ABB Group Annual Report, 2001 - English

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2002 16:33 Uhr Seite 1

ABB Group Annual Report 2001
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Contents
1 About ABB 25 Chief Financial Officer: 38 Financial Review
2 Key figures and highlights A year of change
4 Chairman’s letter 26 Group Transformation:
6 Chief Executive’s letter Creating a leaner organization
8 ABB at a glance 27 Group Processes:
Customers expect us to work
10 Utilities the same way in all markets
12 Process Industries 28 Industrial IT
14 Manufacturing and 30 Sustainability
Consumer Industries 32 Research and Development
16 Oil, Gas and Petrochemicals
18 Power Technology Products 34 Management
20 Automation Technology 37 ABB Board of Directors
Products
22 Financial Services
Forward looking statement

The ABB Group publishes Annual Reports in English, German and Swedish. The English-language version
is binding. ABB also issues quarterly results in April, July and October. All figures shown for the ABB Group are
in U.S. dollars. ABB also publishes annual sustainability and technology reports. For a copy of these reports
please contact ABB Corporate Communications at the address printed on the back of this report, or download
it from www.abb.com.
The Annual Report includes forward-looking statements. We have based these forward-looking statements
largely on current expectations and projections about future events, financial trends and economic conditions
affecting our business. These forward-looking statements are subject to risks, uncertainties and assumptions,
including among other things, the following: (i) the difficulty of forecasting future market and economic
conditions: (ii) the effects of, and in charges in, laws, regulations, governmental policies, taxation, or accounting
standards and practices; (iii) the effects of competition in the product markets and geographic areas in which
we operate; (iv) our ability to anticipate and react to technological change and evolving industry standards in the
markets we operate; (v) the timely development of new products, technologies, and services that are useful for
our customers; (vi) unanticipated cyclical downturns in some of the industries that we serve; (vii) the risks inherent
in large, long-term projects served by parts of our business; (viii) the difficulties encountered in operating in
emerging markets; and (ix) factors described in documents that we may furnish from time to time with the U.S.
Securities and Exchange Commission. Although we believe that the expectations reflected in any such forward-
looking statement are based on reasonable assumptions, we can give no assurance that they will be achieved.
The words “believe”, “may”, “will”, “estimate”, “continue”, “anticipate”, “intend”,“ expect”, and similar words are
intended to identify forward-looking statements. We undertake no obligation to update publicly or revise any
forward-looking statements because of new information, future events, or otherwise. In light of these risks and
uncertainties, the forward-looking information, events and circumstances might not occur. Our actual results
and performance could differ substantially from those anticipated in our forward-looking statements.
About ABB
ABB is a global leader in power and automation
technologies that enable utility and industry
customers to improve performance while
lowering environmental impact. ABB is present
in more than100 countries.We rank number
one, two or three in almost all of our activities.
We are organized from the outside in to make

sure our customers have quick and easy
access to everything they need, where and
when they need it – whether they buy from us
directly or through distributors, wholesalers,
system integrators or other partners.
ABB is moving all its offerings to a common

systems integration architecture, to deliver
Industrial IT-enabled products and services.
Industrial IT allows our customers to optimize
their operations and link up in real time with
their suppliers and customers.The result is a
leap in efficiency, quality and competitiveness.
ABB Group Annual Report 2001 1

Key figures and highlights
Total Group
Year ended December 31 (U.S. dollar amounts in millions, except per share amounts) 2001 2000
Orders received 23,779 25,440

Revenues 23,726 22,967
Earnings before interest and taxes (EBIT) 279 1,385
Income from continuing operations
before taxes and minority interest 45 1,306
Net income (loss) (691) 1,443
Stockholders’ equity 2,014 5,171
Total assets 32,344 30,962
Capital expenditure, excluding
purchased intangible assets 645 485
Capital expenditure for acquisitions 597 896
Divestitures 283 1,963
Research and development expense 654 703
Order-related development expenditure 916 985
Earnings before interest and taxes/Revenues 1.2% 6.0%
Return on equity (19.2)% 30.6%
Net operating cash flow 2,193 1,022
Number of employees 156,865 160,818
Basic earnings (loss) per share (0.61) 1.22

Diluted earnings (loss) per share (0.61) 1.22
Revenues by region 2001 Employees by region 2001

Europe 54% Europe 65%
The Americas 25% The Americas 17%
Asia 11% Asia 11%
Middle East and Africa 10% Middle East and Africa 7%
2 ABB Group Annual Report 2001

01 23,726 Group revenues
00 22,967 ($ in millions)
99 24,356
UT 5,649 Revenues by division 2001

PI 3,377 ($ in millions)
Utilities (UT)
MC 4,780
Process Industries (PI)
OG 3,489 Manufacturing and
PT 4,042 Consumer Industries (MC)
AT 5,246 Oil, Gas and Petrochemicals (OG)
FS 2,133 Power Technology Products (PT)
Automation Technology
Products (AT)
Financial Services (FS)
01 279 Group earnings

before interest and taxes
00 1,385
($ in millions)*
99 1,122
* Group earnings before interest and taxes include total capital gains of $ 57million in 2001,
$ 447million in 2000 and $180 million in1999.
UT 148 Earnings before interest and

PI 116 taxes by division 2001
($ in millions)
MC 87
Utilities (UT)
OG 79 Process Industries (PI)
234 For more information about ABB:
PT Manufacturing and
AT 380 Consumer Industries (MC) Web site:
(32) FS Oil, Gas and Petrochemicals (OG) w www.abb.com
Power Technology Products (PT)
Media:
Automation Technology
Products (AT) e media.relations@ch.abb.com
Financial Services (FS) Shareholders:
e investor.relations@ch.abb.com

Chairman’s letter The past three years have seen the divestment
of the rail transportation business and the sale of
the power generation activities.The aim was to
concentrate on less capital-intensive activities
and to better leverage the technology base in
standardized and customized offerings.
During 2001, ABB began a profound transformation,
aligning the organization towards customers and
their needs, increasing efficiency and growing
revenues. Key steps are also being taken to improve
profitability and financial solidity. Net debt has been
reduced significantly through a successful cash
generation program.
Early in the year, the change in organizational
structure and the adoption of U.S. Generally
Accepted Accounting Principles (U.S. GAAP)
made it difficult for the financial market to track the
company’s performance. The issue was addressed
as quickly as possible, underscoring that
transparency remains a principal objective.
The Board is grateful for the professionalism and
dedication displayed by ABB employees around
the world, who maintained a solid operational
In today’s business climate, urgency and execution performance in a demanding year of change
are crucial, coupled with a clear concentration on and challenges.
core business. Over the past year, ABB has been In today’s difficult and rapidly changing business
taking important steps to focus its portfolio and environment, ABB has taken the clear strategic
streamline its organization to vigorously deliver value course of focusing on core competencies and
to customers. relentlessly delivering the operational and financial
The ABB strategy centers on pairing leading-edge performance expected of a world leader.The
technologies with an in-depth understanding of entire ABB organization is driven by a strong, shared
our customers’ business environment and success sense of urgency to create value for customers in
factors. As a supplier to utility and industry order to create and sustain value for shareholders,
customers around the globe, ABB builds on a employees and society at large.
world-class portfolio of power and automation
technologies. All our customers – from producers
of consumer goods, manufacturers of paper or
steel to operators of electricity grids – need ABB
products, systems, solutions and services to make Jürgen Dormann
their installations more productive. Chairman

Chief Executive’s letter We will manage the asbestos issue in the U.S. with
the same professionalism as in the past.The issue
stems from the use of asbestos as insulation material
inside welded boilers. Combustion Engineering,
a U.S. subsidiary, used asbestos until the mid-1970s.
At the end of 2001, we took a charge of $ 470 million
increasing our provisions to $ 940 million to cover
the expected claims against Combustion Engineering.
There were 94,000 claims pending at the end of the
year. Combustion Engineering has intensified its
efforts to settle valid claims and dispute those that
appear invalid.
ABB’s steps to increase transparency last year
included the adoption of U.S. GAAP (Generally
Accepted Accounting Principles). Reporting under
the new divisional structure is in place, including
a split-out of the Financial Services balance sheet.
Our commitment to Industrial IT, research and
development and sustainability are key to our
strategy. We have forged ahead with Industrial IT,
our common product and system architecture
ensuring an efficient integration of all our offerings;
more than 3,000 products had been certified as
ABB had a demanding year in 2001.We made Industrial IT-enabled by the end of January, 2002 –
deep and necessary changes, including the largest well ahead of target.
transformation in the company’s history, and took We sharpened the focus of corporate research
key steps towards increased transparency.These and development in 2001, creating global
measures are already starting to yield results and laboratories which link virtually with each other
will pave the way for improved performance. and external partners, and streamlining our efforts
We kept order intake stable and increased revenues towards emerging technologies.
in local currencies while our cash flow from Sustainability is integral to ABB policy, and our
operations more than doubled. Business with our success in this field was again recognized in 2001
main 200 customers grew at a rate that was over when the Dow Jones Sustainability Index ranked
10 percent higher than the Group average for orders, us number one in our market sector for the third
proving that our customer-centric organization consecutive year.
is able to deliver increased customer penetration.
However, the year ended with a net loss, which Business Environment and Outlook 2002
is a disappointment. In order to put the company ABB’s business plan for the year 2002 assumes
on a better footing, we had to take some broad a flat economy. On the positive side, interest rates
operational measures. are low and inventory levels in industry are low. But
With the transformation effort in 2001,we realigned investment levels remain low and unemployment
all business activities around customer groups is high.We also have ongoing consolidation in
and simplified our organization in all markets. some key customer sectors, which usually puts
These were important steps allowing us to leverage an additional brake on investments, and since the
our position as a leader in power and automation events of September11 last year, there is increased
technologies. uncertainty in some parts of the world.
Like any large organization, ABB needs to watch In our customer markets, the utility and life science
its costs. Simpler, leaner structures are vital – sectors remain positive, but there is little indication
which is why we sharply reduced the number of overall economic recovery. Regionally, Asia
of operating companies. (particularly China and India) are expected to develop
positively, the economic dynamics of Europe and
To further lower our cost base, we began a program the U.S. remain slow. Conditions in the Middle East,
to reduce12,000 jobs, coupled with changes Africa and Latin America are mixed, depending
to ensure greater efficiency and productivity. It is on countries and the sectors within each country.
essential to continue to watch costs in order to
improve performance.

In ABB, we have set several priorities for the year
ahead: we will deliver on the promise, made
mid-2001 when the12,000 job reduction program
was announced, to reduce our annual cost run
rate by $ 500 million, and we will further cut our
net debt by $1.5 billion. At the same time, we will
increase efforts to ensure more business per
customer and forge ahead with certifying Industrial IT
products, aiming to certify all relevant products
by year-end.
For 2002, revenues are expected to be flat in
comparison to 2001. EBITmargin for the full year
2002 is expected to be in the range of 4 to 5 percent.
EBIT and net cash from operations are expected
to be stronger in the second half of 2002 than in the
first half.
The targets for 2005 remain unchanged.We aim
to grow revenues on average by 6 percent annually
in the period 2001–2005. EBITmargin is expected
to reach 9 –10 percent by 2005.
The targets for 2002, as well as for 2005, assume
no major currency effects and exclude major
acquisitions and divestments.
Our path forward lies in strengthening our power
and automation technologies portfolio, and in meeting
our customers’ needs by combining our generic
products with industry-specific products, systems,
services and solutions.
We will return to a healthy profit in 2002.The company
is on the right track and the measures we have taken
should strengthen shareholder, market and customer
confidence in the year ahead.
We took hard decisions in 2001 for the benefit of
the company’s future. I am grateful to the employees
Above: Below: who did an excellent job during a very difficult year
Innovative technology Stakeholder dialogues
Research and development is key ABB’s social policy was launched with major programs to re-shape the company.
to ABB’s strategy and business. in February 2001as part of our
Nearly seven percent of revenues sustainability initiative. Part of the
Keeping the development of order intake in line with
in 2001 was spent on technology program involves stakeholder or better than our competitors while growing our
innovation, helping the Group to dialogues, which were conducted revenues and doubling our cash flow from operations
build on its leadership position in in 40 countries to assess the are true indications of their achievements. Together,
power and automation products, policy’s relevance to communities we turned the page, and as one team we are focusing
applications and services. and find ways of implementing it.
on the future.
Jörgen Centerman
President and Chief Executive Officer

ABB at a glance
ABB Group Utilities Process Industries Manufacturing and

Consumer Industries
ABB is a global leader in power Business areas* Business areas Business areas
and automation technologies ■ Modular Substations ■ Marine and Turbocharging ■ Air Handling*
that enable utility and industry ■ Power Systems ■ Paper, Printing, Metals ■ Automotive Industries
customers to improve their ■ Utility Automation and Minerals ■ Building Systems
performance while lowering ■ Utility Services ■ Petroleum, Chemical and ■ Logistic Systems
environmental impact. Life Sciences ■ Telecom and Product
Manufacturing Industries
We have four end-user divisions ABB serves electric, gas and ABB serves the chemical, life ABB sells products, solutions and
serving utilities, process industries, water utilities – whether sciences, oil and gas, refining, services that improve customer
manufacturing and consumer state-owned or private, global petrochemicals, marine, productivity and competitiveness
industries, and the oil, gas and or local, operating in liberalized turbocharging, metals, minerals, in areas such as automotive
petrochemicals sectors. or regulated markets – with a mining, cement, pulp, paper and industries, telecommunications,
Two divisions provide power portfolio of products, services printing industries with process- consumer goods, food and
and automation technology and systems. Our principal specific products and services beverage, product and electronics
products via internal and third- customers are generators of combined with our power and manufacturing, airports, parcel
party channel partners, as well power, owners and operators automation technologies. ABB is and cargo distribution, and public,
as direct sales. The group’s of power transmission systems, the leading supplier in many of industrial and commercial
Financial Services division energy traders and local these markets, and we use our buildings. ABB is a global leader
serves ABB, its channel partners distribution companies. industry and process knowledge in several of these industries.
and customers. ABB is a global leader in the to create Industrial IT solutions
utilities market. that improve the efficiency
w www.abb.com * As of February1, 2002, the Utilities division
and competitive strength * In December 2001, ABB announced a strategic
business areas were realigned.There are of our customers. divestment of its air handling business.
now three business areas: Utility Partner, Utility
Power Systems and Utility Automation Systems.
01 23,726 01 5,649 01 3,377 01 4,780

00 22,967 00 5,473 00 3,339 00 5,225
99 24,356 99 5,875 99 3,485 99 5,697
Revenues ($ in millions) Revenues ($ in millions) Revenues ($ in millions) Revenues ($ in millions)

Oil, Gas and Power Automation Financial Services
Petrochemicals Technology Products Technology Products
Business areas Business areas Business areas Business areas
■ Downstream ■ Distribution Transformers ■ Control and Force Measurement ■ Equity Ventures
■ Upstream ■ High-Voltage Technology ■ Drives and Power Electronics ■ Insurance
■ Medium-Voltage Technology ■ Electrical Machines ■ Structured Finance
■ Power Transformers ■ Instrumentation and Metering ■ Treasury Centers
■ Low-Voltage Products
■ Robotics
ABB supplies a comprehensive ABB is the global market leader in ABB is the global market leader ABB Financial Services supports
range of products, systems and power technology products. We in automation technology.We the group’s businesses and
services to the global oil, gas cover the entire spectrum of provide products, software and customers with innovative
and petrochemicals industries, technology for power transmission services for the automation and financial solutions in structured
from onshore and offshore and power distribution, including optimization of discrete, process finance, leasing, project
exploration technologies to transformers, switchgear, and batch manufacturing development and ownership,
the design and supply of breakers, capacitors and cables, operations. Key technologies financial consulting, insurance
production facilities, refineries as well as other products, include measurement and and treasury activities.With
and petrochemicals plants. platforms and technologies for control, instrumentation, process operations in every major market
ABB is a leading presence in high- and medium-voltage analysis, drives and motors, of the world, ABB Financial
many of the upstream and applications. Our products are power electronics, robots and Services offers its customers the
downstream markets. used in industrial, commercial low-voltage products, all geared unrivaled combination of deep
and utility applications. toward one common Industrial industry knowledge and financial
IT architecture for real-time expertise globally.
automation and information
solutions throughout a business.
01 3,489 01 4,042 01 5,246 01 2,133

00 2,796 00 3,662 00 5,175 00 1,966
99 3,086 99 3,862 99 5,550 99 1,687
Revenues ($ in millions) Revenues ($ in millions) Revenues ($ in millions) Revenues ($ in millions)

Utilities ABB serves electric, gas and water utilities –
whether state-owned or private, global or local,
operating in liberalized or regulated markets –
Business areas* with a portfolio of products, services and
Modular Substations systems. Our principal customers are generators
Power Systems of power, owners and operators of power
Utility Automation transmission systems, energy traders and local
Utility Services distribution companies. ABB is a global leader
in the utilities market.
w www.abb.com/ut
Performance in 2001
Despite general economic downturns in the United
States and Europe, Utilities was able to increase
both orders and revenues by three percent in 2001.
Project delays and lower prices impacted earnings,
particularly in large power systems projects, and
earnings before interest and taxes (EBIT) decreased
by 41percent (24 percent without capital gains)
to $148 million.
Major orders and contracts

ABB won important orders that confirm its ability
to provide customers with the solutions they need
“ABB has long held a unique position of market to compete in the rapidly changing utilities market.
strength and technological leadership in the global ABB also continued its policy of sharing technology
power business. It is this leadership position, with customers around the world.
coupled with simplifying the way we work, that
enabled us to capture large power infrastructure The orders range from helping utilities improve their
orders in 2001.” aging infrastructure (examples include Ireland and
the U.K.) to preventing outages by supplying reliable
Richard Siudek, head of ABB’s Utilities division
power at low cost (Chicago), adding new capacity
in several countries (Brazil, China, Indonesia, Laos,
Romania, Venezuela), and providing a reliable and
cost-effective source of backup power (Alaska).
The value of the orders ranges from $17million for
01 5,649 01 148 Laos to $ 300 million and $ 360 million for Brazil and
00 5,473 00 250 China respectively.
99 5,875 99 182
Revenues ($ millions) Earnings before interest Strategic initiatives
and taxes ($ millions)** ABB is focusing resources on assisting our customers
01 6,436 01 15,745
to better manage their assets.
00 6,235 00 15,826 In November, we enhanced our consulting capabilities
99 5,981 99 17,390 by forming an alliance with Accenture, the world’s
Orders received ($ millions) Number of employees leading provider of management and technology
** In 2000, EBITcontains $ 54 million of capital gains which, in total,
amounts to more than10% of the divisional EBIT.
consulting services.The alliance will enable both
companies to bring a new generation of enterprise
Revenues by business area solutions to global utilities. Customers will benefit
Modular Substations 16% from the combination of ABB’s Industrial IT business
Power Systems 13%
Utility Automation 21%
and management solutions and Accenture’s
Utility Services 12% expertise in supply chain management, outsourcing
Pull-through sales 38%*** and its global network of alliances.
*** Pull-through sales are defined as volume passed through end-user divisions * As of February1, 2002, the Utilities division business areas were realigned.There are now three business
acting as channels to market from the channel partner divisions. areas: Utility Partner, Utility Power Systems and Utility Automation Systems.

Customer success story In December, we sold our railway electrification
Helping make connections in China project business to Balfour Beatty Plc for
In October 2001, the State Power Corporation of China awarded $ 38 million.The divestment is part of ABB’s strategy
ABB a $ 360-million order to build a high-voltage direct current of focusing on core areas of power and automation
(HVDC) power transmission system linking hydropower plants technology for utilities and industry.
in central China to Guangdong province. ABB pioneered
HVDC transmission technology, which is an efficient and
cost-effective way of moving electricity over long distances. New products and new technologies
The link will transmit 3,000 megawatts of power over Among the new technologies launched in 2001 is the
940 kilometers.The two-stage project will be delivered in PS-1, a standardized substation with global potential.
32 months, cutting the normal timetable for a project this size Rather than customizing substations to individual
by 30 percent. ABB is already supplying converter stations for customer specifications, ABB can now offer
an 890-kilometer HVDC power link between the Three Gorges
power plant and Shanghai.
customers a choice of nine standard configurations
for substations up to 170 kV. This has cut delivery time
With more than 20 joint venture companies and 6,000 employees,
ABB’s presence in China is strong.This is ABB’s second major order
in half and the cost to the customer by 20 percent.
in China in two years, further demonstrating our support of China’s The PS-1 is eBusiness-enabled.
economic development by offering advanced technological
solutions, and by working directly with Chinese partners in the Outlook
utility and equipment manufacturing industries. Deregulation continues to present utilities the world
over with challenges and opportunities. ABB’s
capabilities in asset management, real-time
information management and in upgrading and
extending transmission and distribution networks
will continue to help utilities improve cost-efficiency
and service reliability.
Above: Below:
Reliable power at low cost Energy management system
ABB has received several selected by Endesa
contracts from Commonwealth ABB signed a $ 4.25-million
Edison (ComEd) in recent years contract with leading Spanish
to help the electric utility upgrade electricity group Endesa to
its Chicago grid and ensure a provide a new IT system for
reliable and competitive supply management of its power
of power. In 2001, ABB won a installations and operation
$ 44-million contract to help centers. Endesa says it expects
ComEd improve capacity to increase operating results
to meet the growing demand by more than $ 25 million per
for power in Chicago’s central year by using the system.
business district.

Process Industries ABB serves the chemical, life sciences,
oil and gas, refining, petrochemicals, marine,
turbocharging, metals, minerals, mining, cement,
Business areas pulp, paper and printing industries with process-
Marine and Turbocharging specific products and services combined with our
Paper, Printing, Metals and Minerals power and automation technologies. ABB is the
Petroleum, Chemical and Life Sciences leading supplier in many of these markets, and we
use our industry and process knowledge to create
Industrial IT solutions that improve the efficiency
and competitive strength of our customers.
w www.abb.com/pi
Performance in 2001
Revenues grew by one percent in 2001, reflecting
the negative impact of September11 on the industries
served by the division.The notable exception was
in the Marine and Turbocharging business area,
which reported an eight percent increase in revenues.
Early action on cost-cutting and productivity
improvement initiatives, however, helped earnings
before interest and taxes (EBIT) to increase
by 32 percent to $116 million.

One of the most important contracts of the year for
“Despite tumultuous markets, the high number ABB was the ten-year global agreement signed with
of orders we won in all industries and parts Dow Chemical in May to provide process and safety
of the world in the past year demonstrates control solutions.The contract is based on the
our customers’ confidence in us, and the many strength of ABB’s Industrial IT technology, our
long-term agreements we signed with major ability to design systems for specialized chemical
customers reflect our deep knowledge of their applications and our close knowledge of Dow’s way
businesses and the strength of Industrial IT.” of working. The agreement makes ABB the sole
Dinesh C. Paliwal, head of ABB’s Process Industries division supplier of process and safety control systems to
Dow Chemical facilities worldwide.
In winning the contract, ABB significantly
strengthened its position in the chemicals market.
One of the main reasons Dow Chemical selected
01 3,377 01 116
00 3,339 00 88
ABB as its strategic partner is that Industrial IT can
99 3,485 99 123
integrate process and safety control in a single
system, a solution unique to ABB.
Revenues ($ millions) Earnings before interest
and taxes ($ millions) We won a $15-million contract from Visy Industries
01 3,376 01 15,937
for the largest Industrial IT software delivery in the
00 3,497 00 15,997 pulp and paper industry. The software is for product
99 3,525 99 16,237 tracking, production planning, and quality and supply
Orders received ($ millions) Number of employees chain management to link in real time headquarter
offices, local facilities and production lines globally.
Key business also included a $ 42-million order
Revenues by business area from GlobalSantaFe Corporation for the complete
Marine and Turbocharging 22% electrification of two semi-submersible offshore
Paper, Printing, Metals
and Minerals 37%
oil drilling rigs.
Petroleum, Chemical and
Life Sciences 21%
Pull-through sales 20%*
* Pull-through sales are defined as volume passed through end-user divisions

acting as channels to market from the channel partner divisions.

Customer success story Strategic initiatives
Helping the biggest remain the best The acquisition of the international consultancy,
ABB is supplying the world’s largest paper machine with power and Eutech Engineering Solutions of the U.K., greatly
automation technology. The giant PM 6 paper machine – to be increased our domain expertise in life sciences,
built by Finland’s Metso Paper for Papierfabrik Palm of Germany – a market in which we are already the recognized
will be controlled with ABB’s Industrial IT technology.The order is
worth $17million. In addition, the start-up of one of the world’s process industries leader.The acquisition increases
biggest pulp dryers – supplied by ABB – took place in 2001 at the our ability to serve pharmaceutical, biotechnology
Riau Andalan pulp mill in Indonesia. and petrochemical customers.
As preferred supplier to Holcim, ABB is delivering technical
information systems to one of the biggest cement companies New products and new technologies
in the world. ABB has also won a contract to design, supply In the1990s, ABB opened up an entirely new
and install a complete mine hoist system for the deepest mine
in Europe.The mine, owned by Outokumpu, is located in Finland.
market with Azipod ® marine propulsion technology,
which significantly improves the maneuverability
and fuel efficiency of sea-going vessels with diesel
electric propulsion. In 2001, ABB launched the
Compact Azipod ® propulsion system, extending the
same concept to offshore supply vessels and ferries.
This resulted in orders for 25 units, with several
already in operation.
During 2001, Samsung and ABB developed the
Contra-Rotating Propeller propulsion system based
on Azipod technology for use on sea-going container
vessels, improving efficiency and fuel savings.
In the paper industry, we developed a new machine
drive system that eliminates gears and makes
powering the process even more energy-efficient.
M-real, one of Europe’s leading providers of paper
and paperboard, selected the DriveIT Direct Drive
to improve performance, reduce energy
consumption and lower the cost of planning,
installation and maintenance.
TheTPS Turbocharger ®, introduced in 2001,
further improved ABB’s market-leading position in
turbocharging diesel and gas engines. eBusiness
grew rapidly for our turbocharging business
with 50 percent of all transactions conducted via
electronic data interchange and the Internet.
Outlook
Industrial IT-enabled solutions and services
improve the plant efficiency and competitiveness
of our customers.With tight capital spending in
most industries, we expect our asset optimization
and Industrial IT services to play an important role
in productivity enhancement and allow our customers
to reduce time-to-market for new products.While
the metal, paper and chemical industries continue
to consolidate, the pharmaceutical, life sciences,
Above: Below:
Stainless steel in Shanghai Industrial IT in Mexico specialty chemical and marine industries will maintain
Production at the new cold- The biggest installation of ABB’s healthy growth during 2002 and provide ample
rolling mill of Shanghai Krupp Industrial IT fieldbus architecture business opportunities.
Stainless Co. Ltd. began in is at Pemex in Mexico, the state-
November. ABB supplied the owned oil giant and one of the
power and automation largest petroleum companies in
equipment, and helped the the world.
customer achieve start-up
one year ahead of schedule.

Manufacturing and ABB sells products, solutions and services
that improve customer productivity and
Consumer Industries competitiveness in areas such as automotive
Business areas industries, telecommunications, consumer
Air Handling* goods, food and beverage, product and
Automotive Industries electronics manufacturing, airports, parcel
Building Systems and cargo distribution, and public, industrial
Logistic Systems and commercial buildings. ABB is a global
Telecom and Product Manufacturing Industries leader in several of these industries.
w www.abb.com/mc
Performance in 2001
The markets we serve developed negatively during
2001, particularly after September11. As a result,
order intake was substantially lower compared to
2000 – particularly for large orders. Revenues,
however, remained flat apart from Automotive
Industries, reflecting both lower sales of standard
products as well as value added solutions.
Substantial efforts have been made to re-size the
division.These costs, coupled with isolated cases
of poor performance, led to a 58 percent decrease
in earnings before interest and tax (47percent without
capital gains) to $ 87 million in 2001.The restructuring
“Against a backdrop of a difficult and volatile program is running according to plan with phase two
market, notably in the automotive industry, ABB being initiated in early 2002.
won several orders in areas where we were not
active in the past, confirming the validity of our Major orders and contracts
customer-centric strategy. This is a clear sign that The division’s automotive industries business
we will be able to expand the reach of our solutions received several high-profile orders in 2001, mostly
business in the years to come.” from major automotive sub-suppliers. These include
Jan Secher, head of ABB’s Manufacturing and a $ 30-million contract from Tower Automotive to
Consumer Industries division design and build a complete body shop in Belgium.
Major orders were also received from Honda for a
paint shop automation plant ($15 million) in Alabama
in the U.S., and from Plastic Omnium for a paint
01 4,780 01 87
00 5,225 00 205
automation line ($ 9 million) in Slovakia. The latter
99 5,697 99 147
order includes an asset management service and an
operating lease arranged by ABB Structured Finance.
and taxes ($ millions)** Another $ 7-million contract was won from Ford in
Germany for 20 robotic packages for its Cologne
01 4,388 01 29,455 assembly line.
00 5,485 00 33,449
99 6,046 99 34,027 Our telecom and product manufacturing business
Orders received ($ millions) Number of employees maintained a strong profile, winning orders
** In 2000, EBIT contains $ 41million of capital gains which, in total, amounts to more than10% of the divisional EBIT.
from Philips for a further 57 robots and two medium-
voltage transformers for two new factories in China.
Revenues by business area In building systems, we won two prestigious
Air Handling 8% contracts in Germany for the International
Automotive Industries 17%
Building Systems 52%
Business Center in Frankfurt and the International
Logistic Systems 3% Trade Center in Berlin. Both buildings require the
Telecom and Product installation of sophisticated systems and electrical
Manufacturing Industries 15% technology, including UPS (uninterrupted power
Pull-through sales 5%***
supply) in Frankfurt for Deutsche Bank’s exchange
trading center.
*** Pull-through sales are defined as volume passed through end-user divisions
acting as channels to market from the channel partner divisions. * In December 2001, ABB announced a strategic divestment of its air handling business.

Awards for excellence from our customers In December, the division announced a strategic
The Toyota Technology Development Prize is one of the most divestment of its air handling business to Global
respected prizes in the automotive industry. It is awarded to Air Movement (Luxembourg) SARL for $ 225 million.
suppliers whose technology has made a significant contribution The air handling industry is undergoing a period
to Toyota’s product quality or productivity. This year, ABB was
awarded the prize for a cartridge painting system. of consolidation and ABB concluded that the new
owner is in a better position to grow and sustain
The system was praised for achieving a 27 percent reduction
in running costs and a two percent reduction in initial costs for these operations.
Toyota’s global production of five million vehicles. It also achieved
a 45 percent reduction in volatile organic compound (VOC) New products and new technologies
emissions during painting, and improved productivity. ABB is working to increase its levels of domain
ABB received another important award in 2001 from Benteler expertise. This means better understanding our
Automobiltechnik. Benteler is one of the largest independent customers’ businesses and aligning our technology
suppliers in the automotive industry and an important ABB
customer with some 2,000 ABB robots installed worldwide.
and applications according to what we learn.
ABB won the Benteler Supplier Award for outstanding Industrial IT is the platform used to achieve these
performance in the product family “capital goods.”
goals. For example, Industrial IT for press shops in
the automotive industry allows us to manage the
entire process for automation stamping lines.
Industrial IT for project information management
enables us to handle huge volumes of information
in a complex environment – like rolling out a 3G third
generation mobile communications network while
increasing quality and efficiency over its lifetime.
Industrial IT for robot care reduces the impact of
service and maintenance by analyzing and predicting
real needs and true conditions rather than worst-case
factory settings. This solution also allows experts to
access equipment remotely.
Outlook
ABB will continue to offer and develop products and
solutions that make it easier for customers to develop
their businesses and make their business processes
more efficient. Our Industrial IT solutions are setting
new benchmarks for industry as a whole and are
being recognized as such by industry watchdogs.
That process will continue.
Above: Below:
Frozen food for Hot Pockets Designing and building a
Twelve IRB 340 robots and an complete body shop
S4Cplus controller were ordered Tower Automotive, a Tier1
by Chef America to pick and sub-supplier to the automotive
place the Hot Pockets range of industry, placed a $ 30-million
frozen snacks and lunches.The order with ABB to design and
U.S. market for hand-held frozen build a complete body shop
meals and snacks is valued at in Ghent, Belgium. The order
$1.3 billion, of which Chef America includes a large number of
has a 38 percent share. ABB solutions, one of them being
a modular assembly system
called FlexiCell.

Oil, Gas and Petrochemicals ABB supplies a comprehensive range of products,
systems and services to the global oil, gas and
petrochemicals industries, from onshore and
Business areas offshore exploration technologies to the design
Downstream and supply of production facilities, refineries and
Upstream petrochemicals plants. ABB is a leading company
in many of the upstream and downstream markets.
w www.abb.com/ogp
Performance in 2001
Crude oil prices were lower in 2001. Nonetheless,
we recorded a strong increase in orders from
upstream markets.This was offset by a slowdown
in downstream markets, caused by overall
weakening of the world economy. Revenues
increased by 25 percent, and order backlog
remains at the healthy level established at the end
of 2000. Earnings before interest and taxes (EBIT)
were $ 79 million, 50 percent lower than in 2000, due
to provisions for cost overruns and project delays.

“One of our unique strengths is our ability to draw Upstream, major oil companies BP, ExxonMobil and
on research and development, both in-house and Shell awarded ABB contracts for developing offshore
with industry partners, to break new ground in fields in West Africa and the Gulf of Mexico.
deep-sea exploration.Working closely in this way
with our customers is the key to success.” Major contracts included the $180-million Bonga
subsea development off the coast of Nigeria and
Gorm Gundersen, head of ABB’s Oil, Gas and
Petrochemicals division the deepwater floating system at Exxon’s Kizomba
project off Angola. BP awarded ABB a five-year
frame agreement to supply equipment for their
deepwater development in the Gulf of Mexico.
In modification and maintenance (M&M), an area
in which ABB has established market leadership,
01 3,489 01 79 Norsk Hydro awarded ABB a two-year, $110-million
00 2,796 00 157 order and extended a five-year frame agreement.
99 3,086 99 165 M&M contracts were also received in several new
Revenues ($ millions) Earnings before interest markets including Australia, Brazil and Nigeria.
and taxes ($ millions)
In Russia, ABB won the contract for front-end
01 3,403 01 13,471 engineering of the multi-billion-dollar onshore
00 3,923 00 11,549 and offshore oil and gas development project
99 3,030 99 8,941
on Sakhalin Island.
Orders received ($ millions) Number of employees
Our downstream business reported significant
achievements in refining and petrochemicals
Revenues by business area
with contracts in China and Brazil for our ethylene
Downstream 44% technologies, and in Saudi Arabia for our proprietary
Upstream 56% solutions in propane dehydrogenation and
polypropylene. In Algeria, ABB won a $ 93-million
contract to build a gas compressor station.
ABB was also awarded the front-end work, including
a feasibility study, by BP and Sinopec, for a planned
petrochemical complex in Shanghai, China.

