ABB 20F 2021 Annual report

0001091587 us-gaap:DesignatedAsHedgingInstrumentMember abb:ProvisionsAndOtherCurrentLiabilitiesMember 2020-12-31

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, 2021

☐

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:

1,958,344,400

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 Secti

on 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 that 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 I

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

135

Item 8.

Financial Information

136

Item 9.

The Offer and Listing

137

Item 10.

Additional Information

138

Item 11.

Quantitative and Qualitative Disclosures About Market Risk

147

Item 12.

Description of Securities Other than Equity Securities

149

PART II

150

Item 13.

Defaults, Dividend Arrearages and Delinquencies

150

Item 14.

Material Modifications to the Rights of Security Holders

and Use of Proceeds

150

Item 15.

Controls and Procedures

150

Item 16.

[Reserved]

151

Item 16A.

Audit Committee Financial Expert

151

Item 16B.

Code of Ethics

151

Item 16C.

Principal Accountant Fees and Services

151

Item 16D.

Exemptions from the Listing Standards for Audit Committees

152

Item 16E.

Purchase of Equity Securities by Issuer and Affiliated

Purchasers

152

Item 16F.

Change in Registrant’s Certifying Accountant

152

Item 16G.

Corporate Governance

153

Item 16H.

Mine Safety Disclosure

153

Item 16I.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

153

PART III

154

Item 17.

Financial Statements

154

Item 18.

Financial Statements

154

Item 19.

Exhibits

155

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.

Our internet address is www.abb.com

or global.abb. The

information contained on or accessible from our Web

site is not incorporated into this annual report, and

you

should not consider it to be a part of this annual report.

Financial and other information

The Consolidated Financial Statements of ABB Ltd, including

the Notes thereto, as of December 31, 2021

and 2020,

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

ended December 31, 2021, (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

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; and (vi) “INR” and “Indian Rupee”

refer to the lawful currency of India.

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 30,

2021, was $1.00 = CHF 0.9146.

The twelve o’clock buying rate for Swiss francs

on February 18, 2022,

was

$1.00 = CHF 0.9210.

Cautionary Note Regarding 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, 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—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,

•

statements in “Item 8. Financial Information—Legal Proceedings”

regarding the outcome of

certain legal and compliance matters, and

•

statements in “Item 8. Financial Information—Dividends

and Dividend Policy” regarding our policy

on future dividend payments.

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

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 fluctuation

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 Switzer

land 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 includes 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 or actual

or alleged infringement of a third

party’s 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 I

Item 1.

Identity of Directors, Senior Management and Advisers

Not applicable

Item 2.

Offer Statistics and Expected Timetable

Not applicable

Item 3.

Key Information

—

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 exist or that

we currently believe may exist. Our business, financial

condition or results of 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 “Cautionary Note Regarding

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 (including the

supply of semiconductors) and the cost of capital.

Given the global nature of our business, COVID-19

has had an adverse impact on our revenues and

operating margins in all of our businesses and is expected to continue

to have an impact at least in the short

term. In particular, our Robotics

and Process Industries businesses as well as our

service businesses have

been materially impacted. 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 of 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

have delayed payments of amounts they owe us

and this had lead and 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

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

of 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 2021, 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 2021 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 2021, 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

•

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

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, 2021, employed

about

105,000 people, of which approximately 48 percent were

located in the Europe region, approximately

28 percent in the Asia, Middle East and Africa region and

approximately 24 percent in the Americas region.

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. Currency

and other local regulatory limitations

related to the transfer of funds exist in a number of countries where

we operate, including: China, India, the

Russian Federation, South Africa and Turkey.

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 changi

ng 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 to 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 is

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 to 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. Additionally,

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

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.

In 2021, global supply chain constraints caused us to

experience some delays in supplier deliveries and

product shortages for various categories such as semiconductors

and certain other raw materials as well as

constraints in the transportation of inbound supplies. We

took steps to mitigate supply chain shortages,

including building up buffer stocks, approving new

suppliers and redesigning certain products. Although we

were able to mitigate some disruptions and support our

business growth, we have experienced some delays

in delivering to certain of our customers and cannot assure

you that our mitigation efforts will be sufficient

overcome these supply chain constraints if these continue

or worsen in 2022.

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

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

of 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. In 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

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 our 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

or 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 of any future incident cannot be predicted.

Our business strategy includes

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 divestment, including our divestment in 2020 of

80.1 percent of the Power Grids business and the divestment

in 2021 of our Mechanical Power Transmission

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

anticipated benefits, including operating synergies and cost

savings, from these transactions, 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, other applicable

laws or regulations or our Code of Conduct. 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

applicable law has occurred, and the consequences of

any such investigation 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 do 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

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

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

or actual or alleged infringement of a third

party’s 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 recognition, 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 coul

adversely affect our business. In addition, there

exist risks around actual or alleged infringement of third-party

intellectual property rights, which could – even

with mitigation processes in place - lead to claims against

us that require significant resources to resolve. 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 in 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, we 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 of

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 to 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 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

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 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

105,000 talented 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, Motion, Process Automation,

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 Energy Ltd, formerly Hitachi ABB Power Grids

Ltd (Hitachi Energy) 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

information contained on or accessible from our Web

site is not incorporated into this annual report, and

you

should not consider it to be a part of this annual report.

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).

ABB Today

As a global leader in resource efficiency,

excelling in electrification and automation, our offering

is relevant for

the global energy transition, increased energy efficiency,

and the transition to more adaptive manufacturing

and automation, putting us right in the center of long-term

secular trends.

The ABB Purpose

The ABB Purpose captures what we do, and the ABB

Way describes how we do it. 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.

Our core competencies

Our leadership in resource efficiency is based on our

core competencies, each of which constitutes a barrier

to entry: decades-long domain expertise, cutting-edge

technology and innovation as well as the ability to

scale operations and distribution.

With its long history,

ABB not only invented or pioneered many power and automation

technologies but has

retained technology and market leadership in many of

these areas. Being present in various vertical markets

for decades with close long-term relationships with customers

and channel partners has resulted in our

unique deep domain expertise, enabling a thorough understanding

of customers’ needs and operations.

We continuously evolve our offering to remain

a relevant and trusted partner to our customers. Our annual

non-order related research and development spending

in 2021 amounted to approximately 4.2 percent of

revenues. We focus our research and development

expenditures on key areas of innovation and have spent

approximately $7 billion since the beginning of 2016, focusing

on developing best-in-class products and

services in the fields of electrification and automation with

the goal of helping our customers to increased

productivity and lower their ecological footprint.

All our four Business Areas are market leaders in their respective

areas being in either the number 1 or 2

positions. Our global reach along with our extensive local

presence assists us in scaling innovations to

achieve stronger returns, which supports higher absolute investments

for future growth. Active globally,

our

revenues are well-balanced across regions with customers

served directly and through a strong channel

partner network.

The ABB Way

The ABB Way is the glue that unites

our Group and comprises a select number of common processes

covering our business model, our people and culture, the ABB

brand and our governance framework. It

facilitates accountability,

transparency and speed in ABB.

In our operating model, the Divisions represent the highest

level of operating decisions. They are closest to

their respective markets and customer needs. Each Division

progresses through the strategic mandates and

priorities of stability and profitability before growth. Meaning, in

order to deploy full focus on organic and

acquired growth to the extent of consolidating the market, the

business’ structure should be robust and

profitability should be at least in line with industry peers.

We have made good progress on the transition

through these priorities with two thirds of our Divisions,

representing approximately 60 percent of Group

revenues, now on a growth mandate.

Each Division has full accountability for its results and

carries the responsibility for business development,

and research and development for leading technology

to secure a number 1 or 2 market position. To

fully

complete the decentralized way of working at ABB, our

focus area in 2022 will be to make sure that we also

have accountability, transparency

and speed within all of the Divisions. Strong performance

management is

key in a decentralized business model. We apply a

monthly scorecard system for the Divisions and Business

Areas, based on a standardized set of Key Performance

Indicators, to support full transparency of

performance. It is accompanied by a mandatory target

to make annual productivity improvements of at least

3 percent each year.

The corporate functions focus on necessary strategic, financial

and governance activities, with a lean

headcount of approximately 800 employees.

Enhanced growth profile

Over the past several years, we have taken significant

organic and inorganic actions to align our business

portfolio to more attractive growth markets, increasing

our focus on discrete industries, as well as transport

and infrastructure, that offer better growth opportunities.

Additionally, we

have increased the proportion of

sales stemming from short-cycle businesses, meaning

a reduced proportion from project-related activities,

which should reduce the risk and volatility in our earnings.

This ongoing shift towards better quality of

revenues is part of ABB’s DNA which centers

around resource-efficiency in electrification

and automation.

The responsibility for growth has been fully transferred

to the Divisions,

as they are closest to customers.

This includes both organic and acquired growth. The Divisions

have the best insights into current and future

customer needs and are accountable for building their

respective business accordingly.

With more Divisions

transitioning over time from stability and profitability to

growth, we expect to see a continuous shift in our

growth profile.

Finally, the underlying

demand for our products, systems and services

is supported by strong sustainability

megatrends with more favorable regulations, improved technology

and changing consumer patterns all being

positive drivers. An example of such a megatrend is sustainable

transport. We estimate that approximately

10 percent of our order intake comes from this area and that

we have outgrown the market in recent years.

The related segments have different commercial

maturity, including

more mature technologies which already

generate significant orders, including traction systems in rail

or hybrid ships using Azipod® propulsion.

Segments that are in commercial take-off (i.e. currently

see very high growth rates) include electric vehicle

charging solutions or robotic solutions for electric

vehicle manufacturing. There are also very early-stage

segments which are still emerging and which might offer

a high potential in the future such as fully electric

mines (“eMines”) or alternative fuels such as hydrogen.

—

Businesses

Our markets

ABB is a leading global technology company with a comprehensive

and increasingly digitalized offering of

electrification, motion and automation solutions. Our

exposure to customers is geographically balanced while

catering to multiple end-markets and segments. 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.

We are focused on creating superior customer value

through our comprehensive, modular offering,

combining traditional products and services with software

-enabled products and systems as well as digital

services and software that we sell both separately and

combined as scalable solutions. Superior software is

key differentiation of our digital offering

and about 60 percent of our approximately 7,000 employees

research and development are active in software development.

The majority of our businesses are market leaders within their respective

segments. We believe market

leadership is critical, as it provides the opportunity for

price leadership, which in turn supports profitability,

enabling us to invest in further 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

ongoing 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 recovered from the initial pandemic-related

impacts. In discrete industries, end-

markets such as food and beverage, consumer electronics,

machine builders and general industry grew

strongly. Investments

in robotics by the automotive industry recovered

and we applied a strategic selective

order approach aimed at improving long-term profitability

in the segment.

Later-cycle process industries segments picked up especially

during the second half of 2021, benefiting from

a rebound in commodity prices and generally easing

international travel restrictions. This was particularly

the

case for the oil and gas segment, while the recovery in

segments such as pulp and paper,

mining or water

and wastewater had already started earlier.

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 strong

in 2021. Buildings activity rebounded from the widespread

lockdowns of the previous year.

Data center markets continued to expand,

with ABB successful in offering

bundled solutions to hyperscale and co-location customers

in particular. Underlying demand

in rail for

electrification and traction solutions was also high, while

modest growth rates were impacted by the strong

order intake in 2020. In the marine sector,

we saw continued strong order demand

for our market-leading

electric propulsion systems. Services in the cruise segment started

to pick-up in the second half of 2021 in

anticipation of a recovery in cruising activities. EV charging

markets also continued to see very strong growth

rates.

Utilities market

ABB delivers solutions mainly for distribution utilities

and renewables customers, while continuing to service

conventional power generation customers with our control

and automation solutions. Following the

divestment of our Power Grids business to Hitachi in July

2020, our exposure to the utilities market has

decreased significantly.

During 2021, the renewables markets saw very strong

growth after a challenging, pandemic-impacted 2020.

Business levels in the conventional power generation

market improved, albeit from a low level. Demand from

electrical distribution utilities was strong, 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

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

50,800 employees on December 31, 2021, and

generated $13.2 billion of revenues in 2021.

Customers

The Electrification Business Area serves a wide range

of customer segments, including residential,

commercial, and industrial buildings, electric utilities, oi

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 six 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, 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 Division’s

highly innovative solutions serve rising

global demand among developers, owners, and investors

for smart building technology,

offering significant

sustainable and financial benefits, as well as answering social

and environmental needs, and addressing

customers’ carbon reduction strategies.

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 manufactures solutions for medium-voltage

applications used in utility and industrial applications under

its marquee brands including Elastimold

reclosers and switchgear, capacitor

switches, current limiting fuses, the High Tech

Valiant

full-range current

limiting fuse for fire mitigation, faulted current indicators

and distribution connectors, cable accessories and

apparatus 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 requirements, 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.

The E-mobility Division engineers electrification solutions

to enable global,

accessible, reliable, smart and

emission-free mobility.

The Division offers to its customers a total electric

vehicle charging solution from

compact AC wall boxes and DC fast charging stations

to on-demand electric bus charging systems. The

Division also provides customers with services such as

infrastructure installation and maintenance to meet

the requirements

of the next generation of smarter mobility.

ABB Ability™ connected chargers enable fast

global service and pro-active maintenance.

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

$345 million in 2021, compared to $316

million in 2020.

Investments in 2021 were higher than in 2020 as

some investments were previously delayed in 2020 due

to the COVID-19 pandemic. Investments in 2021

principally related to capacity expansion for e-mobility

products, including the construction of a new factory in

Italy, and to footprint changes,

equipment replacement and upgrades. Geographically,

in 2021, Europe

represented 54 percent of the capital expenditures,

followed by the Americas (34 percent) and Asia, Middle

East and Africa (12 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 20,000

employees as of December 31, 2021, and generated

around $6.9 billion of revenues in 2021.

Products and Services

The Motion Business Area designs, manufactures and

sells drives, motors, generators and traction

converters.

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.

At December 31, 2021, the Motion Business Area’s

products and services are delivered through seven

operating Divisions. The Business Area divested its Mechanical

Power Transmission Division on

November 1, 2021, which designed, manufactured and

sold various mechanical power transmission products

sold under the Dodge® brand.

The Drive Products Division serves the industries and

infrastructure segments with world-class drives and

programmable logic controllers (PLC). With its products,

global scale and local presence, the Division helps

customers to improve energy efficiency,

productivity and safety.

The System Drives Division supplies high-power,

high-performance drives, drive systems and packages

for

industrial process and large infrastructure applications.

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, safely

and reliably.

The Traction Division is a recognized

leader in traction technologies that drive innovation in rail,

bus and

other modes of electric transportation. A comprehensive

range of high performance propulsion, auxiliary

and

energy storage solutions help improve energy efficiency

and contributes to making transportation more

sustainable.

The IEC Low Voltage Motors

Division is a global market leader that provides a full range of

energy efficient

low voltage motors, including ultra-efficient motors

such as synchronous reluctance motors (SynRM)

to help

customers reduce power bills and cut emissions. Through a

global footprint, application expertise and with

rugged designs, the Division’s products support

customers with IEC low-voltage motor solutions that

improve

reliability and productivity in the most demanding applications

The Large Motors and Generators Division offers

a comprehensive product portfolio of large AC

motors and

generators. The Division’s robust, reliable and

highly efficient offerings power critical

infrastructure and

transportation across all major industries and applications

often in remote and demanding locations.

The NEMA Motors Division is a marketer,

designer and manufacturer that offers

Baldor-Reliance® industrial

electric motors, primarily in North America. The Division

focuses on quality,

reliability and efficiency to provide

a comprehensive offering of NEMA motors in the

market across most industrial segments and applications.

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, HVAC,

water and wastewater, 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 to 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 $230 million in

2021, compared to $118

million in 2020. Principal investments in 2021 related

to the purchase of a formerly

leased property in China as well as equipment replacement,

footprint adjustments and automation upgrades.

Geographically,

in 2021, Asia, Middle East and Africa represented 49 percent

of the capital expenditures,

followed by Europe (34 percent) and the Americas (17

percent).

—

Process Automation Business Area

Overview

In 2021, the former Industrial Automation Business

Area was renamed Process Automation and there was no

change in the composition of the Divisions. The Process

Automation Business Area offers customers in

process, hybrid and maritime industries a broad range of

integrated automation, electrical, motion and digital

systems, solutions and related services that are designed to

optimize productivity,

energy efficiency,

sustainability and safety of industrial processes and operations,

based on the Business Area’s deep domain

knowledge and expertise of each end market.

The Business Area’s offering can be grouped

with about half relating to solutions for new and

brownfield

projects and half relating to service,

mainly for installed own products.

In some cases, the Business Area

integrates offerings from the Electrification, Motion

and Robotics & Discrete Automation Business Areas

into

its integrated systems. The Business Area’s offerings

are sold primarily through its direct sales force with a

smaller share through partners and distributors.

The Business Area had approximately 22,000 employees

as of December 31, 2021, and generated revenues

of $6.3 billion in 2021.

Customers

The Process Automation Business Area’s end customers

include companies across process, hybrid and

maritime industries. These industries include oil, gas, chemicals

and plastics, mining and minerals, metals,

pulp and paper, pharmaceuticals,

food and beverage, power generation, marine

and ports.

Products and Services

The offering of the Process Automation Business

Area includes an extensive portfolio of products, solutions,

digital applications and services for the control of the simplest

to the most complex and critical of processes

and infrastructure. These systems can link various process

and information flows, allowing customers to

manage and control their entire business process based on

real-time information. The Business Area’s

control platform includes ABB Ability™ Distributed Control

System (DCS),

System 800xA

, which is also an

electrical control system, a safety system and a collaboration

enabler with the capacity to improve

engineering efficiency,

operator performance and asset utilization. Other control

solutions include Symphony

Plus (designed to address the open automation platform

needs of the Hydropower and Water

industry

segments) and our Freelance DCS solution.

Components for basic automation solutions,

process controllers,

I/O modules, panels, and Human Machine Interfaces (HMI),

are available through the Compact Product Suite

offering. The product portfolio is complemented by

a suite of ABB Ability™ Advanced Digital Services and

ABB Care, a subscription-based lifecycle management

program that provides services to maintain and

continually advance and enhance ABB’s distributed

control systems and optimize customers’ lifecycle

costs.

The ABB Ability™

Genix Industrial Analytics and Artificial Intelligence

Suite unlocks greater value by

contextualizing and integrating data from IT,

engineering, and operations systems to provide deep,

meaningful and actionable insights. The portfolio is complemented

by a range of industry-specific products in

each Division.

The Process Automation Business Area has five operating

Divisions.

The Energy Industries Division enables safe, smart, and

sustainable projects and operations for businesses

across the oil and gas, chemicals, life sciences, power

generation and water sectors. It is committed to

driving more sustainable use of our planet’s resources

through innovative solutions that enable energy

efficient and low carbon operations across traditional

industries and support the development of new and

renewable energy models. The Division serves the

energy market with leading integrated solutions that

automate, digitalize and electrify operations across

industries. The Division’s goal is to help customers

adapt

and succeed in the rapidly changing global energy transition. Harnessing

data, machine learning and AI, the

Division brings over 50 years of domain expertise delivering solutions

designed to improve energy,

process

and production efficiency,

as well as reduce risk, operational cost and capital

cost, while minimizing waste for

all customers,

from project start-up and throughout the entire plant lifecycle.

The Process Industries Division serves the mining, minerals

processing, metals, aluminum, cement, pulp and

paper, battery manufacturing,

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, increase productivity and reduce 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

electrical and motion systems, including 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 shipping industry

through its extensive portfolio of integrated marine

systems and solutions that improve the flexibility,

reliability and energy efficiency of vessels. By

coupling

power, propulsion, automation,

marine software and services that ensure maximum vessel

uptime, we are

well positioned to help improve the profitability and sustainability

of our customers’ business throughout the

entire lifecycle of a fleet. With ABB Ability™ Marine software solutions

and ABB Ability™ Collaborative

Operations Centers around the world, shipowners and

operators can run their fleets at lower fuel and

maintenance costs, while improving crew,

passenger and cargo safety as well as overall productivity

of their

operations. Further, the Division

delivers automation, electrical systems and digital solutions

for container and

bulk cargo handling, from ship to gate. These solutions

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 portfolio of the Measurement & Analytics Division

consists of analyzers (measuring compositions of

gases and liquids), instrumentation (measuring the typical

process variables of temperature, pressure, flow,

and level) as well as specialized measurements for specific

industries. With this offering the Division serves

virtually all process, hybrid and marine industries, the largest

among them being the oil, gas and chemical

value chain, water and power generation industries. The

Division also provides advanced digital solutions to

help customers improve productivity,

safety and environmental sustainability.

The Turbocharging Division manufactures

and services turbochargers for diesel and gas engines with

power

levels ranging from 500 kilowatts to over 80 megawatts. Key end

sectors are marine-

and land-based power

generation. The Division provides engine builders and

operators advanced solutions and services for efficient

and flexible application operations, in compliance with

the most stringent environmental requirements.

Sales and Marketing

The Process 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 Process Automation Business Area’s principal

competitors vary by industry or product group.

Competitors include: Emerson, Honeywell, Schneider

Electric, Siemens, Siemens Energy,

Yokogawa,

Endress + Hauser, Kongsbe

rg, Valmet and Garrett.

Capital Expenditures

The Process Automation Business Area’s capital

expenditures for property,

plant and equipment totaled

$85 million in 2021, compared to $75 million in 2020. Principal

investments in 2021 were in the

Turbocharging and the Measurement

& Analytics Divisions. Geographically,

in 2021, Europe represented

73 percent of the capital expenditures, followed by Asia,

Middle East and Africa (18 percent) and the

Americas (9 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

10,600 employees as of

December 31, 2021, and generated $3.3 billion of revenues

in 2021.

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 including robots, robotics

application cells and smart systems, field services, spare

parts, digital services, engineering and operations

software. This offering provides customers with increased

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

address 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.

In 2021, we acquired ASTI Mobile Robotics Group

(ASTI) adding a broad

portfolio of autonomous mobile robot vehicles and solutions.

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 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 and include companies

such as Fanuc, Kuka, Yaskawa

Epson, Dürr, Stäubli, Universal

Robots, Rockwell Automation,

Siemens,

Mitsubishi Electric and Beckhoff.

Capital Expenditures

The Robotics & Discrete Automation Business Area’s

capital expenditures for property,

plant and equipment

totaled $96 million in 2021, compared to $65 million in

2020. Principal investments in 2021 were primarily

related to research and development and training facilities,

especially the new Machine Automation Division

global innovation and training campus in Austria,

and upgrades and equipment replacement. In 2021,

Europe

represented 75 percent of capital expenditures, followed by

Asia, Middle East and Africa (23 percent) and the

Americas (2 percent).

—

Corporate and Other

Corporate and Other includes core headquarter functions,

real estate activities, Corporate Treasury

Operations, Global Business Services (GBS), the investment

in Hitachi Energy and other minor business

activities. Certain strategic investments managed by ABB Technology

Ventures are also included

Corporate. The remaining activities of certain EPC projects

which we are completing and are in a wind-down

phase are reported as non-core businesses within 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,

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 and the related

number of employees are allocated to the

Business Areas. GBS also provides services to third-parties

under transitional service agreements in relation

to certain divested businesses, the largest of which is

the Power Grids business.

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 1,000 employees

at December 31, 2021, of which approximately 200

pertain to our non-core businesses.

—

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

provided 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 offer

ed 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 (STATCOM)

technologies to address stability and power quality issues.

The Grid Integration

operation’s portfolio also included a 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

manufactured 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 supplie

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

$820 million, $694 million and $762 million in 2021,

2020 and 2019, respectively.

In 2021 and 2020, capital expenditures were 8 percent and

24 percent lower,

respectively, than

depreciation and amortization. Excluding acquisition

-related amortization, capital

expenditures were 28 percent higher in 2021 and 6 percent

higher in 2020,

respectively, than

depreciation

and amortization.

Capital expenditures in 2021 remained primarily focused in mature

markets, reflecting the geographic

distribution of our existing production facilities. Capital

expenditures in Europe and North America in 2021

were driven primarily by upgrades and maintenance of

existing production facilities, mainly in the U.S.,

Austria, Italy, Switzerland,

Finland and Sweden. Capital 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. We also are constructing a new

facility in Italy for our E-mobility Division. This investment

aims to serve as a global center of excellence and

production site for electric vehicle charging infrastructure

Our capital expenditures in emerging markets

continued to remain primarily concentrated in China and

focus on increasing existing production capacity.

Asia, we continued our significant investments

in China investing in the new automated and flexible robotics

factory and also purchasing a significant formerly leased

property.

The share of emerging markets capital

expenditures as a percentage of total capital expenditures

in 2021 and 2020 was 33 percent and 22 percent,

respectively.

At December 31, 2021, construction in progress for property,

plant and equipment was $522 million, mainly in

the U.S., Switzerland, Germany,

Sweden, Italy, China

and India while 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.

Our capital expenditures relate primarily to property,

plant and equipment and are funded primarily through

cash flows from operating activities.

For 2022, we estimate the expenditures for property,

plant and

equipment will be higher 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 a 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 2021, 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.

Responding to the challenges of overall

global supply chain constraints, each Business Area quickly

implemented a task force to mitigate supply

chain shortages.

The Business Areas experienced some delays in supplier

deliveries and product shortages

for various categories such as semiconductors and other

raw materials as well as constraints in the

transportation of inbound supplies. However,

we responded to these challenges and took mitigating actions

such as building up buffer stocks, approving new

suppliers, changing supplier splits, combined with daily,

weekly and monthly task force project follow ups.

We have, to a large extent, been able to mitigate

most

disruptions, maintain a competitive service level and support our

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, 2021,

we have approximately 25,000 patent applications and registrations,

of which approximately 5,500 are

pending applications. These patents include more than 3,500

utility model and design applications and

registrations, of which approximately 200 are pending

applications. In 2021, we filed more than 2,250

patents, utility model and design applications for more than

1,250 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 proactively assert

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

the business on any single patent, utility model or design application.

—

Sustainability activities

Sustainability is a key part of ABB’s company

Purpose and of the long-term value that we aim to create

for

our stakeholders. We believe that sustainable development

means progress towards a healthier and more

prosperous world today and for future generations. This

means balancing the needs of society,

the

environment and the economy.

achieve this, we act and embed this approach to business

across our

value chain, including our own operations, our suppliers

and the communities we serve. We strive to

always

be an exemplary corporate citizen wherever we operate.

Our 2030 sustainability goals include:

Enabling a low-carbon society

by helping to reduce carbon emissions through

our technologies which

target sectors that account for three quarters of global

energy consumption. Our 2030 commitment:

•

supporting our customers in reducing their annual CO

emissions by at least 100 megatons,

equivalent to the annual emissions of 30 million combustion

cars,

•

achieve carbon neutrality across our own operations,

and

•

engage with suppliers to extend our impact in reducing

emissions across our supply chain.

Preserving resources

by embedding circularity across our value chain. Our

solutions reduce waste,

increase recycling and foster reusability.

Our 2030 commitment:

•

ensure that at least 80 percent of ABB products and solutions

are covered by our circularity

approach,

and

•

dispose of zero waste from our own operations in landfills, wherever

this is compatible with local

conditions and regulations.

Promoting social progress

by taking care of our employees and promoting progress

around the world. We

create safe, fair and inclusive working environments and support

community building.

Our 2030 commitment:

•

pursue the ambition that no harm is caused to our people

and contractors – we aim for a yearly

reduction in lost time from incidents,

•

double the number of women in senior management roles to

25 percent, within our

comprehensive diversity and inclusion framework,

•

targeting a top-tier employee engagement score in our

industry,

and

•

provide impactful support for community-building initiatives.

Acting with integrity and transparency across the value chain

by:

•

Adhering always to the ABB Code of Conduct,

which is the basis for interactions with projects

and counterparties

•

ensuring that compliance with our Supplier Code of Conduct

is included in all procurement terms

& conditions,

•

incorporating sustainability targets into our senior management

incentives, and

•

by 2030, ensuring that at least 80 percent of supply spend

in focus countries is covered by our

Sustainable Supply Base Management program, which

includes environmental, social and

governance performance.

Reflecting the importance of sustainability as a strategic

topic, ABB’s Board of Directors oversees our

sustainability strategy,

targets and our annual sustainability report. The

Governance and Nomination

Committee of the Board of Directors is responsible for

overseeing corporate social responsibility (including

health, safety and environment as well as sustainability),

while the Compensation Committee ensures that

ABB remuneration policies are linked to the achievement of

its sustainability targets.

manage environmental aspects of our own operations,

in 2021 we have updated our internal standards to

be in line with our new ambitions and launched programs

in our Business Areas to implement our new

targets. We see a further improvement in the share

of green electricity we use from 32 percent in 2020 to

51 percent in 2021. The amount of waste sent to landfill has

decreased from 15.1 thousand tons to

12.6 thousand tons. Globally,

operations at 305 sites and offices are covered by

externally certified

environmental management systems.

A total of five environmental incidents were reported

in 2021, none of

which had a material environmental impact.

At our capital markets day on December 7, 2021, we

announced a new circularity approach, which will cover

at least 80 percent of ABB’s products and solutions

and evaluate them against a clear and transparent

scoring system, based on eight circularity levers – two for each stage

of the product lifecycle. This approach

will drive circularity in our own operations and in our supply

chain as well as enable our customers to become

more circular.

In 2021, we recorded no fatalities and our lost time incident

frequency rate dropped from 0.16 to 0.14 per

200,000 hours worked.

The number of women in senior management

positions increased from 13.5 percent

to 16.3 percent.

Our employee engagement score decreased by 1 percentage

point to 74 percent, while the response rate

increased from 73 percent to 78 percent. We continued

to provide impactful support for community-building

initiatives across all regions.

Suppliers are required to perform their contractual obligations

in accordance with both the ABB Code of

Conduct and the ABB Supplier Code of Conduct, as part

of their standard contractual conditions. The code of

conduct covers Integrity,

social and environment expectations

A senior sustainability management incentive was developed

and applies as of 2021, in addition to the

existing incentive on safety.

—

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 on 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. In 2021, no revenues were attributable to

this work.

—

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, as of December 31, 2021, 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 Energy Ltd (formerly Hitachi ABB Power Grids Ltd).

ABB’s operational group structure is described

above in the “Businesses” section of Item 4.

Name

Location

Country

Group

Interest %

ABB S.A.

Buenos Aires

Argentina

100.00

ABB Australia Pty Limited

Moorebank

Australia

100.00

ABB Group Holdings Pty. Ltd.

Moorebank

Australia

100.00

ABB Group Investment Management Pty. Ltd.

Moorebank

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

Canada

100.00

ABB Inc.

Saint-Laurent

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

Name

Location

Country

Group

Interest %

ABB LV Installation Materials Co. Ltd. Beijing

Beijing

China

85.70

ABB Shanghai Free Trade Zone Industrial Co., Ltd.

Shanghai

China

100.00

ABB Shanghai Motors Co. Ltd.

Shanghai

China

75.00

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 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 Business Services and Contracting India

Private Limited

Bangalore

India

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

Mexico

100.00

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

San Luis Potosi

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

99.94

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

Bielsko-Biala

Poland

99.94

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

Klodzko

Poland

99.94

ABB Sp. z o.o.

Warsaw

Poland

99.94

Industrial C&S of P.R.

LLC

San Juan

Puerto Rico

100.00

ABB Ltd.

Moscow

Russian

Federation

100.00

Name

Location

Country

Group

Interest %

ABB Electrical Industries Co. Ltd.

Riyadh

Saudi Arabia

65.00

ABB Pte. Ltd.

Singapore

100.00

ABB Holdings (Pty) Ltd.

Modderfontein

South Africa

100.00

ABB Investments (Pty) Ltd

Modderfontein

South Africa

51.00

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 Electrification Sweden 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

Zürich

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 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, 2021, 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,

Italy, Finland,

India, Sweden, Switzerland, Poland and Canada. 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 Energy Ltd, formerly Hitachi ABB

Power Grids.

The net book value of our property,

plant and equipment at December 31, 2021, was

$4,045 million, of which

machinery and equipment represented $1,337 million, land

and buildings represented $2,186 million and

construction in progress represented $522 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 2021 and 2020. See “Item 5.

Operating and Financial Review and Prospects” in our

Annual Report on Form 20-F for the year ended

December 31, 2020, for a comparative discussion and

analysis between 2020 and 2019.

—

Management overview

During 2021, we saw a strong recovery from the pandemic-related

disruptions of 2020. It also was the first full

fiscal year where we operated under our decentralized

operating model, the ABB Way.

In 2021, we have

seen improved efficiencies from this new way of operating

and we expect the increased transparency,

accountability and speed to further support future growth and

profitability.

Additionally,

we made progress in

reshaping our business portfolio,

completing the divestment of the Mechanical Power

Transmission business,

as we continue to be fully focused on electrification and

automation. This transaction completes

the first of

the three planned Divisional exits previously announced

in 2020.

