanges in Financial Reporting and Accounting Policies      Swedish GAAP      Accounting Policies Adopted In 20032004      In 2003,2004, Electrolux implemented the following new accounting standards:      RR2:02—InventoriesRR29—Employee benefits.. RR2:02 is an update of the previous standard on inventories, RR2. The adoption of RR2:02 has not had an impact on the business, results of operations, and financial position of the Company. RR22—Presentation of financial statements.The objective of this standard is to prescribe the basis for presentation of general purpose financial statements, in order to ensure comparability both with the company’s own financial statements of previous periods and with the financial statements of other companies. RR24—Investment property.This standard prescribes the accounting treatment for investment property held to earn rentals or for capital appreciation or both, and related disclosure requirements. The adoption of RR24 has not had an impact on the business, results of operations, and financial position of the Company. 42 RR25—Segment reporting.The objective of this standard is to establish principles for reporting financial information by segment to help users of financial statements to better understand different types of products and services a company produces and in which geographical areas it operates. The effect of implementing RR25 has not had a material effect on the presentation of Electrolux’s segment information. RR26—Events after the balance sheet date. This statement prescribes when a company should adjust its financial statements for events after the balance sheet date and the disclosures that a company should provide about the date when the statements were authorized for issue and about events after the balance sheet date. The effect of implementing RR26 has not had a material effect on the business, results of operations, and financial position of the Company. RR27—Financial instruments.Disclosure and presentation. The objective of this standard is to enhance financial statement user’s understanding of the significance of on-balance-sheet and off-balance-sheet financial instruments to a company’s business, results of operations, and financial position. The standard prescribes certain requirements for presentation of on-balance-sheet (recognized) and off-balance-sheet (unrecognized) financial instruments. The effect of implementing RR27 has not had a material impact on the business, results of operations, and financial position of the Company. RR28—Accounting for Government Grants. This standard applies for financial reporting and disclosure of government grants and other forms of government assistance. The effect of implementing RR28 has not had a material impact on the business, results of operations, and financial position of the Company. Accounting Policies Adopted In 2004 As of January 1, 2004, Electrolux implementedapplies the following new accounting standard: RR29—Employee benefits.This standard describesfrom the accounting treatmentSwedish Financial Accounting Standards Council, RR 29, “Employee Benefits”. RR 29 stipulates how the company shall account for and disclosure ofreport employee benefits. The standardmain differences between RR 29 and the earlier accounting standards refer to defined benefit post-employment plans. RR 29 requires a companythat liabilities for these plans are calculated according to recognize (a) a liability when an employee has provided service in exchange for employeethe Projected Unit Credit Method and reduced by the market value of the plan assets. RR 29 also requires that the cost of the benefits to be paidexpensed in the future and (b) an expense whenperiod in which the company consumes the economic benefit arising from service provided by an employee in exchange for employee benefits. Pensions and other post-retirement benefits have previously been reported in accordance with the applied local rules in each country. In accordance with RR5, “Accounting for changes in accounting principles”, this has incurredare earned. The implementation of RR 29 had a one-time chargeeffect of SEK 1,602 million, net of taxes, that has been charged to opening balance of SEK 1,600 million, to Group’s opening equity in 2004, and has no effect on the income statement or cash flow. The Group’s obligations related to pension benefits in each country will not be affected by thisretained earnings as a change in accounting principles.      Accounting Policies To Be Adopted InNew accounting principles as from 2005      As of January 1, 2005, Electrolux will applycomply with International Financial Reporting Standards (IFRS), also known as IAS, in accordance with the European Union regulation.      Swedish Accounting Standards have gradually incorporated IFRS and, consequently, several IFRS issued prior to 2004 have already been implemented in Sweden. However, a number of new standards and amendments to and improvements of existing standards will be adopted for the first time in 2005. The effects of the transition to IFRS are preliminary and based on interpretation of standards effective at present. IFRS could change during 2005 due to new interpretations submitted by the International Financial Reporting Interpretations Committee (IFRIC) and new IFRS effective as of January 1, 2006, which may allow early 49 adoption. The effect on the Group’s income and equity referring to the transition will be limited. A description of their approximate impact on Electrolux financial statements is stated below.      The transition to IFRS will be accounted for following the rules stated in IFRS 1, First Time Application of International Accounting Standards, and any transition effects will be recorded through an adjustment to opening retained earnings as per January 1, 2004. This date has been determined as Electrolux date of transition to IFRS. The Group has started the preparationsreport for the first quarter of 2005 will be the first Group report in accordance with IFRS. This report will include all reconciliations between the Group’s present accounting principles and IFRS as required by IFRS 1 and also a full set of IFRS accounting principles. Comparative figures for 2004 will be restated.      The following areas represent the preliminary identified differences: Intangible Assets      The transition rules stated in IFRS 1 stipulate that a company at transition recognizes intangible assets that qualify for recognition under IAS 38, Intangible Assets, even though these intangible assets have previously been expensed. Electrolux has made an inventory of the Group’s intangible assets resulting in a net adjustment of intangible assets as per January 1, 2004, in the amount of approximately SEK 50 million. Share Based Payments      IFRS 2 shall be applied for share-based compensation programs granted after November 7, 2002, and identifiedthat had not vested on January 1, 2005. IFRS 2 differs from previously applied accounting principles in that an estimated cost for the areas wheregranted instruments, based on the most significant differences existinstruments fair value at present. Additional differences could arise whengrant date, shall be charged to the income statement over the vesting period. Previously, only employer contributions related to these instruments have been accounted for, and no charge has been taken to the income statement for equity instruments granted as compensation to employees. Business Combinations      In business combinations, IFRS 3 requires a thorough inventory of intangible assets and does not allow provisions for restructuring activities. IFRS 3 stipulates that goodwill shall not be amortized but submitted to impairment test at least once a year. Goodwill amortization will therefore cease as of January 1, 2005, and comparative figures for 2004 will be restated. Electrolux has even previously carried out impairment test of goodwill at least once a year and, therefore, will not take any additional impairment charge at the date of transition to IFRS. IFRS 3 also prohibits the recognition of negative goodwill. At transition, negative goodwill will consequently be written off through an adjustment to opening retained earnings as per January 1, 2004. Comparative figures for 2004 will be restated.      Electrolux has chosen to apply the exemption allowed by IFRS 1 and will not restate previous business combinations. No acquisitions were made during 2004. Financial Instruments      As of January 1, 2005, the Group will introduce the new accounting standard IAS 39, Financial Instruments: Recognition and Measurement. The standard will be applied prospectively by adjusting the opening retained earnings at January 1, 2005, and no restatement of comparison numbers for 2004 will be made.      The standard stipulates that all IFRS applicable 2005financial derivative instruments shall be recognized at fair value in the balance sheet. The changes in fair value for derivatives used for proprietary trading as well as derivatives entered into for hedging purposes that do not qualify for hedge accounting according to the standard will be reported in the income statement as the changes occur. The standard allows for hedge accounting only if certain criteria are finalized.met, e.g., documentation, linking with exposure and effectiveness testing. In orderconnection with hedge accounting, changes in fair value for cash-flow hedges are reported in equity. The majority of derivatives used by the Electrolux Group are used for hedging purposes, i.e., to mitigate various financial risks. The risk management practices are described in Note 2 and the fair values of such instruments are specified in Note 18. 50      The implementation of IAS 39 will result in higher volatility in income, net borrowings and the Group’s equity. This volatility cannot be predicted with certainty, but it is the Group’s intention to meet the requirementscriteria for comparative information priorhedge accounting and limit the volatility of the income statement as far as possible to 2005, the Group has already implemented certain changes in the reporting systems. For more information, see Note 1a justifiable cost. Preliminary IFRS transition effects on income statement, 2004 (amounts may be subject to the consolidated financial statements.change)                                                 Income                             Income       statement                             statement       before                             after   SEK million   transition     IFRS 2     IFRS 3     Other     transition     Net sales     120,651       —       —       —       120,651   Operating income     4,714       -50       155       -15       4,804   Income after financial items     4,359       -50       155       -15       4,449   Net income     3,148       -35       155       -12       3,256   Net income per share, basic, SEK     10.55       -0.12       0.52       -0.04       10.91     Preliminary IFRS transition effects on closing balance, 2004 (amounts may be subject to change)                                                 Closing                             Closing       balance                             balance       before                             after   SEK million   transition     IFRS 2     IFRS 3     Other     transition     Intangible fixed assets     5,077       —       155       36       5,268                                             Other fixed assets     20,382       -1       —       —       20,381                                             Current assets     49,473       —       —       —       49,473                                               Total assets     74,932       -1       155       36       75,122                                             Equity     23,410       42       155       35       23,642                                             Minority interests     10       —       —       —       10                                             Provisions     14,064       -43       —       1       14,022                                             Financial liabilities     9,843       —       —       —       9,843                                             Operating liabilities     27,605       —       —       —       27,605                                               Total liabilities and equity     74,932       -1       155       36       75,122        U.S. GAAP      Accounting Policies Adopted In 20032004      In 2003,2004, Electrolux implemented the following new accounting standards:      SFAS 143FIN 46(R) In August 2001,January 2003, the FASB issued SFAS No. 143, Accounting for Obligations Associated with the RetirementInterpretation 46, “Consolidation of Long-Lived Assets. TheVariable Interest Entities” and in December 2003, a revised interpretation was issued (FIN 46 (R)), which clarified certain provisions of SFAS No. 143 applyFIN 46 and provided for further scope exceptions. FIN 46 (R) requires variable interest entities to all entitiesbe consolidated by the party that incur obligations associated withhas a variable interest that will absorb a majority of the retiremententity’s expected losses and/or receive a majority of tangible long-lived assets. This statementthe entity’s expected residual returns or both (the primary beneficiary). A variable interest entity is effective for financial statements issued for fiscal years beginning after June 15, 2002 and became effective fora legal entity that possesses one or more of the Company on January 1, 2003. The adoption of SFAS 143 has not had a significant impact on Electrolux’s financial position and results of operations.following characteristics: 4351 SFAS 145      In April 2002,1. equity interest holders as a group that lack the FASB issued SFAS 145, “Rescissioncharacteristics of FASB Statements No. 4, 44,a controlling financial interest, including: decision making ability and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. This statement rescinds SFAS 4, “Reporting Gains and Losses from Extinguishment of Debt”, an amendment of APB Opinion No. 30, which required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effects. As a result, the criteria set forth by APB Opinion 30 will now be used to classify those gains and losses. SFAS 145 also amends SFAS 13 to require that certain lease modifications that have economic affects similar to sale-leaseback transactions be accounted forinterest in the same manner as sale-leaseback transactions. In addition, SFAS 145 amends other existing authoritative pronouncementsentity’s residual risks and rewards; or      2. the equity holders have not provided sufficient equity investment to make various technical corrections, clarify meaningspermit the entity to finance its activities without additional subordinated financial support; or describe their applicability under changed conditions. The standard is generally effective for transactions occurring after May 15, 2002. The adoption of SFAS 145 has not had a significant impact on Electrolux’s financial position and results of operations.      SFAS 146      In June 2002,3. equity investments having voting rights that are not proportionate to their economic interest and the FASB issued SFAS 146, “Accounting for Costs Associated with Exitactivities of the entity involve or Disposal Activities”. This standard addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred rather than at the dateare conducted on behalf of an entity’s commitment to an exit plan. SFAS 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. In 2003, the Group did not have any material restructuring charges.investor with a disproportionate small voting interest. SFAS 148      In December 2002, the FASB issued SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure”. This standard amends SFAS 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of SFAS 123 to require prominent disclosure about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation. Finally, SFAS 148 amends APB Opinion No. 28, “Interim Financial Reporting,” to require disclosure about those effects in interim financial information. SFAS 148 is effective for fiscal years beginning after December 15, 2002. The Company has no current plan to change to the fair value method of accounting for stock-based compensation under SFAS 123 and SFAS 148 has had no impact on the Group’s financial statements. SFAS 149      In April 2003, the FASB issued SFAS 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”. SFAS 149 amends SFAS 133 for decisions made: 1. as part of the Derivatives Implementation Group process that effectively required amendments to SFAS 133. 2. in connection with other FASB projects dealing with financial instruments and 3. in connection with implementation issues raised in relation to the application of the definition of a derivative. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, with certain exceptions, and for hedging relationships designated after June 30, 2003. Adoption of SFAS 149 did not have a material impact on the Group’s consolidated financial statements SFAS 150      In May 2003, the FASB issued SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”, to establish standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument within its scope as a liability (or an asset in some circumstances). 44      SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for certain provisions which have been deferred.     There was no impact onin the Group’s consolidated financial statements as a result of adopting SFAS 150. EITF 00-21      In January 2003, the Emerging Issues Task Force (EITF) issued EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”. EITF 00-21 addresses the issues of (1) how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting;FIN 46 (R) and (2) how arrangement consideration should be measured and allocated to the separate units of accounting in the arrangement. EITF 00-21 does not change otherwise applicable revenue recognition criteria. EITF 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. There wasthere are no significant impact in the Group’s consolidated financial statement as a result of adopting EITF 00-21.variable interest entities to be disclosed.      SAB 104 On December 17, 2003, the Staff of the Securities and Exchange Commission issued Staff Accounting Bulletin 104 (SAB 104), “Revenue Recognition”, which supersedessupercedes SAB 101, “Revenue” Revenue Recognition in Financial Statements”. SAB 104’s primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superceded as a result of the issuance of EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”. The revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104. There was no impact in the Group’s consolidated financial statements as a result of adopting SAB 104.      FIN 45EITF 03-1 In November 2002,June 2004, the FASBEITF issued FIN 45, “Guarantor’s AccountingEITF 03-1, “The Meaning of Other Than Temporary Impairment and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”Its Application to Certain Investments”. The initial recognitionissue includes determining the meaning of other than temporary impairment and measurement provisionsits application to debt and equity securities within the scope of FIN 45SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities” and equity securities that are not subject to the scope of SFAS No. 115 and not accounted for under the equity method of accounting. EITF 03-1 will be effective for guarantees issued or modified after December 31, 2002. Swedish GAAP does not require recognition of the fair value of a guarantee. There wasdisclosure in reporting periods beginning from June 15, 2004 and will have no material impact on the Group’s consolidated financial statementsstatement. EITF 03-6In March 2004, EITF issued EITF 03-6, “Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share”. This issue addressed changes in the reporting and calculation requirements for earnings per share, providing the method to be used when a company has granted holders of any form of security rights to participate in the earnings of the company along with the participation rights of common stockholders. This issue will be effective in reporting periods beginning after March 31, 2004. There will be no impact on the Group’s reporting and disclosure as a result of adopting FIN 45.EITF 03-6.      FIN 46FAS 151 In January 2003,November 2004, the FASB issued Interpretation 46, “ConsolidationStatement No. 151, “Inventory Costs an amendment of Variable Interest Entities”ARB No. 43”. A variable interest entity isThe new standard requires that idle facility expense, freight, handling costs, and wasted material (spoilage) are recognized as current-period charges. In addition, this statement requires allocation of fixed production overhead to the costs of conversion based on the normal capacity of a legal entityproduction facility. The provisions of this statement are effective for inventory costs that lacks either: 1. equity interest holders as a group that lack the characteristics of a controlling financial interest, including: decision making ability and an entity’s residual risks and rewards or 2. the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial report.      Interpretation 46 requires a variable interest entity createdincur during fiscal years beginning after February, 2003 to be consolidated if any of its interest holders are entitled to a majorityJune 15, 2005. The adoption of the entity’s residual return or are exposed to a majorityprovisions of its expected losses as of December 31, 2003. This party is referred to as the primary beneficiary. There was noFAS 151 will not have an impact inon the Group’s consolidated financial statements as a result of adopting FIN 46.statement.      FIN 46 (R)FAS 153 In December 2003,2004, the FASB issued SFAS 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29”. The guidance in APB Opinion No. 29. “Accounting for Nonmonetary Transactions”, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. This Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. This Statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Electrolux do not believe that the adoption of this Statement will materially affect the Group’s consolidated financial statement. FAS 123 (R)In December 2004, the FASB Interpretation 46issued SFAS No. 123 (R), “ConsolidationShare Based Payment, which is a revision of Variable Interest Entities”. FIN 46SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, SFAS No. 123 (R) replaces FIN 46 and clarifies the accountingis for interests in variable interest entities. The Group will begininterim or annual periods beginning after June 15, 2005. SFAS No. 123 (R) requires all share- 52 based payments to apply FIN 46 (R) to entities consideredemployees, including grants of stock options, to be variable interest entities for periods after December 31, 2003.recognized in the statement of operations based on their fair values. Electrolux is in the process of assessing the impact of FIN 46SFAS 123 (R). 4553 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. DIRECTORS AND SENIOR MANAGEMENTDirectors and Senior Management Board of Directors      The Articles of Association of Electrolux stipulate that the Board of Directors shall consist of not less than five and not more than fifteen Directors, with not more than ten Deputy Directors (serving as alternates to the Directors), elected each year by the shareholders at the Annual General Meeting of the Company. Additionally, under Swedish law, employees have the right to appoint three additional Directors (and their Deputies).      During 2003,At the end of 2004, there were twelveten Directors and three Deputy Directors on the Board of Directors. TwoOne board members, Rune Andersson and Jacob Wallenberg,member, Louis R. Hughes, resigned in September 2004 and Aina Nilsson Ström was elected as director at the Annual General Meeting on April 21, 2004. The Directors and the Deputy Directors as of December 31, 2003,2004, and their respective shareholdings as of March 31, 2004,February 14, 2005, were as follows:       Names   Position and Background Rune AnderssonMichael Treschow   Chairman. Born 1944.1943, M. Eng. Elected 1998.1997. Chairman of the Electrolux Remuneration Committee. Board Chairman: Telefonaktiebolaget LM Ericsson, The Confederation of Mellby GårdSwedish Enterprise. Board Member: ABB Ltd. Previously President and CEO of AB amd Älvsbyhus AB. HoldingElectrolux, 1997–2002. President and CEO of Atlas Copco AB, 1991-1997. Holdings in AB Electrolux: 500,000 A Shares and 500,000 B Shares through a company. 35,000 B-shares, 60,000 options. Peggy Bruzelius   Director.Deputy Chairman. Born 1949.1949, M. Econ. Elected 1996. Chairman of the Electrolux Audit Committee. Board ofChairman: Grand Hotel Holding AB, and Lancelot Asset Management AB. Board Member of Axel Johnson AB,Member: Axfood AB, AB Drott, Industry and Commerce Stock Exchange Committee, Axel Johnson AB, AB Ratos, Scania AB, Syngenta AG, and theThe Association of the Stockholm School of Economics. Deputy Chairman of the Board ofChairman: The Royal Swedish Academy of Engineering Sciences. Previously Executive Vice President of SEB, Skandinaviska Enskilda Banken, 1997-1998, President and CEO of ABB Financial Services AB, 1991-1997. Holding in AB Electrolux: 2,500 B Shares.5,000 B-shares. Thomas Halvorsen   Director. Born 1949.1949, B.A. Elected 1996. Member of the Electrolux Audit Committee. President of the Fourth Swedish National Pension Fund.Fund since 1993. Board Member ofMember: AP Fastigheter AB, and Beijer Alma AB. Previously Executive Vice President of the Fourth Swedish National Pension Fund, 1988-1993. Holding in AB Electrolux: 500 B Shares.B-shares. Louis R. Hughes Aina Nilsson Ström   Director. Born 1949.1953, Master of Fine Art Industrial Design. Elected 1996. Non-executive Chairman of the Board of Maxager Technology. Board Member of British Telecom plc., Sulzer AG and ABB Ltd.2004. Member of the Electrolux Remuneration Committee. Design Director of Volvo 3P since 2001. Board Member: Ballingslöv International AB, Beckmans Skola AB, School of AdvisersDesign. Member of Wave Crest Laboratories. Executive Vice Presidentthe Finnish-Swedish Design Academy. Previously Design Director of General MotorsVolvo Truck Corporation, 1992-2000.1995-2001. Held several management positions within design at Saab Automobile AB, 1990-1995. Holding in AB Electrolux: 1,000 ADRs, each ADS representing two B Shares.199 B-shares. 54 Names Position and Background Hans Stråberg   Director, President and Chief Executive OfficerCEO. Born 1957, M. Eng. Elected 2002. President and CEO of Electrolux since 2002. Born 1957. Elected 2002. Board Member ofMember: The Association of Swedish Engineering Industries Board, and AB Ph. Nederman & Co. HoldingHoldings in AB Electrolux: 2,870 B-shares, 196,400 options.   2,870 B Shares and 196,400 options to acquire B Shares. Barbara R. Thoralfsson   Director. Born 1959.1959, MBA, B.A. Elected 2003. Board Member of Riebertthe Electrolux Audit Committee. President of TeliaSonera Norway, Oslo, Norway, since 2001. Board Member: Rieber & Søn ASA, IKT-Norway.Norwegian Airlines. Member of the Board of Representatives in Storebrand ASA. Previously at Midelfart & Co, Norway, as President, of NetCom ASA, Norway.1995-2001, and on various positions within marketing and sales, 1988-1995. Holding in Electrolux AB: NilAB Electrolux: 0 shares. Michael Treschow Director. Born 1943. Elected 1997. President and Chief Executive Officer, 1997-2002. Chairman of the Board of 46       Names Position and Background Telefonaktiebolaget LM Ericsson (publ). Deputy Chairman of the Confederation of Swedish Enterprise. Member of the Board of ABB Ltd. Holding in AB Electrolux: 33,250 B Shares and 60,000 options to acquire B Shares. Karel Vuursteen   Director. Born 1941.1941, Agricultural Eng. Elected 1998. Board Member of the Electrolux Remuneration Committee. Board Member: Akzo Nobel N.V., Gucci Group N.V., Heineken Holding N.V., Henkel KGaA, Nyenrode University, RoyaldRoyal Ahold N.V,N.V., ING Group N.V. and Ranstad Holding N.V.Previously President and Chief Executive OfficerCEO of Heineken N.V. 1993-2002., Amsterdam, The Netherlands, 1993–2002. Holding in AB Electrolux: 250 B Shares.B-shares. Jacob Wallenberg   Deputy Chairman. Born 1956. Elected 1998. Board Chairman of SEB (Skandinaviska Enskilda Banken). Deputy Chairman of Investor AB, Atlas Copco AB, Knut & Alice Wallenberg Foundation and SAS AB. Board Member of ABB Ltd., The Nobel Foundation and the Confederation of Swedish Enterprise. Holding in AB Electrolux: 2,000 B Shares. Ulf Carlsson   Director (employee representative). Born 1958. Appointed 2001. Representative of the Swedish Confederation of Trade Unions. Elected 2001. Holding in AB Electrolux: Nil0 shares. Bert Gustafsson   Director (employee representative). Born 1951. Appointed 1999. Representative of the Federation of Salaried Employees in Industry and Services. Deputy Member, 1997–1998. Ordinary Member, 1999. Holding in AB Electrolux: Nil0 shares. Annika Ögren   Director (employee representative). Born 1965. Appointed 2003. Representative of the Swedish Confederation of Trade Unions. Elected 2003. Holding in AB Electrolux: Nil0 shares. Malin Björnberg   Deputy Director (employee representative). Born 1959. Appointed 1999. Representative of the Federation of Salaried Employees in Industry and Services. Elected 1999. Holding in AB Electrolux: Nil0 shares. Mats Ekblad Gunilla Brandt   Deputy Director (employee representative). Born 1967. Appointed 2000.1953. Representative of the Federation of Salaried Employees in Industry and Services. Elected 2004. Holding in AB Electrolux: 200 B0 shares. Ola Bertilsson   Deputy Director (employee representative). Born 1955. Representative of the Swedish Confederation of Trade Unions. AppointedElected 2002. Holding in AB Electrolux: Nil0 shares. 2004 Changes Within the Board of Directors      Prior to the election of new Board members at the Annual General Meeting (AGM) on April 21, 2004, Chairman of the Board Rune Andersson and Deputy Chairman Jacob Wallenberg both declined renomination, after having served on the Board since 1998. Eight Board members were elected at the AGM, including new member Aina Nilsson Ström. When the Board was constituted on April 21, 2004, Michael Treschow was 55 appointed Chairman and Peggy Bruzelius Deputy Chairman. In September 2004, Louis R. Hughes resigned from the Board and the Audit Committee, after having served on the Board since 1996. The Board subsequently comprised seven members, elected by the AGM. Changes in the Board also involved changes in the composition of both the Audit Committee and the Remuneration Committee. Secretary of the Board of Directors: Cecilia Vieweg Born 1955, B. of Law. General Counsel of AB Electrolux. Secretary of the Board since 1999. Holding in AB Electrolux: 0 shares, 136,400 options. Auditors: Peter Clemedtson PricewaterhouseCoopers AB. Born 1956. Authorized Public Accountant. Partner in Charge. Other audit assignments include Gambro, Ericsson, KMT, Medivir, OMX, SEB and SinterCast. Holding in AB Electrolux: 0 shares. Anders Lundin PricewaterhouseCoopers AB. Born 1956. Authorized Public Accountant. Other audit assignments include ASSA ABLOY, Axis, Bong Ljungdahl and SäkI. Holding in AB Electrolux: 0 shares. Group Management And Company Structure      The operations of the Electrolux Group are organized in six business sectors with a total of 27 product lines, and four group staff units, as set forth in the following diagram: 56      As of 2005, the Group’s operations comprise Indoor Products and Outdoor Products, instead of the previous Consumer Durables and Professional Products. In addition, the number of business sectors has been reduced from seven to six, as responsibility for major appliances outside Europe and North America has been divided. There is now a single sector for Major Appliances in North and Latin America and another sector for Major Appliances in Europe, Asia, Africa and Oceania.      In addition to the President and CEO, Group Management includes the five sector heads and the four Group staff heads. The President and CEO is responsible for on-going management of the Group in accordance with the Board’s guidelines and instructions. Group Management holds monthly meetings to review the previous month’s results, update forecasts and plans, and discuss strategic issues. The sector heads have complete responsibility for the results and balance sheets of their respective sectors. The overall management of the sectors is the responsibility of sector boards, which meet quarterly. The President and CEO is the chairman of all sector boards. The sector board meetings are attended by the President and CEO, the management of the respective sectors, and the Chief Financial Officer. The sector boards are responsible for monitoring on-going operations, establishing strategies, determining sector budgets, and making decisions on major investments. The product line managers are responsible for the profitability and long-term development of their product lines.      The senior management of the Company, as of December 31, 2003,2004, the year they were appointed and their respective shareholdings as of March 31, 2004February 14, 2005 are as follows:       Name Names   Position and Background Hans Stråberg   President and CEO. Born 1957, M.Eng. Joined Electrolux in 1983. Head of product area, Dishwashers and Washing Machines, 1987. Head of product division, Floor Care Products, Västervik, 1992. Executive Vice-President, Frigidaire Home Products, USA, 1995. Head of Floor Care Products and Small Appliances and Executive Vice-President, AB Electrolux, 1998. Chief ExecutiveOperating Officer since 2002. Born 1957. Holding in AB Electrolux: 2,870 B Shares and 196,400 options to acquire B Shares.of Electrolux, October 2001. President 4757       Name Names   Position and Background and CEO of Electrolux, 2002. Board Member: The Association of Swedish Engineering Industries Board, AB Ph. Nederman & Co. Holdings: 2,870 B-shares, 196,400 options. Bengt Andersson   SeniorHead of Outdoor Products. Born 1944, Mech. Eng. Production Engineer, Facit AB, 1966–1975. Joined Electrolux in 1973. Sector Manager, Facit-Addo, 1976, Technical Director, Electrolux Motor, 1980, Product-line Manager, Outdoor Products North America, 1987, Product-line Manager, Forest and Garden Equipment, 1991 and Flymo, 1996. Head of Professional Outdoor Products, Executive Vice President since 2002. Born 1944. Executive Vice President prior thereto and sinceVice-President, AB Electrolux, 1997. Head of Consumer and Professional Outdoor products. Born 1944. Holding inProducts, Senior Executive Vice-President, AB Electrolux:Electrolux, 2002. Board Member: Kabe Husvagnar AB. Holdings: 5,000 B-shares, 136,400 options.   5,000 B Shares and 136,400 options to acquire B Shares. Johan Bygge   SeniorHead of Major Appliances Europe and Asia/Pacific. Born 1956, M. Econ. Deputy Group Controller, Telefonaktiebolaget LM Ericsson, 1983, Head of Cash Management, 1986. Joined Electrolux in 1987 as Group Controller. Head of Group Controlling, Accounting, Taxes, Auditing, Administration and IT, 1996–2000, as well as Acting Treasurer in 2000. Head of Consumer Outdoor Products outside North America, Executive Vice President since 2002. Born 1956. Executive Vice President prior thereto and sinceVice-President, AB Electrolux, 2001. Head of White GoodsMajor Appliances outside Europe and North America. Born 1956. Holding inAmerica, Senior Executive Vice-President, AB Electrolux:Electrolux, 2002. Head of Consumer Outdoor Products outside North America, 2001–2003. Also Head of Major Appliances Europe as of November 2004. Board Member: First Swedish National Pension Fund, The Bank of Sweden Tercentenary Foundation. Holdings: 2,024 B Shares andB-shares, 136,400 options to acquire B Shares.options. Wolfgang König   Executive Vice President since 2000. Born 1950. Head of White Goods Europe. Holding in AB Electrolux: 1,500 B Shares and 103,000 options to acquire B Shares and 118,400 synthetic options. Keith R. McLoughlin   Executive Vice President since 2003. Born 1956. Head of White GoodsMajor Appliances North and Latin America. HoldingBorn 1956, B.S.Eng. Held a number of senior management positions with DuPont between 1981–2003, most recently as Vice-President and General Manager of DuPont Nonwovens, 2000–2003, and of DuPont Corian, 1997–2000. Joined Electrolux in 2003 as Head of Major Appliances North America and Executive Vice-President, AB Electrolux: NilElectrolux. Also Head of Major Appliances Latin America as of November 2004. Holdings: 0 shares, 15,000 options to acquire ADSs, each ADS representing two B Shares.30,000 options. Detlef Münchow   Executive Vice President since 1999. Born 1952. Head of Professional Indoor Products. HoldingBorn 1952, MBA and PhD Econ. Member of senior management in consulting firms Knight Wendling/Wegenstein AG, 1980–1989 and GMO AG, 1989–1992. FAG Bearings AG, 1993–1998, as Chief Operating Officer in FAG Bearings Corporation, USA. Joined Electrolux in 1999 as Head of Professional Indoor Products and Executive Vice-President, AB Electrolux: NilElectrolux. Holdings: 0 shares, and 136,400 options to acquire B Shares.options. Magnus Yngen   Executive Vice President since 2002. Born 1958. Head of Floor Care Products and Small Appliances. Holding: Nil sharesBorn 1958, M.Eng. Lic.Tech. Held several international sales and 81,500 options to acquire B Shares.marketing positions, 1988–1995. Joined Electrolux in 1995 as Technical Director within the direct sales operation LUX. Head of Floor Care International operations, 1999. Head of Floor Care Europe 58 Lilian Fossum   Names Position and Background operations, 2001. Head of Floor Care and Small Appliances, Executive Vice-President, AB Electrolux, 2002. Holdings: 0 shares, 81,500 options. Lars Göran Johansson Head of Group Staff Communications and Branding. Born 1954, M. Econ. Account Executive, KREAB Communications Consultancy, 1978–1984, President, 1985–1991. Headed the Swedish “Yes to EU Foundation campaign” for the referendum that determined Sweden’s membership in the EU in 1994. Joined Electrolux as Senior Vice President sinceVice-President, Communication and Public Affairs, 1995. Holdings: 500 B-shares, 136,400 options. Fredrik Rystedt Chief Financial Officer. Born 1963, M. Econ. Joined Electrolux Treasury Department, 1989. Subsequently held several positions within the Group’s financial operations. Head of Mergers and Acquisitions, 1996. Joined Sapa AB in 1998, as Head of Business Development, Chief Financial Officer, 2000. Rejoined Electrolux in 2001 as Chief Administrative Officer, responsible for Controlling, Accounting, Taxes and Auditing. In November 2004, appointed Chief Financial Officer and responsible also for Group Treasury. Holdings: 0 shares, 90,000 options. Cecilia Vieweg Head of Group Staff Legal Affairs. Born 1962. 1955, B. of Law. Attorney with Berglund & Co. Advokatbyrå, Gothenburg, 1987–1990, Corporate Legal Counsel, AB Volvo, 1990–1992. General Counsel, Volvo Car Corporation, 1992–1997. Attorney and partner in Wahlin Advokatbyrå, Gothenburg, 1998. Joined Electrolux in 1999 as General Counsel. Board member: Haldex AB. Holdings: 0 shares, 136,400 options. Harry de Vos Head of Group Staff Human Resources and Organizational Development. HoldingBorn 1956, Process Eng, post-doc Training Management. Has held various positions within General Electric, 1978-2001. His latest position was as Human Resource Director for GE Plastics Europe, 1999-2001. Joined Electrolux in AB Electrolux: 7,600 B Shares2002 as head of Human Resources and 64,300 options to acquire B Shares. Cecilia Vieweg Senior Vice President since 1999. Born 1955. General Counsel andOrganization within Major Appliances Europe. Took on his position as Head of Group Staff Legal Affairs. Holding in AB Electrolux: NilHuman Resources and Organizational Development on January 1, 2005. Holdings: 0 shares, and 136,400 options to acquire B Shares. Nina Linander Senior Vice President since 2001. Born 1959. Head of Group Staff Treasury. Holding in AB Electrolux: 1,000 B Shares and 60,000 options to acquire B Shares. Fredrik Rystedt Senior Vice President since 2001. Born 1963. Chief Administrative Officer. Holding in AB Electrolux: Nil shares and 90,000 options to acquire B Shares. Lars Göran Johansson Senior Vice-President since 1995. Born 1954. Head of Group Staff Communication and Branding. Holding in AB Electrolux: 500 B Shares and 136,400 options to acquire B Shares.30,000 options.      On March 14, 2003, Keith McLoughlin replaced Robert E. Cook2004 Changes in Group Management      Wolfgang König left his positions as Head of White Goods North AmericaMajor Appliances Europe and a memberExecutive Vice-President of AB Electrolux in November 2004. He was succeeded by Johan Bygge. Nina Linander left her position as Head of Group management. Robert E CookStaff Treasury on December 31, 2004. Lilian Fossum left her position as Head of Group Staff Human Resources and Organizational Development on January 1, 2005, and was succeeded by Harry de Vos. Since September 2004, she has been Head of the Group’s pricing program, and Regional Administrative Officer, within the Group’s holding structure, for the central European region. B.Compensation      Remuneration to the President and CEO and Group Management is currentlyproposed by the headRemuneration Committee, and comprises fixed salary, variable salary in the form of Consumer Outdoor Products North America reporting to Bengt Andersson.a short-term incentive based on annual 4859 performance targets, long-term incentives, and benefits such as pensions and insurance. The general principles for remuneration within Electrolux are based on the position held, individual as well as team performance and competitive remuneration in the country of employment.      Variable salary is paid according to performance. Variable salary for the President and CEO is determined by the achievement of financial targets. Variable salary for sector heads is determined by the achievement on both financial and non-financial targets. Value created is the most important financial indicator. For 2004, the non-financial target focused on product innovation. Group staff heads receive variable salary based on the value created for the Group as well as the achievement of performance targets within their respective functions. For more information on the value creation concept, see “Item 5—Results of Operations for 2004 as Compared to 2003—Value Creation”.      In terms of long-term incentive programs, Electrolux has implemented a performance share program and several employee stock-option programs, which are designed to align management incentives with shareholder interests. In 2004, the Annual General Meeting approved to replace the Group’s stock option programs with a performance related long-term share program based on value created over a three-year period.                                             Remuneration to Group Management in 2004                                             Variable     Pension     Long-term         ’000 SEK   Fixed salary     salary     cost     incentive1     Total     President and CEO     7,708       4,246       3,683       2,400       18,037                                             Other members of Group Management2     36,958       16,279       27,569       10,800       91,606                                               Total     44,666       20,525       31,252       13,200       109,643   B. COMPENSATION 1. Target value of Share Program 2004. 2. Other members of Group Management comprised 11 people up to October and 9 for the rest of the year.      For a discussion of the compensation paid to Electrolux’s board of directors and members of its Group management for the year ended December 31, 2003,2004, please see Note 27 to the consolidated financial statements. For information on provisions for pensions and similar commitments, please see Note 22 to the consolidated financial statements. C. BOARD PRACTICESBoard Practices      The Board Of Directors’ Activities In 20032004      The Board of Directors of Electrolux during 2003 consistedconsists of (i) nineseven members, (without deputies)without deputies, who are elected by the shareholders at the Annual General Meeting and (ii) threefor a period of one year. Three additional members, (with deputies)with deputies, are appointed by the Swedish employee organizations. Other Company personnel participateorganizations, in accordance with Swedish labor laws. With the exception of the President and CEO, the members of the Board meetingsare non-executives. Electrolux complies with the listing requirements of the Stockholm Stock Exchange regarding independent Board members.      Remuneration to Board members is authorized by the AGM and distributed by the Board to the members who are not employed by the Group. Information on remuneration to Board members is given in the table above under “Item 6.B – Compensation” and Note 27 to the consolidated financial statements. No remuneration for consultancy services has been paid to the Board of Directors in 2004. Remuneration to the President and the CEO is proposed by the Remuneration Committee. See “Remuneration Committee” below.      The average age of the Board members is 52. Two of the ten members are not Swedish citizens. Four are women. Six members are shareholders in Electrolux, with a total holding of 43,819 B-shares, representing 0.01% of the total voting rights. Holdings by Board members have declined from time to time and contribute with presentations on specific issues.the previous year as a result of the change in the Board’s composition.      Seven ordinary and four additional Board meetings were held during the year. Six of the ordinary meetings were held in Stockholm, Sweden, and one in Hungary, where the Board visited the Group’s production center for refrigerators, freezers and floor-care products. 60 In addition, there were three meetings addressing specific issues. Duringthe course of the year, the Board of Directors conducted ongoing reviews ofreviewed the Group’s results and financial position andon an ongoing basis, as well as the outlook presented by the President at each meeting. The Board also addressed issues concerningdealt regularly with questions related to acquisitions and divestments, establishment of new operations, investments and the Group’s strategic direction, including strategies for branding, design, relocation of the Group.purchasing and production as well as development and launching of new products.      The Board of Directors has adopteddecides on issues such as Group strategy, financing, investments, acquisitions and divestments of companies, organization and major policies. The Board’s work is governed by regulations that include the Swedish Companies Act, the Articles of Association and the working procedures whichestablished by the Board.      The Board determines its working procedures each year and reviews them when necessary. The working procedures stipulate that 4-7 meetingsthe meeting for formal constitution of the Board shall be held annually,directly after the AGM. Decisions are made at this meeting regarding election of which onethe Chairman, distribution of remuneration to the Board members, and authorization to sign for the Company.      The Board normally meets on six other occasions during the year. Four of these meetings are held in connection with publication of the Group’s annual and interim reports. One or two meetings shall beare held in conjunctionconnection with a visitvisits to an operating entity.companies. Additional meetings, including telephone-conferences, are held when necessary.      The Company’s auditor shall be requested to submit a report toworking procedures for the Board of Directors at least once a year. The work procedures also include a detailed instructioninstructions to the President with respect toand CEO regarding issues that require the issues requiring the Board of Directors’ approval andBoard’s approval. Among other things, these instructions specify the type of financial and other reports that shall be submitted to the Board, of Directors. These instructions specify, among other things,and the maximum amounts whichthat various decision-making functions within the Group have the rightare authorized to approve with respect toregarding credit limits, capital expenditures.expenditure, and other outlays. The Board’s workworking procedures also cover the Group’s financial policypolicy.      