ABB 20F 2020 Annual report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM

20-F

☐

REGISTRATION STATEMENT

PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended

December 31, 2020

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

☐

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report ____________________

Commission file number:

001-16429

_________________________________________

ABB Ltd

(Exact name of registrant as specified in its charter)

Switzerland

(Jurisdiction of incorporation or organization)

Affolternstrasse 44

CH-8050

Zurich

Switzerland

(Address of principal executive offices)

Richard A. Brown

Affolternstrasse 44

CH-8050

Zurich

Switzerland

Telephone: +

317-7111

Facsimile:

+41-43-317-7992

(Name, Telephone, E-mail and/or Facsimile

number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the

Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

American Depositary Shares

each representing one Registered Share

ABB

New York Stock Exchange

Registered Shares, par value CHF 0.12

N/A

New York Stock Exchange

_________________________________________

Securities registered or to be registered pursuant to Section 12(g) of the

Act: None.

Securities for which there is a reporting obligation pursuant to

Section 15(d) of the Act: None.

Indicate the number of outstanding shares of each of the issuer’s

classes of capital or common stock as of the close of the period covered

by the annual report:

2,030,834,169

Registered Shares

_________________________________________

Indicate by check mark if the registrant is a well-known seasoned

issuer, as defined in Rule 405 of the Securities Act.

Yes

☒

⬜

If this report is an annual or transition report, indicate by check

mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)

of the Securities

Exchange Act of 1934. Yes

☐

☒

Note – Checking the box above will not relieve any registrant required

to file reports pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934 from their

obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports

required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the

preceding 12 months (or for such shorter period that the registrant was

required to file such reports), and (2) has been subject to such

filing requirements for the past

90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically

every Interactive Data File required to be submitted pursuant to

Rule 405 of Regulation S-T

(§232.405 of this chapter) during the preceding 12 months (or

for such shorter period that the registrant was required to submit

such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large

accelerated filer, an accelerated filer,

a non-accelerated filer, or an emerging growth company

See definition of

“large accelerated filer,” “accelerated filer,

”

and “emerging growth company” in Rule 12b-2 of the Exchange

Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Emerging growth company

☐

If an emerging growth company that prepares its financial

statements in accordance with U.S. GAAP,

indicate by check mark if the registrant has elected not to

use the

extended transition period for complying with any new or revised

financial accounting standards†

provided pursuant to Section 13(a) of the Exchange Act.

☐

† The term “new or revised financial accounting standard” refers

to any update issued by the Financial Accounting Standards Board

to its Accounting Standards

Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a

report on and attestation to its management’s

assessment of the effectiveness of its internal control over

financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15

U.S.C. 7262(b)) by the registered public accounting firm tha

prepared or issued its audit report.

☒

Indicate by check mark which basis of accounting the registrant has

used to prepare the financial statements included in this filing:

U.S. GAAP

☒

International Financial Reporting Standards as issued

by the International Accounting Standards Board

☐

Other

☐

If “Other” has been checked in response to the previous question,

indicate by check mark which financial statement item the registrant

has elected to follow.

Item 17

☐

Item 18

☐

If this is an annual report, indicate by check mark whether the registrant

is a shell company (as defined in Rule 12b-2 of the Exchange

Act). Yes

☐

☒

__________________________________________________

* Listed on the New York

Stock Exchange not for trading or quotation purposes,

but only in connection with the registration of American Depositary Shares

pursuant to

the requirements of the Securities and Exchange Commission.

(i)

TABLE OF CONTENTS

Page

PART

Item 1.

Identity of Directors, Senior Management and Advisers

Item 2.

Offer Statistics and Expected Timetable

Item 3.

Key Information

Item 4.

Information on the Company

Item 4A.

Unresolved Staff Comments

Item 5.

Operating and Financial Review and Prospects

Item 6.

Directors, Senior Management and Employees

Item 7.

Major Shareholders and Related Party Transactions

133

Item 8.

Financial Information

133

Item 9.

The Offer and Listing

135

Item 10.

Additional Information

135

Item 11.

Quantitative and Qualitative

Disclosures About Market Risk

143

Item 12.

Description of Securities Other than Equity Securities

145

PART

146

Item 13.

Defaults, Dividend Arrearages and Delinquencies

146

Item 14.

Material Modifications to the Rights of Security Holders

and Use of Proceeds

146

Item 15.

Controls and Procedures

146

Item 16A.

Audit Committee Financial Expert

147

Item 16B.

Code of Ethics

147

Item 16C.

Principal Accountant Fees and Services

148

Item 16D.

Exemptions from the Listing Standards for Audit Committees

148

Item 16E.

Purchase of Equity Securities by Issuer and Affiliated

Purchasers

149

Item 16F.

Change in Registrant’s Certifying

Accountant

149

Item 16G.

Corporate Governance

149

Item 16H.

Mine Safety Disclosure

149

PART

III

150

Item 17.

Financial Statements

150

Item 18.

Financial Statements

150

Item 19.

Exhibits

151

INTRODUCTION

ABB Ltd is a corporation organized under the

laws of Switzerland. In this Annual Report on Form 20-F

(Annual Report), “the ABB Group,”

“the Group,”

“ABB,” the “Company,”

“we,” “our” and “us” refer to ABB Ltd and

its consolidated subsidiaries (unless the context otherwise

requires). We

also use these terms to refer to ABB Asea

Brown Boveri Ltd and its subsidiaries prior to the establishment

of ABB Ltd as the holding company for the entire ABB

Group in 1999, as described in this Annual Report under

“Item 4. Information on the Company—Introduction—History

of the ABB Group”. Our American Depositary Shares

(each representing one registered share of ABB Ltd) are referred

to as “ADSs”. The registered shares of ABB Ltd are referred

to as “shares”. Our principal corporate offices

are located

at Affolternstrasse 44, CH-8050 Zurich, Switzerland,

telephone number +41-43-317-7111.

FINANCIAL AND OTHER INFORMATION

The Consolidated Financial Statements of ABB Ltd, including

the Notes thereto, as of December 31, 2020 and

2019, and for each of the years in the three-year period

ended December 31, 2020, (our Consolidated Financial

Statements) have been prepared in accordance with United

States generally accepted accounting principles

(U.S. GAAP).

In this Annual Report: (i) “$,” “U.S. dollar”

and “USD” refer to the lawful currency of the United States of

America; (ii) “CHF” and “Swiss franc”

refer to the lawful currency of Switzerland; (iii) “EUR”

and “euro”

refer to the

lawful currency of the participating member states of the

European Economic and Monetary Union (Eurozone);

(iv) “SEK” and “Swedish krona” refer to the lawful

currency of Sweden; (v) “Chinese renminbi” and “CNY” refer to the

lawful currency of the People’s

Republic of China; (vi) “AED” refers to the lawful

currency of the United Arab

Emirates; (vii) “INR” and “Indian Rupee”

refer to the lawful currency of India, and (viii) “HKD” refers to the

Hong

Kong dollar. Information

contained on, or that can be accessed through, our Web

site does not constitute a part of this

annual report and is not incorporated by reference herein.

Except as otherwise stated, all monetary amounts in this

Annual Report are presented in U.S. dollars. Where

specifically indicated, amounts in Swiss francs have been

translated into U.S. dollars. These translations are provided

for

convenience only,

and they are not representations that the Swiss franc could be

converted into U.S. dollars at the rate

indicated. The twelve o’clock buying rate in the City of

New York

for cable transfers as certified for customs purposes

by the Federal Reserve Bank of New York

for Swiss francs on December 31,

2020,

was $1.00 = CHF 0.8841.

The

twelve o’clock buying rate for Swiss francs on February

19,

2021,

was $1.00 = CHF 0.8948.

FORWARD

-LOOKING STATEMENTS

This Annual Report includes forward-looking statements within

the meaning of the United States Private

Securities Litigation Reform Act of 1995.

We intend such

forward-looking statements to be covered by the safe harbor

provisions for forward-looking statements contained

in Section 27A of the Securities Act of 1933,

as amended, and

Section 21E of the Securities Exchange Act of 1934,

as amended (Exchange Act). These forward-looking statements can

be identified by the use of forward-looking terminology,

including the terms “believes,”

“estimates,” “anticipates,”

“expects,”

“intends,”

“may,”

“will,” or “should”

or, in each case, their negative,

or other variations or comparable

terminology. These

forward-looking statements include all matters that are not

historical facts. They appear in a number

of places throughout this Annual Report and include

statements regarding our intentions, beliefs or current expectations

concerning, among other things, our results of operations,

financial condition, liquidity,

prospects, growth, dispositions,

strategies and the countries and industries in which we

operate.

These forward looking statements include, but are not limited

to, statements about our financial condition and

performance, operating results, liquidity and our ability

to fund our business operations and initiatives, the impact of the

COVID-19 pandemic on our business, capital expenditure

and debt service obligations, plans regarding

our capital

structure, ability to take advantage of market opportunities and

drive growth, our products and service offerings and

their anticipated performance and impact across various

industries and consumer segments, anticipated benefits to

the

shareholders, planned divestments, acquisitions and integration,

and related synergies and other benefits, investment and

risk management strategies, volatility in the credit

markets, oil prices, foreign currency exchange rates and other market

conditions, trends and opportunities, industry trends and

expectations, including the Energy and Fourth Industrial

Revolutions and changing consumer behavior and demands,

our ability to respond to changing business and economic

conditions, our comparative advantages, our commitments

and contingencies, availability of raw materials, and other

plans, goals, strategies, priorities and initiatives related to

our business, including our brand management initiative, the

implementation of ABB Way,

and cost-saving measures, as well as, the following:

•

statements in “Item 3. Key Information—Dividends and

Dividend Policy”

regarding our policy on future

dividend payments,

•

statements in “Item 3. Key Information—Risk Factors,”

•

statements in “Item 5. Operating and Financial Review and

Prospects”

regarding our management

objectives, including our outlook, as well as trends in results, prices,

volumes, operations, margins and

overall market trends, and

•

statements in “Item 8. Financial Information—Legal Proceedings

”

regarding the outcome of certain legal

and compliance matters.

By their nature, forward-looking statements involve risks and

uncertainties because they relate to events and

depend on circumstances that may or may not occur in

the future. We caution

you that forward-looking statements are

not guarantees of future performance and that our actual

results of operations, financial condition and liquidity,

and the

development of the countries and industries in which

we operate, may differ materially from those described

in or

suggested by the forward-looking statements contained

in this Annual Report. In addition, even if our results of

operations, financial condition and liquidity,

and the development of the countries and industries in which we

operate,

are consistent with the forward-looking statements contained

in this Annual Report, those results or developments may

not be indicative of results or developments in subsequent

periods. Important factors that could cause actual results to

differ materially from our expectations are contained

in cautionary statements in this Annual Report and include,

without limitation, the following:

Business, economic and industry risks

•

Our business is exposed to risks associated with the COVID

-19 pandemic.

•

Our business is exposed to risks associated with the volatile

global economic environment and political

conditions.

•

Our operations in emerging markets expose us

to risks associated with conditions in those markets.

•

We may encounter

difficulty in managing our business due to the global

nature of our operations.

•

We operate

in very competitive and rapidly changing markets and could

be adversely affected if we fail to

keep pace with technological changes.

•

Industry consolidation could result in more powerful

competitors and fewer customers.

•

Increases in costs or limitation of supplies of raw materials

may adversely affect our financial performance.

•

Our multi-national operations expose us to the risk of

fluctuations in currency exchange rates.

•

The uncertainties relating to the United Kingdom’s

new relationship with the European Union and its

potential impact on the relationship between Switzerland

and the European Union, may have a negative

effect on cross-border trade and our business.

Operational risks

•

Increased information technology (IT) security threats

and more sophisticated cyber‑attacks could pose a

risk to our systems, networks, products, solutions and

services.

•

Our business strategy may include making strategic

divestitures. There can be no assurance that any

divestitures will provide business benefit.

•

Anticipated benefits of historical, existing and potential

future mergers, acquisitions, joint ventures or

strategic alliances may not be realized.

•

There is no guarantee that our ongoing efforts

to reduce costs will be successful.

•

Illegal behavior by any of our employees or agents could

have a material adverse impact on our

consolidated operating results, cash flows, and financial

position as well as on our reputation and our

ability to do business.

•

We may be

the subject of product liability claims.

•

Undertaking long‑term, technically complex projects or

projects that are dependent upon factors not

wholly within our control could adversely affect

our profitability and future prospects.

•

If we are unable to obtain performance and other guarantees

from financial institutions, we may be

prevented from bidding on, or obtaining, some contracts, or

our costs with respect to such contracts could

be higher.

•

Our hedging activities may not protect us against the

consequences of significant fluctuations in exchange

rates, interest rates or commodity prices on our earnings

and cash flows.

Legal and regulatory risks

•

An inability to protect our intellectual property rights

could adversely affect our business.

•

Failure to comply with evolving data privacy and

data protection laws and regulations or to otherwise

protect personal data, may adversely impact our business

and financial results.

•

Examinations by tax authorities and changes in tax regulations

could result in lower earnings and cash

flows.

•

We are subject

to environmental laws and regulations in the countries in

which we operate. We

incur costs

to comply with such regulations, and our ongoing operations

may expose us to environmental liabilities.

•

We could be

affected by future laws or regulations enacted to address

climate change concerns as well as

the physical effects of climate change.

General risk factors

•

If we are unable to attract and retain qualified management

and personnel then our business may be

adversely affected.

•

Our business subjects us to considerable potential exposure

to litigation and legal claims and could be

materially adversely affected if we incur

legal liability.

We urge

you to read the other important factors set forth under sections

of this Annual Report entitled “Item 3.

Key Information—Risk Factors,”

“Item 4. Information on the Company”

and “Item 5. Operating and Financial Review

and Prospects” for a more complete discussion of the

important factors that could affect our future performance

and the

countries and industries in which we operate. In light of

these risks, uncertainties and assumptions, the forward-looking

circumstances described in this Annual Report and the

assumptions underlying them may not occur.

Except as required by law or applicable stock exchange

rules or regulations, we undertake no obligation to

update or revise publicly any forward-looking statement,

whether as a result of new information, future events or

otherwise. All subsequent written and oral forward-looking

statements attributable to us or to persons acting on our

behalf are expressly qualified in their entirety by the cautionary

statements referred to above and contained elsewhere in

this Annual Report.

PART

Item 1.

Identity of Directors, Senior Management and Advisers

Not applicable

Item 2.

Offer Statistics and Expected Timetable

Not applicable

Item 3.

Key Information

SELECTED FINANCIAL DATA

The following table presents our selected financial

and operating information at the dates and for each of the

periods indicated. We

report our financial results in U.S. dollars. Due to our global

operations, a significant amount of

our revenues, expenses, assets and liabilities are denominated

in other currencies. As a consequence, movements in

exchange rates between currencies may affect

our profitability, the comparability

of our results between periods, as well

as the reported carrying value of our assets and liabilities. You

should read the following information together with the

information contained in “Item 5. Operating and Financial

Review and Prospects,”

as well as our Consolidated Financial

Statements and the Notes thereto, included elsewhere in

this Annual Report.

Our selected financial data in the following tables as well as financial

information in “Item 5. Operating and

Financial Review and Prospects” is presented in accordance

with U.S. GAAP and have been derived from our published

Consolidated Financial Statements. Our Consolidated

Financial Statements as of and for each of the years ended

December 31, 2020, 2019 and 2018, were audited by KPMG AG.

Our Consolidated Financial Statements as of

December 31, 2017, and for each of the years ended

December 31, 2017 and 2016, were audited by Ernst & Young

AG.

Our Consolidated Financial Statements as of December

31, 2016 have not been audited following the reclassification

2018 of the Power Grids business from continuing operations

to discontinued operations.

INCOME STATEMENT

DATA:

($ in millions, except per share data in $)

2020

2019

2018

2017

2016

Total

revenues

26,134

27,978

27,662

25,196

24,929

Total

cost of sales

(18,256)

(19,072)

(19,118)

(17,350)

(17,396)

Gross profit

7,878

8,906

8,544

7,846

7,533

Selling, general and administrative expenses

(4,895)

(5,447)

(5,295)

(4,765)

(4,532)

Non-order related research and development expenses

(1,127)

(1,198)

(1,147)

(1,013)

(967)

Impairment of goodwill

(311)

—

Other income (expense), net

(323)

124

162

(105)

Income from operations

1,593

1,938

2,226

2,230

1,929

Interest and dividend income

Interest and other finance expense

(240)

(215)

(262)

(234)

(201)

Losses from extinguishment of debt

(162)

—

Non-operational pension (cost) credit

(401)

(38)

Income from continuing operations before

taxes

841

1,862

2,119

2,102

1,761

Income tax expense

(496)

(772)

(544)

(583)

(526)

Income from continuing operations, net of

tax

345

1,090

1,575

1,519

1,235

Income from discontinued operations, net of tax

4,860

438

723

846

799

Net income

5,205

1,528

2,298

2,365

2,034

Net income attributable to noncontrolling interests

(59)

(89)

(125)

(152)

(135)

Net income attributable to ABB

5,146

1,439

2,173

2,213

1,899

Amounts attributable to ABB shareholders:

Income from continuing operations, net of tax

294

1,043

1,514

1,441

1,172

Income from discontinued operations, net of tax

4,852

396

659

772

727

Net income

5,146

1,439

2,173

2,213

1,899

Basic earnings per share attributable

to ABB shareholders:

Income from continuing operations, net of tax

0.14

0.49

0.71

0.67

0.54

Income from discontinued operations, net of tax

2.30

0.19

0.31

0.36

0.34

Net income

2.44

0.67

1.02

1.04

0.88

Diluted earnings per share attributable

to ABB shareholders:

Income from continuing operations, net of tax

0.14

0.49

0.71

0.67

0.54

Income from discontinued operations, net of tax

2.29

0.19

0.31

0.36

0.34

Net income

2.43

0.67

1.02

1.03

0.88

Weighted

-average number of shares outstanding

(in millions)

used to compute:

Basic earnings per share attributable to ABB shareholders

2,111

2,133

2,132

2,138

2,151

Diluted earnings per share attributable to ABB shareholders

2,119

2,135

2,139

2,148

2,154

BALANCE SHEET DATA:

unaudited

December 31,

($ in millions)

2020

2019

2018

2017

2016

Cash and equivalents and current restricted cash

3,601

3,544

3,445

4,526

3,644

Marketable securities and short-term investments

2,108

566

712

1,083

1,953

Restricted cash - non-current

300

—

Total assets

(1)

41,088

46,108

44,441

43,458

39,391

Long-term debt (excluding current maturities of long-term

debt)

4,828

6,772

6,587

6,682

5,785

Total debt

(2)

6,121

9,059

8,618

7,408

6,783

Common stock

188

192

Total stockholders’

equity (including noncontrolling interests)

15,999

13,980

14,534

15,349

13,897

CASH FLOW DATA:

($ in millions)

2020

2019

2018

2017

2016

Operating activities:

Net cash provided by operating activities — continuing operations

1,875

1,899

2,352

2,588

2,607

Net cash provided by (used in) operating activities — discontinued

operations

(182)

426

572

1,211

1,236

Net cash provided by operating activities

1,693

2,325

2,924

3,799

3,843

Investing activities:

Net cash used in investing activities — continuing operations

(2,272)

(651)

(2,908)

(1,118)

(1,108)

Net cash provided by (used in) investing activities — discontinued

operations

9,032

(164)

(177)

(332)

(197)

Net cash provided by (used in) investing activities

6,760

(815)

(3,085)

(1,450)

(1,305)

Financing activities:

Net cash used in financing activities — continuing operations

(8,206)

(1,328)

(741)

(1,688)

(3,308)

Net cash provided by (used in) financing activities — discontinued

operations

(55)

(48)

(47)

Net cash used in financing activities

(8,175)

(1,383)

(789)

(1,735)

(3,355)

(1)

Total assets

includes ass

ets held for

sale and in

discontinued

operations. See

“Note 3 - Discontinued

operations”

to our Consolidated

Financial Statements.

(2)

Total debt

is equal to

the sum of short

-term debt (including

current maturities

of long-term

debt) and long

-term debt.

DIVIDENDS AND DIVIDEND POLICY

Payment of dividends is subject to general business conditions,

ABB’s current and expected

financial condition

and performance and other relevant factors including

growth opportunities. ABB’s current

dividend policy is to pay a

rising, sustainable annual

dividend per share over time.

The unconsolidated statutory financial statements of ABB Ltd

are prepared in accordance with the Swiss Code

of Obligations.

Based on these financial statements, dividends may be paid only

if ABB Ltd has sufficient distributable

profits from previous years or sufficient free

reserves to allow the distribution of a dividend. As a holding company,

ABB Ltd’s main sources of

income are dividend and interest payments from its subsidiaries.

At December 31, 2020, the total unconsolidated stockholders’ equity

of ABB Ltd was CHF 9,063 million,

including CHF 260 million representing share capital, CHF 12,032

million representing reserves and CHF 3,229 million

representing a reduction of equity for own shares (treasury

stock). Of the reserves, CHF 3,229 million relating to own

shares and CHF 52 million representing 20 percent of share

capital, are restricted and not available for distribution.

With respect to the years

ended December 31, 2016, 2017,

2018 and 2019,

ABB Ltd paid a dividend of

CHF 0.76 (USD 0.76) per share, CHF 0.78 (USD 0.81)

per share, CHF 0.80 (USD 0.79) per share and CHF 0.80

(USD 0.82)

per share,

respectively.

The USD amounts for each of the foregoing dividend payments made

in CHF have

been translated using the average rates of the months

in which the dividends were paid.

With respect to the year ended December

31, 2020,

ABB Ltd’s Board of Directors

has proposed to pay a

dividend of CHF 0.80 per share to shareholders. The distribution

is subject to approval by shareholders at ABB Ltd’s

2021 Annual General Meeting (AGM).

For further information on dividends and dividend policy

see “Item 6. Directors, Senior Management and

Employees—Shareholders—Shareholders’ rights—Shareho

lders’ dividend rights”.

RISK FACTORS

You

should carefully consider all of the

information set forth in this Annual Report and the following

description of risks and uncertainties that we currently

believe may exist. Our business, financial condition or results

operations could be adversely affected by any of these

risks. Additional risks of which we are unaware

or that we

currently deem immaterial may also impair

our business operations. This Annual Report also contains

forward-looking

statements that involve risks and uncertainties. Our results

could differ materially from those

anticipated in these

forward-looking statements as a result

of certain factors, including those described below and

elsewhere in this Annual

Report. See “Forward-Looking Statements”.

Business, economic and industry risks

Our business is exposed to risks associated with the COVID-19

pandemic.

The novel coronavirus (COVID-19)

pandemic has had, and continues to have, significant impacts on

the global

economy including on demand for products, operational

predictability, the movement

of people and products across

borders, supply chains and the cost of capital. Given the global

nature of our business, COVID-19 has adversely

impacted our revenues and operating margins

in all of our businesses and is expected to continue to do

so at least in the

short term. In particular, our service

businesses have been materially impacted and some customer

industries, most

notably cruise operators, are operating significantly below

their normal levels. The ultimate extent to which the

pandemic impacts our business, liquidity,

results of operations and financial condition will depend on

future

developments, which are highly uncertain and cannot

be predicted with confidence, including the availability and

effectiveness of vaccines, future mutations

of the COVID-19 virus and any resulting impact on the effectiveness

vaccines, the duration and extent of the pandemic and

waves of infection, travel restrictions and social distancing, the

duration and extent of business closures and business disruptions

and the effectiveness of actions taken to contain,

treat

and prevent the disease. If we or our customers experience

prolonged shutdowns or other business disruptions, our

business, liquidity,

results of operations and financial condition may be materially

adversely affected and our ability to

access the capital markets may be limited.

Our business is exposed to risks associated with the volatile global

economic environment and political conditions.

Adverse changes in economic or political conditions,

particularly in locations where our customers or

operations are located, as well as concerns about global

trade, global health crises, developments in energy

prices, and

terrorist activities, could have a material adverse effect

on our business, financial condition, results of operations and

liquidity and may adversely impact the demand for our

products and services. These and other factors may prevent

our

customers and suppliers from obtaining the financing

required to pursue their business activities as planned, which

may

force them to modify,

delay or cancel plans to purchase or supply our products or

services. In addition, if our customers

do not generate sufficient revenue, or fail

to timely obtain access to the capital markets, they may not

be able to pay, or

may delay payment of, the amounts they owe us. Customers

with liquidity issues may lead to additional bad debt

expense for us, which may adversely affect

our results of operations and cash flows. We

are also subject to the risk that

the counterparties to our credit agreements and hedging

transactions may go bankrupt if they suffer catastrophic

demand

on their liquidity that prevents them from fulfilling their

contractual obligations to us.

Our business environment is influenced also by numerous

other economic or political uncertainties which may

affect the global economy and the international

capital markets. In periods of slow economic growth or

decline, our

customers are more likely to buy less of our products and

services, and as a result we are more likely to experience

decreased revenues. Our Businesses are affected by

the level of investments and demand in the markets that we serve,

principally utilities, industry and transport & infrastructure.

At various times during the last several years, we also have

experienced, and may experience in the future, gross margin

declines in certain businesses, reflecting the effect

factors such as competitive pricing pressures, inventory write-downs,

charges associated with the cancellation of

planned expansion and increases in component and manufacturing

costs resulting from higher labor and material costs

borne by our manufacturers and suppliers that, as a result

of competitive pricing pressures or other factors, we are unable

to pass on to our customers. Economic downturns also may

lead to restructuring actions and associated expenses.

Uncertainty about future economic conditions makes it difficult

for us to forecast operating results and to make

decisions about future investments.

In addition, we are subject to the risks that our business operations

in or with certain countries may be

adversely affected by trade tariffs, trade

or economic sanctions or other restrictions imposed on these countries

including the trade tensions between the United States and

China in recent years.

These could lead to increased costs for

us or for our customers or limit our ability to do business in

or with certain countries. In addition, actual or potential

investors that object to certain of these business operations

may adversely affect the price of our shares by

disposing or

deciding not to purchase our shares. These countries may

from time to time include countries that are identified by the

United States as state sponsors of terrorism. If any countries

where or with whom we do business are subject to such

sanctions or restrictions, our business, consolidated operating

results, financial condition and the trading price of our

shares may be adversely affected. In 2020,

our total revenues from business with countries identified by the

U.S.

government as state sponsors of terrorism represented significantly

less than 1 percent of our total revenues. Based on

the amount of revenues and other relevant quantitative and

qualitative factors, we have determined that our business in

2020 with countries identified by the U.S. government

as state sponsors of terrorism was not material.

Our operations in emerging markets expose us to risks associated

with conditions in those markets.

A significant amount of our operations is conducted in

the emerging markets in South America, Asia, and the

Middle East and Africa. In 2020, approximately 40 percent

of our consolidated revenues were generated from these

emerging markets. Operations in emerging

markets can present risks that are not encountered in countries with

well-established economic and political systems, including:

•

economic instability,

which could make it difficult for us to anticipate future

business conditions in these

markets, cause delays in the placement of orders for projects

that we have been awarded and subject us to

volatile geographic markets,

•

political or social instability,

which could make our customers less willing to make cross-border

investments in such regions and could complicate our

dealings with governments regarding permits or

other regulatory matters, local businesses and workforces,

•

boycotts and embargoes that may be imposed

by the international community on countries in which we do

business or where we seek to do business could adversely

affect the ability of our operations in those

countries to obtain the materials necessary to fulfill contracts

and our ability to pursue business or establish

operations in those countries,

•

foreign state takeovers of our and our customers’ facilities,

•

significant fluctuations in interest rates and currency

exchange rates,

•

the imposition of unexpected taxes or other payments on

our revenues in these markets,

•

our inability to obtain financing and/or insurance coverage

from export credit agencies, and

•

the introduction of exchange controls and other

restrictions by foreign governments.

Additionally, political

and social instability resulting from increased violence in certain

countries in which we

do business has raised concerns about the safety of our

personnel. These concerns may hinder our ability to send

personnel abroad and to hire and retain local personnel.

Such concerns may require us to increase security for personnel

traveling to and working in affected countries

or to restrict or wind-down operations in such countries, which

may

negatively impact us and result in higher costs and inefficiencies.

Consequently, our

exposure to the conditions in or affecting emerging

markets may adversely affect our

business, financial condition, results of operations and

liquidity.

We may encounter difficulty

in managing our business due to the global nature of

our operations.

We operate

in approximately 100 countries around the world and,

as of December 31, 2020, employed about

105,600 people, of which approximately 47 percent were

located in the Europe region, approximately 27 percent in the

Asia, Middle East and Africa region and approximately

26 percent in the Americas region. To

manage our day-to-day

operations, we must deal with cultural and language barriers

and assimilate different business practices. Due

to our

global nature, we deal with a range of legal and regulatory

systems some of which are less developed and less

well-enforced than others. The laws and regulations to

which we are subject can change rapidly and in unexpected

directions. All of this may impact our ability to protect our

contractual, intellectual property and other legal rights. In

addition, we are required to create compensation programs,

employment policies and other administrative programs

that

comply with the laws of multiple countries. We

also must communicate, monitor and uphold group-wide

standards and

directives across our global network, including in relation

to our suppliers, subcontractors and other relevant

stakeholders. Our failure to manage successfully our geographically

diverse operations could impair our ability to react

quickly to changing business and market conditions and

to enforce compliance with group-wide standards and

procedures.

We operate in very

competitive and rapidly changing markets and could

be adversely affected if we fail to keep pace

with technological changes.

We operate

in very competitive and rapidly changing markets where

we regularly need to innovate and develop

products, systems, services and solutions that address the business challenges

and needs of our customers. The nature of

these challenges varies across the geographic markets

and product areas that we serve. The markets for our products

and

services are characterized by evolving industry standards,

which may require us to modify our products and systems.

The continual development of advanced technologies for

new products and product enhancements is an important way

in which we remain competitive and maintain acceptable

pricing levels. If we fail to keep pace with technological

changes in the industrial sectors that we serve, we may

experience lower revenues, price erosion and lower margins.

Our primary competitors are sophisticated companies

with significant resources that may develop products and

services that are superior to our products and services or

may adapt more quickly than we do to new technologies,

industry changes or evolving customer requirements. We

are also facing increased competition from low cost

competitors in emerging markets, which may

give rise to increased pressure to reduce our prices. Our failure

anticipate or respond quickly to technological developments

or customer requirements could adversely affect

our

business, results of operations, financial condition and

liquidity.

Industry consolidation could result in more powerful competitors and

fewer customers.

Competitors in the industries in which we operate are

consolidating. In particular, the automation industry

undergoing consolidation that is reducing the number

but increasing the size of companies that compete with us. As our

competitors consolidate, they likely will increase their market

share, gain economies of scale that enhance their ability

compete with us and/or acquire additional products and

technologies that could displace our product offerings.

Our customer base also is undergoing consolidation.

Consolidation within our customers’ industries (such as

the marine and cruise industry,

automotive, aluminum, steel, pulp and paper and pharmaceutical

industries and the oil

and gas industry) could affect our customers and

their relationships with us. If one of our competitors’ customers

acquires any of our customers, we may lose that business. Addi

tionally, as our customers

become larger and more

concentrated, they could exert pricing pressure on all suppliers,

including us. If we were to lose market share or

customers or face pricing pressure due to consolidation of

our customers, our results of operations and financial

condition could be adversely affected.

Increases in costs or limitation of supplies of raw materials may

adversely affect our financial performance.

We purchase

large amounts of commodity-based raw

materials, including steel, copper,

aluminum and oil.

Prevailing prices for such commodities are subject to fluctuations

due to changes in supply and demand and a variety of

additional factors beyond our control, such as global

political and economic conditions. Historically,

prices for some of

these raw materials have been volatile and unpredictable,

and such volatility is expected to continue. Therefore,

commodity price changes may result in unexpected

increases in raw material costs, and we may be unable to increase

our prices to offset these increased costs without

suffering reduced volumes, revenues or operating

income. We do

not

fully hedge against changes in commodity prices and our

hedging procedures may not work as planned.

We depend

on third parties to supply raw materials and other components

and may not be able to obtain

sufficient quantities of these materials and components,

which could limit our ability to manufacture products on a

timely basis and could harm our profitability.

The risk that we may not be able to obtain raw materials or other

components is increased by the COVID-19 pandemic. For

some raw materials and components, we rely on a single

supplier or a small number of suppliers. If one of these suppliers were

unable to provide us with a raw material or

component we need, our ability to manufacture some of our

products could be adversely affected until we

are able to

establish a new supply arrangement. We

may be unable to find a sufficient alternative

supply channel in a reasonable

time period or on commercially reasonable terms, if at

all. If our suppliers are unable to deliver sufficient

quantities of

materials on a timely basis, the manufacture and sale of

our products may be disrupted, we may be required to assume

liability under our agreements with customers and our

sales and profitability could be materially adversely affected.

Our multi-national operations expose us to the risk of fluctuations

in currency exchange rates.

Currency exchange rate fluctuations have had, and

could continue to have, a material impact on our operating

results, the comparability of our results between periods,

the value of assets or liabilities as recorded on our

Consolidated Balance Sheet and the price of our securities.

Volatility

in exchange rates makes it harder to predict

exchange rates and perform accurate financial planning.

Changes in exchange rates can unpredictably and adversely

affect our consolidated operating results and

could result in exchange losses.

Currency Translation

Risk.

The results of operations and financial position of most

of our non-U.S.

companies are initially recorded in the currency of the

country in which each such company resides, which we call

“local currency”. That financial information is then translated

into U.S. dollars at the applicable exchange rates for

inclusion in our Consolidated Financial Statements. The

exchange rates between local currencies and the U.S. dollar can

fluctuate substantially,

which could have a significant translation effect

on our reported consolidated results of

operations and financial position.

Increases and decreases in the value of the U.S. dollar versus local

currencies will affect the reported value

our local currency assets, liabilities, revenues and expenses

in our Consolidated Financial Statements, even if the

value

of these items has not changed in local currency

terms. These translations could significantly and adversely affect

our

results of operations and financial position from period

to period.

Currency Transaction

Risk.

Currency risk exposure also affects our operations when

our sales are

denominated in currencies that are different from

those in which our manufacturing or sourcing costs are incurred.

this case, if, after the parties agree on a price, the value of

the currency in which the price is to be paid were to weaken

relative to the currency in which we incur manufacturing

or sourcing costs, there would be a negative impact on

the

profit margin for any such transaction. This

transaction risk may exist regardless of whether there is also

a currency

translation risk as described above.

Currency exchange rate fluctuations in those currencies

in which we incur our principal manufacturing

expenses or sourcing costs may adversely affect

our ability to compete with companies whose costs are incurred

in other

currencies. If our principal expense currencies appreciate

in value against such other currencies, our competitive position

may be weakened.

The uncertainties relating to the United Kingdom’s

new relationship with the European Union and its potential

impact on the relationship between Switzerland and the European

Union, may have a negative effect on cross-border

trade and our business.

The United Kingdom has withdrawn from the European

Union and has negotiated the terms of such departure

(the UK-EU Trade and Cooperation Agreement

or TCA). The TCA is subject to formal approval by

the European

Parliament and the Council of the European Union before

it comes into effect and has been applied provisionally since

January 1, 2021. Because the agreement merely sets forth

a framework in many respects and will require complex

additional bilateral negotiations between the United Kingdom

and the European Union as both parties continue to work

on the rules for implementation, significant political and

economic uncertainty remains and this has had and may

continue to have a material effect on cross-border

trade with the United Kingdom and with the European Union.

Lack of

clarity about future United Kingdom laws and regulations,

potentially divergent national laws, the possibility of

increased regulatory complexities, or future developments

in the European Union could depress economic activity,

reduce demand for our products and services, restrict ou

access to capital, and diminish or eliminate barrier-free access

between the United Kingdom and other European Union

member states or among the European economic area

overall.

Furthermore, the TCA may influence discussions on

open trade and political matters between Switzerland

and the

European Union. Any of these factors could have an adverse

effect on our business, financial condition

and results of

operations.

Operational risks

Increased information technology (IT) security threats and more

sophisticated cyber-attacks could pose a risk to our

systems, networks, products, solutions and services.

We have observed

a global increase in IT security threats and more sophisticated cyber-attacks,

which pose a

risk to the security of systems and networks and the confidentiality,

availability and integrity of data stored and

transmitted on those systems and networks. Despite our

efforts, we have experienced, and may in the future

experience,

cyber-attacks against us and we have

incurred and will continue to incur substantial costs to reduce

the cyber risks to our

systems, networks, products, solutions and services. Similarly,

we have observed a continued increase in attacks

generally against industrial control systems as well as against

our customers and the systems we supply

to them, which

pose a risk to the security of those systems and networks.

Future attacks could potentially lead to the compromising of

confidential information, disruption of our business, improper

use or downtime of our systems and networks or those we

supplied to our customers, manipulation, corruption,

inaccessibility and destruction of data, defective products

services, production downtimes and supply shortages. Such

attacks may also expose us to loss of business, claims or

regulatory action.

Any such impact in turn could adversely affect our reputation,

competitiveness and results of

operations. Our insurance coverage may not be adequate

to cover all the costs related to cyber security attacks or

disruptions resulting from such events. Due to the nature

of these security threats, the nature and scope of the impact

any future incident cannot be predicted.

Our business strategy may include making strategic divestitures.

There can be no assurance that any divestitures will

provide business benefit.

Our strategy includes divesting certain businesses. The divestiture

of an existing business could reduce our

future profits and operating cash flows and make our financial

results more volatile. We

may also retain certain

obligations or grant indemnities in connection with a divestment.

We may not find

suitable purchasers for our non-core

businesses and may continue to pay operating costs associated

with these businesses. Failed attempts to divest non-core

businesses may distract management’s

attention from other business activities, erode employee morale

and customers’

confidence, and harm our business. A divestiture could

also cause a decline in the price of our shares and increased

reliance on other elements of our core business operations.

Whether we realize the anticipated benefits of a divestmen

including our divestment in 2020 of 80.1 percent of the

Power Grids business, depends on whether we successfully

manage the related risks. If we do not successfully manage

the risks associated with a divestiture, our business, financial

condition, and results of operations could be adversely affected.

Anticipated benefits of historical, existing and potential

future mergers, acquisitions, joint ventures or strategic

alliances may not be realized.

As part of our overall strategy,

we may, from time

to time, acquire businesses or interests in businesses,

including noncontrolling interests, or form joint ventures

or create strategic alliances. Whether we realize the anticipat

benefits,

including operating synergies and cost savings,

from these transactions, including our acquisition in 2018 of

General Electric Company’s

Industrial Solutions business, depends, in part, upon the integration

between the businesses

involved, the performance and development of the underlying

products, capabilities or technologies, our correct

assessment of assumed liabilities and the management

of the operations in question. Accordingly,

our

financial results

could be adversely affected by unanticipated

performance and liability issues, transaction-related charges,

amortization

related to intangibles, charges for impairment

of long-term assets and partner performance.

There is no guarantee that our ongoing efforts

to reduce costs will be successful.

We seek continued

cost savings through operational excellence and supply chain

management. Lowering our

cost base is important for our business and future competitiveness.

However, there is no guarantee

that we will achieve

this goal. If we are unsuccessful

and the shortfall is significant, there could be an adverse effect

on our business,

financial condition, and results of operations.

Illegal behavior by any of our employees or agents could

have a material adverse impact on our consolidated

operating results, cash flows, and financial position as

well as on our reputation and our ability to do business.

Certain of our employees or agents have taken, and may

in the future take, actions that violate or are alleged to

violate the U.S. Foreign Corrupt Practices Act of 1977

(FCPA), legislation

promulgated pursuant to the 1997

Organisation for Economic Co-operation

and Development (OECD) Convention on Combating Bribery

of Foreign

Public Officials in International Business Transactions,

applicable antitrust laws and other applicable laws or

regulations. For more information regarding investigations of

past actions taken by certain of our employees, see

“Item 8. Financial Information—Legal Proceedings”.

Such actions have resulted, and in the future could result, in

governmental investigations, enforcement actions, civil

and criminal penalties, including monetary penalties and other

sanctions, and civil litigation. It is possible that any

governmental investigation or enforcement action arising

from such

matters could conclude that a violation of applicable law

has occurred, and the consequences of any such investigat

ion

or enforcement action may have a material adverse impact

on our consolidated operating results, cash flows and

financial position. In addition, such actions, whether actual

or alleged, could damage our reputation and ability to

business.

Further, detecting, investigating and

resolving such actions could be expensive and could consume

significant

time and attention of our senior management. While we

are committed to conducting

business in a legal and ethical

manner, our internal control

systems at times have not been, and in the future may not be, completely

effective to

prevent and detect such improper activities by our employees and

agents. We are

subject to certain ongoing

investigations by governmental agencies.

We may be

the subject of product liability claims.

We may be

required to pay for losses or injuries purportedly caused by

the design, manufacture or operation of

our products and systems. Additionally,

we may be subject to product liability claims for the improper

installation of

products and systems designed and manufactured by others.

Product liability claims brought against us may be based

in tort or in contract, and typically involve claims

seeking compensation for personal injury or property

damage. Claims brought by commercial businesses are often

made

also for financial losses arising from interruption

to operations. Depending on the nature and application of many

of the

products we manufacture, a defect or alleged defect in one

of these products could have serious consequences. For

example:

•

If the products produced by our electricity-related

businesses are defective, there is a risk of fire,

explosions and power surges, and significant

damage to electricity generating, transmission and

distribution facilities as well as electrical shock causing injury

or death.

•

If the products produced by our automation-related businesses

are defective, our customers could suffer

significant damage to facilities and equipment that

rely on these products and systems to properly monitor

and control their manufacturing processes. Additionally,

people could be exposed to electrical shock and/or

other harm causing injury or death.

•

If any of our products contain hazardous substances, then

there is a risk that such products or substances

could cause injury or death.

•

If any of our protective products were to fail to function

properly, there is a risk that

such failure could

cause injury or death.

If we were to incur a very large product liability

claim, our insurance protection might not be adequate or

sufficient to cover such a claim in terms of

paying any awards or settlements, and/or paying for

our defense costs.

Further, some claims may be

outside the scope of our insurance coverage. If a litigant

were successful against us, a lack

or insufficiency of insurance coverage

could result in an adverse effect on our business, financial condition,

results of

operations and liquidity.

Additionally, a well-publicized

actual or perceived issue relating to us or our products could

adversely affect our market reputation,

which could result in a decline in demand for our products and reduce

the trading

price of our shares. Furthermore, if we were required or

we otherwise determined to make a product recall, the costs

could be significant.

Undertaking long-term, technically complex projects or projects that

are dependent upon factors not wholly within

our control could adversely affect our profitability

and future prospects.

We derive a

portion of our revenues from long-term, fixed price and turnkey

projects and from other

technically complex projects that can take many months,

or even years, to complete. Such contracts typically involve

substantial risks, including the possibility that we may

underbid and consequently have no means of recouping the

actual

costs incurred, and the assumption of a large

portion of the risks associated with completing related projects, including

the warranty obligations. Some projects involve technological

risks, including in cases where we are required to modify

our existing products and systems to satisfy the technical requirements

of a project, integrate our products and systems

into the existing infrastructure and systems at the installation

site, or undertake ancillary activities such as civil works at

the installation site. Our revenue, cost and gross profit

realized on such contracts can vary,

sometimes substantially,

from our original projections for numerous reasons, including:

•

unanticipated issues with the scope of supply,

including modification or integration of supplied products

and systems that may require us to incur incremental

expenses to remedy such issues,

•

the quality and efficacy of our products and

services cannot be tested and proven in all situations and

environments and may lead to premature failure or unplanned

degradation of products,

•

changes in the cost of components, materials or labor,

•

difficulties in obtaining required governmental

permits or approvals,

•

delays caused by customers, force majeure or local weather

and geological conditions, including the

ongoing COVID-19 pandemic and natural disasters,

•

shortages of construction equipment,

•

changes in law or government policy,

•

supply bottlenecks, especially of key components,

•

suppliers’, subcontractors’ or consortium partners’ failure

to perform or delay in performance,

•

diversion of management focus due to responding to

unforeseen issues, and

•

loss of follow-on work.

These risks are exacerbated if a project is delayed because

the circumstances upon which we originally bid and

quoted a price may have changed in a manner that increases

our costs or other liabilities relating to the project. In

addition, we sometimes bear the risk of delays caused

by unexpected conditions or events. Our project contracts often

subject us to penalties or damages if we cannot complete

a project in accordance with the contract schedule. In certain

cases, we may be required to pay back to a customer all or

a portion of the contract price as well as potential damages

(which may significantly exceed the contract price), if

we fail to meet contractual obligations.

If we are unable to obtain performance and other guarantees

from financial institutions, we may be prevented from

bidding on, or obtaining, some contracts, or our costs with respect

to such contracts could be higher.

In the normal course of our business and in accordance

with industry practice, we provide a number of

guarantees including bid bonds, advance payment bonds

or guarantees, performance bonds or guarantees and

warranty

bonds or guarantees, which guarantee our own performance.

These guarantees may include guarantees that a

project will

be completed on time or that a project or particular equipment

will achieve other defined performance criteria. If we fail

to satisfy any defined criteria, we may be required to

make payments in cash or in kind. Performance guarantees

frequently are requested in relation to large

projects.

Some customers require that performance guarantees

be issued by a financial institution. In considering

whether to issue a guarantee on our behalf, financial

institutions consider our credit ratings. If, in the future, we cannot

obtain such a guarantee from a financial institution on commercially

reasonable terms or at all, we could be prevented

from bidding on, or obtaining, some contracts, or our costs with

respect to such contracts could be higher,

which would

reduce the profitability of the contracts. If we cannot obtain

guarantees on commercially reasonable terms or at

all from

financial institutions in the future, there could be a

material impact on our business, financial condition, results of

operations or liquidity.

Our hedging activities may not protect us against the consequences

of significant fluctuations in exchange rates,

interest rates or commodity prices on our earnings and cash flows.

Our policy is to hedge material currency exposures by

entering into offsetting transactions with third-party

financial institutions. Given the effective horizons

of our risk management activities and the anticipatory nature of

the

exposures intended to be hedged, there can be no assurance

that our currency hedging activities will fully offset the

adverse financial impact resulting from unfavorable movements

in foreign exchange rates. In addition, the timing of the

accounting for recognition of gains and losses related to

a hedging instrument may not coincide with the timing of

gains

and losses related to the underlying economic exposures.

As a resource-intensive operation, we are exposed to a variety

of market and asset risks, including the effects of

changes in commodity prices and interest rates. We

monitor and manage these exposures as an integral part

of our

overall risk management program, which recognizes the unpredictability

of markets and seeks to reduce the potentially

adverse effects on our business. As part of our

effort to manage these exposures, we may enter into

commodity price and

interest rate hedging arrangements. Nevertheless, changes

in commodity prices and interest rates cannot always be

predicted or hedged.

If we are unable to successfully manage the risk of changes

in exchange rates, interest rates or commodity

prices or if our hedging counterparties are unable to perform

their obligations under our hedging agreements with them,

then changes in these rates and prices could have an adverse effect

on our financial condition and results of operations.

Legal and regulatory risks

An inability to protect our intellectual property rights could

adversely affect our business.

Our intellectual property rights are fundamental to all

of our businesses. We generate,

maintain, utilize and

enforce a substantial portfolio of trademarks, trade dress, patents

and other intellectual property rights globally.

Intellectual property protection is subject to applicable

laws in various local jurisdictions where interpretations and

protections vary or can be unpredictable and costly to enforce.

We use our

intellectual property rights to protect the

goodwill of our products, promote our product recogni

tion, protect our proprietary technology and development

activities, enhance our competitiveness and otherwise

support our business goals and objectives. However,

there can be

no assurance that the steps we take to obtain, maintain

and protect our intellectual property rights will be adequate. Our

intellectual property rights may fail to provide us with

significant competitive advantages, particularly in foreign

jurisdictions that do not have, or do not enforce, strong intellectual

property rights. The weakening of protection of our

trademarks, trade dress, patents and other intellectual property

rights could adversely affect our business. We

also may

engage in legal action to protect our own intellectual property

rights, and enforcing our rights may require considerable

time, money and oversight, and existing laws in the various

countries in which we provide services or solutions may

offer only limited protection.

Failure to comply with evolving data privacy and data

protection laws and regulations or to otherwise protect

personal data, may adversely impact our business and financial

results.

We are subject

to many rapidly evolving privacy and data protection laws

and regulations around the world

including the General Data Protection Regulation (GDPR)

in Europe as well as the California Data Privacy Act and

the

California Privacy Rights Act (effective in

January 2023) in the United States. This requires us to operate

in a complex

environment where there are significant constraints on

how we can process personal data across our business. The

GDPR, which became effective in May 2018, has

established stringent data protection requirements for companies

doing business in or handling personal data of individuals

in the European Union. The GDPR imposes obligations on

data controllers and processors including the requirement

to maintain a record of their data processing and to implement

policies and procedures as part of their mandated privacy

governance framework. Breaches of the GDPR could result

substantial fines, which in some cases could be up to

four percent of our worldwide revenue. In addition, a breach

of the

GDPR or other data privacy or data protection laws or

regulations could result in regulatory investigations, reputational

damage, orders to cease/change our use of data, enforcement

notices, as well as potential civil claims including class

action type litigation. We

have invested, and continue to invest, human and technology

resources in our data privacy and

data protection compliance efforts. There

can be no assurance that any such actions will be sufficient

to prevent

cybersecurity breaches, disruptions, unauthorized release of

sensitive information or corruption of data. Despite such

actions,

there is a risk that we may be subject to fines and penalties, litigation

and reputational harm if we fail to

properly process or protect the data or privacy of third

parties or comply with the GDPR or other applicable data

privacy

and data protection regimes.

Examinations by tax authorities and changes in tax regulations could

result in lower earnings and cash flows.

We operate

in approximately 100 countries and therefore are subject to

different tax regulations. Changes in tax

laws could result in a higher tax expense and higher

tax payments. Furthermore, this could materially impact

our tax-

related receivables and liabilities as well as deferred income

tax assets and liabilities. In addition, the uncertainty of

the

tax environment in some regions could limit our ability

to enforce our rights. As a globally operating organization,

conduct business in countries subject to complex tax rules,

which may be interpreted in different ways.

Future

interpretations or developments of tax regimes may affect

our tax liabilities, returns on investments and business

operations. We

are regularly examined by tax authorities in various jurisdictions.

An adverse decision by a tax authority

could cause a material adverse effect on our business,

financial condition and results of operations.

We are subject to environmental

laws and regulations in the countries in which we operate.

We incur costs to comply

with such regulations, and our ongoing operations may

expose us to environmental liabilities.

Our operations are subject to U.S., European and other

laws and regulations governing the discharge

materials into the environment or otherwise relating to

environmental protection. Our manufacturing facilities use and

produce paint residues, solvents, metals, oils and related

residues. We use

petroleum-based insulation in transformers

and chloroparaffins as a flame retardant.

We have manufactured

and sold, and we are using in some of our factories,

certain types of transformers and capacitors containing

polychlorinated biphenyls (PCBs). These are considered

to be

hazardous substances in many jurisdictions in which

we operate. We may

be subject to substantial liabilities for

environmental contamination arising from the use of such

substances. All of our manufacturing operations are subject

ongoing compliance costs in respect of environmental matters

and the associated capital expenditure requirements.

In addition, we may be subject to significant fines and

penalties if we do not comply with environmental laws

and regulations, including those referred to above. Some

environmental laws provide for joint and several or strict

liability for remediation of releases of hazardous substances,

which could result in us incurring a liability for

environmental damage without regard to our negligence

or fault. Such laws and regulations could expose us to liability

arising out of the conduct of operations or conditions caused by

others, or for our acts which were in compliance with all

applicable laws at the time the acts were performed. Additionally,

we may be subject to claims alleging personal injury

or property damage as a result of alleged exposure to

hazardous substances. Changes in the environmental laws and

regulations, or claims for damages to persons, property,

natural resources or the environment, could result in substantial

costs and liabilities to us.

We could be

affected by future laws or regulations enacted to address

climate change concerns as well as the physical

effects of climate change.

Existing or pending laws and regulations intended to

address climate change concerns could materially affect

us in the future. We

have incurred, and may need to incur additional costs to comply

with these laws and regulations and

any non-compliance could adversely affect

our reputation and result in significant fines. We

could also be affected

indirectly by increased prices for goods or services provided

to us by companies that are directly affected

by these laws

and regulations and pass their increased costs through to

their customers. At this time, we cannot estimate what impact

such costs may have on our business, results of operations

or financial condition. We

could also be affected by the

physical consequences of climate change itself, although

we cannot estimate what impact those consequences might

have on our business or operations. Any such changes

could also impact our ability to achieve our 2030 Sustainability

targets as well as the related costs and resources

necessary to do so.

General risk factors

If we are unable to attract and retain qualified management and

personnel then our business may be adversely

affected.

Our success depends in part on our continued ability

to hire, assimilate and retain highly qualified personnel,

particularly our senior management team and key

employees. Competition for highly qualified management and

technical personnel remains intense in the industries and

regions in which we operate. If we are unable to attract and

retain members of our senior management team and

key employees, including in connection with our ongoing

organizational transformation, this could have

an adverse effect on our business.

Our business subjects us to considerable potential exposure

to litigation and legal claims and could be materially

adversely affected if we incur legal liability.

We are subject

to, and may become a party to, a variety of litigation or

other claims. Our business is subject to

the risk of claims involving current and former employees,

customers, partners, subcontractors, suppliers, competitors,

shareholders, government regulatory agencies or others through

private actions, class actions, whistleblower claims,

administrative proceedings, regulatory actions or other

proceedings. Our acquisition activities have in the

past and may

in the future be subject to litigation or other claims. While we

maintain insurance for certain potential liabilities, such

insurance does not cover all types and amounts of potential

liabilities and is subject to various exclusions as well as caps

on amounts recoverable.

Item 4.

Information on the Company

INTRODUCTION

About ABB

ABB is a leading global technology company that energizes

the transformation of society and industry to

achieve a more productive, sustainable future. By connecting

software to its electrification, robotics, automation and

motion product portfolio, ABB pushes the boundaries of

technology to drive performance to new levels. With

a history

of excellence stretching back more than 130 years, ABB’s

success is driven by about 106,000 employees

Our business is international in scope and we generate revenues in

numerous currencies. We

operate in over

100 countries across three regions: Europe, the Americas, and

Asia, Middle East and Africa. We

are headquartered in

Zurich, Switzerland.

We manage

our company through our four Business Areas: Electrification,

Industrial Automation, Motion and

Robotics & Discrete Automation. For a breakdown

of our consolidated revenues (i) by Business Area, (ii) by

geographic

region,

and (iii) by product type, see “Item 5. Operating and Financial Review

and Prospects—Analysis of Results of

Operations—Revenues” and “Note 23 - Operating segment

and geographic data” to our Consolidated Financial

Statements. Until June 30, 2020, we also operated the

Power Grids business, which is reported as discontinued

operations in the Consolidated Financial Statements (see “Discontinued

operations” section below). On July 1, 2020, we

completed the divestment of 80.1 percent of the Power

Grids business to Hitachi Ltd (Hitachi).

We retain a 19.9

percent

ownership interest through our investment in Hitachi

ABB Power Grids Ltd (Hitachi ABB Power Grids) which

beneficially owns or controls all the subsidiaries of the

Power Grids business.

Our principal corporate offices are located at Affolternstrasse

44, CH 8050 Zurich, Switzerland, telephone

number +41 43 317 7111.

Our agent for U.S. federal securities law purposes is ABB Holdings

Inc., located at

305 Gregson Drive, Cary,

North Carolina 27511. Our internet address is www.abb.com

or global.abb.

The United States

Securities and Exchange Commission (SEC) maintains a website

at www.sec.gov which

contains in electronic form

each of the reports and other information that we have

filed electronically with the SEC.

History of the ABB Group

The ABB Group was formed in 1988 through a merger

between Asea AB and BBC Brown Boveri AG. Initially

founded in 1883, Asea AB was a major participant in the

introduction of electricity into Swedish homes and businesses

and in the development of Sweden’s

railway network. In the 1940s and 1950s, Asea AB expanded

into the power,

mining and steel industries. Brown Boveri and Cie. (later

renamed BBC Brown Boveri AG) was formed in Switzerland

in 1891 and initially specialized in power generation

and turbines. In the early to mid‑1900s, it expanded its operations

throughout Europe and broadened its business operations

to include a wide range of electrical engineering activities.

In January 1988, Asea AB and BBC Brown Boveri AG each

contributed almost all of their businesses to the

newly formed ABB Asea Brown Boveri Ltd, of which

they each owned 50 percent. In 1996, Asea AB was renamed

ABB AB and BBC Brown Boveri AG was renamed

ABB AG. In February 1999, the ABB Group announced a group

reconfiguration designed to establish a single parent

holding company and a single class of shares. ABB Ltd was

incorporated on March 5, 1999, under the laws of Switzerland.

In June 1999, ABB Ltd became the holding company for

the entire ABB Group. This was accomplished by having

ABB Ltd issue shares to the shareholders of ABB AG and

ABB AB, the two companies that formerly owned the

ABB Group. The ABB Ltd shares were exchanged for the shares

of those two companies, which, as a result of the share

exchange and certain related transactions, became wholly‑owned

subsidiaries of ABB Ltd.

As described above, on July 1, 2020, we divested

80.1 percent

of our ownership in the Power Grids business to

Hitachi.

ABB Ltd shares are currently listed on the SIX Swiss Exchange,

the NASDAQ OMX Stockholm Exchange and

the New York

Stock Exchange (in the form of American Depositary Shares).

BUSINESSES

Our markets

ABB is a leading global technology company with a comprehensive

and increasingly digitalized offering of

electrification, motion and automation solutions.

ABB’s exposure to customers is geographically

balanced while

catering to multiple end-markets and segments. Through

a full business cycle, we estimate that our end-markets

combined grow at around two percent per annum.

We believe that our

portfolio is well positioned to benefit from secular

growth drivers, including urbanization, labor shortage,

shift to electrification, automation and robotization,

as well as

other data and digitalization trends.

The majority of our businesses are market leaders within

their respective segments with approximately

two-thirds of revenues coming from our Divisions where

we hold a number one or two position in the relevant market.

We believe market

leadership is critical, as it provides an opportunity for us to

be a cost leader in our markets and to also

have the ability to invest more than competitors in research

and development to sustain our technological leadership.

For

a discussion of the geographic distribution of our total

revenues, see “Item 5. Operating and Financial Review and

Prospects—Analysis of Results of Operations—Revenues

.”

Industry Market

Approximately half of our customers are industrial customers. We

serve production facilities and factories

all

around the world from process industries such as oil and

gas, pulp and paper as well as mining, to discrete industries

including automotive, food and beverage and consumer

electronics. Automation,

software and digital services that help

customers achieve improved safety,

uptime, energy efficiency and productivity

are key to the success of our offerings in

this market. The COVID-19 pandemic has served as a prominent

reminder for companies of the importance of simplicity

and flexibility in automated production and has accelerated

customer demand for the digital services and solutions we

offer.

Industrial end-markets were materially impacted by

the COVID-19 pandemic resulting in lower demand for our

products and services worldwide. Global travel restrictions

hindered our capability to execute our project and service

businesses even while customer acceptance of remote

digital services and solutions increased. In process industries,

oil

and gas customers, faced with a substantial decrease in

commodity prices, reduced planned capital expenditures,

which

impacted our order levels. Other process industries, such

as pulp and paper or mining were resilient in 2020.

In discrete industries, end-markets such as food

and beverage, and logistics were robust. Conversely,

investments in robotics

by the automotive industry continued to be challenged

by weak customer demand as well as

uncertainty around the timing and pace of transition from

traditional to electric vehicles.

Transport & Infrastructure

Market

Approximately one-third of our customers operate

in the transport & infrastructure market. Our expertise

provides efficient,

reliable and sustainable solutions for these customers, with a focus

on energy efficiency and reduced

operating costs.

Transport & infrastructure markets were

resilient in 2020. Demand in rail for electrification and

traction

solutions was strong over the year.

Data center markets continued to expand with ABB successful in offering

bundled

solutions

to hyperscale and co-location customers in particular.

Buildings activity was impacted by COVID-19

lockdowns. In the marine sector, we

saw continued strong order demand for our market-leading

electric propulsion

systems, while the services business particularly suffered

after the shutdown of the global cruise industry due to the

COVID-19 pandemic.

EV charging markets continued to expand

during the period.

We received

multiple orders from customers for

EV charging infrastructure, including for

our high-voltage direct-current (DC) fast‑charging

station, the Terra

HP.

As of

December 31, 2020, we have sold more than 17,000 ABB DC

fast-chargers across 80 countries.

Utilities Market

ABB delivers solutions mainly for distribution utilities and renewables

customers, while continuing to service

conventional power generation customers with our contro

and automation solutions. Following the divestment of our

Power Grids business to Hitachi on July 1, 2020, our exposure

to the utilities market has decreased significantly.

During 2020, business levels in the conventional power

generation and renewables markets were challenged by

global travel restrictions during the COVID-19 pandemic

as well as a lower general demand environment, particularly

for fossil fuels. Demand from electrical distribution utilities was resilient,

with ongoing investments to increase grid

reliability and resilience with integrating increased renewables.

We serve industry

transport & infrastructure and utilities through our operating

Divisions which are included

in our Business Areas. Developments in these Business Areas are

discussed in more detail below.

Revenue figures

presented in this Businesses section are before intersegment

eliminations.

Electrification Business Area

Overview

The products of the Electrification Business Area portfolio

are designed to enable safe, smart, and sustainable

electrification, with a full range of low- and medium

-voltage products and solutions, along with pre-engineered

packaged services and tailored solutions for intelligent protection

and connection.

The Electrification Business Area delivers products through

a global network of channel partners and end

customers. Most of the Business Area’s

revenue is derived from distributors and approximately a

quarter is derived from

direct sales to end-users. The remaining revenues

are generated from original equipment manufacturers (OEMs),

engineering, procurement, construction (EPC) contracting

companies, system integrators, utilities and panel builders.

The proportion of direct compared to channel partner

sales varies by segment, product technology and geographic

markets.

The Electrification Business Area had approximately 50,500

employees on December 31, 2020, and generated

$11.9 billion of revenues in 2020.

Customers

The Electrification Business Area serves a wide range of

customer segments, including residential, commercial,

and industrial buildings, electric utilities, oil and gas, chemicals,

data centers, e-mobility,

renewables, food and

beverage, and other industries and infrastructure.

Products and Services

The Electrification Business Area’s

products and services are delivered through five operating

Divisions.

The Distribution Solutions Division helps utility,

industry and transport & infrastructure customers improve

power quality and control, reduce outage time and

enhance operational reliability and efficiency.

The Division offers

products, solutions and services that largely

serve the power distribution sector,

often providing the requisite medium-

voltage link between high-voltage transmission systems and

low-voltage users. With ABB Ability

enabled digital

solutions at its core, the offering includes low-voltage

switchgear (up to 1 kilovolt) and medium-voltage equipment

(1 to

66 kilovolts), indoor and outdoor circuit breakers, reclosers,

fuses, contactors, relays, instrument transformers, sensors,

motor control centers, as well as a wide range of air-

and gas-insulated switchgear. The

Division also produces indoor

and outdoor modular systems and other segment-specific

solutions to facilitate efficient and reliable distribution,

protection and control of power,

adding value through design, engineering, project management

and service. The service

offering spans the entire value

chain, from the moment a customer makes the first inquiry

to disposal and recycling of

the product, enriched by advanced digital services for asset management.

Throughout the value chain, the Division

provides training, technical support and customized contracts.

The Smart Power Division helps protect, control,

and connect people, plants, and systems with a portfolio of

low-voltage products and systems. The product offering

includes electric vehicle charging infrastructure from

AC wall

boxes to DC fast charging,

molded-case and air-circuit breakers, safety products including

sensors, switches, contactors,

relays, and power protection solutions such as uninterruptible

power supply (UPS) solutions, status transfer switches and

power distribution units.

The Smart Buildings Division helps optimize efficiency,

safety, security,

and comfort in homes and other

buildings. The Division offers digitally enabled

controls for HVAC,

lighting, shutters, and security in addition to low-

voltage products including conventional wiring accessories,

industrial plugs and sockets, emergency lighting

DIN-rail

products, and enclosures ideal for single family homes, multiple

dwellings, commercial buildings, infrastructure and

industrial applications.

The Installation Products Division helps manage the connection,

protection and distribution of electrical power.

The Division’s products are

engineered to provide ease of installation and perform in demanding

and harsh conditions,

helping to ensure safety and continuous operation for

our customers and people around the world. The commercial

essentials product segment includes electrical junction

boxes, commercial fittings, strut and cable tray metal framing

systems for commercial and residential construction.

The premier industrial product segment includes multiple

product

lines, such as Ty

-Rap®, T&B Liquidtight Systems®, PVC coated and nylon

conduit systems, power connection and

grounding systems, cable protection systems of conduits and

fittings for harsh and industrial applications. The Division

also produces cable accessories and apparatus solutions

for medium-voltage applications including reclosers, switchgear,

capacitor switches, current limiting fuses, faulted current

indicators and distribution connectors, with products for

overhead and underground distribution.

The Power Conversion Division supplies innovative

critical power solutions to infrastructure customers and

manufacturers of a wide range of equipment. The Division

supports its customers in telecom/5G, networking, data

centers, and industrial applications (such as oil and gas,

utility, power generation,

and robotics) in rapidly changing,

disruptive environments where information, access and

response times are redefining the markets. The Power

Conversion Division also provides customers with reliable

and efficient power that supports increasing infrastructure

requirement, ensuring that data flows 24/7, while optimizing

footprint, energy costs and operations. The

Division

supports customers by providing the latest industry

insights and technology,

partnering to co-develop solutions to tackle

evolving challenges.

Sales and Marketing

The Electrification Business Area’s

global markets common sales and marketing organization

creates demand

across all channels and products, with a range of promotional activities

and support services including account, channel,

and segment sales management, commercial operations,

and digital expertise.

Competition

The Electrification Business Area’s

principal competitors vary by product group and include

Chint, Eaton,

Hubbell, Legrand, LS Electric, Panasonic, Rittal, Schneider

Electric and Siemens.

Capital Expenditures

The Electrification Business Area’s

capital expenditures for property,

plant and equipment totaled $276 million

in 2020, compared to $279 million in 2019. Investments

in 2020 were primarily related to footprint changes,

equipment

replacement and upgrades. Geographically,

in 2020, Europe represented 48 percent of the capital expenditures,

followed

by the Americas (41 percent) and Asia, Middle East and

Africa (11 percent).

Industrial Automation Business Area

Overview

The Industrial Automation Business Area offers

customers in process and maritime industries, a broa

range of

industry-specific integrated automation, electrification

and digital solutions that are designed to optimize the

productivity, energy

efficiency and safety of industrial processes and operations,

based on the Business Area’s deep

domain knowledge and expertise of each end market.

The solutions include turnkey engineering, control technologies,

software and lifecycle services, measurement and analytics

products, marine and turbocharging offerings,

Human

Machine Interfaces (HMI) and integrated safety technology

The systems can link various process and information flows

allowing customers to manage and control their entire

business process based on real-time information. Additionally,

the

systems and solutions enable customers to increase production

efficiency,

optimize assets and reduce environmental

impact.

The Industrial Automation Business Area’s

offerings are available as separately sold

products or as part of an

automation, electrification and/or instrumentation solution

For overall solutions, Industrial Automation integrates

products and solutions from the Electrification, Motion

and Robotics & Discrete Automation Business Areas. The

Business Area’s offering

are sold primarily through its direct sales force as well as third

-party channels.

The Business Area had approximately 21,500 employees

as of December 31, 2020, and generated revenues of

$5.8 billion in 2020.

Customers

The Industrial Automation Business Area’s

end customers include companies in the oil and gas,

minerals and

mining, metals, pulp and paper,

chemicals, plastics, pharmaceuticals, food and beverage, power

generation and maritime

industries. These customers are looking for automation,

electrification,

instrumentation and digitalization offerings that

deliver value mainly through lower capital costs, increased

plant availability, lower

life-cycle costs and lower project

risks.

Products and Services

Industrial Automation offers an extensive portfolio

of products, solutions,

digital applications and services.

These offerings can be standalone basic control

to integrated collaborative systems for complex or critical processes.

Solutions,

such as Distributed Control

System (DCS) 800Xa, provide a scalable extended automation

system for process

and production control, safety and production monitoring.

Freelance, another solution, is a full-fledged, easy-to-use DCS

for small to medium-size applications. Components for

basic automation solutions, process and safety controllers, field

interfaces, panels, process recorders and HMI are

available through our Compact Product Suite offering.

The product

portfolio is complemented by services such as Automat

ion Sentinel, a subscription-based life cycle management

program that provides services to maintain and continually

advance and enhance ABB Ability

control systems (e.g.

cyber security patches) and thus allows it to manage a

customer’s life-cycle costs. The ABB Ability

Advanced

Services offering portfolio provides individual

software-based services to continuously improve automation and

processes. ABB Ability

Genix supports industries to unlock value by contextualizing

and integrating data from a

variety of systems, further utilizing artificial intelligence

and analytics to provide deep meaningful actionable insights.

In addition, ABB Ability

Edgenius, a cloud-managed edge platform,

makes real time operations data from a large

number of systems and devices at the point of production

available for visualization, analysis and action.

The Industrial Automation Business Area has five operating

Divisions selling their offerings into the

energy,

process and maritime industries.

The Energy Industries Division serves the energy

market with leading automation solutions for oil, gas,

chemicals, pharmaceuticals, and all types of power generation

Oil, gas and chemicals solutions cover the entire

hydrocarbon value chain, from exploration and production

to supply, transport

and distribution, as well as refining,

chemicals and petrochemicals. The Division brings deep

industry domain expertise coupled with the ability to integrate

both automation

and electrical, resulting in faster start-up times, increased facility productivity

and reduced overall

capital and operating costs for customers. ABB specializes in

mastering the control loop and transforming client

operations through actionable insights

that optimize performance in real time. From the

well head to the refinery,

ABB

Ability™ solutions aim to connect people with data to

optimize performance, improve reliability,

enhance efficiency and

minimize environmental impact from project start-up throughout

the entire plant life cycle. For the power generation

market, the offering includes instrumentation,

excitation and control systems. Its technologies are designed to

help

optimize performance, improve reliability,

enhance efficiency and minimize environmental

impact throughout the plant

life cycle. In the pharmaceuticals and fine chemicals areas, the

Division offers applications to support manufacturing,

packaging, quality control and compliance with regulatory

agencies.

The Division also serves the water industry,

including applications such as pumping stations and desalination

plants.

The Process Industries Division serves the mining, minerals

processing, metals, aluminum, cement, pulp and

paper, and food and beverage, as well as their

associated service industries. The Division brings

deep industry domain

expertise coupled with the ability to integrate both automation

and electrical increased productivity and reduced overall

capital and operating costs for customers. For mining,

metals and cement customers, solutions include specialized

products and services, as well as total production systems.

The Division designs, plans, engineers, supplies, erects and

commissions integrated electric equipment, drives, motors,

high power rectifiers and equipment for automation and

supervisory control within a variety of areas including mineral

handling, mining operations, aluminum smelting, hot

and

cold steel applications and cement production.

The offering for the pulp and paper industries includes control

systems,

quality control systems, drive systems, on-line sensors, actuators

and field instruments. Digitalization solutions,

including collaborative operations and augmented reality,

help improve plant and enterprise productivity,

and reduce

maintenance and energy costs.

The Marine & Ports Division serves the marine and

ports industry through its leading solutions for specialty

vessels, as well as container and bulk cargo handling.

For the shipping industry,

the Division offers an extensive

portfolio of integrated marine systems and solutions that improve

the flexibility, reliability

and energy efficiency of

vessels. By coupling power, automation

and marine software, proven fuel-efficient technologies and

services that ensure

maximum vessel uptime, ABB is well positioned to help

improve the profitability of a customer’s business throughout

the entire life cycle of a fleet. The Division designs,

engineers, builds, supplies and commissions automation and

electrical systems for marine

power generation, power distribution and electric propulsion,

as well as turbochargers to

improve efficiency.

With ABB Ability™ Collaborative

Operations Centers around the world and marine software

solutions, owners and operators can run their fleets at lower

fuel and maintenance cost, while improving crew,

passenger, and cargo safety

and overall productivity of their operations. In addition,

the Division delivers automation

and electrical systems for container and bulk cargo

handling, from ship to gate. These systems and services help

terminal

operators meet the challenge of larger ships,

taller cranes and bigger volumes per call, and make terminal

operations

safer, greener and more productive.

The Turbocharging Division

manufactures and maintains turbochargers

for diesel and gas engines having

power levels ranging from 500 kilowatts to over 80

megawatts. The Division provides engine builders and application

operators with advanced turbocharging solutions

and services for efficient and flexible application operations

and in

compliance with the most stringent environmental requirements.

The Measurement & Analytics Division portfolio is designed

to measure product properties, such as weight,

thickness, color, brightness, moisture

content and additive content, and includes a full line of instrumentation

and

analytical products to analyze, measure and record industrial

and power processes. Actuators allow the customer to

make automatic adjustments during the production process to

improve the quality and consistency of the product. Field

instruments measure properties of the process, such as flow

rate, chemical

content and temperature.

Sales and Marketing

The Industrial Automation Business Area’s

sales are primarily made through its direct sales force

as well as

third-party channel partners, such as distributors, system

integrators and OEMs. The majority of revenues are derived

through the Business Area’s

own direct sales channels.

Competition

The Industrial Automation Business Area’s

principal competitors vary by industry or product group

Competitors include:

Emerson, Honeywell, Schneider Electric, Siemens, Yokogawa

General Electric,

Endress +

Hauser,

Kongsberg, Valmet

and Garrett.

Capital Expenditures

The Industrial Automation Business Area’s

capital expenditures for property,

plant and equipment totaled

$56 million in 2020,

compared to $64 million in 2019. Principal investments in 2020

were in Turbocharging and

the

Measurement & Analytics Divisions. Geographically,

in 2020,

Europe represented 70 percent of the capital

expenditures, followed by Asia, Middle East and

Africa (19 percent) and the Americas (11 percent).

Motion Business Area

Overview

The Motion Business Area provides pioneering technology,

products, solutions and related services to

industrial customers to increase energy efficiency,

improve safety and reliability,

and maintain precise control over

processes. The portfolio includes motors, generators

and drives for a wide range of applications in all industrial sectors.

The Motion Business Area had approximately 20,900

employees as of December 31, 2020, and generated

around $6.4 billion of revenues in 2020.

Products and Services

Motion manufactures and sells drives, motors, generators,

traction converters and mechanical power

transmission products. Building on long-standing experience

in electric powertrains, the Business Area combines

domain expertise and technology to deliver the optimum

solution for a wide range of applications for a comprehensive

range of industrial segments. In addition, the Business Area, along

with its channel partners, has an industry-leading

global service presence.

The Motion Business Area’s

products and services are delivered through six operating

Divisions.

The Motors & Generators Division offers a

comprehensive product portfolio of large AC motors and

generators, and IEC low-voltage (LV)

and NEMA motors. The Division provides a large range

of motors, from general

purpose, to highly customized designs, large

AC synchronous motors and high-voltage induction motors to

support high

efficiency,

reliability and availability across all major industries and applications.

