SKF – A world of reliable rotation

Niclas Rosenlew, CFO

Bond issue, June 2020 – Investor presentation

Slide 1 Disclaimer / Important information

This presentation material (the “Material”) has been prepared by Aktiebolaget SKF (publ) (“SKF” or that they understand such transaction and have made an independent assessment of the appropriateness of the “Company”) solely for a limited group of potential investors in connection with a potential issue by the such transaction in light of their own objectives and circumstances, including the possible risks and benefits of Company of senior unsecured notes (the “Notes”) governed by certain terms and conditions for the Notes entering into such transaction. Potential investors should also consider seeking advice from their own (the “Terms and Conditions”) (the “Transaction”). The joint bookrunners for such a contemplated offering of advisors in making this assessment, including regarding the legal, tax, financial and other consequences of an the Notes will be Bank Abp, Skandinaviska Enskilda Banken AB (publ), and Svenska AB investment. 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Slide 3 Agenda • About SKF • Sustainability / circular economy • Financial overview • Funding and transaction overview • Appendix – Risk factors

Slide 4 ABOUT SKF

Slide 5 A world of reliable rotation

The undisputed leader in the business

Slide 6 Bearings and units Seals Lubrication systems

SKF’s combined offering

Condition monitoring Services

Slide 7 WE ARE EVERYWHERE

Slide 8 ……………………. …………………………………. 86 bn 12.9 % net sales operating margin …………………… ………………………………….

ISO-certifications: 9001 Quality 14001 Environment 50001 Energy OHSAS 18001 Health & Safety

Slide 9 The future is digital, electric and clean – our 6 strategic focus areas

Digital sales New business Innovation World class Future Cleantech models workforce

Slide 10 Our two value propositions

The needs of the customers? Product Rotating equipment performance Meets performance Meets the needs of customers requirements of specific who operate critical machinery parameters such as speed, load, by maximizing performance. noise or physical environment.

Slide 11 Reliable rotation at Brazilian steel mills Gerdau Steel and SKF have signed a fee-based agreement that includes bearings, remanufacturing, lubrication systems and connected condition monitoring units. The agreement aims to increase productivity and reduce unplanned downtime at Gerdau’s Charqueadas and Araçariguama steel mills in Brazil.

Slide 12 Bearings for Volkswagen all-electric vehicles To help Volkswagen in their fight for sustainability and commercial success, SKF delivers bearings for their strategically important MEB, all-electric vehicle powertrain platform, as well as their new manual gearbox project.

Slide 13 SUSTAINABILITY / CIRCULAR ECONOMY

Slide 14 Climate targets for 2025

< 2 °C Raw material Manufacturing Goods transport Customer solutions

Support suppliers to reduce Support customers to reduce Targets – 40% – 40% their CO2 emissions their CO2 emissions 2025 CO2 emission reduction CO2 emission reduction per tonne of sold bearings per tonne of shipped products

83% Results of major energy intensive SEK 5,1 billion 2019 suppliers are ISO 50001 – 36% – 2% revenues from key areas certified

Baseyear 2015 Key areas are e.g. renewable energy, electric vehicles, recycling industry, bearing remanufacturing Sustainable growth is possible! Even if revenue has grown by 13%, emissions have been reduced by 36%.

Slide 15 How we contribute to a better environment Our products reduce friction Working with clean technologies

Carbon neutral manufacturing Remanufacturing bearings New business models

Slide 16 Realizing the circular economy - Substantially reduced cost and environmental impact with improved efficiency

Enablers

Digitalisation

Business model: From transactional to fee based + bonus

Striving for green

Slide 17 Remanufacturing • A remanufactured bearing reduces the carbon foot-print compared to a new one by up to 90%. • Remanufacturing brings benefits such as reduced lead times, lean operations and -90% often lower costs. REDUCED CARBON FOOTPRINT

Slide 18 Next step: carbon neutral factories

Slide 19 FINANCIAL OVERVIEW

Slide 20 Impact from Covid-19 on SKF Precautionary measures by authorities and overall lower customer demand is impacting SKF • Ensure the safety and wellbeing of our employees • Closure of sites, reducing costs and increasing flexibility: • operations in China opened on 10 February • closed sites in & Italy as of mid-March • limited automotive production in Europe • adjusting global production rates • High level of uncertainty – scenario planning for different alternatives – and appropriate actions Slide 21 Taking action to face a period of lower demand

Q1 2020 – Low volumes, stable margins Building an even stronger SKF • Organic decline of 8.6% • Investing for the future • Stable operating margin* at 12.8% • Delivering on cost savings • Strong cash flow 1.9 bn (0.7) • Protecting cash * Adjusted (For more detailed financial data, please visit SKF’s Investor Relations web page: https://investors.skf.com/en/financial-data)

Slide 22 Stable operating profit on lower sales

Organic growth, % Operating income*, SEK bn 10,0 +8.0 +7.5 3 12 8,0 2.7 2.7

2.6 Thousands 6,0 2,5 10 Thousands 2.4

4,0 2.0 2 8 2,0 +0.3

0,0 1,5 6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 -2,0

1 4 -4,0 2016 2017 2018 2019

-6,0 0,5 2 -8,0

-8.6 -10,0 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 (For more detailed financial data, please visit SKF’s Investor Relations web page: https://investors.skf.com/en/financial-data) 2016 2017 2018 2019 2020 * Adjusted Positive one-time items Negative one-time items Slide 23 Net debt/equity ratio well below target Strong balance sheet and solid liquidity position positions us for the future

Net debt, SEK bn Net debt/equity, %

0 160%

-5 140%

120% -10

100% -15 80% -20 60% 57.6% -25 40% Net debt/equity -30 20% Net debt, excl leasing & post empl. Net fin debt Post-empl. Benefits Leasing benefits/equity 7.5% -35 0% 2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020

(For more detailed financial data, please visit SKF’s Investor Relations web page: https://investors.skf.com/en/financial-data)