The Group’s external auditors report to the Board at least once a year, and also attend meetings with the Audit Committee.      Each Board meeting normally includes a review of the Group.Group’s results and financial position as well as the outlook for the next quarter, which is presented by the President. The meeting also deals with investments and establishment of new operations as well as acquisitions and divestments. In addition, a business sector head usually presents current strategic issues for the sector.      The work procedures further provide that remuneration to Group Management shall be proposed by a Remuneration Committee. The committee is comprised of Rune Andersson (ChairmanIn the course of the Board), Jacob Wallenberg (Deputyyear, the Board evaluated its activities, including working procedures and the working climate as well as the presence of and need for special competence. This evaluation served as input for the nomination procedure work, in which shareholder representatives and the Chairman of the Board) and Hans Stråberg (CEO and President of Electrolux). Mr. Stråberg is excluded from participation in discussions with respect to his compensationBoard jointly evaluate such matters as the PresidentBoard’s composition and CEO.remuneration, as described above. Committees      The Board has established a Remuneration Committee, an Audit Committee and a Disclosure Committee. The Board has also decided that issues can be referred to ad hoc committees that deal with specific matters. The work of these committees is largely preparatory. Remuneration Committee      The main task of the Remuneration Committee is to propose principles for remuneration of members of Group management. The Remuneration Committee is obliged to makemakes proposals to the Board of Directors on compensation matters for the President and on the principles of compensation of the other members of Group Management, includingregarding targets for variable compensation, the relationship between fixed and variable salary, changes in fixed or variable salary, the criteria to be applied in thefor assessment of variable salary, long-term incentives, pension terms and other benefits.      The Committee comprises the allotmentChairman of stock options,the Board and pension terms. A minimumtwo Board members. Prior to the AGM in 2004, the Committee comprised Rune Andersson (Chairman), Jacob Wallenberg and Hans Stråberg. The elected Board appointed Michael Treschow as Chairman of the Remuneration Committee, and Karel Vuursteen and Barbara R. Thoralfsson as members. The latter was replaced by Aina Nilsson Ström in October 2004. 61      At least two meetings are convened each year by the remuneration committee with additionalannually. Additional meetings scheduled asare held when needed. SixSeven meetings were held byin 2004. Special consideration was given to the remuneration committee during 2003.new annual long-term share program and a new supplementary pension plan for some of the Swedish members of Group Management. Audit Committee      The Audit Committee was established by the Board of Directors has established an Audit Committee comprising three non-executive Board Members. Theas of 2003. Its primary purpose of the committee is to assist the Board of Directors in overseeing the accounting and financial reporting processes, including the effectiveness of disclosure controls and procedures and the adequacy and effectiveness of internal controls and auditsover financial reporting. The audit committee also assists the Board of Directors in overseeing the audit of the financial statements including related disclosures of Electrolux. The Audit Committee consists of three Board members: Peggy Bruzelius (Chairperson), Thomas Halvorsen and Louis R. Hughes. An Audit Committee Charter, with work procedures, was adopted by the Board of Directors in early 2003. The Charter provides that the Audit Committee shall meet at least three times per year. As part of its responsibilities, the Committee shall each year reviewdisclosures. This involves reviewing proposals for the appointment of external auditors and fee arrangements with the external auditor. The Committee shall also pre-approvein connection therewith, pre-approving audit and non-audit services to be provided by the external auditor, related party transactionsauditors, reviewing the objectivity and independence of the external auditors, overseeing the work of the external auditors, evaluating the external auditor’s performance and where applicable recommending replacement of the external auditors.      The Audit Committee also reviews the Internal Audit function, known as Management Assurance & Special Assignments, in terms of organization, staffing, budget, plans, results, and reports prepared by this function.      The Audit Committee comprises three non-executive directors: Peggy Bruzelius (Chairman), Thomas Halvorsen and Barbara R. Thoralfsson. The latter replaced Louis R. Hughes in October 2004.      The external auditors report to the Audit Committee on each ordinary meeting.      At least three meetings are held annually. Additional meetings are held when needed. Three meetings were held in 2004. Key topics at these meetings included review relationships betweenof the financial statements as well as review and pre-approval of audit and permissible non-audit services provided by the external auditor, and Electrolux. In addition, the scope and costs of these services. Disclosure Committee      A Disclosure Committee shall reviewwas established at the audited financial statementsstart of 2005. This Committee contributes to considering the materiality of information relating to Electrolux and related disclosures.ensuring that such information is properly communicated to the market on a timely basis.      The BoardDisclosure Committee comprises the head of Directors has also establishedGroup Staff Legal Affairs, the practiceChief Financial Officer, the head of referring specific matters to ad hoc committees formed withGroup Staff Communications and Branding, and the sole purposehead of addressing those issues. An ad hoc committee for reviewing Electrolux’s financial policy, including its pension policy held one meeting during the year.Investor Relations and Financial Information. 49 Election of Directors and Auditors      The following describesAGM decides on the nominating processnomination procedure for the coming year for the Board members who were proposed by a group of major shareholders for electionto be elected at the 2004 Annual General Meeting.      Duringnext meeting, namely, for all members except the fourth quarter of 2003,three, with deputies, who are appointed by the Swedish employee organizations in accordance with Swedish labor law. In accordance with the decision by the meeting, the Chairman of the Board contacted representatives offor at least three of the majorlargest shareholders during the fourth quarter of Electrolux,the year. The shareholder representatives contacted were Anders Scharp of Investor, AB (represented by Claes Dahlbäck),Ramsay J. Brufer of Alecta Mutual Pension Insurance, (represented by Ramsay J. Brufer), AMFMarianne Nilsson of Robur Investment Funds and Carl Rosén of Second Swedish National Pension Funds (represented by Tor Marthin). Five meetingsFund. The names of these representatives were held topublished in the Group’s Interim report for July-September 2004.      Together with the Chairman, these representatives evaluate the Board’s activities,composition, remuneration, and the manner in whichneed for special competence on the Board. These representatives have held four meetings. The names of the proposed members and a proposal for remuneration were published on March 16, 2005.      Individual shareholders have been given the right to propose candidates for the Board was composed duringdirectly to the prior year, the directors’ fees and any requirement of special expertise in the Board.Chairman by e-mail to chairman@electrolux.com      The results of this preparatory work were provided in the written notice of the Annual General Meeting.62      In 2002, the shareholders elected PricewaterhouseCoopers AB as auditors of Electrolux. Pursuant to Swedish law, the election is for a four year term.term, until the AGM in 2006. D. EMPLOYEESEmployees      The Group worldwide generally enjoys good relations with its employees and with labor unions. The following tables set forth certain employee data for the past three fiscal years.                           Employee Data   2003   2002   2001 Average number of employees worldwide     77,140       81,971       87,139   Average number of employees in Sweden     6,635       6,586       7,272   Number of employees worldwide at year end     74,989       83,347       85,749   Salaries and remuneration (SEKm)     17,154       19,408       20,330   Of which in Sweden (SEKm)     2,014       1,904       1,972   Change in Average Number of Employees 2003 Average number of employees in 2002 81,971 Number of employees in operations divested in 2003 -3,014 Restructuring programs -2,487 Other changes 670 Average number of employees in 2003 77,140                           Employee Data   2004     2003     2002   Average number of employees worldwide     72,382       77,140       81,971   Average number of employees in Sweden     6,549       6,635       6,586   Number of employees worldwide at year end     74,098       74,989       83,347   Salaries and remuneration (SEK million)     17,014       17,154       19,408   Of which in Sweden (SEK million)     2,028       2,014       1,904     Change in Average Number of Employees   2004   Average number of employees in 2003     77,140   Number of employees in operations divested in 2003     -3,014   Restructuring programs     -3,398   Other changes     1,654   Average number of employees in 2004     72,382   E. SHARE OWNERSHIPShare Ownership      As of March 31, 2004,February 14, 2005, the members of the Board and Management as a group owned the equivalent of 500,0000 A-shares, 561,19451,343 B Shares and 1,367,2001,169,900 options to acquire B Shares.      Their individual shareholdings are disclosed under “Item 6.A—6.A¾Directors and Senior Management” above.      OptionLong-term Incentive Programs      Electrolux has implemented several employee stock optionslong-term incentive programs which are offered tofor senior managers. TheThese programs are intended to attract, retain and motivate managers by providing long-term incentives through benefits linked to the Company’s share price. They have been designed to align management incentives with shareholder interest.      A detailed description of all option programs and related costs can be found in Note 27 to the consolidated financial statements. 2002 Option Program      Under the employee stock option program in 2002 (the “2002 Option Program”), options to purchase 2,865,000 B Shares were allotted to less than 200 senior managers in lots of 15,000 options. The President was 5063 granted four lots, members of Group Management two lots and all other senior managers one lot. The options were allotted free of charge to participants, with a maturity period of seven years. The strike price is SEK 191, which was 10% above the average closing price of the Electrolux B Shares on the Stockholm Exchange during a limited period prior to allotment. 2003 Option Program      Under the employee stock option program in 2003 (the “2003 Option Program”), a maximum of options to purchase 2,745,000 B Shares were allotted to less than 200 senior managers. The 2003 Option Program is based on the same parameters as the 2001 and 2002 programs, including the number of options per lot. The Company’s obligations under the 2003 Option Program, including estimated employer contribution, are fulfilled by repurchased shares.      Assuming that all stock options allotted under the 2003 Option Program are exercised, the sale of previously repurchased shares under this program would result in a dilution of 1.1%. The maximum dilution from the 2003 Option Program and all existing option programs is 3.5%. This includes the sale of shares for hedging of employer contribution in connection with the exercise of the options. The financing cost for these shares for hedging purposes was SEK 22 million for 2003. 2004 Long-term Incentive Program      The Annual General Meeting in 2004, decided on a new annual long-term incentive program for 2004. The program is based on goals approved by the Board for the value creation within the Group over a three-year period. It supports the Electrolux principles of “pay-for-performance” and is an integral part of the total compensation plan for Electrolux management.      Depending on the outcome of value creation, the proposed program would distribute a variable number of Electrolux B Shares, up to 1,500,000, to fewer than 200 senior managers in more than 20 countries. The defined levels for value creation include a minimum level which must be exceeded in order to enable distribution of shares, as well as a maximum level. The shares will be distributed at the end of the three-year performance period, and managers will be required to hold the shares for a period of two years.      Senior managers have been grouped on five levels, i.e. the President and CEO, Group Management and three levels for other managers. The Board will approve the value of the program for each of these five levels. The approved value determines the number of shares to be distributed, on the basis of the average trading price for the Electrolux B Share, adjusted for the estimated net present value of dividends for the three-year period.      The Company’s obligations under the program, including employer contribution, shall be secured by repurchased shares.      The total cost of the program over a three year period is estimated at SEK 150 million, including costs for employer contributions and the financing cost for the repurchased shares. It is estimated that the cost will not exceed SEK 240 million. The minimum cost, if no shares are distributed, will amount to SEK 17 million, i.e. the financing cost for the repurchased shares.      The distribution of repurchased shares under this program would result in a maximum dilution of 0.55%, measured as the maximum increase in number of shares. 51 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. MAJOR SHAREHOLDERSMajor Shareholders      The following table sets forth, as of MarchDecember 31, 2004, information with respect to shareholders known by Electrolux to be the beneficial owners of more than five percent of Electrolux’s A Shares and B Shares. Electrolux is not aware of any significant changes in percentage ownership held by a major shareholder during the past three years.                                                                           Identity of   Number of   Percentage of Total   Number of B Shares   Percentage of Total   Percentage of Total Person or Company   A Shares Owned   A Shares1   Owned   B Shares1   Voting1 Identity of Person or   Number of A   Percentage of   Number of B   Percentage of   Percentage of   Company   Shares Owned   Total A Shares1   Shares Owned   Total B Shares1   Total Voting1   Investor AB   9,232,390     92.3 %   9,832,900     3.3 %     25.8 %   8,770,771     92.3%   9,686,800     3.4%     25.9% Directors and executive officers as a group2   500,000     5.0 %   561,194     0.2 %     1.4 %   0     0%   51,144     0.02%     0.01% 1.   Adjusted for 17,489,40017,739,400 repurchased shares held by Electrolux as of MarchDecember 31, 2003.2004.   2.   See “Item 6.A—Directors and Senior Management” for information regarding their individual shareholdings.      A Shares are entitled to one vote per share whereas B Shares are entitled to one-tenth of a vote per share. No shareholder in Electrolux has different voting rights than any other shareholder except as a consequence of holding A Shares rather than B Shares.      As of MarchDecember 31, 2004, 99.3%the share capital comprised 9,502,275 A-shares and 299,418,033 B-shares. As of December 31, 2004, 99.8% of the A Shares and 62.9%60.6% of the B Shares were held by shareholders in Sweden. The total number of shareholders in Sweden as of this date was 63,500.39,400. See “Item 9 – The Offer and Listing” for details of shareholdings in the United States.      Investor AB      Investor AB is a major Swedish industrial holding company that has wide ranging affiliations in the financial community in Sweden. As of December 31, 2003,2004, the major shareholder in Investor AB, the Knut & Alice Wallenberg Foundation, owned 18.6% of the nominal capital, representing 40.0%40% of the votes in Investor AB. Electrolux recognizes that both Investor AB and the Knut & Alice Wallenberg Foundation may be deemed to be affiliatescontrolling persons of Electrolux within the meaning of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. Electrolux, however, does not believe that either Investor AB or the Knut & Alice Wallenberg Foundation should be deemed to be controlling persons of Electrolux, despite Investor AB’s direct, and the Knut & Alice Wallenberg Foundation’s indirect, voting rights in Electrolux. Electrolux has had no indication that either Investor AB or the Knut & Alice Wallenberg Foundation has obtained its ownership interest in Electrolux for other than investment purposes. Both Investor AB and the Knut & Alice Wallenberg Foundation are known to have made substantial investments in a number of diverse Swedish companies without seeking to exercise day-to-day control over each particular company. B. RELATED PARTY TRANSACTIONSRelated Party Transactions      Other than as set forth below, to the best of our knowledge, there were no material transactions during the last three fiscal years nor are there any presently proposed material transactions to which Electrolux was or is to be a party, in which any director, officer, controlling shareholder, or relative or spouse of any of the foregoing persons had or is to have a direct or indirect material interest and no director, officer or associate of Electrolux has been indebted to Electrolux during the last three fiscal years.      Investor AB may be deemed to control Skandinaviska Enskilda Banken AB (SEB). Electrolux, in the ordinary course of its business, has a number of banking, securities trading and trade finance relationships with SEB, all on an arms-length basis. The Electrolux floor-care products area purchases supplies on an arms-length basis from Suzhou Kingclean Floorcare Company Ltd and Suzhou Kingclean Motor Company Ltd, which are majority owned by Investor AB. C. INTERESTS OF EXPERTS AND COUNSEL      Not applicable. 5264 C.Interests of Experts and Counsel      Not applicable. 65 ITEM 8. FINANCIAL INFORMATION A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATIONConsolidated Statements and Other Financial Information      Audited financial statements for the three years ended December 31, 2003,2004, are included in “Item 17-Financial17¾Financial Statements”.      Legal Proceedings      Electrolux is subject to a variety of legal proceedings in the ordinary course of business. Among others, the claims include allegations of breach of contract, improper delivery of goods and services, product liability and infringement of intellectual property rights.      Asbestos Litigation. Litigation and claims related to asbestos are pending against the Group in the United 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. Many of the cases involve multiple plaintiffs who have made identical allegations against many other defendants who are not part of the Electrolux Group.      As of MarchDecember 31, 2004, there were 732842 lawsuits pending against Electrolux entities representing approximately 22,50016,200 (approximately 21,000) plaintiffs. During 2003, 497 new cases were filed and 129 pending cases were resolved. During the first quarter of 2004, a total of 163457 new cases with approximately 1,7005,600 plaintiffs were filed and 15199 pending cases with approximately 10,500 plaintiffs were resolved. Approximately 21,50015,100 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 discussions with those insurance carriers.      Additional lawsuits may be filed against Electrolux in the future. It is not possible to predict either the number of future claims or the number of plaintiffs that any future claims may present. 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 result of operations in the future.      Settlement of U.S. vacuum-cleaner lawsuit.In May 2004, a settlement agreement was reached in a lawsuit regarding upright vacuum cleaners in the United States. According to the terms of the settlement, Electrolux paid the plaintiff USD 30 million. Including legal expenses this amounted to SEK 239 million, which was charged against operating income within items affecting comparability. Dividend Policy      The Annual General Meeting adopted a proposal byBoard of Directors proposes an increase of the Boarddividend for 2004 to SEK 7.00 (6.50) per share, for a dividendtotal payment of SEK 6.50 (6.00) per share corresponding2,038 million (1,993). The proposed dividend corresponds to 39% (36%)47% (39) of net income per share for the year, excluding items affecting comparability. The Group’s goal is thatfor the dividend corresponds to 30-50%correspond to at least 30% of net income, forexcluding items affecting comparability. This is a change from the year.previous policy of 30–50% of net income. B. SIGNIFICANT CHANGESSignificant Changes      None. 5366 ITEM 9. THE OFFER AND LISTING      Trading of Class A Shares occurs primarily on the Stockholm Stock Exchange, but due to the very low number of shares not held by Investor AB, trading is rare on the Stockholm Stock Exchange and virtually non-existent elsewhere.      The principal trading markets for the Class B Shares are the Stockholm and London Stock Exchanges. The B Shares were also listed on the stock exchanges in Paris and Zurich. During 2003, the Electrolux share was de-listed from the stock exchanges in Paris and Zurich. The de-listing in Paris was finalized as of August 29, 2003, and the de-listing in Zurich as of April 30, 2003. Trading of Electrolux shares also takes place in the over the counter market in Frankfurt A.M. and Munich in Germany.      There is trading in the United States for sponsored American Depositary Shares representing B Shares. These American Depositary Shares are evidenced by American Depositary Receipts (“ADRs”) issued by The Bank of New York and, areuntil recently, were traded on the NASDAQ National Market.      The Board of Directors decided in February 2005 to delist the Group’s ADRs (ELUX) from the NASDAQ Stock Market in the United States. The ADR program will be maintained, and trading in these receipts has been transferred to the U.S. over-the-counter market. The de-listing was completed by the end of March 2005. The majority of the trading in Electrolux shares is on the Stockholm Stock Exchange. Trading volume in ADRs is low and the Board of Directors decided that it did not justify a listing. In addition, capital markets are becoming increasingly global which reduces the need for listings on multiple exchanges. The majority of the Electrolux shareholders in the United States owns shares, not ADRs. Electrolux shares have been listed on NASDAQ since 1987. One ADR corresponds to two B-shares.      The high and low sales price, rounded to the nearest krona, for Class A and B Shares on the Stockholm Stock Exchange and the high and low sales prices in United States dollars for the ADSs in the NASDAQ System for the periods indicated are set out in the following table:                                                                                                   A Shares   B Shares   ADSs   A Shares   B Shares   ADSs     High   Low   High   Low   High   Low   High   Low   High   Low   High   Low     (SEK)   (SEK)   (USD)   (SEK)   (SEK)   (USD)   2003-2004   May 2004   170   160   154   142.5   41.06   36.75   April 2004   174.5   167.5   162   150   42.7   39.01   March 2004   165   156   163.5   150   43.30   39.30   February 2004   172   160.5   174   157   47.80   43.90   January 2004   177   159   174   157   47.80   43.90   December 2003   163   151   164   151.5   44.26   41.60   2004-2005   March 2005   179.00   171.00   172.50   161.50   49.99   46.26   February 2005   175.00   145.00   168.00   145.50   48.61   41.19   January 2005   155.50   147.00   156.50   141.50   46.61   41.44   December 2004   153.50   144.00   154.00   142.00   46.40   42.09   November 2004   151.00   135.00   150.00   131.00   44.64   37.22   October 2004   133.00   130.50   135.00   126.00   37.62   34.84     2005   First Quarter   179.00   145.00   172.50   141.50   49.99   41.44     2004     Fourth Quarter   154   131   154   126   49   40   Third Quarter   158   132   146   128   42   37   Second Quarter   175   146   162   141   39   34   First Quarter   177   156   175.5   150   49.31   39.30     177   156   176   150   46   35     2003     Fourth Quarter   179.5   150.5   184.5   151.5   47.56   40.37     179.5   150.5   184.5   151.5   47.56   40.37   Third Quarter   185   151   194.5   153.5   46.75   38.80     185   151   194.5   153.5   46.75   38.80   Second Quarter   153   133   160.5   131   41.70   31.15     153   133   160.5   131   41.70   31.15   First Quarter   148   128   149.5   128   35.35   29.26     148   128   149.5   128   35.35   29.26   2002   Fourth Quarter   157   130   167.5   119.5   36.60   25.98   Third Quarter   176   135   188   128.5   40.69   28.30   Second Quarter   185   163.5   193   165   40.30   32.57   First Quarter   186   146   197   145   37.65   27.71     2004   177   131   154   126   49   40   2003   185   128   194.5   123   47.50   29.26     185   128   194.5   123   47.50   29.26   2002   186   130   197   119.5   40.69   25.98     186   130   197   119.5   40.69   25.98   2001   155   94   171   92   34.25   17.20     155   94   171   92   34.25   17.20   2000   230   114   230   110   54  1/8   22  3/8     230   114   230   110   5 41/8   2 23/8   1999   220   119   222   118   41  1/4   21  3/4   67      Each ADS represents two B Shares (or the right to receive two such shares). As of May 14, 2004,March 31, 2005, there were 1,960,8172,711,426 American Depositary Shares outstanding, representing 3,921,6341,355,713 B Shares, and approximately 7071 record holders. The number of record holders of ADS’s is not necessarily representative of the number of actual individuals for whose benefit the ADS’s were held. 54     According to the share register at the VPC (Swedish Central Securities Depository & Clearing Organization), at year-end 2004 the Group had a total of approximately 63,800 shareholders. The shares held by the ten largest owners corresponded to approximately 27% of the total share capital and approximately 43% of the voting rights.      Approximately 50% of the share capital was owned by Swedish institutions and mutual funds, 38% by foreign investors, and 12% by private Swedish investors. The total number of shareholders in Sweden as of this date was approximately 39,400. 68 ITEM 10. ADDITIONAL INFORMATION A. SHARE CAPITALShare Capital      Not applicable B. MEMORANDUM AND ARTICLES OF ASSOCIATIONMemorandum and Articles of Association      Aktiebolaget Electrolux (publ) is entered under no. 556009-4178 in the Company Register kept by the Swedish Patent and Registration Office. The objects and purposes of the Company are described in Article 3 of the Articles of Association which are attached hereto as Exhibit 1. Set forth below is a summary of certain provisions in the Articles of Association and certain requirements of the Swedish Companies Act of 1975 (the “Swedish Companies Act”). Such summary does not purport to be complete and for the full text of the Articles of Association please refer to Exhibit 1.      Changes in Share Capital and Preferential Rights of Shareholders      The Electrolux Articles of Association provide that the share capital of the Company may not be less than SEK 1,500 million nor more than SEK 6,000 million, represented by shares of SEK 5 nominal value.      The shares of Electrolux may be issued in three series, A and B and C. Shares of series A may be issued up to a maximum number so that the aggregate number of A Shares constitutes not more than nine-tenths of the total number of shares in the Company. Shares of series C may only be issued up to a total number of 27,457,000. Remaining shares are of series B. Should Electrolux decide to issue new series A and series B and series C shares by way of a cash issue, the holders of series A and series B and series C shares shall have the priority right to subscribe for new shares of the same series in proportion to their existing shareholding (primary right of priority). Shares not subscribed for by primary right of priority shall be offered to all shareholders (subsidiary right of priority). If the number of shares available for subscription is insufficient for the actual subscription made under subsidiary right of priority, the available shares shall be distributed among those wishing to subscribe in proportion to their existing shareholdings and, insofar as this cannot be done, by drawing of lots. Should Electrolux decide to issue new shares of only series A or series B or series C by way of a cash issue, all shareholders shall have right of priority to subscribe for new shares in proportion to their existing shareholdings irrespective of whether they hold series A or series B or series C shares.      At present, the share capital of AB Electrolux consists of A-shares and B-shares. An A-share entitles the holder to one vote and a B-share to one-tenth of a vote. All shares entitle the holder to the same proportion of assets and earnings, and carry equal rights in terms of dividends.      The above shall not constitute any restriction in Electrolux’s right to decide on a cash issue without taking the priority rights of shareholders into account.      If the share capital is increased by way of a bonus issue, new shares of each series shall be issued in proportion to the existing number of shares of each series. Existing shares of a given series shall thereby entitle the holder to receive new shares of the same series. This shall not constitute any restriction in Electrolux’s right to issue new shares of a new series by way of a bonus issue, following appropriate amendment to the Articles of Association.      Certain Powers of Directors and the President      Under the Swedish Companies Act, the board of directors is ultimately responsible for the organization of the company and the management of the company’s affairs. The president is charged with the day-to-day management of the company in accordance with guidelines and instructions provided by the board of directors. The president has borrowing powers only to the extent such borrowing is part of the day-to-day management of the company and in accordance with any guidelines and instructions provided by the board of directors.      The general meeting of shareholders decides on compensation for the directors. Typically the general meeting decides on an aggregate amount which is to be distributed among the directors as determined by the board. 69      According to the Swedish Companies Act, a member of the board of directors and the president may not take part in matters regarding agreements between the director and the company, or between the company and third parties where the director has a material interest in the matter which may conflict with the interests of the company, or in agreements between the company and a legal entity which the director may represent, either individually or together with any other person. 55      The Articles of Association do not provide any rules relating to the foregoing matters.      Dividends      A Shares and B Shares carry equal rights to dividends. Shares of series C do not carry rights to dividends.      Under Swedish law, only the Annual General Meeting of Shareholders may authorize the payment of dividends, which may not exceed the amount recommended by the Board of Directors (except to a limited extent in the event of a demand by holders of at least ten percent of the total number of shares outstanding and then to be paid only from funds available for dividends). Under Swedish law, no interim dividends may be paid in respect of a financial period as to which audited financial statements have not been adopted by the Annual General Meeting of Shareholders. The normal practice in Sweden is for dividends to be paid only annually. It is the present practice of the Board of Directors of Electrolux to decide upon their recommendation in respect of dividends for the preceding fiscal year and issue a proposal in February of each year. The recommendation of the Board of Directors is considered at the Annual General Meeting which is usually held in April or May of the year following that to which the dividend relates. The record date (determined by the Annual General Meeting) by which shareholders in Electrolux must be registered in the share register in order to participate in any dividend is normally the third business day following the date of the shareholders meeting authorizing the payment of the dividend. The dividend is normally paid on the third business day after the record date. The shares are quoted on the Stockholm Stock Exchange ex-dividend on the business day after the date of the Annual General Meeting.      Annual General Meeting      The decision-making rights of shareholders in AB Electrolux are exercised at the Annual General Meeting, or at an Extraordinary Meeting.      Participation in decision-making requires the shareholder’s presence at the meeting, whether personally or through a proxy. In addition, the shareholder must be registered in the share register as of a prescribed date prior to the meeting and must provide notice of participation in due course.      Additional requirements for participation apply for shareholders with holdings in the form of US ADRs or similar certificates. Holders of such certificates are advised to contact the ADR depositary bank, fund manager or the issuer of the certificate in good time before the meeting in order to obtain more information.      The Annual General Meeting must be held within six months of the end of the accounting year. The meeting resolves on dividends, adoption of the annual report, election of Board members and when applicable auditors, and remuneration to Board members and auditors and other important matters. The Annual General Meeting in 2004 was attended by shareholders representing 42.5% of the share capital and 55.2% of the voting rights in the Company.      An Extraordinary General Meeting can be held at the discretion of the Board of Directors, or if requested by the auditors or by shareholders owning at least 10% of the shares. In June 2004, the Board convened an Extraordinary General Meeting to decide on the redemption of shares and payment of redemption proceeds to the shareholders. The Extraordinary General Meeting was attended by shareholders representing 27.1% of the share capital and 42.1% of the voting rights in the Company. Voting at the General Meeting of Shareholders      For the purposes of voting at a General Meeting, each share of series A carries one vote and each share of series B and C carries one-tenth of a vote. 70      Electrolux is required to publish notices to attend the Annual General Meeting and extraordinary general meetingsExtraordinary General Meetings regarding changes in the Articles of Association no earlier than six weeks and no later than four weeks prior to the general meeting. Notices to attend other types of extraordinary general meetingsExtraordinary General Meetings must be published no earlier than six weeks and no later than two weeks prior to the general meeting.      In order to be entitled to attend and vote at a general meeting of the shareholders, a shareholder must be registered in the register of shareholders at least ten days prior to the date of the meeting and the Articles of Association provides that the shareholder must have given notice to the Company of his intention to attend not later than 4 p.m. on the date specified in the notice convening the meeting, being a date not earlier than the fifth business day preceding the meeting.      A person registered in the register of shareholders as a nominee (including the depositary of the ADSs) is not entitled to vote at a general meeting nor is the beneficial owner whose shares are registered in the name of the nominee, unless the beneficial owner arranges to have his own name entered in the register. A shareholder may attend and vote at the meeting in person or by proxy. Proxies are not valid for longer than a year from the date of issuance.      Under the Swedish Companies Act of 1975, resolutions are normally passed by a simple majority of votes cast. Exceptions which require special quorums or majorities include:   1.    resolutions which amend the Articles of Association (except as described below), which resolutions generally require an affirmative vote of at least two-thirds of the votes cast as well as two-thirds of the shares represented at the meeting;     2.    resolutions which amend the Articles of Association and which reduce any shareholder’s rights to profits or assets, or restrict the transferability of shares, or alter the legal relationship between shares, which resolutions require an affirmative vote of all shares present at the meeting and a quorum of nine-tenths of the shares outstanding;     3.    resolutions which amend the Articles of Association and which limit the number of shares which a single shareholder may vote, or require the retention of a larger amount of the net profit than required by the Swedish Companies Act or amend shareholders rights in 56 liquidation or dissolution, which resolutions require the approval of two-thirds of the votes cast as well as nine-tenths of the shares represented at the meeting;     4.    resolutions under 2. or 3. may be approved by a lower supermajority of at least two-thirds of the votes cast as well as two-thirds of the shares represented at the meeting, if   a.    the change would adversely affect only certain shares, and the resolution is approved by all holders of such shares represented at the meeting with a quorum of at least nine-tenths of the shares adversely affected, or     b.    the change would adversely affect only one class of shares, and the resolution is approved by holders of at least one-half of the shares of such class outstanding as well as at least 90% of the shares of such class represented at the meeting.   5.    resolutions which would allow the company to deviate from the shareholders’ preferential rights in connection with an issue (except for an issue in kind) of new shares, or to reduce the share capital, or to acquire or dispose of own shares, or to approve a merger, which resolutions require approval of at least two-thirds of the votes cast as well as two-thirds of the shares represented at the meeting.      Under Swedish law, a general meeting of shareholders may not adopt any resolution, which is likely to give an undue advantage to a shareholder to the detriment of other shareholders. 71      Cancellation and Purchase of Own Shares      Since 2000, a Swedish limited liability company whose shares are trading on a securities exchange, an authorized market or another regulated marketplace is entitled under Swedish law to repurchase its own shares under certain conditions. Such repurchase requires the approval by the general meeting of shareholders with a majority of two-thirds of the votes cast at the meeting as well as two-thirds of the shares represented at the meeting. A company may not hold more than 10% of its own shares at any given time. Electrolux repurchased 750,000 B Shares in 2004 as compared to 11,331,828 B Shares in 2003, as compared to 11,246,052 B Shares in 2002 and 11,570,000 B Shares in 2001 and 25,035,000 in 2000.2001. In 20032004 Electrolux cancelled 14,612,580nil B Shares compared to 27,457,00014,612,580 B Shares cancelled in 2002. As2003. However, a total of March 11, 2004 Electrolux owned 17,489,400497,725 A Shares and 14,681,967 B Shares, equal to 5.4%representing approximately 4.7% of the total number of shares. On April 21,shares, were redeemed in 2004 for a total consideration of approximately SEK 3 billion. As of March 31, 2005 Electrolux owned 17,738,400 B Shares, equal to 5.74% of the Annual General Meeting authorized a program for additional repurchasestotal number of shares. The repurchase mandate of the Annual General Meeting authorizes the Board of Directors under the period up to the next Annual General Meeting to acquire up to 10% of the total number of shares. Repurchased shares may be transferred to cover stock option obligations or in connection with corporate acquisitions. On June 16, 2004, an Extraordinary General Meeting approved the redemption of 497,725 A Shares and 14,681,967 B Shares, representing approximately 4.7% of the total number of shares, for a total consideration of approximately SEK 3 billion. Transfer of Shares      Under the Articles of Association of the Company, there are no restrictions on the transfer of shares and there are no provisions which restrict persons, associations and foundations of non-Swedish nationality from acquiring shares in the Company.      Pursuant to recommendations concerning the disclosure of acquisition and transfer of shares issued byNäringslivets Börskommitté(the Swedish Industry and Commerce Stock Exchange Committee), any seller or purchaser of securities including shares of stock, convertible debt instruments, warrants, non-standardized options and futures of a Swedish company listed on Stockholm Stock Exchange, must report to the exchange and to the Company transactions in which the purchaser or seller acquires or disposes of 5 percent of any subsequent percentage that is a multiple of five, up to and including 90 percent of either the voting rights of all shares or the total number of shares in the Company. These changes in ownership should also be reported to an established news agency and to a nationally published newspaper in Sweden no later than 9 a.m. on the next day on which trading is conducted on Stockholm Stock Exchange. In addition, according to the Swedish Financial Instruments Trading Act, if a natural person or legal person who acquires or disposes of shareholdings in a Swedish company that has its shares listed on a stock exchange situated or operating within one or more countries in the European Economic Area and, as a result of such acquisition or disposition, holds voting rights equal to, in excess of or less than one of the thresholds of 10 percent, 20 percent, 33 1/333? percent, 50 percent or 57 66 2/3 66? percent, the person is required to notify the company in writing at the same time it notifies the stock exchange or, if the shares are not listed in Sweden, to Finansinspektionen (the Swedish Financial Supervisory Authority) within seven calendar days of the acquisition or disposition. In addition, the Act on Reporting Obligations Regarding Certain Holdings of Financial Instruments requires, among other things, that certain individuals who own shares representing 10 percent or more of the share capital or the voting rights in a publicly traded company report such ownership to Finansinspektionen, which keeps a public register based on the information contained in such reports, and also to report any changes in such ownership.      If shares of a Swedish limited liability company are held in the name of a nominee, the nominee must issue a public report to the VPC (the central securities depository and clearinghouse for Stockholm Stock Exchange) every six months, listing all beneficial holders of more than 500 of the shares. C. MATERIAL CONTRACTS C.Material Contracts      The Company does not have any material contracts other than contracts entered into in the ordinary course of business. D. EXCHANGE CONTROLS D.Exchange Controls      There are no Swedish governmental laws, decrees or regulations that restrict the export or import of capital or that affect the remittance of dividends or other payments to non-residents of Sweden who hold Electrolux shares. In addition, since January 1, 1993, there have been no limitations imposed by Swedish law or 72 Electrolux’s Articles of Association on the right of non-residents of Sweden or non-citizens of Sweden to hold or vote Electrolux shares.      There are no limitations on the right of non-resident or foreign owners of the Electrolux B Shares to hold or vote such securities that are imposed by the Articles of Association of the Company. However, under Swedish law the holder of an American Depositary Receipt must, before being entitled to vote at a general meeting of shareholders, register the shares represented by such American Depositary Receipts in his or her own name. E. TAXATION General E.Taxation General      The taxation discussion set forth below does not purport to be a complete analysis or listing of all potential tax effects relevant to the acquisitionownership and ownershipdisposition of ADSs or shares. The statements of United States and Swedish tax laws set forth below are based on the laws in force as of the date of this annual report and may be subject to any changes in United States or Swedish law, and in any double taxation convention or treaty between the United States and Sweden, occurring after that date, which changes may have retroactive effect. Specific tax provisions may apply for certain categories of taxpayers. Your tax treatment if you are a holder of ADSs or shares depends in part on your particular situation. If you are a holder of ADSs or shares you should consult a tax advisor as to the specific Swedish and United States federal, state and local tax consequences relating to your particular circumstances resulting from the ownership of ADSs or shares.      Certain Swedish Tax Considerations      This section describes the material Swedish income and net wealth tax consequences for a holder of ADSs or shares who is not considered to be a Swedish resident for Swedish tax purposes. This section applies to you only if you are a holder of portfolio investments representing less than 10 percent of capital and votes and is not applicable if the ADSs or shares pertain to a permanent establishment or fixed base of business in Sweden.      Taxation on Capital Gains      Generally, non-residents of Sweden are not liable for Swedish capital gains taxation with respect to the sale of ADSs or shares. However, under Swedish tax law, capital gains from the sale of Swedish shares and certain other securities by private individuals may be taxed in Sweden at a rate of 30 percent if they have been residents of Sweden or have lived permanently in Sweden at any time during the year of the sale or the 10 calendar years preceding the year of the sale (absent treaty provisions to the contrary). 58      The provision is applicable to ADSs and shares. This provision may, however, be limited by tax treaties that Sweden has concluded with other countries. Under the income and property tax treaty between Sweden and the United States currently in force (the “U.S.-Sweden Tax Treaty”), this provision applies for 10 years from the date the individual became a non-resident of Sweden.      Taxation on Dividends      A Swedish withholding tax at a rate of 30 percent is imposed on dividends paid by a Swedish corporation, such as Electrolux, to non-residents of Sweden. The same withholding tax applies to certain other payments made by a Swedish corporation, including payments as a result of redemption of shares or a repurchase of shares through an offer directed to its shareholders. Exemption from the withholding tax or a lower tax rate may apply by virtue of a tax treaty. Under the U.S.