The Division offers a full range of

energy efficient low-voltage IEC motors,

including SynRM (synchronous reluctance) motors to support customers

reduce power bills and cut emissions. The Division also provides

IEC LV

motor solutions that are designed to improve

reliability and productivity in severe applications. Baldor

-Reliance® NEMA industrial electric motors offer customers

quality, reliability

and efficiency.

Our investments in technology,

tools and processes aim to ensure the broad NEMA

offering of general purpose and application

-specific solutions perform as expected, every time. The Division

designs

and

builds

generators for a wide range of industries, including power generation,

marine, oil and gas, mining, and data

centers.

The Drive Products Division serves industries, infrastructure

and machine builders with state-of-the-art drives

and softstarters. With products, global

scale and local presence, the Division helps

customers to improve energy

efficiency,

productivity and safety.

The System Drives Division provides global supplies of

high-power, high-performance drives,

drive systems

and packages for industrial process and large infrastructure

applications. In addition, the Division offers

global support

to help customers, partners and equipment manufacturers with

asset reliability, performance

improvement and energy

efficiency in mission critical applications.

The Service Division serves customers worldwide and aims

to help customers by maximizing uptime,

extending life cycle and enhancing the performance and

energy efficiency of their electrical motion

solutions. The

Division is leading the way in digitalization by securely connecting

motors and drives to help customers prevent

expensive downtime while also optimizing operations’

profitably, safety and reliably

The Traction Division is a recognized

leader in traction technologies that drive innovation in rail and

mobility. A comprehensive

range of high performance propulsion, auxiliary and energy

storage solutions help improve

energy efficiency and contributes to making

transportation more sustainable.

The Mechanical Power Transmission Division

offers the Dodge® brand of mounted bearings,

enclosed gearing

and power transmission components to help customers

in robust industries increase the safety,

productivity and

profitability of their operations. The Division offers

customized innovative solutions and advanced technologies

that

improve output, increase uptime, and enhance system value.

Customers

The Motion Business Area serves a wide range of

customers in different industrial segments such as pulp

and

paper, oil and gas, metals and

mining, food and beverage, transportation, power generation,

marine and offshore.

Sales and Marketing

Sales are made both through direct sales forces and through

channel partners, such as distributors and

wholesalers, as well as installers, OEMs and system integrators.

The proportion of direct sales to end users compared

channel partner sales varies among the different

industries, products and geographic markets.

Competition

The principal competitors of the Motion Business Area include

Schneider, Siemens, Toshiba,

WEG Industries,

SEW EURODRIVE and Danfoss.

Capital Expenditures

Capital expenditures in the Motion Business Area for

property, plant and

equipment totaled $93 million in

2020, compared to $110 million in

2019. Principal investments in 2020 were primarily related to

equipment

replacement, footprint adjustments and automation upgrades. Geographically,

in 2020, Europe represented 45 percent of

the capital expenditures, followed by the Americas (40

percent) and Asia, Middle East and Africa (15 percent).

Robotics & Discrete Automation Business Area

Overview

The Robotics & Discrete Automation Business Area provides robotics

and machine and factory automation

including products, software, solutions and services. Revenues

are generated both from direct sales to end users as well

as from indirect sales mainly through system integrators

and machine builders.

The Robotics & Discrete Automation Business Area had approximately

10,300 employees as of December 31,

2020 and generated $2.9 billion of revenues in 2020.

Products and Services

The Robotics & Discrete Automation Business Area’s

products and services are delivered through two

operating Divisions.

The Robotics Division offers a wide range

of products, solutions and services such as robots, robotics

application cells and smart systems, field services, spare parts, digital

services, engineering and operations software.

This offering provides productivity,

quality, flexibility and

simplicity for operations,

e.g. to meet the challenge of

making smaller lots of a larger number of

specific products in shorter cycles for today’s

dynamic global markets and

coping with increasing uncertainty.

Robots are also used in activities or environments which may

be hazardous to

employee health and safety,

such as repetitive or strenuous lifting, dusty,

hot or cold rooms, or painting booths and can

help customers overcome labor shortages. Robotics solutions

are used in a wide range of segments from automotive

OEMs, automotive suppliers, electronics, general

industry, consumer goods,

food and beverage, and warehouse/logistics

center automation. They are increasingly deployed in service applications

for health care, restaurants and retail. Typical

robotic applications include welding, material handling,

machine tending, machining, painting, picking, packing,

palletizing and assembly.

The Machine Automation Division offers integrated

automation solutions based on programmable logical

controllers, industrial PCs, servo motion, industrial transport

systems and machine vision. It also provides software

for

engineering and optimization. The range of solutions are

mainly used by machine builders for various types of series

machines, e.g. for plastics, metals, printing and packaging.

Customers

Robotics & Discrete Automation serves a wide range

of customers. The main customers are active in industries

such as automotive, machine building, metalworking,

electronics, food and beverage and logistics. They include

end-

users such as manufacturers, system integrators and machine

builders.

Sales and Marketing

Sales are made both through direct sales forces as well as through

third‑party channel partners, such as system

integrators and machine builders.

The proportion of direct sales compared to channel partner

sales varies among the

different industries, product technologies and

geographic markets.

Competition

Competitors of the Robotics & Discrete Automation Business

Area vary by offering.

They include companies

such as Fanuc, Kuka, Yaskawa

Epson,

Dürr, Stäubli, Universal Robots, Rockwell Automation

Siemens Digital

Factory,

Mitsubishi Electric and Beckhoff.

Capital Expenditures

The Robotics & Discrete Automation Business Area’s

capital expenditures for property,

plant and equipment

totaled $64 million in 2020, compared to $59 million

in 2019. Principal investments in 2020 were primarily related to

production capacity,

upgrades and equipment replacement. Geographically,

in 2020, Europe represented 81 percent of

the capital expenditures, followed by Asia, Middle East and

Africa (16 percent) and the Americas (3 percent).

Corporate and Other

Corporate and Other includes headquarters, central research

and development, real estate activities, Corporate

Treasury Operations, Global Business Services

(GBS), the investment in Hitachi ABB Power Grids and

other minor

business activities. The remaining activities of certain EPC projects

which we are completing and are in a wind-down

phase are also reported in Corporate and Other.

In addition, the historical business activities of certain divested

businesses are presented in Corporate and Other.

These include the high-voltage cables business, steel structures and

certain EPC contracts relating to the oil and gas industry.

Corporate headquarters and stewardship activities include

the operations of our corporate headquarters in

Zurich, Switzerland, as well as limited corporate‑related

activities in some countries. These activities cover staff

functions with group‑wide responsibilities, such as accounting

and financial reporting, corporate finance and corporate

treasury, taxes, financial

planning and analysis, internal audit, legal and integrity,

compliance, risk management and

insurance, corporate communications, information systems and

investor relations.

GBS operates shared service centers globally through

a network of five hubs and consists of both expert and

transactional services in the areas of human resources, finance,

information services, legal, real estate, procurement and

logistics, customer contact centers, global travel services

and other ancillary activities. GBS also staffs and maintains

front offices in most countries. The costs in GBS are

incurred primarily for the benefit of the Business Areas, who

are

charged

for their use of the services.

A significant portion of the costs for GBS and other

shared corporate overhead costs are charged to the

operating businesses. Up until the divestment of the

Power Grids business on July 1, 2020, overhead and other

management costs, including GBS costs, which would

have been allocated or charged to our Power Grids

business, and

which were not directly attributable to this business, have

not been allocated to the discontinued operation and are

included in Corporate and Other as “stranded costs”.

Corporate and Other had approximately 1,600 employees at

December 31, 2020.

DISCONTINUED OPERATIONS

In July 2020, we divested 80.1 percent of our Power

Grids business to Hitachi Ltd. As a result, the Power Grids

business is reported as discontinued operations

in the Consolidated Financial Statements for all years presented. See

“Note 3 - Discontinued operations” to our Consolidated

Financial Statements.

Power Grids business

The former Power Grids business of ABB delivered products, systems,

software and service solutions across

the power value chain for utility,

industry and transport & infrastructure customers.

The Power Grids business operated worldwide with

a globally diversified manufacturing,

engineering,

and

research and development footprint. Direct sales account

ed for the majority of total revenues generated by the

business

while external channel partners such as EPCs, wholesalers, distributors

and OEMs accounted for the rest.

Products and Services

The Grid Automation operation supplied

substation automation products, systems and services. It also provide

Supervisory Control and Data Acquisition (SCADA) systems for

transmission and distribution networks as well as a

range of wireless, fiber optic and powerline carrier-based

telecommunication technologies for mission-critical

applications and also offered grid-edge and

microgrid solutions. Its enterprise software portfolio provided

solutions for

managing and optimizing assets, operations, logistics, financials and

HR, reducing operating costs and improving

productivity for customers.

The Grid Integration operation was a leading provider

of integration and transmission solutions such as High

Voltage

Direct Current (HVDC). Another key part of the portfolio

was the Flexible Alternating Current Transmission

Systems (FACTS) business,

which comprises Static Var

Compensation (SVC) and static compensator (STAT

COM)

technologies to address stability and power quality issues. The

Grid Integration operation’s portfolio

also included

range of high-power semiconductors, a core technology

for power electronics deployed in HVDC, FACTS

and rail

applications. The Grid Integration operation also provided

transmission and distribution substations and associated

lifecycle services. These substations are used in utility and

non-utility applications including rail, data centers and

various industries. Battery energy storage solutions

and shore-to-ship power supply were also part of the customer

offering.

The High Voltage

products operation was a provider of high voltage switchgear

up to 1200 kV AC and 1100

kV DC with a portfolio spanning air-insulated,

gas-insulated and hybrid technologies. It also manufacture

generator

circuit breakers, a key product for integrating large

power plants into the grid. The portfolio also included

a broad range

of capacitors and filters that facilitate power quality,

instrument transformers and other substation components.

The Transformers operation supplied

transformers that are an integral component found across the power

value

chain, enabling the reliable, efficient and

safe conversion of voltage levels. The product range included

dry- and liquid-

distribution transformers, traction transformers for rail

applications and special application transformers plus related

components, for example, insulation kits, bushings and

other transformer accessories.

The Power Grids business also had an extensive portfolio

of service offerings across the value chain

The

portfolio included spare parts, condition monitoring

and maintenance services, on- and off‑site repairs as well as retrofits

and upgrades. Advanced software-based monitoring and

advisory services further enhanced the portfolio.

CAPITAL EXPENDITURES

Total capital expenditures

for property, plant and

equipment and intangible assets (excluding intangibles

acquired through business combinations) amounted to

$694

million,

$762 million and $772 million in 2020, 2019 and

2018, respectively.

In 2020 and 2019,

capital expenditures were 24 percent and 21 percent lower,

respectively, than

depreciation and amortization. Excluding acquisition

-related amortization, capital expenditures were 6 percent higher

2020 and 9 percent higher in 2019,

respectively,

than depreciation and amortization.

Capital expenditures in 2020 remained primarily focused

in mature markets, reflecting the geographic

distribution of our existing production facilities. Capital expenditures

in Europe and North America in 2020 were driven

primarily by upgrades and maintenance of existing production

facilities, mainly in the U.S., Switzerland, Germany,

Italy, Finland,

Sweden and Austria. Capital expenditure in the U.S. was primarily driven

by GEIS-related footprint

changes and product conversions in the Electrification Business Area

and upgrades

of existing production facilities in

the Motion Business Area.

Expenditures in Austria included continued investment

in the state-of-the-art innovation and

training campus, which is planned to become one of our

largest research and development centers for new automation

technologies. Additionally,

we started the construction of an upgraded facility in Switzerland

for our Motion Business

Area. This investment aims to expand our existing global

center of excellence for power electronics and also expand

related innovation capabilities. Capital expenditures in

emerging markets continued to remain primarily concentrated

China, India and Poland, and focus on increasing existing

production capacity.

The construction of an advanced,

automated and flexible robotics factory in China

continued and is expected to be completed in 2021. This factory is

designed to combine our connected digital technologies, state-of

-the-art collaborative robotics and innovative artificial

intelligence research. The share of emerging

markets capital expenditures as a percentage of total capital expenditures

2020 and 2019 was 22 percent and 27 percent, respectively.

At December 31, 2020, construction in progress for

property, plant and equipment

was $505 million, mainly in

the U.S., Switzerland, Austria, Germany and China while

at December 31, 2019, construction in progress for property,

plant and equipment was $500 million, mainly in the U.S.,

Switzerland, Finland, Germany,

Austria and Sweden.

Our capital expenditures relate primarily to property,

plant and equipment. For 2021, we estimate the

expenditures for property,

plant and equipment will be lower than our annual depreciation

and amortization charge,

excluding acquisition-related amortization.

SUPPLIES AND RAW

MATERIALS

We purchase

a variety of supplies and products which contain raw materials

for use in our production and

project execution processes. The primary materials used

in our products, by weight, are copper,

aluminum, steel, mineral

oil and various plastics. We

also purchase a wide variety of fabricated products,

electronic components and systems. We

operate a worldwide supply chain management network

with employees dedicated to this function in our Business

Areas, Divisions and in key countries. Our supply chain

operations consists of a number of teams, each focusing on

different product categories. These category

teams take advantage of opportunities to leverage the scale of ABB on

global, Business Area and/or Division level, as appropriate,

to optimize the efficiency of our supply networks

in a

sustainable manner.

Our supply chain management organization

’s activities and objectives include

•

pool and leverage procurement of materials and services,

•

provide transparency of ABB’s global

spending through a comprehensive performance and reporting

system linked to our enterprise resource planning (ERP)

systems,

•

strengthen ABB’s supply

chain network by implementing an effective product

category management

structure and extensive competency‑based training, and

•

monitor and develop our supply base to ensure sustainability,

both in terms of materials and processes

used.

We buy many

categories of products which contain steel, copper,

aluminum, crude oil and other commodities.

Continuing global economic growth in many emerging

economies, coupled with the volatility in foreign currency

exchange rates, has led to significant fluctuations in

these raw material costs over the last few years. While we expect

global commodity prices to remain highly volatile, we

expect to offset some market volatility through the

use of

long‑term contracts and global sourcing.

We seek to mitigate

the majority of our exposure to commodity price risk

by entering into derivative contracts.

For example, we manage copper,

silver and aluminum price risk using principally swap contracts

based on prices for

these commodities quoted on leading exchanges. ABB’s

hedging policy is designed to safeguard margins

by minimizing

price volatility and providing a stable cost base during order execution.

In addition to using derivatives to reduce our

exposure to fluctuations in raw materials prices, in some

cases we can reduce this risk by incorporating changes in raw

materials prices into the prices of our end products (through

price escalation clauses).

Overall, during 2020, supply chain management personnel

in our businesses, and in the countries in which we

operate, along with the category teams, continued to focus

on value chain optimization efforts in all areas, while

maintaining and improving quality and delivery performance.

Each Business Area quickly implemented a COVID-19

task force both in operations and supply chain management.

The Business Areas experienced some delays and shortages

with suppliers due to the global pandemic, however we responded

to these shortages and took mitigating actions such as

building up larger buffer stocks, approving

new suppliers, changing supplier splits, combined with daily,

weekly and

monthly task force project follow up.

We have been able

to operate without significant disruption and support business

growth while maintaining delivery schedules to our customers.

In August 2012, the SEC issued its final rules regarding

“Conflict Minerals”, as required by section 1502 of the

Dodd‑Frank Wall

Street Reform and Consumer Protection Act. We

initiated conflict minerals processes in 2013 and

have continuously aimed at improving and tailoring the

processes to our value chain. We

continue to work with our

suppliers and customers, to enable us to comply with

the rules and disclosure obligations. Further information on ABB’s

Conflict Minerals policy and supplier requirements can

be found under “Material Compliance”

global.abb/group/en/about.supplying.

PATENTS

AND TRADEMARKS

While we are not materially dependent on any one of our

intellectual properties, as a technology-driven

company, we believe

that intellectual property rights are crucial to protect the

assets of our business. Over the past ten

years, we have continued to substantially add new applications

to our existing first patent filings, and we intend to

continue our aggressive approach to seeking patent protection.

As of December 31, 2020, we have approximately 23,900

patent applications and registrations, of which approximately

5,300 are pending applications. These patents include

more than 3,100 utility model and design applications

and registrations, of which approximately 250 are pending

applications. In 2020, we filed more than 1,600 patent

s, utility model and design applications for more than 600

new

inventions. Based on our existing intellectual property

strategy, we believe that we

have adequate control over our core

technologies. The “ABB” trademarks and logo are protected in

all of the countries in which we operate. We

aggressively

defend our intellectual property rights to safeguard the reputation

associated with the ABB technology and brand. While

these intellectual property rights are fundamental to

all of our businesses, there is no dependency of the business on

any

single patent, utility model or design application.

SUSTAINABILITY ACTIVITIES

Sustainability management is one of our highest business priorities.

We seek to address

sustainability issues in

all our business operations in order to improve our social,

health, safety and environmental performance continuously,

and to enhance the quality of life in the communities and

countries where we operate.

Our social, health, safety and environmental efforts

include:

•

implementing sustainability objectives covering all relevant

parts of our operations,

•

joining initiatives that foster economic, environmental,

social and educational development, and strengthen

observance of human rights in business practice,

•

making positive contributions in the communities where

we operate so they welcome us and consider ABB

a good neighbor, an attractive

employer and a good investment,

•

offering our customers eco‑efficient products

that save energy and are safe to use, that optimize

the use of

natural resources, minimize waste and reduce environmental

impact over their complete life cycles,

•

applying non‑financial risk assessment to key business decision‑making

processes, and to projects,

•

sharing our latest technologies with emerging

markets by, for example,

helping customers in developing

countries implement environmentally sound processes and

technologies and providing environmental

awareness and safety training to our business partners,

•

ensuring that our operations and processes comply

with applicable environmental and health and safety

standards and social legislation. Specifically,

every operating unit must implement an environmental

management system that seeks to continuously improve

its environmental performance and a health and

safety management system that similarly seeks to continuously

improve health and safety performance,

•

ensuring that our social, health and safety and environmental

policies are communicated and implemented,

•

working towards achieving best practices in occupational

health and safety,

and ensuring the health and

safety of our employees, contractors and others involved

in or affected by our activities,

•

ensuring that suppliers have sustainability policies and

systems that are comparable with our own, and

•

continuing our program to decontaminate sites that were

polluted by historical manufacturing processes.

Our eco-efficiency portfolio of products, solutions

and services continues to grow.

This portfolio delivers

positive use-phase impacts in three areas: energy

efficiency,

renewable energy and resource efficiency.

In 2020, ABB

set the target to support customers in reducing

their annual CO

emissions by at least 100 megatonnes by 2030. In

responsible operations all reported measures are on track

to achieve the 2030 targets.

To manage environmen

tal aspects of our own operations, we have implemented

environmental management

systems according to the ISO 14001 standard at our manufacturing

and service sites. For non‑manufacturing sites we

have implemented an adapted environmental management

system in order to ensure management of environmental

aspects and continual improvement of performance. Globally,

operations at 293 sites and offices are covered

externally certified environmental management systems.

We have Environmental

Product Declarations to communicate the environmental performance

of our core

products. These describe the significant environmental aspects and

impacts of a product line, viewed over its complete

life cycle. Declarations are based on Life Cycle Assessment

studies, created according to the international standard

ISO/TR 14025. Approximately 70 declarations for major

product lines are published on our Web

site www.abb.com

some of which have been externally certified.

In 2020, approximately 91 percent of our employees were

covered by confirmed data gathered through ABB’s

formal environmental reporting system that is verified

by an independent verification body.

The operations of companies

acquired during 2020 are not yet covered by our environmental

reporting. We

expect that this reporting will be

implemented in 2021. The remaining parts of our business that

are not yet covered by our environmental reporting

system, mainly sales, have very limited environmental

exposure. A total of 5 environmental incidents were reported in

2020, none of which had a material environmental impact.

In 2020, substantially all of our employees were covered by

confirmed data gathered through ABB’s

formal

social reporting system that is verified by an independent

verification body.

The remaining parts of our business that are

not yet covered by our social reporting system, mainly

sales offices in countries where we do not perform

manufacturing, have very limited social exposure.

REGULATION

Our operations are subject to numerous governmental

laws and regulations including those governing antitrust

and competition, corruption, the environment, securities transactions

and disclosures, import and export of products,

currency conversions and repatriation, taxation of foreign

earnings and earnings of expatriate personnel and use of local

employees and suppliers.

As a reporting company under Section 12 of the

Exchange Act,

we are subject to the FCPA

’s anti‑bribery

provisions with respect to our conduct around the

world.

Our operations are also subject to the 1997 OECD Convention

on Combating Bribery of Foreign Public

Officials in International Business Transactions.

The convention obliges signatories to adopt national

legislation that

makes it a crime to bribe foreign public officials. Those

countries which have adopted implementing legislation

and

have ratified the convention include the U.S., several

European nations and certain other countries in which we have

significant operations.

We conduct

business in certain countries known to experience governmental

corruption. While we are

committed to conducting business in a legal and ethical

manner, our employees or agents have taken,

and in the future

may take, actions that violate the U.S. FCPA,

legislation promulgated pursuant to the 1997 OECD Convention

Combating Bribery of Foreign Public Officials in

International Business Transactions, antitrust

laws or other laws or

regulations. These actions have resulted and could result in

monetary or other penalties against us and could damage

our

reputation and, therefore, our ability to do business. For

more information, see “Item 8. Financial Information

—Legal

Proceedings”.

The U.S. Iran Threat Reduction and Syria Human

Rights Act of 2012 requires U.S. listed companies to disclose

information relating to certain transactions with Iran.

In 2018, certain non-U.S. subsidiaries of ABB, in accordance

with

applicable laws, provided electrical equipment, automation

systems and on-site services to OEMs, distributors, panel

builders, EPC contracting companies and other customers for

Iranian business. ABB discontinued its Iranian

business on

November 4, 2018. ABB is completing minor work

on a long-term contract which is being performed in line with

applicable sanctions. The revenues attributable to these products

and services in 2020 amounted to approximately

$2 million.

ORGANIZATIONAL STRUCTURE

ABB Ltd is the ultimate parent company of the ABB Group.

It is the sole shareholder of ABB Asea Brown

Boveri Ltd which directly or indirectly owns the other

companies in the ABB Group. The table below both sets forth,

of December 31, 2020, the name, place of incorporation

and ownership interest of the significant direct and indirect

subsidiaries of ABB Ltd, Switzerland. In addition, ABB Ltd

also owns 19.9 percent of Hitachi ABB Power Grids Ltd.

ABB’s operational group

structure is described above in the “Businesses” section of Item

Company name/location

Country

ABB

interest %

ABB S.A., Buenos Aires

Argentina

100.00

ABB Australia Pty Limited, Moorebank, NSW

Australia

100.00

ABB Group Investment Management Pty. Ltd., Moorebank, NSW

Australia

100.00

ABB AG,

Wiener Neudorf

Austria

100.00

B&R Holding GmbH, Eggelsberg

Austria

100.00

B&R Industrial Automation GmbH, Eggelsberg

Austria

100.00

ABB N.V.

Zaventem

Belgium

100.00

ABB Automacao Ltda., Sorocaba

Brazil

100.00

ABB Eletrificacao Ltda., Sorocaba

Brazil

100.00

ABB Bulgaria EOOD, Sofia

Bulgaria

100.00

ABB Electrification Canada ULC, Edmonton, Alberta

Canada

100.00

ABB Inc., Saint-Laurent, Quebec

Canada

100.00

ABB S.A., Santiago

Chile

100.00

ABB (China) Investment Limited, Beijing

China

100.00

ABB (China) Ltd., Beijing

China

100.00

ABB Beijing Drive Systems Co. Ltd., Beijing

China

90.00

ABB Beijing Switchgear Limited, Beijing

China

60.00

ABB Electrical Machines Ltd., Shanghai

China

100.00

ABB Engineering (Shanghai) Ltd., Shanghai

China

100.00

ABB Shanghai Free Trade Zone Industrial Co., Ltd., Shanghai

China

100.00

ABB Shanghai Motors Co. Ltd., Shanghai

China

75.00

Company name/location

Country

ABB

interest %

ABB Xiamen Low Voltage

Equipment Co. Ltd., Xiamen

China

100.00

ABB Xiamen Switchgear Co. Ltd., Xiamen

China

66.52

ABB Xinhui Low Voltage

Switchgear Co. Ltd., Xinhui

China

90.00

ABB s.r.o., Prague

Czech Republic

100.00

ABB A/S, Skovlunde

Denmark

100.00

ABB for Electrical Industries (ABB ARAB) S.A.E., Cairo

Egypt

100.00

Asea Brown Boveri S.A.E., Cairo

Egypt

100.00

ABB AS, Jüri

Estonia

100.00

ABB Oy, Helsinki

Finland

100.00

ABB France, Cergy Pontoise

France

99.83

ABB SAS, Cergy Pontoise

France

100.00

ABB AG,

Mannheim

Germany

100.00

ABB Automation GmbH, Mannheim

Germany

100.00

ABB Automation Products GmbH, Ladenburg

Germany

100.00

ABB Beteiligungs- und Verwaltungsges.

mbH, Mannheim

Germany

100.00

ABB Stotz-Kontakt GmbH, Heidelberg

Germany

100.00

B + R Industrie-Elektronik GmbH, Bad Homburg

Germany

100.00

Busch-Jaeger Elektro GmbH, Lüdenscheid

Germany

100.00

ABB Engineering Trading and Service Ltd., Budapest

Hungary

100.00

Industrial C&S Hungary Kft., Budapest

Hungary

100.00

ABB Global Industries and Services Private Limited, Bangalore

India

100.00

ABB India Limited, Bangalore

India

75.00

ABB S.p.A., Milan

Italy

100.00

ABB K.K., Tokyo

Japan

100.00

ABB Ltd., Seoul

Korea, Republic of

100.00

ABB Electrical Control Systems S. de R.L. de C.V.,

Monterrey

Mexico

100.00

ABB Mexico S.A. de C.V.,

San Luis Potosi SLP

Mexico

100.00

Asea Brown Boveri S.A. de C.V.,

San Luis Potosi SLP

Mexico

100.00

ABB B.V.,

Rotterdam

Netherlands

100.00

ABB Finance B.V.,

Rotterdam

Netherlands

100.00

ABB Holdings B.V.,

Rotterdam

Netherlands

100.00

ABB AS, Fornebu

Norway

100.00

ABB Electrification Norway AS, Skien

Norway

100.00

ABB Holding AS, Fornebu

Norway

100.00

ABB Business Services Sp. z o.o., Warsaw

Poland

99.93

ABB Industrial Solutions (Bielsko-Biala) Sp. z o.o., Bielsko-Biala

Poland

99.93

ABB Industrial Solutions (Klodzko) Sp.z o.o., Klodzko

Poland

99.93

ABB Sp. z o.o., Warsaw

Poland

99.93

Industrial C&S of P.R.

LLC, San Juan

Puerto Rico

100.00

Company name/location

Country

ABB

interest %

ABB Ltd., Moscow

Russian Federation

100.00

ABB Electrical Industries Co. Ltd., Riyadh

Saudi Arabia

65.00

ABB Pte. Ltd., Singapore

Singapore

100.00

ABB Holdings (Pty) Ltd., Modderfontein

South Africa

100.00

ABB South Africa (Pty) Ltd., Modderfontein

South Africa

74.91

Asea Brown Boveri S.A., Madrid

Spain

100.00

ABB AB, Västerås

Sweden

100.00

ABB Norden Holding AB, Västerås

Sweden

100.00

ABB Asea Brown Boveri Ltd, Zurich

Switzerland

100.00

ABB Canada EL Holding GmbH, Zurich

Switzerland

100.00

ABB Capital AG, Zurich

Switzerland

100.00

ABB Information Systems Ltd., Zurich

Switzerland

100.00

ABB Investment Holding 2 GmbH, Zurich

Switzerland

100.00

ABB Management Services Ltd., Zurich

Switzerland

100.00

ABB Schweiz AG, Baden

Switzerland

100.00

ABB Ltd.,

Taipei

Taiwan (Chinese Taipei)

100.00

ABB Elektrik Sanayi A.S., Istanbul

Turkey

99.99

ABB Industries (L.L.C.), Dubai

United Arab Emirates

49.00

(1)

ABB Holdings Limited, Warrington

United Kingdom

100.00

ABB Limited, Warrington

United Kingdom

100.00

ABB Finance (USA) Inc., Wilmington, DE

United States

100.00

ABB Holdings Inc., Cary, NC

United States

100.00

ABB Inc., Cary, NC

United States

100.00

ABB Installation Products Inc, Memphis, TN

United States

100.00

ABB Installation Products International LLC., Wilmington, DE

United States

100.00

ABB Motors and Mechanical Inc, Fort Smith, AR

United States

100.00

ABB Treasury Center (USA), Inc., Wilmington, DE

United States

100.00

Edison Holding Corporation, Wilmington, DE

United States

100.00

Industrial Connections & Solutions LLC, Cary, NC

United States

100.00

(1) Company consolidated

as ABB exercises full management control.

DESCRIPTION OF PROPERTY

As of December 31, 2020, we occupy real estate in around

100 countries throughout the world. The facilities

consist mainly of manufacturing plants, office

buildings,

research centers and warehouses. A substantial portion of our

production and development facilities is situated in the U.S.,

China, Germany, Finland,

Canada, Italy, India, Sweden,

Poland and Switzerland. We

also own or lease other properties, including office

buildings, warehouses, research and

development facilities and sales offices in many

countries. We own

substantially all of the machinery and equipment

used in our manufacturing operations.

From time to time, we have a surplus of space arising from

acquisitions, production efficiencies and/or

restructuring of operations. Normally,

we seek to sell such surplus space which may involve leasing property

to third

parties for an interim period. As a result of the divestment

of the Power Grids business to Hitachi Ltd, certain property,

plant and equipment previously owned by ABB which related to

the Power Grids business, was sold as part of the

divestment. In addition, certain property,

plant and equipment relating to the Power Grids business continues

to be

owned by ABB and is leased to Hitachi ABB Power Grids.

The net book value of our property,

plant and equipment at December 31, 2020, was $4,174 million,

of which

machinery and equipment represented $1,530 million,

land and buildings represented $2,139 million and construction

progress represented $505 million. We

believe that our current facilities are in good condition

and are adequate to meet

the requirements of our present and foreseeable future operations.

Item 4A.

Unresolved Staff Comments

None

Item 5.

Operating and Financial Review and Prospects

The discussion in Item 5 below provides a comparative

analysis between 2020 and 2019. See “Item 5.

Operating and Financial Review and Prospects” in our

Annual Report on Form 20-F for the year ended December 31,

2019,

for a comparative discussion and analysis between 2019

and 2018.

MANAGEMENT OVERVIEW

The year 2020 was unprecedented due to the COVID-19

pandemic. ABB prioritized the health and safety of its

employees while ensuring business continuity where

possible.

ABB responded to the challenges, adapting its operations

to keep the vast majority running during various levels

of government restrictions. This response allowed ABB to stay

close to customers and to keep, where possible, to order

delivery deadlines, particularly for critical infrastructure

applications. Going forward we

look to retain some portion of the more beneficial learnings from

COVID-19, for

example, by enhancing flexible working arrangements

and encouraging more virtual meetings with customers.

During 2020, additional steps were taken to sustainably

improve ABB’s future operating

performance. Some of

the key actions include the launch of the ABB Purpose, implementing

the operating model the ABB Way,

which

increases accountability,

transparency and speed by transferring operating decisions

closer to customers, a review of the

business portfolio as well as a review of the digital strategy.

The ABB Purpose

The ABB Purpose was launched mid-year in 2020 and

captures what we stand for today and what we aspire to

be in the future. We

believe that ABB’s technologies

and products are well aligned to key market trends and customer

needs such as the electrification of transport, automated

manufacturing, digital solutions and increased sustainable

productivity. The Group

is trusted by customers, holding number 1 or number 2 market

share positions in most of the

segments in which we operate. With our

Purpose at the core, ABB strives to create superior value for customers,

employees and shareholders. The ABB Purpose is summarized

as:

•

We succeed by

creating superior value.

•

We push the

boundaries of technology to drive performance to new levels.

•

We energize

the transformation of society and industry to achieve a more productive,

sustainable future.

The ABB Way

Under

the ABB Way,

we further evolve our decentralized business model in order

that the mandate and

accountability lie in our Divisions, strengthening performance

management, consistently putting stability and

profitability before growth, and driving active portfolio

management.

The ABB Way comprises

of a select number of common processes covering

our business model, our people

and culture, the ABB brand and

our governance framework. It sets the stage for accountability,

transparency and speed

at ABB.

Closeness to customers and domain expertise sit in the

Divisions, hence under the ABB Way

the Divisions

have been made the highest level at which operating

decisions are made, prioritizing stability and profitability

before

growth. A Division should not focus fully on growth

before having achieved a structurally stable business platform

and

a profitability level contributing to the Group’s

targeted financial framework.

Each Division within the four Business Areas of Electrification,

Industrial Automation, Motion and Robotics &

Discrete Automation, now has full accountability for its results

of operations and operating balance sheet. Each Division

carries the responsibility for business development and

research and development for leading technology to secure

number 1 or 2 market position.

The Divisions are free to collaborate where it adds efficiency,

for example by sharing select business services

or administrative functions. In line with this accountability,

commencing in 2021 there will no longer be any shared

services or functions operated centrally at a corporate

level requiring cost allocations to the Business Areas. The

corporate area will focus on necessary financial, strategic

and governance activities, with a reduced headcount of less

than 1,300 employees. Over the past two years, simplification

efforts have delivered meaningful cost benefits

to the

Group such that by the end of 2020, we achieved net annual

run rate cost savings exceeding $500 million.

Strong performance management is key in a decentralized

business model. In the middle of 2020,

a new

scorecard system for the Divisions and Business Areas was introduced,

based on a standardized set of Key Performance

Indicators. The system aids continuous improvement by increasing

transparency and accountability.

It is accompanied

by a mandatory target to make annual productivity

improvements of at least 3 percent each year.

Starting in 2021, the Annual Incentive Plans (AIPs) will be

aligned to Business Area and Divisional mandates

for stability and profitability before growth. For example,

AIP targets in a growth Division will have a higher

weighting

toward the delivery of targeted orders or

revenues growth, as well as the mandatory 3 percent productiv

ity improvement.

Business portfolio review

We have further

strengthened our portfolio review process to ascertain whether

ultimately ABB is the best

owner of businesses. Our systematic approach is based

on multiple factors within the three evaluation categories:

strategic attractiveness, value creation potential and

fit within ABB. During 2020, the Group’s

continuous portfolio

review process resulted in a decision to sell the businesses operated

by three Divisions: Turbocharging

in Industrial

Automation, Mechanical Power Transmission

in Motion, and Power Conversion in Electrification. Combined,

these

Divisions generated

approximately $1.6 billion revenues in 2020,

or about 6 percent of total revenues. The divestment

process will focus on seeking the best value-accretive solution

for ABB and those businesses with time being a critical

factor.

In addition, ABB’s active portfolio

management process will drive decisions within the Divisions to

improve or

exit areas of underperformance, supporting improved

performance ambitions. Further,

the Group intends to pursue

strategic partnerships as well as bolt-on acquisitions, and

plans to complete five or more such transactions each

year,

mainly in our Divisions with growth mandates.

Digital strategy

In line with our Purpose, the Group’s

digital strategy is focused on creating superior customer value. Our

digital offering is comprised of software-enabled

products and systems, as well as software and digital services,

and is

differentiated through our domain expertise.

Our deep understanding of customers’ needs and operations is based

decades-long history in a sector-focused approach,

our large installed base and the global leadership

position we have in

many sectors.

We intend to

accelerate the expansion of our digital offering that is tailore

to specific sectors or applications.

In line with the ABB Way

this will be led by our businesses that have already successfully

developed a comprehensive

digital offering.

Our digital strategy drives new revenues in software and

digital services that generally have a higher gross

margin and additionally pull-through some

of our traditional offering. Overall, this results in higher

quality of revenues

for the Group with improved margins and superior

returns.

We continue

to right-size our investments in technology according to

the need of each Division. In 2020, we

spent 4.3 percent of our revenues on non-order related

research and development. Within our

research and development

spend, we expect the focus on digitalization will grow

Already, out of approximately

7,000 employees in research and

development, more than 60 percent are focused on software

and digitalization. Our ambition is to grow revenues derived

from software and digital services at a double-digit rate going

forward.

Business progress

During 2020, our financial performance was impacted

by challenging general market conditions, influenced by

the effects of the COVID-19 pandemic. At the

same time, we focused on accelerating cost mitigation efforts,

which

aided profitability and cash flow generation during a

tough period. Throughout the COVID-19 pandemic, our top

priority has been the health and safety of our people. Substantially

all of our production facilities have remained fully or

partly operational and operations have been adapted as necessary

for the new environment.

Orders and revenues declined in all Business Areas driven by

pandemic induced headwinds and the steep drop

in the oil price. Demand decreased year-on-year in all

regions with the Americas seeing the largest declines,

while

AMEA was almost flat due to strength in China particularly

towards the end of the year. While

short-cycle product

demand recovered relatively quickly from the sharp downturn

seen at the onset of the pandemic,

project and service

activities continued through the year to be impacted by

various travel restrictions implemented by countries around

the

world.

As a result, the Electrification and Motion Business Areas, which

are both more product-focused,

showed a

relatively resilient performance with annual orders in

2020 declining 9 and 3 percent respectively.

Portfolio changes

adversely affected Electrification by about

3 percent. Industrial Automation and Robotics & Discrete Automation

faced

greater challenges in end-markets such as oil and gas,

conventional power generation, marine and automotive.

As a

result, annual orders

in Robotics & Discrete Automation declined 12 percent, while Industrial

Automation,

benefiting

from a few significant large orders in Marine

declined 4 percent in 2020.

Despite the market challenges faced by the

Group during 2020, our order backlog increased 7 percent

Group profitability showed good resilience, reflecting

cost reductions in all Business Areas, strong progress in

Electrification with the integration of the GEIS business

and turnaround of the Installation Products Division,

and cost

savings achieved through the ABB OS program,

particularly corporate costs declining,

as well as the elimination of

stranded costs. A significant amount of our cost reductions

were due to COVID-19 restrictions,

especially for

discretionary travel and certain marketing costs. The

Motion Business Area maintained its track record of solid

performance benefitting from a change in product

mix as well as cost savings efforts. Conversely,

in the Industrial

Automation Business Area, the segment profit was negatively

impacted by the amount recorded relating to the

settlement in South Africa with Eskom in relation

to the Kusile power generation project, as well as by an adverse

change in product mix due to reduced service revenues.

Profitability in the Robotics & Discrete Automation Business

Area was impacted by lower volumes and an adverse change

in product mix stemming from the continued downturn

its key end-markets such as automotive.

Within the Electrification Business Area,

the integration of GEIS progressed well. Since the acquisition

2018, we aim to deliver approximately $200 million

of cumulative annual cost synergies by 2022,

of which

approximately 80 percent is anticipated to come from

product and technology portfolio harmonization and footprint

optimization. To

support this transformation, we plan to expend approximately

$410 million for the GEIS business from

the acquisition date through 2022 and have, to date,

spent approximately $300 million. By the end of 2020, more

than

$140 million of cost synergies have been achieved

including the effects from a closure of 18 sites, primarily

production

plants as well as certain service facilities. Product substitutions

were on track with 52 new products introduced to the

market in 2020.

Several acquisitions and divestments were completed

in 2020, strengthening our portfolio. In March 2020, the

Electrification Business Area acquired a majority stake

in Shanghai Chargedot New Energy Technology

Co., Ltd, a

leading Chinese e-mobility solution provider,

and acquired Cylon Controls Ltd, enhancing its Smart Buildings

portfolio

in the commercial buildings segment. In October 2020,

the Robotics & Discrete Automation Business Area acquired

Codian Robotics B.V.,

a leading provider of delta robots, which are used primarily

for high-precision pick and place

applications. Codian Robotics’ offering includes

a hygienic design line, ideal for hygiene-sensitive industries including

food and beverage and pharmaceuticals. Additionally,

we completed the previously announced divestment of the solar

inverters business to FIMER S.p.A (Italy) in February

2020.

We continued

to make organic growth investments in a disciplined

manner, prioritizing research and

development while reducing administrative costs. Total

non-order related research and development was $1.1 billion

2020,

or 4.3 percent of revenues.

Capital allocation

The Board of Directors is proposing a dividend of

0.80 Swiss francs per share at the 2021 Annual Genera

Meeting (AGM).

Our sustained capital allocation priorities are unchanged:

•

funding organic growth, research and development,

and capital expenditures at attractive returns,

•

paying a rising, sustainable dividend per share over time,

•

investing in value-creating acquisitions, and

•

returning additional cash to shareholders.

Following the completion of the divestment of our Power

Grids business to Hitachi on July 1, 2020, and

consistent with our overall capital structure optimization

program, we launched a share buyback program on July

23,

2020. As part of our plan to return cash proceeds of $7.6

-7.8 billion from the sale of the Power Grids business we

initially intend to buy up to 10 percent of our issued share

capital. This initial program is planned to continue until our

AGM on March 25, 2021. At the AGM, we intend

to request shareholder approval to cancel the shares purchased

through this initial program and to announce the next steps.

As part of a capital structure optimization program, we have

also been reviewing our outstanding debt and

defined benefit pension structures during 2020. As a result,

we executed public tenders on two outstanding bonds and

redeemed and repaid outstanding amounts on two other

debt obligations. During 2020, we reduced our total debt

approximately $2.9 billion and completed the transfer of

certain of the Group’s defined benefit

pension plan obligations

to third parties, which contributed to a reduction in pension

underfunding by approximately $1.1 billion. In connection

with these transactions we recorded losses on extinguishment

of debt of $162 million and non-operational pension

costs

of $520 million. These transactions are an efficient

way to deleverage, significantly reducing the underfunding

of our

pension liabilities while reducing potential negative future

cash flow and income statement impacts, and improve our

financial flexibility.

Short-term outlook

Market uncertainty due to COVID-19 increased

through the fourth quarter of 2020.

The outlook remains muted

for segments such as oil and gas, conventional power

generation and marine, while raw materials costs are rising. That

said, there are signs of positive development in general

industry and machine builders’ segments, while end-markets

including buildings, distribution utilities, data centers,

consumer electronics and food and beverage are expected

to grow

robustly.

Financial framework mirrors ambition for

improved performance

During 2020, we have taken resourceful action to

sustainably improve the performance of ABB. We

look to

improve the quality of revenues, investing to expand

the Group’s exposure to high-growth

segments and the distributor

channel, as well as to expand our digital offering,

while continuing to exit high-risk EPC activities. We

have increased

accountability,

transparency and speed in decision making by transferring responsibilities to

our Divisions. This is

reflected in the targets within our financial framework,

which guides to:

•

3 to 5 percent annual average revenues growth through

economic cycle, of which approximately two-thirds

is anticipated to come from organic growth,

and approximately one-third from acquired growth,

•

Operational EBITA

margin of 13 to 16 percent,

•

Return on Capital Employed (ROCE) of 15 to 20 percent,

•

Cash conversion to net income of approximately 100

percent, and

•

Basic EPS growth above revenue growth.

APPLICATION OF CRITICAL

ACCOUNTING POLICIES

General

We prepare

our Consolidated Financial Statements in accordance with

U.S. GAAP and present these in U.S.

dollars unless otherwise stated.

The preparation of our financial statements requires us to make

assumptions and estimates that affect the

reported amounts of assets, liabilities, revenues and expenses and

the related disclosure of contingent assets and

liabilities. We evaluate

our estimates on an ongoing basis (see “Note 2 -

Significant accounting policies” to our

Consolidated Financial Statements for a listing of our most

significant accounting estimates). Where appropriate, we

base our estimates on historical experience and on various

other assumptions that we believe to be reasonable under the

circumstances, the results of which form the basis for

making judgments about the carrying values of assets and

liabilities that are not readily apparent from other sources.

Actual results may differ from our estimates and assumptions.

We deem an

accounting policy to be critical if it requires

an accounting estimate to be made based on

assumptions about matters that are highly uncertain at

the time the estimate is made and if different

estimates that

reasonably could have been used, or if changes in the

accounting estimates that are reasonably likely to occur

periodically, could

materially impact our Consolidated Financial Statements. We

also deem an accounting policy to be

critical when the application of such policy is essential to our

ongoing operations. We

believe the following critical

accounting policies require us to make subjective judgments,

often as a result of the need to make estimates regarding

matters that are inherently uncertain and material to our

Consolidated Financial Statements.

These policies should be

considered when reading our Consolidated Financial Statements.

Revenue recognition

A customer contract exists if collectability under the contract

is considered probable, the contract has

commercial substance, contains payment terms, the rights and

commitments of both parties, and has been approved. By

analyzing the type, terms and conditions of each contract

or arrangement with a customer,

we determine which revenue

recognition method applies.

We recognize

revenues when control of goods or services is transferred

to customers in an amount that reflects

the consideration we expect to be entitled to in exchange

for these goods or services. Control is transferred when the

customer has the ability to direct the use and obtain the

benefits from the goods or services.

The percentage‑of‑completion method of accounting involves the

use of assumptions and projections,

principally relating to future material, labor,

subcontractor and project‑related overhead costs as well as estimates of the

amount of variable consideration to which we expect

to be entitled. As a consequence, there is a risk that total contract

costs or the amount of variable consideration will, respectively,

either exceed or be lower than those we originally

estimated (based on all information reasonably available

to us) and the margin will decrease or the contract may

become

unprofitable. This risk increases if the duration of a contract

increases because there is a higher probability that the

circumstances upon which we originally developed our

estimates will change, resulting in increased costs that we may

not recover. Factors that

could cause costs to increase include:

•

unanticipated technical problems with equipment supplied

or developed by us which may require us to

incur additional costs to remedy,

•

changes in the cost of components, materials or labor,

•

difficulties in obtaining required governmental

permits or approvals,

•

project modifications creating unanticipated costs,

•

suppliers’

or subcontractors’

failure to perform, and

•

delays caused by unexpected conditions or events.

Changes in our initial assumptions, which we review

on a regular basis between balance sheet dates, may result

in revisions to estimated costs, current earnings and anticipated

earnings. We recognize

these changes in the period in

which the changes in estimates are determined. By recognizing

changes in estimates cumulatively,

recorded revenue and

costs to date reflect the current estimates of the stage of

completion of each project. Additionally,

losses on such

contracts are recognized in the period when they are identified

and are based upon the anticipated excess of contract

costs over the related contract revenues.

Pension and other postretirement

benefits

As more fully described in “Note 17 - Employee benefits”

to our Consolidated Financial Statements, we have

number of defined benefit pension and other postretirement

plans and recognize an asset for a plan’s

overfunded status

or a liability for a plan’s underfunded

status in our Consolidated Balance Sheets. We

measure such a plan’s

assets and

obligations that determine its funded status as of the end

of the year.

Significant differences between assumptions

and actual experience, or significant changes in assumptions,

may

materially affect the pension obligations. The

effects of actual results differing from

assumptions and the changing of

assumptions are included in net actuarial loss within “Accumulated

other comprehensive loss”.

We recognize

actuarial gains and losses gradually over time. Any cumulative

unrecognized actuarial gain or

loss that exceeds 10 percent of the greater of the

present value of the projected benefit obligation (PBO) and

the fair

value of plan assets is recognized in earnings over the expected

average remaining working lives of the employees

participating in the plan, or the expected average

remaining lifetime of the inactive plan participants if the

plan is

comprised of all or almost all inactive participants. Otherwise,

the actuarial gain or loss is not recognized in the

Consolidated Income Statements.

We use actuarial

valuations to determine our pension and postretirement benefit

costs and credits. The amounts

calculated depend on a variety of key assumptions, including

discount rates, mortality rates and expected return

on plan

assets. Under U.S. GAAP,

we are required to consider current market conditions

in making these assumptions. In

particular, the discount rates are reviewed

annually based on changes in long‑term, highly‑rated corporate

bond yields.

Decreases in the discount rates result in an increase in

the PBO and in pension costs. Conversely,

an increase in the

discount rates results in a decrease in the PBO and in pension

costs. The mortality assumptions are reviewed annually by

management. Decreases in mortality rates result in an increase

in the PBO and in pension costs. Conversely,

an increase

in mortality rates results in a decrease in the PBO and

in pension costs.

Holding all other assumptions constant, a 0.25 percentage

point decrease in the discount rate would have

increased the PBO related to our defined benefit pension

plans by $300 million while a 0.25 percentage point increase in

the discount rate would have decreased the PBO related

to our defined benefit pension plans by $289 million.

The expected return on plan assets is reviewed regularly

and considered for adjustment annually based upon the

target asset allocations and represents the long‑term

return expected to be achieved. Decreases in the expected

return on

plan assets result in an increase to pension costs. Holding

all other assumptions constant, an increase or decrease of

0.25 percentage points in the expected long‑term rate of asset return

would have decreased or increased, respectively,

the

net periodic benefit cost in 2020 by $24 million.

The funded status, which can increase or decrease based

on the performance of the financial markets or changes

in our assumptions, does not represent a mandatory

short‑term cash obligation. Instead, the funded status of a defined

benefit pension plan is the difference between

the PBO and the fair value of the plan assets. At December 31,

2020, our

defined benefit pension plans were $656 million underfunded

compared to an underfunding of $1,751 million at

December 31, 2019. Our other postretirement plans were

underfunded by $98 million and $110

million at December 31,

2020 and 2019, respectively.

We have multiple

non‑pension postretirement benefit plans. Our health

care plans are generally contributory

with participants’ contributions adjusted annually.

For purposes of estimating our health care costs, we have

assumed

health care cost increases to be 5.9 percent per annum

for 2021, gradually declining to 4.9 percent per annum by 2028

and to remain at that level thereafter.

Income taxes

In preparing our Consolidated Financial Statements, we are

required to estimate income taxes in each of the

jurisdictions in which we operate. Tax

expense from continuing operations is reconciled from the weighted‑average

global tax rate (rather than from the Swiss domestic statutory

tax rate).

As the parent company of the ABB Group,

ABB Ltd, is domiciled in Switzerland,

income which has been generated in jurisdictions outside of Switzerland

(hereafter “foreign jurisdictions”) and has already been

subject to corporate income tax in those foreign jurisdictions

is,

to a large extent, tax exempt in Switzerland. Therefore,

generally no or only limited Swiss income tax has to

be provided

for on the repatriated earnings of foreign subsidiaries. There

is no requirement in Switzerland for a parent company of

group to file a tax return of the group determining domestic

and foreign pre‑tax income and as our consolidated income

from continuing operations is predominantly earned

outside of Switzerland, corporate income tax in foreign jurisdictions

largely determines our global weighted‑average

tax rate.

We account

for deferred taxes by using the asset and liability method.

Under this method, we determine

deferred tax assets and liabilities based on temporary differences

between the financial reporting and the tax bases of

assets and liabilities. Deferred tax assets and liabilities are measured

using the enacted tax rates and laws that are

expected to be in effect when the differences

are expected to reverse. We

recognize a deferred tax asset when it is more

likely than not that the asset will be realized. We

regularly review our deferred tax assets for recoverability

and establish

a valuation

allowance based upon historical losses, projected future taxable

income and the expected timing of the

reversals of existing temporary differences. To

the extent we increase or decrease this allowance in a period,

recognize the change in the allowance within “Income

tax expense” in the Consolidated Income Statements unless the

change relates to discontinued operations, in which

case the change is recorded in “Income from discontinued

operations, net of tax”.

Unforeseen changes in tax rates and tax laws, as well as differences

in the projected taxable

income as compared to the actual taxable income, may affect

these estimates.

Certain countries levy withholding taxes, dividend distribution

taxes or additional corporate income taxes

(hereafter “withholding taxes”) on dividend distributions.

Such taxes cannot always be fully reclaimed by the

shareholder, although they have

to be declared and withheld by the subsidiary.

Switzerland has concluded double

taxation treaties with many countries in which we operate.

These treaties either eliminate or reduce such withholding

taxes on dividend distributions. It is our policy to distribute

retained earnings of subsidiaries, insofar as such earnings

are

not permanently reinvested or no other reasons exist that

would prevent the subsidiary from distributing them. No

deferred tax liability is set up, if retained earnings are

considered as indefinitely reinvested, and used for financing

current operations as well as business growth through

working capital and capital expenditure in those countries.

We operate

in numerous tax jurisdictions and, as a result, are regularly

subject to audit by tax authorities. We

provide for tax contingencies whenever it is deemed more

likely than not that a tax asset has been impaired or

a tax

liability has been incurred for events such as tax claims

or changes in tax laws. Contingency provisions are recorded

based on the technical merits of our filing position, considering

the applicable tax laws and OECD guidelines and are

based on our evaluations of the facts and circumstances

as of the end of each reporting period. Changes in the facts and

circumstances could result in a material change to the

tax accruals. Although we believe that our tax estimates are

reasonable and that appropriate tax reserves have been

made, the final determination of tax audits and any related

litigation could be different than that which

is reflected in our income tax provisions and accruals.

An estimated loss from a tax contingency must be

accrued as a charge to income if it is more likely than

not

that a tax asset has been impaired or a tax liability has

been incurred and the amount of the loss can be reasonably

estimated. We apply

a two‑step approach to recognize and measure uncertainty

in income taxes. The first step is to

evaluate the tax position for recognition by determining

if the weight of available evidence indicates that it is more

likely than not that the position will be sustained on

audit, including resolution of related appeals or litigation

processes,

if any. The second step

is to measure the tax benefit as the largest amount

which is more than 50 percent likely of being

realized upon ultimate settlement. The required amount

of provisions for contingencies of any type may change

in the

future due to new developments.

Business combinations

The amount of goodwill initially recognized in a business combination

is based on the excess of the purchase

price of the acquired company over the fair value of the

assets acquired and liabilities assumed. The determination of

these fair values requires us to make significant estimates and

assumptions. For instance, when assumptions

with respect

to the timing and amount of future revenues and expenses

associated with an asset are used to determine its fair

value,

but the actual timing and amount differ materially,

the asset could become impaired. In some cases, particularly for

large

acquisitions, we may engage independent third‑party appraisal

firms to assist in determining the fair values.

Critical estimates in valuing certain intangible assets include but

are not limited to: future expected cash flows

of the acquired business, brand awareness, customer

retention, technology obsolescence and discount rates.

In addition, uncertain tax positions and tax‑related

valuation allowances assumed in connection with a business

combination are initially estimated at the acquisition

date. We re-evaluate

these items quarterly, based

upon facts and

circumstances that existed at the acquisition date with

any adjustments to our preliminary estimates being recorded to

goodwill provided that we are within the twelve‑month

measurement period. Subsequent to the measurement period or

our final determination of the tax allowance’s

or contingency’s estimated value,

whichever comes first, changes to these

uncertain tax positions and tax‑related valuation allowances

will affect our income tax expense in our

Consolidated

Income Statements and could have a material impact on

our results of operations and financial position. The

fair values

assigned to the intangible assets acquired are described

in “Note 4 - Acquisitions, divestments and equity-accounted

companies” as well as “Note 11

- Goodwill and intangible assets”,

to our Consolidated Financial Statements.

Investments in equity-accounted companies

We account

for investments where we have the ability to exercise significant

influence, but not control, under

the equity method of accounting. Income from equity-accounted

companies represents our proportionate share of net

income generated by the equity-accounted investees. Differences

in the basis of the investments and the separate net

asset value of the investees, if any,

are amortized into net income over the remaining useful lives of

the underlying

assets. Similar to the “Business combinations” section

above, in determining the fair value of these investments,

judgements and assumptions are inherent in our estimates of

(i) future revenues, expenses and cash flows, (ii)

discount

rates, and (iii) the valuation of certain intangible assets, etc. Investments

in equity-accounted companies are assessed for

impairment whenever changes in the facts and circumstances

indicate a loss in value has occurred, if the loss is deemed

to be other than temporary.

When the loss is deemed to be other than temporary,

the carrying value of the equity method

investment is written down to fair value. See “Note

4 - Acquisitions, divestments and equity-accounted companies

”, to

our Consolidated Financial Statements for details of

our investments in equity-accounted companies.

Goodwill and intangible assets

We review goodwill

for impairment annually as of October 1, or more frequently

if events or circumstances

indicate the carrying value may not be recoverable.

We use either a qualitative

or quantitative assessment method for

each reporting unit.

When performing the qualitative assessment, we first determine,

for a reporting unit, factors which would affect

the fair value of the reporting unit including: (i) macroeconomic

conditions related to the business, (ii) industry and

market trends and (iii) the overall future financial performance

and future opportunities in the markets in which the

business operates. We

then consider how these factors would impact the most recent

quantitative analysis of the

reporting unit’s fair value.

Key assumptions in determining the fair value of the reporting

unit include the projected level

of business operations, the reporting unit’s

weighted‑average cost of capital, the income tax rate and

the terminal growth

rate.

We adopted

ABB’s new operating model

the ABB Way,

on July 1, 2020, which resulted in a change to the

composition of reporting units. Previously,

the reporting units were the same as the operating segments for

Electrification, Motion and Robotics & Discrete Automation,

while for the Industrial Automation operating segment the

reporting units were determined to be at the Division level,

which is one level below the operating segment. The

ABB

Way provides

the Divisions with full ownership and accountability for their respective

strategies, performance and

resources and as a result we concluded that our reporting

units would then be the 18 Divisions. This change resulted

only in an allocation of goodwill within the operating

segments and thus there was no change to segment level goodwill.

As a result of the new composition of the reporting units and

reallocation of goodwill, an interim quantitative

impairment test was conducted before and after the change

as of July 1, 2020. In the “before” test, it was concluded

that

the fair value of our reporting units exceeded the carrying

value under the historical reporting unit structure.

We then performed

the impairment test immediately after the change in reporting

units and the fair value of

each was determined using a discounted cash flow

fair value estimate based on objective information at the

measurement date. The significant assumptions used to

develop the estimates of fair value for each reporting unit

included our best estimates of the expected future results and

discount rates specific to the reporting unit. Determining

the projected future cash flows required significant judgments and

estimates involving variables such as future sales

volumes, sales prices, production and other operating costs,

capital expenditures, net working capital requirements and

other economic factors such as the continued impact of

the COVID-19 pandemic. The fair value estimates were based

on assumptions that we believed to be reasonable,

but which were inherently uncertain and thus, actual

results may

differ from those estimates. Sensitivity analyses were

performed around certain of these assumptions in order

to assess

the reasonableness of the assumptions and the resulting

estimated fair values.

The interim quantitative impairment test indicated that,

with the exception of the Machine Automation

reporting unit within the Robotics & Discrete Automation

operating segment, the estimated fair values of our reporting

units were substantially in excess of their carrying value.

The contraction of the global economy in 2020, particularly

end-customer industries and considerable uncertainty around the

continued pace of macroeconomic recovery generally

led to a reduction in the fair values of the reporting units,

thus also affecting the Machine Automation repor

ting unit. At

the Division level, this reporting unit does not benefit

from shared cash flows generated within an entire operating

segment. In addition, the book value of the Machine Automation

Division includes

a significant amount of intangible

assets recognized in past acquisitions, resulting in a proportionately

higher book value than the other reporting unit

within the Robotics & Discrete Automation Business Area.

These factors led to the carrying value of the Machine

Automation reporting unit exceeding its fair value. During

2020, a goodwill impairment charge of $290

million was

recorded to reduce the carrying value of this reporting

unit to its implied fair value. The remaining goodwill for the

Machine Automation reporting unit was $554 million

as of December 31, 2020. Since the carrying value of this

reporting unit was reduced to its fair value as of July 1,

2020, any material adverse changes such as market deterioration

or changes in the competitive landscape could result in

future impairment charges.

At October 1, 2020 and 2019, respectively,

we performed qualitative assessments

and determined that it was

not more likely than not that the fair value for each

of these reporting units was below the carrying value.

As a result, we

concluded that it was not necessary to perform the

quantitative impairment test.

Intangible assets are reviewed for recoverability upon

the occurrence of certain triggering events (such as a

decision to divest a business or projected losses of an

entity) or whenever events or changes in circumstances indicate

that the carrying amount may not be recoverable. We

record impairment charges other than impairments

of goodwill in

“Other income (expense), net” in our Consolidated Income

Statements, unless they relate to a discontinued operation, in

which case the charges are recorded in “Income

from discontinued operations, net of tax”.

NEW ACCOUNTING PRONOUNCEMENTS

For a description of accounting changes and recent accounting

pronouncements, including the expected dates of

adoption and estimated effects, if any,

on our Consolidated Financial Statements, see “Note 2 -

Significant accounting

policies” to our Consolidated Financial Statements.

RESEARCH AND DEVELOPMENT

Each year, we invest significantly in

research and development. Our research and development focuses

developing and commercializing the technologies, products

and solutions of our businesses that are of strategic

importance to our future growth. In 2020, we invested

$1,127 million, or approximately 4.3 percent of our 2020

consolidated revenues, on research and development activities in

our continuing operations. We

also had expenditures of

$46 million, or approximately 0.2 percent of our 2020

consolidated revenues, on order‑related development activities.

These are customer‑ and project‑specific development

efforts that we undertake to develop or adapt equipment

and

systems to the unique needs of our customers in connection

with specific orders or projects.

In addition to continuous product development, and order

‑related engineering work, we develop platforms for

technology applications in our businesses in our research

and development laboratories, which operate on a global basis,

such as our ABB Ability™

platform.

Through active management of our investment in research and

development, we

seek to maintain a balance between short‑term and long‑term

research and development programs and optimize our

return on investment. We

protect these results by holding patents, copyrights and

other appropriate intellectual property

protection.

To complement

our business-focused product development, our businesses invest together

in collaborative

research activities covering topics such as artificial intelligence,

software, sensors, control and optimization,

mechatronics and robotics, power electronics, communication

technologies, material and manufacturing,

electrodynamics or electrical switching technologies. This

results in advancing the state-of-the-art technologies used in

our products and in common technology platforms that

can be applied in multiple product lines.

Universities are incubators of future technology,

and one task of our research and development teams

is to

transform university research into industry‑ready technology

platforms. We

collaborate with multiple universities and

research institutions to build research networks and foster

new technologies. We

believe these collaborations shorten the

amount of time required to turn basic ideas into viable

products, and they additionally help us to recruit and train

new

personnel. We

have built numerous university collaborations in several continents,

including long-term, strategic

relationships with a number of leading institutions in the

U.S., the United Kingdom, Sweden, Germany,

Switzerland,

Poland, India and China.

We are also leveraging

our ecosystem to enhance our innovation efforts

and gain speed with strategic partners

with complementary competencies. In addition, we invest and

collaborate

with start-ups worldwide via our corporate

venture arm ABB Technology

Ventures

and our start-up collaboration arm SynerLeap.

The result of our investment in research and development

is that ABB is widely recognized for its world-class

technology. Technology

has been deeply embedded in our DNA since our founding

and has carried us through our

century-long history.

It is one of the main reasons why customers and partners turn to

us for help on their biggest

challenges. Together

with them, we continuously push technology frontiers to make

things possible that were not

possible before. We

are committed to stay ahead to help our customers address the

world’s energy challenges,

transform

industries to reach new levels of performance and embed

sustainability, all to leav

behind a world for future

generations that is at least as healthy and prosperous as

the one we inherited.

ACQUISITIONS AND DIVESTMENTS

Acquisitions

There were no significant acquisitions in 2020 or 2019.

Divestments

Divestment of Power Grids

On July 1, 2020,

ABB completed the divestment of 80.1 percent of its former

Power Grids business to Hitachi.

As this divestment represented a strategic shift that had

a major effect on the Company’s

operations and financial

results, the results of operations for this business are

presented as discontinued operations and the assets and liabilities

are reflected as held for sale for all periods presented.

For more information on the divestment of the Power Grids

business see “Note 3 - Discontinued operations”

to our Consolidated Financial Statements.

Divestment of solar inverters

In February 2020, ABB completed the sale of its solar

inverters business to FIMER S.p.A. (Italy) for no

consideration. Under the agreement,

which was reached in July 2019, ABB was obligated to transfer

$143 million of

cash to the buyer on the closing date. In addition, further

payments totaling EUR 132 million ($145 million at the

divestment date) are required to be transferred to the buyer

from 2020 through 2025. In connection with this divestment,

in 2019, we recorded a loss of $421 million,

representing the excess of the carrying value over the

estimated fair value

of this business. In 2020, a further $33 million was recorded

for additional changes in fair value occurring prior to

the

date of sale. Both amounts, in the respective years are

reported in “Other income (expense), net”. The assets and

liabilities of this business are included within assets and

liabilities held for sale in our Consolidated Balance Sheet

as at

December 31, 2019. For more information on assets held for sale,

see “Note 4 - Acquisitions, divestments and equity-

accounted companies” to our Consolidated Financial Statements.

Other

In 2019, we recorded net gains (including transaction costs)

of $55 million, primarily due to the divestment of

two businesses in China.

EXCHANGE RATES

We report

our financial results in U.S. dollars. Due to our global operations,

a significant amount of our

revenues, expenses, assets and liabilities are denominated

in other currencies. As a consequence, movements in

exchange rates between currencies may affect:

(i) our profitability, (ii)

the comparability of our results between periods

and (iii) the reported carrying value of our assets and liabilities.

We translate non

‑USD denominated results of operations, assets and liabilities to USD in

our Consolidated

Financial Statements. Balance sheet items are translated

to USD using year‑end currency exchange rates. Income

statement and cash flow items are translated to USD using

the relevant monthly average currency exchange rate.

Increases and decreases in the value of the USD against other

currencies will affect the reported results of

operations in our Consolidated Income Statements and

the value of certain of our assets and liabilities in our

Consolidated Balance Sheets, even if our results of

operations or the value of those assets and liabilities have

not

changed in their original currency.

As foreign exchange rates impact our reported results of operations and

the reported

value of our assets and liabilities, changes in foreign exchange

rates could significantly affect the comparability

of our

reported results of operations between periods and result

in significant changes to the reported value of our assets,

liabilities and stockholders’

equity.

While we operate globally and report our financial results

in USD, exchange rate movements between the USD

and the EUR, the CNY and the CHF are of particular

importance to us due to (i) the location of our significant

operations and (ii) our corporate headquarters being

in Switzerland.

The exchange rates between the USD and the EUR,

the USD and the CHF and the USD and the CNY at

December 31, 2020, 2019 and 2018, were as follows:

Exchange rates into $

2020

2019

2018

EUR 1.00

1.23

1.12

1.15

CHF 1.00

1.14

1.03

1.02

CNY 1.00

0.15

0.14

0.15

The average exchange rates between the USD and the

EUR, the USD and the CHF and the USD and the CNY

for the years ended December 31, 2020, 2019 and 2018, were as follows:

Exchange rates into $

2020

2019

2018

EUR 1.00

1.14

1.12

1.18

CHF 1.00

1.07

1.01

1.02

CNY 1.00

0.14

0.15

When we incur expenses that are not denominated in the same

currency as the related revenues, foreign

exchange rate fluctuations could affect our

profitability. To

mitigate the impact of exchange rate movements on our

profitability, it is our

policy to enter into forward foreign exchange contracts to manage

the foreign exchange transaction

risk of our operations.

In 2020,

approximately 76 percent of our consolidated revenues were reported

in currencies other than the

USD. The following percentages of consolidated revenues

were reported in the following currencies:

•

Euro, approximately 23 percent, and

•

Chinese renminbi, approximately 15 percent.

In 2020,

approximately 74 percent of our cost of sales and selling, general

and administrative expenses were

reported in currencies other than the USD. The following

percentages of consolidated cost of sales and selling, general

and administrative expenses were reported in the following

currencies:

•

Euro, approximately 22 percent, and

•

Chinese renminbi, approximately 13 percent.

We also incur

expenses other than cost of sales and selling, general and

administrative expenses in various

currencies.

The results of operations and financial position of our subsidiaries

outside of the U.S. are generally accounted

for in the currencies of the countries in which those

subsidiaries are located. We

refer to these currencies as “local

currencies”. Local currency financial information is then

translated into USD at applicable exchange rates for inclusion

in our Consolidated Financial Statements.

The discussion of our results of operations below provides

certain information with respect to orders, revenues,

income from operations and other measures as reported

in USD (as well as in local currencies). We

measure

period‑to‑period variations in local currency results by

using a constant foreign exchange rate for all periods under

comparison. Differences in our results of operations

in local currencies as compared to our results of operations in

USD

are caused exclusively by changes in currency exchange

rates.

While we consider our results of operations as measured

in local currencies to be a significant indicator of

business performance, local currency information

should not be relied upon to the exclusion of U.S. GAAP financial

measures. Instead, local currencies reflect an additional

measure of comparability and provide a means of viewing

aspects of our operations that, when viewed together with

the U.S. GAAP results, provide a more complete

understanding

of factors and trends affecting the business. As local

currency information is not standardized, it may not

be possible to compare our local currency information

to other companies’

financial measures that have the same or a

similar title. We encourage

investors to review our financial statements and publicly

filed reports in their entirety and

not to rely on any single financial measure.

ORDERS

Our policy is to book and report an order when a binding

contractual agreement has been concluded with a

customer covering, at a minimum, the price and scope

of products or services to be supplied, the delivery schedule and

the payment terms. The reported value of an order corresponds

to the undiscounted value of revenues that we expect to

recognize following delivery of the goods or services

subject to the order, less any trade discounts

and excluding any

value added or sales tax. The value of orders received

during a given period of time represents the sum of

the value of all

orders received during the period, adjusted to reflect

the aggregate value of any changes to the value of orders received

during the period and orders existing at the beginning

of the period. These adjustments, which may in the aggregate

increase or decrease the orders reported during the period,

may include changes in the estimated order price up to the

date of contractual performance, changes in the scope

of products or services ordered and cancellations of orders.

The

undiscounted value of future revenues we expect to generate from

our orders at any point in time is represented by our

order backlog.

The level of orders fluctuates from year to year.

Portions of our business involve orders for long‑term projects

that can take months or years to complete and many large

orders result in revenues in periods after the order is booked.

Consequently, the

level of orders generally cannot be used to accurately predict

future revenues or operating

performance. Orders that have been placed can often be cancelled,

delayed or modified by the customer.

These actions

can reduce or delay any future revenues from the order

or may result in the elimination of the order.

PERFORMANCE MEASURES

We evaluate the

performance of our operating segments based on orders received,

revenues and Operational

EBITA.

Operational EBITA

represents income from operations excluding:

•

amortization expense on intangibles arising upon acquisitions

(acquisition-related amortization),

•

restructuring, related and implementation costs,

•

changes in the amount recorded for obligations related to

divested businesses occurring after the

divestment date (changes in obligations related to

divested businesses),

•

changes in estimates relating to opening balance sheets of

acquired businesses (changes in pre‑acquisition

estimates),

•

gains and losses from sale of businesses (including fair

value adjustment on assets and liabilities held for

sale),

•

acquisition-

and divestment-related expenses and integration costs,

•

other income/expense relating to the Power Grids joint

venture,

•

certain other non-operational items, as well as

•

foreign exchange/commodity timing differences

in income from operations consisting of: (a) unrealized

gains and losses on derivatives (foreign exchange, commodities,

embedded derivatives), (b) realized gains

and losses on derivatives where the underlying hedged

transaction has not yet been realized, and

(and related assets/liabilities).

Certain other non-operational items generally includes:

certain regulatory, compliance

and legal costs, certain

asset write downs/impairments (including impairment

of goodwill) and certain other fair value changes, as well

as other

items which are determined by management on a case-by-case basis.

See “Note 23 - Operating segment and geographic

data” to our Consolidated Financial Statements for a

reconciliation of the total Operational EBITA

to income from continuing operations before taxes.

ANALYSIS OF

RESULTS

OF OPERATIONS

Our consolidated results from operations were as follows:

INCOME STATEMENT

DATA:

($ in millions, except per share data in $)

2020

2019

2018

Revenues

26,134

27,978

27,662

Cost of sales

(18,256)

(19,072)

(19,118)

Gross profit

7,878

8,906

8,544

Selling, general and administrative expenses

(4,895)

(5,447)

(5,295)

Non-order related research and development expenses

(1,127)

(1,198)

(1,147)

Impairment of goodwill

(311)

—

Other income (expense), net

(323)

124

Income from operations

1,593

1,938

2,226

Interest and dividend income

Interest and other finance expense

(240)

(215)

(262)

Losses from extinguishment of debt

(162)

—

Non-operational pension (cost) credit

(401)

Income tax expense

(496)

(772)

(544)

Income from continuing operations, net of

tax

345

1,090

1,575

Income from discontinued operations, net of tax

4,860

438

723

Net income

5,205

1,528

2,298

Net income attributable to noncontrolling interests

(59)

(89)

(125)

Net income attributable to ABB

5,146

1,439

2,173

Amounts attributable to ABB shareholders:

Income from continuing operations, net of tax

294

1,043

1,514

Income from discontinued operations, net of tax

4,852

396

659

Net income

5,146

1,439

2,173

Basic earnings per share attributable

to ABB shareholders:

Income from continuing operations, net of tax

0.14

0.49

0.71

Income from discontinued operations, net of tax

2.30

0.19

0.31

Net income

2.44

0.67

1.02

Diluted earnings per share attributable

to ABB shareholders:

Income from continuing operations, net of tax

0.14

0.49

0.71

Income from discontinued operations, net of tax

2.29

0.19

0.31

Net income

2.43

0.67

1.02

A more detailed discussion of the orders, revenues, income

from operations and Operational EBITA

for our

Business Areas follows in the sections of “Business analysis

”

below for Electrification, Industrial Automation, Motion,

Robotics & Discrete Automation and Corporate and

Other. Orders and revenues of

our businesses include intersegment

transactions which are eliminated in the “Corporate and

Other” line in the tables below.

Orders

% Change

($ in millions)

2020

2019

2018

2020

2019

Electrification

11,884

13,050

11,867

(9)%

10%

Industrial Automation

6,144

6,432

6,697

(4)%

Motion

6,574

6,782

6,725

(3)%

Robotics & Discrete Automation

2,868

3,260

3,808

(12)%

(14)%

Total

Business Areas

27,470

29,524

29,097

(7)%

Corporate and Other

Non-core and divested businesses

(31)

(91)

364

n.a.

Intersegment eliminations and other

(927)

(845)

(871)

n.a.

Total

26,512

28,588

28,590

(7)%

In 2020, total orders decreased 7 percent compared to 2019

(7 percent in local currencies). Total

orders reflect

the decline across all Business Areas as the COVID-19 pandemic

affected most of our businesses across all regions.

Measures taken by governments worldwide to contain

the virus severely restrained investments, travel and

consumption.

The decrease was most significant in the Robotics & Discrete Automation

Business Area, recording a significant

decrease in orders due to COVID-19 disruptions

and strong headwinds in discrete markets. The order decreas

in the

Electrification, Industrial Automation and Motion Business Areas

was moderate. The decline in orders

was most

significant in the second quarter of the year,

with variable recovery levels during the second half of 2020

In particular,

in the Asia, Middle East and Africa region, order levels

showed signs of a full recovery by the end of 2020 in

most

businesses. For additional information about individual

Business Area order performance, refer to the relevant

sections

of “Business analysis” below.

We determine

the geographic distribution of our orders based on the location

of the ultimate destination of the

products’ end use, if known, or the location of the customer.

