20-F

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As filed with the Securities and Exchange Commission on May 27, 2005

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

o	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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)

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

Title of each class	Name of each exchange on which registered
American Depositary Shares, each representing one Registered Share	New York Stock Exchange
Registered Shares, par value CHF 2.50	New York Stock Exchange*

*

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.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 2,070,314,947 Registered Shares

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 ý        No o

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o        Item 18 ý

TABLE OF CONTENTS

			Page
PART I			4
	Item 1.	Identity of Directors, Senior Management and Advisers	4
	Item 2.	Officer Statistics and Expected Timetable	4
	Item 3.	Key Information	4
	Item 4.	Information on the Company	20
	Item 5.	Operating and Financial Review and Prospects	43
	Item 6.	Directors, Senior Management and Employees	114
	Item 7.	Major Shareholders and Related Party Transactions	126
	Item 8.	Financial Information	130
	Item 9.	The Offer and Listing	133
	Item 10.	Additional Information	139
	Item 11.	Quantitative and Qualitative Disclosures About Market Risk	155
	Item 12.	Description of Securities Other than Equity Securities	156
PART II			157
	Item 13.	Defaults, Dividend Arrearages and Delinquencies	157
	Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	157
	Item 15.	Controls and Procedures	157
	Item 16A.	Audit Committee Financial Expert	158
	Item 16B.	Code of Ethics	158
	Item 16C.	Principal Accountant Fees and Services	158
	Item 16D.	Exemptions from the Listing Standards for Audit Committees.	159
	Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers.	160
PART III			161
	Item 17.	Financial Statements	161
	Item 18.	Financial Statements	161
	Item 19.	Exhibits	162

i

INTRODUCTION

        ABB Ltd is a corporation organized under the laws of Switzerland. In this report, "the ABB Group," "ABB," "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 report under "Item 4. Information on the Company—Introduction—History of the ABB Group." Our American Depositary Shares (each representing one of our registered shares) are referred to as "ADSs." The registered shares of ABB Ltd are referred to as "shares."

        Our principal corporate offices are located at Affolternstrasse 44, CH-8050 Zurich, Switzerland, telephone number +41-43-317-7111.

FINANCIAL AND OTHER INFORMATION

        ABB Ltd has prepared its statutory unconsolidated financial statements in accordance with the Swiss Federal Code of Obligations. The consolidated financial statements of ABB Ltd, including the notes thereto, as of December 31, 2004, 2003 and 2002 and for the years then ended (our "Consolidated Financial Statements") have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP").

        In this report: (i) "$," "U.S. dollars" and "USD" refer to the lawful currency of the United States of America; (ii) "CHF" and "Swiss francs" refer to the lawful currency of Switzerland; (iii) "€," "EUR" and "euro" refer to the lawful currency of the participating member states of the European Union (the "EU"); (iv) "SEK" and "Swedish krona" refer to the lawful currency of Sweden; (v) "£," "sterling," "pounds sterling" and "GBP" refer to the lawful currency of the United Kingdom; (vi) "Norwegian krone" refers to the lawful currency of Norway; and (vii) "Chinese renminbi" refers to the lawful currency of the People's Republic of China.

        Except as otherwise stated, all monetary amounts in this 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. These translations have been made using the noon buying rate in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York as of December 31, 2004, unless otherwise indicated. The noon buying rate for Swiss francs on December 31, 2004 was $1.00 = CHF 1.1412. The noon buying rate for Swiss francs on May 25, 2005 was $1.00 = CHF 1.2264.

FORWARD-LOOKING STATEMENTS

        This report includes forward-looking statements. 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 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 industry in which we operate.

        These forward-looking statements include, but are not limited to the following:

•

statements in "Item 3. Key Information—Dividends and Dividend Policy" regarding our policy on future dividend payments;

1

•

statements in "Item 5. Operating and Financial Review and Prospects" and "Item 8. Financial Information—Legal Proceedings" regarding the expected outcome of our proposed pre-packaged plans of reorganization under Chapter 11 of the U.S. Bankruptcy Code for our subsidiaries Combustion Engineering and Lummus and the outcome of certain compliance matters under investigation;



•

statements in "Item 3. Key Information—Risk Factors," "Item 4. Information on the Company" and "Item 5. Operating and Financial Review and Prospects" regarding our management objectives and the timing of intended disposals; and



•

statements in "Item 5. Operating and Financial Review and Prospects" regarding our management objectives, as well as trends in results, prices, volumes, operations, margins and overall market trends.

        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 the actual results of our operations, financial condition and liquidity, and the development of the countries and the industries in which we operate may differ materially from those described in or suggested by the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and liquidity, and the development of the countries and the industries in which we operate, are consistent with the forward-looking statements contained in this 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 report and include, without limitation, the following:

•

We are subject to ongoing litigation and potentially substantial liabilities arising out of asbestos claims.



•

If we are not able to comply with the covenants contained in our $1 billion credit facility, our financial position may be adversely affected.



•

Our ability to bid for large contracts depends on our ability to obtain performance guarantees from financial institutions.



•

We have retained performance guarantees related to our divested power generation business.



•

Undertaking long-term fixed price projects exposes our businesses to risk of loss.



•

Our international operations expose us to the risk of fluctuations in currency exchange rates.



•

Our hedging activities may not protect us against the consequences of significant fluctuations in exchange rates on our earnings and cash flows.



•

We operate in very competitive markets and could be adversely affected if we fail to keep pace with technological changes.



•

Industry consolidation could result in more powerful competitors and fewer customers.



•

Our business is affected by the global economic and political climate.



•

We have retained liability for environmental remediation costs relating to businesses that we sold in 2000, and we could be required to make payments in respect of these retained liabilities in excess of established reserves.



•

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.

2

•

We may be the subject of product liability claims.



•

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.



•

Our reputation and our ability to do business may be impaired by corrupt behavior by any of our employees or agents or those of our subsidiaries.



•

Our Oil, Gas and Petrochemicals business may experience losses if the oil and gas industry generally experiences a downturn.



•

Increase in the costs of our raw materials may adversely affect our financial performance.



•

If we are unable to successfully address the material weaknesses in our internal control over financial reporting, our ability to report our financial results on a timely and accurate basis may be adversely affected. As a result, investors could lose confidence in our financial reporting, which may harm our business and the trading price of our stock.

        We urge you to read the sections of this 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 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 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 report.

3

PART I

Item 1.    Identity of Directors, Senior Management and Advisers

        Not applicable

Item 2.    Officer Statistics and Expected Timetable

        Not applicable

Item 3.    Key Information

SELECTED FINANCIAL DATA

        The following table presents our selected financial and operating information at the dates and for each of the periods indicated. You should read the following information together with the information contained in "Item 5. Operating and Financial Review and Prospects," as well as our Consolidated Financial Statements and the notes thereto, included elsewhere in this report.

        Our selected financial data are presented in the following tables in accordance with U.S. GAAP and have been derived from our published consolidated financial statements.

        The consolidated financial statements and other financial data included in this report reflect restatements we made in September 2004, when we restated certain financial statements contained in our annual report for the year ended December 31, 2003, as published in our Form 20-F filed with the U.S. Securities and Exchange Commission in April 2004. The amendments reflected restatements of our consolidated financial statements at December 31, 2003 and 2002 and for each of the years in the three-year period ended December 31, 2003, and of certain financial data at December 31, 2001 and 2000, and for the year ended December 31, 2000. These changes were intended to correct the effect of earnings overstatements by the medium-voltage business unit of our Power Technologies division in Italy on its previously reported financial statement results.

        The cumulative effect of these overstatements on our earnings before interest and taxes and net income was approximately $73 million and $89 million, respectively, from the first quarter of 1998 through the end of March 2004. The negative impact on income tax expense results from the inability to claim tax benefits under Italian tax law for adjustments made to improperly filed tax returns for the years 1998 through 2002, as well as a reassessment of the probability of realization of our deferred tax assets due to a cumulative loss position after the restatement. As compared with financial data originally published, the corrections increased net loss by $12 million ($0.01 per share basic and diluted), $36 million ($0.04 and $0.03 per share basic and diluted, respectively) and $14 million ($0.02 per share basic and diluted) in 2003, 2002 and 2001, respectively, decreased net income by $17 million ($0.01 and $0.02 per share basic and diluted, respectively) and $6 million ($0.01 per share basic and diluted) in 2000 and 1999, respectively, and decreased stockholders' equity by $109 million at December 31, 2003.

        Our consolidated financial statements at and for each of the years ended December 31, 2004, 2003, 2002 and 2001 were audited by Ernst & Young AG, except for the 2001 consolidated financial statements of ABB Holdings Inc., a wholly owned subsidiary, the 2004, 2003, 2002 and 2001 financial statements of Jorf Lasfar Energy Company, a corporation in which we have a 50 percent interest, the 2002 and 2001 consolidated financial statements of Swedish Export Credit Corporation, in which we had a 35 percent interest at December 31, 2002, and the 2001 financial statements of Scandinavian Reinsurance Company Limited, a then wholly owned subsidiary, which were audited by other independent auditors.

4

        Our consolidated financial statements at and for the year ended December 31, 2000, before the restatement described above with respect to the earnings overstatement at one of our Italian subsidiaries and before reclassifications for operations discontinued, were audited jointly by Ernst & Young AG and KPMG Klynveld Peat Marwick Goerdeler SA. The Consolidated Financial Statements at December 31, 2002, 2001 and 2000 and for each of the years ended December 31, 2001 and 2000, have not been audited after the reclassifications of certain businesses between continuing operations and discontinued operations. The Consolidated Financial Statements at December 31, 2001 and 2000, and for the year ended December 31, 2000, have not been audited after the restatements described above.

INCOME STATEMENT DATA:

	Year ended December 31,
	2004			2003			2002			2001			2000
	(audited)			(audited)			(audited)			(unaudited)			(unaudited)
	(U.S. dollars in millions, except per share data)
Revenues	$	20,721		$	20,427		$	19,472		$	20,058		$	20,052
Cost of sales		(15,757	)		(15,928	)		(15,098	)		(15,211	)		(14,920	)
Gross profit		4,964			4,499			4,374			4,847			5,132
Selling, general and administrative expenses		(3,786	)		(3,917	)		(4,050	)		(4,030	)		(4,082	)
Amortization expense(1)		(45	)		(31	)		(45	)		(203	)		(196	)
Other income (expense), net(2)		(49	)		(194	)		(80	)		(158	)		273
Earnings before interest and taxes		1,084			357			199			456			1,127
Interest and dividend income		164			152			194			353			381
Interest and other finance expense		(387	)		(569	)		(327	)		(580	)		(452	)
Income (loss) from continuing operations before taxes and minority interest		861			(60	)		66			229			1,056
Provision for taxes		(311	)		(245	)		(81	)		(85	)		(309	)
Minority interest		(102	)		(66	)		(111	)		(69	)		(47	)
Income (loss) from continuing operations		448			(371	)		(126	)		75			700
Income (loss) from discontinued operations, net of tax(3)		(483	)		(408	)		(693	)		(755	)		726
Cumulative effect of change in accounting principles (SFAS 133), net of tax(4)		—			—			—			(63	)		—
Net income (loss)	$	(35	)	$	(779	)	$	(819	)	$	(743	)	$	1,426
Basic earnings (loss) per share(5):
Income (loss) from continuing operations	$	0.22		$	(0.30	)	$	(0.11	)	$	0.07		$	0.59
Net Income (loss)	$	(0.02	)	$	(0.64	)	$	(0.74	)	$	(0.66	)	$	1.21
Diluted earnings (loss) per share(5):
Income (loss) from continuing operations	$	0.22		$	(0.30	)	$	(0.27	)	$	0.07		$	0.59
Net Income (loss)	$	(0.02	)	$	(0.64	)	$	(0.86	)	$	(0.66	)	$	1.20

5

BALANCE SHEET DATA:

	December 31,
	2004		2003		2002			2001			2000
	(audited)		(audited)		(unaudited)			(unaudited)			(unaudited)
	(U.S. dollars in millions)
Cash and equivalents	$	3,676	$	4,783	$	2,529		$	2,470		$	1,234
Marketable securities and short-term investments		524		473		589			1,236			2,349
Total assets		24,677		30,401		29,522			32,313			30,967
Long-term borrowings		4,901		6,290		5,358			5,010			3,760
Total debt(6)		5,534		7,934		7,935			9,739			7,262
Capital stock and additional paid-in capital		3,083		3,067		2,027			2,028			2,082
Total stockholders' equity		2,824		2,917		931	(8)		1,938	(8)		5,147	(8)
Net operating assets(7)	$	9,622	$	9,857	$	9,870		$	9,396		$	10,922

CASH FLOW DATA:

	Year ended December 31,
	2004			2003			2002			2001			2000
	(audited)			(audited)			(audited)			(audited)			(unaudited)
	(U.S dollars in millions)
Net cash provided by (used in) operating activities	$	962		$	(173	)	$	—		$	1,983		$	747
Net cash provided by (used in) investing activities		354			754			2,651			(1,218	)		(489	)
Net cash provided by (used in) financing activities	$	(2,805	)	$	1,603		$	(2,793	)	$	677		$	(392	)

OTHER FINANCIAL AND OPERATING DATA:

	Year ended December 31,
	2004		2003		2002		2001			2000
	(audited)		(audited)		(audited)		(unaudited)			(unaudited)
	(U.S dollars in millions)
Purchases of property, plant and equipment	$	543	$	547	$	602	$	761	(8)	$	553
Depreciation and amortization(1)		633		585		611		787	(8)		836
Research and development		690		635		572		602			661
Order-related development(9)	$	727	$	886	$	719	$	824		$	973

(1)

Includes goodwill amortization of $161 million and $155 million in 2001 and 2000, respectively. In accordance with the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, after January 1, 2002, goodwill is no longer amortized but is charged to operations when specified tests indicate that the goodwill is impaired.

(2)

During 2004, 2003, 2002, 2001, and 2000, we incurred restructuring charges and related asset write-downs of $165 million, $340 million, $255 million, $226 million, and $187 million, respectively, relating to a number of restructuring initiatives throughout the world. The restructuring costs incurred in 2002, 2001 and 2000 were accrued in the respective periods pursuant to the requirements of EITF 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). The restructuring costs incurred in 2004 and 2003 were accrued pursuant to the requirements of Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities.

6

(3)

In 2004 and 2003, we recorded net losses of $70 million and $44 million, respectively, and in 2002 we recorded net income of $14 million relating to the upstream part of our Oil, Gas and Petrochemicals businesses. The sale of this business was completed in July 2004. In 2004, 2003, 2002 and 2001, we recorded charges of $262 million, $142 million, $395 million and $470 million, respectively, related to the retained asbestos liability of our disposed power generation segment. During 2000, we recorded gains on the disposal of our power generation segment of approximately $730 million, which included our investment in ABB ALSTOM POWER NV and our nuclear business, which were partly offset by a $70 million provision related to our retained asbestos liability, a $300 million provision for estimated environmental remediation costs, $136 million of accumulated foreign currency translation losses and operating losses associated with these businesses. For additional information, see "Item 5. Operating and Financial Review and Prospects" and Note 18 to the Consolidated Financial Statements. Prior to 2001, we estimated certain reserves for unpaid claims and expenses in our Reinsurance business, which we sold in April 2004, by calculating the present value of funds required to pay losses at future dates. As of 2001, the timing and amount of future claims payments had become more uncertain. Therefore, the discounted value could no longer be reliably estimated. Consequently, we showed the expected future claims at full face value, resulting in a net charge of $295 million in income (loss) from discontinued operations, net of tax in the 2001 Consolidated Income Statement.

(4)

We accounted for the adoption of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), as a change in accounting principle. Based on our outstanding derivatives at January 1, 2001, we recognized the cumulative effect of the accounting change as a loss in the Consolidated Income Statement.

(5)

The number of shares and earnings per share data in the Consolidated Financial Statements have been presented as if ABB Ltd shares had been issued for all periods presented and as if the four-for-one split of ABB Ltd shares in May 2001 had occurred as of the earliest period presented. Basic earnings (loss) per share is calculated by dividing income (loss) by the weighted-average number of shares outstanding during the year. Diluted earnings (loss) per share is calculated by dividing income (loss) 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, if dilutive; the securities issued under the Company's employee incentive plans, if dilutive; and shares issuable in relation to outstanding convertible bonds, if dilutive; and outstanding written put options, for which net share settlement at average market price of our stock was assumed, if dilutive (see Notes 2, 15, 22 and 24 to the Consolidated Financial Statements).

(6)

Total debt, also referred to as total borrowings, is equal to the sum of short-term borrowings and long-term borrowings.

(7)

Net operating assets is calculated based upon total assets (excluding cash and equivalents, marketable securities and short-term investments, current loans receivable, tax assets, assets held for sale and in discontinued operations, prepaid pension and other employee benefits and other assets) less total liabilities (excluding borrowings, tax liabilities, provisions, pension and employee related liabilities, liabilities held for sale and in discontinued operations and certain other liabilities).

(8)

Audited.

(9)

Order-related development activities 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. Order-related development amounts are initially recorded in inventories as part of the work in progress of a contract and then are reflected in cost of sales at the time revenue is recognized in accordance with our accounting policies. These amounts are unaudited.

7

DIVIDENDS AND DIVIDEND POLICY

        Payment of dividends is subject to general business conditions, the ABB Group's current and expected financial condition and performance and other relevant factors including growth opportunities.

        Dividends may be paid only if ABB Ltd has sufficient distributable profits from previous fiscal years or sufficient free reserves to allow the distribution of a dividend. In addition, at least 5 percent of ABB Ltd's annual net profits must be retained and booked as legal reserves, unless these reserves already amount to 20 percent of ABB Ltd's share capital. As a holding company, ABB Ltd's main sources of income are dividend, interest and debt payments from its subsidiaries. At December 31, 2004, of the CHF 8,911 million of stockholders' equity recorded in the unconsolidated statutory financial statements of ABB Ltd prepared in accordance with Swiss law, CHF 5,176 million was attributable to the share capital, CHF 1,780 million was attributable to legal reserves, CHF 412 million was attributable to reserves for treasury, CHF 1,533 million was attributable to other reserves and CHF 11 million was available for distribution.

        ABB Ltd may only pay out a dividend if it has been proposed by a shareholder or the board of directors of ABB Ltd, approved at a general meeting of shareholders and the statutory auditors confirm that the dividend conforms to statutory law and the articles of incorporation of ABB Ltd. In practice, the shareholders' meeting usually approves dividends as proposed by the board of directors, if the board of directors' proposal is confirmed by the statutory auditors.

        Dividends are usually due and payable no earlier than three trading days after the shareholders' resolution. Dividends not collected within five years after the due date accrue to ABB Ltd and are allocated to its other reserves. For information about the deduction of withholding taxes from dividend payments, see "Item 10. Additional Information—Taxation."

        We have established a dividend access facility for shareholders who are resident in Sweden under which these shareholders may register with VPC AB (Sweden) ("VPC"), as holder of up to 600,004,716 shares, and receive dividends in Swedish kronor equivalent to the dividend paid in Swiss francs without deduction of Swiss withholding tax. For further information, see "Item 10. Additional Information—Taxation."

        Because ABB Ltd pays cash dividends, if any, in Swiss francs (subject to the exception for certain shareholders in Sweden described above), 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.

        The following table sets forth in Swiss francs and in U.S. dollars the dividend paid per share with respect to the years ended December 31, 2004, 2003, 2002, 2001 and 2000. On May 12, 2005, at the annual general meeting of shareholders, the shareholders decided that no dividend would be paid with respect to the year ended December 31, 2004.

Year ended December 31,	Dividend per share
	(CHF)	($)
2004	—	—
2003	—	—
2002	—	—
2001	—	—
2000	0.75	0.43	(1)

(1)

The dividend was approved at the annual general meeting held in March 2001 and is converted in dollars at the rate of $1 = CHF1.7258.

8

RISK FACTORS

You should carefully consider all of the information set forth in this report and the following description of risks and uncertainties 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 "Forward-Looking Statements."

        We are subject to ongoing litigation and potentially substantial liabilities arising out of asbestos claims.

        Companies in the ABB group are subject to thousands of lawsuits brought by plaintiffs seeking compensation for personal injuries allegedly resulting from exposure to asbestos. In the United States, our Combustion Engineering subsidiary has been a co-defendant in a large number of these lawsuits, and a smaller number of claims have been brought against two other subsidiaries, ABB Lummus Global Inc. ("Lummus") (which is part of our Oil, Gas and Petrochemicals business and was formerly a subsidiary of Combustion Engineering) and Basic Incorporated ("Basic") (which was a subsidiary of Combustion Engineering and of Asea Brown Boveri Inc. ("Asea Brown Boveri") and is now a subsidiary of ABB Holdings Inc. ("Holdings") following the merger in December 2004 of Asea Brown Boveri into Holdings).

        Since early 2003, we and our subsidiaries have been seeking to resolve our asbestos-related liabilities principally through a proposed plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code for our subsidiary Combustion Engineering. In March 2005, following the ruling of the U.S. Court of Appeals for the Third Circuit in December 2004 (the "Third Circuit Decision") that reversed the lower courts' approval of the original plan, we reached agreement with various parties on basic terms for a modified plan of reorganization for Combustion Engineering (the "Modified CE Plan") and a separate plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code for Lummus (the "Lummus Plan"). The proposed plans do not address Basic, and we expect that Basic's asbestos-related liabilities will have to be resolved through its own bankruptcy or similar U.S. state court liquidation proceeding, or through the tort system.

        We and various other interested parties are now working to reach agreement on open issues, details relating to the Modified CE Plan and the Lummus Plan and the form and substance of the operative documents and related Bankruptcy Court motions and other pleadings. We cannot be certain when those negotiations will be concluded or whether or on what terms the parties will resolve outstanding issues. The Modified CE Plan and the Lummus Plan will become effective only if different classes of their respective creditors vote in favor of the respective plans. The Modified CE Plan and the Lummus Plan will be subject to the approval of the Bankruptcy and District Courts, as well as to further judicial review if appeals are made. While we believe that the Modified CE Plan and the Lummus Plan are consistent with the Third Circuit Decision and other applicable laws and precedents, we cannot be certain whether the courts will approve the plans, nor can we predict whether the plans will receive the needed creditor votes.

        We cannot be certain of the duration of the asbestos-related litigation process, its outcome or its eventual cost to us. We do not know whether any plan of reorganization for Combustion Engineering or Lummus will ultimately be confirmed or whether asbestos-related liabilities of any other ABB group entities would be resolved by any such plan. If for any reason a Chapter 11 plan relating to Combustion Engineering is not eventually confirmed, Combustion Engineering could be required to enter a Chapter 7 proceeding. If for any reason a Chapter 11 plan relating to Lummus is not eventually confirmed, we expect that Lummus' asbestos-related liabilities will have to be resolved through the tort system.

9

        If any ABB group entities are not included in the protection offered by the channeling injunction entered pursuant to any Combustion Engineering plan that is confirmed, such entities could be required to resolve in the tort system, or otherwise, current and future asbestos-related claims that are asserted against such entities. Such events would be subject to numerous uncertainties, risk and expense.

        All of these factors make the ultimate outcome of our efforts to resolve the asbestos-related claims against Combustion Engineering and our other subsidiaries uncertain, and, moreover, could cause our obligations to make payments in respect of asbestos-related claims, indemnity payments and related defense costs to significantly exceed our estimates. From time to time we update our forecasts to take into consideration developments regarding any plan of reorganization, recent claims experience and other developments and such updates may affect our estimates of future asbestos-related liabilities and costs. Any expenses incurred or increases to our asbestos reserves as a result of a delay or abandonment of any plan of reorganization for Lummus or Combustion Engineering, revised forecasts, adverse jury verdicts or court decisions or other negative developments involving resolution of our asbestos-related liabilities, whether through the bankruptcy courts, liquidation proceedings or the tort system, may cause the value or trading prices of our securities to decrease significantly. These negative developments could also cause our credit ratings to be downgraded, restrict our access to the capital markets or otherwise have a material adverse effect on our financial condition, results of operations, cash flows and liquidity.

        If we are not able to comply with the covenants contained in our new $1 billion credit facility, our financial position may be adversely affected.

        We are party to a three-year $1 billion credit facility that became available in December 2003. It contains certain financial covenants in respect of minimum interest coverage, maximum net leverage and a minimum level of consolidated net worth, as well as specific negative pledges. If we are unable to comply with the covenants in the credit facility, we may be required to renegotiate the facility with our lenders or to replace it in order not to default under it. We can offer no assurance that we would be able to renegotiate or replace the facility on terms that are acceptable to us, if at all. We have never drawn any funds under the facility and we currently do not intend to draw on it. See "Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Credit Facilities."

        Our ability to bid for large contracts depends on our ability to obtain performance guarantees from financial institutions.

        In the normal course of our business and in accordance with industry practice, we provide performance guarantees on large projects, including long-term operation and maintenance contracts, which guarantee our own performance. These guarantees may include guarantees that a project will be completed or that a project or particular equipment will achieve defined performance criteria. If we fail to attain the defined criteria, we must make payments in cash or in kind. Performance guarantees frequently are requested in relation to bids for large projects, both in our core power and automation businesses and in our Oil, Gas and Petrochemicals business.

        Some customers require that performance guarantees be issued by a financial institution in the form of a letter of credit, surety bond or other financial guarantee. In considering whether to issue a guarantee on our behalf, financial institutions consider our credit ratings. Our current credit rating and financial position have not prevented us from obtaining such guarantees from financial institutions, but they can make and have made the process more difficult and expensive. If, in the future, we cannot obtain such a guarantee from a financial institution on reasonable terms, we could be prevented from bidding on or obtaining the contract or our costs would be higher, which would reduce the profitability of the contract. If we cannot obtain sufficient guarantees from financial institutions in the future, there could be a material impact on our business, financial condition, results of operations or liquidity.

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        We have retained performance guarantees related to our divested power generation business.

        We have retained performance guarantees related to the power generation business that we contributed to the former ABB ALSTOM POWER joint venture. The guarantees primarily consist of performance guarantees, advance payment guarantees, product warranty guarantees and other miscellaneous guarantees under certain contracts such as indemnification for personal injuries and property damages, taxes and compliance with labor laws, environmental laws and patents. The guarantees are related to projects that are expected to be completed by 2015 but in some cases the guarantees have no definite expiration. ALSTOM and its subsidiaries have primary responsibility for performing the obligations that are the subject of the guarantees. In connection with the sale to ALSTOM of our interest in the joint venture in May 2000, ALSTOM, (the parent company), and ALSTOM POWER (the former joint venture entity) have undertaken jointly and severally to fully indemnify us and hold us harmless against any claims arising under these guarantees. Due to the nature of product warranty guarantees and certain other guarantees, we are unable to develop an estimate of the maximum potential amount of future payments for these guarantees. Our best estimate of the total maximum potential exposure under all quantifiable guarantees we issued on behalf of our former power generation business was approximately $875 million as of December 31, 2004. This maximum potential exposure, as required by Financial Accounting Standards Board Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, is based on the original guarantee or contract amount and does not reflect our assessment of actual exposure under the guarantees.

        As of December 31, 2004, no losses have been recognized in connection with the guarantees relating to the divested power generation business. We have not concluded that a loss is probable under these guarantees and, therefore, we have not recorded a provision as of December 31, 2004. However, if we are required to fund payments under these guarantees following a failure of the divested power generation business to perform its obligations, and if ALSTOM does not to fulfill its undertaking to indemnify us, we could incur material losses. See "Item 5. Operating and Financial Review and Prospects—Off Balance Sheet Arrangements—Guarantees."

        Undertaking long-term fixed price projects exposes our businesses to risk of loss.

        We derive a portion of our revenues from long-term, fixed price or turnkey projects that are awarded on a competitive basis and can take many months, or even years, to complete. Such contracts involve substantial risks, including the possibility that we may underbid and the fact that we typically assume substantially all of the risks associated with completing the project and the post-completion warranty obligations. We also assume the project's technical risk, meaning that we must tailor our products and systems to satisfy the technical requirements of a project even though, at the time we are awarded the project, we may not have previously produced such a product or system. The revenue, cost and gross profit realized on such contracts can vary, sometimes substantially, from our original projections because of changes in conditions, including but not limited to:

•

unanticipated technical problems with the equipment being supplied or developed by us which may require that we spend our own money to remedy the problem;



•

changes in the cost of components, materials or labor;



•

difficulties in obtaining required governmental permits or approvals;



•

project modifications creating unanticipated costs;



•

delays caused by local weather conditions; and



•

suppliers' or subcontractors' failure to perform.

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        These risks are exacerbated if the duration of the project is long-term because there is an increased risk that the circumstances upon which we originally bid and developed a price will change in a manner that increases our costs. In addition, we sometimes bear the risk of delays caused by unexpected conditions or events. The contracts for our long-term, fixed-price projects often make us subject to penalties if we cannot complete portions of the project in accordance with agreed-upon time limits.

        Historically, we have incurred significant losses as a result of performing long-term projects on a fixed-price or turnkey basis. For example, in 2003 the operating income of the downstream part of our Oil, Gas and Petrochemicals business was adversely affected by cost overruns amounting to $399 million, primarily relating to four large, long-term, fixed-price projects which had been contracted prior to 2002. In 2004 no significant losses were reported from such long-term projects. In view of the potential for losses from such contracts, we have been seeking to reduce our involvement with new long-term, fixed-price contracts and have instead been pursuing contracts with a cost-reimbursement element. However, because we still do enter into new contracts on a fixed price basis and continue to have substantial obligations under long-term, fixed-price contracts, we still face the risk of significant losses on these types of contracts.

        In connection with long-term projects, we routinely undertake substantial customer- and project-specific development efforts to develop or adapt equipment and systems to the unique needs of our customers in connection with specific orders or projects. We had expenditures of $727 million, $886 million, and $719 million, or approximately 3.5 percent, 4.3 percent and 3.7 percent of annual consolidated revenues, in 2004, 2003 and 2002, respectively, on such order-related development activities. Order-related development amounts are initially recorded in inventories as part of the work in progress of a contract and then are reflected in cost of sales at the time revenue is recognized in accordance with our accounting policies. If our revenues on these projects are insufficient, we must write off the associated order-related development expenditures. Additionally, to the extent that order-related development expenditures in a specific project exceed expectations, the profit margin on that project will be adversely affected.

        We may expend significant resources, both in management time as well as money, on bidding for projects that we are not awarded.

        Our international operations expose us to the risk of fluctuations in currency exchange rates.

        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. Foreign exchange rate changes resulted in an increase in our reported revenues and earnings before interest and taxes of 6 percent and 18 percent in 2004 and 12 percent and 42 percent in 2003, respectively. 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, which we call "local currency," of the country in which the respective company resides. 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 fluctuate substantially, which has a significant translation effect on our reported consolidated results of operations and financial position. In 2004 as in 2003, the U.S. dollar continued to depreciate against most of the currencies in which our companies reported results of operations. In particular, the exchange rates between the U.S. dollar and the EUR and the U.S. dollar and the CHF at December 31, 2004, 2003, and 2002, were as follows.

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Exchange rates into U.S. dollars

	At December 31,
	2004		2003		2002
EUR 1.00	$	1.37	$	1.26	$	1.05
CHF 1.00	$	0.88	$	0.81	$	0.72

        The average exchange rates between the U.S. dollar and the EUR and the U.S. dollar and the CHF for the years ended December 31, 2004, 2003 and 2002, were as follows.

Exchange rates into U.S. dollars

	For the year ended December 31,
	2004		2003		2002
EUR 1.00	$	1.25	$	1.13	$	0.94
CHF 1.00	$	0.81	$	0.75	$	0.64

        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 costs 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 costs are incurred. In this case, if after the parties agree on a price, the value of the currency in which the purchase price is to be paid weakens relative to the currency in which we incur manufacturing costs, there would be a negative impact on the profit margin for any such transaction. This transaction risk may exist regardless of whether or not there is also a translation risk as described above.

        In 2004, approximately 84 percent of our consolidated revenues were generated in local currencies and translated into U.S. dollars. Of that amount, the following percentages were reported in the following local currencies:

•

Euro, approximately 37 percent;



•

Chinese renminbi, approximately 6 percent;



•

Swedish krona, approximately 6 percent;



•

Swiss franc, approximately 5 percent; and



•

Pound sterling, approximately 3 percent.

        In 2004, approximately 83 percent of our consolidated cost of sales and selling, general and administration expenses were reported in currencies other than U.S. dollars. Of that amount, the following percentages were reported in the following currencies:

•

Euro, approximately 37 percent,



•

Chinese renminbi, approximately 5 percent,



•

Swedish krona, approximately 6 percent,



•

Swiss franc, approximately 5 percent and



•

Pound sterling, approximately 4 percent.

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        Currency exchange rate fluctuations in those currencies in which we incur our principal manufacturing expenses 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 competitiveness may be weakened.

        Our hedging activities may not protect us against the consequences of significant fluctuations in exchange rates on our earnings and cash flows.

        Our policy is to hedge material net currency exposures by entering into offsetting transactions with third party financial institutions. Given that, and 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.

        We operate in very competitive markets and could be adversely affected if we fail to keep pace with technological changes.

        We operate in very competitive environments in several specific respects, including product performance, developing integrated systems and applications that address the business challenges faced by our customers, pricing, new product introduction time and customer service. The relative importance of these factors differs across the geographic markets and product areas that we serve. The markets for our products and services are characterized by evolving industry standards (particularly for our automation technology products and systems), rapidly changing technology (in both our power and automation businesses) and increased competition as a result of deregulation (particularly for our power technology products and systems). For example, for a number of years power transmission and distribution providers throughout the world have been undergoing substantial deregulation and privatization. This has increased their need for timely product and service innovations that increase efficiency and allow them to compete in a deregulated environment. Additionally, the continual development of advanced technologies for new products and product enhancements is an important way in which we maintain acceptable pricing levels. If we fail to keep pace with technological changes in the industrial sectors that we serve, we may experience price erosion and lower margins.

        The principal competitors for our automation technology products and services include Emerson Electric Co., Honeywell International, Inc., Invensys plc, Schneider Electric S.A. and Siemens AG. We primarily compete with Areva S.A., Schneider Electric SA and Siemens AG in sales of our power technology products and systems to our utilities customers. The principal competitors with our Oil, Gas and Petrochemicals business include Bechtel Group, Inc., UOP LLC, Fluor Corporation, Halliburton Company and Technip-Coflexip S.A. All of our 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. 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 of all of our business divisions 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.

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        Our customer base also is undergoing consolidation. Consolidation among our customers' industries (such as the marine and cruise industry, the automotive, aluminum, steel, pulp and paper, 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 its business. Additionally, as our customers become larger and more concentrated, they could exert pricing pressure on all suppliers, including ABB. For example, in an industry such as power transmission, which historically has consisted of large and concentrated customers such as utilities, price competition can be a factor in determining which products and services will be selected by a customer.

Our business is affected by the global economic and political climate.

        Adverse changes in economic conditions or the political climate could have a material adverse effect on our business, financial condition, results of operations and liquidity. The business environment is influenced by numerous political uncertainties, which will continue to affect the global economy and the international capital markets. In periods of slow economic growth or decline, our customers are more likely to decrease expenditures on the types of products and systems we supply and we are more likely to experience decreased revenues as a result. Our Power Technologies division is affected by the level of investments by utilities, and our Automation Technologies division is affected by conditions in a broad range of industries, including the automotive, pharmaceutical, pulp and paper, metals and minerals and manufacturing and consumer industries. Our Oil, Gas and Petrochemicals business is affected by conditions in the oil, gas and petrochemicals industry, including the level of market growth in low hydrocarbon cost regions and high economic growth regions.

        We have retained liability for environmental remediation costs relating to businesses that we sold in 2000, and we could be required to make payments in respect of these retained liabilities in excess of established reserves.

        We have retained liability for environmental remediation costs at two sites in the United States that were operated by our nuclear technology business, which we sold in April 2000 to British Nuclear Fuels plc ("BNFL"). We have retained all environmental liabilities associated with our Combustion Engineering subsidiary's Windsor, Connecticut facility and a portion of the liabilities associated with our ABB C-E Nuclear Power, Inc. subsidiary's Hematite, Missouri facility. The primary environmental liabilities associated with these sites relate to the costs of remediating radiological and chemical contamination upon decommissioning the facilities. Based on information that BNFL has made publicly available, we believe remediation may take until 2013 at the Hematite site and until 2008 at the Windsor site. At the Windsor site, we believe that a significant portion of such remediation costs will be the responsibility of the U.S. government pursuant to federal law, although the exact amount of such responsibility cannot reasonably be estimated. In connection with the sale of the nuclear business in April 2000, we established a reserve of $300 million in respect of estimated remediation costs related to these facilities. Expenditures charged to the remediation reserve were $10 million, $6 million and $12 million during 2004, 2003 and 2002, respectively. It is possible that we could be required to make expenditures in excess of the reserve, in a range of amounts that cannot reasonably be estimated. See "Item 5. Operating and Financial Review and Prospects—Environmental Liabilities

        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, PVC resin to manufacture PVC cable and chloroparafine as a flame retardant. We use inorganic lead as a counterweight in robots that we

15

produce. 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 strict liability for remediation of releases of hazardous substances, which could result in our 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 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. If the claimant runs a commercial business, claims are often made also for financial losses arising from interruption of operations consequential to property damage. Because of our broad offering of products, these claims arise in different contexts, including the following:

•

If our power technology products and systems are defective, there is a substantial risk of fires, explosions and power surges and significant damage to electricity generating, transmission and distribution facilities.



•

If our automation technology products and systems are defective, our customers could suffer significant damage to facilities that rely on these products and systems to properly monitor and control their manufacturing processes.

        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 problem could adversely affect our market reputation which could result in a decline in demand for our products.

        Our operations in emerging markets expose us to risks associated with conditions in those markets.

        An increasing amount of our operations are conducted in the emerging markets of Latin America, Asia, the Middle East and Africa. In 2004, approximately 35 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 markets;

16

•

political or social instability, which makes our customers less willing to make investments in such regions and complicates 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 operate, which 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;



•

significant fluctuations in interest rates and currency exchange rates;



•

the imposition of unexpected taxes or other payments on our revenues in these markets; and



•

the introduction of exchange controls and other restrictions by foreign governments.

        In addition, the legal and regulatory systems of the emerging markets identified above are less developed and less well-enforced than in industrialized countries. Therefore, our ability to protect our contractual and other legal rights in those regions could be limited. We cannot offer any assurance that our exposure to conditions in emerging markets will not 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, 2004, employed approximately 102,500 people. As of December 31, 2004, approximately 59 percent of our employees were located in Europe, approximately 16 percent in the Americas, approximately 16 percent in Asia and approximately 9 percent in the Middle East and Africa. In order to manage our day-to-day operations, we must overcome cultural and language barriers and assimilate different business practices. 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 and monitor group-wide standards and directives across our global network. Our failure to successfully manage 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.

        Our reputation and our ability to do business may be impaired by corrupt behavior by any of our employees or agents or those of our subsidiaries.

        There is a risk that our employees or agents may take actions that violate either the U.S. Foreign Corrupt Practices Act (FCPA) or legislation promulgated pursuant to the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions or other applicable anti-corruption regulations. Such actions have resulted, and could in the future result, in monetary penalties against us or our subsidiaries and 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 and our subsidiaries are committed to conducting business in a legal and ethical manner, our internal control systems have not been, and in the future may not be, completely effective to prevent and detect such improper activities by our employees and agents.

        In 2004, we agreed to a civil settlement and paid civil penalties in connection with FCPA violations in Nigeria, we discovered earnings overstatements and related improper payments by one of our units in Italy (and as a result in 2004 we restated our consolidated financial statements as of December 31, 2003 and 2002 and for each of the years in the three year period ended December 31, 2003) and we discovered and reported to European authorities anticompetitive practices by employees in our gas insulated switchgear business.

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        On April 19, 2005, we voluntarily disclosed to the U.S. Department of Justice and the U.S. Securities Exchange Commission certain suspect payments made by employees of ABB network management, a specialized U.S.-based business unit. The suspect payments became apparent during an internal investigation following the dismissal of two managers from the company in mid-2004. The payments were made to intermediaries in Latin America and in the Middle East in connection with the company's business, which is control software for utility customers. We are continuing our investigation and compliance review of this business.

        If these payments are found to have been illegal, we could be subject to civil and criminal penalties. There can be no assurance that any governmental investigation or our investigation of these matters will not conclude that violations of applicable laws have occurred or that the results of these investigations will not have a material adverse effect on our business and results of operations.

        For more information, see "Item 8. Financial Information—Legal Proceedings."

        Our Oil, Gas and Petrochemicals business may experience losses if the oil and gas industry generally experiences a downturn.

        Our Oil, Gas and Petrochemicals business, which is part of our Non-core activities, depends on the condition of the oil and gas and chemical industry and particularly on capital expenditure budgets of the companies engaged in the downstream refining and petrochemicals segments. The prices of oil and gas and their uncertainty in the future, along with forecasted growth in world oil and gas demand, strongly influence the extent of investment in downstream production activities. Demand for our Oil, Gas and Petrochemicals services will also be affected by refinery margins and prices for petrochemical products such as ethylene and polypropylene.

        Refining budgets may be impacted by slower growth in transport fuel demands in China and other growing economies, reduction in fuel usage due to high gasoline prices in the Western economies and slowdown in implementing clean fuels regulations.

        Petrochemicals investments, which are normally cyclical and which have been on a high growth pattern in the Middle East and China, may flatten or decline if there is a slowdown in consumption of plastics or if there are political or social events which disrupt business in the Middle East.

        Increases in the costs of our 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 in response to changes in supply and demand and a variety of additional factors beyond our control, such as global political and economic conditions. Historically, prices received for some of these raw materials has 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 volume, revenue and 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, which could limit our ability to manufacture products on a timely basis and could harm our profitability. Any supply interruption in a limited or sole-sourced component or raw material could materially harm our ability to manufacture our products until a new source of supply, if any, could be found. We may be unable to find a sufficient alternative supply channel in a reasonable time period or on commercially reasonable terms, if at all. If our suppliers are unable to deliver sufficient quantities of these materials on a timely basis, the manufacture and sale of our products may be disrupted and our sales and profitability could be materially adversely affected.

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        If we are unable to successfully address the material weaknesses in our internal control over financial reporting, our ability to report our financial results on a timely and accurate basis may be adversely affected. As a result, investors could lose confidence in our financial reporting, which may harm our business and the trading price of our stock.

        Effective internal control is necessary for us to provide reliable financial reports, and effective disclosure controls are important in enabling us to meet our reporting obligations under the U.S. federal securities laws and other relevant rules and regulations. The Sarbanes-Oxley Act of 2002 requires, among other things, that we maintain adequate internal control structure and procedures for financial reporting. If we can not provide reliable reports, our business and operating results could be harmed. In connection with their evaluation of our disclosure controls and procedures as of December 31, 2004, our Chief Executive Officer and Chief Financial Officer determined that several areas of our internal control over financial reporting need improvement, including a material weakness arising from our September 2004 restatement of our consolidated financial statements as of December 31, 2003 and 2002 and for each of the years in the three year period ended December 31, 2003 and data for 2004 and prior years, and a material weakness resulting from a series of significant deficiencies in our financial reporting process (including, significant deficiencies that were identified in prior years but had not yet been remediated). Based on their evaluation of our disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer were not able to conclude that as of December 31, 2004 our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We have begun executing a remediation plan to address these weaknesses in our internal controls over financial reporting, as discussed in Item 15 "Controls and Procedures."

        In April 2005, in accordance with our 2004 civil settlement with the U.S. Securities and Exchange Commission, we appointed an independent consultant to review our policies and procedures as they relate to compliance with the books and records, internal accounting controls and anti-bribery provisions of the FCPA. The consultant is expected submit a report in August 2005 documenting findings and making recommendations (the "Report") to our Board of Directors. Within ninety days after receiving the Report, we are required to adopt the recommendations contained in the Report, except in certain limited circumstances. We cannot predict what conclusions the independent consultant will reach, or what changes we will make to our controls and procedures following recommendations by the independent consultant. See "Item 8. Financial Information—Legal Proceedings."

        Unless and until we successfully address the material weaknesses and significant deficiencies, and any other inadequacies in our internal controls and disclosure controls and procedures, our ability to manage our business and to report on a timely and accurate basis may be adversely affected. Any failure to improve our internal control to address these identified material weaknesses and significant deficiencies could also cause investors to lose confidence in our reported financial information, which could have a negative impact on the trading price of our securities.

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Item 4.    Information on the Company

INTRODUCTION

        We are a global provider of power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. We serve electric, gas and water utilities, as well as industrial and commercial customers, with a broad range of products, systems and services for power transmission, distribution and power plant automation. We also deliver automation systems for measurement, control, motion, protection and plant optimization across a full range of industries. We apply our expertise to develop creative ways of integrating our products and systems with our customers' business processes to enhance their productivity and efficiency.

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 & 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 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 publicly traded 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, and are no longer publicly traded. ABB Ltd shares are currently traded on the SWX Swiss Exchange (virt-x), the Stockholm Exchange, the New York Stock Exchange (in the form of American Depositary Shares), the Frankfurt Exchange and the London Stock Exchange.

Organizational Structure

        We manage our business based on a divisional structure. Each of our divisions manages several business areas, which in turn are subdivided into business units.

        Our core business consists of two divisions, Power Technologies and Automation Technologies, and our management intends to continue to focus its attention on, and future investments in, these divisions. In addition, certain of our operations are classified in Non-core activities and Corporate/Other.

        Non-core activities comprise businesses and activities that are not integral to our focus on power and automation technologies and that we are considering for sale, winding down or otherwise exiting.

        Effective January 1, 2003, some business areas within our business divisions were reorganized or combined. Consequently, the results of operations in 2002 for certain of the affected business areas are not directly comparable to our results in 2003. When our results of operations in 2003 on a business area basis are not directly comparable to our results of operations in 2002, we combine the results of

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the affected business areas to create an aggregated basis on which we can compare and discuss our results of operations.

        Effective January 1, 2005, some business areas within our business divisions were combined. These changes are further discussed within the "Our business divisions" section below.

        The following table sets forth the amount and percentage of ABB Ltd. revenues derived from each of our business divisions for the fiscal years ended December 31, 2004, 2003 and 2002, based on our current organizational structure:

	Revenues Year ended December 31,									Percentage of Revenues Year ended December 31,
	2004			2003			2002			2004	2003	2002
		(U.S dollars in millions)								(%)
Power Technologies	$	8,755		$	7,598		$	6,814		41	35	33
Automation Technologies		11,030			9,628			8,201		51	45	40
Non-Core Activities		1,693			4,322			5,614		8	20	27
Subtotal		21,478			21,548			20,629		100	100	100
Corporate/Other and Eliminations		(757	)		(1,121	)		(1,157	)
Consolidated Revenues	$	20,721		$	20,427		$	19,472

        For a breakdown of our consolidated revenues derived from each geographic region in which we operate, see "Item 5. Operating and Financial Review and Prospects—Analysis of Results of Operations—Revenues."

        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 501 Merritt 7, Norwalk, Connecticut 06851.

BUSINESS DIVISIONS

Power Technologies Division

Overview

        The Power Technologies division serves electric, gas and water utilities as well as industrial and commercial customers, with a broad range of products, systems and services for power transmission, distribution and power plant automation. Key technologies include high- and medium-voltage switchgear, high-voltage power converters, advanced cables for underground and undersea power transmission, electrical transformers, and products and systems to automate and control power plants, electrical and other utility networks. The division had 149 manufacturing plants and 40,500 employees as of January 1, 2005.

Power Industry Background

        The portions of an electricity grid that operate at highest voltages are "transmission" systems, while those at lower voltages are "distribution" systems. Transmission systems link power generation sources to distribution systems. Distribution networks then branch out over shorter distances to carry electricity from the transmission system to end users. These electricity networks incorporate sophisticated devices to control and monitor operations and to prevent damage from failures or stresses.

        Electricity is transformed at different stages in the delivery process between the source and the ultimate end user. For example, electrical power is often generated in large power plants at 10 to 20

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kilovolts. Because this voltage is too low to be transmitted efficiently, transformers are used to increase the voltage of electricity (up to 1,100 kilovolts) for long-distance transmission. This reduces losses and increases the amount of power that can be carried per line.

        Transformers are also used to decrease the voltage at the local end for distribution to end users, such as residential, commercial or industrial consumers. An electric utility distribution system comprises distribution substations and networks, both overhead and underground. Some large industrial and commercial facilities receive electricity at higher voltage levels from the transmission or distribution network, while most industrial, commercial and residential users receive electricity from distribution network feeders at lower voltages.

        There is a global trend toward deregulation and privatization of the power industry, which is creating a more competitive environment for our customers. This trend is evident in the United States, parts of Latin America and Western Europe, particularly in the United Kingdom and the Nordic countries. It is accelerating elsewhere in Europe and is developing in other regions. The creation of a free market for electricity requires our customers to become more cost- efficient and reliable to compete as a lowest-cost provider among power suppliers. Grid operators must be able to deliver power to customers that are hundreds or thousands of miles away within a few minutes. As more disturbance-sensitive loads (such as computers and telecommunications systems) have been added to networks, demand for reliable, high-quality electricity is increasing. Power suppliers can achieve this efficiency and reliability in a number of ways, including the following:

•

Replacing and modernizing assets and investing in information technology-based control and monitoring equipment and communications networks to control and supervise power networks based on instantaneous access to information.



•

Upgrading current technologies and introducing new technologies to improve network reliability, increase network power rating and enhance the control of power flow through existing transmission and distribution assets.

Business Areas

        The following table sets forth the approximate proportion of the Power Technologies division's revenue generated in 2004 by each of the business areas in the division:

Business Area	Proportion of Division Revenues
Transformers	26	%
Power Systems	22	%
Medium-Voltage Products	19	%
High-Voltage Products	17	%
Utility Automation Systems	16	%

        Through 2003 and 2004, two of the division's business areas—Power Systems and Utility Automation Systems—primarily provided engineering services drawing on the ABB Group's complete range of products and services. The other three business areas—High-Voltage Products, Medium-Voltage Products, and Transformers—mainly consisted of product manufacturing businesses. As of January 1, 2005, the Power Technologies division simplified its structure from five into two business areas, organized around products and systems, in order to further improve efficiency and cost competitiveness. The Power Technology Systems business area offers systems for power transmission, distribution grids and power plants. The Power Technology Products business area incorporates ABB's manufacturing network for power technologies, such as switchgear, breakers, transformers and cables.

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Transformers

        Effective January 1, 2004, the Power Technologies division merged its Power Transformers business area with its Distribution Transformers business area to form a single Transformers business area. The merger was intended to reduce product overlaps, eliminate redundant research and development efforts and improve supply chain management. The two former business areas already shared many production locations prior to their merger.

        The Transformers business area designs and manufactures power transformers (72.5 to 800 kilovolts) for utility, transportation and industrial customers, as well as transformer components such as bushings and tap changers. The business area also produces insulation material. Transformers are typically used for power transmission and distribution systems, such as in large substations. Generator transformers are used in power generation when it is necessary to increase power voltage from a power plant for long-distance transmission. Industrial transformers are mainly delivered to the steel and aluminum industry, which need their own high-voltage transformers and substations on-site to service their heavy electricity requirements. Finally, the business area produces traction transformers used in electric locomotives. Customers in the components business come both from the transformer and electrical motor industry. The business area also provides a wide range of transformer service and retrofit solutions for utilities and industry customers.

        The business area also manufactures distribution transformers for use in industrial facilities, commercial buildings and utility distribution networks to step down electrical voltage to the levels needed by end users. The business area manufactures and sells a full range of power distribution transformers (up to 72.5 kilovolts), including oil-type, dry-type and special application distribution transformers. Although oil-type transformers are more commonly used, demand for dry-type transformers is growing because they minimize fire hazards and have applications in high-density office buildings, windmills, offshore drilling platforms, naval vessels and high-volume industrial plants.

Power Systems

        Our Power Systems business area undertakes turnkey contracts to install and upgrade transmission and distribution systems incorporating components manufactured by this division and the Automation Technologies division, as well as those manufactured by third parties.

        We are a leader in high-voltage direct current ("HVDC") technology. HVDC transmission is an advanced technology for transporting electricity over long distances. It reduces power losses, increases system stability and provides a more controllable flow than high-voltage alternating current. An HVDC transmission system typically includes converters, which change alternating current to direct current and then back to alternating current when it reaches the terminal point, and transmission lines, either above or below ground. Advances in converter and cable technology have enabled us to introduce a system called HVDC Light™. Converter stations for HVDC Light™ are approximately one-fifth the size of conventional HVDC technology for the same rated power. HVDC Light™ extends the range of applications for high-voltage direct current. Typical applications include interconnection of separate networks that operate on different frequencies or provide variational power quality, such as wind parks. The system can also be used as a substitute for local power generation in remote areas, islands or oil platforms.

        We also provide flexible alternating current (AC) transmission systems ("FACTS") to enhance power grid stability, improve power quality and thus increase transmission capability. FACTS devices include series compensators, static VAR compensators ("SVCs") and SVC Light™ (based on the same unique technology as HVDC Light™).

        HVDC, HVDC Light™, FACTS, and SVC Light™ systems rely on advanced power semiconductor components. Our in-house power semiconductor unit enables us to develop and manufacture

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tailor-made components to maximize the performance of these systems. This business area supplies power semiconductor devices to other ABB businesses and to external customers in the power transmission and distribution, drives, and transportation markets.

        The Power Systems business area also supplies substations to interconnect electricity grids operating on different voltage levels, to sectionalize portions of the grid and to protect the electrical system against damage from outside sources such as lightning and overload. By sectionalizing the grid, power can be rerouted from portions of the transmission system that are experiencing problems to sections that are functioning properly, thereby enhancing the overall reliability of the power supply. This business area delivers complete air and gas insulated substations for power transmission. Substations are also necessary in a power distribution network to sectionalize and reduce the voltage of the main power lines and cables to the lower voltages required for efficient distribution and consumption. For power distribution, this business area sells traditional custom-engineered substations as well as compact, modular substations, which require less space than a conventional substation and thus are particularly well suited for urban settings. It also offers prefabricated secondary substations that can be installed more quickly than traditional substations, and which transform electricity to consumer-level voltages.

        Power Systems also delivers the engineering, procurement and construction ("EPC") of overhead transmission lines, one of the main subsystems in a transmission network. ABB in-house engineering and manufacturing of steel transmission towers and composite insulators also add value in the delivery of a transmission line project. Power Systems also provides studies on the design of new transmission lines and system optimization that take into account technical, economic and environmental considerations.

        This business area offers service contracts and support for management of existing power transmission and distribution assets, including both ABB products and those manufactured by third parties. In addition, it offers asset management services including technical consulting (system diagnostics, network analysis, planning and optimization), commercial consulting (cost reduction programs, investment strategies, reengineering of business processes) and execution (maintenance strategies, logistics).

Medium-Voltage Products

        The Medium-Voltage Products business area develops products and systems that reduce outage times and improve power quality and control, which are key to improving operational efficiency of both utility and industrial customers. It supplies switching equipment both directly to end users and through distributors and original equipment manufacturers ("OEMs"). Most of its products provide connections between higher voltage substations and lower voltage uses. It produces a comprehensive line of medium-voltage equipment (1 to 50 kilovolts), including products such as indoor and outdoor switch disconnectors, breakers, reclosers, fuses, contactors, instrument transformers and sensors as well as air- and gas-insulated switchgear, motor control centers, and ring main units for primary and secondary distribution. It also produces indoor and outdoor modular systems, compact substations and power distribution centers. As with the High-Voltage Products business area, many of its components form part of the offering of the Power Systems business area. In addition, a significant portion of its products are sold through external channel partners such as OEMs.

High-Voltage Products

        The High-Voltage Products business area provides power utilities with electricity transmission equipment that allows them to operate more efficiently and with lower environmental impact, both of which are significant business concerns in the market in which our customers operate. The business area manufactures the principal components of power transmission systems (50 to 800 kilovolts),

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including air- and gas-insulated switchgear, cables, capacitors, high-voltage circuit breakers, grounding switches and instrument transformers. This business area is also responsible for the entire ABB portfolio of low, medium and high voltage capacitors and surge arresters. Its products and components also include circuit breaker drives and cable accessories. Some of the business area's products are integrated into the offering of the Power Systems business area or are sold through external channel partners such as engineering, procurement and construction firms.

Utility Automation Systems

        Our Utility Automation Systems business area applies its power industry and automation expertise to integrate products manufactured by both the Power Technologies and the Automation Technologies divisions, as well as those of third parties, to provide utility customers with automation systems tailored for their generating plants or transmission and distribution networks.

        In the area of power plant automation, the Utility Automation Systems business area offers complete system integration of instrumentation, control and electrical ("ICE") equipment for the power generation market. The services offered by the business area include combustion management, plant performance optimization, condition monitoring and asset management.

        For water plants, the business area offers system integration for all ICE applications in water systems, including automation services for water treatment plants, distribution systems, waste water collection systems and wastewater treatment. The business area offers turnkey pumping stations and control systems for water leakage management, lift-station monitoring and optimization of plant performance.

        The Utility Automation Systems business area offers high-end supervisory control and data acquisition ("SCADA") systems to power and gas customers. SCADA systems are used to monitor and control energy transmission, distribution and power generation management systems. They are also used to operate market systems for power networks by tracking energy costs, end-user consumption and retail and wholesale prices, among other things. In addition, this business area offers customer care systems and asset management systems for electrical networks, district heating networks and gas networks. These allow utilities to optimize their business by improving the performance of their installed network equipment to meet changing customer requirements and new market conditions.

        This business area also provides system integration for substations used in power generation, transmission and distribution. Its offering includes small electrical SCADA systems, wide area protection systems, feeder automation systems and power system monitoring, which provides real-time information that enables utilities to make informed system-related decisions.

        The business area provides wireless and fixed communication systems for power, water and gas utilities, including both operational and corporate communication networks. It offers fiber optics, microwave radio and power line applications for data networking and broadband network management, as well as teleprotection and substation communication networks and voice switching management systems.

        The Utility Automation Systems business area offers a range of service capabilities aimed at reducing the in-house operational and maintenance requirements of utility customers. It offers service contracts for spare parts management, support agreements, software and hardware upgrades and retrofits, service consulting, asset management and training.

Customers

        The Power Technologies division's principal customers are electric, gas and water utilities, owners and operators of power transmission systems, utilities that own or operate networks and owners and operators of power generating plants. Other customers include gas transmission companies, local

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distribution companies and multi-utilities, which are involved in the transmission or distribution of more than one commodity. The division also serves industrial and commercial customers, such as operators of large commercial buildings and heavy industrial plants. In 2004, the division's ten largest customers accounted for approximately 14 percent of the division's orders received.

Geographic Markets

        The following table sets forth the proportion of Power Technologies division's revenues derived from each geographic region (based on the location of the customer, which may be different from the ultimate destination of the products' end use) in which the ABB Group operates:

	Year ended December 31,
	2004	2003
	(percent)
Europe	39	38
The Americas	22	25
Asia	25	24
Middle East and Africa	14	13
Total	100	100

Sales and Marketing

        The Power Technologies division sells its products individually through its three product business areas and as parts of larger systems through its two systems business areas. Most product sales are made through the division's own direct sales force, which is enhanced by industrial representatives and agents where appropriate. In 2004, direct sales accounted for a majority of the division's total product sales, and sales through external channel partners, such as wholesalers, distributors and OEMs, accounted for the remainder. Sales in the systems business areas are handled primarily by the division's specialized sales engineering teams, although these divisions use system integrators and other third-party sellers from time to time.

Competition

        On a global basis, the Power Technologies division's principal competitors are Areva, Schneider and Siemens. In the distribution transformers market, the division also competes with companies such as Cooper Cameron and Howard Industries. In the utility automation area, the division's principal competitors are ALSTOM, Emerson, GE Harris, Honeywell, Invensys and Siemens.

Research and Development

        Research and development expenses that were not order-related for the Power Technologies division amounted to approximately $210 million for 2004. The division's research and development activities in 2004 primarily related to streamlining product portfolios in all business areas. The aim is to increase product standardization and thus improve the efficiency of our design, supply, manufacturing, sales and distribution functions. Related research has focused on technologies that enable faster production cycles, mainly in the areas of new materials and design. In the Utility Automation Systems business area, research continued to focus on the standardization of controls and protection systems, with the goal of reducing costs in the production of substation automation systems, power plant controls and SCADA systems. In addition, order-related research and development expenses for the Power Technologies division amounted to $179 million during 2004. A significant part of this amount was spent in the Systems business area.

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Capital Expenditures

        The Power Technologies division's capital expenditures for property, plant and equipment were $137 million in 2004, compared to $120 million and $116 million in 2003 and 2002, respectively. Principal investments in 2004 included investments to replace existing equipment, particularly in Sweden, the United States, China and Germany, mainly in the Power Transformers business area. Geographically, in 2004, Europe accounted for about 63 percent of the capital expenditure, with about 12 percent in the Americas, about 20 percent in Asia and about 5 percent in Middle East and Africa. Asia and Middle East experienced increases in the total amount of capital expenditure, particularly in China, India and Saudi Arabia.

Automation Technologies Division

Overview

        The Automation Technologies division provides products, systems, software and services for the automation and optimization of industrial and commercial processes. Key technologies include measurement and control, instrumentation, process analysis, drives and motors, power electronics, robots and low- voltage products. This division had approximately 150 manufacturing, software and application centers and 55,000 employees as of January 1, 2005.

        We are a recognized market leader in our core automation products and systems, with particular strength in process automation systems (including supervisory control and data acquisition, or SCADA, systems), quality control systems, advanced robotics, process instrumentation (including analytical measurement devices), electrical machines and alternating current, or AC, drives.

        The Automation Technologies division offers its products, both as separately sold devices and as part of a total automation system, through one product-based business area and two primarily system and service-based business areas, as discussed below. The division focuses on developing synergies and efficiencies among its business areas, such as common marketing, software re-use and streamlined geographic sales and service networks.

Automation Industry Background

        Our customers use automation technologies primarily to improve product quality, productivity and consistency in industrial and manufacturing applications. The automation market can be divided into three sectors:

•

Process automation refers to control systems applied in processes where the main objective is continuous production, such as oil and gas, electricity, chemicals and pulp and paper. Product lines for this market include instrumentation, analytical measurement and control products and systems, as well as motors and drives. This division offers complete process automation systems that incorporate medium and low- voltage switchgear, synchronized drive systems, instrument and control and advanced diagnostic packages. Its products also include software to optimize the manufacturing and business processes.



•

Factory automation refers to discrete operations which manufacture individual items used mainly within the automotive, packaging and consumer goods industries. Product lines for this market include robots and robot cells, which include standardized and tailored systems for discrete applications such as painting, picking, packing, palletizing, welding and assembly. This division provides a comprehensive set of systems using these technologies, including application-specific software and configuration tools.



•

Building automation comprises product lines and applications particularly targeted at the building industry. Product lines for this market include a wide range of low-voltage products for control

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of climate, lighting and security, as well as software for optimal management of the energy cost of buildings.

        The Automation Technologies division manufactures products and systems relating to all three sectors, primarily focusing on process automation products and systems, as well as robotics technologies for factory automation. The division provides to its customers the full range of ABB's products on a stand-alone basis, or as part of systems involving conceptual design, detailed engineering, project management, installation and commissioning, as well as after-sales services and system optimization during the full life span of the system.

        In mid-2001, this division entered into a ten-year strategic alliance with The Dow Chemical Company ("Dow") in which Dow agreed to use our Industrial IT automation systems in nearly all of its new automation projects, as well as in retrofits of existing systems. Another significant strategic cooperation was forged in 2001 through a framework agreement with the original equipment manufacturer York International (U.S.), a long-time customer, for simplified account service, pricing and joint development spanning multiple product lines. In late 2002, the division was awarded two contracts for long-term asset management services totaling more than $130 million at papermaker Carter Holt Harvey Limited (New Zealand) and petrochemical leader ENI Group (Italy). The division has similar strategic relationships with nearly 100 customers, and has been successful in expanding the scope of such agreements over time to cover additional ABB products and services. Significant agreements during 2003 included a frame agreement with transportation leader Bombardier for up to $500 million in power and automation technologies, signed in cooperation with our Power Technologies division, and a $34 million contract extension to provide site service, spare parts and modifications to oil producer Statoil.

        In December 2003, this division commercially released the latest version of its Industrial IT process automation platform, called System 800xA. This system extends the capability of traditional process control systems, introducing advanced functions such as batch management, asset optimization and field device integration which "plug in" to a common user environment. The same user interface may also be used to manage components of existing multiple ABB control systems that have been installed in the market over the past approximately 20 years. In this way, System 800xA gives customers a way to migrate to new functions one step at a time, rather than having to make a large-scale capital investment to replace their entire control system. By creating a common user interface that can be used to manage multiple systems, the System 800xA also reduces the research and development investment needed to achieve a "one size fits all" solution across our large installed systems base.

        Our customers are increasingly under pressure to deliver their products more quickly to their customers and to respond rapidly to changing customer preferences. At the same time, constant price pressure requires them to find ways to decrease production costs. Furthermore, as the quality of products becomes more equalized among our customers' competitors, our customers increasingly focus on design and branding to distinguish their products from those of their competitors. This change in focus means that much of the manufacturing and production activities are outsourced to sub-suppliers, which may manufacture products for a number of different companies in a given industry. The consolidation in the manufacturing role enables the sub-suppliers to provide products at a lower cost and presents further opportunities for ABB to provide flexible solutions for automation. Another growing practice among our customers is the outsourcing of non-core tasks such as maintenance and facilities management services. The division has sought to capitalize on this trend by providing an increasing number of service arrangements covering overall plant maintenance and asset optimization.

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Business Areas

        Effective January 1, 2004, the Automation Technologies division merged its six business areas into three business areas as part of its drive to further simplify and focus the business and to improve efficiency. The three business areas are:

•

Automation Products, comprising the former business areas Low-Voltage Products and Instrumentation and Drives, Motors and Power Electronics.



•

Process Automation, comprising the former Control Platform and Enterprise Products, Petroleum, Chemical and Consumer Industries, and Paper, Minerals, Marine and Turbocharging business areas.



•

Manufacturing Automation, previously called Robotics, Automotive and Manufacturing.

        The following table sets forth the approximate amount of the Automation Technologies division's revenue generated in 2004 by each of the business areas in the division:

Business Area	Proportion of Division Revenues
Automation Products	47	%
Process Automation	40	%
Manufacturing Automation	13	%

Automation Products

        The Automation Products business area manufactures low-voltage circuit breakers, switches and control products to protect people, installations and electronic equipment from electrical overloads. It also manufactures instrumentation products to measure and control the flow of fluids.

        This business area makes line protection products, wiring accessories and enclosures and cable systems that are primarily used for control and protection in building installations. It also produces European Installation Bus/Powernet systems, which integrate and automate a building's electrical installations, ventilation, security and data communication networks. Although it provides low-voltage products and systems for building automation, this business area is not involved in the execution of building system projects and installations (which is the business of the non-core Building Systems business area).

        The process instrumentation products manufactured by this business area interact with the division's Open Control System products and include products for the measurement of process variables such as pressure, temperature, volume and flow. The increasing sophistication of many process automation systems often requires thousands of measurement points for such variables. These instrumentation products are sold separately or in combination with control systems. The various analytical measurement devices produced by this business area form an important part of instrumentation and control systems. These devices measure chemical characteristics while process instrumentation products measure physical characteristics.

        This business area also develops low-voltage and medium-voltage AC drive products and systems for industrial, commercial and residential applications. Drives provide motion and torque while adding control and efficiency to equipment such as fans, pumps, compressors, conveyors, kilns, centrifuges, mixers, hoists, cranes, extruders, printing machinery and textile machines. Our drives are used in the building automation, marine, power, transportation and manufacturing industries, among others.

        The Automation Products business area also produces a range of power electronics products. It produces static excitation and synchronizing systems that provide stability for power stations, as well as high power rectifiers that convert AC power to DC power for very high-amperage applications such as furnaces in zinc plants and aluminum and magnesium smelters. The business area also manufactures

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frequency converters that use state-of-the-art semiconductor technology to convert electrical power into the type and frequency required by individual customers.

        In addition, this business area supplies a comprehensive range of electrical motors and generators, including high-efficiency motors that conform to leading environmental and efficiency standards. Efficiency is an important criterion for selection by customers, because electric motors account for nearly two-thirds of the electricity consumed by industrial plants. This business area manufactures synchronous motors for the most demanding applications and a full range of low and high-voltage induction motors.

Process Automation

        The Process Automation business area offers integrated process control and information management systems for a variety of industries, primarily pulp and paper, minerals and mining, chemicals and pharmaceuticals, oil and gas, and the marine industry.

        Our control systems are used in such applications as batch management, asset optimization, energy management and safety control. They are the hubs that link instrumentation, devices and systems for control and supervision of an industrial process and enable customers to integrate their production systems with their enterprise, resource and planning systems, thereby providing a link to their ordering, billing and shipping processes. This link allows customers to manage their entire manufacturing and business process based on real-time access to plant information. Additionally, it allows customers to employ information received from instrumentation and measurement products to increase production efficiency, optimize their assets and reduce environmental waste.

        The business area emphasizes Open Control Systems, including batch control systems, supervisory control and data acquisition systems, and, to a lesser but increasing extent, programmable logic controls ("PLCs") and remote terminal units ("RTUs").

        Batch control systems control the production of a variety of products in shorter runs, such as certain pharmaceuticals and food and beverage products. Supervisory control and data acquisition systems are used to collect and manage data over wide areas or long distances such as those involved in operating electric power networks.

        The business area's product offerings for the pulp and paper industries include quality control systems for pulp and paper mills, control systems, drive systems, on-line sensors, actuators and field instruments. On-line sensors measure product properties, such as weight, thickness, color, brightness, moisture content and additive content. Actuators allow the customer to make automatic adjustments during the production process to improve the quality and consistency of the product. Field instruments measure properties of the process, such as flow rate, chemical content and temperature.

        We offer our customers in the metals and minerals industries specialized products and services, as well as total production systems. We design, plan, engineer, supply, erect and commission electric equipment, drives, motors and equipment for automation and supervisory control within a variety of areas including mining, mineral handling, aluminum smelting, hot and cold steel applications and cement production.

        In the oil and gas sector, we provide onshore, offshore and subsea production technology, gas gathering and processing, refining, transportation and distribution applications. In the pharmaceuticals and fine chemicals areas, the business area provides software and solutions for applications including manufacturing, packaging, quality control and compliance with regulatory agencies.

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        In the marine field, we provide global shipbuilders with power and automation technologies for luxury cruise liners, ferries, tankers, offshore oil rigs and special purpose vessels. We design, engineer, build, supply and commission electrical systems and software for marine power generation, power distribution and diesel electric propulsion, as well as turbochargers to improve efficiency for diesel and gasoline engines.

        We also offer full-service contracts across all of our customer segments, in which we take over in-house maintenance activities for customers and apply strategies to reduce overall maintenance costs and helps optimize these investments.

Manufacturing Automation

        The Manufacturing Automation business area develops and manufactures industrial robots and related equipment for the automotive industry and other manufacturing industries. This business area designs, installs and commissions automation systems for customers in the automotive industry and their sub-suppliers, incorporating software developed by its engineers into its range of products, as well as those manufactured by the Power Technologies division. The products and systems are used in such areas as press shop, body shop, paint shop, power train assembly, trim and final assembly.

        In addition to serving the automotive industry, this business area provides complete production automation systems for industry segments ranging from metal and glass fabrication to telecommunications. Manufacturers use our flexible automation and advanced robotics products for applications involving multiple tasks such as welding, material handling, painting, picking, packing and palletizing. For example, we provide painting systems for mobile phones, as well as robot cells to produce base stations for telecom companies. This business area incorporates software developed by its engineers into its automation products and the power products manufactured by the Power Technologies division to maximize energy efficiency and provide a secure power supply for manufacturing lines. Our services include design and project management, engineering, installation, training and life-cycle care of the complete production line.

Customers

        The Automation Technologies division's end customers are primarily companies in the chemical, life sciences (pharmaceuticals), automotive, marine, turbocharging, metals, minerals, mining, cement, paper, petroleum, food and beverage, printing and building industries. In each of these industries, we sell both through direct sales forces as well as through third-party channels, such as distributors, wholesalers, installers, system integrators and OEMs.

Geographic Markets

        The following table sets forth the proportion of Automation Technologies division's revenues derived from each geographic region (based on the location of the customer which may be different from the ultimate destination of the products' end use) in which the ABB Group operates:

	Year Ended December 31,
	2004	2003
	(percent)
Europe	60	61
The Americas	15	17
Asia	19	16
Middle East and Africa	6	6
Total	100	100

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        The ultimate destination of our products' end use is relevant for the Automation Technologies division as some global distributors and wholesalers in Europe sell our products in Asia, the Americas and Middle East and Africa. We estimate this volume to be approximately 10 percent of the division revenues, divided between the ultimate destinations of Asia, the Americas and Middle East and Africa.

Sales and Marketing

        In each of the Automation Technologies division's business areas, sales are made both through direct sales forces as well as through third-party channel partners, such as distributors, wholesalers, installers and OEMs. The proportion of direct sales compared to channel partner sales varies among the different industries, product technologies and geographic markets. For the division as a whole, the majority of the products are sold through channel partners, with the remainder being sold through the division's own direct sales channels.

Competition

        The Automation Technologies division's principal competitors vary by product line but include Alstom, Emerson, Fanuc, General Electric, Honeywell, Invensys, Metso Automation, Rockwell Automation, Schneider, Siemens, Voith AG, Aspen Technologies, and Yokogawa Electric Corporation.

Research and Development

        Research and development expenses that were not order-related for the Automation Technologies division amounted to approximately $370 million for 2004. In addition, order related research and development expenses for the Automation Technologies division amounted approximately to $146 million during 2004 with around 40 percent share coming from the Process Automation business area and approximately equal share of the remaining amount coming from the other two business areas.

        An important focus of the division's research programs is the group-wide commitment to Industrial IT. The Automation Technologies division is responsible for the development of the Industrial IT platform architecture and the base Industrial IT control products and systems. As a result, the division's research is heavily focused on intelligent, "information enabled" products and devices that may be integrated easily to provide better access to real-time information across the business enterprise. Increasing "productization" of automation technologies is intended to yield a growing portfolio of reusable building blocks that may be easily deployed and bundled by customers, channel partners and the division itself.

Capital Expenditures

        The Automation Technologies division's capital expenditures for property, plant and equipment were $186 million in 2004, compared to $154 million and $130 million in 2003 and in 2002, respectively. Principal investments in 2004 were primarily related to ordinary course purchases of machinery and equipment mainly in Germany, Italy, France, Sweden, Finland and Switzerland. Geographically, in 2004, Europe accounted for about 82 percent of the capital expenditure, with about 6 percent in the Americas, about 11 percent in Asia and 1 percent in the Middle East and Africa.

Non-Core Activities

        These activities at December 31, 2004 constituted primarily the Oil, Gas and Petrochemicals, Building Systems, New Ventures, Equity Ventures and Structured Finance business areas and a number of other activities, including Customer Service Workshops and the Logistic Systems business areas. Non-core activities generated revenues in 2004 of approximately $1.7 billion, and had approximately 5,000 employees at December 31, 2004.

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        The following is a description of our principal businesses in the Non-Core Activities division.

Oil, Gas and Petrochemicals

        Our Oil, Gas and Petrochemical business is a full service engineering business that principally serves the downstream oil, gas and petrochemicals markets. The downstream markets typically relate to the processing and transportation of hydrocarbon raw materials in and through refineries, petrochemical and chemical plants and pipelines. In addition to offering engineering, procurement and construction (or EPC) project expertise to engineering and project management services, this business area also licenses process technologies to the refining, petrochemical and polymer industries. This business area has particular expertise in ethylene process technologies through ABB Lummus Global, which is a part of the Oil, Gas and Petrochemical business. Ethylene is used as a raw material in a wide variety of plastics. This business area also provides modernization and maintenance services for refining and petrochemicals facilities in the downstream market. In 2002, we initiated a more selective process to effect a strategic shift in the types of projects for which we bid, from large, long term projects with fixed-price contracts to narrower-scope projects with reimbursable contracts. We believe projects with reimbursable contracts are lower risk projects, as reimbursable contracts allow a more balanced sharing of risks and opportunities between customer and contractor. In July 2004, we divested substantially all of our oil, gas and petrochemicals business operating in the upstream oil, gas and petrochemicals markets. We refer to this divested portion as the Upstream Oil, Gas and Petrochemicals business. We are currently winding down our Floating Production Systems business, which is a part of this business area, and sold our related intellectual property in this business in 2005. In December 2004, we reclassified our remaining Oil, Gas and Petrochemicals business into continuing operations within non-core activities from discontinued operations as it did not meet the accounting criteria required to be classified in discontinued operations.

Building Systems

        Our Building Systems business area designs, builds and maintains installations for industrial, infrastructure and commercial facilities. Following our decision in 2002 to divest our Building Systems business area, we substantially reduced the number of businesses held in the Building Systems business area during 2003 and 2004. However, we remain involved in a number of these divested businesses through a combination of technology licenses, supplier relationships and participation on such businesses' board of directors. In addition, in February 2004 we sold our Building Systems business located in Switzerland, but retained a 10 percent equity interest. During 2004, we took steps to close down the Building Systems businesses in the United States and Egypt and to sell the business in Hong Kong. In 2004, revenues for the Business Systems business area were generated principally in Germany.

New Ventures

        Our New Ventures business area was established in 2001 as a business incubator that would find, develop and invest in new and mature business opportunities, both internally and externally. New Ventures had three investment portfolios, two of which focused on investment opportunities externally, and one of which focused on opportunities internally. This business area also directly managed several majority-owned companies. Since October 2002, we have been restructuring the New Ventures business area to transfer core activities to other business areas and to dispose of the remaining businesses. At December 31, 2004, this business area principally consisted of the Distributed Energy business and certain portfolio investments in emerging technology businesses.

Equity Ventures

        Our Equity Ventures business area focused its activities on investments in and the operation of independent power projects that would provide business opportunities for our former power generation

33

division or that would develop opportunities to sell our equipment and systems. At December 31, 2004, this business area managed investments in power plants in Brazil, Colombia, India, Morocco and the Ivory Coast and an airport in South Africa. Our Equity Ventures business has not pursued further project development or significant additional investments since its classification to Non-core activities in 2002.

Structured Finance

        Our Structured Finance business area provided financing, including export, trade and project financing, and asset-based leasing and lending. We sold a significant part of this business area in 2002 and we continued our divestments in 2003 and 2004, including the sale of certain lease and loan portfolios, ownership interests in infrastructure projects and other financial assets. At December 31, 2004, the Structured Finance business area consisted of a portfolio of loans, leases and unfunded commitments which were available for sale or run-off, with net operating assets of $524 million.

        Our Other Non-core activities principally consist of our Customer Service Workshop and Logistic Systems business areas. Our Customer Service Workshop business area overhauls, repairs, rewinds and lubricates rotating machine products manufactured by the Automation Technologies division as well as those from third-party suppliers. Most of our Customer Service Workshop businesses have been transferred to the core divisions, closed or divested. The Logistic Systems business area provides air traffic management, turnkey electromechanical and airfield lighting systems, and information technology packages and automation services for airport baggage and material handling.

Corporate/Other

        Our Corporate/Other division comprises headquarters and stewardship activities, research and development activities and other activities. The Corporate/Other division had approximately 1,500 employees at December 31, 2004.

        Headquarters and stewardship activities include the operations of our corporate headquarters in Zurich, Switzerland, as well as corresponding local holding companies in certain countries. These activities cover staff functions with group-wide responsibilities, such as group accounting and consolidation, finance and controlling, audit, tax, financial advisory, legal affairs, risk management and insurance, communications, investor relations and human resources.

        Group Research and Development consists of two Group R&D laboratories: Power Technologies and Automation Technologies. Each laboratory collaborates with universities and other external partners to support our divisions in developing cross-divisional technology platforms and focusing on core areas of power, automation and emerging technologies. The Global R&D laboratories have operations in nine countries: the United States, Sweden, Switzerland, Finland, Poland, China, Germany, Norway and India.

        Other activities include our Real Estate and Group Treasury Operations. Our Real Estate business area principally manages the use of our real estate assets and facilities. Group Treasury Operations act as a cost center for internal treasury activities.

DISCONTINUED OPERATIONS

Overview

        We have adopted, with effect from January 1, 2002, Statement of Financial Accounting Standards No. 144 ("SFAS 144"), Accounting for the Impairment or Disposal of Long Lived Assets. SFAS 144 broadened the presentation of discontinued operations to include disposal transactions involving less than an entire reporting segment, if certain criteria are met. The purpose of SFAS 144 was to allow for

34

historically comparable data to be available to investors without the distortions created by divestments or operation abandonments, thereby improving the predictive value of financial statements.

        The following businesses and costs are included in our Consolidated Financial Statements as discontinued operations:

•

Our Upstream Oil, Gas and Petrochemicals business, whose sale was completed in July 2004. The upstream oil and gas business is a global producer of equipment and services for oil and gas exploration and production. The remaining portions of our Oil, Gas and Petrochemicals business primarily consists of a full service engineering company which, in addition to having expertise in engineering, procurement and construction projects, also licenses process technologies in the refining, chemical, petrochemical and polymer fields. This business does not meet the accounting criteria required to be classified in discontinued operations and is now reported in continuing operations within Non-core activities.



•

Provisions and other expenses recorded in connection with asbestos-related claims, including those against our U.S. subsidiary, Combustion Engineering, of approximately $262 million, $142 million and $395 million in 2004, 2003 and 2002, respectively. The status of our potential asbestos obligation is described in "Item 5. Operating and Financial Review and Prospects—Asbestos Liabilities," as well as in Note 18 to the Consolidated Financial Statements.



•

Our Reinsurance business, which we sold to White Mountains Insurance Group Limited, a Bermuda-based insurance holding company, in April 2004. See Note 3 to the Consolidated Financial Statements. Our Reinsurance business provided international reinsurance, insurance underwriting through Sirius International and specialized primary insurance in the United States through Sirius America. In reinsurance, the reinsurer, in return for a premium payment, provides coverage to a primary insurance company for all or a specific portion of the primary insurer's obligation to its customer. The business area's brokerage companies, Komposit in Germany and ABB Insurance Brokers in Switzerland, provided services to ABB companies and third-party clients. Our network of branches and local companies comprised locations in Sweden, Germany, Belgium, Switzerland, Singapore and the United States. An important part of our reinsurance portfolio was excess of loss coverage, mainly in the property, marine, aviation, oil and energy sectors.



•

Most of our Power Lines business, including operations in Brazil, which were abandoned in 2004, Nigeria, which were sold in January 2005, Italy, which were sold in February 2005, and Germany. This business designs and builds overhead alternating current power transmission lines.



•

Our Foundry business, which was part of our Automation Technologies division. This business provides mainly third-party products for the melting side of the metals foundry business and is not related to the foundry business within out Manufacturing Automation business area.



•

Our Wind Energy business in Greece and Germany, of which we sold a portion to GI Ventures of Munich, Germany in December 2003. This business focused on the development and engineering, procurement and construction of wind parks in Europe.



•

Most of our Structured Finance business that we sold to GE Commercial Finance in November 2002. This business provided debt capital for projects and equipment, and asset-based financing (such as leasing).



•

Our MDVC cable business in Germany, which we agreed to sell to Wilms Group of Menden, Germany in December 2003 (this sale was completed in January 2004). This business manufactures medium- and high-voltage cables, cable systems and accessories for power suppliers and network operators.

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•

ABB Export Bank, which we sold to a financial investor in December 2003. ABB Export Bank arranged international export, trade and project financing.



•

Our Metering business, which we sold to Ruhrgas Industries GmbH of Essen, Germany in December 2002. This business produced electricity, water, energy and gas meters, metering systems and load control systems.



•

Various businesses that were abandoned in 2004, 2003 and 2002 for which a buyer could not be found.



•

Legal and professional fees related to the above disposals.

CAPITAL EXPENDITURES

        Total capital expenditures for property, plant and equipment for the ABB Group (excluding discontinued operations) amounted to $400 million, $402 million and $440 million in 2004, 2003 and 2002, respectively. The majority of the capital expenditures in 2004 related to replacement of existing equipment and improvements in existing production and testing sites, primarily in Germany, Italy, Sweden, Switzerland, China and Finland. Total divestitures of property, plant and equipment amounted to $113 million, $153 million and $459 million in 2004, 2003 and 2002, respectively. Of the total divestitures of 2004, $78 million related to the sale of our real estate properties, mainly from Switzerland, Italy and Germany. Construction in progress for property, plant and equipment as of December 31, 2004 was $122 million, mainly from Germany, Sweden, United States, Italy, Spain and Switzerland. We intend to finance our expenditures for construction in progress internally.

SUPPLIES AND RAW MATERIALS

        We purchase a variety of raw materials for use in our production and project execution processes. The main materials used in our products, by weight, are steel, copper, aluminum, mineral oil and various plastics. We also purchase a variety of fabricated products and electronic components.

        We operate a worldwide supply chain management network with employees dedicated to this function in business areas and key countries. The supply chain management network uses the scale of the ABB Group to maximize the efficiency of supply networks. We expanded our eBusiness activities in recent years, including e-procurement for materials and services, and further developed advanced supplier collaboration tools and a supplier information system.

        For many commodities that we purchase, including steel, fabricated copper and aluminum products and products derived from crude oil, the recovery in global economic growth, rising demand from China and changes in foreign exchange rates (particularly the U.S. dollar and the euro) have led to increases in raw materials costs for these commodities. While some of these increases will be offset through use of multi-year contracts and, in the case of copper and aluminum, through hedging, we expect prices for many of these commodities to rise in 2005 compared to 2004, which, we anticipate, will primarily impact the results of our Power Technologies division.

        In the field of electronic components, subassemblies or fabricated products, prices remained stable or decreased slightly in 2004 compared to 2003. Electronic component lead times remained relatively short in the first half of the year, but increased in the second half, although there were no shortages. We expect to experience shortages and significant price increases for certain components during 2005, which we expect will primarily affect our Automation Technologies division.

        There can be no assurance that our ability to obtain sufficient raw materials will not be adversely affected by unforeseen developments. In addition, the price of raw materials may vary, perhaps substantially, from year to year.

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        We hedge our exposure to commodity risk arising from the changes in prices of raw materials. We manage copper and aluminum price risk using swap and forward contracts based on the London Metal Exchange price for these commodities. Our hedging policy is designed to minimize price volatility and create a stable cost base for the ABB Group. Hedging has the effect of minimizing the unfavorable impact of price increases in commodities, but it also limits the favorable impact of decreasing prices. In most cases, the gains and losses derived from our commodity hedging transactions are deferred and reflected in the cost of goods sold when the underlying physical transaction takes place. In addition to using hedging 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 products.

RESEARCH AND DEVELOPMENT

        Each year, we invest significantly in research and development. Our research and development area focuses on developing and commercializing the core technologies of our businesses that are of strategic importance to our future growth. In 2004, 2003 and 2002, we invested $690 million, $635 million, and $572 million, respectively, or approximately 3.3 percent, 3.1 percent, and 2.9 percent of annual consolidated revenues, respectively, on research and development activities. We also had expenditures of $727 million, $886 million, and $719 million, respectively, or approximately 3.5 percent, 4.3 percent and 3.7 percent, respectively, of annual consolidated revenues in 2004, 2003 and 2002, 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. Order-related development amounts are initially recorded in inventories as part of the work in progress of a contract and then are reflected in cost of sales at the time revenue is recognized in accordance with our accounting policies.

        In addition to continuous product development, and order-related engineering work, we develop future technology platforms for technology applications in our automation and power businesses in our Group research and development labs, which operate on a global basis. 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.

        Our research and development strategy focuses on three objectives:

•

To monitor and develop emerging technologies and create a pioneering, sustainable technology base for the company;



•

To develop technology platforms that enable efficient product design for our power and automation customers;



•

To create the next generation of power and automation products and systems that we believe will be the engines of profitable growth.

        Universities are the incubators of future technology, and a central task of our research and development team is to transform university research into industry-ready technology platforms. We collaborate with a number of 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 recruit and train new personnel. We have built more than 50 university partnerships in the U.S., Europe and Asia, including long-term, strategic relationships with institutions such as Stanford University, the Massachusetts Institute of Technology, Carnegie Mellon University, Cambridge University and Imperial College London. Our collaborative projects include research on materials, sensors, micro-engineered mechanical systems, robotics, controls, manufacturing, software, distributed power and communication.

        Common platforms for power and automation technologies are developed around advanced materials, efficient manufacturing, information technology and data communication, as well as sensor

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and actuator technology. Common applications of basic power and automation technologies can also be found in power electronics, electrical insulation, and control and optimization. Our power technologies, including our insulation technologies, current interruption and limitation devices, power electronics, flow control and power protection processes, apply as much to large, reliable, blackout-free transmission systems as they do to everyday household needs. Our automation technologies, including our control and optimization processes, software technologies, power electronics, sensors and microelectronics, mechatronics and wireless communication processes, are designed to improve efficiency in plants and factories around the world—including our own.

        Group research and development is carried out in two global laboratories for power and automation technologies, combining research units in the U.S., Europe and Asia. The cultural diversity and closeness to our customers and the world's best universities creates a breeding ground for success. We continue to expand our research and development activities in India, Singapore and China, reflecting its growth strategy in Asia. Our corporate research center in Bangalore, India was launched in early 2002. As a focal point for software research, it develops platforms for both automation and power technologies. In China—our fastest-growing market—research and development activity is focused on power transmission and distribution, manufacturing and robotics. It is centered in new facilities in Beijing and Shanghai, where our researchers are in close contact with Chinese universities and customers.

        Our researchers have been recognized in recent years for contributions in areas like HCI (human-computer interface), safeguarding power transmission systems, faster and more efficient automation systems, improved electrical insulation and industrial applications of nanotechnology and wireless technology.

        Our current research programs focus on:

•

Power device technology;



•

Power transmission and distribution applications;



•

Power electronics;



•

Mechatronics and robotics applications;



•

Control and optimization processes;



•

Automation networks and devices;



•

Software architecture and processes;



•

Advanced materials; and



•

Manufacturing technologies.

PATENTS AND TRADEMARKS

        We believe that intellectual property has become as important as tangible assets for a technology group such as ABB. Over the past ten years, we have almost doubled our total number of first patent filings, and we intend to continue our aggressive approach to seeking patent protection. Currently, we have nearly 14,000 patent applications and registrations, of which approximately 7,000 are pending applications. In 2004, we filed patent applications for more than 470 new inventions. Based on our existing intellectual property strategy, we believe that we have adequate control over our core technologies. The "ABB" trademarks and logo are protected in all of the countries in which we operate. We aggressively defend the reputation associated with the ABB brand.

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ENVIRONMENTAL ACTIVITIES

        Environmental management is one of our highest business priorities. We address environmental issues in all our business operations. Our goal is to improve our social and environmental performance continuously, and improve the quality of life in the communities and countries where we operate.

        Our social and environmental efforts include:

•

joining initiatives that foster economic, environmental, social and educational development;



•

making positive contributions in the communities where we operate so they will welcome us and consider ABB an attractive employer and a good investment;



•

offering our customers eco-efficient products that save energy and are safe to use, that optimize the use of natural resources, minimize waste and reduce environmental impact over their complete life cycles;



•

sharing our latest technologies with emerging markets;



•

ensuring that our operations and processes comply with applicable environmental standards and legislation. Specifically, every operating unit must implement an environmental management system that continuously improves its environmental performance;



•

ensuring that our social and environmental policies are communicated and implemented;



•

working towards achieving best practices in occupational health and safety, and ensuring the health and safety of our employees, contractors and others involved in or affected by our activities; and



•

favoring suppliers that have sustainability policies and systems similar to our own.

        To continuously improve the environmental performance of our own operations, we are implementing environmental management systems according to the ISO 14001 standard on all our sites. We have implemented the ISO 14001 in 96 percent of our manufacturing facilities and service workshops (approximately 390 sites) and our environmental management program now includes operations in approximately 50 countries. We also require every operating unit within the ABB Group to implement an environmental management system that aims continuously to improve its environmental performance. We are now implementing an adapted environmental management system in our non-manufacturing organizations.

        We have introduced the concept of Environmental Product Declarations to communicate the environmental performance of our core products. These describe the salient environmental aspects and impacts of a product line, viewed over its complete life cycle. Declarations are based on Life Cycle Assessment studies, created according to the international standard ISO/TR 14025. To date, approximately 50 declarations have been produced for major product lines, 10 of which have been externally certified by agencies such as Det Norske Veritas (DNV) of Norway and the RINA Management System Certification Society in Italy.

        We have expanded the scope of our environmental reporting in recent years. In 2004, our formal reporting system covered approximately 88 percent of our employees. The parts of our business that are not yet covered by our reporting system have very limited environmental impacts. A total of 12 accidents were reported in 2004, none of which had a material environmental impact.

        One of our corporate objectives is to phase out the use of the hazardous substances that are recorded on our list of "restricted" substances. Priorities for replacement are set by each business using criteria such as the environmental aspects of alternatives, the risk of the substance escaping into the environment, how hazardous the substance is, whether we can use the substance under strict control and whether there are any technically acceptable alternatives.

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        We have retained liability for environmental remediation costs at two sites in the United States that were operated by our former nuclear business, which we have sold to BNFL. The primary environmental liabilities associated with these sites relate to the costs of remediating radiological contamination upon decommissioning the facilities. For further information, see "Item 5. Operating and Financial Review and Prospects—Environmental Liabilities."

REGULATION

        Our operations are subject to numerous other governmental laws and regulations including those governing 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 U.S. Securities Exchange Act of 1934, we are subject to the U.S. Foreign Corrupt Practices Act's antibribery provisions with respect to our conduct around the world.

        Our operations are also subject to the 1997 Organization of Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, as implemented by the 34 signatory countries. The convention obliges signatories to adopt national legislation that makes it a crime to bribe foreign public officials. As of December 31, 2004, those countries which have adopted implementing legislation and have ratified the convention include the United States, Switzerland and several European nations in which we have significant operations.

        We and our subsidiaries conduct business in certain countries known to experience governmental corruption. While we and our subsidiaries are committed to conducting business in a legal and ethical manner, there is a risk that our employees or agents may take actions that violate either the U.S. Foreign Corrupt Practices Act or legislation promulgated pursuant to the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. These actions could result in monetary penalties against us or our subsidiaries and could damage our reputation and, therefore, our ability to do business.

SIGNIFICANT SUBSIDIARIES

        ABB Ltd, Zurich, Switzerland is the ultimate parent company of the ABB Group, which is comprised of around 500 subsidiaries (excluding dormant companies) worldwide. Besides ABB Ltd, the only other listed company in the ABB Group is ABB Ltd, India, which is listed on the exchanges in India at Mumbai (BSE and NSE), Ahmadabad, New Delhi and Kolkata.

        The following table sets forth, as of March 31, 2005, the name, country of incorporation and ownership interest of ABB Ltd of its significant subsidiaries:

Company Name / Location	Country	ABB Interest
		(percent)
ABB S.A., Buenos Aires	Argentina	100.00
ABB Australia Pty Limited, Sydney	Australia	100.00
ABB AG, Vienna	Austria	100.00
ABB Ltda., Osasco	Brazil	100.00
ABB Bulgaria EOOD, Sofia	Bulgaria	100.00
ABB Inc., St. Laurent, Quebec	Canada	100.00
ABB (China) Ltd., Beijing	China	100.00
Asea Brown Boveri Ltda., Bogotá	Colombia	99.99
ABB Ltd., Zagreb	Croatia	100.00
ABB s.r.o., Prague	Czech Republic	100.00
ABB A/S, Skovlunde	Denmark	100.00
Asea Brown Boveri S.A., Quito	Ecuador	96.87

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Asea Brown Boveri S.A.E., Cairo	Egypt	100.00
ABB AS, Tallinn	Estonia	100.00
ABB Oy, Helsinki	Finland	100.00
ABB S.A., Rueil-Malmaison	France	100.00
ABB AG, Mannheim	Germany	100.00
ABB Automation Products GmbH, Eschborn	Germany	100.00
ABB Berteiligungs-und Verwaltungsges GmbH, Mannheim	Germany	100.00
ABB Gebäudetechnik AG, Mannheim	Germany	100.00
Asea Brown Boveri S.A., Metamorphossis Attica	Greece	100.00
ABB (Hong Kong) Ltd., Hong Kong	Hong Kong	100.00
ABB Engineering Trading and Service Ltd., Budapest	Hungary	100.00
ABB Ltd., Bangalore	India	52.11
ABB Ltd, Dublin	Ireland	100.00
ABB Technologies Ltd., Tirat Carmel	Israel	99.99
ABB S.p.A., Milan	Italy	100.00
ABB SACE S.p.A., Sesto S. Giovanni (MI)	Italy	100.00
ABB Technology SA, Abidjan	Ivory Coast	99.00
ABB K.K., Tokyo	Japan	100.00
ABB Ltd., Seoul	Korea, Republic of	100.00
ABB Holdings Sdn. Bhd., Subang Jaya	Malaysia	100.00
Asea Brown Boveri S.A. de C.V., Tlalnepantla	Mexico	100.00
ABB BV, Rotterdam	Netherlands	100.00
ABB Holdings BV, Amsterdam	Netherlands	100.00
Luwoco Lummus Worldwide Contracting (Netherlands) B.V., The Hague	Netherlands	100.00
ABB Limited, Auckland	New Zealand	100.00
ABB Holding AS, Billingstad	Norway	100.00
Asea Brown Boveri S.A., Lima	Peru	99.99
Asea Brown Boveri Inc., Paranaque, Metro Manila	Philippines	100.00
ABB Sp. zo.o., Warsaw	Poland	96.01
ABB S.G.P.S, S.A., Amadora	Portugal	100.00
Asea Brown Boveri Ltd., Moscow	Russia	100.00
ABB Contracting Company Ltd., Riyadh	Saudi Arabia	65.00
ABB Holdings Pte. Ltd., Singapore	Singapore	100.00
ABB Holdings (Pty) Ltd., Sunninghill	South Africa	80.00
Asea Brown Boveri S.A., Madrid	Spain	100.00
ABB AB, Västeros	Sweden	100.00
ABB Norden Holding AB, Stockholm	Sweden	100.00
ABB Asea Brown Boveri Ltd, Zurich	Switzerland	100.00
ABB LIMITED, Bangkok	Thailand	100.00
ABB Holding A.S., Istanbul	Turkey	99.95
ABB Ltd., Kiev	Ukraine	100.00
ABB Industries (L.L.C), Dubai	United Arab Emirates	49.00
ABB Ltd., Warrington	United Kingdom	100.00
ABB Lummus Global Inc., Bloomfield, NJ	United States	100.00
ABB Holdings, Inc., Norwalk, CT	United States	100.00
ABB Inc., Norwalk, CT	United States	100.00
Asea Brown Boveri S.A., Caracas	Venezuela	100.00
ABB (Private) Ltd., Harare	Zimbabwe	100.00

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DESCRIPTION OF PROPERTY

        As of December 31, 2004, the ABB Group occupied manufacturing, production and development facilities in approximately 100 countries throughout the world with over 18 million square meters of land and over 7 million square meters of building space. The facilities consist mainly of manufacturing plants, office buildings, research centers and warehouses. A substantial portion of our production and development facilities are situated in Germany, Sweden, the United States, Switzerland, China, Finland, and Italy. We also own or lease other properties, including office buildings, warehouses, research and development facilities and sales offices in many countries. We own approximately 50 percent of the buildings and approximately 80 percent of the land on which our facilities are located and lease the remainder.

        We own essentially 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 or, to a lesser extent, lease it to third parties.

        It is our general policy to maintain facilities and equipment at quality levels assuring continuous production at good efficiency and safety standards. The net book value of our property, plant and equipment as of December 31, 2004 was $2,981 million, of which machinery and equipment represented $1,337 million and land and buildings represented $1,523 million and construction in progress of $121 million. We believe that our current facilities are in good condition and are adequate to meet the requirements of our present and foreseeable future industrial operations.

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Item 5.    Operating and Financial Review and Prospects

You should read the following discussion of our financial condition and results of operations in conjunction with our Consolidated Financial Statements and the related notes and other financial information contained elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties, including those discussed in "Item 3. Key Information—Risk Factors." See "Forward-looking statements" at the beginning of this annual report. The financial statements and certain financial data set forth in our Consolidated Financial Statements as of December 31, 2003 and 2002 and for each of the years in the three year period ended December 31, 2003, reflect restatements made in September 2004 of our previously issued financial statements for those periods. This restatement was intended to correct the effect of earnings overstatements by the medium-voltage business unit of our Power Technologies division (or PT-MV BAU) in Italy on its previously reported financial statement results.

MANAGEMENT OVERVIEW

        Our operating performance improved significantly during 2004 following three years of substantial losses. Improved performance in our core divisions contributed to a 204 percent increase in earnings before interest and taxes, which increased $727 million to $1,084 million.

        During 2004, we continued to dispose of businesses that are outside our core activities, including the Upstream Oil, Gas and Petrochemicals and the Reinsurance businesses. The net cash proceeds from these dispositions, approximately $1,182 million, helped us fund the reduction of our debt. Our total borrowings fell from approximately $7.9 billion at the end of 2003 to $5.5 billion at the end of 2004, while our cash and cash equivalents were $4.8 billion at the end of 2003 and $3.7 billion at the end of 2004.

        Having made substantial progress in refocusing our business on our two core divisions, we are planning to address four key goals in 2005.

Improving Operational Performance

        Our financial targets for 2005 include achieving earnings before interest and taxes (EBIT) margins of 7.7 percent for the group and 10.7 percent for the Automation Technologies division. As part of the announcement of our first quarter 2005 results, we advised that due to the ongoing volatility in the Power Technologies businesses the achievement of our previously announced 10 percent EBIT margin in 2005 for the Power Technologies division was unlikely and could no longer be reaffirmed. We have not yet announced a new EBIT margin target for that division. Margin targets exclude major acquisitions, divestitures and business closures.

        We expect that the 2005 performance in our Power Technologies division will reflect higher revenues and improved capacity utilization. We further expect a positive impact from cost savings and improved efficiencies following the division's reorganization from five business areas to two effective as of January 1, 2005. In addition, we expect benefits from the implementation of a common front-end sales organization. The division performance in 2005 will reflect the reclassification of the majority of our Power Lines business unit to discontinued operations, as the exit strategy initiated in the fourth quarter 2004 is progressing as planned. A further increase in commodity prices could adversely affect the performance in the Power Technologies division in 2005.

        We expect that the performance in 2005 of our Automation Technologies division will reflect the cost savings and operating efficiencies resulting from this division's reorganization from eleven business areas at the beginning of 2003 into three business areas by the end of 2004. We additionally expect that the Automation Technologies division will benefit from a risk evaluation procedure, implemented in 2003, that subjects the division's large projects to a review based on the size and complexity of each project to help mitigate the risk of booking projects that ultimately will not be profitable. Various

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factors could also adversely affect the performance of the Automation Technologies division in 2005, including a decline in the value of the U.S. dollar against the euro or an increase in commodity prices.

        The performance of our Non-core activities in 2005 will depend significantly upon the results of our Oil, Gas and Petrochemicals business. Several years ago, we decided to shift our focus in that business from long-term fixed price contracts to reimbursable contracts to reduce project execution risk. While this change in strategy has led to reduced revenues in this business, we believe that over time it will enable us to improve margins and reduce risks.

Lowering Corporate Costs

        Reducing our cost base continues to be an important objective, and during 2005 we plan to focus particularly on reducing corporate costs. While cost reduction will have continuing benefits for us over the long term, it will also require us to incur additional restructuring and other related expenses in the near term.

Aligning Behavior to Rules

        During the past few years, we have discovered several instances in which ABB employees have failed to comply with our policies and applicable laws. One of our highest priorities is improving the compliance culture and control mechanisms within our entire organization so similar situations can be avoided in the future.

Resolving Asbestos

        In December 2004, the U.S. Court of Appeals for the Third Circuit effectively reversed the lower courts' order confirming the proposed plan of reorganization of Combustion Engineering. Resolving the asbestos-related liabilities of our subsidiaries remains a top priority. We intend to seek confirmation of a modified plan that continues to reflect the fundamental approach of the original plan to channeling claims against Combustion Engineering to a trust funded, in part, by us or other of our subsidiaries. To this end, in March 2005 we reached agreement with certain representatives of various parties on the basic terms of a modified plan, in connection with which we would increase by approximately $232 million the contributions to be made by us for the benefit of the claimants. We are now working with those parties to reach agreement on other issues relating to, and details of, the proposed modified plan and related proceedings involving Lummus and to prepare the related documentation. As soon as possible, we will submit each of the proposed plans for the approval of creditors and review by the courts.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

General

        We prepare our Consolidated Financial Statements in accordance with U.S. GAAP.

        The preparation of our financial statements requires us to make estimates and judgments 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, including, but not limited to, those related to: costs expected to be incurred to complete projects; costs of product guarantees and warranties; provisions for bad debts; recoverability of inventories, investments, goodwill and intangible assets; income tax related costs and accruals; provisions for restructuring; gross profit margins on long-term contracts; pensions and other post-retirement benefit assumptions; and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily

44

apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        We deem an accounting policy to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or if changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our Consolidated Financial Statements. We also deem an accounting policy to be critical when the application of such policy is essential to our ongoing operations. We believe the following critical accounting policies reflect the accounting policies relating to our more significant estimates and assumptions that we use in the preparation to our Consolidated Financial Statements. These policies should be considered in reviewing our Consolidated Financial Statements.

Revenues and cost of sales recognition

        We recognize revenues from the sale of manufactured products when persuasive evidence of an arrangement exists, the price is fixed and determinable, collectibility is reasonably assured and upon transfer of title, including the risks and rewards of ownership, to the customer. When multiple elements, such as products and services, are contained in a single arrangement or in a series of related arrangements with the same customer, we allocate revenue to each element based on its relative fair value, provided that such element meets the criteria for treatment as a separate unit of accounting. The allocation of the sales price between delivered elements and undelivered elements might affect the timing of revenue recognition, but would not change the total revenue recognized on the contract. Revenues from short-term or noncustomer specific contracts to deliver products or services are recognized upon completion of required services to the customer. Revenues from contracts that contain customer acceptance provisions are deferred until customer acceptance occurs, we have tested to the level required to ensure that acceptance will occur or the contractual acceptance period has lapsed. As a result, judgment in the selection of revenue recognition methods must be made.

        These revenue recognition methods require the collectibility of the revenues recognized to be reasonably assured. When recording the respective accounts receivable, allowances are calculated to estimate those receivables that will not be collected. These reserves assume a level of default based on historical information, as well as knowledge about specific invoices and customers. The risk remains that a greater number of defaults will occur than originally estimated. As such, the amount of revenues recognized might exceed that which will be collected, resulting in a deterioration of earnings in the future. This risk is likely to increase during periods of significant negative industry or economic trends.

        Revenues under long-term contracts are recognized using the percentage-of-completion method of accounting. We principally use the cost-to-cost or delivery events methods to measure progress towards completion on contracts. We determine the method to be used by type of contract based on our experience and judgment as to which method best measures actual progress towards completion.

        The percentage-of-completion method of accounting involves the use of assumptions and projections, relating to future material, labor, construction and overhead costs. As a consequence, there is a risk that total contract costs will exceed those we originally estimated. This risk increases if the duration of a contract increases or if the project is a fixed price turnkey project, because there is a higher probability that the circumstances upon which we originally developed estimates will change, resulting in increased costs that we will not recover. Factors that could cause costs to increase include:

•

unanticipated technical problems with equipment supplied or developed by us which may require that we incur additional costs to remedy;



•

changes in the cost of components, materials or labor;



•

difficulties in obtaining required governmental permits or approvals;

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•

project modifications creating unanticipated costs;



•

suppliers' or subcontractors' failure to perform;



•

penalties incurred as a result of not completing portions of the project in accordance with agreed upon time limits; 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 total estimated costs, current earnings and anticipated earnings. We recognize these changes in the period in which the changes in estimate are determined. By recognizing changes in estimates cumulatively, recorded revenue and costs to date reflect the current estimates of the stage of completion. Additionally, losses on long-term 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. Any such losses are recorded as a component of cost of sales.

        We accrue anticipated costs for warranties when we recognize the revenue on the related contracts. Warranty costs include calculated costs arising from imperfections in design, material and workmanship, performance guarantees (technical risks) and delays in contract fulfillment. Although we generally make assessments on an overall, statistical basis, we make individual assessments on contracts with risks resulting from order-specific conditions or guarantees, such as plants or installations. There is a risk that actual warranty costs may exceed the amounts provided for, which would result in a deterioration of earnings in the future when these actual costs are determined.

        Revenues under cost-reimbursement contracts are recognized as costs are incurred. Shipping and handling costs are recorded as a component of cost of sales.

Accounting for discontinued operations

        Our strategy is to focus on power and automation technologies for utility and industry customers. In accordance with our strategy, we have sold and plan to sell certain businesses that are not part of our core power and automation technologies businesses. Statement of Financial Accounting Standards No. 144 (SFAS 144), Accounting for the Impairment or Disposal of Long Lived Assets, broadened the presentation of discontinued operations to include disposal transactions involving less than an entire reporting segment, if certain criteria are met. The purpose of SFAS 144 is to allow for historically comparable data to be available to investors without the distortions created by divestments or the closure or abandonment of businesses, thereby improving the predictive value of financial statements. SFAS 144 requires the revenues and associated costs, net of taxes, of certain divestments and abandonments, to be classified as discontinued operations, net of taxes, below income from continuing operations in our Consolidated Income Statement and requires the related assets and liabilities to be classified as assets or liabilities held for sale and in discontinued operations in our Consolidated Balance Sheet.

        In order to classify a business as a discontinued operation, SFAS 144 requires that certain criteria be met. In certain cases, significant interpretation is required to determine the appropriate classification. Changes in plans regarding the sale of a business may change our interpretation as to whether a business should be classified as a discontinued operation. Any such reclassification may have a material impact on our income from continuing operations and the individual components thereof.

        In the Consolidated Statement of Cash Flows, we have included the businesses classified as discontinued operations together with continuing operations in the individual line items within cash from operating, investing and financing activities, as permitted by U.S. GAAP.

        For a description of our discontinued operations, see Note 3 to our Consolidated Financial Statements.

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Goodwill and other intangible assets impairment

        We review goodwill for impairment annually on October 1 and additionally whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable in accordance with Statement of Financial Accounting Standards No. 142 (SFAS 142), Goodwill and Other Intangible Assets. SFAS 142 requires that a two-step impairment test be performed on goodwill. In the first step, we compare the fair value of each reporting unit to its carrying value. Our reporting units are one level below the reportable segments identified in Note 26 to our Consolidated Financial Statements. We use a discounted cash flow model to determine the fair value of reporting units unless there is a readily determinable fair market value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and no further testing is performed. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step to determine the implied fair value of the reporting unit's goodwill and compare it to the carrying value of the reporting unit's goodwill. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, then we must record an impairment loss equal to the difference.

        The discounted cash flow model, which we use to estimate the fair value of our reporting units is dependent on a number of factors including estimates of future cash flows, appropriate discount rates and other variables. Estimating future cash flows requires us to make significant estimates and judgments involving variables such as sales volumes, sales prices, sales growth, production and operating costs, capital expenditures, market conditions and other economic factors. We base our fair value estimates on assumptions we believe to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates.

        We review intangible assets in accordance with SFAS 144, and accordingly test for impairment upon the occurrence of certain triggering events, such as a decision to divest a business or projected losses of an entity.

        We record any related impairment charge in other income (expense), net, in our Consolidated Income Statement, unless it is related to a discontinued operation, in which case the charge is recorded in loss from discontinued operations, net of tax.

Pension and post-retirement benefits

        As more fully described in Note 21 to our Consolidated Financial Statements, we operate pension plans that cover the majority of our employees. We use actuarial valuations to determine our pension and post-retirement benefit costs and credits. The amounts calculated depend on a variety of key assumptions, including discount rates and expected return on plan assets. We are required to consider current market conditions, including changes in interest rates, in selecting these assumptions. The discount rates are reviewed annually and considered for adjustment based on changes in long-term, highly rated corporate bond yields. Decreases in the discount rate result in an increase in the projected benefit obligation and to pension costs.

        The expected return on plan assets is reviewed annually and considered for adjustment based on current and expected 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. An increase or decrease of 0.5 percent in the expected long-term rate of asset return would have decreased or increased, respectively, the net periodic benefit cost in 2004 by approximately $30 million.

        Under U.S. GAAP, we accumulate and amortize over future periods actual results that differ from the assumptions used. Therefore, actual results generally affect our recognized expense and recorded liabilities for pension and other post-retirement benefit obligations in future periods.

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        The "unfunded" balance, which can increase or decrease based on the performance of the financial markets or changes in our assumptions regarding rates, does not represent a mandatory short-term cash obligation. Instead, the unfunded balance of a pension plan is the difference between the projected obligation to employees (PBO) and the fair value of the plan assets. While we comply with appropriate statutory funding requirements, at December 31, 2004, the unfunded balance of our pension plans was $1,451 million. In accordance with Statement of Financial Accounting Standards No. 87 (SFAS 87), Employers' Accounting for Pensions, we have recorded on the Consolidated Balance Sheet a net liability of $410 million in relation to this unfunded benefit balance. The difference is primarily due to an unrecognized actuarial loss of $1,019 million, which is amortized using the "minimum corridor" approach as defined by SFAS 87.

        In May 2003, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus on Emerging Issues Task Force No. 03-4 (EITF 03-4), Determining the Classification and Benefit Attribution Method for a "Cash Balance" Pension Plan, which requires the "traditional unit credit method" to be used for the calculation of the liability and attribution of the costs for pension plans with certain characteristics. We determined that certain of our pension plans covering the employees of Switzerland had the characteristics described in EITF 03-4 and therefore we changed the approach to calculating the PBO from the projected unit credit method to the traditional unit credit method. The change in cost attribution methods resulted in an actuarial gain of $406 million in 2003 that is included in the unrecognized actuarial loss of $1,019 million and as described above, will result in lower net pension costs in future years.

        We have multiple non-pension post-retirement benefit plans. Our health care plans are generally contributory with participants' contributions adjusted annually. For purposes of estimating our health care costs, we have assumed health care cost increases per annum to be 11.76 percent for 2005, then gradually declining to 6.24 percent per annum in 2013, and to remain at that level thereafter.

Taxes

        In preparing our Consolidated Financial Statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. 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. The differences 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 probable 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 provision for taxes in the Consolidated Income Statement unless the change relates to discontinued operations, in which case the change is recorded in loss from discontinued operations, net of tax. Unforeseen changes in tax rates and tax laws as well as differences in the projected taxable income compared to the actual taxable income may affect these estimates.

        We operate in numerous tax jurisdictions and, as a result, are regularly subject to audit by tax authorities. 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 income tax provisions and accruals.

        Accounting for tax contingencies requires that an estimated loss from a contingency such as a tax claim should be accrued as a charge to income if it is probable that an asset has been impaired or a liability has been incurred, and the amount of the loss can be reasonably estimated. The required amount of provision for contingencies of any type may change in the future due to new developments.

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Consolidation

        We evaluate our investments in joint ventures and other types of investments for purposes of determining whether consolidation or the cost or equity method of accounting is appropriate. This determination is based upon our ability to retain and exercise control through our decision-making powers and our ability to exercise significant influence over the entity, as well as our ownership interests in the entity.

        Material changes in our ability to retain control and exercise significant influence over an entity could change the accounting method between consolidation or the cost or equity methods, which could have a material impact on our Consolidated Financial Statements.

        In January 2003 and December 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46) Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51 and revised Interpretation No. 46 (FIN 46(R)), respectively, which require variable interest entities (VIEs) to be consolidated by their primary beneficiaries. Accordingly, effective January 31, 2003, we consolidate VIEs when we are considered the primary beneficiary. Also effective January 31, 2003, previously consolidated VIEs would be deconsolidated when a triggering event, as defined by FIN 46(R), indicates we are no longer the primary beneficiary. For those VIEs where we are not the primary beneficiary, we apply our existing consolidation policies in accordance with U.S. GAAP.

        In determining the primary beneficiary of a VIE, we are required to make projections of expected losses and expected residual returns to be generated by that VIE. The projected expected losses and expected residual returns are critical to the identification of the primary beneficiary. These projections require us to use assumptions, including assumptions regarding the probability of cash flows. Expected losses and expected residual returns materially different from those projected could identify another entity as the primary beneficiary. A change in the contractual arrangements or ownership between the parties involved in the VIE could have an impact on our determination of the primary beneficiary, which in turn, could have a material impact on our Consolidated Financial Statements.

Contingencies

        As more fully described in Note 18 to our Consolidated Financial Statements, we are subject to proceedings, lawsuits and other claims related to asbestos, environmental, labor, product and other matters. We are 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 amount of 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 provision for a contingency of any type may change in the future due to new developments in the particular matter, including changes in approach to its resolution.

Restructuring

        Certain restructuring provisions include estimates pertaining to employee termination costs and the settlements of contractual obligations resulting from our actions. Although we do not anticipate significant changes, the actual costs may differ from these estimates due to subsequent developments such as voluntary retirement of employees and other business developments. Restructuring costs are recorded in other income (expense), net, in the Consolidated Income Statements. However, restructuring costs relating to discontinued operations are recorded in loss from discontinued operations, net of tax.

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Insurance

        In April 2004, we completed the sale of substantially all of our business operating in the reinsurance industry. We refer to the divested portion of this business as the Reinsurance business. Consequently, we have reflected the results of operations of the Reinsurance business in loss from discontinued operations, net of tax, and the assets and liabilities in assets and liabilities held for sale and in discontinued operations for all periods presented.

        We generally recognized premiums in earnings on a pro rata basis over the period coverage was provided. Premiums earned included estimates of certain premiums not yet collected. These premium receivables included premiums relating to retrospectively rated contracts. For such contracts, a provisional premium was collected that will eventually be adjusted. We included an estimated value of the actual premium in receivables. Unearned premiums represented the portion of premiums written that was applicable to the unexpired terms of reinsurance contracts or certificates in force. These unearned premiums were calculated by the monthly pro rata method or were based on reports from ceding companies that we reinsure.

        Insurance liabilities were reflected in liabilities held for sale and in discontinued operations, in our Consolidated Balance Sheet and represented unpaid claims, losses, and related loss expenses based upon estimates for losses reported, estimates received from ceding reinsurers, and estimates of incurred but not reported losses related to direct and assumed business, less amounts ceded to reinsurers. Reserves for unreported losses were determined by an estimate established using various statistical and actuarial techniques reflecting historical patterns of development of paid and reported losses adjusted for current trends. The inherent variability of the estimate was analyzed in order to ascertain whether it was reasonable before application. We did not discount loss and loss adjustment expense reserves.

        We developed our estimate considering a range of reserve estimates bounded by a high and a low estimate. The high and low ends of the range did not correspond to an absolute best and worst case scenario of ultimate settlements because such estimates may have been the result of unlikely assumptions. Our best estimate therefore did not include the set of all possible outcomes but only those outcomes that were considered reasonable. Those estimates were subject to the effects of trends in loss severity and frequency. Although considerable variability was inherent in such estimates, we believed the reserves for losses and loss adjustment expenses were adequate. The estimates were continually reviewed and adjusted as necessary as experience developed or new information became known; such adjustments were included in discontinued operations. Adjustments to reserves were reflected in the loss from discontinued operations, net of tax, in the periods in which the estimates were changed.

        We reflected our liability for losses net of anticipated salvage and subrogation recoveries. Salvage and subrogation received and changes in estimates of future recoveries were reflected in current year underwriting results. We believe the liabilities for losses and loss adjustment expenses were adequate to cover the ultimate liability; however, due to the underlying risks and high degree of uncertainty associated with the determination of the liability for losses, such estimates may have been more or less than the amounts ultimately paid when the claims were settled.

