ABB 20F 2022 Annual report

0001091587 us-gaap:SalesMember us-gaap:ForeignExchangeContractMember 2022-01-01 2022-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM

20-F

☐

REGISTRATION

STATEMENT

PURSUANT TO SECTION

12(b) OR (g) OF THE SECURITIES

EXCHANGE ACT OF

1934

☒

ANNUAL REPORT PURSUANT

TO SECTION 13

OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF

1934

For the fiscal year ended

December 31, 2022

☐

TRANSITION REPORT

PURSUANT TO SECTION

13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period

from ____________________

to ____________________

☐

SHELL COMPANY

REPORT PURSUANT

TO SECTION 13

OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF

1934

Date of event requiring this

shell company report ____________________

Commission file number:

001-16429

_________________________________________

ABB Ltd

(Exact name of registrant as specified in its charter)

Switzerland

(Jurisdiction of incorporation or organization)

Affolternstrasse 44

CH-8050

Zurich

Switzerland

(Address of principal executive offices)

Richard A. Brown

Affolternstrasse 44

CH-8050

Zurich

Switzerland

Telephone: +

317-7111

Facsimile:

+41-43-317-4343

(Name, Telephone, E-mail

and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant

to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

American Depositary Shares

each representing one Registered Share

ABB

New York Stock Exchange

Registered Shares, par value CHF 0.12

N/A

New York Stock Exchange

_________________________________________

Securities registered or to be registered pursuant

to Section 12(g) of the Act: None.

Securities for which there is a reporting obligation pursuant

to Section 15(d) of the Act: None.

Indicate the number of outstanding shares of each of the

issuer’s classes of capital or common stock as of the close of

the period covered by the annual report:

1,865,003,331

Registered Shares

_________________________________________

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

seasoned issuer, as defined in Rule 405 of

the Securities Act

Yes

☒

⬜

If this report is an annual or transition report, indicate

by check mark if the registrant is not required to file reports pursuant

to Section 13 or 15(d) of the Securities

Exchange Act of 1934.

Yes

☐

☒

Note – Checking the box above will not relieve any

registrant required to file reports pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934 from their

obligations under those Sections.

Indicate by check mark whether the registrant (1)

has filed all reports required to be filed by Section 13 or 15(d) of

the Securities Exchange Act of 1934 during the

preceding 12 months (or for such shorter period that

the registrant was required to file such reports), and (2) has been

subject to such filing requirements for the past

90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted

electronically every Interactive Data File required to be submitted pursuant

to Rule 405 of Regulation S-T

(§232.405 of this chapter) during the preceding 12

months (or for such shorter period that the registrant was required

to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated

filer, an accelerated filer, a non

-accelerated filer, or an emerging growth

company. See definition of

“large accelerated filer,” “accelerated filer,”

and “emerging growth company” in Rule 12b

-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Emerging growth company

☐

If an emerging growth company that prepares its financial statements

in accordance with U.S. GAAP,

indicate by check mark if the registrant

has elected not to use the

extended transition period for complying with any new or

revised financial accounting standards†

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

☐

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

to any update issued by the Financial Accounting Standards Board

to its Accounting Standards

Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report

on and attestation to its management’s assessment of

the effectiveness of its internal control

over

financial reporting under Section 404(b) of the Sarbanes

-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting

firm that prepared or issued its audit report.

☒

If securities are registered pursuant to Section 12(b)

of the Act, indicate by check mark whether the financial statements of

the registrant included in the filing reflect the

correction of an error to previously issued financial statements.

☐

Indicate by check mark whether any of those error

corrections are restatements that required a recovery analysis of incentive

-based compensation received by any of the

registrant’s executive officers

during the relevant recovery period pursuant to §240.10D-1(b).

☐

Indicate by check mark which basis of accounting the

registrant has used to prepare the financial statements included in

this filing:

U.S. GAAP

☒

International Financial Reporting Standards as issued by the International Accounting Standards Board

☐

Other

☐

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

indicate by check mark which financial statement item the

registrant has elected to follow.

Item 17

☐

Item 18

☐

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

registrant is a shell company (as defined in Rule 12b

-2 of the Exchange Act).

Yes

☐

☒

__________________________________________________

Listed on the New York Stock Exchange not for trading or quotation purposes, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the

Securities and Exchange Commission.

(i)

TABLE OF CONTENTS

Page

PART I

Item 1.

Identity of Directors, Senior Management

and Advisers

Item 2.

Offer Statistics and Expected Timetable

Item 3.

Key Information

Item 3A.

[Reserved]

Item 4.

Information on the Company

Item 4A.

Unresolved Staff Comments

Item 5.

Operating and Financial Review

and Prospects

Item 6.

Directors, Senior Management and

Employees

Item 7.

Major Shareholders and Related

Party Transactions

137

Item 8.

Financial Information

138

Item 9.

The Offer and Listing

139

Item 10.

Additional Information

140

Item 11.

Quantitative and Qualitative Disclosures

About Market Risk

149

Item 12.

Description of Securities Other

than Equity Securities

151

PART II

152

Item 13.

Defaults, Dividend Arrearages and

Delinquencies

152

Item 14.

Material Modifications to the Rights

of Security Holders

and Use of Proceeds

152

Item 15.

Controls and Procedures

152

Item 16.

[Reserved]

153

Item 16A.

Audit Committee Financial Expert

153

Item 16B.

Code of Ethics

153

Item 16C.

Principal Accountant Fees and

Services

153

Item 16D.

Exemptions from the Listing Standards

for Audit Committees

154

Item 16E.

Purchase of Equity Securities by

Issuer and Affiliated Purchasers

154

Item 16F.

Change in Registrant’s Certifying Accountant

154

Item 16G.

Corporate Governance

155

Item 16H.

Mine Safety Disclosure

155

Item 16I.

Disclosure Regarding

Foreign Jurisdictions that Prevent Inspections

155

PART III

156

Item 17.

Financial Statements

156

Item 18.

Financial Statements

156

Item 19.

Exhibits

157

Introduction

ABB Ltd is a corporation organized

under the laws of Switzerland.

In this Annual Report on Form 20-F

(Annual Report),

“the ABB Group,”

“the Group,” “ABB,”

the “Company,”

“we,”

“our”

and “us” refer to ABB Ltd

and its consolidated subsidiaries

(unless the context otherwise

requires). We also use these terms to refer

ABB Asea Brown Boveri Ltd and its

subsidiaries prior to the establishment

of ABB Ltd as the holding

company for the entire ABB

Group in 1999, as described

in this Annual Report under “Item 4. Information

the Company—Introduction—History

of the ABB Group”. Our American Depositary

Shares (each

representing one registered

share of ABB Ltd) are referred to as “ADSs”.

The registered shares of ABB

Ltd

are referred to as “shares”. Our principal

corporate offices are located at Affolternstrasse

44, CH-8050 Zurich,

Switzerland, telephone number

+41-43-317-7111.

Our internet address is www.abb.com or global.abb.

The

information contained on or accessible

from our Web site is not incorporated

into this annual report, and you

should not consider it to be a part of

this annual report.

Financial and other information

The Consolidated Financial

Statements of ABB Ltd, including

the Notes thereto, as of December 31, 2022

and 2021,

and for each of the years in the

three-year period ended

December 31, 2022, (our Consolidated

Financial Statements) have been

prepared in accordance with

United States generally accepted

accounting

principles (U.S. GAAP).

In this Annual Report: (i) “$,” “U.S.

dollar”

and “USD” refer to the lawful currency

of the United States of

America; (ii) “CHF”

and “Swiss franc”

refer to the lawful currency

of Switzerland; (iii) “EUR” and

“euro”

refer to

the lawful currency of the participating

member states of the European

Economic and Monetary Union

(Eurozone); (iv) “SEK” and “Swedish

krona”

refer to the lawful currency

of Sweden; (v) “Chinese renminbi”

and “CNY” refer to the lawful currency

of the People’s Republic

of China; and (vi) “INR” and “Indian Rupee”

refer to the lawful currency of

India.

Except as otherwise stated, all monetary

amounts in this Annual

Report are presented in U.S. dollars.

Where

specifically indicated, amounts in Swiss

francs have been translated into

U.S. dollars. These translations

are

provided for convenience only, and they are not representations

that the Swiss franc could be converted

into

U.S. dollars at the rate indicated.

The twelve o’clock buying rate in

the City of New York for cable transfers as

certified for customs purposes by

the Federal Reserve Bank of New York for Swiss francs on

December 30,

2022,

was $1.00 = CHF 0.9241.

The twelve o’clock buying rate for Swiss

francs on February 17, 2023, was

$1.00 = CHF 0.9266.

Cautionary Note Regarding

Forward-Looking Statements

This Annual Report includes forward-looking

statements within the meaning of

the United States Private

Securities Litigation Reform Act of

1995.

We intend such forward-looking statements

to be covered by the

safe harbor provisions for forward-looking

statements contained in

Section 27A of the Securities Act of 1933,

as amended, and Section 21E of the

Securities Exchange Act of 1934,

as amended (Exchange

Act). These

forward-looking statements can be

identified by the use of forward-looking

terminology, including the terms

“believes,”

“estimates,”

“anticipates,”

“expects,”

“intends,”

“may,”

“will,”

or “should”

or, in each case, their

negative, or other variations or comparable

terminology. These forward-looking statements include

all matters

that are not historical facts. They appear

in a number of places throughout

this Annual Report and include

statements regarding our intentions,

beliefs or current expectations

concerning, among other

things, our

results of operations, financial

condition, liquidity, prospects, growth, dispositions,

strategies and the

countries and industries in which

we operate.

These forward looking statements include,

but are not limited to, statements

about our financial condition

and

performance, operating results, liquidity

and our ability to fund our business

operations and initiatives, the

impact of the COVID-19 pandemic on

our business, capital

expenditure and debt service obligations,

plans

regarding our capital structure, ability

to take advantage of market opportunities

and drive growth, our

products and service offerings and their

anticipated performance

and impact across various industries

and

consumer segments, anticipated

benefits to the shareholders,

planned divestments, acquisitions

and

integration, and related synergies

and other benefits, investment and risk

management strategies,

volatility in

the credit markets, oil prices,

foreign currency exchange rates and

other market conditions, trends and

opportunities, industry trends and expectations,

changing consumer behavior

and demands, our ability to

respond to changing business

and economic conditions, our comparative

advantages, our commitments

and

contingencies, availability of raw

materials, and other plans, goals,

strategies, priorities and initiatives

to our business, including our brand

management initiative, the implementation

of ABB Way, and cost-saving

measures, as well as, the following:

•

statements in “Item 3. Key Information—Risk

Factors”,

•

statements in “Item 5. Operating

and Financial Review and

Prospects”

regarding our

management objectives, including

our outlook, as well as trends in results,

prices, volumes,

operations, margins and overall

market trends,

•

statements in “Item 8. Financial Information—Legal

Proceedings”

regarding the outcome of

certain legal and compliance

matters, and

•

statements in “Item 8. Financial Information—Dividends

and Dividend Policy”

regarding our policy

on future dividend payments.

By their nature, forward-looking statements

involve risks and uncertainties

because they relate to events

and

depend on circumstances that may or

may not occur in the future.

We caution you that forward-looking

statements are not guarantees of future

performance and that our actual

results of operations, financial

condition and liquidity, and the development of the countries

and industries in which we operate,

may differ

materially from those described

in or suggested by the forward-looking

statements contained in this Annual

Report. In addition, even if our results

of operations, financial

condition and liquidity, and the development of

the countries and industries in which

we operate, are consistent

with the forward-looking statements

contained in this Annual Report, those

results or developments

may not be indicative of results

developments in subsequent

periods. Important factors that

could cause actual results to differ materially

from our expectations are contained

in cautionary statements in this

Annual Report and include,

without

limitation, the following:

Business, economic and industry

risks

•

Our business is exposed to risks

associated with the volatile

global economic environment and

political conditions.

•

Our business is exposed to risks associated

with the COVID-19 pandemic.

•

Our operations in emerging markets

expose us to risks associated

with conditions in those

markets.

•

We may encounter difficulty in managing

our business due to the global nature

of our operations.

•

We operate in very competitive and

rapidly changing markets and

could be adversely affected if

we fail to keep pace with technological

changes.

•

Industry consolidation could result

in more powerful competitors and

fewer customers.

•

Increases in costs or limitation

of supplies of raw materials

may adversely affect our financial

performance.

•

Our multi-national operations expose

us to the risk of fluctuations

in currency exchange rates.

•

The uncertainties relating to the United

Kingdom’s new relationship

with the European Union and

its potential impact on the relationship

between Switzerland

and the European Union, may have

a negative effect on cross-border trade and

our business.

Operational risks

•

Increased information technology

(IT) security threats and more

sophisticated cyber

‑

attacks

could pose a risk to our systems,

networks, products, solutions

and services.

•

Our business strategy includes making

strategic divestitures. There

can be no assurance that

any divestitures will provide business

benefit.

•

Anticipated benefits of historical, existing

and potential future mergers,

acquisitions, joint

ventures or strategic alliances

may not be realized.

•

There is no guarantee that our ongoing

efforts to reduce costs will be successful.

•

Illegal behavior by any of our employees

or agents could have a material

adverse impact on our

consolidated operating

results, cash flows, and financial position

as well as on our reputation and

our ability to do business.

•

We may be the subject of product liability

claims.

•

Undertaking long

‑

term, technically complex projects or

projects that are dependent upon

factors

not wholly within our control could

adversely affect our profitability and

future prospects.

•

If we are unable to obtain performance

and other guarantees from

financial institutions, we may

be prevented from bidding on, or obtaining,

some contracts, or our costs

with respect to such

contracts could be higher.

•

Our hedging activities may not protect

us against the consequences

of significant fluctuations in

exchange rates, interest rates, inflation

or commodity prices on our

earnings and cash flows.

•

Failure to meet ESG expectations

or standards or achieve our ESG

goals could adversely affect

our business, results of operations, and

financial condition.

Legal and regulatory risks

•

An inability to protect our intellectual

property rights or actual or alleged

infringement of a third

party’s intellectual property rights could

adversely affect our business.

•

Failure to comply with evolving

data privacy and data protection

laws and regulations or to

otherwise protect personal data,

may adversely impact our

business and financial results.

•

Examinations by tax authorities and

changes in tax regulations

could result in lower earnings

and

cash flows.

•

We are subject to environmental laws and

regulations in the countries in which

we operate. We

incur costs to comply with such regulations,

and our ongoing

operations may expose us to

environmental liabilities.

•

We could be affected by future laws or regulations

enacted to address climate change

concerns

as well as the physical effects of climate

change.

General risk factors

•

If we are unable to attract and retain

qualified management and personnel

then our business

may be adversely affected.

•

Our business subjects us to considerable

potential exposure to litigation

and legal claims and

could be materially adversely

affected if we incur legal liability.

We urge you to read the other important

factors set forth under sections

of this Annual Report entitled

“Item 3. Key Information—Risk Factors,”

“Item 4. Information on

the Company”

and “Item 5. Operating and

Financial Review and Prospects”

for a more complete discussion

of the important factors that could

affect our

future performance and the countries

and industries in which

we operate. In light of these risks,

uncertainties

and assumptions, the forward-looking

circumstances described in

this Annual Report and the assumptions

underlying them may not occur.

Except as required by law or applicable

stock exchange rules or regulations, we

undertake no obligation

update or revise publicly any forward-looking

statement, whether as a result of new

information, future events

or otherwise. All subsequent written

and oral forward-looking statements attributable

to us or to persons

acting on our behalf are expressly qualified

in their entirety by the cautionary

statements referred to above

and contained elsewhere

in this Annual Report.

PART

Item 1.

Identity of Directors, Senior

Management and Advisers

Not applicable

Item 2.

Offer Statistics and Expected

Timetable

Not applicable

Item 3.

Key Information

—

Risk factors

You should carefully consider all of the information set forth

in this Annual Report and

the following

description of risks and uncertainties

that exist or that we currently believe

may exist. Our business, financial

condition or results of operations could

be adversely affected by any of

these risks. Additional

risks of which

we are unaware or that we currently

deem immaterial may also

impair our business operations.

This Annual

Report also contains forward-looking

statements that involve risks and uncertainties.

Our results could differ

materially from those anticipated

in these forward-looking statements

as a result of certain factors,

including

those described below and

elsewhere in this Annual Report.

See “Cautionary Note Regarding

Forward-Looking Statements”.

—

Business,

economic and industry risks

Our business is exposed to risks

associated with the volatile

global economic environment

and

political conditions.

Adverse changes in economic or political

conditions,

particularly in locations

where our customers or

operations are located, as well as concerns

about global trade and

global supply chain,

global health crises,

developments in energy prices, inflation,

labor market challenges

and terrorist activities, could have a

material adverse effect on our business,

financial condition, results of

operations and liquidity

and may

adversely impact the demand

for our products and services. These

and other factors may prevent

our

customers and suppliers from obtaining

the financing required

to pursue their business activities as

planned.

Financial and other reasons may force

them to modify, delay or cancel orders or plans to purchase

or supply

our products or services. In addition,

if our customers do not generate

sufficient revenue, or fail to timely

obtain access to the capital markets,

they may not be able to pay, or may delay payment of,

the amounts

they owe us. Customers with liquidity

issues have delayed payments of

amounts they owe us and

this has

led and may lead to additional

bad debt expense for us, which may adversely

affect our results of operations

and cash flows. We are also subject to

the risk that the counterparties

to our credit agreements and hedging

transactions may go bankrupt if

they suffer catastrophic demand

on their liquidity that prevents them

from

fulfilling their contractual obligations

to us.

Our business environment is influenced

also by numerous other economic

or political uncertainties which

may affect the global economy and

the international capital markets.

In periods of slow economic growth or

decline, our customers are more likely

to buy less of our products and services,

and as a result we are more

likely to experience decreased

revenues. Our businesses are affected by

the level of investments and

demand in the markets that we serve,

principally utilities, industry and

transport & infrastructure. At various

times during the last several years,

we also have experienced,

and may experience in the

future, gross

margin declines in certain businesses,

reflecting the effect of factors such as

competitive pricing pressures,

inventory write-downs, charges associated

with the cancellation

of planned expansion and increases

component and manufacturing costs

resulting from higher labor

and material costs borne by our

manufacturers and suppliers that, as

a result of competitive pricing

pressures or other factors, we are

unable

to pass on to our customers. Economic

downturns also may

lead to restructuring actions and

associated

expenses. Uncertainty about future economic

conditions makes it difficult for us

to forecast operating results

and to make decisions about future

investments.

In addition, we are subject to

the risks that our business operations

in or with certain countries may

adversely affected by trade tariffs, trade or economic

sanctions or other restrictions

imposed on these

countries,

including sanctions against

Russia relating to the war in Ukraine,

contributing to our decision to

exit

the Russian market, and the trade

tensions in recent years

with China.

These could lead to increased

costs

for us or for our customers or limit

our ability to do business in

or with certain countries. In addition,

actual or

potential investors that object to

certain of these business operations

may adversely affect the price of our

shares by disposing or deciding

not to purchase our shares. These

countries may from time to time

include

countries that are identified by the United

States as state sponsors

of terrorism. If any countries

where or with

whom we do business are subject

to such sanctions or restrictions, our

business, consolidated operating

results, financial condition

and the trading price of our shares

may be adversely affected. In 2022, our

total

revenues from business with countries

identified by the U.S. government

as state sponsors of terrorism

represented significantly less than 1

percent of our total revenues.

Based on the amount of revenues

and

other relevant quantitative and qualitative

factors, we have determined

that our business in 2022

with

countries identified by the U.S. government

as state sponsors of terrorism was

not material.

Our business is exposed to risks

associated with the COVID-19

pandemic.

The novel coronavirus (COVID-19) pandemic

has had, and continues to have, significant

impacts on the

global economy including

on demand for products, operational

predictability, the movement of people and

products across borders, supply chains

(including the supply

of semiconductors) and the cost of

capital.

Given the global nature of our business,

COVID-19 has had an adverse

impact on our revenues and

operating margins in all of our businesses

and is expected to continue

to have an impact at least in the short

term. Our Robotics business in China

has been particularly impacted.

The ultimate extent to which the

pandemic impacts our business, liquidity, results of operations

and financial condition will

depend on future

developments, which are highly

uncertain and cannot be predicted

with confidence, including

future

mutations of the COVID-19 virus and

any resulting impact on the effectiveness

of vaccines, the duration and

extent of the pandemic and waves of

infection, any new travel restrictions

and social distancing orders

imposed,

as well as future business closures

and business

disruptions that may be caused by

actions taken

to contain, treat and prevent the disease.

If we or our customers experience

prolonged shutdowns or other

business disruptions, our business,

liquidity, results of operations and financial

condition may be materially

adversely affected and our ability to access

the capital markets may be limited.

Our operations in emerging markets

expose us to risks associated

with conditions in those markets.

A significant amount of our operations

is conducted in the emerging

markets in South America, Asia,

and the

Middle East and Africa. In 2022, approximately

40 percent of our consolidated

revenues were generated from

these emerging markets. Operations

in emerging markets can present

risks that are not encountered in

countries with well-established

economic and political systems, including:

•

economic instability, which could make it difficult for us

to anticipate future business conditions

these markets, cause delays in

the placement of orders for projects

that we have been awarded

and subject us to volatile geographic

markets,

•

political or social instability, which could make our customers

less willing to make cross-border

investments in such regions and

could complicate our dealings

with governments regarding

permits or other regulatory matters,

local businesses and workforces,

•

boycotts and embargoes that may

be imposed by the international

community on countries in

which we do business or where

we seek to do business could

adversely affect the ability of our

operations in those countries to obtain

the materials necessary to fulfill

contracts and our ability

to pursue business or establish

operations in those countries,

•

foreign state takeovers of our and

our customers’ facilities,

•

significant fluctuations in interest

rates and currency exchange

rates,

•

the imposition of unexpected taxes

or other payments

on our revenues in these markets,

•

our inability to obtain financing

and/or insurance coverage from export

credit agencies, and

•

exchange controls and other restrictions

by foreign governments.

Additionally, political and social instability resulting

from increased violence

in certain countries in which we

do business has raised concerns

about the safety of our personnel.

These concerns may hinder our

ability to

send personnel abroad

and to hire and retain local personnel.

Such concerns may require us to increase

security for personnel traveling

to and working in affected countries

or to restrict or wind-down operations

such countries, which may negatively

impact us and result in higher

costs and inefficiencies.

Consequently, our exposure to the conditions in or affecting

emerging markets may adversely

affect our

business, financial condition,

results of operations and liquidity.

We may encounter difficulty in managing

our business due to the global

nature of our operations.

We operate in approximately 100 countries around

the world and, as of December

31, 2022, employed about

105,000 people, of which approximately

47 percent were located in

the Europe region, approximately

28 percent in the Asia, Middle East

and Africa region and approximately

25 percent in the Americas region.

manage our day-to-day operations,

we must deal with cultural and

language barriers and

assimilate

different business practices. Due to our

global nature, we deal

with a range of legal and regulatory

systems

some of which are less developed

and less well-enforced than others.

The laws and regulations to which

are subject can change rapidly

and in unexpected directions. Currency

and other local regulatory

limitations

related to the transfer of funds exist in

a number of countries where

we operate, including: China, India,

South Africa and Turkey. All of this may impact our ability to protect

our contractual, intellectual

property and

other legal rights. In addition, we

are required to create

compensation programs, employment

policies and

other administrative programs

that comply with the laws of

multiple countries. We also must communicate,

monitor and uphold group-wide

standards and directives across our global

network, including in relation

our suppliers, subcontractors and

other relevant stakeholders. Our

failure to manage successfully

our

geographically diverse operations

could impair our ability to react quickly

to changing business and market

conditions and to enforce compliance

with group-wide standards and

procedures.

We operate in very competitive and rapidly

changing markets and could

be adversely affected if

fail to keep pace with technological

changes.

We operate in very competitive and rapidly

changing markets where we regularly

need to innovate and

develop products, systems, services

and solutions that address

the business challenges and

needs of our

customers. The nature of these challenges

varies across the geographic markets

and product areas that we

serve. The markets for our products

and services are characterized

by changing regulatory requirements,

developing ESG expectations and evolving

industry standards, which may require

us to modify our products

and systems. The continual development

of advanced technologies for new products

and product

enhancements is an important way

in which we remain competitive

and maintain acceptable pricing

levels. If

we fail to keep pace with technological

changes in the industrial sectors

that we serve, we may experience

lower revenues, price erosion and

lower margins.

Our primary competitors are sophisticated

companies with significant

resources that may develop

products

and services that are superior to our

products and services or may adapt

more quickly than we do to

new

technologies, industry changes

or evolving customer requirements.

We are also facing increased competition

from low cost competitors in emerging

markets, which may give

rise to increased pressure to

reduce our

prices. Our failure to anticipate or

respond quickly to technological

developments or customer requirements

could adversely affect our business, results

of operations, financial condition

and liquidity.

Industry consolidation could result

in more powerful competitors and

fewer customers.

Competitors in the industries in which

we operate are consolidating.

In particular, the automation industry is

undergoing consolidation

that is reducing the number but increasing

the size of companies that compete

with

us. As our competitors consolidate,

they likely will increase

their market share, gain economies of

scale that

enhance their ability to compete with

us and/or acquire additional

products and technologies that could

displace our product offerings.

Our customer base also is undergoing

consolidation. Consolidation

within our customers’ industries (such as

the marine and cruise industry, automotive, aluminum,

steel, pulp and paper and pharmaceutical

industries

and the oil and gas industry) could

affect our customers and their relationships

with us. If one of our

competitors’ customers acquires any

of our customers, we

may lose that business. Additionally, as our

customers become larger and

more concentrated, they could

exert pricing pressure on all suppliers,

including

us. If we were to lose market share or

customers or face pricing

pressure due to consolidation

of our

customers, our results of operations

and financial condition

could be adversely affected.

Increases in costs or limitation

of supplies of raw materials may

adversely affect our financial

performance.

We purchase large amounts of commodity-based

raw materials, including

steel, copper, aluminum and oil.

Prevailing prices for such commodities

are subject to fluctuations due

to changes in supply and demand

and

a variety of additional factors beyond

our control, such as global

political and economic conditions.

Historically, prices for some of these raw materials have

been volatile and unpredictable,

and such volatility is

expected to continue. Therefore,

commodity price changes may result

in unexpected increases in raw

material costs, and we may be unable

to increase our prices to offset these increased

costs without suffering

reduced volumes, revenues or operating

income. We do not fully hedge against

changes in commodity prices

and our hedging procedures

may not work as planned.

We depend on third parties to supply raw

materials and other components

and may not be able

to obtain

sufficient quantities of these materials

and components, which could

limit our ability to manufacture products

on a timely basis and could harm our

profitability. For some raw materials and components, we rely

on a

single supplier or a small number

of suppliers. If one of these suppliers

were unable to provide us with a raw

material or component we need, our ability

to manufacture some of our

products could be adversely affected

if we are unable to find a sufficient alternative

supply channel in

a reasonable period of time, on commercially

reasonable terms, or at all.

In 2022, global supply chain constraints

caused us to experience

some delays in supplier deliveries

and

product shortages for various categories

such as semiconductors

and certain other raw materials

as well as

constraints in the transportation of

inbound supplies. Although

we were able to mitigate some disruptions,

have experienced some delays

in delivering to certain of our customers

and cannot assure you that

our

mitigation efforts will be sufficient to overcome

these supply chain constraints

if they continue or worsen in

2023.

If our suppliers are unable

to deliver sufficient quantities of materials

on a timely basis, the manufacture

and

sale of our products may be disrupted,

we may be required to assume liability

under our agreements with

customers and our sales and profitability

could be materially adversely

affected.

Our multi-national operations expose

us to the risk of fluctuations in currency

exchange rates.

Currency exchange rate fluctuations have

had, and could continue

to have, a material impact on our

operating results, the comparability

of our results between periods,

the value of assets or liabilities

recorded on our Consolidated

Balance Sheet and the price of our securities.

Volatility in exchange rates

makes it harder to predict exchange

rates and perform accurate financial

planning. Changes in

exchange

rates can unpredictably and adversely

affect our consolidated operating

results and could result in exchange

losses.

Currency Translation Risk.

The results of operations and financial

position of most of our non-U.S.

companies are initially recorded

in the currency of the country in which

each such company resides, which

we call “local currency”. That financial

information is then translated into

U.S. dollars at the applicable

exchange rates for inclusion in our

Consolidated Financial

Statements. The exchange rates between

local

currencies and the U.S. dollar can

fluctuate substantially, which could have a significant

translation effect on

our reported consolidated results

of operations and financial

position.

Increases and decreases in the

value of the U.S. dollar versus local

currencies will affect the reported

value

of our local currency assets, liabilities,

revenues and expenses in our Consolidated

Financial Statements,

even if the value of these items has not

changed in local currency terms.

These translations could

significantly and adversely affect our results

of operations and financial

position from period to period.

Currency Transaction Risk.

Currency risk exposure

also affects our operations when our sales

are

denominated in currencies

that are different from those in which

our manufacturing or sourcing

costs are

incurred. In this case, if, after the parties

agree on a price, the value

of the currency in which the price

is to be

paid were to weaken relative to

the currency in which we incur manufacturing

or sourcing costs, there would

be a negative impact on the profit

margin for any such transaction.

This transaction risk may exist regardless

of whether there is also a currency

translation risk as described

above.

Currency exchange rate fluctuations in

those currencies in which

we incur our principal manufacturing

expenses or sourcing costs may adversely

affect our ability to compete with

companies whose costs are

incurred in other currencies. If our

principal expense currencies

appreciate in value against

such other

currencies, our competitive position

may be weakened.

The uncertainties relating to the United

Kingdom’s new relationship with

the European Union and its

potential impact on the relationship

between Switzerland and the

European Union, may have

negative effect on cross-border trade

and our business.

The United Kingdom has withdrawn

from the European Union

and has negotiated the terms of

such

departure (the UK-EU Trade and Cooperation

Agreement or TCA), which

was ratified and entered into

full

force on May 1, 2021.

Because the agreement merely

sets forth a framework in many respects

and will

require complex additional

bilateral negotiations between the United

Kingdom and the European Union

both parties continue to work on the

rules for implementation, significant

political and economic uncertainty

remains and this has had and may

continue to have a material

effect on cross-border trade with the United

Kingdom and with the European

Union. Lack of clarity about future United

Kingdom laws and regulations,

potentially divergent national

laws, the possibility of increased

regulatory complexities, or future

developments in the European

Union could depress economic

activity, reduce demand for our products and

services, restrict our access to capital,

and diminish or eliminate

barrier-free access between the United

Kingdom and other European

Union member states or among

the European economic area overall.

Furthermore, the TCA may influence

discussions on open trade and

political matters between Switzerland

and the European Union. Any of

these factors could have an

adverse effect on our business, financial

condition and results of operations.

—

Operational risks

Increased information technology

(IT) security threats and more sophisticated

cyber-attacks could

pose a risk to our systems,

networks, products, solutions and

services.