The geographic distribution of our consolidated orders

was

as follows:

% Change

($ in millions)

2020

2019

2018

2020

2019

Europe

9,618

10,509

10,725

(8)%

(2)%

The Americas

7,956

9,057

8,243

(12)%

10%

of which: United States

5,971

6,804

6,135

(12)%

11%

Asia, Middle East and Africa

8,938

9,022

9,622

(1)%

(6)%

of which: China

4,121

4,118

4,201

(2)%

Total

26,512

28,588

28,590

(7)%

In 2020, orders declined in all regions,

reflecting the global impact of the COVID-19 pandemic. In the

Americas orders declined 12 percent (11

percent in local currencies) and declined in all Business Areas. Orders

declined

in the U.S., Canada, Brazil, Mexico, Argentina

and Peru, while they remained flat in Chile, driven by large

orders in the

Industrial Automation Business Area. In Europe,

orders decreased 8 percent (9 percent in local currencies) with

all

Business Areas reporting order declines.

Orders decreased in Germany,

Switzerland, Italy, Finland

and Norway while

they increased in most Business Areas in Sweden,

reflecting lighter local COVID-19 restrictions. In Asia, Middle

East

and Africa orders declined 1 percent (1 percent in local

currencies) and were lower in the Robotics & Discrete

Automation and Electrification Business Areas, while in the Industrial

Automation and Motion Business Areas

orders

increased, driven by the growth in China. Total

orders decreased in India, Singapore and Japan while they

increased in

South Korea and Australia driven by large

orders in the Motion and Industrial Automation Business Areas. Orders

from

China remained flat.

Order backlog

December 31,

% Change

($ in millions)

2020

2019

2018

2020

2019

Electrification

4,358

4,488

4,113

(3)%

Industrial Automation

5,805

5,077

4,986

14%

Motion

3,320

2,967

2,740

12%

Robotics & Discrete Automation

1,403

1,356

1,438

(6)%

Total

Business Areas

14,886

13,888

13,277

Corporate and Other

Non-core and divested businesses

139

192

555

(28)%

(65)%

Intersegment eliminations

(722)

(756)

(748)

n.a.

Total

14,303

13,324

13,084

At December 31, 2020, consolidated order backlog was 7

percent higher (3 percent in local currencies)

compared to December 31, 2019. Order backlog increased

significantly in the Industrial Automation and Motion

Business Areas,

increased moderately in Robotics & Discrete Automation

Business Area, while it decreased slightly in

the Electrification Business Area. The increase in the

Motion Business Area was driven by strong order growth in

long-

cycle businesses. Order backlog also increased in the

Industrial Automation Business Area due to orders

relating to

specialty marine vessels. The order backlog in the Robotics &

Discrete Automation Business Area increased slightly,

benefiting from order intake in the 3C and automotive

and automotive-related sectors.

Revenues

% Change

($ in millions)

2020

2019

2018

2020

2019

Electrification

11,924

12,728

11,686

(6)%

Industrial Automation

5,792

6,273

6,500

(8)%

(3)%

Motion

6,409

6,533

6,463

(2)%

Robotics & Discrete Automation

2,907

3,314

3,611

(12)%

(8)%

Total

Business Areas

27,032

28,848

28,260

(6)%

Corporate and Other

Non-core and divested businesses

(6)

273

n.a.

(86)%

Intersegment eliminations and other

(892)

(907)

(871)

n.a.

Total

26,134

27,978

27,662

(7)%

In 2020, revenues decreased 7 percent (6 percent in

local currencies). Revenues decreased across all Business

Areas with the impacts of the COVID-19 pandemic

resulting in a reduction in business activity and a substantial

drop in

book-and-bill activities. Despite these challenges,

revenues in the Electrification and Motion Business Areas reflected

good execution of the order backlog as well as resilience

in the short-cycle businesses, particularly in the

second half of

the year. For additional analysis of

revenues for each of the Business Areas,

refer to the relevant sections of Business

analysis below.

We determine

the geographic distribution of our revenues based on the

location of the ultimate destination of

the products’ end use, if known, or the location of the customer.

The geographic distribution of our consolidated

revenues was as follows:

% Change

($ in millions)

2020

2019

2018

2020

2019

Europe

9,764

10,097

10,129

(3)%

The Americas

7,949

8,955

8,042

(11)%

11%

of which: United States

6,027

6,753

6,005

(11)%

12%

Asia, Middle East and Africa

8,421

8,926

9,491

(6)%

of which: China

4,098

4,047

4,910

(18)%

Total

26,134

27,978

27,662

(7)%

In 2020, revenues decreased across all regions,

reflecting the impact of the COVID-19 pandemic.

In the

Americas revenues decreased 11 percent

(9 percent in local currencies) and were lower across all Business Areas.

Revenues declined in the U.S., Canada, Brazil, Mexico,

Argentina, Chile and Peru. In Europe revenues decreased

3 percent (4 percent in local currencies),

partly due to the sale of the solar inverters business in 2020.

In Europe,

revenues

decreased across all Business Areas except in the Motion Business Area

reflecting lower sales volumes in

Germany, Switzerland,

Italy, Norway and the

United Kingdom while revenues

grew in Sweden and Finland with robust

execution of orders, especially in short-cycle businesses and

due to lighter COVID-19 restrictions in Sweden. In

Asia,

Middle East and Africa revenues decreased 6 percent

(5 percent in local currencies) and decreased across all Business

Areas except the Motion Business Area which remained flat.

Revenues decreased in Saudi Arabia, India, Australia,

South Korea and Singapore while they increased in China

and in Japan due to a strong execution of the order backlog

and generally lower lockdown restrictions

over the year,

benefiting the Robotics & Discrete Automation Business Area.

Cost of sales

Cost of sales consists primarily of labor,

raw materials and component costs but also includes indirect

production costs, expenses for warranties, contract and

project charges, as well as order‑related development

expenses

incurred in connection with projects for which corresponding

revenues have been recognized.

In 2020,

cost of sales decreased 4 percent (4 percent in local currenc

ies) to $18,256 million and cost of sales as

a percentage of revenues increased from 68.2 percent to 69.9 percent

in 2020,

a reduction in the gross margin percentage

of 1.7 percent, partially due to the impact on sales volumes

of the COVID-19 pandemic.

The decrease in gross margin

percentage also reflects additional losses for projects in

non-core businesses and warranty charges relating

to a divested

business. In the Business Areas, the gross margin

percentage was steady in the Electrification

Business Area,

benefiting

from favorable changes in commodity prices in 2020.

Gross margin percentages in the Robotics & Discrete Automation

Business Area and the Industrial Automation Business Area

were lower in 2020 compared to 2019, while in the Motion

Business Area they were steady.

For ABB, the gross margin did benefit partially from

the results of savings from supply

chain, operational excellence and the results of OS initiatives.

Selling, general and administrative expenses

The components of selling, general and administrative

expenses were as follows:

($ in millions)

2020

2019

2018

Selling expenses

3,087

3,383

3,228

General and administrative expenses

1,808

2,064

2,067

Total

4,895

5,447

5,295

In 2020, general and administrative expenses decreased

by 12 percent compared to 2019 (12 percent in local

currencies). As a percentage of revenues, general and

administrative expenses decreased to 6.9% from 7.4% in 2019.

General and administrative expenses were impacted by

$152 million of restructuring and implementation expenses

for

the OS program and administrative expenses from the

integration of the acquired GEIS business compared to

$240 million in 2019.

General and administrative expenses in 2020 did benefit from

a $185 million reduction of

stranded corporate costs compared to 2019 but continue

to include those ongoing costs required to deliver services to

Hitachi ABB Power Grids

under transition service agreements, for which we are compensated

and recorded $91 million

in Other income and expense,

net, during 2020. Stranded costs were overhead and other

management costs which could

previously be allocated to the Power Grids business and

were lower in 2020 as a large portion of the central

costs

supporting that business were transferred directly to the business.

We had a decrease

of general corporate function costs,

including the impact of a significant reduction in travel expenses.

In 2020, selling expenses decreased 9 percent compared

to 2019 (9 percent in local currencies) mainly driven

by significantly reduced sales activities and related travel

expenses as virtual sales meetings have been introduced

substitute face-to-face customer visits, due to the COVID-19

pandemic.

This resulted in lower selling expenses across

all Business Areas. These factors resulted in decreasing

selling expenses as a percentage of orders received from 11.8

percent to 11.6 percent.

Non‑order related research

and development expenses

In 2020, non‑order related research and development

expenses decreased 6 percent (7 percent in local

currencies) compared to 2019. Non‑order related research

and development expenses decreased mainly as a result of a

reduction in the number of research and development

employees, due to both restructuring efforts and transfer

employees to Hitachi ABB Power Grids.

In 2020, non‑order related research and development

expenses as a percentage of revenues remained

unchanged at 4.3 percent compared to the previous year.

Impairment of goodwill

In 2020, as a result of the new composition of the reporting

units and reallocation of goodwill, we recorded an

impairment charge of $311

million, the majority of which related to our Machine Automation

Division within the

Robotics & Discrete Automation Business Area. See “Note 11

- Goodwill and intangible assets”

to our Consolidated

Financial Statements.

Other income (expense), net

($ in millions)

2020

2019

2018

Income (loss) from equity-accounted companies

(66)

Income from provision of services under transition services agreement

—

Brand income from Hitachi ABB Power Grids

—

Net gain from sale of property,

plant and equipment

Gain (loss) from change in fair value of investments in

equity securities

(5)

(6)

Favorable resolution of an uncertain purchase price adjustment

—

Net gain (loss) from sale of businesses

(2)

Gain on liquidation of foreign subsidiary

—

Restructuring and restructuring-related expenses

(1)

(87)

(69)

(37)

Fair value adjustment on assets and liabilities held for sale

(33)

(421)

—

Asset impairments

(35)

(56)

(30)

Other income (expense)

(24)

Total

(323)

124

(1) Excluding

asset impairments

In 2020, Other income (expense), net, was a gain of $48

million while it was a loss of $323 million in 2019.

2020,

the amount includes the brand income from Hitachi ABB Power Grids

and an income of $91 million related to

services provided to Hitachi ABB Power Grids as part of transitional

service agreements. The amount also includes fair

value adjustments of investments in our ABB Technology

Ventures

portfolio of $73 million. Partially offsetting this

were costs for restructuring and restructuring-related

expenses, asset impairments and net losses of $66 million from

equity-accounted companies.

The net loss from equity-accounted companies primarily

reflects the loss from the Hitachi

ABB Power Grids joint venture (see “Note 4 - Acquisitions,

divestments and equity-accounted companies” to our

Consolidated Financial Statements for additional information)

Other income (expense), net in 2019 included a loss of $421

million for the fair value adjustment to the net

assets of the solar inverters business. This was partially offset

by a gain of $92 million resulting from a favorable

resolution of an uncertain purchase price adjustment

related to the acquisition of GEIS.

Income from operations

% Change

($ in millions)

2020

2019

2018

2020

2019

Electrification

1,335

1,049

1,290

27%

(19)%

Industrial Automation

344

700

853

(51)%

(18)%

Motion

989

1,009

924

(2)%

Robotics & Discrete Automation

(163)

298

456

n.a.

(35)%

Total

Business Areas

2,505

3,056

3,523

(18)%

(13)%

Corporate and Other

(927)

(1,113)

(1,302)

n.a.

Intersegment elimination

(5)

n.a.

Total

1,593

1,938

2,226

(18)%

(13)%

In 2020 and 2019, changes in income from operations

were a result of the factors discussed above and in

“Business analysis” below.

Financial income and expenses

Financial income and expenses include “Interest and

dividend income”, “Interest and other finance

expense”

and “Losses from extinguishment of debt”.

“Interest and other finance expense” includes interest

expense on our debt, the amortization of upfront

transaction costs associated with long‑term debt and

committed credit facilities, commitment fees on credit facilities,

foreign exchange gains and losses on financial items and

gains and losses on marketable securities. In addition, interest

accrued relating to uncertain tax positions is included

within interest expense. “Interest and other finance expense”

excludes interest expense which has been allocated to

discontinued operations.

($ in millions)

2020

2019

2018

Interest and dividend income

Interest and other finance expense

(240)

(215)

(262)

Losses from extinguishment of debt

(162)

—

In 2020,

“Interest and other finance expense” increased compared to 2019. Although

we incurred lower interest

charges on outstanding debt due to lower interest rates

and a reduction of debt outstanding, this was offset

by higher

foreign currency exchange losses.

In 2020, we redeemed the full amount outstanding

for two bonds according to the terms of the instruments and

executed public tenders for two additional bonds resulting

in a partial reduction of the principal outstanding. These

transactions resulted in losses on extinguishment of debt totaling

$162 million (see “Note 12 - Debt” to our Consolidated

Financial Statements).

Non-operational pension (cost) credit

A non-operational pension cost of $401 million was incurred in

2020 compared to a $72 million credit in 2019.

In 2020, we incurred charges of $520 million for

certain settlements of international pension plans (see “Note

17 -

Employee benefits” to our Consolidated Financial Statements).

Income tax expense

($ in millions)

2020

2019

2018

Income from continuing operations before taxes

841

1,862

2,119

Income tax expense

(496)

(772)

(544)

Effective tax rate for the year

59.0%

41.5%

25.7%

In 2020, the effective tax rate increased from

41.5 percent to 59.0 percent due to several factors. First, in 2020,

the distribution of income within the Group resulted in

a 5 percent higher weighted-average global tax rate.

Additionally, the

tax rate was negatively impacted by 9 percent due to the impairment

of non-deductible goodwill and

10 percent due to non-deductible charges relating

to the settlement of certain defined benefit pension plans

in 2020. The

rate was also negatively impacted by 5 percent due

to losses from extinguishment of debt which were incurred in

jurisdictions with a full valuation allowance. These negative

impacts

were partially offset by the favorable

resolution of

an uncertain tax position in Asia which reduced the

tax rate by 10 percent and the positive impact due to the

reorganization of a business of 2 percent.

In 2019 there were impacts

on the effective tax rate from recording a loss for

the planned sale of the solar

inverters business which reduced the weighted-average global tax

rate by approximately 2 percent and an increase in the

effective tax rate by 6 percent due to a change in

a valuation allowance. During 2019, the effective tax

rate also was

negatively impacted due to amounts for the planned

divestment of the Power Grids business, primarily non-deductible

expenses, taxes payable due to the reorganization

of the business in connection with the planned sale, changes

valuation allowances and additional taxes for unremitted

earnings. Additionally, the

effective tax rate was also higher

due to changes

in valuation allowances and changes in taxes due to interpretation

of tax law and double tax treaty

agreements by competent tax authorities. See “Note 16

- Income taxes” to our Consolidated Financial Statements for

additional information.

Income from continuing operations, net of

tax

As a result of the factors discussed above, income from

continuing operations, net of tax, in 2020 decreased by

$745 million compared to 2019 to $345 million.

Income from discontinued operations, net of

tax

Income from discontinued operations, net of tax, in

2020, 2019 and 2018 was as follows:

($ millions)

2020

2019

2018

Total revenues

4,008

9,037

9,698

Total cost of sales

(3,058)

(6,983)

(7,378)

Gross profit

950

2,054

2,320

Expenses

(808)

(1,394)

(1,326)

Net gain recognized on sale of the Power Grids business

5,141

—

Income from operations

5,282

660

994

Net interest and other finance expense

(5)

(61)

(55)

Non-operational pension (cost) credit

(94)

Income from discontinued operations before

taxes

5,182

605

951

Income tax expense

(322)

(167)

(228)

Income from discontinued operations, net of

tax

4,860

438

723

On July 1, 2020, we completed the divestment of

80.1 percent of our former Power Grids business to Hitachi.

As a result of the sale, substantially all Power Grids related assets and

liabilities have been sold. As this divestment

represented a strategic shift that would have a major effect

on our operations and financial results, the results of

operations for this business have been presented as discontinued

operations for all periods presented. In addition,

consistent with the presentation of the business as discontinued

operations, during 2019 and up to the sale in 2020, we

did not record depreciation or amortization on the property,

plant

and equipment, and intangible assets reported as

discontinued operations.

In 2020, as a result of the sale of the Power Grids business,

we recognized a net gain of $5,141 million, net of

transaction costs, for the sale of the entire Power Grids

business which is included in Income from discontinued

operations, net of tax. Included in the net gain was a cumulative

translation loss relating to the Power Grids business of

$420 million which was reclassified from accumulated

other comprehensive loss (see “Note 21 - Other comprehensive

income” to our Consolidated Financial Statements). Certain amounts

included in the net gain are estimated or otherwise

subject to change in value and, as a result, we may

record additional adjustments to the gain in future periods which

are

not expected to have a material impact on the Consolidated

Financial Statements.

Until the date of the divestment, Income from discontinued

operations excluded

certain costs which were

previously able to be allocated to the former Power Grids business.

As a result, $40 million and $225 million for

2020

and 2019, respectively,

of allocated overhead and other management costs (stranded

corporate costs), which were

previously able to be included in the measure of segment profit

for the Power Grids business were reported as part

Corporate and Other.

The amounts shown in the table above for the full-year 2020

primarily represent the operations of the Power

Grids business for six months, compared to a full year

of operations for 2019 and 2018. Income from discontinued

operations for 2020 and 2019 included income from operations

before tax, of $5,182 million and $605 million,

respectively. The

results in 2020 reflect the unfavorable impact of COVID-19

on the Power Grids business in the first

half of the year, higher expenses when

compared to the first half of 2019 and the non-operational pension

cost related to

the settlement of a defined benefit pension plan in 2020.

In addition, in 2020 and 2019 we recorded $322 million and

$167 million, respectively,

as income tax expense within discontinued operations. In

2020, this included $262 million in

Income tax expense within discontinued operations in

connection with the reorganization of the legal entity

structure of

the Power Grids business required to facilitate its sale.

For additional information on the divestment and discontinued

operations,

see “Note 3 - Discontinued

operations”

to our Consolidated Financial Statements.

Net income attributable to ABB

As a result of the factors discussed above, net income

attributable to ABB in 2020 increased by $3,707 million

compared to 2019 to $5,146 million.

Earnings per share attributable to ABB shareholders

(in $)

2020

2019

2018

Basic earnings per share attributable

to ABB shareholders:

Income from continuing operations, net of tax

0.14

0.49

0.71

Income from discontinued operations, net of tax

2.30

0.19

0.31

Net income

2.44

0.67

1.02

Diluted earnings per share attributable

to ABB shareholders:

Income from continuing operations, net of tax

0.14

0.49

0.71

Income from discontinued operations, net of tax

2.29

0.19

0.31

Net income

2.43

0.67

1.02

Basic earnings per share is calculated by dividing income

by the weighted‑average number of shares

outstanding during the year.

Diluted earnings per share is calculated by dividing income by the

weighted‑average

number of shares outstanding during the year,

assuming that all potentially dilutive securities were exercised,

if dilutive.

Potentially dilutive securities comprise: outstanding written

call options and outstanding options and shares granted

subject to certain conditions under our share‑based payment

arrangements. See “Note 20 - Earnings per share”

to our

Consolidated Financial Statements.

Business analysis

Electrification Business Area

The financial results of our Electrification Business Area, including

the operations of GEIS which was acquired

in June 2018, were as follows:

% Change

($ in millions)

2020

2019

2018

2020

2019

Orders

11,884

13,050

11,867

(9)%

10%

Order backlog at December 31,

4,358

4,488

4,113

(3)%

Revenues

11,924

12,728

11,686

(6)%

Income from operations

1,335

1,049

1,290

27%

(19)%

Operational EBITA

1,681

1,688

1,626

Orders

Approximately two-thirds of the Business Area’s

orders are for products with short delivery times; orders

are

usually recorded and delivered within a three-month period

and thus are generally considered as short-cycle. The

remainder of orders is comprised of smaller projects that

require longer lead times, as well as larger solutions

requiring

engineering and installation. Approximately half of the

Business Area’s orders are received

via third-party distributors;

as a consequence, end-customer market data is based parti

ally on management estimates.

In 2020, orders decreased 9 percent (9 percent in local currencies)

as the global COVID-19 pandemic

negatively impacted demand across all Divisions. Measures taken

by governments worldwide to contain the virus

severely restrained private consumption, investment, trade

and travel. Orders decreased 3 percent due to the impact of

the divestment of the solar inverters business in the first quarter

of 2020, as well as the divestment of two joint ventures

in China in the end of 2019. Investment in oil and gas related

projects decreased

significantly, reflecting

the current

economic uncertainty.

Demand in the building segment was significantly impacted

by global lockdowns and COVID-19

related restrictions across various markets,

while residential activities showed signs

of recovery during the fourth

quarter.

Commercial and industrial buildings suffered from weaker

market conditions, which contributed to the overall

order decrease. A lower level of large

orders from the utility sector negatively impacted orders in the

Distribution

Solutions

Division in 2020.

The demand for data centers benefited from a positive momentum

with strong contribution

from colocation,

cloud-based customers and hyperscale investments. Demand for

electric vehicle infrastructure and

urban mobility (E-bus, AC-DC chargers, Metro

trains) was strong, with investment in all regions. Rail investments

continued to be robust throughout the year.

The geographic distribution of orders for our Electrification

Business Area was as follows:

($ in millions)

2020

2019

2018

Europe

4,149

4,281

4,225

The Americas

4,033

4,653

3,771

of which: United States

3,065

3,501

2,746

Asia, Middle East and Africa

3,702

4,116

3,871

of which: China

1,819

1,885

1,776

Total

11,884

13,050

11,867

In 2020, orders decreased in all regions. Orders in Europe

decreased 3 percent (3 percent in local currencies) as

robust order intake in Germany and Sweden partially compensated

lower order volumes

in Italy, France and Spain

due

to the current market contraction.

Demand in Asia, Middle East and Africa decreased 10 percent (10

percent in local

currencies) despite a recovery in China during the second

half of the year which substantially offset the COVID-19

related order drop in the first half of the year.

The COVID-19 pandemic impacted total orders in the Americas

significantly,

decreasing 13 percent (12 percent in local currencies). Orders

in the U.S., Brazil and Mexico decreased

substantially.

Orders in Canada were also lower but showed signs of recovery

in the fourth quarter.

Order backlog

In 2020, the order backlog decreased 3 percent (5 percent

in local currencies). The order backlog decreased

2 percent due to the impact of the divestment of the solar

inverters business in the first quarter of 2020. The remaining

order backlog decreased by 1 percent, partly due to strong

backlog execution in the Distribution Solutions Division,

but

also reflecting the weaker order intake in most Divisions during

the year.

Revenues

In 2020, revenues decreased 6 percent (6 percent in

local currencies). Revenues declined across all Divisions

reflecting the challenging market condition and operational

environment caused by the COVID-19 pandemic. Revenues

decreased 3 percent due to the impact of the divestment

of the solar inverters business in the first quarter of 2020, as

well as the divestment of two joint ventures in China in

the end of 2019. Revenues from long-cycle businesses were

impacted by COVID-19 related execution challenges such

as restrictions to access customer sites, as well as customer

driven delays in receiving finished goods. Revenues from

data centers, e-mobility,

power distribution and mining were

more robust than oil and gas, and conventional power

generation. Revenues from short-cycle product businesses were

negatively affected by COVID-19 and decreased

across most end-user segments,

including residential and commercial

buildings. Revenues for the Installation Products and Power

Conversion Divisions,

which have a high dependence on the

North American market,

were particularly challenged.

The geographic distribution of revenues for our Electrification

Business Area was as follows:

($ in millions)

2020

2019

2018

Europe

4,190

4,251

4,136

The Americas

4,093

4,635

3,715

of which: United States

3,115

3,555

2,724

Asia, Middle East and Africa

3,641

3,842

3,835

of which: China

1,858

1,749

1,752

Total

11,924

12,728

11,686

In 2020, revenues in the Americas were strongly impacted

by the COVID-19 pandemic and decreased

12 percent (11 percent in local currencies)

with significant declines in the U.S., Brazil and Mexico.

Revenues in Europe

were robust, decreasing 1 percent (2 percent in local currencies).

Lower revenues in Switzerland, Italy and Spain were

partially offset by growth in Germany,

Sweden, Finland and Netherlands.

Revenues decreased 5 percent

(5 percent in

local currencies)

in Asia, Middle East and Africa,

as the recovery in China during the second half of the year could

not

fully compensate revenue declines within the region, such

as in India,

caused by lower demand and COVID-19

pandemic driven lockdowns.

Income from operations

In 2020, income from operations increased 27 percent,

mainly due to both the comparative loss of $421 million

recognized in 2019 to record the solar inverters business at fair

value net of the higher gain in 2019 of $92 million

relating the receipt of cash from General Electric for a

favorable resolution of an uncertainty with respect to the

price

paid to acquire GEIS. The COVID-19 pandemic negatively

affected the Business Area with lower revenues,

higher costs

of underutilized manufacturing facilities as well as higher costs

for various necessary safety measures and protective

equipment. This was partly offset by government

grants, furlough measures and a significant reduction of travel

and

other discretionary expenses. Income from operations

in 2020 benefited from a reduction in acquisition-related expenses

and integration costs compared to 2019,

mainly relating to GEIS. The Business Area also benefited

from lower

commodity prices in 2020, although commodity

headwinds gradually increased during the year.

Product pricing actions

across the product businesses and the benefits of savings

realized from ongoing restructuring and cost savings programs

also had a positive impact on operating margin

s. However, the Distribution Solutions

Division experienced negative

impacts from pricing pressure,

and OS related implementation costs were higher in 2020

compared to 2019.

Restructuring related expenses in our operating Divisions

were steady,

and changes in foreign currencies, including the

impacts from FX/commodity timing differences

had no significant impact on 2020 compared to 2019.

Operational EBITA

The reconciliation of Income from operations to Operational

EBITA for

the Electrification Business Area was

as follows:

($ in millions)

2020

2019

2018

Income from operations

1,335

1,049

1,290

Acquisition-related amortization

115

106

Restructuring, related and implementation costs

145

112

Changes in obligations related to divested businesses

—

Changes in pre-acquisition estimates

Gains and losses from sale of businesses

(42)

(81)

Fair value adjustment on assets and liabilities held for sale

421

—

Favorable resolution of an uncertain purchase price adjustment

(36)

(92)

—

Acquisition-

and divestment-related expenses and integration costs

119

168

Certain other non-operational items

(2)

FX/commodity timing differences in income

from operations

(21)

(19)

Operational EBITA

1,681

1,688

1,626

In 2020,

Operational EBITA

remained flat (1 percent lower excluding the impacts from

changes in foreign

currencies) compared to 2019, primarily due to the reasons

described under “Income from operations”, excluding the

explanations related to the reconciling items in the

table above.

Industrial Automation Business Area

The financial results of our Industrial Automation

Business Area were as follows:

% Change

($ in millions)

2020

2019

2018

2020

2019

Orders

6,144

6,432

6,697

(4)%

Order backlog at December 31,

5,805

5,077

4,986

14%

Revenues

5,792

6,273

6,500

(8)%

(3)%

Income from operations

344

700

853

(51)%

(18)%

Operational EBITA

451

732

914

(38)%

(20)%

Orders

In 2020, orders decreased 4 percent (4 percent in local currencies)

compared to 2019 reflecting the combined

effects of the COVID-19 pandemic and a

lower oil price. Those effects negatively impacted orders

in the Measurement

& Analytics, Turbocharging

Energy Industries and Process Industries Divisions

while orders in Marine & Ports

Division were up primarily due to large capital

investment orders, specifically for the liquefied natural

gas (LNG) sector.

This increase could not offset the significant

decline in orders, in particular in the ongoing service business which

was

driven by mobility constraints caused by extensive lockdown

restrictions as well as lower demand from customers

invest in the current uncertain environment. Customer

investment decreased significantly in cruise, conventional power

generation, oil and petrochemical,

and mining sectors.

The geographic distribution of orders for our Industrial

Automation Business Area was as follows:

($ in millions)

2020

2019

2018

Europe

2,365

2,599

2,867

The Americas

1,360

1,627

1,564

of which: United States

770

995

990

Asia, Middle East and Africa

2,419

2,206

2,266

of which: China

559

631

564

Total

6,144

6,432

6,697

Orders in Europe decreased 9 percent (9 percent in

local currencies) driven by lower orders in the Energy

Industries Division due to the effect of a

depressed oil price and mobility constraints, and in the

Marine & Ports Division

due to lower cruise orders. Orders in Asia, Middle East and

Africa increased 10 percent (10 percent in local currencies)

due to larger orders related to capital investments in

LNG in the Marine & Ports Division. The remaining

end-markets in

Asia, Middle East and Africa were subdued. China orders

were down in the Energy Industries, Marine & Ports

and

Process Industries Divisions. Orders in the Americas decreased by

16 percent (14 percent in local currencies) and

decreased in all Divisions

except the Marine & Ports Division.

Orders in the U.S. were down in all Divisions except for

the Marine & Ports Division due to a large

specialty marine vessel order.

Order backlog

The order backlog at the end of 2020 was 14 percent

higher (9 percent in local currencies) than at the end of

2019. All Divisions registered an increase in backlog except

the Turbocharging Division

which was impacted by the

marine and conventional onshore oil and gas markets. The

Marine & Ports Division benefited from orders for

specialty

marine vessels which are executed over multiple years.

The Energy Industries Division’s

backlog increase reflected

select orders for LNG solutions and the Process Industries Division’s

backlog benefited from the receipt of a large

order

in the mining market.

Revenues

In 2020, revenues decreased 8 percent (7 percent in

local currencies). Revenues were lower across all Divisions

compared to 2019,

reflecting subdued level of book-and-bill activities. Revenues in

shorter cycle businesses were

particularly impacted due to the COVID-19 pandemic and

service was significantly down, due to mobility constraints

and difficulties in executing services described

above.

The geographic distribution of revenues for our Industrial

Automation Business Area was as follows:

($ in millions)

2020

2019

2018

Europe

2,395

2,494

2,534

The Americas

1,329

1,595

1,479

of which: United States

808

950

944

Asia, Middle East and Africa

2,068

2,184

2,487

of which: China

629

612

616

Total

5,792

6,273

6,500

In 2020,

revenues were 4 percent lower (4 percent in local currencies)

in Asia, Middle East and Africa,

17 percent lower (15 percent in local currencies) in the

Americas and 5 percent weaker (5 percent in local currencies)

Europe compared to 2019. In Asia, Middle East and Africa,

the Process Industries, Marine & Ports and Turbocharging

Divisions registered strong growth in 2020.

The Process Industries, Marine & Ports and Turbocharging

Divisions grew

strongly in China while revenues in the Energy

Industries Division were negatively impacted by project-related

challenges in the Kusile power generation project in

South Africa. In Europe, revenues decreased across all Divisions

except in the Process Industries Division. In the Americas

revenues were negatively impacted across all Divisions.

Revenues in the U.S. declined significantly,

reflecting the downturn in the oil and gas and cruise market

segments.

Income from operations

In 2020, income from operations decreased 51 percent

compared to 2019 on weaker sales volumes in all

Divisions, project-related challenges in the Kusile power

generation project in South Africa and legacy projects in India,

and higher restructuring charges of approximately

$100 million. Income from operations was also impacted

by legal

costs relating to challenges in certain projects, unfavorable

pricing and product mix. The Business Area benefited from

the positive results of ongoing business rationalization efforts

and other cost saving measures especially lower sales

expenses. The changes in foreign currencies, including

the effect from changes in the FX/commodity timing

differences

summarized in the table below,

increased

income from operations by 4 percent compared to 2019.

Operational EBITA

The reconciliation of Income from operations to Operational

EBITA for

the Industrial Automation Business

Area was as follows:

($ in millions)

2020

2019

2018

Income from operations

344

700

853

Acquisition-related amortization

Restructuring, related and implementation costs

125

Gains and losses from sale of businesses

—

Acquisition-

and divestment-related expenses and integration costs

—

Certain other non-operational items

FX/commodity timing differences in income

from operations

(25)

Operational EBITA

451

732

914

In 2020, Operational EBITA

decreased 38 percent (39 percent excluding the impacts from

changes in foreign

currencies) compared to 2019. The change is due

to the reasons described under “Income from operations”, excluding

the explanations related to the reconciling items in

the table above.

Motion Business Area

The financial results of our Motion Business Area were as follows:

% Change

($ in millions)

2020

2019

2018

2020

2019

Orders

6,574

6,782

6,725

(3)%

Order backlog at December 31,

3,320

2,967

2,740

12%

Revenues

6,409

6,533

6,463

(2)%

Income from operations

989

1,009

924

(2)%

Operational EBITA

1,075

1,082

1,023

(1)%

Orders

In 2020, orders declined 3 percent (2 percent in local currencies)

compared to 2019, reflecting the impact of the

COVID-19 pandemic.

Orders development had a mixed performance across the market

segments. The Business Area

benefited from rising demand in the rail sector,

mainly in the Traction Division and an

increase in demand in the water

and waste water sector in the System Drives and Drive

Products Divisions, with stable demand from traditional heavy

industries such as mining and minerals and pulp and paper

as well as slower demand from oil, gas and chemicals.

The geographic distribution of orders for our Motion Business Area

was as follows:

($ in millions)

2020

2019

2018

Europe

2,219

2,355

2,260

The Americas

2,276

2,437

2,490

of which: United States

1,898

2,048

2,105

Asia, Middle East and Africa

2,079

1,990

1,975

of which: China

1,077

987

929

Total

6,574

6,782

6,725

In 2020, in Europe orders decreased 6 percent (6 percent

in local currencies)

as orders declined in Finland,

Russia, France, Italy and Spain. In Asia, Middle East and

Africa, orders increased 4 percent (6 percent in local

currencies) driven by growth in China, especially in the

Drive Products

Division and was partly offset by other markets

In the Americas, orders declined 7 percent (6 percent

in local currencies) mainly as a result of decreased orders

in the

U.S., reflecting the impact of the COVID-19 pandemic

Order backlog

The order backlog in 2020 increased 12 percent (6 percent

in local currencies) compared to 2019. The order

backlog increased driven by strong long-cycle order

growth.

Revenues

In 2020, revenues declined 2 percent (2 percent in local

currencies) compared to 2019, and were lower across

most Divisions, resulting from the impacts of the COVID-19

pandemic. However, revenues reflected

strong execution

from the order backlog especially in the System Drive

Division as well as resilience in the short-cycle business,

particularly in the second half of the year.

The geographic distribution of revenues for our Motion

Business Area was as follows:

($ in millions)

2020

2019

2018

Europe

2,196

2,162

2,169

The Americas

2,225

2,378

2,436

of which: United States

1,867

2,009

2,044

Asia, Middle East and Africa

1,988

1,993

1,858

of which: China

1,040

955

940

Total

6,409

6,533

6,463

In 2020, revenues in Europe increased 2 percent (1 percent

in local currencies) driven by increases in Poland,

Spain and Sweden while sales volumes

declined in Germany and Norway.

In Asia, Middle East and Africa revenues

remained stable as revenue growth was strong in China

partially offset by decreases

in India and Saudi Arabia. In the

Americas,

revenues decreased 6 percent (5 percent in local currencies)

mainly as a result of lower revenues in the U.S.,

especially in the book-and-bill business in the Motors

& Generators and Mechanical Power Transmission

Divisions.

Income from operations

In 2020, income from operations decreased 2 percent

compared to 2019 driven primarily by lower revenues.

The lower business volumes reflect the impacts of the COVID-19

pandemic on customer demand and product deliveries.

These impacts were mitigated partially by continued cost

discipline, lower travel expenses and a focus on operational

performance. In 2020, the Motion Business Area was also impacted

by higher restructuring and restructuring-related

expenses. Changes in foreign currencies, including

the impacts from FX/commodity timing differences summarized

the table below,

positively impacted income from operations by 3 percent.

Operational EBITA

The reconciliation of Income from operations to Operational

EBITA for

the Motion Business Area was as

follows:

($ in millions)

2020

2019

2018

Income from operations

989

1,009

924

Acquisition-related amortization

Restructuring, related and implementation costs

Gains and losses from sale of businesses

—

Acquisition-

and divestment-related expenses and integration costs

—

Certain other non-operational items

FX/commodity timing differences in income

from operations

(27)

(6)

Operational EBITA

1,075

1,082

1,023

In 2020, Operational EBITA

decreased 1 percent (1 percent excluding

the impact from changes in foreign

currency exchange rates) primarily due to the reasons

described under “Income from operations”, excluding the

explanations related to the reconciling items in the

table above.

Robotics & Discrete Automation Business Area

The financial results of our Robotics & Discrete Automation

Business Area were as follows:

% Change

($ in millions)

2020

2019

2018

2020

2019

Orders

2,868

3,260

3,808

(12)%

(14)%

Order backlog at December 31,

1,403

1,356

1,438

(6)%

Revenues

2,907

3,314

3,611

(12)%

(8)%

Income (loss) from operations

(163)

298

456

n.a.

(35)%

Operational EBITA

237

393

528

(40)%

(26)%

Orders

In 2020, orders decreased 12 percent (12 percent in local

currencies). Demand levels in the Robotics and

Machine Automation Divisions were negatively impacted

by the COVID-19 pandemic. During the second quarter,

both

Divisions suffered a significant decrease in

demand when activity levels declined

across key end-markets, including

traditional automotive and automotive-related sectors, machine

builders and electronics markets. Orders showed signs

recovery

in the second half of the year benefiting from select robotics

investments in the 3C and automotive sectors,

mostly in China, food and beverage, and logistics markets

The geographic distribution of orders for our Robotics & Discrete

Automation Business Area was as follows:

($ in millions)

2020

2019

2018

Europe

1,424

1,717

1,870

The Americas

388

457

493

of which: United States

277

310

311

Asia, Middle East and Africa

1,056

1,086

1,445

of which: China

781

729

1,019

Total

2,868

3,260

3,808

In 2020, order intake for Asia, Middle East and Africa

decreased 3 percent (2 percent in local currencies)

compared

to 2019. Strong demand in China was partially offset by

order decreases

in India and Japan.

Demand in

Europe declined 17 percent (18 percent in local currencies)

as a result of the impacts from the COVID-19 pandemic,

with a strong decline in orders in Germany,

Italy and France. The orders in the Americas declined 15

percent (12 percent

in local currencies) as a result of the large

decrease of orders in the U.S. in both Divisions.

Order backlog

In 2020, the order backlog increased 3 percent (2 percent

lower in local currencies) compared to 2019. In local

currencies, the backlog decreased despite a recovery

in order levels in both Divisions in the second half of the year

impacted by the positive momentum in 3C and automotive

and automotive-related sectors.

Revenues

In 2020, revenues decreased 12 percent (13 percent

in local currencies) compared to 2019.

Revenues decreased

in both Divisions due to lower volumes from book-and-bill

business, impacted by the COVID-19 pandemic.

Service

revenues also decreased, driven by weak demand from

automotive and automotive-related sectors partially offset

by an

increase in consumer segments.

The geographic distribution of revenues for our Robotics &

Discrete Automation Business Area was as

follows:

($ in millions)

2020

2019

2018

Europe

1,481

1,680

1,777

The Americas

389

464

482

of which: United States

273

293

313

Asia, Middle East and Africa

1,037

1,170

1,352

of which: China

719

829

991

Total

2,907

3,314

3,611

In 2020, revenues decreased in all regions.

The revenues from Asia, Middle East and Africa decreased

11 percent (12 percent in local currencies)

compared to 2019 due to lower book-and-bill revenues and lower

execution

of orders in China. Revenues in Europe decreased 12 percent

(13 percent in local currencies) with Italy and Germany

performing poorly while revenues grew slightly in

the United Kingdom and France. In the Americas,

revenues declined

16 percent (13 percent in local currencies) due to a slight

decrease in revenues in the U.S. in both Divisions, negatively

impacted by the COVID-19 pandemic.

Income (loss) from operations

In 2020, the Business Area recorded a loss from operations

of $163 million compared to an income of

$298 million in 2019, reflecting both the impact of an

impairment of goodwill in 2020 in the Machine Automation

Division of $290 million and a decrease in underlying operating

performance. The operational performance was affected

by lower sales volumes, an adverse change in the revenue

mix, partially offset by benefits of cost reduction measures

(especially selling costs) and lower travel expenses. Changes in

foreign currencies, including the impacts from

FX/commodity timing differences summarized

in the table below, negatively

impacted the loss from operations by

approximately 7 percent.

Operational EBITA

The reconciliation of Income (loss) from operations to

Operational EBITA for

the Robotics & Discrete

Automation Business Area was as follows:

($ in millions)

2020

2019

2018

Income (loss) from operations

(163)

298

456

Acquisition-related amortization

Restructuring, related and implementation costs

Changes in pre-acquisition estimates

—

(11)

Acquisition-

and divestment-related expenses and integration costs

—

Impairment of goodwill

290

—

Certain other non-operational items

FX/commodity timing differences in income

from operations

(4)

Operational EBITA

237

393

528

In 2020, Operational EBITA

decreased 40 percent (40 percent excluding the impact from changes

in foreign

currency exchange rates) compared to 2019, primarily

due to the reasons described under “Income (loss) from

operations”, excluding the explanations related to the

reconciling items in the table above.

Corporate and Other

Net loss from operations for Corporate and Other was as follows:

($ in millions)

2020

2019

2018

Corporate headquarters and stewardship

(334)

(391)

Costs for divestment of Power Grids

(86)

(141)

—

Income (loss) from equity-accounted companies

(68)

—

Corporate research and development

(49)

(185)

(183)

Restructuring

(46)

(60)

(18)

Digital

(45)

(33)

(46)

OS implementation costs

(24)

(83)

(11)

Net gain (loss) from sale of businesses

(2)

(17)

Fair value adjustment on equity securities

(5)

(6)

Corporate brand income from Hitachi ABB Power Grids

—

Corporate real estate

Other corporate costs

(61)

—

Stranded corporate costs

(40)

(225)

(297)

Divested businesses and other non-core activities

(342)

(164)

(408)

Total

Corporate and Other

(912)

(1,113)

(1,302)

In 2020, the net loss from operations within Corporate

and Other decreased by $201 million to $912 million

compared to 2019.

This reflected a reduction in stranded corporate costs and

other costs eliminated due to the

divestment of the Power Grids business. In 2020, we incurred

significantly lower restructuring and implementation costs

for the OS program and also lower costs relating to

the divestment of the Power Grids business. Additionally,

costs also

declined for corporate research and development expenses.

This was partially offset by higher losses in

the non-core

businesses compared to 2019 as well as the impact of recording

the equity-method loss relating to the Hitachi ABB

Power Grids joint venture in the second half of the year.

In 2020, Corporate brand income of $60 million was recorded

relating to the use of the ABB brand by the Hitachi ABB Power

Grids joint venture.

Corporate

In 2020, corporate headquarters and stewardship costs remained

flat, benefiting from savings generated from

results of the OS restructuring program efforts

offset by costs for current strategic projects. Costs were lower

corporate functions including: communications, finance, human

resources, tax, treasury and information technology.

Lower costs reflect the benefits of the reduction in country

-level general management costs, spending controls adopted

due to the impact of the COVID-19 pandemic and the

impact of lower travel expenses and certain marketing costs.

Our investment in the Hitachi ABB Power Grids joint venture

is accounted for using the equity method. Income

(loss) from equity-accounted companies in 2020 primarily

reflects the loss recorded from this joint venture commencing

in July 2020. The equity-method loss from the joint

venture reflects the amortization of the notional

purchase price

accounting adjustments (net of tax) which were recorded

due to the fair value accounting applied on initial investment

the joint venture (see “Note 4 - Acquisitions, divestments and

equity-accounted companies” to our Consolidated

Financial Statements for information on the accounting

for the investment in Hitachi ABB Power Grids).

Corporate research and development costs declined

significantly compared to 2019. This was primarily due to

the transfer of resources to the Power Grids business as well as

headcount reductions resulting from restructuring

initiatives under the OS program.

For further information on the OS Program see “Restructuring

and other cost savings initiatives” below as well

as “Note 22 - Restructuring and related expenses” to our

Consolidated Financial Statements.

During 2020, we recorded net revaluation gains totaling

$71 million on investments in equity securities in our

equity ventures investment portfolio.

Corporate brand income results from the granting of

the use of the ABB brand to Hitachi ABB Power Grids,

the fair value of which was initially determined on the

date of the divestment. A portion of the proceeds received

for the

sale of the Power Grids business was allocated to the fair

value of the granting of the use of the brand and is being

amortized over the expected period of use by Hitachi ABB Power

Grids.

Corporate real estate primarily includes income from property

rentals and gains from the sale of real estate

properties. In 2020,

income from operations in Corporate real estate included gains

from the sale of real estate properties

of $27 million compared to $48 million in 2019.

Other corporate costs consists of operational costs of our

Corporate Treasury Operations and certain

other

charges such as costs and penalties associated with legal

cases and environmental expenses.

Stranded corporate costs includes the amount of

allocated general and administrative and other overhead costs

previously included in the measure of segment profit (Operational

EBITA) for

the Power Grids business which is

presented as discontinued operations. These allocated costs

do not qualify for being reported as costs within the

discontinued operation. During 2020, stranded costs were

recorded until the sale of the Power Grids business and the

lower relative costs reflect the effects of transferring

centralized functions directly to the Power Grids business. The

remaining underlying cost base which we continue to

maintain for the benefit of Hitachi ABB Power Grids is subject to

transition services agreements.

Other - Divested businesses and other non-core activities

The results of operations for certain divested businesses and other

non‑core activities are presented in

Corporate and Other.

Divested businesses include the high-voltage cables business, steel structures

business as well as

the oil & gas EPC business. Other continuing non‑core

activities include the execution and wind‑down of certain

legacy

EPC and other contracts.

In both 2020 and 2019, the amounts represent charges

and losses relating to divested businesses and the

winding down of the remaining EPC projects. In 2020, we

recorded $143 million for certain retained warranty

obligations relating to the steel structures business and also

recorded charges for certain retained commitments and

guarantees in connection with the oil & gas EPC business. The

loss in 2020 also reflects further operational challenges

and customer obligations relating to several legacy projects

including the full train retrofit business, substations and

offshore wind. In 2019, we recorded additional

losses for legacy substations,

plant electrification EPC contracts and the

full train retrofit business, which were driven by additional

project cost overruns.

At December 31, 2020, our remaining non‑core activities primarily

include the completion of the remaining

EPC contracts for substations and oil & gas as well as the

completion of the remaining obligations for the full

train

retrofit business.

Restructuring and other cost savings initiatives

OS program

In December 2018, ABB announced a two-year restructuring program

with the objective of simplifying its

business model and structure through the implementation

of a new organizational structure driven

by its businesses. The

program resulted in the elimination of the country and

regional structures within the previous matrix organization,

including the elimination of the three regional Executive

Committee roles. The operating businesses are now responsible

for both their customer-facing activities and business

support functions, while the remaining Group-level

corporate

activities primarily focus on Group strategy,

portfolio and performance management and capital allocation. As

December 31, 2020, we have incurred substantially all restructuring

and related expenses related to the OS program.

During the course of the program, we implemented and

executed various restructuring initiatives across all

business support functions and all operating segments.

The cumulative restructuring and related expenses under this

program, originally estimated to be $350 million, were

reduced by $41 million to $309 million, mainly due to the

reductions in both estimated costs and number of projects planned.

The following table outlines the costs incurred in 2020,

2019,

2018 and the cumulative costs incurred under the

program per operating segment and Corporate and Other

as of December 31, 2020:

Cumulative costs

Costs incurred in

incurred up to

($ in millions)

2020

2019

2018

December 31, 2020

Electrification

Industrial Automation

Motion

Robotics & Discrete Automation

—

Corporate and Other

114

Total

149

303

ABB completed and has incurred substantially all costs related

to the OS program as of December 31, 2020.

The restructuring program resulted in run-rate cost savings of

approximately $590 million, impacting all Business Areas

and Corporate and Other.

These cost savings were realized mainly as reductions in cost of sales, selling,

general and

administrative expenses, and non-order related research

and development expenses.

The majority of the remaining cash outlays as of December

31, 2020,

primarily for employee severance

benefits, are expected to occur in 2021.

LIQUIDITY AND CAPITAL

RESOURCES

Principal sources of funding

We meet our

liquidity needs principally using cash from operations, proceeds

from the issuance of debt

instruments (bonds and commercial paper), and short‑term

bank borrowings. In 2020, we also received significant funds

from the sale of the Power Grids business, which was completed

on July 1, 2020.

Our net debt is shown in the table below:

December 31,

($ in millions)

2020

2019

Short-term debt and current maturities of long-term debt

1,293

2,287

Long-term debt

4,828

6,772

Cash and equivalents

(3,278)

(3,508)

Restricted cash - current

(323)

(36)

Marketable securities and short-term investments

(2,108)

(566)

Restricted cash - non-current

(300)

—

Net debt

(defined as the sum of the above lines)

112

4,949

During 2020, we significantly deleveraged the Company,

driven by the receipt of $9,241 million initial net

proceeds from the sale of the Power Grids business. As a result,

we reduced net debt to $112

million at December 31,

2020, from $4,949 million at December 31, 2019.

This change was also supported by cash flows from

operating

activities during 2020 of $1,693 million and by the

sale of treasury stock in relation to our employee share plans

for

$412

million. Partially offsetting these items were amounts

for purchases of treasury shares of $3,048 million including

$2,702 million relating to the announced buyback of our

shares as well as $1,736 million for the payment of the

dividend to our shareholders.

We made net

purchases of property,

plant and equipment and intangible assets of

$580 million (for both continuing and discontinued operations)

and made payments of dividends to noncontrolling

shareholders totaling $82 million.

In addition, net debt increased by $269 million due to moveme

nts in foreign exchange

rates. See “Financial position”, “Investing activities” and

“Financing activities” for further details.

During March 2020, as a result of the reaction of global

financial markets

to the COVID-19 pandemic, access

to commercial paper markets was limited.

However, the bond and bank

credit markets continued to be accessible at

temporarily increased credit spreads. To

support our short-term liquidity needs at that time, we entered

into a bank-

funded short-term EUR 2 billion Revolving Credit Agreement

and received the proceeds on March 31, 2020, amounting

to $2,183 million, net of issuance costs. We

repaid this borrowing after the completion of the sale of the

Power Grids

business at which time the agreement was terminated.

Financial markets quickly stabilized and we were again able

access the commercial paper markets with costs commensurate

to our credit rating. Through the rest of the year,

we did

not require access to the commercial paper markets for

funding.

Our Corporate Treasury Operations is responsible

for providing a range of treasury management services

to our

group companies, including investing cash in excess of

current business requirements. At December 31, 2020 and 2019,

the proportion of our aggregate “Cash and equivalents” and

“Marketable securities and short‑term investments”

managed by our Corporate Treasury Operations

amounted to approximately 53 percent and 34 percent, respectively.

Our investment strategy for cash (in excess of current

business requirements) has generally been to invest in

short-term time deposits with maturities of less than 3

months, supplemented at times by investments in money market

funds, and in some cases, government securities. We

primarily invested the proceeds received from the sale

of the Power

Grids business in money market funds and reduced

these funds over the rest of 2020 to execute our share buyback

activities and to pay back maturing debt and retire other

debts in advance.

We actively monitor

credit risk in our

investment portfolio and derivative portfolio. Credit risk

exposures are controlled in accordance with policies approved

by our senior management to identify,

measure, monitor and control credit risks. We

have minimum rating requirements

for our counterparts and closely monitor developments

in the credit markets making appropriate changes to our

investment policy as deemed necessary.

In addition to minimum rating criteria, we have strict investment

parameters and

specific approved instruments as well as restrictions on the

types of investments we make. These parameters are

closely

monitored on an ongoing basis and amended as we consider

necessary.

Our cash is held in various currencies around the world.

Approximately 31 percent of our cash and cash

equivalents held at December 31, 2020, was in U.S. dollars,

while other significant amounts were held in Chinese

renminbi (23 percent) and euro (21 percent).

We believe the

ongoing cash flows generated from our business, supplemented,

when necessary, through

access to the capital markets (including short‑term commercial

paper) and our credit facilities are sufficient

to support

business operations, capital expenditures, business acquisitions,

the payment of dividends to shareholders and

contributions to pension plans. Consequently,

we believe that our ability to obtain funding from these sources

will

continue to provide the cash flows necessary to satisfy our

working capital and capital expenditure requirements, as well

as meet our debt repayments and other financial commitments for

the next 12 months. See “Disclosures about

contractual obligations and commitments”.

Due to the nature of our operations, including the timing

of annual incentive payments to employees, our cash

flow from operations generally tends to be weaker in the

first half of the year than in the second half of the year.

Debt and interest rates

Total outstanding

debt was as follows:

December 31,

($ in millions)

2020

2019

Short-term debt and current maturities of long-term debt

1,293

2,287

Long-term debt:

Bonds

4,580

6,587

Other long-term debt

248

185

Total

debt

6,121

9,059

The decrease in short‑term debt in 2020 was due to the

repayment at maturity of both the USD 300 million

2.8% Notes and the EUR 1,000 million floating rate

Notes as well as a net reduction of outstanding commercial paper

$676 million. This was partially offset by the

reclassification to short-term of the USD 650 million 4.0% Notes

and the

CHF 350 million 2.250% Bonds.

At December 31, 2020,

Long-term debt decreased $1,944 million compared to the end

of 2019

due partly to the

reclassifications to short-term described above. We

also reduced through public tenders or otherwise redeemed debt

having a combined outstanding principal of $1,208 million.

This included partial public tenders of both our USD

750

million 3.8% Notes due 2028 and our USD 750 million

4.375% Notes due 2042 and as well as full redemptions of our

USD 250 million 5.625% Notes due 2021 and our USD

450 million 3.375% Notes due 2023.

Our debt has been obtained in a range of currencies and maturities

and with various interest rate terms. For

certain of our debt obligations, we use derivatives to manage

the fixed interest rate exposure. For example, we use

interest rate swaps to effectively conv

ert fixed rate debt into floating rate liabilities. After considering

the effects of

interest rate swaps, at December 31, 2020, the effective

average interest rate on our floating rate long‑term debt

(including current maturities) of $3,330 million and our

fixed rate long‑term debt (including current maturities) of

$2,638 million was 0.2 percent and 3.3 percent, respectively.

This compares with an effective rate of 1.1 percent

for

floating rate long‑term debt of $2,221 million and 2.4

percent for fixed rate long‑term debt of $6,000 million

December 31, 2019.

For a discussion of our use of derivatives to modify

the interest characteristics of certain of our individual bond

issuances, see “Note 12 - Debt” to our Consolidated Financial

Statements.

Credit facility

In December 2019, we replaced our previous multicurrency

revolving credit facility with a new $2 billion

multicurrency revolving credit facility,

maturing in 2024. In 2020,

we exercised our option to extend the maturity to

2025 and retain an option which we can exercise in 2021

to further extend the maturity to 2026. No amount was drawn

under the facility at December 31, 2020 and 2019. The facility is available

for general corporate purposes and contains

cross‑default clauses whereby an event of default would

occur if we were to default on indebtedness, as defined in the

facility, at or above

a specified threshold.

The credit facility does not contain financial covenants that would

restrict our ability to pay dividends or raise

additional funds in the capital markets. For further details of

the credit facility,

see “Note 12 - Debt” to our Consolidated

Financial Statements.

Commercial paper

At December 31, 2020,

we had two commercial paper programs in place:

•

a $2 billion commercial paper program for the private

placement of U.S. dollar denominated commercial

paper in the United States, and

•

a $2 billion Euro‑commercial paper program for the issuance of

commercial

paper in a variety of

currencies.

At December 31, 2020,

$32 million was outstanding under the $2 billion program

in the United States,

compared to $708 million outstanding at December 31,

2019.

At December 31, 2020 and 2019, no amount was outstanding

under the $2 billion Euro‑commercial paper

program.

European program for the issuance of

debt

The European program for the issuance of debt

allows the issuance of up to the equivalent of $8 billion in

certain debt instruments. The terms of the program do

not obligate any third party to extend credit to us and the terms

and possibility of issuing any debt under the program

are determined with respect to, and as of the date of issuance

of,

each debt instrument. At December 31, 2020,

two bonds (principal amount of EUR 700 million, du

in 2023 and

principal amount of EUR 750 million, due in 2024) having

a combined carrying amount of $1,821 million were

outstanding under the program. At December 31, 2019, the carrying

amount of these bonds was $1,658 million.

In January 2021, we issued one additional bond under

this program having a principle amount of

EUR 800 million at zero interest, and a term of 9 years.

Credit ratings

Credit ratings are assessments by the rating agencies of

the credit risk associated with ABB and are based on

information provided by us or other sources that the rating

agencies consider reliable. Higher ratings generally result in

lower borrowing costs and increased access to capital markets. Our

ratings are of “investment grade” which is defined as

Baa3 (or above) from Moody’s

and BBB− (or above) from Standard & Poor’s.

At December 31, 2020,

our long‑term debt was rated A3 with a Stable outlook

by Moody’s compared to A2

the end of 2019. At December 31, 2020, our long-term

debt was rated A- with a Stable outlook by Standard &

Poor’s

compared to A at the end of 2019.

Limitations on transfers of funds

Currency and other local regulatory limitations related

to the transfer of funds exist in a number of countries

where we operate, including: China, Egypt, India, Indones

ia, Kazakhstan, Malaysia, South Korea, Taiwan

(Chinese

Taipei), Thailand

Turkey and Viet

Nam. Funds, other than regular dividends, fees

or loan repayments, cannot be readily

transferred offshore from these countries and are

therefore deposited and used for working capital needs in those

countries. In addition, there are certain countries where,

for tax reasons, it is not considered optimal to transfer the cash

offshore. As a consequence, these funds are

not available within our Corporate Treasury

Operations to meet short‑term

cash obligations outside the relevant country.

The above described funds are reported as cash in our Consolidated

Balance Sheets, but we do not consider these funds immediately

available for the repayment of debt outside the

respective countries where the cash is situated, including

those described above. At December 31, 2020 and 2019, the

balance of “Cash and equivalents” and “Marketable

securities and other short‑term investments” under such limitations

(either regulatory or sub‑optimal from a tax perspective)

totaled approximately $1,751 million and $1,843 million,

respectively.

During 2020, we continued to direct our subsidiaries in countries with

restrictions to place such cash with our

core banks or investment grade banks, in order to minimize

credit risk on such cash positions. We

continue to closely

monitor the situation to ensure bank counterparty risks are minimized.

FINANCIAL POSITION

Balance sheets

December 31,

($ in millions)

2020

2019

% Change

Current assets

Cash and equivalents

3,278

3,508

(7)%

Restricted cash

323

n.a.

Marketable securities and short-term investments

2,108

566

272%

Receivables, net

6,820

6,434

Contract assets

985

1,025

(4)%

Inventories, net

4,469

4,184

Prepaid expenses

201

191

Other current assets

760

674

13%

Assets held for sale and in discontinued operations

282

9,840

(97)%

Total

current assets

19,226

26,458

(27)%

For a discussion on Cash and equivalents, see sections “Liquidity

and Capital Resources—Principal sources of

funding” and “Cash flows” for further details.

The increase in restricted cash relates to certain amounts

received on the sale of the Power Grids business

which are being held in escrow pending the finalization

of legal transfer of certain entities of that business to Hitachi

ABB Power Grids. See “Note 3 - Discontinued operations”

to our Consolidated Financial Statements.

Marketable securities and short‑term investments increased

as a significant portion of the proceeds received for

the sale of the Power Grids business are invested in money

market funds (see “Note 5 - Cash and equivalents,

marketable securities and short-term investments” to our

Consolidated Financial Statements).

Receivables, net, increased 6 percent primarily due to

currency exchange movements. In local currency,

Receivables, net, increased 2 percent.

Contract assets decreased 4 percent (9 percent in local

currencies). The decrease reflects lower amounts in the

non-core businesses and the Motion Business Area. This

was partially offset by higher levels in the Industrial

Automation and Robotics & Discrete Automation Business Areas.

Inventories, net, increased 7 percent primarily due

to movements in exchange rates. In local currencies,

inventory decreased 1 percent.

Current assets held for sale and in discontinued operations

decreased to $282 million from $9,840 million due

to the sale in 2020 of both the solar inverters and Power

Grids businesses. The balance at December 31, 2020, relates

primarily to working capital balances of certain contracts

in the Power Grids business which ABB is executing for

the

benefit of Hitachi ABB Power Grids. For the details of

the assets of the Power Grids business see “Note 3 -

Discontinued operations” to our Consolidated Financial

Statements.

December 31,

($ in millions)

2020

2019

% Change

Current liabilities

Accounts payable, trade

4,571

4,353

Contract liabilities

1,903

1,719

11%

Short-term debt and current maturities of long-term debt

1,293

2,287

(43)%

Current operating leases

270

305

(11)%

Provisions for warranties

1,035

816

27%

Other provisions

1,519

1,375

10%

Other current liabilities

4,181

3,761

11%

Liabilities held for sale and in discontinued operations

644

5,650

(89)%

Total

current liabilities

15,416

20,266

(24)%

Accounts payable, trade, increased 5 percent due primaril

to currency exchange rate movements. Excluding

movements in exchange rates, the balance was steady.

The decrease in Short-term debt and current maturities of

long-term debt was primarily due to repayment at

maturity of both the USD 300 million 2.8% Notes and

the EUR 1,000 million floating rate Notes. In addition,

reduced the amount outstanding on the U.S. commercial

paper program by $676 million. This was partially offset

by a

reclassification to Short-term debt and current maturities

of long-term debt of the USD 650 million Notes and

the

CHF 350 million Bonds.

Current operating leases includes the portion of the operating

lease liabilities that are due to be paid in the next

12 months. For a summary of operating lease liabilities, see

“Note 14 - Leases” to our Consolidated Financial

Statements.

Provisions for warranties increased 27 percent (20 percent

in local currencies).

The increase is mainly due to an

increase of $143 million in the warranty provision

related to a divested business. For details on the change

in the

Provision for warranties, see “Note 15 - Commitments and

contingencies” to our Consolidated Financial Statements.

Current liabilities held for sale and in discontinued operations decreased

to $644 million from $5,650 million

due to the sale in 2020 of both the solar inverters and Power

Grids businesses. The amount at December 31, 2020,

relates to certain working capital balances of the Power

Grids business as described above. For the details of the

liabilities of the Power Grids business see “Note 3 - Discontinued

operations” to our Consolidated Financial Statements.

December 31,

($ in millions)

2020

2019

% Change

Non-current assets

Restricted cash, non-current

300

—

n.a.

Property, plant and

equipment, net

4,174

3,972

Operating lease right-of-use assets

969

994

(3)%

Goodwill

10,850

10,825

Intangible assets, net

2,078

2,252

(8)%

Prepaid pension and other employee benefits

360

133

171%

Investments in equity-accounted companies

1,784

n.a.

Deferred taxes

843

910

(7)%

Other non-current assets

504

531

(5)%

Total

non-current assets

21,862

19,650

11%

Restricted cash at December 31, 2020, represents certain

amounts received on the sale of the Power Grids

business which have been placed in escrow,

pending resolution of certain of our contractual obligations to Hitachi

Ltd.

See “Note 3 - Discontinued operations” to our Consolidated

Financial Statements.

In 2020, Property,

plant and equipment, net, increased 5 percent (flat in local

currencies) as net capital

expenditures (purchases net of disposals for property,

plant and equipment) were at a similar level to the annual

depreciation recorded in 2020.

In 2020, Goodwill was flat (decreased 2 percent in local

currencies). The decrease in local currencies includes

the impact of recording goodwill impairments of $311

million in 2020.

Intangible assets, net, decreased 8 percent (11

percent in local currencies) due to the amortization recorded

during the year. For additional

information on goodwill and intangible assets see “Note 11

- Goodwill and intangible

assets” to our Consolidated Financial Statements.

The balance for Investment in equity-accounted

companies at December 31, 2020, primarily represents our

remaining 19.9 percent interest in the Hitachi ABB Power Grids

joint venture. For additional information on investment

in equity-accounted companies see “Note 4 - Acquisitions,

divestments and equity-accounted companies” to our

Consolidated Financial Statements.

Prepaid pension and other employee benefits increased

171 percent reflecting changes in the funding status for

pension plans primarily in Switzerland due to discretionary

contributions made in 2020.

For additional information on

Pension and employee benefits see “Note 17 - Employee

benefits” to our Consolidated Financial Statements.

In 2020, Deferred taxes, decreased 7 percent (18 percent

in local currencies). For details on deferred tax assets

see “Note 16 - Income taxes” to our Consolidated Financial

Statements.

December 31,

($ in millions)

2020

2019

% Change

Non-current liabilities

Long-term debt

4,828

6,772

(29)%

Non-current operating leases

731

717

Pension and other employee benefits

1,231

1,793

(31)%

Deferred taxes

661

911

(27)%

Other non-current liabilities

2,025

1,669

21%

Liabilities held for sale and in discontinued operations

197

—

n.a.

Total

non-current liabilities

9,673

11,862

(18)%

Long-term debt decreased 29 percent. The decrease in

2020 reflects the reclassifications to short-term of the

bonds and notes described above. In addition, we reduced

our outstanding debt by $508

million in connection with cash

tender offers

to the noteholders of our USD 750 million Notes, due 2028,

and our USD 750 million Notes, due 2042. We

also exercised our early redemption options on the full

amounts outstanding of our USD 250 million Notes due 2021

and

our

USD 450 million Notes due 2023 under the original terms of these

instruments. During 2020, Long-term debt

increased 4 percent due to movements in foreign exchange

rates. For additional information on Long-term debt, see

“Liquidity and Capital Resources—Debt and interest rates”

as well as “Note 12 - Debt” to our Consolidated Financial

Statements.

Non-current operating leases includes the portion

of the operating

lease liabilities that are due to be paid in

more than 12 months.

Pension and employee benefits decreased 31 percent

(37 percent in local currencies).

The decrease in 2020

primarily reflects the settlement of certain defined benefit pension

obligations during 2020. For additional information

on Pension and employee benefits see “Note 17 - Employee

benefits” to our Consolidated Financial Statements.

For a breakdown of Other non‑current liabilities, see “Note

13 - Other provisions, other current liabilities and

other non-current liabilities” to our Consolidated Financial

Statements.

Non-current liabilities held for sale and in discontinued

operations relate to the sale in 2020 of the Power Grids

business. The amount at December 31, 2020, relates to certain amounts

which are expected to be payable in more than

one year. For the details of

the liabilities of the Power Grids business see “Note 3 - Discontinued

operations” to our

Consolidated Financial Statements.

Cash flows

The Consolidated Statements of Cash Flows are shown

on a continuing operations basis, with the effects of

discontinued operations shown in aggregate for each major

cash flow activity and also include the impact from changes

in restricted cash.

The Consolidated Statements of Cash Flows can be summarized

as follows:

($ in millions)

2020

2019

2018

Net cash provided by operating activities

1,693

2,325

2,924

Net cash provided by (used in) investing activities

6,760

(815)

(3,085)

Net cash used in financing activities

(8,175)

(1,383)

(789)

Effects of exchange rate changes on cash and

equivalents

(28)

(131)

Net change in cash and equivalents and restricted cash

357

(1,081)

Operating activities

($ in millions)

2020

2019

2018

Net income

5,205

1,528

2,298

Less: Income from discontinued operations, net of tax

(4,860)

(438)

(723)

Depreciation and amortization

915

961

916

Total adjustments

to reconcile net income to net cash provided by

operating activities (excluding depreciation and amortization)

263

220

(189)

Total changes

in operating assets and liabilities

352

(372)

Net cash provided by operating activities —

continuing operations

1,875

1,899

2,352

Net cash provided by (used in) operating activities

— discontinued

operations

(182)

426

572

Cash flows from operating activities of continuing operations

in 2020 provided net cash of $1,875 million, a

decrease of 1 percent from 2019. In 2020, lower cash

effective net income (i.e. net income from continuing

operations

adjusted for depreciation, amortization and other non

-cash items) which included the impacts of the cash payments made

to settle certain international pension plans in 2020 as well

as payments for certain project and legal settlements was

offset by higher cash generated from a reduction

in working capital during the year.

In 2020, net cash provided by

operating activities benefited from a reduction of inventory

levels (in local currencies) and a more favorable timing of

cash flows on long-term projects.

Cash flows from operating activities of discontinued

operations in 2020 decreased to a net outflow of

$182 million compared to an inflow of $426 million

in 2019. This primarily reflects the timing of the divestment

of the

Power Grids business in July 2020, with 2020 primarily

reflecting the cash flows in the first half of the year.

This

business typically generated most of its operating cash flows in

the second half of the year and thus the two years are

not

comparable.

Investing activities

($ in millions)

2020

2019

2018

Purchases of investments

(5,933)

(748)

(322)

Purchases of property,

plant and equipment and intangible assets

(694)

(762)

(772)

Acquisition of businesses (net of cash acquired) and

increases in cost- and equity-accounted companies

(121)

(22)

(2,664)

Proceeds from sales of investments

4,341

749

567

Proceeds from maturity of investments

160

Proceeds from sales of property,

plant and equipment

114

Proceeds from sales of businesses (net of transaction costs and

cash

disposed) and cost- and equity-accounted companies

(136)

113

Net cash from settlement of foreign currency derivatives

138

(76)

(30)

Other investing activities

(23)

(32)

Net cash used in investing activities — continuing operations

(2,272)

(651)

(2,908)

Net cash provided by (used in) investing activities

— discontinued

operations

9,032

(164)

(177)

Net cash used in investing activities for continuing

operations in 2020 was $2,272 million compared to

$651 million in 2019. The amount in 2020 reflects primarily the

net investment in money market funds of amounts

received from the sale of the Power Grids

business as well as cash payments for purchases of property,

plant and

equipment. In 2020, we also recorded net investing

cash flows of $138 million for settlements of derivatives compared

to net outflows of $76 million in 2019.

The following presents purchases of property,

plant and equipment and intangible assets by significant asset

category:

($ in millions)

2020

2019

2018

Construction in progress

493

536

523

Purchase of machinery and equipment

134

156

152

Purchase of land and buildings

Purchase of intangible assets

Purchases of property,

plant and equipment and intangible assets

694

762

772

In 2020 there were no significant business acquisitions. The

divestment of the solar inverters business resulted

in a net cash outflow of $143 million in 2020.

In 2020, we divested the Power Grids business and recorded

net proceeds of $9,168 million (net of transaction

costs and purchase price related repayments) which are included

in cash provided by investing activities from

discontinued operations.

Financing activities

($ in millions)

2020

2019

2018

Net changes in debt with maturities of 90 days or less

(587)

164

221

Increase in debt

343

2,406

1,914

Repayment of debt

(3,459)

(2,156)

(830)

Delivery of shares

412

Purchase of treasury stock

(3,048)

—

(250)

Dividends paid

(1,736)

(1,675)

(1,717)

Dividends paid to noncontrolling shareholders

(82)

(90)

(86)

Other financing activities

(49)

(35)

Net cash used in financing activities — continuing operations

(8,206)

(1,328)

(741)

Net cash provided by (used in) financing activities

— discontinued

operations

(55)

(48)

Our financing cash flow activities primarily include

debt transactions (both from the issuance of debt securities

and borrowings directly from banks), share transactions

and payments of distributions to controlling and noncontrolling

shareholders. Net cash from financing activities for discontinued

operations represents primarily distributions paid to

noncontrolling shareholders of certain subsidiaries classified in

discontinued operations and in 2020, also includes net

borrowings of the discontinued operation.

In 2020, the net outflow for debt with maturities of

90 days or less related to net repayments of amounts

outstanding under the U.S. commercial paper program

In 2020, “Repayment of debt”

includes the repayment at maturity of the USD 300

million 2.8% Notes and the

EUR 1,000 million floating rate Notes. We

also made payments of $1,376 million in connection

with early retirement of

bonds including partial public tenders of both our USD 750

million 3.8% Notes due 2028 and our USD 750 million

4.375% Notes due 2042 as well as full redemptions of

our USD 250 million 5.625% Notes due 2021 and our

USD 450 million 3.375% Notes due 2023.

“Delivery of shares” in 2020 reflects cash received primarily

from the exercise of options in connection with

our Management Incentive

Plan (resulting in a delivery of 16.5 million shares) and in connection

with our Employee

Share Acquisition Plan (resulting in a delivery of 1.4 million

shares). All shares were delivered out of Treasury

stock.

In 2020, “Purchase of treasury stock” reflects $2,702

million of cash payments to purchase 109 million of our

own shares in connection with the announced share buyback

program. It also reflects $346 million paid to purchase

13 million shares on the open market during 2020.

Disclosures about contractual obligations and

commitments

The contractual obligations presented in the table below

represent our estimates of future payments under fixed

contractual obligations and commitments. These amounts may

differ from those reported in our Consolidated

Balance

Sheet at December 31, 2020.

Changes in our business needs, cancellation provisions and

changes in interest rates, as

well as actions by third parties and other factors, may

cause these estimates to change. Therefore, our actual payments

future periods may vary from those presented below.

The following table summarizes certain of our contractual

obligations and principal and interest payments under

our debt instruments, leases and purchase obligations at

December 31, 2020:

Total

Less than

1 - 3

3 - 5

More than

($ in millions)

1 year

years

5 years

Payments due by period

Long-term debt obligations

5,730

1,108

2,115

1,321

1,186

Interest payments related to long-term debt obligations

842

128

148

472

Operating lease obligations

(1)

1,083

282

371

210

220

Finance lease obligations

(1)

230

Purchase obligations

3,264

2,701

458

Total

11,149

4,257

3,155

1,754

1,983

(1) Lease obligations

represent total

cash payments

to be made in

the future,

and include

an implied interest

expense, being

the differen

between undiscounted

cash flows and

discounted cash

flows,

of $82 million

and $43

million,

for operating and

finance leases,

respectively

See “Note 14 -

Leases” to our

Consolidated

Financial Statements.

In the table above, the Long‑term debt obligations reflect

the cash amounts to be repaid upon maturity of those

debt obligations. The cash obligations above will differ

from Long‑term debt due to the impacts of fair value hedge

accounting adjustments and premiums or discounts on

certain debt. In addition, finance lease obligations are shown

separately in the table above while they are combined

with long‑term debt amounts in our Consolidated Balance Sheets.

We have determined

the interest payments related to long‑term debt obligations

by reference to the payments

due under the terms of our debt obligations at the time

such obligations were incurred. However,

we use interest rate

swaps to modify the interest characteristics of certain

of our debt obligations. The net effect of these swaps may

be to

increase or decrease the actual amount of our cash interest payme

nt obligations, which may differ from those

stated in

the above table. For further details on our debt obligations

and the related hedges, see “Note 12 - Debt” to our

Consolidated Financial Statements.

Of the total of $1,455 million unrecognized tax benefits (net

of deferred tax assets) at December 31, 2020,

it is

expected that $32 million will be paid within less than

a year. However,

we cannot make a reasonably reliable estimate

as to the related future payments for the remaining amount.

Off‑balance sheet arrangements

Commercial commitments

We disclose the maximum

potential exposure of certain guarantees, as well as possible recourse

provisions that

may allow us to recover from third parties amounts paid

out under such guarantees. The maximum potential exposure

does not allow any discounting of our assessment of actual

exposure under the guarantees. The information below

reflects our maximum potential exposure under the guarantees,

which is higher than our assessment of the expected

exposure.

Guarantees

The following table provides quantitative data regarding

our third‑party guarantees. The maximum potential

payments represent a worst‑case scenario, and do not reflect

our expected outcomes.

December 31,

2020

2019

Maximum potential

($ in millions)

payments

(1)

Performance guarantees

6,726

1,860

Financial guarantees

339

Indemnification guarantees

(2)

177

Total

7,242

1,934

(1)

Maximum potential payments include amounts in both continuing

and discontinued operations.