-Sweden Tax Treaty, the withholding tax on dividends paid on portfolio investments to eligible U.S. holders is reduced to 15 percent. With regard to dividends paid from shares in corporations registered with the VPC (such as Electrolux shares), a reduced rate of dividend withholding tax under a tax treaty is generally applied at the source by the VPC or, if the shares are registered with a nominee, by the nominee, as long as the person entitled to the dividend is registered as a non resident and sufficient information regarding the tax residency of the beneficial owner is available to the VPC or the nominee. 73      In those cases where Swedish withholding tax is withheld at the rate of 30 percent and the person who received the dividends is entitled to a reduced rate of withholding tax under a tax treaty, a refund may be claimed from the Swedish tax authorities before the end of the fifth calendar year following the distribution.      Net Wealth Taxation      The ADSs and shares are not subject to Swedish net wealth taxation if owned by a holder that is not resident in Sweden for tax purposes. You should consult your own tax advisors regarding the Swedish and other tax consequences of your ownership of ADSs and shares.      Certain United States Federal Income Tax Consequences      The following discussion is a summary of the material United States federal income tax consequences relevant to the ownership and disposition of ADSs or shares. This discussion is based on the tax laws of the United States (including the Internal Revenue Code of 1986, as amended, (the “Code”) its legislative history, existing, temporary and proposed Treasury regulations promulgated thereunder, published rulings, administrative pronouncements and court decisions), all as in effect onas of the date hereof,of this annual report, all of which are subject to change or changes in interpretation, possibly with retroactive effect. The discussion is not a full discussion of all tax considerations that may be relevant to the ownership and disposition of ADSs or shares.      The discussion applies only if you hold the ADSs and/or the shares as capital assets and you use the U.S. dollar as your functional currency. It does not deal with the tax treatment of investors subject to special rules, such as grantor trusts, real estate investment trusts, regulated investment companies, banks, brokers or dealers in securities, traders in securities or currencies that elect to use a mark-to-market method of recording for their securities holdings,accounting, financial institutions, insurance companies, tax-exempt entities, investors liable for the alternative minimum tax, U.S. expatriates, persons owning (directly, indirectly or by attribution) 10 percent or more of the share capital or voting stock of Electrolux, persons holding ADSs and/or shares as part of a hedging, straddle, conversion or constructive sale transaction, persons who acquired ADSs and/or shares pursuant to the exercise of employee stock options or otherwise as compensation and persons who are resident or ordinarily resident in Sweden. You should consult your own tax advisorsadvisor about the United States federal, state, local and foreign tax consequences to you of the ownership and disposition of the ADSs or shares. You also are urged to consult with your tax advisor concerning whether you are eligible for benefits under the U.S.-Sweden Tax Treaty. If a partnership (including for this purpose any entity treated as a partnership for United States federal income tax purposes) holds ADSs and/or shares, the tax treatment of a partner will depend upon the status of the partner and the activities of the partnership. If you are a partner in a partnership that holds ADSs and/or shares, you should consult your own tax advisor regarding the specific tax consequences of the ownership and disposition of ADSs and/or shares.      The discussion below applies to you only if you are a U.S. holder and you are beneficial owner of ADSs and/or shares and are not resident in Sweden for purposes of the U.S.-Sweden Tax Treaty and (a) you are (1) a citizen or individual resident of the United States for United States federal income tax purposes, (2) a corporation (or any other entity taxable as a corporation for United States federal income tax purposes) that is organized in 59 or under the laws of the United States or any State thereof (including the District of Columbia), (3) a trust if a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of the substantial decisions of the trust, or (4) an estate the income of which is subject to United States federal income taxation regardless of its source:source; (b) you are not (and have not been at any time during the prior 10 years) a resident of Sweden for purposes of the U.S.-Sweden Tax Treaty and you are entitled to Treaty benefits under the limitation on benefits article contained therein; (c) you do not maintain a permanent establishment or fixed base situated in Sweden to which the ADSs and/or shares are attributable and through which you carry on or have carried on a trade or business (or, if you are an individual, you perform or have performed independent personal services in Sweden); (d) you hold the ADSs and/or shares as a capital asset; and (e) you own (directly, indirectly or by attribution) less than 10 percent of the share capital or voting powerstock of Electrolux.      The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations provided for in or otherwise contemplated by the deposit agreement and any related agreement will be complied with in accordance with the terms. If you hold ADSs, you will be treated as the holder of the underlying shares represented by those ADSs for United States federal income tax purposes. 74      Taxation of ADSs or SharesDividends Dividends      For United States federal income tax purposes, the gross amount of dividends (without reduction for any Swedish withholding taxes) paid with respect to the ADSs or shares generally will be included in your gross income as ordinaryforeign source dividend income to the extentincome. The dividends paid or deemed paid out of Electrolux’s current or accumulated earnings and profits (as determined for United States federal income tax purposes).      Distributions in excess of earnings and profits will be treated first as a non-taxable return of capital to the extent of your adjusted tax basis in the ADSs or shares and thereafter taxable as capital gain. The dividendsby us will not be eligible for the dividends“dividends received deductiondeduction” available to US corporations in respect of dividends received from other U.S. corporations. The amount of any dividend paid in SEK will be the U.S. dollar value of the dividend payment based on the exchange rate in effect on the date of actual or constructive receipt by you, in the case of shares or by the depositary, in the case of ADSs, whether or not the payment is converted into U.S. dollar at that time. If you hold shares and you convert the SEK into U.S. dollars on the date of receipt you generally should not recognize any exchange gain or loss. If you do not convert the SEK into U.S. dollars on the date of receipt you generally will have a tax basis in the SEK received equal to the U.S. dollar amount on such date. Gain or loss, if any, recognized on a subsequent conversion or other disposition of the SEK generally will be treated as U.S. source ordinary income or loss.      As discussed under “—“¾Certain Swedish Tax Considerations—Considerations¾Taxation on Dividends,” above, dividends paid by Electrolux generally will be subject to Swedish withholding tax at a statutory rate of 30 percent. However, pursuant to the U.S.-Sweden Tax Treaty, if you are eligible for Treaty benefits you will be subject to Swedish withholding tax at a maximum rate of 15 percent on the dividend payment.      If a U.S. holder is an accrual method taxpayer, for taxable years beginning before 2005, it must translate Swedish taxes into U.S. dollars at a rate equal to the average exchange rate for the taxable year in which the taxes accrue, but must translate taxable dividends into U.S. dollars at the spot rate on the date received. This difference in exchange rates may reduce the U.S. dollar value of the credits for Swedish taxes relative to its United States federal income tax liability attributable to a dividend. However, for taxable years beginning after 2004, an accrual method U.S. holder may elect to translate Swedish taxes into U.S. dollars using the exchange rate in effect at the time the taxes were paid. Any such election will apply for the taxable year in which it is made and all subsequent years, unless revoked with the consent of the Internal Revenue Service. Subject to certain limitations, you generally will be entitled to receive a foreign tax credit against your United States federal income tax liability (or a deduction against your United States federal taxable income) with respect to any Swedish tax withheld in accordance with the U.S.-SwedenUnited States-Sweden Tax Treaty and paid over to Sweden. If a refund of the tax withheld is available to you under the laws of Sweden or under the U.S.-SwedenUnited States-Sweden Tax Treaty, the amount of tax withheld that is refundable will not be eligible for such credit against your United States federal income tax liability (and will not be eligible for the deduction against your United States federal taxable income). For foreign tax credit limitation purposes, the dividend will be income from sources outside the United States, and generally will be treated as “passive income” (or,or, for certain U.S. holders, “financial services income.” Under recently enacted legislation, for taxable years beginning January 1, 2007, dividend income generally will constitute “passive category income” or, in the case of certain holders, “financial services income”).U.S. Holders, “general category income.”      The United States Treasury has expressed concern that parties to whom ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credits for U.S. holders of ADSs. Accordingly, the analysisdiscussion above of the creditability of Swedish withholding taxes could be affected by future actions that may be taken by the United States Treasury. 60 Recent     If you are a non-corporate U.S. Tax Law Changes Applicableholder, the U.S. dollar amount of any dividends paid to Individuals      Under 2003 U.S. tax legislation, certain holders (including individuals) are eligible for reduced rates of United States federal income tax (currently a maximum of 15 percent) in respect ofyou prior to January 1, 2009 that constitute “qualified dividend income” received ingenerally will be taxable years beginning after December 31, 2002to you at a maximum rate of 15 percent, provided that you meet certain holding period and beginning before January 1, 2009. For this purpose,other requirements. Dividends that we pay with respect to our ADSs and shares generally will be qualified dividend income generally includes dividends paid by non-U.S. corporations if, amongstamong other things, certain minimum holding periods are met and either (i)we were not, in the shares (or ADSs) with respectyear prior to the year in which the dividend has beendividends were paid, and are readily tradable on an established securities marketsnot, in the United States, or (ii)year in which the non-U.S. corporation is eligible for the benefits ofdividends are paid, a comprehensive United States income tax treaty (such as the U.S.-Sweden Tax Treaty) which provides for the exchange of information. Electroluxpassive foreign investment company. We currently believesbelieve that dividends paid with respect to itsour ADSs and shares and ADSs willshould constitute qualified dividend income for United StatesU.S. federal income tax purposes, providedhowever, this is a factual matter and is subject to change. The U.S. Treasury and the individual U.S. holders of its shares and ADSs meet certain requirements. Some of the eligibility requirements for non-U.S. corporations are not entirely certain, however, and further guidance from the United States Internal Revenue Service is anticipated. In addition, the Internal Revenue Service is expectedhave announced their intention to issue certification procedures in 2004 whereby a non-U.S. corporationpromulgate rules pursuant to which holders of ADSs, among others, will be requiredpermitted to certifyrely on certifications from issuers to establish that dividends are treated as qualified dividends. You are urged to consult your own tax advisor regarding the eligibilityavailability to you of its dividends for the reduced United States federal income 75 dividend tax rates.rate in light of your own particular situation and the computations of your foreign tax credit limitation with respect to any qualified dividends paid to you, as applicable.      Sale or Exchange of ADSs or Shares      You generally will recognize capital gain or loss on the sale or other disposition of the ADSs or shares for United States federal income tax purposes in an amount equal to the difference between the U.S. dollar value of the amount realized and your adjusted tax basis (determined in U.S. dollar)dollars) in the ADSs or shares. Such gain or loss will be U.S. source capital gain or loss and generally will be treated as long-term capital gain or loss if the holding period in the ADSs or shares exceeds one year at the time of disposition. If you are an individual, any long-term capital gain generally will be subject to United States federal income tax at preferential rates if specified minimum holding periods are met.rates. The deductibility of capital losses is subject to significant limitations.      You will have a tax basis in any foreign currency received equal to the U.S. dollar amount realized. Any exchange gain or loss you realize on a subsequent conversion or other disposition of such foreign currency will be treated as U.S. source ordinary income or loss.      The deposit or withdrawal of shares in exchange for ADSs by you under the deposit agreement generally will not be subject to United States federal income tax.      Passive Foreign Investment Company Status      A non-U.S. corporation will be classified as a passive foreign investment company (a “PFIC”) for any taxable year if at least 75 percent of its gross income consists of passive income (such as dividends, interest, rents or royalties (other than rents or royalties derived in the active conduct of a trade or business and received from an unrelated person), or at least 50 percent of the quarterly average value of its assets is attributable to assets that produce or are held to produce passive income. Based on the market value of Electrolux’s shares, the composition of its assets, and income and its operations, Electrolux currently believes it did not qualify as a PFIC for the taxable year ending December 31, 2003.2004. If Electrolux were to become a PFIC for any taxable year (which conclusion is a factual determination that must be made as of the close of the taxable year) in which you held ADSs or shares, you would be subject to adverse tax consequences with respect to certain distributions on, and gain realized upon a disposition of the ADSs or shares. Furthermore, dividends paid by Electrolux would not be “qualified dividend income” and would be subject to tax at the higher rates applicable to other items of ordinary income. Application of the PFIC rules is complex. You should consult your own tax advisor regarding the possible application of the PFIC rules to Electrolux.      United States Information Reporting and Backup Withholding      In general, dividend payments made to holders and proceeds paid from the sale or other disposition of ADSs and/or shares may be subject to information reporting to the Internal Revenue Service and possible federal backup withholding at a current rate of 28 percent. Backup withholding will not apply to a holder who furnishes an accurate taxpayer identification number or certificate of foreign status and makes any other required certification or who is otherwise exempt from backup withholding. U.S. persons who are required to establish their exempt status generally must provide such certification on IRS Form W-9 (Request for Taxpayer Identification Number and Certification). Non-U.S. holders generally are not subject to U.S. information reporting or backup withholding. However, such holders may be required to provide certification of non-U.S. 61 status (generally on IRS Form W-8BEN) in connection with payments received in the United States or through U.S.-related financial intermediaries. Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your United States federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the Internal Revenue Service in a timely manner and furnishing any required information. F. DIVIDEND AND PAYING AGENTS F.Dividend and Paying Agents      Not applicable. 76 G. STATEMENTS BY EXPERTS G.Statements by Experts      Not applicable. H. DOCUMENTS ON DISPLAY H.Documents on Display      Electrolux is subject to the informational requirements of the U.S. Securities Exchange Act of 1934, as amended. In accordance with these requirements, Electrolux files reports and other information with the U.S. Securities and Exchange Commission. These materials, including this annual report and the exhibits thereto, may be inspected and copied at the Commission’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission’s regional office at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of the materials may be obtained from the Public Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The public may obtain information on the operation of the Commission’s Public Reference Room by calling the Commission in the United States at 1-800-SEC-0330. Copies may also be obtained from the Commission’s website at http://www.sec.gov. Information about Electrolux is also available at http://www.electrolux.com. Information on Electrolux’s website does not form part of this document. I. SUBSIDIARY INFORMATION I.Subsidiary Information      Not applicable. 6277 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK      Financial Risk Management      The Group is exposed to a number of risks relating to financial instruments including, for example, liquid funds, accounts receivables, customer financing receivables, payables, borrowings, and derivative instruments. The risks associated with these instruments are, primarily:   •    Interest-rate risk on liquid funds and borrowings     •    Financing risks in relation to the Group’s capital requirements     •    Foreign-exchange risk on earnings and net investments in foreign subsidiaries     • Commodity priceCommodity-price risk affecting the expenditure on raw material and components for goods produced     •    Credit risk relating to financial and commercial activities      The Board of Directors of Electrolux has approved a financial policy as well as a credit policy for the Group to manage and control these risks. Each business sector has specific financial and credit policies approved by each sub-boardsector-board (hereinafter all policies are referred to as “the Financial Policy”). These risks are to be managed by amongst others the use of derivative financial instruments according to the limitations stated in the Financial Policy. The Financial Policy also describes the management of risks relating to pension fund assets.      The management of financial risks has largely been centralized to Group Treasury in Stockholm. Local financial issues are managed by four regional treasury centers located in Europe, North America, Asia Asia/Pacific and Latin America. Measurement of risk in Group Treasury is performed by a separate risk controlling function on a daily basis. Furthermore, there are guidelines in the Group’s policies and procedures for managing operating risk relating to financial instruments by, for example, segregation of duties and power of attorney.      Proprietary trading in currency, commodities and interest-bearing instruments is permitted within the framework of the Financial Policy. This trading is primarily aimed at maintaining a high quality of information flow and market knowledge to contribute to the proactive management of the Group’s financial risks.      Interest – RateInterest-Rate Risk on Liquid Funds and Borrowings      Interest-rate risk refers to the Group’s exposure to the market risk for adverse effects of changes in interest rates on the Group’s income. The main factors determining this risk include the interest-fixing period.      Liquid Fundsfunds      Liquid funds consist of cash on hand, bank deposits and other short-term investments, cash and cash equivalents.investments. Electrolux goal is that the level of liquid funds corresponds to at least 2.5% of net sales. The Group’sIn addition, net liquid funds (defined as liquid funds less short-term borrowings) shall exceed zero, with due consideration fortaking into account fluctuations referring toarising from acquisitions, divestments and seasonal variations. Investment of liquid funds is mainly made in interest-bearing instruments with high liquidity and with issuers with a long-term rating of at least A-definedA- as defined by StandardsStandard & Poor’s or similar as stated in the Financial Policy.similar.      Interest-Rate RiskInterest-rate risk in Liquid Fundsliquid funds      Group Treasury manages the interest rateinterest-rate risk of the investments in relation to a benchmark position defined as a one-day holding period. Any deviation from the benchmark is limited by a risk mandate. Derivative financial instruments like Futures and Forward-Rate Agreements are used to manage the interest-rate risk. The holding periods of investments are mainly short-term. The major portion of the investments is made with maturities between 0 and 3 months. A downward shift in the yield curves of one-percentage point would reduce the Group’s interest income by approximately SEK 10070 million. 63     Liquid funds consist of cash on hand, bank deposits and other short-term investments, of which the majority have original maturity of three months or less. The table below presents the key data of liquid funds. The book value of liquid funds is approximately equal to fair value. 78                                                 Liquidity profile   2003   2002   2001   2004   2003   2002     (SEKm)   (SEK million)   Investments with maturities over three months   3,783   7,602   892     265   3,783   7,602   Investments with maturities up to three months   8,207   6,698   11,482                 Investments and deposits with maturities up to three months   7,675   8,207   6,698   Fair value derivative assets included in short-term investments   612   —   —     762   612   —                               Total Liquid funds   12,602   14,300   12,374     Liquid funds   8,702   12,602   14,300   % of annualized net sales   11.3   11.8   9.8     7.7   11.3   11.8   Net liquidity   8,593   12,682   7,118     2,799   8,593   12,682   Fixed-interest term, days   64   48   32     61   64   48                 Effective yield, % (average per annum)   4.4   4.4   4.7     2.4   4.4   4.4                                    For 2004, liquid funds amounted to 7.7% (11.3) of annualized net sales. The net liquidity is calculated by deducting short-term loans from liquid funds. As from year 2003, long-term borrowings maturing within 12 months are included in short-term loans.      Borrowings      The debt financing of the Group is managed by Group Treasury in order to ensure efficiency and risk control. Debt is primarily taken up at the Parent Company level and transferred to subsidiaries as internal loans or capital injections. In this process various swap instruments are used to convert the funds to the required currency. Short-term financing to meet seasonal working capital requirements areis also undertaken locally in the local subsidiaries.subsidiaries where there are capital restrictions. The Group’s borrowings contain no terms (financial triggers) for premature cancellation based on rating.      Credit Ratingsratings      Electrolux has Investment Grade ratings from Moody’s and Standard & Poor’s. The long-term ratings from both rating institutions wereremained unchanged during the year. Standard and Poor’s changed the long-term outlook from positive to stable.                                   Short-term debt, Rating Agency   Long-term debt   Outlook   Short-term debt Rating Agency   Long-term debt Outlook Short-term debt Sweden Moody’s   Baa1   Stable   P-2     Standard & Poor’s   BBB+   Stable   A-2   K-1      Interest-rate risk in long-term borrowings      The Financial Policy states that the goalbenchmark for the long-term loan portfolio is an average interest-fixing period of one year. Group Treasury can choose to deviate from this policybenchmark on the basis of a risk mandate established by the Board of Directors. However, the maximum fixed-rate period is three years. Derivatives, such as interest-rate swap agreements, are used to manage the interest-rate risk by changing the interest from fixed to floating or vice versa. On the basis of 20032004 volumes and interest fixing, a one-percentage point shift in interest rates paid would impact the Group’s interest expenses by approximately SEK –25+/-20 million in 2004.2005. This calculation is based on a parallel shift of all yield curves simultaneously by one-percentage point. Electrolux acknowledges that the calculation is an approximation and does not take into consideration the fact that the interest-ratesinterest rates on different maturities and different currencies might change differently.      Interest-bearing liabilities      At year-end 2003,2004, the Group’s total interest-bearing liabilities including interest-bearing pension liabilities, amounted to SEK 12,5019,843 million (15,698m)(12,501), of which SEK 8,1733,940 million (13,759 million)(8,173) referred to long-term loans. As of December 31, 2003, long-termLong-term loans with maturities within 12 months, SEK 2,4143,896 million, are reported as short-term loans in the Group’s balance sheet. A significant portion of the total of outstanding long-term borrowings has been made under Electrolux global medium term note program. This program allows for borrowings of up to EUR 2,000 million. As of December 31, 2003,2004, Electrolux utilized approximately EUR 630627 million (680 million)(630) of the capacity of the program. 6479      The majority of total long-term borrowings, SEK 7,3317,187 million, are taken up in Sweden at the parent company level. Given the strong liquidity, Electrolux does not currently maintain any committed credit facilities for short-term borrowings, other than as back-up facility for the European commercial papercommercial-paper program, which amounts to EUR 150 million. Electrolux expects to meet any future requirements for short-term borrowings through bilateral bank facilities and capital marketcapital-market programs such as commercial papercommercial-paper programs.      At year-end 2003,2004, the average interest-fixing period for long-term borrowings was 1.11.3 years (0.9)(1.1). The calculation of the average interest-fixing period includes the effect of interest-rate derivatives used to manage the interest-rate risk of the debt portfolio. The interest-rateinterest rate at year-end for the total borrowings was 4.9% (4.2%)4,9% (4.9).      The fair value of the interest-bearing loans including swap transactions used to manage the interest fixing was approximately SEK 12,65010,127 million. The loans and the interest-rate swaps are valued marked-to-market in order to calculate the fair value.      The following table sets out the carrying amount of the Group’s interest-bearing liabilities that are exposed to fixed and floating interest-rate risk. 65 Interest-bearing liabilities                                                                         Total Book Value   Total Book Value     Nominal value   31 December   Nominal value   Dec. 31,   Issue/maturity dates   Description of loan   Interest rate   Currency   (in Currency)   2003   2002   Description of loan   Interest rate   Currency   (in currency)   2004   2003   Bond Loans               Fixed rate1                 (SEK m)   Bond loans                                             Fixed rate(1)                                             2001-2008   Global MTN Program     6.0000     EUR     268       2,400       2,416   2001-2008   Global MTN Program     6.0000     EUR     32       288       290   1998-2008   SEK MTN Program     4.2303     SEK     85       85       85   2000-2005   Global MTN Program   6,1250   EUR   300   2,712   2,735     Global MTN Program(2)     6.1250     EUR     300       —       2,712   2000-2008   Global MTN Program   6,0000   EUR   268   2,416   2,437   1996-2004   Bond Loan FRF 1,000m2   6,5000   FRF   690   —   959   2000-2008   Global MTN Program   6,0000   EUR   32   290   293   1998-2008   Global MTN Program   6,5000   NOK   400   —   503   2001-2005   SEK MTN Program   5,3000   SEK   200   200   200     SEK MTN Program(2)     5.3000     SEK     200       —       200   2001-2004   SEK MTN Program2   3,3820   SEK   170   —   170   2001-2008   SEK MTN Program   4,2303   SEK   85   85   85   1996-2003   SEK MTN Program   8,7000   SEK   —   —   100   Floating Rate               Floating rate                                             1998-2005   Global MTN Program   Floating   USD   25   181   220     Global MTN Program   Floating   USD     25       —       181   1997-2027   Industrial Development Revenue Bonds   Floating   USD   10   73   88     Industrial Development Revenue Bonds   Floating   USD     10       66       73                                                               Total bond loans   —   —   —   5,957   7,790           —       —       —       2,839       5,957   Other long-term loans                                                             Fixed Rate Loans   —   —   —   1,901   1,642     Fixed Rate Loans     —       —       —       457       1,901     Floating Rate Loans2   —   —   —   315   4,327     Floating Rate Loans     —       —       —       644       315                                                               Total other long-term loans       —   —   —   2,216   5,969           —       —       —       1,101       2,216                                                               Total long-term loans       —   —   —   8,173   13,759           —       —       —       3,940       8,173   Short-term loans                                                           Short-term part of Long-term Loans           Short-term part of long-term loans                                             2000-2005   Global MTN Program(2)     6.1250     EUR     300       2,695       —   2001-2005   SEK MTN Program(2)     5.3000     SEK     200       200       —   1998-2005   Global MTN Program(2)   Floating   USD     25       165       —   2001-2004   SEK MTN Program2   3,3820   SEK   170   170   —     SEK MTN Program     3.3820     SEK     170       —       170   1996-2004   Bond Loan FRF 1,000m2   6,5000   FRF   690   952   —     Bond Loan FRF 1,000 million     6.5000     FRF     690       —       952     Other long-term loans2   —   —   —   1,292   —     Other long-term loans     —       —       —       836       1,292   Other short-term loans                                                             Bank Borrowings & Commercial Papers   —   —   —   1,316   1,618     Bank borrowings and commercial papers     —       —       —       1,643       1,316     Fair Value of Derivative Liabilities   —   —   —   279   —     Fair value of derivative liabilities     —       —       —       364       279                                                               Total short-term loans       —   —   —   4,009   1,618           —       —       —       5,903       4,009                                                               Interest-bearing pensions               319   321           —       —       —       —       319                                                               Total interest-bearing liabilities       —   —   —   12,501   15,698           —       —       —       9,843       12,501                                                               1.(1)   The interest- rateinterest-rate fixing profile of the loans above has been adjusted from fixed to floating with interest-rate swaps.   2.(2)   Long-term loans in the table above with maturities within 12 months are classified as short-term loans in the Group’s balance sheet as of December 31, 2003.sheet.      The average maturity of the Group’s long-term borrowings (including long-term loans with maturities within 12 months) was 2.72.2 years (3.3)(2.7) at the end of 2003.2004. As a result of the Group’s positive cash flow, no additional long-term funding was undertaken in 2003, apart from SEK 100m to fund the operations in Brazil.2004. A net total of SEK 1,490m1,836 million in loans, originating essentially from long-term loans, matured or were amortized. Short-term loans pertain primarily to countries with capital restrictions. The table below presents the repayment schedule of long-term borrowings. Repayment Schedule of Long-term Borrowings, as at 31 December (SEKm)                                                                       2004   2005   2006   2007   2008   2009   2010-   Total Debenture and bond loans     —       3,093       —       —       2,791           —       73       5,957   Bank and other loans     —       964       416           29       21       —       786       2,216   Short-term part of long-term loans     2,414       —       —       —       —       —       —       2,414                                                                     Total     2,414       4,057       416       29       2,812       —       859       10,587                                                                     6680 Repayment schedule of long-term borrowings, as at December 31 (SEK m)                                                                       2005     2006     2007     2008     2009     2010     2011-     Total   Debenture and bond loans     —       —       —       2,773       —       —       66       2,839   Bank and other loans     —       410       36       16       24       4       611       1,101   Short-term part of long-term loans     3,896       —       —       —       —       —       —       3,896                                                     Total     3,896       410       36       2,789       24       4       677       7,836                                                          Financing Riskrisk      Financing risk refers to the risk that financing of the Group’s capital requirements and refinancing of existing loans could become more difficult or more costly. This risk can be decreased by ensuring that maturity dates are evenly distributed over time, and that total short-term borrowings do not exceed liquidity levels. The net borrowings (i.e., total interest-bearing liabilities less liquid funds), excluding seasonal variances, shall be long-term according to the Financial Policy. The Group’s goals for long-term debts include an average time to maturity of at least two years, and an evenly spread of maturities. A maximum of 25% of the borrowings are normally allowed to mature in a 12-month period. Exceptions are made when the net borrowing position of the Group is small.      Foreign Exchange RiskForeign-exchange risk      Foreign exchangeForeign-exchange risk refers to the adverse effects of changes in foreign exchangeforeign-exchange rates on the Group’s income and equity. In order to manage such effects, the Group covers these risks within the framework of the Financial Policy. The Group’s overall currency exposure is managed centrally.      The major currencies that Electrolux is exposed to are the U.S. dollar, the euro, the Canadian dollar, and the British pound. Other significant exposures are the Norwegian krona, the Australian dollar and various EastEastern European currencies.      Transaction Exposureexposure from Commercial Flowscommercial flows      The Group’s financial policy stipulates the hedging of forecasted sales in foreign currencies, taking into consideration the price fixing periods and the competitive environment. The business sectors within Electrolux have varying policies for hedging depending on their commercial circumstances. The sectors define a hedging horizon between 6 up to 12 months of forecasted flows. Hedging horizons outside this period are subject to approval from Group Treasury. The Financial Policy permits the operating units to hedge invoiced and forecasted flows from 75% to 100%. The maximum hedging horizon is up to 18 months. Group subsidiaries cover their risks in commercial currency flows mainly through the Group’s four regional treasury centers. Group Treasury thus assumes the currency risks and covers such risks externally by the use of currency derivatives.      The Group’s geographically widespread production reduces the effects of changes in exchange rates. The table below shows the distribution of the Group’s sales and operating expenses in major currencies. As the table indicates, there was a good currency balance during the year in the USU.S. dollar and the euro.                                                   Share of 2003 Net   Share of 2003   Average   Average   Net Sales and Expenses by Currency   Sales %   Expenses % Net sales and expenses, by   Share of   Share of   exchange   exchange   currency   net sales, %   expenses, %   rate 2004   rate 2003   SEK   3   8     4   8   —   —   USD   37   39     37   40   7.33   8.08   EUR   33   36     32   36   9.12   9.13   GBP   5   3     5   2   13.38   13.25   Other   22   14     22   14   —   —                               Total   100   100     100   100                  The Group’s financial policy stipulates the hedging of forecasted sales in foreign currencies, taking into consideration the price fixing periods and the competitive environment. This implies that the various business sectors within Electrolux have varying policies for hedging depending on their commercial circumstances. The Financial Policy permits the operating units to hedge invoiced and forecasted flows from 75% to 100% up to 18 months. Group subsidiaries cover their risks in commercial currency flows mainly through the Group’s four regional treasury centers. The Group Treasury thus assumes the currency risks and covers such risks externally by the use of currency derivatives.81      Commercial Flows (SEKm)flows      The table below shows the forecasted transaction flows (imports and exports) for the 12-month period of 20042005 and hedges at year-end 2003.2004.      The hedged amounts during 20042005 are dependent on the hedging policy for each flow considering the existing risk exposure. Gross hedging of flows above 12 months and up to 18 months, not shown in the table, amounts to SEK 434m474 million and this hedging refers mainly to USD/SEK and EUR/SEK. 67                                                                                                       GBP     CAD     AUD     NOK     CZK     CHF     HUF     SEK     EUR     USD     Other     Total   Inflow of currency (long position)     3,700       2,570       1,350       1,140       860       860       960       1,970       5,480       1,910       4,470       25,270   Outflow of currency (short position)     -170       -190       -270       -200       —       -60       -2,480       -4,880       -9,570       -6,510       -940       -25,270         Gross transaction flow     3,530       2,380       1,080       940       860       800       -1,520       -2,910       -4,090       -4,600       3,530       —   Hedge     -1,580       -1,840       -710       -560       -590       -580       870       2,390       1,240       2,850       -1,490       —         Net transaction flow     1,950       540       370       380       270       220       -650       -520       -2,850       -1,750       2,040       —                                                                                                               GBP   CAD   NOK   CZK   AUD   CHF   HUF   EUR   USD   SEK   Other   Total Inflow of currency (long position)     3,450       2,560       1,150       730       920       790       450       5,620       2,190       1,520       3,810       23,190   Outflow of currency (short position)     -340       -390       0       0       -190       -100       -1,590       -8,520       -5,430       -5,370       -1,260       -23,190   Gross transaction Flow     3,110       2,170       1,150       730       730       690       -1,140       -2,900       -3,240       -3,850       2,550       0   Hedge     -1,020       -760       -120       -130       -290       -170       640       -900       1,200       2,020       -470       0                                                                                                     Net transaction Flow     2,090       1,410       1,030       600       440       520       -500       -3,800       -2,040       -1,830       2,080       0                                                                                                          The effect of hedging on operating income during 20032004 amounted to SEK 69m (112m)-76 million (69). At year-end 2004, unrealized exchange-rate gainslosses on forward contracts amounted to SEK 47m (150m)-20 million (47), where SEK 35m will mature in 2004 and SEK 12mall of which will mature in 2005.      Translation Exposureexposure from Consolidationconsolidation of Entitiesentities outside Sweden      Changes in exchange rates also affect the Group’s income in connection with translation of income statements of foreign subsidiaries into Swedish kronor. Electrolux does not hedge such exposure. The translation exposures arising from income statements of foreign subsidiaries are included in the sensitivity analysis mentioned below.      Foreign ExchangeForeign-exchange sensitivity from Transactiontransaction and Translation Exposure.translation exposure      Electrolux is particularly exposed to changes in exchange rates between Swedish kronor and the U.S. dollar, the euro, the Canadian dollar and the British pound. For example, a change up or down by 10% in the value of each of the USD, EUR, CAD, and GBP against the SEK would affect the Group’s income after financial term items for one year by approximately SEK +/-400m,–400 million, as a static calculation. The model assumes the distribution of earnings and costs effective at year-end 20032004 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)net investments (balance sheet exposure)      The net of assets and liabilities in foreign subsidiaries constitutes a net investment in foreign currency, which generates a translation difference in connection with consolidation. In order to limit negative effects on Group equity resulting from translation differences, hedging is implemented on the basis of borrowings and foreign exchangeforeign-exchange derivative contracts. This impliesmeans that the decline in value of a net investment, resulting from a rise in the exchange rate of the Swedish krona, is offset by the exchange gain on the Parent Company’s borrowings and foreign exchangeforeign-exchange derivative contracts, and vice versa. Hedging of the Group’s net investments is implemented within the Parent Company in Sweden. The Financial Policy stipulates the extent to which the net investments can be hedged and also sets the benchmark for risk measurement. Group Treasury areis allowed to deviate from the benchmark under a given risk mandate.      Commodity Price RisksCommodity-price risks      Commodity priceCommodity-price risk is the risk that the cost of direct and indirect materials could increase as underlying commodity prices rise in global markets. The Group is exposed to fluctuations in commodity prices through agreements with suppliers, whereby the price is linked to the raw material price on the world market. This exposure can be divided into direct commodity exposure, which refers to pure commodity exposures, and indirect commodity exposures, which is defined as exposure arising from only part of a developed product.component. The Group hedges only a limited number of materials that are exchange-traded on the world market, through commodity forwards and futures. The hedged materials are copper, aluminum, nickel and zinc. The hedging horizon 82 depends on the business environment and is defined within each business sector. Commodity-price risk is also managed through contracts with the suppliers.      Credit Riskrisk      Credit Riskrisk in Financial Activitiesfinancial activities      Exposure to credit risks arises from the investment of liquid funds, and as counterpart risks related to derivatives. In order to limit exposure to credit risk, a counterpart list has been established which specifies the maximum permissible exposure in relation to each counterpart. The Group strives for arranging master netting 68 agreements (ISDA) with the counterparts for derivative transactions and has established such agreements with the majority of the counterparts.      Credit Riskrisk in Accounts Receivablesaccounts receivable      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 one of the Customer Financing operations in the Group. Customer Financing solutions are also arranged outside the Group. The Credit Policy of the Group ensures that management process for customer credits includes customer rating, credit limits, decision levels and management of bad debts. The Board of Directors setsdecides on customer credit limits that exceed SEK 300m.300 million. There is a concentration of credit exposures on a number of customers in, primarily, USA and Europe.      Other interest-bearing investments      Interest-bearing receivables from customer financing amounting to SEK 874m (971m)745 million (874) are included in the item Other receivables in the Group’s balance sheet. The Group’s customer financing activities are performed in order to provide sales support and are directed mainly to independent retailers in the USUnited States and in Scandinavia. The majority of the financing is shorter than 12 months. There is no major concentration of credit risk related to customer financing. Collaterals and the right to repossess the inventory also reduce the credit risk in the financing operations. The income from customer financing is subject to interest-rate risk. This risk is immaterial to the Group.      