We have observed a global increase

in IT security threats and more sophisticated

cyber-attacks, which pose

a risk to the security of systems and

networks and the confidentiality, availability

and integrity of data stored

and transmitted on those systems

and networks. Although

we have experienced occasional

cybersecurity

incidents, none have had a material

effect on our business operations. Since

we may in the future experience

cyber-attacks against our systems, networks,

products, solutions and

services,

we expect that we will

continue to incur substantial costs

to help mitigate this risk. Similarly, we have observed

a continued increase

in attacks generally against industrial

control systems as well as against

our customers and the systems

supply

to them, which pose a risk to the security

of those systems and networks.

Future attacks could

potentially lead to the compromising

of confidential information, disruption

of our business, improper use or

downtime of our systems and networks

or those we supplied

to our customers, manipulation, corruption,

inaccessibility and destruction

of data, defective products or

services, production downtimes

and supply

shortages.

Such attacks may also expose

us to loss of business, claims

or regulatory action.

Any such impact

in turn could adversely affect our reputation,

competitiveness and results of

operations. Our insurance

coverage may not be adequate to

cover all the costs related

to cyber security attacks or disruptions

resulting

from such events. Due to the nature

of these security threats,

the nature and scope of the impact

of any

future incident cannot be predicted.

Our business strategy includes

making strategic divestitures.

There can be no assurance that any

divestitures will provide business

benefit.

Our strategy includes divesting certain

businesses. The divestiture

of an existing business could

reduce our

future profits and operating cash flows

and make our financial

results more volatile. We may also retain

certain obligations or grant indemnities

in connection with a divestment.

We may not find suitable purchasers

for our non-core businesses and may

continue to pay operating costs associated

with these businesses.

Failed attempts to divest non-core businesses

may distract management’s attention

from other business

activities, erode employee morale

and customers’ confidence,

and harm our business. A divestiture

could

also cause a decline in the price

of our shares and increased

reliance on other elements of our core

business

operations. Whether we realize

the anticipated benefits of a divestment,

including the divestment of the

Power Grids business,

of the Turbocharging business and

of the Mechanical Power Transmission business,

depends on whether we successfully

manage the related risks. If we

do not successfully manage

the risks

associated with a divestiture, our business,

financial condition, and results

of operations could be adversely

affected.

Anticipated benefits of historical,

existing and potential future mergers,

acquisitions, joint ventures

or strategic alliances may not be realized.

As part of our overall strategy, we may, from time to time, acquire businesses

or interests in businesses,

including noncontrolling

interests, or form joint ventures or create

strategic alliances. Whether we realize

the

anticipated benefits,

including operating

synergies and cost savings, from these

transactions, depends, in

part, upon the integration between

the businesses involved, the performance

and development of the

underlying products, capabilities

or technologies, our correct assessment

of assumed liabilities and

the

management of the operations in question.

Accordingly, our financial results could be adversely

affected by

unanticipated performance and

liability issues, transaction-related

charges, amortization related to

intangibles, charges for impairment

of long-term assets and

partner performance.

There is no guarantee that our ongoing

efforts to reduce costs

will be successful.

We seek continued cost savings through

operational excellence

and supply chain management.

Lowering our

cost base is important for our business

and future competitiveness.

However, there is no guarantee that we

will achieve this goal. If we are unsuccessful

and the shortfall is significant,

there could be an adverse effect

on our business, financial condition,

and results of operations.

Illegal behavior by any of our employees

or agents could have a material

adverse impact on our

consolidated operating results, cash

flows, and financial position

as well as on our reputation and

our ability to do business.

Certain of our employees or agents

have taken, and may in the future

take, actions that violate or

are alleged

to violate the U.S. Foreign Corrupt Practices

Act of 1977 (FCPA), legislation promulgated pursuant

to the

1997 Organisation for Economic Co-operation

and Development (OECD) Convention

on Combating Bribery

of Foreign Public Officials in International

Business Transactions, applicable antitrust

laws,

other applicable

laws or regulations or our Code

of Conduct. For more information

regarding investigations

of past actions

taken by certain of our employees,

see “Item 8. Financial Information—Legal

Proceedings”. Such actions

have resulted, and in the future could

result, in governmental investigations,

enforcement actions, civil

and

criminal penalties, including

monetary penalties and other sanctions,

and civil litigation. It is possible

that any

governmental investigation

or enforcement action arising

from such matters could conclude that

a violation of

applicable law has occurred, and

the consequences of

any such investigation or enforcement

action may

have a material adverse impact

on our consolidated operating

results, cash flows and financial

position. In

addition, such actions, whether actual

or alleged, could damage

our reputation and ability to do business.

Further, detecting, investigating and resolving

such actions could be expensive

and could consume

significant time and attention of our senior

management. While we are committed

to conducting business in a

legal and ethical manner, our internal control

systems at times have not been,

and in the future may not be,

completely effective to prevent and detect

such improper activities by our

employees and agents. We are

subject to certain ongoing

investigations by governmental

agencies.

We may be the subject of product liability

claims.

We may be required to pay for losses or

injuries purportedly caused

by the design, manufacture or

operation

of our products and systems. Additionally, we may be subject

to product liability claims for the

improper

installation of products and systems designed

and manufactured by others.

Product liability claims brought against

us may be based in tort or

in contract, and typically involve

claims

seeking compensation for personal

injury or property damage. Claims

brought by commercial businesses

are

often made also for financial losses

arising from interruption to operations.

Depending on the nature and

application of many of the products we

manufacture, a defect or alleged

defect in one of these products could

have serious consequences. For example:

•

If the products produced by our electricity-related

businesses are defective,

there is a risk of fire,

explosions and power surges,

and significant damage to

electricity generating, transmission

and

distribution facilities as well as electrical

shock causing injury or death.

•

If the products produced by our automation-related

businesses are defective, our

customers

could suffer significant damage to facilities

and equipment that rely on these

products and

systems to properly monitor and

control their manufacturing

processes. Additionally, people

could be exposed to electrical shock

and/or other harm

causing injury or death.

•

If any of our products contain hazardous

substances, then

there is a risk that such products

substances could cause injury or death.

•

If any of our protective products were

to fail to function properly, there is a risk that such

failure

could cause injury or death.

If we were to incur a very large product

liability claim, our insurance

protection might not be adequate

sufficient to cover such a claim in

terms of paying any awards

or settlements, and/or paying

for our defense

costs. Further, some claims may be outside the

scope of our insurance coverage.

If a litigant were successful

against us, a lack or insufficiency of insurance

coverage could result in

an adverse effect on our business,

financial condition, results of operations

and liquidity. Additionally, a well-publicized actual or perceived issue

relating to us or our products could

adversely affect our market reputation,

which could result in a decline

demand for our products and reduce

the trading price of our shares.

Furthermore, if we were required

or we

otherwise determined to make a

product recall, the costs could

be significant.

Undertaking long-term, technically

complex projects or

projects that are dependent upon factors

not

wholly within our control could

adversely affect our profitability

and future prospects.

We derive a portion of our revenues

from long-term, fixed price and turnkey

projects and from other

technically complex projects that

can take many months, or even

years, to complete. Such contracts

typically

involve substantial risks, including

the possibility that we may underbid

and consequently have no means

recouping the actual costs incurred,

and the assumption of a large portion

of the risks associated with

completing related projects, including

the warranty obligations. Some projects

involve technological

risks,

including in cases where

we are required to modify our existing

products and systems to satisfy

the technical

requirements of a project, integrate our

products and systems into the existing

infrastructure and systems at

the installation site, or undertake

ancillary activities such as civil works

at the installation site.

Our revenue,

cost and gross profit realized on such

contracts can vary, sometimes substantially, from our original

projections for numerous reasons,

including:

•

unanticipated issues with the scope

of supply, including modification or integration

of supplied

products and systems that may require

us to incur incremental

expenses to remedy such issues,

•

the quality and efficacy of our products and

services cannot be tested and

proven in all situations

and environments and may lead

to premature failure or unplanned

degradation of products,

•

changes in the cost of components,

materials or labor,

•

difficulties in obtaining required

governmental permits or approvals,

•

delays caused by customers,

force majeure or local weather

and geological conditions, including

the ongoing COVID-19 pandemic

and natural disasters,

•

shortages of construction equipment,

•

changes in law or government policy,

•

supply bottlenecks, especially of key

components,

•

suppliers’, subcontractors’ or consortium

partners’ failure to perform

or delay in performance,

•

diversion of management focus due

to responding to unforeseen

issues, and

•

loss of follow-on work.

These risks are exacerbated if a

project is delayed because

the circumstances upon which

we originally bid

and quoted a price may have changed

in a manner that increases

our costs or other liabilities

relating to the

project. In addition, we sometimes

bear the risk of delays caused

by unexpected conditions or events.

Our

project contracts often subject us

to penalties or damages if we cannot

complete a project in accordance

with

the contract schedule. In certain cases,

we may be required

to pay back to a customer all or a portion

of the

contract price as well as potential

damages (which may significantly

exceed the contract price), if

we fail to

meet contractual obligations.

If we are unable to obtain performance

and other guarantees from

financial institutions, we may

prevented from bidding on,

or obtaining, some contracts,

or our costs with respect to such

contracts

could be higher.

In the normal course of our business

and in accordance with industry practice,

we provide a number of

guarantees including

bid bonds, advance payment bonds or guarantees,

performance bonds or guarantees

and warranty bonds or guarantees, which

guarantee our own performance.

These guarantees may include

guarantees that a project will

be completed on time or that a project

or particular equipment

will achieve other

defined performance criteria.

If we fail to satisfy any defined

criteria, we may be required to make payments

in cash or in kind. Performance guarantees

frequently are requested in relation

to large projects.

Some customers require that performance

guarantees be issued

by a financial institution. In considering

whether to issue a guarantee on our behalf,

financial institutions consider

our credit ratings. If, in

the future,

we cannot obtain such a guarantee

from a financial institution

on commercially reasonable

terms or at all, we

could be prevented from bidding

on, or obtaining, some contracts, or

our costs with respect to such contracts

could be higher, which would reduce the profitability

of the contracts. If we cannot obtain

guarantees on

commercially reasonable

terms or at all from financial institutions

in the future, there could be a

material

impact on our business, financial

condition, results of operations

or liquidity.

Our hedging activities may

not protect us against the consequences

of significant fluctuations

exchange rates, interest rates,

inflation or commodity

prices on our earnings and cash

flows.

Our policy is to hedge material currency

exposures by entering

into offsetting transactions with third-party

financial institutions. Given the effective

horizons of our risk management activities

and the anticipatory

nature of the exposures intended

to be hedged, there can

be no assurance that our currency hedging

activities will fully offset the adverse financial

impact resulting from unfavorable

movements in foreign

exchange rates. In addition, the

timing of the accounting for recognition

of gains and losses related

to a

hedging instrument may not coincide

with the timing of gains

and losses related to the underlying

economic

exposures.

As a resource-intensive operation, we are

exposed to a variety of market

and asset risks, including

the

effects of changes in inflation, commodity

prices and interest rates.

We monitor and manage these exposures

as an integral part of our overall

risk management program, which

recognizes the unpredictability

of markets

and seeks to reduce the potentially

adverse effects on our business.

As part of our effort to manage these

exposures, we may enter into commodity

price and interest rate hedging

arrangements. Nevertheless,

changes in commodity prices and interest

rates cannot always be

predicted or hedged.

If we are unable to successfully

manage the risk of changes

in exchange rates, interest rates, inflation

commodity prices or if our hedging

counterparties are unable to perform their

obligations under our hedging

agreements with them, then changes

in these rates and prices could

have an adverse effect on our financial

condition and results of operations.

Failure to meet ESG expectations

or standards or achieve our ESG

goals could adversely affect

our

business, results of operations, and

financial condition

There has been an increased focus

from regulators and stakeholders

on environmental, social and

governance (ESG) matters. These

include greenhouse

gas emissions and climate-related

risks; diversity,

equity, and inclusion; responsible sourcing; human

rights and social responsibility; and

corporate

governance. We have established

certain ESG goals, commitments

and targets. Our ability to accomplish

them presents

numerous operational,

regulatory, financial, legal, and other challenges,

several of which are

outside of our control. Our failure

to achieve our ESG goals,

commitments and targets or

comply with

emerging ESG regulations could adversely

affect our business, results of operations,

and financial condition.

Any such failure could harm our

reputation, adversely impact our

ability to attract and retain

customers and

talent and expose us to increased

scrutiny from the investment community

and enforcement authorities.

—

Legal and regulatory risks

An inability to protect our intellectual

property rights or actual or alleged

infringement of a third

party’s intellectual property rights could adversely

affect our business.

Our intellectual property rights are

fundamental to all of our

businesses. We generate, maintain,

utilize and

enforce a substantial portfolio

of trademarks, trade dress, patents

and other intellectual property rights

globally. Intellectual property protection is subject to applicable

laws in various local jurisdictions

where

interpretations and protections vary

or can be unpredictable

and costly to enforce. We use our intellectual

property rights to protect the goodwill

of our products, promote our product

recognition, protect our

proprietary technology and development

activities, enhance our competitiveness

and otherwise support our

business goals and objectives. However, there can

be no assurance that the steps

we take to obtain,

maintain and protect our intellectual

property rights will be adequate.

Our intellectual property rights may

fail

to provide us with significant competitive

advantages, particularly

in foreign jurisdictions that do not

have, or

do not enforce, strong intellectual

property rights. The weakening

of protection of our trademarks, trade

dress, patents and other intellectual

property rights could

adversely affect our business. In addition, there

exist risks around

actual or alleged infringement

of third-party intellectual property rights,

which could – even

with mitigation processes in place - lead

to claims against us that require

significant resources to resolve.

also may engage in legal

action to protect our own intellectual

property rights, and enforcing our rights

may

require considerable

time, money and oversight, and existing

laws in the various countries in which

provide services or solutions may

offer only limited protection.

Failure to comply with evolving

data privacy and data protection

laws and regulations or to otherwise

protect personal data, may adversely

impact our business and financial

results.

We are subject to many rapidly evolving

privacy and data protection laws and

regulations around the world

including the General Data Protection

Regulation (GDPR) in Europe

and the Personal Information Protection

Law in China as well as the California

Data Privacy Act and the California

Privacy Rights Act (effective in

January 2023) in the United States.

This requires us to operate

in a complex environment where

there are

significant constraints on how we

can process personal data across our

business. The GDPR, which became

effective in May 2018, has established

stringent data protection requirements

for companies doing business

in or handling personal data of individuals

in the European Union. The GDPR

imposes obligations on data

controllers and processors including

the requirement to maintain a record

of their data processing

and to

implement policies and procedures

as part of their mandated privacy

governance framework. Breaches

of the

GDPR or other applicable

data privacy laws could result in substantial

fines, which in some cases could

up to four percent of our worldwide

revenue. In addition, a breach of the

GDPR or other data privacy or data

protection laws or regulations could

result in regulatory investigations,

reputational damage, orders to

cease/change our use of data, enforcement

notices, as well as potential

civil claims including class action

type litigation. We have invested, and continue

to invest, human and technology

resources in our data privacy

and data protection compliance

efforts. There can be no assurance that any

such actions will be sufficient to

prevent cybersecurity breaches, disruptions,

unauthorized release

of sensitive information or corruption

data. Despite such actions, there is a

risk that we may be

subject to fines and penalties, litigation

and

reputational harm if we fail to properly

process or protect the data

or privacy of third parties or

comply with the

GDPR or other applicable

data privacy and data protection

regimes.

Examinations by tax authorities

and changes in tax regulations

could result in lower earnings

and

cash flows.

We operate in approximately 100 countries and

therefore are subject to different

tax regulations. Changes

tax laws,

including those addressing

tax avoidance and profit sharing,

could result in a higher tax expense

and higher tax payments. Furthermore,

this could materially impact our

tax-related receivables and liabilities

as well as deferred income tax assets

and liabilities. In addition,

the uncertainty of the tax environment

some regions could limit our ability

to enforce our rights. As a globally

operating organization, we

conduct

business in countries subject to

complex tax rules, which

may be interpreted in different ways.

Future

interpretations or developments of

tax regimes may affect our tax liabilities,

returns on investments and

business operations. We are regularly

examined by tax authorities in

various jurisdictions. An adverse

decision by a tax authority could

cause a material adverse effect on our business,

financial condition and

results of operations.

We are subject to environmental

laws and regulations in the countries

in which we operate. We incur

costs to comply with such regulations,

and our ongoing operations

may expose us to environmental

liabilities.

Our operations are subject to U.S.,

European and other laws

and regulations governing

the discharge of

materials into the environment or

otherwise relating to environmental

protection. Our manufacturing facilities

use and produce paint residues,

solvents, metals, oils and

related residues. We use petroleum-based

insulation in transformers and chloroparaffins

as a flame retardant. We have

manufactured and sold, and we

are using in some of our factories,

certain types of transformers and

capacitors containing

polychlorinated

biphenyls (PCBs). These are considered

to be hazardous substances in

many jurisdictions in which we

operate. We may be subject to substantial

liabilities for environmental

contamination arising from the use of

such substances. All of our manufacturing

operations are subject to ongoing

compliance costs in respect of

environmental matters and the associated

capital expenditure

requirements.

In addition, we may be subject to

significant fines and penalties

if we do not comply with environmental

laws

and regulations, including

those referred to above. Some environmental

laws provide for joint and several

strict liability for remediation of releases

of hazardous substances,

which could result in us incurring

a liability

for environmental damage without

regard to our negligence

or fault. Such laws and regulations

could expose

us to liability arising out of the conduct

of operations or conditions

caused by others, or for our acts which

were in compliance with all

applicable laws at the time the acts were

performed. Additionally, we may be

subject to claims alleging personal

injury or property damage as a result of

alleged exposure to hazardous

substances. Changes in the environmental

laws and regulations,

or claims for damages to persons, property,

natural resources or the environment,

could result in substantial

costs and liabilities to us.

We could be affected by future laws

or regulations enacted to address

climate change concerns as

well as the physical effects of

climate change.

Existing or pending laws and

regulations intended to address

climate change concerns could affect

us in the

future. We have incurred, and may need

to incur additional costs to

comply with these laws and regulations

and any non-compliance could

adversely affect our reputation and result in

significant fines. We could also

affected indirectly by increased prices for

goods or services provided

to us by companies that are directly

affected by these laws and regulations

and pass their increased

costs through to their customers. At

this

time, we cannot estimate what impact

such costs may have on

our business, results of operations or

financial

condition. We could also be affected by the physical

consequences of climate change

itself, although we

cannot estimate what impact those

consequences might have

on our business or operations. Any

such

changes could also impact our ability

to achieve our 2030 Sustainability

targets as well as the related costs

and resources necessary to do so.

—

General risk factors

If we are unable to attract and retain

qualified management and

personnel then our business

may be

adversely affected.

Our success depends in part on our

continued ability to hire, assimilate

and retain highly qualified

personnel,

particularly our senior management

team and key employees. Competition

for highly qualified

management

and technical personnel

remains intense in the industries and

regions in which we operate. If we

are unable

to attract and retain members of our

senior management team and

key employees, including in

connection

with our ongoing organizational

transformation, this could have

an adverse effect on our business.

Our business subjects us to considerable

potential exposure to

litigation and legal claims and could

be materially adversely affected

if we incur legal liability.

We are subject to, and may become

a party to, a variety of litigation or other

claims. Our business is subject

to the risk of claims involving

current and former employees, customers,

partners, subcontractors, suppliers,

competitors, shareholders, government

regulatory agencies

or others through private actions, class

actions,

whistleblower claims, administrative

proceedings, regulatory actions

or other proceedings.

Our acquisition

activities have in the past and may

in the future be subject to

litigation or other claims. While

we maintain

insurance for certain potential liabilities,

such insurance does not cover

all types and amounts of potential

liabilities and is subject to various

exclusions as well as caps on amounts

recoverable.

Item 3A.

[Reserved]

Item 4.

Information on the Company

—

Introduction

About ABB

ABB is a technology leader in

electrification and automation,

enabling a more sustainable

and

resource-efficient future. The company’s solutions

connect engineering

know-how and software to optimize

how things are manufactured, moved,

powered and operated.

Building on more than 130 years of

excellence,

ABB’s approximately 105,000 employees

are committed to driving innovations

that accelerate industrial

transformation.

We operate in over 100 countries across

three regions: Europe, the

Americas, and Asia, Middle

East and

Africa, and generate revenues in numerous

currencies.

We are headquartered in Zurich, Switzerland

and we

govern our company through our four

Business Areas: Electrification, Motion,

Process Automation, and

Robotics & Discrete Automation.

For a breakdown of our consolidated

revenues (i) by Business Area, (ii) by

geographic region, and (iii) by product

type, see “Item 5. Operating and

Financial Review and Prospects—

Analysis of results of operations—Revenues”

and “Note 23 - Operating segment

and geographic data” to our

Consolidated Financial

Statements.

Until June 30, 2020, we also

operated the Power Grids

business, which

is reported as discontinued operations

in the Consolidated Financial

Statements (see “Discontinued

operations” section below). On

July 1, 2020, we completed

the divestment of 80.1 percent of the

Power Grids

business to Hitachi Ltd (Hitachi).

We retained a 19.9 percent ownership

interest through our investment in

Hitachi Energy Ltd (Hitachi Energy), which

beneficially owns or controls all

the subsidiaries of the Power

Grids business,

until December 2022 when

we sold the remaining investment in

Hitachi Energy to Hitachi.

Our principal corporate offices are located

at Affolternstrasse 44, CH 8050

Zurich, Switzerland, telephone

number +41 43 317 7111. Our agent for U.S. federal securities law purposes

is ABB Holdings Inc., located at

305 Gregson Drive, Cary, North Carolina 27511. Our internet address is www.abb.com or global.abb.

The

information contained on or accessible

from our Web site is not incorporated

into this annual report, and you

should not consider it to be a part of

this annual report. The United

States Securities and Exchange

Commission (SEC) maintains a website

at www.sec.gov which contains in electronic

form each of the reports

and other information that we have

filed electronically with

the SEC.

History of the ABB Group

The ABB Group was formed in 1988

through a merger between

Asea AB and BBC Brown Boveri AG.

Initially

founded in 1883, Asea AB was a major

participant in the introduction

of electricity into Swedish homes and

businesses and in the development

of Sweden’s railway network. In

the 1940s and 1950s, Asea AB

expanded into the power, mining and steel industries.

Brown Boveri and Cie. (later renamed

BBC Brown

Boveri AG) was formed in Switzerland

in 1891 and initially specialized

in power generation and turbines. In

the early to mid

‑

1900s, it expanded its operations

throughout Europe and broadened

its business operations

to include a wide range of electrical

engineering activities.

In January 1988, Asea AB and

BBC Brown Boveri AG each

contributed almost all of their businesses

to the

newly formed ABB Asea Brown Boveri

Ltd, of which they each

owned 50 percent. In 1996, Asea

AB was

renamed ABB AB and BBC Brown

Boveri AG was renamed ABB

AG. In February 1999, the ABB

Group

announced a group reconfiguration

designed to establish a single parent

holding company and a single

class

of shares. ABB Ltd was incorporated

on March 5, 1999, under the laws

of Switzerland. In June 1999,

ABB Ltd became the holding company

for the entire ABB Group.

This was accomplished by having

ABB Ltd

issue shares to the shareholders

of ABB AG and ABB AB, the two

companies that formerly owned

the ABB

Group. The ABB Ltd shares were

exchanged for the shares

of those two companies, which,

as a result of the

share exchange and certain related

transactions, became wholly

‑

owned subsidiaries of ABB Ltd.

As described above, on July 1, 2020, we

divested 80.1 percent

of our ownership in the Power

Grids business

to Hitachi,

and in December 2022,

Hitachi purchased the remaining

19.9 percent of Hitachi Energy.

ABB Ltd shares are currently listed

on the SIX Swiss Exchange,

the NASDAQ OMX Stockholm Exchange

and the New York Stock Exchange (in the form of American

Depositary Shares).

ABB today

As a global technology leader

in electrification and automation enabling

sustainability and resource efficiency,

our offering is relevant for the global

transition towards low-carbon

energy, increased energy efficiency, and

the transition to more adaptive manufacturing

and automation, putting us right in

the center of long-term

secular trends.

The ABB Purpose

ABB's purpose is to enable a more sustainable

and resource-efficient future with our technology

leadership in

electrification and automation.

Our core competencies

Our leadership in resource efficiency is

based on our core competencies,

each of which constitutes a barrier

to entry: decades-long domain

expertise, cutting-edge technology

and innovation as well as the ability to

scale operations and distribution.

With its long history, ABB not only invented or pioneered

many power and automation technologies

but has

retained technology and market leadership

in many of these areas. Being

present in various vertical markets

for decades with close long-term relationships

with customers and channel

partners has resulted in our

unique deep domain expertise, enabling

a thorough understanding of customers’ needs

and operations.

We continuously evolve our offering to remain

a relevant and trusted partner

to our customers. Our annual

non-order related research and

development spending in 2022

amounted to approximately 4 percent of

revenues. We focus our research and

development expenditures

on key areas of innovation and have

spent

approximately $7.8 billion

since the beginning of 2016, focusing

on developing best-in-class

products and

services in the fields of electrification

and automation with the goal

of helping our customers to create

resource-efficient value.

All our four Business Areas are market

leaders in their respective

areas being in either the number

1 or 2

position. Our global reach along

with our extensive local presence

assists

us in scaling innovations

to achieve

stronger returns, which supports higher

absolute investments for future

growth. Active globally, our revenues

are well-balanced across regions

with customers served directly and

through a strong channel

partner

network.

The ABB Way

The ABB Way is the glue that unites our Group and

comprises a select number

of common processes

covering our business model, our

people and culture, the ABB brand

and our governance framework.

facilitates accountability, transparency and speed in ABB.

In our operating model, the Divisions

represent the highest

level of operating decisions.

They are closest to

their respective markets and customer

needs. Each Division

progresses through the strategic mandates

and

priorities of stability and profitability before

growth. In order to deploy full

focus on organic and acquired

growth to the extent of consolidating

the market, the business’

structure should be robust and profitability

should be at least in line with industry

peers.

Each Division has full accountability

for its results and carries the

responsibility for business development,

and research and development

for leading technology to secure a number

1 or 2 market position.

During

2022,

we completed

the implementation of the decentralized

way of working at ABB within all our Divisions.

Our focus area in 2023

will be to increasingly shift our

focus to profitable growth, and further

increase the

number of our Divisions with

this mandate.

Strong performance management

is key in a decentralized

business model. We apply a monthly scorecard

system for the Divisions and

Business Areas, based on a

standardized set of Key Performance

Indicators, to support full

transparency of operational

performance. It is

accompanied by a mandatory target

to make annual productivity improvements

of at least 3 percent each

year.

The corporate functions focus on

necessary strategic, financial

and governance activities, with a lean

headcount of approximately 900

employees.

Enhanced growth profile

Over the past several years, we have

taken significant organic

and inorganic actions to align our business

portfolio to more attractive growth markets,

increasing our focus on discrete

industries, as well as transport

and infrastructure, that offer better growth

opportunities. Additionally, we have increased the proportion

sales stemming from short-cycle businesses,

meaning a reduced proportion

from project-related activities,

which we believe should

reduce the risk and volatility in our earnings.

This ongoing shift towards better

quality of revenues is now an integral

part of governance and

business

execution.

The responsibility for growth has

been fully transferred

to the Divisions,

as they are closest to customers.

This includes both organic and

acquired growth. The Divisions

have the best insights into current

and future

customer needs and are accountable

for building their respective

business accordingly. With more Divisions

transitioning over time from stability

and profitability to growth, we expect

to see a gradual strengthening

our growth profile.

Finally, environmental, social and governance (ESG) drivers

are accelerating and translating

into increased

demand for our electrification and automation

offering. The demand for electricity is growing

twice as fast as

other energy sources, resulting

in approximately 50 percent higher

average annual investments

into

distribution networks over the next 10

years (source: IEA World Energy Outlook

2021, Announced Pledges

Scenario). The share of low-carbon sources

in the global energy mix is expected

to increase to 50 percent by

2050 from only 20 percent today (source:

IEA World Energy Outlook 2021,

Announced Pledges Scenario).

The need to improve energy efficiency has

never

been more relevant, from both the

perspective of

sustainable operations and

reducing operating costs in a high

energy cost environment. Today approximately

45 percent of the world’s electricity is converted

into motion by electric motors

yet only approximately

20 percent of the world’s electric motors are

optimized through

the control of drives.

Lastly, the global number

of working age people (25 to 64 years)

per retiree (65 years or over) is

expected to fall by about 20 percent

over the next 10 years (source: United

Nations World Population

Prospects 2019), supporting demand for

robotics and automation solutions.

We believe ABB’s offering is well positioned

to address these trends.

—

Businesses

Our markets

ABB is a technology leader in

electrification and automation

with a comprehensive and increasingly

digitalized offering of electrification, motion

and automation solutions. Our exposure

to customers is

geographically balanced

while catering to multiple end-markets and segments.

We believe our customer

offering is well positioned to benefit from

secular growth drivers, including

urbanization, labor shortage, shift

to electrification, automation and

robotization, as well as other data

and digitalization trends.

We are focused on creating superior customer

value through our comprehensive,

modular offering,

combining traditional products

and services with software-enabled

products and systems as well as digital

services and software that we sell

both separately and combined

as scalable solutions. Our advanced

software is a key differentiation of our digital

offering and about 60 percent of our

approximately

7,500 employees in research and

development are active in

software development.

The majority of our businesses are

market leaders within their respective

segments. We believe market

leadership is critical, as it provides

the opportunity for price leadership,

which in turn supports profitability,

enabling us to invest further in research

and development to sustain

our technological leadership.

For a

discussion of the geographic distribution

of our total revenues, see “Item 5.

Operating and Financial

Review

and Prospects—Analysis of results

of operations—Revenues.”

Industry market

Approximately half of our revenues

are derived from customers within

the industrial segment where we serve

production facilities and factories all

around the world, from process

industries such as oil and

gas, pulp and

paper as well as mining, to discrete

industries including automotive,

food and beverage and consumer

electronics. Demand for our electrification

and automation offerings with embedded

digital solutions

increased as the energy crisis and

tight labor markets served

as a prominent reminder to companies

of the

importance of energy efficiency and flexibility

in automated production.

This has accelerated customer

demand for the digital services and solutions

we offer.

In discrete industries, demand from

end-markets such as food and

beverage, machine builders

and general

industry grew strongly in 2022 as did

the automotive segment due to broadly

accelerating investments in

the

EV segment. As supply chain constraints

eased in the latter part of 2022,

we saw a normalization of

customers’ order patterns following

a period of pre-buying due to extended delivery

lead times.

Later-cycle process industries improved

across nearly all customer

segments.

We saw an increase in

gas-related demand during

the second half of the year.

Early signs of headwind

were noted in energy

intensive industries such as metals

as a result of higher energy

prices.