(2)

Certain indemnifications provided to Hitachi in connection with

the divestment of Power Grids are without limit.

The carrying amount of liabilities recorded in the Consolidated

Balance Sheets reflects our best estimate of

future payments, which we may incur as part of fulfilling

our guarantee obligations. In respect of the above guarantees,

the carrying amounts of liabilities at December 31, 2020,

amounted to $135 million, which was included in discontinued

operations, while at December 31, 2019, balances were

not significant.

In addition, in the normal course of bidding for and executing certain

projects, we have entered into standby

letters of credit, bid/performance bonds and surety bonds

(collectively “performance bonds”) with various financial

institutions. Customers can draw on such performance

bonds in the event that we do not fulfill our contractual

obligations. We

would then have an obligation to reimburse the financial

institution for amounts paid under the

performance bonds. At December 31, 2020 and 2019,

the total outstanding performance bonds aggregated to

$4.3 billion

and $6.8 billion, respectively,

of which $0.3 billion and $3.7 billion, respectively,

relate to discontinued operations.

There have been no significant amounts reimbursed to

financial institutions under these types of arrangements in

2020,

2019 and 2018.

For additional descriptions of our performance,

financial and indemnification guarantees see “Note 15

Commitments and contingencies” to our Consolidated Financial

Statements.

Item 6.

Directors, Senior Management and Employees

SUMMARY OF CORPORATE

GOVERNANCE APPROACH

Corporate governance - general principles

ABB is committed to the highest international standards

of corporate governance and this is reinforced in its

structure, processes and rules as outlined in this section of

the Annual Report. In line with this, ABB complies with the

general principles as set forth in the Swiss Code of Best Practice

for Corporate Governance, as well as those of the

capital markets where its shares are listed and traded. In

addition to the provisions of the Swiss Code of Obligations,

ABB’s key principles and

rules on corporate governance are laid down in ABB’s

Articles of Incorporation, the ABB Ltd

Board Regulations & Corporate Governance Guidelines (which

includes the regulations of ABB’s Board

committees

and the ABB Ltd Related Party Transaction

Policy, which was prepared

based on the Swiss Code of Best Practice for

Corporate Governance and the independence criteria set

forth in the corporate governance rules of the New York

Stock

Exchange), and the ABB Code of Conduct. These documents

are available on ABB’s website

https://new.abb.com/about/corporate

-governance

. It is the duty of ABB’s Board of

Directors (the Board) to review and

amend or propose amendments to those documents from

time to time to reflect the most recent developments and

practices, as well as to ensure compliance with applicable

laws and regulations. Shareholders and other interested parties

may communicate with the Chairman of the Board or

the independent directors by writing to ABB Ltd (Attn:

Chairman

of the Board / independent directors), at Affolternstrasse

44, CH-8050 Zurich, Switzerland.

Compensation governance and Board and EC compensation

Information about ABB’s compensation

governance as well as Board and Executive Committee (EC)

compensation and shareholdings is provided in the

Compensation Report that can be found in the section titled

"Compensation" below.

BOARD OF DIRECTORS

Board and Board committees (2020 - 2021 board term)

Board of Directors

Chairman:

Peter R. Voser

Matti Alahuhta

Jennifer Xin-Zhe Li

Vice‑Chairman:

Jacob Wallenberg

Gunnar Brock

Geraldine Matchett

David Constable

David Meline

Frederico Fleury Curado

Satish Pai

Lars Förberg

Finance, Audit and Compliance

Committee

Governance and Nomination

Committee

Compensation

Committee

David Meline (chairman)

Jacob Wallenberg

(chairman)

David Constable (chairman)

Gunnar Brock

Matti Alahuhta

Frederico Fleury Curado

Geraldine Matchett

Lars Förberg

Jennifer Xin‑Zhe Li

Satish Pai

Board governance

The Board

The Board defines the ultimate direction of the business of

ABB and issues the necessary instructions. It

determines the organization of the ABB Group

and appoints, removes and supervises the persons entrusted

with the

executive management and representation of ABB. The internal

organizational structure and the definition of the

areas

of responsibility of the Board, as well as the information

and control instruments vis-à-vis the Executive Committee are

set forth in the ABB Ltd Board Regulations & Corporate

Governance Guidelines (available at

https://new.abb.com/about/corporate

-governance

The Board takes decisions as a whole, supported by its three

committees: the Finance, Audit and Compliance

Committee (FACC),

the Governance and Nomination Committee (GNC), and the

Compensation Committee (CC).

These committees assist the Board in its tasks and

report regularly to the Board. The members of the Board committees

either are required to be independent or are elected

directly by the shareholders. The Board and its committees

meet

regularly throughout the year.

The directors and officers of a Swiss corporation

are bound, as specified in the Swiss Code of Obligations,

perform their duties with all due care, to safeguard the

interests of the corporation in good faith and to extend equal

treatment to shareholders in like circumstances.

The Swiss Code of Obligations does not specify what

standard of due care is required of the directors of a

corporate board. However, it is generally

held by Swiss legal scholars and jurisprudence that the directors

must have the

requisite capability and skill to fulfill their function, and

must devote the necessary time to the discharge

of their duties.

Moreover, the directors must exercise

all due care that a prudent and diligent director would have

taken in like

circumstances. Finally,

the directors are required to take actions in the best interests

of the corporation and may not take

any actions that may be harmful to the corporation.

Although the Swiss Code of Obligations does not discuss specifically

conflicts of interest for board members,

the ABB Ltd Board Regulations & Corporate Governance

Guidelines (available at

https://new.abb.com/about/corporate

-governance

) state that board members shall avoid entering into any situation

which their personal or financial interest may conflict

with the interests of ABB.

Chairman of the Board

The Chairman is elected by the shareholders to represent

their interests in creating sustainable value through

effective governance. In addition, the Chairman

(1) takes provisional decisions on behalf of the Board on urgent

matters

where a regular Board decision cannot be obtained,

(2) calls for Board meetings and sets the related agendas,

(3)

interacts with the CEO and other EC members on a more

frequent basis outside of Board meetings and (4)

represents

the Board internally and in the public sphere.

Vice-Chairman

of the Board

The Vice‑Chairman

is elected by the Board and handles the responsibilities of the Chairman

to the extent the

Chairman is unable to do so or would have a conflict of

interest in doing so. He also acts as counselor/advisor to the

Chairman on any matters that are Company or Board relevant

and as appropriate or as the Chairman may require

and

with a particular focus on strategic aspects related to the

Company and its business in general. In addition, the

Vice‑Chairman takes such

other actions as may be decided by the Board or requested

by the Chairman.

Finance, Audit and Compliance Committee

The FACC is responsible

for overseeing (1) the integrity of ABB’s

financial statements, (2)

ABB’s compliance

with legal, tax and regulatory requirements, (3)

the independent auditors’ qualifications and independence, (4)

the

performance of ABB’s internal

audit function and external auditors, and (5)

ABB’s capital structure,

funding

requirements and financial risk and policies.

The FACC must comprise

three or more independent directors who have a thorough

understanding of finance

and accounting. The Chairman of the Board and, upon

invitation by the committee’s

chairman, the CEO or other

members of the Executive Committee may participate

in the committee meetings, provided that any potential conflict

interest is avoided and confidentiality of the discussions is maintained.

In addition, the chief integrity officer,

the head of

internal audit and the external auditors participate in the

meetings as appropriate. The Board has determined that

each

member of the FACC

is an audit

committee financial expert as such term is defined

in Form 20-F.

Governance and Nomination Committee

The GNC is responsible for (1)

overseeing corporate governance practices within ABB, (2)

overseeing

corporate social responsibility (including health, safety and

environment as well as sustainability), (3) nominating

candidates for the Board, the role of CEO and other

positions on the Executive Committee, and (4) succession planning

and employment matters relating to the Board and the

Executive Committee. The GNC is also responsible for

maintaining an orientation program for new Board members

and an ongoing education program for existing Board

members.

The GNC must comprise three or more independent directors.

The Chairman of the Board (unless he is already

a member) and, upon invitation by the committee’s

chairman, the CEO or other members of the Executive Committee

may participate in the committee meetings, provided that

any potential conflict of interest is avoided and confidentiality

of the discussions is maintained.

Compensation Committee

The CC is responsible for compensation matters relating

to the Board and the Executive Committee.

The CC must comprise three or more directors who are

elected by the shareholders. The Chairman of the Board

and, upon invitation by the committee’s

chairman, the CEO or other members of the Executive Committee

may

participate in the committee meetings, provided that any

potential conflict of interest is avoided and confidentiality

the discussions is maintained.

Board membership

Board composition

In proposing individuals to be elected to the Board, the

Board seeks to align the composition and skills of the

Board with the Company’s

strategic needs, business portfolio, geographic reach and culture.

The Board must be diverse

in all aspects including gender, nationalities,

geographic/regional experience and business experience.

In addition, the

average tenure of the members of the Board should be

well‑balanced. The Board also considers the number

of other

mandates of each Board member to ensure that he/she will

have sufficient time to dedicate to his/her role as

an ABB

Board member.

Elections and term of office

The members of the Board of Directors and the Chairman

of the Board as well as the members of the

Compensation Committee are elected by shareholders

at the general meeting of shareholders for a term of office

extending until completion of the next ordinary general

meeting of shareholders. Members whose terms of office

have

expired shall be immediately eligible for re‑election.

Our Articles of Incorporation (available at

https://new.abb.com/about/corporate

-governance

) do not provide for the retirement of directors based on

their age.

However, an age limit for members

of the Board is set forth in the ABB Ltd Board Regulations &

Corporate

Governance Guidelines (although waivers are possible

and subject to Board discretion) (available at

https://new.abb.com/about/corporate

-governance

). If the office of the Chairman of the Board of

Directors or any

position on the Compensation Committee becomes vacant

during a Board term, the Board of Directors may appoint

(shall appoint in the case of the Chairman of the Board) another

individual from among its members to that position for

the remainder of that term. The Board of Directors shall consist of

no less than 7 and no more than 13 members.

Members of the Board (2020-2021 board term)

Peter R. Voser

has been a member and Chairman of ABB’s

Board of Directors since April 2015.

He was also

ABB’s Chief Executive Officer

from April 2019 to February 2020.

He is a member of the board of directors of IBM

Corporation (U.S.).

He is also a member of the board of directors of Temasek

Holdings (Private) Limited (Singapore) as

well as chairman of the board of PSA International

Pte Ltd (Singapore), one of its subsidiaries.

In addition, he is the

chairman of the board of trustees of the St. Gallen Foundation

for International Studies. He was previously the chief

executive officer of Royal Dutch Shell plc (The

Netherlands). Mr. Voser

was born in 1958 and is a Swiss citizen.

Jacob Wallenberg

has been a member of ABB’s Board

of Directors since June 1999 and Vice-Chairman

since

April 2015. He is the chairman of the board of Investor

AB (Sweden). He is vice‑chairman of the boards of

Telefonaktiebolaget

LM Ericsson, FAM AB and

Patricia Industries (all Sweden). He is also a member of the

boards

directors of Nasdaq, Inc. (U.S.) and the Knut and Alice Wallenberg

Foundation (Sweden) as well as a member of the

nomination committee of SAS AB (Sweden). Mr.

Wallenberg

was born in 1956 and is a Swedish citizen.

Matti Alahuhta

has been a member of ABB’s

Board of Directors since April 2014. He is the

chairman of the

board of DevCo Partners Oy and vice-chairman of the

board of Metso Outotec Corporation (both Finland). He is also a

member of the boards of directors of KONE Corporation

(Finland) and AB Volvo

(Sweden). He was previously the

president and chief executive officer of KONE

Corporation and he served in several executive positions at Noki

Corporation (Finland). Mr.

Alahuhta was born in 1952 and is a Finnish citizen.

Gunnar Brock

has been a member of ABB’s Board

of Directors since March 2018. He is currently

chairman of

the boards of Neptunia Invest AB, Mölnlycke Health Care

AB and Stena AB (all Sweden). He is a member of the

boards

of directors of Investor AB and Patricia Industries (both

Sweden). He was formerly president and chief executive officer

of Atlas Copco AB (Sweden).

Mr. Brock was born in

1950 and is a Swedish citizen.

David Constable

has been a member of ABB’s Board

of Directors since April 2015.

Effective January 2021, he

was appointed chief executive officer of

Fluor Corporation (U.S.), for which he continues to serve as a

member of the

board of directors. He was a member of the boards of directors

of Rio Tinto plc (U.K.) and Rio Tinto

Limited (Australia)

until the end of 2020.

He was formerly the chief executive

officer and president as well as a member of

the board of

directors of Sasol Limited (South Africa). He joined

Sasol after more than 29 years with Fluor Corporation (U.S.). Mr.

Constable was born in 1961 and is a Canadian and U.S. citizen.

Frederico Fleury Curado

has been a member of ABB’s Board

of Directors since April 2016. He is the chief

executive officer of Ultrapar Participações S.A. (Brazil)

the holding company of the Ultra Group of companies.

Mr. Curado is a member

of the board of directors of Transocean Ltd.

(Switzerland). He was formerly the chief executive

officer of Embraer S.A. (Brazil). Mr.

Curado was born in 1961 and is a Brazilian and Portuguese citizen.

Lars Förberg

has been a member of ABB’s

Board of Directors since April 2017. He is co‑founder

and

managing partner of Cevian Capital. Mr.

Förberg was born in 1965 and is a Swedish and

Swiss citizen.

Jennifer Xin-Zhe Li

has been a member of ABB’s Board

of Directors since March 2018. She is

a member of the

board of directors of Flex Ltd (Singapore/U.S.) as well

as, through May 2021, of the boards of directors of Philip Morris

International Inc. (U.S.) and The Hongkong and Shanghai

Banking Corporation Limited (Hong Kong). Ms. Li is a

founder and general partner of Changcheng Investment Partners

(P.R.C.),

a private investment fund. From 2008 to 2018,

she served as chief financial officer of Baidu Inc.

(P.R.C.)

and chief executive officer of Baidu Capital (P.R.C.)

Prior to

that, Ms. Li spent 14 years with General Motors, holding

various senior finance positions, including chief financial

officer of GM China and corporate controller for

GMAC North American Operations.

Ms. Li was born in 1967 and is a

Canadian citizen.

Geraldine Matchett

has been a member of ABB’s Board

of Directors since March 2018. She is

the co-chief

executive officer (since February 2020), the chief

financial officer and a member of the managing

board of Royal DSM

N.V.

(The Netherlands).

She was previously chief financial officer of SGS Ltd

(Switzerland). Prior to joining SGS she

worked as an auditor at Deloitte Ltd (Switzerland) and

KPMG LLP (U.K.). Ms. Matchett was born in 1972 and is a

Swiss, British and French citizen.

David Meline

has been a member of ABB’s Board

of Directors since April 2016. He is the chief financial

officer of Moderna Inc. (U.S.). From 2014

through 2019, Mr. Meline was the chief

financial officer of Amgen Inc.

(U.S.). He was formerly with the 3M Company (U.S.), where

he served as chief financial officer.

Prior to joining 3M,

Mr. Meline worked for more

than 20 years for General Motors Company (U.S.). Mr.

Meline was born in 1957 and is a

U.S. and Swiss citizen.

Satish Pai

has been a member of ABB’s Board

of Directors since April 2016. He is the managing

director and a

member of the board of directors of Hindalco Industries Ltd.

(India). He joined Hindalco in 2013 after 28 years with

Schlumberger Limited (U.S.). Mr.

Pai was born in 1961 and is an Indian citizen.

As of December 31, 2020, none of the Board members

held any official functions or political posts. Further

information on ABB’s Board members

can be found by clicking on the ABB Board of Directors link

(available at

https://new.abb.com/about/corporate

-governance

Board meetings and attendance

The Board and its committees have regularly scheduled

meetings throughout the year.

These meetings are

supplemented by additional meetings (either in person

or by conference call), as necessary.

Board meetings are

convened by the Chairman or upon request by any other

board member or the CEO. Documentation covering

the various

items of the agenda for each Board meeting is sent out

in advance to each Board member in order to allow each

member

time to study the covered matters prior to the meetings.

Each board meeting has a private session without management

or others being present. Decisions made at the Board meetings

are recorded in written minutes of the meetings. Some

decisions are also taken by circular resolution.

2020 was an intensive year for the Board and its committees.

The table below shows the number of meetings

held during 2020 by the Board and its committees, their

average duration, as well as the attendance of the individual

Board members. The Board meetings shown include a strategic

retreat attended by the members of the Board and the

EC.

2020 Board and Board

Committee Meetings

Pre annual general meeting 2020

Post annual general meeting 2020

Board

FACC

GNC

Board

FACC

GNC

Meetings and attendance

Mtg.

Conf. Call

Mtg.

Conf. Call

Average duration (hours)

2.75

1.5

1.75

8.5

3.25

1.5

1.6

Number of meetings

Meetings attended:

Peter R. Voser

Jacob Wallenberg

Matti Alahuhta

Gunnar Brock

David Constable

Frederico Fleury Curado

Lars Förberg

Jennifer Xin-Zhe Li

Geraldine Matchett

David Meline

Satish Pai

Mandates of Board members outside the ABB Group

No member of the Board may hold more than ten additional

mandates of which no more than four may be in

listed companies. Certain types of mandates, such as

those in our subsidiaries, those in the same group of companies

and

those in non‑profit and charitable institutions, are not

subject to those limits. Additional details can be found in

Article 38 of ABB’s Articles of

Incorporation (available at

https://new.abb.com/about/corporate

-governance

Business relationships between ABB and its Board members

This section describes important business relationships between

ABB and its Board members, or companies

and organizations represented by them. This determination

has been made based on ABB Ltd's Related Party

Transaction Policy.

This policy is contained in the ABB Ltd Board Regulations

& Corporate Governance Guidelines

(available at

https://new.abb.com/about/corporate

-governance

IBM Corporation (IBM) is an important supplier to

ABB. IBM supplies ABB primarily with IT related

hardware, software and services. Peter Voser

is a director of IBM.

After reviewing the level of purchases from IBM, the Board

has determined that ABB’s business

relationship

with IBM is not unusual in its nature or conditions and

does not constitute a material business relationship. As a result,

the Board concluded that all members of the Board are considered

to be independent directors. This determination was

made in accordance with ABB Ltd's Related Party Transaction

Policy which was prepared based on the Swiss Code of

Best Practice for Corporate Governance and the independence criteria

set forth in the corporate governance rules of the

New York

Stock Exchange

Information and control systems of the

Board vis-à-vis the Executive Committee

Information from the Executive Committee

In accordance with the ABB Board Regulations and

Corporate Governance Guidelines (available at

https://new.abb.com/about/corporate

-governance

), the CEO reports regularly to the Board about ABB’s

overall business

and when circumstances require on any extraordinary

events that may arise. This includes:

•

Reports on financial results (including profit and loss, balance

sheet and cash flows);

•

Changes in key members of management;

•

Information that may affect the supervisory

or monitoring function of the Board (including on matters of

strategy and compliance);

and

•

Significant developments in legal matters.

At each Board meeting, Board members are briefed

by the Chairman, CEO, CFO and other EC members on

ABB’s business performance

and on material developments affecting ABB. Outside

of Board meetings, Board members

generally channel any requests for information through

the Chairman. Board members also obtain information through

offsite retreats with the Executive Committee and

visits to ABB sites. In addition, Board members obtain information

through the Board committees in which they participate

and which are also attended by relevant EC members and

management representatives from human resources, finance,

legal and the business.

Internal Audit

ABB has an Internal Audit team that provides independent

objective assurance and other services to help

ensure that ABB operates in accordance with applicable

laws as well as internal policies and procedures. Internal Audit

reports to the FACC

and to the CFO. The FACC

reviews and approves the internal audit plan, and material

changes to

the plan. Investigations of potential fraud and inappropriate

business conduct are an integral part of the internal audit

process. Depending on circumstances,

Internal Audit may act together with ABB’s

Office of Special Investigations,

which is part of ABB’s integrity

function. Internal Audit reports on a regular basis its main observations

and

recommendations to the relevant members of the EC and

to the FACC as appropriate

Risk Management

ABB has an enterprise risk management program (ERM)

in place which takes into account ABB’s

size and

complexity. ERM

provides the EC and the Board with a comprehensive and

holistic view of the risks facing the

business. ERM involves managing the acceptance of risk

to achieve the objectives of the business. The ERM process is

typically cyclical in nature, conveying the idea of continuous

refinement of the risk management approach in a dynamic

business environment. Furthermore, ABB runs a mitigation

process for the identified risks that is key to the success

this process. ERM assessments are both top down and

bottom up. They cover strategic, financial, and operational

risks,

both current and long term. Key risks identified and

managed in 2020 were those related to the COVID-19 pandemic,

well as those related to the finalization of both the

transformation of the Group and the separation of the Power

Grids

business. ERM results are reported to the FACC

and the entire Board. This information becomes

part of the overall

strategic and risk discussions by the Board to help create

value for stakeholders.

Information to the Board and the Finance, Audit and Compliance

Committee

Supervisory and control instruments vis-à-vis

the auditors

Our auditors, KPMG, attend each meeting of the

FACC and each meeting

includes a private session between

the auditors and the FACC

without the management being present. In 2020,

the FACC had 7 meetings

(either in person

or via telephone call). On at least an annual basis, the

FACC reviews and

discusses with the external auditors all

significant relationships that the auditors have with the

Company that could impair their independence. The FACC

reviews the auditor engagement letter and the audit plan including

discussion of scope, staffing, locations and

general

audit approach. The FACC

also reviews and evaluates the auditors’ judgment on

the quality and appropriateness of the

Company’s accounting

principles as applied in the financial reporting. In addition,

the FACC approves in

advance any

non-audit services to be performed by the auditors.

At least annually,

the FACC obtains and

reviews a report by the auditors that includes discussion on:

•

The Company’s internal

control procedures;

•

Material issues, if any,

raised by the most recent internal quality control review;

•

Critical accounting policies and practices of the Company;

•

All alternative accounting treatments of financial information

that were discussed between the auditors and

management as well as the related ramifications; and

•

Material communications between the auditors and

management such as any management letter or

schedule of audit differences.

Taking into account

the opinions of management the FACC

evaluates the qualifications, independence and

performance of the auditors. The FACC

reports the material elements of its supervision

of the auditors to the Board and

on an annual basis recommends to the Board the auditors

to be proposed for election at the shareholders meeting.

EXECUTIVE COMMITTEE

Composition of the Executive Committee (at December

31, 2020)

Björn Rosengren

Chief Executive Officer

Corporate Officers

Business Area Presidents

Timo Ihamuotila

Tarak Mehta

Chief Financial Officer

Electrification

Sylvia Hill

Peter Terwiesch

Chief Human Resources Officer

Industrial Automation

Maria Varsellona

Morten Wierod

General Counsel

Motion

Theodor Swedjemark

Sami Atiya

Chief Communications Officer

Robotics & Discrete Automation

Executive Committee responsibilities and organization

The Board has delegated the executive management

of ABB to the CEO. The CEO and,

under his direction, the

other members of the Executive Committee are responsible

for ABB’s overall business

and affairs and day-to-day

management. The CEO reports to the Board regularly,

and whenever extraordinary circumstances so require, on the

course of ABB’s business and

financial performance and on all organizationa

and personnel matters, transactions and

other issues material to the Group. Each member of the

Executive Committee is appointed and discharged by

the Board.

Members of the Executive Committee (at December

31, 2020):

Björn Rosengren

was appointed Chief Executive Officer and member of

the Executive Committee effective

March 2020. Before joining ABB, he was the president and

chief executive officer of Sandvik AB (Sweden)

since 2015.

Prior to that, Mr. Rosengren

was the chief executive officer of Wärtsilä Corporation

(Finland) from 2011 to 2015. He

held a variety of management roles at Atlas Copco AB (Sweden)

from 1998 to 2011. Mr.

Rosengren was born in 1959

and is a Swedish citizen.

Timo Ihamuotila

was appointed Chief Financial Officer and member of the

Executive Committee effective

April 2017. He is a member of the board of directors of

SoftwareONE Holding AG (Switzerland). From 2009 to 2016,

Mr. Ihamuotila was chief

financial officer and an executive vice president of the

Nokia Corporation (Finland). From

1999 to 2009, he held various senior roles with Nokia.

Mr. Ihamuotila was born in 1966

and is a Finnish citizen.

Sylvia Hill

was appointed Chief Human Resources Officer

and member of the Executive Committee effective

June 2019.

From 2014 until June 2019 she was ABB’s

Head of Global HR Services and HR Transformation.

From 2011

to 2014 Ms. Hill was the Head of HR for ABB’s

Discrete Automation division. During 2005 to 2010 she

was the Head

of HR and Organization Health & Safety for ABB in

France and for part of that time she was also the Head of

HR for

the Mediterranean region. From 1993 through 2005

she held various HR roles with ABB. Ms. Hill was born in 1960

and

is a German citizen.

Maria Varsellona

was appointed General Counsel and member of the Executive

Committee effective

November 2019.

She was a member of the board of directors of Nordea Bank Abp

(Finland) through May 2020. From

2014 to 2019 she was the Chief Legal Officer

of Nokia Corporation and from 2018 to 2019 she was also the

president of

Nokia Technologies.

From 2013 to 2014 she was the General Counsel of Nokia

Siemens Networks. During the period

from 2011 to 2013 Ms. Varsellona

was the Group General Counsel of Tetra

Pak and from 2009 to 2010 she was the

Group General Counsel of Sidel, both part of the Tetra

Laval Group. From 2001 to 2009 she held various senior legal

roles mainly with GE Oil & Gas. Ms. Varsellona

was born in 1970 and is an Italian citizen.

Theodor Swedjemark

was appointed Chief Communications Officer and

member of the Executive Committee

effective August 2020. He is a member

of the board of directors of the Swedish Swiss Chamber

of Commerce.

Mr. Swedjemark assumed

the role of Chief of Staff in 2017, later adding group

responsibility for government relations

and public affairs. During 2016, he managed

the Strategic Portfolio Review of the Power Grids project.

From 2006 to

2015, he held various management positions at ABB in different

functions and businesses. Mr.

Swedjemark was born in

1980 and is a Swedish citizen.

Tarak Mehta

was appointed President of the Electrification Business effective

April 2019 and has been a

member of the Executive Committee since October 2010.

He had previously been President of the Electrification

Products division since January 2016.

From October 2010 through December 2015, he was President of

the Low

Voltage

Products division. From 2007 to 2010, he was Head of ABB’s

transformers business. Between 1998 and 2006,

he held several management positions with ABB. Mr.

Mehta was born in 1966 and is a U.S. citizen.

Peter Terwiesch

was appointed President of the Industrial Automation

Business effective January 2017 and has

been a member of the Executive Committee since January

2015. He is a member of the board of directors of Metall Zug

AG (Switzerland). He was the President of the Process Automation

division from 2015 to 2016. From 2011

to 2014, Mr.

Terwiesch was Head

of ABB’s Central Europe

region. He was ABB’s Chief Technology

Officer from 2005 to 2011.

From 1994 to 2005, he held several positions with ABB. Mr.

Terwiesch was born

in 1966 and is a Swiss and German

citizen.

Morten Wierod

was appointed President of the Motion Business and member

of the Executive Committee

effective April 2019. From 2015 until April 2019

he was the Managing Director of the drives business unit in

the

Robotics and Motion division. During 2011

to 2015, Mr. Wierod

was the Managing Director of the control products

business unit in the Low Voltage

Products division. Between 1998 to 2011,

Mr. Wierod

held various management roles

with ABB. Mr. Wierod

was born in 1972 and is a Norwegian citizen.

Sami Atiya

was appointed President of the Robotics & Discrete Automation

Business effective April 2019 and

has been a member of the Executive Committee since June

2016. He is a member of the board of directors of SGS SA

(Switzerland). He had previously been President of

the Robotics and Motion division since January 2017. From

June to

December 2016 he was President of the Discrete Automation

and Motion division. Prior to joining ABB, Mr.

Atiya held

senior roles at Siemens in Germany from 1997 to 2015, including

as chief executive officer of the mobility and logistics

division in the infrastructure and cities sector from 2011.

Mr. Atiya was born in 1964

and is a German citizen.

Effective as of January 1, 2021,

Carolina Granat

has been appointed as Chief Human Resources Officer

and

member of the Executive Committee of ABB. Ms. Granat was previously

ABB’s Global Head of People Development

and prior to that she was globally responsible for Human

Resources at Sandvik’s Machining

Solutions business area.

Further information about the members of the Executive

Committee can be found by clicking on the Executive

Committee link (available at

https://new.abb.com/about/corporate

-governance

Mandates of EC members outside the ABB Group

No member of the EC may hold more than five additional

mandates of which no more than one may be in a

listed company.

Certain types of mandates, such as those in our subsidiaries, those

in the same group of companies and

those in non‑profit and charitable institutions, are not

subject to those limits. Additional details can be found in Article

38 of ABB’s Articles of Incorporation

(available at

https://new.abb.com/about/corporate

-governance

Business relationships between ABB and its EC members

This section describes important business relationships between

ABB and its EC members, or companies and

organizations represented by them. This determination

has been made based on ABB Ltd's Related Party Transaction

Policy. This policy

is contained in the ABB Ltd Board Regulations & Corporate

Governance Guidelines (available at

https://new.abb.com/about/corporate

-governance

ABB has an unsecured syndicated $2 billion, revolving

credit facility. As of December

31, 2020, Nordea Bank

Abp (Nordea) had committed to approximately $105.7

million out of the $2 billion total. In addition, ABB has regular

banking business with Nordea.

Maria Varsellona

was a director of Nordea through May 2020.

After reviewing the banking commitments of Nordea,

the Board has determined that ABB’s

business

relationship with Nordea is not unusual in its nature or

conditions and does not constitute a material business

relationship. This determination was made in accordance

with ABB Ltd's Related Party Transaction Policy

which was

prepared based on the Swiss Code of Best Practice for Corporate

Governance and the independence criteria

set forth in

the corporate governance rules of the New York

Stock Exchange.

Share capital of ABB

At December 31, 2020,

ABB’s ordinary share capital

(including treasury shares) as registered with the

Commercial Register amounted to CHF 260,177,791.68,

divided into 2,168,148,264 fully paid registered shares with

par value of CHF 0.12 per share.

ABB Ltd’s shares are listed

on the SIX Swiss Exchange, the NASDAQ OMX Stockholm

Exchange and the

New York

Stock Exchange (where its shares are traded in the form of American

depositary shares (ADS) – each ADS

representing one registered ABB share). At December 31,

2020,

ABB Ltd had a market capitalization based on

outstanding shares (total number of outstanding shares:

2,030,834,169) of approximately CHF 50 billion ($57 billion,

SEK 465 billion). The only consolidated subsidiary in the

ABB Group with listed shares is ABB India Limited,

Bangalore, India, which is listed on the BSE Ltd. (Bombay

Stock Exchange) and the National Stock Exchange of

India.

At December 31, 2020,

ABB Ltd, Switzerland, directly or indirectly owned 75 percent

of ABB India Limited,

Bangalore, India, which at that time had a market capital

ization of approximately INR 257 billion.

Stock exchange listings (at December 31, 2020)

Stock exchange

Security

Ticker symbol

ISIN code

SIX Swiss Exchange

ABB Ltd, Zurich, share

ABBN

CH0012221716

SIX Swiss Exchange

ABB Ltd, Zurich, share buyback

(second trading line)

ABBNE

CH0357679619

NASDAQ OMX Stockholm Exchange

ABB Ltd, Zurich, share

ABB

CH0012221716

New York Stock

Exchange

ABB Ltd, Zurich, ADS

ABB

US0003752047

BSE Ltd. (Bombay Stock Exchange)

ABB India Limited, Bangalore, share

ABB

(1)

INE117A01022

National Stock Exchange of India

ABB India Limited, Bangalore, share

ABB

INE117A01022

(1) also called

Scrip ID.

Share repurchases and cancellation

Under the share buyback program announced in July

2020, ABB repurchased a total of 108,829,359 shares as

per December 31, 2020,

and a total of 117,012,859 shares as per

February 15, 2021. ABB intends to ask the shareholders

at the Annual General Meeting 2021 to approve the cancellation

of 115,000,000 shares that were repurchased.

addition, ABB repurchased a total of 13,046,013 shares

as per December 31, 2020, primarily for use in connection with

employee share programs. Further information can be

found at https://www.abb.com/investorrelations

Changes to the ordinary share capital

In 2020,

ABB paid a dividend of 0.80 Swiss francs per share relating

to the year 2019. In 2019, ABB paid a

dividend of 0.80 Swiss francs per share relating to the

year 2018. In 2018, ABB paid a dividend of 0.78 Swiss francs

per

share relating to the year 2017.

There were no changes to ABB’s

ordinary share capital during 2020,

2019 and 2018.

Convertible bonds and options

ABB does not have any bonds outstanding that are

convertible into ABB shares. For information about options

on shares issued by ABB, please refer to “Note 19 - Stockholders' equity

”

to ABB’s Consolidated Financial

Statements.

Contingent share capital

At December 31, 2020,

ABB’s share capital may be

increased by an amount not to exceed CHF 24,000,000

through the issuance of up to 200,000,000 fully paid registered

shares with a par value of CHF 0.12 per share through

the exercise of conversion rights and/or warrants granted

in connection with the issuance on national or international

capital markets of newly or already issued bonds or

other financial market instruments. If this contingent share capital

were fully issued this would increase the existing share

capital by approximately 9.2 percent. The contingent share

capital has not changed during the last three years.

At December 31, 2020,

ABB’s share capital may be

increased by an amount not to exceed CHF 1,200,000

through the issuance of up to 10,000,000 fully paid registered

shares with a par value of CHF 0.12 per share through the

exercise of warrant rights granted to its shareholders.

If this contingent share capital were fully issued this would

increase the existing share capital by approximately

0.5 percent. This contingent share capital has not changed

during

the last three years. The Board may grant warrant rights

not taken up by shareholders for other purposes in the interest of

ABB.

The pre‑emptive rights of the shareholders are excluded in

connection with the issuance of convertible or

warrant-bearing bonds or other financial market instruments

or the grant of warrant rights. The then current owners

conversion rights and/or warrants will be entitled to subscribe

for new shares. The conditions of the conversion rights

and/or warrants will be determined by the Board.

The acquisition of shares through the exercise of

warrants and each subsequent transfer of the shares will be

subject to the restrictions of ABB’s

Articles of Incorporation (see “Limitations on

transferability of shares and nominee

registration” in the Shareholders section below) (available

https://new.abb.com/about/corporate

-governance

In connection with the issuance of convertible or warrant-bearing

bonds or other financial market instruments,

the Board is authorized to restrict or deny the advance subscription

rights of shareholders if such bonds or other financial

market instruments are for the purpose of financing or

refinancing the acquisition of an enterprise, parts of

an enterprise,

participations or new investments or an issuance on national

or international capital markets. If the Board denies

advance subscription rights, the convertible or warrant‑bearing

bonds or other financial market instruments will be

issued at the relevant market conditions and the new

shares will be issued pursuant to the relevant market conditions

taking into account the share price and/or other

comparable instruments having a market price. Conversion rights may

exercised during a maximum ten‑year period, and warrants

may be exercised during a maximum seven‑year period, in

each case from the date of the respective issuance. The

advance subscription rights of the shareholders may be granted

indirectly.

At December 31, 2020,

ABB’s share capital may be

increased by an amount not to exceed CHF 11,284,

656

through the issuance of up to 94,038,800 fully paid shares

with a par value of CHF 0.12 per share to employees.

If this

contingent

share capital were fully issued this would increase the existing

share capital by approximately 4.3 percent.

This contingent share capital has not changed during the

last three years. The pre‑emptive and advance subscription

rights of ABB’s shareholders

are excluded. The shares or rights to subscribe for shares

will be issued to employees

pursuant to one or more regulations to be issued by the

Board, taking into account performance, functions, level of

responsibility and profitability criteria. ABB may issue shares or

subscription rights to employees at a price lower than

that quoted on a stock exchange. The acquisition of shares within

the context of employee share ownership and each

subsequent transfer of the shares will be subject to the restrictions

of ABB’s Articles of Incorporation

(see “Limitations

on transferability of shares and nominee registration” in the

Shareholders section below).

Authorized share capital

At December 31, 2020,

ABB had an authorized share capital in the amount of up

to CHF 24,000,000 through

the issuance of up to 200,000,000 fully paid registered

shares with a par value of CHF 0.12 each, which is valid through

May 2, 2021. If the authorized share capital were fully issued,

this would increase the existing share capital by

approximately 9.2 percent. Aside from renewal at the

2019 AGM, the authorized share capital has not changed

during

the last three years. The Board is authorized to determine the date

of issue of new shares, the issue price, the type of

payment, the conditions for the exercise of pre‑emptive rights

and the beginning date for dividend entitlement. In this

regard, the Board may issue new shares by means of a firm

underwriting through a banking institution, a syndicate or

another third party with a subsequent offer

of these shares to the shareholders. The Board may permit

pre‑emptive rights

that have not been exercised by shareholders to expire

or it may place these rights and/or shares as to which pre

‑emptive

rights have been granted but not exercised at market conditions

or use them for other purposes in the interest of the

Company. Furthermore,

the Board is authorized to restrict or deny the pre‑emptive rights

of shareholders and allocate

such rights to third parties if the shares are used (1) for

the acquisition of an enterprise, parts of an enterprise, or

participations, or for new investments, or in case of

a share placement, for the financing or refinancing of such

transactions; or (2) for the purpose of broadening the shareholder

constituency in connection with a listing of shares on

domestic or foreign stock exchanges. The subscription

and the acquisition of the new shares, as well as each subsequent

transfer of the shares, will be subject to the restrictions

of ABB’s Articles of Incorporation

(available at

https://new.abb.com/about/corporate

-governance

SHAREHOLDERS

Shareholder structure

As of December 31, 2020, the total number of shareholders

directly registered with ABB Ltd was

approximately 102,000 and another 397,000 shareholders

held shares indirectly through nominees. In total as of that

date, ABB had approximately 499,000 shareholders.

Significant shareholders

Investor AB, Sweden, held 265,385,142 ABB shares as of

December 31, 2020 (refer to Investor’s year-end

2020 report available at

https://www.investorab.com/investors

-media/reports-presentations

). This holding represents

approximately 12.2 percent of ABB’s total

share capital and voting rights as registered in the Commercial

December 31, 2020.

The number of shares held by Investor AB does not include

shares held by Mr. Jacob Wallenberg,

the chairman of Investor AB and a director of ABB, in his individual

capacity.

Cevian Capital II GP Limited, Jersey,

disclosed that as of August 3, 2020,

it held 105,988,662 ABB shares.

This holding represents approximately 4.89 percent of ABB’s

total share capital and voting rights as registered in the

Commercial Register on December 31, 2020.

BlackRock Inc., U.S., disclosed that as of August 31, 2017

it, together with its direct and indirect subsidiaries,

held 72,900,737 ABB shares. This holding represents 3.36

percent of ABB’s total share capital

and voting rights as

registered in the Commercial Register on December 31,

2020.

The Capital Group Companies Inc., USA, disclosed

that as of November 4, 2020, it, together with its direct and

indirect affiliates, held 65,680,803 ABB shares. This

holding represents 3.03 percent of ABB’s

total share capital and

voting rights as registered in the Commercial Register on

December 31, 2020.

At December 31, 2020,

to the best of ABB’s knowledge,

no other shareholder held 3 percent or more of ABB’s

total share capital and voting rights as registered in the

Commercial Register on that date.

ABB Ltd has no cross shareholdings in excess of 5 percent

of capital, or voting rights with any other company.

Announcements related to disclosure notifications made

by shareholders during 2020 can be found via the

search facility on the platform of the Disclosure Office

of the SIX Swiss Exchange

: https://www.ser-

ag.com/en/resources/notifications

-market-participants/significant-shareholders.html#/

Under ABB’s Articles of Incorporation

(available at

https://new.abb.com/about/corporate

-governance

), each

registered share represents one vote. Significant shareholders do

not have different voting rights. To

our knowledge, we

are not directly or indirectly owned or controlled by any

government or by any other corporation or person.

Shareholders’ rights

Shareholders have the right to receive dividends, to

vote and to execute such other rights as granted under

Swiss law and the Articles of Incorporation (available

https://new.abb.com/about/corporate

-governance

Right to vote

ABB has one class of shares and each registered share

carries one vote at the general meeting. Voting

rights

may be exercised only after a shareholder has been

registered in the share register of ABB as a shareholder

with the right

to vote, or with Euroclear Sweden AB (Euroclear), which

maintains a subregister of the share register of ABB.

A shareholder may be represented at the Annual General

Meeting by its legal representative, by another

shareholder with the right to vote or by the independent

proxy elected by the shareholders (unabhängiger

Stimmrechtsvertreter). If the Company does not have

an independent proxy, the

Board of Directors shall appoint the

independent proxy for the next General Meeting of Shareholders.

All shares held by one shareholder may be represented

by one representative only.

For practical reasons shareholders must be registered in the

share register no later than 6 business days before

the general meeting in order to be entitled to vote. Except

for the cases described under “Limitations on transferability of

shares and nominee registration”

below, there are no

voting rights restrictions limiting ABB’s

shareholders’ rights.

Annual General Meeting/COVID-19

ABB’s top priority

is protecting the health of its shareholders and employees. Therefore,

due to the

extraordinary circumstances and in accordance with applicable

Swiss COVID-19 legislation, shareholders were not able

to attend ABB’s Annual General

Meeting 2020 in person, but could exercise their shareholder

rights via the independent

proxy only. The

Board of Directors has resolved that for ABB’s

Annual General Meeting 2021, in accordance

with

applicable Swiss COVID-19 legislation, the same procedures

shall apply.

Shareholders’ dividend rights

The unconsolidated statutory financial statements of ABB Ltd

are prepared in accordance with Swiss law.

Based on these financial statements, dividends may be paid

only if ABB Ltd has sufficient distributable profits

from

previous years or sufficient free reserves to allow

the distribution of a dividend. Swiss law requires that ABB Ltd

retain

at least 5 percent

of its annual net profits as legal reserves until these reserves amount

to at least 20 percent of ABB

Ltd’s share capital. Any

net profits remaining in excess of those reserves are at

the disposal of the shareholders’

meeting.

Under Swiss law, ABB Ltd

may only pay out a dividend if it has been proposed by

a shareholder or the Board

of Directors and approved at a general meeting of shareholders,

and the auditors confirm that the dividend conforms to

statutory law and ABB’s Articles of

Incorporation. In practice, the shareholders’ meeting usually approves

dividends as

proposed by the Board of Directors.

Dividends are usually due and payable no earlier than

2 trading days after the shareholders’ resolution and the

ex‑date for dividends is normally 2 trading days after the

shareholders’ resolution approving the dividend. Dividends are

paid out to the holders that are registered on the record

date. Euroclear administers the payment of those shares

registered with it. Under Swiss law,

dividends not collected within 5 years after the due date accrue

to ABB Ltd and are

allocated to its other reserves. As ABB Ltd pays cash dividends,

if any, in Swiss francs (subject

to the exception for

certain shareholders in Sweden described below), exchange

rate fluctuations will affect the U.S. dollar

amounts received

by holders of ADSs upon conversion of those cash dividends by

Citibank, N.A., the depositary,

in accordance with the

Amended and Restated Deposit Agreement dated

May 7, 2001.

For shareholders who are residents of Sweden, ABB has

established a dividend access facility (for up to

600,004,716 shares). With respect

to any annual dividend payment for which this facility is made

available, shareholders

who register with Euroclear may elect to receive

the dividend from ABB Norden Holding AB in Swedish krona (in

amount equivalent to the dividend paid in Swiss francs) without

deduction of Swiss withholding tax. For further

information on the dividend access facility,

see ABB’s Articles of Incorporation.

Limitations on transferability of shares and

nominee registration

ABB may decline a registration with voting rights

if a shareholder does not

declare that it has acquired the

shares in its own name and for its own account. If the

shareholder refuses to make such declaration, it will be registered

as a shareholder without voting rights. A person failing to

expressly declare in its registration/application that it holds

the shares for its own account (a nominee), will be entered

in the share register with voting rights, provided that such

nominee has entered into an agreement with ABB concerning

its status, and further provided that the nominee is subject

to recognized bank or financial market supervision.

In special cases the Board may grant exemptions. There were

exemptions granted in 2020.

The limitation on the transferability of shares may be removed by

an amendment of ABB’s

Articles of Incorporation by a shareholders’ resolution

requiring two-thirds of the votes represented at the meeting.

No restriction on trading of shares

No restrictions are imposed on the transferability of ABB shares.

The registration of shareholders in the ABB

Share register, Euroclear and the ADS

transferability of ABB shares or ADSs.

Registered ABB shareholders or ADR holders may therefore purchase

or sell their ABB shares or ADRs at any time,

including before a General Meeting regardless of the

record date. The record date serves

only to determine the right to

vote at a General Meeting.

Duty to make a public tender offer

ABB’s Articles of Incorporation

do not contain any provisions raising the threshold (opting up) or

waiving the

duty (opting out) to make a public tender offer

pursuant to Article 135 of the Swiss Act on Financial Market

Infrastructures and Market Conduct in Securities and Derivatives

Trading.

OTHER GOVERNANCE INFORMATION

ABB Group organizational structure

ABB Ltd, Switzerland is the ultimate parent company

of the ABB Group. It is the sole shareholder of ABB

Asea Brown Boveri Ltd which directly or indirectly

owns the other companies in the ABB Group. The table

in the

appendix to this Corporate governance report sets forth,

as of December 31, 2020, the name, place of incorporation,

ownership interest and share capital of the significant direct

and indirect subsidiaries of ABB Ltd. In addition, ABB Ltd

also owns 19.9 percent of Hitachi ABB Power Grids Ltd. ABB’s

operational group structure is described in the

“Financial review of ABB Group” section of this Annual

Report under “Operating and financial review and prospects –

Organizational structure”.

Management contracts

There are no management contracts between ABB and companies

or natural persons not belonging to the ABB

Group.

Change of control clauses

Board members, Executive Committee members, and other

members of senior management do not receive any

special benefits in the event of a change of control. However,

the conditional grants under the Long Term

Incentive Plan

(LTIP)

and the Management Incentive Plan (MIP) may be subject to

accelerated vesting in the event of a change of

control. From 2021, the rules for the LTIP

will be amended to no longer provide for accelerated vesting

upon a change

in control. This amendment will apply to future grants made

under the LTIP.

No further grants are made under the MIP.

Employee participation programs

In order to align its employees’ interests with the business goals

and financial results of the Company,

ABB

operates a number of incentive plans, linked to ABB’s

shares, such as the Employee Share Acquisition Plan, the

Management Incentive Plan and the Long Term

Incentive Plan. For a more detailed description of these incentive

plans,

please refer to “Note 18 - Share-based payment arrangements”

to ABB’s Consolidated Financial

Statements.

Governance differences from NYSE Standards

According to the New York

Stock Exchange’s corporate

governance standards (the Standards), ABB is

required to disclose significant ways in which its corporate

governance practices differ from the Standards.

ABB has

reviewed the Standards and concluded that its corporate

governance practices are generally consistent with the

Standards, with the following

significant exceptions:

•

Swiss law requires that the external auditors be elected

by the shareholders at the Annual General Meeting

rather than by the audit committee or the board of directors.

•

The Standards require that all equity compensation

plans and material revisions thereto be approved by the

shareholders. Consistent with Swiss law such matters are

decided by our Board. However, the

shareholders

decide about the creation of new share capital that can

be used in connection with equity compensation

plans.

•

Swiss law requires

that the members of the compensation committee are elected

by the shareholders rather

than appointed by our Board.

•

Swiss law requires shareholders to approve the maximum

aggregate Board compensation and the

maximum aggregate Executive Committee compensation.

COMPENSATION

Compensation governance

Shareholder engagement

ABB’s Articles of Incorporation,

approved by its shareholders, contain provisions on compensation

which

govern and outline the principles of compensation relating

to our Board of Directors (Board) and Executive Committee

(EC). They can be found on ABB’s Corporate

governance Web site new.abb.com/about/corporate

-governance and are

summarized below:

•

Compensation Committee

(Articles 28 to 31): The Compensation Committee (CC) is composed

of a

minimum of three members of the Board of Directors who

are elected individually by the shareholders at

the Annual General Meeting (AGM) for a period

of one year. The CC supports

the Board in establishing

and reviewing the compensation strategy,

principles and programs, in preparing the proposals to the AGM

on compensation matters and in determining the compensation

of the Board and of the EC. The

responsibilities of the CC are defined in more detail in

the Board Regulations and Corporate Governance

guidelines, which are available on ABB’s

Corporate governance Web

site.

•

Compensation principles

(Article 33): Compensation of the members of the

Board consists of fixed

compensation only,

which is delivered in cash and shares (with an option to elect for

shares only).

Compensation of the members of the EC consists of fixed

and variable compensation. Variable

compensation may comprise short-term and long-term

elements. Compensation may be paid in cash, shares

or other benefits.

•

“Say-on-pay” vote

(Article 34): Shareholders approve the maximum aggregate

amount of compensation

of the Board for the following Board term and of the EC

for the following financial year.

•

Supplementary amount for new EC members

(Article 35): If the maximum approved aggregate

compensation amount is not sufficient to

also cover the compensation of newly promoted/hired EC

members, up to 30 percent of the last maximum approved

aggregate amount shall be available as a

supplementary amount to cover the compensation of such

new EC members.

•

Loans

(Article 37): Loans may not be granted to members

of the Board or of the EC.

Shareholders also have a consultative vote on the prior

year’s Compensation Report at the AGM. The

Compensation Policy sections of this Report describe

the compensation policies and programs as well as the governance

framework related to the compensation of the Board

and EC. The Compensation Implementation sections of this Report

provide details of the compensation paid to the members

of the Board and of the EC in the prior calendar year.

The Compensation Report is prepared in accordance with

the Ordinance against Excessive Remuneration in

Listed Stock Corporations (Ordinance), the Directive

on Information

relating to Corporate Governance of the SIX

Exchange Regulation, the rules of the stock markets of

Sweden and the United States where ABB’s shares

are also

listed, and the principles of the Swiss Code of Best Practice for

Corporate Governance of economiesuisse.

Authority levels in compensation matters

The CC acts in an advisory capacity while the Board

retains the decision authority on compensation matters,

except for the maximum aggregate compensation amounts

of the Board and of the EC, which are subject to the approval

of shareholders at the AGM. The authority levels of

the different bodies on compensation matters are detailed

Compensation Exhibit 1.

Compensation Exhibit 1: Authority levels in compensation

matters

CEO

Board

AGM

Compensation policy including incentive plans

●

Maximum aggregate compensation amount EC members

●

CEO compensation

●

Individual compensation EC members

●

Performance target setting and assessment CEO

●

Performance target setting and assessment EC members

●

Shareholding requirements CEO and EC members

●

Maximum aggregate compensation amount Board

members

●

Individual compensation Board members

●

Compensation Report

●

Consultative vote

●

Proposal

●

Recommendation

●

Approval

Activities of the CC in 2020

The CC meets as often as business requires but at least four

times a year. In 2020, the CC held

seven meetings

and performed the activities described in Compensation Exhibit

2. Details on meeting attendance of the individual

members are provided in the section titled “Board of Directors

– Meetings and attendance” of the Corporate Governance

Report.

Compensation Exhibit 2: CC activities during 2020

Board Compensation

Review of approach to benchmarking

Review of benchmark data

EC Compensation

Review of approach to benchmarking

Review of benchmark data and recommendations on

individual compensation for EC members

Review of the share ownership of EC members

Review and approval of compensation for new and departing EC

members

Performance – relating to past performance

cycle

Assessment of short-term incentive awards for 2019

Assessment of achievement of performance targets

for Long-Term

Incentive Plan (LTIP)

awards

vesting in 2020

Performance – relating to forthcoming performance

cycle

Setting of preliminary Annual Incentive Plan (AIP)

targets for 2021

Setting of performance targets for LTIP

awards granted in 2020

Review impact of Power Grids (PG) joint venture

on LTIP

targets

Updates on achievement against performance targets

for 2020 AIP and unvested LTIP

awards

Compliance

Review of the Swiss gender pay regulatory and disclosure

requirements

Review of the LTIP

rules

Review of feedback from Investor Engagement meetings

Regulatory and market updates

Review of the Compensation Report for publication

Preparation of maximum aggregate compensation for Board

to be submitted for AGM vote

Preparation of maximum aggregate compensation for EC to

be submitted for AGM vote

100

The Chairman of the CC reports to the full Board

after each CC meeting. The minutes of the meetings are

available to the members of the Board.

The CC retains independent, external advisors for compensation

matters. PricewaterhouseCoopers (PwC) are

currently mandated to provide services related to executive

compensation matters. Apart from its CC advisory role, PwC

also provides human resources, tax and advisory services

to ABB.

The CEO, the Chief Human Resources Officer

(CHRO) and the Head of Performance and Reward also attend

all or part of the CC meetings in an advisory capacity.

The Chairman of the CC may decide to invite other executives

upon consultation with the CEO, as appropriate. Executives

do not attend the meetings or the parts of the meetings

which their own compensation and/or performance are

being discussed.

Board compensation policy

Overview

The compensation system for the members of the Board is designed

to attract and retain experienced people on

the Board. Compensation of Board members takes into

account the responsibilities, time and effort required to fulfill

their roles on the Board and its committees. A fixed fee

is payable for the Chairman, Vice

-Chairman and members of the

Board, and additional fees are payable for chairing or membership

of a Board Committee,

except for the Chairman and

Vice-Chairman.

Board members do not receive variable compensation

or pension benefits, underscoring their focus on

corporate strategy,

supervision and governance. In accordance with Swiss law,

Board members may not receive ‘golden

parachutes’ or other special benefits in the event of a

change of control. Board members are paid for their service

over a

12-month period that starts with their election at the AGM.

Payment of fees is made in semi-annual installments

arrears.

In order to further align the interests of the Board members

with those of ABB’s shareholders,

half of their fee

must be paid in ABB shares, although Board members

may choose to receive all of their fee in shares. The number

shares delivered is calculated prior to each semi-annual

payment by dividing the monetary amount to which the Board

members are entitled by the average closing price of the

ABB share over a predefined 30-day period. The shares are

subject to a three-year restriction period during which they

cannot be sold, transferred or pledged. Any restricted shares

are unblocked when the Board member leaves the Board.

Implementation of Board compensation policy

From time to time, the levels and mix of compensation

of Board members are compared against the

compensation of non-executive board members from

a cross section of publicly traded companies in Switzerland

that are

part of the Swiss Market Index (i.e. Adecco, Alcon, Geberit, Givaudan,

LafargeHolcim, Lonza, Richemont, SGS, Sika,

Swisscom, Swiss Life, Zurich Insurance). Such a

review was undertaken in 2020, and there was no adjustment

made to

Board fees for the term of office from the 2020

AGM to the 2021 AGM, as set out in Compensation Exhibit 3 below.

101

Compensation Exhibit 3: Current Board

fees

Board term fee (CHF)

(1)

Chairman of the Board

(2)

1,200,000

Vice-Chairman of

the Board

(2)

450,000

Member of the Board

290,000

Additional committee fees:

Chairman of FACC

(3)

110,000

Chairman of CC or GNC

(3)

60,000

Member of FACC

(3)

40,000

Member of CC or GNC

(3)

30,000

(1)

The Chairman and the Vice-Chairman

do not receive any additional committee fees for their roles on the GNC.

(2)

CC: Compensation Committee,

FACC: Finance, Audit and Compliance

Committee,

GNC: Governance and Nomination Committee.

(3)

These fees do not reflect the 10 percent COVID-19 related voluntary

donation in fees for the first half of the

2020-2021 Board term.

The compensation paid to the Board members for

the calendar year 2020 and for the term of office from

the

2020 AGM to the 2021 AGM are disclosed in Compensation

Exhibits 24 and 25, respectively,

in the section

“Compensation and share ownership tables”.

At the 2020 AGM, the shareholders approved a maximum

aggregate compensation amount of

CHF 4.70 million for the 2020-2021 Board term, the

same as was approved for the previous Board term. The

compensation actually paid was five percent lower than

the prior term due to the voluntary donation of 10 percent of

fees for a six-month period during 2020 to fight the impacts

of the COVID-19 crisis.

The Board compensation is

therefore within the amount approved by the shareholders.

See Compensation Exhibit 4 below and Compensation

Exhibit 25 in the section “Compensation and share

ownership tables”.

Compensation Exhibit 4: Board compensation

(in CHF)

Board term

Board of Directors

2020–2021

2019–2020

Number of members

Total compensation

4,436,500

4,670,000

Maximum aggregate compensation amount approved at

AGM

4,700,000

Shareholdings

of Board members

The members of the Board collectively owned less than

one percent of ABB’s total shares outstanding

December 31, 2020.

Compensation Exhibit 26 in the section “Compensation

and share ownership tables” shows the number of ABB

shares held by each Board member at December 31, 2020

and 2019. Except as described in this Compensation Exhibit,

no member of the Board and no person closely linked

to a member of the Board held any shares of ABB or options in

ABB shares.

In 2020, ABB did not pay any fees or compensation

to the members of the Board for services rendered to ABB

other than those disclosed in this report.

102

Compensation of former Board members

In 2020, no payment was made to any former Board

member.

Executive Committee compensation policy

Overview

ABB’s compensation

system reflects its commitment to attract, motivate and retain

people with the talent

necessary to strengthen ABB’s

position as a leading global technology company,

connecting software to its

electrification, robotics, automation and motion portfolio

to drive performance to new levels.

The compensation system is designed to provide competitive

compensation and to encourage

executives to

deliver outstanding results and create sustainable shareholder

value without taking excessive risks. The compensation

system balances:

•

fixed and variable compensation;

•

short-term and long-term incentives;

•

the recognition of Group,

business and individual performance.

Compensation structure ‒ overview

The structure for EC members consists of an annual base

salary, a short-term

incentive plan (AIP) based on

annual performance targets, a long-term incentive

plan (LTIP)

based on three-year performance targets, and

benefits.

This structure is linked to our strategy and, as illustrated

in Compensation Exhibits 5 and 6, a significant

portion of total compensation depends on variable pay

components which require the achievement of challenging

performance targets.

103

Compensation Exhibit 5: Structure of

EC compensation for 2021

Compensation structure

Fixed compensation -

annual base salary

and benefits

Short-term incentive

(AIP)

Long-term incentive

(LTIP)

Wealth at Risk/

Share Ownership

Purpose and link to strategy

Compensates

EC members

for the role

Rewards annual

company and individual

performance. Drives

annual strategy

implementation

Encourages creation of

long-term, sustainable

value for shareholders,

and delivery of

long-term strategic goals

Aligns individual’s

personal wealth at risk

directly to the ABB

share price

Operation

Cash salary, benefits

in kind, and pension

contribution

Annual awards, payable

in cash after

a 1-year

performance period

Annual awards in shares

which may vest after 3

years subject to

performance conditions

Individuals required

to hold ABB shares

Opportunity level (as % of

annual base salary)

Based on scope of

responsibilities,

individual experience

and skillset

Target: 100%

Maximum: 150%

CEO

Target at grant: 150%

Vesting: 0-300%

Target at grant: 100%

Vesting: 0-200%

CEO wealth at risk:

500% (net)

EC wealth at risk:

400% (net)

Time period

Delivered in year

1 year

3 years

Total EC tenure

Performance measures

Changes to annual base

salary takes into account

the Executive’s

performance in the

preceding year and

potential for the future

All: ABB Op EBITA

margin (%)

(20-25%);

Business measures,

which may include, for

example:

ROCE, Business Area

Op EBITA margin (%),

productivity,

OFCF (55-60%);

All: individual

objectives (20%);

All: ESG boundary

condition for awards

Relative TSR

(1)

(50%)

Average EPS

(2)

(50%)

Direct link to

ABB share price

(1)

Total Shareholder

Return.

(2)

Earnings Per

Share.

104

Compensation Exhibit 6: Compensation components under

various scenarios

Competitive positioning of compensation

The Board considers competitive market data when setting

the compensation policy for the EC. It is also one of

several factors in positioning the target compensation

for individual EC members which include:

•

market value of the role (external benchmarking);

•

individual profile of the incumbent in terms of experience

and skills;

•

individual performance and potential;

•

affordability for the Company.

The CC conducted a comprehensive review of its approach

to competitive benchmarking, in the light of the

new operating model, the ‘ABB Way

’, the consequential change in responsibilities on

the EC and the divestment of the

Power Grids (PG) business.

105

As a result of this review,

the number of competitive benchmarking peer groups has been

reduced from four to

three – a Global Industry peer group,

a Pan-European Market peer group and a Swiss Market peer group.

In all cases,

these peer groups have been designed to match the size,

scope and complexity of ABB. Companies from the

financial

services sector have been removed. The U.S. peer group

was considered to be less relevant and was therefore removed.

The Global Industry peer group has been redesigned to

a specifically tailored group of 16 peers/competitors

matching the size, scope and complexity of ABB, selected from

ABB’s competitive landscape.

It now includes

companies in Asia, has a reduced number of companies in

North America and excludes companies from the

financial

services

sector.

The Pan-European Market peer group has been streamlined

from its original 400 companies to a robust panel of

50 cross-industry organizations matching the

size, scope and complexity of ABB, excluding companies from

the

financial services sector.

The Swiss Market peer group, included to reflect ABB’s

headquarters

and listing location in Switzerland,

consists of a panel of 16 cross-industry companies matching

the size, scope

and complexity of ABB, and excludes

companies from the financial services

sector.

The use of these peer groups will depend on the nature

of the role and the source of relevance. For example, a

stronger emphasis will be placed on the Global Industry

peer group for operational roles and in compensation design,

and on the Pan-European Market peer group for functional

roles. In all cases, the other two peer groups will be used to

stress test the findings of the primary peer group (see the

summary in Compensation Exhibit 7 below).

It is the intention to position target compensation

for individual EC members between median and upper

quartile of the relevant peer group(s) considering the other

factors referenced above (e.g. skills, experience,

performance, potential).

Compensation Exhibit 7: Compensation benchmarking

peer groups

REFERENCE

COMPOSITION

RATIONALE

Global Industry

A tailored group of 16 global

industry peer companies

(1)

matching the scale and complexity

of ABB

Focus for operational roles and

benchmarking compensation

design

Pan-European Market

A panel of 50 cross-industry

European companies

(2)

, matching

the scale and complexity of ABB

Focus for functional roles;

continuity and stability of data

points

Swiss Market

A panel of 16 SMI and SMIM

companies

(3)

, matching the scale

and complexity of ABB

Swiss listing and location of

headquarters

(1)

AB SKF, Alstom, Airbus, Atlas

Copco, Denso, Eaton, Emerson Electric, Honeywell, Mitsubishi Electric,

Mitsubishi Heavy Industries, Schneider

Electric, Schindler, Siemens, Thermo Fisher Scientific,

Toshiba and Traton

(2) AB InBev, Adidas, Air Liquide, Associated

British Foods, AstraZeneca, BAE Systems, Bayer,

Bouygues, British American Tobacco,

Compass Group,

Continental, CRH, Danone, Endesa, EssilorLuxottica, Fresenius,

Fresenius Medical Care, GlaxoSmithKline, HeidelbergCement,

Heineken, Henkel,

Hennes & Mauritz, Iberdrola, Imperial Brands, Industria de Diseno

Textil, Jeronimo Martins SGPS, Kuehne

& Nagel, LafargeHolcim, Linde, L’Oreal,

Michelin, National Grid, Naturgy Energy Group, Nokia,

Novartis, Novo Nordisk, OMV,

Philips, Rio Tinto, Safran, Saint Gobain, Sanofi, SAP,

Schneider Electric, Telefonaktiebolaget

LM Ericsson, Thales, Umicore, Veolia

Environment, Vinci, Vodafone

(3)

SMI: Swiss Market Index; SMIM: Swiss Market Index MID; Companies

include: Adecco,

Geberit, Givaudan, Glencore, Kuehne & Nagel, Lafarge

Holcim, Nestle, Novartis, Richemont, Roche, Schindler,

SGS, Sika, STMicroelectronics, Swatch, and Swisscom.

ABB is typically at the median of key comparator indicators

(market capitalization, revenues, number of

employees) against the Global Industry and Pan-European

Market peer groups, and at the upper quartile of the Swiss

Market peer group. See Compensation Exhibit 8 below.

106

Compensation Exhibit 8: Comparison of ABB to compensation

benchmarking peer groups

(1)

Market

capitalization

(2)(3)(4)

Revenues

(2)(4)(5)

Number of

employees

(5)(6)

ABB

45.6

27.0

110,000

Global Industry

Upper Quartile

54.6

37.8

137,828

Median

31.1

29.2

94,500

Lower Quartile

12.4

16.5

72,827

Pan-European Market

Upper Quartile

68.9

38.4

126,994

Median

37.4

26.9

95,331

Lower Quartile

18.2

22.2

61,450

Swiss Market

Upper Quartile

31.6

31.7

93,930

Median

25.9

13.4

55,930

Lower Quartile

18.0

8.2

31,785

(1) Data

sources for

market capitalization,

revenues and

number of employees

are Thomson

Reuters or

Annual Reports.

(2) Market

capitalization

and revenues

are in CHF

millions.

(3) Market

capitalization

is averaged

over a period

of three months

(May 3, 2020

until August

3, 2020).

(4) Amounts

have been

translated

to CHF using

the one-year

average rate

from July 1,

2019 until

June 30, 2020.

(5) Revenues

and number

of employees

as per last

financial year

prior to October

2020.

(6)

Number of

employees

in full-time

equivalent

(FTE) unless

FTE information

was not available,

then in total

number of employees.

Compensation elements

Fixed compensation – annual base salary and benefits

Purpose and link to strategy

•

Compensates the EC members for the role.

Operation

•

Fixed annual base salary and benefits.

•

Benefits consist mainly of retirement, insurance and

healthcare plans that are designed to provide a

reasonable level of support for the employees and their dependents

in case of retirement, disability or

death. Benefit plans are in line with the local competitive and

legal environment and are, at a minimum, in

accordance with the legal requirements of the respective

country.

Opportunity level

•

Annual base salary based on the scope of responsibilities,

individual experience and skill set.

•

The monetary value of benefits is disclosed in Compensation

Exhibit 27: EC compensation in 2020.

107

Performance measures

•

When considering changes in annual base salary,

the executive’s performance

during the preceding year

against individual objectives as well as potential for the

future are taken into account.

Annual Incentive Plan (AIP)

Purpose and link to strategy

•

The AIP is designed to reward EC members for the Group’s

results, the results of their business or function

and their individual performance over a time horizon

of one year.

Operation

•

Annual cash award based on performance assessment over

the given year.

Opportunity levels

•

100 percent of annual base salary at target,

with a maximum opportunity of 150 percent.

Performance measures

•

The AIP structure was revised for 2020 in the light of

feedback from shareholders and other stakeholders,

the new ABB operating model, and to further increase

the focus on operational delivery and underpin our

performance culture.

•

It is designed to create focus on key priorities, with

a maximum of five measures.

•

In 2021, all EC members will have a common measure

with a minimum 20 percent weighting.

•

Up to three measures will be linked to specific Business Area

needs, which have a total 60 percent

weighting.

•

All EC members will also have personal measures for

the remaining total 20 percent weighting. This

individual component is informed by up to three objectives

which may include a combination of

quantitative and qualitative goals.

One of these objectives will include a common safety measure

– the percentage improvement

in the Lost Time Incident Frequency

Rate (LTIFR),

underpinned by at least two sustainability

observation tours.

The CC has a discretionary authority to adjust the AIP

results based on safety performance,

including fatalities.

The final outcome against this measure will be a discretionary

judgment based on the

combined performance against all objectives.

•

For each performance measure, a target will

be set corresponding to the expected level of performance

that

will generate a target (100 percent) award.

Further, a minimum level of performance,

below which there is

no award (threshold) and a maximum level of performance,

above which the award is capped at

150 percent of the target (cap), will also be

defined. For qualitative Group and business measures, the

award percentage achievements between threshold,

target and the cap will be determined by linear

interpolations from target to threshold and target

to cap.

108

•

Outcomes may be subject to appropriate discretionary upward

or downward adjustments for non-

operational items and other adjustment principles agreed

with the Board.

For example, in

2020, this included caps on outcomes for Corporate Officers

to ensure there

were not

unintended windfalls due to the impact of the COVID-19 crisis on

cost or other

qualitative measures.

•

From 2021, progress against defined ESG target(s)

will be a ‘boundary condition’ for making AIP awards.

Under this approach, the Board will, each year,

agree specific ESG target(s) and review whethe

the

Company had made sufficient progress at the

end of the year to justify making the indicated AIP award.

If,

in the opinion of the Board, insufficient progress

has been made, the AIP award may be reduced on a

discretionary basis. For 2021, the ‘boundary condition’ will be

the setting of plans in each ABB Division to

mitigate for ABB scope 1 and 2 emissions.

•

An illustration of the measures to be applied to the CEO for

2021 is set out in Compensation Exhibit 9.

Compensation Exhibit 9: 2021 Annual Incentive Plan

for CEO – Measures and Weightings

Measure

Weighting

(total 100%)

Description

Link to Strategy

Group

Operational

EBITA %

(Common

measure)

25.00%

Operational EBITA margin is Operational EBITA (as defined in

“Note 23 – Operating segment and geographic data” to the

Consolidated Financial Statements) as a percentage of Operational

revenues, which is total revenues adjusted for foreign

exchange/commodity timing differences in total revenues

Increased weighting on

Group Operational EBITA

to focus on strategic

execution and improving

margin, resulting in a

strong bottom line

Group ROCE %

25.00%

ROCE is calculated as Operational EBITA after tax divided by the

average of the period’s opening and closing Capital employed,

adjusted to reflect impacts from significant

acquisitions/divestments occurring during the same period. Capital

employed is calculated as the sum of Adjusted total fixed assets

and Net working capital

ROCE reflects the strong

focus on delivering high

return on capital employed

in both business operations

and corporate portfolio

management

Group

Productivity

10.00%

Calculation is based on the 12-month rolling revenues over the

average number of total workforce in the last three months.

Productivity growth is the change of productivity over the same

period a year earlier, represented in percentage change

An increase in productivity

will lead to an

improvement in margin and

drive overall performance

Group FCF

(Free cash flow)

20.00%

Free cash flow is calculated as net cash provided by operating

activities adjusted for: (i) purchases of property, plant and

equipment and intangible assets, and (ii) proceeds from sales of

property, plant and equipment

Operating cash flow has

been replaced by free cash

flow to better focus on cash

available to return to

shareholders

Individual

Measure

20.00%

Linked to a maximum of three KPIs, which will include safety

targets related to the Lost Time Incident Frequency Rate (LTIFR).

LTIFR is seen as a clear indicator of the effectiveness of incident

prevention programs in ABB

Reflecting importance of

safety agenda in keeping it

with the sustainability

strategy and commitment to

achieve excellence in

health, safety and the

environment at ABB

ESG Boundary

Condition for

awards

Setting of plans in each ABB Division to mitigate for ABB scope 1

and 2 emissions

Aligned to ABBs

sustainability strategy and

associated targets

Long-term incentive Plan (LTIP)

Purpose and link to strategy

•

Aimed at driving long-term shareholder value creation

in a sustainable manner. It rewards

the achievement

of predefined performance goals over a three-year

period.

109

Operation

•

Annual Conditional Grant.

•

Target

LTIP

grant values are defined as a percentage of annual base salary (see

Compensation Exhibit 10

below).

Compensation Exhibit 10: Target

LTIP grant value (% of annual base salary)

EPS measure

TSR measure

Total

CEO

75%

150%

(1)

40-50%

80-100%

(1) The target grant value for the Chief Communications Officer

(CCO) is set at 80 percent of annual base salary.

•

The total value of the grant size for EC members as a pool

may be increased or decreased by the Board by

up to 12.5 percent. This does not apply to the CEO.

•

The number of shares to be granted is determined by

dividing the grant value by the average share price

over the period 20 trading days prior,

and 20 trading days after, the date

of publication of ABB’s full year

financial results. Settlement of the LTIP

is three years after grant, subject to achievement of performanc

conditions, defined prior to grant.

•

The actual settlement value of awards will vary between

zero and 200 percent of the grant value according

to achievement against two equally weighted performance

measures, one tied to ABB’s EPS and

one to

ABB’s TSR (see performance

measures section below).

•

Default settlement of the final LTIP

award is 100 percent in shares, with an automatic sell-to-cover

place for employees who are subject to withholding taxes.

•

LTIP

shares are subject to malus and clawback rules, which

include illegal activities and any financial

misstatement that has a material impact on any Group

company.

This means that the Board of Directors

may decide not to pay any unpaid or unvested incentive

compensation (malus), or may seek to recover

incentive compensation that has been paid in the past (claw

back).

•

The CC also has the ability to suspend the payment

of awards if it is likely that the Board determines that

the malus or clawback provisions may potentially apply

(e.g. if the employee is subject to an external

investigation), in line with leading market practice.

•

For awards from 2021, the LTIP

rules will be amended to remove the automatic accelerated

vesting of

awards in the event of a change of control.

Performance measures

TSR

•

Achievement against this measure is determined by ABB’s

relative TSR performance against a defined

peer group.

•

The constituents of the peer group and the appropriate

threshold (zero), target (100 percent) and maximum

(200 percent) award points are reviewed by the CC on

an annual basis.

•

The TSR calculations are made for the reference period

beginning in the year of the conditional grant of

the shares and ending three years later.

The evaluation is performed by an independent third party.

110

EPS

•

Achievement against this measure is determined by ABB’s

average EPS over a three-year period.

•

The average EPS result is calculated from the sum of EPS

for each of the three relevant years, divided by

three.

•

EPS is defined as ‘Diluted earnings per share attributable

to ABB shareholders, calculated using Income

from continuing operations, net of tax, unless the Board

elects to calculate using Net income for a

particular year’.

•

Appropriate threshold (zero), target (100 percent)

and maximum (200 percent) award points are reviewed

by the CC on an annual basis.

•

Performance target points are set using an ‘outside-in’

view, taking into account

the growth expectations,

risk profile, investment levels and profitability levels that

are typical for the industry.

•

This ‘outside-in’ approach is provided by external advisors

and assumes that investors expect a risk-

adjusted return on their investment, which is based on

market value (and not on book value) and translates

such expected returns over a three-year period into

EPS targets.

•

Adjustments to the outcome of the EPS may be considered

for items which are not part or the result of the

normal course of business operation and/or which were

not considered, either by way of inclusion or

exclusion, for the target setting of a specific

LTIP

launch. Only the net impact of such adjustments over the

vesting period of the respective LTIP

grant will be considered.

Total

wealth at risk

Purpose and link to strategy

•

To align EC members’

interests with those of shareholders in order to maintain focus on

the long-term

success of the Company.

•

Wealth at risk

is broadly defined as two components – namely personal

share ownership and unvested

shares arising from the Company’s

share grants (e.g. LTIP

grants).

Share ownership program

•

EC members are required to retain all shares vested from

the Company’s LTIP

and any other share-based

compensation until his or her share ownership requirement

is met. In circumstances where there is a

withholding tax obligation, the number of shares received

will be considered to be the number of shares

vested minus the shares sold under the default sell-to-cover

facility.

•

The share ownership requirement is equivalent to

a multiple of the EC member’s annual base salary,

net of

tax (see Compensation Exhibit 11).

•

These shareholding requirements are significantly above

market practice and result in a wealth at risk for

each EC member which is aligned with shareholder

interests.