Derivative financial instruments      The tables below present the fair value and nominal amounts of the Group’s derivative financial instruments for managing of financial risks and proprietary trading. The fair value of financial instruments used for proprietary trading at the end of 20032004 was SEK 6m (5m)4 million (6). Fair value                                                                                     Fair value (SEKm)   2003   2002   Positive   Negative   Positive   Negative       2004   2003     MV   MV   Net MV   MV   MV   Net MV   Positive MV   Negative MV   Net MV   Positive MV   Negative MV   Net MV   Interest-rate swaps   364   -145   219   424   -220   204     290   -66   224   364   -145   219   Cross currency interest-rate swaps   15   -16   -1   68   -58   10     21   -10   11   15   -16   -1   Forward-rate agreements & futures   10   -10   0   3   -4   -1   Foreign exchange derivatives (Forwards & Options)   759   -319   440   889   -194   695   Forward-rate agreements and futures   9   -9   —   10   -10   —   Foreign exchange derivatives (Forwards and Options)   828   -534   294   759   -319   440   Commodity derivatives   9   -4   5   8   -10   -2     —   —   —   9   -4   5                                                       Total   1,148   -619   529   1,157   -494   663     1,157   494   663   1,392   -486   906                                                            Valuation of derivative financial instruments at market value (MV), presented in the table above, is done at the most accurate market prices available. This means that instruments, which are quoted on the market, such as for instance the major bond and interest-rate future markets, are all marked-to-market with the current price.spot mid-price. The foreign-exchange spot ratemid-rate is then used to convert the market value into Swedish kronor, before it is discounted back to the valuation date. For instruments where no reliable price is available on the market, cash flows are discounted using the deposit/swap curve of the cash flowcash-flow currency. In the event that no proper cash flow schedule is available, for instance as in the case with forward rateforward-rate agreements, the 83 underlying schedule is used for valuation purposes. To the extent option instruments are used, the valuation is based on the Black-Scholes formula. All valuations are done at mid-prices, e.g., the average of bid and ask prices are used. 69Nominal amounts (SEKm)                       2004     2003   Interest-rate swaps                 Maturity shorter than 1 year     5,600       8,219   Maturity 2–5 years     4,760       9,188   Maturity 6–10 years     —       —         Total interest-swaps     10,360       17,407   Cross currency interest-rate swaps     75       245   Forward-rate agreements     15,751       35,625   Foreign-exchange derivatives (Forwards and Options)     18,104       12,603   Commodity derivatives     —       21                 Total     44,290       65,901                 84                   Nominal Amounts (SEKm)   2003   2002 Interest-rate swaps                 Maturity shorter than 1 year     8,219       934   Maturity 2-5 years     9,188       7,837   Maturity 6-10 years     —       2,472   Total interest-swaps     17,407       11,243   Cross currency interest-rate swaps     245       1,150   Forward rate agreements     35,625       23,974   Foreign Exchange derivatives (Forwards & Options)     12,603       21,958   Commodity derivatives     21       165                     Total     65,901       58,489                     70 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES      Not applicable. 7185 PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES      Not applicable. 7286 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS      Not applicable. 7387 ITEM 15. CONTROLS AND PROCEDURES      The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief AdministrativeFinancial Officer, as appropriate, to allow timely decisions regarding required disclosure.      As of the end of the period covered by this Form 20-F, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in United States Securities Exchange Act of 1934, as amended, Rule 13a-15(e)). Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective in timely identifying material information potentially required to be included in the Company’s SEC filings.      There have been no changes in the Company’s internal control over financial reporting that occurred during the period covered by this Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 7488 ITEM 16.     ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT      The Board of Directors has determined that there is no “audit committee financial expert” as defined in Item 16A of Form 20-F serving on the Audit Committee. No single member of the Audit Committee meets all of the five attributes required to meet the definition of audit committee financial expert. Nonetheless, the Board considers that the Audit Committee members as a group possess adequate skills and expertise to fulfill the tasks entrusted to the Audit Committee. ITEM 16B. CODE OF ETHICS      In February 2004, the Board of Directors adopted the Electrolux Group Code of Ethics. It outlines both prescriptive and proscriptive ethical standards which are to be strictly followed by all employees and Board Members of the Electrolux Group, in all markets and at all times. The Code formalizes the principles by which the Group conducts its relations with employees, shareholders, business partners and other interests. This code of ethics is posted on our website, www.electrolux.com, and may be found as follows:   1.    From our main web page, first click on Inside Electrolux.     2.    Next, click on Corporate Government.Governance.     3.    Finally, click on Electrolux Group Code of Ethics. ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES      KPMG served as Electrolux’s independent auditor for the financial year ended December 31, 2001, for which audited financial statements appear in this annual report on Form 20-F.     PricewaterhouseCoopers AB has served as Electrolux’s independent auditor for each of the financial years in the two-yearthree year period ended December 31, 2003,2004, for which audited financial statements appear in this annual report on Form 20-F. The April 2002 Annual General Meeting of Electrolux shareholders appointed PricewaterhouseCoopers AB as Electrolux’s independent auditor for a four-year period.      The following table presents the aggregate fees for professional services and other services rendered by PricewaterhouseCoopers AB to Electrolux in 2004, 2003 and 2002.                                           2003   2002   2004   2003   2002     SEKm   SEKm   SEK million   SEK million   SEK million   Audit Fees1   45   38     46   45   38   Audit-related Fees2   4   1     3   4   1   Tax Fees3   9   9     10   9   9   All Other Fees   —   —     —   —   —                           Total   58   48     59   58   48   (1)   Audit Fees consist of fees billed for the annual audit services engagement and other audit services, which are those services that only the external auditor reasonably can provide, and include the Company audit; statutory audits; comfort letters and consents; attest services; and assistance with and review of documents filed with the SEC.   (2)   Audit-related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements or that are traditionally performed by the external auditor, and include consultations concerning financial accounting and reporting standards; review of security controls and operational effectiveness of systems;internal control reviews and employee benefit plan audits.   (3)   Tax Fees include fees billed for tax compliance services, including the preparation of original and amended tax returns and claims for refund; tax consultations, tax advice related to mergers and acquisitions, transfer pricing, and requests for rulings or technical advice from taxing authorities; tax planning services; and expatriate tax planning and services.      Audit Committee Pre-approval Policies and Procedures      The purpose of the Audit Committee Pre-approval Policies and Procedures is to ensure that AB Electrolux and its subsidiaries are in full compliance with the Sarbanes-Oxley Act of 2002 (“SOA”) and the SEC Rules regarding Auditor Independence. 75      The Audit Committee (“AC”) will in the pre-approval process consider three basic principles before approving any non-audit services: (1) an auditor cannot function in the role of management, (2) an auditor cannot audit his own work and (3) an auditor cannot serve in an advocacy role for his client. 89      AB Electrolux management shall each year submit to the AC an Audit and Permissible Non-Audit Services Matrix (the “Matrix”) listing the types of audit and non-audit services that are permitted under SOA and the SEC Rules and categorizing the types of audit and non-audit services.      Based on the categories in the Matrix, AB Electrolux management shall each year list each known and/or anticipated audit service for the upcoming calendar year as well as each known and/or anticipated non-audit service together with suggested maximum fee limits for each category of recurring non-audit services.      At the annual January AC meeting, the AC will either approve or reject the categories of services in the Matrix, either approve or reject each of the listed known and/or anticipated audit services and the associated budgeted fee and either approve or reject each known and/or anticipated non-audit service as well as the suggested maximum fee limit for each category of recurring non-audit services.      The AC will, at its Annual January AC meeting, delegate to the Chairman of the AC the authority to pre-approve interim requests for additional audit and non-audit services.      Prior to engaging PwCPricewaterhouseCoopers AB for additional non-recurring audit and non-audit services, AB Electrolux management shall submit to the Audit Committee, or if a pre-approval is urgently required, to the Chairman of the AC, an Interim pre-approval request.      At each subsequent AC meeting after January, the Chairman of the AC shall report to the AC any interim audit or non-audit service pre-approvals since the last AC meeting and AB Electrolux management will provide the AC with a summary description of ongoing and completed audit and non-audit services and a year to date of the actual spendspending against the pre-approved level for non-audit services and an updated estimate for the full year. 76ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES      Not applicable. 90 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS                                                       Total Number of     Maximum Number                       Shares Purchased     of Shares that may                       as Part of Publicly     yet be Purchased       Total Number of     Average Price Paid     Announced     under the   Period   Shares Purchased     per share     Programs1     Programs4   2004-01-01 to 2004-01-31     500,000       160.1       9,105,128 2     14,910,000   2004-02-01 to 2004-02-29     -       -       -       -   2004-03-01 to 2004-03-31     -       -       -       -   2004-04-01 to 2004-04-30     -       -       -       -   2004-05-01 to 2003-05-31     -       -       -       -   2004-06-01 to 2004-06-30     -       -       -       -   2004-07-01 to 2004-07-31     -       -       -       -   2004-08-01 to 2004-08-31     250,000       136.1       250,000 3     13,152,630   2004-09-01 to 2004-09-30     -       -       -       -   2004-10-01 to 2004-10-31     -       -       -       -   2004-11-01 to 2003-11-30     -       -       -       -   2004-12-01 to 2004-12-31     -       -       -       -   (1) Share repurchase programs require the approval of the General Meeting of Shareholders under Swedish law. (2) At the 2003 Annual General meeting (AGM), held on April 22 2003, the company was authorized to purchase its own shares up to a maximum of ten percent of the total number of shares outstanding. The authorization is valid for one year, for the period until the next AGM, and thus expired on April 21, 2004. (3) At the 2004 AGM, held on April 21 2004, the company was granted a new authorization to purchase its own shares up to a maximum of ten percent of the total number of shares outstanding. The authorization is valid for one year, for the period until the next AGM, which is expected to take place on April 20, 2005 (4) In the period covered by the table, amount of outstanding shares was affected by the company’s redemption of a total of 15,179,692 shares. Additionally, the company sold 10,600 repurchased shares to options holders during the same period.      In April 2004, the Annual General Meeting approved a proposed redemption of shares that entitled shareholders to redeem every twentieth share against cash payment of SEK 200. The decision was made on the basis of the Group’s strong balance sheet and the ambition to contribute to increased shareholder value. Payment for the redeemed shares was made to the shareholders on June 30, 2004.      A total of 15,179,692 shares were tendered for redemption, corresponding to a value of over SEK 3 billion. The redemption reduced the Electrolux share capital by SEK 76 million, corresponding to a par value of SEK 5 per redeemed share. Following redemption, the Electrolux share capital is SEK 1,545 million, corresponding to 9,502,275 A-shares and 299,418,033 B-shares, or a total of 308,920,308 shares. 91                                                                   Number of       Number of     Number of     Number of     shares held   Redemption and repurchase of shares   outstanding     outstanding     shares held     by other   in 2004 and 2005   A- shares     B-shares     by Electrolux     shareholders     Number of shares as of January 1, 2004     10,000,000       314,100,000       17,000,000       307,100,000   Shares sold to senior managers in 1st quarter under the stock option programs     —       —       -10,600       10,600   Redemption of shares in June, 2004     -497,725       -14,681,967       —       -15,179,692   Repurchase of shares in 2004     —       —       750,000       -750,000     Total number of shares as of December 31, 2004     9,502,275       299,418,033       17,739,400       291,180,908   Repurchase of shares in January, 2005     —       —       —       —     Total number of shares as of February 14, 2005     9,502,275       299,418,033       17,739,400       291,180,908   Proposed Renewed Mandate For Share Repurchases      The Annual General Meeting in 2004 authorized the Board of Directors to acquire and transfer own shares during the period up to the next Annual General Meeting in April 2005. Shares of series A and/or B may be acquired on the condition that, following each repurchase transaction, the company owns a maximum of 10% of the total number of shares. As of February 14, 2005, the Group owned a total of 17,739,400 B-shares, equivalent to 5.7% of the total number of outstanding shares.      The Board of Directors has decided to propose that the Annual General Meeting approve a renewed mandate for the repurchase of a maximum of 10% of the total number of shares. This authorization would cover the period up to the Annual General Meeting in 2006. The details of the proposal were published on March 8, 2005. Repurchases of Own Shares in 2004 And 2005      During 2004, Electrolux repurchased 750,000 own B-shares for a total of SEK 114 million, corresponding to an average price of SEK 152 per share. During the year, senior managers purchased 10,600 B-shares from Electrolux under the terms of the employee stock option programs for a total of approximately SEK 2 million, corresponding to an average price of SEK 170 per share. As of December 31, 2004, the company owned a total of 17,739,400 B-shares, which is equivalent to 5.7% of the total number of outstanding shares.                               Repurchase of own shares                   2002–2004   2004     2003     2002     Repurchased shares     750,000       11,331,828       11,246,052   Amount paid, SEK million     114       1,688       1,703   Price per share, SEK     152       149       151   Shares held by Electrolux, at year-end     17,739,400       17,000,000       20,394,052   % of outstanding shares     5.7       5.2       6.0       1) After cancellation of shares.                              The purpose of the share repurchase program is to enable adapting the capital structure of the Group and thereby contribute to increased shareholder value, or to use the repurchased shares in conjunction with the financing of potential acquisitions and the Group’s long-term incentive programs. 92 PART III ITEM 17. FINANCIAL STATEMENTS      Attached. See page F-1: Index to Financial Statements. 77 ITEM 17.17      FINANCIAL STATEMENTS INDEX           Page Report of Independent Auditors F-2     Page Report of Independent Auditors F-2 Consolidated Income Statements for the Years Ended December 31, 2001, 2002, 2003 and 20032004 F-3     F-4 Consolidated Balance Sheets, December 31, 20022003 and 20032004 F-4     F-5 Consolidated Statements of Cash Flow for the Years Ended December 31, 2001, 2002, 2003 and 20032004 F-6     F-7 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2001, 2002, 2003 and 20032004 F-7     F-8 Notes to Consolidated Financial Statements F-8     F-9 Schedule II Valuation and Qualifying Accounts and Reserves for the Years ended December 2001, 2002, 2003 and 20032004   F-51 F-57 F-1 REPORT OF INDEPENDENT AUDITOR To the Board of Directors and Shareholders of AB Electrolux: In our opinion,We have audited the accompanying consolidated balance sheets of AB Electrolux and its subsidiaries at December 31, 2004 and 2003 and the related consolidated statements of income, of cash flows and of changes in stockholders’ equity present fairly, in all material respects, the financial position of AB Electrolux and its subsidiaries at December 31, 2003 and December 31, 2002, and the results of their operations and their cash flows for each of the twothree years ended December 31, 2003 and December 31, 2002 in conformity with accounting principles generally accepted in Sweden.2004. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in Sweden and in accordance with the standards of the Public Company Accounting Oversight Board (United States). These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in the Accounting and Valuation Principles note to the consolidated financial statements, with effect from January 1, 2003, the Company prospectively adopted RR 27, Financial Instruments: Classification and Disclosure. As discussed in the 2002 consolidated financial statements, with effect from January 1, 2002, the Company prospectively adopted RR 15, Intangible Assets. Accounting principles generally accepted in Sweden vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 29 to the consolidated financial statements. PricewaterhouseCoopers AB Stockholm, Sweden February 11, 2004 F-2 REPORT OF INDEPENDENT PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of AB Electrolux:      We have audited the consolidated statements of income, cash flows and changes in stockholders’ equity of AB Electrolux and subsidiaries for the year ended December 31, 2001 as listed in the accompanying index. In connection with our audit of these consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index for the year ended December 31, 2001. These consolidated financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards in Sweden and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and the cash flowsfinancial position of AB Electrolux and its subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the yearthree years ended December 31, 20012004, in conformity with accounting principles generally accepted accounting principles in Sweden. AlsoIn addition, in our opinion, the related financial statement schedule when considered in relation to the basic consolidated financial statements taken as a whole,included on page F-57, presents fairly, in all material respects, the information set forth therein forwhen read in conjunction with the year ended December 31, 2001.related consolidated financial statements.      GenerallyAs discussed in the Accounting and Valuation Principles note to the consolidated financial statements, with effect from January 1, 2004, the Company prospectively adopted RR 29, Employee Benefits. As discussed in the Accounting and Valuation Principles note, with effect from January 1, 2003, the Company prospectively adopted RR 27, Financial Instruments: Classification and Disclosure. Accounting principles generally accepted accounting principles in Sweden vary in certain significant respects from accounting principles generally accepted accounting principles in the United States.States of America. Information relating to the nature and effect of such differences is presented in Note 2930 to the consolidated financial statements. As discussed in Note 29, the financial information prepared in accordance with generally accepted accounting principles in the United States as of December 31, 2001 has been restated. KPMG BohlinsPricewaterhouseCoopers AB Stockholm, Sweden February 28, 2005 February 7, 2002, except for the restatement of prior periods described on pages F-45 and F-46 in Note 29 — U.S. GAAP Information which is dated June 10, 2003. F-3F-2 AB ELECTROLUX AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS YEARS ENDED DECEMBER 31                                                 (SEKm)   2003   2002   2001 Net Sales (Note 4)   124,077   133,150   135,803   (SEK m)   2004   2003   2002   Net sales(Note 4)   120,651   124,077   133,150   Cost of goods sold   -93,742   -101,705   -105,654     -91,006   -93,742   -101,705                     Gross Profit   30,335   31,445   30,149   Selling expense   -16,877   -17,738   -17,806   Administrative expense   -5,699   -5,405   -5,790   Gross operating income   29,645   30,335   31,445     Selling expenses   -17,369   -16,877   -17,738   Administrative expenses   -5,513   -5,699   -5,405   Other operating income (Note 5)   130   135   150     91   130   135   Other operating expenses (Note 6)   -251   -272   -281     -180   -251   -272   Items affecting comparability (Note 7)   -463   -434   -141     -1,960   -463   -434                     Operating Income(Notes 4, 8, 28)   7,175   7,731   6,281   Operating income1) (Notes 4, 8, 27)   4,714   7,175   7,731     Financial income (Note 9)   794   947   973     583   794   947   Financial expense (Note 9)   -963   -1,133   -2,039   Financial expenses (Note 9)   -938   -963   -1,133                     Income after financial items   7,006   7,545   5,215     4,359   7,006   7,545     Taxes (Note 10)   -2,226   -2,459   -1,477     -1,210   -2,226   -2,459   Minority interests in net income (Note 11)   -2   9   132     -1   -2   9       Net income   4,778   5,095   3,870     3,148   4,778   5,095                   Net income per share, basic and diluted SEK(Note 12)   15.25   15.60   11.35   Net income per share, basic, SEK (Note 12)   10.55   15.25   15.58   Diluted   10.54   15.24   15.57                   Net income per share, basic and diluted, according to US GAAP, SEK (Note 29)   15.60   16.25   11.00   Net income per share, basic, according to U.S. GAAP, SEK (Note 30)   9.35   15.58   16.23   Diluted   9.34   15.58   16.23                   Average number of shares, basic, millions (Note 12)   298.3   313.3   327.1   Diluted   298.6   313.6   327.3         1) Operating income includes depreciation and amortization in the amount of:   3,178   3,353   3,854   The accompanying notes form an integral part of these consolidated financial statements. F-3 AB ELECTROLUX AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS YEARS ENDED DECEMBER 31                   ASSETS (SEKm)   2004     2003   Fixed assets                 Intangible assets (Note 13)     5,077       4,782   Tangible assets (Note 14)     16,033       15,638   Financial assets (Note 15)     1,412       1,276   Deferred tax assets (Note 10)     2,937       1,914         Total fixed assets     25,459       23,610                     Current assets                 Inventories, etc. (Note 16)     15,742       14,945                     Current receivables                 Accounts receivable (Note 17)     20,627       21,172   Taxes receivable     617       490   Other receivables (Note 18)     2,657       2,972   Prepaid expenses and accrued income     1,128       1,237               25,029       25,871                     Liquid funds (Note 18)                 Short-term investments     4,442       8,577   Cash and cash equivalents     4,260       4,025               8,702       12,602         Total current assets     49,473       53,418         Total assets     74,932       77,028                     Assets pledged(Note 19)     137       423         The accompanying notes form an integral part of these consolidated financial statements. F-4 AB ELECTROLUX AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS YEARS ENDED DECEMBER 31 ASSETS (SEKm)                                               2003           2002 Fixed assets                                 Intangible assets (Note 13)             4,782               4,928   Tangible assets (Note 14)             15,638               18,188   Financial assets (Note 15)             1,276               1,591   Deferred tax assets (Note 10)             1,914               2,991                                     Total fixed assets             23,610               27,698                                     Current assets                                 Inventories (Note 16)             14,945               15,614   Current receivables                                 Accounts receivable (Note 17)     21,172               22,484           Other receivables (Note 18)     3,462 ��             4,293           Prepaid expense and accrued income     1,237       25,871       1,035       27,812                                     Liquid funds: (Note 18)                                 Short-term investments     8,577               8,316           Cash and bank balances     4,025       12,602       5,984       14,300                                     Total current assets             53,418               57,726                                     TOTAL ASSETS             77,028               85,424                                     Assets pledged(Note 19)             423               1,908                     EQUITY AND LIABILITIES (SEKm)   2004     2003   Equity(Note 20)                 Share capital (Note 21)     1,545       1,621   Restricted reserves     11,136       11,711   Retained earnings     7,581       9,352   Net income     3,148       4,778               23,410       27,462   Minority interests     10       27   Provisions                 Provisions for pensions and similar commitments (Note 22)     7,852       5,678   Deferred tax liabilities (Note 10)     1,251       1,256   Other provisions (Note 23)     4,961       4,427               14,064       11,361                     Financial liabilities                 Long-term loans (Note 18)     3,940       8,173   Short-term loans (Note 18)     5,903       4,009               9,843       12,182                     Operating liabilities                 Accounts payable     16,550       14,857   Tax liabilities     900       1,180   Other liabilities     2,153       1,935   Accrued expenses and prepaid income (Note 24)     8,002       8,024               27,605       25,996         Total equity and liabilities     74,932       77,028                     Contingent liabilities(Note 25)     1,323       1,179         The accompanying notes form an integral part of these consolidated financial statements. F-5 AB ELECTROLUX AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETSSTATEMENTS OF CASH FLOW YEARS ENDED DECEMBER 31                                   EQUITY AND LIABILITIES (SEKm)   2003   2002 Equity(Note 20)                                 Share capital (Note 21)     1,621               1,694           Restricted reserves     11,711               14,287           Retained earnings     9,352               6,553           Net income     4,778       27,462       5,095       27,629                                     Minority interests     27               592           Provisions                                 Provisions for pensions and similar commitments (Note 22)     5,678               6,018           Deferred tax liabilities (Note 10) (Note 10)     1,256               1,998           Other provisions (Note 23)     4,427       11,361       5,582       13,598                                     Financial liabilities                                 Long-term loans (Note 18)     8,173               13,759           Short-term loans     4,009       12,182       1,618       15,377   Operating liabilities                                 Accounts payable     14,857               16,223           Tax liabilities     1,180               1,211           Other liabilities     1,935               2,535           Accrued expense and prepaid income (Note 24)     8,024       25,996       8,259       28,228                                                                       TOTAL EQUITY AND LIABILITIES             77,028               85,424                                     Contingent liabilities(Note 25)             1,179               949                             CASH FLOW STATEMENTS (SEK m)   2004     2003     2002   Operations                         Income after financial items     4,359       7,006       7,545   Depreciation and amortization     3,178       3,353       3,854   Capital gain/loss included in operating income     —       -8       -1,910   Restructuring provisions     1,224       -1,410       1,551   Provision for pension litigation     —       —       -913   Change in accrued and prepaid interest     52       26       -49               8,813       8,967       10,078                             Taxes paid     -1,673       -1,817       -1,027                             Cash flow from operations, excluding change in operating assets and liabilities     7,140       7,150       9,051   Change in operating assets and liabilities                         Change in inventories     -1,516       -746       -706   Change in accounts receivable     -5       -1,624       28   Change in other current assets     235       -136       804   Change in operating liabilities and provisions     2,728       1,649       1,728         Cash flow from operations     8,582       6,293       10,905                             Investments                         Acquisition of operations (Note 26)     —       —       -1,542   Divestment of operations (Note 26)     —       857       3,771   Machinery, buildings, land, construction in progress, etc.     -4,515       -3,463       -3,335   Capitalization of product development and software     -669       -470       -195   Other     -174       506       290         Cash flow from investments     -5,358       -2,570       -1,011                             Total cash flow from operations and investments     3,224       3,723       9,894                             Financing                         Change in short-term loans     2,225       1,099       -2,096   Change in long-term loans     -4,099       -2,579       -2,061   Dividend     -1,993       -1,894       -1,483   Redemption and repurchase of shares     -3,154       -1,669       -1,703         Cash flow from financing     -7,021       -5,043       -7,343                             Total cash flow     -3,797       -1,320       2,551   Liquid funds at beginning of year     12,602       14,300       12,374   Exchange-rate differences referring to liquid funds     -103       -378       -625   Liquid funds at year-end     8,702       12,602       14,300                                   Change in net borrowings                                                   Total cash flow, excluding change in loans     -1,923       160       6,708   Net borrowings at beginning of year     101       -1,398       -10,809   Exchange-rate differences referring to net borrowings     681       1,339       2,703   Net borrowings at year-end     -1,141       101       -1,398         The accompanying notes form an integral part of these consolidated financial statements. F-6 AB ELECTROLUX AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW YEARS ENDED DECEMBER 31                           CASH-FLOW STATEMENTS (SEKm)   2003   2002   2001 Operations                         Income after financial items     7,006       7,545       5,215   Depreciation and amortization     3,353       3,854       4,277   Capital gain/loss included in operating income     -8       -1,910       -2,931   Provision for restructuring     -1,410       1,551       1,975   Provision for pension litigation     —       -913       -1,192                                   8,941       10,127       7,344     Taxes paid     -1,817       -1,027       -1,496     Cash flow from operations excluding change in operating assets and liabilities     7,124       9,100       5,848   Change in operating assets and liabilities                         Change in inventories     -746       -706       1,164   Change in accounts receivable     -1,624       28       -50   Change in other current assets     -141       832       146   Change in current liabilities and provisions     1,680       1,651       2,374                             Cash flow from operations     6,293       10,905       9,482     Investments                         Acquisition of operations (Note 26)     —       -1,542       -2,524   Divestment of operations (Notes 26)     857       3,771       7,385   Machinery, buildings, land, construction in progress, etc     -3,463       -3,335       -4,195   Capitalization of product development and software     -470       -195       —   Other     506       290       547                             Cash flow from investments     -2,570       -1,011       1,213     Total cash flow from operations and investments     3,723       9,894       10,695     Financing                         Change in short-term loans (Note 26)     1,099       -2,096       -4,232   Change in long-term loans     -2,579       -2,061       173   Dividend     -1,894       -1,483       -1,365   Repurchase of shares     -1,669       -1,703       -1,752                             Cash flow financing     -5,043       -7,343       -7,176     Total cash flow     -1,320       2,551       3,519   Liquid funds at beginning of year     14,300       12,374       8,422   Exchange-rate differences relating to liquid funds     -378       -625       433   Liquid funds at year-end     12,602       14,300       12,374                             Change in net borrowings                         Total cash flow excluding change in loans     160       6,708       7,578   Net borrowings at beginning of year     -1,398       -10,809       -16,976   Exchange-rate differences relating to net liquidity     1,339       2,703       -1,411   Net borrowings at year-end     101       -1,398       -10,809                             The accompanying notes form an integral part of these consolidated financial statements. F-7 AB ELECTROLUX AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY YEARS ENDED DECEMBER 31                                       Capital                 Stock par                 value A and   Restricted   Retained         B shares   reserves   earnings   Total     (SEKm, except per share amounts) Balance at December 31, 2000     1,831       11,850       12,643       26,324   Cash dividend (SEK 4.00 per share)     —       —       -1,365       -1,365   Repurchase of shares     —       —       -1,752       -1,752   Adjustments for translation differences     —       —       1,787       1,787   Transfer of retained earnings     —       1,588       -1,588       0   Net income     —       —       3,870       3,870                                     Balance at December 31, 2001     1,831       13,438       13,595       28,864                                     Balance at December 31, 2001     1,831       13,438       13,595       28,864   Cancellation of shares     -137       137       —       —   Cash dividend (SEK 4.50 per share)     —       —       -1,483       -1,483   Repurchase of shares     —       —       -1,703       -1,703   Minimum liability, US pensions     —       —       -1,335       -1,335   Adjustments for translation differences     —       —       -1,809       -1,809   Transfer of retained earnings             712       -712       —   Net income     —       —       5,095       5,095                                     Balance at December 31, 2002     1,694       14,287       11,648       27,629                                     Balance at December 31, 2002     1,694       14,287       11,648       27,629   Cancellation of shares     -73       73       —       —   Cash dividend (SEK 6.00 per share)     —       —       -1,894       -1,894   Repurchase of shares     —       —       -1,669       -1,669   Minimum liability, US pensions     —       —       -123       -123   Adjustments for translation differences     —       —       -1,259       -1,259   Transfer of retained earnings     —       -2,649       2,649       —   Net income     —       —       4,778       4,778                                     Balance at December 31, 2003     1,621       11,711       14,130       27,462                                                                           Share     Restricted     Retained         (SEK m, except per share amounts)   capital     reserves     earnings     Total   Beginning balance January 1, 2002     1,831       13,438       13,595       28,864   Translation differences     —       —       -1,786       -1,786   Minimum liability, U.S. pensions     —       —       -1,335       -1,335   Transfers between restricted and unrestricted equity     —       712       -712       —   Net income     —       —       5,095       5,095   Cancellation of shares     -137       137       —       —   Dividend payment (SEK 4.50 per share)     —       —       -1,483       -1,483   Repurchase of shares     —       —       -1,703       -1,703   Dividends to minority shareholders     —       —       -23       -23         Closing balance Dec. 31, 2002     1,694       14,287       11,648       27,629         Translation differences     —       —       -1,259       -1,259   Minimum liability, U.S. pensions     —       —       -123       -123   Transfers between restricted and unrestricted equity     —       -2,649       2,649       —   Net income     —       —       4,778       4,778   Cancellation of shares     -73       73       —       —   Dividend payment (SEK 6.00 per share)     —       —       -1,894       -1,894   Repurchase of shares     —       —       -1,669       -1,669         Closing balance Dec. 31, 2003     1,621       11,711       14,130       27,462         Adjustment of opening balance     —       —       -1,602       -1,602   Translation differences     —       —       -451       -451   Transfers between restricted and unrestricted equity     —       -651       651       —   Net income     —       —       3,148       3,148   Cancellation of shares     -76       76       —       —   Dividend payment (SEK 6.50 per share)     —       —       -1,993       -1,993   Repurchase of shares     —       —       -112       -112   Redemption of shares     —       —       -3,042       -3,042         Closing balance Dec. 31, 2004     1,545       11,136       10,729       23,410         F-8F-7 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1. Accounting and Valuation Principlesvaluation principles Amounts in SEKm,SEK million, unless otherwise stated BASIS OF PREPARATION      The consolidated financial statements are prepared in accordance with accounting principles generally accepted in Sweden, thereby applying the standards of the Swedish Financial Accounting Standards Council. These accounting principles differ in certain significant respects from those in the US.United States. Certain non-USnon-U.S. GAAP measures are used in this annual report, e.g., value creation. For a description of significant differences, see Note 29.30. In the interest of achieving comparable financial information within the Group, Electrolux companies apply uniform accounting rules as defined in the Electrolux Accounting Manual, irrespective of national legislation.      The following should be noted:   • A number of new standards from the Swedish Financial Accounting Standards Council, RR 2:02, 22, 24, 25, 26 and 28 came into effectEffective as of January 1, 2003. The implementation of the new standards has had no material effect on the consolidated financial statements. • As of January 1, 2003, Electrolux implemented also RR 27, “Financial instruments: Disclosure and classification”. RR 27 stipulates how financial instruments shall be classified in the balance sheet and prescribes the disclosures to be presented in order to make it easier for the reader of financial statements to understand how financial instruments affect the results, financial situation and cash flows of an entity. RR 27 applies to all financial instruments, whether they are reported on the balance sheet or not, with the exception of shares in subsidiaries and associated companies, post-employment benefits and share based compensation to employees. The implementation of RR 27 increased total assets and liabilities by approximately SEK 300m.     •    As of January 1, 2004, Electrolux applies the new standard from the Swedish Financial Accounting Standards Council, RR 29, “Employee Benefits”. RR 29 stipulates how the company shall account for and report employee benefits. The main differences between RR 29 and the presentearlier accounting standards refer to defined benefit post-employment plans. RR 29 requires that liabilities for these plans are calculated according to the Projected Unit Credit Method and reduced by the market value of the plan assets. RR 29 also requires that the cost of the benefits be expensed in the period in which the benefits are earned. The implementation of RR 29 has had a one-time effect of SEK 1,600m1,602 million, net of taxes, that has been charged to opening balance of retained earnings as a change in accounting principle.principles.     •    As of January 1, 2005, Electrolux will apply International Financial Reporting Standards (IFRS, previously IAS). Swedish accounting principles have in recent years been successively adapted to IFRS. However, there are still certain areas where differences exist. Further, certain IFRS standards, mandatory from 2005, are not in final form yet. The Group believes that the finalization of these standards might create certain additional differences, besides the areas identified below. Based on the present knowledge, the Group has identified the following standards as being those that most significantly differ from the accounting standards presently applied under Swedish GAAP: –    IAS 19 “Employee Benefits” (the difference disappeared when RR 29 was implemented in 2004)     –•      IAS 38 “Intangible assets” –    IAS 39 “Financial Instruments: RecognitionComputation of net debt/equity, and Measurement”.equity/assets includes minority interests in adjusted shareholders’ equity.      The effects have not yet been quantified, except for IAS 19 as described above. At transition, the effect of the changes will be reported as an adjustment to opening balance of retained earnings.      The Group has already implemented certain changes in its reporting systems in order to be able to collect the comparative information that will be necessary when the new standards are implemented in 2005. F-9 Principles applied for consolidation      The consolidated financial statements have been prepared in accordance with Standard RR 1:00 of the Swedish Financial Accounting Standards Council applying the purchase method, whereby the assets and liabilities in a subsidiary on the date of acquisition are evaluated to determine the acquisition value to the Group. Any differences between the acquisition price and the market value of the acquired net assets are reported as goodwill or negative goodwill. The consolidated income for the Group includes the income statements for the Parent Company and its direct and indirect owned subsidiaries after:after   •    elimination of intra-group transactions and unrealized profits in stock, and     •    depreciation and amortization of groupGroup goodwill and other acquired surplus values. Segment reporting      The Group’s primary segments (business areas) basically follow the internal management of the Group and are based on the different business models for end-customers, consumers and professional users, and further divided on product categories. The secondary segments are based on the Group’s consolidated sales per market. F-8      The segments are responsible for the operating result and the net assets used in their businesses, whereas finance net and taxes as well as net borrowings and equity are not reported per segment. The operating results and net assets of the segments are consolidated using the same principles as for the total Group. The segments consist of separate legal units as well as divisions in multi-segment legal units where some allocations of costs and net assets are made. Operating costs not included in the segments are shown under Group Common costs and include mainly costs for corporate functions.      Sales between segments are made on market conditions with arms-length principles. Definition of Group companies      The consolidated financial statements include AB Electrolux and all companies in which the Parent Company at year-end directly or indirectly owns more than 50% of the voting rights referring to all shares and participations, or otherwise exercises decisive control.      The following applies to acquisitions and divestments during the year: •    Companies acquired during the year have been included in the consolidated income statement as of the date of acquisition.   •    Companies divested during the year have been included in the consolidated income statement up to and including the date of divestment.      At year-end 2003,2004, the Group comprised 353 (409)358 (353) operating units, and 284 (299)276 (284) companies. Associated companies      Investments in associated companies, i.e., those in which the Parent Company directly or indirectly owned 20—20–50% of the voting rights at year-end, or otherwise exercised significant influence, have been reported according to the equity method. This means that the Group’s share of income before taxes in an associated company is reported as part of the Group’s operating income and the Group’s share of taxes is reported as part of the Group’s taxes. Investments in such a company are reported at a value corresponding to the Group’s share of the company’s equity, adjusted for possible over- and undervalue. Joint ventures are reported according to the equity method. Related party transactions      All transactions with related parties are carried out on an arms-length basis. Translation of financial statements in foreign subsidiaries      According to RR 8, “Effects of changes in exchange rates”, foreign subsidiaries can be classified as either foreign operations that are integral to the operations of the reporting entity, or as independent foreign entities. The method used to translate the financial statements of a foreign subsidiary depends on how it is classified. An independent entity accumulates cash and other monetary items, incurs expenses and generates income, all substantially in its local currency. Electrolux subsidiaries are classified as independent foreign entities. Based on this classification, the balance sheets of foreign subsidiaries have been translated into Swedish kronor at year-end rates. Income statements have been translated at the average rates for the year. Translation differences thus arising have been taken directly to equity.      