ASSA ABLOY Annual Report 2010

FY2010 Annual Report · ASSA ABLOY

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ASSA ABLOY is the global
leader in door opening solutions,
dedicated to satisfying
end-user needs for security,
safety and convenience

www.assaabloy.com

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ASSA ABLOY AB
P.O. Box 70 340
SE-107 23 Stockholm
Klarabergsviadukten 90
SE-111 64 Stockholm
Tel +46 (0) 8 506 485 00
Fax +46 (0) 8 506 485 85

Annual Report
2010

The global leader in
door opening solutions

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Contents

Report on operations

Divisions

CSR

Report of the Board
of Directors

Financial statements

Shareholder information

The ASSA ABLOY Group
Vision, financial targets and strategy
Statement by the President and CEO
Market presence
Product leadership
Cost-efficiency
Growth and profitability
ASSA ABLOY divisions
EMEA division
Americas division
Asia Pacific division
Global Technologies division
Entrance Systems division
Employees
Sustainable development
Report of the Board of Directors
Significant risks and risk management
Corporate governance
Board of Directors
The Executive Team
Remuneration guidelines for senior management
Sales and income
Consolidated income statement and
Statement of comprehensive income
Comments by division
Results by division
Financial position
Consolidated balance sheet
Cash flow
Consolidated cash flow statement
Changes in consolidated equity
Parent company financial statements
Notes
Comments on five years in summary
Five years in summary
Quarterly information
Definitions of key data
Proposed distribution of earnings
Audit report
The ASSA ABLOY share
Information for shareholders
Glossary

1
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18
26
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36
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59
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64
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74

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112
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» Future shareholder value is based on organic
and acquired growth as well as continued
rationalization and synergies in the Group «

– Johan Molin, President and CEO

Cover photograph: Kitty Yu and daughter Chloe.

Kitty is a graduate of the University of Southern
California Law School, Los Angeles, USA and is legal
affairs director of ASSA ABLOY Asia Pacific. She is based
in Hong Kong and brings great competence to all
acquisitions and major legal undertakings
in the Asia Pacific region.

ASSA ABLOY is the global
leader in door opening solutions,
dedicated to satisfying
end-user needs for security,
safety and convenience

www.assaabloy.com

A
S
S
A
A
B
L
O
Y

A
n
n
u
a
l

R
e
p
o
r
t
2
0
1
0

ASSA ABLOY AB
P.O. Box 70 340
SE-107 23 Stockholm
Klarabergsviadukten 90
SE-111 64 Stockholm
Tel +46 (0) 8 506 485 00
Fax +46 (0) 8 506 485 85

Annual Report
2010

The global leader in
door opening solutions

Contents

Report on operations

Divisions

CSR

Report of the Board
of Directors

Financial statements

Shareholder information

1
4
8
18
26
32
36
38
40
42
44
48
50
52
59
61
64
68
70
73
74

75
76
77
78
79
80
81
82
84
86
112
113
114
115
116
117
118
122
123

» Future shareholder value is based on organic
and acquired growth as well as continued
rationalization and synergies in the Group «

– Johan Molin, President and CEO

Cover photograph: Kitty Yu and daughter Chloe.

The ASSA ABLOY Group

ASSA ABLOY is the global leader in door opening solutions,
dedicated to satisfying end-user needs for security, safety and
convenience.

ASSA ABLOY is represented on both mature and emerging
markets worldwide, with leading positions in much of Europe,
North America, Asia and the Pacific. In the fast-growing electro-
mechanical security segment, the Group has a leading position
in areas such as access control, identification technology,
entrance automation and hotel security.

Since its formation in 1994, ASSA ABLOY has grown from
a regional company into an international group with around
37,000 employees and sales of around SEK 37 billion. As the
world’s leading lock group, ASSA ABLOY offers a more complete
range of door opening solutions than any other company on the
market.

Key data

Sales, SEK M
of which: Organic growth, %
Acquired growth, %
Exchange-rate effects, %
Operating income (EBIT), SEK M
Operating margin (EBIT), %
Income before tax (EBT), SEK M
Operating cash flow, SEK M
Return on capital employed, %

Data per share

Earnings per share after tax
and dilution, SEK/share
Equity per share after
dilution, SEK/share
Dividend, SEK/share
Number of shares after
dilution, thousands

2008¹

34,829
0
4
0
5,526²
15.9²
4,756²
4,769
17.2²

2008

9.21²

55.91
3.60

2009¹

34,963
–12
3
9
5,413²
15.5²
4,779²
6,843
16.2²

2009

9.22²

54.76
3.60

2010

Change

36,823
3
8
–6
6,046
16.4
5,366
6,285
18.5

+5%

+12%

+12%
–8%

2010

Change

+18%

10.89

58.64
4.00³

380,713

372,931

372,736

¹ 2008 and 2009 have been reclassified. ² Excluding items affecting comparability. ³ As proposed by the Board of Directors.

•

Important events during the year

Sales rose 5 percent to SEK 36,823 M (34,963).

Operating income amounted to SEK 6,046 M (5,413).

Earnings per share after full dilution amounted to
SEK 10.89 (9.22).

Operating cash flow amounted to SEK 6,285 M (6,843)

Investments in product development accelerated
and a large number of new products were launched.

A scalable infrastructure for secure delivery of
mobile keys was launched during the year.

Acquisition of Pan Pan which is China’s largest
manufacturer of high security steel doors. Other large
acquisitions where King Door Closers, South Korea,
Paddock, United Kingdom and ActivIdentity, USA.

•

Signed an agreement to acquire Cardo, a leading
Swedish industrial door company.

DEVELOPMENT 2006–2010

FOR A COMPLETE REVIEW OF THE GROUP AND ITS DIVISIONS, SEE PAGE 36–37

SALES AND OPERATING INCOME

INCOME BEFORE TAX AND OPERATING CASH FLOW

EARNINGS PER SHARE¹ AFTER TAX AND FULL DILUTION

DEVELOPMENT OF EARNINGS PER SHARE

Sales
SEK M

36,000

30,000

24,000

18,000

12,000

6,000

Operating income
SEK M

6,000

5,000

4,000

3,000

2,000

1,000

(cid:132) Sales1
Operating income2

¹ Figures for 2008 and 2009
are affected by reclassifica-
tion.
² Excluding items affecting

comparability, 2006, 2008
and 2009.

09 10

SEK M

7,000

6,000

5,000

4,000

3,000

2,000

1,000

(cid:132) Income before tax1
(cid:132) Operating cash flow

O
N
341

R D I C ECOL

123

I
N

TED M A T T E

09 10

¹ Excluding items affecting
comparability, 2006, 2008
and 2009.

SEK

09 10

¹ Excluding items affecting
comparability, 2006, 2008
and 2009.

SEK

11
10
9
8
7
6
5
4
3
2
1
0

Production: ASSA ABLOY, Hallvarsson & Halvarsson.
Photos: front page, Can Wong, page 6–7 Peter Hoelstad, page 16 Rafn Sigurbjörnsson,
page 19, 29, 47 Getty Images, page 22–23 Rithuset,page 26–27 White View,
page 8–9 Dehli Airport Image© HOK and ASSA ABLOYs own photographic library, among others.
Translation: Textforum. Printing: Elanders AB, Falköping, March 2011.

The ASSA ABLOY Group

ASSA ABLOY is the global leader in door opening solutions,
dedicated to satisfying end-user needs for security, safety and
convenience.

Key data

Data per share

Earnings per share after tax
and dilution, SEK/share
Equity per share after
dilution, SEK/share
Dividend, SEK/share
Number of shares after
dilution, thousands

2008¹

34,829
0
4
0
5,526²
15.9²
4,756²
4,769
17.2²

2008

9.21²

55.91
3.60

2009¹

34,963
–12
3
9
5,413²
15.5²
4,779²
6,843
16.2²

2009

9.22²

54.76
3.60

2010

Change

36,823
3
8
–6
6,046
16.4
5,366
6,285
18.5

+5%

+12%

+12%
–8%

2010

Change

+18%

10.89

58.64
4.00³

380,713

372,931

372,736

¹ 2008 and 2009 have been reclassified. ² Excluding items affecting comparability. ³ As proposed by the Board of Directors.

•

Important events during the year

Sales rose 5 percent to SEK 36,823 M (34,963).

Operating income amounted to SEK 6,046 M (5,413).

Earnings per share after full dilution amounted to
SEK 10.89 (9.22).

Operating cash flow amounted to SEK 6,285 M (6,843)

Investments in product development accelerated
and a large number of new products were launched.

A scalable infrastructure for secure delivery of
mobile keys was launched during the year.

•

Signed an agreement to acquire Cardo, a leading
Swedish industrial door company.

DEVELOPMENT 2006–2010

FOR A COMPLETE REVIEW OF THE GROUP AND ITS DIVISIONS, SEE PAGE 36–37

SALES AND OPERATING INCOME

INCOME BEFORE TAX AND OPERATING CASH FLOW

EARNINGS PER SHARE¹ AFTER TAX AND FULL DILUTION

DEVELOPMENT OF EARNINGS PER SHARE

Sales
SEK M

36,000

30,000

24,000

18,000

12,000

6,000

Operating income
SEK M

6,000

5,000

4,000

3,000

2,000

1,000

(cid:132) Sales1
Operating income2

¹ Figures for 2008 and 2009
are affected by reclassifica-
tion.
² Excluding items affecting

comparability, 2006, 2008
and 2009.

09 10

SEK M

7,000

6,000

5,000

4,000

3,000

2,000

1,000

(cid:132) Income before tax1
(cid:132) Operating cash flow

O
N
341

R D I C ECOL

123

I
N

TED M A T T E

09 10

¹ Excluding items affecting
comparability, 2006, 2008
and 2009.

SEK

09 10

¹ Excluding items affecting
comparability, 2006, 2008
and 2009.

SEK

11
10
9
8
7
6
5
4
3
2
1
0

Creating opportunities for growth and profitability

Today ASSA ABLOY is the leading global supplier of lock and security solutions. Products from
ASSA ABLOY account for more than one in ten of all lock and security installations worldwide.
The strategy to further strengthen the Group’s position is divided into three areas:

World-leading
market presence

A world-leading market presence is achieved by exploiting the strength of the brand
portfolio, increasing growth in the core business and expanding into new markets and
segments. ASSA ABLOY has many of the industry’s strongest brands. The sales teams
on the local markets are united under the ASSA ABLOY master brand to better meet
the rising demand for more complete security solutions. Collaboration with architects,
security consultants and major end-users on the specification and project market is
being intensified. The Group is expanding into new geographical markets through the
development of distribution channels, with customized product offerings and through
acquisitions.

The Group’s
product leadership

The Group’s product leadership is achieved through the continuous development of
products offering enhanced customer value and lower product costs. A key activity for
achieving this is the use of common product platforms with fewer components. New
products are also being developed in close collaboration with ASSA ABLOY’s end-users
and distributors to enhance customer value. The product development process has
been streamlined by implementing a clearly defined common development process
and by separating the maintenance and improvement of existing products from new
development.

Efforts to increase
cost-efficiency

Efforts to increase cost-efficiency continue in all areas, including common product
platforms with fewer components and common product development. In production,
flexible final assembly close to the customer is combined with the transfer of high-volume
standard production to external and internal production units in low-cost countries. The
implementation of lean methods continues, and is leading to more efficient production
flows, better control of material costs, improved decision-making procedures, shorter
development times and increased cooperation between marketing and sales teams.

Increased growth
and profitability

ASSA ABLOY creates opportunities for increased growth and profitability through
a strong focus on the strategy’s three areas of market presence, product leadership
and cost-efficiency.

ASSA ABLOY ANNUAL REPORT 2010

VISION, FINANCIAL TARGETS AND STRATEGY 1

Vision

•

To be the world-leading, most successful and most innovative
provider of total door opening solutions,

to lead in innovation and offer well-designed, convenient, safe and
secure solutions that create added value for our customers, and

•

to be an attractive company to work for.

Financial targets

•

10 percent annual growth through a combination of organic
and acquired growth.

• An operating margin of 16–17 percent.

The financial targets are long-term goals and should be considered
as an average over a business cycle.

VISION, FINANCIAL TARGETS AND STRATEGY

ASSA ABLOY ANNUAL REPORT 2010

Strategy

The Group’s overall focus is to spearhead the trend towards higher security with a product-driven
offering centered on the customer. The primary product areas are the traditional segments of
mechanical locks and security doors, as well as the fast-growing segments of electromechanical
and electronic locks, access control, identification technology and automatic doors.

ASSA ABLOY’s strong development is based on long-term structural growth in demand on mature
markets in Europe, North America, Australia and New Zealand, increasing demand on emerging
markets in Asia, eastern Europe, Africa and South America, and successes in fast-growing product
segments.

The strategic action plans have been divided into three focus areas: market presence,
product leadership and cost-efficiency.

Strategy

Product
leadership

page 18–25

Goal

Growth and
profitability

page 32–35

Cost-
efficiency

page 26–31

Market
presence

page 8–17

ASSA ABLOY ANNUAL REPORT 2010

VISION, FINANCIAL TARGETS AND STRATEGY 3

Statement by the President and CEO
Continued profitable growth

I was pleased to note that the business cycle improved in 2010 and organic growth returned to a good
6 percent in the second half of the year. The good growth was achieved through consistent investments
in new products, selective strengthening of the market organization and a number of exciting acquisi-
tions. Meanwhile ASSA ABLOY continued its successful efforts to increase efficiency and emerged from
the recession as a much stronger company. Earnings and margins remained at a record high and increas-
ing level throughout the year, while cash flow was strong and the financial position was robust. 13 acqui-
sitions were completed during the year increasing sales by 8 percent, largely in emerging markets, and
the Group’s largest ever acquisition was initiated by a public offer for the Swedish Cardo group.

Strategic action plans
We operate in an industry that is under consolidation and
increased presence on existing and new markets is there-
fore crucial for the Group’s growth and position as market
leader. Organic growth is the single most important driving
force and requires strong innovative product leadership. In
addition, continuous efforts to increase cost-efficiency are
required to secure strong value creation. We create the
opportunities for future growth with continued high profit-
ability by combining enhanced market presence, strong
innovative product leadership and cost-efficiency.

Market presence
During the year the Group continued to unite the sales
forces under the ASSA ABLOY master brand, enabling a fur-
ther widening of the product range and streamlining of
market development. Today more than 70 percent of the
products are double-branded with the local brand endorsed
by the ASSA ABLOY brand and it is gradually increasing. In
addition the remaining 30 percent of the products are sold
under the Yale, HID, ABLOY and Mul-T-Lock brands. These

global brands complement ASSA ABLOY’s market presence
and range.

Clear market segmentation of the sales organization is
fundamental for continued growth in the core business. The
successful expansion of the market organization continued,
with increased focus on specifiers, architects and the fast-
growing area of electromechanical door opening solutions.

I especially would like to emphasize the consistent actions

to increase our presence on emerging markets in Asia, East
Europe, the Middle East, Africa and South America. These mar-
kets accounted for a full 24 percent of total Group sales in
2010, compared with 9 percent six years ago.

Acquisition activity was high during the year and is an
important part of the Group’s development. Acquisitions
complement ASSA ABLOY’s product range, provide new
technology and increases the Group’s geographical market
presence.

A total of 13 acquisitions were completed, with annual

sales of SEK 2,880 M, equivalent to 8 percent acquired
growth. Major acquisitions included Pan Pan (China), King
Door Closers (South Korea), ActivIdentity (USA) and Pad-
dock (UK).

STATEMENT BY THE PRESIDENT AND CEO

ASSA ABLOY ANNUAL REPORT 2010

Product leadership
ASSA ABLOY is firmly convinced that a continuous flow of
new innovative products, with enhanced customer value
and lower product costs, is the single most important driver
for organic growth. Successful product development is
therefore vital for the Group’s future. ASSA ABLOY’s vision
is to be the most innovative supplier of total door opening
solutions and investments in R&D have increased signifi-
cantly in recent years.

A Group-wide product development process based on
customer needs has been introduced, considerably stream-
lining and shortening the development of new products. As
a result, we saw sales of products launched in the past three
years exceeding 20 percent (8) for the first time.

Key measures for achieving this were the use of common
product platforms, modularization with fewer components,
the introduction of shared competence centers and widen-
ing the geographical spread of new products.

Customers are increasingly demanding more advanced
door opening solutions and the technical level is constantly
rising. Meanwhile sales of electromechanical door open-
ing solutions are growing considerably faster than those of
traditional mechanical products. Global common product
platforms, which are then adapted to the local markets, have
therefore become increasingly important. These platforms
have been successfully developed by the Group product
development function, Shared Technologies, and through
collaboration within and between divisions.

Cost-efficiency
Cost-efficiency affects the production structure, product
costs and the administrative flow in the Group.

The process of change in the production structure began
with the restructuring programs launched in 2006, 2008 and
2009. These have been very successful, resulting in large sav-
ings and increased efficiency in the Group’s production units.
At year-end these programs had resulted in the closure of 38
production units, while 42 units had switched to mainly final
assembly. As a result of this restructuring 5,387 employees
have left the Group. Another 13 units are set to close during
2011 and 2012. One consequence is that an increasing vol-
ume of standard production has been transferred to inter-
nal and external units in low-cost countries. Meanwhile the
remaining local assembly has been improved through the
introduction of Lean methods throughout the Group, com-
bined with efficient final assembly of customized products.

Development of the divisions
EMEA division
Following a good start to the year, growth slowed during the
third and fourth quarter resulting in organic growth of 2 per-
cent (–12).

EMEA continued to develop and lead the European lock
market through aggressive marketing efforts. Specification
of total door opening solutions is increasingly important for
sales, and the number of specification sales representatives
has therefore been increased substantially in EMEA and the
close collaboration with architects and security consultants
was further strengthened.

The division made major investments in new innovative
products and several new pan-European product platforms
were launched. New products included digital door locks for
the residential market and electromechanical Cliq cylinders
with high security intended for commercial customers.

New innovative products and the ongoing efficiency pro-
grams resulted in a substantial increase in operating income.
The year saw the acquisition of Paddock (UK), Aptus
(Sweden), Seccom (Austria) and two small companies in
Denmark and Israel.

Americas division
The division returned to positive growth in the second half
of the year driven by gradually increasing demand in the ren-
ovation market. However, the absence of new construction
projects in North America had a negative impact on sales.
Growth was high throughout the year in Mexico, Central
and South America. All the division’s business units showed
growth towards the end of the year and organic growth for
the full year was –2 percent (–19).

The division continued to focus on the specification of
security solutions and further increased its knowledge of
end-user needs. Marketing tools such as a Mobile Innovation
Showroom allowed customers to view and learn about the
latest door opening solutions at convenient local venues.
The permanent product exhibition, the Innovation Show-
room, at the division’s main plant in Connecticut increased
customer awareness of new products and security solutions.
Many new electromechanical products and environmen-

tally sensitive solutions were launched.

Active marketing campaigns, new innovative products
and streamlining measures enabled the division to maintain
a very strong operating income and cash flow.

The year saw the acquisition of two U.S. companies:

In parallel with the reorganization of production in high-

Schaub and Security Metal Products.

cost countries, it is very satisfying to see that ASSA ABLOY
has maintained a rapid expansion of the production base
in low-cost countries. A large proportion of the Group’s
total numbers of employees are now employed in low-cost
countries.

In product development, the Group works with common

product platforms with fewer components and common
product development.

With regard to the Group’s administrative flow, efforts

are now focused on automated and standardized solu-
tions, also known as Seamless Flow. Manual work is to be
reduced, and in many cases eliminated, creating a seamless
flow from the customer through the company’s various pro-
cesses to the suppliers. Cost reductions and increased effi-
ciency and quality will be immediate as these solutions are
implemented.

Asia Pacific division
The division grew strongly throughout the year led by very
strong growth in China, where demand particularly for secu-
rity doors was high. Growth was also strong on the South
Korean, Australian and New Zealand markets. The division
reported 14 percent (–1) organic growth for the year.

Asia Pacific worked actively on a number of initiatives to
increase the division’s market presence. Some of the most
important initiatives were the development of the specifica-
tion and project market, expansion into new markets and
segments, particularly in South and South-east Asia, and
through acquisitions.

As a result of organic growth and strategic acquisitions,
the Group can now offer a complete range of door opening
solutions on the Asian markets.

ASSA ABLOY ANNUAL REPORT 2010

STATEMENT BY THE PRESIDENT AND CEO 5

Statement by the President and CEO

» Future shareholder value is based on
organic and acquired growth as well
as continued rationalization and
synergies in the Group «

– Johan Molin, President and CEO

Profitability in the division and all business units increased
and was very strong.

The year saw the acquisition of Pan Pan and Longdian

(China) and King Door Closers (South Korea).

Global Technologies division
The Global Technologies division reported strong organic
growth of 10 percent (–12) for the year. HID experienced
strong growth throughout the year, while Hospitality
returned to positive growth in the second half of the year.

HID successfully launched a large number of new products
and services in logical and physical access and in secure card
issuance. These new products were well received by the
market resulting in strong growth. In addition, a number of
major customer projects were obtained in the product areas
of eGovernment and secure card issuance as well as from a
large number of major public institutions. Towards the end
of the year, the strategically important company ActivIden-
tity was acquired, providing important technology in logical
access. An agreement was also signed to acquire LaserCard
Corporation.

Hospitality continued to see a reduction in new hotel con-

struction, which has now reached its lowest level for three
years. Meanwhile demand for renovation and upgrades of
lock systems increased strongly as a result of the launch of
new hotel locks using RFID technology. Demand strength-
ened further towards the end of the year following the launch
of Orion, a system enabling more efficient hotel management
and also resulting in energy savings of up to 30 percent.

Through growing volumes and continued efficiency pro-

grams profitability increased throughout the division.

ASSA ABLOY’s Executive Team
From left to right: Tzachi Wiesenfeld, Head of EMEA division; Denis Hébert, Head of the HID Global business unit; Jonas Persson, Head of Asia Pacific division; Ulf
Södergren, Chief Technology Officer (CTO); Johan Molin, President and CEO and Head of Global Technologies division; Tomas Eliasson, Chief Financial Officer (CFO);

STATEMENT BY THE PRESIDENT AND CEO

ASSA ABLOY ANNUAL REPORT 2010

Entrance Systems division
New sales of automatic doors were weak throughout the
year, while service sales continued to grow strongly. Newly
acquired Ditec, where a large number of improvement proj-
ects were implemented, saw sales of entrance automation
products develop positively towards the end of the year. The
division reported organic growth of –2 percent (–3).

Efforts to expand the customer offering by selling total
automatic entrance solutions and industrial doors, includ-
ing a comprehensive service concept, continued success-
fully. Regular preventive service is beneficial for customers,
and ongoing contact with the end-customers also enhances
opportunities for additional sales. More efficient and auto-
mated processes were implemented in the service organi-
zation, providing opportunities for an increased number of
customer visits.

Rationalization of the production structure resulted in

a very strong earnings trend although the division’s total
operating margin was negatively impacted by the dilutive
effect of the Ditec acquisition.

The year saw the acquisition of Peiser (Germany) and Hunter
(Canada). In addition, an agreement was signed to acquire
a stake in Agta Record (Switzerland) and a bid was made for
the Swedish company Cardo. The acquisition of Cardo will
more than double the division’s sales and enable it to offer
customers a complete and unique range of products and
service in entrance automation.

Future development
The Group has further consolidated its market leadership
during the year and is today very well positioned for long-
term sustainable growth due to the global presence and
the market’s most innovative product range. Our focus on
the profitable commercial segment, the high proportion of
aftermarket sales and the increasing share of fast-growing
electromechanical and electronic products ensure strong
growth and earnings.

Looking forward to 2011, we expect continued good
growth on emerging markets and cautious recovery on
mature markets. The underlying economic trend is posi-
tive, but budgetary constraints may affect those market
segments that are dependent on public financing.

Major efforts by employees
Finally I should like to thank all our employees who contrib-
uted to the Group’s successes during the year, and I look
forward to our continued joint efforts to make ASSA ABLOY
even more successful.

Since its formation in 1994, ASSA ABLOY has gone
through several distinct stages of development and estab-
lished a global leadership position. Much has been accom-
plished, but many key markets and product areas remain to
be developed. We have never had a better product range,
higher market penetration or more innovative new products
than today. The continued demand for safety and security,
as well as continued population growth and urbanization
ensure that there is an underlying structural demand for the
Group’s products, which will increase over time. Combined
with the implemented and planned restructuring measures,
this means that we have excellent long-term opportunities
for continued growth and good profitability.

Stockholm, 7 February 2011

Johan Molin
President and CEO

Thanasis Molokotos, Head of Americas division; Tim Shea, Head of the ASSA ABLOY
Hospitality business unit; Juan Vargues, Head of Entrance Systems division.

ASSA ABLOY ANNUAL REPORT 2010

STATEMENT BY THE PRESIDENT AND CEO 7

Market
presence

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2010

A world-leading market presence is achieved by
exploiting the strength of the brand portfolio,
increasing growth in the core business and
expanding into new markets and segments.

The Asian Game Center in Guangzhou is one of many sports
arenas using ASSA ABLOY security solutions.

ASSA ABLOY ANNUAL REPORT 2010

MARKET PRESENCE 9

Market presence
Three main approaches to enhancing
market presence

A world-leading market presence is achieved by exploiting the strength of the brand portfolio,
increasing growth in the core business and expanding into new markets and segments.

» ASSA ABLOY has its own operations in

50 countries and sales all over the world «

The security market
Today ASSA ABLOY is the world-leading supplier of total
door opening solutions. As the Group has grown, its prod-
uct portfolio has expanded and evolved to cover the widely
varying needs of, for example, airports, schools, hospitals,
offices and homes. Growth in the security market is mainly
fuelled by increasing prosperity, urbanization and a general
trend towards increased security. The underlying trends and
growing uncertainty in the world put security high on the
agenda, driving the development of increasingly advanced
solutions and upgrades of existing security systems.

The total security market consists primarily of security
services and electronic and mechanical security products.
ASSA ABLOY estimates the total security market to be worth
around EUR 200 billion. The Group has focused its opera-
tions on electronic and mechanical security products as
well as security doors. The segment in which the Group is
active accounts for around 15 percent of the total market.
ASSA ABLOY has a global market share of over 10 percent
of that segment but with large variations between different
markets.

Mechanical and electronic security products
Mechanical security products mainly include cylinders, lock
cases, door closers, industrial locks, emergency exit devices
and window hardware. ASSA ABLOY is also a major manu-
facturer of security doors and door hardware. Development
in mechanical security products is mainly driven by renova-
tions and replacements of old locks in existing windows and
doors, as well as new construction. The market is growing in
pace with each country’s GDP, averaged over an economic
cycle, and is relatively stable for ASSA ABLOY. The majority
of Group sales are for use in existing buildings and therefore
less sensitive to cyclical fluctuations. The large aftermarket,
combined with the spread of ASSA ABLOY’s sales across a
large number of countries with different economic cycles,
contributes to stability in sales and profitability.

ASSA ABLOY’s range of electronic security products
includes electronic cylinders, automatic doors, secure iden-
tification and various access control products, some of
which use radio-frequency identification (RFID). Electronic
products generally offer high functionality and high security,
making them ideal for commercial applications. Focused
product development in this area is constantly expanding

the applications for ASSA ABLOY’s electromechanical prod-
ucts. Annual growth in the market for electronic security
products is estimated to be two to three times as great as
for mechanical security products. This is partly due to the
fact that today only 3–4 percent of all doors have electro-
mechanical locks or access control systems, but the percent-
age is steadily rising. Electronic products account for around
one-third of Group sales and this percentage is increasing
substantially every year.

Customer segments
ASSA ABLOY’s main customer segment is the commercial
segment comprising institutional and commercial custom-
ers, such as schools, hospitals, universities, airports and large
office buildings. This commercial segment accounts for
around 75 percent of Group sales, while the private residen-
tial segment accounts for around 25 percent.

Major customers
– the institutional and commercial market
This segment consists of institutional and commercial cus-
tomers such as universities, hospitals, offices, airports and
shopping malls, through which a large number of people
pass daily. The procurement of these projects is often com-
plex and involves many stakeholders on the customer side,
such as property and security managers. ASSA ABLOY has
specification staff who are experts in a specialized market
segment, in order to understand the varying needs for the
development of optimal security solutions for the customer.
Such projects often have long lead times and are based prin-
cipally on customized solutions. Distribution and installa-
tion are largely handled by installers and locksmiths.

Small and medium-sized customers
This segment is characterized by the customer’s need for
professional advice and installation, which is primarily met
by specialized distributors and installers, such as locksmiths.
ASSA ABLOY works actively to train distributors and to
develop more standardized solutions for small and medium-
sized companies such as stores and offices.

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2010

Share of Group sales by region 2010

NORTH AMERICA

32 %
0 %

EUROPE

ASIA

43 %
+6 %

15 %
+66 %

Share of Group sales
in local currencies
2010, %

Change relative to
the previous year, %

SOUTH AMERICA

AFRICA

PACIFIC

2 %
+38 %

2 %
–5 %

6 %
+6 %

Share of Group sales
in local currencies
2010, %

Change relative to
the previous year, %

INCREASED SALES ON EMERGING MARKETS

2004

2010

Emerging markets, 9 %
Mature markets, 91 %

Emerging markets, 24 %
Mature markets, 76 %

ASSA ABLOY ANNUAL REPORT 2010

MARKET PRESENCE 11

Market presence

The consumer market
The majority of sales are replacements or upgrades of exist-
ing security products. Private customers have a great need
for advice and installation assistance. ASSA ABLOY has devel-
oped a number of home security concepts to meet con-
sumer needs. In some geographical markets, ASSA ABLOY
also works with door and window manufacturers or special-
ized distribution channels such as DIY stores and locksmiths.

Distribution channels
In today’s market, products mainly reach the end-customer
through a variety of distribution channels, particularly lock-
smiths, building and lock wholesalers, door and window
manufacturers and security system integrators.

of private individuals want electronic locks for their homes,
providing a major growth opportunity. Through its Group
company iRevo in South Korea, ASSA ABLOY is the world’s
leading producer of residential digital locks, and a number of
products were developed in 2010 for markets such as China,
the USA, Australia and the UK. Digital locks are set to be
launched on a large number of markets in 2011.

Globally, the lock market is still fragmented. However, the

market in each country is relatively consolidated, as compa-
nies in the industrialized world are often still family-owned
and leaders on their home markets. They are well-estab-
lished and have strong ties with local distributors. In less-
developed countries, however, established lock standards
and brands are less common.

Differences between markets
North Americans spend more than twice as much on emer-
gency exit devices as Europeans. Conversely, northern Euro-
peans spend three to four times as much on high-security
locks for their homes than North Americans. Automatic
doors are also much more common in Europe than in the
USA. Electromechanical products are considerably more
prevalent in the commercial segment than in the residential
segment. If the demand for security and evacuation solutions
was as large in Europe as in the USA, the total market would
roughly double. This represents considerable potential for
ASSA ABLOY.

Digital door locks are a growing segment
with a large global market
The market potential arising from the technological shift
from mechanical to electronic security products is consid-
erably larger in the commercial segment than in the pri-
vate residential segment. However, an increasing number

Competition
Although some consolidation has taken place over the past
ten years, the security industry is still fragmented in a global
perspective. Some countries have one strong manufacturer
with a large share of the local market. These companies
often focus on their domestic market and have limited inter-
national operations.

ASSA ABLOY is the global market leader; its main com-
petitors are four other major players, which operate in part
in ASSA ABLOY’s segment: Ingersoll-Rand, Stanley Black &
Decker, Dorma, and Kaba. Two of these are based in the USA
and two in Europe. All these competitors are strongest on
their home markets as well as having a presence on some
other markets, although none of them has international
market penetration comparable with ASSA ABLOY’s. The
Asian market is still very fragmented; even the largest manu-
facturers have modest market shares.

» North Americans spend more than twice as much on emergency exit devices
as Europeans. Conversely, northern Europeans spend three to four times as
much on high-security locks for their homes as North Americans «

THE TOTAL SECURITY MARKET

ASSA ABLOY’S SALES BY PRODUCT GROUP

(cid:132) ASSA ABLOYs

product areas, 15%

(cid:132) Security guards
and other, 27%
(cid:132) Fire alarms, 2%
(cid:132) Doors and windows, 40%
(cid:132) Intrusion protection, 3%
(cid:132) IT security and logical
access control, 4%
(cid:132) Alarm centers, 9%

(cid:132) Mechanical locks,
lock systems and
accessories, 42%
(cid:132) Electromechanical
and electronic
locks, 36%

(cid:132) Security doors and
fittings, 22%

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2010

INCREASED MARKET PRESENCE

ASSA ABLOY’s strategy for increasing its market
presence has three main aspects:
• Exploiting the strength of the brand portfolio.
•
Increasing growth in the core business.
• Expanding into new markets and segments.

Exploiting the strength of the brand portfolio
Common sales force
In order to compete effectively in a global market, the
sales force operates as an integrated organization under
the ASSA ABLOY master brand. The sales staff represent
ASSA ABLOY and create solutions for the customer using dif-
ferent products from established local brands. A common
sales force means that customers can be offered total door
opening solutions, while recognizing the local brands.

ASSA ABLOY’s brand strategy
As a result of its many acquisitions, ASSA ABLOY owns a
variety of well-known brands and has the world’s larg-
est installed lock base. In order to exploit and manage
this valuable asset while benefiting from the Group’s size,
ASSA ABLOY’s logo is combined with the individual product

of ASSA ABLOY’s sales consist of
renovations, refurbishments, extensions,
replacements and upgrades.

67 %
33 % of ASSA ABLOY’s sales consist of new

construction.

brands. This approach preserves the link to the installed lock
base, while increasing the visibility of the ASSA ABLOY mas-
ter brand.

The master brand is complemented by four global
brands, which are all leaders in their respective market seg-
ments. These brands are HID in access control, secure card
issuance and identification technology, Yale in the resi-
dential market, Besam in automatic doors, and Mul-T-Lock
and ABLOY in high-security locks. The growing visibility of
ASSA ABLOY as the master brand for complete security solu-
tions demonstrates the great breadth of the Group’s prod-
uct range as the world’s largest supplier of security solutions.

Increasing growth in the core business
Growth in the core business is promoted through close
collaboration with architects, security consultants, major
end-users and distributors. Continued clear market seg-
mentation is also vital for offering relevant solutions to the
customer.

Complete security solutions
The requirements in different areas vary greatly, since the
security solution for each door is adapted to the door’s
location and application, for example an entrance door
or a door to a computer room or a conference room. The
door’s functionality must also be adapted on the basis of
security and convenience. This may be affected by whether
it is an internal or external door, the frequency of opening,
the number of users, and special requirements such as fire
safety. Customers are also increasingly demanding that the
products can be easily integrated into new or existing secu-
rity systems and IT networks.

WHAT DRIVES DEMAND?

BREAKDOWN BY CUSTOMER SEGMENT

(cid:132) Commercial and
institutional
customers, 75%
(cid:132) Residential market

– private customers, 25%

(cid:132) Aftermarket1, 67%
(cid:132) New construction, 33%

¹ The aftermarket consists of
renovation, rebuilding, exten-
sions, replacements and
upgrades.

ASSA ABLOY ANNUAL REPORT 2010

MARKET PRESENCE 13

Market presence

75 %

of sales are to the
institutional and
commercial market.

25 %

of sales are to private
customers and the
residential market.

Specification of security solutions increasingly important
Bringing new and innovative solutions to market requires
close collaboration not only with distributors, but also with
architects, security consultants and major end-users. This
collaboration stimulates demand from distributors and cus-
tomers. Building and lock wholesalers, security consultants
and locksmiths have a key role in delivering the products
specified for various construction projects. ASSA ABLOY has
developed close collaboration with architects and security
consultants to specify appropriate products and achieve a
well-functioning security solution. Many door and window
manufacturers install lock cases and fittings in their prod-
ucts before delivering them to customers.

In contrast, electronic security products mainly reach the

end-user via security installers and specialized distributors.
These products are also sold through security integrators
who often offer a total solution for the installation of perim-
eter protection, access control and increasingly also com-
puter security.

Increased focus on distributors
ASSA ABLOY works closely with its distribution channels to
offer end-customers the right products, correct installation
and consequently a well-functioning security solution. Dis-
tributors also have a key role in providing service and sup-
port after installation. This role may vary between different
customer segments. In the commercial segment, distribu-
tors in some markets act as consultants and project manag-
ers to create good security solutions. They understand the
customer’s needs and ensure that products comply with
local regulations.

As technology moves towards more complex security

solutions, distributors need increasing skills levels. Lock-
smiths, who are key distributors of mechanical and elec-
tromechanical security products on many markets, are
an example of specialized security distributors. They buy
direct from the manufacturer or via wholesalers and provide
advice, products, installation and service. Some locksmiths
have an increased focus on electronics, while IT integrators
are increasingly also offering physical security solutions.

DISTRIBUTION CHANNELS FOR THE SECURITY MARKET

FEEDBACK | DEMAND | INCREASED SALES

In today’s security mar-
ket, manufacturers of
security products, such
as ASSA ABLOY, mainly
reach their end-customers
through a variety of distri-
bution channels. A large
percentage of ASSA ABLOY’s
products are sold in small
volumes to a large number
of end-customers with very
different needs.

SPECIFICATION Together with end-customers and other stakeholders,
ASSA ABLOY specifies a security solution for major commercial projects.

ASSA ABLOY
Representative

Distributor

ASSA ABLOY

SPECIFICATION

DISTRIBUTORS

DISTRIBUTION CHANNELS Security system integrators, locksmiths and
security installers, building and lock wholesalers, retailers, DIY, hardware
and security stores, OEMs, door and window manufacturers.

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2010

The ASSA ABLOY master brand

ASSA ABLOY is the Group’s master brand,
under which the sales departments unite.

Examples of product brands

Well-known product brands
benefit from the large
installed lock base and are
adapted to comply with
local regulations and safety
standards. The product
brands are combined with
the ASSA ABLOY master
brand.

Two focused brands for specific segments

Global brands with a unique market position

Besam is a world-leading supplier of automatic entrance
solutions. VingCard is the world’s best-known brand for
lock systems in the hospitality and cruise ship market.

Complementary global brands, where the products’
leading position and market positioning in their specific
segment are unique or overlap with ASSA ABLOY.

FEEDBACK | DEMAND | INCREASED SALES

ASSA ABLOY
Representative

Installer

SPECIFICATION Together with end-customers and other stakeholders,
ASSA ABLOY specifies a security solution for major commercial projects.

ASSA ABLOY
Representative

End-
customer

INSTALLERS

SPECIFICATION

END-CUSTOMERS

ASSA ABLOY
Representative

Stakeholders

STAKEHOLDERS

CODES AND SECURITY STANDARDS

END-CUSTOMERS
Large institutional and
commercial customers
• Healthcare • Education • Retail

• Hospitality • Offices • Industrial

Small and medium-sized customers
• Offices • Stores

Residential market
• Apartments • Houses

STAKEHOLDERS
Such as architects, security consul-
tants, public authorities responsible
for security standards and other
stakeholders.

ASSA ABLOY ANNUAL REPORT 2010

MARKET PRESENCE 15

Market presence

70 %

About 70 percent of the
Group’s products are
co-branded with the local
brand and the ASSA ABLOY
master brand.

Expanding into new markets and segments
The Group is expanding into new markets and segments
by establishing ASSA ABLOY on new geographical markets,
developing the OEM market, exploiting opportunities on the
residential market, and introducing new technology.

Geographical expansion is achieved principally through
acquisitions. By establishing ASSA ABLOY on markets with
rising populations and developing economies, the Group
can build a strong platform for future growth. Emerging
markets in Asia, East Europe, the Middle East, Africa and
South America accounted for 24 percent of total Group
sales in 2010, compared with 9 percent six years ago.

The Group’s presence on the OEM market for door
and window manufacturers varies between markets.
There is considerable potential here for improved market
penetration.

Security doors are an area with considerable growth
potential. Since 2000 sales have risen from SEK 2 billion to
over SEK 8 billion, equivalent to 22 percent of total Group
sales in 2010.

The door automation market is another area with very
large growth potential. Traditionally ASSA ABLOY has only
been active in door automation for people traffic. However,
with the acquisition of Ditec, the Group has entered the
much larger entrance automation market, which includes
industrial doors, systems for loading docks and garage doors.

Efforts to develop channels and products for the residen-
tial market continue, with digital door locks a high-priority
product area.

The increased demand for electromechanical products is

one of the clearest trends in the security market. This prod-
uct area is also seeing increased technical standardization
in which different components in the security solution can
be easily integrated with one another. ASSA ABLOY’s prod-
ucts aim for open standards to facilitate integration with
the customer’s other security and administrative systems.
Interesting new growth areas are created by exploiting the
Group’s strength in specific technologies. One example is
RFID, which is now adapted to special applications such as
contactless hotel locks opened by a card.

ASSA ABLOY’S TOTAL SALES BY REGION

(cid:132) Europe, 43%
(cid:132) North America, 32%
(cid:132) Pacific, 6%
(cid:132) Asia, 15%
(cid:132) Central and

South America, 2%

(cid:132) Africa, 2 %

» The common sales organization operates under the ASSA ABLOY master brand, but
also acts as representatives of the local product brands recognized by the customer «

MARKET PRESENCE

ASSA ABLOY ANNUAL REPORT 2010

Tianming and Gardesa win deal for
the best in security and design

As one of Beijing’s most exclusive addresses, No. 8 Xiaoyun
Road is a high-end residential project that puts high demands
on its security solutions. Many of the buildings in the neigh-
borhood are inspired by architectural designs from the US
and Europe, and are built with state-of-the-art materials,
making Chaoyang one of the best-known parts of the city.
The design team was charged with renovating No. 8
Xiaoyun Road in a style that worked with interior decoration
from the famous Hong Kong interior designer Doris Chui.

ASSA ABLOY’s door expert in China, Tianming, supplied 800
armored doors for the building after in-depth research and co-
operation with Italian Group company Gardesa, which enjoys
a good reputation in the high-end residential market in China.
The client chose ASSA ABLOY due to the fact that the
doors meet the Chinese fire-rated accreditation standards,
have an appealing design and the strong technical specifica-
tions, as well as the supplier’s thorough understanding of the
client’s needs.

Students gain access with HID in Reykjavik

Reykjavik University is a vibrant international university
located at the heart of Iceland’s capital city, Reykjavik. It is
Iceland’s largest private university and focuses on teaching,
research, entrepreneurship, technology development and
co-operation with the active business community.

The campus was extended by 7,000 square meters
in August 2010 and the existing HID Prox solution was
upgraded to HID iCLASS®, using both multi-technology
cards and readers. Now, HID Global’s multi-technology

smart cards provide about 4,000 students access to univer-
sity buildings. The cards are used throughout the old and
new buildings for access to classrooms, lab rooms and study
areas 365 days a year, 24 hours a day.

By uploading a photograph to the university’s intranet,

the students’ cards will be issued on their very first day of
school. Student details and photo are already printed on the
card by a FARGO® HDP5000 printer, which is handled by the
receptionists who can deliver cards to new students.

ASSA ABLOY ANNUAL REPORT 2010

MARKET PRESENCE 17

Product
leadership

The Group’s product leadership is
achieved through the continuous
development of products offering
enhanced customer value and lower
product costs.

PRODUCT LEADERSHIP

ASSA ABLOY ANNUAL REPORT 2010

Leading museums all over the world invest in intelligent door
opening solutions from ASSA ABLOY.

ASSA ABLOY ANNUAL REPORT 2010

PRODUCT LEADERSHIP 19

Product leadership
Successful product development
drives organic growth

A constant flow of new innovative products to the market is the single most important source
of organic growth. Successful product development is therefore vital for the Group’s future.
ASSA ABLOY’s vision is to be the most innovative supplier of total door opening solutions, and
investments in R&D have increased substantially in recent years. ASSA ABLOY is creating tomorrow’s
secure, convenient and flexible security solutions by developing Group-wide technology platforms.

Product leadership
Successful product development and product leadership
are the single most important driver for organic growth.
Product leadership is achieved through the continuous
development of products offering enhanced customer value
and lower product costs. A key activity for achieving this
is the use of common product platforms with fewer com-
ponents. New products are also being developed in close
collaboration with ASSA ABLOY’s end-users and distribu-
tors to enhance customer value. The product development
process is under constant improvement and renewal. Sev-
eral customer segments were studied in detail during the
year giving rise to new interesting product concepts. The
ASSA ABLOY Future Lab is an internet forum in which the
Group can ask customers questions to obtain information
on long-term trends and product initiatives. Lean Innovation
was launched during the year with the aim of halving devel-
opment time using new approaches. Customers are increas-
ingly demanding more advanced lock and door products
and the technical level is constantly rising, with electrome-
chanical door opening solutions growing considerably faster
than traditional mechanical products. Global common
product platforms, which are then adapted to the local mar-
kets, have therefore become increasingly important. These
platforms are developed by the Group product develop-
ment function, Shared Technologies, and through collabora-
tion within and between divisions.

Today’s customer base helps to develop
tomorrow’s security solutions
ASSA ABLOY has the largest base of installed locks and lock
systems in the world and its products are well adapted to
comply with local and regional standards. The Group builds

INVESTMENTS IN RESEARCH AND DEVELOPMENT¹

SEK

1,200

1,000

800

600

400

200

09 10

¹ Figures for 2008 and 2009 are
affected by reclassification.

on this installed lock base to develop tomorrow’s solutions,
in which electronic codes supplement or replace mechani-
cal identification.

People are assigned access rights to doors or comput-
ers. Keys, cards and other ID credentials are assigned codes,
which are managed securely and distributed encrypted.
ASSA ABLOY has further consolidated its position in secure
identification through acquisitions during the year.

Security and convenience
Security is not just a question of identification. The mechani-
cal and electromechanical products that prevent intrusion
and permit rapid evacuation are just as important to the
final solution. A well-specified security solution also takes
into account the design of the products and ensures that
they simplify use. The Group’s electro mechanical products
help to meet all these security requirements. The electro-
mechanical segment is growing rapidly and now accounts
for more than one-third of Group sales.