Recovering oil from hostile environments In May, we formed a joint venture company with
As oil and gas companies explore fields in deeper and deeper Schlumberger, called Syntheseas, to improve the
waters, the need for technologies and systems that can withstand efficiency and profitability of subsea oil and gas
the enormous pressure of working underwater at depths of up to development. We also signed an alliance agreement
2,100 meters and high operating temperatures is growing.
with BP and Chevron to carry out collaborative
ABB is a leading supplier of deepwater and subsea technology and research in seafloor processing for deepwater oil and
is focusing on developing cost-effective and reliable solutions that
will help companies recover resources efficiently and safely in areas gas reserves. Downstream, the Chevron Lummus
that were once considered uneconomical. Global partnership expanded the scope of cooperation
In 2001, we received a number of high-profile orders that confirm
to include a wider range of hydroprocessing
our position. One of these, from Shell and valued at $190 million, is technologies and catalysts.
for a subsea production system for the Bonga development project
located 120 kilometers off the coast of Nigeria. New products and new technologies
Another product in Subsea Electrical Power
Distribution System (SEPDIS™) was released in
April. It is the first full-size frequency converter for
the subsea market and joins other ABB innovations
such as the subsea transformer and high-voltage
connector, which make up the SEPDIS system.
ABB’s new Extended Tension Leg Platform, which
is between 40 and 50 percent lighter than previous
tension leg platforms, was selected by ExxonMobil
for a deepwater field off Angola.
In olefins, ABB signed a technology development
agreement with Sinopec, the largest petroleum and
petrochemicals company in China.The agreement
is projected to significantly improve the economics
of olefins production, a field in which ABB is the
world leader.
Outlook
Our activities in oil, gas and petrochemicals are
wide-ranging and enable us to leverage our
expertise to sell the products and technologies
of the whole ABB Group.That applies particularly
to power and automation technologies, which
will continue to play a major role in our product
development and market offering.
ABB’s oil, gas and petrochemicals division is very
well placed in both upstream and downstream
markets to take advantage of the growth trends
and opportunities.
Above: Below:
Clean fuels for Russia Key orders for offshore
ABB technology is helping projects in West Africa in 2001
Russian refineries produce The Sendje Ceiba FPSO
cleaner transportation fuels (Floating Production, Storage
for domestic and European and Offloading) has been equipped
markets. In 2001,we were with ABB oil processing units
awarded the engineering as well as control and automation
contract for the hydrocracking systems. It first produced oil
complex at the Kirishi Refinery off Equatorial Guinea in
near St. Petersburg. January 2002.

Power Technology Products ABB is the global market leader in power tech-
nology products. We cover the entire spectrum
of technology for power transmission and power
Business areas distribution, including transformers, switchgear,
Distribution Transformers breakers, capacitors and cables, as well as other
High-Voltage Technology products, platforms and technologies for high-
Medium-Voltage Technology and medium-voltage applications.Our products
Power Transformers are used in industrial, commercial and utility
applications.
w www.abb.com/ptp
Performance in 2001
Revenues increased by 10 percent, with all busi-
nesses reporting high single-digit or low double-digit
growth. Demand in the United States, Brazil, China,
India and Italy was particularly strong. Earnings before
interest and taxes (EBIT) decreased by four percent
to $ 234 million, due to higher restructuring charges.

In cooperation with the other ABB divisions, our high-
voltage technology business won a number of orders
from utilities in the U.S. for dead-tank circuit breakers
and other high-voltage equipment. Many of these
“We compete on speed, quality and efficiency. orders are contracts for three to five years and are
For our customers, this means drastically worth between $ 5 – 20 million annually.
reducing the time from order to delivery, thanks
to our online configuration, Industrial IT and In power transformers, we sealed our biggest order,
simplified manufacturing processes. I’m proud working together with the Utilities division. It was part
to say we are ahead of the industry learning curve.” of the $ 360-million contract that ABB won to build
the transmission system between the Three Gorges
Peter Smits, head of ABB’s Power Technology Products division
hydropower plant and Guangdong province in China.
ABB’s medium-voltage technology business received
an order for 200 switchgear ring main units (RMU)
from Northern Electric, U.K. – the first such order from
the U.K. for RMU according to the International
01 4,042 01 234 Engineering Consortium standard.
00 3,662 00 244
99 3,862 99 282
We achieved significant market expansion in North
America, Brazil, China, India, Russia and South Africa.
and taxes ($ millions)*
Strategic initiatives
01 4,221 01 27,555 ABB’s Industrial IT platform is enabling customers
00 4,071 00 27,785
to streamline their product portfolios, customize
99 3,841 99 27,871
their products and increase efficiency in factories. In
Orders received ($ millions) Number of employees Poland, we began work on what will become the first
* In1999, EBIT contains $ 30 million of capital gains which, in total, amounts to more than10% of the divisional EBIT.
ABB factory driven by Industrial IT; and in Sweden,
we started work on a new ABB breaker factory that
Revenues by business area will incorporate Industrial IT solutions to reduce cycle
Distribution Transformers 21% times by 50 percent and the number of parts by
High-Voltage Technology 30%
Medium-Voltage 60 percent.
Technology 25%
Power Transformers 24%

Customer success story Two key investments were concluded in China.
Breaking records in Brazil In Xiamen, we opened a new plant for the production
ABB has set itself the goal of reducing the cycle times accepted of our ELK-04 gas-insulated switchgear, and acquired
as standard by the power industry. In Brazil, we delivered two a joint venture partner in the medium-voltage business.
extra high-voltage power transformers to the utility, Furnas, in the In Hefei, we opened the most modern facility in
record time of six months. The industry standard for a delivery of
this complexity is more than 12 months. China for the production of oil-filled distribution
ABB saved time at all stages of the business process, including transformers. ABB has more than 20 joint venture
planning and design, which ensured smooth collaboration with the companies in China, maintains a sales network
customer. Significant cuts were also made in transportation (three in 22 cities and employs 6,000 people.The Hefei
days instead of the usual 30) and in installation (13 days instead of factory is the first wholly-owned ABB company
40). A team of 35 engineers and fitters worked around the clock for
the entire six months.
in China outside Hong Kong.
The transformers enable an additional 1,500 MW of power to In South Africa, we acquired Reyrolle and NEI
be transmitted, enough to supply 3.2 million people in the Power Engineers to strengthen our leading position
São Paulo region. in switchgear and distribution transformers in
sub-Saharan Africa.
New products and new technologies

We launched the Compact Configurator for
high-voltage switchgear, which enables us to
collaborate with customers online in configuring
and optimizing switchgear solutions.
Virtually all of ABB’s power transformers are
now based on a common design, called TrafoStar,
which is used in all our factories worldwide.This
means that customers benefit from the same high
quality standards, performance and production
speed everywhere.
Outlook
ABB will continue to focus on developing
technologies that drastically reduce the time it takes
to conclude a business transaction, from the first
contact between customer and supplier to delivery
of the end product.The business process will be
cut to a matter of days rather than several weeks
or months – one instance of how we are changing
the way business is done. Industrial IT, Internet
configurators and highly automated manufacturing
will help us achieve these goals.
Above: Below:
Power transformer for China Many try to imitate, but none
One of the 28 ABB power succeed
transformers destined for PASS is a gas-insulated,
China which will be used to high-voltage switchgear module
create a high-voltage power that combines breaker, line
transmission system linking disconnector, earthing switch
the Three Gorges hydropower and metering in one
project to Guangdong province. factory-assembled and
factory-tested unit. It is a unique
product that many competitors
have unsuccessfully tried
to imitate.

Automation Technology Products ABB is the global market leader in automation
technology. We provide products, software
and services for the automation and optimization
Business areas of discrete, process and batch manufacturing
Control and Force Measurement operations. Key technologies include
Drives and Power Electronics measurement and control, instrumentation,
Electrical Machines process analysis, drives and motors, power
Instrumentation and Metering electronics, robots and low-voltage products,
Low-Voltage Products all geared toward one common Industrial IT
Robotics architecture for real-time automation and
w www.abb.com/atp information solutions throughout a business.
Performance in 2001
Markets in Europe followed the economic downturn
in the United States, while Asia remained stable.
Drives and Power Electronics, Electrical Machines
and Low-Voltage Products grew in revenues –
whereas Control and Force Measurement,
Instrumentation and Metering and particularly
Robotics suffered from difficult market conditions
in the automotive and process industries. Earnings
before interest and taxes (EBIT) decreased 18 percent
to $ 380 million as a result of the sharp downturn
in Robotics and a personnel reduction of more than
3,000 employees.
“ABB anticipates growing demand among our
industry customers for intelligent and easy-to-use Major orders and contracts
products and services. In automation, this means Working with the other ABB divisions, we won
using our unique Industrial IT platform to speed up several important contracts in 2001, including
manufacturing, increase efficiency, cut costs a comprehensive control and instrumentation
and reduce environmental impact.” system for the Pemex refinery in Veracruz, Mexico –
Jouko Karvinen, head of ABB’s Automation Technology one of the world’s largest process automation
Products division installations. Pemex will have an integrated
automation solution that extends from the refinery
units to the business enterprise system, all based
on ABB’s Industrial IT technology.
We formed customer alliances in 2001with Grundfos,
01 5,246 01 380
00 5,175 00 464
the Danish pump manufacturer, and Glasstech, a
99 5,550 99 392
leading manufacturer of glass bending and tempering
equipment for the automotive and building industries.
and taxes ($ millions) In addition, for Södra Cell, the largest pulp producer
01 5,170 01 39,834
in the world, we were able to increase functionality
00 5,421 00 41,332 and productivity at its Mörrum mill in Sweden. New
99 5,622 99 43,874 Industrial IT operator stations were installed, working
Orders received ($ millions) Number of employees in concert with ABB controllers and input-output (I/O)
modules installed as far back as1988.

Strategic initiatives
Control and Force Measurement 10% In June, ABB acquired Entrelec, the France-based
Drives and Power Electronics 13% supplier of industrial automation and control
Electrical Machines 13% products, strengthening our position in key growth
Instrumentation and Metering 21% technologies and markets. ABB acquired 99.1
Low-Voltage Products 36%
Robotics 7% percent of Entrelec for about $ 360 million, including
assumed debt.The company operates in17countries
and employs about 2,000 people.

Customer success story ABB New Ventures acquired a minority stake in the
Glasstech chooses the Industrial IT umbrella Swedish software company Industrial & Financial
Glasstech is an original equipment manufacturer (OEM) of machine- Systems (IFS). The partnership builds an important
to-form glass and safety glass for the automotive industry, with link in our long-term Industrial IT strategy to
some 400 machines installed at customer sites all over the world. seamlessly integrate plant systems with business
The control equipment for these machines had become obsolete,
so Glasstech began searching for a strategic supplier to replace it. applications. It also moves ABB into cross-licensing,
whereby key Industrial IT components are made
ABB has not traditionally been Glasstech’s first choice of supplier,
but we offered the company a wide-ranging alliance – both for available to selected third-party software applications.
state-of-the-art control systems to replace their aging equipment
and for compatible automation solutions from other ABB New products and new technologies
businesses. In keeping with our Industrial IT commitment, we
As a result, Glasstech is now using ABB as a one-stop-shop for continued to simplify and streamline our product
low-voltage controls, drives, fans, instruments and control systems, portfolio by eliminating overlaps from past
all using Industrial IT technology.
acquisitions and by making existing products
Industrial IT compliant.
Among the new products and software launched in
2001 are the ACS 800 AC Drive, which we expect to
extend our dominance in the drives market; and the
Fieldbus Plug, which has been judged a major
breakthrough in bus communication in the low-
voltage environment. A number of enhancements
to our Industrial IT control platform were also
released, and more than 500 products from various
Automation Technology Products’ business units
were Industrial IT-enabled for easier integration
within broader solutions.
Outlook
Automation and the ability to connect all the links in
the value chain – from suppliers through production
to management and customers – make up the new
industrial benchmark. Industrial IT is that benchmark,
and ABB will continue to aggressively develop the
concept and the technologies that make it possible.
Above: Below:
ThyssenKrupp Stahl Preserving the customer’s
selects Industrial IT freedom of choice
ThyssenKrupp Stahl has When Companhia Vale do
selected ABB to supply Rio Doce (CVRD) selected
the entire electrification and ABB to optimize a new iron ore
process control for a new pelletizing plant in Brazil, it did so
coking plant at Schwelgern in because the flexibility of the open
Germany. Its 25,000 I/Os will Industrial IT platform ensured that
make it the largest Profibus it would not be tied exclusively to
control system in an industrial ABB. CVRD retained its freedom
plant in the world. The contract to choose between fieldbus
is valued at $ 32 million. communication protocols,
suppliers, hardware and software.

Financial Services ABB Financial Services supports the group’s
businesses and customers with innovative
financial solutions in structured finance, leasing,
Business areas project development and ownership, financial
Equity Ventures consulting, insurance and treasury activities.
Insurance With operations in every major market of the
Structured Finance world, ABB Financial Services offers its customers
Treasury Centers the unrivaled combination of deep industry
knowledge and financial expertise globally.
w www.abb.com/fs
Performance in 2001
Revenues grew eight percent to reach over
$ 2.1billion, mainly due to increased insurance
premiums and an expanded Structured Finance
business. Earnings before interest and taxes (EBIT)
posted a loss of $ 32 million in 2001.The loss came
from Insurance as a result of increased provisions
against expected claims – including $ 48 million
relating to September 11– and a non-cash charge
of $ 295 million following a change in accounting
estimate for a portion of our insurance reserves.
Structured Finance, Equity Ventures, and Treasury
Centers all improved performance compared
“Demand in today’s financial services markets is to 2000.
driven as much by the availability of intellectual
capital as it is by financial capital, providing an Major orders and contracts
excellent growth opportunity for ABB and our ABB’s Structured Finance and Equity Ventures
increasing number of partners.” businesses closed several key contracts on their own,
Jan Roxendal, head of ABB’s Financial Services division and alongside the other ABB divisions, demonstrating
their ability to provide customers with competitive
and innovative solutions.
Structured Finance acted as financial advisor to the
Saudi Arabian National Petrochemical Industries
Company (NPIC) and Basell Holdings Middle East
joint venture to secure the commercial debt financing
01 2,133 (32) 01
00 1,966 00 349
for a $ 500-million polypropylene complex in Saudi
99 1,687 99 337
Arabia. We signed a deal to finance a $ 40-million
contract from Tower Automotive to design and build
and taxes ($ millions) a complete body shop in Belgium, working with
ABB’s other business divisions.
01 2,133 01 1,220
00 1,966 00 1,125 ABB Equity Ventures, a co-sponsor with Petrobras
99 1,687 99 1,049 and A&A Electricity Investment (Jersey) Limited,
Orders received ($ millions) Number of employees led the financing of the Termobahia project which
consists of a $173-million loan from the Inter-
American Development Bank. This is the first of
Brazil’s 49 thermal emergency generating plants
Equity Ventures 2%* to reach financial closure.
Insurance 44%
Structured Finance 17%
Despite volatile capital market conditions,Treasury
Treasury Centers 37% Centers were again instrumental in financing ABB
at attractive levels.
* The majority of income from Equity Ventures business area does not appear
as revenues but is instead recognized in earnings before interest and taxes.

Financing the world’s infrastructure ABB took over Xerox’s leasing operations in the
ABB Financial Services played a key role in financing infrastructure Nordic countries and signed an exclusive agreement
projects in countries all over the world. We have over the years with Xerox to provide sales support and equipment
achieved expertise in large-scale projects in power generation, the financing for about 15,000 customers.The value of the
oil, gas and petrochemicals markets, and power transmission and
distribution. In recent years, however, we have broadened our leasing portfolio is $ 362 million.
scope to projects in wind power, utilities, telecommunications
and airports.
Several strategic partnerships were signed,
which extend our customer base into new areas.
One of many examples in 2001 was the arrangement of loan These include an agreement with the London-based
facilities on behalf of Lietuvos Energija, the state-controlled power
generation and transmission utility in Lithuania. The loan facility of ANZ Investment Bank for business development in
$13 million over a period of 12 years is for the reconstruction of marine transportation finance; an agreement with
switchgear for the national grid. Mediocredito Centrale SpA for the joint development
of financial solutions for the recently deregulated
Italian rail sector; and an agreement with Zürcher
Kantonalbank of Switzerland for cooperation in
structuring and underwriting services.
New products and new solutions

We offered a groundbreaking financial solution to
industrial projects in the Organization for Economic
Cooperation and Development (OECD) countries.
The solution is structured around the low-cost
funding capability of Swedish Export Credit
Corporation and the experience of Swedish Export
Credits Guarantee Board in assessing commercial
risk in export industries.
Internally, our Treasury Centers launched a new global
intranet which integrates a vast amount of financial
and treasury-related information as well as automated
trading, transactions and reporting.
Measurement and management of credit and market
risk have been further improved to meet the highest
standards of international banks.
Outlook
After years of sustained growth with historically
low losses, 2002 will be a year of consolidation for
ABB Financial Services. Higher risk premiums reflect
uncertainty about the future development of the
economy. We will continue to closely monitor the
development of our counterparts, assets, and
processes to meet our customers’ demand for high
quality, low risk financial solutions and structures.
Above: Below:
Extending our customer base High growth in small ticket
ABB was a lead arranger on the vendor leasing
project finance loan for the Manila Over the past two years, ABB
North Toll Road in the Philippines. has enjoyed 95 percent growth
ABB and other top-tier financial in small ticket vendor leasing
institutions provided a bank debt thanks to an acquisition and a
of $ 260 million to finance the unique concept for, and skills in,
rebuilding of an 84-kilometer vendor leasing in the Nordic
stretch of road. countries.

A year of change
Renato Fassbind, Chief Financial Officer
These reporting changes involved a large number

of managers and finance experts throughout the
Group, and were delivered – with enormous effort –
on time and with high quality. Financial markets
did not easily understand all the changes, so in the
second half of the year we stepped up our efforts
to improve communications.
What were the highlights for you in 2001?

Increasing transparency, laying a strong foundation
for consistent reporting in the future, and improving
ABB’s financial position.We now give more
Renato Fassbind, Chief Financial Officer for the financial detail than ever before. Moreover, the new
ABB Group*, answers questions about the structure allows us to show our performance in a
challenges faced by the company, and looks at way that mirrors our business model.
some of the highlights in 2001. The listing itself in April in NewYork was a great
experience. It capped a lot of hard and diligent work.
The best moment was when Jörgen Centerman
rang the opening bell in the NewYork Stock Exchange
on April 6.
I am particularly proud of how the entire Group rallied
What were the main challenges for you to focus on cash generation toward the end of the
as Chief Financial Officer in 2001? year. As a result, we significantly reduced our net debt.
The main operational challenge was to reduce
net debt. In the first quarter, we borrowed to buy From a process-oriented viewpoint,
treasury shares for resale into the U.S., but the what was most important for you last year?
share placement was later cancelled due to poor We continued to drive value-based management
market conditions. This meant that we had to deeper into the ABB organization. As a decentralized
work hard to generate cash through a number of company, it is especially important for us to have
actions – and by year-end, we were so successful a common view on what creates value and how
that we reduced our net debt by $ 2.2 billion in value drivers can be optimized.This is what will drive
the fourth quarter. the Group’s cash flow growth and value creation
On the reporting side, it was a year of tremendous into the future.
change. First, we completed the shift to US GAAP
(Generally Accepted Accounting Principles) with
the 2000 results.We also finalized the preparations
for the listing of ABB shares on the NewYork
Stock Exchange (NYSE). In addition, we adapted
our reporting to reflect the new customer-centric
organization, including a split-out of the Financial
Services balance sheet to give greater transparency.
* At the end of March, 2002, Peter Voser (born1958) will take over the responsibility
of Executive Vice President, Chief Financial Officer. Renato Fassbind leaves the
Group at that time.

Creating a leaner organization
Eric Drewery, Group Transformation
What are the main aims of the transformation?

To deliver a new, lean organization that is driven by
strategic account managers, and to increase volumes
and profit per customer. We have four end-user
divisions serving utilities, process industries,
manufacturing and consumer industries, and the oil,
gas and petrochemicals sectors. Two divisions
provide power and automation technology products
via internal and third-party channel partners, as well
as direct sales. The group’s Financial Services division
serves ABB, its channel partners and customers. Our
task is to make all of these parts work together, simply,
During 2001, the Group Transformation division to the benefit of our employees and customers.
led the efforts to make ABB a leaner and more
customer-focused organization. Eric Drewery, You were given 12 months to accomplish your task.
who headed the division*, reports on progress. Did you succeed?
Yes, I believe we did. All the main pillars of change
Performance highlights in 2001 are now in place, and ownership has been transferred
■ Progress in all markets (more than 60 countries) to the local management teams. Progress is being
on or ahead of schedule closely monitored with regular reporting against
■ Old country holdings replaced by local divisional relevant metrics to ensure we remain on course.
structures and management The targets are tough, but our employees appreciate
■ New, slimmer group legal structure established the need for change, and are working hard and
on January 1, 2002 enthusiastically to implement the program.
■ More than 6,000 customers mapped and major
accounts identified Why is ABB reducing staff?
■ 237 strategic account managers appointed We aim to create more volume and profit per
customer, and in part this will require a leaner
organization. The restructuring projects are designed
to remove, for all time, certain activities and their
related costs – this is about sustainable productivity
improvement, not capacity cutting.
What remains to be done in 2002?

On January 1, 2002, we introduced a new legal
structure that is leading to a very sharp reduction
in the number of legal entities within the Group.
Before this change we were running with more
than1,000 active companies. Going forward,
we will have 400 and this is a major element in the
process of streamlining and simplifying ABB.
The Group Processes division will now focus on
three key areas which will deliver the largest savings
in the short term – supply chain management,
enterprise resource planning (ERP) and
* ABB announced at the end of January 2002 that it is combining the activities of two shared services.
group divisions, Group Transformation and Group Processes, with immediate
effect. Group Transformation has been folded into Group Processes, with Eric Drewery
taking responsibility for the division.

Customers expect us to work
the same way in all markets
Andrew Eriksson, Group Processes
What, in broad terms, did you set out to achieve?

If there is one word which defines the strategy it’s
simplicity. The way we work should be basically the
same everywhere across the company, and it should
be simple – from the way we handle orders or
document our products to the way we purchase our
office supplies. That makes it easier for customers
to do business with us, and easier for our people to
focus on what their customers need.
You can’t tackle every process in the company.

Where do you draw the line?
The Group Processes division was formed in January We cancelled more than 350 individual projects and
2001 to drive growth and cut costs by establishing refocused our efforts only on those that best support
common working processes and a common our customers and employees and provide the
infrastructure for the entire ABB Group. What did biggest, fastest return on investment. We target the
it achieve in its first 12 months? Andrew Eriksson, way we work with customers, with suppliers, and
who headed the division in 2001*, gives his views. how we manage projects. We support that with
standardized infrastructure in IT, eBusiness and
Performance highlights in 2001 internal reporting, and we provide cost-effective
■ Major progress in streamlining IT and eBusiness shared services like accounting and payroll to our
infrastructure groupwide local companies.
■ Launched a pioneering Web-based tool that
tracks and analyzes more than $ 4 billion What challenges have you faced?
in global purchasing We’re asking our employees to change the way they
■ Significantly changed ABB’s culture towards think and behave. That’s not easy in a company with
common ways of working a product and delivery scope and geographic spread
■ Rolled out a common process for handling as wide as ABB’s. Will a way of managing projects
customer complaints in all divisions worldwide for a utility customer also work for an automotive
customer? Can the eBusiness purchasing tool
developed in one part of the company work just as
well elsewhere? These are the questions that people
naturally ask and we say the answer is a clear yes. ABB
still has a way to go but we came a long way in 2001.
How are ABB’s customers benefiting from

common processes?
Our customers expect ABB to speak with the same
voice and work the same way in all markets and
businesses. Common processes provide them with
this one voice. In the short term, they make us faster
and more responsive to our customers’ needs. Longer
term, they allow us to line up our processes with
both our suppliers and customers much more easily.
That is key to building the deep business partnerships
* ABB announced at the end of January 2002 that it is combining the activities of two which will keep us competitive in future.
group divisions, Group Transformation and Group Processes, with immediate effect.
Group Transformation will be folded into Group Processes, with Eric Drewery taking
responsibility for the division.

Industrial IT The modern industrial enterprise consists
of numerous information systems – control,
maintenance, procurement, production, sales
and management – all full of vital information
but often working in isolation. ABB’s Industrial
IT* integrates these systems into a seamless
and easily navigated framework from which
information can be selected, retrieved and acted
upon rapidly and in real time. No other competitor
brings such a visionary solution to power
and automation technologies.
Complexity made easy

Aspect Object™ technology Product launches and certification
The strength of Industrial IT lies in its being the only Hundreds of Industrial IT products were launched
system that successfully addresses the three key during the year, including new components in the
factors of system integration – easy navigation, Operate IT and Control IT product suites, which
consistency of information, and adaptability to the include software for information exchange across
needs of users.This is made possible by ABB’s Aspect business enterprises.
Object technology, which was formally launched in
More than1,000 ABB products had been certified as
August 2001.
meeting Industrial IT standards at the end of 2001.
Aspects and objects, and the flow of information Each certified product is assigned to a product suite
between them, are the core of Industrial IT. An object and named according to what it does and how it fits
is anything from a sensor or valve to a manufacturing into the Industrial IT system.This is a unique and
order, process recipe or end product. An aspect is consistent naming strategy for our industry,
one of the pieces of information – a wiring diagram, underscoring the compatibility of products across
maintenance record or control parameter – essential ABB’s broad portfolio.
to the functioning of that object. A large industrial
plant can consist of some 50,000 objects, each object Pilot projects
containing up to100 aspects. Industrial IT brings all To demonstrate the power of the Industrial IT
that information into a single architecture, based on approach, ABB is running a series of advanced pilot
open industry standards, and makes it easily projects with customers to address unique business
accessible.The system can be managed from a needs. One such project supports gas turbine power
common PC, whether the user is a shop floor worker plant operators to weigh the advantages of running
or senior manager. a plant at overload in a high-price slot against the risk
of greater wear to the plant. At year’s end there were
ABB brings more than100 years of engineering
more than 50 Industrial IT pilot projects in progress.
experience and know-how to the Industrial IT concept,
including an intimate understanding of the production,
operations and management processes of our
customers’ industries. We believe this expertise is
unparalleled in the power and automation industries.
Left: Above:
Dow Chemical selects Internal deployment
Industrial IT of Industrial IT
The ten-year agreement with The ABB transformer factory in
Dow Chemical is ABB’s largest Lodz, Poland, is in the process
Industrial IT order. Dow Chemical of becoming a fully integrated,
selected Industrial IT because it multi-enterprise, Industrial IT
was the only system to meet the plant. The same solution will
company’s strict requirements for be applied to ABB’s 33 other
safety, simplicity, standardization transformer factories.
and operational reliability. Other
important Industrial IT orders
* The “Industrial IT” wordmark and all other product names in the form “XXXX IT” were won from Visy Industries,
contained in this Annual Report are registered or pending trademarks of ABB. ThyssenKrupp Stahl and Pemex.

Sustainability Sustainability at ABB means enhancing and
balancing the company’s economic, environmental
and social performance.This extends itself to
developing, manufacturing and supplying
eco-efficient products and services at competitive
prices while respecting social needs. It also means
sharing technology with emerging and developing
markets, contributing to common efforts,
implementing ABB’s social policy and building
dialogues on sustainability issues with a range of
stakeholders, from employees to non-governmental
organizations.
ABB’s 600 sustainability controllers enforce ISO14001
standards, produce environmental product
declarations (EPDs) for our products, and develop
social sustainability programs which take account
of dialogues with our stakeholders.
Stakeholder dialogues in 40 countries

Following the launch of our social policy in February
2001, stakeholder dialogues were conducted in
40 countries to assess the relevance of the policy
to their communities, to find ways of implementing
it and to measure our adherence to its principles.
The dialogues usually bring together representatives
of local governments, non-governmental
organizations, academia, media, trade unions and
senior ABB personnel.These dialogues allow ABB
to learn what issues are important locally and become
a better corporate citizen.
Protecting the environment

ABB’s achievement in merging industrial automation
and information technology in Industrial IT helps
customers use their resources more efficiently and
lowers the environmental impact of their operations.
Delivering on our promise

ABB is in the midst of an ambitious program to environmental performance of our operations.
Industrial IT-enable all its products. Life-cycle This means, among other things, that our controllers
assessments, which describe the environmental are responsible for the continual monitoring
impacts of a product over its complete life cycle, of environmental performance in relation to legal
are an important part of the program. requirements and scientific knowledge.
Producing environmental product declarations for all
Outlook
ABB core products continues.To date, 43 declarations
In 2002, we intend to integrate sustainability into all
have been produced for major product lines, nine of
levels of the ABB organization – our strategic plans,
which have been externally certified. Twenty more
management systems and operating processes.
are in the pipeline.
In the longer term, we want to create a climate in
Having implemented ISO14001at almost all of our which sustainability becomes an imperative for
manufacturing facilities and service workshops (some all ABB businesses. We want to continue to work
550 sites), we are now expanding our scope by with our customers, their customers and all our
implementing an adapted environmental management other stakeholders to achieve this.
system in ABB’s non-manufacturing organizations.
In pursuit of this aim, we have set four goals for ABB:
to improve our economic performance; to extend
Economic success is the key our environmental management system to all
Healthy financial results and competitive strength employees and all activities; to begin full-scale
are a precondition for sustainable development. It is worldwide implementation of our social policy;
only by being successful in helping our customers and to align our core competences with common
create more value that we can advance in all aspects efforts to help reduce poverty throughout the world.
of sustainability.
ABB tops sustainability index

ABB was for the third year in a row ranked number 01 43 01 551
one in corporate sustainability in its industry group 00 30 00 529

99 500
by the Dow Jones Sustainability Index. ABB was
praised for its “integration of information technology – Number of environmental Number of ISO certifications
product declarations
Industrial IT – into products and systems, as well
as its efforts in small-scale, decentralized energy
and renewables.”
Minimizing the environmental risk exposure

An important task for the network of sustainablility
controllers is to assess and minimize ABB’s
exposure to financial risks related to the

Research and Development Research and development are integral to
our competitiveness. ABB has a long history as
a technology leader, and we continue to develop
and patent hundreds of new power and automation
technology products and services every year.
Last year, ABB invested some seven percent of

revenues, or $1.6 billion, in technology innovation.
ABB spent $ 654 million, or 2.8 percent of revenues,
on research and development, and $ 916 million,
3.9 percent of revenues, on order-related
development.That represents a strong commitment
to maintaining our competitive edge.
We had a portfolio of 18,120 patents in 2001,
almost the same number as the previous year.The
percentage of software-related first filings to total
first filings, a good indicator of our strategic focus,
was 28 percent, up five percentage points over 2000.
Intensifying the focus on our

core technologies
In November 2001, we sharpened the focus of our Online all the time
corporate research programs considerably, by shifting The global laboratories, operating virtually, are
resources toward new technologies like Industrial IT strategically focused on four key areas of research:
and wireless applications. We are building up new automation, power, engineering and manufacturing,
research and development activities in the U.S. and and oil and gas technologies.The four focal points
Asia, while moving away from mature technologies were chosen to better support our core areas of
in Europe. expertise in power and automation technologies.
The global laboratories coordinate their research
We streamlined our portfolio of projects and created
and link our scientists and engineers – in a fully
four networked laboratories, linking our local
networked, online environment – with one another,
research and development units in the U.S., Europe
and with universities, research institutes and
and Asia. We call them global virtual laboratories.
partner organizations.
ABB has 6,000 employees working in research
and development. This simplified way of working – without geographic
borders – eases the way for multi-market project
teams. For example, a team of scientists from Poland,
Finland and India recently worked to develop new
software for the maintenance of factory equipment,
collaborating across borders and time zones to create
a solution that works in almost all countries.
Achievements in 2001
ABB released a number of products in 2001 that
quickly made an impact. These include efficient
engineering systems for transmission grids;
pre-engineered modular substations; the Compact
Azipod ship propulsion system; the world’s most
flexible heavy-duty robots; the installation of
full-size frequency converters for subsea use, and
the successful operation of subsea oil and gas
processing plants.
Some 50 percent of ABB’s research and development
projects address environmental concerns. Many of
the projects are geared to saving energy.
Emerging technologies and university collaboration

ABB collaborates with approximately 70 universities
and research institutes all over the world, and works
strategically with five renowned universities in the
U.S. and the U.K. in emerging areas like
nanotechnology, microelectromechanical systems,
wireless applications and software technologies.
01 654
00 703
99 865
Group investment in research
and development ($ millions)
01 18,120
00 18,595
99 16,316
Total number of patent
applications
01 28%
00 23%
99 18%
Percentage of software-
related first filings to total
first filings

Management
Group Executive Committee 2002
Jörgen Centerman (born 1951) President and
Chief Executive Officer
Eric Drewery (born 1939) Executive Vice President
Group Processes
Renato Fassbind* (born 1955) Executive Vice President
Chief Financial Officer
Gorm Gundersen (born 1944) Executive Vice President
Oil, Gas and Petrochemicals
Jouko Karvinen (born 1957) Executive Vice President
Automation Technology Products
Dinesh C. Paliwal (born 1957) Executive Vice President
Process Industries
Jan Roxendal (born 1953) Executive Vice President
Financial Services
Jan Secher (born 1957) Executive Vice President
Manufacturing and Consumer Industries
Richard Siudek (born 1946) Executive Vice President
Utilities
Peter Smits (born 1951) Executive Vice President
Power Technology Products
* At the end of March, Peter Voser (born1958) will take over the responsibility of Executive Vice President, Chief Financial Officer. Renato Fassbind leaves the Group at that time.
Management Compensation
For the period from January1 to December 31, 2001, compensation to the President and Chief Executive Officer consisted of a base salary of
CHF1,500,000 and a bonus amount of CHF1,500,000.
For the same period, total compensation to the nine other current members of the Executive Committee was in the aggregate amount of
CHF13,000,000. This amount includes unconfirmed bonus amounts relating to 2001 performance.
In addition to receiving annual base and bonus compensation, members of the Executive Committee may participate in the Company’s management
incentive program.
Executive Committee members also enjoy pension benefits in accordance with Swiss social security legislation and, depending on seniority, under
certain supplementary pension benefit programs.
Finally, Executive Committee members receive customary additional benefits such as a company car and health insurance compensation, which are
not material in the aggregate.
Senior Group Officers

Markus Bayegan
Beat Hess
Sune Karlsson
Alfred Storck

Group Functions reporting to CEO
Corporate Communications Björn Edlund Oil, Gas and Petrochemicals
Corporate Strategy and Ventures Eric Elzvik Downstream Stephen M. Solomon
New Ventures Ltd Teemu Tunkelo Upstream Erik Fougner
Human Resources Arne Olsson
Large Projects Sune Karlsson Automation Technology Products
Legal Affairs and Compliance Beat Hess Control and Force Measurement Lars Krantz
Research and Development Markus Bayegan Drives and Power Electronics Systems Bernhard Jucker
Sustainability Affairs Christian Kornevall Electrical Machines Anders Jonsson
Instrumentation and Metering Jouko Karvinen
Group Functions reporting to CFO
Low-Voltage Products Tom Sjökvist
Controlling Silvio Ghislanzoni
Robotics Lars-Gunnar Berggren
Corporate Finance and Taxes Alfred Storck
Real Estate Walter Stücklin
Power Technology Products
Risk Management and Insurance Charles Salek
DistributionTransformers Brice Koch
Value Services Cheryl Sunderland
High-Voltage Technology Josef Dürr
Business Area Managers Medium-Voltage Technology Guido Traversa
Utilities Power Transformers Joakim Olsson
Utility Partner Rana Mukerji
Utility Power Systems Gian Maria Ferrero Financial Services
Utility Automation Systems: Michael Hirth Equity Ventures Chris Antonopoulos
Insurance Göran Thorstensson
Process Industries Structured Finance Lennart Blecher
Marine and Turbocharging Martinus Brandal Treasury Centers Thomas Meyer
Paper, Printing, Metals and Minerals Pekka Ilvonen
Petroleum, Chemical and Life Sciences Frank Duggan Group Processes
Group Competitiveness Øivind Lund
Manufacturing and Consumer Industries Group Internal Audit Markus Kistler
Air Handling Hannu Paitula Shared Services and Local Support Lars-Göran Lemelius
Automotive Industries Bo Elisson
Building Systems Jukka Rinnevaara
Logistic Systems Stephan Mey
Telecom and Product Manufacturing Industries Bruce Loxton