Prior to consolidation, the financial statements of subsidiaries in countries with highly inflationary economies have been remeasured into their functional currency and the exchange-rate differences arising from that remeasurement have been charged to income. The remeasured financial statements have then been translated into Swedish kronor following the same method as for other independent foreign entities. Consequently, changes in equity due to high inflation are reported in the consolidated income statement. Hedging of net investment      The Parent Company uses foreign exchange derivative contracts and loans in foreign currencies in hedging certain net foreign investments. Exchange-rate differences related to these contracts and loans have been charged to Group equity after deduction of taxes, to the extent to which there are corresponding translation differences. F-10F-9 General accounting and valuation principles Revenue recognition      Sales are recorded net of VAT (Value-Added Tax), specific sales taxes, returns and trade discounts. Revenues arise almost exclusively from sales of finished products. Sales are recognized when the significant risks and rewards connected with ownership of the goods have been transferred to the buyer and the Group retains neither a continuing right to dispose of the goods, nor effective control of those goods and when the amount of revenue can be measured reliably. This means that sales are recorded when goods have been put at the disposal of the customers in accordance with agreed terms of delivery. Revenues from services are recorded when the service has been performed. Government grants      Government grants are recognized when there is reasonable assurance that the Group will comply with the conditions attaching to them, and that the grants will be received. Grants related to assets are included in the balance sheet as “deferred“prepaid income” and recognized as income over the useful life of the asset. In the income statement, grants are deducted in reporting the related expense. In 2003,2004, grants recognized in the income statement amounted to SEK 55m.36 million (55 million). Other operating income and expenses      These items include profits and losses arising from the sale of fixed assets and the divestment of operations, as well as the share of income in associated companies. Other operating expenses also include amortization of goodwill. See Notes 5 and 6. Items affecting comparability      This item includes events and transactions with significant effects in comparing income for the current period with previous periods including: •    Capital gains and losses from divestments of product groups or major units   •    Close-down or significant down-sizing of major units or activities   •    Restructuring initiatives with a set of activities aimed at reshaping a major structure or process   •    Significant impairment   •    Other major non-recurring costs or income Borrowing costs      Borrowing costs are recognized as an expense in the period in which they are incurred. Taxes      Taxes include current and deferred taxes applying the liability method. Deferred taxes are calculated using enacted tax rates. Taxes incurred by the Electrolux Group are affected by appropriations and other taxable (or tax-related) transactions in the individual Group companies. They are also affected by utilization of tax losses carried forward referring to previous years or to acquired companies. This applies to both Swedish and foreign Group companies. Deferred tax assets on tax losses and temporary differences are recognized only if it is probable that they will be utilized in the near future. Deferred tax and deferred tax liabilities are shown net when they refer to the same taxation authority and when a company or a group of companies, through tax consolidation schemes etc., have a legally enforceable right to set off tax assets against tax liabilities.      A comparison of the Group’s theoretical and actual tax rates and other disclosures are provided in Note 10. Financial assets and liabilities in foreign currency      In the individual subsidiaries’ accounts, assets and liabilities denominated in foreign currency are valued at year-end exchange rates. Exchange-rate differences arising from commercial receivables and liabilities in foreign currency are included in operating income. Exchange-rate differences arising from financial assets and liabilities are included in financial items in the profit and loss statement. Foreign currency derivatives used for hedging financial assets and liabilities are valued at year-end exchange rates and the interest in the contracts is accrued and included in the income statement. F-11Intangible fixed assets F-10 Intangible fixed assets Acquisition goodwill      Acquisition goodwill is reported as an intangible asset and amortized over the estimated useful life, which is usually 10—10–20 years.      It is generally difficult to refer the acquisitions to the functions in the income statement in a logical way and the goodwill amortization is therefore included in Other operating expenses. Over the last few decades, Electrolux has made a large number of acquisitions. For four of them Electrolux applies an amortization period of 40 years, i.e., for the goodwill arising from the major strategic acquisitions of Zanussi, White Consolidated Industries, American Yard Products and Email. These acquisitions have given Electrolux major market shares in Europe, North America and Australia as well as a leading global position.      The industry in which the Group operates is relatively stable, and large market shares are a key success factor as they enable economies of scale and create barriers to entry by new competitors. Zanussi, White Consolidated Industries and American Yard Products were acquired in the late 1980s, when useful lives of 40 years were in accordance with current international practice. Experience of these acquisitions clearly indicates useful lives of well over 40 years, which supported the decision to assign a useful life of 40 years for the acquisition of Email in 2001. The value of goodwill is continuously monitored, and impairment tests indicate that the assigned useful lives are clearly sustainable for these acquisitions. Amortization of goodwill for these four acquisitions in 20032004 amounted to SEK 105m.101 million (105 million).      A useful life of 20 years has been assigned for the goodwill arising from the strategic acquisition of Diamant Boart in 2002. Trademarks      The right to use the Electrolux brand in North America, acquired in May 2000, is amortized over 40 years in the consolidated accounts. To build fewer but stronger brands is one of the Group’s key strategies and this acquisition providesgives Electrolux with the possibilityright to use the Electrolux brand worldwide. Although the useful life is regarded as indefinite, it was established at 40 years in 2000 to be consistent with the useful lives of the strategic acquisitions made in North America. Capitalized development expenses      Electrolux capitalizes certain development expenses for new products and expenses for developed and/or acquired software provided that the level of certainty of their future economic benefits and useful life is high. Capitalization has been limited to development projects initiated after January 1, 2002. Tangible fixed assets      Tangible fixed assets are stated at historical cost less straight-line accumulated depreciation, which is based on the estimated useful life of the asset. These are:           Buildings   10-4010–40 years Machinery and technical installations   3-153–15 years Other equipment   3-103–10 years Financial fixed assets      Financial assets are initially recognized at proceeds paid, net of transaction costs incurred. After initial recognition short-term investments and derivatives, used for hedging these investments, are valued at the lowest of cost or market value on a portfolio basis. Long-term investments held to maturity are valued at amortized cost using the effective interest method.      Shares and participations in associated companies are accounted for according to the equity method. Impairment      At each balance sheet date, the Group assesses whether there is any indication that any of the company’s fixed assets are impaired. If any such indication exists, the company estimates the recoverable amount of the asset. An impairment loss is recognized by the amount of which the carrying amount of an asset exceeds its recoverable amount, which is the higher of an asset’s net selling price and value in use. The value in use of an asset is mostly estimated using the discounted cash-flows method. The discount rates used in 20032004 F-12F-11 were in the range of 11 to 36%28%. For the purposes of assessing impairment, assets are grouped atin cash-generating units which are the lowest level for which theresmallest identifiable groups of assets that generates cash inflows that are separately identifiablelargely independent of the cash flows.inflows from other assets or groups of assets. Leasing      The Group generally owns its production facilities. The Group rents some warehouse and office premises under leasing agreements and has also leasing contracts for certain office equipment.      Leases, where a significant portion of the risks and rewards of ownership are retained by the lessor, are classified as operationaloperating leases. Most leasing agreements in the Group are operational leases and the costs recognized directly in the income statement in the corresponding period.      Leases of land and buildings, where the Group has substantially all the riskrisks and rewards of ownership are classified as financial leases. Financial leases are capitalized at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments.      Assets under financial leases are recognized in the balance sheet and the future leasing payments are recognized as a loan. Expenses for the period correspond to depreciation of the leased asset and interest cost for the loan.      The revised standard from the Swedish Financial Accounting Standard Council RR 6:99, “Leases”, came into effect on January 1, 2000. Electrolux then chose the alternative not to reconsider the classification of leases entered into before January 1, 1997. Inventories      Inventories are valued at the lower of acquisition cost and market value. Acquisition cost is computed according to the first-in, first-out method (FIFO) or weighted average method. Appropriate provisions have been made for obsolescence. Accounts receivable      The Group records provisions for bad debts based upon a formula with 50% for receivables past due by 6 months and with 100% for receivables overdue by 12 months. In conjunction with the formula based provision, the Group reviews the bad debt provision each period end to ensure that the provision is appropriate given the perceived risks. In addition, all expected losses are independently reserved. When foreign currency contracts intended as hedges for the cross-border flow of goods and services have been arranged, accounts receivable are valued at contract rates. Cash and cash equivalentsLiquid funds      Cash and cash equivalentsLiquid funds comprise cash on hand, bank deposits and other short-term highly liquid investments, of which the majority have original maturity of three months or less. Provisions      Provisions are recognized when the Group has a present obligation as a result of a past event, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.      Provisions for warranty are recognized at the date of sale of the products covered by the warranty and are calculated based on historical data for similar products.      Restructuring provisions are recognized when the company has adopted a detailed formal plan for the restructuring and the plan has been communicated to those affected by the restructuring. PensionsPost-employment benefits      Starting 2004, Electrolux applies RR29 Employee benefits for the accounting of its post-employment benefits. RR29 classifies post-employment benefit plans as either defined contribution or defined benefit plans.      Under a defined contribution plan, the company pays fixed contributions into a separate entity and will have no legal obligation to pay further contributions if the fund does not hold sufficient assets to pay all F-12 employee benefits. Contributions are expensed as paid. The methodsaccounting for calculatingdefined contributions plans has not been affected by the adoption of RR29.      All other post-employment benefit plans are defined benefit plans. In accordance with RR 29, the company shall use the Projected Unit Credit Method to measure the present value of its obligations and accounting pension costs and pension liabilities differ from countrycosts. The calculations shall be made annually using actuarial assumptions determined close to country. The companies report according to local rules, and the reported figures are includedbalance sheet date. Changes in the consolidated accountspresent value of obligations due to revised actuarial assumptions are treated as actuarial gains or losses and are amortized over the employees’ expected average remaining working lifetime in accordance with the corridor method. Differences between expected and actual return on plan assets are treated as actuarial gains or losses.      Net provisions for post-employment benefits in the balance sheet represent the present value of the Group.Group’s obligations at year end less market value of plan assets, unrecognized actuarial gains and losses and unrecognized past service costs. Borrowings      Borrowings are initially recognized at proceeds received, net of transaction costs incurred. After initial recognition, borrowings are valued at amortized cost using the effective interest method. Gains and losses are recorded in the income statement when borrowings are derecognized, as well as through the amortization process. F-13 When interest-rate swaps are used for hedging of loans, the interest is accrued and recorded in the income statement as interest expense. Derivatives      Derivatives are initially recognized in the balance sheet at cost when a premium is received or paid, otherwise they are kept off-balance.      Foreign currency and interest-rate derivatives held for trading are valued at the lowest of cost or market value on a portfolio basis. In the Parent Company and the regional treasury centers, foreign currency derivatives (internal and external) used for hedging of transaction exposure are valued at the lowest of cost or market value on a portfolio basis.      In other groupGroup companies, foreign currency derivatives used for hedging of transaction exposure are kept off-balance in accordance with deferral hedge accounting.      In the Parent Company and the regional treasury centers, foreign commodity derivatives (internal and external) used for hedging of forecasted purchases are valued at the lowest of cost or market value on a portfolio basis. In other groupGroup companies commodity derivatives used for hedging of forecasted purchases are kept off-balance in accordance with deferral hedge accounting. Accounts payable      When foreign currency contracts intended as hedges for the cross-border flow of goods and services have been arranged, accounts payable are valued at contract rates. Employee stock options      For the employee stock optionsoption programs, the Group provides for employer contributions expected to be paid when the options are exercised. The provision is periodically revalued. Cash flow      The cash-flow statement has been prepared according to the indirect method. Use of estimates      Management of the Group has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from these estimates. F-14F-13 Note 2. Financial Risk Managementrisk management Financial risk management      The Group is exposed to a number of risks relating to financial instruments including, for example, liquid funds, accounts receivables, customer financing receivables, payables, borrowings, and derivative instruments. The risks associated with these instruments are, primarily: •    Interest-rate risk on liquid funds and borrowings   •    Financing risks in relation to the Group’s capital requirements   •    Foreign-exchange risk on earnings and net investments in foreign subsidiaries   •   • Commodity priceCommodity-price risk affecting the expenditure on raw material and components for goods produced.produced   •    Credit risk relating to financial and commercial activities      The Board of Directors of Electrolux has approved a financial policy as well as a credit policy for the Group to manage and control these risks. Each business sector has specific financial and credit policies approved by each sub-boardsector-board (hereinafter all policies are referred to as “the Financial Policy”). These risks are to be managed by amongst others the use of derivative financial instruments according to the limitations stated in the Financial Policy. The Financial Policy also describes the management of risks relating to pension fund assets.      The management of financial risks has largely been centralized to Group Treasury in Stockholm. Local financial issues are managed by four regional treasury centers located in Europe, North America, Asia Asia/Pacific and Latin America. Measurement of risk in Group Treasury is performed by a separate risk controlling function on a daily basis. Furthermore, there are guidelines in the Group’s policies and procedures for managing operating risk relating to financial instruments by, e.g., segregation of duties and power of attorney.      Proprietary trading in currency, commodities and interest-bearing instruments is permitted within the framework of the Financial Policy. This trading is primarily aimed at maintaining a high quality of information flow and market knowledge to contribute to the proactive management of the Group’s financial risks. Interest-Rate RiskInterest-rate risk on Liquid Fundsliquid funds and Borrowingsborrowings      Interest-rate risk refers to the Group’s exposure to the market risk for adverse effects of changes in interest rates on the Group’s income. The main factors determining this risk include the interest-fixing period. Liquid funds      Liquid funds consist of cash on hand, bank deposits and other short-term investments, cash and cash equivalents.investments. Electrolux goal is that the level of liquid funds corresponds to at least 2.5% of net sales. The Group’sIn addition, net liquid funds (defined as liquid funds less short-term borrowings) shall exceed zero, with due consideration fortaking into account fluctuations referring toarising from acquisitions, divestments and seasonal variations. Investment of liquid funds is mainly made in interest-bearing instruments with high liquidity and with issuers with a long-term rating of at least A-definedA- as defined by StandardsStandard & Poor’s or similar as stated in the Financial Policy.similar. Interest-rate risk in liquid funds      Group Treasury manages the interest rateinterest-rate risk of the investments in relation to a benchmark position defined as a one-day holding period. Any deviation from the benchmark is limited by a risk mandate. Derivative financial instruments like Futures and Forward-Rate Agreements are used to manage the interest-rate risk. The holding periods of investments are mainly short-term. The major portion of the investments is made with maturities between 0 and 3 months. A downward shift in the yield curves of one-percentage point would reduce the Group’s interest income by approximately SEK 100m.70 million. For more information, see Note 18. Borrowings      The debt financing of the Group is managed by Group Treasury in order to ensure efficiency and risk control. Debt is primarily taken up at the Parent Company level and transferred to subsidiaries as internal loans or capital injections. In this process various swap instruments are used to convert the funds to the required currency. Short-term financing to meet seasonal working capital requirements areis also undertaken locally in the local subsidiaries.subsidiaries where there are capital restrictions. The F-14 Group’s borrowings contain no terms (financial triggers) for premature cancellation based on rating. For more information, see Note 18. F-15 Interest-rate risk in long-term borrowings      The Financial Policy states that the goalbenchmark for the long-term loan portfolio is an average interest-fixing period of one year. Group Treasury can choose to deviate from this policybenchmark on the basis of a risk mandate established by the Board of Directors. However, the maximum fixed-rate period is three years. Derivatives, such as interest-rate swap agreements, are used to manage the interest-rate risk by changing the interest from fixed to floating or vice versa. On the basis of 20032004 volumes and interest fixing, a one-percentage point shift in interest rates paid would impact the Group’s interest expenses by approximately SEK -25m+/-20 million in 2004.2005. This calculation is based on a parallel shift of all yield curves simultaneously by one-percentage point. Electrolux acknowledges that the calculation is an approximation and does not take into consideration the fact that the interest rates on different maturities and different currencies might change differently. Credit ratings      Electrolux has Investment Grade ratings from Moody’s and Standard & Poor’s. The long-term ratings from both rating institutions wereremained unchanged during the year. Standard and Poor’s changed the long-term outlook from positive to stable. Ratings                     Long-term       Ratings Long-term OutlookShort-   Short-term Short-term debt,     debt   Outlook   term debt   debt, Sweden Moody’s   Baa1   Stable   P-2     Standard & Poor’s   BBB+   Stable   A-2   K-1 Financing Risk      Financing risk refers to the risk that financing of the Group’s capital requirements and refinancing of existing loans could become more difficult or more costly. This risk can be decreased by ensuring that maturity dates are evenly distributed over time, and that total short-term borrowings do not exceed liquidity levels. The net borrowings (i.e., total interest-bearing liabilities less liquid funds), excluding seasonal variances, shall be long-term according to the Financial Policy. The Group’s goals for long-term debts include an average time to maturity of at least two years, and an evenly spread of maturities. A maximum of 25% of the borrowings are normally allowed to mature in a 12-month period. Exceptions are made when the net borrowing position of the Group is small. For more information, see Note 18. Foreign ExchangeForeign-Exchange Risk      Foreign exchangeForeign-exchange risk refers to the adverse effects of changes in foreign exchangeforeign-exchange rates on the Group’s income and equity. In order to manage such effects, the Group covers these risks within the framework of the Financial Policy. The Group’s overall currency exposure is managed centrally.      The major currencies that Electrolux is exposed to are the USU.S. dollar, the euro, the Canadian dollar, and the British pound. Other significant exposures are the Norwegian krona, the Australian dollar and various Eastern European currencies. Transaction exposure from commercial flows      The Group’s financial policy stipulates the hedging of forecasted sales in foreign currencies, taking into consideration the price fixing periods and the competitive environment. This implies that the variousThe business sectors within Electrolux have varying policies for hedging depending on their commercial circumstances. The sectors define a hedging horizon between 6 up to 12 months of forecasted flows. Hedging horizons outside this period are subject to approval from Group Treasury. The Financial Policy permits the operating units to hedge invoiced and forecasted flows from 75% to 100%. The maximum hedging horizon is up to 18 months. Group subsidiaries cover their risks in commercial currency flows mainly through the Group’s four regional treasury centers. Group Treasury thus assumes the currency risks and covers such risks externally by the use of currency derivatives.      The Group’s geographically widespread production reduces the effects of changes in exchange rates. For more information on exposures and hedging, see Note 18. F-15 Translation exposure from consolidation of entities outside Sweden      Changes in exchange rates also affect the Group’s income in connection with translation of income statements of foreign subsidiaries into Swedish kronor. Electrolux does not hedge such exposure. The F-16 translation exposures arising from income statements of foreign subsidiaries are included in the sensitivity analysis mentioned below. Foreign exchangeForeign-exchange sensitivity from transaction and translation exposure.exposure      Electrolux is particularly exposed to changes in exchange rates between Swedish kronor and the USU.S. dollar, the euro, the Canadian dollar and the British pound. For example, a change up or down by 10% in the value of each of the USD, EUR, CAD, and GBP against the SEK would affect the Group’s income after financial items for one year by approximately SEK +/-400m,–400 million, as a static calculation. The model assumes the distribution of earnings and costs effective at year-end 20032004 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)net investments (balance sheet exposure)      The net of assets and liabilities in foreign subsidiaries constitutes a net investment in foreign currency, which generates a translation difference in connection with consolidation. In order to limit negative effects on Group equity resulting from translation differences, hedging is implemented on the basis of borrowings and foreign exchangeforeign-exchange derivative contracts. This impliesmeans that the decline in value of a net investment, resulting from a rise in the exchange rate of the Swedish krona, is offset by the exchange gain on the Parent Company’s borrowings and foreign exchangeforeign-exchange derivative contracts, and vice versa. Hedging of the Group’s net investments is implemented within the Parent Company in Sweden. The Financial Policy stipulates the extent to which the net investments can be hedged and also sets the benchmark for risk measurement. Group Treasury is allowed to deviate from the benchmark under a given risk mandate. Commodity Price RisksCommodity-price risks      Commodity-price risk is the risk that the cost of direct and indirect materials could increase as underlying commodity prices rise in global markets. The Group is exposed to fluctuations in commodity prices through agreements with suppliers, whereby the price is linked to the raw material price on the world market. This exposure can be divided into direct commodity exposure, which refers to pure commodity exposures, and indirect commodity exposures, which is defined as exposure arising from only part of a developed product.component. The Group hedges only a limited number of materials that are exchange-traded on the world market, through commodity forwards and futures. The hedged materials are copper, aluminum, nickel and zinc. The hedging horizon depends on the business environment and is defined within each business sector. Commodity-price risk is also managed through contracts with the suppliers. Credit Riskrisk Credit risk in financial activities      Exposure to credit risks arises from the investment of liquid funds, and as counterpart risks related to derivatives. In order to limit exposure to credit risk, a counterpart list has been established which specifies the maximum permissible exposure in relation to each counterpart. The Group strives for arranging master netting agreements (ISDA) with the counterparts for derivative transactions and has established such agreements with the majority of the counterparts. Credit risk in accounts receivable      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 one of the Customer Financing operations in the Group. Customer Financing solutions are also arranged outside the Group. The Credit Policy of the Group ensures that management process for customer credits includes customer rating, credit limits, decision levels and management of bad debts. The Board of Directors setsdecides on customer credit limits that exceed SEK 300m.300 million. There is a concentration of credit exposures on a number of customers in, primarily, USA and Europe. For more information, see Note 17. Note 3. Segment Informationinformation Business areas F-16      Electrolux products are classified in three areas, i.e., Consumer Durables, Professional Indoor Products and Professional Outdoor Products. These areas form the basis for the Group’s primary segment information.      The Consumer Durables business area comprises mainly white goods. It also includes floor-care products as well as garden equipment and light-duty chainsaws. Professional Indoor Products comprise food-service equipment and laundry equipment for professional users. The operation in compressors was divested F-17 during the year. Professional Outdoor Products comprise mainly high-performance chainsaws and professional lawn and garden equipment, as well as power cutters and diamond tools.      Within Consumer Durables, the white goodswhite-goods operation is managed regionally while floor-care products and consumer outdoor products areis managed globally. Consumer Outdoor Products is together with Professional Outdoor Products managed globally. In the Group’s external financial reporting, floor-care products and consumer outdoor products areis reported together with white goods within the respective geographical regions, since these products are sold in the same markets and to a large extent to the same retailers, and are therefore exposed to similar risks. Consumer Outdoor Products is reported separately, due to the unified management for all Outdoor Products.      Financial information related to the above business areas is reported below. Business areas (SEKm)                                                                                           Business area (SEK million)   Net sales   Operating income     Net sales   Operating income   2004   2003   2002   2004   2003   2002     2003   2002   2001   2003   2002   2001     Europe   47,312   48,250   47,200   3,382   3,265   2,528     42,703   44,267   45,128   3,124   3,289   3,136   North America   45,063   48,450   46,814   2,866   3,271   1,814     30,767   32,247   35,245   1,106   1,583   2,027   Rest of the World   12,646   14,820   14,976   2   51   287   Rest of the world   13,479   12,544   14,796   -159   —   56   Consumer Outdoor Products   17,579   17,223   18,229   1,552   1,493   1,445                                 Total Consumer Durables   105,021   111,520   108,990   6,250   6,587   4,629     104,528   106,281   113,398   5,623   6,365   6,664                                 Professional Indoor Products   8,113   10,887   17,073   556   753   1,070     6,440   8,113   10,887   442   556   753   Professional Outdoor Products   10,856   10,597   9,452   1,576   1,508   1,313     9,623   9,596   8,719   1,479   1,462   1,431                                 Total Professional Products   18,969   21,484   26,525   2,132   2,261   2,383     16,063   17,709   19,606   1,921   2,018   2,184                                 Other   87   146   288     60   87   146   —   —   —   Common Groups costs   —   —   —   -744   -683   -590   Common Group costs   —   —   —   -870   -745   -683   Items affecting comparability   —   —   —   -463   -434   -141     —   —   —   -1,960   -463   -434                                 Total   124,077   133,150   135,803   7,175   7,731   6,281     120,651   124,077   133,150   4,714   7,175   7,731                                 Business areas (SEKm)                                                                       Assets   Liabilities   Capital expenditure   Cash flow (2)     2003   2002   2003   2002   2003   2002   2003   2002 Europe     29,678       30,517       22,702       22,958       1,269       1,328       3,170       4,746   North America     10,999       12,851       274       198       1,089       984       2,803       3,628   Rest of the World     6,589       6,470       2,128       2,338       470       406       -262       1,023                                                                     Total Consumer Durables     47,266       49,838       25,104       25,494       2,828       2,718       5,711       9,397   Professional Indoor Products     3,818       6,085       2,844       4,455       278       295       23       142   Professional Outdoor Products     7,126       7,293       2,696       3,417       305       229       771       1,569                                                                     Total Professional Products     10,944       13,378       5,540       7,872       583       524       794       1,711   Other (1)     4,368       5,323       3,902       4,176       52       93       -796       -1   Items affecting comparability     882       1,187       2,492       3,963       —       —       —       —                                                                     Total Operating     63,460       69,726       37,038       41,505       3,463       3,335       5,709       11,107   Liquid Assets     12,602       14,302       —       —       —       —       —       —   Interest-bearing receivables     966       1,396       —       —       —       —       —       —   Interest-bearing liabilities     —       —       12,502       15,698       —       —       —       —   Equity     —       —       27,488       28,221       —       —       —       —   Financial items     —       —       —       —       —       —       -169       -186   Taxes paid     —       —       —       —       —       —       -1,817       -1,027                                                                     Total     77,028       85,424       77,028       85,424       3,463       3,335       3,723       9,894   1)    Includes common Group services such as Holding and Treasury as well as customer financing activities. 2)    Cash flow from operations and investments. F-18F-17                                                                       Assets     Liabilities     Capital expenditure     Cash flow1)   Business area (SEK million)   2004     2003     2004     2003     2004     2003     2004     2003         Europe     23,421       23,237       17,300       17,450       1,561       1,202       2,531       3,280   North America     11,833       11,652       5,214       3,948       1,439       618       886       961   Rest of the world     8,176       7,780       3,114       3,095       438       470       -855       -151   Consumer Outdoor Products     7,903       7,451       3,325       2,776       517       560       1,315       1,371         Total Consumer Durables     51,333       50,120       28,953       27,269       3,955       2,850       3,877       5,461         Professional Indoor     3,123       3,242       2,105       2,243       144       278       400       370   Professional Outdoor     5,703       5,774       1,834       1,661       393       283       1,656       861         Total Professional Products     8,826       9,016       3,939       3,904       537       561       2,056       1,231         Other2)     3,137       3,442       3,396       3,373       23       52       3       15   Items affecting comparability     2,145       882       5,381       2,492       —       —       -736       -1,024         Total operating     65,441       63,460       41,669       37,038       4,515       3,463       5,200       5,683         Liquid assets     8,702       12,602       —       —       —       —       —       —   Interest-bearing receivables     789       966       —       —       —       —       —       —   Interest-bearing liabilities     —       —       9,843       12,502       —       —       —       —   Equity     —       —       23,420       27,488       —       —       —       —   Financial items     —       —       —       —       —       —       -303       -143   Taxes paid     —       —       —       —       —       —       -1,673   ��   -1,817         Total     74,932       77,028       74,932       77,028       4,515       3,463       3,224       3,723         1) Cash flow from operations and investments. 2) Includes common Group services such as Holding and Treasury as well as customer financing activities.      The business areas are responsible for the management of the operational assets and their performance is measured at the same level, while the financing is managed by Group Treasury at Group or country level. Consequently, liquid assets, interest-bearing receivables, interest-bearing liabilities and equity are not allocated to the business segments.      In the internal management reporting, items affecting comparability are not included in the business areas. The table below specifies the business areas to which they correspond. Items affecting comparability (SEKm)(SEK million)                                                                   Impairment/restructuring   Capital gain/losses   Impairment/restructuring   Other   Business area   2004   2003   2004   2003     2003   2002   2003   2002     Europe   —   -303   —   —     -437   —   —   —   North America   —   -396   —   —     -1,132   —   -239   —   Rest of the world   —   -723   —   —     -103   —   —   —   Consumer Outdoor Products   —   —   —   —                         Total Consumer Durables   —   -1,422   —   —     -1,672   —   -239   —   Professional Indoor   -293   -922   -85   1,910     -49   —   —   -378   Professional Outdoor   —   —   —   —     —   —   —   —                         Total Professional Products   -293   -922   -85   1,910     -49   —   —   -378   Other   —   —   -85   —     —   -85   —   —                         Total   -293   -2,344   -170   1,910     -1,721   -85   -239   -378       F-18 Inter-segment sales exist only within Consumer Durables with the following split (SEKm)(SEK million):                                   2004   2003     2003   2002     Europe   1,061   1,049     1,012   1,061   North America   551   747     559   551   Rest of the world   40   27     45   40                 Eliminations   -1,652   -1,823     -1,616   -1,652                 Geographical segments      The Group’s business segments operate mainly in three geographical areas of the world; Europe, North America and Rest of the world. Sales by market are presented below and show the Group’s consolidated sales by geographical market, regardless of where the goods were produced. Sales, by market (SEKm)(SEK million)                                   2004   2003     2003   2002     Europe   59,460   61,632     57,383   59,460   North America   49,205   53,391     46,983   49,205   Rest of the world   15,412   18,127     16,285   15,412                 Total   124,077   133,150   Total   120,651   124,077       Assets and capital expenditure, by geographical areas (SEKm):area (SEK million)                                                               Assets   Capital expenditure     Assets   Capital expenditure   2004   2003   2004   2003     2003   2002   2003   2002     Europe   53,954   58,293   1,820   1,869     50,754   53,954   2,037   1,820   North America   18,597   22,671   1,157   1,042     19,035   18,597   1,483   1,157   Rest of the world   4,477   4,460   486   424     5,143   4,477   995   486                         Total   77,028   85,424   3,463   3,335     74,932   77,028   4,515   3,463                     F-19 Note 4. Net Salessales and Operation Income (SEKm)operating income      Net sales in Sweden amounted to SEK 4,294 million (4,307 million). Exports from Sweden during the year amounted to SEK 9,816 million (9,463 million), of which SEK 7,970 million (7,688 million) was to Group subsidiaries. Revenue rendered from service activities amounted to SEK 1,209 million (848 million).      Operating income includes net exchange-rate differences in the amount of SEK 225m (-7)249 million (225 million). Net sales in Sweden amounted to SEK 4,307m (4,473m). Exports from Sweden during the year amounted to SEK 9,463m (10,547m), of which SEK 7,688m (8,587m) was to Group subsidiaries. The Group’s Swedish factories accounted for 7,6% (6.8%7.5% (7.6%) of the total value of production. Costs for research and development amounted to SEK 1,322 m (1,627m)1,566 million (1,322 million) and are included in Cost of goods sold. Note 5. Other Operating Income (SEKm)operating income (SEK million)                                                   2004   2003   2002     2003   2002   2001     Gain on sale of     Tangible fixed assets   99   62   119     91   99   62   Operations and shares   31   73   31     —   31   73                     Total   130   135   150     91   130   135                     F-19 Note 6. Other Operating Expenses (SEKm)operating expenses (SEK million)                                                   2004   2003   2002     2003   2002   2001     Loss on sale of     Tangible fixed assets   -24   -43   -8     -10   -24   -43   Operations and shares   -13   -23   -28     -42   -13   -23   Shares of income in associated companies   -32   24   12     27   -32   24   Amortization of goodwill   -182   -230   -257   Amortization on goodwill   -155   -182   -230                     Total   -251   -272   -281     -180   -251   -272                     Note 7. Items Affecting Comparability (SEKm)affecting comparability (SEK million)                                                   2003   2002   2001   2004   2003   2002   Capital gains, Leisure appliances   —   1,800   3,120       Capital gain, Leisure appliances   —   —   1,800   Other capital gains   —   110   —     —   —   110   Capital loss, Compressors   -85   —   —     —   -85   —   Provision loan guarantees   -293   —   —     —   -293   —   Vacuum-cleaner lawsuit, USA   -239   —   —   Restructuring and impairment   -85   -2,344   -3,261     -1,760   -85   -2,344   Unused restructuring provisions reversed   39   —   —                     Total   -463   -434   -141     -1,960   -463   -434                          Items affecting comparability in 20032004 include a capital loss fromcosts for the divestmentclosure of the compressorfollowing plants; The vacuum-cleaner plant in El Paso, USA; the refrigerator plant in Greenville, USA; the vacuum-cleaner plant in Västervik, Sweden; the cooker plant in Reims, France; and the closure of the tumble dryer factory in Tommerup, Denmark. Items affecting comparability also include costs relating to restructuring measures implemented within the Australian appliance operation a provision for previously issued loan guarantees for launderette operators in Germany as well as write-downa settlement of assetsa vacuum-cleaner lawsuit in the partly owned railcar operator Nordwaggon.United States. In 2004, unused amounts from previous restructuring programs have been reversed. F-20 Note 8. Leasing (SEKm)(SEK million)      At December 31, 2004, the Electrolux Group’s financial leases, recognized as tangible assets, consist of:                       Operating leases   Financial leases 2001     1,032       44   2002     996       47   2003     967       49   2004     844       47   2005-08     1,589       54   2009-     629       4                     Total     3,062       105                                                   2004     2003     2002         Acquisition costs                         Buildings and land     380       317       320   Machinery and other equipment     6       4       4         Closing balance Dec. 31     386       321       324         Accumulated depreciation                         Buildings and land     121       114       107   Machinery and other equipment     2       1       1         Closing balance Dec. 31     123       115       108         Net book value Dec. 31     263       206       216              The bookfuture amount of minimum lease payment obligations are distributed as follows:                       Operating leases     Financial leases         2005     896       55   2006–09     1,860       46   2010–     689       47         Total     3,445       148              Expenses in 2004 for rental payments (minimum leasing fees) amounted to SEK 1,020 million (SEK 1,016 million in 2003 and SEK 1,043 million in 2002). Operating leases      Among the Group’s operating leases there are no material contingent expenses, nor any restrictions. Financial leases      Within the Electrolux Group there are no financial non-cancelable contracts that are being subleased. There are no contingent expenses in the period’s results, nor any restrictions in the contracts related to leasing of facilities. The financial leases of facilities contain purchase options by the end of the contractual time. Today’s value of assets under financial leases consists of building and land in the amount offuture lease payments are SEK 170m.142 million. F-21 Note 9. Financial Incomeincome and Expenses (SEKm)expenses (SEK million)                                               2004   2003   2002     2003   2002   2001     Financial income     Interest income and similar items   794   942   972     580   794   942   Dividends   —   5   1     3   —   5                     Total financial income   794   947   973     583   794   947       Financial expenses     Interest expense and similar items   -949   -1,182   -2,059     -1,003   -949   -1,182   Exchange-rate differences on other loans and borrowings, net   -14   49   20     65   -14   49                     Total financial expenses   -963   -1,133   -2,039     -938   -963   -1,133                          Interest income includes income from the Group’s Customer Financing operations in the amount of SEK 123m (212m)108 million (123 million). Premiums on forward contracts intended as hedges for foreign net investments have been amortized as interest in the amount of SEK -43m (114m)-327 million (-43 million). Note 10. Taxes (SEKm)(SEK million)                                                   2004   2003   2002     2003   2002   2001     Current taxes   -1,945   -1,772   -1,160     -1,305   -1,945   -1,772   Deferred taxes   -270   -676   -305     100   -270   -676   Group share of taxes in associated companies   -11   -11   -12     -5   -11   -11                     Total   -2,226   -2,459   -1,477     -1,210   -2,226   -2,459                          Current taxes include additional costs of SEK 174m96 million related to previous years. Deferred taxes include a positive effect of SEK 156m26 million due to changes in tax rates.                           Theoretical and actual tax rates, %   2003   2002   2001 Theoretical tax rate     35.6       37.2       38.0   Losses for which deductions have not been made     3.0       4.6       5.8   Non-taxable income statement items, net     4.1       -8.7       -10.0   Timing differences     -5.8       -3.2       5.8   Utilized tax-loss carry forwards     -2.8       -0.8       -12.2   Dividend tax     0.2       0.4       0.6   Other     -2.5       3.1       0.3                             Actual tax rate     31.8       32.6       28.3                             F-21F-22 Theoretical and actual tax rates, %                               2004     2003     2002         Theoretical tax rate     35.1       35.6       37.2   Losses for which deductions have not been made     6.5       3.0       4.6   Non-taxable income statement items, net     -0.2       4.1       -8.7   Timing differences     -3.5       -5.8       -3.2   Utilized tax loss carry-forwards     1.0       -2.8       -0.8   Dividend tax     0.4       0.2       0.4   Other     -11.5       -2.5       3.1         Actual tax rate     27.8       31.8       32.6              The theoretical tax rate for the Group is calculated on the basis of the weighted total Group net sales per country, multiplied by the local statutory tax rates. In addition, the theoretical tax rate is adjusted for the effect of non-deductible amortization of goodwill. Changes in deferred taxes (SEKm)(SEK million)           Net deferred tax assets and liabilities DecemberDec. 31, 20022003     993658   Deferred taxes in acquired/divested operations     43—   Deferred taxes recognized in equity     626   Deferred taxes recognized in the income statement     -270100 Deferred tax on opening balance adjustment for pensions 1,035   Exchange-rate differences     -130 Other 16-133           Net deferred tax assetassets and liabilities DecemberDec. 31, 20032004     6581,686                As of December 31, 2003,2004, the Group had tax loss carry-forwards and other deductible temporary differences of SEK 1,741m (3,535m)4,245 million (1,741 million), which have not been included in computation of deferred tax assets. Of those tax loss carry-forwards, SEK 115m70 million expire in 2004,2005, SEK 165m220 million between 20052006 and 20072008 and SEK 1,461m 20083,955 million in 2009 or later.      