        We sought to reduce the loss from our underwriting liabilities by reinsuring certain levels of risks with other insurance enterprises or reinsurers. We used recoverable amounts for both paid and unpaid losses. We estimated these recoverable amounts in a manner consistent with the claim liability associated with the reinsurance policy. The risk of collectibility of these reinsurance receivables arose from disputes relating to the policy terms and the ability of the reinsurer to pay.

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NEW ACCOUNTING PRONOUNCEMENTS

        In December 2004, the Financial Accounting Standards Board issued Statement No.123(R) (SFAS 123R), Share-Based Payment, which replaces SFAS 123 and APB 25, Accounting for Stock Issued to Employees, and requires the Company to measure compensation cost for all share-based payments at fair value. On April 14, 2005, the U.S. Securities and Exchange Commission announced the adoption of a new rule that amends the compliance dates for SFAS 123R. As a result of this announcement, the Company plans to adopt SFAS 123R as of January 1, 2006. The Company will recognize share-based employee compensation cost from January 1, 2006, as if the fair-value based accounting method had been used to account for all employee awards granted, modified, or settled after the effective date and for any awards that were not fully vested as of the effective date. Based on currently existing share-based compensation plans, the Company does not expect the adoption of SFAS 123R to have a material impact on its financial position or results of operations.

        In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51. FIN 46 requires variable interest entities (VIEs) to be consolidated by their primary beneficiaries. During 2003, we adopted the requirements of FIN 46 and applied the guidance to VIEs in which we have an interest. See Note 8 to the Consolidated Financial Statements for information relating to the impact of adopting FIN 46. FIN 46 was revised in December 2003. We adopted the December revision (FIN 46R) effective March 31, 2004. The adoption of FIN 46R did not have a material impact on our financial position or results of operations.

RESTRUCTURING EXPENSES

        We have implemented several major restructuring programs during the past three years (see Note 25 to the Consolidated Financial Statements).

2001 Program

        Our restructuring program announced in July 2001 (the 2001 Program) was substantially completed at September 30, 2002. Restructuring charges relating to workforce reductions, lease terminations and other exit costs associated with the 2001 Program, along with changes in estimates accrued for any of these charges, are included in other income (expense), net. Termination benefits were paid to approximately 100, 2,270 and 4,000 employees in 2004, 2003 and 2002, respectively. As a result of the 2001 Program, certain assets, inventories and property, plant and equipment were identified as being impaired or would no longer be used in continuing operations. We recorded in 2002 a charge of $18 million to write down these assets to their fair values, and such costs are included in cost of sales and other income (expense), net.

Step change program

        In October 2002, we announced the Step change program. The goals of the Step change program were to increase competitiveness of our core businesses, reduce overhead costs and streamline operations. At June 30, 2004, the Step Change program was substantially complete.

        Restructuring charges relating to workforce reductions, lease terminations and other exit costs associated with the Step change program are included in other income (expense), net. Termination benefits were paid to approximately 950, 1,500 and 200 employees in 2004, 2003 and 2002, respectively. Workforce reductions occurred principally from production, managerial and administrative employees. Changes in management's original estimate of the amounts accrued for workforce reductions, lease terminations and other exit costs were included in other income (expense), net.

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        As a result of the Step change program, certain assets, inventories and property, plant and equipment were identified as being impaired or would no longer be used in continuing operations. We recorded $0 million, $3 million and $2 million in 2004, 2003 and 2002, respectively, to write down these assets to their fair value, and such costs were included in cost of sales and other income (expense), net.

Other

        Certain restructuring programs were initiated primarily during 2003 at specified locations not included in the Step change program. The goals of these programs are to increase efficiencies by reducing headcount and streamlining operations. These programs are expected to increase productivity of the non-core businesses. Anticipated savings will be recognized through the strategic divestment of these operations.

        Restructuring charges related to workforce reductions, lease terminations and other exit costs associated with these other programs are included in other income (expense), net. Termination benefits were paid to approximately 1,290 and 1,300 employees in 2004 and 2003, respectively. Workforce reductions occurred principally from production, managerial and administrative employees. Changes in management's original estimate of the amounts accrued for workforce reductions, lease terminations and other exit costs have been included in other income (expense), net.

        As a result of other restructuring programs, certain assets, inventories and property, plant and equipment have been identified as being impaired or would no longer be used in continuing operations. We recorded $5 million and $11 million in 2004 and 2003, respectively, to write down these assets to fair value and such costs are included in cost of sales and other income (expense), net.

Restructuring liabilities

        Restructuring liabilities consist of the following:

		2001 Program						Step change						Other						Total
		Workforce reductions			Lease terminations and other exit costs			Workforce reductions			Lease terminations and other exit costs			Workforce reductions			Lease terminations and other exit costs
		(U.S. dollars in millions)
Balance at January 1, 2002		$	78		$	39		$	—		$	—		$	20		$	12		$	149
	Restructuring expense		168			40			51			26			—			—			285
	Cash paid		(156	)		(29	)		(13	)		(1	)		—			—			(199	)
	Exchange rate differences		20			5			—			—			—			—			25
	Changes in estimate		(16	)		(5	)		—			—			(9	)		—			(30	)
Balance at December 31, 2002			94			50			38			25			11			12			230
	Restructuring expense		—			—			181			56			110			25			372
	Cash paid		(99	)		(10	)		(143	)		(48	)		(43	)		(12	)		(355	)
	Exchange rate differences		14			9			24			4			7			3			61
	Changes in estimate		—			(22	)		(4	)		—			(6	)		—			(32	)
Balance at December 31, 2003			9			27			96			37			79			28			276
	Restructuring expense		—			—			42			17			98			31			188
	Cash paid		(9	)		(9	)		(137	)		(18	)		(103	)		(16	)		(292	)
	Exchange rate differences		—			2			6			3			5			4			20
	Changes in estimate		—			(6	)		(7	)		—			(5	)		(5	)		(23	)
Balance at December 31, 2004		$	—		$	14		$	—		$	39		$	74		$	42		$	169

52

        We expect that we will continue to expend cash and incur restructuring expenses. In particular, we expect that we will pay in 2005 a significant portion of our total restructuring liabilities at December 31, 2004. We also expect to incur restructuring expenses in an amount equal to approximately 0.5 to 0.7 percent of our revenues in each year as part of our routine assessment of our business practices and strategy. These expenses will be recorded in cost of sales, selling, general and distribution expenses and other income (expense), net, in the Consolidated Income Statements according to the nature of the expenses, except for restructuring expenses incurred by businesses classified in discontinued operations, which will be recorded in income (loss) from discontinued operations. We expect to fund our cash expenditures under our restructuring programs through cash generated from our continuing operations. The benefits of these restructuring programs are expected to be realized through reductions in selling, general and administrative expenses and cost of sales in the subsequent years. These benefits, however, may be offset by increases in cost of sales, selling, general and administrative expenses and other income (expense), net, due to various other factors, which cannot be predicted in advance.

Cumulative

        The cumulative amounts at December 31, 2004, for each plan are given below:

	2001 Program			Step change			Other			Total
	(U.S. dollars in millions)
Restructuring charge for workforce reduction	$	282		$	274		$	228		$	784
Restructuring charge for lease terminations and other		111			99			68			278
Changes in estimate		(49	)		(11	)		(25	)		(85	)
Total restructuring charges	$	344		$	362		$	271		$	977

Division information

        Restructuring charges by division and business activity consist of the following:

		Year ended December 31,
		2004		2003		2002
		(U.S. dollars in millions)
Power Technologies		$	51	$	61	$	57
Automation Technologies			72		139		126
Non-core activities:
	Oil, Gas and Petrochemicals		20		20		—
	Equity Ventures		—		—		—
	Structured Finance		—		—		—
	Building Systems		11		43		22
	New Ventures		1		1		2
	Other Non-core activities		—		47		15
Total Non-core activities			32		111		39
Corporate/Other			10		29		33
Total restructuring charges		$	165	$	340	$	255

53

ACQUISITIONS, INVESTMENTS AND DIVESTITURES

Acquisitions and investments

        In 2004, 2003 and 2002, we paid aggregate consideration of $24 million, $55 million and $154 million, respectively, related to acquisitions and investments in new businesses, joint ventures and affiliated companies.

Divestitures of businesses, joint ventures and affiliated companies

        In 2004, 2003 and 2002, we received cash, net of cash disposed, from sales of businesses, joint ventures and affiliated companies of $1,182 million, $543 million and $2,509 million, respectively. In relation to these dispositions we recognized net gains in 2004, 2003, and 2002 within other income (expense), net, of $52 million, $43 million and $98 million, respectively. We also recognized net losses in 2004, 2003, and 2002 within loss from discontinued operations, net of tax, of $63 million, $38 million and $194 million, respectively.

        Our material and certain other dispositions are described below.

Divestitures in 2004

        In December 2004, we sold our entire 15.7 percent equity interest in IXYS Corporation for approximately $42 million and recorded a gain, before tax, of $20 million in other income (expense), net.

        In July 2004, we sold the Upstream Oil, Gas and Petrochemicals business to a consortium of private equity investors (collectively, the Purchasers). We received net cash proceeds of approximately $800 million, which reflects an initial sales price of $925 million adjusted for approximately $85 million of unfunded pension liabilities and changes in net working capital. We recognized in 2004 a loss on disposal of $26 million in loss from discontinued operations, net of tax. On February 9, 2005, we and the Purchasers entered into a Settlement Agreement and Amendment (the Settlement Agreement) finalizing the sales price. This Settlement Agreement contains provisions to indemnify the Purchasers with respect to certain incomplete projects. We believe the provisions we have accrued for such indemnified projects are adequate.

        In June 2004, we sold a business in the Automation Technologies division operating in Sweden, for gross and net proceeds of approximately $11 million, and recorded a gain on disposal of $7 million, before tax, in other income (expense), net.

        In April 2004, we completed the sale of our Reinsurance business to White Mountains Insurance Group Limited, a Bermuda based insurance holding company, receiving gross cash proceeds of $415 million and net proceeds of approximately $280 million. In anticipation of the sale of this business, we recorded in 2003 an impairment charge of $154 million in loss from discontinued operations, net of tax. We recognized in 2004 a net loss of $41 million in loss from discontinued operations, net of tax, that related primarily to currency translation effects from December 2003 through the date of sale in April 2004 (as explained in "Note 2 Significant accounting policies—Translation of foreign currencies and foreign exchange transactions" to our Consolidated Financial Statements).

        In February 2004, we sold our Swiss Building Systems business to a Swiss private equity company, for gross cash proceeds of approximately $39 million, but retained a 10 percent ownership interest. We recognized in 2004 a net gain on disposal of $12 million, before tax, in other income (expense), net.

        In January 2004, we sold our MDCV (Mitsubishi-Dainichi Continuous Vulcanization) Cable Business. We recorded in 2003 asset write-downs of $10 million in anticipation of the sale of this business in loss from discontinued operations, net of tax.

54

Divestitures in 2003

        In December 2003, as part of the divestment of our Structured Finance business, we sold ABB Export Bank. We received cash proceeds of approximately $50 million from the sale and recorded in 2003 a loss on disposal of $12 million, in loss from discontinued operations, net of tax.

        In December 2003, as part of the divestment of the Wind Energy business (which was held in the New Ventures business area prior to its classification to discontinued operations), we sold the majority of the business for total consideration of $35 million, which included a vendor note of $10 million. We recognized in 2003 a loss on disposal from this sale of approximately $25 million in loss from discontinued operations, net of tax.

        In August 2003, as part of the divestment of our Building Systems businesses, we sold to YIT Corporation of Finland our Building Systems businesses located in Sweden, Norway, Denmark, Finland, Russia and the Baltic states for consideration of $213 million. We recorded a gain on disposal of approximately $124 million, before tax, in other income (expense), net. Additionally, throughout 2003, we sold other Building Systems businesses in a number of countries, including Belgium, the Netherlands, Austria, Hungary and the United Kingdom, for aggregate proceeds of $21 million. We recorded in 2003 a loss on disposal from the sale of these businesses of approximately $41 million, before tax, in other income (expense), net.

        In June 2003, we sold our entire 35 percent interest in the Swedish Export Credit Corporation to the government of Sweden for net proceeds of approximately $149 million, and recorded a loss on disposal of approximately $80 million, before tax, included in other income (expense), net.

        Also in June 2003, we sold our interests in certain equity investments in Australia for cash proceeds of approximately $90 million, and recorded in 2003, a gain on disposal of approximately $28 million, before tax, in other income (expense), net.

        In March 2003, we sold our aircraft leasing business for approximately $90 million. This business consisted of a portfolio of loans and leases related to commuter aircraft and helicopters used primarily in Northern Europe. We provided significant financial support to the entity formed by the buyer for the acquisition. Following the introduction of FIN 46 in 2003, we determined that this entity should be treated as a variable interest entity and, as a result of the financial support we provided, that we are the primary beneficiary of this entity. Accordingly, we consolidated this entity in our Consolidated Financial Statements.

Divestitures in 2002

        In December 2002, we completed the sale of our Metering business to Ruhrgas Industries GmbH for consideration of approximately $223 million. We recorded in 2002 a loss on disposal of approximately $48 million from this sale in loss from discontinued operations, net of tax. Cash held in escrow of $15 million was released after resolution of certain disputed items in 2003.

        In November 2002, we completed the sale of most of our Structured Finance business to General Electric Capital Corporation (GE) and received cash proceeds of approximately $2.0 billion, including a contingent payment of $20 million to be released to us should amounts ultimately collected by GE, from a portfolio transferred by us to GE, reach specified targets. Collection of the last portion of the contingent payment, which culminated our collection of substantially all of the contingent payment, took place on August 3, 2004. We recorded in 2002 a loss on disposal from this sale of approximately $146 million in loss from discontinued operations, net of tax. Pursuant to the sale and purchase agreement for this transaction, we provided GE with cash collateralized letters of credit in the aggregate amount of $202 million as security for certain performance-related obligations retained by us, of which approximately $63 million were outstanding as of December 31, 2004. The remaining cash collateralized letters of credit will further be reduced as our performance related obligations expire.

55

The sale and purchase agreement also provided GE with the option to require us to repurchase designated financial assets transferred to GE. The fair value of GE's right to require us to repurchase the designated assets was $11 million at December 31, 2003. On January 26, 2004, we repurchased the designated financial assets for approximately $28 million. No further obligation exists for us to repurchase any assets under the sale and purchase agreement.

        In January 2002, we sold our Air Handling business for cash proceeds of $113 million, which was the sales price of $147 million less a vendor note of 39 million euro principal value (approximately $34 million at the date of issuance) issued by the purchaser, Global Air Movement (Luxembourg) Sarl. We recognized in 2002 a gain on disposal from this sale of $74 million, before tax, in other income (expense), net.

Other divestitures

        In May 2003, we sold our interest in China National Petrochemical Corporation (Sinopec Corp.) for approximately $82 million and recorded in 2003 a loss on disposal of $40 million, before tax, in interest and other finance expense, net.

        During 2004, 2003 and 2002, we sold several operating units and investments not described above for total proceeds of $39 million, $31 million and $209 million, respectively, and recognized net gains, before tax, on disposal of $13 million, $12 million and $24 million, respectively, in other income (expense), net. Net income from these businesses and investments was not significant in 2004, 2003 and 2002.

        In addition, throughout 2003, we engaged in a number of sales and terminations of lease portfolios and individual financing receivables resulting in cash proceeds of approximately $400 million. These disposals continued in 2004, generating cash proceeds of approximately $180 million. The gains (losses) on such disposals were not material.

EXCHANGE RATES

        We report our financial results in U.S. dollars. A significant amount of our revenues, expenses, assets and liabilities are denominated in other currencies due to our global operations. As a consequence, movements in exchange rates between currencies may affect:

•

our profitability,



•

the comparability of our results between periods, and



•

the carrying value of our assets and liabilities.

        We must translate non-U.S. dollar denominated results of operations, assets and liabilities to U.S. dollars in our Consolidated Financial Statements. Balance sheet items are translated to U.S. dollars using year-end currency exchange rates. Income statement and cash flow items are translated to U.S. dollars using the average currency exchange rate over the relevant period. As a consequence, increases and decreases in the value of the U.S. dollar against other currencies will affect our reported results of operations in our Consolidated Income Statement and the value of certain of our assets and liabilities in our Consolidated Balance Sheet, even if our results of operations or the value of those assets and liabilities have not changed in their original currency. Because of the impact foreign exchange rates have on our reported results of operations and the reported value of our assets and liabilities, changes in foreign exchange rates could significantly affect the comparability of our reported results of operations between periods and result in significant changes to the reported value of our assets, liabilities and shareholders' equity, as has been the case during the period from 2002 through 2004.

        While we operate globally and report our financial results in U.S. dollars, because of the location of our significant operations and because our headquarters are in Switzerland, exchange rate movements between the U.S. dollar and both the euro (EUR) and the Swiss franc (CHF) are of

56

particular importance to us. The decline in the value of the U.S. dollar against the euro and Swiss franc between 2002 and 2004 has had a material impact on our financial statements.

        The exchange rates between the U.S. dollar and the EUR and the U.S. dollar and the CHF at December 31, 2004, 2003, and 2002, are as follows.

	At December 31,
Exchange rates into U.S. dollars
	2004		2003		2002
EUR 1.00	$	1.37	$	1.26	$	1.05
CHF 1.00	$	0.88	$	0.81	$	0.72

        The average exchange rates between the U.S. dollar and the EUR and the U.S. dollar and the CHF for the years ended December 31, 2004, 2003 and 2002, are as follows.

	Year ended December 31,
Exchange rates into U.S. dollars
	2004		2003		2002
EUR 1.00	$	1.25	$	1.13	$	0.94
CHF 1.00	$	0.81	$	0.75	$	0.64

        When we incur expenses that are not denominated in the same currency as the related revenues, foreign exchange rate fluctuations could adversely affect our profitability. To mitigate the impact of exchange rate movements on our profitability, it is our policy to enter into forward foreign exchange contracts to manage the foreign exchange risk of our operations.

        In 2004, approximately 84 percent of our consolidated revenues were reported in currencies other than U.S. dollars. Of that amount, the following percentages were reported in the following currencies:

•

Euro, approximately 37 percent,



•

Chinese renminbi, approximately 6 percent,



•

Swedish krona, approximately 6 percent,



•

Swiss franc, approximately 5 percent and



•

Pound sterling, approximately 3 percent.

        In 2004, approximately 83 percent of our consolidated cost of sales and selling, general and administration expenses were reported in currencies other than U.S. dollars. Of that amount, the following percentages were reported in the following currencies:

•

Euro, approximately 37 percent,



•

Chinese renminbi, approximately 5 percent,



•

Swedish krona, approximately 6 percent,



•

Swiss franc, approximately 5 percent and



•

Pound sterling, approximately 4 percent.

        Foreign exchange rate changes resulted in an increase in our reported revenues and EBIT by 6 percent and 18 percent in 2004 and 12 percent and 42 percent in 2003, respectively.

        We also incur expenses other than cost of sales and selling, general and administration expenses in various currencies.

        The results of operations and financial position of most of our non-U.S. subsidiaries are reported in the currencies of the countries in which those subsidiaries reside. We call these "local currencies." That local currency financial information is then translated into U.S. dollars at applicable exchange rates for inclusion in our Consolidated Financial Statements.

57

        The discussion of our results of operations below provides certain information with respect to orders, revenues, earnings before interest and taxes and other measures as reported in local currencies (as well as in U.S. dollars). We measure period-to-period variations in local currency results by using a constant foreign exchange rate for all periods under comparison. Differences in our results of operations as reported in local currencies as compared to our results of operations as reported in U.S. dollars 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 and our reconciliations, provide a more complete understanding of factors and trends affecting the business. Because local currency information is not standardized, it may not be possible to compare our local currency information with other companies' financial measures having the same or a similar name. Management strongly encourages investors to review our financial statements and publicly-filed reports in their entirety, and not to rely on any single financial measure.

ORDERS

        We book and report an order when a binding contractual agreement has been concluded with the customer covering, at a minimum, the price and scope of products or services to be supplied, the delivery schedule and payment terms. The reported value of an order corresponds to the undiscounted value of revenues that we expect to recognize following our 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 a 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, cancellations of orders, returns of delivered goods, and the recognition of operating or financial services income relating to the order (except that the cancellation of orders with an expected revenue value of over $10 million that were received in a previous period are not deducted from the value of orders received during the present period, and instead, are balanced against order backlog only).

        The undiscounted value of revenues we expect to generate from our orders at any point in time is represented by our order backlog. Approximately 12 percent of the value of the orders we booked in 2004 were "large orders," which we define as orders from third parties involving at least $15 million worth of products or systems. Of the total value of orders in the Power Technologies and Automation Technologies divisions in 2004, approximately 11 percent and 7 percent, respectively, represented large orders. Within Non-core activities, large orders represented 49 percent of total orders in 2004, as large orders accounted for 68 percent of the value of orders received by the Oil, Gas and Petrochemicals business.

        The level of orders fluctuates from year to year. Arrangements included in particular orders can be complex and unique to the order. Portions of our business involve orders for long-term projects that can take months or years to complete and many large orders result in revenues in periods after the order is booked. However, the level of large orders and backlog, and orders and backlog generally, cannot be used to accurately predict future revenues or operating performance. Orders that are placed can 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.

58

PERFORMANCE MEASURES

        We evaluate the performance of our divisions based on orders received, revenues, earnings before interest and taxes (or EBIT), EBIT as a percentage of revenues (or EBIT margin) and net cash provided by (used in) operating activities. The orders, revenues and EBIT of our divisions include interdivisional transactions. In 2004, approximately 95 percent of our core divisions' orders and revenues were from third-party customers. EBIT, which is commonly referred to as operating profit, is the amount resulting from the subtraction of our cost of sales, selling, general and administrative expenses, amortization expense and other income (expense), net, from our revenues. EBIT margin is the percentage amount resulting from the division of EBIT by revenues. Net cash provided by (used in) operating activities represents the cash provided by or used in a business before cash inflows and outflows from investing and financing activities, and, as relates to our divisions, includes interdivisional transactions.

RESTATEMENT

        The financial statements and other financial data included in this report reflect restatements we made in September 2004, when we restated certain financial statements contained in our annual report for the year ended December 31, 2003 as published in our Form 20-F filed with the U.S. Securities and Exchange Commission in April 2004. The amendments reflected restatements of our consolidated financial statements at December 31, 2003 and 2002 and for each of the years in the three-year period ended December 31, 2003, and of certain financial data at December 31, 2001, 2000 and 1999 and for each of the years in the two-year period ended December 31, 2000. These changes were intended to correct the effect of earnings overstatements by the PT-MV BAU in Italy on its previously reported financial statement results.

        The cumulative effect of these overstatements on our EBIT and net income was approximately $73 million and $89 million, respectively, from the first quarter of 1998 through the end of March 2004. The negative impact on income tax expense results from the inability to claim tax benefits under Italian tax law for adjustments made to improperly filed tax returns for the years 1998 through 2002, as well as a reassessment of the probability of realization of our deferred tax assets due to a cumulative loss position after the restatement. As compared with financial data originally published, the corrections increased net loss by $12 million ($0.01 per share basic and diluted), $36 million ($0.04 and $0.03 per share basic and diluted, respectively) and $14 million ($0.02 per share basic and diluted) in 2003, 2002 and 2001, respectively, decreased net income by $17 million ($0.01 and $0.02 per share basic and diluted, respectively) and $6 million ($0.01 per share basic and diluted) in 2000 and 1999, respectively, and decreased stockholders' equity by $109 million at December 31, 2003.

DIFFERENCES FROM PRELIMINARY EARNINGS ANNOUNCEMENT

        On February 17, 2005, we announced, in an unaudited earnings release, net income for the year ended December 31, 2004 totaling $201 million. Following extensive negotiations between various representatives of asbestos claimants and us, on March 21, 2005, we announced that we reached an agreement with those parties on the basic terms of an amended plan of reorganization for Combustion Engineering and ABB Lummus Global to resolve the asbestos claims against both companies.

        This event, and the resulting change in estimate relating to our potential asbestos-related liabilities, is required under accounting rules to be recorded in our results for the year ended December 31, 2004. As a result of the changes required to reflect that change in estimate, our Consolidated Financial Statements included in this report differ in certain respects from the financial information stated in the February 17, 2005 earnings release.

59

        In the Consolidated Financial Statements, we have adjusted the preliminary amounts announced in the earnings release as follows:

	Year Ended December 31, 2004
Selected Financial Data	As reported on February 17, 2005			Adjustments*			As adjusted
	(U.S. dollars in millions, except per share data)
Loss from discontinued operations, net of tax	$	(247	)	$	(236	)	$	(483	)
Net income (loss)		201			(236	)		(35	)
Net income (loss) per share	$	0.10		$	(0.12	)	$	(0.02	)
Accrued liabilities and other	$	6,200		$	236		$	6,436
Total stockholders' equity	$	3,060		$	(236	)	$	2,824

*

Adjustments due to changes in asbestos related cost provision.

ANALYSIS OF RESULTS OF OPERATIONS

Consolidated

        Our results from operations were as follows:

		Year ended December 31,
		2004			2003			2002
		(U.S. dollars in millions, except per share data)
Orders		$	21,689		$	19,701		$	19,153
Order backlog(1)			12,364			11,306			12,127
Revenues			20,721			20,427			19,472
Cost of sales			15,757			15,928			15,098
Selling, general and administrative expenses			3,786			3,917			4,050
EBIT			1,084			357			199
Interest and other finance expense, net			(223	)		(417	)		(133	)
Loss from discontinued operations			(483	)		(408	)		(693	)
Net loss		$	(35	)	$	(779	)	$	(819	)
Basic earnings (loss) per share:
	Income (loss) from continuing operations	$	0.22		$	(0.30	)	$	(0.11	)
	Net loss	$	(0.02	)	$	(0.64	)	$	(0.74	)
Diluted earnings (loss) per share:
	Income (loss) from continuing operations	$	0.22		$	(0.30	)	$	(0.27	)
	Net loss	$	(0.02	)	$	(0.64	)	$	(0.86	)

⁽¹⁾

at December 31

        A more detailed discussion of the orders, revenues, cost of sales, selling, general and administrative expenses and EBIT for each of our individual divisions and segments follows in sections entitled "Power Technologies," "Automation Technologies," "Non-core activities" and "Discontinued operations" below.

60

Orders

		Year ended December 31,
		2004			2003			2002
		(U.S. dollars in millions)
Power Technologies		$	9,372		$	7,682		$	6,686
Automation Technologies			11,334			9,691			8,428
	Total Core Divisions		20,706			17,373			15,114
	Non-core activities
Oil, Gas and Petrochemicals			1,216			1,156			2,123
Building Systems			388			1,616			2,351
New Ventures			41			45			70
Equity Ventures			7			26			19
Structured Finance			6			48			77
Other Non-core activities			36			469			960
	Total Non-core activities		1,694			3,360			5,600
Corporate/Other and inter-division eliminations.			(711	)		(1,032	)		(1,561	)
	Total	$	21,689		$	19,701		$	19,153

        In 2004, orders increased by $1,988 million, or 10 percent (3 percent in local currencies), to $21,689 million.

        Orders received by the core divisions increased by 19 percent in 2004 (12 percent in local currencies), with orders received by the Power Technologies and Automation Technologies divisions increasing 22 percent and 17 percent (15 percent and 9 percent in local currencies), respectively. Orders received by Non-core activities decreased by 50 percent (53 percent in local currencies) in 2004 as compared to 2003. Orders valued at approximately $92 million, or 0.4 percent of 2004 orders, were received prior to 2004 and were cancelled, but not deducted from the reported value of orders received, during 2004.

        In 2003, orders increased by $548 million, or 3 percent (decreased by 9 percent in local currencies), to $19,701 million from $19,153 million in 2002. This small increase in orders was due to a 40 percent (43 percent in local currencies) decline in orders received by Non-core activities that substantially offset increases in orders received by each of the Power Technologies and Automation Technologies divisions of 15 percent (5 percent and 1 percent, respectively, in local currencies). Orders valued at approximately $136 million, or 0.7 percent of 2003 orders, were received prior to 2003 and were cancelled, but not deducted from the reported value of orders received, during 2003. Orders valued at approximately $644 million, or 3.4 percent of 2002 orders, were received prior to 2002 and were cancelled, but not deducted from the reported value of orders received, during 2002.

		Year ended December 31,
		2004		2003		2002
		(U.S. dollars in millions)
Europe		$	11,009	$	11,024	$	10,915
The Americas			3,797		3,227		3,862
Asia			5,013		3,460		2,822
MEA			1,870		1,990		1,554
	Total	$	21,689	$	19,701	$	19,153

        Orders from Europe remained flat in 2004 and 2003, but declined 8 percent and 12 percent in local currencies, respectively. Changes in our orders from Europe from 2002 to 2004 were primarily the

61

result of divestments from the Building Systems business and a shift to reimbursable contracts in the Oil, Gas and Petrochemicals business. Orders from the Americas increased 18 percent (15 percent in local currencies) during 2004, driven largely by automotive industries after a decline of 16 percent (18 percent in local currencies) during 2003.

        Asian orders increased 45 percent and 23 percent (38 percent and 15 percent in local currencies) in 2004 and 2003, respectively, principally resulting from an increase in orders from China in the same respective periods driven by economic growth and infrastructure development. South Asian orders were predominantly from India, where orders grew in 2004 and 2003, following the Indian government's economic liberalization and initiatives. In 2004, orders from Middle East and Africa (MEA) declined by 6 percent (14 percent in local currencies) in 2004 compared to 2003, which included several large orders received by the Power Technologies division's Power Systems business area thereby resulting in an increase of 28 percent (20 percent in local currencies) in 2003 as compared to 2002.

Order backlog

		At December 31,
		2004			2003			2002
		(U.S. dollars in millions)
Power Technologies		$	6,874		$	6,030		$	5,682
Automation Technologies			4,322			3,826			3,486
Non-core activities			1,533			1,865			3,579
Corporate/Other and inter-division eliminations			(365	)		(415	)		(620	)
	Total	$	12,364		$	11,306		$	12,127

        Order backlog increased by $1,058 million, or 9 percent (3 percent in local currencies), to $12,364 million in 2004 as an increase in order backlog in the core divisions exceeded an 18 percent decline (24 percent in local currencies) in the order backlog in Non-core activities. In 2003, order backlog decreased by $821 million, or 7 percent (17 percent in local currencies), to $11,306 million from $12,127 million in 2002, as an increase in order backlog in the core divisions was more than offset by a 48 percent (53 percent in local currencies) decline in order backlog in Non-core activities.

Revenues

		Year ended December 31,
		2004			2003			2002
		(U.S. dollars in millions)
Power Technologies		$	8,755		$	7,598		$	6,814
Automation Technologies			11,030			9,628			8,201
	Core Divisions		19,785			17,226			15,015
	Non-core activities
Oil, Gas and Petrochemicals			1,079			1,895			2,321
Building Systems			508			1,829			2,375
New Ventures			49			53			50
Equity Ventures			7			26			19
Structured Finance			6			48			66
Other Non-core activities			44			471			783
	Total Non-core activities		1,693			4,322			5,614
Corporate/Other and inter-division eliminations			(757	)		(1,121	)		(1,157	)
	Total	$	20,721		$	20,427		$	19,472

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        Revenues increased in each of 2004, 2003 and 2002, driven by growth in our core divisions partially offset by declines in Non-core activities.

        Revenues increased by $294 million, or 1 percent (decreased by 5 percent in local currencies), to $20,721 million in 2004 from $20,427 million in 2003. The relatively flat revenue growth in 2004 was due to a 61 percent decrease (63 percent in local currencies) in revenues generated by Non-core activities that substantially offset revenue increases of 15 percent and 15 percent (9 percent and 7 percent in local currencies) in the Power Technologies and Automation Technologies divisions, respectively. In 2003, revenues increased by $955 million, or 5 percent (decreased by 7 percent in local currencies), to $20,427 million from $19,472 million in 2002. The increase in revenues in 2003 was due to increases in revenue of 12 percent and 17 percent (2 percent and 3 percent in local currencies) in the Power Technologies and Automation Technologies divisions, respectively, partially offset by a 23 percent decrease (36 percent in local currencies) in revenues in Non-core activities.

		Year ended December 31,
		2004		2003		2002
		(U.S. dollars in millions)
Europe		$	10,764	$	10,963	$	10,461
The Americas			3,624		3,900		4,177
Asia			4,296		3,519		2,860
MEA			2,037		2,045		1,974
	Total	$	20,721	$	20,427	$	19,472

        European revenues decreased 2 percent (10 percent in local currencies) in 2004 after increasing 5 percent (declining 10 percent in local currencies) in 2003. These changes were primarily the result of revenue reductions associated with the Building Systems divestments in the Nordic countries, Switzerland and in the United Kingdom, substantially offset by exchange rate effects related to the declining value of the U.S. dollar over this period. Within Europe, Central and Eastern European revenues decreased in 2004 after increasing substantially in 2003. Improvement by the core divisions in this region was more than offset in 2004 by the shift to reimbursable contracts in our Oil, Gas and Petrochemicals business and the sale of businesses from the Building Systems business. Revenues from the Americas decreased 7 percent in both 2004 and 2003 (9 percent and 8 percent in local currencies respectively) across all divisions, primarily reflecting the relatively weak markets in the previous periods. North American revenues declined in 2003 reflecting a decline in sales of distribution transformers by the Power Technologies division. Revenues from Asia increased 22 percent and 23 percent (17 percent and 15 percent in local currencies) in 2004 and 2003, respectively, primarily reflecting growth in China. Revenues from India almost doubled in 2004, after a small decline in 2003. The increase in Indian revenue in 2004 was across all business areas, whereas the decline in 2003 reflects the revenues pertaining to an oil and petrochemical refinery project in India that stalled during 2003 due to complications encountered by the customer in obtaining necessary additional financing. Revenues in the MEA remained flat (decline of 6 percent in local currencies) in 2004 after a period of growth in 2003, principally due to higher revenues from an Angolan oil and gas project completed in 2003 that resulting in an increase of MEA revenues in 2003 of 4 percent (2 percent in local currencies) as compared to 2002.

Cost of sales

        Cost of sales decreased by $171 million, or 1 percent (7 percent in local currencies), to $15,757 million in 2004 after increasing by $830 million, or 5 percent (decreased 7 percent in local currencies), to $15,928 million from $15,098 million in 2002.

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        Cost of sales consists primarily of labor, raw materials and related components. Cost of sales also includes provisions for warranty claims, contract losses and project penalties, as well as order-related development expenses incurred in connection with projects for which we have recognized corresponding revenues. Order-related development is recorded in cost of sales, and amounted to $727 million, $886 million and $719 million in 2004, 2003 and 2002, respectively. Order-related development amounts are initially recorded in inventories as works in progress, and reflected in cost of sales at the time revenue is recognized.

        The gross profit margin on a consolidated basis and for each core division and Non-core activities, calculated as gross profit divided by revenues, were as follows.

	Year ended December 31,
	2004		2003		2002
Power Technologies	20.3	%	22.0	%	22.1	%
Automation Technologies	29.4	%	29.0	%	29.8	%
Non-core activities*	6.7	%	(0.5	)%	5.0	%
Consolidated	24.0	%	22.0	%	22.5	%

*

Excludes revenues of $0 million, $421 million and $758 million and gross profit of $0 million, $378 million and $707 million of the Group Processes business area in 2004, 2003 and 2002, respectively.

        The gross profit margin improved in 2004 as compared to 2003, principally due an improvement in gross profit margin in the in the Oil, Gas and Petrochemicals business area from negative 9.5 percent in 2003 to 9.9 percent in 2004 following a $1,103 million reduction in costs of sales related to the winding down or culmination of long-term fixed price contracts.

Selling, general and administrative expenses

        Selling, general and administrative expenses decreased by $131 million, or 3 percent (10 percent in local currencies), to $3,786 million in 2004 from $3,917 million in 2003. In 2003, selling, general and administrative expenses decreased by $133 million, or 3 percent (15 percent in local currencies), to $3,917 million from $4,050 million in 2002.

        The components of selling, general and administrative expenses were as follows:

	Year ended December 31,
	2004			2003			2002
	(U.S. dollars in millions)
Selling expenses	$	1,910		$	1,830		$	1,815
General and administrative expenses		1,876			2,087			2,235
Total selling, general and administrative expenses	$	3,786		$	3,917		$	4,050
Total selling, general and administrative expenses as a percentage of revenues		18.3	%		19.2	%		20.8	%

        Selling, general and administrative expenses as a percentage of revenues have decreased in Power Technologies, Automation Technologies and Non-core activities in each of the past two years as compared to the previous period.

        Selling expenses increased 4 percent and 1 percent (decreased 3 percent and 11 percent in local currencies) in 2004 and 2003, respectively. The increase in 2004 was due to growth in selling expense in each of the Power Technologies and Automation Technologies divisions of 13 percent (6 percent and 5 percent in local currencies, respectively), partially offset by business divestments and closures in Non-core activities.

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        General and administrative expenses decreased by 10 percent and 7 percent (16 percent and 17 percent in local currencies) in 2004 and 2003, respectively. General and administrative expenses decreased in 2004 as a result of business sales and closures in Non-core activities, partially offset by increases of 2 percent and 15 percent (a decrease of 5 percent and an increase of 5 percent in local currencies) in the Power Technologies and Automation Technologies divisions, respectively. General and administrative expenses decreased in 2003 as a result of business sales and closures in Non-core activities, as well as a decrease of 3 percent (13 percent in local currencies) in the Power Technologies division and partially offset by an increase of 6 percent (a decrease of 10 percent in local currencies) in the Automation Technologies division.

        General and administrative expenses include non-order related research and development not related to a specific order or project, which increased 9 percent and 11 percent (decreased 1 percent and 1 percent in local currencies) in 2004 and 2003, respectively. Research and development costs not related to a specific order or project were $690 million, $635 million and $572 million in 2004, 2003 and 2002, respectively.

        General and administrative expenses in 2002 additionally include the recovery of payments to two former chief executive officers.

Amortization expense

        Amortization expense of other intangibles was $45 million, $31 million and $45 million in 2004, 2003 and 2002, respectively. Amortization expense of other intangibles primarily reflects the amortization of intellectual property related to an acquisition made in 1999 and the amortization of patents and other intangible assets from acquisitions held by the Oil, Gas and Petrochemicals business. The increase in amortization expense in 2004 was primarily due to the reclassification of the Oil, Gas and Petrochemicals business in 2004, and the related recognition of amortization expense not recorded while this business was classified in discontinued operations. Amortization of assets ceases when the assets meet the criteria to be classified as held for sale. Amortization expenses for businesses classified in discontinued operations are not recorded as an amortization expense in our consolidated results of operations. When a business is reclassified from discontinued operations, we recognize in the period of reclassification all amortization expense that would have been recognized by the reclassified business during the period of time the business was classified in discontinued operations as long as this amount is less than the fair value of the assets on the date the business is reclassified into continuing operations.

Other income (expense), net

        Other income (expense), net, typically consists of: restructuring expenses; gains or losses from the sale of businesses, gains or losses from the sale or disposal of property, plant and equipment; asset write-downs; our share of income or loss from equity accounted companies, principally from our Equity Ventures business; and license income.

	Year ended December 31,
	2004			2003			2002
	(U.S. dollars in millions)
Restructuring expenses	$	(165	)	$	(340	)	$	(255	)
Capital gains, net		73			69			107
Asset write-downs		(71	)		(35	)		(94	)
Income from licenses, equity accounted companies and other		114			112			162
Total	$	(49	)	$	(194	)	$	(80	)

        Restructuring expenses are described above in "—Restructuring expenses".

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        Capital gains, net in 2004 included gains of $33 million on the sale of land and buildings, $20 million on the sale of our shares of IXYS Corporation and lesser amounts from a number of smaller transactions. Capital gains, net in 2003 included gains of $83 million from the sale of businesses from the Building System business area, $28 million from the sale of equity investments in Australia, $26 million from the sale of land and buildings and lesser amounts from a number of smaller transactions, partly offset by an $80 million loss on the sale of our equity interest in the Swedish Export Credit Corporation. Capital gains in 2002 included a $74 million gain on the sale of our Air Handling business, a $22 million gain from the sale of machinery, land and buildings and a number of smaller gains.

        Asset write-downs in 2004 included charges of $21 million in respect of goodwill, $14 million in respect of an e-business investment, $8 million in respect of property impairments, $2 million in respect of machinery and equipment, approximately $20 million in a write-down of notes receivable in the Power Technologies division and a number of smaller write-downs. Asset write-downs in 2003 related to software, several equity investments, impairments of property and a number of smaller write-downs. Asset write-downs in 2002 included $25 million in respect of software, $30 million in respect of a number of equity investments, approximately $30 million in respect of impairments of property and a number of smaller write-downs.

        License income was $24 million, $25 million and $14 million in 2004, 2003 and 2002, respectively, primarily reflecting income from liquid crystal display licenses.

        Income from equity accounted companies was $87 million, $96 million and $220 million in 2004, 2003 and 2002, respectively. Included in these values is income from our investment in Jorf Lasfar, which operates a power plant in Morocco, of $68 million, $62 million and $73 million in 2004, 2003 and 2002, respectively. The decline in 2003 of income from equity accounted companies is primarily due to the sale of our investment in the Swedish Export Credit Corporation, which we divested in the second quarter of 2003.

Earnings before interest and taxes

        Our EBIT for the years ended December 31, 2004, 2003 and 2002 was as follows:

		Year ended December 31,
		2004			2003			2002
		(U.S. dollars in millions)
Power Technologies		$	610		$	595		$	451
Automation Technologies			1,027			738			495
	Core Divisions		1,637			1,333			946
	Non-core Activities
Oil, Gas and Petrochemicals			(4	)		(296	)		(142	)
Building Systems			(70	)		(104	)		(113	)
New Ventures			(5	)		(21	)		(37	)
Equity Ventures			69			76			43
Structured Finance			(14	)		(65	)		96
Other Non-core activities			(22	)		(57	)		(157	)
	Total Non-core activities		(46	)		(467	)		(310	)
Corporate/Other and inter-division eliminations			(507	)		(509	)		(437	)
	Total	$	1,084		$	357		$	199

        EBIT increased by $727 million, or 204 percent (186 percent in local currencies), to $1,084 million in 2004 and by $158 million, or 79 percent (37 percent in local currencies), to $357 million in 2003.

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        The EBIT margin for our core divisions and on a consolidated basis for the years ended December 31, 2004, 2003 and 2002, are as follows:

	Year ended December 31,
	2004		2003		2002
Power Technologies	7.0	%	7.8	%	6.6	%
Automation Technologies	9.3	%	7.7	%	6.0	%
Core Divisions	8.3	%	7.7	%	6.3	%
Total	5.2	%	1.7	%	1.0	%

        The 2004 EBIT margin decline in the Power Technologies division principally reflected a $26 million (of which approximately $20 million was included in other income (expense) net,) write-down of notes receivable, the increase in raw materials costs (especially for steel, copper, and aluminum and transformer oil) during the year, $14 million in project-related hedging costs incurred following our decision to cease accounting for certain hedges under Statement of Accounting Financial Standards No. 133 (or SFAS 133), Accounting for Derivative Instruments and Hedging Activity and lower margin turnkey projects in the Utility Automation Systems business area including, in certain instances, cost overruns. Lower margin levels in the Power Systems business area due to continued low capacity utilization also contributed to the declining EBIT margin in 2004, caused principally by a lack of large orders received by the high voltage direct current business unit and a related declining order backlog relating to our performance in China and Brazil of orders with a combined value of approximately $553 million received in 2001. These developments were partially offset by strong, productivity-driven margin improvements in the Medium Voltage Products business area. The EBIT margin increased in 2003 as compared to 2002, primarily due to the elimination of overlapping product lines and production sites, as well as productivity improvements.

        The EBIT margin in the Automation Technologies division increased in 2004 due to increases in EBIT in all business areas resulting from productivity improvements and operational excellence initiatives along with a decrease in restructuring costs in 2004 from 2003. The EBIT margin increased in all Automation Technologies business areas in 2003 as compared to 2002, primarily due to productivity improvements and cost savings programs, partially offset by higher restructuring expenses in 2003 than 2002.

        The EBIT margin in Non-core activities improved in 2004 as compared to 2003, primarily due to charges and losses realized in 2003 relating to certain large projects in the Oil, Gas and Petrochemicals business, the $80 million loss on the sale of our investment in the Swedish Export Credit Corporation and the cessation or transfer of the Group Processes business. Non-core activities EBIT margin declined in 2003 due to the aforementioned items in the Oil, Gas and Petrochemicals business and the Structured Finance business.

Net interest and other finance expense

        Net interest and other finance expense consists of interest and dividend income and interest and other finance expense. Interest and other finance expense includes expenses associated with the change in fair value of the embedded derivative that was in our $968 million convertible bonds, the

67

amortization of costs associated with our credit facility, the issuance of our debt securities, gains (losses) on marketable securities and interest expense on our borrowings.

	Year ended December 31,
	2004			2003			2002
	(U.S. dollars in millions)
Interest and dividend income	$	164		$	152		$	194
Interest and other finance expense		(387	)		(569	)		(327	)
Net interest and other finance expense	$	(223	)	$	(417	)	$	(133	)

        Net interest and other finance expense decreased by 47 percent in 2004 after rising 214 percent in 2003.

        Interest and dividend income increased in 2004 due to higher average balances of cash and marketable securities in 2004 compared to 2003, as well as higher average market interest rates. Interest and dividend income decreased in 2003 because market interest rates were lower than those in 2002 and because our divestments reduced our previous sources of dividend income.

        Interest and other finance expense decreased in 2004 due to lower average debt levels in the period, partially offset by higher average interest rates on our borrowings. The debt repaid in 2004 was largely debt that had been swapped into floating interest rates. Consequently, fixed rate debt, with higher average interest rates than our floating rate debt during 2004, represented an increased proportion of our total debt balance. Interest and other finance expense in 2004 also included a $43 million non-cash gain on available for sale marketable securities contributed to our German pension funds in 2004 and a $20 million expense relating to our securitization programs. In 2003, these expenses included a $40 million loss on the sale of our shares in the China National Petrochemical Corporation (Sinopec), a $36 million impairment charge for available-for-sale marketable securities in Germany and a $21 million expense relating to our securitization programs. The change in fair value of the embedded derivative and the amortization of the related discount on issuance from our $968 million convertible bonds resulted in an expense of $52 million in 2004, as compared to an expense of $84 million in 2003 and a decrease in expense of $215 million in 2002.

Provision for taxes

	Year ended December 31,
	2004			2003			2002
	(U.S. dollars in millions)
Income (loss) from continuing operations, before taxes and minority interest	$	861		$	(60	)	$	66
Provision for taxes	$	(311	)	$	(245	)	$	(81	)
Effective tax rate for the year		36.1	%		(408.3	)%		122.7	%

        The provision for taxes in 2004 was $311 million, representing an effective tax rate for the year of 36.1 percent. The provision for taxes in 2004 includes an expense relating to a valuation allowance of $107 million, predominantly relating to our operations in certain countries including Canada and France, and a benefit of approximately $45 million from the losses of a post divestment reorganization and of $39 million relating to the favorable resolution in 2004 of certain prior year tax matters.

        In 2003, the loss from continuing operations before taxes and minority interest of $60 million included an $84 million expense comprising the change in fair value of the embedded derivative and the amortization of the related discount on issuance from our $968 million convertible bonds combined with the continued amortization of the discount on issuance of these bonds. Furthermore, the provision for taxes includes the release of an approximately $38 million tax provision related to a tax case ruled in our favor and an expense of approximately $16 million related to a tax claim filed in Central

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Europe. In addition, the provision for taxes includes a valuation allowance of approximately $258 million on deferred tax assets as a result of the determination that it was more likely than not that such deferred tax assets would no longer be realized within our Oil, Gas and Petrochemicals business. The effective tax rate in 2003 applicable to income from continuing operations excluding the tax effect of these items would have been 37.5 percent.

        The effective tax rate in 2002 was 122.7 percent, in part as a result of a valuation allowance of approximately $33 million on deferred tax assets in the Oil, Gas and Petrochemicals business. Furthermore, the provision for taxes in 2002 includes a valuation allowance of $17 million on deferred tax assets and an increased tax expense of $7 million related to non-deductible expenses under Italian tax law as a result of the overstatement within the PT-MV BAU in Italy. The effective tax rate in 2002 applicable to income from continuing operations excluding the tax effect of these items would have been 36.4 percent.

Income (loss) from continuing operations

        Income (loss) from continuing operations increased by $819 million to an income of $448 million in 2004 compared to a loss of $371 million in 2003. The increase reflects improved EBIT and reduced net interest and other finance expense in 2004.

        Income (loss) from continuing operations deteriorated by $245 million to a loss of $371 million in 2003 compared to a loss of $126 million in 2002. The deterioration reflects increased net interest and other finance expense and increased tax expense in 2003:

Loss from discontinued operations, net of tax

        The loss from discontinued operations, net of tax, are as set forth below:

		Year ended December 31,
Discontinued operations
		2004			2003			2002
		(U.S. dollars in millions)
Combustion Engineering (Asbestos)		$	(262	)	$	(142	)	$	(395	)
Powerlines			(75	)		(10	)		(17	)
Upstream Oil, Gas and Petrochemicals			(70	)		(44	)		14
Reinsurance			(41	)		(97	)		22
Wind Energy			(25	)		(42	)		(1	)
Foundry			(17	)		—			—
MDCV Cables			—			(24	)		(1	)
Export Bank			—			(9	)		10
Metering			12			(3	)		(54	)
Structured Finance			14			(29	)		(183	)
Other abandoned or sold businesses			(19	)		(8	)		(88	)
	Loss from discontinued operations, net of tax	$	(483	)	$	(408	)	$	(693	)

        Tax expense, net, in discontinued operations was $41 million, $42 million and $91 million in 2004, 2003 and 2002, respectively.

        A detailed discussion of the results of the significant discontinued businesses follows in the section entitled "Discontinued operations."

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Net loss

        As a result of the factors discussed above, net loss improved by $744 million to a loss of $35 million in 2004 from a loss of $779 million in 2003. The net loss in 2003 decreased by $40 million to a net loss of $779 million in 2003 from a net loss of $819 million in 2002.

Earnings (loss) per share

		Year ended December 31,
Basic and Diluted earnings (loss) per share
		2004			2003			2002
		(U.S. dollars)
Income (loss) from continuing operations
	Basic	$	0.22		$	(0.30	)	$	(0.11	)
	Diluted	$	0.22		$	(0.30	)	$	(0.27	)
Loss from discontinued operations
	Basic	$	(0.24	)	$	(0.34	)	$	(0.63	)
	Diluted	$	(0.24	)	$	(0.34	)	$	(0.59	)
Net loss
	Basic	$	(0.02	)	$	(0.64	)	$	(0.74	)
	Diluted	$	(0.02	)	$	(0.64	)	$	(0.86	)

        Basic earnings (loss) per share is calculated by dividing income (loss) by the weighted-average number of shares outstanding during the year. Diluted earnings (loss) per share is calculated by dividing income (loss) 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, if dilutive; the securities issued under our employee incentive plans, if dilutive; and shares issuable in relation to our convertible bonds, if dilutive.

        Basic loss per share was $0.02 in 2004 compared to $0.64 in 2003. Basic loss per share was $0.64 in 2003 compared to $0.74 in 2002.

        The difference between the basic and diluted earnings per share in 2002 primarily reflects the effect of the gain of $215 million recognized in 2002 under SFAS 133 with respect to changes in the fair value of the embedded derivative and the amortization of the related discount on issuance from our $968 million convertible bond.

POWER TECHNOLOGIES

        Effective January 1, 2005, the business areas within the Power Technologies division were reorganized into two businesses areas. The Transformers, Medium Voltage Products and High Voltage Products business areas were combined to form the Products business area, while the Power Systems and Utility Automation Systems business areas were combined to form the Systems business area. We expect to report future financial results for the Power Technologies business area based on the Products and Systems business areas.

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        The financial results of the Power Technologies division were as follows:

	Year ended December 31,
Power Technologies
	2004		2003		2002
	(U.S. dollars in millions)
Orders	$	9,372	$	7,682	$	6,686
Order backlog		6,874		6,030		5,682
Revenues		8,755		7,598		6,814
Cost of sales		6,976		5,927		5,306
Selling, general and administrative expenses		1,097		1,020		989
EBIT	$	610	$	595	$	451

Orders

        Orders increased by $1,690 million, or 22 percent (15 percent in local currencies), to $9,372 million in 2004. Orders in 2004 grew at a rate between 18 percent and 27 percent (11 percent and 19 percent in local currencies) in all business areas except for Utility Automation Systems, where orders increased approximately 12 percent (6 percent in local currencies). Both base and large orders improved in 2004, with the large order growth driven by an order for the Three Gorges project in China of approximately $390 million. Orders from other divisions were $500 million in 2004 as compared to $435 million in 2003, representing 5 percent and 6 percent of division orders, respectively.

        The proportionate geographic distribution of orders of the Power Technologies division (based on the location of the customer, which may be different from the ultimate destination of the products' end use) were approximately as follows:

		Year ended December 31,
		2004		2003
Europe		37	%	40	%
The Americas		22	%	22	%
Asia		29	%	21	%
MEA		12	%	17	%
	Total	100	%	100	%

        Order growth in 2004 was particularly strong in Asia, led by China where orders almost doubled, making Asia the Power Technologies division's second largest regional source of orders. Orders also grew in Europe in 2004, which continued to be the division's largest regional source of orders. Orders in North America increased significantly while orders from South America decreased slightly. Orders from MEA were down due mainly to a lower level of large orders in 2004 than in 2003.

        In 2003, orders increased by $996 million, or 15 percent (5 percent in local currencies), to $7,682 million. Orders increased in all business areas, with increases of 30 percent (20 percent in local currencies) in our Medium Voltage Products business area following growth in our base orders, and 26 percent and 16 percent (13 percent and 8 percent in local currencies) in the Utility Automation Systems and Power Systems business areas, respectively. Orders grew by 13 percent (flat in local currencies) in our High Voltage Products business area as large orders from Eastern Europe and the MEA were partially offset by a decrease from the United States. Orders in our Transformers business area increased by 5 percent (decreased by 5 percent in local currencies).

        Order growth in 2003 was driven by growth in the MEA, Asia and Europe, moderated by a decrease in the Americas. Orders from other divisions were $435 million in 2003 compared to $433 million in 2002, representing 6 percent of division orders in both the periods.

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Order backlog

        Order backlog increased by $844 million, or 14 percent (7 percent in local currencies), to $6,874 million as at December 31, 2004 from $6,030 million as at December 31, 2003.

        Order backlog increased by $348 million, or 6 percent (decreased by 6 percent in local currencies), to $6,030 million as at December 31, 2003 from $5,682 million as at December 31, 2002.

Revenues

        The distribution of revenues of the Power Technologies division by business area for the years ended December 31, 2004 and 2003, were approximately as follows:

	Year ended December 31,
Business area
	2004		2003
Transformers	26	%	25	%
Power Systems	22	%	25	%
Medium Voltage Products	19	%	18	%
High Voltage Products	17	%	16	%
Utility Automation Systems	16	%	16	%

        Revenues increased by $1,157 million, or 15 percent (9 percent in local currencies), to $8,755 million in 2004 from $7,598 million in 2003, principally reflecting a 22 percent (16 percent and 15 percent in local currencies, respectively) revenue growth in the Medium Voltage Products and High Voltage Products business areas, and a 19 percent (13 percent in local currencies) increase in the Transformers business area. Revenues in the Utility Automation Systems business area increased by 11 percent (5 percent in local currencies), whereas revenues in the Power Systems business area increased by 1 percent (down 5 percent in local currencies), reflecting a lower level of order backlog of large projects than in 2003.

        Revenues increased by $784 million, or 12 percent (2 percent in local currencies), to $7,598 million in 2003 from $6,814 million in 2002. Revenues from our Medium Voltage Products business area increased 30 percent (20 percent in local currencies) in 2003, based mainly on growth in China and Eastern Europe, while revenues from the High Voltage Products business area increased by 8 percent (4 percent decrease in local currency terms as a result of lower order backlog at the beginning of 2003). Revenues in our Power Systems and Utility Automation Systems business areas decreased by 8 percent and 10 percent (1 percent and 1 percent in local currencies), respectively, due to a reduced number of short-term orders received in the second half of 2002. Revenues for the Power Technologies division were also negatively affected by the loss of revenues from three businesses that were divested in each of the United States, Poland and Italy.

        The proportionate geographic distribution of revenues of the Power Technologies division (based on the location of the customer, which may be different from the ultimate destination of the products' end use) were approximately as follows:

		Year ended December 31,
		2004		2003
Europe		39	%	38	%
The Americas		22	%	25	%
Asia		25	%	24	%
MEA		14	%	13	%
	Total	100	%	100	%

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        Regionally, revenues were higher in Europe, MEA and Asia. Asian revenues in 2004 reflected relatively modest growth in China, where revenues from the Power Systems business area declined from a peak in 2003. Revenue growth in the Americas in 2004 was flat, principally resulting from a decline in revenues in the United States.

        Regionally, in 2003 revenues from Asia and the MEA significantly increased primarily driven by increased revenues in China and Saudi Arabia. Revenues from Europe increased in U.S. dollar terms but decreased slightly in local currencies. These increases in revenues for 2003 were partly offset by decreases in the Americas, with the Americas revenues decline in 2003 reflecting a decline in sales of distribution transformers by the Power Technologies division.

        Revenues from other divisions were $499 million in 2004 (representing 6 percent of the Power Technologies division's revenues), $476 million in 2003 (representing 6 percent of division revenues) compared to $298 million in 2002 (representing 4 percent of division revenues).

Cost of sales

        Cost of sales increased by $1,049 million, or 18 percent (11 percent in local currencies), to $6,976 million in 2004 from $5,927 million in 2003. The Power Technologies division's gross profit margin decreased from 22.0 percent in 2003 to 20.3 percent in 2004, reflecting higher input prices of raw materials, particularly steel, copper, aluminum and transformer oil, that principally impacted the Transformers business area, low capacity utilization of the Power Systems business area and project-related hedging costs incurred following our decision to cease accounting for certain hedges under SFAS 133, offset in part by savings in supply chain management and productivity improvements.

        Cost of sales increased by $621 million, or 12 percent (2 percent in local currencies), to $5,927 million in 2003 from $5,306 million in 2002. The Power Technologies division's gross profit margin decreased from 22.1 percent in 2002 to 22.0 percent in 2003. Despite difficult markets in 2003 characterized by a less favorable product mix and price level erosion, most noticeably in our High Voltage Products and Transformers business areas, gross profit margin remained relatively flat mainly due to ongoing productivity improvements and cost savings.

Selling, general and administrative expenses

        Selling, general and administration expenses increased by $77 million, or 8 percent (flat in local currencies), to $1,097 million in 2004 from $1,020 million in 2003. Expressed as a percentage of revenues, selling, general and administration expenses decreased to 12.5 percent in 2004 from 13.4 percent in 2003, reflecting productivity gains from improved sales and administrative processes and our restructuring under the Step Change program.

        Selling, general and administration expenses increased by $31 million, or 3 percent (decreased by 8 percent in local currencies), to $1,020 million in 2003 from $989 million in 2002. Expressed as a percentage of revenues, selling, general and administration expenses decreased to 13.4 percent in 2003 compared to 14.5 percent in 2002, reflecting the benefits of restructuring and efficiency improvement programs.

Earnings before interest and taxes

        EBIT grew $15 million, or 3 percent (2 percent decrease in local currencies) to $610 million in 2004. EBIT reflected restructuring expenses of $51 million and $61 million in 2004 and 2003, respectively.

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        EBIT margin for the Power Technologies division was 7.0 percent in 2004 compared to 7.8 percent for 2003. The decrease in EBIT margin in 2004 principally reflected the increase in raw materials costs (especially for steel, copper, aluminum and transformer oil) during the year, a $26 million (of which approximately $20 million was included in other income (expense), net) write-down of notes receivable, $14 million in project-related hedging costs incurred following our decision to cease accounting for certain hedges under SFAS 133, lower margin levels in the Power Systems business area due to continued low capacity utilization and lower margin turnkey projects in the Utility Automation Systems business area including, in certain instances, cost overruns. These decreases were partially offset by strong, productivity-driven margin improvements in the Medium Voltage Products business area.

        EBIT increased by $144 million, or 32 percent (28 percent in local currencies), to $595 million in 2003 from $451 million in 2002. EBIT margin increased from 6.6 percent in 2002 to 7.8 percent in 2003, caused principally by comparatively significant improvements from the Medium Voltage Products, Utility Automation Systems and Power Systems business areas due to the elimination of overlapping product lines and production sites, as well as productivity improvements. EBIT margin in the Transformers business area remained flat.

AUTOMATION TECHNOLOGIES

        The financial results of the Automation Technologies division were as follows:

	Year ended December 31,
Automation Technologies
	2004		2003		2002
	(U.S. dollars in millions)
Orders	$	11,334	$	9,691	$	8,428
Order backlog		4,322		3,826		3,486
Revenues		11,030		9,628		8,201
Cost of sales		7,785		6,835		5,760
Selling, general and administrative expenses		2,147		1,889		1,786
EBIT	$	1,027	$	738	$	495

Orders

        Orders increased by $1,643 million, or 17 percent (9 percent in local currencies), from $9,691 million in 2003 to $11,334 million in 2004. Orders received by the Automation Products business area increased by 21 percent (13 percent in local currencies) in 2004 led by an increase in orders from process industries and building installations customers. Orders received by the Process Automation business area grew at 11 percent (3 percent in local currencies) in 2004, as growth in orders from the mining, cement, metals, the cruise and ferry and oil and gas industries exceeded declining orders from businesses operating in the chemicals, pharmaceuticals and pulp and paper markets. Orders received by the Manufacturing Automation business area increased by 23 percent (16 percent in local currencies), primarily driven by orders for automotive systems from North America and China. Orders from other divisions were $355 million in 2004, compared to $344 million in 2003 representing 3 percent and 4 percent of the division orders, respectively.

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        The proportionate geographic distribution of orders of the Automation Technologies division (based on the location of the customer, which may be different from the ultimate destination of the products' end use) were approximately as follows:

		Year ended December 31,
		2004	2003
Europe		59%	61%
The Americas		16%	15%
Asia		19%	18%
MEA		6%	6%
	Total	100%	100%

        The ultimate destination of our products' end use is relevant for the Automation Technologies division as some global distributors and wholesalers in Europe sell our products in Asia, the Americas, and MEA. We estimate this volume to be approximately 10 percent of the division orders, divided between the ultimate destinations of Asia, the Americas, and MEA.

        In 2004, orders from Asia increased faster than in any other region. Orders from the Americas also grew, driven by a large order from the United States automotive sector. European orders grew in 2004, as increases in orders from Western Europe, which accounted for more than 90 percent of European orders, more than offset a reduction in orders from Eastern Europe following the receipt of a large order in Poland during 2003. Orders from the MEA increased moderately.

        Orders increased by $1,263 million, or 15 percent (1 percent in local currencies), to $9,691 million in 2003 compared to $8,428 million in 2002. Over this period, the Automation Products business area experienced significant growth in Asia, which was partially offset by lower orders from Europe and America. The Process Automation business area increased the volume of large orders during 2003 by approximately 87 percent (59 percent in local currencies), led by a large order for $173 million in the fourth quarter for turnkey gas compressors for a pipeline project in Poland. This increase in large orders, however, could not offset a lower volume of base orders from the paper and minerals industries. Orders in the Manufacturing Automation business area decreased on lower orders from the automotive industries in North America and Europe. Orders from other divisions were $344 million in 2003 compared to $311 million in 2002.

        European orders increased, reflecting strong order increases in Eastern Europe moderated by the slower growth in Western Europe. Orders from the Americas declined in 2003, primarily reflecting lower orders from the automotive and other industrial sectors. Orders from Asia increased significantly in 2003, driven by China and India. Orders from the MEA in 2003 increased in U.S. dollar terms but decreased slightly in local currencies.

Order backlog

        Order backlog increased by $496 million, or 13 percent (6 percent in local currencies), to $4,322 million as at December 31, 2004 from $3,826 million as at December 31, 2003, principally as a result of increased order intake during 2004.

        Order backlog increased by $340 million, or 10 percent (decreased by 4 percent in local currencies), to $3,826 million as at December 31, 2003 from $3,486 million as at December 31, 2002.

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Revenues

        The distribution of revenues of the Automation Technologies division by business area were approximately as follows:

	Year ended December 31,
Business area
	2004	2003
Automation Products	47%	46%
Process Automation	40%	40%
Manufacturing Automation	13%	14%

        Revenues increased by $1,402 million, or 15 percent (7 percent in local currencies), to $11,030 million in 2004 from $9,628 million in 2003, principally due to 17 percent (9 percent in local currencies) revenue growth in the Automation Products business area. Revenues in 2004 for the Process Automation business area increased by 13 percent (5 percent in local currencies), reflecting growth in the Oil and Gas, Minerals, Turbocharging and Control Products business units moderated by declines in the Pulp and Paper and Marine business units. Our Manufacturing Automation business area, which accounted for 13 percent of Automation Technologies' 2004 revenues, grew more slowly at 4 percent (decreased 4 percent in local currencies) as a result of a weak backlog of system orders. Revenues from other divisions were $391 million in 2004 compared to $356 million in 2003 representing 4 percent of the division orders for both periods.

        Revenues in the Automation Technologies division increased by $1,427 million, or 17 percent (3 percent in local currencies), to $9,628 million in 2003 compared to $8,201 million in 2002. Revenues increased 14 percent (flat in local currencies) in 2003 in the Manufacturing Automation business area. Revenues in the businesses now constituting the Automation Products and Process Automation business areas increased 17 percent (2 percent in local currencies), as sales of products and services increased and despite declining revenues generated from the paper industry. Revenues from other divisions were $356 million in 2003 compared to $328 million in 2002, representing approximately 4 percent of division revenues in both periods.

        The proportionate geographic distribution of revenues of the Automation Technologies division (based on the location of the customer, which may be different from the ultimate destination of the products' end use) were approximately as follows:

		Year ended December 31,
		2004	2003
Europe		60%	61%
The Americas		15%	17%
Asia		19%	16%
MEA		6%	6%
	Total	100%	100%

        The ultimate destination of our products' end use is relevant for the Automation Technologies division as some global distributors and wholesalers in Europe sell our products in Asia, the Americas, and MEA. We estimate this volume to be approximately 10 percent of the division revenues, divided between the ultimate destinations of Asia, the Americas, and MEA.

        Revenues generated in Asia grew significantly in 2004, reflecting sales growth in China and India, with the result that Asia became Automation Technologies' second largest regional source of revenues. Revenues increased in Europe, which remained Automation Technologies' largest revenue contributor. Revenues from the Americas fell slightly in 2004 due to lower orders in 2003, principally from the

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automotive industry. Revenues from the MEA increased following the receipt of several large orders in 2003.

        In 2003, revenues from Europe increased, as increases in Eastern Europe were tempered by slower growth in Western Europe due to lower order backlog at the beginning of 2003. The Americas increased slightly as compared to 2002, while revenues from Asia and the MEA increased significantly, driven by higher revenues in 2003 from China, India, Algeria and the United Arab Emirates.

Cost of sales

        Cost of sales increased $950 million, or 14 percent (6 percent in local currencies), to $7,785 million in 2004 from $6,835 million in 2003. The Automation Technologies division's gross profit margin increased to 29.4 percent in 2004 from 29.0 percent in 2003 following cost reduction and productivity gains from the Step Change program and operational excellence initiatives, offset in part by increasing costs for raw materials, particularly steel, copper and oil.

        Cost of sales increased $1,075 million, or 19 percent (4 percent in local currencies), to $6,835 million in 2003 from $5,760 million in 2002. The Automation Technologies division's gross profit margin decreased to 29.0 percent in 2003 from 29.8 percent in 2002. Gross profit margin in 2003 decreased as savings in supply chain management and manufacturing and engineering activities were more than offset by increased input prices from our suppliers following the strengthening of the euro against the U.S. dollar and price reductions on certain of our products. In 2003, the gross profit margin remained flat in the Manufacturing Automation business area, as operational improvements were offset by an increase in material costs. For the businesses now constituting the Process Automation and Automation Products business areas, gross profit margin declined following cost increases related to systems projects, despite the declining percentage of revenue represented by such projects.

Selling, general and administrative expenses

        Selling, general and administration expenses increased by $258 million, or 14 percent (5 percent in local currencies), to $2,147 million in 2004 from $1,889 million in 2003 Expressed as a percentage of revenues, selling, general and administration expenses decreased to 19 percent in 2004 from 20 percent in 2003, reflecting cost reductions primarily from the Step change program.

        Selling, general and administration expenses increased by $103 million, or 6 percent (decreased 8 percent in local currencies), to $1,889 million in 2003 compared to $1,786 million in 2002. Expressed as a percentage of revenues, selling, general and administration expenses decreased to 20 percent in 2003 from 22 percent in 2002, reflecting the impact of the various restructuring and efficiency improvement programs.

Earnings before interest and taxes

        EBIT grew $289 million, or 39 percent (30 percent in local currencies) to $1,027 million in 2004. EBIT margin increased to 9.3 percent in 2004 from 7.7 percent in 2003. EBIT margin increased in all business areas reflecting productivity improvements, benefits from operational excellence initiatives and a decrease in restructuring costs in 2004 to $72 million from $139 million in 2003.

        EBIT increased by $243 million, or 49 percent (30 percent in local currencies), to $738 million in 2003 compared to $495 million in 2002. All business areas improved in operating income in 2003, mainly due to productivity improvements and our cost savings programs. The increase in operating income was partially offset by higher restructuring costs in 2003, at $139 million, as compared to $126 million during 2002. As a result, the EBIT margin increased to 7.7 percent in 2003 compared to 6.0 percent in 2002.

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NON-CORE ACTIVITIES

Orders

        Orders received by Non-core activities were as follows:

	Year ended December 31,
	2004		2003		2002
	(U.S. dollars in millions)
Oil, Gas and Petrochemicals	$	1,216	$	1,156	$	2,123
Building Systems		388		1,616		2,351
New Ventures		41		45		70
Equity Ventures		7		26		19
Structured Finance		6		48		77
Other Non-core activities		36		469		960
Total Non-core activities	$	1,694	$	3,360	$	5,600

        Orders received declined by 50 percent and 40 percent (53 percent and 43 percent in local currencies) in 2004 and 2003, respectively. The reductions in orders over these periods were primarily due to ongoing divestments, declining orders in the Building Systems business area, the discontinuation and reduction of activities in the Group Processes business area and a shift in our Oil, Gas and Petrochemicals business away from entering into long-term fixed price contracts toward reimbursable contracts. Non-core activities orders from other divisions amounted to $36 million in 2004 (representing 2 percent of the division orders in 2004), $445 million in 2003 (representing 13 percent of the division orders in 2003) and $980 million in 2002 (representing 17 percent of the division orders in 2002). The orders received by the Group Processes business area, which only received internal orders from other divisions, constituted $413 million and $755 million of Non-core activities orders received in 2003 and 2002, respectively.

        In 2004, orders for Oil, Gas and Petrochemicals business area increased mainly through base orders (orders below $15 million). Large orders in 2004, 2 percent below 2003, included major projects in Sweden, Russia, China, Poland and Middle East. Orders increased in all regions during 2004 compared to 2003.

        Within the Building Systems business area, 91 percent of the orders in 2004 were received by our German business and 6 percent by the now-sold Swiss business.

        In 2004, Non-core activities orders predominantly came from Europe, with approximately 50 percent of our orders from Western Europe and approximately 20 percent from Eastern Europe. The remaining orders were received in roughly equal proportions from the Americas (principally from the United States), Asia (principally from China) and the MEA.

        In 2003, orders decreased by $2,240 million, or 40 percent (43 percent in local currencies), to $3,360 million. This reduction in orders is partially due to the divestment of businesses, the performance of the remaining businesses in the Building Systems business area and the discontinuation and reduction of activities in the Group Processes business area. Additionally, this reduction resulted in part from a decrease in large orders in our Oil, Gas and Petrochemical business, mainly attributable to our strategic decision to de-emphasize fixed priced EPC contracts in favor of lower-risk reimbursable contracts (which generally have lower order values) and to more selectively tender for project work.

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Order backlog

        Order backlog in Non-core activities was as follows:

	Year ended December 31,
	2004		2003		2002
	(U.S. dollars in millions)
Oil, Gas and Petrochemicals	$	1,251	$	1,264	$	2,143
Building Systems		255		554		1,263
New Ventures		8		14		79
Equity Ventures		—		—		—
Structured Finance		—		2		3
Other Non-core activities		19		31		91
Total Non-core activities	$	1,533	$	1,865	$	3,579

Revenues

        Revenues from Non-core activities were as follows:

	Year ended December 31,
	2004		2003		2002
	(U.S. dollars in millions)
Oil, Gas and Petrochemicals	$	1,079	$	1,895	$	2,321
Building Systems		508		1,829		2,375
New Ventures		49		53		50
Equity Ventures		7		26		19
Structured Finance		6		48		66
Other Non-core activities		44		471		783
Total Non-core activities	$	1,693	$	4,322	$	5,614

        Revenues decreased by 61 percent and 23 percent (63 percent and 36 percent in local currencies) in 2004 and 2003, respectively. Revenues from other divisions amounted to $52 million, $476 million and $882 million (representing 3 percent, 11 percent and 15 percent of Non-core activities revenues) in 2004, 2003 and 2002, respectively.

        Oil, Gas and Petrochemicals revenues in 2004 were 43 percent (46 percent in local currencies) lower than 2003, primarily due to the winding down and reduced scope of large projects. Revenues from the licensing of process technologies significantly increased, led by revenues from the licensing of ethylene and novolen technologies. Revenues decreased by 18 percent (28 percent in local currencies) in 2003 compared to 2002, primarily due to the lower volume of order backlog going into 2003 as a consequence of our focus in pursuing reimbursable EPC projects. In an effort to reduce our exposure to risks associated with long-term fixed price contracts, particularly in our Oil, Gas and Petrochemicals business, we have been pursuing instead long-term reimbursable contracts in which we charge our customers the sum of our materials, production, logistics, administrative and financial costs, together with a negotiated operating profit. We believe that long-term reimbursable contracts, while not eliminating the risk of loss completely, should generally enable us to recover from the customer costs relating to contract delays or cost increases more easily than we can with fixed price contracts, where we generally must demonstrate that the delays and increased costs were a direct result of the customer's action or omission. Despite our strategy of focusing on reimbursable contracts, we may continue to experience losses on our contracts.

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        Building Systems revenues decreased by 72 percent and 23 percent (74 percent and 34 percent in local currencies) in 2004 and 2003, respectively, primarily resulting from the sale of businesses. Building Systems revenues in 2004 were primarily generated in Germany, with 79 percent of 2004 business area revenues, the United States (which we plan to close) with 10 percent, and Switzerland (sold in February 2004) with 6 percent.

        New Ventures revenues came from distributed energy operations in Europe.

        Equity Ventures includes mainly equity accounted companies, the income from which, are recorded in other income (expense), net.

        Structured Finance revenues decreased in each of 2004 and 2003 due to the ongoing portfolio reduction.

        Other Non-core activities include Group Processes, Customer Service Workshops and Logistic Systems business areas. Group Processes revenues decreased by $421 million, or 100 percent, to $0 million in 2004. In 2003, Group Processes revenues decreased by $183 million, or 30 percent (37 percent in local currencies), to $421 million in 2003 from $604 million in 2002. This business area does not generate revenue from third-party sales, with all the revenues of this business area resulting from internal charges to other divisions. These decreases were due principally to the transfer of activities to the other business areas or cessation of activities. Of the remaining businesses, revenues decreased by $6 million and $129 million in 2004 and 2003, respectively, due to the ongoing divestment and related closing processes in our Customer Service Workshop and Logistic Systems business areas.

Earnings before interest and taxes

        EBIT for Non-core activities was as follows:

	Year ended December 31,
	2004			2003			2002
	(U.S. dollars in millions)
Oil, Gas and Petrochemicals	$	(4	)	$	(296	)	$	(142	)
Building Systems		(70	)		(104	)		(113	)
New Ventures		(5	)		(21	)		(37	)
Equity Ventures		69			76			43
Structured Finance		(14	)		(65	)		96
Other Non-core activities		(22	)		(57	)		(157	)
Total Non-core activities	$	(46	)	$	(467	)	$	(310	)

        The Oil, Gas and Petrochemicals business area in 2004 improved as compared to 2003, reflecting better project execution capabilities across the organization as well as a significant reduction in project-related write-offs in 2004. Stronger performance following the winding down or culmination of unprofitable long-term, fixed price EPC projects and increased revenue related to the licensing of process technologies was partially offset by under absorption of operating costs by the Floating Production Systems business. EBIT in 2004 was also negatively impacted by a charge to depreciation and amortization of $26 million for the years 2003 and 2004. This charge was required in 2004 following the reclassification of this business area from discontinued operations to continuing operations (see the section entitled "Discontinued operations" below).

        EBIT losses generated by the Oil, Gas and Petrochemicals business area increased in 2003 compared to 2002, primarily due to charges in 2003 of approximately $399 million relating to four large, long-term fixed price projects booked prior to the implementation of our current bidding strategy that focuses on reimbursable contracts. The customers and countries in which these four projects were located are unrelated. The charges are related to delays, project cost overruns and write-downs of assets that we no longer considered recoverable.

        EBIT losses generated by the Building Systems business area decreased by $34 million in 2004 as compared to 2003, primarily due to operational improvements and a reduction in restructuring

80

expenses, primarily in Germany, partially offset by losses in the United States and the loss of income from the profitable Nordic businesses sold in 2003 and the Swiss business sold in February, 2004. In 2003, EBIT losses decreased by $9 million as compared to 2002. EBIT for 2003 included the gain on sale of the Nordic businesses for approximately $124 million, partially offset by a loss on sale of businesses located in several other countries, principally Belgium, the Netherlands, Austria and the UK, of approximately $41 million.

        EBIT losses in the New Ventures business area decreased by $16 million in 2004 compared to 2003. This improvement resulted partly because in 2004 this area no longer included the income from our investment in Turbec AB, which generated negative earnings recognized in 2003. Turbec was sold in the fourth quarter of 2003. The 2004 operating loss also includes a $20 million gain on the divestment of our equity interest in IXYS Corporation. In 2003, EBIT losses decreased by $16 million as compared to 2002, largely due to restructuring activities leading to a significant reduction in selling, general and administrative expenses and lower asset write-downs, offset in part by negative earnings from equity accounted companies related to our investment in Turbec AB.

        EBIT generated by the Equity Ventures business area decreased by $7 million in 2004 as compared to 2003. The decline from the EBIT generated in 2003, which included a $28 million gain on the sale of investments in Australia, was offset in part by an increase in EBIT from savings in sales, general and administrative expenses following the cessation of development activities and from a gain on the sale of an investment in Oman. In 2003, EBIT increased by $33 million as compared to 2002, due to the gain realized from divestments in Australia and savings in sales, general and administrative expenses.

        EBIT losses in the Structured Finance business area decreased by $51 million in 2004 as compared to 2003, principally because 2003 included a loss of $80 million on the disposal of our investment in the Swedish Export Credit Corporation (which was offset in part in 2003 by income from Swedish Export Credit Corporation of $13 million recognized in other income (expense), net). In 2003, EBIT decreased by $161 million as compared to 2002 due to the loss on disposal of our investment in the Swedish Export Credit Corporation and a reduction in income from the Swedish Export Credit Corporation of $112 million.

        EBIT generated by the businesses in Other Non-core activities increased by $35 million in 2004 as compared to 2003. This improvement was due to the dissolution of the Group Processes business area, which represented $0 million and $42 million of the losses in 2004 and 2003, respectively. EBIT generated by the Customer Service Workshops business area improved in 2004 due to a reduction in restructuring expenses and improved operational performance by the few remaining units. The Logistic Systems business area recognized an operating loss of $24 million in 2004 due to issues relating to the Harare airport project completed in 2001. In 2003, EBIT losses in Other Non-core activities decreased by $100 million as compared to 2002. Group Processes represented approximately $42 million and $105 million of the losses in 2003 and 2002, respectively.

Corporate/Other

        Corporate and other activities comprise headquarters and stewardship, research and development and other activities. EBIT for Corporate and other activities are as follows:

	Year ended December 31,
	2004			2003			2002
	(U.S. dollars in millions)
Headquarters and stewardship	$	(421	)	$	(352	)	$	(202	)
Research & Development		(91	)		(92	)		(93	)
Other		5			(65	)		(142	)
Total	$	(507	)	$	(509	)	$	(437	)

        Headquarters and stewardship operating costs increased by $69 million and $150 million in 2004 and 2003, respectively. The 2004 expense included a $14 million write-down in 2004 of an e-business

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investment. The increase in 2003 as compared to 2002 was mainly due to events in 2002, such as the recovery of payments from two former chief executive officers, that did not recur in 2003.

        Other operating costs (including Real Estate, Group Treasury Operations and consolidation) decreased by $70 million and $77 million in 2004 and 2003, respectively. The improvement in 2004 occurred in each of Real Estate, Group Treasury Operations and consolidation. Real estate improved in 2004 as compared to 2003 due to reduced restructuring expenses. Group Treasury Operations improved in 2004 due to a reduction in the level of general and administrative expenses.

        Other operating costs improved in 2003 mainly due to lower costs following the cessation of proprietary trading in 2002 and the consequent reduction in employees in Group Treasury Operations, as well as a reduction in earnings from certain intra-company transactions as compared to 2002.

DISCONTINUED OPERATIONS

        Loss from discontinued operations, net of tax, in our Consolidated Income Statement reflects primarily the following.

•

Our Upstream Oil, Gas and Petrochemicals business, whose sale was completed in July 2004. The remaining portions of our oil, gas and petrochemicals business owned by us as at December 31, 2004 do not meet the accounting criteria required to be classified in discontinued operations.

•

Provisions and other expenses incurred in connection with asbestos-related claims, including those against our U.S. subsidiary, Combustion Engineering Inc. An overview of our potential asbestos-related obligations is contained in "Contingencies and retained liabilities" below, as well as in Note 18 "Commitments and Contingencies" of the Consolidated Financial Statements.

•

Our Reinsurance business, which was sold in April 2004.

•

Most of our Power Lines business area, including operations in Brazil, which were abandoned in 2004, Nigeria, which were sold in January 2005, Italy, which were sold in February 2005, and Germany.

•

Our foundry business, which was part of our Automation Technologies division.

•

Our Wind Energy business in Germany and Greece, the majority of which was sold in December 2003.

•

Most of our Structured Finance business, which we sold in November 2002.

•

Our MDCV Cable business located in Germany, which we sold in January 2004.

•

ABB Export Bank, which we sold in December 2003.

•

Our Metering business, which we sold in December 2002.

•

Legal, professional and other fees related to the above disposals.

        Loss from discontinued operations, net of tax, was $483 million, $408 million and $693 million in 2004, 2003 and 2002, respectively. The loss from discontinued operations, net of tax, and including operational results, accumulated foreign currency translation adjustments, allocation of interest in accordance with Emerging Issues Task Force No. 87-24 (EITF 87-24), Allocation of Interest to Discontinued Operations, capital gains and losses on sale, impairment charges, goodwill write-offs and

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other costs for businesses classified in discontinued operations for the years ended December 31, 2004, 2003 and 2002 are as set forth below.

		Year ended December 31,
Discontinued operations
		2004			2003			2002
		(U.S. dollars in millions)
Combustion Engineering (Asbestos)		$	(262	)	$	(142	)	$	(395	)
Powerlines			(75	)		(10	)		(17	)
Upstream Oil, Gas and Petrochemicals			(70	)		(44	)		14
Reinsurance			(41	)		(97	)		22
Wind Energy			(25	)		(42	)		(1	)
Foundry			(17	)		—			—
MDCV Cables			—			(24	)		(1	)
Export Bank			—			(9	)		10
Metering			12			(3	)		(54	)
Structured Finance			14			(29	)		(183	)
Other abandoned or sold businesses			(19	)		(8	)		(88	)
	Income (loss) from discontinued operations, net of tax	$	(483	)	$	(408	)	$	(693	)

        In addition to the businesses already classified in discontinued operations, we may from time to time dispose of or close businesses that are not integral to our core divisions. If such a business meets the criteria of SFAS 144, we will reflect the results of operations from the business as discontinued operations in our Consolidated Income Statement and as assets and liabilities held for sale and in discontinued operations in our Consolidated Balance Sheet. We will reclassify the prior years' presentation to reflect any disposals or closures on a comparable basis.

Asbestos

        Loss from discontinued operations, net of tax, includes costs and provisions related to asbestos-related claims, including those against our U.S. subsidiary, Combustion Engineering Inc., of approximately $262 million, $142 million and $395 million in 2004, 2003 and 2002, respectively.

        An overview of our potential asbestos-related obligations is included separately in "Contingencies and retained liabilities."

Powerlines

        Our Powerlines business is a construction business that operates in a market with very low barriers to entry. This has resulted in increasing price-based competition with local competitors in the various countries in which we operate. The business has consequently experienced declining revenues, and net losses.

        At the time we decided to exit the Powerlines business, this business operated in Austria, Germany, Italy, Saudi Arabia, Brazil, Venezuela, South Africa and Nigeria. The Nigerian and Italian businesses were sold in January 2005 and February 2005, respectively. The Brazilian business was abandoned in the fourth quarter of 2004. We expect the German business to be sold during 2005. In the fourth quarter of 2004, we reclassified the Nigerian, Italian, Brazilian and German businesses to discontinued operations. This reclassification has been reflected in the financial statements for 2004, 2003 and 2002 and the results of the reclassified businesses are discussed below. We intend to exit our remaining Powerlines businesses, although we have not classified them in discontinued operations.

        Revenues were $117 million, $187 million and $254 million in 2004, 2003 and 2002, respectively. We recorded net losses of $75 million, $10 million and $17 million in 2004, 2003 and 2002, respectively. The increase in losses in 2004 relates to reducing the book value of net assets to fair value less costs to sell the operations in Italy, Germany and Nigeria, costs related to the abandonment in Brazil and operational losses.

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Upstream Oil, Gas and Petrochemicals

        In July 2004 we closed the sale of the Upstream Oil, Gas and Petrochemicals business to a consortium of private equity investors, Candover Partners, JP Morgan Partners and 3i Group, for an initial sale price of $925 million. We received net cash proceeds from the sale of approximately $800 million after adjustments for approximately $85 million of unfunded pension liabilities and changes in net working capital.

        The Upstream Oil, Gas and Petrochemicals business generated revenues of $855 million (up to the date of sale), $1,499 million and $1,535 million in 2004, 2003 and 2002, respectively.

        Revenues declined in 2004 as compared to 2003 due to the sale of the business in July 2004. Revenues decreased in 2003 as compared to 2002 due to a large project in the Floating Production Systems unit nearing completion and the smaller value of new orders due to our pursuit of long-term reimbursable contracts, rather than long-term fixed price contracts.

        We recorded net losses for the Upstream Oil, Gas and Petrochemicals business of $70 million and $44 million in 2004 and 2003, respectively, and a net income of $14 million in 2002. The 2004 net loss of $70 million includes a loss on disposal of approximately $26 million and compliance costs relating to violations of the Foreign Corrupt Practices Act, including aggregate fines of $10.5 million and a $5.9 million payment to the United States Securities and Exchange Commission as a disgorgement of unlawful profits and in resolution of civil charges, as well as other related costs.

        In 2003, this business generated a net loss of $44 million, a $58 million decline from net income in 2002 of $14 million. This decline was primarily due to certain loss order provisions in Brazil and the settlement of a project-related dispute that resulted in an asset write-down in 2003.

Reinsurance business

        In April 2004 we sold our Reinsurance business to White Mountains Insurance Group Limited of Bermuda for gross cash proceeds of $415 million.

        Reinsurance revenues were $139 million, $782 million and $644 million in 2004, 2003 and 2002, respectively. Reinsurance revenues decreased in 2004 due to the sale of the business in April 2004. The increase in revenues in 2003 as compared to 2002 was primarily due to higher premium income from increased volumes and higher insurance premium rates compared to the rates for comparable products and risks in 2002.

        We recorded net losses for our Reinsurance business of $41 million and $97 million in 2004 and 2003, respectively, and a net income of $22 million in 2002. The 2004 net loss was primarily a result of currency translation effects (as explained in Note 2 "Significant accounting policies—Translation of foreign currencies and foreign exchange transactions" to our Consolidated Financial Statements) of $32 million, transaction costs, and price adjustments (as part of the sales agreement all operational risks and results in 2004 were transferred to the purchaser). The 2003 net loss includes a $154 million impairment charge, income from operations of approximately $72 million (resulting from higher technical insurance results and improved investment income) in the major operating units and an allocation of interest of $15 million in accordance with EITF 87-24. The impairment charge of $154 million recorded in 2003 related to the anticipated disposal of the Reinsurance business and principally consisted of impairment charges to assets of $48 million, to goodwill and other intangible assets of $89 million and to deferred tax assets of approximately $16 million, and selling costs of $25 million, offset in part by an accumulated foreign currency translation gain of $24 million. The 2002 net income of $22 million reflects the normal operating results of the Reinsurance business.

Wind Energy

        Our Wind Energy business primarily focused on the development and operation of wind parks located mainly in Europe. While this business purchased equity interests in a number of established wind park companies, its main focus remained general wind park construction contracting.

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        In December 2003, we sold most of our Wind Energy business to GI Ventures AG of Munich, including the majority of our investment in Windpark Dahme. As part of this sale, GI Ventures also took over most of the projects under development in our German Wind Energy business and all the employees. The wind energy business has, since that time, been non-operative. We also sold one of our equity participations in Greece as part of a management buy-out in February 2004 and we intend to sell the remaining Greek equity participation during 2005. Once this sale is complete there will be no other projects or participations in respect of our Wind Energy business remaining.

        Revenues were $0 million, $16 million and $48 million in 2004, 2003 and 2002, respectively.

        We recorded net losses of $25 million, $42 million and $1 million in 2004, 2003 and 2002, respectively. The 2004 net loss of $25 million was principally caused by asset impairment charges relating to the remaining windpark in Rhodes. The 2003 net loss of $42 million was comprised principally of a $25 million loss from disposal (net of a tax benefit of $10 million), impairment charges to assets of $9 million and loss from operations of $8 million.

Foundry

        Our Foundry business provides furnace systems, pouring systems, forging systems and related services in Germany, Sweden, the United States, Brazil and Thailand. We expect to sell this business in 2005.

        Revenues were $41 million, $45 million and $49 million in 2004, 2003 and 2002, respectively. We recorded net losses of $17 million, $0 million and $0 million in 2004, 2003 and 2002, respectively. The 2004 net loss includes an anticipated capital loss on divestment and the operational results, which included restructuring costs.

MDCV Cable business

        In January 2004, we sold our MDCV (Mitsubishi-Dainichi Continuous Vulcanization) cable business. This business was located in Germany and manufactured medium and high-voltage cables, cable-systems and accessories for power suppliers and network operators.

        Revenues were $0 million, $74 million and $78 million in 2004, 2003 and 2002, respectively. MDCV Cable business revenues were $0 million in 2004 due to the sale of the business. The decrease in 2003 was mainly due to the loss of important projects. We recorded net losses of $0 million, $24 million and $1 million in 2004, 2003 and 2002, respectively. The net loss was $0 million in 2004 due to the sale of the business. The 2003 net loss of $24 million was comprised principally of impairment charges to assets of $10 million and a loss from operations of $14 million.

ABB Export Bank

        In December 2003, we completed the sale of ABB Export Bank, which was part of our Structured Finance business area and arranged export, trade and project financing. Revenues were $0 million, $9 million and $17 million in 2004, 2003 and 2002, respectively. Revenues declined in 2003 due to lower business volumes, the sale of assets following our decision to divest the business and lower interest rates.

        We recorded a net loss of $0 million and $9 million in 2004 and 2003, respectively, and a net income of $10 million in 2002. The 2003 net loss of $9 million includes a $12 million loss on disposal, income from operations of $6 million and the allocation of interest expense of $3 million in accordance with EITF 87-24. The loss on disposal of $12 million for the sold business was principally comprised of an asset write-down of $20 million, transaction costs of $1 million, capital tax expense associated with the disposal of $4 million and an accumulated foreign currency translation gain of approximately $13 million. The 2002 net income of $10 million consisted of normal operational income and the release of approximately $8 million of excess bad debt provisions.

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Metering

        In December 2002, we sold our Metering business. This business produced electricity, water, energy and gas meters, metering systems and load control systems.

        We recorded net income of $12 million in 2004 and net losses of $3 million and $54 million in 2003 and 2002, respectively. The 2004 net income of $12 million resulted from the release of provisions originally made at the date of sale for certain price and net equity adjustments. The 2003 net loss of $3 million relates to transaction costs and price adjustments relating to the divestment in 2002. The 2002 net loss of $54 million included a $48 million loss on disposal, loss from operations of $3 million and the allocation of interest expense of $3 million in accordance with EITF 87-24. The loss on disposal of $48 million principally consisted of impairment charges in respect of goodwill and other intangibles of $65 million, transaction costs and other provisions of $46 million, tax expense associated with the disposal of $21 million and an accumulated currency translation loss of $35 million, offset in part by a gain of $119 million recognized in disposal of the business.

Structured Finance

        Our Structured Finance business provided debt capital for projects and equipment, and asset-based financing such as leasing. In November 2002, we completed the sale of most of our Structured Finance business to General Electric Capital Corporation (GE) and received cash proceeds of approximately $2.0 billion. The divestment included a put right in favor of GE regarding certain designated assets which was exercised in January 2004 for $28 million as well as some letters of credit for certain performance related obligations retained by us, of which approximately $63 million were outstanding at December 31, 2004.

        We recorded net income of $14 million in 2004 and net losses of $29 million and $183 million in 2003 and 2002, respectively. The 2004 net income of $14 million relates to the settlement of some outstanding matters with GE and resulted from the release of excess provisions. The 2003 net loss of $29 million primarily relates to a provision taken with respect to these outstanding matters that were finalized in 2004. The 2002 net loss of $183 million included a $146 million loss on disposal, loss from operations of $22 million and the allocation of interest expense of $15 million in accordance with EITF 87-24. The loss on disposal of $146 million for the sold business was principally comprised of an asset write-down of $15 million, goodwill and other intangible write-offs of $2 million, transaction costs of $27 million, the fair value for GE's right to require us to repurchase certain designated assets for $38 million, capital tax expense associated with the disposal of $10 million and an accumulated foreign currency translation loss of $54 million.

LIQUIDITY AND CAPITAL RESOURCES

Principal sources of funding

        In 2004, 2003 and 2002, we met our liquidity needs using cash from operations, bank borrowings, the proceeds from the issuance of debt securities, divestment proceeds, as well as the sales of receivables under our securitization programs. The reductions in our credit rating during 2002 (see "—Credit ratings") restricted our access to the capital markets during 2002 and the first half of 2003. As a result, we relied increasingly on proceeds from divestments, bank borrowings, cash from operations and, cash raised from our capital strengthening program in 2003. Also, in the first quarter of 2003, we raised approximately $156 million from the sale of 80 million treasury shares in two transactions.

        During the second half of 2003, we completed a number of steps to strengthen our Consolidated Balance Sheet and to improve our liquidity. In September 2003, we issued convertible unsubordinated bonds of an aggregate principal amount of CHF 1,000 million, due 2010. See "—Bonds and notes." In October 2003, we announced a three-component capital strengthening program, consisting of a rights issue providing net proceeds of approximately $2.5 billion, a new $1 billion unsecured revolving credit facility to replace our $1.5 billion credit facility and a bond offering of 650 million euro (equivalent to

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approximately $769 million at the date of issuance). This program has provided a stronger financial base for the growth of our core operations, has deleveraged our balance sheet by reducing our gearing (defined as total debt divided by the sum of total debt and the stockholders' equity including minority interest) from 87 percent at December 31, 2002 to 71 percent at December 31, 2003 (see "—Financial position") and has given us more financial flexibility.

        During 2004, our financial position was further strengthened by the positive cash flow from operating activities of $962 million and the proceeds from sales of businesses (net of cash disposed) of $1,182 million. The cash generated allowed us to repay maturing debt, repurchase debt (see "—Bond repurchases") and further reduce gearing to 64 percent at December 31, 2004 (see "—Financial position").

        We believe that our ability to obtain funding from the sources described above 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 twelve months. Due to the nature of our operations, 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.

Rights issue

        On November 20, 2003, our shareholders approved the issuance of 840,006,602 new shares pursuant to a fully underwritten rights issue. For each share that they owned, holders of existing shares were allocated one right to purchase the offered shares. For every 10 rights, holders of existing shares were entitled to purchase seven offered shares. The banks agreed to underwrite 840,006,602 shares at an issue price of CHF 4.00 per share, representing an approximate 50 percent discount on the share price at the time and providing for net proceeds of $2,487 million. The rights issue was completed on December 12, 2003 when the cash was received together with the net proceeds of the bonds of 650 million euro aggregate principal amount (see "—Bonds and Notes"). Of these funds, approximately $1.2 billion was used to repay debt maturing in December 2003 and repurchase bonds with a face value of $94 million, while the remainder was placed on deposit with banks to be used to repay debt maturing in 2004.

Interest rates

        We have obtained financing in a range of currencies and maturities and on various interest rate terms. We use derivatives to reduce the interest rate and/or foreign exchange exposures arising on our debt. For example, to reduce our exposure to interest rates, we use interest rate swaps to effectively convert fixed rate borrowings into floating rate liabilities and we use cross currency swaps to effectively convert foreign currency denominated bonds into U.S. dollar liabilities. At December 31, 2004, after considering the effects of interest rate swaps, the effective average interest rate on our floating rate long-term borrowings (including current maturities) of $1,950 million and our fixed rate long-term borrowings (including current maturities) of $1,625 million was 5.8 percent and 5.5 percent, respectively. This compares with an effective rate of 3.2 percent for floating rate long-term borrowings and 5.8 percent for fixed-rate long-term borrowings as of December 31, 2003. A discussion of our use of derivatives to modify the characteristics of our long-term borrowings is contained in Note 15 to our Consolidated Financial Statements.

Bond repurchases

        During the first six months of 2004, through open market repurchases, we repurchased a portion of our public bonds with a total equivalent face value of $458 million. These repurchases included 107 million euro (approximately $131 million) of the 475 million euro 5.125 percent bonds due 2006, and 26,500 million Japanese yen (approximately $243 million) of 50,000 million Japanese yen 0.5 percent bonds due 2005. The 26,500 million Japanese yen bonds and the 107 million euro bonds were subsequently cancelled at the end of July and mid-September 2004, respectively. During the second half of 2004, a further 6,075 million Japanese yen 0.5 percent bonds (approximately $55 million)

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were repurchased on the open market and were not cancelled. The open market repurchases resulted in a gain on extinguishments of debt of approximately $6 million. During 2003, we repurchased outstanding bonds with a face value of $94 million and recorded an insignificant gain on extinguishments of debt in connection with the repurchases.

        On July 29, 2004, we announced tender offers to repurchase all of the outstanding 300 million euro 5.375 percent bonds due 2005 and 475 million euro 5.125 percent bonds due 2006, being approximately 275 million euro and approximately 368 million euro, respectively. In conjunction with the tender offers, we convened bondholders' meetings to vote on amendments to these bonds to allow us to call and redeem those bonds that were not tendered under the respective tender offer. Bonds validly tendered and accepted under the tender offers were settled on September 14, 2004. On September 9, 2004, bondholders approved the resolutions, which gave us the option to redeem the outstanding instruments. We exercised our option to redeem early the remaining outstanding 2005 and 2006 bonds that were not tendered and set the redemption date as September 29, 2004. The open market repurchases, combined with the tender offers and calls, resulted in a decrease in total borrowings during 2004 of $1,330 million.

Bonds and notes

        In 2004, we did not issue any bonds.

        In 2003, we completed two note issuances, including the issuance of bonds convertible into our shares, as sources of funding.

        In September 2003, we issued convertible unsubordinated bonds of an aggregate principal amount of CHF 1,000 million (approximately $722 million at the date of issuance), due 2010. This transaction lengthened the maturity profile of our debt, thereby reducing our dependence on short-term funding. We used the proceeds, net of expenses and fees, to reduce our drawing under our $1.5 billion credit facility (see "—Credit Facilities"). The convertible bonds pay interest annually in arrears at a fixed annual rate of 3.5 percent. On issuance, each CHF 5,000 principal amount of bonds was convertible into 418.41004 fully paid ABB ordinary shares at an initial conversion price of CHF 11.95. The conversion price is subject to adjustment provisions to protect against dilution or change in control. As a result of the rights issue discussed above, the conversion price and conversion ratio of the bonds were adjusted to CHF 9.53 and 524.65897 shares, respectively, effective December 12, 2003, representing 104,931,794 fully paid ordinary ABB shares if the bonds are fully converted.

        The bonds are convertible at the option of the bondholder at any time from October 21, 2003 up to and including the tenth business day prior to September 10, 2010. We may at any time on or after September 10, 2007 redeem the outstanding bonds at par plus accrued interest if, for a certain number of days during a specified period of time, the official closing price of our ordinary shares on the relevant exchange has been at least 150 percent of the conversion price. In addition, at any time prior to maturity, we can redeem the outstanding bonds at par plus accrued interest, if at least 85 percent in aggregate of the principal amount of bonds originally issued have been redeemed, converted or purchased and cancelled. We have the option to redeem the bonds when due in cash, ordinary shares or any combination thereof.

        In November 2003, as part of our three-component capital strengthening program, we issued bonds of an aggregate principal amount of 650 million euro (approximately $769 million at the time of issuance), due 2011. These bonds pay interest semi-annually in arrears at a fixed annual rate of 6.5 percent. In the event of a change of control of ABB Ltd, the terms of the bonds require us to offer to repurchase the bonds at 101 percent of the principal amount thereof, plus any accrued interest.

        In May 2002, we issued $968 million aggregate principal amount of convertible unsubordinated bonds due 2007. The bonds pay interest semi-annually in arrears at a fixed annual rate of 4.625 percent. On issuance each $1,000 principal amount of bonds was convertible into 87.7489 fully paid ABB ordinary shares at an initial conversion price of CHF 18.48 (converted into U.S. dollars at a fixed conversion rate of CHF 1.6216 per U.S. dollar). The conversion price is subject to adjustment

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provisions to protect against dilution or change in control. As a result of the rights issue and resulting increase in our share capital discussed above, the conversion price of the bonds was adjusted, effective November 21, 2003, to CHF 14.64 (converted into U.S. dollars at the fixed exchange rate of CHF 1.6216 per U.S. dollar), representing a total of 107,220,546 shares if the bonds were fully converted. As a result of the amendment to the bonds in May 2004, described below, the conversion price of the bonds was amended to $9.03, representing 107,198,228 shares if the bonds are fully converted.

        The $968 million bonds are convertible at the option of the bondholder at any time from June 26, 2002 up to and including May 2, 2007. We may, at any time on or after May 16, 2005, redeem the outstanding bonds at par plus accrued interest if (1) for a certain number of days during a specified period of time, the official closing price of our American Depositary Shares on the New York Stock Exchange exceeds 170 percent of the conversion price or (2) at least 85 percent in aggregate principal amount of bonds originally issued have been exchanged, redeemed or purchased and cancelled. We have the option to redeem the bonds when due, in cash, American Depositary Shares or any combination thereof.

        Under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, a component of the convertible bonds due 2007 had to be accounted for as an embedded derivative as the shares to be issued upon conversion were denominated in Swiss francs, while the bonds are denominated in U.S. dollars. A portion of the issuance proceeds was deemed to relate to the value of the derivative on issuance and subsequent changes in value of the derivative were recorded through earnings and as an adjustment to the carrying value of the bonds. The allocation of a portion of the proceeds to the derivative created a discount on issuance that was being amortized to earnings over the life of the bonds. On May 28, 2004, bondholders voted in favor of our proposed amendment to the terms of the bonds whereby, if the bonds are converted, we will deliver U.S. dollar-denominated American Depositary Shares rather than Swiss franc-denominated ordinary shares. The conversion price was set at $9.03. As a result of the amendment, we are no longer required to account for a portion of the bonds as a derivative. Consequently, on May 28, 2004, the value of the derivative was fixed and the amount previously accounted for separately as an embedded derivative was considered to be a component of the carrying value of the bonds. This carrying value is being accreted to the $968 million par value of the bonds as an expense in interest and other finance expense over the remaining life of the bonds. The amortization of the discount on the bonds will be between $7 million and $9 million per quarter until the bonds mature in May 2007.

        Also in May 2002, we issued 200 million pounds sterling (approximately $292 million at the time of issuance) aggregate principal amount of bonds due 2009 (sterling-denominated bonds), which were issued under our medium term note program and pay interest semi-annually in arrears at 10 percent per annum. We also issued in May 2002, 500 million euro (approximately $466 million at the time of issuance) aggregate principal amount of bonds due 2008 (euro-denominated bonds), which were also issued under our medium term note program and pay interest annually in arrears at 9.5 percent per annum.

        The sterling-denominated bonds and the euro-denominated bonds contain certain clauses linking the interest paid on the bonds to the credit rating assigned to the bonds. If the rating assigned to these bonds by both Moody's and Standard & Poor's remains at or above Baa3 and BBB-, respectively, then the interest rate on the bonds remains at the level at issuance, that is 10 percent and 9.5 percent, for the sterling-denominated and euro-denominated bonds, respectively. If the rating assigned by either Moody's or Standard & Poor's decreases below Baa3 or BBB-, respectively, then the annual interest rate on the bonds increases by 1.5 percent per annum to 11.5 percent and 11 percent, for the sterling-denominated and euro-denominated bonds, respectively. If after such a rating decrease, the rating assigned by both Moody's and Standard & Poor's returns to a level at or above Baa3 and BBB-, respectively, then the interest rates on the bonds return to their original levels. As a result of the downgrade of our long-term credit rating by Moody's to Ba2 on October 31, 2002, this step-up clause

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in interest was triggered on both bonds. The increase in interest costs is effective for interest periods beginning after the payment of the coupon accruing at the date of the downgrade. This increase in interest rates had no significant impact on 2002 interest expense. The total impact on 2004 and 2003 was an increase in interest expense of approximately $15 million and $13 million, respectively. Future years will also be affected if our credit ratings do not return to at least both Baa3 and BBB- from Moody's and Standard & Poor's, respectively.

        A cross-currency swap has been used to modify the characteristics of the sterling-denominated bonds and an interest rate swap has been used to modify the euro-denominated bonds. After considering the impact of the cross-currency and interest rate swaps, the sterling-denominated bonds effectively became a floating rate U.S. dollar obligation, while the euro-denominated bonds became a floating rate euro obligation. In both cases, the floating rate resets every three months. See Note 15 to our Consolidated Financial Statements.

        Almost all of our publicly traded bonds contain cross-default clauses which would allow the bondholders to demand repayment if we were to default on certain borrowings at or above a specified threshold amount.

Credit facilities

        On November 17, 2003, as part of our three-component capital strengthening program, we entered into a unsecured syndicated $1 billion three-year revolving credit facility which became available in December 2003 after the fulfillment of certain conditions including the repayment and cancellation of the previous $1.5 billion facility and the raising of specified minimum levels of gross proceeds from the rights issue (see "—Rights Issue") and from the bonds denominated in euros which were issued in November 2003 (see "—Bonds and Notes"). The $1 billion facility is for general corporate purposes. At December 31, 2004 and 2003, nothing was outstanding under the facility and although we currently do not intend to draw on it, it provides us with additional financial flexibility.

        In November 2004, the facility was amended. The amendments included a reduction in the level of commitment fees and the removal of restrictions on us to redeem early capital market instruments, such as bonds, having a maturity date beyond that of the facility.

        The facility contains certain financial covenants in respect of minimum interest coverage, maximum net leverage and a minimum level of consolidated net worth. We are required to meet these covenants on a quarterly basis. Should our unsecured long-term debt ratings reach certain defined levels (basically investment grade), these covenants will only have to be calculated as of June and December of each year. The facility also contains provisions for the mandatory prepayment and cancellation of the facility upon a change of control of ABB Ltd.

        The facility imposes restrictions on the amount of third party indebtedness in subsidiaries other than in the obligors under the facility, subject to certain exceptions. The facility also contains certain other undertakings including certain limitations on disposals of assets, certain restrictions on mergers and acquisitions and negative pledges.

        The facility 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 facility replaced a $1.5 billion 364-day revolving facility entered into in December 2002 and secured by a package of assets with a net carrying value of $3.5 billion at December 31, 2002 and by certain intra-group loans.

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        The $1.5 billion facility contained certain stringent financial covenants in respect of minimum interest coverage, total gross debt, a maximum level of debt in subsidiaries other than those specified as borrowers under that facility, a minimum level of consolidated net worth, as well as specific negative pledges. We were required to meet these financial covenants at each quarter-end commencing December 31, 2002. In addition, in order to ensure the continued availability of the $1.5 billion facility until its cancellation in December 2003, we were required to obtain minimum levels of proceeds from the disposal of specified assets and businesses and/or equity issuances during 2003.

Securitization programs

        In addition to the aforementioned primary sources of liquidity and capital resources, we also sell certain trade receivables to Qualifying Special Purpose Entities ("QSPEs"), unrelated to us, primarily through two revolving-period securitization programs. Solely for the purpose of credit enhancement from the perspective of the QSPEs, we retain an interest in the sold receivables. Retained interests at December 31, 2004 and 2003 amounted to $373 million and $390 million, respectively. The fair value of the retained interests at December 31, 2004 and 2003 was approximately $349 million and $367 million, respectively.

        The net cash received from (paid to) QSPEs during 2004, 2003 and 2002 was $130 million, $(119) million and $(384) million, respectively, as follows:

	At December 31,
	2004			2003			2002
Gross trade receivables sold to QSPEs ($25, $505 and $832)(1)	$	5,846		$	5,661		$	5,972
Collections made on behalf of and paid to QSPEs ($(23), $(696) and $(753))(1)		(5,713	)		(5,883	)		(6,074	)
Purchaser, liquidity and program fees ($0, $(2) and $(5))(1)		(20	)		(21	)		(37	)
Decrease (increase) in retained interests ($0, $117 and $(87))(1)		17			124			(245	)
Net cash received from (paid to) QSPEs during the year ($2, $(76) and $(13))(1)	$	130		$	(119	)	$	(384	)

⁽¹⁾

Related to assets held for sale and in discontinued operations for 2004, 2003 and 2002, respectively.

        At December 31, 2004 and 2003, of the gross trade receivables sold, the total trade receivables for which cash has not been collected at those dates amounted to $1,083 million and $898 million, respectively. Of these amounts, $54 million and $34 million at December 31, 2004 and 2003, respectively, was more than 90 days past due.

        In addition, we transfer receivables outside of the above described securitization programs. These transfers were sales, made without recourse, directly to banks or pursuant to factoring or similar type arrangements. Total sold receivables included in these transactions during 2004 and 2003 were approximately $902 million and $1,400 million, respectively, of which, sales of $159 million and $594 million, respectively, related to assets held for sale and in discontinued operations. During 2004 and 2003, the related costs, including the associated gains and losses, were $10 million and $12 million, respectively, of which, costs of $1 million and $3 million, respectively, related to assets held for sale and in discontinued operations.

        For further discussion of our securitization programs, see the section entitled "Off-balance sheet arrangements" below and Notes 2 and 7 to our Consolidated Financial Statements.

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Credit ratings

        Debt ratings are an assessment by the rating agencies of the credit risk associated with our company and are based on information provided by us or other sources that the rating agencies consider reliable. Lower ratings generally result in higher borrowing costs and reduced access to capital markets.

        At December 31, 2002, after a series of rating downgrades during 2002, our long-term company ratings were Ba3 and BBB- (our long-term unsecured debt was rated B1 and BB+) from Moody's and Standard & Poor's, respectively. On January 13, 2003, Standard & Poor's further lowered our long-term company rating to BB+ and our long-term unsecured debt to BB-. In late October 2003, both rating agencies changed the outlook on these ratings to positive from negative. On May 18, 2004, Moody's increased our long-term company rating from Ba3 to Ba2 and our long-term unsecured debt from B1 to Ba2, both with stable outlook. On December 6, 2004, Standard & Poor's changed the outlook on these ratings from positive to stable. Our ratings are currently below "investment grade" that would be represented by Baa3 (or above) and BBB- (or above) from Moody's and Standard & Poor's, respectively. A rating below investment grade is reflected in higher interest costs on borrowings. Until our credit rating has returned to investment grade, we do not anticipate having the ability to access the commercial paper markets.

Restrictions on transfers of funds

        We face restrictions on the transfer of funds in various countries due to local regulations and foreign exchange restrictions. Funds, other than regular dividends, fees or loan repayments, cannot be transferred offshore from these countries and are therefore deposited locally. As a consequence, these funds are not available within our Group Treasury Operations to meet short-term cash obligations. These funds are reported as cash on our Consolidated Balance Sheet, but we do not consider these funds as available for the repayment of debt outside the respective countries where the cash is situated, including those described below.

        Currency and other local regulatory restrictions exist in a number of countries where we operate, including: Brazil, China, Egypt, India, Korea, Malaysia, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and Venezuela.

        Furthermore, restricted cash amounting to $452 million and $433 million at December 31, 2004 and 2003, respectively, is not included in cash and equivalents but is reflected in long-term assets on our Consolidated Balance Sheet.

FINANCIAL POSITION

Balance sheet

        During 2004 and 2003, the divestments and discontinuations of certain businesses were recorded as discontinued operations pursuant to SFAS 144, as discussed in detail under "Application of Critical Accounting Policies—Accounting for discontinued operations" above. Accordingly, the balance sheet data for all periods presented have been restated to present the financial position and results of operations of the businesses meeting the criteria of SFAS 144 as assets and liabilities held for sale and in discontinued operations.

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Current assets

	At December 31,
	2004		2003
	(U.S. dollars in millions)
Cash and equivalents	$	3,676	$	4,783
Marketable securities and short-term investments		524		473
Receivables, net		6,330		6,049
Inventories, net		2,977		2,671
Prepaid expenses and other		1,688		1,794
Assets held for sale and in discontinued operations		155		4,981
Total current assets	$	15,350	$	20,751

        Our total current assets, at December 31, 2004, decreased by 26 percent, compared to December 31, 2003. See "—Cash Flows" for a detailed discussion on changes in cash and equivalents.

        Our Group Treasury Operations invest the surplus cash available from time to time in time deposits and marketable securities, with varied maturities based on defined investment guidelines and the liquidity requirements of the business. Investments which are less than three months in duration are classified as part of cash equivalents, and those of more than three months in duration are classified as part of marketable securities and short term investments. Receivables, net, as at the end of 2004 increased from the end of 2003, primarily as a result of a decline in the value of the U.S. dollar, which we use for reporting purposes, against local currencies. A reduction in receivables, particularly from Non-core activities is primarily due to collections from the contracts completed over the same period, was more than offset by increases in receivables in the core divisions resulting from higher volume of revenues. Inventories, net, increased by 5 percent in local currencies reflecting a higher order backlog at the end of 2004 compared to the end of 2003.

Current liabilities

	At December 31,
	2004		2003
	(U.S. dollars in millions)
Accounts payable, trade	$	4,272	$	4,034
Accounts payable, other		1,437		1,395
Short-term borrowings and current maturities of long-term borrowings		633		1,644
Accrued liabilities and other		6,436		5,957
Liabilities held for sale and in discontinued operations		290		3,990
Total current liabilities	$	13,068	$	17,020

        Total current liabilities as at the end of December 2004 decreased by 23 percent compared to December 31, 2003. Operating liabilities, excluding liabilities held for sale and in discontinued operations, include accounts payable, short-term borrowings including current maturities of long-term borrowings and accrued liabilities and other.

        Total accounts payable increased at December 31, 2004 compared to December 31, 2003, as increases in this account from the core divisions were partially offset by reductions, primarily from the Oil, Gas and Petrochemicals business.

        Our short-term debt was lower at the end of 2004 than at the end of 2003, reflecting our debt repayments during the year (see "—Liquidity and capital resources").

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        Accrued liabilities and other increased primarily as a result of higher volume of advances received from customers and additional provisions in respect of asbestos-related liabilities, recorded at December 31, 2004 (see "—Asbestos liability").

Non-current assets

	At December 31,
	2004		2003
	(U.S. dollars in millions)
Financing receivables, non-current	$	1,233	$	1,372
Property, plant and equipment, net		2,981		2,858
Goodwill		2,602		2,528
Other intangible assets, net		493		601
Prepaid pension and other related benefits		549		564
Investments and other		1,469		1,727
Total Non-current assets	$	9,327	$	9,650

        Financing receivables at December 31, 2004, which include receivables from leases and loans receivable, decreased compared to December 31, 2003, as we continue to terminate our lease portfolios and loan receivables within our Structured Finance business area.

        The increase in the value of property, plant and equipment, net, at December 31, 2004, mainly reflects the decline in the value of the U.S. dollar, which we use for reporting purposes, against local currencies. Expressed in local currency terms, property, plant and equipment decreased by 3 percent primarily as a result of the sale of real estate properties, mainly in Switzerland, and normal levels of depreciation. Capital expenditure during 2004 increased, with major investments in the core divisions in machinery and equipments in Germany, Italy, Finland and Sweden partially offset by reduced investments in Non-core activities, particularly in the Equity Ventures business area.

        The reduction in other intangible assets, net mainly reflects amortization on capitalized software and other intangible assets.

        During 2004, goodwill increased principally due to a decline in the value of the U.S. dollar, which we use for reporting purposes, partly offset by a write-off of $21 million goodwill related to the sale of businesses.

        Investments and other decreased, mainly due to write-down of certain deferred tax assets created in the previous years as we did not believe the tax assets were more likely than not to be realized and to a lesser extent due to the sale of our ownership interests in investments during 2004.

Non-current liabilities

	At December 31,
	2004		2003
	(U.S. dollars in millions)
Long-term borrowings	$	4,901	$	6,290
Pension and other related benefits		1,551		1,790
Deferred taxes		953		1,022
Other liabilities		1,083		1,077
Total Non-current liabilities	$	8,488	$	10,179

        During 2004, long-term borrowings were significantly reduced through the repayment of maturing bonds, open market repurchases of public bonds, the tender offer for certain of our bonds and the call

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of those bonds not tendered. Our gearing ratio (defined as total borrowings divided by the sum of total borrowings and the stockholders equity including minority interest), excluding the borrowings in the discontinued operations, was 64 percent at December 31, 2004, compared to 71 percent at December 31, 2003, reflecting the reduction of our total debt. The reduction in the value of pension and other employee benefits at December 31, 2004, was mainly due to our contribution of $549 million of available-for-sale debt securities to certain of our pension plans in Germany, offset in part by an increase in liabilities related to the decline in value of the U.S. dollar, our use of a lower discount rate compared to 2003 and lower performance of existing plan assets, along with the normal increase in the pension liabilities during the year.

        Other liabilities include non-current provisions of $439 million and $441 million, deferred income of $143 million and $158 million, and non-current derivative liabilities of $53 million and $40 million at December 31, 2004 and 2003, respectively. Included in non-current provisions are amounts accrued for the estimated environmental remediation costs related to our former Nuclear Technology business (see Note 18 to our Consolidated Financial Statements) of $266 million and $276 million at December 31, 2004 and 2003, respectively.

        We entered into certain leasing transactions with U.S. investors prior to 1999. Prepaid rents that have been received on these transactions are $314 million and $312 million at December 31, 2004 and 2003, respectively, and have been recorded as deposit liabilities. Net gains on these transactions are being recognized over the lease terms.