The Group is a global leader in automatic doors through

its Entrance Systems division. Automatic doors have sen-
sors and electronics that ensure a convenient and energy-
saving door environment in for example stores, hotels and
hospitals.

It is becoming increasingly important to be able to offer

a total entrance automation solution comprising both
automatic door solutions and industrial doors. The service
offering can therefore be expanded to include automatic
entrances for people traffic at the front of a commercial
building and for goods deliveries at the rear of the building.

RFID enhances security and is user-friendly
Radio-frequency identification (RFID) and wireless commu-
nication allow the Group to create new security applications
while offering services that are user-friendly.

Wireless Aperio technology allows cost-effective con-
nection of several doors in an existing access control system.
Battery-operated electromechanical cylinders and locks
communicate wirelessly with the existing network, avoiding
expensive installation costs, new keycards and new access
systems. Today many leading manufacturers of access con-
trol systems have integrated Aperio technology into their
systems.

In contrast to Aperio, Smartair is an off-line system.
Smart air’s update-on-card facility increases security and
convenience through validation; access is updated on the

PRODUCT LEADERSHIP

ASSA ABLOY ANNUAL REPORT 2010

keycard for a specific period. If the card is not updated in one
of the special readers or printers that come with the system,
the person is not granted access. Lost cards can easily be
blocked and are of no use to unauthorized people.

RFID technology is also the basis for the rapid expansion
of logical access control, in which computers are provided
with ASSA ABLOY’s software that prevents start-up if the
user fails to present the right access card.

Mobile phone replaces key
For hotels, VingCard has used RFID and the wireless technol-
ogy offered by mobile telephony in combination with Near
Field Communication (NFC). The hotel guest can use their
mobile phone to book and pay online. The mobile phone
serves as a code carrier, and guests can also use their mobile
phones to unlock the door of their hotel room by holding
the phone close to the lock. In 2010 the first test installation
was successfully implemented at the Clarion Hotel Stock-
holm (Sweden) and aroused considerable interest.

Using wireless technology from ASSA ABLOY, many
hotels have connected their rooms online, providing guests
with enhanced security and comfort, such as arranging
room changes without visiting the lobby.

The Group is carefully following developments in this
area through its participation in the NFC Forum and other
wireless technology organizations.

VingCard Orion was also launched during the year. This

is an energy-monitoring system solution in which tem-
perature control of the hotel room depends on the guest’s
presence, but can also be controlled and monitored from
reception.

Total door opening solutions are ASSA ABLOY’s strength
ASSA ABLOY’s sales are not only based on innovations. The
Group’s strength is the variety of traditional and new prod-
ucts that can be combined to create a large number of dif-
ferent door environments. ASSA ABLOY has products for

different climates, different types of buildings and differing
security and safety requirements. By combining hundreds of
thousands of components to meet the needs of consumers,
architects and installers, the Group creates products with
the right quality, design and price, which are ideal for both
new buildings and renovations.

During the year a number of products were launched
with the aim of reducing energy consumption in buildings.
By using doors with improved insulation together with new
sealing products, loss of heat to a cooler environment can
be reduced, while in hot climates air-conditioning costs can
be cut. In addition, the use of recycled materials in doors is
increasingly possible and desirable.

A common process with increased customer
focus and better product planning
ASSA ABLOY continues to develop a Group-wide product
development process with the aim of halving development
time and increasing the number of new products. A clear
gateway process with common terminology and interdis-
ciplinary collaboration ensures the quality of the product
development process and the implementation of Lean activ-
ities is intended to halve development time.

’Voice of the Customer’ is a natural part of the Group’s
process for strengthening customer relationships and inte-
grating customers into the Group’s product development
process, thereby increasing the fitness for purpose of the
Group’s product offerings.

Up to and including 2010, more than 2,000 employ-
ees have received training in the innovation process, and a
number of in-depth studies together with customers have
resulted in many new concepts and products under devel-
opment. Work on Value Analysis/Value Engineering (VA/VE)
of the existing product range intensified, and the number
of implemented cost savings increased by an additional 40
percent compared with the previous year. A total of nearly
90 projects to increase the skills of hundreds of employees
were implemented during the year.

» Successful product development is the single
most important driver for organic growth «

CHANGE IN PRODUCT MIX

2000
SEK 14 billion

2010
SEK 37 billion

Mechanical products, 66 %
Electronic products, 20 %
Security doors, 14 %

Mechanical products, 42 %
Electronic products, 36 %
Security doors, 22 %

ASSA ABLOY ANNUAL REPORT 2010

PRODUCT LEADERSHIP 21

Product leadership

A total security solution from ASSA ABLOY comprises many
different types of products. These include automatic doors
and access control at the main entrance and access systems
on each office floor. They may also include security doors,
high-security cylinders, mechanical cylinders, handles,
hinges and internal doors in the offices. Access cards may
also be used to log on to computers and networks and to
make secure electronic payments. These are examples of
ASSA ABLOY products that together create a total security
solution.

ASSA ABLOY’s Hi-O communication platform allows the intelligent door to be connected to a
network over which each individual component around the door can communicate interac-
tively with other systems, such as security or maintenance systems. The advantages are secure
information about each component, simple installation using standardized connections, and
remote configuration over the network, which can also be connected to the Internet. In 2010
work continued on Hi-O certification of new products in the ASSA ABLOY Group.

Magnetic lock

Electronic strike

Access control

Handles

Electromechanical
cylinders

Automatic
door closer

Electronic
lock case

Exit device

Electronic hardware

PRODUCT LEADERSHIP

ASSA ABLOY ANNUAL REPORT 2010

Access control

Access to

computers with

access card

Payment with

access card

Access control

Turnstile

Printer for secure

issuance of access cards

Revolving door

ASSA ABLOY ANNUAL REPORT 2010

PRODUC
PRODUCT LEADERSHIP 23

Product leadership

Mobile phones replace hotel room keys
ASSA ABLOY initiated a world first pilot project in the
fall of 2010 at the Clarion Hotel Stockholm in Sweden.
ASSA ABLOY joined forces with Choice Hotels Scandina-
via, TeliaSonera, VingCard Elsafe and Venyon to replace
hotel room keys with NFC-enabled mobile phones. The
end result was the world’s first complete mobile key ser-
vice utilizing NFC technology.

Selected hotel guests receive an NFC-enabled mobile

phone with special software installed. They book hotel
rooms in the usual way and receive booking confirmation
on their mobile phones. The guests can check in on their
mobile phones before arrival at the hotel. When check-in
is complete, a digital hotel room key is sent to the mobile
phone. On arrival at the hotel, the guests skip the check-
in line, go directly to their rooms and open the door by
holding the mobile phone close to the door lock. When
leaving the room, the doors lock automatically. Guests
check out using their mobile phones and the digital hotel
room keys are deactivated.

The solution is made possible through ASSA ABLOYs
scalable secure delivery infrastructure for mobile keys.
This solution ensures end-to-end security and is applica-
ble for residential, commercial and hotel applications.

Sliding doors for clean-room
environments
Ditec Entrematic added three new
product lines to its VALOR range of
pedestrian sliding doors in 2010:
the VALOR D space-saving model for
double doors, the VALOR S for doors
weighing up to 500 kg, and the VALOR
H hermetic model.

The new additions double the
number of models in the range to six,
allowing Ditec Entrematic distributors
to provide sliding door automation
for an even wider array of applications,
including clean-room environments.
All VALOR automation units fea-
ture advanced electronics and user-
friendly control panels and displays for
operating and monitoring the doors.
Both the opening width and closing
time can be set to adjust automatically
when user traffic increases.

Enhanced security with HID
HID Global introduced its multi-
CLASS™ Magnetic Stripe readers that
are designed for customers upgrading
their current access control card sys-
tem from the popular magnetic stripe
(magstripe) technology to enhanced
security from 13.56 MHz smart card
technology. Supporting access con-
trol technology combinations includ-
ing magnetic stripe, keypad, HID Prox
and 13.56 MHz smart card technol-
ogy (including iCLASS and FIPS 201
credentials), the multiCLASS™ reader
line represents the ultimate in flexibil-
ity, enabling a cost effective and truly
seamless migration solution with no
operational disruption.

PRODUCT LEADERSHIP

ASSA ABLOY ANNUAL REPORT 2010

Aesthetic trim wins design award
The SARGENT HP Series push/pull
trim for healthcare was recently
awarded the prestigious 2010 GOOD
DESIGN award from the Chicago Ath-
enaeum: Museum of Architecture
and Design, and The European Cen-
tre for Architecture Art Design and
Urban Studies.

This recognition reflects the
growing demand by architects and
designers for hardware products that
perform their security and life-safety
functions without detracting from
the aesthetics of a building.

The push/pull trim features a
sleek, aesthetic form that aligns
with the evidenced-based design
approach to healing environments.
The trim provides a functional liga-
ture-resistant solution for behavioral
health units and enables hands-free
door operation.

Cliq Remote is controlled by mobile phone
Cliq Remote is a new locking system enabling the user
to control a key’s access rights by mobile phone.

The keys are programmed remotely via the admin-
istration system. Each time a Cliq key is inserted into an
updating unit, it connects via the internet to the admin-
istration system, downloads new access rights and
removes old rights. This allows detailed control of access
rights so that an individual can open a certain door for a
certain period.

The key also energizes the lock cylinder, which there-

fore does not need its own power supply. The battery
lasts for around 30,000 door operations and two years’
use. Information transfer and the key’s access rights are
encrypted using the same technology as banks use in
digital certificates.

The locking system was launched in 2010 and has
already aroused considerable interest among, for exam-
ple, energy companies, telecoms operators, rail and
water companies with base stations, transformer sta-
tions and pumping stations that are remotely located
and need occasional maintenance.

Yale develops home security
The smart digital door lock from Yale
was launched in the UK during 2010.
The lock allows users to access and
secure their homes using a personal-
ized PIN code or remote control fob,
with no need for a mechanical key.

PIN code access means no more
problems with forgotten keys. If a fam-
ily member forgets the code it can
simply be texted to them. PIN code
access also avoids carrying heavy keys.
The visitor code function allows fam-
ily, friends or neighbors to gain access
to the house without needing an extra
key.

The electronic lock makes life safer

- automatically locking on the latch
when the door is closed, preventing
anyone from following inside.

ASSA ABLOY ANNUAL REPORT 2010

PRODUCT LEADERSHIP 25

Cost-
efficiency

ASSA ABLOY has installed many security products in
Stockholm’s newest and largest conference centre, Stockholm
Waterfront Congress Centre.

COST-EFFICIENCY

ASSA ABLOY ANNUAL REPORT 2010

Efforts to increase cost-efficiency continue
in all areas, including common product
platforms with fewer components and
common product development.

ASSA ABLOY ANNUAL REPORT 2010

COST-EFFICIENCY 27

Cost-efficiency
The share of purchases from low-cost
countries has doubled

Efforts to increase cost-efficiency continue in the production structure, in product costs and in the
administrative flow in the Group. All areas are affected, including common product platforms with
fewer components, and common product development. In production, flexible final assembly close
to the customer is combined with the transfer of high-volume standard production to external and
internal production units in low-cost countries.

ASSA ABLOY focuses on cost-efficiency in the production
structure, in product costs and in the administrative flow
in the Group. In product development, the Group works on
common product platforms with fewer components and on
common product development, as discussed in the section
‘Product leadership’.

quence is that an increasing volume of standard production
has been transferred to internal and external units in low-
cost countries. The production process has been improved,
while local presence on end-customer markets ensures fast
delivery and efficient assembly of customized products.

In parallel with the reorganization of production in high-

The production value-chain is constantly under review
and the capacity for flexible final assembly close to the cus-
tomer is combined with the transfer of high-volume stan-
dard production to internal and external production units
in low-cost countries.

Successful restructuring programs
The process of change in the production structure began
with the restructuring programs launched in 2006, 2008
and 2009. These have been very successful, resulting in large
savings and increased efficiency in the Group’s production
units. At year-end these programs had resulted in the clo-
sure of 38 production units, while an additional 42 units had
switched to mainly final assembly. As a result of this restruc-
turing 5,387 employees have left the Group. One conse-

cost countries, the Group has maintained rapid expansion
of the production base in low-cost countries. More than 50
percent of the Group’s total employees are now employed
in low-cost countries.

Lean methods
Work to implement Lean methods in the Group’s operations
continues. Lean methods lead to more efficient produc-
tion flows, better control of material costs, improved deci-
sion-making procedures, shorter development times and
increased cooperation with the marketing and sales teams.

Many of the companies in the Group have followed these

principles for several years and have achieved increased
efficiency.

CHANGE IN PRODUCTION STRUCTURE

SHARE OF PRODUCTION IN LOW-COST COUNTRIES

100

09 10

High-cost countries,
Full production
High-cost countries,
Assembly
Low-cost countries,
Production
Acquired production
units

09 10

An increasing volume of standard production has been transferred to internal and
external units in low-cost countries. The production process has been improved,
while local presence on end-customer markets ensures fast delivery and efficient
assembly of customized products.

The share of the Group’s total purchases of raw materials, components and finished
goods from low-cost countries has increased from 30 percent to 46 percent over the
past five years.

COST-EFFICIENCY

ASSA ABLOY ANNUAL REPORT 2010

World culture heritage secured by Abloy

The State Hermitage is a museum of art and culture in Saint
Petersburg, Russia – one of the largest and oldest museums
in the world. It was founded in 1764 by Catherine the Great
and has been open to the public since 1852. The collection
of the State Hermitage includes more than three million
works of art and artefacts of world culture.
Abloy has been the Hermitage’s chosen security provider
since 1990, when the construction of the Staraya Derevnya
Restoration facility and Storage Centre, covering an overall

surface area of 35,000 square meters, began. Mechanical
and electromechanical ABLOY locks, door automatics, door
closers, handles and pulls, together with ABLOY Classic and
ABLOY Protec masterkeyed cylinder systems were installed.
Abloy authorized dealers in Russia have proved that a
total Abloy locking solution products with professional
installation and well-managed after-sale services is the key
to keep such a world-class customer satisfied.

ASSA ABLOY ANNUAL REPORT 2010

COST-EFFICIENCY 29

Cost-efficiency

Seamless Flow in administration
Automation of flows throughout the business is the most
important activity in driving administrative efficiency.
Manual work is to be reduced or completely eliminated in
all processes. On the customer side, this means electronic
order handling for both large and small customers. On the
supplier side, electronic handling of purchasing is to be
introduced. Manufacturing, product development, logistics
and other internal processes are included. Such activities are
known as Seamless Flow. As Seamless Flows and the coordi-
nation of IT tools are implemented, it will also be possible to
coordinate support functions effectively.

Efficient sourcing
In purchasing, a comprehensive supply management project
covering both raw materials and components has been initi-
ated. This will be increasingly important as areas of compo-
nent supply are outsourced to external suppliers in low-cost
countries and will result in better exploitation of economies
of scale in the Group. The share of the Group’s total purchases
of raw materials, components and finished goods from low-
cost countries has increased from 30 percent to 46 percent
over the past five years. The divisions have appointed special-
ized purchasing managers for each component category. As
a result the number of suppliers has fallen by 4 percent in the
Group.

Besam helps hospital provide comfort and security

As a new construction, the Vlietland Hospital in
Schiedam, the Netherlands, needed various automatic
entrances for its facilities – and it turned to Besam for the
solutions. A comprehensive solution portfolio, dedicated
service organization and quality products were key fac-
tors in Vlietland Hospital’s decision to work with Besam.
The hospital wanted to enhance accessibility through-

out the facility, create a safe, draught-proof and conve-
nient main entrance, and develop various automatic sys-
tems for a variety of swing doors.

To meet these needs, Besam installed a large, two-wing
UniTurn revolving door and an accompanying Besam air
curtain in the main entrance, offering both draught-proof
comfort and energy savings, as well as guaranteeing a safe
escape route and easy access.

200 automatic swing door systems and 150 sliding
doors were also installed to provide easy, convenient and
safe access between hospital departments.

Besam was also contracted to provide preventative

maintenance and service for all of the installations.

COST-EFFICIENCY

ASSA ABLOY ANNUAL REPORT 2010

Chinese insurer looks to HID Global
to secure financial data

China Pacific Insurance is one of China’s largest insurance companies, serving 47 million indi-
vidual clients and 2.8 million corporate clients in China.
With such a large client base, HID Global’s full-functionality VertX® network access solu-
tions as well as iCLASS card readers met the insurers’ needs for a secure and stable physical
access solution.
Covering risk protection services including life and property insurance, as well as wealth
management and asset management services, the company required a system with robust
technology, a brand with a proven track record in the financial industry, a scalable network sys-
tem and comprehensive local support. Any security loopholes could cause considerable losses.
The IP-based HID VertX controllers for access management and iCLASS® card readers’ dual
security identification technology tightened the control of entry points and enabled network
monitoring for secure login.

The solutions included card issuance, physical access management, time/attendance man-

agement, elevator management and cashless payment systems.

South Carolina Governor’s School

The South Carolina Governor’s School for Science and Math, located in
Hartsville, South Carolina, is a public, residential high school for academi-
cally advanced juniors and seniors. The academic institution offers a flexible,
enriched and balanced curriculum with a special focus on science and math.
A recent renovation project at the school included a campus-wide
upgrade of doorway security. For this important element of student safety,
school officials selected a complete opening package from ASSA ABLOY.
The school envisioned a security platform that would require student
and faculty ID cards to gain entrance to residence hall, administrative and

academic buildings. The main challenge was finding electromechanical locks
that incorporated multiple devices into a single lock body.
ASSA ABLOY fulfilled this need with SARGENT Harmony locksets featuring
built-in proximity card readers and request-to-exit switches, and SARGENT
Powered-by-PERSONA locksets with magnetic stripe card readers for resi-
dential halls. The opening package was rounded out with SARGENT mortise
and cylindrical locks, Signature key system, door closers and exit devices;
McKINNEY mechanical and ElectroLynx hinges; and GRAHAM wood doors.

ASSA ABLOY ANNUAL REPORT 2010

COST-EFFICIENCY 31

Growth
and
profitability

ASSA ABLOY creates opportunities for increased
growth and profitability through a strong focus on
the strategy’s three areas of market presence,
product leadership and cost-efficiency.

GROWTH AND PROFITABILITY

ASSA ABLOY ANNUAL REPORT 2010

Like many other airports worldwide, New Delhi International
Airport has chosen ASSA ABLOY security solutions for its
new terminal T3.

ASSA ABLOY ANNUAL REPORT 2010

GROWTH AND PROFITABILITY 33

Growth and profitability
Successful expansion

Today ASSA ABLOY is the global leader in intelligent door opening solutions following 16 years of
successful expansion. Since its formation in 1994, the Group has expanded successfully through a
combination of organic growth and acquisitions, transforming the company from a traditional lock
company into a modern, multinational security company in intelligent door opening solutions.
Today ASSA ABLOY is the global market leader in this sector.

» Successful expansion through organic growth and acquisitions «

Growth from SEK 3 billion to SEK 37 billion in 16 years
Since ASSA ABLOY’s formation, Group sales have risen from
SEK 3 billion to SEK 37 billion. Today the Group has around
37,000 employees, compared with 4,700 employees in
1994. Operating income (EBIT) excluding items affecting
comparability has increased from SEK 212 M in 1994 to
SEK 6,046 M in 2010, an increase of over 2,700 percent.

ASSA ABLOY was founded when Securitas in Sweden and
Metra in Finland merged their lock businesses. The company
had operations in Sweden, Finland, Norway, Denmark and
Germany at that time.

Today the Group has its own operations in 50 countries
and sales throughout the world. ASSA ABLOY is focusing on
enhancing its presence on emerging markets in Asia, East
Europe, the Middle East, Africa and South America. Sales on
these markets account for 24 percent of total Group sales.
Following the acquisition of Pan Pan, China accounts for
nearly 9 percent of sales.

Today one in ten lock purchasers worldwide chooses

an ASSA ABLOY lock, and the Group continues to grow.
Demand for safety and security is constantly increasing in
the world and the Group has never had a wider product

range, higher market penetration and so many innovative
new products.

At the start in 1994, the product range largely con-
sisted of mechanical security products such as traditional
locks and handles for entrance doors. In 2010 ASSA ABLOY
launched more products than ever before in the Group’s
history. These were mainly in the fast-growing product seg-
ments of electromechanical and electronic locks, access
control, identification technology and automatic doors.

New technology areas and innovative products are the

most important driver for organic growth and the Group
therefore invests heavily in R&D. Investments in product
development have increased by between 10 and 20 per-
cent per year in recent years and today the Group employs
around 1,000 development engineers.

ASSA ABLOY has come a long way in 16 years. However,
the goals and expectations for the Group’s future develop-
ment are high. The demand for secure and safe security solu-
tions is constantly increasing and will offer the Group major
opportunities.

2,700 %

Sales have risen over
2,700 percent in 16 years.

SALES AND OPERATING INCOME (EBIT)

Sales, SEK M

(cid:132) Sales Operating Income (EBIT)

EBIT, SEK M

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

963

973

983

993

003

013 023

033

062

081,2 091,2

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

¹ Reclassification has been made.
² Excluding items affecting comparability.
³ 1996–2003 have not been adjusted for IFRS.

GROWTH AND PROFITABILITY

ASSA ABLOY ANNUAL REPORT 2010

Strategy

Market
presence

Product
leadership

Cost-
efficiency

Exploiting the strength of the
brand portfolio.

Increasing growth in the core
business.

Expanding into new markets
and segments.

Developing products offering
enhanced customer value and
lower product costs.

Common product platforms
with fewer components.

Close collaboration with
ASSA ABLOY’s end-users and
distributors.

Common product platforms
and fewer components result in
cost-efficiency.

In production, flexible final
assembly close to the customer
is combined with the transfer
of high-volume standard
production to low-cost countries.

Seamless Flows streamline
administration.

Implementation of Lean methods
continues.

Objectives

Growth and profitability

10 percent annual growth through a combination of organic and acquired growth.

An operating margin of 16–17 percent.

The financial targets are long-term goals and should be considered as an average over a business cycle.

ACQUISITIONS 2005–2010

2005 – Increased
presence in China
ASSA ABLOY enters a joint venture
with the Chinese company
Wangli, a leading supplier of
high-security locks and doors.
Other acquisitions: Doorman
Services (UK) and Security
World (South Africa).

2006 – Secure ID cards
ASSA ABLOY acquires Fargo
Electronics, which develops
systems for secure issuance of
credit, bank, debit and ID cards.
Other acquisitions: Adams
Rite (USA) and Baron Metal
Industries (Canada).

2007 – Expansion in Asia
A new brand strategy is launched,
with ASSA ABLOY as the master
brand. The Group acquires
iRevo in South Korea, a major
player in digital door locks.
Other acquisitions: Aontec
(Irish Republic), Baodean
(China), Powershield (UK),
Pyropanel (Australia), Pemko
Manufacturing Company and
La Force Associates (USA), Alba
(Israel), Esety (Italy), Integrated
Engineering (Netherlands)
and Portronik (Canada).

2008 – Wireless
technology launched
The new Aperio wireless
technology is launched. This
technology makes it easy for
customers to upgrade their
access control systems.
Other acquisitions: Beijing
Tianming and Shenfei (China),
Gardesa and Valli&Valli (Italy),
Copiax (Sweden), Cheil (South
Korea) and Rockwood (USA).

2009 – Strong results
despite weak market
Acquisition of the Ditec Group,
a leading company in automatic
doors, industrial doors, fast
doors and gate automation.
Other acquisitions: Portsystem
2000 (Sweden), Maiman (USA)
and Cerracol (Colombia).

2010 – Complementary
acquisitions strengthen
the customer offering
Acquisition of Pan Pan, China’s
largest manufacturer of high-
security steel doors, King
Door Closers, South Korea’s
leading manufacturer of door
closers, Paddock, the UK’s

leading manufacturer of multi-
point locks, and ActivIdentity,
a leader in secure identity
solutions and Security Metal
Products (USA). Agreements
were signed to acquire Cardo,
a leading manufacturer of
industrial doors (Sweden),
LaserCard (USA) and Swesafe
(Sweden) as well as a stake in
Agta Record (Switzerland).

In addition to the acquisitions
listed here, ASSA ABLOY
has acquired a number of
smaller companies.

ASSA ABLOY ANNUAL REPORT 2010

GROWTH AND PROFITABILITY 35

ASSA ABLOY

Division

Americas

Division

EMEA

Americas division manufactures and sells mechanical and
electromechanical locks, cylinders, security doors and door
frames in North and South America. The majority of the divi-
sion’s sales are in North America, where ASSA ABLOY has an
extensive sales organization and sells its products through
distributors. Sales in South America and Mexico take place
mainly through distributors, wholesalers and DIY stores.
Some of the division’s leading brands are Ceco, Corbin Russ-
win, Curries, Emtek, Medeco, Phillips, SARGENT and La Fonte.
The division has 7,000 employees and divisional manage-
ment is located in New Haven, Connecticut, USA.

EMEA division manufactures and sells mechanical, electro-
mechanical and electronic locks, cylinders, security doors
and fittings in Europe, the Middle East and Africa. Most sales
take place in West Europe, but emerging markets in East
Europe and the Middle East are gaining in importance.
EMEA consists of a number of Group companies with a good
knowledge of their local and in many respects diversified
markets. Some of the division’s leading brands are ABLOY,
ASSA, IKON, Mul-T-Lock, TESA, UNION, Yale and Vachette.
The division has 9,500 employees and divisional manage-
ment is located in London, United Kingdom.

SHARE OF GROUP

Sales

Operating income (EBIT)

Sales

Operating income (EBIT)

SHARE OF GROUP

26 %

30 %

34 %

For further information on Americas see pages 40–41

For further information on EMEA see pages 38–39

Division

Global Technologies

Global Technologies has a leading position as a supplier of
electronic security solutions worldwide. The division con-
sists of two business units: HID Global and ASSA ABLOY
Hospitality, with sales mainly to the commercial segment.
HID Global is a global leader in secure identity solutions,
primarily in identity and access control, and in contact-

Division

Entrance Systems

Entrance Systems division is a global leader in automatic
entrance solutions. The product range, sold under the
Besam brand, includes automatic swing-, sliding- and
revolving doors, air curtains and a comprehensive service
range. Door-, gate- and garage door automation and indus-
trial doors are sold under the Ditec brand. The products are
sold through distributors and installation companies, and

THE DIVISIONS

ASSA ABLOY ANNUAL REPORT 2010

– divisions

Division

Asia Pacific

Asia Pacific division manufactures and sells mechanical and
electromechanical locks, digital door locks, high-security
doors and fittings. China and the rest of Asia account for
around 70 percent of sales, while Australia and New Zealand
account for the remaining 30 percent of the division’s sales.
In Asia, the division’s largest brands are Baodean, Gateman,
Guli, King, Pan Pan, Shenfei, Tianming, Wangli and Yale.
In Australia and New Zealand, the largest brands are Lock-
wood and Interlock. The division has 15,500 employees and
divisional management is based in Hong Kong, China.

SHARE OF GROUP

Sales

Operating income (EBIT)

15 %

13 %

For further information on Asia Pacific see pages 42–43

less identification solutions. ASSA ABLOY Hospitality is
the market leader in electronic lock systems and safes for
hotels and cruise ships. The division has 2,500 employ-
ees and divisional management is based in Stockholm,
Sweden.

SHARE OF GROUP

Sales

Operating income (EBIT)

14%

13 %

For further information on Global Technologies see pages 44–46

installed in industrial, commercial, institutional and resi-
dential applications. The division’s third brand, EM, markets
automatic pedestrian door products and targets major
distributors particularly in Europe. Entrance Systems has
2,700 employees and divisional management is located in
Landskrona, Sweden.

SHARE OF GROUP

Sales

Operating income (EBIT)

11 %

10 %

For further information on Entrance Systems see pages 48–49

ASSA ABLOY ANNUAL REPORT 2010

THE DIVISIONS 37

EMEA
Aggressive marketing efforts
strengthen leading position

Following a good start to the year, growth slowed in third and fourth quarter. However, EMEA continued
to develop and lead the European lock market through aggressive marketing efforts. The division made
major investments in new innovative products and several new pan-European product platforms were
launched. New products included digital door locks for the residential market and high security electro-
mechanical Cliq cylinders intended for commercial customers. New innovative products and the ongoing
efficiency programs resulted in a substantial increase in operating income. The year saw the acquisition of
Paddock (UK), Aptus (Sweden), Seccom (Austria) and two smaller companies in Denmark and Israel.

EMEA in brief
The EMEA division manufactures and sells mechanical,
electromechanical and electronic locks, cylinders, security
doors and accessories in Europe, the Middle East and Africa.
EMEA consists of a number of Group companies which have
a good knowledge of their local, often diversified, markets
and which sell products under some of the most respected
brands in the industry, such as ABLOY, ASSA, IKON, Mul-T-
Lock, TESA, UNION, Yale and Vachette.

Report on the year
The division’s sales during the year totaled SEK 13,036 M
(13,601), which was a reduction of 4 percent. Operating
income (EBIT) excluding restructuring costs rose by 6 per-
cent to SEK 2,174 M (2,056), which represents an operating
margin of 16.7 percent (15.1).

The division’s markets recovered initially, but growth
slowed in the second half of the year. Germany, Finland, Rus-
sia, Scandinavia and areas of the Baltic States showed stable
growth, but public sector budget cuts affected investment
on other markets. Demand for high-security products and
electromechanical products was strong. Exports by Euro-
pean Group companies to other geographical regions
increased and car lock sales showed good growth. The
emerging markets of East Europe, Africa, the Middle East,
Asia and South America showed positive, strong growth,
with sales into the emerging markets rising to nearly 16
percent of the division’s sales in 2010. Markets in southern
Europe recovered slowly, but showed positive growth at the
end of the year. Operating income continued to improve
strongly thanks to aggressive marketing efforts, new innova-
tive products and savings from efficiency programs.

Local differences between markets
EMEA’s companies operate in a highly diversified market
with significant local differences. Building regulations, secu-
rity standards and climates vary greatly between the coun-
tries of northern Europe and southern Europe, and to some
extent the Middle East and Africa. Consequently there are
great differences between the products in demand and
sold in each local market. ASSA ABLOY’s regional companies
have a good local knowledge of lock standards and long-
term relationships with their distributors, making demand
stable. In addition, the aftermarket contributes a significant
proportion of sales, since the installed lock base consists
of many millions of units that are continually replaced and
upgraded.

Market presence
EMEA is working actively to increase the division’s market
presence through development of the specification and
project market, expansion into new markets and segments,
and to grow through acquisitions.

Specification of total door opening solutions is increas-
ingly important for sales, and the number of specification
sales representatives has therefore been increased substan-
tially in EMEA and the close collaboration with architects and
security consultants further strengthened.

Many sales organizations in EMEA have been coordinated

under the ASSA ABLOY master brand resulting in a joint cus-
tomer image and a considerably wider product portfolio
based on the Group’s total offering.

Efforts to further strengthen the sales organization in
the highly diversified European market continue through an
increased focus on specification sales representatives and
the structuring of the sales organization into different market
segments. One example is the residential segment in which
new products are being launched under the Yale consumer
brand, which has shown very strong growth in 2010.

Product leadership
Efficient product development with a strong customer focus
is the strongest driver of organic growth. The use of Group-
wide product platforms with fewer components is con-
stantly increasing, contributing to enhanced customer value
and lower costs. Substantially increased investment in R&D
in recent years has resulted in the launch of many new elec-
tromechanical and electronic products that are both secure
and easy to use. The digital door locks for the housing market
launched under the brand Yale are one example.

In electromechanical security systems, ASSA ABLOY has
developed an electronic cylinder called Cliq, which is an elec-
tronic development of a mechanical master-key system suit-
able for large complex security systems. The technology was
developed by ASSA ABOY Shared Technologies and Group
companies including ASSA, IKON and Abloy use the techno-
logical platform for adapted products. In a Cliq Remote secu-
rity system, the administrator can issue time-limited digital
keys with different access rights to padlocks and high-secu-
rity systems suitable for remote installations, such as tele-
coms installations or hydroelectric power plants.

A new range of door closers has been launched under
the ASSA ABLOY brand. The products are designed to meet
the strictest European standards, have a uniform design and

EMEA DIVISION

ASSA ABLOY ANNUAL REPORT 2010

KEY FIGURES
SEK M

Income statement
Sales²
Organic growth, %
Operating income (EBIT)¹
Operating margin (EBIT)¹, %
Capital employed
Capital employed
– of which goodwill
Return on capital employed¹, %
Cash flow
Cash flow
Average number of employees

¹ Excluding items affecting comparability. 2009.
² Reclassification has been made for 2009.

SALES AND OPERATING INCOME

2009

2010

13,601
–12
2,056
15.1

9,814
5,540
16.9

2,850
10,138

13,036
2
2,174
16.7

8,759
5,471
21.6

2,607
9,471

SEK M

14,000

12,000

10,000

8,000

6,000

09 10

SEK M

2,800

2,400

2,000

1,600

1,200

(cid:132) Sales2

Operating income¹

¹ Excluding items affecting compa-
rability 2006, 2008 and 2009.
² Reclassification has been made
for 2008 and 2009.

CAPITAL EMPLOYED AND RETURN ON CAPITAL EMPLOYED¹

SEK M

12,000

10,000

8,000

6,000

4,000

09 10

(cid:132) Capital employed

Return on capital
employed

¹ Excluding items affecting compa-
rability 2006, 2008 and 2009.

SALES BY PRODUCT GROUP

Mechanical locks,
lock systems
and accessories, 63 %
Electromechanical
and electronic locks, 22 %
Security doors and
fittings, 15 %

MARKET SEGMENTS

Non-residential, 55 %
Residential, 45 %

» EMEA continued its aggressive
marketing campaigns to develop and
lead the European lock market «

are suitable for a wide range of doors, making them well
suited for the specification of major projects. This project
has involved various Group companies in Finland, Italy and
China in order to be able to offer the best price relative to
function and performance.

The Group’s new product-development process focuses
on increased customer value, while improving cost-efficiency
and maintaining higher quality. The products have been well
received by customers and have strengthened ASSA ABLOY’s
market-leading position in total security solutions.

Cost-efficiency
The Group’s efficiency programs continued intensively
during the year. The aim of these efficiency programs is to
improve production efficiency and transfer component pro-
duction to low-cost countries. In 2010 the Group continued
to outsource the production of components and basic prod-
ucts, mainly to preferred suppliers in low-cost countries. The
production of some important components is now concen-
trated in specialized production plants, such as cylinders in
the Czech Republic and lock cases in Romania. In order to
maintain high standards of service and proximity to custom-
ers, West European production facilities will focus on final
assembly and product customization.

An important initiative in EMEA is the coordination of
purchases for the different production units by specialized
purchasing managers for each component category. This
has led to an increased percentage of purchases in low-cost
countries and better exploitation of economies of scale in
the division.

Administrative services such as wage administration
and accounts are being coordinated on a regional basis to
improve efficiency. Joint administration has already been
successfully implemented in Germany and all regions will be
similarly organized in the coming years.

Coordination of the division’s IT infrastructure was a new
project which was initiated during the year and will continue
for the next few years. This project will lead to more efficient
coordination of the division’s IT systems and the implemen-
tation of electronic order and order management systems
for distributors and other customers. The aim is that this
should lead to better internal efficiency and an increased
service level for ASSA ABLOY’s customers.

ASSA ABLOY ANNUAL REPORT 2010

EMEA DIVISION 39

Americas
Increased market presence and innovation

The division returned to growth in the second half of the year driven by gradual, increasing demand in
the renovation market. However, low activity in the new construction market in North America had a
negative impact on sales. Growth was high throughout the year on the Latin American market. Market-
ing initiatives in the commercial market continued in 2010 through increased market presence and
product development. Many new electromechanical products and environmentally sensitive solutions
were launched. Active marketing campaigns, new innovative products and efficiency measures enabled
the division to maintain a strong operating income and cash flow. The year saw the acquisition of two
US companies: Schaub and Security Metal Products.

Americas in brief
The Americas division manufactures and sells mechanical
and electromechanical locks, cylinders, security doors and
door frames in North and South America. The majority of
the division’s sales are in North America where ASSA ABLOY
has an extensive sales organization and sells its products
through distributors. Sales in South America and Mexico
take place mainly through distributors, wholesalers and DIY
stores. The Americas division operates in both the non-res-
idential and residential segments. The non-residential seg-
ment accounts for the majority of the division’s sales. Some
of the division’s leading brands are Ceco, Corbin Russwin,
Curries, Emtek, Medeco, Phillips, SARGENT and La Fonte.

Report on the year
The division’s sales during the year totaled SEK 9,536 M
(9,880), which was a reduction of 3 percent. Operating
income (EBIT) fell 2 percent to SEK 1,886 M (1,925), which
represents an operating margin of 19.8 percent (19.5).

Different products for different market segments
In the North American market there is a clear distinction
between products intended for the residential segment
and products for the non-residential segment. As a result,
very few of the division’s products are suitable for both seg-
ments, and the distribution channels are also completely
distinct. Security doors, door frames and locks are major
components of the solutions offered to non-residential
customers. There is also increased demand for sustain-
able products and solutions to contribute to the growing
desire for LEED building certifications in the non-residential
market.

Positive development in the non-residential segment
The non-residential segment accounts for a large percent-
age of the division’s sales in the US and Canada. The market
improved gradually during the year, with growth in third
and fourth quarters. Despite lower volumes, Americas suc-
ceeded in maintaining very good margins thanks to active
marketing efforts and cost control. The division works vig-
orously to generate demand in many non-residential seg-
ments, including public buildings, hospitals, school and
college campuses, airports, transport terminals, sports and
shopping centers, manufacturing plants and commercial
offices. Since security and safety standards for these envi-
ronments are often highly complex, they require more lock
and door functionality than typical residential applications.
Fire and life-safety building codes make ever-increasing

demands on product functionality, complexity and durabil-
ity. It is increasingly essential that security solutions should
consider the door environment as a whole. A total security
solution from ASSA ABLOY is often a combination of doors,
door frames, locks, hinges, door closers or exit devices,
access-control products and high-security key systems.

Demand stabilization in the residential segment
The residential segment, which constitutes only a minor part
of the division’s sales, continued to show a slightly nega-
tive trend at the beginning of the year, due to the prolonged
downturn in the high-end home construction segment
in the US. Substantial efforts to cut costs, combined with
aggressive new product launches, made positive contribu-
tions to managing the weak market conditions and demand
stabilized in the second half of the year. The acquisition of
Schaub complements the division’s product offering in the
high-end residential segment in the US market.

Strong growth in Latin America
Growth in Latin America was strong during the year. The
countries in Latin America have their own local security
standards requiring unique security solutions. Sales in Brazil
and Chile rose strongly, particularly in Brazil where the local
demand for security products is good due to the constantly
increasing living standard. The acquisition of Cerracol in
Colombia at the end of 2009 has strengthened the division’s
opportunities for successfully meeting market demand in
Central America. In Mexico, the successful efficiency pro-
grams continued, while sales exceeded market growth.

Market presence
The Americas division continues to focus on specifying
security solutions and increasing its knowledge of end-
user needs. Marketing tools such as the Mobile Innovation
Showroom allow customers to view and learn about the
latest door opening solutions at convenient local venues.
Increased marketing activities and private showings of secu-
rity solutions at the permanent Innovation Showroom at
the division’s main plant in Connecticut have increased cus-
tomer awareness of new products and security solutions.
The division also works closely with architects and security
consultants early in the construction process. ASSA ABLOY’s
specification consultants share their expertise to ensure
that security solutions are code-compliant and meet the
complex functional and security needs of the end-user. Such
activities strengthen relations with architects and increase
the likelihood of orders when the project is procured. In

AMERICAS DIVISION

ASSA ABLOY ANNUAL REPORT 2010

» Increased focus on market presence, innovation and
cost control in tough market conditions «

2010 the division participated actively in the US Green
Building Council (USGBC), the Canadian Green Building
Council (CGBC) and the US Regenerative Council.

Product leadership
Integration of electronics into traditional mechanical door
and security products remains a key priority for Americas
division. Product development continues at a high rate as
well as the focus on aesthetic product design and specific
security solutions for the end-user.

In 2010 the division launched additional aesthetic and
environmentally sensitive solutions and access control solu-
tions. Some of these door and hardware solutions were win-
ners of various of prestigious prizes for design and function
by the design and architecture world.

Cost-efficiency
The Americas division strives for operational excellence to
further improve performance in a number of areas. Some
of the areas targeted for further cost-efficiency gains are
shared services, production efficiency, Lean methods and
coordinated purchasing for the production units.

The implementation of Seamless Flow activities to
streamline the order flow process has increased the divi-
sion’s cost-efficiency. Lean activities in both manufactur-
ing and administration are an important part of Americas’
operations and culture and drive continuous improvement
across the entire division. Smart outsourcing of components
and improved automation processes complement the divi-
sion’s cost-efficiency strategy.

Americas division continues to coordinate administra-
tive services for its companies. In addition to financial ser-
vices and human resources, legal and IT services have been
consolidated across most companies in the division, leading
to increased efficiency and quality.

KEY FIGURES
SEK M

¹ Excluding items affecting comparability. 2009.
² Reclassification has been made for 2009.

SALES AND OPERATING INCOME

2009

2010

9,880
–19
1,925
19.5

8,687
6,003
20.5

2,677
6,897

9,536
–2
1,886
19.8

8,163
6,039
21.3

2,013
6,969

SEK M

12,000

10,000

8,000

6,000

4,000

(cid:132) Sales2

Operating income¹

SEK M

2,400

2,000

1,600

1,200

¹ Excluding items affecting compa-

rability 2006, 2008 and 2009.
² Reclassification has been made

800

for 2008 and 2009.

09 10

CAPITAL EMPLOYED AND RETURN ON CAPITAL EMPLOYED 1

(cid:132) Capital employed
Return on capital
employed

¹ Excluding items affecting comparability
2006, 2008 and 2009.

SEK M

10,000

8,000

6,000

4,000

09 10

SALES BY PRODUCT GROUP

Mechanical locks,
lock systems and
accessories, 52 %
Electromechanical
and electronic locks, 10 %
Security doors and
fittings, 38 %

MARKET SEGMENTS

Non-residential, 90 %
Residential, 10 %

ASSA ABLOY ANNUAL REPORT 2010

AMERICAS DIVISION 41

Asia Pacific
Strong development in Asia

The division grew throughout the year driven by very strong development in China, where demand
was high particularly for security doors. Growth was also strong on the South Korean, Australian and
New Zealand markets. The division worked actively on a number of initiatives to increase market
presence. Some of the most important initiatives were the development of the specification and
project market, expansion into new markets and segments, and through acquisitions. As a result of
organic growth and strategic acquisitions, the Group can now offer a complete range of door opening
solutions on the Asian markets. The profitability of the division and all business units increased to a
good level. The year saw the acquisition of Pan Pan and Longdian (China) and King Door Closers
(South Korea).

Asia Pacific in brief
The Asia Pacific division manufactures and sells mechani-
cal and electromechanical locks, high-security doors and
fittings. China and the rest of Asia account for around 70
percent of sales, while Australia and New Zealand account
for around 30 percent of the division’s sales. In Asia, the divi-
sion’s leading brands are Baodean, Gateman, Guli, King, Pan
Pan, Shenfei, Tianming, Wangli and Yale. The Australian and
New Zealand markets are more mature, with established
lock standards and strong brands such as Lockwood and
Interlock. The majority of sales are for the renovation and
upgrade of previously installed security products. The Asian
markets do not yet have such established security standards
and the majority of products are sold for new buildings. The
production units in China also supply ASSA ABLOY’s other
regions.

Report on the year
The division’s sales during the year totaled SEK 6,081 M
(3,789), which was an increase of 60 percent. Operating
income (EBIT) rose by 84 percent to SEK 843 M (459), which
represents an operating margin of 13.9 percent (12.1).

Strong growth in China
The Chinese lock market is growing thanks to rapid urban-
ization. Migration from the country to the cities and the
modernization of both residential and commercial build-
ings are creating increased demand for security. The mar-
ket is fragmented, with many local security companies, but
ASSA ABLOY has a leading position as the largest security-
door and lock manufacturer in China. The Chinese market
is important for ASSA ABLOY and China is now the Group’s
second largest market after the US.

In China the same types of lock, handle and fittings are
often used in both homes and offices. Sales comprise both
products manufactured in the region and premium prod-
ucts imported from Europe and North America.

There are few national or regional standards govern-
ing how locks, doors and fittings should be designed and
fit together. ASSA ABLOY is working with Chinese regula-
tory authorities to develop and improve these security
standards.

Asia Pacific has established a Door Group comprising
the Group companies Wangli, Tianming, Longdian and Pan
Pan. These companies are working together to develop new
products, technologies and sales channels and to reduce
the costs of adapting products to different national and

security standards. The investment in the new Door Group
is expected to lead to higher growth due to the increased
focus across the region on higher security requirements for
doors, including fire safety requirements.

Central government measures have been implemented
to slow down growth in the large coastal cities with high pop-
ulation growth, while the public authorities have stimulated
construction in inland cities. A key strategy for ASSA ABLOY
has therefore been creating a presence to exploit the growth
in these regions. This has been achieved partly through the
acquisition of Pan Pan. Sales in China were very strong during
the year, particularly in the Door Group.

Other Asian markets
There is still considerable growth potential in the large, frag-
mented markets in the rest of Asia. These markets are gener-
ally underdeveloped, with low security standards, and are
therefore mainly driven by the price of the lock and secu-
rity solution. Asia Pacific is continuing its strong efforts to
develop the sales organization into focused sales teams and
to concentrate on fewer but stronger brands, which has fur-
ther strengthened the division’s product offering.

Sales in India have risen substantially and the Group won

the prestigious contract for the new terminal T3 at New
Delhi International Airport, which was completed in 2010.
Continued expansion on the Indian market is a key priority
for the division.