Compensation Exhibit 11:

Share ownership requirement

CEO

5 × annual base salary,

net of tax

Other EC members

4 × annual base salary,

net of tax

111

•

Only vested shares owned by an EC member and

the member’s spouse are included in the share ownership

calculation. Vested

but unexercised and unvested stock options under the MIP

are not considered for this

purpose.

•

The CC reviews the status of EC share ownership on an

annual basis. It also reviews the required

shareholding amounts annually,

based on salary and expected share price developments.

Notice period, severance provisions and

non-competition clauses

Operation

•

Employment contracts for EC members include a notice

period of 12 months, during which they are

entitled to their annual base salary,

benefits and short-term incentive. In accordance with Swiss law and

ABB’s Articles of Incorporation,

the contracts for the EC members do not allow for any severance

payment.

•

Non-compete agreements have been entered into

with the CEO and all EC members for a period of 12

months after their employment. Compensation for such

agreements, if any, may

not exceed the EC

member’s last total annual compensation (annual

base salary, short

-term incentive and benefits).

Implementation of executive compensation policy

Overview

EC members received total compensation of CHF 35.4

million in 2020 compared with CHF 51.4 million in

2019, as summarized in Compensation Exhibit 12 below and

presented in detail in Compensation Exhibits 27 and

28.

This 31 percent decrease in total compensation was

influenced by the reduction in the number of active EC members,

lower payments to former EC members, EC members voluntarily

donating 10 percent of their salary to fight the impacts

of the COVID-19 pandemic for a six-month period during

2020, and much lower short-term incentive awards due

to the

impact of COVID-19.

Compensation Exhibit 12: Total

compensation of EC members (in CHF millions)

(1)

2020

2019

Base salaries

8.4

12.1

Pension benefits

4.5

5.5

Other benefits

5.9

6.9

Total

fixed compensation

18.8

24.5

Short-term incentives

6.8

12.7

Long-term incentives (fair value at grant)

6.5

12.6

Replacement share grants

3.3

1.6

Total

variable compensation

16.6

26.9

Total

compensation

35.4

51.4

(1) Has been

adjusted for roundin

where appropriate

For an overview

of compensation

by individual

and component,

please refer

to Compensation

Exhibit 27

and

Compensation Exhibit

28 in “Compensation

and share ownership

tables” below.

An overview of

2020

realized compensation

by individual

is in Compensation

Exhibit 33.

At the 2019 AGM, the shareholders approved a maximum

aggregate compensation amount of

CHF 55.5 million for the EC for the year 2020. The EC

compensation for 2020 amounted to CHF 35.4 million and

within the approved

amount. See Compensation Exhibit 13 below.

112

Compensation Exhibit 13: EC compensation (in CHF)

Calendar year

Executive Committee

2020

2019

Number of members

Total compensation

35,448,118

(1)

51,355,121

Maximum aggregate compensation amount approved at

AGM

55,500,000

52,000,000

(1)

Total compensation

for 2020 compared

to 2019 was lower

mainly due to

the reduction

in the number

of active EC

members,

lower payments

to former EC members,

and lower short

-term incentive

awards due to

the impact of

COVID-19.

Overall ratio of compensation components

The ratio of fixed to variable components in any given year

depends on the performance of the Company and

individual EC members against predefined performance

objectives.

In 2020,

the variable compensation of the new CEO was 51 percent of his

total annual compensation (previous

year:

52 percent applicable to the previous interim CEO). The total

annual compensation for the new CEO excludes the

value of the one-time replacement share grant to compensate

for foregone benefits with the previous employer.

For the

other EC members, the variable compensation represent

ed an average of 41 percent (previous year: 45 percent).

Terms of appointment

for new Executive Committee members

The new Chief Human Resources Officer (CHRO), Carolina

Granat, was appointed to the EC effective from

January 1, 2021 with an annual base salary of CHF 700,000,

a target short-term and long-term incentive

of 100 percent

of annual base salary.

This represents a reduction in total target direct compensation

(TTDC) compared to the prior

incumbent. She is eligible for standard EC benefits and,

where appropriate legacy relocation benefits.

The Chief Communications Officer (CCO), Theodor

Swedjemark, was appointed to a new EC position on

August 1, 2020, with an annual base salary of CHF 500,000,

a target short-term incentive of 100 percent of

annual base

salary and a target long-term incentive of 80

percent of annual base salary,

leading to a TTDC of CHF 1,400,000. He is

eligible for standard EC benefits.

Compensation elements – 2020 highlights

Annual base salary

Three of the nine EC members in place in March

2020 received a salary adjustment, which ranged from 4.3

7.1 percent, the latter being for an exceptional performance

and market adjustment. This corresponded to a 1.6 percent

increase on annual base salaries for the EC members in post in

March, 2020.

Short-term incentive - design

As disclosed in the 2019 Compensation Report, ABB’s

short-term incentive, the Annual Incentive Plan (AIP)

was redesigned in 2020 to create focus on key priorities,

with a maximum of five performance measures.

Under the AIP,

all members of the EC have a common measure, with a 20 to

25 percent weighting. In 2020,

this was Group ROCE - designed to create a greater focus

on profitability and the efficiency with which

capital is used.

In line with the new ABB operating model, up to three measures

were linked to specific Business Area or

Function needs, rather than having largely

common measures for all EC members. Together,

these Business Area or

Functional measures had a total of a 55 to 60 percent weighting.

•

For the CEO and CCO, the measures were Group Operational

EBITA margin

(%), Group Revenue and

Group Free Cash Flow.

113

•

For Business Area Presidents, measures were tailored

to business

imperatives and included their respective

Business Area Operational EBITA

(absolute), Operational EBITA

margin (%), Net Working

Capital,

Operational Free Cash Flow (OFCF), Orders received,

and absolute Gross Profit on orders.

•

For other Corporate Officers, measures included

Group financial measures, corporate function cost and

progress against functional imperatives such as functional

effectiveness and the completion of the

divestment of the PG business. As a reminder,

in 2021 all Corporate Officers will move to the same

Group

quantitative measures as the CEO.

Definitions of the quantitative measures for EC members

used above are set out in the Compensation

Exhibit 14, below.

Compensation Exhibit 14: Business Area

and Function specific quantitative objectives in 2020

Objective

Description

ROCE %

ROCE is calculated as Operational EBITA after tax divided by the average of the

period’s opening and closing Capital employed, adjusted to reflect impacts from

significant acquisitions/divestments occurring during the same period. Capital

employed is calculated as the sum of Adjusted total fixed assets and Net Working

Capital

Operational EBITA

(absolute)

(1)

Operational EBITA (as defined in “Note 23 – Operating segment and geographic

data” to the Consolidated Financial Statements) is a profit measure before interest, tax

and amortization expenses. It excludes non-operational items such as restructuring,

foreign exchange/commodity timing differences, M&A transaction and integration

costs and certain other non-operational items

Operational EBITA

margin (%)

Operational EBITA margin

is Operational EBITA as a percentage of Operational

revenues, which is total revenues adjusted for foreign exchange/commodity timing

differences in total revenues

Free Cash Flow

(FCF)

Free Cash Flow is calculated as net cash provided by operating activities adjusted for:

(i) purchases of property, plant and equipment and intangible assets, and (ii) proceeds

from sales of property, plant and equipment

Operational Free

Cash Flow (OFCF)

Cash generated by business operations after paying expenditures but before paying

interests and taxes (OCF

(2)

minus Capital expenditures)

Function Cost

Total operating costs of the function that include the personnel costs and other

operating expenses such as rent, travel, consultancy, communication, office

administration and other related expenses to run the function

Net Working

Capital

(1)

Net Working Capital is the sum of (i) receivables, net, (ii) contract assets, (iii)

inventories, net, and (iv) prepaid expenses; less (v) accounts payable, trade, (vi)

contract liabilities, and (vii) other current liabilities (excluding primarily: (a) income

taxes payable, (b) current derivative liabilities, (c) pension and other employee

benefits, (d) payables under the share buyback program and (e) liabilities related to

the divestment of the Power Grids business); and including the amounts related to

these accounts which have been presented as either assets or liabilities held for sale

but excluding any amounts included in discontinued operations

Orders received

Represents the values of goods and services contracted and ordered by customers

within a given accounting period net of cancellations

Gross Profit on

orders (absolute)

(1)

Gross profit on orders is calculated by deducting the total costs to complete the order

from the total revenue value of the order

Revenues

Revenues realized from executing and fulfilling customer orders, before any costs or

expenses are deducted

(1) Applied to

Industrial Automation

Business Area

only.

(2) Cash flow

from operating

activities excluding

payments for

interest and

income taxes

All EC members also had an individual measure with

a 20 percent weighting. This individual component was

informed by up to three objectives, which included a combination

of quantitative and qualitative objectives. The final

outcome against this measure was based on a discretionary

judgment of the combined performance against all

objectives.

114

•

In 2020, all the EC had a common safety objective –

namely relevant improvement targets for the

Total

Recordable Incident Frequency Rate (TRIFR) – for the

CEO and Corporate Officers, these related to

Group targets, and for Business Area Presidents their

respective Business Areas targets.

•

For the CEO, the other two objectives were linked to

the delivery of the long-term Group strategy and of

the Group sustainability strategy and targets.

•

For other EC members, objectives included qualitative

and/or quantitative objectives such as establishing

robust internal controls, delivery of digital goals and business transformation.

The relative weighting and composition of Group, Business Area,

Functional and Individual measures for EC

members for 2020 are summarized in Compensation

Exhibit 15 below.

Compensation Exhibit 15: Weighting

and composition of objectives for EC members for 2020

CEO

(1)

Business Area

Presidents

Corporate

Officers

(2)

Group measures

80%

20%

Business Area /

Functional measures

n.a.

60%

Individual measures

20%

Overall composition

of AIP measures:

- Quantitative

- Qualitative

80%

20%

80%+

Up to 20%

40-80%

20-60%

(1) Chief Communications Officer (CCO) replicated CEO

measures in 2020 (targets in individual measure varied).

(2) Chief Financial Officer (CFO), Chief Human Resources

Officer (CHRO) and General Counsel (GC).

For each measure, a target was set corresponding

to the expected level of performance that would generate a

target (100 percent) award. Further,

a minimum level of performance, below which there is no

award (threshold) and a

maximum level of performance, above which the award

is capped at 150 percent of the target (cap), were also

defined.

For qualitative Group,

Business Area and Functional measures, the award percentage

achievements between threshold

and target,

as well as between target and cap were determined by

linear interpolations between these points.

Outcomes were subject to appropriate discretionary upward

or downward adjustments for some non-operational

items and other adjustment principles agreed with the Board.

2020 Annual Incentive Plan (AIP) – outcomes

In summary, the

average award for the EC under the AIP for 2020 was 72.

percent (out of a maximum

150 percent), compared to 94.7 percent in 2019. This significant

drop in outcomes from the prior year was heavily

influenced by the impact on the business from COVID-19.

The 2020 AIP outcomes were net of the application

of adjustments for some non-operational items and other

adjustment principles agreed with the Board, specifically

including balance sheet risk mitigation actions, where the

benefits will be factored into the settling of future AIP

targets. It also included caps on outcomes for Corporate

Officers

to ensure there were not unintended windfalls due to

the impact of the COVID-19 crisis on cost or other qualitative

measures. The average outcome for the EC without the

application of these adjustments would have been nine percent

lower.

Common measure

Achievement against the 2020 Group ROCE measure, which

applied to all EC members, with a weighting of

20-25%, was zero percent (2019: n.a.). The Group’s

ROCE was 10.3 percent compared to 11.1

percent in 2019,

reflecting the recognition of the investment in the Power Grids

business joint venture as well as lower business activity.

115

Group measures

The outcome related to the other Group measures,

which were applied to the CEO and CCO, with weightings

of 10 to 25 percent, ranged from zero to for 109 percent

and the weighted achievement related to all Group measures,

including the common measure is 35 percent.

Business Area and Functional measures

Up to three quantitative business measures were applied

to Business Area Presidents,

with weightings from 15

to 40 percent, and the outcomes ranged from zero

to 150 percent of target.

Up to three qualitative or quantitative business measures were

applied to the CFO, CHRO and GC (‘Corporate

Officers’), with weightings from 15 to 25

percent, and the outcomes ranged from 53 to 125 percent

of target.

Individual Measures

Thanks to the Company’s

strong

focus on safety, in 2020

the target set for the Total

Recordable Incident

Frequency Rate (TRIFR) – has been overachieved at the

Group level, resulting from the majority of Business Areas and

Functions having overachieved their targets.

In summary, for EC

members the assessed achievement of objectives representing

the personal component,

inclusive of the safety outcomes described, which has a weighting

of 20 percent, ranged from 100 to 150 percent of

target for 2020.

This compared to a range of 59 to 111

percent in 2019.

Overall outcomes

The overall average award under the AIP for the entire EC

was 72.4

percent of target (2019: 94.7 percent) with

a range from 51.0 percent (lowest achievement) to 95.6

percent of target (highest achievement). This compared

to a

range of 72.0 to 106.2 percent in 2019.

These outcomes are summarized in Compensation Exhibit

16 below.

116

Compensation Exhibit 16: ‘At a Glance’ STI 2020 outcomes

(rounded, with 2019 comparisons)

2020

(% of target)

Group

(1)

2020

(% of target)

Business Area

Presidents

2020

(% of target)

Corporate

Officers

2019

(% of target)

Common Measure

Group ROCE

n.a.

Group Measures

Cost Savings

n.a.

149%

Free Cash Flow

109%

n.a.

Operational Net Income

n.a.

79%

Operational EBITA

margin (%)

53%

83%

Operational Cash Flow

n.a.

93%

Revenues

89%

Weighted Group results

(Common + Group measures)

35%

97%

Business Area Measures

(2)

Gross Profit on orders

(absolute)

Operational EBITA

margin (%)

0 - 95%

Orders received

0 - 83%

Operational Free Cash Flow

106 - 150%

Operational EBITA

(absolute)

Net Working

Capital

105%

Range of results

0 - 150%

Weighted Business Area

results

(Common + Business Area measures)

21 - 66%

n.a.

Functional Measures

Range of results

(2)(3)

53 - 125%

n.a.

Weighted Functional

results

(Common + Functional measures)

47 - 61%

n.a.

Individual Measures

Range of results

(4)

100 - 150%

59 - 111%

Combined AIP results from Common, Group,

Business Area/Functional and Individual Measures

Range of outcomes

(4)

51 - 96%

72 - 106%

Overall Average

(4)

72%

95%

(1) Applied to

CEO and CCO in

2020. Therefore

CCO is excluded

from Corporate

Officers data.

(2) Up to three

business measures

were applied to

each Business

Area President

and Corporate

Officer.

(3) May include

Group measures

and after the

application of

relevant caps.

(4) Applies to

all Executive

Committee members

The table below provides information related to the

actual 2020 AIP achievement,

in comparison to the target

for all active EC members.

117

Compensation Exhibit 17: Overview of targeted

and realized AIP 2020 values

Target

AIP

award

(in % of base

salary)

Target

AIP award

(in CHF)

(1)

Actual AIP award

(in % of target)

Actual AIP award

(in CHF)

(2)

Björn Rosengren

(3)

100%

1,504,131

65.0%

977,685

Timo Ihamuotila

100%

902,500

77.4%

698,535

Sylvia Hill

100%

730,000

75.0%

547,500

Maria Varsellona

100%

760,000

86.3%

655,880

Theodor Swedjemark

(4)

100%

200,000

65.0%

130,000

Sami Atiya

100%

760,000

55.0%

418,000

Tarak Mehta

100%

855,000

81.3%

695,115

Peter Terwiesch

100%

760,000

51.0%

387,600

Morten Wierod

100%

712,500

95.6%

681,150

Total

7,184,131

5,191,465

(1)

Inclusive of adjustments for the COVID-19 salary donation program

and pro-rating for time served on the EC.

(2)

Represents accrued AIP award for the year 2020, which will be

paid in 2021, after the publication of ABB's financial results.

(3)

Björn Rosengren joined the EC on January 27, 2020.

(4)

Theodor Swedjemark joined the EC on August 1, 2020.

2020 Long-term incentive plan outcomes

The estimated value at grant of the share-based grants to

EC members under the 2020 LT

IP award was

CHF 6.5 million, compared with CHF 12.6 million in

2019. This deviation is primarily driven from the reduction

in the

numbers of EC members between 2019 (11

EC members) and 2020 (9 EC members).

The companies approved by the Board to determine

ABB’s relative TSR performance

for the 2020 LTIP

were:

3M, Danaher, Eaton, Emerson Electric,

General Electric, Honeywell Intl., LafargeHolcim,

Legrand, Mitsubishi Electric,

Raytheon Technologies,

Rockwell, Rolls Royce, Schneider Electric, Siemens and

Yokogawa.

Note that LafargeHolcim

replaced ThyssenKrupp, which had been previously included

in the peer group. These were selected to provide an

appropriate and very challenging set of peers, and

influenced the payment point setting accordingly (see Compensation

Exhibit 18 below).

The EPS targets for the 2020 LTIP,

which were set before the COVID-19 crisis occurred, were not

changed for

the impact of COVID-19. This may have a materially

negative impact on the final amount which may be delivered

under

the award.

The reference price for the 2020 LTIP

grant which is used to determine the number of shares granted

participants was set in March, during a time of high market

volatility due to the COVID-19 crisis. Given the high

variability between the formulaic outcome of the reference

price under the LTIP

rules, of CHF 23.00,

and the share price

near the date of grant, in the region of CHF 16.00, it was decided

to use the prior year’s reference price of CHF 19.36.

Also note that, from 2020, for the top 100 senior leaders outside

the EC, future grants under the Management

Incentive Plan (MIP) – a stock option plan, without performance

conditions – were discontinued and replaced by the

LTIP.

Other employees previously eligible to receive grants under

the MIP received grants under a restricted share plan.

The 2020 LTIP

award curves are also illustrated in Compensation Exhibit

18 below.

118

Compensation Exhibit 18: 2020 LTIP Targets

The change in the EPS award curve for the 2020 LTIP

(range cut from plus/minus 25 percent of target

plus/minus 17 percent of target) is a reflection

of the perceived EPS volatility during the performance period,

and also

serves to make the achievement of a threshold award under

the plan more demanding.

2017 LTIP outcome

The final number of shares vesting under the 2017 LTIP

grant in 2020 was determined based on the

achievement level against the defined Net income and EPS targets.

The Net income measure was achieved at

105 percent (2016 grant 100 percent) out of a potential

of 150 percent.

The CC exercised its discretion to apply Net income to determine

EPS rather than income from continuing

operations, net of tax, given the move of the Power

Grids business into discontinued operations. The average EPS

measure vested at 41 percent (previous year: 85 percent)

out of a potential 200 percent, net of adjustments for items

considered outside the normal course of business operation

and/or which were not considered in the target setting

of the

2017 LTIP

On this occasion, adjustments were made for the impact of

divestments, integration and restructuring costs.

Without the impact of the approved

adjustments the vesting level would have been 21 percent.

119

The average achievement level of the two performance

measures under the 2017 LTIP

was 73.0 percent (out of

a maximum 175 percent), with the actual level varying

by individual EC member, from 69.4 to

75.4 percent, as specified

in Compensation Exhibit 20.

Since the performance period for determining the value

of the award was from 2017 to 2019, the outcome

was

not affected by the impact of COVID‑19.

As announced in our 2019 Compensation Report,

the EPS performance targets for vested LTIP

awards will be

retrospectively disclosed in our Compensation Reports.

The three target points (threshold, target and

maximum) and the

actual achievement for the 2017 EPS performance

measure are shown in Compensation Exhibit 19 below.

Compensation Exhibit 19: 2017 LTIP EPS

performance measure

Notes

1. Net

income used to

determine EPS

rather than income

from continuing

operations,

net of tax, given

the

move of the Power

Grids business

into discontinued

operations.

2. Actual

value shown

net of adjustments

for items considered

outside the

normal course

of business

operation and/or

which were not

considered in

the target

setting of the

LTIP.

Please note that

as a result

of the adjustments

applied, the

EPS number shown

above will no

reconcile with

EPS calculated

based

on Net income

only.

Overview of disclosed and realized LTIP

2017 value

A new table below,

requested by stakeholders, provides information related

to the LTIP 2017

grant, showing

the previously disclosed ‘fair value’ of the grant to

each EC member and the actual value of the grant at the time

delivery in 2020. Values

are gross, e.g. before payment of any applicable taxes. This indicates

the gross realized value

was 65.4 percent of the disclosed grant fair value.

120

Compensation Exhibit 20: Realized value of 2017 LTIP

grant

2017 LTIP

grant date

granted

related to

the Net

income

measure

(1)

granted

related to

the EPS

measure

(2)

Total

number

of shares

granted

Disclosed

grant fair

value

(3)

2017 LTIP

vesting date

Vesting

percentage

Number

of vested

Realized

value

(4)

Björn Rosengren

n.a.

Timo Ihamuotila

June 13, 2017

20,500

41,000

998,965

June 13, 2020

73.0%

29,930

593,811

Sylvia Hill

n.a.

Maria Varsellona

n.a.

Theodor Swedjemark

n.a.

Sami Atiya

June 13, 2017

18,691

16,044

34,735

845,147

June 13, 2020

75.4%

26,205

519,907

Tarak Mehta

June 13, 2017

15,331

19,163

34,494

842,145

June 13, 2020

69.4%

23,955

475,267

Peter Terwiesch

June 13, 2017

19,989

17,158

37,147

903,833

June 13, 2020

75.4%

28,024

555,996

Morten Wierod

June 13, 2017

7,029

14,058

n.a.

June 13, 2020

73.0%

10,263

203,618

Total

3,590,090

2,348,599

(1)

Actual achievement level of the Net income measure was 105 percent.

(2)

Actual achievement level of the EPS measure was 41 percent.

(3)

At the time of disclosure Morten Wierod was not member of the EC.

(4)

Valued at CHF 19.84, the closing price of the ABB share on the day of vesting.

Historical vesting outcomes

The historical vesting percentages for the prior five years

are shown in Compensation Exhibit 21 below.

Over

the last five years vesting has averaged at 79.6 percent

of target and 53.1 percent of the maximum award.

Compensation Exhibit 21: LTIP historical actual

vesting percentages

(1)

Plan Year

of Award

2013

2014

2015

2016

2017

Vesting

in % of target award

77.2%

74.8%

80.5%

92.5%

73.0%

Vesting

in % of maximum potential award

55.1%

53.4%

53.7%

61.7%

41.7%

(1) Average

of relevant performance

measures.

Shareholdings of EC members

Three out of nine EC members have achieved or exceeded their

share ownership requirement. A further five

members have been newly appointed to the EC in the

last two years. The EC members collectively owned less than

1 percent of ABB’s total shares

outstanding at December 31, 2020.

At December 31, 2020, members of the EC held ABB shares

and conditional rights to receive shares, as shown

in Compensation Exhibit 31 in the section “Compensation

and share ownership tables” below.

Their holdings at

December 31, 2019, are shown in Compensation Exhibit

32 in the section “Compensation and share ownership

tables”

below.

As previously stated, no further grants will be made under

the Management Incentive Plan (MIP), a stock

option plan without performance conditions. Any MIP

instruments held by EC members were awarded prior to their

appointment as EC members. For a more detailed description

of MIP,

please refer to “Note 18 – Share-based payment

arrangements” in our Consolidated Financial Statements.

Except as described in Compensation Exhibits 29 and

30, no member of the EC and no person closely linked

a member of the EC held any shares of ABB or options on

ABB shares at December 31, 2020 and 2019.

121

Other compensation

Members of the EC are eligible to participate in the Employee Share

Acquisition Plan (ESAP), a savings plan

based on stock options, which is open to employees around

the world. Five members of the EC participated in the

17th

annual launch of the plan in 2020. EC members who

participated will, upon vesting, each be entitled to acquire

up to

440 ABB shares at CHF 22.87 per share, the market share

price at the start of the 2020 launch.

For a more detailed description of the ESAP,

please refer to “Note 18 – Share‑based payment arrangements”

our Consolidated Financial Statements.

In 2020, ABB did not pay any fees or compensation

to the members of the EC for services rendered to ABB

other than those disclosed in this Compensation Report.

Except as disclosed in the section titled “Executive Committee

─ Business relationships

between ABB and its EC members” in the Corporate

Governance Report, ABB did not pay any

additional fees or compensation in 2020 to persons

closely linked to a member of the EC for services rendered to ABB.

Terms of

departure for former EC members

The former CHRO, Sylvia Hill, will continue to

receive her annual base salary and benefits during her

notice

period, until her termination date, on December 31, 2021.

She will receive a short-term incentive payment for 2021,

based on the average short-term incentive award percentages

achieved in 2019 and 2020, at the termination date.

Outstanding LTIP

grants made for the years 2019 and 2020 will be settled according

to the plan-related vesting

schedule, subject to achievement against the relevant performance

conditions.

Legacy MIP awards may be exercised up

to one year following the termination date. She withdrew

from the voluntary 10 percent salary donation program.

Compensation of former EC members

In 2020, certain former EC members received contractual

compensation for the period after leaving the EC, as

shown in Compensation Exhibit 27, footnotes (6) and

(7).

Votes

on compensation at the 2021 AGM

As illustrated in Compensation Exhibit 22, the Board’s

proposals to shareholders at the 2021 AGM will relate

to Board compensation for the 2021–2022 term of

office and EC compensation for the calendar

year 2022. There will

also be a non-binding vote on the 2020 Compensation Report.

122

Compensation Exhibit 22: Shareholders

will have three separate votes on

compensation at the 2021 AGM

In determining the proposed maximum aggregate

EC compensation, the Board takes into consideration the

criteria illustrated in Compensation Exhibit 23. Given the

variable nature of a major portion of the compensation

components, the proposed maximum aggregate EC compensation

will almost always be higher than the actual

compensation paid or awarded, as it must cover the

potential maximum value of each component of compensation.

123

Compensation Exhibit 23: Overview of key factors affecting the

determination of

maximum aggregate EC compensation

124

Compensation and share ownership tables

Compensation Exhibit 24: Board compensation

in 2020 and 2019

Paid in 2020

Paid in 2019

November

Board term 2020-2021

May

Board term 2019-2020

November

Board term 2019-2020

May

Board term 2018-2019

Name

Settled in

cash

(1)

Settled in

shares -

number

of shares

received

(2)

Settled in

cash

(1)

Settled in

shares -

number

of shares

received

(2)

Total

compensation

paid in 2020

(3)

Settled in

cash

(1)

Settled in

shares -

number

of shares

received

(2)

Settled in

cash

(1)

Settled in

shares -

number

of shares

received

(2)

Total

compensation

paid in 2019

(3)

CHF

Peter Voser,

Chairman

(4)

—

21,831

—

32,642

1,140,000

—

29,156

—

29,943

1,200,000

Jacob Wallenberg

(5)

101,250

3,297

112,500

4,928

427,500

112,500

4,397

112,500

4,515

450,000

Matti Alahuhta

(6)

—

4,787

—

7,155

304,000

—

6,384

80,000

3,210

320,000

Gunnar Brock

(7)

—

4,937

—

7,379

313,500

—

6,584

82,500

3,311

330,000

David Constable

(8)

78,750

2,564

87,500

3,833

332,500

87,500

3,420

87,500

3,511

350,000

Frederico Curado

(9)

—

4,438

—

6,646

304,000

—

5,934

80,000

2,973

320,000

Lars Förberg

(10)

—

5,805

—

8,688

304,000

—

7,755

—

7,970

320,000

Jennifer Xin-Zhe Li

(11)

72,000

2,163

80,000

3,239

304,000

80,000

2,892

80,000

2,973

320,000

Geraldine Matchett

(12)

74,250

3,159

82,500

4,722

313,500

82,500

4,213

82,500

4,326

330,000

David Meline

(13)

90,000

2,931

100,000

4,380

380,000

100,000

3,908

100,000

4,013

400,000

Satish Pai

(14)

74,520

2,231

82,500

3,340

313,500

82,500

2,983

82,500

3,066

330,000

Total

490,770

58,143

545,000

86,952

4,436,500

545,000

77,626

787,500

69,811

4,670,000

_____________________

(1)

Represents gross amounts paid, prior to deductions for social security, withholding tax etc.

(2)

Number of shares per Board member is calculated based on net amount due after deductions for social security, withholding tax etc.

(3)

In addition to the Board remuneration stated in the above table, in 2020 and 2019 the Company paid CHF 272,312 and CHF 270,933, respectively, in related mandatory social security

payments.

(4)

Chairman of the ABB Ltd Board for the 2018-2019, 2019-2020 and 2020-2021 board terms and Chairman of the Governance and Nomination Committee for the 2018-2019 board term; is

receiving 100 percent of his compensation in the form of ABB shares.

(5)

Vice-Chairman of the ABB Ltd Board for the 2018-2019, 2019-2020 and 2020-2021 board terms; Chairman of the Governance and Nomination Committee for the 2019-2020 and 2020-

2021 board terms and member of that committee for the 2018-2019 board term; is receiving 50 percent of his compensation in the form of ABB shares.

(6)

Member of the Governance and Nomination Committee for the 2018-2019, 2019-2020 and 2020-2021 board terms; received 50 percent of his compensation in the form of ABB shares for

the 2018-2019 board term and is receiving 100 percent of his compensation in shares for the 2019-2020 and 2020-2021 board terms.

(7)

Member of the Finance, Audit and Compliance Committee for the 2018-2019, 2019-2020 and 2020-2021 board terms; received 50 percent of his compensation in shares for the 2018-2019

board term and is receiving 100 percent of his compensation in the form of ABB shares for the 2019-2020 and 2020-2021 board terms.

(8)

Chairman of the Compensation Committee for the 2018-2019, 2019-2020 and 2020-2021 board terms; is receiving 50 percent of his compensation in the form of ABB shares.

(9)

Member of the Compensation Committee for the 2018-2019, 2019-2020 and 2020-2021 board terms; received 50 percent of his compensation in the form of ABB shares for the 2018-2019

board term and is receiving 100 percent of his compensation in shares for the 2019-2020 and 2020-2021 board terms.

(10)

Member of the Governance and Nomination Committee for the 2018-2019, 2019-2020 and 2020-2021 board terms; is receiving 100 percent of his compensation in the form of ABB shares.

(11)

Member of the Compensation Committee for the 2018-2019, 2019-2020 and 2020-2021 board terms; is receiving 50 percent of her compensation in the form of ABB shares.

(12)

Member of the Finance, Audit and Compliance Committee for the 2018-2019, 2019-2020 and 2020-2021 board terms; is receiving 50 percent of her compensation in the form of ABB

shares.

(13)

Chairman of the Finance, Audit and Compliance Committee for 2018-2019, 2019-2020 and 2020-2021 board terms; is receiving 50 percent of his compensation in the form of ABB shares.

(14)

Member of the Finance, Audit and Compliance Committee for the 2018-2019, 2019-2020 and 2020-2021 board terms; is receiving 50 percent of his compensation in the form of ABB

shares.

125

Compensation Exhibit 25: Board compensation

for the Board terms 2020-2021 and

2019-2020

Name

Specific Board Roles

Board term

2020-2021

(1)

Board term

2019-2020

CHF

Peter Voser

Chairman of the Board

1,140,000

1,200,000

Jacob Wallenberg

Vice-Chairman of the Board and Chairman GNC

427,500

450,000

Matti Alahuhta

Member GNC

304,000

320,000

Gunnar Brock

Member FACC

313,500

330,000

David Constable

Chairman CC

332,500

350,000

Frederico Curado

Member CC

304,000

320,000

Lars Förberg

Member GNC

304,000

320,000

Jennifer Xin-Zhe Li

Member CC

304,000

320,000

Geraldine Matchett

Member FACC

313,500

330,000

David Meline

Chairman of FACC

380,000

400,000

Satish Pai

Member FACC

313,500

330,000

Total

4,436,500

4,670,000

__________________________

(1)

This reflects a 10 percent COVID-19 related voluntary donation in Board fees

for the first half of the 2020-2021 Board term.

Key:

CC: Compensation Committee

FACC: Finance, Audit and Compliance

Committee

GNC: Governance and Nomination Committee

Compensation Exhibit 26: Board ownership

of ABB shares

Total number of shares

held

Name

December 31, 2020

December 31, 2019

Peter Voser

(1)

314,648

260,175

Jacob Wallenberg

234,246

226,021

Matti Alahuhta

93,408

51,466

Gunnar Brock

26,951

14,635

David Constable

33,978

27,581

Frederico Curado

32,382

21,298

Lars Förberg

49,992

35,499

Jennifer Xin-Zhe Li

33,721

8,319

Geraldine Matchett

19,800

11,919

David Meline

(2)

33,774

25,463

Satish Pai

24,618

19,047

Total

897,518

701,423

______________

(1) Includes 2,000 shares held by spouse.

(2) Includes 3,150 shares held by spouse.

126

Compensation Exhibit 27: EC compensation in 2020

Cash Compensation

Estimated value

of share-based

grants under the

LTIP in 2020

(5)

Estimated value

of replacement

share-based

grant in 2020

2020 Total

(incl.

conditional

share-based

grants)

(6)

Name

Base salary

(1)

Short-term

incentive

(1)(2)

Pension

benefits

Other

benefits

(3)

2019 Total cash-

based

compensation

(4)

CHF

Björn Rosengren (EC member

as of January 27, 2020, CEO

as of March 1, 2020)

1,504,141

977,685

666,175

688,685

3,836,686

1,970,457

3,308,781

9,115,924

Timo Ihamuotila

902,508

698,535

494,360

646,278

2,741,681

734,103

—

3,475,784

Sylvia Hill

725,004

547,500

471,925

290,108

2,034,537

564,097

—

2,598,634

Maria Varsellona

760,008

655,880

471,538

818,288

2,705,714

618,193

—

3,323,907

Theodor Swedjemark (EC

member as of August 1, 2020)

200,002

130,000

118,951

75,259

524,212

92,887

—

617,099

Sami Atiya

760,008

418,000

465,509

423,787

2,067,304

618,193

—

2,685,497

Tarak Mehta

848,339

695,115

479,932

390,681

2,414,067

695,462

—

3,109,529

Peter Terwiesch

760,008

387,600

456,374

334,575

1,938,557

618,193

—

2,556,750

Morten Wierod

704,171

681,150

413,120

346,080

2,144,521

579,552

—

2,724,073

Total current Executive

Committee members at

December 31, 2020

7,164,189

5,191,465

4,037,884

4,013,741

20,407,279

6,491,137

3,308,781

30,207,197

Peter Voser (EC

member until

February 29, 2020)

280,835

421,250

37,443

48,160

787,688

—

787,688

Ulrich Spiesshofer (EC

member until April 16,

2019)

(7)

561,670

749,825

214,588

820,421

2,346,504

—

2,346,504

Jean-Christophe Deslarzes

(EC member until May 31,

2019)

156,668

158,939

86,309

169,099

571,015

—

571,015

Diane de Saint Victor (EC

member until October 31,

2019)

250,001

260,750

74,561

950,402

1,535,714

—

1,535,714

Total departing Executive

Committee members

1,249,174

1,590,764

412,901

1,988,082

5,240,921

—

5,240,921

Total

8,413,363

6,782,229

4,450,785

6,001,823

25,648,200

6,491,137

3,308,781

35,448,118

____________________________

(1)

Base salary as well as the target short-term incentive were adjusted where appropriate for EC members who voluntarily donated 10 percent of their salary to fight the impacts of the COVID-19

crisis for a six-month period during 2020.

(2)

Represents accrued short-term variable compensation for the year 2020, which will be paid in 2021, after the publication of ABB's financial results. Short-term variable compensation is linked

to the objectives defined in each EC member's annual incentive plan. Upon full achievement of these objectives, the short-term variable compensation of the EC members represents 100

percent of their respective base salary. The short-term variable compensation of the former CEO, Ulrich Spiesshofer, corresponds to the contractually agreed average of the year 2017 and 2018

short-term variable compensation award. Peter Voser received his short-term variable compensation payment monthly at target

achievement level. Diane de Saint Victor and Jean-Christophe

Deslarzes received a pro-rata short-term variable compensation payment for their period of service as an EC member, in accordance with the contractual obligations of ABB.

(3)

Other benefits comprise payments related to social security, health insurance, children's education, transportation, tax advice and certain other items like compensation for unused vacation

balances at the time of departure from ABB.

(4)

Prepared on an accrual basis.

(5)

The estimated value of the share-based LTIP grants are based on the price of ABB shares on the grant date, adjusted for expected foregone dividends during the vesting period. On the day of

vesting (April 27, 2023), the value of the share-based awards granted under the LTIP may vary from the above amounts due to changes in ABB's share price and the outcome of the

performance factors.

(6)

Payments totaling CHF 161,274 were made in 2020 on behalf of certain other former EC members, representing social security premium payments.

(7)

ABB paid Ulrich Spiesshofer in addition to the compensation related to the termination period,

non-compete payments for the period May 1, 2020, to December 31, 2020, and related social

security payments totaling CHF 2,806,111.

127

Compensation Exhibit 28: EC compensation in 2019

Cash Compensation

Estimated value

of share-based

grants under the

LTIP in 2019

(4)

Estimated value

of replacement

share-based

grant in 2019

2019 Total

(incl.

conditional

share-based

grants)

(5)

Name

Base salary

Short-term

incentive

(1)

Pension

benefits

Other

benefits

(2)

2019 Total cash-

based

compensation

(3)

CHF

Peter Voser (CEO

as of April

17, 2019)

1,187,167

1,780,739

149,772

320,688

3,438,366

—

3,438,366

Timo Ihamuotila

945,005

960,450

500,830

581,983

2,988,268

836,661

—

3,824,929

Sylvia Hill (EC member as of

June 1, 2019)

408,334

433,650

268,643

198,236

1,308,863

616,494

—

1,925,357

Maria Varsellona (EC

member as of November 1,

2019)

(6)

133,335

133,333

40,619

472,088

779,375

822,328

1,624,386

3,226,089

Frank Duggan

(7)

667,708

707,103

363,173

552,220

2,290,204

704,559

—

2,994,763

Chunyuan Gu

(8)

685,847

685,963

263,125

708,252

2,343,187

616,494

—

2,959,681

Sami Atiya

786,676

602,400

467,214

528,033

2,384,323

845,459

—

3,229,782

Tarak Mehta

860,004

747,340

478,990

570,644

2,656,978

757,396

—

3,414,374

Claudio Facchin

810,006

583,200

469,271

404,865

2,267,342

713,355

—

2,980,697

Peter Terwiesch

795,009

668,800

460,453

389,694

2,313,956

704,559

—

3,018,515

Morten Wierod (EC member

as of April 1, 2019)

525,000

516,600

304,632

200,336

1,546,568

616,494

—

2,163,062

Total Executive Committee

members at December 31,

2019

7,804,091

7,819,578

3,766,722

4,927,039

24,317,430

7,233,799

1,624,386

33,175,615

Ulrich Spiesshofer (EC

member until April 16, 2019)

1,685,010

2,249,475

639,222

979,554

5,553,261

2,967,911

—

8,521,172

Jean-Christophe Deslarzes

(EC member until May 31,

2019)

940,007

998,280

513,258

522,119

2,973,664

827,846

—

3,801,510

Diane de Saint Victor (EC

member until October 31,

2019)

1,000,001

1,062,000

298,242

246,441

2,606,684

880,685

—

3,487,369

Greg Scheu (EC member until

October 31, 2019)

(9)

661,604

557,123

228,298

199,474

1,646,499

722,956

—

2,369,455

Total departing Executive

Committee members

4,286,622

4,866,878

1,679,020

1,947,588

12,780,108

5,399,398

—

18,179,506

Total

12,090,713

12,686,456

5,445,742

6,874,627

37,097,538

12,633,197

1,624,386

51,355,121

____________________________

(1)

Represents accrued STI for the year 2019, which was paid in 2020, after the publication of ABB's financial results. STI is linked to the objectives defined in each EC member's scorecard.

Upon full achievement of these objectives, the STI of the EC members represents 100 percent of their respective annual base salary. The STI of the former CEO, Ulrich Spiesshofer,

corresponds to the contractually agreed average of the year 2017 and 2018 STI award. Peter Voser received his STI payment monthly at target

achievement level. Greg Scheu received a pro-

rata STI payment for his period of service as an EC member, in accordance with the contractual obligations of ABB.

(2)

Other benefits comprise payments related to social security, health insurance, children's education, transportation, tax advice and certain other items. Other benefits for Peter Voser

include

mandatory social security payments only.

(3)

Prepared on an accrual basis.

(4)

On the day of vesting (May 16, 2022), the value of the share-based awards granted under the LTIP may vary from the above amounts due to changes in ABB's share price and the outcome of

the performance factors. The estimated value of the share-based grants is based on the price of ABB shares on the grant date, adjusted for expected foregone dividends during the vesting

period.

(5)

Payments totaling CHF 216,069 were made in 2019 on behalf of certain other former EC members, mainly representing mandatory social security payments.

(6)

In addition to the replacement share grant, Maria Varsellona received compensation in the amount of CHF 445,939 for 10 months of foregone STI payments from her previous employer,

which is shown under other benefits.

(7)

Frank Duggan received 20 percent of his base salary in AED and 80 percent in EUR. The Company purchased EUR with AED to meet this obligation. All AED amounts were converted into

Swiss francs using a rate of CHF 0.2635992 per AED.

(8)

Chunyuan Gu received for the period January to February 2019, 100 percent of his compensation in CNY and for the period March to December 2019, 100 percent of his base salary in HKD.

All CNY amounts were converted into Swiss francs using a rate of CHF 0.1391052 per CNY and all HKD amounts were converted into Swiss francs using a rate of CHF 0.12434741 per

HKD.

(9)

Greg Scheu received 100 percent of his base salary in USD. All USD amounts were converted into Swiss francs using a rate of CHF 0.9682 per USD.

128

Compensation Exhibit 29: LTIP grants in 2020

Name

Reference number

of shares under the

EPS performance

factor of the 2020

launch

of the LTIP

(1)

Total estimated

value of share-

based grants under

the EPS

performance factor

of the 2020 launch

of the LTIP

(2),(3)

Reference number

of shares under the

TSR performance

factor of the 2020

launch

of the LTIP

(1)

Total estimated

value of share-

based grants under

the TSR

performance factor

of the 2020 launch

of the LTIP

(2),(3)

Total number of

shares granted

under the 2020

launch

of the LTIP

(1),(2)

Total estimated

value of share-

based grants under

the LTIP in

2020

(2),(3)

CHF

Björn Rosengren (EC member as of

January 27, 2020, CEO as of March 1,

2020)

65,857

985,221

65,858

985,236

131,715

1,970,457

Timo Ihamuotila

(4)

24,535

367,044

24,536

367,059

49,071

734,103

Sylvia Hill

18,853

282,041

18,854

282,056

37,707

564,097

Maria Varsellona

20,661

309,089

20,662

309,104

41,323

618,193

Theodor Swedjemark (EC member as of

August 1, 2020)

(4)

3,104

46,436

3,105

46,451

6,209

92,887

Sami Atiya

20,661

309,089

20,662

309,104

41,323

618,193

Tarak Mehta

(4)

23,244

347,731

23,244

347,731

46,488

695,462

Peter Terwiesch

(4)

20,661

309,089

20,662

309,104

41,323

618,193

Morten Wierod

(4)

19,370

289,776

19,370

289,776

38,740

579,552

Total current Executive

Committee

members at December 31, 2020

216,946

3,245,516

216,953

3,245,621

433,899

6,491,137

__________________

(1)

Vesting date April 27, 2023.

(2)

The reference number of shares of the EPS and TSR performance factors are valued using the fair value of the ABB shares on the grant date adjusted for expected foregone dividends

during the vesting period.

(3)

Default settlement of the final LTIP award is 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to withholding taxes. The plan foresees a

maximum payout of 200 percent of the number of reference shares granted based on the achievement against the pre-defined average EPS and relative TSR targets.

(4)

In addition to the above awards, five members of the EC participated in the 17th launch of the ESAP in 2020, which will allow them to save over a 12-month period and, in November

2021, use their savings to acquire ABB shares under the ESAP. Each EC member who participated in ESAP will be entitled to acquire up to 440 ABB shares at an exercise price of CHF

22.87 per share.

129

Compensation Exhibit 30: LTIP grants in 2019

Name

Reference number

of shares under the

EPS performance

factor of the 2019

launch

of the LTIP

(1)

Total estimated

value of share-

based grants under

the EPS

performance factor

of the 2019 launch

of the LTIP

(2),(3)

Reference number

of shares under the

TSR performance

factor of the 2019

launch

of the LTIP

(1)

Total estimated

value of share-

based grants under

the TSR

performance factor

of the 2019 launch

of the LTIP

(2),(3)

Total number of

shares granted

under the 2019

launch

of the LTIP

(1),(2)

Total estimated

value of share-

based grants under

the LTIP in

2019

(2),(3)

CHF

Timo Ihamuotila

(4)

24,535

418,322

24,536

418,339

49,071

836,661

Sylvia Hill (EC member as of June 1,

2019)

18,079

308,247

18,079

308,247

36,158

616,494

Maria Varsellona (EC member

as of

November 1, 2019)

20,661

411,154

20,662

411,174

41,323

822,328

Frank Duggan

(4)

20,661

352,271

20,662

352,288

41,323

704,559

Chunyuan Gu

18,079

308,247

18,079

308,247

36,158

616,494

Sami Atiya

24,793

422,721

24,794

422,738

49,587

845,459

Tarak Mehta

22,211

378,698

22,211

378,698

44,422

757,396

Claudio Facchin

20,919

356,669

20,920

356,686

41,839

713,355

Peter Terwiesch

(4)

20,661

352,271

20,662

352,288

41,323

704,559

Morten Wierod (EC member as of

April 1, 2019)

(4)

18,079

308,247

18,079

308,247

36,158

616,494

Total Executive Committee

members

at December 31, 2019

208,678

3,616,847

208,684

3,616,952

417,362

7,233,799

Ulrich Spiesshofer (EC member until

April 16, 2019)

87,035

1,483,947

87,036

1,483,964

174,071

2,967,911

Jean-Christophe Deslarzes (EC member

until May 31, 2019)

24,277

413,923

24,277

413,923

48,554

827,846

Diane de Saint Victor (EC member until

October 31, 2019)

25,826

440,334

25,827

440,351

51,653

880,685

Greg Scheu (EC member until

October 31, 2019)

21,201

361,478

21,201

361,478

42,402

722,956

Total departing Executive Committee

members

158,339

2,699,682

158,341

2,699,716

316,680

5,399,398

Total

367,017

6,316,529

367,025

6,316,668

734,042

12,633,197

__________________

(1)

Vesting date May 16, 2022.

(2)

The valuation method of the share grant has been adjusted to reflect best practice, according to which, it is not recommended to use a Monte Carlo simulation at the time of grant to

determine the fair value of a share grant. In response to that, the reference number of shares of the EPS and TSR performance factors are valued using the fair value of the ABB shares on

the grant date adjusted for expected foregone dividends during the vesting period.

(3)

The LTIP foresees delivering 65 percent of the value of vested performance shares (both performance factors EPS and TSR), if any, in

shares and the remainder in cash. However, upon

vesting participants have the possibility to elect to receive 100 percent of the vested award in shares. The plan foresees a maximum payout of 200 percent of the number of reference shares

granted based on the achievement against the pre-defined average EPS and relative TSR targets.

(4)

In addition to the above awards, four members of the EC participated in the 16th launch of the ESAP in 2019, which allowed them to save over a 12-month period and, in November 2020,

use their savings to acquire ABB shares under the ESAP. Each EC member who participated in ESAP was entitled to acquire up to 480 ABB shares at an exercise price of CHF 20.78 per

share.

130

Compensation Exhibit 31: EC shareholding

overview at December 31, 2020

Total number

of shares

held at

December 31,

2020

Vested at

December 31,

2020

Unvested at December 31, 2020

Number of

vested

options held

under the

MIP

Number of

unvested

options

held under

the MIP

Reference

number of

deliverable

under the

2018

performance

components

(EPS and

TSR) of the

LTIP

(1)

Reference

number of

deliverable

under the

2019

performance

factors (EPS

and TSR) of

the LTIP

(1)

Reference

number of

deliverable

under the

2020

performance

factors (EPS

and TSR) of

the LTIP

(1)

Replacement

share grant

for foregone

benefits from

former

employer

(2)

Replacement

share grant

for foregone

benefits from

former

employer

(2)

Replacement

share grant

for foregone

benefits from

former

employer

(2)

Name

(vesting

2021/2022)

(vesting

2021)

(vesting

2022)

(vesting

2023)

(vesting

2021)

(vesting

2022)

(vesting

2023)

Björn Rosengren (EC

member as of January 27,

2020, CEO as of March 1,

2020)

5,000

—

131,715

—

130,150

18,904

Timo Ihamuotila

171,610

—

37,217

49,071

—

Sylvia Hill

2,265

796,875

318,750

—

36,158

37,707

—

Maria Varsellona

—

41,323

40,010

40,009

—

Theodor Swedjemark (EC

member as of August 1,

2020)

(3)

480

102,000

250,750

—

6,209

—

Sami Atiya

42,778

—

23,301

49,587

41,323

—

Tarak Mehta

179,636

—

34,790

44,422

46,488

—

Peter Terwiesch

142,338

—

37,379

41,323

—

Morten Wierod

1,544

—

15,292

36,158

38,740

—

Total Executive

Committee members at

December 31, 2020

545,651

898,875

569,500

147,979

298,042

433,899

40,010

170,159

18,904

______________

(1)

The final LTIP 2018 award and LTIP

2019 award will be settled 65 percent in shares and 35 percent in cash. This applies to both performance factors (EPS and TSR). However, the participants have the

possibility to elect to receive 100 percent of the vested award in shares. The final LTIP 2020 award will be settled 100 percent in shares, with an automatic sell-to-cover in place for employees who are

subject to withholding taxes.

(2)

It is expected that the replacement share grants will be settled 65 percent in shares and 35 percent in cash. However, the participants have the possibility to elect to receive 100 percent of the vested

award in shares.

(3)

In addition, his spouse holds unvested shares and options granted in connection with her role in the company.

131

Compensation Exhibit 32: EC shareholding

overview at December 31, 2019

Total number

of shares

held at

December 31,

2019

Vested at

December 31,

2019

Unvested at December 31, 2019

Number of

vested options

held under

the MIP

Number of

unvested

options held

under the

MIP

Reference

number of

deliverable

under the

2017

performance

components

(P1 and P2) of

the LTIP

(1)

Reference

number of

deliverable

under the

2018

performance

factors (EPS

and TSR) of

the LTIP

(2)

Reference

number of

deliverable

under the

2019

performance

factors (EPS

and TSR) of

the LTIP

(2)

Replacement

share grant

for foregone

benefits from

former

employer

(3)

Replacement

share grant

for foregone

benefits from

former

employer

(4)

Name

(vesting

2020/2021)

(vesting 2020)

(vesting 2021)

(vesting 2022)

(vesting 2020)

(vesting 2021/

2022)

Timo Ihamuotila

64,572

—

41,000

37,217

49,071

76,628

—

Sylvia Hill (EC member as

of June 1, 2019)

2,265

743,750

584,375

—

36,158

—

Maria Varsellona (EC

member as of November 1,

2019)

—

41,323

—

80,019

Frank Duggan

269,846

—

34,984

31,756

41,323

—

Chunyuan Gu

45,577

—

31,196

33,981

36,158

—

Sami Atiya

24,435

—

34,735

23,301

49,587

—

Tarak Mehta

212,869

—

34,494

34,790

44,422

—

Claudio Facchin

163,219

—

39,076

26,214

41,839

—

Peter Terwiesch

122,242

—

37,147

37,379

41,323

—

Morten Wierod (EC

member as of April 1,

2019)

1,064

398,440

—

15,292

36,158

—

Total Executive

Committee members at

December 31, 2019

(5)

906,089

1,142,190

584,375

252,632

239,930

417,362

76,628

80,019

_______________

(1)

The LTIP 2017 foresees that 70 percent are settled in shares and 30 percent in cash for the performance components (P1 and P2). However, participants have the possibility to elect to receive

100 percent of the vested award in shares.

(2)

It is expected that the LTIP 2018 and 2019 will be settled 65 percent in shares and 35 percent in cash for the performance factors (EPS and TSR). However,

the participants have the

possibility to elect to receive 100 percent of the vested award in shares.

(3)

The replacement share grant was settled 100 percent in shares.

(4)

It is expected that the replacement share grants will be settled 65 percent in shares and 35 percent in cash. However, the participant has the possibility to elect to receive 100 percent of the

vested award in shares.

(5)

Departing Executive Committee members are not included in this table.

132

Compensation Exhibit 33: Targeted

and realized EC Total

Compensation in 2020

Target Compensation (in

CHF)

Base salary

Pension

benefits

Other

benefits

(1)

Target

short-term

incentive

(2)

LTIP Grant

Fair Value

2017

(3)

Target total

variable

compensation

Target Total

Compensation

Björn Rosengren (EC member as of

January 27, 2020, CEO as of March

1, 2020)

1,504,141

666,175

688,685

1,504,131

n.a.

1,504,131

4,363,132

Timo Ihamuotila

902,508

494,360

646,278

902,500

998,965

1,901,465

3,944,611

Sylvia Hill

725,004

471,925

290,108

730,000

n.a.

730,000

2,217,037

Maria Varsellona

760,008

471,538

818,288

760,000

n.a.

760,000

2,809,834

Theodor Swedjemark (EC member as

of August 1, 2020)

200,002

118,951

75,259

200,000

n.a.

200,000

594,212

Sami Atiya

760,008

465,509

423,787

760,000

845,147

1,605,147

3,254,451

Tarak Mehta

848,339

479,932

390,681

855,000

842,145

1,697,145

3,416,097

Peter Terwiesch

760,008

456,374

334,575

760,000

903,833

1,663,833

3,214,790

Morten Wierod

704,171

413,120

346,080

712,500

377,781

1,090,281

2,553,652

Total

7,164,189

4,037,884

4,013,741

7,184,131

3,967,871

11,152,002

26,367,816

Realized Compensation (in CHF)

Base salary

Pension

benefits

Other

benefits

(1)

Short-term

incentive

(4)

Realized

Value LTIP

2017

(5)

Total variable

compensation

Total

Compensation

Björn Rosengren (EC member as of

January 27, 2020, CEO as of March

1, 2020)

1,504,141

666,175

688,685

977,685

n.a.

977,685

3,836,686

Timo Ihamuotila

902,508

494,360

646,278

698,535

593,811

1,292,346

3,335,492

Sylvia Hill

725,004

471,925

290,108

547,500

n.a.

547,500

2,034,537

Maria Varsellona

760,008

471,538

818,288

655,880

n.a.

655,880

2,705,714

Theodor Swedjemark (EC member as

of August 1, 2020)

200,002

118,951

75,259

130,000

n.a.

130,000

524,212

Sami Atiya

760,008

465,509

423,787

418,000

519,907

937,907

2,587,211

Tarak Mehta

848,339

479,932

390,681

695,115

475,267

1,170,382

2,889,334

Peter Terwiesch

760,008

456,374

334,575

387,600

555,996

943,596

2,494,553

Morten Wierod

704,171

413,120

346,080

681,150

203,618

884,768

2,348,139

Total

7,164,189

4,037,884

4,013,741

5,191,465

2,348,599

7,540,064

22,755,878

Realized achievement level

Base salary

Pension

benefits

Other

benefits

(1)

Short-term

incentive

(4)

Realized

Value LTIP

2017

in %

(5)

Total

variable

compensation

Total

Compensation

Björn Rosengren (EC member as of

January 27, 2020, CEO as of March

1, 2020)

100%

65%

n.a.

65%

88%

Timo Ihamuotila

100%

77%

59%

68%

85%

Sylvia Hill

100%

75%

n.a.

75%

92%

Maria Varsellona

100%

86%

n.a.

86%

96%

Theodor Swedjemark (EC member as

of August 1, 2020)

100%

65%

n.a.

65%

88%

Sami Atiya

100%

55%

62%

58%

79%

Tarak Mehta

100%

81%

56%

69%

85%

Peter Terwiesch

100%

51%

62%

57%

78%

Morten Wierod

100%

96%

54%

81%

92%

Total

100%

72%

59%

68%

86%

______________________

(1)

Other benefits comprise payments related to social security, health insurance, children's education, transportation, tax advice and certain other items.

(2)

Target short-term incentive corresponds to 100 percent of the latest applicable annual base salary adjusted for the voluntary COVID-19 donation and pro-rated for the EC members who

joined the EC during the year 2020.

(3)

Represents the LTIP 2017 grant date fair value as per June 13, 2017, as disclosed in our annual report 2017.

(4)

Represents accrued STI for the year 2020, which will be paid in 2021, after the publication of ABB's financial results. STI is linked to the objectives defined in each EC member's

annual incentive plan.

(5)

Valued at CHF 19.84, the closing price of the ABB share on the day of vesting.

133

EMPLOYEES

A breakdown of our employees by geographic region is as follows:

December 31,

2020

2019

2018

Europe

49,200

68,400

68,300

The Americas

27,600

35,200

35,600

Asia, Middle East and Africa

28,800

40,800

42,700

Total

105,600

144,400

146,600

The proportion of our employees that are represented

by labor unions or are subject to collective bargain

ing

agreements varies based on the labor practices of each

country in which we operate.

Item 7.

Major Shareholders and Related Party Transactions

MAJOR SHAREHOLDERS

At December 31, 2020, we had approximately 499,000 shareholders.

Approximately 282,000 were U.S.

holders, of which approximately 430 were record holders.

Based on the share register, U.S. holders

(including holders of

ADSs) held approximately 12 percent of the total share

capital and voting rights as registered in the Commercial

For information on major shareholders see “Item 6. Directors,

Senior Management and Employees—

Shareholders—Significant shareholders”.

RELATED PARTY

TRANSACTIONS

Affiliates and associates

In the normal course of our business, we purchase products

from, sell products to and engage in other

transactions with entities in which we hold an equity interest. The

amounts involved in these transactions are not

material to ABB Ltd. Also, in the normal course of our

business, we engage in transactions with businesses that we have

divested. We

believe that the terms of the transactions we conduct with

these companies are negotiated on an arm’s

length basis.

Key management personnel

For information on important business relationships between

ABB and its Board and EC members, or

companies and organizations represented by them,

see “Item 6. Directors, Senior Management and Employees

”

sections

entitled “Board of Directors—Business Relationships between

ABB and its Board members” and “Executive

Committee—Business Relationships between ABB and

its EC members”.

Item 8.

Financial Information

CONSOLIDATED STATEMENTS

AND OTHER FINANCIAL INFORMATION

See “Item 18. Financial Statements”.

134

LEGAL PROCEEDINGS

Regulatory

As a result of an internal investigation, ABB self-reported

to the Securities and Exchange Commission (SEC)

and the Department of Justice (DoJ) in the United States

as well as to the Serious Fraud Office (SFO) in the

United

Kingdom concerning certain of our past dealings with

Unaoil and its subsidiaries, including alleged improper payments

made by these entities to third parties. In May 2020, the

SFO closed its investigation, which it originally announced in

February 2017, as the case did not meet the relevant

test for prosecution. We

continue to cooperate with the U.S.

authorities as requested. At this time, it is not possible for

us to make an informed judgment about the outcome of this

matter.

Based on findings during an internal investigation, ABB self

-reported to the SEC and the DoJ, in the United

States, to the Special Investigating Unit (SIU) and the

National Prosecuting Authority (NPA)

in South Africa as well as

to various authorities in other countries potential suspect payments

and other compliance concerns in connection with

some of our dealings with Eskom and related persons.

Many of those parties have expressed an interest in, or

commenced an investigation into, these matters and we

are cooperating fully with them. ABB paid $104 million to

Eskom in December 2020 as part of a full and final settlement

with Eskom and the Special Investigating Unit relating to

improper payments and other compliance issues associated with

the Controls and Instrumentation Contract, and its

Variation

Orders for Units 1 and 2 at Kusile. ABB continues to cooperate

fully with the National Prosecuting Authority

in South Africa as well as other authorities in their review

of the Kusile project. Although we believe that there could

an unfavorable outcome in one or more of these ongoing reviews,

at this time it is not possible for us to make an

informed judgment about the possible financial impact.

General

In addition, we are aware of proceedings, or the threat of proceedings,

against us and others in respect of

private claims by customers and other third parties with

regard to certain actual or alleged anticompetitive practices.

Also, we are subject to other claims and legal proceedings,

as well as investigations carried out by various law

enforcement authorities. With respect

to the above-mentioned claims, regulatory matters, and

any related proceedings,

we will bear the related costs including costs necessary

to resolve them.

Liabilities recognized

At December 31, 2020 and 2019, we had aggregate liabilities of

$100 million and $157 million, respectively,

included in “Other provisions” and “Other non-current liabilities”, for

the above regulatory,

compliance and legal

contingencies, and none of the individual liabilities recognized

was significant. As it is not possible to make an informed

judgment on, or reasonably predict, the outcome of certain

matters and as it is not possible, based on information

currently available to management, to estimate the maximum

potential liability on other matters, there could be adverse

outcomes beyond the amounts accrued.

DIVIDENDS AND DIVIDEND POLICY

See “Item 3. Key Information—Dividends and Dividend

Policy” and “Item 6. Directors, Senior Management

and Employees—Shareholders—Shareholders’ rights—Shareholders’

dividend rights”.

SIGNIFICANT CHANGES

Except as otherwise described in this Annual Report,

there has been no significant change in our financial

position since December 31, 2020.

135

Item 9.

The Offer and Listing

MARKETS

The shares of ABB Ltd. are principally traded on the SIX Swiss Exchange

(under the symbol “ABBN”) and on

the NASDAQ OMX Stockholm Exchange (under the symbol “ABB”).

ADSs of ABB Ltd. have been traded on the New

York

Stock Exchange under the symbol “ABB” since April 6, 2001.

ABB Ltd.’s ADSs are issued under

the Amended

and Restated Deposit Agreement, dated May 7, 2001, with

Citibank, N.A. as depositary.

Each ADS represents one

share.

There were no suspensions in the trading of our shares

in 2020, 2019 and 2018.

Item 10.

Additional Information

DESCRIPTION OF SHARE CAPITAL

AND ARTICLES OF INCORPORATION

This section summarizes the material provisions of ABB Ltd’s

Articles of Incorporation and the Swiss Code of

Obligations relating to the shares of ABB Ltd. The description

is only a summary and is qualified in its entirety by

ABB Ltd’s Articles of Incorporation,

a copy of which has been filed as Exhibit 1.1 to this Annual Report,

ABB Ltd’s

filings with the commercial register of the Canton of Zurich

(Switzerland) and Swiss statutory law.

Other than as

disclosed below, the

information called for by this Item is set forth in Exhibit 2.3

to this Annual Report and is

incorporated by reference into this Annual Report.

Registration and Business Purpose

ABB Ltd was registered as a corporation (

Aktiengesellschaft

) in the commercial register of the Canton of

Zurich (Switzerland) on March 5, 1999, under the name

of “New ABB Ltd” and its name was subsequently changed

“ABB Ltd”. Its commercial register number is CHE-101.049.653.

ABB Ltd’s purpose, as set forth

in Article 2 of its Articles of Incorporation, is to hold interests in

business

enterprises, particularly in enterprises active in the areas

of industry, trade and

services. It may acquire, encumber,

exploit or sell real estate and intellectual property rights

in Switzerland and abroad and may also finance other

companies. It may engage in all types of transactions

and may take all measures that appear appropriate to promote,

that are related to, its purpose. Finally,

in pursuing its purpose, ABB Ltd shall strive for long-term

sustainable value

creation.

Capital Structure

For a description of ABB Ltd’s

capital structure (including issued shares, contingent

share capital and

authorized share capital) and its dividend policy,

see “Item 6. Directors, Senior Management and Employees—Shares”

and “Item 3. Key Information—Dividends and Dividend

Policy”.

Shareholders’

Meetings

Under Swiss law, the annual

general meeting of shareholders must be held within 6 months after

the end of

ABB Ltd’s fiscal year.

Annual general meetings of shareholders are convened

by the board of directors, liquidators or

representatives of bondholders or,

if necessary, by the statutory

auditors. The board of directors is further required to

convene an extraordinary general meeting of shareholders

if so resolved by the shareholders in a general meeting of

shareholders or if so requested by one or more shareholders

holding in aggregate at least 10 percent of ABB Ltd’s

capital. A general meeting of shareholders is convened

by publishing a notice in the Swiss Official Gazette of

Commerce (

Schweizerisches Handelsamtsblatt

) at least 20 days prior to the meeting date. In addition,

ABB publishes

notices for its general meetings in certain newspapers

as well as on its website. Such notices contain information

as to

procedures to be followed by shareholders in order to

participate and exercise voting rights at the shareholders’

meetings.

136

One or more shareholders whose combined holdings represent

an aggregate par value of at least CHF 48,000

may require, in the form of a written request,

40 calendar days prior to a general meeting of shareholders

that specific

items and proposals be included on the agenda and voted

on at the next general meeting of shareholders.

The following powers are vested exclusively in

the general meeting of the shareholders:

•

adoption and amendment of the Articles of Incorporation,

•

election of members of the Board of Directors, the Chairman

of the Board, the members of the

Compensation Committee, the auditors and the independent

proxy,

•

approval of the annual management report and the consolidated

financial statements,

•

approval of the annual financial statements and decision

on the allocation of profits shown on the balance

sheet, in particular with regard to dividends,

•

approval of the compensation of the Board of Directors and

of the Executive Committee pursuant to

ABB Ltd’s Articles of Incorporation,

•

granting discharge to the members of the

Board of Directors and the persons entrusted with management,

and

•

passing resolutions as to all matters reserved to the authority

of the shareholders’ meeting by law or under

ABB Ltd’s Articles of Incorporation

or that are submitted to the shareholders’ meeting by the Board

Directors to the extent permitted by law.

There is no provision in ABB Ltd’s

Articles of Incorporation requiring a quorum for the holding

shareholders’

meetings.

Resolutions and elections usually require the approval

of an “absolute majority”

of the shares represented at a

shareholders’

meeting (i.e. a majority of the shares represented at the shareholders

’

meeting with abstentions having the

effect of votes against the resolution). If the

first ballot fails to result in an election and more than one candidat

standing for election, the presiding officer will order

a second ballot in which a relative majority (i.e. a majority

of the

votes) shall be decisive.

A resolution passed with a qualified majority (at least two-thirds)

of the shares represented at a shareholders’

meeting is required for:

•

a modification of the purpose of ABB Ltd,

•

the creation of shares with increased voting powers,

•

restrictions on the transfer of registered shares and the

removal of those restrictions,

•

restrictions on the exercise of the right to vote and the

removal of those restrictions,

•

an authorized or conditional increase in share capital,

•

an increase in share capital through the conversion of

capital surplus, through an in-kind contribution or in

exchange for an acquisition of property,

and the grant of special benefits,

•

the restriction or denial of pre-emptive rights,

•

a transfer of ABB Ltd’s place

of incorporation, and

137

•

ABB Ltd’s dissolution.

In addition, the introduction of any provision in ABB Ltd’s

Articles of Incorporation providing for a qualified

majority must be resolved in accordance with such qualified

majority voting requirements.

Pursuant to the Swiss Federal Merger Act, special

quorum rules apply by law to a merger (

Fusion

) (including a

possible squeeze-out merger), de-merger

(

Spaltung

), or conversion (

Umwandlung

) of ABB Ltd.

At shareholders’

meetings, shareholders can be represented by proxy,

but only by their legal representative,

another shareholder with the right to vote, or the independent

proxy elected by the shareholders (

unabhängiger

Stimmrechtsvertreter

). All shares held by one shareholder may be represented

by only one representative. Votes

are

taken on a show of hands unless a secret ballot is required

by the general meeting of shareholders or the presiding

officer. The

presiding officer may arrange for resolutions and elections

to be carried out by electronic means. As a result,

resolutions and elections carried out by electronic means

will be deemed to have the same effect as secret ballots.

The

presiding officer may at any time order that

a resolution or election decided by a show of hands be repeated through

secret ballot if, in his view,

the results of the vote are in doubt. In this case, the preceding

decision by a show of hands

shall be deemed to have not occurred.

Only shareholders registered in ABB Ltd’s

share register with the right to vote are entitled to participate

shareholders’

meetings. For practical reasons, shareholders must be registered

in the share register with the right to vote

no later than 6 business days prior to a shareholders’ meeting

in order to be entitled to participate and vote at such

shareholders’

meeting.

Holders of Euroclear Sweden AB-registered shares are provided

with financial and other information on

ABB Ltd in the Swedish language in accordance with regulatory

requirements and market practice. For shares that are

registered in the system of Euroclear Sweden AB in the

name of a nominee, such information is to be provided by the

nominee.

Borrowing Power

Neither Swiss law nor ABB Ltd’s

Articles of Incorporation restrict in any way ABB Ltd’s

power to borrow and

raise funds. The decision to borrow funds is taken by or

under the direction of the Board of Directors or the Executive

Committee, and no shareholders’ resolution is required.

Directors and Officers

For further information regarding the material provisions

of ABB Ltd’s Articles of Incorporation

and the Swiss

Code of Obligations regarding directors and officers,

see “Item 6. Directors, Senior Management and Employees

—

Board Of Directors—Board governance”.

Auditors

The auditors are elected by the shareholders at the Annual

General Meeting. Pursuant to ABB Ltd’s

Articles of

Incorporation, their term of office is one year.

KPMG AG, Zürich, Switzerland, assumed the sole auditing

mandate of the consolidated financial statements of

the ABB Group beginning in the year ended December

31, 2018. The auditor in charge and responsible for

the mandate,

Hans-Dieter Krauss, began serving in this capacity in respect

of the financial year ended December 31, 2018.

See “Item 16C. Principal Accountant Fees and Services” for

information regarding the fees paid to KPMG AG.

138

MATERIAL CONTRACTS

The following descriptions of the material provisions of

the referenced agreements do not purport to be

complete and are subject to, and qualified in their entirety

by reference to, the agreements which have been filed as

exhibits to this Annual Report.

Sale and Purchase agreement relating

to the divestment of the Power Grids business

On December 17, 2018, ABB Ltd (the Seller) entered into a

Sale and Purchase Agreement with Hitachi Ltd (the

Purchaser) for the sale and purchase of 80.1% of

the shares of ABB Management Holding AG (or such other

entity as

agreed between the Seller and the Purchaser). See Exhibit

4.6 to this Annual Report.

Revolving Credit Facilities

On December 16, 2019, ABB entered into a syndicated

$2 billion five-year revolving credit facility with the

right to extend for up to two additional years in accordance

with its terms. For a description of the facility,

see “Item 5.

Operating and Financial Review and Prospects—Liquidity

and Capital Resources—Credit Facility” and “Note 12

Debt” to our Consolidated Financial Statements. See Exhibit

4.1 to this Annual Report.

In March 2020, ABB entered into a bank-funded short

-term EUR 2 billion Revolving Credit Agreement (the

Agreement). This Agreement was in addition to our

existing $2 billion multicurrency revolving credit facility (see

below). Under this Agreement, outstanding amounts were

subject to interest at the rate of EURIBOR plus a margin

0.25 percent. We

requested the full amount to be borrowed and the proceeds

were received on March 31, 2020,

amounting to $2,183 million, net of issuance costs. The

Agreement required that all outstanding amounts be repaid

within 15 days after the completion of the sale of the

Power Grids business. The Agreement was terminated after the

final repayment on July 8, 2020.

2012 Notes Indenture

On May 8, 2012, ABB’s subsidiary,

ABB Finance (USA) Inc., issued $500,000,000 aggregate principal

amount

of 1.625% notes due 2017, $1,250,000,000 aggregate principal amount

of 2.875% notes due 2022 and $750,000,000

aggregate principal amount of 4.375% notes due 2042

under an Indenture and a First Supplemental Indenture

dated as

of May 8, 2012, among ABB Finance (USA) Inc., ABB and Deutsche

Bank Trust Company Americas (the

“2012

Indenture”). The notes due in 2017 were repaid at maturity.

In 2020, the notes due 2042 were subject to a cash

tender

offer by the issuer and redeemed in part. Pursuant

to the terms of the 2012 Indenture, ABB has fully and unconditionally

guaranteed payment of principal, premium, if any,

and interest in respect of the outstanding notes. See Exhibit

4.2 and

4.3 to this Annual Report.

2018 Notes Indenture

On April 3, 2018, ABB’s subsidiary,

ABB Finance (USA) Inc., issued (i) $300,000,000 aggregate

principal

amount of 2.8% notes due 2020 (ii) $450,000,000 aggregate

principal amount of 3.375% notes, due 2023, and

(iii)

$750,000,000 aggregate principal amount of 3.8% notes due

2028 under an Indenture and a First Supplemental

Indenture dated, dated as of April 3, 2018, among ABB Finance

(USA) Inc., ABB and Deutsche Bank Trust

Company

Americas (the “2018 Indenture”). The notes due in 2020

were repaid

at maturity. The notes due

2023 were redeemed in

full in 2020 following the exercise of ABB’s

early redemption option.

The notes due 2028 were subject to a cash tender

offer in 2020 by the issuer and redeemed in part.

Pursuant to the terms of the 2018 Indenture, ABB has fully and

unconditionally guaranteed payment of principal, premium,

if any, and interest in respect

of the outstanding notes. See

Exhibits

4.4 and 4.5 to this Annual Report.

139

EXCHANGE CONTROLS

Other than in connection with Swiss government sanctions

imposed on Belarus, the Republic of Burundi, the

Central African Republic, the Democratic Republic of

the Congo, Guinea, the Islamic Republic of Iran, the Republic

Iraq, Lebanon, Libya, the Republic of Mali, Myanmar

(Burma), Nicaragua, the Democratic People's Republic of

Korea

(North Korea), the Republic of Guinea-Bissau, Somalia, the

Republic of South Sudan, Sudan, Syria, Venezuela,

Yemen,

Zimbabwe, persons and organizations with connection

to the late Osama bin Laden, the “al Qaeda” group or the Taliban

certain persons connected with the assassination of Rafik

Hariri and certain measures in connection with the prevention

of circumvention of international sanctions in connection

with the situation in the Ukraine, there are currently no laws,

decrees or regulations in Switzerland that restrict the

export or import of capital, including, but not limited to, Swiss

foreign exchange controls on payment of dividends, interest or

liquidation proceeds, if any,

to non-Swiss resident

holders of shares. In addition, there are no limitations imposed

by Swiss law or ABB Ltd’s

Articles of Incorporation on

the rights of non-Swiss residents or non-Swiss citizens as shareholders

to hold shares or to vote.

TAXATION

Swiss Taxation

Withholding Tax

on Dividends and Other Distributions

Dividends paid and similar cash or in-kind distributions that we

make to a holder of shares or ADSs (including

dividends on liquidation proceeds and stock dividends and

taxable income resulting from partial liquidation) are subject

to a Swiss federal withholding tax at a rate of 35 percent.

A repurchase of shares by us for the purpose of a capital

reduction is defined as a partial liquidation of the

Company. In this case, the

difference between the nominal value of the

shares and their repurchase price is qualified as taxable

income. The same would be true upon a repurchase of shares

we were not to dispose of the repurchased shares within

six years after the repurchase, or if 10 percent of outstanding

shares were exceeded. We

must withhold the tax from the gross distribution and pay

it to the Swiss Federal Tax

Administration.

