A global group The Volvo Group is one of the leading suppliers of commercial 2 Organization The Volvo Group 2006 4 Volvo in society transport solutions providing products such as trucks, 6 Vision, mission and values buses, construction equipment, drive systems for marine 8 Market overview T By creating value for 10 CEO comment and industrial applications compo- h as well as aircraft engine e our customers, we 12 Our customers’ needs govern our nents. The Volvo Group also offers its customers strategy… V o create value for our 13 1. Profitable growth fi nancial services. l 14 2. Innovation and product development v o 15 3. Highest quality in implementation The Group has about 83,000 employees, production facilities shareholders 16 Financial strategy G in 18 countries, and sales activities in some 180 countries. 18 Leading supplier of commercial r o transport solutions During 2006 Volvo Group sales rose 7% to SEK 248 billion, u 20 Volvo 3P – Development and synergies p SEK 40.20. 24 Volvo Powertrain - Uniform power with earnings per share advancing 25% to The 2 28 Long-term strategy in Asia 0 share is listed on the Stockholm Stock Exchange and on 30 The share 0 6 Sustainable development NASDAQ in the US. 32 Introduction 35 Environmental responsibility 40 Social responsibility Board of Directors’ Report 46 Significant events 50 Financial performance 52 Financial position 54 Cash-flow statement 56 Risk management 59 Business areas 60 Mack Trucks 62 Renault Trucks 64 Volvo Trucks 66 Trucks 68 Buses Information about IFRS 70 Construction Equipment As of January 1, 2005, AB Volvo complies with International Financial Reporting Standards (IFRS), 72 Volvo Penta 74 Volvo Aero previously known as IAS, as adopted by the European Union. Figures for the corresponding peri- 76 Financial Services ods in 2004 have been restated according to IFRS. In the financial information on pages 1 to 77 Volvo Financial Services is reported in accordance with the equity method. Reporting in accor- Corporate Governance Report 78 Report dance with IAS 1 begins with Financial information on page 86. 82 Group Management 84 Board of Directors and auditors Financial information 87 Income statements 88 Balance sheets 89 Changes in shareholders’ equity w 90 Cash-flow statements w 91 Notes to the consolidated financial w statements . v 138 Parent Company AB Volvo o l v 152 Proposed disposition of unappropriated o earnings . c This report contains “forward-looking statements.” Such statements reflect management’s current expectations with respect to certain future 153 Audit Report for AB Volvo o events and potential financial performance. Although the Company believes that the expectations reflected in such forward looking statements m are reasonable, no assurance can be given that such expectations will prove to have been correct. Such statements are subject to risk and 154 Eleven-year summary uncertainties and such future events and financial performance could differ materially from those set out in the forward looking statements as a result of, among other factors, (i) changes in economic, market and competitive conditions, (ii) success of business and operating initiatives, (iii) 162 Customer offering changes in the regulatory environment and other government actions, (iv) fluctuations in exchange rates and (v) business risk management. This report does not imply that the company has undertaken to revise these forward-looking statements, beyond what is required under the Flap Definitions company’s registration contract with the Stockholm Stock Exchange if and when circumstances arise that will lead to changes compared to the date when these statements were provided. Annual General Meeting The Volvo Group’s formal financial reports are presented on pages 46-77 and 86-152 in the printed version and has been audited by the company’s auditors. A global group The Volvo Group is one of the leading suppliers of commercial 2 Organization The Volvo Group 2006 4 Volvo in society transport solutions providing products such as trucks, 6 Vision, mission and values buses, construction equipment, drive systems for marine 8 Market overview T By creating value for 10 CEO comment and industrial applications compo- h as well as aircraft engine e our customers, we 12 Our customers’ needs govern our nents. The Volvo Group also offers its customers strategy… V o create value for our 13 1. Profitable growth fi nancial services. l 14 2. Innovation and product development v o 15 3. Highest quality in implementation The Group has about 83,000 employees, production facilities shareholders 16 Financial strategy G in 18 countries, and sales activities in some 180 countries. 18 Leading supplier of commercial r o transport solutions During 2006 Volvo Group sales rose 7% to SEK 248 billion, u 20 Volvo 3P – Development and synergies p SEK 40.20. 