Transport & infrastructure market

Approximately one-third of our customers

operate in the transport & infrastructure

market. Our expertise

provides efficient, reliable and sustainable

solutions for these customers, with

a focus on energy efficiency

and reduced operating costs.

In transport & infrastructure, there

was a very strong order development

across data centers and the

e-mobility business. The buildings

segment improved in both the residential

and non-residential segments,

although softness in residential

building in China was noted, as well

as general weakness in

residential-related demand

towards the second half of the year.

In the marine segment there were

positive

developments

for the cruise ship sector as well as general

marine and ports

demand.

Utilities market

We deliver solutions mainly for distribution

utilities and renewables

customers, while continuing to service

conventional power generation

customers with our control and automation

solutions.

During 2022, the renewables

markets continued to see strong growth.

Business levels in the conventional

power generation market remained

stable. Demand from electrical distribution

utilities remained strong, with

ongoing investments to increase grid

reliability and resilience

due to increased integration of renewables.

We serve industry, transport & infrastructure and utilities

through our operating Divisions

which are included

in our Business Areas. Developments

in these Business Areas are discussed

in more detail below. Revenue

figures presented in this Businesses

section are before intersegment

eliminations.

—

Electrification Business Area

Overview

Electrification provides leading

electrical distribution and management

technologies, solutions and

services to

electrify the world in a safe, smart

and sustainable way. The portfolio includes medium-

and low-voltage

electrical components, switchgear, digital devices,

enclosures, breakers, power

conversion products and

charging solutions for electric vehicles,

among others. With our products,

solutions and services, we

collaborate with customers to improve

power delivery and

security, enhance energy management, efficiency

and operational reliability, as we seek to achieve a low

carbon society.

The Electrification Business Area delivers

products through a global

network of channel partners and end

customers. Approximately half of

the Business Area’s revenue is derived

from distributors and approximately

a quarter is derived from direct sales

to end-users. The remaining

revenues

are generated from original

equipment manufacturers (OEMs), engineering,

procurement, construction (EPC)

contracting companies,

system integrators, utilities and

panel builders. The proportion

of direct compared to channel partner

sales

varies by segment, product technology

and geographic markets.

The Electrification Business Area had

approximately 52,300 employees

as of December 31, 2022, and

generated $14.1 billion of revenues

in 2022.

Customers

The Electrification Business Area serves

a wide range of customer

segments, including residential,

commercial

and industrial buildings, utilities,

oil and gas, chemicals, data centers,

e-mobility, renewables,

food and beverage, transport and infrastructure,

among others.

From some of the world’s tallest buildings

the busiest airports, the Business

Area’s products and solutions

cover a wide range of applications

and

business segments.

Products and Services

The Electrification Business Area’s products

and services are delivered

through seven operating Divisions.

The Distribution Solutions Division

helps utility, industry and transport & infrastructure customers

improve

power quality and control, reduce

outage time and enhance

operational reliability and efficiency. The Division

offers products, solutions and services

that largely serve the power

distribution sector, often providing the

requisite medium-voltage link

between high-voltage transmission

systems and low-voltage users.

With ABB

Ability

enabled digital solutions at its

core, the offering includes low-voltage

switchgear (up to 1 kilovolt) and

medium-voltage equipment

(1 to 66 kilovolts), indoor and outdoor

circuit breakers, reclosers, fuses,

contactors, relays, instrument

transformers, sensors, motor

control centers, as well as a wide

range of

air-

and gas-insulated switchgear. The Division also

produces indoor and

outdoor modular systems and other

segment-specific solutions to

facilitate efficient and reliable distribution,

protection and control of power,

adding value through design,

engineering and project management.

The Smart Power Division helps

protect, control, and connect

people, plants, and systems with

a portfolio of

low-voltage products and systems.

The product offering includes, molded-case

and air-circuit breakers,

safety products including sensors,

switches, contactors, relays,

and power protection solutions

such as

uninterruptible power supply

(UPS) solutions, status transfer switches and

power distribution units.

The Smart Buildings Division

enables optimization of energy

efficiency, safety,

security and comfort for any

building type, through new installations

or retrofit solutions. The Division

offers integrated digital technologies

for HVAC, lighting, shutters, and security, in addition to energy distribution

solutions including DIN rail

products, enclosures and emergency

lighting through to industrial

plugs and sockets and conventional

wiring

accessories, accommodating

for single family homes, multiple

dwellings, commercial buildings,

infrastructure

and industrial applications. The Division’s

highly innovative technologies

and digital solutions serve rising

global demand among

real estate developers, owners,

and investors for smart building

technologies that

optimize energy distribution and

building automation. The scalable

solutions aim to deliver significant

sustainable and financial

benefits, meeting social and environmental

demands, while being able

to address

even the most complex of customers’

carbon reduction strategies.

The Installation Products Division

helps manage the connection,

protection and distribution of electrical

power. The Division’s products are engineered to provide

ease of installation and perform in demanding

and

harsh conditions, helping

to ensure safety and continuous operation

for our customers and people around

the

world. The Commercial Essentials

product segment includes

electrical junction boxes, commercial

fittings,

strut and cable tray metal framing systems

for commercial and residential

construction. The Premier

Industrial product segment includes

multiple product lines, such

as Ty-Rap® cable ties, T&B Liquidtight

Systems® protection products,

PVC coated and nylon conduit

systems, power connection and grounding

systems, and cable protection systems

of conduits and fittings for

harsh and industrial applications.

The

Division also manufactures solutions

for medium-voltage applications

used in utility and industrial applications

under its marquee brands including

Elastimold™

reclosers and switchgear, capacitor switches, current

limiting fuses, the High Tech Valiant™

full-range current limiting fuse

for fire mitigation, faulted current

indicators and distribution connectors,

cable accessories and

apparatus with products for overhead

and

underground distribution.

Manufacturing includes made-to-stock

and custom-made solutions.

The Power Conversion Division

designs, develops and manufactures

end-to-end solutions to power

and

safeguard life’s everyday moments.

The Division supports customers in

rapidly changing, disruptive

industries where power reliability, efficiency, and quality matter most, and customers

rely on the Division to

solve their most difficult power challenges.

Customers include businesses

in telecom/5G, networking, data

centers, and industrial applications

such as EV charging, robotics, laser, test & measurement,

and utilities.

The Division is powering the technology

behind today’s connected world, helping

to enable industrial

advancement with the realization

of 5G and to advance data center power

architectures as the cloud

becomes more business-critical than

ever before.

The E-mobility Division is contributing

to a zero-emission mobility future with

smart, reliable and emission-free

electric vehicle charging solutions

including market leading charging

hardware, ABB Ability™ enabled digital

services and energy and fleet management

solutions.

ABB E-mobility offers a leading portfolio

of EV charging

solutions from smart chargers for

the home to high-power chargers

for the highway stations of

the future,

solutions for the electrification of

fleets and opportunity charging

for electric buses and trucks.

The Service Division partners with

our customers to address their energy

challenges for today and

tomorrow.

Our team of world-class engineers

collaborate globally across ABB’s Electrification

portfolio to service

customers in utilities, transportation,

infrastructure and industry, assisting to maintain

uninterrupted power

supply,

maximizing energy efficiency while lowering

cost and carbon emissions. We bring greater

reliability,

predictability and sustainability

to their operations, and through

our digital service portfolio, we drive

new

levels of optimization, responsiveness

and connectivity.

Sales and Marketing

Sales and marketing is generally

conducted within the Divisions

in Electrification. This enables

the Divisions

to manage their respective end-to-end

activities and create demand across

all channels, products and

solutions. They increase focus and

speed for our customers to

drive faster growth. Where necessary, the

Divisions work together on joint services,

such as the management

of accounts, channels, and

segment-sales,

engaging in a range of promotional

activities,

both internal and external.

Competition

The Electrification Business Area’s principal

competitors vary by product group

and include Chint, Eaton,

Hubbell, Legrand, LS Electric, Panasonic,

Schneider Electric,

Siemens and Vertiv.

Capital Expenditures

The Electrification Business Area’s capital

expenditures for property, plant and equipment totaled

$385 million in 2022, compared

to $345 million in 2021. Investments

in 2022 were higher than in

2021

driven

by capacity expansion for e-mobility

products

and some investments which were

previously delayed in 2021

and 2020 due to the COVID-19 pandemic.

Investments in 2022

principally related to real estate investments,

capacity expansion, as well as equipment

replacement and upgrades.

Geographically, in 2022, Europe

represented 55 percent of the capital

expenditures, followed

by the Americas (33 percent) and Asia,

Middle

East and Africa (12 percent).

—

Motion Business Area

Overview

The Motion Business Area provides

pioneering technology, products, solutions and related

services to

industrial customers to increase

energy efficiency, improve safety and reliability, and maintain precise control

over processes. The portfolio

includes motors, generators and

drives for a wide range of applications

in all

industrial sectors.

The Motion Business Area designs,

manufactures and sells

drives, motors, generators and

traction

converters. Building on long-standing

experience in electric powertrains,

the Business Area combines domain

expertise and technology to deliver

the optimum solution for a wide range

of applications for a comprehensive

range of industrial segments. In addition,

the Business Area, along with its

channel partners, has an

industry-leading global service

presence.

The Motion Business Area had approximately

21,100 employees as of December

31, 2022, and generated

$6.7 billion of revenues in 2022.

Customers

The Motion Business Area serves

a wide range of customers

in different industrial segments such

as pulp

and paper, oil and gas, metals and mining, food and

beverage, HVAC, water and wastewater, transportation,

power generation, marine and

offshore.

Products and Services

At December 31, 2022, the Motion

Business Area’s products and services

are delivered through seven

operating Divisions.

The Business Area divested its Mechanical

Power Transmission Division on

November 1, 2021, which designed,

manufactured and sold various

mechanical power transmission

products

sold under the Dodge® brand.

The Drive Products Division serves

the industries and infrastructure segments

with world-class drives and

programmable logic controllers

(PLC). With its products, global

scale and local presence, the Division

helps

customers to improve energy efficiency, productivity and safety.

The System Drives Division supplies

high-power, high-performance drives, drive systems and

packages for

industrial process and large

infrastructure applications. The Division

offers global support to help customers,

partners and equipment manufacturers

with asset reliability, performance improvement and

energy efficiency

in mission critical applications.

The Service Division serves customers

worldwide and aims to help

customers by maximizing uptime,

extending life cycle and enhancing

the performance and energy efficiency of their electrical

motion solutions.

The Division is leading the way

in digitalization by securely

connecting motors and drives

to help customers

prevent expensive downtime while

also optimizing operations profitably, safely and reliably.

The Traction Division is a recognized leader

in traction technologies

that drive innovation in rail, bus and

other modes of electric transportation.

A comprehensive range

of high performance propulsion,

auxiliary and

energy storage solutions help

improve energy efficiency and contributes

to making transportation more

sustainable.

The IEC Low Voltage Motors Division is a global

market leader that provides a full

range of energy efficient

low voltage motors, including

ultra-efficient motors such as synchronous

reluctance motors (SynRM)

to help

customers reduce power bills and cut

emissions. Through a

global footprint, application

expertise and with

rugged designs, the Division’s products support customers

with IEC low-voltage motor solutions

that improve

reliability and productivity in the

most demanding applications.

The Large Motors and Generators

Division offers a comprehensive

product portfolio of large AC motors

and

generators. The Division’s robust, reliable

and highly efficient offerings power critical

infrastructure and

transportation across all major industries

and applications often in remote and

demanding locations.

The NEMA Motors Division is a marketer, designer

and manufacturer that offers Baldor-Reliance®

industrial

electric motors, primarily in North

America. The Division focuses

on quality, reliability and efficiency to provide

a comprehensive offering of NEMA motors in

the market across most industrial

segments and applications.

Sales and Marketing

Sales are made both through direct

sales forces and through

channel partners, such as distributors

and

wholesalers, as well as installers,

OEMs and system integrators.

The proportion of direct sales to

end users

compared to channel partner sales

varies among the different industries,

products and geographic

markets.

Competition

The principal competitors of the

Motion Business Area include

Schneider, Siemens, Toshiba, WEG

Industries, SEW EURODRIVE and

Danfoss.

Capital Expenditures

Capital expenditures in the Motion

Business Area for property, plant and equipment totaled

$150 million in

2022, compared to $230 million

in 2021, which included the purchase

of a formerly leased property in

China.

Principal expenditures in

2022 related to real estate investments,

capacity expansion, equipment

replacement and upgrades across

various countries including

Finland, the United States, China and

India.

Geographically, in 2022, Europe represented 60 percent

of the capital expenditures,

followed by the

Americas (28 percent) and Asia,

Middle East and Africa (12 percent).

—

Process Automation Business Area

Overview

The Process Automation Business

Area offers customers in process,

hybrid and maritime industries a

broad

range of integrated automation, electrical,

motion and digital systems,

solutions and related services

that are

designed to optimize productivity, energy efficiency, sustainability and safety of

industrial processes and

operations, based on the Business Area’s

deep domain knowledge

and expertise of each end market.

The Business Area’s offering can be grouped

into two categories,

with approximately half of the offering

category

management structure and extensive

competency-based training,

and

•

monitor and develop our supply

base to ensure sustainability, both in terms of materials and

processes used.

We buy many categories of products which

contain steel, copper, aluminum, crude oil

and other

commodities. Continuing global

economic growth in many emerging

economies, coupled with the volatility

foreign currency exchange rates,

has led to significant fluctuations

in these raw material costs over

the last

few years. While we expect global

commodity prices to remain highly

volatile, we expect to offset some

market volatility through the use of

long-term contracts and

global sourcing.

We seek to mitigate the majority of our

exposure to commodity price risk

by entering into derivative

contracts.

For example, we manage copper, silver and aluminum

price risk using principally

swap contracts based on

prices for these commodities quoted

on leading exchanges. ABB’s

hedging policy is designed

to safeguard

margins by minimizing price volatility

and providing a stable

cost base during order execution. In

addition to

using derivatives to reduce our exposure

to fluctuations in raw materials prices,

in some cases we can reduce

this risk by incorporating changes

in raw materials prices into the prices

of our end products (through

price

escalation clauses).

Overall, during 2022, supply chain

management personnel

in our businesses, and in the countries

in which

we operate, along with the category

teams, continued to focus on value

chain optimization efforts in all

areas,

while maintaining and improving

quality and delivery performance. Responding

to the challenges of overall

global supply chain constraints,

each Business Area quickly

implemented a task force to mitigate

supply

chain shortages. The Business Areas

experienced some delays

in supplier deliveries

and product shortages

for various categories such as semiconductors

and other raw materials as

well as constraints in the

transportation of inbound supplies.

However, we responded to these challenges

and took mitigating actions

such as building up buffer stocks, approving

new suppliers, changing

supplier splits, combined with daily,

weekly and monthly task force project

follow ups. We have, to a large

extent, been able to mitigate

most

disruptions, maintain a competitive service

level and support our business growth,

while maintaining delivery

schedules to our customers.

Through our Sustainable Supply

Base Management (SSBM) approach,

we assess ESG risks, compliance

and the performance of our suppliers

in these areas to make sure they

meet our expectations. These

expectations are detailed in the ABB

Supplier Code of Conduct

and the ABB Code of Conduct.

We manage our obligations in relation

to conflict minerals through our Conflict

Minerals policy and processes

that we aim to continually improve

and tailor to our value chain.

We continue to work with our suppliers

and

customers to enable us to comply

with the SEC’s rules and disclosure

obligations relating to conflict minerals.

Further information on ABB’s Conflict Minerals

policy and supplier requirements

can be found under “Material

Compliance” at

global.abb/group/en/about/supplying/material-compliance

—

Patents and trademarks

While we are not materially dependent

on any one of our intellectual

properties, as a technology-driven

company, we believe that intellectual property rights

are crucial to protect the

assets of our business. We

continue to file new patent applications

to protect our new inventions.

As of December 31, 2022, we have a

portfolio of approximately 25,000 pending

patent applications and granted

patents,

of which approximately

5,500 are pending applications.

This portfolio includes

approximately 3,500 utility models

and design rights,

of which approximately 200 are pending

applications. In 2022, we filed close to 500 priority

patents, utility

model and design applications,

each covering a unique invention

or unique angle on an invention.

Additionally, we filed approximately 1,850 secondary patents,

utility model and design

applications, each

extending the coverage of a previously

filed priority application.

Based on our existing intellectual

property strategy, we believe that we have adequate

control over our core

technologies. The “ABB” trademarks

and logo are protected in

all of the countries in which we operate.

proactively assert our intellectual property

rights to safeguard the reputation

associated with the ABB

technology and brand. While these

intellectual property rights

are fundamental to all of our

businesses, there

is no dependency of the business on

any single patent, utility

model or design application.

—

Sustainability activities

Sustainability is key to our purpose

which is to enable a more sustainable

and resource-efficient future with

our technology leadership

in electrification and automation. We believe

that sustainable development

means

progress towards a healthier and

more prosperous world today

and for future generations.

This means

balancing the needs of society, the environment and the

economy. To

achieve this, we act and embed

this

approach to business across our value

chain, including our own

operations, our suppliers, our customers

and

the communities we serve. We strive

to always be an exemplary corporate

citizen wherever we operate.

Our 2030 sustainability strategy consists

of four pillars:

Enabling a low-carbon society

by helping to reduce carbon

emissions through our technologies

which

target sectors that account for

three quarters of global energy

consumption. Our ambition is to

support our

customers in avoiding emissions. As

we intend to have our

targets validated against the Science

Based

Targets

initiative’s new Net-Zero Standard,

we are no longer focusing

on a limited number of cases linked

the 100 megatons emissions avoidance

but rather on our complete

portfolio of offerings. Our 2030

commitments for emissions in our

own operations and

supply chain are:

•

achieve carbon neutrality across our

own operations and

reduce CO

e (CO

equivalent)

emissions in own operations

by at least 80 percent compared

to baseline year 2019, and

•

work with our main tier-one

suppliers (suppliers covering

70 percent of our annual procurement

spend) to achieve a 50 percent reduction

in their CO

e emissions by 2030.

Preserving resources

by embedding circularity across

our value chain. Our solutions

reduce waste, provide

increased recyclability and

foster reusability. Our 2030 commitments are:

•

ensure that at least 80 percent of

ABB products and solutions

are covered by our circularity

approach, and

•

send zero waste from our own operations

to landfills, wherever this is compatible

with local

conditions and regulations.

Promoting social progress

by taking care of our employees

and promoting progress around

the world. We

create safe, fair and inclusive working

environments and support

community building. Our 2030

commitments:

•

pursue the ambition that no harm is

caused to our people and

contractors – we aim for a yearly

reduction in lost time from incidents,

•

double the number of women in senior

management roles to 25 percent,

within our

comprehensive diversity and inclusion

framework,

•

targeting a top-tier employee engagement

score in our industry, and

•

provide impactful support for community-building

initiatives.

Creating a culture of integrity and

transparency along the extended

value chain by:

•

always adhering to the ABB Code

of Conduct, which forms the

basis for interactions with projects

and counterparties,

•

successfully implementing a global

framework for assessing and

mitigating all third-party risks

through risk-based due diligence

and life-cycle monitoring,

•

successfully implementing a global

integrity program underpinned

by accountability for integrity

and an adaptive risk management

strategy gained from insights

through targeted learnings,

transparent reporting and monitoring,

•

incorporating sustainability targets

into our senior management

incentives, and

•

ensuring that at least 80 percent of

supply spend in focus countries

is covered by our Sustainable

Supply Base Management program, which

includes environmental,

social and governance

performance.

Reflecting the importance of sustainability

as a strategic topic, ABB’s Board

of Directors oversees our

sustainability strategy, targets and our annual sustainability

report. The Governance and Nomination

Committee of the Board of Directors

is responsible for overseeing

“corporate social responsibility” (including

health, safety and environment as well

as sustainability), while

the Compensation Committee

ensures that

ABB remuneration policies are linked

to the achievement of its sustainability

targets.

In 2022, we continued our efforts to work

towards our 2030 sustainability

targets. We see a further

improvement in the share of green

electricity we use from 51 percent

in 2021 (53 percent adjusting

for the

divestment of the Mechanical Power

Transmission division) to 81 percent in 2022.

The amount of waste sent

to landfill has decreased from 12.6

thousand tons in 2021 (12.3

thousand tons adjusting for the divestment

the Mechanical Power Transmission division)

to 11.6 thousand tons in 2022. Globally, operations at

75 percent of our

sites and offices are covered by externally

certified environmental management

systems. A

total of 3 environmental incidents

were reported in 2022, none of which

had a material environmental

impact.

In 2022, we recorded zero work-related

fatalities and our lost time incident

frequency rate slightly increased

from 0.142 per 200,000 hours worked

in 2021 to 0.143 in 2022. The number

of women in senior management

positions increased from 16.3 percent

in 2021

to 17.8 percent in 2022.

Our employee engagement score increased

from 74 (out of 100) in 2021

to 76 in 2022, while the response

rate increased from 78 percent

to 82 percent. We continued to provide

impactful support for community-

building initiatives across all regions.

During 2022, we introduced

a new procedure for the management

of third parties. This was rolled out across

ABB to cover all sales channels, suppliers

and customers, among others.

The enhanced process will

strengthen our conduct of risk-based

due diligence, our oversight

of interactions with third parties

and the

performance of the third parties

themselves. At the end of 2022,

22 percent of high-risk supply

spend in focus

countries was covered by our Sustainable

Supply Base Management program.

We believe we are on track

for our medium-term target of 80

percent of our high-risk supply

spend in focus countries by 2025.

In 2022, all Executive Committee

members had at least two sustainability-related

goals (e.g., CO

emission

reduction, safety, female leadership) in their individual

component of the Annual Incentive

Plan (AIP).

—

Regulation

Our operations are subject to numerous

governmental laws and

regulations including those governing

antitrust and competition, corruption,

the environment, securities

transactions and disclosures, import and

export of products, currency conversions

and repatriation, taxation of

foreign earnings and earnings

expatriate personnel and use

of local employees and suppliers.

As a reporting company under

Section 12 of the Exchange Act, we

are subject to the FCPA’s anti-bribery

provisions with respect to our conduct

around the world.

Our operations are also subject

to the 1997 OECD Convention

on Combating Bribery of Foreign

Public

Officials in International Business Transactions.

The convention obliges

signatories to adopt national

legislation that makes it a crime

to bribe foreign public officials. Those

countries which have adopted

implementing

legislation and have ratified the convention

include the U.S., several European

nations and

certain other countries in which we have

significant operations.

We conduct business in certain countries

known to experience

governmental corruption. While we

are

committed to conducting business

in a legal and ethical manner, our employees

or agents have taken, and

the future may take, actions that violate

the U.S. FCPA, legislation promulgated

pursuant to the 1997 OECD

Convention on Combating

Bribery of Foreign Public Officials in International

Business Transactions, antitrust

laws or other laws or regulations.

These actions have resulted

and could result in monetary or

other penalties

against us and could damage

our reputation and, therefore, our ability

to do business. For more information,

see “Item 8. Financial Information—Legal

Proceedings”.

The U.S. Iran Threat Reduction and

Syria Human Rights Act of

2012 requires U.S. listed companies

disclose information relating

to certain transactions with Iran.

In 2018, certain non-U.S. subsidiaries

of ABB,

in accordance with applicable

laws, provided electrical equipment, automation

systems and on-site services

to OEMs, distributors, panel builders,

EPC contracting companies

and other customers for Iranian business.

ABB discontinued its Iranian business

on November 4, 2018. As previously

disclosed, ABB is completing

minor work on a long-term contract

which is being performed

in line with applicable

sanctions. The revenues

attributable to this work in 2022 amounted

to approximately $0.2 million.

—

Organizational structure

ABB Ltd is the ultimate parent company

of the ABB Group. It is the sole

shareholder of ABB Asea Brown

Boveri Ltd which directly or indirectly

owns the other companies

in the ABB Group. The table below

both sets

forth, as of December 31, 2022,

the name, place of incorporation

and ownership interest of the significant

direct and indirect subsidiaries

of ABB Ltd, Switzerland. ABB’s operational

group structure is described above

in the “Businesses” section of

Item 4.

Name

Location

Country

Group

Interest %

ABB Australia Pty Limited

Moorebank

Australia

100.00

ABB Group Holdings

Pty. Ltd.

Moorebank

Australia

100.00

ABB Group Investment

Management Pty. Ltd.

Moorebank

Australia

100.00

ABB AG

Wiener Neudorf

Austria

100.00

B&R Holding GmbH

Eggelsberg

Austria

100.00

B&R Industrial Automation

GmbH

Eggelsberg

Austria

100.00

ABB N.V.

Zaventem

Belgium

100.00

ABB Automacao LTDA

Sorocaba

Brazil

100.00

ABB Eletrificacao LTDA

Sorocaba

Brazil

100.00

ABB Bulgaria EOOD

Sofia

Bulgaria

100.00

ABB Electrification Canada

ULC

Edmonton

Canada

100.00

ABB Inc.

Saint-Laurent

Canada

100.00

ABB S.A.

Santiago

Chile

100.00

ABB (China) Investment

Limited

Beijing

China

100.00

ABB (China) Ltd.

Beijing

China

100.00

ABB Beijing Drive Systems

Co. Ltd.

Beijing

China

90.00

Name

Location

Country

Group

Interest %

ABB Beijing Switchgear

Limited

Beijing

China

60.00

ABB Electrical Machines

Ltd.

Shanghai

China

100.00

ABB Engineering (Shanghai)

Ltd.

Shanghai

China

100.00

ABB LV Installation Materials Co. Ltd.

Beijing

China

85.70

ABB Shanghai Free Trade Zone

Industrial Co., Ltd.

Shanghai

China

100.00

ABB Shanghai Motors

Co. Ltd.

Shanghai

China

75.00

ABB Xiamen Low Voltage Equipment

Co. Ltd.

Xiamen

China

100.00

ABB Xiamen Switchgear

Co. Ltd.

Xiamen

China

66.52

ABB Xinhui Low Voltage Switchgear

Co. Ltd.

Xinhui

China

90.00

ABB s.r.o.

Prague

Czech Republic

100.00

ABB A/S

Skovlunde

Denmark

100.00

ABB for Electrical Industries

(ABB ARAB) S.A.E.

Cairo

Egypt

100.00

Asea Brown Boveri S.A.E.

Cairo

Egypt

100.00

ABB AS

Jüri

Estonia

100.00

ABB Oy

Helsinki

Finland

100.00

ABB France

Cergy Pontoise

France

99.84

ABB SAS

Cergy Pontoise

France

100.00

ABB AG

Mannheim

Germany

100.00

ABB Beteiligungs-

und Verwaltungsgesellschaft

mbH

Mannheim

Germany

100.00

ABB Stotz-Kontakt GmbH

Heidelberg

Germany

100.00

ABB Striebel & John

GmbH

Sasbach

Germany

100.00

B + R Industrie-Elektronik

GmbH

Bad Homburg

Germany

100.00

Busch-Jaeger Elektro

GmbH

Lüdenscheid

Germany

100.00

ABB Engineering Trading and Service

Ltd.

Budapest

Hungary

100.00

ABB Global Business Services

and Contracting India

Private Limited

Bangalore

India

100.00

ABB Global Industries

and Services Private

Limited

Bangalore

India

100.00

ABB India Limited

Bangalore

India

75.00

ABB E-mobility S.p.A.

Milan

Italy

91.56

ABB S.p.A.

Milan

Italy

100.00

ABB K.K.

Tokyo

Japan

100.00

ABB Ltd.

Seoul

Korea, Republic of

100.00

ABB Electrical Control

Systems S. de R.L.

de C.V.

Monterrey

Mexico

100.00

ABB Mexico S.A. de C.V.

San Luis Potosi

Mexico

100.00

Asea Brown Boveri S.A.

de C.V.

San Luis Potosi

Mexico

100.00

ABB B.V.

Rotterdam

Netherlands

100.00

ABB E-mobility B.V.

Delft

Netherlands

91.56

ABB Finance B.V.

Rotterdam

Netherlands

100.00

ABB Holdings B.V.

Rotterdam

Netherlands

100.00

ABB AS

Fornebu

Norway

100.00

ABB Electrification Norway

Skien

Norway

100.00

ABB Holding AS

Fornebu

Norway

100.00

ABB Business Services

Sp. z o.o.

Warsaw

Poland

99.94

Name

Location

Country

Group

Interest %

ABB Industrial Solutions

(Klodzko) Sp. z o.o.

Klodzko

Poland

99.94

ABB Sp. z o.o.

Warsaw

Poland

99.94

Industrial C&S of P.R. LLC

San Juan

Puerto Rico

100.00

ABB Electrical Industries

Co. Ltd.

Riyadh

Saudi Arabia

65.00

ABB Pte. Ltd.

Singapore

100.00

ABB Holdings (Pty) Ltd.

Modderfontein

South Africa

100.00

ABB Investments (Pty)

Ltd

Modderfontein

South Africa

51.00

ABB South Africa (Pty) Ltd.

Modderfontein

South Africa

74.91

Asea Brown Boveri S.A.

Madrid

Spain

100.00

ABB AB

Västerås

Sweden

100.00

ABB Electrification Sweden

Västerås

Sweden

100.00

ABB Norden Holding

Västerås

Sweden

100.00

ABB Asea Brown Boveri

Ltd

Zurich

Switzerland

100.00

ABB Canada EL Holding

GmbH

Zurich

Switzerland

100.00

ABB Capital AG

Zurich

Switzerland

100.00

ABB E-mobility Holding

Ltd

Baden

Switzerland

91.56

ABB Information Systems

Ltd.

Zurich

Switzerland

100.00

ABB Management Services

Ltd.

Zurich

Switzerland

100.00

ABB Schweiz AG

Baden

Switzerland

100.00

ABB Ltd.

Taipei

Taiwan (Chinese

Taipei)

100.00

ABB Elektrik Sanayi A.S.

Istanbul

Turkiye

99.99

ABB Industries (L.L.C.)

Dubai

United Arab

Emirates

49.00

(1)

ABB Holdings Limited

Warrington

United Kingdom

100.00

ABB Limited

Warrington

United Kingdom

100.00

ABB E-mobility Inc.

Wilmington, DE

United States

91.56

ABB Finance (USA)

Inc.

Wilmington, DE

United States

100.00

ABB Holdings Inc.

Cary, NC

United States

100.00

ABB Inc.

Cary, NC

United States

100.00

ABB Installation Products

Inc.

Memphis, TN

United States

100.00

ABB Motors and Mechanical

Inc.

Fort Smith, AR

United States

100.00

ABB Treasury Center (USA),

Inc.

Wilmington, DE

United States

100.00

Edison Holding Corporation

Wilmington, DE

United States

100.00

Industrial Connections

& Solutions LLC

Cary, NC

United States

100.00

(1)

Company consolidated

as ABB exercises

full management

control.

—

Description of property

As of December 31, 2022, we occupy

real estate in around

100 countries throughout the world.