Group Representatives
Europe Americas
Austria Rudolf Petsche Argentina Ulises de la Orden
Benelux Countries Jacques de Raad Bolivia Gery Cerruto
Czech Republic Olle Jarleborg Brazil Benny Olsson*
Denmark Claus Madsen Canada Paul Kefalas
Estonia Bo Henriksson Central America and Caribbean Alvardo Malveira
Finland Mikko Niinivaara Chile Victor Ballivian
France Max Abitbol* Colombia Ramón Monrás
Germany Bengt Pihl Ecuador Carlos Guerra
Greece Costas Cosmadakis Mexico Fredrik Wikstrom
Hungary Peter Hegedüs Peru Eduardo Soldano
Ireland Diarmuid O’Sullivan USA Donald P. Aiken
Italy Gian Francesco Imperiali Venezuela Armando Basave
Latvia Bo Henriksson
Lithuania Vytautas Niedvaras Asia
Norway Peer-Hakon Jensen Australia John Gaskell
Poland Miroslaw Gryszka China/Hong Kong SAR Peter Leupp
Portugal Carlos Dias India Ravi Uppal
Romania Peter Simon Japan Lave Lindberg
Russia Michel Tchesnakoff Korea Robert Suter
Slovak Republic Andrej Toth Malaysia Bengt Andersson
Spain Fernando Conte New Zealand John Gaskell
Sweden Sten Jakobsson Philippines Thomas Ng
Switzerland Rolf Schaumann Singapore Boonkiat Sim
Turkey Alf-Åke Jansson Taiwan Göran Sundin
United Kingdom Trevor J. Gregory Thailand Jonny Axelsson
Vietnam Per Brekke
** Region Managers
Middle East and Africa
Dubai/UAE Faraj Al Jarba
Region Managers
Egypt Bassim Youssef
Latin America Benny Olsson
Israel Jacob Shani
Middle East and Africa Max Abitbol
Morocco/North and Francophone Africa Jean-Claude Lanzi
Balkans and Central Asia Bruno Berggren
Nigeria/West Africa Wolfgang Pfeiffer
North and South East Asia Horst Dietz
Saudi Arabia Mahmoud Shaban
South Africa Carlos Poñe
Kenya/East Africa Rainer Benz
Zimbabwe Vittorio Semilia

ABB Board of Directors
Also, the Board proposes the election of the following new members to
the Board for a period of one year:
Jürgen Dormann (born 1940) Chairman Roger Agnelli, President and CEO of Companhia Vale do Rio Doce
Chairman of the Management Board: Aventis (France) Hans Ulrich Maerki, Chairman IBM Europe/Middle East/Africa
Michel de Rosen, President and CEO of ViroPharma, Inc.
Board Member: Allianz (Germany), IBM (USA) Bernd W.Voss, former member of the Management Board of Dresdner
Bank AG.
After the General Meeting the Board intends to re-elect Mr. Jürgen
Robert A. Jeker (born 1935) Vice-Chairman Dormann as its Chairman.
Chairman: Batigroup Holding Ltd., Georg Fischer Ltd.,
MCH Swiss Exhibition Ltd., Swiss Steel Ltd. (all Switzerland) Committees reporting to the ABB Board of Directors
Vice Chairman: Neue Zürcher Zeitung (Switzerland) Finance and Audit Committee
Board member: Synthes Stratec Inc. (USA) R. Jeker
Former President: Credit Suisse (Switzerland) G. Cromme
E. Somm
Jörgen Centerman (born 1951) J. Wallenberg
Vice Chairman: b-business partners (Netherlands)
Nomination and Compensation Committee

Gerhard Cromme (born 1943) J. Dormann Chairman
Chairman of the Supervisory Board: ThyssenKrupp (Germany) M. Ebner
Board Member: Allianz, Deutsche Lufthansa (since January1, 2002), R. Jeker
E.ON, Ruhrgas, Volkswagen (all Germany), Suez,Thales (both France)
Scheduled board meetings take place five times per year. Extraordinary
Martin Ebner (born 1945) meetings are held depending upon the needs in each year. During 2001,
Chairman: BZ Group Holding, Lonza Group six board meetings were held. Written documentation covering the
(both Switzerland) 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
Board Member: Alcan (Canada) study the respective matters prior to the meetings. Decisions made at the
board meetings are recorded in written minutes of the meetings.
Edwin Somm (born 1933)

Board Compensation
Chairman: SIG (Switzerland) For the period from the Annual General Meeting 2001 to the Annual
Board Member: Georg Fischer (Switzerland) General Meeting 2002, board members’ compensation was fixed as
follows (in CHF):
Chairman1,500,000*
Jacob Wallenberg (born 1956) Vice-Chairman 400,000
Chairman: SEB – Skandinaviska Enskilda Banken (Sweden) Members 250,000
Committee Membership 50,000
Vice-Chairman: Knut and Alice Wallenberg Foundation, Atlas Copco,
* In November 2001, the Chairman’s fee was reduced to CHF 1,000,000.
Electrolux, Investor AB, SAS (all Sweden)
96.5% of all board fees were paid in the form of Company shares.
Board Member: WM-data, Nobel Foundation, Confederation of Swedish Board members do not receive pension benefits and are not eligible
Enterprise (all Sweden), EQT (Netherlands) to participate in the Company’s management incentive program.
Proposed Changes in the ABB Board of Directors Beat Hess, Secretary to the Board
The term of office for all members of the Board of Directors expires at the
General Meeting on March12, 2002.
On November 21, 2001Mr. Percy Barnevik retired from his Board Auditor
membership and resigned as Chairman of the Board. Messrs. Gerhard
Cromme, Robert Jeker, and Edwin Somm have decided not to stand for Ernst & Young AG
re-election. Zurich
The remaining members stand for re-election. Accordingly the Board
proposes the re-election of Messrs.
Jörgen Centerman, Swedish
Jürgen Dormann, German
Martin Ebner, Swiss
Jacob Wallenberg, Swedish
to the Board for a further period of one year, i.e. until the General Meeting
2003.

Financial review
Operating and financial 68 Consolidated Financial Statements ABB Ltd, Zurich

review and prospects Notes to Consolidated 98 Financial Statements
39 Overview Financial Statements of ABB Ltd, Zurich
72 Note 1 The Company Notes to Financial Statements
40 Restructuring
72 Note 2 Significant accounting policies 99 Note 1 Cash and equivalents
40 Acquisitions, investments and
77 Note 3 Business combinations 99 Note 2 Receivables
divestitures
77 Note 4 Discontinued operations 99 Note 3 Participations
42 Selected financial data
78 Note 5 Marketable securities 99 Note 4 Current liabilities
43 Analysis of results
79 Note 6 Financial instruments 99 Note 5 Bonds
of operations
80 Note 7 Receivables 100 Note 6 Stockholders’ equity
48 Business divisions
81 Note 8 Inventories 100 Proposed appropriation
58 Liquidity and capital
82 Note 9 Prepaid expenses and other of available earnings
resources
82 Note 10 Financing receivables 101 Report of the Statutory Auditors
64 Exchange
82 Note 11 Property, plant and equipment
64 Impact of inflation and
82 Note 12 Goodwill and other intangible assets 102 Investor information
changing prices
83 Note 13 Borrowings 104 Price trend for ABB Ltd shares
64 New accounting standards
84 Note 14 Accrued liabilities and other 105 ABB Group statistical data
65 Environmental contingencies
84 Note 15 Leases 106 Exchange rates
and retained liabilities
85 Note 16 Commitments and contingencies
87 Note 17 Taxes
88 Note 18 Other liabilities
88 Note 19 Employee benefits
90 Note 20 Management incentive plan
92 Note 21 Stockholders’ equity
93 Note 22 Restructuring charges
93 Note 23 Segment and geographic data
96 ABB Ltd Group Auditors’ Report
97 ABB Ltd Group Auditors’ Report

Operating and financial review and prospects The ABB Manufacturing and Consumer Industries division
sells products, systems and services that improve customer
Overview productivity and competitiveness in areas such as automo-
We are a global provider of power and automation tech- tive industries, telecommunications, consumer goods, food
nologies that enable utility and industry customers to and beverage, product and electronics manufacturing,
improve performance while lowering environmental airports, parcel and cargo distribution, and public, indus-
impact. In January 2001 we announced the transformation trial and commercial buildings. The division has approxi-
of our worldwide enterprise around customer groups, mately 29,000 employees.
aiming to boost growth by helping our customers become
The ABB Oil, Gas and Petrochemicals division supplies a
more successful in a business environment of accelerating
comprehensive range of products, systems and services to
globalization, deregulation, consolidation and eBusiness.
the global oil, gas and petrochemicals industries, from the
We replaced our former business segments with seven development of onshore and offshore exploration tech-
business divisions structured along customer groups. nologies to the design and supply of production facilities,
Four end-user divisions – Utilities, Process Industries, refineries and petrochemicals plants. The division has
Manufacturing and Consumer Industries and Oil, Gas and approximately 13,000 employees.
Petrochemicals – serve end-user customers with products,
The ABB Power Technology Products division covers the
systems and services. Two channel partner divisions,
entire spectrum of technology for power transmission and
Power Technology Products and Automation Technology
power distribution. It includes transformers, switchgear,
Products, serve external channel partners such as whole-
breakers, capacitors, cables, as well as other products,
salers, distributors, original equipment manufacturers and
platforms and technologies for high-and medium-voltage
system integrators directly and end-user customers indi-
applications. Power technology products are used in
rectly through the end-user divisions. The Financial
industrial, commercial and utility applications. They are
Services division provides services and project support for
sold through the end-user divisions, as well as through
the ABB Group as well as for external customers.
external channel partners such as distributors, contractors,
The ABB Utilities division serves electric, gas and water original equipment manufacturers and system integrators.
utilities – whether state-owned or private, global or local, The division has approximately 28,000 employees.
operating in liberalized or regulated markets – with a
The ABB Automation Technology Products division
portfolio of products, services and systems. Our principal
provides products, systems, software and services for the
customers are generators of power, owners and operators
automation and optimization of industrial and commercial
of power transmission systems, energy traders and local
processes. Key technologies include measurement and
distribution companies. The division has approximately
control, instrumentation, process analysis, drives and
16,000 employees.
motors, power electronics, robots, and low-voltage
The ABB Process Industries division serves the chemical, products. These technologies are sold to customers
life sciences, oil and gas, refining, petrochemicals, marine, through the end-user divisions as well as through external
turbocharging, metals, minerals, mining, cement, pulp, channel partners such as wholesalers, distributors, original
paper and printing industries with process-specific equipment manufacturers and system integrators. The
products and services combined with ABB’s power and division has approximately 40,000 employees.
automation technologies. ABB is the leading supplier
The ABB Financial Services division supports the ABB
in many of these markets, and we use our industry and
Group’s businesses and customers with innovative
process knowledge to create Industrial IT solutions
financial solutions in structured finance, leasing, project
that improve the efficiency and competitive
development and ownership, financial consulting,
strength of customers. The division has approximately
insurance and treasury activities. The division has approxi-
16,000 employees.
mately 1,200 employees.

Restructuring As of December 31, 2001, we recorded charges of
During the first quarter of 1999, we acquired Elsag Bailey $114 million relating to workforce reductions and
Process Automation N.V. in a business combination $ 73 million relating to lease terminations and other exit
accounted for as a purchase. We implemented a costs associated with the restructuring program. These
restructuring plan in connection with the acquisition that costs are included in other income (expense), net.
included reorganizing operations predominantly in Termination benefits of $ 35 million were paid in 2001 to
Germany and the United States and called for workforce approximately 2,300 employees and $ 33 million was paid
reductions of approximately 1,500 salaried employees, to cover costs associated with lease terminations and
of which approximately 1,000 were Elsag Bailey other exit costs. Workforce reductions include production,
employees. In conjunction with our completed assessment managerial and administrative employees. At December
of our post-merger strategy related to the Elsag Bailey 31, 2001, accrued liabilities include $ 79 million for
acquisition, we recorded a $141 million restructuring termination benefits and $ 40 million for lease terminations
liability in our purchase price allocation, principally related and other exit costs.
to employee terminations and severance. In conjunction
As a result of the restructuring, certain assets have
with the acquisition of Elsag Bailey, a $ 38 million expense
been identified as impaired or will no longer be used in
charge was incurred in 1999 related to restructuring
continuing operations.We have recorded $ 44 million
activities of ABB’s businesses primarily related to
to write down these assets to fair value. These costs are
employee termination and severance costs associated
included in other income (expense), net.
with the integration of the Elsag Bailey businesses.
Restructuring charges of $195 million were included Acquisitions, investments and divestitures
in other income (expense), net, during 2000, of which In 2001, 2000 and 1999, we paid aggregate consideration
approximately $ 90 million related to the continued of $ 597 million, $ 896 million and $ 2,428 million,
integration of Elsag Bailey. The Elsag Bailey restructuring respectively, related to acquisitions and investments in
was substantially complete at the end of 2000. The joint ventures and affiliated companies completed in those
remainder related primarily to the consolidation of years. In 2001, we completed the acquisition of Entrelec
manufacturing operations in our former Power Group, a France-based supplier of automation and
Transmission segment and other actions to improve control products, for a total aggregate consideration of
efficiency throughout the ABB Group. $ 284 million. In 2000, we acquired for aggregate
consideration of $130 million the oil and gas service
In July 2001, we announced a restructuring program
activities of Umoe ASA, a Norwegian service company in
anticipated to extend over 18 months. This initiative is
the oil and gas industry, to support our further growth
expected to lead to one-time costs of $ 500 million over the
in that market. In 1999, we acquired Kemper Europe
18-month period and, when completed, to produce cost
Reassurances for aggregate considerations of $120 million.
benefits amounting to $ 500 million annually. The primary
We also completed the acquisition of Elsag Bailey for total
component of the restructuring, and the cost benefit,
consideration of $ 2,210 million (including assumed debt
will be a reduction in headcount of approximately
of $ 648 million).
12,000 employees, including through natural attrition.
This restructuring program was initiated in an effort
to simplify product lines, reduce multiple location
activities and respond to the economic conditions in our
major markets.

In June 2000, we entered into a share subscription our former power generation segment as discontinued
agreement to acquire 42% interest in b-business partners operations.
B.V. Pursuant to the terms of the agreement, we committed
Effective June 30,1999, we formed the ABB ALSTOM
to invest a total of $ 278 million, of which $ 69 million was
POWER joint venture with ALSTOM by contributing
paid in 2000 and $134 million was paid during the first
our power generation business and assets. Upon the
half of 2001. In December 2001, Investor AB acquired
fomation of the joint venture, we received $1,500 million
90 percent of our investment and capital commitments for
cash boot and recognized a corresponding net gain of
$166 million. After this initial transaction, b-business
$1,339 million.
partners B.V. repurchased 50% of all its outstanding shares,
which resulted in a return of capital to us of $10 million. In the first quarter of 1999, we sold our 50% interest in
After these transactions, we retain a 4% investment in the ABB Daimler-Benz Transportation GmbH joint
b-business partners B.V. and we are committed to provide venture to DaimlerChrysler AG for cash consideration
additional capital to b-business partners B.V. of $ 3 million. of $ 472 million. Upon the disposal of our investment,
Further, b-business partners B.V. retains a put right to we realized a net gain of $ 464 million. Our Consolidated
cause us to repurchase 150,000 shares of b-business Financial Statements reflect our equity in the earnings
partners B.V. at a cost of approximately $13 million. The of this joint venture, together with the gain from its sale,
2001 transactions are reflected in the Consolidated as a discontinued operation.
Statements of Cash Flows and included in the aggregate
total amounts of investments ($ 578 million net of
cash acquired) and divestment ($ 283 million net of
cash disposed).
In 2001, 2000 and 1999, we received aggregate cash

consideration of $ 283 million, $1,963 million and
$ 2,283 million, respectively, from dispositions and
recognized net gains of $ 34 million, $ 931 million and
$1,935 million, respectively. The material dispositions
are described below. In addition, we received cash
consideration of $ 77 million in 1999 from the disposition
of our two standard power cable businesses in Norway
and Sweden.
In 2000, we disposed of our power generation businesses,

which included our investment in the ABB ALSTOM
POWER joint venture described below and our nuclear
power business. We received cash proceeds of
$1,197 million from ALSTOM in exchange for our joint
venture interest and recognized a net gain of $ 713 million.
We received proceeds of $ 485 million from the sale of
the nuclear power business and recognized a net gain of
$17 million. Our Consolidated Financial Statements reflect

Selected financial data
The following table demonstrates the amount and percentage of ABB Group revenues derived from each of our business
divisions (see Note 23 of the Notes to Consolidated Financial Statements):
Revenues Percentage of revenues

Year ended December 31, Year ended December 31,
2001 2000 1999 2001 2000 1999
($ in millions) (in %)
Utilities 5,649 5,473 5,875 19.7 19.8 20.1

Process Industries 3,377 3,339 3,485 11.8 12.1 11.9
Manufacturing and Consumer Industries 4,780 5,225 5,697 16.6 18.9 19.5
Oil, Gas and Petrochemicals 3,489 2,796 3,086 12.1 10.1 10.5
PowerTechnology Products 4,042 3,662 3,862 14.1 13.3 13.2
Automation Technology Products 5,246 5,175 5,550 18.3 18.7 19.0
Financial Services 2,133 1,966 1,687 7.4 7.1 5.8
Subtotal 28,716 27,636 29,242 100.0 100.0 100.0
Corporate and eliminations (4,990) (4,669) (4,886)
Consolidated revenues 23,726 22,967 24,356
We conduct business in more than 100 countries around the world. The following table demonstrates the amount and
percentage of our consolidated revenues derived from each geographic region (based on the location of the customer)
in which we operate:
Revenues Percentage of revenues

2001 2000 1999 2001 2000 1999
Europe 12,780 12,570 13,893 53.9 54.7 57.0

The Americas 5,944 5,702 5,675 25.0 24.8 23.3
Asia 2,686 2,770 2,763 11.3 12.1 11.4
Middle East and Africa 2,316 1,925 2,025 9.8 8.4 8.3
Total 23,726 22,967 24,356 100.0 100.0 100.0
Orders and percentage of completion accounting orders are typically recognized on a percentage of
We book an order when a binding contractual agreement completion basis over a period, ranging from several
has been concluded with the customer covering, at a months to several years.
minimum, the price and the scope of products or services
The level of orders can fluctuate from year-to-year.
to be supplied. Approximately 13% of our total orders
Arrangements included in particular orders can be
booked in 2001 were large orders. We define large orders
extremely complex and non-recurring. Some contracts do
as orders from third parties involving at least $15 million
not provide for a fixed amount of work to be performed
worth of products or systems. Portions of our business,
and are subject to modification or termination by the
particularly in our Oil, Gas and Petrochemicals, Utilities
customer. Although large orders are more likely to result
and Power Technology Products divisions, involve orders
in revenues in future periods, the level of large orders,
related to long-term projects which can take many months
and orders generally, cannot be used to predict accurately
or even years to complete. Revenues related to these
future revenues or operating performance. Orders that

are placed can be cancelled, delayed or modified by the 8% in 2001 compared to 2000. This reflects the significant
customer. These actions can have the effect of reducing effect of translating revenues generated in local currencies
or eliminating the level of expected revenues or delaying into the U.S. dollar, which strengthened against most of
the realization of revenues. Both the Utilities and the Oil, our local currencies.
Gas and Petrochemicals divisions’ total orders contain
Revenues for the Utilities division increased by $176 mil-
a significant number of large orders. The Utilities division
lion, or 3%, in 2001 compared to 2000 (a 7% increase as
often receives large third party orders and in turn places
reported in local currencies). The increase in revenues was
internal orders for products with the Power Technology
primarily due to revenue increases in our Power Systems
Products division. Internal orders may be considerably
and Modular Substations business areas. The Process
larger than $ 15 million.
Industries division increased revenues by $ 38 million, or
Orders for the ABB Group decreased $1,661 million, or 1%, in 2001 compared to 2000 (a 5% increase as reported
7%, to $ 23,779 million in 2001 from a high order intake in local currencies). Our Marine and Turbocharging
level in 2000 of $ 25,440 million. As reported in local business area was the primary contributor to this revenue
currencies, orders declined by 2% in 2001 compared increase. Manufacturing and Consumer Industries
to 2000. The level of orders declined significantly in the experienced a $ 445 million, or 9%, decrease in revenues
Manufacturing and Consumer Industries, Oil, Gas for 2001 compared to 2000 (a 4% decrease as reported in
and Petrochemicals, and Automation Technology local currencies), due primarily to the negative impact
Products divisions. of the economic slowdown in the automotive industry.
Revenues from Oil, Gas and Petrochemicals increased
Large orders often arise in connection with long-term,
by $ 693 million, or 25%, in 2001 compared to 2000
fixed price projects. When we undertake a long-term,
(a 28% increase as reported in local currencies). The
fixed-price project, we recognize costs, revenues and
increase primarily reflected the large order intake of 2000,
profit margin from that project in each period based on
a significant portion of which was converted into revenues
the percentage of the project completed. Profit margin
in 2001, and a full year of revenues from Umoe ASA,
is based on our estimate of the amount by which total
the oil and gas company acquired in the second half
contract revenues will exceed total contract costs at
of 2000. This improvement was driven by upstream
completion. The nature of this accounting method is such
exploration markets, while downstream ended flat. Power
that refinements of the estimating process for changing
Technology Products revenues increased by $ 380 million,
conditions and new developments are continuous.
or 10%, in 2001 compared to 2000 (a 15% increase as
Accordingly, as work progresses or as change orders
reported in local currencies). Revenues increased in most
are approved and estimates are revised, contract margins
of the business areas, with our High-Voltage Products
may be increased, reduced or, on contracts for which a
business area being the main contributor to the revenue
loss has become apparent, eliminated. In addition to the
increase. Revenues for the Automation Technology
elimination of previously recognized margins, expected
Products division increased by $ 71 million, or 1%, in 2001
losses on loss contracts are recognized in full immediately.
compared to 2000 (a 6% increase as reported in local
currencies). Revenue growth was strongest in our Drives
Analysis of result of operations and Power Electronics business area, offset in part by
declines in our Robotics business area. Revenues from
Consolidated
Financial Services increased by $167 million, or 8%, in
Year ended December 31, 2001 compared 2001 compared to 2000 (a 13% increase as reported in local
with year ended December 31, 2000 currencies). This increase primarily reflected improved
revenues from our Insurance business area, primarily from
Revenues
acquisitions, and our Structured Finance business area.
Revenues for the ABB Group increased by $ 759 million,
or 3%, to $ 23,726 million in 2001 from $ 22,967 million in For a more detailed discussion of the individual divisions,
2000. As reported in local currencies, revenues increased see “Business divisions” below.

Cost of sales and efficiency improvement initiatives. As a percentage
Cost of sales for the ABB Group increased by $1,486 mil- of revenues, expenses declined to 18.5% in 2001 from
lion, or 9%, to $18,708 million in 2001 from $17,222 million 19.2% in 2000. Selling, general and administrative expenses
in 2000. As a percentage of revenues, cost of sales increased included research and development cost of $ 654 million
from 75.0% in 2000 to 78.9% in 2001. The increase in actual in 2001 and $ 703 million in 2000. In 2001, the Automation
cost of sales was primarily attributable to the increase in Technology Products and the Power Technology Products
revenues from the divisions, in particular the Utilities and divisions incurred research and development costs of
the Oil, Gas and Petrochemicals divisions. Cost of sales $ 269 million and $103 million respectively. The other
increased in the Financial Services division mainly reflecting industrial divisions shared the remaining cost in approxi-
a $ 295 million non-cash charge from a change in mately equal proportions.
accounting estimate for reinsurance reserves. Prior to 2001,
we presented a portion of our insurance reserves on a Amortization expense
discounted basis, which estimated the present value of Amortization expense increased by $17 million, or 8%, to
funds required to pay losses at future dates. During 2001, $ 236 million in 2001 from $ 219 million in 2000, attributable
the timing and amount of claims payments being ceded to slightly higher amortization of purchased goodwill
to us in respect of prior years’ finite risk reinsurance and intangibles, in particular from the Umoe acquisition
contracts has changed and cannot be reliably determined completed in June 2000 and the acquisition of Entrelec
at December 31, 2001. Therefore, we have not discounted Group in June 2001. In accordance with Statement of
our loss reserves, resulting in a charge to losses and loss Financial Accounting Standards No. 142, Goodwill and
adjustment expenses in 2001 of $ 295 million. In addition, Other Intangible Assets, goodwill is no longer amortized
our Insurance business area booked provisions for $138 as of January 1, 2002.
million in underwriting losses, including $ 48 million in pro-
visions for expected claims arising from the events of Other income (expense), net
September 11, 2001. Additionally, costs and provisions for Other income (expense), net, typically consists of our share
alternative energy projects of $ 55 million in New Ventures of income or loss on investments, principally from our
business area and project cost overruns in Oil, Gas and Equity Ventures business area, as well as gains or losses
Petrochemicals division of $140 million also contributed to from sales of businesses, investments and property, plant
the higher cost of sales during 2001. Our cost of sales and equipment, licence income and restructuring charges.
consists primarily of labor, raw materials and related com- Other income (expense), net, decreased by $ 382 million,
ponents. Cost of sales also includes provisions for warranty to an expense of $106 million in 2001 from an income
claims, contract losses and project penalties, as well as of $ 276 million in 2000. The change was primarily related
order-related development expenses related to projects for to the benefit in 2000 of $ 447 million from capital gains,
which we have recognized corresponding revenues. Order- which was not repeated, as against $ 57 million in 2001. The
related development expenditures amounted to $ 916 million significant capital gains in 2000 primarily resulted from the
and $ 985 million, in 2001 and 2000, respectively. In these sale of non-core property and businesses. Also included
periods, $ 499 million and $ 423 million, respectively, of were asset write-downs ($ 93 million in 2001, $17 million in
order-related development expenditures were related to 2000), and income from equity accounted companies,
the Oil, Gas and Petrochemicals division. Order-related licence income and other of $161 million in 2001 and $ 41
development amounts are initially recorded in inventories million in 2000.
as part of the work in progress of a contract, and then
reflected in cost of sales at the time revenue is recognized. Earnings before interest and taxes
Earnings before interest and taxes, or operating income,
Selling, general and administrative expenses decreased $1,106 million, or 80%, to $ 279 million in 2001
Selling, general and administrative expenses decreased by from $1,385 million in 2000. As reported in local curren-
$ 20 million, to $ 4,397 million in 2001 from $ 4,417 million cies, earnings before interest and taxes declined by 78%
in 2000. The decrease reflects group-wide cost reduction in 2001 compared to 2000. The decrease is primarily

attributable to the higher cost of sales in 2001, and the Income (loss) from discontinued operations,
significantly lower capital gains recorded in 2001 net of tax
compared to 2000. When adjusted for capital gains of Loss from discontinued operations, net of tax, was
$ 57 million in 2001 and $ 447 million in 2000, operating $ 510 million in 2001, compared to an income, net of tax,
income decreased by 76% in 2001 compared to 2000. of $ 562 million in 2000. The loss from discontinued
As a percentage of revenues, reported operating income operations reflects significant reduction in gains from the
decreased from 6.0% in 2000 to 1.2% in 2001. sale of discontinued operations and an additional provision
taken for the asbestos liabilities relating to our discontinued
Net interest and other finance expense power generation business. In 2000, we recorded gains
Interest and other finance expense increased by $158 mil- on the sale of our interest in the ABB ALSTOM POWER
lion, or 25%, to $ 802 million in 2001 from $ 644 million in joint venture and our nuclear power business, which were
2000. Net interest expense was primarily affected by a not repeated in 2001. During 2001, we experienced a
higher net debt position, which arose to fund our share substantial increase in the level of new asbestos claims as
repurchases in 2001 as well as costs associated with the well as an increase in settlement costs per claim. In light
listing of our shares in the United States and costs to hedge of this, we recorded a charge of $ 470 million. See “Environ-
our management incentive plan. See Note 20 of the Notes mental contingencies and retained liabilities” below.
to Consolidated Financial Statements. Interest expense
reflects fluctuations, which may be substantial, in the level Net income (loss)
of borrowings throughout the year as required by the As a result of the factors discussed above, net income
operating needs of our business. The level of interest and decreased to a loss of $ 691 million in 2001 from an income
dividend income earned remained flat at $ 568 million in of $1,443 million in 2000. The net loss in 2001 primarily
2001 from $ 565 million in 2000. reflects the significantly lower level of gains from sales of
businesses, including discontinued business, and higher
Provision for taxes cost of sales, which includes the non-cash charge related
Provision for taxes decreased by $ 272 million, or 72%, to our reinsurance business. We also recorded a $12 million
to $105 million in 2001 from $ 377 million in 2000. The extraordinary gain on the repurchase of our own bonds
decrease in the provision reflects primarily the reduction and a one-time after tax charge of $ 63 million, due to
in income from continuing operations before taxes and cumulative effect of change in accounting principles
minority interests, which declined from $1,306 million upon adoption of Statement of Financial Accounting
to $ 45 million. As a percentage of income from Standards No.133 (SFAS 133) Accounting for Derivative
continuing operations before taxes and minority interest, Instruments and Hedging Activities. See “New accounting
the development led to a higher tax rate of 234% in 2001 standards” below.
compared to 28.9% in 2000. The higher effective rate
reflects the inclusion of the provision for our reinsurance Earnings (loss) per share
business located in a low tax jurisdiction. The tax rate Diluted earnings (loss) per share was a loss per share of $0.61
applicable for income from continuing operations without in 2001 compared to an income per share of $1.22 in 2000,
the insurance provision would have been 30.9%. We largely resulting from the factors mentioned above which
generally conduct our tax planning activities to achieve negatively impacted net income. Diluted loss per share from
a tax structure for ABB that provides for an effective tax discontinued operations were $0.45 compared to diluted
rate of approximately 30% on our operations. earnings per share of $0.48 in 2000, reflecting the loss from
discontinued operations discussed above as opposed to
Income (loss) from continuing operations a gain in 2000. Diluted earnings (loss) per share from con-
Income (loss) from continuing operations decreased tinuing operations decreased to a loss of $0.11 in 2001 from
$1,011 million to a loss of $130 million in 2001 from an earnings of $0.74 per share in 2000, primarily as a result of
income of $ 881 million in 2000. The decrease reflects the the decreases in the gross margin and in capital gains and
impact of the items discussed above. higher interest expense in 2001.

Year ended December 31, 2000 compared compared to 1999. This increase primarily reflected
with year ended December 31,1999 increased revenues from our Insurance business area
mainly through acquisitions.
Revenues
Revenues for the ABB Group decreased by $1,389 million, For a more detailed discussion on the individual divisions,
or 6%, to $ 22,967 million in 2000 from $ 24,356 million in see “Business divisions” below.
1999. This includes the significant effect of translating
revenues generated in local currencies into the U.S. dollar, Cost of sales
which strengthened against most of our local currencies. Cost of sales for the ABB Group decreased $1,235 million,
As reported in local currencies, revenues increased by 2% or 7%, to $17,222 million in 2000 from $18,457 million in
in 2000 compared to 1999. The divisional revenues were 1999. As a percentage of revenues, cost of sales was 75.0%
also impacted by this translation effect. In four of our in 2000 compared to 75.8% in 1999. The reduction in actual
divisions the translation effect changed the local currency cost of sales was primarily attributable to the reduced level
revenue increases into revenue decreases. of revenues and the improvement in the gross margin
was mainly a result of cost reduction efforts. Order-related
Utilities revenues decreased by $ 402 million, or 7%, in
development expenses amounted to $ 985 million and
2000 compared to 1999 (a 2% decrease as reported in local
$1,212 million in 2000 and 1999 respectively. The
currencies). The decrease in revenues was primarily due to
reduction in these costs was mainly a result of the stream-
reductions in Power Systems. Orders for the division,
lining of research and development activities. This stream-
however, increased by, 4% as compared to 1999. Process
lining reflects the significant progress that we made
Industries division decreased revenues by $146 million, or
towards common ABB platforms and products. Order-
4%, in 2000 compared to 1999 (a 2% increase as reported
related development amounts are initially recorded in
in local currencies). The revenues performance reflected
inventories as part of the work in progress of a contract,
weakness in our Petroleum, Chemical and Life Sciences
and then reflected in cost of sales at the time revenue is
business area, which was affected by the low backlog from
recognized, in accordance with our accounting policies.
year-end 1999. Manufacturing and Consumer Industries
experienced a $ 472 million, or 8%, decrease in revenues
Selling, general and administrative expenses
for 2000 compared to 1999 (a flat development as reported
Selling, general and administrative expenses decreased by
in local currencies). The reported reduction primarily
$ 265 million, or 6%, to $ 4,417 million in 2000 from
arose from our Building Systems business area. Revenues
$ 4,682 million in 1999. The decreased selling, general and
from Oil, Gas and Petrochemicals decreased by $ 290 mil-
administrative costs reflect reductions resulting from the
lion, or 9%, in 2000 compared to 1999 (a 3% decrease as
restructuring in connection with the integration of the
reported in local currencies). The decrease in 2000
Elsag Bailey operations, which initially had higher selling,
primarily reflected both a strong order backlog at the end
general and administrative expenses than our existing
of 1998, which positively affected early 1999 revenues, and
related businesses. The decrease also reflects group-wide
generally weak market conditions in 1999. Power Tech-
cost reduction and efficiency improvement initiatives as
nology Products revenues decreased by $ 200 million, or
well as expenditures to prepare for the Year 2000 issues
5%, in 2000 compared to 1999 (a 2% increase as reported
in 1999, which were not repeated in 2000. Selling, general
in local currencies). Our High-Voltage Products business
and administrative expenses included $ 703 million and
area experienced a considerable reduction in 2000 as a
$ 865 million of research and development costs in 2000
result of lower volumes from a low order intake in 1999.
and 1999 respectively.
Automation Technology Products division revenues
decreased by $ 375 million, or 7%, in 2000 compared to
Amortization expense
1999 (a 2% increase as reported in local currencies). The
Amortization expense was $ 219 million in 2000 and
reported decrease primarily reflected weakness in sales of
$189 million in 1999. There were no material acquisitions
larger automation systems. Revenues from Financial
that affected the level of amortization expense in 2000.
Services increased by $ 279 million, or 17%, in 2000

Other income (expense), net as well as earnings in countries with tax rates lower than
Other income, net, increased by $182 million to $ 276 mil- the weighted average rate.
lion in 2000 from $ 94 million in 1999. The improvement
was primarily attributable to an increase in net gains from Income from continuing operations
sales of non-core property, plant and equipment and Income from continuing operations increased by $ 238
improved earnings from investments made by Equity million, or 37%, to $ 881 million in 2000 from $ 643 million
Ventures, offset by an increase in restructuring costs. in 1999. As a percentage of revenues, income from
continuing operations increased to 3.8% in 2000 from 2.6%
Earnings before interest and taxes in 1999. The increase reflects the impact of the items
Earnings before interest and taxes, or operating income, discussed above.
increased by $ 263 million, or 23%, to $1,385 million in
2000 from $1,122 million in 1999. As reported in local Income (loss) from discontinued operations, net of tax
currencies, earnings before interest and taxes increased Income from discontinued operations, net of tax, decreased
38% in 2000 compared to 1999. As a percentage of by $155 million, or 22%, to $ 562 million in 2000 from
revenues, operating income increased to 6.0% in 2000 $717 million in 1999. The 1999 amount reflected both the
from 4.6% in 1999. The increase is primarily attributable to net gain on the contribution of our power generation
the benefit from the 6% reduction in selling, general and business to the ABB ALSTOM POWER joint venture of
administrative expenses and the increased level of other $1,339 million and the gain on the sale of ADtranz of
income, net. The improvements in other income, net, $ 464 million, partially offset by operating losses from the
reflected primarily significant capital gains in 2000 of divested businesses. The 2000 amount includes a net gain
$ 447 million as compared to $180 million in 1999. As of $713 million on the sale of our remaining 50% share in
adjusted for capital gains, operating income remained flat ABB ALSTOM POWER and a net gain of $17 million on the
for 2000 compared to 1999. Significant capital gains in 1999 sale of our nuclear power business. The net gain from the
relate to gains from the sale of shares and participations sale of our nuclear power business includes a $ 300 million
and from the sale of non-core property. provision for estimated environmental remediation.
Net interest and other finance expense Net income

Interest expense decreased by $ 64 million, or 9%, to As a result of the factors discussed above, net income in-
$ 644 million in 2000 from $ 708 million in 1999. The creased by $ 83 million, or 6%, to $1,443 million in 2000 from
decrease primarily reflects a lower level of borrowings $1,360 million in 1999. The increase in net income reflects
during 2000 compared to 1999, resulting from the use of the 37% improvement in income from continuing operations.
cash generated by operations and divestitures to reduce This improvement more than offset the 22% decrease in
borrowings during the period. The level of interest and income from discontinued operations resulting from the
dividend income earned decreased by $ 43 million, lower level of gains on sales of non-core businesses.
to $ 565 million in 2000 from $ 608 million in 1999.
Earnings per share
Provision for taxes Diluted earnings per share increased by $ 0.07 to $1.22 in
Provision for taxes increased by $ 34 million, or 10%, to 2000 from $1.15 in 1999. The increase primarily reflected the
$ 377 million in 2000 from $ 343 million in 1999, primarily significant increase in income from continuing operations.
reflecting taxes on an increased level of income from Diluted earnings per share from continuing operations
continuing operations. As a percentage of income from increased by $ 0.20 to $ 0.74 in 2000, from $ 0.54 in 1999,
continuing operations before taxes and minority interest, reflecting the increase in income from continuing opera-
however, we incurred a lower effective tax rate of 28.9% in tions discussed above. This increase was only partially
2000 compared to 33.6% in 1999. The lower effective tax offset by a decrease in diluted earnings per share from
rate can be attributed to a change in the financing of our discontinued operations of $ 0.13 to $ 0.48 in 2000 from
operations in a number of countries throughout 2000, $ 0.61 in 1999. This decrease reflected the lower level of
including financing related to the Elsag Bailey operations, income from discontinued operations discussed above.
Business divisions
Overview
Revenues, earnings before interest and taxes (or operating income) and operating margins by division for the fiscal year 2001,
2000 and 1999 and net operating assets as of December 31, 2001, 2000 and 1999 are as follows (see Note 23 of the Notes to
Consolidated Financial Statements):
Revenues Net operating assets

Year ended December 31, December 31,
2001 2000 1999 2001 2000 1999
($ in millions) ($ in millions)
Utilities 5,649 5,473 5,875 795 1,018 912

Process Industries 3,377 3,339 3,485 738 839 795
Manufacturing and Consumer Industries 4,780 5,225 5,697 249 411 634
Oil, Gas and Petrochemicals 3,489 2,796 3,086 315 893 554
PowerTechnology Products 4,042 3,662 3,862 1,311 1,328 1,483
Automation Technology Products 5,246 5,175 5,550 2,558 3,215 3,388
Financial Services 2,133 1,966 1,687 10,926 9,098 7,750
Corporate and eliminations (4,990) (4,669) (4,886) (3,114) (2,170) (2,372)
Consolidated figures 23,726 22,967 24,356 13,778 14,632 13,144
Earnings before interest and taxes Operating margins

2001 2000 1999 2001 2000 1999
Utilities 148 250 182 2.6 4.6 3.1

Process Industries 116 88 123 3.4 2.6 3.5
Manufacturing and Consumer Industries 87 205 147 1.8 3.9 2.6
Oil, Gas and Petrochemicals 79 157 165 2.3 5.6 5.3
PowerTechnology Products 234 244 282 5.8 6.7 7.3
Automation Technology Products 380 464 392 7.2 9.0 7.1
Financial Services (32) 349 337 n/a n/a n/a
Corporate and eliminations (733) (372) (506) n/a n/a n/a
Consolidated operating income/margins 279 1,385 1,122 1.2 6.0 4.6
Division costs As a percentage of revenues, cost of sales is approximately

Cost of sales and selling, general and administrative equal for all industrial divisions, except that it is slightly
expenses comprise the most significant part of operating lower for the Automation Technology Products division
expenses for all divisions. Cost of sales includes costs as a result of the higher gross margins typical in the
related to the sale of products and services, which automation industry. Selling, general and administrative
comprise, among other things, the cost of raw materials, expenses as a percentage of revenues are typically higher
components, order-related research and development and in the Automation Technology Products division com-
procurement costs. Cost of sales for the Financial Services pared to our other industrial divisions, due to relatively
division includes insurance claims, acquisition costs and higher volumes attributable to smaller units of sales.
direct costs incurred to obtain revenues and income from The Oil, Gas and Petrochemicals division, in contrast, has
third parties and related parties. Selling, general and a higher level of cost of sales (a lower gross margin) than
administrative expenses include the overhead related to the other industrial divisions but significantly lower selling,
the sales force and all costs related to general manage- general and administrative expenses as a percentage
ment, human resources, financial control, corporate of revenues, due to relatively higher volumes attributable
finance and non order-related research and development. to large projects.

