According to the Swedish Companies Act and the Swedish Code of Corporate Governance, the Board of Directors must

• ensure that the Company has satisfactory internal controls;
• inform itself of the Company’s internal control system; and
• assess how well it is working.

This report has been prepared in accordance with the Swedish Code of Corporate Governance, section 3.7.2, and is thereby limited to internal control over financial reporting.

The Swedish Corporate Governance Board has made a pronouncement to the effect that the Internal Control report must be included as part of the Corporate Governance Report. The Board of Directors needs not state how well the internal control over financial reporting has worked; nor do the auditors have to examine the Internal Control Report. In accordance with this pronouncement, we are not making any such statement in this report for 2007, and this report has not been examined by our auditors.

Because the Company is listed in the United States, the assessed effectiveness of internal controls over financial reporting, outlined in SOX section 404, apply. The Company has implemented detailed controls, documentation and testing procedures in accordance with the COSO framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission, to ensure compliance with SOX 404. Management’s report according to SOX 404 will be included in Ericsson’s Annual Report on Form 20-F which will be filed with the SEC in the United States. During 2007, the Company has continued to work with the design and execution of financial controls to improve the efficiency of the controls.

Ericsson has integrated risk management and internal control into its business processes. As defined in the COSO framework for internal control, components of internal control are: a control environment, risk assessment, control activities, information and communication, and monitoring.

The Company’s internal control structure is based on the division of labor between the Board of Directors and its Committees and the President and CEO and a management system that is based on:

• the Company’s organization and mode of operations, with well-defined roles and responsibilities and delegations of authority;
• steering documents, such as policies and directives, and a Code of Business Ethics; and
• several well-defined processes for planning, operations and support.

The most essential parts of the control environment relative to financial reporting are included in steering documents for accounting and financial reporting. These steering documents are updated regularly to include, among other things, changes to laws, financial reporting standards and listing requirements, such as IFRS and SOX.

Risks related to financial reporting are fraud and loss or embezzlement of assets, undue favorable treatment of counter-parties at the expense of the Company, and other risks of material misstatements in the financial statements, for example, those related to recognition and measurement of assets, liabilities, revenue and cost or insufficient disclosure. Ericsson is managed through common processes, where risk management is integrated, applying various methods of risk assessment and control, to ensure that the risks to which the Company is exposed are managed according to established policies. Accounting and financial reporting policies and directives cover areas of particular significance to support correct accounting, reporting and disclosure.

The Company’s business processes include financial controls regarding the approval and accounting of business transactions. The financial closing and reporting process has controls regarding recognition, measurement and disclosure, including the application of critical accounting policies and estimates, in individual subsidiaries as well as in the consolidated accounts. All legal entities, business units and market units in Ericsson have own dedicated controller functions which participate in planning and evaluating each unit’s performance. Regular analysis of the financial reports for their respective units covers the significant elements of assets, liabilities, revenues, costs and cash flow. Together with analysis performed at the Group level, this important element of internal control ensures that the financial reports do not contain material errors.

For external financial reporting purposes, additional controls ensure that all disclosure requirements are fulfilled by a Disclosure Committee established by Company management.

The Company has implemented controls to ensure that the financial reports are prepared in accordance with IFRS. To ensure that Ericsson’s CEO and CFO can assess the effectiveness of the internal control in a way that is compliant with SOX requirements, the Company also maintains detailed documentation on internal controls related to accounting and financial reporting, as well as on monitoring the execution and results of such controls. A thorough review of materiality levels related to the financial reports has resulted in the implementation of detailed control documentation in several subsidiaries with significant scale of operations. For other subsidiaries, the Company has implemented overall controls which relate to the control environment and comply with the policies and directives related to financial reporting.

The Company’s information and communication channels support completeness and correctness of financial reporting, for example, by making internal instructions and policies regarding accounting and financial reporting widely known and accessible to all employees concerned, as well as through regular updates and briefing documents regarding changes in accounting policies and reporting and disclosure requirements.

Subsidiaries and operations units make regular financial and management reports to internal steering groups and Company management, including analysis and comments on financial performance and risks. The Board of Directors receives financial reports monthly. The Audit Committee has established a “whistle blower” procedure for reporting violations relative to accounting, internal controls and auditing matters.

The Company’s financial performance is reviewed at each Board meeting. The committees of the Board fulfill important monitoring functions regarding remuneration, borrowing, investments, customer financing, cash management, financial reporting and internal control. The Audit Committee and the Board of Directors review all interim and annual financial reports before they are released to the market. The Audit Committee also receives regular reports from the external auditors. The Audit Committee follows up on any actions taken to improve or modify controls.

The Company’s process for financial reporting is reviewed annually by Management and forms a basis for evaluating the internal management system and internal steering documents to ensure that they cover all significant areas related to financial reporting. Compliance with policies and directives is monitored through annual self-assessments and representation letters from heads and controllers in all subsidiaries as well as from business units and market units. The Company’s internal audit function, which reports to the Audit Committee, performs independent audits.