Slide 24 FUNDING AND TRANSACTION OVERVIEW

Slide 25 Rating Profile

Baa1

BBB+

Slide 26 Debt maturity profile and issuance rationale 350 Available credit facilities: 296 300 300 300 ▪ EUR 500 million 2025 250 206 200 200 ▪ EUR 250 million 2022 150 No financial covenants or material 100 100 adverse change clause. EUR EUR 50 EUR EUR EUR USD

0 2020 2021 2022 2025 2027 2029

Slide 27 Key terms of the offering*

Issuer Aktiebolaget SKF (publ) Status Senior Unsecured Maturity June 2024 (4 years) Coupon Type Fixed and/or FRN Issuer rating Baa1 (Moody’s) / BBB+ (Fitch) Expected bond rating Baa1 (Moody’s) Documentation Standalone Swedish bond documentation, Negative Pledge, Change of Control (500bp rating triggered step-up) Listing Nasdaq Stockholm Governing Law Swedish Use of Proceeds General Corporate Purposes Joint Lead Managers Handelsbanken, Nordea, SEB Manufacturer target market (MiFID II product governance) is eligible counterparties and professional clients only (all distribution channels). Target Market No PRIIPs key information document (KID) has been prepared as not available to retail in EEA or in the UK

*The Issuer urge you to read the risk factors prior to subscribing to any notes

Slide 28 APPENDIX – RISK FACTORS

Slide 29 Risk factors In this section, material risk factors are illustrated and discussed, including risks relating to the Group’s business and operations, legal risks, financial risks as well as risks relating to the Notes. The Issuer’s assessment of the materiality of each risk factor is based on the probability of their occurrence and the expected magnitude of their negative impact. The description of the risk factors below is based on information available and estimates made on the date of this Material. The risk factors are presented in categories where the most material risk factors in a category are presented first under that category. Subsequent risk factors in the same category are not ranked in order of materiality or probability of occurrence. Where a risk factor may be categorised in more than one category, such risk factor appears only once and in the most relevant category for such risk factor.

Slide 30 Risk factors Risks relating to the Issuer and the Group The Group is exposed to tax risks. Risks relating to the Group’s business and operations The Group is exposed to employment law issues. The Group is exposed to risks related to changed economic climate Financial risks and changes in customer behavior. The Group is exposed to currency risks. The Group is exposed to risks related to outages and disruptions at The Group is exposed to liquidity risks. its manufacturing units. The Group is exposed to credit risks. The Group is exposed to risks related to price and access to raw The Group is exposed to interest rate risks. materials, components and energy. The Group is exposed to price risks. The Group is exposed to IT related risks. The Group is exposed to risks related to product liability and claims. The Group is subject to risks related to market competition. Risks relating to the Notes The Group is dependent on attracting and retaining key employees. Credit risk The Group is exposed to risks associated with acquisitions. Risk related to the Notes’ interest rate structures Legal risks European Benchmark Regulation The Group is exposed to risks related to unanticipated claims, legal Risks relating to admission to trading disputes and administrative proceedings. No action against the Issuer and Noteholders’ representation The Group is exposed to compliance-related risks. Risks relating to currency The Group is exposed to environmental risks. Risks relating to credit rating

Slide 31 Risks relating to the Issuer and the Group Risks relating to the Group’s business and operations

The Group is exposed to risks related to changed economic climate and changes in customer In addition, there is a risk that a general decline in the demand for the products and services behavior. provided by the Group could mean lower residual profits and lower dividend income for the parent company, as well as a need for writing down values of the shares in the subsidiaries. The Group is a global supplier of products, solutions and services within bearings, seals, With the high levels of uncertainty in the current global economic situation and potential lubrication systems and services, and operates in many different industrial and geographical additional initiatives by authorities and Group’s customers, there is a considerable risk that a areas that are at different stages of the economic cycle. Demand for the Group’s products, weaker economic climate, changes in customers’ purchasing behaviour and a continuously solutions and services depends on the general economic climate within the segments and falling demand for the Group’s products and services would have a material adverse effect sectors to which the Group’s offering is focused, which in turn is affected by macroeconomic on the Group’s business, financial position and results of operations. factors in those countries and regions where the Group conducts operations, including the rate of growth in the global economy, currency rate fluctuations, tariffs and other global The Group is exposed to risks related to outages and disruptions at its manufacturing units. measures restricting trade, price or exchange controls, commodity prices and inflation, as The Group owns and operates 103 manufacturing units in 22 countries around the world well as extraordinary events such as natural disasters and pandemics. A reduced demand for and the manufacturing comprises a chain of processes in which outages and disruptions can the Group’s products, solutions and services as a result of a general economic downturn at affect the Group’s possibilities to perform its obligations to customers. The Group’s global level or in the markets in which the Group operates presents a highly significant risk manufacturing units are primarily located in Europe, North America and Asia. The Group is to the Group’s business, results of operations and financial position. exposed to a number of risks which may be more or less specific to the region in question. For example, the recent global spread of Covid-19 and the mitigations and practices These risks include, among other things, geopolitical unfavorable developments, pandemics, implemented by governments, such as restrictions on movement of people, temporary extreme weather conditions and natural disasters, fire, theft, systems failures, mechanical failures or equipment breakdown and similar risks. For example, due to the Covid-19 closure of businesses and/or public works stoppages has led to and may continue to lead to pandemic, some manufacturing units have been temporarily closed, and in some, the a fall in demand for the Group’s products, solutions and services. During the first quarter capacity has been reduced. Disruption upstream in the demand chain may also affect the 2020, the Group’s net sales fell organically by almost 9 per cent and sales were impacted Group’s ability to manufacture and produce. Any extensive outages or disruptions as a across most regions due to both government-imposed closures as well as lower underlying consequence of such events would affect the Group’s ability to manufacture, sell and demand. The fall in demand due to Covid-19 was aggravated in the last two weeks of March distribute products, which could have a material adverse effect on the Group’s business, 2020, when the Group’s sales fell by 25 per cent compared to the same period 2019. The results of operations and financial position. degree to which Covid-19 will affect the demand of the Group’s products, solutions and services going forward is uncertain, and presents a highly significant risk to the Group.