Utilities Utilities 01 5,649
Selected key figures 00 5,473
Demand in the Americas remained strong throughout 2001.
99 5,875
The slowdown in the U.S. economy and the events of
Revenues ($ millions)
September 11, 2001 did not significantly affect utilities
markets in 2001, as utility investments primarily are infra-
01 148
structure-related and generally have long lead times. 00 250
Market activities in the US and Europe were stable while in 99 182
China and Brazil, the positive market trend from large Earnings before interest
project investments continued from the year 2000. In the
Middle East and Africa political instability has slowed
* In 2000, EBIT contains $ 54 million of capital gains which, in total, amounts to more than 10% of the divisional EBIT.
investments in large projects. The Utilities division
strengthened its focus on core utility customers through
the sale of its railway electrification project business to Operating income included capital gains of $ 54 million
Balfour Beatty in the fourth quarter of 2001. The divested in 2000. When adjusted for capital gains, earnings before
business employed approximately 350 people. A shift interest and taxes decreased by 24%. The reduction
in customer investments from power sources to power primarily related to the Power Systems business area,
networks continues to drive the market. Driven by where competition-driven price deterioration reduced
need for reliable power, demand for new systems and margins, and fixed costs related to projects that were
improvements in existing systems are foreseen. deferred negatively impacted profitability.
Year ended December 31, 2001 compared Year ended December 31, 2000 compared
with year ended December 31, 2000 with year ended December 31,1999
Orders increased by $ 201 million, or 3%, to $ 6,436 million Orders increased $ 254 million, or 4%, to $ 6,235 million in
in 2001 from $ 6,235 million in 2000. As reported in local 2000 from $ 5,981 million in 1999. As reported in local
currencies, orders increased 7% in 2001 compared to 2000. currencies, orders increased 10% in 2000 compared to 1999.
This order improvement included a $ 360 million order in A number of significant orders were received by the Power
China for the Power Systems business area, announced in Systems business area for an interconnection between
the fourth quarter of 2001. This order relates to a project Brazil and Argentina and HVDC projects in the United
involving the construction of a HVDC power transmission States and Australia. The strongest improvement came from
system linking hydropower plants in central China to the the Modular Substations business area, which improved
Guangdong province. In 2001, large orders represented orders significantly through the booking of large projects,
approximately 17% of the division’s total orders. primarily in western Europe.
Revenues increased by $176 million, or 3%, to $ 5,649 Revenues decreased $ 402 million, or 7%, to $ 5,473 million
million in 2001 from $ 5,473 million in 2000. As reported in in 2000 from $ 5,875 million in 1999. As reported in local
local currencies, revenues increased 7% in 2001 compared currencies, revenues decreased 2% in 2000 compared to
to 2000. All business areas reported higher revenues in 1999. All business areas contributed to the negative
2001 compared to 2000 due to strong order intake in 2000, revenue development, except our Utility Services business
with the exception of the Utility Services business area, area, which increased revenues significantly by invoicing
where the 2000 results reflected a period of heightened several large projects and benefited from full service
revenues from the invoicing of the ComEd project in contracts signed in 1999 and early 2000. Full service
Chicago. contracts typically last for several years and revenue is
Earnings before interest and taxes, or operating income, recognized throughout the contract period. The decrease
decreased by $102 million, or 41%, to $148 million in 2001 in revenues primarily resulted from investment uncer-
from $ 250 million in 2000. There was no significant effect tainty in Latin America in 1999, which resulted in order
from translating local currency earnings into U.S. dollars. deferrals, particularly in our Power Systems business area.

Earnings before interest and taxes, or operating income, Process Industries 01 3,377
increased by $ 68 million, or 37%, to $ 250 million in 2000
99 3,485
from $182 million in 1999. As reported in local currencies,
operating income increased by 46% in 2000 compared
to 1999. Operating income included capital gains of
01 116
$ 54 million in 2000. Adjusted for capital gains the earnings 00 88
before interest and taxes increased $14 million, or 8%. 99 123
In general, the improvement reflected the benefits of cost Earnings before interest
base reduction and improved internal efficiency, produc-
tivity and quality management on a global basis. These
efforts included the restructuring of our Utility Automation
business area. For our Utility Services business area the
higher volumes largely contributed to the strong increase business area as a result of the high order backlog from
in earnings before interest and taxes. 2000. Additionally, our Petroleum, Chemical and
Life Sciences business area contributed to the revenue
Process Industries improvement.
Throughout 2001, many industries served by the Process
Industries division consolidated, in particular the paper, Earnings before interest and taxes, or operating income,
aluminum and steel industries. Consolidation has diverted increased by $ 28 million, or 32%, to $116 million in 2001
attention toward integration and has led to reduced capital from $ 88 million in 2000. As reported in local currencies,
spending by customers in those industries. The overall earnings before interest and taxes rose 35% in 2001
economic slowdown in the United States, exacerbated by compared to 2000. This increase primarily resulted
the events of September 11, 2001, negatively affected from improvements in cost controls and project manage-
the cruise industry, and contributed to a consolidation trend ment in our Petroleum, Chemical and Life Sciences
in the marine industry. The poor economic environment business area, as well as revenue growth in our Marine
also had a negative effect on the metal, pulp and paper and and Turbocharging business area.
mining businesses. In contrast, oil and gas vessel demand
remained high in 2001 due to the continued exploration of Year ended December 31, 2000 compared
new oil fields. The chemical and life sciences industries with year ended December 31,1999
experienced growth in 2001. Orders decreased slightly by $ 28 million, or 1%, to
$ 3,497 million in 2000 from orders of $ 3,525 million in
Year ended December 31, 2001 compared 1999. As reported in local currencies, however, orders
with year ended December 31, 2000 increased by 6% in 2000 compared to 1999. The reported
Orders decreased by $121 million, or 3%, to $ 3,376 million decrease primarily reflects the impact of translating local
in 2001 from $ 3,497 million in 2000. As reported in local currencies into U.S. dollars for reporting purposes.
currencies, orders remained flat. Orders increased signifi- Our Petroleum, Chemical and Life Sciences business area
cantly in the Petroleum, Chemical and Life Sciences experienced decreased orders, while orders improved in
business area offsetting decreases in our Paper, Printing, our Marine and Turbocharging business area.
Metals and Minerals and Marine and Turbocharging Revenues decreased by $146 million, or 4%, to $ 3,339
business areas. million in 2000 from $ 3,485 million in 1999. As reported in
Revenues increased by $ 38 million, or 1%, to $ 3,377 million local currencies, however, revenues increased by 2% in
in 2001 from $ 3,339 million in 2000. As reported in local 2000 compared to 1999. The reported decrease reflects the
currencies, revenues increased 5% in 2001 compared significant effect of translating revenues generated in local
to 2000. Revenue increases were primarily attributable currencies into U.S. dollars for reporting purposes.
to increased volumes in our Marine and Turbocharging

Revenues in our Paper, Printing, Metals and Minerals and Manufacturing and 01 4,780
Consumer Industries 00 5,225
our Marine and Turbocharging business areas declined Selected key figures
99 5,697
due to adverse market conditions. Revenues from
our Petroleum, Chemical and Life Sciences business area
decreased significantly due primarily to the low order
01 87
backlog from the end of 1999 in the oil and gas industry. 00 205
99 147
Earnings before interest
in 2000 decreased by $ 35 million, or 28%, to $ 88 million and taxes ($ millions)*
operating income decreased 17% in 2000 compared to * In 2000, EBIT contains $ 41 million of capital gains which, in total, amounts to more than 10% of the divisional EBIT.
1999. Operating income in our Paper, Printing, Metals and
Minerals business area remained unchanged from 1999,
but operating income in our Marine and Turbocharging 2001 compared to 2000. The reduction in orders was
and Petroleum, Chemical and Life Sciences business areas primarily attributed to our Automotive Industries and
experienced significant decreases from the 1999 levels. Building Systems business areas, particularly in the United
These two business areas were both negatively affected by States, Germany and Sweden. Additionally, large order
significant losses from large projects due to cost overruns. intake decreased, as well as orders for standard products,
primarily robots supplied by the Automation Technology
Manufacturing and Consumer Industries Products division.
Most of our markets – automotive, telecom, air handling Revenues decreased by $ 445 million, or 9%, to $ 4,780 mil-
and building construction – were negatively influenced lion in 2001 from $ 5,225 million in 2000. As reported in local
by general economic uncertainty in 2001. In the second currencies, revenues declined 4% in 2001 compared to 2000.
half of 2000, automotive industry customers reduced The decrease in revenues mainly arose from the impact of
spending and postponed investments. As this continued the global economic slowdown in our Automotive Industries
in 2001, large order intake decreased and toward the business area. This was partly offset by moderate revenue
middle of 2001, base orders also slowed significantly. In increases in our Building Systems business area, due to good
the telecom industry, the repositioning of the major order backlog carried over from 2000.
operators and the uncertainty about new UMTS mobile
communication network technology postponed rollout Earnings before interest and taxes, or operating income,
projects, while investments in traditional GSM commu- decreased by $118 million, or 58%, to $ 87 million in 2001
nication networks have been at a minimum. After the from $ 205 million in 2000. As reported in local currencies,
events of September 11, a number of airport expansion earnings before interest and taxes decreased 56% in 2001
projects have been delayed and scaled back. The compared to 2000. Operating income includes capital gains
European construction market for buildings weakened of $ 41 million in 2000. Adjusted for capital gains the
in 2001 with a marked drop in applications for building earnings before interest and taxes decreased 47%. Our cost
permits, whereas the retrofit and building service cutting efforts, although significant, lagged behind the
market is expected to improve. These industries will sharp downturn in our markets. Our Automotive Industries
present challenging markets in 2002, although we business area in Germany was impacted by a number of
expect some improvement toward the end of the year. project losses and initiated restructuring to improve the
efficiency of project execution. In the United States, reposi-
Year ended December 31, 2001 compared tioning of selected activities within our Telecom and
with year ended December 31, 2000 Product Manufacturing Industries business area led to
Orders decreased by $1,097 million, or 20%, to lower operating margins. In addition, our Building Systems
$ 4,388 million in 2001 from $ 5,485 million in 2000. As business area experienced project losses and higher costs
reported in local currencies, orders decreased by 16% in related to over-capacity in the United Kingdom, Australia,

Poland and Germany. Our Logistics Systems business area Oil, Gas and Petrochemicals
also experienced lower volumes in 2001. The division Capital expenditures by customers of the Oil, Gas and
reduced the number of employees by more than 10% Petrochemicals division are influenced by oil company
during 2001. expectations about the supply and demand for crude
oil and natural gas products, the energy price environment
Year ended December 31, 2000 compared that results from supply and demand imbalances and
with year ended December 31,1999 consolidation of the oil and gas markets. Key factors that
Orders decreased by $ 561 million, or 9%, to $ 5,485 million may influence the worldwide oil and gas market include
in 2000 from $ 6,046 million in 1999. As reported in local production restraint of OPEC nations and other oil-
currencies, orders decreased by 1% in 2000 compared to producing countries, global economic growth, technolog-
1999. A large order was booked in 2000 in our Telecom and ical progress in oil exploration and production and the
Product Manufacturing Industries business area for the maturity of the resource base. The downstream markets
maintenance and upgrade of a telecommunications access are influenced by factors such as economic growth,
network. This improvement was, however, more than substitution of products and demand for more environ-
offset by reductions in other business areas, primarily in mentally friendly products.
our Building Systems business area.
Crude oil prices dropped in the fourth quarter of 2001 to
Revenues decreased by $ 472 million, or 8%, to $ 5,225 mil- below the OPEC band of $ 22 to $ 28 per barrel, with the
lion in 2000 from $ 5,697 million in 1999. As reported average price for 2001 below that of 2000. The upstream
in local currencies, however, revenues increased by 1% business (from the well or bore hole to the refinery)
in 2000 compared to 1999. Increased revenues in our continued to see high activity levels in 2001. The activity
Telecom and Product Manufacturing Industries business in West Africa continued its strong 2000 level throughout
area resulted from higher volumes in our full service 2001, with some softening of demand in the fourth quarter
business. This improvement was offset by reductions in due to the economic slowdown. Oil exploration activities
other business areas, primarily in our Building Systems in the Gulf of Mexico were robust while there was a
business area as a result of the discontinuation of the rail shortfall in the gas exploration and production market, due
service and contracting business in Australia. to lower gas prices in the United States. The high order
levels in the downstream market in 2000 did not continue
through 2001. Demand in the petrochemicals industry
increased by $ 58 million, or 39%, to $ 205 million in 2000
decreased, subsequently leading to reduced investments in
new capacity, while investments in refineries and gas-pro-
operating income increased by 51% in 2000 compared to
cessing plants remained stable, driven by environmental
1999. Operating income includes capital gains of $ 41
regulations. The deterioration of the world economy had a
million in 2000. Adjusted for capital gains, the earnings
negative impact on the downstream business, resulting in
before interest and taxes increased 12%. The increase was
reduced activities in the process technology market in
driven by improvements in our Automotive Industries
2001. We expect this challenging downstream environment
and Telecom and Product Manufacturing business areas,
to continue in 2002.
particularly in the United States, reflecting the favorable
market conditions at the end of 1999 and the beginning
Year ended December 31, 2001 compared
of 2000. Additionally, the earnings improvement can
with year ended December 31, 2000
be attributed to efficient execution of projects, favorable
Orders decreased by $ 520 million, or 13%, to
product mix and savings in general and administration
$ 3,403 million in 2001 from $ 3,923 million in 2000. As
costs following active cost management. Operating
reported in local currencies, orders decreased 12% in 2001
income in our Building Systems business area remained
compared to 2000. In 2001, approximately half of the
relatively unchanged as losses in the United Kingdom
total order volume in the Oil, Gas and Petrochemicals
offset operational improvements achieved in other
division was composed of large orders. From the particu-
markets.

Oil, Gas and Petrochemicals 01 3,489 $ 3,923 million in 2000 from $ 3,030 million in 1999. As
reported in local currencies, orders increased by 40% in
99 3,086
2000 compared to 1999. A considerable part of the increase
in orders was attributable to additional large orders booked
in 2000. Large orders are by nature longer-term and do not
01 79
00 157
immediately affect revenues.
99 165
Revenues decreased by $ 290 million, or 9%, to $ 2,796
Earnings before interest
and taxes ($ millions) million in 2000 from $ 3,086 million in 1999. As reported in
local currencies, revenues decreased 3% in 2000 compared
to 1999. The decrease resulted from the low level of orders
in 1999 reflecting the drop in overall market volume, both
upstream and downstream, in 1999. Additionally, the
larly high level of large orders in 2000, the upstream improved levels of orders in late 1999 and 2000 were only
business continued to grow, but was offset by reductions in reflected in revenues in late 2000.
the downstream business. We experienced high tendering
activity in the Oil, Gas and Petrochemicals division in 2001. Earnings before interest and taxes, or operating income,
This is expected to affect orders positively going into 2002. decreased by $ 8 million, or 5%, to $157 million in 2000
Revenues increased by $ 693 million, or 25%, to earnings before interest and taxes remained flat in 2000
$ 3,489 million in 2001 from $ 2,796 million for 2000. As compared to 1999. A capital gain of $15 million arising
reported in local currencies, revenues increased 28% from non-core divestitures was included in 2000 operating
in 2001 compared to 2000. This growth was primarily income. Cost of sales showed a favorable development, but
generated by the large order intake in 2000 and also by a was offset by selling, general and administrative expenses,
full year of revenues from Umoe, the oil and gas company which did not keep pace with the revenue decrease.
acquired in the second half of 2000. Revenues improved in
our Upstream business area, but the Downstream business Power Technology Products
area remained flat in 2001 compared to 2000. Demand in the Americas remained high during 2001, in
Earnings before interest and taxes, or operating income, particular for power transmission products. The U.S.
decreased by $ 78 million, or 50%, to $ 79 million in 2001 market in particular showed good demand and a higher
from $157 million in 2000. As reported in local currencies, level of investments in our High-Voltage Technology
earnings before interest and taxes decreased 49% in 2001 business area, which primarily serves the utilities market.
compared to 2000. Earnings before interest and taxes The market in China continued to grow with a strong
were adversely affected by provisions for major cost fourth quarter of 2001, while the majority of the Southeast
overruns and project delays, the majority of which related Asian market remained stable with respect to infrastructure
to two large projects. The remaining underlying business and industrial investments. Markets in Europe were mixed,
developed positively, benefiting from the higher level of with moderate growth in the German, Italian and Swedish
revenues. markets, offset by flat or declining investments in other
European countries. Demand in Middle Eastern and African
Year ended December 31, 2000 compared markets, in particular Saudi Arabia and the United Arab
with year ended December 31,1999 Emirates, showed improved momentum during the
As oil prices recovered during 2000, demand in both the second half of 2001. Generally, we expect the positive
upstream market and the downstream markets increased in developments to continue and weaker markets to recover
2000, reflecting renewed investments by companies in the during 2002.
oil, gas and petrochemical-related industries. This resulted
in an increase in orders of $ 893 million, or 29%, to

Power Technology Products 01 4,042 higher level of revenues and operational improvements,
however, were offset in part by lower product prices and
99 3,862
the postponement of certain orders.

01 234
00 244
with year ended December 31,1999
99 282 Orders increased by $ 230 million, or 6%, to $ 4,071 million
Earnings before interest in 2000 from $ 3,841 million in 1999. As reported in local
currencies, orders increased by 14% in 2000 compared to
1999. The main contributor was our High-Voltage Tech-
* In 1999, EBIT contains $ 30 million of capital gains which, in total, amounts to more than 10% of divisional EBIT.
nology business area, which represented approximately
one third of total division orders. In particular, significant
Year ended December 31, 2001 compared orders were received from the Utilities division for an
with year ended December 31, 2000 interconnection between Brazil and Argentina and HVDC
Orders increased by $150 million, or 4%, to $ 4,221 million projects in the United States and Australia.
in 2001 from $ 4,071 million in 2000. As reported in local Revenues decreased $ 200 million, or 5%, to $ 3,662 million
currencies, orders increased 9% in 2001 compared to 2000. in 2000 from $ 3,862 million in 1999. As reported in local
Our Power Transformers business area recorded currencies, however, revenues increased by 2% in 2000
strong order growth mainly due to a considerable large compared to 1999. The level of revenues reflected the
order booked for the Chinese power link project. Our weakness of orders from Latin America in 1999 that affected
High-Voltage Technology business area increased revenues in 2000, particularly in our High-Voltage Tech-
orders substantially in the United States, Brazil, China and nology business area, which experienced a significant
Russia. Orders in our Distribution Transformers and revenue decrease. The Latin American market has been an
Medium-Voltage Technology business areas showed more important market for this business area. The decrease
modest growth as a result of the economic slowdown was offset by an improvement in revenues from our Power
in North America, which affected the building and infra- Transformers business area. Revenues from our Distribu-
structure markets. tion Transformers business area increased as a result of
Revenues increased by $ 380 million, or 10%, to $ 4,042 an improved business climate, primarily in North America,
million in 2001 from $ 3,662 million in 2000. As reported where the business area performed well.
in local currencies, revenues increased 15% in 2001 Earnings before interest and taxes, or operating income,
compared to 2000. Our High-Voltage Technology business decreased by $ 38 million, or 13%, to $ 244 million in 2000
area showed a substantial revenue increase, generated from $ 282 million in 1999. As reported in local currencies,
in the Americas and Europe through increased volumes however, operating income decreased by 9% in 2000
in high-voltage breakers and systems activities. Other compared to 1999. Excluding capital gains of $ 30 million
distribution and transmission products recorded high in 1999, operating income decreased 3% in 2000.
single-digit or low double-digit growth in local currencies. The decrease in operating income was mainly the result
Earnings before interest and taxes, or operating income, of weak revenues and higher costs associated with
decreased by $10 million, or 4%, to $ 234 million in 2001 restructuring charges in our Power Transformers and High-
from $ 244 million in 2000. As reported in local currencies, Voltage Technology business areas. Efforts to increase
earnings before interest and taxes remained unchanged production efficiency include reducing product overlaps
in 2001 compared to 2000. Excluding the effect of and increasing the standardization of products where
increased restructuring charges in 2001, earnings before appropriate. Particularly in our Medium-Voltage Tech-
interest and taxes showed a slight improvement as a result nology business area these efforts have lowered our cost
of revenue growth and operational improvements. The base and improved the level of operating income

already in 2000. These positive developments were offset Automation Technology Products 01 5,246
by added development costs for the new technology
99 5,550
within the area of distributed generation.
Automation Technology Products

01 380
The 2001 economic downturn, first in the United States 00 464
and later in Europe, negatively impacted demand. Asia 99 392
generally remained stable. The automotive industry Earnings before interest
experienced significant reductions in investments due to
generally weaker economic conditions across our major
markets. The events of September 11, 2001 negatively
affected the cruise industry in particular. Continuing con-
solidation in the pulp and paper industry depressed Earnings before interest and taxes, or operating income,
demand as customers focused on integration issues. The decreased by $84 million, or 18%, to $380 million in 2001
weakened construction market, especially in Germany, from $464 million in 2000. As reported in local currencies,
adversely affected our Low-Voltage Products business area. earnings before interest and taxes decreased 14% in 2001
compared to 2000. In our Robotics business area, reduced
Year ended December 31, 2001 compared revenues resulted in significantly reduced operating income.
with year ended December 31, 2000 Operating income in our Low-Voltage Products business
Orders decreased by $ 251 million, or 5%, to area declined in 2001 reflecting the divestiture of certain
$ 5,170 million in 2001 from $ 5,421 million in 2000. As profitable, but non-core, businesses. Earnings before interest
reported in local currencies, orders were flat in 2001 and taxes in our Drives and Power Electronics business
compared to 2000. Our Drives and Power Electronics area increased due to good volume development; however,
business area increased orders in 2001 and improved this development did not fully offset reductions in other
market share, while our Robotics business area was business areas. Ongoing efforts to simplify product lines and
negatively affected by the decline in the automotive multiple manufacturing locations should help to counteract
industry. Order levels in all other business areas decreased the difficult market conditions going forward. Additionally,
as they were impacted by increasingly difficult market the division reduced personnel by approximately 3,000 in the
conditions. Despite difficult conditions, our Instrumen- second half of 2001.
tation and Metering and Low-Voltage Products business
areas maintained their market shares. Year ended December 31, 2000 compared
Revenues increased by $ 71 million, or 1%, to $ 5,246 mil- with year ended December 31, 1999
lion in 2001 from $ 5,175 million in 2000. As reported in Orders decreased by $ 201 million, or 4%, to $ 5,421 million
local currencies, revenues increased by 6% in 2001 in 2000 from $ 5,622 million in 1999. As reported in local
compared to 2000. Revenue growth was especially strong currencies, however, orders increased by 6% in 2000
in our Drives and Power Electronics business area. compared to 1999. Growth was especially strong in our
Supported by the strong order backlog at the end of 2000, Drives and Power Electronics, Electrical Machines,
our Electrical Machines and Low-Voltage Products Robotics and Low-Voltage Products business areas, due
business areas increased revenues. Offsetting in part the to strong markets.
revenue increase were a significant decline in our Robotics
and Control and Force Measurement business areas due
to the downturn in the automotive industry and ongoing
consolidation in the pulp, paper and metals industries,
respectively.

Revenues decreased by $ 375 million, or 7%, to Financial Services 01 2,133
$ 5,175 million in 2000 from revenues of $ 5,550 million in
99 1,687
1999. As reported in local currencies, however, revenues
increased by 2% in 2000 compared to 1999. The revenue
level reflected the weakness in sales of larger automation
(32) 01
systems sold through the Manufacturing and Consumer 00 349
Industries division. Increased sales volumes, particularly 99 337
in Europe, Asia and Latin America, partially offset pricing Earnings before interest
pressure on our automation products. Our Robotics
business area significantly increased revenues, largely as a
result of higher volumes from large automotive orders.

in 2000 increased by $ 72 million, or 18%, to $ 464 million The events of September 11, 2001 negatively affected
in 2000 from $ 392 million in 1999. As reported in local financial markets but had a mixed impact on the global
currencies, earnings before interest and taxes increased insurance market. As a consequence, the worldwide
by 32% in 2000 compared to 1999. In general, the insurance business is experiencing rising demand for
improvement in earnings before interest and taxes reflects insurance and reinsurance while facing reduced capacity,
the division’s substantial efforts to reduce its cost base and substantially higher premium rates, a flight to quality,
improve internal efficiency, productivity and quality rethinking of risk assessments, and more restrictive terms
management. In particular, our Drives and Power and conditions. At the same time the insurance industry
Electronics business area experienced operational was impacted by lower investment results, reflecting
improvements and healthy market conditions. Increased generally declining equity markets compared to the
sales volumes and improved efficiency moderately beginning of 2001. During 2001, there was a global trend
increased operating income in the Low-Voltage Products toward lower interest rates, resulting in higher market
business area. Our Robotics business area significantly values of bond portfolios.
increased operating income due to higher volumes.
Efficiency improvements in our Electrical Machines
business area also contributed to significantly higher
with year ended December 31, 2000
Revenues increased by $167 million, or 8%, to $ 2,133 mil-
operating income.
lion in 2001 from $1,966 million in 2000. As reported in
Financial Services local currencies, revenues increased 13% in 2001 compared
The Financial Services division is impacted by interest rate to 2000. The main contributors to the increase in revenues
movements in various currencies, mainly the U.S. dollar, were our Insurance business area, due to a higher level
the Euro and the Swiss franc, as well as exchange rate of insurance premiums resulting from increased volumes,
movements. The level of investment income generated and our Structured Finance business area, resulting from
from the investments in our Insurance business area the acquisition of a portfolio of small, mainly standardized
and the income from the division’s lease portfolio are leases and increased revenues from its growing financial
affected by movements in interest rates, while the trading receivables portfolio. The majority of income in our Equity
results of the Treasury Centers are affected by move- Ventures business area derives from equity-accounted
ments in interest rates and exchange rates. Additionally, investments, which do not appear as revenue but are
movements in the equity markets affect the ability to instead recognized in other income.
realize investment results in our Insurance business area. Earnings before interest and taxes, or operating income,
decreased by $ 381 million, to a loss of $ 32 million in 2001
from $ 349 million in 2000. The reduction in operating
income is principally the result of a $ 295 million non-cash

charge in 2001 relating to our reinsurance business. Prior Total assets of Financial Services amounted to
to 2001, we presented a portion of our insurance reserves approximately $15 billion as of December 31, 2001,
on a discounted basis, which estimated the present value representing marketable securities held by Treasury
of funds required to pay losses at future dates. During 2001, Centers and Insurance, financial leases held by Structured
the timing and amount of claims payments being ceded Finance, equity participations held by Equity Ventures,
to us in respect of prior years’ finite risk reinsurance lending to infrastructure projects by Structured Finance
contracts has changed and cannot be reliably determined and to ABB companies by Treasury Centers.
at December 31, 2001. Therefore, we have not discounted
our loss reserves resulting in a charge to losses and loss Year ended December 31, 2000 compared
adjustment expenses in 2001 of $ 295 million. For further with year ended December 31,1999
information, see Note 14 of the Notes to Consolidated Financial Services revenues increased by $ 279 million, or
Financial Statements. 17%, to $1,966 million in 2000 from $1,687 million in 1999.
As reported in local currencies, revenues increased 23%
Our Structured Finance business area reported an increase
in 2000 compared to 1999. The revenue increase primarily
in profitability as a consequence of higher income from
related to improved revenues in our Insurance business
its expanded financial receivables portfolio, and also due
area, which arose mainly from the acquisition of Kemper
to its 35% stake in Swedish Export Credit Corporation,
Europe Reassurances and a higher level of insurance
which was acquired in June 2000. Our Structured Finance
premiums.
business area successfully sold various lease transactions
during 2001. Earnings before interest and taxes, or operating income,
increased by $12 million, or 4%, to $ 349 million in 2000
Our Equity Ventures business area achieved higher
from $ 337 million in 1999. As reported in local currencies,
earnings before interest and taxes through successful
operating income increased 12% in 2000 compared to 1999.
refinancing, improved performance and achievement of
milestones in infrastructure projects. During 2001, our Our Structured Finance business area posted higher
Equity Ventures business area reduced its stakes in certain earnings for 2000, mainly reflecting higher net
projects. interest income from the growing lease and loan portfolio.
Structured Finance earnings also included ABB’s share in
Results for our Insurance business area were negatively
the results of Swedish Export Credit Corporation
impacted by insurance losses, mainly through a non-cash
amounting to $16 million following our acquisition of a
charge of $ 295 million following the change in estimation
35% interest in that institution in June 2000.
of insurance loss reserves described above. In addition,
our Insurance business area recorded provisions for Our Equity Ventures business area increased its earnings
$138 million in underwriting losses – including provisions as a result of higher income from its investment in special
totaling $ 48 million relating to the events of September 11, purpose infrastructure companies. New investments during
2001 – leading to substantial additional negative insurance 2000 included a stake in a high-voltage power transmission
results. A lower level of capital gains on the equity line in Australia.
investment portfolio was realized during 2001, which was
Earnings in our Insurance business area decreased in
partly offset by realized gains in the bond portfolio due
2000 compared to 1999 as a consequence of reduced
to lower interest rates, particularly in the United States.
investment and underwriting results. The reduced
Weakened economic conditions and the monetary policy investment income reflects both the unusually strong
following the events of September 11, 2001 exacerbated equity markets in 1999 and the volatile markets in 2000.
the trend of lower U.S. interest rates. Benefiting from such The decrease also reflected the costs of integrating Kemper
trends and other price movements, our Treasury Centers Europe Reassurances into our Insurance business area.
business area increased earnings mainly by improvements
in its trading results in financial markets.