Active portfolio management is part of our performance

culture. On the back of systematic portfolio reviews

we ascertain whether ultimately ABB is the best owner

of the different businesses. As a result, we have

successfully divested the Mechanical Power Transmission

Division during 2021. We continue to make

progress on the exit of the Turbocharging

Division, where we are currently running a dual track process

for a

spin-off or divestment, and plan to exit the Power

Conversion Division. At the same time, we are

carving-out

the E-mobility Division and work towards an initial public

offering to create a platform for accelerated growth

and value creation. We plan to remain a majority

owner of the new company.

In addition, our active portfolio management process is

driving decisions within the Divisions to improve or

exit areas of underperformance, supporting improved performance

ambitions. Further, we

intend to pursue

strategic partnerships as well as bolt-on acquisitions driven

by the Divisions. In 2021, we acquired ASTI

Mobile Robotics Group, a global leader in the high-growth

autonomous mobile robots market with a broad

portfolio of vehicles and software. As part of our future

strategy we aim to complete five or more bolt-on

acquisitions each year.

Business progress

During 2021, demand for ABB’s offering

recovered from the low level in 2020 when the adverse

business

impact of the pandemic was most significant. Orders and revenues

increased in all Business Areas. Demand

increased year-on-year in all regions with the Americas seeing

the highest growth, while the increase was

lower in Asia, Middle East and Africa as China had already started

to recover in 2020. While short-cycle

product demand recovered relatively quickly from the sharp downturn

seen at the onset of the pandemic,

project activities, particularly in process industries, predominantly

picked-up during the second half of 2021.

The loosening of various pandemic-related travel restrictions

allowed for a more significant improvement in

service-related activities.

While our orders increased 20 percent in 2021, revenues

only grew by 11 percent.

Supply chain constraints

and imbalances in the overall supply chain limited our

ability to convert orders into actual deliveries resulting

in an increase of our order backlog by 16 percent to $16.6

billion at the end of the year.

Group profitability showed strong improvement during 2021

with segment profit (Operational EBITA)

higher in

all Business Areas and continued progress towards a lean corporat

function. The result was driven by better

volumes, continuous improvements,

improved internal efficiency and the absence

of certain larger non-core

project losses incurred in 2020. Active price management and

productivity gains were able to offset

increasing raw material costs and general cost inflation

emphasized by the tight supply situation over the

year. While some costs such

as discretionary travel or certain marketing costs are still expected

to rebalance

from low pandemic levels, we believe we are on track

to achieve our future business targets.

The profitability improvement as well as lower cash costs

for transformation initiatives have also allowed us to

achieve strong cash generation,

with cash flows from operating activities in continuing operations

improving

to $3.3 billion in 2021, an increase of 78 percent compared

to 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

$1.2 billion in 2021, or 4.2 percent of revenues. We

also completed key acquisitions and divestments

in 2021,

strengthening our portfolio.

Capital allocation

Our 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.

We expect that our improved cash generation

on the back of the ABB Way operating

model,

will enhance

our flexibility to invest in both organic growth and bolt-on

acquisitions, while providing attractive returns to

shareholders.

At the 2022 Annual General Meeting (AGM), the Board of Directors

is proposing a dividend of 0.82 Swiss

francs per share. We also plan to continue

our announced share buyback to return $7.8 billion of

cash

proceeds from the Power Grids divestment to shareholders.

At December 31, 2021, under the initial and

follow-up share buyback programs, we had cumulatively purchased

shares for approximately $5.5 billion.

Updated financial target framework

During 2021, we raised our growth target to 4 to 7 percent

(up from 3 to 5 percent) annual average revenue

growth, through an economic cycle and in constant currencies.

This includes 3 to 5 percent organic growth

and 1 to 2 percent from acquired growth.

For the Operational EBITA

margin, we have removed the previous margin ranges

and raised our target to at

least 15 percent as from 2023 (from upper half of 13 to

16 percent range in 2023).

The other targets within our financial framework remain unchanged:

•

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.

Sustainability strategy 2030

With our 2030 sustainability strategy,

we are actively contributing to a more sustainable world,

leading by

example in our own operations and partnering with customers

and suppliers to enable a low-carbon society,

preserve resources and promote social progress. Our

sustainability focus is part of ABB’s commitment

responsible business practices, which are at the center of our

comprehensive governance framework, based

on integrity and transparency.

Amongst other focus areas in 2021, we unveiled,

at the Capital Markets Day 2021, our circularity framework

covering every stage of the product lifecycle to preserve

resources. It includes four stages: circular design

and sourcing, resource efficient operations, optimized

use phase and responsible end of life. The goal is to

have 80 percent of ABB products, solutions and services

covered by the circularity framework by 2030, with

our progress measured against a set of KPIs. For a detailed

discussion of our sustainability strategy 2030

and our progress in 2021, see “Item 4. Information on

the Company—Sustainability activities”.

—

Critical accounting policies and estimates

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

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.

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,

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

‑

completion method of accounting is generally used when

recognizing revenue on an over

time basis and 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

a 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

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 $262 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

$254 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 2021 by $21 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, 2021, our defined benefit pension

plans were $27 million overfunded compared to

an underfunding of $656 million at December 31, 2020.

Our other postretirement plans were underfunded by

$71 million and $98 million at December 31, 2021 and

2020, respectively.

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 a 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, we 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,

including for transfer pricing. 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.

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.

As each of our Divisions have full ownership and accountability

for their respective strategies, performance

and resources, we have determined our reporting units

to be at the Division level, which is one level below

our operating segments of Electrification, Motion, Process

Automation and Robotics & Discrete Automation.

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.

During 2021, we added three new Divisions by splitting two

existing ones into multiple standalone Divisions

and announced (in July 2021) the divestment of the

Mechanical Power Transmission

Division, resulting in

twenty reporting units in total for the Group at October

1, 2021. For each change in reporting unit which arose

during 2021, an interim quantitative impairment test was

conducted before and after the change. In both the

“before” and “after” tests, it was concluded that the fair

value of the reporting units exceeded the carrying

value by a significant amount.

In 2020, prior to the adoption of the new “ABB Way”

operating model on July 1, 2020, goodwill was generally

assessed at the level of ABB’s operating segments (one

level above the Division, with the exception of

Process Automation where the reporting units were the

same as the Divisions) while after the change,

goodwill impairment was assessed at the Division level.

Although the new operating model resulted only in an

allocation of goodwill within the operating segments and did not

change the segment level goodwill, an

interim quantitative impairment test was conducted before and

after the July 1 change.

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. For the impairment

test performed immediately after the change

in reporting units, the fair value of each of the eighteen reporting

units 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 2020 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 in 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 reporting 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 operating segment.

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, 2021 and 2020, 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 on

developing and commercializing the technologies,

products and solutions of our businesses that are

strategic importance to our future growth. In 2021, we invested

$1,219 million, or approximately 4.2 percent

of our 2021 consolidated revenues, on research and development

activities in our continuing operations. We

also had expenditures of $53 million, or approximately

0.2 percent of our 2021 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.

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 and 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

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 leave behind a world for future generations that is

at least as healthy and prosperous as the one we

inherited.

—

Acquisitions and divestments

Acquisitions

During 2021 and 2020, ABB paid $212 million and $79 million

to purchase two and three businesses,

respectively.

The principal acquisition in 2021 was ASTI Mobile Robotics

Group SL (ASTI). ASTI,

headquartered in

Burgos, Spain,

is a global autonomous mobile robot (AMR) manufacturer

and employs approximately

300 people. See “Note 4 - Acquisitions, divestments and

equity-accounted companies” to our Consolidated

Financial Statements.

There were no significant acquisitions in 2020 or 2019.

Divestments

Divestment of Mechanical Power Transmission

Division

In November 2021, we completed the sale of our Mechanical

Power Transmission Division (Dodge)

to RBC

Bearings Inc. for cash proceeds of $2,862 million, net

of transactions costs and cash disposed and

recognizing a net gain on sale of $2,195 million. Prior to

its disposal, the Dodge business was part of our

Motion operating segment. See “Note 4 - Acquisitions,

divestments and equity-accounted companies” to our

Consolidated Financial Statements.

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 our 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”. 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

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

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, 2021, 2020 and 2019, were as follows:

Exchange rates into $

2021

2020

2019

EUR 1.00

1.13

1.23

1.12

CHF 1.00

1.10

1.14

1.03

CNY 1.00

0.16

0.15

0.14

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, 2021, 2020

and 2019, were as follows:

Exchange rates into $

2021

2020

2019

EUR 1.00

1.18

1.14

1.12

CHF 1.00

1.09

1.07

1.01

CNY 1.00

0.16

0.14

When we incur expenses that are not denominated in

the same currency as the related revenues, foreign

exchange rate fluctuations could affect our profitability.

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 2021, approximately 77 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 17 percent.

In 2021, 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 20 percent,

and

•

Chinese renminbi, approximately 14 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

‑

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

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 larger

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 (c) unrealized

foreign exchange movements on

receivables/payables (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 $)

2021

2020

2019

Revenues

28,945

26,134

27,978

Cost of sales

(19,478)

(18,256)

(19,072)

Gross profit

9,467

7,878

8,906

Selling, general and administrative expenses

(5,162)

(4,895)

(5,447)

Non-order related research and development expenses

(1,219)

(1,127)

(1,198)

Impairment of goodwill

—

(311)

—

Other income (expense), net

2,632

(323)

Income from operations

5,718

1,593

1,938

Interest and dividend income

Interest and other finance expense

(148)

(240)

(215)

Losses from extinguishment of debt

—

(162)

—

Non-operational pension (cost) credit

166

(401)

Income tax expense

(1,057)

(496)

(772)

Income from continuing operations, net of tax

4,730

345

1,090

Income (loss) from discontinued operations, net of tax

(80)

4,860

438

Net income

4,650

5,205

1,528

Net income attributable to noncontrolling interests

(104)

(59)

(89)

Net income attributable to ABB

4,546

5,146

1,439

Amounts attributable to ABB shareholders:

Income from continuing operations, net of tax

4,625

294

1,043

Income (loss) from discontinued operations, net of tax

(79)

4,852

396

Net income

4,546

5,146

1,439

Basic earnings per share attributable to ABB shareholders:

Income from continuing operations, net of tax

2.31

0.14

0.49

Income (loss) from discontinued operations, net of tax

(0.04)

2.30

0.19

Net income

2.27

2.44

0.67

Diluted earnings per share attributable to ABB shareholders:

Income from continuing operations, net of tax

2.29

0.14

0.49

Income (loss) from discontinued operations, net of tax

(0.04)

2.29

0.19

Net income

2.25

2.43

0.67

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, Motion, Process

Automation, 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)

2021

2020

2019

2021

2020

Electrification

14,381

11,884

13,050

21%

(9)%

Motion

7,616

6,574

6,782

16%

(3)%

Process Automation

6,779

6,144

6,432

10%

(4)%

Robotics & Discrete Automation

3,844

2,868

3,260

34%

(12)%

Total Business Areas

32,620

27,470

29,524

19%

(7)%

Corporate and Other

Non-core and divested businesses

(10)

(31)

(91)

n.a.

Intersegment eliminations and other

(742)

(927)

(845)

n.a.

Total

31,868

26,512

28,588

20%

(7)%

In 2021, total orders increased 20 percent compared to 2020 (17

percent in local currencies).

Total

orders

reflect the growth across all Business Areas as the pandemic

-related slowdown affected most of our

businesses across all regions in the previous year.

The growth rate was highest in the Robotics & Discrete

Automation Business Area, while the amount of orders increased

the most in Electrification, our largest

Business Area. Order growth rates were also strong in

the Motion and Process Automation Business Areas.

The increase in orders

was most significant in the second quarter of the year

with growth rates declining over

the remainder of the year.

The significant growth was visible across all regions.

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)

2021

2020

2019

2021

2020

Europe

11,857

9,618

10,509

23%

(8)%

The Americas

9,940

7,956

9,057

25%

(12)%

of which: United States

7,453

5,971

6,804

25%

(12)%

Asia, Middle East and Africa

10,071

8,938

9,022

13%

(1)%

of which: China

5,036

4,121

4,118

22%

Total

31,868

26,512

28,588

20%

(7)%

In 2021, total orders increased in all regions as all regions

made strong recoveries from the pandemic-related

downturn in the previous year.

In the Americas, orders increased 25 percent (24 percent

in local currencies)

and increased across all Business Areas. Orders grew in the

U.S., Canada, Brazil and Mexico.

In Europe,

orders increased 23 percent (19 percent in local currencies)

with all Business Areas reporting order growth.

Orders increased in Germany,

France, Switzerland, Italy and Finland while they declined

in Poland. In Asia,

Middle East and Africa,

orders increased 13 percent (8 percent in

local currencies) and were higher across all

Business Areas. Total

orders increased in China,

India and Australia while they decreased in South

Korea,

Singapore and Saudi Arabia.

Order backlog

% Change

December 31, ($ in millions)

2021

2020

2019

2021

2020

Electrification

5,458

4,358

4,488

25%

(3)%

Motion

3,749

3,320

2,967

13%

12%

Process Automation

6,079

5,805

5,077

14%

Robotics & Discrete Automation

1,919

1,403

1,356

37%

Total Business Areas

17,205

14,886

13,888

16%

Corporate and Other

Non-core and divested businesses

114

139

192

(18)%

(28)%

Intersegment eliminations

(712)

(722)

(756)

n.a.

Total

16,607

14,303

13,324

16%

At December 31, 2021, consolidated order backlog was

16 percent higher (21 percent in local currencies)

compared to December 31, 2020. Order backlog increased

significantly in most Business Areas with a

moderate growth in the Process Automation Business

Area. The order backlog in the Motion Business Area

was driven by both short and long-cycle business order

growth in most Divisions.

Order backlog increased

across all Divisions in the Electrification Business Area

with a very strong order intake, but also reflecting

execution challenges. Growth was strong in the E-mobility

and Power Conversion Divisions but grew only

moderately in the Distribution Solutions Division.

The growth in the Process Automation Business

Area was

driven by a strong order increase in most Divisions except

the Marine & Ports Division, which decreased,

mainly on the execution of large orders received in 2020

The increase in the order backlog in the

Robotics & Discrete Automation Business Area was driven

by strong growth in the Machine Automation

Division, while the Robotics Division decreased slightly

due to lower demand from the automotive systems

end market.

Revenues

% Change

($ in millions)

2021

2020

2019

2021

2020

Electrification

13,187

11,924

12,728

11%

(6)%

Motion

6,925

6,409

6,533

(2)%

Process Automation

6,259

5,792

6,273

(8)%

Robotics & Discrete Automation

3,297

2,907

3,314

13%

(12)%

Total Business Areas

29,668

27,032

28,848

10%

(6)%

Corporate and Other

Non-core and divested businesses

(6)

n.a.

Intersegment eliminations and other

(734)

(892)

(907)

n.a.

Total

28,945

26,134

27,978

11%

(7)%

In 2021, revenues increased 11

percent (8 percent in local currencies). Revenues increased

across all

Business Areas, recovering from the pandemic-related impacts

of the previous year. The Electri

fication and

Robotics & Discrete Automation Business Areas reported

strong growth, largely driven by the short-cycle

businesses. 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)

2021

2020

2019

2021

2020

Europe

10,529

9,764

10,097

(3)%

The Americas

8,686

7,949

8,955

(11)%

of which: United States

6,397

6,027

6,753

(11)%

Asia, Middle East and Africa

9,730

8,421

8,926

16%

(6)%

of which: China

4,932

4,098

4,047

20%

Total

28,945

26,134

27,978

11%

(7)%

In 2021, revenues increased across all regions, reflecting

the recovery from the pandemic-related challenges

of the previous year. In the

Americas revenues increased

9 percent (9 percent in local currencies) and were

higher across all Business Areas. Revenues increased in the

U.S., Canada, Brazil, Mexico, Argentina and

Chile while they decreased slightly in Peru and Panama.

In Europe revenues increased 8 percent (5 percent

in local currencies) and increased across all Business

Areas except the Process Automation Business Area.

Sales were lower in Finland and France while revenues

grew in Germany,

the United Kingdom, Italy,

Sweden, Turkey,

Austria, Netherlands and Switzerland.

In Asia, Middle East and Africa revenues increased

16 percent (11 percent

in local currencies) and increased across all

Business Areas. Revenues increased in

China, India, Australia and South Korea while they decreased

in Japan.

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 2021, costs of sales increased 7 percent (4 percent

in local currencies) to $19,478 million. Cost of sales as

a percentage of revenues decreased to 67.3 percent from

69.9 percent in 2020, an increase in the gross

margin of 2.6 percent, primarily driven by lower losses

in non-core businesses, and because 2020 included

significant warranty charges related to a divested business

as well as losses on specific projects.

The

increase in gross margin also reflects higher revenue

volumes, a positive portfolio mix as well as price

increases and certain cost savings actions taken to mitigate

higher commodity prices

and freight costs. In

2021, gross margin percentages were higher in the Electrification,

Robotics & Discrete Automation and

Process Automation Business Areas. The gross margin percentage

in the Motion Business Area was lower in

2021 compared to 2020 due to the impact of higher commodit

prices. For ABB, the gross margin did benefit

partially from the results of saving initiatives in the areas of supply

chain and operational excellence.

Selling, general and administrative expenses

The components of selling, general and administrative

expenses were as follows:

($ in millions)

2021

2020

2019

Selling expenses

3,281

3,087

3,383

General and administrative expenses

1,881

1,808

2,064

Total

5,162

4,895

5,447

In 2021, general and administrative expenses increased

4 percent (1 percent in local currencies) compared

to 2020. As a percentage of revenues, general and administrative

expenses decreased to 6.5 percent from

6.9 percent in 2020.

General and administrative expenses in 2021 benefit

ed partially from a $40 million

reduction of stranded corporate costs compared to 20

20 but continue to include the ongoing costs required

deliver services to Hitachi Energy Ltd under transition

service agreements, for which we are compensated

and recorded $173 million in Other income (expense),

net during 2021 compared to $91 million in the

previous year.

Stranded costs were overhead and other management

costs which could previously be

allocated to the Power Grids business.

In 2021, selling expenses increased 6 percent (3 percent

in local currencies) compared to 2020 across all

Business Areas as pandemic-related restrictions were

gradually relaxed and we increased sales activities to

keep pace with the strong recovery in demand. Selling

expenses as a percentage of orders received

decreased from 11.6

percent in 2020 to 10.3 percent in 2021 mainly due to

strong order growth.

Non

‑

order related research and development expenses

In 2021, non

‑

order related research and development expenses

increased 8 percent (4 percent in local

currencies) compared to 2020. Non

‑

order related research and development expenses increase

mainly due

to higher investment activities related to selective growth

areas in certain operating Divisions such as

Distribution Solutions, Robotics, Process Industries, Smart Buildings

and E-mobility.

In 2021, the higher non

‑

order related research and development expenses were

consistent with the higher

revenues and as a percentage of revenues these expenditures

decreased in 2021 to 4.2 percent from

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. In

2021, no impairment was recorded as a result of the

annual review. See “Note 11

- Goodwill and intangible assets” to our Consolidated

Financial Statements.

Other income (expense), net

($ in millions)

2021

2020

2019

Net gain (loss) from sale of businesses

2,193

(2)

Income from provision of services under transition services agreements

173

—

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

105

(5)

Brand income from Hitachi Energy

—

Net gain from sale of property, plant and equipment

Favorable resolution of an uncertain purchase price adjustment

Fair value adjustment on assets and liabilities held for sale

—

(33)

(421)

Asset impairments

—

(35)

(56)

Restructuring and restructuring-related expenses

(1)

(48)

(87)

(69)

Income (loss) from equity-accounted companies

(100)

(66)

Other income (expense)

176

(24)

Total

2,632

(323)

(1)

Excluding

asset impairments

In 2021, Other income (expense), net, was an income

of $2,632 million compared to $48 million in 2020. In

2021, we recorded gains of $2,193 million in Other income (expense),

net for net gains from sales of

businesses. This is primarily due to the divestment of the Dodge

business.

In 2021, we also recorded a full

year of both brand income and income for provision of

transition services relating to Hitachi Energy,

compared to only six months of income in 2020. In 2021,

we recorded higher increases in the fair value of

various equity investments in our ABB Technology

Ventures portfolio,

the most significant of which related to

CMR Surgical Ltd. The amount in 2021 also reflects lower

restructuring and restructuring-related expenses

and lower asset impairments. Partially offsetting

this were higher losses from equity-accounted companies

mainly reflecting the loss recorded from the Hitachi Energy

joint venture.

Income from operations

% Change

($ in millions)

2021

2020

2019

2021

2020

Electrification

1,841

1,335

1,049

38%

27%

Motion

3,276

989

1,009

231%

(2)%

Process Automation

713

344

700

107%

(51)%

Robotics & Discrete Automation

269

(163)

298

n.a.

Total Business Areas

6,099

2,505

3,056

143%

(18)%

Corporate and Other

(385)

(927)

(1,113)

n.a.

Intersegment elimination

(5)

n.a.

Total

5,718

1,593

1,938

259%

(18)%

In 2021 and 2020, 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)

2021

2020

2019

Interest and dividend income

Interest and other finance expense

(148)

(240)

(215)

Losses from extinguishment of debt

—

(162)

—

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 in 2020 totaling $162 million

(see “Note 12 - Debt” to our Consolidated Financial Statements)

The reduction of outstanding debt from

these public tenders as well as maturities of bonds in both 2021

and 2020 reduced “Interest and other finance

expense” by approximately $70 million compared to 2020.

This was partially offset by higher interest

expense

for income tax related contingencies and the elimination

of the allocation of interest expense to discontinued

operations subsequent to the divestment of the Power

Grids business.

Non-operational pension (cost) credit

A non-operational pension credit of $166 million was recorded

in 2021 compared to a $401 million cost in

2020. Non-operational pension credits primarily result

from higher expected returns

on plan assets compared

to interest costs

on benefit obligations. The net cost in 2020 was

mainly due to charges of $520 million for

settlements of certain international pension plans (see “Note 17

- Employee benefits” to our Consolidated

Financial Statements).

Income tax expense

($ in millions)

2021

2020

2019

Income from continuing operations before taxes

5,787

841

1,862

Income tax expense

(1,057)

(496)

(772)

Effective tax rate for the year

18.3%

59.0%

41.5%

In 2021, the effective tax rate decreased from 59.0

percent in 2020 to 18.3 percent primarily due to specific

items which increased the effective tax rate in

2020. In 2020, the income tax rate was higher by 9 percent

due to the impairment of non-deductible goodwill, 10

percent due to non-deductible charges relating to the

settlement of certain defined benefit pension plans

and 5 percent due to losses from extinguishment of debt

which were incurred in jurisdictions

with a full valuation allowance.

In 2021, the tax impacts related to the sale

of the Dodge business reduced the effective tax

rate by approximately 5 percent.

We also realized certain

benefits from internal reorganizations in anticipation

of this divestment which reduced the effective

tax rate by

a further 4 percent.

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, compared to

2020, Income from continuing operations, net of tax,

increased by $4,385 million to $4,730 million in 2021.

Income from discontinued operations, net of tax

Income (loss) from discontinued operations, net of tax,

in 2021, 2020 and 2019 was as follows:

($ in millions)

2021

2020

2019

Total

revenues

—

4,008

9,037

Total

cost of sales

—

(3,058)

(6,983)

Gross profit

—

950

2,054

Expenses

(18)

(808)

(1,394)

Change to net gain recognized on sale of the Power Grids business

(65)

5,141

—

Income (loss) from operations

(83)

5,282

660

Net interest income (expense) and other finance expense

(5)

(61)

Non-operational pension (cost) credit

—

(94)

Income (loss) from discontinued operations before taxes

(81)

5,182

605

Income tax

(322)

(167)

Income (loss) from discontinued operations, net of tax

(80)

4,860

438

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, we also have 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

(loss) from discontinued operations, net of tax.

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. Certain amounts included

in the net gain are estimated or otherwise

subject to change in value and, as a result, we have recorded

additional adjustments in 2021, primarily due to

the impacts of the final purchase price settlement agreed with

Hitachi and net foreign currency losses on

certain obligations. We may record additional

adjustments in future periods to the gain which are not

expected to have a material impact on the Consolidated Financial

Statements.

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. Income

from discontinued

operations for 2020 included income from operations,

before tax, of $5,182 million. In 2020, we recorded

$322 million as income tax expense within discontinued operations

which included $262 million in Income

tax 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, compared to 2020, Net

income attributable to ABB decreased by

$600 million to $4,546 million in 2021.

Earnings per share attributable to ABB shareholders

(in $)

2021

2020

2019

Basic earnings per share attributable to ABB shareholders:

Income from continuing operations, net of tax

2.31

0.14

0.49

Income (loss) from discontinued operations, net of tax

(0.04)

2.30

0.19

Net income

2.27

2.44

0.67

Diluted earnings per share attributable to ABB shareholders:

Income from continuing operations, net of tax

2.29

0.14

0.49

Income (loss) from discontinued operations, net of tax

(0.04)

2.29

0.19

Net income

2.25

2.43

0.67

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 were as follows:

% Change

($ in millions)

2021

2020

2019

2021

2020

Orders

14,381

11,884

13,050

21%

(9)%

Order backlog at December 31,

5,458

4,358

4,488

25%

(3)%

Revenues

13,187

11,924

12,728

11%

(6)%

Income from operations

1,841

1,335

1,049

38%

27%

Operational EBITA

2,121

1,681

1,688

26%

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 partially on

management estimates.

In 2021, orders increased 21 percent (18 percent in local

currencies) as demand improved across most end-

user segments and markets in both short-cycle and

long-cycle businesses. Although global economic output

recovered during the year and is now above the pre-pandemic

level of 2019, growth was geographically

uneven, largely due to diverse ongoing pandemic impacts,

especially in emerging economies. Demand in the

buildings segment, the Electrification Business Area’s

largest end-user segment,

was robust with strong

growth in the residential market and recovery of the non-residential

building sector with increasing

investments in commercial and healthcare. Substantial

growth continues in the e-mobility segment along with

strong growth in food and beverage, utilities,

renewables and data centers.

Additionally, demand

in the oil

and gas segment increased following higher oil prices.

The geographic distribution of orders for our Electrification Business

Area was as follows:

($ in millions)

2021

2020

2019

Europe

5,022

4,149

4,281

The Americas

5,199

4,033

4,653

of which: United States

3,891

3,065

3,501

Asia, Middle East and Africa

4,160

3,702

4,116

of which: China

2,141

1,819

1,885

Total

14,381

11,884

13,050

In 2021, orders increased in all regions. Orders in the

Americas increased 29 percent (28 percent in local

currencies), with strong growth in Mexico, Canada and

in the U.S.

Orders in Europe increased 21 percent

(18 percent in local currencies) with widespread demand

pickup across the region including key markets such

as Germany and Italy.

Demand in Asia, Middle East and Africa increased 12 percent

(8 percent in local

currencies) with China and India contributing strongly despite

continuing pandemic-related challenges.

Order backlog

In 2021, the order backlog increased 25 percent (29 percent

in local currencies). The order backlog benefited

from the strong order intake, but also reflected execution challenges

caused by material shortages,

transportation constraints as well as pandemic-related

production pressures

in some local markets.

Revenues

In 2021, revenues increased 11

percent (8 percent in local currencies). Revenues increased

in all Divisions

reflecting widespread market recovery across all regions

however growth was hampered by component

shortage and logistic challenges, particularly for the project

business.

Revenue growth in short-cycle

businesses was higher than in long-cycle businesses, reflecting some

customer stockpiling. Pricing actions

taken to mitigate increasing material and transportation

costs

also contributed to the higher revenue level.

The revenue growth rate was led by the E-mobility Division

mirroring the very high demand in this segment.

There was also double-digit revenue growth in the Installation

Products Division reflecting demand recovery

in the U.S. and Canada, as well as in the Smart Power

Division. Revenue growth was solid for the Smart

Buildings Division, whereas revenues grew more modest

ly for the Distribution Solutions and Power

Conversion Divisions.

The geographic distribution of revenues for our Electrification

Business Area was as follows:

($ in millions)

2021

2020

2019

Europe

4,628

4,190

4,251

The Americas

4,503

4,093

4,635

of which: United States

3,322

3,115

3,555

Asia, Middle East and Africa

4,056

3,641

3,842

of which: China

2,110

1,858

1,749

Total

13,187

11,924

12,728

In 2021, revenues in the Americas increased 10 percent (9

percent in local currencies) led by a strong

recovery in Canada and Mexico, while revenues in the U.S. recorded

high single-digit growth.

Revenues

increased 11 percent (7

percent in local currencies) in Asia, Middle East and

Africa, driven by growth in China

and India. Revenues in Europe increased 10 percent (8 percent

in local currencies) reflecting widespread

growth across the region, including key markets such as Germany

and Italy.

Income from operations

In 2021, income from operations increased 38 percent,

supported by higher revenues. Pricing actions across

the product businesses and the benefits of savings realized

from ongoing restructuring and cost savings

programs also positively influenced the income from operations.

Restructuring related expenses and

implementation costs

in our operating Divisions were lower in 2021 than in

2020, mainly as the integration of

GEIS is nearing completion. These positives were partially

dampened by higher commodity prices in 2021, as

well as increased costs

for transportation and logistics. The income from operations

was burdened by higher

personnel expenses driven by a ramp-up of manufacturing capacity

to meet higher demand. There was also

negative comparable impact from the discontinuance of

various pandemic-related government support

programs that were more significant in 2020 compared

to 2021. Changes in foreign currencies, including the

impacts from FX/commodity timing differences summarized

in the table below, positively

impacted the

income from operations by approximately 1 percentage point.

Operational EBITA

The reconciliation of Income from operations to Operational

EBITA for the Electrification

Business Area was

as follows:

($ in millions)

2021

2020

2019

Income from operations

1,841

1,335

1,049

Acquisition-related amortization

117

115

Restructuring, related and implementation costs

145

112

Changes in obligations related to divested businesses

—

Changes in pre-acquisition estimates

(6)

Gains and losses from sale of businesses

(42)

Fair value adjustment on assets and liabilities held for sale

—

421

Favorable resolution of an uncertain purchase price adjustment

(5)

(36)

(92)

Acquisition-

and divestment-related expenses and integration costs

119

Certain other non-operational items

—

FX/commodity timing differences in income from operations

(21)

(19)

Operational EBITA

2,121

1,681

1,688

In 2021, Operational EBITA

increased 26 percent (20 percent excluding the impact

from changes in foreign

currency exchange rates) compared to 2020, primarily 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)

2021

2020

2019

2021

2020

Orders

7,616

6,574

6,782

16%

(3)%

Order backlog at December 31,

3,749

3,320

2,967

13%

12%

Revenues

6,925

6,409

6,533

(2)%

Income from operations

3,276

989

1,009

231%

(2)%

Operational EBITA

1,183

1,075

1,082

10%

(1)%

Orders

In 2021, orders increased 16 percent (13 percent in

local currencies) compared to 2020. Order development

had a strong performance across most of the market segments

and Divisions. The Business Area benefited

from high demand in food and beverage, HVACR

(heating, ventilation,

air conditioning and refrigeration),

chemicals, metals, pulp and paper,

cement, mining, wind and water segments. Oil and

gas demand was flat

but showed signs of recovery due to higher oil prices

and emerging trends.

The geographic distribution of orders for our Motion Business

Area was as follows:

($ in millions)

2021

2020

2019

Europe

2,617

2,219

2,355

The Americas

2,677

2,276

2,437

of which: United States

2,200

1,897

2,048

Asia, Middle East and Africa

2,322

2,079

1,990

of which: China

1,232

1,077

987

Total

7,616

6,574

6,782

In 2021, orders increased 18 percent (14 percent in local

currencies) in Europe as orders increased mainly in

Switzerland, Spain, Italy,

Austria, Turkey and France partially

offset by a decrease in Poland. In Asia, Middle

East and Africa, orders increased 12 percent (7 percent in local

currencies) driven by growth in China and

India. In the Americas, orders increased 18 percent (17

percent in local currencies) as a result of recoveries

in the U.S., Canada and Mexico.

Order backlog

The order backlog in 2021 increased 13 percent (19 percent

in local currencies) compared to 2020. The order

backlog increased across most Divisions, driven by both

short and long-cycle order growth.

Revenues

In 2021, revenues increased 8 percent (5 percent in local currencies)

compared to 2020 and were higher

across all Divisions, recovering from the pandemic-related decline

in 2020. Revenues also reflected strong

execution from the order backlog as well as resilience in the

short-cycle business.