In South Korea, the Group company iRevo is the market
leader in digital door locks under the brand name Gateman.
This type of residential door lock has been very successful in
both South Korea and China. iRevo has also developed digi-
tal locks for the US and European markets, with their higher
security standards. These digital locks were launched on the
consumer market under the brand name Yale.

Stable market in the Pacific
In Australia and New Zealand ASSA ABLOY is the market
leader on both the housing and the commercial markets
with its established Lockwood and Interlock brands. The
development in 2010 was good and sales increased particu-
larly at the beginning of the year, due to central government
stimulus packages, but returned to more normal levels at
the end of the year.

Market presence
Asia Pacific is working actively on a number of initiatives to
increase the division’s market presence. Some of the most

ASIA PACIFIC DIVISION

ASSA ABLOY ANNUAL REPORT 2010

» Strong growth
on Chinese
market «

KEY FIGURES
SEK M

Income statement
Sales¹
Organic growth, %
Operating income (EBIT)
Operating margin (EBIT), %
Capital employed
Capital employed
– of which goodwill
Return on capital employed, %
Cash flow
Cash flow
Average number of employees

1 Reclassification has been made for 2009.

SALES AND OPERATING INCOME

2009

2010

3,789
–1
459
12.1

2,768
1,536
16.1

610
7,560

6,081
14
843
13.9

4,080
3,202
25.1

917
15,510

SEK M

6,500

5,500

4,500

3,500

2,500

1,500

500

09 10

SEK M

800

700

600

500

400

300

200

(cid:132) Sales2

Operating income¹

¹ Excluding items affecting compa-

rability 2006, 2008 and 2009.
² Reclassification has been made

for 2008 and 2009.

CAPITAL EMPLOYED AND RETURN ON CAPITAL EMPLOYED¹

SEK M

4,500

3,750

3,000

2,250

1,500

750

09 10

SALES BY PRODUCT GROUP

(cid:132) Capital employed
Return on capital
employed

¹ Excluding items affecting compa-
rability 2006, 2008 and 2009.

Mechanical locks,
lock systems
and accessories, 49 %
Electromechanical
and electronic locks, 9 %
Security doors and
fittings, 42 %

MARKET SEGMENTS

Non-residential, 60 %
Residential, 40 %

important initiatives are expansion into new markets and
segments and through acquisitions as well as the develop-
ment of the specification and project market.

Acquisitions remain important for increasing market
presence and Pan Pan, which has production in seven loca-
tions in China, was acquired in 2010. The company is China’s
largest manufacturer of high-security doors, including fire-,
corrosion-proof, armored and standard high-security doors,
and has the capacity to produce 2.4 million doors per year.
Pan Pan has an extensive and well-established distribution
network across China and is a good fit with ASSA ABLOY’s
other door companies. The year also saw the acquisition of
King Door Closers, South Korea’s leading manufacturer of
door closers and floor springs. King has a comprehensive
range of standard and certified commercial and residential
door closers as well as a complete range of floor springs. The
company has a strong presence on the strategically impor-
tant specification market and a large proportion of exports
mainly to the Middle East and the rest of Asia. The Chinese
company Longdian was also acquired during the year.

Specification of total door opening solutions is increas-

ingly important for sales and the number of specification
sales representatives has therefore been increased substan-
tially in Asia Pacific and the close collaboration with archi-
tects and security consultants further strengthened. The
local sales organizations are united under the ASSA ABLOY
master brand in order to better meet the demand for total
door and security solutions.

Today ASSA ABLOY is the largest door opening solutions
company in China and has some 14,000 employees on the
local market. The Group has a leading position in door open-
ing solutions with a complete product range covering many
different segments and well-known brands. This has been
achieved through a healthy combination of acquired and
organic growth.

Product leadership
Innovation and continued product development are impor-
tant factors enabling the division to maintain an attrac-
tive product range and increase sales. Electromechanical
security products, such as digital door locks from iRevo, are
increasingly important and there is considerable growth
potential in the commercial segment. Major resources are
also invested in product development of mechanical prod-
ucts and doors. 2010 saw the successful launch of a fire door
for the higher-end housing market under the Yale brand.

Cost-efficiency
The Group’s efficiency programs intensified. The division
has continued to invest in production facilities in China,
mainly to meet rising demand on the local market but also
to increase intra-Group deliveries to Europe, North America
and the Pacific.

The remaining production plants in Australia and New
Zealand now focus on customized solutions and final assem-
bly. A large proportion of the components and standard
products will be made by the division’s Chinese plants. Pro-
ductivity in these plants is constantly improving as a result of
the continued implementation of Lean methods and invest-
ments in semi-automated processes and sustainability.

ASSA ABLOY ANNUAL REPORT 2010

ASIA PACIFIC DIVISION 43

Global Technologies
Strong growth in secure identity
and product launches within Hospitality

Demand returned in 2010 and the year saw very strong growth. HID Global showed strong growth
throughout the year, while Hospitality returned to growth in the second half of the year. HID Global
launched a number of new products and services in logical and physical access and in secure card issu-
ance, all of which were well received by the market. A number of major projects were also won in eGov-
ernment. The US company ActivIdentity was acquired during the year. New product launches within
Hospitality led to a sharp increase in demand for renovation and upgrades on all markets. Meanwhile it
continued to see a reduction in new hotel construction, which has now reached its lowest level for three
years. Increased volume and continued efficiency programs raised profitability throughout the division.

Global Technologies in brief
Global Technologies division has a leading position as a sup-
plier of electronic security solutions worldwide. The division
consists of two business units, HID Global and ASSA ABLOY
Hospitality, with sales mainly to the commercial segment.
HID Global is a global leader in secure identity solutions, pri-
marily in identity and access management, and in contact-
less identification technology solutions. ASSA ABLOY Hos-
pitality is the market leader in electronic lock systems and
safes for hotels and cruise ships.

Report on the year
The division’s sales during the year totaled SEK 5,015 M
(4,766), which was an increase of 5 percent. Operating
income (EBIT) excluding restructuring costs rose by 13 per-
cent to SEK 862 M (766), which represents an operating
margin of 17.2 percent (16.1).

HID Global
HID Global is a global leader in secure identity solutions, pri-
marily in identity and access management, and in contact-
less identification technology solutions. Identity and access
management product lines include contactless smart cards,
wall mount, desktop and mobile readers, for physical and
logical access control, secure issuance card printers, and
card personalization services.

HID Global – main events in 2010
Demand for HID Global’s products increased gradually dur-
ing the year. New products and active marketing efforts
resulted in considerable interest in secure identity solutions.

ActivIdentity, a market leader in secure identity and
authentication solutions, was acquired in the second half
of the year. The company’s product portfolio is a good fit
with HID Global. An agreement was also signed to acquire

Identity and
access management

2. Physical
access control

1. Secure
issuance

3. Logical
access control

Secure
identity

7. Industry
and logistics

HID Global’s product areas
HID Global works with a common technology platform for
secure identification using smart cards, RFID and encryption.
Below are some examples of HID Global’s product offering
in this area of the security market.

Identity and access management
1. Secure issuance

Printing and issuance of secure ID cards

2. Physical access control

Contactless cards and card readers

3. Logical access control

Card readers and software for secure login

4. Contactless
payment

Identification solutions
4. Contactless payment

Contactless payment cards and reader modules

5. eGovernment

Identification technology for ID cards, ePassports,
and readers

6. Animal ID

5. eGovernment

6. Animal ID

Contactless tags and readers for identifying livestock

7. Industry and logistics

Contactless tags and readers for inventory control and
logistics

ASSA ABLOY ANNUAL REPORT 2010

Identification solutions

GLOBAL TECHNOLOGIES DIVISION

KEY FIGURES
SEK M

¹ Excluding items affecting comparability 2009.
² Reclassification has been made for 2009.

SALES AND OPERATING INCOME

2009

2010

4,766
–12
766
16.1

5,464
4,030
12.9

1,005
2,416

5,015
10
862
17.2

5,772
4,265
14.7

868
2,487

SEK M

5,000

4,000

3,000

2,000

SEK M

1,000

(cid:132) Sales2

Operating income¹

800

600

¹ Excluding items affecting compa-
rability 2006, 2008 and 2009.
² Reclassification has been made

400

for 2008 and 2009.

09 10

CAPITAL EMPLOYED AND RETURN ON CAPITAL EMPLOYED¹

SEK M

6,000

5,000

4,000

3,000

2,000

09 10

SALES BY PRODUCT GROUP

(cid:132) Capital employed
Return on capital
employed

¹ Excluding items affecting compa-
rability 2006, 2008 and 2009.

Identity and access, 55 %
Identification solutions, 22 %
Hotel locks, 23 %

MARKET SEGMENTS

Non-residential, 100 %
Residential, 0 %

» Global leader in secure identity
and hotel security «

LaserCard Corporation, a leading provider of secure ID
solutions to governments and commercial customers
worldwide.

Active efforts to improve the efficiency and organiza-
tion of the business unit contributed to an increase in HID
Global’s margin.

Market presence
HID Global continued its long-term investments in mar-
ket presence. A new collaboration project was started to
develop contactless smart cards reader technology for the
global PC market. The year also saw the launch of Genuine
HID, which provides customers with many benefits, such as
interoperable products, services and solutions, technology
migration options a global network of authorized reseller
partners, and trusted industry expertise.

Secure identity and ePassports are an increasingly impor-

tant market. HID Global has supplied over 100 million con-
tactless inlays, strengthening its leading position in the
global ePassport market.

Product leadership
In physical access, iCLASS products continue to be success-
ful, but the older Prox technology also continues to grow. In
logical access, a number of customers including Dell have
adopted HID’s technology for secure computer login. A new
generation of leading card printers for secure card issuance
has also been launched. The printers feature innovative
functions such as an embedded badging software appli-
cation, network connectivity, printing and encoding of ID
cards and enhanced ribbon handling.

HID Global increasingly supplies reader technology to
all the Group’s divisions. Reader technology is being inte-
grated into mechanical door opening solutions. This results
in increased growth for both HID Global and the other divi-
sions, as it considerably raises the technology level of tra-
ditional products, offering customers higher security and
better functionality. One of HID Global’s key priorities is
therefore drawing up a development strategy for a global
solutions platform.

Cost-efficiency
One important project in 2010 was to reduce inventories in

ASSA ABLOY ANNUAL REPORT 2010

GLOBAL TECHNOLOGIES DIVISION 45

HID Global. The project was implemented across all product
and geographical areas and resulted in a reduction in capital
employed and an improved cash flow.

Consolidation of the business unit’s production to the
production unit in Malaysia was ongoing and will continue
in 2011. A global quality function was also established to
reduce costs and confirm that product quality targets are
met.

HID Global also increased its activities in Value Analysis/

Value Engineering (VA/VE). The goal is to reduce product
costs and at the same time increase functionality. This has
led to significant cost savings in both the existing product
range and the production of new products.

ASSA ABLOY Hospitality
ASSA ABLOY Hospitality produces electronic locking sys-
tems and in-room safes for hotels and cruise ships. The busi-
ness unit includes leading global brands such as VingCard
Elsafe and TimeLox. VingCard Elsafe, the world’s best-known
brand for hotel locking systems and in-room safes, has prod-
ucts installed in over 6.5 million hotel rooms in more than
39,000 hotels worldwide.

ASSA ABLOY Hospitality – main events in 2010
The new construction market remained at a low level
throughout the year. However, demand for renovation
and upgrades increased sharply as hotel occupancy rates
improved.

ASSA ABLOY Hospitality has worked actively to upgrade
customers’ installed locks from magnetic locking systems to
more secure, flexible and user-friendly locks using Radio Fre-
quency Identification (RFID). The new contactless RFID hotel
locks were well received by the market and made a posi-
tive contribution to sales. In recent years demand for ASSA
ABLOY’s RFID technology has increased. RFID technology
offers higher security and when combined with ZigBee tech-
nology provides a very reliable and cost-efficient wireless
online security system (VISIONLINE), improving efficiency
and reducing maintenance costs for hotels.

The new VISIONLINE system is integrated with the hotel’s

other operating systems to add efficient in housekeeping,
security, front desk and maintenance functions. The VISION-
LINE system improves security by managing card cancella-
tion straight from the server, customer service by enabling
the front desk to authorize room changes, extensions of stay
and access to conference rooms without the guest need-
ing to hand in their key at the reception to be re-encoded.
New integrated technology for further development of the
VISIONLINE system, such as mobile keys in mobile phones,

loyalty cards for regular customers.
VingCard Elsafe also presented with great success the new
Energy Management Solution, Orion, which intelligently
determines guest presence to efficiently manage the energy
and HVAC consumption in the room ensuring savings, guest
comfort and contributing hotels green initiatives.

Market presence
It is strategically important for ASSA ABLOY Hospitality to
expand its customer base beyond the traditional hotel and
cruise sectors. Marketing efforts are therefore being made
in other segments, such as retirement and student accom-
modation, where security and accessibility requirements
can be met by the products and technologies offered by
ASSA ABLOY Hospitality. Future initiatives are in hand to
offer integrated security solutions with other ASSA ABLOY
companies.

Product leadership
One strategic priority for increased growth in ASSA ABLOY
Hospitality is offering upgrades for previously installed
products. Important components in achieving this are tech-
nologies such as RFID, NFC in mobile phones and ZigBee RF
online solutions, which are designed to facilitate gradual
upgrade of existing technology to better satisfy customer
needs and investment plans.

A successful project during the year was the Clarion
Hotel Stockholm, in which ASSA ABLOY and its partners
developed the worlds first hotel integrated locking sys-
tem for replacing hotel keys with NFC compatible mobile
phones. The technology makes it possible for hotel guests to
bypass the check-in at reception and use their NFC-compati-
ble mobile phones.

Cost-efficiency
Major efforts are also being made to increase efficiency in
the business unit through relocation of production to low-
cost countries and outsourcing of component production
to high-quality suppliers in low-cost countries. In 2010 ASSA
ABLOY Hospitality completed the relocation, which began
in 2006, of all production from West Europe to the new pro-
duction plant in Shanghai, China. This relocation resulted in
increased production efficiency and lower costs, which had
a positive impact on margins.

Hospitality is continuing to implement a global ERP sys-
tem, which will improve the efficiency of administrative and
global purchasing functions and develop the web-based
ordering portal used by Hospitality’s business partners.

GLOBAL TECHNOLOGIES DIVISION

ASSA ABLOY ANNUAL REPORT 2010

Famous landmark secured by VERSO Cliq

Berlin’s television tower is one of the city’s most famous
landmarks. Part of the World Federation of Great Towers
(WFGT), it reaches 368 meters, making it the tallest struc-
ture in Germany.

The areas managed by the operator, including all public
areas, two high-speed lifts, restaurant, storerooms and
administrative offices in and around the building, call for a
hierarchical access structure.

TV Turm Alexanderplatz Gastronomiegesellschaft has 1.2

million visitors annually, so the company that operates the
building has high security requirements. The IKON VERSO
Cliq is an intelligent system solution integrating high-grade
precision mechanics and electronic modules, offered the
company the security and flexibility they needed.

The use of seasonal and temporary workers, restructur-
ing or outsourcing to external companies, also mean access
authorizations need to be adapted quickly and flexibly.
Another aspect in VERSO Cliq´s favor was the availability
of reliable, comprehensive documentation as well as its easy
system handling and programming.

ASSA ABLOY ANNUAL REPORT 2010

Entrance Systems
Acquisitions strengthen customer
offering in entrance automation

New sales of automatic doors were weak throughout the year, while service sales continued to grow
strongly. Demand in the healthcare segment fell, while it increased in the retail segment. Newly acquired
Ditec, where a large number of improvement projects were implemented, saw sales of entrance automa-
tion products develop positively towards the end of the year. Rationalization of the production structure
resulted in a strong earnings trend although the division’s operating margin was negatively impacted by
the dilutive effect of the Ditec acquisition. The year saw the acquisition of Peiser (Germany) and Hunter
(Canada). In addition, an agreement was signed to acquire a stake in Agta Record ( Switzerland) and a
bid was made for the Swedish company Cardo. The acquisition of Cardo will enable the Group to offer
customers a complete and unique range of products and services in the entrance automation field.

Entrance Systems in brief
Entrance Systems division is a global leader in automatic
entrance solutions. The product range, sold under the
Besam brand, includes automatic swing-, sliding- and revolv-
ing doors, air curtains and a comprehensive service range. A
significant part of sales goes direct to major end-customers
in the healthcare, retail and transport sectors.

Door-, gate-, garage door- and industrial door auto-
mations are sold under the Ditec brand. The products are
sold through distributors and installation companies and
installed in industrial, commercial, institutional and residen-
tial applications.

The division’s third brand, EM, markets automatic
pedestrian door products; and targets major distributors
particularly in Europe.

Report on the year
The division’s sales during the year totaled SEK 4,072 M
(3,733), which was an increase of 9 percent. Operating
income (EBIT) excluding restructuring costs rose by 7 per-
cent to SEK 627 M (587), which represents an operating
margin of 15.4 percent (15.7).

Demand improved during the year from a low level, par-
ticularly in the division’s important retail segment. However,
new sales continued to weaken on the institutional mar-
ket in the healthcare sector as a result of reduced invest-
ments by customers. Service remains a key success factor
for achieving good sales and profitability, particularly in a
market with a low level of new sales. Ditec’s products, which
are now also marketed by Entrance Systems’ organization
on several new markets, showed positive growth during the
year. The division also made major investments in new prod-
ucts and increased marketing activities under the EM brand
that targeted distributors. Asia continued to show strong
growth during the year and the division worked on prod-
uct development to adapt products to local standards and
requirements.

Entrance automation for commercial customers
Automatic pedestrian and industrial door solutions and ser-
vice offerings are mainly sold in the commercial segment,
which comprises end-users in both the private and public
sectors.

Typical customers are retailers, hospitals, homes for the

elderly, hotels, airports, transport terminals, office build-
ings, public buildings and schools. It is increasingly impor-

tant to be able to offer a total entrance automation solution
comprising automatic pedestrian and industrial door solu-
tions. The service offering can then be expanded to include
all automated entrances for both pedestrians and goods.
Acquisitions of industrial door companies complement the
product, solutions and service offering to commercial and
institutional customers.

EMEA
The low activity in new sales in EMEA resulted in slightly
negative growth during the year, but the division neverthe-
less continued to increase its market shares in many key
markets. Entrance Systems positively developed several
activities to mitigate this negative growth, including new
product launches and the development of new service
concepts which are progressing well. Emerging markets in
East Europe, the Middle East and South Africa showed good
growth during the year.

North America
Sales on the North American market improved gradually
due largely to improved service concepts, which resulted
in a number of new contracts in the US and Canada. Prod-
uct launches improved the customer offering and led to
increased market shares. Hunter Door Automatics was
acquired during the year to develop the growing distribu-
tion and installation market. The company will contribute
to Ditec’s growth and adds a large number of attractive
products for the North American market.

Asia, Australia and New Zealand
Sales in Asia remained strong during the year, with positive
growth in China and southeast Asia. The acquisition of Cheil
in South Korea has developed positively and significantly
strengthened the position in the region. The Australian and
New Zealand markets improved from a low activity level and
the division consolidated its market position mainly through
a stronger service offering.

Market presence
Entrance Systems is continuously working to expand its cus-
tomer offering by selling entrance automation products
and components, as well as total automatic pedestrian and
industrial door solutions, including a comprehensive service
concept. Regular preventive maintenance is beneficial for
customers, and ongoing contact with these end-customers

ENTRANCE SYSTEMS DIVISION

ASSA ABLOY ANNUAL REPORT 2010

» Entrance
automation
acquisitions
strengthen the
customer offering «

KEY FIGURES
SEK M

¹ Excluding items affecting comparability 2009.
² Reclassification has been made for 2009.

SALES AND OPERATING INCOME

2009

2010

3,733
–3
587
15.7

4,116
3,223
15.2

680
2,253

4,072
–2
627
15.4

4,365
3,303
14.6

580
2,738

SEK M

4,500

4,000

3,500

3,000

2,500

2,000

09 10

SEK M

640

(cid:132) Sales2

Operating income¹

580

520

460

400

340

¹ Excluding items affecting compa-
rability 2006, 2008 and 2009.
² Reclassification has been made

for 2008 and 2009.

CAPITAL EMPLOYED AND RETURN ON CAPITAL EMPLOYED¹

SEK M

4,500

4,000

3,500

3,000

2,500

2,000

09 10

SALES BY PRODUCT GROUP

(cid:132) Capital employed
Return on capital
employed

¹ Excluding items affecting compa-
rability 2006, 2008 and 2009.

Automatic doors, 64 %
Service, 36 %

MARKET SEGMENTS

Non-residential, 93 %
Residential, 7 %

also enhances opportunities for additional sales. The divi-
sion is also working on increasing efficiency in the service
organization, further automating processes and increasing
the number of customer visits.

The previous acquisitions of Ditec and Portsystem 2000

have been well-integrated and complement the division
in automatic pedestrian, sectional and high speed doors
docking stations and gate automation. The companies also
strengthen the division’s indirect sales channel to both
the mature markets in Europe and North America, and the
expanding business in emerging markets.

The announced acquisition of Cardo will further strength-
en the product offering in industrial doors by strengthening
the division’s ability to offer a total entrance automation
package to customers. It will also strengthen both the prod-
uct portfolio and channel reaching the residential segment.
The division has continued to focus on emerging markets
and allocated more resources to exploit the growth oppor-
tunities in these markets.

Product leadership
The division continued to invest in product development
and initiated a number of important projects in 2010.

Besam launched the VersaMax product line with man-
ual-, sliding and telescopic door opening solutions suitable
for patient rooms. VersaMax products have a patent pend-
ing, equal leaf design, offering the largest clear door opening
in the industry.

Besam also launched a new UniSlide 100 slim sliding
door operator. This product has filled a gap in Besam’s prod-
uct portfolio in Austria and Germany, where there is large
demand for slim door operators.

Product customization to meet local conditions and

requirements in Asia and North America continued,
strengthening competitiveness in several key markets.

Cost-efficiency
The division’s efficiency programs continued intensively. The
aim of these programs is to improve production efficiency
and transfer component production to low-cost countries.
Several important projects to relocate component pur-
chases and production capacity to low-cost countries were
completed during the year, and new projects were initi-
ated to further reduce product costs. The relocation of the
Landskrona production plant to the Czech Republic and
the reduction of production in Italy and Spain continued in
2010. The division was also successful in adapting costs to
the lower volume of new sales, which had a positive impact
on the operating margin in 2010.

Measures to increase sales and productivity continue in
the service organization. The project to provide service engi-
neers in several countries with personal digital assistants
(PDAs) to increase their efficiency continued during the
year producing good results and leading to reduced service
administration costs. Today all service engineers in Europe
have PDAs and a pilot project is in progress in the USA to
implement the project and increase the efficiency of the
North American service organization.

ASSA ABLOY ANNUAL REPORT 2010

ENTRANCE SYSTEMS DIVISION 49

Employees
Employees generate success

ASSA ABLOY’s vision and ambition is to be an attractive company to work for. It is also becoming
increasingly important to be able to recruit and retain employees with the competence and the
experience required to secure the Group’s continued success. Considerable efforts are therefore
being made globally and locally to offer stimulating assignments, clear accountability, good
development opportunities and a positive, engaging work situation.

Common knowledge base
All employees must complete the interactive web-based ori-
entation program ‘Entrance to ASSA ABLOY’. This program is
available in 15 languages and covers the organization’s his-
tory, products, strategy and Code of Conduct. It also helps to
increase understanding of how the employee’s own efforts
contribute to the overall goals. A new version of the pro-
gram is set to be launched 2011.

Global employee survey
A global employee survey, first carried out in 2006, is con-
ducted every 18 to 24 months to find out the employees’
opinions on their work, their workplace and the company.
Evaluation and comparison with the results of previ-
ous surveys show the impact of the measures taken and
the areas that need prioritizing in the ongoing improve-
ment process. In spring 2010 the third employee survey
was conducted with over 18,000 participants. In addition
to the overall results for the Group and the divisions, the
results are broken down into a large number of local units,
enabling concrete measures and the involvement of many
employees.

The overall results for 2010 were on a par with the results

for 2008, which is positive in view of the comprehensive
restructuring measures that have affected many units as a
consequence of the financial crisis.

Management training
Every year ASSA ABLOY offers a number of senior managers
the opportunity to take part in the Group’s two develop-
ment programs, ASSA ABLOY Management Training (MMT)
and the ASSA ABLOY Business Leadership Program. In 2010
around 60 managers took part in these programs.

MMT, which is an internal program, is an important
tool for the integration of the Group, particularly of newly
acquired companies, by providing a deeper insight into
and an understanding of all aspects of ASSA ABLOY’s opera-
tions. It also helps to develop internal contacts, share best
practices and identify new business opportunities. Since
the first program in 1996, 390 managers from 33 countries
(including the 2011 program) have taken part. The program
comprises three modules over a 12-month period and takes
place in different global locations where ASSA ABLOY has
significant operations.

Scholarship gives employees
a chance to grow

The ASSA ABLOY Scholarship program is designed to provide employees with
the opportunity to further develop their professional knowledge and skills,
as well as to create a deeper understanding of ASSA ABLOY.

Candidates for scholarships should have an good record and, for practical pur-
poses, be able to communicate in English.
One of last year’s participants, Aaron Buxton-Rella from ASSA ABLOY Australia,
spent two months at the EMEA IT Shared Service Center in Landskrona, Sweden.
“It was a fairly intensive induction program,” Aaron says. “It was a great way of
developing stronger working relationships.”

Anna Pojen, an Online Corporate Communicator from ASSA ABLOY Head Office
in Sweden spent one month at HID Global in Irvine, California. “It was incredibly fun
to be able to take on a role where I could share the best of my 13 years of communi-
cation experience,” Anna says. “I strengthened my knowledge about search engine
optimization, my English improved, and I learned a lot about the identification and
access control industry, where HID operates.”

EMPLOYEES

ASSA ABLOY ANNUAL REPORT 2010

» ASSA ABLOY’s vision:
to be an attractive
company to work for «

The ASSA ABLOY Business Leadership Program was launched
in 2005 and is the result of collaboration with the Institute
for Management Development (IMD) in Lausanne, Switzer-
land. In 2010 one program took place with 26 participants.
A total of around 230 managers have taken part since the
program began.

A new program is currently being developed jointly with

IMD, which will be implemented for the first time in 2011.

Scholarship Program
ASSA ABLOY’s Scholarship Program offers employees the
opportunity to work at another Group company, providing
the opportunity to learn about the methods, procedures
and products of another Group company and to bring this
knowledge back to their own workplace. This program is
open to all employees.

Employee development
ASSA ABLOY has a well-established global employee devel-
opment process at all levels, the Talent Management Pro-
cess. The aim is to support career development in a struc-
tured way and optimize utilization of the Group’s total
competence.

Recruitment
A basic principle of ASSA ABLOY’s recruitment policy is to
give priority to internal candidates provided they have equal
qualifications to external applicants. To encourage and facili-
tate internal mobility, all job vacancies are advertised on the
Group’s global intranet.

Gender balance
ASSA ABLOY’s ambition is to achieve a better gender bal-
ance at all levels in the organization. A separate gender bal-
ance policy was developed during the year to underline this
ambition.

AVERAGE NUMBER OF EMPLOYEES

Number

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

09 10

NUMBER OF EMPLOYEES BY REGION

Europe, 11,450
North America, 7,256
Central and
South America, 925
Africa, 476
Asia, 16,045
Pacific, 1,127

DISTRIBUTION, MEN AND WOMEN

Men, 63%
Women, 37%

Employees voice heard through EWC

The European Works Council (EWC) is a forum where 24 employee representatives are
not only informed about what’s going on within ASSA ABLOY, but also have the chance to
ask Group management questions.

“EWC is the only transnational forum within ASSA ABLOY where employees get infor-
mation and can discuss important transnational issues with Group management,” says
the council’s president, Rune Hjälm.

In the end of November 2010 the EWC meeting were held in Sweden where Johan
Molin, ASSA ABLOY’s President and CEO, and Tzachi Wiesenfeld, the Executive Vice Presi-
dent and Head of EMEA division, talked about the Group’s economic and financial situa-
tion and expected trends in business, production and sales.
Other topics covered were for example competence development, equal opportuni-
ties, the Code of Conduct and the manufacturing footprint program.

ASSA ABLOY ANNUAL REPORT 2010

EMPLOYEES 51

Sustainable development
A natural part of the business

ASSA ABLOY’s work on sustainability is integrated throughout the value chain – from sourcing to
recycling. Sustainability initiatives are based on an ongoing risk analysis as well as on the Group’s
Code of Conduct and engage both internal and external stakeholders.

Sustainability Report
2010

The global leader in
door opening solutions

The 2010 Sustainability
Report will be published in
connection with the 2011
Annual General Meeting.

Code of Conduct
The Code of Conduct establishes the principles that
ASSA ABLOY applies in relation to its employees, suppliers
and other stakeholders. The Code is based on international
standards, is consistent across the global organization and is
available in 17 languages. ASSA ABLOY monitors the imple-
mentation of the Code of Conduct and deals immediately
with any non-compliance.

The Code of Conduct is available to all employees, who

are required to read and abide by it and related policies.
Whistle-blowing procedures are in place to enable individu-
als to report infringements.

ASSA ABLOY’s way of working
Social responsibility and sustainable development are based
on ASSA ABLOY’s Code of Conduct. The Board of Direc-
tors has the overall responsibility, while the Executive Team
handles operational management of sustainability and the
Group’s strategies.

Appointed coordinators at divisional and Group com-
pany level are responsible for the availability and implemen-
tation of sustainability and environmental guidelines, pro-
grams and tools. HR functions at Group and divisional level
monitor social and ethical issues. The divisions and their
companies are responsible for compliance with the Group’s
Code of Conduct and for reporting back to Head Office.

A committee led by ASSA ABLOY’s HR director monitors

compliance with the Code of Conduct and includes two
employee representatives. Matters dealt with by the com-
mittee include whistle-blowing cases.

As well as information and guidelines, ASSA ABLOY’s
intranet also provides tools to support the Group companies
in their sustainable development work. These tools include
a database of previous best practice in the Group. This data-
base includes all the facts, reporting and monitoring relating
to the sustainability program. Statistics and reports can be
extracted from the database to enable Group companies to
compare their performance with other ASSA ABLOY Group
companies and assess the measures to be taken.

The sustainability program
The first sustainability program was launched in 2007 and
completed in 2010 with all the targets fulfilled. New targets
for 2015 were then drawn up for all divisions and individual
Group companies. These include chemical handling, energy
efficiency, health and safety, supplier relations, product

development, employee issues and overall control. The pro-
gram has made it possible to introduce procedures for qual-
ity and environmental management and to establish a struc-
ture for ongoing improvement in day-to-day operations.
These now provide a firm platform for building a sustainable
future for the Group.

Corporate Governance
ASSA ABLOY complies with the Swedish Code of Corporate
Governance, which forms part of the NASDAQ OMX rules
governing the Stockholm Stock Exchange. The principles of
the Code are that companies should either comply with the
rules or explain any deviation from them. The Code stipulates
responsibilities and procedures for the Annual General Meet-
ing, ASSA ABLOY’s Board of Directors and the Executive Team.

Supplier control
Auditing and improving the ASSA ABLOY supplier base is
a continuous task, and supplier selection is based on stan-
dardized criteria for both quality and sustainability.

Suppliers are also required to comply with the Code of
Conduct. Quality and sustainability audits are carried out
before new suppliers are approved, and these audits are pri-
oritized for suppliers deemed to be in a risk category.

The system used to monitor suppliers’ compliance with
the Code of Conduct includes criteria on wages, overtime,
noise levels, protective equipment, chemical handling, acci-
dent recording, environmental management systems and
health and safety training.

Any supplier failing to comply with these requirements is

asked to implement necessary improvements, and the con-
tract is terminated if non-compliance continues.

The supplier selection process
The process has three stages:
• Supplier self-assessment – the supplier assesses its ability

to meet ASSA ABLOY’s standards.

• On-site audit – the sustainability audit assesses how well

a potential supplier meets requirements.

• Extended sustainability audit – this complements the

standard audit.

After the audit, suppliers are graded green, yellow or red.
Green means the supplier is approved; yellow means the
supplier needs to improve within a specific timeframe; red
means the supplier is not approved.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY ANNUAL REPORT 2010

SUSTAINABILITY
– integrated in each part of

the value chain

C ust o m e

Inn

S
o
u

rcing

Code of Conduct and Governance

s
e

People

Manufactu r i n g

A red or yellow grade can be upgraded through an improve-
ment plan. If no action is taken, the supplier is immediately
classed as red. All purchases from the supplier are then
stopped until a green grade has been achieved.

ability non-compliance is either stopped immediately or
must wait until the deficiencies have been addressed for
approval.

» An important part of ASSA ABLOY’s sustainable

development program is ensuring that all suppliers
meet the Group’s requirements «

Audits performed
ASSA ABLOY performed 376 sustainability audits in 2010.
At year-end, 288 active suppliers had satisfied the minimum
standards for quality and sustainability and were classed as
reliable. 16 suppliers were blacklisted.

Screening will continue, with annual monitoring of pre-
viously approved suppliers. Random, un announced inspec-
tions will be more frequent.

ASSA ABLOY’s supplier database
The Group’s suppliers are listed, graded and monitored in
a supplier database. Both quality and sustainability audit
reports are regularly entered in the database.

The database also lists non-approved and blacklisted
suppliers to ensure they are not used again. Sustainability
audit results override quality audit results regarding non-
compliance. This means that a supplier rejected for sustain-

Product development
ASSA ABLOY’s ambition to achieve world-class product
development involves looking at the environmental impact
of every product, and not just focusing on Green products.
Group companies use the Group’s Product Innovation

Process and environmental checklist for all new product
development.

The Product Innovation Process has three major

elements:
• Product management – addressing the strategic aspects

of the process.

• Voice of the Customer – ensuring the company develops

products that customers want.

• The Gateway process – ensuring that development proj-

ects are structured and efficient.

ASSA ABLOY implements its sustainability strategy and
reduces costs by minimizing the chemicals, energy and
materials used in manufacturing. The Group’s environ-
mental checklist helps to eliminate unnecessary functions,
reduce the amount of hazardous materials used and ensure
that processes are sustainable and efficient.

NUMBER OF REPORTING UNITS

USE OF CHLORINATED ORGANIC SOLVENTS (PER AND TRI)

250

200

150

100

08 09

The number of reporting units
in the Group has increased
from 181 to 204.

Tonnes

100

09 10

2010 and 2009 relate to
comparable units.

ASSA ABLOY ANNUAL REPORT 2010

SUSTAINABLE DEVELOPMENT 53

Sustainable development

Manufacturing
Energy
ASSA ABLOY’s ambition is to reduce energy consumption
and emissions of harmful greenhouse gases. The Group is
therefore implementing a three-stage approach to reduce
energy consumption.

Health and Safety
ASSA ABLOY is committed to providing a safe working envi-
ronment and eliminating risks that can cause accidents or
impair the health and wellbeing of employees. The aim is to
create a culture where everybody contributes to improved
health and safety.

The first stage is to concentrate manufacture in as few
plants as possible in order to maintain full capacity, efficient
working practices and high quality.

ASSA ABLOY has defined a number of targets intended to
lead to ongoing improvements. These targets are based on a
zero vision for work-related accidents.

The second stage is to introduce smart solutions that
reduce energy and water consumption in both offices and
factories.

The third stage is to evaluate alternative energy sources
which in combination with innovative product design can
make manufacturing processes even more energy-efficient.

Water consumption
Efforts to improve water efficiency have focused on plants
with surface treatment processes, where most of the con-
sumption occurs.

Technical improvements in the purification and reuse of

water in the production process reduced water consump-
tion in 2010.

Waste management
The Reduce, Reuse, Recycle principle is applied across the
organization by reducing the amount of material in prod-
ucts, designing products that can be upgraded rather than
replaced, and enabling recycling of production waste and
products at the end of their life cycle.

Hazardous chemicals
ASSA ABLOY also works continuously to reduce hazardous
substances in the production process and find substitutes
for them. For example, most production plants have phased
out chlorinated organic solvents successfully.

Health and Safety audits are included in the internal
audits, and risk assessment is carried out routinely. Inci-
dent reporting and analysis are used to identify preventive
measures.

All units are graded and compared with each other. As a
result, special initiatives can be implemented at plants with
the greatest need.

Sales and customers
ASSA ABLOY’s communication with its customers is primar-
ily through the sales force, and its image as a sustainable
company is often based on the customer’s relationship with
the sales representatives.

ASSA ABLOY’s requirements with regard to the Code of
Conduct and business ethics therefore form an important
part of the Group’s sales training.

Sustainability can provide new business opportunities.

Studies show that 10 percent of all new commercial con-
struction projects in the Western world are environmentally
rated.

A responsible employer
Factory Compliance Audits covering areas such as working
conditions, human rights, human resources issues, the work
environment, workplace culture and skills development are
conducted regularly at ASSA ABLOY’s factories. These audits
are conducted by external auditors in accordance with inter-
nationally accepted procedures to obtain an impartial view
of the situation at each factory.

The audits are followed by measures to implement

improvements where needed.

ENERGY USE

ACCIDENTS PER MILLION HOURS WORKED

GWh

600

500

400

300

200

100

2010 and 2009 relate
to comparable units.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY ANNUAL REPORT 2010

Stakeholders
ASSA ABLOY’s stakeholders in the area of sustainable devel-
opment include shareholders, investors, customers, suppli-
ers, employees, local communities, non-governmental orga-
nizations (NGOs) and the media. The company’s policy of
openness means listening to these stakeholders and taking
on board their views.

In 2010 ASSA ABLOY held round-table discussions and

separate meetings with a number of investors. Requests
from investors have generally concerned making more infor-
mation externally available about purchases in low-cost

Some of the results of the sustainability program

countries, such as procedures for establishing new opera-
tions, due diligence procedures, suppliers, sourcing vol-
umes, indicators for and information on supplier audits, and
information on non-approved suppliers. Investors have also
requested increased transparency with regard to the targets
for each monitored area. These meetings have proved valu-
able and given the Group important feedback on subjects
such as suppliers, the sustainability agenda and new busi-
ness opportunities for Green products.

Targets

Result 2007

Result 2008

Result 2009

Result 2010

Trend

Energy consumption – in manufacturing: A
15 percent reduction by 2012 compared with the
result in 2006, based on normalized values.

Organic solvents – Phase out all use of
perchloroethylene and trichloroethylene.²

Health and Safety
Zero-vision and targets for improvement:
– IR, injury rate = number of injuries per million

hours worked.

– ILDR, injury lost-day rate = number of days lost

due to injuries per million hours worked.

ISO 14001 – Compliance at all factories with
significant environmental impact.3

536 GWh

482 GWh

491 GWh

493 GWh¹

93 tonnes

42 tonnes

44 tonnes

32 tonnes

IR: 9.5
ILDR: 179

IR: 8.7
ILDR: 166

IR: 8.4
ILDR: 150

IR: 8.7
ILDR: 147

Suppliers – Sustainability appraisals
– Code of Conduct requirement for all suppliers.

Sustainability audits of suppliers in risk category.

120 sustain-
ability audits
in China

Gender equality – Improve current levels of
gender equality at senior levels.

Level 2: 0 %
Level 3: 14 %
Level 4: 19 %
Level 5: 22 %

100 sustain-
ability audits
in China

Level 2: 0 %
Level 3: 11 %
Level 4: 17 %
Level 5: 23 %

178 sustain-
ability audits
in China

Level 2: 0 %
Level 3: 15 %
Level 4: 18 %
Level 5: 20 %

376 sustain-
ability audits
in China

Level 2: 0 %
Level 3: 16 %
Level 4: 18 %
Level 5: 24 %

¹ For comparable units. Total energy consumption amounted to 535 GWh, including units acquired during the year

Deterioration

Unchanged

Improvement

and increased reporting.

² Plants with completely closed washing processes will be phased out when the machinery is taken out of service.
Read more about the updated target in the 2010 Sustainability Report.
³ Number of certificates plus the corresponding number of certifiable systems for North American units.

The change is due to the closure of plants under the restructuring program and to the addition of a number
of new plants with certificates.

THE SUSTAINABLE DEVELOPMENT PROGRAM IN BRIEF

2004/2005
Code of Conduct

Whistle-blowing

Internal audits

Training and best
practice

Investment criteria
> SEK 1 M

Due diligence directive

2006
Tools for supplier
control

Employee survey

2007
Sustainability
program

2008
Sustainability strategy
for product development
including checklists

2009
Sales companies and
offices are included in
reported figures

2010
Increased audit of
suppliers in low-cost
countries

Employee survey

Marketing and sales
training

Training in supplier control

Updated Code of Conduct

Increased monitoring
of energy consumption
and CO2
Launch of joint recruit-
ment and selection
guide

Targets for 2015
are defined for all
monitored areas

ASSA ABLOY ANNUAL REPORT 2010

SUSTAINABLE DEVELOPMENT 55

Sustainable
development

ASSA ABLOY joins
US Regenerative Network

ASSA ABLOY is proud to have become the 25th member of the US Regenerative Net-
work, the business consortium of leading global and venture-backed green building
product manufacturers and service providers.
ASSA ABLOY’s membership of the network signals its commitment to sustainable
development.

“Environmental ethics and social responsibility are an integrated part of

ASSA ABLOY’s commitment to providing products and services that are environmen-
tally sound throughout the entire production process and the product life-cycle,” says
David Gottfried, US Regenerative Network CEO and founder. “ASSA ABLOY’s presence
greatly enhances our dynamic roster of companies that seek the highest pinnacle of
sustainability.”

“The environment, business ethics and social responsibility are critical issues that

corporations must address to be integral members of society,” said Aaron Smith,
Director of Sustainable Building Solutions at ASSA ABLOY. “Our unconditional aim is
to make sustainability a central part of our business philosophy, culture and strategy.
Our membership in the US Regenerative Network will help ASSA ABLOY realize these
objectives and enhance our position as a socially responsible market leader.”

Smart system cuts hotel
energy use and costs

With energy one of the highest costs for hotel properties, the
Orion energy management solution from VingCard Elsafe
helps reduce both running costs and environmental impact.
The award-winning intelligent solution automatically
controls temperature settings as guests enter and leave their
rooms, reducing energy costs while ensuring guest comfort.
The Orion system can also be fully integrated with a hotel’s
wireless online locks, safes, lights and other networked sub-
systems, providing even greater control for the hotelier.
Several installations have already shown the energy
savings recouping the cost of the capital investment in two
years or less.

The Orion system received the prestigious Editor’s
Choice Award at the 2010 International Hotel, Motel
Restaurant Show (IHMRS) in New York as best green
technology.

SUSTAINABLE DEVELOPMENT

ASSA ABLOY ANNUAL REPORT 2010

Besam solves Ostankino Tower’s draught problems

The tallest free-standing structure in Europe, Russia’s 540-
meter Ostankino Tower, broadcasts television and radio
transmissions from more than 30 stations. It also features
conference facilities, several observation decks and a well-
known restaurant, making it a popular destination for
tourists.

Because of its great height, the building is subject to
powerful internal draughts in its elevator shafts. These con-
ditions not only impact the comfort of staff and visitors, but
also the fire resistance of the building.

Besam, an ASSA ABLOY Group company, installed two large,
three-wing revolving doors in the tower entrances to com-
pletely separate the indoor and outdoor environments,
while still allowing the building’s large number of visitors
convenient access.

Besam also provided 14 fire-rated automatic sliding
doors in the entrances to the elevator halls, resulting in a
draught-free environment and enhanced fire-resistance.
The contract includes Besam Service for all 16 installations.

ASSA ABLOY ANNUAL REPORT 2010

SUSTAINABLE DEVELOPMENT 57

Report of the Board of Directors
and Financial statements
Contents

Report of the Board of Directors

Significant risks and risk management
Corporate governance
Board of Directors
The Executive Team
Remuneration guidelines for senior management

Sales and income
Income statement - Group
and Statement of comprehensive income
Comments by division
Results by division
Financial position
Balance sheet - Group
Cash flow
Cash flow statement - Group
Changes in equity - Group
Parent company financial statements

59
61
64
68
70
73
74

75
76
77
78
79
80
81
82
84

Notes

1 Significant accounting and valuation principles
2 Sales
3 Auditors’ fees
4 Other operating income and expenses
5 Share of earnings in associates
6 Operational leasing agreements
7 Expenses by nature
8 Depreciation and amortization
9 Exchange differences in the income statement
10 Financial income
11 Financial expenses
12 Tax on income
13 Earnings per share
14 Intangible assets
15 Tangible assets
16 Shares in subsidiaries
17 Shares in associates
18 Deferred tax
19 Other long-term financial assets
20 Inventories
21 Accounts receivables
22 Parent company’s equity
23 Share capital, number of shares and

dividend per share

24 Post-employment employee benefits
25 Other provisions
26 Other short-term liabilities
27 Accrued expenses and prepaid income
28 Contingent liabilities
29 Assets pledged against liabilities to

credit institutions
30 Business combinations
31 Cash flow
32 Employees
33 Financial risk management and

financial instruments

Comments on five years in summary
Five years in summary
Quarterly information
Definitions of key data terms
Proposed distribution of earnings
Audit report

86
91
92
92
92
92
92
92
92
93
93
93
93
94
96
97
97
98
98
98
98
98

98
99
101
101
101
101

101
102
103
104

107
112
113
114
115
116
117

ASSA ABLOY ANNUAL REPORT 2010

Report of the Board of Directors

The Annual Report of ASSA ABLOY AB (publ.), corporate identity number 556059–3575,
contains the consolidated financial statements for the financial year 1 January–
31 December 2010. ASSA ABLOY is the global leader in door opening solutions,
dedicated to satisfying end-user needs for security, safety and convenience.