The facilities

consist mainly of manufacturing plants,

office buildings, research centers and

warehouses. A substantial

portion of our production and development

facilities is situated in China, the U.S.,

Germany, Finland,

Sweden, Italy, Canada, India, Poland and Mexico.

We also own or lease other properties,

including office

buildings, warehouses, research and

development facilities

and sales offices in many countries.

We own

substantially all of the machinery and

equipment used in our

manufacturing operations.

From time to time, we have a surplus of

space arising from acquisitions,

production efficiencies and/or

restructuring of operations. Normally, we seek to sell

such surplus space which

may involve leasing property

to third parties for an interim period.

As a result of the divestment of

the Power Grids business

to Hitachi Ltd

in 2020,

certain property, plant and equipment previously owned

by ABB which related to the Power

Grids

business, was sold as part of the divestment.

In addition, certain property, plant and equipment relating

to the

former Power Grids business continues

to be owned by ABB and is leased

to Hitachi Energy Ltd.

The net book value of our property, plant and equipment

at December 31, 2022, was $3,911 million, of which

machinery and equipment represented

$1,305 million, land and buildings

represented $2,020 million

and

construction in progress represented

$586 million. We believe

that our current facilities are in good condition

and are adequate to meet the requirements

of our present and foreseeable

future operations.

Item 4A.

Unresolved Staff Comments

None

Item 5.

Operating and Financial Review

and Prospects

The discussion in Item 5 below provides

a comparative analysis

between 2022 and 2021. See

“Item 5.

Operating and Financial Review

and Prospects” in our Annual

Report on Form 20-F for the year ended

December 31, 2021, for a comparative

discussion and analysis between

2021 and 2020.

—

Management overview

In 2022, we managed to navigate high

customer activity in a complex

macroeconomic environment

marked

by inflation, a strained value chain,

an energy crisis, the war in Ukraine

with the related economic sanctions

on Russia as well as the lingering

impacts of the COVID-19 pandemic.

During the year,

we also worked to

fully implement the ABB Way operating model

within our Divisions. Our

new and more efficient ways of

working combined with a strong market

situation led to increased

operational results. In the wake of the

COVID-19 pandemic,

ongoing supply chain, logistics

and labor challenges

emerged, but we were able to

avoid major business disruptions with our

more agile organization. Our strong

price management processes

proved effective as we quickly responded

to rising input costs and were

able to more than offset the higher

costs of inflation through price increases

during the year.

Active portfolio management continues

to be part of our performance culture.

On the back of systematic

portfolio reviews we ascertain whether,

ultimately,

ABB is the best owner of

the different businesses. We

continued

to make strong progress in aligning

our business portfolio with our purpose,

and fully focus on the

areas of electrification and automation.

We completed the spin-off of the Turbocharging Division

October 2022 and sold the remaining

19.9 percent interest in Hitachi Energy

to Hitachi in December. The net

cash received from the sale further strengthened

our balance sheet,

giving us additional flexibility

in our

capital allocation decisions.

Looking forward, after the end

of the year, we also reached an agreement in

January 2023 to sell our Power Conversion

Division to AcBel Polytech

Inc. The transaction is subject

regulatory approvals and is expected

to be completed in the second half

of 2023.

At the same time, we remain committed

to our strategy to separately

list our E-mobility business subject

constructive market conditions. In

the meantime, we received

gross proceeds of approximately

CHF 200 million ($216 million)

through a private placement of new

shares in ABB E-mobility in

November 2022. After the end of the

year, we obtained an additional amount of funding

through the private

placement, increasing the total gross

proceeds by an additional

CHF 325 million ($351 million)

February 2023. We remain a committed partner

to ABB E-mobility with a shareholding

of 81 percent as of

February 2023.

In addition, our active portfolio management

process is driving decisions

within the Divisions to improve or

exit areas of underperformance and

support improved performance

ambitions. During 2022 we accelerated

the pace of strategic partnerships as

well as bolt-on acquisitions

driven by the Divisions. The Motion

Business Area announced their

first two acquisitions in more than

a decade, with a combined value

approximately $125 million.

Both the planned acquisition of the Siemens

low voltage NEMA motor business

(closing in 2023) and the PowerTech Converter acquisition will

help the respective Divisions to further

strengthen their leading market positions.

We have also made minority investments led

by our Divisions. Both

the InCharge Energy,

Inc (In-Charge) and Numocity Technologies Private Ltd (Numocity)

majority

acquisitions made earlier

this year are good examples that minority

investments can later also

become

acquisition targets. As part of our

future strategy, we continue to aim to complete five

or more bolt-on

acquisitions each year.

Business progress

During 2022, demand for ABB’s offering was robust,

driven by strong demand across

all regions and most

customer segments, leading to positive

developments

in both volumes and pricing,

the latter of which was

largely driven by our quick response

to rising input costs which we

were able to pass on to our

customers.

Orders increased in all Business Areas

with higher demand in

all regions with the Americas seeing

the

highest growth, while growth in Asia,

Middle East, and Africa was lower, driven mainly

by lower growth rates

in China versus prior year. Overall demand increased

for the short-cycle flow business

and the

systems-driven offerings as well as in

service.

While our orders increased 7 percent (13

percent in local currencies)

in 2022, revenue growth was lower

2 percent (9 percent in local currencies).

Supply chain constraints and

imbalances in the overall supply

chain

limited our ability to convert orders into

actual deliveries resulting

in an increase of our order backlog of

20 percent to $19.9 billion at the

end of the year.

Group profitability showed strong improvement

during 2022

with segment profit (Operational EBITA)

improving in all Business Areas but reflecting

approximately 10 percent of negative

currency translation

impacts compared to 2021.

The result was driven by strong

pricing execution, increased volumes

and

improved internal efficiency. Active price management and

productivity gains were able to offset increasing

raw material costs and general

cost inflation emphasized

by the tight supply situation over

the year.

Cash flows from operating activities

was $1.3 billion in 2022,

a decrease of 61 percent compared

to 2021.

The profitability improvement was more

than offset by the impact of a buildup

of working capital, especially

inventories, required to support our record

high backlog and the impact

of higher pay-out of employee

bonuses due to the strong financial

performance in 2021,

as well as significant cash outflows

relating to the

exit of a non-core business, the payment

for the settlement related to regulatory

penalties for the Kusile

project as well as ongoing restructuring

and business transformation costs.

We continued to make organic growth investments

in a disciplined

manner, prioritizing research and

development while reducing

administrative costs. Total non-order related research and development

was

$1.2 billion in 2022, or 4 percent

of revenues.

Capital allocation

Our capital allocation priorities

are unchanged:

•

funding organic growth, research

and development, and

capital expenditures at attractive returns,

•

paying a rising, sustainable

dividend per share over time,

•

investing in value-creating acquisitions,

and

•

returning additional cash

to shareholders.

We expect that our strong cash generation,

on the back of the ABB

Way operating model,

will enhance our

flexibility to invest in both organic

growth and bolt-on acquisitions,

while providing attractive returns

shareholders.

At the 2023

Annual General Meeting (AGM),

the Board of Directors is proposing

a dividend of 0.84 Swiss

francs per share. During the year we

reached our goal of returning $7.8

billion of the cash proceeds

from the

Power Grids divestment to shareholders.

Under the various share buyback

programs we have now

purchased in excess of our goal

with $2.8 billion of shares purchased

in 2022 in addition to the $5.5 billion

purchased through the end of 2021.

Sustainability strategy 2030

With our 2030 sustainability

strategy, we are actively contributing to a more sustainable

world, leading by

example in our own operations

and partnering with customers

and suppliers to enable a low-carbon

society,

preserve resources and promote

social progress. Our sustainability

focus is part of ABB’s commitment to

responsible business practices,

which are at the center of our comprehensive

governance framework, based

on integrity and transparency.

Amongst other focus areas in 2022,

we announced a new emissions

target for our supply chain. We aim

work with our main tier-one suppliers

to achieve a 50 percent reduction

in their CO

e emissions by 2030. The

target is focused on suppliers covering

70 percent of ABB’s annual procurement

expenditure. The new target

is expected to make an important

contribution to our goal of enabling

a low carbon society as, in many cases,

our suppliers have a bigger

footprint than our company. For a detailed discussion

of our sustainability

strategy 2030 and our progress in 2022,

see “Item 4. Information on the Company—Sustainability

activities”.

—

Critical accounting policies

and estimates

General

We prepare our Consolidated Financial

Statements in accordance

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

dollars unless otherwise stated.

The preparation of our financial

statements requires us to make assumptions

and estimates that affect the

reported amounts of assets, liabilities,

revenues and expenses and

the related disclosure of contingent

assets and liabilities. We evaluate our estimates

on an ongoing basis (see

“Note 2 - Significant accounting

policies” to our Consolidated

Financial Statements for a listing

of our most significant accounting

estimates).

Where appropriate, we base our estimates

on historical experience

and on various other assumptions

that we

believe to be reasonable

under the circumstances, the results

of which form the basis

for making judgments

about the carrying values of assets

and liabilities that are not readily

apparent from other sources. Actual

results may differ from our estimates

and assumptions.

We deem an accounting policy to be critical

if it requires an accounting

estimate to be made based

assumptions about matters that are highly

uncertain at the time

the estimate is made and if different

estimates that reasonably could

have been used, or if changes

in the accounting estimates that are

reasonably likely to occur periodically, could materially

impact our Consolidated Financial

Statements. We

also deem an accounting policy

to be critical when the application

of such policy is essential to our ongoing

operations. We believe the following

critical accounting policies

require us to make subjective judgments,

often as a result of the need to make

estimates regarding

matters that are inherently uncertain

and material

to our Consolidated Financial

Statements. These policies should

be considered when reading

our

Consolidated Financial

Statements.

Revenue recognition

A customer contract exists if collectability

under the contract is considered

probable, the contract has

commercial substance, contains

payment terms, the rights and commitments

of both parties,

and has been

approved. By analyzing the type, terms

and conditions of each contract

or arrangement with a customer, we

determine which revenue recognition

method applies.

We recognize revenues when control of

goods or services is transferred

to customers in an amount

that

reflects the consideration we expect

to be entitled to in exchange

for these goods or services. Control

transferred when the customer has

the ability to direct the use

and obtain the benefits from

the goods or

services.

The percentage

‑

completion method of accounting

is generally used when

recognizing revenue on an over

time basis and involves the use of assumptions

and projections, principally

relating to future material, labor,

subcontractor and project

‑

related overhead costs as well

as estimates of the amount of variable

consideration to which we expect to

be entitled.

As a consequence, there

is a risk that total contract costs

the amount of variable consideration

will,

respectively, either exceed or be lower than those we originally

estimated (based on all information

reasonably available to us) and

the margin will decrease or the

contract

may become unprofitable. This risk increases

if the duration of a contract increases

because there is a higher

probability that the circumstances upon

which we originally developed

our estimates will change, resulting

increased costs that we may not recover. Factors

that could cause costs to increase

include:

•

unanticipated technical problems

with equipment supplied or developed

by us which may require

us to incur additional costs to remedy,

•

changes in the cost of components,

materials or labor,

•

difficulties in obtaining required

governmental permits or approvals,

•

project modifications creating unanticipated

costs,

•

suppliers’

or subcontractors’

failure to perform, and

•

delays caused by unexpected conditions

or events.

Changes in our initial assumptions,

which we review on a regular

basis between balance sheet

dates, may

result in revisions to estimated costs,

current earnings and anticipated

earnings. We recognize these

changes in the period in which

the changes in estimates are determined.

By recognizing changes

estimates cumulatively, recorded revenue and costs to

date reflect the current estimates

of the stage of

completion of each project. Additionally, losses on such

contracts are recognized in the period

when they are

identified and are based upon

the anticipated excess of contract costs

over the related contract revenues.

Pension and other postretirement benefits

As more fully described in “Note 17 -

Employee benefits” to our

Consolidated Financial

Statements, we have

a number of defined benefit pension

and other postretirement

plans and recognize an asset

for a plan’s

overfunded status or a liability

for a plan’s underfunded status in our

Consolidated Balance

Sheets. We

measure such a plan’s assets and obligations

that determine its funded status as

of the end of the year.

Significant differences between assumptions

and actual experience,

or significant changes in assumptions,

may materially affect the pension obligations.

The effects of actual results differing from assumptions

and the

changing of assumptions are included

in net actuarial loss within “Accumulated

other comprehensive loss”.

We recognize actuarial gains and losses

gradually over time. Any cumulative

unrecognized actuarial

gain or

loss that exceeds 10 percent of the greater

of the present value of

the projected benefit obligation

(PBO) and

the fair value of plan assets is recognized

in earnings over the expected average

remaining working

lives of

the employees participating in

the plan, or the expected average

remaining lifetime of the inactive

plan

participants if the plan is comprised

of all or almost all inactive

participants. Otherwise, the actuarial

gain or

loss is not recognized in the Consolidated

Income Statements.

We use actuarial valuations to determine

our pension and postretirement benefit

costs and credits. The

amounts calculated depend

on a variety of key assumptions, including

discount rates, mortality rates and

expected return on plan assets. Under

U.S. GAAP, we are required to consider current market conditions

making these assumptions. In particular, the discount

rates are reviewed annually

based on changes in

long

‑

term, highly

‑

rated corporate bond yields. Decreases

in the discount rates result in

an increase in the

PBO and in pension costs. Conversely, an increase in the

discount rates results in a decrease in

the PBO

and in pension costs. The mortality

assumptions are reviewed

annually by management. Decreases in

mortality rates result in an increase in

the PBO and in pension

costs. Conversely, an increase in mortality

rates results in a decrease in the

PBO and in pension costs.

Holding all other assumptions constant,

a 0.25 percentage-point

decrease in the discount rate would

have

increased the PBO related to our

defined benefit pension plans

by $144 million while a 0.25 percentage-point

increase in the discount rate would

have decreased the PBO related

to our defined benefit pension

plans by

$140 million.

The expected return on plan assets is

reviewed regularly and

considered for adjustment annually

based upon

the target asset allocations and represents

the long

‑

term return expected to be achieved.

Decreases in the

expected return on plan assets result

in an increase to pension

costs. Holding all other assumptions constant,

an increase or decrease of 0.25 percentage

points in the expected long

‑

term rate of asset return would

have

decreased or increased, respectively, the net periodic benefit

cost in 2022

by $20 million.

The funded status, which can increase

or decrease based on the performance

of the financial markets or

changes in our assumptions, does not

represent a mandatory short

‑

term cash obligation. Instead,

the funded

status of a defined benefit pension

plan is the difference between

the PBO and the fair value of the plan

assets. Our defined benefit pension

plans were overfunded by $326

million and $27 million at December

31,

2022 and 2021, respectively.

Our other postretirement

plans were underfunded

by $50 million and $71 million

at December 31, 2022

and 2021, respectively.

Income taxes

In preparing our Consolidated

Financial Statements, we are required

to estimate income taxes in each

of the

jurisdictions in which we operate.

Tax

expense from continuing

operations is reconciled from the

weighted

‑

average global tax rate (rather than from

the Swiss domestic statutory tax

rate). As the parent

company of the ABB Group, ABB Ltd,

is domiciled in Switzerland,

income which has been generated

jurisdictions outside of Switzerland

(hereafter “foreign jurisdictions”)

and has already been subject

corporate income tax in those foreign

jurisdictions is, to a large extent,

tax exempt in Switzerland.

Therefore,

generally no or only limited

Swiss income tax has to be

provided for on the repatriated earnings

of foreign

subsidiaries. There is no requirement

in Switzerland for a parent company

of a group to file a tax return

of the

group determining domestic and

foreign pre

‑

tax income and as our consolidated

income from continuing

operations is predominantly

earned outside of Switzerland,

corporate income tax in foreign

jurisdictions

largely determines our global

weighted

‑

average tax rate.

We account for deferred taxes by using

the asset and liability method. Under

this method, we determine

deferred tax assets and liabilities

based on temporary differences between

the financial reporting

and the tax

bases of assets and liabilities. Deferred

tax assets and liabilities are

measured using the enacted tax

rates

and laws that are expected to be in effect

when the differences are expected

to reverse. We recognize a

deferred tax asset when it is more likely

than not that the asset will be

realized. We regularly review our

deferred tax assets for recoverability

and establish a valuation

allowance based upon historical

losses,

projected future taxable income and

the expected timing of the

reversals of existing temporary

differences. To

the extent we increase or decrease

this allowance in a period,

we recognize the change in the allowance

within “Income tax expense”

in the Consolidated Income

Statements unless the change

relates to

discontinued operations, in which

case the change is recorded

in “Income from discontinued operations,

net

of tax”. Unforeseen changes in tax

rates and tax laws, as well

as differences in the projected taxable

income

as compared to the actual taxable income,

may affect these estimates.

Certain countries levy withholding

taxes, dividend distribution taxes or additional

corporate income taxes

(hereafter “withholding taxes”) on dividend

distributions. Such taxes cannot

always be fully reclaimed by

the

shareholder, although they have to be declared

and withheld by the subsidiary. Switzerland has concluded

double taxation treaties with many

countries in which we operate.

These treaties either eliminate

or reduce

such withholding taxes on dividend

distributions. It is our policy to distribute

retained earnings

of subsidiaries,

insofar as such earnings are not permanently

reinvested or no other reasons

exist that would prevent

the

subsidiary from distributing them. No

deferred tax liability is

set up if retained earnings are

considered as

indefinitely reinvested and

used for financing current operations

as well as business growth

through working

capital and capital expenditure

in those countries.

We operate in numerous tax jurisdictions

and, as a result, are regularly

subject to audit by tax authorities,

including for transfer pricing. We provide for

tax contingencies whenever

it is deemed more likely than not

that a tax asset has been impaired

or a tax liability has been

incurred for events such as tax claims

changes in tax laws. Contingency provisions

are recorded based on

the technical merits of our filing

position,

considering the applicable

tax laws and OECD guidelines and

are based on our evaluations

of the facts and

circumstances as of the end of each

reporting period. Changes

in the facts and circumstances could

result in

a material change to the tax accruals.

Although we believe that our

tax estimates are reasonable

and that

appropriate tax reserves have been

made, the final determination

of tax audits and any related litigation

could

be different than that which is reflected in

our income tax provisions

and accruals.

An estimated loss from a tax contingency

must be accrued as a charge

to income if it is more likely

than not

that a tax asset has been impaired

or a tax liability has been

incurred and the amount of the loss can

reasonably estimated. We apply a two

‑

step approach to recognize

and measure uncertainty in income

taxes.

The first step is to evaluate the

tax position for recognition by determining

if the weight of available evidence

indicates that it is more likely

than not that the position will

be sustained on audit, including

resolution of

related appeals or litigation

processes, if any. The second step is to measure the tax benefit

as the largest

amount which is more than 50 percent

likely of being realized

upon ultimate settlement. The required

amount

of provisions for contingencies

of any type may change in the future

due to new developments.

Goodwill and intangible assets

We review goodwill for impairment annually

as of October 1, or more frequently if

events or circumstances

indicate the carrying value may not

be recoverable. We use either a qualitative

or quantitative assessment

method for each reporting unit.

As each of our Divisions have full

ownership and accountability

for their respective strategies, performance

and resources, we have determined

our reporting units

to be at the Division level, which

is one level below

our operating segments of Electrification,

Motion, Process Automation and

Robotics & Discrete Automation.

When performing the qualitative assessment,

we first determine, for a reporting

unit, factors which would

affect the fair value of the reporting unit

including: (i) macroeconomic

conditions related to the business,

(ii) industry and market trends,

and (iii) the overall future financial

performance and future opportunities

in the

markets in which the business operates.

We then consider how these factors would

impact the most recent

quantitative analysis of the reporting

unit’s fair value. Key assumptions

in determining the fair value

of the

reporting unit include the projected level

of business operations, the reporting

unit’s weighted

‑

average cost of

capital, the income tax rate and

the terminal growth rate.

During 2022,

we added one new Division

by creating a standalone Division

from components of two existing

Divisions resulting in twenty-one

reporting units in total for the Group at

October 1, 2022.

Subsequently ABB

completed the spin-off of the Turbocharging Division

in October 2022. For each change

in reporting unit

which arose during 2022, an interim

quantitative impairment test was

conducted before and after the

change.

In both the “before” and “after”

tests, it was concluded that the fair

value of the reporting units exceeded

the

carrying value by a significant amount.

During 2021, we added three

new Divisions by splitting two existing

ones into multiple standalone

Divisions

and announced (in July 2021)

the divestment of the Mechanical

Power Transmission Division, resulting in

twenty reporting units in total for the

Group at October 1, 2021. For each

change in reporting unit which

arose

during 2021, an interim quantitative

impairment test was conducted

before and after the change.

In both the

“before” and “after” tests, it was

concluded that the fair value

of the reporting units exceeded

the carrying

value by a significant amount.

In 2020, prior to the adoption of

the new “ABB Way” operating model

on July 1, 2020, goodwill was generally

assessed at the level of ABB’s operating

segments (one level above

the Division, with the exception of

Process Automation where the reporting

units were the same as

the Divisions) while after the change,

goodwill impairment was assessed

at the Division level.

Although the new operating model

resulted only in an

allocation of goodwill within

the operating segments and

did not change the segment level

goodwill, an

interim quantitative impairment

test was conducted before and

after the July 1 change. As a result of

the

interim quantitative impairment

test, a goodwill impairment charge

of $290 million was recorded in 2020

reduce the carrying value of the Machine

Automation reporting

unit to its implied fair value. For more

information, please refer to “Note 11 – Goodwill and intangible

assets” to ABB’s Consolidated Financial

Statements.

At October 1, 2022

and 2021, we performed qualitative

assessments and determined

that it was not more

likely than not that the fair value

for each of these reporting units

was below the carrying value.

As a result,

we concluded that it was not necessary

to perform the quantitative

impairment test.

Intangible assets are reviewed for

recoverability upon the

occurrence of certain triggering events

(such as a

decision to divest a business or projected

losses of an entity) or whenever

events or changes in

circumstances indicate that the

carrying amount may not be recoverable.

We record impairment charges

other than impairments of goodwill

in “Other income (expense), net”

in our Consolidated Income

Statements,

unless they relate to a discontinued

operation, in which case the

charges are recorded in “Income from

discontinued operations, net of tax”.

—

New accounting pronouncements

For a description of accounting changes

and recent accounting pronouncements,

including the expected

dates of adoption and estimated

effects, if any, on our Consolidated Financial

Statements, see “Note 2 -

Significant accounting policies”

to our Consolidated Financial

Statements.

—

Research and development

Each year, we invest significantly in research and development.

Our research and development

focuses on

developing and commercializing

the technologies,

products and solutions of our businesses

that are of

strategic importance to our future growth.

In 2022, we invested $1,166

million, or approximately 4 percent of

our 2022

consolidated revenues, on research

and development activities in our

continuing operations.

also had expenditures of approximately

$48 million on order-related

development activities. These are

customer

‑

and project

‑

specific development efforts

that we undertake to develop or adapt

equipment and

systems to the unique needs

of our customers in connection

with specific orders or projects.

In addition to continuous product development,

and order

‑

related engineering work, we develop

platforms for

technology applications

in our businesses in our research

and development laboratories,

which operate on a

global basis. Through active management

of our investment in research and

development, we seek to

maintain a balance between

short

‑

term and long

‑

term research and development

programs and optimize our

return on investment. We protect these

results by holding patents, copyrights

and other appropriate

intellectual property protection.

complement our business-focused

product development, our businesses

invest together in collaborative

research activities covering topics

such as artificial intelligence,

software, sensors, control and optimization,

mechatronics and robotics, power

electronics, communication

technologies, material and manufacturing,

electrodynamics and electrical

switching technologies. This results in

advancing the state-of-the-art

technologies used in our products

and in common technology

platforms that can be applied across multiple

product lines.

Universities are incubators of future

technology, and one task of our research and development

teams is to

transform university research into

industry

‑

ready technology platforms.

We collaborate with multiple

universities and research institutions

to build research networks and

foster new technologies. We believe

these collaborations shorten the amount

of time required to turn

basic ideas into viable products, and

they

additionally

help us to recruit and train new personnel.

We have built numerous university strategic

relationships with a number of leading

institutions in various countries

around the world.

We are also leveraging our ecosystem to

enhance our innovation

efforts and gain speed with strategic

partners with complementary competencies.

In addition, we invest and collaborate

with start-ups worldwide

via our corporate venture arm ABB

Technology Ventures

and our start-up collaboration

arm SynerLeap.

The result of our investment in research

and development is that

ABB is widely recognized

for its world-class

technology.

—

Acquisitions and divestments

Acquisitions

During 2022 and 2021, ABB paid

$195 million and $212 million

to purchase five and two businesses,

respectively.

The principal acquisition

in 2022 was InCharge Energy, Inc. (In-Charge),

where we increased our ownership

to a 60 percent controlling interest, expanding

the market presence of the E-mobility

Division within our

Electrification operating segment,

particularly in the North

American market. In-Charge is headquartered

Santa Monica, United States,

and is a provider of turn-key commercial

electric vehicle charging

hardware and

software solutions. See “Note 4 - Acquisitions,

divestments and equity-accounted

companies” to our

Consolidated Financial

Statements.

The principal acquisition

in 2021 was ASTI Mobile Robotics Group

SL (ASTI). ASTI is headquartered

Burgos, Spain.

There were no significant acquisitions

in 2020.

Divestments and spin-offs

Spin-off of the Turbocharging Division

In September 2022, the shareholders

approved the spin-off of the Company’s

Turbocharging Division into an

independent, publicly traded company, Accelleron

Industries AG (Accelleron), which

was completed through

the distribution of common stock of

Accelleron to the stockholders

of ABB on October 3, 2022. As a result of

the spin-off of this Division, the Company distributed

net assets of $272 million, net of amounts

attributable to

noncontrolling interests of $12 million,

which was reflected as a reduction

in Retained earnings. In

addition,

total accumulated comprehensive

income of $95 million, including

the cumulative translation adjustment,

was

reclassified to Retained earnings.

Cash and cash equivalents distributed

with Accelleron was $172 million.

Prior to being spun-off, the Turbocharging Division

was part of our Process Automation

Business Area. See

“Note 4 - Acquisitions, divestments and

equity-accounted companies”

to our Consolidated Financial

Statements.

Divestment of Mechanical Power

Transmission Division

In November 2021, we completed

the sale of our Mechanical

Power Transmission Division (Dodge) to RBC

Bearings Inc. for cash proceeds

of $2,862 million, net of transaction

costs and cash disposed and

recognizing

a net gain on sale of $2,195

million.

Prior to its disposal, the Dodge business

was part of our Motion Business

Area. See “Note 4 - Acquisitions, divestments

and equity-accounted

companies” to our Consolidated

Financial Statements.

Divestment of Power Grids

On July 1, 2020,

we completed the divestment

of 80.1 percent of our former

Power Grids business (Hitachi

Energy) to Hitachi. As this divestment

represented a strategic

shift that would have a major effect on our

operations and financial

results, the results of operations for

this business are presented as discontinued

operations and the assets and liabilities

are reflected as held for sale for

all periods presented. For more

information on the divestment of

the Power Grids business see

“Note 3 - Discontinued operations”

to our

Consolidated Financial

Statements.

Hitachi held a call option which

required ABB to sell the remaining

19.9 percent interest in Hitachi Energy

at a

price consistent with what was paid

by Hitachi to acquire the initial

80.1 percent or at fair value, if

higher. In

September 2022, we agreed with Hitachi

that we would sell our remaining

investment in Hitachi Energy and

concurrently settle certain outstanding

contractual obligations relating

to the initial sale of the business,

including certain indemnification

guarantees (see Note 15 - Commitments

and contingencies). The

transaction was completed in December

2022, and we received

proceeds of $1,552 million. See “Note 4

Acquisitions, divestments and equity-accounted

companies” to our Consolidated

Financial Statements.

—

Exchange rates

We report our financial results in U.S. dollars.

Due to our global operations,

a significant amount of our

revenues, expenses, assets and liabilities

are denominated in other currencies.

As a consequence,

movements in exchange rates between

currencies may affect: (i) our profitability, (ii) the comparability

of our

results between periods and (iii)

the reported carrying value

of our assets and liabilities.

We translate non

‑

USD denominated results of operations,

assets and liabilities

to USD in our Consolidated

Financial Statements. Balance sheet

items are translated

to USD using year

‑

end currency exchange

rates.

Income statement and cash flow items

are translated to USD using

the relevant monthly average

currency

exchange rate.

Increases and decreases in the

value of the USD against other

currencies will affect the reported

results of

operations in our Consolidated

Income Statements and the value of certain

of our assets and liabilities

in our

Consolidated Balance

Sheets, even if our results of operations

or the value of those assets and liabilities

have not changed in their original

currency. As foreign exchange rates impact our reported

results of

operations and the reported value

of our assets and liabilities,

changes in foreign exchange

rates could

significantly affect the comparability of

our reported results of operations

between periods and result in

significant changes to the reported

value of our assets, liabilities

and stockholders’

equity.

While we operate globally

and report our financial results in USD,

exchange rate movements between

the

USD and the EUR, the CNY and the CHF

are of particular importance

to us due to (i) the location of our

significant operations and (ii) our

corporate headquarters being

in Switzerland.

The exchange rates between

the USD and the EUR, the USD

and the CHF and the USD and

the CNY at

December 31, 2022, 2021 and 2020,

were as follows:

Exchange rates into $

2022

2021

2020

EUR 1.00

1.07

1.13

1.23

CHF 1.00

1.08

1.10

1.14

CNY 1.00

0.14

0.16

0.15

The average exchange rates between

the USD and the EUR, the USD

and the CHF and the USD and

the

CNY for the years ended December 31,

2022, 2021 and 2020, were as follows:

Exchange rates into $

2022

2021

2020

EUR 1.00

1.05

1.18

1.14

CHF 1.00

1.05

1.09

1.07

CNY 1.00

0.15

0.16

0.14

When we incur expenses that are not

denominated in the same

currency as the related revenues,

foreign

exchange rate fluctuations could affect our

profitability. To

mitigate the impact of exchange

rate movements

on our profitability, it is our policy to enter into forward foreign

exchange contracts to manage the foreign

exchange transaction risk of our operations.

In 2022, approximately 75 percent of

our consolidated revenues

were reported in currencies other than

the

USD. The following percentages

of consolidated revenues were

reported in the following

currencies:

•

Euro, approximately 22 percent, and

•

Chinese renminbi, approximately

16 percent.

In 2022, approximately 72 percent of

our cost of sales and

selling, general and administrative

expenses were

reported in currencies other than

the USD. The following percentages

of consolidated cost of sales and

selling, general and administrative

expenses were reported in the

following currencies:

•

Euro, approximately 19 percent, and

•

Chinese renminbi, approximately

13 percent.

We also incur expenses other than cost

of sales and selling,

general and administrative expenses

in various

currencies.

The results of operations and financial

position of our subsidiaries

outside of the U.S. are generally

accounted for in the currencies of

the countries in which those subsidiaries

are located. We refer to these

currencies as “local currencies”. Local

currency financial information

is then translated into USD at applicable

exchange rates for inclusion in our

Consolidated Financial

Statements.