The geographic distribution of revenues for our Motion

Business Area was as follows:

($ in millions)

2021

2020

2019

Europe

2,258

2,196

2,162

The Americas

2,396

2,225

2,378

of which: United States

1,974

1,867

2,009

Asia, Middle East and Africa

2,271

1,988

1,993

of which: China

1,256

1,040

955

Total

6,925

6,409

6,533

In 2021, revenues in Europe increased 3 percent (flat

in local currencies) driven by increases in Turkey,

Germany, Poland, Switzerland,

Austria and Spain while sales volumes declined in

Sweden, Estonia, Italy and

Finland. In Asia, Middle East and Africa revenues increased

14 percent (9 percent in local currencies)

compared to 2020 driven by strong revenue growth in China, India

and Australia. In the Americas, revenues

increased 8 percent (7 percent in local currencies) on

higher revenues in the U.S., particularly in the book-

and-bill business in the NEMA Motors Division. The Mechanical

Power Transmission Division also reported

strong order growth prior to its divestment in November

2021.

Income from operations

In 2021, income from operations increased 231 percent

compared to 2020 and included the gain of

$2,195 million

recognized on sale of the Mechanical Power Transmission

Division. Excluding this gain,

income from operations increased 9 percent driven primarily

by higher revenues. The higher business

volumes reflect the recovery from the pandemic-related slowdown

in 2020. Profitability was also supported by

active price management, continued cost discipline, a focus

on operational performance and a positive

divisional mix which offset increasing commodities

and freight expenses and other cost inflation. Changes

foreign currencies, including the impacts from FX/commodity

timing differences summarized in the

table

below, had no significant impact

on the change in income from operations.

Operational EBITA

The reconciliation of Income from operations to Operational

EBITA for the Motion

Business Area was as

follows:

($ in millions)

2021

2020

2019

Income from operations

3,276

989

1,009

Acquisition-related amortization

Restructuring, related and implementation costs

Gains and losses from sale of businesses

(2,196)

—

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

1,183

1,075

1,082

In 2021, Operational EBITA

increased 10 percent (6 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.

Process Automation Business Area

The financial results of our Process Automation Business

Area were as follows:

% Change

($ in millions)

2021

2020

2019

2021

2020

Orders

6,779

6,144

6,432

10%

(4)%

Order backlog at December 31,

6,079

5,805

5,077

14%

Revenues

6,259

5,792

6,273

(8)%

Income from operations

713

344

700

107%

(51)%

Operational EBITA

801

451

732

78%

(38)%

Orders

In 2021, orders increased 10 percent (7 percent in

local currencies) compared to 2020. Orders grew double

digit in almost all Divisions except the Marine & Ports

Division where orders declined

due to the receipt of a

large capital investment order in 2020. Markets recovered to

pre-pandemic levels and customers made

capital and operational investments

across almost all market segments. Demand for products,

systems and

services improved in the process-related segments like

mining, pulp and paper, chemicals,

and oil and gas.

Demand for products and services recovered in the power

generation market and operational investments

improved in the marine sector.

The geographic distribution of orders for our Process Automation

Business Area was as follows:

($ in millions)

2021

2020

2019

Europe

2,614

2,365

2,599

The Americas

1,645

1,360

1,627

of which: United States

1,047

770

995

Asia, Middle East and Africa

2,520

2,419

2,206

of which: China

821

590

631

Total

6,779

6,144

6,432

Orders in Europe increased 11

percent (6 percent in local currencies) driven by strong

orders in the process-

related businesses and increases in service activity.

In local currencies, orders increased in Germany,

Norway, France, Russia

and the United Kingdom while orders decreased in Sweden

and Italy. Orders

Asia, Middle East and Africa increased 4 percent (remained

flat in local currencies). Higher orders in China,

India and Australia were partly offset primarily

by the lower order volumes in South Korea and Singapore

due

to large orders booked in 2020. In the Americas, orders

increased 21 percent (20 percent in local currencies)

supported by strong investments in the U.S. across all Divisions.

Order backlog

In 2021, the order backlog increased 5 percent (10 percent

in local currencies) compared to 2020. Strong

order growth drove significant increases in order backlog for

all Divisions except the Marine & Ports Division

which decreased mainly on lower orders and strong backlog

execution.

Revenues

In 2021, revenues increased 8 percent (5 percent in local currencies)

compared to 2020. Revenues

increased in all Divisions, reflecting strong execution

of the order backlog in the long-cycle businesses,

partially offset by challenges from supply chain constraints.

The geographic distribution of revenues for our Process

Automation Business Area was as follows:

($ in millions)

2021

2020

2019

Europe

2,439

2,395

2,494

The Americas

1,439

1,329

1,595

of which: United States

836

808

950

Asia, Middle East and Africa

2,381

2,068

2,184

of which: China

742

629

612

Total

6,259

5,792

6,273

In 2021, revenues were 15 percent higher (11

percent in local currencies) in Asia, Middle East and

Africa,

8 percent higher (7 percent in local currencies) in the

Americas and 2 percent higher (decrease of 2 percent

in local currencies) in Europe compared to 2020. In Asia,

Middle East and Africa, the Marine & Ports Division

registered strong growth in South Korea and China while

revenues also increased in the United Arab

Emirates and South Africa in the Energy Industries Division.

In Europe, revenues were higher in Russia and

the United Kingdom while lower in France, Finland and

Germany. In the

Americas, revenues were higher in

the U.S., Brazil and Canada while revenues declined

in Mexico.

Income from operations

In 2021, income from operations increased 107 percent

compared to 2020 primarily due to the significant

charges recorded in 2020 for the Kusile power generation

project in South Africa, legacy projects in India and

other significant restructurings. This was partially offset

by higher divestment-related expenses, mainly

related to the planned exit of the Turbocharging

Division. Excluding these items, income from operations

improved significantly driven by volume, strong execution, savings

from supply and operation excellence

initiatives and continued overhead cost structure improvements.

Changes in foreign currencies, including the

effect from changes in the FX/commodity timing

differences summarized in the table below,

decreased

income from operations by 3 percent compared to 2020.

Operational EBITA

The reconciliation of Income from operations to Operational

EBITA for the Process

Automation Business

Area was as follows:

($ in millions)

2021

2020

2019

Income from operations

713

344

700

Acquisition-related amortization

Restructuring, related and implementation costs

125

Gains and losses from sale of businesses

(13)

—

Acquisition-

and divestment-related expenses and integration costs

—

Certain other non-operational items

FX/commodity timing differences in income from operations

(25)

Operational EBITA

801

451

732

In 2021, Operational EBITA

increased 78 percent (70 percent excluding the

impacts from changes in foreign

currencies) compared to 2020. The change is 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)

2021

2020

2019

2021

2020

Orders

3,844

2,868

3,260

34%

(12)%

Order backlog at December 31,

1,919

1,403

1,356

37%

Revenues

3,297

2,907

3,314

13%

(12)%

Income (loss) from operations

269

(163)

298

n.a.

(155)%

Operational EBITA

355

237

393

50%

(40)%

Orders

In 2021, orders increased 34 percent (29 percent in

local currencies). Demand levels in both the Robotics

and Machine Automation Divisions recovered in 2021

after 2020 was impacted by the COVID-19 pandemic.

Commencing in the second quarter,

both Divisions reported significant increases

in demand, including from

traditional automotive and automotive-related sectors,

general industry,

machine builders and electronics

market sectors.

Orders continued to grow in the second half of the year

benefiting from larger investments by

customers in the machine automation sector.

The geographic distribution of orders for our Robotics

& Discrete Automation Business Area was as follows:

($ in millions)

2021

2020

2019

Europe

1,978

1,424

1,717

The Americas

530

388

457

of which: United States

371

277

310

Asia, Middle East and Africa

1,336

1,056

1,086

of which: China

976

781

729

Total

3,844

2,868

3,260

In 2021, orders increased in all regions. Orders in Europe

increased 39 percent (35 percent in local

currencies) driven by increases

in demand in Germany,

Italy, Netherlands

and Austria.

Orders in the

Americas increased 37 percent (35 percent in local currencies)

compared to 2020, driven by the strong order

intake in the U.S. in both Divisions.

Orders in Asia, Middle East and Africa increased 27

percent (20 percent

in local currencies) with strong demand in China and India

Order backlog

In 2021, the order backlog increased 37 percent (43 percent

in local currencies) compared to 2020.

The order

backlog increased in the Machine Automation Division, but

was negatively impacted by our selectivity of

orders in the automotive segment partially offset by

positive momentum in the general industry and consumer

segments.

Revenues

In 2021, revenues increased 13 percent (9 percent in local currencies)

compared to 2020. Revenues

increased in both Divisions due to higher volumes from

book-and-bill business,

however growth was

hampered by component shortages (primarily related to

semiconductors), logistic challenges which triggered

longer lead times for some customer deliveries and a tight

labor market. Service revenues also increased,

driven by strong demand from all industry segments but especially

from general industry.

The geographic distribution of revenues for our Robotics

& Discrete Automation Business Area was as

follows:

($ in millions)

2021

2020

2019

Europe

1,582

1,481

1,680

The Americas

441

389

464

of which: United States

309

273

293

Asia, Middle East and Africa

1,274

1,037

1,170

of which: China

950

719

829

Total

3,297

2,907

3,314

In 2021, revenues increased in all regions. The revenues

from Asia, Middle East and Africa increased

23 percent (17 percent in local currencies) compared to

2020 due to higher book-and-bill revenues and a

higher level of execution of automotive segment orders,

particularly in China. Revenues in Europe increased

7 percent (4 percent in local currencies) with Austria and

Spain performing strongly while revenues declined

in the United Kingdom and France. In the Americas, revenues

increased 13 percent (12 percent in local

currencies) due to strong demand in the U.S. in both

Divisions after recovery from the low levels in 2020.

Income (loss) from operations

In 2021, the Business Area recorded income from operations

of $269 million compared to a loss of

$163 million in 2020, as the improvement in underlying

operating performance in 2020 was more than offset

by the $290 million impairment of goodwill recorded in the Machine

Automation Division in 2020. The

operational performance in 2021 reflected improved sales

volumes, a favorable change in the revenue mix

and the benefit of cost reduction measures taken in 2020.

Changes in foreign currencies, including the

impacts from FX/commodity timing differences summarized

in the table below, positively

impacted the

income from operations by approximately 6 percent.

Operational EBITA

The reconciliation of Income (gain) from operations to

Operational EBITA for

the Robotics & Discrete

Automation Business Area was as follows:

($ in millions)

2021

2020

2019

Income (loss) from operations

269

(163)

298

Acquisition-related amortization

Restructuring, related and implementation costs

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

(5)

Operational EBITA

355

237

393

In 2021, Operational EBITA

increased 50 percent (41 percent excluding the impact

from changes in foreign

currency exchange rates) compared to 2020, 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)

2021

2020

2019

Corporate headquarters and stewardship

(399)

(334)

Income (loss) from equity-accounted companies

(102)

(68)

Other corporate costs

(32)

(63)

Restructuring

(5)

(46)

(60)

Fair value adjustment on equity securities

(5)

Corporate brand income from Hitachi Energy

—

Corporate real estate

Costs for divestment of Power Grids

—

(86)

(141)

Corporate research and development

—

(49)

(185)

Digital program costs

—

(45)

(33)

OS implementation costs

—

(24)

(83)

Stranded corporate costs

—

(40)

(225)

Divested businesses and other non-core activities

(67)

(342)

(164)

Total Corporate and Other

(381)

(912)

(1,113)

In 2021, the net loss from operations within Corporate

and Other decreased by $531 million to $381 million

compared to 2020. This reflected several items including an elimination

of stranded corporate costs and the

high costs in 2020 related to the divestment of the Power

Grids business. Additionally,

corporate costs in

2021 reflect the ending in 2020 of the remaining corporate research

and development and digital program

costs, which were eliminated as part of the ABB Way

program. In 2021, losses in non-core businesses

decreased compared to 2020 as projects were completed and certain

large losses were not repeated. This

was partially offset by a higher loss from equity

-accounted companies in 2021 compared to 2020 while

corporate brand income of $89 million was higher than

2020 for the use of the ABB brand by the Hitachi

Energy Ltd. joint venture.

Corporate

In 2021, corporate headquarters and stewardship costs

increased compared to 2020, mainly driven by

residual unallocated costs for the Global Business Services

operations and continuous implementation of

ABB Way.

Our investment in the Hitachi Energy Ltd. joint venture

is accounted for using the equity method and

presented as Income (loss) from equity-accounted companies. The

amount in 2021 is for a full year

compared to six months in 2020 and primarily represents

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 in 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 Energy

Ltd).

During 2021, we recorded net revaluation gains totaling

$94 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 Energy Ltd.,

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 Energy Ltd.

Corporate real estate primarily includes income from property rentals

and gains from the sale of real estate

properties. In 2021, income from operations in corporate

real estate included gains from the sale of real

estate properties of $22 million compared to $27 million in

2020.

Other corporate costs consists of operational costs of our

Corporate Treasury Operations and other

minor

items including elimination of changes to eliminated internal

profit of Inventory.

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 2021 and 2020, the amounts represent charges

and losses relating to divested businesses and the

winding down of the remaining EPC projects. In 2021,

we recorded losses

of $67 million which were mostly

related to the full train retrofit business but also related

to legacy EPC projects and the divested oil & gas

EPC business. 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.

At December 31, 2021, 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

From December 2018 to December 2020, we executed

a two-year restructuring program with the objective of

simplifying our business model and structure through the implementation

of a new organizational structure

driven by our 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 of December 31, 2020, we had 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 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

December 31, 2020

Electrification

Motion

Process Automation

(1)

Robotics & Discrete Automation

Corporate and Other

114

Total

149

303

(1)

Formerly named

the Industrial

Automation

operating

segment.

As of December 31, 2020, ABB completed and had incurred

substantially all costs related to the OS program.

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 at December

31, 2020, occurred in 2021 and were primarily for

employee severance benefits.

—

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 2021, we also received

significant funds from the sale of the Mechanical Power

Transmission Division, which was completed

November 1, 2021.

Our net debt/cash is shown in the table below:

December 31, ($ in millions)

2021

2020

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

1,384

1,293

Long-term debt

4,177

4,828

Cash and equivalents

(4,159)

(3,278)

Restricted cash - current

(30)

(323)

Marketable securities and short-term investments

(1,170)

(2,108)

Restricted cash - non-current

(300)

Net debt (cash)

(defined as the sum of the above lines)

(98)

112

During 2021, we benefited from a significant increase in

cash provided by operating activities compared to

2020 and cash proceeds from sales of businesses.

A significant amount of these funds was paid to

shareholders during 2021 through both the payment of the

annual dividend and the continuation of share

buyback activities.

During 2021, we changed from a net debt position of $11

million at December 31, 2020, to a net cash

position of $98 million at December 31, 2021. Approximately

$170 million of this movement is due to

movements in foreign exchange rates with several other

significant movements mostly offsetting over the

year. In 2021, we received

net proceeds of $2,862 million for the sale of the Dodge business

later in the year.

We generated cash flows from operating activities

during 2021 of $3,330 million and sold treasury stock

relation to our employee share plans for $826 million. Mostly offsetting

these items were amounts for

purchases of treasury shares of $3,708 million,

including $2,680 million relating to the announced buyback

of our shares,

as well as $1,726 million for the payment of the dividend

to our shareholders.

We made net

purchases of property,

plant and equipment and intangible assets of $727

million and made payments of

dividends to noncontrolling shareholders totaling $98

million. See “Financial position”, “Investing activities”

and “Financing activities” for further details.

Our Corporate Treasury Operations is responsible

for providing a range of treasury management services

our group companies, including investing cash in excess

of current business requirements. At December 31,

2021 and 2020, the proportion of our aggregate “Cash

and equivalents” (including restricted cash) and

“Marketable securities and short

‑

term investments” managed by our Corporate Treasury

Operations

amounted to approximately 44 percent and 47 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 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

40 percent of our cash and cash

equivalents held at December 31, 2021, was in U.S. dollars,

while the most significant foreign currency cash

and cash equivalents were held in Chinese renminbi (17

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

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 “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)

2021

2020

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

1,384

1,293

Long-term debt:

Bonds

3,984

4,580

Other long-term debt

193

248

Total debt

5,561

6,121

The increase in short

‑

term debt in 2021 was due to the reclassification to

short-term of the USD 1,250 million

2.875% Notes mostly offset by the repayment at maturity

of both the USD 650 million 4.0% Notes and the

CHF 350 million 2.25% Bonds.

At December 31, 2021, Long-term debt decreased $651

million compared to the end of 2020 due to the

reclassification to short-term described above offset

partly by the issuance in 2021 of EUR 800 million

0% Notes.

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 convert

fixed rate debt into floating rate liabilities. After considering

the effects of interest rate swaps, at December 31,

2021, the effective average interest rate

on our floating

rate long

‑

term debt (including current maturities) of $3,598

million and our fixed rate long

‑

term debt (including

current maturities) of $1,885 million was 0.3 percent and

3.1 percent, respectively.

This compares with an

effective rate of 0.2 percent for floating rate long

‑

term debt of $3,330 million and 3.3 percent for fixed rate

long

‑

term debt of $2,638 million at December 31, 2020.

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 2021 we exercised our

option to further extend the

maturity to 2026. No amount was drawn under the facility at

December 31, 2021 and 2020. 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, 2021, 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, 2021, no amount was outstanding under

the $2 billion program in the United States,

compared to $32 million outstanding at December 31,

2020.

At December 31, 2021 and 2020, 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, 2021, three bonds (principal amount of

EUR 700 million, due in 2023,

principal amount of EUR 750 million, due in 2024,

and principal amount of

EUR 800 million, due in 2030)

having a combined carrying amount of $2,522 million were

outstanding under

the program. The carrying

amount of the bonds outstanding under the program at December

31, 2020, was

$1,821 million.

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, 2021 and 2020, our long

‑

term debt was rated A3 by Moody’s and

currently with a Stable

outlook. At December 31, 2021 and 2020, our long-term

debt was rated A- by Standard & Poor’s and

currently with a Stable outlook.

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, Malaysia, the

Philippines, the Russian Federation, South

Africa, South Korea, Taiwan

(Chinese Taipei),

Thailand and Turkey.

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, 2021 and 2020, 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 $2,074

million and

$1,751 million, respectively.

During 2021, 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

closely monitor the situation to ensure bank counterparty

risks are minimized.

—

Financial position

Balance sheets

December 31, ($ in millions)

2021

2020

% Change

Current assets

Cash and equivalents

4,159

3,278

27%

Restricted cash

323

n.a.

Marketable securities and short-term investments

1,170

2,108

(44)%

Receivables, net

6,551

6,820

(4)%

Contract assets

990

985

Inventories, net

4,880

4,469

Prepaid expenses

206

201

Other current assets

573

760

(25)%

Current assets held for sale and in discontinued operations

136

282

(52)%

Total current assets

18,695

19,226

(3)%

For a discussion on Cash and equivalents, see sections

“Liquidity and Capital Resources—Principal sources

of funding” and “Cash flows” for further details.

In 2021, the amount of cash subject to short-term restrictions

decreased as restrictions on cash of

$290 million were removed upon ABB completing certain obligations

in connection with the sale of Power

Grids to Hitachi. See “Note 3 - Discontinued operations”

to our Consolidated Financial Statements.

Marketable securities and short-term investments decreased

in 2021. The reduction primarily reflects lower

amounts placed in money market funds classified as

equity securities (see “Note 5 - Cash and equivalents,

marketable securities and short-term investments” to our

Consolidated Financial Statements).

Receivables, net, decreased 4 percent primarily due to

changes in foreign currencies. In local currency,

Receivables, net, remained flat.

Contract assets increased 1 percent (5 percent in local

currencies). The increase reflects higher levels in the

Process Automation and Motion Business Areas. This

was partially offset by lower levels in the non-core

businesses and in the Robotics & Discrete Automation Business

Area.

Inventories, net, increased 9 percent (15 percent in local

currencies).

The increase reflects a significant build-

up of raw materials and some increases in the price of components.

Supply chain challenges and shortages

in the availability of some items have created the need

to stockpile certain key components and also have

resulted in some delays in completing and delivering finished

goods.

Current assets held for sale and in discontinued operations

decreased to $136 million from $282 million.

These amounts primarily relate to working capital for certain

contracts which remain with ABB and are being

executed for the direct benefit of the Power Grids business.

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)

2021

2020

% Change

Current liabilities

Accounts payable, trade

4,921

4,571

Contract liabilities

1,894

1,903

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

1,384

1,293

Current operating leases

230

270

(15)%

Provisions for warranties

1,005

1,035

(3)%

Other provisions

1,386

1,519

(9)%

Other current liabilities

4,367

4,181

Current liabilities held for sale and in discontinued operations

381

644

(41)%

Total current liabilities

15,568

15,416

Accounts payable, trade, increased 8 percent (11

percent in local currencies) due primarily to higher

inventory purchases.

The increase in short-term debt in 2021 was due to the

reclassification to short-term of the USD 1,250 million

2.875% Notes partially offset by the repayment at

maturity of both the USD 650 million 4.0% Notes and

the

CHF 350 million 2.25% 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 decreased 3 percent (remained

flat in local currencies). For details on the change in

the Provisions for warranties, see “Note 15 - Commitments

and contingencies” to our Consolidated Financial

Statements.

Current liabilities held for sale and in discontinued operations

decreased to $381 million from $644 million.

These amounts primarily relate to certain working capital

balances of the Power Grids business as described

above as well as amounts recorded for certain guarantees

provided for the benefit of Power Grids.

December 31, ($ in millions)

2021

2020

% Change

Non-current assets

Restricted cash, non-current

300

Property, plant and equipment, net

4,045

4,174

(3)%

Operating lease right-of-use assets

895

969

(8)%

Investments in equity-accounted companies

1,670

1,784

n.a.

Prepaid pension and other employee benefits

892

360

148%

Intangible assets, net

1,561

2,078

(25)%

Goodwill

10,482

10,850

(3)%

Deferred taxes

1,177

843

40%

Other non-current assets

543

504

Total non-current assets

21,565

21,862

(1)%

Restricted cash at December 31, 2021 and 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 2021, Property,

plant and equipment, net, decreased

3 percent (increased 1 percent in local currencies).

The sale of the Mechanical Power Transmission

Division decreased Property,

plant and equipment, net, by

3 percent.

In 2021, Goodwill decreased 3 percent (2 percent in local currencies)

The sale of the Mechanical Power

Transmission Division reduced Goodwill

by 3 percent. Acquisitions of businesses increased Goodwill

1 percent.

Intangible assets, net, decreased 25 percent (22 percent

in local currencies). The sale of the Mechanical

Power Transmission Division reduced Intangible

assets, net, by 10 percent. Acquisitions of businesses

increased Intangible assets, net, by 3 percent. 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, 2021 and 2020, primarily

represents our remaining 19.9 percent interest in the

Hitachi Energy joint venture. For additional information

on investments

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

148 percent (150 percent in local currencies). For

additional information on Pension and employee benefits

see “Note 17 - Employee benefits” to our

Consolidated Financial Statements.

In 2021, Deferred taxes, increased 40 percent (50 percent

in local currencies). For details on deferred tax

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

Financial Statements.

December 31, ($ in millions)

2021

2020

% Change

Non-current liabilities

Long-term debt

4,177

4,828

(13)%

Non-current operating leases

689

731

(6)%

Pension and other employee benefits

1,025

1,231

(17)%

Deferred taxes

685

661

Other non-current liabilities

2,116

2,025

Non-current liabilities held for sale and in discontinued operations

197

(78)%

Total non-current liabilities

8,735

9,673

(10)%

Long-term debt decreased 13 percent. This decrease

reflects the reclassification to short-term described

above offset mostly by the issuance in 2021 of EUR

800 million 0% Notes. Long-term debt also decreased

6 percent due to changes in currency 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

more than 12 months.

Pension and employee benefits decreased 17 percent (12 percent

in local currencies).

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 balance decreased compared to 2020

due to reclassification to current of certain

amounts expected to be paid within the next year.

The remaining amount at December 31,

2021, 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)

2021

2020

2019

Net cash provided by operating activities

3,330

1,693

2,325

Net cash provided by (used in) investing activities

2,307

6,760

(815)

Net cash used in financing activities

(4,968)

(8,175)

(1,383)

Effects of exchange rate changes on cash and equivalents

(81)

(28)

Net change in cash and equivalents and restricted cash

588

357

Operating activities

($ in millions)

2021

2020

2019

Net income

4,650

5,205

1,528

Loss (income) from discontinued operations, net of tax

(4,860)

(438)

Depreciation and amortization

893

915

961

Total

adjustments to reconcile net income to net cash provided by

operating activities (excluding depreciation and amortization)

(2,593)

263

220

Total

changes in operating assets and liabilities

308

352

(372)

Net cash provided by operating activities — continuing operations

3,338

1,875

1,899

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

operations

(8)

(182)

426

Cash flows from operating activities in continuing operations

in 2021 provided net cash of $3,338

million, an

increase of 78 percent compared to 2020. In 2021, we

had significantly higher cash effective net

income (i.e.

net income from continuing operations adjusted for depreciation,

amortization and other non-cash items). The

higher cash effective net income is due partly to the negative

impacts in 2020 of payments made to settle

certain international pension plans. The higher amount

in 2021 was also driven by generally higher business

volumes and higher profitability.

In 2021, changes in operating assets and liabilities

positively impacted cash

flows primarily due to the timing of payments of higher

accrued liabilities, including employee bonuses. Cash

paid for income taxes increased to $1,292 million from

$905 million, reflecting higher current income taxes,

including tax impacts from the sales of businesses. 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.

In 2021, there were no significant cash flows from operating

activities of discontinued operations while in

2020, there were net outflows

of $182 million. The amount in 2020 primarily reflects

the cash flows of the

Power Grids business in the first half of the year.

Investing activities

($ in millions)

2021

2020

2019

Purchases of investments

(1,528)

(5,933)

(748)

Purchases of property, plant and equipment and intangible assets

(820)

(694)

(762)

Acquisition of businesses (net of cash acquired) and

increases in cost- and equity-accounted companies

(241)

(121)

(22)

Proceeds from sales of investments

2,272

4,341

749

Proceeds from maturity of investments

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

2,958

(136)

Net cash from settlement of foreign currency derivatives

(121)

138

(76)

Other investing activities

(23)

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

operations

2,671

(2,272)

(651)

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

operations

(364)

9,032

(164)

Net cash provided by investing activities for continuing

operations in 2021 was $2,671 million compared to

$2,272 million used in investing activities during 2020. In 2021,

we received proceeds of $2,958 million in

connection with sales of businesses, primarily from

the sale of the Dodge business. The amount in 2020

reflects 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 2021, we also

recorded net investing cash outflows of $121 million for

settlements of derivatives compared to net inflows

$138 million in 2020.

The following presents purchases of property,

plant and equipment and intangible assets by significant

asset

category:

($ in millions)

2021

2020

2019

Construction in progress

479

493

536

Purchase of machinery and equipment

150

134

156

Purchase of land and buildings

158

Purchase of intangible assets

Purchases of property, plant and equipment and intangible assets

820

694

762

Cash expenditures for acquisitions of businesses in 2021 primarily

reflects the amount paid to acquire ASTI.

The divestment of the solar inverters business resulted in

a net cash outflow of $143 million in 2020.

Cash flows from investing activities for discontinued operations

relates to the Power Grids business. We sold

this business in 2020 and generated net cash proceeds

of $9,168 million. Certain amounts related to the

purchase price were subject to adjustment, including the

final settlement for working capital balances. In

2021, certain elements of the purchase price were finalized and

we made payments related to the purchase

price and certain other obligations totaling $364 million.

Financing activities

($ in millions)

2021

2020

2019

Net changes in debt with maturities of 90 days or less

(83)

(587)

164

Increase in debt

1,400

343

2,406

Repayment of debt

(1,538)

(3,459)

(2,156)

Delivery of shares

826

412

Purchase of treasury stock

(3,708)

(3,048)

—

Dividends paid

(1,726)

(1,736)

(1,675)

Dividends paid to noncontrolling shareholders

(98)

(82)

(90)

Other financing activities

(41)

(49)

Net cash used in financing activities — continuing operations

(4,968)

(8,206)

(1,328)

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

operations

—

(55)

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.

In 2021, 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

and various local country borrowings.

In 2021, “Increase in debt” primarily represents the issuance

of EUR 800 million 0% Notes due 2030 and

borrowings under commercial paper programs for terms

longer than 90 days.

In 2021, “Repayment of debt”

includes the repayment at maturity of the USD 650

million 4.0% Notes and the

CHF 350 million 2.25% Bonds and repayments under

commercial paper programs for terms longer than 90

days.

“Delivery of shares” in 2021 reflects cash received from

the exercise of options in connection with our

Management Incentive Plan (resulting in a delivery of

36 million shares)

and in connection with our Employee

Share Acquisition Plan (resulting in a delivery of 1.7 million shares)

All shares were delivered out of Treasury

stock.

In 2021, “Purchase of treasury stock” reflects $2,680 million

of cash payments to purchase 78 million of our

own shares in connection with both of the announced

share buyback programs. It also reflects $1,028 million

paid to purchase 33 million shares on the open market

during 2021.

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, 2021.

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 in

future periods may vary from those presented below.

The table below summarizes certain of our cash requirements

for known contractual obligations and principal

and interest payments under our debt instruments and

purchase obligations at December 31, 2021 and the

timing thereof. For details of future operating and finance

lease payments, see “Note 14 - Leases” to our

Consolidated Financial Statements.

At December 31, 2021 ($ in millions)

Current

Non-current

Total

Long-term debt obligations

1,271

4,091

5,362

Interest payments related to long-term debt obligations

638

711

Purchase obligations

3,500

992

4,492

Total

4,844

5,721

10,565

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.

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 increase or decrease the

actual amount of our cash interest payment 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.

Purchase obligations are defined as agreements to purchase

goods and services that are enforceable and

legally binding, that specify all significant terms, including the

quantities to be purchased, price provisions and

the approximate timing of the transactions. Purchase

obligations includes procurement contracts for raw

materials, sub-contracted work, supplies and services.

Purchase obligations include amounts recorded as

well as amounts that are not recorded in the Consolidated Balance

Sheets.

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.

Maximum potential payments

(1)

December 31, ($ in millions)

2021

2020

Performance guarantees

4,540

6,726

Financial guarantees

339

Indemnification guarantees

(2)

136

177

Total

4,728

7,242

(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,

2021 and 2020, amounted to $156 million and

$135 million,

respectively,

the majority of which is included in discontinued operations

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,

2021 and 2020, the total outstanding performance

bonds aggregated to $3.6 billion and $4.3 billion, respectively,

of which $0.1 billion

and $0.3 billion,

respectively, relate to

discontinued operations. There have been no significant

amounts reimbursed to

financial institutions under these types of arrangements in 2021

and 2020.

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 Governance

Rules (which includes the governance rules 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 at

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 (2021 - 2022 board term)

Board of Directors

Chairman:

Peter R. Voser

Gunnar Brock

Jennifer Xin-Zhe Li

Vice

‑

Chairman:

Jacob Wallenberg

David Constable

Geraldine Matchett

Frederico Fleury Curado

David Meline

Lars Förberg

Satish Pai

Finance, Audit and Compliance

Committee

Governance and Nomination

Committee

Compensation

Committee

David Meline (chairman)

Peter R. Voser (chairman)

Frederico Fleury Curado (chairman)

Gunnar Brock

Lars Förberg

David Constable

Geraldine Matchett

Jennifer Xin-Zhe Li

Jennifer Xin

‑

Zhe Li

Satish Pai

Jacob Wallenberg

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 Governance Rules (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 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.

Prior to proposing new candidates for election to the

Board, checks are performed to ensure that they are independent

and that there are no conflicts of interest.

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 Governance Rules (available at

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

-governance

) state

that board members shall avoid entering into any situation

in which their personal or financial interests

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

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 external

auditors’ qualifications and independence, (4) the

performance and role of ABB’s internal audit function

and the performance of the external auditors, (5)

ABB’s

capital structure, funding requirements and financial and

risk policies, and (6) ABB’s implementation and

maintenance of an integrity program and internal controls

designed to mitigate integrity risk.

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 of 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.

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 of 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 the 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. ABB’s 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

Governance Rules (available at

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

-governance

), although waivers are

possible and subject to Board discretion. 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 (2021-2022 board term)

Board Experience

Corporate Officer

Experience

Other Business Experience

Global Experience

Country of Origin /

Nation

ality

Gender

Non

Executive

Independent

Board Member

ABB Board

Tenure (years)

Other Public

Board

Experience

CEO

CFO

Operations

Risk

Management

Sustainability

Digital /

Technology

Peter R. Voser

●

Yes

Jacob Wallenberg

●

Yes

Gunnar Brock

●

Yes

David Constable

●

CA, US

Yes

Frederico Fleury Curado

●

BR, PT

Yes

Lars Förberg

●

SE, CH

Yes

Jennifer Xin-Zhe Li

●

CN, CA

Yes

Geraldine Matchett

●

CH, UK, FR

Yes

David Meline

●

US, CH

Yes

Satish Pai

●

Yes

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 of 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.

Gunnar Brock

has been a member of ABB’s Board of

Directors since March 2018. He is 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.