Cash flows

        In the Consolidated Statements of Cash Flows, the effects of the discontinued operations are not segregated, as permitted by Statement of Financial Accounting Standards No. 95 (SFAS 95), Statement of Cash Flows. The Consolidated Statements of Cash Flows can be summarized into main activities as follows:

	Year ended December 31,
	2004			2003			2002
	(U.S. dollars in millions)
Cash flows provided by (used in) operating activities	$	962		$	(173	)	$	0
Cash flows provided by investing activities		354			754			2,651
Cash flows provided by (used in) financing activities		(2,805	)		1,603			(2,793	)
Effects of exchange rate changes		74			150			141
Adjustment for the net change in cash and equivalents in assets held for sale and in discontinued operations		308			(80	)		60
Net change in cash and equivalents — continuing operations	$	(1,107	)	$	2,254		$	59

Cash flows provided by (used in) operating activities

        Operating assets and liabilities include marketable securities held for trading purposes, trade receivables, inventories, payables and other assets and liabilities. Debt and equity securities that are purchased and held principally for the purpose of sale in the near term are classified as trading securities. Cash flows from marketable securities classified as available-for-sale are reflected in investing

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activities. Cash flows from discontinued operations are included in the table below in the respective divisions in which these businesses were formerly classified.

	Year ended December 31,
	2004			2003			2002
	(U.S. dollars in millions)
Net loss, net of adjustments for non-cash items	$	942		$	(431	)	$	(419	)
Changes in operating assets and liabilities		20		$	258		$	419
Sub-total: Cash flows provided by (used in) operating activities	$	962		$	(173	)	$	0
Consisting of:
Power Technologies	$	499		$	639		$	337
Automation Technologies		1,090			814			503
Non-core activities*		(69	)		(754	)		(27	)
Corporate and Other	$	(558	)	$	(872	)	$	(813	)

*

Including the entire Oil, Gas and Petrochemicals, Wind Energy, Reinsurance and Export Bank businesses.

        In 2004, as compared to 2003, cash from operations from the Power Technologies division decreased, primarily influenced by lower advances from customers and increased volume of project receivables. Over the same period, cash from operations provided by the Automation Technologies division increased, mainly through higher earnings, higher advances from customers and the increase of trade payables. Cash used in Non-core activities was lower compared to 2003 primarily from the improvements in our Oil, Gas and Petrochemicals business due to a stronger focus on cash management and improved collection of receivables from customers as a result of completion of several large projects. These factors more than offset the cash outflows from the Upstream Oil, Gas and Petrochemicals business due to the cancellation of securitization programs and other activities involved in the preparation for the sale of this business. Other cash inflows in Non-core activities mainly represented the dividend received from Jorf Lasfar by our Equity Ventures business area in 2004. Cash used in corporate was lower in 2004 compared to 2003, influenced primarily by lower cash payments to the Combustion Engineering settlement trust. The cash payments in 2004 relating to the settlement of asbestos-related issues were $45 million. Cash inflows from operating activities improved by $1,135 million over 2003.

        During 2003, higher earnings and working capital improvements contributed to increased cash in 2003 as compared to 2002 from the operating activities of the Power Technologies and Automation Technologies divisions. These cash flows were more than offset by cash used in corporate, which included cash payments of $388 million towards the settlement of asbestos-related issues as well as cash used in corporate overheads and interest payments. In addition, losses from Building Systems and New Ventures business areas mainly contributed to cash outflows in Non-core activities during 2003. The net cash used in operating activities during 2003 was $173 million, compared to a break even level of cash during the year 2002.

        During 2002, net cash provided by operating activities of the Power Technologies and Automation Technologies divisions primarily resulted from improved earnings and a reduction of net working capital. Net cash provided by Non-core activities, excluding the Oil, Gas and Petrochemicals businesses, mainly consisted of net cash proceeds from the sale of marketable securities (trading) of $498 million. The Oil, Gas and Petrochemicals businesses had an operating cash outflow due to project losses and higher working capital levels. Corporate cash outflows were influenced by increased costs in respect of the credit facility and other financing arrangements, and included cash payments related to asbestos-related claims of $246 million. These resulted in a break-even level of cash from operations for 2002.

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Cash flows provided by (used in) investing activities

	Year ended December 31,
	2004			2003			2002
	(U.S. dollars in millions)
Acquisitions, investments, divestitures, net	$	1,158		$	488		$	2,365
Asset purchases, net of disposals		(420	)		(392	)		(126	)
Other investing activities		(384	)		658			412
Sub-total: Cash flows provided by investing activities	$	354		$	754		$	2,651

        Investing activities include: accounts receivable from leases and third party loans (financing receivables); net investments in marketable securities that are not held for trading purposes; purchases of property, plant and equipment, net of disposals; and acquisitions of, investments in and divestitures of businesses. Net cash provided by investing activities was $354 million during 2004, a decrease of $400 million from $754 million during 2003.

        We continued our program of divesting non-core businesses and other assets during 2004. For 2004, cash inflows from acquisitions, investments and divestitures, net, were higher by $670 million compared to 2003. Significant divestitures during 2004 were the sale of our Upstream Oil, Gas and Petrochemicals business ($800 million), the sale of our Re-insurance business (approximately $280 million) and the sale of our participations in IXYS Corporation ($42 million).

        During 2003, we received cash proceeds of approximately $149 million from the sale of our 35 percent stake in Swedish Export Credit Corporation and approximately $90 million from the sale of our investments in two projects in Equity Ventures business area in Australia. Cash proceeds of approximately $213 million were received through the sale of our Building Systems businesses in Sweden, Norway, Denmark, Finland and Russia. In addition, the sale of the ABB Export Bank for approximately $50 million, and the sale of part of our Wind Energy business, part of the New Ventures business in Non-core activities, were completed during the fourth quarter of 2003. As a result of these significant divestitures and net cash outflows of $24 million for certain smaller investments and disposals, net cash inflows from purchases of, investments in and divestitures of businesses was $488 million during 2003.

        The net cash outflows from the purchase and sale of property, plant and equipment was higher in 2004 as compared to 2003, reflecting fewer properties sold in 2004. Cash outflow for capital investment in property, plant and equipment remained at the same level for 2004 compared to 2003. Major capital expenditures on investment in machinery and equipment during 2004 occurred in Germany, Italy, Finland and Sweden. For 2004, proceeds of $123 million were received on the sale of property, plant and equipment compared to $155 million in 2003. Significant asset sales during 2004 included the sale of real estate properties in Switzerland, Germany and Italy.

        Cash used for purchases of property, plant and equipment, net of disposals, was $392 million during 2003, an increase of $266 million compared to $126 million during 2002. While investment in property plant and equipment remained at nearly the same level in both 2003 and 2002, proceeds of approximately $300 million from the sale of our real estate properties in Sweden in 2002, substantially offset the outflows of investment in property, plant and equipment.

        During 2004, we made a non-cash contribution of $549 million in available-for-sale debt securities to certain of our pension plans in Germany. Prior to the non-cash contribution, a significant portion of these securities was purchased during 2004, which significantly increased net cash used in other investing activities. Additionally, cash outflows in investing activities for 2004 represents the net investment of cash in marketable securities by Group Treasury Operations and our Group captive

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insurance companies, partly offset by cash inflows from the termination of lease portfolios and loan receivables from our remaining Structured Finance business.

        Cash provided by other investing activities increased to $658 million in 2003 from $412 million in 2002. The cash provided by other investing activities largely resulted from cash proceeds of $390 million from the sale of financing receivables related to our Structured Finance business and net cash proceeds of $268 million from the sale of marketable securities that were not held for trading purposes, primarily relating to the Reinsurance business which we sold in April 2004 and the sale of our shares in the China National Petrochemical Corporation (Sinopec Corp.) for approximately $80 million. The increase in cash provided by other activities in 2002 was primarily due to a reduction in investments in financing receivables.

Cash flows provided by (used in) financing activities

	Year ended December 31,
	2004			2003			2002
	(U.S. dollars in millions)
Change in borrowings, net of repayments	$	(2,752	)	$	(1,016	)	$	(2,796	)
Treasury and capital stock transactions		(36	)		2,675			0
Other financing activities		(17	)		(56	)		3
Sub-total: Cash flows provided by financing activities	$	(2,805	)	$	1,603		$	(2,793	)

        Our financing activities primarily include borrowings, both from the issuance of debt securities and directly from banks, treasury and capital stock transactions.

        Significant cash outflow from financing activities during the year 2004 included the repayment of maturing bonds, open market repurchases of public bonds, the tender offer for certain of our bonds and the call of those bonds not tendered. See "Liquidity and Capital Resources" for a detailed discussion on the nature of borrowings. The cash outflow for the treasury and capital stock transactions represented payments made in 2004 in respect of certain tax and other liabilities incurred in connection with the rights issue carried out during the fourth quarter of 2003.

        During 2003, as part of our strategy to lengthen our debt maturity profile, we replaced maturing short-term borrowings with long-term borrowings. Cash outflows in connection with borrowings reflected the repayment of short-term (including current portion of long-term) borrowings as they fell due, partially offset by cash inflows from the proceeds of the CHF 1,000 million convertible bonds and 650 million euro aggregate principal of bonds issued in September and November 2003, respectively. The net proceeds of the rights issuance of $2.5 billion, completed in December 2003 and the proceeds from the sale of treasury shares during the first quarter of 2003 for $156 million, contributed to the overall net cash inflow of $2,675 million during 2003.

        During 2002, net cash outflows from borrowings reflected our strategy to reduce our overall level of borrowings, particularly in respect of borrowings with maturities of 90 days or less. There were no treasury and capital stock transactions or dividends paid in 2002.

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DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMITMENTS

Contractual obligations

        The following table summarizes certain of our contractual obligations and principal payments under our debt instruments and leases at December 31, 2004:

Payments due by period	Total		Less than 1 year		1–3 years		3–5 years		After 5 years
	(U.S. dollars in millions)
Long-term debt obligations	$	5,350	$	449	$	1,040	$	1,854	$	2,007
Operating lease obligations		1,924		347		536		389		652
Purchase obligations	$	3,013	$	2,003	$	651	$	186	$	173

OFF-BALANCE SHEET ARRANGEMENTS

Commercial commitments

        Certain guarantees issued or modified after December 31, 2002 are accounted for in accordance with Financial Accounting Standards Board Interpretation No. 45 (FIN 45), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. Upon issuance of certain guarantees, a liability, equal to the fair value of the guarantee, is recorded.

        FIN 45 requires that 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" as defined by FIN 45 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 results.

        The carrying amount of liabilities recorded in the Consolidated Balance Sheets reflects our best estimate of future payments we may incur as part of fulfilling our guarantee obligations.

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	At December 31,
	2004				2003
	Maximum potential payments		Carrying amount of liabilities		Maximum potential payments		Carrying amount of liabilities
	(U.S. dollars in millions)
Third-party performance guarantees	$	1,525	$	2	$	1,200	$	—
Financial guarantees		253		1		207		—
Indemnification guarantees		198		16		—		—
Total	$	1,976	$	19	$	1,407	$	—

Guarantees related to third-party performance

        Performance guarantees represent obligations where we guarantee the performance of a third party's product or service according to the terms of a contract. Such guarantees may include guarantees that a project will be completed within a specified time. If the third party does not fulfill the obligation, we will compensate the guaranteed party in cash or in kind.

        We retained obligations for guarantees related to the Power Generation business contributed in mid-1999 to the former ABB ALSTOM POWER NV joint venture. The guarantees primarily consist of performance guarantees, advance payment guarantees and other miscellaneous guarantees under certain contracts such as indemnification for personal injuries and property damages, taxes, and compliance with labor laws, environmental laws and patents. The guarantees are related to projects that are expected to be completed by 2015, but in some cases the guarantees have no definite expiration. In May 2000, we sold our interest in the ABB ALSTOM POWER NV joint venture to ALSTOM SA (ALSTOM). As a result, ALSTOM and its subsidiaries have primary responsibility for performing the obligations that are the subject of the guarantees. Further, ALSTOM, the parent company, and ALSTOM POWER NV, formerly ABB ALSTOM POWER NV, have undertaken jointly and severally to fully indemnify and hold us harmless against any claims arising under such guarantees. Our best estimate of the total maximum potential exposure of quantifiable guarantees issued by us on behalf of the Power Generation business is approximately $875 million and $1,200 million at December 31, 2004 and 2003, respectively. We have not experienced any losses related to guarantees issued on behalf of the Power Generation business.

        We have retained obligations for guarantees related to the Upstream Oil, Gas and Petrochemicals business sold in July 2004. The guarantees primarily consist of third-party performance guarantees, advance payment guarantees and other miscellaneous guarantees. The guarantees have maturity dates ranging from one to five years. The maximum amount payable under the guarantees is approximately $650 million at December 31, 2004. We have the ability to recover potential payments under these guarantees through certain backstop guarantees. The maximum potential recovery under these backstop guarantees is approximately $146 million at December 31, 2004.

Guarantees relating to financial obligations

        Financial guarantees represent irrevocable assurances that we will make payment to a beneficiary in the event that a third party fails to fulfill its financial obligations and the beneficiary under the guarantee incurs a loss due to that failure.

        At December 31, 2004 and 2003, we had $253 million and $207 million, respectively, of financial guarantees outstanding. Of those amounts, $123 million and $189 million, respectively, were issued on behalf of companies in which we currently have or formerly had an equity interest. The guarantees have original maturity dates ranging from one to thirteen years. Also included in the $253 million are financial guarantees we retained related to the Upstream Oil, Gas and Petrochemicals business sold in July 2004. The maximum amount payable under these guarantees is approximately $101 million and the

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guarantees have original maturity dates ranging from one to six years and in some cases have no time-related expiry as they are contingent on future events.

Guarantees relating to indemnification

        We delivered to the purchasers of the Upstream Oil, Gas and Petrochemicals business and Reinsurance business guarantees related to assets and liabilities divested in 2004. The maximum liability at December 31, 2004, of approximately $49 million and $149 million, relating to the Upstream Oil, Gas and Petrochemicals business and Reinsurance business, respectively, will reduce over time, pursuant to the agreements. The fair value of these guarantees is not material.

        We have indemnified certain purchasers of divested businesses for potential claims arising from the operations of the divested businesses, including for asbestos-related claims arising from the operations of Combustion Engineering and its predecessors and affiliates. Such indemnifications have not been fair valued to the extent they were issued prior to the effective date of FIN 45. Additionally, in cases where we could not calculate the maximum loss related to such indemnifications, no amounts have been included under maximum potential payments in the table above. Indemnifications for which maximum losses could not be calculated include indemnifications for legal claims.

Other commitments

        We have granted lines of credit and have committed to provide additional capital for certain equity accounted companies. At December 31, 2004, the total unused lines of credit amounted to $78 million and capital commitments amounted to $24 million.

Securitization programs

        In addition to the primary sources of liquidity and capital resources described in the section entitled "Liquidity and Capital Resources", we also sell certain trade receivables to Qualifying Special Purpose Entities ("QSPEs"), unrelated to us, primarily through two revolving-period securitization programs. Under the two securitization programs, neither QSPE commits to purchase our trade receivables, and the QSPEs may at any time refuse to continue purchasing our trade receivables. If both QSPEs simultaneously refuse to purchase additional receivables, then we would experience a temporary loss of cash flow from the sale of trade receivables over a period of several weeks until new trade receivables generated by us began to convert to cash in the normal course of our business.

        Solely for the purpose of credit enhancement from the perspective of the QSPEs, we retain an interest in the sold receivables. Pursuant to the requirements of the revolving-period securitizations, we effectively bear the risk of potential delinquency or default associated with trade receivables sold or interests retained. Retained interests included in other receivables at December 31, 2004 and 2003 amounted to $373 million and $390 million, respectively. The decrease in the retained interest during 2004 of $17 million was mainly due to a change in terms of one program, resulting in a reduction in the level of reserves required. In the normal course of servicing the assets sold, we evaluate potential collection losses and delinquencies and update the estimated fair value of our retained interest. Pursuant to the terms of the securitization programs, receivables more than 90 days overdue are considered delinquent. An increase in delinquency rates compared to historic levels will cause an increase in retained interests, while a decrease in delinquency rates compared to historic levels will cause a corresponding decrease in retained interests. Ultimately, if the customer defaults, we will be responsible for the uncollected amount up to the amount of our retained interest relating to the relevant securitization program. The fair value of the retained interests at December 31, 2004 and 2003 was approximately $349 million and $367 million, respectively.

        We retain servicing responsibility relating to the sold receivables. Net cash settlements on both programs take place twice per month. However, in one of the programs there is, in addition, the daily

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transfer of collections of sold receivables. Under the terms of the latter program, if our rating falls below BB+ (Standard & Poor's) or Ba3 (Moody's) then we may be required to relinquish the right to collect the sold receivables on behalf of the QSPE, and instead the cash collection of such sold receivables would be made directly to the accounts of the QSPE rather than via us.

        The net cash received from (paid to) QSPEs during 2004, 2003 and 2002 was $130 million, $(119) million and $(384) million, respectively, as follows:

	Year ended December 31,
	2004			2003			2002
	(U.S. dollars in millions)
Gross trade receivables sold to QSPEs ($25, $505 and $832)(1)	$	5,846		$	5,661		$	5,972
Collections made on behalf of and paid to QSPEs ($(23), $(696) and $(753))(1)		(5,713	)		(5,883	)		(6,074	)
Purchasers, liquidity and program fees ($0, $(2) and $(5))(1)		(20	)		(21	)		(37	)
Decrease (increase) in retained interests ($0, $117 and $(87))(1)		17			124			(245	)
Net cash received from (paid to) QSPEs ($2, $(76) and $(13))(1)	$	130		$	(119	)	$	(384	)

⁽¹⁾

Related to assets held for sale and in discontinued operations for 2004, 2003 and 2002, respectively.

        The increase in gross receivables sold in 2004 compared to 2003, is due primarily to an increase in the programs' size, a change in the definition of receivables eligible to be sold in one program and the addition of new sellers to one of the programs. The decrease in gross receivables sold in 2003, as compared to 2002, is due primarily to the fact that businesses which were either classified as discontinued operations or which we sold were phased out of the securitization programs during 2003.

        We pay purchaser, liquidity and program fees on our securitization programs. Purchaser and program fees are based on the amount of funding that we receive, while liquidity fees are based on the programs' size. These costs of $20 million, $21 million and $37 million in 2004, 2003 and 2002, respectively, are included in interest and other finance expense.

        At December 31, 2004 and 2003, of the gross trade receivables sold, the total trade receivables for which cash has not been collected at those dates amounted to $1,083 million and $898 million, respectively. Of these amounts, $54 million and $34 million at December 31, 2004 and 2003, respectively, was more than 90 days past due.

        In addition, we transfer receivables outside of the above described securitization programs. These transfers were sales, made without recourse, directly to banks and/or sales pursuant to factoring or similar type arrangements. Total sold receivables included in these transactions during 2004 and 2003 were approximately $902 million and $1,400 million, respectively, of which, sales of $159 million and $594 million, respectively, related to assets held for sale and in discontinued operations. During 2004 and 2003, the related costs, including the associated gains and losses, were $10 million and $12 million, respectively, of which, costs of $1 million and $3 million, respectively, related to assets held for sale and in discontinued operations. The reduction in the amount of receivables transferred outside of the securitization programs in 2004 compared to 2003 was mainly the result of the sale of a business classified in discontinued operations that had in 2003 generated significant sales of receivables.

        For a further discussion of our securitization programs, see Notes 2 and 7 to our Consolidated Financial Statements.

Pension and other post-retirement obligations

        At December 31, 2004 and 2003, our pension liabilities exceeded plan assets by $1,451 million and $1,680 million, respectively. Our other post-retirement plan liabilities exceeded plan assets by $369 million and $397 million at December 31, 2004 and 2003, respectively. This underfunding is not a

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short-term obligation for us as the settlement of the pension liability will take place as the covered employees draw benefits from the plans in the future. At the end of April 2005, we announced that we anticipate contributing a total of $187 million and $29 million to our pension plans and our postretirement benefit plans, respectively, in 2005.

Variable interests

        We are a party to certain off-balance sheet arrangements including variable interests in unconsolidated entities. See Note 8 to the Consolidated Financial Statements for additional information on variable interests.

ENVIRONMENTAL LIABILITIES

        All of our operations, but particularly our manufacturing operations, are subject to comprehensive environmental laws and regulations. Violations of these laws could result in fines, injunctions (including orders to cease the violating operations) or other penalties (including orders to improve the condition of the environment in the affected area or to pay for such improvements). In addition, environmental permits are required for our manufacturing facilities (for example, with respect to air emissions and wastewater discharges). In most countries in which we operate, environmental permits must be renewed on a regular basis and we must submit reports to environmental authorities. These permits may be revoked, renewed or modified by the issuing authorities at their discretion and in compliance with applicable laws. We have implemented formal environmental management systems at nearly all of our manufacturing sites in accordance with the international environmental management standard ISO 14001, and we believe that we are in substantial compliance with environmental laws, regulations and permit requirements in the various jurisdictions in which we operate, except for such instances of non-compliance that, in the aggregate, are not reasonably likely to be material.

        In a number of jurisdictions, including the United States, we may be liable for environmental contamination at our present or former facilities, or at other sites where wastes generated from our present or former facilities were disposed. In the United States, the Environmental Protection Agency and various state agencies are responsible for regulating environmental matters. These agencies have identified certain of our current and former U.S. based companies as potentially responsible parties in respect to a number of such sites under the Comprehensive Environmental Response, Compensation, and Liability Act, the Resource Conservation and Recovery Act and other federal and state environmental laws. As a potentially responsible party, we may be liable for a share of the costs associated with cleaning up these sites. As of December 31, 2004, there were approximately 25 sites, at which, our companies have, or may be potentially responsible for, environmental clean up costs. These 25 sites include several of our current or former facilities where we have undertaken voluntary corrective actions. The clean up of these sites involves primarily soil and groundwater contamination. We do not believe that our aggregate liability in connection with these sites will have a material adverse impact on our consolidated financial position, results of operations and cash flows.

        Generally, our liability with regard to any specific site will depend on the number of potentially responsible parties, their relative contributions of hazardous substances or wastes to the site and their financial resources, as well as on the nature and extent of the contamination. Nevertheless, such laws commonly impose strict liability jointly and severally on the parties involved, so that any one party may be liable for the entire cost of cleaning up a contaminated site.

        In addition, we retained liability for certain specific environmental remediation costs at two sites in the United States that were operated by our Nuclear technology business, which has been sold to British Nuclear Fuels PLC (BNFL) in April 2000. Pursuant to the purchase agreement with BNFL, we have retained all of the environmental liabilities associated with our subsidiary Combustion Engineering Inc.'s (Combustion Engineering) Windsor, Connecticut facility and a portion of the environmental liabilities associated with our ABB C-E Nuclear Power Inc. subsidiary's Hematite,

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Missouri facility. The primary environmental liabilities associated with these sites relate to the costs of remediating radiological and chemical contamination at these facilities. Such costs are not payable until a facility is taken out of use and generally are incurred over a number of years. Although it is difficult to predict with accuracy the amount of time it may take to remediate radiological contamination upon decommissioning, based on information that BNFL has made publicly available, we believe that it may take until 2013 to remediate the Hematite site. With respect to the Windsor site, we believe the remediation may take until 2008. At the Windsor site, a significant portion of the contamination is related to activities that were formerly conducted by or for the United States government. We believe that a significant portion of the remediation costs for this facility will be covered by the United States government under the government's Formerly Utilized Sites Remedial Action Program. As a result of the sale of the Nuclear Technology business, in 2000 we established in other liabilities a reserve of $300 million in connection with our estimated remediation costs related to both facilities. We have estimated the total contingent liability in a range of loss from $266 million to $447 million. As such, at December 31, 2004, we have recorded in other liabilities a reserve of $266 million, net of payments since inception of $34 million. Expenditures charged to the remediation reserve were $10 million, $6 million and $12 million during 2004, 2003 and 2002, respectively. In connection with the Chapter 11 filing by Combustion Engineering discussed below, we will assume any and retain all remaining environmental liabilities of Combustion Engineering in respect to the Windsor and Hematite sites.

        Estimates of the future costs of environmental compliance and liabilities are imprecise due to numerous uncertainties. Such costs are affected by the enactment of new laws and regulations, the development and application of new technologies, the identification of new sites for which we may have remediation responsibility and the apportionment of remediation costs among, and the financial viability of, responsible parties. In particular, the exact amount of the responsibility of the United States government for the Windsor site cannot be precisely estimated. It is possible that final resolution of environmental matters may require us to make expenditures in excess of our expectations, over an extended period of time and in a range of amounts that cannot be reasonably estimated. Although final resolution of such matters could have a material effect on our Consolidated Income Statement in a particular reporting period in which the expenditure is incurred, we believe that these expenditures will not have a material adverse impact on our consolidated financial position, results of operations and cash flows.

ASBESTOS LIABILITIES

Summary

        Our Combustion Engineering subsidiary has been a co-defendant in a large number of lawsuits claiming damage for personal injury resulting from exposure to asbestos. A smaller number of claims have also been brought against two other subsidiaries, ABB Lummus Global Inc. ("Lummus") (which is part of our Oil, Gas and Petrochemicals business and was formerly a subsidiary of Combustion Engineering) and Basic Incorporated ("Basic") (which was a subsidiary of Combustion Engineering and of Asea Brown Boveri Inc. ("Asea Brown Boveri") and is now a subsidiary of ABB Holdings Inc. ("Holdings") following the merger in December 2004 of Asea Brown Boveri into Holdings), as well as against other ABB group entities. In late 2002, taking into consideration the growing number and cost of asbestos-related claims, Combustion Engineering and we determined that Combustion Engineering's asbestos-related liability should be resolved through a comprehensive settlement that included a plan of reorganization for Combustion Engineering under Chapter 11 of the U.S. Bankruptcy Code.

        In November 2002, Combustion Engineering and the representatives of various asbestos claimants entered into a Master Settlement Agreement which settled the value of approximately 154,000 open asbestos-related claims against Combustion Engineering. Under that agreement, Combustion Engineering established and funded a trust (the "CE Settlement Trust") to provide for partial payment on such settled claims.

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        In January 2003, Combustion Engineering reached agreement with various creditors (including representatives of the asbestos claimants who participated in the Master Settlement Agreement and a representative of future claimants) on the terms of a proposed "Pre-Packaged Plan of Reorganization for Combustion Engineering" under Chapter 11 of the U.S. Bankruptcy Code (as amended through June 4, 2003, the "CE Plan"). The CE Plan provided for a "channeling injunction" to be issued, under which asbestos-related claims related to the operations of Combustion Engineering, Lummus and Basic could only be brought against a trust (separate from the CE Settlement Trust established under the Master Settlement Agreement) to be established and funded by Combustion Engineering, ABB Ltd and other ABB group companies. This channeling injunction was intended to free Combustion Engineering, ABB Ltd and affiliates, as well as certain former direct or indirect owners, joint venture partners and affiliates of Combustion Engineering, including ALSTOM and ABB ALSTOM POWER NV, from further liability for such claims.

        The CE Plan was filed with the U.S. Bankruptcy Court on February 17, 2003, and confirmed by the District Court on August 8, 2003. However, on December 2, 2004, the Court of Appeals for the Third Circuit effectively reversed the District Court's confirmation order. The Court of Appeals remanded the CE Plan to the District Court for a determination of whether, in light of the pre-petition payments made by Combustion Engineering to the CE Settlement Trust under the Master Settlement Agreement and the fact that claimants who received partial payments of their claims under the Master Settlement Agreement participated in the approval of the plan, the treatment of asbestos-related personal injury claims against Combustion Engineering under the CE Plan was consistent with the requirements of the Bankruptcy Code. Combustion Engineering and we have been reviewing the Court of Appeals' decision and considering various options to resolve the asbestos-related liability of Combustion Engineering, Lummus and Basic.

        In March 2005, following extensive discussions with certain representatives of various parties, including the Creditors Committee and the Future Claimants Representative appointed in the Combustion Engineering case, we reached an agreement on certain "settlement points" for modifying the CE Plan with a view to bringing it into conformity with the Court of Appeals' decision and for providing a mechanism for resolving finally Lummus' potential asbestos liability. The settlement points contemplate that the modified plan will continue to reflect the CE Plan's fundamental approach of channeling asbestos-related claims against Combustion Engineering to a trust funded in part by other entities of the ABB group of companies. The settlement points provide for us to make an additional contribution of approximately $232 million to pay present and future asbestos claimants of Combustion Engineering and Lummus. In addition, the settlement points provide that we will pay directly or indirectly up to $8 million in respect of certain approved legal fees in the Chapter 11 case of Combustion Engineering. The settlement points contemplate that the modified CE Plan will become effective under the Bankruptcy Code concurrently with a separate Chapter 11 plan of reorganization for Lummus. The parties are now working to reach agreement on other issues relating to, and details of, the proposed modified plan and related proceedings involving Lummus and to prepare the related documentation. Each of the proposed plans will require approval of creditors and be subject to court review.

        One of the holdings of the Court of Appeals was that the asbestos-related claims against Basic that are not related to Combustion Engineering's operations could not be "channeled" to the proposed trust under the CE Plan. The proposed plans do not address Basic, and we expect that Basic's asbestos-related liabilities will have to be resolved through its own bankruptcy or similar U.S. state court liquidation proceeding, or through the tort system.

Background

        When we sold our 50 percent interest in the former ABB ALSTOM POWER NV joint venture to ALSTOM in May 2000, we retained ownership of Combustion Engineering, a subsidiary that had conducted part of our former power generation business and that now owns commercial real estate that

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it leases to third parties. Combustion Engineering is a co-defendant, together with other third parties, in numerous lawsuits in the United States in which the plaintiffs claim damages for personal injury arising from exposure to asbestos in equipment or materials that Combustion Engineering allegedly supplied or was responsible for, primarily during the early 1970s and before.

        From 1989 through February 17, 2003 (the date that Combustion Engineering filed for Chapter 11 as described below), approximately 438,000 asbestos-related claims were filed against Combustion Engineering. On February 17, 2003, there were approximately 164,000 asbestos related personal injury claims pending against Combustion Engineering. There were approximately 138,000 such claims pending against Combustion Engineering on December 31, 2002, and approximately 94,000 such claims were pending on December 31, 2001. Of the approximately 164,000 claims that were pending on February 17, 2003, approximately 154,000 are claims by asbestos claimants who participated in the Master Settlement Agreement. Approximately 29,000 new claims were made in the period from January 1, 2003, to February 17, 2003 (all but 111 of which agreed to participate in the Master Settlement Agreement). Approximately 34,500 claims were resolved in 2002 and approximately 27,000 claims were resolved in 2001.

        Other entities of ours have sometimes been named as defendants in asbestos-related claims, including Lummus and Basic. At December 31, 2004 and 2003, there were approximately 11,000 claims pending against Lummus and 4,300 and 4,200 claims, respectively, pending against Basic.

        Additionally, at December 31, 2004 and 2003, there were approximately 12,400 and 8,700 asbestos-related claims pending against our entities other than Combustion Engineering, Lummus and Basic. These claims are unrelated to Combustion Engineering and will not be resolved in the Combustion Engineering bankruptcy case. Of the 12,400 claims outstanding at December 31, 2004, approximately 3,660 are claims that were brought in the state of Mississippi in the United States, in 7 cases that include multiple plaintiffs and hundreds of co-defendants and make no specific allegations of any relationship between any entity of ours and the plaintiffs. Approximately 4,240 of such claims have been brought in the state of Ohio in the United States by claimants represented by a single law firm in cases that typically name 50 to 60 co-defendants and do not allege any specific linkage between the plaintiffs and any entity of ours. Approximately 2,700 such claims are pending in the state of West Virginia in the United States. The remaining such claims are pending in various jurisdictions. We generally seek dismissals from claims where there is no apparent linkage between the plaintiffs and any entity of ours. To date, resolving claims against our entities other than Combustion Engineering, Lummus and Basic has not had a material impact on our consolidated financial position, results of operations or cash flows.

Negotiations with representatives of asbestos claimants and pre-packaged Chapter 11 filing

        During 2001 and 2002, Combustion Engineering experienced a significant increase in the level of new claims and higher total and per-claim settlement costs as compared to prior years. In October 2002, Combustion Engineering and we determined that it was likely that the expected asbestos-related costs of Combustion Engineering would exceed the value of its assets ($812 million at September 30, 2002 and $828 million at December 31, 2002) if its historical settlement patterns continued into the future. In October 2002, Combustion Engineering and we determined to resolve the asbestos-related liability of Combustion Engineering and its affiliates by reorganizing Combustion Engineering under Chapter 11, the principal business reorganization chapter of the U.S. Bankruptcy Code. Combustion Engineering and we determined to structure the Chapter 11 reorganization as a "pre-packaged plan," in which Combustion Engineering would solicit votes from asbestos claimants to approve the plan before the Chapter 11 case was filed with the Bankruptcy Court.

        Beginning in October 2002, Combustion Engineering and we conducted extensive negotiations with representatives of certain asbestos claimants with respect to a pre-packaged plan. On November 22, 2002, Combustion Engineering and the asbestos claimants' representatives entered into a Master

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Settlement Agreement for settling open asbestos-related personal injury claims that had been filed against Combustion Engineering prior to November 15, 2002. Combustion Engineering also agreed, pursuant to the Master Settlement Agreement, to form and fund the CE Settlement Trust to administer and pay the asbestos-related personal injury claims settled under the Master Settlement Agreement. Under the terms of the Master Settlement Agreement, eligible claimants who met all criteria to qualify for payment were entitled to receive a percentage of the value of their claim from the CE Settlement Trust and retain a claim against Combustion Engineering for the unpaid balance (the "stub claim"). The Master Settlement Agreement divides claims into three categories based on the status of the claim at November 14, 2002, the status of the documentation relating to the claim and whether or not the documentation establishes a valid claim eligible for settlement and payment by Combustion Engineering. The Master Settlement Agreement was supplemented in January 2003 to clarify the rights of certain claimants whose right to participate in a particular payment category was disputed. The Master Settlement Agreement, as supplemented, settles the value of and provides for the partial payment on approximately 154,000 open asbestos-related personal injury claims that had been lodged against Combustion Engineering.

        The Master Settlement Agreement, as supplemented, provided that the CE Settlement Trust was to be funded by:

•

cash contributions from Combustion Engineering in the amount of $5 million;



•

cash contributions from ABB Inc., a subsidiary of ABB Ltd, in the amount of $30 million;



•

a promissory note from Combustion Engineering in the principal amount of approximately $101 million (guaranteed by Asea Brown Boveri, now merged into Holdings); and



•

an assignment by Combustion Engineering of the $311 million unpaid balance of principal and interest due to Combustion Engineering from Asea Brown Boveri, now merged into Holdings, under a loan agreement dated May 12, 2000 (guaranteed by ABB Ltd).

        Approximately 154,000 eligible claimants have entered into the Master Settlement Agreement or adoption agreements with Combustion Engineering and the CE Settlement Trust and have received partial payment on their claims.

Pre-packaged plan of reorganization

        On January 17, 2003, we announced that Combustion Engineering and we had reached an agreement on a proposed Pre-Packaged Plan of Reorganization for Combustion Engineering under Chapter 11 of the U.S. Bankruptcy Code. The agreement was reached with representatives of certain asbestos claimants with existing asbestos-related personal injury claims against Combustion Engineering (encompassing both claimants who had lodged claims prior to November 15, 2002, and claimants who had filed claims on or after that date and were not eligible to participate in the Master Settlement Agreement) and with the proposed representative of persons who may be entitled to bring asbestos-related personal injury claims in the future.

        As proposed, the CE Plan provided for the creation of the Asbestos PI Trust, an independent trust separate and distinct from the CE Settlement Trust, and addressed Asbestos PI Trust Claims, which consist of present and future asbestos-related personal injury claims (including the stub claims of claimants who previously settled pursuant to the Master Settlement Agreement) that arise directly or indirectly from any act, omission, products, or operations of Combustion Engineering, Lummus or Basic. The CE Plan provided that, if it were to become effective, a channeling injunction would be issued under Section 105 of the U.S. Bankruptcy Code pursuant to which the Asbestos PI Trust Claims against ABB Ltd and certain of its affiliates (including Combustion Engineering, Lummus and Basic) would be channeled to the Asbestos PI Trust. The effect of the channeling injunction contemplated by the CE Plan would be that the sole recourse of a holder of an Asbestos PI Trust Claim would be to the Asbestos PI Trust and such holder would be barred from asserting such a claim against ABB Ltd and

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the affiliates covered by the injunction (including Combustion Engineering and, under the CE Plan as proposed, Lummus and Basic).

        As proposed, the CE Plan provided that on its effective date, the Asbestos PI Trust would be funded with the following:

•

a $20 million 5 percent term note (the "CE Convertible Note") with a maximum term of ten years from the effective date of the CE Plan, to be issued by Combustion Engineering and secured by its Windsor, Connecticut real estate and real estate leases (under certain specified contingencies, the Asbestos PI Trust may have the right to convert the term note into ownership of 80 percent of the voting securities of the reorganized Combustion Engineering);



•

excess cash held by Combustion Engineering on the effective date of the CE Plan (the "Excess CE Cash");



•

a non-interest bearing promissory note (the "ABB Promissory Note") to be issued by ABB Inc. and ABB Ltd, and guaranteed by certain ABB Ltd subsidiaries, in an aggregate amount of up to $350 million payable in installments (including two $25 million payments contingent upon ABB Ltd generating an earnings before interest and taxes margin of 12 percent in 2007 and 2008);



•

a non-interest bearing promissory note to be issued on behalf of Lummus (the "Lummus Note") in the amount of $28 million payable in relatively equal annual installments over 12 years;



•

a non-interest bearing promissory note (the "Basic Note") to be issued on behalf of Basic in the aggregate amount of $10 million payable in relatively equal annual installments over 12 years;



•

30,298,913 shares of ABB Ltd (the "CE Settlement Shares"), which had a fair value of $170 million, $154 million and $86 million at December 31, 2004, 2003 and 2002, respectively; and



•

an assignment by Combustion Engineering, Lummus, and Basic to the Asbestos PI Trust of any proceeds under certain insurance policies. As of December 31, 2004, aggregate unexhausted product liability limits under such policies were approximately $200 million for Combustion Engineering, approximately $43 million for Lummus and approximately $28 million for Basic, although amounts ultimately recovered by the Asbestos PI Trust under these policies may be substantially different from the policy limits. In addition, Combustion Engineering would assign to the Asbestos PI Trust scheduled payments under certain of its insurance settlement agreements ($78 million at December 31, 2004). (The proceeds and payments to be assigned are together referred to as "Certain Insurance Amounts".)

        In addition, the CE Plan as proposed provided that if Lummus were sold within 18 months after the CE Plan's effective date, ABB Inc. would contribute $5 million to the CE Settlement Trust and $5 million to the Asbestos PI Trust (together, these payments are referred to as the "Lummus Sale Payments"). If the CE Settlement Trust has ceased to exist at that time, both $5 million payments would be made to the Asbestos PI Trust, but in no event would this contribution exceed the net proceeds from the sale of Lummus.

        Upon the effective date under the CE Plan, ABB Inc. would indemnify the Combustion Engineering estate against up to $5 million of liability on account of certain contingent claims held by certain indemnified insurers. Further, on the effective date, Asea Brown Boveri (now merged into Holdings) would provide for the benefit of Combustion Engineering a nuclear and environmental indemnity with regard to obligations arising out of Combustion Engineering's Windsor, Connecticut, site. The two indemnities described in this paragraph are referred to as the "Related Indemnities".

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Judicial review process

        The solicitation of votes to approve the CE Plan began on January 19, 2003. Combustion Engineering filed for Chapter 11 in the U.S. Bankruptcy Court in Delaware on February 17, 2003, based on the terms previously negotiated in connection with the CE Plan. On June 23, 2003, the Bankruptcy Court issued its Order Approving the Disclosure Statement but Recommending Withholding of Confirmation of the Plan of Reorganization for Combustion Engineering for Ten Days (the "Initial Ruling") and related findings of fact. The Initial Ruling approved the disclosure statement that was the document used as the basis for soliciting approval of the CE Plan from asbestos claimants and verified the voting results that approved the CE Plan and indicated that the Bankruptcy Court would recommend that the CE Plan be confirmed if Combustion Engineering and we could establish to the court's satisfaction certain specified information. We then submitted the additional information for the court's consideration.

        On July 10, 2003, the Bankruptcy Court issued a Supplemental and Amendatory Order Making Additional Findings and Recommending Confirmation of Plan of Reorganization (the "Supplemental Ruling"). The Supplemental Ruling recommended to the U.S. District Court, among other things, that the CE Plan be confirmed.

        Following the issuance of the Supplemental Ruling, interested parties had a period during which they could appeal the Initial Ruling and the Supplemental Ruling. This appeal period expired on July 24, 2003. A number of interested parties, including a small number of asbestos claimants and certain insurance companies which historically have provided insurance coverage to Combustion Engineering, Lummus and Basic filed appeals based on various objections to the CE Plan. The District Court held a hearing on July 31, 2003, with respect to the appeals and entered its confirmation order on August 8, 2003.

        Various parties appealed the District Court's confirmation order to The United States Court of Appeals for the Third Circuit, which granted a motion for expedition of appeals and ordered that all briefs were to be filed by October 7, 2003. On June 3, 2004, the Court of Appeals held a hearing with respect to the appeals of the confirmation order of the District Court. On December 2, 2004, the Court of Appeals issued its decision (the "Third Circuit Decision").

        The effect of the Third Circuit Decision was to reverse the District Court's confirmation order in respect of the CE Plan. The Third Circuit Decision focused on three issues raised by the appealing parties which relate to the ultimate terms of the CE Plan: (i) whether the Bankruptcy Court had "related to" jurisdiction over the claims against the non-debtors, Lummus and Basic, that do not arise from any products or operations of Combustion Engineering (the "non-derivative claims"); (ii) whether the non-debtors, Lummus and Basic, could avail themselves of the protection of the channeling injunction by invoking Section 105 of the Bankruptcy Code and contributing assets to the Asbestos PI Trust; and (iii) whether the two-trust structure and use of stub claims in the voting process comply with the Bankruptcy Code. The Court of Appeals held that there were insufficient factual findings to support "related-to" jurisdiction and that Section 105 of the Bankruptcy Code could not be employed to extend the channeling injunction to the non-derivative claims against nondebtors, such as Lummus and Basic. With regard to the two-trust structure, the Court of Appeals remanded the CE Plan to the District Court to determine whether creditors received fair treatment in light of the pre-petition payments made to the CE Settlement Trust participants and the use of stub claims in the voting process. Among other things, the Court of Appeals instructed the lower courts to consider whether payments under the CE Settlement Trust constituted voidable preferences that were inconsistent with the fair distribution scheme of the Bankruptcy Code.

        On December 15, 2004, Combustion Engineering filed a petition seeking a rehearing en banc by the Court of Appeals. Specifically, Combustion Engineering and its immediate parent, Asea Brown Boveri, now merged into Holdings, challenged the holding in the Third Circuit Decision that the Bankruptcy and District Courts did not have "related to" jurisdiction over the non-derivative claims against Lummus and Basic and that Section 105 of the Bankruptcy Code could not be used to extend the channeling injunction to such claims. On January 19, 2005, the Court of Appeals denied the petition for rehearing en banc.

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        Notwithstanding the Third Circuit Decision, the Master Settlement Agreement, which settles the amount of and provides for partial payment on approximately 154,000 asbestos-related claims, remains effective. Early in the Combustion Engineering bankruptcy case, an asbestos claimant commenced an action against the trustee of the CE Settlement Trust and individuals who had received distributions from such trust, asserting that further distributions by the CE Settlement Trust should be enjoined because the transaction that created the CE Settlement Trust was a voidable preference. The Bankruptcy Court ruled that it would not dismiss that action for lack of standing. On October 22, 2004, the trustee of the CE Settlement Trust moved to dismiss the complaint in that action. This matter is pending and no decision has been rendered by the Court.

        Following the Third Circuit Decision, the lower courts assumed jurisdiction over further confirmation proceedings in respect of the CE Plan. On January 27, 2005, the Bankruptcy Court authorized the Future Claimants Representative and the Creditors Committee to file any available bankruptcy-related and similar claims against third parties, including preference claims against certain claimants that did not participate in the CE Settlement Trust, and any potential bankruptcy related claims against us. The Bankruptcy Court further stated that if Combustion Engineering and we cannot agree on modifications to the CE Plan with the Future Claimants Representatives and Creditors Committee, and the representative of Combustion Engineering claimants who opposed the confirmation order, the Bankruptcy Court would appoint an independent representative to prosecute all of the foregoing preference claims and bankruptcy related claims asserted against us. We also entered into a tolling agreement to extend the time period within which bankruptcy related claims against us could be brought.

        Since February 17, 2003, a stay and preliminary injunction have barred the commencement and prosecution of certain asbestos-related claims against Combustion Engineering, Lummus, Basic, certain other ABB group entities and certain other parties, including parties indemnified by us. The barred claims include, among others, claims arising from asbestos exposure caused by Combustion Engineering, Lummus or Basic and claims alleging fraudulent conveyance, successor liability and veil piercing. We do not know the number or nature of claims that would now be pending against the protected entities if those legal measures had not been in place.

Modified CE Plan

        In March 2005, following extensive discussions with certain representatives of various claimants, the Creditors Committee and the Future Claimants Representative, we reached an agreement on certain "settlement points" for modifying the CE Plan with a view to bringing it into conformity with the Third Circuit Decision and for providing a mechanism for resolving finally Lummus' potential asbestos liability.

        The settlement points contemplate the following elements for finally resolving both Combustion Engineering's and Lummus' potential asbestos liability:

•

The modified plan for Combustion Engineering (the "Modified CE Plan") would continue to reflect the CE Plan's fundamental approach of channeling claims against Combustion Engineering to a trust funded, in part, by other entities in the ABB group of companies.



•

Confirmation and effectiveness of the Modified CE Plan would be obtained concurrently with a Chapter 11 Plan for Lummus (the "Lummus Plan"), acceptances to which would be obtained from voting Lummus asbestos claimants prior to Lummus commencing a Chapter 11 case.



•

We would contribute to the Asbestos PI Trust the CE Convertible Note, the ABB Promissory Note, the Excess CE Cash and the CE Settlement Shares and would provide the Related Indemnities and assign the Certain Insurance Amounts, as contemplated by the CE Plan, subject to any modifications that may be agreed.

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•

We would make an additional contribution (the "Additional Contribution") of $232 million. The Additional Contribution will be used as follows: (i) up to $28 million will be used to fund payment of all current and future asbestos claims against Lummus by a trust created under §524(g) of the Bankruptcy Code pursuant to the Lummus Plan; and (ii) the remaining amounts will be used to provide additional funding under the Modified CE Plan to pay CE's asbestos creditors through the Asbestos PI Trust. Under the Modified CE Plan, the Lummus Sale Payments would not be required and the Lummus Note would be replaced by contributions to a separate Lummus §524(g) trust as discussed below.



•

Lummus has retained a person to act as a representative for future Lummus asbestos personal injury claimants (the "Lummus FCR"). The parties to the settlement points have agreed that the Lummus FCR will determine the appropriate funding to pay in full all current and future Lummus asbestos claims. In the event the Lummus FCR concludes that such amount exceeds $28 million, we will increase the amount of our contribution for the benefit of such Lummus claims by the amount in excess of $28 million, up to an additional $5 million. If the Lummus FCR concludes that such amount exceeds $33 million, we will have the option to terminate the settlement with no further obligations under the settlement points.



•

We will directly or indirectly pay up to $8 million in respect of certain approved legal fees in the Chapter 11 case of Combustion Engineering.



•

The Modified CE Plan would provide for a settlement of all pending preference claims and related claims, including any claims against us, our affiliates, and our and their officers, directors and employees, being asserted in the CE case.



•

The scope of the channeling injunction to be issued under the Modified CE Plan would be the same as under the CE Plan, except that non-derivative claims against Basic would not be subject to the injunction.



•

Basic would not be addressed in the Modified CE Plan and would therefore not contribute the Basic Note.



•

The Modified CE Plan would also involve certain other adjustments, including certain changes in the relative amounts to be paid by the CE Asbestos PI Trust to different categories of claimants and changes in the administration of the trust.

        In a status conference on April 5, 2005, the Bankruptcy Court instructed the Company to submit the documentation relating to the Modified CE Plan and the Lummus Plan to the Bankruptcy Court within approximately 60 days. We and various other interested parties are now working to reach agreement on open issues, details relating to the Modified CE Plan and the Lummus Plan and the form and substance of the operative documents and related Bankruptcy Court motions and other pleadings. We cannot be certain when those negotiations will be concluded or whether or on what terms the parties will resolve outstanding issues. The Modified CE Plan and the Lummus Plan will become effective only if different classes of their respective creditors vote in favor of the respective plans. The Modified CE Plan and the Lummus Plan will be subject to the approval of the Bankruptcy and District Courts, as well as to further judicial review if appeals are made. While we believe that the Modified CE Plan and the Lummus Plan are consistent with the Third Circuit Decision and other applicable laws and precedents, we cannot be certain whether the courts will approve the plans, nor can we predict whether the plans will receive the needed creditor votes.

        We do not know whether any plan of reorganization for Combustion Engineering or Lummus will ultimately be confirmed or whether asbestos-related liabilities of any other ABB group entities would be resolved by any such plan. If for any reason a Chapter 11 plan relating to Combustion Engineering is not eventually confirmed, Combustion Engineering could be required to enter a Chapter 7

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proceeding. If for any reason a Chapter 11 plan relating to Lummus is not eventually confirmed, we expect that Lummus' asbestos-related liabilities will have to be resolved through the tort system.

        Because the Third Circuit Decision held that non-derivative claims cannot be subject to the CE Plan's proposed channeling injunction, Basic will not be included in the Modified CE Plan. We expect that Basic's asbestos-related liabilities will have to be resolved through its own bankruptcy or similar U.S. state court liquidation proceeding or through the tort system.

        If any ABB group entities are not included in the protection offered by the channeling injunction entered pursuant to any Combustion Engineering plan that is confirmed, such entities could be required to resolve in the tort system, or otherwise, current and future asbestos-related claims that are asserted against such entities. Such events would be subject to numerous uncertainties, risk and expense.

        If U.S. federal legislation addressing asbestos personal injury claims is passed, which is speculative at this time, such legislation may affect the amount that will be required to resolve the asbestos-related claims against ABB group entities.

Effect on our financial position

        Expenses.    We recorded expenses related to asbestos of $262 million, $142 million and $395 million in loss from discontinued operations, net of tax, and $1 million, $3 million and $25 million in income from continuing operations, net of tax, for 2004, 2003 and 2002, respectively. Loss from discontinued operations, net of tax, for 2004 reflects a charge of $232 million taken in connection with the agreement we reached in March 2005 on the basic terms of the Modified CE Plan, $17 million resulting from the mark-to-market adjustment relating to the CE Settlement Shares, a credit of $6 million resulting from adjustment of the provision for the estimated liability of Basic as described below, and other costs of $19 million. Loss from discontinued operations, net of tax, for 2003 includes a charge of $68 million, net of tax, resulting from the mark-to-market adjustment relating to the CE Settlement Shares, a provision of $41 million, representing the present value of the first two $25 million payments under the ABB Promissory Note, which were previously considered contingent, as well as $33 million of other costs. The 2002 amount reflected our estimate of incremental total costs to be incurred based upon the terms of the CE Plan.

        Cash Payments.    Cash payments, before insurance recoveries, related to Combustion Engineering's asbestos-related claims were $56 million (including $49 million contributed to the CE Settlement Trust, described above), $391 million (including $365 million contributed to the CE Settlement Trust), and $236 million (including $30 million contributed into the CE Settlement Trust), in 2004, 2003 and 2002, respectively. Administration and defense costs were $10 million, $36 million and $32 million in 2004, 2003 and 2002, respectively.

        Cash payments related to asbestos-related claims against Lummus and Basic made through December 31, 2004 were approximately $3 million and $3 million, respectively. Cash payments to resolve asbestos-related claims against entities other than Combustion Engineering, Lummus and Basic have been immaterial to date, totaling less than $1 million in the aggregate. We have not maintained a reserve for the claims pending against entities other than Combustion Engineering, Lummus and Basic.

        Provisions.    At December 31, 2004, 2003 and 2002, we recorded total provisions on a consolidated basis of $1,023 million, $815 million and $1,095 million in respect of asbestos-related claims and defense costs related to Combustion Engineering, Lummus and Basic. Our provisions in continuing operations for asbestos-related liabilities at December 31, 2003 and 2002, now include $2 million and $4 million, respectively, previously classified in liabilities held for sale and in discontinued operations. Based upon the expected implementation of the Modified CE Plan and the Lummus Plan, we recorded provisions of $985 million and $33 million, respectively, at December 31, 2004, in accrued liabilities and

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other. If the Modified CE Plan and Lummus Plan become effective, certain amounts will be reclassified as of the effective date to other long-term liabilities based on the timing of the future cash payments to the Asbestos PI Trust or any similar trust created under the Lummus Plan. Future earnings will be affected by mark-to-market adjustments relating to the CE Settlement Shares through the effective date of the Plan, as well as contingent payments when they become probable of payment. The provisions as of December 31, 2003 and 2002, were based on our obligations under the CE Plan and assumed that the CE Plan would be confirmed and become effective as proposed.

        In light of the decision of the Court of Appeals, we have made a separate provision as of December 31, 2004 with respect to Basic in accordance with Financial Accounting Standard Board Statement No. 5, Accounting for Contingencies, and Financial Accounting Standards Board Interpretation No. 14, Reasonable Estimation of the Amount of a Loss: an interpretation of FASB Statement No. 5. With respect to Basic, we have established a provision of $5 million relating to its asbestos-related liabilities based on analysis of historical claims statistics and related settlement costs and a projection of such claims activity over the next several years.

        Management believes that it is probable that the full amount of the relevant provisions will be required to settle the respective asbestos-related liabilities of Combustion Engineering, Lummus and Basic. We may incur liability greater than the existing provisions, whether in connection with a modified plan of bankruptcy or otherwise, but management does not believe that the amount of any such incremental liability can be reasonably estimated or that there is a better estimate of these liabilities than the amounts that are provided for.

        Our provisions in respect of asbestos-related claims include, as stated above, amounts for each of Combustion Engineering, Lummus and Basic. The assets of Combustion Engineering include amounts receivable of approximately $221 million, $232 million and $241 million at December 31, 2004, 2003 and 2002, respectively, for probable insurance recoveries, which were established with respect to asbestos-related claims.

        The ultimate outcome of our efforts to resolve the asbestos-related personal injury claims against Combustion Engineering and other entities of ours (including any such claims against third parties indemnified by entities of ours) remains uncertain. The related costs may be higher than our provisions reflect and could have a material adverse impact on our consolidated financial position, results of operations and cash flows. In the event the Modified CE Plan or Lummus Plan do not become effective, the ultimate cost for the resolution of asbestos-related personal injury claims against Combustion Engineering and Lummus may be significantly higher and could have a material adverse impact on our consolidated financial position, results of operations and cash flows.

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Item 6.    Directors, Senior Management and Employees

BOARD OF DIRECTORS

        Our board of directors 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 management and representation of ABB. The internal organizational structure and the definition of the areas of responsibility of our board of directors, as well as the information and control instruments vis-à-vis the executive committee, are set forth in the regulations of the board of directors. We have been granted an exception by the Federal Office of Justice of Switzerland (Bundesamt für Justiz) to the rule that a majority of the members of the board of directors of ABB must be citizens of Switzerland with residence in Switzerland according to Article 708 para 1 of the Swiss Code of Obligations.

        Our articles of incorporation stipulate that the board of directors must consist of not fewer than seven and no more than 13 members at any time. Swiss law and our articles of incorporation also provide that each director must be a shareholder of ABB Ltd. Directors are elected for terms of one year by the shareholders in a shareholders' meeting. Members of the board of directors whose terms of office have expired are immediately eligible for re-election. Our articles of incorporation do not provide for the retirement or non-retirement of directors under an age-limit requirement. Our internal regulations provide that a director shall resign at the annual general meeting of shareholders taking place in the year of his 70th birthday.

        The board of directors appoints its Chairman and one or more Vice Chairmen, as well as the persons entrusted with our management and representation, whom the board of directors is also responsible for removing. At present, the position of Vice Chairman is vacant.

        The following table sets forth the names and the years of birth of our directors and their current positions with ABB.

Name	Born	Current Position
Jürgen Dormann	1940	Chairman of the Board
Roger Agnelli	1958	Director
Louis R. Hughes	1949	Director
Hans Ulrich Märki	1946	Director
Michel de Rosen	1951	Director
Michael Treschow	1943	Director
Bernd W. Voss	1939	Director
Jacob Wallenberg	1956	Director

        ABB Ltd became the ultimate holding company of the ABB Group on June 28, 1999. The biographies of Messrs. Dormann and Wallenberg also note the years of service they provided to ABB Asea Brown Boveri Ltd, the former parent company of the ABB Group.

Jürgen Dormann has been the Chairman of ABB's board of directors since November 2001 and served as ABB's President and Chief Executive Officer from September 5, 2002 until December 31, 2004. He has been a member of ABB's board of directors since June 28, 1999. From 1998 to 1999, he served as a member of the board of directors of ABB Asea Brown Boveri Ltd. He is the vice-chairman of the board of directors of sanofi aventis (France). He is a member of the boards of directors of Adecco (Switzerland), IBM (U.S.) and BG Group (U.K., as from June 1, 2005). Mr. Dormann is a German citizen.

Roger Agnelli was elected to ABB's board of directors at the annual general meeting of shareholders on March 12, 2002. He is the President and Chief Executive Officer of Companhia Vale do Rio Doce (Brazil). He is also a member of the board of directors of Duke Energy (U.S.) and Suzano Petroquimica (Brazil, as of April 2005). Mr Agnelli is a full member of the Economic and Social Development Council (CDGS), an advisory council to the President of Brazil, and member of

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the International Investments Council, which advises the President of the Republic of South Africa. He is also President of the Chinese-Brazilian Business Council. Mr. Agnelli is a Brazilian citizen.

Louis R. Hughes was elected to ABB's board of directors at the annual general meeting of shareholders on May 16, 2003. Mr. Hughes is the chairman of the board of directors of Maxager Technology and appointed Chief Executive Officer of GBS Laboratories (both U.S.). He is also a member of the boards of directors of BT Group (U.K.), Sulzer (Switzerland) and Electrolux (Sweden). Mr. Hughes was the president and chief operating officer of Lockheed Martin Corp. in 2000 and was an executive vice president of General Motors from 1992 to 2000. He was also the acting chief executive officer of Wavecrest Laboratories from 2002 to 2003. Mr. Hughes is a United States citizen. As announced on October 28, 2004, Louis R. Hughes has taken a temporary leave of absence from ABB's board of directors to serve the United States government as chief of staff of the Afghanistan Reconstruction Group.

Hans Ulrich Märki was elected to ABB's board of directors at the annual general meeting of shareholders on March 12, 2002. He is chairman of IBM Europe, Middle East and Africa (France) and a member of the board of directors of Mettler-Toledo International (Switzerland). Mr. Märki is a Swiss citizen.

Michel de Rosen was elected to ABB's board of directors at the annual general meeting of shareholders on March 12, 2002. He is the chairman, president and chief executive officer of ViroPharma (U.S.). He is a member of the boards of directors of Ursinus College and Pennsylvania Biotech (both U.S.). He is also a member of the advisory boards of Paul Capital Partners Royalty Fund and the Global Business Coalition on HIV/AIDS (both U.S.). Mr. de Rosen is a French citizen.

Michael Treschow was elected to ABB's board of directors at the annual general meeting of shareholders on May 16, 2003. He is the chairman of the boards of directors of Ericsson, Electrolux and the Confederation of Swedish Enterprise (all Sweden). From 1997 to 2002, he was the president and chief executive officer of Electrolux (Sweden). Prior to 1997, he was the president and chief executive officer of Atlas Copco. Mr. Treschow is a Swedish citizen.

Bernd W. Voss was elected to ABB's board of directors at the annual general meeting of shareholders on March 12, 2002. He is a member of the supervisory board of Dresdner Bank (Germany). He is also a member of the boards of directors of Allianz Leben, Continental, Quelle, Hapag-Lloyd, Wacker Chemie and Osram (all Germany). Mr. Voss is a German citizen.

Jacob Wallenberg has been a member of ABB's board of directors since June 28, 1999. From March 1999 to June 1999, he served as a member of the board of directors of ABB Asea Brown Boveri Ltd. He is the chairman of the board of directors of Investor and W Capital Management (both Sweden). He is vice-chairman of Skandinaviska Enskilda Banken, Atlas Copco and SAS (all Sweden). He is also a member of the boards of directors of the Knut and Alice Wallenberg Foundation, the Nobel Foundation (both Sweden) and the Wharton European Advisory Board (U.S.). Mr. Wallenberg is a Swedish citizen.

SENIOR MANAGEMENT

        Our board of directors has delegated the executive management of ABB to the chief executive officer and the other members of the executive committee. The chief executive officer, and under his direction the other members of the executive committee, are responsible for our overall business and affairs and day-to-day management. The chief executive officer reports to the board regularly, and whenever extraordinary circumstances so require, on the course of our business and financial performance and on all organizational and personnel matters, transactions and other issues relevant to the group.

        Upon proposal by the nomination and compensation committee, the executive committee is appointed and discharged by the board and consists of the chief executive officer, the chief financial officer and the other executive vice presidents.

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        The following table sets forth the names and the years of birth of the members of the executive committee, their current positions with us and the dates of their initial appointment to their current positions.

Name	Born	Current Position	Year of Appointment
Fred Kindle	1959	President and Chief Executive Officer	2005
Michel Demaré	1956	Chief Financial Officer	2005
Dinesh C. Paliwal	1957	Head of Automation Technologies Division	2003
Peter Smits	1951	Head of Power Technologies Division	2003
Gary Steel	1952	Head of Human Resources	2003

Fred Kindle has been our Chief Executive Officer since January 2005, after joining ABB on September 1, 2004. Mr. Kindle is a member of the board of directors of VZ Holding Ltd. (Switzerland). Before joining ABB he has been the chief executive officer of Sulzer (Switzerland). Mr. Kindle has been with the Sulzer Group since 1992. In 1999, he became responsible for Sulzer Industries. In 2001, he became chief executive officer of Sulzer. From 2003 to 2004 he has also been a member of Sulzer's board of directors. Mr. Kindle has dual Liechtenstein and Swiss citizenship.

Michel Demaré joined ABB as Chief Financial Officer on January 1, 2005. He succeeded Peter Voser, who left ABB on September 30, 2004 to become chief financial officer of Royal Dutch/Shell (Netherlands/U.K.). From 2002 until 2004 Mr. Demaré has been vice president and chief financial officer Europe of Baxter International. From 1984 until 2002 he held various positions within Dow Chemical (U.S.), including group finance director for the global polyolefins and elastomers business from 1997 to 2002. Mr. Demaré is a Belgian citizen.

Dinesh C. Paliwal has been the Head of our Automation Technologies division since January 2003. From April 2002 to January 2003, he was our Executive Vice President responsible for our Industries Division. Between January 1, 2001 and March 2002, he was our Executive Vice President responsible for our Process Industries division. From 1999 to 2001, he was responsible for our worldwide activities in the Automation Segment for the paper, printing, metals, mining and cement industries. From 1998 to 1999, he was responsible for our worldwide activities in the Automation Segment for the pulp, paper and printing industries. From 1994 to 1998, he was Vice President responsible for our automation activities in process industries in China and Northeast Asia. From 1990 to 1994, he was Director of Marketing and Sales for our automation activities for the paper industry in Asia. Prior to 1990, he held several positions in sales and project management. Mr. Paliwal has dual Indian and U.S citizenship.

Peter Smits has been the Head of our Power Technologies division since January 2003. From 2001 to January 2003, he was Executive Vice President responsible for the Power Technology Products division. From 1998 to 2001, he was Senior Vice President, Business Area Manager Distribution Transformers, at ABB T&D Ltd. From 1994 to 1998, he was President and Country Manager at Asea Brown Boveri SA, Belgium. From 1990 to 1994, he served as President at Pfleiderer Verkehrstechnik GmbH. From 1988 to 1990, he held the position of Vice-President at ABB Schaltanlagen GmbH and was Business Unit Manager within our High-Voltage Switchgear business area. From 1980 to 1988, he held several positions at Asea Lepper GmbH. Mr. Smits is a German citizen.

Gary Steel was appointed our Head of Human Resources in January 2003. In 2002, he was the Human Resources Director, Group Finance at Shell. Between 1976 and 2002, he held several human resources and employee relations positions at Shell. Mr. Steel is a British citizen.

CORPORATE GOVERNANCE

        We are committed to the highest international standards of corporate governance, and we support 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 ABB shares are listed: the SWX Swiss Exchange, the Stockholm Exchange, the London Stock Exchange, the Frankfurt Stock Exchange and the New York Stock Exchange (where our shares are traded in the form of ADSs).

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        In addition to the provisions of the Swiss Code of Obligations, our principles and rules on corporate governance are laid down in our articles of incorporation, our board regulations, our standards for corporate governance, the charters of our board committees, the board membership guidelines, several internal directives (such as the directive on insider information) and the code on business ethics. It is the duty of our board of directors 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.

        In November 2003, the Securities and Exchange Commission approved changes to the New York Stock Exchange's listing standards related to the corporate governance practices of listed companies. Under these rules, listed foreign private issuers, such as ABB, must disclose any significant ways in which their corporate governance practices differ from those followed by U.S. domestic companies under the New York Stock Exchange listing standards. This disclosure can be found on our web site under www.abb.com/about.

Duties of Directors and Officers

        The directors and officers of a Swiss corporation are bound, as specified in the Swiss Code of Obligations, to perform their duties with all due care, to safeguard the interests of the corporation in good faith and to extend equal treatment to shareholders in like circumstances.

        The Swiss Code of Obligations does not specify what standard of due care is required of the directors of a corporate board. However, it is generally held in Swiss doctrine 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 may not take any actions that may be harmful to the corporation.

Exercise of Powers

        Directors as well as other persons authorized to act on behalf of a Swiss corporation may perform all legal acts on behalf of the corporation which the business purpose as set forth in the articles of incorporation of the corporation, may entail. Pursuant to court practice, such directors and officers can take any action that is not explicitly excluded by the business purpose of the corporation. In so doing, however, the directors and officers must still pursue the duty of due care and the duty of loyalty described above and must extend equal treatment to the corporation's shareholders in like circumstances. Our articles of incorporation do not contain provisions concerning a director's power, in the absence of an independent quorum, to vote on the compensation to themselves or any members of their body.

Conflicts of Interest

        Swiss law does not have a general provision on conflicts of interest and our articles of incorporation do not limit our directors' power to vote on a proposal, arrangement or contract in which the director or officer is materially interested. However, the Swiss Code of Obligations requires directors and officers to safeguard the interests of the corporation and, in this connection, imposes a duty of care and loyalty on directors and officers. This rule is generally understood and so recommended by the Swiss Code of Best Practice for Corporate Governance as disqualifying directors and officers from participating in decisions, other than in the shareholders' meeting, that directly affect them.

Confidentiality

        Confidential information obtained by directors and officers of a Swiss corporation acting in such capacity must be kept confidential during and after their term of office.

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Sanctions

        If directors and officers transact on behalf of the corporation with bona fide third parties in violation of their statutory duties, the transaction is nevertheless valid as long as it is not explicitly excluded by the corporation's business purpose as set forth in its articles of incorporation. Directors and officers acting in violation of their statutory duties—whether transacting with bona fide third parties or performing any other acts on behalf of the company—may, however, become liable to the corporation, its shareholders and its creditors for damages. The liability is joint and several, but the courts may apportion the liability among the directors and officers in accordance with their degree of culpability.

        In addition, Swiss law contains a provision under which payments made to a shareholder or a director or any person(s) associated therewith other than at arm's length must be repaid to the company if the shareholder or director or any person associated therewith was acting in bad faith.

        If the board of directors has lawfully delegated the power to carry out day-to-day management to a different corporate body, e.g., the executive committee, it is not liable for the acts of the members of that different corporate body. Instead, the directors can only be held liable for their failure to properly select, instruct and supervise the members of that different corporate body.

Board Practices

        Board meetings are convened by the chairman or upon request by a director or the chief executive officer. During 2004, five board meetings were held. Written 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 the member time to study the covered matters prior to the meetings. Decisions made at the board meetings are recorded in written minutes of the meetings. Our board membership guidelines require that the board of directors be comprised of a substantial majority of independent directors. Currently all board members, with the exception of Jürgen Dormann are independent, non-executive directors. The board of directors has made this determination in accordance with the Swiss Code of Best Practice and the independence criteria set forth in the corporate governance rules of the New York Stock Exchange. Mr. Dormann held also the position of president and chief executive officer from September 5, 2002 until December 31, 2004 in addition to his ongoing role as chairman.

        In order to address potential conflict of interests, which Jürgen Dormann in his dual role could have experienced, the board created in 2003 the new position of lead director. The additional tasks of Jacob Wallenberg, who was appointed as lead director, were to act as counselor to the chairman and facilitate the dialogue between the members of the board and the chairman. He held special sessions without the chairman's presence where the chairman's role and performance was discussed. The position of lead director ceased to exist as of January 1, 2005, when Fred Kindle took over the position of president and chief executive officer from Jürgen Dormann, who remains chairman of the board of directors.

        Our board of directors has appointed from among its members three board committees, the finance and audit committee, the nomination and compensation committee and the strategy committee, which has recently been dissolved. The duties and objectives of the board committees (except for the strategy committee, which was created in July 2003 and was only a temporary committee) are set forth in charters issued or approved by the board of directors. These committees assist the board in its tasks and report regularly to the board.

        The finance and audit committee oversees the financial reporting processes and accounting practices, evaluates the independence, objectivity and effectiveness of external and internal auditors, reviews audit results, monitors compliance with the laws and regulations governing the preparation of our financial statements and assesses the processes relating to our risk management and internal control systems. The finance and audit committee is required to be composed of three or more independent directors who have a thorough understanding of finance and accounting. The chief

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financial officer and, as determined by the committee's chairman for matters related to their respective functions, the head of internal audit, as well as the external auditors may participate in the finance and audit committee meetings. Mr. Voss is the chairman of the finance and audit committee, and Messrs. Agnelli and Wallenberg are members. The committee met six times in 2004.

        The nomination and compensation committee determines the selection of candidates for the board of directors and its committees, plans for the succession of directors and ensures that newly elected directors receive the appropriate introduction and orientation and that all directors receive adequate continuing education and training to fulfill their obligations. The nomination and compensation committee proposes the remuneration of the members of the executive committee. The nomination and compensation committee is required to be composed of three or more independent directors. Upon invitation by the committee's chairman, the chief executive officer or other members of the group executive committee may participate in the committee meetings, provided that any potential conflict of interest is avoided and confidentiality of the discussions is maintained. Mr. Märki is the chairman of the nomination and compensation committee, and Messrs. de Rosen and Wallenberg are members. The committee met seven times in 2004.

        During a review of the group's medium-term strategy in 2003 and 2004, the board's strategy committee worked in cooperation with the ABB Group executive committee to discuss proposals for the group's future focus and direction. The committee completed its work in 2004 and was then dissolved. Mr. Hughes was the chairman of the strategy committee, and Messrs. Märki and Treschow were members. Most meetings of the strategy committee were also attended by all of the members of the group executive committee. The committee met four times in 2004.

COMPENSATION

Board of Directors

        For the period from the annual general meeting of shareholders in 2004 to the annual general meeting of shareholders in 2005, the compensation of the board of directors was kept at the previous year's level, which is:

•

Chairman: CHF 1,000,000 (approximately $876,271 at December 31, 2004);



•

Member: CHF 250,000 (approximately $219,068 at December 31, 2004);



•

Committee chairman: CHF 50,000 (approximately $43,814 at December 31, 2004); and



•

Committee member: CHF 20,000 (approximately $17,525 at December 31, 2004).

        Payments to board members are made in May and November in advance of each term.

        Board members receive at least 50 percent (and may elect to receive a higher ratio) of their net compensation (i.e., after deduction of social security costs and withholding tax, where applicable), in ABB shares, which they are entitled to receive at a discount of 10 percent of the average share trading price during a 30-day reference period. During the term of board membership, the ABB shares are kept in a blocked account and may be disposed of only after the respective person has left the board of directors. The gross compensation paid to board members in shares and cash with respect to 2004 amounted to CHF 2,870,000 ($2,514,897 at December 31, 2004).

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        Our current board members received the following compensation with respect to 2004 (the calculation of the number of shares and the cash amount varies depending on whether the person is subject to taxation at source):

	Total Annual Compensation (gross)	Amount received in cash (net)	Number of shares received
	CHF
Jürgen Dormann(1)	1,000,000	—	93,382
Roger Agnelli	270,000	—	27,630
Louis R. Hughes(2)	150,000	52,202	7,848
Hans Ulrich Märki	320,000	—	44,922
Michel de Rosen	270,000	93,901	13,815
Michael Treschow	270,000	93,901	13,815
Bernd W. Voss	300,000	—	30,832
Jacob Wallenberg	290,000	—	29,688
Total	2,870,000	240,004	261,932

⁽¹⁾

Jürgen Dormann received this compensation in addition to his compensation as chief executive officer (see below).

⁽²⁾

Louis R. Hughes received compensation only for the first semester as thereafter he took a temporary leave of absence (see above).

        With the exception of Jürgen Dormann for the period during which he served as both chairman of the board and chief executive officer, board members do not receive pension benefits and are not eligible to participate in any of our incentive programs.

        No payments were made to former board members in 2004.

Executive Committee

        Members of the group executive committee receive annual base compensation. They are further eligible for annual bonus compensation, determined in accordance with the principles explained below.

        In addition to receiving annual base and bonus compensation, members of the group executive committee may participate in the newly created employee share acquisition plan and performance incentive share plan. Some members of the group executive committee have participated in the earlier launches of our management incentive plan (MIP). Group executive committee members receive customary additional benefits such as a company car and health insurance compensation and contributions to children education in some cases (see table below).

        The table below shows the gross payments (i.e. compensation before deduction of employee social insurance and pension contributions) that were made to the members of the group executive committee with respect to 2004, as well as the employer's part of the ordinary pension contributions. All members of the group executive committee are insured in the ABB Pension Fund, the ABB Supplementary Insurance Plan and the Tödi Foundation (the regulations are available under www.abbvorsorge.ch), with the exception of Dinesh Paliwal, who is insured under the U.S. pension plan. The table also shows the numbers of conditionally granted shares under the performance incentive share plan (see "Performance Incentive Share Plan"). The exact number of shares to be received will be known in March 2006. In addition to the figures provided in the table below, Peter Smits and Gary Steel, but none of the other members of the group executive committee, participate in the employee share acquisition plan (see

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details of the plan further below) with the maximum annual savings amount of CHF 9,000 ($7,886 at December 31, 2004).

	Currency	Salary	Bonus(1)	Additional compensation	Total annual compensation(8)	Employer's pension contributions	No. of shares granted(2)	Costs of company car	Costs of health insurance	Costs of Children education
Jürgen Dormann(3)	CHF	3,372,508	1,046,250	0	4,418,758	1,352,544	0	31,440	3,926	0
Fred Kindle(4)	CHF	433,336	400,000	200,000	1,033,336	99,607	130,480	5,814	1,787	0
Dinesh Paliwal(5)	USD	654,167	557,125	800,000	2,011,292	370,970	110,475	24,000	22,365	114,905
Peter Smits	CHF	862,500	743,850	0	1,606,350	237,407	113,282	41,738	7,925	0
Gary Steel	CHF	670,840	585,675	0	1,256,515	170,134	89,193	31,475	8,093	64,700
Peter Voser(6)	CHF	600,837	498,000	0	1,098,837	132,997	0	30,740	5,269	0
Total(7)	CHF	6,686,556	3,909,566	1,112,960	11,709,082	2,416,039	443,430	168,596	52,523	195,830

⁽¹⁾

The table above provides compensation amounts with respect to 2004 on an accrual basis. Bonuses with respect to 2004 were paid in 2005.

⁽²⁾

All such shares were granted under the Performance Incentive Plan. The shares will only vest if certain targets are met.

⁽³⁾

This compensation as chief executive officer is in addition to the compensation received as chairman of the board.

⁽⁴⁾

As Fred Kindle joined ABB on September 1, 2004, this table shows his salary from September 1, 2004 until December 31, 2004. The additional compensation was for share options due to change of employment. The number of shares conditionally granted under the Performance Incentive Share Plan is pro-rated.

⁽⁵⁾

As Dinesh Paliwal has a U.S. employment contract, he received his salary in U.S. dollars. His pension contributions are based on the U.S. pension plan. The additional compensation of USD 800,000 was paid in January 2005 as a stay-on bonus agreed by the previous management for staying until December 31, 2004.

⁽⁶⁾

As Peter Voser left ABB on September 30, 2004, this table shows his salary from January 1, 2004 until September 30, 2004. The bonus of CHF 498,000 is a pro-rated performance bonus for 2004.

⁽⁷⁾

For the purpose of calculating the total, the U.S. dollar amounts relating to Dinesh Paliwal have been converted into Swiss francs using the noon buying rate for Swiss francs on December 31, 2004 ($1.00 = CHF 1.1412).

⁽⁸⁾

Excluding Employer's pension contributions, costs of the company car, costs of health insurance, contributions to children education and the number of shares conditionally granted.

Bonus determination

        In 2003, ABB introduced a structure for aligning the performance expectations of its senior managers.

        Group executive committee members, corporate staff and country managers of the 19 largest countries receive targets and are measured on ABB Group results, rather than on the basis of individual businesses. Business area managers and local country divisional managers receive targets and are measured on ABB Group results (60 percent) and on their business area or divisional results (40 percent). At least 20 percent of this "scorecard" must be made up of qualitative measurements relating, for example, to customers, employees or an issue of focus for the ABB Group.

        In addition to this group of senior managers, all other participating managers are measured with a minimum of 30 percent on ABB Group results. Resulting bonuses are paid in March each year after full-year results are announced. In applying the scorecard principles, group executive committee members have a maximum bonus opportunity of 100 percent of their base salary.

Employee participation programs

        In order to align its employees' interests with the business goals and financial results of the company, we operate a number of participation programs, linked to ABB's shares, which are described below.

Employee share acquisition plan (ESAP)

        To incentivize employees, we granted stock options under an Employee Share Acquisition Plan (ESAP Plan) in November 2004. In the initial launch of the ESAP Plan, employees in eleven countries, including the United States, were invited to participate. The ESAP Plan is an employee stock option plan with a savings feature. Employees save over a twelve-month savings period, by way of monthly salary deductions. The maximum monthly savings amount is the lower of 10 percent of gross monthly salary or the local currency equivalent of CHF 750. At the end of the savings period, employees choose whether to exercise their stock options using their savings plus interest to buy ABB Ltd shares (American Depositary Shares (ADS) in the case of employees in the United States—each ADS

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representing one registered share of the Company) at the exercise price set at the grant date, or have their savings returned with interest. The savings are accumulated in a bank account held by a third party trustee on behalf of the participants and earn interest.

        The maximum number of shares that each employee can purchase has been determined based on the exercise price and the aggregate savings for the twelve-month period, increased by 10 percent to allow for currency fluctuations. If, at the exercise date, the balance of savings plus interest exceeds the maximum amount of cash the employee must pay to fully exercise his stock options, the excess funds will be returned to the employee. If the balance of savings and interest is insufficient to permit the employee to fully exercise his stock options, the employee has the choice but not the obligation, to make an additional payment so that the employee may fully exercise his stock options.

        If an employee ceases to be employed by us, the accumulated savings as of the date of cessation of employment will be returned to the employee and the employee's right to exercise his stock options will be forfeited. Employees can withdraw from the ESAP Plan at any time during the savings period and will be entitled to a refund of their accumulated savings.

        The exercise price per share and ADS of CHF 6.95 and $5.90, respectively, was determined using the respective closing price of the ABB Ltd share on SWX Swiss Exchange (virt-x) and ADS on the New York Stock Exchange on November 9, 2004, the grant date. We granted stock options, such that, if fully exercised, we would issue 7,548,360 registered shares (including shares represented by ADS). The aggregate fair value of the awards at the date of grant was $5 million, assuming zero percent dividend yield, expected volatility of 28.25 percent, a risk-free interest rate of 0.97 percent and a life of one year from the grant date. Forfeitures since the date of the grant have been insignificant. See Note 22 to the Consolidated Financial Statements for additional information regarding the Employee Share Acquisition Plan.

Management Incentive Plan (MIP)

        We have a management incentive plan under which approximately 1,200 key employees received warrants and warrant appreciation rights for no consideration over the course of eight launches from 1998 to 2004. The warrants are exercisable for shares at a predetermined price, not less than the fair market value as of the date of grant. Participants may also sell the warrants rather than exercise the right to purchase shares. Equivalent warrants are listed on the SWX Swiss Exchange, which facilitates valuation and transferability of warrants granted under the management incentive plan.

        Each warrant appreciation right entitles the holder to an amount in cash equal to the market price of one equivalent warrant on the SWX Swiss Exchange on the date of exercise of the warrant appreciation right. Warrant appreciation rights are not transferable. Participants may exercise or sell warrants or exercise warrant appreciation rights only during the 30 days immediately following publication of our interim or annual results. No exercise or sale is permitted until after the vesting period, which is three years from date of grant, although vesting restrictions can be waived in certain circumstances such as death or disability. All warrants and warrant appreciation rights expire six years from the date of grant.

        As of March 31, 2005, the warrants outstanding represented the rights to acquire 21,894,263 of our shares (representing less than 2 percent of our total outstanding shares), including the right of the current members of our executive committee to acquire an aggregate of 740,330 shares. Also on that date, the warrant appreciation rights represented the rights to receive the cash equivalent to the market price of 131,030,020 warrants, including the right of the current members of our executive committee to receive the cash equivalent to the market price of 2,350,000 warrants. Our obligations under the management incentive plan are covered by contingent share capital. See Note 22 to the Consolidated Financial Statements for additional information regarding the management incentive plan.

        The amounts of warrants outstanding include those instruments held by employees of the former ABB ALSTOM POWER joint venture, a discontinued operation. Under the terms and conditions of the management incentive program, employees of the former ABB ALSTOM POWER joint venture retain their entitlements in the management incentive plan.

        As of March 31, 2005, 55,230,560 warrants representing the right to purchase 13,923,413 shares (representing less than 1 percent of our total outstanding shares) were exercisable and 80,540,520 warrant appreciation rights were exercisable.

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        The following table sets forth the number of warrants outstanding under the management incentive plan as of March 31, 2005.

Launch (Year)	Warrants Outstanding	Exercise Ratio (Warrants: Shares)	Number of Shares Underlying Warrants	Exercise Price (CHF)	Expiration Date
3 (1999)	4,648,060(1)	1:0.2521	1,171,758(1)	29.75	06/10/05
4 (1999)	14,565,000(1)	1:0.2521	3,671,781(1)	32.73	11/11/05
5 (2000)	19,630,000(1)	1:0.2521	4,948,648(1)	42.05	06/13/06
6 (2001)	16,387,500(1)	1:0.2521	4,131,226(1)	13.49	12/10/07
7 (2003)	25,379,250	1:0.2000	5,075,850	7.00	12/08/09
8 (2004)	14,475,000	1:0.2000	2,895,000	7.50	12/13/10

⁽¹⁾

All of the warrants from Launches 3, 4, 5 and 6, representing the right to purchase an aggregate of 13,923,413 shares, are currently exercisable.

        The following table sets forth the number of warrant appreciation rights outstanding under the management incentive plan as of March 31, 2005.

Launch (Year)	Warrant Appreciation Rights Outstanding(1)	Expiration Date
3 (1999)	345,520	06/09/05
4 (1999)	16,700,000	11/10/05
5 (2000)	30,335,000	06/12/06
6 (2001)	33,160,000	12/09/07
7 (2003)	19,999,500	12/07/09
8 (2004)	30,490,000	12/13/10

⁽¹⁾

With respect to each launch, the warrant appreciation right represents a future right to receive the cash equivalent of the market price of a warrant issued in the same launch year.

Performance incentive share plan

        In December 2004, we introduced a performance incentive share plan (Performance Plan) for members of our Group executive committee (EC Members). EC Members did not participate in the management incentive plan in 2004.

        The Performance Plan involves annual conditional grants of ABB Ltd shares (or ADSs where deemed appropriate by the Nomination and Compensation Committee). The number of shares conditionally granted is dependent upon the base salary of the EC Member. The actual number of shares that the participants will receive free of charge at a future date is dependent on 1) the performance of ABB Ltd shares during a defined period (Evaluation Period) compared to those of a selected peer group of publicly-listed multinational companies and 2) the term of service of the respective EC Member in that capacity during the Evaluation Period. The actual number of shares received after the Evaluation Period cannot exceed 100 percent of the conditional grant.

        The Evaluation Period of the initial launch was defined as the period from March 15, 2004, to March 15, 2006. The reference price of CHF 7.68 for the purpose of comparison with the peers was calculated as the average of the closing prices of the ABB Ltd share on SWX Swiss Exchange (virt-x) over the 20 trading days preceding March 15, 2004.

        Our performance compared to our peers over the Evaluation Period will be measured as the sum, in percentage terms, of the average percentage price development of the ABB share price over the Evaluation Period and an average annual dividend yield percentage (Our Performance).

        In order for shares to vest, Our Performance over the Evaluation Period must be positive and equal to or better than half of the defined peers. The actual number of shares to be delivered will be

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dependent on our ranking in comparison with the defined peers. The full amount of the conditional grant will vest when Our Performance is better than three-quarters of the defined peers.

        If an EC Member gives notice of resignation or, under certain circumstances is given notice of termination, and the vesting period has not expired, then the right to shares is forfeited. In the event of death or disability during the vesting period, the conditional grant size for that participant is reduced pro rata based on the remaining vesting period. An evaluation of the Company's Performance for the Evaluation Period up to the date of death or disability is made to establish the number of shares that vest. If a Performance Plan participant ceases to be an EC Member for reasons other than described above, the conditional grant size is reduced pro rata based on the portion of the vesting period remaining when the participant ceases to be an EC Member. In respect of a Performance Plan grant for which the vesting period has not expired, the Nomination and Compensation Committee can invite a new EC Member to receive a conditional grant, adjusted to reflect the shorter service period.

        In 2004, 443,430 shares were conditionally granted to EC Members. In January 2005, a further 59,001 shares were conditionally granted under the 2004 launch to Michel Demaré as a new EC Member. See Note 22 to the Consolidated Financial Statements for additional information regarding the Performance Incentive Share Plan.

Compensation to former members of the group executive committee

        In 2004, we made a total payment of CHF 1,454,722 ($1,274,730 at December 31, 2004) gross to two former members of the group executive committee who departed before the calendar year 2004, in fulfillment of contractual pension commitments (whereof CHF 589,592 ($516,642 at December 31, 2004) was made in January 2004, as already reported in the 2003 annual report on Form 20-F).

Employment Contracts

        None of our board members or executive committee members benefits from a "golden parachute" clause which would become effective upon a change of control. Employment contracts normally contain notice periods of 12 months for executive committee members, during which they are entitled to salaries and bonuses. No director has a contract with us providing for further benefits upon termination of his board membership, other than pursuant to applicable employment agreements in case of simultaneous termination of their employment.

Additional fees and remuneration

        Other than as disclosed herein, none of the members of our board of directors, our group executive committee, or persons closely linked to any of them received any additional fees and remunerations for services rendered to us. A closely linked person includes a spouse, children below the age of eighteen, legal or natural person acting as a fiduciary and legal entities controlled by a member of the board of directors or the executive committee.

Loans and guarantees granted to the board of directors or group executive committee.

        We have not granted any loans or guarantees to our board members or members of our group executive committee.

SHARE OWNERSHIP

        Under our management incentive plan, certain members of the executive committee have received warrants and warrant appreciation rights in the years 1998 to 2003, although there were no grants to members of the executive committee in 2002 and 2004. For details of the various warrant launches please see "Item 6. Directors, Senior Management and Employees Management Incentive Plan."

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        As of March 31, 2005 the current members of the board of directors and executive committee held the following numbers of shares (or ADSs representing such shares), warrants and warrant appreciation rights:

			Number of Warrants and Warrant Appreciation Rights Granted under Management Incentive Plan
	Number of Shares	Number of Shares granted(2)	Launch Year 1999	Launch Year 2000	Launch Year 2001	Launch Year 2003
Jürgen Dormann	673,797	—	—	—	—	1,000,000
Roger Agnelli	98,243	—	—	—	—	—
Louis R. Hughes	44,504	—	—	—	—	—
Hans Ulrich Märki	240,499	—	—	—	—	—
Michel de Rosen	68,843	—	—	—	—	—
Michael Treschow	51,898	—	—	—	—	—
Bernd W. Voss	136,970	—	—	—	—	—
Jacob Wallenberg	124,017	—	—	—	—	—
Fred Kindle	2,500	130,480
Dinesh Paliwal(1)	110,000	110,475	100,000	250,000	1,000,000	1,000,000
Peter Smits	51,000	113,282	100,000	250,000	1,000,000	1,000,000
Gary Steel	—	89,193	—	—	—	1,000,000
Michel Demaré(1)	500	59,001	—	—	—	—
Total	1,602,771	502,431	200,000	500,000	2,000,000	4,000,000

⁽¹⁾

Shares held jointly with his wife.

⁽²⁾

All such shares were granted under the Performance Incentive Plan. The shares will only vest if certain targets are met.

        The current members of our board of directors and executive committee owned less than 1 percent of our total shares outstanding as of March 31, 2005.

        Other than as stated in the table above, no person closely linked to any member of the executive committee holds any shares of ABB or options in ABB shares. A closely linked person includes a spouse, children below the age of eighteen, legal or natural person acting as a fiduciary and legal entities controlled by a member of the board of directors or the executive committee.

        Share amounts provided in this section do not include the shares beneficially owned by Investor AB, of which Mr. Wallenberg is chairman. See "Item 7. Major Shareholders and Related Party Transactions—Major Shareholders."

EMPLOYEES

        As of April 30, 2005, we employed approximately 102,100 people. A breakdown of our employees by geographic region for the years ended December 31, 2004, 2003 and 2002, is as follows:

	At December 31,
Region
	2004	2003	2002
Europe	60,200	70,500	89,200
The Americas	16,300	19,000	23,700
Asia	16,500	15,700	15,900
Middle East and Africa	9,500	11,300	10,300
Total	102,500	116,500	139,100

        The proportion of our employees that are represented by labor unions or are the subject of collective bargaining agreements varies based on the labor practices of each country in which we operate. We estimate that approximately 63 percent of all ABB Group employees are covered by collective bargaining agreements. We believe that our employee relations are good.

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Item 7.    Major Shareholders and Related Party Transactions

MAJOR SHAREHOLDERS

        To the best of our knowledge, as of May 23, 2005, the following persons held 5 percent or more of our total current issued share capital:

Name	Number of Shares Owned	Total Percentage of Share Capital
Investor AB(1)(2)	181,975,142	8.8	%
FMR Corp.(3)	152,535,942	7.4	%

⁽¹⁾

Mr. Jacob Wallenberg, a member of our board of directors, is the chairman of Investor AB. The number of shares indicated above does not include 124,017 shares owned by Mr. Wallenberg as an individual and earned as compensation for services as a member of our board of directors. See "Item 6. Directors, Senior Management and Employees—Compensation."

⁽²⁾

According to a Schedule 13D filed with the U.S. Securities and Exchange Commission on November 22, 2002, Investor AB first acquired in excess of 5 percent of our total share capital on November 4, 2002, when it had beneficial ownership of 120,067,731 of our registered shares, which at that time constituted 10.01 percent of our total share capital. On March 8, 2005, Investor AB amended its Schedule 13D, stating that it had beneficial ownership of 187,374,142 registered shares, a reduction in its holdings from the former number of 204,115,142 registered shares. Based on information from our share register, Investor AB subsequently further reduced its holdings to 181,975,142 shares.

⁽³⁾

In its notice to us, FMR Corp. indicated that as of April 7, 2005, the number of shares held or deemed to be held by FMR Corp. and Fidelity International Limited and their respective direct and indirect subsidiaries together was 152,535,942 shares. To our knowledge, neither FMR Corp. or Fidelity International Limited has filed a Schedule 13D or other statement with the U.S. Securities and Exchange Commission concerning its beneficial ownership in our registered shares, and we have not been able to ascertain whether FMR Corp. beneficially owns 5% or more of our outstanding registered shares pursuant to the rules of the Securities Exchange Act of 1934, as amended.

        On March 19, 2003, pursuant to the rules of the Federal Act on Stock Exchanges and Securities Trading (the "Swiss Stock Exchange Act"), the Capital Group International, Inc. and certain of its affiliates announced that, as at March 11, 2003, it held a total of 64,043,388 of our registered shares, which at that time constituted 5.33 percent of our total share capital. On July 30, 2003, Capital Group International, Inc. reported pursuant to the rules of the Swiss Stock Exchange Act that as at July 22, 2003, it held a total of 59,978,124 of our registered shares, which at the time constituted less than 5 percent of our total share capital. On December 1, 2003, Capital Group International, Inc. and certain of its affiliates filed a Schedule 13D with the U.S. Securities and Exchange Commission, stating that as at November 21, 2003, these shareholders beneficially owned 84,099,190 of our registered shares, which at the time constituted 6.8 percent of our total share capital. On February 13, 2004, these shareholders amended their Schedule 13D, stating that as at December 31, 2003, Capital Group International, Inc. and certain of its affiliates held 133,888,830 of our registered shares, which at the time constituted 6.5 percent of our total share capital. On April 30, 2004, pursuant to the rules of the Swiss Stock Exchange Act, these shareholders announced that as at April 23, 2004, they owned less than five percent of our registered shares. On February 14, 2005, Capital Group International, Inc. and certain of its affiliates amended their Schedule 13D, stating that at December 31, 2004, these shareholders beneficially owned 184,350 registered shares, which at the time constituted less than 1 percent of our total share capital.

        Under our articles of incorporation, each registered share represents one vote. Major shareholders do not have different voting rights.

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        To our knowledge, we are not directly or indirectly owned or controlled by any government or by any other corporation or person.

        Under the Swiss Stock Exchange Act, shareholders and groups of shareholders acting in concert who reach, exceed or fall below the thresholds of 5 percent, 10 percent, 20 percent, 33¹/3 percent, 50 percent or 66²/3 percent of the voting rights of a Swiss listed corporation must notify the corporation and the exchange(s) in Switzerland on which such shares are listed of such holdings in writing within four trading days, whether or not the voting rights can be exercised. Following receipt of such a notification, the corporation must inform the public within two trading days.

        An additional disclosure requirement exists under the Swiss Federal Code of Obligations, according to which we must disclose individual shareholders and groups of shareholders and their shareholdings if they hold more than 5 percent of all voting rights and we know or have reason to know of such major shareholders. Such disclosures must be made once a year in the notes to the financial statements as published in our annual report.

        At April 14, 2005, we had approximately 288,000 shareholders. Approximately 30,000 were U.S. holders, of which approximately 700 were record holders. Based on the share register, U.S. holders (including holders of ADSs) held approximately 6 percent of the total number of shares issued, including treasury shares, at that date.

RELATED PARTY TRANSACTIONS

        In the normal course of our industrial activities, we sell products and derive certain other revenues from companies in which we hold an equity interest. The revenues derived from these transactions are not material for ABB Ltd. In addition, in the normal course of our industrial activities, we purchase products from companies in which we hold an equity interest. The amounts involved in these transactions are not material for ABB Ltd. Also, in the normal course of our industrial activities, 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.

        We have participations in joint ventures and affiliated companies, which are accounted for using the equity method. Many of these entities have been established to perform specific functions, such as constructing, operating and maintaining a power plant. In addition to our investments, we may provide products to specific projects, may act as contractor of such projects or may operate the finished products. We may also grant lines of credit to these entities or for specific projects and guarantee their obligations, as discussed under the section entitled "Off-balance sheet arrangements" above. These joint ventures, affiliated companies or project-specific entities generally receive revenues either from the sale of the final product or from selling the output generated by the product. The revenue usually is defined by a long-term contract with the end user of the output.

        Our risk with respect to these entities is substantially limited to the carrying value of the companies on our Consolidated Balance Sheets. The carrying value for the equity accounted companies at December 31, 2004 and 2003, was $596 million and $642 million, respectively.

        Our 2004 and 2003 Consolidated Financial Statements include the following aggregate amounts related to transactions with equity accounted investees and other related parties, including related party transactions, that are recorded in loss from discontinued operations, net of tax, and assets and liabilities held for sale and in discontinued operations:

	Year ended December 31,
	2004		2003
	(U.S. dollars in millions)
Revenues	$	57	$	99
Receivables		11		105
Other current assets		13		23
Financing receivables (non-current)		45		22
Payables		1		6
Other current liabilities		1		4
Short-term borrowings		18		32
Non-current liabilities		4		2
Long-term borrowings	$	—	$	48

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        In December 2001, we entered into, and, in April 2002, we amended and restated, a $3 billion 364 day revolving credit facility. Skandinaviska Enskilda Banken ("SEB") was one of the lenders under the credit facility with a $155 million commitment representing approximately 5 percent of the total commitment available to us under the credit facility. In December 2002, we replaced that credit facility with a $1.5 billion 364 day revolving credit facility. SEB was also a lender under this credit facility, with a $145 million commitment, representing approximately 9.6 percent of the total commitment available to us. In addition, Dresdner Bank Luxembourg S.A. was a lender under the $1.5 billion credit facility, with a $97 million commitment, representing approximately 6.5 percent of the total commitment available to us. We repaid and cancelled the $1.5 billion bank facility in December 2003. On November 17, 2003, we entered into a new unsecured syndicated $1 billion three year revolving credit facility, which became available in December 2003 after the fulfillment of certain conditions including the repayment and cancellation of the former $1.5 billion facility. Each of SEB and Dresdner Bank Luxembourg S.A. has committed to $70.8 million out of the $1 billion total. Jacob Wallenberg, a member of our board of directors, is the vice-chairman of SEB and Bernd W. Voss, a member of our board of directors, is a member of the supervisory board of Dresdner Bank AG.

        We consider our relationships with SEB and Dresdner Bank to be among our primary banking relationships. In addition to participating in the credit facilities described above, each of these banks has from time to time provided commercial banking, lending, investment banking and financial advisory services to us and our affiliates in the ordinary course of business. They have received customary fees and/or commissions for such services. We expect to continue to conduct transactions with them in the future on an arm's length basis.

        In June 2003, we entered into a 10 year global framework agreement with International Business Machines Corporation ("IBM") to outsource our information systems infrastructure services to IBM. This global framework agreement forms the basis for country agreements entered into with IBM in 15 countries (status as of December 31, 2004) in Europe, North America and our headquarters representing a significant portion of our information systems infrastructure. The agreement involved the transfer to IBM of 800 of our employees, in addition to the 380 employees transferred under pilot programs prior to 2003. Our total expenditure in respect of the agreement will amount to approximately $1.7 billion over 10 years, based on the current level of usage of the services. While the agreement was negotiated and transacted at arm's length with IBM, it should be noted that Jürgen Dormann, our chairman (who at the time also served as our president and chief executive officer), was a member of the board of directors of IBM until April 29, 2003, and has again been appointed member of IBM's board of directors as of February 22, 2005. Hans Ulrich Märki, a member of our board of directors, is chairman of IBM Europe, Middle East and Africa.

        During 2004 and during the first four months of 2005, we were party to several contracts with Companhia Vale do Rio Doce (CVRD), a Brazilian company with operations in mining, logistics (railways and ports) and power generation, and its subsidiaries. The largest contracts were for engineering services and the supply of electrical equipment for CVRD's pellets plant in the North of Brazil with a value of approximately $4.6 million. There are also various purchase orders for spare parts and machinery in general. The total value of such contracts is approximately $17 million. Roger Agnelli, a member of our board of directors, is president and chief executive officer of CVRD.

        We are a supplier of transmission and distribution equipment to Duke Power. In 2004, we supplied turnkey installation support for both capital improvements and operation and maintenance projects. We recognized revenues in 2004 from Duke Power of $10 million, with a turnkey circuit breaker replacement order representing $3 million of that total. Roger Agnelli, a member of our board of directors, is a member of the board of directors of Duke Energy, the parent corporation of Duke Power.

        In February 2004, we completed the sale of Etavis AG, our Building Systems business located in Switzerland, but retained a 10 percent ownership interest. In connection with this transaction, Etavis AG and our wholly owned subsidiary ABB Switzerland Ltd entered into a loan agreement, pursuant to

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which we have extended a loan in the amount of CHF 1,858,974 to Etavis AG. This loan bears an interest at an annual rate of 3.5 percent. The largest amount of this loan outstanding during the period covered by this report was CHF 1,909,941 (or $1,673,625) as at December 31, 2004. As of April 27, 2005, the outstanding amount of this loan was CHF 1,909,941. Additionally, under the terms of the sale agreement, ABB Switzerland Ltd and our other affiliates in Switzerland are obligated to continue using Etavis AG as their preferred installations service provider until September 2005. In addition, we have agreed to use our best efforts to grant Etavis AG "most-favored nation" treatment for our new building technology products in Switzerland until March 2006.

        There are no cross-shareholdings in excess of 5 percent of the share capital or the voting rights between ABB and another company.

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Item 8. Financial Information

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

        See "Item 18. Financial Statements" for a list of financial statements contained in this report.

LEGAL PROCEEDINGS

        We are involved in legal proceedings from time to time incidental to the ordinary conduct of our business. These proceedings principally involve matters relating to warranties, personal injury, damage to property, environmental liabilities and intellectual property rights.

        ABB Barranquilla Inc. ("ABB Barranquilla"), a subsidiary of our ABB Equity Ventures Inc. ("ABB Equity Ventures") subsidiary, is an equity investor in Termobarranquilla S.A., Empresa de Servicios Publicos ("TEBSA"), which owns a Colombian independent power generation project known as Termobarranquilla. One of the other shareholders of TEBSA is Corporación Electrica de la Costa Atlántica ("CORELCA"), a government-owned Colombian electric utility. CORELCA also purchases the electricity produced from the Termobarranquilla project. In addition to our equity investment, our former power generation business was EPC contractor for Termobarranquilla. The project was awarded to us and another company, as joint bidders, after a competitive bidding process in 1994. The co-bidder manages the operation and maintenance of the facility. We entered into certain side agreements with the co-bidder for a sharing and reallocation of a portion of the amounts paid to us and to the co-bidder under the EPC contracts and the operation and maintenance contract. These side agreements were not disclosed at the time they were entered into to TEBSA or CORELCA. They also were not disclosed to the lenders who provided financing to TEBSA for the project, including U.S. Overseas Private Investment Corporation and U.S. Export Import Bank, at the time of the closing of such financing, as required pursuant to the lending documents.

        On June 28, 2002, ABB Barranquilla, ABB Equity Ventures, the co-bidder, TEBSA and CORELCA settled all claims and potential claims by TEBSA and CORELCA arising out of the entry into or performance of the side agreements. CORELCA and TEBSA released and discharged ABB and its affiliates from any claims that TEBSA and CORELCA had, may have or may thereafter claim to have, arising on or before June 28, 2002 (the effective date of the settlement) and whether or not previously asserted, which in any way may arise out of or relate to the entry into or the performance of any of the side agreements. As consideration, we terminated the side agreements, paid $13 million to CORELCA, and reimbursed CORELCA for its legal expenses. We also agreed to indemnify (i) TEBSA for any and all penalties, fines and interest, if any, incurred by TEBSA arising out of or in connection with the entry into or performance of the side agreements and (ii) CORELCA for liabilities, costs or expenses related to certain taxes payable by CORELCA as a result of the settlement. On June 28, 2002, TEBSA's project lenders consented to the terms of the settlement and waived all defaults under the project lending documents arising out of the entry into or performance of the side agreements. As consideration for the lenders' consent and waiver, ABB Switzerland Holding Ltd. and the co-bidder agreed to indemnify the project lenders from and against (i) any investigation, litigation or proceeding related to the entry into or performance of the side agreements and (ii) any other exposure as a consequence of, or which might be asserted against any of the project lenders by virtue of, the failure of ABB or the co-bidder to disclose the side agreements. The indemnification obligation is joint but not several and is limited to the credit exposure of the project lenders. On December 31, 2004, the outstanding balance owed by TEBSA to the project lenders was approximately $160.5 million.

        On February 3, 2003, ABB Ltd, ABB Holdings Inc. and ABB Equity Ventures entered into a compliance agreement with U.S. Export-Import Bank. The compliance agreement, among other things, requires us to adopt and maintain additional compliance procedures and allow U.S. Export-Import Bank to audit our compliance.

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        In response to information provided by our employees, during 2002 and 2003 we undertook an investigation of potentially improper business conduct within our Oil, Gas and Petrochemical division. In such internal investigations, we uncovered a limited number of improper payments by some of our employees and agents in the upstream business in Africa, Central Asia, and South America, which we have voluntarily disclosed to the U.S. Department of Justice and the U.S. Securities and Exchange Commission. The payments, which violated our internal policies on business ethics, were made in order to obtain from local officials confidential information and commercial advantages, including with respect to contracts on which we were bidding. For further information on the sale of the upstream part of the Oil, Gas and Petrochemicals business, see "Item 5. Operating and Financial Review and Prospects—Acquisitions, Investments and Divestitures—Divestitures of businesses, joint ventures and affiliated companies—Divestitures in 2004" and "Item 10. Additional Information—Material Contracts—Sale Agreement for Part of the Oil, Gas and Petrochemicals Business."

        Subsequently, ABB Vetco Gray Inc. and ABB Vetco Gray UK Ltd., two of our subsidiaries that were sold as part of the Oil, Gas and Petrochemicals upstream business in July 2004, pleaded guilty on July 6, 2004, to two counts of conduct in violation of the U.S. Foreign Corrupt Practices Act of 1977 (FCPA), relating to the payment of bribes to officials of NAPIMS, a Nigerian government agency that evaluates and approves potential bidders for contract work on oil exploration projects in Nigeria, including bidders seeking subcontracts with foreign oil and gas companies. According to the stipulated statement of facts, the two former subsidiaries paid more than $1 million in exchange for obtaining confidential bid information and favorable recommendations from Nigerian government agencies in connection with seven oil and gas construction contracts in Nigeria from which the companies expected to realize profits of almost $12 million. As part of the plea agreement, we paid a criminal fine of $10.5 million to the Department of Justice.

        In a separate, but related, action, the U.S. Securities and Exchange Commission filed a complaint against us. The complaint alleges violations of anti-bribery, books and records, and internal control provisions of the FCPA, arising from alleged payments in Nigeria, Kazakhstan and Angola. ABB Ltd has agreed to a civil settlement that includes (i) the hiring of an independent consultant to review our policies and procedures as they relate to compliance with the books and records, internal accounting controls and anti-bribery provisions of the FCPA, (ii) the disgorgement of profits and pre-judgment interest of $5.9 million, and (iii) a civil penalty payment of $10.5 million, which is to be deemed satisfied by payment of the criminal fine to the Department of Justice discussed above.

        In May 2004, we announced that we had undertaken an internal investigation which uncovered that certain of our employees—together with employees of other companies active in the gas insulated switchgear business—were involved in anti-competitive practices. We have reported promptly such practices to the appropriate authorities including the European Commission. We have received an amnesty decision from the European Commission and are cooperating with it in the investigation that it has launched.

        In June 2004, we disclosed to the U.S. Securities and Exchange Commission and the Italian authorities the preliminary results of our inquiry conducted with the assistance of outside counsel and forensic accountants. Those results showed that from the first quarter of 1998 through the first quarter of 2004, the PT-MV BAU overstated its earnings before interest and taxes (operating income) and net income through the early recognition of certain revenue from incomplete projects, improper capitalization of costs on certain projects, unrecorded liabilities and borrowings, and other improper journal entries. As a result, the financial statements and certain financial data set forth in our Consolidated Financial Statements as of December 31, 2003 and 2002 and for each of the years in the three year period ended December 31, 2003 were restated in September 2004. The inquiry also uncovered improper payments to an employee of an Italian power generation company. The investigation by the Italian authorities is ongoing and we are not currently in a position to predict the outcome.

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        On April 19, 2005, we announced that we had made a voluntary disclosure to the U.S. Department of Justice and the U.S. Securities and Exchange Commission of certain suspect payments made by employees of ABB network management, a specialized U.S.-based business unit. The suspect payments became apparent during an internal investigation following the dismissal of two managers from the company in mid-2004. The payments were made to intermediaries in Latin America and in the Middle East in connection with the company's business, which is control software for utility customers. We are continuing our investigation and compliance review of this business.

        If these payments are found to have been illegal, we could be subject to civil and criminal penalties. There can be no assurance that any governmental investigation or our investigation of these matters will not conclude that violations of applicable laws have occurred or that the results of these investigations will not have a material adverse effect on our business and results of operations.

        For a description of our involvement in asbestos litigation, see "Item 3. Risk Factors—We are subject to ongoing litigation and potentially substantial liabilities arising out of asbestos claims" and "Item 5. Operating and Financial Review and Prospects—Asbestos Liabilities."

DIVIDENDS AND DIVIDEND POLICY

        See "Item 3. Key Information—Dividends and Dividend Policy."

SIGNIFICANT CHANGES

        Except as otherwise described in this report, there has been no significant change in our financial position since December 31, 2004.

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Item 9.    The Offer and Listing

MARKETS

        The shares of ABB Ltd are principally traded on virt-x (under the symbol "ABBN") and on the Stockholm Exchange (under the symbol "ABB"). The shares are also traded on the Frankfurt Exchange and the London Stock Exchange.

        ADSs of ABB Ltd have been traded on the New York Stock Exchange under the symbol "ABB" since April 6, 2001. ABB Ltd's ADSs are issued under the Amended and Restated Deposit Agreement, dated May 7, 2001, with Citibank, N.A. as depositary. Each ADS represents one share.

TRADING HISTORY

        In connection with the sale of our structured finance business, on September 4, 2002, trading in our shares was suspended for approximately two hours on virt-x, but not on any other exchange on which our shares trade. No other suspension in the trading of our shares occurred in the years ended December 31, 2002, 2003 and 2004.

        The table below sets forth, for the periods indicated, the reported high and low closing sale prices for the shares on virt-x and the Stockholm Exchange and for the ADSs on the New York Stock Exchange. All share prices have been adjusted to reflect the share capital increase completed in December 2003.

		virt-x(1)		Stockholm Exchange		New York Stock Exchange
		High	Low	High	Low	High		Low
		(CHF)		(SEK)		($)
Annual highs and lows
2000		43.24	30.10	232.43	173.22
2001		35.20	7.93	208.66	52.77	18.95	(2)	6.49	(2)
2002		14.52	1.29	91.44	8.30	11.11		1.14
2003		6.66	2.02	39.88	12.81	6.24		1.95
2004		8.18	6.20	48.00	36.10	6.70		4.93
Quarterly highs and lows
2002	First Quarter	14.52	8.73	91.44	54.78	11.11		6.60
	Second Quarter	12.50	9.64	79.36	60.83	9.77		7.84
	Third Quarter	10.87	3.86	68.48	24.57	9.07		3.40
	Fourth Quarter	4.26	1.29	26.59	8.30	3.54		1.14
2003	First Quarter	3.74	2.02	24.09	12.81	3.51		1.95
	Second Quarter	4.05	2.56	24.01	16.27	3.95		2.43
	Third Quarter	6.66	3.29	39.88	20.14	6.12		3.01
	Fourth Quarter	6.53	5.39	37.95	32.07	6.24		4.79
2004	First Quarter	8.01	6.26	46.70	36.10	6.44		5.08
	Second Quarter	8.18	6.51	48.00	38.90	6.34		5.10
	Third Quarter	7.75	6.20	45.40	37.20	6.20		4.93
	Fourth Quarter	8.00	6.20	46.70	36.10	6.70		5.43
2005	First Quarter	7.64	6.35	44.70	37.30	6.52		5.42

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Monthly highs and lows
2004	November	7.14	6.65	42.10	39.60	6.24	5.69
	December	7.04	6.20	41.40	36.10	6.17	5.43
2005	January	6.93	6.35	40.50	37.30	5.91	5.42
	February	7.18	6.69	42.30	39.10	6.12	5.59
	March	7.64	7.12	44.70	42.10	6.52	6.15
	April	7.80	7.22	45.90	42.70	6.53	6.10

(1)

Until June 25, 2001, the shares were traded on the SWX Swiss Exchange.

(2)

From April 6, 2001.

THE SWX SWISS EXCHANGE AND VIRT-X

        ABB Ltd's shares are listed on the main board of the SWX Swiss Exchange and are included in the Swiss Market Index, a capitalization-weighted index of the shares of 27 large Swiss corporations currently traded on virt-x. ABB Ltd is subject to the regulations and listing rules of the SWX Swiss Exchange.

        The SWX Swiss Exchange was founded in 1993 as the successor to the local stock exchanges of Zurich, Basel and Geneva. Trading in foreign equities and derivatives began in December 1995. In August 1996, the SWX Swiss Exchange introduced full electronic trading in Swiss equities, derivatives and bonds. The aggregate value of trading activity of Swiss shares, investment funds, warrants, and bonds as well as other non-Swiss shares, warrants and bonds on the SWX Swiss Exchange and on virt-x was in excess of CHF 1,200 billion in 2004. As of December 31, 2004, the equity securities of 409 corporations, including 120 foreign corporations, were listed and traded on the SWX Swiss Exchange.

        In 2001, virt-x Exchange Limited (formerly Tradepoint Financial Networks plc), a pan-European blue chip trading platform based in London, was created as a collaboration among the SWX Swiss Exchange, the U.K.-based securities exchange TradepointFinancial Networks plc and a consortium of internationally active investment banks and financial services companies (called the TP Consortium) to provide an efficient and cost effective pan-European equities market. virt-x is a Recognized Investment Exchange supervised by the Financial Services Authority in the United Kingdom. On February 2, 2003, the SWX Swiss Exchange announced that as of January 31, 2003, it controlled 94.8 percent of the equity capital and voting rights of virt-x following a successful public tender offer.

        All trading in the 27 stocks included in the Swiss Market Index, including ABB, was transferred to virt-x on June 25, 2001. The trading of these stocks is conducted in Swiss francs. virt-x uses the SWX Swiss Exchange trading platform and network under a facilities management agreement. Most of the systems operation and development capability is outsourced to the SWX Swiss Exchange in Switzerland.

        Trading begins each business day at 9:00 a.m. (CET) and continues until 5:30 p.m. (CET). At 5:20 p.m. (CET) the exchange moves into "Closing Auction" status. The closing auction stops at 5:30 p.m. (CET). Orders can be placed up to 10:00 p.m. (CET) and again from 6:00 a.m. (CET) onwards.

        Members register incoming orders from their customers in their trading system. These orders are forwarded to the relevant trader and checked, or fed directly into the trading system by the trader. From here they are submitted to the central exchange system of virt-x, which acknowledges receipt of the order, assigns a time stamp to it and verifies its formal correctness.

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        Market information (last paid price, volume, timestamp, current best bid and ask orders) are also transmitted in real time to data vendors (such as Reuters, Bloomberg and Telekurs). In the fully automated exchange system in use at virt-x, buy and sell orders are matched according to clearly defined matching rules.

        Regardless of their size or origin, incoming orders are executed in the order of price (first priority) and time received (second priority).

        Transactions take place through the automatic matching of orders. Each valid order of at least one share is entered and listed according to its price. In general, orders placed at the best price (known as "market orders") are executed first followed by orders placed with a price limit (known as "limit orders"). If several orders are listed at the same price, they are executed in the order of the time they were entered.

        Any transaction executed under the rules of virt-x must be reported. Order book executions are automatically and immediately reported by the trading system. There are separate provisions for the delayed reporting of certain qualifying trades. Individual elements of portfolio trades must be reported within one hour, while block trades and enlarged risk trades must be reported when the business is substantially (80 percent) completed, or by 5:30 p.m. (CET) on the day of trade, unless the trade is agreed after 4:30 p.m. (CET), in which case the trade must be reported by 5:30 p.m. (CET) the following business day. Block trades and enlarged risk trades are subject to minimum trade size criteria. All other transactions must be reported within three minutes, except when the transaction is conducted in a SWX Swiss Exchange listed security, in which case the trade must be reported within 30 minutes.

        virt-x trades can be settled by CRESTCo, SIS SegaInterSettle AG or Euroclear Bank S.A./N.V. Members may employ one, two or a combination of all three depositories to settle their virt-x transactions. Each depository maintains its own unique service offering and facilitates settlements with the other depositories by real-time links. Exchange transactions are usually settled on a T+3 basis, meaning that delivery against payment of exchange transactions occurs three days after the trade date. Where any settlement is due to take place on a day on which the central bank for the currency in which the transaction is conducted is closed, the settlement due date is adjusted to be the next business day after the currency holiday.

        The traded prices of all securities are constantly monitored. As soon as the difference between two successive trade prices is greater than a specific predefined value, a brief trading suspension, called "stop trading," is automatically triggered. The triggering parameters and length of a stop trading differ according to the security.

THE SWEDISH SECURITIES MARKET

        ABB Ltd's shares are listed on the A-list (consisting of the largest companies in Sweden) on the Stockholm Exchange and are included in the OMX Index, which mirrors the total price changes in the 30 most traded shares on the Stockholm Exchange. ABB Ltd is subject to the regulations and listing rules of the Stockholm Exchange.

Trading System

        Trading on the Stockholm Exchange is conducted on behalf of clients by banks and brokers. While banks and brokers are permitted to act as principal in trading both on and off the Stockholm Exchange, they generally engage in transactions as agents. There are no market maker or specialist systems on the Stockholm Exchange.

        Each trading day on the Stockholm Exchange begins with an open morning call and ends with an open closing call. At 8:45 a.m. (CET) an open call procedure begins for all shares simultaneously, preceding the commencement of trading at 9:00 a.m. (CET), when the first share is assigned its

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opening price, and then becomes subject to continuous trading. After approximately 8 minutes, at 9:08 a.m. (CET), the opening prices for all the shares have been established and trading continues at prices based on market demand until 5:20 p.m. (CET) when the closing call is initiated. The closing call ends at 5:30 p.m. (CET), which is the Stockholm Exchange's closing time. Buy and sell orders are registered on the Stockholm Automated Exchange System, or SAXESS, a computerized order-matching system, in round lots, typically of 100 shares, and odd lots are matched separately at the last price for round lots.

        The Stockholm Exchange is a fully electronic marketplace. Trading on the SAXESS comprises all Swedish stocks traded on the Stockholm Exchange and the new paperless account-based security system, administered by the VPC, was introduced full scale. Member firms of the Stockholm Exchange are able to operate from an optional geographic location via advanced data communications. The brokers' representatives are able to trade via network stations that have been developed by the Stockholm Exchange or via their own electronic data processing systems which are linked to SAXESS.

        In addition to official trading on the Stockholm Exchange, there is also trading off the Stockholm Exchange during and after official trading hours. Trades in excess of 20 round lots can be effected off the Stockholm Exchange if the transaction price lies within the spread then appearing on SAXESS. Trades in excess of 250 round lots, however, may be effected off the Stockholm Exchange without regard to that spread. Trades after official trading hours off the Stockholm Exchange that relate to 250 round lots or less must normally be effected at a transaction price that lies within the spread appearing on SAXESS at the time of the closing. If there are no orders in SAXESS at that time, the trade may be effected at a price that otherwise reflects the market situation at that time. Trading on the Stockholm Exchange tends to involve a higher percentage of retail clients, while trading off the Stockholm Exchange, whether through intermediaries or directly, often involves larger Swedish institutions, banks arbitraging between the Swedish market and foreign markets and foreign buyers and sellers purchasing shares from or selling shares to Swedish institutions.