The discussion of our results of operations

below provides certain information

with respect to orders,

revenues, income from operations

and other measures as reported

in USD (as well as in local

currencies).

We measure period

‑

period variations in local currency

results by using a constant foreign

exchange rate

for all periods under comparison.

Differences in our results of operations

in local currencies as compared

our results of operations in USD are

caused exclusively by changes

in currency exchange rates.

While we consider our results of operations

as measured in local currencies

to be a significant indicator of

business performance, local currency

information should not be relied

upon to the exclusion of U.S.

GAAP

financial measures. Instead, local

currencies reflect an additional

measure of comparability and provide

means of viewing aspects of our operations

that, when viewed together with the U.S.

GAAP results, provide a

more complete understanding

of factors and trends affecting

the business. As local currency information

not standardized, it may not be possible

to compare our local currency information

to other companies’

financial measures that have

the same or a similar title. We encourage

investors to review our financial

statements and publicly filed reports

in their entirety and not to

rely on any single financial

measure.

—

Orders

Our policy is to book and report

an order when a binding contractual

agreement has been concluded

with a

customer covering, at a minimum,

the price and scope of products or

services to be supplied, the delivery

schedule and the payment terms.

The reported value of an order corresponds

to the undiscounted value of

revenues that we expect to recognize

following delivery of the goods

or services subject to the order, less any

trade discounts and excluding

any value added or sales tax. The

value of orders received during

a given

period of time represents the sum of

the value of all orders received

during the period, adjusted to reflect

the

aggregate value of any changes

to the value of orders received

during the period and orders

existing at the

beginning of the period. These adjustments,

which may in the aggregate increase

or decrease the orders

reported during the period, may include

changes in the estimated order

price up to the date of contractual

performance, changes in the scope

of products or services ordered

and cancellations of orders. The

undiscounted value of future revenues

we expect to generate from our

orders at any point in time is

represented by our order backlog.

The level of orders fluctuates from

year to year. Portions of our business involve orders

for long

‑

term projects

that can take months or years to complete

and many larger

orders result in revenues in periods

after the

order is booked. Consequently, the level of orders generally

cannot be used to accurately predict

future

revenues or operating performance.

Orders that have been placed

can often be cancelled, delayed or

modified by the customer. These actions can reduce

or delay any future revenues

from the order or may

result in the elimination of the order.

—

Performance measures

We evaluate the performance of our operating

segments based on orders received,

revenues and

Operational EBITA.

Operational EBITA represents income from operations

excluding:

•

amortization expense on intangibles

arising upon acquisitions (acquisition-related

amortization),

•

restructuring, related and implementation

costs,

•

changes in the amount recorded for

obligations related to divested

businesses occurring after

the

divestment date (changes in obligations

related to divested businesses),

•

changes in estimates relating to

opening balance sheets of acquired

businesses (changes in

pre

‑

acquisition estimates),

•

gains and losses from sale of businesses

(including fair value adjustment

on assets and liabilities

held for sale),

•

acquisition-

and divestment-related expenses

and integration costs,

•

other income/expense relating

to the Power Grids joint

venture,

•

certain other non-operational

items, as well as

•

foreign exchange/commodity timing

differences in income from operations

consisting of:

(a) unrealized gains and

losses on derivatives (foreign exchange,

commodities, embedded

derivatives), (b) realized gains and

losses on derivatives where

the underlying hedged

transaction has not yet been realized,

and (c) unrealized foreign

exchange movements on

receivables/payables (and

related assets/liabilities).

Certain other non-operational

items generally includes: certain

regulatory, compliance and legal costs, certain

asset write downs/impairments (including

impairment of goodwill)

and certain other fair value changes, as

well as other items which are determined

by management on a case-by-case

basis.

See “Note 23 - Operating segment

and geographic data” to our Consolidated

Financial Statements for a

reconciliation of the total Operational

EBITA to income from continuing operations before taxes.

—

Analysis of results of operations

Our consolidated results from operations

were as follows:

Income Statement Data:

($ in millions, except per

share data in $)

2022

2021

2020

Revenues

29,446

28,945

26,134

Cost of sales

(19,736)

(19,478)

(18,256)

Gross profit

9,710

9,467

7,878

Selling, general and administrative

expenses

(5,132)

(5,162)

(4,895)

Non-order related research

and development expenses

(1,166)

(1,219)

(1,127)

Impairment of goodwill

—

(311)

Other income (expense),

net

(75)

2,632

Income from operations

3,337

5,718

1,593

Interest and dividend income

Interest and other finance

expense

(130)

(148)

(240)

Losses from extinguishment

of debt

—

(162)

Non-operational pension

(cost) credit

115

166

(401)

Income tax expense

(757)

(1,057)

(496)

Income from continuing

operations, net of

tax

2,637

4,730

345

Income (loss) from discontinued

operations, net of

tax

(43)

(80)

4,860

Net income

2,594

4,650

5,205

Net income attributable

to noncontrolling

interests and redeemable

noncontrolling interests

(119)

(104)

(59)

Net income attributable

to ABB

2,475

4,546

5,146

Amounts attributable to

ABB shareholders:

Income from continuing

operations, net of

tax

2,517

4,625

294

Income (loss) from discontinued

operations, net of

tax

(42)

(79)

4,852

Net income

2,475

4,546

5,146

Basic earnings per share

attributable to ABB

shareholders:

Income from continuing

operations, net of

tax

1.33

2.31

0.14

Income (loss) from discontinued

operations, net of

tax

(0.02)

(0.04)

2.30

Net income

1.30

2.27

2.44

Diluted earnings per share

attributable to ABB

shareholders:

Income from continuing

operations, net of

tax

1.32

2.29

0.14

Income (loss) from discontinued

operations, net of

tax

(0.02)

(0.04)

2.29

Net income

1.30

2.25

2.43

A more detailed discussion of

the orders, revenues, income

from operations and Operational

EBITA for our

Business Areas follows in the sections

of “Business analysis”

below for Electrification, Motion,

Process

Automation, Robotics & Discrete Automation

and Corporate and Other. Orders and revenues

of our

businesses include intersegment

transactions which are eliminated

in the “Corporate

and Other”

line in the

tables below.

Orders

% Change

($ in millions)

2022

2021

2020

2022

2021

Electrification

15,901

14,381

11,884

11%

21%

Motion

7,896

7,616

6,574

16%

Process Automation

6,825

6,779

6,144

10%

Robotics & Discrete Automation

4,116

3,844

2,868

34%

Total Business Areas

34,738

32,620

27,470

19%

Corporate and Other

Non-core and divested businesses

(10)

(31)

n.a.

Intersegment eliminations

and other

(796)

(742)

(927)

n.a.

Total

33,988

31,868

26,512

20%

In 2022, total orders increased 7 percent

compared to 2021 (13 percent in

local currencies). All Business

Areas contributed to the order growth

driven by both higher business

volumes and price

increases, reflecting

strong demand across most regions

and most customer segments,

as well as the impact of successfully

passing on rising input costs to end

customers.

Orders were higher for product and

project businesses as

well as for service businesses.

In addition to strong underlying

market demand,

orders were also supported

by customers placing orders early

to secure deliveries in an

environment with a generally

tight supply chain,

especially earlier in the year.

As supply chain constraints eased

over the year, customer order patterns

tended to normalize. Growth rates were

highest in the Electrification

and Robotics & Discrete Automation

Business Areas.

Both the Process Automation and

Motion Business Areas contributed

modest growth, with

the former impacted by the spin-off of the Turbocharging

Division in October 2022 and the latter

impacted by

the divestment of the Mechanical

Power Transmission business sold in November

2021 which together had a

combined negative impact on consolidated

order growth of approximately 3 percent.

For additional

information about individual

Business Area order performance, refer

to the relevant sections of “Business

analysis” below.

We determine the geographic distribution

of our orders based on the location

of the ultimate destination of the

products’ end use, if known, or

the location of the customer. The geographic

distribution of our consolidated

orders was as follows:

% Change

($ in millions)

2022

2021

2020

2022

2021

Europe

11,778

11,857

9,618

(1)%

23%

The Americas

11,825

9,940

7,956

19%

25%

of which: United States

8,920

7,453

5,971

20%

25%

Asia, Middle East and Africa

10,385

10,071

8,938

13%

of which: China

5,087

5,036

4,121

22%

Total

33,988

31,868

26,512

20%

In 2022, orders increased 19 percent

in the Americas (20 percent in

local currencies),

with orders growing in

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

In Europe,

orders decreased 1 percent (increased

13 percent in local

currencies) with the Motion and

Robotics & Discrete Automation

Business Areas reporting order

growth.

Orders were higher in France, Switzerland,

Italy and the United Kingdom

while they declined in Germany,

Sweden and Finland.

In Asia, Middle East and Africa,

orders increased 3 percent (9 percent

in local

currencies) with orders increasing

in China,

India,

Singapore, South Korea and

Saudi Arabia while they

decreased in Australia.

Order backlog

% Change

December 31, ($ in millions)

2022

2021

2020

2022

2021

Electrification

6,933

5,458

4,358

27%

25%

Motion

4,726

3,749

3,320

26%

13%

Process Automation

6,229

6,079

5,805

Robotics & Discrete Automation

2,679

1,919

1,403

40%

37%

Total Business Areas

20,567

17,205

14,886

20%

16%

Corporate and Other

Non-core and divested businesses

114

139

(80)%

(18)%

Intersegment

eliminations

(723)

(712)

(722)

n.a.

Total

19,867

16,607

14,303

20%

16%

At December 31, 2022, consolidated

order backlog was 20 percent higher

(26 percent in local currencies)

compared to December 31, 2021.

Order backlog increased significantly

in most Business Areas with the

Process Automation Business Area having

only modest growth. The order backlog

in the Motion Business

Area was driven by order growth

in both the short-

and long-cycle businesses

in most Divisions. Order

backlog increased across all Divisions

in the Electrification Business Area

reflecting the very high order levels

with the strongest growth in the E-mobility

and Distribution Solutions

Divisions. The order backlog in the

Process Automation Business Area was

supported by a strong order increase

in most Divisions

except the

Marine & Ports Division, which was negatively

impacted by an order reversal due

to a customer bankruptcy in

Germany.

The low order backlog growth in

the Process Automation Business

Area also reflects the spin-off of

the Turbocharging Division. The increase in the order

backlog in the Robotics & Discrete

Automation

Business Area was driven by strong growth

in both Divisions (Machine Automation

and Robotics).

Revenues

% Change

($ in millions)

2022

2021

2020

2022

2021

Electrification

14,105

13,187

11,924

11%

Motion

6,745

6,925

6,409

(3)%

Process Automation

6,044

6,259

5,792

(3)%

Robotics & Discrete Automation

3,181

3,297

2,907

(4)%

13%

Total Business Areas

30,075

29,668

27,032

10%

Corporate and Other

Non-core and divested businesses

135

(6)

n.a.

Intersegment eliminations

and other

(764)

(734)

(892)

n.a.

Total

29,446

28,945

26,134

11%

In 2022, revenues increased by 2 percent

(9 percent in local currencies).

During the first half of the year,

revenues were hampered as component

constraints slowed production

and hindered customer deliveries.

However, the supply chain challenges progressively

eased, triggering higher revenue

growth rates in the

latter part of the year. All Business Areas benefited

from increased volumes and

price

increases as we were

able to pass on the impacts of higher

cost inputs to the end customers.

Growth rates were highest in

the

Electrification Business Area. In local

currencies, the Motion Business

Area achieved a single-digit growth

rate despite the adverse impact

from the divestment of the Mechanical

Power Transmission Division in

November 2021. The Process Automation

Business Area saw moderate growth

in local currencies despite

the spin-off of the Turbocharging Division in October 2022.

Revenues in the Robotics & Discrete

Automation

Business Area increased in local

currencies,

with revenues benefiting

in the second half of the year from

easing of component constraints.

For additional analysis of revenues

for each of the Business Areas, refer

the relevant sections of “Business

analysis” below.

We determine the geographic distribution

of our revenues based on the location of

the ultimate destination of

the products’ end use, if known,

or the location of the customer. The geographic

distribution of our

consolidated revenues was

as follows:

% Change

($ in millions)

2022

2021

2020

2022

2021

Europe

10,286

10,529

9,764

(2)%

The Americas

9,572

8,686

7,949

10%

of which: United States

7,021

6,397

6,027

10%

Asia, Middle East and Africa

9,588

9,730

8,421

(1)%

16%

of which: China

4,696

4,932

4,098

(5)%

20%

Total

29,446

28,945

26,134

11%

In 2022, the increase in revenues was

driven by the Americas region,

where revenues increased 10

percent

(11 percent in local currencies) and were higher across

all Business Areas except the

Motion Business Area.

Revenues increased in the U.S., Canada,

Brazil, Mexico, Argentina and

Peru. In Europe,

revenues

decreased 2 percent (increased

12 percent in local currencies)

and were higher across all Business

Areas

except the Motion Business Area,

which was flat. Sales were higher

in Finland, the United Kingdom and

France while revenues

were lower in Sweden, Switzerland

and Norway. Germany and Italy reported stable

sales.

In Asia, Middle East and Africa

revenues decreased 1 percent (increased

5 percent in local currencies)

and revenues grew in the Electrification

Business Area while

the Process Automation and Robotics

Discrete Automation Business Areas

reported a decrease with the

Motion Business Area being stable.

Revenues increased in India

and Singapore while they decreased

in China, Saudi Arabia,

Australia, Japan

and South Korea.

Cost of sales

Cost of sales consists primarily of labor, raw materials

and component costs but also includes

indirect

production costs, expenses for warranties,

contract and project charges,

as well as order-related

development expenses incurred

in connection with projects for which

corresponding revenues

have been

recognized.

In 2022, costs of sales increased 1

percent (8 percent in local

currencies) to $19,736 million. Cost of

sales as

a percentage of revenues decreased

to 67.0 percent from 67.3 percent

in 2021, increasing the gross

margin,

primarily driven by price

increases and certain cost savings

actions taken to mitigate higher inflation

in labor,

commodity prices

and freight costs. It is partly

offset by a negative impact due to portfolio

changes. In 2022,

gross margin percentages were higher

in the Electrification,

Process Automation and Motion

Business Areas.

The gross margin percentages

in the Robotics & Discrete

Automation Business Areas were lower

in 2022

compared to 2021 due to the impact of

higher inflation and

lower volume due to general

supply chain

constraints.

Selling, general and administrative expenses

The components of selling, general

and administrative expenses were

as follows:

($ in millions)

2022

2021

2020

Selling expenses

3,248

3,281

3,087

General and administrative

expenses

1,884

1,881

1,808

Total

5,132

5,162

4,895

In 2022, general and administrative

expenses were flat (increased

8 percent in local currencies) compared

2021. The local currency increase principally

represents an impact from inflation.

As a percentage of

revenues, general and administrative

expenses slightly decreased to 6.4 percent

from 6.5 percent in 2021

mainly due to strong revenue growth

compared to more modest cost

increases.

General and administrative

expenses in 2022

continue to include the ongoing

costs required to deliver services

to Hitachi Energy Ltd and

Accelleron (commencing in October

2022) under transition service

agreements for which we are

compensated and have recorded

$162 million in Other income

(expense), net,

during 2022 compared to

$173 million in 2021.

In 2022, selling expenses decreased

1 percent (increased 6 percent

in local currencies) compared

to 2021

and was higher in local currencies

across all Business Areas.

Spending levels increased

as pandemic-related

restrictions were gradually relaxed

and sales activities increased

to keep pace with the strong growth

underlying demand. Selling expenses

as a percentage of orders received

decreased from 10.3 percent

2021 to 9.6 percent in 2022 mainly due

to strong order growth.

Non

‑

order related research and development expenses

In 2022, non

‑

order related research and development

expenses decreased 4 percent

(increase 4 percent in

local currencies) compared to 2021.

In 2022, non

‑

order related research and development

expenses as a

percentage of revenues remained

similar to prior year levels (4.0 percent

in 2022 compared to 4.2 percent

2021) as we continued investing

in research and development in

line with revenues growth.

Other income (expense), net

($ in millions)

2022

2021

2020

Income from provision

of services under transition

services agreements

221

173

Net gain from sale of property, plant

and equipment

Gain (loss) from change in

fair value of investments

in equity securities

108

Brand income from Hitachi

Energy

Favorable resolution of an

uncertain purchase

price adjustment

Fair value adjustment on

assets and liabilities

held for sale

—

(33)

Net gain (loss) from sale

of businesses & equity-accounted

investments

(1)

2,193

(2)

Asset impairments

(55)

(33)

(35)

Income (loss) from equity-accounted

companies

(102)

(100)

(66)

Restructuring and restructuring-related

expenses

(2)

(227)

(48)

(87)

Regulatory penalties in connection

with Kusile project

(313)

—

Other income (expense)

157

206

(26)

Total

(75)

2,632

(1)

Includes gain

on sale

of the remaining

19.9 percent

investment

in Hitachi

Energy Ltd.

(2)

Excluding

asset impairments

In 2022, Other income (expense),

net, was a loss of $75 million

compared to a gain of $2,632 million

in 2021.

In 2022, we recorded costs of $313

million associated with regulatory

penalties assessed in connection

with

the Kusile project and higher restructuring

and restructuring-related

expenses which included $195

million in

connection with the exit of the full

train retrofit business primarily

for contract settlement costs.

In 2022, we

recorded a gain of $43 million

relating to the sale of the remaining

19.9

percent of Hitachi Energy to Hitachi.

In 2021, we recorded gains of $2,193

million in Other income (expense),

net for net gains from sales of

businesses. This was primarily due

to the divestment of the Dodge

business.

In 2022

compared to 2021,

recorded lower gains for net fair value

increases in various equity investments,

the most significant of which

in 2022 related to InCharge Energy, Inc and in 2021 related

to CMR Surgical Ltd.

Income from operations

% Change

($ in millions)

2022

2021

2020

2022

2021

Electrification

2,159

1,841

1,335

17%

38%

Motion

1,092

3,276

989

(67)%

231%

Process Automation

663

713

344

(7)%

107%

Robotics & Discrete Automation

247

269

(163)

(8)%

n.a.

Total Business Areas

4,161

6,099

2,505

(32)%

143%

Corporate and Other

(823)

(385)

(927)

n.a.

Intersegment elimination

(1)

n.a.

Total

3,337

5,718

1,593

(42)%

259%

In 2022 and 2021, changes in income

from operations were

a result of the factors discussed

above and in

“Business analysis” below.

Financial income and expenses

include “Interest and dividend

income”, “Interest and other finance

expense”

and “Losses from extinguishment

of debt”.

“Interest and other finance expense” includes

interest expense on our debt,

the amortization of upfront

transaction costs associated with long

‑

term debt and committed credit

facilities, commitment fees on

credit

facilities, foreign exchange gains

and losses on financial items and

gains and losses on marketable

securities. In addition, interest accrued

relating to uncertain tax positions

is included within interest expense.

“Interest and other finance expense”

excludes interest expense

which has been allocated

to discontinued

operations.

($ in millions)

2022

2021

2020

Interest and dividend income

Interest and other finance

expense

(130)

(148)

(240)

Losses from extinguishment

of debt

—

(162)

In 2022, increases in market interest

rates resulted in both higher

interest income on cash deposits and

higher interest expense on floating

rate debt. Interest expense

was lower primarily due to net

reversals of

interest expense in connection with

income tax related contingencies.

This was partially offset by the effect of

higher rates of interest on floating rate

debt as well as higher

amounts of outstanding commercial

paper.

Non-operational pension (cost) credit

A non-operational pension

credit of $115 million was recorded in 2022

compared to a $166 million credit in

2021. Compared to 2021, the 2022 non-operational

pension credit has decreased

due to lower expected

returns on plan assets and higher

interest costs on the benefit

obligations (see “Note 17 - Employee

benefits”

to our Consolidated Financial

Statements).

Income tax expense

($ in millions)

2022

2021

2020

Income from continuing

operations before

taxes

3,394

5,787

841

Income tax expense

(757)

(1,057)

(496)

Effective tax rate for the

year

22.3%

18.3%

59.0%

In 2022, the effective tax rate increased to

22.3 percent from 18.3 percent in

2021. The effective tax rate in

2022 was approximately 2 percentage

points higher due to the non-deductible

regulatory penalties in

connection with the Kusile project and

3 percentage points due

to not benefiting losses in entities

having a

participation exemption.

The effective tax rate in 2022

also reflects a benefit of approximately

6 percentage

points due to changes in assessment

of recoverability of deferred

tax assets. In 2021, the tax impacts

to the sale of the Dodge business reduced

the effective tax rate by approximately

5 percentage points. We

also realized certain benefits from

internal reorganizations

in anticipation of this divestment which

reduced

the effective tax rate by a further 4 percentage

points.

See “Note 16 - Income taxes” to our

Consolidated Financial

Statements for additional information.

Income from continuing operations, net of tax

As a result of the factors discussed above,

compared to 2021, Income

from continuing operations,

net of tax,

decreased by $2,093 million

to $2,637 million in 2022.

Income from discontinued operations, net of tax

Income (loss) from discontinued

operations, net of tax, in 2022,

2021 and 2020 was as follows:

($ in millions)

2022

2021

2020

Total revenues

—

4,008

Total

cost of sales

—

(3,058)

Gross profit

—

950

Expenses

(38)

(18)

(808)

Change to net gain recognized

on sale of the Power

Grids business

(10)

(65)

5,141

Income (loss) from operations

(48)

(83)

5,282

Net interest income (expense)

and other finance expense

—

(5)

Non-operational pension

(cost) credit

—

(94)

Income (loss) from discontinued

operations before

taxes

(48)

(81)

5,182

Income tax

(322)

Income (loss) from discontinued

operations, net of

tax

(43)

(80)

4,860

On July 1, 2020, we completed

the divestment of 80.1 percent

of our former Power Grids business

to Hitachi.

As a result of the sale, substantially

all Power Grids related assets and

liabilities have been

sold. As this

divestment represented a strategic shift

that would have a major effect on our

operations and financial

results, the results

of operations for this business

have been presented

as discontinued operations for all

periods presented. In addition, we also

have retained obligations

(primarily for environmental and

taxes)

related to other businesses disposed

or otherwise exited that qualified

as discontinued operations. Changes

to these retained obligations

are also included in Income (loss) from discontinued

operations, net of tax.

In 2020, as a result of the sale of the

Power Grids business,

we recognized a net gain for the

sale of the

entire Power Grids business which is

included in Income from discontinued

operations, net of tax. Certain

amounts included in the net gain

are estimated or otherwise

subject to change in value and, as

a result, we

have recorded additional

adjustments in 2022 and 2021,

primarily due to the impacts of

the final purchase

price settlement agreed with Hitachi and

net foreign currency losses

on certain obligations.

We may record

additional adjustments in future periods

to the gain which are not expected

to have a material impact on

the

Consolidated Financial

Statements.

For additional information on the divestment

and discontinued

operations,

see “Note 3 - Discontinued

operations”

to our Consolidated Financial

Statements.

Net income attributable to ABB

As a result of the factors discussed above,

compared to 2021, Net income attributable

to ABB decreased by

$2,071 million to $2,475 million

in 2022.

Earnings per share attributable to ABB shareholders

(in $)

2022

2021

2020

Basic earnings per share

attributable to ABB

shareholders:

Income from continuing

operations, net of

tax

1.33

2.31

0.14

Income (loss) from discontinued

operations, net of

tax

(0.02)

(0.04)

2.30

Net income

1.30

2.27

2.44

Diluted earnings per share

attributable to ABB

shareholders:

Income from continuing

operations, net of

tax

1.32

2.29

0.14

Income (loss) from discontinued

operations, net of

tax

(0.02)

(0.04)

2.29

Net income

1.30

2.25

2.43

Basic earnings per share is calculated

by dividing income by the weighted

‑

average number of shares

outstanding during the year. Diluted earnings

per share is calculated by dividing

income by the

weighted

‑

average number of shares outstanding

during the year, assuming that all potentially

dilutive

securities were exercised, if dilutive.

Potentially dilutive securities

comprise: outstanding written call

options

and outstanding options and

shares granted subject to

certain conditions under our share

‑

based payment

arrangements. See “Note 20 - Earnings

per share”

to our Consolidated Financial

Statements.

—

Business analysis

Electrification Business Area

The financial results of our Electrification

Business Area were as follows:

% Change

($ in millions)

2022

2021

2020

2022

2021

Orders

15,901

14,381

11,884

11%

21%

Order backlog

at December 31,

6,933

5,458

4,358

27%

25%

Revenues

14,105

13,187

11,924

11%

Income from operations

2,159

1,841

1,335

17%

38%

Operational EBITA

2,328

2,121

1,681

10%

26%

Orders

Approximately two-thirds of the Business

Area’s orders are for products

with short delivery times; these

orders are usually recorded and

delivered within a three-month period

and thus are generally considered

short-cycle. The remainder is comprised

of smaller project orders that require

longer lead times, as well

larger solutions requiring

engineering and installation. Approximately

half of the Business Area’s orders are

received via third-party distributors.

As a consequence, end-customer

market data is based partially

management estimates.

In 2022, orders increased 11 percent (17 percent in local

currencies) as demand improved across

all key

end-user segments.

Demand in the buildings

segment, the Electrification Business

Area’s largest end-user

segment,

was robust,

with strong growth particularly

in the non-residential building

sector. Solid growth in the

residential building sector in the first half

of the year was partly offset

by a slowdown in the second

half of

2022,

particularly in certain European

markets. Substantial growth continues

in the e-mobility segment along

with strong growth in data centers, food

and beverage,

infrastructure and renewables. Demand

from the oil

and gas segment increased significantly

during the year,

while growth in the utilities

and rail segments was

solid even if geographically

uneven.

The geographic distribution

of orders for our Electrification

Business Area was as follows:

($ in millions)

2022

2021

2020

Europe

4,973

5,022

4,149

The Americas

6,776

5,199

4,033

of which: United States

5,273

3,891

3,065

Asia, Middle East and Africa

4,152

4,160

3,702

of which: China

2,028

2,141

1,819

Total

15,901

14,381

11,884

In 2022, orders in local currencies increased

in all regions. The pandemic-related

challenges improved

compared to 2021 in most geographies.

Orders in the Americas increased

30 percent (31 percent in local

currencies), with demand strengthening

across all key markets, led by increases

in the U.S. and Brazil.

Orders in Europe decreased 1 percent,

reflecting the weakening

of many European currencies against

the

U.S. dollar, but increased 13 percent in local currencies,

with growth across the region

including in key

markets such as Italy and Germany.

Orders in Asia, Middle

East and Africa were on the same level

as in

2021,

but increased 6 percent in local currencies,

with strong order growth in

India throughout the year

offsetting a slowdown in China.

Orders in China were lower

in most end-user segments mainly as

business

activity was hampered by pandemic-related

measures, but also reflected a

challenging comparable

due to

strong order performance in 2021.

Order backlog

In 2022, order backlog increased 27

percent (33 percent in local

currencies). Order backlog benefited

from

strong order

intake, but was also impacted

by execution challenges

caused by material shortages,

transportation constraints as well

as pandemic-related production

pressures

in some local markets.

Revenues

In 2022, revenues increased 7 percent

(14 percent in local currencies).

Revenues

in local currencies

increased in all Divisions

reflecting the strong demand across regions

and end-user segments, however

growth was still hampered by component

shortages, logistics

challenges and a tight labor

market. Pricing

actions taken to mitigate increasing

material,

labor and transportation

costs contributed strongly to

the higher

revenue level and accounted

for around three quarters

of the revenue growth in 2022. The revenue

growth

was led by the E-mobility Division,

mirroring the very high

demand in this segment. There was

also strong

double-digit revenue growth in local

currencies in the Power Conversion

Division as well as in the Installation

Products and Smart Power Divisions.

The geographic distribution

of revenues for our Electrification

Business Area was as follows:

($ in millions)

2022

2021

2020

Europe

4,544

4,628

4,190

The Americas

5,372

4,503

4,093

of which: United States

3,940

3,322

3,115

Asia, Middle East and Africa

4,189

4,056

3,641

of which: China

2,004

2,110

1,858

Total

14,105

13,187

11,924

In 2022, revenues in the Americas increased

19 percent (20 percent

in local currencies) with widespread

regional growth.

Revenues

increased 3 percent (10 percent in local

currencies) in Asia, Middle East and

Africa, supported by strong growth in

India,

while revenues in China

were lower than the previous year.

Revenues in Europe decreased

2 percent,

impacted by weakening

currencies in many European countries

versus the U.S.

dollar, while revenues in the region grew 13

percent in local currencies.

Income from operations

In 2022, income from operations increased

17 percent (28 percent

in local currencies), supported by

higher

volumes as well as strong price management,

which helped offset the adverse

impact from cost inflation

raw materials, freight and labor. Benefits of savings

realized from ongoing restructuring

and cost savings

programs also positively influenced

income from operations. Restructuring-related

expenses and

implementation costs in our operating

Divisions were lower in 2022

than in 2021, mainly due to the

substantial completion of the integration

of GEIS,

which we acquired

in 2018.

Also contributing to the higher

income from operations in 2022 compared

to 2021 were higher gains

from net fair value increases in various

equity investments, the most significant

being InCharge Energy, Inc., as well as lower GEIS integration

costs.

These positive effects were partially

dampened by widespread

inflationary cost pressures in 2022, as well

higher personnel expenses

driven by a ramp-up of manufacturing

capacity to meet higher demand.

Changes

in foreign currencies, including

the impacts from FX/commodity timing differences

summarized in the table

below,

negatively impacted income from operations

by approximately 6 percent.

Operational EBITA

The reconciliation of Income from

operations to Operational

EBITA for the Electrification Business Area was

as follows:

($ in millions)

2022

2021

2020

Income from operations

2,159

1,841

1,335

Acquisition-related amortization

116

117

115

Restructuring, related and

implementation

costs

145

Changes in obligations

related to divested businesses

—

Changes in pre-acquisition

estimates

(6)

Gains and losses from

sale of businesses

(1)

Fair value adjustment on

assets and liabilities

held for sale

—

Favorable resolution of an

uncertain purchase

price adjustment

—

(5)

(36)

Acquisition-

and divestment-related

expenses and integration

costs

Changes in fair value of

investments in equity

securities

(57)

(15)

—

Certain other non-operational

items

FX/commodity timing

differences in income from

operations

(2)

(21)

Operational EBITA

2,328

2,121

1,681

In 2022, Operational EBITA increased 10 percent (20 percent

excluding the impact from changes

in foreign

currency exchange rates) compared

to 2021, primarily due to the reasons described

under “Income from

operations”, excluding the explanations

related to the reconciling

items in the table above.