As of December 31, 2004, the Group had accumulated deferred taxes recognized in equity of SEK 55 million (29 million). F-23                                                                               Assets   Liabilities   Net Deferred tax assets and liabilities   2003   2002   2001   2003   2002   2001   2003   2002   2001 Fixed assets1)     412       358       62       1,631       1,559       1,813       -1,219       -1,201       -1,751   Inventories     288       197       143       537       495       646       -249       -298       -503   Current receivables     168       126       80       130       19       26       38       107       54   Liquid funds     —       —       —       51       —       —       -51       —       —   Provisions for pensions and similar commitments             1,439       1,063       130       414       —       1,025       1,063       130   Other provisions     562       719       1,420       367       282       379       195       437       1,041   Financial and operating liabilities     708       739       781       68       —       —       640       739       781   Other items     —       9       182       107       352       17       -107       -343       165   Recognized unused tax losses     386       489       1,013       —       —       —       386       489       1,013                                                                             Tax assets and liabilities     3,963       3,700       3,811       3,305       2,707       2,881       658       993       930   Set-off of tax     -2,049       -709       -1,033       -2,049       -709       -1,033       —       —       —                                                                             Net deferred tax assets and liabilities     1,914       2,991       2,778       1,256       1,998       1,848       658       993       930                                                                             Deferred tax assets and liabilities                                                                               Assets     Liabilities     Net       2004     2003     2002     2004     2003     2002     2004     2003     2002         Fixed assets1)     372       412       358       1,550       1,631       1,559       -1,178       -1,219       -1,201   Inventories     300       288       197       532       537       495       -232       -249       -298   Current receivables     189       168       126       152       130       19       37       38       107   Liquid funds     —       —       —       —       51       —       —       -51       —   Provisions for pensions and similar commitments     2,221       1,439       1,063       458       414       —       1,763       1,025       1,063   Other provisions     647       562       719       308       367       282       339       195       437   Financial and operating liabilities     811       708       739       21       68       —       790       640       739   Other items     —       —       9       102       107       352       -102       -107       -343   Recognized unused tax losses     269       386       489       —       —       —       269       386       489   Tax assets and liabilities     4,809       3,963       3,700       3,123       3,305       2,707       1,686       658       993   Set-off of tax     -1,872       -2,049       -709       -1,872       -2,049       -709       —       —       —         Net deferred tax assets and liabilities     2,937       1,914       2,991       1,251       1,256       1,998       1,686       658       993         1) Of which a net of SEK 39m33 million refers to shares and participations. Note 11. Minority Interests (SEKm)interests (SEK million)                                                   2004   2003   2002     2003   2002   2001     Minority interests in                 Income after financial items   -9   2   133     -1   -9   2   Taxes   7   7   -1     —   7   7                     Net income   -2   9   132     -1   -2   9                     F-22 Note 12. Net Income Per Shareincome per share                               2003   2002   2001 Net income, SEKm     4,778       5,095       3,870   Number of shares1), basic and diluted     313,270,489       327,093,373       340,064,997   Net income per share, basic and diluted, SEK     15.25       15.60       11.35                                 2004     2003     2002         Net income, SEK million     3,148       4,778       5,095                             Number of shares1)                         basic     298,314,025       313,270,489       327,093,373   diluted     298,627,079       313,587,839       327,340,923   Net income per share, SEK                         basic     10.55       15.25       15.58   diluted     10.54       15.24       15.57   1) Weighted average number of shares outstanding during the year, after repurchase of own shares. F-24 Note 13. Intangible Assetsassets (SEK million)                                                                                   Product                 Goodwill   Product development   Software   Other   Total   Goodwill   development   Software   Other   Total     (SEKm)     Acquisition costs     Closing balance Dec. 31, 2001   7,645   —   —   810   8,455   Closing balance Dec. 31, 2002   6,479   176   19   758   7,432   Acquired during the year   638   —   —   80   718     -25   —   —   14   -11   Development   —   176   19   —   195     —   344   126   —   470   Fully amortized   -727   —   —   —   -727   Sold during the year   -159   —   —   —   -159   Exchange-rate differences   -918   —   —   -132   -1,050                         Closing balance Dec. 31, 2002   6,479   176   19   758   7,432                         Acquired during the year   -25   —   —   14   -11   Development   —   344   126   —   470   Reclassification1)   -108   —   —   186   78   Reclassification1)   -108   —   —   186   78   Sold during the year   -32   —   —   -22   -54     -32   —   —   -22   -54   Fully amortized   -647   —   —   -13   -660     -647   —   —   -13   -660   Exchange-rate differences   -637   -5   -1   -22   -665     -637   -5   -1   -22   -665                             Closing balance Dec. 31, 2003   5,030   515   144   901   6,590     5,030   515   144   901   6,590                             Acquired during the year   41   —   —   232   273   Development   —   486   183   —   669   Reclassification   —   —   —   —   —   Sold during the year   —   —   —   —   —   Fully amortized   -6   —   —   -26   -32   Exchange-rate differences   -328   -32   -16   -14   -390       Closing balance Dec. 31, 2004   4,737   969   311   1,093   7,110         Accumulated amortization according to plan     Closing balance Dec. 31, 2001   3,037   —   —   259   3,296   Amortization for the year   230   5   2   31   268   Sold and acquired during the year   -35   —   —   4   -31   Fully amortized   -727   —   —   —   -727   Impairment   195   —   —   1   196   Exchange-rate differences   -389   —   —   -109   -498                             Closing balance Dec. 31, 2002   2,311   5   2   186   2,504     2,311   5   2   186   2,504                             Amortization for the year   182   38   5   57   282     182   38   5   57   282   Sold and acquired during the year   -32   —   —   -1   -33     -32   —   —   -1   -33   Fully amortized   -647   —   —   -13   -660     -647   —   —   -13   -660   Impairment   —   —   —   —   —     —   —   —   —   —   Exchange-rate differences   -284   —   —   -1   -285     -284   —   —   -1   -285                             Closing balance Dec. 31, 2003   1,530   43   7   228   1,808     1,530   43   7   228   1,808                             Net book value Dec. 31, 2002   4,168   171   17   572   4,928   Amortization for the year   155   119   35   63   372   Sold and acquired during the year   —   —   —   —   —   Fully amortized   -6   —   —   -26   -32   Impairment   —   —   —   —   —   Exchange-rate differences   -102   -3   -3   -7   -115         Closing balance Dec. 31, 2004   1,577   159   39   258   2,033                               Net book value Dec. 31, 2003   3,500   472   137   673   4,782     3,500   472   137   673   4,782                               Net book value Dec. 31, 2004   3,160   810   272   835   5,077       1) Final purchase price allocation of Diamant Boart InternationalInternational. F-23      As described in Note 1, goodwill from four major acquisitions is amortized over 40 years. The goodwill amortization for these amounted to SEK 105m in 2003.101 million (105 million).      In 2002,Accumulated impairments on goodwill in low-performing operations within Consumer Durables, Rest of the world,were at year-end SEK 143 million (143 million) and within the compressor operations was impaired. Discount rates of 13-35% were used when calculating value in use.on other intangibles SEK 1 million (1 million). Note 14. Tangible Fixed Assets                                                       Land and           Machinery and           Construction         land           technical   Other   in progress and         improvements   Buildings   installations   equipment   advances   Total Acquisition costs   (SEKm) Closing balance Dec. 31, 2001     1,738       11,130       40,037       3,532       3,370       59,807   Acquired during the year     5       113       1,227       263       1,727       3,335   Corporate acquisitions     53       478       232       161       5       929   Corporate divestments     2       -336       -3,017       -482       -60       -3,893   Transfer of work in progress and advances     5       223       3,147       -49       -3,326       —   Sales, scrapping, etc     -142       -492       -1,834       -389       -21       -2,878   Exchange-rate differences     -129       -1,068       -3,844       -184       -617       -5,842                                                     Closing balance Dec. 31, 2002     1,532       10,048       35,948       2,852       1,078       51,458                                                     Acquired during the year     8       225       832       258       2,140       3,463   Corporate acquisitions     —       —       —       —       —       —   Corporate divestments     -68       -749       -4,058       -290       -38       -5,203   Transfer of work in progress and advances     15       218       1,555       -1       -1,787       —   Sales, scrapping, etc     -62       -355       -2,301       -297       —       -3,015   Exchange-rate differences     -56       -750       -2,780       -129       -188       -3,903                                                     Closing balance Dec. 31, 2003     1,369       8,637       29,196       2,393       1,205       42,800                                                     Accumulated depreciation according to plan                                                 Closing balance Dec. 31, 2001     167       5,266       29,530       2,318       —       37,281   Depreciation for the year     17       374       2,894       301       —       3,586   Corporate acquisitions     0       220       143       119       —       482   Corporate divestments     10       -147       -2,429       -359       —       -2,925   Sales, scrapping, etc     -21       -308       -1,725       -389       —       -2,444   Impairment     47       276       672       36       —       1,032   Exchange-rate differences     -15       -510       -3,108       -109       —       -3,742                                                     Closing balance Dec. 31, 2002     205       5,171       25,977       1,917       —       33,270                                                     Depreciation for the year     11       387       2,423       249       —       3,070   Corporate divestments     -36       -454       -3,252       -124       —       -3,866   Sales, scrapping, etc     -12       -226       -2,240       -252       —       -2,730   Impairment                     12       1       —       13   Exchange-rate differences     -15       -413       -2,086       -81       —       -2,595                                                     Closing balance Dec. 31, 2003     153       4,465       20,834       1,710               27,162                                                 ��   Net book value Dec. 31, 2002     1,327       4,877       9,971       935       1,078       18,188                                                     Net book value Dec. 31, 2003     1,216       4,172       8,362       683       1,205       15,638                                                     F-24F-25 Note 14. Tangible fixed assets (SEK million)                                                       Land and             Machinery and             Construction             land             technical     Other     in progress             improvements     Buildings     installations     equipment     and advances     Total         Acquisition costs                                                                                                   Closing balance Dec. 31, 2002     1,532       10,048       35,948       2,852       1,078       51,458   Acquired during the year     8       225       832       258       2,140       3,463   Corporate acquisitions     —       —       —       —       —       —   Corporate divestments     -68       -749       -4,058       -290       -38       -5,203   Transfer of work in progress and advances     15       218       1,555       -1       -1,787       —   Sales, scrapping, etc.     -62       -355       -2,301       -297       —       -3,015   Exchange-rate differences     -56       -750       -2,780       -129       -188       -3,903         Closing balance Dec. 31, 2003     1,369       8,637       29,196       2,393       1,205       42,800         Acquired during the year     69       227       743       209       3,267       4,515   Corporate acquisitions     —       —       —       —       —       —   Corporate divestments     —       —       —       —       —       —   Transfer of work in progress and advances     10       86       1,896       30       -2,022       —   Sales, scrapping, etc.     -50       -264       -1,130       -164       -15       -1,623   Exchange-rate differences     -28       -278       -1,109       -44       -246       -1,705         Closing balance Dec. 31, 2004     1,370       8,408       29,596       2,424       2,189       43,987                                                           Accumulated depreciation according to plan                                                 Closing balance Dec. 31, 2002     205       5,171       25,977       1,917       —       33,270   Depreciation for the year     11       387       2,423       249       —       3,070   Corporate divestments     -36       -454       -3,252       -124       —       -3,866   Sales, scrapping, etc.     -12       -226       -2,240       -252       —       -2,730   Impairment     —       —       12       1       —       13   Exchange-rate differences     -15       -413       -2,086       -81       —       -2,595         Closing balance Dec. 31, 2003     153       4,465       20,834       1,710       —       27,162         Depreciation for the year     8       280       2,278       240       —       2,806   Corporate divestments     —       —       —       —       —       —   Sales, scrapping, etc.     -1       -216       -1,110       -150       —       -1,477   Impairment     12       141       450       —       —       603   Exchange-rate differences     -6       -158       -945       -31       —       -1,140         Closing balance Dec. 31, 2004     166       4,512       21,507       1,769       —       27,954                                                           Net book value Dec. 31, 2003     1,216       4,172       8,362       683       1,205       15,638                                                           Net book value Dec. 31, 2004     1,204       3,896       8,089       655       2,189       16,033              In 2002,2004, tangible fixed assets in low-performing operations within Consumer Durables Europe, North America and Rest of the world and within the compressor operations were impaired. Discount rates of 11-22% were used when calculating value in use. The book values for land were SEK 1,160m (1,238m)1,160 million (1,160 million).      The tax assessment value for Swedish Group companies was for buildings SEK 328m (332m)329 million (328 million), and land SEK 74 m (66m)75 million (74 million).      The corresponding book values for buildings were SEK 186m (181m)180 million (186 million), and land SEK 21m (22m)21 million (21 million). Accumulated write-ups on buildings and land were at year-end SEK 134m (147m)134 million (134 million). Accumulated impairments on buildings and land were at year-end SEK 549 million (400 million) and on machinery and other equipment SEK 623 million (254 million). F-26 Note 15. Financial Fixed Assetsfixed assets (SEK million)                                   2003   2002   2004   2003     (SEKm)     Participations in associated companies   185   167     196   185   Participations in other companies   55   80     46   55   Shares in subsidiaries   —   —   Long-term receivables in subsidiaries.   —   —   Long-term holdings in securities   149   262     168   149   Other receivables   887   1,082     1,002   887                 Total   1,276   1,591     1,412   1,276                      A specification of shares and participations is provided in Note 28.29. Note 16. Inventories (SEK million)                                   2003   2002   2004   2003     (SEKm)     Raw materials   3,111   4,017     3,787   3,111   Products in progress   598   778     493   598   Finished products   11,313   11,153     11,490   11,313   Advances to suppliers   37   71     63   37   Advances from customers   -114   -405     -91   -114                 Total   14,945   15,614     15,742   14,945                 Note 17. Accounts Receivablereceivable      At year-end 2003,2004, accounts receivable, net of provisions for doubtful accounts, amounted to SEK 21,172m (22,484m)20,627 million (21,172 million), representing the maximum possible exposure to customer defaults. The book value of accounts receivable is considered to represent fair value. The total provision for bad debts at year-end was SEK 1,012m (1,459m)730 million (1,012 million). Electrolux has a significant concentration on a number of major customers primarily in the USUnited States and Europe. Accounts receivable attributableReceivables concentrated to customers with credit limits amounting to SEK 300m300 million or more represent 31%31.5% of the total accounts receivable. F-25F-27 Note 18. Financial Instrumentsinstruments      Financial instrumentinstruments is defined in accordance with the Swedish Financial Accounting Standard Council’s standard RR27,RR 27, which is based on IAS 32. Additional and complementary information is presented in the following Notesnotes to the annual report:Annual Report: Note 1, “Accounting and valuation principles”, discloses the accounting and valuation policies adopted and Note 2, “Financial risk management”, describes the Group’s risk policies in general and regarding the principal financial instruments of Electrolux in more detail. Note 17, “Accounts receivable”, describes the accounts receivables and related credit risks. The information in this note highlights and describes the principal interest-bearing financial instruments of the Group regarding specific major terms and conditions when applicable, and the exposure to interest rate risk and the fair values at year-end. Liquid funds      Liquid funds consist of cash on hand, bank deposits and other short-term investments, (less than one year) and cash equivalents.of which the majority have original maturity of three months or less. The table below presents the key data of liquid funds. The book value of liquid funds is approximately equal to fair value.                   Liquidity profile   2003   2002     (SEKm) Investments with maturities over three months     3,783       7,602   Investments with maturities up to three months     8,207       6,698   Fair value derivative assets included in short-term investments     612       —                     Liquid funds     12,602       14,300   % of annualized net sales     11.3       11.8   Net liquidity 1)     8,593       12,682   Fixed-interest term, days     64       48   Effective yield, % (average per annum)     4.4       4.4                     1) The net liquidity calculation in 2003 includes long-term borrowings with maturities within 12 months. Liquidity profile                       2004     2003       (SEK million)   Investments with maturities over three months     265       3,783   Investments and deposits with maturities up to three months     7,675       8,207   Fair value derivative assets included in short-term investments     762       612         Liquid funds     8,702       12,602   % of annualized net sales     7.7       11.3   Net liquidity     2,799       8,593   Fixed-interest term, days     61       64   Effective yield, % (average per annum)     2.4       4.4              For 2003,2004, liquid funds amounted to 11.3% (11.8%7.7% (11.3%) of annualized net sales, thereby exceeding the Group’s minimum criterion, primarily due to positive operating cash flow and divestments of operationssales. The net liquidity is calculated by deducting short-term loans from liquid funds. As from year 2003, long-term borrowings maturing within 12 months are included in recent years.short-term loans. Interest-bearing liabilities      At year-end 2003,2004, the Group’s total interest-bearing liabilities including interest-bearing pension liabilities, amounted to SEK 12,501m (15,698m)9,843 million (12,501 million), of which SEK 8,173m (13,759m)3,940 million (8,173 million) referred to long-term loans. As of December 31, 2003, long-termLong-term loans with maturities within 12 months, SEK 2,414m,3,896 million, are reported as short-term loans in the Group’s balance sheet. A significant portion of the total of outstanding long-term borrowings has been made under Electrolux global medium term note program. This program allows for borrowings of up to EUR 2,000m.2,000 million. As of December 31, 2003,2004, Electrolux utilized approximately EUR 630m (680m)627 million (630 million) of the capacity of the program.      The majority of total long-term borrowings, SEK 7,331m,7,187 million, are taken up in Sweden at the parent company level. Given the strong liquidity, Electrolux does not currently maintain any committed credit facilities for short-term borrowings, other than as back-up facility for the European commercial papercommercial-paper program, which amounts to EUR 150m.150 million. Electrolux expects to meet any future requirements for short-term borrowings through bilateral bank facilities and capital marketcapital-market programs such as commercial papercommercial-paper programs.      At year-end 2003,2004, the average interest-fixing period for long-term borrowings was 1.11.3 years (0.9)(1.1). The calculation of the average interest-fixing period includes the effect of interest-rate derivatives used to manage the interest-rate risk of the debt portfolio. The interest-rateinterest rate at year-end for the total borrowings was 4.9% (4.2%4,9% (4.9%).      The fair value of the interest-bearing loans including swap transactions used to manage the interest fixing was approximately SEK 12,650m.10,127 million. The loans and the interest-rate swaps are valued marked-to-market in order to calculate the fair value. F-26      The following table sets out the carrying amount of the Group’s interest-bearing liabilities that are exposed to fixed and floating interest-rate risk. F-28 Interest-bearing liabilities                                                               Nominal   Total book value 31       value (in   Dec.   Nominal value   Total book value Dec. 31,   Issue/maturity dates   Description of loan   Interest rate   Currency   Currency)   2003   2002   Description of loan   Interest rate, %   Currency   (in currency)   2004   2003   Bond Loans                           (SEKm)   Bond loans                                             Fixed rate1)                                                                     2001-2008   Global MTN Program     6.0000     EUR     268       2,400       2,416   2001-2008   Global MTN Program     6.0000     EUR     32       288       290   1998-2008   SEK MTN Program     4.2303     SEK     85       85       85   2000-2005   Global MTN Program   6,1250   EUR   300   2712   2735   Global MTN Program2)     6.1250     EUR     300       —       2,712   2000-2008   Global MTN Program   6,0000   EUR   268   2416   2437 1996-2004   Bond Loan FRF 1,000m2)   6,5000   FRF   690   —   959 2000-2008   Global MTN Program   6,0000   EUR   32   290   293 1998-2008   Global MTN Program   6,5000   NOK   400   —   503 2001-2005   SEK MTN Program   5,3000   SEK   200   200   200   SEK MTN Program2)     5.3000     SEK     200       —       200   2001-2004   SEK MTN Program2)   3,3820   SEK   170   —   170 2001-2008   SEK MTN Program   4,2303   SEK   85   85   85 1996-2003   SEK MTN Program   8,7000   SEK   —   —   100 Floating Rate                         Floating rate                                             1998-2005   Global MTN Program   Floating   USD   25   181   220   Global MTN Program   Floating   USD     25       —       181     Industrial Development Revenue                       Industrial Development Revenue                                         1997-2027   Bonds   Floating   USD   10   73   88   Bonds   Floating   USD     10       66       73                           Total bond loans       —   —   —   5,957   7,790         —       —       —       2,839       5,957                                               Other long-term loans                                                                       Fixed Rate Loans   —   —   —   1,901   1,642   Fixed Rate Loans     —       —       —       457       1,901     Floating Rate Loans2)   —   —   —   315   4,327   Floating Rate Loans     —       —       —       644       315                               Total other long-term loans       —   —   —   2,216   5,969         —       —       —       1,101       2,216                               Total long-term loans       —   —   —   8,173   13,759         —       —       —       3,940       8,173   Short-term loans                                                                     Short-term part of Long-term Loans                         Short-term part of long-term loans                                             2000-2005   Global MTN Program2)     6.1250     EUR     300       2,695       —   2001-2005   SEK MTN Program2)     5.3000     SEK     200       200       —   1998-2005   Global MTN Program2)   Floating   USD     25       165       —   2001-2004   SEK MTN Program2)   3,3820   SEK   170   170   —   SEK MTN Program     3.3820     SEK     170       —       170   1996-2004   Bond Loan FRF 1,000m2)   6,5000   FRF   690   952   —   Bond Loan FRF 1,000 million     6.5000     FRF     690       —       952     Other long-term loans2)   —   —   —   1,292   —   Other long-term loans     —       —       —       836       1,292                                               Other short-term loans                                                                       Bank borrowings & commercial                       papers.   —   —   —   1,316   1,618   Bank borrowings and commercial papers     —       —       —       1,643       1,316     Fair value of derivative                       Fair value of derivative                                           liabilities   —   —   —   279   —   liabilities     —       —       —       364       279                               Total short-term loans       —   —   —   4,009   1,618         —       —       —       5,903       4,009                                                                   Interest-bearing pensions                   319   321         —       —       —       —       319                                                                   Total interest-bearing liabilities       —   —   —   12,501   15,698 Total interest-bearing liabilities     —       —       —       9,843       12,501                               1)   The interest-rate fixing profile of the loans above has been adjusted from fixed to floating with interest-rate swaps.   2)   Long-term loans in the table above with maturities within 12 months are classified as short-term loans in the Group’s balance sheet as of December 31, 2003.sheet. F-27      The average maturity of the Group’s long-term borrowings (including long-term loans with maturities within 12 months) was 2.72.2 years (3.3)(2.7) at the end 2003.of 2004. As a result of the Group’s positive cash flow, no additional long-term funding was undertaken in 2003, apart from SEK 100m to fund the operations in Brazil.2004. A net total of SEK 1,490m1,836 million in loans, originating essentially from long-term loans, matured or were amortized. Short-term loans pertain primarily to countries with capital restrictions. The table below presents the repayment schedule of long-term borrowings. F-29 Repayment schedule of long-term borrowings, as at December 31, December, (SEKm)(SEK million)                                                                                                                 2005   2006   2007   2008   2009   2010   2011-   Total     2004   2005   2006   2007   2008   2009   2010-   Total     Debenture and bond loans   —   3,093   —   —   2,791   —   73   5,957     —   —   —   2,773   —   —   66   2,839     Bank and other loans   —   964   416   29   21   —   786   2,216     —   410   36   16   24   4   611   1,101     Short-term part of long-term loans   2,414   —   —   —   —   —   —   2,414     3,896   —   —   —   —   —   —   3,896                                           Total   2,414   4,057   416   29   2,812   —   859   10,587     3,896   410   36   2,789   24   4   677   7,836                                         Other interest-bearing investments      Interest-bearing receivables from customer financing amounting to SEK 874m (971m)745 million (874 million) are included in the item Other receivables in the Group’s balance sheet. The Group’s customer financing activities are performed in order to provide sales support and are directed mainly to independent retailers in the USUnited States and in Scandinavia. The majority of the financing is shorter than 12 months. There is no major concentration of credit risk related to customer financing. Collaterals and the right to repossess the inventory also reduce the credit risk in the financing operations. The income from customer financing is subject to interest-rate risk. This risk is immaterial to the Group. Commercial Flowsflows      The table below shows the forecasted transaction flows (imports and exports) for the 12-month period of 20042005 and hedges at year-end 2003.2004.      The hedged amounts during 20042005 are dependent on the hedging policy for each flow considering the existing risk exposure. Gross hedging of flows above 12 months and up to 18 months, not shown in the table, amounts to SEK 434m474 million and this hedging refers mainly to USD/SEK and EUR/SEK.                                                                                                       GBP   CAD   NOK   CZK   AUD   CHF   HUF   EUR   USD   SEK   Other   Total   GBP   CAD   AUD   NOK   CZK   CHF   HUF   SEK   EUR   USD   Other   Total                                                         Inflow of currency (long position)   3,450   2,560   1,150   730   920   790   450   5,620   2,190   1,520   3,810   23,190   ��   3,700   2,570   1,350   1,140   860   860   960   1,970   5,480   1,910   4,470   25,270     Outflow of currency (short position)   -340   -390   —   —   -190   -100   -1,590   -8,520   -5,430   -5,370   -1,260   -23,190     -170   -190   -270   -200   —   -60   -2,480   -4,880   -9,570   -6,510   -940   -25,270   Gross transaction Flow   3,110   2,170   1,150   730   730   690   -1,140   -2,900   -3,240   -3,850   2,550   —       Gross transaction flow   3,530   2,380   1,080   940   860   800   -1,520   -2,910   -4,090   -4,600   3,530   —   Hedge   -1,020   -760   -120   -130   -290   -170   640   -900   1,200   2,020   -470   —     -1,580   -1,840   -710   -560   -590   -580   870   2,390   1,240   2,850   -1,490   —                                                         Net transaction flow   2,090   1,410   1,030   600   440   520   -500   -3,800   -2,040   -1,830   2,080   —     1,950   540   370   380   270   220   -650   -520   -2,850   -1,750   2,040   —                                                              The effect of hedging on operating income during 20032004 amounted to SEK 69m (112m)-76 million (69 million). At year-end 2004, unrealized exchange-rate gainslosses on forward contracts amounted to SEK 47m (150m)- -20 million (47 million), where SEK 35mall of which will mature in 2004 and SEK 12m will mature in 20052005. Derivative financial instruments      The tables below present the fair value and nominal amounts of the Group’s derivative financial instruments for managing of financial risks and proprietary trading. The fair value of financial instruments used for proprietary trading at the end of 20032004 was SEK 6m (5m)4 million (6 million). F-28F-30 Fair value                                                                                 Fair value   2003   2002       2004   2003         Positive   Negative   Positive   Negative         Positive   Negative   Positive   Negative       MV   MV   Net MV   MV   MV   Net MV     MV   MV   Net MV   MV   MV   Net MV     Interest-rate swaps   364   -145   219   424   -220   204     290   -66   224   364   -145   219   Cross currency interest-rate swaps   15   -16   -1   68   -58   10     21   -10   11   15   -16   -1   Forward-rate agreements & futures.   10   -10   0   3   -4   -1   Foreign exchange derivatives (Forwards & Options)   759   -319   440   889   -194   695   Forward-rate agreements and futures   9   -9   —   10   -10   —   Foreign exchange derivatives (Forwards and Options)   828   -534   294   759   -319   440   Commodity derivatives   9   -4   5   8   -10   -2     —   —   —   9   -4   5                                 Total   1,157   -494   663   1,392   -486   906     1,148   -619   529   1,157   -494   663                                      Valuation of derivative financial instruments at market value (MV), presented in the table above, is done at the most accurate market prices available. This means that instruments, which are quoted on the market, such as for instance the major bond and interest-rate future markets, are all marked-to-market with the current price.spot mid-price. The foreign-exchange spot ratemid-rate is then used to convert the market value into Swedish kronor, before it is discounted back to the valuation date. For instruments where no reliable price is available on the market, cash flows are discounted using the deposit/swap curve of the cash flowcash-flow currency. In the event that no proper cash flow schedule is available, for instance as in the case with forward rateforward-rate agreements, the underlying schedule is used for valuation purposes. To the extent option instruments are used, the valuation is based on the Black-Scholes formula. All valuations are done at mid-prices, e.g., the average of bid and ask prices are used. Nominal Amountsamounts (SEKm)                       2003   2002 Interest-rate swaps                 Maturity shorter than 1 year     8,219       934   Maturity 2-5 years     9,188       7,837   Maturity 6-10 years     —       2,472                     Total interest-swaps     17,407       11,243                     Cross currency interest-rate swaps     245       1,150   Forward rate agreements     35,625       23,974   Foreign Exchange derivatives (Forwards & Options)     12,603       21,958   Commodity derivatives     21       165                     Total     65,901       58,489                                           2004     2003         Interest-rate swaps Maturity shorter than 1 year     5,600       8,219   Maturity 2–5 years     4,760       9,188   Maturity 6–10 years     —       —         Total interest-swaps     10,360       17,407   Cross currency interest-rate swaps     75       245   Forward-rate agreements     15,751       35,625   Foreign-exchange derivatives (Forwards and Options)     18,104       12,603   Commodity derivatives     —       21         Total     44,290       65,901         F-31 Note 19. Assets Pledgedpledged for Liabilitiesliabilities to Credit Institutionscredit institutions (SEK million)                                   2003   2002   2004   2003     (SEKm)         Real-estate mortgages   418   1,090     126   418   Corporate mortgages   —   9     —   —   Receivables   —   124     —   —   Inventories   —   238     —   —   Other   5   447     11   5                 Total   423   1,908     137   423                      The sharp reduction of pledged assets in 2003 iswas mainly due to that the company in India has ceased pledging assets, the divestment of the compressor unit in China and renegotiations of bank loans in Germany. F-29 Note 20. Equity      Unrestricted consolidated earnings amount to SEK 14,130m.10,729 million. No allocation to restricted reserves is required. The accumulated translation differences charged to equity since January 1, 1998, amount to SEK -1,583m (-324m)-2,034 million (–1,583 million). Translation differences in 20032004 amount to SEK -1,259m–451 million and have been reduced by SEK 376m,41 million, net of taxes, through equity hedging. The equity method reserve amounted to SEK 62m(-124m)74 million (62 million).      Retained earnings is the sum of the free reserves of the Parent Company and that portion of each subsidiary’s equity that could be paid as dividend without requiring the Parent Company to write down the book value of the subsidiary. The remaining portion of equity is recognized as restricted reserves. Note 21. Share Capitalcapital and Numbernumber of Sharesshares               Value at par (SEKm)(SEK million) On December 31, 2003,2004, the share capital comprised         10,000,0009,502,275 A-shares, par value SEK 5     5048   314,100,000299,418,033 B-shares, par value SEK 5     1,5711,497           Total     1,6211,545           F-32      A-shares carry one vote and B-shares one-tenth of a vote.                                                   Owned by   Owned by       Owned by   Owned by other       Number of shares   the company   shareholders   Total   Electrolux   shareholders   Total   Shares at Dec 31, 2002       Shares at Dec. 31, 2003     A-shares   —   10,000,000   10,000,000     —   10,000,000   10,000,000   B-shares   20,394,052   308,318,528   328,712,580   Repurchased shares   A-shares   —   —   —   B-shares   11,331,828   -11,331,828   —   Cancelled shares   A-shares   —   —   —   B-shares   -14,612,580   -14,612,580   Sold shares   —   —   —   A-shares   —   —   —   B-shares   -113.300   113,300   —   Shares at Dec 31, 2003   A-shares   —   10,000,000   10,000,000     B-shares   17,000,000   297,100,000   314,100,000     17,000,000   297,100,000   314,100,000                   Repurchased shares     A-shares   —   —   —     B-shares   750,000   -750,000   —     Cancelled shares     A-shares   —   -497,725   -497,725     B-shares   —   -14,681,967   -14,681,967     Sold shares     A-shares   —   —   —     B-shares   -10,600   10,600   —     Shares at Dec. 31, 2004     A-shares   —   9,502,275   9,502,275     B-shares   17,739,400   281,678,633   299,418,033            As of December 31, 2003,2004, Electrolux had repurchased 17,000,00017,739,400 B-shares, with a total par value of SEK 85m. 89 million. The average number of shares during the year has been 313,270,489 (327,093,373)298,314,025 (313,270,489). F-30 Note 22. Provisions for Pensions and Similar Commitments (SEKm)                               2003   2002   2001 Interest-bearing pensions     319       321       269   Other pensions     2,757       2,801       744   Other commitments     2,602       2,896       3,082                             Total     5,678       6,018       4,095                             (SEK million) Pension liabilitiesPost-employment benefits      The Group sponsors pension plans in many of the countries in which it has significant activities. Pension plans can be defined contribution or defined benefit plans or a combination of both, and follow, in general, the local practices.      The Group’s major Under defined benefit pension plans, cover employees in the US, UK, Switzerland, Germany and Sweden. The German plan is unfundedcompany enters into a commitment to provide pension benefits based upon final or career average salary, employment period or other factors that are not known until the time of retirement. Under defined contribution plans, the company makes periodic payments to independent authorities or investment plans and the plans inlevel of benefits depends on the US, UK, Switzerland and Sweden are funded.      The methods for calculating and accounting for pension costs and pension liabilities differ from country to country. The companies report according to local rules, and the reported figures are included in the consolidated accounts of the Group.      In case of underfunding, US rules require the companies to record an additional minimum liability. Following these rules, the Group recorded in 2002 an additional pre-tax pension liability of USD 245m, equivalent to SEK 2,154m, at year-end exchange rate and which, after deduction of deferred taxes, resulted in a charge to equity of SEK 1,335m. In 2003, the additional minimum liability has increased to a pre-tax pension liability of USD 272m, equivalent to SEK 1,976m at year-end exchange rate. After deduction of deferred taxes and adjustment for changes in exchange rates, the increase has resulted in a charge to equity of SEK 123m. The adjustment will be reversed when the underfunding situation ends.      All pension assets are managed by external investment companies and the portfolios comprise both shares and interest-bearing securities. Other commitments      In addition to providing pension benefits, the Group provides other post retirement benefits, primarily health care benefits, for some of its employees in certain countries (US).actual return on those investments.      In some countries and following local regulations, the companies make provisions for obligatory severance payments. These provisions cover the Group’s commitment to pay employees a lump sum upon reaching retirement age, or upon the employees’ dismissal or resignation. These plans are listed below as Other post-employment benefits. Swedish     In addition to providing pension foundationsbenefits, the Group provides other post-employment benefits, primarily health-care benefits, for some of its employees in certain countries (United States). These plans are listed below as Other post-employment benefits.      The pension liabilitiesGroup’s major defined benefit plans cover employees in the United States, UK, Switzerland, Germany and Sweden. The German plan is unfunded and the plans in the United States, UK, Switzerland and Sweden are funded.      A small number of the Group’s Swedishemployees in Sweden is covered by a multi-employer defined benefit pension plans were funded through two pension foundations established in 1998. The two foundations were merged on October 1, 2003. The market value ofplan administered by Alecta. It has not been possible to obtain the assets ofnecessary information for the foundation amounted to SEK 1,253m, while the pension commitments amounted to SEK 1.271m as per December 31, 2003. In the Swedish companies a total of SEK 105m is recorded as liabilities to the pension foundation. F-31F-33 accounting of this plan as a defined benefit plan, and therefore, it has been accounted as a defined contribution plan.      The methods for calculating and accounting for pension costs and pension liabilities differ from country to country. For the years 2002 and 2003, the companies reported according to local rules, and the reported figures were included in the consolidated accounts of the Group.      In case of underfunding, U.S. rules require the companies to record an additional minimum liability. Following these rules, the Group recorded in 2002 an additional pre-tax pension liability of USD 245 million, equivalent to SEK 2,154 million, at year-end exchange rate and which, after deduction of deferred taxes, resulted in a charge to equity of SEK 1,335 million. In 2003, the additional minimum liability increased to a pre-tax pension liability of USD 272 million, equivalent to SEK 1,976 million at year-end exchange rate. After deduction of deferred taxes and adjustment for changes in exchange rates, the increase resulted in a charge to equity of SEK 123 million.      As of January 1, 2004, the Group applies the Swedish Financial Accounting Standard Council’s standard RR 29, “Employee benefits”, for the accounting of its defined benefit pension plans and other employee benefits around the world. This accounting standard is similar in most respects to the International Accounting Standard No. 19, “Employee benefits”. Under RR 29, the net liability of the defined benefit pension plans in each country is determined based on consistent and comparable principles and assumptions. A transitional liability was determined as of January 1, 2004, based on the difference between the previously used accounting principles and RR 29. The difference between the Group’s net pension liability as of December 31, 2003, and the Group’s opening balance under RR 29 as of January 1, 2004, has been adjusted through a decrease in shareholders’ equity. Figures for 2002 and 2003 have not been restated.      Below are set out schedules which show the obligations of the plans in the Electrolux Group assessed under RR 29, the assumptions used to determine these obligations, and the assets relating to the benefit plans, as well as the amounts recognized in the income statement and balance sheet. The schedules also include a reconciliation of changes in net provisions during the year. The Group’s policy for recognizing actuarial gains and losses is to recognize in the profit and loss that portion of the cumulative unrecognized gains or losses in each plan that exceeds 10% of the greater of the defined benefit obligation and the plan assets. These gains or losses in each plan are recognized on a straight-line basis over the expected average remaining working lifetime of the employees participating in the plans. Expense for post-employment benefits 2004 Service cost 409 Interest cost 1,112 Expected return on plan assets -839 Amortization of actuarial losses — Amortization of past service cost 14 Effect of any curtailments and settlements -5 Effect of limit on assets 7 Expense for defined benefit plans 698 Expense for defined contribution plans 149 Total expense for post-employment benefits 847 Actual return on net asset -931 F-34      Total expense for post-employment benefits has been recognized as operating expense and classified as manufacturing, selling or administrative expense depending on the function of the employee.                               