Treasury Centers posted earnings higher in 2000 than in Liquidity and capital resources
1999, mainly due to a stronger trading result. Liquidity and capital resources have been drawn from
three primary sources: cash from operations, proceeds from
Total assets of Financial Services amounted to approximately
the issuance of debt securities, and bank borrowings.
$12 billion as of December 31, 2000, representing marketable
securities held by Treasury Centers and Insurance, financial We believe that our ability to generate cash flow through
leases held by Structured Finance, equity participations our operating activities, our access to both domestic and
held by Equity Ventures, lending to infrastructure projects international capital markets, as well as our credit lines with
by Structured Finance and to ABB companies by banks, will continue to provide the cash flows necessary
Treasury Centers. to satisfy our working capital requirements as well as meet
our financial commitments for at least the next 12 months.
Corporate
ABB Ltd and certain finance subsidiaries serve as the
The corporate and elimination line item includes our New
primary vehicles for the issuance of publicly traded and
Venture activities, Corporate Research and Development,
privately placed debt securities and bank borrowings.
the Group Processes Division, costs for other corporate
Debt securities are issued within amount, maturity,
functions such as for our holding companies, and elimina-
currency and price guidelines set each year and reviewed
tion of intra-company interest from the Financial Services
periodically by ABB Ltd. We have a number of commercial
division. Total operating cost from corporate and elimina-
paper programs giving us access to short-term liquidity
tion increased by $ 361 million, to $ 733 million in 2001
throughout the world, as reflected in the table below:
from $ 372 million in 2000. The loss in our New Venture
activities increased by $107 million to a loss of $119 million,
Program description Program size Program size
from a loss of $12 million in 2000, and reflects both the (in local ($ in millions) (1)
currency millions)
negative operating results of consolidated or equity
Nordic & Baltic commercial
accounted units, as well as the write-down of intangible paper program SEK 6,000 568
assets and some participations in non consolidated New European commercial
Venture units. Corporate research and development cost paper program USD 3,000 3,000
increased by $ 7 million to $103 million in 2001, from German commercial
paper program EUR 1,000 880
$ 96 million in 2000, due to higher research activities during
U.S. commercial
2001, mainly in the area of Industrial IT. Expenses for our paper program USD 2,000 2,000
Group Processes division decreased slightly by $ 2 million Australian commercial
to $ 55 million, from $ 57 million in 2000. Intra-company paper program AUD 250 127
(1) Translated using year-end exchange rates.
elimination of interest income of our Financial Services
division increased by $ 20 million to $171 million, from At December 31, 2001 and 2000, a total of $ 3,297 million
$151 million in 2000, due to higher corporate borrowings and $ 1,923 million respectively, was outstanding under
in the market through the Financial Services division, these programs with a weighted average interest rate of
mainly to finance treasury shares purchases and corporate 2.7% and 5.9%, respectively. The weighted average interest
acquisitions. Costs for other corporate decreased by rate on our other short-term debt of $ 983 million and
$ 50 million to $ 315 million, from $ 365 million in 2000, $1,163 million was 4.6% and 6.0% at December 31, 2001
mainly due to cost reduction activities in the context and 2000, respectively.
of the new organizational structure. The main reason for
the lower result in 2001 was the significant drop in
capital gains of $ 279 million to $ 30 million, down from
$ 309 million in 2000.

We have access to long-term funding through both December 31, 2001, no amounts were outstanding under
public debt issuances and private placements. These debt this facility. In the event that the long-term debt rating for
securities are issued both under our existing medium ABB Ltd falls below either A3 or A- from Moody’s Investors
term note program (with a program size of $ 5,250 mil- Service or Standard & Poor’s Ratings Services, respectively,
lion) and as separate issuances outside of the program. the terms of the facility will be renegotiated. If after such
At December 31, 2001 and 2000, $ 3,575 million and negotiations with the banks we are unable to reach
$ 2,502 million, respectively, was outstanding under our agreement on revised terms, the facility will be terminated.
medium term note program and $ 1,768 million
On December 19, 2001, Moody’s Investors Service
and $ 1,405 million, respectively, outside of the program.
confirmed our short-term debt rating at Prime-1 and
Depending on market opportunities, we fund ourselves in lowered our long-term debt rating from Aa3 to A2, with a
a range of currencies and maturities and on various interest negative outlook. On February 7, 2002, Standard & Poor’s
rate terms. We use derivatives to reduce the exposures Ratings Services lowered both our short-term debt rating
created by such debt issuances. For example, to reduce our from A-1+ to A-1 and our long-term debt rating from AA- to
exposure to interest rates, we use interest rate swaps to A+, also with a negative outlook. A further ratings change
effectively convert fixed rate borrowings into floating rate may affect our funding cost.
liabilities and we use cross currency swaps to effectively
In addition to the aforementioned three primary sources of
convert foreign currency denominated bonds into U.S.
liquidity and capital resources, we also sold certain trade
dollar liabilities. After considering the effect of interest rate
receivables to Qualifying Special Purpose Entities (QSPEs)
swaps, the effective average interest rate on our floating
unrelated to us, in revolving-period securitizations during
rate long-term borrowings of $ 4,422 million and our fixed
2001 and 2000. The net cash received from QSPEs during
rate long-term borrowings of $1,017 million was 2.7% and
2001 and 2000 was $ 86 million and $ 208 million, respec-
5.3%, respectively. This compares with an effective rate
tively. We retain servicing responsibility relating to the sold
of 5.4% for floating rate long-term borrowings and 4.6% for
receivables.
fixed rate long-term borrowings as of December 31, 2000.
Solely for the purpose of credit enhancement from the
During 2001, we succeeded in broadening our sources
perspective of the QSPEs, we retained an interest in the sold
of funding. We raised the equivalent of $ 417 million
receivables. Pursuant to the requirements of the revolving-
through the first Japanese yen denominated bond by a
period securitization we effectively bear the risk of potential
Swiss corporate and a further equivalent of $ 215 million
delinquency or default associated with trade receivables
resulted from an overnight index-linked bond targeted
sold or interests retained. The fair value of the retained
at the French investor base. Both of these bonds were
interests at December 31, 2001, and December 31, 2000, was
issued under our medium term note program. Furthermore,
approximately $ 264 million and $ 214 million, respectively.
we raised $ 350 million through our first Rule 144A
private placement into the United States market. Cash settlement with the QSPEs takes place monthly on a
net basis. The total cost of $ 33 million and $ 26 million
In mid-December 2001, as support for our commercial
in 2001 and 2000, respectively, related to the securitization
paper issuance, as well as for general corporate purposes,
of trade receivables, is included in the determination of
we entered into a syndicated $ 3,000 million, 364-day
current earnings.
unsecured revolving credit facility, with the option to
convert up to $1,000 million of any outstanding amounts At December 31, 2001 and 2000, of the gross trade
at the end of the period into a one-year term facility. At receivables sold, the total outstanding trade receivables
amounted to $1,058 million and $ 918 million, respectively.
At December 31, 2001 and 2000 an amount of $ 65 million
and $ 49 million, respectively, was more than 90 days past
due, which according to the terms of the programs, is
deemed to be delinquent. For more information regarding

our securitization programs, see Note 7 of the Notes to Our financial services business has guaranteed the
Consolidated Financial Statements. obligations of certain third parties in return for a commis-
sion. These financial guarantees represent irrevocable
Our debt and operating lease obligations as of
assurances that we will make payment in the event that
December 31, 2001 are summarized in the table below:
the third party fails to fulfill its obligations and the
Obligations Payments due by period
beneficiary under the guarantee records a loss under the
($ in millions)
Less terms of the guarantee agreement. The commissions
than 1– 3 4–5 After
Total 1year years years 5 years
collected are recognized as income over the life of the
Long-term debt 5,510 467 2,679 1,815 549 guarantee and we record a provision when we become
Commercial paper 3,297 3,297 – – – aware of an event of default or a potential event of default
Short-term loans and occurs. At December 31, 2001, we had issued approxi-
repurchase agreements 983 983 – – – mately $ 270 million of financial guarantees with maturity
Operating leases 1,340 269 414 293 364 dates ranging from one to nineteen years. We do not
expect to incur significant losses under these contracts.
It is industry practice to use letters of credit, surety bonds

Financial position
and other performance guarantees on major projects,
Our operating assets, excluding cash and equivalents,
including long-term operation and maintenance contracts.
decreased to $16,747 million at December 31, 2001, from
Such guarantees may include guarantees that a project will
$17,314 million at December 31, 2000. Operating assets
be completed or that a project or particular equipment will
include marketable securities, receivables, inventories and
achieve defined performance criteria. The guarantors may
prepaid expenses. The decrease in 2001 partially reflects
include subsidiaries of ABB Ltd and/or ABB Ltd. Because
the impact of translating balance sheet amounts from local
such guarantees may not state a fixed or maximum amount,
currencies to U.S. dollars for reporting purposes. The decrease
the aggregate amount of our potential exposure under the
also reflects a $1,263 million decrease in marketable securities
guarantees cannot reasonably be estimated. Provisions are
and a reduction in inventories of $117 million, partially offset
recorded in the consolidated financial statements at the
by a $773 million increase in prepaid expenses. This increase
time it becomes probable we will incur losses pursuant to
is mainly due to increases in the fair value of derivatives
a performance guarantee. We do not expect to incur
recorded on the balance sheet as required by SFAS 133.
significant losses under these guarantees in excess of our
provisions. However, such losses, if incurred, could have Current operating liabilities include accounts payable,
a material impact on our consolidated financial position, short-term borrowings, accrued liabilities and insurance
liquidity or results of operations. reserves (which form part of the normal operations
of our insurance business), among other items. The
$ 3,583 million increase in current operating liabilities
from December 31, 2000 to December 31, 2001 is
principally the result of the increase of trade and other
accounts payable of $ 963 million, of short-term borrowings
of $1,160 million and accrued liabilities and other of
$1,460 million. This increase is due to an increase
in insurance reserve, as well as the application of SFAS 133,
which requires derivative assets and liabilities to be
reported on the balance sheet.

Receivables from leases and loans receivable increased to Short-term borrowings, including current maturities of
$ 4,263 million at December 31, 2001 from $ 3,875 million long-term debt, increased by $1,160 million, or 32%,
at December 31, 2000. The increase is principally due to to $ 4,747 million outstanding at December 31, 2001
a higher level of project financing activity throughout the from $ 3,587 million outstanding at December 31, 2000.
year that was only partially offset by our cash generation Long-term borrowings increased by $1,267 million,
activity late in the year. or 34%, in 2001 to $ 5,043 million at December 31, 2001
from $ 3,776 million at December 31, 2000.
Property, plant and equipment decreased to
$ 3,003 million at December 31, 2001, from $ 3,243 million The consolidated statement of cash flows can be
at December 31, 2000, primarily reflecting the effect summarized into main activities as follows:
of translating balance sheet amounts into U.S. dollars Year ended December 31,
and normal levels of depreciation and disposition of 2001 2000 1999

($ in millions)
non-core property, plant and equipment. Intangible
Cash flows provided by (used in):
assets increased to $ 3,299 million at December 31, 2001,
Operations 2,193 1,022 1,575
from $ 3,155 million at December 31, 2000 reflecting
Acquisitions, investments, divestitures
an increase in software capitalization and goodwill from and discontinued operations, net (505) 331 (641)
acquisitions, which was only partially offset by the Asset purchases, net of disposals (609) (315) (351)
amortization expense. Other investing activities (314) (780) (321)
Investments and other assets increased to $2,265 million at Borrowings, net of repayments 2,639 (44) (525)
December 31, 2001, from $1,978 million at December 31, Treasury and capital stock transactions (1,393) 244 (165)
2000. The increase primarily resulted from a higher amount Other financing activities (569) (592) (497)
Effects of exchange rate changes (72) (84) (100)
of prepaid pension assets ($162 million contribution to our
Increase (decrease) in cash 1,370 (218) (1,025)
U.S. pension plan), improved returns on investments in
projects with ABB equity participation and a higher amount
of deferred tax assets. This increase was partially offset by Cash flow from operating activities
the sale of our interest in b-business partners. Net cash provided by operating activities in 2001 increased
by $1,171 million to $ 2,193 million from $1,022 million in
Our net debt position (defined as borrowings minus
2000. Income from continuing operations, net of adjust-
cash and equivalents and marketable securities) amounted
ments for non-cash items, decreased by $ 623 million in
to $ 4,077 million at December 31, 2001, compared to
2001, from $1,323 million in 2000 to $ 700 million in 2001.
$1,757 million at December 31, 2000. The increase in net
This was more than offset by net cash provided related
debt during the year arose due to the need to fund the
to the decrease in net operating assets of $1,493 million
acquisition of Entrelec, significant investments in Financial
in 2001 as compared to the cash outflow related to the
Services assets and the purchase of treasury shares.
increase in net operating assets of $ 301 million in 2000.
At December 31, 2001 and 2000, we had total borrowings, The increase in net cash provided by operating activities in
including short-, medium- and long-term borrowings, 2001 was primarily due to the increase in trade payables
outstanding of $ 9,790 million and $ 7,363 million, and non-trade payables. The increase also reflected an
respectively. During 2001, our level of borrowings increase in insurance reserves (which is a non-cash charge
increased significantly during the first nine months mainly to the income statement), related to our reinsurance
due to the financing of the repurchase of our own shares
as well as a higher level of activity in project financing.
Toward year-end, we decreased our borrowings signifi-
cantly through a strong increase in our operating cash flow.

business (which form part of the normal operations of the acquisition of Entrelec) and cash used for discontinued
our insurance business). Net operating assets include operations totaled $ 210 million, mainly in the settlement
marketable securities held for trading purposes, of claims resulting from the asbestos litigation. These cash
receivables, inventories, payables and other assets and outflows were only partially offset by disposals of busi-
liabilities. Marketable securities are classified as either nesses for an amount of $ 283 million. In 2000, cash used
trading or available-for-sale. Debt and equity securities for acquisitions totaling $ 893 million was more than
that are bought and held principally for the purpose offset by cash from discontinued operations ($ 949 million,
of sale in the near term are classified as trading securities. primarily relating to the divestiture of our remaining
interest in ABB ALSTOM POWER and our nuclear power
Net cash provided by operating activities decreased by
business) and disposals ($ 275 million, primarily relating
$ 553 million to $1,022 million at December 31, 2000
to the disposal of our 50% shareholding in ABB ALSTOM
from $1,575 million at December 31,1999. Income from
POWER), which amounted to $1,224 million.
continuing operations, net of adjustments for non-cash
items, increased by $159 million from $1,164 million Purchases of property, plant and equipment, net of
in 1999. This was more than offset by cash outflows related disposals, increased by $ 294 million to $ 609 million in
to the increase in net operating assets of $ 301 million 2001 from $ 315 million in 2000. This increase resulted
in 2000 as compared to cash provided by the decrease in from reduced proceeds from property, plant and
net operating assets of $ 411 million in 1999. The increase equipment disposals and a return to historical acquisition
in net operating assets in 2000 was primarily due to levels. Purchases of property, plant and equipment,
the increase in cash tied up in ongoing customer projects net of disposals, decreased by $ 36 million in 2000 from
where unbilled receivables and inventories, after con- $ 351million in 1999.
sideration of advances from customers, exceeded the level
Cash used in other investing activities decreased by
experienced in 1999.
$ 466 million to $ 314 million in 2001 as compared
to $ 780 million in 2000. This decrease primarily resulted
Cash flow from investing activities
from a higher level of net proceeds from the sale
Investing activities include: acquisitions of, investments
of marketable securities that are not held for trading
in and divestitures of businesses, purchases of property,
purposes, which amounted to $ 593 million from
plant and equipment, net of disposals; net investments
$ 53 million in 2000. The increase more than offset a
in marketable securities that are not held for trading
higher level of investments in financing receivables,
purposes; and accounts receivable from leases and
which increased to $ 907 million in 2001 from $ 833 million
third-party loans (financing receivables). Net investments
in 2000 due to a higher level of project financing activity
in marketable securities that are not held for trading
during most of the year.
purposes and financing receivables are summarized in
the table above as “other investing activities” and Cash used in other investing activities increased by
increases in these amounts reflect cash outflows. Net cash $ 459 million to $ 780 million in 2000 as compared
used in investing activities decreased by $ 495 million to to $ 321 million in 1999. This increase primarily resulted
$1,218 million in 2001 from $1,713 million in 2000. Net from a lower level of net proceeds from sales of
cash used in investing activities decreased by $ 323 million marketable securities that are not held for trading
to $1,713 million in 2000 from $ 2,036 million in 1999. purposes, which decreased by $ 281 million from
$ 334 million in 1999 to $ 53 million in 2000. The increase
Net cash flow resulting from purchases of, investments in,
also reflects a higher level of investment in financing
and divestitures of businesses, and discontinued operations
receivables, which increased to $ 833 million in 2000 from
(“business combinations”) changed by $ 836 million to
$ 655 million in 1999.
$ 505 million used in 2001 from $ 331 million provided in
2000. In 2001, cash used for acquisitions of new businesses
totaled $ 578 million (including $ 284 million, related to

Cash flow from financing activities Related and certain other parties
Our financing activities primarily include net borrowings, ABB has participations in joint ventures and affiliated
both from the issuance of debt securities and directly companies, which are accounted for using the equity
from banks, treasury and capital stock transactions, and method. Many of these entities have been established to
payment of dividends. Net cash provided by financing perform specific functions, such as constructing,
activities increased by $1,069 million to $ 677 million operating and maintaining a power plant. In addition to
provided in 2001 as compared to $ 392 million used in our investment, we may provide products to the project,
2000. Cash provided by long-term borrowings, net of may act as contractor of the project and may operate
repayments, increased by $ 3,361 million to $ 2,708 million the finished product. The entity created generally would
provided in 2001 as compared to $ 653 million repaid receive revenues either from the sale of the final product
in 2000. This was partially offset by a decrease of $ 678 mil- or from selling the output generated by the product.
lion in cash flow from borrowings with maturities of The revenue usually is defined by a long-term contract
90 days or less from $ 609 million cash provided in 2000 with the end user of the output.
to $ 69 million cash used in 2001. During 2001, we used
Our risk with respect to these entities is substantially
$ 1,393 million of cash for the purchase of our shares
limited to the carrying value of the companies on our
for treasury, offset by proceeds from the sale of options to
consolidated balance sheet. The balance sheet carrying
purchase our shares. In April 2001, we paid dividends
value for the equity accounted companies at December 31,
of $502 million with respect to 2000.
2001 and 2000 was $ 718 million and $ 682 million,
Net cash used in financing activities decreased by respectively.
$ 795 million in 2000 to $ 392 million from $1,187 million
Included in financing receivables is notes receivable from
in 1999. The decrease was primarily due to a decrease
affiliates at December 31, 2001 and 2000 of $ 234 million
in the level of net repayments of other borrowings to
and $ 239 million, respectively. Loans granted to equity
$ 653 million in 2000 from $ 908 million in 1999. The net
accounted companies are contained in these amounts.
decrease also reflects a higher level of borrowings,
particularly borrowings with a maturity of 90 days or less, We retained obligations for performance and other
at year-end 2000 as compared to year-end 1999. guarantees related to the power generation businesses we
contributed to the ABB ALSTOM POWER joint venture.
During 2000, our net sales of treasury shares and put
In addition, in connection with a power plant construction
options provided net cash of $ 244 million. We hold some
project in a business sold to ALSTOM POWER N.V., one of
of our shares in treasury to provide shares for delivery
our subsidiaries has issued an advance payment guarantee
upon exercise of warrants in future years under our
towards a bank holding funds which are to be drawn down
management incentive program. We used $165 million in
by a consortium led by a subsidiary of ALSTOM POWER.
cash in 1999 to purchase our shares for this purpose.
The guarantee was approximately $ 370 million at
We paid dividends of $ 531 million and $ 503 million in
December 31, 2001. ALSTOM and its subsidiaries have
2000 and 1999, respectively.
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 and ALSTOM POWER have undertaken
to fully indemnify us against any claims arising under such
guarantees. As of December 31, 2001, there have been no
material claims made under these guarantees.

In connection with the sale of our nuclear business Exchange gains (losses), net, amounted to losses of
to British Nuclear Fuels (BNFL) in 2000, one of our $5 million, $ 3 million and $ 28 million in 2001, 2000 and
subsidiaries retained obligations under surety bonds 1999, respectively, and were recorded in interest
relating to the performance by the nuclear business under expense. Exchange gains (losses), net, includes the
certain contracts entered into prior to the sale to BNFL. re-measurement of certain currencies into functional
Pursuant to the purchase agreement under which the currencies and the costs of hedging certain balance
nuclear business was sold, BNFL is required to indemnify sheet exposures.
us for any costs and liabilities incurred by us with respect
With respect to cash flows, exchange differences recorded
to such bonds. Our total liability under these bonds
are the result of translating cash and equivalents from
at December 31, 2001 is approximately $ 700 million.
year-end to average exchange rates. In 2001 and 2000,
As of December 31, 2001, there have been no material
this translation resulted in a reduction of $ 72 million and
claims made under these surety bonds. We do not expect
$ 84 million, respectively, to our total cash flow.
to incur significant losses under these surety bonds.
Impact of inflation and changing prices

Exchange
Inflation affects our operations in some markets. However,
All our local subsidiaries report their financial results
the majority of our revenues, costs and income are derived
in their respective local currencies, and our Consolidated
from economies which have been characterized by low
Financial Statements are reported in U.S. dollars.
inflation in recent years.
Accordingly, balance sheet items are translated into U.S.
dollars using year-end exchange rates, while income In high-inflation environments, we are generally able to
statement and cash flow items are translated using average increase prices to counteract the inflationary effects of
exchange rates for the year. increasing costs and to generate sufficient cash flows to
maintain our productive capability.
We have commercial activities denominated in all major
currencies, in particular U.S. dollars, Swiss francs, Euro,
New accounting standards
Scandinavian currencies, and Japanese yen. In 2001 the
On January 1, 2001, we adopted Statement of Financial
euro continued to weaken against the U.S. dollar, reaching
Accounting Standards No.133, Accounting for Derivative
an exchange rate of 0.88 at the end of 2001, with the
Instruments and Hedging Activities, as amended by the
deterioration in the first half recovering in part in the
Statement of Financial Accounting Standards No.137,
second half of 2001. The average exchange rate for the year
Accounting for Derivative Instruments and Hedging
was 0.89. The Swiss franc also declined versus the U.S.
Activities – Deferral of the Effective Date of FASB Statement
dollar in the first half of the year, reaching a low of 0.55 in
No. 133 and the Statement of Financial Accounting
May and June 2001, with a recovery in the fourth quarter
Standards No.138, Accounting for Certain Derivative
of 2001 reaching an exchange rate of 0.62. However, the
Instruments and Certain Hedging Activities, collectively
Swiss franc declined slightly closing the year at 0.59. The
referred to as SFAS133. These Statements require the
average Swiss franc exchange rate for 2001 was 0.59.
recognition of all derivatives, other than certain derivatives
In 2000, the Euro weakened against the U.S. dollar from
indexed to our own stock, on the balance sheet at fair value.
its opening level of 1.001 to a closing exchange rate of 0.93.
Derivatives that are not designated as hedges must be
The average exchange rate for 2000 was also 0.93. The
adjusted to fair value through income. If the derivative is
Swiss franc also declined versus the U.S. dollar in 2000,
designated as a hedge, depending on the nature of the
from an opening level of 0.63 to a year-end closing
hedge, changes in the fair value of derivatives will either
exchange rate of 0.61.
be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or
recognized in accumulated other comprehensive loss

until the hedged item is recognized in earnings. The accounting and reporting guidance for long-lived assets
ineffective portion of a derivative’s change in fair value to be disposed of by sale and broadens the presentation
will be immediately recognized in earnings. Based on of discontinued operations to include more disposal
our outstanding derivatives on January 1, 2001, we transactions. We will adopt this statement on January 1,
recognized a loss in the consolidated income statement 2002. We have not yet determined the impact, if any, that
of approximately $ 63 million, net of tax, and a reduction this statement will have on our financial position or
to equity of $ 41 million, net of tax, in accumulated other results of operations, although we expect to present more
comprehensive loss. disposals as discontinued operations subsequent to
adoption of SFAS 144.
In June 2001, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards
Environmental contingencies and retained liabilities
No. 141, Business Combinations, and Statement of
All of our operations, but particularly our manufacturing
Financial Accounting Standards No. 142, Goodwill and
operations, are subject to comprehensive environmental
Other Intangible Assets, which modify the accounting
laws and regulations. Violations of these laws could result
for business combinations, goodwill and identifiable
in fines, injunctions (including orders to cease the violating
intangible assets. All business combinations initiated after
operations and to improve the condition of the environ-
June 30, 2001 must be accounted for by the purchase
ment in the affected area or to pay for such improvements)
method. Goodwill from acquisitions completed after that
or other penalties. In addition, environmental permits
date will not be amortized, but will be charged to
are required for our manufacturing facilities (for example,
operations when specified tests indicate that the goodwill
with respect to wastewater discharge). In most countries
is impaired, that is, when the goodwill’s fair value is lower
in which we operate, environmental permits must be
than its carrying value. Certain intangible assets will be
renewed on a regular basis and we must submit reports to
recognized separately from goodwill, and will be
environmental authorities. These permits may be revoked,
amortized over their useful lives. As of January 1, 2002,
renewed or modified by the issuing authorities at their
all goodwill must be tested for impairment and a transition
discretion and in compliance with applicable laws.
adjustment recognized at that time. All goodwill
We have implemented formal environmental management
amortization will also cease at that date. We recognized
systems at nearly all of our manufacturing sites in
goodwill amortization expense of $191 million,
accordance with the international environmental
$174 million and $155 million in 2001, 2000 and 1999,
management standard ISO 14001, and we believe that
respectively. We do not expect to record a material
we are in substantial compliance with environmental
transition adjustment in connection with such impairment
laws, regulations and permits in the various jurisdictions
testing in 2002.
in which we operate, except for such instances of non-
In August 2001, the FASB issued Statement of Financial compliance that, in the aggregate, are not reasonably
Accounting Standards No. 144 (SFAS 144), Accounting likely to be material.
for the Impairment or Disposal of Long-Lived Assets. This
In a number of jurisdictions, including the United States,
Statement modifies the discontinued operations guidance
we may be liable for environmental contamination at our
of Accounting Principles Board Opinion 30, Reporting
present or former facilities, or at sites at which hazardous
the Results of Operations – Reporting the Effects of Disposal
substances generated by our operations were disposed
of a Segment of a Business, and Extraordinary, Unusual
of. In the U.S., the Environmental Protection Agency
and Infrequently Occurring Events and Transactions, and
and various state agencies are responsible for regulating
supersedes Statement of Financial Accounting Standards
environmental matters. These agencies have identified
No. 121 (SFAS 121), Accounting for the Impairment
companies in the ABB Group as potentially responsible
of Long-Lived Assets and for Long-Lived Assets to Be
parties for the costs of cleaning up hazardous substances
Disposed Of , while retaining certain requirements of
at a number of sites pursuant to the Comprehensive
SFAS 121 regarding impairment loss recognition and
Environmental Response, Compensation, and Liability Act,
measurement. In addition, SFAS 144 provides additional

the Resource Conservation and Recovery Act and other Program because such costs relate to materials used by
federal and state environmental laws. As of December 31, Combustion Engineering in its research and development
2001, companies within the ABB Group had been named work on, and fabrication of, nuclear fuel for the United
as potentially responsible parties with respect to seven States Navy. As a result of the sale of the nuclear business,
locations, primarily involving soil and groundwater con- in April 2000 we established a reserve of $ 300 million in
tamination. We do not believe that our aggregate liability in connection with estimated remediation costs related to
connection with these sites will be material. these facilities. During 2001 approximately $ 6 million was
expended on remediation of the Windsor site.
Generally, our liability with regard to any specific site will
depend on the number of potentially responsible parties, Estimates of the future costs of environmental compliance
their relative contributions of hazardous substances or and liabilities are imprecise due to numerous uncertainties.
wastes to the site and their financial viability, as well as on Such costs are affected by the enactment of new laws
the nature and extent of the contamination. Nevertheless, and regulations, the development and application of new
such laws commonly impose liability that is strict, joint and technologies, the identification of new sites for which
several, so that any one party may be liable for the entire we may have remediation responsibility and the
cost of cleaning up a contaminated site. apportionment of remediation costs among, and the
financial viability of, responsible parties. In particular,
In addition, we have retained liability for certain specific
the exact amount of the responsibility of the U.S.
environmental remediation costs at two sites in the
government for the Windsor site cannot reasonably
U.S. that were operated by our nuclear business, which has
be estimated. It is possible that final resolution of environ-
been sold to British Nuclear Fuels. Pursuant to the
mental matters may require us to make expenditures in
purchase agreement with British Nuclear Fuels, we have
excess of our expectations, over an extended period of
retained all of the environmental liabilities associated
time and in a range of amounts that cannot be reasonably
with our Combustion Engineering subsidiary’s Windsor,
estimated. Although final resolution of such matters could
Connecticut, facility and a portion of the environmental
have a material effect on our consolidated results of
liabilities associated with our ABB CE Nuclear subsidiary’s
operations in a particular reporting period in which the
Hematite, Missouri facility. The primary environmental
expenditure is incurred, we believe that these expenditures
liabilities associated with these sites relate to the costs of
should not have a material adverse effect on our
remediating radiological contamination upon decommis-
consolidated financial position.
sioning the facilities. Such costs are not payable until a
facility is taken out of use and generally are incurred over We retain ownership of Combustion Engineering, Inc.,
a number of years. Although it is difficult to predict with a subsidiary that formerly conducted part of our divested
accuracy the amount of time it may take to remediate power generation business and which now owns
radiological contamination upon decommissioning, based commercial real estate which it leases to third parties.
on information that British Nuclear Fuels has made publicly Combustion Engineering is a co-defendant, together with
available, we believe that it may take approximately six third parties, in numerous lawsuits pending in the United
years for this remediation at the Hematite site, from the States in which the plaintiffs claim damages for personal
time of decommissioning. With regard to the Windsor site, injury arising from exposure to or use of equipment which
we believe the remediation may take until 2008. British contained asbestos that Combustion Engineering supplied,
Nuclear Fuels has notified the Nuclear Regulatory Commis- primarily during the 1970s and before. Other ABB Group
sion of its intention to decommission the Hematite facility entities are sometimes named as defendants in asbestos
in 2003. British Nuclear Fuels decommissioned the Windsor claims. These claims, however, are insignificant compared
facility in 2001 and the process of remediation has begun. to the Combustion Engineering claims and have not had,
At the Windsor site, we believe that a significant portion of and are not expected to have, a material impact on our
such remediation costs will be the responsibility of the consolidated financial position or consolidated results
U.S. government pursuant to the Atomic Energy Act and of operations. As of December 31, 2001 and 2000, reserves
the Formerly Used Site Environmental Remediation Action of $ 940 million and $ 590 million, respectively, were

recorded in respect of asbestos claims and related defense
costs. These reserves do not reflect probable insurance
recoveries on those claims. We also recorded assets of
approximately $150 million and $160 million at December
31, 2001 and 2000, respectively, for probable insurance
recoveries, which were established with respect to the
claims reserved against. During 2001, Combustion
Engineering experienced a significant increase in the level
of new claims and higher total and per-claim settlement
costs as compared to recent years. This resulted in an
increase in the reserves for potential asbestos liabilities
by $ 470 million. Cash payments to resolve Combustion
Engineering’s asbestos claims were $136 million,
$125 million and $ 67 million in 2001, 2000 and 1999,
respectively.
The ultimate cost of asbestos claims is difficult to estimate

with any degree of certainty due to the nature and number
of variables associated with asbestos claims. Future
consolidated operating results will continue to reflect the
effect of changes in estimated claims settlement costs
resulting from actual claim activity as well as changes in
available insurance coverage. It is reasonably possible that
expenditures could be made in excess of established
reserves, in a range of amounts that cannot reasonably
be estimated. Although the final resolution of any such
matters could have a material impact on our reported
consolidated results for a particular reporting period, we
believe it should not have a material adverse effect on
our consolidated financial condition or liquidity. Please see
Note 16 of the Notes to Consolidated Financial Statements
contained elsewhere in this report.

Consolidated Financial Statements
Consolidated Income Statements

Year ended December 31 (in millions, except per share data) 2001 2000 1999
Revenues $ 23,726 $ 22,967 $ 24,356

Cost of sales (18,708) (17,222) (18,457)
Gross profit 5,018 5,745 5,899
Selling, general and administrative expenses (4,397) (4,417) (4,682)

Amortization expense (236) (219) (189)
Other income (expense), net (106) 276 94
Earnings before interest and taxes 279 1,385 1,122
Interest and dividend income 568 565 608

Interest and other finance expense (802) (644) (708)
Income from continuing operations before taxes and minority interest 45 1,306 1,022
Provision for taxes (105) (377) (343)

Minority interest (70) (48) (36)
Income (loss) from continuing operations (130) 881 643
Income (loss) from discontinued operations, net of tax (510) 562 717
Extraordinary gain on debt extinguishment, net of tax 12 – –
Cumulative effect of change in accounting principles (SFAS 133), net of tax (63) – –
Net income (loss) $ (691) $ 1,443 $ 1,360
Weighted average shares outstanding 1,132 1,180 1,184

Dilutive potential shares 3 5 3
Diluted weighted average shares outstanding 1,135 1,185 1,187
Basic earnings (loss) per share:

Income (loss) from continuing operations $ (0.11) $ 0.74 $ 0.54
Net income (loss) $ (0.61) $ 1.22 $ 1.15
Diluted earnings (loss) per share:

Income (loss) from continuing operations $ (0.11) $ 0.74 $ 0.54
Net income (loss) $ (0.61) $ 1.22 $ 1.15
See accompanying notes to consolidated financial statements.