Significant events
Sales and income
Sales totaled SEK 36,823 M (34,963), with organic growth of
3 percent (–12) and acquired growth of 8 percent (3). Oper-
ating income (EBIT) excluding restructuring costs rose 12
percent to SEK 6,046 M (5,413), equivalent to an operating
margin of 16.4 percent (15.5). Income before tax excluding
restructuring costs totaled SEK 5,366 M (4,779).

Operating cash flow excluding restructuring payments

remained strong and amounted to SEK 6,285 M (6,843).
Earnings per share after full dilution excluding restructuring
costs were SEK 10.89 (9.22), an increase of 18 percent.

Restructuring
The activities of the restructuring programs launched in
2006, 2008 and 2009 continued at a high level during the
year. At year-end 2010, 5,387 employees had left the Group
as a result of the changes in the production structure since
the programs began. A total of 38 plant closures have been
implemented and a large number of plants in high-cost
countries have switched from production to final assembly.
Around 20 offices have also closed. The Group’s produc-
tion is increasingly concentrated in China, central and East
Europe.

Payments related to the restructuring programs totaled

SEK 465 M (676) for the full year. At year-end 2010, the
remaining provisions for structural measures amounted to
SEK 924 M (1,577).

Acquisitions and divestments
In January Asia Pacific division acquired 70 percent of Pan
Pan, China’s largest manufacturer of high-security steel
doors. The company has a well-established distribution
network across China, a strong brand and is a good comple-
ment to ASSA ABLOY’s other door companies on the Chinese
market. The company, headquartered in Yingkou, north of
Beijing, has annual sales of around SEK 1,500 M. In April the
division also acquired King Door Closers, South Korea’s lead-
ing manufacturer of floor springs and door closers. The com-
pany has annual sales of around SEK 300 M. Both acquisitions
were EPS-accretive from the acquisition date.

In July EMEA division acquired Paddock, the UK’s leading

manufacturer of multi-point locks. The company, head-
quartered in Walsall near Birmingham, has annual sales of
around SEK 300 M. The acquisition was EPS-accretive from
the acquisition date.

In December Global Technologies division acquired shares
in the NASDAQ-listed company ActivIdentity. The company,
headquartered in California, USA, is a market leader in
secure identity and authentication solutions. Initially the
acquisition will be marginally dilutive to earnings per share.
Including minor acquisitions, a total of 13 acquisitions
were consolidated during the year. The total purchase price
for these acquisitions on a debt-free basis was SEK 4,582 M
and preliminary acquisition analyses indicate that goodwill
and other intangible assets with an indefinite useful life
amount to SEK 3,818 M.

In 2010 agreements were signed with a number of major
shareholders to acquire 63.6 percent of the shares in Cardo,
a leading manufacturer of industrial doors. ASSA ABLOY has
also made a recommended public offer to the other share-
holders in Cardo. The total bid value of all the Cardo shares
amounts to around SEK 11.3 billion. In 2010 the company
had sales of SEK 8.0 billion and around 5,400 employees. If
ASSA ABLOY acquires more than 90 percent of the shares
in Cardo, it intends to compulsorily redeem the remaining
shares in the company, in accordance with the provisions of
the Swedish Companies Act.

Agreements were also signed to acquire LaserCard (USA)

and Swesafe (Sweden) as well as a stake in Agta Record
(Switzerland). LaserCard is a leading provider of secure
ID solutions to governments and commercial custom-
ers worldwide. In January 2011 the bid was accepted by a
majority of the share holders. The acquisition is expected to
be completed in Q1 2011. Swesafe is the largest locksmith
in Sweden, with sales of over SEK 400 M. These acquisitions
require approval by the public authorities concerned.

Businesses in Switzerland and Russia were sold during
the year. The impact on the Group’s financial position and
performance was not material.

Research and development
ASSA ABLOY’s expenditure on research and development
during the year amounted to SEK 1,015 M (920), which is
equivalent to 2.8 percent (2.6) of sales.

ASSA ABLOY has a central function, Shared Technologies,

with responsibility for the standardization of electronics in
the Group’s common platforms. The objective is that this
standardization should result in lower development costs
and a shorter development time for new products.

ASSA ABLOY ANNUAL REPORT 2010

REPORT OF THE BOARD OF DIRECTORS 59

Report of the Board of Directors

Outlook
Long-term outlook
Long term, ASSA ABLOY expects an increase in security-
driven demand. Focus on end-user value and innovation as
well as leverage on ASSA ABLOY’s strong position will accel-
erate growth and increase profitability.

Organic sales growth is expected to be strong. The oper-
ating margin (EBIT) and operating cash flow are expected to
develop well.

Transactions with related parties
No transactions that have significantly affected the com-
pany’s financial position and performance have taken place
between ASSA ABLOY and related parties.

Sustainable development
Two of ASSA ABLOY’s subsidiaries in Sweden carry on licens-
able activities in accordance with the Swedish Environmen-
tal Code. The Group’s licensable and notifiable activities
have an impact on the external environment mainly through
the subsidiaries ASSA AB and ASSA OEM AB. These com-
panies operate machine shops, foundries and associated
surface-coating plants, which have an impact on the exter-
nal environment through emissions to water and air as well
as solid waste.

The subsidiaries ASSA AB and ASSA OEM AB are actively
addressing environmental issues and are certified in accor-
dance with ISO14001. Most units outside Sweden carry on
licensable activities and hold equivalent licenses under local
legislation.

ASSA ABLOY’s units all over the world are working pur-
posefully to reduce greenhouse gas emissions. This applies
to units on both mature and new markets and to both exist-
ing and newly acquired companies.

The 2010 Sustainability Report, reporting on the Group’s
prioritized environmental activities and providing other infor-
mation about sustainable development, will be published at
the time of the Annual General Meeting in April 2011.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2010

Report of the Board of Directors
Significant risks and risk management

Risk management
Uncertainty about future developments and the course of
events is a natural risk for any business. Risk-taking in itself
provides opportunities for continued economic growth, but
naturally the risks may also have a negative impact on busi-
ness operations and company goals. It is therefore essential
to have a systematic and efficient risk assessment process
and an effective risk management program in general. The
purpose of risk management at ASSA ABLOY is not to avoid
risks, but to take a controlled approach to identifying, man-
aging and minimizing the effects of these risks. This work is
based on an assessment of the probability of the risks and
their potential impact on the Group.

ASSA ABLOY is an international Group with a wide geo-

graphical spread, involving exposure to various forms of
strategic, operational and financial risks. Strategic risks refer
to changes in the business environment with potentially
significant effects on ASSA ABLOY’s operations and business
objectives. Operational risks comprise risks directly attribut-
able to business operations, entailing a potential impact on
the Group’s financial position and performance. Financial
risks mainly comprise financing risk, currency risk, interest
rate risk, credit risk, and risk associated with the Group’s
pension obligations.

ASSA ABLOY’s Board of Directors has overall responsibil-
ity for risk management within the Group and determines
the Group’s strategic focus based on recommendations
from the Executive Team. In view of the decentralized struc-
ture of the Group, and to keep risk analysis and risk manage-
ment as close as possible to the actual risks, a large propor-
tion of operational risk management takes place at division
and business-unit level.

Strategic risks
The main risks of this nature encountered by ASSA ABLOY
include various forms of business environment risks with an
impact on the security market in general, mainly changes in
customer behavior, competitors, brand positioning and envi-
ronmental risks. In addition, there are country-specific risks.
ASSA ABLOY has global market penetration, with sales
and production in a large number of countries. The empha-
sis is on West Europe and North America, but the proportion
of sales in Asia and in central and East Europe has increased
in recent years. The Group is therefore exposed to both gen-

eral business environment risks and country-specific risks,
including political decisions and comprehensive changes in
the regulatory framework. Changes in customer behavior
in general and the actions of competitors affect demand for
different products and their profitability.

Customers and suppliers, including the Group’s relation-
ships with them, are subject to continuous local review. The
Group has a central business intelligence function primarily
focused on industry-specific factors. As regards competitors,
risk analyses are carried out both centrally and locally.

The Group owns a number of the strongest brands in
the industry, including several global brands that comple-
ment the ASSA ABLOY master brand. Local product brands
are gradually being linked increasingly to the master brand.
Generally speaking, ASSA ABLOY’s good reputation is one of
the Group’s strengths and serves as a foundation for market
leadership.

Activities to maintain and further strengthen ASSA
ABLOY’s good reputation are constantly ongoing. These
include ensuring compliance with ASSA ABLOY’s Code of
Conduct. The Code expresses the Group’s high ambitions
with regard to social responsibility, commitment and envi-
ronmental considerations.

Operational risks
Operational risks comprise risks directly attributable to busi-
ness operations and with a potential impact on the Group’s
financial position and performance. Operational risks
include legal risks, acquisition of new businesses, restructur-
ing measures, availability and price fluctuations of raw mate-
rials, customer dependence and more. Risks relating to com-
pliance with laws and regulations and to financial reporting
and internal control also fall into this category.

The table on page 62 describes in more detail the man-

agement of these risks.

Financial risks
Group Treasury at ASSA ABLOY is responsible for the Group’s
short- and long-term financing, financial cash management,
currency risk and other financial risk management. Financial
operations are centralized in a Treasury function which man-
ages most financial operations as well as financial risks with a
Group-wide focus.

STRATEGIC RISKS

OPERATIONAL RISKS

FINANCIAL RISKS

Changes in the business environment
with potentially significant effects on
operations and business objectives.

Risks directly attributable to business
operations with a potential impact on
financial position and performance.

Financial risks with a potential impact
on financial position and performance.

• Customer behavior
• Competitors
• Brand positioning
• Environmental risks
• Country-specific risks etc.

• Legal risks
• Acquisition of new businesses
• Restructuring measures
• Availability and price fluctuations of

raw materials

• Customer dependence etc.

• Financing risks
• Currency risks
• Interest rate risks
• Financial credit risks
• Risks associated with pension

obligations

ASSA ABLOY ANNUAL REPORT 2010

REPORT OF THE BOARD OF DIRECTORS 61

Report of the Board of Directors
Significant risks and risk management

Operational risks

Risk management

Comments

Legal risks

The Group continuously monitors anticipated and
implemented changes in legislation in the coun-
tries in which it operates.

At the end of 2010 it was assessed that there are
no outstanding legal disputes that may lead to
significant costs for the Group.

A Group-wide legal policy has been implemented,
specifying the legal framework in which business
operations may be conducted.

Ongoing and potential disputes and other legal
matters are reported regularly to the Group’s cen-
tral legal function.

Guidelines on compliance with current competi-
tion legislation have been implemented.

Legal risks associated with property and liability
issues are continually evaluated together with
insurance company representatives.

Acquisition of new businesses

Acquisitions are carried out by a number of peo-
ple with considerable acquisition experience and
with the support of, for example, legal and finan-
cial consultants.

The Group’s acquisitions in 2010 are reported in
the Report of the Board of Directors and in Note
30, Business combinations.

Acquisitions are carried out according to a uni-
form and predefined Group-wide process. This
consists of four documented phases: strategy,
evaluation, implementation and integration.

Restructuring measures

The Group is implementing
specific restructuring programs,
which entail some production
units changing focus mainly to
final assembly while certain
units are closed.

The restructuring programs are carried on as a
series of projects with stipulated activities and
schedules.

The scope, costs and savings of the restructuring
programs are presented in more detail in the
Report of the Board of Directors.

The various projects are systematically monitored
on a regular basis.

Price fluctuations and
availability of raw materials

Raw materials are purchased and handled primar-
ily at division and business-unit level.

For further information about procurement of
materials, see Note 7.

Regional committees coordinate these activities
with the help of senior coordinators for selected
material components.

Credit losses

Insurance risks

Accounts receivables are spread across a large
number of customers in many markets.

Commercial credit risks are managed locally at
company level and reviewed at division level.

Receivables from each customer are relatively
small in relation to total accounts receivables. The
risk of significant credit losses for the Group is
considered to be limited.

A Group-wide insurance program is in place,
mainly relating to property, business interruption,
and liability risks. The insurance program covers
all business units.

The Group’s insurance cover is considered to be
generally adequate, providing a reasonable bal-
ance between assessed risk exposure and insur-
ance costs.

The Group’s exposure to the risk areas listed
above is regulated by means of its own captive
reinsurance company.

Risks relating to internal
control regarding financial
reporting

The organization is considered to be relatively
transparent, with a clear allocation of responsibili-
ties.

Internal control and other related issues are
reported in more detail in the Report of the Board
of Directors, section on Corporate governance.

Instructions about the allocation of responsibili-
ties, authorization and other internal control
procedures are laid down in an internal control
manual.

Compliance with internal control is evaluated
annually for all operating companies in the form
of self assessment and via the Group’s Manage-
ment Assurance function.

Risks relating to financial
reporting

A well-established Controller organization at both
division and Group level analyzes and monitors
financial reporting quality.

A comprehensive systematic risk assessment of
financial reporting has been implemented.

See also the section ‘Basis of preparation’ in Note 1.

Further information about risk management relat-
ing to financial reporting can be found in the
Report of the Board of Directors, section on
Corporate governance.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2010

Interest rate risk
With respect to interest rate risks, interest rate changes
have a direct impact on ASSA ABLOY’s net interest expense.
The net interest expense is also impacted by the size of the
Group’s net debt and its currency composition. Net debt
was SEK 10,564 M (11,048) at the end of 2010 and was
mainly denominated in SEK, USD and EUR. Group Treasury
analyzes the Group’s interest rate exposure and calculates
the impact on income of interest rate changes on a roll-
ing 12-month basis. In addition to raising fixed-rate and
variable-rate loans, various interest rate derivatives are used
to adjust interest rate sensitivity. At year-end, the average
fixed interest term, excluding pension liabilities, was 23
months (26).

Credit risk
Credit risk arises in ordinary business operations and as a
result of the financial transactions carried out by Group
Treasury. Accounts receivables are spread across a large
number of customers, which reduces the credit risk. Credit
risks relating to operational business activities are managed
locally at company level and reviewed at division level.

Financial risk management exposes ASSA ABLOY to cer-
tain counterparty risks. Such exposure may arise, for exam-
ple, as a result of the placement of surplus cash, borrowings
and derivative financial instruments. Counterparty limits
are set for each financial counterparty and are continuously
monitored.

Pension obligations
At year-end 2010, ASSA ABLOY had obligations for pen-
sions and other post-employment benefits of SEK 4,484 M
(4,696). The Group manages pension assets valued at SEK
2,854 M (2,817). Pension provisions in the balance sheet
amount to SEK 1,078 M (1,118). Changes in the value of
assets and liabilities from year to year are due partly to the
development of equity and debt capital markets, and partly
to the actuarial assumptions made. These assumptions
include discount rates, as well as anticipated inflation and
salary increases.

A financial policy, which is approved by the Board, regulates
the allocation of responsibilities and control of the Group’s
financing activities. Group Treasury has the main responsi-
bility for financial risks within the framework established in
the financial policy. A large number of financial instruments
are used in this work. Accounting principles, risk manage-
ment and risk exposure are described in more detail in
Notes 1 and 33, as well as Note 24 regarding post-employ-
ment employee benefits.

The Group’s financial risks mainly comprise financing
risk, currency risk, interest rate risk, credit risk, and risks asso-
ciated with the Group’s pension obligations.

Financing risk
Financing risk refers to the risk that financing the Group’s
capital requirements and refinancing outstanding loans
become more difficult or more expensive. Financing risk can
be reduced by maintaining an even maturity profile for loans
and by maintaining a high credit rating. The risk is further
reduced by substantial unused confirmed credit facilities.

Currency risk
Since ASSA ABLOY sells its products in countries world-
wide and has companies in over 60 countries, the Group is
exposed to the effects of exchange rate fluctuations. Such
changes affect Group earnings when the income statements
of foreign subsidiaries are translated to Swedish kronor
(translation exposure), and when products are exported
and sold in countries outside the country of production
(transaction exposure). Translation exposure is primarily
related to earnings in USD and EUR. This type of exposure
is not hedged. Currency risk in the form of transaction
exposure, i.e. the relative values of exports and imports of
goods, is fairly limited in the Group, though it is expected
to increase over time due to efficiency measures in produc-
tion and purchasing. In accordance with financial policy, the
Group only hedged a limited part of current currency flows
in 2010. As a result exchange rate fluctuations had a direct
impact on business operations.

Exchange rate fluctuations also affect the Group’s debt-
equity ratio and equity. The difference between the assets
and liabilities of foreign subsidiaries in the respective for-
eign currency is affected by exchange rate fluctuations and
causes a translation difference which affects the Group’s
comprehensive income. A general weakening of the Swed-
ish krona leads to an increase in net debt, but at the same
time increases Group equity. At year-end, the largest foreign
net assets were denominated in USD and EUR.

ASSA ABLOY ANNUAL REPORT 2010

REPORT OF THE BOARD OF DIRECTORS 63

Report of the Board of Directors
Corporate governance

ASSA ABLOY is a Swedish public limited liability company
with registered office in Stockholm, Sweden.

The Group’s corporate governance is based on, among

Meeting, a maximum number of Series B shares so that after
each repurchase ASSA ABLOY holds a maximum ten percent
of the total number of shares in the company.

other things, its articles of association, the Swedish Com-
panies Act and the rules and regulations of NASDAQ OMX
Stockholm. ASSA ABLOY applies the Swedish Code of Cor-
porate Governance and is considered, at the end of 2010,
to be in compliance with all of its provisions.

ASSA ABLOY’s objective is that its activities should gen-
erate good long-term returns for its shareholders and other
stakeholders. An effective scheme of corporate governance
for ASSA ABLOY can be summarized in a number of interact-
ing components, which are described below.

orting
Financial rep

Share-
holders
General Meeting
Nomination
Committee

Board of Directors
Audit Committee
Remuneration Committee

CEO and Executive Team
Management philosophy
Guidelines and policies
Internal control and risk management

Decentralized organization

Shareholders
At year-end, ASSA ABLOY had 20,199 shareholders (22,014).
The principal shareholders are Investment AB Latour and
SäkI (9.6 percent of the share capital and 29.7 percent of the
votes) and Melker Schörling AB (4.0 percent of the share
capital and 11.6 percent of the votes). Foreign shareholders
accounted for around 63 percent (53) of the share capital
and around 43 percent (36) of the votes. The ten largest
shareholders accounted for around 31 percent (37) of the
share capital and 53 percent (57) of the votes.

A shareholders’ agreement exists between Gustaf
Douglas, Melker Schörling and related companies and
includes an agreement on right of first refusal if any party
disposes of Series A shares. The Board of ASSA ABLOY is
not aware of any other shareholders’ agreements or other
agreements between shareholders in ASSA ABLOY.

Share capital and voting rights
ASSA ABLOY’s share capital amounted at year-end to SEK
366,177,194 distributed among 19,175,323 Series A shares
and 347,001,871 Series B shares. The total number of votes
was 538,755,101. Each Series A share carries ten votes and
each Series B share one vote. All shares have a par value of
SEK 1.00 and give the shareholders equal rights to the com-
pany’s assets and earnings.

Repurchase of own shares
The 2010 Annual General Meeting authorized the Board to
repurchase, during the period until the next Annual General

ASSA ABLOY holds a total of 300,00 Series B shares,
which were repurchased in Q2 2010 to secure the com-
pany’s obligations, including the cost of social security
contributions, in connection with the company’s long-term
incentive program (LTI 2010). These shares account for
0.1 percent of the share capital and each share has a par
value of SEK 1.00. The purchase consideration amounted
to SEK 48 M.

Share and dividend policy
ASSA ABLOY’s Series B share is listed on the NASDAQ OMX
Stockholm Large Cap list. At year-end, ASSA ABLOY’s mar-
ket capitalization amounted to SEK 69,391 M. The Board’s
objective is that, in the long term, the dividend should be
equivalent to 33–50 percent of income after standard tax, but
always taking into account ASSA ABLOY’s long-term financing
requirements.

General Meeting
Shareholders’ rights to decide on the affairs of ASSA ABLOY
are exercised at the General Meeting. Shareholders who
are registered in the share register on the record day and
have duly notified their intention to attend are entitled to
take part in the General Meeting, either in person or via
a proxy. Resolutions at the General Meeting are normally
passed by simple majority. However, on certain matters the
Swedish Companies Act prescribes that a proposal should
be supported by a higher majority. Individual shareholders
who wish to have an issue raised at the General Meeting
can apply to ASSA ABLOY’s Board of Directors at a special
address published on the company’s website well before
the Meeting.

The Annual General Meeting should be held within six
months of the end of the company’s financial year. Matters
considered at the Annual General Meeting include among
other things: a dividend; adoption of the income statement
and balance sheet; discharge of the Board of Directors
and the CEO from liability; election of board members and
Chairman of the Board; appointment of the Nomination
Committee and auditors; determination of remuneration
guidelines for senior management and fees for the Board of
Directors and auditors. An Extraordinary General Meeting
may be held if the Board of Directors considers this neces-
sary or if ASSA ABLOY’s auditors or shareholders holding at
least 10 percent of the shares so request.

2010 Annual General Meeting
The Annual General Meeting in April 2010 was attended by
shareholders representing 52.3 percent of the company’s
share capital and 67.6 percent of the votes.

At the Annual General Meeting, Gustaf Douglas, Carl
Douglas, Birgitta Klasén, Eva Lindqvist, Johan Molin, Sven-
Christer Nilsson, Jorma Halonen, Lars Renström and Ulrik
Svensson were re-elected as members of the Board. Gustaf
Douglas was re-elected as Chairman of the Board. In July

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2010

Jorma Halonen left ASSA ABLOY’s Board at his own request.
The Meeting approved a dividend of SEK 3.60 per share,
in accordance with the proposal of the Board and the CEO.
In addition, the Meeting passed resolutions on fees payable
to the Board, remuneration guidelines for senior execu-
tives, authorization of the Board regarding repurchase and
transfers of own Series B shares, and the implementation of
a long-term incentive program (LTI 2010) for senior execu-
tives and other key staff in the Group, as well as appointing
members of the Nomination Committee in advance of the
2011 Annual General Meeting.

Nomination Committee
The Nomination Committee prior to the 2011 Annual
General Meeting comprises Gustaf Douglas (Investment
AB Latour and SäkI), Mikael Ekdahl (Melker Schörling AB),
Liselott Ledin (Alecta), Marianne Nilsson (Swedbank Robur
Funds) and Per-Erik Mohlin (SEB Funds/SEB Trygg Liv).
Mikael Ekdahl is Chairman of the Nomination Committee.
If a shareholder represented by one of the members of the
Nomination Committee ceases to be among the major
shareholders in ASSA ABLOY, the Committee has the right
to appoint another representative of one of the major
shareholders to replace such a member. The same applies
if a member of the Nomination Committee ceases to be
employed by such a shareholder or leaves the Committee
before the 2011 Annual General Meeting for any other
reason.

The Nomination Committee has the task of preparing,
on behalf of the shareholders, decisions on the election of
the Chairman and other members of the Board of Directors,
the appointment of the auditor, the election of the Chair-
man of the Annual General Meeting, the appointment of the
Nomination Committee prior to the Annual General Meet-
ing, and fees and associated matters.

objectives, strategies and policies, as well as on acquisitions,
divestments and investments. The Board approves the
Annual Report and Interim Reports, proposes a dividend
and remuneration guidelines for senior management to the
Annual General Meeting, and makes decisions concerning
the Group’s financial structure.
The Board’s other duties include:
• continuously evaluating the company’s operational

management, including the work of the CEO,

• ensuring that there are effective systems in place for
monitoring and control of the company’s operations,
• ensuring that the company’s information provision is

transparent, accurate, relevant and reliable,

• ensuring that there is satisfactory control of the compa-
ny’s compliance with laws and other regulations apply-
ing to the company’s operations, and

• ensuring that necessary ethical guidelines for the com-

pany’s conduct are established.

The Board’s rules of procedure and instructions for the divi-
sion of duties between the Board and the CEO are updated
and approved at least once a year. The Board has also issued
written instructions specifying how financial reporting to
the Board should be carried out.

In addition to leading the work of the Board, the Chair-
man should continuously monitor the Group’s operations
and development through contact with the CEO. The
Chairman should consult the CEO on strategic issues and
represent the company in matters concerning the owner-
ship structure. The Chairman should also, when necessary,
take part in particularly important external discussions and,
in consultation with the CEO, in other matters of particular
significance. The Chairman should ensure that the work of
the Board is evaluated annually, and that new members of
the Board receive appropriate training.

Prior to the 2011 Annual General Meeting, the Nomina-

The Board has at least four scheduled meetings and one

tion Committee has made an assessment of whether the
current Board is appropriately composed and fulfils the
demands made on the Board by the company’s present
situation and future direction. The annual evaluation of the
Board was part of the basis for this assessment. The search
for suitable board members is carried out throughout the
year and proposals for new board members are based in
each individual case on a profile of requirements estab-
lished by the Nomination Committee.

Shareholders wishing to submit proposals to the Nomi-

nation Committee can do so e-mailing to: nomination-
committee@assaabloy.com. The Nomination Committee’s
proposals are published at the latest in conjunction with the
formal notification of the Annual General Meeting, which is
expected to be issued around 30 March 2011.

Board of Directors
In accordance with the Swedish Companies Act, the Board
of Directors is responsible for the organization and admin-
istration of the Group and for ensuring satisfactory control
of bookkeeping, asset management and other financial
circumstances. The Board decides on the Group’s overall

meeting following election per year. The scheduled meet-
ings take place in connection with the company’s publica-
tion of its year-end or quarterly results. At least once a year
the Board visits, and makes an in-depth review of one of
the Group’s businesses. In addition, extra board meetings
are held when necessary. All meetings follow an approved
agenda. Prior to each meeting, a draft agenda including
documentation relating to each point is sent to all board
members.

The Board has a Remuneration Committee and an Audit
Committee. The purpose of these Committees is to deepen
and streamline the work of the Board and to prepare mat-
ters in these areas. The Committees have no decision-mak-
ing powers. The members of the Committees are appointed
annually by the Board at the board meeting following elec-
tion. Instructions for the Committees are included in the
Board’s working procedures.

The Board’s work during 2010
During the year the Board held ten meetings, including
three by telephone and one per capsulam. Two members
were absent at one of these meetings. All board members

ASSA ABLOY ANNUAL REPORT 2010

REPORT OF THE BOARD OF DIRECTORS 65

Report of the Board of Directors
Corporate governance

were present at the other meetings. At the scheduled board
meetings, the President and CEO reported on the Group’s
performance and financial position, including the outlook
for the coming quarters. Investments, acquisitions and
divestments were also considered. All acquisitions and
divestments with a value (on a debt-free basis) exceeding
SEK 100 M are decided by the Board. This amount presumes
that the matter relates to acquisitions or divestments
within the framework of the strategy agreed by the Board.
More important matters dealt with by the Board dur-
ing the year included the acquisition of Cardo, Paddock
and ActivIdentity. During the year the Board conducted
in-depth reviews of the Group’s Asia Pacific and Entrance
Systems operations and visited the Group’s sales and pro-
duction units in Italy. Furthermore, it was decided on the
basis of the authorization of the 2010 Annual General Meet-
ing to repurchase a maximum 300,000 Series B shares in
the company.

Remuneration Committee
During 2010 the Remuneration Committee comprised
Gustaf Douglas (Chairman) and Sven-Christer Nilsson.
The Remuneration Committee’s task is to draw up

remuneration guidelines for senior management, which the
Board proposes to the Annual General Meeting for resolu-
tion. The Board’s proposal for guidelines prior to the 2011
Annual General Meeting can be seen on page 73.

The Remuneration Committee also prepares, negotiates

and evaluates matters regarding salaries, bonus, pension,
severance pay and incentive programs for the CEO and
other senior management.

The Committee held two meetings during the year at
which all members were present. The remuneration Com-
mittee has during the year, inter alia, evaluated existing
incentive programs and prepared the proposal for a long-
term incentive programme (LTI 2011). The meetings of the
Remuneration Committee are minuted; the minutes are
sent out with material for the Board and a verbal report is
given at board meetings.

Audit Committee
During 2010 the Audit Committee comprised Ulrik Svensson
(Chairman), Birgitta Klasén and Lars Renström.

The duties of the Audit Committee include the continu-
ous quality assurance of ASSA ABLOY’s financial reporting.
Regular communication is maintained with the company’s
auditor on matters including the focus and scope of the
audit. The Audit Committee is also responsible for evalu-
ating the audit assignment and informing the Board of

Directors and the Nomination Committee of the results, as
well as continuously monitoring the current risk status of
legal risks in the operations. At least one of the Committee’s
members has accounting or auditing competence.

The Audit Committee held four meetings during the
year at which all members, the company’s auditor and rep-
resentatives of senior management were present.

The meetings of the Audit Committee are minuted; the
minutes are sent out with material for the Board and a ver-
bal report is given at board meetings.

More important matters dealt with by the Audit Com-
mittee during the year included a review of new financial
reporting standards relating to acquisitions and the Group’s
new insurance package.

ASSA ABLOY’s Board of Directors
The Board of Directors is elected annually at the Annual
General Meeting for the period until the end of the next
Annual General Meeting and shall according to the articles
of association comprise a minimum six and a maximum ten
members elected by the Meeting. Two of the members are
appointed by the employee organizations in accordance
with Swedish law. The employee organizations also appoint
two deputies. The Board currently consists of eight elected
members and two employee representatives. With the
exception of the CEO, none of the board members are
members of the Executive Team. The CEO has no significant
shareholdings or partnerships in companies with significant
business relationships with ASSA ABLOY.

Remuneration of the Board
The Annual General Meeting passes a resolution on the
remuneration to be paid to board members. The 2010
Annual General Meeting passed a resolution on Board fees
totaling SEK 4,050,000 (excluding remuneration for com-
mittee work), to be allocated between the members as
follows: SEK 900,000 to the Chairman and SEK 450,000 to
each of the other members not employed by the company.
As remuneration for committee work, the Chairman of the
Audit Committee is to receive SEK 200,000, the Chairman
of the Remuneration Committee SEK 100,000, members
of the Audit Committee SEK 100,000 and members of the
Remuneration Committee SEK 50,000.

The Chairman and other board members have no pen-
sion benefits or severance payment agreements. The CEO
and employee representatives do not receive Board fees.
For further information about the remuneration of board
members in 2010, see Note 32.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2010

Independence of the Board

The Board of Directors of
ASSA ABLOY meets the
requirements for indepen-
dence, in accordance with
the rules and regulations of
NASDAQ OMX Stockholm
and the Swedish Code of
Corporate Governance.

Name

Gustaf Douglas
Carl Douglas
Birgitta Klasén
Eva Lindqvist
Johan Molin

Sven-Christer Nilsson
Lars Renström
Ulrik Svensson

Position

Independent of the company
and its management

Independent of the company’s
major shareholders

Chairman of the Board
Board member
Board member
Board member
Board member,
President and CEO
Board member
Board member
Board member

Yes
Yes
Yes
Yes
No

Yes
Yes
Yes

No
No
Yes
Yes
–

Yes
Yes
No

Incentive
program
Series B
shares

–

–
–

The Board’s composition and shareholdings

Name

Gustaf Douglas

Carl Douglas
Birgitta Klasén

Eva Lindqvist
Johan Molin

Position

Chairman of
the Board
Board member
Board member

Board member
Board member,
President and CEO

Elected

Born

1994

1938

2004
2008

2008
2006

1965
1949

1958
1959

Sven-Christer Nilsson Board member

2001

1944

Lars Renström

Board member

2008

1951

Ulrik Svensson

Board member

2008

1961

Seppo Liimatainen

Mats Persson

Rune Hjälm

Per Edvin Nyström

Board member,
employee representative
Board member,
employee representative
Deputy, employee
representative
Deputy, employee
representative

2003

1950

1994

1955

2005

1964

1994

1955

1 Including family and through companies.

Remuneration
Committee

Audit
Committee

Series A
shares¹

Series B
shares¹

– 13,865,243 21,300,000

Chairman of
the Board
–
–

–
–

Board
member
–

–
Board
member
–
–

–

Board
member
– Chairman of
the Board
–

–

–
–

–

–
5,000

–
506,699

–
440,000

3,500

10,000

3,000

2,600

–

7,727

–

ASSA ABLOY ANNUAL REPORT 2010

REPORT OF THE BOARD OF DIRECTORS 67

Report of the Board of Directors
Corporate governance Board of Directors

Board members elected at the 2010 Annual General Meeting

Gustaf Douglas
Chairman of the Board
Board member since 1994
Born 1938
MBA, Harvard Business School 1964.
Principal shareholder of Investment AB Latour and SäkI AB.
Self-employed since 1980.
Other appointments: Chairman of SäkI AB. Board member
of Stiftelsen Svenska Dagbladet and the Swedish Moderate
Party.
Shareholdings (including family and through companies):
6,746,425 Series A shares and 19,000,000 Series B shares
through Investment AB Latour, and 7,118,818 Series A
shares and 2,300,000 Series B shares through SäkI AB.

Carl Douglas
Board member since 2004
Born 1965
Bachelor of Arts
Self-employed
Other appointments: Vice Chairman of Securitas AB. Board
member of Investment AB Latour, Niscayah Group AB,
Swegon AB and Säkl AB.
Shareholdings (including family and through companies): –

Birgitta Klasén
Board member since 2008
Born 1949
Master of Science in Engineering.
Independent IT consultant (Senior IT Advisor). Chief
Information Officer (CIO) and Head of Information
Management at EADS (European Aeronautics Defence and
Space Company) 2004–2005. CIO and Senior Vice President
of Pharmacia 1996–2001 and prior to that, CIO at Telia. Held
various posts at IBM 1976–1994.
Other appointments: Board member of Acando AB,
BISNODE AB and IFS AB.
Shareholdings (including family and through companies):
5,000 Series B shares.

Eva Lindqvist
Board member since 2008
Born 1958
Master of Science in Engineering and Bachelor of Science in
Business Administration and Economics.
Senior Vice President of Mobile Business at TeliaSonera AB
2006–2007. Prior to that several senior posts at TeliaSonera
AB, such as President and Head of Business Operation
International Carrier, and various posts in the Ericsson Group
1981–1999.
Other appointments: Chairman of Xelerated AB and board
member of companies including Tieto OY, Niscayah Group
AB, Transmode AB and Nordia Innovation AB. Member of the
Royal Swedish Academy of Engineering Sciences (IVA).
Shareholdings (including family and through companies): –

Johan Molin
Board member since 2006
Born 1959
Bachelor of Science in Economics.
President and CEO of ASSA ABLOY AB since 2005. CEO of
Nilfisk-Advance 2001–2005. Various posts mainly in finance
and marketing, later divisional head in the Atlas Copco
Group 1983–2001.
Other appointments: Board member of AB Electrolux and
Nobia AB.
Shareholdings (including family and through companies):
506,699 Series B shares as well as Incentive 2006 and
Incentive 2007 corresponding, on full conversion, to
440,000 Series B shares.

Sven-Christer Nilsson
Board member since 2001
Born 1944
B.Sc.
President and CEO of Telefonaktiebolaget LM Ericsson
1998–1999, various executive positions mainly in marketing
and management in the Ericsson Group 1982–1997.
Other appointments: Chairman of the National Swedish
Public Service Broadcasting Foundation and the Swedish
National Defence Materiel Administration (FMV). Board
member of Sprint Nextel Corporation and CEVA, Inc.
Shareholdings (including family and through companies):
3,500 Series B shares.

Gustaf Douglas

Carl Douglas

Birgitta Klasén

Eva Lindqvist

Johan Molin

Sven-Christer Nilsson

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2010

Lars Renström
Board member since 2008
Born 1951
Master of Science in Engineering and Bachelor of Science in
Business Administration and Economics.
President and CEO of Alfa Laval AB since 2004. President and
CEO of Seco Tools AB 2000–2004. President and Head of
Division of Atlas Copco Rock Drilling Tools 1997–2000. Prior
to that a number of senior posts at ABB and Ericsson.
Other appointments: Board member of Alfa Laval AB and
TeliaSonera AB.
Shareholdings (including family and through companies):
10,000 Series B shares.

Ulrik Svensson
Board member since 2008
Born 1961
Bachelor of Science in Economics.
CEO of Melker Schörling AB. CFO of Swiss International
Airlines Ltd. 2003–2006. CFO of Esselte AB 2000–2003 and
controller/CFO of the Stenbeck Group’s foreign telecoms
ventures 1992–2000.
Other appointments: Board member of AAK AB, Loomis AB,
Niscayah Group AB, Hexagon AB, Hexpol AB and Flughafen
Zürich AG.
Shareholdings (including family and through companies):
3,000 Series B shares.

Board members appointed by employee organizations

Seppo Liimatainen
Board member since 2003
Born 1950
Employee representative, Federation of Salaried Employees
in Industry and Services.
Shareholdings: 2,600 Series B shares.

Mats Persson
Board member since 1994
Born 1955
Employee representative, Swedish Metal Workers Union.
Shareholdings: –

Rune Hjälm
Deputy board member since 2005
Born 1964
Employee representative, Swedish Metal Workers Union.
Chairman of ASSA ABLOY European Works Council (EWC).
Shareholdings: –

Per Edvin Nyström
Deputy board member since 1994
Born 1955
Employee representative, Swedish Metal Workers Union.
Shareholdings: 7,727 Series B shares.

Lars Renström

Ulrik Svensson

Seppo Liimatainen

Mats Persson

Rune Hjälm

Per Edvin Nyström

ASSA ABLOY ANNUAL REPORT 2010

REPORT OF THE BOARD OF DIRECTORS 69

Report of the Board of Directors
Corporate governance The Executive Team

Johan Molin

Tomas Eliasson

Denis Hébert

Thanasis Molokotos

Jonas Persson

Tim Shea

Ulf Södergren

Juan Vargues

Tzachi Wiesenfeld

Tomas Eliasson
Born 1962
Bachelor of Science in Economics
Executive Vice President
Chief Financial Officer (CFO)
Employed since: 2006
Shareholdings: 2,072 Series B shares.
Incentive 2006 and Incentive 2007
corresponding, on full conversion, to
108,600 Series B shares.

Thanasis Molokotos
Born 1958
Master of Science in Engineering
Executive Vice President
Head of Americas division
Employed since: 1996
Shareholdings: 28,407 Series B shares.
Incentive 2006 and Incentive 2007
corresponding, on full conversion, to
74,300 Series B shares.

Tim Shea
Born 1959
Degree in Mechanical Engineering, MBA
Executive Vice President
Head of Global Technologies business unit
ASSA ABLOY Hospitality
Employed since: 2004
Shareholdings: 1,604 Series B shares.
Incentive 2006 and Incentive 2007
corresponding, on full conversion, to
27,700 Series B shares.

Juan Vargues
Born 1959
Degree in Mechanical Engineering, MBA
Executive Vice President
Head of Entrance Systems division
Employed since: 2002
Shareholdings: 2,484 Series B shares.
Incentive 2006 and Incentive 2007
corresponding, on full conversion, to
182,900 Series B shares.

The Executive Team

Johan Molin
Born 1959
Bachelor of Science in Economics
President and CEO and Head of Global
Technologies division
Employed since: 2005
Shareholdings: 506,699 Series B shares.
Incentive 2006 and Incentive 2007
corresponding, on full conversion, to
440,000 Series B shares.

Denis Hébert
Born 1956
Bachelor of Commerce, MBA
Executive Vice President
Head of Global Technologies business unit
HID Global
Employed since: 2002
Shareholdings: 2,674 Series B shares.
Incentive 2006 and Incentive 2007
corresponding, on full conversion, to
56,200 Series B shares.

Jonas Persson
Born 1969
Master of Science in Engineering
Executive Vice President
Head of Asia Pacific division
Employed since: 2009
Shareholdings: 1,722 Series B shares.

Ulf Södergren
Born 1953
Master of Science in Engineering,
Bachelor of Science in Business
Administration and Economics
Executive Vice President
Chief Technology Officer (CTO)
Employed since: 2000
Shareholdings: 1,810 Series B shares.
Incentive 2006 and Incentive 2007
corresponding, on full conversion, to
139,800 Series B shares.

Tzachi Wiesenfeld
Born 1958
Bachelor of Science in Industrial
Engineering, MBA
Executive Vice President
Head of EMEA division
Employed since: 2000
Shareholdings: 2,709 Series B shares.
Incentive 2006 and Incentive 2007
corresponding, on full conversion, to
144,900 Series B shares.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2010

The Executive Team and organization
The Executive Team consists of the CEO, the heads of the
Group’s divisions, the Chief Financial Officer and the Chief
Technology Officer. ASSA ABLOY’s operations are divided
into five divisions, where the fundamental principle is that
these divisions should be responsible, as far as possible, for
business operations, while various functions at headquar-
ters are responsible for coordination, monitoring, policies
and guidelines at an overall level. The Group’s structure
results in a geographical and strategic spread of responsibil-
ity ensuring short decision-making paths. The Group’s man-
agement philosophy is based on trust and respect for local
cultures and conditions.

Guidelines and policies
The Group’s most important guidelines and policies define
the product areas in which the Group should operate and
describe the principles for market development, growth,
product development, organization, cost-efficiency and
staff development. These principles are described in the
publication ‘Our Road to the Future’, which has been
provided to all employees in the Group. Other important
guidelines and policies concern financial control, commu-
nication matters, the Group’s brands, business ethics and
environmental issues. Common financial, accounting and
investment policies provide the framework for financial
control and monitoring. ASSA ABLOY’s communication
policy aims to provide essential information at the right
time and in compliance with stock market rules, as well as
ensuring compliance with other legal requirements. Brand
guidelines aim to protect and develop the major assets that
the Group’s brands represent.

ASSA ABLOY has adopted a Code of Conduct that applies

to the whole Group. The Code, which is based on a set of
internationally accepted conventions, defines the values
and guidelines that should apply within the Group with
regard to the environment, health, safety, business ethics,
working conditions, human rights and social responsibility.
Application of the Code of Conduct in the Group’s differ-
ent units is monitored regularly to ensure compliance and
relevance.

Decentralized organization
ASSA ABLOY’s operations are decentralized. Decentraliza-
tion is a deliberate strategic choice based on the local
nature of the lock industry and a conviction of the benefits
of a divisional control model. Another contributory factor
is that the Group has been built up over a relatively short
period through a large number of acquisitions.

ASSA ABLOY’s operating structure is designed to create

maximum transparency, to facilitate financial and opera-
tional monitoring, and to promote the flow of information
and communication across the Group. The Group consists
of five divisions, which are divided into around 30 busi-
ness units. These consist in turn of a large number of sales
and production units, depending on the structure of the

business unit concerned. Apart from monitoring by unit,
monitoring of products and markets is also carried out.

Internal control regarding financial reporting
ASSA ABLOY’s process for internal control regarding finan-
cial reporting is designed to provide reasonable assurance
of reliable financial reporting, which is in compliance with
generally accepted accounting principles, applicable laws
and regulations, and other requirements for listed compa-
nies. The process is based on the internal control framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). It can be divided into a num-
ber of sub-components, as defined in the above framework,
and is described in more detail below.

Control environment
The Board of Directors is responsible for effective internal
control and has therefore established fundamental docu-
ments of significance for financial reporting. These docu-
ments include the Board’s rules of procedure and instruc-
tions to the CEO, the Code of Conduct, financial policy, and
an annual financial evaluation plan. Regular meetings are
held with the Audit Committee. The Group has established
a Management Assurance function, with the primary goal of
providing reliable financial reporting. This function is man-
aged by the Group Controller and reports to the Executive
Team and the Audit Committee.

ASSA ABLOY’s effective decentralized organizational

structure makes a substantial contribution to a good
control environment. All units in the Group apply uniform
accounting and reporting instructions. Minimum levels for
internal control of financial reporting have been established
and are monitored annually for all operating companies.
The Code of Conduct has been reviewed and updated, and
compliance is monitored systematically in operations.

Risk assessment
Risk assessment includes identifying and evaluating the
risk of material error in financial reporting and accounting
at Group, division and local levels. A number of previously
established documents govern the procedures to be used
for accounting, finalizing accounts, reporting and review.
The entire Group uses a financial reporting system with pre-
defined report templates.

A systematic comprehensive risk assessment of finan-
cial reporting has been implemented and is monitored at
Group level.

Control activities
The Group’s controller and accounting organization at both
central and division level plays a significant role in ensuring
reliable financial information. It is responsible for complete,
accurate and timely financial reporting.

A global financial Management Assurance function has

been established and carries out annual financial evalua-
tions in accordance with the plan annually adopted by the

ASSA ABLOY ANNUAL REPORT 2010

REPORT OF THE BOARD OF DIRECTORS 71

Audit Committee. The results of the financial evaluations for
2010 are submitted to the Audit Committee and the audi-
tors. Group-wide internal control guidelines are reviewed
annually. These guidelines affect various processes, such as
orders and purchasing (including payments), procedures
for finalizing accounts and facilities, as well as compliance
with various relevant policies and HR issues.

Information and communication
Reporting and accounting manuals as well as other finan-
cial reporting guidelines are available to all employees
concerned on the Group’s intranet. A regular review and
analysis of financial outcomes is carried out at both business
unit and division level and as part of the Board’s established
operating structure. The Group also has established pro-
cedures for external communication of financial informa-
tion, in accordance with the rules and regulations for listed
companies.

Review process
The Board of Directors and the Audit Committee evaluate
and review the Annual Report and Interim Reports prior to
publication. The Audit Committee monitors the financial
reporting and other related issues, and regularly discusses
these issues with the external auditors.

All business units report their financial results monthly
in accordance with the Group’s accounting principles. This
reporting serves as the basis for quarterly reports and a
monthly operating review. Operating reviews conform to a
long-established structure – LockPack – in which sales, earn-
ings, cash flow, capital employed and other important key
figures and trends for the Group are compiled and form the
basis for analysis and actions by management and control-
lers at different levels. Financial reviews take place quarterly
at divisional board meetings, monthly in the form of perfor-
mance reviews and through more informal analysis. Other

important Group-wide components of internal control are
the annual business planning and budgeting process and
quarterly detailed forecasts of all the financial parameters
for the current calendar year.