        The Stockholm Exchange is an authorized stock exchange in accordance with the Swedish Stock Exchange and Clearing House Act (lag 1992:543 om börs-och clearingverksamhet) and is subject to regulation by the Swedish Financial Supervisory Authority. The Swedish Stock Exchange and Clearing House Act provides for the regulation and supervision of the Swedish securities markets and market participants and the Swedish Financial Supervisory Authority implements this regulation and supervision.

        The regulatory system governing trading on and off the Stockholm Exchange is intended to achieve transparency and equality of treatment. All trades on the Stockholm Exchange are made through SAXESS to the Stockholm Exchange, which records information as to the banks and the brokers involved, the issuer, the number of shares and the price and the time of the transaction. Each bank or broker is required to maintain records indicating trades carried out as agent or, in the case of banks, as principal. All trades off the Stockholm Exchange by or through members of the Stockholm Exchange must also be reported to the Stockholm Exchange within 5 minutes, unless they are effected after 5:30 p.m. (CET). Trades after 5:30 p.m. (CET) must be reported no later than 15 minutes prior to the opening of the next trading day. All trading information reported on the Stockholm Exchange is publicly available. The Stockholm Exchange also maintains a Market Supervision Unit that reviews trading during the day on a "real time" basis, as described below.

        Under the Act on Reporting Obligations for Certain Holdings of Financial Instruments (lag 2000:1087 om anmälningsskyldighet för vissa innehav av finansiella instrument), certain natural persons may have an obligation to report their shareholdings and changes in shareholdings to the Swedish Financial Supervisory Authority. The persons covered by this obligation are persons who through their position or mandate normally obtain non-public information which can be presumed to affect the price of the listed securities (so called "insider information"), such as members of the board of directors of

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the listed Swedish company in question, the CEO or deputy CEO. The Swedish Financial Supervisory Authority keeps an insider register containing such reported information, which is publicly available.

        The Swedish Insider Penal Act (insiderstrafflagen 2000:1086) provides sanctions against insider trading. The insider trading rules are policed by the Swedish Financial Supervisory Authority and the Market Supervision Unit of the Stockholm Exchange reviews trading data for indications of unusual market activity or trading behavior.

        The Market Supervision Unit also continually examines information disseminated by listed companies. Accordingly, information such as earnings reports, acquisition and other investment plans and changes in ownership structure, is reviewed on a daily basis. When the Market Supervision Unit becomes aware of non-public price sensitive information, it monitors trading in the shares concerned to ensure that if unusual trading activity develops which evidences that persons may be trading on that information, the information is made public as soon as possible.

        Certain types of agreements in connection with financial instruments trading, such as fictitious transactions or transactions aiming to withdraw financial instruments from public trading, if entered into with the intention of improperly influencing the market price of these instruments, constitutes a criminal offense under the Insider Penal Act. Similarly, other measures taken with a view to improperly influencing the market price constitute a criminal offense. Market manipulation may also constitute fraud or swindlery under Swedish law. However, as previously described, trading data is recorded as to all securities and derivative transactions relating to listed securities and data related to trading activity is subject to supervisory review by the Swedish Financial Supervisory Authority. This provides an enforcement mechanism for reducing market manipulation. The Swedish Financial Supervisory Authority may cause the operating license of a bank or broker to be revoked if the bank or broker has engaged in improper conduct. Improper conduct could include behavior constituting market manipulation.

Registration Process

        The shares of ABB are registered in the account-based security system of VPC, and the register of shareholders of ABB is kept by VPC. VPC is an authorized central securities depository under the Swedish Act on Registration of Financial Instruments (lag 1998:1479 om kontoföring av finansiella instrument) and carries out, among other things, the duties of registrar for Swedish companies listed on the Stockholm Exchange.

        The VPC keeps a paperless share registration system. Share certificates in ABB are not issued. Title to shares is ensured only through registration with VPC.

        In accordance with Swedish law and practice and the regulations of VPC:

•

Only one person is normally registered as the holder of a share. Joint holders are not usually recorded on the VPC register. Shareholders may be entered on the register in the name of the beneficial owner or in the name of the person designated as nominee for the beneficial owner. In the latter case, a note is made in the register to the effect that the nominee is holding the share(s) in such capacity. There is also a separate register maintained by VPC for the recording of persons who have other interests in respect of shares, such as the interest of a pledgee.



•

Where the registered holder is a nominee, the nominee receives, for the account of the beneficial owner, dividends and, on capital increases, shares as well as rights in respect of shares such as in relation to a rights issue or a bonus issue. Dividends are remitted in a single payment to the nominee. That nominee is then responsible for the distribution of these dividends to the beneficial owner. A similar procedure is used for share issues.



•

Specific authority to act as a nominee must be given by VPC.

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•

A nominee is required to file a report with VPC with regard to any holding on behalf of a single beneficial owner in excess of 500 shares in one company. A list containing this information must be open to public inspection. Such a list must reveal the name of the beneficial owner but need not reveal the name of the nominee in whose name the shares have been registered. The beneficial owner would need to reveal its name if it wishes to vote at a shareholders' meeting, since a holder must re-register nominee-held shares in the name of such beneficial holder no later than ten calendar days prior to the shareholders' meeting (the record day).



•

The rights attaching to shares that are eligible for dividends, rights issues or bonus issues, accrue to those persons whose names are recorded in the register of shareholders on a particular day (the record day). Dividends are paid to an account designated by the shareholder or, in the absence of an account, sent to the shareholder at the address registered with VPC.

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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 Federal 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 report, and the commercial registry of the Canton of Zurich (Switzerland) and by Swiss statutory law.

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 registry number is CH-020.3.021.615-2.

        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 area 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.

Our Shares

        ABB Ltd's shares are registered shares (Namenaktien) with a par value of CHF 2.50 each. The shares are fully paid and non-assessable. The shares rank pari passu in all respects with each other, including in respect of entitlements to dividends, to a share of the liquidation proceeds in the case of a liquidation of ABB Ltd, and to preemptive rights.

        Each share carries one vote in ABB Ltd's general shareholders' meeting. Voting rights may be exercised only after a shareholder has been recorded in ABB Ltd's share register (Aktienbuch) as a shareholder with voting rights, or with VPC in Sweden, which maintains a subregister of ABB Ltd's share register. Registration with voting rights is subject to the restrictions described in "—Transfer of Shares."

        The shares are not issued in certificated form and are held in collective custody at SIS SegaInterSettle AG. Shareholders do not have the right to request printing and delivery of share certificates (aufgehobener Titeldruck), but may at any time request ABB Ltd to issue a confirmation of the number of registered shares held.

The Ordinary Capital Increase

        On November 20, 2003, the extraordinary general meeting of shareholders resolved to increase our share capital by CHF 2,100,016,505 by issuing 840,006,602 new shares. Shareholders who did not wish to exercise their rights to subscribe for new shares could sell them. 99.4 percent of the rights were exercised. The shares related to unexercised rights were sold in the market and the proceeds were received by ABB. ABB's new share capital of CHF 5,100,040,085, divided into 2,040,016,034 shares, was registered in the commercial register on December 9, 2003.

The Creation of the Asbestos Shares

        Subsequent to the ordinary capital increase, in December 2003, ABB issued 30,298,913 shares out of its authorized capital for purposes of fulfilling ABB's obligations under the pre-packaged plan of reorganization of Combustion Engineering. In accordance with its then-current articles of incorporation, the pre-emptive rights of shareholders were excluded and allocated to an ABB

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subsidiary, which has subscribed for these shares and holds them until they will be contributed to the Asbestos PI Trust or any similar trust, once a plan of reorganization of Combustion Engineering has become effective. The new share capital of CHF 5,175,787,367.50 divided into 2,070,314,947 shares was registered in the commercial register on December 15, 2003.

Capital Structure

Issued Shares

        ABB Ltd was incorporated with an initial share capital of CHF 100,000 divided into 10,000 fully paid registered shares with a par value of CHF 10 each. With effect as of June 28, 1999, ABB Ltd's share capital was increased to CHF 3,000,023,580 by the issuance of additional 299,992,358 registered shares with a par value of CHF 10 each. In accordance with the requirements of the Swiss Federal Code of Obligations, the following information was recorded in the commercial register in connection with the capital increase:

(i)

that 145,807,329 registered shares with par value of CHF 10 each were issued against contribution in kind of 5,453,500 registered shares with a par value of CHF 10 each and 7,904,200 bearer shares with a par value of CHF 50 each of ABB Participation AG (formerly ABB AG) in Baden, Switzerland, as per a contribution agreement of June 26, 1999;



(ii)

that 142,830,293 registered shares with par value of CHF 10 each were issued against contribution in kind of 651,818,826 A shares and 241,261,761 B shares of ABB Participation AB (formerly ABB AB) in Västerås, Sweden, as per a contribution agreement of June 26, 1999;



(iii)

that pursuant to an acquisition agreement of June 26, 1999, ABB Ltd acquired 16,383,744 A shares and 28,453,689 B shares of ABB Participation AB (formerly ABB AB) in Västerås, Sweden, for the price of CHF 71,708,860; and



(iv)

that ABB Ltd intended to acquire, after the capital increase, all shares of ABB Participation AG (formerly ABB AG) in Baden, Switzerland, which were not tendered to ABB Ltd in connection with the exchange offer of March 26, 1999 from the public shareholders or pursuant to the cancellation procedures in accordance with Article 33 of the Swiss Stock Exchange Act. See "Item 4. Information on the Company—Introduction—History of the ABB Group."

        With effect as of May 11, 2001, by way of a share split each registered share with par value of CHF 10 was split into four registered shares with par value of CHF 2.50 each. The share split had no effect on the total amount of ABB Ltd's share capital.

        With effect as of December 9, 2003, ABB's share capital was increased to CHF 5,100,040,085 (see "—The Ordinary Capital Increase").

        With effect as of December 15, 2003, ABB's share capital was increased to CHF 5,175,787,367.50 (see "—The Creation of the Asbestos Shares").

        The following table sets forth the changes in the issued share capital of ABB Ltd since ABB Ltd's incorporation in 1999:

Year	Transaction	Change of no. in shares	Change in share capital	Total no. of shares	Total share capital	Nominal value
			(CHF)		(CHF)	(CHF)
1999	Capital increase	299,992,358	2,999,923,580	300,002,358	3,000,023,580	10.00
2001	Share split	900,007,074	—	1,200,009,432	3,000,023,580	2.50
2003	Capital increase	840,006,602	2,100,016,505	2,040,016,034	5,100,040,085	2.50
2003	Capital increase (Asbestos shares)	30,298,913	75,747,282.50	2,070,314,947	5,175,787,367.50	2.50

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        The current issued share capital of ABB Ltd (including treasury shares), as registered in the commercial register, is CHF 5,175,787,367.50 divided into 2,070,314,947 fully paid registered shares, with a par value of CHF 2.50 per share.

Contingent Share Capital

        ABB Ltd's share capital may be increased in an amount not to exceed CHF 550,000,000 through the issuance of up to 220,000,000 fully paid shares with a par value of CHF 2.50 per Share (a) up to the amount of CHF 525,000,000 (equivalent to 210,000,000 shares) 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 by ABB Ltd or one of its group companies and (b) up to the amount of CHF 25,000,000 (equivalent to 10,000,000 shares) through the exercise of warrant rights granted to its shareholders by ABB Ltd or by one of its subsidiaries. ABB Ltd's board of directors may grant warrant rights not taken up by shareholders for other purposes in the interest of ABB Ltd.

        The preemptive 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 the new shares. The conditions of the conversion rights and/or warrants will be determined by the board of directors of ABB Ltd.

        The acquisition of shares through the exercise of conversion rights and/or warrants and each subsequent transfer of the shares will be subject to the transfer restrictions of ABB Ltd's articles of incorporation. See "—Transfer of Shares."

        In connection with the issuance of convertible or warrant-bearing bonds or other financial market instruments, the board of directors 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 of directors 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.

        ABB Ltd's share capital may be increased by an amount not to exceed CHF 200,000,000 through the issuance of up to 80,000,000 fully paid new shares to employees of ABB Ltd and its group companies. The preemptive and advance subscription rights of ABB Ltd'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 of directors, taking into account performance, functions, levels of responsibility and profitability criteria. ABB Ltd may issue shares or subscription rights to employees at a price lower than that quoted on the 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 transfer restrictions of ABB Ltd's articles of incorporation. See "—Transfer of Shares."

Authorized Share Capital

        ABB Ltd's authorized share capital expired on May 19, 2005. Consequently the respective Article 4ter of ABB Ltd's articles of incorporation will be deleted. Previously ABB Ltd's board of directors was authorized to increase ABB Ltd's share capital in an amount not to exceed CHF

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174,252,717.50 through the issuance of up to 69,701,087 paid registered shares with a par value of CHF 2.50 per share by not later than May 19, 2005.

Transfer of Shares

        The transfer of shares is effected by corresponding entry in the books of a bank or depository institution following an assignment in writing by the selling shareholder and notification of such assignment to ABB Ltd by the bank or depository institution. The transfer of shares also requires that the purchaser file a share registration form in order to be registered in ABB Ltd's share register (Aktienbuch) as a shareholder with voting rights. Failing such registration, the purchaser may not be able to participate in or vote at shareholders' meetings, but will be entitled to dividends and liquidation proceeds. Shares and associated pecuniary rights may only be pledged to the depository institution that administers the book entries of those shares for the account of the shareholder.

        A purchaser of shares will be recorded in ABB Ltd's share register with voting rights upon disclosure of its name and address. However, ABB Ltd may decline a registration with voting rights if the 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. If persons fail to expressly declare in their registration application that they hold the shares for their own accounts ("nominees"), the board of directors may still enter such persons in the share register with the right to vote, provided that the nominee has entered into an agreement with the board of directors concerning his status, and further provided the nominee is subject to recognized bank or financial market supervision.

        After having given the registered shareholder or nominee the right to be heard, the board of directors may cancel registrations in the share register retroactive to the date of registration if such registrations were made on the basis of incorrect information. The relevant shareholder or nominee will be informed immediately as to the cancellation. The board of directors will regulate the details and issue the instructions necessary for compliance with the preceding regulations. In special cases, it may grant exemptions from the rule concerning nominees.

        Acquirors of registered shares who have chosen to have their shares registered in the share register with VPC do not have to present any written assignment from the selling shareholder nor may they be requested to file a share registration form or declare that they have acquired the shares in their own name and for their own account in order to be registered as a shareholder with voting rights. However, in order to be entitled to vote at a shareholders' meeting those acquirors need to be entered in the VPC share register in their own name no later than ten calendar days prior to the shareholders' meeting. Uncertificated shares registered with VPC may be pledged in accordance with Swedish law.

Shareholders' Meetings

        Under Swiss law, the annual general meeting of shareholders must be held within six 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 nominal share capital. A general meeting of shareholders is convened by publishing a notice in the Swiss Official Gazette of Commerce (Schweizerisches Handelsamtsblatt) at least 20 days prior to the meeting date. Holders of VPC-registered shares are able to attend shareholders' meetings in respect of such shares. Notices of shareholders' meetings are published in at least three national Swedish daily newspapers, as well as on ABB Ltd's Internet 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.

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        One or more shareholders whose combined holdings represent an aggregate par value of at least CHF 1,000,000 may request in writing 40 calendar days prior to a general meeting of shareholders that specific items and proposals be included on the agenda and voted on at the next general meeting of shareholders.

        The following powers are vested exclusively in the general meeting of the shareholders:

•

adoption and amendment of the articles of incorporation;



•

election of members of the board of directors, the auditors, the group auditors and the special auditors referred to below;



•

approval of the annual 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;



•

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 the 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 a relative majority shall be decisive.

        A resolution passed with a qualified majority of 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 preemptive rights;



•

a transfer of ABB Ltd's place of incorporation; and



•

ABB Ltd's dissolution without liquidation.

        In addition, the introduction or abolition of any provision in the articles of incorporation providing for a qualified majority must be resolved in accordance with such qualified majority voting requirements.

        At shareholders' meetings, shareholders can be represented by proxy, but only by their legal representative, another shareholder with the right to vote, a corporate body (Organvertreter), an independent proxy (unabhängiger Stimmrechtsvertreter) or a depository institution (Depotvertreter). All shares held by one shareholder may be represented by only one representative. Votes are taken on a

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show of hands unless a secret ballot is required by the general meeting of shareholders or the presiding officer. The presiding officer may arrange for resolutions and elections to be carried out by electronic means. As a result, resolutions and elections carried out by electronic means will be deemed to have the same effect as secret ballots. The presiding officer may at any time order that a resolution or election decided by a show of hands be repeated through 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 register with the right to vote are entitled to participate at shareholders' meetings. See "—Transfer of Shares." For practical reasons, shareholders must be registered in the share register with the right to vote no later than ten calendar days prior to a shareholders' meeting in order to be entitled to participate and vote at such shareholders' meeting.

        Holders of VPC-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 VPC system in the name of a nominee, such information is to be provided by the nominee.

Net Profits and Dividends

        Swiss law requires that ABB Ltd retain at least 5 percent of its annual net profits as legal reserves for so long as these reserves amount to less than 20 percent of ABB Ltd's nominal 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 pay dividends only if it has sufficient distributable profits from previous business years, or if its reserves are sufficient to allow distribution of a dividend. In either event, dividends may be paid out only after approval by the shareholders' meeting. The board of directors may propose that a dividend be paid out, but cannot itself set the dividend. The statutory auditors must confirm that the dividend proposal of the board of directors conforms with statutory law. In practice, the shareholders' meeting usually approves the dividend proposal of the board of directors.

        Dividends are usually due and payable after the shareholders' resolution relating to the allocation of profits has been passed by the shareholders' meeting. Under Swiss law, the statute of limitations in respect of dividend payments is five years. Dividends not collected within five years after their due date accrue to ABB Ltd and will be allocated to ABB Ltd's other reserves.

        Payment of dividends on VPC-registered shares is administered by VPC and paid out to the holder that is registered with VPC on the record date. Through the dividend access facility, shareholders with tax residence in Sweden will be entitled to receive, through the VPC system, a dividend in Swedish kronor equivalent to the dividend paid in Swiss francs without deduction of Swiss withholding tax. For further information, see "—Taxation."

Preemptive Rights

        Shareholders of a Swiss corporation have certain preemptive rights to subscribe for new shares issued in connection with capital increases in proportion to the nominal amount of their shares held. A resolution adopted at a shareholders' meeting with a supermajority of two-thirds of the shares represented may, however, repeal, limit or suspend (or authorize the board of directors to repeal, limit or suspend) preemptive rights for cause. Cause includes an acquisition of a business or a part thereof, an acquisition of a participation in a company or the grant of shares to employees. However, based on Article 4bis para. 1 and 4 and Article 4ter para. 4 of the articles of incorporation of ABB Ltd, preemptive 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 or may be restricted or denied by the board of directors of ABB Ltd under certain circumstances. See "—Capital Structure—Authorized Capital."

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Advance Subscription Rights

        Shareholders of a Swiss corporation may have an advance subscription right with respect to bonds and other instruments issued in connection with options or conversion rights for shares if such option or conversion rights are based on the corporation's conditional capital. However, the shareholders' meeting can, with a supermajority of two-thirds of the shares represented at the meeting, exclude or restrict (or authorize the board of directors to exclude or restrict) such advance subscription rights for cause. See "—Capital Structure—Contingent Capital."

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. The articles of incorporation of ABB Ltd do not contain provisions concerning borrowing powers exercisable by its directors or how such borrowings could be varied.

Repurchase of Shares

        Swiss law limits a corporation's ability to repurchase or hold its own shares. ABB Ltd and its subsidiaries may only repurchase shares if ABB Ltd has sufficient freely distributable reserves to pay the purchase price, and if the aggregate par value of such shares does not exceed 10 percent of ABB Ltd's nominal share capital. Furthermore, ABB Ltd must create a special reserve on its balance sheet in the amount of the purchase price of the acquired shares. Such shares held by ABB Ltd or its subsidiaries do not carry any rights to vote at shareholders' meetings, but are entitled to the economic benefits applicable to the shares generally and are considered to be "outstanding" under Swiss law.

        At the annual general meeting of ABB Ltd held on March 20, 2001, the shareholders approved a share repurchase in the nominal amount of CHF 60,000,000, corresponding to 6,000,000 shares (24,000,000 shares after implementation of the share split), which at such time represented approximately 2 percent of ABB Ltd's nominal share capital. This share repurchase took place exclusively on the SWX Swiss Exchange and was completed in May 2001. At the annual general meeting of ABB Ltd held on March 12, 2002, the shareholders took notice that such shares would not be cancelled and would become treasury shares. ABB Ltd sold 80 million treasury shares in the first quarter of 2003. In connection with the capital increase in December 2003, ABB Ltd or its subsidiaries exercised its rights in respect of the remaining 6,830,312 treasury shares and received 4,781,217 shares at the offer price of CHF 4 per share. In December 2003, ABB Ltd issued to a subsidiary 30,298,913 shares for use with the pre-packaged plan of reorganization of its U.S. subsidiary, Combustion Engineering Inc. These shares will be held as treasury shares until used in connection with such a plan.

        ABB Ltd may make additional repurchases of shares for treasury from time to time in the future. Treasury shares are available for issuance to satisfy obligations under the management incentive plan and for other corporate purposes. As of December 31, 2004, ABB Ltd held 41,910,442 shares, directly and indirectly through subsidiaries.

Notices

        Written communication by ABB Ltd to its shareholders will be sent by ordinary mail to the last address of the shareholder or authorized recipient entered in the share register. To the extent that personal notification is not mandated by law, all communications to the shareholders are validly made by publication in the Swiss Official Gazette of Commerce (Schweizerisches Handelsamtsblatt).

        Notices required under the Listing Rules of the SWX Swiss Exchange will be published in two Swiss newspapers in German and French. ABB Ltd or the SWX Swiss Exchange may also disseminate the relevant information on the online exchange information systems. Notices required under the listing

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rules of the Stockholm Exchange will be published in three national daily Swedish newspapers, as well as on ABB Ltd's website.

Duration, Liquidation and Merger

        The duration of ABB Ltd as a legal entity is unlimited. It may be dissolved at any time by a shareholders' resolution which must be approved by (1) an absolute majority of the shares represented at the general meeting of shareholders in the event it is to be dissolved by way of liquidation or (2) a supermajority of two-thirds of the shares represented at the general meeting of shareholders in other events (e.g., in a merger where it is not the surviving entity). Dissolution by court order is possible if it becomes bankrupt or if shareholders holding at least 10 percent of the share capital can establish cause for dissolution.

        Under Swiss law, any surplus arising out of a liquidation of a corporation (after the settlement of all claims of all creditors) is distributed to the shareholders in proportion to the paid-up par value of shares held but this surplus is subject to Swiss withholding tax of 35 percent (see "—Taxation").

Disclosure of Major Shareholders

        Under the Swiss Stock Exchange Act, shareholders and groups of shareholders acting in concert who directly or indirectly acquire or sell shares of a listed Swiss corporation and thereby reach, exceed or fall below the thresholds of 5 percent, 10 percent, 20 percent, 33¹/3 percent, 50 percent or 66²/3 percent of the voting rights of the corporation must notify the corporation and the exchange(s) in Switzerland on which such shares are listed of such holdings in writing within four trading days, whether or not the voting rights can be exercised. Following receipt of such a notification, the corporation must inform the public within two trading days.

        An additional disclosure requirement exists under the Swiss Federal Code of Obligations, according to which ABB Ltd must disclose individual shareholders and groups of shareholders acting in concert and their shareholdings if they hold more than 5 percent of all voting rights and ABB Ltd knows or has reason to know of such major shareholders. Such disclosures must be made once a year in the notes to the financial statements as published in its annual report. For a list of our major shareholders, see "Item 7. Major Shareholders and Related Party Transactions—Major Shareholders."

Mandatory Offering Rules

        Under the Swiss Stock Exchange Act, shareholders and groups of shareholders acting in concert who acquire more than 33¹/3 percent of the voting rights (whether exercisable or not) of a listed Swiss company have to submit a takeover bid to all remaining shareholders unless the articles of incorporation of the company provide for an alteration of this obligation. ABB Ltd's articles of incorporation do not provide for any alterations of the bidder's obligations under the Swiss Stock Exchange Act. The mandatory offer obligation may be waived under certain circumstances, for example if another shareholder owns a higher percentage of voting rights than the acquiror. A waiver from the mandatory bid rules may be granted by the Swiss Takeover Board or the Swiss Federal Banking Commission. If no waiver is granted, the mandatory takeover bid must be made pursuant to the procedural rules set forth in the Swiss Stock Exchange Act and the implementing ordinances.

Cancellation of Remaining Equity Securities

        Under Swiss law, any offeror who has made a tender offer for the shares of a Swiss target company and who, as a result of such offer, holds more than 98 percent of the voting rights of the target company, may petition the court to cancel the remaining equity securities. The corresponding petition must be filed against the target company within three months after the lapse of the exchange offer period. The remaining shareholders may join in the proceedings. If the court orders cancellation of the remaining equity securities, the target company will reissue the equity securities and deliver such

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securities to the offeror against performance of the offer for the benefit of the holders of the cancelled equity securities.

Directors and Officers

        For further information regarding the material provisions of ABB Ltd's articles of incorporation and the Swiss Federal Code of Obligations regarding directors and officers, see "Item 6. Directors, Senior Management and Employees—Corporate Governance—Duties of Directors and Officers."

Auditors

        The auditors are subject to confirmation by the shareholders at the annual general meeting on an annual basis. Ernst & Young AG, with its registered head office at Bleicherweg 21, CH-8002 Zurich, Switzerland, has been the independent auditor of ABB Ltd and the ABB Group for the years ended December 31, 2002, 2003 and 2004.

        OBT AG, with its registered office at Hardturmstrasse 120, CH-8005 Zurich, Switzerland, has been the special auditor to issue special review reports required in connection with capital increases (if any) for the years ended December 31, 2002, 2003 and 2004. The special auditors are subject to confirmation by the shareholders at the annual general meeting on an annual basis.

        Ernst & Young AG assumed the existing auditing mandate as auditor of the ABB Group in 1994. The head auditor responsible for the mandate, Mr. Charles Barone, began serving in this function in May 2003.

        Ernst & Young AG periodically reads the approved minutes of meetings of our board of directors. Ernst & Young AG is present at the finance and audit committee meetings where audit planning is discussed and the results of our internal audit department's audit procedures are presented. Ernst & Young AG also periodically meets with the finance and audit committee to discuss the results of its audit procedures.

        See "Item 16C. Principal Accountant Fees and Services" for information regarding the fees paid to Ernst & Young 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 report.

Revolving Credit Facility

        On November 17, 2003, we entered into a $1 billion credit facility. For a description of the facility, see "Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Credit Facilities" and Note 15 to the Consolidated Financial Statements. See also Exhibits 4.3 and 4.4 to this report.

Medium Term Note Program

        Two of our subsidiaries, ABB International Finance Limited and ABB Capital BV, have entered into a medium term note program ("MTN Program") under which they are authorized to issue up to $5,250 million in certain debt instruments. The terms of the MTN Program do not obligate any third party to extend credit to us, and the terms and availability of issuances under the MTN Program are determined with respect to, and at the date of issuance of, each debt instrument. As a result, we may be unable to access capital through the MTN Program on terms favorable to us, if at all. As at December 31, 2004, the aggregate amount outstanding under the MTN Program was approximately

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$2.3 billion from nine separate issuances of debt instruments. See Exhibits 2.3, 2.4, 2.5, 2.6 and 2.6 to this report.

Sale Agreement for Structured Finance Business

        Pursuant to an agreement dated September 4, 2002 between ABB Financial Services B.V., General Electric Capital Corporation ("GE Capital") and ABB Ltd, as amended and restated by an agreement dated November 29, 2002, we sold most of our structured finance business, including our project finance, export and trade finance and leasing and similar businesses. The cash consideration for the sale was approximately $2,000 million.

        The business was sold with the benefit of customary warranties, covenants and indemnities in addition to those described herein. We agreed to indemnify GE Capital with respect to certain intra-group guarantees granted by ABB entities for the benefit of certain businesses sold to GE Capital, and this indemnity is supported by letters of credit provided by one or more banks. As of December 31, 2004, the aggregate outstanding value of these letters of credit totaled approximately $63 million.

        With respect to certain specified receivables sold in the transaction, GE Capital agreed to make payments to us if the amount recovered by GE Capital in respect of those receivables exceeded the recovery amount projected by GE Capital. All such payments have been made as of December 31, 2004. In addition, certain other designated assets were acquired by GE Capital with the understanding that third-party purchasers would be sought for such assets. We have repurchased certain of these assets for an aggregate consideration of approximately $28 million. Letters of credit supporting our obligations to repurchase certain assets have expired without any amounts thereunder having been claimed.

        See Exhibits 4.5 and 4.6 to this report and Note 3 to our Consolidated Financial Statements.

ALSTOM Settlement

        Pursuant to a Share Purchase and Settlement Agreement, dated as of March 31, 2000, among ABB Ltd, ALSTOM and ABB ALSTOM POWER, as amended by the Amendment to Share Purchase and Settlement Agreement, dated as of May 11, 2000 (which we refer to collectively as the Settlement Agreement), ALSTOM purchased our 50 percent interest in the joint venture ABB ALSTOM POWER for a cash payment of €1.25 billion. The Settlement Agreement provided for the termination of various joint venture agreements, the execution of various releases, the settlement of certain disputed items in relation to the joint venture, the unwinding of various financial arrangements between ABB ALSTOM POWER and the ABB Group, the prospective transfer to the joint venture of various assets and liabilities required to have been transferred to the joint venture under the original joint venture agreements, the transfer to us of certain subsidiaries of the joint venture, various payments among members of the ALSTOM group and the ABB Group in connection with the foregoing transactions (separate from the purchase price mentioned above), indemnification and the execution of various ancillary documents. The transaction was consummated on May 11, 2000. See Exhibit 4.1 to this report.

Sale Agreement for Nuclear Business

        On December 21, 1999, our subsidiary, ABB Handels-Und Verwaltungs AG, entered into an agreement to sell our nuclear business to BNFL for $485 million. Under the agreement, we have undertaken not to compete with the divested business during a seven-year period ending April 28, 2007. We have agreed to indemnify BNFL against, among other things, certain environmental and other liabilities arising from specific sites operated by the nuclear business and certain tax liabilities of the nuclear business. These potential liabilities are described in "Item 3. Key Information—Risk Factors" and "Item 5. Operating and Financial Review and Prospects—Environmental Liabilities." The transaction was consummated on April 28, 2000. See Exhibit 4.2 to this report.

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Sale Agreement for Part of the Oil, Gas and Petrochemicals Business

        On January 16, 2004 we announced that our subsidiary, ABB Handels-Und Verwaltungs AG, had entered into an agreement to sell the upstream part of our Oil, Gas and Petrochemicals business to Laradew Limited, a new company formed by a private equity consortium consisting of Candover Partners, JP Morgan Partners and 3i Group. The sale includes our U.S.-based Vetco Gray unit and our Norway-based Offshore Systems business. In July 2004, the Company completed the sale of the Upstream business for an initial purchase price of $925 million. Net cash proceeds from the sale were approximately $800 million, reflecting the initial purchase price adjusted for unfunded pension liabilities and changes in net working capital. On February 9, 2005, the purchasers and we entered into a Settlement Agreement and Amendment finalizing the sales price. As part of the sale, we have agreed, among other things, to terminate certain securitization programs and operational leases, to indemnify the purchaser against certain pre-existing environmental and tax liabilities, to reimburse the purchaser against financial losses that may be incurred on certain ongoing projects of the business. See Exhibits 4.7 and 4.8 to this report.

Sale Agreement for the Sale of the Global Reinsurance and Insurance Businesses

        On December 8, 2003, our subsidiary ABB Holding AG (which in December 2003 was merged into ABB Asea Brown Boveri Ltd) entered into an agreement to sell the global reinsurance and insurance businesses which we have operated through the Sirius group of companies to a subsidiary of White Mountains Insurance Group ("WMI") for an initial purchase consideration of SEK 3.22 billion (approximately $425 million). The transaction closed in April, 2004. As part of the sale we have undertaken to indemnify WMI, among other things, for potential losses in excess of reserves established in the 2003 financial accounts relating to the future final settlement of certain disputes as well as potential losses arising from certain guarantees issued by the Sirius business. See Exhibits 4.9 and 4.10 to this report.

EXCHANGE CONTROLS

        Other than in connection with government sanctions imposed on Cote d'Ivoire, Iraq, Liberia, Myanmar, Yugoslavia, Zimbabwe and persons and organizations with connection to Osama bin Laden, the "al Qaeda" group or the Taliban, 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 our articles of incorporation on the rights of non-Swiss residents or non-Swiss citizens to hold or vote our shares.

TAXATION

        The following is a summary of the material Swiss and United States federal income tax consequences of the purchase, ownership and disposition of our shares or ADSs.

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Swiss Taxation

Withholding Tax on Dividends and 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) are subject to a Swiss federal withholding tax at a rate of 35 percent. 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 United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income, which entered into force on December 19, 1997 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 on dividends in respect of our shares or ADSs. 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. 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.

        Claims for refunds must be filed with the Swiss Federal Tax Administration, Eigerstrasse 65, 3003 Bern, Switzerland. The form used for obtaining a refund is Swiss Tax Form 82 (82C for companies; 82E for other entities; 82I for individuals). This form may be obtained from any Swiss Consulate General in the United States or from the Swiss Federal Tax Administration at the address above. 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.

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 SWX Swiss Exchange may be subject to a stock exchange levy.

United States Taxes

        The following is a summary of the material U.S. federal income tax consequences of the ownership 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 holders are initial purchasers of shares or ADSs and hold shares or ADSs as capital assets. This summary does not address tax considerations applicable to holders that may be subject to special tax rules, such as dealers or traders in securities or currencies, partnerships owning shares or ADSs, tax-exempt entities, banks, 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, and 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. 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 (1) 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

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available on the date of this registration statement and (2) 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 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 resident of the United States;



•

a corporation 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 (1) a U.S. court can exercise primary supervision over its administration and (2) one or more U.S. persons have the authority to control all of its substantial decisions.

        If a partnership (including any entity treated as a partnership for United States 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.

        A non-U.S. holder is a beneficial owner of shares or ADSs that is not a U.S. holder.

        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.

Ownership of ADSs in General

        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.

        The U.S. Treasury Department has expressed concern that depositaries for American depositary receipts, or other intermediaries between the holders of shares of an issuer and the issuer, may be taking actions that are inconsistent with the claiming of U.S. foreign tax credits by U.S. holders of those receipts or shares. Accordingly, the analysis regarding the availability of a U.S. foreign tax credit for Swiss taxes and sourcing rules described below could be affected by future actions that may be taken by the U.S. Treasury Department.

Distributions

        Subject to the discussion below under "—Passive Foreign Investment Company Considerations," if you are a U.S. holder, for U.S. federal income tax purposes, the gross amount of any distribution (other than certain distributions, if any, of shares distributed to all shareholders of ABB, including holders of ADSs) made to you with respect to shares or ADSs, including the amount of any Swiss taxes withheld from the distribution, will constitute dividends to the extent of ABB's current and accumulated earnings and profits (as determined under U.S. federal income tax principles). Subject to the discussion below under "—Passive Foreign Investment Company Considerations," 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 taxable years beginning on or before December 31, 2008. These dividends will not be eligible for the dividends received deduction generally allowed to corporate U.S. holders. Subject to the discussion below under "—Passive Foreign Investment Company Considerations," if distributions with respect to shares or ADSs exceed ABB's current and accumulated earnings and profits as determined under U.S.

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federal income tax principles, the excess 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 would be treated as capital gain. ABB does not maintain calculations of its earnings and profits under U.S. federal income tax principles.

        If you are a U.S. holder, 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, you generally should not be required to recognize foreign currency gain or loss with respect to the conversion, if you are a U.S. holder. However, any gains or losses resulting from the conversion of Swiss francs between the time of the receipt of dividends paid in Swiss francs and the time the Swiss francs are converted into U.S. dollars will be treated as ordinary income or loss to you, as the case may be, if you are a U.S. holder. 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, you will have a basis in any Swiss francs received as a refund of Swiss withholding taxes equal to a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt of the dividend on which the tax was withheld. (See "—Swiss Taxation—Obtaining a Refund of Swiss Withholding Tax for U.S. Residents" above.)

        If you are a U.S. holder, 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 United States federal income tax liability. However, to the extent that you are a U.S. holder and 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 United States foreign tax credit with respect to the amount of such withholding taxes which may be refunded, even if you fail to claim such 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, or, in the case of certain U.S. holders, financial services income. The rules relating to the determination of the U.S. foreign tax credit are complex, and, if you are a U.S. holder, you should consult your tax advisor to determine whether and to what extent you would be entitled to this credit.

        Subject to the discussion below under "—Backup Withholding and Information Reporting," if you are a non-U.S. holder of shares or ADSs, you generally will not be subject to U.S. federal income or withholding tax on dividends received on shares or ADSs, unless the dividends are effectively connected with the conduct by you of a trade or business in the United States, or the dividends are attributable to a permanent establishment or fixed base that is maintained in the United States if that is required by an applicable income tax treaty as a condition for subjecting a non-U.S. holder to U.S. taxation on a net income basis. In such cases, you will be taxed in the same manner as a U.S. holder. Moreover, if you are a corporate non-U.S. holder, you may be subject, under certain circumstances, to an additional branch profits tax on any effectively connected dividends at a 30 percent rate, or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.

Sale or Exchange of Shares or ADSs

        Subject to the discussion below under "—Passive Foreign Investment Company Considerations," if you are a U.S. holder that holds shares or ADSs as capital assets, you generally will recognize capital

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gain or loss for U.S. federal income tax purposes upon a sale or exchange 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 noncorporate U.S. holder, the maximum marginal U.S. federal income tax rate applicable to the gain will be 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, the gain or loss, if any, recognized by you generally will be treated as U.S. source income or loss, as the case may be, for U.S. foreign tax credit purposes. Certain limitations exist on the deductibility of capital losses for U.S. federal income tax purposes.

        If you are a U.S. holder and you receive any foreign currency on the sale of shares or ADSs, you may recognize U.S. source ordinary income or loss as a result of currency fluctuations between the date of the sale of the shares or ADS, as the case may be, and the date the sales proceeds are converted into U.S. dollars.

        Subject to the discussion below under "—Backup Withholding and Information Reporting," if you are a non-U.S. holder of shares or ADSs, you generally will not be subject to U.S. federal income or withholding tax on gain realized on the sale or exchange of your shares or ADSs unless (1) the gain is effectively connected with the conduct by you of a trade or business in the United States, or the gain is attributable to a permanent establishment or fixed base that is maintained in the United States if that is required by an applicable income tax treaty as a condition for subjecting a non-U.S. holder to U.S. taxation on a net income basis, or (2) if you are an individual non-U.S. holder, you are present in the United States for 183 days or more in the taxable year of the sale or exchange and certain other conditions are met. Moreover, if you are a corporate non-U.S. holder, you may be subject, under certain circumstances, to an additional branch profits tax on any effectively connected gains at a 30 percent rate, or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.

Passive Foreign Investment Company Considerations

        A non-U.S. corporation will be classified as a "passive foreign investment company," or a PFIC, for United States federal income tax purposes in any taxable year in which, after applying certain look-through rules, either

•

at least 75 percent of its gross income is "passive income"; or



•

at least 50 percent, on average, of the gross value of its assets is attributable to assets that produce "passive income" or are held for the production of passive income.

        Passive income for this purpose generally includes dividends, interest, certain royalties, certain rents and gains from commodities and securities transactions.

        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 ending December 31, 2004. ABB's status in future years will depend on its assets and activities in those years. ABB has no reason to believe that its assets or activities will change in a manner that would cause it to be classified as a PFIC. If ABB were a PFIC, and you are a U.S. holder, you generally would be subject to imputed interest charges and other disadvantageous tax treatment with respect to any gain from the sale or exchange of, and certain distributions with respect to, your shares or ADSs, including the denial of the taxation of certain dividends at the lower rates applicable to long-term capital gains (as discussed above in "—Distributions").

        If ABB were a PFIC, you may be able to make a variety of elections which might alleviate certain of the tax consequences referred to above. However, it is expected that the conditions necessary for

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making such elections will not be present in the case of shares or ADSs. You should consult your own tax advisor regarding the tax consequences that would arise if ABB were treated as a PFIC.

Backup Withholding and Information Reporting

        U.S. backup withholding tax and information reporting requirements generally apply to certain payments to certain noncorporate 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 a non-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 or otherwise fail to establish an exception from backup withholding. The amount of any backup withholding from a payment to you will 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 to the U.S. Internal Revenue Service. The backup withholding tax rate is 28 percent for years 2004 through 2010.

        In the case of payments made within the United States to a foreign simple trust, foreign grantor trust, or foreign partnership (other than payments to a foreign simple trust, foreign grantor trust, or foreign partnership that qualifies as a withholding foreign trust or withholding foreign partnership within the meaning of the applicable U.S. Treasury Regulations and payments to a foreign simple trust, foreign grantor trust, or foreign partnership that are effectively connected with the conduct of a trade or business in the United States), the beneficiaries of the foreign simple trust, the persons treated as the owners of the foreign grantor trust or the partners of the foreign partnership, as the case may be, will be required to provide the certification discussed above in order to establish an exemption from backup withholding tax and information reporting requirements. Moreover, if you are a non-U.S. holder, a payor may rely on a certification provided by you only if the payor does not have actual knowledge or a reason to know that any information or certification stated in the certificate is incorrect.

        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 Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file reports and other information with the Securities and Exchange Commission. These materials, including this report and the exhibits thereto, may be inspected and copied at prescribed rates at the Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Further information on the operation of the public reference room may be obtained by calling the Commission at 1-800-SEC-0330. The Commission also maintains a web site at http://www.sec.gov that contains reports and other information regarding registrants that file electronically with the Commission. Our annual reports and some of the other information we submit to the Commission 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 20 Broad Street, New York, New York 10005.

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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 firm-wide basis. To efficiently aggregate and manage financial risk that could impact our financial performance, we operate a Group Treasury function. Our Group Treasury function provides an efficient source of liquidity, financing, risk management, and other global financial services to our group companies. The Group does not permit proprietary trading activities. The market risk management activities are focused on mitigating material financial risks resulting from our global operating and financing activities.

        The Group Treasury function 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. Such exposures are governed by written policies. 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, foreign exchange rates, equity prices and commodity prices, as applicable.

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 certain operating subsidiaries 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 Group Treasury function.

        We have foreign exchange transaction exposures related to our global operating and financing activities in currencies other than the functional currency in which our entities operate. Specifically, we are exposed to foreign exchange risk related to future earnings, assets or liabilities denominated in foreign currencies. The most significant currency exposures relate to operations in Sweden, Switzerland and Germany. In addition, the Group is 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 hedge contracts with the Group Treasury function, where legally possible, or external transactions to hedge this risk. The intercompany transactions have the effect of transferring the operating companies' currency risk to the Group Treasury function, but create no additional market risk to our consolidated results. The Group Treasury function then manages this risk by entering into offsetting transactions with third party financial institutions. According to our policy, material net currency exposures are hedged. Exposures 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. The Group Treasury function also hedges currency risks associated with their financing of other ABB companies. For certain non-U.S. dollar denominated borrowings, we use cross currency swaps to hedge the currency risk and effectively convert the borrowings into U.S. dollar obligations. These swap contracts have maturity dates that exactly match the associated borrowings.

        As of December 31, 2004 and December 31, 2003, the net fair value of financial instruments with exposure to foreign currency rate movements was $1,158 million and $164 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 $67 million and $91 million for

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December 31, 2004 and December 21, 2003, 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. This represents a material limitation of the quantitative risk 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 Group Treasury function 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 the Group Treasury function. The Group Treasury function 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. As of December 31, 2004 and December 31, 2003, the net fair value of interest rate instruments was $(1,582) million and $(865) million, respectively. The potential loss in fair value for such financial instruments from a hypothetical 100 basis point parallel shift in interest rates against ABB's position (or a multiple of 100 basis points where 100 basis points is less than 10 percent of the applicable interest rate) would be approximately $164 million and $130 million for December 31, 2004 and December 31, 2003, respectively.

        Leases are not included as part of the sensitivity analysis. This represents a limitation of the analysis. While sensitivity analysis includes the interest rate sensitivity of the funding of the lease portfolio, a corresponding change in the lease portfolio was not considered in the sensitivity model.

Equity Risk

        At December 31, 2003, we were exposed to equity risk primarily due to the equity conversion option feature (the right to convert the bonds into shares of ABB Ltd) of the $968 million convertible bonds due 2007. Our shares are denominated in Swiss francs, while the bonds are denominated in U.S. dollars. Under SFAS 133, the equity conversion option had to be accounted for as a derivative and the changes in its fair value recorded through earnings. As of December 31, 2003, the fair value of this option was $45 million and an increase in the ABB Ltd share price by 10 percent would have resulted in an adverse impact on earnings of $15 million. During 2004, the terms of the bonds were amended whereby, if the bonds are converted, we will deliver U.S. dollar-denominated American Depositary Shares of ABB Ltd rather than the Swiss franc-denominated ordinary shares. Consequently, we are no longer exposed to equity risk on the conversion feature of these bonds, as of December 31, 2004.

        In addition, certain ABB entities have equity investments that expose the Group to equity price risk. As of December 31, 2004 and 2003, the net fair value of equity risk sensitive instruments was $107 million and $477 million, respectively. The potential loss in fair value of such financial instruments from a hypothetical 10 percent move in equity prices against our position would be approximately $11 million and $48 million, respectively.

Item 12.    Description of Securities Other than Equity Securities

        Not applicable.

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PART II

Item 13.    Defaults, Dividend Arrearages and Delinquencies

        Not applicable.

Item 14.    Material Modifications to the Rights of Security Holders and Use of Proceeds

        Not applicable.

Item 15.    Controls and Procedures

        (a)    Evaluation of disclosure controls and procedures.

        We maintain controls and procedures designed to provide reasonable assurance that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported on a timely basis. Our chief executive officer, Fred Kindle, and chief financial officer, Michel Demaré, with the participation of key corporate senior management and management of key Group functions, performed an evaluation of our disclosure controls and procedures as of December 31, 2004. While we have not yet completed our assessment of internal controls under Section 404 of the Sarbanes-Oxley Act, we have made the following determination with respect to our internal control environment. Our determination is based on our interpretation of the internal control-related definitions of the new Public Company Accounting Overnight Board (PCAOB) Standard 2. PCAOB Standard 2 changed the definitions of internal control deficiencies and added the concept of aggregation of internal control deficiencies. Specifically, a material weakness is defined as a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

        In connection with this evaluation and taking into account observations from our outside auditor, our Chief Executive Officer and Chief Financial Officer have concluded that the September 2004 restatement of our financial statements for the year ended December 31, 2003 in connection with the earnings misstatements by the Power Technologies division's medium voltage business in Italy, and in conjunction with the failure to remediate certain root causes that facilitated the misstatement prior to December 31, 2004, is a material weakness in our internal control over our financial reporting process. Further details on the restatement are set forth in Item 5 "Operating and Financial Review and Prospects—Restatement."

        Additionally, we have concluded that a series of significant deficiencies in our financial reporting process, including deficiencies identified in prior years not yet remediated, are, in the aggregate, evidence of a material weakness in the financial statement reporting process.

        In order to address the above material weaknesses, we performed additional procedures during the preparation of our 2004 consolidated financial statements to compensate for the potential effect of such matters on our reporting. In addition, we are taking steps to remedy the matters referred to above, which include, among other things, implementation of more detailed financial statement review procedures, documentation of information technology-related controls, continued documentation of internal controls as part of the implementation of Section 404 of the Sarbanes-Oxley Act, and strengthening of U.S. GAAP skills of our accounting staff on a regional basis and at the Corporate Center.

        We have implemented a global Ethics & Compliance policy, which includes a strict zero-tolerance stance on misconduct and a whistleblowing process with appropriate follow-up from our investigation group. In addition, in each country where we have significant operations, employees generally must sign an ethics letter wherein they confirm compliance with conflict of interest rules, insider trading rules,

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political contribution rules and corporate policies. Beginning in 2005, on a quarterly basis, finance managers in each country are required to sign a certification as to the quality of the financial reporting information and disclosure of significant events in their respective areas of responsibility.

        In April 2005, in accordance with our 2004 civil settlement with the U.S. Securities and Exchange Commission, we appointed an independent consultant to review our policies and procedures as they relate to compliance with the books and records, internal accounting controls and anti-bribery provisions of the FCPA. The consultant is expected to submit a report in August 2005 documenting findings and making recommendations (the "Report") to our Board of Directors. Within ninety days after receiving the Report, we are required to adopt the recommendations contained in the Report, except in certain limited circumstances.

        Based on their evaluation of our disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer were not able to conclude that as of December 31, 2004 our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We performed additional procedures in the preparation of our 2004 consolidated financial statements in order to ascertain that they were fairly presented in all material respects in accordance with U.S. GAAP.

        (b)    Changes in internal control.

        Except as discussed above, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the period covered by this report, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

        In addition, we will continue to evaluate the effectiveness of our disclosure controls and procedures and may make such changes from time to time as we consider appropriate.

Item 16A.    Audit Committee Financial Expert

        Our board of directors has determined that Bernd W. Voss, who serves on our audit committee, is independent, as that term is defined in the listing standards promulgated by the New York Stock Exchange, and is an audit committee financial expert.

Item 16B.    Code of Ethics

        Our chief executive officer, chief financial officer, principal accounting officer and persons performing similar functions are bound to adhere to our code on business ethics, which applies to all employees of all companies in the ABB Group. Our code of business ethics is accessible on our web site at www.abb.com/about.

Item 16C.    Principal Accountant Fees and Services

Audit Fees

        Fees for audit services provided by Ernst & Young totaled approximately $30 million and $21 million in 2004 and 2003, respectively. 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 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 group auditor such as assistance with the application of new accounting policies, pre-issuance reviews of quarterly financial results and

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comfort letters delivered to underwriters in connection with debt and equity offerings. Included in 2004 audit fees is $6 million related to the 2003 audit, which fees were not agreed until after the Company had filed its Annual Report on Form 20-F dated April 9, 2004 and also fees associated with the Company's filing of it's Annual Report on Form 20-F/A (Amendment No. 1) dated September 24, 2004.

Audit-Related Fees

        Fees for audit-related services provided by Ernst & Young totaled approximately $5 million and $11 million in 2004 and 2003, consisting primarily of accounting consultations and audits in connection with divestments, audits of pension and benefit plans and accounting advisory services.

Tax Fees

        Fees for tax services provided by Ernst & Young totaled approximately $3 million and $2 million in 2004 and 2003, respectively, representing tax compliance fees as well as tax advice and planning fees.

All Other Fees

        Fees for other services provided not included in the above three categories by Ernst & Young totaled approximately $0.3 million and $0.4 million in 2004 and 2003, respectively.

Pre-Approval Procedures and Policies

        In accordance with the requirements of the U.S. Sarbanes-Oxley Act of 2002 and rules issued by the Securities and Exchange Commission, we introduced a procedure for the review and pre-approval of any services performed by Ernst & Young. The procedure requires that all proposed engagements of Ernst & Young for audit and permitted non-audit services are submitted to the Finance & Audit Committee for approval prior to the beginning of any such services.

Other Matters

        Our auditor, Ernst & Young AG has informed the Finance & Audit Committee of our Board of Directors that certain non-audit services performed for us by affiliates of Ernst & Young AG in several countries have raised questions regarding Ernst & Young's independence in the performance of audit services. Ernst & Young AG has disclosed that, during 2004 or a prior year: its affiliate in Hong Kong received funds from an ABB subsidiary in Switzerland to be used to make tax payments of de minimis amounts on behalf of certain expatriate employees of one of our subsidiaries in Hong Kong and Ernst &Young's affiliate paid such funds to the tax authorities; its affiliate in Sri Lanka provided certain payroll services for our employees in one of our subsidiaries in Sri Lanka; its affiliate in Kazakhstan provided personnel to assist us in the preparation of certain of our required tax filings; its affiliates in Singapore provided company secretary services to one of our subsidiaries; its affiliate in Poland provided expatriate related services to one of our subsidiaries; and the aggregate compensation paid for the above services was an immaterial amount. Such services are not permitted under applicable auditor independence rules. These services have been discontinued. Ernst & Young AG and the Finance & Audit Committee have discussed these circumstances and Ernst & Young AG and the Finance & Audit Committee have concluded that Ernst & Young AG's independence with respect to ABB has not been compromised by the provision of such services.

Item 16D.    Exemptions from the Listing Standards for Audit Committees.

        Not yet applicable.

159

Item 16E.    Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

        The table below sets forth the information with respect to purchases made by or on behalf of ABB Ltd or any "affiliated purchaser", as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, of ABB Ltd shares for the year ended December 31, 2004.

Period		Total Number of Shares Purchased(1)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
			(CHF)
January	1/1/04–1/31/04	—	—	N/A	N/A
February	2/1/04–2/28/04	—	—
March	3/1/04–3/31/04	—	—
April	4/1/04–4/30/04	—	—
May	5/1/04–5/31/04	137,631	6.95
June	6/1/04–6/30/04	—	—
July	7/1/04–7/31/04	—	—
August	8/1/04–8/31/04	—	—
September	9/1/04–9/30/04	—	—
October	10/1/04–10/31/04	124,301	7.73
November	11/1/04–11/30/04	—	—
December	12/1/04–12/31/04	—	—
Total		261,932	7.32	N/A	N/A

⁽¹⁾

The total number of shares purchased were purchased through open-market transactions. These purchases were made in respect of our obligation to deliver shares as compensation to our directors.

160

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-84 and pages S-1 to S-2, which are incorporated herein by reference.

(a)

Reports of Independent Registered Public Accounting Firms.



(b)

Consolidated Income Statements for the years ended December 31, 2004, 2003 and 2002.



(c)

Consolidated Balance Sheets at December 31, 2004 and 2003.



(d)

Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002.



(e)

Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2004, 2003 and 2002.



(f)

Notes to Consolidated Financial Statements.



(g)

Report of Independent Registered Public Accounting Firm on Financial Statement Schedule.



(h)

Schedule II—Valuation and Qualifying Accounts.

161

Item 19. Exhibits

1.1	Articles of Incorporation of ABB Ltd as amended to date. Incorporated by reference to Exhibit 1.1 to the Annual Report on Form 20-F filed by ABB Ltd on April 9, 2004.
2.1	Form of Amended and Restated Deposit Agreement, by and among ABB Ltd, Citibank, N.A., as Depositary, and the holders and beneficial owners from time to time of the American Depositary Shares issued thereunder (including as an exhibit the form of American Depositary Receipt). Incorporated by reference to Exhibit (a)(i) to Post-Effective Amendment No. 1 on Form F-6 (File No. 333-13346) filed by ABB Ltd on May 7, 2001.
2.2	Form of American Depositary Receipt (included in Exhibit 2.1).
2.3	EMTN Amended and Restated Fiscal Agency Agreement, dated November 24, 2004 between ABB International Finance Limited, ABB Capital B.V., Banque Generale du Luxembourg S.A., JPMorgan Chase Bank and Banque Meespierson BGL S.A.
2.4	EMTN Amended and Restated Dealership Agreement, dated November 24, 2004, between ABB International Finance Limited, ABB Capital B.V., ABB Ltd and Morgan Stanley & Co. International Limited.
2.5	EMTN Deed of Covenant, dated March 10, 1993, by ABB International Finance N.V. Incorporated by reference to Exhibit 2.4 to the Annual Report on Form 20-F filed by ABB Ltd on June 27, 2002.
2.6	EMTN Deed of Covenant, dated March 10, 1993, by ABB Finance Inc. Incorporated by reference to Exhibit 2.5 to the Annual Report on Form 20-F filed by ABB Ltd on June 27, 2002.
2.7	EMTN Deed of Covenant, dated March 10, 1993, by ABB Capital B.V. Incorporated by reference to Exhibit 2.6 to the Annual Report on Form 20-F filed by ABB Ltd on June 27, 2002.
	The total amount of long-term debt securities of ABB Ltd authorized under any other instrument does not exceed 10 percent of the total assets of the ABB Group on a consolidated basis. ABB Ltd hereby agrees to furnish to the Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of ABB Ltd or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.
4.1	Share Purchase and Settlement Agreement dated as of March 31, 2000 among ABB Ltd, ALSTOM and ABB ALSTOM POWER N.V., as amended. Incorporated by reference to Exhibit 4.1 to the Annual Report on Form 20-F filed by ABB Ltd on June 27, 2002.
4.2	Purchase Agreement, dated as of December 21, 1999, between ABB Handels-Und Verwaltungs AG, as Seller, and British Nuclear Fuels plc, as Purchaser, as amended. Incorporated by reference to Exhibit 4.2 to the Annual Report on Form 20-F filed by ABB Ltd on June 27, 2002.
4.3	$1,000,000,000 Multicurrency Revolving Credit Agreement, dated November 17, 2003 and as amended on December 10, 2003. Incorporated by reference to Exhibit 4.3 to the Annual Report on Form 20-F filed by ABB Ltd on April 9, 2004.
4.4	Amendment dated November 1, 2004 to the $1,000,000,000 Multicurrency Revolving Credit Agreement dated November 17, 2003, as amended on December 10, 2003.

162

4.5	Sale and Purchase Agreement, dated 4 September 2002, between ABB Financial Services B.V., General Electric Capital Corporation and ABB Ltd. Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
4.6	Amendment Agreement, dated 29 November 2002, between ABB Financial Services B.V., General Electric Capital Corporation and ABB Ltd. Incorporated by reference to Exhibit 4.6 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
4.7	Stock and Asset Purchase Agreement, dated January 16, 2004, between ABB Handels-und Verwaltungs AG and Laradew Limited. Incorporated by reference to Exhibit 4.6 to the Annual Report on Form 20-F filed by ABB on April 9, 2004.
4.8	Settlement Agreement and Amendment, dated as of February 9, 2005, between ABB Handels-und Verwaltungs AG and Vetco Limited (formerly known as Laradew Limited), relating to the Stock and Asset Purchase Agreement dated as of January 16, 2004, between Handels-und Verwaltungs AG and Laradew Limited.
4.9	Purchase Agreement, dated as of December 8, 2003, between ABB Holding AG, Zurich, and Lagrummet December NR 919 AB (under change of name to "Fund American Holdings AB"). Incorporated by reference to Exhibit 4.7 to the Annual Report on Form 20-F filed by ABB on April 9, 2004.
4.10	Amendment and Acknowledgement, dated April 14, 2004, to the Purchase Agreement, dated as of December 8, 2003, between ABB Holding AG, Zurich, and Lagrummet December NR 919 AB (under change of name to "Fund American Holdings AB").
4.11	Employment Agreement of Jürgen Dormann, dated December 5, 2002. Incorporated by reference to Exhibit 4.7 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
4.12	Employment Agreement of Peter Voser, dated November 21, 2001. Incorporated by reference to Exhibit 4.8 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
4.13	Employment Agreement of Dinesh Paliwal, dated as of February 21, 2003. Incorporated by reference to Exhibit 4.9 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
4.14	Employment Agreement of Peter Smits, dated November 1, 2001. Incorporated by reference to Exhibit 4.10 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
4.15	Employment Agreement of Gary Steel, dated August 27, 2002. Incorporated by reference to Exhibit 4.11 to the Annual Report on Form 20-F filed by ABB on June 30, 2003.
4.16	Employment Agreement of Fred Kindle, dated February 21, 2004.
4.17	Employment Agreement of Michel Demaré, dated October 28, 2004.
8.1	Subsidiaries of ABB Ltd as of March 31, 2005.
12.1	Certification of the chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2	Certification of the chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1	Certification by the chief executive officer of ABB Ltd pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
13.2	Certification by the chief financial officer of ABB Ltd pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

        * This document is being furnished in accordance with SEC Release Nos. 33-8212 and 34-74551.

163

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 report on its behalf.

ABB LTD
By:	/s/  MICHEL DEMARÉ
	Name:	MICHEL DEMARÉ
	Title:	Executive Vice President and Chief Financial Officer
By:	/s/  RICHARD A. BROWN
	Name:	RICHARD A. BROWN
	Title:	Group Vice President and Assistant General Counsel

Date: May 27, 2005.

164

ABB Ltd

Index to Consolidated Financial Statements and Schedules

Consolidated Financial Statements:
Reports of Independent Registered Public Accounting Firms	F-2
Consolidated Income Statements for the years ended December 31, 2004, 2003 and 2002	F-5
Consolidated Balance Sheets at December 31, 2004 and 2003	F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002	F-7
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2004, 2003 and 2002	F-8
Notes to the Consolidated Financial Statements	F-9
Financial Statement Schedule:
Report of Independent Registered Public Accounting Firm	S-1
Schedule II—Valuation and Qualifying Accounts	S-2

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of ABB Ltd:

        We have audited the accompanying consolidated balance sheets of ABB Ltd as of December 31, 2004 and 2003, and the related consolidated income statements, statements of cash flows and statements of changes in stockholders' equity for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Jorf Lasfar Energy Company, a corporation in which the Company has a 50% interest, (the Company's equity in Jorf Lasfar Energy Company's net income is stated at $63 million in 2004, $60 million in 2003 and $66 million in 2002) and we did not audit the 2002 consolidated financial statements of Swedish Export Credit Corporation, a corporation in which the Company had a 35% interest, (the Company's equity in Swedish Export Credit Corporation's consolidated net income is stated at $89 million in 2002). Those statements were audited by other auditors whose reports have been furnished to us. Our opinion, insofar as it relates to amounts included for those companies and their subsidiaries, is based solely on the reports of the other auditors.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.

        In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of ABB Ltd at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

        As discussed in Note 2 to the consolidated financial statements, in 2003 the Company changed its method of consolidation relating to variable interest entities.

/s/ ERNST & YOUNG AG
Zurich, Switzerland
April 6, 2005

F-2

Report of Independent Registered Public Accounting Firm

To the Management Committee
and Stockholders of Jorf Lasfar
Energy Company S.C.A.
B.P. 99 Sidi Bouzid
El Jadida

        We have audited the accompanying balance sheets of Jorf Lasfar Energy Company S.C.A. (the "Company") as of December 31, 2004, 2003 and 2002, and the related statements of income, of stockholders' equity and of cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Jorf Lasfar Energy Company S.C.A. at December 31, 2004, 2003 and 2002, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ PRICE WATERHOUSE
Casablanca, Morocco,
February 11, 2005

F-3

Report of Independent Registered Public Accounting Firm

To the Board of Directors of
AB Svensk Exportkredit:

        We have audited the accompanying consolidated and parent company balance sheets of AB Svensk Exportkredit (Swedish Export Credit Corporation) (the "Company") as of December 31, 2002, and the related consolidated and parent company statements of income and of cash flows for each of the two years in the period ended December 31, 2002 (not presented separately herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated and parent company financial statements referred to above present fairly, in all material respects, the respective financial position of the Company at December 31, 2002, and the respective results of operations and of cash flows for each of the two years in the period ended December 31, 2002, in conformity with generally accepted accounting principles in Sweden.

        Accounting principles generally accepted in Sweden vary in certain significant respects from accounting principles generally accepted in the United States of America. Application of accounting principles generally accepted in the United States of America would have affected consolidated results of operations for each of the two years in the period ended December 31, 2002 and consolidated shareholders' funds as of December 31, 2002, to the extent summarized in Note 33 to the consolidated financial statements (not presented separately herein). As more fully described in Note 33 to the consolidated financial statements, the originally reported amount of net income for the year ended December 31, 2001 under U.S GAAP has been restated (not presented separately herein).

KPMG

By: /s/  ANDERS LINER Authorized Public Accountant

Stockholm, Sweden
February 20, 2003 except Note 32 and
Note 33, which are as of March 31, 2003

F-4

ABB Ltd

Consolidated Income Statements

for the years ended December 31, 2004, 2003 and 2002

		Year ended December 31,
		2004			2003			2002
		(in millions, except per share data)
Revenues		$	20,721		$	20,427		$	19,472
Cost of sales			(15,757	)		(15,928	)		(15,098	)
Gross profit			4,964			4,499			4,374
Selling, general and administrative expenses			(3,786	)		(3,917	)		(4,050	)
Amortization expense			(45	)		(31	)		(45	)
Other income (expense), net			(49	)		(194	)		(80	)
Earnings before interest and taxes			1,084			357			199
Interest and dividend income			164			152			194
Interest and other finance expense			(387	)		(569	)		(327	)
Income (loss) from continuing operations before taxes and minority interest			861			(60	)		66
Provision for taxes			(311	)		(245	)		(81	)
Minority interest			(102	)		(66	)		(111	)
Income (loss) from continuing operations			448			(371	)		(126	)
Loss from discontinued operations, net of tax			(483	)		(408	)		(693	)
Net loss		$	(35	)	$	(779	)	$	(819	)
Basic earnings (loss) per share:
	Income (loss) from continuing operations	$	0.22		$	(0.30	)	$	(0.11	)
	Net loss	$	(0.02	)	$	(0.64	)	$	(0.74	)
Diluted earnings (loss) per share:
	Income (loss) from continuing operations	$	0.22		$	(0.30	)	$	(0.27	)
	Net loss	$	(0.02	)	$	(0.64	)	$	(0.86	)

See accompanying notes to the Consolidated Financial Statements

F-5

ABB Ltd

Consolidated Balance Sheets

at December 31, 2004 and 2003

		December 31,
		2004			2003
		(in millions, except share data)
Cash and equivalents		$	3,676		$	4,783
Marketable securities and short-term investments			524			473
Receivables, net			6,330			6,049
Inventories, net			2,977			2,671
Prepaid expenses and other			1,688			1,794
Assets held for sale and in discontinued operations			155			4,981
Total current assets			15,350			20,751
Financing receivables, non-current			1,233			1,372
Property, plant and equipment, net			2,981			2,858
Goodwill			2,602			2,528
Other intangible assets, net			493			601
Prepaid pension and other employee benefits			549			564
Investments and other			1,469			1,727
Total assets		$	24,677		$	30,401
Accounts payable, trade		$	4,272		$	4,034
Accounts payable, other			1,437			1,395
Short-term borrowings and current maturities of long-term borrowings			633			1,644
Accrued liabilities and other			6,436			5,957
Liabilities held for sale and in discontinued operations			290			3,990
Total current liabilities			13,068			17,020
Long-term borrowings			4,901			6,290
Pension and other employee benefits			1,551			1,790
Deferred taxes			953			1,022
Other liabilities			1,083			1,077
Total liabilities			21,556			27,199
Minority interest			297			285
Stockholders' equity:
	Capital stock and additional paid-in capital		3,083			3,067
	Retained earnings		1,725			1,760
	Accumulated other comprehensive loss		(1,846	)		(1,772	)
	Less: Treasury stock, at cost (11,611,529 shares at December 31, 2004 and 2003)		(138	)		(138	)
Total stockholders' equity			2,824			2,917
Total liabilities and stockholders' equity		$	24,677		$	30,401

See accompanying notes to the Consolidated Financial Statements

F-6

ABB Ltd

Consolidated Statements of Cash Flows

for the years ended December 31, 2004, 2003 and 2002

			Year ended December 31,
			2004			2003			2002
			(in millions)
Operating activities
Net loss			$	(35	)	$	(779	)	$	(819	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
	Depreciation and amortization			633			585			611
	Provisions			92			(728	)		(132	)
	Pension and postretirement benefits			55			21			37
	Deferred taxes			3			47			(123	)
	Net gain from sale of property, plant and equipment			(36	)		(26	)		(23	)
	Loss on sale of discontinued operations			63			38			194
	Other			167			411			(164	)
	Changes in operating assets and liabilities:
		Marketable securities (trading)		43			13			498
		Trade receivables		(160	)		85			627
		Inventories		(74	)		238			369
		Trade payables		(63	)		(381	)		79
		Other assets and liabilities, net		274			303			(1,154	)
Net cash provided by (used in) operating activities				962			(173	)		—
Investing activities
Changes in financing receivables				176			390			264
Purchases of marketable securities and short-term investments (other than trading)				(2,877	)		(2,781	)		(4,377	)
Purchases of property, plant and equipment				(543	)		(547	)		(602	)
Acquisitions of businesses (net of cash acquired)				(24	)		(55	)		(144	)
Proceeds from sales of marketable securities and short-term investments (other than trading)				2,317			3,049			4,525
Proceeds from sales of property, plant and equipment				123			155			476
Proceeds from sales of businesses (net of cash disposed)				1,182			543			2,509
Net cash provided by investing activities				354			754			2,651
Financing activities
Net changes in borrowings with maturities of 90 days or less				(104	)		(99	)		(1,677	)
Increases in borrowings				265			1,976			9,069
Repayment of borrowings				(2,913	)		(2,893	)		(10,188	)
Treasury and capital stock transactions				(36	)		2,675			—
Other				(17	)		(56	)		3
Net cash provided by (used in) financing activities				(2,805	)		1,603			(2,793	)
Effects of exchange rate changes on cash and equivalents				74			150			141
Adjustment for the net change in cash and equivalents in assets held for sale and in discontinued operations				308			(80	)		60
Net change in cash and equivalents—continuing operations				(1,107	)		2,254			59
Cash and equivalents beginning of year				4,783			2,529			2,470
Cash and equivalents end of year			$	3,676		$	4,783		$	2,529
Interest paid			$	382		$	438		$	482
Taxes paid			$	379		$	238		$	298

See accompanying notes to the Consolidated Financial Statements

F-7

ABB Ltd
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 2004, 2003 and 2002

								Accumulated other comprehensive loss
		Capital stock and additional paid-in capital			Retained earnings			Foreign currency translation adjustment			Unrealized gain (loss) on available- for-sale securities			Minimum pension liability adjustment			Unrealized gain (loss) of cash flow hedge derivatives			Total accumulated other comprehensive loss			Treasury stock			Total stockholders' equity
		(in millions)
Balance at January 1, 2002,		$	2,028		$	3,358		$	(1,521	)	$	(41	)	$	(49	)	$	(87	)	$	(1,698	)	$	(1,750	)	$	1,938
Comprehensive loss:
	Net loss					(819	)																				(819	)
	Foreign currency translation adjustments								(304	)											(304	)					(304	)
	Accumulated foreign currency translation adjustments allocated to divestments of businesses								90												90						90
	Effect of change in fair value of available- for-sale securities, net of tax of $1											3									3						3
	Minimum pension liability adjustments, net of tax of $30														(107	)					(107	)					(107	)
	Change in derivatives qualifying as cash flow hedges, net of tax of $52																	131			131						131
	Total comprehensive loss																										(1,006	)
Other			(1	)																							(1	)
Balance at December 31, 2002,			2,027			2,539			(1,735	)		(38	)		(156	)		44			(1,885	)		(1,750	)		931
Comprehensive loss:
Net loss						(779	)																				(779	)
	Foreign currency translation adjustments								25												25						25
	Accumulated foreign currency translation adjustments allocated to divestments of businesses								(37	)											(37	)					(37	)
	Effect of change in fair value of available- for-sale securities, net of tax of $18											65									65						65
	Minimum pension liability adjustments, net of tax of $5														19						19						19
	Change in derivatives qualifying as cash flow hedges, net of tax of $13																	41			41						41
	Total comprehensive loss																										(666	)
	Sale of treasury stock		(1,456	)																				1,612			156
	Capital stock issued in connection with rights offering, net		2,487																								2,487
	Call options		9																								9
Balance at December 31, 2003,			3,067			1,760			(1,747	)		27			(137	)		85			(1,772	)		(138	)		2,917
Comprehensive loss:
Net loss						(35	)																				(35	)
	Foreign currency translation adjustments								19												19						19
	Accumulated foreign currency translation adjustments allocated to divestments of businesses								20												20						20
	Effect of change in fair value of available- for-sale securities, net of tax of $6											(15	)								(15	)					(15	)
	Minimum pension liability adjustments, net of tax of $37														(69	)					(69	)					(69	)
	Change in derivatives qualifying as cash flow hedges, net of tax of $16																	(29	)		(29	)					(29	)
	Total comprehensive loss																										(109	)
	Call options		8																								8
	Other		8																								8
Balance at December 31, 2004,		$	3,083		$	1,725		$	(1,708	)	$	12		$	(206	)	$	56		$	(1,846	)	$	(138	)	$	2,824

See accompanying notes to the Consolidated Financial Statements

F-8

ABB Ltd

Notes to the Consolidated Financial Statements

(U.S. dollar amounts in millions, except per share amounts)

Note 1    The company

        ABB Ltd and its subsidiaries (collectively, the "Company") is a leading global company in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact. The Company works with customers to engineer and install networks, facilities and plants with particular emphasis on enhancing efficiency and productivity for customers that source, transform, transmit and distribute energy.

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 generally accepted accounting principles and are presented in United States dollars ($) unless otherwise stated. Par value of capital stock is denominated in Swiss francs.

Scope of consolidation

        The Consolidated Financial Statements include 100 percent of the assets, liabilities, revenues, expenses, income, loss and cash flows of ABB Ltd and companies in which ABB Ltd has a controlling interest (subsidiaries), as if ABB Ltd and its subsidiaries were a single company. Intercompany accounts and transactions have been eliminated. Minority interest is calculated for entities fully consolidated but not wholly owned. The components of net income and equity attributable to the minority shareholders are presented in the minority interest line items included in the Consolidated Income Statements and Consolidated Balance Sheets, respectively.

        Effective January 31, 2003, variable interest entities (VIEs) are consolidated when the Company is considered the primary beneficiary. Also, effective January 31, 2003, previously consolidated VIEs would be deconsolidated when a triggering event, as defined by Financial Accounting Standards Board Interpretation No. 46(R) (FIN 46R), Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51, indicates the Company is no longer the primary beneficiary. For those VIEs where the Company is not the primary beneficiary, existing consolidation policies are applied. See Note 8 for information relating to the impact of adopting FIN 46R.

        Investments in joint ventures and affiliated companies in which the Company has significant influence, but not a controlling interest, are accounted for using the equity method. This is generally presumed to exist when the Company owns between 20 percent and 50 percent of the investee. In certain circumstances, the Company's ownership is between 20 percent and 50 percent of the investee but it consolidates the investment because the Company participates in significant operating and financial decisions of the investee.

        Under the equity method, the Company's investment in and amounts due to and from an equity investee are included in the Consolidated Balance Sheets; the Company's share of an investee's earnings is included in the Consolidated Income Statements; and the dividends, cash distributions, loans or other cash received from the investee, additional cash investments, loan repayments or other cash paid to the investee, are included in the Consolidated Balance Sheets and the Consolidated Statements

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of Cash Flows. Additionally, the carrying values of investments accounted for using the equity method of accounting are adjusted downward to reflect any other-than-temporary declines in value.

        Investments in non-public companies in which the Company does not have a controlling interest or significant influence are accounted for at cost. This is generally presumed to exist when the Company owns less than 20 percent of the investee. Dividends and other distributions of earnings from these investments are included in income when received. The carrying value of investments accounted for using the cost method of accounting are adjusted downward to reflect any other-than-temporary declines in value.

Reclassifications

        Amounts reported for prior years in the Consolidated Financial Statements and Notes have been reclassified to conform to the current year's presentation, primarily as a result of the application of Statement of Financial Accounting Standards No. 144 (SFAS 144), Accounting for the Impairment or Disposal of Long-Lived Assets, in reflecting assets and liabilities held for sale and in discontinued operations.

Operating cycle

        A portion of the Company's operating cycle, including long-term construction activities, exceeds one year. For classification of current assets and liabilities related to these types of construction activities, the Company elected to use the duration of the contract as its operating cycle.

Use of estimates

        The preparation of the Consolidated Financial Statements requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates.

Concentrations of credit risk

        The Company sells a broad range of products, systems and services to a wide range of industrial and commercial customers throughout the world. Concentrations of credit risk with respect to trade receivables 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 and, generally, no collateral is required.

        Subsequent to the sale of a significant portion of the Company's Structured Finance business during 2002, the Financial Services activities of the Company were substantially reduced. As a consequence of this divestment, the credit risk of the Company's remaining Financial Services activities is primarily concentrated in the remaining lease and loan portfolio. Policies and procedures to control the remaining credit risks include measurements to develop and ensure the maintenance of a diversified portfolio through the active monitoring of counterparty, country and industry exposure.

        The Company maintains reserves for potential credit losses and such losses, in the aggregate, are in line with the Company's expectations.

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        It is Company 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, as well as maintaining such investments in deposits or liquid investments. 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 a counterparty will fail to meet its obligations. To reduce this risk, the Company has credit policies that require the establishment and periodic review of credit limits for individual counterparties. In addition, the Company has entered into close-out netting agreements with most 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.

Cash and equivalents

        Cash and equivalents include highly liquid investments with original maturities of three months or less. Cash and equivalents does not include restricted cash of $452 million and $433 million at December 31, 2004 and 2003, respectively, which are reflected as long-term assets.

Marketable securities and short-term investments

        Debt and equity securities are classified as either trading or available-for-sale at the time of purchase and are carried at fair value. Debt and equity securities that are purchased and held principally for the purpose of sale in the near term are classified as trading securities and unrealized gains and losses thereon are included in the determination of earnings. Unrealized gains and losses on available-for-sale 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 (accumulated other comprehensive loss) until realized. Realized gains and losses on available-for-sale securities are computed based upon the historical cost of these securities applied using the specific identification method. Declines in fair values of available-for-sale securities that are other-than-temporary are included in the determination of earnings.

        The Company analyzes its available-for-sale securities for impairment during each reporting period to evaluate whether an event or change in circumstances has occurred in that period that may have a significant adverse effect on the fair value of the investment. The Company records an impairment charge through current period earnings and adjusts the cost basis for such other-than-temporary declines in fair value when the fair value is not anticipated to recover above cost within a three-month period after the measurement date unless there are mitigating factors that indicate an impairment charge through earnings may not be required. If an impairment charge is recorded, subsequent recoveries in fair value are not reflected in earnings until sale of the security.

Revenue recognition

        The Company recognizes revenues from the sale of manufactured products when persuasive evidence of an arrangement exists, the price is fixed or determinable, collectibility is reasonably assured and upon transfer of title, including the risks and rewards of ownership to the customer, or upon the

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rendering of services. If contracts for sale of manufactured products require installation that can only be performed by the Company, revenues are deferred until installation of the products is complete. In accordance with Emerging Issues Task Force No. 00-21, Revenue Arrangements with Multiple Deliverables, when multiple elements such as products and services are contained in a single arrangement or in related arrangements with the same customer, the Company allocates revenues to each element based on its relative fair value, provided that such element meets the criteria for treatment as a separate unit of accounting. Revenues from contracts that contain customer acceptance provisions are deferred until customer acceptance occurs, the Company has tested to the level required to ensure that acceptance will occur or the contractual acceptance period has lapsed.

        Revenues under long-term contracts are recognized using the percentage-of-completion method of accounting. The Company principally uses the cost-to-cost or delivery events methods to measure progress towards completion on contracts. Management determines the method to be used by type of contract based on its judgment as to which method best measures actual progress towards completion. Revenues under cost-reimbursement contracts are recognized as costs are incurred.

Product-related expenses and contract loss provisions

        Anticipated costs for warranties are recorded when revenues are recognized. Losses on product and maintenance-type 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 are recorded as a component of cost of sales.

Receivables

        The Company accounts for the securitization of trade receivables in accordance with Statement of Financial Accounting Standards No. 140 (SFAS 140), Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 140 requires an entity to recognize the financial and servicing assets it controls and the liabilities it has incurred and to derecognize financial assets when control has been surrendered, as evaluated in accordance with the criteria provided in SFAS 140.

        The Company accounts for the transfer of its receivables to Qualifying Special Purpose Entities (QSPEs) as a sale of those receivables to the extent that consideration other than beneficial interests in the transferred accounts receivable is received. The Company does not recognize the transfer as a sale unless the receivables have been put presumptively beyond the reach of the Company and its creditors, even in bankruptcy or other receivership. In addition, the QSPEs must obtain the right to pledge or exchange the transferred receivables, and the Company cannot retain the ability or obligation to repurchase or redeem the transferred receivables.

        At the time the receivables are sold, the balances are removed from trade receivables and a retained interest or deferred purchase price component is recorded in other receivables. The retained interest is recorded at its estimated fair value. Costs associated with the sale of receivables are included in the determination of earnings.

        The Company, in its normal course of business, sells receivables outside its securitization programs without recourse (see Note 7). Sales or transfers that do not meet the requirements of SFAS 140 are accounted for as secured borrowings.

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Inventories

        Inventories are stated at the lower of cost (determined using either the first-in, first-out or the weighted-average cost method) or market. Inventoried costs relating to percentage-of-completion contracts are stated at actual production costs, including overhead incurred to date, reduced by amounts recognized in cost of sales. For inventory relating to long-term contracts, inventoried costs include amounts relating to contracts with long production cycles, a portion of which is not expected to be realized within one year.

Impairment of long-lived assets and accounting for discontinued operations

        Long-lived assets that are "held and used" are assessed for impairment when events or circumstances indicate the carrying amount of the asset may not be recoverable. If the asset's net carrying value exceeds the asset's net undiscounted cash flows expected to be generated over its remaining useful life, the carrying amount of the asset is reduced to its estimated fair value, pursuant to the measurement criteria of Statement of Financial Accounting Standards No. 144 (SFAS 144), Accounting for the Impairment or Disposal of Long-Lived Assets. The Company adopted SFAS 144 as of January 1, 2002. In the Consolidated Statements of Cash Flows, the amounts related to businesses with assets and liabilities held for sale and in discontinued operations are not segregated, as permitted by Statement of Financial Accounting Standards No. 95, Statement of Cash Flows.

        In accordance with SFAS 144, the Company includes in assets and liabilities held for sale and in discontinued operations the assets and liabilities that meet certain criteria with respect to the Company's plans for their sale or abandonment. Depreciation and amortization cease when the asset meets the criteria to be classified as held for sale. If (1) a planned or completed disposal involves a component (disposal group) of the Company whose operations and cash flows can be distinguished operationally and for financial reporting purposes; (2) such operations and cash flows will be (or have been) eliminated from the Company's ongoing operations; and (3) the Company will not have any significant continuing involvement in the disposal group, then the disposal group's results of operations are presented as discontinued operations for all periods. Operating losses from discontinued operations are recognized in the period in which they occur. Long-lived assets (or groups of assets and related liabilities) classified as held for sale, are measured at the lower of carrying amount or fair value less cost to sell.

        In addition to the interest expense contained within businesses classified as discontinued operations, a portion of the Company's interest expense is reclassified from interest and other finance expense to loss from discontinued operations, net of tax, in accordance with Emerging Issues Task Force No. 87-24 (EITF 87-24), Allocation of Interest to Discontinued Operations. Such amounts were $20 million, $33 million and $41 million in 2004, 2003 and 2002, respectively. These amounts were calculated based upon the ratio of net assets of the discontinued business less debt that is required to be paid as a result of the disposal, divided by the sum of total net assets and total debt (other than the portion of debt directly attributable to other operations of the Company, debt of the discontinued operation that will be assumed by the buyer and debt that is required to be paid as a result of the disposal transaction). This ratio was multiplied by the portion of total interest expense not directly attributable to other operations of the Company to arrive at allocable interest attributable to businesses reflected as discontinued operations.

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Goodwill and other intangible assets

        The excess of cost over the fair value of net assets of acquired businesses is recorded as goodwill. The Company accounts for its goodwill in accordance with Statement of Financial Accounting Standards No. 142 (SFAS 142), Goodwill and Other Intangible Assets. Under SFAS 142, effective January 1, 2002, the Company ceased amortizing goodwill. In accordance with SFAS 142, goodwill is tested for impairment annually and also upon the occurrence of a triggering event requiring the re-assessment of a business' carrying value of its goodwill. The Company performs its annual impairment assessment on October 1. A fair value approach is used to identify potential goodwill impairment and, when necessary, measure the amount of impairment. The Company uses a discounted cash flow model to determine the fair value of reporting units, unless there is a readily determinable fair market value.

        The cost of acquired intangible assets is amortized on a straight-line basis over their estimated useful lives, typically ranging from 3 to 10 years. Intangible assets are tested for impairment upon the occurrence of certain triggering events.

Capitalized software costs

        Capitalized costs of software for internal use are accounted for in accordance with Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, and are amortized on a straight-line basis over the estimated useful life of the software, typically ranging from 3 to 5 years. Capitalized costs of a software product to be sold are accounted for in accordance with Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, and are carried at the lower of unamortized cost or net realizable value until the product is available for general release to customers, at which time capitalization ceases and costs are amortized on a straight-line basis over the estimated life of the product. The Company expenses costs incurred prior to technological feasibility, and thereafter capitalizes costs incurred in developing or obtaining software for internal use and for software products to be sold.

Property, plant and equipment

        Property, plant and equipment is stated at cost, less accumulated depreciation, and is depreciated using the straight-line method over the estimated useful lives of the assets as follows: 10 to 50 years for buildings and leasehold improvements and 3 to 15 years for machinery and equipment.

Derivative financial instruments

        The Company uses derivative financial instruments to manage interest rate and currency exposures, and to a lesser extent commodity exposures, arising from its global operating, financing and investing activities. The Company's policies require that its industrial entities hedge their exposure from firm commitments denominated in foreign currencies, as well as at least fifty percent of the anticipated foreign currency denominated sales volume of standard products over the next twelve months. In addition, derivative financial instruments were also used for proprietary trading purposes within the

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Company's former Financial Services division and within limits determined by the Company's Board of Directors until June 2002, when the Company ceased entering into new positions.

        The Company accounts for its derivative financial instruments in accordance with Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as subsequently amended (SFAS 133). SFAS 133 requires the Company to recognize all derivatives, other than certain derivatives indexed to the Company's own stock, on the Consolidated Balance Sheets at fair value. Derivatives that are not designated as hedges must be adjusted to fair value through earnings. 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 through earnings or recognized in accumulated other comprehensive loss until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings.

        Forward foreign exchange contracts are the primary instrument used to manage foreign exchange risk. Where forward foreign exchange contracts are designated as cash flow hedges under SFAS 133, changes in their fair value are recorded in accumulated other comprehensive loss until the hedged item is recognized in earnings. The Company also enters into forward foreign exchange contracts that serve as economic hedges of existing assets and liabilities. These are not designated as accounting hedges under SFAS 133 and, consequently, changes in their fair value are reported in earnings where they offset the translation gain or loss on the foreign currency denominated asset or liability.

        To reduce its interest rate and currency exposure arising from its funding activities and to hedge specific assets, the Company uses interest rate and currency swaps. Where interest rate swaps are designated as fair value hedges, the changes in fair value of the swaps are recognized in earnings, as are the changes in the fair value of the underlying assets or liabilities. Where such interest rate swaps do not qualify for the short cut method as defined under SFAS 133, any ineffectiveness is included in earnings. Where interest rate swaps are designated as cash flow hedges, their change in value is recognized in accumulated other comprehensive loss until the hedged item is recognized in earnings.

        All other swaps, futures, options and forwards that are designated as effective hedges of specific assets, liabilities or committed or forecasted transactions are recognized in earnings consistent with the effects of the hedged transactions.

        If an underlying hedged transaction is terminated early, the hedging derivative financial instrument is treated as if terminated simultaneously, with any gain or loss on termination of the derivative immediately recognized in earnings. Where derivative financial instruments have been designated as hedges of forecasted transactions, and such forecasted transactions become probable of not occurring, hedge accounting ceases and any derivative gain or loss previously included in accumulated other comprehensive loss is reclassified into earnings.

        Certain commercial contracts may grant rights to the Company or other counterparties, or contain other provisions considered to be derivatives under SFAS 133. Such embedded derivatives are assessed at inception of the contract and depending on their characteristics accounted for as separate derivative instruments pursuant to SFAS 133.

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Sale-leasebacks

        The Company periodically enters into transactions accounted for as sale-leasebacks, in which fixed assets, generally real estate and/or equipment, are sold to a third party and then leased for use by the Company. Under certain circumstances, the necessary criteria to recognize a sale of the assets may not occur, and the transaction is reflected as a financing transaction, with the proceeds received from the transaction reflected as a borrowing or as a deposit liability. When the necessary criteria have been met to recognize a sale, gains or losses on the sale of the assets are generally deferred and amortized over the term of the transaction, except in certain limited instances when a portion of the gain or loss may be recognized. The lease of the assets is accounted for as either an operating lease or a capital lease depending upon its specific terms, as required by Statement of Financial Accounting Standards No. 13, Accounting for Leases. By their nature, sale-leaseback transactions are generally highly structured and complex transactions, which therefore require detailed analyses to be made by the Company in determining the appropriate accounting treatment.

Insurance

        The following accounting policies apply specifically to the Reinsurance business. In April 2004, the Company completed the sale of its Reinsurance business and reflected the results of operations in loss from discontinued operations, net of tax, and the assets and liabilities in assets and liabilities held for sale and in discontinued operations for all periods presented.

Premiums and acquisition costs

        Premiums were generally earned pro rata over the period coverage was provided. Premiums earned included estimates of certain premiums due, including adjustments on retrospectively rated contracts. Premium receivables included premiums related to retrospectively rated contracts that represented the estimate of the difference between provisional premiums received and the ultimate premiums due. Unearned premiums represented the portion of premiums written that was applicable to the unexpired terms of reinsurance contracts or certificates in force. These unearned premiums were calculated by the monthly pro rata method or were based on reports from ceding companies. Acquisition costs were costs related to the acquisition of new business and renewals. These costs were deferred and charged against earnings ratably over the terms of the related policy.

Profit commission

        Certain contracts carried terms and conditions that resulted in the payment of profit commissions. Estimates of profit commissions were reviewed based on underwriting experience to date and, as adjustments become necessary, such adjustments were reflected in earnings.

Loss and loss adjustment expenses

        Loss and loss adjustment expenses were charged to operations as incurred. The liabilities for unpaid loss and loss adjustment expenses were determined on the basis of reports from ceding companies and underwriting associations, as well as estimates by management and in-house actuaries, including those for incurred, but not reported, losses, salvage and subrogation recoveries. Inherent in the estimates of losses were expected trends of frequency, severity and other factors that could vary significantly as claims were settled. The Company estimated expected trends using actuarial methods

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widely used in the insurance industry, such as the Bornhuetter-Ferguson method, utilizing the Company's historically paid and incurred losses.

Fees

        Contracts that neither result in the transfer of insurance risk nor the reasonable possibility of significant loss to the reinsurer were accounted for as financing arrangements rather than reinsurance. Consideration received for such contracts was reflected as accounts payable, other, and was amortized on a pro rata basis over the life of the contract.

Funds withheld

        Under the terms of certain reinsurance agreements, the ceding reinsurer retained a portion of the premium to provide security for expected loss payments. The funds withheld were generally invested by the ceding reinsurer and earn an investment return that became additional funds withheld.

Reinsurance

        The Company sought to reduce the loss that may have arisen from catastrophes and other events that may have caused unfavorable underwriting results by reinsuring certain levels of risks with other insurance enterprises or reinsurers. Reinsurance contracts were accounted for by reducing premiums earned by amounts paid to the reinsurers. Recoverable amounts were established for paid and unpaid losses and loss adjustment expense ceded to the reinsurer. Amounts recoverable from the reinsurer were estimated in a manner consistent with the claim liability associated with the reinsurance policy. Contracts where it was not reasonably possible that the reinsurer would realize a significant loss from the insurance risk generally did not meet the conditions for reinsurance accounting and were recorded as deposits. The Company assessed probability of risks transferred in significant loss realization based on the terms in the reinsurance contract that impact the timing and amount of reimbursement under the contract and the present value of all cash flows without regard to how cash flows are characterized, in accordance with Statement of Financial Accounting Standards No. 113, Accounting and Reporting for Reinsurance of Short Duration and Long Duration Contracts.

Translation of foreign currencies and foreign exchange transactions

        The functional currency for most of the Company's operations 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 rates of exchange 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 entity is sold, substantially liquidated or being 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 intra-Company loans that are equity-like in nature with no reasonable expectation of repayment, which are recognized in accumulated other comprehensive loss.

        In highly inflationary countries, monetary balance sheet positions in local currencies are converted into U.S. dollars at the year-end rate. Fixed assets are kept at historical U.S. dollar values from

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acquisition dates. Sales and expenses are converted at the exchange rates prevailing upon the date of the transaction. All translation gains and losses resulting from the restatement of balance sheet positions are included in the determination of earnings.

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 will be in effect when the differences are expected to reverse. For financial statement purposes the Company records a deferred tax asset when it determines that it is probable that the deduction will be sustained based upon the deduction's technical merit. Deferred tax assets are reduced by a valuation allowance to reflect the amount that is more likely than not to be realized.

        Generally, deferred taxes are not provided on the unremitted earnings of subsidiaries to the extent it is expected that these earnings are permanently reinvested. Such earnings may become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends. Deferred taxes are provided in situations where the Company's subsidiaries plan to make future dividend distributions.

        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 relating to audits by tax authorities based upon its best estimate of the facts and circumstances as of each reporting period. Changes in the facts and circumstances could result in a material change to the tax accruals. The Company provides for contingencies whenever it is deemed probable 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.

Research and development

        Research and development expense was $690 million, $635 million and $572 million in 2004, 2003 and 2002, respectively. These costs are included in selling, general and administrative expenses.

Earnings per share

        Basic earnings (loss) per share is calculated by dividing income (loss) by the weighted-average number of shares outstanding during the year. Diluted earnings (loss) per share is calculated by dividing income (loss) 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, if dilutive; the securities issued under the Company's employee incentive plans, if dilutive; and shares issuable in relation to outstanding convertible bonds, if dilutive (See Notes 15, 22 and 24).

Stock-based compensation

        The Company has certain employee incentive plans under which it offers stock-based securities to employees. The plans are described more fully in Note 22. The Company accounts for such stock-based securities using the intrinsic value method of APB Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, as permitted by Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock Based Compensation. All such securities were issued with exercise prices greater

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than or equal to the market prices of the stock on the dates of grant. Accordingly, the Company has recorded no compensation expense related to these securities, except in circumstances when a participant receives appreciation rights or ceases to be employed by a consolidated subsidiary, such as after a divestment by the Company. The following table illustrates the effect on net loss and on loss per share (see Note 24) if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation. Fair value of these securities offered to employees was determined on the date of grant by using a dynamic proprietary option-pricing model (see Note 22).

		Year ended December 31,
		2004			2003			2002
Net loss, as reported		$	(35	)	$	(779	)	$	(819	)
Less: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(8	)		(11	)		(22	)
Pro forma net loss		$	(43	)	$	(790	)	$	(841	)
Loss per share:
	Basic—as reported	$	(0.02	)	$	(0.64	)	$	(0.74	)
	Basic—pro forma	$	(0.02	)	$	(0.65	)	$	(0.76	)
	Diluted—as reported	$	(0.02	)	$	(0.64	)	$	(0.86	)
	Diluted—pro forma	$	(0.02	)	$	(0.65	)	$	(0.88	)

New accounting pronouncements

        In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51. FIN 46 requires variable interest entities (VIEs) to be consolidated by their primary beneficiaries. During 2003, the Company adopted the requirements of FIN 46 and applied the guidance to VIEs in which the Company has an interest. See Note 8 for information relating to the impact of adopting FIN 46. FIN 46 was revised in December 2003. The Company adopted the December revision (FIN 46R) effective March 31, 2004. The adoption of FIN 46R did not have a material impact on the Company's financial position or results of operations.

        In December 2004, the Financial Accounting Standards Board issued Statement No. 123R (SFAS 123R), Share-Based Payment, which replaces SFAS 123 and APB 25 and requires the Company to measure compensation cost for all share-based payments at fair value. The Company plans to adopt SFAS 123R as of July 1, 2005. The Company will recognize share-based employee compensation cost from July 1, 2005, as if the fair-value-based accounting method had been used to account for all employee awards granted, modified, or settled after the effective date and for any awards that were not fully vested as of the effective date. Based on currently existing share-based compensation plans, the Company does not expect the adoption of SFAS 123R to have a material impact on its financial position or results of operations.

Note 3    Discontinued operations

        In December 2002, the Company's Board of Directors approved management's plans to sell the Company's Oil, Gas and Petrochemicals business. As discussed below, the Company completed the sale of the upstream part of the Oil, Gas and Petrochemicals business (Upstream business) in July 2004. In

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December 2002 management did not believe the divestment of the remaining Oil, Gas and Petrochemicals business would be contingent on the resolution of the asbestos litigation facing Combustion Engineering, Inc, a subsidiary of the Company, as described in Note 18. Subsequently, after discussions with potential purchasers, management determined the divestment would likely only occur upon a pre-packaged plan of reorganization for Combustion Engineering, Inc becoming effective. Following the U.S. Third Circuit Court's decision in December 2004 that effectively reversed the District Court's confirmation order regarding the reorganization under the U.S. Bankruptcy Code of Combustion Engineering, Inc, the Company determined it no longer met the criteria required to continue to classify the remaining Oil, Gas and Petrochemicals business in discontinued operations. Therefore, as of the fourth quarter of 2004, the results of operations of the remaining Oil, Gas and Petrochemicals business were reclassified to continuing operations for all periods presented. Additionally, the assets and liabilities of the remaining Oil, Gas and Petrochemicals business are no longer included in assets and liabilities held for sale and in discontinued operations but have been reclassified to the appropriate asset and liability lines in the Consolidated Balance Sheet for all periods presented. The remaining Oil, Gas and Petrochemicals business had revenues of $1,076 million, $1,876 million and $2,314 million and losses before interest and taxes of $4 million, $296 million and $142 million in 2004, 2003 and 2002, respectively.

        The following are divestments of businesses no longer pursued for strategic reasons and which are in line with the Company's strategy to focus on Power Technologies and Automation Technologies as described in Note 26.

        During the fourth quarter of 2004, the Company reclassified most of its Power Lines business, part of the Power Technologies division, to discontinued operations. The businesses that have been reclassified are in Brazil, which was abandoned in the fourth quarter of 2004, and Nigeria and Italy, whose sales were completed in January and February 2005, respectively. Also reclassified is the business in Germany, which the Company plans to sell during 2005. These reclassified businesses had revenues of $117 million, $187 million and $254 million and net losses of $75 million, $10 million and $17 million for the years ended December 31, 2004, 2003 and 2002, respectively. The net loss related to these businesses in 2004 relates to operational losses of $46 million and costs to sell these businesses of $29 million. Losses recorded in 2003 and 2002 relate to operational losses incurred in such years.

        During the fourth quarter of 2004, the Company reclassified its Foundry business, part of the Automation Technologies division, to discontinued operations. The Company plans to sell this business in 2005. The Foundry business had revenues of $41 million, $45 million and $49 million and net losses of $17 million, $0 million and $0 million for the years ended December 31, 2004, 2003 and 2002, respectively. The net loss recorded in 2004 includes $10 million related to costs to sell the Foundry business.

        In January 2004, the Company agreed to sell the Upstream business to a consortium of private equity investors consisting of Candover Partners Limited, JP Morgan Partners LLC and 3i Group PLC (collectively, the "Purchasers"). In July 2004, the Company completed the sale of the Upstream business for an initial purchase price of $925 million. Net cash proceeds from the sale were approximately $800 million, reflecting the initial sales price adjusted for unfunded pension liabilities and changes in net working capital. The Upstream business had revenues of $855 million, $1,499 million and $1,535 million in 2004, 2003 and 2002, respectively, and net losses of $70 million and $44 million in 2004 and 2003, respectively, and net income of $14 million in 2002. Included in the

F-20

$70 million net loss recorded in 2004 is the loss on sale of approximately $26 million which includes goodwill and other intangible assets of approximately $350 million. On February 9, 2005, the Company and the Purchasers entered into a Settlement Agreement and Amendment (Settlement Agreement) finalizing the sales price. The Settlement Agreement also contains provisions to indemnify the Purchasers with respect to certain incomplete projects (see Note 18). The Company believes the provisions recorded for such indemnified projects are adequate.

        In April 2004, the Company completed the sale of its Reinsurance business to White Mountains Insurance Group Limited, a Bermuda-based insurance holding company, receiving gross cash proceeds of $415 million and net cash proceeds of approximately $280 million. As a result of the anticipated sale, the Company recorded an impairment charge of $154 million in the fourth quarter of 2003. The Company recorded losses totaling $41 million and $97 million in 2004 and 2003, and net income of $22 million in 2002 and revenues of $139 million, $782 million and $644 million in 2004, 2003 and 2002, respectively. The $41 million net loss related primarily to foreign exchange effects of the business in 2004 through the date of sale. The 2003 net loss of $97 million includes a $154 million impairment charge, income from operations of approximately $72 million and an allocation of interest of $15 million in accordance with EITF 87-24. The impairment charge recorded in 2003 from the anticipated disposal of the Reinsurance business of $154 million was principally comprised of an asset write-down of $48 million, goodwill and other intangible write-offs of $89 million, selling costs of $25 million, deferred tax write-offs of approximately $16 million, offset in part by an accumulated foreign currency translation gain of $24 million.

        In November 2002, the Company completed the sale of most of its Structured Finance business to General Electric Capital Corporation (GE) and received cash proceeds of approximately $2.0 billion, including a contingent payment of $20 million to be released to the Company should amounts ultimately collected by GE, from a portfolio transferred by the Company to GE, reach specified targets. The Company received the last portion of the contingent payment amount in August 2004. The Company's Structured Finance business had revenues of $262 million in 2002, and a net loss of $183 million in 2002. The 2002 net loss of $183 million included a $146 million loss on disposal, loss from operations of $22 million and the allocation of interest expense of $15 million in accordance with EITF 87-24. The loss on disposal of $146 million was principally comprised of asset write-downs of $15 million, goodwill and other intangible write-offs of $2 million, transaction costs of $27 million, the fair value for GE's right to require the Company to repurchase certain designated assets of $38 million, capital tax expense associated with the disposal of $10 million and an accumulated foreign currency translation loss of $54 million. Upon final settlement in 2004 of a purchase price dispute with GE, the Company recorded a net gain of $14 million.

        Pursuant to the sale and purchase agreement, the Company provided GE with cash collateralized letters of credit totaling $202 million as security for certain performance-related obligations retained by the Company, of which approximately $63 million were outstanding at December 31, 2004. The remaining cash collateralized letters of credit will further be reduced as the performance-related obligations of the Company expire.

        The sale and purchase agreement provided GE the option to require the Company to repurchase certain designated financial assets transferred to GE upon the occurrence of certain events, but in any event no later than February 1, 2004. In January 2004, the Company repurchased the financial assets

F-21

for approximately $28 million. No further obligation exists for the Company to repurchase any assets under the sale and purchase agreement with GE.

        As a continuation of the Company's divestment of its Structured Finance business, the Company completed the sale of ABB Export Bank in December 2003 for approximately $50 million. ABB Export Bank had revenues of $9 million and $17 million in 2003 and 2002, respectively, and a net loss of $9 million in 2003 and net income of $10 million in 2002. The 2003 net loss of $9 million in loss from discontinued operations, net of tax, includes a $12 million loss on disposal, income from operations of $6 million and the allocation of interest expense of $3 million in accordance with EITF 87-24. The loss on disposal of $12 million was principally comprised of an asset write-down of $20 million, transaction costs of $1 million, capital tax expense associated with the disposal of $4 million offset by an accumulated foreign currency translation gain of approximately $13 million.

        In December 2002, the Company completed the sale of its Metering business to Ruhrgas Industries GmbH of Essen, Germany, for $223 million, including $15 million held in escrow until certain disputed items were resolved. The cash held in escrow was released after the resolution of these items in 2003. The Metering business sold to Ruhrgas Industries GmbH had revenues of $372 million and a net loss of $54 million in 2002. The 2002 net loss of $54 million included a $48 million loss on disposal, loss from operations of $3 million and the allocation of interest expense of $3 million in accordance with EITF 87-24. The loss on disposal of $48 million for the sold business was principally comprised of goodwill and other intangible write-offs of $65 million, transaction costs and other provisions of $46 million, tax expense associated with the disposal of $21 million and an accumulated foreign currency translation loss of $35 million, offset in part by a gain of $119 million, being the difference between the proceeds received and net assets of the business. Upon final settlement in 2004 of a purchase price dispute with Ruhrgas Industries GmbH, the Company recorded a net gain of $12 million.

        During the fourth quarter of 2002, the Company reclassified its Wind Energy business to discontinued operations. In December 2003, the Company sold a portion of its Wind Energy business in Germany to GI Ventures AG of Munich, Germany, for proceeds of approximately $35 million including a vendor note of approximately $10 million. The Wind Energy business had revenues of $0 million, $16 million and $48 million and net losses of $25 million, $42 million and $1 million in 2004, 2003 and 2002, respectively. The 2003 net loss of $42 million was comprised principally of a $25 million loss from disposal (net of a tax benefit of $10 million), asset write-downs of $9 million and a loss from operations of $8 million. The 2004 net loss of $25 million, consisted of an additional impairment charge related to a portion of the unsold Wind Energy business.

        In January 2004, the Company completed the sale of its MDCV cable business based in Germany to the Wilms Group of Menden, Germany. This business was part of the Power Technologies division. It had revenues of $74 million and $78 million and net losses of $24 million and $1 million in 2003 and 2002, respectively. The 2003 net loss of $24 million was comprised principally of asset write-downs of $10 million and a loss from operations of $14 million.

        Loss from discontinued operations, net of tax, also includes costs related to the Company's potential asbestos obligation of the Company's U.S. subsidiary, Combustion Engineering Inc., of approximately $262 million, $142 million and $395 million in 2004, 2003 and 2002, respectively (see Note 18).

F-22

        Operating results of the discontinued businesses are summarized as follows:

	Year ended December 31,
	2004			2003			2002
Revenues	$	1,165		$	2,641		$	3,379
Costs and expenses, finance loss		(1,569	)		(2,963	)		(3,818	)
Loss before taxes		(404	)		(322	)		(439	)
Tax expense		(16	)		(48	)		(60	)
Net loss from discontinued operations		(420	)		(370	)		(499	)
Loss from dispositions, net of a tax benefit (expense) of $(25) million, $6 million and $(31) million in 2004, 2003 and 2002, respectively		(63	)		(38	)		(194	)
Loss from discontinued operations, net of tax	$	(483	)	$	(408	)	$	(693	)

        The components of assets and liabilities held for sale and in discontinued operations are summarized as follows:

	December 31,
	2004		2003
Cash and equivalents	$	9	$	317
Marketable securities and short-term investments		—		1,625
Receivables, net		59		1,904
Inventories, net		16		283
Prepaid expenses and other		11		148
Financing receivables, non-current		—		10
Goodwill and Other intangible assets		6		360
Property, plant and equipment, net		50		223
Other assets		4		111
Assets held for sale and in discontinued operations	$	155	$	4,981
Accounts payable	$	49	$	1,060
Short-term borrowings and current maturities of long-term borrowings		2		14
Accrued liabilities and other		112		2,425
Long-term borrowings		18		47
Other liabilities, non-current		109		444
Liabilities held for sale and in discontinued operations	$	290	$	3,990

        Included in the table above are the assets and the liabilities held for sale of the Building Systems businesses of approximately $81 million and $42 million, respectively, at December 31, 2003. In accordance with SFAS 144, certain Building Systems businesses met the criteria for the classification of assets and liabilities as held for sale, but did not meet the additional criteria for its results of operations to be classified as discontinued operations (see Note 4).

F-23

        At December 31, 2004 and 2003, the Consolidated Balance Sheets included $18 million and $79 million of pledged cash balances, respectively. Approximately $0 million and $44 million related to the Company's Reinsurance business and $0 million and $8 million related to the Upstream business and, as such, were included in assets held for sale and in discontinued operations in 2004 and 2003, respectively.

Note 4    Business combinations and other divestments

Acquisitions and investments

        During 2004, 2003, and 2002, the Company invested $24 million, $55 million and $154 million in 24, 24 and 32 new businesses, joint ventures or affiliated companies, respectively. The aggregate excess of the purchase price over the fair value of the net assets acquired totaled $15 million, $2 million and $93 million, in 2004, 2003 and 2002, respectively, and has been recorded as goodwill. Assuming these acquisitions had occurred on the first day of the year prior to their purchase, the pro forma Consolidated Income Statements for those years would not have materially differed from reported amounts either on an individual or an aggregate basis.

Other divestitures

        In addition to the sold businesses described under discontinued operations, the Company periodically divests businesses and investments not considered by management to be aligned with its focus on Power Technologies and Automation Technologies as described in Note 26. The results of operations of these divested businesses are included in the Company's Consolidated Income Statements in the respective line items of income from continuing operations, through the date of disposition.

Divestment of Building Systems businesses

        In April 2002, the Company decided to dispose of its Building Systems businesses. The gradual disposal process was envisaged to extend over a non-defined period of time preceded by restructurings in several locations. The disposal of the Building Systems businesses contemplated that the Company would retain an involvement in the disposed operations through a combination of technology license agreements, supplier relationships, retention of certain orders and participation on the Board of Directors of some of the disposed of companies. As a result of these factors, the Company concluded that classification of the Building Systems businesses as discontinued operations in accordance with SFAS 144 was not appropriate.

        In August 2003, the Company completed the sale of its Building Systems businesses located in Sweden, Norway, Denmark, Finland, Russia and the Baltics to YIT Corporation of Helsinki, Finland, for consideration of approximately $213 million. The Company recognized a net gain on disposal of $124 million, which is included in other income (expense), net.

        During 2003, the Company completed, in a series of transactions, the sale of its Building Systems businesses located in several other countries, principally Belgium, the Netherlands, Austria, and the UK for aggregate proceeds of approximately $21 million. The Company recognized a net loss on disposal of $41 million, which is included in other income (expense), net.

F-24

        In February 2004, the Company completed the sale of its Building Systems business located in Switzerland to CapVis Equity Partners AG, a Swiss private equity company, for a purchase price of approximately $39 million. The Company retained a 10 percent ownership interest in the sold business and recognized a net gain on disposal of $12 million, which is included in other income (expense), net.

Divestment of Air Handling business

        In January 2002, the Company sold its Air Handling business to Global Air Movement (Luxembourg) Sarl for proceeds of $147 million, including a vendor note of 39 million euro principal value, issued by the purchaser. The Company recognized a net gain on disposal of $74 million, which is included in other income (expense), net.

Other divestitures

        In June 2003, the Company sold its interests in certain equity investees in Australia for approximately $90 million, resulting in a gain on disposal of $28 million recorded in other income (expense), net.

        In June 2003, the Company sold its entire 35 percent interest in Swedish Export Credit Corporation to the Government of Sweden for 1,240 million Swedish krona ($159 million), resulting in net proceeds of approximately $149 million and a loss on disposal of $80 million recorded in other income (expense), net.

        In June 2004, the Company sold a business in Sweden, formerly part of the automation technologies division, for $11 million, resulting in a gain on disposal of $7 million recorded in other income (expense), net.

        In December 2004, the Company sold its entire 15.7 percent interest in IXYS Corporation, Santa Clara, California, mainly to institutional investors, for approximately $42 million and recorded a gain on disposal of $20 million in other income (expense), net.

        During 2004, 2003 and 2002, the Company sold several operating units and investments, excluding the divestments disclosed above, for total proceeds of $39 million, $31 million and $209 million, respectively, and recognized net gains on disposal of $13 million, $12 million and $24 million, respectively, which are included in other income (expense), net. Revenues and net income from these businesses and investments were not significant in 2004, 2003 and 2002.

F-25

Note 5    Marketable securities and short-term investments

        Marketable securities and short-term investments consist of the following:

	December 31,
	2004		2003
Available-for-sale securities	$	263	$	314
Time deposits		247		142
Securities serving as hedges of the Company's management incentive plan (see Note 22)		14		17
Total	$	524	$	473

        To hedge its exposure to fluctuations in fair value of the Company's warrant appreciation rights (WARs) issued under the Company's management incentive plan, the Company purchases cash-settled call options, which entitle the Company to receive amounts equivalent to its obligations under the outstanding WARs. In accordance with Emerging Issues Task Force No. 00-19 (EITF 00-19), Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock, the cash-settled call options have been recorded as assets measured at fair value, with subsequent changes in fair value recorded through earnings as an offset to the compensation expense recorded in connection with the WARs.

        Available-for-sale securities classified as marketable securities consist of the following:

		Cost		Unrealized gains		Unrealized losses			Fair value
At December 31, 2004:
Equity securities		$	28	$	9	$	—		$	37
Debt securities:
	U.S. government obligations		99		—		—			99
	European government obligations		30		—		(1	)		29
	Corporate		59		1		(1	)		59
	Other		33		6		—			39
Total debt securities			221		7		(2	)		226
Total		$	249	$	16	$	(2	)	$	263
At December 31, 2003:
Equity securities		$	76	$	25	$	(1	)	$	100
	Debt securities:
	U.S. government obligations		71		2		(1	)		72
	European government obligations		29		1		(1	)		29
	Corporate		5		—		—			5
	Other		87		21		—			108
Total debt securities			192		24		(2	)		214
Total		$	268	$	49	$	(3	)	$	314

F-26

        At December 31, 2004, contractual maturities of the above available-for-sale debt securities consist of the following:

	Cost		Fair value
Less than one year	$	37	$	36
One to five years		99		99
Six to ten years		56		57
Due after ten years		29		34
Total	$	221	$	226

        Gross realized gains on available-for-sale securities were $85 million, $8 million and $11 million in 2004, 2003 and 2002, respectively. The $85 million gain included a realized gain of $43 million relating to the non-cash contribution of $549 million of marketable securities to the Company's German pension plans as described in Note 21. Gross realized losses on available-for-sale securities were $5 million, $2 million and $9 million in 2004, 2003 and 2002, respectively. Additionally, in 2004, 2003 and 2002, the Company recorded charges of $0 million, $36 million and $6 million, respectively, related to the impairment of available-for-sale securities. The charges recorded in 2003 and 2002 are included in interest and other finance expense and other income (expense), net, respectively. In 2003, the Company sold available-for-sale securities in a strategic investment included in investments and other resulting in realized loss of $40 million, which was recorded in interest and other finance expense.

        The following table reflects gross unrealized losses and the fair value of those available-for-sale securities, aggregated by investment category, that at December 31, 2004, have been in a continuous unrealized loss position.

	Securities with unrealized losses for a period less than 12 months					Securities with unrealized losses for a period greater than 12 months
Description of securities:	Fair value		Unrealized losses			Fair value		Unrealized losses
Corporate obligations	$	29	$	(1	)	$	—	$	—
European government obligations		—		—			27		(1	)
	$	29	$	(1	)	$	27	$	(1	)

        Unrealized losses on equity and debt securities held and classified as available-for-sale are judged to be only temporary based on the creditworthiness of the obligors as it relates to debt securities and as it relates to all corporate securities held, the financial position of the underlying companies, the significance of the unrealized losses relative to the asset cost and the duration that the securities have been in an unrealized loss position.

        The net change in unrealized gains and losses in fair values of trading securities was not significant in 2004, 2003 or 2002.

        At December 31, 2004 and 2003, the Company pledged $51 million and $41 million, respectively, of marketable securities as collateral for issued letters of credit and other security arrangements.

F-27

Note 6    Financial instruments

Cash flow hedges

        The Company enters into forward foreign exchange contracts to manage the foreign exchange risk of its operations. To a lesser extent the Company also uses commodity contracts to manage its commodity risks. Where such instruments are designated and qualify as cash flow hedges, the changes in their fair value are recorded in accumulated other comprehensive loss, until the hedged item is recognized in earnings. At such time, the respective amount in accumulated other comprehensive loss is released to earnings and is shown in either revenues or cost of sales consistent with the classification of the earnings impact of the underlying transaction being hedged. Any hedge ineffectiveness is included in revenues and cost of sales, but was not significant for 2004 or 2003.

        The amount of derivative financial instrument net gains or losses reclassified from accumulated other comprehensive loss to earnings was a net gain of $31 million (excluding the $14 million loss described below) and $58 million in 2004 and 2003, respectively. It is anticipated that during 2005, $30 million of net gains included in accumulated other comprehensive loss at December 31, 2004, will be reclassified to earnings when the underlying hedged transactions impact earnings. Derivative financial instrument gains and losses reclassified to earnings offset the losses and gains on the items being hedged.

        While the Company's cash flow hedges are primarily hedges of exposures over the next twelve months, the amount included in accumulated other comprehensive loss at December 31, 2004 includes hedges of certain exposures maturing up to 2009.

        During 2004, the Company reclassified losses of $14 million from accumulated other comprehensive loss to earnings as a result of the discontinuance of certain cash flow hedges as it became probable that the original forecasted transactions related to these hedges would not occur within the forecasted time period.

Fair value hedges

        To reduce its interest rate and foreign currency exposures arising primarily from its funding activities, the Company uses interest rate and cross-currency swaps. Where such instruments are designated as fair value hedges, the changes in fair value of these instruments, as well as the changes in fair value of the underlying liabilities, are recorded as offsetting gains and losses in the determination of earnings. The hedge ineffectiveness in both 2004 and 2003 resulted in a gain of $11 million.

Disclosure about fair values of financial instruments

        The Company uses the following methods and assumptions in estimating fair values for financial instruments:

        Cash and equivalents, receivables, accounts payable, short-term borrowings and current maturities of long-term borrowings: The carrying amounts approximate the fair values.

F-28

        Marketable securities and short-term investments:    Fair values of marketable securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. The carrying amounts of short-term investments approximate the fair values.

        Financing receivables and loans (non-current portion):    Fair values are determined using a discounted cash flow methodology based upon loan rates of similar instruments. The carrying values and estimated fair values of long-term loans granted at December 31, 2004, were $337 million and $337 million, respectively, and at December 31, 2003 were $437 million and $424 million, respectively.

        Long-term borrowings (non-current portion):    Fair values are based on the present value of future cash flows discounted at estimated borrowing rates for similar debt instruments or in the case of bond or note issuances, using the relevant borrowing rates derived from interest rate swap curves. Such swap curves are composed of interest rates quoted by market participants for the relevant maturities, excluding any component associated with the credit risk of counterparties. As these bonds or note issuances reflect liabilities of the Company, if the Company's credit rating were reflected in these discount rates, the present value calculation would result in a lower fair value liability. The carrying values and estimated fair values of long-term borrowings at December 31, 2004, were $4,901 million and $5,533 million, respectively, and at December 31, 2003, were $6,290 million and $6,936 million, respectively.

        Derivative financial instruments:    Fair values are the amounts by which the contracts could be settled. These fair values are estimated by using a discounted cash flow methodology based on available market data, option pricing models or by obtaining quotes from brokers. At December 31, 2004 and 2003, the carrying values equal fair values. Current derivative assets are recorded in prepaid expenses and other, and non-current derivative assets are recorded in investments and other. Current derivative liabilities are recorded in accrued liabilities and other, and non-current derivative liabilities are recorded in other liabilities. Current derivative assets and current derivative liabilities in 2003 have been reclassified to conform with the current year's presentation. The fair values are:

	December 31,
	2004		2003
Derivative assets, current	$	374	$	398
Derivative assets, non-current		251		287
Total	$	625	$	685
Derivative liabilities, current	$	324	$	180
Derivative liabilities, non-current		53		40
Total	$	377	$	220

F-29

Note 7    Receivables

        Receivables consist of the following:

		December 31,
		2004			2003
Trade receivables		$	4,022		$	3,647
Other receivables			1,289			1,263
Allowance			(317	)		(245	)
			4,994			4,665
Unbilled receivables, net:
	Costs and estimated profits in excess of billings		2,257			2,233
	Advance payments received		(921	)		(849	)
			1,336			1,384
Total		$	6,330		$	6,049

        Trade receivables include contractual retention amounts billed to customers of $124 million and $101 million at December 31, 2004 and 2003, respectively. Management expects the majority of related contracts will be completed and substantially all of the billed amounts retained by the customer will be collected within one year of the respective balance sheet date. Other receivables consist of value added tax, claims, employee and customer related advances, the current portion of direct finance and sales-type leases and other non-trade receivables, including the retained interests on sold receivables under the Company's securitization programs.