Obtaining a Refund of Swiss Withholding

Tax for

U.S. Residents

The Convention between the Swiss Confederation and the

United States of America for the Avoidance

Double Taxation

with Respect to Taxes

on Income, which was signed on October 2, 1996 (including

any amendments

thereto) and which we will refer to in the following discussion

as the Treaty,

allows U.S. resident individuals or U.S.

corporations to seek a refund of the Swiss withholding

tax paid in respect of our shares or ADSs if they qualify for

benefits under the Treaty.

U.S. resident individuals and U.S. corporations holding less than 10

percent of the voting

rights in respect of our shares or ADSs are entitled to seek

a refund of withholding tax to the extent the tax withheld

exceeds 15 percent of the gross dividend or other distribution.

U.S. corporations holding 10 percent or more of the

voting rights of our shares or ADSs are entitled to seek a refund

of withholding tax to the extent the tax withheld

exceeds 5 percent of the gross dividend or other distribution.

Qualifying U.S. pension or other retirement arrangements

and – as from January 1, 2020 – also individual retirement

saving plans that do not control the Company are entitled

seek a full refund of withholding tax.

Claims for refunds must be filed with the Swiss Federal Tax

Administration, Eigerstrasse 65, 3003 Bern,

Switzerland, no later than December 31 of the third year

following the calendar year in which the dividend or similar

distribution became payable. The form used for obtaining a

refund is Swiss Tax Form

82 (82C for companies; 82E for

other entities; 82I for individuals; 82R for regulated

investment companies (RICs)). This form may be obtained

from any

Swiss Consulate General in the United States, from

the Swiss Federal Tax

Administration at the address above or under

www.estv.admin.ch

. The form must be filled out in triplicate with each copy duly

completed and signed before a notary

public in the United States. The form must be accompan

ied by evidence of the deduction of withholding tax

withheld at

the source (including tax voucher issued by the custodian

bank).

140

Stamp Duties upon Transfer

of Securities

The sale of shares or ADSs, whether by Swiss resident or non-resident

holders, may be subject to a Swiss

securities transfer stamp duty of up to 0.15 percent calculated

on the sale proceeds

if it occurs through or with a Swiss

bank or other Swiss securities dealer as defined in the

Swiss Federal Stamp Tax

Act. In addition to the stamp duty,

the

sale of shares or ADSs by or through a member of

the SIX Swiss Exchange may be subject to a stock exchange

levy.

United States Taxes

The following is a summary of the material U.S. federal

income tax consequences of the ownership by U.S.

holders (defined below) of shares or ADSs. This summary

does not purport to address all of the tax considerations that

may be relevant to a decision to purchase, own or dispose

of shares or ADSs. This summary assumes that U.S. holders

hold shares or ADSs as capital assets for U.S. federal

income tax purposes. This summary does not address tax

considerations applicable to holders that may be subject

to special tax rules, such as U.S. expatriates, dealers or traders

in securities or currencies, partnerships owning shares or

ADSs, tax-exempt entities, banks and other financial

institutions, regulated investment companies, traders in

securities that elect to apply a mark-to-market method of

accounting, insurance companies, holders that own (or

are deemed to own) at least 10 percent or more (by voting power

or value) of the stock of ABB, investors whose functional

currency is not the U.S. dollar, persons

subject to the

alternative minimum tax, persons subject to special tax

accounting rules as a result of any item of gross income with

respect to the shares or ADSs being taken into account

in an applicable financial statement, persons that will hold

or ADSs as part of a position in a straddle or as part

of a hedging or conversion transaction for U.S. tax purposes and

persons who are not U.S. holders. This discussion does not

address aspects of U.S. taxation other than U.S. federal

income taxation, nor does it address state, local or foreign

tax consequences of an investment in shares or ADSs.

This summary is based (i) on the Internal Revenue

Code of 1986, as amended, U.S. Treasury

Regulations and

judicial and administrative interpretations thereof,

in each case as in effect and available on the date

of this registration

statement and (ii) in part, on representations of the depositary

and the assumption that each obligation in the deposit

agreement and any related agreement will be performed in

accordance with its terms. The U.S. tax laws and regulations

and the interpretation thereof are subject to change, which

change could apply retroactively and could affect the

tax

consequences described below.

For purposes of this summary,

a U.S. holder is a beneficial owner of shares or ADSs that,

for U.S. federal

income tax purposes, is:

•

a citizen or individual resident of the United States,

•

a corporation (or other entity treated as a corporation for

U.S. federal income tax purposes) created or

organized in or under the laws of the United States or

any state, including the District of Columbia,

•

an estate if its income is subject to U.S. federal income

taxation regardless of its source, or

•

a trust if such trust validly has elected to be treated as

a U.S. person for U.S. federal income tax purposes

or if (i) a U.S. court can exercise primary supervision over

its administration and (ii) one or more U.S.

persons have the authority to control all of its substantial decisions.

If a partnership (including any entity or arrangement

treated as a partnership for U.S. federal income tax

purposes) is a beneficial owner of shares or ADSs, the treatment

of a partner in the partnership will generally depend on

the status of the partner and the activities of the partn

ership. If you are a partner in a partnership that holds shares or

ADSs you should consult your tax advisor.

Each prospective purchaser should consult the purchaser

’s tax advisor with respect to the

U.S. federal, state,

local and foreign tax consequences of acquiring, owning or

disposing of shares or ADSs.

141

Ownership of ADSs in General,

and Exchange of ADSs for Shares

For U.S. federal income tax purposes, a holder of ADSs generally

will be treated as the owner of the shares

represented by the ADSs, and the following discussion assumes

that such treatment will be respected. If so, no gain

loss will be recognized upon an exchange of shares for ADSs or

an exchange of ADSs for shares. The U.S. Treasury

has

expressed concerns that intermediaries in the chain of

ownership between the holder of an ADS and the issuer

of the

security underlying the ADS may be taking actions

that are inconsistent with the beneficial ownership of the underlying

shares. Accordingly,

the creditability of foreign taxes and the availability of

the reduced tax rate for dividends received

by certain non-corporate U.S. holders, if any,

as described below, could

be affected by actions taken by intermediaries in

the chain of ownership between the holder of an ADS and

ABB.

Distributions

In general, for U.S. federal income tax purposes, the gross

amount of any distribution (other than certain

distributions, if any,

of shares distributed to all shareholders of ABB, including

holders of ADSs) made to you with

respect to shares or ADSs, including the amount of any

Swiss taxes withheld from the distribution, will constitute

dividends and be includible in gross income in the year

received to the extent of ABB’s current

and accumulated

earnings and profits (as determined under U.S. federal

income tax principles).

Non-corporate U.S. holders generally will be taxed

on such distributions at the lower rates applicable to

long-term capital gains (i.e., gains from the sale of capital

assets held for more than one year) with respect to

distributions during 2020, provided that the U.S. holder meets certain

holding period and other requirements and

provided that such distributions constitute “qualified dividends”

for U.S. federal income tax purposes. Distributions

treated as dividends will not be treated as “qualified dividends”

if we were to be treated as a “passive foreign investment

company” (PFIC) for U.S. federal income tax purposes in

the year that the dividend is paid or in the year prior to the

year that the dividend is paid. Based on certain estimates of

its gross income and gross assets and the nature of its

business, ABB believes that it will not be classified as a PFIC for

the taxable year ended December 31, 2020 and does

not expect to be classified as a PFIC for the taxable

year ending December 31, 2021. ABB’s

status in the current year

and in future years will depend on its assets and activities in

those years. ABB has no reason to believe that its assets or

activities will change in a manner that would cause it to

be classified as a PFIC. However, as PFIC status is a

factual

matter that depends on, among other things, the composition

of the income and assets, and the market value of the assets

as reflected in market capitalization, of ABB and its subsidiaries

that must be determined annually at the close of each

taxable year, there can be no certainty

regarding ABB’s PFIC status in any

particular year until the end of that year.

U.S.

holders are urged to consult their own tax advisors

regarding the availability to them of the reduced dividend

rate in light

of their own particular circumstances and the consequences

to them if ABB were to be treated as a PFIC with respect to

any taxable year.

Dividends paid to U.S. corporate holders will not be eligible for

the dividends received deduction generally

allowed to corporate U.S. holders.

If you are a U.S. holder and distributions with respect to shares or

ADSs exceed ABB’s current and

accumulated earnings and profits as determined under U.S.

federal income tax principles, then the excess generally

would be treated first as a tax-free return of capital to

the extent of your adjusted tax basis in the shares or ADSs. Any

amount in excess of the amount of the dividend and the

return of capital generally would be treated as capital gain. ABB

does not maintain calculations of its earnings and profits under

U.S. federal income tax principles, so a U.S. holder

should expect all cash distributions to be reported as dividends

for U.S. federal income tax purposes.

142

If you are a U.S. holder, then

dividends paid in Swiss francs, including the amount

of any Swiss taxes withheld

from the dividends, will be included in your gross income

in an amount equal to the U.S. dollar value of the Swiss francs

calculated by reference to the spot exchange rate in

effect on the day the dividends are includible in income.

In the case

of ADSs, dividends generally are includible in income on

the date they are received by the depositary,

regardless of

whether the payment is in fact converted into U.S.

dollars at that time. If dividends paid in Swiss francs are converted

into U.S. dollars on the day they are includible in income,

then you generally should not be required to recognize foreign

currency gain or loss with respect to the conversion. However,

any gains or losses resulting from the conversion of

Swiss francs between the time of the receipt of dividends

paid in Swiss francs and the time the Swiss francs are

converted into U.S. dollars will be treated as ordinary income

or loss to you, as the case may be. The amount of any

distribution of property other than cash will be the

fair market value of the property on the date of distribution.

If you are a U.S. holder, then

dividends received by you with respect to shares or ADSs will

be treated as

foreign source income, which may be relevant in calculating your

foreign tax credit limitation. Subject to certain

conditions and limitations, Swiss tax withheld on dividends

may be deducted from your taxable income or credited

against your U.S. federal income tax liability.

However, to the extent that you would

be entitled to a refund of Swiss

withholding taxes pursuant to the U.S.-Switzerland tax treaty,

you may not be eligible for a U.S. foreign tax credit with

respect to the amount of such withholding taxes which

may be refunded, even if you fail to claim the refund. See “—

Swiss Taxation—Obtaining a Refund of Swiss Withholding

Tax for U.S. Residents”.

The limitation on foreign taxes

eligible for credit is calculated separately with respect

to specific classes of income. For this purpose, dividends

distributed by ABB generally will constitute passive income.

The rules relating to the determination of the U.S. foreign

tax credit are complex, and you should consult your

tax advisor to determine whether and to what extent you

would be

entitled to this credit.

Sale, Exchange or other Taxable

Disposition of Shares or ADSs

If you are a U.S. holder that holds shares or ADSs as capital assets, then

you generally will recognize capital

gain or loss for U.S. federal income tax purposes upon

a sale, exchange or other taxable disposition of your shares or

ADSs in an amount equal to the difference between

your adjusted tax basis in the shares or ADSs and the amount

realized on their disposition. If you are a non-corporate

U.S. holder, the maximum marginal

U.S. federal income tax rate

applicable to the gain is generally lower than the maximum

marginal U.S. federal income tax rate applicable

to ordinary

income (other than certain dividends) if your holding period

for the shares or ADSs exceeds one year (i.e., long term

capital gains). If you are a U.S. holder,

then the gain or loss, if any,

recognized by you generally will be treated as U.S.

source income or loss, as the case may be, for U.S. foreign

tax credit purposes.

If you are a U.S. holder and you receive any foreign currency

on the disposition of shares or ADSs, the amount

realized will be the U.S. dollar value of the payment

received, translated at the spot rate of exchange on the date

taxable disposition. If the shares are treated as traded

on an established securities market, a cash basis U.S. holder

and an

accrual basis U.S. holder who has made a special election

(which must be applied consistently from year to year and

cannot be changed without the consent of the U.S. Internal

Revenue Service) will determine the U.S. dollar value of the

amount realized in foreign currency by translating the amount

received at the spot rate of exchange on the settlement

date of the disposition. An accrual basis U.S. holder

that does not make the special election will recognize U.S.

source

ordinary income or loss as a result of currency fluctuations

between the trade date and the settlement date of the

disposition of the shares or ADSs, as the case may be.

Medicare Tax

For taxable years beginning after December 31, 2012,

certain U.S. holders who are individuals, estates or trusts

must pay a 3.8 percent tax on the lesser of (i) the U.S. holder’s

“net investment income” for the relevant taxable year

and

(ii) the excess of the U.S. holder’s modified adjusted

gross income for the taxable year over a certain threshold

(which in

the case of individuals will be between $125,000 and $250,000,

depending on the individual’s circumstances).

A U.S.

holder’s net investment income will generally include

its dividend income and its net gains from the disposition of

shares or ADSs, unless such income or net gains are derived

in the ordinary course of the conduct of a trade or business

(other than a trade or business that consists of certain passive

or trading activities). If you are a U.S. holder that is an

individual, estate or trust, you are urged to

consult your tax advisor regarding the applicability of the

Medicare tax to

your income and gains in respect of your investment in

shares or ADSs.

143

Information with Respect to Foreign

Financial Assets

Certain U.S. holders who are individuals (and certain

entities) that hold an interest in “specified foreign

financial assets” (which may include the shares) are required

to report information relating to such assets, subject to

certain exceptions (including an exception for shares held

in accounts maintained by certain financial institutions).

Penalties can apply if U.S. holders fail to satisfy such reporting

requirements. U.S. holders should consult their tax

advisors regarding the effect, if any,

of this requirement on their ownership and disposition of

the shares.

Backup Withholding

and Information Reporting

U.S. backup withholding tax and information reporting

requirements generally apply to certain payments to

certain non-corporate holders of stock. Information reporting

generally will apply to payments of dividends on, and to

proceeds from the sale or redemption of, shares or ADSs made

within the United States to a holder of shares or ADSs

(other than an exempt recipient, including a corporation,

a payee that is not a U.S. holder that provides an appropriate

certification, and certain other persons).

A payor will be required to withhold backup withholding

tax from any payments of dividends on, or the

proceeds from the sale or redemption of, shares or ADSs within

the United States to you, unless you are an exempt

recipient, if you fail to furnish your correct taxpayer identification

number or otherwise fail to establish an exception

from backup withholding tax requirements. U.S. holders who

are required to establish their exempt status may be

required to provide such certification on U.S. Internal

Revenue Service Form W-9. Backup

withholding is not an

additional tax. The amount of any backup withholding from

a payment to you may be allowed as a credit against your

U.S. federal income tax liability and may entitle you to

a refund, provided that the required information is furnished

timely to the U.S. Internal Revenue Service.

THE ABOVE SUMMARIES ARE NOT INTENDED TO

CONSTITUTE A COMPLETE ANALYSIS

OF ALL

TAX CONSEQUENCES

RELATING TO

THE OWNERSHIP OF SHARES OR ADSS. PROSPECTIVE

PURCHASERS OF SHARES OR ADSS SHOULD CONSULT

THEIR TAX ADVISORS

CONCERNING THE

TAX CONSEQUENCES

OF THEIR PARTICULAR

SITUATIONS.

DOCUMENTS ON DISPLAY

We are subject

to the informational requirements of the Exchange Act.

In accordance with these requirements,

we file reports and other information with the SEC. The

SEC maintains a Web site at

www.sec.gov

that contains reports,

including this Annual Report and the exhibits thereto,

and other information regarding registrants that file electronically

with the SEC. Our Annual Reports on Form 20-F,

reports on Form 6-K and some of the other information we

submit to

the SEC may be accessed through this Web

site. In addition, material that we file can be inspected at the offices

of the

New York

Stock Exchange at 11 Wall

Street, New York,

New York

10005.

Item 11.

Quantitative and Qualitative Disclosures about Market

Risk

Market Risk Disclosure

The continuously evolving financial markets and

the dynamic business environment expose us to changes in

foreign exchange, interest rate and other market price

risks. We have

developed and implemented comprehensive

policies, procedures, and controls to identify,

mitigate, and monitor financial risk on a company

-wide basis. To

efficiently aggregate and manage financial

risks that could impact our financial performance, we operate

a Corporate

Treasury Operations function. Our Corporate

Treasury Operations provides an efficient

source of liquidity, financing,

risk management and other global financial services

to the ABB Group companies. Our policies do not allow our

Corporate Treasury Operations or ABB Group

companies to perform speculative trading. Market risk

management

activities are focused on mitigating material financial

risks resulting from our global operating and financing

activities.

144

Corporate Treasury Operations maintains risk

management control systems to monitor foreign exchange

and

interest rate risks and exposures arising from our underlying

business, as well as the associated hedge positions. Our

written policies govern how such exposures are managed.

Financial risks are monitored using a number of analytical

techniques including market value and sensitivity analysis.

The following quantitative analyses are based on sensitivity

analysis tests, which assume parallel shifts of interest rate

yield curves, and foreign exchange rates and equity prices.

Currency Fluctuations and Foreign

Exchange Risk

It is our policy to identify and manage all transactional

foreign exchange exposures to minimize risk. With

the

exception of certain financing subsidiaries and to the extent

certain operating subsidiaries are domiciled in high inflation

environments, the functional currency of each of our companies

is considered to be its local currency.

Our policies

require our subsidiaries to hedge all contracted foreign

exchange exposures, as well as a portion of their forecast

exposures, against their local currency.

These transactions are undertaken mainly with our Corporate

Treasury

Operations.

We have foreign

exchange transaction exposures related to our global operating

and financing activities in

currencies other than the functional currency in which

our entities operate. Specifically,

we are exposed to foreign

exchange risk related to future earnings, assets or liabilities

denominated in foreign currencies. The most significant

currency exposures relate to operations in the Eurozone

area, Sweden and Switzerland. In addition, we are exposed

currency risk associated with translating our functional

currency financial statements into our reporting currency,

which

is the U.S. dollar.

Our operating companies are responsible for identifying

their foreign currency exposures and entering into

intercompany derivative contracts with Corporate Treasury

Operations, where legally possible, to hedge their exposures.

Where local laws restrict our operating companies from

entering into intercompany derivatives with Corporate Treasury

Operations, derivative contracts are entered into

locally with third-party financial institutions. The intercompany

transactions have the effect of transferring the operating

companies’ currency risk to Corporate Treasury

Operations, but

create no additional market risks on a consolidated

basis. Corporate Treasury Operations then

manages this risk by

entering into offsetting transactions with third

-party financial institutions. According to our policy,

material net currency

exposures are required to be hedged and are primarily

hedged with forward foreign exchange contracts. The

majority of

the foreign exchange hedge instruments have, on average,

a maturity of less than twelve months. Corporate Treasury

Operations also hedges currency risks arising from monetary

intercompany balances, primarily loans receivable

from

other ABB companies.

At December 31, 2020 and 2019, the net fair value of financial

instruments with exposure to foreign currency

rate movements was an asset of $1,973 million and

$2,382 million, respectively.

The potential loss in fair value of such

financial instruments from a hypothetical 10 percent move

in foreign exchange rates against our position would be

approximately $647 million and $428 million for December

31 2020 and 2019, respectively.

The analysis reflects the

aggregate adverse foreign exchange impact associated with

transaction exposures, as well as translation exposures

where

appropriate. Our sensitivity analysis assumes a simultaneous

shift in exchange rates against our positions exposed

foreign exchange risk and as such assumes an unlikely

adverse case scenario. Exchange rates rarely move in the same

direction. Therefore, the assumption of a simultaneous shift

may overstate the impact of changing rates on assets and

liabilities denominated in foreign currencies. The underlying

trade-related transaction exposures of the industrial

companies are not included in the quantitative analysis. If

these underlying transaction exposures were included, they

would tend to have an offsetting effect

on the potential loss in fair value detailed above.

Interest Rate Risk

We are exposed

to interest rate risk due to our financing, investing, and

liquidity management activities. Our

operating companies primarily invest excess cash with, and

receive funding from, our Corporate Treasury

Operations on

an arm’s length basis. It is

our policy that the primary third-party funding and investing

activities, as well as the

monitoring and management of the resulting interest rate

risk, are the responsibility of Corporate Treasury

Operations.

Corporate Treasury Operations adjusts the duration

of the overall funding portfolio through derivative instruments

order to better match underlying assets and liabilities, as well

as minimize the cost of capital.

145

At December 31, 2020 and 2019, the net fair value of instruments

subject to Interest Rate Risk was an Asset of

$2,095 million and $5,765 million liability,

respectively. The potential

loss in fair value for such instruments from a

hypothetical 100 basis points parallel shift in interest rates

against our position (or a multiple of 100 basis points where

100 basis points is less than 10 percent of the interest rate)

would be approximately $395 million and $286 million,

for

December 31, 2020 and 2019, respectively.

Equity Risk

Certain of our entities have equity investments that expose

us to equity price risk. At December 31, 2020 and

2019, the net fair value of equity risk sensitive instruments was

an asset of $21 million and $26 million, respectively.

The potential loss in fair value of such financial instruments

from a hypothetical 10 percent move in the underlying

equity prices against our position would be approximately

$8 million and $10 million, for December 31, 2020 and 2019,

respectively.

Commodity Risk

We enter into

commodity derivatives to hedge certain of our raw material exposures.

At both December 31,

2020 and 2019, the net fair value of commodity derivatives

was an asset of $15 million. The potential loss in fair

value

for such commodity hedging derivatives from a hypothetical

adverse 10 percent move against our position in the

underlying commodity prices would be approximately

$11 million and $39 million for December

31, 2020 and 2019,

respectively. A portion

of our commodity derivatives are denominated in euro. The foreign

exchange risk arising on

such contracts has been excluded from the calculation

of the potential loss in fair value from a hypothetical 10 percent

move in the underlying commodity prices as discussed

above.

Item 12.

Description of Securities Other Than Equity Securities

American Depositary Shares

Depositary fees payable upon the issuance and cance

llation of ADSs are typically paid to the depositary bank

by the brokers (on behalf of their clients) receiving

the newly-issued ADSs from the depositary bank and by the brokers

(on behalf of their clients) delivering the ADSs to the depositary

bank for cancellation. The brokers in turn may charge

these transaction fees to their clients.

Depositary fees payable in connection with distributions

of cash or securities to ADS holders and the depositary

services fee are charged by the depositary

bank to the holders of record of ADSs as of the applicable ADS

record date.

The depositary fees payable for cash distributions are

generally deducted from the cash being distributed. In

the case of

distributions other than cash (i.e., stock dividends, rights

offerings), the depositary bank charges

the applicable fee to the

ADS record date holders concurrent with the distribution. In

the case of ADSs registered in the name of the investor

(whether certificated or un-certificated in direct registration),

the depositary bank sends invoices to the applicable

record

date ADS holders. In the case of ADSs held in brokerage

and custodian accounts via the central clearing and settlement

system, The Depository Trust Company

(DTC), the depositary bank, generally collects its fees through

the systems

provided by DTC (whose nominee is the registered holder

of the ADSs held in DTC) from the brokers and custodians

holding ADSs in their DTC accounts. The brokers and

custodians who hold their clients’ ADSs in DTC accounts in turn

charge their clients’ accounts the amount of

the fees paid to the depositary banks.

In the event of refusal to pay the depositary fees, the

depositary bank may,

under the terms of the deposit

agreement, refuse the requested service until payment

is received or may set-off the amount of the depositary

fees from

any distribution to be made to the ADS holder.

146

Depositary fees are as follows:

Depositary Service

Fee

Issuance of ADSs upon deposit of shares

Up to $5.00 per 100 ADSs (or fraction thereof) issued.

Delivery of deposited security against surrender of

ADSs

Up to $5.00 per 100 ADSs (or fraction thereof) surrendered.

Distribution of dividend

Up to $2.00 per 100 ADSs (or fraction thereof) held.

Distribution of cash proceeds

Up to $2.00 per 100 ADSs (or fraction thereof) held.

Distribution of ADSs pursuant to exercise of rights

Up to $5.00 per 100 ADSs (or fraction thereof) issued.

Depositary Payments

In 2020,

we received reimbursements from Citibank N.A., the Depositary

Bank of our ADS program, of

approximately $4 million to help cover costs related to our

ADS program. Those costs, in addition to costs associated

with compliance with U.S. securities laws, include expenses

such as listing fees, proxy expenses, printing and

distribution of reports, and other investor relations-related

activities.

PART

Item 13.

Defaults, Dividend Arrearages and Delinquencies

None

Item 14.

Material Modifications to the Rights of Security Holders and Use

of Proceeds

None

Item 15.

Controls and Procedures

Disclosure controls and procedures

In designing and evaluating our disclosure controls and

procedures, management recognizes that any controls

and procedures, no matter how well designed and

operated, can provide only reasonable, not absolute, assurance

achieving the desired control objectives. In addition,

the design of disclosure controls and procedures must reflect the

fact that there are resource constraints and that management is required

to apply judgment in evaluating the benefits of

possible controls and procedures relative to their costs.

Our Chief Executive Officer,

Björn Rosengren, and Chief Financial Officer,

Timo Ihamuotila, with the

participation of key corporate senior management and

management of key corporate functions, performed an evaluation

of our disclosure controls and procedures (as defined in

Rule 13a-15(e) of the Exchange Act) as of December 31, 2020,

including the effects of the COVID-19 pandemic.

Based on that evaluation, management, including the Chief

Executive

Officer and Chief Financial Officer,

has concluded that, as of December 31, 2020, our disclosure controls

and

procedures were effective.

Management’s annual report

on internal control over financial reporting

The Board of Directors and management of the ABB Group

are responsible for establishing and maintaining

adequate internal control over financial reporting as defined

in Rule 13a-15(f) of the Exchange Act.

147

Because of its inherent limitations, internal control

over financial reporting may not prevent or detect

misstatements. Also, projections of any evaluation of

effectiveness to future periods are subject to the risk that

controls

may become inadequate because of changes in conditions,

or that the degree of compliance with the policies and

procedures may deteriorate.

Management conducted an assessment of the effectiveness

of internal control over financial reporting as of

December 31, 2020. In making this assessment, management used

the criteria established in Internal Control—

Integrated Framework issued by the Committee of Sponsoring

Organizations of the Treadway

Commission (2013

framework). Based on this assessment, management

has concluded that internal control over financial reporting

was

effective as of December 31, 2020.

Report of the independent registered

public accounting firm

KPMG’s opinion on

the effectiveness of the ABB Group’s

internal control over financial reporting as of

December 31, 2020,

is included in “Item 18. Financial Statements”.

Changes in internal control over financial reporting

During the year ended December 31, 2020, changes

were made to the ABB Group’s

organizational structure

under the launch of the ABB Way

decentralized operating model. Aligning our internal

control framework with these

changes, the ownership and accountability for certain entity

-level controls have been reallocated between the Business

Areas, GBS and certain corporate functions relating to

the provision of assurance over key activities. Management

believes that these changes materially affected

the Company’s internal control

over financial reporting. These entity-

level controls, and the changes thereto, were included

within management’s assessment of

the effectiveness of internal

control over financial reporting as of December 31, 2020

described above.

There have been no other changes in our internal control over

financial reporting that occurred during the

period covered by this annual report that have materially

affected, or are reasonably likely to materially

affect, our

internal control over financial reporting. Since the

first quarter of 2020, in response to the COVID-19 pandemic,

the

majority of our accounting, finance and legal employees

have been working remotely.

The COVID-19 pandemic has not

had a material effect on, and is not reasonably

likely to materially affect, the ABB Group’s

internal control over

financial reporting.

Item 16A.

Audit Committee Financial Expert

Our Board of Directors has determined that David Meline,

Gunnar Brock, Geraldine Matchett and Satish Pai,

who serve on our Finance, Audit and Compliance Committee

(FACC),

are independent for purposes of serving on

the

audit committee under Rule 10A-3 of the Exchange Act

and the listing standards promulgated by the New York

Stock

Exchange, and are audit committee financial experts.

Item 16B.

Code of Ethics

Our Board of Directors as well as our Chief Executive

Officer, Chief Financial Officer,

principal accounting

officer and persons performing similar functions

are bound to adhere to our Code of Conduct, which applies to

all

employees of all companies in the ABB Group. Our

Code of Conduct is available on our Web

site in the section

“Corporate governance”

www.abb.com/investorrelations

. ABB intends to satisfy any applicable disclosure

requirement regarding amendment to, or waiver from, a

provision of our Code of Conduct by posting such information

on our Web

site at the address and location specified above.

148

Item 16C.

Principal Accountant Fees and Services

The aggregate fees for services rendered by KPMG along

with their respective affiliates for professional

services were as follows:

KPMG

($ in millions)

2020

2019

Audit Fees

40.6

37.5

Audit-Related Fees

2.7

0.7

Tax Fees

0.8

0.5

Other Fees

0.0

Total

44.1

38.7

Audit Fees

Audit fees include the standard audit work performed

each fiscal year necessary to allow the auditor to issue an

opinion on our Consolidated Financial Statements (including

the integrated audit of internal controls over financial

reporting) and to issue an opinion on the local statutory financial

statements of ABB Ltd and its subsidiaries. Audit fees

also include services that can be provided only by the

ABB Group auditor such as pre-issuance reviews of quarterly

financial results (no such reviews have been performed)

and comfort letters delivered to underwriters in connection

with

debt and equity offerings. Included in the 2020

audit fees were approximately $4.5 million related to audits

from 2019

and earlier,

which were not agreed until after the Company had filed its annual

report on Form 20-F with the SEC on

February 26, 2020.

Audit-Related Fees

These services consisting primarily of agreed-upon procedure

reports, accounting consultations, audits of

pension and benefit plans, accounting advisory services and

other attest services related to financial reporting that are

not required by statute or regulation.

Tax Fees

Fees for tax services represent primarily income tax

and indirect tax compliance services as well as tax

advisory services.

All Other Fees

Fees for other services not included in the above three

categories.

Pre-Approval

Procedures and Policies

In accordance with the requirements of the U.S. Sarbanes-Oxley

Act of 2002 and rules issued by the SEC, we

utilize a procedure for the review and pre-approval of

any services performed by KPMG. The procedure requires that

all

proposed engagements of KPMG for audit and permitted

non-audit services are submitted to the FACC

for approval

prior to the beginning of any such services. In accordance

with this policy, all services

performed by and fees paid to

KPMG in 2020

and 2019 were approved by the FACC

Item 16D.

Exemptions from the Listing Standards for Audit Committees

None

149

Item 16E.

Purchase of Equity Securities by Issuer and Affiliated

Purchasers

The following table sets out certain information about

purchases of our own shares made by us or on our behalf

or by affiliated purchasers:

Total number

Maximum

of shares

number of

purchased

shares that

Average

as part of

may yet be

Total number

price paid

publicly

purchased

of shares

per share

announced

under the

Period

purchased

(1)

(in CHF)

program

(2)

program

January 2020

—

February 2020

—

March 2020

—

April 2020

—

May 2020

—

June 2020

—

July 2020

8,569,859

23.71

8,569,859

171,430,141

August 2020

24,665,000

23.70

24,665,000

146,765,141

September 2020

26,074,500

23.46

26,074,500

120,690,641

October 2020

26,197,500

23.50

24,047,500

96,643,141

November 2020

17,699,000

23.85

11,494,000

85,149,141

December 2020

18,669,513

24.02

13,978,500

71,170,641

Total

121,875,372

108,829,359

(1)

In 2020, 13,046,013

shares were bought

outside of the

publicly announced

program. These

share purchases

were made through

open-

market transactions.

(2)

In July 2020,

ABB announced

it initially

intends to buy

10 percent of

its issued share

capital (which

at the time represented

a maximum

of 180 million

shares, in addition

to those already

held in treasury)

through the share

buyback program

that started in

July 2020. The

share buyback

program is executed

on a second trading

line on the SIX

Swiss Exchange

and is planned

to run until

ABB’s Annual

General Meeting

(AGM) in March

2021. At the

AGM, ABB intends

to request shareholder

approval to cancel

the shares purchased

through this

program.

Item 16F.

Change in Registrant’s Certifying Accountant

Not applicable.

Item 16G.

Corporate Governance

See “Item 6. Directors, Senior Management and Employees—Other

governance information—Governance

differences from NYSE Standards”

for significant ways in which ABB’s corporate

governance practices differ from the

New York

Stock Exchange’s standards.

Item 16H.

Mine Safety Disclosure

Not applicable.

150

PART

III

Item 17.

Financial Statements

We have elected

to provide financial statements and the related information

pursuant to Item 18.

Item 18.

Financial Statements

See pages F-1 to F-86, which are incorporated herein

by reference. All schedules are omitted as the required

information is inapplicable or the information is presented

in the Consolidated Financial Statements or notes thereto.

151

Item 19.

Exhibits

1.1

Articles of Incorporation of ABB Ltd

as amended to date.

2.1

Form of Amended and Restated Deposit Agreement, by and among ABB Ltd, Citibank, N.A., as

Depositary, and the holders and beneficial owners from time to time of the American Depositary Shares

issued thereunder (including as an exhibit the form of American Depositary Receipt). Incorporated by

reference to Exhibit (a) to Form F-6EF (File No. 333-147488) filed by ABB Ltd on November 19, 2007.

2.2

Form of American Depositary Receipt (included in Exhibit 2.1).

2.3

Description of Securities

(1)

4.1

$2,000,000,000 Multicurrency Revolving Credit Agreement, dated December 16, 2019

entered into

between ABB Ltd, certain subsidiaries of ABB Ltd as borrowers,

19 banks as mandated lead arrangers,

Citibank Europe PLC, UK Branch, as facility agent and

euro swingline agent and Citibank N.A. as dollar

swingline agent. Incorporated by reference to Exhibit

4.1 to the Annual Report on Form 20-F filed by

ABB Ltd on February 26, 2020.

4.2

Indenture dated as of May 8, 2012, among ABB Finance (USA) Inc., ABB and Deutsche Bank Trust

Company Americas, pursuant to which ABB has fully and unconditionally guaranteed payment of

principal, premium, if any, and interest in respect of any notes issued thereunder. On May 8, 2012, ABB’s

subsidiary, ABB Finance (USA) Inc., issued $500,000,000 aggregate principal amount of 1.625% notes

due 2017, $1,250,000,000 aggregate principal amount of 2.875% notes due 2022 and $750,000,000

aggregate principal amount of 4.375% notes due 2042 under the Indenture. Incorporated by reference to

Exhibit 1 to the Form 6-K filed by ABB Ltd on March 9, 2018.

4.3

First Supplemental Indenture, dated as of May 8, 2012, among ABB Finance (USA) Inc., as Issuer, ABB

Ltd, as Guarantor, and Deutsche Bank Trust Company Americas, as Trustee. Incorporated by reference to

Exhibit 2 to the Form 6-K filed by ABB Ltd on March 9, 2018.

4.4

Indenture dated as of April 3, 2018, among ABB Finance (USA) Inc., ABB Ltd. and Deutsche Bank Trust

Company Americas, pursuant to which ABB has fully and unconditionally guaranteed payment of

principal, premium, if any, and interest in respect of any notes issued thereunder. On March 26, 2018,

ABB’s subsidiary, ABB Finance (USA) Inc., issued $300,000,000 aggregate principal amount of

2.8% notes due 2020, $450,000,000 aggregate principal amount of 3.375% notes due 2023 and

$750,000,000 aggregate principal amount of 3.8% notes due 2028 under the Indenture. Incorporated by

reference to Exhibit 4.1 to the Form 6-K filed by ABB Ltd on April 3, 2018.

4.5

First Supplemental Indenture dated April 3, 2018, among ABB Finance (USA) Inc., ABB Ltd and

Deutsche Bank Trust Company Americas, as Trustee (including the form of the 2.800% Notes due 2020,

the form of the 3.375% Notes due 2023 and the form of the 3.800% Notes due 2028). Incorporated by

reference to Exhibit 4.2 to the Form 6-K filed by ABB Ltd on April 3, 2018.

4.6

Sale and Purchase Agreement dated December 17, 2018, between ABB Ltd (the Seller) and Hitachi Ltd

(the Purchaser) for the sale and purchase of 80.1% of the shares in ABB Management Holding AG (or

such other entity as agreed between the Seller and the Purchaser).

Incorporated by reference to Exhibit 4.6

to the Form 20-F filed by ABB Ltd on March

28,

2019.

8.1

Subsidiaries of ABB Ltd

as of December 31, 2020.

(1)

12.1

Certification of the chief executive officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

(1)

12.2

Certification of the chief financial officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

(1)

13.1

Certification by the chief executive officer of ABB Ltd pursuant to 18 U.S.C. Section 1350, as adopted

pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

13.2

Certification by the chief financial officer of ABB Ltd pursuant to 18 U.S.C. Section 1350, as adopted

pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

15.1

Consent of KPMG AG.

(1)

17.1

List of Subsidiary Issuers and Guarantors of Registered Securities

(1)

101.INS

XBRL Instance Document - the instance document does

not appear in the Interactive Data File because its

XBRL tags are embedded within the Inline XBRL document.

152

101.SCH

Inline XBRL Taxonomy

Extension Schema Document

101.CAL

Inline XBRL Taxonomy

Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy

Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy

Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy

Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline

XBRL and contained in Exhibit 101)

(1)

* This

document is being furnished in accordance with SEC Release Nos.

33-8212 and 34-74551.

(1) Filed at the SEC Herewith

153

SIGNATURES

The registrant hereby certifies that it meets all of the

requirements for filing on Form 20-F and that it has duly

caused and authorized the undersigned to sign this Annual

Report on its behalf.

ABB LTD

By:

/s/ T

IMO

HAMUOTILA

Date: February 25, 2021

Name:

Timo Ihamuotila

Title:

Executive Vice

President and

Chief Financial Officer

By:

/s/ R

ICHARD

ROWN

Date: February 25, 2021

Name:

Richard A. Brown

Title:

Group Senior Vice

President and

Chief Counsel Corporate & Finance

F-1

INDEX TO CONSOLIDATED

FINANCIAL STATEMENTS

AND SCHEDULES

Consolidated Financial Statements:

Report of management on internal control over financial

reporting

F-2

Reports of Independent Registered Public Accounting

Firm

F-3

Consolidated Income Statements for the years ended December

31, 2020, 2019 and 2018

F-8

Consolidated Statements of Comprehensive Income for

the years ended December 31, 2020,

2019 and

2018

F-9

Consolidated Balance Sheets as of December 31, 2020 and

2019

F-10

Consolidated Statements of Cash Flows for the years

ended December 31, 2020,

2019 and 2018

F-11

Consolidated Statements of Changes in Stockholders

’

Equity for the years ended December 31, 2020,

2019

and 2018

F-12

Notes to the Consolidated Financial Statements

F-13

F-2

Report of management on internal control

over financial reporting

The Board of Directors and Management of ABB Ltd and

its consolidated subsidiaries (“ABB”) are responsible

for establishing and maintaining adequate internal

control over financial reporting. ABB’s

internal control over financial

reporting is designed to provide reasonable assurance

regarding the reliability of financial reporting and the preparati

and fair presentation of the published Consolidated Financial Statements

in accordance with U.S. generally accepted

accounting principles.

Because of its inherent limitations, internal control

over financial reporting may not prevent or detect

misstatements. Also, projections of any evaluation of

effectiveness to future periods are subject to the risk that

controls

may become inadequate because of changes in conditions,

or that the degree of compliance with ABB’s

policies and

procedures may deteriorate.

Management conducted an assessment of the effectiveness

of internal control over financial reporting based on

the criteria established in Internal Control—Integrated

Framework issued by the Committee of Sponsoring

Organizations of the Treadway

Commission (2013 framework). Based on this assessment, manage

ment has concluded

that ABB’s internal control

over financial reporting was effective as of December

31, 2020.

KPMG AG, the independent registered public accounting

firm who audited the Company’s

consolidated

financial statements

included in this Form 20-F,

has issued an opinion on the effectiveness of ABB’s

internal control

over financial reporting as of December 31, 2020,

which is included on page F-7 of this Annual Report.

/s/ B

JÖRN

OSENGREN

Chief Executive Officer

/s/ T

IMO

HAMUOTILA

Chief Financial Officer

Zurich, February 25,

2021

F-3

Report of Independent Registered Public Accounting

Firm

To the

Board of Directors and Stockholders of ABB Ltd

Opinion on the Consolidated Financial Statements

We have audited

the accompanying consolidated balance sheets of ABB Ltd and

its subsidiaries (the Company)

as of December 31, 2020 and 2019, the related consolidated

income statements, statements of comprehensive income,

cash flows and changes in stockholders’ equity for each of

the years in the three-year period ended December 31,

2020,

and the related notes (collectively,

the consolidated financial statements). In our opinion,

the consolidated financial

statements present fairly,

in all material respects, the financial position of the Company

as of December 31, 2020 and

2019, and the results of its operations and its cash flows

for each of the years in the three-year period ended

December 31, 2020, in conformity with U.S. generally

accepted accounting principles.

We also have

audited, in accordance with the standards of the Public Company

Accounting Oversight Board

(United States) (PCAOB), the Company’s

internal control over financial reporting as of December 31,

2020, based on

criteria established in

Internal Control – Integrated Framework (2013)

issued by the Committee of Sponsoring

Organizations of the Treadway

Commission (COSO), and our report dated February 25, 2021,

expressed an unqualified

opinion on the effectiveness of the Company’s

internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements,

the Company has changed its method of

accounting for leases as of January 1, 2019, due to the

adoption of Accounting Standard Codification (ASC), 842

Leases

Basis for Opinion

These consolidated financial statements are the responsibility

of the Company’s Board

of Directors and

management. Our responsibility is to express an opinion

on these consolidated financial statements

based on our audits.

We are a public

accounting firm registered with the PCAOB and are required

to be independent with respect to the

Company in accordance with the U.S. federal securities laws

and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

We conducted

our audits in accordance with the standards of the PCAOB. Those standards

require that we plan

and perform the audit to obtain reasonable assurance about

whether the consolidated financial statements are free

material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of

material misstatement of the consolidated financial statements,

whether due to error or fraud, and performing procedures

that respond to those risks. Such procedures included

examining, on a test basis, evidence regarding the amounts and

disclosures in the consolidated financial statements. Our

audits also included evaluating the accounting principles used

and significant estimates made by management, as well as evaluating

the overall presentation of the consolidated

financial statements. We

believe that our audits provide a reasonable basis for

our opinion.

Critical Audit Matters

The critical audit matters communicated below are

matters arising from the current period audit of the

consolidated financial statements that were communicated

or required to be communicated to the audit committee and

that: (1) relate to accounts or disclosures that are material

to the consolidated financial statements and (2) involved

our

especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter

any way our opinion on the consolidated financial

statements, taken as a whole, and we are not, by communicating

the

critical audit matters below,

providing separate opinions on the critical audit matters

or on the accounts or disclosures to

which they relate.

F-4

Revenue recognition for long-term fixed price

contracts using the percentage-of-completion

method

As discussed in Note 2 to the consolidated financial statements,

revenues from the sale of customized products,

including long-term fixed price contracts for integrated

automation and electrification systems and solutions are

generally recognized on an over time basis using the percentage

of completion method of accounting. For the year ended

December 31, 2020, the Company reported $21,214 million

of revenue from sales of products, a portion of which

to long-term fixed price contracts.

We identified

the evaluation of estimated costs to complete related to revenue

recognition of long-term fixed

price contracts using the percentage of-completion method

of accounting as a critical audit matter.

In particular, a high

degree of subjective auditor judgment was required

to evaluate the Company’s estimates regardi

ng the amount of future

direct materials, labor and subcontract costs, and indirect

costs to complete the contracts.

The following are the primary procedures we performed

to address this critical audit matter.

We evaluated

the

design and tested the operating effectiveness

of certain internal controls related to the Company’s

revenue process

including controls over the development of estimates regarding

the amount of future direct materials, labor and

subcontract costs, and indirect costs. We

assessed the Company’s

historical ability to accurately estimate costs to

complete by comparing historical estimates to actual results for

a selection of contracts. We

evaluated the estimate of

remaining costs to be incurred for a selection of contracts

by assessing progress to date and the nature and complexity

work to be performed through interviewing project managers and

inspecting correspondence, if any,

between the

Company and the customer and/or subcontractors.

Valuation

of unrecognized tax benefits related

to transfer pricing

As discussed in Note 2 to the consolidated financial statements,

the Company operates across multiple tax

jurisdictions, is exposed to numerous tax laws and is regularly

subject to tax audits by local tax authorities. As discussed

in Note 16, the Company reported total unrecognized tax

benefits of $1,298 million, a portion of which related

unrecognized tax benefits related to transfer pricing.

We identified

the valuation of unrecognized tax benefits related to transfer

pricing as a critical audit matter.

high degree of subjective auditor judgment and specialized

skills and knowledge was required in assessing the

Company’s interpretation

of international tax practice and developments in relation to

intragroup charges and intragroup

sales of goods and services and the Company’s

ability to estimate the ultimate resolution of the tax positions.

The following are the primary procedures we performed

to address this critical audit matter.

We evaluated

the

design and tested the operating effectiveness

of certain internal controls related to the Company’s

tax process including

controls related to the Company’s

interpretation of international tax practice and developments in relation

to intragroup

charges and intragroup sale of goods and services

and the estimate of the related unrecognized tax benefits. We

tested

the identified costs that have a higher likelihood of being

challenged by tax authorities associated with intragroup

arrangements and potential price adjustments for intragroup

sales of goods and services. We

involved tax professionals

with specialized skills and knowledge, who assisted in evaluating

(1) the Company’s historical ability

to accurately

estimate the unrecognized tax benefits related to transfer

pricing by comparing historical tax positions to subsequent

settlements (2) the Company’s

transfer pricing documentation and methodology for compliance

with applicable laws

and regulations by assessing the documentation and

relevant agreements, (3) the impact of new information or changes

in international tax practice and developments on historical

tax positions, and (4) developing an independent expectation

of the unrecognized tax benefits estimate relating to the

Company’s intragroup

sales of goods and services and

comparing the results to the Company’s

assessment.

F-5

Valuation

of goodwill for the Machine Automation reporting

unit

As discussed in Note 2 to the consolidated financial statements,

goodwill is evaluated for impairment annually

as of October 1, or more frequently if events or circumstances indicate

that the carrying value may not be recoverable.

As discussed in Note 11, effective

July 1, 2020, the Company implemented a new operating model

resulting in the

identification of new goodwill reporting units and a revised allocation

of goodwill within operating segments. As a

result, interim quantitative impairment tests were performed

over the newly established goodwill reporting units, with

the fair value of each reporting unit estimated using

a discounted cash flow model. The Company’s

quantitative

impairment test indicated that the Machine Automation

reporting unit within the Robotics & Discrete Automation

operating segment had a carrying value that was not recoverable,

resulting in an impairment charge of $290 million,

which was recorded to reduce the carrying value of

this reporting unit to its implied fair value. The goodwill balance

was $2,228 million for the Robotics & Discrete Automation

operating segment as of December 31, 2020.

We identified

the valuation of goodwill for the Machine Automation

reporting unit as a critical audit matter.

high degree of subjective auditor judgment and specialized

skills and knowledge was required to evaluate the projected

revenue growth rates, projected earnings before interest,

taxes, depreciation, and amortization (“EBITDA”) margins,

and

the discount rate used in the Company’s

impairment test.

The following are the primary procedures we performed

to address this critical audit matter.

We evaluated

the

design and tested the operating effectiveness

of certain internal controls related to the Company’s

goodwill process. This

included controls related to management’s

determination of the projected revenue growth rates, projected

EBITDA

margins, and the discount rate. We

assessed the Company’s

ability to accurately prepare projections for the Machine

Automation reporting unit by comparing the projected

revenues from past periods to actual results for the same period.

Additionally, we

evaluated the reasonableness of the reporting unit projected revenue

growth rates and projected

EBITDA margins used in management’s

discounted cash flow analysis by comparing projected amounts

to past

performance of the reporting unit. We

involved valuation professionals with specialized skills and

knowledge who

assisted in assessing: (1) the reasonableness of the projected revenue

growth rates and projected EBITDA margins by

comparing the assumptions to relevant industry trends and

current market indices of comparable entities (2) the

reasonableness of the discount rate through testing the source

information underlying the determination of the discount

rate, and developing a range of independent estimates and

comparing those to the discount rate applied by management.

Valuation

of the retained noncontrolling

interest in the Power Grids business

As discussed in Notes 3 and 4 to the consolidated financial

statements, the Company completed the sale of 80.1

percent of its Power Grids (“PG”) business and retained

a 19.9 percent ownership interest in the PG business with

a fair

value estimated at $1,661 million as of July 1, 2020, which

was valued using a discounted cash flow model, and

recognized within Investments in equity-accounted companies.

The valuation of the retained noncontrolling interest had

a direct impact on the gain on sale of the PG business, for

which the Company recognized a gain of $5,141 million in

Income from discontinued operations, net of tax.

We identified

the valuation of the retained noncontrolling interest in the

PG business as a critical audit matter.

A high degree of subjective auditor judgment and specialized

skills and knowledge was required to evaluate the

projected revenue growth rates, projected earnings before

interest, taxes, depreciation, and amortization (“EBITDA”)

margins, and the risk-adjusted weighted-average

cost of capital (“discount rate”) assumptions applied by management

the discounted cash flow model used to estimate the fair

value of the retained noncontrolling interest.

F-6

The following are the primary procedures we performed

to address this critical audit matter.

We evaluated

the

design and tested the operating effectiveness

of certain internal controls related to the Company’s

valuation of

noncontrolling interest process including internal controls related

to management’s determination

of the projected

revenue growth rates, projected EBITDA margins,

and the discount rate assumptions used in the discounted

cash flow

model. We

evaluated the projected revenue growth rates and projected EBITDA

margins by comparing projected

amounts to historical performance of the PG business. We

involved valuation professionals with specialized skills and

knowledge who assisted in assessing: (1) the reasonableness of

the projected revenue growth rates and projected

EBITDA margins by comparing the assumptions

to relevant industry trends and current market indices of

comparable

entities (2) the reasonableness of the discount rate through

testing the source information underlying the determination

of the discount rate, and developing a range of independent

estimates and comparing those to the discount rate applied

by management.

/s/ KPMG AG

We have served

as the Company’s auditor since

2018.

Zurich, Switzerland

February 25, 2021

F-7

Report of Independent Registered Public Accounting

Firm

To the

Board of Directors and Stockholders of ABB Ltd

Opinion on Internal Control Over Financial

Reporting

We have audited

ABB Ltd and its subsidiaries’ (the Company) internal control over

financial reporting as of

December 31, 2020, based on criteria established in Internal

Control – Integrated Framework (2013) issued by the

Committee of Sponsoring Organizations of

the Treadway Commission (COSO). In our

opinion the Company

maintained, in all material respects, effective

internal control over financial reporting as of December 31, 2020,

based on

criteria established in Internal Control – Integrated

Framework (2013) issued by COSO.

We also have

audited, in accordance with the standards of the Public Company

Accounting Oversight Board

(United States) (PCAOB), the consolidated balance sheets

of the Company as of December 31, 2020 and 2019, the

related consolidated income statements, statements of comprehensive

income, cash flows and changes in stockholders’

equity for each of the years in the three-year period ended

December 31, 2020, and the related notes (collectively,

the

consolidated financial statements), and our report dated

February 25, 2021, expressed an unqualified opinion on those

consolidated financial statements.

Basis for Opinion

The Company’s Board

of Directors and management is responsible for maintaining

effective internal control

over financial reporting and for its assessment of the effectiveness

of internal control over financial reporting, included

in the accompanying Report of management on internal

control over financial reporting. Our responsibility is to express

an opinion on the Company’s

internal control over financial reporting based on our

audit. We are a public

accounting

firm registered with the PCAOB and are required to be independent

with respect to the Company in accordance with the

U.S. federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission

and the

PCAOB.

We conducted

our audit in accordance with the standards of the PCAOB. Those

standards require that we plan

and perform the audit to obtain reasonable assurance about

whether effective internal control over financial

reporting

was maintained in all material respects. Our audit of internal

control over financial reporting included obtaining an

understanding of internal control over financial reporting,

assessing the risk that a material weakness exists, and testing

and evaluating the design and operating effectiveness

of internal control based on the assessed risk. Our audit also

included performing such other procedures as we considered

necessary in the circumstances. We

believe that our audit

provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control

Over Financial Reporting

A company’s internal

control over financial reporting is a process designed to provide

reasonable assurance

regarding the reliability of financial reporting and the preparation

of financial statements for external purposes in

accordance with generally accepted accounting principles.

A company’s internal control

over financial reporting

includes

those policies and procedures that (1) pertain to the maintenance

of records that, in reasonable detail, accurately

and fairly reflect the transactions and dispositions of the

assets of the company; (2) provide reasonable assurance that

transactions are recorded as necessary to permit preparation

of financial statements in accordance with generally

accepted accounting principles, and that receipts and expenditures

of the company are being made only in accordance

with authorizations of management and directors of the

company; and (3) provide reasonable assurance regarding

prevention or timely detection of unauthorized acquisition,

use, or disposition of the company’s

assets that could have a

material effect on the financial statements.

Because of its inherent limitations, internal control

over financial reporting may not prevent or detect

misstatements. Also, projections of any evaluation of

effectiveness to future periods are subject to the risk that

controls

may become inadequate because of changes in conditions,

or that the degree of compliance with the policies or

procedures may deteriorate.

/s/ KPMG AG

Zurich, Switzerland

February 25, 2021

F-8

ABB Ltd

Consolidated Income Statements

Year

ended December 31 ($ in millions, except per share

data in $)

2020

2019

2018

Sales of products

21,214

22,554

22,366

Sales of services and other

4,920

5,424

5,296

Total

revenues

26,134

27,978

27,662

Cost of sales of products

(15,229)

(15,811)

(15,961)

Cost of services and other

(3,027)

(3,261)

(3,157)

Total

cost of sales

(18,256)

(19,072)

(19,118)

Gross profit

7,878

8,906

8,544

Selling, general and administrative expenses

(4,895)

(5,447)

(5,295)

Non-order related research and development expenses

(1,127)

(1,198)

(1,147)

Impairment of goodwill

(311)

Other income (expense), net

(323)

124

Income from operations

1,593

1,938

2,226

Interest and dividend income

Interest and other finance expense

(240)

(215)

(262)

Losses from extinguishment of debt

(162)

Non-operational pension (cost) credit

(401)

Income from continuing operations before

taxes

841

1,862

2,119

Income tax expense

(496)

(772)

(544)

Income from continuing operations, net of

tax

345

1,090

1,575

Income from discontinued operations, net of tax

4,860

438

723

Net income

5,205

1,528

2,298

Net income attributable to noncontrolling interests

(59)

(89)

(125)

Net income attributable to ABB

5,146

1,439

2,173

Amounts attributable to ABB shareholders:

Income from continuing operations, net of tax

294

1,043

1,514

Income from discontinued operations, net of tax

4,852

396

659

Net income

5,146

1,439

2,173

Basic earnings per share attributable to ABB shareholders:

Income from continuing operations, net of tax

0.14

0.49

0.71

Income from discontinued operations, net of tax

2.30

0.19

0.31

Net income

2.44

0.67

1.02

Diluted earnings per share attributable to ABB shareholders:

Income from continuing operations, net of tax

0.14

0.49

0.71

Income from discontinued operations, net of tax

2.29

0.19

0.31

Net income

2.43

0.67

1.02

Weighted-average

number of shares outstanding (in millions) used to compute:

Basic earnings per share attributable to ABB shareholders

2,111

2,133

2,132

Diluted earnings per share attributable to ABB shareholders

2,119

2,135

2,139

Due to rounding, numbers presented may not add to the totals provided.

See accompanying Notes to the Consolidated Financial Statements

F-9

ABB Ltd

Consolidated Statements of Comprehensive Income

Year

ended December 31 ($ in millions)

2020

2019

2018

Net income

5,205

1,528

2,298

Other comprehensive income (loss), net of tax:

Foreign currency

translation adjustments:

Foreign currency translation adjustments

498

(130)

(627)

Gain on liquidation of foreign subsidiary

(31)

Changes attributable to divestments

519

(2)

Foreign currency translation adjustments

1,017

(132)

(646)

Available-for-sale

securities:

Net unrealized gains (losses) arising during the year

(4)

Reclassification adjustments for net (gains) losses included

in net income

(14)

Changes attributable to divestments

(3)

Unrealized gains (losses) on available-for-sale

securities

(3)

Pension and other postretirement

plans:

Prior service (costs) credits arising during the year

(7)

Net actuarial losses arising during the year

(200)

(220)

(352)

Amortization of prior service credit included in net income

(11)

(28)

(24)

Amortization of net actuarial loss included in net income

Net (gains) losses from pension settlements included in

net income

518

Changes attributable to divestments

151

Pension and other postretirement

plan adjustments

589

(142)

(295)

Cash flow hedge derivatives:

Net unrealized gains (losses) arising during the year

(49)

Reclassification adjustments for net (gains) losses included

in net income

(9)

Unrealized gains (losses) of cash flow hedge derivatives

(28)

Total

other comprehensive income (loss), net of tax

1,615

(249)

(972)

Total

comprehensive income, net of tax

6,820

1,279

1,326

Total comprehensive

income attributable to noncontrolling interests, net of tax

(86)

(83)

(110)

Total

comprehensive income attributable to ABB, net of

tax

6,734

1,196

1,216

Due to rounding, numbers presented may not add to the totals provided.

See accompanying Notes to the Consolidated Financial Statements

F-10

ABB Ltd

Consolidated Balance Sheets

December 31 ($ in millions, except share data)

2020

2019

Cash and equivalents

3,278

3,508

Restricted cash

323

Marketable securities and short-term investments

2,108

566

Receivables, net

6,820

6,434

Contract assets

985

1,025

Inventories, net

4,469

4,184

Prepaid expenses

201

191

Other current assets

760

674

Current assets held for sale and in discontinued operations

282

9,840

Total current

assets

19,226

26,458

Restricted cash, non-current

300

Property, plant and equipment, net

4,174

3,972

Operating lease right-of-use assets

969

994

Investments in equity-accounted companies

1,784

Prepaid pension and other employee benefits

360

133

Intangible assets, net

2,078

2,252

Goodwill

10,850

10,825

Deferred taxes

843

910

Other non-current assets

504

531

Total assets

41,088

46,108

Accounts payable, trade

4,571

4,353

Contract liabilities

1,903

1,719

Short-term debt and current maturities of long-term debt

1,293

2,287

Current operating leases

270

305

Provisions for warranties

1,035

816

Other provisions

1,519

1,375

Other current liabilities

4,181

3,761

Current liabilities held for sale and in discontinued operations

644

5,650

Total current

liabilities

15,416

20,266

Long-term debt

4,828

6,772

Non-current operating leases

731

717

Pension and other employee benefits

1,231

1,793

Deferred taxes

661

911

Other non-current liabilities

2,025

1,669

Non-current liabilities held for sale and in discontinued operations

197

Total liabilities

25,089

32,128

Commitments and contingencies

nil

Stockholders’ equity:

Common stock, CHF

0.12

par value

(

2,168,148,264

issued shares at December 31, 2020 and 2019)

188

Additional paid-in capital

Retained earnings

22,946

19,640

Accumulated other comprehensive loss

(4,002)

(5,590)

Treasury stock, at cost

(

137,314,095

and

34,647,153

shares at December 31, 2020 and 2019, respectively)

(3,530)

(785)

Total ABB stockholders’ equity

15,685

13,526

Noncontrolling interests

314

454

Total stockholders’ equity

15,999

13,980

Total liabilities and stockholders’ equity

41,088

46,108

Due to rounding, numbers presented may not add to the totals provided.

See accompanying Notes to the Consolidated Financial Statements

F-11

ABB Ltd

Consolidated Statements of Cash Flows

Year

ended December 31 ($ in millions)

2020

2019

2018

Operating activities:

Net income

5,205

1,528

2,298

Less: Income from discontinued operations, net of tax

(4,860)

(438)

(723)

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation and amortization

915

961

916

Impairment of goodwill

311

Pension and other employee benefits

(102)

(100)

Deferred taxes

(280)

(83)

(142)

Losses from extinguishment of debt

162

Net loss (gain) from derivatives and foreign exchange

(2)

Net gain from sale of property, plant and

equipment

(37)

(51)

(57)

Net loss (gain) from sale of businesses

(55)

(57)

Fair value adjustment on assets and liabilities held for sale

421

Share-based payment arrangements

Other

(20)

Changes in operating assets and liabilities:

Trade receivables, net

(100)

(202)

(144)

Contract assets and liabilities

186

128

(18)

Inventories, net

196

(182)

(336)

Accounts payable, trade

(13)

130

454

Accrued liabilities

(92)

(76)

252

Provisions, net

243

(36)

Income taxes payable and receivable

(76)

(3)

(102)

Other assets and liabilities, net

(131)

(143)

Net cash provided by operating activities — continuing

operations

1,875

1,899

2,352

Net cash provided by (used in) operating activities

— discontinued operations

(182)

426

572

Net cash provided by operating activities

1,693

2,325

2,924

Investing activities:

Purchases of investments

(5,933)

(748)

(322)

Purchases of property, plant and equipment

and intangible assets

(694)

(762)

(772)

Acquisition of businesses (net of cash acquired) and increases

in cost- and equity-accounted companies

(121)

(22)

(2,664)

Proceeds from sales of investments

4,341

749

567

Proceeds from maturity of investments

160

Proceeds from sales of property, plant and

equipment

114

Proceeds from sales of businesses (net of transaction costs and

cash disposed) and cost- and equity-accounted companies

(136)

113

Net cash from settlement of foreign currency derivatives

138

(76)

(30)

Other investing activities

(23)

(32)

Net cash used in investing activities — continuing operations

(2,272)

(651)

(2,908)

Net cash provided by (used in) investing activities —

discontinued operations

9,032

(164)

(177)

Net cash provided by (used in) investing activities

6,760

(815)

(3,085)

Financing activities:

Net changes in debt with maturities of 90 days or less

(587)

164

221

Increase in debt

343

2,406

1,914

Repayment of debt

(3,459)

(2,156)

(830)

Delivery of shares

412

Purchase of treasury stock

(3,048)

(250)

Dividends paid

(1,736)

(1,675)

(1,717)

Dividends paid to noncontrolling shareholders

(82)

(90)

(86)

Other financing activities

(49)

(35)

Net cash used in financing activities — continuing operations

(8,206)

(1,328)

(741)

Net cash provided by (used in) financing activities

— discontinued operations

(55)

(48)

Net cash used in financing activities

(8,175)

(1,383)

(789)

Effects of exchange rate changes on cash and equivalents and

restricted cash

(28)

(131)

Net change in cash and equivalents and restricted cash

357

(1,081)

Cash and equivalents and restricted cash, beginning of period

3,544

3,445

4,526

Cash and equivalents and restricted cash, end of period

3,901

3,544

3,445

Supplementary disclosure of cash flow information:

Interest paid

189

284

243

Income taxes paid

905

1,005

1,026

Due to rounding, numbers presented may not add to the totals provided.

See accompanying Notes to the Consolidated Financial Statements

F-12

ABB Ltd

Consolidated Statements of Changes in Stockholders’ Equity

Years

ended December 31, 2020, 2019 and 2018 ($ in millions)

Accumulated

Additional

other

Total ABB

Non-

Total

Common

paid-in

Retained

comprehensive

Treasury

stockholders’

controlling

stockholders’

stock

capital

earnings

loss

stock

equity

interests

equity

Balance at January 1, 2018

188

19,594

(4,345)

(647)

14,819

530

15,349

Cumulative effect of changes

in accounting principles

(192)

(9)

(201)

Comprehensive income:

Net income

2,173

125

2,298

Foreign currency translation

adjustments, net of tax

(631)

(15)

(646)

Effect of change in fair value of

available-for-sale securities, net of tax

(3)

Unrecognized income (expense)

related to pensions and other

postretirement plans, net of tax

(295)

Change in derivatives qualifying as

cash flow hedges, net of tax

(28)

Total comprehensive income

1,216

110

1,326

Changes in noncontrolling interests

(4)

(19)

(23)

Noncontrolling interests recognized in

connection with business combination

107

Dividends to noncontrolling shareholders

(146)

Dividends paid to shareholders

(1,736)

Share-based payment arrangements

Purchase of treasury stock

(249)

Delivery of shares

(35)

Call options

Balance at December 31, 2018

188

19,839

(5,311)

(820)

13,952

582

14,534

Adoption of accounting standard update

(36)

Comprehensive income:

Net income

1,439

1,528

Foreign currency translation

adjustments, net of tax

(126)

(6)

(132)

Effect of change in fair value of

available-for-sale securities, net of tax

Unrecognized income (expense)

related to pensions and other

postretirement plans, net of tax

(142)

Change in derivatives qualifying as

cash flow hedges, net of tax

Total comprehensive income

1,196

1,279

Changes in noncontrolling interests

(17)

(5)

Fair value adjustment to noncontrolling interests

recognized in business combination

(44)

Changes in noncontrolling interests

in connection with divestments

(55)

Dividends to noncontrolling shareholders

(122)

Dividends paid to shareholders

(1,675)

Share-based payment arrangements

Delivery of shares

(24)

Call options

Balance at December 31, 2019

188

19,640

(5,590)

(785)

13,526

454

13,980

Adoption of accounting standard update

(82)

(9)

(91)

Comprehensive income:

Net income

5,146

5,205

Foreign currency translation

adjustments, net of tax

990

1,017

Effect of change in fair value of

available-for-sale securities, net of tax

Unrecognized income (expense)

related to pensions and other

postretirement plans, net of tax

589

Change in derivatives qualifying as

cash flow hedges, net of tax

Total comprehensive income

6,734

6,820

Changes in noncontrolling interests

(16)

Changes in noncontrolling interests

in connection with divestments

(138)

Dividends to noncontrolling shareholders

(98)

Dividends paid to shareholders

(1,758)

Share-based payment arrangements

Purchase of treasury stock

(3,181)

Delivery of shares

(24)

436

412

Other

(3)

Balance at December 31, 2020

188

22,946

(4,002)

(3,530)

15,685

314

15,999

Due to rounding, numbers presented may not add to the totals provided.

See accompanying Notes to the Consolidated Financial Statements

F-13

Note 1—The Company

ABB Ltd and its subsidiaries (collectively,

the Company) together form a leading global technology

company,

connecting software to its electrification, robotics, automation

and motion portfolio to drive performance to new levels.

Note 2—Significant accounting policies

The following is a summary of significant accounting

policies followed in the preparation of these

Consolidated Financial Statements.

Basis of presentation

The Consolidated Financial Statements are prepared

in accordance with United States of America (United

States or U.S.) generally accepted accounting principles

(U.S. GAAP) and are presented in United States dollars ($

USD) unless otherwise stated. Due to rounding, numbers

presented may not add to the totals provided. The par value

capital stock is denominated in Swiss francs.

Reclassifications

Certain amounts reported for prior years in the Consolidated

Financial Statements and the accompanying Notes

have been reclassified to conform to the current year’s

presentation. These changes primarily relate to the separate

presentation of Restricted cash in the Consolidated Balance

Sheets.

Scope of consolidation

The Consolidated Financial Statements include the

accounts of ABB Ltd and companies which are directly or

indirectly controlled by ABB Ltd. Additionally,

the Company consolidates variable interest entities if it has determined

that it is the primary beneficiary.

Intercompany accounts and transactions are eliminated. Investments

in joint ventures

and affiliated companies in which the Company

has the ability to exercise significant influence over operating and

financial policies (generally through direct or indirect ownership

percent to

percent of the voting rights), are

recorded in the Consolidated Financial Statements using the

equity method of accounting.

Translation of foreign

currencies and foreign exchange transactions

The functional currency for most of the Company’s

subsidiaries is the applicable local currency.

The translation

from the applicable functional currencies into the Company’s

reporting currency is performed for balance sheet

accounts

using exchange rates in effect at the balance

sheet date and for income statement accounts using average

exchange rates

prevailing during the year.

The resulting translation adjustments are excluded from the determination

of earnings and are

recognized in “Accumulated other comprehensive loss”

until the subsidiary is sold, substantially liquidated or evaluated

for impairment in anticipation of disposal.

Foreign currency exchange gains and losses, such as those

resulting from foreign currency denominated

receivables or payables, are included in the determination

of earnings, except as they relate to intercompany loans that

are equity‑like in nature with no reasonable expectation

of repayment, which are recognized in “Accumulated other

comprehensive loss”. Exchange gains and losses recognized

in earnings are included in “Total

revenues”, “Total

cost of

sales”, “Selling, general and administrative expenses”

or “Interest and other finance expense” consistent with the nature

of the underlying item.

F-14

Discontinued operations

The Company reports a disposal, or planned disposal, of

a component or a group of components as a

discontinued operation if the disposal represents a strategic shift

that has or will have a major effect on the Company’s

operations and financial results. A strategic shift could

include a disposal of a major geographical area, a major line

business or other major parts of the Company.

A component may be a reportable segment or an operating segment,

reporting unit, a subsidiary,

or an asset group.

The assets and liabilities of a component reported

as a discontinued operation are presented separately as held

for sale in the Company’s

Consolidated Balance Sheets.

Interest expense that is not directly attributable to or related

to the Company’s continuing

business or

discontinued business is allocated to discontinued operations based

on the ratio of net assets to be sold less debt that is

required to be paid as a result of the planned disposal transaction

to the sum of total net assets of the Company plus

consolidated debt. General corporate overhead is not allocated

to discontinued operations (see Note 3).

Operating cycle

A portion of the Company’s

activities (primarily long‑term system integration activities)

has an operating cycle

that exceeds

one year

. For classification of current assets and liabilities related to such

activities, the Company elected to

use the duration of the individual contracts as its operating

cycle. Accordingly, there

are accounts receivable, inventories

and provisions related to these contracts which will not

be realized within one year that have been classified as current.

Use of estimates

The preparation of financial statements in conformity

with U.S. GAAP requires management to make

assumptions and estimates that directly affect

the amounts reported in the Consolidated Financial Statements and

the

accompanying Notes. These accounting assumptions and

estimates include:

•

growth rates, discount rates and other assumptions used

to determine impairment of long‑lived assets and

in testing goodwill for impairment,

•

estimates to determine valuation allowances for deferred

tax assets and amounts recorded for unrecognized

tax benefits,

•

assumptions used in determining inventory obsolescence

and net realizable value,

•

estimates and assumptions used in determining the initial fair

value of retained noncontrolling interest and

certain obligations in connection with divestments,

•

estimates and assumptions used in determining the fair

values of assets and liabilities assumed in business

combinations,

•

assumptions used in the determination of corporate costs directly

attributable to discontinued operations,

•

estimates of loss contingencies associated with litigation or

threatened litigation and other claims and

inquiries, environmental damages, product warranties,

self‑insurance reserves, regulatory and other

proceedings,

•

estimates used to record expected costs for employee severance

in connection with restructuring programs,

•

estimates related to credit losses expected to occur over

the remaining life of financial assets such as trade

and other receivables, loans and other instruments,

F-15

•

assumptions used in the calculation of pension and

postretirement benefits and the fair value of pension

plan assets, and

•

assumptions and projections, principally related to future

material, labor and project‑related overhead

costs, used in determining the percentage‑of‑completion

on projects, as well as the amount of variable

consideration the Company expects to be entitled to.

The actual results and outcomes may differ from

the Company’s estimates and

assumptions.

Cash and equivalents

Cash and equivalents include highly liquid investments

with maturities of three months or less at the date of

acquisition.

Currency and other local regulatory limitations related

to the transfer of funds exist in a number of countries

where the Company operates. Funds, other than regular

dividends, fees or loan repayments, cannot be readily transferred

abroad from these countries and are therefore deposited

and used for working capital needs locally.

These funds are

included in cash and equivalents as they are not considered

restricted.

Cash and equivalents that are subject to contractual restrictions

or other legal obligations and not readily

available are classified as “Restricted cash”.

Marketable securities and short‑term investments

Management determines the appropriate classification of

held‑to‑maturity and available‑for‑sale debt securities

at the time of purchase. Debt securities are classified as held

‑to‑maturity when the Company has the positive intent and

ability to hold the securities to maturity.

Held‑to‑maturity debt securities are carried at amortized cost, adjusted

for

accretion of discounts or amortization of premiums to

maturity computed under the effective interest method.

Such

accretion or amortization is included in “Interest and

dividend income”. Marketable debt securities not classified as

held‑to‑maturity are classified as available‑for‑sale and reported

at fair value.

Unrealized gains and losses on available‑for‑sale debt

securities are excluded from the determination of

earnings and are instead recognized in the “Accumulated

other comprehensive loss” component of stockholders’

equity,

net of tax, until realized. Realized gains and losses on available‑for‑sale

debt securities are computed based upon the

historical cost of these securities, using the specific identification

method.

Marketable debt securities are classified as either “Cash and

equivalents” or “Marketable securities and

short‑term investments” according to their maturity at the

time of acquisition.

Marketable equity securities are generally classified as “Marketable

securities and short‑term investments”,

however,

any marketable securities held as a long‑term investment rather

than as an investment of excess liquidity are

classified as “Other non‑current assets”. Equity securities are measured

at fair value with fair value changes reported in

net income. Fair value changes for equity securities are generally

reported in “Interest and other finance expense”,

however,

fair value changes for certain equity securities classified as long

-term investments are reported in “Other

income (expense),

net”.

For debt securities classified as available-for-sale where

fair value has declined below amortized cost due to

credit losses, the Company records an allowance for expected

credit losses and adjusts the allowance in subsequent

periods in “Interest and other finance expense”.

All fair value changes other than those related to credit

risk are reported

in “Accumulated other comprehensive loss” until the security

is sold.

In addition, equity securities without readily determinable

fair values

are written down to fair value if a

qualitative assessment indicates

that the investment is impaired and the fair value of the

investment is less than its

carrying amount. The impairment charge

is recorded in “Interest and other finance expense”.

F-16

Accounts receivable and allowance for expected

credit losses

Accounts receivable are recorded at the invoiced

amount. The Company has a group‑wide policy on the

management of credit risk. The policy includes a credit

assessment methodology to assess the creditworthiness of

customers and assign to those customers a risk category.

Third‑party agencies’ ratings are considered, if available.

For

customers where agency ratings are not available, the

customer’s most recent financial statements, payment

history and

other relevant information are considered in the assignment

to a risk category. Customers

are assessed at least annually

or more frequently when information on significant changes

in the customer’s financial

position becomes known. In

addition to the assignment to a risk category,

a credit limit per customer is set.

The Company recognizes an allowance for credit losses to

present the net amount of receivables expected to be

collected as of the balance sheet date. The allowance is based

on the credit losses expected to arise over the asset’s

contractual term taking into account historical loss experience,

customer-specific data as well as forward looking

estimates. Receivables are grouped in pools based

on similar risk characteristics to estimate expected credit losses.

Expected credit losses are estimated individually when

the related assets do not share similar risk characteristics.

Accounts receivable are written off when

deemed uncollectible and are recognized as a deduction from

the

allowance for credit losses. Expected recoveries, which

are not to exceed the amount previously written off, are

considered in determining the allowance balance at

the balance sheet date.

The Company, in

its normal course of business, transfers receivables to third parties, generally

without

recourse. The transfer is accounted for as a sale when the

Company has surrendered control over the receivables. Control

is deemed to have been surrendered when (i) the transferred

receivables have been put presumptively beyond the

reach

of the Company and its creditors, even in bankruptcy or other

receivership, (ii) the third‑party transferees have the

right

to pledge or exchange the transferred receivables, and

(iii) the Company has relinquished effective control over the

transferred receivables and does not retain the ability or

obligation to repurchase or redeem the transferred receivables.