Slide 32 Risks relating to the Issuer and the Group Risks relating to the Group’s business and operations

The Group is exposed to risks related to price and access to raw materials, components and processed data, computer systems and other technology solutions. For example, the Group’s energy. offering of technology to connect, collect and analyse critical data from customers’ The Group uses a number of different raw materials, components and energy in its machines is highly dependent on the Group’s IT infrastructure. Accordingly, the Group is manufacturing and is thereby exposed to risks associated with the price structure of, and exposed to risks related to outages and disruptions in its IT infrastructure, which may be access to, raw materials, components and energy that are necessary for the Group’s caused by, among other things, data viruses, power outages, human or technical errors, production. In 2019, the cost of raw materials and components amounted to approximately sabotage, weather and nature-related events or problems due to deficient care and maintenance. IT attacks, errors and damage to IT systems, operational disruptions, defective MSEK 27,917. As of 31 December 2019, an increase/decrease of +/- 1 per cent in the cost of raw materials and components would have affected the Group’s operating profit by or incorrect deliveries of IT services from the Group’s IT providers that lead to extensive approximately +/- MSEK 279. The single most important raw material for the Group is steel, manufacturing outages or loss of information would materially adversely affect the Group’s which is a major component in the production of bearings. In addition to raw materials and business. components, the Group uses a significant quantity of energy in its manufacturing, of which The Group has initiated a programme to replace its current ERP systems in order to create a electricity makes up the absolute majority in terms of costs. Based on the conditions common ERP platform for the Group. There is a risk that the process will not be successful prevailing on 31 December 2019, an increase/decrease of +/- 10 per cent in the energy and not fulfil the Group’s anticipated effects, for example by the ERP system not being costs would have affected the Group's operating profit by approximately MSEK 130. compatible with the rest of the IT infrastructure. If the roll-out of the ERP system, or other Accordingly, an increase in the price of raw materials, components and energy adversely updates of the IT infrastructure, does not work satisfactorily, and that would lead to affects the Group’s operating profit and financial position. inefficiency and major disruptions in the operations, it would have an adverse effect on the The Group’s ambition is to use local sourcing as far as possible, however parts of the Group Group’s reputation and business. are also to a certain extent dependent on long distance sourcing of raw materials and The Group’s business includes, in certain cases, the handling of sensitive and confidential components. The access to raw materials and components may be adversely affected by information which, if it falls into the wrong hands, risks to damage both the Group and the tariffs and other global measures restricting trade. For example, the price in the United business of its customers. Such confidential information consist of, for example, States for steel increased in 2018 as a result of the customs tariffs that the United States manufacturing data, customer data in sales processes or research and development data. imposed on imported steel. These circumstances related to disruptions in access to Accordingly, the Group is dependent on maintaining adequate information management important raw materials and components may thus adversely affect the Group’s systems. There is a risk that the Group will be subject to cyber intrusion by potential manufacturing costs and profitability, thereby presenting a significant risk for the Group. adversaries placing so-called ransomware on IT assets or gaining unauthorised access to the The Group is exposed to IT related risks. Group’s information or computer systems, which could lead to, among other things, loss, theft or manipulation of sensitive data such as personal data or data relating to export The Group is dependent on a well-functioning IT infrastructure in order to manufacture, control regulations. In addition, the ongoing digitalization within the Group is increasing the develop and sell its products, solutions and services. Due to the ongoing digitalization of the risk of loss of data, for example by its employees not having enough knowledge of how to industry, the Group’s operations are increasingly dependent on electronically stored and handle the relevant data. Extensive dissemination or loss of sensitive and confidential data would have a material adverse on the Group’s business and reputation.

Slide 33 Risks relating to the Issuer and the Group Risks relating to the Group’s business and operations

The Group is exposed to risks related to product liability and claims. companies to win market shares, which would lead to more competitors to the Group. The Group’s customers are primarily industrial and automotive companies, and the Group’s These factors entail that the Group will need to reposition and adapt its business and offering consist of, among other things, developing and manufacturing bearings, seals and offering to the driving trends of the industry. If the Group fails with such repositioning, or lubrication systems, as well as rotating shaft services to their industrial customers, and adapting to new technology and new business models, or for any other reason fails to customized bearings, seals and related products for wheel-end, driveline, engine, e- compete effectively, this would lead to the Group losing market shares or customers and powertrain, suspension and steering applications to their automotive customers. The have a material adverse effect on the Group’s net sales business. Group’s offerings are often customized and must then meet certain requirements, both In addition, the Group’s competitiveness depends on a number of factors, among other requirements from the customers and requirements imposed by laws and regulations. For things, price, quality of the products and distribution channels. Competitors may find better example products for railway need to fulfill specific application standard for railway bearings. and more cost-efficient ways to produce and distribute products and services, find ways to There is a risk that the Group’s offerings will not meet such requirements, or in other ways produce better functioning products to meet the customers’ needs, as well as lower its be defective, which could lead to the Group’s facing both warranty and product liability prices. As a result, the Group may have to make investments, restructurings and/or price claims. The highest risk for claims, both in terms of likelihood and financial impact, is from reductions in order to adapt to a changed competitive situation, which could lead to a the aerospace, automotive, railway, energy and marine customers, due to the nature and lowered margin for the Group’s business. There is also a risk that the Group is not able to high safety standards of such industries. If such claims are not covered by the Group’s counteract the effects of the competition at all, which would have a material adverse effect insurance programs, this would have a material adverse effect on the Group’s financial on the Group’s operating profit and financial position. position. In addition, extensive adverse publicity about warranty and product liability claims The Group owns or otherwise holds a large number of intellectual property rights such as could also damage the Group’s reputation, even if the claims are unfounded. patents, trademarks and logos, which have significant relevance for the Group’s The Group is subject to risks related to market competition. competitiveness. There is a risk that the Group fails to adequately maintain protection for its The Group operates in a global industry. The trend is towards fewer, larger and more intellectual property rights and that competitors will seek to the Group's patents, international manufacturers and distributors. Like most global industries, the Group’s trademarks and logos when they market their products. For example, in 2017, the Group industry is exposed to strong competition and the Group estimates that a small number of completed legal proceedings against a dealer of counterfeit SKF bearings in Greece, where global bearing manufacturers represents approximately 60 per cent of the global bearing 15 tons of bearings where seized and destroyed. If similar situations occur again and a market. Over the last years, the global bearing market has been affected by digitalization, competitor sells products of low quality under any of the Group’s trademarks and logos, this changing customer requirements, pressure to decarbonize industry sectors and disruptive risks to seriously limit the Group’s competitiveness as well as damage the Group’s brand business models. The trend of disruptive technologies is an opportunity for entrepreneurial image and reputation.