        Costs and estimated profits in excess of billings represent sales earned and recognized under the percentage-of-completion method. Amounts are expected to be collected within one year of the respective balance sheet date.

        During 2004 and 2003, the Company sold trade receivables to two separate QSPEs, unrelated to the Company, in revolving-period securitizations. The Company retains servicing responsibility relating to the sold receivables. Solely for the purpose of credit enhancement from the perspective of the QSPEs, the Company retains an interest in the sold receivables (retained interests). These retained interests are initially measured at estimated fair values, which the Company believes approximate historical carrying values, and are subsequently measured based on a periodic evaluation of collections and delinquencies.

        Given the short-term, lower-risk nature of the assets securitized, market movements in interest rates would not significantly impact the carrying value of the Company's retained interests. An adverse movement in foreign currency rates could have an impact on the carrying value of these retained interests as the retained interests are denominated in the original currencies underlying the sold receivables. While such remeasurements are recognized in earnings, the impact has historically not been significant due to the short-term nature of the receivables and economic hedges in place relating to foreign currency movement risk.

        The Company routinely evaluates its portfolio of trade receivables for risk of non-collection and records an allowance for doubtful debts to reflect the carrying value of its trade receivables at

F-30

estimated net realizable value. Pursuant to the requirements of the revolving-period securitizations through which the Company securitizes certain of its trade receivables, the Company effectively bears the risk of potential delinquency or default associated with trade receivables sold up to the amount of its retained interest relating to the relevant securitization program. Accordingly, in the normal course of servicing the assets sold, the Company evaluates potential collection losses and delinquencies and updates the estimated fair value of the Company's retained interests. An increase in delinquency rates compared to historic levels would cause an increase in the retained interest. Ultimately, if the customer defaults, the Company will be responsible for absorbing the amount. The fair value of the retained interests at December 31, 2004 and 2003, was approximately $349 million and $367 million, respectively.

        In accordance with SFAS 140, the Company has not recorded a servicing asset or liability as management believes it is not practicable to estimate this value given that verifiable data as to the fair value of the compensation and/or cost related to servicing the types of the assets sold are not readily obtainable nor reliably estimable for the multiple geographic markets in which the entities selling receivables operate.

        During 2004, 2003 and 2002, the following cash flows were received from and paid to QSPEs:

	December 31,
	2004			2003			2002
Gross trade receivables sold to QSPEs ($25, $505 and $832)(1)	$	5,846		$	5,661		$	5,972
Collections made on behalf of and paid to QSPEs ($(23), $(696) and $(753))(1)		(5,713	)		(5,883	)		(6,074	)
Purchaser, liquidity and program fees ($0, $(2) and $(5))(1)		(20	)		(21	)		(37	)
Decrease (increase) in retained interests ($0, $117 and $(87))(1)		17			124			(245	)
Net cash received from (paid to) QSPEs during the year ($2, $(76) and $(13))(1)	$	130		$	(119	)	$	(384	)

⁽¹⁾

Related to assets held for sale and in discontinued operations for 2004, 2003 and 2002, respectively.

        Net cash settlements on the Company's programs take place twice per month. However, in one of the programs there is, in addition, the daily transfer of collections of sold receivables. Under the terms of the latter program, if the Company's rating falls below BB+ (Standard & Poor's) or Ba3 (Moody's) then the Company may be required to relinquish its right to collect the sold receivables on behalf of the QSPE, and instead the cash collection of such sold receivables would be made directly to the account of the QSPE.

        The Company records a loss on sale at the time of sale of the receivables to the QSPEs and subsequently records purchaser, liquidity and program fees. The total cost of $20 million, $21 million and $37 million in 2004, 2003 and 2002, respectively, related to the securitization of trade receivables, is included in interest and other finance expense.

F-31

        The increase in gross trade receivables sold in 2004 compared to 2003, is due primarily to an increase in the programs' size, a change in the definition of receivables eligible to be sold in one program and the addition of new sellers to one of the programs. The decrease in gross receivables sold in 2003 compared to 2002 is due primarily to the fact that businesses which were either classified as discontinued operations or which were sold by the Company were phased out of the securitization programs during the year.

        The following table reconciles total gross receivables to the amounts in the Consolidated Balance Sheets after the effects of securitization at December 31, 2004 and 2003:

	December 31,
	2004			2003
Total trade receivables	$	5,132		$	4,784
Portion derecognized		(710	)		(508	)
Retained interests included in other receivables		(373	)		(390	)
Trade receivables		4,049			3,886
Less: Trade receivables included in assets held for sale and in discontinued operations		(27	)		(239	)
Trade receivables—continuing operations	$	4,022		$	3,647

        The increase in the portion derecognized at December 31, 2004, compared to December 31, 2003, is due primarily to an increase in the programs' size, a change in the definition of receivables eligible to be sold in one program and the addition of new sellers to one of the programs.

        At December 31, 2004 and 2003, of the gross trade receivables sold, the total trade receivables for which cash has not been collected at those dates amounted to $1,083 million and $898 million, respectively. At December 31, 2004 and 2003, an amount of $54 million and $34 million, respectively, was more than 90 days past due which is considered delinquent pursuant to the terms of the programs.

        In addition, the Company transfers receivables outside of the above described securitization programs. These transfers were sales, made without recourse, directly to banks and/or sales pursuant to factoring or similar type arrangements. Total sold receivables included in these transactions during 2004 and 2003 were approximately $902 million and $1,400 million, respectively, of which sales of $159 million and $594 million, respectively, related to assets held for sale and in discontinued operations. During 2004 and 2003, the related costs, including the associated gains and losses, were $10 million and $12 million, respectively, of which costs of $1 million and $3 million, respectively, related to assets held for sale and in discontinued operations.

Note 8    Variable interest entities

The following VIEs are consolidated, as the Company is the primary beneficiary as defined by FIN 46R.

        In March 2003, the Company sold its aircraft-leasing portfolio in Sweden to a third party. Subsequent to divestment, the Company continued its involvement in this business by providing significant financial support in the form of mezzanine and subordinated financing of approximately

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$90 million to the VIE formed by the buyer upon acquisition, exclusively for the purpose of servicing the aircraft leasing portfolio. As the primary beneficiary of the VIE, the Company retained approximately $148 million of assets and acquired approximately $84 million of third party long-term borrowings provided to the VIE at December 31, 2004. All of the VIE's assets serve as collateral for the senior debt provided by third parties. The Company has no ownership interest and there is no recourse to the general credit of the Company.

        The Company also has interests in other VIEs which are consolidated as the Company is considered the primary beneficiary. These VIEs are immaterial both individually and in the aggregate.

The following VIEs are not consolidated, as the Company is not the primary beneficiary as defined by FIN 46R.

        The Company maintains a combined equity and financing interest of approximately $354 million in six VIEs that were established as joint ventures to develop power plants in various countries. The Company's involvement with these VIEs began between 1995 and 2000 at the dates of inception of the VIEs. The purpose of the VIEs is to contract the engineering, procurement, commissioning and financing of the power plants. At and for the year ended December 31, 2004, these VIEs have combined total assets of approximately $2,920 million and reported combined total revenues and earnings before interest and taxes of $749 million and $308 million, respectively. The exposure to loss as a result of involvement with the VIEs is limited to the Company's equity and financing interests.

        The Company maintains a 50 percent equity interest in two VIEs that were established to build four transmission power lines and 22 substations in Mexico. The equity interests are not significant in value. The Company's involvement with these VIEs began in September and November 1997, respectively, when the VIEs were formed. The purpose of the VIEs is to contract the engineering, procurement, commissioning and financing of these projects. At and for the year ended December 31, 2004, these VIEs have total assets of approximately $85 million, and reported insignificant combined total revenues and earnings before interest and taxes. The exposure to loss as a result of involvement with the VIEs is limited to the Company's equity interest.

        The Company maintains a combined equity and financing interest of $8 million in two VIEs that were established to execute a project in London, England. One VIE was established to serve as a consortium among two third parties and the Company. The purpose of this VIE is to operate, maintain and finance the power distribution project. The second VIE is the financing vehicle for the project. The Company's involvement began at the inception of these VIEs in August 1998. At and for the year ended December 31, 2004, these VIEs have total assets of approximately $449 million and reported combined total revenues and earnings before interest and taxes of $125 million and $18 million, respectively. The Company's exposure to loss as a result of involvement with the VIEs is limited to the Company's equity and financing interest.

        The Company has an equity interest of approximately $0.4 million in four VIEs that were established for developing, holding and leasing real estate in Germany. The Company's involvement with these VIEs began when they were established in 1993 and 1995, respectively. At and for the year ended December 31, 2004, these VIEs have total assets of approximately $102 million and earnings

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before interest and taxes of the VIEs is approximately break-even. The Company's exposure to loss as a result of involvement with the VIEs is limited to the Company's equity interest.

        The Company also has interests in other VIEs which are not consolidated as the Company is not considered the primary beneficiary. These VIEs are immaterial both individually and in the aggregate.

Note 9    Inventories

        Inventories, including inventories related to long-term contracts, consist of the following:

		December 31,
		2004			2003
Commercial inventories, net:
	Raw materials	$	1,260		$	1,082
	Work in process		1,215			1,129
	Finished goods		395			371
			2,870			2,582
Contract inventories, net:
	Inventoried costs		395			426
	Contract costs subject to future negotiation		20			29
	Advance payments received related to contracts		(308	)		(366	)
			107			89
Total		$	2,977		$	2,671

        Contract costs subject to future negotiation are deemed probable of recovery through changes in the contract price and are deferred until the parties have agreed on these changes.

Note 10    Prepaid expenses and other

        Prepaid expenses and other current assets consist of the following:

	December 31,
	2004		2003
Prepaid expenses	$	194	$	209
Interest receivable		143		224
Deferred taxes		670		579
Advances to suppliers and contractors		227		226
Derivatives		374		398
Income tax receivable		80		158
Total	$	1,688	$	1,794

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Note 11    Financing receivables

        Financing receivables consist of the following:

	December 31,
	2004		2003
Loans receivable	$	337	$	437
Finance leases (see Note 17)		362		425
Other		534		510
Total	$	1,233	$	1,372

        Loans receivable primarily represent financing arrangements provided to customers under long-term construction contracts and other activities, including financing relating to a divestment in 2002 as described in Note 4.

        Included in finance leases at December 31, 2004 and 2003, are $7 million and $8 million, respectively, of assets pledged as security for other liabilities. Additionally, $204 million and $246 million of finance lease receivables were pledged as security for long-term borrowings at December 31, 2004 and 2003, respectively.

        Other financing receivables at December 31, 2004 and 2003, include $314 million and $312 million, respectively, of assets pledged as security for other liabilities. Of these amounts, $58 million and $54 million, respectively, are marketable securities.

        During 2004 and 2003, the Company sold or transferred to financial institutions various portfolios and individual financing receivables (see Note 17). These transfers included sales of finance lease receivables and loan receivables. Financing receivables sold or transferred and derecognized from the Consolidated Balance Sheets in accordance with SFAS 140 totaled $57 million and $338 million in 2004 and 2003, respectively.

Note 12    Property, plant and equipment

        Property, plant and equipment consist of the following:

	December 31,
	2004			2003
Land and buildings	$	2,684		$	2,518
Machinery and equipment		4,946			4,627
Construction in progress		121			105
		7,751			7,250
Accumulated depreciation		(4,770	)		(4,392	)
Total	$	2,981		$	2,858

        At December 31, 2004 and 2003, the Company had $85 million and $150 million, respectively, of property, plant and equipment pledged as security or collateral for certain liabilities or other obligations of the Company.

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Note 13    Goodwill and other intangible assets

        The changes in the carrying amount of goodwill for the year ended December 31, 2004, are as follows:

	Automation Technologies			Power Technologies			Non-core activities			Corporate/ Other			Total
Balance at January 1, 2004	$	1,816		$	439		$	201		$	72		$	2,528
Goodwill acquired during the year		15			—			—			—			15
Goodwill written off related to sale of businesses		(3	)		(2	)		(4	)		(12	)		(21	)
Other		—			(4	)		10			—			6
Reallocations		(86	)		116			9			(39	)		—
Foreign currency translation		53			12			9			—			74
Balance at December 31, 2004	$	1,795		$	561		$	225		$	21		$	2,602

        The changes in the carrying amount of goodwill for the year ended December 31, 2003, are as follows:

	Automation Technologies			Power Technologies		Non-core activities			Corporate/ Other			Total
Balance at January 1, 2003	$	1,732		$	427	$	180		$	58		$	2,397
Goodwill acquired during the year		1			1		—			—			2
Impairment losses		—			—		—			(2	)		(2	)
Goodwill written off related to sale of businesses		—			—		(2	)		(1	)		(3	)
Other		(4	)		—		—			—			(4	)
Reallocations		1			—		(10	)		9			—
Foreign currency translation		86			11		33			8			138
Balance at December 31, 2003	$	1,816		$	439	$	201		$	72		$	2,528

        The Company's presentation of goodwill by division has been corrected and restated for all periods presented to adjust amounts of goodwill related to Automation Technologies previously reflected under Non-core activities. Such goodwill was tested for impairment in 2004, 2003 and 2002, as a component of the Company's Automation Technologies division. At December 31, 2004 and 2003, the $225 million and the $201 million of goodwill, respectively, in Non-core activities was principally related to the Company's remaining Oil, Gas and Petrochemicals business. The reallocations in the table above relate to Company internal reorganizations. During 2004, the reallocations are principally due to the Substation Automation business formerly in the Automation Technologies division that was integrated in to the Power Technologies division. The goodwill reallocated for the Substation Automation business was $107 million based on fair value. During 2004, the Company also reallocated goodwill from the Corporate/Other division to the Automation Technologies and Power Technologies division as the expected benefit of goodwill resides in these divisions.

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        The goodwill of $15 million acquired in 2004 relates to the purchase of two entities and the increase in majority interest in two consolidated subsidiaries of the Company for consideration of $19 million.

        Other intangible assets consist of the following:

	December 31,
	2004							2003
	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Capitalized software	$	818	$	(537	)	$	281	$	804	$	(454	)	$	350
Other		595		(383	)		212		586		(335	)		251
Total	$	1,413	$	(920	)	$	493	$	1,390	$	(789	)	$	601

        Amortization expense of intangible assets for 2004 and 2003 amounted to $212 million and $177 million, respectively.

        Amortization expense of intangible assets is estimated to be as follows:(1)

2005	$	138
2006	$	123
2007	$	114
2008	$	76
2009	$	18
Thereafter	$	13

(1)

The estimated amortization expense is calculated as if no future expenditures would be made.

        In 2004 and 2003, the Company did not identify any intangible assets not subject to amortization with the exception of $11 million and $2 million, respectively, related to an intangible pension asset (see Note 21).

        Other intangible assets primarily include intangibles created through acquisitions, such as trademarks and patents.

        For the years ended December 31, 2004 and 2003, the Company acquired intangible assets of $75 million ($65 million of software and $10 million of other intangible assets) and $92 million ($85 million of software and $7 million of other intangible assets), respectively. For items capitalized in 2004 and 2003, amortization expense is calculated using a weighted-average life of 4 years for capitalized software and of 5 years for other intangible assets.

        The Company recorded impairment charges to intangible assets of $3 million, $11 million and $25 million, in 2004, 2003 and 2002, respectively, related to software developed for internal use. These charges are included in other income (expense), net, in the Consolidated Income Statements.

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Note 14    Equity accounted companies

        The Company recorded earnings of $87 million, $96 million and $220 million in 2004, 2003 and 2002, respectively, in investments and other, and other income (expense), net, representing the Company's share of the pre-tax earnings of investees accounted for under the equity method of accounting. The Company has recorded, at December 31, 2004, and 2003, $596 million and $642 million, respectively, in investments and other, representing the Company's investment in these equity investees. Significant companies accounted for using the equity method of accounting included: Jorf Lasfar Energy Company S.C.A. (JLEC), Morocco (the Company owns 50 percent) and Swedish Export Credit Corporation (SECC), Sweden (the Company owned 35.4 percent). In June 2003, the Company sold its entire interest in SECC to the Government of Sweden.

					The Company's share of the pre-tax earnings of equity-accounted investees
	Investment balance 2004		Investment balance 2003
					2004			2003			2002
JLEC	$	356	$	372	$	68		$	62		$	73
SECC		—		—		—			13			125
Other(1)		240		270		19			21			22
Total	$	596	$	642	$	87		$	96		$	220
Less: Current income tax expense						(8	)		(7	)		(49	)
The Company's share of earnings of equity-accounted investees					$	79		$	89		$	171

(1)

Encompasses additional investments, none of which are individually significant

        As reflected in its audited financial statements, SECC's total net income for the year ended December 31, 2002, was $254 million.

        The following table represents selected financial information for JLEC and not the Company's share in this equity accounted company.

	2004		2003		2002
Total current assets	$	316	$	281	$	239
Total non-current assets	$	1,147	$	1,162	$	1,124
Total current liabilities	$	274	$	317	$	262
Total non-current liabilities	$	572	$	613	$	622
Total shareholders' equity	$	617	$	513	$	479
Revenues	$	462	$	369	$	364
Income before taxes	$	133	$	122	$	143
Net income	$	125	$	120	$	132

        As security for repayment by JLEC of certain of its loans, the Company, JLEC and the other 50 percent shareholder in JLEC have entered into various pledge agreements with several banks and

F-38

other secured parties. The Company has pledged all of its shares, claims, rights and interest in JLEC in accordance with the pledge agreements. Such security shall continue in effect until the repayment in full of all outstanding principal and interest and other fees, which is scheduled to occur in February 2013.

        The Company has entered into other similar pledge agreements for certain other equity accounted for companies. The Company has also granted lines of credit and has committed to provide additional capital for certain equity accounted companies. At December 31, 2004, the total unused lines of credit amounted to $78 million and the capital commitments amounted to $24 million.

        The Company's 2004 Consolidated Financial Statements include the following aggregate amounts related to transactions with equity accounted investees and other related parties, including related party transactions that are recorded in loss from discontinued operations, net of tax, and assets and liabilities held for sale and in discontinued operations:

	2004		2003
Revenues	$	57	$	99
Receivables	$	11	$	105
Other current assets	$	13	$	23
Financing receivables, non-current	$	45	$	22
Payables	$	1	$	6
Other current liabilities	$	1	$	4
Short-term borrowings	$	18	$	32
Non-current liabilities	$	4	$	2
Long-term borrowings	$	—	$	48

Note 15    Borrowings

        The Company's total borrowings at December 31, 2004 and 2003, were $5,534 million and $7,934 million, respectively.

Short-term borrowings

        The Company's short-term borrowings consist of the following:

	December 31,
	2004		2003
Other short-term borrowings (weighted-average interest rate of 6.6% and 3.7%)	$	184	$	293
Current portion of long-term borrowings (weighted-average interest rate of 3.9% and 4.9%)		449		1,351
Total	$	633	$	1,644

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        Other short-term borrowings primarily represent short-term loans from various banks.

        On November 17, 2003, the Company entered into an unsecured syndicated $1.0 billion three-year revolving credit facility, which became available in December 2003 after the fulfillment of certain conditions, including the repayment and cancellation of the previous facility and the raising of a specified minimum level of gross proceeds from the rights issue (see Note 23) and from the euro denominated bonds issued in November 2003.

        In November 2004, the facility was amended. The amendments included a reduction in the level of commitment fees and the removal of restrictions on the Company to redeem early capital market instruments, such as bonds, having a maturity date beyond that of the facility.

        No amount was drawn under the facility at December 31, 2004 and 2003. The interest costs of borrowings under the facility are LIBOR (or EURIBOR in the case of drawings in euro) plus 0.8 percent to 2.25 percent, depending on the Company's senior unsecured long-term debt rating. Commitment fees are paid on the unused portion of the facility and a utilization fee is payable when borrowings are equal to or greater than 33 percent of the facility; the level of these fees is linked to the ratings of the Company's senior unsecured long-term debt.

        The facility contains certain financial covenants in respect of minimum interest coverage, maximum net leverage and a minimum level of consolidated net worth. The Company is required to meet these covenants on a quarterly basis. Should the Company's senior unsecured long-term debt ratings reach certain defined levels, these covenants will only have to be calculated at June and December of each year. The facility also contains provisions for the mandatory prepayment and cancellation of the facility upon a change of control of the Company.

        The facility imposes restrictions on the amount of third party indebtedness in subsidiaries other than in the obligors under the facility, subject to certain exceptions. The facility also contains certain other undertakings including limitations on disposals of assets, restrictions on mergers and acquisitions and negative pledges.

        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.

Long-term borrowings

        The Company utilizes a variety of derivative products to modify the characteristics of its long-term borrowings. The Company uses interest rate swaps to effectively convert certain fixed-rate long-term borrowings into floating rate obligations. For certain non-U.S. dollar denominated borrowings, the Company utilizes cross-currency swaps to effectively convert the borrowings into U.S. dollar obligations. As required by SFAS 133, borrowings designated as being hedged by fair value hedges are stated at their fair values.

F-40

        The following table summarizes the Company's long-term borrowings considering the effect of interest rate and currency swaps. Consequently, a fixed rate borrowing subject to a fixed-to-floating interest rate swap is included as a floating rate borrowing in the table below:

	December 31, 2004							December 31, 2003
	Balance			Nominal rate		Effective rate		Balance			Nominal rate		Effective rate
Floating rate	$	1,950		8.2	%	5.8	%	$	4,241		5.9	%	3.2	%
Fixed rate		1,625		5.1	%	5.5	%		1,754		5.8	%	5.8	%
Convertible bonds		1,775		4.1	%	4.1	%		1,646		4.1	%	4.1	%
		5,350							7,641
Current portion of long-term borrowings		(449	)	3.9	%	1.6	%		(1,351	)	4.9	%	1.8	%
Total	$	4,901						$	6,290

        At December 31, 2004, maturities of long-term borrowings were as follows:

Due in 2005	$	449
Due in 2006		92
Due in 2007		948
Due in 2008		986
Due in 2009		868
Thereafter		2,007
Total	$	5,350

Bond repurchases

        During the first six months of 2004, through open market repurchases, the Company repurchased a portion of its public bonds with a total equivalent face value of $458 million. These repurchases included 107 million euro (approximately $131 million) of the 475 million euro 5.125 percent bonds due 2006, and 26,500 million Japanese yen (approximately $243 million) of the 50,000 million Japanese yen 0.5 percent bonds due 2005. The 26,500 million Japanese yen bonds and the 107 million euro bonds were subsequently cancelled at the end of July 2004 and mid-September 2004, respectively. During the second half of 2004, a further 6,075 million Japanese yen 0.5 percent bonds (approximately $55 million) were repurchased on the open market and were not cancelled. As a result of the repurchases of these Japanese yen bonds, the total principal amount outstanding at December 31, 2004, was 17,425 million Japanese yen (approximately $171 million), which is included in floating rate borrowings in the table of long-term borrowings above. The open market repurchases resulted in a gain on extinguishments of debt of approximately $6 million. During 2003, the Company repurchased outstanding bonds with a face value of $94 million and recorded an insignificant gain on extinguishments of debt in connection with the repurchases.

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        On July 29, 2004, the Company announced tender offers to repurchase all of the outstanding 300 million euro 5.375 percent bonds due 2005 and 475 million euro 5.125 percent bonds due 2006, being approximately 275 million euro and approximately 368 million euro, respectively. In conjunction with the tender offers, the Company convened bondholders' meetings to vote on amendments to these bonds to allow the Company to call and redeem those bonds that were not tendered under the respective tender offer. Bonds validly tendered and accepted under the tender offers were settled on September 14, 2004. On September 9, 2004, bondholders approved the resolutions, which gave the Company the option to redeem the outstanding instruments. The Company exercised its option to redeem early the remaining outstanding 2005 and 2006 bonds that were not tendered and set the redemption date as September 29, 2004. The open market repurchases, combined with the tender offers and calls, resulted in a decrease in total borrowings during 2004 of $1,330 million. At December 31, 2003, the bonds tendered and called in 2004 were included as floating rate borrowings in the table of long-term borrowings above.

Bond issuances

        The Company did not issue any bonds during 2004.

        In November 2003, the Company issued bonds of an aggregate principal amount of 650 million euro, or approximately $769 million at issuance, due 2011. These bonds pay interest semi-annually in arrears at a fixed annual rate of 6.5 percent and are included as fixed rate borrowings in the table of long-term borrowings above. In the event of a change of control of the Company, the terms of the bonds require the Company to offer to repurchase the bonds at 101 percent of the principal amount thereof, plus any accrued interest.

        In September 2003, the Company issued convertible unsubordinated bonds of an aggregate principal amount of 1,000 million Swiss francs, or approximately $722 million at issuance, due 2010. The bonds pay interest annually in arrears at a fixed annual rate of 3.5 percent. On issuance, each 5,000 Swiss francs of principal amount of bonds was convertible into 418.41004 fully paid ordinary shares of the Company at an initial conversion price of 11.95 Swiss francs. The conversion price is subject to adjustment provisions to protect against dilution or change in control. As a result of the decision at the extraordinary general meeting of shareholders on November 20, 2003, to increase the share capital of the Company by issuing a further 840,006,602 shares, the conversion price and conversion ratio of the bonds were adjusted to 9.53 Swiss francs and 524.65897 shares respectively, effective December 12, 2003, representing a total of 104,931,794 shares if the bonds were fully converted.

        The bonds are convertible at the option of the bondholder at any time from October 21, 2003 up to and including the tenth business day prior to September 10, 2010. The Company may at any time on or after September 10, 2007 redeem the outstanding bonds at par plus accrued interest if, for a certain number of days during a specified period of time, the official closing price of the Company's ordinary shares on the relevant exchange has been at least 150 percent of the conversion price. In addition, at any time prior to maturity, the Company can redeem the outstanding bonds at par plus accrued interest, if at least 85 percent in aggregate of the principal amount of bonds originally issued have been redeemed, converted or purchased and cancelled. The Company has the option to redeem the bonds when due in cash, ordinary shares or any combination thereof.

F-42

        In May 2002, the Company issued $968 million aggregate principal amount of convertible unsubordinated bonds due 2007. The bonds pay interest semi-annually in arrears at a fixed annual rate of 4.625 percent. The bonds were initially convertible into 84,940,935 fully paid ordinary shares of the Company at an initial conversion price of 18.48 Swiss francs (converted into U.S. dollars at a fixed conversion rate of 1.6216 Swiss francs per U.S. dollar). The conversion price is subject to adjustment provisions to protect against dilution or change in control. As a result of the rights issue and resulting increase in the share capital of the Company, the conversion price of the bonds was adjusted, effective November 21, 2003, to 14.64 Swiss francs (converted into U.S. dollars at the fixed exchange rate of 1.6216 Swiss francs per U.S. dollar), representing a total of 107,220,546 shares if the bonds were fully converted. As a result of an amendment to the bonds in May 2004, described below, the conversion price of the bonds was amended to $9.03, representing a total of 107,198,228 shares if the bonds were fully converted.

        The $968 million bonds are convertible at the option of the bondholder at any time from June 26, 2002 up to and including May 2, 2007. The Company may, at any time on or after May 16, 2005, redeem the outstanding bonds at par plus accrued interest if (1) for a certain number of days during a specified period of time, the official closing price of the Company's American Depositary Shares on the New York Stock Exchange exceeds 170 percent of the conversion price, or (2) at least 85 percent in aggregate principal amount of bonds originally issued have been exchanged, redeemed or purchased and cancelled. The Company has the option to redeem the bonds when due, in cash, American Depositary Shares or any combination thereof.

        Under SFAS 133, a component of these convertible bonds had to be accounted for as an embedded derivative as the shares to be issued upon conversion were denominated in Swiss francs, while the bonds are denominated in U.S. dollars. A portion of the issuance proceeds was deemed to relate to the value of the derivative on issuance and subsequent changes in value of the derivative were recorded through earnings and as an adjustment to the carrying value of the bonds. The allocation of a portion of the proceeds to the derivative created a discount on issuance, which was being amortized to earnings over the life of the bonds. On May 28, 2004, bondholders voted in favor of the Company's proposed amendment to the terms of the bonds whereby, if the bonds are converted, the Company will deliver U.S. dollar-denominated American Depositary Shares rather than Swiss franc-denominated ordinary shares. The conversion price was set at $9.03. As a result of the amendment, the Company was no longer required to account for a portion of the bonds as a derivative. Consequently, on May 28, 2004, the value of the derivative was fixed and the amount previously accounted for separately as an embedded derivative was considered to be a component of the carrying value of the bonds at that date. This carrying value is being accreted to the $968 million par value of the bonds as an expense in interest and other finance expense over the remaining life of the bonds.

        As to the embedded derivative, the Company recorded an expense of $16 million from the increase in fair value of the derivative from January 1, 2004, up to the date of the bond amendment, related among other factors, to the increase in the Company's share price since December 31, 2003. When added to the accretion of the discount on the bonds for 2004 of $36 million, this resulted in aggregate expense of $52 million in 2004, reflected in interest and other finance expense and a corresponding increase in borrowings when compared to December 31, 2003. As a result of an increase in fair value of the derivative (related among other factors, to the increase in the Company's share

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price since December 31, 2002), combined with the accretion of the discount on issuance, there was a charge to interest and other finance expense of $84 million in 2003, and a corresponding increase in long-term borrowings at December 31, 2003, when compared to December 31, 2002. Through December 31, 2002, primarily as a result of the decline in the Company's share price since issuance of the bonds, the Company recorded a gain from the change in fair value of the derivative, partially offset by amortization of effective discount, resulting in a net decrease to interest and other finance expense of $215 million.

        In May 2002, the Company issued bonds due in 2009 with an aggregate principal amount of 200 million pounds sterling, or approximately $292 million at the time of issuance, which pay interest semi-annually in arrears at 10 percent per annum. The Company also issued in May 2002 bonds due in 2008 with an aggregate principal amount of 500 million euro, or approximately $466 million at the time of issuance, which pay interest annually in arrears at 9.5 percent per annum.

        The 200 million pounds sterling bonds and the 500 million euro bonds contain certain clauses linking the interest paid on the bonds to the credit rating assigned to the bonds. If the rating assigned to these bonds by both Moody's and Standard & Poor's remains at or above Baa3 and BBB-, respectively, then the interest rate on the bonds remains at the level at issuance, that is 10 percent and 9.5 percent for the sterling and euro bonds, respectively. If the rating assigned by either Moody's or Standard & Poor's decreases below Baa3 or BBB-, respectively, then the annual interest rate on the bonds increases by 1.5 percent per annum to 11.5 percent and 11 percent for the sterling and euro bonds, respectively. If after such a rating decrease, the rating assigned by both Moody's and Standard & Poor's returns to a level at or above Baa3 and BBB-, respectively, then the interest rates on the bonds return to the interest level at issuance. As a result of the downgrade of the Company's long-term credit rating by Moody's to Ba2 on October 31, 2002, this step-up clause in interest was triggered on both bonds. The increase in interest costs is effective for interest periods beginning after the payment of the coupon accruing at the date of the downgrade.

        In line with the Company's policy of reducing its interest and currency exposure, a cross-currency swap has been used to modify the characteristics of the 200 million pounds sterling bonds and an interest rate swap has been used to modify the 500 million euro bonds. After considering the impact of the cross-currency and interest rate swaps, the 200 million pounds sterling bonds effectively became a floating rate U.S. dollar obligation, while the 500 million euro bonds became a floating rate euro obligation. In both cases, the floating rate resets every three months. Accordingly, both the 200 million pounds sterling bonds and the 500 million euro bonds are included as "floating rate" in the table of long-term borrowings above.

        In September 1999, the Company issued bonds of an aggregate principal amount of 500 million Swiss francs, or approximately $334 million at issuance, due 2009. These bonds pay interest annually in arrears at a fixed annual rate of 3.75 percent and are included in fixed rate borrowings in the table of long-term borrowings above.

        Almost all of the Company's publicly traded bonds 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.

        In addition to the publicly issued bonds described above, included in long-term borrowings at December 31, 2004 and 2003, are private placements, lease obligations, bank borrowings of subsidiaries, obligations in the Company's remaining Structured Finance business and other long-term borrowings.

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Note 16    Accrued liabilities and other

        Accrued liabilities and other consists of the following:

	December 31,
	2004		2003
Asbestos and related costs (see Note 18)	$	1,023	$	815
Contract related reserves		460		531
Provisions for restructuring		169		276
Provisions for warranties and contract penalties		741		580
Derivatives		324		180
Employee benefit costs		77		112
Taxes payable		369		434
Deferred taxes		200		188
Accrued personnel costs		750		723
Interest		177		306
Advances from customers		931		729
Other liabilities		1,215		1,083
Total	$	6,436	$	5,957

        Advance from customers in 2003 have been reclassified from other liabilities to conform with the current year's presentation.

Note 17    Leases

Lease obligations

        The Company's lease obligations primarily relate to real estate and office equipment. In the normal course of business, management expects most leases to be renewed or replaced by other leases. Minimum rent expense under operating leases included in the income from continuing operations was $371 million, $392 million and $340 million in 2004, 2003 and 2002, respectively. The sub-lease income received by the Company was $33 million, $18 million and $14 million in 2004, 2003 and 2002, respectively.

        At December 31, 2004, future net minimum lease payments for operating leases having initial or remaining non-cancelable lease terms in excess of one year consist of the following:

2005	$	347
2006		299
2007		237
2008		206
2009		183
Thereafter		652
		1,924
Sublease income		(128	)
Total	$	1,796

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Investments in leases

        The Company retained some leasing assets including investments in sales-type leases, leveraged leases and direct financing leases that are included in financing receivables (see Note 11), subsequent to the divestment of most of its Structured Finance business to GE in November 2002 (see Note 3).

        The Company's non-current investments in direct financing, sales-type and leveraged leases, including $37 million and $54 million in 2004 and 2003, respectively, of net investments in an aircraft leasing portfolio, reported by a VIE in Sweden (see Note 8), consist of the following:

	December 31,
	2004			2003
Minimum lease payments receivable	$	388		$	464
Unearned income		(54	)		(64	)
		334			400
Leveraged leases		64			61
		398			461
Current portion		(36	)		(36	)
Total	$	362		$	425

        At December 31, 2004, minimum lease payments under direct financing and sales-type leases are scheduled to be received as follows:

2005	$	45
2006		23
2007		22
2008		50
2009		18
Thereafter		230
Total	$	388

Note 18    Commitments and contingencies

Earnings overstatement in an Italian subsidiary

        During the second quarter of 2004, the Company received information regarding earnings overstatements by the medium-voltage business unit of the Company's Power Technologies division (the "PT-MV BAU") in Italy. An investigation performed by the Company, with the assistance of outside counsel and forensic accountants, has shown that from the first quarter of 1998 through the first quarter of 2004, the PT-MV BAU overstated its earnings before interest and taxes and net income through the early recognition of certain revenue from incomplete projects, improper capitalization of costs on certain projects, unrecorded liabilities and borrowings, and other improper journal entries.

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        The cumulative effect of these overstatements on the Company's earnings before interest and taxes and net income was approximately $70 million and $87 million, respectively, from the first quarter of 1998 through the end of 2003. The negative impact on income tax expense results from the inability to claim tax benefits under Italian tax law for adjustments made to improperly filed tax returns for the years 1998 through 2002, as well as a reassessment of the realizability of the Company's deferred tax assets due to a cumulative loss position after the adjustment for the overstatements. The Company restated its financial statements for all prior periods as a result of these overstatements. The restated presentation forms the basis for the 2004 financial statements before reclassifications as described in Note 3. The impact of the restatement in 2003 and 2002 was to increase net loss by $12 million and $36 million, respectively. The cumulative impact on stockholders' equity as a result of the restatement was $106 million at December 31, 2004.

        The Company has undertaken measures, including termination of employment, with respect to the personnel involved in the earnings overstatement to address the matters identified by the Company's investigation. Additional remedial measures may be considered by the Company in light of this investigation. In addition, the Company's investigation revealed that certain employees of ABB Power Technologies S.p.A. participated in arranging improper payments to an employee of an Italian power generation company in order to obtain a contract. The Company has reported this matter to the Italian Public Prosecutor's Office, which is conducting its own investigation, as well as to the United States Securities and Exchange Commission. The Company cannot be certain as to the outcome of the Italian Public Prosecutor's Office investigation. The Company has terminated employees determined to be involved in arranging such improper payments.

Gas Insulated Switchgear business

        In May 2004, the Company announced that it had undertaken an internal investigation which uncovered that certain of its employees—together with employees of other companies active in the gas insulated switchgear business—were involved in anti-competitive practices. The Company has reported promptly such practices to the appropriate authorities including the European Commission. The Company has received an amnesty decision from the European Commission and is cooperating with it in the investigation that the European Commission has launched.

Vetco Gray

        During 2003 and 2002 the Company undertook an investigation of potentially improper business conduct within the Company's Oil, Gas and Petrochemical business which the Company had voluntarily disclosed to the U.S. Department of Justice and the U.S. Securities and Exchange Commission. The investigation uncovered a limited number of improper payments in certain countries in the Company's Upstream business.

        ABB Vetco Gray Inc. and ABB Vetco Gray UK Ltd., two of the Company's subsidiaries that were sold in 2004 as part of the Upstream business pleaded guilty in July 2004 to violation of the Foreign Corrupt Practices Act (FCPA) and paid an aggregate fine to the U.S Department of Justice totaling $10.5 million. In addition, in July 2004, the Company agreed with the United States Securities and Exchange Commission to resolve civil charges relating to the FCPA, including the payment of

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$5.9 million to disgorge allegedly unlawful profits and to retain an independent consultant to review the Company's FCPA compliance policies and procedures.

IBM Outsourcing Agreement

        In 2003, the Company entered into a 10-year global framework agreement with International Business Machines Corporation (IBM) to outsource the Company's information systems infrastructure services to IBM. This global framework agreement forms the basis for country agreements entered into between the Company and IBM in 15 countries in which the Company operates as well as Company headquarters. Pursuant to these agreements, the Company's information technology (IT) personnel were transferred and certain IT equipment was sold to IBM. Costs associated with the transfer of employees have been recognized in 2003 and were not significant. The IT equipment was sold to IBM at its net book value resulting in no gain or loss on disposal.

        Pursuant to the global framework agreement, the Company is permitted to terminate an individual country agreement, upon providing to IBM three months' notice. Upon termination, charges which are within standard commercial terms are payable to IBM. Such termination charges decline over the term of the global framework agreement and are based on the preceding 12-month period's costs and the number of years remaining on the agreement.

        The global framework agreement also includes an obligation for IBM to lease new personal computers and other IT equipment to the Company as older equipment is retired. The Company accounts for these items as capital leases or operating leases based on the terms of the leases.

        Further, pursuant to the global framework agreement, IBM will receive monthly payments from the Company's subsidiaries in the respective countries related to information systems infrastructure services. Expected annual costs during the 10-year term of the global framework agreement approximate $223 million based on the current level of usage of the services.

        While the above agreement was negotiated and transacted at arms-length between IBM and the Company, it should be noted that Jürgen Dormann, the Company's Chairman, was a member of the Board of Directors of IBM until April 29, 2003, and has been elected again to the Board of Directors of IBM effective February 22, 2005, and Hans-Ulrich Märki, a director on the Company's Board of Directors, is chairman and general manager of IBM Europe/Middle East/Africa.

Contingencies—general

        The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business that have not been finally adjudicated. It is not possible at this time for the Company to predict with any certainty the outcome of such litigation. However, except as stated below, management is of the opinion, based upon information presently available and on advice of external counsel, that it is unlikely that any such liability, to the extent not provided for through insurance or otherwise, would have a material adverse effect on the Company's financial position, results of operations or cash flows.

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Contingencies—environmental

        The Company is a participant in several legal and regulatory actions, which result from various U.S. and other federal, state and local environmental protection legislation as well as agreements with third parties. While the Company cannot estimate the impact of future regulations affecting these actions, management believes that the ultimate resolution of these matters will not have a material impact on the Company's financial position, results of operations or cash flows.

        Provisions are recorded when it is probable that losses will result from these actions and the amounts of losses can be reasonably estimated. Estimated losses for environmental remediation obligations are not discounted to their present value. In respect to these matters, the Company may be able to recover a portion of the costs from insurers or other third parties. Receivables are recorded when it is probable that recoveries will be collected.

Guarantees—general

        Certain guarantees issued or modified after December 31, 2002 are accounted for in accordance with Financial Accounting Standards Board Interpretation No. 45 (FIN 45), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. Upon issuance or modification of certain guarantees, a liability, equal to the fair value of the guarantee, is recorded.

        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 the Company's expected results.

        The carrying amount of liabilities recorded in the Consolidated Balance Sheets reflects the Company's best estimate of future payments it may incur as part of fulfilling its guarantee obligations.

	December 31, 2004				December 31, 2003
	Maximum potential payments		Carrying amount of liabilities		Maximum potential payments		Carrying amount of liabilities
Third-party performance guarantees	$	1,525	$	2	$	1,200	$	—
Financial guarantees		253		1		207		—
Indemnification guarantees		198		16		—		—
Total	$	1,976	$	19	$	1,407	$	—

Guarantees—third-party performance

        Performance guarantees represent obligations where the Company guarantees the performance of a third party's product or service according to the terms of a contract. 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. Performance guarantees include surety bonds, advance payment guarantees, and performance standby letters of credit.

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        The Company retained obligations for guarantees related to the Power Generation business contributed in mid-1999 to the former ABB ALSTOM POWER NV joint venture. The guarantees primarily consist of performance guarantees, advance payment guarantees and other miscellaneous guarantees under certain contracts such as indemnification for personal injuries and property damages, taxes, and compliance with labor laws, environmental laws and patents. The guarantees are related to projects which are expected to be completed by 2015 but in some cases have no definite expiration. In May 2000, the Company sold its interest in the ABB ALSTOM POWER NV joint venture to ALSTOM SA (ALSTOM). As a result, ALSTOM and its subsidiaries have primary responsibility for performing the obligations that are the subject of the guarantees. Further, ALSTOM, the parent company, and ALSTOM POWER NV, formerly ABB ALSTOM POWER NV, have undertaken jointly and severally to fully indemnify and hold harmless the Company against any claims arising under such guarantees. Management's best estimate of the total maximum potential exposure of quantifiable guarantees issued by the Company on behalf of its former Power Generation business is approximately $875 million and $1,200 million at December 31, 2004 and 2003, respectively. The Company has not experienced any losses related to guarantees issued on behalf of the former Power Generation business.

        The Company retained obligations for guarantees related to the Upstream business sold in July 2004. The guarantees primarily consist of third-party performance guarantees, advance payment guarantees and other miscellaneous guarantees. The guarantees have maturity dates ranging from one to five years. The maximum amount payable under the guarantees is approximately $650 million at December 31, 2004. The Company has the ability to recover potential payments under these guarantees through certain backstop guarantees. The maximum potential recovery under these backstop guarantees is approximately $146 million at December 31, 2004.

Guarantees—financial

        Financial guarantees represent irrevocable assurances that the Company will make payment to a beneficiary in the event that a third party fails to fulfill its financial obligations and the beneficiary under the guarantee incurs a loss due to that failure.

        At December 31, 2004 and 2003, the Company had $253 million and $207 million, respectively, of financial guarantees outstanding. Of those amounts, $123 million and $189 million, respectively, were issued on behalf of companies in which the Company currently has or formerly had an equity interest. The guarantees have original maturity dates ranging from one to thirteen years. Also included in the $253 million of financial guarantees is approximately $101 million related to the Upstream business sold in July 2004. These guarantees have original maturity dates ranging from one to six years and in some cases have no time-related expiry as they are contingent on future events.

Guarantees—indemnification

        The Company delivered to the purchasers of the Upstream business and Reinsurance business guarantees related to assets and liabilities divested in 2004. The maximum liability at December 31, 2004, of approximately $49 million and $149 million, relating to the Upstream business and Reinsurance business, respectively, will reduce over time, pursuant to the agreements. The fair values of these guarantees are not material.

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        The Company has indemnified certain purchasers of divested businesses for potential claims arising from the operations of the divested businesses. Such indemnifications have not been fair valued to the extent they were issued prior to the effective date of FIN 45. Additionally, to the extent the maximum loss related to such indemnifications could not be calculated, no amounts have been included under maximum potential payments in the table above. Indemnifications for which maximum losses could not be calculated include indemnifications for legal claims.

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 provision for warranties and contract penalties in Note 16 includes penalties resulting from delays in contract fulfillment, which is not included in the amounts below.

        Reconciliation of the provision for warranties, including guarantees of product performance is as follows:

	2004			2003
Balance at the beginning of year	$	513		$	349
Claims paid in cash or in kind		(72	)		(37	)
Net increase to provision for changes in estimates, warranties issued and warranties expired		178			162
Exchange rate differences		58			39
Balance at the end of year	$	677		$	513

Asbestos liability

Summary

        The Company's Combustion Engineering subsidiary has been a co-defendant in a large number of lawsuits claiming damage for personal injury resulting from exposure to asbestos. A smaller number of claims have also been brought against two other subsidiaries, ABB Lummus Global Inc. ("Lummus") (which is part of the Company's Oil, Gas and Petrochemicals business and was formerly a subsidiary of Combustion Engineering) and Basic Incorporated ("Basic") (which was a subsidiary of Combustion Engineering and of Asea Brown Boveri Inc. ("Asea Brown Boveri") and is now a subsidiary of ABB Holdings Inc. ("Holdings") following the merger in December 2004 of Asea Brown Boveri into Holdings), as well as against other entities of the Company. In late 2002, taking into consideration the growing number and cost of asbestos-related claims, Combustion Engineering and the Company determined that Combustion Engineering's asbestos-related liability should be resolved through a comprehensive settlement that included a plan of reorganization for Combustion Engineering under Chapter 11 of the U.S. Bankruptcy Code.

        In November 2002, Combustion Engineering and the representatives of various asbestos claimants entered into a Master Settlement Agreement which settled the value of approximately 154,000 open asbestos-related claims against Combustion Engineering. Under that agreement, Combustion

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Engineering established and funded a trust (the "CE Settlement Trust") to provide for partial payment on such settled claims.

        In January 2003, Combustion Engineering reached agreement with various creditors (including representatives of the asbestos claimants who participated in the Master Settlement Agreement and a representative of future claimants) on the terms of a proposed "Pre-Packaged Plan of Reorganization for Combustion Engineering" under Chapter 11 of the U.S. Bankruptcy Code (as amended through June 4, 2003, the "CE Plan"). The CE Plan provided for a "channeling injunction" to be issued, under which asbestos-related claims related to the operations of Combustion Engineering, Lummus and Basic could only be brought against a trust (separate from the CE Settlement Trust established under the Master Settlement Agreement) to be established and funded by Combustion Engineering, ABB Ltd and other entities of the Company. This channeling injunction was intended to free Combustion Engineering, ABB Ltd and its affiliates, as well as certain former direct or indirect owners, joint venture partners and affiliates of Combustion Engineering, including ALSTOM and ABB ALSTOM POWER NV, from further liability for such claims.

        The CE Plan was filed with the U.S. Bankruptcy Court on February 17, 2003, and confirmed by the District Court on August 8, 2003. However on December 2, 2004, the Court of Appeals for the Third Circuit effectively reversed the District Court's confirmation order. The Court of Appeals remanded the CE Plan to the District Court for a determination of whether, in light of the pre-petition payments made by Combustion Engineering to the CE Settlement Trust under the Master Settlement Agreement and the fact that claimants who received partial payments of their claims under the Master Settlement Agreement participated in the approval of the plan, the treatment of asbestos-related personal injury claims against Combustion Engineering under the CE Plan was consistent with the requirements of the Bankruptcy Code. Combustion Engineering and the Company have been reviewing the Court of Appeals' decision and considering various options to resolve the asbestos-related liability of Combustion Engineering, Lummus and Basic.

        In March 2005, following extensive discussions with certain representatives of various parties, including the Creditors Committee and the Future Claimants Representatives appointed in the Combustion Engineering case, the Company reached an agreement on certain "settlement points" for modifying the CE Plan with a view to bringing it into conformity with the Court of Appeals' decision and for providing a mechanism for resolving finally Lummus' potential asbestos liability. The settlement points contemplate that the modified plan will continue to reflect the CE Plan's fundamental approach of channeling asbestos-related claims against Combustion Engineering to a trust funded in part by other entities of the Company. The settlement points provide for the Company to make an additional contribution of approximately $232 million to pay present and future asbestos claimants of Combustion Engineering and Lummus. In addition, the settlement points provide that the Company will pay directly or indirectly up to $8 million in respect of certain approved legal fees in the Chapter 11 case of Combustion Engineering. The settlement points contemplate that the modified CE Plan will become effective under the Bankruptcy Code concurrently with a separate Chapter 11 plan of reorganization for Lummus. The parties are now working to reach agreement on other issues relating to, and details of, the proposed modified plan and related proceedings involving Lummus and to prepare the related documentation. Each of the proposed plans will require approval of creditors and be subject to court review.

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        One of the holdings of the Court of Appeals was that the asbestos-related claims against Basic that are not related to Combustion Engineering's operations could not be "channeled" to the proposed trust under the CE Plan. The proposed plans do not address Basic, and the Company expects that Basic's asbestos-related liabilities will have to be resolved through its own bankruptcy or similar U.S. state court liquidation proceeding, or through the tort system.

Background

        When the Company sold its 50 percent interest in the former ABB ALSTOM POWER NV joint venture to ALSTOM in May 2000, it retained ownership of Combustion Engineering, a subsidiary that had conducted part of its former power generation business and that now owns commercial real estate that it leases to third parties. Combustion Engineering is a co-defendant, together with other third parties, in numerous lawsuits in the United States in which the plaintiffs claim damages for personal injury arising from exposure to asbestos in equipment or materials that Combustion Engineering allegedly supplied or was responsible for, primarily during the early 1970s and before.

        From 1989 through February 17, 2003 (the date that Combustion Engineering filed for Chapter 11 as described below), approximately 438,000 asbestos-related claims were filed against Combustion Engineering. On February 17, 2003, there were approximately 164,000 asbestos related personal injury claims pending against Combustion Engineering. There were approximately 138,000 such claims pending against Combustion Engineering on December 31, 2002, and approximately 94,000 such claims were pending on December 31, 2001. Of the approximately 164,000 claims that were pending on February 17, 2003, approximately 154,000 are claims by asbestos claimants who participated in the Master Settlement Agreement. Approximately 29,000 new claims were made in the period from January 1, 2003, to February 17, 2003 (all but 111 of which agreed to participate in the Master Settlement Agreement). Approximately 34,500 claims were resolved in 2002 and approximately 27,000 claims were resolved in 2001.

        Other entities of the Company have sometimes been named as defendants in asbestos-related claims, including Lummus and Basic. At December 31, 2004 and 2003, there were approximately 11,000 claims pending against Lummus and 4,300 and 4,200 claims, respectively, pending against Basic.

        Additionally, at December 31, 2004 and 2003, there were approximately 12,400 and 8,700 asbestos-related claims pending against entities of the Company other than Combustion Engineering, Lummus and Basic. These claims are unrelated to Combustion Engineering and will not be resolved in the Combustion Engineering bankruptcy case. Of the 12,400 claims outstanding at December 31, 2004, approximately 3,660 are claims that were brought in the state of Mississippi in the United States, in 7 cases that include multiple plaintiffs and hundreds of co-defendants and make no specific allegations of any relationship between any entity of the Company and the plaintiffs. Approximately 4,240 of such claims have been brought in the state of Ohio in the United states by claimants represented by a single law firm in cases that typically name 50 to 60 co-defendants and do not allege any specific linkage between the plaintiffs and any entity of the Company. Approximately 2,700 such claims are pending in the state of West Virginia in the United States. The remaining such claims are pending in various jurisdictions. The Company generally seeks dismissals from claims where there is no apparent linkage between the plaintiffs and any entity of the Company. To date, resolving claims against the Company's

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entities other than Combustion Engineering, Lummus and Basic has not had a material impact on the Company's consolidated financial position, results of operations or cash flows.

Negotiations with representatives of asbestos claimants and pre-packaged Chapter 11 filing

        During 2001 and 2002, Combustion Engineering experienced a significant increase in the level of new claims and higher total and per-claim settlement costs as compared to prior years. In October 2002, Combustion Engineering and the Company determined that it was likely that the expected asbestos-related costs of Combustion Engineering would exceed the value of its assets ($812 million at September 30, 2002 and $828 million at December 31, 2002) if its historical settlement patterns continued into the future. In October 2002, Combustion Engineering and the Company determined to resolve the asbestos-related liability of Combustion Engineering and its affiliates by reorganizing Combustion Engineering under Chapter 11, the principal business reorganization chapter of the U.S. Bankruptcy Code. Combustion Engineering and the Company determined to structure the Chapter 11 reorganization as a "pre-packaged plan," in which Combustion Engineering would solicit votes from asbestos claimants to approve the plan before the Chapter 11 case was filed with the Bankruptcy Court.

        Beginning in October 2002, Combustion Engineering and the Company conducted extensive negotiations with representatives of certain asbestos claimants with respect to a pre-packaged plan. On November 22, 2002, Combustion Engineering and the asbestos claimants' representatives entered into a Master Settlement Agreement for settling open asbestos-related personal injury claims that had been filed against Combustion Engineering prior to November 15, 2002. Combustion Engineering also agreed, pursuant to the Master Settlement Agreement, to form and fund the CE Settlement Trust to administer and pay the asbestos-related personal injury claims settled under the Master Settlement Agreement. Under the terms of the Master Settlement Agreement, eligible claimants who met all criteria to qualify for payment were entitled to receive a percentage of the value of their claim from the CE Settlement Trust and retain a claim against Combustion Engineering for the unpaid balance (the "stub claim"). The Master Settlement Agreement divides claims into three categories based on the status of the claim at November 14, 2002, the status of the documentation relating to the claim and whether or not the documentation establishes a valid claim eligible for settlement and payment by Combustion Engineering. The Master Settlement Agreement was supplemented in January 2003 to clarify the rights of certain claimants whose right to participate in a particular payment category was disputed. The Master Settlement Agreement, as supplemented, settles the value of and provides for the partial payment on approximately 154,000 open asbestos-related personal injury claims that had been lodged against Combustion Engineering.

        The Master Settlement Agreement, as supplemented, provided that the CE Settlement Trust was to be funded by:

•

cash contributions from Combustion Engineering in the amount of $5 million;



•

cash contributions from ABB Inc., a subsidiary of ABB Ltd, in the amount of $30 million;



•

a promissory note from Combustion Engineering in the principal amount of approximately $101 million (guaranteed by Asea Brown Boveri, now merged into Holdings); and

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•

an assignment by Combustion Engineering of the $311 million unpaid balance of principal and interest due to Combustion Engineering from Asea Brown Boveri, now merged into Holdings, under a loan agreement dated May 12, 2000 (guaranteed by ABB Ltd).

        Approximately 154,000 eligible claimants have entered into the Master Settlement Agreement or adoption agreements with Combustion Engineering and the CE Settlement Trust and have received partial payment on their claims.

Pre-packaged plan of reorganization

        On January 17, 2003, the Company announced that Combustion Engineering and the Company had reached an agreement on a proposed Pre-Packaged Plan of Reorganization for Combustion Engineering under Chapter 11 of the U.S. Bankruptcy Code. The agreement was reached with representatives of certain asbestos claimants with existing asbestos-related personal injury claims against Combustion Engineering (encompassing both claimants who had lodged claims prior to November 15, 2002, and claimants who had filed claims on or after that date and were not eligible to participate in the Master Settlement Agreement) and with the proposed representative of persons who may be entitled to bring asbestos-related personal injury claims in the future.

        As proposed, the CE Plan provided for the creation of the Asbestos PI Trust, an independent trust separate and distinct from the CE Settlement Trust, and addressed Asbestos PI Trust Claims, which consist of present and future asbestos-related personal injury claims (including the stub claims of claimants who previously settled pursuant to the Master Settlement Agreement) that arise directly or indirectly from any act, omission, products, or operations of Combustion Engineering, Lummus or Basic. The CE Plan provided that, if it were to become effective, a channeling injunction would be issued under Section 105 of the U.S. Bankruptcy Code pursuant to which the Asbestos PI Trust Claims against ABB Ltd and certain of its affiliates (including Combustion Engineering, Lummus and Basic) would be channeled to the Asbestos PI Trust. The effect of the channeling injunction contemplated by the CE Plan would be that the sole recourse of a holder of an Asbestos PI Trust Claim would be to the Asbestos PI Trust and such holder would be barred from asserting such a claim against ABB Ltd and the affiliates covered by the injunction (including Combustion Engineering and, under the CE Plan as proposed, Lummus and Basic).

        As proposed, the CE Plan provided that on its effective date, the Asbestos PI Trust would be funded with the following:

•

a $20 million 5 percent term note (the "CE Convertible Note") with a maximum term of ten years from the effective date of the CE Plan, to be issued by Combustion Engineering and secured by its Windsor, Connecticut, real estate and real estate leases (under certain specified contingencies, the Asbestos PI Trust may have the right to convert the term note into ownership of 80 percent of the voting securities of the reorganized Combustion Engineering);



•

excess cash held by Combustion Engineering on the effective date of the CE Plan (the "Excess CE Cash");



•

a non-interest bearing promissory note (the "ABB Promissory Note") to be issued by ABB Inc. and ABB Ltd, and guaranteed by certain ABB Ltd subsidiaries, in an aggregate amount of up to

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$350 million payable in installments (including two $25 million payments contingent upon ABB Ltd generating an earning before interest and taxes margin of 12 percent in 2007 and 2008);

•

a non-interest bearing promissory note to be issued on behalf of Lummus (the "Lummus Note") in the amount of $28 million payable in relatively equal annual installments over 12 years;



•

a non-interest bearing promissory note (the "Basic Note") to be issued on behalf of Basic in the aggregate amount of $10 million payable in relatively equal annual installments over 12 years;



•

30,298,913 shares of ABB Ltd (the "CE Settlement Shares"), which had a fair value of $170 million, $154 million and $86 million at December 31, 2004, 2003 and 2002, respectively; and



•

an assignment by Combustion Engineering, Lummus, and Basic to the Asbestos PI Trust of any proceeds under certain insurance policies. As of December 31, 2004, aggregate unexhausted product liability limits under such policies were approximately $200 million for Combustion Engineering, approximately $43 million for Lummus and approximately $28 million for Basic, although amounts ultimately recovered by the Asbestos PI Trust under these policies may be substantially different from the policy limits. In addition, Combustion Engineering would assign to the Asbestos PI Trust scheduled payments under certain of its insurance settlement agreements ($78 million at December 31, 2004). (The proceeds and payments to be assigned are together referred to as "Certain Insurance Amounts".)

        In addition, the CE Plan as proposed provided that if Lummus is sold within 18 months after the CE Plan's effective date, ABB Inc. would contribute $5 million to the CE Settlement Trust and $5 million to the Asbestos PI Trust (together, these payments are referred to as the "Lummus Sale Payments"). If the CE Settlement Trust has ceased to exist at that time, both $5 million payments would be made to the Asbestos PI Trust, but in no event would this contribution exceed the net proceeds from the sale of Lummus.

        Upon the effective date under the CE Plan, ABB Inc. would indemnify the Combustion Engineering estate against up to $5 million of liability on account of certain contingent claims held by certain indemnified insurers. Further, on the effective date, Asea Brown Boveri (now merged into Holdings) would provide for the benefit of Combustion Engineering a nuclear and environmental indemnity with regard to obligations arising out of Combustion Engineering's Windsor, Connecticut, site. The two indemnities described in this paragraph are referred to as the "Related Indemnities".

Judicial review process

        The solicitation of votes to approve the CE Plan began on January 19, 2003. Combustion Engineering filed for Chapter 11 in the U.S. Bankruptcy Court in Delaware on February 17, 2003, based on the terms previously negotiated in connection with the CE Plan. On June 23, 2003, the Bankruptcy Court issued its Order Approving the Disclosure Statement but Recommending Withholding of Confirmation of the Plan of Reorganization for Combustion Engineering for Ten Days (the "Initial Ruling") and related findings of fact. The Initial Ruling approved the disclosure statement that was the document used as the basis for soliciting approval of the CE Plan from asbestos claimants

F-56

and verified the voting results that approved the CE Plan and indicated that the Bankruptcy Court would recommend that the CE Plan be confirmed if Combustion Engineering and the Company could establish to the court's satisfaction certain specified information. The Company then submitted the additional information for the court's consideration.

        On July 10, 2003, the Bankruptcy Court issued a Supplemental and Amendatory Order Making Additional Findings and Recommending Confirmation of Plan of Reorganization (the "Supplemental Ruling"). The Supplemental Ruling recommended to the U.S. District Court, among other things, that the CE Plan be confirmed.

        Following the issuance of the Supplemental Ruling, interested parties had a period during which they could appeal the Initial Ruling and the Supplemental Ruling. This appeal period expired on July 24, 2003. A number of interested parties, including a small number of asbestos claimants and certain insurance companies which historically have provided insurance coverage to Combustion Engineering, Lummus and Basic filed appeals based on various objections to the CE Plan. The District Court held a hearing on July 31, 2003, with respect to the appeals and entered its confirmation order on August 8, 2003.

        Various parties appealed the District Court's confirmation order to The United States Court of Appeals for the Third Circuit, which granted a motion for expedition of appeals and ordered that all briefs were to be filed by October 7, 2003. On June 3, 2004, the Court of Appeals held a hearing with respect to the appeals of the confirmation order of the District Court. On December 2, 2004, the Court of Appeals issued its decision (the "Third Circuit Decision").

        The effect of the Third Circuit Decision was to reverse the District Court's confirmation order in respect of the CE Plan. The Third Circuit Decision focused on three issues raised by the appealing parties which relate to the ultimate terms of the CE Plan: (i) whether the Bankruptcy Court had "related to" jurisdiction over the claims against the non-debtors, Lummus and Basic, that do not arise from any products or operations of Combustion Engineering (the "non-derivative claims"); (ii) whether the non-debtors, Lummus and Basic, could avail themselves of the protection of the channeling injunction by invoking Section 105 of the Bankruptcy Code and contributing assets to the Asbestos PI Trust; and (iii) whether the two-trust structure and use of stub claims in the voting process comply with the Bankruptcy Code. The Court of Appeals held that there were insufficient factual findings to support "related-to" jurisdiction and that Section 105 of the Bankruptcy Code could not be employed to extend the channeling injunction to the non-derivative claims against nondebtors, such as Lummus and Basic. With regard to the two-trust structure, the Court of Appeals remanded the CE Plan to the District Court to determine whether creditors received fair treatment in light of the pre-petition payments made to the CE Settlement Trust participants and the use of stub claims in the voting process. Among other things, the Court of Appeals instructed the lower courts to consider whether payments under the CE Settlement Trust constituted voidable preferences that were inconsistent with the fair distribution scheme of the Bankruptcy Code.

        On December 15, 2004, Combustion Engineering filed a petition seeking a rehearing en banc by the Court of Appeals. Specifically, Combustion Engineering and its immediate parent, Asea Brown Boveri, now merged into Holdings, challenged the holding in the Third Circuit Decision that the Bankruptcy and District Courts did not have "related to" jurisdiction over the non-derivative claims

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against Lummus and Basic and that Section 105 of the Bankruptcy Code could not be used to extend the channeling injunction to such claims. On January 19, 2005, the Court of Appeals denied the petition for rehearing en banc.

        Notwithstanding the Third Circuit Decision, the Master Settlement Agreement, which settles the amount of and provides for partial payment on approximately 154,000 asbestos-related claims, remains effective. Early in the Combustion Engineering bankruptcy case, an asbestos claimant commenced an action against the trustee of the CE Settlement Trust and individuals who had received distributions from such trust, asserting that further distributions by the CE Settlement Trust should be enjoined because the transaction that created the CE Settlement Trust was a voidable preference. The Bankruptcy Court ruled that it would not dismiss that action for lack of standing. On October 22, 2004, the trustee of the CE Settlement Trust moved to dismiss the complaint in that action. This matter is pending and no decision has been rendered by the Court.

        Following the Third Circuit Decision, the lower courts assumed jurisdiction over further confirmation proceedings in respect of the CE Plan. On January 27, 2005, the Bankruptcy Court authorized the Future Claimants Representative and the Creditors Committee to file any available bankruptcy-related and similar claims against third parties, including preference claims against certain claimants that did not participate in the CE Settlement Trust, and any potential bankruptcy related claims against the Company. The Bankruptcy Court further stated that if Combustion Engineering and the Company cannot agree on modifications to the CE Plan with the Future Claimants Representatives and Creditors Committee, and the representative of Combustion Engineering claimants who opposed the confirmation order, the Bankruptcy Court would appoint an independent representative to prosecute all of the foregoing preference claims and bankruptcy related claims asserted against the Company. The Company also entered into a tolling agreement to extend the time period within which bankruptcy related claims against it could be brought.

        Since February 17, 2003, a stay and preliminary injunction have barred the commencement and prosecution of certain asbestos-related claims against Combustion Engineering, Lummus, Basic, certain other entities of the Company and certain other parties, including parties indemnified by the Company. The barred claims include, among others, claims arising from asbestos exposure caused by Combustion Engineering, Lummus or Basic and claims alleging fraudulent conveyance, successor liability and veil piercing. The Company does not know the number or nature of claims that would now be pending against the protected entities if those legal measures had not been in place.

Modified CE Plan

        In March 2005, following extensive discussions with certain representatives of various claimants, the Creditors Committee and the Future Claimants Representative, the Company reached an agreement on certain "settlement points" for modifying the CE Plan with a view to bringing it into conformity with the Third Circuit Decision and for providing a mechanism for resolving finally Lummus' potential asbestos liability.

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        The settlement points contemplate the following elements for finally resolving both Combustion Engineering's and Lummus' potential asbestos liability:

•

The modified plan for Combustion Engineering (the "Modified CE Plan") would continue to reflect the CE Plan's fundamental approach of channeling claims against Combustion Engineering to a trust funded, in part, by other entities of the Company.



•

Confirmation and effectiveness of the Modified CE Plan would be obtained concurrently with a Chapter 11 Plan for Lummus (the "Lummus Plan"), acceptances to which would be obtained from voting Lummus asbestos claimants prior to Lummus commencing a Chapter 11 case.



•

The Company would contribute to the Asbestos PI Trust the CE Convertible Note, the ABB Promissory Note, the Excess CE Cash and the CE Settlement Shares and would provide the Related Indemnities and assign the Certain Insurance Amounts, as contemplated by the CE Plan, subject to any modifications that may be agreed.



•

The Company would make an additional contribution (the "Additional Contribution") of $232 million. The Additional Contribution will be used as follows: (i) up to $28 million will be used to fund payment of all current and future asbestos claims against Lummus by a trust created under §524(g) of the Bankruptcy Code pursuant to the Lummus Plan; and (ii) the remaining amount will be used to provide additional funding under the Modified CE Plan to pay CE's asbestos creditors through the Asbestos PI Trust. Under the Modified CE Plan, the Lummus Sale Payments would not be required and the Lummus Note would be replaced by contributions to a separate Lummus §524(g) trust as discussed below.



•

Lummus has retained a person to act as a representative for future Lummus asbestos personal injury claimants (the "Lummus FCR"). The parties to the settlement points have agreed that the Lummus FCR will have determined by April 15, 2005, the appropriate funding to pay in full all current and future Lummus asbestos claims. In the event the Lummus FCR concludes that such amount exceeds $28 million, the Company will increase the amount of its contributions for the benefit of such Lummus claims by the amount in excess of $28 million, up to an additional $5 million. If the Lummus FCR concludes that such amount exceeds $33 million, the Company will have the option to terminate the settlement with no further obligations under the settlement points.



•

The Company will directly or indirectly pay up to $8 million in respect of certain approved legal fees in the Chapter 11 case of Combustion Engineering.



•

The Modified CE Plan would provide for a settlement of all pending preference claims and related claims, including any claims against the Company, its affiliates, and the officers of the Company and the affiliates, directors and employees, being asserted in the CE case.



•

The scope of the channeling injunction to be issued under the Modified CE Plan would be the same as under the CE Plan, except that non-derivative claims against Basic would not be subject to the injunction.



•

Basic would not be addressed in the Modified CE Plan and would therefore not contribute the Basic Note.

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•

The Modified CE Plan would also involve certain other adjustments, including certain changes in the relative amounts to be paid by the CE Asbestos PI Trust to different categories of claimants and changes in the administration of the trust.

        In a status conference on April 5, 2005, the Bankruptcy Court instructed the Company to submit the documentation relating to the Modified CE Plan and the Lummus Plan to the Bankruptcy Court within 60 days. The Company and various other interested parties are now working to reach agreement on open issues, details relating to the Modified CE Plan and the Lummus Plan and the form and substance of the operative documents and related Bankruptcy Court motions and other pleadings. The Company cannot be certain when those negotiations will be concluded or on what terms the parties will resolve outstanding issues. The Modified CE Plan and the Lummus Plan will become effective only if different classes of their respective creditors vote in favor of the respective plans. The Modified CE Plan and the Lummus Plan will be subject to the approval of the Bankruptcy and District Courts, as well as to further judicial review if appeals are made. While the Company believes that the Modified CE Plan and the Lummus Plan are consistent with the Third Circuit Decision and other applicable laws and precedents, it cannot be certain whether the courts will approve the plans, nor can it predict whether the plans will receive the needed creditor votes.

        The Company does not know whether any plan of reorganization for Combustion Engineering or Lummus will ultimately be confirmed or whether asbestos-related liabilities of any other entities of the Company would be resolved by any such plan. If for any reason a Chapter 11 plan relating to Combustion Engineering is not eventually confirmed, Combustion Engineering could be required to enter a Chapter 7 proceeding. If for any reason a Chapter 11 plan relating to Lummus is not eventually confirmed, the Company expects that Lummus' asbestos-related liabilities will have to be resolved through the tort system.

        Because the Third Circuit Decision held that non-derivative claims cannot be subject to the CE Plan's proposed channeling injunction, Basic will not be included in the Modified CE Plan. The Company expects that Basic's asbestos-related liabilities will have to be resolved through its own bankruptcy or similar U.S. state court liquidation proceeding or through the tort system.

        If any entities of the Company are not included in the protection offered by the channeling injunction entered pursuant to any Combustion Engineering plan that is confirmed, such entities could be required to resolve in the tort system, or otherwise, current and future asbestos-related claims that are asserted against such entities. Such events would be subject to numerous uncertainties, risk and expense.

        If U.S. federal legislation addressing asbestos personal injury claims is passed, which is speculative at this time, such legislation may affect the amount that will be required to resolve the asbestos-related claims against entities of the Company.

Effect on the Company's financial position

Expenses.    The Company recorded expenses related to asbestos of $262 million, $142 million and $395 million in loss from discontinued operations, net of tax, and $1 million, $3 million and $25 million in income from continuing operations, net of tax, for 2004, 2003 and 2002, respectively. Loss from discontinued operations, net of tax, for 2004 reflects a charge of $232 million taken in connection with

F-60

the agreement the Company reached in March 2005 on the basic terms of the Modified CE Plan, $17 million resulting from the mark-to-market adjustment relating to the CE Settlement Shares, a credit of $6 million resulting from adjustment of the provision for the estimated liability of Basic as described below, and other costs of $19 million. Loss from discontinued operations, net of tax, for 2003 includes a charge of $68 million, net of tax, resulting from the mark-to-market adjustment relating to the CE Settlement Shares, a provision of $41 million, representing the present value of the first two $25 million payments under the ABB Promissory Note, which were previously considered contingent, as well as $33 million of other costs. The 2002 amount reflected the Company's estimate of incremental total costs to be incurred based upon the terms of the CE Plan.

Cash Payments.    Cash payments, before insurance recoveries, related to Combustion Engineering's asbestos-related claims were $56 million (including $49 million contributed to the CE Settlement Trust, described above), $391 million (including $365 million contributed to the CE Settlement Trust), and $236 million (including $30 million contributed into the CE Settlement Trust), in 2004, 2003 and 2002, respectively. Administration and defense costs were $10 million, $36 million and $32 million in 2004, 2003 and 2002, respectively.

        Cash payments related to asbestos-related claims against Lummus and Basic made through December 31, 2004 were approximately $3 million and $3 million, respectively. Cash payments to resolve asbestos-related claims against entities other than Combustion Engineering, Lummus and Basic have been immaterial to date, totaling less than $1 million in the aggregate. The Company has not maintained a reserve for the claims pending against entities other than Combustion Engineering, Lummus and Basic.

Provisions.    At December 31, 2004, 2003 and 2002, the Company recorded total provisions on a consolidated basis of $1,023 million, $815 million and $1,095 million in respect of asbestos-related claims and defense costs related to Combustion Engineering, Lummus and Basic. The Company's provisions in continuing operations for asbestos-related liabilities at December 31, 2003 and 2002, now include $2 million and $4 million, respectively, previously classified in liabilities held for sale and in discontinued operations. Based upon the expected implementation of the Modified CE Plan and the Lummus Plan, the Company recorded provisions of $985 million and $33 million, respectively, at December 31, 2004, in accrued liabilities and other. If the Modified CE Plan and Lummus Plan become effective, certain amounts will be reclassified as of the effective date to other long-term liabilities based on the timing of the future cash payments to the Asbestos PI Trust or any similar trust created under the Lummus Plan. Future earnings will be affected by mark-to-market adjustments relating to the CE Settlement Shares through the effective date of the Plan, as well as contingent payments when they become probable of payment. The provisions at December 31, 2003 and 2002, were based on the Company's obligations under the CE Plan and assumed that the CE Plan would be confirmed and become effective as proposed.

        In light of the decision of the Court of Appeals, the Company has made a separate provision at December 31, 2004, with respect to Basic in accordance with Financial Accounting Standards Board Statement No. 5, Accounting for Contingencies, and Financial Accounting Standards Board Interpretation No. 14, Reasonable Estimation of the Amount of a Loss: an interpretation of FASB Statement No. 5. With respect to Basic, the Company has established a provision of $5 million relating

F-61

to its asbestos-related liabilities based on analysis of historical claims statistics and related settlement costs and a projection of such claims activity over the next several years.

        Management believes that it is probable that the full amount of the relevant provisions will be required to settle the respective asbestos-related liabilities of Combustion Engineering, Lummus and Basic. The Company may incur liability greater than the existing provisions, whether in connection with a modified plan of bankruptcy or otherwise, but management does not believe that the amount of any such incremental liability can be reasonably estimated or that there is a better estimate of these liabilities than the amounts that are provided for.

        The Company's provisions in respect of asbestos-related claims include, as stated above, amounts for each of Combustion Engineering, Lummus and Basic. The assets of Combustion Engineering include amounts receivable of approximately $221 million, $232 million and $241 million at December 31, 2004, 2003 and 2002, respectively, for probable insurance recoveries, which were established with respect to asbestos-related claims.

        The ultimate outcome of the Company's efforts to resolve the asbestos-related personal injury claims against Combustion Engineering and other entities of the Company (including any such claims against third parties indemnified by entities of the Company) remains uncertain. The related costs may be higher than the Company's provisions reflect and could have a material adverse impact on its consolidated financial position, results of operations and cash flows. In the event the Modified CE Plan or Lummus Plan do not become effective, the ultimate cost for the resolution of asbestos-related personal injury claims against Combustion Engineering and Lummus may be significantly higher and could have a material adverse impact on the Company's consolidated financial position, results of operations and cash flows.

Contingencies related to former Nuclear Technology business

        The Company retained liabilities for certain specific environmental remediation costs at two sites in the U.S. that were operated by its Nuclear Technology business, which was sold to British Nuclear Fuels PLC (BNFL) in April 2000. Pursuant to the sale agreement with BNFL, the Company has retained all of the environmental liabilities associated with its Combustion Engineering subsidiary's Windsor, Connecticut facility and a portion of the environmental liabilities associated with its ABB C-E Nuclear Power Inc. subsidiary's Hematite, Missouri facility. The primary environmental liabilities associated with these sites relate to the costs of remediating radiological and chemical contamination at these facilities. Such costs are not payable until a facility is taken out of use and generally are incurred over a number of years. Although it is difficult to predict with accuracy the amount of time it may take to remediate radiological contamination upon decommissioning, based on information that BNFL has made publicly available, the Company believes that it may take until 2013 to remediate the Hematite site. With respect to the Windsor site, the Company believes the remediation may take until 2010. At the Windsor site, a significant portion of the contamination is related to activities that were formerly conducted by or for the U.S. government. The Company believes that a significant portion of the remediation costs will be covered by the U.S. government under the U.S. government's Formerly Utilized Sites Remedial Action Program. The Company has estimated the total contingent liability in a range of loss from $266 million to $447 million on an undiscounted basis. The Company has recorded in other liabilities a reserve of $266 million, net of payments from inception of $34 million, at

F-62

December 31, 2004. Payments for remediation were $10 million, $6 million and $12 million during 2004, 2003 and 2002, respectively. The Company does not expect the majority of the remaining costs to be paid during 2005.

Note 19    Taxes

        Provision for taxes consists of the following:

	Year ended December 31,
	2004			2003		2002
Current taxes on income	$	333		$	217	$	255
Deferred taxes		(22	)		28		(174	)
Tax expense from continuing operations		311			245		81
Tax expense from discontinued operations		41			42		91

        The weighted-average tax rate is the tax rate that results from applying each subsidiary's statutory income tax rate to the income from continuing operations before taxes and minority interest. The Company operates in countries that have differing tax laws and rates. Consequently, the consolidated weighted-average effective rate will vary from year to year according to the source of earnings or losses by country.

	Year ended December 31,
	2004			2003			2002
Reconciliation of taxes:
Income (loss) from continuing operations before taxes and minority interest	$	861		$	(60	)	$	66
Weighted-average tax rate		38.8	%		(13.3	)%		40.9	%
Taxes at weighted-average tax rate		334			8			27
Items taxed at rates other than the weighted-average tax rate		(36	)		15			(126	)
Changes in valuation allowance		107			266			167
Changes in enacted tax rates		(18	)		4			1
Other, net		(76	)		(48	)		12
Tax expense from continuing operations	$	311		$	245		$	81
Effective tax rate for the year		36.1	%		(408.3	)%		122.7	%

        In 2003, items taxed at rates other than the weighted-average tax rate included the tax effect of an $84 million expense comprising the change in fair value of the embedded derivative contained in the Company's $968 million convertible bonds combined with the continued amortization of the discount on issuance of these bonds (see Note 15), partially offset by earnings recognized in relation to certain of the Company's equity accounted investments. In 2002, items taxed at rates other than the weighted-average tax rate included a $215 million gain, reflecting the change in fair value of the embedded derivative contained in the Company's $968 million convertible bonds, partially offset by amortization of the discount on issuance of these bonds, as well as earnings recognized in relation to certain of the Company's equity accounted investments.

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        The reconciliation of taxes for 2004, 2003 and 2002 included changes in the valuation allowance recorded in certain jurisdictions in respect of deferred tax assets that were recognized for net operating losses incurred in those jurisdictions. The change in valuation allowance was required as the Company determined it was more likely than not that such deferred tax assets would no longer be realized. In 2004, the change in valuation allowance is predominately related to the Company's operations in certain countries including Canada and France. In 2003, the change in valuation allowance included an allowance of approximately $258 million on deferred tax assets as a result of the Company's determination that it was more likely than not that such deferred tax assets would no longer be realized within the Company's remaining Oil, Gas and Petrochemicals business. In 2002, the change in valuation allowance included an allowance of $17 million on deferred tax assets as a result of the overstatement within the Company's Power Technologies division in Italy (see Note 18). The change in valuation allowance in 2002 also included an allowance of approximately $33 million on deferred tax assets as a result of the Company's determination that it was more likely than not that such deferred tax assets would no longer be realized within the Company's remaining Oil, Gas and Petrochemicals business.

        In 2004 and 2003, the reconciling item "Other, net" included a benefit of approximately $39 million and approximately $56 million, respectively, relating to the favorable resolution of certain prior year tax matters, including the release of a $38 million tax provision related to a tax case ruled in favor of the Company in 2003. Furthermore, 2004 included the one-time benefit of approximately $45 million from the losses of a post divestment reorganization and 2003 included the expense of approximately $16 million related to a tax claim filed in Central Europe. Additionally, in 2003 and 2002, "Other, net" included $5 million and $7 million, respectively, related to expenses that are no longer deductible under the Italian tax law as a result of the overstatement within the Company's Power Technologies division in Italy.

        In 2003, the loss from continuing operations before taxes and minority interest of $60 million included an $84 million expense comprising the change in fair value of the embedded derivative contained in the Company's $968 million convertible bonds combined with the continued amortization of the discount on issuance of these bonds. Furthermore, the tax expense from continuing operations included the release of a $38 million tax provision related to a tax case ruled in favor of the Company, offset by expense of approximately $16 million related to a tax claim filed in Central Europe. In addition, the tax expense from continuing operations included a valuation allowance of approximately $258 million on deferred tax assets as a result of the determination that it was more likely than not that such deferred tax assets would no longer be realized within the Company's remaining Oil, Gas and Petrochemicals business. The effective tax rate applicable to income from continuing operations excluding the tax effect of these items would be 37.5 percent.

        In 2002, the tax expense from continuing operations included an allowance of approximately $33 million on deferred tax assets as a result of the determination that it was more likely than not that such deferred tax assets would no longer be realized within the Company's remaining Oil, Gas and Petrochemicals business as well as an allowance of $17 million on deferred tax assets and $7 million related to non-deductible expenses under Italian tax law both as a result of the overstatement within the Company's Power Technologies division in Italy. The effective tax rate applicable to income from continuing operations excluding the tax effect of these items would have been 36.4 percent.

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        Deferred income tax assets and liabilities consist of the following:

		December 31,
		2004			2003
Deferred tax liabilities:
	Financing receivables	$	(236	)	$	(244	)
	Property, plant and equipment		(290	)		(464	)
	Pension and other accrued liabilities		(479	)		(371	)
	Other		(148	)		(131	)
Total deferred tax liability			(1,153	)		(1,210	)
Deferred tax assets:
	Investments and other		36			20
	Property, plant and equipment		77			172
	Pension and other accrued liabilities		833			692
	Unused tax losses and credits		1,694			1,713
	Other		553			444
Total deferred tax asset			3,193			3,041
Valuation allowance			(2,017	)		(1,872	)
Deferred tax asset, net of valuation allowance			1,176			1,169
Net deferred tax asset (liability)		$	23		$	(41	)

        Deferred tax assets and deferred tax liabilities are allocated between current and non-current as follows:

	December 31,
	2004						2003
	Current			Non-current			Current			Non-current
Deferred tax liability	$	(200	)	$	(953	)	$	(188	)	$	(1,022	)
Deferred tax asset, net of valuation allowance		670			506			579			590
Net deferred tax asset (liability)	$	470		$	(447	)	$	391		$	(432	)

        The non-current deferred tax asset, net of valuation allowance, is included in investments and other.

        Certain entities have deferred tax assets related to net operating loss carry-forwards and other items. Because recognition of these assets is uncertain, valuation allowances of $2,017 million and $1,872 million have been established at December 31, 2004 and 2003, respectively.

        At December 31, 2004, net operating loss carry-forwards of $4,291 million and tax credits of $141 million are available to reduce future taxes of certain subsidiaries, of which $2,241 million loss carry-forwards and $92 million tax credits expire in varying amounts through 2024 and the remainder

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does not expire. These carry-forwards are predominantly related to the Company's U.S. and German operations.

        The provision for tax contingencies was approximately $295 million and $300 million at December 31, 2004 and 2003, respectively. A significant part of these provisions has been accrued for pending court cases in Northern Europe relating to certain sale and leaseback transactions.

        The Company had no income tax expense impact from the repatriation provision of the American Jobs Creation Act of 2004 regarding the one-time dividend tax rate reduction.

Note 20    Other liabilities

        The Company's other liabilities amount to $1,083 million and $1,077 million at December 31, 2004 and 2003, respectively.

        Other liabilities include non-current provisions of $439 million and $441 million, deferred income of $143 million and $158 million and non-current derivative liabilities of $53 million and $40 million at December 31, 2004 and 2003, respectively. Included in non-current provisions are amounts accrued for the Company's estimated environmental remediation costs related to its former Nuclear Technology business (see Note 18) of $266 million and $276 million at December 31, 2004 and 2003, respectively.

        The Company entered into tax-advantaged leasing transactions with U.S. investors prior to 1999. Prepaid rents that have been received on these transactions are $314 million and $312 million at December 31, 2004 and 2003, respectively, and have been recorded as deposit liabilities. Net gains on these transactions are being recognized over the lease terms.

Note 21    Employee benefits

        The Company operates several pension plans, including defined benefit, defined contribution and termination indemnity plans, in accordance with local regulations and practices. These plans cover the majority 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 postretirement benefit plans in certain countries.

        Some of these plans require employees to make contributions and enable employees to earn matching or other contributions from the Company. The funding policies of the Company's plans are consistent with the local government and tax requirements. The Company has several pension plans that are not required to be funded pursuant to local government and tax requirements.

        The Company uses a December 31 measurement date for its plans.

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Obligations and funded status

        The following tables set forth the change in benefit obligations, the change in plan assets and the funded status recognized in the Consolidated Financial Statements at December 31, 2004 and 2003, for the Company's benefit plans:

		Pension benefits						Other benefits
		2004			2003			2004			2003
Benefit obligation at the beginning of year		$	7,721		$	7,250		$	397		$	444
	Service cost		190			204			3			3
	Interest cost		375			369			23			26
	Contributions from plan participants		46			50			10			7
	Benefit payments		(523	)		(528	)		(39	)		(38	)
	Benefit obligations of businesses acquired		38			—			—			—
	Benefit obligations of businesses disposed		(118	)		(131	)		—			—
	Actuarial (gain) loss		366			(371	)		(23	)		42
	Plan amendments and other		(14	)		(16	)		(3	)		(88	)
	Exchange rate differences		632			894			1			1
Benefit obligation at the end of year			8,713			7,721			369			397
Fair value of plan assets at the beginning of year			6,041			5,319			—			—
	Actual return on plan assets		476			407			—			—
	Contributions from employer		753			309			29			31
	Contributions from plan participants		46			50			10			7
	Benefit payments		(523	)		(528	)		(39	)		(38	)
	Plan assets of businesses acquired		34			—			—			—
	Plan assets of businesses disposed		(92	)		(127	)		—			—
	Plan amendments and other		(8	)		—			—			—
	Exchange rate differences		535			611			—			—
Fair value of plan assets at the end of year			7,262			6,041			—			—
Unfunded amount			1,451			1,680			369			397
Unrecognized transition liability			—			—			(11	)		(14	)
Unrecognized actuarial loss			(1,019	)		(782	)		(141	)		(174	)
Unrecognized prior service cost			(22	)		(38	)		16			15
Net amount recognized		$	410		$	860		$	233		$	224

        In May 2003, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus on Emerging Issues Task Force No. 03-4 (EITF 03-4), Determining the Classification and Benefit Attribution Method for a "Cash Balance" Pension Plan. EITF 03-4 clarifies that a cash balance plan, as defined by the guidance, should be accounted for as a defined benefit plan using the traditional unit credit attribution method. The Company adopted EITF 03-4 in May 2003. As a result, the Company accounts for certain of its plans in Switzerland as cash balance plans in accordance with EITF 03-4. The adoption of EITF 03-4 resulted in an actuarial gain of $406 million during 2003.

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        The following amounts have been recognized in the Company's Consolidated Balance Sheet at December 31, 2004 and 2003:

	Pension benefits						Other benefits
	2004			2003			2004		2003
Prepaid pension cost	$	(536	)	$	(569	)	$	—	$	—
Accrued pension cost		1,272			1,613			233		224
Intangible assets		(11	)		(2	)		—		—
Accumulated other comprehensive loss		(315	)		(182	)		—		—
Net amount recognized	$	410		$	860		$	233	$	224

        Included in the $1,551 million of pension and other employee benefits at December 31, 2004, are $46 million of long-term employee-related obligations not accounted for under Statement of Financial Accounting Standards No. 87 (SFAS 87), Employers' Accounting for Pensions or Statement of Financial Accounting Standards No. 106 (SFAS 106), Employers' Accounting for Postretirement Benefits Other Than Pensions. Additionally, accrued liabilities and other (see Note 16), contains an accrual of $77 million and $112 million at December 31, 2004 and 2003, respectively, for short-term employee benefits that do not meet the criteria of SFAS 87 or SFAS 106.

        The pension and other employee benefits liability reported in the Consolidated Balance Sheets includes $326 million and $216 million at December 31, 2004 and 2003, respectively, to record a minimum pension liability. The $216 million of minimum pension liability at December 31, 2003, included liabilities related to discontinued operations of $32 million.

        The accumulated benefit obligation (ABO) for all defined benefit pension plans was $8,228 million and $7,414 million at December 31, 2004 and 2003, respectively.

        The projected benefit obligation (PBO) and fair value of plan assets for pension plans with benefit obligations in excess of plan assets were:

	December 31,
	2004							2003
	PBO		Assets		Difference			PBO		Assets		Difference
PBO exceeds assets	$	8,294	$	6,810	$	1,484		$	4,432	$	2,624	$	1,808
Assets exceed PBO		419		452		(33	)		3,289		3,417		(128	)
Total	$	8,713	$	7,262	$	1,451		$	7,721	$	6,041	$	1,680

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        The accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were:

	December 31,
	2004							2003
	PBO		Assets		Difference			PBO		Assets		Difference
ABO exceeds assets	$	5,008	$	3,910	$	1,098		$	2,233	$	667	$	1,566
Assets exceed ABO		3,220		3,352		(132	)		5,181		5,374		(193	)
Total	$	8,228	$	7,262	$	966		$	7,414	$	6,041	$	1,373

Components of net periodic benefit cost

        For the years ended December 31, 2004, 2003 and 2002, net periodic benefit cost consists of the following:

	Pension benefits									Other benefits
	2004			2003			2002			2004			2003		2002
Service cost	$	190		$	204		$	193		$	3		$	3	$	6
Interest cost		375			369			328			23			26		30
Expected return on plan assets		(330	)		(325	)		(292	)		—			—		—
Amortization transition liability		5			1			13			2			6		7
Amortization prior service cost		4			9			15			(2	)		—		—
Amortization of net actuarial loss		37			45			23			9			9		6
Other		4			8			9			2			—		—
Net periodic benefit cost	$	285		$	311		$	289		$	37		$	44	$	49

Assumptions

        The following weighted-average assumptions were used to determine benefit obligations at December 31, 2004 and 2003:

	Pension benefits				Other benefits
	2004		2003		2004		2003
Discount rate	4.60	%	5.00	%	5.75	%	6.25	%
Rate of compensation increase	2.23	%	2.31	%	—		—

        The following weighted-average assumptions were used to determine net periodic benefit cost for years ended December 31, 2004, 2003 and 2002:

	Pension benefits						Other benefits
	2004		2003		2002		2004		2003		2002
Discount rate	4.97	%	5.10	%	5.10	%	6.25	%	6.74	%	7.24	%
Expected long-term return on plan assets	5.57	%	6.06	%	6.21	%	—		—		—
Rate of compensation increase	2.28	%	3.07	%	3.07	%	—		—		—

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        The expected long-term rate of return on assets assumption is derived from the current and projected asset allocation, the current and projected types of investments in each asset category and the long-term historical returns for each investment type.

        The Company has multiple non-pension postretirement benefit plans. The Company's health care plans are generally contributory with participants' contributions adjusted annually.

	2004		2003
Health care cost trend rate assumed for next year	11.76	%	11.81	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	6.24	%	5.96	%
Year that the rate reaches the ultimate trend rate	2013		2013

        Assumed health care cost trends have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects at December 31, 2004:

	1-percentage- point increase		1-percentage- point decrease
Effect on total of service and interest cost	$	2	$	(1	)
Effect on postretirement benefit obligation	$	25	$	(22	)

        As of July 1, 2004, the Company adopted Financial Accounting Standards Board Staff Position (FSP) No. FAS 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (which superceded FAS FSP No. 106-1). This FSP provides authoritative guidance on the accounting for the U.S. subsidy and other provisions of the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The effects of these provisions resulted in a reduction of $24 million in ABO with an offset to unrecognized net actuarial loss in other benefits. The U.S. government will begin making the subsidy payments for employers in 2006. The effect of the Act on the foreign net periodic benefit costs at December 31, 2004, is $2 million.

Plan assets

        The Company's pension plan weighted-average asset allocations at December 31, 2004 and 2003, and approximate target allocation at December 31, 2004, is as follows:

	Plan assets				Target allocation
	2004		2003		2004
Asset category:
Equity securities	33	%	37	%	30	%
Debt securities	54	%	49	%	51	%
Real estate	9	%	10	%	12	%
Other	4	%	4	%	7	%
Total	100	%	100	%	100	%

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        The pension plan assets are invested in accordance with statutory regulations, pension plan rules, and recommendations of the pension fund trustees. The investment allocation strategy is expected to remain consistent with historical averages.

        At December 31, 2004 and 2003, plan assets included approximately $5 million (approximately 1 million shares), of the Company's capital stock.

Contributions

        During 2004, the Company made a non-cash contribution of $549 million of available-for-sale debt securities to certain of the Company's pension plans in Germany.

        The Company expects to contribute approximately $150 million to its pension plans and $29 million to its other postretirement benefit plans in 2005.

        The Company also maintains several defined contribution plans. The expense for these plans was $71 million, $86 million and $90 million in 2004, 2003 and 2002, respectively. The Company also contributed $74 million, $80 million and $74 million to multi-employer plans in 2004, 2003 and 2002, respectively.

Estimated future benefit payments

        The following table reflects the total pension benefits expected to be paid from the plans or from the Company's assets, including both the Company's share of the benefit cost and the participants' share of the cost, which is funded by participant contributions. Additionally, the Medicare subsidies column represents payments estimated to be received from the U.S. government as part of the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

			Other postretirement benefits
	Pension benefits		Benefit payments		Medicare subsidies
2005	$	495	$	29	$	—
2006		509		30		(2	)
2007		529		31		(2	)
2008		545		30		(2	)
2009		565		30		(2	)
Years 2010–2014		2,980		152		(11	)

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Note 22    Employee incentive plans

Management incentive plan

        The Company maintains a management incentive plan under which it offers stock warrants and warrant appreciation rights (WARs) to key employees for no consideration.

        Warrants granted under this plan allow participants to purchase shares of the Company at predetermined prices. Participants may sell the warrants rather than exercise the right to purchase shares. Equivalent warrants are listed on the SWX Swiss Exchange (virt-x), which facilitates valuation and transferability of warrants granted under this plan.

        Each WAR gives the participant the right to receive, in cash, the market price of a warrant on the date of exercise of the WAR. The WARs are non-transferable.

        Participants may exercise or sell warrants and exercise WARs after the vesting period, which is three years from the date of grant. Vesting restrictions can be waived in certain circumstances such as death or disability. All warrants and WARs expire six years from the date of grant. As the primary trading market for shares of ABB Ltd is the SWX Swiss Exchange (virt-x), the exercise prices of warrants and the trading prices of equivalent warrants listed on the SWX Swiss Exchange (virt-x) are denominated in Swiss francs. Accordingly, exercise prices are presented below in Swiss francs. Fair values have been presented in U.S. dollars based upon exchange rates in effect as of the applicable period.

Warrants

        The Company accounts for the warrants using the intrinsic value method of APB 25 as permitted by SFAS 123. All warrants were issued with exercise prices greater than the market prices of the stock on the dates of grant. Accordingly, the Company records no compensation expense related to the warrants, except in circumstances when a participant ceased to be employed by a consolidated subsidiary, such as after a divestment by the Company. In accordance with Financial Accounting Standards Board Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, the Company records compensation expense based on the fair value of warrants retained by participants on the date their employment ceased, with an offset to additional paid in capital. The impact of such expense is not material.

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        Presented below is a summary of warrant activity for the years shown:

	Number of warrants		Number of shares(1)		Weighted-average exercise Price (Swiss francs)(2)
Outstanding at January 1, 2002	76,496,150		25,240,463		26.55
Forfeited	(8,105,090	)	(2,043,264	)	24.03
Outstanding at December 31, 2002	68,391,060		23,197,199		26.77
Granted(3)	27,254,250		5,450,850		7.00
Forfeited	(1,435,000	)	(361,758	)	19.66
Outstanding at December 31, 2003	94,210,310		28,286,291		23.05
Granted(4)	14,475,000		2,895,000		7.50
Forfeited	(3,000,000	)	(661,864	)	9.94
Expired	(10,538,000	)	(8,612,664	)	22.17
Outstanding at December 31, 2004	95,147,310		21,906,763		21.74
Exercisable at December 31, 2002	29,751,060		13,456,203		25.71
Exercisable at December 31, 2003	49,381,060		18,404,851		30.11
Exercisable at December 31, 2004	55,230,560		13,923,413		30.08

(1)

All warrants granted prior to 1999 require the exercise of 100 warrants for 81.73 registered shares of ABB Ltd. Warrants granted in 1999, 2000 and 2001 require the exercise of 100 warrants for 25.21 registered shares of ABB Ltd. No warrants were granted in 2002. Warrants granted in 2003 and 2004 required the exercise of five warrants for one registered share of ABB Ltd. Information presented reflects the number of registered shares of ABB Ltd that warrant holders can receive upon exercise.

(2)

Information presented reflects the exercise price per registered share of ABB Ltd.

(3)

The aggregate fair value at date of grant of warrants issued in 2003 was $12 million, assuming a zero percent dividend yield, expected volatility of 44 percent, risk-free interest rate of 2.41 percent, and an expected life of six years.

(4)

The aggregate fair value at date of grant of warrants issued in 2004 was $4 million, assuming dividend yield of 1.53 percent, expected volatility of 28.5 percent, risk-free interest rate of 1.98 percent, and an expected life of six years.

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        Presented below is a summary of warrants outstanding at December 31, 2004.

Exercise price (in Swiss francs)(1)	Number of warrants	Number of shares(2)	Weighted-average remaining life
29.75	4,648,060	1,171,758	0.4 years
32.73	14,565,000	3,671,781	0.9 years
42.05	19,630,000	4,948,648	1.4 years
13.49	16,387,500	4,131,226	2.9 years
7.00	25,441,750	5,088,350	4.9 years
7.50	14,475,000	2,895,000	5.9 years

(1)

Information presented reflects the exercise price per registered share of ABB Ltd.

(2)

Information presented reflects the number of registered shares of ABB Ltd that warrant holders can receive upon exercise of warrants.

WARs

        As each WAR gives the holder the right to receive cash equal to the market price of a warrant on date of exercise, the Company is required by APB 25 to record a liability based upon the fair value of outstanding WARs at each period end, amortized on a straight-line basis over the three-year vesting period. In selling, general and administrative expenses, the Company recorded income of $4 million for 2004, expense of $1 million for 2003 and income of $14 million for 2002, respectively, as a result of changes in the fair value of the outstanding WARs and the vested portion. To hedge its exposure to fluctuations in fair value of outstanding WARs, the Company purchases cash-settled call options, which entitle the Company to receive amounts equivalent to its obligations under the outstanding WARs. In accordance with EITF 00-19 the cash-settled call options have been recorded as assets measured at fair value (see Note 5), with subsequent changes in fair value recorded through earnings as an offset to the compensation expense recorded in connection with the WARs. During 2004, 2003 and 2002, the Company recognized expense of $15 million, $9 million and $26 million, respectively, in interest and other finance expense, related to the cash-settled call options.

        The aggregate fair value of outstanding WARs was $14 million and $17 million at December 31, 2004 and 2003, respectively. Fair value of WARs was determined based upon the trading price of equivalent warrants listed on the SWX Swiss Exchange (virt-x).

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        Presented below is a summary of WAR activity for the years shown.

	Number of WARs outstanding
Outstanding at January 1, 2002	103,553,070
Exercised	(1,455,080	)
Forfeited	(3,803,750	)
Outstanding at December 31, 2002	98,294,240
Granted	21,287,000
Exercised	(2,052,500	)
Forfeited	(1,850,000	)
Outstanding at December 31, 2003	115,678,740
Granted	30,490,000
Exercised	(3,481,220	)
Forfeited	(2,600,000	)
Expired	(7,895,000	)
Outstanding at December 31, 2004	132,192,520

        At December 31, 2004 and 2003, 81,590,520 and 57,619,240 of the WARs were exercisable, respectively. The aggregate fair value at date of grant of WARs issued in 2004 and 2003 was $8 million and $9 million, respectively. No WARs were granted in 2002.

Employee Share Acquisition Plan

        To incentivize employees, the Company granted stock options under an Employee Share Acquisition Plan (ESAP Plan) in November 2004. In the initial launch of the ESAP Plan, employees in eleven countries, including the United States, were invited to participate. The ESAP Plan is an employee stock option plan with a savings feature. Employees save over a twelve-month savings period, by way of monthly salary deductions. The maximum monthly savings amount is the lower of 10 percent of gross monthly salary or the local currency equivalent of 750 Swiss francs. At the end of the savings period, employees choose whether to exercise their stock options using their savings plus interest to buy ABB Ltd shares (American Depositary Shares (ADS) in the case of employees in the United States—each ADS representing one registered share of the Company) at the exercise price set at the grant date, or have their savings returned with interest. The savings are accumulated in a bank account held by a third party trustee on behalf of the participants and earn interest.

        The maximum number of shares that each employee can purchase has been determined based on the exercise price and the aggregate savings for the twelve-month period, increased by 10 percent to allow for currency fluctuations. If, at the exercise date, the balance of savings plus interest exceeds the maximum amount of cash the employee must pay to fully exercise his stock options, the excess funds will be returned to the employee. If the balance of savings and interest is insufficient to permit the employee to fully exercise his stock options, the employee has the choice but not the obligation, to make an additional payment so that the employee may fully exercise his stock options.

F-75

        If an employee ceases to be employed by the Company, the accumulated savings as of the date of cessation of employment will be returned to the employee and the employee's right to exercise his stock options will be forfeited. Employees can withdraw from the ESAP Plan at any time during the savings period and will be entitled to a refund of their accumulated savings.

        The exercise price per share and ADS of 6.95 Swiss francs and $5.90, respectively, was determined using the respective closing price of the ABB Ltd share on SWX Swiss Exchange (virt-x) and ADS on the New York Stock Exchange on November 9, 2004, the grant date. The Company granted stock options, such that, if fully exercised, the Company would issue 7,548,360 registered shares (including shares represented by ADS), The aggregate fair value of the awards at date of grant was $5 million, assuming a zero percent dividend yield, expected volatility of 28.25 percent, a risk-free interest rate of 0.97 percent and a life of one year from grant date. Forfeitures since grant date have been insignificant.

        The Company accounts for awards under the ESAP Plan using the intrinsic value method of APB 25. The awards were issued with an exercise price equal to the market price of the stock on grant date. Accordingly, the intrinsic value as of grant date was zero and the Company has recorded no compensation expense related to the ESAP Plan.

Performance Incentive Share Plan

        In December 2004, the Company introduced a Performance Incentive Share Plan (Performance Plan) for members of its Executive Committee (EC Members). EC Members did not participate in the management incentive plan in 2004.

        The Performance Plan involves annual conditional grants of ABB Ltd shares (or ADSs where deemed appropriate by the Nomination and Compensation Committee). The number of shares conditionally granted is dependent upon the base salary of the EC Member. The actual number of shares that the participants will receive free of charge at a future date is dependent on 1) the performance of ABB Ltd shares during a defined period (Evaluation Period) compared to those of a selected peer group of publicly-listed multinational companies and 2) the term of service of the respective EC Member in that capacity during the Evaluation Period. The actual number of shares received after the Evaluation Period cannot exceed 100 percent of the conditional grant.

        The Evaluation Period of the initial launch was defined as the period from March 15, 2004, to March 15, 2006. The reference price of 7.68 Swiss francs for the purpose of comparison with the peers was calculated as the average of the closing prices of the ABB Ltd share on SWX Swiss Exchange (virt-x) over the 20 trading days preceding March 15, 2004.

        The performance of the Company compared to its peers over the Evaluation Period will be measured as the sum, in percentage terms, of the average percentage price development of the ABB share price over the Evaluation Period and an average annual dividend yield percentage (the Company's Performance).

        In order for shares to vest, the Company's Performance over the Evaluation Period must be positive and equal to or better than half of the defined peers. The actual number of shares to be delivered will be dependent on the Company's ranking in comparison with the defined peers. The full

F-76

amount of the conditional grant will vest when the Company's Performance is better than three-quarters of the defined peers.

        If an EC Member gives notice of resignation or, under certain circumstances is given notice of termination, and the vesting period has not expired, then the right to shares is forfeited. In the event of death or disability during the vesting period, the conditional grant size for that participant is reduced pro rata based on the remaining vesting period. An evaluation of the Company's Performance for the Evaluation Period up to the date of death or disability is made to establish the number of shares that vest. If a Performance Plan participant ceases to be an EC Member for reasons other than described above, the conditional grant size is reduced pro rata based on the portion of the vesting period remaining when the participant ceases to be an EC Member. In respect of a Performance Plan grant for which the vesting period has not expired, the Nomination and Compensation Committee can invite a new EC Member to receive a conditional grant, adjusted to reflect the shorter service period.

        In 2004, 443,430 shares were conditionally granted to EC Members. In January 2005, a further 59,001 shares were conditionally granted under the 2004 launch to a new EC Member.

        The Company accounts for awards under the Performance Plan using the intrinsic value method of APB 25. As the shares that vest are awarded free of charge, the intrinsic value of the award is equivalent to the market price of the stock. Since the actual number of shares that participants will ultimately receive is not determinable until March 15, 2006, the Performance Plan is deemed to be a variable plan in accordance with APB 25. Changes in the fair value of the Company's stock and actual number of shares that vest up to July 1, 2005, date of adoption of SFAS 123R, will result in a change in the intrinsic value and amount of the awards and a corresponding change to compensation expense over the vesting period. The amount of compensation expense for 2004 was insignificant. The aggregate fair value of the 2004 awards at grant date, assuming vesting of the maximum award in March 2006, was approximately $2 million.

Note 23    Stockholders' equity

        In March 2003, the Company sold 80 million treasury shares in two transactions for approximately $156 million.

        At the Company's annual general meeting held on May 16, 2003, the Company's shareholders approved amendments to its articles of incorporation providing for an increase in authorized share capital and an increase in contingent share capital. The amendments include the creation of 250 million Swiss francs in authorized share capital, replacing the 100 million Swiss francs in authorized share capital that expired in June 2001. This entitled the Company's Board of Directors to issue up to 100 million new ABB Ltd shares, including approximately 30 million CE Settlement Shares (see Note 18). The amendments also included an increase of contingent capital from 200 million Swiss francs to 750 million Swiss francs, allowing the issuance of up to a further 300 million new ABB Ltd shares which may be used primarily for the exercise of conversion rights granted in connection with issuance of bonds and other financial market instruments and for the issuance of new shares to employees.

        In October 2003, the Company announced a three-component capital-strengthening program, comprised of a share capital increase, a credit facility agreement and a bond issuance. As part of this

F-77

program, in November 2003, an extraordinary shareholders' meeting resolved to increase the Company's share capital by approximately 840 million shares through a rights issue. In December 2003, the Company completed the 7-for-10 rights offering for the 840 million new registered shares at an offer price of 4 Swiss francs per share resulting in a net increase of capital stock and additional paid in capital of approximately $2.5 billion.

        In December 2003, the Company issued 30,298,913 CE Settlement Shares out of its authorized capital for purposes of fulfilling the Company's obligations under a pre-packaged plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code of Combustion Engineering. In accordance with its then current articles of incorporation, the pre-emptive rights of the shareholders were excluded and allocated to a Company subsidiary, which subscribed for these shares and holds them until they will be contributed to the Asbestos PI Trust or any similar trust, once a plan of reorganization of Combustion Engineering is declared effective.

        At December 31, 2004, the Company had 2,440,016,034 authorized shares. Of these, 2,070,314,947 shares are registered and issued, including 30,298,913 CE Settlement Shares that are reserved for use in connection with a pre-packaged plan of reorganization of Combustion Engineering. As these shares are presently held by one of the Company's subsidiaries and carry no participation rights, these shares are not treated as outstanding for the purposes of the Company's Consolidated Financial Statements. The CE Settlement Shares will only become outstanding and carry participation rights once a plan of reorganization for Combustion Engineering becomes effective and the shares have been contributed to the Asbestos PI Trust or any similar trust created under such a plan. Should a plan ultimately not become effective, the CE Settlement Shares reserved for such use would be cancelled by the Company.

        At December 31, 2004, including the securities issued under the employee incentive plans and call options sold to a bank at fair value during 2001, 2003 and 2004, the Company had outstanding obligations to deliver 62 million shares at exercise prices ranging from 6.95 to 42.05 Swiss francs. These financial instruments expire in periods ranging from June 2005 to December 2010 and were recorded as equity instruments in accordance with EITF 00-19. Also, at December 31, 2004, the Company had obligations to deliver approximately 107 million shares at a conversion price of $9.03 as a result of the issuance of convertible debt in May 2002 and to deliver approximately 105 million shares at a conversion price of 9.53 Swiss francs as a result of the issuance of convertible debt in September 2003. In addition, at December 31, 2004, the Company had outstanding contingent obligations to deliver up to a maximum of 0.5 million shares free of charge to EC Members under the Performance Plan (see Note 22).

        Dividends are payable to the Company's stockholders based on the requirements of Swiss law, ABB Ltd's Articles of Incorporation, and stockholders' equity as reflected in the unconsolidated financial statements of ABB Ltd prepared in compliance with Swiss law. At December 31, 2004, of the 8,911 million Swiss francs stockholders' equity reflected in such unconsolidated financial statements, 5,176 million Swiss francs is share capital, 2,191 million Swiss francs is restricted, 1,533 million Swiss francs is unrestricted and 11 million Swiss francs is available for distribution.

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Note 24    Earnings per share

        Basic earnings (loss) per share is calculated by dividing income (loss) by the weighted-average number of shares outstanding during the year. Diluted earnings (loss) per share is calculated by dividing income (loss) 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, if dilutive; the securities issued under the Company's employee incentive plans, if dilutive; and shares issuable in relation to outstanding convertible bonds, if dilutive. The shares issuable in relation to the warrants and options outstanding in connection with the Company's employee incentive plans were excluded from the computation of diluted earnings per share in 2003 and 2002 as their inclusion would have been antidilutive. In 2004, only the shares issuable in relation to the warrants and options outstanding in connection with the Company's December 2003 launch under the management incentive plan were included in the computation of diluted earnings (loss) per share as the inclusion of potential shares from the warrants and options of other launches under the employee incentive plans would have been antidilutive. In 2002, the shares issuable in relation to the $968 million convertible bonds were included in the computation of diluted earnings per share for the period they were outstanding. In 2004 and 2003, the shares issuable in relation to the convertible bonds were excluded from the calculation of diluted earnings per share as their inclusion would have been antidilutive.

	Year ended December 31,
	2004			2003			2002
Basic earnings (loss) per share:
Income (loss) from continuing operations	$	448		$	(371	)	$	(126	)
Loss from discontinued operations, net of tax		(483	)		(408	)		(693	)
Net loss	$	(35	)	$	(779	)	$	(819	)
Weighted-average number of shares outstanding (in millions)		2,028			1,220			1,113
Earnings (loss) per share:
Income (loss) from continuing operations	$	0.22		$	(0.30	)	$	(0.11	)
Loss from discontinued operations, net of tax		(0.24	)		(0.34	)		(0.63	)
Net loss	$	(0.02	)	$	(0.64	)	$	(0.74	)

F-79

	Year ended December 31,
	2004			2003			2002
Diluted earnings (loss) per share:
Income (loss) from continuing operations	$	448		$	(371	)	$	(126	)
Effect of dilution:
Convertible bonds, net of tax		—			—			(187	)
Income (loss) from continuing operations, adjusted		448			(371	)		(313	)
Loss from discontinued operations, net of tax		(483	)		(408	)		(693	)
Net loss, adjusted	$	(35	)	$	(779	)	$	(1,006	)
Weighted-average number of shares outstanding (in millions)		2,028			1,220			1,113
Dilutive potential shares:
Warrants and options		1			—			—
Convertible bonds		—			—			53
Diluted weighted-average number of shares outstanding (in millions)		2,029			1,220			1,166
Earnings (loss) per share:
Income (loss) from continuing operations, adjusted	$	0.22		$	(0.30	)	$	(0.27	)
Loss from discontinued operations, net of tax		(0.24	)		(0.34	)		(0.59	)
Net loss, adjusted	$	(0.02	)	$	(0.64	)	$	(0.86	)

Note 25    Restructuring charges

2001 Program

        In July 2001, the Company announced and initiated a restructuring program (2001 Program) in an effort to improve productivity, reduce cost base, simplify product lines, reduce multiple location activities and perform other downsizing in response to weakening markets and consolidation of major customers in certain industries. The 2001 Program was substantially completed at September 30, 2002.

        Restructuring charges relating to workforce reductions, lease terminations and other exit costs associated with the 2001 Program are included in other income (expense), net. Termination benefits were paid to approximately 100, 2,270 and 4,000 employees in 2004, 2003 and 2002, respectively. Workforce reductions include production, managerial and administrative employees. Changes in management's original estimate of the amounts accrued for workforce reductions, lease terminations and other exit costs have been included in other income (expense), net.

        As a result of the 2001 Program, certain assets, inventories and property, plant and equipment were identified as impaired or that would no longer be used in continuing operations. The Company recorded a charge of $18 million in 2002 to write down these assets to fair value and such costs were included in cost of sales and other income (expense), net.

Step change program

        In October 2002, the Company announced the Step change program. The goals of the Step change program were to increase competitiveness of the Company's core businesses (see Note 26), reduce

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overhead costs and streamline operations by approximately $1 billion on an annual basis by 2005. At June 30, 2004, the Step change program was substantially complete.

        Restructuring charges relating to workforce reductions, lease terminations and other exit costs associated with the Step change program are included in other income (expense), net. Termination benefits were paid to approximately 950, 1,500 and 200 employees in 2004, 2003 and 2002, respectively. Workforce reductions include production, managerial and administrative employees. Changes in management's original estimate of the amounts accrued for workforce reductions, lease terminations and other exit costs were included in other income (expense), net.

        As a result of the Step change program, certain assets, inventories and property, plant and equipment were identified as impaired or will no longer be used in continuing operations. The Company recorded $0 million, $3 million and $2 million in 2004, 2003 and 2002, respectively, to write down these assets to their fair value and such costs were included in cost of sales and other income (expense), net.

Other

        Certain restructuring programs were initiated primarily during 2003 at specified locations not included in the Step change program. The goals of these programs are to increase efficiencies by reducing headcount and streamlining operations. These programs are expected to increase productivity of the non-core businesses (see Note 26). Anticipated savings will be recognized through the strategic divestment of these operations.

        Restructuring charges related to workforce reductions, lease terminations and other exit costs associated with these other programs are included in other income (expense), net. Termination benefits were paid to approximately 1,290 and 1,300 employees in 2004 and 2003, respectively. Workforce reductions include production, managerial and administrative employees. Changes in management's original estimate of the amounts accrued for workforce reductions, lease terminations and other exit costs have been included in other income (expense), net.

        As a result of these restructuring programs, certain assets, inventories and property, plant and equipment have been identified as impaired or will no longer be used in continuing operations. The Company recorded $5 million and $11 million in 2004 and 2003, respectively, to write down these assets to fair value and such costs are included in cost of sales and other income (expense), net.

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        Restructuring liabilities consist of the following:

		2001 Program						Step Change						Other
		Workforce reductions			Lease terminations and other exit costs			Workforce reductions			Lease terminations and other exit costs			Workforce reductions			Lease terminations and other exit costs			Total
Balance at January 1, 2002		$	78		$	39		$	—		$	—		$	20		$	12		$	149
	Restructuring expense		168			40			51			26			—			—			285
	Cash paid		(156	)		(29	)		(13	)		(1	)		—			—			(199	)
	Exchange rate differences		20			5			—			—			—			—			25
	Changes in estimate		(16	)		(5	)		—			—			(9	)		—			(30	)
Balance at December 31, 2002			94			50			38			25			11			12			230
	Restructuring expense		—			—			181			56			110			25			372
	Cash paid		(99	)		(10	)		(143	)		(48	)		(43	)		(12	)		(355	)
	Exchange rate differences		14			9			24			4			7			3			61
	Changes in estimate		—			(22	)		(4	)		—			(6	)		—			(32	)
Balance at December 31, 2003			9			27			96			37			79			28			276
	Restructuring expense		—			—			42			17			98			31			188
	Cash paid		(9	)		(9	)		(137	)		(18	)		(103	)		(16	)		(292	)
	Exchange rate differences		—			2			6			3			5			4			20
	Changes in estimate		—			(6	)		(7	)		—			(5	)		(5	)		(23	)
Balance at December 31, 2004		$	—		$	14		$	—		$	39		$	74		$	42		$	169

Cumulative

        The cumulative amounts at December 31, 2004, for each plan are given below:

	2001 Program			Step change			Other			Total
Restructuring charge for workforce reduction	$	282		$	274		$	228		$	784
Restructuring charge for lease terminations and other		111			99			68			278
Changes in estimate		(49	)		(11	)		(25	)		(85	)
Total restructuring charges	$	344		$	362		$	271		$	977

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Segment information

        Restructuring charges by segment consist of the following:

		Year ended December 31,
		2004		2003		2002
Power Technologies		$	51	$	61	$	57
Automation Technologies			72		139		126
Non-core activities:
	Oil, Gas and Petrochemicals		20		20		—
	Equity Ventures		—		—		—
	Structured Finance		—		—		—
	Building Systems		11		43		22
	New Ventures		1		1		2
	Other Non-core activities		—		47		15
Total Non-core activities			32		111		39
Corporate/Other			10		29		33
Total restructuring charges		$	165	$	340	$	255

Note 26    Segment and geographic data

        Effective January 1, 2003, in order to streamline the Company's structure and improve operational performance, the Company put into place two divisions: Power Technologies, which combined the former Power Technology Products and Utilities divisions and employed approximately 40,400 people at December 31, 2004; and Automation Technologies, which combined the former Automation Technology Products and Industries divisions and employed approximately 54,600 people at December 31, 2004. The remaining operations of the Company are grouped in Non-core activities. Effective January 1, 2004, the Group Processes activities, previously in the Non-core activities division, were integrated into the core divisions and the Substations Automation business was integrated into the Power Technologies division from the Automation Technologies division. All periods presented have been restated to reflect the new organizational structure of the Company.

•

The Power Technologies division produces transformers, switchgear, breakers, capacitors, cables and other products and technologies for high- and medium-voltage applications. It serves electric, gas, and water utilities as well as industrial and commercial customers, with a broad range of products, systems and services for power transmission, distribution and power plant automation. The division's principal customers are electric, gas and water utilities, owners and operators of power transmission systems, utilities that own or operate networks and owners and operators of power generating plants. Other customers include gas transmission companies, local distribution companies and multi-utilities, which are involved in the transmission or distribution of more than one commodity. The division also serves industrial and commercial customers, such as operators of large commercial buildings and heavy industrial plants.



•

The Automation Technologies division provides products, systems, software and services for the automation and optimization of industrial and commercial processes. Key technologies include

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measurement and control, instrumentation, process analysis, drives and motors, power electronics, robots, and low voltage products. These technologies are sold to customers of the automotive, cement, chemical, distribution, electronics, food and beverage, life sciences, marine, metals, mining, paper, petroleum, printing and telecommunications industries with application-specific power and automation technology.

•

Non-core activities include the following:



•

The Company's remaining Oil, Gas and Petrochemicals business;



•

The Company's remaining Equity Ventures business;



•

The Company's remaining Structured Finance business;



•

The Company's remaining Building Systems business;



•

The Company's New Ventures business area;



•

The Company's Customer Service, Logistic Systems, and Semiconductors business areas.