At the time of sale, the sold receivables are removed from

the Consolidated Balance Sheets and the related cash inflows

are classified as operating activities in the Consolidated Statements

of Cash Flows. Costs associated with the sale of

receivables, including the related gains and losses from

the sales, are included in “Interest and other finance expense”.

Transfers of receivables that do not

meet the requirements for treatment as sales are accounted for

as secured borrowings

and the related cash flows are classified as financing activities

in the Consolidated Statements of Cash Flows.

Concentrations of credit risk

The Company sells a broad range of products, systems, services

and software to a wide range of industrial,

commercial and utility customers as well as various government

agencies and quasi‑governmental agencies throughout

the world. Concentrations of credit risk with respect to

accounts receivable are limited, as the Company’s

customer base

is comprised of a large number of individual

customers. Ongoing credit evaluations of customers’ financial positions

are

performed to determine whether the use of credit support

instruments such as guarantees, letters of credit or credit

insurance are necessary; collateral is not generally required.

The Company maintains an allowance for credit losses as

discussed above in “Accounts receivable and allowance

for expected credit losses”. Such losses, in the aggregate,

are in

line with the Company’s expectations.

It is the Company’s

policy to invest cash in deposits with banks throughout the

world with certain minimum

credit ratings and in high quality,

low risk, liquid investments. The Company actively manages

its credit risk by

routinely reviewing the creditworthiness of the banks and

the investments held. The Company has not incurred

significant credit losses related to such investments.

The Company’s exposure

to credit risk on derivative financial instruments is the risk that

the counterparty will

fail to meet its obligations. To

reduce this risk, the Company has credit policies that require the

establishment and

periodic review of credit limits for individual counterparties.

In addition, the Company has entered

into close‑out netting

agreements with most derivative counterparties. Close‑out

netting agreements provide for the termination, valuation and

net settlement of some or all outstanding transactions

between two counterparties on the occurrence of one or more

pre‑defined trigger events. Derivative instruments are

presented on a gross basis in the Consolidated Financial

Statements.

F-17

Revenue recognition

A customer contract exists if collectability under the contract

is considered probable, the contract has

commercial substance, contains payment terms, as well as the

rights and commitments of both parties, and has been

approved.

The Company offers arrangements with multiple

performance obligations to meet its customers’ needs.

These

arrangements may involve the delivery of multiple products

and/or performance of services (such as installation and

training) and the delivery and/or performance may occur

at different points in time or over different

periods of time.

Goods and services under such arrangements are evaluated

to determine whether they form distinct performance

obligations and should be accounted for as separate

revenue transactions. The Company allocates the sales price to

each

distinct performance obligation based on the price of each

item sold in separate transactions at the inception of the

arrangement.

The Company generally recognizes revenues for the sale

of non‑customized products including circuit breakers,

modular substation packages, control products, motors,

generators, drives, robots, turbochargers, measurement

and

analytical instrumentation, and other goods which are

manufactured on a standardized basis at a point in time.

Revenues

are recognized at the point in time that the customer

obtains control of the goods, which is when it has taken

title to the

products and assumed the risks and rewards of ownership

of the products specified in the purchase order or sales

agreement. Generally,

the transfer of title and risks and rewards of ownership are

governed by the contractually defined

shipping terms. The Company uses various International

Commercial Terms (as promulgated

by the International

Chamber of Commerce) in its sales of products to third

party customers, such as Ex Works

(EXW), Free Carrier (FCA)

and Delivered Duty Paid (DDP).

Billing terms for these point in time contracts vary but

generally coincide with delivery to the customer.

Payment is generally due upon receipt of the invoice,

payable within 90 days or less.

The Company generally recognizes revenues for the sale

of customized products,

including integrated

automation and electrification systems and solutions, on

an over time basis using the percentage‑of‑completion method

of accounting. These systems are generally accounted for

as a single performance obligation as the Company is required

to integrate equipment and services into one deliverable

for the customer. Revenues

are recognized as the systems are

customized during the manufacturing or integration process and

as control is transferred to the customer as evidenced by

the Company’s right to

payment for work performed or by the customer’s

ownership of the work in process. The

Company principally uses the cost‑to‑cost method to measure

progress towards completion on contracts. Under

this

method, progress of contracts is measured by actual

costs incurred in relation to the Company’s

best estimate of total

costs based on the Company’s

history of manufacturing or constructing similar assets for customers.

Estimated costs are

reviewed and updated routinely for contracts in progress to reflect

changes in quantity or pricing of the inputs. The

cumulative effect of any change in estimate is recorded

in the period when the change in estimate is determined.

Contract costs include all direct materials, labor and subcontract

costs and indirect costs related to contract performance,

such as indirect labor, supplies, tools

and depreciation costs.

The nature of the Company’s

contracts for the sale of customized products gives rise

to several types of

variable consideration, including claims, unpriced change

orders, liquidated damages and penalties. These amounts

are

estimated based upon the most likely amount of consideration

to which the customer or the Company will be entitled.

The estimated amounts are included in the sales price to

the extent it is probable that a significant reversal of cumulative

revenues recognized will not occur when the uncertainty

associated with the variable consideration is resolved. All

estimates of variable consideration are reassessed periodically.

Back charges to suppliers or subcontractors are

recognized as a reduction of cost when it is determined

that recovery of such cost is probable and the amounts can be

reliably estimated.

Billing terms for these over‑time contracts vary but

are generally based on achieving specified milestones. The

differences between the timing of revenues recognized

and customer billings result in changes to contract assets and

contract liabilities. Payment is generally due upon receipt

of the invoice, payable within 90 days or less. Contractual

retention amounts billed to customers are generally due

upon expiration of the contractual warranty period.

F-18

Service revenues reflect revenues earned from the Company’s

activities in providing services to customers

primarily subsequent to the sale and delivery of a product

or complete system. Such revenues consist of maintenance

type contracts, repair services, equipment upgrades, field

service activities that include personnel and accompanying

spare parts, training, and installation and commissioning

of products as a stand-alone service or as part of a service

contract. The Company generally recognizes revenues from

service transactions as services are performed or at the

point

in time that the customer obtains control of the spare parts.

For long-term service contracts including monitoring and

maintenance services, revenues are recognized on a straight

line basis over the term of the contract consistent with the

nature, timing and extent of the services or,

if the performance pattern is other than straight line, as the

services are

provided based on costs incurred relative to total expected

costs.

In limited circumstances the Company sells extended warranties that

extend the warranty coverage beyond the

standard coverage offered on specific products.

Revenues for these warranties are recorded over the length

of the

warranty period based on their stand‑alone selling price.

Billing terms for service contracts vary but are generally

based on the occurrence of a service event. Payment is

generally due upon receipt of the invoice, payable within

90 days or less.

Revenues are reported net of customer rebates, early settlement

discounts, and similar incentives. Rebates are

estimated based on sales terms, historical experience and

trend analysis. The most common incentives relate to amounts

paid or credited to customers for achieving defined volume

levels.

Taxes assessed by

a governmental authority that are directly imposed on revenue

-producing transactions

between the Company and its customers, such as sales, use,

value added and some excise taxes, are excluded from

revenues.

The Company does not adjust the contract price for the

effects of a financing component if the Company

expects, at contract inception, that the time between

control transfer and cash receipt is less than 12 months.

Sales commissions are expensed immediately when the

amortization period for the costs to obtain the contract

is less than a year.

Contract loss provisions

Losses on contracts are recognized in the period when

they are identified and are based upon the anticipated

excess of contract costs over the related contract revenues.

Shipping and handling costs

Shipping and handling costs are recorded as a component

of cost of sales.

Inventories

Inventories are stated at the lower of cost or net realizable

value. Cost is determined using the first‑in, first‑out

method, the weighted‑average cost method, or the specific

identification method. Inventoried costs are stated at

acquisition cost or actual production cost, including direct

material and labor and applicable manufacturing overheads.

Adjustments to reduce the cost of inventory to its net realizable value

are made, if required, for decreases in sales prices,

obsolescence or similar reductions in value.

F-19

Impairment of long‑lived assets

Long‑lived assets that are held and used are evaluated for

impairment for each of the Company’s

asset groups

when events or circumstances indicate that the carrying

amount of the long-lived asset or asset group may not be

recoverable. If the asset group’s

net carrying value exceeds the asset group’s

net undiscounted cash flows expected to be

generated over its remaining useful life including net

proceeds expected from disposition of the asset group,

if any, the

carrying amount of the asset group is reduced to its estimated

fair value. The estimated fair value is determined using a

market, income and/or cost approach.

Property, plant

and equipment

Property, plant and

equipment is stated at cost, less accumulated depreciation

and is depreciated using the

straight‑line method. The estimated useful lives of the assets are

generally as follows:

•

factories and office buildings:

years,

•

other facilities:

years,

•

machinery and equipment:

years,

•

furniture and office equipment:

years, and

•

leasehold improvements are depreciated over their estimated useful

life or, for operating leases, over the

lease term, if shorter.

Goodwill and intangible assets

Goodwill is reviewed for impairment annually as of

October 1, or more frequently if events or circumstances

indicate that the carrying value may not be recoverable.

Goodwill is evaluated for impairment at the reporting unit

level. A reporting unit is an operating segment or

one level below an operating segment. For the annual

impairment review performed in 2020, the reporting units

were

determined to be one level below the operating

segments.

When evaluating goodwill for impairment, the Company

uses either a qualitative or quantitative assessment

method for each reporting unit. The qualitative assessment in

volves determining, based on an evaluation of qualitative

factors, if it is more likely than not that the fair value of a

reporting unit is less than its carrying value. If, based on

this

qualitative assessment, it is determined to be more likely

than not that the reporting unit’s

fair value is less than its

carrying value, a quantitative impairment test is performed,

otherwise no further analysis is required. If the Company

elects not to perform the qualitative assessment for a reporting

unit, then a quantitative impairment test is performed.

When performing a quantitative impairment test, the

Company calculates the fair value of a reporting unit using

an income approach based on the present value of

future cash flows, applying a discount rate that represents

the

reporting unit’s weighted-average

cost of capital, and compares it to the reporting unit’s

carrying value. If the carrying

value of the net assets of a reporting unit exceeds the

fair value of the reporting unit then the Company records

impairment charge equal to the difference,

provided that the loss recognized does not exceed the total amount

goodwill allocated to that reporting unit.

The cost of acquired intangible assets with a finite life is amortized

using a method of amortization that reflects

the pattern of intangible assets’ expected contributions

to future cash flows. If that pattern cannot be reliably determined,

the straight‑line method is used. The amortization

periods range from

years for software and from

years

for customer‑, technology‑

and marketing‑related intangibles. Intangible assets with a finite life

are tested for

impairment upon the occurrence of certain triggering

events.

F-20

Derivative financial instruments and hedging activities

The Company uses derivative financial instruments

to manage currency,

commodity, interest rate and

equity

exposures, arising from its global operating, financing

and investing activities (see Note 6).

The Company recognizes all derivatives, other than certain

derivatives indexed to the Company’s

own stock, at

fair value in the Consolidated Balance Sheets. Derivatives that

are not designated as hedging instruments are reported

fair value with derivative gains and losses reported through

earnings and classified consistent with the nature of the

underlying transaction.

If the derivatives are designated as a hedge, depending

on the nature of the hedge, changes in the fair value of

the derivatives will either be offset against the change

in fair value of the hedged item attributable to the risk being

hedged through earnings (in the case of a fair value hedge)

or recognized in “Accumulated other comprehensive loss”

until the hedged item is recognized in earnings (in the case

of a cash flow hedge). Where derivative financial instruments

have been designated as cash flow hedges of forecasted

transactions and such forecasted transactions are no longer

probable of occurring, hedge accounting is discontinued

and any derivative gain or loss previously included in

“Accumulated other comprehensive loss” is reclassified into

earnings consistent with the nature of the original

forecasted transaction. Gains or losses from derivatives

designated as hedging instruments in a fair value hedge are

reported through earnings and classified consistent with the nature

of the underlying hedged transaction.

Certain commercial contracts may grant rights to the Company

or the counterparties, or contain other

provisions that are considered to be derivatives. Such embedded

derivatives are assessed at inception of the contract and

depending on their characteristics, accounted for as separate

derivative instruments and shown at their fair value

in the

Consolidated Balance Sheets

with changes in their fair value reported in earnings consistent

with the nature of the

commercial contract to which they relate.

Derivatives are classified in the Consolidated Statements

of Cash Flows in the same section as the underlying

item. Cash flows from the settlement of undesignated

derivatives used to manage the risks of different

underlying items

on a net basis are classified within “Net cash provided

by operating activities”, as the underlying items are primarily

operational in nature. Other cash flows on the settlement

of derivatives are recorded within “Net cash provided by (used

in) investing activities”.

Leases

The Company leases primarily real estate, vehicles and

machinery.

In January 2019, the Company adopted a new lease

accounting standard.

Prior to the adoption of the new

accounting standard, lease transactions where substantially

all risks and rewards incident to ownership were transferred

from the lessor to the lessee were accounted for as capital

leases. All other leases were accounted for as operating leases.

The periodic rent expense for operating leases was recorded

on a straight‑line basis over the life of the lease term.

Amounts due under capital leases were recorded as a liability.

The value of the assets under capital leases were recorded

as property, plant

and equipment. Depreciation and amortization of assets recorded

under capital leases was included in

depreciation and amortization expense.

Under the new lease accounting standard, the Company

evaluates if a contract contains a lease at inception of

the contract. A contract is or contains a lease if it conveys

the right to control the use of identified property,

plant, or

equipment (an identified asset) for a period of time in

exchange for consideration. To

determine this, the Company

assesses whether, throughout

the period of use, it has both the right to obtain substantially all of

the economic benefits

from use of the identified asset and the right to direct the

use of the identified asset. Leases are classified as either

finance or operating, with the classification determining

the pattern of expense recognition in the Consolidated Income

Statements. Lease expense for operating leases continues

to be recorded on a straight-line basis over the lease term.

Lease expense for finance leases is separated between amortization

of right-of-use assets and lease interest expense.

F-21

In many cases, the Company’s

leases include one or more options to renew,

with renewal terms that can extend

up to 5 years. The exercise of lease renewal options is at the

Company’s discretion. Renewal

periods are included in the

expected lease term if they are reasonably certain of being

exercised by the Company.

Certain leases also include

options to purchase the leased property.

None of the Company’s lease agreements

contain

material residual value

guarantees or material restrictions or covenants.

Long-term leases (leases with terms greater than 12

months) are recorded in the Consolidated Balance Sheets at

the commencement date of the lease based on the

present value of the minimum lease payments. The present

value of

the lease payments is determined by using the interest rate

implicit in the lease if available. As most of the Company’s

leases do not provide an implicit rate, the Company’s

incremental borrowing rate is used for most leases and is

determined for portfolios of leases based on the remaining

lease term, currency of the lease, and the internal credit rating

of the subsidiary which entered into the lease.

Short-term leases (leases with an initial lease term of 12

months or less and where it is reasonably certain that

the property will not be leased for a term greater than

12 months) are not recorded in the Consolidated Balance

Sheets

and are expensed on a straight-line basis over the

lease term. The majority of short-term leases relate to real estate and

machinery.

Assets under operating lease are included in “Operating

lease right-of-use assets”. Operating lease liabilities are

reported both as current and non-current operating lease liabilities. Right

-of-use assets represent the Company’s

right to

use an underlying asset for the lease term and lease liabilities

represent its obligation to make lease payments arising

from the lease.

Assets under finance lease are included in “Property,

plant and equipment,

net” while finance lease liabilities

are included in “Long-term debt” (including “Current maturities

of long-term debt”

as applicable).

Lease and non-lease components for leases other than real

estate are not accounted for separately.

Income taxes

The Company uses the asset and liability method to

account for deferred taxes. Under this method, deferred tax

assets and liabilities are determined based on temporary

differences between the financial reporting and the

tax bases of

assets and liabilities. Deferred tax assets and liabilities are measured

using enacted tax rates and laws that are expected

to be in effect when the differences are

expected to reverse. The Company records a deferred tax asset when

determines that it is more likely than not that the deduction

will be sustained based upon the deduction’s

technical merit.

Deferred tax assets and liabilities that can be offset

against each other are reported on a net basis. A valuation

allowance

is recorded to reduce deferred tax assets to the amount

that is more likely than not to be realized.

Deferred taxes are provided on unredeemed retained earnings

of the Company’s subsidiaries.

However,

deferred taxes are not provided on such unredeemed retained

earnings to the extent it is expected that the earnings are

permanently reinvested. Such earnings may become taxable

upon the sale or liquidation of these subsidiaries or upon

the

remittance of dividends.

The Company operates in numerous tax jurisdictions and,

as a result, is regularly subject to audit by tax

authorities. The Company provides for tax contingencies

whenever it is deemed more likely than not that a tax asset has

been impaired or a tax liability has been incurred.

Contingency provisions are recorded based on the technical merits

the Company’s filing position,

considering the applicable tax laws and Organisation

for Economic Co‑operation and

Development (OECD) guidelines and are based on its evaluations of

the facts and circumstances as of the end of each

reporting period.

The Company applies a two‑step approach to recognize and

measure uncertainty in income taxes. The first step

is to evaluate the tax position for recognition by determining

if the weight of available evidence indicates that it is more

likely than not that the position will be sustained on

audit, including resolution of related appeals or litigation

processes,

if any. The second step

is to measure the tax benefit as the largest amount

which is more than 50 percent likely of being

realized upon ultimate settlement. Uncertain tax

positions that could be settled against existing loss carryforwards

income tax credits are reported net.

F-22

Expenses

related to tax penalties are classified in the Consolidated Income

Statements as “Income tax expense”

while interest thereon is classified as “Interest and other

finance expense”.

Current income tax relating to certain items is

recognized directly in “Accumulated other comprehensive

loss” and not in earnings. In general, the Company

applies the

individual items approach when releasing income tax effects

from “Accumulated other comprehensive loss”.

Research and development

Research and development costs not related to specific customer

orders are generally expensed as incurred.

Earnings per share

Basic earnings per share is calculated by dividing income

by the weighted‑average number of shares

outstanding during the year.

Diluted earnings per share is calculated by dividing income by the

weighted‑average

number of shares outstanding during the year,

assuming that all potentially dilutive securities were exercised,

if dilutive.

Potentially dilutive securities comprise outstanding written

call options, outstanding options and shares granted subject

to certain conditions under the Company’s

share‑based payment arrangements. See further discussion related

to earnings

per share in Note 20 and of potentially dilutive securities in

Note 18.

Share‑based payment arrangements

The Company has various share‑based payment arrangements

for its employees, which are described more

fully in Note 18. Such arrangements are accounted for

under the fair value method. For awards that are equity‑settled,

total compensation is measured at grant date, based

on the fair value of the award at that date, and recorded in

earnings

over the period the employees are required to render service. For

awards that are cash‑settled, compensation is initially

measured at grant date and subsequently remeasured at

each reporting period, based on the fair value and vesting

percentage of the award at each of those dates, with changes

in the liability recorded in earnings.

Fair value measures

The Company uses fair value measurement principles to record

certain financial assets and liabilities on a

recurring basis and, when necessary,

to record certain non‑financial assets at fair value on a non

‑recurring basis, as well

as to determine fair value disclosures for certain financial

instruments carried at amortized cost in the financial

statements. Financial assets and liabilities recorded at

fair value on a recurring basis include foreign currency,

commodity and interest rate derivatives, as well as cash‑settled

call options and available‑for‑sale securities.

Non‑financial assets recorded at fair value on a non‑recurring

basis include long‑lived assets that are reduced to their

estimated fair value due to impairments.

Fair value is the price that would be received when

selling an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement

date. In determining fair value, the Company uses various

valuation techniques including the market approach (using

observable market data for identical or similar assets and

liabilities), the income approach (discounted cash flow

models) and the cost approach (using costs a market participant

would incur to develop a comparable asset). Inputs used

to determine the fair value of assets and liabilities are defined

by a three‑level hierarchy,

depending on the nature of those inputs. The Company

has categorized its financial assets and

liabilities and non‑financial assets measured at fair value

within this hierarchy based on whether the inputs to the

valuation technique are observable or unobservable.

An observable input is based on market data obtained from

independent sources, while an unobservable input refl

ects the Company’s assumptions

about market data.

F-23

The levels of the fair value hierarchy are as follows:

Level 1: Valuation

inputs consist of quoted prices in an active market for identical assets or

liabilities

(observable quoted prices). Assets and liabilities valued using

Level 1 inputs include

exchange‑traded equity securities, listed derivatives which

are actively traded such as commodity

futures, interest rate futures and certain actively traded

debt securities.

Level 2: Valuation

inputs consist of observable inputs (other than Level 1 inputs)

such as actively quoted

prices for similar assets, quoted prices in inactive markets

and inputs other than quoted prices such

as interest rate yield curves, credit spreads, or inputs

derived from other observable data by

interpolation, correlation, regression or other means. The adjustments

applied to quoted prices or

the inputs used in valuation models may be both observable

and unobservable. In these cases, the

fair value measurement is classified as Level 2 unless the

unobservable portion of the adjustment or

the unobservable input to the valuation model is significant,

in which case the fair value

measurement would be classified as Level 3. Assets and

liabilities valued or disclosed using Level

2 inputs include investments

in certain funds, certain debt securities that are not actively traded,

interest rate swaps, commodity swaps, cash‑settled call options,

forward foreign exchange

contracts, foreign exchange swaps and forward rate

agreements, time deposits, as well as financing

receivables and debt.

Level 3: Valuation

inputs are based on the Company’s

assumptions of relevant market data (unobservable

input).

Investments in private equity,

real estate and collective funds held within the Company’s

pension plans are

generally valued using the net asset value (NAV)

per share as a practical expedient for fair value provided

certain

criteria are met. The NAVs

are determined based on the fair values of the underlying

investments in the funds. These

assets are not classified in the fair value hierarchy but

are separately disclosed.

Whenever quoted prices involve bid‑ask spreads, the

Company ordinarily determines fair values based on

mid‑market quotes. However,

for the purpose of determining the fair value of cash‑settled call

options serving as hedges

of the Company’s management

incentive plan (MIP), bid prices are used.

When determining fair values based on quoted prices

in an active market, the Company considers if the level of

transaction activity for the financial instrument has significantly

decreased, or would not be considered orderly.

In such

cases, the resulting changes in valuation techniques would

be disclosed. If the market is considered disorderly or if

quoted prices are not available, the Company is required

to use another valuation technique, such as an income

approach.

Disclosures about the Company’s

fair value measurements of assets and liabilities are included

in Note 7.

Contingencies

The Company is subject to proceedings, litigation

or threatened litigation and other claims and inquiries,

to environmental, labor, product, regulatory,

tax (other than income tax) and other matters, and is required

to assess the

likelihood of any adverse judgments or outcomes to these

matters, as well as potential ranges of probable losses. A

determination of the provision required, if any,

for these contingencies is made after analysis of each individual

issue,

often with assistance from both internal and external legal

counsel and technical experts. The required amount of a

provision for a contingency of any type may change in

the future due to new developments in the particular matter,

including changes in the approach to its resolution.

The Company records a provision for its contingent obligations

when it is probable that a loss will be incurred

and the amount can be reasonably estimated. Any such provision

is generally recognized on an undiscounted basis using

the Company’s best estimate of

the amount of loss incurred or at the lower end of an estimated

range when a single best

estimate is not determinable. In some cases, the Company

may be able to recover a portion of the costs relating to these

obligations from insurers or other third parties; however,

the Company records such amounts only when it is probable

that they will be collected.

F-24

The Company provides for anticipated costs for warranties when

it recognizes revenues on the related products

or contracts. Warranty

costs include calculated costs arising from imperfections

in design, material and workmanship in

the Company’s products.

The Company makes individual assessments on contracts with

risks resulting from

order‑specific conditions or guarantees and assessments on

an overall, statistical basis for similar products sold

in larger

quantities.

The Company may have legal obligations to perform

environmental clean‑up activities related to land and

buildings as a result of the normal operations of its business.

In some cases, the timing or the method of settlement,

both, are conditional upon a future event that may or may

not be within the control of the Company,

but the underlying

obligation itself is unconditional and certain. The Company

recognizes a provision for these obligations when it is

probable that a liability for the clean‑up activity has been

incurred and a reasonable estimate of its fair value can

made. In some cases, a portion of the costs expected

to be incurred to settle these matters may be recoverable. An

asset

is recorded when it is probable that such amounts are recoverable.

Provisions for environmental obligations are not

discounted to their present value when the timing of payments cannot

be reasonably estimated.

Pensions and other postretirement

benefits

The Company has a number of defined benefit pension

plans, defined contribution pension plans and

termination indemnity plans. The Company recognizes an

asset for such a plan’s overfunded

status or a liability for such

a plan’s underfunded status

in its Consolidated Balance Sheets. Additionally,

the Company measures such a plan’s

assets and obligations that determine its funded status as of

the end of the year and recognizes the changes in the funded

status in the year in which the changes occur.

Those changes are reported in “Accumulated other comprehensive

loss”.

The Company uses actuarial valuations to determine its pension

and postretirement benefit costs and credits.

The amounts calculated depend on a variety of key assumpt

ions, including discount rates and expected return on plan

assets. Current market conditions are considered in selecting

these assumptions.

The Company’s various pension

plan assets are assigned to their respective levels in the

fair value hierarchy in

accordance with the valuation principles described in the

“Fair value measures” section above.

See Note 17 for further discussion of the Company’s

employee benefit plans.

Business combinations

The Company accounts for assets acquired and liabilities assumed

in business combinations using the

acquisition method and records these at their respective fair

values. Contingent consideration is recorded at fair value

an element of purchase price with subsequent adjustments

recognized in income.

Identifiable intangibles consist of intellectual property such

as trademarks and trade names, customer

relationships, patented and unpatented technology,

in‑process research and development, order backlog and capitalized

software; these are amortized over their estimated useful

lives. Such intangibles are subsequently subject to evaluation

for potential impairment if events or circumstances indicate

the carrying amount may not be recoverable. See “Goodwill

and intangible assets” above. Acquisition‑related costs are

recognized separately from the acquisition and expensed

incurred. Upon gaining control of an entity in which

an equity method or cost basis investment was held by the

Company, the carrying

value of that investment is adjusted to fair value with the related

gain or loss recorded in income.

Deferred tax assets and liabilities based on temporary

differences between the financial reporting

and the tax

base of assets and liabilities as well as uncertain tax positions

and valuation allowances on acquired deferred tax

assets

assumed in connection with a business combination

are initially estimated as of the acquisition date based on facts

and

circumstances that existed at the acquisition date.

These estimates are subject to change within the measurement

period

(a period of up to 12 months after the acquisition date

during which the acquirer may adjust the provisional acquisition

amounts) with any adjustments to the preliminary estimates being

recorded to goodwill. Changes in deferred taxes,

uncertain tax positions and valuation allowances on acquired deferred

tax assets that occur after the measurement period

are recognized in income.

F-25

New accounting pronouncements

Applicable for current period

Measurement of credit

losses on financial instruments

In January 2020, the Company adopted a new account

ing standard update, along with additional related updates

containing targeted improvements and clarifications,

that replaces the previous incurred loss impairment methodology

for most financial assets with a new “current expected

credit loss” model. The new model requires immediate

recognition of the estimated credit losses expected to occur

over the remaining life of financial assets such as trade and

other receivables, held-to-maturity debt securities, loans and other

instruments. Measurement of expected credit losses is

now based on historical experience, current conditions,

and reasonable and supportable forecasts. The update also

requires additional disclosures related to estimates and

judgments used to measure credit losses. Credit losses relating to

available-for-sale debt securities are now measured

in a manner similar to the loss impairment methodology,

except that

the losses are recorded through an allowance for credit

losses rather than as a direct write-down of the security.

The Company has adopted these updates on a modified

retrospective basis and has therefore recorded a

cumulative-effect adjustment of $

million to the opening balance of retained earnings on January

1, 2020, relating to

an increase in the allowance for credit losses on financial

assets carried at amortized cost. This adjustment consisted

primarily of an impact on the opening balance of trade receivables

of $

million (excluding an offsetting amount for

deferred tax), of which $

million related to continuing operations and $

million related to the Power Grids business,

which is included in discontinued operations.

Disclosure Framework — Changes

to the disclosure requirements

for fair value measurement

In January 2020, the Company adopted a new accounting

standard update which modified the disclosure

requirements for fair value measurements. The update

eliminates the requirements to disclose the amount of and reasons

for transfers between Level 1 and 2 of the fair value hierarchy,

the timing of transfers between levels and the Level 3

valuation process, while expanding the Level 3 disclosures

to include the range and weighted-average used to develop

significant unobservable inputs and the changes in unrealized

gains and losses on recurring fair value measurements.

This update was applied prospectively for the changes and

modifications to the Level 3 disclosures, while all other

amendments were applied retrospectively.

The update does not have a significant impact on the Company’s

Consolidated Financial Statements.

Applicable for future periods

Simplifying the accounting for income taxes

In December 2019, an accounting standard update was issued

which enhances and simplifies

various aspects of

the income tax accounting guidance related to intraperiod

tax allocations, ownership changes in investments, and

certain

aspects of interim period tax accounting. This update is

effective for the Company for annual and interim

periods

beginning January 1, 2021. Depending on the amendment,

adoption may be applied on a retrospective, modified

retrospective or prospective basis. The Company does not

expect this update to have a significant impact on its

Consolidated Financial Statements.

Facilitation of the effects of reference

rate reform on financial reporting

In March 2020, an accounting standard update was issued

which provides temporary optional expedients and

exceptions to the current guidance on contract modifications

and hedge accounting to ease the financial reporting

burdens related to the expected market transition from

the London Interbank Offered Rate (LIBOR) and

other interbank

offered rates to alternative reference rates. The

update can be adopted and applied no later than December

31, 2022, with

early adoption permitted. The Company is currently evaluating

the impact of adopting this optional guidance on its

Consolidated Financial Statements.

F-26

Note 3—Discontinued operations

Divestment of the Power Grids business

On July 1, 2020, the Company completed the sale of

80.1

percent of its Power Grids business to Hitachi Ltd

(Hitachi). The transaction was executed through the

sale of

80.1

percent of the shares of Hitachi ABB Power Grids Ltd

(“Hitachi ABB PG” or “HAPG”). Cash consideration received

at the closing date was $

9,241

million net of cash

disposed. Further, for accounting

purposes, the

19.9

percent ownership interest retained by the Company is deemed

have been both divested and reacquired at its fair value

on July 1, 2020. The Company also obtained a put option,

exercisable commencing in April 2023, allowing the

Company to require Hitachi to purchase the remaining interest for

fair value, subject to a minimum floor price equivalent

to a

percent discount compared to the price paid for the initial

80.1

percent. The combined fair value of the retained investment and

the related put option, which amounted to

1,779

million, was recorded at fair value on July 1, 2020, and also was accounted

for as part of the proceeds for the sale

of the entire Power Grids business (see Note 4). The Company

also recorded a liability in discontinued operations for

estimated future costs and other cash payments of $

487

million for various contractual items relating to the sale

of the

business including required future cost reimbursements payable

to HAPG, costs incurred by the Company for the direct

benefit of HAPG and an amount due to Hitachi Ltd in

connection with the expected purchase price finalization of the

closing debt and working capital balances. From the date of

the disposal through December 31, 2020, $

million of

these liabilities have been paid and are reported as reductions

in the cash consideration received.

As a result of the Power Grids sale, the Company has recognized

a net gain of $

5,141

million, net of transaction

costs, for the sale of the entire Power Grids business which

is included in Income from discontinued operations, net of

tax, in 2020. Included in the calculation of the net gain was a

cumulative translation loss relating to the Power Grids

business of $

420

million which was reclassified from Accumulated other comprehensive

loss (see Note 21). Certain

amounts included in the net gain are estimated or

otherwise subject to change in value and, as a result, the Company

may record additional adjustments to the gain in future

periods which are not expected to have a material impact

on the

Consolidated Financial Statements. In 2020, the Company

has also recorded $

262

million in Income tax expense within

discontinued operations in connection with the reorganization

of the legal entity structure of the Power Grids business

required to facilitate the sale.

Certain entities of the Power Grids business for which

the legal process or other regulatory delays resulted in

the Company not yet having transferred legal titles to Hitachi have

been accounted for as being sold since control of the

business as well as all risks and rewards of the business have

been fully transferred to Hitachi ABB PG. The proceeds

for these entities are included in the cash proceeds described

above and certain funds have been placed in escrow

and are

reflected as current restricted cash of $

302

million at December 31, 2020. All entities are expected to be transferred

HAPG by the first half of 2021.

The Company has recognized liabilities in discontinued

operations in connection with the divestment for

certain indemnities (see Note 15 for additional information). The

Company has also recorded an initial liability of

258

million representing the fair value of the right granted

to Hitachi ABB PG for the use of the ABB brand for up to

years.

Upon closing of the sale, the Company entered into various transition

services agreements (TSAs). Pursuant to

these TSAs, the Company and Hitachi ABB PG provide

to each other, on an interim, transitional

basis, various services.

The services provided by the Company primarily include

finance, information technology,

human resources and certain

other administrative services. Under the current terms,

the TSAs will continue for up to

years, and can only be

extended on an exceptional basis for business-critical services for

an additional period which is reasonably necessary to

avoid a material adverse impact on the business. In 2020,

the Company has recognized within its continuing operations,

general and administrative expenses incurred to perform the TSAs, offset

by $

million in TSA-related income for such

services that is reported in Other income and expense,

net.

F-27

Discontinued operations

As a result of the sale of the Power Grids business, substantially

all Power Grids-related assets and liabilities

have been sold. As this divestment represented a strategic

shift that would have a major effect on the Company’s

operations and financial results, the results of operations

for this business have been presented as discontinued

operations and the assets and liabilities are presented as held for

sale and in discontinued operations for all periods

presented. Certain of the business contracts in the Power

Grids business continue to be executed by subsidiaries of

the

Company for the benefit/risk of Hitachi ABB PG. Assets and

liabilities relating to, as well as the net financial results of,

these contracts will continue to be included in discontinued

operations until they have been completed or otherwise

transferred to Hitachi ABB PG.

Prior to the divestment, interest expense that was not directly

attributable to or related to the Company’s

continuing business or discontinued business was allocated

to discontinued operations based on the ratio of net assets to

be sold less debt that was required to be paid as a result

of the planned disposal transaction to the sum of total net assets

of the Company plus consolidated debt. General corporate

overhead was not allocated to discontinued operations.

Operating results of the discontinued operations are

summarized as follows:

($ in millions)

2020

2019

2018

Total revenues

4,008

9,037

9,698

Total cost of sales

(3,058)

(6,983)

(7,378)

Gross profit

950

2,054

2,320

Expenses

(808)

(1,394)

(1,326)

Net gain recognized on sale of the Power Grids business

5,141

—

Income from operations

5,282

660

994

Net interest and other finance expense

(5)

(61)

(55)

Non-operational pension (cost) credit

(94)

Income from discontinued operations before

taxes

5,182

605

951

Income tax expense

(322)

(167)

(228)

Income from discontinued operations, net of

tax

4,860

438

723

Of the total Income from discontinued operations before

taxes in the table above, $

5,170

million, $

566

million

and $

874

million in 2020, 2019 and 2018, respectively,

are attributable to the Company,

while the remainder is

attributable to noncontrolling interests.

Until the date of the divestment, Income from discontinued

operations before taxes excluded stranded costs

which were previously able to be allocated to the Power

Grids operating segment. As a result, $

million, $

225

million

and $

297

million, for 2020, 2019 and 2018, respectively,

of allocated overhead and other management costs which were

previously included in the measure of segment profit for

the Power Grids operating segment are now reported as part

Corporate and Other.

In the table above, Net interest and other finance expense

in 2020, 2019 and 2018 includes

million, $

million and $

million, respectively,

of interest expense which has been recorded on an allocated

basis

in accordance with the Company’s

accounting policy election until the divestment date. In addition,

as required by U.S.

GAAP,

subsequent to December 17, 2018,

(the date of the original agreement to sell the Power Grids business) the

Company has not recorded depreciation or amortization

on the property, plant

and equipment and intangible assets

reported as discontinued operations. In 2018, a total

of $

258

million of depreciation and amortization expense was

recorded for such assets.

Included in the reported Total

revenues of the Company for 2020, 2019 and 2018

are revenues for sales from

the Company’s operating

segments to the Power Grids business of $

108

million, $

213

million and $

243

million,

respectively, which

represent intercompany transactions that, prior to Power Grids

being classified as a discontinued

operation, were eliminated in the Company’s

Consolidated Financial Statements (see Note 23). Subsequent

to the

divestment, sales to Hitachi ABB PG are reported as third

-party revenues.

F-28

In addition, the Company also has retained obligations

(primarily for environmental and taxes) related to other

businesses disposed or otherwise exited that qualified

as discontinued operations. Changes to these retained obligations

are also included in Income from discontinued operations,

net of tax, above.

The major components of assets and liabilities held for

sale and in discontinued operations in the Company’s

Consolidated Balance Sheets are summarized as follows:

December 31,

($ in millions)

2020

(1)

2019

Receivables, net

280

2,541

Contract assets

1,243

Inventories, net

1,667

Property, plant and

equipment, net

1,754

Goodwill

1,631

Other current assets

1,004

Current assets held for sale and in discontinued operations

282

9,840

Accounts payable, trade

188

1,722

Contract liabilities

1,121

Pension and other employee benefits

419

Other current liabilities

456

1,984

Current liabilities held for sale and in discontinued operations

644

5,246

Other non-current liabilities

197

Non-current liabilities held for sale and in discontinued

operations

197

(1) At December 31, 2020, the balances reported as held for sale and in discontinued operations pertain to

Power Grids activities and other

obligations which will remain with the Company until such time as the

obligation is settled or the activities are fully wound down.

Note 4—Acquisitions, divestments and equity-accounted companies

Acquisition of controlling interests

Acquisitions of controlling interests were as follows:

($ in millions, except number of acquired businesses)

2020

2019

2018

Purchase price for acquisitions (net of cash acquired)

2,638

Aggregate excess of purchase price over fair value of net

assets

acquired

(1)

1,472

Number of acquired businesses

(1)

Recorded as goodwill

(see Note 11).

Includes adjustments

of $

million in 2019

arising during

the measurement

period of

acquisitions,

primarily reflecting

changes in the

valuation of net

working capital,

deferred tax

liabilities and

intangible assets

acquired.

Acquisitions of controlling interests have been accounted

for under the acquisition method and have been

included in the Company’s

Consolidated Financial Statements since the date of acquisition. In

2020 and 2019,

acquisitions of controlling interests were not material.

F-29

On June 30, 2018, the Company acquired through numerous

share and asset purchases substantially all the

assets, liabilities and business activities of GEIS, General

Electric’s global electrification

solutions business. GEIS,

headquartered in Atlanta, United States, provides technologies

that distribute and control electricity and support

the

commercial, data center, health care,

mining, renewable energy,

oil and gas, water and telecommunications sectors. The

resulting cash outflows for the Company amounted to

2,622

million (net of cash acquired of $

192

million). The

acquisition strengthens the Company’s

global position in electrification and expands its access to the North

American

market through strong customer relationships, a large

installed base and extensive distribution networks. Consequently,

the goodwill acquired represents expected operating

synergies and cost savings as well as intangible assets that are

not

separable such as employee know-how and expertise.

While the Company uses its best estimates and assumptions

as part of the purchase price allocation process to

value assets acquired and liabilities assumed at the acquisition

date, the purchase price allocation for acquisitions is

preliminary for up to 12 months after the acquisition date

and is subject to refinement as more detailed analyses are

completed and additional information about the fair values

of the acquired assets and liabilities becomes available. The

purchase price allocation relating to the GEIS acquisition

was finalized during the second quarter of 2019 and resulted in

million of net measurement period adjustments, increasing goodwill,

primarily related to changes in the valuation of

net working capital, deferred tax liabilities and intangible

assets acquired.

In addition, in November 2019, the Company recognized

a gain of $

million relating to the receipt of cash

from General Electric for a favorable resolution of an

uncertainty with respect to the price paid to acquire GEIS.

This

occurred after the end of the measurement period

and as a result, the Company recorded a gain in “Other income

(expense), net”.

The final allocation of purchase consideration for

GEIS was as follows:

GEIS

($ in millions)

Weighted-average

Allocated amounts

useful life

Technology

7 years

Customer relationships

178

12 years

Trade names

135

13 years

Supply agreement

13 years

Intangible assets

437

Property, plant and

equipment

373

Deferred tax liabilities

(45)

Inventories

405

Other assets and liabilities, net

(1)

(19)

Goodwill

(2)

1,534

Noncontrolling interest

(63)

Total

consideration (net of cash acquired)

(3)

2,622

(1)

Gross receivables

from the GEIS acquisition

totaled $

658

million; the fair

value of which

was $

624

million after

adjusting for

contractual

cash flows not

expected to be

collected.

(2)

The amount of

goodwill which

is tax deductible

is $

769

million.

(3)

Cash acquired

in the GEIS acquisition

totaled $

192

million.

The Company’s Consolidated

Income Statement for 2018, includes total revenues of

1,317

million and net

income of $

million in respect of GEIS since the date of acquisition.

F-30

The unaudited pro forma financial information in the

table below summarizes the combined pro forma results

of the Company and GEIS for 2018 as if GEIS had been

acquired on January 1, 2017.

($ in millions)

2018

Total revenues

28,936

Income from continuing operations, net of tax

1,622

The pro forma results are for information purposes only and

do not include any anticipated cost synergies or

other effects of the planned integration

of GEIS. Accordingly, such

pro forma amounts are not necessarily indicative of

the results that would have occurred had the acquisition

been completed on the date indicated, nor are they indicative

the future operating results of the combined company.

The unaudited pro forma results above include certain

adjustments related to the GEIS acquisition. The table

below summarizes the adjustments necessary to present

the pro forma financial information of the combined entity as if

GEIS had been acquired on January 1, 2017.

($ in millions)

2018

Impact on cost of sales from additional amortization of intangible

assets

(10)

Impact on cost of sales from fair valuing acquired inventory

Impact on cost of sales from additional depreciation of property,

plant and equipment

(4)

Impact on selling, general and administrative expenses from

additional amortization of intangible assets

(5)

Impact on selling, general and administrative expenses from

acquisition-related costs

Impact on interest expense from financing costs

(15)

Taxation adjustments

(5)

Total

pro forma adjustments

Acquisition of noncontrolling interests

In connection with the divestment of its Power Grids business to

Hitachi (see Note 3), the Company retained a

19.9

percent interest in the business. For accounting purposes the

19.9

percent interest is deemed to have been both

divested and reacquired, with a fair value at the transaction

date of $

1,661

million. The fair value was based on a

discounted cash flow model considering the expected

results of the future business operations of Hitachi ABB PG and

using relevant market inputs including

a risk-adjusted weighted-average cost of capital. The Company

also obtained a

right to require Hitachi to purchase this investment (see

Note 3) with a floor price equivalent to a

percent discount

compared to the price paid for the initial

80.1

percent. This option was valued at $

118

million using a standard option

pricing model with inputs considering the nature of the

investment and the expected period until option exercise. As this

option is not separable from the investment the value has

been combined with the value of the underlying investment

and is accounted for together.

The Company has concluded that based on its continuing

involvement with the Power Grids business, including

membership in its governing board of directors, it has significant

influence over Hitachi ABB PG.

As a result, the

investment (including the value of the option) is accounted

for using the equity method.

F-31

The difference between the initial carrying

value of the Company's investment in Hitachi ABB PG at fair

value

and its proportionate share of the underlying net assets created

basis differences of $

8,503

million ($

1,692

million for

the Company’s

19.9

percent ownership), which are allocated as follows:

Weighted-average

($ in millions)

Allocated amounts

useful life

Inventories

169

5 months

Order backlog

727

2 years

Property, plant and

equipment

(1)

1,016

Intangible assets

(2)

1,731

9 years

Other contractual rights

251

2 years

Other assets

Deferred tax liabilities

(942)

Goodwill

5,959

Less: Amount attributed to noncontrolling interest

(451)

Basis difference

8,503

(1)

Property,

plant and equipment

includes assets

subject to amortization

having an initial

fair value difference

of $

686

million and a

weighted-average

useful life

14 years

(2)

Intangible assets

include brand

license agreement,

technology and

customer relationships.

For assets subject to depreciation or amortization, the

Company amortizes these basis differences over

the

estimated remaining useful lives of the assets that gave rise to

this difference, recording the amortization, net of

deferred tax benefit, as a reduction of income from equity-accounted

companies. Certain other assets are recorded as an

expense as the benefits from the assets are realized. At December

31, 2020, the Company determined that no impairment

of its equity-accounted investments existed.

The carrying value of the Company’s

investments in equity-accounted companies and respective percentage

ownership is as follows:

Ownership as of

Carrying value at December 31,

($ in millions, except ownership share in %)

December 31, 2020

2020

2019

Hitachi ABB Power Grids Ltd

19.9%

1,710

—

Others

Total

1,784

In 2020, 2019 and 2018, the Company recorded a loss of

million, and gains of $

million and $

million,

respectively, in Other

income (expense), net, representing the Company's share of

the earnings of investees

accounted

for under the equity method of accounting, the components

of which are as follows:

($ in millions)

2020

2019

2018

Income from equity-accounted companies, net of taxes

Basis difference amortization (net of deferred

income tax benefit)

(95)

—

Income (loss) from equity-accounted companies

(66)

Business divestments

In 2020, the Company completed the sale of its Power Grids

business (see Note 3 for details) and its solar

inverters business. In 2019, the Company recorded net

gains (including transactions costs) of $

million, primarily due

to the divestment of two businesses in China, and in 2018,

there were no significant amounts recognized from

divestments of consolidated businesses.

F-32

Divestment of the solar inverters business

In February 2020, the Company completed the sale of

its solar inverters business for

consideration. Under

the agreement, which was reached in July 2019, the

Company was required to transfer $

143

million of cash to the buyer

on the closing date. In addition, payments totaling EUR

132

million ($

145

million) are required to be transferred to the

buyer from 2020 through 2025. In 2019, the Company

recorded a loss of $

421

million, in “Other income (expense),

net”, representing the excess of the carrying value, which

includes a loss of $

million arising from the cumulative

translation adjustment, over the estimated fair value

of this business. In 2020, a further loss of $

million was recorded

in “Other income (expense), net” for changes in fair value

of this business. The loss in 2020 includes the $

million

reclassification from other comprehensive income of

the currency translation adjustment related to the business.

The fair value was based on the estimated current market

values using Level 3 inputs, considering the

agreed-upon sale terms with the buyer.

The solar inverters business, which includes the solar inverter

business acquired

as part of the Power-One acquisition in 2013,

was part of the Company’s

Electrification operating segment.

As this divestment does not qualify as a discontinued

operation, the results of operations for this business prior

to its disposal are included in the Company’s

continuing operations for all periods presented. The assets and

liabilities of

this business were shown as assets and liabilities held for

sale in the Company’s Consolidated Balance

Sheet at

December 31, 2019,

and as at that date, the carrying amounts of the major classes of assets and

liabilities held for sale

were as follows:

($ in millions)

December 31, 2019

Assets

Receivables, net

Inventories, net

127

Property, plant and

equipment, net

Intangible assets, net

Other assets

Valuation

allowance on assets held for sale

(319)

Current assets held for sale

Liabilities

Accounts payable, trade

Contract liabilities

Provisions for warranties

108

Other liabilities

Fair value adjustment on disposal group

102

Current liabilities held for sale

404

Including the above loss of $

million and $

421

million in 2020 and 2019, respectively,

Income from

continuing operations before taxes includes net losses of

million and $

490

million, from the solar inverters business.

In 2018, net losses of $

million from this business were included in Income from continuing

operations before taxes.

F-33

Note 5—Cash and equivalents, marketable securities and

short-term investments

Current assets

Cash and equivalents and marketable securities and short‑term

investments consisted of the following:

December 31, 2020

Marketable

securities

Gross

and

unrealized

Cash and

short-term

($ in millions)

Cost basis

gains

losses

Fair value

equivalents

investments

Changes in fair value recorded in

net income

Cash

2,388

Time deposits

1,513

Equity securities

1,704

1,716

5,605

—

5,617

3,901

1,716

Changes in fair value recorded in

other comprehensive income

Debt securities available-for-sale:

—U.S. government obligations

274

293

—European government obligations

—Corporate

367

—

392

—

392

Total

5,972

—

6,009

3,901

2,108

Of which:

—Restricted cash, current

323

—Restricted cash, non-current

300

December 31, 2019

Marketable

securities

Gross

and

unrealized

Cash and

short-term

($ in millions)

Cost basis

gains

losses

Fair value

equivalents

investments

Changes in fair value recorded in

net income

Cash

2,111

Time deposits

1,433

Equity securities

294

304

3,838

—

3,848

3,544

304

Changes in fair value recorded in

other comprehensive income

Debt securities available-for-sale:

—U.S. government obligations

191

(1)

197

—Corporate

252

(1)

262

—

262

Total

4,090

(1)

4,110

3,544

566

Of which:

—Restricted cash, current

F-34

Contractual maturities

Contractual maturities of debt securities consisted of the following:

December 31, 2020

Available-for-sale

($ in millions)

Cost basis

Fair value

Less than one year

104

One to five years

133

139

Six to ten years

Due after ten years

Total

367

392

At December 31, 2020 and 2019, the Company pledged $

million and $

million, respectively,

available‑for‑sale marketable securities as collateral for issued

letters of credit and other security arrangements.

Note 6—Derivative financial instruments

The Company is exposed to certain currency,

commodity, interest rate and

equity risks arising from its global

operating, financing and investing activities. The Company

uses derivative instruments to reduce and manage the

economic impact of these exposures.

Currency risk

Due to the global nature of the Company’s

operations, many of its subsidiaries are exposed to currency

risk in

their operating activities from entering into transactions

in currencies other than their functional currency.

To manage

such currency risks, the Company’s

policies require its subsidiaries to hedge their foreign currency

exposures from

binding sales and purchase contracts denominated in foreign

currencies. For forecasted foreign currency denominated

sales of standard products and the related foreign currency

denominated purchases, the Company’s

policy is to hedge up

to a maximum of

100

percent of the forecasted foreign currency denominated exposures,

depending on the length of the

forecasted exposures. Forecasted exposures greater

than

months are not hedged. Forward foreign exchange contracts

are the main instrument used to protect the Company against

the volatility of future cash flows (caused by changes in

exchange rates) of contracted and forecasted sales and

purchases denominated in foreign currencies. In addition, within

its treasury operations, the Company primarily uses foreign

exchange swaps and forward foreign exchange contracts

manage the currency and timing mismatches arising in

its liquidity management activities.

Commodity risk

Various

commodity products are used in the Company’s

manufacturing activities. Consequently it is exposed

volatility in future cash flows arising from changes in commodity

prices. To manage

the price risk of commodities, the

Company’s policies require

that its subsidiaries hedge the commodity price risk exposures

from binding contracts, as

well as at least

percent (up to a maximum of

100

percent) of the forecasted commodity exposure over the next

months or longer (up to a maximum of

months). Primarily swap contracts are used to manage the

associated price

risks of commodities.

Interest rate risk

The Company has issued bonds at fixed rates. Interest

rate swaps are used to manage the interest rate risk

associated with certain debt and generally such swaps are

designated as fair value hedges. In addition, from time

to time,

the Company uses instruments such as interest rate swaps,

interest rate futures, bond futures or forward rate

agreements

to manage interest rate risk arising from the Company’s

balance sheet structure but does not designate such instruments

as hedges.

F-35

Equity risk

The Company is exposed to fluctuations in the fair value of

its warrant appreciation rights (WARs)

issued

under its MIP (Management Incentive Plan) (see Note

18).

A WAR

gives its holder the right to receive cash equal

to the

market price of an equivalent listed warrant on the date of

exercise. To eliminate

such risk, the Company has purchased

cash‑settled call options,

indexed

to the shares

of the

Company,

which entitle the Company to receive amounts

equivalent to its obligations under the outstanding WARs.

Volume

of derivative activity

In general, while the Company’s

primary objective in its use of derivatives is to minimize exposures

arising

from its business, certain derivatives are designated

and qualify for hedge accounting treatment while others either

are

not designated or do not qualify for hedge accounting.

Foreign exchange and interest

rate derivatives

The gross notional amounts of outstanding foreign exchange

and interest rate derivatives (whether designated

as hedges or not) were as follows:

Type of derivative

Total notional amounts at December 31,

($ in millions)

2020

2019

2018

Foreign exchange contracts

12,610

15,015

13,612

Embedded foreign exchange derivatives

1,134

924

733

Interest rate contracts

3,227

5,188

3,300

Derivative commodity contracts

The Company uses derivatives to hedge its direct or indirect

exposure to the movement in the prices of

commodities which are primarily copper,

silver and aluminum. The following table shows the notional

amounts of

outstanding derivatives (whether designated as hedges

or not), on a net basis, to reflect the Company’s

requirements for

these commodities:

Total notional amounts at December 31,

Type of derivative

Unit

2020

2019

2018

Copper swaps

metric tonnes

39,390

42,494

46,143

Silver swaps

ounces

1,966,677

2,508,770

2,861,294

Aluminum swaps

metric tonnes

8,112

8,388

9,491

Equity derivatives

At December 31, 2020, 2019 and 2018, the Company held

million,

million and

million cash‑settled

call options indexed to ABB Ltd shares (conversion ratio

:1) with a total fair value of $

million, $

million and

million, respectively.

Cash flow hedges

As noted above, the Company mainly uses forward foreign

exchange contracts

to manage the foreign exchange

risk of its operations, commodity swaps to manage its commodity

risks and cash‑settled call options to hedge its WAR

liabilities. Where such instruments are designated and

qualify as cash flow hedges, the effective portion of

the changes

in their fair value is recorded in “Accumulated other

comprehensive loss” and subsequently reclassified into earnings

the same line item and in the same period as the underlying

hedged transaction affects earnings. Any

ineffectiveness in

the hedge relationship, or hedge component excluded from

the assessment of effectiveness, is recognized in earnings

during the current period.

F-36

At December 31, 2020,

2019 and 2018, “Accumulated other comprehensive loss” included

net unrealized

losses of $

million, $

million and net unrealized gains of $

million, respectively,

net of tax, on derivatives

designated as cash flow hedges. Of the amount at December

31, 2020, net losses of $

million are expected to be

reclassified to earnings in 2021. At December 31, 20

20, the longest maturity of a derivative classified as a cash flow

hedge was

months.

In 2020,

2019 and 2018, the amounts of gains or losses, net of tax,

reclassified into earnings due to the

discontinuance of cash flow hedge accounting and the amount

of ineffectiveness in cash flow hedge relationships

directly recognized in earnings were not significant.

The pre‑tax effects of derivative instruments,

designated and qualifying as cash flow hedges, on “Accumulated

other comprehensive loss” and the Consolidated Income

Statements in 2020, 2019 and 2018, were not significant.

Fair value hedges

To reduce its interest

rate exposure arising primarily from its debt issuance activities,

the Company uses

interest rate swaps. Where such instruments are designated

as fair value hedges, the changes in the fair value of these

instruments, as well as the changes in fair value of the

risk component of the underlying debt being hedged, are

recorded

as offsetting gains and losses in “Interest

and other finance expense”.

The effect of Interest rate contracts, designated

and qualifying as fair value hedges, on the Consolidated Income

Statements was as follows:

($ in millions)

2020

2019

2018

Gains (losses) recognized in Interest and other finance

expense:

- on derivatives designated as fair value hedges

(4)

- on hedged item

(11)

(38)

Derivatives not designated in hedge relationships

Derivative instruments that are not designated as hedges

or do not qualify as either cash flow or fair value

hedges are economic hedges used for risk management

purposes. Gains and losses from changes in the fair values of

such derivatives are recognized in the same line

in the income statement as the economically hedged transaction.

Furthermore, under certain circumstances, the Company is required

to split and account separately for foreign

currency derivatives that are embedded within certain

binding sales or purchase contracts denominated in a currency

other than the functional currency of the subsidiary

and the counterparty.

F-37

The gains (losses) recognized in the Consolidated Income

Statements on derivatives not designated in hedging

relationships were as follows:

($ in millions)

Gains (losses) recognized in income

Type of derivative not designated as a hedge

Location

2020

2019

2018

Foreign exchange contracts

Total revenues

(7)

(121)

Total cost of sales

(64)

SG&A expenses

(1)

(11)

Non-order related research and

development

(2)

(1)

Interest and other finance

expense

207

(122)

Embedded foreign exchange contracts

Total revenues

(34)

Total cost of sales

(1)

(6)

(4)

SG&A expenses

(1)

Commodity contracts

Total cost of sales

(33)

Other

Interest and other finance

expense

Total

310

(167)

(1)

SG&A expenses

represent “Selling,

general and

administrative

expenses”.

The fair values of derivatives included in the Consolidated

Balance Sheets were as follows:

December 31, 2020

Derivative assets

Derivative liabilities

Non-current

Current in

in “Other

Current in

in “Other

“Other current

non-current

“Other current

non-current

($ in millions)

assets”

liabilities”

Derivatives designated as hedging instruments:

Foreign exchange contracts

Interest rate contracts

Cash-settled call options

Total

Derivatives not designated as hedging instruments:

Foreign exchange contracts

221

106

Commodity contracts

Interest rate contracts

Embedded foreign exchange derivatives

Total

292

143

Total

fair value

308

114

145

F-38

December 31, 2019

Derivative assets

Derivative liabilities

Non-current

Current in

in “Other

Current in

in “Other

“Other current

non-current

“Other current

non-current

($ in millions)

assets”

liabilities”

Derivatives designated as hedging instruments:

Foreign exchange contracts

Interest rate contracts

Cash-settled call options

Total

Derivatives not designated as hedging instruments:

Foreign exchange contracts

127

Commodity contracts

Cash-settled call options

Embedded foreign exchange derivatives

Total

109

141

Total

fair value

120

104

143

Close‑out netting agreements provide for the termination,

valuation and net settlement of some or all

outstanding transactions between two counterparties on

the occurrence of one or more pre‑defined trigger events.

Although the Company is party to close‑out netting agreements

with most derivative counterparties, the fair

values in the tables above and in the Consolidated Balance

Sheets at December 31, 2020 and 2019, have been presented

on a gross basis.

The Company’s netting

agreements and other similar arrangements allow net settlements under

certain

conditions. At December 31, 2020 and 2019, information

related to these offsetting arrangements was as follows:

($ in millions)

December 31, 2020

Gross amount of

Derivative liabilities

Type of agreement or

recognized

eligible for set-off in

Cash collateral

Non-cash collateral

Net asset

similar arrangement

assets

case of default

received

exposure

Derivatives

410

(106)

304

Total

410

(106)

—

304

($ in millions)

December 31, 2020

Gross amount of

Derivative liabilities

Type of agreement or

recognized

eligible for set-off in

Cash collateral

Non-cash collateral

Net liability

similar arrangement

liabilities

case of default

pledged

exposure

Derivatives

147

(106)

Total

147

(106)

—

F-39

($ in millions)

December 31, 2019

Gross amount of

Derivative liabilities

Type of agreement or

recognized

eligible for set-off in

Cash collateral

Non-cash collateral

Net asset

similar arrangement

assets

case of default

received

exposure

Derivatives

214

(102)

112

Total

214

(102)

—

112

($ in millions)

December 31, 2019

Gross amount of

Derivative liabilities

Type of agreement or

recognized

eligible for set-off in

Cash collateral

Non-cash collateral

Net liability

similar arrangement

liabilities

case of default

pledged

exposure

Derivatives

151

(102)

Total

151

(102)

—

Note 7—Fair values

Recurring fair value measures

The fair values of financial assets and liabilities measured at

fair value on a recurring basis were as follows:

December 31, 2020

Total

($ in millions)

Level 1

Level 2

Level 3

fair value

Assets

Securities in “Marketable securities and short-term

investments”:

Equity securities

1,716

Debt securities—U.S. government obligations

293

Debt securities—European government obligations

Debt securities—Corporate

Derivative assets—current in “Other current assets”

308

Derivative assets—non-current in “Other non-current

assets”

114

Total

317

2,213

—

2,530

Liabilities

Derivative liabilities—current in “Other current liabilities”

145

Derivative liabilities—non-current in “Other non-current liabilities”

Total

—

191

—

191

F-40

December 31, 2019

Total

($ in millions)

Level 1

Level 2

Level 3

fair value

Assets

Securities in “Marketable securities and short-term

investments”:

Equity securities

304

Debt securities—U.S. government obligations

197

Debt securities—Corporate

Derivative assets—current in “Other current assets”

120

Derivative assets—non-current in “Other non-current

assets”

104

Total

197

593

—

790

Liabilities

Derivative liabilities—current in “Other current liabilities”

143

Derivative liabilities—non-current in “Other non-current liabilities”

Total

—

166

—

166

During 2020, 2019 and 2018 there have been

reclassifications for any financial assets or liabilities between

Level 1 and Level 2.

The Company uses the following methods and assumptions

in estimating fair values of financial assets and

liabilities measured at fair value on a recurring basis:

•

Securities in “Marketable securities and short‑term investments”:

If quoted market prices in active

markets for identical assets are available, these are considered

Level 1 inputs; however, when markets

are

not active, these inputs are considered Level 2. If such

quoted market prices are not available, fair value is

determined using market prices for similar assets or present

value techniques, applying an appropriate

risk‑free interest rate adjusted for non‑performance

risk. The inputs used in present value techniques are

observable and fall into the Level 2 category.

•

Derivatives:

The fair values of derivative instruments are determined

using quoted prices of identical

instruments from an active market, if available

(Level 1 inputs). If quoted prices are not available, price

quotes for similar instruments, appropriately adjusted, or

present value techniques, based on available

market data, or option pricing models are used.

Cash‑settled call options hedging the Company’s

WAR

liability are valued based on bid prices of the equivalent

listed warrant. The fair values obtained using price

quotes for similar instruments or valuation techniques represent

a Level 2 input unless significant

unobservable inputs are used.

Non‑recurring fair value measures

The Company elects to record private equity investments

without readily determinable fair values at cost, less

impairment, adjusted for observable price changes. The

Company reassesses at each reporting period whether these

investments continue to qualify for this treatment. In 2020,

the Company recognized net increases in fair value of

million related to certain of its private equity investments based on

observable market price changes for an identical

or similar investment of the same issuer.

The fair values of these investments totaled $

105

million and were determined

using Level 2 inputs.

Based on valuations at July 1, 2020, the Company recorded

goodwill impairment charges of $

311

million in the

third quarter of 2020. The fair value measurements used

in the analyses were calculated using the income approach

(discounted cash flow method). The discounted cash

flow models were calculated using unobservable inputs, which

classified the fair value measurement as Level 3 (see Note

11 for additional information including

further detailed

information related to these charges and significant

unobservable inputs).

F-41

In June 2019, upon meeting the criteria as held for sale,

the Company adjusted the carrying value of the solar

inverters business which was sold in February 2020 (see

Note 4). Apart from the transactions above, there were

additional significant non‑recurring

fair value measurements during 2020 and 2019.

Disclosure about financial instruments carried on a

cost basis

The fair values of financial instruments carried

on a cost basis were as follows:

December 31, 2020

Carrying

Total

($ in millions)

value

Level 1

Level 2

Level 3

fair value

Assets

Cash and equivalents (excluding securities

with original maturities up to 3 months):

Cash

1,765

Time deposits

1,513

Restricted cash

323

Restricted cash, non-current

300

Liabilities

Short-term debt and current maturities of long-term debt

(excluding finance lease obligations)

1,266

497

769

1,266

Long-term debt (excluding finance lease obligations)

4,668

4,909

4,998

December 31, 2019

Carrying

Total

($ in millions)

value

Level 1

Level 2

Level 3

fair value

Assets

Cash and equivalents (excluding securities

with original maturities up to 3 months):

Cash

2,075

Time deposits

1,433

Restricted cash

Liabilities

Short-term debt and current maturities of long-term debt

(excluding finance lease obligations)

2,270

1,534

736

2,270

Long-term debt (excluding finance lease obligations)

6,618

6,267

692

6,959

The Company uses the following methods and assumptions

in estimating fair values of financial instruments

carried on a cost basis:

•

Cash and equivalents (excluding securities with original maturities

up to 3 months), Restricted cash,

current and non-current,

and Marketable securities and short‑term investments (excluding

securities):

The

carrying amounts approximate the fair values as the items are

short‑term in nature or, for cash held

banks, are equal to the deposit amount.

•

Short‑term debt and current maturities of long

‑term debt (excluding finance lease obligations):

Short‑term

debt includes commercial paper, bank

borrowings and overdrafts. The carrying amounts of short‑term

debt

and current maturities of long‑term debt, excluding finance

lease obligations, approximate their fair values.

•

Long‑term debt (excluding finance lease obligations):

Fair values of bonds are determined using quoted

market prices (Level 1 inputs), if available. For bonds without

available quoted market prices and other

long‑term debt, the fair values are determined using

a discounted cash flow methodology based upon

borrowing rates of similar debt instruments and reflecting

appropriate adjustments for non‑performance

risk (Level 2 inputs).

F-42

Note 8—Receivables, net and Contract assets and liabilities

“Receivables, net” consisted of the following:

December 31,

($ in millions)

2020

2019

Trade receivables

6,417

5,967

Other receivables

760

695

Allowance

(357)

(228)

Total

6,820

6,434

“Trade receivables”

in the table above includes contractual retention amounts billed

to customers of

146

million and $

151

million at December 31, 2020 and 2019, respectively.

Management expects that the substantial

majority of related contracts will be completed and the

substantial majority of the billed amounts retained by the

customer will be collected. Of the retention amounts outstanding

at December 31, 2020,

percent and

percent are

expected to be collected in 2021 and 2022,

respectively.

“Other receivables”

in the table above consists of value added tax, claims, rental deposits and

other non‑trade

receivables.

The reconciliation of changes in the allowance for doubtful

accounts is as follows:

($ in millions)

2020

2019

2018

Balance at January 1,

228

219

202

Transition adjustment

—

Current-period provision for expected credit losses

115

Write-offs charged

against the allowance

(42)

(19)

(17)

Exchange rate differences

(3)

(16)

Balance at December 31,

357

228

219

The following table provides information about Contract

assets and Contract liabilities:

($ in millions)

2020

2019

2018

Contract assets

985

1,025

1,082

Contract liabilities

1,903

1,719

1,707

Contract assets primarily relate to the Company’s

right to receive consideration for work completed but for

which no invoice has been issued at the reporting date.

Contract assets are transferred to receivables when rights to

receive payment become unconditional. Management

expects that the majority of the amounts will be collected within

one year of the respective balance sheet date.

Contract liabilities primarily relate to up-front advances

received on orders from customers as well as amounts

invoiced to customers in excess of revenues recognized

predominantly on long-term projects. Contract liabilities are

reduced as work is performed and as revenues are recognized.

F-43

The significant changes in the Contract assets and Contract

liabilities balances were as follows:

2020

2019

Contract

($ in millions)

assets

liabilities

assets

liabilities

Revenue recognized, which was included in the Contract liabilities

balance at January 1, 2020/2019

(1,011)

(1,158)

Additions to Contract liabilities - excluding amounts recognized

revenue during the period

1,129

1,255

Receivables recognized that were included in the Contract

assets

balance at January 1, 2020/2019

(680)

(786)

The Company considers its order backlog to represent

its unsatisfied performance obligations. At December 31,

2020, the Company had unsatisfied performance obligations

totaling $

14,303

million and, of this amount, the Company

expects to fulfill approximately

percent of the obligations in 2021, approximately

percent of the obligations in

2022 and the balance thereafter.

Note 9—Inventories, net

“Inventories, net” consisted of the following:

December 31,

($ in millions)

2020

2019

Raw materials

1,785

1,760

Work in

process

1,020

819

Finished goods

1,499

Advances to suppliers

165

106

Total

4,469

4,184

Note 10—Property,

plant and equipment, net

“Property, plant and

equipment, net” consisted of the following:

December 31,

($ in millions)

2020

2019

Land and buildings

3,889

3,568

Machinery and equipment

6,144

5,620

Construction in progress

505

500

10,538

9,688

Accumulated depreciation

(6,364)

(5,716)

Total

4,174

3,972

Assets under finance leases included in “Property,

plant and equipment, net” were as follows:

December 31,

($ in millions)

2020

2019

Land and buildings

169

142

Machinery and equipment

248

204

Accumulated depreciation

(111)

(99)

Total

137

105

F-44

In 2020, 2019 and 2018 depreciation, including depreciation

of assets under finance leases, was $

586

million,

616

million and $

578

million, respectively.

In 2020, 2019 and 2018 there were no significant impairments

of property,

plant or equipment.

Note 11—Goodwill and intangible

assets

The changes in “Goodwill” were as follows:

Robotics &

Industrial

Discrete

Corporate

($ in millions)

Electrification

Automation

Motion

Automation

and Other

Total

Balance at January 1, 2019

4,276

1,616

2,441

2,410

10,764

Goodwill acquired during the year

(1)

—

Goodwill allocated to disposals

(18)

—

(18)

Exchange rate differences and other

(1)

(5)

(29)

—

(13)

Balance at December 31, 2019

4,372

1,615

2,436

2,381

10,825

Goodwill acquired during the year

—

Impairment of Goodwill

—

(290)

(21)

(311)

Exchange rate differences and other

116

—

244

Balance at December 31, 2020

(2)

4,527

1,639

2,456

2,228

10,850

(1)

Amount consists

of adjustments

arising during

the twelve-month

measurement period

subsequent to

the respective

acquisition date

(see

Note 4).

(2)

As of December

31, 2020, the

gross goodwill

amounted to $

11,152

million. The

accumulated

impairment charges

amounted to

302

million and related

to the Robotics

& Discrete Automation

segment.

The Company adopted a new operating model on July

1, 2020, which resulted in a change to the identification

of the goodwill reporting units. Previously,

the reporting units were the same as the operating segments for

Electrification, Motion and Robotics & Discrete Automation,

while for the Industrial Automation operating segment the

reporting units were determined to be at the Division level,

which is one level below the operating segment. The

new

operating model provides the Divisions with full ownership

and accountability for their respective strategies,

performance and resources and based on these changes, the

Company concluded that the reporting units would change

and be the respective Divisions within each operating

segment. This change resulted only in an allocation of goodwill

within the operating segments and thus there is no change

to segment level goodwill in the table above.

As a result of the new allocation of goodwill, an interim quantitative

impairment test was conducted both

before and after the changes

which were effective July 1, 2020. In the “before”

test, it was concluded that the fair value

of the Company’s reporting

units exceeded the carrying value under the historical reporting

unit structure.

The impairment test was performed for the new reporting

units and the fair value of each was determined using

a discounted cash flow fair value estimate based on

objective information available at the measurement date.

The

significant assumptions used to develop the estimates of

fair value for each reporting unit included management’s

best

estimates of the expected future results and discount

rates specific to the reporting unit. The fair value estimates were

based on assumptions that the Company believed to be reasonable,

but which are inherently uncertain and thus, actual

results may differ from those estimates. The fair values

for each of the individual reporting units and their associated

goodwill were determined using Level 3 measurements.

F-45

The interim quantitative impairment test indicated that

the estimated fair values of the reporting units were

substantially in excess of their carrying value for all repor

ting units except for the Machine Automation reporting unit

within the Robotics & Discrete Automation operating segment.

The contraction of the global economy in 2020,

particularly in end-customer industries related to this reporting

unit and considerable uncertainty around the continued

pace of macroeconomic recovery generally led to a reduction

in the fair values of the reporting units, thus affecting

this

reporting unit. Also, at the division level, this reporting

unit does not

benefit from shared cash flows generated within an

entire operating segment.

In addition, the book value of the Machine Automation Division includes

a significant amount

of intangible assets recognized in past acquisitions,

resulting in a proportionately higher book value than the other

reporting unit within the Robotics & Discrete Automation

Business Area. With the fair value

of the reporting unit lower

due to the economic conditions, the existing book value

of the intangible assets combined with the newly allocated

reporting unit goodwill led to the carrying value of the Machine

Automation reporting unit exceeding its fair value.

During 2020, a goodwill impairment charge

of $

290

million was recorded to reduce the carrying value of this reporting

unit to its implied fair value. The remaining goodwill

for the Machine Automation reporting unit was $

554

million as of

December 31, 2020.

The Company performed its annual impairment test as of

October 1, 2020, using a qualitative assessment

method for each reporting unit and determined it was not

more likely than not

that any reporting unit’s fair value

is less

than its carrying value.

Intangible assets consisted of the following:

December 31,

2020

2019

Gross

Net

Gross

Net

carrying

Accumulated

carrying

Accumulated

carrying

($ in millions)

amount

amortization

amount

amortization

amount

Capitalized software for internal use

828

(694)

134

790

(628)

162

Capitalized software for sale

(32)

(29)

—

Intangibles other than software:

Customer-related

2,557

(1,104)

1,453

2,513

(1,005)

1,508

Technology-related

1,170

(898)

272

1,056

(722)

334

Marketing-related

492

(304)

188

501

(286)

215

Other

(33)

(26)

Total

5,143

(3,065)

2,078

4,948

(2,696)

2,252

In 2020 and 2019, additions to intangible assets were $

million and $

million, respectively

There were no significant intangible assets acquired

in business combinations during 2020 and 2019.

Amortization expense of intangible assets consisted of the following:

($ in millions)

2020

2019

2018

Capitalized software for internal use

Intangibles other than software

268

271

279

Total

329

345

338

In 2020,

2019 and 2018, impairment charges on intangible

assets were not significant.

F-46

At December 31, 2020, future amortization expense

of intangible assets is estimated to be:

($ in millions)

2021

323

2022

288

2023

261

2024

215

2025

181

Thereafter

810

Total

2,078

Note 12—Debt

The Company’s total debt

at December 31, 2020 and 2019, amounted to $

6,121

million and $

9,059

million,

respectively.

Short‑term debt and current maturities of

lon

g̩

‑term debt

The Company’s “Short‑term

debt and current maturities of long‑term debt” consisted of

the following:

December 31,

($ in millions)

2020

2019

Short-term debt (weighted-average interest rate of

2.8

% and

2.8

%, respectively)

153

838

Current maturities of long-term debt (weighted-average

nominal interest rate of

3.2

and

0.7

%, respectively)

1,140

1,449

Total

1,293

2,287

Short‑term debt primarily represents short‑term loans from

various banks and issued commercial paper.

At December 31, 2020, the Company had in place

commercial paper programs: a $

billion

Euro‑commercial paper program for the issuance of commercial

paper in a variety of currencies, and a $

billion

commercial paper program for the private placement of U.S.

dollar denominated commercial paper in the United

States.

At December 31, 2020 and 2019,

amount was outstanding under the $

billion Euro-commercial paper program. At

December 31, 2020 and 2019, $

million and $

708

million, respectively,

was outstanding under the $

billion program

in the United States.

In March 2020, the Company entered into a bank-funded

short-term EUR

billion Revolving Credit

Agreement (the “Agreement”). This Agreement was in

addition to the Company’s existing $

billion multicurrency

revolving credit facility (see below). Under this Agreement,

outstanding amounts were subject to interest at the rate

EURIBOR plus a margin of

0.25

percent. The Company requested the full amount to be borrowed

and the proceeds

were received on March 31, 2020, amounting to $

2,183

million, net of issuance costs. The Agreement required

that all

outstanding amounts be repaid within

days after the completion of the sale of the Power Grids business.