Consolidated Balance Sheets
December 31(in millions, except share data) 2001 2000
Cash and equivalents $ 2,767 $ 1,397

Marketable securities 2,946 4,209
Receivables, net 8,368 8,328
Inventories, net 3,075 3,192
Prepaid expenses and other 2,358 1,585
Total current assets 19,514 18,711
Financing receivables, non-current 4,263 3,875

Property, plant and equipment, net 3,003 3,243
Goodwill and other intangible assets, net 3,299 3,155
Investments and other 2,265 1,978
Total assets $ 32,344 $ 30,962
Accounts payable, trade $ 3,991 $ 3,375

Accounts payable, other 2,710 2,363
Short-term borrowings and current maturities of long-term borrowings 4,747 3,587
Accrued liabilities and other 7,587 6,127
Total current liabilities 19,035 15,452
Long-term borrowings 5,043 3,776

Pension and other related benefits 1,688 1,790
Deferred taxes 1,360 1,528
Other liabilities 2,989 2,924
Total liabilities 30,115 25,470
Minority interest 215 321

Stockholders’ equity:
Capital stock and additional paid-in capital, par value CHF 2.50,
1,280,009,432 shares authorized, 1,200,009,432 shares issued 2,028 2,082
Retained earnings 3,435 4,628
Accumulated other comprehensive loss (1,699) (1,122)
Less:
Treasury stock, at cost (86,875,616 and 16,532,932 shares
at December 31, 2001and 2000, respectively) (1,750) (417)
Total stockholders’ equity 2,014 5,171
Total liabilities and stockholders’ equity $ 32,344 $ 30,962

Consolidated Statements of Cash Flows
Year ended December 31 (in millions) 2001 2000 1999
Operating activities
Income (loss) from continuing operations $ (130) $ 881 $ 643
Adjustments to reconcile income (loss) from continuing operations to net cash
provided by operating activities:
Depreciation and amortization 787 836 795
Restructuring provisions 45 (73) (52)
Pension and post-retirement benefits 1 (57) (38)
Deferred taxes (89) 102 10
Net gain from sale of property, plant and equipment (23) (247) (47)
Other 109 (119) (147)
Changes in operating assets and liabilities:
Marketable securities (trading) 72 10 151
Trade receivables 65 77 (328)
Inventories (106) (136) (7)
Trade payables 736 266 433
Other assets and liabilities, net 726 (518) 162
Net cash provided by operating activities 2,193 1,022 1,575
Investing activities
Changes in financing receivables (907) (833) (655)
Purchases of marketable securities (other than trading) (3,280) (2,239) (973)
Purchases of property, plant and equipment (761) (553) (839)
Acquisitions of businesses (net of cash acquired) (578) (893) (1,720)
Proceeds from sales of marketable securities (other than trading) 3,873 2,292 1,307
Proceeds from sales of property, plant and equipment 152 238 488
Proceeds from sales of businesses (net of cash disposed) 283 275 356
Net cash used in investing activities (1,218) (1,713) (2,036)
Financing activities
Changes in borrowings with maturities of 90 days or less (69) 609 383
Increases in other borrowings 9,357 3,626 3,570
Repayment of other borrowings (6,649) (4,279) (4,478)
Treasury and capital stock transactions (1,393) 244 (165)
Dividends paid (502) (531) (503)
Other (67) (61) 6
Net cash provided by (used in) financing activities 677 (392) (1,187)
Net cash provided by (used in) discontinued operations (210) 949 723
Effects of exchange rate changes on cash and equivalents (72) (84) (100)
Net change in cash and equivalents 1,370 (218) (1,025)
Cash and equivalents – beginning of year 1,397 1,615 2,640
Cash and equivalents – end of year $ 2,767 $ 1,397 $ 1,615
Interest paid $ 702 $ 647 $ 793

Taxes paid 273 273 251

Consolidated Statements of Changes in Stockholders’ Equity (1)
For the years ended December 31, 2001,

2000 and 1999 Accumulated other comprehensive loss
Capital Unrealized Unrealized Total
stock and Foreign gain (loss) Minimum gain (loss) accumulated
additional currency on available- pension of cash- other Total
paid-in Retained translation for-sale liability flow hedge comprehensive Treasury stockholders’
(in millions) capital earnings adjustment securities adjustment derivatives loss stock equity
Balance at January1,1999 $ 2,037 $ 2,859 $ (779) $ 157 $ (283) $– $ (905) $ (286) $ 3,705
Comprehensive income:
Net income 1,360 1,360
Foreign currency translation
adjustments (226) (226) (226)
Effect of change in fair value of
available-for-sale securities,
net of tax of $ 39 (90) (90) (90)
Minimum pension liability
adjustments, net of tax of $7 190 190 190
Total comprehensive income 1,234
Dividends paid (503) (503)
Purchase of treasury stock (199) (199)
Purchase of non-tendered
ABB AB stock(2) (438) (438)
Issuance of ABB Ltd. stock(3) 34 438 472
Balance at December 31,1999 2,071 3,716 (1,005) 67 (93) – (1,031) (485) 4,271
Comprehensive income:
Net income 1,443 1,443
adjustments (152) (152) (152)
net of tax of $ 7 20 20 20
adjustments, net of tax of $ 21 41 41 41
Total comprehensive income 1,352
Purchase of treasury stock (400) (400)
Sale of treasury stock
and put options 11 468 479
Balance at December 31, 2000 2,082 4,628 (1,157) 87 (52) – (1,122) (417) 5,171
Comprehensive loss:
Net loss (691) (691)
adjustments (365) (365) (365)
net of tax of $ 16 (128) (128) (128)
adjustments, net of tax of $ 1 3 3 3
Cumulative effect of change
in accounting principles,
net of tax of $ 17 (41) (41) (41)
Change in derivatives qualifying as cash flow
hedges, net of tax of $ 18 (46) (46) (46)
Total comprehensive loss (1,268)
Purchase of treasury stock (1,615) (1,615)
Sale of treasury stock (101) 282 181
Call options 47 47
Balance at December 31, 2001 $ 2,028 $ 3,435 $ (1,522) $ (41) $ (49) $ (87) $ (1,699) $ (1,750) $ 2,014
(1) Retroactively restated to reflect the issuance of ABB Ltd shares in exchange for all issued shares of ABB AB and ABB AG in June1999.
(2) Purchase of 3% of issued stock of ABB AB (see Note1).
ABB Group Annual Report 2001 (3) Issuance of approximately 20 million shares of ABB Ltd, representing the equivalent number of shares purchased in (2) above (see Note1). 71
Notes to Consolidated Financial Statements
(U.S. dollar amounts in millions, except per share amounts)
Note 1 The Company

ABB Ltd is a leading global company in power and automation technologies organized in seven business divisions structured along customer groups,
with each division having global responsibility for its business strategies and its manufacturing and product development activities, as applicable. Four
end-user divisions serve end-user customers with systems, products and services.Two channel partner divisions serve external channel partners such
as wholesalers, distributors, original equipment manufacturers and system integrators directly and the end-user customers indirectly through the end-
user customer divisions. They are also responsible for all generic products in ABB. A financial services division provides services and project support for
the other divisions as well as for external customers.
In June 1999, ABB Ltd, a newly incorporated Swiss company, issued approximately 1,180 million registered shares to the stockholders of ABB AB, a
Swedish publicly listed company, and ABB AG, a Swiss publicly listed company. As of that date, neither ABB AB nor ABB AG had operations or assets
other than their respective 50% ownership interests in ABB Asea Brown Boveri Ltd. In exchange, the stockholders of ABB AB and ABB AG tendered all
issued shares of the two companies except for 3% of total issued ABB AB stock. The stockholders of ABB AB who did not tender their shares for ABB
Ltd shares received cash of $ 438 million in return for their shares of ABB AB and the equivalent number of registered shares of ABB Ltd (approximately
20 million) were sold to third parties, resulting in a total of 1,200 million issued shares of ABB Ltd as of June 28, 1999.
The capital transaction to form ABB Ltd and create a single class of capital voting stock for the stockholders of ABB AB and ABB AG resulted in the
following:
Before June 28, 1999 After June 28, 1999
ABB AG ABB AB Former ABB AG Former ABB AB

Stockholders Stockholders Stockholders Stockholders
50% 50%
100% 100% ABB Ltd
100% 100%
ABB AG ABB Participation AG ABB Participation AB

ABB AB
(formerly ABB AG) (formerly ABB AB)
50% 50% 50% 50%
ABB Asea Brown Boveri Ltd ABB Asea Brown Boveri Ltd
As of and for the six months ended June 28, 1999, the combined selected financial information of ABB AG and ABB AB included cash and marketable
securities of $ 28 million, total liabilities of $1million, interest and other income, net, of $ 9 million, and a special dividend by ABB AG of $179 million,
excluding each company’s respective ownership interest and equity in earnings of ABB Asea Brown Boveri Ltd. The combined assets and liabilities
exclude $ 62 million related to the special dividend which was not yet able to be distributed to ABB AG stockholders.
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 on the basis of United States (U.S.) generally accepted accounting principles and are presented in
U.S. dollars ($) unless otherwise stated. Par value of capital stock is denominated in Swiss francs (CHF).
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.
Principles of consolidation
The consolidated financial statements include the accounts and subsidiaries of ABB Ltd and ABB Asea Brown Boveri Ltd (collectively, the “Company”).
All significant intercompany balances have been eliminated in consolidation.
The Company’s investments in joint ventures and affiliated companies, which generally include companies that are 20% to 50% owned, are accounted
for using the equity method. Accordingly, the Company’s share of earnings of these companies is included in the determination of consolidated net
income. Other investments are recorded at cost.
Use of estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates.
Reclassifications
Certain amounts reported for prior years in the notes to the consolidated financial statements have been reclassified to conform to the current year
presentation.

Note 2 Significant accounting policies, continued
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 due to a large number of customers comprising the Company’s customer
base. Ongoing credit evaluations of customers’ financial position are performed and, generally, no collateral is required.
The Company, as part of its financial services activities, offers a broad range of financial products. To monitor credit risk, such activities are regulated by
specific policies and procedures including those for the identification, evaluation and mitigation of credit risks. Such policies and procedures also
include measurements to develop and ensure the maintenance of a diversified portfolio through the active monitoring of counterparty, country and
industry exposure.The concentration of credit risk is limited due to the large number of customers comprising the Company’s portfolio. In general, for
leasing and lending activities collateral is required.The nature of such collateral depends on the type of financial product that is offered but includes, for
example, retention of title or mortgage on the equipment financed, or the assignment of rights under contracts. In the case of leasing, ownership of the
equipment normally constitutes the main collateral.
The Company maintains reserves for potential credit losses and such losses, in the aggregate, have not exceeded management’s expectations.
The Company invests excess cash in deposits with banks throughout the world and in other high quality, liquid marketable securities (such as
commercial paper, government agency notes and asset-backed securities). The Company actively monitors its credit risk by routinely reviewing the
credit worthiness of the investments held and by maintaining such investments in deposits or liquid securities. The Company has not incurred any
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 which require the establishment and review of credit limits for individual counterparties. In addition, close-out netting
agreements have been entered into with most counterparties. Close-out netting agreements are agreements which 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.
Marketable securities
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 bought and held principally for the purpose of sale in the near term are classified as trading securities and unrealized gains and
losses are included in the determination of net income. Unrealized gains and losses on available-for-sale securities are excluded from the determination
of net income and are accumulated as a component of other comprehensive loss until realized. Realized gains and losses on available-for-sale
securities are computed based upon historical cost of these securities applied using the specific identification method. Declines in fair values of
available-for-sale investments that are other than temporary are included in the determination of net income.
Revenue recognition
The Company has recognized revenues in accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin No.101 (SAB 101),
Revenue Recognition in Financial Statements, since adoption on October1, 2000. SAB 101provides additional guidance on the application of
previously existing U.S. generally accepted accounting principles to revenue recognition in financial statements.
The Company recognizes substantially all revenues from the sale of manufactured products upon transfer of title including the risks and rewards of
ownership to the customer which generally occurs upon shipment of products. On contracts for sale of manufactured products requiring installation
which can only be performed by the Company, revenues are deferred until installation of the products is complete. Revenues from short-term fixed-
price contracts to deliver services are recognized upon completion of required services to the customer. Revenues from contracts which contain
customer acceptance provisions are deferred until customer acceptance occurs or the contractual acceptance period has lapsed.
Sales under long-term fixed-price contracts are recognized using the percentage-of-completion method of accounting. The Company principally uses
the cost-to-cost or delivery events method to measure progress towards completion on contracts. Management determines the method to be used
for each contract based on its judgment as to which method best measures actual progress towards completion.
Anticipated costs for warranties on products are accrued upon sales recognition on the related contracts. Losses on fixed-price contracts are
recognized in the period when they are identified and are based upon the anticipated excess of contract costs over the related contract sales.
Sales under cost-reimbursement contracts are recognized as costs are incurred. 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, which was issued in September 2000 and replaced, in its
entirety, Statement of Financial Accounting Standards No. 125, 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 in accordance with the criteria provided in SFAS 140. The Company adopted the disclosure
requirements of SFAS 140 effective December 2000, and has applied the new accounting rules to transactions beginning in the second quarter of 2001,
with no significant impact to the Company’s financial position or results of operations.
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 current earnings.
From time to time, the Company may, in its normal course of business, sell receivables outside the securitization programs with or without recourse.
Sales and transfers that do not meet the requirements of SFAS 140 are accounted for as secured borrowings.
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
identified with sales recognized.
Impairment of long-lived assets

Long-lived tangible and intangible assets are reviewed for impairment in accordance with Statement of Financial Accounting Standards No. 121
(SFAS 121), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, when events or circumstances
indicate the carrying amount of a long-lived asset may not be recoverable. Impairment is assessed by comparing an asset’s net undiscounted cash
flows expected to be generated over its remaining useful life to the asset’s net carrying value. If impairment is indicated, the carrying amount of the
asset is reduced to its estimated fair value.
Goodwill and other intangible assets

The excess of cost over the fair value of net assets of acquired businesses is recorded as goodwill and has been amortized on a straight-line basis
over periods ranging from 3 to 20 years.The cost of other acquired intangibles is amortized on a straight-line basis over their estimated useful lives,
typically ranging from 3 to 10 years. In accordance with Statement of Financial Accounting Standards No.142 (SFAS142), Goodwill and Other
Intangible Assets, issued in June 2001, goodwill from acquisitions completed after June 30, 2001, is not amortized (see Note 2 – New accounting
standards).The total amount of goodwill recognized on acquisitions completed after June 30, 2001, was not significant.
Capitalized software costs

The Company expenses costs incurred in the preliminary project stage, and thereafter capitalizes costs incurred in developing or obtaining software.
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 released to customers, at which time capitalization ceases and costs are amortized on a
straight-line basis over the estimated life of the product.
Property, plant and equipment

Property, plant and equipment is stated at cost, less accumulated depreciation, using the straight-line method over the estimated useful lives of the
assets as follows:10 to 50 years for buildings and leasehold improvements, 3 to15 years for machinery and equipment and 3 to 5 years for furniture
and fixtures.
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 the industrial entities economically hedge all
contracted foreign exposures, as well as at least fifty percent of the anticipated sales volume of standard products over the next twelve months. In
addition, within limits determined by the Company’s Board of Directors, derivative financial instruments are also used for proprietary trading purposes
within the Company’s Financial Services division.
Change in accounting principles

On January1, 2001, the Company adopted Statement of Financial Accounting Standards No.133, Accounting for Derivative Instruments and Hedging
Activities, as amended by Statement of Financial Accounting Standards No.137, Accounting for Derivative Instruments and Hedging Activities –
Deferral of the Effective Date of FASB Statement No.133 and the Statement of Financial Accounting Standards No.138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, collectively referred to as SFAS133.These Statements require the Company to recognize all
derivatives, other than certain derivatives indexed to the Company’s own stock, on the balance sheet at fair value. Derivatives that are not designated
as hedges must be adjusted to fair value through income. If the derivative is designated as a hedge, depending on the nature of the hedge, changes
in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments 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.
The Company accounted for the adoption of SFAS133 as a change in accounting principle. Based on the Company’s outstanding derivatives
at January 1, 2001, the Company recognized the cumulative effect of the accounting change as a loss in the consolidated income statement of
approximately $ 63 million, net of tax (basic and diluted per share loss of $ 0.06), and a reduction to equity of $ 41million, net of tax, in accumulated
other comprehensive loss.
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 the accumulated other comprehensive loss component of
stockholders’ equity, net of tax, 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 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 value of the swaps are recognized in earnings, as are the
changes in the value of the underlying assets or liabilities. Where such interest rate swaps do not qualify for the short cut method as defined under
SFAS133, any ineffectiveness is therefore included in earnings. Where interest rate swaps are designated as cash flow hedges, their change in value is
recognized in the accumulated other comprehensive loss component of stockholders’ equity, net of tax, until the hedged item is recognized in earnings.
All other swaps, futures, options and forwards which are designated as effective hedges of specific assets, liabilities or committed or forecasted
transactions are recognized in earnings consistent with the effects of hedged transactions.
If the underlying hedged transaction is terminated early, the hedging derivative financial instrument is terminated simultaneously, with any gains or
losses recognized immediately. Where derivative financial instruments have been designated as hedges of forecasted transactions, and such
forecasted transactions become no longer probable of occurring, hedge accounting ceases and any derivative gain or loss previously included in the
accumulated other comprehensive loss component of stockholders’ equity is reclassified into earnings.
Prior to implementation of SFAS 133 – years 2000 and 1999
Prior to January1, 2001, instruments which were used as hedges had to be effective at reducing the risk associated with the exposure being hedged
and had to be designated as a hedge at the inception of the contract. Accordingly, changes in market values of hedge instruments had to be highly
correlated with changes in the market values of the underlying hedged items, both at inception of the hedge and over the life of the hedge contract. Any
derivative that was not designated as a hedge, or was so designated but was ineffective, or was in connection with anticipated transactions, was
marked to market and recognized in earnings.
Gains and losses on foreign currency hedges of existing assets or liabilities were recognized in income consistent with the hedged item. Gains and
losses on foreign currency hedges of firm commitments were deferred and recognized in income as part of the hedged transaction. Other foreign
exchange contracts were marked to market and recognized in earnings.
Interest rate and currency swaps that were designated as hedges of borrowings or specific assets were accounted for on an accrual basis and were
recorded as an adjustment to the interest income or expense of the underlying asset or liability over its life.
All other swaps, futures, options and forwards which were designated and effective hedges of specific assets, liabilities, or committed transactions,
were recognized consistent with the effects of hedged transactions.
If the underlying hedged transaction was terminated early, the hedging derivative financial instrument was terminated simultaneously, with any gains or
losses recognized immediately. Gains or losses arising from early termination of a derivative financial instrument of an effective hedge were accounted
for as adjustments to the basis of the hedged transaction.
Derivative financial instruments used in the Company’s trading activities were marked to market and recognized in earnings.
Borrowings
From time to time, the Company may, in the normal course of business, buy back portions of its debt securities. Such repurchases are accounted for
as debt extinguishments in accordance with Statement of Financial Accounting Standards No. 4, Reporting Gains and Losses from Extinguishment
of Debt – an amendment of APB Opinion No. 30, irrespective of whether the securities are canceled or held as treasury securities. Gains or losses on
extinguishment of debt which are material to the earnings of the Company are disclosed as extraordinary items, net of tax. If subsequently reissued,
the reissue price becomes the new cost basis of the securities.
Insurance
The following accounting policies apply specifically to the Insurance business area.
Premiums and acquisition costs
Premiums are generally earned pro rata over the period coverage is provided and are reflected in revenues in the Consolidated Income Statement.
Premiums earned include estimates of certain premiums due, including adjustments on retrospectively rated contracts. Premium receivables
include premiums relating to retrospectively rated contracts that represent the estimate of the difference between provisional premiums received
and the ultimate premiums due. Unearned premiums represent the portion of premiums written that is applicable to the unexpired terms of
reinsurance contracts or certificates in force. These unearned premiums are calculated by the monthly pro rata method or are based on reports from
ceding companies. Acquisition costs are costs related to the acquisition of new business and renewals. These costs are deferred and charged
against earnings ratably over the terms of the related policy.
Profit commission
Certain contracts carry terms and conditions that result in the payment of profit commissions. Estimates of profit commissions are reviewed based on
underwriting experience to date and, as adjustments become necessary, such adjustments are reflected in current operations.
Loss and loss adjustment expenses

Loss and loss adjustment expenses are charged to operations as incurred and are reflected in cost of sales in the Consolidated Income Statement.
The liabilities for unpaid loss and loss adjustment expenses, reflected in accrued liabilities, other, are determined on the basis of reports from ceding
companies and underwriting associations, as well as on management’s, including in-house actuaries’, estimates including those for incurred but
not reported losses, salvage and subrogation recoveries. Inherent in the estimates of losses are expected trends of frequency, severity and other
factors that could vary significantly as claims are settled. Accordingly, ultimate losses could vary from the amounts provided for in these consolidated
financial statements.
Fees
Contracts that neither result in the transfer of insurance risk nor the reasonable possibility of significant loss to the reinsurer are accounted for as
financing arrangements rather than reinsurance. Consideration received for such contracts is reflected as accounts payable, other, and are amortized
on a pro rata basis over the life of the contract.
Funds Withheld
Under the terms of certain reinsurance agreements, the ceding reinsurer retains a portion of the premium to provide security for expected loss
payments.The funds withheld are generally invested by the ceding reinsurer and earn an investment return that becomes additional funds withheld.


Reinsurance
The Company seeks to reduce the loss that may arise from catastrophes and other events that may cause unfavorable underwriting results by
reinsuring certain levels of risks with other insurance enterprises or reinsurers. Reinsurance contracts are accounted for by reducing premiums
earned by amounts paid to the reinsurers. Recoverable amounts are established for paid and unpaid losses and loss adjustment expense ceded to
the reinsurer. Amounts recoverable from the reinsurer are estimated in a manner consistent with the claim liability associated with the reinsurance
policy. Contracts where it is not reasonably possible that the reinsurer may realize a significant loss from the insurance risk generally do not meet the
conditions for reinsurance accounting and are recorded as deposits.
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 net income and are accumulated as a component of other comprehensive loss until the entity is sold or substantially liquidated.
Foreign currency transactions, such as those resulting from the settlement of foreign currency denominated receivables or payables, are included in the
determination of net income, except as related to intra-Company loans that are equity-like in nature with no reasonable expectation of repayment
which are accumulated as a component of 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 acquisition dates. Sales and expenses are converted at the exchange rates prevailing upon the date of the
transaction. All translation gains and losses from restatement of balance sheet positions are included in the determination of net income.
Taxes
Deferred taxes are accounted for by using the asset and liability method. 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.They are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to reverse. In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that the deferred tax assets will be realizable.
Generally, deferred taxes are not provided on the unremitted earnings of subsidiaries as 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.
Research and development

Research and development costs were $ 654 million, $ 703 million and $ 865 million in 2001, 2000 and 1999, respectively. These costs are included in
selling, general and administrative expenses as incurred.
Earnings per share

Basic earnings per share is calculated by dividing income by the weighted-average number of shares outstanding during the year. Diluted earnings
per share is calculated by dividing income by the weighted-average number of shares outstanding during the year, assuming that all potentially dilutive
securities were exercised and that any proceeds from such exercises were used to acquire shares of the Company’s stock at the average market
price during the year or the period the securities were outstanding, if shorter. Potentially dilutive securities comprise outstanding written put options,
for which net share settlement at average market price of the Company’s stock was assumed, if dilutive, and outstanding written call options and
the securities issued under the Company’s management incentive plan, to the extent the average market price of the Company’s stock exceeded the
exercise prices of such instruments (see Notes 20 and 21).
New accounting standards

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No.141, Business
Combinations, which, together with SFAS142 modify the accounting for business combinations, goodwill and identifiable intangible assets.
SFAS141 requires the Company to account for all business combinations initiated after June 30, 2001, under the purchase method. Under SFAS142,
certain intangible assets will be recognized separately from goodwill, and will be amortized over their useful lives. The Company is required to test
all goodwill for impairment as of January1, 2002, and record a transition adjustment if impairment exists.The Company does not expect to record a
material transition adjustment in connection with such impairment testing in 2002. After January1, 2002, goodwill will no longer be amortized but
will be charged to operations when specified tests indicate that the goodwill is impaired. The Company recognized goodwill amortization expense of
$191 million, $174 million and $155 million in 2001, 2000 and 1999, respectively.
In June 2001, the FASB issued Statement of Financial Accounting Standards No.143, Accounting for Asset Retirement Obligations, which modifies
the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and associated asset retirement
costs. The Company will adopt this Statement effective January1, 2002.The Company has not yet determined the impact, if any, that this Statement
will have on its financial position or results of operations.
In August 2001, the FASB issued Statement of Financial Accounting Standards No.144 (SFAS144), Accounting for the Impairment or Disposal of
Long-Lived Assets.This Statement modifies the discontinued operations guidance of Accounting Principles Board Opinion 30, Reporting the
Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events
and Transactions, and supersedes SFAS No.121, while retaining certain requirements of SFAS No.121 regarding impairment loss recognition
and measurement. In addition, SFAS 144 provides additional accounting and reporting guidance for long-lived assets to be disposed of by sale
and broadens the presentation of discontinued operations to include more disposal transactions.The Company will adopt this Statement on
January1, 2002.The Company has not yet determined the impact, if any, this Statement will have on its financial position or results of operations,
although the Company expects to present more disposals as discontinued operations subsequent to adoption of SFAS144.

Note 3 Business combinations

Elsag Bailey
In October1998, the Company entered into an agreement to acquire all of the outstanding shares of Elsag Bailey Process Automation N.V. (“Elsag Bailey”).
The transaction has been accounted for as a purchase.The Company’s consolidated financial statements include Elsag Bailey’s results of operations
since January14,1999, the transaction closing date. The cash purchase price of $1,562 million was allocated to the identified assets acquired and liabilities
assumed based upon their estimated fair values as follows.
Tangible assets acquired $ 1,260
Liabilities assumed (1,767)
Identified intangible assets 379
Goodwill 1,690
$ 1,562
The Company recorded a $141million liability in its purchase price allocation for restructuring costs, comprised of involuntary employee terminations
and severance.The Elsag Bailey integration restructuring was substantially complete at the end of 2000.
In August 1999, the Company sold certain business operations of Elsag Bailey involved in the manufacture and sale of gas chromatograph and mass
spectrometer products. The net gain on disposal of $ 41million has been recorded as an adjustment to the allocation of the original purchase price.
b-business partners B.V.

In June 2000, the Company entered into a share subscription agreement to acquire 42% interest in b-business partners B.V. Pursuant to the terms of
the agreement, the Company committed to invest a total of $ 278 million, of which $ 69 million was paid in 2000 and $134 million was paid during
the first half of 2001. In December 2001, Investor AB acquired 90 percent of the Company’s investment in b-business partners B.V. for approximately
book value, or $166 million in cash. Immediately after this transaction, b-business partners B.V. repurchased 50% of its outstanding shares from
all investors, which resulted in a return of capital to the Company of $10 million. As of December 31, 2001, the Company retains a 4% investment in
b-business partners B.V. and is committed to provide additional capital to b-business partners B.V. of $ 3 million. Further, b-business partners B.V.
retains a put right to compel the Company to repurchase150,000 shares of b-business partners B.V. at a cost of approximately $13 million.
Entrelec Group
In June 2001, the Company completed the acquisition, through an open-market tender, of Entrelec Group, a France-based supplier of industrial
automation and control products operating in17countries.The cash purchase price of the acquisition was approximately $ 284 million.The excess of
the purchase price over the fair value of the assets acquired totaled to $ 294 million and has been recorded as goodwill.The transaction has been
accounted for as a purchase. Included in the purchase price allocation was an amount of $ 21million for a restructuring of the business.The Company’s
consolidated financial statements include Entrelec’s result of operations since June 20, 2001, the transaction closing date.
Other acquisitions and investments

During 2001, 2000 and 1999, the Company invested $179 million, $ 896 million and $ 218 million, respectively, in 60, 61 and 74 new businesses, joint
ventures and affiliated companies. Of these transactions,10, 24 and 24, respectively, represented acquisitions accounted for as purchases and
accordingly, the results of operations of the acquired businesses have been included in the Company’s consolidated financial statements from the
respective acquisition dates. The aggregate purchase price of these acquisitions during 2001, 2000 and 1999 was $ 45 million, $ 416 million and
$ 190 million, respectively.The aggregate excess of the purchase price over the fair value of the net assets acquired totaled $ 29 million, $ 447 million
and $ 137 million, 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 results of operations for those years would not have materially differed from reported amounts either on an
individual or an aggregate basis.
Other divestitures
In the ordinary course of business, the Company periodically divests businesses and investments not considered by management to be aligned with
its focus on activities with high growth potential. The results of operations of the divested businesses are included in the Company’s consolidated
results of operations through the date of disposition. During 2001, 2000 and 1999, the Company sold several operating units and investments for total
proceeds of $117million, $ 281million and $ 311million, respectively, and recognized a net gain of $ 34 million, $ 201 million and $ 132 million,
respectively. Such amounts are included in other income (expense), net. Income from continuing operations before taxes and minority interest from
these operations was not material in 2001, 2000 and 1999.
Note 4 Discontinued operations

In a series of transactions during 2000, the Company disposed of its Power Generation segment, which included its investment in ABB ALSTOM
POWER NV (the “Joint Venture”) and its nuclear technology business. The Company sold its nuclear technology business to British Nuclear Fuels PLC
in April 2000 and its 50% interest in the Joint Venture to ALSTOM SA (ALSTOM) in May 2000. The Company disposed of its Transportation segment
in the first quarter of 1999. As a result of these transactions, the Company’s consolidated financial statements present the net assets and results of
operations of these segments as discontinued operations.
In connection with the sale of its 50% interest in the Joint Venture to ALSTOM in May 2000, the Company received cash proceeds of $ 1,197 million
and recognized a gain of $ 734 million ($ 713 million, net of tax), which includes $ 136 million of accumulated foreign currency translation losses. In
connection with the sale of the nuclear technology business to British Nuclear Fuels PLC in April 2000, the Company received cash proceeds of
$ 485 million and recognized a gain of $ 55 million ($ 17 million, net of tax). The net gain from the sale of the nuclear technology business reflects a
$ 300 million provision for estimated environmental remediation. These gains were also offset by operating losses associated with these businesses.

Note 4 Discontinued operations, continued

Effective June 30,1999, the Company formed the Joint Venture with ALSTOM by contributing certain assets and businesses of its power generation
business. Upon formation of the Joint Venture, the Company received cash boot and recognized a corresponding gross gain of $1,500 million
($1,339 million, net of tax). The Company accounted for its 50% ownership in the Joint Venture as an equity investment through the date of disposal.
For the six-month period ended December 31, 1999, the Company recognized net losses of $ 99 million for its share of the results of the Joint Venture’s
operations.
In the first quarter of 1999, the Company sold its 50% interest in ABB Daimler-Benz Transportation GmbH (ADtranz), a rail transportation joint venture,
to DaimlerChrysler for cash consideration of $ 472 million. Upon disposal of its investment, the Company realized a net gain of $ 464 million.
Operating results of the discontinued businesses are summarized as follows:
Year ended December 31, 2001 2000 1999
Revenues $– $ 120 $ 3,813

Costs and expenses (496) (258) (4,889)
Loss before taxes (496) (138) (1,076)
Tax benefit (expense) (14) (7) 157
Net loss from discontinued operations (510) (145) (919)
Net loss from equity accounted investments, net of tax benefit of $15 million
and tax expense of $ 51million in 2000 and 1999, respectively – (23) (168)
Gain from dispositions of discontinued operations, net of tax expense of $ 59 million
and $161million in 2000 and 1999, respectively – 730 1,804
Income (loss) from discontinued operations, net of tax $ (510) $ 562 $ 717
The loss before taxes in 2001includes a charge of $ 470 million related to the increase in management’s estimate of future asbestos-related claims
(see Note16).
The loss before taxes in1999 includes charges for contract loss provisions recorded in accordance with the Company’s periodic review of such
provisions of approximately $ 560 million, primarily related to technical difficulties with a new model of gas turbine.The loss before taxes in 1999 also
includes other costs of approximately $ 300 million principally related to the increase in management’s estimate of future asbestos-related claims
(see Note16).
Basic and diluted per share loss from discontinued operations were both $ 0.45 in 2001, compared to basic and diluted per share income from
discontinued operations of $ 0.48 and $ 0.61 in 2000 and 1999, respectively.
Note 5 Marketable securities

Marketable securities consist of the following:
December 31, 2001 2000
Trading $ 545 $ 676

Available-for-sale 2,401 3,533
Total $ 2,946 $ 4,209
Available-for-sale securities classified as marketable securities consist of the following:

Unrealized Unrealized Fair
Cost gains losses value
At December 31, 2001:

Equity securities $ 681 $ 22 $ (276) $ 427
Debt securities:
U.S. government obligations 655 12 (12) 655
European government obligations 437 1 (2) 436
Corporate 388 4 (2) 390
Asset-backed 3 – (–) 3
Other 450 41 (1) 490
Total debt securities 1,933 58 (17) 1,974
$ 2,614 $ 80 $ (293) $ 2,401

Note 5 Marketable securities continued

At December 31, 2000:
Unrealized Unrealized Fair
Cost gains losses value
Equity securities $ 593 $ 53 $ (139) $ 507

Debt securities:
U.S. government obligations 800 21 (3) 818
European government obligations 549 8 (4) 553
Corporate 231 3 (1) 233
Asset-backed 667 1 (1) 667
Other 723 32 – 755
Total debt securities 2,970 65 (9) 3,026
$ 3,563 $ 118 $ (148) $ 3,533
At December 31, 2001, contractual maturities of the above available-for-sale debt securities consist of the following:
Fair
Cost value
Less than one year $ 454 $ 459

One to five years 1,032 1,044
Six to ten years 299 313
Due after ten years 148 158
Total $ 1,933 $ 1,974
Gross realized gains on available-for-sale securities were $ 78 million, $ 39 million and $ 87 million in 2001, 2000 and 1999, respectively. Gross realized
losses on available-for-sale securities were $ 39 million, $ 27 million and $ 32 million in 2001, 2000 and 1999, respectively.
The net change in unrealized gains and losses in fair values of trading securities was not significant in 2001 or 2000.
At December 31, 2001and 2000, the Company pledged $ 848 million and $1,099 million, respectively, of marketable securities as collateral for certain
bank borrowings, issued letters of credit, insurance contracts or other security arrangements.
At December 31, 2001 and 2000, investments and other in the consolidated balance sheet includes $ 236 million and $ 263 million, respectively, of
available-for-sale securities that are pledged in connection with the Company’s pension plan in Sweden. These securities are comprised of European
government and other debt securities recorded at their fair value of $161million and $192 million, respectively (including $ 3 million and $ 5 million,
respectively, of unrealized gains) and equity securities recorded at their fair value of $ 75 million and $ 71million, respectively (net of unrealized losses of
$ 13 million and $ 9 million, respectively).
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 the accumulated other comprehensive loss component of stockholders’ equity, 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 therefore
included in revenues and cost of sales but is not material for 2001.
During 2001, the amount reclassified from accumulated other comprehensive loss to earnings, which represented derivative financial instrument
losses, amounted to $130 million, net of taxes, of which $ 31million, net of taxes, was associated with the transition adjustment at January1, 2001.
It is anticipated that during 2002, $ 67million, net of taxes, of the amount included in accumulated other comprehensive loss at December 31, 2001,
which represents derivative financial instrument losses, will be reclassified to earnings. Derivative financial instrument losses reclassified to earnings
offset the gains on the items being hedged.
While the Company’s cash flow hedges are primarily hedges of exposures over the next eighteen months, the amount included in accumulated other
comprehensive loss at December 31, 2001 includes hedges of certain exposures maturing up to 2007.
Fair value hedges

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 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 or assets, are recorded as offsetting gains and losses in the determination of earnings. The amount of hedge
ineffectiveness for 2001is not material.

Note 6 Financial instruments, continued
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
reported in the balance sheet approximate the fair values.
Marketable securities (including trading and available-for-sale securities): Fair values 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.
Financing receivables and loans: Fair values are determined using 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, 2001were $1,724 million and $1,745 million, respectively,
and at December 31, 2000 were $1,469 million and $1,456 million, respectively.
Long-term borrowings: Fair values are based on the present value of future cash flows discounted at estimated borrowing rates for similar debt
instruments. The carrying values and estimated fair values of long-term borrowings at December 31, 2001 were $ 5,043 million and $ 5,056 million,
respectively, and at December 31, 2000 were $ 3,776 million and $ 3,861million, respectively.
Derivative financial instruments: Fair values are the amounts by which the contracts could be settled. These fair values are estimated by using
discounted cash flow methodology based on available market data, option pricing models or by obtaining quotes from brokers. At December 31, 2001,
the carrying values equal fair values. The fair values are disclosed in Note 9 and Note 14. At December 31, 2000, the total carrying value of derivatives
used for both risk management and trading purposes amounted to a net liability of $ 72 million compared to a fair value of $ 165 million unrealized loss.
Notional amounts as of December 31, 2000

The notional values of outstanding derivative financial instruments as of December 31, 2000 for interest rate and currency swaps, and other fixed
income contracts was $ 48,261million, and for foreign exchange forward contracts and options was $ 38,129 million.
The gross notional values indicated the extent of the Company’s use of derivatives but did not reflect the Company’s exposure to market or credit risk
arising from such transactions.
Note 7 Receivables
Receivables consist of the following:
December 31, 2001 2000
Trade receivables $ 4,120 $ 4,289

Other receivables 3,435 3,168
Allowance (258) (234)
7,297 7,223
Unbilled receivables, net:
Costs and estimated profits in excess of billings 2,082 1,769
Advance payments received (1,011) (664)
1,071 1,105
$ 8,368 $ 8,328
Trade receivables include contractual retention amounts billed to customers of $ 135 million and $ 140 million at December 31, 2001 and 2000,
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 V.A.T., claims, employee and customer-
related advances, the current portion of direct finance and sales-type leases and other non-trade receivables.
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 2001 and 2000, the Company sold trade receivables, to 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 interest). 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 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 interest is denominated in the original currencies underlying the sold receivables. Due to the short-term nature of the receivables and
economic hedges in place relating to currency movement risk, the impact has historically not been significant.
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 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 or interests retained. 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.The fair value of the retained interests at
December 31, 2001, and December 31, 2000, was approximately $ 264 million and $ 214 million, respectively.