Other post-             employment   Specification of net provisions for post-employment benefits at December 31, 2004   Pensions     benefits         Present value of obligations for unfunded plans     3,131       3,678   Present value of obligations for funded plans     14,582       180   Fair value of plan assets     -12,234       -180   Unrecognized actuarial gains/losses     -1,233       -340   Unrecognized past service cost     -28       —   Assets not recognized due to limit on assets     47       —         Net provisions for post-employment benefits     4,265       3,338         Whereof reported as                 Prepaid pension cost     249       —   Provisions for pensions and similar commitments     4,514       3,338                     Weighted-average actuarial assumptions (%)   Jan. 1 2004,     Dec. 31, 2004         Discount rate     5.5       5.1   Expected long-term return on assets     7.0       7.3   Expected salary increases     3.0       3.8   Medical cost trend rate, current year     10.0       10.0                                 Other post-               employment   Reconciliation of changes in net provisions   Pensions     benefits         Provisions for pensions and similar commitments at December 31, 2003     3,076       2,602   Other pensions related net liabilities     115       —   Net provisions for pensions and similar commitments at December 31, 2003     3,191       2,602   Change in accounting principles     1,599       1,038   Net liability at January 1, 2004     4,790       3,640   Pension expense     476       222   Cash contributions and benefits paid directly by the company     -894       -278   Exchange differences     -107       -246         Net provisions for post-employment benefits     4,265       3,338         F-35 Note 23. Other Provisions (SEKm)provisions (SEK million)                                                                               Provisions for                   Provisions   Warranty             restructuring   Warranty   Pension           for restructuring   commit-             Acquisitions   Other   commitments   litigation   Other   Total   Acquisitions   Other   ments   Other   Total   Closing balance Dec. 31, 2001   —   1,771   1,223   1,084   2,415   6,493   Provisions made   166   886   723   —   810   2,585   Provisions used   -13   -751   -390   -880   -656   -2,690   Unused amounts reversed   —   —   -45   -75   -70   -190   Exchange-rate differences   1   -113   -93   -129   -282   -616                                 Closing balance Dec. 31, 2002   154   1,793   1,418   —   2,217   5,582     154   1,793   1,418   2,217   5,582       Provisions made   —   —   1,271   —   1,094   5,152     —   —   1,271   1,094   2,365   Provisions used   -136   -1,280   -957   —   -684   -5,844     -136   -1,280   -957   -684   -3,057   Unused amounts reversed   —   —   -83   —   -45   -128     —   —   -83   -45   -128   Exchange-rate differences   -1   -62   -87   —   -185   -335     -1   -62   -87   -185   -335                                 Closing balance Dec. 31, 2003   17   451   1,562   —   2,397   4,427     17   451   1,562   2,397   4,427                                 Provisions made   —   1,203   992   393   2,588   Provisions used   -4   -463   -876   -332   -1,675   Unused amounts reversed   —   -39   -79   -50   -168   Exchange-rate differences   —   -58   -49   -104   -211       Closing balance Dec. 31, 2004   13   1,094   1,550   2,304   4,961            Provisions for restructuring represent the expected costs to be incurred in the coming years as a consequence of the Group’s decision to close some factories, rationalize production and reduce personnel, both for newly acquired and previously owned companies. The amounts are based on management’s best estimates and are adjusted when changes to these estimates are known. The majority of restructuring plans are expected to be completed during 20042005, and the amounts have not been discounted. Provisions for warranty commitments are recognized as a consequence of the Group’s policy to cover the cost of repair of defective products. Warranty is normally granted for 1 to 2 years after the sale. Other provisions include mainly provisions for tax, environmental or other claims, none of which is material to the Group. Note 24. Accrued Expensesexpenses and Prepaid Incomeprepaid income (SEK million)                                 2003   2002   2004   2003     (SEKm)     Accrued holiday pay   1,139   1,214     1,150   1,139   Other accrued payroll costs   1,267   1,217     1,280   1,267   Accrued interest expenses   202   199     168   202   Prepaid income   637   1,040     483   637   Other accrued expenses   4,779   4,589     4,921   4,779                 Total   8,024   8,259     8,002   8,024                      Other accrued expenses include accruals for fees, advertising and sales promotion, bonuses, extended warranty, rebates and other items. Note 25. Contingent Liabilities                       2003   2002     (SEKm) Discounted bills     —       10   Accounts receivable, with recourse     370       182   Guarantees and other commitments On behalf of subsidiaries     —       —   Other     728       666   Capital value of pension commitments in excess of reported liabilities     81       91                     Total     1,179       949                     F-32F-36 Note 25. Contingent liabilities (SEK million)                       2004     2003         Discounted bills     —       —   Accounts receivable, with recourse     468       370   Guarantees and other commitments     855       728   Employee benefits in excess of reported liabilities     —       81         Total     1,323       1,179              In addition to the above contingent liabilities, guarantees for fulfillment of contractual undertakings are given as part of the Group’s normal course of business. There was no indication at year-end that payment will be required in connection with any contractual guarantees.      Electrolux has, jointly with the state-owned company AB Swedecarrier, issued letters of support for loans and leasing agreements totaling SEK 1,492m1,412 million in the associated company Nordwaggon AB. Note 26. Acquired and Divested Operations (SEK million)                                                                                                 2002   2003   2001   Acquisitions   Divestments   Net       (SEKm)       2004   2003   2002   2004   2003   2002   2004   2003   2002   Fixed assets   -1,600   -753   735     —   —   654   —   -1,600   -1,407   —   -1,600   -753   Inventories   -482   -46   -43     —   —   605   —   -482   -651   —   -482   -46   Receivables   -1,146   -670   -576     —   —   610   —   -1,146   -1,280   —   -1,146   -670   Other current assets   -98   -245   -2,450     —   —   22   —   -98   -267   —   -98   -245   Liquid funds   -389   127   -68     —   —   203   —   -389   -76   —   -389   127   Loans   870   -43   2,943     —   —   -789   —   870   746   —   870   -43   Other liabilities and provisions   1,531   837   417     —   —   -907   —   1,531   1,744   —   1,531   837   Purchase price   1,246   2,101   2,288     —   —   -1,745   —   1,246   3,846   —   1,246   2,101   Liquid funds in acquired/divested operations   -389   128   -68     —   —   203   —   -389   -75   —   -389   128                 Effect on Group liquid funds   857   2,229   2,220     —   —   -1,542   —   857   3,771   —   857   2,229                      The assets and liabilities in 2003 refer to the divestments of Compressors and Vestfrost.      The acquired and divested assets and liabilities in 2002 refer mainly to the acquisition of Diamant Boart International and the divestments of the remaining part of the Leisure appliance product line, the European motor operation and Zanussi Metallurgica.      In the consolidated cash flow statement of 2001, an amount of SEK 2,641m, referring to short-term loans in the sold Veneta Factoring, was included in cash flow from investments under the heading Divestment of operations. Note 27. Employees, Salaries, Remunerationssalaries, remunerations and Employer Contributions                           Average number of employees, by geographical area 2003   2002   2001       Europe     39,514       42,601       46,899   North America     21,169       20,117       21,294   Rest of the world     16,457       19,253       18,946                             Total     77,140       81,971       87,139                             employer contributions      In 2003,2004, the average number of employees was 77,140 (81,971)72,382 (77,140), of whom 51,240 (54,755)48,039 (51,240) were men and 25,900 (27,216) were24,343 (25,900) women. A detailed specification of the average number of employees by country has been submitted to the Swedish Patent andCompanies Registration Office and is available on request from AB Electrolux, Investor Relations and Financial Information. See also Electrolux website www.electrolux.com/ir F-37                                                   Salaries, other           2003           2002           2001 remuneration and employer   Salaries and   Employer   Salaries and   Employer   Salaries and   Employer contributions   remuneration   contributions   remunera-tion   contributions   remunera-tion   contributions Group total     17,154       5,605       19,408       6,323       20,330       6,483   (of which pension costs)             (683) 1)             (619) 1)             (503) 1)                                                   Average number of employees, by geographical area                               2004     2003     2002         Europe     35,623       39,514       42,601   North America     21,547       21,169       20,117   Rest of the world     15,212       16,457       19,253         Total     72,382       77,140       81,971         Salaries, other remuneration and employer contributions (SEKm)                                                       2004     2003     2002       Salaries and             Salaries and             Salaries and             remunera-     Employer     remunera-     Employer     remunera-     Employer       tion     contributions     tion     contributions     tion     contributions   Group total     17,014       5,642       17,154       5,605       19,408       6,323                                                     (of which pension costs)             (847) 1)             (907 ) 1)             (909 ) 1)       1). Of whichIncludes a net cost reduction of SEK 1m (19m)3 million in 2004, costs of SEK 1 million in 2003 and (22m) respectively refersSEK 19 million in 2002, referring to pension costs for the President and his predecessors. F-33 Salaries and remuneration for Board members, senior managers and other employees, by geographical area                                                       2004     2003     2002       Board                                         members and             Board members             Board members             senior     Other     and senior     Other     and senior     Other       managers     employees     managers     employees     managers     employees         Sweden     64       1,964       75       1,939       56       1,848   EU, excluding Sweden     127       7,157       129       7,721       156       8,737   Rest of Europe     16       571       35       655       37       692   North America     37       5,311       48       5,196       39       6,047   Latin America     17       323       19       271       18       328   Asia     25       368       24       232       31       371   Africa     —       33       —       30       —       23   Oceania     8       993       11       769       8       1,017                                                           Group total     294       16,720       341       16,813       345       19,063                                                           Salaries and remuneration   2003   2002   2001 for board members senior   Boards           Boards           Boards     managers and other employees,   and senior   Other   and senior   Other   and senior   Other by geographical area   managers   employees   managers   employees   managers   employees Sweden     75       1,939       56       1,848       30       1,924   EU, excluding Sweden     119       7,445       142       8,456       135       8,786   Rest of Europe     45       931       51       973       44       999   North America     48       5,196       39       6,047       55       6,451   Latin America     19       271       18       328       24       449   Asia     24       232       31       371       32       426   Africa     —       30       —       23       2       33   Oceania     11       769       8       1,017       5       917                                                     Group total     341       16,813       345       19,063       327       19,985                                                          Of the Board members and senior managers in the Group 216 were 395 men and 5824 women, of whom 1512 men and 67 women in the Parent Company. Employee absence due to illness                       Second half of 2003 Employee absence due to illness Employees in the All employees in   Parent Company Sweden Total absence due to illness,     8.0 %     6.6 % as a percentage of the total number of normal working hours of which 60 days or more     57.9 %     54.5 % Absence due to illness, by category1)                 women     10.9 %     9.8 % men     6.5 %     5.4 % 29 years or younger     5.5 %     4.6 % 30 — 49 years     8.7 %     7.2 % 50 years or older     9.1 %     7.7 %                                       Full year 2004     Second half 2003               All     Employees             Employees in the     employees     in Parent     All employees       Parent Company     in Sweden     Company     in Sweden   Total absence due to illness, as a percentage of total normal working hours     8.3 %     6.7 %     8.0 %     6.6 % of which 60 days or more     59.7 %     53.5 %     57.9 %     54.5 %                                   Absence due to illness, by category1)                                                                   Women     11.8 %     10.3 %     10.9 %     9.8 % Men     6.5 %     5.4 %     6.5 %     5.4 % 29 years or younger     5.1 %     4.5 %     5.5 %     4.6 % 30–49 years     9.5 %     7.4 %     8.7 %     7.2 % 50 years or older     8.4 %     7.1 %     9.1 %     7.7 % 1) % of total normal working hours within each category respectively.      According toIn accordance with the new regulations in the Swedish Annual Accounts Act effectivein effect as of July 1, 2003, absence due to illness for employees in the Parent Company and the Group’s employees in Sweden is F-38 reported in the table.table above. The Parent Company comprises the Group’s head office as well as a number of units and plants, and employs approximately half of the Group’s employees in Sweden. Remuneration to the Board of Directors, the President, and other members of Group Management Compensation to the Board of Directors      The Annual General Meeting (AGM) determines the total compensation to the Board of Directors for a period of one year until the next AGM. The Board allocates a portion of this compensation for committee work, and the rest is distributed exclusively to members who are not employed by the Group. Compensation is paid quarterly. Compensation paid in 2004 refers to 2/4 of the compensation authorized by the AGM in 2003, and 2/4 of the compensation authorized by the AGM in 2004. Total compensation paid in 2004 amounted to SEK 3,725,000, of which SEK 3,375,000 referred to ordinary compensation and SEK 350,000 to committee work. For distribution of compensation by Board member, see table below. Compensation to the Board members in 2004, ´000 SEK                                       Compensation             Ordinary     for committee     Total   Member of the Board   compensation     work     compensation         Rune Andersson, Chairman up to the AGM     500       —       500   Michael Treschow, Chairman as of the AGM     775       —       775   Jacob Wallenberg, Deputy Chairman up to the     175       —       175   Peggy Bruzelius, Deputy Chairman as of the AGM     350       150       500   Louis R. Hughes1)     350       75       425   Thomas Halvorsen     350       75       425   Barbara R. Thoralfsson     350       25       375   Karel Vuursteen     350       25       375   Aina Nilsson Ström     175       —       175   Hans Stråberg     —       —       —   Ulf Carlsson     —       —       —   Bert Gustafsson     —       —       —   Annika Ögren     —       —       —         Total     3,375       350       3,725         1) Louis R. Hughes left the Board of Directors on September 20, 2004. Remuneration Committee      The working procedures of the Board of Directors stipulate that remuneration to Group Management is proposed by a Remuneration Committee. The Committee comprises the Chairman of the Board and two additional Directors. As of the AGM in April, 2004, the Committee members were Michael Treschow (Chairman), Barbara R. Thoralfsson and Karel Vuursteen. In October 2004, Aina Nilsson Ström replaced Barbara R. Thoralfsson, who succeeded Louis R. Hughes in the Audit Committee.      The Remuneration Committee establishes principles for remuneration for the President and the other members of Group Management, and auditors Remuneration Committee      Remuneration for Group Management is proposedsubject to subsequent approval by the Board of Directors. Proposals submitted by the Remuneration Committee to the Board of Directors. The committee comprises of Rune Andersson, Chairman of the Board, Jacob Wallenberg, Deputy Chairman of the Board, and Hans Stråberg, President and CEO of Electrolux. The President is excluded from participation in the meetings and decision-making, with respect to total compensation for the President.      The Remuneration Committee is obliged to make proposals to the Board of Directors on compensation matters for the President and other members of Group Management includinginclude targets for variable compensation, the relationship between fixed and variable salary, changes in fixed or variable salary, the criteria to be applied in thefor assessment of variable salary, long-term incentives, pension terms and pension terms.other benefits. F-34 A minimum of two meetings is convened each year withand additional meetings scheduled asare held when needed. SixSeven meetings were held during the year. Compensation to the Board of Directors      In accordance with the decision by the Annual General Meeting, fees were paid to the Board of Directors amounting to SEK 3,750,000. SEK 1,000,000 was paid to the Chairman, SEK 350,000 was paid to the Deputy Chairman and to each of the other members who are not employed by the Group.      The Board decided that SEK 300,000 would be allocated for committee work. This amount has been distributed between the members of the Audit Committee with regard to their additional commitment and responsibility. SEK 150,000 was paid to Peggy Bruzelius, Chairperson, and SEK 75,000 each to Louis R. Hughes and Thomas Halvorsen. Fees to auditors      PricewaterhouseCoopers (PwC) are appointed auditors for the period until the 2006 Annual General Meeting. Fees in 2003, to PwC, which as of 2002 performs virtually all external auditing within the Group, amounted to SEK 45m (38m) for audits, and SEK 13m (10m) referring primarily to tax services for the Group. Fees to other audit firms amounted to SEK 3m (4m).2004. General principles for compensation within Electrolux      The overall principles for compensation within Electrolux are tied strongly to the position held, individual as well as team performance, and competitive compensation in the country of employment. F-39      The overall compensation at Electroluxpackage for higher-level management comprises fixed salary, variable salary in the form of a short-term incentive based on annual performance targets, long-term incentives, and benefits such as pensions and insurance.      Electrolux strives to offer fair and competitive total compensation with an emphasis on “pay for performance” and consequently, variable salary. Variable compensation thus represents a significant proportion of total compensation for higher-level management positions. When objectives are achieved, totalmanagement. Total compensation is favourable and when objectiveslower if targets are not the total compensation is lower. The financial driver for variable salary is value creation.achieved.      Through 2002, Electrolux employed diverse programs for variable salary.     In 2003, the Group introduced a new and more uniform systemprogram for variable salary for management and other key positions. The systemVariable salary is based on grading of positions through the Mercer International Position Evaluation System (IPE). Aa financial target for value creation as well as non-financial targets. Each job level is linked to a target and a stretch level for variable salary, and the program is capped.      In 2004, Electrolux introduced a new performance-based long-term incentive program that replaced the option program for less than 200 senior managers of variable compensation arethe Group. The performance share program is linked to targets for the IPE grade. According to the IPE grading, higher-level positions haveGroup’s value creation over a higher percentage of variable salary than lower positions. Total cash compensation, i.e., annual base salary plus variable salary, is evaluated when setting rates of pay.three-year period.      To apply the variable salary system within the entire Group it has been divided into three different structures; Group Staffs, North AmericaThe vesting and all other.      In the beginning of 2004, nearly allexercise rights of the previously existing variable salaryoption programs had been replaced by the new system. Individual transition plans are being completed and the new system implementationlaunched up till 2003 will be finished in the beginning of 2006.continue as scheduled. Compensation to the President and Group Management      The total compensation to the President and the other members of Group Management is comprised of fixed salary, variable salary, benefits, and long-term incentives. The general principles of compensation at Electrolux are closely observed with strong regard for the position held, competitive compensation in the country where located as well as individual performance. Variable salary for the President and members of Group Management is based on the principles applied within the Group, which reward improvement in value created. Variable salary for the President is based on value created for the Group and sector heads on the value created for their sectors. Group staff heads receive variable salary based on value created for the Group and performance objectives within their functions. The maximum variable salary as a percent of annual fixed salary is 110% for the President and no more than 100% of base salary for members of Group Management except one, which is limited to 150%. The Group’s long-term incentive program in 2003 is a stock option program. F-35 The following table shows the compensation to the President and other members of Group Management. Summary of compensation to Group Management                                                                                                                                                   Variable   Total   Value   Number   2004   2003     salary   remuneration   of   of options   Variable   Variable             paid   not   options   Granted       salary,   Annual   salary,   Value of       ’000 SEK, unless   Annual fixed   earned 2004,   Pension   Long-term   fixed   earned   Pension   options       otherwise stated   salary1)   paid 20052)   costs   incentive3)   Total   salary1)   2003, paid 2004   cost4)   granted5)   Total   President and CEO   7,708   4,246   3,683   2,400   18,037   7,152   288   3,894   1,620   12,954   Other members of Group Management6)   36,958   16,279     27,569 7)   10,800   91,606   37,248   11,807   21,783   8,100   78,938     Fixed   in 2003   Pension   including   granted   Beginning   during   End of         salary1)   for 2002   costs2)   options   in 20033)   of 20034)   the year   Exercised   2003 President and CEO   7,151,806   6,058,630   3,894,200   17,104,636   1,620,000   152,300   60,000   —   212,300   Other members of Group Management   37,248,309   27,540,616   21,782,700   86,571,625   8,100,000   874,400   300,000   -10,000   1,164,400   Total   44,400,115   33,599,246   25,676,900   103,676,261   9,720,000   1,026,700   360,000   -10,000   1,376,700     44,666   20,525   31,252   13,200   109,643   44,400   12,095   25,677   9,720   91,892         1) The amount includesIncluding vacation salary, paid vacation days and travel allowance.   2) The variable salary as estimated in early 2005, and may differ from the final amount. 3) Target value of Share Program 2004. 4) In addition to this amount, approximately SEK 604,500 has been recordedbooked as a contingent liability related to death and disability coverage for the President and CEO, and a total of approximately SEK 772,900 in total for the other members of Group Management.   3)5) The value is calculated with the Black-Scholes Options Valuation model at the date of grant with a volatility factor of 30% and dividend growth rate in line with the historical development;trend, resulting in SEK 27 per option. No reduction in value has been made for the absence of transferability and other restrictions inherent in employee stock option programs. The President and CEO received 60,000 options and members of Group Management 30,000 options each.   4)6) Refers to holdings in the beginning of the year by theIn 2004, other members of Group Management comprised 11 people up to October and 9 for the rest of the year. In 2003, other members of Group Management comprised 11 people. Salaries and other compensation to members of group management after leaving their function as a member of December 31, 2003.group management is not included. 7) During 2004, the supplementary pension plan for some of the Swedish members of Group Management was amended retroactively from 2002, resulting in an additional cost of SEK 5,800,000 in 2004. This was related to a change from a defined benefit to a defined contribution pension scheme. Terms of employment for the President      The compensation package for the President comprises fixed salary, variable salary based on annual targets, long-term incentive programs and other benefits such as pensions and insurance.      Base salary is revised annually per January 1. The annualized base salary for 2004, was SEK 7,600,000 (6,600,000), corresponding to an increase of 15.2% over 2003. Salary did not increase in 2003.      The variable salary is based on an annual target for value created within the Group. The variable salary is 70% of the annual based salary at target level, and capped at 110% at stretch level. Variable salary earned in 2004 was SEK 4,246,000 (288,000). F-40      The President participates in the Group’s long-term incentive programs. The long-term incentive programs comprise the new performance-based long-term share program introduced in 2004, as well as previous option programs. For more information on these programs, see below.      The notice period for the company is 12 months, and for the President 6 months. There is no agreement for special severance compensation.      The President is not eligible for fringe benefits such as a company car or housing. Pensions for the President and members of Group Management      The President and other Swedish members of Group Management areis covered by the ITP plan. With one exception, all membersGroup’s pension policy. Retirement age for the President is 60. In addition to the retirement contribution, Electrolux provides disability and survivor benefits.      The retirement benefit is payable for life or a shorter period of Group Management are membersnot less than 5 years. The President determines the payment period at the time of theretirement.      The President is covered by an alternative ITPITP-plan that is a defined contribution pension plan.plan in which the contribution increases with age. In addition, he is covered by two supplementary defined contribution plans.      The contribution to the alternative ITPannual cost for retirement is an amount between 20 andapproximately 35% of pensionable salary between 7.5 and 30 base amounts, which increases to higher level, as participants grow older.      The President and other Swedish Group Management are also covered by two supplemental defined contribution retirement plans. One plan has a contribution of 15% of the pensionable salary for the President, and 10% of the pensionable salaries of other Swedish Group Management members. The second plan is an extension of the alternative ITP, a flat contribution of 20% on pensionable salary above 30 base amounts. With one exception, the retirement age is 60 for the President and other Swedish members of Group Management.      The pensionablesalary. Pensionable salary is calculated as the current fixed salary plus the average actual variable salary for the last three years. Pension costs in 2004 amount to SEK 3,683,000 (3,894,000).      The company will finalize outstanding payments to the Alternative ITP-plan and one of the supplementary plans, provided that the President retains his position until age 60.      In addition to the retirement contribution, Electrolux provides disability benefits equal to 70% of pensionable salary, including credit for other disability benefits, plus survivor benefits maximized to 250 (150) Swedish base amounts as defined by the Swedish National Insurance Act. The survivor benefit is payable over a minimum five-year period.      The capital value of pension commitments for the current President, prior Presidents and survivors is SEK 122 million (127 million). In addition there are commitments regarding death and disability benefit of SEK 3 million (3 million). Compensation for other members of Group Management      Like the President, other members of Group Management receive a compensation package that comprises fixed salary, variable salary based on annual targets, long-term incentive programs and other benefits such as pensions and insurance.      Base salary is revised annually per January 1. The average base salary increase in 2004 was 5.7%, and 11.0%, with promotions included.      Variable salary for sector heads in 2004 is based on both financial and non-financial targets. The financial targets comprise the value created on sector and Group level. The non-financial target is focused on product innovation.      The target for variable salary for European-based sector heads is 45-50% of annual base salary, maximized to 90-100%. Corresponding figures for the U.S.-based sector head are 100% and 150%.      Group staff heads receive variable salary based on value created for the Group and on performance objectives within their functions. The target variable salary is 30% of annual base salary, maximized to 55%.      The members of Group Management participate in the Group’s long-term incentive programs. These programs comprise the new performance-based long-term share program introduced in 2004 as well as previous option programs. For more information on these programs, see below. F-41      There is no agreement for special severance compensation.      The Swedish members of Group Management are not eligible for any major fringe benefits such as company cars or housing. For members of Group Management employed outside of Sweden, varying fringe benefits and conditions may apply, depending upon the country of employment. Pensions for other members of Group Management      The members of Group Management are covered by the Group’s pension policy.      The retirement age is 65 for one Swedish member of Group Management, and 60 for the others. Swedish members of Group Management are covered by the ITP-plan or the Alternative ITP-plan, as well as a supplementary plan.      The retirement benefit is payable for life or a shorter period of not less than 5 years. The participant determines the payment period at the time of retirement.      In addition to the retirement contribution, Electrolux provides disability benefits at a level of 70% of pensionable salary including credit for other disability benefits, plus survivor benefits equal to a sum of 150 Swedish base amounts payable over a minimum five-year period.      One member of Group Management has chosen to retain a defined benefit pension plan on top of the ITP plan. The retirement age is 65 and the benefits are payable for life. These benefits amount to the equivalent of 32.5% of the portion of salary corresponding to 20—30 base amounts as defined by the Swedish National Insurance Act, 50% of the portion corresponding to 30—100 base amounts, and 32.5% of the portion exceeding 100 base amounts.      The capital value of pension commitments for the current President, prior Presidents and survivors is SEK 130 m (137m).      There is no agreement for special severance pay for members of Group Management.      For members of Group Management employed outside of Sweden, varying pension terms and conditions apply, depending upon the country of employment. The earliest retirement age for a full pension is 60.62. F-36      The Swedish members of Group Management are covered by an alternative ITP plan that is a defined contribution plan where the contribution increases with age.      The contribution is between 20% and 35% of pensionable salary, between 7.5 and 30 base amounts. The pensionable salary is calculated as the current fixed salary, plus the average variable salary for the last three years.      The Swedish members are also covered by a supplementary defined contribution plan. In 2004, the plan was revised retroactively from 2002. Following the revision, the premiums amount to 35% of the pensionable salary. In addition, four members are covered by individual additional contributions as a consequence of the switch of plans in 2001.      In addition to the retirement contribution, Electrolux provides disability benefits equal to 70% of pensionable salary including credit for other disability benefits, plus survivor benefits maximized to 250 (150) Swedish base amounts. The survivor benefit is payable over a minimum five-year period. Option Programs     One Swedish member of Group Management has chosen to retain a defined benefit pension plan on top of the ITP-plan. The retirement age for this member is 65 and the benefits are payable for life.      These benefits equal 32.5% of the portion of pensionable salary corresponding to 20–30 base amounts as defined by the Swedish National Insurance Act, 50% of the portion corresponding to 30–100 base amounts, and 32.5% of the portion exceeding 100 base amounts.      In addition, Electrolux provides disability and survivor benefits. 1998—Long-term incentive programs      Over the years, Electrolux has implemented several long-term incentive programs (LTI) for senior managers. These programs are intended to attract, retain and motivate the participating managers by providing long-term incentives through benefits linked to the company’s share price. They have been designed to align management incentives with shareholder interests. A detailed presentation of the different programs is given below. 1998, 1999 and 2000 option programs      In 1998, an annual program for employee stock options was introduced for approximately 100 senior managers. Options were allotted on the basis of value created according to the Group’s model for value creation. If no value was created, no options were issued. The options can be used to purchase Electrolux B-shares at a strike price whichthat is 15% higher than the average closing price of the Electrolux B-shares on the Stockholm Stock Exchange during a limited period prior to allotment. The options were granted free of consideration to participants.consideration. Annual F-42 programs with the same conditions were also launched in 1999 and 2000. The 1998 program expired on February 25, 2004. 2001, 2002 and 2003 option programs      In 2001, a new program for employee stock options was introduced for less than 200 senior managers. The options can be used to purchase Electrolux B-shares at a strike price whichthat is 10% above the average closing price of the Electrolux B-shares on the Stockholm Stock Exchange during a limited period prior to allotment. The options were granted free of consideration to participants. Theconsideration. Annual programs with the same conditions were also launched in 2002 and 2003 option program are based on the same parameters as the 2001 program.2003. SummaryRecalculation of option programs 1998—2003exercise price 2004      In light of the redemption of shares in Electrolux in 2004, option exercise prices were recalculated in accordance with standard terms that are generally applied in Sweden for options and similar instruments. These terms were included in the option agreements. Options provided to Group Management 1999-2003                                                                       Total number of outstanding options                                         Number of                         Beginning of           options in   Strike price,   Expiration   Vesting Program   Grant date   2003   End of 2003   each lot1)   SEK   date   years 1998   Feb. 25, 1999     556,500       455,000       10,600       170     Feb. 25, 2004     1   1999   Feb. 25, 2000     1,068,800       1,002,000       16,700       216     Feb. 25, 2005     1   2000   Feb. 26, 2001     524,300       472,300       6,500       170     Feb. 26, 2006     1   2001   May 10, 2001     2,475,000       2,365,000       15,000       177     May 10, 2008     32)   2002   May 6, 2002     2,865,000       2,805,000       15,000       191     May 6, 2009     32)   2003   May 8, 2003     —       2,745,000       15,000       164     May 8, 2010     32)                                                                                           Number of options       Beginning of                     End of       20041)     Cancelled     Exercised     2004         President and CEO     212,300       -15,900       —       196,400   Other members of Group Management     1,001,400       -53,600       —       947,800         Total     1,213,700       -69,500       —       1,144,200         1) Refers to holdings at the beginning of the year by members of Group Management as of December 31, 2004. Option programs 1998–2003                                                           Total number of outstanding options                                     Number of                     Beginning of           options   Strike price,   Expiration     Program   Grant date   2004   End of 2004   per lot1)   SEK2)   date   Vesting, years   1998   Feb. 25, 1999     455,000       -       10,600       170     Feb. 25, 2004     1    1999   Feb. 25, 2000     1,002,000       885,100       16,700       212.70 (216)   Feb. 25, 2005     1    2000   Feb. 26, 2001     472,300       426,800       6,500       167.40 (170)   Feb. 26, 2006     1    2001   May 10, 2001     2,365,000       2,215,000       15,000       174.30 (177)   May 10, 2008    33) 2002   May 6, 2002     2,805,000       2,670,000       15,000       188.10 (191)   May 6, 2009     33) 2003   May 8, 2003     2,700,000       2,670,000       15,000       161.50 (164)   May 8, 2010     33)       1) The President and CEO was granted 4 lots, Group Management members 2 lots and all other senior managers 1 lot.   2) Strike prices were recalculated in 2004 in light of the redemption of shares (original prices in parentheses). 3) ForOf the 2001, 2002 and 2003 options, one third vests after 12 months, one third after 24 months and the final one third after 36 months. Change in number of options per program                                                                 Program   Number of options 2003   Number of options 2004                                                                 Jan. 1,   Dec. 31,   Dec. 31,     Number of   Number of       2003   Granted   Exercised   Cancelled1)   2003   Exercised   Cancelled1)   2004     Jan. 1,   options 20021)   Dec. 31,   options 2003   Dec. 31,     Program   2002   Granted   Exercised   Cancelled2)   2002   Granted   Exercised   Cancelled2)   2003 1998   694,300   —   —   137,800   556,500   —   80,300   21,200   455,000     556,500   —   80,300   21,200   455,000   10,600   444,400   —   1999   1,285,900   —   217,100   1,068,800   —   —   66,800   1,002,000     1,068,800   —   —   66,800   1,002,000   —   116,900   885,100   2000   595,800   —   —   71,500   524,300   —   13,000   39,000   472,300     524,300   —   13,000   39,000   472,300   —   45,500   426,800   2001   2,490,000   —   —   15,000   2,475,000   —   20,000   90,000   2,365,000     2,475,000   —   20,000   90,000   2,365,000   —   150,000   2,215,000   2002   —   2,865,000   —   —   2,865,000   —   —   60,000   2,805,000     2,865,000   —   —   60,000   2,805,000   —   135,000   2,670,000   2003   —   —   —   —   —   2,745,000   —   —   2,745,000     —   2,745,000   —   45,000   2,700,000   —   30,000   2,670,000   1) No options were exercised during 2002. 2) Options are cancelled if not exercised, which may bee.g., due to expiration at the end of the term of the options or before their term of expiration, normally because of termination of employment. Cancellation is governed by the provisions of the option program. Synthetic options 2000      TheIn 2000, the Board granted Wolfgang König, Head of White GoodsMajor Appliances Europe until November 8, 2004, 118,400 synthetic employee stock options with the right to receive a cash amount for each option when exercised,exercised. This amount was calculated as the difference between the current share price and the strike price of SEK 147.145.70 (148). The options may be exercised until July 1, 2006.November 8, 2005. The options have beenwere allotted without F-43 consideration and as compensation for lost options with his former F-37 employer immediately before joining the Electrolux Group. employer. This program is hedged with an equity swap. The annual cost is SEK 0.7m.0.6 million. Hedging arrangementsPerformance Share Program 2004      The Annual General Meeting 2004 approved a new annual long-term incentive program.      The program is based on value-creation targets for the stock option programsGroup that are established by the Board of Directors, and involves an allocation of shares if these targets are achieved or exceeded after a three-year period. The program comprises B-shares.      The program is in line with the Group’s principles for remuneration based on performance, and is an integral part of the total compensation for Group Management and other senior managers. The program benefits the company’s shareholders and also facilitates recruitment and retention of competent employees.      Allocation of shares under the program is determined on the basis of three levels of value creation, calculated according to the Group’s previously adopted definition of this concept. The three levels are “entry”, “target” and “stretch”. “Entry” is the minimum level that must be reached to enable allocation. “Stretch” is the maximum level for allocation and may not be exceeded regardless of the value created during the period. The number of shares allocated at “stretch” is 50% greater than at “target”. The shares will be allocated after the three-year period free of charge. Participants are permitted to sell the allocated shares to cover personal income tax, but the remaining shares must be held for two years.      The program covers almost 200 senior managers and key employees in more than 20 countries. Participants in the program comprise five groups, i.e., the President, other members of Group Management, and three groups of other senior managers and key employees. Number of shares distributed per individual performance target                       Target number of     Target value in       B-shares1)     SEK2)   President and CEO     18,228       2,400,000   Other members of Group                 Management     9,114       1,200,000   Other senior managers, cat. C     6,836       900,000   Other senior managers, cat. B     4,557       600,000   Other senior managers, cat. A     3,418       450,000   1) Each target value is subsequently converted into a number of shares. The number of shares is based on a share price of SEK 152.90, calculated as the average closing price of the Electrolux B-share on the Stockholm Stock Exchange during a period of ten trading days before the day participants were invited to participate in the program, less the present value of estimated dividend payments for the period until shares are allotted. 2) Total target value for all participants is SEK 111 million. It was decided at the Annual General Meeting that the company’s obligations under the program should be secured by repurchased shares.      The discounted value of the targeted number of shares in the 2004 performance share program as of the grant date was SEK 111 million.      If the target level is attained the total cost of the program over a three-year period is estimated at SEK 150 million, including costs for employer contributions and the financing cost for the repurchased shares. If the maximum level (stretch) is attained, the cost is estimated at a maximum of SEK 240 million. If the entry level for the program is not reached, the minimum cost will amount to SEK 17 million, i.e., the financing cost for the repurchased shares. The distribution of repurchased shares under this program will result in an estimated maximum increase of 0.48% in the number of outstanding shares. Repurchased shares for the LTI-programs      The company uses repurchased Electrolux B-shares in order to meet the company’s obligations under the stock option and share programs. The shares will be sold to option holders who wish to exercise their rightrights under the F-44 option agreement(s). and if performance targets are met will be distributed to share-program participants. Electrolux will alsointends to sell additional shares on the market in connection with the exercise of options or distribution of shares under the share program in order to cover the cost of employer contributions. Between 2000 and 2003,In 2004, the Annual General Meeting approved the sale of 12,839,1001,313,010 shares to cover the employer contributions related to the LTI-programs delivered in 1999-2003. The estimated financing costs for this purpose. hedging through repurchased shares was SEK 76m, calculated on an annual basis. Assuming that all outstanding stock options allotted up to and including 2003 are exercised and that the targeted number of shares in the performance share program are distributed, a sale of previously repurchased shares will result in a dilutionan increase of 3.5%.3.64% in the number of outstanding shares. This includes the sale of shares to cover employer contributions in connection with exercise.employee contributions. Accounting principles and cost of options      The Group accounts for the employer contributions that are expected to be paid when the options are exercised. The provision for outstanding options is periodically revalued. The total provision as per December 31, 2003, for all option programs was SEK 120m.      The option programs are settled through repurchased shares. Such repurchase increases the financial expenses of the Group with approximately SEK 76m annually. When exercised the Group sells repurchased shares, which increases the Group’s equity without an effect on the profit and loss statement.      The Black-Scholes value of the 2003 option program at grant date was SEK 74m. The estimated financing costs for the hedging through repurchased shares was SEK 22m calculated on an annual basis. Long-term incentive program 2004      The Annual General Meeting in 2004 decided on a new annual long-term incentive program for 2004. The program is based on goals approved by the Board for the value creation within the Group over a three-year period. It supports the Electrolux principles of “pay-for-performance” and is an integral part of the total compensation plan for Electrolux management.      Depending on the outcome of value creation, the program would distribute a variable number of Electrolux B-shares, up to 1,500,000, to fewer than 200 senior managers in more than 20 countries. The defined levels for value creation include a minimum level which must be exceeded in order to enable distribution of shares, as well as a maximum level. The shares will be distributed at the end of the three-year performance period, and managers will be required to holdor the shares for a period of two years.      Senior managers havedistributed. A provision has been grouped on five levels, i.e., the President and CEO, Group Management and three levelsmade for other managers. The Board will approve the value of the program for each of these five levels.synthetic options granted to Wolfgang Köng in 2000. The approved value determines the number of shares to be distributed, on the basis of the average trading priceoptions was calculated according to the Black-Scholes model, and the provision covers related employer contributions. The provision is revalued periodically. Starting in 2005, Electrolux will apply the IFRS 2 rules for Sharebased Payment. Note 28. Fees to auditors (SEK million) Fees to auditors PricewaterhouseCoopers (PwC) are appointed auditors for the Electrolux B-share, adjusted forperiod until the estimated net present value of dividends for the three-year period.2006 Annual General Meeting.                               