He is the chief executive

officer of Fluor Corporation (U.S.), for which he

also serves

as a member of the board of directors. 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 a member

of the boards of directors of Ultrapar S.A. (Brazil) and

Transocean Ltd. (Switzerland). He was formerly

the

chief executive officer of Ultrapar S.A. and Embraer

S.A. (both 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 boards

of directors of Flex Ltd (Singapore/U.S.),

Kone Oy (Finland) and Full Truck

Alliance Co. Ltd.

(Cayman Islands/P.R.C.).

Through May 2021, she was a member 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, the chief

financial officer and a member of the managing

board of Royal DSM N.V.

(The

Netherlands).

She was previously the 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, 2021, 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

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.

2021 was an intensive year for the Board and its committees.

The table below shows the number of meetings

held during 2021 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.

2021 Board and Board Committee Meetings

Pre annual general meeting 2021

Post annual general meeting 2021

Board

Meetings and attendance

Mtg.

Conf.

Call

FACC

GNC

Mtg.

Conf.

Call

FACC

GNC

Average duration (hours)

7.5

1.5

1.25

1.75

1.4

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.

Fluor Corporation (Fluor) is an important customer of ABB.

ABB sells primarily electrical switchgears, control

systems and electrical solutions through its Electrification

and Process Automation businesses to Fluor.

David Constable is the CEO and a director of Fluor.

After reviewing the level of business with Fluor,

the Board has determined that ABB’s

business relationship

with Fluor 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 independent.

These determinations were 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. This policy is contained in the

ABB Ltd Board Governance Rules (available at

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

-governance

Information and control systems of the Board vis-à-vis the Executive Committee

Information from the Executive Committee

In accordance with the ABB Board Governance Rules

(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 Integrity Investigations and Monitoring department

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 of 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 2021 were those related to

the continuation of the COVID-19 pandemic, to

constraints in global supply chains, as well as to the preparation

for the separation of ABB’s turbocharging

business and the planned initial public offering

in Switzerland of ABB’s electric-vehicle charging

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 2021, the FACC

had 6 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, 2021)

Björn Rosengren

Chief Executive Officer

Corporate Officers

Business Area Presidents

Timo Ihamuotila

Tarak

Mehta

Chief Financial Officer

Electrification

Carolina Granat

Peter Terwiesch

Chief Human Resources Officer

Process Automation

Maria Varsellona

Morten Wierod

General Counsel

Motion

Theodor Swedjemark

Sami Atiya

Chief Communications and Sustainability 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 organizational 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, 2021):

Björn Rosengren

was appointed Chief Executive Officer and member

of the Executive Committee effective

March 2020. He is a member of the board of directors

of the World Childhood Foundation (Sweden).

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 and Hitachi Energy Ltd

(both 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.

Carolina Granat

was appointed Chief Human Resources Officer

and member of the Executive Committee

effective January 2021. She joined ABB in 2020

as Head of People Development. Prior to that, she was

globally responsible for human resources at the Machining

Solutions business area of Sandvik AB (Sweden).

Ms. Granat was born in 1972 and is a Swedish citizen.

Maria Varsellona

was appointed General Counsel and member of the

Executive Committee effective

November 2019. From 2014 to 2019 she was the Chief

Legal Officer of Nokia Corporation (Finland)

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 (Sweden).

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. As per March 2021

his title was amended to Chief Communications and

Sustainability

Officer and member of the Executive Committee.

He is a member of the board of directors of the

Swedish

Swiss Chamber of Commerce and is the chairman of the ABB

Jürgen Dormann Foundation.

Mr. Swedjemark

acted as interim Head of Corporate Communications

& Public Affairs from March 2020 through

August 2020.

Prior to that, he assumed the role of Chief of Staff

in 2017, later adding group responsibility for government

relations and public affairs. During 2016, Mr.

Swedjemark 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 is a member of the board of directors of

Prysmian S.p.A. (Italy). 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. and Swiss citizen.

Peter Terwiesch

was appointed President of the Process

Automation Business (known as Industrial

Automation from 2017–2020) and member of the Executive Committee

effective January 2015. He is a

member of the board of directors of Metall Zug AG (Switzerland).

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 German and

Swiss 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.

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.

ABB has a minority stake in Hitachi Energy Ltd (Hitachi

Energy), the holding company of ABB’s former

power

grids business. Hitachi Energy is both an important supplier

to and customer of ABB. Timo

Ihamuotila is a

director of Hitachi Energy.

After reviewing the level of business with Hitachi Energy,

the Board has determined that ABB’s business

relationship with Hitachi Energy is not unusual in its

nature or conditions.

These determinations were 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. This policy is contained in the

ABB Ltd Board Governance Rules (available at

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

-governance

—

Share capital of ABB

At December 31, 2021, ABB’s ordinary share capital

(including treasury shares) as registered with the

Commercial Register amounted to CHF 246,377,791.68,

divided into 2,053,148,264 fully paid registered

shares with a 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, 2021, ABB Ltd had a market

capitalization based on outstanding shares (total number

of outstanding shares: 1,958,344,400) of

approximately CHF 68 billion ($75 billion, SEK 676 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, 2021,

ABB Ltd, Switzerland,

directly or indirectly owned 75 percent of ABB India Limited,

Bangalore, India, which at that time had a market

capitalization of approximately INR 474 billion.

Stock exchange listings (at December 31, 2021)

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 that ran from July 2020 to

March 2021, ABB repurchased a total of

128,620,589 shares. At ABB’s Annual General

Meeting 2021, the shareholders approved the proposal

cancel 115,000,000

repurchased shares. These shares

were cancelled in June 2021, resulting in a reduced

total number of issued ABB Ltd shares of 2,053,148,264.

ABB intends to propose to the Annual General

Meeting 2022 to cancel the remaining 13,620,589 repurchased

shares.

In April 2021, ABB launched a follow-up share buyback

program of up to $4.3 billion to complete ABB’s plan

to return $7.8 billion of cash proceeds from the Power

Grids divestment to shareholders.

Under that share

buyback program, ABB repurchased a total of 58,627,600

shares as per December 31, 2021, and a total

74,782,600 shares as per February 15, 2022. ABB intends

to propose to the Annual General Meeting 2022 to

cancel these shares.

In addition, ABB repurchased a total of 32,668,987 shares

as per December 31, 2021, 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

Except for the share cancellation described above, there

were no other changes to ABB’s ordinary share

capital during 2021, 2020 and 2019.

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, 2021, 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

9.7 percent.

The contingent share capital has not changed

during the last three years.

At December 31, 2021, 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 of 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 at

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 be 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, 2021, 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

approximately 4.6 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, 2021, 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 March 25, 2023. If the authorized share

capital were fully issued, this would increase the

existing share capital by approximately 9.7 percent. Aside

from renewal at the 2021 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

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

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

-governance

—

Shareholders

Shareholder structure

As of December 31, 2021, the total number of shareholders

directly registered with ABB Ltd was

approximately 96,000 and another 513,000 shareholders

held shares indirectly through nominees. In total as

of that date, ABB had approximately 609,000 shareholders.

Significant shareholders

Under the Swiss Financial Market Infrastructure Act, shareholders

and groups of shareholders acting in

concert who directly or indirectly acquire or sell shares

of a listed Swiss corporation or rights based thereon

and thereby reach, exceed or fall below the thresholds

of 3 percent, 5 percent, 10 percent, 15 percent,

20 percent, 25 percent, 33

percent, 50 percent or 66

percent of the voting rights of the corporation

must

notify the corporation and the SIX Swiss Exchange of

such holdings. Consequently,

significant shareholdings

may have varied within the relevant threshold levels since

they were reported.

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

of December 31, 2021 (refer to Investor’s year-end

2021 report available at

https://www.investorab.com/investors

-media/reports-presentations

). This holding

represented 12.9 percent of ABB’s total share

capital and voting rights as registered in the Commercial

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.

The Capital Group Companies Inc., USA, disclosed that

as of July 1, 2021, it, together with its direct and

indirect affiliates, held 115,841,336

ABB shares. This holding represented 5.64 percent of

ABB’s total share

capital and voting rights as registered in the Commercial Register

at that time.

Cevian Capital II GP Limited, Jersey,

disclosed that as of August 3, 2020, it held 105,988,662

ABB shares.

This holding represented 4.89 percent of ABB’s

total share capital and voting rights as registered in

the

Commercial Register at that time.

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 represented 3.36

percent of ABB’s total share capital and voting

rights as registered in the Commercial Register at that

time.

At December 31, 2021, 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 2021 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

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

-governance

), each

registered share represents one vote. Significant shareholders

do not have different voting rights.

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

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

2021 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 2022, in accordance with applicable Swiss COVID-19

legislation, the same procedures shall apply.

In addition, ABB will offer shareholders the opportunity

to address questions on agenda items to the Board

Directors in writing ahead of the meeting.

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 sharehold

ers 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 divi

dend 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 an 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

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 no exemptions granted in 2021.

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 register kept by Citibank does not affect

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

the appendix to this Corporate Governance Report sets

forth, as of December 31, 2021, 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

Energy Ltd. ABB’s operational group structure

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 have been

amended to no longer provide for

accelerated vesting upon a change in control. 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.

General blackout periods for trading ABB securities

During the 30 days prior to the day of publication of the

ABB Group’s quarterly financial results, as

well as on

such day, the members

of the Board of Directors and the Executive Committee

as well as certain employees

of ABB, as specified in ABB’s internal policies, are

prohibited from trading in ABB Ltd securities and any

related financial instruments.

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 at a glance

Board compensation

Compensation for the 2021-2022 term of office

The effective Board compensation for the 2021-2022

term of office (CHF 4,380,000) was within the

maximum

amount approved at the 2021 AGM (CHF 4,400,000).

Compensation Exhibit 1: Board compensation (in

CHF) for the 2021-2022 term of office

Effective compensation

4,380,000

Approved compensation amount

4,400,000

Shareholding of Board members

All Board members held ABB shares at December 31,

2021, worth at least 200 percent of their 2021 Board

compensation.

Compensation Exhibit 2: Board members shareholding

(at December 31, 2021) in % of 2021 total

compensation

Based on share

price of CHF

26.59, the

2021 LTIP

reference

price, and

held at December

31, 2021.

Executive Committee (EC) compensation

Compensation structure as from 2022

Compensation Exhibit 3: EC compensation structure

as from 2022

Fixed compensation -

base salary and benefits

Variable compensation -

short-term incentive (AIP)

Variable compensation -

long-term incentive (LTIP)

Wealth at risk/

Share ownership

Purpose and

link to strategy

Base salary compensates for

the role and relevant

experience; Benefits protect

against risks. Facilitates

attraction and retention of

talented EC members

Rewards annual Company,

Business Area, functional

and individual performance.

Aligned with the Company’s

Annual Performance Plan

Rewards the achievement of

Company goals over a three-

year period. Encourages

creation of long-term,

sustainable value for

shareholders, and delivery of

long

‑

term strategic goals

Aligned with the Company’s

Long-term Performance Plan

Aligns individual’s personal

wealth at risk directly to the

ABB share price, and EC

members’ interests with

those of shareholders in

order to maintain focus on

ABB's long-term success

Operation

Salary in cash, benefits in

kind, and pension

contribution

Annual awards, payable in

cash after a one-year

performance period

Annual grants in shares

which may vest after three

years subject to performance

conditions

Individuals required to hold

ABB shares

Opportunity

level

(as % of base

salary)

Based on scope of

responsibilities, personal

experience and skillset

CEO

500% (net of tax)

Other EC members

400% (net of tax)

higher LTIP opportunity to be largely

offset by lower fixed cost benefits

Performance

indicators

Changes to base salary take

into account individual

performance, future potential

and external benchmarking

Exposed to ABB share price

Total EC compensation

for 2021

The effective EC compensation for 2021 (CHF 39,157,04

6) is within the maximum amount approved at the

2020 AGM (CHF 39,500,000).

Compensation Exhibit 4: EC compensation (in CHF) for 2021

Effective aggregate compensation

39,157,046

Approved aggregate compensation

39,500,000

The larger portion of the CEO’s 2021 total compensation

was delivered via variable compensation

(61 percent represented by short-term incentive and

long-term incentive). For the other EC members, on an

aggregate level, variable compensation represented 54

percent of their 2021 compensation. The following

chart shows the composition of the 2021 total compensation

for the current EC, without consideration of

former EC members.

Compensation Exhibit 5: 2021 Total compensation mix for the CEO and other

EC members on aggregate level

Realized variable compensation in 2021

Realized variable compensation considers the AIP award

and the LTIP award

at the end of their respective

performance cycles, reflecting actual AIP payment and

LTIP vesting,

based on achievement of the plan

specific performance measures.

While the outcome of the 2021 short-term incentive was above

the target for all current EC members

(143.4 percent on average),

the long-term incentive that vested in 2021 (2018 LTIP)

remained substantially

below the target, with a final vesting level of 57.4 percent

of target.

Compensation Exhibit 6: AIP 2021 outcome compared

to target

200%

57.4%

114.8%

100%

25%

50%

75%

100%

125%

150%

175%

200%

LTIP Vesting (total)

Average EPS (50% of total)

Relative TSR (50% of total)

Target achievement level

Realized achievement level

Maximum achievement level

Compensation Exhibit 7: Long-term incentive: 2018

LTIP outcome compared to target

Realized total compensation in 2021

Considering the stated variable components above, the realized

total compensation in 2021 was above the

target total compensation for all current EC members,

driven by strong performance in 2021.

Compensation Exhibit 8: Realized total compensation

compared to target total compensation

Further details related to the realized compensation of

each EC member and each compensation component

are specified in Compensation Exhibit 44.

Shareholding of EC members

Three out of nine EC members have achieved or exceeded their

share ownership requirement. A further two

members are close to achieving their requirement, while three

members have been newly appointed to the

EC in the last two years, and one member is leaving the

Company. Note

that EC members may not sell their

shares (except to meet tax and social security costs) until they

achieve the required shareholding level.

Compensation Exhibit 9: EC shareholding compared

to share ownership guideline*

Based on share

price of CHF

26.59, the

2021 LTIP

reference

price,

and shares

held at December

31, 2021.

Compensation governance

The Compensation Report is prepared in accordance

with the Ordinance against Excessive Remuneration in

Listed Stock Corporations, 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 shares

are also listed, and the principles of the Swiss Code of

Best Practice for Corporate Governance of

economiesuisse.

ABB’s Articles of Incorporation

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 and Executive

Committee. 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 and are elected

individually by the shareholders at

the Annual General Meeting for a period of one year.

It 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 also 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.

100

•

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.

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 in Compensation Exhibit 10. Shareholders

also have a consultative vote on the prior

year’s Compensation Report at the AGM and a binding vote on the maximum

aggregate amount of

compensation of the Board for the following Board term and

of the EC for the following financial year.

Compensation Exhibit 10: Authority levels in compensation

matters

CEO

Board

AGM

Compensation policy including incentive plans

●

Maximum aggregate compensation amount for the EC

●

CEO compensation

●

Individual compensation of other EC members

●

Performance target setting and assessment of the CEO

●

Performance target setting and assessment of other EC members

●

Shareholding requirements for CEO and other EC members

●

Maximum aggregate compensation amount for the Board

●

Individual compensation of Board members

●

Compensation Report

●

Consultative vote

●

Proposal

●

Recommendation

●

Approval

Activities of the CC in 2021

The CC meets as often as business requires but at least

four times a year. In 2021,

the CC held seven

meetings and performed the activities described in Compensation

Exhibit 11. 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

in which their own compensation and/or performance

are being discussed. Details on meeting attendance of

the individual CC members (number of meetings held during 2021,

their average duration, as well as the

attendance of the individual members) are provided in the

section titled “Board of Directors – Meetings and

attendance” of the Corporate Governance Report.

101

Compensation Exhibit 11: CC activities during 2021

Strategy

Review of Long-Term

Incentive plan (LTIP)

Review of link between Environmental, Social and Corporate Governance (ESG) and compensation

EC Compensation

Review of recommendations on individual compensation for EC members

Review of the share ownership of EC members

Review and approval of compensation for departing EC members

Performance – relating to past performance cycle

Assessment of short-term incentive awards for 2020

Assessment of achievement of performance targets for LTIP awards vesting in 2021

Performance – relating to forthcoming performance cycle

Setting of Annual Incentive Plan (AIP) design and targets for 2021

Consideration of forecast AIP outcomes for 2021

Consideration of preliminary AIP targets for 2022

Setting of performance targets for LTIP grants in 2021

Consideration of forecast achievement against performance targets for unvested LTIP grants

Compliance

Review of CC Terms

of Reference and annual plan

Review of the gender pay policy and disclosure in Switzerland

Review of feedback from Stakeholder Engagement meetings

Regulatory and market updates

Review of the Compensation Report for publication

Preparation of maximum aggregate compensation for the Board to be submitted for AGM vote

Preparation of maximum aggregate compensation for the EC to be submitted for AGM vote

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)

was mandated to provide consulting services related to

executive compensation matters. Apart from its CC

advisory role, PwC also provides human resources, tax and

advisory services to ABB.

Pay equity

ABB believes that a culture of diversity,

inclusion and equal opportunity is critical to our business

success and

makes us stronger. This mindset

is supported by our Diversity & Inclusion Strategy 2030, that

clearly defines

ABB plans to ensure an inclusive culture and equal treatment

of everyone, regardless of gender,

age, ethnic

origin, sexual orientation, etc. Equal pay is a critical component

of this strategy.

In Switzerland, under the revised Swiss Federal Act on Gender

Equality (GEA) that came into force last year,

legal entities with more than 100 employees are required

to conduct an equal pay analysis. ABB has

completed this analysis for all four required legal entities and

the results of this analysis were verified by an

external accounting firm, KPMG. As a result, the two

in-scope legal entities forming part of ABB Switzerland

(ABB Schweiz AG and ABB Power Protection SA, which

now is part of ABB Schweiz AG), meet the equal

pay requirements and are within the applicable thresholds for

salary and overall compensation (salary plus

actual bonus).

102

At ABB Headquarters, ABB Asea Brown Boveri Ltd meets

the equal pay requirements and is within the

applicable thresholds for salary and overall compensation (salary

plus actual bonus). The smaller legal entity

in scope, ABB Management Services Ltd, meets the

equal pay requirements for salary and slightly

underachieves the parity level for overall compensation (salary

plus actual bonus), as it has employees from

different businesses assigned with different

bonus plans, leading to varying levels of bonus payments.

accordance with the Swiss law,

ABB will continue to monitor these requirements.

Board compensation policy

The compensation policy for the members of the

Board is designed to attract and retain experienced people

to the Board of Directors. Compensation takes into

account the responsibilities, time and effort required

fulfill their roles on the Board and its Committees, and

is generally positioned at levels similar to other

Swiss

listed companies of comparable size and complexity.

Compensation structure

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 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 in

arrears.

Each fee is delivered in cash and shares, although

Board members may elect to receive all their fees in

shares. The number of 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

Board fees by role

As mentioned above, the levels and mix of compensation

of Board members are regularly 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, Holcim, Lonza,

Richemont, SGS, Sika, Swisscom, Swiss Life, Zurich Insurance).

Such a review was last undertaken in 2020,

and there was no adjustment made to Board fees for

the term of office from the 2021 AGM to

the 2022 AGM,

as set out in Compensation Exhibit 12 below.

103

Compensation Exhibit 12: Current Board fees

Board term fee (CHF)

Chairman of the Board

(1)

1,200,000

Vice-Chairman of the Board

(1)

450,000

Member of the Board

290,000

Additional committee fees:

Chairman of FACC

(2)

110,000

Chairman of CC or GNC

(2)

60,000

Member of FACC

(2)

40,000

Member of CC or GNC

(2)

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.

Total

Board compensation

The compensation paid to the Board members for the calendar

year 2021 and for the term of office from

the

2021 AGM to the 2022 AGM are disclosed in Compensation

Exhibit 13 below and in Compensation

Exhibits 35 and 36,

respectively,

in the section “Compensation tables and share ownership

tables”.

At the 2021 AGM, the shareholders approved a maximum

aggregate compensation amount of

CHF 4.40 million for the 2021-2022 Board term. This amount

was lower than the approved amount for the

previous Board term, reflecting the reduction of the total number

of members of the Board from eleven to ten.

The Board compensation to be paid is CHF 4.38 million and

is therefore within the amount approved by the

shareholders. The Board compensation paid for the previous 2020-2021

term of office was below the amount

approved by the shareholders 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 pandemic.

Compensation Exhibit

13: Board compensation (in CHF)

Board term

Board of Directors

2021–2022

2020–2021

Number of members

Total

compensation

4,380,000

4,436,500

Maximum aggregate compensation amount approved at previous AGM

4,400,000

4,700,000

Compensation of former Board members

In 2021, no payment was made to any former Board member.

Compensation for services rendered

In 2021, 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.

Shareholding of Board members

The members of the Board collectively owned less than 1 percent

of ABB’s total shares outstanding at

December 31, 2021.

104

Compensation Exhibit 37 in the section “Compensation

tables and share ownership tables” shows the

number of ABB shares held by each Board member at

December 31, 2021 and 2020. 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.

Shares delivered to Board members as part of their compensation

are blocked for a period of three years.

Compensation Exhibit 14 shows the wealth at risk for

each Board member, comparing

the value of held

shares at December 31, 2021 with the total compensation

for the 2021-2022 term of office. At December

31,

2021, all Board members held ABB shares worth at

least 200 percent of their 2021 total compensation.

Compensation Exhibit 14: Board shareholding (at

December 31, 2021) in % of 2021 total compensation*

Based on share

price of CHF

26.59, the

2021 LTIP

reference

price,

and shares

held at December

31, 2021.

Executive Committee compensation policy

The EC compensation policy reflects ABB’s commitment

to attract, motivate and retain people with the talent

necessary to strengthen its position as a leading global technology

company.

Compensation structure

The compensation structure is designed to be competitive,

based on performance, and to encourage

executives to deliver outstanding results and create sustainable

shareholder value without taking excessive

risks. The EC compensation framework therefore balances

fixed and variable compensation. Variable

compensation is provided through short-term and long-term incentives

based on strategic, financial and ESG

objectives, recognizing Group, Business Area and Corporate Function

performance as well as individual

performance.

This structure is linked to our strategy and is illustrated

in Compensation Exhibit 15.

105

Compensation Exhibit 15: EC compensation structure

as from 2022

Fixed compensation -

base salary and benefits

Variable compensation -

short-term incentive (AIP)

Variable compensation -

long-term incentive (LTIP)

Wealth at risk/

Share ownership

Purpose and

link to strategy

Base salary compensates for

the role and relevant

experience; Benefits protect

against risks. Facilitates

attraction and retention of

talented EC members

Rewards annual Company,

Business Area, functional

and individual performance.

Aligned with the Company’s

Annual Performance Plan

Rewards the achievement of

Company goals over a three-

year period. Encourages

creation of long-term,

sustainable value for

shareholders, and delivery of

long

‑

term strategic goals

Aligned with the Company’s

Long-term Performance Plan

Aligns individual’s personal

wealth at risk directly to the

ABB share price, and EC

members’ interests with

those of shareholders in

order to maintain focus on

ABB's long-term success

Operation

Salary in cash, benefits in

kind, and pension

contribution

Annual awards, payable in

cash after a one-year

performance period

Annual grants in shares

which may vest after three

years subject to performance

conditions

Individuals required to hold

ABB shares

Opportunity

level

(as % of base

salary)

Based on scope of

responsibilities, personal

experience and skillset

CEO

500% (net of tax)

Other EC members

400% (net of tax)

higher LTIP opportunity to be largely

offset by lower fixed cost benefits

Performance

indicators

Changes to base salary take

into account individual

performance, future potential

and external benchmarking

Exposed to ABB share price

A significant portion of total compensation depends on

variable pay components, which require the

achievement of challenging performance targets, in alignment

with ABB Annual and Long-Term

Performance

Plans.

106

25%

24%

15%

10%

25%

24%

25%

36%

Current Other EC

Members

New Other EC

Members

Base salary

Pension benefits

Other benefits

Short-term incentive

Long-term incentive

The target AIP award is defined as a percentage of base

salary, currently

100 percent for all EC members.

There is no award under the AIP if performance is below threshold

on all financial performance measures.

When performance exceeds targets, the maximum

award is capped at 150 percent of the targeted amount.

The target LTIP

grant size is defined as a percentage of base salary,

currently 150 percent for the CEO and

80 to 100 percent for all other EC members. There will

be no award under the LTIP

if performance is below

thresholds for all applicable measures. When performance

exceeds targets, the maximum award is capped at

200 percent of the conditional grant.

From 2022, the mix of fixed and variable target compensation

elements for new EC members will be adjusted

to provide a greater emphasis on variable pay.

This will be achieved by increasing the LTIP

grant size from

100 percent to 150 percent of base salary,

while reducing the level of pension contributions

and other

benefits. The reduction of pension contributions and other

benefits substantially offsets the increase

of the

LTIP component, and

represents a shift from guaranteed pay elements

to pay at risk. Fixed compensation for

new EC members will represent 40 percent of their target

total compensation, in comparison to 50 percent

for

current EC members. Compensation Exhibit 16 below

illustrates the changes for new EC members in more

detail.

Compensation Exhibit 16: Mix of target compensation

for current and new EC members

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 (compensation benchmarking);

•

individual profile of the EC member in terms of experience

and skills;

•

personal performance and potential.

The CC conducted a comprehensive review of its approach

to competitive benchmarking in 2020, which led

to the creation of three benchmarking peer groups, designed

to match the size, scope and complexity of

ABB, and exclude companies from the financial services

sector.

The use of these peer groups depends on the nature

of the role and the source of relevance. For example,

stronger emphasis is 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 are used to stress test the findings of the primary

peer group (see the summary in Compensation

Exhibit 17 below).

107

Compensation Exhibit 17: Compensation benchmarking

peer groups

Peer Group

Composition

Rationale

Global Industry

A tailored group of 16 global industry peer companies

(1)

matching the scale and complexity of ABB

Focus for Business Area 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 Corporate 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, Holcim,

Linde, L’Oreal, Michelin, National Grid,

Naturgy Energy Group, Nokia, Novartis, Novo Nordisk,

OMV, Philips, Rio Tinto,

Safran, Saint Gobain,

Sanofi, SAP,

Schneider Electric, Telefonaktiebolage

LM Ericsson, Thales, Umicore, Veolia

Environment, Vinci and Vodafone

(3) SMI: Swiss Market Index; SMIM: Swiss Market Index

MID; Companies include: Adecco, Geberit, Givaudan, Glencore,

Kuehne & Nagel, Holcim,

Nestle, Novartis, Richemont, Roche, Schindler,

SGS, Sika, STMicroelectronics, Swatch and Swisscom

Since benchmark reviews are performed every other year,

the comparison of ABB to its compensation

benchmarking peer groups shown in Compensation Exhibit

18 below is based on the last review in 2020.

This data shows that ABB is typically positioned 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.

Compensation Exhibit 18: 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.

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., the EC member’s

skills, experience, performance, potential).

Compensation elements

Compensation Exhibit 15 above sets out the purpose

and link to strategy,

the operation, the opportunity level

and the performance measures. In addition,

this section provides further details for each compensation

element.

108

Fixed compensation - base salary and benefits

Purpose and link to strategy

Base salary compensates for the role and relevant experience;

Benefits protect against risks, and facilitate

the attraction and retention of talented EC members.

Base salary is paid in cash. Benefits consist primarily of

retirement, insurance and healthcare plans that are

designed to provide a reasonable level of support for the employees

and their dependants in case of

retirement, disability or death.

Opportunity levels

Base salary is set with reference to the scope of responsibilities,

personal experience and skills, and

competitive market data.

Benefit plans are set in line with the local competitive

and legal environment and are, at a minimum, in

accordance with the legal requirements of the respective

country.

The monetary value of base salary and benefits are disclosed

in Compensation Exhibit 38 “EC compensation

in 2021”.

Performance measures and weighting

Base salary is adjusted considering the factors set out

under opportunity levels above, the executive’s

performance as well as their future potential.

Variable compensation - 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 Area or

Corporate Function and their individual performance over

a time horizon of one year,

and is aligned with the

Annual Performance Plan approved by the Board.

Opportunity levels

The AIP opportunity levels for the EC are 100 percent

of base salary at target with a maximum opportunity of

150 percent.

Performance measures and weighting

The AIP structure is designed to incentivize operational

delivery and underpin our performance culture. As

such, it is focused on key priorities, with a maximum of

five measures.

•

A common Group measure with a 20 to 25 percent weighting

•

Up to three Corporate or Business Area measures, with

a 55 to 60 percent weighting.

•

An individual measure with a 20 percent weighting. This

personal component is informed by up to

three key performance indicators (KPIs) which may

include a combination of quantitative and

qualitative goals.

From 2022, at least two of these KPIs will relate to

ESG, e.g., CO

emissions, safety or

female leader targets.

Business Area Presidents will continue to have a safety

KPI, and an environment KPI (CO

emissions) will be introduced.

Corporate Officers will have a social KPI (gender representation

on management level) or

governance KPI (internal controls) and an environment

KPI (CO

emissions).

The final outcome against this individual measure will

be a discretionary judgment based on

the combined performance against all personal KPIs.

109

•

The CC/Board has a discretionary authority to adjust the results

and/or the award. This

specifically includes a downwards adjustment based on safety performance,

including fatalities.

A summary of the composition and total weighting of the

measures for all EC members is set out in

Compensation Exhibit 19.

Compensation Exhibit 19: Composition and weighting

of short-term incentive measures for EC members

CEO and Corporate Officers

(1)

Business Area Presidents

Common Group measure

25%

20%

Other Group measures

Up to three measures

n.a.

55%

Business Area measures

n.a.

Up to three measures

60%

Individual measure

Function-specific

Business-specific

20%

Total

100%

(1)

Corporate Officers include: Chief Financial Officer, Chief Human Resources Officer, General Counsel and

Chief Communications and

Sustainability Officer.

Other design features

For each performance measure, a target will be set corresponding

to the expected level of performance that

will generate a target (100 percent) award. For all except

the individual measure, 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 quantitative Group, Business

Area and Functional measures, the award percentage achievements

between threshold and target, as well

as between target and cap are determined by linear interpolations

between these points.

The outcomes of financial AIP measures are subject

to appropriate discretionary upward or downward

adjustments for non-operational items and other adjustment

principles agreed with the Board.

In 2021, progress against defined ESG target(s) was a

“boundary condition” for making AIP awards. Under

this approach, the Board agreed to review whether 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 had

been made, the AIP award might have been reduced on

a discretionary basis. Following feedback from

stakeholders, this practice will be discontinued in 2022

and replaced with the approach to ESG in the AIP

individual measure described above, and in the LTIP

described below.

Variable compensation - Long

-Term Incentive Plan

(LTIP)

Purpose and link to strategy

Rewards the achievement of predefined performance

goals over a three year period. Encourages the

creation of long-term, sustainable shareholder value creation

and is aligned with the Company’s Long-Term

Performance Plan approved by the Board.

Opportunity levels

The LTIP opportunity

levels for the EC are 80 to 100 percent of base salary at

target, with a maximum

opportunity of 160 to 200 percent. For new EC members

from 2022, the opportunity levels will be 150 percent

and 300 percent, respectively.

This change, to be mostly offset by a reduction

in pension and other benefits

costs, is taking into account historical LTIP

vesting levels and the risks associated in moving from

fixed to

variable pay.

110

For the CEO the opportunity levels are 150 percent of

base salary at target, with a maximum opportunity of

300 percent.

Performance measures and weighting

The LTIP will have

from 2022, three performance measures:

Total

Shareholder Return (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.

•

For grants from 2022, the award curve for the TSR measure

will be adjusted to become more

challenging. The threshold point for awards, for which

vesting starts, will move from the 25th

percentile to the 50th percentile (P50) of the TSR peer

group, i.e., there will be no award for

performance below P50.

•

Vesting for P50 achievement

remains at 100 percent of target, and vesting for

a 75th percentile

(P75) achievement level remains at 200 percent of target (capped).

There will be a linear vesting

for an achievement between P50 and P75 (100 to 200

percent of target).

Earnings Per Share (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 the long-term strategic plan,

calibrated against 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.

ESG

●

The Board will determine on an annual basis LTI

specific ESG measure(s) and related targets.

●

For 2022, the ESG measure will be the Company’s

scope 1&2 CO

emission reduction at the end

of the three-year performance period (2022-2024), compared

to the 2019 baseline.

111

●

Appropriate threshold (zero), target (100 percent) and

maximum (200 percent) award points are

reviewed and approved by the CC on an annual basis.

The approved ESG target points for the 2022 LTIP,

which are designed to incentivize material progress

towards our 2030 sustainability strategy commitments,

are illustrated in Compensation Exhibit 20 below.