Group-wide internal control guidelines were reviewed

during the year in all operating companies through self-
assessment and a second opinion from external auditors.
These self-assessments are then reviewed at division and
Group level to further improve the reliability of the financial
reporting.

External audit
At the 2010 Annual General Meeting, Pricewaterhouse-
Coopers (PwC) were appointed as the company’s external
auditors for a four-year period up to the 2014 Annual
General Meeting, with authorized public accountant
Peter Nyllinge as the auditor in charge. PwC have been the
Group’s auditors since the Group was formed in 1994. Peter
Nyllinge, born 1966, is responsible for auditing Securitas
and SäkI as well as ASSA ABLOY.

PwC submits the audit report for ASSA ABLOY AB, the
Group and a large majority of the subsidiaries worldwide.
The audit of ASSA ABLOY AB also includes the administra-
tion by the Board of Directors and the CEO.

The company’s auditor attends all Audit Committee
meetings as well as the February board meeting, at which he
reports his observations and recommendations concerning
the Group audit for the year.

The external audit is carried out in accordance with
good auditing practice in Sweden. The audit of the financial
statements for legal entities outside Sweden is carried out
in accordance with statutory requirements and other appli-
cable rules in each country. For information about the fees
paid to auditors and other assignments carried out in the
Group during the last three financial years, see Note 3 and
the Annual Report for 2009 Note 3.

REPORT OF THE BOARD OF DIRECTORS

ASSA ABLOY ANNUAL REPORT 2010

Report of the Board of Directors
Remuneration guidelines
for senior management

The Board’s proposal to remuneration guidelines for
senior management
The Board of ASSA ABLOY proposes that the 2011 Annual
General Meeting adopts the following guidelines for the
remuneration and other employment conditions of the
President and CEO and the other members of the Executive
Team. Apart from the changes resulting from the Board’s
proposal for a long-term incentive program (LTI 2010), the
proposed guidelines below do not involve any material
change, compared with the guidelines adopted by the 2010
Annual General Meeting. The basic principle is that remu-
neration and other employment conditions should be in
line with market conditions and competitive. ASSA ABLOY
takes into account both global remuneration practice and
practice in the home country of each member of the Execu-
tive Team. The total remuneration of the Executive Team
should consist of basic salary, variable components in the
form of annual and long-term variable remuneration, other
benefits and pension.

The total remuneration of the Executive Team, including
previous commitments not yet due for payment, is reported
in Note 32.

Fixed and variable remuneration
The basic salary should be competitive and reflect respon-
sibility and performance. The variable part consists of
remuneration paid partly in cash and partly in the form of
shares. The Executive Team should have the opportunity to
receive variable cash remuneration based on the outcome
in relation to financial targets and, when applicable, indi-
vidual targets. This remuneration should be equivalent to
a maximum 75 percent of the basic salary (excluding social
security expenses).

In addition, the Executive Team should, within the
framework of the Board’s proposal for a long-term incen-
tive program, have the opportunity to receive variable

remuneration in the form of shares based on an interval
defined by the Board regarding the development of earn-
ings per share during 2011. This remuneration model
also includes the right, when purchasing a share under
certain conditions, to receive a free matching share from
the company. This remuneration should, if the share price
is unchanged, be equivalent to a maximum 75 percent of
basic salary (excluding social security expenses).

The cost of variable remuneration for the Executive Team
as above, assuming maximum outcome, amounts to a total
of SEK 55 M (excluding social security expenses). This cal-
culation is made on the basis of the current members of the
Executive Team.

Other benefits and pension
Other benefits, such as company car, extra health insurance
or occupational healthcare, should be payable to the extent
this is considered to be in line with market conditions in
the market concerned. All members of the Executive Team
should be covered by defined-contribution pension plans,
for which pension premiums are allocated from the execu-
tive’s total remuneration and paid by the company during
the period of employment.

Notice and severance pay
If the CEO is given notice, the company is liable to pay the
equivalent of 24 months’ salary and other employment
benefits. If one of the other members of the Executive Team
is given notice, the company is liable to pay a maximum 6
months’ basic salary and other employment benefits plus an
additional 12 months’ basic salary.

Deviations from guidelines
The Board should have the right to deviate from these
guidelines if there are particular reasons for doing so in an
individual case.

ASSA ABLOY ANNUAL REPORT 2010

REPORT OF THE BOARD OF DIRECTORS 73

Sales and income

• Organic growth for comparable units was 3 percent (–12), while acquired growth was 8 percent (3).
• Operating income (EBIT) excluding restructuring costs rose 12 percent to SEK 6,046 M (5,413),

equivalent to an operating margin of 16.4 percent (15.5).

• Earnings per share after full dilution excluding restructuring costs amounted to SEK 10.89 (9.22).

Sales
The Group’s sales rose to SEK 36,823 M (34,963). Exchange-
rate effects had an impact on sales of SEK –1,626 M (3,491).

Change in sales
%

Organic growth
Acquired growth
Exchange-rate effects

Total

2009

2010

–12
3
9

3
8
–6

The total change in sales for 2010 was 5 percent (0). Organic
growth for comparable units was 3 percent (–12), while
acquired units made a positive contribution of 8 percent (3).

Sales by product group
Mechanical locks, lock systems and accessories accounted for
42 percent (45) of sales. Sales of electromechanical and elec-
tronic locks rose to 36 percent (35), while security doors and
fittings accounted for 22 percent (20) of sales.

Cost structure
Total wage costs, including social security expenses and
pension expenses, amounted to SEK 10,110 M (10,133), cor-
responding to 27 percent (29) of sales. The average number
of employees in the Group was 37,279 (29,375). The average
number of employees in the Parent company was 104 (94).

Operating income
Operating income (EBIT) excluding restructuring costs rose
to SEK 6,046 M (5,413) due to efficiency savings etc. The
corresponding operating margin was 16.4 percent (15.5).
Exchange-rate effects amounted to SEK –262 M (643).

Operating income before depreciation and amortiza-
tion (EBITDA) excluding restructuring costs amounted to
SEK 7,041 M (6,426). The corresponding margin was 19.1
percent (18.4).

Restructuring costs
Operating income for the year was not affected by restruc-
turing costs. In 2009, restructuring costs totaled SEK
1,039 M, of which impairment of assets, mainly machinery
and equipment, accounted for SEK 124 M. The remaining
portion mainly related to payments in connection with staff
redundancies.

Income before tax
Income before tax excluding restructuring costs totaled SEK
5,366 M (4,779). The exchange-rate effect amounted to SEK
–232 M (598). Net financial items amounted to SEK –680 M
(–634). This increase is partly attributable to the discounting
effects of deferred payments for acquisitions. Profit margin
– defined as income before tax in relation to sales – was 14.6
percent (13.7) excluding restructuring costs.

The Parent company’s income before tax was SEK

The Group’s material costs rose to SEK 12,553 M

1,679 M (1,694).

(11,346), equivalent to 34 percent (32) of sales.

Other purchasing costs totaled SEK 7,049 M (6,985),

equivalent to 19 percent (20) of sales.

Depreciation and amortization of non-current assets
amounted to SEK 995 M (1,014), equivalent to 3 percent (3)
of sales.

Tax
The Group’s tax expense totaled SEK 1,286 M (1,081),
equi valent to an effective tax rate, excluding restructuring
effects, of 24 percent (27).

Earnings per share
Earnings per share after full dilution excluding restructuring
costs amounted to SEK 10.89 (9.22).

SALES AND OPERATING INCOME

SEK M

36,000

30,000

24,000

18,000

12,000

6,000

09 10

SEK M

6,000

5,000

4,000

3,000

2,000

1,000

(cid:132) Sales

Operating income1

1 Excluding items affecting
compa rability 2006,
2008 and 2009.

GROUP FINANCIAL REPORTS

ASSA ABLOY ANNUAL REPORT 2010

Income statement – Group
and Statement of comprehensive income

Income statement, SEK M

Sales
Cost of goods sold

Gross income

Selling expenses
Administrative expenses
Research and Development costs
Other operating income and expenses
Share of earnings in associates

Operating income

Financial income
Financial expenses

Income before tax

Tax on income

Net income

Net income attributable to:

Parent company shareholders’
Non-controlling interest

Earnings per share

before dilution, SEK
after dilution, SEK
after dilution excluding items affecting comparability, SEK

Statement of comprehensive income, SEK M

Profit for the year

Other comprehensive income

Exchange rate differences on translating foreign operations

Total comprehensive income

Total comprehensive income attributable to:

–Parent company shareholders’
–Non-controlling interest

Note

4
5

6–9, 32

10
9, 11

13
13
13

2009

34,963
–21,780

13,183

–5,836
–1,915
–920
–150
12

4,374

130
–764

3,740

–1,081

2,659

2,626
32

7.18
7.06
9.22

2009

2,659

–826

1,833

1,814
19

2010

36,823
–21,987

14,836

–5,666
–2,039
–1,015
–73
3

6,046

26
–706

5,366

–1,286

4,080

4,050
30

11.07
10.89
10.89

2010

4,080

–1,249

2,831

2,805
26

SALES BY PRODUCT GROUP, 2010

EARNINGS PER SHARE AFTER TAX AND DILUTION

(cid:132) Mechanical locks, lock systems
and accessories, 42% (45)

(cid:132) Electromechanical and

electronic locks, 36% (35)

(cid:132) Security doors and
fittings, 22% (20)

SEK

(cid:132) Earnings per share

after tax and dilution1

09 10

1 Excluding items affecting
compa rability 2006, 2008
and 2009.

ASSA ABLOY ANNUAL REPORT 2010

GROUP FINANCIAL REPORTS 75

Comments by division

ASSA ABLOY is organized into five divisions. The three divisions EMEA (Europe, Middle East and Africa), Americas
(North and South America) and Asia Pacific (Asia and Pacific) manufacture and sell mechanical and electrome-
chanical locks, security doors and fittings in their respective geographical markets. Global Technologies division
operates worldwide in the product areas of access control systems, secure card issuance, identification technol-
ogy and hotel locks. Entrance Systems division is a global supplier of automatic doors and service.

Global Technologies
Sales totaled SEK 5,015 M (4,766), with organic growth of
10 percent (–12). Acquired units contributed 1 percent (–)
to sales. Operating income excluding restructuring costs
amounted to SEK 862 M (766), with an operating margin
(EBIT) of 17.2 percent (16.1). Return on capital employed
excluding restructuring costs was 14.7 percent (12.9).
Operating cash flow before interest paid amounted to
SEK 868 M (1,005).

The HID Global business unit showed strong organic
growth, while ASSA ABLOY Hospitality returned to positive
growth in the second half of the year. Increased volume
and continued efficiency programs increased profitability
throughout the division.

Entrance Systems
Sales totaled SEK 4,072 M (3,733), with organic growth of
–2 percent (–3). Acquired units contributed 17 percent (12)
to sales. Operating income excluding restructuring costs
amounted to SEK 627 M (587), with an operating margin
(EBIT) of 15.4 percent (15.7). Return on capital employed
excluding restructuring costs was 14.6 percent (15.2).
Operating cash flow before interest paid amounted to
SEK 580 M (680).

New sales of automatic doors were weak throughout the
year, while service sales continued to grow strongly. Operat-
ing margin and cash flow were maintained at a high level.

Other
The costs of Group-wide functions, such as Group manage-
ment, accounting and finance, supply management and
central product development, amounted to SEK 346 M
(380). Elimination of sales between the Group’s segments
is included in ‘Other’.

EMEA
Sales totaled SEK 13,036 M (13,601), with organic growth
of 2 percent (–12). Acquired units contributed 1 percent
(3) to sales. Operating income excluding restructuring
costs amounted to SEK 2,174 M (2,056), with an operat-
ing margin (EBIT) of 16.7 percent (15.1). Return on capital
employed excluding restructuring costs was 21.6 percent
(16.9). Operating cash flow before interest paid amounted
to SEK 2,607 M (2,850).

Following a good start to the year, growth slowed in
Q3 and Q4. New innovative products and the efficiency
programs implemented resulted in an increased operating
margin and continued strong cash flow.

Americas
Sales totaled SEK 9,536 M (9,880), with organic growth of
–2 percent (–19). Acquired units contributed 2 percent
(2) to sales. Operating income amounted to SEK 1,886 M
(1,925), with an operating margin (EBIT) of 19.8 percent
(19.5). Return on capital employed excluding restructuring
costs was 21.3 percent (20.5). Operating cash flow before
interest paid amounted to SEK 2,013 M (2,677).

The division returned to positive growth in the second
half of the year driven by gradually increasing demand in the
renovation market. The operating margin was maintained
at a high level thanks to continued active marketing and
good cost control.

Asia Pacific
Sales totaled SEK 6,081 M (3,789), with organic growth of
14 percent (–1). Acquired units contributed 43 percent
net (5) to sales. Operating income excluding restructur-
ing costs amounted to SEK 843 M (459), with an operating
margin (EBIT) of 13.9 percent (12.1). Return on capital
employed excluding restructuring costs was 25.1 percent
(16.1). Operating cash flow before interest paid amounted
to SEK 917 M (610).

Growth in China was very strong, particularly for security

doors. South Korea, Australia and New Zealand also per-
formed well during the year. Operating margin and operat-
ing cash flow strengthened compared with the previous year.

EXTERNAL SALES, 2010

(cid:132) EMEA, 34% (38)
(cid:132) Americas, 26% (28)
(cid:132) Asia Pacific, 15% (10)
(cid:132) Global Technologies, 14% (13)
(cid:132) Entrance Systems, 11% (11)

GROUP FINANCIAL REPORTS

ASSA ABLOY ANNUAL REPORT 2010

SEK M

Sales, external
Sales, internal

Sales
Organic growth
Share of earnings in associates

Operating income (EBIT) exclud-
ing items affecting comparability
Operating margin (EBIT) excluding
items affecting comparability
Items affecting comparability 6

Operating income (EBIT)
Operating margin (EBIT)
Net financial items
Tax on income

Net income

Capital employed
– of which goodwill
– of which other intangible and

tangible assets

– of which shares in associates
Return on capital employed exclud-
ing items affecting comparability

Results by division

EMEA1

2009

2010

Americas2
2009

2010

Asia Pacific3

2009

2010

Global
Technologies4
2010

2009

Entrance
Systems
2009

2010

13,275
327

12,660
376

13,601 13,036
2%
3

–12%
4

9,831
49

9,880
–19%
8

9,491
45

9,536
–2%
–

3,507
282

3,789
–1%
–

5,698
384

6,081
14%
–

4,664
102

4,766
–12%
–

4,951
64

5,015
10%
–

3,685
47

3,733
–3%
–

4,024
48

4,072
–2%
–

Other

Total

2009

2010

2009

2010

–
–8077

–
–9167

34,963

36,823

–807
–
–

–916 34,963 36,823
3%
–12%
3
12

–
–

2,056

2,174

1,925

1,886

459

843

766

862

587

627

–380

–346

5,413

6,046

15.1%
–789

1,267
9.3%

16.7%
–

2,174
16.7%

19.5%
–

1,925
19.5%

19.8%
–

1,886
19.8%

12.1%
–2

457
12.1%

13.9%
–

843
13.9%

16.1%
–167

599
12.6%

17.2%
–

862
17.2%

15.7%
–81

506
13.6%

15.4%
–

627
15.4%

–
–

–380
–

–346
–

15.5%
–1,039

4,374
12.5%
–634
–1,081

16.4%
–

6,046
16.4%
–680
1,286

9,814
5,540

3,097
39

8,759
5,471

2,632
37

8,687
6,003

1,757
–

8,163
6,039

1,566
–

2,768
1,536

933
–

4,080
3,202

2,306
–

5,464
4,030

1,138
–

5,772
4,265

1,267
–

4,116
3,223

4,365
3,303

–467
–

485
–

431
–

16.9%

21.6%

20.5%

21.3%

16.1%

25.1%

12.9%

14.7%

15.2%

14.6%

Operating income (EBIT)
Restructuring costs
Depreciation
Investments in fixed assets
Sales of fixed assets
Change in working capital

1,267
789
473
–358
77
602

2,174
–
417
–357
40
334

1,925
–
236
–138
4
649

1,886
–
222
–124
10
19

Cash flow 5

2,850

2,607

2,677

2,013

457
2
99
–90
10
132

610

843
–
142
–217
19
130

917

599
167
156
–190
63
211

1,005

862
–
145
–109
0
–30

868

506
81
38
–41
8
88

680

627
–
57
–55
8
–58

580

Adjustment for non-cash items
Paid and received interest

Operating cash flow 5

2,659

4,080

30,382
20,333

31,385
22,279

7,541
39

8,336
37

245
–

136
–

–

16.2%

18.5%

–346
–
14
–8
85
–33

4,374
1,039
1,014
–825
161
1,460

6,046
–
995
–870
162
362

–288

7,222

6,695

45
–455

127
–507

45
–455

6,843

6,285

130
–

–

–380
–
11
–9
–
–222

–600

127
–507

Average number of employees

10,138

9,471

6,897

6,969

7,560

15,510

2,416

2,487

2,253

2,738

112

104

29,375

37,279

1 Europe, Middle East and Africa.
2 North and South America.
3 Asia and Pacific.
4 ASSA ABLOY Hospitality and

HID Global.

5 Excluding restructuring payments.
6 Items affecting comparability con-
sist of restructuring costs for 2009.

7 Which of eliminations 916 SEK M

(807).

The segments has been determined on the basis of report-
ing to the CEO, who monitors the overall performance and
makes decisions on resource allocation.

The different segments obtain their revenue from the
manufacture and the sale of mechanical, electromechanical
and electronic locks, lock systems and accessories, and secu-
rity doors and fittings.

The breakdown of sales is based on customer sales in the
respective country. Sales between segments are carried out
at arm’s length. For further information on sales, please see
Note 2.

OPERATING INCOME, 20101, 2

AVERAGE NUMBER OF EMPLOYEES, 2010

(cid:132) EMEA, 34% (36)
(cid:132) Americas, 30% (33)
(cid:132) Asia Pacific, 13% (8)
(cid:132) Global Technologies, 13% (13)
(cid:132) Entrance Systems, 10% (10)

1 Operating income excluding
items affecting compa rability.
2 ”Other” is not included in the
calculation. See section Com-
ments by division for what is
included in ”Other”.

(cid:132) EMEA, 25% (35)
(cid:132) Americas, 19% (23)
(cid:132) Asia Pacific, 42% (26)
(cid:132) Global Technologies, 7% (8)
(cid:132) Entrance Systems, 7% (8)

ASSA ABLOY ANNUAL REPORT 2010

GROUP FINANCIAL REPORTS 77

Financial position

• Capital employed amounted to SEK 31,385 M (30,382).
• A strong positive operating cash flow reduced net debt to SEK 10,564 M (11,048).
• The net debt/equity ratio was 0.51 (0.57).

SEK M

Capital employed
– of which, goodwill
Net debt
Equity
– of which non-controlling

interests

2009

30,382
20,333
11,048
19,334

2010

31,385
22,279
10,564
20,821

162

169

Capital employed
The Group’s capital employed – defined as total assets less
interest-bearing assets and non-interest-bearing liabilities
including deferred tax liabilities – amounted to SEK
31,385 M (30,382). The return on capital employed exclud-
ing items affecting comparability was 18.5 percent (16.2).
Intangible assets amounted to SEK 25,193 M (22,324).

This increase is mainly due to the effects of completed
acquisitions. During the year, goodwill and other intangible
assets with an indefinite useful life have arisen to a pre-
liminary value of SEK 3,818 M. A valuation model based on
discounted future cash flows is used for impairment testing
of goodwill and other intangible assets with an indefinite
useful life.

Tangible assets amounted to SEK 5,422 M (5,550). Capi-
tal expenditure on tangible assets and intangible assets, less
sales of tangible assets and intangible assets, totaled SEK
708 M (664). Depreciation amounted to SEK 995 M (1,014).
Accounts receivables totaled SEK 5,596 M (5,618) and
inventories totaled SEK 4,825 M (4,349). The average col-
lection period for accounts receivables was 51 days (55).
Material throughput time was 103 days (97). The Group is
making systematic efforts to increase capital efficiency.

Net debt
Net debt amounted to SEK 10,564 M (11,048), of which
pension commitments and other remuneration on termi-
nation of employment accounted for SEK 1,078 M (1,118).
Net debt was increased by acquisitions and the dividend to
shareholders and reduced by the continued strong positive
operating cash flow. The net reduction is mainly due to a
continued good earnings trend and a release of working
capital.

External financing
The Group’s long-term loan financing mainly consists of
Private Placement Programs in the USA totaling USD 580 M
(630), GMTN-programs of SEK 2,705 M (3,292) and Incen-
tive Programs of EUR 100 M (138). The change in long-term
loans is mainly due to some of the original long-term loans
now having less than one year to maturity. In addition, a
bilateral bank loan totaling SEK 1,000 M was repaid in 2010.
During the year long-term bilateral financing totaling SEK
139 M was raised.

The Group’s short-term loan financing mainly consists

of two Commercial Paper Programs for a maximum of
USD 1,000 M (1,000) and SEK 5,000 M (5,000) respec-
tively. At year-end, SEK 747 M (632) of the Commercial
Paper Programs had been utilized. In addition, substantial
credit facilities are available, mainly in the form of a Multi-
Currency Revolving Credit Facility for a maximum of EUR
1,100 M (1,100), which was not utilized at all at year-end.
To secure financing for the acquisition of Cardo, additional
credit facilities totaling SEK 14,300 M were secured. These
have a term of between 1 and 3 years. Following comple-
tion of the acquisition, these credit facilities will, however,
be refinanced on the capital markets in good time before
maturity.

The interest coverage ratio, defined as income before
tax plus net interest, divided by net interest, was 10.1 (7.2).
Fixed interest terms fell somewhat during the year, with an
average term of 23 months (25) at year-end.

Cash and cash equivalents amounted to SEK 1,302 M
(2,235) and are invested in banks with high credit ratings.

Some of the Group’s main financing agreements contain

a customary Change of Control clause. The effect of this
clause is that lenders have the right in certain circumstances
to demand the renegotiation of conditions or to terminate
the agreement if control of the company should change.

Equity
The Group’s equity totaled SEK 20,821 M (19,334) at year-
end. The return on shareholders’ equity amounted to 19.1
percent (12.7). The equity ratio was 45.9 percent (45.4).
The debt/equity ratio, defined as net debt divided by equity,
was 0.51 (0.57).

NET DEBT

CAPITAL EMPLOYED AND RETURN ON CAPITAL EMPLOYED

SEK M

15,000

12,000

9,000

6,000

3,000

09 10

(cid:132) Net debt

Net debt / equity

1.0

0.8

0.6

0.4

0.2

SEK M

36,000

30,000

24,000

18,000

12,000

6,000

09 10

(cid:132) Capital employed
Return on capital
employed1

1 Excluding items affecting
comparability 2006, 2008
and 2009.

ASSA ABLOY ANNUAL REPORT 2010

GROUP FINANCIAL REPORTS

Balance sheet – Group

SEK M

ASSETS
Non-current assets
Intangible assets
Tangible assets
Shares in associates
Other long-term financial assets
Deferred tax receivables

Total non-current assets

Current assets
Inventories
Accounts receivables
Current tax receivables
Other short-term receivables
Prepaid expenses and accrued income
Derivative financial instruments
Short-term investments
Cash and cash equivalents

Total current assets

TOTAL ASSETS

EQUTIY AND LIABILITIES
Equity
Parent company's shareholders
Share capital
Other contributed capital
Exchange rate differences
Retained earnings

Non-controlling interest

Total equity

Non-current liabilities
Long-term loans
Convertible debenture loans
Deferred tax liabilities
Pension provisions
Other long-term provisions
Other long-term liabilities

Total non-current liabilites

Current liabilities
Short-term loans
Convertible debenture loans
Derivative financial instruments
Accounts payables
Current tax liabilities
Short-term provisions
Other short-term liabilities
Accrued expenses and prepaid income

Total current liabilities

TOTAL EQUITY AND LIABILITIES

Note

2009

2010

14
15
17
19
18

20
21

33
33
33

33
33
18
24
25
33

33
33
33

25
26
27

22,324
5,550
39
334
814

29,061

4,349
5,618
231
541
399
100
84
2,235

13,557

42,618

366
8,887
760
9,159

19,172
162

19,334

9,263
1,429
63
1,118
1,829
176

25,193
5,422
37
856
702

32,210

4,825
5,596
311
581
416
146
2
1,302

13,179

45,389

366
8,921
–484
11,849

20,652
169

20,821

7,235
899
309
1,078
1,793
2,134

13,878

13,448

1,869
–
32
2,682
324
726
895
2,878

9,406

42,618

2,481
311
72
3,123
458
771
1,146
2,758

11,120

45,389

ASSA ABLOY ANNUAL REPORT 2010

GROUP FINANCIAL REPORTS 79

Cash flow

• Operating cash flow remained strong and amounted to SEK 6,285 M (6,843).
• Change in working capital amounted to SEK 362 M (1,460).

Operating cash flow

SEK M

Operating income (EBIT)
Restructuring costs
Depreciation
Net capital expenditure
Change in working capital
Paid and received interest
Non-cash items

Operating cash flow¹

Operating cash flow/
Income before tax

1 Excluding restructuring payments.
² Excluding restructuring costs.

2009

4,374
1,039
1,014
–664
1,460
–507
127

6,843

1.432

2010

6,046
–
995
–708
362
–455
45

6,285

1.17

The Group’s operating cash flow amounted to SEK 6,285 M
(6,843), equivalent to 117 percent (143) of income before
tax excluding restructuring costs. The Parent company’s
cash flow amounted to SEK 0 M (–1).

Net capital expenditure
Direct net capital expenditure on intangible assets and tan-
gible assets totaled SEK 708 M (664), equivalent to 71 per-
cent (65) of depreciation of intangible assets and tangible
assets. The low net capital expenditure is partly due to the
Group’s long-term efforts to streamline the production
structure.

Change in working capital

SEK M

Inventories
Accounts receivables
Accounts payables
Other working capital

Change in working capital

2009

987
806
–232
–102

1,460

2010

–338
–118
406
412

362

The material throughput time was 103 days (97) at year-
end. Capital tied up in inventories and accounts receivables
increased during the year, which had an impact on cash flow
of SEK –456 M (1,793) overall. However, total working capital
tied up fell, due to suppliers’ increased credit periods.

Relationship between cash flow from operating
activities and operating cash flow

SEK M

Cash flow from operating activities
Restructuring payments
Net capital expenditure
Reversal of tax paid

Operating cash flow

2009

5,924
676
–664
907

6,843

2010

5,729
465
–708
799

6,285

Investments in subsidiaries
The total purchase price for acquisitions of subsidiaries
amounted to SEK 4,898 M (1,107). Acquired cash totaled
SEK 705 M (50).

Change in net debt
Net debt was mainly affected by the strong positive operat-
ing cash flow, the dividend to shareholders and acquisitions.

SEK M

Net debt at 1 January
Operating cash flow
Restructuring payments
Tax paid
Acquisitions/Disposals
Dividend
Purchase of treasury shares
Exchange rate differences

Net debt at 31 December

2009

14,013
–6,843
676
907
1,171
1,317
–
–193

11,048

2010

11,048
–6,285
465
799
3,319
1,317
48
–147

10,564

INCOME BEFORE TAX AND OPERATING CASH FLOW

CAPITAL EXPENDITURE

SEK M

7,000

6,000

5,000

4,000

3,000

2,000

1,000

(cid:132) Income before tax1
(cid:132) Operating cash flow

09 10

1 Excluding items affecting
comparability 2006, 2008
and 2009.

SEK M

1,000

800

600

400

200

09 10

(cid:132) Net capital
expenditure
(cid:132) Depreciation
Net capital
expenditure
% of sales

2.5

2.0

1.5

1.0

0.5

GROUP FINANCIAL REPORTS

ASSA ABLOY ANNUAL REPORT 2010

Cash flow statement – Group

Note

14, 15
14, 15
31
31
31

SEK M

OPERATING ACTIVITIES
Operating income
Depreciation
Reversal of restructuring costs
Restructuring payments
Non-cash items

Cash flow before interest and tax

Interest paid
Interest received
Tax paid on income

Cash flow before changes in working capital

Changes in working capital

Cash flow from operating activities

INVESTING ACTIVITIES
Investments in tangible and intangible assets
Sales of tangible and intangible assets
Investments in subsidiaries
Disposals of subsidiaries
Other investments

Cash flow from investing activities

FINANCING ACTIVITES
Dividends
Long-term loans raised
Long-term loans repaid
Purchase of treasury shares
Net cash effect of changes in other borrowings

Cash flow from financing activities

CASH FLOW

CASH AND CASH EQUIVALENTS
Cash and cash equivalents at 1 January
Cash flow
Effect of exchange rate differences

Cash and cash equivalents at 31 December

2009

4,374
1,014
1,039
–676
127

5,878

–596
89
–907

4,464

1,460

5,924

–825
161
–1,077
–71
–23

–1,835

–1,317
3,384
–2,601
–
–3,207

– 3,741

348

1,931
348
–44

2,235

2010

6,046
995
–
–465
45

6,621

–463
8
–799

5,367

362

5,729

–870
162
–2,594
–34
–691

–4,027

–1,317
139
–1,000
–48
–371

–2,597

–895

2,235
–895
–38

1,302

ASSA ABLOY ANNUAL REPORT 2010

GROUP FINANCIAL REPORTS 81

Changes in equity – Group

SEK M

Note

Parent company’s shareholders

Share
capital

Other con-
tributed
capital

Exchange rate
differences

Retained
earnings

Non control-
ling interest

Opening balance 1 January 2009

366

8,887

1,572

Profit for the year
Other comprehensive income

Total comprehensive income

Dividend for 2008
Change in non-controlling interest

Sum of transactions with parent
company shareholders’

–812

Closing balance 31 December 2009

366

8,887

760

Opening balance 1 January 2010

366

8,887

760

Profit for the year
Other comprehensive income

Total comprehensive income

Dividend for 2009
Stock purchase plans
Share issue
Purchase of treasury shares
Change in non-controlling interest

Sum of transactions with parent
company shareholders’

Closing balance 31 December 2010 23

–1,244

366

8,921

–484

7,850

2,626

–1,317

9,159

4,050

–1,317
6

–48

–1,359

11,849

Total

18,838

2,659
–826

1,833

–1,317
–20

–1,337

19,334

163

32
–13

–20

162

19,334

30
–5

–19

169

4,080
–1,249

2,831

–1,317
6
34
–48
–19

–1,344

20,821

SHAREHOLDERS’ EQUITY PER SHARE AFTER DILUTION AND
RETURN ON SHAREHOLDERS’ EQUITY AFTER TAX

DIVIDEND

SEK

(cid:132) Shareholders’ equity per
share after dilution, SEK
(cid:132) Return on shareholders’
equity after tax, %

SEK

(cid:132) Dividend per share
(cid:132) Earnings per share

after tax and dilution1

09 10

1 Excluding items affecting
comparability 2006, 2008
and 2009.

GROUP FINANCIAL REPORTS

ASSA ABLOY ANNUAL REPORT 2010

Eden Park is ready for 2011 Rugby World Cup

Located in the heart of Auckland, Eden Park is New Zealand’s
largest stadium and host to about half a million sport fans
and patrons from around the globe each year.

The stadium will host the 2011 Rugby World Cup, which
includes the opening ceremony and final matches. The rede-
velopment of the Eden Park stadium, which has 100 years’
history behind it, has included the new three-tier South
Stand, a two-tier East Stand with acoustic barrier for noise
control, a 2,000 seat extension to the ASB stand and a mod-
ern public concourse connecting all stands to the now inter-
nalized transportation hub.

A full door hardware schedule for the project was provided
to the architects by ASSA ABLOY New Zealand’s specifica-
tion team. This schedule took into consideration the multi-
faceted security needs of the project, including perimeter
security, crowd control and safety egress. In addition, the
delivery of timely and reliable information allowed for an
accurate information flow from the hardware merchants
right through to the construction team.

ASSA ABLOY ANNUAL REPORT 2010

Parent company financial statements

Income statement
– Parent company

SEK M

Administrative expenses
Research and Development costs
Other operating income and expenses

Statement of
comprehensive income
– Parent company

Balance sheet
– Parent company

Operating income

Financial income
Financial expenses

Income before tax

Tax on income

Net income

SEK M

Net income

Other comprehensive income
Changes in value of financial instruments
Group contributions
Tax effect of Group contributions

Total comprehensive income

SEK M

ASSETS
Non-current assets
Intangible assets
Tangible assets
Shares in subsidiaries
Other long-term financial assets

Total non-current assets

Current assets
Receivables from subsidiaries
Other short-term receivables
Prepaid expenses and accrued income
Cash and cash equivalents

Total current assets

TOTAL ASSETS

EQUITY AND LIABILITIES
Equity
Restricted equity
Share capital
Statutory reserve
Unrestricted equity
Premium fund
Retained earnings
Net income

Total equity

Provisions
Other provisions

Total provisions

Non-current liabilities
Long-term loans
Convertible debenture loans

Total non-current liabilities

Current liabilities
Short-term loans
Convertible debenture loans
Accounts payables
Short-term liabilities to subsidiaries
Current tax liabilities
Other short-term liabilities
Accrued expenses and prepaid income

Total current liabilities

TOTAL EQUITY AND LIABILITIES

Assets pledged

Contingent liabilities

Note

3, 6, 8, 9
6, 8, 9
4

9, 32

10
9, 11

Note

14
15
16
19

33
33

2009

–610
–222
1,398

566

1,365
–237

1,694

–158

1,536

2009

1,536

–408
–594
157

691

2009

321
3
19,115
34

19,473

4,118
28
30
0

4,176

2010

–612
–233
1,623

778

1,147
–246

1,679

–187

1,492

2010

1,492

–
–725
190

957

2010

150
3
19,686
776

20,615

3,476
58
25
0

3,559

23,649

24,174

366
8,905

–
2,343
1,536

366
8,905

34
1,984
1,492

13,150

12,781

4,291
1,429

5,720

681
–
20
3,906
16
6
145

4,774

23,649

–

7,472

–

2,702
899

3,601

300
311
20
6,960
16
6
179

7,792

24,174

–

6,136

PARENT COMPANY FINANCIAL REPORTS

ASSA ABLOY ANNUAL REPORT 2010

Cash flow statement
– Parent company

SEK M

OPERATING ACTIVITIES
Operating income
Depreciation

Cash flow before interest and tax

Paid and received interest
Dividends received
Tax paid and received

Cash flow before changes in working capital

Changes in working capital

Cash flow from operating activities

INVESTING ACTIVITIES
Investment in tangible and intangible assets
Sales of tangible and intangible assets
Investments in subsidiaries
Other investments

Cash flow from investing activities

FINANCING ACTIVITIES
Dividends
Loan raised
Loan repaid
Purchase of treasury shares

Cash flow from financing activities

CASH FLOW

CASH AND CASH EQUIVALENTS
Cash and cash equivalents at 1 January
Cash flow

Cash and cash equivalents at 31 December

Note

2009

2010

566
183

749

45
898
–29

1,663

–4

1,659

–1
4
–1,439
23

–1,413

– 1,317
5,859
–4,789
–

–247

–1

1
–1

778
183

961

–145
1,028
9

1,853

–141

1,712

–11
0
–603
–713

–1,327

–1,317
4,415
–3,435
–48

–385

0
0

Change in equity
– Parent company

SEK M

Opening balance 1 January 2009

Profit for the year
Changes in value of financial instruments
Group contributions
Tax effect of Group contributions

Total comprehensive income

Dividend for 2008

Sum of transactions with parent company shareholders’

Closing balance 31 December 2009

Opening balance 1 January 2010

Profit for the year
Group contributions
Tax effect of Group contributions

Total comprehensive income

Stock purchase plans
Purchase of treasury shares
Share issue
Dividend for 2009

Sum of transactions with parent company shareholders’

Closing balance 31 December 2010

Restricted shareholders’ equity

Unrestricted shareholders’ equity

Note

Share
capital

Statutory
reserve

Fair value
reserve

Premium
fund

Retained
earnings

366

8,905

408

–408

–

366

8,905

366

8,905

366

8,905

–

4,097

1,536

–594
157

1,099

–1,317

3,879

1,492
–725
190

957

6
–48

–1,317

–1,359

3,476

Total

13,776

1,536
–408
–594
157

691

–1,317

13,150

1,492
–725
190

957

6
–48
34
–1,317

– 1,325

12,781

ASSA ABLOY ANNUAL REPORT 2010

PARENT COMPANY FINANCIAL REPORTS 85

Notes

Note 1 Significant accounting and valuation principles

•

The Group
ASSA ABLOY applies International Financial Reporting Stan-
dards (IFRS) as endorsed by the European Union (EU), the
Swedish Annual Accounts Act and standard RFR 1.3 of the
Swedish Financial Reporting Board. The accounting princi-
ples are based on IFRS as endorsed by 31 December 2010
and have been applied to all years presented, unless stated
otherwise. This Note describes the most significant account-
ing principles that have been applied in the preparation of
the financial statements, which comprise the information
appearing on pages 59–116.

Basis of preparation
ASSA ABLOY’s consolidated financial statements have been
prepared in accordance with IFRS as endorsed by the EU. The
consolidated financial statements have been prepared in
accordance with the cost method, except regarding finan-
cial assets and liabilities (including derivatives) measured at
fair value through profit and loss.

The preparation of financial statements requires estimates

and assessments to be made for accounting purposes. The
management also makes assessments when applying the
Group’s accounting principles. Estimates and assessments
may affect the income statement and balance sheet as well as
the supplementary information that appears in the financial
statements. Thus changes in estimates and assessments may
lead to changes in the financial statements.

Estimates and assessments play an important part in the
valuation of items such as identifiable assets and liabilities in
acquisitions, impairment testing of goodwill and other
assets, in determining actuarial assumptions for calculating
employee benefits and other types of provisions, as well as
in the valuation of deferred taxes. Estimates and assess-
ments are continually reassessed and are based on a combi-
nation of historical experience and reasonable expectations
about the future.

The Group considers that estimates and assessments
relating to impairment testing of goodwill and other intan-
gible assets with indefinite useful life are of material impor-
tance to the consolidated financial statements. The Group
tests carrying amounts for impairment on an annual basis.
The recoverable amounts of cash generating units are deter-
mined by calculating their values in use. The calculations are
based on certain assumptions about the future which, for
the Group, are associated with the risk of material adjust-
ments in carrying amounts during the next financial year.
Material assumptions and the effects of reasonable changes
in them are described in Note 14.

New and revised standards applied by the Group
The Group has applied the following new and revised IFRS
from 1 January 2010.
•

IFRS 3 (Revised), Business Combinations is applied to all
business combinations acquired on or after 1 January 2010.
IFRS 3 R continues to apply the purchase method but with
some significant differences compared with IFRS 3. For
example, all payments relating to the acquisition are car-
ried at fair value at the acquisition date, while subsequent
additional purchase considerations are classified as liabili-
ties that are then revalued through profit and loss. Non-
controlling interests in the acquired business can be mea-
sured, on an optional individual basis, either at fair value or
at the proportional share of the net assets of the acquired
business held by non-controlling interests. All acquisition-
related transaction costs are expensed as incurred.

IAS 27 (Revised), Consolidated and Separate Financial
Statements requires that the effects of all transactions
with non-controlling interests (previously minority inte-
rests) are recognized in equity unless it involves a change
in the controlling interest. This standard also states that
when a Parent company loses its controlling interest, any
remaining share is revalued at fair value and a profit or
loss is recognized in the income statement.

•

New and amended standards not yet effective
The following new IFRS and revisions to current IFRS have
been published but are not yet effective, and have not been
applied in the preparation of the financial statements.
•

IAS 24 (Revised): Related Party Disclosures, effective
from 1 January 2011.
IFRIC 19: Extinguishing Financial Liabilities with Equity
Instruments, effective from 1 July 2010, not yet endorsed
by the EU.
IFRIC 14 (Revised): Prepayments of a Minimum Funding
Requirement. The Limit on a Defined Benefit Asset, Mini-
mum Funding Requirements and their Interaction, effec-
tive from 1 January 2011, not yet endorsed by the EU.
IASB Annual Improvement Project, effective from 1 Janu-
ary 2011, not yet endorsed by the EU.
IFRS 9, Financial Instruments, effective from 1 January
2013, not yet endorsed by the EU.
IAS 32 (Revised): Classification of Rights Issues, effective
for financial years beginning 1 February 2010 or later.
Management analyzes the impact of the new and amended
standards on the financial statements. The revisions will not
affect the financial statements prepared prior to the effec-
tive dates. The current assessment is that none of the new
and revised standards listed above will have a significant
impact on the Group’s financial statements.

•

Consolidated financial statements
The consolidated financial statements include ASSA ABLOY
AB (the Parent company) and companies in which the Par-
ent company held, directly or indirectly, more than 50 per-
cent of the voting rights at the end of the period, as well as
companies in which the Parent company otherwise has a
controlling interest, for example by having the right to for-
mulate financial and operating strategies. Companies
acquired during the year are included in the consolidated
financial statements with effect from the date when a con-
trolling interest was obtained. Companies sold during the
year are included in the consolidated financial statements
up to the date when a controlling interest ceased.

The consolidated financial statements have been pre-

pared in accordance with the purchase method, which
means that the cost of shares in subsidiaries is eliminated
against their equity at the time of acquisition. In this con-
text, equity in subsidiaries is determined on the basis of the
fair value of assets, liabilities and contingent liabilities at the
acquisition date. Thus only that part of subsidiaries’ equity
that has arisen after the acquisition date is included in the
Group’s equity. A positive difference between the cost of
shares in subsidiaries and the fair value of the Group’s share
of acquired net assets is reported as goodwill. A negative dif-
ference, negative goodwill, is recognized immediately in the
income statement. As from 1 January 2010 additional pur-
chase considerations are classified as financial liabilities and
revalued through profit and loss in operating income. Sub-
stantial additional purchase considerations are discounted
to present value. Acquisition-related transaction costs are
expensed as incurred.

NOTES

ASSA ABLOY ANNUAL REPORT 2010

Not 1 forts.

Intragroup transactions and balance sheet items and unre-
alized profits on transactions between Group companies
are eliminated in the consolidated financial statements.

The rates for currencies used in the Group, relative to the
Group’s presentation currency (SEK), were as follows – the
weighted average for the year, and the closing day rate.

Non-controlling interests
Non-controlling interests are based on subsidiaries’
accounts with application of fair value adjustments result-
ing from a completed acquisition analysis. Non-controlling
interests’ share in subsidiaries’ earnings is shown in the
income statement, in which net income is attributed to the
Parent company’s shareholders and to non-controlling
interests. Non-controlling interests’ share in subsidiaries’
equity is shown separately in consolidated equity. Transac-
tions with non-controlling interests are shown as transac-
tions with the Group’s shareholders.

Associates
Associates are defined as companies which are not subsid-
iaries but in which the Group has a significant, but not a con-
trolling, interest. This is usually taken to be companies in
which the Group’s shareholding represents between 20 and
50 percent of the voting rights.

Interests in associates are accounted for in accordance
with the equity method. In the consolidated balance sheet,
shareholdings in associates are reported at cost, and the
carrying amount is adjusted for the share of associates’
earnings after the acquisition date. Dividends from associ-
ates are reported as a reduction in the carrying amount of
the holdings. The share of associates’ earnings is reported in
the consolidated income statement in operating income as
the holdings are related to business operations.

Segment reporting
Operating segments are reported in accordance with inter-
nal reporting to the chief operating decision maker. Chief
operating decision maker is the function that is responsible
for allocation of resources and assessing performance of the
operating segments. The divisions form the operational
structure for internal control and reporting and also consti-
tute the Group’s segments for external financial reporting.
The Group’s business is divided into five divisions. Three
divisions are based on products sold in local markets in the
respective division: EMEA, Americas and Asia Pacific. Global
Technologies’ and Entrance Systems’ products are sold
worldwide.

Foreign currency translation
Functional currency corresponds to local currency in each
country where Group companies operate. Transactions in
foreign currencies are translated to functional currency by
application of the exchange rates prevailing on the transac-
tion date. Foreign exchange gains and losses arising from
the settlement of such transactions are normally reported
in the income statement, as are those arising from transla-
tion of monetary balance sheet items in foreign currencies
at the year-end rate. Exceptions are transactions relating to
qualifying cash flow hedges, which are reported in compre-
hensive income. Receivables and liabilities are valued at the
year-end rate.

In translating the accounts of foreign subsidiaries pre-
pared in functional currencies other than the Group’s pre-
sentation currency, all balance sheet items except net
income are translated at the year-end rate and net income is
translated at the average rate. The income statement is
translated at the average rate for the period. Foreign
exchange differences arising from the translation of foreign
subsidiaries are reported as translation differences in com-
prehensive income.

Country

Currency

2009

2010

2009

2010

Average rate

Closing rate

Argentina
Australia
Brazil
Canada
Switzerland
Chile
Colombia
China
Czech Republic
Denmark
Estonia
Euro zone
United Kingdom
Hong Kong
Hungary
Israel
Kenya
South Korea
Lithuania
Mexico
Malaysia
Norway
New Zealand
Poland
Russia
Singapore
Thailand
USA
South Africa

ARS
AUD
BRL
CAD
CHF
CLP
COP
CNY
CZK
DKK
EEK
EUR
GBP
HKD
HUF
ILS
KES

2.06
5.98
3.80
6.68
7.05
0.014
0.0035
1.12
0.40
1.43
0.68
10.63
11.85
0.99
0.038
1.95
0.099
KRW 0.0060
3.08
0.56
2.17
1.21
4.80
2.46
0.24
5.25
0.22
7.63
0.92

LTL
MXN
MYR
NOK
NZD
PLN
RUB
SGD
THB
USD
ZAR

1.85
6.61
4.10
6.98
6.94
0.014
0.0038
1.07
0.38
1.28
0.61
9.57
11.14
0.93
0.035
1.93
0.091
0.0062
2.77
0.57
2.24
1.19
5.19
2.38
0.24
5.29
0.23
7.23
0.98

1.88
6.42
4.13
6.86
6.94
0.014
0.0035
1.05
0.39
1.39
0.66
10.32
11.44
0.93
0.038
1.89
0.095
0.0062
2.99
0.55
2.10
1.24
5.15
2.50
0.24
5.12
0.22
7.19
0.97

1.72
6.93
4.05
6.85
7.20
0.015
0.0034
1.03
0.35
1.21
0.57
8.99
10.53
0.88
0.032
1.91
0.085
0.0060
2.60
0.55
2.21
1.15
5.21
2.26
0.23
5.28
0.23
6.84
1.02

Revenue
Revenue comprises the fair value of goods sold, excluding
VAT and discounts, and after eliminating intra-group sales.
The Group’s sales revenue arises principally from sales of
products. Service related to products sold makes up a lim-
ited fraction of revenue. Revenue from sales of the Group’s
products is recognized when all significant risks and
rewards associated with ownership are transferred to the
purchaser in accordance with applicable conditions of sale,
which is normally upon delivery. If the product requires
installation at the customer’s premises, revenue is recog-
nized when installation is completed. Revenue from service
contracts is recognized on a continuous basis over the con-
tract period. In the case of installations over a longer period
of time, the percentage of completion method is used.