The

Agreement was terminated after the final repayment on

July 8, 2020.

F-47

In addition, during 2019, the Company replaced its previous $

billion multicurrency revolving credit facility,

maturing in 2021, with a new $

billion

-year multicurrency credit facility maturing in 2024. The new

credit facility

provides an option in 2020 and 2021 to extend the maturity

to 2025 and 2026, respectively.

The Company exercised the

option in 2020 to extend the maturity of the facility to

2025. The facility is for general corporate purposes. Interest

costs

on drawings under the facility are LIBOR or EURIBOR (depending

on the currency of the drawings) plus a margin

0.175

percent, while commitment fees (payable on the unused

portion of the facility) amount to

percent of the

margin, which represents commitment fees of

0.06125

percent per annum. Utilization fees, payable on drawings,

amount

0.075

percent per annum on drawings up to one‑third of the facility,

0.15

percent per annum on drawings in excess of

one‑third but less than or equal to two‑thirds of the facility,

0.30

percent per annum on drawings over two‑thirds of

the facility. The

facility contains cross‑default clauses whereby an event of default

would occur if the Company were to

default on indebtedness as defined in the facility,

at or above a specified threshold.

NaN

amount was drawn at

December 31, 2020 and 2019, under this facility.

Long‑term debt

The Company raises long-term debt in various currencies,

maturities and on various interest rate terms. For

certain of its debt obligations,

the Company utilizes derivative instruments to modify

its interest rate exposure. In

particular, the Company uses interest

rate swaps to effectively convert certain

fixed‑rate long‑term debt into floating rate

obligations. The carrying value of debt, designated as being

hedged by fair value hedges, is adjusted for changes

in the

fair value of the risk component of the debt being hedged.

The following table summarizes the Company’s

long‑term debt considering the effect of interest rate swaps.

Consequently, a

fixed‑rate debt subject

to a fixed‑to‑floating interest rate swap is included as a floating

rate debt in the

table below:

December 31,

2020

2019

Nominal

Effective

Nominal

Effective

($ in millions, except % data)

Balance

rate

Balance

rate

Floating rate

3,330

1.6

0.2

2,221

1.5

1.1

Fixed rate

2,638

3.2

3.3

6,000

2.8

2.4

5,968

8,221

Current portion of long-term debt

(1,140)

3.2

2.6

(1,449)

0.7

0.6

Total

4,828

6,772

At December 31, 2020,

the principal amounts of long‑term debt repayable (excluding

finance lease obligations)

at maturity were as follows:

($ in millions)

2021

1,108

2022

1,255

2023

860

2024

1,238

2025

Thereafter

1,186

Total

5,730

F-48

Details of the Company’s

outstanding bonds were as follows:

December 31,

2020

2019

Nominal

Carrying

Nominal

Carrying

outstanding

value

(1)

outstanding

value

(1)

(in millions)

Bonds:

2.8

% USD Notes, due 2020

—

USD

300

Floating EUR Notes, due 2020

—

EUR

1,000

1,122

4.0

% USD Notes, due 2021

USD

650

649

USD

650

648

2.25

% CHF Bonds, due 2021

CHF

350

403

CHF

350

373

5.625

% USD Notes, due 2021

—

USD

250

260

2.875

% USD Notes, due 2022

USD

1,250

1,280

USD

1,250

1,267

3.375

% USD Notes, due 2023

—

USD

450

448

0.625

% EUR Instruments, due 2023

EUR

700

875

EUR

700

799

0.75

% EUR Instruments, due 2024

EUR

750

946

EUR

750

859

0.3

% CHF Notes, due 2024

CHF

280

317

CHF

280

288

3.8

% USD Notes, due 2028

USD

383

381

USD

750

746

1.0

% CHF Notes, due 2029

CHF

170

192

CHF

170

175

4.375

% USD Notes, due 2042

USD

609

589

USD

750

724

Total

5,632

8,009

(1)

USD carrying

values include

unamortized debt

issuance costs,

bond discounts

or premiums,

as well as adjustments

for fair value

hedge

accounting, where

appropriate.

During 2020, the Company repaid at maturity

its

2.8

% USD Notes and its floating EUR Notes. The

2.8

% USD Notes paid interest semi‑annually in arrears, while the

floating EUR Notes paid interest quarterly in arrears at

a variable interest rate of

basis points above the 3-month EURIBOR, with a floor rate

In November 2020, the Company completed a cash

tender offer on its

3.8

% USD Notes due 2028 and

4.375

USD Notes due 2042. As a result of this tender offer

the Company redeemed principal amounts of $

367

million of the

3.8

% USD Notes due 2028 and $

141

million of the

4.375

% USD Notes due 2042 for a total cash payment of

629

million. The Company recognized losses from extinguishment of

debt of $

123

million for these two transactions,

representing the premium associated with the early

redemption, as well as the recognition of remaining unamortized

issuance discounts and costs.

In December 2020, the Company exercised its early

redemption option on its

5.625

% USD Notes due 2021 and

its

3.375

% USD Notes due 2023. Both USD Notes paid interest semi-annually

in arrears. In connection with the

redemption, the Company recognized losses from extinguishment

of debt of $

million representing the premium

associated with the early redemption,

as well as the recognition of the relevant remaining unamortized premium

discount and issuance costs.

The

4.0

% USD Notes, due 2021, pay interest semi‑annually in arrears, at

a fixed annual rate of

4.0

percent. The

Company may redeem these notes prior to maturity,

in whole or in part, at the greater of (i)

100

percent of the principal

amount of the notes to be redeemed and (ii) the sum

of the present values of remaining scheduled payments of

principal

and interest (excluding interest accrued to the redemption

date) discounted to the redemption date at a rate defined in

the

note terms, plus interest accrued at the redemption date.

F-49

The

2.25

% CHF Bonds, due 2021, pay interest annually in arrears, at a

fixed annual rate of

2.25

percent. The

Company has the option to redeem the bonds prior

to maturity, in whole,

at par plus accrued interest, if

percent of the

aggregate principal amount of the bonds has been redeemed

or purchased and cancelled. The Company entered into

interest rate swaps to hedge its interest obligations on

these bonds. After considering the impact of such swaps, these

bonds effectively became floating rate Swiss franc

obligations and consequently have been shown as floating rate

debt

in the table of long‑term debt above.

The

2.875

% USD Notes, due 2022, pay interest semi‑annually in arrears

at a fixed annual rate of

2.875

percent.

The

4.375

% USD Notes, due 2042, pay interest semi‑annually in arrears

at a fixed annual rate of

4.375

percent. The

Company may redeem both of these notes (which were

issued together in May 2012) prior to maturity,

in whole or in

part, at the greater of (i)

100

percent of the principal amount of the notes to be redeemed and

(ii) the sum of the present

values of remaining scheduled payments of principal and

interest (excluding interest accrued to the redemption date)

discounted to the redemption date at a rate defined

in the note terms, plus interest accrued at the redemption

date. These

notes, registered with the U.S. Securities and Exchange

Commission, were issued by ABB Finance (USA) Inc., a

100

percent owned finance subsidiary,

and were fully and unconditionally guaranteed by ABB Ltd. There

are no

significant restrictions on the ability of the parent

company to obtain funds from its subsidiaries by dividend or loan.

reliance on Rule 3‑10 of Regulation S‑X, the separate

financial statements of ABB Finance (USA) Inc. are not provided.

The Company has entered into interest rate swaps for an

aggregate nominal amount of $

1,050

million to partially hedge

its interest obligations on the

2.875

% USD Notes, due 2022. After considering the impact of such swaps,

1,050

million

of the outstanding principal is shown as floating rate debt

in the table of long‑term debt above.

The

0.625

% EUR Instruments, due 2023, were issued in May 2016, with

total net issuance proceeds of

EUR

697

million (equivalent to approximately $

807

million on date of issuance). These Instruments pay interest

annually in arrears at a fixed rate of

0.625

percent per annum. The Company may redeem these notes three

months prior

to maturity (Par call date), in whole or in part, at

the greater of (i)

100

percent of the principal amount of the notes to be

redeemed and (ii) the sum of the present values of remaining

scheduled payments of principal and interest (excluding

interest accrued to the redemption date) discounted to the

redemption date at a rate defined in the note terms, plus

interest accrued at the redemption date. The Company

may redeem these instruments in whole or in part, after the

Par

call date at

100

percent of the principal amount of the notes to be redeemed.

The Company entered into interest rate

swaps to hedge its interest on these bonds. After considering

the impact of such swaps, these notes effectively

became

floating rate euro obligations and consequently have

been shown as floating rate debt, in the table of long‑term debt

above.

The

0.75

% EUR Instruments, due 2024, were issued in May 2017, with

total net issuance proceeds of

EUR

745

million (equivalent to approximately $

824

million on date of issuance). These Instruments pay interest

annually in arrears at a fixed rate of

0.75

percent per annum and have the same early redemption terms

as the

0.625

% EUR Instruments above. The Company entered into interest rate swaps to

hedge its interest on these bonds.

After considering the impact of such swaps, these bonds effectively

became floating rate euro obligations and

consequently have been shown as floating rate debt

in the table of long‑term debt above.

In April 2018, the Company issued the following notes

(i) $

300

million of

2.8

% USD Notes, due 2020,

(ii) $

450

million of

3.375

% USD Notes, due 2023, and (iii) $

750

million of

3.8

% USD Notes, due 2028. Each of the

respective notes pays interest semi‑annually in arrears.

The aggregate net proceeds of these bond issues, after

underwriting discount and other fees, amounted to $

1,494

million. The 2020 Notes were repaid at maturity in October

2020 and the 2023 Notes were redeemed in full in December

2020.

The Company may redeem the remaining principal

outstanding on the 2028 Notes up to

three months

prior to their maturity date, in whole or in part, at the greater

(i)

100

percent of the principal amount of the notes to be redeemed

and (ii) the sum of the present values of remaining

scheduled payments of principal and interest (excluding

interest accrued to the redemption date) discounted to the

redemption date at a rate defined in the Notes terms,

plus interest accrued at the redemption date. On or after January

2028 (

three months

prior to their maturity date), the Company may also redeem

the 2028 Notes, in whole or in part, at

any time at a redemption price equal to

100

percent of the principal amount of the notes to be redeemed

plus unpaid

accrued interest to, but excluding, the redemption date.

These notes, registered with the U.S. Securities and Exchange

Commission, were issued by ABB Finance (USA) Inc.,

100

percent owned finance subsidiary,

and were fully and

unconditionally guaranteed by ABB Ltd. There are no

significant restrictions on the ability of the parent company

obtain funds from its subsidiaries by dividend or loan.

In reliance on Rule 3‑10 of Regulation S‑X, the separate

financial

statements of ABB Finance (USA) Inc. are not provided.

F-50

In February 2019, the Company issued the following

notes: (i) CHF

280

million of

0.3

% CHF Notes, due 2024

and (ii) CHF

170

million of

1.0

% CHF Notes, due 2029. Each of the respective notes pays interests

annually in arrears.

The Company recorded aggregate net proceeds, after

underwriting discount and other fees, of CHF

449

million

(equivalent to approximately $

449

million on date of issuance).

The Company’s various debt

instruments contain cross‑default clauses which would allow the bondholders

demand repayment if the Company were to default on

any borrowing at or above a specified threshold. Furthermore, all

such bonds constitute unsecured obligations of the

Company and rank pari passu with other debt obligations.

In addition to the bonds described above, included in long‑term

debt at December 31, 2020 and 2019, are

finance lease obligations, bank borrowings of subsidiaries

and other long‑term debt, none of which is individually

significant.

Subsequent events

In January 2021, the Company issued

interest notes having a principal amount of EUR

800

million and

due in 2030. The Company recorded net proceeds (after underwriting

fees) of EUR

791

million (equivalent to

960

million on the date of issuance).

Note 13—Other provisions, other current

liabilities and other non-current liabilities

“Other provisions” consisted of the following:

December 31,

($ in millions)

2020

2019

Contract-related provisions

754

607

Restructuring and restructuring-related provisions

292

234

Provisions for contractual penalties and compliance and litigation

matters

113

209

Provision for insurance-related reserves

176

168

Other

184

157

Total

1,519

1,375

“Other current liabilities” consisted of the following:

December 31,

($ in millions)

2020

2019

Employee-related liabilities

1,467

1,396

Accrued expenses

650

592

Non-trade payables

622

442

Income taxes payable

395

355

Accrued customer rebates

317

287

Other tax liabilities

286

282

Derivative liabilities (see Note 6)

145

143

Deferred income

130

Pension and other employee benefits

Accrued interest

Other

159

Total

4,181

3,761

F-51

“Other non‑current liabilities” consisted of the following:

December 31,

($ in millions)

2020

2019

Income tax related liabilities

1,423

1,218

Deferred income

138

Provisions for contractual penalties and compliance and litigation

matters

120

112

Employee-related liabilities

Environmental provisions

Derivative liabilities (see Note 6)

Other

190

189

Total

2,025

1,669

Note 14—Leases

The Company’s lease obligations

primarily relate to real estate,

machinery and equipment. Prior to the adoption

of the new lease standard in 2019, rent expense was $

364

million in 2018. Sublease income received by the Company

leased assets was $

million in 2018.

Under the accounting standard, adopted in January

2019, the components of lease expense were as follows:

2020

2019

Land

Machinery

Land

Machinery

and

($ in millions)

buildings

equipment

Total

buildings

equipment

Total

Operating lease cost

287

376

268

101

369

Finance lease cost:

Amortization of right-of-use assets

Interest on lease liabilities

Variable

lease cost

(1)

Short-term lease cost

Sub-lease income

(20)

(1)

(21)

(2)

Total

lease expense

300

138

438

299

157

456

(1) Primarily

relates to variable

payments that

are tied to the

consumer price

index and are

therefore included

in the measurement

of the

right-of-use

asset or lease

liability.

F-52

The following table presents supplemental cash flow information

related to leases:

2020

2019

Land

Machinery

Land

Machinery

and

($ in millions)

buildings

equipment

Total

buildings

equipment

Total

Cash paid for amounts included in

the measurement of lease liabilities:

Operating cash flows from

- operating leases

263

346

252

348

- finance leases

Financing cash flows from

- finance leases

Right-of-use assets obtained

in exchange for new liabilities:

Under operating leases

266

323

153

205

Under finance leases

At December 31, 2020,

the future net minimum lease payments for operating and finance

leases and the related

present value of the net minimum lease payments consisted

of the following:

Operating Leases

Finance Leases

Land and

Machinery

Land and

Machinery

($ in millions)

buildings

and equipment

buildings

and equipment

2021

215

2022

168

2023

138

2024

110

2025

Thereafter

215

Total

minimum lease payments

933

150

201

Difference between undiscounted cash flows

and discounted cash flows

(80)

(2)

(43)

Present value of minimum lease payments

853

148

158

The following table presents certain information related

to lease terms and discount rates:

Operating Leases

Finance Leases

Land and

Machinery

Land and

Machinery

buildings

and equipment

buildings

and equipment

($ in millions)

2020

2019

2020

2019

2020

2019

2020

2019

Weighted-average

remaining term (months)

107

110

Weighted-average

discount rate

3.0%

2.0%

2.2%

7.7%

8.2%

2.3%

2.8%

The present value of minimum finance lease payments

included in “Short‑term debt and current maturities of

long‑term debt”

and “Long‑term debt”

in the Consolidated Balance Sheets at December 31, 2020, amounts

million and $

160

million, respectively,

and at December 31, 2019, amounts to $

million and $

154

million,

respectively.

F-53

Note 15—Commitments and contingencies

Contingencies—Regulatory,

Compliance and Legal

Regulatory

As a result of an internal investigation, the Company self-reported

to the Securities and Exchange Commission

(SEC) and the Department of Justice (DoJ) in the United States as well

as to the Serious Fraud Office (SFO)

in the

United Kingdom concerning certain of its past dealings with

Unaoil and its subsidiaries, including alleged improper

payments made by these entities to third parties. In May

2020, the SFO closed its investigation, which it originally

announced in February 2017, as the case did not meet

the relevant test for prosecution. The Company continues

cooperate with the U.S. authorities as requested. At this time,

it is not possible for the Company to make an informed

judgment about the outcome of this matter.

Based on findings during an internal investigation, the

Company self-reported to the SEC and the DoJ, in the

United States, to the Special Investigating Unit (SIU)

and the National Prosecuting Authority (NPA)

in South Africa as

well as to various authorities in other countries potential suspect

payments and other compliance concerns in connection

with some of the Company’s

dealings with Eskom and related persons. Many of those

parties have expressed an interest

in, or commenced an investigation into, these matters

and the Company is cooperating fully with them. The Company

paid $

104

million to Eskom in December 2020 as part of a full and final

settlement with Eskom and the Special

Investigating Unit relating to improper payments and

other

compliance issues associated with the Controls and

Instrumentation Contract, and its Variation

Orders for Units 1 and 2 at Kusile. The Company continues

to cooperate

fully with the National Prosecuting Authority in South

Africa as well as other authorities in their review of the

Kusile

project. Although the Company believes that there

could be an unfavorable outcome in one or more of these ongoing

reviews,

at this time it is not possible for the Company to

make an informed judgment about the possible financial

impact.

General

The Company is aware of proceedings, or the threat

of proceedings, against it and others in respect of private

claims by customers and other third parties with regard

to certain actual or alleged anticompetitive practices. Also, the

Company is subject to other claims and legal proceedings,

as well as investigations carried out by various law

enforcement authorities. With respect

to the above-mentioned claims, regulatory matters, and

any related proceedings,

the Company will bear the related costs, including

costs necessary to resolve them.

Liabilities recognized

At December 31, 2020 and 2019, the Company had aggregate

liabilities of $

100

million and $

157

million,

respectively, included

in “Other provisions”

and “Other non‑current liabilities”, for the above regulatory,

compliance

and legal contingencies, and none of the individual

liabilities recognized was significant. As it is not possible to make

informed judgment on, or reasonably predict, the outcome

of certain matters and as it is not possible, based on

information currently available to management, to

estimate the maximum potential liability on other matters, there could

be adverse outcomes beyond the amounts accrued.

F-54

Guarantees

General

The following table provides quantitative data regarding

the Company’s third‑party guarantees.

The maximum

potential payments represent a “worst‑case scenario”, and

do not reflect management’s

expected outcomes.

December 31,

2020

2019

Maximum potential

($ in millions)

payments

(1)

Performance guarantees

6,726

1,860

Financial guarantees

339

Indemnification guarantees

(2)

177

Total

7,242

1,934

(1)

Maximum potential payments include amounts in both continuing

and discontinued operations.

(2)

Certain indemnifications provided to Hitachi in connection with

the divestment of Power Grids are without limit.

The carrying amount of liabilities recorded in the Consolidated

Balance Sheets reflects the Company’s

best

estimate of future payments, which it may incur as part

of fulfilling its guarantee obligations. In respect of the above

guarantees, the carrying amounts of liabilities at December

31, 2020, amounted to $

135

million, which was included in

discontinued operations, while at December 31, 2019,

balances were not significant.

The Company is party to various guarantees providing

financial or performance assurances to certain third

parties. These guarantees, which have various maturities up

to 2035, mainly consist of performance guarantees whereby

(i) the Company guarantees the performance of a third

party’s product or service according

to the terms of a contract and

(ii) as member of a consortium/joint venture that includes third

parties, the Company guarantees not only its own

performance but also the work of third parties. Such guarantees

may include guarantees that a project will be completed

within a specified time. If the third party does not fulfill

the obligation, the Company will compensate the guaranteed

party in cash or in kind. The original maturity dates for

the majority of these performance guarantees range from

one

ten years

In conjunction with the divestment of the high‑voltage cable and

cables accessories businesses, the Company

has entered into various performance guarantees with other

parties with respect to certain liabilities of the divested

business. At December 31, 2020 and 2019, the maximum

potential payable under these guarantees amounts to

994

million and $

898

million, respectively,

and these guarantees have various maturities ranging from

one

ten years

The Company retained obligations for financial, performance

and indemnification guarantees related to the

Power Grids business sold on July 1, 2020 (see Note 3

for details). The performance and financial guarantees

have been

indemnified by Hitachi at the same proportion of its ownership

in Hitachi ABB Power Grids (

80.1

percent). These

guarantees, which have various maturities up to 2035,

primarily consist of bank guarantees, standby letters of credit,

business performance guarantees and other trade-related

guarantees, the majority of which have original maturity dates

ranging from

one

ten years

. The maximum amount payable under the guarantees is approximately

5.5

billion and the

carrying amounts of liabilities (recorded in discontinued

operations) at December 31, 2020, amounted to $

135

million.

F-55

Commercial commitments

In addition, in the normal course of bidding for and executing certain

projects, the Company has entered into

standby letters of credit, bid/performance bonds and surety

bonds (collectively “performance bonds”) with various

financial institutions. Customers can draw on such

performance bonds in the event that the Company does not

fulfill its

contractual obligations. The Company would then have

an obligation to reimburse the financial institution for amounts

paid under the performance bonds. At December 31,

2020 and 2019, the total outstanding performance bonds

aggregated to $

4.3

billion and $

6.8

billion, respectively,

of which $

0.3

billion and $

3.7

billion, respectively,

relate to

discontinued operations.

There have been no significant amounts reimbursed to

financial institutions under these types

of arrangements in 2020, 2019 and 2018.

Product and order‑related contingencies

The Company calculates its provision for product

warranties based on historical claims experience and specific

review of certain contracts.

The reconciliation of the “Provisions for warranties”, including

guarantees of product performance, was as

follows:

($ in millions)

2020

2019

2018

Balance at January 1,

816

948

909

Net change in warranties due to acquisitions, divestments

and

liabilities held for sale

(1)

(88)

Claims paid in cash or in kind

(209)

(310)

(307)

Net increase in provision for changes in

estimates, warranties issued and warranties expired

369

276

341

Exchange rate differences

(10)

(36)

Balance at December 31,

1,035

816

948

(1)

Includes adjustments

to the initial

purchase price

allocation recorded

during the measurement

period.

During 2018, the Company determined that the provision

for a product warranty related to a divested business

was no longer sufficient to cover expected warranty

costs in the remaining warranty period. Due to an unexpected

level

of product failure, the previously estimated product warranty

provision was increased by a total of $

million during

2018 and further increased by $

143

million during 2020. In both years, the corresponding increase

was included in “Cost

of sales of products”. As these costs relate to a divested

business, in accordance with the definition of the Company’s

primary measure of segment performance, Operational

EBITA (see Note 23)

the costs have been excluded from this

measure.

The warranty liability has been recorded based on

the information currently available and is subject to change

in the future.

Related party transactions

The Company conducts business with certain companies

where members of the Company’s

Board of Directors

or Executive Committee act, or in recent years have acted,

as directors or senior executives. The Company’s

Board of

Directors has determined that the Company’s

business relationships with those companies do not

constitute material

business relationships. This determination was made

in accordance with the Company’s

related party transaction policy

which was prepared based on the Swiss Code of Best Practice

and the independence criteria set forth in the corporate

governance rules of the New York

Stock Exchange.

F-56

Note 16—Income taxes

“Income tax expense” consisted of the following:

($ in millions)

2020

2019

2018

Current taxes

776

855

686

Deferred taxes

(280)

(83)

(142)

Income tax expense allocated to continuing operations

496

772

544

Income tax expense allocated to discontinued operations

322

167

228

Income tax expense from continuing operations is reconciled

below from the Company’s weighted

‑average

global tax rate (rather than from the Swiss domestic statutory

tax rate) as the parent company of the ABB Group,

ABB Ltd, is domiciled in Switzerland and income generated

in jurisdictions outside of Switzerland (hereafter “foreign

jurisdictions”) which has already been subject to corporate

income tax in those foreign jurisdictions is, to a large

extent,

tax exempt in Switzerland. There is no requirement

in Switzerland for any parent company of a group to file a

tax return

of the consolidated group determining domestic and

foreign pre‑tax income. As the Company’s

consolidated income

from continuing operations is predominantly earned

outside of Switzerland, the weighted‑average global tax

rate of the

Company results from enacted corporate income tax

rates in foreign jurisdictions.

The reconciliation of “Income tax expense from

continuing operations” at the weighted‑average tax rate

to the

effective tax rate is as follows:

($ in millions, except % data)

2020

2019

2018

Income from continuing operations before

income taxes

841

1,862

2,119

Weighted-average global

tax rate

22.9%

18.3%

22.2%

Income taxes at weighted-average tax rate

193

341

470

Items taxed at rates other than the weighted-average

tax rate

(7)

(43)

Unrecognized tax benefits

(38)

133

(22)

Changes in valuation allowance, net

198

Effects of changes in tax laws and (enacted) tax

rates

Non-deductible expenses (including impairment of goodwill)

232

Other, net

Income tax expense from continuing operations

496

772

544

Effective tax rate for the year

59.0%

41.5%

25.7%

The allocation of consolidated income from continued operations,

which is predominantly earned outside of

Switzerland, impacts the “weighted-average global tax

rate”. In 2019, based on the enacted tax rates in the applicable

jurisdictions, the loss recorded for the planned sale of the solar

inverters business reduced the weighted-average global

tax rate by approximately

percent.

In 2018, the benefit reported in “Items taxed at rates other

than the weighted-average tax rate” included positive

impacts of $

million, relating to non-taxable amounts for net gains from sale of

businesses. In 2020 and 2019, the

amount was not significant.

In 2020,

“Changes in valuation allowance, net” predominantly reflects increases

in the valuation allowance

resulting from changes in expectations of future economic

conditions due to impacts on the Company’s

business from

the COVID-19 pandemic.

In 2019, “Changes in valuation allowance, net”

included adjustments to the valuation allowance in certain

jurisdictions where the Company updated its assessment that

it was more likely than not that such deferred tax

assets

would be realized. In 2019, the Company recorded an

increase of $

158

million to the valuation allowance in certain

operations in North America,

including an amount to provide

for certain deferred tax assets arising in 2019.

F-57

In 2018, the “Changes in valuation allowance, net”

included adjustments in valuation allowance recorded in

certain jurisdictions where the Company updated its assessment

that it was more likely than not that such deferred

tax

assets would be realized. The amount included an increase

of $

million relating to certain operations in Central

Europe.

In 2020,

“Effects of changes in tax laws and (enacted) tax rates” primarily

reflects the impact of changes to tax

rates in certain countries in Asia by $

million. In 2019, “Effects of changes in tax laws and

(enacted) tax rates”

primarily reflects a change in tax law applicable to a country

in Europe.

The benefit in 2019 was mostly offset by a

related change in the valuation allowance, resulting

in a net benefit of $

million.

In 2020, the impact on the income tax expense from

“Non-deductible expenses” was $

232

million, and includes

an impact of $

million for the impairment of non-deductible goodwill. In

addition, the amount in 2020 includes

million relating to non-operational pension costs resulting from

the settlement of certain defined benefit plans which

were principally not deductible. Non-deductible expenses

also includes other items that were deducted for financial

accounting purposes but are typically not tax deductible, such as

interest expense, local taxes on productive activities,

disallowed meals and entertainment expenses and other

similar items. The amounts in 2019 and 2018 related primarily

to these typically non-deductible items.

In 2020 and 2018, “Unrecognized tax benefits” in the

table above included a net benefit of $

million and

million, respectively,

related to the interpretation for tax law and double tax

treaty agreements by competent tax

authorities while in 2019, “Unrecognized tax benefits” included

a net charge of $

million.

In 2020, “Other, net” represents income

tax expense of $

million related to finalization of tax audits in

Europe.

F-58

Deferred tax assets and liabilities (excluding amounts held

for sale and in discontinued operations) consisted of

the following:

December 31,

($ in millions)

2020

2019

Deferred tax assets:

Unused tax losses and credits

758

507

Provisions and other accrued liabilities

750

650

Other current assets including receivables

114

121

Pension

413

592

Inventories

370

463

Intangible assets

873

972

Other

179

Total

gross deferred tax asset

3,354

3,484

Valuation

allowance

(1,518)

(1,632)

Total

gross deferred tax asset, net of valuation

allowance

1,836

1,852

Deferred tax liabilities:

Property, plant and

equipment

(275)

(244)

Intangible assets

(419)

(483)

Other assets

(65)

(161)

Pension

(223)

(214)

Other liabilities

(310)

(359)

Inventories

(29)

(39)

Unremitted earnings of subsidiaries

(333)

(353)

Total

gross deferred tax liability

(1,654)

(1,853)

Net deferred tax asset (liability

)

182

(1)

Included in:

“Deferred taxes”—non-current assets

843

910

“Deferred taxes”—non-current liabilities

(661)

(911)

Net deferred tax asset (liability)

182

(1)

Certain entities have deferred tax assets related to net operating

loss carry‑forwards and other items. As

recognition of these assets in certain entities did not

meet the more likely than not criterion, valuation allowances have

been recorded. “Unused tax losses and credits” at December

31, 2020 and 2019, in the table above, included

170

million and $

126

million, respectively,

for which the Company has established a valuation allowance

as, due to

limitations imposed by the relevant tax law,

the Company determined that, more likely than not, such deferred

tax assets

would not be realized.

The valuation allowance at December 31, 2020, 2019

and 2018, was $

1,518

million, $

1,632

million and

1,535

million, respectively.

At December 31, 2020 and 2019, deferred tax liabilities totaling

333

million and $

353

million, respectively,

have been provided for withholding taxes, dividend

distribution taxes or additional corporate income taxes

(hereafter

“withholding taxes”) on unremitted earnings which will be

payable in foreign jurisdictions in the event of repatriation

the foreign earnings to Switzerland. Income which has

been generated outside of Switzerland and has already been

subject to corporate income tax in such foreign jurisdictions

is, to a large extent, tax exempt in Switzerland and

therefore, generally no or only limited Swiss income tax has

to be provided for on the repatriated earnings of foreign

subsidiaries.

F-59

Certain countries levy withholding taxes on dividend distributions

and these taxes cannot always be fully

reclaimed by the Company’s

relevant subsidiary receiving the dividend although the taxes

have to be withheld and paid

by the relevant subsidiary distributing such dividend

In 2020 and 2019, certain taxes arose in certain foreign

jurisdictions for which the technical merits do not allow

utilization of benefits. At December 31, 2020 and 2019, foreign

subsidiary retained earnings subject to withholding taxes

upon distribution of approximately $

100

million and

100

million, respectively,

were considered as indefinitely reinvested, as these funds are used for

financing current

operations as well as business growth through working

capital and capital expenditure in those countries and,

consequently, no

deferred tax liability was recorded.

At December 31, 2020, net operating loss carry‑forwards

of $

3,033

million and tax credits of $

million were

available to reduce future income taxes of certain subsidiaries.

Of these amounts, $

1,682

million of operating loss carry-

forwards and $

million of tax credits will expire in varying amounts through

2042, while the remainder are available

for carryforward indefinitely.

The largest amount of these carry‑forwards

related to the Company’s Europe

operations.

Unrecognized tax benefits consisted of the following:

Penalties and

interest

related to

Unrecognized

unrecognized

($ in millions)

tax benefits

Total

Classification as unrecognized tax items on January

1, 2018

1,025

242

1,267

Net change due to acquisitions and divestments

Increase relating to prior year tax positions

Decrease relating to prior year tax positions

(99)

(85)

Increase relating to current year tax positions

126

131

Decrease due to settlements with tax authorities

(44)

(17)

(61)

Decrease as a result of the applicable statute of limitations

(66)

(31)

(97)

Exchange rate differences

(24)

(11)

(35)

Balance at December 31, 2018, which would, if recognized,

affect

the effective tax rate

961

239

1,200

Net change due to acquisitions and divestments

Increase relating to prior year tax positions

202

287

Decrease relating to prior year tax positions

(82)

(63)

(145)

Increase relating to current year tax positions

163

169

Decrease due to settlements with tax authorities

(57)

(8)

(65)

Decrease as a result of the applicable statute of limitations

(83)

(28)

(111)

Exchange rate differences

(9)

(5)

(14)

Balance at December 31, 2019, which would, if recognized,

affect

the effective tax rate

1,106

233

1,339

Net change due to acquisitions and divestments

Increase relating to prior year tax positions

298

394

Decrease relating to prior year tax positions

(161)

(57)

(218)

Increase relating to current year tax positions

390

395

Decrease due to settlements with tax authorities

(340)

(75)

(415)

Decrease as a result of the applicable statute of limitations

(59)

(16)

(75)

Exchange rate differences

Balance at December 31, 2020, which would, if recognized,

affect

the effective tax rate

1,298

192

1,490

In 2020, the “Increase relating to current year tax positions”

included a total of $

381

million, in taxes related to

the interpretation of tax law and double tax treaty agreements by

competent tax authorities, of which $

301

million is

reported as Income tax expense in discontinued operations.

F-60

In 2019 and 2018, the “Increase relating to current year tax

positions” included a total of $

163

million and

111

million, respectively,

in taxes related to the interpretation of tax law and double tax

treaty agreements by

competent tax authorities.

In 2020, the “Increase relating to prior year tax positions”

is predominantly related to the interpretation of tax

law and double tax treaty agreements by competent

tax authorities in Europe, of which $

million is reported as Income

tax expense in discontinued operations.

In 2020, the “Decrease relating to prior year tax positions” included

a total of $

million related to a change of

interpretation of tax law in Asia and changed tax risk assessments

in Europe of $

million.

In 2020, the “Decrease due to settlements with tax authorities”

is predominantly related to closed tax audits in

Europe.

At December 31, 2020,

the Company expected the resolution, within the next twelve

months, of unrecognized

tax benefits related to pending court cases amounting

to $

million for income taxes, penalties and interest. Otherwise,

the Company had not identified any other significant changes which

were considered reasonably possible to occur

within the next twelve months.

At December 31, 2020,

the earliest significant open tax years that remained subject to

examination were the

following:

Region

Year

Europe

2015

United States

2017

Rest of Americas

2015

China

2011

Rest of Asia, Middle East and Africa

2011

Note 17—Employee benefits

The Company operates defined benefit pension plans, defined

contribution pension plans, and termination

indemnity plans, in accordance with local regulations and

practices. At December 31, 2020, the Company’s

most

significant defined benefit pension plans are in Switzerland

as well as in Germany, the

United Kingdom, and the United

States. These plans cover a large portion of the

Company’s employees and provide

benefits to employees in the event of

death, disability,

retirement, or termination of employment. Certain of these plans

are multi‑employer plans. The

Company also operates other postretirement benefit plans

including postretirement health care benefits and other

employee‑related benefits for active employees including

long‑service award plans. The measurement date used for the

Company’s employee

benefit plans is December 31. The funding policies of the Company

’s plans are consistent with the

local government and tax requirements.

During 2020, the Company took steps to transfer

the defined benefit pension risks in

International

countries to external financial institutions.

NaN

of these plans were settled entirely for accounting purposes while

the

third plan involved the settlement of specific obligations

for certain former employees. In connection with these

transactions, the Company made net payments of $

309

million and recorded non-operational pension charges

520

million which are included in net periodic benefit cost

as curtailments, settlements and special termination benefits.

The Company also made cash payments of $

143

million and recorded non-operational pension charges

of $

101

million

in 2020 for the settlement of pension obligations in discontinued

operations.

The Company recognizes in its Consolidated Balance Sheets

the funded status of its defined benefit pension

plans, postretirement plans, and other employee‑related

benefits measured as the difference between the

fair value of the

plan assets and the benefit obligation.

F-61

Unless otherwise indicated, the following tables include amounts

relating to both continuing and discontinued

operations.

Obligations and funded status of the plans

The change in benefit obligation, change in fair value

of plan assets, and funded status recognized in the

Consolidated Balance Sheets were as follows:

Other

Defined pension

postretirement

benefits

Switzerland

International

($ in millions)

2020

2019

2020

2019

2020

2019

Benefit obligations at January 1,

4,308

3,993

7,878

7,429

110

120

Service cost

113

Interest cost

111

174

Contributions by plan participants

—

Benefit payments

(160)

(133)

(295)

(302)

(12)

(10)

Settlements

(101)

(111)

(2,542)

(102)

—

Benefit obligations of businesses acquired (divested)

(765)

—

(165)

(21)

(5)

—

Actuarial (gain) loss

323

214

617

(1)

Plan amendments and other

—

(64)

(3)

(5)

Exchange rate differences

365

286

(58)

Benefit obligation at December 31,

3,870

4,308

5,527

7,878

110

Fair value of plan assets at January 1,

4,189

3,879

6,246

5,866

—

Actual return on plan assets

191

320

375

689

—

Contributions by employer

228

611

115

Contributions by plan participants

—

Benefit payments

(160)

(133)

(295)

(302)

(12)

(10)

Settlements

(101)

(111)

(2,542)

(102)

—

Plan assets of businesses acquired (divested)

(664)

—

(82)

(12)

—

Plan amendments and other

—

Exchange rate differences

378

221

(27)

—

Fair value of plan assets at December 31,

4,133

4,189

4,608

6,246

—

Funded status — overfunded (underfunded)

263

(119)

(919)

(1,632)

(98)

(110)

The amounts recognized in "Accumulated other comprehensive

loss" and "Noncontrolling interests" were:

December 31,

2020

2019

2018

2020

2019

2018

Defined pension

Other postretirement

($ in millions)

benefits

Net actuarial (loss) gain

(2,038)

(2,782)

(2,628)

Prior service credit

Amount recognized in OCI

(1)

and NCI

(2)

(1,963)

(2,723)

(2,554)

Taxes associated with

amount recognized

in OCI and NCI

374

536

535

—

Amount recognized in OCI and NCI, net of tax

(3)

(1,589)

(2,187)

(2,019)

(1)

OCI represent

“Accumulated other

comprehensive

loss”.

(2)

NCI represents

“Noncontrolling

interests”.

(3)

NCI, net of tax,

amounted to $

(1)

million, $

(1)

million, and

(1)

million at December

31, 2020, 2019

and 2018.

F-62

In addition, the following amounts were recognized in

the Company's Consolidated Balance Sheets:

December 31,

2020

2019

2020

2019

2020

2019

Defined pension

Other postretirement

benefits

($ in millions)

Switzerland

International

Overfunded plans

267

—

Underfunded plans — current

(78)

(22)

(295)

(9)

(14)

Underfunded plans — non-current

(4)

(103)

(989)

(1,408)

(89)

(96)

Funded status - underfunded

263

(119)

(919)

(1,632)

(98)

(110)

Amounts reported as assets and

liabilities held for sale

(78)

(277)

(5)

December 31,

($ in millions)

2020

2019

Non-current assets

Overfunded pension plans

359

132

Other employee-related benefits

Pension and other employee benefits

360

133

December 31,

($ in millions)

2020

2019

Current liabilities

Underfunded pension plans

(22)

(374)

Underfunded other postretirement benefit plans

(9)

(14)

Other employee-related benefits

(11)

(72)

Pension and other employee benefits

(42)

(460)

Amounts reported as Current

liabilities held for sale

(424)

December 31,

($ in millions)

2020

2019

Non-current liabilities

Underfunded pension plans

(993)

(1,510)

Underfunded other postretirement benefit plans

(89)

(96)

Other employee-related benefits

(149)

(186)

Pension and other employee benefits

(1,231)

(1,792)

F-63

The accumulated benefit obligation (ABO) for all defined

benefit pension plans was $

9,310

million and

11,981

million at December 31, 2020 and 2019, respectively.

The projected benefit obligation (PBO), ABO and fair

value of plan assets, for pension plans with a PBO in excess

of fair value of plan assets or ABO in excess of fair value

plan assets, was:

PBO exceeds fair value of plan assets

ABO exceeds fair value of plan assets

($ in millions)

Switzerland

International

Switzerland

International

December 31,

2020

2019

2020

2019

2020

2019

2020

2019

PBO

3,769

5,131

7,346

3,769

5,008

7,228

ABO

3,769

5,056

7,156

3,769

4,942

7,054

Fair value of plan assets

3,588

4,120

5,643

3,588

4,004

5,537

All of the Company's other postretirement benefit plans

are unfunded.

Components of net periodic benefit cost

Net periodic benefit cost consisted of the following:

Defined pension

Other postretirement

benefits

Switzerland

International

($ in millions)

2020

2019

2018

2020

2019

2018

2020

2019

2018

Operational pension cost:

Service cost

113

122

Operational pension cost

113

122

Non-operational pension cost (credit):

Interest cost

111

174

198

Expected return on plan assets

(123)

(112)

(117)

(253)

(276)

(305)

—

Amortization of prior service cost (credit)

(11)

(14)

(15)

(2)

(5)

Amortization of net actuarial loss

—

109

108

(3)

(1)

Curtailments, settlements and special

termination benefits

—

644

(10)

—

Non-operational pension cost (credit)

(115)

(100)

(102)

613

(2)

(14)

(2)

Net periodic benefit cost

(41)

(24)

(10)

705

148

131

(1)

(13)

(1)

The components of net periodic benefit cost other than

the service cost component are included in the line Non-

operational pension (cost) credit in the income statement.

Net periodic benefit cost includes $

121

million, $

million

and $

million in 2020, 2019 and 2018, respectively,

related to discontinued operations.

F-64

Assumptions

The following weighted-average assumptions were used

to determine benefit obligations:

December 31,

2020

2019

2020

2019

2020

2019

Defined pension

Other postretirement

benefits

(in %)

Switzerland

International

Discount rate

0.2

1.6

2.0

2.1

2.8

Rate of compensation increase

—

1.0

2.2

0.2

Rate of pension increase

—

1.4

1.3

—

Cash balance interest credit rate

1.0

2.1

1.6

—

For the Company’s significant

benefit plans, the discount rate used at each measurement

date is set based on a

high-quality corporate bond yield curve (derived based

on bond universe information sourced from reputable third-party

index and data providers and rating agencies)

reflecting the timing, amount and currency of the future expected

benefit

payments for the respective plan. Consistent discount rates

are used across all plans in each currency zone, based on

the

duration of the applicable plan(s) in that zone. For plans in

the other countries, the discount rate is based on high quality

corporate or government bond yields applicable in the respective

currency, as appropriate

at each measurement date with

a duration broadly consistent with the respective plan’s

obligations.

At the end of 2018, the Company changed the approach

used to calculate the service and interest components

of net periodic benefit cost for its significant benefit plans

to provide a more precise measurement of service and interest

costs. This change compared to the previous approach

resulted in a net decrease in the service and interest components

for benefit cost in 2019. Previously,

the Company calculated the service and interest cost components

utilizing a single

weighted-average discount rate derived from the yield

curve used to measure the benefit obligation at the beginning

the period. The Company has elected to utilize an approach

that discounts the individual expected cash flows using the

applicable spot rates derived from the yield curve over

the projected cash flow period. This change does not affect

the

measurement of our total benefit obligations.

The following weighted‑average assumptions were used

to determine the “Net periodic benefit cost”:

Defined pension

Other postretirement

benefits

Switzerland

International

(in %)

2020

2019

2018

2020

2019

2018

2020

2019

2018

Discount rate

0.3

0.8

1.9

2.8

2.6

2.8

3.9

3.2

Expected long-term rate of return on plan assets

3.0

4.3

4.9

—

Rate of compensation increase

—

2.2

2.4

2.5

0.2

—

Cash balance interest credit rate

1.0

1.6

1.7

—

The “Expected long‑term rate of return on plan assets” is derived

for each benefit plan by considering the

expected future long‑term return assumption for each

individual asset class. A single long‑term return assumption

is then

derived for each plan based upon the plan’s

target asset allocation.

F-65

The Company maintains other postretirement benefit plans,

which are generally contributory with participants’

contributions adjusted annually.

The assumptions used were:

December 31,

2020

2019

Health care cost trend rate assumed for next year

5.9%

6.3%

Rate to which the trend rate is assumed to decline (the ultimate

trend rate)

4.9%

5.0%

Year

that the rate reaches the ultimate trend rate

2028

Plan assets

The Company has pension plans in various countries with

the majority of the Company’s

pension liabilities

deriving from a limited number of these countries.

The pension plans are typically funded by regular

contributions from employees and the Company.

These plans

are typically administered by boards of trustees (which include

Company representatives) whose primary responsibilities

include ensuring that the plans meet their liabilities through

contributions and investment returns. The boards of trustees

have the responsibility for making key investment strategy

decisions within a risk‑controlled framework.

The pension plan assets are invested in diversified por

tfolios that are managed by third‑party asset managers, in

accordance with local statutory regulations, pension plan

rules and the respective plans’ investment guidelines, as

approved by the boards of trustees.

Plan assets are generally segregated from those of the

Company and invested with the aim of meeting the

respective plans’ projected future pension liabilities. Plan assets

are measured at fair value at the balance sheet

date.

The boards of trustees manage the assets of the pension

plans in a risk‑controlled manner and assess the risks

embedded in the pension plans through asset/liability management

studies. Asset/liability management studies typically

take place every three years. However,

the risks of the plans are monitored on an ongoing basis.

The board of trustees’ investment goal is to maximize the

long‑term returns of plan assets within specified risk

parameters, while considering the future liabilities and liquidity

needs of the individual plans. Risk measures taken into

account include the funding ratio of the plan, the

likelihood of extraordinary cash contributions being required, the

risk

embedded in each individual asset class, and the plan

asset portfolio as a whole.

The Company’s global

pension asset allocation is the result of the asset allocations of

the individual plans,

which are set by the respective boards of trustees. The

target asset allocation of the Company’s

plans on a

weighted‑average basis is as follows:

Target

(in %)

Switzerland

International

Asset class

Equity

Fixed income

Real estate

Other

Total

100

The actual asset allocations of the plans are in line with the

target asset allocations.

F-66

Equity securities primarily includes investments in large‑cap

and mid‑cap publicly traded companies. Fixed

income assets primarily include corporate bonds

of companies from diverse industries and government bonds.

Both

fixed income and equity assets are invested either

via funds or directly in segregated investment mandates,

and include

an allocation to emerging markets. Real estate consists

primarily of investments in real estate in Switzerland

held in the

Swiss plans. The “Other” asset class includes investments in

private equity, hedge

funds, commodities, and cash, and

reflects a variety of investment strategies.

Based on the above global asset allocation and the fair

values of the plan assets, the expected long‑term return

on assets at December 31, 2020, is

3.5

percent. The Company and the local boards of trustees regularly

review the

investment performance of the asset classes and individual

asset managers. Due to the diversified nature of the

investments, the Company is of the opinion that no significant

concentration of risks exists in its pension fund assets.

At December 31, 2020 and 2019, plan assets include ABB Ltd’s

shares (as well as an insignificant amount of

the Company’s debt instruments)

with a total value of $

million and $

million, respectively.

The fair values of the Company’s

pension plan assets by asset class are presented below.

For further

information on the fair value hierarchy and an overview

of the Company’s valuation

techniques applied, see the “Fair

value measures” section of Note 2.

December 31, 2020

Not subject

Total

($ in millions)

Level 1

Level 2

to leveling

(1)

fair value

Asset class

Equity

Equity securities

180

185

Mutual funds/commingled funds

1,298

Emerging market mutual funds/commingled

funds

243

Fixed income

Government and corporate securities

389

1,415

1,804

Government and corporate—mutual funds/commingled

funds

2,876

Emerging market bonds—mutual funds/commingled

funds

547

Real estate

1,289

Insurance contracts

Cash and short-term investments

103

190

293

Private equity

156

Hedge funds

Total

672

6,624

1,446

8,742

F-67

December 31, 2019

Not subject

Total

($ in millions)

Level 1

Level 2

to leveling

(1)

fair value

Asset class

Equity

Equity securities

224

231

Mutual funds/commingled funds

1,687

1,710

Emerging market mutual funds/commingled

funds

339

Fixed income

Government and corporate securities

521

1,013

1,534

Government and corporate—mutual funds/commingled

funds

3,738

3,769

Emerging market bonds—mutual funds/commingled

funds

805

Real estate

1,433

Insurance contracts

123

Cash and short-term investments

101

152

253

Private equity

211

Hedge funds

Commodities

Total

846

7,890

1,699

10,435

(1)

Amounts relate

to assets measured

using the NAV

practical expedient

which are not

subject to leveling.

The Company applies accounting guidance related to the

presentation of certain investments using the net asset

value (NAV)

practical expedient. This accounting guidance exempts investments

using this practical expedient from

categorization within the fair value hierarchy.

Investments measured at NAV

are primarily non exchange-traded

commingled or collective funds in private equity and

real estate where the fair value of the underlying assets is

determined by the investment manager.

Investments in private equity can never be redeemed, but

instead the funds will

make distributions through liquidation of the underlying

assets. Total unfunded

commitments for the private equity

funds were approximately $

115

million at December 31, 2020. The real estate funds are

typically subject to a lock-in

period of up to three years after subscribing. After this

period, the real estate funds typically offer a redemption

notice of

three to twelve months.

Contributions

Employer contributions were as follows:

Defined pension

Other postretirement

benefits

Switzerland

International

($ in millions)

2020

2019

2020

2019

2020

2019

Total contributions

to defined benefit pension

and other postretirement benefit plans

228

611

115

Of which, discretionary contributions to

defined benefit pension plans

152

520

In 2020, total contributions included non‑cash contributions totaling

224

million of available‑for‑sale debt

securities to certain of the Company’s

pension plans in Switzerland and the United Kingdom. The

contributions in 2019

and 2018 were not significant.

F-68

The Company expects to contribute approximately

156

million, including $

million in discretionary

contributions, to its defined benefit pension plans in 2021.

Of these discretionary contributions, $

million are expected

to be non‑cash contributions. The Company expects to

contribute approximately $

million to its other postretirement

benefit plans in 2021.

The Company also contributes to a number of defined

contribution plans. The aggregate expense for these

plans in continuing operations was $

205

million, $

190

million and $

186

million in 2020, 2019 and 2018, respectively.

Contributions to multi‑employer plans were not significant

in 2020, 2019 and 2018.

Estimated future benefit payments

The expected future cash flows to be paid by the

Company’s plans in respect of pension

and other

postretirement benefit plans at December 31, 2020, are

as follows:

Defined pension

Other postretirement

benefits

($ in millions)

Switzerland

International

2021

347

314

2022

235

264

2023

219

257

2024

209

261

2025

200

264

Years

2026 - 2030

877

1,308

Note 18—Sharebased payment arrangements

The Company has granted share-based instruments to its employees

under

principal share‑based payment

plans, as more fully described in the respective sections below.

Compensation cost for equity‑settled awards is recorded

in Total cost of

sales and in Selling, general and administrative expenses and

totaled $

million, $

million and

million in 2020, 2019 and 2018, respectively,

while compensation cost for cash‑settled awards, recorded

in Selling,

general and administrative expenses, was not significant,

as mentioned in the WARs,

LTIP

and Other share‑based

payments sections of this note. The total tax benefit

recognized in 2020,

2019 and 2018 was not significant.

At December 31, 2020, the Company had the ability

to issue up to

million new shares out of contingent

capital in connection with share‑based payment arrangements.

In addition,

million of the

137

million shares held by

the Company as treasury stock at December 31, 2020

could be used to settle share‑based payment arrangements.

As the primary trading market for the shares of ABB Ltd is the

SIX Swiss Exchange (on which the shares are

traded in Swiss francs) and substantially all the share‑based

payment arrangements with employees are based on

the

Swiss franc share or have strike prices set in Swiss francs, certain

data disclosed below related to the instruments granted

under share‑based payment arrangements are presented

in Swiss francs.

Management Incentive Plan

Up to 2019, the Company offered, under the MIP,

options and cash‑settled WARs

to key employees for

consideration. Starting in 2020, the employee group previously

eligible to receive grants under the MIP were granted

shares under the LTIP

(see LTIP section

below) and consequently no grants were made in 2020

under the MIP.

The options granted under the MIP allow participants to

purchase shares of ABB Ltd at predetermined prices.

Participants may sell the options rather than exercise the

right to purchase shares. Equivalent warrants are listed by a

third‑party bank on the SIX Swiss Exchange, which facilitates pricing

and transferability of options granted under this

plan. The options entitle the holder to request that the

third‑party bank purchase such options at the market price of

equivalent listed warrants related to that MIP launch. If

the participant elects to sell the options, the options will

thereafter be held by a third party and, consequently,

the Company’s obligation

to deliver shares will be toward this third

party.

F-69

Each WAR

gives the participant the right to receive, in cash, the

market price of an equivalent listed warrant on

the date of exercise of the WAR.

Participants may exercise or sell options and exercise WARs

after the vesting period,

which is

three years

from the date of grant. All options and WARs

expire

six years

from the date of grant.

Options

The fair value of each option was estimated on the date

of grant using a lattice model that used the assumptions

noted in the table below.

Expected volatilities were based on implied volatilities from

equivalent listed warrants on

ABB Ltd shares. The expected term of the options granted

is the contractual

six‑year

life of each option, based on the

fact that after the vesting period, a participant can elect to

sell the option rather than exercise the right to purchase

shares, thereby also realizing the time value of the options.

The risk‑free rate was based on a

six‑year

Swiss franc

interest rate, reflecting the

six‑year

contractual life of the options. In estimating forfeitures, the

Company used data from

previous comparable MIP launches.

2019

2018

Expected volatility

19%

17%

Dividend yield

4.7%

3.1%

Expected term

6 years

Risk-free interest rate

-0.9%

-0.1%

Presented below is a summary of the activity related

to options under the MIP:

Weighted-

Aggregate

average

intrinsic

exercise

remaining

value

Number of

price

contractual

(in millions

options

(in Swiss

term

of Swiss

(in millions)

(1)

francs)

(2)

(in years)

francs)

(3)

Outstanding at January 1, 2020

417.6

83.5

21.13

Exercised

(4)

(72.5)

(14.5)

21.00

Forfeited

(8.9)

(1.8)

21.16

Expired

(0.1)

21.00

Outstanding at December 31, 2020

336.1

67.2

21.16

2.5

239

Vested and expected

to vest at December 31, 2020

336.1

67.2

21.16

2.5

239

Exercisable at December 31, 2020

261.0

52.2

21.15

2.0

186

(1)

Information presented

reflects the number

of ABB Ltd shares

that can be received

upon exercise,

as options have

a conversion ratio

:1.

(2)

Information presented

reflects the exercise

price per ABB

Ltd share.

(3)

Computed using

the closing

price, in Swiss

francs, of ABB

Ltd shares on

the SIX Swiss

Exchange and the

exercise price

of each option

in Swiss francs.

(4)

The cash received

upon exercise

amounted to approximately

334

million. The

shares were delivered

out of treasury

stock.

At December 31, 2020, there was $

million of total unrecognized compensation cost related to non‑vested

options granted under the MIP.

That cost is expected to be recognized over a weighted‑average

period of

1.3

years. The

weighted‑average grant‑date fair value (per option)

of options granted during 2019 and 2018 was

0.34

Swiss francs and

0.46

Swiss francs, respectively. As mentioned

previously, no options

were granted in 2020. In 2020 and 2018, the

aggregate intrinsic value (on the date of exercise) of options

exercised was $

million and $

million, respectively,

while the amount in 2019 was not significant.

F-70

Presented below is a summary,

by launch, related to options outstanding at December 31,

2020:

Weighted-

average

Number of

remaining

options

contractual

Exercise price (in Swiss francs)

(1)

(in millions)

(2)

term (in years)

19.50

77.9

15.6

0.6

21.50

72.7

14.5

1.7

22.50

63.9

12.8

2.6

23.50

62.4

12.5

3.7

19.00

59.2

11.8

4.7

Total

number of options and shares

336.1

67.2

2.5

(1)

Information presented

reflects the exercise

price per share

of ABB Ltd.

(2)

Information presented

reflects the number

of shares of

ABB Ltd that can

be received upon

exercise.

WARs

As each WAR

gives the holder the right to receive cash equal to

the market price of the equivalent listed

warrant on date of exercise, the Company records a

liability based upon the fair value of outstanding WARs

at each

period end, accreted on a straight‑line basis over the

three‑year

vesting period. In Selling, general and administrative

expenses, the Company records the changes in both

the fair value and vested portion of the outstanding WARs.

hedge its exposure to fluctuations in the fair value of outstanding

WARs,

the Company purchased cash‑settled call

options, which entitle the Company to receive amounts

equivalent to its obligations under the outstanding WARs.

The

cash‑settled call options are recorded as derivatives measured

at fair value (see Note 6), with subsequent changes in

fair

value recorded in Selling, general and administrative expenses to

the extent that they offset the change in fair value

the liability for the WARs.

The total impact in Selling, general and administrative

expenses in 2020, 2019 and 2018 was

not significant.

The aggregate fair value of outstanding WARs

was $

million and $

million at December 31, 2020 and

2019, respectively.

The fair value of WARs

was determined based upon the trading price of equivalent

warrants listed

on the SIX Swiss Exchange.

Presented below is a summary of the activity related

to WARs:

Number of WARs

(in millions)

Outstanding at January 1, 2020

39.9

Exercised

(17.1)

Forfeited

(0.7)

Outstanding at December 31, 2020

22.1

Exercisable at December 31, 2020

9.0

The aggregate fair value at date of grant of WARs

granted in 2019 and 2018 was not significant.

As mentioned

previously,

grants were made in 2020 under the MIP.

In 2020, share‑based liabilities of $

million were paid upon

exercise of WARs

by participants. The amounts in 2019 and 2018 were

not significant.

F-71

Employee Share Acquisition Plan

The employee share acquisition plan (ESAP) is an employee

stock‑option plan with a savings feature.

Employees save over a

twelve‑month

period, by way of regular payroll deductions. At the end of the

savings period,

employees choose whether to exercise their stock options using

their savings plus interest, if any,

to buy ABB Ltd shares

(American Depositary Shares (ADS) in the case of

employees in the United States and Canada—each ADS representing

registered share of the Company) at the exercise price set at the grant

date, or have their savings returned with any

interest. The savings are accumulated in bank accounts held

by a third‑party trustee on behalf of the participants and

earn interest, where applicable. Employees can withdraw

from the ESAP at any time during the savings period and will

be entitled to a refund of their accumulated savings.

The fair value of each option is estimated on the date

of grant using the same option valuation model as

described under the MIP,

using the assumptions noted in the table below.

The expected term of the option granted has

been determined to be the contractual

one‑year

life of each option, at the end of which the options vest and the

participants are required to decide whether to exercise their

options or have their savings returned with interest. The

risk‑free rate is based on

one‑year

Swiss franc interest rates, reflecting the

one‑year

contractual life of the options. In

estimating forfeitures, the Company has used the data

from previous ESAP launches.

2020

2019

2018

Expected volatility

24%

18%

19%

Dividend yield

3.8%

4.1%

Expected term

1 year

Risk-free interest rate

-0.7%

-0.6%

Presented below is a summary of activity under the ESAP:

Weighted-

Aggregate

average

intrinsic

exercise

remaining

value

Number of

price

contractual

(in millions

(in Swiss

term

of Swiss

(in millions)

(1)

francs)

(2)

(in years)

francs)

(2)(3)

Outstanding at January 1, 2020

2.3

20.78

Granted

2.1

22.87

Forfeited

(0.1)

20.79

Exercised

(4)

(1.4)

20.78

Not exercised (savings returned plus interest)

(0.8)

20.78

Outstanding at December 31, 2020

2.1

22.87

0.8

3.9

Vested and expected

to vest at December 31, 2020

2.0

22.87

0.8

3.8

Exercisable at December 31, 2020

—

(1)

Includes shares

represented by

ADS.

(2)

Information presented

for ADS is based

on equivalent

Swiss franc denominated

awards.

(3)

Computed using

the closing

price, in Swiss

francs, of ABB

Ltd shares on

the SIX Swiss

Exchange and the

exercise price

of each option

in Swiss francs.

(4)

The cash received

in 2020 upon

exercise was approximately

million. The

shares were delivered

out of treasury

stock.

The exercise prices per ABB Ltd share and per ADS of

22.87

Swiss francs and $

24.93

, respectively, for

the

2020 grant,

20.78

Swiss francs and $

20.17

, respectively, for the

2019 grant, and

20.38

Swiss francs and $

20.37

respectively, for the

2018 grant were determined using the closing price of the

ABB Ltd share on the SIX Swiss

Exchange and ADS on the New York

Stock Exchange on the respective grant dates.

F-72

At December 31, 2020, the total unrecognized compensation

cost related to non‑vested options granted under

the ESAP was not significant. The weighted‑average

grant‑date fair value (per option) of options granted during

2020,

2019 and 2018 was

1.67

Swiss francs,

1.05

Swiss francs and

1.10

Swiss francs, respectively.

The total intrinsic value

(on the date of exercise) of options exercised in 2020,

2019 and 2018 was not significant.

Long-Term

Incentive Plan

The long‑term incentive plan (LTIP)

involves annual grants of the Company’s

stock subject to certain

conditions (Performance Shares) to members of the Company’s

Executive Committee and selected other senior

executives, as defined in the terms of the LTIP.

In 2020, certain of the employee group previously eligible

to receive

grants under the MIP are now included in the LTIP.

The ultimate amount delivered under the LTIP’s

Performance

Shares grant is based on achieving certain results against targets,

as set out below,

over a

three-year

period from grant

and the final amount is delivered to the participants at the

end of this period. In addition, for certain awards to vest, the

participant has to fulfill a

three-year

service condition as defined in the terms and conditions of the

LTIP.

The Performance Shares under the 2020, 2019 and 2018

LTIP launch

es include a performance component,

based on the Company’s earnings

per share performance, and a market component, based

on the Company’s relative

total shareholder return.

For the relative total shareholder return component

of the Performance Shares,

the actual number of shares that

will be delivered at a future date is based on the Company’s

total shareholder return performance relative to a peer group

of companies over a

three-year

period starting with the year of grant. The actual number

of shares that will ultimately be

delivered will vary depending on the relative total shareholder

return outcome achieved between a lower threshold (no

shares delivered) and an upper threshold (the number

of shares delivered is capped at

200

percent of the conditional

grant).

For the earnings per share performance component

of the Performance Shares,

the actual number of shares that

will be delivered at a future date is based on the Company’s

average earnings per share over

three

financial years,

beginning with the year of launch. The actual number

of shares that will ultimately be delivered will vary depending

the earnings per share outcome as computed under each

LTIP launch,

interpolated between a lower threshold (no shares

delivered) and an upper threshold (the number of shares

delivered is capped at

200

percent of the conditional grant).

Under the 2019 and 2018 LTIP

launches, participants receive

percent of the shares that have vested in the

form of shares and

percent of the value of the shares that have vested in

cash, with the possibility to elect to also

receive the

percent portion in shares rather than in cash. Under the

2020 LTIP

launches, participants generally do not

have the ability to receive any of the award in cash,

subject to legal restrictions in certain jurisdictions.

Presented below is a summary of activity under the Performance

Shares of the LTIP:

Weighted-average

Number of

grant-date

Performance Shares

fair value per share

(in millions)

(Swiss francs)

Nonvested at January 1, 2020

1.0

19.26

Granted

1.4

10.50

Vested

(0.7)

15.72

Forfeited

(0.4)

16.41

Nonvested at December 31, 2020

1.3

12.76

The aggregate fair value, at the dates of grant, of Performance

Shares granted in 2019 and 2018 was

million and $

million, respectively,

while in 2020 it was not significant. The total grant-date

fair value of shares

that vested during 2019 and 2018 was $

million and $

million, respectively.

The amount in 2020 was not

significant.

The weighted-average grant-date fair value (per share) of

shares granted during 2020, 2019 and 2018 was

10.50

Swiss francs,

15.94

Swiss francs and

21.97

Swiss francs, respectively.

F-73

Starting in 2020, key employees which were previously

eligible to participate in the MIP and which were not

included in the employee group granted the Performance

Shares described above, were granted Restricted Shares of the

Company under the LTIP.

The Restricted Shares do not have performance conditions and vest over

three-year

period

from the grant date.

Presented below is a summary of activity under the Restricted

Shares of the LTIP:

Weighted-average

Number of

grant-date

Restricted Shares

fair value per share

(in millions)

(Swiss francs)

Nonvested at January 1, 2020

Granted

1.3

15.76

Forfeited

(0.1)

15.20

Nonvested at December 31, 2020

1.2

15.80

The aggregate fair value, at the dates of grant, of Restricted

Shares granted in 2020 was $

million. The

weighted‑average grant‑date fair value (per share) of

shares granted during 2020 was

15.76

Swiss francs.

Equity‑settled awards are recorded in the Additional

paid‑in capital component of Stockholders’ equity,

with

compensation cost recorded in Selling, general and administrative

expenses over the vesting period (which is from grant

date to the end of the vesting period) based on the grant‑date

fair value of the shares. Cash‑settled awards are recorded

a liability, remeasured

at fair value at each reporting date for the percentage vested,

with changes in the liability

recorded in Selling, general and administrative expenses.

At December 31,

2020, total unrecognized compensation cost related to equity‑settled

awards under the LTIP

was $

million and is expected to be recognized over a weighted-average

period of

2.3

years. The compensation cost

recorded in 2020, 2019 and 2018 for cash‑settled awards was

not significant.

For the relative total shareholder return component

of the LTIP

launches, the fair value of granted shares at

grant date, for equity‑settled awards, and at each reporting

date, for cash‑settled awards, is determined using a Monte

Carlo simulation model. The main inputs to this model

are the Company’s share price

and dividend yield, the volatility

of the Company’s and the

peer group’s share price as well

as the correlation between the peer companies. For

the

earnings per share component of the LTIP

launches, the fair value of granted shares is based on

the market price of the

ABB Ltd share at grant date for equity‑settled awards and

at each reporting date for cash‑settled awards, as well as the

probable outcome of the earnings per share achievement,

as computed using a Monte Carlo simulation model. The

main

inputs to this model are the Company’s

and external financial analysts’ revenue growth rates and Operational

EBITA

margin expectations.

Other share‑based payments

The Company has other minor share‑based payment arrangements

with certain employees. The compensation

cost related to these arrangements in 2020, 2019 and

2018 was not significant.

Note 19—Stockholders' equity

At both December 31, 2020 and 2019, the Company had

2,672

million authorized shares, of which

2,168

million were registered and issued.

F-74

At the Annual General Meeting of Shareholders (AGM)

in March 2020,

the shareholders approved the proposal

of the Board of Directors to distribute a total of

0.80

Swiss francs per share. The approved dividend distribution

amounted to $

1,758

million and was paid in April 2020. At the AGM in March

2019, the shareholders approved the

proposal of the Board of Directors to distribute a total

0.80

Swiss francs per share. The approved dividend distribution

amounted to $

1,675

million and was paid in May 2019. At the AGM in March

2018, the shareholders approved the

proposal of the Board of Directors to distribute a total

0.78

Swiss francs per share. The approved dividend distribution

amounted to $

1,736

million and was paid in April 2018.

In July 2020, the Company announced it initially intends

to buy

percent of its share capital (which at the

time represented a maximum of

180

million shares, in addition to those already held in treasury)

through the share

buyback program that started in July 2020. The share

buyback program is executed on a second trading line on the SIX

Swiss Exchange and is planned to run until the Company’s

AGM in March 2021. At the AGM the Company intends to

request shareholder approval to cancel the shares purchased

through this program. In 2020, under this program,

the

Company purchased

109

million shares for cancellation, resulting in an increase in

Treasury Stock of $

2,835

million.

In addition to the ongoing share buyback program,

in the fourth quarter of 2020,

the Company purchased

million of its own shares on the open market mainly for

use in connection with its employee share plans. These

transactions resulted in an increase in Treasury

stock of $

346

million. In the first quarter of 2018, the Company

purchased on the open market an aggregate of

million of its own shares to be available for delivery under

its

employee share programs. These transactions resulted in an

increase in Treasury stock of $

249

million.

Upon and in connection with each launch of the Company’s

MIP,

the Company sold call options to a bank at

fair value, giving the bank the right to acquire shares

equivalent to the number of shares represented by the MIP WAR

awards to participants. Under the terms of the agreement

with the bank, the call options can only be exercised by

the

bank to the extent that MIP participants have exercised

their WARs.

At December 31, 2020, such call options

representing

9.7

million shares and with strike prices ranging from

19.00

23.50

Swiss francs (weighted‑average strike

price of

21.15

Swiss francs) were held by the bank. The call options expire

in periods ranging from August 2021 to

August 2025. However, only

5.3

million of these instruments, with strike prices ranging from

19.00

23.50

Swiss

francs (weighted‑average strike price of

20.99

Swiss francs), could be exercised at December 31, 2020, under

the terms

of the agreement with the bank.

In addition to the above, at December 31, 2020,

the Company had further outstanding obligations to deliver:

•

up to

15.6

million shares relating to the options granted under the 2015

launch of the MIP,

with a strike

price of

19.50

Swiss francs, vested in August 2018 and expiring in August 2021,

•

up to

14.5

million shares relating to the options granted under the 2016

launch of the MIP,

with a strike

price of

21.50

Swiss francs, vested in August 2019 and expiring in August 2022,

•

up to

12.8

million shares relating to the options granted under the 2017

launch of the MIP,

with a strike

price of

22.50

Swiss francs, vested in August 2020 and expiring in August 2023,

•

up to

12.5

million shares relating to the options granted under the 2018

launch of the MIP,

with a strike

price of

23.50

Swiss francs, vesting in August 2021 and expiring in August 2024,

•

up to

11.8

million shares relating to the options granted under the 2019

launch of the MIP,

with a strike

price of

19.00

Swiss francs, vesting in August 2022 and expiring in August 2025,

•

up to

2.1

million shares relating to the ESAP,

vesting and expiring in October 2021,

•

up to

6.7

million shares to Eligible Participants under the 2020, 2019 and

2018 launches of the LTIP,

vesting and expiring in April 2023, May 2022 and

April 2021, respectively,

and

•

approximately

million shares in connection with certain other share‑based payment

arrangements with

employees.

F-75

See Note 18 for a description of the above share‑based

payment arrangements.

In 2020 and 2018, the Company delivered

16.5

million and

2.4

million shares, respectively,

out of treasury

stock, for options exercised in relation to the MIP,

while in 2019 the amount was not significant. In addition,

in 2020

and 2019 the Company delivered

1.4

million and

0.5

million shares from treasury stock under the ESAP.

NaN

shares were

delivered in 2018 under the ESAP.

Amounts available to be distributed as dividends to

the stockholders of ABB Ltd are based on the requirements

of Swiss law and ABB Ltd’s Articles

of Incorporation, and are determined based on amounts presented

in the

unconsolidated financial statements of ABB Ltd, prepared

in accordance

with Swiss law. At December

31, 2020,

the

total unconsolidated stockholders’ equity of ABB Ltd was

9,063

million Swiss francs ($

10,287

million), including

260

million Swiss francs ($

295

million) representing share capital,

12,032

million Swiss francs ($

13,657

million)

representing reserves and

3,229

million Swiss francs ($

3,665

million) representing a reduction of equity for own shares

(treasury stock). Of the reserves,

3,229

million Swiss francs ($

3,665

million) relating to own shares and

million

Swiss francs ($

million) representing

percent of share capital, are restricted and not available for

distribution.

In February 2021, the Company announced that a

proposal will be put to the 2021 AGM for approval by the

shareholders to distribute

0.80

Swiss francs per share to shareholders.

Subsequent events

Subsequent to December 31, 2020, and up to February

24, 2021, the Company purchased, under the share

buyback program, an additional

million shares, for approximately $

400

million, and, on the open market, an

additional

million shares, for approximately $

378

million.

Note 20—Earnings per share

Basic earnings per share is calculated by dividing income

by the weighted‑average number of shares

outstanding during the year.

Diluted earnings per share is calculated by dividing income by the

weighted‑average

number of shares outstanding during the year,

assuming that all potentially dilutive

securities were exercised, if dilutive.

Potentially dilutive securities comprise outstanding written

call options and outstanding options and shares granted

subject to certain conditions under the Company’s

share‑based payment arrangements. In 2020, 2019 and 2018,

outstanding securities representing a maximum of

million,

million and

million shares, respectively,

were

excluded from the calculation of diluted earnings per

share as their inclusion would have been antidilutive.

Basic earnings per share:

($ in millions, except per share data in $)

2020

2019

2018

Amounts attributable to ABB shareholders:

Income from continuing operations, net of tax

294

1,043

1,514

Income from discontinued operations, net of tax

4,852

396

659

Net income

5,146

1,439

2,173

Weighted-average number

of shares outstanding (in millions)

2,111

2,133

2,132

Basic earnings per share attributable

to ABB shareholders:

Income from continuing operations, net of tax

0.14

0.49

0.71

Income from discontinued operations, net of tax

2.30

0.19

0.31

Net income

2.44

0.67

1.02

F-76

Diluted earnings per share:

($ in millions, except per share data in $)

2020

2019

2018

Amounts attributable to ABB shareholders:

Income from continuing operations, net of tax

294

1,043

1,514

Income from discontinued operations, net of tax

4,852

396

659

Net income

5,146

1,439

2,173

Weighted-average

number of shares outstanding (in millions)

2,111

2,133

2,132

Effect of dilutive securities:

Call options and shares

Adjusted weighted-average number of shares outstanding

(in millions)

2,119

2,135

2,139

Diluted earnings per share attributable

to ABB shareholders:

Income from continuing operations, net of tax

0.14

0.49

0.71

Income from discontinued operations, net of tax

2.29

0.19

0.31

Net income

2.43

0.67

1.02

F-77

Note 21—Other comprehensive income

The following table includes amounts recorded

within “Total other comprehensive

income (loss)” including the

related income tax effects:

2020

2019

2018

Before

Tax

Net of

Before

Tax

Net of

Before

Tax

Net of

($ in millions)

tax

effect

tax

effect

tax

effect

tax

Foreign currency translation

adjustments:

Foreign currency translation adjustments

500

(2)

498

(130)

—

(130)

(641)

(627)

Gain on liquidation of foreign subsidiary

—

(31)

—

(31)

Changes attributable to divestments

519

—

519

(2)

—

(2)

—

Net change during the year

1,019

(2)

1,017

(132)

—

(132)

(660)

(646)

Available-for

-sale securities:

Net unrealized gains (losses) arising

during the year

(7)

(2)

(5)

(4)

Reclassification adjustments for net

(gains) losses included in net income

(18)

(14)

(1)

—

Changes attributable to divestments

(3)

—

(3)

—

Net change during the year

(3)

(4)

(3)

Pension and other postretirement

plans:

Prior service (costs) credits arising

during the year

(12)

(11)

(7)

Net actuarial gains (losses) arising

during the year

(243)

(200)

(293)

(220)

(411)

(352)

Amortization of prior service cost (credit)

included in net income

(11)

—

(11)

(25)

(3)

(28)

(19)

(5)

(24)

Amortization of net actuarial loss included

in net income

113

(25)

(31)

(22)

Net losses from pension settlements

included in net income

650

(132)

518

(6)

(4)

Changes attributable to divestments

186

(35)

151

—

Net change during the year

750

(161)

589

(178)

(142)

(327)

(295)

Cash flow hedge derivatives:

Net gains (losses) arising during the year

—

(51)

(49)

Reclassification adjustments for net (gains)

losses included in net income

(2)

(9)

—

(9)

Net change during the year

—

(31)

(28)

Total

other comprehensive income (loss)

1,779

(164)

1,615

(282)

(249)

(1,022)

(972)

F-78

The following table shows changes in “Accumulated other

comprehensive loss” (OCI) attributable to ABB, by

component, net of tax:

Unrealized

Pension and

Unrealized

Foreign

gains (losses)

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	6th grade Good

ABB (ABLZF) 20-F2020 FY Annual report (foreign)

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