Compensation Exhibit 20: ESG target points for

the 2022 LTIP

Measure

Weighting

Threshold

Target

Maximum

ABB scope 1&2 CO

emission

reduction compared to 2019 baseline

20%

60%

70%

80%

At or below

threshold

point: no

award;

At target

point: 100

percent award;

At or above

maximum

point: capped

at 200 percent

award;

Linear award

interpolations

between

points.

The relative weighting of measures for the LTIP

is as follows:

•

EPS measure: 50 percent

•

TSR measure: 30 percent

•

ESG measure: 20 percent

Other design features

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 performance

conditions, defined prior to grant.

The actual settlement of shares awarded will vary between zero

and 200 percent of the shares granted,

according to achievement against the performance measures

stated above.

Default settlement of the final LTIP

award is 100 percent in shares, and an automatic sell

-to-cover is in 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 have a material impact on any Group company.

This means that the Board may decide not

to award any unsettled or unvested incentive compensation (malus),

or may seek to recover long-term

incentive compensation that has been settled in the past

(clawback).

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).

For grants from 2021, there is no automatic accelerated vesting

of awards in the event of a change of control.

For LTIP grants as

of 2022 participants will also be entitled to receive a cash amount

on each vested award

share that is equal to the total dividends per share paid by

ABB on the ABB Ltd share between the grant date

and the delivery date of the vested award (a “dividend

equivalent payment”). This will be offset by reducing

other benefit-related costs by a similar level over the life of the

share grant.

CC discretion will be extended to allow for discretionary

adjustments to the formulaic LTIP

vesting outcome.

Clawback will be extended to include material reputational damage

and will apply for a period of up to five

years following the originally scheduled plan specific vesting

date.

112

Total wealth at risk

/ Share ownership

Purpose and link to strategy

align EC members’ personal wealth directly with the

interests of shareholders in order to maintain focus

on the long-term success of the Company.

Share ownership program

EC members are required to retain all shares vested from

the Company’s LTIP

and any other share-based

compensation until their 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 15).

These shareholding requirements are aligned with market

practice and result in a wealth at risk for each EC

member which is aligned with

shareholder interests.

Only vested shares owned by an EC member and their

spouse count for the comparison of the actual share

ownership against the share ownership requirement. Vested

but unexercised and unvested stock options

under the Management Incentive Plan (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

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 other 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 cash remuneration (comprising of base

salary, short-term

incentive and benefits).

Implementation of EC compensation policy

Overview

EC members received total compensation of CHF 39.2

million in 2021, compared with CHF 35.4 million in

2020, as summarized in Compensation Exhibit 21 below

and presented

in detail in Compensation Exhibits 38

and 39.

113

Compensation Exhibit 21: Total compensation of EC members (monetary values

in CHF)

(1)

Calendar year

2021

2020

Number of active EC members

Base salaries

8,713,406

8,413,363

Pension benefits

4,795,259

4,450,785

Other benefits

4,819,803

6,001,823

Total fixed compensation

18,328,468

18,865,971

Short-term incentives

12,144,280

6,782,229

Long-term incentives (fair value at grant)

8,684,298

6,491,137

Replacement share grants

n.a.

3,308,781

Total variable compensation

20,828,578

16,582,147

Total compensation

39,157,046

35,448,118

Maximum aggregate compensation approved at AGM

39,500,000

55,500,000

(1)

For an overview

of compensation

by individual

and component,

please refer

to Compensation

Exhibits

38 and 39

in section

“Compensation

tables and

share ownership

tables” below.

An overview

of 2021

realized

compensation

by individual

is provided

Compensation

Exhibit 44

in the same

section.

The total compensation for the EC in 2021 increased by

10.5 percent compared to 2020. Context of the

change in costs, in addition to the over-achievement against

the challenging short-term incentive targets,

includes:

●

The COVID-19 pandemic, which negatively impacted achievement

under the 2020 short-term

incentive - when targets were not adjusted - compared

to the outperformance against targets in

2021.

●

In addition, the target short-term incentive was decreased

in 2020 to reflect the voluntary

10 percent donation of the EC members’ salary to fight

the impact of the COVID-19 pandemic

and a pro-rata outcome was applied for those EC members

who joined the EC during the year.

●

An increase in base salary resulting from a) the omission of

the voluntary 10 percent donation of

the EC members’ salary to fight the impact of the COVID

-19 pandemic for a six-month period

during 2020, b) that all EC members provided services for

the full year during 2021 and c) the

increases in salary for three EC members.

•

An increase in pension contributions is solely due to changes

in the constitution of the Executive

Committee. The contribution rates in the pension plan

have not changed for several years, and

only age driven adjustments were applied.

•

A reduction in other benefits costs given that 2020 included

costs related to four former EC

members, including the interim CEO, while in 2021 the costs

related to only one former EC

member.

●

The increase of the grant fair value for the 2021 LTIP

grant compared to the 2020 LTIP

grant, is

mainly driven by the price of the ABB share at the day of grant.

At the 2020 AGM, the shareholders approved a maximum

aggregate compensation amount of

CHF 39.5 million for the EC for the year 2021. The EC

total compensation for 2021 amounted to

CHF 39.2 million and is therefore within the approved

amount. See Compensation Exhibit 21 above.

114

20%

22%

12%

10%

12%

30%

32%

31%

22%

CEO

Other EC Members

Base salary

Pension benefits

Other benefits

Short-term incentive

Long-term incentive

Compensation mix

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 2021, the variable compensation of the CEO was 61 percent

of his total annual compensation (previous

year: 51 percent). For the other EC members, the variable compensation

was 54 percent on average

(previous year: 41 percent). To

allow an appropriate year-on-year comparison, the

calculation of the total

annual compensation excludes the value of any one-time

replacement grant to compensate for foregone

compensation with the previous employer.

Compensation Exhibit 22 below shows the composition of the

total annual compensation in 2021 for the CEO

and for other current EC members on an aggregate level,

specifying the split of its five compensation

components.

Note that compensation paid in 2021 for former EC members

is not included in Compensation Exhibit 22.

This can be found in Compensation Exhibit 38.

Compensation Exhibit 22: Compensation mix

Compensation elements - 2021 highlights

Base salary

Three of the nine EC members in place in March 2021 received

a salary adjustment, which ranged from 2.1

to 6.7 percent, reflecting exceptional performance and closer

market alignment. The base salary of Timo

Ihamuotila was increased by 2.1 percent to CHF 970,000,

Tarak

Mehta by 3.3 percent to CHF 930,000, and

Morten Wierod by 6.7 percent to CHF 800,000.

Considering that the other six current EC members had

no salary adjustments, this corresponded to a

1.3 percent increase on annual base salaries for the EC

members post March 2021, which was broadly

consistent with the salary review budget for the wider

Swiss employee population.

Annual Incentive Plan (AIP) - design

Compensation Exhibit 23 below shows the composition and

weighting of the measures applied in 2021 for all

EC members under their AIP,

specified by their roles.

115

Compensation Exhibit 23: Composition and weighting

of 2021 short-term incentive measures for EC members

Focus of

measure

CEO and

Corporate

Officers

(1)

President

Electrification

President Motion

President Process

Automation

President

Robotics &

Discrete

Automation

ESG boundary

condition for short

term incentive awards:

Reduction of CO

₂

equivalent scope 1&2 emission

Common

Group

measure

Bottom line

earnings

Op EBITA margin

25%

Op EBITA margin

20%

Op EBITA margin

20%

Op EBITA margin

20%

Op EBITA margin

20%

Other Group

measures

Profitability and

capital efficiency

ROCE margin

25%

Cash generation

Free Cash Flow

20%

Bottom line output

Productivity growth

10%

Business Area

measures

Bottom line

earnings

Op EBITA margin

30%

Op EBITA margin

30%

Op EBITA margin

30%

Op EBITA margin

30%

Cash generation

Op Free Cash Flow

20%

Op Free Cash Flow

20%

Bottom line profit

Gross Profit on Orders

20%

Top line input

Orders received

20%

Bottom line output

Productivity growth

10%

Productivity growth

10%

Productivity growth

10%

Productivity growth

10%

Individual

measure

Safety, Cost

discipline, Strategy

implementation

Function-specific

20%

Safety,

Acquisitions,

Digitalization

Business-specific

20%

Business-specific

20%

Business-specific

20%

Business-specific

20%

Total

100%

(1)

Corporate Officers include: Chief Financial Officer, Chief Human Resources Officer, General Counsel and

Chief Communications and Sustainability Officer.

Under the AIP,

all members of the EC have a common Group measure,

with a 20 to 25 percent weighting. In

2021, this was Group Operational EBITA

margin, applied to create a greater focus on profitability

In addition to the common Group measure, the CEO and the Corporate

Officers share the same Group

measures, including ROCE margin, Free Cash Flow and Productivity

growth,

with a total weighting of

55 percent.

For Business Area Presidents, up to three measures were tailored

to business imperatives, with a total

weighting of 60 percent. While all Business Area Presidents

shared two measures (Operational EBITA

margin and Productivity growth, with 30 percent and 10 percent

weighting, respectively), the third measure

varied, including Operational Free Cash Flow,

Gross Profit on Orders and Orders received, for the

remaining

20 percent.

Definitions of the quantitative measures for EC members

are set out in Compensation Exhibit 24, below.

116

Compensation Exhibit 24: Definition of quantitative objectives,

applied in 2021

Objective

Description

Operational EBITA

margin (%)

Operational EBITA, which is Operational earnings before interest, tax and

amortization, as a percentage of Operational revenues, which is total

revenues adjusted for foreign exchange/commodity timing differences in

total revenues

Return on Capital

Employed (ROCE)

margin (%)

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

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

Productivity growth

Productivity is calculated as 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 as a

percentage change

Operational Free

Cash Flow (OFCF)

(1)

Cash generated by business operations after paying capital expenditures but

before paying interests and taxes (OCF

(2)

minus capital expenditures)

Gross Profit on

Orders (absolute)

(3)

Gross profit on orders is calculated by deducting the total costs to complete

the order from the total revenue value of the order

Orders received

(4)

Represents the values of goods and services contracted and ordered by

customers within a given accounting period net of cancellations

(1) Applied

to Robotics

& Discrete

Automation

and Electrification

only.

(2) Cash flow

from operating

activities

excluding

payments

for interest

and income

taxes.

(3) Applied

to Process

Automation

only.

(4) Applied

to Motion

only.

All EC members also had an individual measure with a

20 percent weighting. This individual component was

informed by up to three KPIs, which included a combination

of quantitative and qualitative objectives. The

final outcome against the individual measure was based

on a discretionary judgment of the combined

performance against all three KPIs.

●

In 2021, all the EC had a common safety KPI – namely

the percentage improvement in the Lost

Time Incident Frequency Rate (LTIFR),

underpinned by sustainability observation tours. For the

CEO and the Corporate Officers, this related to

Group level and for Business Area Presidents to

their respective Business Areas.

●

For the CEO and Corporate Officers, the other

KPIs were linked to the Group or Function costs,

to the strategy implementation on Group or Function level, or

to internal controls.

●

For the Business Area Presidents, the other KPIs were

business growth, digitalization or market

positioning targets.

Outcomes were subject to appropriate adjustments for

some non-operational items and other adjustment

principles agreed with the Board.

For 2021, the “boundary condition” was the setting of plans

in each ABB Division to mitigate for ABB scope 1

and 2 CO

emissions, aligned with ABB’s sustainability

strategy and associated targets.

117

2021 Annual Incentive Plan - achievements

In summary, the average

award for the current EC members under the AIP for 2021

was 143.4 percent (out

of a maximum 150 percent), compared to 72.4 percent in 2020.

In addition to achieving the challenging

performance targets in 2021,

this improvement in outcomes from the prior year was

influenced by the

following factors:

•

In 2021, all nine EC members served on a full-year basis,

compared to only seven members

working on a full-year basis in 2020. AIP opportunities

and final awards for 2020 were prorated

for those EC members who joined the EC during the year.

•

EC members voluntarily donated 10 percent of their salary

to fight the impacts of the COVID-19

pandemic for a six-month period during 2020. Consequently AIP opportunities

and final awards

for 2020 were based on the reduced salaries.

•

In 2020, the negative impact of the COVID-19 pandemic on

the business performance - when

targets were not adjusted - was bigger than in 2021.

The 2021 AIP outcomes were net of the application of adjustments

for some non-operational items, aligned

with adjustment principles agreed with the Board. These led to

minor increases

in awards for two EC

members.

Common Group measure

Achievement against the 2021 Group Operational EBITA

margin measure, which applied to all EC members,

with a weighting of 20 or 25 percent, was 150 percent (20

20: 53 percent). The 2021 Group Operational

EBITA margin was

14.2 percent compared to 11.1

percent in 2020, primarily reflecting the increased

business activity. The

weighted achievement related to the common Group measure

was 37.5 percent for the

CEO and the Corporate Officers, and 30 percent

for the Business Area Presidents.

Other Group measures

The outcome related to all other Group measures,

applied to the CEO and Corporate Officers,

with

weightings of 10 to 25 percent,

was at maximum. Achievement against the Group

ROCE target was

150 percent (2020: zero percent), achievement against

of the Free Cash Flow target was 150 percent

(2020: 109 percent) and achievement against the Productivity

growth target was also 150 percent

(2020: n.a.).The weighted achievement related to these Group

measures was 82.5 percent.

Business Area measures

Up to three quantitative business measures were applied to

Business Area Presidents, with weightings from

10 to 30 percent, and the outcomes ranged from 119

to 150 percent of target.

Achievement against the Operational EBITA

margin measure ranged from 119

to 150 percent (2020: zero to

95 percent), Operational Free Cash Flow 150 percent for

the two Business Areas applicable (2020: 106 to

150 percent), Gross Profit on Orders 150 percent (2020: zero

percent), Orders received 150 percent

(2020: zero to 83 percent) and Productivity growth 150 percent

for the four Business Areas (2020: n.a.).The

weighted achievement related to these Business Area

measures ranged from 80.8 to 90 percent (2020: 21 to

66 percent).

Individual measure

Thanks to the Company’s strong focus on safety,

in 2021 the target set for the Lost Time

Incident Frequency

Rate (LTIFR) was

overachieved at Group level, as a result of all Business

Areas overachieving their targets.

There were no work-related fatalities in 2021, for the first

time since 2011. The

assessed achievement of the

KPIs informing the outcome of the personal component for

EC members, with a weighting of 20 percent,

inclusive of the safety outcomes described, ranged from

100 to 150 percent (2020: 100 to 150 percent).

These outcomes are summarized in Compensation Exhibit

25 below.

118

Compensation Exhibit 25: AIP 2021 outcomes for the

CEO and the Corporate Officers (rounded)

AIP 2021 outcomes for the Business Area Presidents

(rounded)

ESG boundary condition

The Board also considered that the terms for the 2021

ESG “boundary condition” were fully met.

Overall outcomes

The overall average award under the AIP for the entire

current EC was 143.4 percent of target

(2020: 72.4 percent) with a range from 140.8 percent (lowest

achievement) to 145.0 percent of target (highest

achievement). This compared to a range of 51.0 to 95.6

percent in 2020.

Compensation Exhibit 26 below provides information related

to the overall actual 2021 AIP outcomes, in

comparison to the target 2021 AIP for all current EC

members.

119

Compensation Exhibit 26: Overview of targeted

and realized AIP 2021 values

Common Group

measure

Other Group

measures

Business Area

measures

Individual measure

Total AIP outcome

percentage

(in % of target)

Target AIP award

(in CHF)

Actual

AIP award

(in CHF)

(1)

Achievement

Weighting

Outcome

Achievement

Weighting

Outcome

Achievement

Weighting

Outcome

Achievement

Weighting

Outcome

Björn Rosengren

150.0%

25.0%

37.5%

150.0%

55.0%

82.5%

n.a.

125.0%

20.0%

25.0%

145.0%

1,700,000

2,465,000

Timo Ihamuotila

150.0%

25.0%

37.5%

150.0%

55.0%

82.5%

n.a.

100.0%

20.0%

140.0%

970,000

1,358,000

Carolina Granat

150.0%

25.0%

37.5%

150.0%

55.0%

82.5%

n.a.

100.0%

20.0%

140.0%

700,000

980,000

Maria Varsellona

150.0%

25.0%

37.5%

150.0%

55.0%

82.5%

n.a.

125.0%

20.0%

25.0%

145.0%

800,000

1,160,000

Theodor Swedjemark

150.0%

25.0%

37.5%

150.0%

55.0%

82.5%

n.a.

125.0%

20.0%

25.0%

145.0%

500,000

725,000

Sami Atiya

150.0%

20.0%

30.0%

n.a.

150.0%

60.0%

90.0%

125.0%

20.0%

25.0%

145.0%

800,000

1,160,000

Tarak Mehta

150.0%

20.0%

30.0%

n.a.

150.0%

60.0%

90.0%

125.0%

20.0%

25.0%

145.0%

930,000

1,348,500

Peter Terwiesch

150.0%

20.0%

30.0%

n.a.

150.0%

60.0%

90.0%

125.0%

20.0%

25.0%

145.0%

800,000

1,160,000

Morten Wierod

150.0%

20.0%

30.0%

n.a.

134.7%

60.0%

80.8%

150.0%

20.0%

30.0%

140.8%

800,000

1,126,400

Total

8,000,000

11,482,900

(1)

Represents accrued AIP award for the year 2021, which will be paid in 2022, after the publication of ABB's financial results.

Long-Term Incentive

(LTIP)

2021 LTIP grants

The estimated value at grant of the share-based grants

to EC members under the 2021 LTIP

was

CHF 8.7 million, compared with CHF 6.5 million in 2020.

This increase in grant fair value for the 2021 LTIP

grant compared to 2020 was mainly driven by the price

of the ABB share on the day of grant. In 2020 the

price of the ABB share at the day of grant, was influenced

by significant market volatility at the start of the

COVID-19 pandemic which impacted the 2020 LTIP

grant fair value substantially at that time.

The 2021 LTIP is based

on two equally weighted performance measures,

one tied to ABB’s TSR and the

other to ABB’s EPS.

The companies approved by the Board to determine ABB’s

relative TSR performance for the 2021 LTIP

were: 3M, Danaher, Eaton,

Emerson Electric, General Electric, Honeywell Intl., Holcim,

Legrand, Mitsubishi

Electric, Raytheon Technologies,

Rockwell, Rolls Royce, Schneider Electric, Siemens and

Yokogawa.

These

were selected to provide an appropriate and very challenging set

of peers, and influenced the vesting point

setting accordingly.

The 2021 LTIP

target points are illustrated

in Compensation Exhibit 27 below.

Compensation Exhibit 27: 2021 LTIP target points

Measure

Weighting

Threshold

Target

Maximum

Relative TSR

50%

25th percentile

50th percentile

75th percentile

Average EPS

50%

Target

point

-14%

Disclosed after

performance period

Target

point

+14%

At or below

threshold

point: no

award;

At target

point:

100 percent

award;

At or above

maximum

point:

capped at

200 percent

award;

Linear award

interpolations

between

points;

The actual

EPS target

is not prospectively

disclosed

for reasons

of commercial

sensitivity.

The latest change in the EPS target points (range reduced

from plus/minus 17 percent of target for 2020 LTIP

to plus/minus 14 percent of target for the 2021 LTIP

)

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.

120

The reference price for the 2021 LTIP

grant which is used to determine the number of shares

granted to

participants was CHF 26.59.

2018 LTIP - achievements

The final number of shares

vesting under the 2018 LTIP

grant in 2021 was determined based on the

achievement level against the defined TSR and EPS targets.

The relative TSR measure was achieved at 114.8

percent (previous year: not applicable) out of a potential

200 percent.

The average EPS measure vested at zero percent (previous

year: 41 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 2018 LTIP.

On this occasion, adjustments were made for the

impact of divestments, integration costs and restructuring

costs. The EPS for 2020 applicable to the 2018

LTIP grant after the

application of the approved adjustments, amounted to USD 1.06,

leading to plan relevant

average EPS of USD 0.98, being below the threshold target

point.

The average weighted achievement level of the two performance

measures under the 2018 LTIP

was

57.4 percent (out of a maximum 200 percent), as specified

in Compensation Exhibit 28.

There was no award under the EPS measure, since the

performance period for determining the value of the

award was from 2018 to 2021 and in consequence the

EPS outcome was impacted by the COVID

‑

pandemic, for which no adjustment was applied.

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 adjusted 2018

EPS performance measure are shown in

Compensation Exhibit 28 below.

Compensation Exhibit 28: Target points and achievements of 2018 LTIP performance measures

Measure

Weighting

Threshold

Target

Maximum

Actual

Relative TSR

50%

percentile

54th percentile

Achievement level

100%

200%

114.8%

Average EPS (USD)

50%

1.15

1.36

1.57

0.98

Achievement level

100%

200%

Award as percentage of target (capped at 200%)

57.4%

Since the Average EPS amounted to USD 0.98,

no vesting occurred under this measure as the threshold

target was not met. The relative ranking of ABB’s

TSR against the predefined peer group of companies for

the 2018 LTIP set on

the 54

percentile, which leads to a vesting level of 114.8

percent under this measure.

The weighted combined vesting level corresponds to 57.4

percent of the target.

Overview of disclosed and realized 2018 LTIP

value

In the 2020 Compensation Report ABB introduced a new

table, requested by stakeholders, to provide

information related to the past LTIP

that vested in the reporting year.

This table compares the previously

disclosed “fair value”

of the grant to each EC member and the actual value of the

grant at the time of vesting.

The following Compensation Exhibit 29 shows such comparison

for the 2018 LTIP,

that vested in 2021.

121

74.80%

80.50%

92.50%

73.00%

57.40%

53.40%

53.70%

61.70%

41.70%

28.70%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

2014 LTIP

2015 LTIP

2016 LTIP

2017 LTIP

2018 LTIP

Vesting in % of target award

Vesting in % of maximum potential award

The values presented are gross and before payment of

any applicable taxes owing by the recipient. This

indicates the average gross realized LTIP

value was 76.2 percent of the disclosed grant fair value.

Compensation Exhibit 29: Realized value of 2018 LTIP grant for current EC members

Grant date

Number of

granted

related to

the TSR

measure

(1)

granted

related to

the EPS

measure

(2)

Total

number

of shares

granted

Disclosed

grant fair

value

(CHF)

(3)(4)

Vesting date

Vesting

percentage

Number

of vested

Realized

value

(CHF)

(5)

Björn Rosengren

n.a.

Timo Ihamuotila

April 6, 2018

18,609

18,608

37,217

819,965

April 6, 2021

57.4%

21,364

624,897

Carolina Granat

n.a.

Maria Varsellona

n.a.

Theodor

Swedjemark

n.a.

Sami Atiya

April 6, 2018

11,651

11,650

23,301

513,368

April 6, 2021

57.4%

13,376

391,248

Tarak Mehta

April 6, 2018

17,395

34,790

766,494

April 6, 2021

57.4%

19,970

584,123

Peter Terwiesch

April 6, 2018

18,690

18,689

37,379

823,534

April 6, 2021

57.4%

21,457

627,617

Morten Wierod

April 6, 2018

7,646

15,292

336,913

April 6, 2021

57.4%

8,778

256,757

Total

3,260,274

2,484,642

(1)

Actual achievement level of the TSR measure was 114.8 percent.

(2)

Actual achievement level of the EPS measure was zero percent.

(3)

Valued at CHF 22.03, the grant fair value of the ABB share on the day of grant.

(4)

At the time of disclosure Morten Wierod was not member of the EC.

(5)

Valued at CHF 29.25, the closing price of the ABB share on the day of vesting.

LTIP vesting outcomes

in the last five years

The historical vesting percentages for the prior five years

are shown in Compensation Exhibit 30 below.

Over

the last five years vesting has averaged at 75.6 percent

of target and 47.8 percent of the maximum award.

Compensation Exhibit 30: LTIP historical actual vesting percentages

(1)

(1) Average

of relevant

performance

measures.

122

115%

105%

113%

114%

115%

108%

107%

105%

109%

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

Björn Rosengren

Timo Ihamuotila

Carolina Granat

Maria Varsellona

Theodor Swedjemark

Sami Atiya

Tarak Mehta

Peter Terwiesch

Morten Wierod

Target total compensation

Realized total compensation

Realized total compensation - 2021

In the 2020 Compensation Report, ABB started to disclose

the realized total compensation for each EC

member. Realized compensation

means that the AIP award and the LTIP

award are disclosed at the end of

their respective performance cycles, reflecting actual

payment and settlement, based on achievements of the

plan specific performance measures. Such transparency

on realized compensation is designed to aid

stakeholder’s understanding of ABB's link between pay and performance.

The following Exhibit 31 sets out a high-level comparison

of realized and target total compensation for each

EC member. Note that the

higher percentages relating to the CEO and Corporate

Officers (except for the

CFO) are driven by the fact that they were not an EC

member in 2018, and therefore did not receive an LTIP

grant in 2018, for which the vesting level in 2021 was 57.4 percent.

A detailed summary table is specified in

in Exhibit 44 in the section “Compensation tables and share

ownership tables“.

Compensation Exhibit 31: Realized total compensation

compared to target total compensation

Other compensation - 2021

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 18th annual launch of the plan in 2021. EC members

who participated will, upon vesting, each be

entitled to acquire up to 330 ABB shares at CHF 30.32

per share, the market share price at the start of the

2021 launch.

For a more detailed description of the ESAP,

please refer to “Note 18 – Share

‑

based payment arrangements”

in our Consolidated Financial Statements.

In 2021, 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 2021 to persons closely linked to a member

of the EC for services rendered to ABB.

123

Shareholding of EC members

Three out of nine EC members have achieved or exceeded their

share ownership requirement. Two

members are close to achieving their requirement, and a further

three members have been newly appointed

to the EC in the last two years.

When considering the number of granted, but unvested shares

of current EC members as per December 31,

2021, it is expected that the majority of these members

will meet or exceed their share ownership

requirement.

Compensation Exhibit 32: EC shareholding compared

to share ownership guideline*

Based on share

price of CHF

26.59, the

2021 LTIP

reference

price,

and shares

held at December

31, 2021.

Future allocation

of granted,

but unvested

shares is

based on

target achievement

level and

relevant

plan specific

settlement:

default settlement

of the final

2019 LTIP

award is 65

percent in

shares (recipients

may elect

to receive

100 percent

of the vested

LTIP

award in shares),

default settlement

of the

final 2020

LTIP

and 2021 LTIP

awards

is 100 percent

in shares.

Default settlement

of replacement

shares is

65 percent

in shares

(recipients

may elect

to receive

100 percent

of the vested

award in

shares).

The EC members collectively owned less than 1 percent

of ABB’s total shares outstanding at December

31,

2021.

At December 31, 2021, EC members held ABB shares and conditional

rights to receive shares, as shown in

Compensation Exhibit 42 in the section “Compensation

tables and share ownership tables” below.

Their

holdings at December 31, 2020, are shown in Compensation

Exhibit 43 in the same section.

As previously communicated, as from 2020, grants under the

Management Incentive Plan (MIP), a stock

option plan without performance conditions, have been

discontinued, and no further grants were made. 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 42 and

43, no member of the EC and no person closely

linked

to a member of the EC held any shares of ABB or options

on ABB shares at December 31, 2021 and 2020.

124

Changes applicable to EC members

Terms of appointment for new EC 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 CHRO incumbent. Carolina Granat

is eligible for standard EC benefits and, where

appropriate legacy relocation benefits.

Terms of departure for EC members

The General Counsel & Company Secretary,

Maria Varsellona,

has resigned from ABB and will depart on

March 31, 2022. She will be entitled to receive compensation

and benefits up to the point of her departure.

This includes a contractually agreed pro-rata short-term

incentive payment of CHF 181,985 for the period

January 1 to March 31, 2022. All her unvested LTIP

share grants and the unvested second tranche of her

replacement share grant were forfeited.

Compensation of former EC members

In 2021, certain former EC members received contractual compensation

for the period after leaving the EC,

as shown in Compensation Exhibit 38, footnotes (5)

and (6).

Votes on compensation at the 2022 AGM

As illustrated in Compensation Exhibit 33, the Board’s

proposals to shareholders at the 2022 AGM will relate

to Board compensation for the 2022–2023 term of office

and EC compensation for the calendar year 2023.

There will also be a non-binding vote on the 2021 Compensation

Report.

125

Compensation Exhibit 33: Shareholders will have three

separate votes on compensation at the 2022

AGM

In determining the proposed maximum aggregate EC compensation,

the Board takes into consideration the

criteria illustrated in Compensation Exhibit 34. Given the

variable nature of a major portion of the

compensation components, the proposed maximum aggregate

EC compensation will almost normally be

higher than the actual compensation paid or awarded, as

it must cover the potential maximum value of each

component of compensation.

It is important to note that the increase in maximum aggregate

compensation for 2023 is mainly the result of

the associated cost related to the 2020 LTIP

vesting in 2023, influenced by:

a) the increased number of shares subject to vesting compared

to prior years

(see Compensation Exhibit 34),

b) the current solid performance of the Company against its earnings

per share targets and total

shareholder return peer group and

c) the strong share price development since the time of grant with

a reference price of

CHF 19.36,

rather than any structural increase to EC compensation.

126

Compensation Exhibit 34: Overview of key factors

affecting the determination of maximum aggregate

EC compensation

127

Compensation tables and share ownership tables

Compensation Exhibit 35: Board compensation

in 2021 and 2020

Paid in 2021

Paid in 2020

November

Board term

2021-2022

May

Board term

2020-2021

Total compensation

paid in 2021

(3)

November

Board term

2020-2021

May

Board term

2019-2020

Total

compensation

paid in 2020

(3)

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)

Settled in

cash

(1)

Settled in

shares -

number

of shares

received

(2)

Settled in

cash

(1)

Settled in

shares -

number

of shares

received

(2)

CHF

Peter Voser, Chairman

(4)

—

17,209

—

20,089

1,200,000

—

21,831

—

32,642

1,140,000

Jacob Wallenberg

(5)

112,500

2,599

112,500

3,033

450,000

101,250

3,297

112,500

4,928

427,500

Matti Alahuhta

(6)

—

3,615

160,000

—

4,787

—

7,155

304,000

Gunnar Brock

(7)

82,500

1,906

—

4,542

330,000

—

4,937

—

7,379

313,500

David Constable

(8)

80,000

1,848

87,500

2,359

335,000

78,750

2,564

87,500

3,833

332,500

Frederico Curado

(9)

—

3,829

—

4,090

335,000

—

4,438

—

6,646

304,000

Lars Förberg

(10)

—

4,577

—

5,347

320,000

—

5,805

—

8,688

304,000

Jennifer Xin-Zhe Li

(11)

87,500

1,866

80,000

1,993

335,000

72,000

2,163

80,000

3,239

304,000

Geraldine Matchett

(12)

82,500

2,490

82,500

2,906

330,000

74,250

3,159

82,500

4,722

313,500

David Meline

(13)

100,000

2,310

100,000

2,696

400,000

90,000

2,931

100,000

4,380

380,000

Satish Pai

(14)

82,500

1,759

82,500

2,055

330,000

74,520

2,231

82,500

3,340

313,500

Total

627,500

40,393

545,000

52,725

4,525,000

490,770

58,143

545,000

86,952

4,436,500

(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 2021 and 2020 the Company paid CHF 231,287 and CHF 272,312, respectively, in related mandatory social

security payments.

(4)

Chairman of the ABB Ltd Board for the 2019-2020, 2020-2021 and 2021-2022 board terms and Chairman of the Governance and Nomination Committee for the 2021-2022

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 2019-2020, 2020-2021 and 2021-2022 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 2021-2022 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 2019-2020 and 2020-2021 board terms; received 100 percent of his compensation in the form of ABB shares

for the 2019-2020 and 2020-2021 board terms. Did not stand for election in 2021.

(7)

Member of the Finance, Audit and Compliance Committee for the 2019-2020, 2020-2021 board terms; received 100 percent of his compensation in the form of ABB shares for

the 2019-2020 and 2020-2021 board term and is receiving 50 percent of his compensation in the form of ABB shares for the 2021-2022 board term.

(8)

Chairman of the Compensation Committee for the 2019-2020, 2020-2021 board terms and member of that committee for the 2021-2022 board term; is receiving 50 percent of

his compensation in the form of ABB shares.

(9)

Member of the Compensation Committee for the 2019-2020, 2020-2021 and Chairman of the Compensation Committee for the 2021-2022 board term; is receiving 100 percent

of his compensation in the form of ABB shares.

(10)

Member of the Governance and Nomination Committee for the 2019-2020, 2020-2021 and 2021-2022 board terms; is receiving 100 percent of his compensation in the form of

ABB shares.

(11)

Member of the Compensation Committee for the 2019-2020, 2020-2021 and 2021-2022 board terms and member of Governance and Nomination Committee for 2021-2022

board term; is receiving 50 percent of her compensation in the form of ABB shares.

(12)

Member of the Finance, Audit and Compliance Committee for the 2019-2020, 2020-2021 and 2021-2022 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 2019-2020, 2020-2021 and 2021-2022 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 2019-2020, 2020-2021 and 2021-2022 board terms; is receiving 50 percent of his compensation in the form

of ABB shares.