Motion Business Area

The financial results of our Motion Business

Area were as follows:

% Change

($ in millions)

2022

2021

2020

2022

2021

Orders

7,896

7,616

6,574

16%

Order backlog at December

31,

4,726

3,749

3,320

26%

13%

Revenues

6,745

6,925

6,409

(3)%

Income from operations

1,092

3,276

989

(67)%

231%

Operational EBITA

1,163

1,183

1,075

(2)%

10%

Orders

In 2022, orders increased 4 percent

(11 percent in local currencies) compared to 2021.

Strong market activity

as well as effective price management offset

negative impacts from both exchange

rates and the divestment

in November 2021 of the Mechanical

Power Transmission Division

which negatively impacted the growth rate

by approximately 9 percent.

The Business Area recorded

strong double-digit order growth

in local currencies

across all Divisions and in key customer

segments and benefited

from strong order growth in the buildings

segment (heating, ventilation, air conditioning

and refrigeration) as well

as in rail, with solid demand recovery

and high year-on-year growth

in the chemical, and oil and

gas segments. Other segments

supporting strong

order development include

metals,

pulp and paper, marine and other segments such

as power generation

(including wind), food and beverage,

and mining. The market shift

towards carbon reduction, energy

efficiency and digitalization continued

to support business growth.

The geographic distribution

of orders for our Motion Business

Area was as follows:

($ in millions)

2022

2021

2020

Europe

2,710

2,617

2,219

The Americas

2,583

2,677

2,276

of which: United States

2,128

2,200

1,897

Asia, Middle East and Africa

2,603

2,322

2,079

of which: China

1,314

1,232

1,077

Total

7,896

7,616

6,574

In 2022, orders increased 4 percent

(18 percent in local currencies)

in Europe as orders increased

across the

region particularly in Turkiye, Italy, Sweden, Germany, France and Poland. In Asia, Middle

East and Africa,

orders increased 12 percent (18 percent

in local currencies) driven

by growth in India, China and

Australia. In

the Americas, orders decreased 4 percent

(2 percent in local currencies)

reflecting the impact of the

divestment of the Mechanical Power

Transmission Division, which operated

principally in the United States.

Order backlog

Order backlog in 2022 increased

26 percent (33 percent in local

currencies) compared to 2021

reaching

$4.7 billion. Order backlog increased

across all Divisions and was driven

mainly by the large orders received

in the long-cycle business. Additionally, supply chain constraints

impacted customer deliveries,

particularly in

the short-cycle business, further

adding to the order backlog.

Revenues

In 2022, revenues declined 3 percent

(up 5 percent in local

currencies) compared to 2021, negatively

impacted by approximately 9 percent

by the divestment of the Mechanical

Power Transmission Division in

November 2021. The growth in the

other Divisions was

supported by strong demand and solid

price

management particularly in the products

business.

The geographic distribution

of revenues for our Motion Business

Area was as follows:

($ in millions)

2022

2021

2020

Europe

2,271

2,258

2,196

The Americas

2,208

2,396

2,225

of which: United States

1,823

1,974

1,867

Asia, Middle East and Africa

2,266

2,271

1,988

of which: China

1,245

1,256

1,040

Total

6,745

6,925

6,409

In 2022, revenues in Europe increased

1 percent (16 percent in local

currencies) compared to 2021.

Revenue increases in local

currencies were driven by Turkiye, Germany, the United Kingdom,

Finland and

Italy while sales volumes declined

in Poland, Switzerland and Austria.

In Asia, Middle East and Africa

revenues were flat (up 6 percent in

local currencies) as

revenue growth in India and China

was partly offset

by declines

in Australia and Japan. In the Americas,

revenues decreased

8 percent (7 percent in local

currencies) impacted by the divestment

of the Mechanical Power Transmission Division,

which was partially

offset by growth in the U.S., particularly

in the book-and-bill

business in the NEMA Motors Division.

Income from operations

In 2022, income from operations declined

67 percent compared to 2021 as the previous

year included a gain

of $2,195 million on the sale of

the Mechanical Power Transmission Division.

Excluding this gain, income

from operations increased 1 percent as

higher volume in 2022 offset the impact

of the divestment. The higher

revenues reflected strong demand

and active price management

during 2022 which more than

offset

increasing commodities and

freight expenses and other cost inflation.

Profitability was also supported

continued cost discipline, focus on operational

performance and a positive divisional

mix. Changes in foreign

currencies, including the impacts from

FX/commodity timing differences summarized

in the table below,

negatively impacted income from operations

by approximately 4 percent.

Operational EBITA

The reconciliation of Income from

operations to Operational

EBITA for the Motion Business Area was as

follows:

($ in millions)

2022

2021

2020

Income from operations

1,092

3,276

989

Acquisition-related amortization

Restructuring, related and

implementation

costs

Gains and losses from

sale of businesses

(2,196)

—

Acquisition-

and divestment-related

expenses and integration

costs

—

Certain other non-operational

items

—

FX/commodity timing

differences in income from

operations

(27)

Operational EBITA

1,163

1,183

1,075

In 2022, Operational EBITA decreased 2 percent (increased

6 percent excluding the impact from

changes in

foreign currency exchange rates)

compared to 2021, primarily due

to the reasons described under

“Income

from operations”, excluding

the explanations related to

the reconciling items in the table

above.

Process Automation Business Area

The financial results of our Process

Automation Business Area were as

follows:

% Change

($ in millions)

2022

2021

2020

2022

2021

Orders

6,825

6,779

6,144

10%

Order backlog at December

31,

6,229

6,079

5,805

Revenues

6,044

6,259

5,792

(3)%

Income from operations

663

713

344

(7)%

107%

Operational EBITA

848

801

451

78%

Orders

In 2022, orders increased 1 percent

(8 percent in local currencies)

compared to 2021. Order growth

was

impacted approximately 3 percent due

to the spin-off of the Turbocharging Division. Orders grew

in all

Divisions and were especially

strong in the Measurement & Analytics and

Process Industries Divisions.

Strong demand was seen for the product,

systems and service businesses

and supported by most customer

segments. Demand was particularly

strong in sectors such as chemicals

and refining, with positive

developments also recorded

in the areas of mining,

metals, and oil and gas, including

the liquefied natural

gas sector. Customer activities increased in power

generation, pulp and paper,

and ports segments, whereas

demand in marine was lower. Customer interest was

high in the hydrogen segment, which

remains a small

but growing part of the business.

The geographic distribution

of orders for our Process Automation

Business Area was as follows:

($ in millions)

2022

2021

2020

Europe

2,361

2,614

2,365

The Americas

1,994

1,645

1,360

of which: United States

1,201

1,047

770

Asia, Middle East and Africa

2,470

2,520

2,419

of which: China

748

821

590

Total

6,825

6,779

6,144

Orders in Europe decreased 10 percent

(increased 2 percent in local

currencies). In local currencies

and

excluding the impact of the spin-off of the Turbocharging

Division, orders increased in Poland,

Norway, the

Netherlands and the United Kingdom

while orders decreased in

Russia where the ABB Group is winding

down remaining business

activities and Germany where a customer

bankruptcy resulted in an order

reversal

of approximately $170 million.

Orders in Asia, Middle East and

Africa decreased 2 percent (increased

percent in local currencies). Higher

orders in India, South Korea,

Singapore and Saudi Arabia

were partly

offset by lower order volumes in China

and Australia both of which had

a higher order intake in 2021.

In the

Americas, orders increased 21 percent

(23 percent in local currencies)

supported by strong demand

in the

U.S., Canada, Argentina and Brazil.

Order backlog

In 2022, order backlog increased

2 percent (8 percent in local

currencies) compared to 2021. Order backlog

increased in all Divisions

due to strong order intake during

2022.

Revenues

In 2022, revenues decreased 3 percent

(increased 4 percent in local

currencies) compared to 2021

due to

foreign currency translation and the impact

from the spin-off of the Turbocharging Division

business.

Revenues increased in all

Divisions, reflecting strong execution

of the order backlog in the long-cycle

businesses and strong underlying

demand that was partially held

back by challenges from supply chain

constraints which hampered customer

deliveries.

The geographic distribution

of revenues for our Process Automation

Business Area was as follows:

($ in millions)

2022

2021

2020

Europe

2,266

2,439

2,395

The Americas

1,569

1,439

1,329

of which: United States

943

836

808

Asia, Middle East and Africa

2,209

2,381

2,068

of which: China

668

742

629

Total

6,044

6,259

5,792

In 2022, revenues were 7 percent

lower (1 percent in local currencies)

in Asia, Middle East and Africa,

9 percent higher (11 percent in local currencies) in

the Americas and 7 percent lower (5

percent higher in

local currencies) in Europe compared

to 2021. In Asia, Middle

East and Africa, revenues were higher

in India

and Australia but declined in

China, Singapore and South Korea.

In the Americas, revenue growth

was driven

by the U.S. and Argentina while

revenues in Brazil were steady. Growth in Europe was reported

in key

markets including Italy, Germany, France, Norway and the United Kingdom.

Income from operations

In 2022, income from operations decreased

7 percent compared

to 2021 driven largely by unfavorable

foreign currency exchange changes

and the impact of the spin-off of the

Turbocharging Division. Excluding

these impacts, all Divisions reported

higher operating income. In local

currencies,

income growth was driven

by higher revenue volumes, operational

improvements in project execution,

a favorable business mix and

discipline in cost controls. The impact

from inflation on costs was offset by pricing

actions taken to secure

gross margin levels, mainly in the

short-cycle business. Changes

in foreign currencies, including

the effect

from changes in the FX/commodity

timing differences summarized

in the table below, negatively impacted

income from operations by approximately

10 percent.

Operational EBITA

The reconciliation of Income from

operations to Operational

EBITA for the Process Automation Business

Area was as follows:

($ in millions)

2022

2021

2020

Income from operations

663

713

344

Acquisition-related amortization

Restructuring, related and

implementation

costs

125

Gains and losses from

sale of businesses

—

(13)

—

Acquisition-

and divestment-related

expenses and integration

costs

134

Certain other non-operational

items

—

FX/commodity timing

differences in income from

operations

(25)

Operational EBITA

848

801

451

In 2022, Operational EBITA increased 6 percent (15 percent

excluding the impact from

changes in foreign

currency exchange rates) compared

to 2021, primarily due to the reasons

described under “Income

from

operations”, excluding the explanations

related to the reconciling

items in the table above.

Robotics & Discrete Automation Business Area

The financial results of our Robotics &

Discrete Automation Business

Area were as follows:

% Change

($ in millions)

2022

2021

2020

2022

2021

Orders

4,116

3,844

2,868

34%

Order backlog at December

31,

2,679

1,919

1,403

40%

37%

Revenues

3,181

3,297

2,907

(4)%

13%

Income (loss) from operations

247

269

(163)

(8)%

n.a.

Operational EBITA

340

355

237

(4)%

50%

Orders

In 2022, orders increased 7 percent

(16 percent in local currencies).

Both the Robotics and the

Machine

Automation Divisions contributed

to the robust order growth

driven by positive developments

in both volumes

and pricing,

reflecting strong demand across

all regions and most of the customer

segments. In the

automotive sector, demand was particularly driven by

EV investments.

Strength was also noted in

the

automotive-related sectors, general

industry, machine builders and electronics market sectors.

In addition to

strong underlying market demand,

the order intake was also supported

by customers placing orders early

an effort to secure deliveries in an

environment with a generally

tight supply chain, especially earlier

in the

year. As supply chain constraints progressively eased

over the year, customer order patterns tended to

normalize.

The geographic distribution

of orders for our Robotics & Discrete Automation

Business Area was as follows:

($ in millions)

2022

2021

2020

Europe

2,043

1,978

1,424

The Americas

609

530

388

of which: United States

404

371

277

Asia, Middle East and Africa

1,464

1,336

1,056

of which: China

1,151

976

781

Total

4,116

3,844

2,868

In 2022, orders increased in all regions.

Orders in Europe increased

3 percent (16 percent in local currencies)

driven by increased demand, mainly

in Germany. Orders in the Americas increased

15 percent (15 percent in

local currencies) compared to 2021,

driven by strong order

intake in the U.S. in the Robotics Division.

Orders

in Asia, Middle East and Africa increased

10 percent (15 percent in

local currencies) with strong

demand in

the Robotics Division in China.

Order backlog

In 2022, order backlog increased

40 percent (49 percent in local

currencies) compared to 2021. Order

backlog increased in both Divisions.

The order backlog benefited

from strong order intake, despite our

selectivity of orders in the automotive

EV segment and also reflected

customer deliveries being

hampered by

material shortages, transportation

constraints as well as pandemic-related

production pressures in some local

markets.

Revenues

In 2022, revenues decreased 4 percent

(increased 5 percent in local

currencies) compared to 2021.

Revenues increased in both

Divisions due to higher volumes

from book-and-bill business

and price increases

to compensate for higher input expenses.

However, growth in the first half of

the year was hindered by

component shortages (primarily related

to semiconductors) and

logistic challenges. Additionally, the

COVID-19 related shutdown of the robotics

factory in Shanghai,

China, in April, with the subsequent gradual

ramp up of production during May, had a significant impact

on customer deliveries in the second

quarter.

Service revenues also increased,

driven by strong demand

from all industry segments.

The geographic distribution

of revenues for our Robotics & Discrete

Automation Business Area was

follows:

($ in millions)

2022

2021

2020

Europe

1,498

1,582

1,481

The Americas

525

441

389

of which: United States

374

309

273

Asia, Middle East and Africa

1,158

1,274

1,037

of which: China

898

950

719

Total

3,181

3,297

2,907

Revenues from Asia, Middle East

and Africa decreased 9 percent (decreased

4 percent in local currencies)

compared to 2021 due to the impact

from the factory shutdown

in Shanghai, China, described

above.

Revenues in Europe decreased

5 percent (increased 8 percent in

local currencies) with Austria,

Italy and the

Czech Republic performing

strongly while revenues declined

in the United Kingdom. In the Americas,

revenues increased 19 percent

(increased 19 percent in local

currencies) due to strong demand

in both

Divisions in the U.S. and in the Robotics

Division in Brazil, following

the recovery from the lower levels

2021.

Income (loss) from operations

In 2022, the Business Area recorded

income from operations

of $247 million compared to $269 million

2021, with both Divisions contributing

to the higher income level. The operational

performance in 2022

reflected improved sales volumes,

price increases, a favorable

change in the revenue mix, and the benefit

cost reduction measures taken in

the second half of 2022. These positive

drivers were partially offset by

widespread inflationary

cost pressures in 2022 as well as under

absorption of fixed costs due to volumes

being hampered by component

shortages, particularly in the first

half of the year.

Changes in foreign

currencies, including the impacts from

FX/commodity timing differences summarized

in the table below,

negatively impacted income from operations

by approximately 14 percent.

Operational EBITA

The reconciliation of Income (loss)

from operations to

Operational EBITA for the Robotics & Discrete

Automation Business Area was as

follows:

($ in millions)

2022

2021

2020

Income (loss) from operations

247

269

(163)

Acquisition-related amortization

Restructuring, related and

implementation

costs

Changes in pre-acquisition

estimates

(1)

—

Favorable resolution of an

uncertain purchase

price adjustment

(15)

—

Acquisition-

and divestment-related

expenses and integration

costs

—

Impairment of goodwill

—

290

Certain other non-operational

items

—

FX/commodity timing

differences in income from

operations

(5)

Operational EBITA

340

355

237

In 2022, Operational EBITA decreased 4 percent (increased

8 percent excluding the impact

from changes in

foreign currency exchange rates)

compared to 2021, primarily

due to the reasons described

under “Income

(loss) from operations”, excluding

the explanations related to the reconciling

items in the table above.

Corporate and Other

Net loss from operations for Corporate

and Other was as follows:

($ in millions)

2022

2021

2020

Corporate headquarters

and stewardship

(430)

(399)

(334)

Regulatory penalty in

connection with Kusile

project

(313)

—

Loss from equity-accounted

companies

(101)

(102)

(68)

Other corporate costs

(25)

(29)

(65)

Corporate brand income

from Hitachi Energy

Net gain (loss) from sale

of businesses

(1)

(3)

Corporate real estate

Restructuring costs in Corporate

—

(5)

(46)

Fair value adjustment on

equity securities

(4)

OS implementation costs

—

(24)

Digital program costs

—

(45)

Corporate research and

development

—

(49)

Costs for divestment of Power

Grids

—

(86)

Stranded corporate costs

—

(40)

Divested businesses and

other non-core activities

(117)

(67)

(342)

Total Corporate and Other

(824)

(381)

(912)

(1)

Includes gain

on sale

of the remaining

19.9 percent

investment

in Hitachi

Energy Ltd.

In 2022, the net loss from operations within

Corporate and Other increased

by $443 million to $824 million

compared to 2021. This increase was driven

by costs associated with regulatory

penalties assessed in

connection with the Kusile project,

restructuring expenses in connection

with the exit of the full train retrofit

business and lower gains

for fair value adjustments on

equity investments. Partly offsetting

these negative

impacts was the reversal of a provision

that we had previously recorded

related to one of our divested

businesses and the gain in December

2022 from the sale of the remaining

19.9 percent of Hitachi Energy

Hitachi.

Corporate

In 2022, Corporate headquarters and

stewardship costs increased

by $31 million, mainly due to higher

external consulting costs as part of

the implementation of the ABB

Way operating model.

Excluding this,

Corporate headquarters and

stewardship costs were lower, supported by lower costs

especially in the

corporate legal function.

During 2022, we did not have any

significant revaluations of equity investments

while in 2021 we recognized

gains of $94 million for investments

in our corporate equity ventures

portfolio.

Corporate brand income results from

the granting of use of the

ABB Brand to Hitachi Energy, the fair value of

which was initially determined

on the date of the divestment of the former

Power Grids business in 2020.

portion of the proceeds received

for the sale was allocated to

the fair value of the granting of the use

of the

brand and is being amortized

over the expected period of benefit

received by Hitachi Energy.

Corporate real estate primarily includes

income and expenses

from property rentals and gains from

the sale

of real estate properties. In 2022, income

from operations in corporate real estate

included gains from the

sale of real estate properties of approximately

$73 million compared to $22 million

in 2021.

Other corporate costs consists of operational

costs of our Corporate Treasury Operations and

other minor

items including changes of the elimination

related to internal profit of inventory.

Other - Divested businesses

and other non-core activities

The results of operations for certain

divested businesses and

other non

‑

core activities are presented in

Corporate and Other. Divested businesses include

the high-voltage cables

business, steel structures

business and the oil & gas EPC business.

Other continuing non

‑

core activities include the execution

and

wind

‑

down of certain legacy EPC and other

contracts.

In 2022 and 2021, the amounts represent

charges and losses relating

to divested businesses and the

winding down of the remaining

EPC projects. In 2022, we recorded

a restructuring expense of $195 million

connection with the exit of the full

train retrofit business primarily

for contract settlement costs. This was

offset

in part by the reversal of a provision

of $61 million that we had previously

recorded related to one of our

divested businesses based on

a settlement proposal issued

by the ruling court. In 2021, we recorded

losses

of $67 million which were mostly related

to the full train retrofit business but

also related to legacy EPC

projects and the divested oil & gas

EPC business.

At December 31, 2022, our remaining

non

‑

core activities primarily include

the completion of the remaining

EPC contracts for substations and

oil & gas.

—

Liquidity and capital resources

Principal sources of funding

We meet our liquidity needs principally

using cash from operations, proceeds from

the issuance of debt

instruments (bonds and commercial

paper), and short

‑

term bank borrowings. In 2022,

we also received

significant funds from the sale of our

remaining investment in

Hitachi Energy which was sold in

December 2022.

Our net debt/cash is shown in the

table below:

December 31, ($ in millions)

2022

2021

Short-term debt and current

maturities of long-term

debt

2,535

1,384

Long-term debt

5,143

4,177

Cash and equivalents

(4,156)

(4,159)

Restricted cash - current

(18)

(30)

Marketable securities and

short-term investments

(725)

(1,170)

Restricted cash - non-current

—

(300)

Net debt (cash)

(defined as the sum

of the above lines)

2,779

(98)

During 2022, cash generation

from operating activities was lower

than in 2021 while we increased

our total

cash payments to shareholders

in the form of dividends and

purchases of treasury stock. These

factors were

the primary contributors to the change

in net debt as presented

in the table above.

During 2022, we changed from a net

cash position of $98 million

at December 31, 2021, to a net debt

position of $2,779 million at December

31, 2022. The effect of the exchange

rate movements reduced

net

debt by approximately $30 million.

In 2022, we received net proceeds of $1,552

million for the sale of our

remaining investment in Hitachi Energy.

We generated cash flows from operating

activities during 2022

$1,287 million and sold treasury

stock in relation to our employee

share plans for $394 million. We also

issued shares in our subsidiary

ABB E-Mobility to third parties

in private placements for $216 million.

These

items were more than offset by amounts

for purchases of treasury shares of

$3,553 million,

including

$2,891 million relating to the announced

buybacks

of our shares,

as well as $1,698 million

for the payment of

the dividend to our shareholders.

We made net purchases of property, plant and equipment

and intangible

assets of $635 million and made

payments of dividends to noncontrolling

shareholders totaling $99 million.

See “Financial position”, “Investing activities”

and “Financing activities”

for further details.

Our Corporate Treasury Operations is responsible

for providing a range of treasury

management services to

our group companies, including

investing cash in excess of current business

requirements. At December 31,

2022

and 2021, the proportion of our aggregate

“Cash and equivalents”

(including restricted cash) and

“Marketable securities and short

‑

term investments” managed

by our Corporate Treasury Operations

amounted to approximately 51 percent

and 44 percent, respectively.

Our investment strategy for cash

(in excess of current business

requirements) has generally

been to invest in

short-term time deposits with maturities

of less than 3 months, supplemented

at times by investments in

money market funds, and in some

cases, government securities.

We actively monitor credit risk in our

investment and derivative portfolios.

Credit risk exposures are

controlled in accordance with

policies

approved by our senior management

to identify, measure, monitor and control credit risks.

We have minimum

rating requirements for our counterparts

and closely monitor

developments in the credit markets

making

appropriate changes to our investment

policy as deemed

necessary. In addition to minimum rating criteria,

we have strict investment parameters

and specific approved

instruments as well as restrictions

on the types

of investments we make. These

parameters are closely monitored

on an ongoing basis and

amended as we

consider necessary.

Our cash is held in various currencies

around the world. Approximately 41 percent

of our cash and

equivalents held at December 31,

2022, was in U.S. dollars, while

the most significant foreign currencies

which cash and equivalents

was held was euros (21 percent) and Indian

rupees (10 percent).

We believe the ongoing cash flows generated

from our business, supplemented,

when necessary, through

access to the capital markets (including

short

‑

term commercial paper) and

our credit facilities are sufficient to

support business operations, capital

expenditures, business

acquisitions, the payment of dividends

shareholders and contributions

to pension plans. Consequently, we believe that our ability

to obtain funding

from these sources will continue

to provide the cash flows necessary

to satisfy our working capital

and capital

expenditure requirements, as well

as meet our debt repayments and

other financial commitments

for the next

12 months. See “Contractual obligations

and commitments”.

Due to the nature of our operations,

including the timing of annual

incentive payments to employees, our

cash flow from operations generally

tends to be weaker in the first half

of the year than in the second half

the year.

Debt and interest rates

Total

outstanding debt was as follows:

December 31, ($ in millions)

2022

2021

Short-term debt and current

maturities of long-term

debt

2,535

1,384

Long-term debt:

Bonds

4,944

3,984

Other long-term debt

199

193

Total debt

7,678

5,561

The increase in short-term debt

in 2022 was due primarily

to the increase in commercial paper

outstanding

offset partially by a reduction in Current

maturities of long-term debt.

At December 31, 2022, Long-term debt

was $966 million higher

compared to the end of 2021 due

to the

issuance of five new instruments which

remain classified as Long-term

debt at December 31, 2022

(EUR 700 million 0.625% Instruments

due 2024, EUR 500 million

floating rate Instruments due 2024,

CHF 150 million 2.1% Bonds due 2025,

CHF 425 million 0.75% Bonds

due 2027 and CHF 150 million

2.375% Bonds due 2030)

offset partially by the reclassification

to current of the EUR 700 million

0.625%

Instruments, due 2023.

The increase in interest rates

also resulted in a reduction in our

long-term debt of

approximately $200 million

due to the application of fair value hedge

accounting on certain outstanding

instruments.

Our debt has been obtained

in a range of currencies and

maturities and with various interest

rate terms. For

certain of our debt obligations,

we use derivatives to manage

the fixed interest rate exposure. For example,

we use interest rate swaps and cross-currency

interest rate swaps to effectively

convert fixed rate debt into

floating rate liabilities. After considering

the effects of interest rate swaps and cross-currency

interest rate

swaps,

at December 31, 2022, the effective

average interest

rate on our floating rate long-term

debt

(including current maturities) of

$3,459 million and our fixed rate long-term

debt (including current

maturities)

of $2,771 million was 2.8 percent and

2.2 percent, respectively. This compares with

an effective rate of

0.3 percent for floating rate long-term

debt of $3,598 million

and 3.1 percent for fixed rate long-term

debt of

$1,885 million at December 31, 2021.

For a discussion of our use of derivatives

to modify the interest characteristics

of certain of our individual

bond issuances, see “Note 12 - Debt”

to our Consolidated Financial

Statements.

Credit facility

In December 2019, we replaced our

previous multicurrency revolving

credit facility with a new $2 billion

multicurrency revolving credit facility, maturing in 2024.

In 2021 we exercised our option to

further extend the

maturity to 2026.

No amount was drawn under

the facility

at December 31, 2022 and 2021.

The facility is

available for general

corporate purposes and contains

cross-default clauses whereby an event

of default

would occur if we were to default on

indebtedness, as

defined in the facility, at or above a specified threshold.

The credit facility does not contain

financial covenants that would

restrict our ability to pay dividends

or raise

additional funds in the capital

markets. For further details of the

credit facility, see “Note 12 - Debt” to our

Consolidated Financial

Statements.

Commercial paper

At December 31, 2022, we had

two commercial paper programs

in place:

•

a $2 billion commercial paper

program for the private placement of U.S.

dollar denominated

commercial paper in the United States,

and

•

a $2 billion Euro-commercial

paper program for the issuance

of commercial paper in a variety of

currencies.

At December 31, 2022 and 2021,

there was no amount outstanding

under the $2 billion program

in the United

States.

At December 31, 2022, $1,383 million

was outstanding under the $2

billion Euro-commercial paper

program.

There was no amount outstanding

at December 31, 2021.

European program for the issuance of debt

The European program for the issuance

of debt allows the issuance

of up to the equivalent of $8 billion

certain debt instruments. The terms

of the program do

not obligate any third party to extend

credit to us and

the terms and possibility of issuing

any debt under the program

are determined with respect to,

and as of the

date of issuance of, each debt instrument.

At December 31, 2022,

five bonds (principal amount of

EUR 700 million, due in 2023,

principal amount of EUR 700

million, due in 2024, principal

amount of

EUR 500 million, due in 2024, principal

amount of EUR 750 million, due

in 2024, and principal amount

EUR 800 million, due in 2030)

having a combined carrying

amount of $3,444 million were outstanding

under

the program. The carrying amount

of the three bonds outstanding

under the program at December 31, 2021,

was $2,522 million.

Credit ratings

Credit ratings are assessments by

the rating agencies of the credit

risk associated with ABB and

are based

on information provided by us or other

sources that the rating agencies

consider reliable. Higher

ratings

generally result in lower borrowing

costs and increased access to capital

markets. Our ratings are of

“investment grade” which is defined

as Baa3 (or above) from

Moody’s and BBB− (or above) from Standard

Poor’s.

At December 31, 2022 and 2021, our

long-term debt was rated A3 by

Moody’s and currently with a Stable

outlook.

At December 31, 2022

and 2021, our long-term debt was

rated A- by Standard & Poor’s and

currently with a Stable outlook.

Limitations on transfers of funds

Currency and other local regulatory

limitations related to the transfer

of funds exist in a number of

countries

where we operate or otherwise have

bank deposits,

including: China, Egypt, India, Malaysia,

the Russian

Federation, South Africa, South Korea,

Taiwan (Chinese Taipei),

Thailand,

Turkiye and Vietnam. Funds,

other than regular dividends, fees or loan

repayments, cannot be readily

transferred offshore from these

countries and are therefore deposited

and used for working

capital needs in those countries.

In addition,

there are certain countries where,

for tax reasons, it is not considered

optimal to transfer the cash offshore.

As a consequence, these funds are not

available within our Corporate

Treasury Operations to meet

short-term cash obligations outside

the relevant country. The above described funds are reported

as cash in

our Consolidated Balance

Sheets, but we do not consider

these funds immediately available

for the

repayment of debt outside the respective

countries where the cash is

situated, including those

described

above. At December 31, 2022 and

2021, the balance of “Cash and

equivalents” and “Marketable

securities

and other short-term investments” under

such limitations (either regulatory

or sub-optimal from a tax

perspective) totaled approximately

$1,381 million and $2,074

million, respectively.

During 2022, we continued

to direct our subsidiaries in

countries with restrictions to place such

cash with our

core banks or investment grade banks,

in order to minimize credit risk

on such cash positions.

We continue to

closely monitor the situation to ensure

bank counterparty risks

are minimized.

—

Financial position

Balance sheets

December 31, ($ in millions)

2022

2021

% Change

Current assets

Cash and equivalents

4,156

4,159

Restricted cash

(40)%

Marketable securities and

short-term investments

725

1,170

(38)%

Receivables, net

6,858

6,551

Contract assets

954

990

(4)%

Inventories, net

6,028

4,880

24%

Prepaid expenses

230

206

12%

Other current assets

505

573

(12)%

Current assets held for

sale and in discontinued

operations

136

(29)%

Total current assets

19,570

18,695

For a discussion on Cash and equivalents,

see sections “Liquidity and

Capital Resources—Principal

sources

of funding” and “Cash flows” for

further details.

Marketable securities and short-term

investments decreased

in 2022. The change primarily reflects

lower

amounts placed in bank time deposits

and a reduction in amounts placed

in money market funds classified

equity securities (see “Note 5 - Cash

and equivalents, marketable

securities and short-term investments”

our Consolidated Financial

Statements).

Receivables, net, increased 5 percent (12

percent in local currencies)

reflecting the higher revenues (due

both higher business volumes and

higher prices) at the end of 2022

compared to 2021. Receivables

also

decreased 3 percent due to the spin-off of

the Turbocharging Division.

Contract assets decreased 4 percent

(increased 2 percent in local

currencies).

Contract assets decreased

2 percent due to the spin-off of the Turbocharging

Division with the remaining local

currency increase of

4 percent reflecting higher levels

of business activity

at the end of 2022 compared

to 2021.

Inventories, net, increased 24 percent (32

percent in local currencies)

and were significantly higher

in all

inventory categories.

A portion of this increase reflects

higher business activities at the end of

2022

compared to 2021 as well as higher

inventories in order to fulfil the higher

order backlog. We also had a

significant build-up in the amount of raw

materials as well as cost increases

for materials.

Supply chain

challenges and shortages in

the availability of some items have

created the need for our businesses

stockpile certain key components.