•

The remaining Oil, Gas and Petrochemicals business primarily consists of a full service engineering company which, in addition to having expertise in engineering, procurement and construction projects, also licenses process technologies in the refining, chemical, petrochemical and polymer fields.



•

The Building Systems business area designs, builds and maintains complete installations for industrial, infrastructure and commercial facilities, integrating products manufactured by the Power Technologies and Automation Technologies divisions, as well as those from third-party suppliers.



•

Corporate/Other includes Headquarters, Central Research and Development, Real Estate, Group Treasury Operations and the Financial Advisory business.

        The Company evaluates performance of its segments based on earnings before interest and taxes, which excludes interest and dividend income, interest and other finance expense, provision for taxes, minority interest, and loss from discontinued operations, net of tax. In accordance with Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company presents division revenues, depreciation and amortization, earnings before interest and taxes, net operating assets and capital expenditures, all of which have been restated to reflect the changes to the Company's internal structure, including the effect of inter-division transactions. The Company accounts for inter-division sales and transfers as if the sales and transfers were to third parties, at current market prices.

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        The following tables summarize information for each segment:

2004		Revenues			Depreciation and amortization		Earnings (loss) before interest and taxes			Net operating assets(1)			Capital expenditures(2)
Power Technologies		$	8,755		$	214	$	610		$	2,728		$	137
Automation Technologies			11,030			292		1,027			3,754			186
Non-core activities:
	Oil, Gas and Petrochemicals		1,079			26		(4	)		363			1
	Equity Ventures(3)		7			6		69			1,161			10
	Structured Finance		6			1		(14	)		524			—
	Building Systems		508			3		(70	)		—			1
	New Ventures		49			4		(5	)		99			10
	Other Non-core activities		44			1		(22	)		9			1
Total Non-core activities			1,693			41		(46	)		2,156			23
Corporate/Other			887			84		(507	)		1,901			54
Inter-division elimination			(1,644	)		—		—			(917	)		—
Consolidated		$	20,721		$	631	$	1,084		$	9,622		$	400

2003		Revenues			Depreciation and amortization		Earnings(loss) before interest and taxes			Net operating assets(4)			Capital expenditures(2)
Power Technologies		$	7,598		$	183	$	595		$	2,568		$	120
Automation Technologies			9,628			253		738			3,868			154
Non-core activities:
	Oil, Gas and Petrochemicals		1,895			—		(296	)		276			5
	Equity Ventures(3)		26			5		76			1,151			46
	Structured Finance		48			1		(65	)		643			—
	Building Systems		1,829			9		(104	)		9			3
	New Ventures		53			5		(21	)		195			11
	Other Non-core activities		471			53		(57	)		(226	)		6
Total Non-core activities			4,322			73		(467	)		2,048			71
Corporate/Other			905			68		(486	)		2,513			57
Inter-division elimination			(2,026	)		—		(23	)		(1,140	)		—
Consolidated		$	20,427		$	577	$	357		$	9,857		$	402

F-85

2002	Revenues			Depreciation and amortization		Earnings (loss) before interest and taxes			Net operating assets			Capital expenditures(2)
Power Technologies	$	6,814		$	168	$	451		$	2,266		$	116
Automation Technologies		8,201			199		495			3,554			130
Non-core activities:
Oil, Gas and Petrochemicals		2,321			16		(142	)		152			5
Equity Ventures(3)		19			—		43			1,062			—
Structured Finance		66			1		96			1,165			2
Building Systems		2,375			11		(113	)		68			9
New Ventures		50			11		(37	)		144			14
Other Non-core activities		783			75		(157	)		(178	)		20
Total Non-core activities		5,614			114		(310	)		2,413			50
Corporate/Other		1,014			78		(363	)		2,361			144
Inter-division elimination		(2,171	)		—		(74	)		(724	)		—
Consolidated	$	19,472		$	559	$	199		$	9,870		$	440

(1)

Net operating assets at December 31, 2004, are calculated based upon total assets of $24,677 million excluding cash and equivalents of $3,676 million, marketable securities and short-term investments of $524 million, current loans receivable of $17 million, tax assets of $1,256 million, assets held for sale and in discontinued operations of $155 million, prepaid pension and other employee benefits of $549 million and other assets of $89 million, less total liabilities of $21,556 million excluding borrowings of $5,534 million, tax liabilities of $1,522 million, provisions of $3,326 million, pension and employee related liabilities of $1,628 million, liabilities held for sale and in discontinued operations of $290 million and certain other liabilities of $467 million.

(2)

Capital expenditures reflect purchases of tangible fixed assets.

(3)

Includes the Company's investment in Jorf Lasfar Energy Company S.C.A. (see Note 14).

(4)

Net operating assets at December 31, 2003, are calculated based upon total assets of $30,401 million excluding cash and equivalents of $4,783 million, marketable securities and short-term investments of $473 million, current loans receivable of $23 million, tax assets of $1,327 million, assets held for sale and in discontinued operations of $4,981 million, prepaid pension and other employee benefits of $564 million and other assets of $143 million, less total liabilities of $27,199 million excluding borrowings of $7,934 million, tax liabilities of $1,644 million, provisions of $3,021 million, pension and employee related liabilities of $1,902 million, liabilities held for sale and in discontinued operations of $3,990 million and certain other liabilities of $458 million.

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Geographic information

	Revenues Year ended December 31,
	2004		2003		2002		2004		2003
Europe	$	10,764	$	10,963	$	10,461	$	2,288	$	2,159
The Americas		3,624		3,900		4,177		272		297
Asia		4,296		3,519		2,860		299		281
Middle East and Africa		2,037		2,045		1,974		122		121
	$	20,721	$	20,427	$	19,472	$	2,981	$	2,858

        Revenues have been reflected in the regions based on the location of the customer. The United States generated approximately 11 percent, 12 percent and 14 percent of the Company's total revenues in 2004, 2003 and 2002 respectively. Germany generated approximately 11 percent of the Company's total revenues in 2004, 2003 and 2002 respectively. More than 95 percent of the Company's total revenues were generated outside Switzerland in 2004, 2003 and 2002. Long-lived assets represent property, plant and equipment, net, and are shown by location of the assets. Switzerland and Germany represented approximately 22 percent and 15 percent, respectively, of the Company's long-lived assets at both December 31, 2004 and 2003, respectively.

        The Company does not segregate revenues derived from transactions with external customers for each type or group of products and services. Accordingly, it is not practicable for the Company to present revenues from external customers by product and service type.

        Management estimates that approximately 63 percent of the Company's employees are subject to collective bargaining agreements in various countries. These agreements are subject to various regulatory requirements and are renegotiated on a regular basis in the normal course of business.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and
Stockholders of ABB Ltd:

        We have audited the consolidated financial statements of ABB Ltd as of December 31, 2004 and 2003, and for each of the three years in the period ended December 31, 2004, and have issued our report thereon dated April 6, 2005 (included elsewhere in this report on Form 20-F). Our audits also included the financial statement schedule listed in Item 18(h) of this report on Form 20-F. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. We did not audit the financial statements of Jorf Lasfar Energy Company, a corporation in which the Company has a 50% interest, (the Company's equity in Jorf Lasfar Energy Company's net income is stated at $63 million in 2004, $60 million in 2003 and $66 million in 2002) and we did not audit the 2002 consolidated financial statements of Swedish Export Credit Corporation, a corporation in which the Company had a 35% interest, (the Company's equity in Swedish Export Credit Corporation's consolidated net income is stated at $89 million in 2002). Those statements were audited by other auditors whose reports have been furnished to us. Our opinion, insofar as it relates to amounts included for those companies and their subsidiaries, is based solely on the reports of the other auditors.

        In our opinion, based on our audits and reports of other auditors, the financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG AG

Zurich, Switzerland

April 6, 2005

S-1

Schedule II—Valuation and Qualifying Accounts

Description	Balance at the beginning of year	Additions	Deductions(1)	Balance at the end of year
	(U.S dollars in millions)
Accounts Receivable—allowance for doubtful accounts:
Year ending December 31,
2004	245	150	78	317
2003	212	129	96	245
2002	221	125	134	212

(1)

Includes foreign currency translation adjustments.

S-2

QuickLinks

TABLE OF CONTENTS
INTRODUCTION
FINANCIAL AND OTHER INFORMATION
FORWARD-LOOKING STATEMENTS
PART I
SELECTED FINANCIAL DATA
DIVIDENDS AND DIVIDEND POLICY
RISK FACTORS
INTRODUCTION
BUSINESS DIVISIONS
DISCONTINUED OPERATIONS
CAPITAL EXPENDITURES
SUPPLIES AND RAW MATERIALS
RESEARCH AND DEVELOPMENT
PATENTS AND TRADEMARKS
ENVIRONMENTAL ACTIVITIES
REGULATION
SIGNIFICANT SUBSIDIARIES
DESCRIPTION OF PROPERTY

Item 5. Operating and Financial Review and Prospects

MANAGEMENT OVERVIEW
APPLICATION OF CRITICAL ACCOUNTING POLICIES
NEW ACCOUNTING PRONOUNCEMENTS
RESTRUCTURING EXPENSES
ACQUISITIONS, INVESTMENTS AND DIVESTITURES
EXCHANGE RATES
ORDERS
PERFORMANCE MEASURES
RESTATEMENT
DIFFERENCES FROM PRELIMINARY EARNINGS ANNOUNCEMENT
ANALYSIS OF RESULTS OF OPERATIONS
POWER TECHNOLOGIES
AUTOMATION TECHNOLOGIES
NON-CORE ACTIVITIES
DISCONTINUED OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL POSITION
DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMITMENTS
OFF-BALANCE SHEET ARRANGEMENTS
ENVIRONMENTAL LIABILITIES
ASBESTOS LIABILITIES

Item 6. Directors, Senior Management and Employees

BOARD OF DIRECTORS
SENIOR MANAGEMENT
CORPORATE GOVERNANCE
COMPENSATION
SHARE OWNERSHIP
EMPLOYEES
MAJOR SHAREHOLDERS
RELATED PARTY TRANSACTIONS

Item 8. Financial Information

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
LEGAL PROCEEDINGS
DIVIDENDS AND DIVIDEND POLICY
SIGNIFICANT CHANGES
MARKETS
TRADING HISTORY
THE SWX SWISS EXCHANGE AND VIRT-X
THE SWEDISH SECURITIES MARKET
DESCRIPTION OF SHARE CAPITAL AND ARTICLES OF INCORPORATION
MATERIAL CONTRACTS
EXCHANGE CONTROLS
TAXATION
DOCUMENTS ON DISPLAY
PART II
PART III
SIGNATURES
ABB Ltd Index to Consolidated Financial Statements and Schedules
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
ABB Ltd Consolidated Income Statements for the years ended December 31, 2004, 2003 and 2002
ABB Ltd Consolidated Balance Sheets at December 31, 2004 and 2003
ABB Ltd Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002
ABB Ltd Notes to the Consolidated Financial Statements (U.S. dollar amounts in millions, except per share amounts)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Schedule II—Valuation and Qualifying Accounts

EX-2.3

EXHBIT 2.3

	LIMITED LIABILITY PARTNERSHIP
	EXECUTION COPY

ABB INTERNATIONAL FINANCE LIMITED

ABB CAPITAL B.V.

as issuers

PROGRAMME FOR THE ISSUANCE OF DEBT INSTRUMENTS

AMENDED AND RESTATED FISCAL AGENCY
AGREEMENT

24 November 2004

CONTENTS

SECTION
1.	Interpretation
2.	Appointment Of The Paying Agents And The Registrars
3.	The Instruments
4.	Issuance Of Instruments
5.	Replacement Instruments
6.	Payments To The Fiscal Agent Or The Registrar
7.	Payments To Holders Of Bearer Instruments
8.	Payments To Holders Of Registered Instruments
9.	Miscellaneous Duties Of The Fiscal Agent And The Paying Agents
10.	Early Redemption
11.	Miscellaneous Duties Of The Registrars
12.	Commissions, Fees And Expenses
13.	Terms Of Appointment
14.	Changes In Agents
15.	Substitution
16.	Further Issuers
17.	Notices
18.	Law And Jurisdiction
19.	Modification
20.	Counterparts
21.	Contracts (Rights Of Third Parties) Act 1999
Form Of Temporary Global Instrument (Bearer)
Form Of Permanent Global Instrument
Form Of Definitive Instrument (“ISMA” Format)
Form Of Registered Instrument
Provisions For Meetings Of Holders Of Instruments
Form Of Deed Of Assumption
Regulations Concerning Transfers Of Registered Instruments And Exchanges Of Bearer Instruments For Registered Instruments
The Specified Offices Of The Paying Agents And The Registrars

THIS AMENDED AND RESTATED FISCAL AGENCY AGREEMENT is made on 24 November 2004 and replaces the Amended and Restated Fiscal Agency Agreement dated 30 May 2001 as supplemented.

BETWEEN:

(1)ABB INTERNATIONAL FINANCE LIMITED (“AIFLTD”) and ABB CAPITAL B.V. (“ACBV”) (the “Issuers” and each an “Issuer”, which expression shall, where the context so permits, include any Further Issuer as defined in Clause 16.1 hereof);

(2)BANQUE GENERALE DU LUXEMBOURG S.A. in its capacities as fiscal agent (the “Fiscal Agent”, which expression shall include any successor to Banque Générale du Luxembourg S.A. in its capacity as such) and principal registrar (the “Principal Registrar”, which expression shall include any successor to Banque Générale du Luxembourg S.A. in its capacity as such);

(3)JPMORGAN CHASE BANK, N.A. in its capacity as alternative registrar (the “Alternative Registrar”, which expression shall include any successor to JPMorgan Chase Bank, N.A. in its capacity as such); and

(4)BANQUE MEESPIERSON BGL S.A. in its capacity as paying agent (together with the Fiscal Agent, the “Paying Agents”, which expression shall include any substitute or additional paying agents appointed in accordance herewith).

WHEREAS:

(A)The Issuers established a programme (the “Programme”) for the issuance of debt instruments (the “Instruments”) having any maturity up to thirty years, subject to compliance with all legal and/or regulatory requirements and in connection with which they have entered into an amended and restated dealership agreement dated 24 November 2004 (the “Dealership Agreement”) and made between the Issuers, ABB Ltd and Morgan Stanley & Co. International Limited (the “Dealer”, which expression shall include any substitute or additional dealers appointed in accordance with the Dealership Agreement).  In respect of bearer Instruments issued in temporary global or permanent global form, each of the Issuers have executed and delivered a deed of covenant dated 10 March 1993 (each a “Deed of Covenant”).

(B)Instruments may be issued on a listed or unlisted basis.  The Issuers have made an application to the Luxembourg Stock Exchange (the “Luxembourg Stock Exchange”) for Instruments issued under the Programme to be listed on the Luxembourg Stock Exchange, in connection with which application an information memorandum dated 24 November 2004 has been prepared to permit Instruments to be so listed during the period of twelve months from the date of such information memorandum or such other period as may be allowed by the Luxembourg Stock Exchange.

(C)The parties hereto wish to record certain arrangements which they have made in relation to the Instruments to be issued under the Programme.

IT IS AGREED as follows:

1

1.INTERPRETATION

1.1In this Agreement, any reference to:

“Authorised Amount” shall have the meaning ascribed in the Dealership Agreement;

“Banking Day” is to a day (other than Saturdays and Sundays) on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in the place where the specified office of the Fiscal Agent or, as the case may be, the Registrar is located;

a “Clause” is, unless the context indicates otherwise, to a Clause in a Section hereof;

“Clearstream, Luxembourg” means Clearstream Banking, société anonyme;

a “Condition” is to the terms and conditions of the Instruments as appearing in the Information Memorandum or, in relation to any Tranche or Series of Instruments, such terms and conditions as the same may be amended or supplemented or replaced as described in the relevant Pricing Supplement or Pricing Supplements and any reference to a numbered “Condition” is to the correspondingly numbered provision thereof and “terms and conditions” should be construed accordingly;

a “Coupon” is to an interest coupon and where the context permits, a Talon, in each case appertaining to a Definitive Instrument;

“Euroclear” is to Euroclear Bank S.A./N.V., as operator of the Euroclear System;

“Event of Default” is to any of the circumstances or events set out in Condition 7 (as the same may be modified by the relevant Pricing Supplement in relation to any Tranche of Instruments);

the “Exchange Act” is to the United States Securities Exchange Act of 1934;

the “Exchange Date” means the date which is 40 days after the completion of the distribution of the Instruments comprising the relevant Tranche, as specified in the relevant Pricing Supplement;

“Information Memorandum” means the information memorandum the preparation of which has been procured by the Issuers in connection with the application for Instruments issued by it to be listed on the Luxembourg Stock Exchange, together with any information incorporated therein by reference, as the same may be amended, supplemented, updated and/or substituted from time to time and any further information memorandum prepared in connection with the listing of such Instruments on any other stock exchange (as such further information memorandum may be amended, supplemented, updated and/or substituted from time to time);

“Instalment Instrument” means an Instrument the principal amount of which is repayable by instalments;

“issue date” means, in relation to any Tranche of Instruments, the date of issue of such Instruments;

2

“local time” in relation to any payment is to the time in the city or town in which the relevant bank or the relevant branch or office thereof is located and any reference to “local banking days” in relation thereto is to days (other than Saturdays and Sundays) on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in such city or town;

“Luxembourg Banking Day” is to a day (other than Saturdays and Sundays) on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in Luxembourg;

“outstanding” means, in relation to the Instruments of any Issuer, all the Instruments of such Issuer and any coupons relating thereto other than:

(i)those which have been redeemed in full or purchased and cancelled pursuant to Condition 6;

(ii)those in respect of which the date for redemption in full (including, but not limited to, the due date for payment of the final instalment in respect of an Instalment Instrument) has occurred and the redemption moneys therefor (including all interest accrued thereon to such date for redemption) have been duly paid to the Fiscal Agent or (in the case of Registered Instruments) the Registrar in the manner provided for in this Fiscal Agency Agreement (and, where appropriate, notice to that effect has been given in accordance with Condition 14) and remain available for payment in accordance with the Conditions;

(iii)any Bearer Instrument which has been exchanged for a Registered Instrument;

(iv)those which have become void under Condition 10 or Condition 9A.06;

(v)(for the purpose only of ascertaining the amount outstanding and without prejudice to their status for any other purpose) those Instruments which are alleged to have been lost, stolen or destroyed and in respect of which replacement Instruments have been issued pursuant to Condition 12;

(vi)those Instruments which have been mutilated or defaced and which have been surrendered or cancelled and in respect of which replacement Instruments have been issued pursuant to Condition 12;

(vii)any Temporary Global Instrument to the extent that it has been exchanged for Definitive Instruments, Registered Instruments or a Permanent Global Instrument; and

(viii)any Permanent Global Instrument to the extent that it has been exchanged for Definitive Instruments.

Provided that for the purposes of the Fifth Schedule those Instruments which are beneficially held by, or are held on behalf of, the relevant Issuer or any affiliated

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company of such Issuer or ABB Ltd or any subsidiary of ABB Ltd and not cancelled shall (unless and until ceasing to be so held) be deemed not to remain outstanding;

“principal amount outstanding” means, on any date, the principal amount of that Instrument on its date of issue (i) less, in respect of any Instrument any amount of principal in respect of that Instrument that has become due and payable and either has been paid to the relevant holder or in respect of which the Relevant Date (as defined in Condition 8) shall have occurred, and (ii) less, in respect of any partly paid Instrument, any amount that shall not have been paid up in full;

“Registrar” is to the Principal Registrar or, as the case may be, the Alternative Registrar as specified in the relevant Pricing Supplement relating to Registered Instruments;

“Regulations” is to the regulations concerning the transfer of Registered Instruments or for the exchange of Bearer Instruments for Registered Instruments as may from time to time be promulgated by the relevant Issuer.  The initial such regulations are set out in the Seventh Schedule;

“Relevant Dealer” means, in respect of any Tranche of Instruments, the institution specified as such in the relevant Pricing Supplement or, if there is only one Dealer in respect of such Tranche of Instruments, such Dealer;

the “specified office” of any Paying Agent or any Registrar is to the office specified against its name in the Eighth Schedule or such other office in the same city or town as such Paying Agent or, as the case may be, such Registrar may specify by notice to the Issuer and the other parties hereto in accordance with Clause 14.7;

a “Schedule” is, unless the context indicates otherwise, to a Schedule hereto;

a “Section” is, unless the context indicates otherwise, to a Section hereof;

the “Securities Act” is to the United States Securities Act of 1933;

a “Talon” is to a talon exchangeable for further Coupons; and

a “Tranche” is to an issue of Instruments which are identical in all respects (save that they may be denominated in different amounts and may comprise Instruments in bearer form and Instruments in registered form), which are intended to be issued on the same closing date.

1.2Terms used, but not defined, herein shall have the meanings ascribed to them as set out in the terms and conditions of the relevant Instruments.

1.3Section and Schedule headings are for ease of reference only and shall not affect the construction or interpretation of this Agreement.

1.4In this Agreement, any reference to payments of principal, redemption amount or interest includes any additional amounts payable in relation thereto under Condition 8.

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2.APPOINTMENT OF THE PAYING AGENTS AND THE REGISTRARS

2.1Each of the Issuers appoint each of the Paying Agents and each of the Registrars at their respective specified offices as their agent in relation to the Instruments of such Issuer for the purposes specified in this Agreement and on the terms and conditions applicable thereto and all matters incidental thereto.  Except where the context otherwise requires references to the Paying Agents and the Registrars are to them acting solely through such respective specified offices.  The obligations of the Paying Agents and the Registrars hereunder are several and not joint.

2.2Each of the Paying Agents and each of the Registrars accepts its appointment as agent of each Issuer in relation to the Instruments and shall perform all matters expressed to be performed by it in, and otherwise comply with, the terms and conditions applicable thereto and the provisions of this Agreement and, in connection therewith, shall take all such action as may be incidental thereto.

3.THE INSTRUMENTS

3.1Instruments may be issued in series (each a “Series”) and each Series may comprise one or more Tranches of Instruments.  Each Tranche will be the subject of a pricing supplement (each a “Pricing Supplement”) prepared by or on behalf of the relevant Issuer or, as the case may be, the relevant Dealer, attached to or incorporated by reference into each Instrument of such Tranche and in the case of a Tranche in relation to which application has been made for listing on the Luxembourg Stock Exchange, lodged with the Luxembourg Stock Exchange.

3.2Instruments may be issued in bearer form or in registered form, as specified in the relevant Pricing Supplement.

3.3Instruments in bearer form (“Bearer Instruments”) will initially be represented by a temporary global instrument, without interest coupons (a “Temporary Global Instrument”), in bearer form which shall be exchangeable in accordance with its terms on and from the Exchange Date applicable to the Instruments represented by such Temporary Global Instrument and upon due certification as described therein, for a permanent global instrument (a “Permanent Global Instrument”) representing such Bearer Instruments or, if so specified in the relevant Pricing Supplement, for definitive instruments (“Definitive Instruments”).  In the case of a Series comprising both Bearer Instruments and Instruments in registered form (“Registered Instruments”) the Temporary Global Instrument may be exchanged for Registered Instruments in accordance with its terms only on and from the Exchange Date applicable to the Instruments represented by such Temporary Global Instrument and upon due certification as described therein.  Each Permanent Global Instrument will only be exchangeable in accordance with its terms for Definitive Instruments and/or (in the case of a Series comprising both Bearer Instruments and Registered Instruments) Registered Instruments.

3.4Each Temporary Global Instrument shall:

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(a)be printed, lithographed or typewritten in substantially the form (duly completed) set out in the First Schedule but with such modifications, amendments and additions as the Fiscal Agent, the relevant Dealer and the relevant Issuer shall have agreed to be necessary;

(b)have attached thereto or incorporated by reference therein the terms and conditions applicable thereto;

(c)be executed manually by two directors (or, as the case may be) managing directors of, or by a duly authorised attorney on behalf of, the relevant Issuer and shall be authenticated manually by or on behalf of the Fiscal Agent; and

(d)bear a unique serial number.

3.5Each Permanent Global Instrument shall:

(a)be printed, lithographed or typewritten in substantially the form (duly completed) set out in the Second Schedule but with such modifications, amendments and additions as the Fiscal Agent, the relevant Dealer and the relevant Issuer shall have agreed to be necessary;

(b)have attached thereto or incorporated by reference therein the terms and conditions applicable thereto;

(c)be executed manually by two directors (or, as the case may be) managing directors of, or by a duly authorised attorney on behalf of, the relevant Issuer and shall be authenticated manually by or on behalf of the Fiscal Agent; and

(d)bear a unique serial number.

3.6Each Definitive Instrument shall:

(a)be in substantially the form (duly completed) set out in the Third Schedule but with such modifications, amendments and additions as the Fiscal Agent, the relevant Dealer and the relevant Issuer shall have agreed to be necessary;

(b)unless the contrary is specified in the relevant Pricing Supplement, be in the format from time to time specified by the International Securities Markets Association or any successor body thereto;

(c)have a unique serial number printed thereon;

(d)if so specified in the relevant Pricing Supplement, have attached thereto at the time of its initial delivery Coupons;

(e)if so specified in the relevant Pricing Supplement, have attached thereto at the time of its initial delivery a Talon;

(f)have endorsed thereon, attached thereto or incorporated by reference therein the terms and conditions applicable thereto;

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(g)be executed manually or in facsimile by two directors (or, as the case may be) managing directors of the relevant Issuer and authenticated manually by or on behalf of the Fiscal Agent;

(h)be printed in accordance with the requirements of any clearing system by which such Instruments are intended to be accepted; and

(i)be printed in accordance with the requirements of any stock exchange on which such Instruments may be listed.

3.7Each Registered Instrument shall:

(a)be printed, lithographed or typewritten in substantially the form (duly completed) set out in the Fourth Schedule but with such modifications, amendments and additions as the Registrar, the relevant Dealer and the relevant Issuer shall have agreed to be necessary;

(b)have endorsed thereon, attached thereto or incorporated by reference therein the terms and conditions applicable thereto; and

(c)be executed manually by two directors (or, as the case may be) managing directors of, or by a duly authorised attorney on behalf of the relevant Issuer or shall be executed in facsimile by two directors (or, as the case may be) managing directors of the relevant Issuer and, in any case, shall be authenticated manually by or on behalf of the Registrar.

3.8Any Issuer may adopt and use the signature of any person who at the date of signing a Temporary Global Instrument, Permanent Global Instrument or Registered Instrument is an authorised signatory for such purpose of the relevant Issuer notwithstanding that such person may for any reason (including death) have ceased to be such an authorised signatory at the time of the creation and issue of the relevant Tranche or the issue and delivery of the relevant Instruments.

3.9Any facsimile signature affixed to an Instrument may be that of a person who is at the time of the creation and issue of the relevant Tranche an authorised signatory for such purpose of the relevant Issuer notwithstanding that such person may for any reason (including death) have ceased to be such an authorised signatory at the time at which the relevant Instrument may be delivered.

3.10Execution in facsimile of any Instruments and any photostatic copying or other duplication of master Global Instruments (in unauthenticated form, but executed manually on behalf of the relevant Issuer as stated above) shall be binding upon the relevant Issuer in the same manner as if such Notes were signed manually by such signatories.

4.ISSUANCE OF INSTRUMENTS

4.1Upon the conclusion of any agreement between the relevant Issuer and any Dealer(s) for the sale by such Issuer and the purchase by such Dealer(s) of any Instruments the

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Issuer shall, as soon as practicable but in any event not later than 3.00 p.m. (Luxembourg time) four Luxembourg Banking Days, prior to the proposed issue date therefor:

(a)confirm by tested telex or tested fax, to the Fiscal Agent or, if such Instruments are to be Registered Instruments, the Registrar (copied to the Fiscal Agent) all such information as the Fiscal Agent or, as the case may be, the Registrar may reasonably require to carry out its functions under this Agreement and in particular, if a Temporary Global Instrument or Registered Instruments from the stock provided for in Clause 4.2 is/are to be used, such details as are necessary to enable it to complete such Temporary Global Instrument or Registered Instruments, the settlement and payment procedures applicable to the relevant Tranche of Instruments and the account of the relevant Issuer to which payment should be made;

(b)deliver a duly executed copy of the Pricing Supplement in relation to the relevant Tranche to the Fiscal Agent or, as the case may be, the Registrar (copied to the Fiscal Agent); and

(c)unless a Temporary Global Instrument or a Registered Instrument from the stock provided for in Clause 4.2 is to be used and the relevant Issuer shall have provided such document to the Fiscal Agent or, as the case may be, the Registrar pursuant to Clause 4.2, ensure that there is delivered to the Fiscal Agent a Temporary Global Instrument (in unauthenticated form but executed on behalf of the relevant Issuer and otherwise complete) or, as the case may be, to the Registrar Registered Instruments (in unauthenticated form and with the names of the registered holders left blank but executed on behalf of the Issuer and otherwise complete) in relation to the relevant Tranche.

4.2Each Issuer may, at its option, deliver from time to time to the Fiscal Agent a stock of pro forma Temporary Global Instruments and Permanent Global Instruments (in unauthenticated form but executed on behalf of the relevant Issuer) and/or, to the Registrar, a stock of pro forma Registered Instruments (in unauthenticated form but executed on behalf of the relevant Issuer).  Any such stock of Instruments shall be held in safe custody by the Fiscal Agent or, as the case may be, the Registrar upon trust for the relevant Issuer for use only in accordance with the written instructions of such Issuer.  The Fiscal Agent or, as the case may be, the Registrar shall return the stock of Instruments to the relevant Issuer forthwith upon written request by such Issuer.

4.3The Fiscal Agent or, as the case may be, the Registrar shall, on behalf of the relevant Issuer, where the relevant Instruments are to be listed on the Luxembourg Stock Exchange, deliver a copy of the Pricing Supplement in relation to the relevant Tranche to the Luxembourg Stock Exchange as soon as practicable but in any event not later than 2.00 p.m. (local time) two Luxembourg Banking Days prior to the proposed issue date therefor.

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4.4The provisions of this Clause 4.4 shall apply to each Tranche of Instruments unless otherwise agreed between the relevant Issuer, the Relevant Dealer and the Fiscal Agent or (in the case of Registered Instruments) the Registrar.  On or before 10.00 a.m. (local time) two Banking Days prior to the issue date in relation to each Tranche, the Fiscal Agent or, as the case may be, the Registrar shall authenticate and deliver to the relevant depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system the relevant Temporary Global Instrument or, as the case may be, Registered Instruments together with instructions to Euroclear or Clearstream, Luxembourg or such other clearing system to credit the Instruments represented by such Temporary Global Instrument or the Registered Instruments to such securities account(s) on a delivery against payment basis (or on such other basis as shall have been agreed between the relevant Issuer and the Relevant Dealer and notified to the Fiscal Agent) as shall have been notified to the Fiscal Agent by the relevant Issuer.

The Fiscal Agent shall give instructions to Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system to credit Instruments represented by a Temporary Global Instrument or, as the case may be, Registered Instruments registered in the name of the relevant depositary, to the Fiscal Agent’s distribution account.  Unless otherwise agreed in respect of any Tranche of Instruments by the relevant Issuer and the Relevant Dealer and notified to the Fiscal Agent each Instrument which is so credited to the Fiscal Agent’s distribution account with Euroclear or Clearstream, Luxembourg or such other clearing system following the delivery of a Temporary Global Instrument or Registered Instrument to the relevant depositary shall be held to the order of the relevant Issuer pending delivery to the relevant Dealer(s) on a delivery against payment basis in accordance with the normal procedures of Euroclear or Clearstream, Luxembourg or such other clearing system, as the case may be.  The Fiscal Agent shall on the issue date in respect of the relevant Tranche and against receipt of funds from the relevant Dealer(s) transfer (with same value date) the proceeds of issue to the relevant Issuer to the account notified in accordance with Clause 4.1 above.

4.5If the Fiscal Agent or, as the case may be, the Registrar should pay an amount (an “advance”) to an Issuer in the belief that a payment has been or will be received from a Dealer and if such payment is not received by the Fiscal Agent or, as the case may be, the Registrar on the date that the Fiscal Agent or, as the case may be, the Registrar pays the relevant Issuer, such Issuer shall forthwith repay the advance (unless prior to such repayment the payment is received from the Dealer) and shall pay interest on such amount which shall accrue (as well after as before judgment) on the basis of a year of 360 days (365 days (or 366 days, in the case of a leap year) in the case of an advance paid in sterling) and the actual number of days elapsed from the date of payment of such advance until the earlier of (i) repayment of the advance or (ii) receipt by the Fiscal Agent or, as the case may be, the Registrar of the payment from the Dealer, and at the rate per annum which is the aggregate of one per cent. per annum and the rate per annum specified by the Fiscal Agent or, as the case may be, the Registrar as reflecting its cost of funds for the time being in relation to the unpaid amount.

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4.6Unless a Permanent Global Instrument from the stock provided for in Clause 4.2 is to be used and the relevant Issuer has provided such document to the Fiscal Agent pursuant to Clause 4.2, the relevant Issuer shall, in relation to each Tranche of Bearer Instruments, ensure that there is delivered to the Fiscal Agent not less than four Luxembourg Banking Days before the Exchange Date for the relevant Temporary Global Instrument, the Permanent Global Instrument (in unauthenticated form but executed by such Issuer and otherwise complete) in relation thereto or, as the case may be, the Definitive Instruments or Registered Instruments (in unauthenticated form but executed by such Issuer and otherwise complete) in relation thereto.  If, in the case of a Series comprising both Bearer Instruments and Registered Instruments, the Temporary Global Instrument is exchangeable for Definitive Instruments and/or Registered Instruments, (unless a Registered Instrument from the stock provided for in Clause 4.2 is to be used and the relevant Issuer shall have provided such document to the Registrar pursuant to Clause 4.2) the Issuer shall ensure that there is delivered to the Registrar, sufficient Registered Instruments to enable the Registrar to effect exchanges of interests in the Temporary Global Instrument for Registered Instruments in accordance with the terms of the Temporary Global Instrument.  The Fiscal Agent or, as the case may be, the Registrar, shall authenticate and deliver such Permanent Global Instrument or, as the case may be, Definitive Instruments and/or Registered Instruments in accordance with the terms hereof and of the relevant Temporary Global Instrument.

4.7The relevant Issuer shall, in relation to each Tranche of Bearer Instruments which is represented by a Permanent Global Instrument in relation to which an exchange notice has been given in accordance with the terms of such Permanent Global Instrument, ensure that there is delivered to the Fiscal Agent not less than ten Luxembourg Banking Days before the day on which the relevant notice period expires the Definitive Instruments (in unauthenticated form but executed by such Issuer and otherwise complete) in relation thereto.  If, in the case of a Series comprising both Bearer Instruments and Registered Instruments, the Permanent Global Instrument is exchangeable for Definitive Instruments and/or Registered Instruments, (unless a Registered Instrument from the stock provided for in Clause 4.2 is to be used and the relevant Issuer shall have provided such document to the Registrar pursuant to Clause 4.2) the Issuer shall ensure that there is delivered to the Registrar, sufficient Registered Instruments to enable the Registrar to effect exchanges of interests in the Permanent Global Instrument for Registered Instruments in accordance with the terms of the Permanent Global Instrument.  The Fiscal Agent or, as the case may be, the Registrar, shall authenticate and deliver such Definitive Instruments and/or Registered Instruments in accordance with the terms hereof and of the relevant Permanent Global Instrument.

4.8Where any Definitive Instruments with Coupons attached are to be delivered in exchange (not earlier than the Exchange Date) for a Temporary Global Instrument or a Permanent Global Instrument, the Fiscal Agent shall ensure that such Definitive Instruments shall have attached thereto only such Coupons as shall ensure that neither loss nor gain of interest shall accrue to the bearer thereof.

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4.9The Fiscal Agent or, as the case may be, the Registrar shall hold in safe custody and in trust for the account of, and to the order of, the relevant Issuer all unauthenticated Temporary Global Instruments, Permanent Global Instruments, Definitive Instruments or, as the case may be, Registered Instruments delivered to it in accordance with this Section 4, Section 5 or Section 11 and shall ensure that the same are authenticated and delivered only in accordance with the terms hereof and, if applicable, the relevant Temporary Global Instrument or Permanent Global Instrument.

4.10The Fiscal Agent and the Registrar are authorised by the relevant Issuer to authenticate such Temporary Global Instruments, Permanent Global Instruments, Definitive Instruments or, as the case may be, Registered Instruments as may be required to be authenticated hereunder by the signature of any of their respective officers or any other person duly authorised for the purpose by the Fiscal Agent or, as the case may be, the Registrar.

4.11On each occasion on which a portion of a Temporary Global Instrument or a Permanent Global Instrument is exchanged for a portion of a Permanent Global Instrument or, as the case may be, for Definitive Instruments and/or Registered Instruments, the Fiscal Agent shall note or procure that there is noted on the Schedule to, or in the absence of a Schedule, on the face of, the Temporary Global Instrument or, as the case may be, Permanent Global Instrument the aggregate principal amount thereof so exchanged and the remaining principal amount of the Temporary Global Instrument or, as the case may be, Permanent Global Instrument (which shall be the previous principal amount thereof less (or, in the case of a Permanent Global Instrument in respect of an exchange of a portion of a Temporary Global Instrument for a Permanent Global Instrument, plus) the aggregate principal amount so exchanged) and shall procure the signature of such notation on its behalf.  The Fiscal Agent shall forthwith cancel or procure the cancellation of each Temporary Global Instrument or, as the case may be, Permanent Global Instrument against surrender of which it has made full exchange for a Permanent Global Instrument or Definitive Instruments and/or Registered Instruments.

4.12The relevant Issuer shall, in relation to each series of Definitive Instruments to which a Talon is attached upon the initial delivery thereof, on each occasion on which a Talon becomes exchangeable for further Coupons, not less than five Luxembourg Banking Days before the date on which the final Coupon comprised in any Coupon sheet (which includes a Talon) matures (“Talon Exchange Date”), ensure that there is delivered to the Fiscal Agent such number of Coupon sheets as may be required in order to enable the Paying Agents to fulfil their obligation under Clause 4.13 hereof.

4.13The Paying Agent shall on or after the Talon Exchange Date in respect of such Talon deliver a Coupon sheet against the presentation and surrender of such Talon provided that if any Talon is presented and surrendered for exchange to any Paying Agent and the Replacement Agent (as defined in Clause 5.1) has delivered a replacement therefor the Paying Agent shall forthwith notify the Fiscal Agent which shall immediately inform the relevant Issuer of such presentation and surrender and the Paying Agent shall not exchange against the same unless and until it is so instructed in writing by the

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Fiscal Agent.  The Paying Agent which makes an exchange as set out in this Clause 4.13 shall cancel each Talon surrendered to it and in respect of which a Coupon sheet shall have been delivered and shall (if such Paying Agent is not the Fiscal Agent) forthwith deliver the cancelled Talon to the Fiscal Agent.

4.14Each of the Issuers undertakes to notify the Fiscal Agent of any changes in the identity of the Dealers and the Fiscal Agent agrees to notify the other Paying Agents and Registrars thereof as soon as reasonably practicable thereafter.

5.REPLACEMENT INSTRUMENTS

5.1The Fiscal Agent or, as the case may be, the Registrar (in such capacity “Replacement Agent”) shall in accordance with the instructions of the relevant Issuer and the terms and conditions (subject to the provisions of Clause 5.2 below) authenticate and deliver a Temporary Global Instrument, Permanent Global Instrument, Definitive Instrument, Coupon or, as the case may be, Registered Instrument as a replacement for any of the same which has been mutilated or defaced or which has or has been alleged to have been destroyed, stolen or lost Provided that no Temporary Global Instrument, Permanent Global Instrument, Definitive Instrument, Coupon or Registered Instrument shall be delivered as a replacement for any of the same which has been mutilated or defaced otherwise than against surrender of the same and any replacement Definitive Instrument shall have the same number of Coupons and, if applicable, a Talon as are attached to the mutilated or defaced Definitive Instrument so replaced.

5.2The Replacement Agent shall not issue any replacement Temporary Global Instrument, Permanent Global Instrument, Definitive Instrument, Coupon or, as the case may be, Registered Instrument unless the claimant shall have:

(i)paid such costs as may be incurred; and

(ii)furnished (in the case of destroyed, lost or stolen Instruments) such evidence, security, indemnity and otherwise as the relevant Issuer may require.

5.3Each replacement Temporary Global Instrument, Permanent Global Instrument, Definitive Instrument, Coupon or Registered Instrument delivered hereunder shall bear a unique serial number.

5.4The Replacement Agent shall cancel each mutilated or defaced Temporary Global Instrument, Permanent Global Instrument, Definitive Instrument, Coupon or Registered Instrument surrendered to it and in respect of which a replacement has been delivered.

5.5The Replacement Agent shall forthwith notify the relevant Issuer, and (in the case of Bearer Instruments) the other Paying Agents of the delivery by it in accordance herewith of any replacement Temporary Global Instrument, Permanent Global Instrument, Definitive Instrument, Coupon or Registered Instrument, specifying the serial number thereof and the serial number (if any and if known) of the Instrument

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which it replaces and confirming (if such be the case) that the Instrument which it replaces has been cancelled.

5.6Each of the Issuers shall ensure that the Replacement Agent has available to it supplies of such Temporary Global Instruments, Permanent Global Instruments, Definitive Instruments, Coupons and Registered Instruments, as the case may be, as shall be necessary to effect the delivery of replacement Instruments under this Section 5.

5.7Each of the Fiscal Agent, the Registrar and the Replacement Agent undertake to notify the relevant Issuer if its holds insufficient Instruments or Coupons to fulfil its respective obligations under Section 4 and this Section 5.

5.8Unless the relevant Issuer instructs otherwise, the Replacement Agent shall destroy each mutilated or defaced Temporary Global Instrument, Permanent Global Instrument, Definitive Instrument, Coupon or Registered Instrument surrendered to and cancelled by it and in respect of which a replacement has been delivered and shall as soon as possible but not later than three months after such destruction furnish such Issuer with a certificate as to such destruction and specifying the serial numbers of the Temporary Global Instrument, Permanent Global Instrument, Definitive Instruments and Registered Instruments in numerical sequence and the total number by maturity date of Coupons (and distinguishing any Talon in respect thereof) so destroyed.

6.PAYMENTS TO THE FISCAL AGENT OR THE REGISTRAR

6.1In order to provide for the payment of interest and principal or, as the case may be, any other redemption amount payable in respect of the Instruments of each Series as the same shall become due and payable the relevant Issuer shall pay to the Fiscal Agent or, as the case may be, the Registrar on or before the date on which such payment becomes due an amount equal to the amount of principal, redemption amount or, as the case may be, interest then becoming due in respect of such Instruments.

6.2Each amount payable by the relevant Issuer under Clause 6.1 shall be paid unconditionally by credit transfer in the currency in which the Instruments of the relevant Series are denominated or, if different, payable and in immediately available, freely transferable funds not later than 10.00 a.m. (local time) on the relevant day to such account with such bank as the Fiscal Agent or, as the case may be, the Registrar may by notice to such Issuer have specified for the purpose.  If the due date for payment in respect of any Instruments is not, in respect of such Instruments, a Relevant Financial Centre Day (as defined in Condition 9B.02 of the terms and conditions of the relevant Instruments) then payment will be made on the next following Relevant Financial Centre Day (or, in the case of Instruments denominated or, if different, payable in Euro on the next following day which is a TARGET Business Day (as defined in Condition 5B.04 of the terms and conditions of the Instruments).  The Fiscal Agent or, as the case may be, the Registrar shall give not less than 14 nor more than 21 days’ notice to the relevant Issuer of the due date for, and amount of, each payment in respect of the Instruments.  The relevant Issuer shall, before 10.00 a.m. (local time) at least two Luxembourg Banking Days before the due date of each payment by it under Clause 6.1, confirm to the Fiscal Agent or, as the

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case may be, the Registrar by tested telex or tested fax that it has given irrevocable instructions for the transfer of the relevant funds to the Fiscal Agent or, as the case may be, the Registrar and the name and the account of the bank through which such payment is being made.

6.3The Fiscal Agent and each Registrar shall be entitled to deal with each amount paid to it hereunder in the same manner as other amounts paid to it as a banker by its customers Provided that:

(a)it shall not against the relevant Issuer exercise any lien, right of set-off or similar claim in respect thereof; and

(b)it shall not be liable to any person for interest thereon.

6.4All moneys paid to the Fiscal Agent by the relevant Issuer in respect of any Instrument shall be held by the Fiscal Agent from the moment when such moneys are received until the time of actual payment thereof, upon trust to apply the same in accordance with Section 7, and the Fiscal Agent shall not be obliged to repay any such amount unless or until claims against such Issuer in respect of the relevant Instruments are prescribed or the relevant payment becomes void or ceases in accordance with the terms and conditions, in which event it shall forthwith repay to the relevant Issuer such portion of such amount as relates to such payment by paying the same by credit transfer to such account with such bank as the relevant Issuer may by notice to the Fiscal Agent have specified for the purpose.

6.5(a)The Fiscal Agent or, as the case may be, the Registrar shall forthwith notify the Paying Agents and the relevant Issuer by telex or fax or cable if, by 10.00 a.m. (local time) on the due date for any payment to it under Clause 6.1, it has not received confirmation that such Issuer has given irrevocable instructions for payment to be made as referred to in Clause 6.2.

(b)The Fiscal Agent or, as the case may be, the Registrar shall forthwith (and in any event within one Relevant Financial Centre Day in respect of the relevant Instruments) notify the relevant Issuer if it has not received from such Issuer in the manner provided herein full payment on the due date of any amount with respect to the Instruments.

(c)If the Fiscal Agent or, as the case may be, the Registrar has not received the full amount payable by the due date but receives such amount later it shall:

(i)forthwith so notify the other Paying Agents; and

(ii)forthwith give notice to the holders of the Instruments in accordance with Condition 14 that it has received such full amount.

6.6All moneys paid to the Registrar by the relevant Issuer in respect of any Instrument shall be held by the Registrar from the moment when such moneys are received until the time of actual payment thereof, upon trust to apply the same in accordance with Section 8, and the Registrar shall not be obliged to repay any such amount unless or

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until the claims against such Issuer in respect of the relevant Registered Instruments are prescribed or the relevant payment becomes void or ceases in accordance with the terms and conditions, in which event it shall forthwith repay to the relevant Issuer such portion of such amount as relates to such claims in respect of the relevant Registered Instruments by paying the same by credit transfer to such account with such bank as the relevant Issuer may by notice to the Registrar have specified for the purpose.

7.PAYMENTS TO HOLDERS OF BEARER INSTRUMENTS

7.1Each Paying Agent shall make payments of interest, principal or, as the case may be, redemption amount in respect of Bearer Instruments in accordance with the terms and conditions applicable thereto (and, in the case of a Temporary Global Instrument or a Permanent Global Instrument, the terms thereof) Provided that:

(a)if any Temporary Global Instrument, Permanent Global Instrument, Definitive Instrument or Coupon is presented or surrendered for payment to any Paying Agent and such Paying Agent has delivered a replacement therefor or has been notified that the same has been replaced, such Paying Agent shall forthwith notify the Fiscal Agent (which shall immediately notify the relevant Issuer) of such presentation or surrender and shall not make payment against the same until it is so instructed in writing by such Issuer and has received the amount to be so paid;

(b)if any Temporary Global Instrument or Permanent Global Instrument is presented or surrendered for payment to any Paying Agent other than the Fiscal Agent, such Paying Agent shall (without prejudice to Clause 7.3) forthwith notify the Fiscal Agent of that fact;

(c)unless and until the full amount of any payment has been transferred to the Fiscal Agent, none of the Paying Agents shall be bound to make payments on behalf of the relevant Issuer in respect of the Instruments;

(d)in the absence of contrary notification from the Fiscal Agent on the due date for any payment in respect of the Instruments of any Series, the Paying Agents shall assume that the Fiscal Agent has received the full amount so due in respect of such Instruments and shall be entitled:

(i)to pay maturing Instruments and Coupons in accordance with the terms and conditions; and

(ii)to claim any amounts so paid by it from the Fiscal Agent;

(e)each Paying Agent shall (in the case of the Temporary Global Instrument or Permanent Global Instrument, in accordance with the directions of the Fiscal Agent) cancel or procure the cancellation of each Temporary Global Instrument, Permanent Global Instrument, Definitive Instrument (in the case of early redemption, together with such unmatured Coupons or unexchanged Talons as are attached to or are surrendered with it at the time of such redemption), or, as the case may be, Coupon against surrender of which it has

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made full payment and shall (if such Paying Agent is not the Fiscal Agent) forthwith deliver or procure the delivery of each Temporary Global Instrument, Permanent Global Instrument, Definitive Instrument (together with as aforesaid) or Coupon so cancelled by it to the Fiscal Agent together with all relevant details; and

(f)in the case of payment of interest, principal or, as the case may be, redemption amount against presentation of a Temporary Global Instrument or a Permanent Global Instrument or in the case of payment of an instalment in respect of an Instalment Instrument against presentation of a Definitive Instrument, the relevant Paying Agent shall (in the case of the Temporary Global Instrument or Permanent Global Instrument, in accordance with the directions of the Fiscal Agent) note or procure that there is noted on the Schedule thereto, or in the absence of a Schedule, on the face thereof, the amount of such payment and, in the case of payment of principal or redemption amount, the remaining principal amount of the relevant Instrument (which shall be the previous principal amount less the amount of principal or, as the case may be, the principal amount in respect of which redemption amount has then been paid) and shall procure the signature of such notation on its behalf.

7.2None of the Paying Agents shall exercise any lien, right of set-off or similar claim against any person to whom it makes any payment under Clause 7.1 in respect thereof, nor shall any commission or expense be charged by it to any such person in respect thereof.

7.3If a Paying Agent other than the Fiscal Agent makes any payment in accordance with Clause 7.1:

(a)it shall notify the Fiscal Agent of the amount so paid by it, the serial number of the Temporary Global Instrument, Permanent Global Instrument, Definitive Instrument or Coupon against presentation or surrender of which payment of interest, principal or redemption amount was made and the number of Coupons by maturity against which payment of interest was made; and

(b)the Fiscal Agent shall on demand promptly reimburse such Paying Agent for the amount so properly paid by it by payment out of the funds received by it under Clause 6.1 of an amount equal to the amount so paid by it by paying the same by credit transfer to such account with such bank as such Paying Agent may by notice to the Fiscal Agent have specified for the purpose.

7.4If the Fiscal Agent makes any payment in accordance with Clause 7.1 out of its own funds, it shall be entitled to appropriate for its own account out of the funds received by it under Clause 6.1 an amount equal to the amount so paid by it.

7.5If at any time and for any reason a Paying Agent makes a partial payment in respect of any Temporary Global Instrument, Permanent Global Instrument, Definitive

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Instrument or Coupon surrendered for payment to it, such Paying Agent shall endorse thereon a statement indicating the amount and date of such payment.

8.PAYMENTS TO HOLDERS OF REGISTERED INSTRUMENTS

8.1The Registrar shall make payments of interest, principal or, as the case may be, redemption amount in respect of Registered Instruments in accordance with the terms and conditions applicable thereto Provided that unless and until the full amount of any payment has been transferred to the Registrar, the Registrar shall not be bound to make payments on behalf of the Instruments.

8.2The Registrar shall not exercise any lien, right of set-off or similar claim against any person to whom it makes any payment under Clause 8.1 in respect thereof, nor shall any commission or expense be charged by it to any such person in respect thereof.

8.3If a Registrar makes any payment in accordance with Clause 8.1 out of its own funds, it shall be entitled to appropriate for its own account out of the funds received by it under Clause 6.1 an amount equal to the amount so paid by it.

8.4If at any time and for any reason a Registrar makes a partial payment in respect of any Registered Instrument surrendered for payment to it, such Registrar shall endorse thereon a statement indicating the amount and date of such payment.

9.MISCELLANEOUS DUTIES OF THE FISCAL AGENT AND THE PAYING AGENTS

Cancellation, destruction and records

9.1The Fiscal Agent shall:

(a)maintain a complete record of all Temporary Global Instruments, Permanent Global Instruments, Definitive Instruments and Coupons delivered hereunder and of their redemption, payment, exchange, cancellation, mutilation, defacement, alleged destruction, theft or loss or replacement Provided that no record need be maintained of the serial numbers of Coupons save insofar as that a record shall be maintained of the serial numbers of unmatured Coupons missing at the time of redemption or other cancellation of the relevant Definitive Instruments and of any subsequent payments against such Coupons and shall send forthwith to the other Paying Agents a list of any unmatured Coupons and/or unexchanged Talons missing upon redemption of the relevant Definitive Instrument;

(b)maintain a record of all certifications received by it in accordance with the provisions of any Temporary Global Instrument;

(c)upon request by an Issuer, inform such Issuer of the spot rate of exchange quoted by it for the purchase of the currency in which the relevant Instruments are denominated against payment of United States dollars (or such other currency specified by such Issuer) on the date on which the Relevant

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Agreement (as defined in the Dealership Agreement) in respect of such Instruments was made;

(d)in relation to each series of Instruments the terms and conditions applicable to which provide that the rate of interest or redemption amount or any calculation applicable thereto shall be determined by the Fiscal Agent, determine such rate of interest or redemption amount or make such calculation from time to time on the basis therein and take all such actions as may to it seem reasonably incidental thereto including, without limitation, the notification of all rates and amounts so determined and the maintenance of all appropriate records; and

(e)make such records available for inspection at all reasonable times by the relevant Issuer and the other Paying Agents.

9.2The Paying Agents shall make available to the Fiscal Agent such information as may reasonably be required for the maintenance of the records referred to in Clause 9.1.

9.3In relation to any Instruments purchased by any Issuer or any of its affiliated companies, the relevant Issuer may deliver to the Fiscal Agent Definitive Instruments and unmatured Coupons appertaining thereto for cancellation or, as the case may be, may procure the delivery to the Fiscal Agent of a Temporary Global Instrument or a Permanent Global Instrument with instructions to cancel a specified aggregate principal amount of Instruments represented thereby (which instructions shall be accompanied by evidence satisfactory to the Fiscal Agent that the relevant Issuer is entitled to give such instructions) whereupon the Fiscal Agent shall cancel such Definitive Instruments and Coupons or, as the case may be, note or procure that there is noted on the Schedule to, or in the absence of a Schedule, on the face of, such Temporary Global Instrument or Permanent Global Instrument the aggregate principal amount of Instruments so to be cancelled and the remaining principal amount thereof (which shall be the previous principal amount thereof less the aggregate principal amount of the Instruments so cancelled) and shall procure the signature of such notation on its behalf.

9.4As soon as possible (and in any event within three months) after each interest or other payment date in relation to any Series of Bearer Instruments, after each date on which Instruments are cancelled in accordance with Clause 9.3, and after each date on which the Instruments fall due for redemption, the Fiscal Agent shall notify the relevant Issuer and the other Paying Agents (on the basis of the information available to it) of:

(i)the aggregate principal amount paid on, and the serial numbers of all Instruments redeemed, surrendered and cancelled and the serial numbers of any Definitive Instruments which have not yet been surrendered for payment;

(ii)for each date for the payment of interest, the total number of Coupons paid and the aggregate amount paid thereon;

(iii)the aggregate principal amount and serial numbers of Instruments purchased and cancelled; and

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(iv)the total number by maturity date of unmatured Coupons missing from Instruments redeemed or purchased and surrendered and the serial numbers of the Instruments to which such missing unmatured Coupons appertained.

9.5The Fiscal Agent shall (unless the relevant Issuer otherwise requests) destroy each Temporary Global Instrument, Permanent Global Instrument, Definitive Instrument and Coupon delivered to or cancelled by it in accordance with Clauses 4.11, 4.13, paragraph (d) of Clause 7.1, Clause 9.14, Clause 11.13 or (where there is no principal amount remaining of such Temporary Global Instrument or Permanent Global Instrument) delivered to and cancelled by it in accordance with Clause 9.3, in which case it shall as soon as possible (and in any event within 3 months of such destruction) furnish the relevant Issuer with a certificate as to such destruction and specifying the serial numbers of the Temporary Global Instrument, Permanent Global Instrument, Definitive Instruments in numerical sequence and the total number by maturity date of Coupons (distinguishing Talons) so destroyed.

Meetings of Holders of Instruments

9.6Each Paying Agent shall, at the request of the holder of any Bearer Instrument issue voting certificates and block voting instructions in a form and manner which comply with the provisions of the Fifth Schedule (except that it shall not be required to issue the same less than forty-eight hours before the time fixed for any meeting therein provided for) and will perform the other functions specified in the Fifth Schedule.  The provisions contained in the Fifth Schedule will have full effect in the like manner as if they had been expressly incorporated herein in full.  Each Paying Agent shall keep a full record of voting certificates and block voting instructions issued by it and will give to the relevant Issuer not less than twenty-four hours before the time appointed for any meeting or adjourned meeting full particulars of all voting certificates and block voting instructions issued by it in respect of such meeting or adjourned meeting.

Documents and Forms

9.7The Issuer shall provide to the Fiscal Agent for distribution among the Paying Agents:

(a)specimen Instruments;

(b)sufficient copies of all documents required to be available for issue or inspection as provided in the Information Memorandum or, in relation to any Instruments, the terms and conditions or Pricing Supplement in respect of such Instruments; and

(c)in the event that the provisions of such Condition become relevant in relation to any Instruments, the certificate contemplated under the Condition headed “Early Redemption for Taxation Reasons”.

9.8Each Paying Agent shall make available for examination or use during normal business hours at its specified office such documents as may be specified as so available at the specified office of such agent in the Information Memorandum or, in relation to any Instruments, the terms and conditions or Pricing Supplement in respect of such

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Instruments, or as may be required by any stock exchange on which the Instruments may be listed and, without prejudice to the generality of the foregoing, the Fiscal Agent and the Paying Agent with its specified office in Luxembourg shall make available for examination or use during normal business hours at its specified office copies of the Information Memorandum and each Pricing Supplement and all other documents listed in paragraph 8 of the General Information Section of the Information Memorandum and, in the event that the provisions of such Condition become relevant, the certificate contemplated in the Condition headed “Early Redemption for Taxation Reasons”.

Notifications

9.9The Fiscal Agent shall make all necessary notifications (including the submission of documents or reports where required) to and with the Bank of England and the Ministry of Finance in Japan in connection with Instruments denominated in Pounds Sterling and Yen respectively and other similar notifications (including the submission of documents or reports where required) as may be required in respect of any other Instruments.  Within one week after the end of each calendar month, the Fiscal Agent shall notify the Bank of England of the principal amount of each Tranche of Instruments denominated in Sterling (i) outstanding as at the end of the relevant calendar month and (ii) issued and redeemed since the previous such notification (or since the date of this Fiscal Agency Agreement, as the case may be).  Such notification shall be made even if no such Instruments were outstanding as at such time or issued or redeemed during such calendar month.  Such notification shall be consistent with the requirements from time to time of the Bank of England.  Within fifteen days after the end of each calendar month, the Fiscal Agent shall submit a report in Japanese to the Ministry of Finance in Japan in respect of each Tranche of Instruments denominated in Yen issued during the relevant calendar month.  Such report shall be submitted even if no such Instruments were issued during such calendar month.  Such report shall be consistent with the requirements from time to time of the Ministry of Finance of Japan.

9.10The Fiscal Agent agrees with each Issuer that, to the extent that it is notified by each relevant Dealer that the distribution of the Instruments of any Tranche is complete it will notify the relevant Issuer and the relevant Dealers of the completion of distribution of the Instruments of any Tranche which are sold to or through more than one Dealer as contemplated in Schedule 1 to the Dealership Agreement.

Notices

9.11Forthwith upon receipt by the Fiscal Agent of any notice or other communication from or on behalf of the holder of any Instrument in relation to any Instrument, the Fiscal Agent shall forward a copy of the notice or communication to the relevant Issuer.  Each of the Paying Agents agrees to notify the Fiscal Agent forthwith in the event that it receives any such notice or communication.

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9.12The Fiscal Agent shall, upon and in accordance with the instructions of the relevant Issuer but not otherwise promptly arrange for the publication of any notices required to be given to the holders of Bearer Instruments in accordance with the terms and conditions of the relevant Instruments or required to comply with the requirements of any stock exchange on which the relevant Instruments may be listed and shall supply a copy thereof to each other Paying Agent.

Indemnity

9.13Each of the Paying Agents shall severally indemnify the Issuers and each of them against any direct loss, liability, cost, claims, action, demand or expense incurred by such Issuer as a result of or arising out of or in relation to or in connection with any breach by such Paying Agent, or any person acting on its behalf, of the terms of this Agreement, or as a result of its wilful misconduct, negligence or bad faith or that of its agents, officers or employees.  The Issuers and each of them shall remain entitled to the benefit and each of the Paying Agents shall be subject to the provisions of this Clause 9.13 notwithstanding the provisions of Clause 14.6.

Exchange of Bearer Instruments for Registered Instruments

9.14In relation to any Series comprising Bearer and Registered Instruments, the Fiscal Agent shall receive requests to effect exchanges of Bearer Instruments for Registered Instruments together with the relevant Bearer Instruments, inform the Registrar (specifying (i) the aggregate principal amount of such Bearer Instruments, (ii) the name(s) and address(es) to be entered on the Register as the holder(s) of the Registered Instrument(s) and (iii) the denomination(s) of the Registered Instrument(s)) and assist in the issue of the Registered Instrument(s) in accordance with the terms and conditions applicable thereto and in accordance with the Regulations.  The Fiscal Agent shall, on the exchange date (as defined in Condition 2.06) applicable to such exchange of Bearer Instruments for Registered Instruments, cancel such Bearer Instruments.

10.EARLY REDEMPTION

10.1If an Issuer intends (other than consequent upon an Event of Default) to redeem all or any of the Instruments prior to their stated maturity date it shall not less than 15 days prior to the latest date for the publication of the notice of redemption required to be given to the holders of any Instruments, give notice of such intention to the Fiscal Agent or, in the case of Registered Instruments, the Registrar (copied to the Fiscal Agent) stating the date on which such Instruments are to be redeemed.

10.2In respect of any Instruments to which Condition 6.06 applies or which carries any other right of redemption at the option of the holders of such Instruments, the relevant Issuer will provide the Paying Agents or, in the case of Registered Instruments, the Registrar with copies of the form of the current redemption notice and the Paying Agents or, as the case may be, the Registrar will make available forms of the current redemption notice to holders of Instruments upon request during usual business hours at their respective specified offices.  Upon receipt of any Instrument deposited in the

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exercise of such option, the Paying Agent or, in the case of Registered Instruments, the Registrar with which such Instrument is deposited shall hold such Instrument (together with, in the case of a Definitive Instrument, any Coupons relating to it deposited with it) on behalf of the depositing holder of such Instrument (but shall not, save as provided below, release it) until the due date for redemption of the relevant Instrument consequent upon the exercise of such option, when, subject as provided below, it shall present such Instrument (and any such Coupons) to itself for payment in accordance with the terms and conditions of the relevant Instruments and shall pay such moneys in accordance with the directions of the holder of the Instrument contained in the relevant redemption notice.  If, prior to such due date for its redemption, such Instrument becomes immediately due and payable by reason of an Event of Default or if upon due presentation payment of such redemption moneys is improperly withheld or refused, the Paying Agent concerned or, as the case may be, the Registrar shall without prejudice to the exercise of such option mail such Instrument (together with any such Coupons) by uninsured post to, and at the risk of, the holder of the relevant Instrument at such address as may have been given by such holder in the relevant redemption notice.

10.3At the end of any applicable period for the exercise of such option or, as the case may be, not later than 7 days after the latest date for the exercise of such option in relation to a particular date, in relation to Bearer Instruments each Paying Agent shall promptly notify the Fiscal Agent of the principal amount of the Instruments in respect of which such option has been exercised with it together with their serial numbers and the Fiscal Agent shall promptly notify such details to the relevant Issuer.

10.4At the end of any applicable period for the exercise of such option or, as the case may be, not later than 7 days after the latest date for the exercise of such option in relation to a particular date, in relation to Registered Instruments, the Registrar shall promptly notify the relevant Issuer of the principal amount of the Instruments in respect of which such option has been exercised together with their serial numbers.

11.MISCELLANEOUS DUTIES OF THE REGISTRARS

Cancellation and Records

11.1Each Registrar shall maintain in relation to each Series of Registered Instruments in relation to which it is appointed as registrar a register (each a “Register”), which shall be kept in accordance with the terms and conditions applicable to such Series of Registered Instruments and the Regulations.  Each Register shall show the aggregate principal amount and date of issue of each Tranche comprising the relevant Series of Registered Instruments, the names and addresses of the initial holders thereof and the dates of all transfers to, and the names and addresses of, all subsequent holders thereof.  The Registrar shall further, in relation to each Series of Registered Instruments the terms and conditions applicable to which provide that the rate of interest or redemption amount or any calculation applicable thereto shall be determined by such Registrar, determine such rate of interest or redemption amount or make such calculation from time to time on the basis therein provided and take all such action as

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may to it seem reasonably incidental thereto including, without limitation, the notification of all rates and amounts so determined and the maintenance of all appropriate records.  The Registrar shall make each Register and all such records available for inspection at all reasonable times by the relevant Issuer.

11.2The Registrar shall by the issue of new Registered Instruments, the cancellation of old Registered Instruments and the making of entries in the relevant Register give effect to transfers of Registered Instruments in accordance with the terms and conditions applicable thereto and in accordance with the Regulations.

11.3In relation to any Instruments purchased by any Issuer or any of its affiliated companies, the relevant Issuer may from time to time deliver to the Registrar such Registered Instruments of which it is the holder for cancellation, whereupon such Registrar shall cancel the same and shall make the corresponding entries in the relevant Register.

11.4As soon as possible (and in any event within three months) after each date on which Registered Instruments are cancelled in accordance with Clause 11.3 or fall due for redemption, the Registrar shall notify the relevant Issuer of:

(i)the aggregate principal amount paid on, and the serial numbers of all Registered Instruments redeemed, surrendered and cancelled and the serial numbers of any Registered Instruments (and the names and addresses of the holders thereof) which have not yet been surrendered for payment; and

(ii)the aggregate principal amount and serial numbers of Registered Instruments purchased and cancelled.

11.5Each of the Issuers shall ensure that each Registrar has available to it supplies of such Registered Instruments as shall be necessary in connection with the transfer of Registered Instruments under this Section 11.

11.6The Registrar shall, upon and in accordance with the instructions of the relevant Issuer but not otherwise, promptly arrange for the despatch of any notices required to be given to the holders of Registered Instruments in accordance with the terms and conditions of the relevant Instruments or required to comply with the requirements of any stock exchange on which the relevant Instruments may be listed.

Meetings of Holders of Instruments

11.7The Registrar shall, at the request of the holder of any Registered Instrument, issue voting certificates and block voting instructions in a form and manner which comply with the provisions of the Fifth Schedule (except that it shall not be required to issue the same less than forty-eight hours before the time fixed for any meeting therein provided for) and shall make available at the request of the holder of any Registered Instrument, forms of proxy in a form and manner which comply with the provisions of the Fifth Schedule and will comply with the other functions specified in the Fifth Schedule.  The provisions contained in the Fifth Schedule will have full effect in the like manner as if they had been expressly incorporated herein in full.  The Registrar

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shall keep a full record of voting certificates and block voting instructions issued by it and will give to the relevant Issuer not less than twenty-four hours before the time appointed for any meeting or adjourned meeting, full particulars of all voting certificates and block voting instructions issued by it in respect of such meeting or adjourned meeting.

Documents and Forms

11.8The Issuer shall provide to the Registrar:

(a)specimen Instruments;

(b)sufficient copies of all documents required to be available for issue or inspection as provided in the Information Memorandum or, in relation to any Instruments, the terms and conditions or Pricing Supplement in respect of such Instruments; and

(c)in the event that the provisions of such Condition become relevant in relation to any Instruments, the certificate contemplated under the Condition “Early Redemption for Taxation Reasons”.

11.9The Registrar shall make available for examination or use during normal business hours at its specified office such documents as may be specified as so available at the specified office of such agent in the Information Memorandum or, in relation to any Instruments, the terms and conditions or Pricing Supplement in respect of such Instruments or as may be required by any stock exchange on which the Instruments may be listed and, without prejudice to the generality of the foregoing, shall make available for examination or use during normal business hours at its specified office copies of the Information Memorandum and each Pricing Supplement and all other documents listed in paragraph 8 of the General Information Section of the Information Memorandum and, in the event that the provisions of such Condition become relevant, the certificate contemplated in the Condition headed “Early Redemption for Taxation Reasons”.

Provision of Information

11.10The Registrar shall provide the Fiscal Agent with all such information as the Fiscal Agent may reasonably require in order to perform the obligations set out in Clause 9.9 hereof.

Indemnity

11.11The Registrar shall severally indemnify the Issuers and each of them against any direct loss, liability, cost, claims, action, demand or expense incurred by such Issuer as a result of or arising out of or in relation to or in connection with any breach by the Registrar, or any person acting on its behalf, of the terms of this Agreement, or as a result of its wilful misconduct, negligence or bad faith or that of its agents, officers or employees.  The Issuers and each of them shall remain entitled to the benefit and the

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Registrar shall be subject to the provisions of this Clause 11.11 notwithstanding the provisions of Clause 14.6.

11.12Forthwith upon receipt by the Registrar of any notice or other communication from or on behalf of the holder of any Instrument in relation to any Instrument, the Registrar shall forward a copy of the notice or communication to the relevant Issuer.

Exchanges of Bearer Instruments for Registered Instruments

11.13In relation to any Series comprising Bearer and Registered Instruments, by the receipt of requests for exchanges of Bearer Instruments for Registered Instruments together with the relevant Bearer Instruments (or notifications from the Fiscal Agent of receipt thereof by the Fiscal Agent), the issue of Registered Instruments and the making of entries in the Register, give effect to exchanges of Bearer Instruments for Registered Instruments in accordance with the terms and conditions applicable thereto and in accordance with the Regulations.

The Registrar shall forthwith upon the receipt of a request for the exchange of Bearer Instruments for Registered Instruments notify the Fiscal Agent thereof (specifying (i) the serial numbers of the Bearer Instruments, (ii) the aggregate principal amount of Instruments involved, and (iii) the exchange date (as defined in Condition 2.06) applicable thereto) and shall on the exchange date cancel the relevant Bearer Instruments and forward the same to the Fiscal Agent.  The Registrar shall notify the relevant Issuer promptly of the exchange of Bearer Instruments for Registered Instruments, specifying the serial numbers of the Bearer Instruments and of the Registered Instruments issued in exchange therefor, the aggregate principal amount involved and the applicable exchange date.

12.COMMISSIONS, FEES AND EXPENSES

12.1The Fiscal Agent and the relevant Issuer shall separately agree from time to time as to the amount of any commissions, fees and expense reimbursements to which the Fiscal Agent, the Paying Agents and the Registrars will be entitled hereunder, and any and all such agreements shall be binding on all of the parties hereto.

12.2Each of the Issuers (on a several basis where the relevant tax or duty is attributable to the Instruments issued by it and the related Coupons but otherwise on a several basis for a proportion thereof which is the same proportion as the aggregate principal amount of Instruments issued by such Issuer and outstanding as at the relevant date for payment bears to the aggregate principal amount of Instruments issued under the Programme and outstanding as at the relevant date for payment) shall pay all stamp and other similar taxes and duties, if any, which may be payable on the execution of this Agreement, on the creation and issue of the Instruments issued by it and the related Coupons and the delivery of the Instruments pursuant to the Dealership Agreement.

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13.TERMS OF APPOINTMENT

13.1Each of the Paying Agents and the Registrars may, in connection with its services hereunder:

(a)(in the case of Bearer Instruments) except as ordered by a court of competent jurisdiction or as required by law and notwithstanding any notice to the contrary or any writing thereon, treat the bearer of any Instrument as the absolute owner thereof and make payments thereon accordingly;

(b)refer any question relating to the ownership of any Instrument or Coupon or, without prejudice to Clause 5.2(ii), the adequacy or sufficiency of any evidence supplied in connection with the replacement of any Instrument or Coupon to the relevant Issuer for determination by such Issuer and rely upon any determination so made; and

(c)after approval by the relevant Issuer such approval not to be unreasonably withheld, engage and pay for the advice or services of any leading firm of lawyers, or other leading experts, with recognised expertise in the relevant field whose advice or services may to it seem necessary and rely upon any advice so obtained.  Any request for the relevant Issuer’s approval of any such firm or expert must be answered by the Issuer within a reasonable time following such request, failing which such approval shall be assumed to have been given.

13.2None of the Paying Agents or the Registrars shall have any obligations towards or relationship of agency or trust for or with any holder of the Instruments or Coupons (except as provided in Clauses 6.4 and 6.6 hereof) and shall be responsible only for performance of the duties and obligations expressly imposed upon them herein.

13.3Each Paying Agent and Registrar and their officers, directors and employees may become the holder of, or acquire any interest in, any Instruments or Coupons with the same rights that it or they would have if it were not such agent or agents hereunder, and may engage or be interested in any transaction with any Issuer and may act on, or as depositary, trustee or agent for, any committee or body of holders of Instruments or Coupons or other obligations of any Issuer as freely as if it were not such agent or agents hereunder.

13.4Each Issuer shall indemnify each Paying Agent and each Registrar against any direct loss, liability, claim, action, demand, reasonable cost or expense which it may properly incur or which may be made against it arising out of or in connection with its appointment or the exercise of its powers and performance of its duties hereunder in respect of Instruments issued by such Issuer, except such as may result from its wilful misconduct, negligence or bad faith or that of its agents, officers or employees.  The foregoing indemnity shall not apply to any expenses of any Paying Agent or Registrar provided for pursuant to Clause 12.1.

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14.CHANGES IN AGENTS

14.1Any Paying Agent or Registrar may resign its appointment as the agent of each Issuer in relation to the Instruments of each Issuer upon the expiration of not less than ninety days’ prior written notice to that effect by such Paying Agent or, as the case may be, the Registrar to each Issuer (with a copy, if necessary, to the Fiscal Agent) Provided that:

(a)any such notice which would otherwise expire within fifteen days before or after the maturity date of any Series of Instruments or any interest or other payment date in relation to any Series of Instruments shall be deemed, in relation to such Series only, to expire on the fifteenth day following such maturity date or, as the case may be, such interest or other payment date; and

(b)in the case of (i) the Fiscal Agent, (ii) the only remaining Paying Agent or Registrar with its specified office in continental Europe (but outside the United Kingdom), (iii) so long as any Instruments are listed on the Luxembourg Stock Exchange and/or any other stock exchange, the Paying Agent or the Registrar with its specified office in Luxembourg and/or in such other place as may be required by such other stock exchange, (iv) the Registrar in respect of any Series of Instruments then outstanding, (v) in the circumstances described in Condition 9A.04, the Paying Agent with its specified office in New York City, (vi) the European Union Directive on the taxation of savings income adopted by the ECOFIN Council on 3 June 2003 being implemented, the Paying Agent appointed in an EU member state that is not obliged to withhold or deduct tax pursuant to the Directive, or (vii) in the case of Instruments issued by ACBV, the Paying Agent with its specified office outside of the European Union, such resignation shall not be effective until a successor thereto (which in the case of the Fiscal Agent and the Registrar shall be a bank or trust company of good standing and authorised to exercise corporate trust powers) has been appointed by the relevant Issuer as the agent of such Issuer in relation to the Instruments of such Issuer and notice of such appointment has been given in accordance with the terms and conditions, Provided that such successor, in the case of (ii), shall have its specified office in continental Europe (but outside the United Kingdom and, in the case of (iii), shall have its specified office in Luxembourg and/or in such other place as may be required by such stock exchange.

14.2Each of the Issuers may revoke its appointment of any Paying Agent or Registrar as its agent in relation to the Instruments by not less than thirty days’ notice to that effect to such Paying Agent or, as the case may be, such Registrar provided, however, that, in the case of (i) the Fiscal Agent, (ii) the only remaining Paying Agent or Registrar with its specified office in continental Europe (but outside the United Kingdom), (iii) so long as any Instruments are listed on the Luxembourg Stock Exchange and/or any other stock exchange, the Paying Agent or Registrar with its specified office in Luxembourg and/or in such other place as may be required by such other stock exchange, (iv) the Registrar in respect of any Series of Instruments then outstanding or

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(v) in the circumstances described in Condition 9A.04, the Paying Agent with its specified office in New York City, (vi) the European Union Directive on the taxation of savings income adopted by the ECOFIN Council on 3 June 2003 being implemented, the Paying Agent appointed in an EU member state that is not obliged to withhold or deduct tax pursuant to the Directive, or (vii) in the case of Instruments issued by ACBV, the Paying Agent with its specified office outside of the European Union, such revocation shall not be effective until a successor thereto (which in the case of the Fiscal Agent and the Registrar shall be a bank or trust company of good standing and authorised to exercise corporate trust powers) has been appointed by the relevant Issuer as the agent of such Issuer in relation to the Instruments of such Issuer and notice of such appointment has been given in accordance with the terms and conditions, Provided that such successor, in the case of (ii), shall have its specified office in continental Europe (but outside the United Kingdom and, in the case of (iii), shall have its specified office in Luxembourg and/or in such other place as may be required by such stock exchange.

14.3The appointment of any Paying Agent or Registrar as the agent of each of the Issuers in relation to the Instruments shall terminate forthwith if any of the following events or circumstances shall occur or arise, namely: such Paying Agent or, as the case may be, Registrar becomes incapable of acting; such Paying Agent or, as the case may be, Registrar is adjudged bankrupt or insolvent; such Paying Agent or, as the case may be, Registrar files a voluntary petition in bankruptcy or makes an assignment for the benefit of its creditors or consents to the appointment of a receiver, administrator or other similar official of all or any substantial part of its property or admits in writing its inability to pay or meet its debts as they mature or suspends payment thereof; a resolution is passed or an order is made for the winding-up or dissolution of such Paying Agent or, as the case may be, Registrar; a receiver, administrator or other similar official of such Paying Agent or, as the case may be, Registrar or of all or any substantial part of its property is appointed; an order of any court is entered approving any petition filed by or against such Paying Agent or, as the case may be, Registrar under the provisions of any applicable bankruptcy or insolvency law; or any public officer takes charge or control of such Paying Agent or, as the case may be, Registrar or of its property or affairs for the purpose of rehabilitation, conservation or liquidation.

14.4Each of the Issuers may (and shall where necessary to comply with the terms and conditions applicable to any Instruments) appoint substitute or additional agents in relation to the Instruments and shall forthwith notify the other parties hereto thereof, whereupon the parties hereto and such substitute or additional agents shall thereafter have the same rights and obligations among them as would have been the case had they then entered into an agreement in the form mutatis mutandis of this Agreement.

14.5Upon any resignation or revocation becoming effective under this Section 14, the relevant Paying Agent or, as the case may be, Registrar shall:

(a)be released and discharged from its obligations under this Agreement (save that it shall remain entitled to the benefit of and subject to and bound by the

28

provisions of Clause 9.13, 11.11, Clause 12.2, Section 13 and this Section 14);

(b)repay to the relevant Issuer such part of any fee paid to it as referred to in Clause 12.1 as may be agreed between the relevant Paying Agent or, as the case may be, the Registrar and such Issuer;

(c)in the case of the Fiscal Agent, deliver to the relevant Issuer and to the successor Fiscal Agent a copy, certified as true and up-to-date by an officer of the Fiscal Agent, of the records maintained by it in accordance with Section 9;

(d)in the case of a Registrar, deliver to the relevant Issuer and to the successor Registrar a copy, certified as true and up-to-date by an officer of such Registrar, of each of the Registers and other records maintained by it in accordance with Section 11; and

(e)forthwith transfer all moneys and papers (including any unissued Temporary Global Instruments, Permanent Global Instruments, Definitive Instruments, Coupons or, as the case may be, Registered Instruments held by it hereunder) to its successor in that capacity and, upon appropriate notice, provide reasonable assistance to such successor for the discharge by it of its duties and responsibilities hereunder.

14.6Any corporation into which any Paying Agent or Registrar may be merged or converted, any corporation with which any Paying Agent or Registrar may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which any Paying Agent or Registrar shall be a party, shall, to the extent permitted by applicable law (and provided, in the case of the Fiscal Agent or any Registrar that such corporation shall be a bank or trust company of good standing and authorised to execute corporate trust powers), be the successor to such Paying Agent or, as the case may be, Registrar as agent of the Issuers in relation to the Instruments without any further formality, whereupon the parties hereto and such successor agent shall thereafter have the same rights and obligations among them as would have been the case had they then entered into an agreement in the form mutatis mutandis of this Agreement.  Notice of any such merger, conversion or consolidation shall forthwith be given by such successor to each of the Issuers and the other parties hereto.

14.7If any Paying Agent or Registrar decides to change its specified office (which may only be effected within the same city) it shall give notice to each of the Issuers (with a copy, if necessary, to the Fiscal Agent) of the address of the new specified office stating the date on which such change is to take effect, which date shall be not less than thirty days after the date of such notice.  The relevant Paying Agent or Registrar shall at its own expense not less than fourteen days prior to the date on which such change is to take effect (unless the appointment of the relevant Paying Agent or Registrar is to terminate pursuant to any of the foregoing provisions of this Section 14

29

on or prior to the date of such change) publish or cause to be published notice thereof in accordance with the terms and conditions.

15.SUBSTITUTION

15.1As provided in Condition 15 of the terms and conditions of the relevant Instruments, the Issuer may be replaced, and ABB Ltd or any direct or indirect subsidiary of ABB Ltd may be substituted for the Issuer, as principal debtor in respect of the Instruments without the consent of the Holders of the Instruments or Coupons.  If the Issuer shall determine that ABB Ltd or any such subsidiary shall become the principal debtor (in such capacity, the “Substituted Debtor”), the Issuer shall give not less than 30 nor more than 45 days’ notice, in accordance with Condition 14, to the Holders of the Instruments of such event and, immediately on the expiry of such notice, the Substituted Debtor shall enter into a Deed of Assumption, substantially in the form set out in the Sixth Schedule hereto, and become the principal debtor in respect of the Instruments in place of the Issuer and the Holders of the Instruments shall thereupon cease to have any rights or claims whatsoever against the Issuer.  However, no such substitution shall take effect (i) if the Substituted Debtor is any other subsidiary of ABB Ltd, until such Substituted Debtor shall have entered into a keep-well agreement with ABB Ltd substantially in the form of the Keep-Well Agreement (as defined in the terms and conditions of the relevant Instruments), (ii) until such Substituted Debtor shall have executed a deed of covenant substantially in the form of the Deed of Covenant (as defined in the terms and conditions of the relevant Instruments), (iii) in any case, until the Substituted Debtor shall have provided to the Fiscal Agent and (if applicable) the Registrar such documents as may be necessary to make the Deed of Assumption, the relevant Instruments, the Fiscal Agency Agreement, such deed of covenant and any such keep-well agreement the legal, valid and binding obligations of, as appropriate, the Substituted Debtor and ABB Ltd together with legal opinions either unqualified or subject only to normal, usual or appropriate qualifications and assumptions to the effect that the Instruments, the Fiscal Agency Agreement, the Deed of Assumption, such deed of covenant and any such keep-well agreement are legal, valid and binding obligations of, as appropriate, the Substituted Debtor and ABB Ltd; (iv) the Substituted Debtor shall have obtained all necessary governmental and regulatory approvals and consents, if any, in connection with the substitution and (v) the Substituted Debtor shall have appointed the process agent appointed by the Issuer in Condition 18.03 of the terms and conditions of the relevant Instruments as its agent in England to receive service of process on its behalf in relation to any legal action or proceedings arising out of or in connection with the relevant Instruments.  Upon any such substitution, the Instruments and Coupons will, if necessary, be deemed to be modified in all appropriate respects.

15.2The terms and conditions of the relevant Instruments shall, following any substitution effected in accordance with this Section, apply to the Substituted Debtor, amended as set out in the Schedule to the Deed of Assumption.

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16.FURTHER ISSUERS

16.1Each of the Paying Agents and Registrars hereby agrees to act as the agent (in the capacity in which it was appointed hereunder) of (i) any Substituted Debtor as defined in (and where such substitution shall have taken effect as provided in) Condition 15 of the terms and conditions of the relevant Instruments or (ii) any New Issuer (as that expression is defined in Clause 10.2 of the Dealership Agreement) which shall have become party to the Dealership Agreement and which shall have (a) executed an agreement, in form and substance satisfactory to the Fiscal Agent, whereby such New Issuer agrees to be bound by the provisions of this Agreement and (b) provided to the Fiscal Agent such documents as may be necessary to make this Agreement its legal, valid and binding obligations (any such Substituted Debtor or New Issuer as described in (i) or (ii) above is herein referred to as a “Further Issuer”).

16.2Each of the Paying Agents and the Registrars hereby agrees that any Issuer in its capacity as such, shall be released from its obligations, undertakings and covenants under this Agreement upon such Issuer ceasing to be an Issuer pursuant to and in accordance with Clause 10.1 of the Dealership Agreement provided always that such release shall not affect any rights, liabilities or obligations accrued or incurred under this Agreement prior to the date upon which such release takes effect.

17.NOTICES

All communications hereunder shall be in writing and shall be delivered to or telexed to or sent by facsimile (confirmed by letter sent by express airmail) to the following addresses:

(a)	if to AIFLTD, to it at:
	Address:	Suite 3, Weighbridge House
		The Pollet, St. Peter Port
		Guernsey GY1 1WL
		Channel Islands
	Fax:	+44 1481 729 016
	Attention:	Business Administration
with a copy to

Address:	ABB Group Treasury Operations
	Affolternstrasse 44
	CH-8050 Zurich
	Switzerland
Fax:	+41 43 317 7474
Attention:	Business Operations

(b)	if to ACBV, to it at:
	Address:	Burgemeester Haspelslaan 65, 5F
		1181NB Amstelveen

31

		The Netherlands
	Fax:	+31 20 445 9844
	Attention:	Business Administration
with a copy to

Address:	ABB Group Treasury Operations
	Affolternstrasse 44
	CH-8050 Zurich
	Switzerland
Fax:	+41 43 317 7474
Attention:	Business Operations

(c)	if to the Fiscal Agent at:
	Address:	Banque Générale du Luxembourg S.A.
		50, Avenue J. F. Kennedy
		L-2951 Luxembourg
	Telex:	3401 BGL lu
	Fax	+352 4242 4200
	Attention:	Fiscal and Paying Agency Department
	(or in the case of a Fiscal Agent not originally a party hereto, specified by notice to the other parties hereto at or about the time of its appointment as the agent of the Issuers in relation to the Instruments).
	All communications relating to this Agreement between the Issuer and any of the Paying Agents or between the Paying Agents themselves shall be made through the Fiscal Agent;

(d)if to a Registrar to it at the address, fax or telex number specified against its name in the Eighth Schedule (or, in the case of a Registrar not originally a party hereto, specified by notice to the other parties hereto at or about the time of its appointment as the agent of the Issuers in relation to the Instruments) for the attention of the person or department therein specified (or as aforesaid)

or, in any case, to such other address, telex number or fax number or for the attention of such other person or department as the addressee has by prior notice to the sender specified for the purpose.

Any notice sent by letter shall take effect at the time of delivery and any notice sent by telex shall take effect at the time of despatch provided that the correct answerback is received and any notice sent by facsimile transmission shall take effect upon receipt thereof.  Where a notice is copied to another address such notice shall take effect at the time when the first of the notice or the copy takes effect.

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18.LAW AND JURISDICTION

18.1This Agreement is governed by, and shall be construed in accordance with, English law.

18.2Each Issuer hereby agrees for the exclusive benefit of each of the Paying Agents and the Registrars that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and that accordingly any suit, action or proceedings (together referred to as “Proceedings”) arising out of or in connection with this Agreement may be brought in such courts.  Nothing contained in this Clause shall limit any right to take Proceedings against any Issuer in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not.

18.3Each Issuer hereby appoints ABB Limited of Daresbury Park, Daresbury, Warrington WA4 4BT, Cheshire to accept service of any Proceedings on its behalf in England.  If for any reason such process agent ceases to act as such or no longer has an address in England, each Issuer agrees to appoint a substitute process agent and notify the Fiscal Agent of such appointment and if any Issuer fails to make any such appointment within twenty-one days, the Fiscal Agent shall be entitled to appoint such a person by notice to such Issuer.

18.4Nothing contained herein shall affect the right to serve process in any other manner permitted by law.

19.MODIFICATION

This Agreement may be amended by the Issuers and the Fiscal Agent, without the consent of the other Paying Agents or the Registrars or the Holder of any Instrument or Coupon, for the purposes of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein, or in any manner which the Issuer and the Fiscal Agent may deem necessary or desirable and which shall not be inconsistent with the Instruments or Coupons and which will not, in the opinion of the Issuer and the Fiscal Agent, be materially prejudicial to the interests of the Holders of the Instruments, the Coupons or the Paying Agents or the Registrars.

20.COUNTERPARTS

This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when so executed shall constitute one and the same binding agreement between the parties.

21.CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.

AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written.

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THE FIRST SCHEDULE

FORM OF TEMPORARY GLOBAL INSTRUMENT (BEARER)

Series Number: [       ] Serial Number: [       ]

THE SECURITIES REPRESENTED BY THIS TEMPORARY GLOBAL INSTRUMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[THIS INSTRUMENT OR ANY INTEREST HEREIN MAY NOT BE SOLD, TRANSFERRED OR DELIVERED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO PROFESSIONAL MARKET PARTIES (“PMP”) WITHIN THE MEANING OF THE EXEMPTION REGULATION UNDER THE DUTCH ACT ON THE SUPERVISION OF CREDIT INSTITUTIONS 1992.

EACH HOLDER OF INSTRUMENTS (OR ANY INTEREST HEREIN), BY PURCHASING THE INSTRUMENTS, WILL BE DEEMED TO HAVE REPRESENTED AND AGREED FOR THE BENEFIT OF THE ISSUER THAT (1) SUCH HOLDER IS A PMP AND IS ACQUIRING SUCH INSTRUMENTS FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER PMP, THAT (2) SUCH INSTRUMENTS MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO A PMP ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER PMP AND THAT (3) THE HOLDER WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS DESCRIBED HEREIN TO ANY SUBSEQUENT TRANSFEREE.](1)

[ABB INTERNATIONAL FINANCE LIMITED

(incorporated with limited liability in Guernsey)]

[ABB CAPITAL B.V.

(incorporated with limited liability in The Netherlands and having its
statutory domicile at Amsterdam)]

(1)  Insert if the Issuer is ACBV and the Instruments do not qualify as High Denomination Instruments (as defined in the Information Memorandum).

34

TEMPORARY GLOBAL INSTRUMENT

representing up to

[Aggregate principal amount of Tranche]

[Title of Instruments]

This Temporary Global Instrument is issued in respect of an issue of [description of Instruments including aggregate principal amount of Tranche] (the “Instruments”) by [                    ] (the “Issuer”).

The Issuer for value received promises, all in accordance with the terms and conditions [attached hereto/set out in the information memorandum prepared by the Issuer and dated 24 November 2004 and the pricing supplement prepared in relation to the Instruments (the “Pricing Supplement”)] to pay to the bearer upon presentation and, if appropriate, surrender hereof on [maturity date] [by [   ] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Pricing Supplement](2) or on such earlier date as the same may become payable in accordance therewith the principal amount of [aggregate principal amount of Tranche] (as reduced from time to time in accordance with such terms and conditions) or such lesser amount as is equal to the outstanding principal amount of the Instruments represented by this Temporary Global Instrument or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on the principal amount hereof from time to time at the rate or rates specified therein], all subject to and in accordance with such terms and conditions.

Except as specified herein, the bearer of this Temporary Global Instrument is entitled to the benefit of the terms and conditions referred to above and of the same obligations on the part of the Issuer as if such bearer were the bearer of the Instruments represented hereby except that the bearer of this Temporary Global Instrument shall not prior to the Exchange Date (defined below) be entitled to receive payment of [the principal of or] interest on the Instruments except to the extent that, upon due presentation and surrender of this Temporary Global Instrument for exchange, delivery of the Permanent Global Instrument, or as the case may be Definitive Instruments or Registered Instruments is improperly withheld or refused, and all payments under and to the bearer of this Temporary Global Instrument shall be valid and effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Instruments.

This Temporary Global Instrument is exchangeable in whole or in part for a permanent global instrument (the “Permanent Global Instrument”) representing the Instruments and in substantially the form (subject to completion) set out in the Second Schedule to an amended and restated fiscal agency agreement dated 24 November 2004 (as further supplemented, amended or replaced, the “Fiscal Agency Agreement”) and made between the Issuer, Banque Générale du Luxembourg S.A., in its capacity as fiscal agent (the “Fiscal Agent”, which expression shall include any successor to Banque Générale du Luxembourg S.A. in its capacity as such), Banque Générale du Luxembourg S.A. as principal registrar and certain other financial institutions named therein or, if so specified in the Pricing Supplement, for

(2)Insert only where Instruments are Instalment Instruments.

35

definitive instruments (“Definitive Instruments”) in substantially the form (subject to completion) set out in the Third Schedule to the Fiscal Agency Agreement [or for registered instruments (“Registered Instruments”) in substantially the form (subject to completion) set out in the Fourth Schedule to the Fiscal Agency Agreement].  An exchange for a Permanent Global Instrument or Definitive Instruments will be made only on or after the date (the “Exchange Date”) which is 40 days after the later of the date of issue of this Temporary Global Instrument and the completion (as notified to the Fiscal Agent by the Issuer) of the distribution of the Instruments represented by this Temporary Global Instrument and upon presentation or, as the case may be, surrender of this Temporary Global Instrument to the Fiscal Agent at its specified office in relation to the Instruments and upon and to the extent only of delivery to the Fiscal Agent of a certificate or certificates issued by Euroclear Bank, S.A./N.V., as operator of the Euroclear System (the “Euroclear System”) or Clearstream, société anonyme, Luxembourg (“Clearstream Luxembourg”), or by any other relevant clearing system and dated not earlier than the Exchange Date in substantially the form set out in Annex I hereto or, as the case may be, in the form that is customarily issued in such circumstances by such other clearing system.  [An exchange for Registered Instruments will be made at any time upon presentation or, as the case may be, surrender of this Temporary Global Instrument to the Fiscal Agent at its specified office.](3)  [Any Registered Instruments shall be made available in exchange in accordance with the terms and conditions applicable to the Instruments represented hereby and the Fiscal Agency Agreement (which shall apply as if the bearer of this Temporary Global Instrument were the bearer of the Instruments represented hereby).](4)  Payments of interest otherwise falling due before the Exchange Date will be made only upon presentation of the Temporary Global Instrument to the Fiscal Agent at its specified office in relation to the Instruments and upon and to the extent only of delivery to the Fiscal Agent of a certificate or certificates issued by the Euroclear System or Clearstream, Luxembourg or by any other relevant clearing system and dated not earlier than the relevant interest payment date in substantially the form set out in Annex II hereto or, as the case may be, in the form that is customarily issued in such circumstances by such other clearing system.

In the event that (i) this Temporary Global Instrument is not duly exchanged, whether in whole or in part, for a Permanent Global Instrument or, as the case may be, Definitive Instruments [or Registered Instruments](5) by 6.00 p.m. (London time) on the thirtieth day after the time at which the preconditions to such exchange are first satisfied or (ii) any Instrument represented hereby becomes immediately redeemable following the occurrence of an Event of Default in relation thereto and is not duly redeemed (and the funds required for such redemption are not available to the Fiscal Agent for the purposes of effecting such redemption and remain available for such purpose) by 6.00 p.m. (London time) on the thirtieth day after the time at which such Instruments become immediately redeemable, then this Temporary

(3)Insert only in the case of a Series comprising both Bearer and Registered Instruments issued by AIFLTD or ACBV if the relevant Pricing Supplement specifies that Bearer Instruments are exchangeable for Registered Instruments.

(4)Insert only in the case of a Series comprising both Bearer and Registered Instruments if the relevant Pricing Supplement specifies that Bearer Instruments are exchangeable for Registered Instruments.

(5)nsert only where the Issuer is AIFLTD or ACBV and the maturity of the Instruments is more than one year.

36

Global Instrument will become void and the bearer will have no further rights hereunder (but without prejudice to the rights which such bearer or any other person having an interest in this Temporary Global Instrument immediately prior to it becoming void may have under a deed of covenant dated 10 March 1993 and executed by the Issuer in respect of the Instruments).

[On any occasion on which a payment of interest is made in respect of this Temporary Global Instrument, the Issuer shall procure that the Paying Agent to which such Temporary Global Instrument is presented notes the same on the Schedule hereto.]

On any occasion on which a payment of principal or redemption amount is made in respect of this Temporary Global Instrument or on which this Temporary Global Instrument is exchanged in whole or in part as aforesaid or on which Instruments represented by this Temporary Global Instrument are to be cancelled, the Issuer shall cause the Paying Agent to which such Temporary Global Instrument is presented to procure that (i) the aggregate principal amount of the Instruments in respect of which such payment is made (or, in the case of a partial payment, the corresponding part thereof) or which are delivered in definitive [or registered form]4 or which are exchanged for a permanent global instrument or which are to be cancelled and (ii) the remaining principal amount of this Temporary Global Instrument (which shall be the previous principal amount hereof less the amount referred to at (i) above) are noted on the Schedule hereto, whereupon the principal amount of this Temporary Global Instrument shall for all purposes be as most recently so noted.

This Temporary Global Instrument is governed by, and shall be construed in accordance with, English law.

This Temporary Global Instrument shall not be valid for any purpose until authenticated for and on behalf of Banque Générale du Luxembourg S.A. as fiscal agent.

AS WITNESS the manual signature of two duly authorised officers on behalf of the Issuer.

[                                   ]		[                                   ]
By:	[manual signature] (duly authorised)	By:	[manual signature]
		(duly authorised)
ISSUED in [           ] as of [		] [   ]

AUTHENTICATED for and on behalf of

BANQUE GÉNÉRALE DU LUXEMBOURG S.A.

as fiscal agent

By: [manual signature]
(duly authorised)

37

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](6)

(6)Insert only where the Issuer is AIFLTD or ACBV and the maturity of the Instruments is more than one year.

38

THE SCHEDULE

Payments, Delivery of Definitive Instruments or Registered Instruments,
Exchange for Permanent Global Instrument and
Cancellation of Instruments

Date of
payment,
delivery or
cancellation Amount of
interest then
paid Amount of
principal or,
as the case
may be,
redemption
amount then
paid Aggregate
principal
amount of
Definitive or
Registered
Instruments
then
delivered Aggregate
principal
amount of
this
Temporary
Global
Instrument
then
exchanged
for the
Permanent
Global
Instrument Aggregate
principal
amount of
Instruments
then
cancelled Remaining
principal
amount of
this
Temporary
Global
Instrument Authorised
signature of
the Fiscal
Agent and/or
the Registrar

39

ANNEX I

[Form of certificate to be given in relation to exchanges of this Temporary Global Instrument for a Permanent Global Instrument or Definitive Instruments.  This Certificate is not required for Registered Instruments issued by AIFLTD or ACBV:]

[Name of Issuer]

[Aggregate principal amount and title of Instruments]

(the “Securities”)

This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organisations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our “Member Organisations”) substantially to the effect set forth in the Fiscal Agency Agreement as of the date hereof, [   ] principal amount of the above-captioned Securities (i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations, estates the income of which is subject to United States Federal income taxation regardless of its source or trusts (a) that are subject to the primary supervision of a court within the United States and with respect to which one or more United States persons have the authority to control all substantial decisions or (b) that have a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person (“United States persons”), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv) (“financial institutions”)) purchasing for their own account or for resale, or (b) acquired the Securities through and are holding through on the date hereof foreign branches of United States financial institutions (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the Issuer or the Issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and to the further effect that United States or foreign financial institutions described in Clause (iii) above (whether or not also described in Clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

This is also to certify with respect to [         ] principal amount of the above-captioned Securities, except as set forth below, we have received in writing, by tested telex or by electronic transmission, from our Member Organisations entitled to a portion of such principal amount, certifications with respect to such portion, substantially to the effect set forth in the Fiscal Agency Agreement.

As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the

40

U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the temporary global security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as at the date hereof.

We understand that this certification is required in connection [with certain tax laws and, if applicable,] certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

Date:	[       ](7)
[Euroclear Bank S.A./N.V., as operator of the Euroclear System/Clearstream Banking, société anonyme, Luxembourg]
By:	[authorised signature]

(7)To be dated not earlier than the Exchange Date.

41

ANNEX II

[Form of certificate to be given in relation to payments of interest falling due before the Exchange Date:]

[Name of Issuer]

[Aggregate principal amount and title of Instruments]

(the “Securities”)

This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organisations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our “Member Organisations”) substantially to the effect set forth in the Fiscal Agency Agreement as of the date hereof, [   ] principal amount of the above-captioned Securities (i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations, estates or trust the income of which is subject to United States Federal income taxation regardless of its source or trusts (a) that are subject to the primary supervision of a court within the United States and with respect to which one or more United States persons have the authority to control all substantial decisions or (b) that have a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person (“United States persons”), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(iv) (“financial institutions”)) purchasing for their own account or for resale, or (b) acquired the Securities through and are holding through on the date hereof foreign branches of United States financial institutions (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the Issuer or the Issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and to the further effect that United States or foreign financial institutions described in Clause (iii) above (whether or not also described in Clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

This is also to certify with respect to such principal amount of Securities set forth above that, except as set forth below, we have received in writing, by tested telex or by electronic transmission, from our Member Organisations entitled to a portion of such principal amount, certifications with respect to such portion, substantially to the effect set forth in the Fiscal Agency Agreement.

42

As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the temporary global security excepted in such certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organisations to the effect that the statements made by such Member Organisations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon as at the date hereof.

We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

Date:	[        ](8)
[Euroclear Bank S.A./N.V., as operator of the Euroclear System/Clearstream Banking, société anonyme, Luxembourg]

By: [authorised signature]

(8)To be dated not earlier than the relevant interest payment date.

43

ANNEX III

[Form of account-holder’s certification referred to in the preceding certificates:]

[Note: This certificate is not required for Registered Instruments issued by AIFLTD or ACBV]

[Name of Issuer]

[Aggregate principal amount and title of Instruments]

(the “Securities”)

This is to certify that as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations, estates or trust the income of which is subject to the United States Federal income taxation regardless of its source or trusts (a) that are subject to the primary supervision of a court within the United States and the control of one or more United States persons as described in section 7701(a)(30) of the Code or (b) that have a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person (“United States persons”), (ii) are owned by United States person(s) that (a) are foreign branches of a United States financial institution (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v)) (“financial institutions”) purchasing for their own account or for resale, or (b) acquired above-captioned the Securities through and are holding through on the date hereof foreign branches of United States financial institutions (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise the Issuer or the Issuer’s agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by United States or foreign financial institution(s) for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in addition if the owner of the above-captioned Securities is a United States or foreign financial institution described in clause (iii) above (whether or not also described in clause (i) or (ii)) this is further to certify that such financial institution has not acquired the above-captioned Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

This is also to certify that, except as set further below, the above-captioned Securities are beneficially owned by (a) non-U.S. person(s) or (b) U.S. persons resident outside the United States who purchased the Securities in transactions outside the United States in accordance with Regulation S under the U.S. Securities Act of 1933, as amended the (“Act”).  As used in this paragraph the terms “U.S. person” and “United States” have the meanings given to them by Regulation S under the Act.

As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the

44

U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Securities held by you for our account in accordance with your operating procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date.

This certification excepts and does not relate to [    ] of such interest in the above Securities in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Securities (or, if relevant, exercise of any rights or collection of any interest) cannot be made until we do so certify.

We understand that this certification is required in connection with certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorise you to produce this certification to any interested party in such proceedings.

Date:  [                ](9)

(9)To be dated not earlier than fifteen days before the Exchange Date or, as the case may be, the relevant interest payment date.

45

[Account-holder] as or as agent for the beneficial owner of the Instruments.

By: [authorised signature]

46

THE SECOND SCHEDULE

FORM OF PERMANENT GLOBAL INSTRUMENT

Series Number:     [      ] Serial Number:  [      ]

THE SECURITIES REPRESENTED BY THIS PERMANENT GLOBAL INSTRUMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[THIS INSTRUMENT OR ANY INTEREST HEREIN MAY NOT BE SOLD, TRANSFERRED OR DELIVERED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO PROFESSIONAL MARKET PARTIES (“PMP”) WITHIN THE MEANING OF THE EXEMPTION REGULATION UNDER THE DUTCH ACT ON THE SUPERVISION OF CREDIT INSTITUTIONS 1992.

EACH HOLDER OF INSTRUMENTS (OR ANY INTEREST HEREIN), BY PURCHASING THE INSTRUMENTS, WILL BE DEEMED TO HAVE REPRESENTED AND AGREED FOR THE BENEFIT OF THE ISSUER THAT (1) SUCH HOLDER IS A PMP AND IS ACQUIRING SUCH INSTRUMENTS FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER PMP, THAT (2) SUCH INSTRUMENTS MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO A PMP ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER PMP AND THAT (3) THE HOLDER WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS DESCRIBED HEREIN TO ANY SUBSEQUENT TRANSFEREE.](10)

[ABB INTERNATIONAL FINANCE LIMITED

(incorporated with limited liability in Guernsey)]

[ABB CAPITAL B.V.

(incorporated with limited liability in The Netherlands and having its
statutory domicile at Amsterdam)]

(10)Insert if the Issuer is ACBV and the Instruments do not qualify as High Denomination Instruments (as defined in the Information Memorandum).

47

PERMANENT GLOBAL INSTRUMENT

representing up to

[Aggregate principal amount of Tranche]

[Title of Instruments]

This Permanent Global Instrument is issued in respect of an issue of [description of Instruments including aggregate principal amount of Tranche] (the “Instruments”) by [                    ] (the “Issuer”).

The Issuer for value received promises, all in accordance with the terms and conditions [attached hereto/set out in the information memorandum prepared by the Issuer and dated 24 November 2004 and the pricing supplement prepared in relation to the Instruments (“Pricing Supplement”)], to pay to the bearer upon presentation and, if appropriate, surrender hereof on [maturity date] [by [   ] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Pricing Supplement](11) or on such earlier date as the same may become payable in accordance therewith the principal amount of [aggregate principal amount of Tranche] (as reduced from time to time in accordance with such terms and conditions) or such lesser amount as is equal to the outstanding principal amount of the Instruments represented by this Permanent Global Instrument or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on the principal amount hereof from time to time at the rate or rates specified therein], all subject to and in accordance with such terms and conditions.

The bearer of this Permanent Global Instrument is entitled to the benefit of the terms and conditions referred to above and the same obligations on the part of the Issuer as if such bearer were the bearer of the Instruments represented hereby, and all payments under and to the bearer of this Permanent Global Instrument shall be valid and effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Instruments.

This Permanent Global Instrument will be exchangeable for definitive Instruments (“Definitive Instruments”) in substantially the form (subject to completion) set out in the Third Schedule to an amended and restated fiscal agency agreement dated 24 November 2004 (as further supplemented, amended or replaced, the “Fiscal Agency Agreement”) and made between the Issuer, Banque Générale du Luxembourg S.A. in its capacity as fiscal agent (the “Fiscal Agent”, which expression shall include any successor to Banque Générale du Luxembourg S.A. in its capacity as such), Banque Générale du Luxembourg S.A. as principal registrar and certain other financial institutions [or for registered instruments (“Registered Instruments”) in substantially the form (subject to completion) set out in the Fourth Schedule to the Fiscal Agency Agreement or for a combination of Definitive Instruments and Registered Instruments](12) (a) if Euroclear Bank S.A./N.V., as operator of the Euroclear System (the “Euroclear System”) or Clearstream Banking, société anonyme, Luxembourg (“Clearstream, Luxembourg”) or any other relevant clearing system is closed for business

(11)Insert only where Instruments are Instalment Instruments.

(12)Insert only in the case of a Series comprising both Bearer and Registered Instruments if the relevant Pricing Supplement specifies that Bearer Instruments are exchangeable for Registered Instruments.

48

for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business; (b) if any of the Instruments represented hereby becomes due and payable following an Event of Default (as defined in Condition 7) of the terms and conditions referred to above; or (c) at the option of the bearer hereof acting on behalf of the relevant beneficial owners of the interests in this Permanent Global Instrument and at the expense of such beneficial owners, and, in each case, upon the request of the bearer hereof on behalf of the relevant beneficial owners of the interests in this Permanent Global Instrument and at the expense of such beneficial owners.  In order to make such request, the bearer hereof must, not less than forty-five days before the date upon which the delivery of such Definitive Instruments [and/or Registered Instruments] is required, deposit this Permanent Global Instrument with the Fiscal Agent at its specified office with the form of exchange notice endorsed hereon duly completed.  On an exchange of the whole of this Permanent Global Instrument, this Permanent Global Instrument shall be surrendered to the Fiscal Agent.  [Any Registered Instruments shall be made available in exchange in accordance with the terms and conditions applicable to the Instruments represented hereby and the Fiscal Agency Agreement (which shall apply as if the bearer of this Permanent Global Instrument were the bearer of the Instruments represented hereby).](12)  Any Definitive Instruments will be made available for collection by the persons entitled thereto at the specified office of the Fiscal Agent.  If default is made by the Issuer in the required delivery of such Definitive Instruments [and/or, as the case may be, Registered Instruments](12) and such default is continuing at 6.00 p.m. (London time) on the thirtieth day after the day on which the relevant notice period expires, then this Permanent Global Instrument will become void and the bearer will have no further rights hereunder (but without prejudice to the rights which such bearer or any other person(s) having an interest in this Permanent Global Instrument immediately prior to it becoming void may have under a deed of covenant dated 10 March 1993 and executed by the Issuer in respect of the Instruments).

[On any occasion on which a payment of interest is made in respect of this Permanent Global Instrument, the Issuer shall procure that the Paying Agent to which this Permanent Global Instrument is presented notes the same on the Schedule hereto].

On any occasion on which a payment of principal or redemption amount is made in respect of this Permanent Global Instrument or on which this Permanent Global Instrument is exchanged as aforesaid or on which any Instruments represented by this Permanent Global Instrument are to be cancelled, the Issuer shall cause the Paying Agent to which this Permanent Global Instrument is presented to procure that (i) the aggregate principal amount of the Instruments in respect of which such payment is made (or, in the case of a partial payment, the corresponding part thereof) or which are delivered in definitive [or registered form](12) or which are to be cancelled and (ii) the remaining principal amount of this Permanent Global Instrument (which shall be the previous principal amount hereof less the amount referred to at (i) above) are noted on the Schedule hereto, whereupon the principal amount of this Permanent Global Instrument shall for all purposes be as most recently so noted.

Insofar as the Temporary Global Instrument by which the Instruments were initially represented has been exchanged in part only for this Permanent Global Instrument and is then to be further exchanged as to the remaining principal amount or part thereof for this

49

Permanent Global Instrument, then upon presentation of this Permanent Global Instrument to the Fiscal Agent at its specified office in relation to the Instruments and to the extent that the aggregate principal amount of such Temporary Global Instrument is then reduced by reason of such further exchange, the Issuer shall cause the Fiscal Agent to procure that (i) the aggregate principal amount of the Instruments in respect of which such further exchange is then made and (ii) the new principal amount of this Permanent Global Instrument (which shall be the previous principal amount hereof plus the amount referred to at (i) above) are noted on the Schedule hereto, whereupon the principal amount of this Permanent Global Instrument shall for all purposes be as most recently noted.

This Permanent Global Instrument is governed by, and shall be construed in accordance with, English law.

This Permanent Global Instrument shall not be valid for any purpose until authenticated for and on behalf of Banque Générale du Luxembourg S.A. as fiscal agent.

50

AS WITNESS the manual signature of two duly authorised officers on behalf of the Issuer.

[                                ]		[                                 ]
By:	[manual signature] (duly authorised)	By:	[manual signature] (duly authorised)

ISSUED in [          ] on [     ] [  ]

AUTHENTICATED for and on behalf of

BANQUE GÉNÉRALE DU LUXEMBOURG S.A.

as fiscal agent

By: [manual signature]
(duly authorised)

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](13)

(13)Insert only where the Issuer is AIFLTD or ACBV and the maturity of the Instruments is more than one year

51

THE SCHEDULE

Payments, Delivery of Definitive or Registered Instruments, Further Exchanges of the
Temporary Global Instrument and Cancellation of Instruments

Date of
payment,
delivery,
further
exchange
of
Temporary
Global
Instrument
or
cancellation Amount of
interest
then paid Amount of
principal
or, as the
case may
be,
redemption
amount
then paid Aggregate
principal
amount of
exchanges
for
Definitive
Instruments
or
Registered
Instruments
then
delivered Aggregate
principal
amount of
Instruments
then
cancelled Aggregate
principal
amount of
exchanges
for further
exchanges
of
Temporary
Global
Instrument Current
principal
amount of
this
Permanent
Global
Instrument Authorised
signature of
the Fiscal
Agent
and/or the
Registrar

52

EXCHANGE NOTICE

                          , being the bearer of this Permanent Global Instrument at the time of its deposit with the Fiscal Agent at its specified office for the purposes of the Instruments, hereby exercises the option set out above to have this Permanent Global Instrument exchanged in whole or in part for Instruments in [definitive/registered form/[     ] in aggregate principal amount of Instruments in definitive form and [   ] in aggregate principal amount of Instruments in registered form]* and directs that such Instruments in definitive form be made available for collection by it from the Fiscal Agent’s specified office and that such Instruments in registered form be made available in accordance with the terms and conditions applicable to the Instruments represented hereby and the Fiscal Agency Agreement.

By:
	(duly authorised)

*Delete and complete, as appropriate

53

THE THIRD SCHEDULE

FORM  OF DEFINITIVE INSTRUMENT (“ISMA” FORMAT)

[On the face of the Instrument:]

[<9999999+AAXXXXXXXXX9+XX+999999>]

[Denomination]

THIS INSTRUMENT HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[THIS INSTRUMENT MAY NOT BE SOLD, TRANSFERRED OR DELIVERED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO PROFESSIONAL MARKET PARTIES (“PMP”) WITHIN THE MEANING OF THE EXEMPTION REGULATION UNDER THE DUTCH ACT ON THE SUPERVISION OF CREDIT INSTITUTIONS 1992.

EACH HOLDER OF THIS INSTRUMENT, BY PURCHASING THIS INSTRUMENT, WILL BE DEEMED TO HAVE REPRESENTED AND AGREED FOR THE BENEFIT OF THE ISSUER THAT (1) SUCH HOLDER IS A PMP AND IS ACQUIRING SUCH INSTRUMENTS FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER PMP, THAT (2) SUCH INSTRUMENT MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO A PMP ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER PMP AND THAT (3) THE HOLDER WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS DESCRIBED HEREIN TO ANY SUBSEQUENT TRANSFEREE.](14)

[ABB INTERNATIONAL FINANCE LIMITED

(incorporated with limited liability in Guernsey)]

[ABB CAPITAL B.V.

(incorporated with limited liability in The Netherlands and having its

statutory domicile at Amsterdam)]

(14)Insert if the Issuer is ACBV and the Instruments do not qualify as High Denomination Instruments (as defined in the Information Memorandum).

54

[Aggregate principal amount of Tranche]

[Title of Instruments]

[                                  ] (the “Issuer”) for value received promises, all in accordance with the terms and conditions [endorsed hereon/attached hereto] [and the pricing supplement referred to therein and prepared in relation to the Instruments (the “Pricing Supplement”)] to pay to the bearer upon presentation and, if appropriate, surrender hereof on [maturity date] [by [   ] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Pricing Supplement](15) or on such earlier date as the same may become payable in accordance therewith the principal amount of:

[denomination in words and numerals]

or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on such principal amount at the rate or rates specified therein, all subject to and in accordance with such terms and conditions].

[This [title of Instrument] shall not/Neither this [title of Instrument] nor any of the interest coupons appertaining hereto shall] be valid for any purpose until this [title of Instrument] has been authenticated for and on behalf of Banque Générale du Luxembourg S.A. as fiscal agent.

This [title of Instrument] is governed by, and shall be construed in accordance with, English law.

AS WITNESS the facsimile signature of two duly authorised officers on behalf of the Issuer.

[                                        ]		[                                        ]
By:	[facsimile signature](duly authorised)	By:	[facsimile signature] (duly authorised)

ISSUED in [      ] as of [       ] [  ]

(15)Insert only where Instruments are Instalment Instruments.

55

AUTHENTICATED for and on behalf of

BANQUE GÉNÉRALE DU LUXEMBOURG S.A.

as fiscal agent

without recourse, warranty or liability

By: [manual signature]
(duly authorised)

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](16)

(16)Insert only where the Issuer is AIFLTD or ACBV and the maturity of the Instruments is more than one year.

56

[On the reverse of the Instruments:]

TERMS AND CONDITIONS

[As contemplated in the Information Memorandum and as amended by the relevant Pricing Supplement]

[At the foot of the Terms and Conditions:]

FISCAL AGENT

Banque Générale du Luxembourg S.A.

50, Avenue J.F. Kennedy

L-2951 Luxembourg

PAYING AGENT

Banque MeesPierson BGL S.A.

57 Rennweg

CH-8023 Zurich

Switzerland

57

Forms of Coupons

[On the front of Coupon:]

[Attached to the Instruments (interest-bearing, fixed rate and having Coupons):]

[Issuer]

[Amount and title of Instruments]

Coupon for [       ] due on [        ]

Such amount is payable (subject to the terms and conditions [endorsed on/attached to the [title of Instrument] to which this Coupon appertains [and the pricing supplement referred to therein], which shall be binding on the holder of this Coupon whether or not it is for the time being attached to such [title of Instrument]) against surrender of this Coupon at the specified office of the Fiscal Agent or any of the Paying Agents set out on the reverse hereof (or any other or further fiscal or paying agents and/or specified offices from time to time designated for the purpose by notice duly given in accordance with such terms and conditions).

[The attention of Couponholders is drawn to condition 9A.06 of the terms and conditions.  The Instrument to which this Coupon appertains may in certain circumstances specified in such terms and conditions, fall due for redemption before the due date in relation to this Coupon.  In such event, the Paying Agent to which such Instrument is presented for redemption may determine, in accordance with the aforesaid condition 9A.06 that this Coupon is to become void.]

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](17)

[<99+9999999+AAXXXXXXXXX9+XX+999999>]

(17)Insert only where the Issuer is AIFLTD or ACBV and the maturity of the Instruments is more than one year.

58

[Attached to the Instrument (interest-bearing, floating rate and having Coupons):]

[Issuer]

[Amount and title of Instruments]

Coupon for the amount of interest due on [         ]

Such amount is payable (subject to the terms and conditions [endorsed on/attached to] the [title of Instrument] to which this Coupon appertains [and the pricing supplement referred to therein], which shall be binding on the holder of this Coupon whether or not it is for the time being attached to such [title of Instrument]) against surrender of this Coupon at the specified office of the Fiscal Agent or any of the Paying Agents set out on the reverse hereof (or any other or further fiscal or paying agents and/or specified offices from time to time designated for the purpose by notice duly given in accordance with such terms and conditions).

The Instrument to which this Coupon appertains may, in certain circumstances specified in such terms and conditions, fall due for redemption before the due date in relation to this Coupon.  In such event, this Coupon will become void and no payment will be made in respect hereof.

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](18)

[<99+9999999+AAXXXXXXXXX9+XX+999999>]

(18)Insert only where the Issuer is AIFLTD or ACBV and the maturity of the Instruments is more than one year.