128

Compensation Exhibit 36: Board compensation for

the Board terms 2021-2022 and 2020-2021

Name

Specific Board Roles

Board term

2021-2022

Board term

2020-2021

(1)

CHF

Peter Voser

Chairman of the Board for 2020-2021 term,

Chairman of the Board and Chairman GNC for

2021-2022 term

1,200,000

1,140,000

Jacob Wallenberg

Vice-Chairman of the Board and Chairman GNC for 2020-2021

term,

Vice Chairman of the Board and Member GNC for 2021-2022

term

450,000

427,500

Matti Alahuhta

Member GNC for 2020-2021 term

n.a.

304,000

Gunnar Brock

Member FACC for both the 2020-2021 and 2021-2022 terms

330,000

313,500

David Constable

Chairman CC for 2020-2021 term, Member CC

for the 2021-2022 term

320,000

332,500

Frederico Curado

Member CC for 2020-2021 term, Chairman CC for

the 2021-2022 term

350,000

304,000

Lars Förberg

Member GNC for both the 2020-2021 and 2021-2022

terms

320,000

304,000

Jennifer Xin-Zhe Li

Member CC for the 2020-2021 term,

Member CC and Member GNC for the 2021-2022

term

350,000

304,000

Geraldine Matchett

Member FACC for both the 2020-2021 and 2021-2022 terms

330,000

313,500

David Meline

Chairman of FACC for both the 2020-2021 and 2021-2022 terms

400,000

380,000

Satish Pai

Member FACC for both the 2020-2021 and 2021-2022 terms

330,000

313,500

Total

4,380,000

4,436,500

(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 37: Board ownership of ABB

Total number of shares held

Name

December 31, 2021

December 31, 2020

Peter Voser

(1)

191,946

314,648

Jacob Wallenberg

239,878

234,246

Matti Alahuhta

(2)

n.a.

93,408

Gunnar Brock

33,399

26,951

David Constable

38,185

33,978

Frederico Curado

40,301

32,382

Lars Förberg

59,916

49,992

Jennifer Xin-Zhe Li

37,580

33,721

Geraldine Matchett

25,196

19,800

David Meline

(3)

37,780

33,774

Satish Pai

28,432

24,618

Total

732,613

897,518

(1) Includes 2,000 shares held by spouse.

(2) Matti Alahuhta did not stand for re-election at ABB's Annual General Meeting in March 2021.

(2) Includes 3,150 shares held by spouse.

129

Compensation Exhibit 38: EC compensation

in 2021

Cash Compensation

Estimated

value of

share-based

grants under

the LTIP in

2021

(4)

Estimated

value of

replacement

share-based

grant in 2021

2021 Total

compensation

(incl.

conditional

share-based

grants)

(5)(6)

Name

Base salary

Short-term

incentive

(1)

Pension

benefits

Other

benefits

(2)

2021 Total

cash-based

compensation

(3)

CHF

Björn Rosengren

1,700,012

2,465,000

744,770

807,000

5,716,782

2,530,828

—

8,247,610

Timo Ihamuotila

966,675

1,358,000

518,063

570,546

3,413,284

962,708

—

4,375,992

Carolina Granat (EC

member as of January 1,

2021)

700,000

980,000

417,382

399,334

2,496,716

694,744

—

3,191,460

Maria Varsellona

800,009

1,160,000

455,000

511,824

2,926,833

793,997

—

3,720,830

Theodor Swedjemark

500,004

725,000

274,535

263,567

1,763,106

397,012

—

2,160,118

Sami Atiya

800,009

1,160,000

482,662

481,598

2,924,269

793,997

—

3,718,266

Tarak Mehta

925,008

1,348,500

507,646

476,481

3,257,635

923,018

—

4,180,653

Peter Terwiesch

800,009

1,160,000

473,441

422,542

2,855,992

793,997

—

3,649,989

Morten Wierod

791,676

1,126,400

443,506

362,112

2,723,694

793,997

—

3,517,691

Total Executive Committee

members at December 31,

2021

7,983,402

11,482,900

4,317,005

4,295,004

28,078,311

8,684,298

—

36,762,609

Sylvia Hill (EC member until

December 31, 2020)

730,004

661,380

478,254

524,799

2,394,437

—

2,394,437

Total departing Executive

Committee members

730,004

661,380

478,254

524,799

2,394,437

—

2,394,437

Total

8,713,406

12,144,280

4,795,259

4,819,803

30,472,748

8,684,298

—

39,157,046

(1)

Represents accrued short-term variable compensation for the year 2021, which will be paid in 2022, 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. Sylvia Hill received a short-term variable compensation payment in

December 2021 related to her termination period, in accordance with the contractual obligations of ABB.

(2)

Other benefits mainly comprise payments related to social security, health insurance, children's education, transportation, tax advice and compensation for foregone

dividends on replacement share grants and certain other items.

(3)

Prepared on an accrual basis.

(4)

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 26, 2024), 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.

(5)

Payments totaling CHF 296,004 were made in 2021 on behalf of certain other former EC members, representing social security premium payments due on the LTIP

2018 vesting and tax advisory services for the period when they have been active EC members.

(6)

Ulrich Spiesshofer received non-compete payments for the period January 1, 2021 to April 30, 2021 and a vesting of the 2018 LTIP,

with related social security

payments, totaling to CHF 1,726,896.

130

Compensation Exhibit 39: 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

compensation

(incl.

conditional

share-based

grants)

(6)

Name

Base salary

(1)

Short-term

incentive

(1)(2)

Pension

benefits

Other

benefits

(3)

2020 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 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 was paid in 2021, after the publication of ABB's 2020 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,

corresponded 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.

131

Compensation Exhibit 40: LTIP grants in 2021

Name

Reference

number of shares

under the EPS

performance

factor of the 2021

launch

of the LTIP

(1)

Total estimated

value of share-

based grants

under the EPS

performance

factor of the 2021

launch of the

LTIP

(2)(3)

Reference

number of shares

under the TSR

performance

factor of the 2021

launch

of the LTIP

(1)

Total estimated

value of share-

based grants

under the TSR

performance

factor of the 2021

launch of the

LTIP

(2)(3)

Total number of

shares granted

under the 2021

launch

of the LTIP

(1)(2)

Total estimated

value of share-

based grants

under the LTIP in

2021

(2)(3)

CHF

Björn Rosengren

47,950

1,265,401

47,951

1,265,427

95,901

2,530,828

Timo Ihamuotila

(4)

18,240

481,354

18,240

481,354

36,480

962,708

Carolina Granat (EC member as of

January 1, 2021)

13,163

347,372

13,163

347,372

26,326

694,744

Maria Varsellona

15,043

396,985

15,044

397,012

30,087

793,997

Theodor Swedjemark

(4)

7,522

198,506

7,522

198,506

15,044

397,012

Sami Atiya

15,043

396,985

15,044

397,012

30,087

793,997

Tarak Mehta

(4)

17,488

461,509

17,488

461,509

34,976

923,018

Peter Terwiesch

(4)

15,043

396,985

15,044

397,012

30,087

793,997

Morten Wierod

(4)

15,043

396,985

15,044

397,012

30,087

793,997

Total Executive Committee

members at December 31, 2021

164,535

4,342,082

164,540

4,342,216

329,075

8,684,298

(1)

Vesting date April 26, 2024.

(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 18th launch of the ESAP in 2021, which will allow them to save over a 12-month period

and, in November 2022, use their savings to acquire ABB shares under the ESAP. Each EC member who participated in ESAP will be entitled to acquire up to 330

ABB shares at an exercise price of CHF 30.32 per share.

Compensation Exhibit 41: 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 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 allowed 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 was entitled to acquire up to 440 ABB

shares at an exercise price of CHF 22.87 per share.

132

Compensation Exhibit 42: EC shareholding overview

at December 31, 2021

Total number

of shares

held at

December 31,

2021

Vested at

December

31, 2021

Unvested at December 31, 2021

Number of

vested

options held

under the

MIP

Number of

unvested

options

held under

the MIP

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)

Reference

number of

deliverable

under the

2021

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)

Name

(vesting

2022)

(vesting

2022)

(vesting

2023)

(vesting

2024)

(vesting

2022)

(vesting

2023)

Björn Rosengren

10,000

—

131,715

95,901

130,150

18,904

Timo Ihamuotila

150,440

—

49,071

36,480

—

Carolina Granat (EC

member as of January 1,

2021)

(3)

1,200

—

26,326

—

Maria Varsellona

(4)

26,006

—

Theodor Swedjemark

(3)(5)

1,360

—

148,750

—

6,209

15,044

—

Sami Atiya

51,472

—

49,587

41,323

30,087

—

Tarak Mehta

118,056

—

44,422

46,488

34,976

—

Peter Terwiesch

100,440

—

41,323

30,087

—

Morten Wierod

51,912

—

36,158

38,740

30,087

—

Total Executive

Committee members at

December 31, 2021

510,886

—

148,750

220,561

354,869

298,988

130,150

18,904

(1)

The final 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 and LTIP 2021 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)

This includes shares held by the spouse.

(4)

Unvested share grants were forfeited as a result of the resignation provided and removed

from the shareholding overview.

(5)

In addition, his spouse holds unvested shares and options granted in connection with her role in

the company.

133

Compensation Exhibit 43: 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

factors (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 held unvested shares and options granted in connection with her role in the company.

134

Compensation Exhibit 44: Targeted and realized EC total compensation in 2021

Target compensation (in CHF)

Base salary

Pension

benefits

Other

benefits

(1)

Target

short-term

incentive

(2)

Grant fair

value of 2018

LTIP

(3)

Target total

variable

compensation

Target total

compensation

Björn Rosengren

1,700,012

744,770

807,000

1,700,000

n.a.

1,700,000

4,951,782

Timo Ihamuotila

966,675

518,063

570,546

970,000

819,965

1,789,965

3,845,249

Carolina Granat (EC member as of

January 1, 2021)

700,000

417,382

399,334

700,000

n.a.

700,000

2,216,716

Maria Varsellona

800,009

455,000

511,824

800,000

n.a.

800,000

2,566,833

Theodor Swedjemark

500,004

274,535

263,567

500,000

n.a.

500,000

1,538,106

Sami Atiya

800,009

482,662

481,598

800,000

513,368

1,313,368

3,077,637

Tarak Mehta

925,008

507,646

476,481

930,000

766,494

1,696,494

3,605,629

Peter Terwiesch

800,009

473,441

422,542

800,000

823,534

1,623,534

3,319,526

Morten Wierod

791,676

443,506

362,112

800,000

336,913

1,136,913

2,734,207

Total

7,983,402

4,317,005

4,295,004

8,000,000

3,260,274

11,260,274

27,855,685

Realized compensation (in CHF)

Base salary

Pension

benefits

Other

benefits

(1)

Short-term

incentive

2021

(4)

Realized

value of 2018

LTIP

(5)

Total variable

compensation

Total

compensation

Björn Rosengren

1,700,012

744,770

807,000

2,465,000

n.a.

2,465,000

5,716,782

Timo Ihamuotila

966,675

518,063

570,546

1,358,000

624,897

1,982,897

4,038,181

Carolina Granat (EC member as of

January 1, 2021)

700,000

417,382

399,334

980,000

n.a.

980,000

2,496,716

Maria Varsellona

800,009

455,000

511,824

1,160,000

n.a.

1,160,000

2,926,833

Theodor Swedjemark

500,004

274,535

263,567

725,000

n.a.

725,000

1,763,106

Sami Atiya

800,009

482,662

481,598

1,160,000

391,248

1,551,248

3,315,517

Tarak Mehta

925,008

507,646

476,481

1,348,500

584,123

1,932,623

3,841,758

Peter Terwiesch

800,009

473,441

422,542

1,160,000

627,617

1,787,617

3,483,609

Morten Wierod

791,676

443,506

362,112

1,126,400

256,757

1,383,157

2,980,451

Total

7,983,402

4,317,005

4,295,004

11,482,900

2,484,642

13,967,542

30,562,953

Realized achievement level

Base salary

Pension

benefits

Other

benefits

(1)

Short-term

incentive

(4)

Realized

value of 2018

LTIP in %

(5)

Total variable

compensation

Total

compensation

Björn Rosengren

100.0%

145.0%

n.a.

145.0%

115.4%

Timo Ihamuotila

100.0%

140.0%

76.2%

110.8%

105.0%

Carolina Granat (EC member as of

January 1, 2021)

100.0%

140.0%

n.a.

140.0%

112.6%

Maria Varsellona

100.0%

145.0%

n.a.

145.0%

114.0%

Theodor Swedjemark

100.0%

145.0%

n.a.

145.0%

114.6%

Sami Atiya

100.0%

145.0%

76.2%

118.1%

107.7%

Tarak Mehta

100.0%

145.0%

76.2%

113.9%

106.5%

Peter Terwiesch

100.0%

145.0%

76.2%

110.1%

104.9%

Morten Wierod

100.0%

140.8%

76.2%

121.7%

109.0%

Average

100.0%

143.4%

76.2%

127.7%

110.0%

(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

(3)

Represents the LTIP 2018 grant date fair value as per April 6, 2018, as disclosed in our annual report 2018.

(4)

Represents accrued STI for the year 2021, which will be paid in 2022, 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 29.25, the closing price of the ABB share on the day of vesting.

135

—

Employees

A breakdown of our employees by geographic region

is as follows:

December 31,

2021

2020

2019

Europe

50,000

49,200

68,400

The Americas

25,600

27,600

35,200

Asia, Middle East and Africa

28,800

40,800

Total

104,400

105,600

144,400

The proportion of our employees that are represented by

labor unions or are subject to collective bargaining

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, 2021, we had approximately 609,000

shareholders. Approximately 377,000 were U.S.

holders, of which approximately 420 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 Register on that date.

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. Our most significant equity method

investment is in Hitachi Energy Ltd (see “Note 4 -

Acquisitions, divestments and equity-accounted companies”

for details). 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”.

136

Item 8.

Financial Information

—

Consolidated Statements and other financial information

See “Item 18. Financial Statements”.

—

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.

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 authorities in their

review of the Kusile project and is in discussions with

them regarding a coordinated resolution.

Although we believe that there could be 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, 2021 and 2020, we had aggregate liabilities of

$104 million and $100 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.

137

—

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, 2021, the total unconsolidated stockholders’

equity of ABB Ltd was CHF 6,837 million,

including CHF 246 million representing share capital,

CHF 9,443 million representing reserves and

CHF 2,853 million representing a reduction of equity for

own shares (treasury stock). Of the reserves,

CHF 2,853 million relating to own shares and CHF 49

million representing 20 percent of share capital, are

restricted and not available for distribution.

With respect to the years ended December 31, 2017,

2018, 2019 and 2020, ABB Ltd paid a dividend of

CHF 0.78 (USD 0.81) per share,

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

0.82) per share and

CHF 0.80 (USD 0.86) 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, 2021, ABB

Ltd’s Board of Directors has proposed to pay

dividend of CHF 0.82 per share to shareholders. The distribution

is subject to approval by shareholders at

ABB Ltd’s 2022 Annual General Meeting (AGM).

For further information on dividends and dividend policy

see “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, 2021.

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, as amended from time to time,

with Citibank, N.A. as depositary.

Each ADS represents one share.

There were no suspensions in the trading of our shares

in 2021, 2020 and 2019.

138

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 2.4 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 to “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, or 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 8. Financial 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 share

capital. A general meeting of shareholders is convened

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.

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.

139

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 of Directors to the extent permitted by law.

There is no provision in ABB Ltd’s Articles of Incorporation

requiring a quorum for the holding of

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 candidate is standing for election, the presiding

officer will order a second ballot in which

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

•

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.

140

At shareholders’

meetings, shareholders can be represented 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

election decided by a show of hands be repeated through

a 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

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, Zurich, 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.

—

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.

141

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.

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

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.

—

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 of 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

the rights of non-Swiss residents or non-Swiss citizens

as shareholders to hold shares or to vote.

142

—

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 if 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 of

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 to 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

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

accompanied by evidence of the deduction of withholding

tax withheld at the source (including tax voucher

issued by the custodian bank).

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.

143

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 shares 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 partnership. 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.

144

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 or 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,

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 distributions (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 2021, 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, 2021 and

does not expect to be classified as a PFIC for the

taxable year ending December 31, 2022. 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

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

dividends for U.S. federal income tax purposes.

145

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. 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, 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 of 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.

146

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.

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.

147

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.

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.

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

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 to 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 eff

ect 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.

148

At December 31, 2021 and 2020, the net fair value of financial

instruments with exposure to foreign currency

rate movements was an asset of $2,048 million and $1,973

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 $367 million and

$647 million for December 31, 2021 and 2020,

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 to 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 in order to better

match underlying assets and liabilities, as well as

minimize the cost of capital.

At December 31, 2021 and 2020, the net fair value of instruments

subject to Interest Rate Risk was an asset

of $2,320 million and $2,095 million, 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

$270 million and $395 million, for December 31, 2021

and 2020, respectively.

Equity Risk

Certain of our entities have equity investments that expose

us to equity price risk. At December 31, 2021 and

2020, the net fair value of equity risk sensitive instruments

was an asset of $29 million and $21 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 $13 million and $8 million, for

December 31, 2021 and 2020, respectively.

Commodity Risk

We enter into commodity derivatives to hedge certain

of our raw material exposures. At December 31, 2021

and 2020, the net fair value of commodity derivatives

was an asset of $1 million and $15 million, respectively.

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

for December 31, 2021 and 2020, respectively.

A portion of our commodity derivatives are denominated

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.

149

Item 12.

Description of Securities Other Than Equity

Securities

American Depositary Shares

Depositary fees payable upon the issuance and cancellation

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.

Depositary fees are as follows:

Depositary Service

Fee

Issuance of ADSs

Up to $5.00 per 100 ADSs (or fraction thereof) issued.

Cancellation of ADSs

Up to $5.00 per 100 ADSs (or fraction thereof) cancelled.

Distribution of cash dividends or other cash

distribution

Up to $5.00 per 100 ADSs (or fraction thereof) held.

Distribution of ADSs pursuant to (i) stock

dividends or other free stock distributions, or

(ii) an exercise of rights to purchase

additional ADSs

Up to $5.00 per 100 ADSs (or fraction thereof) held.

Distribution of securities other than ADSs or

rights to purchase additional ADSs

Up to $5.00 per 100 ADSs (or fraction thereof) held.

Depositary service fee

Up to $5.00 per 100 ADSs (or fraction thereof) held on the

applicable record date(s) established by the Depositary.

Registration of ADS transfers

Up to $5.00 per 100 ADSs (or fraction thereof) transferred.

Conversion of ADSs of one series for ADSs of

another series

Up to $5.00 per 100 ADSs (or fraction thereof) converted.

Depositary Payments

In 2021, we received reimbursements from Citibank N.A.,

the Depositary Bank of our ADS program, of

approximately $6 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.

150

PART II

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 of 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

December 31, 2021, 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, 2021, 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.

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, 2021. 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, 2021.

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, 2021, is included in “Item 18. Financial

Statements”.

Changes in internal control over financial reporting

There have been no 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.

151

Item 16.

[Reserved]

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.

Item 16C.

Principal Accountant Fees and Services

The aggregate fees for services rendered by

KPMG AG

Zurich, Switzerland

(PCAOB ID

3240

), along with

their respective affiliates for professional services

were as follows:

KPMG

($ in millions)

2021

2020

Audit Fees

34.5

40.6

Audit-Related Fees

13.0

2.7

Tax

Fees

0.5

0.8

Other Fees

0.1

—

Total

48.1

44.1

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 2021

audit fees were

approximately $4.7 million related to audits

from 2020 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, 2021. 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 carve-out financial statement

audits in relation to transactional

activities, service organization attestation procedures,

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.

152

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

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 2021 and 2020

were approved by the FACC

Item 16D.

Exemptions from the Listing Standards for Audit Committees

None

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 number

Total number

Average price

of shares purchased

of shares that may

of shares

paid per share

as part of publicly

yet be purchased

2021

purchased

(1)

(in USD)

announced program

(2)(3)

under the program

January 1-31

3,219,779

29.74

1,950,000

69,220,641

February 1-28

26,489,546

29.42

13,338,000

55,882,641

March 1-31

12,425,892

30.08

4,503,230

—

April 1-30

5,853,000

32.45

4,203,000

132,497,000

May 1-31

5,737,000

33.44

4,787,000

127,710,000

June 1-30

7,044,100

34.37

5,944,100

121,765,900

July 1-31

3,950,000

35.26

2,850,000

118,915,900

August 1-31

2,203,500

37.30

1,103,500

117,812,400

September 1-30

8,055,000

35.28

6,955,000

110,857,400

October 1-31

13,450,000

33.27

12,400,000

98,457,400

November 1-30

13,450,000

34.79

12,350,000

86,107,400

December 1-31

9,210,000

36.47

8,035,000

78,072,400

Total

111,087,817

78,418,830

(1)

In 2021, approximately

33 million

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

180 million

shares, in

addition

to those

already held

in treasury)

through the

share buyba

ck program

that started

in July

2020. The

buyback program

was executed

on a second

trading li

ne on the

SIX Swiss

Exchange and

ran until

ABB’s Annual

General Meeting

(AGM) in

March 2021.

At the March

2021 AGM,

shareholder

approved the

cancellation

of 115

million

of the shares

purchased

through this

initial

program and

the cancellation

was completed

in the second

quarter of

2021.

(3)

In March 2021,

ABB announced

a follow-up

share buyback

program of

up to $4.3

billion (which

at the time

represented

a maximum

approximately

137 million

shares).

This buyback

program,

which was

launched

in April

2021, is

being executed

on a second

trading line

the SIX Swiss

Exchange and

is planned

to run until

ABB’s AGM

in March

2022. At

the March

2022 AGM,

ABB intends

to request

shareholder

approval

to cancel

the shares

purchased

through

this follow

-up share

buyback

program as

well as those

shares purchased

under the

initial share

buyback program

that were no

proposed

for cancellation

at the AGM

in March

2021.

Item 16F.

Change in Registrant’s Certifying

Accountant

Not applicable.

153

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.

Item 16I.

Disclosure Regarding Foreign Jurisdictions that Prevent

Inspections

Not applicable.

154

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-83, 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.

155

Item 19.

Exhibits

1.1

Articles of Incorporation of ABB Ltd

as amended to date.

2.1

Form of Amendment No. 1 to the 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). Included as Exhibit (a)(i) to Form F-6 (File No. 333-253576) filed by ABB Ltd

on February 26, 2021.

2.2

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.

2.3

Form of American Depositary Receipt (included in Exhibit 2.1).

2.4

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, 2021.

(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.

156

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.

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

157

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 24, 2022

Name:

Timo Ihamuotila

Title:

Executive Vice President and

Chief Financial Officer

By:

/s/ R

ICHARD

ROWN

Date: February 24, 2022

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, 2021, 2020 and 2019

F-6

Consolidated Statements of Comprehensive Income for

the years ended December 31, 2021,

2020 and 2019

F-7

Consolidated Balance Sheets as of December 31, 2021 and 2020

F-8

Consolidated Statements of Cash Flows for the years

ended December 31, 2021, 2020 and 2019

F-9

Consolidated Statements of Changes in Stockholders’

Equity for the years ended December 31,

2021, 2020 and 2019

F-10

Notes to the Consolidated Financial Statements

F-11

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 preparation 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, management

has

concluded that ABB’s internal control over financial reporting

was effective as of December 31, 2021.

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, 2021, which

is included on page F-5 of this Annual

Report.

/s/ B

JÖRN

OSENGREN

Chief Executive Officer

/s/ T

IMO

HAMUOTILA

Chief Financial Officer

Zurich, February 24, 2022

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, 2021 and 2020, 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, 2021, 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,

2021 and 2020, and the results of its operations and

its

cash flows for each of the years in the three-year

period ended December 31, 2021, 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, 2021,

based on criteria established in Internal Control – Integrated

Framework (2013) issued by the Committee of

Sponsoring Organizations of the Treadway

Commission, and our report dated February 24, 2022,

expressed

an unqualified opinion on the effectiveness of the

Company’s internal control over financial reporting.

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 of 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 in 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.

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, 2021,

the Company reported $23,745 million of revenue from

sales of products, a portion of which related 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.

particular, a high degree of

subjective auditor judgment was required to evaluate the Company’s

estimates

regarding the amount of future direct materials, labor

and subcontract costs, and indirect costs to complete

the contracts.

F-4

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 of 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 $1,322 million, a portion of

which related to unrecognized tax benefits related to transfer

pricing.

We identified the valuation of unrecognized tax

benefits related to transfer pricing as a critical audit

matter. A

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 current year tax positions in

connection with the Company’s intragroup charges

and intragroup sales of goods and services and

comparing the results to the Company’s assessment.

/s/ KPMG AG

We have served as the Company’s auditor

since 2018.

Zurich, Switzerland

February 24, 2022

F-5

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

December 31, 2021, 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, 2021, 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, 2021 and

2020, 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, 2021, and

the related notes (collectively,

the consolidated financial statements), and our report

dated February 24,

2022, 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 24, 2022

F-6

―

ABB Ltd Consolidated Income Statements

Year ended December 31 ($ in millions, except per share data

in $)

2021

2020

2019

Sales of products

23,745

21,214

22,554

Sales of services and other

5,200

4,920

5,424

Total revenues

28,945

26,134

27,978

Cost of sales of products

(16,364)

(15,229)

(15,811)

Cost of services and other

(3,114)

(3,027)

(3,261)

Total cost of sales

(19,478)

(18,256)

(19,072)

Gross profit

9,467

7,878

8,906

Selling, general and administrative expenses

(5,162)

(4,895)

(5,447)

Non-order related research and development expenses

(1,219)

(1,127)

(1,198)

Impairment of goodwill

(311)

Other income (expense), net

2,632

(323)

Income from operations

5,718

1,593

1,938

Interest and dividend income

Interest and other finance expense

(148)

(240)

(215)

Losses from extinguishment of debt

(162)

Non-operational pension (cost) credit

166

(401)

Income from continuing operations before taxes

5,787

841

1,862

Income tax expense

(1,057)

(496)

(772)

Income from continuing operations, net of tax

4,730

345

1,090

Income (loss) from discontinued operations, net of tax

(80)

4,860

438

Net income

4,650

5,205

1,528

Net income attributable to noncontrolling interests

(104)

(59)

(89)

Net income attributable to ABB

4,546

5,146

1,439

Amounts attributable to ABB shareholders:

Income from continuing operations, net of tax

4,625

294

1,043

Income (loss) from discontinued operations, net of tax

(79)

4,852

396

Net income

4,546

5,146

1,439

Basic earnings per share attributable to ABB shareholders:

Income from continuing operations, net of tax

2.31

0.14

0.49

Income (loss) from discontinued operations, net of tax

(0.04)

2.30

0.19

Net income

2.27

2.44

0.67

Diluted earnings per share attributable to ABB shareholders:

Income from continuing operations, net of tax

2.29

0.14

0.49

Income (loss) from discontinued operations, net of tax

(0.04)

2.29

0.19

Net income

2.25

2.43

0.67

Weighted-average number of shares outstanding (in millions) used to

compute:

Basic earnings per share attributable to ABB shareholders

2,001

2,111

2,133

Diluted earnings per share attributable to ABB shareholders

2,019

2,119

2,135

Due to rounding, numbers presented may not add to the

totals provided.

See accompanying Notes to the Consolidated Financial

Statements

F-7

―

ABB Ltd Consolidated Statements of Comprehensive Income

Year ended December 31 ($ in millions)

2021

2020

2019

Net income

4,650

5,205

1,528

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments:

Foreign currency translation adjustments

(521)

498

(130)

Changes attributable to divestments

(9)

519

(2)

Foreign currency translation adjustments

(530)

1,017

(132)

Available-for-sale securities:

Net unrealized gains (losses) arising during the year

(10)

Reclassification adjustments for net (gains) losses included in net income

(5)

(14)

Changes attributable to divestments

(3)

Unrealized gains (losses) on available-for-sale securities

(15)

Pension and other postretirement plans:

Prior service credits arising during the year

Net actuarial gains (losses) arising during the year

411

(200)

(220)

Amortization of prior service credit included in net income

(14)

(11)

(28)

Amortization of net actuarial loss included in net income

Net losses from settlements and curtailments included in net income

518

Changes attributable to divestments

(6)

151

Pension and other postretirement plan adjustments

467

589

(142)

Derivative instruments and hedges:

Net unrealized gains arising during the year

Reclassification adjustments for net (gains) losses included in net income

(13)

(9)

Changes in derivative instruments and hedges

(5)

Total other comprehensive income (loss), net of tax

(83)

1,615

(249)

Total comprehensive income, net of tax

4,567

6,820

1,279

Total

comprehensive income attributable to noncontrolling interests, net of tax

(108)

(86)

(83)

Total comprehensive income attributable to ABB, net of tax

4,459

6,734

1,196

Due to rounding, numbers presented may not add to the

totals provided.

See accompanying Notes to the Consolidated Financial

Statements

F-8

―

ABB Ltd Consolidated Balance Sheets

December 31 ($ in millions, except share data)

2021

2020

Cash and equivalents

4,159

3,278

Restricted cash

323

Marketable securities and short-term investments

1,170

2,108

Receivables, net

6,551

6,820

Contract assets

990

985

Inventories, net

4,880

4,469

Prepaid expenses

206

201

Other current assets

573

760

Current assets held for sale and in discontinued operations

136

282

Total current assets

18,695

19,226

Restricted cash, non-current

300

Property, plant and equipment, net

4,045

4,174

Operating lease right-of-use assets

895

969

Investments in equity-accounted companies

1,670

1,784

Prepaid pension and other employee benefits

892

360

Intangible assets, net

1,561

2,078

Goodwill

10,482

10,850

Deferred taxes

1,177

843

Other non-current assets

543

504

Total assets

40,260

41,088

Accounts payable, trade

4,921

4,571

Contract liabilities

1,894

1,903

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

1,384

1,293

Current operating leases

230

270

Provisions for warranties

1,005

1,035

Other provisions

1,386

1,519

Other current liabilities

4,367

4,181

Current liabilities held for sale and in discontinued operations

381

644

Total current liabilities

15,568

15,416

Long-term debt

4,177

4,828

Non-current operating leases

689

731

Pension and other employee benefits

1,025

1,231

Deferred taxes

685

661

Other non-current liabilities

2,116

2,025

Non-current liabilities held for sale and in discontinued operations

197

Total liabilities

24,303

25,089

Commitments and contingencies

nil

Stockholders’ equity:

Common stock, CHF

0.12

par value

(

2,053

million and

2,168

million shares issued at December 31, 2021 and 2020, respectively)

178

188

Additional paid-in capital

Retained earnings

22,477

22,946

Accumulated other comprehensive loss

(4,088)

(4,002)

Treasury stock, at cost

(

million and

137

million shares at December 31, 2021 and 2020, respectively)

(3,010)

(3,530)

Total ABB stockholders’ equity

15,579

15,685

Noncontrolling interests

378

314

Total stockholders’ equity

15,957

15,999

Total liabilities and stockholders’ equity

40,260

41,088

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 Cash Flows

Year ended December 31 ($ in millions)

2021

2020

2019

Operating activities:

Net income

4,650

5,205

1,528

Loss (income) from discontinued operations, net of tax

(4,860)

(438)

Adjustments to reconcile net income to net cash provided

by operating activities:

Depreciation and amortization

893

915

961

Impairment of goodwill

311

Changes in fair values of investments

(123)

(99)

(5)

Pension and other employee benefits

(216)

(102)

Deferred taxes

(289)

(280)

(83)

Losses from extinguishment of debt

162

Loss (income) from equity-accounted companies

100

(8)

Net loss (gain) from derivatives and foreign exchange

(2)

Net gain from sale of property,

plant and equipment

(38)

(37)

(51)

Net loss (gain) from sale of businesses

(2,193)

(55)

Fair value adjustment on assets and liabilities held for sale

421

Other

117

102

Changes in operating assets and liabilities:

Trade receivables, net

(142)

(100)

(202)

Contract assets and liabilities

186

128

Inventories, net

(771)

196

(182)

Accounts payable, trade

659

(13)

130

Accrued liabilities

454

(92)

(76)

Provisions, net

(48)

243

(36)

Income taxes payable and receivable

117

(76)

(3)

Other assets and liabilities, net

(131)

Net cash provided by operating activities — continuing operations

3,338

1,875

1,899

Net cash provided by (used in) operating activities —

discontinued operations

(8)

(182)

426

Net cash provided by operating activities

3,330

1,693

2,325

Investing activities:

Purchases of investments

(1,528)

(5,933)

(748)

Purchases of property, plant and

equipment and intangible assets

(820)

(694)

(762)

Acquisition of businesses (net of cash acquired) and increases

in cost- and equity-accounted companies

(241)

(121)

(22)

Proceeds from sales of investments

2,272

4,341

749

Proceeds from maturity of investments

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

2,958

(136)

Net cash from settlement of foreign currency derivatives

(121)

138

(76)

Other investing activities

(23)

Net cash provided by (used in) investing activities —

continuing operations

2,671

(2,272)

(651)

Net cash provided by (used in) investing activities —

discontinued operations

(364)

9,032

(164)

Net cash provided by (used in) investing activities

2,307

6,760

(815)

Financing activities:

Net changes in debt with maturities of 90 days or less

(83)

(587)

164

Increase in debt

1,400

343

2,406

Repayment of debt

(1,538)

(3,459)

(2,156)

Delivery of shares

826

412

Purchase of treasury stock

(3,708)

(3,048)

Dividends paid

(1,726)

(1,736)

(1,675)

Dividends paid to noncontrolling shareholders

(98)

(82)

(90)

Other financing activities

(41)

(49)

Net cash used in financing activities — continuing operations

(4,968)

(8,206)

(1,328)

Net cash provided by (used in) financing activities —

discontinued operations

(55)

Net cash used in financing activities

(4,968)

(8,175)

(1,383)

Effects of exchange rate changes on cash and equivalents

and restricted cash

(81)

(28)

Net change in cash and equivalents and restricted cash

588

357

Cash and equivalents and restricted cash, beginning

of period

3,901

3,544

3,445

Cash and equivalents and restricted cash, end of period

4,489

3,901

3,544

Supplementary disclosure of cash flow information:

Interest paid

132

189

284

Income taxes paid

1,292

905

1,005

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 Statements of Changes in Stockholders’ Equity

Accumulated

Additional

other

Total ABB

Non-

Total

Years ended December 31, 2021, 2020 and 2019

Common

paid-in

Retained

comprehensive

Treasury

stockholders’

controlling

stockholders’

($ in millions)

stock

capital

earnings

loss

stock

equity

interests

equity

Balance at January 1, 2019

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 derivative instruments

and 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 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 derivative instruments

and 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 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

Comprehensive income:

Net income

4,546

104

4,650

Foreign currency translation

adjustments, net of tax

(534)

(530)

Effect of change in fair value of

available-for-sale securities, net of tax

(15)

Unrecognized income (expense)

related to pensions and other

postretirement plans, net of tax

467

Change in derivative instruments

and hedges, net of tax

(5)

Total comprehensive income

4,459

108

4,567

Changes in noncontrolling interests

(37)

(20)

(57)

(2)

Dividends to noncontrolling shareholders

(98)

Dividends to shareholders

(1,730)

Cancellation of treasury shares

(10)

(17)

(3,130)

3,157

Share-based payment arrangements

Purchase of treasury stock

(3,682)

Delivery of shares

(84)

(136)

1,046

826

Other

Balance at December 31, 2021

178

22,477

(4,088)

(3,010)

15,579

378

15,957

Due to rounding, numbers presented may not add to the totals provided.