These challenges have also resulted

in some delays in completing and

delivering finished goods. The impact

of the spin-off of the Turbocharging Division

was a reduction of

Inventories, net, of 3 percent.

Current assets held for sale and in

discontinued operations

decreased to $96 million from $136 million.

These

amounts primarily relate to working

capital for certain contracts relating

to the former Power Grids

business

which remain with ABB and are being

executed over time for the direct benefit

of Hitachi Energy. For the

details of the assets of the Power

Grids business see “Note

3 - Discontinued operations” to our

Consolidated

Financial Statements.

December 31, ($ in millions)

2022

2021

% Change

Current liabilities

Accounts payable, trade

4,904

4,921

Contract liabilities

2,216

1,894

17%

Short-term debt and current

maturities of long-term

debt

2,535

1,384

83%

Current operating leases

220

230

(4)%

Provisions for warranties

1,028

1,005

Other provisions

1,171

1,386

(16)%

Other current liabilities

4,323

4,367

(1)%

Current liabilities held

for sale and in discontinued

operations

132

381

(65)%

Total current liabilities

16,529

15,568

Accounts payable, trade, remained

flat (increase 6 percent in local

currencies) while the spin-off of the

Turbocharging Division reduced the balance

by 2 percent. The local currency increase

reflects higher

inventory purchases but the increase

was muted as payment terms

with suppliers have become

somewhat

less favorable in a constrained supply

chain environment.

Contract liabilities increased

17 percent (increased 24 percent in local

currency) reflecting higher

levels of

business activity at the end of 2022

compared to 2021. The spin-off of

the Turbocharging Division reduced

the amount

by 1 percent.

The increase in short-term debt

and current maturities of long-term

debt in 2022 was due to an increase

commercial paper borrowings

under the Euro-commercial paper

program and the reclassification to current

the EUR 700 million 0.625% Instruments,

due 2023, offset partially by the repayment

at maturity of the

USD 1,250 million 2.875% Notes, due

2022.

Current operating leases includes

the portion of the operating lease

liabilities that are due to be paid

in the

next 12 months. For a summary of

operating lease liabilities, see “Note

14 - Leases” to our Consolidated

Financial Statements.

Provisions for warranties increased 2 percent

(7 percent in local currencies).

The spin-off of the

Turbocharging Division reduced the amount

by 2 percent. The local currency increase

reflects the higher

provisioning in 2022 on increased

revenues as well as increases in expected

costs for certain newer product

lines. For details on the change

in the Provisions

for warranties, see “Note 15 - Commitments

and

contingencies” to our Consolidated

Financial Statements.

Current liabilities held

for sale and in discontinued operations

decreased to $132 million from $381

million.

The decrease included the settlement

of $136 million for certain indemnification

guarantees which were

provided in connection with

the original sale of the Power

Grids business to Hitachi. The remaining

amounts

primarily relate to certain working capital

balances of the former

Power Grids business as described

above.

December 31, ($ in millions)

2022

2021

% Change

Non-current assets

Restricted cash, non-current

—

300

(100)%

Property, plant and equipment, net

3,911

4,045

(3)%

Operating lease right-of-use

assets

841

895

(6)%

Investments in equity-accounted

companies

130

1,670

(92)%

Prepaid pension and other

employee benefits

916

892

Intangible assets, net

1,406

1,561

(10)%

Goodwill

10,511

10,482

Deferred taxes

1,396

1,177

19%

Other non-current assets

467

543

(14)%

Total non-current assets

19,578

21,565

(9)%

The non-current Restricted cash at December

31, 2021, related to certain amounts

received on the initial sale

of the Power Grids business in 2020 which

were placed in escrow, pending resolution

of certain of our

contractual obligations to Hitachi. See “Note

3 - Discontinued operations”

to our Consolidated Financial

Statements. In connection with the

sale of the remaining ownership

in Hitachi Energy to Hitachi in December

2022, the restrictions on the bank account

where this cash was deposited

were removed.

In 2022, Property, plant and equipment, net,

decreased

3 percent (increased 2 percent in

local currencies).

The spin-off of the Turbocharging Division reduced

this balance by 4 percent.

In 2022, Goodwill remained flat (increased

2 percent in local

currencies).

The local currency increase

primarily reflects the purchase of

In-Charge.

Intangible assets, net, decreased 10 percent

(8 percent

in local currencies). Acquisitions

of businesses,

primarily In-Charge, increased Intangible

assets, net, by 5 percent. For additional

information on goodwill

and

intangible assets see “Note 11 - Goodwill and intangible

assets” to our Consolidated Financial

Statements.

The balance for Investment in equity-accounted

companies at December 31, 2021,

primarily represented our

remaining 19.9 percent interest in

the Hitachi Energy joint venture.

We sold this remaining interest in

December 2022. For additional

information on investments

in equity-accounted companies

see “Note 4 -

Acquisitions, divestments and equity-accounted

companies” to our Consolidated

Financial Statements.

Prepaid pension and other

employee benefits increased 3 percent

(6 percent in local currencies).

The spin-off

of the Turbocharging Division reduced

this balance by 10 percent. For additional

information on Pension and

employee benefits see “Note 17 - Employee

benefits” to our Consolidated

Financial Statements.

In 2022, Deferred taxes increased 19 percent

(26 percent in local currencies).

For details on deferred tax

assets see “Note 16 - Income taxes”

to our Consolidated Financial

Statements.

December 31, ($ in millions)

2022

2021

% Change

Non-current liabilities

Long-term debt

5,143

4,177

23%

Non-current operating leases

651

689

(6)%

Pension and other employee

benefits

719

1,025

(30)%

Deferred taxes

729

685

Other non-current liabilities

2,085

2,116

(1)%

Non-current liabilities

held for sale and in discontinued

operations

(53)%

Total non-current liabilities

9,347

8,735

Long-term debt increased 23 percent.

The balance at December 31, 2022,

includes five instruments newly

issued in 2022: i) EUR 700 million

0.625% Instruments due 2024,

ii) EUR 500 million floating rate Instruments

due 2024, iii) CHF 150 million

2.1% Bonds due 2025, iv) CHF 425

million 0.75% Bonds due 2027

and

v) CHF 150 million 2.375% Bonds

due 2030. This was partially

offset by the reclassification to current of

the

EUR 700 million 0.625% Instruments,

due 2023, as well as a reduction

of 5 percent in reported amounts

due

to fair value hedge accounting adjustments.

Foreign currency movements

also reduced the balance by

3 percent over the year. For additional information

on Long-term debt, see “Liquidity

and Capital Resources—

Debt and interest rates” as well

as “Note 12 - Debt” to our Consolidated

Financial Statements.

Non-current operating leases includes

the portion of the operating lease

liabilities that are due to be paid

more than 12 months.

Pension and employee benefits

decreased 30 percent (26 percent

in local currencies).

For additional

information on Pension

and employee benefits see “Note

17 - Employee benefits”

to our Consolidated

Financial Statements.

For a breakdown of Other non

‑

current liabilities, see “Note 13

- Other provisions, other current

liabilities and

other non-current liabilities” to our Consolidated

Financial Statements.

Non-current liabilities held

for sale and in discontinued operations

relate to the sale in 2020 of the Power

Grids business. For the details of

the liabilities of the Power Grids business

see “Note 3 - Discontinued

operations” to our Consolidated

Financial Statements.

Cash flows

The Consolidated Statements of Cash

Flows are shown on a continuing

operations basis,

with the effects of

discontinued operations shown

in aggregate for each major cash flow activity

and also include the impact

from changes in restricted cash.

The Consolidated Statements of Cash

Flows can be summarized as follows:

($ in millions)

2022

2021

2020

Net cash provided by

operating activities

1,287

3,330

1,693

Net cash provided by investing

activities

981

2,307

6,760

Net cash used in financing

activities

(2,394)

(4,968)

(8,175)

Effects of exchange rate changes

on cash and equivalents

(189)

(81)

Net change in cash and

equivalents and restricted

cash

(315)

588

357

Operating activities

($ in millions)

2022

2021

2020

Net income

2,594

4,650

5,205

Loss (income) from discontinued

operations, net of

tax

(4,860)

Depreciation and amortization

814

893

915

Total

adjustments to reconcile

net income to net cash

provided by

operating activities

(excluding depreciation

and amortization)

(434)

(2,593)

263

Total

changes in operating

assets and liabilities

(1,683)

308

352

Net cash provided by operating

activities — continuing

operations

1,334

3,338

1,875

Net cash used in operating

activities — discontinued

operations

(47)

(8)

(182)

Cash flows from operating activities

in continuing operations

in 2022 provided net cash of $1,334

million, a

decrease of 60 percent compared

to 2021 of which 7 percent was

due to movements in exchange

rates. In

addition, in 2022, we had lower

cash effective net income (i.e. net income

from continuing operations

adjusted for depreciation, amortization

and other non-cash items) partially

due to costs associated with

business transformation activities,

higher costs relating

to business restructuring and costs

for the spin-off of

the Turbocharging Division and other business

portfolio transactions.

In 2022, this reduction was also

impacted by payments of approximately

$315 million in relation

to regulatory penalties for the Kusile

project.

In 2022, an increase in both business volumes

and inflation-driven cost and price

changes resulted in growth

in our working capital. Changes

in operating assets and liabilities

reflected a high buildup of inventory with a

less favorable timing of inventory

payments,

an increase in amounts receivable

from customers as well as the

timing of payments for accrued liabilities,

including higher employee bonuses

paid in 2022 compared to 2021.

Cash paid for income taxes decreased

to $1,188 million from $1,292 million,

reflecting the higher current

income taxes in 2021,

including tax impacts from

the sales of businesses.

In 2022 and 2021, there were no

significant cash flows from operating

activities of discontinued

operations.

Investing activities

($ in millions)

2022

2021

2020

Purchases of investments

(321)

(1,528)

(5,933)

Purchases of property, plant and equipment

and intangible assets

(762)

(820)

(694)

Acquisition of businesses

(net of cash acquired)

and

increases in cost-

and equity-accounted

companies

(288)

(241)

(121)

Proceeds from sales of

investments

697

2,272

4,341

Proceeds from maturity

of investments

Proceeds from sales of

property, plant and equipment

127

114

Proceeds from sales of

businesses (net of

transaction costs and

cash

disposed) and cost-

and equity-accounted

companies

1,541

2,958

(136)

Net cash from settlement

of foreign currency derivatives

(166)

(121)

138

Changes in loans receivable,

net

320

(19)

(3)

Other investing activities

(14)

(4)

Net cash provided by

(used in) investing

activities — continuing

operations

1,207

2,671

(2,272)

Net cash provided by

(used in) investing

activities — discontinued

operations

(226)

(364)

9,032

Net cash provided by investing activities

for continuing operations

in 2022 was $1,207 million compared

$2,671 million during 2021, a decrease

of $1,464 million. In 2022, we received

net proceeds in connection

with the sale of our remaining equity-method

investment in Hitachi Energy of

$1,552

million. In addition,

included in Changes in loans

receivable, net, are funds collected

from a subsidiary of Accelleron

in October

2022, related to a short-term intercompany

loan granted in anticipation

of the Turbocharging Division spin-off.

In 2021, we received proceeds of

$2,958 million in connection

with sales of businesses, primarily

from the

sale of the Dodge business.

The following presents purchases

of property, plant and equipment and intangible

assets by significant asset

category:

($ in millions)

2022

2021

2020

Construction in progress

540

479

493

Purchase of machinery

and equipment

127

150

134

Purchase of land and buildings

158

Purchase of intangible

assets

Purchases of property, plant and equipment

and intangible assets

762

820

694

Cash expenditures for acquisitions

of businesses in 2022

primarily reflects the amount paid

to acquire

In-Charge while the amount in 2021

primarily reflects the acquisition

of ASTI.

Cash flows used in investing activities

for discontinued operations

includes amounts relating to the original

sale of the Power Grids business

to Hitachi.

We sold this business in 2020

and reported net cash proceeds

$9,168 million in that year.

Certain amounts related to

the purchase price were subject

to adjustment,

including the final settlement for

working capital balances as well

as other payments which were contractually

due to be transferred to Hitachi in periods

after the initial sale.

In 2022

and 2021, these uncertain elements

the purchase price,

including the original

indemnification guarantees, were finalized

and we made payments

related to the purchase price and certain

other obligations totaling $227

million and $364 million, respectively.

Financing activities

($ in millions)

2022

2021

2020

Net changes in debt with

maturities of 90 days or

less

1,366

(83)

(587)

Increase in debt

3,849

1,400

343

Repayment of debt

(2,703)

(1,538)

(3,459)

Delivery of shares

394

826

412

Purchase of treasury

stock

(3,553)

(3,708)

(3,048)

Dividends paid

(1,698)

(1,726)

(1,736)

Cash associated with

the spin-off of the Turbocharging

Division

(172)

—

Dividends paid to noncontrolling

shareholders

(99)

(98)

(82)

Proceeds from issuance

of subsidiary shares

216

—

Other financing activities

(41)

(49)

Net cash used in financing

activities — continuing

operations

(2,394)

(4,968)

(8,206)

Net cash provided by

financing activities

— discontinued

operations

—

Our financing cash flow activities primarily

include debt transactions

(both from the issuance of

debt

securities and borrowings directly

from banks), share transactions

(including share transactions

consolidated subsidiaries) and

payments of distributions to controlling

and noncontrolling shareholders.

2022, we also distributed cash as part

of the spin-off of the Turbocharging Division.

In 2022, the net inflow for debt with

maturities of 90 days or less related

to net borrowings of amounts

outstanding under the Euro-commercial

paper program and various

local country borrowings.

In 2022, “Increase in debt” primarily

represents initial borrowings

for terms longer than 90 days under

the

Euro-commercial paper program

of $1,425 million and borrowings

under the following six long-term debt

transactions (total cashflow amount at

date of borrowings of $2,390 million):

•

CHF 275 million 0% Bonds due 2023

•

EUR 700 million 0.625% Instruments

due 2024

•

EUR 500 million floating rate Instruments

due 2024

•

CHF 150 million 2.1% Bonds due

2025

•

CHF 425 million 0.75% Bonds due

2027

•

CHF 150 million 2.375% Bonds

due 2030

In 2022, “Repayment of debt”

includes the repayment at maturity of

the USD 1,250 million Notes and

repayments of $1,345 million

under the Euro-commercial paper

program for borrowings having terms

longer

than 90 days.

“Delivery of shares” in 2022

primarily reflects cash received

from the exercise of options in connection

with

our Management Incentive Plan (resulting

in a delivery of 16 million

shares). All shares were delivered

out of

Treasury stock.

“Proceeds from issuance of subsidiary

shares” in 2022 relates to the sale of shares

by ABB E-mobility

Holdings Ltd through a private placement

of $216 million.

In 2022, “Purchase of treasury stock” reflects

$2,891 million

of cash payments to purchase 91 million

of our

own shares in connection with the announced

share buyback programs. It also

reflects $662 million paid

purchase 20 million shares on

the open market during the year.

“Cash associated with the spin-off of the

Turbocharging Division” represents the amount

of cash and cash

equivalents which were directly

owned by the entities in the spin-off of

the Turbocharging Division at the date

of the spin-off.

Contractual obligations and commitments

The contractual obligations presented

in the table below represent our estimates

of future payments under

fixed contractual obligations and

commitments. These amounts may differ

from those reported in our

Consolidated Balance

Sheet at December 31, 2022. Changes

in our business needs, cancellation

provisions

and changes in interest rates, as well

as actions by third parties and

other factors, may cause these

estimates to change. Therefore, our actual

payments in future periods may

vary from those presented below.

The table below summarizes certain

of our cash requirements for known

contractual obligations and

principal

and interest payments under our

debt instruments and purchase

obligations at December 31, 2022, and

the

timing thereof.

For details of future operating

and finance lease payments,

see “Note 14 - Leases” to our

Consolidated Financial

Statements.

At December 31, 2022 ($ in

millions)

Current

Non-current

Total

Long-term debt obligations

1,058

5,235

6,293

Interest payments related

to long-term debt obligations

629

699

Purchase obligations

3,519

949

4,468

Total

4,647

6,813

11,460

In the table above, the “Long

‑

term debt obligations”

reflect the cash amounts

to be repaid upon maturity of

those debt obligations. The cash

obligations above will differ from Long

‑

term debt due to the impacts of

fair

value hedge accounting

adjustments and premiums or discounts

on certain debt.

We have determined the interest payments

related to long

‑

term debt obligations by reference

to the

payments due under the terms of our

debt obligations at the

time such obligations were

incurred. However,

we use interest rate swaps to modify

the interest characteristics of

certain of our debt obligations.

The net

effect of these swaps may increase or decrease

the actual amount of our cash interest

payment obligations,

which may differ from those stated in the

above table. For further details

on our debt obligations

and the

related hedges, see “Note 12 - Debt”

to our Consolidated Financial

Statements.

Purchase obligations are defined

as agreements to purchase goods

and services that are enforceable

and

legally binding, that specify all

significant terms, including

the quantities to be purchased, price

provisions and

the approximate timing of the

transactions. Purchase obligations

includes procurement contracts for

raw

materials, sub-contracted work, supplies

and services. Purchase obligations

include amounts recorded as

well as amounts that are not recorded

in the Consolidated Balance

Sheets.

Off

‑

balance sheet arrangements

Commercial commitments

We disclose the maximum potential exposure

of certain guarantees, as well

as possible recourse provisions

that may allow us to recover from

third parties amounts paid

out under such guarantees. The maximum

potential exposure does not allow

any discounting of our assessment of actual

exposure under the

guarantees. The information below

reflects our maximum potential exposure

under the guarantees, which is

higher than our assessment of the

expected exposure.

Guarantees

The following table provides

quantitative data regarding our

third

‑

party guarantees. The maximum

potential

payments represent a worst

‑

case scenario, and do not

reflect our expected outcomes.

Maximum potential payments

(1)

December 31, ($ in millions)

2022

2021

Performance guarantees

4,300

4,540

Financial guarantees

Indemnification guarantees

(2)

—

136

Total

4,396

4,728

(1)

Maximum potential

payments

include amounts

in both continuing

and discontinued

operations.

(2)

Certain indemnifications

provided

to Hitachi

in connection

with the divestment

of Power Grids

were without

limit.

The carrying amount of liabilities

recorded in the Consolidated

Balance Sheets reflects our best estimate of

future payments, which we may incur

as part of fulfilling our guarantee

obligations. In respect of the above

guarantees, the carrying amounts

of liabilities at December 31, 2022

and 2021,

amounted to $1 million and

$156 million,

respectively, the majority of which in 2021 is included in discontinued

operations.

In addition, in the normal course

of bidding for and executing

certain projects, we have entered

into standby

letters of credit, bid/performance bonds

and surety bonds (collectively “performance

bonds”) with various

financial institutions. Customers

can draw on such performance

bonds in the event that we do not fulfill

our

contractual obligations. We would then have

an obligation to reimburse the

financial institution for amounts

paid under the performance bonds.

At December 31, 2022

and 2021, the total outstanding

performance

bonds aggregated to $2.9 billion

and $3.6 billion, respectively; of each

of these amounts, $0.1 billion

relates

to discontinued operations. There have

been no significant amounts

reimbursed to financial institutions

under

these types of arrangements in 2022

and 2021.

For additional descriptions of our performance,

financial and indemnification

guarantees see “Note 15 -

Commitments and contingencies”

to our Consolidated Financial

Statements.

Item 6.

Directors, Senior Management

and Employees

—

Summary of corporate governance

approach

Corporate governance - general principles

ABB is committed to the highest international

standards of corporate governance

and this is reinforced in its

structure, processes and rules as

outlined in this report. In line

with this, ABB complies with the general

principles as set forth in the Swiss

Code of Best Practice for Corporate

Governance, as well as those of the

capital markets where its shares are

listed and traded. In addition

to the provisions of the Swiss Code

Obligations, ABB’s key principles and

rules on corporate governance

are laid down in ABB’s Articles of

Incorporation,

the ABB Ltd Board Governance

Rules (which include

the governance rules of ABB’s Board

committees and the ABB Ltd Related

Party Transaction Policy, which was prepared based on

the Swiss

Code of Best Practice for Corporate

Governance and the independence

criteria set forth in the corporate

governance rules of the New York Stock

Exchange), and the ABB

Code of Conduct. These documents

are

available on ABB’s website at

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

. It is the duty of ABB’s Board

of Directors (the Board) to review and

amend or propose amendments

to those documents from time

to time

to reflect the most recent developments

and practices, as well

as to ensure compliance with

applicable laws

and regulations. Shareholders

and other interested parties may communicate

with the Chairman of the Board

or the independent directors by writing

to ABB Ltd (Attn:

Chairman of the Board/independent

directors), at

Affolternstrasse 44, CH-8050 Zurich,

Switzerland.

Swiss corporate law has been revised,

effective as of January 1, 2023. The

main objectives of the revision

are to strengthen shareholder

rights, improve corporate governance

and modernize corporate law

in general.

Swiss corporations are required

to amend their articles of incorporation

for compliance with the new law

the end of 2024 at the latest. ABB will

propose the necessary changes

to its Articles of Incorporation for

approval by shareholders

at its Annual General Meeting in

March 2023. These changes will

impact certain of

the provisions referred to in this report.

Compensation governance and Board and EC compensation

Information about ABB’s compensation governance

as well as Board and Executive Committee

(EC)

compensation and shareholdings

is provided in the in the section titled

"Compensation" below.

—

Board of Directors

Board and Board committees (2022 - 2023 Board term)

Board of Directors

Chairman:

Peter R. Voser

Gunnar Brock

Jennifer Xin-Zhe Li

Vice

‑

Chairman:

Jacob Wallenberg

David Constable

Geraldine Matchett

Frederico Fleury Curado

David Meline

Lars Förberg

Satish Pai

Finance, Audit and Compliance

Committee

Governance and Nomination

Committee

Compensation

Committee

David Meline (chairman)

Peter R. Voser (chairman)

Frederico Fleury Curado

(chairman)

Gunnar Brock

Lars Förberg

David Constable

Geraldine Matchett

Jennifer Xin-Zhe Li

Jennifer Xin

‑

Zhe Li

Satish Pai

Jacob Wallenberg

Board governance

The Board

The Board defines the ultimate direction

of the business of ABB and

issues the necessary instructions.

determines the organization of the

ABB Group and appoints, removes

and supervises the persons entrusted

with the executive management

and representation of ABB. The internal

organizational structure and

the

definition of the areas of responsibility

of the Board, as well

as the information and control instruments

vis-à-vis the Executive Committee

are set forth in the ABB Ltd

Board Governance Rules (available

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

The Board takes decisions as a whole,

supported by its three committees:

the Finance, Audit and

Compliance Committee (FACC), the Governance and

Nomination Committee (GNC), and

the Compensation

Committee (CC). These committees

assist the Board in its tasks and

report regularly to the Board.

The Board

and its committees meet regularly

throughout the year.

The directors and officers of a Swiss corporation

are bound, as specified in

the Swiss Code of Obligations,

perform their duties with all due

care, to safeguard the interests of

the corporation in good

faith and to extend

equal treatment to shareholders

in like circumstances. Prior to proposing

new candidates for election

to the

Board, checks are performed

to ensure that they are independent

and that there are no conflicts of interest.

The Swiss Code of Obligations does

not specify what standard

of due care is required of the directors

of a

corporate board. However, it is generally held

by Swiss legal scholars and

jurisprudence that the directors

must have the requisite capability

and skills

to fulfill their function, and must

devote the necessary time to

the

discharge of their duties. Moreover, the directors

must exercise all due

care that a prudent and diligent

director would have taken in like circumstances.

Finally, the directors are required to take actions in

the best

interests of the corporation and may

not take any actions that may be

harmful to the corporation.

Although the Swiss Code of Obligations

does not discuss specifically

conflicts of interest for board

members,

the ABB Ltd Board Governance Rules

(available at

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

) state

that Board members shall avoid

entering into any situation

in which their personal or financial

interests

may

conflict with the interests of ABB.

Chairman of the Board

The Chairman is elected by the shareholders

to represent their interests in creating

sustainable value

through

effective governance. In addition, the

Chairman (1) takes provisional

decisions on behalf of the Board on

urgent matters where a regular Board

decision cannot be obtained,

(2) calls for Board meetings and sets the

related agendas, (3) interacts with

the CEO and other EC members

on a more frequent basis

outside of

Board meetings and (4) represents

the Board internally and

in the public sphere.

Vice-Chairman of the Board

The Vice

‑

Chairman is elected by the Board

and handles the responsibilities

of the Chairman to the extent

the

Chairman is unable to do so or would

have a conflict of interest in doing

so. He also acts as

counselor/advisor to the Chairman

on any matters that

are Company or Board relevant and

as appropriate or

as the Chairman may require and

with a particular focus on strategic

aspects related to the Company

and its

business in general. In addition,

the Vice

‑

Chairman takes such other actions

as may be decided by the

Board

or requested by the Chairman.

Finance, Audit and Compliance Committee

The FACC is responsible for overseeing (1) the integrity

of ABB’s financial statements, (2)

ABB’s compliance

with legal, tax and regulatory requirements,

(3) the external auditors’ qualifications

and independence, (4) the

performance and role of ABB’s internal

audit function and the performance

of the external auditors, (5)

ABB’s

capital structure, funding requirements

and financial and risk policies, and

(6) ABB’s implementation and

maintenance of an integrity

program and internal controls

designed to mitigate integrity risk.

The FACC must comprise three or more independent

directors who have a thorough understanding

finance and accounting. The Chairman

of the Board and, upon invitation

by the committee’s chairman, the

CEO or other members of the Executive

Committee may participate

in the committee meetings, provided

that

any potential conflict of interest is

avoided and confidentiality

of the discussions is maintained.

In addition, the

chief integrity officer, the head of internal audit and

the external auditors participate

in the meetings as

appropriate. The Board has determined

that each member of the FACC is an audit committee

financial expert

as such term is defined in Form 20-F.

Governance and Nomination Committee

The GNC is responsible for (1) overseeing

corporate governance practices within

ABB, (2) overseeing

corporate social responsibility

(including health, safety and

environment as well as sustainability),

(3) nominating candidates for the

Board, the role of the CEO and other

positions on the Executive

Committee, and (4) succession planning

and employment matters relating

to the Board and the Executive

Committee. The GNC is also responsible

for maintaining an orientation

program for new Board members and

an ongoing education

program for existing Board members.

The GNC must comprise three

or more independent directors. Upon

invitation by the committee’s

chairman,

the CEO or other members of the

Executive Committee may participate

in the committee meetings,

provided

that any potential conflict of interest is

avoided and confidentiality

of the discussions is maintained.

Compensation Committee

The CC is responsible for compensation

matters relating to the Board

and the Executive Committee.

The CC must comprise three or

more directors who are elected

by the shareholders. The Chairman

of the

Board and, upon invitation by the committee’s

chairman, the CEO or other members

of the Executive

Committee may participate in the

committee meetings, provided

that any potential conflict of interest is

avoided and confidentiality of

the discussions is maintained.

Board membership

Board composition

In proposing individuals to be elected

to the Board, the Board seeks

to align the composition and skills

of the

Board with the Company’s strategic needs,

business portfolio, geographic

reach and culture. The Board

strives for diversity in all aspects including

gender, nationalities, geographic/regional experience

and

business experience. In addition,

the average tenure of the members

of the Board should be well

‑

balanced.

The Board also considers the number

of other mandates of each

Board member to ensure that he/she

will

have sufficient time to dedicate to his/her

role as an ABB Board member.

Elections and term of office

The members of the Board of Directors

and the Chairman

of the Board as well as the members

of the

Compensation Committee are elected

by the shareholders at the general

meeting of shareholders for a term

of office extending until completion

of the next ordinary general

meeting of shareholders. Members whose

terms of office have expired shall be

immediately eligible for re

‑

election. ABB’s Articles of Incorporation

(available at

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

) do not provide for the retirement of directors

based on their age. However, an age limit for members

of the Board is set forth in the ABB

Ltd Board

Governance Rules (available

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

), although waivers are

possible and subject to Board discretion.

If the office of the Chairman of the

Board of Directors or any position

on the Compensation Committee becomes

vacant during a Board term,

the Board of Directors may appoint

(shall appoint in the case of the Chairman

of the Board) another individual

from among its members to that

position for the remainder of that

term. The Board of Directors

shall consist of no less than

7 and no more

than 13 members.

Members of the Board (2022-2023 Board term)

Board Experience

Corporate Officer

Experience

Other Business Experience

Global Experience

Country of Origin /

Nationality

Gender

Non

Executive

Independent

Board Member

ABB Board

Tenure (years)

Other Public

Board

Experience

CEO

CFO

Ope

rations

Risk

Management

Sustainability

Digital /

Technology

Peter R. Voser

●

Yes

Jacob Wallenberg

●

Yes

Gunnar Brock

●

Yes

David Constable

●

CA, US

Yes

Frederico Fleury Curado

●

BR, PT

Yes

Lars Förberg

●

SE, CH

Yes

Jennifer Xin-Zhe Li

●

CN, CA

Yes

Geraldine Matchett

●

CH, UK, FR

Yes

David Meline

●

US, CH

Yes

Satish Pai

●

Yes

Peter R. Voser

has been a member and Chairman

of ABB’s Board of Directors since

April 2015.

He was also

ABB’s Chief Executive Officer from April 2019

to February 2020. He is a member

of the board of directors

IBM Corporation (U.S.).

He is also a member of

the board of directors of Temasek Holdings (Private) Limited

(Singapore) as well as chairman

of the board of PSA International

Pte Ltd (Singapore), one of its

subsidiaries.

In addition, he is the chairman of

the board of trustees of the St. Gallen

Foundation for

International Studies. He was previously

the chief executive officer of Royal Dutch

Shell plc (The

Netherlands). Mr. Voser was born in 1958 and is a Swiss citizen.

Jacob Wallenberg

has been a member of ABB’s Board

of Directors since June 1999 and

Vice-Chairman

since April 2015. He is the chairman

of the board of Investor AB

(Sweden). He is vice

‑

chairman of the boards

of Telefonaktiebolaget LM Ericsson, FAM AB and Patricia Industries (all Sweden).

He is also a member of the

board of directors of the Knut and Alice

Wallenberg Foundation as well as a member of

the nomination

committee of SAS AB (both Sweden).

Through June 2022, he was

a member of the board of

directors of

Nasdaq, Inc. (U.S.). Mr. Wallenberg was born in 1956

and is a Swedish citizen.

Gunnar Brock

has been a member of ABB’s

Board of Directors since March

2018. He is chairman of the

boards of directors of Neptunia Invest

AB and Stena AB (both Sweden)

and a member of the boards of

directors of Investor AB and Patricia

Industries (both Sweden). Through

July 2022, he was the chairman

the board of directors of Mölnlycke

Health Care AB (Sweden).

He was formerly president and chief

executive

officer of Atlas Copco AB (Sweden).

Mr. Brock was born in 1950 and is a Swedish

citizen.