59

[On the reverse of each Coupon:]

FISCAL	Banque Générale du Luxembourg S.A.
AGENT:	50 Avenue J.F. Kennedy L-2951 Luxembourg
PAYING	Banque MeesPierson BGL S.A.
AGENT:	57 Rennweg
	CH-8023 Zurich
	Switzerland

60

Form of Talon

No        

[                ]

[Amount and title of Instruments]

Talon for further Coupons

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.](19)

After all the Coupons appertaining to the Instrument to which this Talon appertains have matured, further Coupons [(including, where appropriate, a Talon for further Coupons)] will be issued at the specified office of the Fiscal Agent or any of the Paying Agents set out in the reverse hereof (or any other or further paying agents and/or specified offices from time to time designated by notice duly given in accordance with the terms and conditions [endorsed on/attached to] the [title of Instrument] to which this Talon appertains [and the pricing supplement referred to therein] (which shall be binding on the holder of this Talon whether or not it is for the time being attached to such [title of Instrument])) upon production and surrender of this Talon upon and subject to such terms and conditions.  The initial Paying Agents and their specified offices are set out on the reverse hereof.

Under the said terms and conditions, such Instrument may, in certain circumstances, fall due for redemption before the original due date for exchange of this Talon and in any such event this Talon shall become void and no exchange shall be made in respect hereof.

[Issuer]

(19)Insert only where the Issuer is AIFLTD or ACBV and the maturity of the Instruments is more than one year.

61

THE FOURTH SCHEDULE

FORM OF REGISTERED INSTRUMENT

ISIN Number: [       ]Series Number: [       ]Serial Number: [        ]

THIS INSTRUMENT HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT IN CERTAIN TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  TERMS USED IN THIS PARAGRAPH HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

[THIS INSTRUMENT OR ANY INTEREST HEREIN MAY NOT BE SOLD, TRANSFERRED OR DELIVERED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO PROFESSIONAL MARKET PARTIES (“PMP”) WITHIN THE MEANING OF THE EXEMPTION REGULATION UNDER THE DUTCH ACT ON THE SUPERVISION OF CREDIT INSTITUTIONS 1992.

EACH HOLDER OF INSTRUMENTS (OR ANY INTEREST HEREIN), BY PURCHASING THE INSTRUMENTS, WILL BE DEEMED TO HAVE REPRESENTED AND AGREED FOR THE BENEFIT OF THE ISSUER THAT (1) SUCH HOLDER IS A PMP AND IS ACQUIRING SUCH INSTRUMENTS FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A PMP, THAT (2) SUCH INSTRUMENTS MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO A PMP ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A PMP AND THAT (3) THE HOLDER WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS DESCRIBED HEREIN TO ANY SUBSEQUENT TRANSFEREE.](20)

[ABB INTERNATIONAL FINANCE LIMITED

(incorporated with limited liability in Guernsey)]

[ABB CAPITAL B.V.

(incorporated with limited liability in The Netherlands and having its
statutory domicile at Amsterdam)]

[Aggregate principal amount of Tranche]

[Title of Instruments]

(20)Insert if the Issuer is ACBV and the Instruments do not qualify as High Denomination Instruments (as defined in the Information Memorandum).

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[                       ] (the “Issuer”) for value received promises, all in accordance with the terms and conditions [endorsed hereon/attached hereto] [and the pricing supplement referred to therein and prepared in relation to the Instruments (“Pricing Supplement”)], to pay to

                                                                                                     of                                                                                                               

                                                                                                                                                     & nbsp;                                                                  

(being the person registered in the register referred to below or, if more than one person is so registered, the first-named of such persons) on [maturity date] [by [   ] [equal] successive [semi-annual/quarterly/other] instalments on the dates specified in the Pricing Supplement](21) or on such earlier date as the same may become payable in accordance therewith the principal sum of                                                            [(, in the case of payment on such earlier date, as reduced in accordance with such terms and conditions)] or such other redemption amount as may be specified therein [and to pay in arrear on the dates specified therein interest on such principal amount [(as reduced in accordance with such terms and conditions)](21) at the rate or rates specified therein], all subject to and in accordance with such terms and conditions.

The statements set forth in the legend, if any, set forth above are an integral part of the terms of this Instrument and by acceptance hereof each holder of this Instrument agrees to be subject to and bound by the terms and provisions set forth in such legend, if any.

This Instrument is evidence of entitlement only.  Title to the Instrument passes only on due registration in the Register maintained by [                                    ](22), as registrar, and only the duly registered holder or if more than one person is so registered, the first-named of such persons is entitled to payment in respect of this Instrument.

This Instrument is governed by, and shall be construed in accordance with, English law.

This Instrument shall not be valid for any purpose until this Instrument has been authenticated for and on behalf of [                                      ](23), as registrar.

AS WITNESS the facsimile or manual signatures of two duly authorised officers of the Issuer.

[                                    ][                                ]

By: [manual/facsimile signature]
(duly authorised) By: [manual/facsimile signature]
(duly authorised)

(21)Insert only where Instruments are Instalment Instruments.

(22)Insert name of the relevant Registrar.

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ISSUED in [                ] as of [                ] [  ]

AUTHENTICATED for and on behalf of

[                                     ]

as registrar without recourse, warranty or liability

By: [manual signature]
(duly authorised)

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FORM OF TRANSFER

FOR VALUE RECEIVED                           , being the registered holder of this [title of Instrument], hereby transfers to                                                                                      of                                                                                                               ,                                          in principal amount of this [title of Instrument] and irrevocably requests and authorises [                                  ](23), in its capacity as registrar in relation to the [title of Instruments] (or any successor to [           ](23), in its capacity as such) to effect the relevant transfer by means of appropriate entries in the register kept by it.

Dated:                             

By: [manual signature]
(duly authorised) [By: [manual signature]
(duly authorised)

Notes:

The name of the person by or on whose behalf this form of transfer is signed must correspond with the name of the registered holder as it appears on the face of this Instrument.

(i)A representative of such registered holder should state the capacity in which he signs (e.g. executor).

(ii)The signature of the person effecting a transfer shall conform to any list of duly authorised specimen signatures supplied by the registered holder or be certified by a recognised bank, notary public or in such other manner as the Registrar may require.

(iii)Any transfer of [title of Instruments] shall be in an amount equal to the minimum denomination as may be specified in the relevant Pricing Supplement or an integral multiple thereof.

(23)Insert name of the relevant Registrar.

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THE FIFTH SCHEDULE

PROVISIONS FOR MEETINGS OF HOLDERS OF INSTRUMENTS

1.(A)As used in this Schedule, the following expressions shall have the following meanings unless the context otherwise requires:

(1)“voting certificate” shall mean a certificate in the English language issued by any Paying Agent or, as the case may be, any Registrar and dated, in which it is stated:

(a)that on the date thereof outstanding Bearer Instruments of any Series (not being Bearer Instruments in respect of which a block voting instruction has been issued and is outstanding in respect of the meeting specified in such voting certificate or any adjournment thereof) bearing specified serial numbers have been deposited to the order of such Paying Agent and that no such Bearer Instruments will be released until the first to occur of:

(i)the conclusion of the meeting specified in such certificate or any adjournment thereof; and

(ii)the surrender of the certificate to such Paying Agent; or

(b)that on the date thereof Registered Instruments of any Series (not being Registered Instruments in respect of which a block voting instruction has been issued and is outstanding in respect of the meeting specified in such voting certificate or any adjournment thereof) are registered in the books and records maintained by the Registrar in the names of specified registered holders; and

(c)that until the release of the Bearer Instruments represented thereby the bearer thereof is entitled to attend and vote at such meeting or any adjournment thereof in respect of the Instruments represented by such certificate; and

(2)“block voting instruction” shall mean a document in the English language issued by any Paying Agent or, as the case may be, any Registrar and dated, in which:

(a)it is certified that outstanding Bearer Instruments of any Series (not being Bearer Instruments in respect of which a voting certificate has been issued and is outstanding in respect of the meeting specified in such block voting instruction or any adjournment thereof) have been deposited to the order of such Paying Agent and that no such Bearer Instruments will be released until the first to occur of:

(i)the conclusion of the meeting specified in such document or any adjournment thereof; and

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(ii)the surrender, not less than 48 hours before the time for which such meeting or adjournment thereof is convened, of the receipt for each such deposited Bearer Instrument which has been deposited to the order of such Paying Agent, coupled with notice thereof being given by such Paying Agent to the relevant Issuer; or

(b)It is certified that Registered Instruments of any Series (not being Registered Instruments in respect of which a voting certificate has been issued and is outstanding in respect of the meeting specified in such block voting instruction and any adjournment thereof) are registered in the books and records maintained by the Registrar in the names of specified registered holders;

(c)It is certified that each depositor of such Instruments or registered holder thereof or a duly authorised agent on his or its behalf has instructed the Paying Agent or, as the case may be, the Registrar that the vote(s) attributable to his or its Instruments so deposited or registered should be cast in a particular way in relation to the resolution or resolutions to be put to such meeting or any adjournment thereof and that all such instructions are, during the period of 48 hours prior to the time for which such meeting or adjourned meeting is convened, neither revocable nor subject to amendment;

(d)the total number, principal amount outstanding, the serial numbers and series numbers of the Instruments so deposited or registered are listed, distinguishing with regard to each such resolution between those in respect of which instructions have been given as aforesaid that the votes attributable thereto should be cast in favour of the resolution and those in respect of which instructions have been so given that the votes attributable thereto should be cast against the resolution; and

(e)any person named in such document (hereinafter called a “proxy”) is authorised and instructed by the Paying Agent or, as the case may be, the Registrar to cast the votes attributable to the Instruments so listed in accordance with the instructions referred to in (c) and (d) above as set out in such document.

(B)A registered holder of a Registered Instrument may by an instrument in writing in the form for the time being available from the specified office of the Registrar in the English language (hereinafter called a “form of proxy”) signed by the holder or its duly appointed attorney or, in the case of a corporation, executed under its seal or signed on its behalf by its duly appointed attorney or a duly authorised officer of the corporation, appoint any person (hereinafter also called a “proxy”) to attend and act on his or its behalf in connection with any meeting or proposed meeting of the holders of Instruments.

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(C)Voting certificates, block voting instructions and forms of proxy shall be valid for so long as the relevant Instruments have not been released or, in the case of Registered Instruments, are duly registered in the name(s) of the registered holder(s) certified in the relevant voting certificate or block voting instruction or, in the case of a form of proxy, in the name of the appointor but not otherwise and notwithstanding any other provision of this Schedule and during the validity thereof the holder of any such voting certificate or, as the case may be, the proxy shall, for all purposes in connection with any meeting of holders of Instruments, be deemed to be the holder of the Instruments of the relevant Series to which such voting certificate, block voting instructions or form of proxy relates and, in the case of Bearer Instruments, the Paying Agent to the order of whom such Instruments have been deposited and, in the case of Registered Instruments, the registered holder(s) shall nevertheless be deemed for such purposes not to be the holder of those Instruments.

2.The relevant Issuer at any time may, and upon a request in writing by holders of Instruments holding not less than one-tenth of the principal amount outstanding of the Instruments of any particular Series for the time being outstanding at any time after such Instruments shall have become repayable owing to an event of default under the Conditions applicable to such Instruments shall, convene a meeting of the holders of Instruments of such Series.  Whenever any Issuer wishes or is obliged to convene any such meeting it shall forthwith give notice in writing to the Fiscal Agent of the day, time and place thereof and of the nature of the business to be transacted thereat.  Every such meeting or adjournment thereof shall be held at such time and place as the Fiscal Agent may approve.

3.At least twenty-one days’ notice (exclusive of the day on which the notice is given and of the day on which the meeting is held) specifying the day, time and place of meeting shall be given to the holders of the Instruments of the relevant Series.  A copy of the notice shall be given to the relevant Issuer unless the meeting shall be convened by such Issuer and a copy shall be given to the Fiscal Agent and, in the case of Registered Instruments, the Registrar.  Such notice shall be given in the manner provided in the Conditions and shall specify the general nature of the business to be transacted at the meeting thereby convened but (except in the case of an Extraordinary Resolution) it shall not be necessary to specify in such notice the form of any resolution to be proposed and shall include, inter alia, statements to the effect:

(a)that Bearer Instruments of the relevant Series may be deposited with (or to the order of) any Paying Agent for the purpose of obtaining voting certificates or appointing proxies until 48 hours before the time fixed for the meeting but not thereafter;

(b)that (without prejudice to the provisions of paragraph 1(B)) registered holders of Registered Instruments may obtain voting certificates or appoint proxies not later than (except in the case of a form of proxy) 48 hours before the time fixed for the meeting but not thereafter.

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4.A person (who may, but need not, be the holder of an Instrument of the relevant Series) nominated in writing by the Fiscal Agent shall be entitled to take the chair at every meeting but if no such nomination is made or if at any meeting the person nominated shall not be present within fifteen minutes after the time appointed for the holding of such meeting the holders of Instruments present may appoint another such person to be chairman and failing such choice the relevant Issuer may appoint the chairman.  The chairman of a reconvened meeting need not be the same person who was chairman of the original meeting.

5.At any such meeting any two or more persons present in person holding Instruments of the relevant Series or voting certificates or being proxies and holding or representing in the aggregate at least one-third in principal amount outstanding of the Instruments of the relevant Series for the time being outstanding shall form a quorum for the transaction of business Provided that at any meeting at which an Extraordinary Resolution is to be proposed for the purpose of effecting any of the modifications specified in the proviso to paragraph 18 hereof the quorum for such meeting shall be any two or more persons present in person holding Instruments of the relevant Series or voting certificates or being proxies and holding or representing in the aggregate at least 75 per cent. in principal amount outstanding of the Instruments of the relevant Series for the time being outstanding and no business (other than the choosing of a chairman) shall be transacted at any meeting unless the requisite quorum be present at the commencement of business.

6.If within 15 minutes from the time appointed for any such meeting a quorum is not present the meeting shall, if convened upon the requisition of holders of Instruments, be dissolved.  In any other case it shall stand adjourned for such period, not being less than fourteen days nor more than forty-two days, as may be decided by the chairman.  At such adjourned meeting two or more persons present in person holding Instruments of the relevant Series or voting certificates or being proxies (whatever the principal amount outstanding of the Instruments of the relevant Series so held or represented by them) shall form a quorum and shall have the power to pass any resolution and to decide upon all matters which could properly have been dealt with at the original meeting had a quorum been present at such meeting Provided that at any adjourned meeting at which an Extraordinary Resolution is to be proposed for the purpose of effecting any of the modifications specified in the proviso to paragraph 18 hereof the quorum for such meeting shall be two or more persons present holding Instruments of the relevant Series or voting certificates or being proxies and holding or representing in the aggregate at least 25 per cent. in principal amount outstanding of the Instruments of the relevant Series for the time being outstanding.

7.The chairman may with the consent of (and shall if directed by) any meeting adjourn the same from time to time and from place to place but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting from which the adjournment took place.

8.At least ten days’ notice (exclusive of the day on which the notice is given and the day on which the meeting is held) of any meeting adjourned through want of a quorum

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shall be given in the same manner as of an original meeting and such notice shall state the quorum required at such adjourned meeting.  Subject as aforesaid, it shall not be necessary to give any notice of an adjourned meeting.

9.Every question submitted to a meeting shall be decided in the first instance by a show of hands and in case of equality of votes the chairman shall both on a show of hands and on a poll have a casting vote in addition to the vote or votes (if any) to which he may be entitled as a holder of an Instrument or voting certificate or being a proxy.

10.At any meeting, unless a poll is (before or on the declaration of the result of the show of hands) demanded by the chairman or the relevant Issuer or by one or more persons holding one or more Instruments of the relevant Series or voting certificates or being proxies and holding or representing in the aggregate not less than 2 per cent. of the principal amount outstanding of the Instruments of the relevant Series for the time being outstanding, a declaration by the chairman that a resolution has been carried or carried by a particular majority or lost or not carried by any particular majority shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution.

11.If at any meeting a poll is so demanded, it shall be taken in such manner and (subject as hereinafter provided) either at once or after such an adjournment as the chairman directs and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded as at the date of the taking of the poll.  The demand for a poll shall not prevent the continuance of the meeting for the transaction of any business other than the question on which the poll has been demanded.

12.Any poll demanded at any meeting on the election of a chairman or on any question of adjournment shall be taken at the meeting without adjournment.

13.The Fiscal Agent, the relevant Issuer and, in the case of Registered Instruments, the Registrar (through their respective representatives) and their respective advisers shall be entitled to attend and speak at any meeting of the holders of Instruments.  No person shall be entitled to attend (except as provided above) or to vote at any meeting of the holders of Instruments or to join with others in requesting the convening of such a meeting unless he is the holder of an Instrument or a voting certificate or is a proxy.

14.Subject as provided in paragraph 9 above, at any such meeting (a) on a show of hands every person who is present (being an individual) in person or (being a corporation) by a duly authorised representative and (i) who is a holder of Instruments, and in the case of Bearer Instruments, produces such Instruments or (ii) who produces a voting certificate or (iii) is a proxy shall have one vote and (b) on a poll every person who is so present shall have one vote in respect of each [            ](24) principal amount outstanding of Instruments of the relevant Series so produced or represented by the voting certificate so produced or in respect of which he is a proxy.  Without prejudice

(24)The currency and amount of the smallest denomination of Instruments available in relation to the particular Series shall be deemed to be inserted here.

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to the obligations of the proxies named in any block voting instruction or form of proxy, any person entitled to more than one vote need not use all his votes or cast all the votes to which he is entitled in the same way.

15.A proxy named in any block voting instruction or form of proxy need not be a holder of an Instrument.

16.Each block voting instruction and each form of proxy, together (if so required by the relevant Issuer) with proof satisfactory to such Issuer of its due execution, shall be deposited at such place as such Issuer shall designate not less than 24 hours before the time appointed for holding the meeting or adjourned meeting at which the proxy named in the block voting instruction or form of proxy proposes to vote and in default the block voting instruction or form of proxy shall not be treated as valid unless the chairman of the meeting decides otherwise before such meeting or adjourned meeting proceeds to business.  A certified copy of each such block voting instruction and form of proxy and satisfactory proof as aforesaid (if applicable) shall, be deposited with the Issuer at such place as aforesaid before the commencement of the meeting or adjourned meeting but such Issuer shall not thereby be obliged to investigate or be concerned with the validity of, or the authority of the proxy named in, any such block voting instruction or form of proxy.

17.Without prejudice to paragraph 1, any vote given in accordance with the terms of a block voting instruction or form of proxy shall be valid notwithstanding the previous revocation or amendment of the block voting instruction or form of proxy or of any of the Instrument holders’ instructions pursuant to which it was executed, provided that no intimation in writing of such revocation or amendment shall have been received by the relevant Issuer or by the chairman of the meeting, in each case not less than 24 hours before the commencement of the meeting or adjourned meeting at which the block voting instruction or form of proxy is used.

18.A meeting of the holders of Instruments shall, in respect of the Instruments of the relevant Series and subject to the provisions contained in the Conditions, in addition to the powers hereinbefore given, but without prejudice to any powers conferred on other persons by these presents, have the following powers exercisable by Extraordinary Resolution only namely:

(a)power with the approval of the relevant Issuer to sanction any modification, abrogation, variation or compromise of, or arrangement in respect of, the rights of the holders of Instruments and/or Coupons in respect of the Instruments of the relevant Series, against the relevant Issuer, whether such rights shall arise under the Instruments of that Series, the Deed of Covenant executed by such Issuer or otherwise;

(b)power to assent to any modification to the provisions contained herein or of the Instruments or Coupons of the relevant Series which shall be proposed by the Issuer;

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(c)power to sanction any proposal by the relevant Issuer for the exchange or substitution for the Instruments of the relevant Series of, or the conversion of those Instruments into, shares, stock, bonds, debentures, debenture stock or other obligations or securities of the relevant Issuer or any other body corporate formed or to be formed otherwise than in accordance with any provisions of the Conditions applicable to the Instruments of the relevant Series;

(d)power to assent to any modification of the provisions contained in the Instruments or the Coupons of the relevant Series, the Conditions thereof, this Schedule, the Fiscal Agency Agreement or the Deed of Covenant executed by such Issuer which shall be proposed by the relevant Issuer;

(e)power to waive or authorise any breach or proposed breach by the relevant Issuer of its obligations under the Conditions applicable to the Instruments of the relevant Series or any act or omission which might otherwise constitute an event of default under the Conditions applicable to the Instruments of the relevant Series;

(f)power to authorise the Fiscal Agent, the Registrar or any other person to concur in and execute and do all such deeds, instruments, acts and things as may be necessary to carry out and give effect to any Extraordinary Resolution;

(g)power to give any authority, direction or sanction which under the Conditions applicable to the Instruments of the relevant Series is required to be given by Extraordinary Resolution;

(h)power to appoint any persons (whether holders of Instruments or not) as a committee or committees to represent the interests of the holders of Instruments in respect of the Instruments of the relevant Series and to confer upon such committee or committees any powers or discretions which such holders of Instruments could themselves exercise by Extraordinary Resolution; and

(i)power to approve other security as contemplated by Condition 4.01.

Provided that the special quorum provisions contained in the provisos to paragraphs 5 and 6 shall apply in relation to any Extraordinary Resolution for the purpose of making modification of the provisions contained in the Instruments or the Coupons of any Series or the Conditions applicable thereto which:

(i)varies the date of maturity or any date of redemption of any of the Instruments of the relevant Series or any date for payment of any principal or interest in respect thereof; or

(ii)reduces or cancels the principal amount of the Instruments of the relevant Series or any amount payable thereon, varies any provision regarding the calculation of the rate of interest or any other amount payable thereon or

72

varies the rate of discount, rate of amortisation or any other rate of return applicable thereto; or

(iii)modifies the provisions contained in this Schedule concerning the quorum required at any meeting of holders of Instruments in respect of the Instruments of the relevant Series or any adjournment thereof or concerning the majority required to pass an Extraordinary Resolution; or

(iv)varies the currency in which any payment (or other obligation) in respect of the Instruments of the relevant Series is to be made; or

(v)amends this proviso in any manner.

19.An Extraordinary Resolution passed at a meeting of the holders of Instruments in respect of the Instruments of the relevant Series duly convened and held in accordance with these presents shall be binding upon all the holders of Instruments of the relevant Series, whether present or not present at such meeting, and upon all the holders of all Coupons in respect of Instruments of the relevant Series and each of the holders of Instruments and Coupons shall, in respect of the Instruments of that Series, be bound to give effect thereto accordingly.  The passing of any such resolution shall be conclusive evidence that the circumstances of such resolution justify the passing thereof.

20.The expression “Extraordinary Resolution” when used in these presents means a resolution passed at a meeting of the holders of Instruments in respect of the Instruments of the relevant Series duly convened and held in accordance with the provisions contained herein by a majority consisting of not less than three-fourths of the votes cast thereon.

21.Minutes of all resolutions and proceedings at every such meeting as aforesaid shall be made and duly entered in books to be from time to time provided for that purpose by the relevant Issuer and any such minutes as aforesaid, if purporting to be signed by the chairman of the meeting at which such resolutions were passed or proceedings transacted or by the chairman of the next succeeding meeting of the holders of Instruments in respect of the Instruments of the relevant Series, shall be conclusive evidence of the matters therein contained and, until the contrary is proved, every such meeting in respect of the proceedings of which minutes have been made and signed as aforesaid shall be deemed to have been duly convened and held and all resolutions passed or proceedings transacted thereat to have been duly passed and transacted.

22.So long as the relevant Instruments are represented by a global instrument, for the purposes of this Schedule the holder of the global instrument shall be deemed to be two persons holding or representing such principal amount of Instruments as are, at the relevant time, represented by such global instrument.

23.Any Instruments which have been purchased or are held by (or on behalf of) the relevant Issuer or any affiliate of the Issuer or ABB Ltd or any subsidiary of ABB Ltd but which have not been cancelled shall, unless or until resold, be deemed not to be outstanding for the purposes of this Schedule.

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THE SIXTH SCHEDULE

FORM OF DEED OF ASSUMPTION

This Deed of Assumption is made on [        ], [   ] between [          ] (the “Issuer”), a company incorporated under the laws of [          ] whose registered/principal office is situated at [          ] and [          ] (the “Substituted Debtor”) a company incorporated in [          ] whose registered/principal office is situated at [          ].

WHEREAS:

(A)The Issuer has issued [insert aggregate principal amount and title of the Instruments] (the “Instruments”, each holder of such Instruments being an “Instrumentholder”) [and any interest coupons attached to such Instruments (the “Coupons”, each holder of such Coupons being a “Couponholder”)] pursuant to a Fiscal Agency Agreement dated 10 March 1993 and amended and restated on 24 November 2004 (the “Fiscal Agency Agreement”) between Banque Générale du Luxembourg S.A. (the “Fiscal Agent”), the Issuer, the other companies named therein as issuers and the paying agents and registrars named therein.

(B)The Issuer proposes, pursuant to Condition 15 of the Terms and Conditions of the Instruments (the “Conditions”) to substitute the Substituted Debtor as principal debtor in respect of the Instruments.

NOW THIS DEED WITNESSETH AS FOLLOWS:

1.The Substituted Debtor hereby agrees that, with effect from and including the effective date hereof, it shall be the “Issuer” for all purposes in respect of the Instruments and the Coupons and accordingly it shall assume all the obligations and liabilities and shall be entitled to all the rights and benefits on the part of the Issuer contained therein.

2.The Substituted Debtor hereby acknowledges and agrees that, with effect from and including the effective date hereof:

(a)the Issuer is released from all its liabilities, in its capacity as issuer of the Instruments, in respect of the Instruments; and

(b)the Conditions are amended in accordance with the Schedule hereto.

3.The Substituted Debtor and the Issuer hereby jointly and severally agree that the existing [Temporary Global Instrument, Permanent Global Instrument, Registered Instrument(s) or, as the case may be, Definitive Instruments] shall continue in full force and effect on the understanding that, with effect from and including the effective date hereof:

(a)all references to “[Name of Issuer]” shall be read and construed as references to the Substituted Debtor; and

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(b)the Conditions shall be amended as set out in the Schedule hereto, together with any other consequential amendments which may be appropriate in order to preserve the rights of the Instrumentholders and (if any) Couponholders.

4.(A)The Substituted Debtor and the Issuer hereby acknowledge and covenant that the benefit of the undertakings and the covenants binding upon them contained in this Deed of Assumption shall be for the benefit of each and every Instrumentholder and (if any) Couponholder whether or not such Instrumentholder or Couponholder was an initial subscriber of such Instrument and each Instrumentholder and (if any) Couponholder shall be entitled severally to enforce the said obligations against the Substituted Debtor.

(B)This Deed of Assumption shall be deposited with and held by the Fiscal Agent and the Substituted Debtor, and the Issuer and the Substituted Debtor hereby acknowledge the right of every Instrumentholder and Couponholder to production of this Deed of Assumption and upon request and payment of the expenses incurred in connection therewith, the production of a copy hereof certified by the Fiscal Agent to be a true and complete copy.

5.The illegality, invalidity or unenforceability of any provision of this Deed of Assumption under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision.

6.This Deed of Assumption may only be amended in the same way as the other Conditions of the Instruments are capable of amendment pursuant to the Fifth Schedule of the Fiscal Agency Agreement.

7.(A)This Deed of Assumption shall be governed by and construed in accordance with the laws of England.

(B)The Courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with this Deed of Assumption and accordingly any legal action or proceedings arising out of or in connection with this Deed of Assumption (“Proceedings”) may be brought in such courts.  Each of the Substituted Debtor and the Issuer irrevocably submits to the jurisdiction of such courts and waives any objection to Proceedings in such courts whether on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum.  These submissions are for the benefit of each of the Instrumentholders and the Couponholders and shall not limit the right of any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not).

(C)Each of the Substituted Debtor and the Issuer irrevocably appoints ABB Limited at its registered office (presently at Orion House, 5 Upper St.

75

Martin’s Lane, London WC2H 9EA) as its authorised agent for service of process in England in respect of any Proceedings.  If for any reason such agent shall cease to be such agent for service of process or shall no longer have a registered office in England, the Substituted Debtor and the Issuer shall appoint another agent for service of process in England within twenty-one days and if the Issuer and/or the Substituted Debtor fails to make any such appointment within twenty-one days, the Fiscal Agent shall be entitled to appoint such a person by notice to the Issuer and/or the Substituted Debtor.

IN WITNESS whereof this Deed has been executed by and on behalf of the parties hereto as of the day and year first above written.

EXECUTED as a deed under Seal by                      )

[the Substituted Debtor]                                          )

acting by [          ] and [          ]                                 )

in the presence of:                                                    )

Witness:

Name:

Address:

Occupation:

Witness:

Name:

Address:

Occupation:

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EXECUTED as a deed under Seal by                           )

[the Issuer]                                                                     )

acting by [          ] and [          ]                                       )

in the presence of:                                                          )

Witness:

Name:

Address:

Occupation:

Witness:

Name:

Address:

Occupation:

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THE SCHEDULE

Post-Substitution Amendments to the Conditions

of the Instruments of the relevant Series

1.Following any substitution pursuant to Condition 15, the Conditions of the Instruments of the relevant Series shall apply as if all references to the “Issuer” therein were to the Substituted Debtor.

2.In the event that ABB Ltd shall become the Substituted Debtor the Conditions shall apply with the following further amendments:

(i)Conditions 4.02, 4.03 and Condition 7.01(v) shall not apply to such Instruments;

(i)the words “... its obligation set out in Condition 4.02 ...” to “... performance or observance of any of its other...” in lines 1 to 5 of Condition 7.01(ii) shall be deleted and replaced by the word “any”;

(ii)Condition 15 shall not apply to such Instruments and, in respect of such Instruments, shall be deemed to be replaced with the following:

“the Issuer may be replaced, and any direct or indirect subsidiary of the Issuer may be substituted for the Issuer, as principal debtor in respect of the Instruments, without the consent of the Holders of the Instruments or Coupons.  If the Issuer shall determine that any such subsidiary shall become the principal debtor (in such capacity, the “Substituted Debtor”), the Issuer shall give not less than 30 nor more than 45 days’ notice, in accordance with Condition 14, to the Holders of the Instruments of such event and, immediately on the expiry of such notice, the Substituted Debtor shall enter into a Deed of Assumption, the form of which is set out in the Sixth Schedule to the Fiscal Agency Agreement and become the principal debtor in respect of the Instruments in place of the Issuer and the Holders of the Instruments shall thereupon cease to have any rights or claims whatsoever against the Issuer.  However, no such substitution shall take effect (i) until such Substituted Debtor shall have entered into a keep-well agreement with ABB Ltd substantially in the form of other keep-well agreements entered into by ABB Ltd with certain of its direct or indirect subsidiaries, (ii) until such Substituted Debtor shall have executed a deed of covenant substantially in the form of the Deed of Covenant, (iii) in any case, until the Substituted Debtor shall have provided such documents as may be necessary to make the Deed of Assumption, the Instruments, the Fiscal Agency Agreement, such deed of covenant and such keep-well agreement the legal, valid and binding obligations of, as appropriate, the Substituted Debtor and ABB Ltd together with legal opinions, either unqualified or subject only to normal, usual or appropriate qualifications and assumptions to the effect that the Deed of Assumption, the Instruments, the Fiscal Agency Agreement, such deed of covenant and such keep-well agreement are legal, valid and binding

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obligations of, as appropriate, ABB Ltd and the Substituted Debtor, (iv) the Substituted Debtor shall have obtained all necessary governmental and regulatory approvals and consents, if any, for the substitution, and (v) the Substituted Debtor shall have appointed the process agent appointed by the Issuer in Condition 18.3 as its agent in England to receive service of process on its behalf in relation to any legal action or proceedings arising out of or in connection with the Instruments and the Coupons.  Upon any such substitution, the Instruments and Coupons will, if necessary, be deemed to be modified in all appropriate respects.”

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THE SEVENTH SCHEDULE

Regulations Concerning Transfers Of Registered Instruments And Exchanges Of Bearer
Instruments For Registered InstrumentS

1.Each Registered Instrument shall be in a principal amount equal to the minimum denomination specified in the relevant Pricing Supplement or an integral multiple thereof.

2.The Registered Instruments are transferable in a principal amount equal to the minimum denomination specified in the relevant Pricing Supplement or an integral multiple thereof by execution of the form of transfer endorsed under the hand of the transferor or of a duly appointed attorney on its behalf or, where the transferor is a corporation, under its seal or signed on its behalf by its duly appointed attorney or a duly authorised officer or officers of the corporation.  In this Schedule ”transferor” shall where the context permits or requires include joint transferors and be construed accordingly.

3.The Registered Instrument to be transferred must be delivered for registration to the specified office of the Registrar accompanied by such other evidence (including legal opinions) as the Registrar may reasonably require to prove the title of the transferor or his right to transfer the Registered Instrument and his identity and, if the form of transfer is executed by some other person on his behalf or in the case of the execution of a form of transfer on behalf of a corporation by an officer or officers or an attorney, the authority of that person or those persons to do so.  The signature of the person effecting a transfer of a Registered Instrument shall conform to any list of duly authorised specimen signatures supplied by the registered holder or be certified by a recognised bank, notary public or in such other manner as the Registrar may require.

4.The executors or administrators of a deceased holder of a Registered Instrument (not being one of several joint holders) and in the case of the death of one or more of joint holders the survivor or survivors of such joint holders shall be the only persons recognised by the relevant Issuer as having any title to such Registered Instruments.

5.Any person becoming entitled to Registered Instruments in consequence of the death or bankruptcy of the holder of such Registered Instruments may, upon producing such evidence that he holds the position in respect of which he proposes to act under this paragraph or of his title as the Issuer shall require (including legal opinions), be registered himself as the holder of such Registered Instruments or, subject to the preceding paragraphs as to transfer, may transfer such Registered Instruments.  The relevant Issuer and the Registrar may retain any amount payable upon the Registered Instruments to which any person is so entitled until such person shall be so registered or shall duly transfer the Registered Instruments.

6.Unless otherwise requested by him and agreed by the relevant Issuer, the holder of Registered Instruments or the holder of Bearer Instruments, the subject of a request for an exchange for Registered Instruments shall be entitled to receive only one Registered

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Instrument in respect of his holding or in respect of the Bearer Instruments, the subject of a particular request for an exchange.

7.The joint holders of a Registered Instrument shall be entitled to one Registered Instrument only in respect of their joint holding which shall, except where they otherwise direct, be delivered to the joint holder whose name appears first in the Register in respect of the joint holding.

8.Where there is more than one transferee (to hold other than as joint holders), separate forms of transfer (obtainable from the specified office of the Registrar) must be completed in respect of each new holding.

9.Where a holder of a Registered Instrument has transferred part only of his holding comprised therein there shall be delivered to him a Registered Instrument in respect of the balance of such holding.

10.The relevant Issuer, the Registrar and the Fiscal Agent shall, save in the case of the issue of replacement Registered Instruments, make no charge to the holders for the registration of any holding of Registered Instruments or any transfer of Registered Instruments or in respect of any exchange of Bearer Instruments for Registered Instruments or for the issue of any Registered Instruments or for the delivery of Registered Instruments at the specified office of the Registrar.

11.Subject always to the terms and conditions applicable to the Instruments of the relevant Series, the Registrar will within three Relevant Banking Days of the transfer date or the exchange date applicable to a transfer of Registered Instruments or an exchange of Bearer Instruments for Registered Instruments make available at its specified office a new Registered Instrument in respect of the Registered Instrument transferred or in respect of Bearer Instruments the subject of a request for an exchange for Registered Instruments.  In the case of a transfer of part only of a Registered Instrument, a new Registered Instrument in respect of the balance of the Registered Instrument transferred will be so delivered to the transferor.

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THE EIGHTH SCHEDULE

THE SPECIFIED OFFICES OF THE PAYING AGENTS AND THE REGISTRARS

The Fiscal Agent and Principal Registrar:
Banque Générale du Luxembourg S.A.
50, Avenue J.F. Kennedy
L-2951 Luxembourg
Telex:	3401 BGL lu
Fax:	+352 4242 4200
Attention:	Fiscal and Paying Agency Department
The other Paying Agent:
Banque MeesPierson BGL S.A.
57 Rennweg
CH-8023 Zurich
Switzerland
Telex:	BGL Zürich 813003 BGL CH
Fax:	+41 12119908
The Alternative Registrar:
JPMorgan Chase Bank, N.A.
15th Floor
450 West 33rd Street
New York, N.Y. 10001 2697
United States of America
Telephone:	+1 212 946 3009
Fax:	+1 212 946 8177
Attention:	Manager, Institutional Trust Services

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SIGNATURES

ABB INTERNATIONAL FINANCE LIMITED

By:	/s/ C.J. Noon	By:	/s/ A. Hall
	Chris Noon		Alex Hall

ABB CAPITAL B.V.

By:	/s/ A. Storck	By:	/s/ B. van Reijn
	Alfred Storck		Brian van Reijn

BANQUE GENERALE DU LUXEMBOURG S.A.

as Fiscal Agent and

Principal Registrar

By:	/s/ R. Genot	By:	/s/ J. Moes
	Robert GENOT		Jean-Marie MOES
	Head of Settlements & Custody		Head of Back-Offices & Securities
			Handling

BANQUE MEESPIERSON BGL S.A.

as Paying Agent

By:	/s/ R. Augustin	By:	/s/ Ch. Schenk
	R. Augustin		Ch. Schenk

JPMORGAN CHASE BANK, N.A.

as Alternative Registrar

By: /s/ Andrew R.Dellow

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EX-2.4

Exhibit 2.4

	LIMITED LIABILITY PARTNERSHIP
	EXECUTION COPY

ABB INTERNATIONAL FINANCE LIMITED

ABB CAPITAL B.V.

as issuers

PROGRAMME FOR THE ISSUANCE OF DEBT INSTRUMENTS

AMENDED AND RESTATED DEALERSHIP AGREEMENT

24 November 2004

CONTENTS

Clause
1.	Definitions
2.	Issuance Of Instruments
3.	Representations, Warranties And Undertakings By Each Issuer And ABB Ltd
4.	Undertakings By The Dealers
5.	Indemnity
6.	Costs And Expenses
7.	Notices And Communications
8.	Changes In Dealers
9.	Increase In Authorised Amount
10.	Change In Issuers
11.	Law And Jurisdiction
12.	Modification And Amendment
13.	Counterparts
14.	Contracts (Rights Of Third Parties) Act 1999
SCHEDULE 1		SELLING RESTRICTIONS
SCHEDULE 2		CONDITIONS PRECEDENT
SCHEDULE 3		DEALER ACCESSION LETTER
SCHEDULE 4		SPECIMEN FORM OF RECORD OF RELEVANT AGREEMENT APPROPRIATE WHERE A GROUP OF DEALERS ARE JOINTLY AND SEVERALLY AGREEING TO SUBSCRIBE FOR THE RELEVANT INSTRUMENTS
SCHEDULE 5		NOTICE OF INCREASE OF AUTHORISED AMOUNT
SCHEDULE 6		UNDERTAKING FROM NEW ISSUER
SCHEDULE 7		NOTICE DETAILS

THIS AMENDED AND RESTATED DEALERSHIP AGREEMENT is made on 24 November 2004 and replaces the Amended and Restated Dealership Agreement dated 11 November 2003.

BETWEEN

(1)ABB INTERNATIONAL FINANCE LIMITED (“AIFLTD”) and ABB CAPITAL B.V. (“ACBV”) (the “Issuers” and each an “Issuer” which expression shall include any New Issuer (as defined in Clause 10.2) which has become a party to this Agreement as an Issuer and shall exclude any entity which shall have ceased to be a party to this Agreement as an Issuer);

(2)ABB LTD; and

(3)MORGAN STANLEY & CO. INTERNATIONAL LIMITED (the “Dealer”, which expression shall include any institution(s) appointed as a dealer in accordance with Clause 8.1(b), together with the Dealer, the “Dealers” and, save as specified herein, excludes any institution(s) whose appointment as a Dealer has been terminated in accordance with Clause 8.1(a)) provided that where any such institution has been appointed as Dealer in relation to a particular Tranche (as defined below) of Instruments, the expression “Dealer” or “Dealers” shall only mean or include such institution in relation to such Tranche).

WHEREAS

(A)The Issuers established a programme (the “Programme”) for the issuance of debt instruments (the “Instruments”, which expression shall refer only to those debt instruments issued under the Programme), in connection with which Programme they entered into a dealership agreement dated 10 March 1993, as amended and restated on 11 November 2003 (the “Original Dealership Agreement”), the Fiscal Agency Agreement and executed and delivered the Deeds of Covenant.

(B)ABB Ltd has given certain undertakings to each Issuer pursuant to, in the case of AIFLTD, a keep-well agreement with AIFLTD effective as of 31 March 2000 and, in the case of ACBV, a keep-well agreement with ACBV effective as of 31 March 2000 (collectively the “Keep-Well Agreements” and individually, in relation to each Issuer, a “Keep-Well Agreement”, which expressions shall include, where the context so admits, any keep-well agreement between ABB Ltd and a New Issuer.  The Keep-Well Agreements are not guarantees by ABB Ltd of the Instruments.

(C)Instruments may be issued on a listed or unlisted basis.  The Issuers have made an application to the Luxembourg Stock Exchange for Instruments issued under the Programme to be listed, in connection with which application the Information Memorandum has been prepared, to permit Instruments to be so listed during the period of twelve months from the date of such Information Memorandum or such other period of time allowed by the Luxembourg Stock Exchange.

(D)The parties hereto wish to record the arrangements agreed between them in relation to the sale by any Issuer and the purchase by Dealers from time to time of Instruments.

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IT IS AGREED as follows:

1.DEFINITIONS

1.1For the purposes of this Agreement:

“this Agreement” includes any amendment or supplement hereto (including any supplemental agreement executed pursuant to Clause 8.1(b) and any undertaking executed pursuant to Clause 10.2(i)) and the expressions ‘herein’ and ‘hereto’ shall be construed accordingly;

“Annual Report” means the most recently published publicly available audited financial statements of the relevant Issuer or, as the case may be, ABB Ltd, whether consolidated or non-consolidated (including the report of the auditors thereon);

“Authorised Amount” means the amount of United States Dollars (“U.S.$”) 5,250,000,000 or such other amount as may have been authorised pursuant to Clause 9 hereof;

a “Condition” means the terms and conditions of the Instruments as appearing in the Information Memorandum or, in relation to any Tranche or Series of Instruments, such terms and conditions as the same may be amended or supplemented or replaced as described in the relevant Pricing Supplement or Pricing Supplements and any reference to a numbered “Condition” is to the correspondingly numbered provision thereof; and “Terms and Conditions” should be construed accordingly;

“Constitutive Documents” means the constitutional documents of the relevant Issuer or ABB Ltd, being, (in the case of AIFLTD) its memorandum and articles of association, (in the case of ACBV) its articles of association and (in the case of ABB Ltd) the extract from the Swiss Commercial Register (“Handelsregister”) and its articles of incorporation;

“Deeds of Covenant” means the two deeds of covenant each dated 10 March 1993 and each executed by an Issuer, as the same may be amended or supplemented from time to time and includes, where the context so admits, any deed of covenant executed by a New Issuer and “Deed of Covenant” means in relation to any Issuer, the Deed of Covenant executed and delivered by it;

“Fiscal Agent” means Banque Générale du Luxembourg S.A. in its capacity as fiscal agent, which expression shall include any successor(s) thereto;

“Fiscal Agency Agreement” means the fiscal agency agreement dated 10 March 1993 made between the Issuers, the Fiscal Agent, the Paying Agents and the Registrars, as amended and restated on 24 November 2004 and as further amended or supplemented from time to time;

“FSMA” means the Financial Services and Markets Act 2000;

“Information Memorandum” means the information memorandum dated 24 November 2004 prepared in connection with the application for Instruments to be

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listed on the Luxembourg Stock Exchange, together with any information incorporated therein by reference, as the same may be amended, supplemented, updated and/or substituted from time to time and any further information memorandum prepared in connection with the admission to the listing, trading and/or quotation of the Instruments on any other listing authority, stock exchanges and/or quotation system on which any Instruments may from time to time be admitted to listing, trading and/or quotation (as such further information memorandum may be amended, supplemented, updated and/or substituted from time to time);

“Listing Agent” means Banque Générale du Luxembourg S.A. in its capacity as listing agent, which expression shall include any successor(s) thereto;

“London business day” means a day on which commercial banks are open for business in London (including dealings in foreign exchange and foreign currency deposits);

“Paying Agents” means Banque MeesPierson BGL S.A. in its capacity as paying agent, which expression shall include the Fiscal Agent and any substitute or additional paying agents appointed in accordance with the Fiscal Agency Agreement;

“Pricing Supplement” means a pricing supplement prepared in relation to the relevant Tranche on the basis of the form in the Information Memorandum;

“Relevant Agreement” means an agreement (oral or in writing) between an Issuer, ABB Ltd and any Dealer(s) for the sale by such Issuer and the purchase as principal by such Dealer(s) (or on such other basis as may be agreed between such Issuer, ABB Ltd and the relevant Dealer(s) at the relevant time) of any Instruments;

“Relevant Dealer” means, in relation to a Relevant Agreement which is made between the Issuer, ABB Ltd and more than one Dealer, the institution specified as such in the Pricing Supplement and/or such Relevant Agreement; and, in relation to a Relevant Agreement which is made between the Issuer, ABB Ltd and a single Dealer, such Dealer;

“Registrars” means Banque Générale du Luxembourg S.A. and JPMorgan Chase Bank, N.A. and “Registrar” means, in relation to any Series of Instruments in registered form, the Principal Registrar or, as the case may be, the Alternative Registrar, as specified in the relevant Pricing Supplement;

“Series” means a Tranche of Instruments or Tranches of Instruments which are identical except that the issue date, the first payment of interest and, if so specified in the relevant Pricing Supplement, the denomination thereof may be different (and save that a Series may comprise Instruments in bearer form and Instruments in registered form);

a “subsidiary” of an Issuer or ABB Ltd means a company the financial statements of which are, in accordance with applicable law and generally accepted accounting principles, consolidated with those of the relevant Issuer or, as the case may be, ABB Ltd;

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“Stabilising Manager” means, in relation to any Tranche of Instruments, the Dealer specified as the Stabilising Manager in the Pricing Supplement relating to such Tranche;

“Tranche” means Instruments, the terms of which are identical (whether as to currency, interest, maturity or otherwise), which are the subject of the same Pricing Supplement and which have the same issue date (save that a Tranche may comprise Instruments in bearer form and Instruments in registered form); and

“Transparency Directive” means a European Union Directive implementing the European Commission’s proposal for a Directive of the European Parliament and of the Council on the harmonisation of transparency requirements with regard to information about issues whose securities are admitted to trading on a regulated market in the European Union (2003/0045 (COD)).

1.2The Original Dealership Agreement shall be amended and restated on the terms of this Agreement.  Any Instruments issued on or after the date of this Agreement shall be issued pursuant to this Agreement.  This does not affect any Instruments issued prior to the date of this Agreement.  Subject to such amendment and restatement, the Original Dealership Agreement shall continue in full force and effect.

2.ISSUANCE OF INSTRUMENTS

2.1Each of the Issuers, ABB Ltd and the Dealers agrees that any Instruments which may from time to time be agreed between an Issuer, ABB Ltd and any Dealer(s) to be issued by an Issuer and purchased by such Dealer(s) shall be issued and purchased on the basis of, and in reliance upon, the representations and warranties, undertakings and indemnities made or given or provided to be made or given in this Agreement or in writing in any Relevant Agreement or in writing in any other agreement between the relevant Issuer, ABB Ltd and the Dealer(s) in respect of the relevant Instruments.  Unless otherwise agreed, no Issuer nor any Dealer is or shall be under any obligation to sell or, as the case may be, purchase any Instruments.

2.2Upon the conclusion of any Relevant Agreement and subject as provided in Clause 2.3:

(a)the Relevant Dealer shall promptly confirm the terms of the Relevant Agreement to the relevant Issuer (with a copy to the Fiscal Agent or, if the Relevant Agreement relates to the sale of Instruments in registered form, the Registrar) in writing (by letter, telex or fax);

(b)the relevant Issuer shall promptly confirm, as appropriate, such terms to the Fiscal Agent or, as the case may be, the Registrar in writing, and the Relevant Dealer or, if such Dealer so agrees with the relevant Issuer, such Issuer will prepare a Pricing Supplement in relation to the relevant Instruments for approval (such approval not to be unreasonably withheld or delayed) by the relevant Issuer or, as the case may be, the Relevant Dealer and for execution on behalf of such Issuer and the relevant Dealer(s);

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(c)the relevant Issuer shall on the agreed date of issue of the relevant Instruments procure the issue of such Instruments in the relevant form (subject to amendment and completion) scheduled to the Fiscal Agency Agreement and shall procure their delivery to or to the order of the relevant Dealer(s);

(d)the Dealer(s) shall for value on the agreed date of issue of the relevant Instruments procure the payment of the net subscription moneys therefor (namely the agreed issue or sale price thereof plus any accrued interest and less any agreed commissions, concessions or other agreed deductibles) to or to the order of the relevant Issuer by credit transfer to such account as may have been specified by or on behalf of such Issuer to the Relevant Dealer for the purpose; and

(e)where a single Dealer has agreed with the Issuer to subscribe a particular tranche pursuant to this Clause 2, if requested by the Relevant Dealer in relation to such Tranche the Issuer, ABB Ltd and the Relevant Dealer shall enter into a subscription agreement based on the form set out in Schedule 4 to this Agreement or such other form as may be agreed between the Issuer, ABB Ltd and the Relevant Dealer.

2.3The obligations of the Dealer(s) under Clause 2.2(d) are conditional upon:

(a)the agreement by the relevant Issuer and the Relevant Dealer to the terms of the relevant Pricing Supplement;

(b)the execution of the relevant Pricing Supplement by or on behalf of the relevant Issuer and the relevant Dealer(s) and the delivery of a copy thereof to each party;

(c)the delivery to or to the order of the Dealer(s) of the temporary global instrument representing the relevant Instruments and/or, as the case may be, the relevant Instruments in registered form to be held to the order of the relevant Issuer pending receipt by such Issuer of the net subscription moneys payable to it in respect of the relevant Instruments;

(d)there having been, in the opinion of the Relevant Dealer acting in good faith, since the date of the Relevant Agreement, no adverse change in the financial condition of the relevant Issuer or of ABB Ltd and its subsidiaries taken as a whole that is material in the context of issuance under the Programme nor, since the date of the Relevant Agreement, any change in the rating accorded by an internationally recognised rating agency to any security of the relevant Issuer or ABB Ltd nor a change which has a material adverse effect on the financial condition of the relevant Issuer or of ABB Ltd and its subsidiaries taken as a whole;

(e)the truth and correctness in all material respects of the representations and warranties on the part of such Issuer and ABB Ltd contained herein or in writing in any Relevant Agreement or in writing in any other agreement

5

between such Issuer, ABB Ltd and the relevant Dealer(s) in respect of the relevant Instruments and there having been no event rendering untrue or incorrect in any material respect any of such representations or warranties as though they had been made and given on the date of the Relevant Agreement and on the agreed date of issue of the relevant Instruments, with reference in each case to the facts and circumstances then subsisting;

(f)neither the relevant Issuer nor ABB Ltd being in material breach of any of its undertakings set out herein or in writing in any Relevant Agreement or in writing in any other agreement between such Issuer, ABB Ltd and the relevant Dealer(s) in respect of the relevant Instruments;

(g)there having been, since the date of the Relevant Agreement and in the opinion of the Relevant Dealer acting in good faith, no such change in national or international financial, political or economic conditions or currency exchange rates or exchange controls as would, in its view, be likely to prejudice materially the placement, offering, distribution or sale of the relevant Instruments (whether in the primary market or in respect of dealings in the secondary market);

(h)the Dealer(s) acting in good faith being satisfied that all authorisations, consents, approvals, filings and registrations, if any, required by any jurisdiction to which the relevant Issuer or ABB Ltd is subject or in the country of origin of the currency or currencies in which the relevant Instruments are denominated or payable or required because of the term or other characteristics of the relevant Instruments, having been obtained and being in full force and effect or having been effected and, where relevant, certified translations thereof into English having been supplied to the Relevant Dealer; and

(i)(in the case of Instruments which are to be listed on the Luxembourg Stock Exchange and/or which are to be listed on such other stock exchange as may have been agreed between the relevant Issuer, ABB Ltd and the relevant Dealer(s)) the Luxembourg Stock Exchange and/or such other stock exchange as aforesaid having agreed to list the relevant Instruments.

2.4The Relevant Dealer, on behalf of itself only, or, as the case may be, the other Dealer(s) party to the Relevant Agreement in question may, in its absolute discretion, waive any of the conditions set out in Clause 2.3 in writing to the relevant Issuer in so far only as they relate to an issue of Instruments by such Issuer to such Dealer(s) and any condition so waived shall be deemed to have been satisfied as regards such Dealer(s) alone.  If any of the conditions set out in Clause 2.3 is not satisfied or, as the case may be, waived by the Relevant Dealer on or before the issue date of any relevant Tranche, the Relevant Dealer shall, subject as mentioned below, be entitled to terminate the Relevant Agreement and, in that event, the parties to such Relevant Agreement shall be released and discharged from their respective obligations

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thereunder (except for any rights or liabilities which may have arisen pursuant to Clauses 3, 4, 5 or 6 of this Agreement).

2.5If the Relevant Dealer, in connection with the distribution of any Tranche of Instruments, offers Instruments in excess of the aggregate principal amount to be issued or effects transactions with a view to stabilising or maintaining the market price of the Instruments at levels other than those which might otherwise prevail in the open market, it shall not in doing so be deemed to act as agent of the relevant Issuer but rather as principal.  Such Issuer will not as a result of any action taken by such Dealer, under this Clause be obliged to issue Instruments in excess of the aggregate amount of Instruments agreed to be issued, nor shall the Issuer be liable for any loss, or entitled to any profit, arising from any excess offers or stabilisation.

2.6The Dealer specified as the Stabilising Manager in the Pricing Supplement relating to any Tranche of Instruments (or any duly appointed person acting for such Stabilising Manager) may over-allot or effect transactions with a view to supporting the market price of the Instruments of the Series of which such Tranche forms part at a level higher than that which might otherwise prevail.  However, there is no obligation on the Stabilising Manager (or any agent of the Stabilising Manager) to do this.  Such stabilising, if commenced, may be discontinued at any time.  Such stabilising shall be conducted in accordance with all applicable laws and rules.  Any loss or profit sustained as a consequence of any such over-allotment or stabilising shall, as against each of the Issuers, be for the account of the Stabilising Manager.

2.7In relation to each issue of Instruments under the Programme in respect of which a Dealer is specified as the Stabilising Manager in the Pricing Supplement, the relevant Issuer represents, warrants and undertakes to the Relevant Dealer(s) that it was informed, prior to any public announcement of such issue, of the existence of the Financial Services Authority’s informational guidance referred to in MAR 2.3.2R(4) of the price stabilising rules made under section 144(1) of the FSMA and the relevant Issuer and ABB Ltd each represents, warrants and undertakes to the Relevant Dealer(s) that it has not issued and will not issue, without the prior consent of the Stabilising Manager, any communication to which MAR 2.3.2R(1) of those rules applies unless that communication adequately discloses that stabilising action may take place in relation to such issue and complies with MAR 2.3.3E of those rules.

3.REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS BY EACH ISSUER AND ABB LTD

3.1The following representations and warranties shall be made or given by each of the Issuers and ABB Ltd, as appropriate, on the date hereof, on each date on which the Information Memorandum is amended, supplemented, updated and/or substituted and, in respect of each Tranche of Instruments agreed as contemplated herein to be issued and purchased, on the issue date and on the date on which the Relevant Agreement is made (it being understood that any representations and warranties made with respect to a Tranche of Instruments on their issue date and on the date the Relevant Agreement relating thereto is made shall be applicable only to the Instruments to be issued and

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sold on such issue date or pursuant to such Relevant Agreement, as the case may be, and that the representations and warranties made by an Issuer at any such date are made only by the Issuer which issues such Instruments or executes such Relevant Agreement), in each case, with reference to the facts and circumstances then subsisting:

(a)each of such Issuer and ABB Ltd is duly incorporated and validly existing under the laws of its jurisdiction of incorporation, with full power and authority to conduct their respective businesses as described in the Information Memorandum;

(b)

(i)such Issuer is and was empowered to enter into and comply with all provisions of this Agreement, the Fiscal Agency Agreement, the Deed of Covenant, the Keep-Well Agreement and the Relevant Agreement, to issue and sell the relevant Instruments (in relation to each Tranche of Instruments agreed as contemplated herein to be issued by such Issuer and purchased by the relevant Dealer(s)) and to undertake and to perform the obligations expressed to be assumed by it herein and therein;

(ii)ABB Ltd is and was empowered to enter into and comply with all provisions of this Agreement and the Relevant Agreement and to undertake and to perform the obligations expressed to be assumed by it herein and therein;

(c)

(i)this Agreement, the Fiscal Agency Agreement, the Deed of Covenant and the Keep-Well Agreement have been duly authorised, executed and delivered by such Issuer and constitute valid and legally binding obligations of such Issuer in accordance with their respective terms and (in relation to each Tranche of Instruments agreed as contemplated herein to be issued and purchased) the Relevant Agreement in respect of such Instruments constitutes valid and legally binding obligations of such Issuer in accordance with its terms;

(ii)this Agreement and the Relevant Agreement in respect of such Instruments each constitute valid and legally binding obligations of ABB Ltd in accordance with its terms;

(d)(in relation to each Tranche of Instruments agreed as contemplated herein to be issued and purchased) the Instruments have been duly authorised by the relevant Issuer and, when duly executed, authenticated and delivered in accordance with the Fiscal Agency Agreement will constitute valid and legally binding obligations of the relevant Issuer in accordance with their terms;

(e)ABB Ltd is and was at the date of execution of the Keep-Well Agreement with such Issuer, empowered to enter into and comply with all the provisions of

8

such Keep-Well Agreement and such Keep-Well Agreement constitutes a valid and legally binding obligation of ABB Ltd in accordance with its terms;

(f)(in relation to each Tranche of Instruments agreed as contemplated herein to be issued and purchased), the obligations of the relevant Issuer in respect of the Instruments of the relevant Series will, subject to Condition 4.01 headed “Negative Pledge”, constitute unsecured and unsubordinated obligations and shall at all times rank pari passu in right of payment and without any preference among themselves.  The payment obligations of the relevant Issuer under the Instruments of the relevant Series shall (subject to Condition 4.01) at all times rank at least equally with all other present and future unsecured and unsubordinated obligations of the relevant Issuer other than any obligations preferred by law;

(g)all necessary actions, authorisations, conditions and things required to be taken, given, fulfilled and done by such Issuer and/or ABB Ltd, as the case may be, (including any necessary registrations and consents) have been or, in relation to each Tranche of Instruments agreed as contemplated herein to be issued and purchased, will, on the date of issue of the relevant Instruments, have been taken, given, fulfilled and done in connection with:

(i)the issue of the Information Memorandum and the distribution of the Information Memorandum and the relevant Pricing Supplement in accordance with the provisions set out in Schedule 1 hereto;

(ii)the execution and delivery by such Issuer of, and the compliance by such Issuer with the provisions of, this Agreement, the Fiscal Agency Agreement and the Deed of Covenant;

(iii)the execution and delivery by ABB Ltd of, and the compliance by ABB Ltd with the provisions of, this Agreement;

(iv)in relation to each Tranche of Instruments of such Issuer agreed as contemplated herein to be issued and purchased, the entry into of, and the compliance with the provisions of, the Relevant Agreement, the creation and issue of the relevant Instruments and the offering of the relevant Instruments in accordance with the terms of this Agreement and the Fiscal Agency Agreement;

(v)the execution and delivery of, and the compliance with the provisions of, the Keep-Well Agreement by such Issuer and ABB Ltd;

(vi)the carrying out of the various procedures and the performance of all other acts contemplated by the Relevant Agreement, this Agreement, the Fiscal Agency Agreement, the Deed of Covenant and the Keep-Well Agreement;

and will be in full force and effect;

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(h)the matters referred to in paragraph (g) above do not and will not conflict with or result in a breach of any existing provisions of the laws or regulations of the country or state of incorporation of the relevant Issuer, ABB Ltd or their respective Constitutive Documents nor of any agreement or other instrument or restriction whether statutory, contractual or otherwise, to which either of such Issuer or ABB Ltd is party or by which it or any of its assets is bound;

(i)the financial statements and other financial information contained in the Annual Report of such Issuer and incorporated by reference in the Information Memorandum present fairly the financial position (consolidated where relevant) of such Issuer and, where relevant, its subsidiaries as of the dates of such statements or information and the results of operations and the changes in financial position (consolidated where relevant) of such Issuer and, where relevant, its subsidiaries for the periods they cover or to which they relate and such financial statements and information have been prepared in accordance with any relevant statutory requirements and with generally accepted accounting principles in its jurisdiction of incorporation applied on a consistent basis throughout the periods involved (unless and to the extent otherwise stated therein);

(j)the consolidated financial statements of ABB Ltd and its subsidiaries contained in the Annual Report of ABB Ltd and incorporated by reference in the Information Memorandum were in conformity with accounting principles generally accepted in the United States and with Swiss law, such consolidated financial statements present fairly the consolidated financial position of ABB Ltd and its subsidiaries as at the dates of such statements and the results of their operations and the changes in their financial position for the periods they cover or to which they relate;

(k)the capitalisation tables and other financial information and statistical data relating to such Issuer and ABB Ltd in the Information Memorandum present fairly the information shown therein and have been compiled on a basis consistent with that of the relevant financial statements and other financial information contained in the Annual Report of such Issuer or, as the case may be, ABB Ltd; the auditors who reported upon the audited financial statements and other financial information included in the Annual Report of such Issuer or, as the case may be, ABB Ltd are appropriately qualified in the country in which the relevant Issuer or, as the case may be, ABB Ltd is incorporated and are independent of such Issuer or, as the case may be, ABB Ltd;

(l)the information contained in the Information Memorandum is true and accurate in all material respects and not misleading and to the best of its knowledge and belief there are no other facts the omission of which would make any statement therein misleading in any material respect and all reasonable enquiries have been made to verify the accuracy of such information and the opinions and intentions expressed therein are honestly held and, in relation to each Tranche of Instruments agreed as contemplated

10

herein to be issued and purchased, the Information Memorandum together with the relevant Pricing Supplement contains all the information which is material in the context of the issue of such Instruments;

(m)save as otherwise disclosed in the Information Memorandum, neither such Issuer nor ABB Ltd and its subsidiaries taken as a whole is involved in any litigation or arbitration proceedings which would be expected to have a material adverse effect on the business of the ABB Group taken as a whole in the context of the Programme nor, so far as such Issuer or ABB Ltd is aware, is any such litigation or arbitration pending or threatened;

(n)since the last day of the period in respect of which the Annual Report of such Issuer or ABB Ltd has been prepared, there has, save as may be disclosed in the Information Memorandum, to the best of the knowledge and belief of such Issuer and ABB Ltd, been no material adverse change in the financial condition (consolidated where relevant) of such Issuer or of ABB Ltd and its subsidiaries taken as a whole nor a change which has a material adverse effect on the financial condition of the relevant Issuer or of ABB Ltd and its subsidiaries taken as a whole;

(o)(in relation to any Tranche of Instruments agreed as contemplated herein to be issued and purchased), as of the issue date of the relevant Instruments, the aggregate principal amount outstanding (as defined in the Fiscal Agency Agreement) (expressed in United States dollars) of Instruments issued under the Programme will not exceed the Authorised Amount and for this purpose (i) Instruments denominated in a currency other than United States dollars shall be converted into United States dollars using the spot rate of exchange for the purchase of the relevant currency against payment of United States dollars being quoted by the Fiscal Agent on the date on which the Relevant Agreement in respect of the relevant Instruments was made or such other rate as the relevant Issuer and the Dealers may agree, (ii) any Instruments which provide for an amount less than the principal amount thereof to be due and payable upon redemption following an event of default in respect of such Instruments shall have a principal amount equal to their nominal amount and (iii) the currency in which any Instruments are payable, if different from the currency of their denomination, shall be disregarded;

(p)(in relation to any Tranche of Instruments agreed as contemplated herein to be issued and purchased) no event exists which, had such Instruments been issued, would (or with the giving of notice, or the lapse of time, or both, would) constitute an “Event of Default” as defined in the Terms and Conditions of the relevant Instruments; and

(q)(in relation to each Tranche of Instruments agreed as contemplated herein to be issued and purchased) neither the relevant Issuer nor any of its affiliates (as defined in Rule 405 under the United States Securities Act of 1933 as amended (the “Securities Act”) nor any person (other than any Dealer or any

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person acting on its behalf as to whom the Issuer makes no representation) acting on behalf of such Issuer or any of its affiliates has engaged or will engage in any directed selling efforts (as defined in Regulation S under the Securities Act) with respect to such Instruments, and such Issuer, any affiliate of such Issuer and all persons (other than any Dealer or any person acting on its behalf as to whom the Issuer makes no representation) acting on its or their behalf with respect to such Instruments have complied and will comply with the offering restrictions requirements of Regulation S under the Securities Act with respect thereto and neither the relevant Issuer nor any person (other than any Dealer or any person acting on its behalf as to whom the Issuer makes no representation) acting on its behalf has engaged or will engage, in any form of general solicitation or general advertising (as those terms are used in Rule 502(c) under the Securities Act) in connection with any offer or sale of Instruments in the United States.

3.2Each of the Issuers and ABB Ltd undertakes to and agrees with the Dealers and each of them, in respect of each Tranche of Instruments agreed as contemplated herein to be issued and purchased, that it shall:

(a)unless the same is capable of remedy and is forthwith remedied, forthwith notify the Relevant Dealer of anything which, prior to payment of the net subscription moneys being made to such Issuer on the agreed date of issue of the relevant Instruments, has or may have rendered or will or may render untrue or incorrect in any material respect any of the representations and warranties made by or on behalf of such Issuer and/or ABB Ltd in respect thereof as if they had been made or given on the date of the Relevant Agreement and on the agreed date of issue of the relevant Instruments;

(b)in relation to each Tranche of Instruments agreed by such Issuer, ABB Ltd and the relevant Dealer(s) to be listed on the Luxembourg Stock Exchange and/or on any other listing authority, stock exchanges and/or quotation system as may have been agreed between such Issuer, ABB Ltd and the relevant Dealer(s), cause the Listing Agent to procure the listing of the relevant Instruments on the Luxembourg Stock Exchange and/or on such other listing authority, stock exchanges and/or quotation system and to maintain the same until none of such Instruments is outstanding provided, however, that:

(i)if it should be impracticable or unduly burdensome to maintain such admission to listing, trading and/or quotation, each of the relevant Issuer and ABB Ltd shall use its reasonable endeavours to procure and maintain as aforesaid an admission to listing, trading and/or a quotation for the relevant Instruments on such other listing authority stock exchanges and/or quotation systems as it and the relevant Dealer(s) decide; or

(ii)(without limiting the generality of sub-paragraph (i)), if as a result of the adoption of the Transparency Directive, an Issuer or ABB Ltd

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could be required to publish financial information either more regularly than it otherwise would be required to or according to accounting principles which are materially different from the accounting principles which it would otherwise use to prepare its published financial information, the Issuer and ABB Ltd may as an alternative procure the admission to listing, trading and/or quotation for the Instruments by such other listing authority, stock exchanges and/or quotation system outside the European Union as it and the relevant Dealer(s) decide, and in either case the Issuers and ABB Ltd shall (A) use all reasonable endeavours to maintain any such alternative admission and (B) be responsible for any fees incurred in connection with seeking and maintaining any such alternative admission.

(c)not and will cause its respective affiliates (as defined in Regulation 501(b) of Regulation D under the Securities Act) not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) in a manner which would require the registration of the Instruments issued by such Issuer under the Securities Act;

(d)procure, in relation to any Tranche of Instruments which is to be listed on the Luxembourg Stock Exchange and/or any other listing authority, stock exchanges and/or quotation system, if required, that the relevant Pricing Supplement is lodged with the Luxembourg Stock Exchange and/or with such other listing authority, stock exchanges and/or quotation system by the time required by the Luxembourg Stock Exchange or such other listing authority, stock exchanges and/or quotation system;

(e)in accordance with the terms thereof, cause the Fiscal Agent to ensure that any Instrument in temporary global or, as the case may be, permanent global form is exchanged for Instrument(s) in permanent global or, as the case may be, definitive and/or (in the case of a Series comprising Instruments in bearer and registered form and if so specified in the relevant Pricing Supplement) registered form and any talon issued in respect of any Instrument in definitive form is exchanged in accordance with the Terms and Conditions of the relevant Instruments for further coupons;

(f)in relation to any Instruments in respect of which any Dealer is appointed as the agent of the Issuer for the purposes of calculating any rate or amount of interest or other redemption amount applicable to such Instruments, indemnify such Dealer in its capacity as such agent in the same manner as set out in Clause 13.4 of the Fiscal Agency Agreement, mutatis mutandis; and

(g)in respect of any Tranche of Instruments which must be redeemed before the first anniversary of the date of its issue, such Issuer will issue such Instruments only if the following conditions apply (or the Instruments can otherwise be issued without contravention of section 19 of the FSMA):

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(i)Selling restrictions: each Relevant Dealer represents, warrants and agrees in the terms set out in sub-clause (b) of the United Kingdom selling restriction in Schedule 1 (Selling Restrictions - United Kingdom); and

(ii)Minimum denomination: the redemption value of each such Instrument is not less than £100,000 (or an amount of equivalent value denominated wholly or partly in a currency other than sterling), and no part of any Instrument may be transferred unless the redemption value of that part is not less than £100,000 (or such an equivalent amount).

3.3Each Issuer and ABB Ltd undertakes to and agrees with the Dealers and each of them that it shall:

(a)

(i)in the case of each Issuer, comply (and for this purpose shall ensure that all necessary action is taken and all necessary conditions are fulfilled) with all applicable laws, regulations, policies and guidelines (as amended from time to time) of any governmental and regulatory authorities or central bank relevant in the context of the issue of any Instruments and the performance of and compliance with its obligations thereunder, under this Agreement, the Fiscal Agency Agreement, the Keep-Well Agreement and the Deed of Covenant, and shall submit (or procure the submission on its behalf of) such reports or information and shall make (or procure that there is made on its behalf) such registrations and filings as may from time to time be required for compliance with such laws, regulations, policies and guidelines and shall procure that Instruments shall have such maturities and denominations as may from time to time be required for compliance with all applicable laws, regulations, policies and guidelines;

(ii)in the case of ABB Ltd, comply (and for this purpose shall ensure that all necessary action is taken and all necessary conditions are fulfilled) with all applicable laws, regulations, policies and guidelines (as amended from time to time) of any governmental and regulatory authorities or central bank relevant in the context of the issue of any Instruments and the performance of and compliance with its obligations thereunder, under this Agreement and the Keep-Well Agreements, and shall submit (or procure the submission on its behalf of) such reports or information and shall make (or procure that there is made on its behalf) such registrations and filings as may from time to time be required for compliance with such laws, regulations, policies and guidelines and shall procure that Instruments shall have such maturities and denominations as may from time to time be required for compliance with all applicable laws, regulations, policies and guidelines;

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(b)in connection with the proposed issuance of Instruments, notify any Dealer promptly upon request by such Dealer of the aggregate principal amount of Instruments of such Issuer then outstanding (expressed in United States dollars) under the Programme and for this purpose sub-paragraphs (i) to (iii) of Clause 3.1(o) shall apply;

(c)in connection with the proposed issuance of Instruments, from time to time deliver to each Dealer a certified copy of any document which amends or supersedes any of its Constitutive Documents and a certified copy of any resolution of its board of directors or, as the case may be, managing directors or other governing body which amends or supersedes the resolution in respect of such Issuer or ABB Ltd, as the case may be, referred to in the Information Memorandum;

(d)deliver to each Dealer a copy of each document lodged by or on behalf of such Issuer or ABB Ltd, as the case may be, in relation to the Programme or any Instruments with the Luxembourg Stock Exchange or with such other listing authority, stock exchanges and/or quotation system on which Instruments shall then be admitted to listing, trading and/or quotation (other than Pricing Supplements) as soon as practicable after it has been lodged and a copy of each document made available for inspection at the offices of any Paying Agent (as detailed in the Information Memorandum) as soon as the same shall have become so available;

(e)without prejudice to paragraph (d) above, as soon as the same become publicly available, deliver to each Dealer a copy of its Annual Report and in the case of ABB Ltd, a copy of its Annual Report and interim financial reports;

(f)supply (or procure the supply) to each Dealer addressed to all Dealers (whether or not (in the case of sub-paragraphs (ii) or (iii) below) any such Dealer is participating in the relevant issuance of Instruments) legal opinions as set out in Schedule 2 to this Agreement, comfort letters or agreed upon procedures letters on the following bases:

(i)(unless, in any case, a legal opinion in respect of ABB Ltd or, as the case may be, such Issuer addressed to all the Dealers shall have been provided during the period of twelve months ended on such anniversary) legal opinions in respect of such Issuer or, as the case may be, ABB Ltd on each anniversary of the date on which such legal opinions were signed and delivered in connection with the original establishment of the Programme, and, on each date which falls twelve calendar months after the provision of the last legal opinion in respect of ABB Ltd or, as the case may be, such Issuer;

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(ii)a legal opinion in respect of ABB Ltd, upon the issuance by such Issuer of any Instruments agreed as contemplated herein to be issued and purchased;

(iii)(unless otherwise stated in the Relevant Agreement) an auditors’ comfort letter or agreed upon procedures letter in respect of ABB Ltd and such Issuer and a legal opinion in respect of such Issuer (from suitable lawyers qualified in English law) upon the issuance by such Issuer of Instruments agreed as contemplated herein to be sold and purchased in transactions in which it is customary under then existing market practice to provide updated auditors’ agreed upon procedures letters or legal opinions in light of, inter alia, the size of the transaction, the nature of the distribution or changes in the financial position of such Issuer or ABB Ltd and its subsidiaries taken as a whole;

(iv)a legal opinion in respect of, as relevant, such Issuer and/or ABB Ltd from suitable lawyers qualified in English or, as relevant Swiss, law if requested by any Dealer in relation to any material change or proposed material change to any of this Agreement, the Fiscal Agency Agreement or the Deed of Covenant or the Keep-Well Agreement, or any change or proposed change in applicable law or regulation relating to the issuance of Instruments affecting in any material respect such Issuer or ABB Ltd, this Agreement, the Fiscal Agency Agreement or the Deed of Covenant or the Keep-Well Agreement;

(g)so long as any Instrument remains outstanding, such Issuer will not modify, amend or terminate the Keep-Well Agreement where such modification, amendment or termination would have an adverse effect upon any holder of any Instrument or Coupon, nor will such Issuer waive, or fail to take all reasonable steps to ensure that ABB Ltd complies with its obligations under the Keep-Well Agreement (except where such waiver or failure would not have an adverse effect upon any holder of any Instrument or Coupon);

(h)in the case of each Issuer, not consent to any amendment to the Fiscal Agency Agreement which may materially adversely affect the interests of any Dealer or any holder of any Instrument or Coupon;

(i)in the case of each Issuer, without prejudice to the provisions of paragraphs (g) and (h) above, give to each Dealer at least fifteen days’ prior notice in writing of any proposed amendment to the Fiscal Agency Agreement, the Deed of Covenant and the Keep-Well Agreement (whether or not adversely affecting the interests of any Dealer or any holder of any Instrument or Coupon);

(j)from time to time deliver to each Dealer a certificate as to the names and signatures of those persons who are authorised to act on behalf of such Issuer, or, as the case may be, ABB Ltd in relation to the Programme; and

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(k)prepare or procure the preparation of an amendment or supplement to the Information Memorandum or publish a new information memorandum as may from time to time be required to be prepared by law or by the requirements of any relevant listing authority, stock exchanges and/or quotation system or, without prejudice to the generality of the foregoing, if, while Instruments are offered under the Programme, there shall occur any adverse change in the financial condition of such Issuer or ABB Ltd and its subsidiaries taken as a whole that is material in the context of issuance under the Programme (in the case of ABB Ltd and its subsidiaries taken as a whole, being a change which might reasonably be expected to affect the decision of a person considering whether to provide finance to such Issuer in reliance on the existence of the relevant Keep-Well Agreement), which is not reflected in the Information Memorandum.

3.4The rights and remedies conferred upon any Dealer (or other indemnified person) under this Clause shall continue in full force and effect notwithstanding the completion of the arrangements set out herein for the issue, sale and purchase of the relevant Instruments and regardless of any investigation made by such Dealer (or other indemnified person).

4.UNDERTAKINGS BY THE DEALERS

4.1Each Dealer undertakes to each Issuer and ABB Ltd that in relation to each Tranche of Instruments agreed as contemplated herein to be sold and purchased:

(a)it will comply with the provisions set out in Schedule 1 hereto it being agreed that, subject to compliance by the relevant Issuer with its obligations under paragraphs (b), (c), (d) and (e) of Clause 3.2 and paragraphs (a) and (k) of Clause 3.3 and not being in breach of any of the representations and warranties on its part contained in paragraphs (a) to (e), (g), (h), (l), (o) and (q) of Clause 3.1, the relevant Issuer shall not have any responsibility in respect of the legality of any Dealer offering and selling Instruments in any jurisdiction or in respect of the Instruments qualifying for sale in any jurisdiction;

(b)in relation to each Tranche of Instruments agreed as contemplated herein to be sold and purchased it will make no public announcement (except for an initial announcement on Reuters in the form typically appearing on Reuters) with regard to the relevant Issuer or ABB Ltd or the issue or sale of the Instruments without the written consent of such Issuer, which consent shall not be unreasonably withheld or delayed;

(c)it will make no representation and supply no information regarding the Issuers, ABB Ltd or any of their respective subsidiaries or the Instruments in connection with the issue or sale of the Instruments other than the form (including the terms and conditions) of the Instruments, the Fiscal Agency Agreement, the Deed of Covenant and the Keep-Well Agreement and other than any information contained in or extracted from any public information

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(including for the avoidance of doubt, the Information Memorandum) or as is approved in writing for such purpose by the relevant Issuer, without the written consent of the relevant Issuer, which consent shall not be unreasonably withheld or delayed; and

(d)it will certify forthwith to the Issuer the date on which it has completed its distribution of each Tranche of Instruments.

4.2Each Dealer agrees with ACBV that:

(a)it can only act as a Dealer in respect of Instruments issued by ACBV if and for so long as it is a “professional market party” within the meaning of the Ministerial Exemption Regulation pursuant to the Netherlands Act on the Supervision of Credit Institutions 1992 and agrees to provide ACBV with such information as it may require to evidence this;

(b)it shall notify any person (each, a “transferee”) to whom it offers, delivers, pledges or otherwise transfers any Instruments issued by ACBV other than High Denomination Instruments (or any beneficial interest or participation therein) of the Dutch selling restrictions applicable to such Instruments;

(c)it will not disclose to ACBV any information regarding the identity of any purchasers or holders of Instruments issued by ACBV on or before the issue date of such Instruments; and

(d)it will be made clear upon making any offers relating to Instruments issued by ACBV with a denomination of less than EUR 50,000 and from any and all documents or advertisements in which the forthcoming offering of such Instruments is publicly announced that the offer is exclusively made to Professional Market Parties (as defined in Schedule 1 to this Agreement) which trade or invest in securities in the conduct of a business or profession.

4.3The obligations of the Dealers hereunder are several.  In addition each of the Dealers agrees that Morgan Stanley & Co. International Limited has only acted in an administrative capacity to facilitate the establishment and/or maintenance of the Programme and has no responsibility to it for (a) the adequacy, accuracy, completeness or reasonableness of any representation, warranty, undertaking, agreement, statement or information in the Information Memorandum, any Pricing Supplement, this Agreement or any information provided in connection with the Programme or (b) the nature and suitability to it of all legal, tax and accounting matters and all documentation in connection with the Programme or any Tranche.

5.INDEMNITY

5.1Each of the Issuers and ABB Ltd undertakes to and agrees with the Dealers and each of them that if such Dealer or any of its officers, directors or employees and each person by whom it is controlled for the purposes of the Securities Act (each a “Relevant Party”) incurs any direct claim, demand, action, liability, damages and loss and any reasonable cost or expense (including, without limitation, reasonable legal fees

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and any applicable value added tax) (a “Loss”) as a result or arising out of or in relation to or in connection with any breach (or any allegation by a person other than any Dealer or any officer, director or employee or controlling person of any Dealer of any breach) of the representations and warranties made by it herein or in writing in any Relevant Agreement or in writing in any other agreement between such Issuer, ABB Ltd and the relevant Dealer(s) in respect of any Instruments agreed to be sold and purchased hereunder or any breach or alleged breach of any of the undertakings given by it herein or in writing in any Relevant Agreement or in writing in any other agreement between such Issuer, ABB Ltd and the relevant Dealer(s) in respect of any Instruments agreed to be sold and purchased hereunder the relevant Issuer or, as the case may be, ABB Ltd shall pay to such Dealer an amount equal to such Loss.  No Dealer shall have any duty or obligation, whether as fiduciary for any Relevant Party or otherwise, to recover any such payment for such Relevant Party or to account to such Relevant Party for any amounts paid to such Dealer under this Clause 5.1.

5.2If any action, proceeding, claim or demand shall be brought or asserted against any Dealer (or any of its officers, directors or employees or any person by whom it is controlled for the purposes of the Securities Act) in respect of which indemnity may be sought from any Issuer or, as the case may be, ABB Ltd as herein provided, such Dealer shall promptly notify such Issuer or, as the case may be, ABB Ltd in writing thereof.

5.3The relevant Issuer or, as the case may be, ABB Ltd shall have the option to assume the defence thereof with legal advisers in each relevant jurisdiction reasonably satisfactory to the relevant Dealer (who shall not without the prior written consent of such Dealer also be legal advisers to the relevant Issuer or, as the case may be, ABB Ltd).  If the relevant Issuer or, as the case may be, ABB Ltd so assumes the defence and retains such legal advisers, such Dealer shall bear the fees and expenses of any additional legal advisers retained by it in any relevant jurisdiction.  If the Issuer or, as the case may be, ABB Ltd does not elect to assume the defence or fails to employ legal advisers in any relevant jurisdiction reasonably satisfactory to such Dealer to represent such Dealer within a reasonable time after notice of commencement of the action, it will reimburse such Dealer for the reasonable fees and expenses of any legal advisers retained by such Dealer.  After timely notice from the relevant Issuer or, as the case may be, ABB Ltd of its election so to assume the defence thereof, such Issuer or, as the case may be, ABB Ltd will not be liable to such Dealer under this Clause 5.3 for any legal expenses subsequently incurred by such Dealer in connection with the defence thereof other than the reasonable costs of investigation.  The Issuer or, as the case may be, ABB Ltd shall not be liable to indemnify any Dealer for any settlement of any such action effected without the written consent of the Issuer or, as the case may be, ABB Ltd which consent shall not be unreasonably withheld or delayed.

5.4The rights and remedies conferred upon any Dealer (or other indemnified person) under this Clause shall continue in full force and effect notwithstanding the completion of the arrangements set out herein for the issue, sale and purchase of the relevant

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Instruments and regardless of any investigation made by such Dealer (or other indemnified person).

5.5Each Dealer undertakes with each Issuer and ABB Ltd that if such Issuer and/or ABB Ltd or any of their respective officers, directors or employees and each person by whom either of the relevant Issuer or ABB Ltd is controlled incurs any direct claim, demand, action, liability, damages and loss and any reasonable cost or expense (including, without limitation, reasonable legal fees and any applicable value added tax) (a “Loss”) as a result or arising out of, or in relation to, or in connection with any breach (or any allegation by a person other than the Issuer, ABB Ltd, any officer, director, employee or controlling person of the Issuer or ABB Ltd of any breach) of any of the warranties, undertakings and agreements made by it herein or in any Relevant Agreement or in writing in any other agreement in respect of any Instruments whether arising before or after the completion of the subscription and issue of the relevant Instruments then such Dealer shall pay to the relevant Issuer or, as the case may be, ABB Ltd an amount equal to such Loss.  The provisions of Clauses 5.3 and 5.4 with respect to the conduct and settlement of actions shall apply mutatis mutandis to this indemnity.

6.COSTS AND EXPENSES

6.1The Issuers (on a several basis or, where any relevant item is attributable to more than one Issuer, on a several basis for a proportion thereof which is the same proportion as the aggregate principal amount of Instruments issued by such Issuer and outstanding as at the relevant date for payment bears to the aggregate principal amount of Instruments issued under the Programme and outstanding as at the relevant date for payment) are each, failing which ABB Ltd is, responsible for payment of the proper costs, charges and expenses (and any applicable value added tax):

(a)incurred by it or of any legal, accountancy and other professional advisers retained and instructed by it in connection with the establishment of the Programme, the preparation of the Information Memorandum, the preparation, production and delivery of this Agreement, the Fiscal Agency Agreement, the Deeds of Covenant and any other document connected with the Programme or the performance of and compliance by it with any of its obligations or without prejudice to Clause 5.5, the exercise of its rights under this Agreement, the Fiscal Agency Agreement, the Deeds of Covenant or the Keep-Well Agreements;

(b)of any legal, accountancy or other professional advisers retained and instructed by it in respect of any Instruments issued by it and any document prepared in connection therewith;

(c)of and incidental to the setting, proofing, printing and distribution of the Information Memorandum and any Pricing Supplements provided that where such costs, charges and expenses are incurred by (a) person(s) other than an Issuer or ABB Ltd, the prior written approval of the relevant Issuer(s) and/or

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ABB Ltd to the incurrence of such costs, charges and expenses shall have been obtained;

(d)of and incidental to the setting, proofing, printing, checking and initial delivery of any Instruments (whether in global or definitive bearer form or in registered form) including inspection and authentication provided that where such costs, charges and expenses are incurred by (a) person(s) other than an Issuer or ABB Ltd, the prior written approval of the relevant Issuer(s) and/or ABB Ltd to the incurrence of such costs, charges and expenses shall have been obtained;

(e)incurred at any time in connection with the listing of Instruments on the Luxembourg Stock Exchange or on such other listing authority, stock exchanges and/or quotation system on which any Instruments may from time to time be admitted to listing, trading and/or quotation and the maintenance of any such admission to listing, trading and/or quotation provided that where such costs, charges and expenses are incurred by (a) person(s) other than an Issuer or ABB Ltd, the prior written approval of the relevant Issuer(s) and/or ABB Ltd to the incurrence of such costs, charges and expenses shall have been obtained; and

(f)of any advertising agreed upon between the Issuers, ABB Ltd or any of them and the Dealers or any of them.

6.2As between the Issuers, ABB Ltd and the Dealers, the Issuers (on a several basis or, where any relevant item is attributable to more than one Issuer, on a several basis for a proportion thereof which is the same proportion as the aggregate principal amount of Instruments issued by such Issuer and outstanding as at the relevant date for payment bears to the aggregate amount of Instruments issued under the Programme and outstanding as at the relevant date for payment) are each, failing which ABB Ltd is, responsible for the payment of the proper costs, charges and expenses (and any applicable value added tax):

(a)incurred by ABB Ltd or of any legal, accountancy and other professional advisers retained and instructed by ABB Ltd in connection with the establishment of the Programme, the preparation of the Information Memorandum, the preparation, production and delivery of this Agreement, the Fiscal Agency Agreement, the Deed of Covenant and any other document connected with the Programme or the performance of and compliance by it with any of its obligations under the Keep-Well Agreement; and

(b)of any legal, accountancy or other professional advisers retained and instructed by it in respect of any Instruments issued by such Issuer and any document prepared in connection therewith;

6.3The Issuers (on a several basis or where any relevant item is attributable to more than one Issuer on a several basis for a proportion thereof which is the same proportion as the aggregate principal amount of Instruments issued by such Issuer and outstanding as

21

at the relevant date for payment bears to the aggregate amount of Instruments issued under the Programme and outstanding as at the relevant date for payment), failing which ABB Ltd, shall be responsible for the payment of all stamp, registration and other taxes and duties (including any interest and penalties thereon or in connection therewith) which may be payable upon or in connection with the execution and delivery of this Agreement and the Fiscal Agency Agreement, the Deed of Covenant executed by such Issuer and/or ABB Ltd, as the case may be, and the issue or initial sale or delivery by such Issuer of Instruments of such Issuer and the execution and delivery by it and/or ABB Ltd, as the case may be, of each Pricing Supplement and any other document to which any Issuer(s) and/or ABB Ltd, as the case may be, is/are party entered into in connection with the Programme or any Instruments of such Issuer and shall indemnify each Dealer against any direct claim, demand, action, loss, liability and damages and any reasonable cost or expense (including, without limitation, reasonable legal fees and any applicable value added tax) which it may incur as a result or arising out of or in relation to any failure to pay or delay in paying any of the same.

7.NOTICES AND COMMUNICATIONS

7.1All notices and communications hereunder shall be made in writing (by letter (first class mail, in the case of inland post and airmail, in the case of cross border post), telex or fax) and shall be sent to the addressee at the address, telex number or fax number specified against its name in Schedule 7 to this Agreement (or, in the case of a Dealer not originally party hereto, specified by notice to each Issuer, ABB Ltd and the other Dealers at or about the time of its appointment as a Dealer) and for the attention of the person or department therein specified (or as aforesaid) or, in any case, to such other address, telex number or fax number and for the attention of such other person or department as the addressee has by prior notice to the sender specified for the purpose.

7.2Whenever a notice or other communication shall be given as aforesaid by telex or fax it shall be deemed received (subject, in the case of telex, to a confirmed answer back being received at the end of the transmission and, in the case of fax, to confirmation being received at the end of the transmission) on the day of dispatch provided that if the time of despatch is after 3.00 p.m. (local time of the recipient) on any day which is a business day (in the place of the recipient) or any time on a day which is not a business day (in the place of the recipient), it shall be deemed to have been received on the next business day (in the place of the recipient) and whenever a notice or other communication is sent by post as aforesaid it shall be deemed received three days (in the case of inland post) or seven days (in the case of cross border post) after being posted in a properly prepaid envelope and whenever a notice or other communication is delivered by hand, it shall be deemed received upon actual delivery.

8.CHANGES IN DEALERS

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8.1The Issuers and/or ABB Ltd may:

(a)by ten days’ notice in writing to any Dealer, terminate the right of such Dealer to remain a Dealer under this Agreement (but without prejudice to any rights, liabilities, duties or obligations accrued or incurred on or before the effective date of termination and in particular the validity of any existing agreement for the sale and purchase of any Instruments); and/or

(b)nominate any reputable institution, which may include any of the Issuers and/or ABB Ltd, as a new Dealer hereunder either generally in respect of the Programme or in relation to a particular Tranche of Instruments, in which event upon the execution by such institution of a supplemental agreement in the terms set out in Schedule 3 to this Agreement or in terms acceptable to the other parties hereto such institution shall, subject as provided below, become a party hereto with all the authority, rights, powers, duties and obligations of a Dealer hereunder either generally in respect of the Programme or in relation to a particular Tranche of Instruments provided always that an institution which has become a Dealer in relation to a particular Tranche of Instruments shall not be entitled to the benefit of the undertakings of the Issuers and ABB Ltd contained in Clause 3.3 and Clause 5.1, except for those contained in paragraphs (a), (f)(ii) and (iii), (g), (h), (i) and (k) of Clause 3.3 and the provisions of Clauses 8, 9 and 10 shall not apply to any such Dealer.

8.2Any Dealer may, by ten days’ written notice to each Issuer and ABB Ltd, resign as a Dealer under this Agreement (but without prejudice to any rights, liabilities, duties or obligations accrued or incurred on or before the effective date of resignation and in particular the validity of any existing agreement for the sale and purchase of any Instruments).

8.3The Issuers or ABB Ltd will notify the Dealers and the Fiscal Agent of any change in the identity of the Dealers appointed generally in respect of the Programme as soon as reasonably practicable thereafter.

9.INCREASE IN AUTHORISED AMOUNT

9.1The Issuers and/or ABB Ltd may, subject to the provisions of Clause 9.2 below, from time to time, by giving at least twenty days’ notice by letter in substantially the form set out in Schedule 5 to this Agreement to each of the Dealers, (with a copy to the Paying Agents and the Registrars), inform each Dealer that the Authorised Amount be increased and, each Dealer will be deemed to have given its consent to the increase in the Authorised Amount, whereupon all references in this Agreement shall be to the increased Authorised Amount.

9.2No increase shall be effective unless and until (i) each of the Dealers shall have received (a) certified true copies (and, if applicable, English translations) of the resolution of the board of directors or, as the case may be, board of managing directors or other governing body of the Issuers and ABB Ltd authorising the increase in the Authorised Amount, (b) the documents and confirmations described in paragraphs 4 and 10 of Schedule 2 to this Agreement and (c) confirmation of the listing of the Programme in respect of Instruments up to the new Authorised Amount

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on the Luxembourg Stock Exchange and any amendment or supplement to the Information Memorandum prepared in connection therewith and (ii) the Issuers and ABB Ltd shall have complied with all legal and regulatory requirements, if any, necessary for the issuance of Instruments up to the new Authorised Amount and shall have provided to each of the Dealers such evidence of compliance as any Dealer may reasonably require.

10.CHANGE IN ISSUERS

10.1An Issuer may, provided that at such time it is not party to a Relevant Agreement in respect of which the related Instruments have not as yet been issued, from time to time by 10 days’ written notice to the Dealers cease, subject to the following provisions of this Clause, to be an Issuer in respect of the Programme.

If, upon the expiry of such notice period, the Issuer does not have outstanding any Instruments then, with effect from the date of the expiry of such notice period such Issuer shall cease to be a party to this Agreement as Issuer, but without prejudice to any rights, liabilities or obligations accrued or incurred under this Agreement on or prior to such date.

If, upon the expiry of such notice period, the Issuer does have outstanding any Instruments, then such Issuer shall not cease to be a party to this Agreement unless and until ABB Ltd or a direct or indirect subsidiary of ABB Ltd shall have been substituted for and become principal debtor in respect of such Instruments or Coupons pursuant to Condition 15 of the Terms and Conditions of such Instruments, in which event such Issuer shall cease to be party to this Agreement on the date upon which such substitution shall take effect, but without prejudice to any rights, liabilities and obligations accrued or incurred under this Agreement on or prior to such date.

10.2Any Issuer may request that ABB Ltd or a direct or indirect subsidiary of ABB Ltd (the “New Issuer”) should become an Issuer in respect of the Programme and accordingly should be party to this Agreement.  If such a request is made, upon the delivery to each of the Dealers of (i) the undertaking of the New Issuer to be bound by the provisions of this Agreement substantially in the form as set out in Schedule 6 hereto and (ii) a copy of an agreement duly executed by the New Issuer whereby the New Issuer agrees to be bound by the Fiscal Agency Agreement, the New Issuer shall become a party to this Agreement as if originally named herein as an Issuer.

11.LAW AND JURISDICTION

11.1This Agreement and each Relevant Agreement is governed by, and shall be construed in accordance with, English law.

11.2Each of the Issuers and ABB Ltd hereby agrees for the exclusive benefit of the Dealers that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and any Relevant Agreement and that accordingly any suit, action or proceedings (together referred to as “Proceedings”) arising out of or in connection with this Agreement and any Relevant Agreement may

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be brought in such courts.  Nothing contained in this Clause shall limit any right to take Proceedings against any Issuer or ABB Ltd in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not.

11.3Each of the Issuers and ABB Ltd hereby appoints ABB Limited of Daresbury Park, Daresbury, Warrington WA4 4BT, Cheshire) to accept service of any Proceedings on its behalf in England.  If for any reason such process agent ceases to act as such or no longer has an address in England, each of the Issuers and ABB Ltd agrees to appoint a substitute process agent and notify the Dealers of such appointment and if any Issuer or ABB Ltd, as the case may be, fails to make any such appointment within twenty-one days, any Dealer shall be entitled to appoint such a person by notice to such Issuer or ABB Ltd, as the case may be.

11.4Nothing contained herein shall affect the right to serve process in any other manner permitted by law.

12.MODIFICATION AND AMENDMENT

No modification or amendment of this Agreement shall be valid unless it is in writing and signed by or on behalf of each of the parties hereto.

13.COUNTERPARTS

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.  Any party may enter into this Agreement by signing any such counterpart.

14.CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.

AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written.

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SCHEDULE 1

SELLING RESTRICTIONS

United States of America:  Each Dealer understands that the Instruments have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act.  Each Dealer represents that it has offered and sold Instruments, and will offer and sell Instruments (i) as part of their distribution at any time and (ii) otherwise until 40 days after the completion of the distribution of Instruments of the relevant Tranche, as determined and certified to the relevant Issuer by such Dealer (or, in the case of a sale of a Tranche of Instruments to or through such Dealer and one or more other Dealers, by each of such Dealers) only in accordance with Rule 903 of Regulation S under the Securities Act.  Accordingly, each Dealer further represents and agrees that neither it, its affiliates nor any person, acting on its behalf have engaged or will engage in any directed selling efforts with respect to Instruments, and that it and they have complied and will comply with the offering restrictions requirement of Regulation S.  Each Dealer agrees that, at or prior to confirmation of sale of Instruments, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Instruments from it during the distribution compliance period a confirmation or notice to substantially the following effect:

“The Instruments covered hereby have not been registered under the U.S. Securities Act of 1933 (the “Securities Act”) and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until forty days after the later of the commencement of the offering and the issue date of the Instruments of the relevant Tranche, except in either case in accordance with Regulation S under the Securities Act.  Terms used above have the meanings given to them by Regulation S.”

Terms used in the above paragraph have the meanings given to them by Regulation S.

Each Dealer represents and agrees that it has not entered and will not enter into any written agreement with any person with respect to any sub-underwriting, selling group or other similar arrangement relating to the distribution or delivery of Instruments except with its affiliates or with the prior written consent of the relevant Issuer.

In addition, each Dealer represents and agrees that:

(i)except to the extent permitted under U.S. Treas. Reg. § 1.163-5(c)(2)(i)(D) (the “D Rules”), (x) it has not offered or sold, and during the restricted period will not offer or sell, Instruments in bearer form to a person who is within the United States or its possessions or to a United States person, and (y) such Dealer has not delivered and will not deliver within the United States or its possessions definitive Instruments in bearer form that are sold during the restricted period;

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(ii)it has and throughout the restricted period will have in effect procedures reasonably designed to ensure that its employees or agents who are directly engaged in selling Instruments in bearer form are aware that such Instruments may not be offered or sold during the restricted period to a person who is within the United States or its possessions or to a United States person, except as permitted by the D Rules;

(iii)if such Dealer is a United States person, it represents that it is acquiring the Instruments in bearer form for purposes of resale in connection with their original issuance and, if such Dealer retains Instruments in bearer form for its own account, it will only do so in accordance with the requirements of U.S. Treas. Reg. § 1.163-5(c)(2)(i)(D)(6);

(iv)with respect to each affiliate (if any) that acquires from such Dealer Instruments in bearer form for the purposes of offering or selling such Instruments during the restricted period, such Dealer either (A) hereby represents and agrees on behalf of such affiliate (if any) to the effect set forth in sub-paragraphs (i), (ii) and (iii) of this paragraph or (B) agrees that it will obtain from such affiliate (if any) for the benefit of the relevant Issuer the representations and agreements contained in sub-paragraphs (i), (ii) and (iii) of this paragraph; and

(v)it will obtain from any distributor (within the meaning of U.S. Treas. Reg. § 1.163-5(c)(2)(i)(D)(4)(ii)) that purchases any Instruments in bearer form from such Dealer pursuant to a written contract with it (except a distributor that is one of its affiliates or is another Dealer), for the benefit of the Issuer and each other Dealer, the representations contained in, and such distributor’s agreement to comply with, the provisions of sub- paragraphs (i), (ii), (iii) and (iv) of this paragraph insofar as they relate to the D Rules, as if such distributor were a Dealer hereunder.

Terms used in the above paragraphs have the meanings given to them by the United States Internal Revenue Code of 1986 and Regulations thereunder, including the D Rules.

Each issuance of index-, commodity- or currency-linked Instruments shall be subject to additional U.S. selling restrictions as the relevant Dealer or Dealers shall agree as a term of the issuance and purchase of such Instruments.  Each Dealer agrees that it shall offer, sell and deliver such Instruments only in compliance with such additional U.S. selling restrictions.

United Kingdom:  Each Dealer further represents and agrees that:

(a)No offer to public

In relation to Instruments which have a maturity of one year or more, it has not offered or sold and, prior to the expiry of a period of six months from the issue date of such Instruments, will not offer or sell any such Instruments to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes

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of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995;

(b)No deposit-taking

In relation to any Instruments having a maturity of less than one year from the date of their issue:

(1)it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business; and

(2)it has not offered or sold and will not offer or sell any Instruments other than to persons:

(a)whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses; or

(b)who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses,

where the issue of the Instruments would otherwise constitute a contravention of section 19 of the FSMA by the Issuer;

(c)Financial promotion

It has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Instruments in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and

(d)General compliance

It has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Instruments in, from or otherwise involving the United Kingdom.

Japan:  Each Dealer understands that the Instruments have not been and will not be registered under the Securities and Exchange Law of Japan and, accordingly, undertakes that it will not offer or sell any Instruments directly or indirectly, in Japan or to, or for the benefit of, any Japanese Person or to others for re-offering or re-sale, directly or indirectly, in Japan or to any Japanese Person except under circumstances which will result in compliance with all applicable laws, regulations and guidelines promulgated by the relevant Japanese governmental and regulatory authorities and in effect at the relevant time.  For the purposes of this paragraph, “Japanese Person” shall mean any person resident in Japan, including any corporation or other entity organised under the laws of Japan.

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The Netherlands/Global:

(a)Instruments issued by ACBV

Each Dealer represents and agrees (and each Dealer further appointed under the Programme will be required to represent and agree) that Instruments issued by ACBV (including rights representing an interest in a Global Instrument) may not be offered, sold, transferred or delivered as part of their initial distribution or at any time thereafter, directly or indirectly, to anyone anywhere in the world other than to the following entities (hereinafter referred to as “Professional Market Parties” or “PMPs”) provided they acquire the Instruments for their own account and, if such Instruments have an individual denomination of less than € 50,000 (or the equivalent in other currency), they also trade or invest in securities in the conduct of a business or profession:

(i)banks, insurance companies, securities firms, collective investment institutions or pension funds that are (i) supervised or licensed under Dutch law or (ii) established in a European Economic Area member state (other than The Netherlands), Hungary, Monaco, Poland, Puerto Rico, Saudi Arabia, Slovakia, Czech Republic, Turkey, South Korea, the United States, Japan, Australia, Canada, Mexico, New Zealand or Switzerland, and are subject to prudential supervision in their country of establishment;

(ii)collective investment institutions which offer their shares or participations exclusively to professional investors (or, as far as foreign investment institutions are concerned: to such investors located in The Netherlands) and are not required to be supervised or licensed under Dutch law;

(iii)the Dutch government (de Staat der Nederlanden), the Dutch Central Bank (de Nederlandsche Bank N.V.), a foreign government body being part of a central government, a foreign central bank, Dutch or foreign regional, local or other decentralised governmental institutions, international treaty organisations and supranational organisations;

(iv)enterprises or entities with total assets of at least €500,000,000 (or the equivalent thereof in another currency) according to their balance sheet at the end of the financial year preceding the date they purchase or acquire the Instruments;

(v)enterprises, entities, or natural persons with a net equity (eigen vermogen) of at least €10,000,000 (or the equivalent thereof in another currency) according to their balance sheet at the end of the financial year preceding the date they purchase or acquire the Instruments and who or which have been active in the financial markets on average twice a month over a period of at least two consecutive years preceding such date;

(vi)subsidiaries of the entities referred to under (i) above, provided such subsidiaries are subject to prudential supervision;

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(vii)enterprises or entities that have a credit rating from an approved rating agency or whose securities have such a rating; and

(viii)such other entities designated by the competent Netherlands authorities after the date hereof by any amendment of the applicable regulations.

All Instruments shall bear a legend to the following effect, it being understood and agreed that the receipt of the Information Memorandum by initial offerees from the Arranger shall constitute sufficient notice of the transfer restrictions set out in the legend:

“THIS INSTRUMENT (OR ANY INTEREST THEREIN) MAY NOT BE SOLD, TRANSFERRED OR DELIVERED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN TO PROFESSIONAL MARKET PARTIES (“PMP”) WITHIN THE MEANING OF THE EXEMPTION REGULATION UNDER THE DUTCH ACT ON THE SUPERVISION OF CREDIT INSTITUTIONS 1992 (AS AMENDED).

EACH HOLDER OF INSTRUMENTS (OR ANY INTEREST THEREIN), BY PURCHASING SUCH INSTRUMENTS (OR ANY INTEREST THEREIN), WILL BE DEEMED TO HAVE REPRESENTED AND AGREED FOR THE BENEFIT OF THE COMPANY THAT (1) IT IS A PMP AND IS ACQUIRING SUCH INSTRUMENTS (OR ANY INTEREST THEREIN) FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A PMP, THAT (2) SUCH INSTRUMENTS (OR ANY INTEREST THEREIN) MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO ANYONE ANYWHERE IN THE WORLD OTHER THAN A PMP ACQUIRING FOR ITS OWN ACCOUNT OF FOR THE ACCOUNT OF A PMP AND THAT (3) IT WILL PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS DESCRIBED HEREIN TO ANY SUBSEQUENT TRANSFEREE.”

The above restriction and legend requirement shall not apply with respect to Instruments issued by ACBV in a particular Series provided the following conditions are met (such Instruments herein referred to as: “High Denomination Instruments”):

(a)all such Instruments of the relevant Series shall have a denomination of at least €500,000 or such lower denominations as shall be applicable under Dutch banking regulations (or the equivalent in other currency); and

(b)on the Issue/Closing Date for the Instruments ACBV is either not reasonably able to identify the holders thereof (other than the Dealer(s) purchasing such Instruments from ACBV who must be a PMP identified as such by ACBV in accordance with the Dutch Central Bank’s regulations) or has verified in accordance with such regulations that all holders it is reasonably able to identify are PMPs; and

(c)all Notes are held at the Issue/Closing Date through a clearing system that is established in a European Economic Area member state, the United States,

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Japan, Australia, Canada or Switzerland in which securities can only be held through a licensed bank or securities firm.

(b)Instruments issued by AIFLTD

Each Dealer further represents and agrees that it has not, directly or indirectly, offered and it will not, directly or indirectly, offer any Instruments (including rights representing an interest in a Global Instrument) of AIFLTD or any New Issuers incorporated outside the European Economic Area in The Netherlands as part of their initial distribution or by way of reoffering, except for Instruments with a denomination of at least EUR 50,000 (or the equivalent thereof in another currency), provided that if any such Instruments are issued:

(1)at a discount, they may only be offered if their issue price is no less than EUR 50,000 (or its equivalent in any other currency);

(2)on a partly-paid basis, they may only be offered if paid-up by their initial holders to at least such amount;

(3)with a denomination of precisely Euro 50,000 (or its equivalent in any other currency), they may only be offered on fully-paid basis and at par or at a premium.

(c)Instruments issued by ACBV and AIFLTD

Each Dealer represents and agrees that, in addition and without prejudice to the restrictions set out above under (a) and (b) and regardless of their denomination in respect of Zero Coupon Instruments and other Instruments on which no interest is paid during their tenor or on which no interest is due whatsoever (other than Registered Instruments) that it has not, directly or indirectly, offered, sold, transferred or delivered, and will not, directly or indirectly, offer, sell, transfer or deliver any of such Instruments in the Netherlands as part of their initial distribution or immediately thereafter.

Federal Republic of Germany: Each Dealer confirms that it is aware of the fact that no German selling prospectus (Verkaufsprospekt) has been or will be published with respect to the Programme and that such Dealer will comply with the Securities Selling Prospectus Act (the “SSPA”) of the Federal Republic of Germany (Wertpapier-Verkaufsprospektgesetz).  In particular, each Dealer undertakes not to engage in public offering (öffentliches Anbieten) or other selling activities in the Federal Republic of Germany with respect to any Instruments issued under the Programme otherwise than in accordance with the SSPA and any other legislation replacing or supplementing the SSPA and all other applicable laws and regulations.

France:  Each of the Dealers and the Issuers has represented and agreed that it has not offered or sold or caused to be offered or sold and will not offer or sell or caused to be offered or sold, directly or indirectly, any Instruments by way of a public offering in the Republic of France (an appel public à l épargne as defined in Article L.411-1 of the French Code monétaire et financier (formerly, Article 6 of Ordonnance no.67-833 of 28 September 1967), and that offers and sales of Instruments will be made in the Republic of France in

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accordance with each Article L.411-2 et seq. and Decree no.98-880 dated 1 October 1998 relating to offers to a limited number of investors and/or qualified investors.

In addition, each Dealer has represented and agreed that it has not distributed or caused to be distributed and will not distribute or cause to be distributed in the Republic of France the Information Memorandum or any other offering material relating to any Instruments issued under the Programme other than to those investors to whom offers and sales of Instruments may be made as described above.

General:  Each Dealer acknowledges that no action has been or will be taken by the Issuer or any Dealer that would, or is intended to, permit a public offer of the Instruments in any country or jurisdiction where any such action for that purpose is required.  Accordingly, each Dealer undertakes that it will observe all applicable laws and regulations in each country or jurisdiction in or from which it may acquire, offer, sell or deliver Instruments or have in its possession or distribute any offering material, information memorandum, offering circular, prospectus, form of application, advertisement or other document or information.

Each Dealer further agrees that it will not directly or indirectly offer, sell or deliver any Instruments or distribute or publish the Information Memorandum or any other offering material in or from any country or jurisdiction except under circumstances that will, in its reasonable belief, result in compliance with any applicable laws and regulations, including in respect of the jurisdictions set out above, and all offers and sales of Instruments by it will be made on the foregoing terms.

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SCHEDULE 2

CONDITIONS PRECEDENT

1.A certified true copy (and, if applicable, English translation) of the Constitutive Documents of the relevant Issuer and ABB Ltd.

2.Certified true copies (and, if applicable, English translations) of all relevant resolutions of its board of directors or, as the case may be, board of managing directors or other governing body of the relevant Issuer (including any New Issuer) authorising the issuance of Instruments in an aggregate principal amount of up to the Authorised Amount applicable to such Issuer and the execution, delivery and performance by such Issuer of the Dealership Agreement, the Fiscal Agency Agreement, the Deed of Covenant and the Instruments.

3.In relation to the relevant Issuer and ABB Ltd, a list of the names and titles and specimen signatures of the persons authorised:

(a)to sign on behalf of such Issuer or ABB Ltd, as the case may be, the above-mentioned documents;

(b)to sign on behalf of such Issuer or ABB Ltd, as the case may be, all notices and other documents to be delivered pursuant thereto or in connection therewith; and

(c)to take any other action on behalf of such Issuer or ABB Ltd, as the case may be,  in relation to the Programme.

4.Any necessary governmental, tax, exchange control or other approvals or consents.

5.The Dealership Agreement, duly executed.

6.The Fiscal Agency Agreement, duly executed or a conformed copy thereof.

7.In respect of the relevant Issuer, the Deed of Covenant duly executed or a conformed copy thereof.

8.A certified copy of the relevant duly executed Keep-Well Agreement.

9.The Information Memorandum and confirmation of the listing of the Programme and the issuance of Instruments by the relevant Issuer on the Luxembourg Stock Exchange.

10.Legal opinions from suitable lawyers qualified in English law and internal Counsel of ABB Ltd, (in the case of AIFLTD) from the legal advisers to AIFLTD in Guernsey, currently Ozannes, (in the case of ACBV) from the legal advisers to ACBV in the Netherlands, currently Clifford Chance, Amsterdam, (in the case of any New Issuer (as defined in Clause 10.2)) from reputable and suitably qualified legal advisers in the jurisdiction of incorporation and, if different, tax residence of such New Issuer.  Each legal opinion referred to above (other than in respect of any New Issuer) to be delivered pursuant to Clause 3.3(f) of the Dealership Agreement.

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11.Confirmation of the ratings for the Programme obtained from applicable rating agency(ies).

12.In relation to the relevant Issuer and ABB Ltd, a letter from ABB Limited agreeing to act as process agent for such Issuer and ABB Ltd, as the case may be, in relation to the Dealership Agreement, the Fiscal Agency Agreement, the Deed of Covenant and the Instruments.

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SCHEDULE 3
DEALER ACCESSION LETTER

[Date]

[New Dealer[s]]

[Address]

Dear Sirs,

ABB INTERNATIONAL FINANCE LIMITED

ABB CAPITAL B.V.

(the “Issuers”)

Programme for the Issuance of Debt Instruments

We refer to the Dealership Agreement dated 10 March 1993 and amended and restated on 24 November 2004 entered into in respect of the above Programme for the Issuance of Debt Instruments (such agreement, as modified or amended from time to time, the “Dealership Agreement”) between ourselves, ABB Ltd and the Dealers from time to time party thereto, and have pleasure in inviting [each of] you to become a Dealer upon the terms of the Dealership Agreement [in respect of and for the purpose of [specify Tranche of Instruments]](1), a copy of which has been supplied to you by us.  We are enclosing copies of the conditions precedent as set out in Schedule 2 to the Dealership Agreement and copies of the most recent comfort letters and opinions delivered pursuant to paragraph (f) of Clause 3.3 of the Dealership Agreement.  Please return to us a copy of this letter signed by an authorised signatory [on your behalf/on behalf of each of you] whereupon [each of] you will become a Dealer for the purposes of the Dealership Agreement with[, subject as hereinafter provided,] all the authority, rights, powers, duties and obligations of a Dealer under the Dealership Agreement [in respect of and for the purpose of [specify Tranche of Instruments] and provided always that [each of] you shall not be entitled to the benefit of our undertakings contained in Clause 3.3 of the Dealership Agreement except for those contained in paragraphs (a), (f)(ii) and (iii), (g), (h), (i) and (k) thereof and the provisions of Clauses 8, 9 and 10 of the Dealership Agreement shall not apply to [any of] you].(1)

This letter is governed by, and shall be construed in accordance with, English law.

Yours faithfully,

[Names of all current Issuers]

By:

By:

By:

ABB Ltd

By:

(1)Applies only where the incoming Dealer is being appointed in respect of a particular Tranche of Instruments

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CONFIRMATION

We hereby accept the appointment as a Dealer and accept all of the duties and obligations under, and terms and conditions of, the Dealership Agreement upon the terms of this letter [in respect of and for the purpose of [specify Tranche of Instruments]].

We confirm that we are in receipt of all the documents referred to in the second sentence of your letter and have found them to be satisfactory.

For the purposes of the Dealership Agreement our communications details are as set out below.

[NEW DEALER]

By:

Date:

Address:[           ]

Telex:[           ]

Facsimile:[           ]

Attention:[           ]

[NEW DEALER]

By:

Date:

Address:[           ]

Telex:[           ]

Facsimile:[           ]

Attention:[           ]

[(1)Copies to:

(i)all existing Dealers who have been appointed in respect of the Programme generally; and

(ii)the Fiscal Agent.]

(1)Applies only where the incoming Dealer is being appointed in respect of the Programme generally

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SCHEDULE 4
SPECIMEN FORM OF RECORD OF RELEVANT AGREEMENT APPROPRIATE WHERE A GROUP OF
DEALERS ARE JOINTLY AND SEVERALLY AGREEING TO SUBSCRIBE FOR THE RELEVANT
INSTRUMENTS

[Letterhead of the Issuer]

[Date]            

Form of Record of Relevant Agreement

[                      ]

(the “Relevant Dealer”)

[                      ]

(together, with the Relevant Dealer, the “Dealers”)

Dear Sirs

ABB INTERNATIONAL FINANCE LIMITED

ABB CAPITAL B.V.

(the “Issuers”)

Programme for the Issuance of Debt Instruments

Issue of

[Aggregate principal amount and title of Instruments to be issued (the “Instruments”)]

We, [ABB International Finance Limited/ABB Capital B.V.] (the “Issuer”) and ABB Ltd, refer to the dealership agreement (the “Dealership Agreement”) dated 10 March 1993 and amended and restated on 24 November 2004 and made between ourselves, the other Issuers, ABB Ltd and the Dealers named therein and entered into with respect to the Programme for the issuance of debt instruments, described in an information memorandum dated 24 November 2004.  [The Instruments are the subject of an invitation telex dated [        ].]

We write in order to record the agreement between us as follows:

(a)our agreement recorded in this letter is a Relevant Agreement as defined in the Dealership Agreement and is subject to the Dealership Agreement (save as modified in relation to the Instruments as provided herein) and the Pricing Supplement which has been prepared in respect of such Instruments;

(b)we will, in accordance with the Fiscal Agency Agreement dated 10 March 1993 and amended and restated on 24 November 2004 and as further amended or supplemented from time to time, issue the Instruments (represented by an appropriate temporary global instrument) on [           ]* (or such later date, being not later than [        ]*, as may be agreed between us and the Relevant Dealer on your behalf) (the “closing date”);

37

(c)you jointly and severally undertake that you will subscribe for the Instruments on the closing date at their [issue price]* as specified in the invitation telex [plus (if the closing date has been subject to postponement) accrued interest on their principal amount]* (the “Issue Price”) and, on the closing date, pay the net subscription moneys for the Instruments being the Issue Price [(less the commissions, concessions and other matters agreed to be deducted pursuant to paragraph (d) below)] by credit transfer in the currency in which the Instruments are denominated for same day/immediate value to [set out full details of the Issuer’s receiving bank account].

(d)[specify agreement with respect to commissions, concessions, costs and expenses and other such matters stating whether such items may be deducted from the Issue Price payable on the closing date;]

(e)[[          ] agrees to act as [insert details of any calculation agency or similar function which [          ] has agreed to undertake] and we confirm that the provisions of Clause 3.2(f) of the Dealership Agreement will apply to such appointment].**

Please signify your confirmation that the foregoing correctly records the agreement between us by counter-signing and returning the enclosed copy of this letter together with evidence of the authority of the person signing on your behalf.

This letter agreement is governed by, and shall be construed in accordance with, English law.

Yours faithfully

[ABB INTERNATIONAL FINANCE LIMITED/ABB CAPITAL B.V.]

By:	By:
ABB LTD
By:	By:

Confirmed

[list the Relevant Dealer and Dealers in

the agreed order]

By:

*delete or complete as appropriate

**only to be considered in relation to Tranches where a Dealer has agreed to undertake any calculation agency or similar function

38

SCHEDULE 5
NOTICE OF INCREASE OF AUTHORISED AMOUNT

To:[list all current Dealers appointed in respect of the Programme generally]

Dear Sirs,

ABB INTERNATIONAL FINANCE LIMITED

ABB CAPITAL B.V.

(the “Issuers”)

Programme for the Issuance of up to U.S.$5,250,000,000 Debt Instruments

We refer to the Dealership Agreement dated 10 March 1993 and amended and restated on 24 November 2004 entered into in respect of the above Programme for the Issuance of Debt Instruments (such agreement, as modified or amended from time to time, the “Dealership Agreement”), between ourselves as Issuers, ABB Ltd and the Dealers from time to time party thereto.  Terms used in the Dealership Agreement shall have the same meanings in this letter.

Pursuant to Clause 9.1 of the Dealership Agreement, we hereby inform each of the addressees listed above that the Authorised Amount be increased from [          ] to [          ] with effect from [date] or such later date upon which the requirements of Clause 9.2 of the Dealership Agreement shall be fulfilled, subject always to the provisions of Clause 9.2 of the Dealership Agreement.

From the date upon which the increase in the Authorised Amount becomes effective, all references in the Dealership Agreement to the Authorised Amount shall be to the new increased amount as specified herein.

This letter is governed by, and shall be construed in accordance with, the laws of England.

Yours faithfully,

[Names of all current Issuers and/or ABB Ltd]

By:

39

SCHEDULE 6
UNDERTAKING FROM NEW ISSUER

To:[list all current Dealers appointed in respect of the Programme generally]

Dear Sirs,

ABB INTERNATIONAL FINANCE LIMITED

ABB CAPITAL B.V.