See accompanying Notes to the Consolidated Financial Statements

F-11

—

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 ($ or USD) unless otherwise stated. Due to rounding,

numbers presented may not add to the totals

provided. The par value of 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 reallocation of certain real estate assets, previously

reported within Corporate and Other,

into the

operating segments which utilize the assets.

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 of

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-12

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 of business or other major parts of the

Company. A component

may be a reportable

segment or an operating segment, a 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 and in discontinued operations 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-13

•

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

‑

overhead costs, used in determining the percentage

‑

completion on projects where revenue is

recognized over time,

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 are not readily

available are classified as “Restricted cash”.

Marketable securities and short

‑

term investments

Management determines the appropriate classification

of held

‑

maturity and available

‑

for

‑

sale debt

securities at the time of purchase. Debt securities are

classified as held

‑

maturity when the Company has

the positive intent and ability to hold the securities to maturity.

Held

‑

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

‑

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.

F-14

In addition, equity securities without readily determinable

fair values

are remeasured if there is an observable

price change in an orderly transaction for the same investment,

or if a qualitative assessment indicates that

the investment is impaired and the fair value of the investment

is less than its carrying amount. Similar to

other fair value changes as described above, depending

on the nature of the investment, this fair value

change is either recorded in “Other income (expense), net”

or “Interest and other finance expense”.

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 at 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

forward looking estimates. The Company’s accounts

receivable are first grouped by the individual legal entity

which generally has a geographic concentration of receivables,

resulting in different risk levels for different

entities. Receivables are then further subdivided within

the entity into 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.

F-15

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

‑

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.

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

‑

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

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

‑

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.

F-16

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.

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 contro

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.

F-17

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.

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 reviews

performed in 2021 and 2020,

respectively, 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 involves

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 an impairment charge equal to the

difference, provided that the loss

recognized does not exceed the total amount of goodwill allocated

to that reporting unit.

F-18

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.

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 at 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

The Company evaluates if a contract contains a lease

at inception of the contract. A contract is or contains

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 the

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 is 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-19

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

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 it 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 of 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 or income tax

credits are reported net.

F-20

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.

‑

based payment arrangements

The Company has various share

‑

based payment arrangements for its employees, which are described

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 reflects the Company’s assumptions

about market data.

F-21

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

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, cross-currency 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

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,

related 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.

F-22

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.

The Company generally provides for anticipated costs

for warranties when it delivers the related products.

Warranty costs include calculated costs arising

from imperfections in design, material and workmanship

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, or 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

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 be 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 assumptions,

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 as 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,

‑

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 as 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.

F-23

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.

New accounting pronouncements

Applicable for current period

Simplifying the accounting for income taxes

In January 2021, the Company adopted a new accounting sta

ndard update, 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. Depending on the amendment,

the adoption was applied on either a retrospective, modified

retrospective, or prospective basis. This update

does not have a significant impact on the Company’s

Consolidated Financial Statements.

Applicable for future periods

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. This update, along with clarifications outlined

in a subsequent update issued in January 2021, can be

adopted and applied no later than December 31,

2022, with early adoption permitted. The Company does

not expect this update to have a significant impact

on its Consolidated Financial Statements.

Business Combinations — Accounting for contract assets

and contract liabilities from contracts with

customers

In October 2021, an accounting standard update was issued

which provides guidance on the accounting for

revenue contracts acquired in a business combination.

The update requires contract assets and liabilities

acquired in a business combination to be recognized and

measured at the date of acquisition in accordance

with the principles for recognizing revenues from contracts

with customers.

This update is effective

prospectively for the Company for annual and interim reporting

periods beginning January 1, 2023, with early

adoption permitted in any interim period. The Company

does not expect this update to have a significant

impact on its Consolidated Financial Statements.

Disclosures about government assistance

In November 2021, an accounting standard update was issued which

requires entities to disclose certain

types of government assistance. Under the update, the Company

is required to annually disclose (i) the type

of the assistance received, including any significant terms

and conditions, (ii) its related accounting policy,

and (iii) the effect such transactions have on its financial

statements. The update is effective either

prospectively for all in-scope transactions at the date of adoption

or retrospectively,

for annual periods

beginning January 1, 2022, with early adoption permitted. The

Company will adopt this update prospectively

as of January 1, 2022. The Company does not expect

this update to have a significant impact on its

Consolidated Financial Statements.

F-24

—

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 Energy Ltd,

formerly Hitachi ABB Power Grids Ltd (“Hitachi Energy”).

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 was

deemed to have been both divested and reacquired at

its fair value on July 1,

2020. The Company also obtained a put option,

exercisable with three-months’ notice commencing in

April

2023 (to be effective from July 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 as an equity-method investment

and also accounted

for as part of the proceeds for the sale of the entire Power

Grids business (see Note 4).

In connection with the divestment, the Company recorded

liabilities 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

Hitachi Energy,

costs to be incurred by

the Company for the direct benefit of Hitachi Energy and an amount

due to Hitachi Ltd in connection with the

expected purchase price finalization of the closing debt and

working capital balances. In October 2021, the

Company and Hitachi concluded an agreement to settle the various

amounts owing by the Company.

The net

difference between the agreed amounts and the

amounts

initially estimated by the Company was recorded in

2021 in discontinued operations as an adjustment to “Net gain

recognized on sale of the Power Grids

business”

in the table below.

During 2021 and 2020, total cash payments (including

the amounts paid under

the settlement agreement) of $

364

million and $

million, respectively,

were made in connection with these

liabilities. At December 31, 2021, the remaining amount

recorded was $

150

million.

As a result of the Power Grids sale, the Company recognized

an initial net gain of $

5,141

million, net of

transaction costs, for the sale of the entire Power Grids

business 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

were estimated or otherwise subject to change in

value and in 2021 the Company recorded adjustments,

including the agreed settlement amount referred to

above, reducing the total net gain by $

million. Certain remaining minor obligations relating to

the

divestment continue to be subject to uncertainty and will

be adjusted in future periods but these adjustments

are not expected to have a material impact on the Consolidated

Financial Statements.

In 2020, the Company recorded $

262

million in Income tax expense within discontinued operations

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

the Company not yet having transferred legal titles to Hitachi were

accounted for as being sold from the initial

divestment date since control of the business as well as

all risks and rewards of the business were fully

transferred to Hitachi Energy.

At December 31, 2021, substantially all of these delayed

entities have been

legally transferred to Hitachi. The proceeds for these entities were

included in the cash proceeds described

above and certain funds were placed in escrow pending completion

of the transfer process. At December 31,

2021 and 2020, current restricted cash includes $

million and $

302

million, respectively,

relating to these

proceeds.

F-25

In connection with the divestment, the Company recognized liabilities

in discontinued operations for certain

indemnities (see Note 15 for additional information) and

also recorded an initial liability of $

258

million

representing the fair value of the right granted to Hitachi

Energy 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 Energy 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 2021

and 2020, the Company recognized within its continuing

operations, general and administrative expenses

incurred to perform the TSAs, offset by $

173

million and $

million, respectively,

in TSA-related income for

such services that is reported in Other income (expense

), net.

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 Energy.

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 Energy.

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)

2021

2020

2019

Total

revenues

4,008

9,037

Total

cost of sales

(3,058)

(6,983)

Gross profit

950

2,054

Expenses

(18)

(808)

(1,394)

Change to net gain recognized on sale of the Power Grids business

(65)

5,141

Income (loss) from operations

(83)

5,282

660

Net interest income (expense) and other finance expense

(5)

(61)

Non-operational pension (cost) credit

(94)

Income (loss) from discontinued operations before taxes

(81)

5,182

605

Income tax

(322)

(167)

Income (loss) from discontinued operations, net of tax

(80)

4,860

438

Of the total Income (loss) from discontinued operations

before taxes in the table above, $

(80)

million,

5,170

million and $

566

million in 2021, 2020 and 2019, respectively,

are attributable to the Company,

while

the remainder is attributable to noncontrolling interests.

F-26

Until the date of the divestment, Income (loss) 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 and $

225

million in 2020 and 2019, 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 of Corporate and Other.

In the table above, Net interest income (expense)

and other finance expense in 2020 and 2019 includes $

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.

Included in the reported Total

revenues of the Company for 2020 and 2019

are revenues for sales from the

Company’s operating segments to the Power Grids business

of $

108

million and $

213

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 Energy are reported

as third-party revenues.

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 (loss) 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, 2021 ($ in millions)

2021

(1)

2020

(1)

Receivables, net

131

280

Inventories, net

Other current assets

Current assets held for sale and in discontinued operations

136

282

Accounts payable, trade

188

Other liabilities

310

456

Current liabilities held for sale and in discontinued operations

381

644

Other non-current liabilities

197

Non-current liabilities held for sale and in discontinued operations

197

(1)

At December

31, 2021

and 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)

2021

2020

2019

Purchase price for acquisitions (net of cash acquired)

212

Aggregate excess of purchase price over fair value of net assets acquired

(1)

161

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.

F-27

In the table above, the “Purchase price for acquisitions”

and “Aggregate excess of purchase price over fair

value of net assets acquired” amounts for 2021, relate

primarily to the acquisition of ASTI Mobile Robotics

Group SL (ASTI). In 2020 and 2019, there were no significant

acquisitions.

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.

On August 2, 2021, the Company acquired the shares of ASTI.

ASTI is headquartered in Burgos, Spain, and

is a global autonomous mobile robot (AMR) manufacturer.

The resulting cash outflows for the Company

amounted to $

186

million (net of cash acquired). The acquisition expands the

Company’s robotics and

automation offering in its Robotics & Discrete Automation

operating segment.

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 acquisition in 2018 of GEIS

(General Electric’s global electrification solutions business)

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”.

Acquisition of noncontrolling interests

In connection with the divestment of its Power Grids business

to Hitachi (see Note 3), the Company retained

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 Energy 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 by

Hitachi 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.

Hitachi also holds a call option which would require the

Company to sell the remaining

19.9

percent interest

in Hitachi Energy at a price consistent with what was paid

by Hitachi to acquire the initial

80.1

percent or at

fair value, if higher. The option

is exercisable with three-months’ notice from April 2023, to

be effective from

July 2023.

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 Energy.

As a

result, the investment (including the value of the option)

is accounted for using the equity method.

F-28

The difference between the initial carrying value

of the Company's investment in Hitachi Energy at fair

value

and its proportionate share of the underlying net assets

created basis differences of $

8,570

million

1,705

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

6,026

Less: Amount attributed to noncontrolling interest

(451)

Basis difference

8,570

(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 related 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, 2021, 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

of ownership is as follows:

Ownership as of

Carrying value at December 31,

($ in millions, except ownership share in %)

December 31, 2021

2021

2020

Hitachi Energy Ltd

19.9%

1,609

1,710

Others

Total

1,670

1,784

In 2021, 2020 and 2019,

the Company recorded its share of the earnings of investees

accounted for under

the equity method of accounting in Other income (expense),

net, as follows:

($ in millions)

2021

2020

2019

Income from equity-accounted companies, net of taxes

Basis difference amortization (net of deferred income tax benefit)

(138)

(95)

Income (loss) from equity-accounted companies

(100)

(66)

F-29

Business divestments

In 2021, the Company received proceeds (net of transactions

costs and cash disposed) of $

2,958

million,

relating to divestments of consolidated businesses and recorded

gains of $

2,193

million in “Other income

(expense), net” on the sales of such businesses. These are primarily

due to the divestment of the Company’s

Mechanical Power Transmission Division

(Dodge) to RBC Bearings Inc. Certain amounts included

in the net

gain for the sale of the Dodge business 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 2021, 2020 and 2019 “Income from

continuing operations before taxes”, included net income of $

115

million, $

million and $

111

million,

respectively, from the

Dodge business which, prior to its sale was part of

the Company’s Motion operating

segment.

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.

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 $33 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.

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.

F-30

—

Note 5

Cash and equivalents, marketable securities and short-term investments

Cash and equivalents and marketable securities and short

‑

term investments consisted of the following:

Marketable

securities

Gross

and

unrealized

Cash and

short-term

December 31, 2021 ($ in millions)

Cost basis

gains

losses

Fair value

equivalents

investments

Changes in fair value recorded in

net income

Cash

2,752

Time deposits

2,037

1,737

300

Equity securities

569

587

5,358

5,376

4,489

887

Changes in fair value recorded in

other comprehensive income

Debt securities available-for-sale:

—U.S. government obligations

203

(1)

209

—Corporate

(1)

277

(2)

283

Total

5,635

(2)

5,659

4,489

1,170

Of which:

—Restricted cash, current

—Restricted cash, non-current

300

Marketable

securities

Gross

and

unrealized

Cash and

short-term

December 31, 2020 ($ 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

Total

5,972

6,009

3,901

2,108

Of which:

—Restricted cash, current

323

—Restricted cash, non-current

300

F-31

Contractual maturities

Contractual maturities of debt securities consisted of the following:

Available-for-sale

December 31, 2021 ($ in millions)

Cost basis

Fair value

Less than one year

One to five years

178

181

Six to ten years

Due after ten years

Total

277

283

At December 31, 2021 and 2020, 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.

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 to 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

to 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.

F-32

Interest rate risk

The Company has issued bonds at fixed rates. Interest

rate swaps and cross-currency interest rate swaps

are used to manage the interest rate and foreign currency

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.

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

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)

2021

2020

2019

Foreign exchange contracts

11,276

12,610

15,015

Embedded foreign exchange derivatives

815

1,134

924

Cross-currency interest rate swaps

906

—

Interest rate contracts

3,541

3,227

5,188

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

2021

2020

2019

Copper swaps

metric tonnes

36,017

39,390

42,494

Silver swaps

ounces

2,842,533

1,966,677

2,508,770

Aluminum swaps

metric tonnes

7,125

8,112

8,388

Equity derivatives

At December 31, 2021, 2020 and 2019, 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.

F-33

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. The

Company applies cash flow hedge accounting in only

limited cases.

In these cases, the effective portion of the changes

in their fair value is recorded in “Accumulated other

comprehensive loss” and subsequently reclassified into earnings

in the same line item and in the same

period as the underlying hedged transaction affects earnings.

In 2021, 2020 and 2019, there were

significant amounts recorded for cash flow hedge accounting

activities.

Fair value hedges

reduce its interest rate exposure arising primarily from its

debt issuance activities, the Company uses

interest rate swaps and cross-currency interest rate swap

s. Where such instruments are designated as fair

value hedges, the changes in the fair value of these instruments,

as well as the changes in the 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 derivative instruments, designated

and qualifying as fair value hedges, on the Consolidated

Income Statements was as follows:

($ in millions)

2021

2020

2019

Gains (losses) recognized in Interest and other finance expense:

Interest rate contracts

Designated as fair value hedges

(55)

Hedged item

(11)

(38)

Cross-currency

Designated as fair value hedges

(37)

—

interest rate swaps

Hedged item

—

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-34

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

2021

2020

2019

Foreign exchange contracts

Total

revenues

(7)

Total

cost of sales

(53)

(64)

SG&A expenses

(1)

(11)

Non-order related research and

development

(2)

Interest and other finance

expense

(173)

207

(122)

Embedded foreign exchange contracts

Total

revenues

(7)

(34)

Total

cost of sales

(2)

(1)

(6)

Commodity contracts

Total

cost of sales

Other

Interest and other finance

expense

Total

(145)

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:

Derivative assets

Derivative liabilities

Current in

Non-current

Current in

Non-current

“Other

in “Other

“Other

in “Other

current

non-current

current

non-current

December 31, 2021 ($ in millions)

assets”

liabilities”

Derivatives designated as hedging instruments:

Foreign exchange contracts

—

Interest rate contracts

—

Cross-currency interest rate swaps

—

109

Cash-settled call options

—

Total

114

Derivatives not designated as hedging instruments:

Foreign exchange contracts

108

107

Commodity contracts

—

Interest rate contracts

—

Embedded foreign exchange derivatives

Total

138

130

Total fair value

176

133

131

F-35

Derivative assets

Derivative liabilities

Current in

Non-current

Current in

Non-current

“Other

in “Other

“Other

in “Other

current

non-current

current

non-current

December 31, 2020 ($ 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

‑

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, 2021 and 2020, 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, 2021 and 2020, information related

to these offsetting arrangements was as

follows:

December 31, 2021 ($ in millions)

Gross amount of

Derivative liabilities

Cash

Non-cash

Type of agreement or

recognized

eligible for set-off in

collateral

Net asset

similar arrangement

assets

case of default

received

exposure

Derivatives

200

(104)

—

Total

200

(104)

—

December 31, 2021 ($ in millions)

Gross amount of

Derivative liabilities

Cash

Non-cash

Type of agreement or

recognized

eligible for set-off in

collateral

Net liability

similar arrangement

liabilities

case of default

pledged

exposure

Derivatives

238

(104)

—

134

Total

238

(104)

—

134

F-36

December 31, 2020 ($ in millions)

Gross amount of

Derivative liabilities

Cash

Non-cash

Type of agreement or

recognized

eligible for set-off in

collateral

Net asset

similar arrangement

assets

case of default

received

exposure

Derivatives

410

(106)

—

304

Total

410

(106)

—

304

December 31, 2020 ($ in millions)

Gross amount of

Derivative liabilities

Cash

Non-cash

Type of agreement or

recognized

eligible for set-off in

collateral

Net liability

similar arrangement

liabilities

case of default

pledged

exposure

Derivatives

147

(106)

—

Total

147

(106)

—

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:

Total

December 31, 2021 ($ in millions)

Level 1

Level 2

Level 3

fair value

Assets

Securities in “Marketable securities and short-term investments”:

Equity securities

587

Debt securities—U.S. government obligations

209

Debt securities—Corporate

Derivative assets—current in “Other current assets”

176

Derivative assets—non-current in “Other non-current assets”

Total

209

878

—

1,087

Liabilities

Derivative liabilities—current in “Other current liabilities”

133

Derivative liabilities—non-current in “Other non-current liabilities”

131

Total

—

264

—

264

F-37

Total

December 31, 2020 ($ 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—Other 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

During 2021, 2020 and 2019 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 2021 and 2020, the Company recognized,

in “Other income (expense), net”, net fair value gains of

108

million and $

million, respectively,

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 were determined using Level 2

inputs. The carrying values of

these investments at December 31, 2021 and 2020 totaled

169

million and $

105

million.

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-38

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 for details). Apart from the transactions

above, there were

additional significant non

‑

recurring fair value measurements during 2021 and 2020

Disclosure about financial instruments carried on a

cost basis

The fair values of financial instruments carried on a cost

basis were as follows:

Carrying

Total

December 31, 2021 ($ 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

2,422

Time deposits

1,737

Restricted cash

Marketable securities and short-term investments (excluding

securities):

Time deposits

300

Restricted cash, non-current

300

Liabilities

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

(excluding finance lease obligations)

1,357

1,288

1,357

Long-term debt (excluding finance lease obligations)

4,043

4,234

4,292

Carrying

Total

December 31, 2020 ($ 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

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 in

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.

F-39

•

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).

—

Note 8

Receivables, net and Contract assets and liabilities

“Receivables, net” consisted of the following:

December 31, ($ in millions)

2021

2020

Trade receivables

6,206

6,417

Other receivables

684

760

Allowance

(339)

(357)

Total

6,551

6,820

“Trade receivables” in the table above includes

contractual retention amounts billed to customers of

119

million and $

146

million at December 31, 2021 and 2020, 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, 2021,

percent and

percent are expected to be collected in 2022 and

2023, 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)

2021

2020

2019

Balance at January 1,

357

228

219

Transition adjustment

Current-period provision for expected credit losses

115

Write-offs charged against the allowance

(37)

(42)

(19)

Exchange rate differences

(14)

(3)

Balance at December 31,

339

357

228

The following table provides information about Contract assets

and Contract liabilities:

($ in millions)

2021

2020

2019

Contract assets

990

985

1,025

Contract liabilities

1,894

1,903

1,719

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-40

The significant changes in the Contract assets and Contract

liabilities balances were as follows:

2021

2020

Contract

($ in millions)

assets

liabilities

assets

liabilities

Revenue recognized, which was included in the Contract liabilities

balance at January 1, 2021/2020

(1,086)

(1,011)

Additions to Contract liabilities - excluding amounts recognized as

revenue during the period

1,136

1,129

Receivables recognized that were included in the Contract assets

balance at January 1, 2021/2020

(566)

(680)

The Company considers its order backlog to represent

its unsatisfied performance obligations. At

December 31, 2021, the Company had unsatisfied performance

obligations totaling $

16,607

million and, of

this amount, the Company expects to fulfill approximately

percent of the obligations in 2022,

approximately

percent of the obligations in 2023 and the balance thereafter.

—

Note 9

Inventories, net

“Inventories, net” consisted of the following:

December 31, ($ in millions)

2021

2020

Raw materials

2,136

1,785

Work in process

995

1,020

Finished goods

1,594

1,499

Advances to suppliers

155

165

Total

4,880

4,469

—

Note 10

Property,

plant and equipment, net

“Property, plant and equipment,

net” consisted of the following:

December 31, ($ in millions)

2021

2020

Land and buildings

3,925

3,889

Machinery and equipment

5,785

6,144

Construction in progress

522

505

10,232

10,538

Accumulated depreciation

(6,187)

(6,364)

Total

4,045

4,174

F-41

Assets under finance leases included in “Property,

plant and equipment, net” were as follows:

December 31, ($ in millions)

2021

2020

Land and buildings

164

169

Machinery and equipment

256

248

Accumulated depreciation

(123)

(111)

Total

133

137

In 2021, 2020 and 2019 depreciation, including depreciation

of assets under finance leases, was

575

million, $

586

million and $

616

million, respectively.

In 2021, 2020 and 2019 there were no significant

impairments of property,

plant or equipment.

—

Note 11

Goodwill and intangible assets

The changes in “Goodwill” were as follows:

Robotics &

Process

Discrete

Corporate

($ in millions)

Electrification

Motion

Automation

and Other

Total

Balance at January 1, 2020

4,372

2,436

1,615

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

(1)

4,527

2,456

1,639

2,228

10,850

Goodwill acquired during the year

—

150

—

161

Goodwill allocated to disposals

—

(338)

(7)

—

(345)

Exchange rate differences and other

(66)

(1)

(19)

(98)

—

(184)

Balance at December 31, 2021

(1)

4,472

2,117

1,613

2,280

10,482

(1)

At December

31, 2021

and 2020,

the gross

goodwill

amounted

to $

10,760

million

and $

11,152

million,

respectively.

The accumulated

impairment

charges amounted

to $

278

million

and $

302

million,

respectively,

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 Process 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.

F-42

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.

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 reporting

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.

During 2021, certain reporting units were split into separate

reporting units. For each change, an interim

quantitative impairment test was conducted before and

after the change and in all cases, it was concluded

that the fair value of the relevant reporting units exceeded

the carrying value by a significant amount.

At October 1, 2021 and 2020, respectively,

the Company 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, the Company concluded that it was

not necessary to perform the quantitative impairment

test.

“Intangible assets, net” consisted of the following:

2021

2020

Gross

Accumu-

Net

Gross

Accumu-

Net

carrying

lated amort-

carrying

lated amort-

carrying

December 31, ($ in millions)

amount

ization

amount

ization

amount

Capitalized software for internal use

835

(732)

103

828

(694)

134

Capitalized software for sale

(29)

(32)

Intangibles other than software:

Customer-related

1,716

(707)

1,009

2,557

(1,104)

1,453

Technology

-related

1,122

(868)

254

1,170

(898)

272

Marketing-related

493

(327)

166

492

(304)

188

Other

(29)

(33)

Total

4,253

(2,692)

1,561

5,143

(3,065)

2,078

In 2021 and 2020, additions to intangible assets were $

million and $

million, respectively

There were no significant intangible assets acquired in

business combinations during 2021 and 2020.

F-43

Amortization expense of intangible assets consisted of

the following:

($ in millions)

2021

2020

2019

Capitalized software for internal use

Intangibles other than software

252

268

271

Total

318

329

345

In 2021, 2020 and 2019,

impairment charges on intangible assets were not

significant.

At December 31, 2021, future amortization expense of intangible

assets is estimated to be:

($ in millions)

2022

276

2023

249

2024

199

2025

155

2026

142

Thereafter

540

Total

1,561

—

Note 12

Debt

The Company’s total debt at December 31, 2021

and 2020, amounted to $

5,561

million and $

6,121

million,

respectively.

Short

‑

term debt and current maturities of lon

g̩

‑

term debt

“Short

‑

term debt and current maturities of long

‑

term debt” consisted of the following:

December 31, ($ in millions)

2021

2020

Short-term debt (weighted-average interest rate of

3.2

% and

2.8

%, respectively)

153

Current maturities of long-term debt

(weighted-average nominal interest rate of

2.8

% and

3.2

%, respectively)

1,306

1,140

Total

1,384

1,293

Short

‑

term debt primarily represents

short

‑

term loans from various banks and issued commercial

paper.

At December 31, 2021, 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, 2021 and 2020,

amount was outstanding under the $

billion Euro-

commercial paper program. At December 31, 2021,

amount was outstanding under the $

billion program

in the United States, while $

million was outstanding at December 31, 2020.

F-44

In December 2019, the Company replaced its previous

multicurrency revolving credit facility with a new

billion multicurrency revolving credit facility maturing

in 2024. In 2021, the Company exercised its option

further extend the maturity of this facility to 2026.

The facility is for general corporate purposes. Interest

costs

on drawings under the facility are LIBOR (for drawings

in currencies for which LIBOR is still published) and

EURIBOR for EURO drawings, plus a margin of

0.175

percent, while commitment fees (payable on the

unused portion of the facility) amount to

percent of the margin, which represents commitment fees

0.06125

percent per annum. Utilization fees, payable on drawings,

amount to

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, 2021 and 2020, 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. For certain non-U.S. dollar

denominated debt, the Company utilizes cross-

currency interest rate swaps to effectively convert the

debt into a U.S. dollar obligation. The carrying value

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 ra

te and

cross-currency interest rate swaps. Consequently,

a fixed

‑

rate debt subject to a fixed

‑

floating interest rate

swap is included as a floating rate debt in the table below:

2021

2020

December 31,

Nominal

Effective

Nominal

Effective

($ in millions, except % data)

Balance

rate

Balance

rate

Floating rate

3,598

1.2

0.3

3,330

1.6

0.2

Fixed rate

1,885

3.0

3.1

2,638

3.2

3.3

5,483

5,968

Current portion of long-term debt

(1,306)

2.8

1.0

(1,140)

3.2

2.6

Total

4,177

4,828

At December 31, 2021, the principal amounts of long

‑

term debt repayable (excluding finance lease

obligations) at maturity were as follows:

($ in millions)

2022

1,271

2023

794

2024

1,156

2025

2026

Thereafter

2,085

Total

5,362

F-45

Details of outstanding bonds were as follows:

2021

2020

December 31, (in millions)

Nominal

Carrying

Nominal

Carrying

outstanding

value

(1)

outstanding

value

(1)

Bonds:

4.0

% USD Notes, due 2021

USD

650

649

2.25

% CHF Bonds, due 2021

CHF

350

403

2.875

% USD Notes, due 2022

USD

1,250

1,258

USD

1,250

1,280

0.625

% EUR Instruments, due 2023

EUR

700

800

EUR

700

875

0.75

% EUR Instruments, due 2024

EUR

750

860

EUR

750

946

0.3

% CHF Bonds, due 2024

CHF

280

306

CHF

280

317

3.8

% USD Notes, due 2028

(2)

USD

383

381

USD

383

381

1.0

% CHF Bonds, due 2029

CHF

170

186

CHF

170

192

% EUR Notes, due 2030

EUR

800

862

—

4.375

% USD Notes, due 2042

(2)

USD

609

589

USD

609

589

Total

5,242

5,632

(1)

USD carrying

values include

unamortized

debt issuance

costs, bond

discounts

or premiums,

as well as

adjustments

for fair value

hedge

accounting,

where appropriate.

(2)

Prior to completing

a cash tender

offer in

2020, the

original

principal

amount outstanding,

on each

of the

3.8

% USD Notes,

due 2028,

and

the

4.375

% USD Notes,

due 2042,

was $

750

million.

During 2021, the Company repaid at maturity its

4.0

% USD Notes and its

2.25

% CHF Bonds. The

4.0

% USD Notes paid interest semi

‑

annually in arrears, while the

2.25

% CHF Bonds paid interest annually in

arrears. The Company had entered into interest rate swaps

to hedge its interest obligations on the

2.25

CHF 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 at December 31, 2020, in the

table

of long-term debt above.

During 2020, in connection with exercising certain early

redemption options on the $

250

million

5.625

USD Notes due 2021 and $

450

million

3.375

% USD Notes due 2023, and the partial redemption

through a

cash tender offer of the

3.8

% USD Notes due 2028 and

4.375

% USD Notes due 2042, the Company

recognized losses on extinguishment of debt of $

162

million, representing the premium associated with the

early redemption, as well as the recognition of the relevant

remaining unamortized issuance premium or

discounts and issuance costs.

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

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. In reliance on Rule 13

‑

01 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.

During 2020, by way of a cash tender offer,

the Company redeemed $

141

million of the original $

750

million

4.375

% USD Notes due 2042 issued.

F-46

The

0.625

% EUR Instruments, due 2023 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 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 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

three months

prior to their maturity 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 Notes terms, plus interest

accrued at the redemption date. On or after January 3, 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. During 2020 by way

of a cash tender offer,

the Company redeemed

367

million of the original $

750

million

3.8

% USD Notes due 2028 issued. 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. In

reliance on Rule 13-01 of Regulation S

‑

X, the separate financial statements of ABB Finance (USA)

Inc. are

not provided.

In February 2019, the Company issued the following notes:

(i) CHF

280

million of

0.3

% CHF Bonds, due

2024 and (ii) CHF

170

million of

1.0

% CHF Bonds, 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).

In January 2021, the Company issued zero 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). These instruments do not

pay interest and have the same early

redemption terms as the

0.625

% EUR Instruments above. In line with the Company’s

policy of reducing its

currency and interest rate exposures, cross-currency

interest rate swaps have been used to modify the

characteristics of these instruments. After considering the impact

of these cross-currency interest rate swaps,

the Company effectively has a floating rate U.S.

dollar obligation.