Slide 34 Risks relating to the Issuer and the Group Risks relating to the Group’s business and operations

The Group is dependent on attracting and retaining key employees. The Group is exposed to risks associated with acquisitions. The Group is dependent on attracting and retaining highly knowledgeable and skilled In 2019, the Group acquired four companies and the acquisition costs totalled MSEK 729. employees. The Group’s business require key skills with respect to, among other things, Three of the acquisitions in 2019 were carried out to strengthen the Group’s rotating digitalization and automation. However, the competition for qualified employees within equipment performance offering, which helps customers move towards a circular economy. these areas is strong and as the industry is more digitalized, more organizations are The ongoing digitalization and driving trends of the industry could result in that the Group competing for the same skills and capabilities, entailing that there is a risk of scarcity of must strengthen more sections of its business through acquisitions. However, there is a risk some of the key skills on the labour market. In turn, this may lead to increased remuneration that in the future, the Group will be unable to carry out such strategic acquisitions due to, levels, which would adversely affect the Group’s results of operations. In 2019, employee for example, competition from other buyers or lack of suitable acquisition candidates. If the benefit expenses, including social security charges, amounted to MSEK 26,227. Based on the Group fails to carry out necessary strategic acquisitions, there is a risk that the Group’s conditions prevailing on 31 December 2019, an increase of 1 per cent in the Group’s competitiveness and business is adversely affected. employee benefit expenses, including social security charges, would have adversely affected In conjunction with acquisitions, the Group is exposed to risks relating to the integration of operating profit by approximately MSEK 262. Conversely, if the Group were to offer new businesses and employees. Hence, it is important to retain key employees and to have a excessively low remuneration levels, this might lead to employees choosing to terminate well-functioning and effective integration process. There is a risk that dissatisfaction can their employments, which would adversely affect the Group’s competitiveness and business. arise among the personnel of the acquired business and the Group’s personnel, and that Reorganizational measures may present difficulties to retain correct competence and this ultimately leads to key employees choosing to terminate their employments. In employees. As an example, the Group is currently taking major steps to reduce the negative addition, the Group may incur significant acquisition costs and restructuring costs or other impact of the uncertain situation due the Covid-19 pandemic, such as by closure of sites, costs in connection with acquisitions, which may be higher than initially anticipated. There is reducing number of employees and increasing flexibility within the workforce. There is a risk also a risk that anticipated synergies will not be realised, or that additional integration costs that these activities will have an adverse impact on employees’ motivation, loyalty and will be required in order to achieve synergies. Furthermore, there is a risk that acquired optimism and may cause unwanted attrition and loss of key personnel and capabilities. businesses will not perform as expected. Following acquisitions, there is also a risk that Further, in order to meet demands on the future workforce and driving trends of the business relations with customers and suppliers change or cease, which risks making it industry, the Group must re-skill parts of its current employees. The Group has initiated difficult for the Group to successfully achieve anticipated synergies. In turn, if any of the programmes including, among other things, re-skilling from production execution to abovementioned risks are materialised, this could lead to that the Group needs to take an maintenance by offering theoretical and practical education in electronics and mechanics, impairment charge on the goodwill or other intangible assets arising in conjunction with up-skilling in automation technology, robotics and simulations. If the Group fails to provide acquisitions, which would have an adverse effect on the Group’s financial position. employees with the correct support and skills development in their new roles, such attempts to re-skill employees risks leading to a shortfall in skills, dissatisfaction among employees and ultimately terminated employments.