Note 7 Receivables, continued

In accordance with SFAS 140, ABB has not recorded a servicing asset as the Company 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 is not readily obtainable nor reliably
estimable for the multiple geographic markets in which the entities selling receivables operate.
During 2001 and 2000, the following cash flows were received from and paid to QSPEs:
December 31, 2001 2000
Gross trade receivables sold to QSPEs $ 5,515 $ 3,708

Collections made on behalf of and paid to QSPEs (5,343) (3,324)
Loss on sale, liquidity and program fees (33) (26)
Increase in retained interests (53) (150)
Net cash received from QSPEs during the year $ 86 $ 208
Cash settlement with the QSPEs takes place monthly on a net basis. Gross trade receivables sold represent the face value of all invoices sold during
the year to the QSPEs. As the Company services the receivables, collection of the receivables previously sold is made on behalf of the QSPEs.The
Company records a loss on sale, liquidity and program fees at the point of sale to the QSPEs.The total cost of $ 33 million and $ 26 million in 2001 and
2000, respectively, related to the securitization of trade receivables is included in the determination of current earnings. Changes in retained interests
of $ 53 million and $ 150 million in 2001 and 2000, respectively, primarily result from increases in the volume of receivables sold during the year and
changes in default and delinquency rates, offset by collections of the underlying receivables.
The following table presents amounts associated with assets securitized at December 31, 2001 and 2000:
December 31, 2001 2000
Total trade receivables $ 5,178 $ 5,207

Portion derecognized (789) (702)
Gross retained interests, included in other receivables (269) (216)
Trade receivables $ 4,120 $ 4,289
At December 31, 2001 and 2000, of the gross trade receivables sold, the total outstanding trade receivables amounted to $1,058 million and
$ 918 million, respectively. At December 31, 2001 and 2000 an amount of $ 65 million and $ 49 million, respectively, was more than 90 days past due
which, according to the terms of the programs, is deemed to be delinquent.
In addition, during 2001, the Company sold or transferred to banks trade receivables outside of the above described securitization programs.
Total receivables sold or transferred and derecognized from the balance sheet in accordance with SFAS 140 included in these transactions totaled
approximately $ 71 million.The related costs, including the associated gains and losses, were not significant.
Note 8 Inventories
Inventories, including inventories related to long-term contracts, consist of the following:
December 31, 2001 2000
Commercial inventories, net:

Raw materials $ 1,063 $ 1,074
Work in process 1,483 1,471
Finished goods 386 373
2,932 2,918
Contract inventories, net:
Inventoried costs 380 387
Contract costs subject to future negotiation 16 53
Advance payments received related to contracts (253) (166)
143 274
$ 3,075 $ 3,192
Contract costs subject to future negotiation represent pending claims for additional contract costs that management believes will be collectible.

Note 9 Prepaid expenses and other

Prepaid expenses and other current assets consist of the following:
December 31, 2001 2000
Prepaid expenses $ 520 $ 496

Deferred taxes 517 530
Advances to suppliers and contractors 242 221
Derivatives 865 225
Other 214 113
$ 2,358 $ 1,585
Note 10 Financing receivables

Financing receivables consist of the following:
December 31, 2001 2000
Third-party loans receivable $ 1,489 $ 1,230

Finance leases (see Note 15) 2,072 1,895
Other 702 750
$ 4,263 $ 3,875
Third-party loans receivable primarily represent financing arrangements provided to customers under long-term construction contracts as well as
export financing and other activities. Not included in this balance at December 31, 2001 and 2000 are $113 million and $173 million, respectively, of
assets pledged as security for financing arrangements.
Included in finance leases at December 31, 2001 and 2000 are $ 445 million and $ 495 million, respectively, of assets pledged as security for other
liabilities. Additionally, $114 million of assets were pledged as security for long-term borrowings at December 31, 2001.
Other financing receivables at December 31, 2001 and 2000 include $ 355 million and $ 357million, respectively, of assets pledged as security for
other liabilities. Of these amounts, $ 53 million in each year are marketable securities. In addition, other financing receivables include notes receivable
from affiliates of $ 234 million and $ 239 million at December 31, 2001 and 2000, respectively.
During 2001, the Company sold or transferred to financial institutions financing receivables.These transfers included sales of finance lease
receivables and sales of loan receivables.Total financing receivables sold or transferred and derecognized from the balance sheet in accordance with
SFAS140 included in these transactions totaled approximately $ 329 million, of which $ 70 million were sold to an affiliated company.The related
costs of these transactions, including the associated gains and losses, were not significant.
The Company, in the normal course of its commercial lending business, has outstanding credit commitments which have not yet been drawn down
by customers.The unused amount as of December 31, 2001, is approximately $ 208 million.
Note 11 Property, plant and equipment

Property, plant and equipment consist of the following:
December 31, 2001 2000
Land and buildings $ 2,303 $ 2,513

Machinery and equipment 4,534 4,683
Construction in progress 188 130
7,025 7,326
Accumulated depreciation (4,022) (4,083)
$ 3,003 $ 3,243
Note 12 Goodwill and other intangible assets

Goodwill and other intangible assets consist of the following:
December 31, 2001 2000
Goodwill $ 3,588 $ 3,222

Other intangible assets 1,065 974
4,653 4,196
Accumulated amortization (1,354) (1,041)
$ 3,299 $ 3,155
Other intangible assets primarily include intangibles created through acquisitions, as well as capitalized software to be sold and for internal use,
trademarks and patents.

Note 12 Goodwill and other intangible assets, continued

Consistent with the Company’s policy of reassessing the carrying value of acquired intangible assets, a write-down of $ 40 million was recorded
during 2001 in relation to goodwill of one of the Company’s investments.The Company also recorded a write-down of $ 26 million related to software
developed for internal use in 2001.
Note 13 Borrowings
The Company actively uses the capital markets to meet liquidity needs. Furthermore, the Company maintains credit lines with various banks worldwide
for borrowing funds on a short or long-term basis.
Short-term borrowings
The Company’s commercial paper and short-term debt financing consist of the following:
December 31, 2001 2000
Commercial paper (weighted average interest rate of 2.7% and 5.9%) $ 3,297 $ 1,923
Other short-term debt (weighted average interest rate of 4.6% and 6.0%) 983 1,163
Current portion of long-term borrowings (weighted average interest rate of 4.6% and 5.0%) 467 501
$ 4,747 $ 3,587
Other short-term debt primarily represents short-term loans from various banks and repurchase agreements. Of the commercial paper outstanding at
December 31, 2001, $ 2,050 million had maturities of less than 3 months, $ 913 million had maturities of 3 to 6 months and $ 334 million had maturities
over 6 months. Commercial paper outstanding at December 31, 2000 had maturities of mainly less than 3 months.
In mid December 2001, the Company entered into a syndicated $ 3 billion 364-day revolving credit facility, with the option to convert up to $1billion of
any outstanding amounts at the end of the period into one year term borrowings.The facility is for general corporate purposes including support for the
Company’s commercial paper issuance. In the event that the Company’s long-term debt rating falls below either A3 or A- from Moody’s and Standard
& Poor’s, respectively, the terms of the facility are required to be renegotiated. If, after such negotiations, the banks and the Company are unable
to reach agreement on revised terms, the facility will be terminated. Commitment fees are paid on the unutilized portion of the facility and their level is
dependent on the credit rating of the Company’s long-term debt. At December 31, 2001, no amounts were outstanding under this facility.
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 of January1, 2001, upon the introduction
of SFAS133, the derivative instruments (primarily interest rate and cross-currency swaps), designated and qualifying as fair value hedges of the
Company’s borrowings have been recorded at their fair values under other assets and other liabilities together with other outstanding derivatives. At
December 31, 2000, cross-currency swaps hedging borrowings were shown as part of the underlying transaction being hedged. As required by
SFAS133, borrowings which have been designated as being hedged by fair value hedges are stated at their respective fair values at December 31, 2001.
The following table summarizes the Company’s long-term borrowings considering the effect of interest rate, currency and equity swaps:
December 31, 2001 2000
Nominal Effective Nominal Effective
balance rate rate balance rate rate
Floating rate $ 4,422 4.0% 2.7% $ 3,444 5.3% 5.4%

Fixed rate 1,017 5.3% 5.3% 611 4.6% 4.6%
Putable bonds – – – 139 6.5% 6.5%
Other 71 1.5% 2.3% 83 6.7% 7.1%
$ 5,510 $ 4,277
Current portion of long-term borrowings (467) 4.6% 2.9% (501) 5.0% 6.5%
$ 5,043 $ 3,776
At December 31, 2001, maturities of long-term borrowings were as follows:

Due in 2002 $ 467
Due in 2003 1,492
Due in 2004 1,187
Due in 2005 1,299
Due in 2006 516
Thereafter 549
$ 5,510
At December 31, 2001, approximately $1,800 million of the Company’s long-term borrowings were denominated in U.S. dollars.

Note 13 Borrowings, continued

During 2001,the Company repurchased, but did not cancel, outstanding bonds with a face value of $ 322 million. In connection with these repurchases,
the Company recorded an extraordinary gain on extinguishment of debt of $12 million, which was not subject to tax effect, representing basic and
diluted earnings per share of $ 0.01. In the period up to December 31, 2001, the Company subsequently reissued a portion of the repurchased bonds
with a face value of $ 248 million.The reissue price has become the new cost basis of the bonds.
Note 14 Accrued liabilities and other

Accrued liabilities and other consists of the following:
December 31, 2001 2000
Insurance reserves $ 2,175 $ 1,399

Contract-related reserves 566 538
Accrued personnel costs 736 791
Taxes payable 506 471
Provisions for warranties 409 413
Deferred taxes 198 235
Interest 380 445
Provisions for restructuring 170 102
Derivatives 803 297
Other 1,644 1,436
$ 7,587 $ 6,127
The Company’s insurance reserves for unpaid claims and claim adjustment expenses are determined on the basis of reports from ceding companies,
underwriting associations and management estimates.The Company continually reviews reserves for claims and claim adjustment expenses during
the year and changes in estimates are reflected in net income. In addition, reserves are routinely reviewed by independent actuarial consultants.
Prior to 2001, the Company presented a portion of its insurance reserves on a discounted basis, which estimated the present value of funds required
to pay losses at future dates.The effect of the discounting was to decrease outstanding losses and loss adjustment expenses by $223 million at
December 31, 2000.The reserves were discounted where anticipated future investment income was an integral part of the premium pricing for a
particular product. During 2001, the timing and amount of premiums and claims payments being ceded to the Company in respect of prior years finite
risk reinsurance contracts has changed. As the amount and timing of ceded claims payments cannot be reliably determined at December 31, 2001,
the Company has not discounted its loss reserves. The Company believes that this variability in ceded loss payments will preclude the Company
from discounting its loss reserves in the future until reliably determinable amounts and timing of these payments can be reestablished. Accordingly,
at December 31, 2001 the insurance reserves have not been presented on a discounted basis, resulting in a charge to losses and loss adjustment
expenses in the fourth quarter of 2001 of $ 295 million for the elimination of the effect of discounting.
Note 15 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 was $ 242 million, $ 252 million and $ 275 million in
2001, 2000 and 1999, respectively.
At December 31, 2001, 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:
2002 $ 269
2003 225
2004 189
2005 152
2006 141
Thereafter 364
$ 1,340
Sublease income (58)
$ 1,282
Investments in leases
The Financial Services division provides sales support to the Company’s industrial entities’ customers by means of lease financing and credit
arrangements as well as other direct third-party lease financing. Investments in sales-type leases, leveraged leases and direct financing leases are
included in financing receivables.
The allowance for losses on lease financing receivables is determined based on loss experience and assessment of inherent risk. Adjustments to the
allowance for losses are made to adjust the net investment in finance leases to the estimated collectible amount.

Note 15 Leases, continued

The Company’s non-current investments in direct financing, sales-type and leveraged leases consist of the following:
December 31, 2001 2000
Minimum lease payments receivable $ 3,400 $ 2,972

Residual values 72 186
Unearned income (1,105) (1,050)
2,367 2,108
Leveraged leases 49 28
Allowance for losses (5) (6)
2,411 2,130
Current portion (339) (235)
$ 2,072 $ 1,895
At December 31, 2001, minimum lease payments under direct financing and sales-type lease payments are scheduled to be received as follows:
2002 $ 594
2003 537
2004 394
2005 408
2006 219
Thereafter 1,248
$ 3,400
Note 16 Commitments and contingencies
General
The Company is subject to various legal proceedings and claims which 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, that it is unlikely that any such liability, to the extent not provided for
through insurance or otherwise, would have a material adverse effect in relation to the Company’s consolidated financial position, liquidity or results of
operations.
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. Provisions for such actions are accrued when the events are probable and the related
costs can be reasonably estimated. Changes in estimates of such costs are recognized in the period determined. While the Company cannot
estimate the impact of future regulations affecting these actions, management believes that the ultimate disposition of these matters will not have a
material adverse effect on the Company’s consolidated financial position, liquidity or results of operations.
The Company records accruals for environmental matters based on its estimated share of costs in the accounting period in which responsibility is
established and costs can be reasonably estimated. Environmental liabilities are recorded based on the most probable cost, if known, or on the
estimated minimum cost, determined on a site-by-site basis. Revisions to the accruals are made in the period the estimated costs of remediation
change.
Costs of future expenditures for environmental remediation obligations are not discounted to their present value.The Company records a receivable if
the estimated recoveries from insurers or other third parties are determined to be probable.
Performance guarantees
It is industry practice to use letters of credit, surety bonds and other performance guarantees on major projects, including long-term operation and
maintenance contracts. Such guarantees may include guarantees that a project will be completed or that a project or particular equipment will achieve
defined performance criteria. The guarantors may include subsidiaries of ABB Ltd and/or ABB Ltd. Because such guarantees may not state a fixed or
maximum amount, the aggregate amount of the Company’s potential exposure under the guarantees cannot reasonably be estimated. Provisions are
recorded in the consolidated financial statements at the time it becomes probable the Company will incur losses pursuant to a performance guarantee.
Management does not expect to incur significant losses under these guarantees in excess of the Company’s provisions. However, such losses, if
incurred, could have a material impact on the Company’s consolidated financial position, liquidity or results of operations.
The Company retained obligations for guarantees of the type described above related to the power generation businesses contributed to the Joint
Venture with ALSTOM. In addition, in connection with a power plant construction project in a business sold to ALSTOM POWER N.V. (“ALSTOM
Power”), one of the Company’s subsidiaries has issued an advance payment guarantee towards a bank holding funds which are to be drawn down by
a consortium led by a subsidiary of ALSTOM Power.The guarantee is approximately $ 370 million at December 31, 2001. 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 the
Company’s interest in the Joint Venture in May 2000, ALSTOM and ALSTOM Power have undertaken to fully indemnify the Company against any
claims arising under such guarantees. As of December 31, 2001, there have been no material claims made under these guarantees.

Note 16 Commitments and contingencies, continued

In connection with the sale of its nuclear business to British Nuclear Fuels (“BNFL”) in 2000, a subsidiary of the Company retained obligations under
surety bonds relating to the performance by the nuclear business under certain contracts entered into prior to the sale to BNFL. Pursuant to the
purchase agreement under which the nuclear business was sold, BNFL is required to indemnify the Company for any costs and liabilities incurred
by the Company with respect to such bonds.The Company’s total liability under these bonds at December 31, 2001 is approximately $ 700 million. As
of December 31, 2001, there have been no material claims made under these surety bonds. Management does not expect to incur significant losses
under these surety bonds.
Financial guarantees
The Company’s financial services business has guaranteed the obligations of certain third parties in return for a commission.These financial guarantees
represent irrevocable assurances that the Company will make payment in the event that the third party fails to fulfill its obligations and the beneficiary
under the guarantee records a loss under the terms of the guarantee agreement. The commissions collected are recognized as income over
the life of the guarantee and the Company records a provision when it becomes aware of an event of default or a potential event of default occurs.
At December 31, 2001, the Company has issued approximately $ 270 million of financial guarantees with maturity dates ranging from one to nineteen
years. Management does not expect to incur significant losses under these contracts.
Contingencies related to former power generation businesses

The Company retains ownership of Combustion Engineering, Inc. (“Combustion Engineering”), a subsidiary that formerly conducted part of the
divested power generation business and which now owns commercial real estate which it leases to third parties. Combustion Engineering is a
co-defendant, together with third parties, in numerous lawsuits pending in the United States in which the plaintiffs claim damages for personal
injury arising from exposure to or use of equipment which contained asbestos that Combustion Engineering supplied, primarily during the 1970s
and before.
It can be expected that additional asbestos-related claims will continue to be asserted. The ultimate cost of these claims is difficult to estimate with
any degree of certainty due to the nature and number of variables associated with unasserted claims. Some of the factors affecting the reliability
of estimating the potential cost of claims are the rate at which new claims are filed, the impact of court rulings and legislative action, the extent of the
claimants’ association with Combustion Engineering’s or other defendants’ products, equipment or operations, the type and severity of the disease
suffered by the claimant, the method of resolution of such cases, the financial condition of other defendants and the availability of insurance to
recover the costs, until the policy limits are exhausted. As of December 31, 2001, there were approximately 94,000 cases pending (2000: 66,000)
against Combustion Engineering. Approximately 55,000 new claims were made in 2001 (2000: 39,000) and approximately 27,000 claims were
resolved in 2001 (2000: 34,000). In 2001, the average payment per claim in which a payment was made increased by 26% over 2000. Approximately
$12.8 million, $10.5 million and $ 8.2 million in administration and defense costs were incurred in 2001, 2000 and 1999, respectively.
Other ABB Group entities are sometimes named as defendants in asbestos claims.These claims are insignificant compared to the Combustion
Engineering claims and have not had, and are not expected to have, a material impact on the Company’s financial position or results of operations.
A reserve is maintained to cover estimated costs for the asbestos claims and an asset is recorded representing estimated insurance reimbursement.
The reserve represents management’s estimate of the costs associated with asbestos claims, including defense costs, based upon historical claims
trends, available industry information and incidence rates of new claims. As a result of changes in management’s expectations regarding the
foreseeable future over which claims would continue to be incurred, the estimates were modified in 1999 to extend the period over which current and
future claims were expected to be settled from 7 to11years.This revision better reflected anticipated claim settlement costs in light of the number and
type of claims being filed at that time and the allocation of such claims to all available insurance policies. As a result of the revision, an additional accrual
of approximately $ 300 million was recorded in 1999 which is included in the results of discontinued operations. During 2000, the level of new claims
and settlement costs increased as compared to previous levels. Consequently, a charge of approximately $ 70 million was recorded in 2000, which is
included in the results of discontinued operations, related to higher costs than were expected during the period. Based on the significant increase in
new claims and settlement costs experienced in 2001 described above, an additional charge of $ 470 million was recorded in 2001, which is included in
the results of discontinued operations. Because of the uncertainty as to the causes of the increase in claims filed against Combustion Engineering in
recent periods, the estimation of future claims to be resolved is subject to substantially greater uncertainty.
At December 31, 2001 and 2000, reserves of approximately $ 940 million and $ 590 million, respectively, were recorded for all asbestos-related claims.
Receivables of $150 million and $160 million were recorded at December 31, 2001 and 2000, respectively, for probable insurance recoveries with
respect to such claims. Allowances against the insurance receivables are established at such time as it becomes likely that insurance recoveries are not
probable. Cash payments to resolve Combustion Engineering’s asbestos claims were $136 million, $125 million and $ 67million in 2001, 2000 and
1999, respectively.
Future operating results will continue to reflect the effect of changes in estimated claims costs resulting from actual claim activity as well as changes in
available insurance coverage. It is reasonably possible that expenditures could be made, in excess of established reserves, in a range of amounts
that cannot reasonably be estimated. Although the final resolution of any such matters could have a material impact on the Company’s reported results
for a particular reporting period, management believes the litigation should not have a material adverse effect on the Company’s consolidated financial
condition or liquidity.
Contingencies related to former nuclear power business

The Company retained liability for certain specific environmental remediation costs at two sites in the U.S. that were operated by its nuclear business,
which has been sold to British Nuclear Fuels. Pursuant to the purchase agreement with British Nuclear Fuels, 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 CE Nuclear subsidiary’s Hematite, Missouri facility.The primary environmental liabilities associated with these sites
relate to the costs of remediating radiological contamination upon decommissioning the 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 British Nuclear Fuels has made publicly available, the Company believes
that it may take approximately six years for remediation at the Hematite site, from the time of decommissioning.With respect to the Windsor site, the
Company believes the remediation may take until 2008. British Nuclear Fuels has notified the Nuclear Regulatory Commission of its intention to

Note 16 Commitments and contingencies, continued

decommission the Hematite facility in 2003. British Nuclear Fuels decommissioned the Windsor facility in 2001 and the process of remediation has
begun. At the Windsor site, the Company believes that a significant portion of such remediation costs will be the responsibility of the U.S. government
pursuant to the Atomic Energy Act and the Formerly Used Site Environmental Remediation Action Program because such costs relate to materials
used by Combustion Engineering in its research and development work on, and fabrication of, nuclear fuel for the United States Navy. As a result of the
sale of the nuclear business, in April 2000 the Company established a reserve of $ 300 million in connection with estimated remediation costs related
to these facilities. During 2001, approximately $6 million was expended on remediation of the Windsor site.
Prior to the sale of the nuclear businesses, the Company conducted and had intended to continue conducting activities at these two sites which
would require maintaining the appropriate licenses from the U.S. Nuclear Regulatory Commission (“NRC”). As long as the NRC licenses were in force,
the Company was not obligated, nor was it necessary, to remediate those sites. At the time of the sale of the nuclear business, there was substantial
likelihood that the NRC licenses would be discontinued.These events would trigger the remediation for which the Company is liable.Therefore, the
Company established the reserve at the time of such sale.
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 the Company
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 U.S. government for the Windsor site cannot reasonably be estimated. It is possible that final resolution
of environmental matters may require the Company to make expenditures in excess of its 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 the Company’s consolidated
results of operations in a particular reporting period in which the expenditure is incurred, the Company believes that these expenditures should not
have a material adverse effect on its consolidated financial position.
Note 17 Taxes
Provision for taxes consists of the following:
Current taxes on income $ 171 $ 263 $ 333

Deferred taxes (66) 114 10
Tax expense from continuing operations 105 377 343
Tax (benefit) expense from discontinued operations 14 51 (47)
$ 119 $ 428 $ 296
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.
Reconciliation of taxes:
Income from continuing operations
before taxes and minority interest $ 45 $ 1,306 $ 1,022
Weighted-average tax rate 38.2% 37.2% 39.1%
Taxes at weighted-average tax rate 17 486 400
Items taxed at rates other than
the weighted-average tax rate 104 (67) 1
Non-deductible goodwill amortization 59 55 58
Changes in valuation allowance (30) (67) (144)
Changes in enacted tax rates 4 (42) 18
Other, net (49) 12 10
Tax expense of continuing operations $ 105 $ 377 $ 343
Effective tax rate for the year (see comment below) 233.6% 28.9% 33.6%
In 2001, the reconciling item “Other, net” of $ 49 million includes an amount of $ 50 million relating to adjustments with respect to the resolution of certain
prior year tax matters.
In 2001, the income from continuing operations before taxes and minority interest of $ 45 million includes an additional provision for insurance liabilities
in an insurance subsidiary, located in a low tax jurisdiction (see Note14).The above item “Items taxed at rates other than the weighted average tax rate”
includes the tax effect of this provision when comparing the weighted average tax rate to the effective tax rate for the year.
The effective tax rate applicable to income from continuing operations excluding the tax effect of this provision would be 30.9%.

Note 17 Taxes, continued

Deferred income tax assets and liabilities consist of the following:
Year ended December 31, 2001 2000
Deferred tax liabilities:

Financing receivables $ (480) $ (512)
Property, plant and equipment (476) (282)
Pension and other accrued liabilities (264) (438)
Insurance reserves (190) (233)
Other (148) (298)
Total deferred tax liability (1,558) (1,763)
Deferred tax assets:
Investments and other 14 19
Property, plant and equipment 207 79
Pension and other accrued liabilities 1,013 1,059
Unused tax losses and credits 753 453
Other 248 162
Total deferred tax asset 2,235 1,772
Valuation allowance (1,176) (777)
Deferred tax asset, net of valuation allowance 1,059 995
Net deferred tax liability $ (499) $ (768)
Deferred tax assets and deferred tax liabilities can be allocated between current and non-current as follows:
Year ended December 31, 2001 2000
Non- Non-
Current current Current current
Deferred tax liability $ (198) $ (1,360) $ (235) $ (1,528)

Deferred tax asset, net 517 542 530 465
Net deferred tax asset (liability) $ 319 $ (818) $ 295 $ (1,063)
The non-current deferred tax asset, net, is recorded in the balance sheet position “Investments and other”.
Certain entities of the group have deferred tax assets related to net operating loss carry-forwards and other items. Because recognition of these assets
is uncertain, the group has established valuation allowances of $1,176 and $ 777million as at December 31, 2001 and 2000, respectively.
At December 31, 2001, net operating loss carryforwards of $1,790 million and tax credits of $127million are available to reduce future taxable income of
certain subsidiaries, of which $1,216 million loss carry-forwards and $ 98 million tax credits expire in varying amounts through 2021 and the remainder
do not expire.These carry-forwards are predominately related to the Company’s U.S. and German operations.
Note 18 Other liabilities

Other liabilities include advances from customers relating to long-term construction contracts of $ 789 million and $ 862 million at December 31, 2001
and 2000, respectively.
The Company entered into tax advantaged leasing transactions with U.S. investors prior to1999. Prepaid rents that have been received on these
transactions are $ 355 million and $ 357million at December 31, 2001 and 2000, respectively, and have been recorded as deposit liabilities. Net gains
on these transactions are being recognized over the lease terms.
In prior years the Company entered into certain lease transactions which resulted in the recognition of a long-term liability of $ 445 million and $ 495
million at December 31, 2001 and 2000, respectively, and a corresponding receivable reflected in finance receivables for similar amounts. Under these
lease structures, certain lessee payments have been assigned to banks which have financed these lease transactions.
Note 19 Employee benefits

The Company operates several pension plans, including defined benefit, defined contribution and termination indemnity, 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.
Some of these plans require employees to make contributions and enable employees to earn matching or other contributions from the Company. The
funding policy of these plans is consistent with the local government and tax requirements. The Company has several pension plans which are not
funded pursuant to local government and tax requirements.

Note 19 Employee benefits, continued

Defined benefit plans provide benefits primarily based on employees’ years of service, age and salary. The cost and obligations from sponsoring
defined benefit plans are determined on an actuarial basis using the projected unit credit method. This method reflects service rendered by the
employees to the date of valuation and incorporates assumptions concerning employees’ projected salaries.
For the years ended December 31, 2001, 2000 and 1999, net periodic pension cost consists of the following:
Pension benefits Other benefits
2001 2000 1999 2001 2000 1999
Service cost $ 186 $ 212 $ 254 $5 $5 $6

Interest cost 329 328 348 29 26 27
Expected return on plan assets (308) (320) (319) – – –
Amortization of transition liability 9 11 16 8 8 11
Amortization of prior service cost 14 38 7 – – –
Recognized net actuarial (gain) loss 4 (1) 18 3 1 1
Other (18) 10 11 – – 7
$ 216 $ 278 $ 335 $ 45 $ 40 $ 52
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, 2001 and 2000, for the Company’s principal benefit plans:
2001 2000 2001 2000
Benefit obligation at the beginning of year $ 6,312 $ 6,328 $ 390 $ 328

Service cost 186 212 5 5
Interest cost 329 328 29 26
Contributions from plan participants 39 38 2 1
Benefit payments (394) (426) (36) (42)
Benefit obligations of businesses acquired 9 58 – –
Benefit obligations of businesses disposed (5) (81) – (12)
Actuarial (gain) loss 45 123 51 78
Plan amendments and other (3) 27 1 6
Exchange rate differences (221) (295) (1) –
Benefit obligation at the end of year 6,297 6,312 441 390
Fair value of plan assets at the beginning of year 4,843 4,788 – –
Actual return on plan assets (312) 276 – –
Contributions from employer 409 391 34 41
Contributions from plan participants 39 38 2 1
Benefit payments (394) (426) (36) (42)
Plan assets of businesses acquired 6 48 – –
Plan assets of businesses disposed (1) (17) – –
Other 15 (78) – –
Exchange rate differences (133) (177) – –
Fair value of plan assets at the end of year 4,472 4,843 – –
Unfunded amount 1,825 1,469 441 390
Unrecognized transition liability (10) (24) (86) (95)
Unrecognized actuarial loss (835) (199) (140) (91)
Unrecognized prior service cost (72) (87) (3) (3)
Net amount recognized $ 908 $ 1,159 $ 212 $ 201

Note 19 Employee benefits, continued

The following amounts have been recognized in the Company’s consolidated balance sheets at December 31, 2001 and 2000:
2001 2000 2001 2000
Prepaid pension cost $ (415) $ (242) $– $–

Accrued pension cost 1,410 1,505 212 201
Intangible assets (14) (13) – –
Accumulated other comprehensive loss (73) (91) – –
Net amount recognized $ 908 $ 1,159 $ 212 $ 201
The pension and other related benefits liability reported in the consolidated balance sheet contains an accrual of $ 66 million and $ 84 million at
December 31, 2001 and 2000, respectively, for employee benefits that do not meet the criteria of Statement of Financial Accounting Standards No. 87,
Employers’ Accounting for Pensions or Statement of Financial Accounting Standards No. 106, Employers’ Accounting for Postretirement Benefits
Other Than Pensions.
There were no significant changes in the minimum pension liability in 2001.The changes in the minimum pension liability in 2000 and 1999 were
primarily attributable to changes in the discount rate and the fair value of plan assets in the German and U.S. pension plans.
During 2001, the Company contributed $162 million of available-for-sale debt securities to certain of the Company’s pension plans in the United States.
The projected benefit obligation and fair value of plan assets for pension plans with benefit obligations in excess of plan assets were $ 6,201 million and
$ 4,367 million, respectively, at December 31, 2001 and $ 5,806 million and $ 4,267million, respectively, at December 31, 2000.The accumulated
benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $ 2,428 million and
$ 1,200 million, respectively, at December 31, 2001 and $1,739 million and $ 533 million, respectively, at December 31, 2000.
At December 31, 2001 and 2000, the assets of the plans were comprised of:
Pension benefits
2001 2000
Equity securities 35% 43%

Debt securities 48% 40%
Other 17% 17%
At December 31, 2001 and 2000, plan assets included $ 6 million and $16 million, respectively, of the Company’s capital stock.
The following weighted-average assumptions were used in accounting for defined benefit pension plans, for the years ended December 31, 2001 and
2000:
2001 2000 2001 2000
Discount rate 5.38% 5.45% 7.24% 7.72%

Expected return on plan assets 6.81% 6.81% – –
Rate of compensation increase 3.09% 3.16% – –
The Company has multiple non-pension post-retirement benefit plans. The Company’s health care plans are generally contributory with participants’
contributions adjusted annually. The health care trend rate was assumed to be 9.65% for 2001, then gradually declining to 5.78% in 2007, and to
remain at that level thereafter.
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, 2001:
One-percentage- One-percentage-
point increase point decrease
Effect on total of service and interest cost components $3 $ (3)

Effect on accumulated post-retirement benefit obligation 31 (26)
The Company also maintains several defined contribution plans.The expense for these plans was $ 27 million, $ 29 million and $ 32 million in 2001,
2000 and 1999, respectively.The Company also contributed $135 million, $108 million and $118 million to multi-employer plans in 2001, 2000 and
1999, respectively.
Note 20 Management incentive plan

The Company has 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.

Note 20 Management incentive plan, continued

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 the event of death, disability or divorce. All warrants and WARs expire six years from the date of grant.The terms and conditions
of the plan allow the employees of subsidiaries that have been divested to retain their warrants and WARs. 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 (CHF). Accordingly, exercise prices are presented below in CHF. 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 Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees,
as permitted by Statement of Financial Accounting Standards No.123 (SFAS123), Accounting for Stock Based Compensation. All warrants were
issued with exercise prices greater than the market prices of the stock on the dates of grant. Accordingly, the Company has recorded 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 FASB Interpretation No.44, Accounting for CertainTransactions Involving Stock Compensation, the
Company recorded 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.
Had the Company accounted for all the warrants under the fair value method of SFAS123, the effect would have been to reduce net income by
$11million ($ 0.01per share), $19 million ($ 0.02 per share) and $ 8 million ($ 0.01per share) in 2001, 2000 and 1999, respectively. Fair value of the
warrants was determined on the date of grant by using the Binomial option model and thereafter by the trading price of equivalent warrants listed
on the Swiss Stock Exchange.
Presented below is a summary of warrant activity for the years shown:
Weighted-
average
exercise
price
Number of Number of (presented
warrants shares(1)(3) in CHF)(4)
Outstanding at January1,1999 10,926,935 7,658,576 27.09

Granted (5) 17,156,040 3,431,208 41.10
Exercised (8,935) (579,344) 16.19
Forfeited (375,000) (243,152) 28.75
Outstanding at December 31,1999 27,699,040 10,267,288 32.34
Granted (2) (6) 28,128,360 5,625,672 53.00
Forfeited (385,000) (65,789) 38.42
Outstanding at December 31, 2000 55,442,400 15,827,171 38.75
Granted (2) (7) 23,293,750 4,658,750 17.00
Forfeited (2,240,000) (461,452) 48.53
Outstanding at December 31, 2001 76,496,150 20,024,469 33.46
Exercisable at December 31,1999 60,000 38,904 28.22

Exercisable at December 31, 2000 60,000 38,904 28.22
Exercisable at December 31, 2001 10,538,000 6,832,839 27.95
(1) All warrants granted prior to 1999, and still outstanding at June 28, 1999, required the exercise of 100 warrants to one bearer share of ABB AG at a weighted average exercise price of CHF 1,859.26 per bearer share
of ABB AG. The warrants were subsequently modified to keep the warrant holders in the same economic position after the payment of a special dividend by ABB AG and the issuance of ABB Ltd shares for all
issued shares of ABB AG in June 1999 (see Note 1). As a result, these warrants now require the exercise of 100 warrants for 64.84 registered shares of ABB Ltd at a weighted average exercise price of CHF 27.98.
In accordance with EITF 90-9, Changes to Fixed Employee Stock Option Plans as a Result of Equity Restructuring, the modifications to outstanding warrants did not result in a new measurement date for the
determination of compensation expense under APB 25. Amounts in the table have been restated to show the effects of these modifications to the warrants, as well as the four-for-one share split in May, 2001.
(2) All warrants granted in 1999, 2000 and 2001 require the exercise of five warrants for one registered share of ABB Ltd.
(3) Information presented reflects the number of registered shares of ABB Ltd that warrant holders can receive upon exercise.
(4) Information presented reflects the exercise price per registered share of ABB Ltd.
(5) The aggregate fair value at date of grant of warrants issued in 1999 was $ 25 million, assuming, depending on the date of grant, a dividend yield of 1.8% to 1.9%, expected volatility of 31% to 34%, risk-free interest
rate of 2.5% to 3.6%, and an expected life of six years.
(6) The aggregate fair value at date of grant of warrants issued in 2000 was $ 54 million, assuming a dividend yield of 1.7%, expected volatility of 33%, risk-free interest rate of 4.4%, and an expected life of six years.
(7) The aggregate fair value at date of grant of warrants issued in 2001 was $ 16 million, assuming a dividend yield of 1.25%, expected volatility of 47%, risk-free interest rate of 3.5%, and an expected life of six years.