The Company’s various debt instruments contain cross

‑

default clauses which would allow the bondholders to

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, 2021 and 2020, are

finance lease obligations, bank borrowings of subsidiaries and other

long

‑

term debt, none of which is

individually significant.

F-47

Subsequent events

At February 23, 2022, the amount outstanding under the

billion Euro-commercial paper program was

475

million.

—

Note 13

Other provisions, other current liabilities and other non-current liabilities

“Other provisions” consisted of the following:

December 31, ($ in millions)

2021

2020

Contract-related provisions

762

754

Restructuring and restructuring-related provisions

188

292

Provision for insurance-related reserves

174

176

Provisions for contractual penalties and compliance and litigation matters

113

Other

199

184

Total

1,386

1,519

“Other current liabilities” consisted of the following:

December 31, ($ in millions)

2021

2020

Employee-related liabilities

1,547

1,467

Accrued expenses

768

650

Non-trade payables

644

622

Income taxes payable

378

395

Accrued customer rebates

322

317

Other tax liabilities

298

286

Derivative liabilities (see Note 6)

133

145

Deferred income

130

Pension and other employee benefits

Accrued interest

Other

113

Total

4,367

4,181

“Other non

‑

current liabilities” consisted of the following:

December 31, ($ in millions)

2021

2020

Income tax related liabilities

1,458

1,423

Derivative liabilities (see Note 6)

130

Provisions for contractual penalties and compliance and litigation matters

129

120

Deferred income

138

Employee-related liabilities

Environmental provisions

Other

227

190

Total

2,116

2,025

F-48

—

Note 14

Leases

The Company’s lease obligations primarily relate to real

estate, machinery and equipment. The components

of lease expense were as follows:

Machinery

Land and buildings

and equipment

Total

($ in millions)

2021

2020

2019

2021

2020

2019

2021

2020

2019

Operating lease cost

240

287

268

101

313

376

369

Finance lease cost

Short-term lease cost

Sub-lease income

(24)

(20)

(2)

(1)

(25)

(21)

(2)

Total lease expense

259

297

299

106

135

152

365

432

451

The following table presents supplemental cash flow information

related to leases:

Machinery

Land and buildings

and equipment

Total

($ in millions)

2021

2020

2019

2021

2020

2019

2021

2020

2019

Operating leases:

Cash paid under operating cash flows

223

263

252

291

346

348

Right-of-use assets obtained

in exchange for new liabilities

267

266

153

353

323

205

In 2021, 2020 and 2019 the cash flow amounts under finance

leases were not significant.

At December 31, 2021, 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

2022

197

2023

164

2024

134

2025

109

2026

Thereafter

154

Total minimum lease payments

839

142

149

Difference between undiscounted cash flows

and discounted cash flows

(59)

(3)

(28)

(1)

Present value of minimum lease payments

780

139

121

F-49

The following table presents certain information related

to lease terms and discount rates:

Land and

Machinery

buildings

and equipment

2021

2020

2019

2021

2020

2019

Operating Leases:

Weighted-average remaining term (months)

Weighted-average discount rate

2.6%

3.0%

1.9%

2.0%

2.2%

Finance Leases:

Weighted-average remaining term (months)

100

107

110

Weighted-average discount rate

7.7%

8.2%

1.8%

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, 2021, amounts to

million and $

134

million, respectively,

and at December 31, 2020, amounts to $

million and

160

million, respectively.

—

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 to 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

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 Investigatin

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 authorities in their review of the

Kusile project and is in discussions with them regarding a coordinated

resolution.

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.

F-50

Liabilities recognized

At December 31, 2021 and 2020, the Company had aggregate

liabilities of $

104

million and $

100

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.

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.

Maximum potential payments

(1)

December 31, ($ in millions)

2021

2020

Performance guarantees

4,540

6,726

Financial guarantees

339

Indemnification guarantees

(2)

136

177

Total

4,728

7,242

(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, 2021 and 2020, amounted to $

156

million and $

135

million, respectively,

the majority of which is included in discontinued

operations.

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, 2021 and 2020,

the maximum potential payable under these

guarantees amounts to $

911

million and $

994

million, respectively,

and these guarantees have various

maturities ranging from

five

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 Energy Ltd,

formerly 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 these guarantees

at December 31, 2021 and 2020, is

approximately $

3.2

billion and $

5.5

billion, respectively,

and the carrying amounts of liabilities (recorded in

discontinued operations) at December 31, 2021 and 2020,

amounted to $

136

million and $

135

million,

respectively.

F-51

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, 2021 and 2020, the total

outstanding performance bonds aggregated to $

3.6

billion and $

4.3

billion, respectively,

of which $

0.1

billion

and $

0.3

billion, respectively,

relate to discontinued operations. There have been no significant

amounts

reimbursed to financial institutions under these types of

arrangements in 2021 and 2020.

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)

2021

2020

2019

Balance at January 1,

1,035

816

948

Net change in warranties due to acquisitions, divestments and

liabilities held for sale

(1)

(88)

Claims paid in cash or in kind

(222)

(209)

(310)

Net increase in provision for changes in

estimates, warranties issued and warranties expired

226

369

276

Exchange rate differences

(35)

(10)

Balance at December 31,

1,005

1,035

816

(1)

Includes adjustments

to the initial

purchase price

allocation

recorded

during the

measurement

period.

In 2020, 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

143

million during 2020. 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-52

—

Note 16

Income taxes

“Income tax expense” consisted of the following:

($ in millions)

2021

2020

2019

Current taxes

1,346

776

855

Deferred taxes

(289)

(280)

(83)

Income tax expense allocated to continuing operations

1,057

496

772

Income tax expense allocated to discontinued operations

322

167

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)

2021

2020

2019

Income from continuing operations before income taxes

5,787

841

1,862

Weighted-average global tax rate

23.7%

22.9%

18.3%

Income taxes at weighted-average tax rate

1,371

193

341

Items taxed at rates other than the weighted-average tax rate

176

(7)

Unrecognized tax benefits

151

(38)

133

Changes in valuation allowance, net

(95)

198

Effects of changes in tax laws and enacted tax rates

Non-deductible / non-taxable items

(542)

232

Other, net

(5)

Income tax expense from continuing operations

1,057

496

772

Effective tax rate for the year

18.3%

59.0%

41.5%

The allocation of consolidated income from continuing operations,

which is predominantly earned outside of

Switzerland, impacts the “weighted-average global tax rate”.

In 2021, gains on sales of businesses increased

the weighted-average global tax rate by approximately

percent. In 2019, based on the enacted tax rates

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 2021, “Items taxed at rates other than the weighted-average

tax rate” included $

107

million for certain

amounts related to the divestment of the Dodge business

In 2020 and 2019, the amount was not significant.

In 2021, “Changes in valuation allowance, net” included positive

impacts from changes

in certain outlooks in

Europe of $

million.

In 2020, “Changes in valuation allowance, net” predominantly

reflects

increases in the valuation allowance

resulting from changes in the expectations at that time of future

economic conditions due to impacts at that

time on the Company’s business from the COVID-19

pandemic.

F-53

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.

There were no significant impacts from “Effects

of changes in tax laws and enacted tax rates”

in 2021. In

2020, the amount primarily reflects the impact of changes

to tax rates in certain countries in Asia for

million. In 2019, the amount 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 2021, “Non-deductible / non-taxable items” includes $

567

million in benefits primarily due to impacts of

divestments and internal reorganizations where the reported

net gain from sale of businesses exceeded the

related taxable gain as well as the impact of a recognition of

previously unrecognized outside basis

differences. In 2020, the negative impact was

232

million, and included $

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 / non-taxable items” also

includes other items that were deducted for financial

accounting purposes but are typically not tax deductible, such

as certain interest expense costs, local taxes

on productive activities, disallowed amounts for meals and

entertainment expenses and other similar items.

The amounts in 2019 related primarily to these typically

non-deductible items.

In 2021 and 2019, “Unrecognized tax benefits” in the table

above included a net cost of $

150

million and

million, respectively,

related to the interpretation for tax law and double

tax treaty agreements by

competent tax authorities. In 2020, “Unrecognized tax

benefits” included a benefit of $

million.

In 2020, “Other, net” includes

an expense of $

million, related to finalization of tax audits in Europe.

F-54

Deferred tax assets and liabilities (excluding amounts

held for sale and in discontinued operations) consisted

of the following:

December 31, ($ in millions)

2021

2020

Deferred tax assets:

Unused tax losses and credits

551

758

Provisions and other accrued liabilities

757

750

Other current assets including receivables

104

114

Pension

338

413

Inventories

266

370

Intangible assets

1,135

901

Other

Total gross deferred tax asset

3,208

3,354

Valuation allowance

(1,263)

(1,518)

Total gross deferred tax asset, net of valuation allowance

1,945

1,836

Deferred tax liabilities:

Property, plant and equipment

(245)

(275)

Intangible assets

(281)

(419)

Other assets

(107)

Pension

(302)

(223)

Other liabilities

(175)

(268)

Inventories

(35)

(29)

Unremitted earnings of subsidiaries

(308)

(333)

Total gross deferred tax liability

(1,453)

(1,654)

Net deferred tax asset (liability

)

492

182

Included in:

“Deferred taxes”—non-current assets

1,177

843

“Deferred taxes”—non-current liabilities

(685)

(661)

Net deferred tax asset (liability)

492

182

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,

2021 and 2020, in the

table above, included $

million and $

170

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, 2021, 2020

and 2019, was $

1,263

million, $

1,518

million and

1,632

million, respectively.

At December 31, 2021 and 2020, deferred tax liabilities

totaling $

308

million and $

333

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 of 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-55

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 2021 and 2020, certain taxes arose

in certain foreign jurisdictions for which the technical

merits do not allow utilization of benefits. At

December 31, 2021 and 2020, 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, 2021, net operating loss carry

‑

forwards of $

2,170

million and tax credits of $

million were

available to reduce future income taxes of certain subsidiaries.

Of these amounts, $

1,258

million of operating

loss carry-forwards and $

million of tax credits will expire in varying amounts

through 2045, 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, 2019

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

Net change due to acquisitions and divestments

(6)

Increase relating to prior year tax positions

240

298

Decrease relating to prior year tax positions

(42)

(3)

(45)

Increase relating to current year tax positions

105

Decrease due to settlements with tax authorities

(175)

(20)

(195)

Decrease as a result of the applicable statute of limitations

(72)

(22)

(94)

Exchange rate differences

(41)

(7)

(48)

Balance at December 31, 2021, which would, if recognized, affect

the effective tax rate

1,322

199

1,521

In 2021, “Increase relating to current year tax positions”

included a total of $

million in taxes related to the

interpretation of tax law and double tax treaty agreements by competent

tax authorities.

F-56

In 2020 and 2019, “Increase relating to current year tax

positions” included a total of $

381

million and

163

million, respectively,

in taxes related to the interpretation of tax law and double

tax treaty agreements by

competent tax authorities. In 2020, $

301

million of the $

381

million is reported as Income tax expense in

discontinued operations.

In 2021, “Increase relating to prior year tax positions” included

a total of $

240

million related to the

interpretation of tax law and double tax treaty agreements by competent

tax authorities in Europe.

In 2020, “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 2021, “Decrease relating to prior year tax positions” included

a total of $

million related to tax risk

assessments in Europe of $

million.

In 2020, “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 2021, “Decrease due to settlements with tax authorities”

is predominantly related to tax assessments

received in Europe.

In 2020, “Decrease due to settlements with tax authorities”

is predominantly related to closed tax audits in

Europe.

At December 31, 2021, 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, 2021, the earliest significant open tax years

that remained subject to examination were the

following:

Region

Year

Europe

2015

United States

2018

Rest of Americas

2017

China

2012

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, 2021, 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 local government and tax

requirements.

F-57

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 of $

520

million which were 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.

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)

2021

2020

2021

2020

2021

2020

Benefit obligation at January 1,

3,870

4,308

5,527

7,878

110

Service cost

Interest cost

(5)

111

Contributions by plan participants

Benefit payments

(130)

(160)

(207)

(295)

(9)

(12)

Settlements

(124)

(101)

(84)

(2,542)

Benefit obligations of businesses acquired (divested)

(765)

(46)

(165)

(11)

(5)

Actuarial (gain) loss

(140)

(15)

214

(8)

Plan amendments and other

(64)

(2)

(3)

Exchange rate differences

(134)

365

(200)

286

Benefit obligation at December 31,

3,434

3,870

5,115

5,527

Fair value of plan assets at January 1,

4,133

4,189

4,608

6,246

Actual return on plan assets

279

191

197

375

Contributions by employer

228

124

611

Contributions by plan participants

Benefit payments

(130)

(160)

(207)

(295)

(9)

(12)

Settlements

(124)

(101)

(84)

(2,542)

Plan assets of businesses acquired (divested)

(664)

(50)

(82)

Plan amendments and other

Exchange rate differences

(144)

378

(147)

221

Fair value of plan assets at December 31,

4,113

4,133

4,463

4,608

Funded status — overfunded (underfunded)

679

263

(652)

(919)

(71)

(98)

F-58

The amounts recognized in "Accumulated other comprehensive

loss" and "Noncontrolling interests" were:

Defined pension

Other postretirement

benefits

December 31, ($ in millions)

2021

2020

2019

2021

2020

2019

Net actuarial (loss) gain

(1,540)

(2,038)

(2,782)

Prior service credit

Amount recognized in OCI

(1)

and NCI

(2)

(1,468)

(1,963)

(2,723)

Taxes

associated with amount recognized

in OCI and NCI

352

374

536

—

Amount recognized in OCI and NCI, net of tax

(3)

(1,116)

(1,589)

(2,187)

(1)

OCI represents

“Accumulated

other comprehensive

loss”.

(2)

NCI represents

“Noncontrolling

interests”.

(3)

NCI, net of

tax, amounted

to $

million,

(1)

million

and $

(1)

million

at December

31, 2021,

2020 and

2019.

In addition, the following amounts were recognized

in the Company's Consolidated Balance Sheets:

Defined pension

Other postretirement

benefits

Switzerland

International

December 31, ($ in millions)

2021

2020

2021

2020

2021

2020

Overfunded plans

683

267

208

—

Underfunded plans — current

(23)

(22)

(7)

(9)

Underfunded plans — non-current

(4)

(837)

(989)

(64)

(89)

Funded status - overfunded (underfunded)

679

263

(652)

(919)

(71)

(98)

December 31, ($ in millions)

2021

2020

Non-current assets

Overfunded pension plans

891

359

Other employee-related benefits

Pension and other employee benefits

892

360

December 31, ($ in millions)

2021

2020

Current liabilities

Underfunded pension plans

(23)

(22)

Underfunded other postretirement benefit plans

(10)

(9)

Other employee-related benefits

(8)

(11)

Pension and other employee benefits

(41)

(42)

December 31, ($ in millions)

2021

2020

Non-current liabilities

Underfunded pension plans

(841)

(993)

Underfunded other postretirement benefit plans

(62)

(89)

Other employee-related benefits

(122)

(149)

Pension and other employee benefits

(1,025)

(1,231)

F-59

The accumulated benefit obligation (ABO) for all defined benefit

pension plans was $

8,452

million and

9,310

million at December 31, 2021 and 2020, 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 of plan assets, was:

PBO exceeds fair value of plan assets

ABO exceeds fair value of plan assets

December 31,

Switzerland

International

Switzerland

International

($ in millions)

2021

2020

2021

2020

2021

2020

2021

2020

PBO

2,994

5,131

2,979

5,008

ABO

2,917

5,056

2,905

4,942

Fair value of plan assets

2,133

4,120

2,119

4,004

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)

2021

2020

2019

2021

2020

2019

2021

2020

2019

Operational pension cost:

Service cost

113

Operational pension cost

113

Non-operational pension cost (credit):

Interest cost

(5)

111

174

Expected return on plan assets

(116)

(123)

(112)

(178)

(253)

(276)

Amortization of prior service cost (credit)

(9)

(11)

(14)

(2)

(3)

(2)

(5)

Amortization of net actuarial loss

109

108

(2)

(3)

Curtailments, settlements and special

termination benefits

644

(10)

Non-operational pension cost (credit)

(129)

(115)

(100)

(34)

613

(3)

(2)

(14)

Net periodic benefit cost

(68)

(41)

(24)

705

148

(2)

(1)

(13)

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 Consolidated

Income Statements. Net periodic benefit cost

includes $

121

million and $

million in 2020 and 2019, respectively,

related to discontinued operations.

Assumptions

The following weighted-average assumptions were used

to determine benefit obligations:

Defined pension

Other postretirement

benefits

Switzerland

International

December 31, (in %)

2021

2020

2021

2020

2021

2020

Discount rate

0.2

2.1

1.6

2.6

2.1

Rate of compensation increase

—

1.5

1.0

0.3

0.2

Rate of pension increase

—

1.7

1.4

—

Cash balance interest credit rate

1.0

2.1

—

F-60

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.

The following weighted-average assumptions were used

to determine the “Net periodic benefit cost”:

Defined pension

Other postretirement

benefits

Switzerland

International

(in %)

2021

2020

2019

2021

2020

2019

2021

2020

2019

Discount rate

0.3

0.8

1.6

1.9

2.8

2.1

2.8

3.9

Expected long-term rate of return on plan

assets

3.0

4.0

4.3

4.9

—

Rate of compensation increase

—

1.0

2.2

2.4

0.2

Cash balance interest credit rate

1.0

2.1

1.6

—

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.

The Company maintains other postretirement benefit plans, which

are generally contributory with participants’

contributions adjusted annually.

The assumptions used were:

December 31,

2021

2020

Health care cost trend rate assumed for next year

5.1%

5.9%

Rate to which the trend rate is assumed to decline (the ultimate trend rate)

4.5%

4.9%

Year that the rate reaches the ultimate trend rate

2026

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 portfolios

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.

F-61

The boards 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.

Equity securities primarily include 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, 2021, is

3.4

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, 2021 and 2020, 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.

F-62

Not subject

Total

December 31, 2021 ($ in millions)

Level 1

Level 2

to leveling

(1)

fair value

Asset class

Equity

Equity securities

124

125

Mutual funds/commingled funds

1,049

Emerging market mutual funds/commingled funds

218

Fixed income

Government and corporate securities

314

1,366

1,680

Government and corporate—mutual funds/commingled funds

3,121

Emerging market bonds—mutual funds/commingled funds

428

Real estate

1,326

Insurance contracts

Cash and short-term investments

158

233

Private equity

257

322

Total

513

6,480

1,583

8,576

Not subject

Total

December 31, 2020 ($ 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

(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 $

125

million and $

115

million at

December 31, 2021 and 2020, respectively.

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.

F-63

Contributions

Employer contributions were as follows:

Defined pension

Other postretirement

benefits

Switzerland

International

($ in millions)

2021

2020

2021

2020

2021

2020

Total

contributions to defined benefit pension

and other postretirement benefit plans

228

124

611

Of which, discretionary contributions to

defined benefit pension plans

152

520

The total contributions included non-cash contributions

totaling $

million and $

224

million, respectively,

for

2021 and 2020, of available-for-sale debt securities to

certain of the Company’s pension plans.

The Company expects to contribute approximately $

108

million to its defined benefit pension plans in 2022.

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 2022.

The Company also contributes to a number of defined contribution

plans. The aggregate expense for these

plans in continuing operations was $

278

million, $

205

million and $

190

million in 2021, 2020 and 2019,

respectively. Contributions

to multi-employer plans were not significant in 2021, 2020

and 2019.

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, 2021, are

as follows:

Defined pension

Other postretirement

benefits

($ in millions)

Switzerland

International

2022

256

265

2023

241

257

2024

226

255

2025

220

256

2026

213

259

Years 2027 - 2031

977

1,299

—

Note 18

Share-based 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 2021, 2020 and 2019, 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 2021, 2020 and 2019 was not significant.

F-64

At December 31, 2021, 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

million shares

held by the Company as treasury stock at December 31,

2021, 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 2021

and

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

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.

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

Expected volatility

19%

Dividend yield

4.7%

Expected term

6 years

Risk-free interest rate

-0.9%

F-65

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, 2021

336.1

67.2

21.16

Exercised

(4)

(160.0)

(32.0)

20.25

Forfeited

(1.7)

(0.3)

20.31

Outstanding at December 31, 2021

174.4

34.9

22.00

2.4

450

Vested and expected to vest

at December 31, 2021

174.4

34.9

22.00

2.4

450

Exercisable at December 31, 2021

158.5

31.7

22.30

2.3

400

(1)

Information

presented

reflects

the number

of ABB Ltd

shares that

can be received

upon exercise,

as options

have a conversion

ratio of

: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

Swiss francs.

(4)

The cash received

upon exercise

amounted

to approximately

693

million.

The shares

were delivered

out of treasury

stock.

At December 31, 2021, the total unrecognized compensation

cost related to non

‑

vested options granted

under the MIP was not significant.

The weighted

‑

average grant

‑

date fair value (per option) of options granted

during 2019 was

0.34

Swiss francs. As mentioned previously,

no options were granted in 2021 and 2020. In

2021 and 2020, the aggregate intrinsic value (on the date of

exercise) of options exercised was

approximately $

313

million and $

million, respectively,

while the amount in 2019 was not significant.

Presented below is a summary,

by launch, related to options outstanding at December

31, 2021:

Weighted-

average

Number of

remaining

options

contractual

Exercise price (in Swiss francs)

(1)

(in millions)

(2)

term (in years)

21.50

9.3

1.9

0.7

22.50

63.4

12.7

1.6

23.50

61.6

12.3

2.7

19.00

40.1

8.0

3.7

Total number of options and shares

174.4

34.9

2.4

(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

the outstanding WARs. To

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 of the liability for the WARs.

The total impact in Selling, general and administrative

expenses in 2021, 2020 and 2019 was not significant.

F-66

The aggregate fair value of outstanding WARs

was $

million and $

million at December 31, 2021 and

2020, 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:

(in millions)

Number of WARs

Outstanding at January 1, 2021

22.1

Exercised

(12.6)

Forfeited

(0.1)

Outstanding at December 31, 2021

9.4

Exercisable at December 31, 2021

3.8

The aggregate fair value at date of grant of WARs

granted in 2019 was not significant. As mentioned

previously,

grants were made in 2021 and 2020 under the MIP.

In 2021 and 2020, share

‑

based liabilities

of $

million and $

million, respectively,

were paid upon exercise of WARs by

participants. The amounts

in 2019 were not significant.

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,

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

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.

2021

2020

2019

Expected volatility

20%

24%

18%

Dividend yield

2.9%

3.8%

4.1%

Expected term

1 year

Risk-free interest rate

-0.6%

-0.7%

F-67

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, 2021

2.1

22.87

Granted

1.8

30.32

Forfeited

(0.1)

22.87

Exercised

(4)

(1.7)

22.87

Not exercised (savings returned plus interest)

(0.3)

22.87

Outstanding at December 31, 2021

1.8

30.32

0.8

8.3

Vested and expected to vest at December 31, 2021

1.7

30.32

0.8

7.9

Exercisable at December 31, 2021

—

(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

Swiss francs.

(4)

The cash received

in 2021 from

exercises

was approximately

million.

The shares

were delivered

out of treasury

stock.

The exercise prices per ABB Ltd share and per ADS of

30.32

Swiss francs and $

33.35

, respectively,

for the

2021 grant,

22.87

Swiss francs and $

24.93

, respectively,

for the 2020 grant, and

20.78

Swiss francs and

20.17

, respectively,

for the 2019 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.

At December 31, 2021, 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 2021, 2020 and 2019 was

1.96

Swiss francs,

1.67

Swiss francs and

1.05

Swiss francs,

respectively. The total

intrinsic value (on the date of exercise) of options exercised

in 2021 was approximately

million, while in 2020 and 2019 it 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.

Starting with 2020, certain of the employee group

previously eligible to receive grants under the MIP have been

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 2021, 2020 and 2019

LTIP launches

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).

F-68

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 on 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 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 2021 and 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, 2021

1.3

12.76

Granted

0.9

38.92

Vested

(0.4)

25.78

Forfeited

(0.3)

19.82

Nonvested at December 31, 2021

1.5

23.23

The aggregate fair value, at the dates of grant, of Performance

Shares granted in 2021 and 2019 was

million and $

million, respectively,

while in 2020 it was not significant. The total grant-date

fair value of

shares that vested during 2019 was $

million. The amounts in 2021 and 2020 were not significant.

The

weighted-average grant-date fair value (per share) of shares

granted during 2021, 2020 and 2019 was

38.92

Swiss francs,

10.50

Swiss francs and

15.94

Swiss francs, respectively.

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 a

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, 2021

1.2

15.80

Granted

0.9

26.39

Forfeited

(0.1)

18.09

Nonvested at December 31, 2021

2.0

20.61

The aggregate fair value, at the dates of grant, of Restricted

Shares granted in 2021 and 2020 was

million and $

million, respectively.

The weighted

‑

average grant

‑

date fair value (per share) of shares

granted during 2021 and 2020 was

26.39

Swiss francs and

15.76

Swiss francs, respectively.

F-69

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 as 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, 2021, 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

years. The

compensation cost recorded in 2021, 2020 and 2019

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 2021,

2020 and 2019 was not significant.

—

Note 19

Stockholders' equity

At December 31, 2021, the Company had

2,557

million authorized shares, of which

2,053

million were

registered and issued. At December 31, 2020, the Company

had

2,672

million authorized shares, of which

2,168

million were registered and issued.

At the Annual General Meeting of Shareholders (AGM) in

March 2021, 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 $

1,730

million with the Company disbursing a portion in March 2021

and the

remaining amounts in April 2021. At the 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 of

0.80

Swiss francs per share. The

approved dividend distribution amounted to $

1,675

million and was paid in May 2019.

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

initial share buyback program was executed on a

second trading line on the SIX Swiss Exchange and was

completed in March 2021. Through this buyback

program, the Company purchased a total of approximately

129

million shares for approximately $

3.5

billion,

of which approximately

million shares (resulting in an increase in Treasury

stock of $

628

million) were

purchased in 2021 and approximately

109

million shares (resulting in an increase in Treasury

Stock of

2,835

million) were purchased in 2020. At the AGM on March

25, 2021, shareholders approved the

cancellation of

115

million of the shares purchased under this buyback program

and the cancellation was

completed in the second quarter of 2021, resulting in a

decrease in Treasury stock of $

3,157

million and a

corresponding total decrease in Capital stock, Additional paid-in

capital and Retained earnings.

F-70

In March 2021, the Company announced a follow-up share

buyback program of up to $

4.3

billion. This

buyback program, which was launched in April 2021,

is being executed on a second trading line on the SIX

Swiss Exchange and is planned to run until the Company’s

AGM in March 2022. Through this follow-up

buyback program, the Company purchased, in 2021, approximately

million shares, resulting in an increase

in Treasury stock of $

2,022

million. At the March 2022 AGM, the Company intends

to request shareholder

approval to cancel the shares purchased through this follow-up

share buyback program as well as those

shares purchased under the initial share buyback program

that were not proposed for cancellation at the

Company’s AGM in March 2021.

In addition to the ongoing share buyback program, in 2021

and 2020, the Company purchased

million and

million, respectively,

of its own shares on the open market, mainly for

use in connection with its employee

share plans, resulting in an increase in Treasury

stock of $

1,032

million and $

346

million, respectively.

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,

2021, such call options representing

5.4

million shares and with strike prices ranging from

19.00

23.50

Swiss francs (weighted

‑

average strike price of

21.93

Swiss francs) were held by the bank. The call

options expire in periods ranging from August 2022 to

August 2025. However, only

3.5

million of these

instruments, with strike prices ranging from

19.00

23.50

Swiss francs (weighted

‑

average strike price of

22.64

Swiss francs), could be exercised at December

31, 2021, under the terms of the agreement with the

bank.

In addition to the above, at December 31, 2021, the Company

had further outstanding obligations to deliver:

•

up to

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

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

million shares relating to the options granted under the 2018

launch of the MIP,

with a

strike price of

23.50

Swiss francs, vested in August 2021 and expiring in August

2024,

•

up to

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

million shares relating to the ESAP,

vesting and expiring in October 2022,

•

up to

million shares to Eligible Participants under the

2021, 2020 and 2019 launches of the

LTIP,

vesting and expiring in April 2024, April 2023 and

May 2022, respectively,

and

•

approximately

million shares in connection with certain other share

‑

based payment

arrangements with employees.

See Note 18 for a description of the above share

‑

based payment arrangements.

In 2021 and 2020, the Company delivered approximately

million and

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 2021, 2020 and 2019, the Company delivered

1.7

million,

1.4

million and

0.5

million shares,

respectively, out

of treasury stock under the ESAP.

F-71

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.

December 31, 2021, the total unconsolidated stockholders’

equity of ABB Ltd was

6,837

million Swiss francs

7,490

million), including

246

million Swiss francs ($

270

million) representing share capital,

9,443

million

Swiss francs ($

10,345

million) representing reserves and

2,853

million Swiss francs ($

3,125

million)

representing a reduction of equity for own shares (treasury

stock). Of the reserves,

2,853

million Swiss francs

3,125

million) relating to own shares and

million Swiss francs ($

million) representing

percent of

share capital, are restricted and not available for distribution.

In February 2022, the Company announced that a proposal

will be put to the 2022 AGM for approval by the

shareholders to distribute

0.82

Swiss francs per share to shareholders.

Subsequent events

Subsequent to December 31, 2021, and up to February

23, 2022, the Company purchased, under the follow-

up share buyback program, an additional

million shares, for approximately $

735

million, and, on the open

market, an additional

million shares, for approximately $

326

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 and 2019, outstanding

securities representing a maximum of

million and

million shares, respectively,

were excluded from the calculation of diluted earnings

per share as their

inclusion would have been antidilutive.

None

were excluded in 2021.

Basic earnings per share:

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

2021

2020

2019

Amounts attributable to ABB shareholders:

Income from continuing operations, net of tax

4,625

294

1,043

Income (loss) from discontinued operations, net of tax

(79)

4,852

396

Net income

4,546

5,146

1,439

Weighted-average number of shares outstanding (in millions)

2,001

2,111

2,133

Basic earnings per share attributable to ABB shareholders:

Income from continuing operations, net of tax

2.31

0.14

0.49

Income (loss) from discontinued operations, net of tax

(0.04)

2.30

0.19

Net income

2.27

2.44

0.67

F-72

Diluted earnings per share:

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

2021

2020

2019

Amounts attributable to ABB shareholders:

Income from continuing operations, net of tax

4,625

294

1,043

Income (loss) from discontinued operations, net of tax

(79)

4,852

396

Net income

4,546

5,146

1,439

Weighted-average number of shares outstanding (in millions)

2,001

2,111

2,133

Effect of dilutive securities:

Call options and shares

Adjusted weighted-average number of shares outstanding (in millions)

2,019

2,119

2,135

Diluted earnings per share attributable to ABB shareholders:

Income from continuing operations, net of tax

2.29

0.14

0.49

Income (loss) from discontinued operations, net of tax

(0.04)

2.29

0.19

Net income

2.25

2.43

0.67

F-73

—

Note 21

Other comprehensive income

The following table includes amounts recorded within

“Total

other comprehensive income (loss)”

including the

related income tax effects:

2021

2020

2019

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

(521)

500

(2)

498

(130)

Changes attributable to divestments

(9)

—

(9)

519

—

519

(2)

—

(2)

Net change during the year

(530)

1,019

(2)

1,017

(132)

Available-for-sale securities:

Net unrealized gains (losses) arising

during the year

(13)

(10)

(7)

(2)

Reclassification adjustments for net

(gains) losses included in net income

(6)

(5)

(18)

(14)

(1)

Changes attributable to divestments

—

(3)

—

(3)

—

Net change during the year

(19)

(15)

(3)

Pension and other postretirement plans:

Prior service (costs) credits arising

during the year

(2)

(12)

Net actuarial gains (losses) arising

during the year

437

(26)

411

(243)

(200)

(293)

(220)

Amortization of prior service cost (credit)

included in net income

(14)

(11)

(25)

(3)

(28)

Amortization of net actuarial loss included

in net income

113

(25)

(31)

Net losses from settlements and curtailments

included in net income

650

(132)

518

(6)

Changes attributable to divestments

(8)

(6)

186

(35)

151

Net change during the year

489

(22)

467

750

(161)

589

(178)

(142)

Derivative instruments and hedges:

Net gains (losses) arising during the year

Reclassification adjustments for net (gains)

losses included in net income

(13)

(2)

(9)

Net change during the year

(6)

(5)

Total other comprehensive income (loss)

(66)

(17)

(83)

1,779

(164)

1,615

(282)

(249)

F-74

The following table shows changes in “Accumulated other

comprehensive loss”

(OCI) attributable to ABB, by

component, net of tax:

Unrealized

Pension and

Foreign

gains (losses)

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	6th grade Good

ABB (ABLZF) 20-F2021 FY Annual report (foreign)

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