Slide 35 Risks relating to the Issuer and the Group Legal risks

The Group is exposed to risks related to unanticipated claims, legal disputes and investigations, disputes or legal proceedings would have a material adverse effect on the administrative proceedings. Group’s business, results of operations and financial position. The Group is, and may continue to be, involved in litigation and arbitration both as plaintiff The Group is exposed to compliance-related risks. and defendant. Many of these disputes relate to claims arising in the ordinary course of its There are regulatory risks associated with the wide geographical presence of the Group. The business including, but not limited to, alleged defects in delivery of the Group’s products, global and diverse nature of the Group's business and operations means that the Group is services and solutions, warranty undertakings, employment issues, patent rights and other required to adhere to numerous laws and regulations related to all aspects of its activities. intellectual property rights and other issues on rights and obligations that arise in Failure to meet these requirements could lead to legal and financial consequences as well as connection with the Group’s operations. The Group may also be exposed to product liability damage to the Group’s reputation. The Group is exposed to compliance risks mainly related claims in the event of product failure in customer applications (see also “The Group is to competition law, fraud and corruption, export control, data privacy (including, but not exposed to risks related to product liability and claims” above). Disputes may also arise in limited to, in relation to Regulation (EU) No. 2016/679 (the General Data Protection connection with mergers and acquisitions. There is a risk that the ultimate outcome of any Regulation)), environmental and health and safety regulations (see also “The Group is such disputes may be unfavourable to the Group and, as a consequence, the Group may exposed to environmental risks”). The Group is dependent on the compliance of such laws incur costs and any mitigating measures (including provisions taken on the Group’s balance and regulations by its employees, suppliers and other third parties. There is a risk that the sheet) adopted to protect against the impact of such costs may prove to be inadequate or Group’s internal governance documents, such as codes of conduct and policies, internal insufficient. The probability of incurring significant cost is often exacerbated in relation to controls and other measures to safeguard compliance with laws and regulations are not at unanticipated claims, which thus presents a significant risk to the Group’s business and all times adequate and fully effective, particularly if the Group is confronted with risks that it results of operations. has not fully or adequately identified or anticipated. The Group also faces the risk that its In addition, the Group may be subject to investigations and legal proceedings brought by executives make decisions that are not in compliance with adopted corporate governance authorities including antitrust and competition authorities. The Issuer is currently subject to practices and internal policies and guidelines. If the Group’s internal policies, guidelines and two investigations in Brazil by the General Superintendence of the Administrative Council for controls are insufficient or its executives act contrary to such policies and guidelines, there is Economic Defense, one investigation regarding an alleged violation of antitrust rules a risk that the Group’s reputation is damaged and that it becomes subject to fines, penalties concerning bearing manufacturers, and another investigation regarding an alleged violation and other sanctions and/or exposed to civil or criminal liability. of antitrust rules by several companies active on the automotive aftermarket in Brazil. An The Issuer’s global operations expose the Group to risks related to sustainability factors such enquiry has further been initiated by the Competition Commission of India against several as human rights, employment conditions and corruption. The regions in which the Group’s different companies, including SKF India Ltd., regarding alleged violation of antitrust rules in exposure to corruption is the highest are Latin America, Middle East, Africa, Eastern Europe, India. Moreover, the Group is subject to related class action claims by direct and indirect the CIS countries and Asia. The highest risk for corruption is when the Group uses a purchasers of bearings, for example in the United States, and may face additional follow-on distributor or another type of intermediary to sell, purchase or in other ways interact with civil actions by both direct and indirect purchasers. state owned entities. The highest internal fraud risks for the Group are in the sales and There is further a risk that the Group will become subject to additional claims, disputes and purchasing processes. These frauds are often done by using companies controlled by legal proceedings, which may prove costly, be time consuming and disrupt normal employees or driven by kickbacks and bribes from business partners. The Group is also operations. The financial, reputational and legal outcomes of material disputes are uncertain subject to external fraud risks by perpetrators using social engineering techniques to obtain and presents a highly significant risk to the Group, since an unfavourable outcome of such payments. During 2019, 26 fraud and corruption incidents were confirmed by the Group’s Slide 36 Risks relating to the Issuer and the Group Legal risks audit team, the majority of which occurred in China and India. As a result, 29 employees had 40 per cent per tonne of shipped products to end customer (with 2015 as the base year and to leave the Group and the Issuer also decided to terminate 20 distributors and other 2025 as the year for reaching the targets)). In 2019, the outcome of the bearing intermediaries for their involvement in unethical business practices. Violations of anti- manufacturing target was a reduction of 36 per cent and the goods transportation target was corruption legislation could further lead to extensive fines and other criminal, civil or a reduction of 2 per cent. If the Group fails to reach its non-financial targets attributable to administrative sanctions or lead to the Issuer being excluded from participating in public the environment or does not drive improvement regarding for example energy and emissions procurement procedures, which would have a material adverse effect on the Group’s in other parts of the value chain, this risks to lead to adverse publicity, which would damage reputation, business, results of operations and financial position. Corruption-related the Group’s reputation. incidents or accusations against distributors or other third parties with whom the Group has As a long-established industrial company, the Issuer may further be held liable to investigate a commercial relationship risk leading to adverse publicity that would damage the Group’s and rectify contamination and emissions at the Group’s plants and on property which the reputation, even if the Group is not involved. Group, or companies and businesses which the Group has acquired or with which it has The Group is exposed to environmental risks. merged, own or have previously owned, irrespective of whether the Group has caused the As an industrial company, the Group is subject to numerous international, national and local contamination or whether the operation which caused the contamination was lawful at the environmental, health and safety laws and regulations governing, among other things, time the contamination occurred. Because of stricter laws and regulations, some with storage, handling, treatment, transportation and disposal of hazardous and toxic materials, retroactive effect, relating to landfill disposal, some of the Group companies are currently the construction and operation of plants and standards relating to energy efficiency and the involved in the cleaning-up of old landfills that have not been used for many years, but at discharge of pollutants to air, soil and water. Any severe non-compliance with such which the Group company was one of many companies contributing to waste disposal in the environmental laws and regulations risk resulting in the imposition of significant fines, past. The majority of these cases concern so-called superfund sites designated by the U.S. penalties or liens, or give rise to civil or criminal liability, which would have a material Environmental Protection Agency and U.S. state agencies and the authorities in several other adverse effect on the Group’s reputation, business and results of operations. Authorities countries. A superfund site is an old landfill or plant site in the United States with soil or around the world require various permits and licenses related to environmental, health and groundwater contamination, subject to a remediation programme according to federal law. In safety matters. In the event of severe non-compliance with legislation, such permits or addition, a few on-going remedial activities are being carried out for soil and groundwater contamination. The ultimate resolution of these issues is not known at present, but presents licences may be revoked, and production activities stopped until sufficient rectification has been completed. a significant risk to the Group's results of operations and financial position. The direct risks to the Issuer related to environmental impact of the Group’s business occurs In addition, stricter environmental laws and regulations, sometimes with retroactive effect, primarily in production processes through the use of materials and energy, emissions into may lead to increased expenditure to comply with these laws and regulations. The Group may the air and water, or through noise and waste. The areas having the greatest impact on the also be subject to claims from public authorities, private individuals, companies or other environment are energy consumption at manufacturing units related carbon dioxide parties who request compensation for alleged personal injury, property damage or damage to emissions, generation of hazardous and non-hazardous waste and air, water and soil nature caused for example by accidental environmental contamination from the Group’s operations, which risk leading to large and unexpected costs. Risks of substantial costs and emissions. Recently, focus on environmental and climate issues has increased, both in the media and on the part of politicians. The Group has adopted certain non-financial targets liabilities, including for the investigation and remediation of past or present contamination, attributable to its environmental impact (e.g. to reduce carbon dioxide emissions from are inherent in the Group’s ongoing operations, and its ownership and occupation of manufacturing by 40 per cent per tonne of bearings sold and from goods transportation by industrial properties thus present a significant risk to the Group’s results of operations. Slide 37 Risks relating to the Issuer and the Group Legal risks