Note 20 Management incentive plan, continued

Presented below is a summary of warrants outstanding at December 31, 2001:
Exercise price Number of Number of Weighted-average

(presented in CHF) (2) warrants shares(1) remaining life
17.00 23,293,750 4,658,750 5.9 years

25.54 5,795,000 3,757,478 2.9 years
30.89 4,743,000 3,075,361 2.0 years
37.50 5,059,400 1,011,880 3.4 years
41.25 15,615,000 3,123,000 3.9 years
53.00 21,990,000 4,398,000 4.5 years
(1) Information presented reflects the number of registered shares of ABB Ltd that warrant holders can receive upon exercise of warrants.
(2) Information presented reflects the exercise price per registered share of ABB Ltd.
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 $ 59 million for 2001, and expense of $ 31million and
$ 42 million in 2000 and 1999, respectively, excluding amounts charged to discontinued operations, as a result of changes in the fair value of the
outstanding WARs and the vested portion. In June 2000, to hedge its exposure to fluctuations in fair value of outstanding WARs, the Company
purchased cash-settled call options from a bank, which entitle the Company to receive amounts equivalent to its obligations under the outstanding
WARs. In accordance with 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. During 2001 and 2000, the Company recognized expense
of $ 55 million and $ 4 million, respectively, in interest and other finance expense, related to the cash-settled call options.
The aggregate fair value of outstanding WARs was $ 53 million and $148 million at December 31, 2001 and 2000, respectively. Fair value of WARs was
determined based upon the trading price of equivalent warrants listed on the SWX Swiss Exchange (virt-x).
Presented below is a summary of WAR activity for the years shown.
Number of
WARs
outstanding
Outstanding at January 1, 1999 10,585,000

Granted 25,269,400
Forfeited (605,000)
Outstanding at December 31, 1999 35,249,400
Granted 30,846,640
Exercised (25,000)
Forfeited (710,000)
Granted 39,978,750
Exercised (548,000)
Forfeited (1,238,720)
At December 31, 2001, 9,087,000 of the WARs were exercisable and at December 31, 2000, none of the WARs was exercisable.The aggregate fair
value at date of grant of WARs issued in 2001, 2000 and 1999 was $ 28 million, $ 80 million and $ 36 million, respectively.
Note 21 Stockholders’ equity

At December 31, 2001, including the warrants issued under the management incentive plan and call options sold to a bank at fair value during 2001,
the Company has outstanding obligations to deliver 43 million shares at exercise prices ranging from CHF 17.00 to CHF 53.00. Of this amount, warrants
and options to purchase 35 million shares were not included in the computation of diluted earnings per share for 2001 because the exercise prices were
greater than the average market price of the Company’s shares during the period the instruments were outstanding.The call options expire in periods
ranging from 2004 to 2007 and were recorded as equity instruments in accordance with EITF 00-19.
During 2000, the Company sold 18 million shares of its treasury stock to a bank at fair market value and sold put options which enabled the bank to sell
up to18 million shares to the Company at exercise prices ranging from CHF 25.54 to CHF 53.00 per share.The put options were recorded as equity
instruments in accordance with EITF00-19, as the terms of the put options allowed the Company to choose a net share settlement. In 2001, the
Company settled the outstanding written put options by purchasing the18 million shares at a weighted average exercise price of CHF 40.93 per share.
At December 31, 2001, retained earnings of $ 357million were restricted under Swiss law and not available for distribution as dividends to the
Company’s stockholders.

Note 22 Restructuring charges

During the first quarter of 1999 and in connection with its purchase of Elsag Bailey, the Company implemented a restructuring plan intended to
consolidate operations and gain operational efficiencies.The plan called for workforce reductions of approximately 1,500 salaried employees primarily
in Germany and the United States (EB Restructuring).The Company recorded a $141million liability in its purchase price allocation principally related to
these costs.
Restructuring charges of $195 million were included in other income (expense), net, during 2000, of which approximately $ 90 million related to the
continued integration of Elsag Bailey.The EB Restructuring was substantially complete at the end of 2000.
In July 2001, the Company announced a restructuring program anticipated to extend over18 months.This restructuring program was initiated in
an effort to simplify product lines, reduce multiple location activities and perform other downsizing in response to consolidation of major customers
in certain industries.
As of December 31, 2001, the Company recorded charges of $114 million relating to workforce reductions and $ 73 million relating to lease terminations
and other exit costs associated with the restructuring program.These costs are included in other income (expense), net. Termination benefits of
$ 35 million were paid in 2001 to approximately 2,300 employees and $ 33 million was paid to cover costs associated with lease terminations and other
exit costs.Workforce reductions include production, managerial and administrative employees. At December 31, 2001, accrued liabilities includes
$ 79 million for termination benefits and $ 40 million for lease terminations and other exit costs.
As a result of the Company’s restructuring, certain assets have been identified as impaired or will no longer be used in continuing operations. The
Company recorded $ 44 million to write down these assets to fair value.These costs are included in other income (expense), net.
Note 23 Segment and geographic data

During 2001, the Company realigned its worldwide enterprise around customer groups, replacing its former business segments with four end-user
divisions, two channel partner divisions, and a financial services division.The four end-user divisions – Utilities, Process Industries, Manufacturing
and Consumer Industries, and Oil, Gas and Petrochemicals – serve end-user customers with products, systems and services.The two channel partner
divisions – Power Technology Products and Automation Technology Products – serve external channel partners such as wholesalers, distributors,
original equipment manufacturers and system integrators directly and end-user customers indirectly through the end-user divisions.The Financial
Services division provides services and project support for the Company as well as for external customers.
■ The Utilities division serves electric, gas and water utilities – whether state-owned or private, global or local, operating in liberalized or regulated
markets – with a portfolio of products, services and systems. Our principal customers are generators of power, owners and operators of power
transmission systems, energy traders and local distribution companies.
■ The Process Industries division serves the chemical, gas, life sciences, marine, metals, minerals, mining, cement, paper, petroleum, printing and
turbocharging industries with process-specific products and services combined with the Company’s power and automation technologies.
■ The Manufacturing and Consumer Industries division sells products, solutions and services that improve customer productivity and competi-
tiveness in areas such as automotive industries, telecommunications, consumer goods, food and beverage, product and electronics manufac-
turing, airports, parcel and cargo distribution, and public, industrial and commercial buildings.
■ The Oil, Gas and Petrochemicals division supplies a comprehensive range of products, systems and services to the global oil, gas and petro-
chemicals industries, from the development of onshore and offshore exploration technologies to the design and supply of production facilities,
refineries and petrochemicals plants.
■ The Power Technology Products division covers the entire spectrum of technology for power transmission and power distribution, including
transformers, switchgear, breakers, capacitors and cables, as well as other products, platforms and technologies for high and medium-voltage
applications. Power technology products are used in industrial, commercial and utility applications.They are sold through the Company’s end-
user divisions as well as through external channel partners, such as distributors, contractors and original equipment manufacturers and system
integrators.
■ The Automation Technology Products division provides products, 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, all geared toward one common industrial IT architecture for real-time automation and information
solutions throughout a business. These technologies are sold to customers through the end-user divisions as well as through external channel
partners such as wholesalers, distributors, original equipment manufacturers and system integrators.
■ The Financial Services division supports the Company’s businesses and customers with financial solutions in structured finance, leasing, project
development and ownership, financial consulting, insurance and treasury activities.
The Company evaluates performance of its divisions based on earnings before interest and taxes (EBIT), which excludes interest and dividend income,
interest expense, provision for taxes, minority interest, and income 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, restructuring charges and related asset write-downs, EBIT, 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 increased inter-division transactions. Accordingly,
division revenues and EBIT are presented as if certain historical third-party sales by subsidiaries in the product divisions had been routed through other
divisions as they would have been under the new customer-centric structure. Management has restated historical division financial information in this
way to allow analysis of trends in division revenues and margins on a basis consistent with the Company’s new internal structure and transaction flow.
The Company also presents additional balance sheet information specific to its Financial Services division to allow a better understanding of the
Company’s industrial and financial activities.

Note 23 Segment and geographic data, continued

The following tables summarize information for each reportable division:
Manufacturing Oil, Gas Power Automation
Process and Consumer and Petro- Technology Technology Financial Corporate/
Utilities Industries Industries chemicals Products Products Services Other Consolidated
2001
Revenues (1) (3) $ 5,649 $ 3,377 $ 4,780 $ 3,489 $ 4,042 $ 5,246 $ 2,133 $ (4,990) $ 23,726
Depreciation and amortization 73 72 49 77 119 224 23 150 787
Restructuring charge and
related asset write-downs (7) 24 29 15 8 52 46 – 57 231
EBIT (2) (4) (6) 148 116 87 79 234 380 (32) (733) 279
Net operating assets (5) 795 738 249 315 1,311 2,558 10,926 (3,114) 13,778
Capital expenditure 27 24 27 38 105 126 42 256 645
2000
Revenues (1) (3) $ 5,473 $ 3,339 $ 5,225 $ 2,796 $ 3,662 $ 5,175 $ 1,966 $ (4,669) $ 22,967
Restructuring charge and
related asset write-downs (7) 39 25 17 3 38 45 1 27 195
EBIT (2) (4) 250 88 205 157 244 464 349 (372) 1,385
Net operating assets (5) 1,018 839 411 893 1,328 3,215 9,098 (2,170) 14,632
1999
Revenues (1) (3) $ 5,875 $ 3,485 $ 5,697 $ 3,086 $ 3,862 $ 5,550 $ 1,687 $ (4,886) $ 24,356
EBIT (2) (4) 182 123 147 165 282 392 337 (506) 1,122
Net operating assets (5) 912 795 634 554 1,483 3,388 7,750 (2,372) 13,144
(1) Revenues have been restated for the four end-user divisions, Utilities, Process Industries, Manufacturing and Consumer Industries, and Oil, Gas and Petrochemicals, to retroactively reflect the increase in inter-
division sales that would have occurred if the Company’s new internal structure and transaction flow had been in place for all periods presented. The effect of assuming that certain historical sales by the product
divisions would have been routed through an end-user division before final sale to an external customer, as they would have been if the new customer-centric structure had been in place, was to increase division
revenues for 2001, 2000 and 1999, respectively, by $ 2,119 million, $ 2,139 million and $ 2,161million for the Utilities division; by $ 674 million, $ 745 million and $ 729 million for the Process Industries division; and
by $ 253 million, $ 356 million and $ 404 million for the Manufacturing and Consumer Industries division. The Company assumed that new internal transfer pricing structures for these inter-division sales were also in
place for all periods presented, resulting in a reduction to division revenues for 2001, 2000 and 1999, respectively, of $ 99 million, $ 211million, and $ 212 million for the Power Technology Products division; and of
$153 million, $ 200 million and $ 221million for the Automation Technology Products division.The elimination of the effects of these assumed inter-division transactions is included in the Corporate/Other column.
(2) Consistent with the assumptions described in (1) above, division EBIT reflects the retroactive transfer of profits of $ 41million, $ 46 million, and $ 49 million in 2001, 2000 and 1999, respectively, from the channel
partner divisions, Power Technology Products and Automation Technology Products, to three customer divisions, Utilities, Process Industries and Manufacturing and Consumer Industries, in order to reflect the
impact that these inter-division sales would have had on historical results.
(3) Amounts included in the Corporate/Other column primarily represent adjustments to eliminate inter-division transactions.
(4) Amounts included in the Corporate/Other column primarily represent local businesses in several countries, internal services such as information management, consulting, corporate research, shared services,
corporate management as well as development and management of the Company’s real estate. Amounts also include the elimination of inter-division net interest income of Financial Services.
(5) Net operating assets is calculated based upon total assets (excluding cash and equivalents, marketable securities, current loans receivable, taxes and deferred charges) less current liabilities (excluding borrowings,
taxes, provisions and pension-related liabilities).
(6) The write-downs of goodwill and other intangibles of approximately $ 66 million disclosed in Note 12 are recorded in the Corporate/Other column.
(7) Includes certain specifically related asset write-downs, consistent with the basis on which the Company evaluates restructuring charges for internal management purposes. See Note 22.
Geographic information
Revenues Long-lived assets
2001 2000 1999 2001 2000
Europe $ 12,780 $ 12,570 $ 13,893 $ 2,196 $ 2,403

The Americas 5,944 5,702 5,675 467 485
Asia 2,686 2,770 2,763 271 281
Middle East and Africa 2,316 1,925 2,025 69 74
$ 23,726 $ 22,967 $ 24,356 $ 3,003 $ 3,243

Note 23 Segment and geographic data, continued

Revenues have been reflected in the regions based on the location of the customer. Long-lived assets primarily represent property, plant and
equipment, net, and are shown by the location of the assets.
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.
Additional information
The balance sheet data appearing under the heading “ABB Ltd Consolidated” is derived from the ABB Ltd consolidated balance sheets for
December 31, 2001 and 2000.The balance sheet data for “Financial Services” and “ABB Group” is reported on the same basis as management
uses to evaluate division performance, which includes the following adjustments:
■ “Financial Services” represents the accounts of all subsidiaries in the Company’s Financial Services division, with net intercompany balances
and certain capital contributions received from other subsidiaries of the Company presented on a one-line basis.
■ “ABB Group” represents the accounts of ABB Ltd and all its subsidiaries other than those in the Company’s Financial Services division, with
net intercompany balances and the Company’s investment in its Financial Services division presented on a one-line basis. For the purposes of this
presentation, the Company’s investment in its Financial Services division is accounted for under the equity method of accounting.
ABB Ltd Consolidated ABB Group ABB Financial Services

December 31 December 31 December 31
2001 2000 2001 2000 2001 2000
Cash, cash equivalents

and marketable securities $ 5,713 $ 5,606 $1,667 $1,285 $ 4,046 $ 4,321
Receivables, net 8,368 8,328 5,810 6,652 2,558 1,676
Inventories, net 3,075 3,192 3,074 3,192 1 –
Prepaid expenses and other 2,358 1,585 1,169 1,067 1,189 518
Total current assets 19,514 18,711 11,720 12,196 7,794 6,515
Financing receivables, non-current 4,263 3,875 452 541 3,811 3,334

Property, plant and equipment, net 3,003 3,243 2,938 3,177 65 66
Goodwill and other intangible assets, net 3,299 3,155 3,217 3,067 82 88
Investments and other 2,265 1,978 1,601 1,350 664 628
Net intercompany balances – – – – 2,106 1,778
Total assets $ 32,344 $ 30,962 $19,928 $ 20,331 $14,522 $12,409
Accounts payable, trade $ 3,991 $ 3,375 $ 3,956 $ 3,347 $ 35 $ 28

Accounts payable, other 2,710 2,363 1,641 1,512 1,069 851
Short-term borrowings and
current maturities of long-term borrowings 4,747 3,587 240 397 4,507 3,190
Accrued liabilities and other 7,587 6,127 4,285 4,303 3,302 1,824
Total current liabilities 19,035 15,452 10,122 9,559 8,913 5,893
Long-term borrowings 5,043 3,776 2,020 509 3,023 3,267

Pensions and other related benefits 1,688 1,790 1,681 1,783 7 7
Deferred taxes 1,360 1,528 575 694 785 834
Other liabilities 2,989 2,924 2,529 2,350 460 574
Net intercompany balances – – 773 44 – –
Total liabilities 30,115 25,470 17,700 14,939 13,188 10,575
Minority interest 215 321 214 221 1 100

Total stockholders’ equity 2,014 5,171 2,014 5,171 1,333 1,734
Total liabilities and stockholders’ equity $ 32,344 $ 30,962 $19,928 $ 20,331 $14,522 $12,409

ABB Ltd Group Auditors’ Report
As auditors of the group, we have audited the accompanying consolidated balance sheet of ABB Ltd as of December 31, 2001, and the related
consolidated income statement, statement of cash flows, statement of changes in stockholders’ equity and notes, for the year then ended.
These consolidated financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and
independence.
We did not audit the financial statements of certain of the Company’s wholly-owned subsidiaries located in the United States and Bermuda, which
statements reflect total assets constituting 23% and total revenues constituting 20% of the related consolidated totals as of and for the year
ended December 31, 2001.Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it
relates to amounts included for these subsidiaries, is based solely on the reports of the other auditors.
Our audit was conducted in accordance with auditing standards generally accepted in the United States and auditing standards promulgated by
the Swiss profession, which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement. We have examined, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall
consolidated financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of ABB Ltd at December 31, 2001, and the consolidated results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally accepted in the United States and Swiss law.
As discussed in Note 2 to the consolidated financial statements, in 2001 the Company changed its method of accounting for derivative financial
instruments.
We recommend that the consolidated financial statements submitted to you be approved.
Ernst & Young AG

J. Birgerson C. Schibler
Auditors in charge
Zurich, February11, 2002

ABB Ltd Group Auditors’ Report
As auditors of the group, we have audited the accompanying consolidated balance sheet of ABB Ltd as of December 31, 2000, and the related
consolidated income statements, statements of cash flows, statements of changes in stockholders’ equity and notes, for each of the two years in
the period ended December 31, 2000.
These consolidated financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We confirm that we meet the legal requirements concerning professional qualification and
independence.
Our audits were conducted in accordance with auditing standards generally accepted in the United States and auditing standards promulgated by
the Swiss profession, which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement. We have examined, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall
consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position
of ABB Ltd at December 31, 2000, and the consolidated results of its operations and its cash flows for each of the two years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted in the United States and Swiss law.
We recommend that the consolidated financial statements submitted to you be approved.
KPMG Klynveld Peat Ernst & Young AG

Marwick Goerdeler SA
B.A. Mathers J. Birgerson
B.J. DeBlanc C. Schibler
Auditors in charge

ABB Ltd, Zurich
Income Statements
Period ended December 31 (CHF in thousands) 2001 2000
Revenues 721 1,684

Personnel expenses (19,980) (81,315)
Other expenses (44,316) (41,575)
Dividend income 4,490,148 1,319,719
Interest income 44,639 30,894
Interest expenses (37,636) (16,407)
Loss sale own shares (37,208) –
Write-down own shares (323,077) –
Income before taxes 4,073,291 1,213,000
Income taxes (60) (60)
Net income 4,073,231 1,212,940
Balance Sheet
December 31 (CHF in thousands) 2001 2000
Current assets
Cash and equivalents 4,300,907 394,099
Receivables 38,423 733,646
Total current assets 4,339,330 1,127,745
Fixed assets
Loans to subsidiary 1,070,000 1,070,000
Participations 6,847,918 6,847,918
Own shares 384,000 –
Total fixed assets 8,301,918 7,917,918
Total assets 12,641,248 9,045,663
Liabilities
Current liabilities 140,689 51,723
Bonds 700,000 500,000
Total liabilities 840,689 551,723
Stockholders’ equity
Share capital 3,000,023 3,000,023
Legal reserve 600,005 600,005
Reserve for treasury shares 2,944,904 638,031
Other reserves 302,968 2,609,841
Retained earnings 879,428 433,100
Net income 4,073,231 1,212,940
Total stockholders’ equity 11,800,559 8,493,940
Total liabilities and stockholders’ equity 12,641,248 9,045,663

Notes to Financial Statements
Note 1 Cash and equivalents
(CHF in thousands) 2001 2000
Cash and bank 907 869

Cash with subsidiary 4,300,000 393,230
Total 4,300,907 394,099
Note 2 Receivables
Non-trade receivables (1) 17,632 262,639

Non-trade receivables from subsidiaries 18 451,050
Prepaid expenses/accrued income 59 49
Prepaid expenses/accrued income from subsidiaries 20,714 19,908
Total 38,423 733,646
(1) Includes a receivable from an employee pension plan amounting to CHF 14,968 thousand (a liability of CHF 21,281 thousand in 2000).
Note 3 Participations
(CHF in thousands) Share capital 2001 2000
ABB Participation AG 100% CH-Baden Holding CHF 462,681,000 3,423,950 3,423,950

ABB Participation AB 100% SE-Västerås Holding SEK 4,689,565,100 3,423,950 3,423,950
Others 18 18
Total 6,847,918 6,847,918
Note 4 Current liabilities

Non-trade payables 1,903 1,678

Non-trade payables to subsidiaries 2,932 1,069
Accrued expenses/deferred income 29,112 33,135
Accrued expenses/deferred income to subsidiaries 93 17
Short-term loan from subsidiary 106,649 15,824
Total 140,689 51,723
Note 5 Bonds
Bond 1999–2009 3.75% 500,000 500,000

Note 2001–2008 3.75% 100,000 –
Note 2001–2003 3.25% 100,000 –
Total 700,000 500,000

Note 6 Stockholders’ equity
Share Restricted Other Retained
(CHF in thousands) capital reserves reserves earnings Net income Total
Opening balance sheet 3,000,023 1,238,036 2,609,841 433,100 1,212,940 8,493,940

Allocation to retained earnings 1,212,940 (1,212,940) –
Dividends paid (766,612) (766,612)
Change in treasury shares 2,306,873 (2,306,873) –
Net income for the year 4,073,231 4,073,231
Closing balance sheet 3,000,023 3,544,909 302,968 879,428 4,073,231 11,800,559
Share capital divided in:

Number of
(CHF in thousands) registered shares Par value Total
Issued shares 1,200,009,432 CHF 2.50 3,000,023

Contingent shares 80,000,000 CHF 2.50 200,000
ABB Ltd and its subsidiaries, ABB Equity Limited and ABB Transinvest Limited, have acquired the following ABB Ltd shares to cover the obligations of
a management incentive plan (refer also to note 20 of the consolidated financial statements) and various corporate purposes:
Treasury shares 2001 2000

Number Price per Number Price per
of shares share/CHF of shares share/CHF
Opening balance 16,484,208 38.71 20,610,200 32.71

Purchases 82,946,104 31.74 13,144,112 50.96
Sales (12,600,000) 25.84 (18,470,104) 40.34
Closing balance 86,830,312 33.92 16,484,208 38.71
Information regarding important shareholders (Art. 663 c of the Swiss Code of Obligations) is listed on page102.
There are no further items which require disclosure in accordance with Art. 663 b of the Swiss Code of Obligations.
Proposed appropriation of available earnings

Net income for the year 4,073,231 1,212,940

Carried forward from previous year 879,428 433,100
Profit available to the Annual General Meeting 4,952,659 1,646,040
Dividend – (766,612)
Balance to be carried forward 4,952,659 879,428
The Board of Directors proposes that the profit available to the Annual General Meeting in the amount of CHF 4,952,659,820 is to be carried forward
to the new account.

Report of the Statutory Auditors
As statutory auditors, we have audited the accounting records and the financial statements (balance sheet, income statement and notes;
page 98 to100) of ABB Ltd, Zurich for the year ended December 31, 2001.The prior year’s corresponding figures were audited jointly with
KPMG Klynveld Peat Marwick Goerdeler SA.
These financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these financial
statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.
Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession, which require that an audit be planned
and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. We have
examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed the accounting
principles used, significant estimates made and the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the accounting records, financial statements and the proposed appropriation of available earnings comply with Swiss law and
the company’s articles of incorporation.
We recommend that the financial statements submitted to you be approved.
Ernst & Young AG

J. Birgerson C. Schibler
Auditors in charge

Investor information
Trend of ABB Ltd share prices during 2001

During 2001, the price of the ABB Ltd shares traded on the SWX Swiss Exchange (virt-x) decreased 63 percent, while the Swiss Performance Index
decreased 23 percent.The price of the ABB Ltd share on Stockholmsbörsen decreased 58 percent, underperforming the Affärsvärldens General
Index, which decreased by18 percent. Source: Bloombergs, SWX Swiss Exchange (virt-x) and Stockholmsbörsen
Share price (data based on closing prices)

SWX Swiss Stockholmsbörsen
Exchange (virt-x/CHF) (SEK)
High 44.30 259.00

Low 10.00 67.50
Year-end 16.00 101.00
Average daily traded number of shares 4,529,000 1,647,000
Source: SWX Swiss Exchange (virt-x), Stockholmsbörsen
Market capitalization
On December 31, 2001, ABB Ltd’s market capitalization based on outstanding shares (total amount of outstanding shares is1,113,133,816) was
approximately $10.6 billion (CHF17.8 billion, SEK111.8 billion, EUR 12.0 billion).
Introduction on the New York Stock Exchange

On April 6, 2001, ABB Ltd listed its shares on the NewYork Stock Exchange (NYSE) under the symbol `ABB´.The shares are traded as American
Depositary Shares (ADSs) and one ADS represents one registered share.The listing supports both ABB’s growth strategy and ambition to broaden its
shareholder base in the United States.
Share buy-back and share-split

In late March 2001, ABB launched a program to buy back two percent of ABB’s shares for subsequent cancellation. At the last Annual General
Meeting of ABB Ltd, shareholders endorsed the buy-back and approved a 4 for1 share split. During the program, and after taking into consideration
the ABB 4 for1 share split that took place on May 7, 2001, ABB repurchased 24 million ABB Ltd shares.The share buyback was completed in the
second quarter of 2001. In the meantime, market conditions have changed, and the Board of Directors has decided not to effect a capital reduction.
ABB has been advised that shareholders who sold their shares in connection with the share buyback will not have any adverse tax consequences.
The Board of Directors will propose that the shareholders take affirmative note of its decision not to effect the capital reduction at the Annual General
Meeting on March12, 2002.
Shareholder structure
As of December 31, 2001, the total number of shareholders directly registered with ABB Ltd was around 148,000. In addition, another
98,000 shareholders hold shares indirectly through nominees. In total, ABB has approximately 246,000 shareholders.
Major shareholders
As of December 31, 2001, BZ Group Holding Limited, Switzerland, directly and indirectly owned 133,777,434 shares of ABB Ltd, corresponding
to11.1% of the total capital and votes.
As of December 31, 2001, ABB owned as treasury shares 86,875,616 shares of ABB Ltd, corresponding to 7.2% of the total capital and votes.
To the best of the company’s knowledge, no other shareholder holds five percent or more of the total voting rights.
Dividend recommendation
In order to strengthen the balance sheet, the Board of Directors proposes that no dividend be paid for 2001.

Per-share data(1)
2001 2000 1999
Dividend (CHF) n.a.(2) 0.75 0.75

Par value (CHF) 2.50 2.50 2.50
Vote per share 1 1 1
Weighted average shares outstanding (in millions) 1,132 1,180 1,184
Dilutive effect of management incentive plan (in millions) 3 5 3
Diluted weighted average shares outstanding (in millions) 1,135 1,185 1,187
(1) 2001, 2000 and 1999 figures restated for the 4 for1share-split on May7, 2001.
(2) In order to strengthen the balance sheet, the Board of Directors proposes that no dividend be paid for 2001.
Key ratios(1)
(US$) 2001 2000 1999
EBITDA per share* 0.94 1.87 1.61

Basic earnings (loss) per share (0.61) 1.22 1.15
Diluted earnings (loss) per share* (0.61) 1.22 1.15
Stockholders’ equity per share* 3.17 3.98 3.36
Cash flow per share* 1.87 0.86 1.33
Dividend pay-out-ratio (%) n.a. 37 40
Direct yield (%) n.a. 1.7 1.5
Market-to-book (%) 525.6 611.1 854.3
Basic P / E ratio n.a. 21.6 26.5
Diluted P / E ratio n.a. 21.6 26.5
* Calculation based on diluted weighted average shares outstanding

(1) 2001 and 2000 figures restated for the 4 for1share-split on May7, 2001.
ABB Ltd Annual General Meeting

The 2002 Annual General Meeting of ABB Ltd will be held at 2:00 p.m. on Tuesday, March12, 2002 at the Messe Zurich hall in Zurich-Oerlikon,
Switzerland.The General Meeting will be held principally in German and will be simultaneously translated into Swedish and English. Shareholders
entered in the share register, with the right to vote, by March1, 2002, are entitled to participate in the General Meeting.
Admission cards
Holders of registered shares of ABB Ltd will receive their admission cards on request using the reply form enclosed with the invitation. The reply form or
a corresponding notification must reach the company no later than March 4, 2002. For technical reasons, notifications arriving after that date will not be
taken into consideration.
The full text of the invitation in accordance with Article 700 of the Swiss Code of Obligations was published in Schweizerisches Handelsamtblatt on
February15, 2002.
ABB shareholders’ calendar 2002

ABB Ltd Annual General Meeting March 12
Three months results 2002 April 24
Six months results 2002 July 24
Nine months results 2002 October 24

Price trend for ABB Ltd shares
CHF
Price trend for ABB Ltd shares, Zurich
60 Swiss Performance Index rebased, Zurich
50
40
30
20
10
1/01 2/01 3/01 4/01 5/01 6/01 7/01 8/01 9/01 10/01 11/01 12/01
SEK
Price trend for ABB Ltd shares, Stockholm
300
Affärsvärlden Index rebased, Stockholm
250
200
150
100
50
1/01 2/01 3/01 4/01 5/01 6/01 7/01 8/01 9/01 10/01 11/01 12/01
Source: Bloomberg and Äffärsvärlden
Stock exchange listings

ABB is listed on the SWX Swiss Exchange (virt-x), Stockholmsbörsen, Frankfurt Stock Exchange, London Stock Exchange and
New York Stock Exchange.
Ticker symbol for ABB Ltd
SWX Swiss Exchange (virt-x) ABBN
Stockholmsbörsen ABB
Frankfurt Stock Exchange ABA
London Stock Exchange ABBN
New York Stock Exchange ABB
Ticker symbol for ABB Ltd at Bloomberg
SWX Swiss Exchange (virt-x) ABBN VX
Stockholmsbörsen ABB SS
Frankfurt Stock Exchange ABJ GR
London Stock Exchange ABBN SW
New York Stock Exchange ABB US
Ticker symbol for ABB Ltd at Reuters
SWX Swiss Exchange (virt-x) ABBZn.VX
Stockholmsbörsen ABB.ST
Frankfurt Stock Exchange ABBn.F
London Stock Exchange ABBZn.VX
New York Stock Exchange ABB.N

ABB Group statistical data
($ in millions, unless otherwise stated) 2001 2000 1999
Consolidated income statements

Revenues 23,726 22,967 24,356
Earnings before interest and taxes (EBIT) 279 1,385 1,122
Income from continuing operations before taxes and minority interest 45 1,306 1,022
Income (loss) from continuing operations (130) 881 643
Net income (loss) (691) 1,443 1,360
Consolidated balance sheets

Cash and equivalents 2,767 1,397 1,615
Marketable securities 2,946 4,209 4,771
Other current assets 13,801 13,105 12,671
Non-current assets 12,830 12,251 11,521
Total assets 32,344 30,962 30,578
Short-term borrowings 4,747 3,587 3,367

Other current liabilities 14,288 11,865 12,515
Long-term borrowings 5,043 3,776 3,586
Other long-term liabilities 6,037 6,242 6,522
Stockholders’ equity including minority interest 2,229 5,492 4,588
Total liabilities and stockholders’ equity 32,344 30,962 30,578
Consolidated statements of cash flows

Net cash provided by operating activities 2,193 1,022 1,575
Net cash used in investing activities (1,218) (1,713) (2,036)
Net cash provided by (used in) financing activities 677 (392) (1,187)
Net cash provided by (used in) discontinued operations (210) 949 723
Effects of exchange rate changes on cash and equivalents (72) (84) (100)
Net change in cash and equivalents 1,370 (218) (1,025)
Other data
Orders received 23,779 25,440 24,633
EBITDA (1) 1,066 2,221 1,917
Capital expenditures, excluding purchased intangible assets 645 485 666
Capital expenditures for acquisitions 597 896 1,780
Research and development expense 654 703 865
Order-related development expenditures 916 985 1,212
Dividends declared pertaining to fiscal year (Swiss francs in millions) – 900 900
Net operating assets 13,778 14,632 13,144
Number of employees 156,865 160,818 161,430
Ratios
Earnings before interest and taxes/Revenues 1.2% 6.0% 4.6%
Return on equity (19.2%) 30.6% 34.1%
Liquidity ratio 1.03 1.21 1.20
Net operating assets/Revenues 58.1% 63.7% 54.0%
Net working capital/Revenues 10.0% 15.4% 10.8%
(1) Earnings before interest, taxes, depreciation and amortization

Exchange rates
Main exchange rates used in the translation of the Financial Statements

Currency ISO Codes Average Year-end Average Year-end
2001/US$ 2001/US$ 2000/US$ 2000/US$
Australian dollar AUD 1,94 1,96 1,72 1,80

Brazilian real BRL 2,32 2,32 1,83 1,95
Canadian dollar CAD 1,55 1,60 1,48 1,49
Chinese yuan renminbi CNY 8,27 8,28 8,28 8,28
Danish krone DKK 8,34 8,45 8,07 8,02
EURO EUR 1,12 1,14 1,08 1,08
Indian Rupee INR 47,18 48,24 44,95 46,67
Japanese yen JPY 121,55 131,27 107,78 114,94
Norwegian krone NOK 9,02 9,05 8,78 8,89
Polish zloty PLN 4,09 3,98 4,33 4,14
Pound sterling GBP 0,69 0,69 0,66 0,67
Swedish krona SEK 10,36 10,56 9,18 9,51
Swiss franc CHF 1,69 1,68 1,69 1,64

Other available publications from ABB

Sustainability Report
The report will be published in June 2002. If you would like a copy,
please contact ABB Corporate Communications at the address
printed on the back of this publication, or download the report from
our Web site (www.abb.com).
Technology Report
The report will be published in November 2002. If you would like a
copy, please contact ABB Corporate Communications at the
address printed on the back of this publication, or download the
report from our Web site (www.abb.com).
© copyright 2002 ABB. All rights reserved.

ABB Group Annual R
a
ABB Ltd ABB Ltd ABB Inc. ABB
Corporate Communications Value Services Value Services Value Services
P.O. Box 8131 P.O. Box 8131 P.O. Box 5308 SE-721 83 Västerås
CH - 8050 Zurich CH - 8050 Zurich Norwalk CT 06856-5308 Sweden
Switzerland Switzerland USA Tel: +46 (0)21 32 50 00
Tel: +41 (0)43 317 7111 Tel: +41 (0)43 317 7111 Tel: +1 203 750 7743 Fax: +46 (0)21 32 54 48
Fax: +41 (0)43 317 7958 Fax: +41 (0)43 311 9817 Fax: +1 203 750 2262
www.abb.com

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AR_en_UG_Rücken_Garamond 17.02.

2002 16:33 Uhr Seite 1

ABB Group Annual Report 2001

Forward looking statement

We are organized from the outside in to make

ABB is moving all its offerings to a common

ABB Group Annual Report 2001 1

Orders received 23,779 25,440

Basic earnings (loss) per share (0.61) 1.22

Revenues by region 2001 Employees by region 2001

2 ABB Group Annual Report 2001

UT 5,649 Revenues by division 2001

01 279 Group earnings

UT 148 Earnings before interest and

ABB Group Annual Report 2001 3

4 ABB Group Annual Report 2001

6 ABB Group Annual Report 2001

ABB Group Annual Report 2001 7

ABB Group Utilities Process Industries Manufacturing and

customers to improve their ■ Utility Automation and Minerals ■ Building Systems

environmental impact. Life Sciences ■ Telecom and Product

01 23,726 01 5,649 01 3,377 01 4,780

8 ABB Group Annual Report 2001

■ Upstream ■ High-Voltage Technology ■ Drives and Power Electronics ■ Insurance

■ Medium-Voltage Technology ■ Electrical Machines ■ Structured Finance

■ Power Transformers ■ Instrumentation and Metering ■ Treasury Centers

01 3,489 01 4,042 01 5,246 01 2,133

ABB Group Annual Report 2001 9

Major orders and contracts

10 ABB Group Annual Report 2001

ABB Group Annual Report 2001 11

Major orders and contracts

* Pull-through sales are defined as volume passed through end-user divisions

12 ABB Group Annual Report 2001

ABB Group Annual Report 2001 13

14 ABB Group Annual Report 2001

ABB Group Annual Report 2001 15

Major orders and contracts

16 ABB Group Annual Report 2001

ABB Group Annual Report 2001 17

Major orders and contracts

18 ABB Group Annual Report 2001

New products and new technologies

ABB Group Annual Report 2001 19

Revenues by business area

20 ABB Group Annual Report 2001

ABB Group Annual Report 2001 21

22 ABB Group Annual Report 2001

New products and new solutions

ABB Group Annual Report 2001 23

These reporting changes involved a large number

What were the highlights for you in 2001?

ABB Group Annual Report 2001 25

What are the main aims of the transformation?

What remains to be done in 2002?

26 ABB Group Annual Report 2001

What, in broad terms, did you set out to achieve?

You can’t tackle every process in the company.

How are ABB’s customers benefiting from