24 Volvo Powertrain - Uniform power with earnings per share advancing 25% to The 2 28 Long-term strategy in Asia 0 share is listed on the Stockholm Stock Exchange and on 30 The share 0 6 Sustainable development NASDAQ in the US. 32 Introduction 35 Environmental responsibility 40 Social responsibility Board of Directors’ Report 46 Significant events 50 Financial performance 52 Financial position 54 Cash-flow statement 56 Risk management 59 Business areas 60 Mack Trucks 62 Renault Trucks 64 Volvo Trucks 66 Trucks 68 Buses Information about IFRS 70 Construction Equipment As of January 1, 2005, AB Volvo complies with International Financial Reporting Standards (IFRS), 72 Volvo Penta 74 Volvo Aero previously known as IAS, as adopted by the European Union. Figures for the corresponding peri- 76 Financial Services ods in 2004 have been restated according to IFRS. In the financial information on pages 1 to 77 Volvo Financial Services is reported in accordance with the equity method. Reporting in accor- Corporate Governance Report 78 Report dance with IAS 1 begins with Financial information on page 86. 82 Group Management 84 Board of Directors and auditors Financial information 87 Income statements 88 Balance sheets 89 Changes in shareholders’ equity w 90 Cash-flow statements w 91 Notes to the consolidated financial w statements . v 138 Parent Company AB Volvo o l v 152 Proposed disposition of unappropriated o earnings . c This report contains “forward-looking statements.” Such statements reflect management’s current expectations with respect to certain future 153 Audit Report for AB Volvo o events and potential financial performance. Although the Company believes that the expectations reflected in such forward looking statements m are reasonable, no assurance can be given that such expectations will prove to have been correct. Such statements are subject to risk and 154 Eleven-year summary uncertainties and such future events and financial performance could differ materially from those set out in the forward looking statements as a result of, among other factors, (i) changes in economic, market and competitive conditions, (ii) success of business and operating initiatives, (iii) 162 Customer offering changes in the regulatory environment and other government actions, (iv) fluctuations in exchange rates and (v) business risk management. This report does not imply that the company has undertaken to revise these forward-looking statements, beyond what is required under the Flap Definitions company’s registration contract with the Stockholm Stock Exchange if and when circumstances arise that will lead to changes compared to the date when these statements were provided. Annual General Meeting The Volvo Group’s formal financial reports are presented on pages 46-77 and 86-152 in the printed version and has been audited by the company’s auditors. A global group 2006 129.6 SEK bn Net sales 2006 2000 Net sales 2000 66.3 SEK bn Volvo Group customers are active in more than 2006 180 countries worldwide, mainly in Europe and 73.7 SEK bn North America as well as to a considerable 2000 38.2 SEK bn extent in Asia. Group sales of products and 2006 19.6 SEK bn services are conducted through wholly owned 2000 and independent dealers. The global service 8.7 SEK bn network handles customer demand for spare parts and other services. During 2006, the Group’s workforce rose to 2006 12.7 SEK bn 83,187 employees in 58 countries. The majority 2000 of employees are based in Sweden, France and 3.4 SEK bn the US. A key feature of the Volvo Group’s growth strategy is to increase its presence in emerging markets, primarily in Asia and Eastern Europe. During 2006, the Group increased its sales in 2006 12.5 SEK bn Eastern Europe by 41%. Volvo implemented 2000 investments in Asia during 2006 in Japan and 4.7 SEK bn China. These provided a platform for increased sales and in the long term are expected to con- tribute to the Group’s growth target. North America South America Europe Asia Rest of world Net sales, SEK M 73,657 12,533 129,613 19,610 12,722 Percentage of the Volvo Group’s sales, % 30 5 52 8 5 Production facilities ■ Mack Trucks Macungie, New River Valley (US) Las Tejerias (VE) Brisbane (AU) ■ Renault Trucks Blainville, Bourg-en-Bresse, Limoges (FR), Villaverde (ES) ■ Volvo Trucks New River Valley (US) Curitiba (BR) Göteborg, Umeå (SE), Gent (BE) Bangalore (IN), Jinan* (CN) Durban (ZA), Brisbane (AU) ■ Buses St Claire, St Eustache (CA), Mexico City (MX) Curitiba (BR) Borås, Säffle, Uddevalla (SE), Tammerfors, Åbo (FI), Wroclaw (PL) Bangalore (IN), Shanghai*, Xian* (CN) Durban (ZA) ■ Construction Equipment Asheville (US), Goderich (CA) Pederneiras (BR) Arvika, Braås, Eskilstuna, Hallsberg (SE), Konz-Könen (DE), Belley (FR), Wroclaw (PL) Changwon (KR), Shanghai (CN), Linyi* (CN) ■ Volvo Penta Lexington (US) Göteborg, Vara (SE) Wuxi* (CN) ■ Volvo Aero Boca Raton, Newington (US) Bromma, Trollhättan (SE), Kongsberg (NO) ■ Volvo Powertrain Hagerstown (US) Curitiba (BR) Köping, Skövde (SE), Vénissieux (FR) * Ownership ≥ 50% A global group 2006 129.6 SEK bn Net sales 2006 2000 Net sales 2000 66.3 SEK bn Volvo Group customers are active in more than 2006 180 countries worldwide, mainly in Europe and 73.7 SEK bn North America as well as to a considerable 2000 38.2 SEK bn extent in Asia.