The Group is exposed to tax risks. The Group is exposed to employment law issues. The Group's operations are global with a presence in 130 countries, manufacturing As of 31 December 2019, the Group had 43,360 employees in 130 countries. The Group operations in 24 countries and direct sales channels in 70 countries and is thus subject to thus needs to comply with several employment-related laws and regulations. There is a risk taxation and several tax laws and regulations worldwide. Its operations, including intra- that the Group’s operations are non-compliant with some of the laws and regulations, or group transactions, are conducted in accordance with the Group’s understanding and that authorities in the relevant countries may make assessments that differ from the Group’s interpretation of applicable tax legislation, tax treaties and other regulations in those understanding and interpretation of the aforementioned laws and regulations. Further, from jurisdictions, and in accordance with the Group’s understanding and interpretation of the time to time, claims are made against the Group by former employees who allege they have requirements of the relevant tax authorities. However, there is a risk that the Group’s been incorrectly pensioned off, terminated or that the Group in some other way has not understanding and interpretation of the aforementioned laws, tax treaties and regulations, complied with employment-related laws and regulations. The degree to which non- for example in relation to transfer pricing, is not correct in all respects. There is also a risk compliance, or amendments, of employment laws or regulations may affect the Group is that the tax authorities in the relevant countries may make assessments and take decisions uncertain and presents a significant risk to the Group’s business and results of operations. that differ from the Group’s understanding and interpretation of the aforementioned laws, Certain parts of the Group's employees are covered by collective bargaining agreements and tax treaties and regulations. The Group’s tax status, in respect of both previous years and the Group holds collective bargaining agreements with trade unions in 20 countries. Such the current year, may be changed as a consequence of the decisions that relevant tax agreements are renegotiated from time to time. There is a risk that such negotiations are authorities take, or as a consequence of amended laws, tax treaties or other regulations. In discontinued, that agreements cannot be reached or that the Group will not be able to 2017-2019, the Group’s tax expenses totalled MSEK 2,375, MSEK 2,511 and MSEK 1,904, renew collective bargaining agreements on favourable terms, such as the Group having to respectively, and its effective tax rate amounted to 24.8 per cent, 25.6 per cent and 31.6 per offer higher salaries. Based on the conditions prevailing on 31 December 2019, an increase cent, respectively. There is a risk that amended laws, tax treaties or other regulations, which of 1 per cent in the Group’s employee benefit expenses, including social security charges, may apply retroactively, lead to increased tax expenses and higher effective tax rate for the would have adversely affected operating profit by approximately MSEK 262. Negotiations of Group, which negatively affect its results of operations. collective bargaining agreements could also cause disruptions to the operations and From time to time, the Group is also involved in tax disputes, tax audits and litigations of increase the risk of strikes other disturbances occasioned by its unionised labour force. varying significance and scope. Such processes can lead to lengthy proceedings over several Accordingly, within its own business or within the business of suppliers or other third years and may require the Group to pay substantial additional tax, and thus presents a parties, the Group is exposed to risks related to strikes or other industrial conflict measures, significant risk to the Group. See also “The Group is exposed to risks related to unanticipated which, if they last for a long period or encompass a substantial part of the workforce in a claims, legal disputes and administrative proceedings” above. major or important part of the business, would create disruptions and delays in the operations. Employment law related risks thus present a significant risk for the Group.