Intra-group sales
Transactions between Group companies are carried out at
arm’s length and thus at market prices. Intra-group sales are
eliminated from the consolidated income statement, and
profits on such transactions have been eliminated in their
entirety.

Government grants
Grants and support from governments, public authorities
etc are reported when there is reasonable assurance that
the company will comply with the conditions attaching to
the grant and that the grant will be received. Grants relating
to assets are reported after reducing the carrying amount of
the asset by the amount of the grant.

Research and development
Research costs are expensed as they are incurred. Develop-
ment costs are reported in the balance sheet only to the
extent that they are expected to generate future economic
benefits for the Group and provided such benefits can be
reliably measured.

ASSA ABLOY ANNUAL REPORT 2010

NOTES 87

Note 1 cont.

Capitalized development expenditure is amortized over the
expected useful life. Such intangible assets, which are not
yet in use, are tested annually for impairment. Expenditure
on the development of existing products is expensed as
incurred.

Borrowing costs
Borrowing costs are interest expenses and other expenses
directly related to borrowing. Borrowing costs directly relat-
ing to acquisition, construction or production of a qualified
asset (an asset that necessarily takes a substantial period of
time to complete for its intended use or sale) are capitalized
as part of the cost of that asset. Other borrowing costs are
recognized as expenses in the period in which they are
incurred.

Tax on income
The income statement includes all tax that is to be paid or
received for the current year, adjustments relating to tax due
for previous years, and changes in deferred tax. Tax sums
have been calculated as nominal amounts, in accordance
with the tax regulations in each country, and in accordance
with tax rates that have either been decided or have been
notified and can confidently be expected to be confirmed.
For items reported in the income statement, associated tax
effects are also reported in the income statement. The tax
effects of items reported directly against equity or compre-
hensive income are themselves reported against equity or
comprehensive income. Deferred tax is accounted for using
the liability method. This means that deferred tax is
accounted for on all temporary differences between the car-
rying amounts of assets and liabilities and their respective
tax bases. Deferred tax assets relating to tax losses carried
forward or other future tax allowances are reported to the
extent that it is probable that the allowance can be set
against taxable income in future taxation. Deferred tax lia-
bilities relating to temporary differences resulting from
investments in subsidiaries are not reported in the consoli-
dated financial statements, since the Parent company can
control the time at which the temporary differences are
reversed, and it is not considered likely that such reversal
will occur in the foreseeable future. Deferred tax assets and
deferred tax liabilities are offset when there is a legal right to
do so and when the deferred tax amounts concern the same
tax authority.

Cash flow statement
The cash flow statement has been prepared according to the
indirect method. The reported cash flow includes only trans-
actions involving cash payments.

Cash and cash equivalents
’Cash and cash equivalents’ covers cash and bank balances
and short-term financial investments with durations of less
than three months from the acquisition date.

Goodwill and acquisition-related intangible assets
Goodwill represents the positive difference between the
cost of acquisition and the fair value of the Group’s share of
the acquired company’s net identifiable assets at the acqui-
sition date, and is reported at cost less accumulated impair-
ment losses. Goodwill is allocated to cash generating units
(CGU) and is tested annually to identify any impairment loss.
Cash generating units are subject to systematic annual
impairment testing using a valuation model based on dis-
counted future cash flows. Deferred tax assets based on
local tax rates are reported in terms of tax-deductible good-
will (with corresponding reduction of the goodwill value).

Such deferred tax assets are expensed as the tax deduction
is utilized. Other acquisition-related intangible assets con-
sist chiefly of various types of intellectual property rights,
such as brands, technology and customer relationships.
Identifiable acquisition-related intellectual property rights
are initially recognized at fair value at the acquisition date
and subsequently at cost less accumulated amortization
and impairment losses. Amortization is on a straight-line
basis over the estimated useful life. Acquisition-related
intangible assets with an indefinite useful life are tested for
impairment annually in the same way as goodwill.

Other intangible assets
An intangible asset that is not acquisition-related is
reported only if it is likely that the future economic benefits
associated with the asset will flow to the Group, and if the
cost of the asset can be measured reliably. Such an asset is
initially recognized at cost and is amortized over its esti-
mated useful life, usually between three and five years. Its
carrying amount is cost less accumulated amortization and
impairment losses.

Tangible assets
Tangible assets are reported at cost less accumulated depre-
ciation and impairment losses. Cost includes expenditure
that can be directly attributed to the acquisition of the asset.
Subsequent expenditure is capitalized if it is probable that
economic benefits associated with the asset will flow to the
Group, and if the cost can be reliably measured. Expenditure
on repairs and maintenance is expensed as it is incurred.
Depreciable amount is the cost of an asset less its estimated
residual value. No depreciation is applied to land. For other
assets, cost is depreciated over the estimated useful life,
which for the Group results in the following average depre-
ciation periods:
• Office buildings 50 years.
•
Industrial buildings 25 years.
• Plant and machinery 7–10 years.
• Equipment and tools 3–6 years.

The residual value and useful life of assets are reviewed at
each financial year-end and adjusted when necessary. Profit
or loss on the disposal of tangible assets is recognized in the
income statement as ‘Other operating income’ or ‘Other
operating expenses’, based on the difference between the
selling price and the carrying amount.

Leasing
The Group’s leasing is chiefly operating leasing. The lease
payments are expensed at a constant rate over the period of
the contract and are reported as operating expenses.

Impairment
Assets with an indefinite useful life are not amortized but
are tested for impairment on an annual basis. For impair-
ment testing purposes, assets are grouped at the lowest
organizational level where there are separate identifiable
cash flows, so-called cash generating units (CGU).

For assets that are depreciated/amortized, impairment
testing is carried out when events or circumstances indicate
that the carrying amount may not be recoverable.
When an impairment loss has been established, the value of
the asset is reduced to its recoverable amount. The recover-
able amount is the higher of the asset’s fair value less selling
expenses, and its value in use.

NOTES

ASSA ABLOY ANNUAL REPORT 2010

Note 1 cont.

Inventories
Inventories are valued in accordance with the ‘first in, first
out’ principle at the lower of cost and net realizable value at
year-end. Deductions are made for internal profits arising
from deliveries between Group companies. Work in prog-
ress and finished goods include both direct costs incurred
and a fair allocation of indirect manufacturing costs.

Accounts receivables
Accounts receivables are recognized initially at fair value
and subsequently measured at amortized cost using the
effective interest method. A provision is recognized when
there is objective evidence that the Group will not be able to
collect recorded amounts. The year’s change in such a provi-
sion is reported in the income statement.

Financial assets
Financial assets include cash and cash equivalents, accounts
receivables, short-term investments and derivatives and are
classified in the following categories; financial assets valued
at fair value through the income statement, available-for-
sale assets, loan receivables and accounts receivables. Man-
agement determines the classification of its financial assets
at initial recognition.

Financial assets valued at fair value
through the income statement
This category has two sub-categories: financial assets held-
for-trading and those designated at fair value through
income statement at inception. A financial asset is classified
in this category if acquired principally for the purpose of sell-
ing in the short term or if so designated by management.
Derivatives are also classified as held-for-trading unless they
are designated as hedges. Assets in this category are classi-
fied as current assets.

Available-for-sale financial assets
Available-for-sale financial assets are non-derivative assets
that have been identified as available for sale or assets that
have not been classified in any other category. They are
included in Non-current assets, unless management intends
to sell the asset within 12 months of the end of the reporting
period. Changes in fair value are reported in Other compre-
hensive income.

Loan receivables and accounts receivables
Accounts receivables and short-term investments are non-
derivative financial assets with fixed or determinable pay-
ments that are not quoted in an active market. They are
included in current assets, except for maturities greater than
12 months after the reporting date, which are classified as
non-current assets.

Financial liabilities
Financial liabilities include additional purchase consider-
ations, loan liabilities, accounts payables and derivative
instruments. Reporting depends on how the liability is clas-
sified.

Financial liabilities valued at fair value
through the income statement
This category includes derivatives with negative fair value
that are not used for hedging, additional purchase consider-
ations and financial liabilities held for trading. Liabilities are
measured at fair value on a continuous basis and changes in
value are reported in the income statement as a financial
item.

Loan liabilities
Loan liabilities are valued initially at fair value after transac-
tion costs, and thereafter at amortized cost. The amortized
cost is determined based on the effective interest rate when
the loan was raised. Accordingly, surplus values and negative
surplus values as well as direct issue expenses are allocated
over the loan period. Long-term loan liabilities have an antici-
pated term to maturity exceeding one year, while current
loan liabilities have a term to maturity of less than one year.

Accounts payables
Trade payables are valued at fair value and thereafter at
amortized cost using the effective interest method.

Recognition and measurement of
financial assets and liabilities
Regular purchases and sales of financial assets are recognized
on the trade date, the date on which the Group commits to
purchase or sell the asset. Investments are initially recog-
nized at fair value plus transaction costs for all financial assets
not carried at fair value through the income statement,
where the transaction cost is reported in the income state-
ment. The fair values of quoted investments are based on
current bid prices. If the market for a financial asset is not
active, the Group establishes fair value by using various valua-
tion techniques. These include the use of available informa-
tion on recent arm’s-length transactions, reference to other
instruments that are substantially the same and discounted
cash-flow analysis. The Group assesses at each reporting date
whether there is objective evidence that a financial asset or a
group of financial assets is impaired. A financial asset is derec-
ognized when the right to receive cash flows from the asset
expires or is transferred to another party through the transfer
of all the risks and benefits associated with the asset to the
other party. A financial liability is derecognized when the
obligation is fulfilled, cancelled or expires, see above.

Derivative instruments and hedging
Derivatives are recognized in the balance sheet at transac-
tion date and are measured at fair value, both initially and on
subsequent revaluations. The method of reporting profit or
loss depends on whether the derivative is classified as a
hedging instrument, and if so, the nature of the item being
hedged. Derivatives are classified within the Group as either
fair value hedges of recognized assets or liabilities or a firm
commitment (fair value hedge).

For fair value hedges, changes in value of both the
hedged item and the hedging instrument are reported in
the income statement (financial items) in the period in
which they arise. Changes in fair value of derivatives not des-
ignated as hedging instruments are reported on a continu-
ous basis in the income statement (financial items). For net
investment hedges, the part of changes in fair value classi-
fied as effective is recognized in other comprehensive
income. The ineffective part of the profit or loss is recog-
nized immediately in the income for the period as financial
items. Accumulated profit or loss in other comprehensive
income is recognized in the income for the period when for-
eign operations, or part thereof, are sold.

Changes in fair value for derivatives not designated as
hedging instruments are reported on a continuous basis in
the income statement (financial items).

When the transaction is entered into, the Group docu-
ments the relationship between the hedging instrument and
the hedged item, as well as the Group’s risk management
objectives and risk management strategy as regards the hedg-
ing. The Group also documents its assessment, both when

ASSA ABLOY ANNUAL REPORT 2010

NOTES 89

Note 1 cont.

hedging is entered into and on a regular basis, of whether the
derivative instruments used in hedge transactions are effec-
tive in counteracting changes in fair value that relate to the
hedged items. The fair value of currency derivatives is calcu-
lated at net present value based on prevailing forward con-
tract prices on the reporting date, while interest rate swaps
are valued using estimates of future discounted cash flows.

Provisions
A provision is recognized when the Group has a legal or
constructive obligation resulting from a past event and it is
probable that an outflow of resources will be required to
settle the obligation, and that a reliable estimate can be
made of the amount. Provisions are reported at a value rep-
resenting the probable outflow of resources that will be
needed to settle the obligation. The amount of a provision
is discounted to present value where the effect of time
value is material.

Employee benefits
Both defined contribution and defined benefit pension
plans exist in the Group. Comprehensive defined benefit
plans are found chiefly in the USA, the UK and Germany.
Post-employment medical benefits also exist, mainly in the
USA, which are reported in the same way as defined benefit
pension plans. Calculations relating to the Group’s defined
benefit plans are performed by independent actuaries and
are based on a number of actuarial assumptions such as dis-
count rate, future inflation and salary increases. Obligations
are valued on the reporting date at their discounted value.
For funded plans, obligations are reduced by the fair value of
the plan assets. Unrecognized actuarial gains and losses
lying outside the so-called corridor (exceeding the higher of
10 percent of the present value of the obligation or the fair
value of plan assets) are spread over the expected average
remaining working lives of the employees. Pension expenses
for defined benefit plans are spread over the employee’s ser-
vice period. The Group’s payments relating to defined con-
tribution pension plans are reported as an expense in the
period to which they refer, based on the services performed
by the employee. Swedish Group companies apply UFR 4,
which means that tax on pension costs is calculated on the
difference between pension expense in accordance with IAS
19 and pension expense determined in accordance with
local regulations.

Equity-based incentive programs
Equity-based remuneration refers to remuneration to
employees, including senior executives, in accordance with
ASSA ABLOY’s long-term incentive program presented for
the first time at the 2010 Annual General Meeting. A com-
pany must report the personnel costs relating to equity-
based incentive programs based on a measure of the value
to the company of the services provided by the employees
during the programs. Since the value of the employees’ ser-
vices cannot be reliably calculated, the cost of the program
is based on the value of the assigned share instrument. Since
the long-term incentive program in its entirety is equity reg-
ulated, an amount equivalent to the personnel cost is
reported in the balance sheet as equity in retained earnings.
The personnel cost is also reported in the income state-
ment, where it is allocated to the respective function.

Long-term incentive program
ASSA ABLOY has equity-based remuneration plans where
settlement will be in the form of shares. For the long-term
incentive program, personnel costs during the vesting

period are reported based on the shares’ fair value on the
assignment date, that is, when the company and the
employees entered into an agreement on the terms and
conditions for the program. The long-term incentive pro-
gram comprises two parts: a matching part where the
employee receives one share for every share the latter
invests during the term of the program and a performance-
based part where the outcome is based on the company’s
financial results (EPS target) during the period. The program
requires that the employee continues to invest in the long-
term incentive program and that the latter remains
employed in the ASSA ABLOY Group.

Fair value is based on the share price on the assignment
date, a reduction in fair value relating to the anticipated divi-
dend has not been made as the participants are compen-
sated for this. The employees pay a price equivalent to the
share price on the investment date. The vesting terms are
not stock market based and affect the number of shares that
ASSA ABLOY will give to the employee when matching. If an
employee stops investing in the program, all remaining per-
sonnel costs are immediately recognized in the income
statement. Personnel costs for shares relating to the perfor-
mance-based program are calculated on each accounting
date based on an assessment of the probability of the per-
formance targets being achieved. The costs are calculated
based on the number of shares that ASSA ABLOY expects to
need to issue at the end of the vesting period. When match-
ing shares, social security contributions must be paid in
some countries to the value of the employee’s benefit. This
value is based on fair value on each accounting date and
reported as a provision for social security contributions.

Earnings per share
Earnings per share before dilution is calculated by dividing
the net income attributable to the Parent company’s share-
holders by the weighted average number of outstanding
shares (less shares in treasury shares). Earnings per share
after dilution is calculated by dividing the net income attrib-
utable to the Parent company’s shareholders by the sum of
the weighted average number of ordinary shares and poten-
tial ordinary shares that may give rise to a dilutive effect. The
dilutive effect of potential ordinary shares is only reported if
their conversion to ordinary shares would lead to a reduc-
tion in earnings per share after dilution.

Dividend
Dividend is reported as a liability once the Annual General
Meeting has approved the dividend.

The Parent company
The Group’s Parent company, ASSA ABLOY AB, is responsible
for the management of the Group and provides Group-wide
functions. The Parent company’s revenue consists of intra-
group franchise and royalty revenues. The significant bal-
ance sheet items consist of shares in subsidiaries, intra-
group receivables and liabilities, and external borrowing.
The Parent company has prepared its annual accounts in
accordance with the Swedish Annual Accounts Act
(1995:1554) and standard RFR 2.3 of the Swedish Financial
Reporting Board. RFR 2.3 requires the Parent company, in its
annual accounts, to apply all the International Financial
Reporting Standards (IFRS) endorsed by the EU in so far as
this is possible within the framework of the Annual Accounts
Act and with regard to the relationship between accounting
and taxation. The recommendation states what exceptions
from, and additions to, IFRS should be made.

NOTES

ASSA ABLOY ANNUAL REPORT 2010

Revenue
The Parent company’s revenue consists of intra-group fran-
chise and royalty revenues. These are reported in the
income statement as ‘Other operating income’ to make it
clear that the Parent company has no product sales similar
to those of other Group companies with external business.

Contingent liabilities
The Parent company has guarantees on behalf of its subsid-
iaries. Such an obligation is classified as a financial guarantee
in accordance with IFRS. For these guarantees, the Parent
company applies the allowed exception in RFR 2.3, reporting
these guarantees as a contingent liability.

Pension obligations
Pension obligations for the Parent company are accounted
for in accordance with FAR SRS RedR 4 and are covered by
taking out insurance with an insurance company.

Dividend
Dividend revenue is recognized when the right to receive
payment is judged to be firm.

Research and development costs
Research and development costs are expensed as they are
incurred.

Intangible assets
Intangible assets comprise patented technology and other
intangible assets. They are amortized over 4–5 years.

Tangible assets
Tangible assets owned by the Parent company is reported at
cost less accumulated depreciation and any impairment
losses in the same way as for the Group. They are depreci-
ated over their estimated useful life, which is 5–10 years for
equipment and 4 years for IT equipment.

Leasing
In the Parent company all lease agreements are treated as
rental agreements (operating leases) regardless of whether
they are financial or operating leases.

Shares in subsidiaries
Shares in subsidiaries are reported at cost less impairment
losses. When there is an indication that the value of shares
and interests in subsidiaries or associates has fallen, the
recoverable amount is calculated. If this is lower than the
carrying amount, an impairment loss is recognized. Impair-
ment losses are reported in Result from interests in subsid-
iaries, which is included in Financial items in the income
statement.

Financial instruments
Derivative instruments are recorded at fair value. Changes in
the fair values of derivative instruments are reported in the
income statement with the exception of exchange rate
changes relating to a monetary item that forms part of a net
investment in a foreign operation, which are reported in the
fair value reserve.

Group contributions
The company reports Group contributions in accordance
with UFR 2 (the Swedish Financial Reporting Board). Group
contributions are reported according to their financial
implications. This means that Group contributions paid with
the aim of minimizing the Group’s total tax charge are
reported directly against equity after deduction of their cur-
rent tax effect. Group contributions comparable to divi-
dends are reported as such, which means that Group contri-
butions received and their current tax effect are reported in
the income statement and Group contributions paid and
their current tax effect are reported directly against equity.

Note 2 Sales

Sales to customer, by country

SEK M

USA
China
France
Australia
Sweden
United Kingdom
Germany
Canada
Netherlands
Italy
Spain
Finland
Norway
Denmark
South Korea
Mexico
Belgium
Switzerland
South Africa
Czech Republic
Brazil
Asia (excluding China, South Korea,
Singapore, India and Thailand)
Austria
New Zealand
Saudi Arabia
Africa (excluding South Africa)
Hong Kong
Israel
Portugal
Central America (excluding Mexico)
India
Russia
Poland
Turkey
Singapore
United Arab Emirates
Colombia
Baltic countries
South America (excluding Brazil, Chile
and Colombia)
Chile
Middle East (excluding Saudi Arabia,
United Arab Emirates and Israel)
Thailand
Romania
Greece
Ireland
Other countries
Total

Sales by product group

SEK M

Mechanical locks, lock systems
and accessories
Electromechanical locks, access
control, automatic doors and
identification technology
Security doors and fittings
Total

Group

2009

10,666
1,479
2,675
1,555
1,563
1,753
1,789
1,146
1,259
869
988
863
794
837
492
571
480
356
375
354
226

262
288
271
211
276
217
209
183
171
107
128
154
95
131
128
21
104

111
88

2010

9,955
3,182
2,487
1,841
1,805
1,742
1,725
1,274
1,105
925
885
837
774
705
694
678
457
417
372
352
321

310
286
278
273
250
215
211
203
193
189
160
147
135
129
127
125
111

110
105

102
90
67
87
74
298
34,963

103
100
85
73
70
302
36,823

Group

2009

2010

15,830

15,591

12,139
6,994
34,963

13,100
8,132
36,823

ASSA ABLOY ANNUAL REPORT 2010

NOTES 91

Note 3 Auditors’ fees

Note 6 Operational leasing agreements

Group

Parent company

2009

2010

2009

2010

SEK M

2009

2010

2009

2010

Group

Parent company

SEK M

Audit assignment
PwC
Other
Audit related services
in addition to audit
assignment
PwC
Other

Tax advice
PwC
Other

Other services
PwC
Other
Total

27
6

1
–

9
2

3
3
51

28
6

1
–

6
2

8
2
53

3
–

1
–

0
0
5

Note 4 Other operating income and expenses

Group

SEK M

Rent received
Net income from sales of fixed assets
Government grants
Business-related taxes
Disposal of subsidiaries
Transaction expenses acquisitions
Write-down of tangible asset
Insurance compensation, net
Exchange rate differences
Other, net
Total

2009

17
3
2
–29
–68
–
–
–
–17
–58
–150

Parent company
Other operating income in the Parent company consist
mainly of franchise and royalty revenues from subsidiaries.

3
–

1
–

1
0
6

2010

12
92
9
–20
–3
–61
–144
66
–26
2
–73

Leasing fees paid during
the year

Total

Nominal value of agreed
future leasing fees:
Due for payment in
(2010) 2011
Due for payment in
(2011) 2012
Due for payment in
(2012) 2013
Due for payment in
(2013) 2014
Due for payment in
(2014) 2015
Due for payment in
(2015) 2016 or later
Total

304

343

297

231

169

127

131
1,052

310

237

177

99
988

Note 7 Expenses by nature

15
88

16
91

In the income statement costs are broken down by func-
tion. Cost of goods sold, Selling expenses, Administrative
expenses and Research and development costs amount to
SEK 30,707 M (30,451). Below, these same costs are broken
down by nature:

SEK M

Remuneration of employees (Note 32)
Direct material costs
Depreciation (Note 8, 14, 15)
Other purchase expenses
Restructuring costs
Total

Group

2009

10,133
11,346
1,014
6,985
973
30,451

2010

10,110
12,553
995
7,049
–
30,707

Note 5 Share of earnings in associates

Note 8 Depreciation and amortization

SEK M

Låsgruppen Wilhelm Nielsen AS
Cerraduras de Colombia Cerracol S.A

Total

Group

2009

2010

4
8

3
–

SEK M

Intangible assets
Machinery
Equipment
Buildings
Land improvements
Total

Group

Parent
company

2009

162
455
237
159
1
1,014

2010

2009

2010

163
442
237
152

1
995

181
–
2
–
–
183

182
–
1
–
–
183

Note 9 Exchange rate differences in income statement

SEK M

2009

2010

2009

2010

Group

Parent
company

Exchange rate differ-
ences reported in
operating income
Exchange rate differ-
ences reported in finan-
cial expenses (Note 11)
Total

–17

–26

–10

–38
–55

5
–21

121
111

94
94

NOTES

ASSA ABLOY ANNUAL REPORT 2010

Note 10 Financial income

Note 13 Earnings per share

Group

Parent
company

Earnings per share before dilution

SEK M

2009

2010

2009

2010

Earnings from participa-
tions in subsidiaries
Intra-group interest
income
Other financial income
External interest income
and similar items
Total

–

–
73

57
130

–

–
2

898

1,028

375
73

119
0

24
26

19
1,365

0
1,147

Note 11 Financial expenses

SEK M

2009

2010

2009

2010

Group

Parent
company

Intra-group interest
expenses
Interest expenses,
convertible debenture
loans
Interest expenses,
other liabilities
Interest expenses,
interest rate swaps
Interest expenses, for-
eign exchange forwards
Exchange-rate differences
on financial instruments
Fair value adjustments
on derivatives, hedge
accounting
Fair value adjustments
on derivatives, non-
hedge accounting
Fair value adjustments
on borrowings, hedge
accounting
Fair value adjustments
on shares and participa-
tions
Other financial expenses
Total

–

–125

–87

–43

–13

–43

–13

–640

–519

–156

–164

–39

–38

–60

–7

–50

–38

–1

–

121

–

–22
–17
–764

0
–96
–706

–22
–12
–237

–44
–32
–246

Note 12 Tax on income

SEK M

Current tax
Tax attributable to prior
years
Deferred tax
Total

Group

2009

2010

–1,095

–971

–289

3
11

–26
–1,081 –1,286

Parent
company

2009

–158

–
–
–158

2010

–188

1
–
–187

SEK M

Earnings attributable to the Parent
company's shareholders
Weighted average number of shares
issued (thousands)
Earnings per share before dilution
(SEK per share)

Group

2009

2010

2,626

4,050

365,918

365,744

7.18

11.07

Earnings per share after dilution

SEK M

Earnings attributable to the Parent
company's shareholders
Interest expenses for convertible
debenture loans, after tax
Net profit for calculating earnings per
share after dilution
Weighted average number of shares
issued (thousands)
Assumed conversion of convertible
debentures (thousands)
Stock purchase plan
Weighted average number of shares
for calculations (thousands)
Earnings per share after dilution (SEK
per share)

Group

2009

2010

2,626

4,050

2,658

4,060

365,918

365,744

10,616
–

7,001
65

376,534

372,810

7.06

10.89

Earnings per share after dilution and
excluding items affecting comparability

SEK M

Earnings attributable to the
Parent company's shareholders
Interest expenses for convertible
debenture loans, after tax
Items affecting comparability, after tax
Net profit for calculating earnings per
share after dilution
Weighted average number of shares
issued (thousands)
Assumed conversion of convertible
debentures (thousands)
Stock purchase plan
Weighted average number of shares
for calculations (thousands)
Earnings per share after dilution and
excluding items affecting
comparability (SEK per share)

Group

2009

2010

2,626

4,050

32
8151

10
–

3,473

4,060

365,918

365,744

10,616
–

7,001
65

376,534

372,810

9.22

10.89

1 Items affecting comparability for 2009 consist of restructuring costs.

Explanations for the difference between nominal Swedish
tax rate and effective tax rate based on income before tax:

Percent

2009

2010

2009

2010

Group

Parent
company

Swedish rate of tax on
income
Effect of foreign tax rates
Non-taxable income/
non-deductible
expenses, net
Deductible goodwill
Utilized loss carry-
forward not recognized
in prior period
Restructuring costs
Other
Effective tax rate in
income statement

26
3

–4
–1

–1
2
4

26
4

–6
–1

–3
–
4

26
–

–17
–

–
–
–

26
–

–15
–

–
–
–

ASSA ABLOY ANNUAL REPORT 2010

NOTES 93

Note 14 Intangible assets

2010, SEK M

Opening accumulated acquisition value
Purchases
Acquisitions of subsidiaries
Divestments of subsidiaries
Adjustments for acquisitions in the prior year
Sales/disposals
Reclassifications
Exchange rate differences

Closing accumulated acquisition value

Opening accumulated amortization/impairment
Impairment
Amortization for the year
Exchange rate differences
Closing accumulated amortization/impairment
Carrying amount

2009, SEK M

Opening accumulated amortization/impairment
Impairment
Amortization for the year
Exchange rate differences
Closing accumulated amortization/impairment
Carrying amount

Group

Intangible
assets

Goodwill

20,397
–
2,988
–
97
–
–
–1,139

22,343

–64
–
–
–
–64
22,279

2,778
112
1,117
–
2
–12
–
–208

3,789

–787
–
–163
75
–875
2,914

Group

Intangible
assets

Goodwill

20,669
–
637
–19
–16
–
–
–874
20,397

–
–64
–
–
–64
20,333

2,665
118
163
–37
–8
–
9
–132
2,778

–672
–
–162
47
–787
1,991

Total

23,175
112
4,105
–
99
–12
–
–1,347

26,132

–851
–
–163
75
–939
25,193

Total

23,334
118
800
–56
–24
–
9
–1,006
23,175

–672
–64
–162
47
–851
22,324

Parent
company

Intangible
assets

934
11
–
–
–
–
–
–

945

–613
–
–182
–
–795
150

Parent
company

Intangible
assets

938
–
–
–
–
–4
–
–
934

–432
–
–181
–
–613
321

Intangible assets consist mainly of licenses and brands. The
carrying value of intangible assets with indefinite life
amounts to SEK 1,950 M (1,214).

Useful life is taken as indefinite where the time period
during which it is judged that an asset will contribute eco-
nomic benefits cannot be defined.

based on estimated future cash flows, which in turn are
based on financial budgets approved by management and
covering a three-year period. Cash flows beyond three years
are extrapolated using estimated growth rates according to
the principles below.

Amortization and impairment of intangible assets have
mainly been reported as costs of goods sold in the income
statement.

Main assumptions used to caluculate values in use:
• Budgeted operating margin.
• Growth rate for extrapolating cash flows beyond the

Impairment testing of goodwill and intangible assets
with indefinite useful life
Goodwill and intangible assets with indefinite useful life are
assigned to the Group’s Cash Generating Units (CGU) which
contains of the Group’s five divisions.

For each Cash Generating Unit, The Group assesses each

year whether any impairment of goodwill and intangible
assets with indefinite useful life is needed, in accordance
with the accounting principles described in Note 1. Recover-
able amounts for Cash Generating Units have been estab-
lished by calculation of value in use. These calculations are

budgeted period.

• Discount rate after tax used for estimated future cash

flows.

Management has established the budgeted operating margin
on a basis of previous results and its expectations about
future market development. For extrapolating cash flows
beyond the budgetperiod, a growth rate of 3 percent (3) is
used for all CGU. The growth rate is thought to be a conserva-
tive estimate. In addition, an average discount rate in local
currency after tax is used for the Group. The difference in
value should a discount rate before tax have been used is not
deemed to be material.

NOTES

ASSA ABLOY ANNUAL REPORT 2010

Note 14 cont.

2010
Overall, the discount rate employed varied between 9.0 and
10.0 percent (EMEA 9.0 percent, Americas 9.0 percent, Asia
Pacific 10.0 percent, Global Technologies 10.0 percent and
Entrance Systems 9.0 percent).

Goodwill and intangible assets with indefinite useful life
were assigned to the Group’s Cash Generating Units as
summarized in the following table:

SEK M

Goodwill
Intangible assets with
indefinite useful life

Total

EMEA

5,471

233

5,704

Americas

Asia Pacific

Global
Technologies

Entrance
Systems

6,039

233

6,272

3,202

974

4,176

4,265

342

4,607

3,303

168

3,471

Total

22,279

1,950

24,229

2009
Overall, the discount rate employed varied between 9.0 and
10.0 percent (EMEA 9.0 percent, Americas 9.0 percent, Asia
Pacific 10.0 percent, Global Technologies 10.0 percent and
Entrance Systems 9.0 percent).

Goodwill and intangible assets with indefinite useful life
were assigned to the Group’s Cash Generating Units as
summarized in the following table:

SEK M

Goodwill
Intangible assets with
indefinite useful life

Total

EMEA

5,540

221

5,761

Americas

Asia Pacific

Global
Technologies

Entrance
Systems

6,003

243

6,246

1,536

212

1,748

4,030

349

4,379

3,223

190

3,413

Total

20,333

1,214

21,547

Sensitivity analysis
A sensitivity analysis has been carried out for each of Cash
Generating Unit. The result of the analysis can be summa-
rized as follows.

2010
If the estimated operating margin after the end of the bud-
get period had been one percentage point lower than the
management’s estimate, total recoverable amount would
be 5 percent lower (EMEA 5 percent, Americas 5 percent,
Asia Pacific 6 percent, Global Technologies 5 percent and
Entrance Systems 6 percent).

If the estimated growth rate to extrapolate cash flows
beyond the budget period had been one percentage point
lower than the basic assumption of 3 percent, total recover-
able amount would be 13 percent lower ( EMEA 13 percent,
Americas 13 percent, Asia Pacific 11 percent, Global Tech-
nologies 11 percent and Entrance Systems 13 percent).
If the estimated weighted cost of capital used for the
Group’s discounted cash flow had been one percentage
point higher than the starting assumption of 9.0 to 10.0 per-
cent, total recoverable amount would be 14 percent lower
(EMEA 14 percent, Americas 14 percent, Asia Pacific 13 per-
cent, Global Technologies 13 percent and Entrance Systems
14 percent).

These calculations are hypothetical and should not be
viewed as an indication that these figures are any more or
less likely to be changed. The sensitivity analysis should
therefore be interpreted with caution.

None of the hypothetical cases above would lead to an
impairment of goodwill in a particular Cash Generating Unit.

2009
If the estimated operating margin after the end of the bud-
get period had been one percentage point lower than the
management’s estimate, total recoverable amount would
be 6 percent lower (EMEA 6 percent, Americas 5 percent,
Asia Pacific 7 percent, Global Technologies 6 percent and
Entrance Systems 5 percent).

None of the hypothetical cases above would lead to an
impairment of goodwill in a particular Cash Generating Unit.

ASSA ABLOY ANNUAL REPORT 2010

NOTES 95

Note 15 Tangible assets

2010, SEK M

Buildings

Opening accumulated
acquisition value
Purchases
Acquisitions of subsidiaries
Sales/disposals
Reclassifications
Exchange rate differences
Closing accumulated acquisition value

Opening accumulated depreciation/
impairment
Sales/disposals
Impairment
Depreciation for the year
Reclassifications
Exchange rate differences
Closing accumulated depreciation/
impairment

Construction in progress
Carrying amount

2009, SEK M

Buildings

Opening accumulated
acquisition value
Purchases
Acquisitions of subsidiaries
Divestments of subsidiaries
Sales/disposals
Reclassifications
Exchange rate differences
Closing accumulated acquisition value

Opening accumulated depreciation/
impairment
Sales/disposals
Impairment
Depreciation for the year
Exchange rate differences
Closing accumulated depreciation/
impairment

Construction in progress
Carrying amount

–1,728

–139

–4,436

–1,698

1,978

681

1,836

546

Land and
land
improve-
ments

829
6
91
–25
5
–86
820

–30
0
–119
–1
–1
12

Land and
land
improve-
ments

834
1
20
–
–2
8
–32
829

–32
0
–
–1
3

–30

3,794
72
212
–84
31
–319
3,706

–1,816
51
–12
–152
1
200

3,849
40
80
–
–19
26
–182
3,794

–1,740
6
–18
–159
95

–1,816

Group

Parent
company

Machinery

Equipment

Total

Equipment

6,784
327
179
–444
112
–686
6,272

–4,971
422
–13
–442
2
566

2,347
178
27
–158
47
–197
2,244

–1,776
142
–
–237
–1
174

13,754
583
509
–711
195
–1,288
13,042

–8,594
615
–144
–832
1
952

–8,002

382
5,422

16
1
–
–
–
–
17

–13
–
–
–1
–
–

–14

–
3

Group

Parent
company

Machinery

Equipment

Total

Equipment

7,064
345
82
–
–354
143
–496
6,784

–5,123
257
–62
–455
412

2,366
152
32
–1
–125
39
–116
2,347

–1,728
103
–8
–237
94

14,113
538
214
–1
–500
216
–826
13,754

–8,623
366
–88
–852
604

–4,971

–1,776

–8,594

15
1
–
–
–
–
–
16

–11
–
–
–2
–

–13

–
3

1,978

799

1,813

571

389
5,550

The tax value of the Group’s Swedish buildings was SEK 101 M (122).
The tax value of the Group’s Swedish land was SEK 17 M (14).

NOTES

ASSA ABLOY ANNUAL REPORT 2010

Note 16 Shares in subsidiaries

Company name

ASSA Sverige AB
Timelox AB
ASSA ABLOY Entrance Systems AB
ASSA ABLOY Kredit AB
ASSA ABLOY Försäkrings AB
ASSA ABLOY Identification Technology Group AB
ASSA ABLOY Svensk Fastighets AB
ASSA ABLOY Asia Holding AB
ASSA ABLOY IP AB
ASSA ABLOY OY
ASSA ABLOY Norge A/S
ASSA ABLOY Danmark A/S
ASSA ABLOY Deutschland GmbH
ASSA ABLOY Nederland BV
Nemef BV
Pan Pan DOOR Co LTD
ASSA ABLOY France SAS
Interlock Holding AG
HID Global Switzerland S.A.
ASSA ABLOY Holding GmbH
ASSA ABLOY Ltd
ITG (UK) Ltd
HID Global Ireland Teoranta
Mul-T-Lock Ltd
ASSA ABLOY Holdings (SA) Ltd
ASSA ABLOY Inc
Fleming Door Products, Ltd
ABLOY Holdings Ltd
AAC Acquisition Inc.
ASSA ABLOY Australia Pacific Pty Ltd
ASSA ABLOY South Asia Pte Ltd
Grupo Industrial Phillips, S.A de C.V.
Cerraduras de Colombia S.A.
ASSA ABLOY Innovation AB
ASSA ABLOY Hospitality AB
ASSA ABLOY North America AB
WHAIG Limited
ASSA ABLOY Asia Pacific Ltd
Total

1 The Group’s holdings amount to 100 percent.
2 The Group’s holdings amount to 70 percent.

Note 17 Shares in associates

2010 Company name

Talleres Agui S.A
Låsgruppen Wilhelm Nielsen AS
Mab Iberica SA
Other
Total

2009 Company name

Talleres Agui S.A
Låsgruppen Wilhelm Nielsen AS
Mab Iberica SA
Other
Total

Corporate identity number,
Registered office

Number
of shares

% of share
capital

Book value,
SEK M

Parent company

556061-8455, Eskilstuna
556214-7735, Landskrona
556204-8511, Landskrona
556047-9148, Stockholm
516406-0740, Stockholm
556645-4087, Stockholm
556645-0275, Stockholm
556602-4500, Stockholm
556608-2979, Stockholm
1094741-7, Joensuu
979207476, Moss
CVR 10050316, Herlev
HR B 66227, Berlin
23028070, Geertruidenberg
08023138, Apeldoorn
210800004058002, Dashiqiao
412140907, R.C.S. Versailles
CH-020.3.913.588-8, Zürich
CH-232-0730018-2, Granges
FN 273601f, A-6175, Kematen
2096505, Willenhall
5099094, Haverhill
364896, Galway
520036583, Yavne
1948/030356/06, Roodepoort
039347-83, Oregon
147126, Ontario
1148165260, St Laurent, Quebec
002098175, Ontario
ACN 095354582, Oakleigh, Victoria
199804395K, Singapore
GIP980312169, Mexico
Public Deed 2798, Bogota
556192-3201, Stockholm
556180-7156, Göteborg
556671-9851, Stockholm
EC21330, Bermuda
53451, Hong Kong

70
15,000
1,000
400
60,000
1,000
1,000
1,000
1,000
800,000
150,000
60,500
2
3,515
4,000
–
15,184,271
211,000
2,500
1
1,330,000
1
501,000
13,787,856
100,220
100
25,846,600
1
1
48,190,000
4,300,000
27,036,635
2,201,670
2,500
1,000
1,000
100,100
1,000,000

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
362
100
98¹
100
100
100
100
100
90¹
100
100
100
100
100
100
100
100
71¹
100
100
100
100
100

197
22
181
528
60
220
0
189
0
4,257
538
376
1,064
87
928
566
1,964
0
47
26
3,077
1
293
901
184
2,259
0
13
17
242
48
765
142
105
14
0
303
72
19,686

Country of
registration

Spain
Norway
Spain

Country of
registration

Spain
Norway
Spain

Number
of shares

4,800
305
700

Number
of shares

4,800
305
700

Group

% of share
capital

40
50
24

Group

% of share
capital

40
50
24

Book value,
SEK M

17
16
0
4
37

Book value,
SEK M

19
16
3
1
39

ASSA ABLOY ANNUAL REPORT 2010

NOTES 97

Note 18 Deferred tax

SEK M

Deferred tax receivables
Tax-deductible goodwill
Pensions
Tax losses and other tax credits
Other deferred tax receivables
Deferred tax receivables
Deferred tax liabilities
Deferred tax receivables, net

Change in deferred tax
At 1 January
Acquisitions of subsidiaries, net
Reported in income statement
Exchange rate differences
At 31 December

Accounts receivables per currency

Group

2009

2010

351
151
174
138
814
63
751

701
–20
11
59
751

262
127
232
81
702
309
393

751
–239
–26
–93
393

EUR
USD
GBP
AUD
CNY
SEK
Other currencies
Total

Current year change in
provision for bad debts

Opening balance
Acquisition and disposals
Receivables written off
Reversal of unused amounts
Provision for bad debt
Exchange rate differences
Closing balance

2009

2,152
1,382
249
290
302
212
1,031
5,618

2009

404
–1
–127
–30
166
–20
392

2010

1,747
1,477
270
308
399
248
1,147
5,596

2010

392
39
–81
–5
148
–28
465

The group has tax losses carried forward and other tax cred-
its of SEK 2,400 M (3,200) for which deferred tax assets have
not been recognized, as it is uncertain whether the allow-
ance can be set against taxable income in future taxation.

Note 19 Other long-term financial assets

SEK M

2009

2010

2009

2010

Group

Parent
company

Other shares and
participations
Interest-bearing
long-term receivables
Other long-term
receivables
Total

Note 20 Inventories

SEK M

Materials and supplies
Work in progress
Finished goods
Advances paid
Total

762

244

48
334

32
856

–
34

750

–
776

Group

2009

1,179
1,274
1,811
85
4,349

2010

1,417
1,214
1,984
210
4,825

Write-downs of inventory amounted to SEK 142 M (191).

Note 21 Accounts receivables

SEK M

Accounts receivables
Provision for bad debts
Total

Maturity analysis
Accounts receivables not due
Accounts receivables past due not
impaired:
< 3 months
3–12 months
> 12 months

Impaired accounts receivables:
< 3 months
3–12 months
> 12 months

Group

2009

6,010
–392
5,618

2010

6,061
–465
5,596

4,119

4,163

1,107
205
39
1,351

245
126
169
540

1,204
164
33
1,401

175
112
210
497

Provision for bad debts
Total

–392
5,618

–465
5,596

Note 22 Parent company’s equity
The Parent company’s equity is split between restricted and
unrestricted equity. Restricted equity consists of share capi-
tal, premium fund and the statutory reserve. Restricted
funds must not be reduced by issue of dividends. Unre-
stricted equity consists of retained earnings and the year’s
net income.

The statutory reserve contains premiums (amounts
received from share issues that exceed the nominal value of
the shares) relating to shares issued up to 2005.

Note 23 Share capital, number of shares

and dividend per share

Number of shares
(thousands)

Series A Series B

Total

Share
capital,
SEK T

19,175 346,743

365,918

19,175 346,743

365,918

191,753 346,743

538,496

19,175 346,743
259

–

365,918
259

19,175 347,002

366,177

191,753 347,002

538,755

Opening balance at
1 January 2009
Closing balance at
31 December 2009
Number of votes,
thousands

Opening balance at
1 January 2010
Share issue
Closing balance at
31 December 2010
Number of votes,
thousands

All shares have a par value of SEK 1.00 and provide the hold-
ers with equal rights to the Company’s assets and earnings.
All shares are entitled to dividends subsequently issued.
Each Series A share carries ten votes and each Series B share
one vote. All issued shares are fully paid.

The weighted average number of shares during the year,
to the nearest thousand, was 365,744 thousand (365,918).
The weighted average number of shares after full conversion
of outstanding convertible bonds, similarly rounded, was
372,810 thousand (376,534).

The total number of treasury shares per December 31
2010 amounted 300,000. During 2010 repurchase of shares
was made to a total of 300,000.

Dividend per share
The dividend paid out during the financial year amounted to
a total sum of SEK 1,317 M (1,317), corresponding to SEK
3.60 (3.60) per share. At the Annual General Meeting on Fri-
day 29 April 2011, a dividend of SEK 4.00 per share for year
2010, a total of SEK 1,466 M - will be proposed.

NOTES

ASSA ABLOY ANNUAL REPORT 2010

Note 24 Post-employment employee benefits

Amounts recognized in the balance sheet

Pension provisions, SEK M

2009

2010

Provisions for defined benefit
pension plans (B)
Provisions for post-employment
medical benefits (B)
Provisions for defined contribution
pension plans
Pension provisions
Financial assets
Pension provisions, net

598

447

73
1,118
–26
1,092

566

436

76
1,078
–26
1,052

Post-employment employee benefits include pensions and
medical benefits. Pension plans are classified as either defined
benefit plans or defined contribution plans. Pension obliga-
tions reported in the balance sheet are mainly due to defined
benefit pension plans. ASSA ABLOY has defined benefit plans
in a number of countries, those in the USA, the UK and Ger-
many being the most significant ones. These are also obliga-
tions related to post-employment medical benefits also exist
in the USA.