2004     2003     2002         PwC                         Audit fees1)     46       45       38   Audit-related fees2)     3       4       1   Tax fees3)     10       9       9   Other fees     —       —       —         Total fees to PwC     59       58       48                                   Audit fees to other audit firms     2       3       4         Total fees to auditors     61       61       52              The Company’s obligations under the program, including employer contribution, shall be secured by repurchased shares. 1) Audit fees consist of fees billed for the annual audit services engagement and other audit services, which are those services that only the external auditor reasonably can provide, and include the Company audit; statutory audits; comfort letters and consents; attest services; and assistance with and review of documents filed with the SEC. 2) Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements or that are traditionally performed by the external auditor, and include consultations concerning financial accounting and reporting standards; internal control reviews and employee benefit plan audits. 3) Tax fees include fees billed for tax compliance services, including the preparation of original and amended tax returns and claims for refund; tax consultations, tax advice related to mergers and acquisitions, transfer pricing, and requests for rulings or technical advice from taxing authorities; tax planning services; and expatriate tax planning and services.      The total cost of the program over a three-year period is estimated at SEK 150m, including costs for employer contributions and the financing cost for the repurchased shares. It is estimated that the cost will not exceed SEK 240m. The minimum cost, if no shares are distributed, will amount to SEK 17m, i.e., the financing cost for the repurchased shares.      The distribution of repurchased shares under this program would result in an estimated maximum dilution of 0.38%, measured as the maximum increase in number of outstanding shares. F-38F-45 Note 28.29. Shares and Participationsparticipations                               Book value, equity Associated companies and joint ventures   Holding, %   method, SEKm Eureka Forbes Ltd, India     40.0       74   Atlas Eléctrica, S.A., Costa Rica     18.4       41   Nordwaggon AB, Sweden     50.0       37   Sidème S.A., France     39.0       16   Viking Financial Services, USA     50.0       9   Diamant Boart S.A., Argentina     46.7       4   A/O Khimki Husqvarna, Russia     50.0       3   Diamant Boart Inc., The Philippines     20.0       1   e2 Home AB, Sweden     50.0       0   Manson Tools AB, Sweden     49.0       0   Saudi Refrigerators Manufacturing Company Ltd, Saudi-Arabia     49.0       0                                   185   Associated companies and joint ventures                               Book value,               equity               method, SEK       Holding, %     million         Eureka Forbes Ltd, India     40.0       77   Atlas Eléctrica, S.A., Costa Rica     18.9       46   Nordwaggon AB, Sweden     50.0       37   Sidème S.A., France     39.3       15   Viking Financial Services, USA     50.0       13   Diamant Boart S.A., Argentina     46.7       4   A/O Khimki Husqvarna, Russia     50.0       2   Diamant Boart Inc., The Philippines     20.0       1   Manson Tools AB, Sweden     49.0       1   e2 Home AB, Sweden     50.0       0                       196        Electrolux does not have unlimited liability for any of these companies. F-46                       Holding, %   Book value, SEKm Other companies Veneta Factoring S.p.A., Italy     10.0       20   Business Partners B.V., The Netherlands     0.7       11   Philco Air Conditioning, China     5.0       7   Electrolux Financial S.A., Spain     10.0       6   Other             11                                   55                                 Book value,   Other companies   Holding, %     SEK million         Veneta Factoring S.p.A., Italy     10.0       20   Philco Air Conditioning, China     5.0       6   Financeria Veneta S.A., Spain     10.0       6   Banca Popolare Friuladria S.p.A., Italy     0.0       3   Business Partners B.V., The Netherlands     0.7       3   Other             8                       46             Subsidiaries       Holding, % Major Group companies:companies         Australia   Electrolux Home Products Pty. Ltd   100 Austria   Electrolux Hausgeräte G.m.b.H.   100   Electrolux Austria G.m.b.H.   100 Belgium   Electrolux Home Products Corp. N.V.   100   Electrolux Belgium N.V.   100   Diamant Boart International S.A.   100 Brazil   Electrolux do Brasil S.A.   98 100 Canada   Electrolux Canada Corp.   100 China   Electrolux Home Appliances (Hangzhou) Co. Ltd   100   Electrolux Zhongyi (Changsha) Refrigerators(China) Home Appliance Co. Ltd   100   Zanussi ZhongyiElectrolux (Changsha) RefrigeratorsAppliance Co. Ltd   100 F-39   Holding, % Denmark   Electrolux Home Products Denmark A/S   100 Finland   Oy Electrolux Ab Electrolux Kotitalouskoneet   100   Oy Electrolux Kotitalouskoneet Ab 100 France   Electrolux France S.A.SAS   100   Electrolux Home Products France S.A.SAS   100 Electrolux Professionnel SAS     Electrolux Professional S.A.100   100 Germany   Electrolux Deutschland GmbH   100   AEG Hausgeräte GmbH   100 Hungary   Electrolux Lehel Hütögépgyár Kft   100 India   Electrolux Kelvinator Ltd   76 90 Italy   Electrolux Zanussi Italia S.p.A.   100   Electrolux Professional S.p.A.   100   Electrolux Italia S.p.A.   100   Electrolux Home Products Italy S.P.A.S.p.A.   100 Luxembourg   Electrolux Luxembourg S.à r.l.   100 Mexico   Electrolux de Mexico, S.A. de CV   100 The Netherlands   Electrolux Associated Company (Nederland) B.V.   100   Electrolux Holding B.V.   100   Electrolux Home Products (Nederland) B.V.   100 Norway   Electrolux Home Products NorgeNorway AS   100 Spain   Electrolux España S.A.   100   Electrolux Home Products España S.A.   100   Electrolux Home Products Operations España 100 F-47 Subsidiaries Holding, % S.L.   100 Sweden   Husqvarna AB   100   Electrolux Laundry Systems Sweden AB   100 Electrolux HemProdukter AB     Electrolux Hemprodukter AB100   100   Electrolux Professional AB   100   Electrolux Floor Care and Light Appliances AB   100 Switzerland   Electrolux Holding AG   100   A+T Hausgeräte AG   100 United Kingdom   Electrolux Plc   100   Electrolux Outdoor Products Ltd   100   Electrolux Professional Ltd   100 USA   Electrolux Home Products Inc.   100   Electrolux North America Inc.   100   Electrolux Professional Inc.   100   Electrolux Professional Outdoor Products Inc.   100      A detailed specification of Group companies has been submitted to the Swedish Patent andCompanies Registration Office and is available on request from AB Electrolux, Investor Relations and Financial Information. Note 29. US30. U.S. GAAP Informationinformation      The consolidated financial statements have been prepared in accordance with Swedish accounting standards (Swedish GAAP), which differ in certain significant respects from accounting principles generally accepted in the United States of America (US(U.S. GAAP). Following is a description of those differences that have a significant effect on net income and shareholders’ equity. The Group also submits an annual report on Form 20-F to the U.S. Securities and Exchange Commission (SEC). Acquisitions      According to Swedish accounting standards, prior to 1996, the tax benefit arising from realized pre-acquisition loss carry-forwards of an acquired subsidiary could be recognized in earnings as a reduction of F-40 current tax expenses when utilized. Under USU.S. GAAP, the benefits arising from such loss carry-forwards are required to be recorded as a component of purchase accounting, usually as a reduction of goodwill. From 1996, these differences no longer exist. Up to 2001, acquisition provisions could be established under Swedish accounting standards for restructuring costs related to other subsidiaries affected by the acquisition. These provisions are reversed to goodwill under USU.S. GAAP. From 2001, these differences no longer exist. Goodwill and other intangible assets      Under Swedish GAAP, all intangible assets including goodwill must be amortized over the expected useful life of the asset. Assigning indefinite useful life is not permitted. Amortization expenses on goodwill and indefinite-lived intangible assets under US GAAP for the year ended December 31, 2001, was SEK -222 m.      According to USthe U.S. accounting standard SFAS 142, “Goodwill and Other Intangible Assets”, applicable as from January 1, 2002, acquisition goodwill and other intangible assets that have indefinite useful lives are not amortized, but are instead tested for impairment at least annually at a reporting unit level. Consequently, amortization of goodwill recorded under Swedish GAAP has been reversed for USU.S. GAAP purposes. Amortization has also been reversed for intangible assets recognized under Swedish GAAP that have been assigned indefinite lives under SFAS 142, such as the acquisition of the right to use the Electrolux trademark in North America. The goodwill and the intangible assets with assigned indefinite lives have been tested for impairment in accordance with the methods prescribed in SFAS 142. Prior to the adoption of SFAS 142, the Group applied the discounted approach under APB 17 in order to test these assets for impairment. No impairment charges were recorded as a result of annual tests performed in December, 2003.2004.      Under Swedish GAAP, intangible assets acquired in a business combination can be recorded separately from goodwill only if they, based on a control-oriented framework, meet the definition and recognition criteria for an intangible asset. SFAS 141 requires recognition of identifiable intangible assets based on separability and F-48 contractually related criteria. The purchase price allocation for Diamant Boart, acquired 2002, was finalized during 2003 and intangible assets were recognized in compliance with both Swedish GAAP and USU.S. GAAP. No major acquisitions were made during 2004. Product development costs      Prior to 2002, Swedish GAAP allowed capitalization of both research and development costs; however, the majority of Swedish corporations, including Electrolux, did not capitalize such costs. Beginning 2002, product development costs associated with the creation of intangible assets should be capitalized under Swedish GAAP if the following can be demonstrated: 1. 1)   the technical feasibility of completing the intangible asset,   2. 2)   the intention to complete it,   3. 3)   the ability to use or sell the intangible asset,   4. 4)   how the asset will generate future economic benefits, and   5. 5)   the ability to measure reliably the expenditure attributable to the intangible asset during the development.      USU.S. GAAP requires that research and development costs be expensed as incurred, except for certain costs associated with the development of software, as discussed below. Software development      Prior to 2002, all costs related to the development of software for internal use were generally expensed as incurred under Swedish GAAP. Under USU.S. GAAP, direct internal and external costs incurred during the application development stage should be capitalized, whereas, internal and external costs incurred during the preliminary project stage and the post-implementation stage should be expensed as incurred. As from 2002, Swedish GAAP is in all material aspects in line with USU.S. GAAP. Restructuring and other provisions      Up until December 31, 2002, the recognition of restructuring cost under USU.S. GAAP, as specified in EITF 94-3, was deferred until a commitment date was established. This was usually the date on which management, having appropriate level of authority, committed the Group to the restructuring plan, identified all significant actions, including the method of disposition and the expected date of completion, and, in the case of employee terminations, specified the severance arrangements and communicated them to employees. Prior to 2002, the guidance under Swedish GAAP was not as prescriptive and, in certain circumstances, allowed for F-41 earlier recognition. Additionally, USU.S. GAAP was more prescriptive than Swedish GAAP regarding the types of costs which were allowed to be classified as restructuring cost, specifically those which were a direct result of the restructuring and which were not associated with the ongoing activities of the Group. As from 2002, Swedish GAAP was in all material aspects in line with EITF 94-3.      In January 2003, SFAS 146, “Accounting for costs Associated with Exit or Disposal Activities”, was adopted under USU.S. GAAP. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred rather than at the date of an entity’s commitment to an exit plan.plan, further the standard restricts what type of costs that can be included in the restructuring provision. The timing of recognition and related measurement of liability for one-time termination benefitsrestructuring costs in relation to employees who are to be involuntarily terminated depends on whether the employees are required to render service until they are terminated2004 have been adjusted in order to receive the termination benefits and, if so, whether employees will be retained to render service beyond a minimum retention period.accordance with SFAS 146.      The SFAS 146 nullifies EITF 94-3 and is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. All restructuring activities initiated prior to January 1, 2003, continue to be accounted for in accordance with EITF 94-3 under USU.S. GAAP. In 2003, the Group did not have any restructuring charges, however, following the new US GAAP standard certain differences are likely to exist in the future. Pensions and other post-employment benefits      AccordingAs of January 1, 2004, accounting for pensions and other post-service benefits is adopted in accordance with RR 29 ”Employee Benefits” which in all material aspects is similar to SwedishIAS 19, “Employee Benefits”. Prior to 2004, these benefits were recognized according to local laws and accounting practice, defined benefit pension obligations are recordedprinciples in the consolidated financial statements on the basis ofeach country. The American accounting standards valid in the countries where the sponsoring companies operate. US accounting standardsprinciples, U.S. GAAP, are defined in SFAS 87, “Employers’”Employers’ Accounting for Pensions” which is more prescriptive, particularlyand SFAS 106, ”Employers Accounting for Post-retirement Benefits Other than Pensions”. A part of the prior differences, in particular the use of actuarial assumptions such asregarding future increase in salary, increases, discount ratesmethods and inflation. Additionally, SFAS 87 requires that a specific actuarial method (the projected unit credit method) be used. Certain pension commitments in Sweden are administered through a multi-employer plan for Swedish white-collar employees. In accordance with Swedish GAAP, Electrolux recognized income and recorded an asset for its allocable portion of a surplus, not utilized in 2000. Under US GAAP, the entire amount was not allowed to be recognized until it was received or available for utilization. In 2002, Electrolux utilized the remaining allocable surplus,inflation and the amountrecognition of the net provisions in the balance sheet have been reduced through the adoption of RR 29. Consequently, the transition adjustment under RR 29 has offset a major part of the previous F-49 U.S. GAAP differences and thus reduced the U.S. GAAP reconciliation adjustment. The remaining material differences between RR 29 and U.S. GAAP which affect the Group are: •   Different dates of implementation cause significant differences in accumulated actuarial gains and losses. SFAS 87 was implemented in 1987 for U.S. plans and in 1989 for non-U.S. plans. SFAS 106 was implemented in 1993. •   Under RR 29, the estimated return on plan assets is based on actual market values while U.S. GAAP allows market-related values as the basis for estimation of the return on assets. •   Under RR 29 the past service cost and expenses resulting from plan amendments are recognized immediately if vested or amortized until vested. Under U.S. GAAP prior service cost is generally recognized over the average remaining service life of the plan participants. •   Under U.S. GAAP an additional minimum liability should be recognized if the accumulated benefit obligation exceeds the sum of the fair value of plan assets and unrecognized prior service costs. A minimum liability is not required under RR 29.      In 2004, the U.S. subsidiaries have been affected by The Medicare prescription Drug, Improvement and Modernization Act of 2003. This change in legislation causes a reduction in the companies’ obligation under FAS 106. This reduction has been recognized in current earnings in accordance with US GAAP.treated as an actuarial gain. Derivatives and Hedginghedging      Effective January 1, 2001, the Group adopted SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, and SFAS 138, “Accounting for Certain Derivative Instruments and Certain Hedging Transactions, an Amendment to FASB Statement 133”, for USU.S. GAAP reporting purposes. These statements establish accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet at fair value as either assets or liabilities, and requires the Group to designate, document and assess the effectiveness of a hedge to qualify for hedge accounting treatment. Under Swedish GAAP, unrealized gains and losses on hedging instruments used to hedge future cash flows are deferred and recognized in the same period that the hedged transaction is recognized.      In accordance with the transition provisions of SFAS 133, the Group recorded a net transition loss of approximately SEK 24m24 million in accumulated other comprehensive income and SEK 4m4 million net loss in earnings to recognize the fair value of derivative and hedging instruments. Substantially, all of the transition adjustment recognized in accumulated other comprehensive income has been recognized in earnings as of December 31, 2001. The subsequent adjustments from Swedish GAAP to USU.S. GAAP represent marked-to-market effects and recognition of items not qualifying for hedge accounting treatment under USU.S. GAAP.      Prior to the adoption of SFAS 133 and SFAS 138, management decided not to designate any derivative instruments as hedges for USU.S. GAAP reporting purposes except for certain instruments used to hedge the net investments in foreign operations. Consequently, derivatives used for the hedging of future cash flows, fair valuefair-value hedges and trading purposes are marked-to-market in accordance with USU.S. GAAP. This increases the volatility of the income statement under USU.S. GAAP as a result of the deviation in accounting standards between Sweden and the United States. Securities      According to Swedish accounting standards, debt and equity securities held for trading purposes are reported at the lower of cost or market. Financial assets and other investments, that are to be held to maturity, are valued at acquisition cost. In accordance with USU.S. GAAP and SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities”,Securities,” holdings are classified, according to management’s intention, as F-42 either “held-to-maturity,” “trading,” or “available for sale.” Debt securities classified as “held-to-maturity” are reported at amortized cost. Trading securities are recorded at fair value, with unrealized gains and losses included in current earnings. Debt and marketable equity securities that are classified as available for sale are recorded at fair value, with unrealized gains and losses reported as a separate component of shareholders’ equity. Electrolux classifies its debt and equity securities as “held for trading” and “available for sale”. Debt securities are classified as “held-to-maturity”. F-50 Discontinued operations      Under Swedish GAAP, the divestment of a segment or a major part of a segment requires segregating information about the divested operations from the continuing operations. None of the divestments made by Electrolux during the three years ended 20032004 were of that magnitude.      Under USU.S. GAAP, the definition of a discontinued operation changed in 2002 with the adoption of SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. Under SFAS 144, each of the following 2003 and 2002 divestments are accounted for as discontinued operations: Vestfrost, 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. Accordingly, the results of operations for 2003 and 2002 relating to these divestments, including any loss for write-down to fair value less cost to sell, and any gain or loss on disposal are required to be reclassified as discontinued operations. Additionally, USU.S. GAAP also requires the results of operations of these divestments for prior years to be reclassified from continuing operations to discontinued operations. The following table sets forth the amounts reflected as discontinued operations in 2003 and 2002, and the amounts reclassified from continuing to discontinued operations, with respect to these divestments, under USU.S. GAAP. No major divestments were made during 2004.                                             Years ended December 31,   Years ended December 31,     2003   2002   2001   2004   2003   2002     (SEKm)   SEK million)   Net sales   2,436   4,828   7,309     —   2,436   4,828   Operating income   62   1,396   -380     —   62   1,396   Net income   2   1,088   -301     —   2   1,088   Revaluation of assets      In accordance with Swedish GAAP, Electrolux has written up certain land and buildings to values in excess of the acquisition cost. Such revaluation is not permitted in accordance with USU.S. GAAP. Stock-based Compensationcompensation      Electrolux has several compensatory employee stock option programs, which are offered to senior managers. As a consequence of the decision taken by the Annual General Meeting to use treasury shares when the options are exercised, the Group has in 2002 dissolved the liability that had previously been recognized for Swedish GAAP purposes. For USU.S. GAAP purposes, Electrolux records a liability in respect of accrued compensation for its variable plans. According to Swedish accounting practice, employer’semployers shall record provisions for related social fees at the time the options are granted. USU.S. GAAP provides that the employer payroll taxes due upon exercise of stock options must be recognized as an expense at the exercise date of the option. Guarantees      In November 2002, the FASB issued FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. The initial recognition and measurement provisions of FIN 45 are effective for guarantees issued or modified after December 31, 2002. Swedish GAAP does not require recognition of the fair value of a guarantee. There was no material impact on the Group’s consolidated financial statements as a result of adopting FIN 45. Adjustments not affecting equity or income Receivables sold with recourse      Under Swedish GAAP, receivables that are sold with recourse are reported as a contingent liability. USU.S. accounting standard SFAS 140 permits the derecognizing of such assets only if the transferor has effectively surrendered control over the transferred assets. The amounts are therefore reclassified and reported as accountaccounts receivables and loans for USU.S. GAAP purposes. F-43F-51 Reclassifications      In accordance with Swedish GAAP, Electrolux has recorded advances received from customers as a reduction to inventory. Under USU.S. GAAP, such items have been classified as a current liability. Consolidated statement of cash flow      The statement of cash flow presented in AB Electrolux financial statements differs from the statement of cash flows according to SFAS 95. The main differences are the following: SFAS 95 requires a reconciliation of cash and cash equivalents (liquid assets with maturities of three months or less when acquired), whereas Electrolux also includes financial instruments with maturities of three months or more at the time of acquisition in liquid assets; SFAS 95 requires that changes in long-term accounts receivable are included in cash flows from operating activities, whereas Electrolux includes these changes as investments. SFAS 95 requires changes in long-term loans to be reported gross showing proceeds and principal payments, whereas Electrolux presents a net amount. Restatement of prior periods      The U.S. GAAP information for the year ended December 31, 2001 was restated in the financial statement for 2002 in order to correct certain errors in previously reported information. Accounting for derivatives and hedging      The U.S. GAAP information for the year ended December 31, 2001 was restated to correct a mathematical error in the accounting for hedges of net investments in foreign subsidiaries according to SFAS 133 “Accounting for Derivative Instruments and Hedging Activities”. This error had no impact on reported U.S. GAAP net income but understated the reported U.S. GAAP comprehensive income and shareholder’s equity as of December 31, 2001 by SEK 540 million before deferred taxes of SEK -151 million, and overstated U.S. GAAP liabilities. Accounting for pensions      The U.S. GAAP information for the year ending December 31, 2001 was restated to correct errors in the accounting for Swedish Pension Funds in accordance with SFAS 87. The errors resulted in an understatement of U.S. GAAP net income by SEK 42 million before tax of SEK 12 million in 2001. In addition, this restatement increased reported U.S. GAAP total equity and assets as of December 31, 2001 by SEK 459 million before tax of SEK -128 million. Comprehensive income      In addition, comprehensive income presented for the year ended December 31, 2001 was restated to reflect the exclusion of certain components of equity which were previously included as part of comprehensive income recognized in accordance with Swedish accounting principles, but which do not qualify as comprehensive income according to U.S. GAAP. F-44      The impact of these restatements on consolidated net income, comprehensive income and total equity according to U.S. GAAP as previously reported in the 2001 20-F were as follows:                   Restatement of Consolidated Net Income According to U.S. GAAP   Year ended December 31,     2001     (SEKm) Net income according to U.S. GAAP as previously reported.             3,711   Effect of restatement                 Pensions as previously reported     266           Correction of error before tax of —12     42       42                     Pension adjustment, as restated     308           Taxes on adjustments as previously reported     -7           Correction of taxes on restatements     -12       -12                     Taxes on adjustment, as restated     -19                             Net income according to U.S. GAAP after effects of restatement             3,741                     Restatement of Comprehensive Income According to U.S. GAAP   Year ended December 31,     2001     (SEKm) Comprehensive income according to U.S. GAAP as previously reported             3,126   Correction of U.S. GAAP income for pensions             30   Derivatives and hedging as previously reported     -385           Correction of error, net of def. tax 151     389       389                     Derivatives and hedging, as restated     4           Comprehensive income items recognized under Swedish accounting principles, as previously reported     35           Correction for comprehensive income items     1,780       1,780                     Comprehensive income items as recognized under Swedish accounting principles, as restated     1,815           Other corrections to comprehensive income as previously reported             140                     Comprehensive income according to U.S. GAAP after effects of restatement             5,465                     Restatement of Equity According to U.S. GAAP   Year ended December 31,     2001     (SEKm) Shareholder’s equity according to U.S. GAAP as previously reported             27,871   Effect of restatement                 Pensions, as previously reported     -220           Correction of error, before def. tax of —128     459       459                     Pension adjustment, as restated     239           Derivatives and hedging, as previously reported     -607           Correction of error, before def. tax —151     540       540                     Derivatives and hedging, as restated     -67           Taxes on adjustments as previously reported     57           Correction of tax effects on restatements     -279       -279                     Taxes on adjustments, as restated     -222                             Shareholder’s equity according to U.S. GAAP after restatement             28,591   F-45 Recently issued accounting standards US GAAP      SFAS 149FIN 46 (R) In AprilJanuary 2003, the FASB issued SFAS 149, “AmendmentInterpretation 46, “Consolidation of Statement 133 on Derivative InstrumentsVariable Interest Entities” and Hedging Activities".SFAS 149 amends SFAS 133in December 2003, a revised interpretation was issued (FIN 46 (R)), which clarified certain provisions of FIN 46 and provided for decisions made:further scope exception. FIN 46(R) requires variable interest entities to be consolidated by the party that has a variable interest that will absorb a majority of the entity’s expected losses and/or receive a majority of the entity’s expected residual returns or both (the primary beneficiary). A variable interest entity is a legal entity that possesses one or more of the following characteristics: 1. 1.   Equity interest holders as parta group lack the characteristics of a controlling financial interest, including: decision making ability and an interest in the Derivatives Implementation Group process that effectively required amendments to SFAS 133,entity’s residual risks rewards; or   2. 2.   in connection with other FASB projects dealing withthe equity holders have not provided a sufficient equity investment to permit the entity to finance its activities without additional subordinated financial instruments, andsupport: or   3. 3.   in connection with implementation issues raised in relationequity investments having voting rights that are not proportionate to their economic interest and the applicationactivities of the definitionentity involve or are conducted on behalf of an investor with a derivative.disproportionate small voting interest.      SFAS 149 is effective for contracts entered into or modified after June 30, 2003, with certain exceptions, and for hedging relationships designated after June 30, 2003. Adoption of SFAS 149 did not have a material impact on the Group’s consolidated financial statements. SFAS 150      In May 2003, the FASB issued SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”, to establish standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument within its scope as a liability (or an asset in some circumstances).      SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for certain provisions which have been deferred.     There was no impact onin the Group’s consolidated financial statements as a result of adopting SFAS 150. EITF 00-21      In January 2003, the Emerging Issues Task Force (EITF) issued EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”. EITF 00-21 addresses the issues of: 1. how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting; and 2. how arrangement consideration should be measured and allocated to the separate units of accounting in the arrangement. EITF 00-21 does not change otherwise applicable revenue recognition criteria.      EITF 00-21 is effective for revenue arrangements entered into fiscal periods beginning after June 15, 2003. There wasFIN 46 (R) and there are no impact in the Group’s consolidated financial statement as a result of adopting EITF 00-21.significant variable interest entities to be disclosed.      SAB 104 On December 17, 2003, the Staff of the Securities and Exchange Commission issued Staff Accounting Bulletin 104 (SAB 104), “Revenue Recognition”, which supercedes SAB 101, “Revenue” Revenue Recognition in Financial Statements”. SAB 104’s primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superceded as a result of the issuance of EITF 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”. The revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104. There was no impact in the Group’s consolidated financial statements as a result of adopting SAB 104.      FIN 46EITF 03-1In June 2004, the EITF issued EITF 03-1, “The Meaning of Other Than Temporary Impairment and Its Application to Certain Investments”. The issue includes determining the meaning of other than temporary impairment and its application to debt and equity securities within the scope of SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities” and equity securities that are not subject to the scope of SFAS No. 115 and not accounted for under the equity method of accounting. EITF 03-1 will be effective for disclosure in reporting periods beginning from June 15, 2004 and will have no material impact on the Group’s consolidated financial statement.      EITF 03-6In January 2003,March 2004, EITF issued EITF 03-6, “Participating Securities and the Two-Class Method under FASB issued Interpretation 46, “ConsolidationStatement No. 128, Earnings per Share”. This issue addressed changes in the reporting and calculation requirements for earnings per share, providing the method to be used when a company has granted holders of Variable Interest Entities”. A variable interest entity isany form of security rights to participate in the earnings of the company along with the participation rights of common stockholders. This issue will be effective in reporting periods beginning after March 31, 2004. There will be no impact on the Group’s reporting and disclosure as a legal entity that lacks either:result of adopting EITF 03-6. 1. equity interest holders as a group that lack the characteristics of a controlling financial interest, including: decision making ability and an interest in the entity’s residual risks and rewards or 2. the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support. F-46F-52      Interpretation 46 FAS 151In November 2004, the FASB issued Statement No. 151, “Inventory Costs an amendment of ARB No. 43”. The new standard requires that idle facility expense, freight, handling costs, and wasted material (spoilage) are recognized as current-period charges. In addition, this statement requires allocation of fixed production overhead to the costs of conversion based on the normal capacity of a variable interest entity createdproduction facility. The provisions of this statement are effective for inventory costs that incur during fiscal years beginning after February, 2003 to be consolidated if any of its interest holders are entitled to a majorityJune 15, 2005. The adoption of the entity’s residual return or are exposed to a majorityprovisions of its expected losses as of December 31, 2003. This party is referred to as the primary beneficiary. There was noFAS 151 will not have an impact inon the Group’s consolidated financial statements as a result of adopting FIN 46.statement.      FIN 46(R)FAS 153 In December 2003,2004, the FASB issued SFAS 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29”. The guidance in APB Opinion No. 29. “Accounting for Nonmonetary Transactions”, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. This Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. This Statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Electrolux do not believe that the adoption of this Statement will materially affect the Group’s consolidated financial statement. FAS 123 (R) In December 2004, the FASB Interpretation 46(R)issued SFAS No. 123 (R), “ConsolidationShare Based Payment,which is a revision of Variable Interest Entities”. FIN 46(R) replaces FIN 46 and clarifies the accountingSFAS No. 123, Accounting for interests in variable interest entities. The Group will beginStock-Based Compensation, as amended by SFAS No. 148, SFAS No. 123 (R) is for interim or annual periods beginning after June 15, 2005. SFAS No. 123 (R) requires all share-based payments to apply FIN 46(R) to entities consideredemployees, including grants of stock options, to be variable interest entities for periods after December 31, 2003.recognized in the statement of operations based on their fair values. Electrolux is in the process of assessing the impact of FIN 46(R)SFAS 123 (R). F-47F-53 THE FOLLOWING IS A SUMMARY OF THE EFFECTS THAT APPLICATION OF USU.S. GAAP WOULD HAVE ON CONSOLIDATED NET INCOME, EQUITY AND THE BALANCE SHEET. A. Consolidated net income, SEKm                                                 A. Consolidated net income, SEK million   2004   2003   2002     2003   2002   2001     Net income as reported in the consolidated income statement   4,778   5,095   3,870     3,148   4,778   5,095   Adjustments before taxes     Acquisitions   —   53   304     —   —   53   Goodwill and other intangible assets   193   233   —     166   193   233   Development costs   -316   -156   —     -367   -316   -156   Restructuring and other provisions   —   -545   -296     178   —   -545   Pensions   33   74     3081)   -312   33   74   Derivatives and hedging   191   579   -33     -158   191   579   Capitalization of computer software   -24   -24   17     -15   -24   -24   Securities   6   -5   —     2   6   -5   Stock-based compensation   -7   -69   34     -87   -7   -69   Taxes on the above adjustments   27   73   -19     233   27   73   Other taxes   —   —   -444                     Net income according to US GAAP   4,881   5,308   3,741   Net income from continuing operations according to US GAAP   4,879   4,220   4,042   Net income/loss from discontinued operation   2   1,088   -301   Net income per share in SEK according to US GAAP.   15.60   16.25   11.00   Number of shares 2)   313,270,489   327,093,373   340,064,997   Net income according to U.S. GAAP   2,788   4,881   5,308   Net income from continuing operations according to U.S. GAAP   2,788   4,879   4,220   Net income/loss from discontinued operations according to U.S. GAAP   —   2   1,088   Net income per share in SEK according to U.S. GAAP, basic   9.35   15.58   16.23   Number of shares1), basic   298,314,025   313,270,489   327,093,373   Net income per share in SEK according to U.S. GAAP, diluted   9.34   15.58   16.23   Number of shares1), diluted   298,350,049   313,276,990   327,093,373   1) After restatement as described on pages F-45 and F-46. 2)   Weighted average number of shares outstanding through the year, after repurchase of own shares. F-48F-54 B. Comprehensive income (SEKm)                               2003   2002   2001 Net income according to US GAAP     4,881       5,308       3,741   Comprehensive income recognized in accordance with Swedish accounting principles     -1,382       -3,121       1,815   Comprehensive income recognized for US GAAP adjustments                         Translation differences     9       76       -49   Pensions, net of tax —, 18 and 12 respectively.     2       42       -181) Derivatives and hedging, net of tax 41, 72 and - -1 respectively     -104       -183       41) Securities, net of tax —, — and 20 respectively     —       —       -28                             Comprehensive income according to US GAAP     3,406       2,122       5,465   C. Equity (SEKm)                               2003   2002   2001 Equity as reported in the consolidated balance sheet     27,462       27,629       28,864   Adjustments before taxes                         Acquisitions     -564       -594       -711   Goodwill and other intangible assets     392       233       —   Development costs     -472       -156       —   Restructuring and other provisions     —       —       545   Pensions     419       355       2391) Derivatives and hedging     303       257       -671) Capitalization of software     20       44       68   Securities     1       -5       —   Revaluation of assets     -134       --147       -159   Stock-based compensation     -42       -35       34   Taxes on the above adjustments     -37       -77       -222                             Equity according to US GAAP     27,348       27,504       28,591                             B. Comprehensive income (SEK million)     2004       2003       2002         Net income according to U.S. GAAP     2,788       4,881       5,308   Comprehensive income recognized in accordance with Swedish accounting principles     -2,053 1)     -1,382       -3,121   Comprehensive income recognized for U.S. GAAP adjustments                         Translation differences     9       9       76   Pensions, net of tax -404, — and 18 respectively     591 2)     2       42   Derivatives and hedging, net of tax -, 41 and 72 respectively     -2       -104       -183         Comprehensive income according to U.S. GAAP     1,333       3,406       2,122   1)   After restatement asIncludes translation differences SEK –451 million and adjustment of opening balance SEK –1,602 million, further described in Item 5. 2) Includes the corresponding U.S. GAAP adjustment on pages F-45 and F-46.the adjustment of the opening balance.                           C. Equity (SEK million)   2004     2003     2002         Equity as reported in the consolidated balance sheet     23,410       27,462       27,629   Adjustments before taxes                         Acquisitions     -546       -564       -594   Goodwill and other intangible assets     548       392       233   Development costs     -819       -472       -156   Restructuring and other provisions     167       —       —   Pensions     1,102       419       355   Derivatives and hedging     143       303       257   Capitalization of software     5       20       44   Securities     3       1       -5   Revaluation of assets     -132       -134       -147   Stock-based compensation     -106       -42       -35   Taxes on the above adjustments     -208       -37       -77         Equity according to U.S. GAAP     23,567       27,348       27,504   F-49F-55 D. Balance sheet (SEKm)(SEK million)      The table below summarizes the consolidated balance sheets prepared in accordance with Swedish accounting principles and USU.S. GAAP.                                                                             According to   According to     According to   According to   Swedish principles   U.S. GAAP     Swedish principles   US GAAP   2004   2003   2002   2004   2003   2002     2003   2002   2001   2003   2002   20011)     Intangible assets   4,782   4,928   5,159   4,362   4,411   4,565     5,077   4,782   4,928   4,329   4,362   4,411   Tangible assets   15,638   18,188   22,526   15,504   18,085   22,351     16,033   15,638   18,188   15,901   15,504   18,085   Financial assets   3,190   4,582   4,666   3,461   4,744   4,689     4,349   3,190   4,582   4,552   3,461   4,744   Current assets   53,418   57,726   62,096   55,045   58,855   63,601     49,473   53,418   57,726   50,735   55,045   58,855                                 Total assets   77,028   85,424   94,447   78,372   86,095   95,206     74,932   77,028   85,424   75,517   78,372   86,095                                 Equity   27,462   27,629   28,864   27,348   27,504   28,591     23,410   27,462   27,629   23,567   27,348   27,504   Minority interests   27   592   699   27   592   699     10   27   592   10   27   592   Provisions for pensions and similar commitments   5,678   6,018   4,095   6,185   6,162   4,403     7,852   5,678   6,018   7,312   6,185   6,162   Other provisions   5,683   7,580   8,341   6,034   7,897   8,081     6,212   5,683   7,580   6,159   6,034   7,897   Financial liabilities   12,182   15,377   22,914   12,772   15,307   23,412     9,843   12,182   15,377   10,585   12,772   15,307   Operating liabilities   25,996   28,228   29,534   26,006   28,633   30,020     27,605   25,996   28,228   27,884   26,006   28,633                                 Total equity and liabilities   77,028   85,424   94,447   78,372   86,095   95,206     74,932   77,028   85,424   75,517   78,372   86,095                                 1) After restatement as described on pages F-45 and F-46. F-50F-56 SCHEDULE II AB ELECTROLUX AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Years Ended December 31, 2001, 2002, 2003 and 20032004 (In millions of SEK)                                                                               Charged       Balance at   Charged   Charged to         Balance at   Charged   (credit)       beginning of   costs &   other   Balance at   Description   beginning of   (credit) costs   to other   Balance at   period   expenses   accounts1, 2   Deductions3   end of period       2004   Reserves deducted from assets to which they apply:   Allowance for doubtful notes and accounts receivable   1,013   -31   -9   -242   730   Allowance for long-term trade accounts and notes receivable   391   -106   -3   12   293         period   & expenses   accounts1, 2   Deductions3   end of period   2003     Reserves deducted from assets to which they apply:     Allowance for doubtful notes and accounts receivable   1,476   29     (69 )     (423 )   1,013     1,476   29   -69   -423   1,013   Allowance for long-term trade accounts and notes receivable   362   50   5     (26 )   391     362   50   5   -26   391                               2002     Reserves deducted from assets to which they apply:     Allowance for doubtful notes and accounts receivable   1,606   366     (257 )     (239 )   1,476     1,606   366   -257   -239   1,476   Allowance for long-term trade accounts and notes receivable   433   16     (121 )   34   362     433   16   -121   34   362                             2001   Reserves deducted from assets to which they apply:   Allowance for doubtful notes and accounts receivable   1,497   386   95     (372 )   1,606   Allowance for long-term trade accounts and notes receivable   355   34     (2 )   46   433                         1)   Includes exchange differences   1.2)   Includes exchange differences. 2. Includes the acquisition of new companies.   3.3)   Includes companies sold. F-51F-57 ITEM 18. FINANCIAL STATEMENTS      The Company has elected to furnish the financial statements and related information specified in Item 17 in lieu of responding to this item. 12695 ITEM 19.   EXHIBITS   1.*    Articles of Association of the Company, as amended on May 2, 2002.2002   2. 2.**   Form of Deposit Agreement dated as of April 20,21, 2004 between the Company and The Bank of New York.   8.    List of the Company’s subsidiaries. Please see Note 2829 to the consolidated financial statements.   12.1    Certification of Hans Stråberg, Chairman and Chief Executive Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.   12.2    Certification of Fredrik Rystedt, Senior Vice President and Head of Group Staff Controlling, Accounting, Taxes, Auditing and IT,Chief Financial Officer, of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.   13.    Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   14.1 15.1   Consent of PricewaterhouseCoopers AB, independent auditors to the Company. 14.2 Consent of KPMG AB, independent auditors to the Company.         _________________ *   Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2002, filed with the SEC on June 27, 2003 (Commission File Number 0-15741). ** Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2003, filed with the SEC on June 24, 2004 (Commission File Number 0-15741). 12796 SIGNATURE The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly cause and authorized the undersigned to sign this annual report on its behalf. AKTIEBOLAGET ELECTROLUX (publ) AKTIEBOLAGET ELECTROLUX (publ)       Stockholm, June 24, 2004April 8, 2005   /s/ Hans Stråberg      President and Chief Executive Officer      Hans Stråberg       /s/ Fredrik Rystedt      Fredrik Rystedt      Senior Vice President and Head of       Group Staffing Controlling, Accounting,       Taxes and Auditing       Chief Financial Officer 12897