Slide 38 Risks relating to the Issuer and the Group Financial risks

The Group is exposed to currency risks. The Group is exposed to liquidity risks. The Group operates on several geographical markets and conducts transactions in a variety Liquidity risk, also referred to as funding risk, is the risk that the Group cannot meet its of currencies, with the most significant net currency flows being in CNY, EUR, USD and SEK. payment obligations at maturity due to insufficient liquidity, or is unable to obtain requisite As the Group’s accounts are consolidated in SEK, the Group is exposed to currency risk with financing and/or refinance its existing loans on acceptable or profitable terms and respect to adverse fluctuations in the exchange rates between SEK and relevant foreign conditions. In order to meet its future capital needs, the Group is highly dependent on currencies. sufficient cash flows, liquid assets as well as the availability of external capital, which in turn Since the Issuer’s foreign subsidiaries report in their functional currency, the Group is depends on factors outside of the Group’s control, such as credit availability within the subject to translation exposure when translating the results and net assets from the foreign financial markets, the Group’s credit capacity, general market conditions and credit rating. As subsidiaries into SEK upon consolidation of the financial statements. Based on the of the date of this Material, the credit rating of the Group by each of Moody’s and Fitch is conditions prevailing on 31 December 2019, a +/- 5 per cent change in the CNY/SEK, Baa1 with a stable outlook and BBB+ with a stable outlook, respectively. Given the EUR/SEK and USD/SEK exchange rates would have resulted in a translation effect on the uncertainty in the current global economic situation, there is a risk that the demand for the Group’s operating profits corresponding to MSEK 125, MSEK 210 and MSEK 72, respectively. Group’s products and services will fall significantly due to the Covid-19 pandemic (see further “The Group is exposed to risks related to changed economic climate and changes in Furthermore, the Group is subject to transaction exposure, which arises as a result of intra- customer behaviour” above), thus negatively impacting the Group’s cash flow, which in turn group transactions between the Group’s manufacturing companies and the Group’s sales could affect the Group’s credit rating. In addition, there is a risk that a deterioration in the companies, situated in other countries and selling the products to end-customers normally global economic climate may negatively affect the general terms and conditions on the in local currency on the local market. In some countries, transaction exposure may arise financial markets, which could result in difficulties raising external capital on acceptable from sales to external customers in a currency different from the local currency. The Group’s terms or at all. principal commercial flows of foreign currencies pertain to exports from Europe to North America and Asia and to flows of currencies within Europe. Based on the conditions As of 31 December 2019, the Group’s current liabilities, comprising trade payables, short- prevailing on 31 December 2019, a +/- 5 per cent change in the CNY/SEK, EUR/SEK and term provisions, other short-term financial liabilities and other short-term liabilities, totalled USD/SEK exchange rates would have resulted in a transactional currency flow effect on the MSEK 23,140. Failure to generate sufficient cash flow or maintain access to financing Group’s operating profits corresponding to MSEK 142, MSEK 345 and MSEK 246, alternatives may impact the amounts of capital available for necessary expenditures. If the respectively. Accordingly, unfavourable fluctuations in relevant currency exchange rates Group is not able to meet its current or future financial commitments, or renew or refinance would have a material adverse effect on the Group’s results of operations and financial current or future credit facilities on acceptable terms and conditions, it would have an statements. adverse effect on the Group’s liquidity, results of operations and financial position.

Slide 39 Risks relating to the Issuer and the Group Financial risks

The Group is exposed to credit risks. Furthermore, changes in the discount rates may affect, for example, the Group’s pension The Group is exposed to credit risk, which arises from the Group’s operating activities as well liabilities. The pension liabilities are calculated based on several assumptions, one of the as from certain financing activities. The credit risk refers to the risk that the Group’s most significant being the discount rate. Based on the conditions prevailing on 31 December customers and other counterparties fail to fulfil their obligations, thus causing the Group to 2019, and taking into account the Group’s most significant pension plans in the United incur a loss. If there were to be a continued downturn in the economy leading to any of the States, Germany, the United Kingdom and , a 1 per cent decrease in the discount Group’s larger customers declaring bankruptcy or otherwise suffering from weakened rate would have increased the Group’s defined gross benefit obligations with MSEK 5,538. Consequently, a significant decreased discount rate would have an adverse impact on the financial abilities, it may negatively affect the likelihood of such counterparties honouring their obligations towards the Group. As of 31 December 2019, the Group had trade Group’s financial position. receivables amounting to MSEK 14,006 (of which MSEK 650 had fallen due for payment The Group is exposed to price risks. more than 30 days ago) and other receivables amounting to MSEK 5,636. The maximum The Group is further exposed to price risks as a result of its investment in equity securities. exposure to credit risk for the Group amounted to MSEK 26,172. A significant increase in As of 31 December 2019, the Group held a total of MSEK 355 in investments in equity trade and other receivables falling due without payment would have a material adverse securities with quoted stock prices, which are measured at fair value. The value of the effect on the Group’s results of operations and financial position. financial assets is highly dependent on, and subject to risks associated with, stock exchange The Group is exposed to interest rate risks. prices and indexes, which are in turn affected by the general economic climate. Increases in market interest rates present a risk to the Group, as it may affect the interest Consequently, the uncertainty in terms of the effects of the Covid-19 pandemic presents a charged on its borrowed capital, and consequently increase the Group’s costs. As of 31 significant risk with respect to the value of the Group’s equity securities. Based on the December 2019, the Group’s total interest-bearing financial liabilities amounted to MSEK conditions prevailing on 31 December 2019, a +/- 5 per cent change in the market share 33,295. Based on the conditions prevailing on the same date, a 1 per cent increase in the prices would have affected the available-for-sale reserve in equity by +/- MSEK 18. interest rate would have reduced the Group’s pre-tax profits, including the effect of Accordingly, there is a risk that decreased stock exchange prices and indexes have a derivatives, by approximately MSEK 90. Accordingly, increased market interest rates may significant negative impact on the value of the Group’s liquidity and financial position. lead to significantly increased costs for the Group, thus adversely impacting its results.