Amounts recognized in the income statement

Pension costs, SEK M

2009

2010

Defined benefit pension plan (A)
Defined contribution pension plan
Post-employment medical benefit plan (A)
Total

126
283
25
434

177
169
33
379

A) Specification of amounts recognized in the income statement

Post-employment
medical benefits

Defined benefit
pension plans

Total

Pension costs, SEK M

2009

2010

Current service cost
Interest on obligation
Expected return on plan assets
Net actuarial losses (gains), net
Write-down pension receivables ¹
Past service cost
Losses (gains) on curtailments/settlements
Total
–of which, included in:
Operating income
Net financial items
Total

5
29
–
–9
–
0
–
25

5
20
25

6
24
–
–1
–
4
–
33

10
23
33

2009

50
223
–158
15
–
0
–4
126

46
80
126

2010

46
218
–167
67
15
0
–2
177

44
133
177

2009

55
252
–158
6
–
0
–4
151

51
100
151

2010

52
242
–167
66
15
4
–2
210

54
156
210

1 In accordance with limitation rule for the valuation of pension plan surplus, IAS 19 paragraph 58.

Actuarial gains/losses resulting from changes in the actuarial
assumptions for defined benefit pension plans are recog-
nized to the extent that their accumulated amount exceeds
the ‘corridor’, i.e. 10 percent of the higher of the obligations
present value or the fair value of plan assets. The surplus/def-
icit outside the 10 percent corridor is recognized as income/
expense over the expected average remaining service
period, starting in the year after the actuarial gain or loss

arose. Amortization of actuarial gains/losses that arose in
2010 will start in 2011 to the stage amortizations are appli-
cable according to current legal framework.

The actual return on plan assets regarding defined benefit

plans in 2010 was SEK 299 M (321).

Partly funded or unfunded pension plans are reported as

provisions for pensions.

B) Specification of amounts recognized in the balance sheet

Specification of defined benefits, SEK M

Present value of funded obligations (C)
Fair value of plan assets (D)
Net value of funded plans
Present value of unfunded obligations (C)
Unrecognized actuarial gains (losses)
Unrecognized past service cost

Provisions for defined contribution pension plans
Total

Post-employment
medical benefits

2009

2010

–
–
–
402
45
0
447

–
–
–
438
–2
0
436

Defined benefit
pension plans

Total

2009

3,499
–2,817
682
795
–879
0
598

2010

3,305
–2,854
451
741
–623
–3
566

2009

3,499
–2,817
682
1,197
–834
0
1,045
73
1,118

2010

3,305
–2,854
451
1,179
–625
–3
1,002
76
1,078

ASSA ABLOY ANNUAL REPORT 2010

NOTES 99

Note 24 cont.

C) Movement in obligations

SEK M

Opening obligations
Current service cost
Interest on obligation
Actuarial losses (gains)
Write-down of pension receivables
Curtailments /settlements
Payments
Exchange rate differences
Closing obligation

D) Movement in fair value of plan assets

SEK M

Opening fair value of plan assets
Expected return on plan assets
Actuarial gains (losses)
Curtailments / settlements
Net payments
Exchange rate differences
Closing fair value of plan assets (E)

E) Plan assets allocation

Plan assets

Shares
Interest-bearing investments
Other assets
Total

F) Sensitivity analysis on medical benefits

The effect of a 1percent change in the assumed
medical cost trend rate, SEK M

Effect on the aggregate of the current service cost
and interest cost
Effect on the defined benefit obligation

G) Key actuarial assumptions

Key actuarial assumptions (weighted average), %

Discount rate
Expected return on plan assets ²
Expected future salary increases
Expected future pension increases
Expected future medical benefit increases
Expected inflation

As at 31 December
Present value of obligation (+)
Fair value of plan assets (–)
Obligation, net

Post-employment
medical benefits

2009

2010

361
5
29
63
–
–4
–39
–13
402

402
6
24
52
–
–
–32
–14
438

Defined benefit
pension plans

Total

2009

3,602
50
223
730
–
–11
–194
–106
4,294

2010

4,294
46
218
–26
15
–15
–188
–298
4,046

2009

3,963
55
252
793
–
–15
–233
–119
4,696

2010

4,696
52
242
26
15
–15
–220
–312
4,484

Defined benefit
pension plans

2009

2,604
158
178
–14
–35
–74
2,817

2009

1,571
857
389
2,817

+1%

3
44

2009

5.4
7.3
2.3
2.9
10.0
3.0

2009
4,696
–2,817
1,879

2010

2,817
167
132
–
–61
–201
2,854

2010

1,439
1,065
350
2,854

–1%

–3
–37

2010

5.1
6.3
2.3
2.4
10.0
2.7

2010
4,484
–2,854
1,630

2006
4,487
–3,133
1,354

2007
4,384
–3,177
1,207

2008
3,963
–2,604
1,359

2 The expected return on plan assets is determined by considering the expected returns available on assets underlying the current investment policy. Plan assets

chiefly consist of equity instruments and interest-bearing investments. The expected return reflects risk premiums and indexes of interest-bearing investments on
the market.

Pensions with Alecta
Commitments for old-age pensions and family pensions for
salaried employees in Sweden are guaranteed in part through
insurance with Alecta. According to UFR3 this is a defined
benefit plan that covers many employers. For the 2010 finan-
cial year the company has not had access to information mak-
ing it possible to report this plan as a defined benefit plan.
Pension plans in accordance with ITP that are guaranteed
through insurance with Alecta are therefore reported as
defined contribution plans. The year’s contribution that are

contracted to Alecta amounts to SEK 14 M (10), of which
SEK 6 M (4) relates to the Parent company. Alecta’s surplus
may be distributed to the policy-holders and/or the persons
insured. At the end of 2010 Alecta’s surplus expressed as col-
lective consolidation level amounted to 146 percent (141).
Collective consolidation level consists of the market value of
Alecta’s assets as a percentage of its insurance commitments
calculated according to Alecta’s actuarial calculation assump-
tions, which do not comply with IAS19.

100

NOTES

ASSA ABLOY ANNUAL REPORT 2010

Note 25 Other provisions

Note 26 Other short-term liabilities

SEK M

Opening balance at
1 January 2009
Provisions for the year
Reversal of non-utilized
amounts
Additional purchase price
subsidiaries
Utilized during the year
Exchange rate differences
Closing balance at
31 December 2009

SEK M

Opening balance at
1 January 2010
Provisions for the year
Reclassification
Reversal of non-utilized
amounts
Utilized during the year
Exchange rate differences
Closing balance at
31 December 2010

Restruc-
turing
reserve

1,518
908

–92

–
–676
–81

Group

Other

Total

722
346

–51

139
–170
–8

2,240
1,254

–143

139
–846
–89

SEK M

VAT and excise duty
Employee withholding tax
Advances received
Social security contributions
and other taxes
Short-term deferred considerations
Other short-term liabilities
Total

Group

2009

2010

283
69
95

55
–
393
895

238
65
261

54
48
480
1,146

1,577

978

2,555

Note 27 Accrued expenses and prepaid income

Restruc-
turing
reserve

1,577
–
–

–49
–465
–139

Other

Total

978
944
286

–18
–517
–33

2,555
944
286

–67
–982
–172

924

1,640

2,564

SEK M

2009

2010

2009

2010

Group

Parent
company

Personnel-related
expenses
Customer-related
expenses
Prepaid income
Accrued interest
expenses
Other

Total

1,642

1,434

430
61

92
653

411
68

85
760

2,878

2,758

–
–

47
13

145

–
–

42
50

179

Group

Note 28 Contingent liabilities

Balance sheet breakdown:

Other long-term provisions
Other short-term provisions
Total

2009

1,829
726
2,555

2010

1,793
771
2,564

The restructuring reserves are concerned chiefly with the
ongoing restructuring program initiated in 2006, 2008 and
2009. The closing balance of the provision is expected to be
utilized during the coming two-year period and is mainly
related to severance payments. The long-term part of the
restructuring provision totaled SEK 502 M. Detailed infor-
mation about the restructuring program appears in the
Report of the Board of Directors. Other provisions related to
estimates of deferred considerations related to acquisitions,
taxes and legal obligations including future environment-
related interventions.

Parent company
Other provisions in the Parent company relate to estimates
of deferred considerations related to acquisitions.

Group

Parent
company

SEK M

2009

2010

2009

2010

Guarantees
Guarantees on behalf
of subsidiaries
Total

–
52

–
49

–

7,472
7,472

6,136
6,136

In addition to the guarantees shown in the table above the
Group has a large number of small performance guarantees
issued by banks in the ordinary course of business. No mate-
rial obligations are expected as a result of these guarantees.

Maturity profile-guarantees, SEK M

2009

2010

Group

<1 year
>1<2 year
>2<5 year
>5 year
Total

21
9
7
15
52

8
10
13
18
49

Note 29 Assets pledged against liabilities to credit institutes

SEK M

Real-estate mortgages
Other mortgages
Total

Group

2009

71
42
113

2010

225
45
270

Parent company

2009

2010

–
–
–

ASSA ABLOY ANNUAL REPORT 2010

NOTES 101

Note 30 Business combinations

SEK M

Cash paid, including direct acquisition costs
for 2009
Unpaid part of purchase prices
Total purchase price
Fair value of acquired net assets
Goodwill

2009

2010

968
139
1,107
–470
637

2,959
1,939
4,898
–1,910
2,988

Acquired assets and liabilities in accor-
dance with purchase price allocations
Intangible assets
Other tangible assets
Inventories
Receivables
Cash and cash equivalents
Interest-bearing liabilities
Other liabilities
Non-controlling interest
Acquired net assets at fair value

Purchase prices settled in cash, including
direct acquisition costs for 2009
Cash and cash equivalents in acquired
subsidiaries
Change in Group cash and cash equivalents
resulting from acquisitions

Net sales from times of acquisition
EBIT from times of acquisition
Net income from times of acquisition

163
244
149
294
50
–195
–248
13
470

1,117
620
437
504
705
–390
–1,081
–2
1,910

968

2,959

–50

–705

918

2,254

415
44
27

2,142
323
195

Total net sales in 2010 of acquired entities amounted to SEK
2,880 M ( 1,175) and net income amounted to SEK 163 M
(33). Acquisition related costs during 2010 amounted to
SEK 61 M and has been reported as other operating costs in
the income statement.

No individually material acquisition was performed in
2010 or 2009. During 2010 the largest and most notable
acquisitions were Pan Pan (China), ActivIdentity (USA), Pad-
dock (United Kingdom) and King Door Closers (South Korea).
During 2010 the holding in iRevo also was increased and at the
end of the year it totaled around 99 percent of the shares. Ditec
(Italy), Maiman (USA), Portsystem (Sweden) and Cerracol
(Colombia) were the largest acquisitions during 2009.

Preliminary purchase price allocations have been made

for all acquisitions during 2010. Earnouts for acquisitions
during 2010 were accounted in the balance sheet as other
long-term liabilities and other short term liabilities and are
discounted when larger acquisitions. During 2010 there has
not been any revaluations of earnouts that effects the
income statement. See below for more information regard-
ing earnouts for Pan Pan.

2010
Pan Pan
On 1 January 2010 the Group acquired 70 per cent of Pan
Pan, China´s largest manufacturer of high security steel
doors. Through the acquisition of Pan Pan the ASSA ABLOY
Group further strengthen its market leading position in
China. Pan Pan manufactures high security doors in the form
of fire, anti theft, armored, corrosion proof and standard
high security doors. The company has an extensive well
established distribution network across China and comple-
ments well ASSA ABLOY’s other door companies on the

Chinese market. The acquisition is an important step in the
strategy of expansion into the fast growing emerging mar-
kets. The Company manufactures in six locations in China
and is headquartered in Yingkou, north of Beijing. The brand
and customer relationships have been separately recog-
nized and remaining goodwill is chiefly related to synergies
and other intangible assets not qualified for separate recog-
nition. The reciprocal right to buy / sell the remaining 30 per-
cent stake to the counterparty is reported as a deferred con-
sideration, which means that the company results and
financial position are consolidated at 100 percent from the
date of acquisition. Deferred consideration is discounted to
present value and the discounting effects are reported as
financial items. The bulk of the purchase price has not been
paid and the amount due is dependent on the earnings per-
formance of the Company during the period 2010-2012.

King Door Closers
On 1 May 2010 the Group acquired 100 per cent of the share
capital of King Door Closers, South Korea´s leading door
closer company. The acquisition is another important step
for the Group in it’s strive to enlarge its presence within the
emerging markets. King adds apart from market leadership
in South Korea also important export customers mainly in
other parts of the Middle east and the Asian region. King has
a comprehensive range of basic and certified commercial
and residential door closers as well as a complete range of
floor springs. King is based in Seoul, South Korea. The brand
has been separately recognized and remaining goodwill is
chiefly related to synergies and other intangible assets not
qualified for separate recognition.

Paddock
On 1 August 2010 the Group acquired 100 per cent of the
share capital of Paddock, the UK´s leading multipoint lock
manufacturer. The strategically important acquisition
enhances ASSA ABLOYs leading position in the fast growing
multipoint lock segment. The acquisition is part of the strat-
egy to expand the presence in the mature markets by adding
complementary lock products to the current portfolio. The
company has an extensive distribution network across the
UK, which complements well ASSA ABLOY’s existing Yale
multipoint lock business. The Company is based in Walsall,
north of Birmingham. The brand has been separately recog-
nized and remaining goodwill is chiefly related to synergies
and other intangible assets not qualified for separate recog-
nition.

ActivIdentity
On 17 December 2010 the Group acquired 100 per cent of
the share capital of ActivIdentity, a global leader in strong
authentication and credential management. ActivIdentity is
an ideal fit with HID Global, finally enabling a unique solu-
tion to convergence between the logical and physical access
domains via a single credential. ActivIdentity’s market lead-
ership in credential management systems, broad portfolio
of complementary strong authentication products and Pro-
fessional Services capabilities complements ASSA ABLOY’s
HID Global Business Unit. ActivIdentity is headquartered in
California, USA.

102

NOTES

ASSA ABLOY ANNUAL REPORT 2010

Note 30 cont.

Note 31 Cash flow

SEK M

Adjustments for non-cash items
Profit on sales of fixed assets
Change of pension obligations
Other
Adjustments for non-cash items

Change in working capital
Inventory increase/decrease (–/+)
Accounts receivables increase/decrease (–/+)
Accounts payables increase/decrease (+/–)
Other working capital increase/decrease (–/+)
Change in working capital

Group

2009

2010

3
51
73
127

987
806
–232
–102
1,460

–84
54
75
45

–338
–118
406
412
362

Investments in subsidiaries
Total purchase price
Less, acquired cash and cash equivalents
Less, unpaid parts of purchase prices
Plus, paid parts of purchase prices relating to
prior years
Investments in subsidiaries

–1,107
50
139

–4,898
705
1,939

–159
–1,077

–340
–2,594

Disposal of subsidiaries
Purchase prices received
Less, disposed cash and cash equivalents
Disposal of subsidiaries

Other investments
Investments in/sales of other shares
Investments in/sales of other financial assets
Other investments

0
–71
–71

1
–24
–23

–
–34
–34

–721
30
–691

2009
Ditec
On 8 September 2009 the Group acquired the Italian com-
pany Ditec Group, a global leader in automatic doors, indus-
trial and high-speed doors and gate automation. At year end
the participating interest amounted to 100 percent of the
share capital. With the acquisition ASSA ABLOY becomes a
world-leader in entrance automation by complementing
the existing product portfolio. The acquisition of Ditec is an
important step in ASSA ABLOYs growth strategy into the fast
growing and profitable market segment of door automatics.
The Company has its headquarters in Caronno, close to
Milan, Italy. The brand has been separately recognized and
remaining goodwill is chiefly related to synergies and other
intangible assets not qualifying for separate recognition.

Disposals’ of subsidiaries
During 2010 smaller business were disposed in Switzerland
and Russia. During 2009 smaller business were disposed in
New Zealand, Switzerland and Sweden. The cashflow effect
and result from the disposals are shown in the table below:

SEK M

Disposed net assets
Fixed assets
Inventories
Receivables
Cash and cash equivalents
Liabilities
Disposed net assets to carrying amount

Purchase prices received
Less, cash and cash equivalents in
disposed subsidiaries
Change in cash and cash equivalents
for the Group

Result from disposals

Group

2009

2010

–59
–14
–14
–71
24
–134

–71

–73

–
–
–8
–34
9
–33

–

–34

–3

ASSA ABLOY ANNUAL REPORT 2010

NOTES 103

Note 32 Employees

Salaries, wages and other remuneration

SEK M

USA
Sweden
France
Germany
United Kingdom
China
Australia
Finland
Italy
Norway
Spain
Switzerland
Netherlands
Denmark
Canada
South America
Czech Republic
Mexico
Israel
South Korea
Hong Kong
New Zealand
South Africa
Belgium
Ireland
Austria
Singapore
Poland
Romania
Malaysia
Portugal
Other
Total

SEK M

Sweden
Other
Total

Social security costs

SEK M

Social security costs
-of which pensions
Total

2009

2010

Group

Salaries, wages
and other
remuneration

of which,
performance-
related salary
paid to managing
directors

Salaries, wages
and other
remuneration

of which,
performance-
related salary
paid to managing
directors

2,534
566
604
568
425
247
328
331
236
275
278
248
248
224
161
75
110
93
109
53
87
79
67
88
44
50
31
13
29
17
21
60
8,299

11
12
2
2
1
0
0
0
–
0
0
1
1
0
1
0
–
1
0
–
2
0
–
0
–
0
0
0
–
0
0
1
35

2,451
580
531
528
453
419
352
306
266
258
245
245
198
194
179
111
101
101
100
99
89
82
74
72
66
47
31
13
24
21
25
61
8,322

15
11
2
2
2
0
–
1
–
1
0
1
0
2
1
1
0
1
0
–
4
–
–
–
–
0
2
0
–
–
0
0
46

Parent company

2009

2010

Salaries, wages
and other
remuneration

of which,
performance-
related salary
paid to managing
directors

Salaries, wages
and other
remuneration

of which,
performance-
related salary
paid to managing
directors

109
–
109

2009

1,834
434
1,834

8
–
8

103
–
103

Group

Parent company

2010

1,788
379
1,788

2009

53
21
53

8
–
8

2010

66
19
66

Fees to Board members in 2010 (including committe work), SEK thousands

Name and post

Gustaf Douglas, Chairman
Jorma Halonen, Member
Carl Douglas, Member
Birgitta Klasén, Member
Eva Lindqvist, Member
Johan Molin, President and CEO
Sven-Christer Nilsson, Member
Lars Renström, Member
Ulrik Svensson, Member
Employee representatives (2)
Total

Remuneration
Committe

Audit
Committee

Social
security
costs

Pension
costs

100
–
–
–
–
–
50
–
–
–
150

–
–
–
100
–
–
–
100
200
–
400

102
–
141
173
141
–
51
173
204
–
985

1,102
105
591
723
591
–
551
723
854
–
5,240

Board

900
105
450
450
450
–
450
450
450
–
3,705

104

NOTES

ASSA ABLOY ANNUAL REPORT 2010

Note 32 cont.

Remuneration and other benefits of the Executive Team in 2010

SEK thousands

Fixed salary Variable salary

benefits Other benefits

Pension costs

Johan Molin
Other members of the Executive Team (9)
Total remuneration and benefits
Total costs¹

10,500
33,081
43,581
52,338

7,875
16,531
24,406
28,856

831
2,006
2,837
3,425

119
2,965
3,084
3,280

3,675
9,089
12,764
28,861

Stockrelated

1 Total costs for the Executive Team include social fees on salaries and benefits, special pension tax and additional costs for other benefits. Salaries and other benefits

paid to the Executive Team during 2009 totaled SEK 82 M and social security costs SEK 39 M, of which SEK 23 M were pension costs.

Salaries and remuneration for the Board of Directors and
the Parent company’s Executive Team
Salaries and other remuneration for the Board of Directors
and the Parent company’s Executive Team totaled SEK 37 M
(42). Social security costs amounted to SEK 35 M (43), of
which SEK 8 M (9) were pension costs.

Long-term incentive program
At the 2010 Annual General Meeting, it was decided to
launch a long-term incentive program (LTI 2010) for senior
executives and other key staff in the Group. The aim of LTI
2010 is to create the prerequisites for retaining and recruit-
ing competent staff for the Group, providing competitive
remuneration and uniting the interests of shareholders,
senior executives and key staff.

For each Series B share acquired by the CEO within the
framework of LTI 2010, the company assigns one matching
stock option and four performance-based stock options. For
each Series B share acquired by other members of the Exec-
utive Team, the company assigns one matching stock option
and three performance-based stock options. For other par-
ticipants, the company assigns one matching stock option
and one performance-based stock option. Employees have
acquired 87,564 shares in ASSA ABLOY AB in accordance
with the terms of the incentive program.

Each matching stock option entitles the holder to receive
one free Series B share in the company after three years, pro-
vided that the holder is still employed in the Group when
the interim report for first quarter 2013 is published and has
retained the shares acquired within the framework of LTI
2010. Each performance-based stock option entitles the
holder to receive one free Series B share in the company
three years after assignment, provided that the above condi-
tions have been fulfilled. In addition, the maximum level in a
range determined by the Board for the performance of the
company’s earnings per share in 2010 must have been ful-
filled. This condition is fulfilled. Outstanding matching and
performance-based stock options total 221,633.

Fair value is based on the share price on the assignment date.
The present value calculation is based on data from an exter-
nal party. Fair value is adjusted for participants who do not
retain their holding of shares under LTI 2010 for the duration
of the program. In the case of performance-based shares,
the company assesses the probability of the performance
targets being met when calculating the compensation
expense. The fair value of ASSA ABLOY’s Series B share on the
assignment date of 28 July 2010 was SEK 161.79. The total
cost of LTI 2010 for 2010 amounted to SEK 6 M (0).

Other equity-based incentive programs
ASSA ABLOY has issued several convertible debentures to
employees in the Group. These were issued at market value
and therefore do not result in any personnel cost for the
Group.

Notice and severance pay
If the CEO is given notice, the company is liable to pay the
equivalent of 24 months’ salary and other employment bene-
fits. If one of the other senior executives is given notice, the
company is liable to pay a maximum 6 months’ basic salary
and other employment benefits plus an additional 12
months’ basic salary.

Absence for illness, %

Total sickness absence
– long-term¹
– sickness absence, men
– sickness absence, women
– employees aged 29 or younger
– employees aged 30–49¹
– employees aged 50 and over¹

The Parent
company

2009

2010

2.3
–
2.8
1.1
0.4
0.8
–

2.9
–
3.3
2.7
0.0
–
–

¹ Information not displayed since it could be linked to specific individuals.

ASSA ABLOY ANNUAL REPORT 2010

NOTES 105

Note 32 cont.

Average number of employees per country, with breakdown into women and men

China
USA
France
Sweden
Mexico
Germany
Czech Republic
United Kingdom
South America
Finland
Australia
Italy
Spain
Netherlands
Norway
Malaysia
South Africa
Canada
Romania
South Korea
Israel
Denmark
Switzerland
New Zealand
Ireland
Belgium
Portugal
Austria
Hong Kong
Other
Total

Sweden
Total

2009

2010

Group

Total which of women which of men

6,855
6,000
1,882
1,371
1,210
1,129
980
1,066
535
921
833
589
673
518
514
419
467
386
368
211
401
401
358
325
134
206
70
95
118
340
29,375

3,264
2,094
699
487
702
433
494
358
139
338
230
171
190
108
157
283
193
101
174
42
109
150
140
99
68
79
18
19
49
143
11,531

3,591
3,906
1,183
884
508
696
486
708
396
583
603
418
483
410
357
136
274
285
194
169
292
251
218
226
67
127
52
76
68
196
17,843

14,449
5,742
1,882
1,301
1,110
1,049
1,035
1,014
925
873
823
813
593
511
470
452
424
404
395
388
377
348
345
303
215
181
118
112
104
523
37,279

5,806
1,799
707
465
583
371
523
339
180
326
225
181
156
102
151
287
183
96
191
134
108
124
129
112
86
63
30
26
42
139
13,664

8,644
3,943
1,175
837
527
679
512
675
745
547
598
632
437
409
319
165
241
308
204
254
269
224
216
191
129
117
88
86
62
382
23,615

2009

2010

Parent company

Total which of women which of men

94
94

26
26

68
68

104
104

27
27

77
77

Gender-split in senior management

Board of Directors ²
Executive Team
– of which Parent company's

Executive Team

Total

² Excluding employee representatives.

2009

2010

Total which of women which of men

9
10

4
19

2
–

–
2

7
10

4
17

8
9

3
17

2
–

–
2

6
9

3
15

106

NOTES

ASSA ABLOY ANNUAL REPORT 2010

Note 33 Financial risk management and
financial instruments

Financial risk management
ASSA ABLOY is exposed to a variety of financial risks through
its international business operations. ASSA ABLOY’s units
have carried out financial risk management in accordance
with the ASSA ABLOY Group’s Treasury Policy. The Group’s
financial risk management principles are described below.

Organization and activities
ASSA ABLOY’s Treasury Policy, which is determined by the
Board of Directors, constitutes a framework of guidelines
and regulations for the management of financial risks and
financial activities.

ASSA ABLOY’s financial activities are coordinated cen-

trally and the majority of financial transactions are con-
ducted by the subsidiary ASSA ABLOY Financial Services AB,
which is the Group’s internal bank. External financial transac-
tions are conducted by Treasury and include the manage-
ment of transactions involving foreign currencies and inter-
est rates. Treasury achieves significant economies of scale
when negotiating borrowing agreements, using interest rate
derivatives and managing currency flows.

Capital structure
The Group’s objective regarding capital structure is to safe-
guard the Group’s ability to continue as a going concern, in
order to provide good returns for shareholders and benefits
for other stakeholders. Maintaining an optimal capital struc-
ture enables the Group to keep the cost of capital as low as
possible. In order to adjust the capital structure in response
to need, the Group can vary the amount paid as dividend to
shareholders, return capital to shareholders, issue new

shares, or sell assets to reduce debt. The Group monitors
capital based on factors such as the net debt/equity ratio.

Net debt is defined as interest-bearing liabilities, includ-
ing negative market values of derivatives, plus pension provi-
sions, less cash and cash equivalents, other interest-bearing
investments and positive market values of derivatives. The
table ‘Net debt and equity’ shows the position as at 31
December.

Net debt and equity

SEK M

Long-term interest-bearing receivables
Short-term interest-bearing investments
incl. positive market values of derivatives
Cash and bank balances
Pension provisions
Long-term interest-bearing liabilities
Short-term interest-bearing liabilities
incl. negative market values of derivatives
Total

Equity
Net debt/equity ratio, times

The Group

2009

–244

–840
– 1,579
1,118
10,692

1,901
11,048

19,334
0.57

2010

–62

–170
–1,280
1,078
8,134

2,864
10,564

20,821
0.51

Another important variable in the assessment of the Group’s
capital structure is the credit rating that credit rating agen-
cies assign to the Group’s liabilities. In order to have access
to both long-term and short-term financing from the capital
markets when needed, it is essential to maintain a good
credit rating. ASSA ABLOY maintains both long-term and
short-term credit ratings from Standard & Poor’s and a
short-term rating from Moody’s.

Maturity profile – financial instruments

SEK M

<1 year >1<2 year >2<5 year

>5 year

<1 year >1<2 year >2<5 year

>5 year

31 December 2009

31 December 2010

Long-term bank loans
Long-term capital market loans
Convertible loans
Short-term bank loans
Commercial papers and short-
term capital market loans
Derivatives

–34
–325
–14
–1,259

–632
38

–1,136
–986
–409
–

–
81

–192
–4,301
–1,037
–

–
63

–88
–4,178
–
–

–
–

Total by period

–2,226

–2,450

–5,467

–4,266

Cash and cash equivalents incl.
interest-bearing receivables
Long-term interest-
bearing receivables
Additional purchase
considerations
Accounts receivables
Accounts payables
Net total

Committed credit facilities
Credit facilities maturing
< 1 year

2,319

–

–
5,618
–2,682
3,029

11,355

–

194

–
–
–
–2,256

–

–
–
–
–5,445

–11,355

–

–
–
–
–4,238

–

Adjusted maturity profile¹

14,384

–2,256

–16,800

–4,238

¹ For maturity structure of guarantees, see Note 28.

–37
–303
–324
–1,133

–1,402
–23

–3,222

1,304

–48
5,596
–3,123
513

24,330

–5,142

19,701

–255
–1,382
–905
–

–
37

–81
–3,277
–
–

–
73

–120
–3,258
–
–

–
11

–2,505

–3,285

–3,367

–

–29
–
–
–2,487

–

–1,932
–
–
–5,193

–19,189

–

–
–
–
–3,367

–

–2,487

–24,382

–3,367

ASSA ABLOY ANNUAL REPORT 2010

NOTES 107

Note 33 cont.

External financing/net debt

Credit lines/facilities

SEK M Maturity

SEK M Currency

Amount,

Carrying
amount,

Amount
2009

Amount
2010

Of which
Parent com-
pany, SEK M

USD
USD
USD
USD
USD
USD
USD
USD
EUR
SEK
SEK
SEK
EUR
SEK
SEK
EUR
EUR
NOK
NOK

SEK
USD
SEK
EUR
USD /EUR
EUR/SEK

80
53
80
76
50
50
122
70
1,100

1,000
100
300
250
45
150
–
350

–
50
300
38
0
0/632

80
53
80
76
50
50
122
70
1,100
4,300
5,000
0
100
300
250
45
150
250
100

5,000
50
300
35
0
0/750

US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
US Private Placement Program
Multi–Currency RCF
Bridge facility A
Bridge facility B
Bank loan
Incentive Program
Global MTN Program

Other long-term loans

Total long-term loans/facilities

Bridge facility C
US Private Placement Program
Global MTN Program
Incentive Program
Global CP Program
Swedish CP Program
Other bank loans
Overdraft facility
Total short-term loans/facilities
Total loans/facilities

Cash and bank balances
Short-term interest-bearing investments
Long-term interest-bearing investments
Market value of derivatives
Pensions
Net debt

¹ The loans are hedged.

547 May 2012
Dec 2013
359
547 May 2015
Dec 2016
517
342
Apr 2017
342 May 2017
835
Dec 2018
479 May 2020
Jun 2014
Dec 2013
Jun 2013
Oct 2011
Jun 2012
Feb 2012
May 2012
Mar 2014
Jun 2014
Jun 2016
Jun 2016

9,889
4,300
5,000
1,000
899
13,485

Dec 2011
Dec 2011
Apr 2011
Jun 2011

469

39,009

5,000
342
300
311
6,841
5,000
716
1,332
19,842
58,851

5731
359
6151
517
342
342
835
479
0
0
0
0
899
300
250
405
1,348
2891
112
469

8,134

0
342
300
311
0
747
716
376
2,792
10,926

–1,280
–24
–62
–74
1,078
10,564

899
300
250
405
1,348
289
112

3,603

300
311

611
4,214

0
–14
–26

4,174

Rating

Agency

Short-
term

Standard & Poor’s
Moody’s

A2
P2

Out-
look

Stable
Stable

Long-term

A –
n/a

Credit
watch

Negative

At the beginning of the year Standard & Poor’s revised the
outlook for the long-term rating from negative to stable.
However, when the acquisition of Cardo was announced,
Standard & Poor’s revised its rating to negative credit watch.
Moody’s rating has not been revised since the previous year.

Financing risk and maturity profile
Financing risk is defined as the risk of being unable to meet
payment obligations as a result of inadequate liquidity or
difficulties in obtaining external funding. ASSA ABLOY man-
ages financing risk at Group level. Treasury is responsible for
external borrowing and external investments. ASSA ABLOY
strives to have access, on every occasion, to both short-term
and long-term loan facilities. According to the Treasury Pol-
icy, the available facilities should include a reserve (facilities
confirmed but not used) equivalent to 10 percent of the
Group’s total annual sales.

Maturity profile
The table ‘Maturity profile’ on page 107 shows the maturi-
ties for ASSA ABLOY’s net debt including confirmed credit
facilities. With the exception of the credit facilities negotia-
tion in connection with the Cardo acquisition, the maturity
period are not concentrated to a particular date in the
immediate future, particularly taking into account the credit
facility of EUR 1,100 M maturing in 2014, which was wholly
unutilized at year-end. The maturities of the loans to be
raised in connection with the completion of the Cardo
acquisition will be allocated over time in a similar way as for
current debt. Moreover, financial assets should also be taken
into account when evaluating the maturity profile. The table
shows undiscounted future cash flows relating to the
Group’s financial instruments at the reporting date, and
consequently these amounts are not found in the balance
sheet.

Interest-bearing liabilities
The Group’s long-term loan financing mainly consists of Pri-
vate Placement Programs in the USA totaling USD 580 M
(630), GMTN Programs of SEK 2,705 M (3,292) and Incentive
Programs of EUR 100 M (138). The change in long-term

108

NOTES

ASSA ABLOY ANNUAL REPORT 2010

Note 33 cont.

capital and 0.8 percent of the total number of votes.
Full conversion of the two programs will add a total of
7,011,960 shares and result in a dilutive effect of 1.9 percent
of share capital and 1.3 percent of the total number of votes.
At year-end 2010 Incentive 2006 amounted to EUR 35 M
and Incentive 2007 to EUR 100 M.

Currency composition
The currency composition of ASSA ABLOY’s borrowing
depends on the currency composition of the Group’s assets.
ASSA ABLOY uses currency swaps to achieve the desired cur-
rency composition. See the table ‘Net debt by currency’
below.

Cash and cash equivalents and other
interest-bearing receivables
Short-term interest-bearing investments amounted to SEK
24 M (740) at year-end. In addition, ASSA ABLOY has long-
term interest-bearing receivables of 62 SEK M (244) and
financial derivatives with a positive market value of SEK
146 M (100) which, in addition to cash and cash equivalents,
are included in the definition of net financial debt. Cash and
cash equivalents are mainly invested in interest-bearing
instruments with high liquidity from issuers with a credit
rating of at least A-, according to Standard & Poor’s or similar
agency. The average term for cash and cash equivalents was
3.3 days (7.5) at the end of 2010.

The Parent company’s cash and cash equivalents are held

in a sub-account to the Group cash pool.

The Group

The Parent
company

SEK M

2009

2010

2009

2010

Cash and bank
balances
Short-term invest-
ments with maturity
less than 3 months
Cash and cash
equivalents
Short-term invest-
ments with maturity
more than 3 months
Long-term interest-
bearing receivables
Positive market value
of derivatives
Total

1,579

1,280

656

2,235

1,302

244

100
2,663

146
1,512

–

–
27

–

–
40

loans is mainly due to some of the original long-term loans
now having less than one year to maturity. In addition, a
bilateral bank loan totaling SEK 1,000 M was repaid in 2010.
During the year long-term bilateral financing totaling SEK
139 M was raised.

The Group’s short-term debt financing mainly consists of

two Commercial Paper Programs for a maximum of USD
1,000 M (1,000) and SEK 5,000 M (5,000) respectively. At
year-end, SEK 747 M (632) of the Commercial Paper Pro-
grams had been utilized. In addition, substantial credit facili-
ties are available, mainly in the form of a Multi-Currency
Revolving Credit Facility for a maximum of EUR 1,100 M
(1,100), which was not utilized at all at year-end. To secure
financing for the acquisition of Cardo, additional credit facil-
ities totaling SEK 14,300 M were obtained. These have a
term of between 1 and 3 years. Following completion of the
acquisition, these credit facilities will, however, be refi-
nanced on the capital markets in good time before maturity.
According to the Group’s policy, the average remaining time
to maturity for interest-bearing liabilities should not be less
than 18 months. At year-end, the average time to maturity,
excluding the pension provision, was 39 months (46). Some
of the Group’s main financing agreements contain a cus-
tomary Change of Control clause. The effect of this clause is
that lenders have the right in certain circumstances to
demand renegotiation of conditions or to terminate the
agreement should control of the company change.

Convertible debenture loans
Incentive 2006 has a variable interest rate equivalent to 0.9*
EURIBOR + 45 basis points. Any conversion of Incentive
2006 can take place in a 180-day period from December
2010 to June 2011. Conversion of the convertible deben-
tures relating to Incentive 2006 began in December 2010.
Conversion is managed by an external party and 259,160
new Series B shares had been issued as at December 2010.
Full conversion at a conversion rate of EUR 14.60 for Series 1,
EUR 15.90 for Series 2, EUR 17.30 for Series 3 and EUR 18.60
for Series 4 will add 2,332,350 shares. The dilutive effect of
full conversion amounts to 0.6 percent of share capital and
0.4 percent of the total number of votes.

Incentive 2007 has a variable interest rate equivalent to
0.9* EURIBOR + 35 basis points. Any conversion of Incentive
2007 can take place in a 30-day period in May and June
2012. Full conversion at a conversion rate of EUR 18.00 for
Series 1, EUR 20.50 for Series 2, EUR 23.00 for Series 3 and
EUR 25.40 for Series 4 will add 4,679,610 shares. The dilutive
effect of full conversion amounts to 1.2 percent of share

Net debt by currency

SEK M

USD
EUR
SEK
AUD
NOK
KRW
CNY
GBP
Other
Total

31 Dec 2009

31 Dec 2010

Net debt excluding
currency swaps

Net debt including
currency swaps

Net debt excluding
currency swaps

Net debt including
currency swaps

4,429
3,998
2,525
–15
530
347
–560
–35
–171
11,048

4,650
3,296
2,215
676
390
347
–560
–629
663
11,048

4,094
3,603
2,500
–10
467
337
–225
–83
–119
10,564

4,813
2,265
2,594
577
221
337
–225
–314
296
10,564

ASSA ABLOY ANNUAL REPORT 2010

NOTES 109

Note 33 cont.

Interest rate risks in interest-bearing assets
Treasury manages interest rate risk in cash and cash equiva-
lents. Derivative instruments such as interest rate swaps and
FRAs (Forward Rate Agreements) may be used to manage
interest rate risk. The investments are mostly short-term.
The term for the majority of these investments is three
months or less. The fixed interest term for these short-term
investments was 1.2 days (11) at year-end 2010. A down-
ward change of one percentage point in the yield curve
would reduce the Group’s interest income by around SEK
9 M (23) and consolidated equity by SEK 7 M (16).

Interest rate risks in borrowings
Changes in interest rates have a direct effect on ASSA
ABLOY’s net interest. Treasury is responsible for identifying
and managing the Group’s interest rate exposure. It analyzes
the Group’s interest rate exposure and calculates the impact
on net income of changes in interest rates on a rolling
12-month basis. The Group seeks to have a mix of fixed rate
and variable rate borrowings and uses interest rate swaps to
overtime adjust the fixed interest term. The Treasury Policy
stipulates that the average fixed interest term should nor-
mally be 24 months. At year-end, the average fixed interest
term on gross debt, excluding pension obligations, was
around 23 months (26). An upward change of one percent-
age point in the yield curve would increase the Group’s
interest expense by around SEK 58 M (75) and reduce con-
solidated equity by SEK 44 M (54).

Currency risk
Currency risk affects ASSA ABLOY mainly through translation
of capital employed and net debt, through translation of
income in foreign subsidiaries, and through the effects on
income of flows of goods between countries with different
currencies.

Transaction exposure
Currency risk in the form of transaction exposure, or the val-
ues of exports and imports of goods, is limited in the Group.
The main principle is to allow currency fluctuations to have
an impact on the business as quickly as possible. As a result
of this strategy, only limited portions of current currency
flows are normally hedged.

Transaction flows relating to major currencies
(import + and export –)

Currency exposure

Currency, SEK M

AUD
CAD
CHF
EUR
GBP
NOK
SEK
USD

2009

286
434
–234
185
225
–136
–602
–414

2010

400
433
–165
836
160
–195
–802
198

Impact on income before tax of a 10 percent
weakening of SEK

Currency, SEK M

AUD
CAD
CNY
DKK
EUR
GBP
NOK
USD

2009

26
13
22
15
131
14
27
227

2010

39
18
46
11
143
23
32
206

Translation exposure in the balance sheet
The impact of translation of equity is reduced by the fact
that financing is largely carried out in local currency.

The capital structure in each country is optimized based
on local legislation. So far as this constraint allows, gearing
per currency should reflect the overall gearing for the whole
Group to limit the effect of fluctuations in individual curren-
cies. Treasury uses currency derivatives to achieve appropri-
ate funding and to eliminate undesirable currency exposure.
The table ‘Net debt by currency’ on page 109 shows the
use of currency forward contracts in relation to funding in
major currencies. These forward contracts are used to neu-
tralize the exposure arising between external debt and
internal needs.

Financial credit risk
Financial risk management exposes ASSA ABLOY to certain
counterparty risks. Such exposure may arise from the place-
ment of surplus cash as well as from the investing in debt
instruments and derivative financial instruments.

ASSA ABLOY’s policy is to minimize the potential credit
risk relating to surplus cash by using cash flow from subsid-
iaries to repay the Group’s loans. This objective is achieved
primarily by cash pools put in place by Treasury. Around 86
percent (84) of the Group’s sales were settled by cash pools
in 2010. However, the Group can in the short term invest
surplus cash in banks to match borrowing and cash flow.

Derivative financial instruments are allocated to banks

according to risk levels defined in the Treasury Policy in
order to limit counterparty risk. Treasury enters into deriva-
tive contracts exclusively with banks that have a good rating.
ISDA agreements (full netting of transactions in case of
counterparty default) have been set up in the case of inter-
est rate and currency derivatives.

Commercial credit risk
The Group’s accounts receivables are distributed across a
large number of customers who are spread internationally.
The concentration of credit risk associated with accounts
receivables is therefore limited. The fair value of accountsre-
ceivables corresponds to the carrying amount. Credit risk
relating to operating activities is monitored by local man-
agement at company level and reviewed by the respective
division.

Translation exposure of income
The table below shows the impact on the Group’s income
before tax of a 10 percent weakening of the Swedish krona
in relation to the major currencies, while all other variables
remain constant.

Commodity risk
The Group is exposed to price risk relating to purchases of
certain commodities (primarily metals) used in production.
Forward contracts are not used to hedge commodity pur-
chases.

110

NOTES

ASSA ABLOY ANNUAL REPORT 2010

Note 33 cont.

Fair value of financial instruments
Derivative financial instruments such as currency and inter-
est rate forwards are used to the extent necessary. The use of
derivative financial instruments is to reduce exposure to
financial risks.

For accounting purposes, financial instruments are classified
into measurement categories in accordance with IAS 39.
The table ‘Financial instruments’ below provides an over-
view of financial assets and liabilities, measurement cate-
gory, and carrying amount and fair value per item.

The positive and negative fair values in the table ‘Out-
standing derivative financial instruments’ below show the
fair values of instruments outstanding at year-end, based on
available fair values, and are the same as the carrying
amounts in the balance sheet. The nominal value represents
the gross value of the contracts.

Outstanding derivative financial instruments at 31 December

When calculating fair value only general changes in mar-
ket rates are taken into account and not credit spread move-
ments for the individual company.

31 December 2009

31 December 2010

Positive fair
value

Negative
fair value

Nominal

value

Positive fair
value

Negative
fair value

Nominal
value

5
95
–
100

–13
–17
–2
–32

3,629
2,326
1,000
6,955

41
104
1
146

–62
–10
–
–72

4,974
2,760
–
7,734

2009

2010

IAS 39
category*

Carrying
amount

Fair value

Carrying
amount

Fair value

3
1
1
5
2

1
1

2
4

4
4
2
4
2

42
292
5,618
95
5
100
84
2,235

1,242
8,021
9,263
1,429
1,869
32
2,682
–

42
292

5,618
95
5
100
84
2,235

1,242
8,134
9,376
1,429
1,869

32
2,682

–

762
94
5,596
96
50
146
2
1,302

1,477
5,758
7,235
1,210
2,481
72
3,123
1,920

762
94
5,596
96
50
146
2
1,302

1,477
5,939
7,416
1,210
2,481
72
3,123
1,920

Instrument, SEK M

Foreign exchange forwards, funding
Interest rate swaps
Forward Rate Agreements
Total

Financial instruments: carrying amounts and
fair values by measurement category

SEK M

Financial assets
Other shares and interests
Other financial assets
Accounts receivables
Derivative instruments – hedge accounting
Derivative instruments – held for trading
Derivative instruments, total
Short-term investments
Cash and cash equivalents

Financial liabilities
Long-term loans – hedge accounting
Long-term loans – not hedge accounting
Long-term loans, total
Convertible debenture loans
Current liabilities – not hedge accounting
Derivative instruments – held for trading
Accounts payables
Additional purchase considerations

* Applicable IAS 39 categories:
1 = Loan receivables and other receivables.
2 = Financial instruments at fair value through profit or loss.
3 = Available-for-sale financial assets.
4 = Financial liabilities at amortized cost.
5 = Derivative hedge accounting.

Financial instruments: measured at fair value

SEK M

Financial assets
Derivative instruments
Other shares and interests

2009

2010

Carrying
amounts

Quoted
prices

Observ-
able data

Non-
observ-
able data

Carrying
amounts

Quoted
prices

Observ-
able data

Non-
observ-
able data

5
42

–
42

5
–

–
–

50
762

–
762

50
–

–
–

Financial liabilities
–
Long-term loans – hedge accounting
–
Derivative instruments
1,920
Deferred considerations¹
¹ Deferred considerations often depend on the earnings trend of an acquired business over a certain period. Measurement of the additional purchase consideration is
based on the management’s best judgment. Discounting to present value takes place in the case of major acquisitions.

1,477
72
1,920

1,477
72
–

1,242
32
–

–
–
–

ASSA ABLOY ANNUAL REPORT 2010

NOTES 111

Comments on five years in summary

2006
This was a very good year for ASSA ABLOY, with the highest
organic growth in the company’s history and a substantial
improvement in profitability. ASSA ABLOY’s robust perfor-
mance was based on strong economic growth in the Group’s
most important markets in Europe and North America, as
well as success in fast-growing segments such as electrome-
chanical locks, access control, automatic doors and identifi-
cation technology. The acquisition rate increased and acqui-
sitions included Fargo Electronics, a global leader in the
fast-growing segment of secure card issuance.