(the “Issuers”)

Programme for the Issuance of up to U.S.$5,250,000,000 Debt Instruments

We refer to the Dealership Agreement dated 10 March 1993 and amended and restated on 24 November 2004 entered into in respect of the above Programme for the Issuance of Debt Instruments (such agreement, as modified or amended from time to time, the “Dealership Agreement”), between the Issuers, ABB Ltd and the Dealers from time to time party thereto.  Terms used in the Dealership Agreement shall have the same meanings in this letter.

We desire to become an Issuer in respect of the Programme and accordingly a party to the Dealership Agreement.

We hereby undertake, with effect from [          ], to each of the Dealers to be bound by and to represent, warrant, undertake, perform and comply with all the provisions of the Dealership Agreement in all respects as if we had been originally named a party thereto as Issuer but on the basis that [specify any amendments, supplements or modifications which are necessary to the provisions of the Dealership Agreement in its application to the New Issuer].

This letter is governed by, and shall be construed in accordance with, the laws of England.

Yours faithfully,

[Name of relevant Issuer]

By:

40

SCHEDULE 7
NOTICE DETAILS

ABB INTERNATIONAL FINANCE LIMITED
Address:	Suite 3
	Weighbridge House
	The Pollet
	St. Peter Port
	Guernsey
	GY1 IWL
	Channel Islands
Fax:	+44 1481 729 016
Attention:	Business Administration
copy to:
Address:	ABB Group Treasury Operations
	Affolternstrasse 44
	CH 8050 Zurich
	Switzerland
Fax:	+41 43 317 7474
Attention:	Business Operations
ABB CAPITAL B.V.
Address:	Burgemeester Haspelslaan 65, 5f
	1181NB Amsterdam
	The Netherlands
Fax:	+3120 445 9844
Attention:	Business Administration
copy to:
Address:	ABB Group Treasury Operations
	Affolternstrasse 44
	CH 8050 Zurich
	Switzerland
Fax:	+41 43 317 7474
Attention:	Business Operations

41

ABB LTD
Address:	Affolternstrasse 44
	8050 Zurich
	Switzerland
Fax:	+41 43 317 7992
Attention:	Legal Department
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
Telex:	8812564
Fax:	+44 20 7677 7733
Attention:	Debt Capital Markets - Head of Transaction Management Group

42

SIGNATURES

The Issuers

ABB INTERNATIONAL FINANCE LIMITED

By:	/s/ C.J. Noon	By:	/s/ A. Hall
	Chris Noon		Alex Hall

ABB CAPITAL B.V.

By:	/s/ A. Storck	By:	/s/ Brian van Reijn
	Alfred Storck		Brian van Reijn

ABB Ltd

ABB LTD

By:	/s/ A. Storck	By:	/s/ Richard Brown
	Alfred Storck		Richard Brown

The Dealer

MORGAN STANLEY & CO. INTERNATIONAL LIMITED

By:	/s/ James Walter
	James Walter

43

EX-4.4

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Exhibit 4.4

AMENDMENT LETTER

To:

The Financial Institutions set pit in Schedule I

CC:

Credit Suisse First Boston (the Facility Agent)

1 November 2004

Dear Sirs

        We refer to the US$1,000,000,000 multi-currency revolving credit agreement dated 17 November 2003 as amended on 10 December 2003 between, amongst others, yourselves and ourselves (the Agreement).

Background

        Since our successful restructuring in late 2003, we have continued to make good progress in our core business areas of power and automation technologies resulting in an improved credit profile for the company- We are grateful for your continued support.

Proposed Amendments

        In view of the above, we now wish to propose certain amendments to the Agreement pursuant to Clause 35 (Amendments and Waivers). The effect of these amendments will be:

•

to reduce the commitment fee from the current level to the lower of 40 per cent of the Margin from time to time and 0.50 per cent per annum (Clause 12.1 (a));



•

to remove the obligation on us to provide a Liquidity Plan (Clause 20.4); and



•

to remove any restrictions on OUT ability to prepay, purchase or redeem any bonds or other capital market instruments (Clause 22.9).

        These amendments and certain consequential amendments (together the Amendments) are set out in Schedule 2 to this letter. We also attach as Schedule 3, for ease of reference, blacklined extracts from the Agreement showing the Amendments-

        Under Clause 35 (Amendments and Waivers) of the Agreement, the proposed amendments will require the consent of all Lenders (as defined in the Agreement).

Amendment Fee and Execution Process

        We are proposing to pay an amendment fee of 5 basis points (the Amendment Fee) to each Lender on its participation under the Agreement on the Effective Date (as defined below).

        In order to approve the Amendments, please sign and return to us and to the Facility Agent the enclosed copies of this letter on or before 15 November 2004. The Amendments will be effective on 19 November 2004 (the Effective Date), if approved by all of the Lenders (as defined in the Agreement) prior to that date. We will notify you promptly after the Effective Date whether or not we have received consent.

        We execute this letter on behalf of ourselves and as agent on behalf of the other Obligors.

        Should you have any questions, please contact either Urs Arnold (Phone: +41-43-3l7 6380) or Alex Hall (Phone: +41-43-317 3572) or the Facility Agent, CSFB (Thomas Muoio, Phone: +44-20-7888 2128; Marc Pereira-Mendoza, Phone: +44-20-7888 7764).

        Please fax your completed consent to ABB (Fax: +41-43-317 3929) and to the attention of Paul Ronchi at CSFB (Fax: +44-20-7888 8398).

        For your information towards the end of this week you will also receive the quarterly covenant compliance information package for the existing Credit Facility,

Yours faithfully

/s/ Dr. Alfred Storck Dr. Alfred Storck
Authorized signatory for
/s/ Urs Arnold Urs Arnold
Authorized signatory for

ABB LTD

As Obligors' Agent for and
on behalf of itself and the Obligors

2

Form of acknowledgement of the amendment letter

We agree to the Amendments outlined above.

By:
	/s/ Banco Bilbao Vizcaya Argentaria
[INSERT NAME OF LENDER]

/s/ Christopher Metherell Christopher Metherell
Global Relationship Manager
/s/ George Silva-Rozzi George Silva-Rozzi
Global Relationship Manager

3

Form of acknowledgement of the amendment letter

We agree to the Amendments outlined above.

/s/ Roger Cosly[INSERT NAME OF LENDER]

Barclays Bank PLC

4

Amendment Fee and Execution Process

        We are proposing to pay an amendment fee of 5 basis points (the Amendment Fee) to each Lender on its participation under the Agreement on the Effective Date (as defined below).

        In order to approve the Amendments, please sign and return to us and to the Facility Agent the enclosed copies of this letter on or before 15 November 2004. The Amendments will be effective on 19 November 2004 (the Effective Date), if approved by all of the Lenders (as defined in the Agreement) prior to that date. We will notify you promptly after the Effective Date whether or not we have received consent.

        We execute this letter on behalf of ourselves and as agent on behalf of the other Obligors.

        Should you have any questions, please contact either Urs Arnold (Phone: +41-43-317 6380) or Alex Hall (Phone; +41-43-317 3572) or the Facility Agent, CSFB (Thomas Muoio, Phone: +44-20-7888 2128; Marc Pereira-Mendoza, Phone: +44-20-7888 7764).

        Please fax your completed consent to ABB (Fax: +41-43-317 39290 and to the attention of Paul Ronehi at CSFB (Fax: +44-20-7888-8398).

        For your information towards the end of this week you will also receive the quarterly covenant compliance information package for the existing Credit Facility.

Yours faithfully

/s/ Dr. Alfred Storck Dr. Alfred Storck
Authorized signatory for
/s/ Urs Arnold Urs Arnold
Authorized signatory for

ABB LTD

We agree to the Amendments outlined above.

Bayerische Hypo-und Vereinsbank AG

/s/ Harold Stegmaier Harold Stegmaier
Senior Vice President
/s/ Thomas Pentenrieder Thomas Pentenrieder
Vice President

5

Form of acknowledgement of the amendment letter

We agree to the Amendments outlined above.

By:	/s/  BNP PARIBAS SA
[INSERT NAME OF LENDER]

/s/ Bummound Heurdier Bummound Heurdier
/s/ Lionel Bordonier Lionel Bordonier

6

Form of acknowledgement of the amendment letter

We agree to the Amendments outlined above.

By:	IXIS CORPORATE AND INVESTMENT BANK
[INSERT NAME OF LENDER]

/s/ Henri Malick Henri Malick
Managing Director for Financing Activities

7

Form of acknowledgement of the amendment letter

We agree to the Amendments outlined above.

By:	Citibank, N.A.            4 Nov. 2004
[INSERT NAME OF LENDER]

/s/ Timo Vatto Timo Vatto
Managing Director

8

Form of acknowledgement of the amendment letter

We agree to the Amendments outlined above.

By:	COMMERZBANK        12 Nov. 2004
[INSERT NAME OF LENDER]

/s/ Wohwen Czaja Wohwen Czaja

9

To:	ABB Ltd. Attn. Urs Arnold/Alex Hall Fax: +41-43 317 3929
Cc:	Credit Suisse First Boston (the Facility Agent) Attn. Paul Ronchi Fax: +44-207-888-8398
Date:	3 November 2004

Re: ABB Ltd.—USD 1,000,000,000 Multi-Currency Revolving Credit Agreement

        We refer to the Amendment Letter dated 1 November 2004 and are pleased to confirm that we agree to the Amendments outlined therein.

CREDIT SUISSE FIRST BOSTON
/s/  Christopher Roder       Christopher Roder	/s/  Clems Kramer       Clems Kramer

10

Form of acknowledgement of the amendment letter

We agree to the Amendments outlined above.

By: Deutsche Bank Luxembourg S.A.[INSERT NAME OF LENDER]
/s/  A. Schneider       A. Schneider	/s/  N. Hibberd       N. Hibberd

11

Fax +41 43 317 3929

CSFB
Paul Ronchi
Fax +44 20 7888 8398

Our ref. Your ref. Date
Oslo, November 9th 2004

AMENDMENT LETTER

        We agree to the Amendments outlined above.

Yours faithfully
on behalf of DnB NOR Bank ASA

/s/  J. Morten Kreutz       J. Morten Kreutz
Senior Vice President
/s/  Kristi Birkeland       Kristi Birkeland
Vice President

12

Form of acknowledgement of the amendment letter

We agree to the Amendments outlined above.

By: Dresdner Bank Luxembourg S.A.[INSERT NAME OF LENDER]
/s/  C. Kogge       C. Kogge Sous-Directeur	/s/  J. Schirra       J. Schirra Fondé de Pouvoirs Principal

13

Form of acknowledgement of the amendment letter

We agree to the Amendments outlined above.

By: HSBC BANK PLC[INSERT NAME OF LENDER]

/s/  Per Orov Synneman       Per Orov Synneman

14

Form of acknowledgement of the amendment letter

We agree to the Amendments outlined above.

By: POUR ING[INSERT NAME OF LENDER]
/s/  Nick Smit       Nick Smit Attaché à la Direction	/s/  Yves Adler       Yves Adler Director Adjoint

15

Form of acknowledgement of the amendment letter

We agree to the Amendments outlined above.

By: KBC Bank[INSERT NAME OF LENDER]
/s/  Herlinda Wouters       Herlinda Wouters Global Relationship Manager Multinationals KBC Bank NV	/s/  Guy Snoeks       Guy Snoeks General Manager IBB

16

Form of acknowledgement of the amendment letter

We agree to the Amendments outlined above.

By:[INSERT NAME OF LENDER]

Nordea Bank AB (publ)
(a company which by a merger completed and registered on 1 March 2004 has acquired and taken over all assets and rights of Nordea Bank Sweden AB (publ) and assumed all the liabilities and obligations of Nordea Bank Sweden AB (publ))

/s/  Arne Ljung       Arne Ljung
/s/  Cecilia Murray       Cecilia Murray

17

Agency Operations Unit
Samba Financial Group
P.O. Box 839
Riyadh 11421
kingdom of Saudi Arabia
Tol. +968-1-211 7421/7456
Fax +965-1-1211 7488
Telex: 400135 AM8A SJ

9th November 2004	Total No. of pages including this page—1
To: ABB Ltd., Zurich	Fax +41 43 317 3929
Attn: Alfred Stock/Urs Arnold
cc: Credit Suisse First Boston, London	Fax +44-20—7888 8398
Attn: Paul Ronchi
cc: Hasan Ali/Khalid Al-Gwaiz (in-house)

Re:

ABB Ltd $1.0 Billion Multi-currency Revolving Credit Agreement dated 17/11/03 (the "Agreement")

Dear Sirs,

        We refer to your letter dated 1st November 2004 requesting the lenders' approval to amend certain provision of the Agreement and, in response, are pleased to advise you of Samba Financial Group's approval to the Amendments proposed, specifically the:

1.

reduction of commitment fee to the lower of 40 percent of the Margin from time to time and 0.50 percent per annum (Cl. 12.1(a));



2.

termination of ABB Ltd.'s undertaking to provide a Liquidity Plan (Cl. 20.4); and



3.

deletion of any restriction on ABB Ltd.'s ability to prepay, purchase or redeem any bonds or other capital market instruments (Cl. 22.9).

provided other terms of the Agreement not affecting any of these amendments shall remain in full force and effect.

        As requested we attach the form for acknowledging our agreement duly signed by our authorized officers.

Yours faithfully,
Samba Financial Group By:
/s/  Hortendio Taeza       Hortendio Taeza Assistant General manager Head of Agency Operation Unit	/s/  Hasan Ali       Hasan Ali RM EXT 7536

18

Form of acknowledgement of the amendment letter

We agree to the Amendments outlined above.

/s/  Ulla S. Nilsson       Ulla S. Nilsson
Skandinaviska Enskilda Banken AB (Publ) /s/  Martin Lindeberg       Martin Lindeberg

19

Svenska Handelsbanken
Division Handelsbanken Markets

ABB
Attn: Urs Arnold
Fax No. +41 43 317 3929
Date: November 10, 2004

CSFB
Attn: Paul Ronchi
Fax No. +44 20 7888 8398
Date November 10, 2004

Dear Sirs,

Re: ABB Ltd USD 1,000,000,000 multi-currency revolving credit agreement dated 17 November 2003 as amended on 10 December 2003.

We hereby agree to the Amendments outlined in your letter dated 1 November 2004

Yours faithfully
/s/  Anders Almberg       Anders Almberg For and on behalf of Svenska Handelsbanken AB (publ)	/s/  Mona Jöhnk       Mona Jöhnk

20

SCHEDULE 1

FINANCIAL INSTITUTIONS

Barclays Bank plc

Bayerische Hypo- und Vereinsbank AG

BNP Paribas SA

Citibank, N.A.

Commerzbank Aktiengesellschaft

Credit Suisse First Boston

Deutsche Bank Luxembourg S.A.

Dresdner Bank Luxembourg S.A.

HSBC Bank Plc

Nordea Bank Sweden AB (Publ)

Skandinaviska Enskilda Banken AB (Publ)

Svenska Handelsbanken AB (Publ)

Banco Bilbao Vizcaya Argentaria S.A.

CDC IXIS

Den Norske Bank ASA

ING Belgium NV

KBC Bank NV

Saudi American Bank

21

SCHEDULE 2

AMENDMENTS TO THE $1,000,000,000 MULTI-CURRENCY REVOLVING
CREDIT AGREEMENT

1.     Commitment Fee (Clause 12)

Paragraph (s) of Clause 12.1 will be amended to read as follows:

"(a) ABB shall pay to the Facility Agent (for the account of each Lender) a commitment fee in the Base Currency computed al the rate of the lower of 40 per cent. of the Margin from time to time and 0.50 per cent. per annum on that Lender's Available Commitment for the Availability Period."

2.     Provision of Liquidity Plan (Clause 20)

(a)

Principal amendment

"ABB shall supply to the Facility Agent (in sufficient copies for all the Lenders), on or prior to 1 December of each financial year ending after 31 December 2003 an updated Business Plan (in respect of financial years ending in 2005 and 2006 for the Business Plan delivered on or prior to 1 December 2004 and in respect of the financial year ending in 2006 for the Business Plan delivered on or prior to 1 December 2005)."

(b)

Consequential amendments:

(i)

The reference to Clause 20.4 in the definition of "Business Plan" will be amended to read "Clause 20.4 (Business Plan)".

(ii)

The definition of "Liquidity Plan" will be deleted.

(iii)

The heading of Clause 19.11 will be amended to read "Financial Statements" and paragraph (f) of this Clause will be deleted.

(iv)

Paragraph (b) of Clause 19.19 (Repetition) will be deleted and paragraph (c) will be amended to read:

"(b)  [Intentionally deleted.]

(c)  The representation and warranty in paragraph (b) of Clause 19.10 (No misleading information) is deemed to be made by ABB on the day each Business Plan is delivered to the Facility Agent pursuant to Clause 20.4 (Business Plan)."

(v)

Paragraph (a)(ii) of Clause 20.3 and the word "; and" at the end of paragraph (a)(i) will be deleted, Paragraph (a)(i) will be renumbered accordingly.



(vi)

The definition of "Net Debt" in Clause 21.1 will be amended to read as follows:

"Net Debt means Total Gross Debt less cash available in group treasury operations."

(vii)

The definition of "Total Gross Debt" in Clause 21.1 will be amended by the deletion of the words commencing in line 3 ", as reported in the latest available Liquidity Plan,"

(viii)

Paragraph (b) (iii) of Schedule 11 (Form of Covenant Compliance Certificate) win be amended to read as follows:

"(iii) Cash available in group treasury operations was [    •    ]."

3.     Prepayment of Group Facilities (Clause 22.9)

The text of Clause 22.9 will be deleted and will be replaced by the words "[Intentionally deleted.]"

22

SCHEDULE 3

EXTRACTS FROM THE AGREEMENT

11.3 Alternative basis of interest or funding

(a)

If a Market Disruption Event occurs and the Facility Agent or ABB so requires, the Facility Agent and ABB shall enter into negotiations (for a period of not more than thirty days) with a view to agreeing a Substitute basis for determining the rate of interest.



(b)

My alternative basis agreed pursuant to paragraph (a) above shall, with the prior Consent of the Majority Lenders and ABB, be binding on all Parties.

11.4 Break Costs

(a)

The relevant Borrower shall, within three Business Days of demand by a finance Party, pay to that Finance Party its Break Costs attributable to all or any part of an Advance or Unpaid Sum being paid by that Borrower on a day other than the last day of an Interest Period for that Advance or Unpaid Sum.



(b)

Each Lender shall, as soon as reasonably practicable after a demand by the Facility Agent, provide to ABB and the relevant Borrower a certificate (which shall constitute prima facie non-binding evidence of the matters to which it refers) addressed to the Facility Agent, ABB and the relevant Borrower confirming the amount of its Break Costs for any Interest Period in which they accrue and setting out the manner of computing such Break Costs.

12.   FEES

12.1 Commitment Fee

(a)

ABB shall pay to the Facility Agent (for the account of each Lender) a commitment fee in the Base currency computed at the rate of the lower of 40 per cent. of the Margin from time to time and 0.50 per cent. per annum.



(b)

The accrued commitment fee is payable on the last day of each successive period of three Months which ends during the Availability Period, on the last day of the Availability Period and, if cancelled in full, on the cancelled amount of the relevant Lender's Commitment at the time the cancellation is effective.

12.2 Utilisation Fee

(a)

ABB shall pay to the Facility Agent (for the account of the Lenders pro rata to their portion of Total Outstandings) a utilisation fee in respect of the Total Outstandings calculated using the rate per annum computed in accordance with the table set out in Schedule 4 (The Margin and Utilisation Fee) provided that:



(i)

on any day that ABB has Credit Ratings from S&P and Moody's which are divergent from each other, the applicable rate per annum for such day shall be the average of the rates applicable to the two Credit Ratings;



(b)

Each Covenant Compliance Certificate shall be signed by two officers of ABB without personal liability.

23

20.4 Business Plan

ABB shall supply to the Facility Agent (in sufficient copies for all the Lenders), on or prior to 1 December of each financial year ending after 31 December 2003 an updated Business Plan (in respect of financial years ending in 2005 and 2006 for the Business Plan delivered on or prior to 1 December 2004 and in respect of the financial year ending in 2006 for the Business Plan delivered on or prior to 1 December 2005)

20.5 Information: miscellaneous

        ABB shall supply to the Facility Agent (in sufficient copies for all the Lenders, if the Facility Agent so requests):

(a)

all documents dispatched by it to its shareholders (or any class of them) Of its creditors generally at the same time as they are dispatched;



(b)

promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings or Environmental Claim which are current, threatened or pending against one or more Group Companies and which could reasonably be expected to have a Material Adverse Effect;



(c)

promptly, such further information regarding the financial condition, business and operations of any Group Company as any Finance Party (acting through the Facility Agent) may reasonably request; and



(d)

promptly upon becoming aware of a material development, details of the progress of the Combustion Engineering Inc Chapter XI filing and any change in the structure of the Group that is material to the interests of the Lenders.

20.6 Notification of default

(a)

ABB and each Obligor snail notify the Facility Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by another Obligor).



(b)

If any Lender considers in good faith that a Default is continuing, promptly upon a request by the Facility Agent, ABB shall supply to the Facility Agent a certificate signed by two of its authorized signatories (without personal liability) on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).

        "Base Currency" means Dollars.

        "Base Currency Amount" means, in relation to an Advance, the amount specified in the Utilisation Request delivered by the relevant Borrower for that Advance (or, if the amount requested is not denominated in the Base Currency, that amount converted into the Base Currency at the Facility Agent's Spot Rate of Exchange on the date which is 3 Business Days before the Utilisation Date or, if later, on the date the Facility Agent receives the Utilisation Request) adjusted to reflect any repayment or prepayment of the Advance.

        "Borrowers" means each Original Borrower and each Additional Borrower, provided that it has not been released from its rights and obligations under this Agreement in accordance with Clause 25.3 (Resignation of Borrower),

        "Break Costs" means the amount (if any) by which;

24

(a)

the interest (excluding the Margin), which a Lender should have received for the period from the date of receipt of all or any part of its participation in an Advance or Unpaid Sum to the last day of the current Interest Period in respect of that Advance: or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;

        exceeds:

(b)

the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

"Business Day" means:

(a)

in relation to any Advance, a day (other than a Saturday or Sunday) on which banks are open for general business in London, and:



(i)

(in relation to any date for payment or purchase of a currency other than Euro) the principal financial centre of the country of that currency; or



(ii)

(in relation to any date for payment or purchase of Euro) any TARGET Day; and



(b)

for all other purposes, a day (other than a Saturday or Sunday) on which banks are open for general business in London.

        "Business Plan" means the 3 year business plan (consisting of an income statement and balance sheet of the Group) dated 7 October 2003 prepared by ABB and as updated in accordance with Clause 20.4 (Business Plan)

        "Lender" means;

(a)

any Original Lender; and



(b)

any bank which has become a Party as a Lender in accordance with Clause 24 (Changes to the Lenders),

        which in each case has not ceased to be a Party in accordance with the terms of this Agreement.

        "LIBOR" means, in relation to any Advance:

(a)

the applicable Screen Rate; or



(b)

(if no Screen Rate is available for the currency or period of that Advance) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Facility Agent at its request quoted by the Reference Banks to leading banks in the London interbank market,

as of the Specified Time on the Quotation Day for the offering of deposits in the currency of that Advance and for a period comparable to the Interest Period for that Advance.

        "Majority Lenders" means a Lender or Lenders whose Commitments aggregate 66²/3% or more of the Total Commitments

"Mandatory Cost" means, the percentage rate per annum calculated by the Facility Agent in accordance with Schedule 9 (Mandatory Costs).

25

        "Margin" means, at any time the rate per annum computed in accordance with the table set out in Schedule 4 (The Margin and Utilisation Fee) provided that:

(a)

on any day that ABB has Credit Ratings from S&P and Moody's which are divergent from each other, the applicable rate per annum for such day shall be the average of the rates applicable to the two Credit Ratings;



(b)

on any day that only one of S&P or Moody's assigns a Credit Rating to ABB, the applicable rate per annum for such day shall be (he rate per annum for that Credit Rating; and



(c)

On any day that neither S&P nor Moody's assigns a Credit Rating to ABB the applicable rate per annum for such day shall be 225 basis points per annum,

        in each case computed in accordance with the table set out in Schedule 4 (The Margin and Utilisation Fee).

        "Material Adverse Effect" means a material adverse effect on:

(c)

Nothing has occurred or been omitted from the information provided by any Group Company in relation to the Information Package and no information has been given or withheld that results in the information contained in the Information Package being untrue or misleading in any material respect as at the date of the relevant component of the Information Package.



(d)

All written information supplied by a Group Company after the date hereof in connection herewith is considered in good faith by ABB to be true, complete and accurate in all material respects as at the date it was given and is not misleading in any material respect as at such date.

19.1 Financial statements

(a)

Its Original Financial Statements were prepared in accordance with GAAP consistently applied.



(b)

Its Original Financial Statements fairly present in all material respects its financial condition and options (consolidated in the case of ABB and, where applicable, any other Obligor) during the relevant financial year,

26

(c)

Each of the latest audited consolidated financial statements required to be delivered under Clause 20.1(a) fairly presents in all material respects the financial position of the Group as at the date to which they were prepared and for the period then ended.



(d)

Each of the latest set of consolidated financial statements required to be delivered under Clause 20.1(b) fairly presents in all material respects the financial condition of the Group as at the date to which they were prepared and for the period then ended.The projections and forecasts contained in the Original Liquidity Plan are fair and based on assumptions considered in good faith by ARB to be reasonable as at the date to which it was drawn up and the Original Liquidity Plan does not omit any information known to ABB which would make such projections and forecasts materially misleading as at the date to which it Was drawn up,

19.12 No Material Adverse Effect

        Since June 2003:

(a)

there has been no material adverse change in any of the business, condition (financial or otherwise), operations, performance or properties of the Group (taken as a whole); and



(b)

no event or circumstance Or series of events or circumstances whether related or not has occurred which has a Material Adverse Effect,

will be deemed to have represented and warranted to the Dutch Borrower that on such date it is a PMP.

19.19 Repetition

(a)

The representations and warranties in Clause 19.1 (Status) to Clause 19.6 (Governing law and enforcement), 19.9 (No Default), paragraph (d) of Clause 19-10 (No misleading information), paragraphs (0) and (d) of Clause 19.11 (Financial Statements) and Clause 19.13 (Pari passu ranking) are deemed to be made by each Obligor by reference to the facts and circumstances then existing on the date of each Utilisation Request and the first day of each Interest Period.



(b)

[Intentionally deleted.]



(c)

The representation and warranty y in paragraph (b) of Clause 19.10 (No misleading information) is deemed to be made by ABB on the day each Business Plan is delivered to the Facility Agent pursuant to Clause 20.4 (Business Plan).

20.   INFORMATION UNDERTAKINGS

        The undertakings in this Clause 20 remain in force from the date of this Agreement for 90 long as any amount is outstanding under the Finance; Documents or any Commitment is in force.

20.1 Financial statements

(a)

ABB and each other Obligor shall supply to the Facility Agent in sufficient copies for all the Lender, as soon as the same become available, but in any event within 120 days after the end of each of its financial years in the case of ABB and within 150 days in the case of each other Obligor its statutory unconsolidated annual statements for that financial year.



(b)

ABB shall supply [(I the Facility Agent in sufficient copies for all the Lenders, as soon as the same become available, but in any event before the date falling 120 days after the end of each of its financial years, its audited consolidated annual statements

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(c)

ABB shall supply to tile Facility Agent in sufficient copies for all the Lenders, as soon as the same become available, but in any event within 4S days after the end of each quarter of each of its financial years (except the fourth quarter) its consolidated financial statements far that quarter.

20.2 Requirements as to financial statements

(a)

Each set of financial statements delivered by an Obligor pursuant to Clause 20.1 (Financial statements) shall be certified without personal liability by a director of the relevant company as fairly representing its financial condition as at the date at which those financial statements were drawn up.



(b)

Each set of financial statements delivered pursuant to Clause 20.l (Financial statements) shall be prepared using GAAP.



(c)

Each set of financial statements of an Obligor delivered Pursuant to Clause 20.1 (Financial statements) shall be prepared using GAAP, and accounting practices and financial reference periods consistent with those applied in the preparation of the; Original Financial Statements unless, in relation to any set of financial statements, ABB or the relevant Obligor notifies the Facility Agent that there has been a change in GAAP, or its accounting practices or reference periods and the relevant Obligor in consultation with its auditors delivers to the Facility Agent:



(i)

a description of any change necessary for those consolidated financial statements to reflect the GAAP, accounting practices and reference periods upon which that Obligor's Original Financial Statements were prepared; and



(ii)

in respect of changes affecting the consolidated accounts of the Group, sufficient information, in form and substance as maybe reasonably required by the Facility Agent, to enable the Lenders to determine: whether Clause 21 (Financial covenants) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and that Obligor's Original Financial Statements.

Any reference in this Agreement to those financial statements shall be construed as a reference to those, financial statements as adjusted to reflect the basis upon which the Original Financial Statements were prepared.

20.3 Covenant Compliance Certificate

(a)

ABB shall supply to the Facility Agent, with each set of financial statements delivered by ABB pursuant to paragraph (b) or (c) of Clause 20.1 (Financial Statements), a Covenant Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 21.2 (Financial Statements) and Clause 21.3 (Restriction on Subsidiary Indebtedness) as at the date as at which those financial statements were drawn up

provided that, at any time on and following the Trigger Date, a Covenant Compliance Certificate will only be required to be delivered with each set of financial statements delivered by ABB pursuant to paragraph (b) of Clause 20.1 (Financial Statements) and with each set of financial statements delivered by ABB pursuant to paragraph (c) of Clause 20.1 (Financial Statement) that relate to the end of the second quarter in any financial year).

(d)

charges or credits in respect of employee share plans and other employee incentive arrangements (including the "management incentive plan") which are (in each case) in place as at the date hereof;

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(e)

impairments or write offs relating to marketable securities classified as available for sale and held by group insurance or reinsurance companies; and



(f)

gains or losses arising by reasons of disposals (such as the sale of businesses, long term assets, equity investments and including the abandonment/liquidation of businesses) occurring after 30 June 2003.

        "Net Debt" means Total Gross Debt less cash available in group treasury operations

        "Quarter Date" means the last day of each Relevant Period.

        "Relevant Period" means each period of twelve months ending on the last day of ABB's financial year and each period of twelve months ending on the last day of each quarter of ABB's financial year.

        "Total Gross Debt" means the aggregate short-term borrowings and current maturities on long-term borrowings and long-term borrowings in each case as reflected in ABB's consolidated balance sheet as of the 1st day of the Relevant Period plus, the obligation of members of the Group to make cash payments to the Asbestos Trusts plus (without double counting) the aggregate net proceeds of any Securitisation to the extent that the aggregate net proceeds thereof for the Group at any time exceed $650,000,000 (excluding any amount of such cash proceeds that are not freely transferable under applicable law and regulation to the group treasury operations as disclosed in the Covenant Compliance Certificate) on the last day of the Relevant Period excluding the impact of changes in US GAAP or the application thereof effective after 30 June: 2003 and further excluding any changes from 30 June 2003 in the market valuation of derivatives embedded in the $968,000,000 convertible bond issued by a member of the Group and the related amortisation of discount on issuance resulting from the bifurcation of the embedded derivatives in such bond.

        "Total Gross Interest" means, in respect of any Relevant Period, the interest expense for financial liabilities and costs of the securitisation programmes of the Group as reflected in ABB's consolidated income statement (excluding items considered as other finance expense, such as, but not limited to any fees, taxes or commissions, foreign exchange: gains or losses, gains or losses On marketable securities, gains or losses on derivatives, the effects arising from the bifurcation of toe embedded derivatives in respect of the $968,000,000 convertible bond issued by a member of the Group and charges or credits in relation to management incentive plans).

21.2 Financial Condition

        ABB shall ensure that:

(a)

The ratio of EBITDA to Total Gross Interest for each Relevant Period ended on each Quarter Date specified below (or, after the Trigger Date, each Relevant

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SCHEDULE 11

FORM OF COVENANT COMPLIANCE CERTIFICATE

To: Credit Suisse First Boston as Facility Agent

From: ABB Ltd

Dated:

Dear Sirs

        ABB Ltd $1,000,000,000 Multicurrency Revolving Credit Agreement dated [sp2f] (the "Agreement")

        We refer to the Agreement. This is a Covenant Compliance Certificate delivered with the consolidated accounts of ABB dated [31 March, 30 June, 30 September] [2003] (the "Reference Date"). Terms defined in the Agreement have the same meaning when used in this Covenant Compliance Certificate unless given a different meaning.

        We confirm that:

(a)

EBITDA; Total Gross Interest

In respect of the Relevant Period ending on the Reference Date:

(i)

EBITDA was [    ].



(ii)

Total Gross Interest was [    ].

Therefore the ratio of EBITDA to Total Gross Interest in respect of such period was [    ]: [    ] and the covenant contained in paragraph 21.2(a) of Clause 21 (Financial Covenants) [has/has not] been complied with.

(b)

Net Debt of the Group

(i)

Short-term borrowings of the Group on the Refinance Date were [    ].



(ii)

Short-term borrowings of the Group on the Refinance Date were [    ].



(iii)

Cash available in group treasury operations was [    •    ].



(iv)

Total Gross Debt was [            ].

Therefore the ratio of Net Debt to EBITDA in respect of such period was [    ]:[    ] and the covenant contained in paragraph 21.2(b) of Clause 21 (Financial Covenants) [has/has not] been complied with.

(c)

Consolidated Net Worth

(i)

Consolidated Net Worth en the Reference Date was [    ].

Provided that any acquisition or other transaction that would not be permitted because of the limitation set out in paragraph (8) above may be made if details thereof have been provided to the Lenders and the Majority Lenders have not objected in writing to such acquisition or other transaction within 30 Business Days;

(ii)

at any time after the Trigger Date, in circumstances where two authorized signatories of ABB have certified in writing to the Lenders that on a historic basis for the most recent Quarter Date prior to such acquisition or other transaction and looking forward for each Date falling on 30 June and 31 December during the term of the Facility on a pro forma

30

basis, such acquisition or other transaction would not give rise to a breach of Clause 21.2 (Financial Condition);

(iii)

to a solvent reorganization not affecting the Obligors or any security contemplated or granted pursuant to the Agreed Form Pledges;



(iv)

to JVs entered into by Group Companies provided the formation of such JV is pursuant to the core business of the Group and consistent with the ordinary business practices of me Group as at the date hereof.

22.7 Change of business

        ABB shall procure that no change is made to the business of the Group which would result in the core business of the Group, taken as a whole, being something other than the business of power and automation technology.

22.8 Insurance

        Each Obligor shall (and ABB shall ensure that each Group Company win) maintain insurances on and in relation to its business and assets with reputable underwriters or insurance companies against those risks and to the extent as is usual for companies carrying on the same or substantially similar business in the relevant jurisdiction and taking into account the availability of insurance generally.

22.9 [Intentionally deleted]

22.10 Restrictions on making loans and guarantees

(a)

ABB shall Dot (and shall ensure that no other Group Company shall) after the date of this Agreement make any loans or grant any credit or other financial accommodation (but excluding for the avoidance of doubt its own bank deposits) to or for the benefit of any person or grant any guarantee or Indemnity in respect of the financial obligations or liabilities of any other person.



(b)

Paragraph (a) above does not apply to:

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Exhibit 4.4

AMENDMENT LETTER
SCHEDULE 1 FINANCIAL INSTITUTIONS
SCHEDULE 2 AMENDMENTS TO THE $1,000,000,000 MULTI-CURRENCY REVOLVING CREDIT AGREEMENT
SCHEDULE 3 EXTRACTS FROM THE AGREEMENT
SCHEDULE 11 FORM OF COVENANT COMPLIANCE CERTIFICATE

EX-4.8

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Exhibit 4.8

EXECUTION COPY

SETTLEMENT AGREEMENT AND AMENDMENT

        SETTLEMENT AGREEMENT AND AMENDMENT (this "Settlement"), dated as of February 9, 2005, between ABB Handels- und Verwaltungs AG, a company incorporated under the laws of Switzerland ("ABB"), and Vetco Limited (registered number 4765054) (formerly known as Laradew Limited), a company incorporated under the laws of England and Wales ("Purchaser").

        WHEREAS, ABB and Purchaser entered into a Stock and Asset Purchase Agreement, dated as of January 16, 2004 (as amended, the "Purchase Agreement"; capitalized terms used in this Settlement and not otherwise defined herein shall have the meanings assigned to such terms in the Purchase Agreement), under which Purchaser agreed to purchase or cause to be purchased from ABB and certain of its Affiliates the OGP Shares and the Purchased Assets and to assume or cause to be assumed the Assumed Liabilities, in each case at the Closing;

        WHEREAS, the Closing occurred on July 12, 2004;

        WHEREAS, on September 24, 2004, Purchaser delivered to ABB the Purchase Price Documentation pursuant to Section 2.10(a) of the Purchase Agreement;

        WHEREAS, by agreement of the Parties, ABB's time to deliver a Dispute Notice pursuant to Section 2.10(b) of the Purchase Agreement was extended to November 24, 2004;

        WHEREAS, on November 23, 2004, ABB delivered its Dispute Notice to Purchaser pursuant to Section 2.10(b)(ii) of the Purchase Agreement; and

        WHEREAS, ABB and Purchaser have agreed, among other things, to settle all claims relating to the Post-Closing Adjustment pursuant to Section 2.10 of the Purchase Agreement and certain related matters;

        NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, ABB and Purchaser hereby agree as follows:

        1.    Payments.    (a) Post-Closing Adjustment. Within three Business Days following the execution and delivery of this Settlement, ABB shall pay to Purchaser, by electronic transfer of immediately available funds to Purchaser's Bank Account in the manner provided by Section 2.04(b) of the Purchase Agreement, US$29,470,000. This payment by ABB and the acceptance thereof by Purchaser is in complete and final settlement of all of ABB's and Purchaser's rights and obligations pursuant to Section 2.10 of the Purchase Agreement, including with respect to the Purchase Price Adjustment and the Final Intercompany Settlement Payment.

        (b)    Other Payment.    In addition to the payment identified in Section 1(a) of this Settlement ABB shall, within three Business Days following the execution and delivery of this Settlement, pay to Purchaser, by electronic transfer of immediately available funds to Purchaser's Bank Account in the manner provided by Section 2.04(b) of the Purchase Agreement, US$8,322,887.39 in settlement of certain of the matters identified in column 1(b) of Annex 1 (being US$10,678,089.09 less US$2,355,201.70). The payment made pursuant to this Section 1(b) is deemed to be made in accordance with Section 5.10(b) of the Purchase Agreement.

        2.    Final Effective Date Balance Sheet.    The worksheet entitled "Star 1 & 2 BS by Unit!" within the Excel workbook entitled "ENA June D&T v1.0.xls" (the "ENA Balance Sheet") is hereby deemed to be the Effective Date Balance Sheet for all purposes under the Purchase Agreement. The ENA Balance Sheet, adjusted to reduce Net Assets by the amount set forth in Section 1(a) of this Settlement (the "Net Asset Reduction") and to allocate the Net Asset Reduction in the manner agreed between the parties, is hereby deemed to be the Final Effective Date Balance Sheet for all purposes under the Purchase Agreement. A copy of the Final Effective Date Balance Sheet is attached hereto as Annex 2.

        3.    Settlement of Certain Matters.    The following items shall be settled as set forth below:

        (a)    Kizomba A Receivables; Lummus Global Back Charges [Steps 1 and 2].    Purchaser and ABB agree the following with respect to matters arising under that certain 2001 agreement (the "Kizomba A Agreement") between ABB Lummus Global Inc. ("Lummus Global") and ABB Vetco Gray Inc. ("Vetco Gray"):

        (i)    Purchaser hereby acknowledges that it accepts the payments tendered by Lummus Global in respect of the invoices under the Kizomba A Agreement listed in Annex 3 on the dates and in the amounts set out in such Annex in full satisfaction of such invoices and Purchaser hereby waives and releases any claim it may have that Lummus Global is in breach of its payment obligations with respect to any of such invoices listed as having been paid prior to the date hereof, including any claim related to deductions from invoiced amounts made by Lummus Global in respect of Back Charges (as hereafter defined). More particularly:

        a.    Purchaser hereby acknowledges that it accepts the payment tendered by Lummus Global on December 17, 2004 in the amount of US$430,858.20 in full satisfaction of Invoice No. P2045 originally issued by Vetco Gray on May 28, 2004 in the aggregate amount of US$2,389,745.59;

        b.    Purchaser hereby acknowledges that it accepts the payments tendered by Lummus Global on various dates in the aggregate amount of US$143,952.50 in full satisfaction of Vetco Gray Invoice Nos. P2001, P2027, P2028 and P2041;

        c.    Purchaser hereby acknowledges that it accepts the payment tendered by Lummus Global on January 21, 2005 in the amount of US$1,194,391 in full satisfaction of Invoice No. P2046 originally issued by Vetco Gray on May 28, 2004 in the aggregate amount of US$1,463,241 and Purchaser also acknowledges that the amount of such payment reflects an offset against the original invoice amount in the amount of US$268,850 in respect of certain air freight charges paid by Lummus Global under the Kizomba A Agreement and triggered by a critical path delay on the part of Vetco Gray subsequent to the Effective Date; and

        d.    Purchaser hereby waives and releases any claim it may have that Lummus Global is in breach of its payment obligations with respect to the invoices specified in paragraphs a, b and c above.

        e.    Notwithstanding anything contained in this Section 3(a)(i) to the contrary, the waivers, releases and acknowledgements contained in this Section 3(a)(i) with respect to Vetco Gray Invoice Nos. P2031, P2044, P2055, 72S07626, 517731, 308110 and 71S35761, issued on various dates, shall be conditional upon receipt by Purchaser or a Purchaser Affiliate of the amount set forth in Section 3(a)(v) of this Settlement.

        (ii)    The amount to be paid by ABB to Purchaser pursuant to Section 1(b) of this Settlement includes an amount equal to US$1,958,887.39 with respect to the deduction made by Lummus Global from its December 17, 2004 remittance to Vetco Gray to satisfy Lummus Global's Invoice No. G9-4-901 for recovery of certain Back Charges that Lummus Global claimed were due from Vetco Gray.

        (iii)    The parties shall cause Lummus Global and Vetco Gray to use their reasonable best efforts to reach a settlement with the ABB/Grootint B.V. Joint Venture (the "Joint Venture") on outstanding change orders Nos. 1 through 69 as soon as practicable after the date of this Settlement. Any amounts up to and including US$5,500,000 paid to Vetco Gray by the Joint Venture after the Effective Date in respect of such change orders shall be promptly

2

paid by Vetco Gray to Lummus Global; any amounts in excess of US$5,500,000 shall be retained by Vetco Gray;

        (iv)    ABB represents that it is not aware of, and that Lummus Global has informed ABB that neither Lummus Global nor the Joint Venture has incurred, any costs or expenses (other than those referenced above) as a result of the failure by Vetco Gray to deliver on a timely basis goods or services required to be delivered by Vetco Gray pursuant to the Kizomba A Agreement which it believes are subject to reimbursement by Vetco Gray ("Back Charges"). Notwithstanding such acknowledgement, if there are any additional Back Charges incurred by reason of delays occurring prior to the Effective Date, ABB will reimburse the Purchaser for such Back Charges; and

        (v)    From and after the date hereof Lummus Global will pay pursuant to the terms of the Kizomba A Agreement an amount equal to US$5,430,129.26. Such amount shall be paid in full promptly after the achievement of milestones 10 and 11 in accordance with the Kizomba A Agreement. In the event Lummus Global fails to make such payment as required, ABB shall hereby guarantee the payment obligations of Lummus Global relating to such payment and will make any such payment on Lummus Global's behalf promptly after receiving written notice of such failure to pay from Purchaser or a Purchaser Affiliate. In the event that Lummus Global makes a payment described in this Section 3(a)(v) and any part of such payment is subsequently paid by Purchaser or a Purchaser Affiliate for or on behalf of the creditors of Lummus Global as required by the application to Lummus Global of any bankruptcy, insolvency or similar creditors' rights law (such payment being a "Clawback Amount"), ABB will pay to Purchaser an amount equal to such Clawback Amount promptly following receipt of a notice of the payment by Purchaser or a Purchaser Affiliate of such Clawback Amount (together with evidence of such Clawback Amount in a form reasonably satisfactory to ABB).

        (b)    Intercompany Amounts [Steps 3 and 12].    (i) The amount to be paid by ABB to Purchaser pursuant to Section 1(b) of this Settlement includes an amount equal to US$5,517,000 in respect of the aggregate of the amounts set forth on Annex 4.

        (ii)    The amount to be paid by ABB to Purchaser pursuant to Section 1(b) of this Settlement has been reduced by US$190,000 to reflect the settlement, on a net basis, of additional Intra-Group Trading Amounts reflected on the Final Effective Date Balance Sheet.

        (iii)    Except to the extent paid or payable pursuant to this Settlement, neither ABB nor any of its Affiliates, on the one hand, nor Purchaser nor any of its Affiliates, on the other hand, shall be liable to the other with respect to any obligation attributable to Intra-Group Trading Amounts as of the Effective Date. For the avoidance of doubt and for purposes of this Section 3(b), any Intra-Group Trading Amount shall include only such amounts arising on or prior to the Effective Date.

        (iv)    In the event that ABB or any ABB Affiliate or Purchaser or any Purchaser Affiliate pays an Intra Group Trading Amount that is settled pursuant to this Section 3(b), such payment shall be promptly reimbursed by the payee thereof.

        (c)    Trademark Fees, Management Fees and Research and Development Fees [Step 4].    Neither Purchaser, any OGP Purchaser nor any OGP Subsidiary shall be liable for any fees due to ABB Asea Brown Boveri Ltd. or any of its Affiliates in connection with any agreement for the maintenance of the ABB trademark, the provision of management services or the provision of research and development facilities or services; provided, however, that Purchaser and its Affiliates shall remain liable for all fees due to ABB or any of its Affiliates for services provided after the Closing Date either (i) pursuant to the Transition Services Agreement or (ii) otherwise at the

3

request of the OGP Business, in each case in accordance with the terms of the underlying agreements.

        (d)    Pension Back Charges [Step 5].    The amount to be paid by ABB to Purchaser pursuant to Section 1(b) of this Settlement includes an amount equal to US$496,000 with respect to amounts due to the ABB Plan in the UK (the "ABB UK Plan") and an amount equal to US$137,000 with respect to amounts paid by Purchaser during the period from July 1, 2004 through the Closing Date to the ABB Retiree Medical Plan. Purchaser hereby confirms that Purchaser has paid US$496,000 to the ABB UK Plan and the US$137,000 referred to above to the ABB Retiree Medical Plan. For the avoidance of doubt, this does not in any way reduce ABB's obligations pursuant to Sections 6.05, 6.06 and 6.10 of the Purchase Agreement.

        (e)    U.S. Workers Compensation Back Charges [Steps 6 and 20].    The Parties acknowledge that the Final Effective Date Balance Sheet includes a consolidated provision in the amount of US$1,992,000 in respect of certain workers compensation claims in the United States reflected on the ENA Balance Sheet. ABB hereby waives any right that it or any of its Affiliates may have to charge any other amounts to Purchaser or any of its Affiliates with respect to any amount paid by ABB or any of its Affiliates with respect to a workers compensation claim in the United States known to any Seller as of the Effective Date that is not reflected on the ENA Balance Sheet and the Parties acknowledge that the retrospective premium adjustment under workers compensation insurance with a valuation date of September 30, 2004 is US$271,536 which is hereby waived; provided that except for such waived amount nothing in this Section 3(e) shall prejudice the rights or obligations of either Party under Section 5.12 of the Purchase Agreement.

        (f)    Other Pre-Closing Intercompany Costs [Step 7].    ABB, on behalf of itself and its Affiliates, hereby waives all claims for reimbursement of expenses in the aggregate amount of US$1,305,000 incurred by the OGP Business prior to the Closing Date for the benefit of Purchaser relating to the attendance by management of the OGP Business at certain business functions throughout the world, the replacement of company signs and the order of business stationery and other materials.

        (g)    Transfer of GE Lease for Subsea Intervention Tools [Step 8].    In connection with obtaining the consent of General Electric Structured Finance ("GE Capital") to the assignment to an affiliate of Purchaser of that certain lease agreement (the "Leaseback Agreement") between GE Capital and ABB AS (which consent has been obtained), ABB has guaranteed the payment of all remaining amounts due to GE Capital from such affiliate of Purchaser under the Leaseback Agreement.

        (h)    MMOI Australia Non-Trade Payables [Step 9].    For the avoidance of doubt, the Final Effective Date Balance Sheet does not reflect any adjustment to the Effective Date Balance Sheet with respect to amounts of equity mis-reported as non-trade payables of ABB Vetco Gray Australia Pty Ltd. and EPT (PNG) Ltd. The amount to be paid by ABB to Purchaser pursuant to Section 1(b) of this Settlement includes an amount equal to US$404,000 in settlement of proposed adjustments to the Effective Date Balance Sheet with respect to amounts due to the OGP Business from ABB.

        (i)    Transfer of Kazakhstan Assets [Step 10].    ABB shall use its reasonable best efforts to facilitate the consummation of the transactions contemplated by the Purchase Agreement with respect to Kazakhstan and the Asset Sale and Purchase Agreement, dated July 12, 2004, between ABB (???????) Kazakhstan LLP ("ABB Kazakhstan") and Vetco Aibel Kazakhstan LLP (formerly Vetco International Kazakhstan, Limited Liability Partnership), as amended.

        (j)    Charges under TCO Contract [Step 11].    Purchaser acknowledges that the amount paid by ABB pursuant to Section 3(b)(i) of this Settlement has been reduced by US$1,153,000 to account for costs incurred by ABB Kazakhstan related to the performance of wellhead maintenance and

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other related services at the Tengizchevroil facility on the Tengiz field pursuant to the agreement, dated on or about 2001, between Tengizchevroil LLP and ABB Kazakhstan (the "TCO Contract") and reflected on the ENA Balance Sheet for the period through the Effective Date. Neither Purchaser nor any OGP Purchaser shall otherwise have any liability to ABB or any of the Sellers for any additional costs incurred by ABB Kazakhstan prior to the Effective Date for the performance of wellhead maintenance and other related services at the Tengizchevroil facility on the Tengiz field pursuant to the TCO Contract. Neither ABB nor any of its Affiliates shall have any liability to Purchaser or any Purchaser Affiliate for any additional costs incurred by Purchaser or any Purchaser Affiliate prior to the Effective Date under or in connection with the TCO Contract (including for the avoidance of doubt costs incurred in relation to taxes or social security charges in connection with personnel).

        (k)    Access to E&Y and KPMG Workpapers; Consolidation Schedules and Associated Workpapers; Provision of Services by Lars-Olov Ekholm [Step 13].    ABB (i) hereby consents to the member practices of Ernst & Young Global ("E&Y") and KPMG Global ("KPMG") granting Purchaser and Purchaser's accountants and auditors access to E&Y's and KPMG's workpapers related to the OGP Business for the years 2000 through 2002 and (ii) shall grant Purchaser and Purchaser's accountants and auditors access to those consolidation schedules (setting out the consolidated profit and loss, balance sheet, and cash flow (if previously prepared) and the associated workpapers ancillary to their production) related to the OGP Business for the years 2000 through 2003 and the first six months of 2004, in each case which are in ABB's possession; provided that in each case such access is subject to Purchaser and Purchaser's accountants and auditors executing usual and customary nondisclosure and hold harmless agreements which, to the extent possible, will be in a form substantially similar to the agreements executed by Deloitte & Touche Tohmatsu in connection with the due diligence it conducted in connection with the transaction contemplated by the Purchase Agreement. ABB hereby consents to Lars-Olov Ekholm consulting with and providing services to Purchaser and Purchaser's accountants and auditors with regard to the OGP Business for the years 2000 through 2004.

        (l)    Allocation of Purchase Price [Step 14].    Pursuant to Section 2.04(c) of the Purchase Agreement, Exhibit C to the Purchase Agreement is hereby amended and restated as set forth in Annex 5 attached hereto.

        (m)    Indemnified Projects [Step 16].    The Estimated Indemnified Project Loss Provisions required to be identified pursuant to Section 9.06(c) of, and Section 3.7 of Exhibit E to, the Purchase Agreement aggregate US$89,301,000, comprised of the following amounts with respect to each Indemnified Project:

(i)	Bonga (Subsea Equipment & Umbilicals)	US$34,480,000
(ii)	Corrib Project	US$2,195,000
(iii)	ABO Project (such amount being a gain)	(US$2,069,000	)
(iv)	Workover Trees	US$4,900,000
(v)	Marlim Manifolds	US$34,725,000
(vi)	Caratinga Trees	US$9,607,000
(vii)	Petrobras Riser Joints (Gas Fill)	US$86,000
(viii)	2,500m Horizontal Trees for Roncador Field	US$5,377,000

        For the avoidance of doubt, the foregoing amounts shall be the values of "Element [A]" in the formulas specified in Section 9.06(d)(ii) and (iii) of the Purchase Agreement.

        (n)    Brazilian Lease Extension [Step 17]. With respect to the sublease from ABB Ltda. to ABB Óleo e Gás Ltda. of certain premises in São Paolo, Brazil (the "Brazil Sublease") forming

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part of the premises covered by the head lease held by ABB Ltda. (the "Brazil Head Lease"), in the event that ABB Ltda. shall agree to a reduction in the size of the premises leased under the Brazil Head Lease, ABB shall pay to Purchaser an amount equal to Purchaser's pro rata portion (based upon the proportion that the reduction of the size of the premises leased under the Brazil Sublease bears to the reduction of the size of the premises leased under the Brazil Head Lease) of any compensation paid by the Brazil Head Lease lessor to ABB Ltda. in connection with such reduction. ABB shall use reasonable best efforts to keep Purchaser informed as to the status of any negotiations relating to any reduction to the size of the premises leased pursuant to the Brazil Head Lease.

        (o)    Compliance Related Fees [Step 19].    ABB shall pay all fees related to the Compliance Review incurred prior to July 12, 2004 by firms engaged by or on behalf of ABB or members of the management team of the OGP Business; provided that ABB shall not be liable for such fees to the extent they exceed US$334,000; provided further that the foregoing obligation shall not apply to fees incurred by Clifford Chance LLP, Deloitte & Touche Tohmatsu or Cadwalader, Wickersham & Taft LLP.

        (p)    Congo VAT Claim [Step 21].    ABB shall use reasonable best efforts to provide, or cause to be provided, such assistance to Purchaser as Purchaser may reasonably request in connection with Purchaser's defense of that certain US$460,000 claim for value added taxes made by Coraf, a Congolese government-owned refinery, against the Congo branch of ABB Process Solutions & Services SPA.

        (q)    Congo Redundancy Claim Documentation [Step 22].    ABB shall use reasonable best efforts to provide, or cause to be provided, such assistance to Purchaser as Purchaser may reasonably request in connection with Purchaser's defense of certain claims made by former employees made redundant during the period from 2000 to 2003 against the Congo branch of ABB Process Solutions & Services SPA.

        (r)    Improvements to Information Flow [Step 23].    ABB shall use reasonable best efforts to provide such assistance to Purchaser as Purchaser may reasonably request with regard to the flow of information to facilitate other work streams related to Norwegian pension data and to clarify treatment of the following matters: adjustment to reflect increase of 1.5% to pensions in payment; liabilities and provisions related to expatriates; employees on secondment; salary adjustments at January 1, 2004; retirees in Nordea; effect of 2004 salary negotiations with the engineering union NITO, and transfer of retirees. In agreeing to provide such information ABB does not concede that any of such information is relevant to the determination of any amounts payable pursuant to Article VI of the Purchase Agreement.

        (s)    Compliance Information Access.    Notwithstanding any prior agreements to the contrary between Purchaser and ABB, in connection with the audits of prior period financial statements and/or the proposed initial public offering (as appropriate) of Vetco International Limited (f/k/a Pixiegrove Limited) ("Vetco International") or its ultimate parent, KPMG (acting in its capacity as registered independent auditor of Vetco International), Baker Botts LLP (acting in its capacity as counsel to Vetco International in connection with such proposed initial public offering of its or its ultimate parent's securities) and Andrews Kurth LLP (acting in its capacity as counsel to the underwriters for Vetco International in connection with a proposed initial public offering of its or its ultimate parent's securities) shall be permitted access to information relating to the results and findings of the Compliance Review, including work products of Cadwalader, Wickersham & Taft LLP, Deloitte & Touche Tohmatsu and PricewaterhouseCoopers; provided that such access is subject to each of KPMG, Baker Botts LLP and Andrews Kurth LLP executing a reasonable and customary non-disclosure agreement, including reasonable and customary hold harmless provisions.

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        (t)    Briarpark Lease Extension.    With respect to the Sublease dated July 30, 2004 from ABB Inc. to Vetco Gray Inc. of certain premises (the "Briarpark Premises") in Briarpark, Houston, Texas, U.S.A. (the "U.S. Sublease"), forming part of the premises covered by the head lease dated June 6, 1998 held by ABB Inc. from SV Westchase AB Limited Partnership, ABB shall cause ABB, Inc. to amend the U.S. Sublease (subject to obtaining the requisite consent of the prime lessor, which consent ABB shall use reasonable best efforts to obtain), to grant to Vetco Gray Inc. the option to extend the U.S. Sublease for an additional year (through July 31, 2007) by giving ABB Inc. notice of exercise of such option on or prior to January 31, 2006 (the "Extended Sublease"). The Basic Rent and Operating Expenses per month (each as defined in the U.S. Sublease) for the Extended Sublease shall be equal to one hundred and ten percent (110%) of the Basic Rent and Operating Expenses for the final month of the initial term of the U.S. Sublease.

        (u)    Erik Fougner Service Agreement.    Purchaser hereby confirms that its indirect parent company, Vetco International has served a notice on Erik Fougner terminating his employment with Purchaser, as there is no long-term role for Mr. Fougner with the Vetco International group. ABB therefore hereby agrees to procure that ABB Oil, Gas and Petrochemicals Management Limited ("ABB OGP") will pay Mr. Fougner all benefits to which he is entitled (after any legally required deductions and applicable withholding taxes) pursuant to his service agreement with that entity dated January 14, 2003 (as amended) within 30 days of receipt of a written notice from Purchaser or a Purchaser Affiliate confirming: (i) the date of termination of employment with Purchaser and Mr. Fougner's tax residency at such date, (ii) that the termination was not for cause, (iii) what (if any) severance or similar payment as a result of such termination has or will be paid; and (iv) that there is no other employment relationship between Mr. Fougner and Purchaser or any Purchaser Affiliate.

        4.    Waiver of Deferred Consideration.    ABB hereby waives its right to the Deferred Consideration provided for in Section 2.04(a) of the Purchase Agreement.

        5.    Amendments to Section 9.06 of the Purchase Agreement.    (a) Section 9.06 of the Purchaser Agreement is hereby amended as follows:

        (i)    Solely for the purposes of Section 9.06 of the Purchase Agreement, the term "Closing Accounting Principles" shall mean the accounting policies, principles, practices, evaluation and translation rules and procedures, methods and bases adopted by the OGP Business in calculating the amount set forth in the "Net Result" row in the "Total per Project Reports" column (or "Project Report" column where only one reporting unit is involved) of the unaudited project status reports for the Indemnified Projects as at June 30, 2004, copies of which are attached hereto as Annex 6;

        (ii)    Section 9.06(b)(iv) of the Purchase Agreement is amended by inserting the words "prepared in accordance with the Closing Accounting Principles" after the words "deliver to ABB monthly statements";

        (iii)    The reference to "at least once each calendar month" in Section 9.06(b)(iii) of the Purchase Agreement shall be replaced by "once every second month" commencing March 2005.

        (iv)    The reference to "and every six months thereafter" in Section 9.06(d)(iii) of the Purchase Agreement is replaced by "in respect of every six months thereafter, within one calendar month of the end of such six month period".


(b)

With respect to the formulas set forth in Section 9.06(d)(ii) and (iii) of the Purchase Agreement for calculation of Net Position and Net Stage Position, respectively, if the amount of the Indemnified Project Loss or Stage Estimate, as applicable, for the Indemnified Project referred to as Bonga (Subsea Equipment and Umbilicals) in Section 9.06 of the Disclosure

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Schedule (the "Bonga Project") otherwise includable in "Element [C]" of such formula exceeds US$39,480,000, then the amount attributable to the Bonga Project included in "Element [C]" of such formula shall be reduced by the amount by which the amount of the Indemnified Project Loss or Stage Estimate, as applicable, exceeds US$39,480,000; provided that the amount of any such reduction shall not exceed US$5,000,000.

        6.    Section 5.30 of the Purchase Agreement.    From and after the date of this Settlement, Purchaser shall have no further obligation to make any payments to ABB pursuant to Section 5.30 of the Purchase Agreement; provided that nothing in this Section 6 shall prejudice the rights or obligations of either Party under Section 9.06 of the Purchase Agreement.

        7.    Releases.    ABB hereby releases and forever discharges Purchaser, and Purchaser hereby releases and forever discharges ABB, and their respective directors, officers, employees, predecessors, successors, affiliates, subsidiaries, agents and attorneys and the shareholders of their respective ultimate holding companies and such holding companies' respective directors, officers, employees, predecessors, successors, affiliates, subsidiaries, agents and attorneys (collectively the "Releasees") from any and all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, controversies, variances, trespasses, damages, judgments, executions, claims and demands whatsoever and howsoever arising, whether in law or in equity, whether known or unknown, contingent or otherwise, which ABB or Purchaser now has, ever had or hereafter can, shall or may have against Purchaser or ABB, as the case may be, and/or its respective Releasees for, upon or by reason of any matter, cause or thing arising out of or related to (i) any breach or alleged breach of Section 2.10 of the Purchase Agreement, (ii) any breach or alleged breach of Section 9.06 of the Purchase Agreement prior to or as at the date hereof, including, in the case of the ABB release, any of the allegations that were asserted by ABB in its Notice of Dispute pursuant to Section 11.12(b) of the Purchase Agreement dated November 29, 2004.

        8.    Settlement Effect on Representations and Warranties.    No Purchaser Indemnified Party shall be entitled to assert any Warranty Claim against ABB pursuant to Section 9.03(a)(i) based on facts, events or circumstances that (i) constitute any part of the basis for any accounting entry made by Purchaser that was rejected by ABB in the Dispute Notice or (ii) constitute any part of the basis for any of the accounting entries included by Purchaser and reflected in the Purchase Price Documentation and set forth on Annex 7 attached hereto. For the avoidance of doubt, this Section 8 shall only apply to the ability of a Purchaser Indemnified Party to assert any rights pursuant to Section 9.03(a)(i) of the Purchase Agreement and shall not, inter alia, restrict the ability of a Purchaser Indemnified Party to assert its rights in connection with any other provision of Section 9.

        9.    Confidentiality.    The Parties agree that neither they nor their counsel shall disclose the existence or terms of this Settlement to any person or entity, except as required by law or regulation, without the express and prior written consent of all of the Parties. For avoidance of doubt, this Section 9 shall not act to prevent either party from sharing this Settlement with its professional advisers or performing necessary financial reporting in accordance with applicable laws and GAAP.

        10.    Advice of Counsel.    The Parties acknowledge that they have been advised by counsel concerning the contents and effect of this Settlement, that they understand all of its provisions, and that they are entering into this Settlement knowingly and voluntarily.

        11.    Authority to Sign.    The undersigned persons represent and warrant that they are duly authorized to sign this Settlement on behalf of the person or entity on whose behalf they are listed as signing and that they have full and proper authority to bind such person or entity to all of the terms herein.

        12.    Rule of Construction.    In the event that an ambiguity or a question of intent or interpretation arises, this Settlement shall be construed as if drafted jointly by the Parties, and no presumption or

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burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Settlement.

        13.    Incorporation by Reference.    The provisions set forth in Sections 1.02, 11.02, 11.03, 11.04, 11.05, 11.06, 11.07, 11.08, 11.09, 11.11, 11.12, 11.14(a) and 11.15 of the Purchase Agreement shall be incorporated by reference herein as if set forth in full herein.

        14.    Ratification of Purchase Agreement.    Except as expressly amended hereby, all of the terms of the Purchase Agreement (including the representations and warranties contained in Articles III and IV therein and the indemnities in Article IX) shall remain the same and in full force and effect in accordance with their terms and the Purchase Agreement, as expressly amended hereby, is hereby ratified and confirmed in all respects.

        IN WITNESS WHEREOF, each of the Parties hereto has caused this Settlement to be executed as of the date first written above by its respective officers thereunto duly authorized.

ABB HANDELS- UND VERWALTUNGS AG
By	/s/  HANS ENHOERNING Name: Hans Enhoerning Title: Vice President
By	/s/  ERIC ELZVIK Name: Eric Elzvik Title: Senior Vice President
VETCO LIMITED (FORMERLY LARADEW LIMITED
By	/s/  JOHN ARNEY Name: John Arney Title: Director

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Exhibit 4.8
EXECUTION COPY

SETTLEMENT AGREEMENT AND AMENDMENT

EX-4.10

Exhibit 4.10

EXECUTION COPY

This Amendment and Acknowledgement (this “Amendment”) to the Purchase Agreement (the “Agreement”) between Lagrummet December NR 919 AB, presently known as “Fund American Holdings AB” (“Purchaser”), and ABB Holding AG, Zurich, a predecessor of ABB Asea Brown Boveri Ltd. (“ABB”), is entered into as of this 14th day of April, 2004 between Purchaser and ABB. Defined terms used in this Amendment but not otherwise defined in this Amendment shall have the meanings set forth in the Agreement.

WHEREAS, the parties hereto desire to amend certain provisions of the Agreement and enter into certain agreements in connection with the Agreement; and

WHEREAS, Section 10.2.1 of the Agreement provides that the Agreement may be amended by the parties thereto by an instrument in writing signed on behalf of each of the parties thereto by their duly authorized representatives.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements set forth herein, the parties hereto, intending to be legally bound, agree as follows:

1.             Unless the context otherwise requires, references in the Agreement to “this shall be deemed to be references to the Agreement as amended by this Amendment.

2.             Section 1.1 of the Agreement shall be amended by adding the following definition immediately after the definition of “Belgian Tax Reassessments” and immediately before the definition of “Branded Assets”:

“‘Belgian Tax Reassessments Claims’ shall have the meaning set out in Section 9.6.4(b).”

3.             Section 3.4.5 of the Agreement shall be amended by deleting the first sentence of Section 3.4.5 of the Agreement in its entirety and inserting in lieu thereof the following:

“The Audited Closing Financial Statements and the Audited Closing Net Equity Statement shall be binding and conclusive upon ABB and Purchaser unless Purchaser shall have notified ABB in writing by May 28, 2004 of any objections thereto (an “Objection Notice”); provided, however, that no objections may be made with respect to amounts in the income statements and statements of cash flow contained in the Audited Closing Financial Statements other than to the extent that such amounts affect amounts included in the Audited Closing Net Equity Statement.”

4.             Section 9.1(e) of the Agreement shall be amended by deleting Section 9.1(e) of the Agreement in its entirety and inserting in lieu thereof the following:

“(e)         (i) the liabilities of Sirius Belgium (other than liabilities incurred by Sirius Belgium after the Closing Date as a result of actions taken after the Closing Date

by Purchaser or its Affiliates (including any Acquired Company) and (A) not authorized in writing by ABB or (B) which otherwise have not been reasonably taken by Purchaser or its Affiliates (including any Acquired Company) to fulfill their obligations under Section 9.6.4(b)) and (ii) any and all liabilities and obligations arising from (A) any actions reasonably taken by Purchaser or its Affiliates (including any Acquired Company) to fulfill their obligations under Section 9.6.4(b), (B) any actions taken by Purchaser or its Affiliates (including any Acquired Company) in connection with Section 9.6.4(b) which have been authorized in writing by ABB or (C) any actions taken by ABB or its Affiliates pursuant to Section 9.6.4(b);”

5.             Sections 9.6.4(b) and (c) of the Agreement shall be amended by deleting Sections 9.6.4(b) and (c) of the Agreement in their entirety and inserting in lieu thereof the following:

“(b)         Notwithstanding anything to the contrary, the amount or economic benefit of (i) any refunds, credits or offsets of Taxes (including any interest in respect thereof) attributable to or resulting from Tax repayments claimed by Sirius Belgium with respect to reassessments of Taxes with the Belgian tax authorities for any Pre-Measurement Tax Period (the “Belgian Tax Reassessments”) and (ii) any claims and rights of any Acquired Company with respect to any third parties attributable to or resulting from the Belgian Tax Reassessments, including indemnification claims, (a “Belgian Tax Reassessments Claim”) shall be for the account of ABB.  ABB and Purchaser agree that ABB shall (i) prepare and file all amended Tax Returns with respect to the Belgian Tax Reassessments and shall control any Tax Claim arising therefrom and (ii) be solely responsible for taking any and all actions necessary or appropriate to recover any amounts payable to any Acquired Company as a result of a Belgian Tax Reassessment Claim. Purchaser shall cooperate, so long as such cooperation in Purchaser’s good faith and reasonable judgment can be made without undue burden or expense or disruption to the operations of the Business, with ABB’s reasonable requests for information held by an Acquired Company, or assistance from an Acquired Company, in order to enable ABB to take any of the actions described in the immediately preceding sentence. Purchaser shall be under no obligation to utilize any refunds, credits or offsets of Taxes attributable to or resulting from the liquidation of Sirius Belgium. If Purchaser, in its sole discretion, determines that, after first taking into account all other items of income, gain, loss, deduction, credit or reserve (including safety reserve) that are available for the relevant taxable period or periods, Sirius International or any affiliate or successor thereto actually utilized any credits or offsets resulting from the liquidation of Sirius Belgium and either (i) such utilization actually reduces the amount of Taxes that Sirius International or any affiliate or successor thereto otherwise would have been required to pay to a taxing authority had it not utilized such credits or offsets or (ii) Sirius International or any affiliate or successor thereto receives a refund or credit against its Taxes from a taxing authority that it would not otherwise have received had it not utilized such credits or offsets, then the amount of such reduction of Taxes paid or the amount of such refund or credit shall be 80 percent

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for the account of ABB and 20 percent for the account of Purchaser, provided, however, that ABB agrees to repay to Purchaser its 80 percent portion of the amount of such reduction or the amount of such refund or credit (plus any penalties, interest or other charges imposed by a taxing authority) in the event that (x) it is determined by a taxing authority that Sirius International was not entitled to such reduction of Taxes paid or (y) Sirius International or any affiliate or successor thereto is required to repay such refund to a taxing authority. ABB and Purchaser agree that (i) ABB will provide reasonable instructions in the preparation and filing of all Tax Returns that relate to the liquidation of Sirius Belgium and (ii) all expenses relating to (a) the liquidation of Sirius Belgium, (b) the preparation of such Tax Returns and (c) the recovery of any amounts payable to any Acquired Company as a result of a Belgian Tax Reassessment Claim shall be borne solely by ABB. For the avoidance of doubt. the amount or economic benefit of any refunds, credits or offsets of Taxes attributable to or resulting from the Belgian Tax Reassessments, the liquidation of Sirius Belgium and each Belgian Tax Reassessments Claim shall not in any way increase Net Equity.

(c)           Each party shall forward, and shall cause its Affiliates to forward, to the party entitled pursuant to this Section 9.6.4 to receive the amount or economic benefit of (i) a refund, credit or offset to Tax the amount of such refund, or the economic benefit of such credit or offset to Tax, within 10 days after such refund is received or after such credit or offset is allowed or applied against another Tax liability, as the case may be, and (ii) a Belgian Tax Reassessments Claim the amount of such Belgian Tax Reassessments Claim, within 10 days after such amount is received.”

6.             Prior to the Closing, ABB shall deliver to Purchaser the report attached as Exhibit A hereto executed by the Business Auditors.

7.             ABB and Purchaser hereby agree and acknowledge that (i) Purchaser has not granted any written consents under Section 7.2.4 or 7.2.6 of the Agreement, (ii) Purchaser has not waived any of its rights under the Agreement, including, without limitation, any of its rights under Article 9 of the Agreement, with respect to breaches, if any, by ABB of any of its representations, warranties, covenants and agreements contained in the Agreement, whether asserted or unasserted or known or unknown by Purchaser as of the date of this Amendment and in each case relating to or arising out of the preparation, content or delivery of the Audited Closing Financial Statements and the Audited Closing Net Equity Statement and (iii) Purchaser shall not be deemed to have granted any such consent or made any such waiver described in clauses (i) and (ii) by virtue of any act or failure to act by Purchaser, including, without limitation, proceeding with the Closing, other than, and only to the extent, as specifically set forth in a written instrument delivered by Purchaser to ABB after the date of this Amendment; provided, however, that this Section 7 of this Amendment shall not constitute an amendment to the Agreement nor shall it in any way affect the rights of Purchaser or any of its Affiliates (including any Acquired Company) arising out of or relating to the Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective as of the day and year first written above.

FUND AMERICAN HOLDINGS AB,
By:	/s/ Robert L. Seelig
	Name:	Robert L. Seelig
	Title:	Attorney-in-Fact
ABB ASEA BROWN BOVERI LTD.,
By:	/s/ E. Koefer
	Name:	Erich Koefer
	Title:
By:	/s/ D. Schindleman
	Name:	Daniel Schindleman
	Title:

EX-4.16

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Exhibit 4.16

Mr. Fred Kindle
Stadthausstr. 12
8400 Winterthur

Dear Mr. Kindle,

This is to confirm the terms and conditions of your employment with ABB Ltd, Zurich (the "Company"). You will start your employment with the Company as of September 1, 2004, as the designated President and Chief Executive Officer of the ABB Group as well as member of the Executive Committee of the ABB Group. The Company will appoint you to President and Chief Executive Officer and member of the Executive Committee of the ABB Group, effective January 1, 2005 (or earlier).

1.

Base Salary.    Your base salary will be specified for each year by the Board Committee and communicated to you in writing. The base salary is normally revised every second year. For 2004 and 2005 it shall amount to CHF 1'300'000.—gross p.a.

The base salary includes a representation allowance of CHF 24'000.- p.a. The base salary and representation allowances are paid in 12 equal monthly installments.

2.

Incentive Plan.    In addition to the base salary, an incentive plan is part of your remuneration package. The incentive formula is predominantly based on quantitative components, relating to the financial performance of the ABB Group. The maximum bonus opportunity amounts to 150% of the base salary mentioned under item 1 above. For the first calendar year of service, i.e. the year 2005, the amount of CHF 1'000'000.- gross shall be guaranteed as a minimum. For the first four months of service in 2004 you will receive a fixed bonus of CHF 400'000.

The incentive plan is revised annually and the incentive plan parameters may be different from one year to another. The applicable incentive for a given year will be specified by the Board Committee and communicated to you in writing.

3.

Health Insurance.    As regards health insurance, you are entitled to a private patient insurance (detailed information about this plan is provided separately). The Company will pay the insurance premiums. Family members are not covered by this health insurance plan.

4.

Pension and Related Benefits.    Your retirement pension, disability pension, widow's pension, child/orphan pension and related benefits are subject to the Company's and its pension funds' applicable regulations or to such other separate agreement as you and the Company may have entered into or may in the future enter into.

5.

Vacation.    You are entitled to a vacation of 30 working days per year. Non-used vacation days of the last 5 years are paid out in cash at the end of employment or when entering retirement. Such payment will be calculated including the base salary valid at the date of discontinuation and the average incentive for the two calendar years preceding the year during which termination occurs.

6.

Company Car.    You are entitled to the use of a Company car according to the Company's Car Program as from time to time issued and applicable. While you are not subject to a specific maximum purchase price limit, the proposed purchase price of your car will be recorded with the Board Committee.

7.

Management Incentive Program.    In the event of the launch by the Company of a management option, share participation or similar program, you will be eligible to participate in such program in accordance with the then applicable terms and to the extent to be determined by the Board Committee.

The Company will compensate you for the loss of outstanding share options due to resignation from your present employment at a total value of CHF 200'000.—. This amount will be paid to you latest 30 days after having taken up your employment with the Company.

8.

Termination of Employment.    The employment is concluded for a fixed period of 40 months starting as from the effective date mentioned above and it, therefore, expires automatically, without notice, on December 31, 2007 unless the parties hereto have agreed in writing before its expiration to extend the employment.

In the event of premature termination of the employment, the Company may elect to release you forthwith from fulfilling your employment obligations. In case that the premature termination of employment is given by the Company, the total compensation for the remaining period of employment will consist of the base salary at the time of termination and the average incentive for the two calendar years preceding the year during which termination occurs. In the event that the employment will be extended beyond December 31, 2007, the following rules for its termination will apply thereafter:

Each party may terminate the present employment relationship with effect at the end of any calendar month by giving 12 months prior written notice.

Under termination of the employment relationship, the Company may elect to release you forthwith from fulfilling your employment obligations. Such release will, however, not affect salary payments payable to you during the 12-months notice period.

In case your employment relationship would be terminated by the Company and if, after expiry of the 12 month notice period, you would not have taken up employment with a third party or commenced an independent, regularly remunerated professional activity, either of which yielding an annual compensation of at least 70% of your last annual compensation with the Company, the Company will continue to pay to you, for a period not exceeding 12 months, a monthly compensation in amounts equal to your total monthly salary during your employment relationship with the Company.

Remuneration for the 12 months notice period, as well as for the additional conditional period as described above, will, in addition to the base salary, include an incentive corresponding to the average incentive (or pro-rata average incentive if applicable) for the two years preceding the year during which notice of termination is given.

Retirement in accordance with the applicable regulations or separate agreement (if any) will interrupt any notice period and constitute termination of your employment relationship with the Company without further notice; accordingly, any salary, incentive or other benefits claims relating to the period after the date of such termination, will be fully substituted by the retirement benefits due pursuant to the said regulations or agreement.

9.

Non-Competition.    You have agreed, and by counter-signing the present Letter-Agreement confirm your agreement, that you shall not, during a period of 1 (one) year after the term of your employment relationship with the Company, operate on your own account, work for or otherwise be directly or indirectly engaged in a business competing with the business activities of the ABB Group. In view of item 8 above, no separate compensation will be due by the Company as consideration for your observance of this non-competition commitment.

10.

Employment Regulations.    The general Employment Regulations, the Travel and Expense Regulations and Car Leasing Regulations, as from time to time issued and applicable for the Company's employees are an integral part of your employment conditions and supplement as to matters not specifically addressed in this Letter-Agreement.

2

11.

Title and Membership in the Executive Committee; Other Assignments.    It is understood and agreed that the titles "President" and "Chief Executive Officer" as well as your membership in the Group Executive Committee are essential parts of your employment relationship with the Company and may not be changed or terminated without notice and without monetary or other compensation by the Company's Board of Directors. Within such employment relationship, the Board Committee may, however, assign to you areas of responsibility which differ from those currently assigned, always provided that such other assignments do not constitute a substantial alteration in the scope or dignity of your work.

12.

Place of Work.    For the fixed term of employment, i.e., until end of 2007, the primary place of work will be located in Switzerland. If the Company decided to move their global headquarters outside of Switzerland and, thereby, the primary place of work would also move out of Switzerland, it is at your discretion to prematurely terminate your employment with the Company. In this event, the Company would incur the same compensation consequences as specified for premature termination in item 8 above.

13.

Supplementary Documents.    In addition you receive the following documents, whose modification is subject to special rules:

•

Regulations of the ABB Pension Fund

•

Regulations concerning the ABB Supplementary Insurance Plan

•

Regulations of the "Todi Foundation"

•

Regulations of the Health Insurance Aquilana

•

Regulations on Delayed Sickness Benefits Insurance

14.

Applicable Law and Jurisdiction.    This Letter-Agreement shall be subject to Swiss law and the parties hereby submit to the exclusive jurisdiction of the Swiss courts. The venue shall be Zurich, Switzerland.

Please confirm your understanding and acceptance of the above terms and conditions by signing and returning to us a copy of this Letter-Agreement

Zurich, February 17, 2004

ABB Ltd
/s/  Hans-Ulrich Maerki       Hans-Ulrich Maerki Chairman of the Nomination and Compensation Committee	/s/  Gary Steel       Gary Steel Group Executive Committee Member Head of Human Resources
Accepted:
Date: February 21, 2004	/s/  F. Kinder       F. Kinder

3

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Exhibit 4.16

EX-4.17

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Exhibit 4.17

Mr. Michel Demaré
Bächaustrasse 3b
8806 Bäch

Dear Mr. Demaré

        This is to confirm the terms and conditions of your employment with ABB Ltd, Zürich (the "Company"). You will start your employment with the Company at a date to be mutually agreed, as the Chief Financial Officer of the ABB Group as well as member of the Executive Committee of the ABB Group.

        1.    Base Salary.    Your base salary will be specified for each year by the Nomination and Compensation Committee of the ABB Group and communicated to your in writing. The base salary is normally revised every year. For 2005 it shall amount to CHF 750,000 gross p.a.

        The base salary includes a representation allowance of CHF 24'000 p.a. The base salary and representation allowances are paid in 12 equal monthly installments.

        2.    Incentive Plan.    In addition to the base salary, an incentive plan is part of your remuneration package. The incentive formula is predominantly based on quantitative components relating to the financial performance of the ABB Group. The maximum bonus opportunity amounts to 100% of the base salary mentioned under item 1 above. For the first calendar year of service, i.e. the year 2005, 50% of the base salary for the year shall be guaranteed as a minimum bonus.

        The incentive plan is revised annually and the incentive plan parameters may be different from one year to another. The applicable incentive for a given year will be specified by the Nomination and Compensation Committee and communicated to you in writing.

        3.    Health Insurance.    As regards health insurance, you are entitled to a private patient insurance (detailed information about this plan is provided separately). The Company will pay the insurance premiums. Family members are not covered by this health insurance plan.

        4.    Pension and Related Benefits.    Your retirement pension, disability pension, widow's pension, child/orphan pension and related benefits are subject to the Company's and its pension funds' applicable regulations or to such other separate agreement as you and the Company may have entered into or may in the future enter into.

        5.    Vacation.    You are entitled to a vacation of 30 working days per year. Non-used vacation days of the last 5 years are paid out in cash at the end of employment or when entering retirement. Such payment will be calculated including the base salary valid at the date of discontinuation and the average incentive for the two calendar years preceding the year during which termination occurs.

        6.    Company Car.    You are entitled to the use of a Company car according to the Company's Car Program as from time to time issued and applicable.

        7.    Performance Share Plan.    You are eligible to participate in the Performance Share Plan the Company has for members of the Executive Committee in accordance with the applicable terms and to the extent to be determined by the Nominations and Compensation Committee.

        The Company will compensate you for the loss of outstanding share options due to resignation from your present employment at a total value of CHF 1,000,000. This amount will be paid to you latest 30 days after having taken up your employment with the Company.

        8.    Termination of Employment

        Each party may terminate the present employment relationship with effect at the end of any calendar month by giving 12 months prior written notice.

        Under termination of the employment relationship, the Company may elect to release you forthwith from fulfilling your employment obligations. Such release will, however, not affect salary payments payable to you during the 12-months notice period.

        In case your employment relationship would be terminated by the Company and it, after expiry of the 12 month notice period, you would not have taken up employment with a third party or commenced an independent, regularly remunerated professional activity, either of which yielding an annual compensation of at least 70% of your last annual compensation with the Company, the Company will continue to pay to you, for a period not exceeding 12 months, a monthly compensation in amounts equal to your total monthly salary during your employment relationship with the Company.

        Remuneration for the 12 months notice period, as well as for the additional conditional period as described above, will, in addition to the base salary, include an incentive corresponding to the average incentive (or pro-rata average incentive if applicable) for the two years preceding the year during which notice of termination is given.

        Retirement in accordance with the applicable regulations or separate agreement (if any) will interrupt any notice period and constitute termination of your employment relationship with the Company without further notice; accordingly, any salary, incentive or other benefits claims relating to the period after the date of such termination, will be fully substituted by the retirement benefits due pursuant to the said regulations or agreement.

        9.    Non-Competition.    You have agreed, and by counter-signing the present Letter-Agreement confirm your agreement, that you shall not, during a period of 1 (one) year after the term of your employment relationship with the Company, operate on your own account, work for or otherwise be directly or indirectly engaged in a business competing with the business activities of the ABB Group. In view of item 8 above, no separate compensation will be due by the Company as consideration for your observance of this non-competition commitment.

        10.    Employment Regulations.    The general Employment Regulations, the Travel and Expense Regulations and Car Leasing Regulations, as from time to time issued and applicable for the Company's employees are an integral part of your employment conditions and supplement as to matters not specifically addressed in this Letter-Agreement.

        11.    Title and Membership in the Executive Committee; Other Assignments.    It is understood and agreed that the title "Chief Financial Officer" as well as your membership in the Group Executive Committee are essential parts of your employment relationship with the Company and may not be changed or terminated without notice and without monetary or other compensation by the Company's Board of Directors. Within such employment relationship, the Board Committee may, however, assign to you areas of responsibility which differ from those currently assigned, always provided that such other assignments do not constitute a substantial alteration in the scope or dignity of your work.

        12.    Place of Work.    For the term of employment the primary place of work will be located in Switzerland. If the Company decided to move their global headquarters outside of Switzerland and, thereby, the primary place of work would also move out of Switzerland, it is at your discretion to prematurely terminate your employment with the Company. In this event, the Company would incur the same compensation consequences as specified for premature termination in item 8 above.

        13.    Supplementary Documents.    In addition you receive the following documents, whose modification is subject to special rules:

•

Regulations of the ABB Pension Fund



•

Regulations concerning the ABB Supplementary Insurance Plan



•

Regulations of the "Tödi Foundation"

2

•

Regulations of the Health Insurance Aquilana



•

Regulations on Delayed Sickness Benefits Insurance

        14.    Applicable Law and Jurisdiction.    This Letter-Agreement shall be subject to Swiss law and the parties hereby submit to the exclusive jurisdiction the Swiss courts. The venue shall be Zurich, Switzerland.

        Please confirm your understanding and acceptance of the above terms and conditions by signing and returning to us a copy of this Letter-Agreement.

Zurich, 28th October, 2004

	ABB Ltd
/s/ Jürgen Dormann Jürgen Dormann Chief Executive Officer and Chairman of the Board	/s/ Gary Steel Gary Steel Member of the Executive Committee Head of Human Resources
Accepted	/s/ Michael Demaré
Date:	28-10-2004

3

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Exhibit 4.17

EX-8.1

Exhibit 8.1

ABB GROUP COMPANIES (CONSOLIDATED) BY COUNTRY AS PER MARCH 31, 2005

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
ALGERIA
ABB Electrical Service Company Spa, Hydra	100.00	Algeria
SARPI - Société Algérienne pour la réalisation de projets industriels, Alger	50.00	Algeria
SpA ABB Lummus Global Algeria, Hydra	100.00	Algeria
ANGOLA
ABB Electrica SGPS, Lda., Luanda	100.00	Angola
ARGENTINA
ABB S.A., Buenos Aires	100.00	Argentina
ABB Tubío S.A., San Luis	100.00	Argentina
ARUBA (NL)
ABB Import & Export Services Ltd., Oranjestad/Aruba (NA)	100.00	Aruba (NL)
AUSTRALIA
ABB Administrative Services Pty. Ltd., Regents Park, NSW	100.00	Australia
ABB Australia Pty Limited, Sydney	100.00	Australia
ABB Group Holdings Pty. Ltd., Sydney	100.00	Australia
ABB Group Investment LLP, Sydney	100.00	Australia
ABB Group Investment Management Pty. Ltd., Sydney	100.00	Australia
Babcock Australia Pty Limited, Sydney, NSW	100.00	Australia
AUSTRIA
ABB AG	100.00	Austria
ABB Montage GmbH, Innsbruck	100.00	Austria
BAHRAIN
ABB Technologies W.L.L., Bahrain	100.00	Bahrain
BELGIUM
Asea Brown Boveri S.A., Brussels	100.00	Belgium
Asea Brown Boveri Europe Ltd., Brussels	100.00	Belgium
Asea Brown Boveri Jumet S.A., Jumet	100.00	Belgium
ABB Energy Service NV, Zaventem	100.00	Belgium
BOLIVIA
Asea Brown Boveri Ltda., La Paz	100.00	Bolivia
BOTSWANA
ABB (Pty) Ltd., Gaborone	100.00	Botswana
BRAZIL
ABB Foundries, Brazil	100.00	Brazil

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
ABB Ltda., Osasco	100.00	Brazil
ABB Lummus Global Ltda., Osasco	100.00	Brazil
ABB Participacoes Ltda., Osasco	100.00	Brazil
Consorcio Lummus Andromeda, Osasco	50.00	Brazil
BULGARIA
ABB Avangard AD, Sevlievo	97.42	Bulgaria
ABB Bulgaria EOOD, Sofia	100.00	Bulgaria
ABB Control EOOD, Petrich	100.00	Bulgaria
CAMEROON
Asea Brown Boveri S.A., Douala	100.00	Cameroon
CANADA
ABB Bomem Inc., Quebec	100.00	Canada
ABB Inc., St. Laurent, Quebec	100.00	Canada
ABB International Projects Inc., St.Laurent, QC	100.00	Canada
Combustion Engineering Technology Investment Corp., St.Laurent, Quebec	100.00	Canada
CHANNEL ISLANDS
ABB Equity Limited, Guernsey	100.00	Channel Islands
ABB Equity Ventures (Jersey) Ltd., Jersey	100.00	Channel Islands
ABB ESAP Limited, Guernsey	100.00	Channel Islands
ABB Insurance Limited, Guernsey	100.00	Channel Islands
ABB International Finance Limited, Guernsey	100.00	Channel Islands
ABB Transinvest Limited, Guernsey	100.00	Channel Islands
CHILE
Asea Brown Boveri S.A., Santiago	100.00	Chile
CHINA
ABB Bailey Beijing Controls Co. Ltd., Beijing	51.00	China
ABB Beijing Drive Systems Co. Ltd., Beijing	90.00	China
ABB (China) Engineering Co. Ltd. Xiamen	100.00	China
ABB (China) Ltd., Beijing	100.00	China
ABB Chongqing Transformer Company Ltd., Chongqing City	62.20	China
ABB Distribution Transformer (Hefei) Limited, Anhui	100.00	China
ABB Engineering (Shanghai) Ltd., Shanghai	100.00	China
ABB Hefei Transformer Co. Ltd., Hefei	85.83	China
ABB High Voltage Switchgear Co. Ltd., Beijing	60.00	China
ABB Holding Ltd., Hong Kong	100.00	China
ABB Huadian High Voltage Switchgear (Xiamen) Company Ltd., Xiamen	51.00	China
ABB Jiangjin Turbo Systems Company Limited, Chongqing	61.00	China
ABB Lummus Global China Co. Ltd., Shanghai	100.00	China
ABB LV Installation Materials Co. Ltd., Beijing	85.70	China
ABB Service Ltd., Hong Kong	100.00	China
ABB Shanghai Motors Co. Ltd., Shanghai	75.00	China

2

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
ABB Shanghai Transformer Co. Ltd., Shanghai	51.00	China
ABB Transmission & Distribution Automation Equipment (Xiamen) Co. Ltd., Fujian	100.00	China
ABB Xiamen Electrical Controlgear Co. Ltd., Fujian Province	80.00	China
ABB Xiamen Low Voltage Equipment Co. Ltd., Xiamen	94.00	China
ABB Xiamen Switchgear Co. Ltd., Xiamen	66.20	China
ABB Xi’an Power Capacitor Company Limited, Xi’an	51.00	China
ABB Xinhui Low Voltage Switchgear Co. Ltd., Xinhui (Guangdong)	80.00	China
ABB Zhongshan Transformer Company Ltd., Zhongshan City	51.00	China
COLOMBIA
Asea Brown Boveri Ltda., Bogotá	99.99	Colombia
COTE D’IVOIRE/IVORY COAST
ABB Technology SA, Abidjan	99.00	Cote d’Ivoire
CROATIA
ABB Ltd., Zagreb	100.00	Croatia
CYPRUS
ABB Lummus Global Cyprus LTD., Nicosia	100.00	Cyprus
CZECH REPUBLIC
ABB s.r.o., Prague	100.00	Czech Republic
ABB Lummus Global s.r.o., Brno	100.00	Czech Republic
DENMARK
ABB A/S, Skovlunde	100.00	Denmark
ECUADOR
Asea Brown Boveri S.A., Quito	96.87	Ecuador
EGYPT
ABB Arab Contractors for Construction, Heliopolis	99.75	Egypt
ABB Arab S.A.E., Cairo	80.00	Egypt
ABB Automation S.A.E., Heliopolis	100.00	Egypt
ABB Group Process Center S.A.E., Cairo	100.00	Egypt
ABB High Voltage Co. S.A.E., Heliopolis/Cairo	100.00	Egypt
ABB Metals & Plastics Manufact. Co. SAE, 10th of Ramadan City	80.00	Egypt
ABB Petroleum Technology, Cairo	100.00	Egypt
ABB SUSA Egypt LLC, Maadi	100.00	Egypt
ABB Transformers S.A.E., El-Nozha El-Gedida	65.00	Egypt
ABB Turbochargers S.A.E., Suez	100.00	Egypt
Asea Brown Boveri S.A.E., Cairo	100.00	Egypt
EL SALVADOR
ABB S.A. de CV, San Salvador	100.00	El Salvador

3

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
ESTONIA
ABB AS, Tallinn	100.00	Estonia
FINLAND
ABB Oy, Helsinki	100.00	Finland
ABB Credit Oy, Helsinki	100.00	Finland
ABB Current Oy, Helsinki	100.00	Finland
ABB Sähkörinne Kiinteistö Oy, Helsinki	100.00	Finland
Kiinteistö Oy Bölenraitti 10, Helsinki	100.00	Finland
FRANCE
ABB Business Services, Rueil-Malmaison	100.00	France
ABB Entrelec SAS, Villeurbanne	100.00	France
ABB Lummus Global SarL., Rueil-Malmaison	100.00	France
ABB Process Industrie, Aix les Bains	100.00	France
ABB S.A., Rueil-Malmaison	100.00	France
Cogelub, Persan	51.00	France
Helita, Persan	99.60	France
L’Ebenoid, Villeurbanne	100.00	France
Soulé Protection Surtensions, Villeurbanne	99.60	France
Striebel & John France S.A.R.L., Wesserling	51.00	France
GERMANY
ABB AG, Mannheim	100.00	Germany
ABB Airport Technologies GmbH, Mannheim	100.00	Germany
ABB Asset Finance GmbH, Mannheim	100.00	Germany
ABB Automation Beteiligungs GmbH, Mannheim	100.00	Germany
ABB Automation GmbH, Mannheim	100.00	Germany
ABB Automation Products GmbH, Eschborn	100.00	Germany
ABB Automatisierungsanlagen Cottbus GmbH, Cottbus	100.00	Germany
ABB Bauprojektmanagement GmbH, Mannheim	100.00	Germany
ABB Beteiligungs- und Verwaltungsges. GmbH, Mannheim	100.00	Germany
ABB Gebäudetechnik AG, Mannheim	100.00	Germany
ABB Grundbesitz Berlin GmbH & Co. Objekte Berlin OHG, Berlin	100.00	Germany
ABB Grundbesitz GmbH, Mannheim	100.00	Germany
ABB Logistics Center Europe GmbH, Menden	100.00	Germany
ABB Lummus Global GmbH, Roigheim	100.00	Germany
ABB New Ventures GmbH, Essen	100.00	Germany
ABB Patent GmbH, Mannheim	100.00	Germany
ABB Reaktor GmbH, Mannheim	100.00	Germany
ABB Schaltanlagentechnik GmbH, Ladenburg	100.00	Germany
ABB Service GmbH, Bobingen	100.00	Germany
ABB Stotz-Kontakt GmbH, Mannheim	100.00	Germany
ABB Stotz-Kontakt/Striebel & John Vertriebs-GmbH, Sasbach	75.50	Germany
ABB Technologie GmbH, Mannheim	100.00	Germany
ABB Training Center GmbH, Mannheim	100.00	Germany
ABB Utilities GmbH, Mannheim	100.00	Germany

4

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
ABB Wirtschaftsbetriebe GmbH, Mannheim	100.00	Germany
Busch-Jaeger Elektro GmbH, Mannheim/Lüdenscheid	100.00	Germany
Elektroinstallation Annaberg GmbH, Annaberg-Buchholz	100.00	Germany
Hartmann & Braun GmbH & Co. KG, Eschborn	100.00	Germany
Hartmann & Braun Grundstücksverwaltungs GmbH, Göttingen	100.00	Germany
JLEC Power Ventures GmbH, Mannheim	100.00	Germany
Komposit-Risikoberatungs- und Versicherungsvermittlungs-GmbH, Heidelberg	100.00	Germany
Pucaro Elektro-Isolierstoffe GmbH, Roigheim	100.00	Germany
Striebel & John GmbH & Co. KG, Sasbach-Obersasbach	51.00	Germany
Striebel Vermögensverwaltungs-GmbH, Sasbach-Obersasbach	51.00	Germany
GREECE
ABB Trade S.A., Metamorphossis Attica	99.99	Greece
Asea Brown Boveri S.A., Metamorphossis Attica	100.00	Greece
Wind Park of Rhodes SA, Rhodes	90.00	Greece
Wind Park of Rhodes SA, Rhodes	90.00	Greece
GUATEMALA
ABB Turbocharger Servicios, S.A., Amatitlan	100.00	Guatemala
HONG KONG
ABB Asia Pacific Ltd., Hong Kong	100.00	Hong Kong
ABB Asia Pacific Services Ltd., Hong Kong	100.00	Hong Kong
ABB (Hong Kong) Ltd., Hong Kong	100.00	Hong Kong
Industrial and Building Systems (H.K.) Limited, Hong Kong	100.00	Hong Kong
HUNGARY
ABB Engineering Trading and Service Ltd., Budapest	100.00	Hungary
ABB Szerbiz Kft., Budapest	100.00	Hungary
INDIA
ABB Corporate Research Limited, Bangalore	100.00	India
ABB Holdings (South Asia) Ltd., Bangalore	100.00	India
ABB Limited, Bangalore	52.11	India
INDONESIA
PT ABB Bailey, Jakarta	100.00	Indonesia
PT ABB Installation Materials, Jakarta	95.00	Indonesia
PT ABB Sakti Industri, Jakarta	51.00	Indonesia
PT ABB Transmission and Distribution, Jakarta	60.00	Indonesia
IRAN, ISLAMIC REPUBLIC OF
ABB (P.J.S.C.), Teheran	100.00	Islamic Republic of Iran
IRELAND
ABB Holdings Ireland Ltd., Dublin	100.00	Republic of Ireland

5

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
ABB Ltd, Dublin	100.00	Republic of Ireland
Rialto Cables & Plastics Ltd., Dublin	100.00	Republic of Ireland
Wessel Industries Holdings Ltd., Dublin	100.00	Republic of Ireland
ISRAEL
ABB Technologies Ltd., Tirat Carmel	99.99	Israel
ITALY
ABB Corporate Administration & Properties S.p.A., Milan	100.00	Italy
ABB Energy Automation S.p.A., Milan	100.00	Italy
ABB Environment Service Srl., Milan	100.00	Italy
ABB Estense Service S.p.A., Ferrara	80.00	Italy
ABB Group Service Center srl., Milano	100.00	Italy
ABB Lummus Global Italia S.r.l., Milan	100.00	Italy
ABB Power Technologies S.p.A., Milano	100.00	Italy
ABB Process Solutions & Services SPA, Milan	100.00	Italy
ABB S.p.A., Milan	100.00	Italy
ABB SACE S.p.A., Sesto S. Giovanni (MI)	100.00	Italy
ABB SAE S.p.A, Milan	99.99	Italy
Consorzio Snamprogetti - ABB LG Chemicals, Milan	50.00	Italy
PR.ENER.CA Ceresio S.r.l., Milan	100.00	Italy
Telecogen s.r.l., Bussolengo	100.00	Italy
Telesafe Energy S.r.l., Massa	51.00	Italy
JAPAN
ABB K.K., Tokyo	100.00	Japan
JORDAN
ABB Ltd. Jordan, Amman	100.00	Jordan
ABB Near East Trading Ltd., Amman	95.00	Jordan
KAZAKHSTAN
ABB Ltd., Almaty	100.00	Kazakhstan
CJSC ENERGIA Kazakh Scientific Research Institute of Energy Systems, Almaty	89.24	Kazakhstan
JV LLP ENERGOINVESTPROJEKT Scientific-production enterprise, Almaty	96.40	Kazakhstan
KENYA
Asea Brown Boveri Ltd., Nairobi	100.00	Kenya
KOREA, REPUBLIC OF
ABB Ltd., Seoul	100.00	Republic of Korea

6

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
KUWAIT
ABB Engg. Technologies Co. (KSCC), Safat	49.00	Kuwait
LATVIA
ABB SIA, Riga	100.00	Latvia
LEBANON
ABB Electrical Co. S.A.L., Beirut	67.00	Lebanon
LITHUANIA
ABB UAB, Vilnius	100.00	Lithuania
LUXEMBOURG
Asea Brown Boveri (Luxembourg) S.A., Luxembourg	100.00	Luxembourg
MALAYSIA
ABB Holdings Sdn. Bhd., Subang Jaya	100.00	Malaysia
ABB Industrial and Building Syst. Sdn. Bhd., Subang Jaya	100.00	Malaysia
ABB Malaysia Sdn Bhd, Subang Jaya	100.00	Malaysia
ABB Manufacturing Sdn. Bhd., Subang Jaya	49.00	Malaysia
ABB Transmission and Distribution Sdn. Bhd., Subang Jaya	66.00	Malaysia
Komposit Asia Pacific Limited, Labuan	100.00	Malaysia
MALI
Asea Brown Boveri Mali, Bamako	100.00	Mali
MALTA
ABB Lummus Malta Limited, Floriana	100.00	Malta
MAURITIUS
ABB International Holdings Ltd., Port Louis	100.00	Mauritius
ABB Lummus Crest Mauritius, Port Louis	100.00	Mauritius
ABB Lummus Crest Mauritius, Port Louis	100.00	Mauritius
Asea Brown Boveri Ltd., Port Louis	51.00	Mauritius
MEXICO
ABB Mexico S.A. de C.V., Tlalnepantla	100.00	Mexico
Asea Brown Boveri S.A. de C.V., Tlalnepantla	100.00	Mexico
Entrelec SA de CV, Nuevo Leon	100.00	Mexico
MOROCCO
Asea Brown Boveri S.A., Casablanca	100.00	Morocco
MOZAMBIQUE
ABB Tecnel Limitada, Maputo	60.00	Mozambique
NAMIBIA
Asea Brown Boveri (Pty) Ltd., Windhoek	100.00	Namibia

7

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
NETHERLANDS
ABB B.V., Rotterdam	100.00	The Netherlands
ABB Capital B.V.	100.00	The Netherlands
ABB Energie Service BV, Rotterdam	100.00	The Netherlands
ABB Energy Ventures Projects B.V., Amsterdam	100.00	The Netherlands
ABB Equity BV, Amsterdam	100.00	The Netherlands
ABB Equity Ventures B.V., Amsterdam	100.00	The Netherlands
ABB Finance B.V., Amsterdam	100.00	The Netherlands
ABB Financial Services B.V., Amsterdam	100.00	The Netherlands
ABB Holdings BV, Amsterdam	100.00	The Netherlands
ABB Lummus Global B.V., The Hague	100.00	The Netherlands
ABB Lummus Global Technology B.V., The Hague	100.00	The Netherlands
ABB Lummus Heat Transfer B.V., The Hague	100.00	The Netherlands
ABB Lummus Project Participations B.V., The Hague Maynard BV, Breda	100.00	The Netherlands
ABB New Ventures B.V., Amstelveen	100.00	The Netherlands
ABB Payment Services B.V., Amstelveen	100.00	The Netherlands
ABB Power Investment (India) B.V., Amsterdam	100.00	The Netherlands
ABB SattLine BV, Etten-Leur	100.00	The Netherlands
ABB Zantingh Energiesystemen BV, Aalsmeer	100.00	The Netherlands
Elsag Bailey Hartmann & Braun Nederland BV, Delft	100.00	The Netherlands
Luwoco Lummus Worldwide Contracting (Netherlands) B.V., The Hague	100.00	The Netherlands
Maynard BV, Breda	100.00	The Netherlands
Novolen Technology Holdings, C.V., The Hague	80.00	The Netherlands
NEW ZEALAND
ABB Limited, Auckland	100.00	New Zealand
ABB Maintenance Services Limited, Auckland	100.00	New Zealand
NIGERIA
ABB Electrical Systems Ltd., Lagos	90.00	Nigeria
ABB NG Ltd., Ikeja/Lagos	60.00	Nigeria
ABB Powerlines Limited., Lagos	52.23	Nigeria
NORWAY
ABB AS, Billingstad	100.00	Norway
ABB ATMA Robotics, Bryne (non legal entity)	100.00	Norway
ABB ATPA Turbo, Olso (non legal entity)	100.00	Norway
ABB Holding AS, Billingstad	100.00	Norway
ABB Telexp AS, Bergen	100.00	Norway
Bergerveien 12 ANS, Oslo	100.00	Norway
Engrossenteret Eiendom AS, Billingstad	100.00	Norway
Nordisk Eiendomsforvaltning AS, Billingstad	100.00	Norway
OMAN
ABB LLC, Al Hamriya	65.00	Oman

8

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
PAKISTAN
ABB (Pvt) Ltd., Lahore	100.00	Pakistan
PANAMA
ABB S.A., Panama	100.00	Pakistan
Tradeinvest Centroamericana S.A., Panama	99.74	Pakistan
PAPAUA, NEW GUINEA
ABB James Watt (PNG) Limited, Regents Park, NSW	100.00	Papaua, New Guinea
PERU
Asea Brown Boveri S.A., Lima	99.99	Peru
PHILIPPINES
Asea Brown Boveri Inc., Paranaque, Metro Manila	100.00	The Philippines
POLAND
ABB Instal Sp. Zo.o., Wroclaw	100.00	Poland
ABB Sp. Zo.o., Warsaw	96.01	Poland
ABB Zamech Gazpetro Sp. Zo.o., Elblag	100.00	Poland
ABB Zamech Marine Sp. Zo.o., Elblag	100.00	Poland
Entrelec Polzka Sp. Zo.o., Leborska	100.00	Poland
PORTUGAL
ABB S.G.P.S, S.A., Amadora	100.00	Portugal
ABB (Asea Brown Bovari) S.A., Amadora	100.00	Portugal
ABB Stotz Kontakt Eléctrica, Unipessoal, Lda., Porto	100.00	Portugal
SGIE 2000 - Consultores em Organizaçao Industrial S.A., Lisboa	100.00	Portugal
SMM - Sociedade de Montagens Metalomecanicas S.A., Amadora	100.00	Portugal
SMM-UM-Sociedade de Montagens Metalomecanicas SA, Amadora	100.00	Portugal
ROMANIA
ABB SRL, Bucharest	100.00	Romania
RUSSIA
000 ABB Lummus Global, Moscow	100.00	Russian Federation
ABB Automation LLC, Moscow	76.20	Russian Federation
ABB Communications and Information Systems Ltd., Moscow	100.00	Russian Federation
ABB El Bushing Ltd., Moscow	100.00	Russian Federation
ABB Electroengineering Ltd., Moscow	100.00	Russian Federation
ABB Energosvyaz LLC, Moscow	100.00	Russian Federation

9

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
ABB Industrial and Building Systems Ltd., Moscow	100.00	Russian Federation
ABB Moskabel Ltd., Moscow	100.00	Russian Federation
ABB PS Ltd., Moscow	100.00	Russian Federation
ABB UETM Ltd., Ekaterinburg	100.00	Russian Federation
Asea Brown Boveri Ltd., Moscow	100.00	Russian Federation
SAUDI ARABIA
ABB Automation Co. Ltd., Riyadh	65.00	Saudi Arabia
ABB Contracting Company Ltd., Riyadh	65.00	Saudi Arabia
ABB Electrical Industries Ltd., Riyadh	65.00	Saudi Arabia
ABB Service Co. Ltd., Al Khobar	65.00	Saudi Arabia
Lummus Alireza Ltd. Co., Saudi Arabia	51.00	Saudi Arabia
Saudi SAE Technical Construction Co. Ltd., Riyadh	99.99	Saudi Arabia
SENEGAL
ABB Technologies S.A., Dakar	100.00	Senegal
SERBIA AND MONTENEGRO
ABB d.o.o., Belgrade	100.00	Serbia and Montenegro
SINGAPORE
ABB Agencies Pte. Ltd., Singapore	100.00	Singapore
ABB Holdings Pte. Ltd., Singapore	100.00	Singapore
ABB Industry Pte. Ltd., Singapore	100.00	Singapore
ABB Lummus Global Pte. Ltd., Singapore	100.00	Singapore
ABB Support Pte. Ltd., Singapore	100.00	Singapore
ABB Treasury Center (Asia Pacific) Pte. Ltd., Singapore	100.00	Singapore
SLOVAKIA
ABB Elektro s.r.o., Bratislava	100.00	Slovakia
ABB Komponenty s.r.o., Kosice	100.00	Slovakia
ABB s.r.o., Bratislava	100.00	Slovakia
SLOVENIA
ABB D.o.o., Ljubljana	100.00	Slovenia
SOUTH AFRICA
ABB Holdings (Pty) Ltd., Sunninghill	80.00	South Africa
ABB Powertech Transformers (Pty) Ltd., Pretoria	40.00	South Africa
ABB South Africa (Pty) Ltd., Sunninghill	80.00	South Africa
Desta Power Matla (Pty) Ltd., Pretoria	29.98	South Africa
Nelspruit Airport Operating Company (Pty) Ltd., Nelspruit	90.00	South Africa
Primkop Airport Management (Pty) Ltd., Nelspruit	90.00	South Africa

10

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
SPAIN
ABB Automation Products S.A., Barcelona	100.00	Spain
ABB Power Technology S.A., Zaragoza	100.00	Spain
ABB Sistemas Industriales S.A., San Quirze del Vallés	100.00	Spain
ABB Stotz Kontakt, S.A., Getafe	100.00	Spain
Asea Brown Boveri S.A., Madrid	100.00	Spain
SWEDEN
AB Cythere 61, Västerås	100.00	Sweden
AB Cythere 63, Västerås	100.00	Sweden
AB Electro-Invest, Västerås	100.00	Sweden
ABB AB, Västerås	100.00	Sweden
ABB Automation Technologies AB, Västerås	100.00	Sweden
ABB Construction AB, Västerås	100.00	Sweden
ABB Fastighet AB, Västerås	100.00	Sweden
ABB Financial Services AB, Sollentuna	100.00	Sweden
ABB Industriservice AB, Uppsala	100.00	Sweden
ABB Industriunderhåll AB, Degerfors	51.00	Sweden
ABB Norden Holding AB, Stockholm	100.00	Sweden
ABB Participation AB, Västerås	100.00	Sweden
ABB Power Technologies AB, Ludvika	100.00	Sweden
ABB Technology LFB AB, Stockholm	100.00	Sweden
ABB Virkestorkar AB, Skellefteå	100.00	Sweden
Romania Invest AB, Västerås	100.00	Sweden
Tre Kronor Investment AB, Västerås	100.00	Sweden
SWITZERLAND
ABB Asea Brown Boveri Ltd., Zurich	100.00	Switzerland
ABB Automation Technologies Management Ltd., Zurich	100.00	Switzerland
ABB Dicoesa, Belfaux	100.00	Switzerland
ABB Energy Engineering AG, Zurich	100.00	Switzerland
ABB Energy Services International Ltd., Zurich	100.00	Switzerland
ABB Handels- und Verwaltungs AG, Zurich	100.00	Switzerland
ABB Immobilien AG, Baden	100.00	Switzerland
ABB Information Systems Ltd., Zurich	100.00	Switzerland
ABB Insurance Brokers AG, Baden	100.00	Switzerland
ABB International Marketing Ltd., Zurich	100.00	Switzerland
ABB International Services AG, Zurich	100.00	Switzerland
ABB Intra AG, Zurich	100.00	Switzerland
ABB Ltd, Zurich	100.00	Switzerland
ABB MEA Participation Ltd., Zurich	100.00	Switzerland
ABB Power Technologies Management Ltd., Zurich	100.00	Switzerland
ABB Research Ltd., Zurich	100.00	Switzerland
ABB Sécheron S.A., Satigny	99.97	Switzerland
ABB Technology Ltd., Zurich	100.00	Switzerland

11

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
ABB Turbo-Systems AG, Baden	100.00	Switzerland
ABB Turbo-Systems Holding Ltd., Baden	100.00	Switzerland
TAIWAN
ABB Ltd., Taipei	100.00	Taiwan
TANZANIA, UNITED REPUBLIC
ABB Tanelec Ltd., Arusha	70.00	United Republic of Tanzania
Asea Brown Boveri Ltd., Dar Es Salaam	100.00	United Republic of Tanzania
THAILAND
ABB Bailey Limited, Bangkok	98.00	Thailand
ABB Foundries, Bangkok	100.00	Thailand
ABB LIMITED, Bangkok	100.00	Thailand
Asea Brown Boveri Holding Ltd., Bangkok	100.00	Thailand
Kent Meters (Thailand) Ltd., Bangkok	100.00	Thailand
TUNISIA
ABB Maghreb Services S.A., Tunis	100.00	Tunisia
L’Ebenoid Production, Tunisie	100.00	Tunisia
TURKEY
ABB Elektrik Sanayi A.S., Istanbul	99.94	Turkey
ABB Holding A.S., Istanbul	99.95	Turkey
UGANDA
ABB Ltd., Kampala	100.00	Uganda
UKRAINE
ABB Ltd., Kiev	100.00	Ukraine
UNITED ARAB EMIRATES
ABB Energy Automation S.p.A., Abu Dhabi	100.00	United Arab Emirates
ABB Industries (L.L.C), Dubai	49.00	United Arab Emirates
ABB Transmission & Distribution Ltd., Abu Dhabi	49.00	United Arab Emirates
UNITED KINGDOM
ABB Credit Ltd., London	100.00	United Kingdom
ABB Combined Heat and Power Ltd., Warrington	100.00	United Kingdom
ABB Equity Development Company Ltd., London	100.00	United Kingdom
ABB Equity Ventures (UK) Ltd., London	100.00	United Kingdom
ABB Holdings Ltd., Warrington	100.00	United Kingdom
ABB Investments Ltd., Warrington	100.00	United Kingdom
ABB IOP Services Ltd., Surrey	100.00	United Kingdom

12

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
ABB Ltd., Warrington	100.00	United Kingdom
ABB Lummus Crest Ltd., Surrey	100.00	United Kingdom
ABB Lutech Resources Ltd., Surrey	100.00	United Kingdom
ABB Service Limited, Warrington	100.00	United Kingdom
Lighting for Staffordshire Holdings Ltd., Staffordshire	60.00	United Kingdom
Lighting for Staffordshire Ltd., Staffordshire	60.00	United Kingdom
UNITED STATES
ABB Barranquilla Inc., Princeton, NJ	100.00	Delaware
ABB Capital (USA) LLC, Delaware	100.00	Delaware
ABB Equity Ventures Inc., Princeton, NJ	100.00	Delaware
ABB Finance Inc., Norwalk, CT	100.00	Delaware
ABB Holdings Inc., Norwalk	100.00	Delaware
ABB Inc., Norwalk, CT	100.00	Delaware
ABB Investments LLC, Norwalk, CT	100.00	Delaware
ABB LGI / Grootint Joint Venture, Houston	50.00	Not Incorporated
ABB Lummus Global, Inc., Bloomfield, NJ	100.00	Delaware
ABB Lummus Global International Corp., Texas	100.00	Delaware
ABB Lummus Global Overseas Corporation, Bloomfield, NJ	100.00	Delaware
ABB Oil & Gas USA Inc., Houston, TX	100.00	Delaware
ABB Performance Services LLC, Norwalk	100.00	Delaware
ABB Prospects Inc., Norwalk	100.00	Delaware
ABB Semiconductors Inc., Pittsburgh PA	100.00	Delaware
ABB Susa Inc., North Brunswick, NJ	100.00	New York
ABB Susa International Inc., North Brunswick, NJ	100.00	Delaware
ABB Susa/Dillingham, North Brunswick	55.00	Not Incorporated
ABB Treasury Center USA Inc., Norwalk, CT	100.00	Delaware
Brown & Root/ABB SUSA, North Brunswick	51.00	Not Incorporated
Camelot IS-2 International, Inc. D/B/A Skyva International, Wickliffe	99.97	Delaware
Combustion Engineering Inc., Norwalk, CT	100.00	Delaware
Connecticut Valley Claims, CT	100.00	Delaware
DLI Engineering Corp., Bainbridge Island	100.00	Washington
Joint Venture ABB Lummus Snamprogetti USA, Houston	50.00	Not Incorporated
KOMPOSIT AMERICAS Risk Management, Consultancy & Insurance Brokerage, Serv. California	100.00	United States
Lummus Catalyst Company, Bloomfield, NJ	100.00	Delaware
URUGUAY
ABB CL Logistic S.A., Montevideo	100.00	Uruguay
UZBEKISTAN
ABB CHTZ Closed Joint Stock Company, Chirchik	68.00	Uzbekistan
ABB Tamir Ltd., Nurabad	51.00	Uzbekistan
VENEZUELA
Asea Brown Boveri S.A., Caracas	100.00	Venezuela

13

COUNTRY Name of Entity, Location	ABB Group Interest	Jurisdiction of Incorporation
VIET NAM
ABB Ltd., Hanoi	100.00	Viet Nam
ZAMBIA
ABB Ltd., Lusaka	100.00	Zambia
ZIMBABWE
ABB (Private) Ltd., Harare	100.00	Zimbabwe

14

EX-12.1

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Exhibit 12.1

CERTIFICATIONS

I, Fred Kindle, certify that:

        1.     I have reviewed this annual report on Form 20-F of ABB Ltd;

        2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

        3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

        4.     The company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



(b)

Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(c)

Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and

        5.     The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and



(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date: May 27, 2005

/s/  FRED KINDLE Fred Kindle
Chief Executive Officer

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Exhibit 12.1

CERTIFICATIONS

EX-12.2

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Exhibit 12.2

CERTIFICATIONS

I, Michel Demaré, certify that:

        1.     I have reviewed this annual report on Form 20-F of ABB Ltd;

        2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

        3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

        4.     The company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



(b)

Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(c)

Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and

        5.     The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and



(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date: May 27, 2005

/s/  MICHEL DEMARÉ Michel Demaré
Chief Financial Officer

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Exhibit 12.2

EX-13.1

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Exhibit 13.1

SECTION 906 CERTIFICATION

        In connection with the Annual Report on Form 20-F for the fiscal year ended December 31, 2003 of ABB Ltd (the "Company") as filed with the U.S. Securities and Exchange Commission (the "Commission") on the date hereof (the "Report") and pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Fred Kindle, Chief Executive Officer of the Company, certify, that:

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and



(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/  FRED KINDLE
	Name:	Fred Kindle
	Title:	Chief Executive Officer

Date: May 27, 2005

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section. The foregoing certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to ABB Ltd and will be retained by ABB Ltd and furnished to the Securities and Exchange Commission or its staff upon request.

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Exhibit 13.1

SECTION 906 CERTIFICATION

EX-13.2

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Exhibit 13.2

SECTION 906 CERTIFICATION

        In connection with the Annual Report on Form 20-F for the fiscal year ended December 31, 2003 of ABB Ltd (the "Company") as filed with the U.S. Securities and Exchange Commission (the "Commission") on the date hereof (the "Report") and pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Michel Demaré, Chief Financial Officer of the Company, certify, that:

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and



(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:
/s/  MICHEL DEMARÉ Name: Michel Demaré
Title: Chief Financial Officer

Date: May 27, 2005

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section. The foregoing certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to ABB Ltd and will be retained by ABB Ltd and furnished to the Securities and Exchange Commission or its staff upon request.

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Exhibit 13.2

SECTION 906 CERTIFICATION