Slide 40 Risks relating to the Notes

Credit risk 2016/1011 of the European parliament and of the council of 8 June 2016 on indices used as Investors in the Notes carry a credit risk relating to the Issuer and the Group. Investors’ benchmarks in financial instruments and financial contracts or to measure the performance ability to receive payment under the Terms and Conditions is therefore dependent on the of investment funds and amending directives 2008/48/EC and 2014/17/EU and Regulation Group’s financial position. If the Group’s financial position deteriorates it is likely that the (EU) No 596/2014). The Benchmark Regulation came into force on 1 January 2018. The credit risk associated with the Notes will increase since the risk that the Issuer cannot fulfil effect of the Benchmark Regulation addressed the provision of benchmarks, the its payment obligations under the Notes increases. The Group’s financial position is affected contribution of input data to benchmarks and the use of benchmarks within the European Union. The effect of the Benchmark Regulation cannot yet be fully determined due, among by numerous risk factors, some of which have been outlined above. other things, to the limited period in which the regulation has been in force. However, there There is a risk that an increased credit risk will cause the market to charge the Notes a is a risk that the Benchmark Regulation will affect how certain benchmarks are determined higher risk premium, which will affect the Notes’ value negatively. There is also a risk that if and how they develop in the future. This could, for example, lead to increased volatility in the financial position of the Group deteriorates it will reduce the Group’s possibility to respect of some benchmarks. There is a risk that administrative requirements, and the receive debt financing at the time of the maturity of the Notes, or earlier, if necessary. resulting regulatory risk, may discourage stakeholders from participating in the production Risk related to the Notes’ interest rate structures of benchmarks, or that some benchmarks cease to be provided. If this were to happen in respect of a benchmark that is used for the Notes, it could potentially be detrimental to the The value of the Notes depends on several factors, one of the most significant in the long Noteholders. term being the market interest rates. Some Notes will bear floating rate interest at the rate of STIBOR plus a margin, and the interest rate of such Notes will be determined two Risks relating to admission to trading business days prior to the first day of each interest period. Hence, the interest rate is to a The Issuer has undertaken to ensure that the Notes are admitted to trading on a regulated certain extent adjusted for changes in the general interest rate levels. There is a risk that an market within certain stipulated time periods, as defined in the Terms and Conditions. There increase in the general interest rate levels will adversely affect the value of the Notes. Some is a risk that the Notes will not be admitted to trading Notes will bear a fixed rate interest and the value of such Notes may be adversely affected should the general interest rates increase above the rate paid on such Notes. The general Even if the Notes are admitted to trading on an exchange market, in accordance with the Terms and Conditions, the Notes may not always be actively traded. In general, financial interest rate level is to a high degree affected by the state of the Swedish and international economy and is outside the Group’s control. instruments with a high nominal value, such as the Notes, are not traded as frequently as financial instruments with a lower nominal value. Given the high nominal value of the Notes European Benchmark Regulation there is a risk that there will not be a liquid market for trading in the Notes. This may result The process for determining STIBOR and other interest-rate benchmarks is subject to a in Noteholders being unable to sell their Notes when they wish to do so or at a price which number of statutory rules and other regulations. Some of these rules and regulations have allows them to make profit comparable to similar investments with an active and already been implemented, whilst some are due to be implemented in the near future. The functioning secondary market. Lack of liquidity in the market may have a negative impact on most extensive initiative in this respect is the Benchmark Regulation (Regulation (EU) the market value of the Notes.

Slide 41 Risks relating to the Notes

No action against the Issuer and Noteholders’ representation return on their investments. Government and monetary authorities may impose (as some In accordance with the Terms and Conditions, the Agent will represent all Noteholders in all have done in the past) exchange controls that could adversely affect an applicable exchange matters relating to the Notes and the Noteholders are prevented from taking unilateral rate or the ability of the Issuer to make payments in respect of the Note. As a result, there is action against the Issuer. Consequently, individual Noteholders do not have the right to take a risk that investors may receive less interest or principal than expected, or no interest or legal action to declare any default by claiming any payment from the Issuer and may principal at all. therefore lack effective remedies against the Issuer, unless and until a requisite majority of Risks relating to credit rating the Noteholders agree to take such action. There is consequently, a risk that the value of the Moody’s have assigned credit rating to the Notes. The rating may not reflect the potential Notes will decrease meanwhile a requisite majority is not willing to take necessary legal impact of all risks related to structure, market, additional factors discussed above, and other actions against the Issuer. The unwillingness of a majority of Noteholders to act could thus factors that may affect the value of the Notes. A credit rating is not a recommendation to damage the value of other Noteholders’ investments in the Notes. buy, sell or hold securities and may be revised, suspended or withdrawn by the rating However, there is a risk that an individual Noteholder, in certain situations, could bring its agency at any time. own action against the Issuer (in breach of the Terms and Conditions), which could adversely In general, European regulated investors are restricted under the CRA Regulation from using affect an acceleration of the Notes or other action against the Issuer. for example, would an credit ratings for regulatory purposes, unless such ratings are issued by a credit rating individual Noteholder initiate a bankruptcy proceeding against the Issuer, such proceeding agency established in the EU and registered under the CRA Regulation (and such registration could, despite being in breach of the Terms and Conditions, be legally valid, and has not been withdrawn or suspended, subject to transitional provisions that apply in consequently, cause damage to the Issuer and/or the other Noteholders. certain circumstances). Such general restriction will also apply in the case of credit ratings Under the Terms and Conditions, the Agent will in some cases have the right to make issued by non-EU credit rating agencies, unless the relevant credit ratings are endorsed by decisions and take measures, including the right to agree to amend and waive provisions an EU-registered credit rating agency or the relevant non-EU rating agency is certified in under the Terms and Conditions, that bind all Noteholders. Consequently, there is a risk that accordance with the CRA Regulation (and such endorsement action or certification, as the the actions of the Agent is such matters affect a Noteholder’s rights under the Terms and case may be, has not been withdrawn or suspended, subject to transitional provisions that Conditions in a manner that is undesirable or negative for some of the Noteholders, and apply in certain circumstances). If the status of the rating agency rating the Notes changes, consequently, the materiality of such risks are dependent on the preferences of each European regulated investors may no longer be able to use the rating for regulatory Noteholder. purposes and the Notes may have a different regulatory treatment. This may result in Risks relating to currency European regulated investors selling the Notes which may impact the value of the Notes and any secondary market. The Notes are denominated and payable in SEK. If Noteholders measure their investment return by reference to a currency other than SEK, an investment in the Notes will entail The list of registered and certified rating agencies published by the European Securities and foreign exchange-related risks due to, among other factors, possible significant changes in Markets Authority (“ESMA”) on its website in accordance with the CRA Regulation is not conclusive evidence of the status of the relevant rating agency included in such list, as there the value of the SEK relative to the currency by reference to which investors measure the return on their investments. This could cause a decrease in the effective yield of the Notes may be delays between certain supervisory measures being taken against a relevant rating below their stated coupon rates and could result in a loss to investors when the return on agency and the publication of the updated ESMA list. Moody’s is a registered credit rating the Notes is translated into the currency by reference to which the investors measure the agency under the CRA Regulation. Slide 42