A three-year restructuring program to realize synergies
and increase efficiency in the Group’s manufacturing units
was launched during the year. This program means that a
major part of production will switch focus from full produc-
tion to concentrate on final assembly. Some production will
be relocated to low-cost countries, resulting in the closure
of a number of production units.

Total restructuring costs amounted to SEK 1,274 M and
the program is predicted to produce annual savings of SEK
600 M when fully implemented in 2009.

Sales volume growth, acquisitions and the restructuring
measures implemented contributed to the strong increase
in operating income.

2007
The year saw strong growth for ASSA ABLOY, combined
with continued very satisfactory growth in earnings. All five
divisions showed growth, increased profitability and an
improved return. ASSA ABLOY’s strong performance was
based on long-term structural growth in demand in the
Group’s most important markets in Europe and North
America, increasing demand in new markets, and successes
in fast-growing segments such as electromechanical locks,
access control, secure smart-card issuance, automatic doors
and identification technology. The acquisition rate remained
high during the year and major acquisitions included Bao-
dean (China), iRevo (South Korea), Aontec (Irish Republic),
Power-shield (Northern Ireland), Pemko (North America)
and Pyropanel (Australia).

The successful implementation of the three-year restruc-
turing program for the Group’s manufacturing units contin-
ued during the year. All 50 projects are proceeding accord-
ing to plan and more than 1,300 employees out of a planned
total of 2,000 have now left the Group. At year-end 2007,
cost savings were running at over 60 percent of the final tar-
get of achieving annual savings of SEK 600 M in 2009.

Sales volume growth, acquisitions, price management

and the restructuring measures implemented, as well as
continuous improvements in production, administration
and market development, contributed to the strong finan-
cial performance.

2008
2008 was a record year for ASSA ABLOY, with increased sales
and profit due to focused efforts to increase demand mainly
on the commercial and institutional markets. The Group
increased its investments in product development and
more products than ever were launched on the market. The
economic situation weakened towards the end of the year
as the financial crisis had a negative impact on investments
in new construction.

2009
The financial crisis led to a downturn in both the housing
and commercial construction markets worldwide, which
was unprecedented in the Group’s history. ASSA ABLOY
was nevertheless able to maintain good profitability and
strengthen its market position even under very trying mar-
ket conditions. Efficient product development with a strong
customer focus, a stronger market presence and continued
cost cutting contributed substantially to the good perfor-
mance. Cash flow and working capital utilization showed
positive development during the year.

Cost adjustments in the form of staff redundancies and

the relocation of components and basic products to low-
cost countries continued at a high rate during the year. A
third restructuring program was launched towards the end
of the year. The new products launched were well received
by customers and strengthened ASSA ABLOY’s market-lead-
ing position in total door opening solutions.

Eight acquisitions were made during the year, consolidat-

ing the Group’s position in industrial and automatic doors
and increasing annual sales by around SEK 1,200 M.

2010
Organic growth was 3 percent, with Asia and South America
reporting strong growth and North America showing good
and increasing growth. Europe began the year well but
growth gradually slowed. Continued investments in the
marketing organization and the launch of new products
strengthened the Group’s market leadership. Acquired
growth was 8 percent.

Operating income rose 12 percent and cash flow devel-

oped well during the year.

A total of 13 acquisitions were completed during the year,

including Pan Pan (China), King Door Closers, South Korea,
ActivIdentity (USA) and Paddock (UK). These acquisitions
increase annual sales by SEK 2,880 M. An agreement was
signed to acquire a majority share holding in Cardo, a leading
Swedish industrial door company.

112

FIVE YEARS IN SUMMARY

ASSA ABLOY ANNUAL REPORT 2010

Five years in summary

Amounts in SEK M unless stated otherwise

2006

2007

2008

2009

2010

Sales and income

Sales
Organic growth, %
Acquired growth, %
Operating income before depreciation/amortization (EBITDA)
Depreciation
Operating income (EBIT)
Income before tax (EBT)
Net income

Cash flow

Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Cash flow
Operating cash flow

Capital employed and financing

Capital employed
– of which, goodwill
– of which, other intangible and tangible assets
– of which, shares in associates
Net debt
Non-controlling interest
Shareholders' equity, excluding non-controlling interest

Data per share, SEK

Earnings per share after tax and before dilution
Earnings per share after tax and dilution (EPS)
Shareholders' equity per share after dilution
Dividend per share
Price of Series B share at year-end

Key data

Operating margin (EBITDA), %
Operating margin (EBIT), %
Profit margin (EBT), %
Return on capital employed, %
Return on capital employed excluding Items affecting
comparability, %
Return on shareholders' equity, %
Equity ratio, %
Net debt/ Equity ratio, times
Interest coverage ratio, times
Interest on convertible debenture loan net after tax
Number of shares, thousands
Number of shares after dilution, thousands
Average number of employees

31,137
9
3
5,6691
–898
4,7711
2,626
1,756

2,968
–3,871
1,203
300
3,528

27,205
16,683
6,263
33
13,560
60
13,585

4.77
7.991
39.13
3.25
149.00

18.21
15.3 1
8.4
12.1

17.1
11.5
38.4
0.99
5.1
43.6
365,918
376,033
31,243

33,550
7
5
6,366
–909
5,458
4,609
3,368

3,871
–2,127
–1,568
176
4,808

28,621
17,270
6,782
39
12,953
201
15,467

9.18
9.02
46.76
3.60
129.75

19.0
16.3
13.7
18.4

18.4
21.0
41.5
0.83
7.4
55.0
365,918
380,713
32,267

34,8293
0
4
6,4471
–921
5,5261
3,499
2,438

4,369
–2,648
–1,311
410
4,769

32,850
20,669
7,945
38
14,013
163
18,674

6.60
9.211
55.91
3.60
88.50

34,9633
–12
3
6,4261
–1,014
5,4131
3,740
2,659

5,924
–1,835
–3,741
348
6,843

30,382
20,333
7,541
39
11,048
162
19,172

36,823
3
8
7,041
–995
6,046
5,366
4,080

5,729
–4,027
–2,597
–895
6,285

31,385
22,279
8,336
37
10,564
169
20,652

7.18
9.221
54.76
3.60
137.80

11.07
10.89
58.64
4.00²
189.50

18.51,3
15.91,3
10.0
13.3

18.41,3
15.51,3
10.7
13.1

17.2
12.8
41.9
0.74
5.7
81.0
365,918
380,713
32,723

16.2
12.7
45.4
0.57
7.2
31.9
365,918
372,931
29,375

19.1
16.4
14.6
18.5

18.5
19.1
45.9
0.51
10.1
9.9
366,177
372,736
37,279

1 Excluding items affecting comparability in 2006, 2008 and 2009.
² For 2010, as proposed by the Board.
³ Reclassification has been made for 2008 and 2009. Reclassification has not been made for 2006-2007. The Group has made a reclassification that affects direct
distribution costs and depreciation on capitalized product development expenditure. The reason is to give a true and fair view of the allocation between direct and
indirect costs as well as for product development expenses. In order to maintain comparability, the financial statements for 2008 and 2009 have been adjusted.
The reclassification involves the transfer of direct distribution costs from selling expenses and administrative expenses, and where appropriate from sales, to cost of
goods sold. In addition, depreciation on product development has been moved from cost of goods sold to selling expenses and administrative expenses. Both
these adjustments affect gross income. Operating income is not affected.

RETURN ON CAPITAL EMPLOYED¹

OPERATING MARGIN (EBIT)¹

AVERAGE NUMBER OF EMPLOYEES

09 10

Number

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

¹ Excluding items affecting compara-
bility 2006, 2008 and 2009.

ASSA ABLOY ANNUAL REPORT 2010

09 10

FIVE YEARS IN SUMMARY 113

Quarterly information

THE GROUP IN SUMMARY
Amounts in SEK M unless stated otherwise

Sales
Organic growth
Gross income excluding items
affecting comparability
Gross income/ Sales
Operating income before
depreciation (EBITDA) excluding
restructuring costs
Gross margin (EBITDA)
Depreciation
Operating income (EBIT) excluding
Items affecting comparability
Operating margin (EBIT)
Items affecting comparability ³
Operating income (EBIT)
Net financial items
Income before tax (EBT)
Profit margin (EBT)
Tax

Net income

Allocation of net income:

Parent company shareholders’
Non-controlling interests

OPERATING CASH FLOW

Operating income (EBIT)
Restructuring costs
Depreciation
Net capital expenditure
Change in working capital
Paid and received interest
Non-cash items

Operating cashflow ¹
Operating cash flow /
Income before tax

CHANGE IN NET DEBT

Net debt at start of period
Operating cash flow
Restructuring payments
Tax paid
Acquisitions/Disposals
Dividend
Purchase of treasury shares
Exchange rate differences and other

Q 1
2009

8,859
–12%

3,550
40.1%

1,594
18.0%
–266

1,328
15.0%
–109
1,219
–205
1,015
11.4%
–296

718

716
3

Q 1
2009

1,219
109
266
–187
–316
–193
–60

Q 2
2009

8,899
–14%

3,502
39.4%

1,601
18.0%
–261

1,340
15.1%
–
1,340
–165
1,176
13.2%
–323

852

843
9

Q 2
2009

1,340
–
261
–186
346
–157
–20

Q 3
2009

8,405
–13%

3,370
40.1%

1,584
18.8%
–237

1,346
16.0%
–
1,346
–159
1,187
14.1%
–300

888

876
12

Q 3
2009

1,346
–
237
–99
612
–38
67

Q 4
2009

8,799
–8%

Full
year
2009

34,963
–12%

3,603
41.0%

14,025
40.1%

1,648
18.7%
–249

1,398
15.9%
–930
468
–106
362
4.1%
–162

6,426
18.4%
–1,014

5,413
15.5%
–1,039
4,374
–634
3,740
10.7%
–1,081

Q 1
2010

8,345
–3%

3,361
40.3%

1,536
18.4%
–241

1,295
15.5%
–
1,295
–137
1,158
13.9%
–278

200

2,659

880

192
9

Q 4
2009

468
930
249
–191
818
–119
140

2,626
32

Full
year
2009

4,374
1,039
1,014
–664
1,460
–507
127

876
4

Q 1
2010

1,295
–
241
–50
–475
–77
–64

Q 2
2010

9,356
2%

3,761
40.2%

1,780
19.0%
–265

1,515
16.2%
–
1,515
–152
1,363
14.6%
–333

1,031

1,019
11

Q 2
2010

1,515
–
265
–270
79
–170
21

Q 3
2010

9,474
6%

3,846
40.6%

1,875
19.8%
–245

1,630
17.2%
–
1,630
–190
1,440
15.2%
–341

1,099

1,090
9

Q 3
2010

1,630
–
245
–153
167
–29
30

Q 4
2010

9,648
6%

Full
year
2010

36,823
3%

3,869 14,836
40.3%
40.1%

1,851
19.2%
–244

1,606
16.6%
–
1,606
–201
1,405
14.6%
–334

1,071

1,064
7

Q 4
2010

1,606
–
244
–235
591
–179
58

7,041
19.1%
–995

6,046
16.4%
–
6,046
–680
5,366
14.6%
–1,286

4,080

4,050
30

Full
year
2010

6,046
–
995
–708
362
–455
45

838

1,584

2,125

2,296

6,843

870

1,440

1,890

2,085

6,285

0.752

1.35

1.79

1.782

1.432

0.75

1.06

1.31

1.48

Q 1
2009

14,013
–838
144
298
263
–
–
437

Q 2
2009

14,317
–1,584
224
397
66
1,317
–
–498

Q 3
2009

14,239
–2,125
147
2
511
–
–
–341

Q 4
2009

12,432
–2,296
161
210
331
–
–
210

Full
year
2009

14,013
–6,843
676
907
1,171
1,317
–
–193

Q 1
2010

11,048
–870
112
261
768
–
–
150

Q 2
2010

11,469
–1,440
182
241
373
1,317
48
418

Q 3
2010

12,608
–1,890
71
94
720
–
–
–739

Q 4
2010

10,864
–2,085
101
203
1,458
–
–
23

1.17

Full
year
2010

11,048
–6,285
465
799
3,319
1,317
48
–147

Net debt at end of period
Net debt / Equity ratio

14,317
0.71

14,239
0.74

12,432
0.67

11,048
0.57

11,469
0.57

12,608
0.62

10,864
0.55

10,564 10,564
0.51

0.51

NET DEBT

Long-term interest-bearing receivables
Short-term interest-bearing
investments including derivatives
Cash and bank balances
Pension obligations
Long-term interest-bearing liabilities
Short-term interest-bearing liabilities
including derivatives

Q 1
2009

–269

Q 2
2009

–256

Q 3
2009

–236

Q 4
2009

–244

–2,632
–1,280
1,222
8,659

–2,250
–1,800
1,200
11,227

–1,989
–1,303
1,093
10,471

–840
–1,579
1,118
10,692

Q 1
2010

–64

Q 2
2010

–60

–699
–1,216
1,114
10,561

–205
–1,271
1,150
10,265

Q 3
2010

–56

–252
–1,225
1,056
9,481

Q 4
2010

–62

–170
–1,280
1,078
8,134

8,617

6,117

4,395

1,901

1,773

2,729

1,860

2,864

Total

14,317

14,239

12,432

11,048

11,469

12,608

10,864

10,564

114

QUARTERLY INFORMATION

ASSA ABLOY ANNUAL REPORT 2010

CAPITAL EMPLOYED AND FINANCING

Capital employed
– of which, goodwill
– of which, other intangible and

tangible assets

– of which, shares in associates
Net debt
Non-controlling interests
Shareholders' equity, excluding
non-controlling interests

DATA PER SHARE, SEK

Earnings per share after tax
and before dilution
Earnings per share after tax and dilution
Earnings per share after tax and dilution
excluding Items affecting
comparability
Shareholders' equity per share
after dilution

NUMBER OF SHARES

Number of shares before dilution,
thousands
Weighted average number of shares
after dilution, thousands

Q 1
2009

Q 2
2009

Q 3
2009

Q 4
2009

34,540
21,443

33,494
20,857

31,108
19,992

30,382
20,333

8,214
55
14,317
163

7,972
54
14,239
152

7,379
52
12,432
149

7,541
39
11,048
162

Q 1
2010

Q 2
2010

Q 3
2010

Q 4
2010

31,523
22,480

33,051
23,659

30,495
22,085

31,385
22,279

7,797
38
11,469
167

8,160
37
12,608
174

7,450
37
10,864
157

8,336
37
10,564
169

20,060

19,110

18,526

19,172

19,887

20,269

19,474

20,652

Q 1
2009

Q 2
2009

Q 3
2009

Q 4
2009

Full
year
2009

Q 1
2010

Q 2
2010

Q 3
2010

Q 4
2010

Full
year
2010

1.96
1.92

2.30
2.25

2.39
2.36

0.52
0.54

7.18
7.06

2.39
2.36

2.79
2.74

2.98
2.93

2.91
2.86

11.07
10.89

2.20

2.25

2.36

2.41

9.22

2.36

2.74

2.93

2.86

10.89

59.55

54.28

53.47

55.29

54.76

56.94

57.89

55.65

58.65

58.64

Mar
2009

Jun
2009

Sep
2009

Dec
2009

Full
year
2009

Mar
2010

Jun
2010

Sep
2010

Dec
2010

Full
year
2010

365,918 365,918 365,918 365,918 365,918 365,918 365,918 365,918 366,177 366,177

380,713 380,197 377,748 376,534 376,534 372,931 372,882 372,827 372,810 372,810

¹ Excluding restructuring payments.
² Operating income before tax excluding items affecting comparability.
³ Items affecting comparability consist of restructuring costs for 2009.

Definitions of key data terms Organic growth

Change in sales for comparable units after adjustments
for acquisitions and exchange-rate effects.

Operating margin (EBITDA)
Operating income before depreciation and amortization
as a percentage of sales.

Operating margin (EBIT)
Operating income as a percentage of sales.

Profit margin (EBT)
Income before tax as a percentage of sales.

Operating cash flow
See the table in operating cash flow for information regard-
ing detailed items.

Net capital expenditure
Investments in fixed assets less disposals of fixed assets.

Depreciation
Depreciation/amortization of tangible and intangible
assets.

Net debt
Interest-bearing liabilities less interest-bearing assets.

Capital employed
Total assets less interest-bearing assets and non-interest-
bearing liabilities including deferred tax liability.

Equity ratio
Shareholders’ equity as a percentage of total assets.

Interest coverage ratio
Income before tax plus net interest divided by net interest.

Return on shareholders’ equity
Net income excluding non-controlling interests, plus inter-
est expenses after tax for convertible debenture loans, as a
percentage of average shareholders’ equity (excluding non-
controlling interests) after dilution.

Return on capital employed
Income before tax plus net interest as a percentage of aver-
age capital employed.

Earnings per share after tax and before dilution
Net income excluding non-controlling interests divided by
weighted average number of shares before dilution.

Earnings per share after tax and dilution
Net income excluding non-controlling interests, plus inter-
est expenses after tax for convertible debenture loans,
divided by weighted average number of shares after dilu-
tion.

Shareholders’ equity per share after dilution
Equity excluding non-controlling interests, plus convertible
debenture loan, divided by number of shares after dilution.

ASSA ABLOY ANNUAL REPORT 2010

QUARTERLY INFORMATION 115115

Proposed distribution of earnings

The following earnings are at the disposal of the Annual General Meeting:

Premium fund: SEK 34 M
Retained earnings brought forward: SEK 1,984 M
Net income for the year: SEK 1,492 M
TOTAL: SEK 3,510 M

The Board of Directors and the President and CEO propose that a dividend of SEK 4.00 per share, a total of SEK 1,466 M,
be distributed to shareholders and that the remainder, SEK 2,044 M, be carried forward to the new financial year.

The dividend amount is calculated on the number of outstanding shares as per 4 February 2011.

Wednesday, 4 May 2011 has been proposed as the record date for dividends. If the Annual General Meeting confirms this
proposal, dividends are expected to be distributed by Euroclear Sweden AB on Monday, 9 May 2011.

The Board of Directors and the President and CEO declare that the consolidated accounts have been prepared in accordance
with International Financial Reporting Standards, IFRS, as adopted by the EU and give a true and fair view of the Group’s
financial position and results. The Parent company’s annual accounts have been prepared in accordance with generally
accepted accounting principles in Sweden and give a true and fair view of the Parent company’s financial
position and results.

The Report of the Board of Directors for the Group and the Parent company gives a true and fair view of the development of
the Group’s and the Parent company’s business operations, financial position and results, and describes material risks and
uncertainties to which the Parent company and the other companies in the Group are exposed.

Stockholm, 4 February 2011

Gustaf Douglas
Chairman of the Board

Carl Douglas
Board member

Birgitta Klasén
Board member

Eva Lindqvist
Board member

Johan Molin
President and CEO

Sven-Christer Nilsson
Board member

Lars Renström
Board member

Ulrik Svensson
Board member

Seppo Liimatainen
Employee representative

Mats Persson
Employee representative

Our audit report was issued on 4 February 2011

PricewaterhouseCoopers AB

Peter Nyllinge
Authorized Public Accountant

116 PROPOSED DISPOSITION OF EARNINGS

ASSA ABLOY ANNUAL REPORT 2010

Audit report

To the General Meeting
of the shareholders of ASSA ABLOY AB,
Corporate identity number 556059-3575

We have audited the annual accounts, the consolidated
accounts, the accounting records and the administration of
the Board of Directors and the President and CEO of
ASSA ABLOY AB for the year 2010. The company’s annual
accounts and consolidated accounts are presented on pages
59–116 of the printed version of this document. The Board
of Directors and the President and CEO are responsible for
these accounts and the administration of the company as
well as for the application of the Annual Accounts Act when
preparing the annual accounts and the application of Inter-
national Financial Reporting Standards, IFRS, as adopted by
the EU, and the Annual Accounts Act when preparing the
consolidated accounts. Our responsibility is to express an
opinion on the annual accounts, the consolidated accounts
and the administration based on our audit.

We conducted our audit in accordance with generally
accepted auditing standards in Sweden. Those standards
require that we plan and perform the audit to obtain reason-
able assurance that the annual accounts and the consoli-
dated accounts are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the accounts. An audit also
includes assessing the accounting principles used and their
application by the Board of Directors and the President and
CEO and significant estimates made by the Board of Direc-
tors and the President and CEO when preparing the annual
accounts and consolidated accounts as well as evaluating
the overall presentation of information in the annual
accounts and the consolidated accounts. As a basis for our
opinion concerning discharge from liability, we examined

significant decisions, actions taken and circumstances of the
company in order to be able to determine the liability, if any,
to the company of any Board member or the President and
CEO. We also examined whether any Board member or the
President and CEO has, in any other way, acted in contraven-
tion of the Companies Act, the Annual Accounts Act or the
Articles of Association. We believe that our audit provides a
reasonable basis for our opinion set out below.

The annual accounts have been prepared in accordance
with the Annual Accounts Act and give a true and fair view of
the company’s financial position and results of operations in
accordance with generally accepted accounting principles
in Sweden. The consolidated accounts have been prepared
in accordance with International Financial Reporting Stan-
dards, IFRS, as adopted by the EU, and the Annual Accounts
Act and give a true and fair view of the Group’s financial posi-
tion and results of operations. A corporate governance
report has been prepared. The statutory administration
report and the corporate governance report are consistent
with the other parts of the annual accounts and the consoli-
dated accounts.

We recommend to the Annual General Meeting of share-

holders that the income statements and balance sheets of
the Parent company and the Group be adopted, that the
profit of the Parent company be dealt with in accordance
with the proposal in the administration report and that the
members of the Board of Directors and the President and
CEO be discharged from liability for the financial year.

Stockholm, 4 February 2011

PricewaterhouseCoopers AB

Peter Nyllinge
Authorized Public Accountant

ASSA ABLOY ANNUAL REPORT 2010

AUDIT REPORT

117

The ASSA ABLOY share

Share price trend in 2010
In 2010 ASSA ABLOY’s Series B share rose 38 percent to
SEK 189.50 (137.80), equivalent to a market capitalization
of SEK 69,391 M (50,423). During the same period, the
NASDAQ OMX Stockholm rose 23 percent. The highest
closing share price was SEK 199.20, recorded on 2 Decem-
ber 2010, and the lowest closing price was SEK 126.60,
recorded on 28 January 2010.

Listing and trading
ASSA ABLOY’s Series B share is listed on NASDAQ OMX
Stockholm, Large Cap. The share has been listed since
8 November 1994.

Total turnover of the ASSA ABLOY share on NASDAQ OMX

Stockholm amounted to 464 million (518) shares, which is
equivalent to an average turnover of 1.8 million shares (2.1)
per day. The turnover rate of the share was around 127 per-
cent (149), compared with a turnover rate of 95 percent
(119) on the NASDAQ OMX Stockholm and 99 percent
(126) on the Large Cap list.

The implementation of the EU Markets in Financial Instru-
ments Directive (MiFID) has changed the structure of equity
trading in Europe. Now that a share can be traded on mar-
kets other than the stock exchange where it is listed, trad-
ing has become more fragmented, while the total turnover
of many shares has increased. The ASSA ABLOY share is now
not only traded on the NASDAQ OMX Stockholm, but also
on several other markets. However, the Stockholm Stock
Exchange accounts for the majority of trading, where 51
percent of the shares were traded in 2010.

Ownership structure
The number of shareholders at year-end was 20,199
(22,014) and the ten largest shareholders accounted for
around 31 percent (37) of the share capital and 53 percent
(57) of the votes. Shareholders with more than 50,000
shares, a total of 378 shareholders, accounted for 95 per-
cent (94) of the share capital and 96 percent (96) of the
votes. Investors outside Sweden accounted for around 63
percent (53) of the capital and 43 percent (36) of the votes,
and were mainly in the USA and the UK.

SHARE PRICE TREND AND TURNOVER 2001–2010

DIVIDEND PER SHARE 2001–2010

300

250

200

150

100

SEK

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

120,000
100,000
80,000
60,000
40,000
20,000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Series B share

OMX Stockholm

No. of shares traded, thousands (incl. after hours)

2010 proposed dividend

Data per share

SEK/share¹

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2.98
1.00
0.7
30.5
151.00
186.00
94.50
35.80

Earnings after tax
and dilution 2
Dividend
Dividend yield, % 5
Dividend, % 2, 6
Share price at year-end
Highest share price
Lowest share price
Equity2
Number of shares,
thousands 7
1 Adjustments made for new issues.
2 2001–2003 have not been adjusted for IFRS.
3 Excluding items affecting comparability 2006, 2008 and 2009.
4 Proposed dividend.

3.53
1.25
1.3
32.2
99.50
159.50
76.50
35.85

361,730

370,935

3.31
1.25
1.5
33.9
85.50
110.00
67.00
31.23

370,935

6.33
2.60
2.3
42.0
113.50
113.50
84.00
34.74

6.97
3.25
2.6
47.6
125.00
126.00
89.25
42.85

7.993
3.25
2.2
64.0
149.00
151.00
109.00
39.13

9.02
3.60
2.8
40.5
129.75
164.00
124.50
46.76

9.213
3.60
4.1
52.3
88.50
126.00
69.75
55.91

9.223
3.60
2.6
47.8
137.80
142.50
71.50
54.76

378,718

376,033
5 Dividend as percentage of share price at year-end.
6 Dividend as percentage of adjusted earnings in line with dividend policy.
7 After full dilution.

380,713

372,931

10.89
4.004
2.1
37.0
189.50
199.20
126.60
58.64

372,736

118 THE ASSA ABLOY SHARE

ASSA ABLOY ANNUAL REPORT 2010

ASSA ABLOY’s ten largest shareholders
Based on the share register at 31 December 2010.

Shareholders

Series A shares

Series B shares

Investment AB Latour
SäkI
Melker Schörling AB
Capital Group Funds
Alecta
Swedbank Robur Funds
Harris Associates
SEB Funds & SEB Trygg Liv
Folksam-Group
SHB Funds
Other shareholders

Total number

Source: SIS Ägarservice AB and Euroclear Sweden AB.

6,746,425
7,118,818
5,310,080

19,000,000
2,300,000
9,162,136
19,245,000
12,180,000
8,488,574
7,525,100
6,703,247
5,568,553
5,400,679
251,428,582

Total number
of shares

25,746,425
9,418,818
14,472,216
19,245,000
12,180,000
8,488,574
7,525,100
6,703,247
5,568,553
5,400,679
251,428,582

Share capital, %

Votes, %

7.0
2.6
4.0
5.3
3.3
2.3
2.1
1.8
1.5
1.5
68.7

16.1
13.6
11.6
3.6
2.3
1.6
1.4
1.2
1.0
1.0
46.7

19,175,323

347,001,871

366,177,194

100.0

OWNERSHIP STRUCTURE (SHARE CAPITAL)

OWNERSHIP STRUCTURE (VOTES)

Investment AB Latour, 7.0 %
Capital Group Funds, 5.3 %
Melker Schörling AB, 4.0 %
Alecta, 3.3 %
SäkI, 2.6 %
Swedbank Robur Funds, 2.3 %
Harris Associates 2.1%
SEB Funds & SEB Trygg Liv, 1.8 %
Other shareholders, 71.6 %

Investment AB Latour, 16.1%
SäkI, 13.6%
Melker Schörling AB, 11.6%
Capital Group Funds, 3.6%
Alecta, 2.3%
Swedbank Robur Funds, 1.6%
Harris Associates 1.4%
SEB Funds & SEB Trygg Liv, 1.2%
Other shareholders, 48.6%

Share capital
ASSA ABLOY’s share capital at 31 December 2010 amounted to SEK 366,177,194, distributed among 19,175,323 Series A
shares and 347,001,871 Series B shares. All shares have a par value of SEK 1.00 and provide the holders with equal rights to
the company’s assets and earnings. Each Series A share carries ten votes and each Series B share one vote.

Year

1989
1994
1994
1994
1996
1996
1997
1998
1999
1999
1999
1999
1999
2000
2000
2000
2001
2002
2002
2010

Transaction

Split 100:1
Bonus issue
Non-cash issue
New share issue
Conversion of Series C shares into Series A shares
New share issue
Converted debentures
Converted debentures before split
Bonus issue
Split 4:1
New share issue
Converted debentures after split and new issues
Converted debentures
New share issue
Non-cash issue
Converted debentures
New share issue
Converted debentures
Converted debentures
Number of shares after dilution

Series A
shares

1,746,005
2,095,206
3,809,466
4,190,412
4,190,412
4,190,412

16,761,648
18,437,812
18,437,812
18,437,812
19,175,323
19,175,323
19,175,323
19,175,323
19,175,323
19,175,323
19,175,323

Series C
shares

20,000

1,428,550
1,714,260

Series B
shares

Share
capital, SEK

2,000,000

50,417,555
60,501,066
60,501,066
66,541,706
66,885,571
67,179,562

268,718,248
295,564,487
295,970,830
301,598,383
313,512,880
333,277,912
334,576,089
344,576,089
346,742,711
347,001,871
353,560,643

2,000,000
2,000,000

53,592,110
64,310,532
64,310,532
70,732,118
71,075,983
71,369,974

285,479,896
314,002,299
314,408,642
320,036,195
332,688,203
352,453,235
353,751,412
363,751,412
365,918,034
366,177,194
372,735,966

ASSA ABLOY ANNUAL REPORT 2010

THE ASSA ABLOY SHARE

119

The ASSA ABLOY share

Share capital and voting rights
The share capital at year-end amounted to SEK 366,177,194
distributed among a total of 366,177,194 shares, compris-
ing 19,175,323 Series A shares and 347,001,871 Series B
shares. All shares have a par value of SEK 1.00 and provide
the holders with equal rights to the company’s assets and
earnings. The total number of voting rights amounts to
538,755,101; each Series A share carries ten votes and each
Series B share one vote.

is published and has retained the shares acquired within
the framework of LTI 2010.

Each performance-based stock option entitles the
holder to receive one free Series B share in the company
three years after assignment, provided that the above con-
ditions have been fulfilled. In addition, the maximum level
in a range determined by the Board for the performance of
the company’s earnings per share in 2010 must have been
fulfilled.

Dividend and dividend policy
The objective of the dividend policy is that, in the long term,
the dividend should be equivalent to 33–50 percent of earn-
ings after standard tax, but always taking into account ASSA
ABLOY’s long-term financing requirements.

The Board of Directors and the CEO propose that a divi-
dend of SEK 4.00 per share (3.60), SEK 1,466 M, be paid to
shareholders for the 2010 financial year, equivalent to a div-
idend yield on Series B shares of 2.1 percent (2.6).

Incentive programs
Long-term incentive program
At the 2010 Annual General Meeting, it was decided to
launch a long-term incentive program (LTI 2010) for senior
executives and other key staff in the Group.

For each Series B share acquired by the CEO within the
framework of LTI 2010, the company assigns one matching
stock option and four performance-based stock options.
For each Series B share acquired by other members of the
Executive Team, the company assigns one matching stock
option and three performance-based stock options. For
other participants, the company assigns one matching
stock option and one performance-based stock option.
Each matching stock option entitles the holder to
receive one free Series B share in the company after three
years, provided that the holder is still employed in the
Group when the interim report for the first quarter 2013

Other equity-based incentive programs
ASSA ABLOY has issued a number of convertible debentures
to employees in the Group.

In 2006, it was decided to launch an incentive program

for senior executives, Incentive 2006. Any conversion of
Incentive 2006 can take place in a 180-day period from
December 2010 to June 2011. Conversion of the convert-
ible debentures relating to Incentive 2006 began in Decem-
ber 2010. Conversion is managed by an external party and
259,160 new Series B shares had been issued as at Decem-
ber 2010. Full conversion at a conversion rate of EUR 14.60
for Series 1, EUR 15.90 for Series 2, EUR 17.30 for Series 3
and EUR 18.60 for Series 4 results in an additional 2,332,350
shares.

In 2007, it was decided to launch a new incentive pro-
gram, Incentive 2007. Any conversion of Incentive 2007 can
take place in a 30-day period in May and June 2012. Full con-
version at a conversion rate of EUR 18.00 for Series 1, EUR
20.50 for Series 2, EUR 23.00 for Series 3 and EUR 25.40 for
Series 4 will add 4,679,610 shares.

Full conversion of Incentive 2006 and 2007 results in

an additional 7,011,960 shares and has a dilutive effect
of 1.9 percent on the share capital and 1.3 percent on the
total number of votes. At year-end 2010 Incentive 2006
amounted to EUR 35 M and Incentive 2007 to EUR 100 M.
Around 2,000 employees in some 15 countries are par-

ticipating in Incentive 2006 and Incentive 2007.

Analysts who follow ASSA ABLOY

Company

Name

Telephone

ABG Sundal Collier
Bank of America Merrill Lynch
Barclays Capital
Carnegie
Cheuvreux
Credit Suisse
Danske Bank
Deutsche Bank
DnBNOR
Dresdner Kleinwort
Enskilda Securities
Goldman Sachs
Handelsbanken Capital Markets
HSBC
ICAP Securities Ltd
JP Morgan
Morgan Stanley
Nordea
Nordea
Redburn Partners
Société Générale
Swedbank Markets
The Royal Bank of Scotland
The Royal Bank of Scotland
UBS
UniCredit Bank AG
Ålandsbanken
Öhman
Öhman

Christer Magnergård
Ben Maslen
Allan Smylie
Kenneth Toll Johansson
Andreas Dahl
Andre Kukhnin
Anders Idborg
Johan Wettergren
Lars Brorson
Colin Grant
Julian Beer
Sam Edmunds
Peder Frölén
Matt Williams
Nick Wilson
Nico Dil
Guillermo Peigneux
Ann-Sofie Nordh
Johan Trocmé
James Moore
Sébastien Grunter
Niclas Höglund
Daniel Cunliffe
Klas Bergelind
Fredric Stahl
Alasdair Leslie
Anders Roslund
David Jacobsson
Oscar Stjerngren

+46 8 566 286 26
+44 20 7996 4783
+44 20 7773 4873
+46 8 588 68 911
+46 8 723 51 63
+44 20 7888 0350
+46 8 568 80 570
+46 8 463 55 18
+44 20 7621 6149
+44 20 7475 9161
+46 8 522 296 52
+44 20 7552 1289
+46 8 701 12 51
+44 20 7991 6750
+44 20 7532 4683
+44 20 7325 4292
+34 9141 81398
+46 8 534 91 452
+46 8 5349 13 99
+44 20 7000 2135
+33 1 4213 4722
+46 8 5859 1800
+44 20 7678 9158
+44 20 7678 6001
+46 8 493 73 09
+44 20 7826 7961
+46 8 791 46 15
+46 8 402 52 72
+46 8 402 50 65

christer.magnergard@abgsc.se
ben.maslen@baml.com
allan.smylie@barcap.com
kentol@carnegie.se
adahl@cheuvreux.com
andre.kukhnin@credit-suisse.com
anders.idborg@danskebank.se
johan.wettergren@db.com
lars.brorson@dnbnor.no
colin.grant@dkib.com
julian.beer@enskilda.se
samson.edmunds@gs.com
pefr15@handelsbanken.se
matt.j.williams@hsbcib.com
nicholas.wilson@icap.com
nico.dil@jpmorgan.com
guillermo.peigneux@morganstanley.com
ann-sofie.nordh@nordea.com
johan.trocme@nordea.com
james.moore@redburn.com
sebastien.grunter@sgcib.com
niclas.hoglund@swedbank.se
daniel.cunliffe@rbs.com
klas.bergelind@rbs.com
fredric.stahl@ubs.com
alasdair.leslie@unicreditgroup.de
anders.roslund@alandsbanken.se
david.jacobsson@ohman.se
oscar.stjerngren@ohman.se

120

THE ASSA ABLOY SHARE

ASSA ABLOY ANNUAL REPORT 2010

Landmarked hotel in Beirut increases
productivity and security

VingCard Elsafe installed VISIONLINE, its wireless RF-online
system, and Signature RFID, its contactless electronic door
locks at the Intercontinental Phoenicia Beirut in Lebanon,
improving the hotel’s operations and overall security.
With VISIONLINE, the hotel is able to facilitate reliable
wireless two-way communication from standalone elec-
tronic door locks to their host security and PMS systems.
Total security control is provided from one central location
and RF-online communication capabilities eliminate the
need to travel to each guestroom to perform tasks including

reprogramming individual locks, remotely cancelling guest
and staff key cards, identifying and changing low batteries
and much more.

To complement the VISIONLINE system, the hotel also

chose Signature RFID contactless electronic door locks,
which offer highly reliable security features and provide
unprecedented convenience and ease-of-operation. The
RFID locks allow for contactless guest room entry and are
compatible with next-generation NFC mobile phones.

ASSA ABLOY ANNUAL REPORT 2010

Information for shareholders

Dividend
Wednesday, 4 May 2011 has been proposed as the record
date for dividends. If the Annual General Meeting confirms
this proposal, dividends are expected to be distributed by
Euroclear Sweden AB on Monday, 9 May 2011.

Further information
Niklas Ribbing, Head of Investor Relations
Telephone: +46 (0) 8 506 485 79
niklas.ribbing@assaabloy.com

Reports can be ordered from ASSA ABLOY AB
• Website
www.assaabloy.com
• Telephone +46 (0) 8 506 485 00
+46 (0) 8 506 485 85
• Fax
ASSA ABLOY AB
• Post
Box 70340
SE-107 23 Stockholm, Sweden

Financial reporting
First quarter: 28 April 2011
Second quarter: 27 July 2011
Third quarter: 28 October 2011
Fourth quarter and Year-end Report: February 2012
Annual Report 2011: March 2012

Online Annual Report
ASSA ABLOY’s online Annual Report has many user-friendly
functions. The texts can be read out loud and the financial
tables can be expanded and downloaded in Excel. All infor-
mation in the Annual Report can be found easily by menu
navigation or by using the Search function.
The online Annual Report is available at:
www.assaabloy.com/annualreport2010

Annual General Meeting
The Annual General Meeting of ASSA ABLOY will be held at
Moderna Museet (Museum of Modern Art), Skeppsholmen,
Stockholm at 15.00 on Friday, 29 April 2011. Shareholders
wishing to attend the Annual General Meeting should:
• Be registered in the share register kept by Euroclear

Sweden AB by Thursday, 21 April 2011.

• Notify ASSA ABLOY AB of their intention to attend by

Thursday, 21 April 2011.

Registration in the share register
In addition to notification of intention to attend, sharehold-
ers whose shares are nominee registered must be temporar-
ily registered in their own name in the share register (voting
right registration) to be able to attend the Annual General
Meeting. In order that this registration has been completed
by Thursday, 21 April 2011, the shareholder should contact
his/her bank or nominee well before that date.

Notification of intention to attend
• Website
• Address
•
• Telephone +46 (0) 8 506 485 14

www.assaabloy.com
ASSA ABLOY AB “årsstämman”,
Box 7842, SE-103 98 Stockholm

The notification should state:
• Name
• Personal or corporate identity number
• Address and daytime telephone number
• Number of shares
• Any accompanying advisers

A shareholder who is to be represented by a proxy should
submit a completed proxy form with the notification of
intention to attend the Annual General Meeting. Proxy
forms are available at: www.assaabloy.com.

Nomination Committee
The Nomination Committee has the task of preparing deci-
sions on the election of the Chairman and other members
of the Board of Directors, the appointment of the audi-
tor, the election of the Chairman of the Annual General
Meeting, and fees and associated matters. The Nomina-
tion Committee prior to the 2011 Annual General Meet-
ing comprises Gustaf Douglas (Investment AB Latour and
SäkI), Mikael Ekdahl (Melker Schörling AB), Liselott Ledin
(Alecta),Marianne Nilsson (Swedbank Robur Funds) and
Per-Erik Mohlin (SEB Funds/SEB Trygg Liv). Mikael Ekdahl is
Chairman of the Nomination Committee.

122

INFORMATION FOR SHAREHOLDERS

ASSA ABLOY ANNUAL REPORT 2010

Glossary

Aperio
Aperio is a new technology that enables mechanical locks to
be wirelessly linked to an existing access control system.
Aperio locks can be installed in a new or existing access con-
trol system and users can use the same credentials they have
for that system.

Lean
The Lean Production philosophy is to use as few resources as
possible. The focus is on just-in-time production, which
means that materials, parts and products are in the right
place at the right time. The Lean philosophy includes striving
for continuous improvement.

ElectroLynx
ElectroLynx is an ASSA ABLOY solution that simplifies the
process of introducing electrical hardware into a door. It has
a wiring scheme and simple, snap-together connectors that
can be used with all electrical ASSA ABLOY products and can
be installed inside doors as desired. The solution means that
installers themselves do not need to solder and connect
individual wires.

Gateway process
The ASSA ABLOY Product Innovation Process is based on a
structured Gateway approach, meaning that all projects
have to pass six gates on their way from idea to installed
products.

NFC
Near Field Communication (NFC) is a short-range wireless
connectivity standard that uses magnetic field induction to
enable communication between devices when they are
touched together or brought within a few centimeters of
each other.

OEM
Original Equipment Manufacturer, a company that makes
the final product that can be sold on the open market. Usu-
ally the OEM company does not sell the product directly to
the public but goes through dealers. The product may con-
sist of proprietary components or a combination of pur-
chased and proprietary.

High Definition Printing (HDP)
Fargo HDP – High Definition Printing – is a process used in
the production of tamper-evident and highly wear-resistant
ID cards. HDP produces high-quality images that are sand-
wiched between Fargo’s HDP film and the card, and that
essentially destroy themselves if there is any attempt to alter
the card.

RFID
Radio Frequency Identification is a technology for reading
and storing information remotely using small radio trans-
mitter/receivers and memories called tags. A tag can be
small enough to fit in a price tag on goods in a store, or
placed in a glass capsule and injected under a pet’s skin with
ID information. One current use of RFID is in keycards.

Hi-O
Highly Intelligent Opening is a standardized new technology
for security and control of door environments. Hi-O allows
interconnectivity – communication between all compo-
nents in a door solution.

ZigBee
ZigBee is a standard for wireless control of equipment in
homes, commercial properties, industry and other places
where there is a need for it. The technique consumes little
energy and the wireless platform makes it easy to install ret-
rospectively.

Inlay
An RFID inlay is one of the components in a contact-free
card or similar document. It consists of a circuit board con-
nected to an antenna mounted on plastic film.

ASSA ABLOY ANNUAL REPORT 2010

GLOSSARY 123

The ASSA ABLOY Group

ASSA ABLOY is the global leader in door opening solutions,
dedicated to satisfying end-user needs for security, safety and
convenience.

Key data

Data per share

Earnings per share after tax
and dilution, SEK/share
Equity per share after
dilution, SEK/share
Dividend, SEK/share
Number of shares after
dilution, thousands

2008¹

34,829
0
4
0
5,526²
15.9²
4,756²
4,769
17.2²

2008

9.21²

55.91
3.60

2009¹

34,963
–12
3
9
5,413²
15.5²
4,779²
6,843
16.2²

2009

9.22²

54.76
3.60

2010

Change

36,823
3
8
–6
6,046
16.4
5,366
6,285
18.5

+5%

+12%

+12%
–8%

2010

Change

+18%

10.89

58.64
4.00³

380,713

372,931

372,736

¹ 2008 and 2009 have been reclassified. ² Excluding items affecting comparability. ³ As proposed by the Board of Directors.

•

Important events during the year

Sales rose 5 percent to SEK 36,823 M (34,963).

Operating income amounted to SEK 6,046 M (5,413).

Earnings per share after full dilution amounted to
SEK 10.89 (9.22).

Operating cash flow amounted to SEK 6,285 M (6,843)

Investments in product development accelerated
and a large number of new products were launched.

A scalable infrastructure for secure delivery of
mobile keys was launched during the year.

•

Signed an agreement to acquire Cardo, a leading
Swedish industrial door company.

DEVELOPMENT 2006–2010

FOR A COMPLETE REVIEW OF THE GROUP AND ITS DIVISIONS, SEE PAGE 36–37

SALES AND OPERATING INCOME

INCOME BEFORE TAX AND OPERATING CASH FLOW

EARNINGS PER SHARE¹ AFTER TAX AND FULL DILUTION

DEVELOPMENT OF EARNINGS PER SHARE

Sales
SEK M

36,000

30,000

24,000

18,000

12,000

6,000

Operating income
SEK M

6,000

5,000

4,000

3,000

2,000

1,000

(cid:132) Sales1
Operating income2

¹ Figures for 2008 and 2009
are affected by reclassifica-
tion.
² Excluding items affecting

comparability, 2006, 2008
and 2009.

09 10

SEK M

7,000

6,000

5,000

4,000

3,000

2,000

1,000

(cid:132) Income before tax1
(cid:132) Operating cash flow

O
N
341

R D I C ECOL

123

I
N

TED M A T T E

09 10

¹ Excluding items affecting
comparability, 2006, 2008
and 2009.

SEK

09 10

¹ Excluding items affecting
comparability, 2006, 2008
and 2009.

SEK

11
10
9
8
7
6
5
4
3
2
1
0

ASSA ABLOY is the global
leader in door opening solutions,
dedicated to satisfying
end-user needs for security,
safety and convenience

www.assaabloy.com

A
S
S
A
A
B
L
O
Y

A
n
n
u
a
l

R
e
p
o
r
t
2
0
1
0

ASSA ABLOY AB
P.O. Box 70 340
SE-107 23 Stockholm
Klarabergsviadukten 90
SE-111 64 Stockholm
Tel +46 (0) 8 506 485 00
Fax +46 (0) 8 506 485 85

Annual Report
2010

The global leader in
door opening solutions

Contents

Report on operations

Divisions

CSR

Report of the Board
of Directors

Financial statements

Shareholder information

1
4
8
18
26
32
36
38
40
42
44
48
50
52
59
61
64
68
70
73
74

75
76
77
78
79
80
81
82
84
86
112
113
114
115
116
117
118
122
123

» Future shareholder value is based on organic
and acquired growth as well as continued
rationalization and synergies in the Group «

– Johan Molin, President and CEO

Cover photograph: Kitty Yu and daughter Chloe.