David Constable

has been a member of ABB’s Board of Directors

since April 2015.

He is the chairman of the

board of directors and chief executive

officer of Fluor Corporation

(U.S.). He was formerly the chief executive

officer and president as well as a member

of the board of directors of Sasol

Limited (South Africa). He

joined

Sasol after more than 29 years with

Fluor Corporation (U.S.). Mr. Constable was born in 1961

and is a

Canadian and U.S. citizen.

Frederico Fleury Curado

has been a member of ABB’s

Board of Directors since April 2016. He

is a member

of the boards of directors of Ultrapar

S.A. (Brazil),

Transocean Ltd. (Switzerland) and LATAM Airlines Group

S.A. (Chile).

He was formerly the chief executive

officer of Ultrapar S.A. and Embraer

S.A. (both Brazil).

Mr. Curado was born in 1961 and is a Brazilian and

Portuguese citizen.

Lars Förberg

has been a member of ABB’s

Board of Directors since April 2017.

He is co

‑

founder and

managing partner of Cevian Capital.

Mr. Förberg was born in 1965 and is a Swedish and

Swiss citizen.

Jennifer Xin-Zhe Li

has been a member of ABB’s Board

of Directors since March 2018. She

a member of

the boards

of directors of SAP SE (Germany),

Kone Oy (Finland) and Full Truck Alliance

Co. Ltd. (Cayman

Islands/P.R.C.). Through August 2022, she was a member of the board of

directors of Flex Ltd

(Singapore/U.S.).

Ms. Li is a founder and general

partner of Changcheng Investment Partners

(P.R.C.),

private investment fund. From 2008

to 2018, she served as chief financial

officer of Baidu Inc. (P.R.C.) and

chief executive officer of Baidu Capital

(P.R.C.)

Prior to that, Ms. Li spent 14 years

with General Motors,

holding various senior

finance positions, including chief financial

officer of GM China and corporate controller

for GMAC North American Operations.

Ms. Li was born in 1967

and is a Canadian citizen.

Geraldine Matchett

has been a member of ABB’s

Board of Directors since March

2018. She is

the co-chief

executive officer, the chief financial officer and a member

of the managing board of Royal

DSM N.V. (The

Netherlands).

She was previously the chief financial

officer of SGS Ltd (Switzerland). Prior

to joining SGS she

worked as an auditor at Deloitte

Ltd (Switzerland) and KPMG LLP (U.K.).

Ms. Matchett was born in 1972

and

is a Swiss, British and French citizen.

David Meline

has been a member of ABB’s Board of Directors

since April 2016. From 2011 through 2022, he

held chief financial officer roles at Moderna

Inc. (U.S.), Amgen Inc. (U.S.) and

the 3M Company (U.S.). From

2008 through 2011 he was the corporate controller and

chief accounting officer of the 3M Company

(U.S.).

Prior to joining 3M, Mr. Meline worked for more than

20 years for General

Motors Company (U.S.).

Mr. Meline

was born in 1957 and is a U.S. and

Swiss citizen.

Satish Pai

has been a member of ABB’s

Board of Directors since April 2016.

He is the managing

director and

a member of the board of directors of

Hindalco Industries Ltd. (India).

He joined Hindalco

in 2013 after 28

years with Schlumberger Limited (U.S.).

Mr. Pai was born in 1961 and is an Indian

citizen.

As of December 31, 2022, none of

the Board members held

any official functions or political posts.

Further

information on ABB’s Board members

can be found on ABB’s website under the

ABB Board of Directors link

(available at

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

Board meetings and attendance

The Board and its committees have

regularly scheduled meetings

throughout the year. These meetings are

supplemented by additional

meetings (either in person or by conference

call), as necessary. Board meetings

are convened by the Chairman or upon

request by any other Board member

or the CEO. Documentation

covering the various items of

the agenda for each Board meeting

is sent out in advance to each

Board

member in order to allow each member

time to study the covered matters

prior to the meetings. Each Board

meeting has a private session without

management or others being

present. Decisions made at the Board

meetings are recorded in written

minutes of the meetings. Some decisions

are also taken by circular

resolution.

The table below shows the number of

meetings held during

2022 by the Board and its committees,

their

average duration, as well as the attendance

of the individual Board

members. The Board meetings shown

include a strategic retreat attended

by the members of the

Board and the EC.

2022 Board and Board Committee

Meetings

Pre annual general meeting

2022

Post annual general meeting

2022

Board

Meetings and attendance

Mtg.

Conf.

Call

FACC

GNC

Mtg.

Conf.

Call

FACC

GNC

Average duration (hours)

7.5

1.5

1.25

8.25

1.5

1.25

Number of meetings

Meetings attended:

Peter R. Voser

Jacob Wallenberg

Gunnar Brock

David Constable

Frederico Fleury Curado

Lars Förberg

Jennifer Xin-Zhe Li

Geraldine Matchett

David Meline

Satish Pai

Mandates of Board members outside the ABB Group

No member of the Board may hold

more than ten additional

mandates,

of which no more than four may be

listed companies. Certain types of

mandates, such as those in our

subsidiaries, those in the same

group of

companies and those in non

‑

profit and charitable institutions,

are not subject to those limits.

Additional details

can be found in Article 38 of ABB’s Articles

of Incorporation (available

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

Business relationships between ABB and its Board members

This section describes important business

relationships between ABB and

its Board members, or companies

and organizations represented

by them.

Fluor Corporation (Fluor) is an important

customer of ABB. ABB

sells primarily electrical switchgears,

control

systems and electrical solutions

through its Electrification

and Process Automation Business Areas

to Fluor.

David Constable is the chairman of

the board of directors and CEO of

Fluor.

After reviewing the level of business

with Fluor, the Board has determined that

ABB’s business relationship

with Fluor is not unusual in its nature

or conditions and does

not constitute a material business

relationship.

As a result, the Board concluded

that all members of the Board

are independent.

These determinations were made in

accordance with ABB Ltd's

Related Party Transaction Policy,

which was

prepared based on the Swiss Code

of Best Practice for Corporate

Governance and the independence

criteria

set forth in the corporate governance

rules of the New York Stock Exchange. This policy is

contained in the

ABB Ltd Board Governance Rules (available

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

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

Information from the Executive Committee

In accordance with the ABB Board

Governance Rules (available

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

governance

), the CEO reports regularly to the Board

about ABB’s overall business and

when circumstances

require on any extraordinary events

that may arise.

This includes:

•

Reports on financial results (including

profit and loss, balance sheet and

cash flows);

•

Changes in key members of management;

•

Information that may affect the supervisory

or monitoring function of

the Board (including on

matters of strategy and compliance);

and

•

Significant developments in legal

matters.

At each Board meeting, Board

members are briefed by

the Chairman, CEO, CFO and other

EC members on

ABB’s business performance and on

material developments affecting ABB.

Outside of Board meetings,

Board members generally channel

any requests for information

through the Chairman. Board members

also

obtain information through offsite retreats

with the Executive Committee and

visits to ABB sites. In addition,

Board members obtain information

through the Board committees in which

they participate and which are

also attended by relevant EC members

and management representatives

from human resources, finance,

legal and the business.

Internal Audit

ABB has an Internal Audit team

that provides independent objective

assurance and other services

to help

ensure that ABB operates in accordance

with applicable laws as well as internal

policies and procedures.

Internal Audit reports to the FACC and to the CFO. The

FACC reviews and approves the internal audit plan,

and material changes to the plan.

Investigations of potential

fraud and inappropriate business

conduct are an

integral part of the internal audit

process. Depending on circumstances,

Internal Audit may act together

with

ABB’s Integrity Investigations and Monitoring

department,

which is part of ABB’s integrity

function. Internal

Audit reports on a regular basis

its main observations and recommendations

to the relevant members of

the

EC and to the FACC as appropriate.

Risk Management

ABB has an enterprise risk management

program (ERM) in place which

takes into account ABB’s size and

complexity. ERM provides the EC and the Board with a

comprehensive and holistic

view of the risks facing

the business. ERM involves managing

the acceptance of risk to achieve

the objectives of the business.

The

ERM process is typically cyclical

in nature, conveying the idea

of continuous refinement of the risk

management approach in a dynamic

business environment. Furthermore,

ABB runs a mitigation process

for

the identified risks that is key to

the success of this process. ERM

assessments are both top down

and

bottom up. They cover strategic,

financial,

and operational risks, both

current and long term. Key risks

identified and managed

in 2022 were those related to the war

in Ukraine, to continued constraints

in global

supply chains and to the planned

initial public offering in Switzerland

of ABB’s electric-vehicle charging

business.

ERM results are reported to

the FACC and the entire Board. This information becomes

part of the

overall strategic and risk discussions

by the Board to help

create value for stakeholders.

Information to the Board and the Finance, Audit and Compliance Committee

Supervisory and control instruments

vis-à-vis the auditors

Our auditors, KPMG, attend each

meeting of the FACC and each meeting includes

a private session between

the auditors and the FACC without management

being present. In 2022, the

FACC had 7 meetings (either in

person or via telephone call). On at

least an annual basis, the

FACC reviews and discusses with the external

auditors all significant relationships

that the auditors have with the Company

that could impair their

independence. The FACC reviews the auditor engagement

letter and the audit plan including

discussion of

scope, staffing, locations and general

audit approach. The FACC also reviews and

evaluates the auditors’

judgment on the quality and appropriateness

of the Company’s accounting principles

as applied in the

financial reporting. In addition, the

FACC approves in advance any non-audit services

to be performed by the

auditors.

At least annually, the FACC obtains and reviews a report by the auditors

that includes discussion on:

•

The Company’s internal control procedures;

•

Material issues, if any, raised by the most recent internal

quality control review;

•

Critical accounting policies

and practices of the Company;

•

All alternative accounting treatments

of financial information that were

discussed between the

auditors and management as well

as the related ramifications;

and

•

Material communications between

the auditors and management

such as any management letter

or schedule of audit differences.

Taking into account the opinions of management the FACC evaluates the qualifications,

independence and

performance of the auditors. The

FACC reports the material elements of its supervision

of the auditors to the

Board and on an annual basis

recommends to the Board the auditors

to be proposed for election at the

shareholders meeting.

—

Executive Committee

Composition of the Executive

Committee (at December 31, 2022)

Björn Rosengren

Chief Executive Officer

CORPORATE OFFICERS

BUSINESS AREA PRESIDENTS

Timo Ihamuotila

Morten Wierod

Chief Financial Officer

Electrification

Carolina Granat

Peter Terwiesch

Chief Human Resources Officer

Process Automation

Andrea Antonelli

Tarak

Mehta

General Counsel

Motion

Karin Lepasoon

Sami Atiya

Chief Communications and Sustainability Officer

Robotics & Discrete Automation

Executive Committee responsibilities and organization

The Board has delegated the executive

management of ABB to the CEO.

The CEO and,

under his direction,

the other members of the Executive

Committee are responsible

for ABB’s overall business and affairs and

day-to-day management. The CEO reports

to the Board regularly, and whenever extraordinary

circumstances

so require, on the course of ABB’s business

and financial performance

and on all organizational

and

personnel matters, transactions and

other issues material to the

Group. Each member of the Executive

Committee is appointed and discharged

by the Board.

Members of the Executive Committee (at December 31, 2022):

Björn Rosengren

was appointed Chief Executive

Officer and member of the Executive

Committee effective

March 2020. He is a member of the board

of directors of the World Childhood

Foundation (Sweden).

Before

joining ABB, he was the president and

chief executive officer of Sandvik AB

(Sweden) since 2015.

Prior to

that, Mr. Rosengren was the chief executive officer of

Wärtsilä Corporation (Finland) from

2011 to 2015. He

held a variety of management roles

at Atlas Copco AB (Sweden)

from 1998 to 2011. Mr. Rosengren was

born in 1959 and is a Swedish

citizen.

Timo Ihamuotila

was appointed Chief

Financial Officer and member of the Executive

Committee effective

April 2017. He is a member of the

board of directors of

SoftwareONE Holding AG and Hitachi

Energy Ltd

(both Switzerland). From 2009

to 2016, Mr. Ihamuotila was chief financial officer and an executive

vice

president of the Nokia Corporation

(Finland). From 1999 to 2009,

he held various senior roles

with Nokia.

Mr. Ihamuotila was born in 1966 and is a Finnish

citizen.

Carolina Granat

was appointed Chief Human

Resources Officer and member of the Executive

Committee

effective January 2021.

She joined ABB in 2020 as Head

of People Development. Prior

to that, she was

globally responsible for human resources

at the machining solutions

business area of Sandvik AB (Sweden).

Ms. Granat was born in 1972 and

is a Swedish citizen.

Andrea

Antonelli

was appointed General Counsel

and member of the Executive Committee

effective March

2022. From 2020 to 2022 he was

General Counsel of both ABB’s Electrification

and Robotics & Discrete

Automation Business Areas. Prior

to joining ABB, Mr. Antonelli was at the Tetra Pak Group, where he held

various positions as regional

general counsel for different regions as well

as vice president legal affairs of

global commercial operations.

He has also worked for General

Electric and Fluor Corporation, as well

as in

private practice at DLA Piper London

offices. Mr. Antonelli was born in 1974

and is an Italian citizen.

Karin Lepasoon

was appointed Chief Communications

and Sustainability Officer and member of

the

Executive Committee effective October 2022.

She joined ABB from Vattenfall, where she served as

head of

group communications and public

& regulatory affairs and member of the company’s group

executive

management team. Prior to that, Ms.

Lepasoon also served

as head of global marketing and communications

at SEB, director of sustainability, communications and

HR at Nordic Capital, head of strategy

and chief of

staff at Skanska, and held various other

roles in the area of communications.

Ms. Lepasoon was born in 1968

and is a Swedish citizen.

Morten Wierod

was appointed President

of the Electrification Business Area

effective April 2022 and has

been a member of the Executive

Committee since April 2019, when

he was appointed President of

the

Motion Business Area. From 2015

until April 2019, he was the Managing

Director of the drives business unit

in the Robotics and Motion division.

During 2011 to 2015, Mr. Wierod was the Managing Director

of the

control products business unit in

the Low Voltage Products division. Between 1998

to 2011, he held various

management roles with ABB. Mr. Wierod was born in

1972 and is a Norwegian

citizen.

Peter Terwiesch

was appointed President

of the Process Automation Business

Area and member of the

Executive Committee effective January 2015

(Process Automation known

as Industrial Automation

from 2017

until 2020).

He is a member of the board of directors

of Hilti AG (Liechtenstein). From

2011 to 2014, Mr.

Terwiesch was Head of ABB’s Central Europe region. He was ABB’s Chief

Technology Officer from 2005 to

2011. From 1994 to 2005, he held several positions with

ABB. Mr. Terwiesch

was born in 1966 and is a

German and Swiss citizen.

Tarak

Mehta

was appointed President of

the Motion Business Area effective April 2022

and has been a

member of the Executive Committee

since October 2010. He is a

member of the board of directors

Prysmian S.p.A. (Italy). He was President

of the Electrification

Business Area since April 2019 and President

of the Electrification Products division

from 2016 to 2019. From October 2010

through December 2015, he

was President of the Low Voltage Products division.

From 2007 to 2010, he was Head

of ABB’s transformers

business. Between 1998 and 2006,

he held several management

positions with ABB. Mr. Mehta was born in

1966 and is a U.S. and Swiss citizen.

Sami Atiya

was appointed President

of the Robotics & Discrete Automation

Business Area effective April

2019 and has been a member of

the Executive Committee since

June 2016. He is a member of the

board of

directors of SGS SA (Switzerland). He

had previously been President

of the Robotics and Motion division

since January 2017.

From June to December 2016

he was President of the Discrete

Automation and Motion

division. Prior to joining ABB, Mr. Atiya held senior

roles at Siemens in Germany

from 1997 to 2015, including

as chief executive officer of the mobility

and logistics division in the infrastructure

and cities sector from 2011.

Mr. Atiya was born in 1964 and is a German citizen.

Further information about the members

of the Executive Committee

can be found on ABB’s website under

the Executive Committee link (available

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

Mandates of EC members outside the ABB Group

No member of the EC may hold more

than five additional mandates,

of which no more than one

may be in a

listed company. Certain types of mandates, such as

those in our subsidiaries,

those in the same group of

companies and those in non

‑

profit and charitable institutions,

are not subject to those limits.

Additional details

can be found in Article 38 of ABB’s Articles

of Incorporation (available

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

Business relationships between ABB and its EC members

This section describes important business

relationships between ABB and

its EC members, or companies

and organizations represented

by them.

Until December 28, 2022, ABB had

a minority stake in Hitachi

Energy Ltd (Hitachi Energy), the holding

company of ABB’s former power grids business.

Hitachi Energy is both an important

supplier to and customer

of ABB. Timo Ihamuotila is a director of Hitachi

Energy.

After reviewing the level of business

with Hitachi Energy, the Board has determined that

ABB’s business

relationship with Hitachi Energy

is not unusual in its nature or conditions.

These determinations were made in

accordance with ABB Ltd's

Related Party Transaction Policy,

which was

prepared based on the Swiss Code

of Best Practice for Corporate

Governance and the independence

criteria

set forth in the corporate governance

rules of the New York Stock Exchange. This policy is

contained in the

ABB Ltd Board Governance Rules (available

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

—

Share capital of ABB

At December 31, 2022, ABB’s ordinary share

capital (including

treasury shares) as registered with the

commercial register amounted

to CHF 235,769,409.00, divided into

1,964,745,075 fully paid registered

shares with a par value of CHF 0.12

per share.

ABB Ltd’s shares are listed on the SIX Swiss

Exchange, the NASDAQ

OMX Stockholm Exchange

and the

New York Stock Exchange (where its shares are traded

in the form of American depositary

shares (ADS) –

each ADS representing one registered

ABB share). At December

31, 2022, ABB Ltd had a market

capitalization based on outstanding

shares (total number of outstanding

shares: 1,865,003,331) of

approximately CHF 52 billion

($57 billion, SEK 590 billion). The only

consolidated subsidiary

in the ABB

Group with listed shares is ABB India

Limited, Bangalore, India, which

is listed on the BSE Ltd. (Bombay

Stock Exchange) and the National

Stock Exchange of India.

At December 31, 2022, ABB Ltd, Switzerland,

directly or indirectly owned 75 percent

of ABB India Limited, Bangalore,

India, which at that time had a

market

capitalization of approximately INR 569

billion.

Stock exchange listings (at December 31, 2022)

Stock exchange

Security

Ticker symbol

ISIN code

SIX Swiss Exchange

ABB Ltd, Zurich, share

ABBN

CH0012221716

SIX Swiss Exchange

ABB Ltd, Zurich, share

buyback

(second trading line)

ABBNE

CH0357679619

NASDAQ OMX Stockholm

Exchange

ABB Ltd, Zurich, share

ABB

CH0012221716

New York Stock Exchange

ABB Ltd, Zurich, ADS

ABB

US0003752047

BSE Ltd. (Bombay Stock

Exchange)

ABB India Limited, Bangalore,

ABB

(1)

INE117A01022

National Stock Exchange

of India

ABB India Limited, Bangalore,

ABB

INE117A01022

(1)

Also called

Scrip ID.

Share repurchases and cancellation

At ABB’s Annual General Meeting 2022,

shareholders approved

the proposal to cancel 88,403,189 shares

repurchased under ABB’s 2020/21 and

2021/22 share buyback programs.

These shares

were cancelled in

June 2022, resulting in a reduced

total number of issued ABB Ltd

shares of 1,964,745,075.

15,283,500

shares repurchased under ABB’s 2021/22

share buyback program are remaining

for cancellation.

In April 2022, ABB launched a follow-up

share buyback program of up to $3 billion.

The main purpose of this

program was to complete

the return of $7.8 billion

cash proceeds from the Power

Grids divestment to

shareholders. Under that share buyback

program, ABB repurchased

a total of 59,956,000 shares as per

December 31, 2022, and a total of 64,615,000

shares as per February 15, 2023.

ABB intends to use the capital band,

which it will propose at the Annual

General Meeting 2023 to its

shareholders for introduction (see

“Authorized share capital”

below), for cancellation of shares repurchased

under the share buyback programs 2021/22

and 2022/23.

Further information on ABB’s share buyback

programs can be found at

https://global.abb/group/en/investors/investor-and-shareholder-resources/share-buybacks.

In addition, ABB repurchased a total of

20,000,000 shares as per December

31, 2022, primarily for use in

connection with employee share

programs. Further information

can be found at

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

Changes to the ordinary share capital

Except for the share cancellations

described above and in ABB’s Annual

Report 2021 on Form 20-F, there

were no other changes to ABB’s ordinary

share capital during

2022, 2021 and 2020.

Convertible bonds and options

ABB does not have any bonds outstanding

that are convertible into ABB shares.

For information about

options on shares issued by ABB, please

refer to “Note 19 – Stockholders'

equity”

to ABB’s Consolidated

Financial Statements.

Contingent share capital

At December 31, 2022, ABB’s share capital

may be increased

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

through the issuance of up to 200,000,000

fully paid registered shares

with a par value of CHF 0.12 per share

through the exercise of conversion

rights and/or warrants granted in

connection with the issuance

on national

or international capital markets of

newly or already issued

bonds or other financial market

instruments. If this

contingent share capital were fully

issued this would increase

the existing share capital by approximately

10.2 percent.

The contingent share capital has

not changed during

the last three years.

At December 31, 2022, ABB’s share capital

may be increased by an

amount not to exceed CHF 1,200,000

through the issuance of up to 10,000,000

fully paid registered shares

with a par value of CHF 0.12 per

through the exercise of warrant rights

granted to its shareholders.

If this contingent share capital

were fully

issued this would increase the existing

share capital by approximately

0.5 percent.

This contingent share

capital has not changed during

the last three years. The Board may grant

warrant rights not taken up by

shareholders for other purposes in

the interest of ABB.

The pre

‑

emptive rights of the shareholders

are excluded in connection

with the issuance of convertible

warrant-bearing bonds

or other financial market instruments

or the grant of warrant rights.

The then current

owners of conversion rights and/or

warrants will be entitled

to subscribe for new shares. The conditions

of the

conversion rights and/or warrants will

be determined by the Board.

The acquisition of shares through

the exercise of warrants and

each subsequent transfer of

the shares will be

subject to the restrictions of ABB’s

Articles of Incorporation (see “Limitations

on transferability of shares

and

nominee

registration” in the Shareholders section

below) (available at

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

governance

In connection with the issuance

of convertible or warrant-bearing

bonds or other financial market instruments,

the Board is authorized to restrict or deny

the advance subscription

rights of shareholders if such bonds

other financial market instruments are

for the purpose of financing

or refinancing the acquisition

of an

enterprise, parts of an enterprise,

participations or new investments

or an issuance on national

international capital markets.

If the Board denies advance subscription

rights, the convertible or

warrant

‑

bearing bonds or other financial

market instruments will be issued

at the relevant market conditions

and the new shares will be issued

pursuant to the relevant market

conditions taking into account

the share

price and/or other comparable instruments

having a market price. Conversion

rights may be exercised during

a maximum ten

‑

year period, and warrants may be

exercised during a maximum

seven

‑

year period, in each

case from the date of the respective

issuance. The advance

subscription rights of the shareholders

may be

granted indirectly.

At December 31, 2022, ABB’s share capital

may be increased

by an amount not to exceed CHF 11,284,656

through the issuance of up to 94,038,800

fully paid shares with a par

value of CHF 0.12 per share to

employees. If this contingent share

capital were fully issued

this would increase the existing share

capital by

approximately 4.8 percent.

This contingent share capital

has not changed during the last

three years. The

pre

‑

emptive and advance subscription

rights of ABB’s shareholders

are excluded. The shares or rights to

subscribe for shares will be issued

to employees pursuant to one or

more regulations to be issued by

the

Board, taking into account performance,

functions, level of responsibility

and profitability criteria. ABB

may

issue shares or subscription rights

to employees at a price lower

than that quoted on a stock exchange.

The

acquisition of shares within the context

of employee share

ownership and each subsequent

transfer of the

shares will be subject to the restrictions

of ABB’s Articles of Incorporation

(see “Limitations on transferability

of shares and nominee registration”

in the Shareholders section

below).

Authorized share capital

At December 31, 2022, ABB had an

authorized share capital

in the amount of up to CHF 24,000,000

through

the issuance of up to 200,000,000

fully paid registered shares

with a par value of CHF 0.12 each, which

valid through March 25, 2023. If the authorized

share capital were fully issued,

this would increase the

existing share capital by approximately

10.2 percent. Aside from renewal

at the 2021 AGM, the authorized

share capital has not changed during

the last three years. The Board is authorized

to determine the date of

issue of new shares, the issue price,

the type of payment,

the conditions for the exercise of

pre

‑

emptive rights

and the beginning date for dividend

entitlement. In this regard, the Board may

issue new shares by means of

a firm underwriting through a banking

institution, a syndicate or another

third party with a subsequent

offer of

these shares to the shareholders.

The Board may permit pre

‑

emptive rights that have not been

exercised by

shareholders to expire or it may place

these rights and/or shares

as to which pre

‑

emptive rights have been

granted but not exercised at market

conditions or use them

for other purposes in the interest

of the Company.

Furthermore, the Board is authorized

to restrict or deny the pre

‑

emptive rights of shareholders

and allocate

such rights to third parties if the

shares are used (1) for

the acquisition of an enterprise, parts

of an

enterprise, or participations, or for

new investments, or in

case of a share placement, for the

financing or

refinancing of such transactions; or (2)

for the purpose of broadening

the shareholder constituency in

connection with a listing of shares on

domestic or foreign stock exchanges.

The subscription and the

acquisition of the new shares, as well

as each subsequent transfer

of the shares, will be subject

to the

restrictions of ABB’s Articles of Incorporation

(available at

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

In line with the revised provisions of

the Swiss Code of Obligations

effective since January 1, 2023, ABB

will

propose to the Annual General Meeting

2023 to replace the then expiring

authorized share capital with a

capital band ranging from CHF 212,192,469

(lower limit) to CHF 259,346,349

(upper limit), i.e. from

90 percent to 110 percent of the share capital currently

entered in the commercial register. Within this capital

band, the Board of Directors shall

be authorized to increase

or reduce the share capital once or

several times

until March 23, 2028, or until an earlier

expiry of the capital band. ABB intends

to use the capital band for

cancellation of shares repurchased

under the share buyback programs

2021/22 and 2022/23 (see “Share

repurchases and cancellation”

above).

—

Shareholders

Shareholder structure

At December 31, 2022, the total number

of shareholders directly registered

with ABB Ltd was approximately

90,000 and another 549,000

shareholders held shares

indirectly through nominees. In total,

as of that date,

ABB had approximately 639,000 shareholders.

Significant shareholders

Under the Swiss Financial

Market Infrastructure Act, shareholders

and groups of shareholders acting

concert who directly or indirectly

acquire or sell shares of a listed

Swiss corporation or rights

based thereon

and thereby reach, exceed or fall

below the thresholds of 3 percent,

5 percent, 10 percent, 15 percent,

20 percent, 25 percent, 33

percent, 50 percent or 66

percent of the voting rights of

the corporation must

notify the corporation and the SIX Swiss

Exchange of such holdings.

Based on the disclosure notifications

made to ABB and the SIX Swiss

Exchange, the following

shareholders hold or control

voting rights of

3 percent or more of ABB Ltd’s issued shares.

Except where indicated

otherwise, the shareholdings

described below are based

on the notices provided to ABB and the

SIX Swiss Exchange and do

not reflect

any subsequent changes in shareholdings

and share capital and votes.

Investor AB, Sweden, disclosed to ABB

and the SIX Swiss Exchange

that as per November 9, 2015, it

owned

232,165,142 ABB Ltd shares and controlled

10.03 percent of the voting rights

in ABB Ltd

In its latest

quarterly financial report, Investor AB,

Sweden, disclosed that as per December

31, 2022, it owned

265,385,142 ABB Ltd shares and

controlled 13.5 percent of

the voting rights in ABB Ltd. The number

shares held by Investor AB does

not include

shares held by Mr. Jacob Wallenberg, the chairman of Investor

AB and a director of ABB, in his individual

capacity.

BlackRock,

Inc.,

U.S.A., disclosed to ABB and

the SIX Swiss Exchange that as per

November 16, 2022,

owned 80,226,133 ABB Ltd shares

and controlled 4.97 percent

of the voting rights in ABB Ltd.

Cevian Capital II GP Limited, Jersey, disclosed to ABB

and the SIX Swiss Exchange that as

per July 30,

2020, it owned 107,344,554 ABB Ltd

shares and controlled

4.95 percent of the voting rights in ABB Ltd

The Capital Group Companies,

Inc., USA, disclosed to ABB and the

SIX Swiss Exchange that as per July

2022, it owned 69,725,960 ABB Ltd shares and

controlled 4.02 percent of

the voting rights in ABB Ltd.

At December 31, 2022, to the best

of ABB’s knowledge, no other shareholder

held 3 percent or more of

ABB’s total share capital and voting rights

as registered in the commercial

ABB Ltd has no cross shareholdings

in excess of 5 percent of capital, or voting

rights with any other

company.

Announcements related to disclosure

notifications made by shareholders

during 2022 can be found via

the

search facility on the platform of

the Disclosure Office of the SIX Swiss Exchange

: https://www.ser-

ag.com/en/resources/notifications-market-participants/significant-shareholders.html#/

Under ABB’s Articles of Incorporation (available

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

), each

registered share represents one vote.

Significant shareholders

do not have different voting rights. To our

knowledge, we are not directly or indirectly

owned or controlled

by any government or by any other

corporation or person.

Shareholders’ rights

Shareholders have the right to receive

dividends, to vote and

to execute such other rights as granted

under

Swiss law and the Articles of Incorporation

(available at

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

Right to vote

ABB has one class of shares and

each registered share carries

one vote at the general meeting.

Voting rights

may be exercised only after a shareholder

has been registered in

the share register of ABB as a shareholder

with the right to vote, or with Euroclear

Sweden AB (Euroclear),

which maintains a subregister of

the share

A shareholder may be represented

at the Annual General

Meeting by its legal representative,

by another

shareholder with the right to vote or by

the independent proxy elected

by the shareholders (unabhängiger

Stimmrechtsvertreter). If the Company

does not have an independent

proxy, the Board of Directors shall

appoint the independent proxy for

the next General Meeting

of Shareholders. All shares held by one

shareholder may be represented

by one representative only.

For practical reasons shareholders

must be registered in the share register

no later than 6 business

days

before the general meeting in order

to be entitled to vote. Except

for the cases described under

“Limitations

on transferability of shares and nominee

registration”

below, there are no voting rights restrictions

limiting

ABB’s shareholders’ rights.

Annual General Meeting/Extraordinary

General Meeting/COVID-19

ABB’s top priority is protecting the health

of its shareholders and

employees. Therefore, due to

the

extraordinary circumstances and in accordance

with applicable Swiss COVID-19 legislation,

shareholders

were not able to attend ABB’s Annual

General Meeting 2022

in person, but could exercise their shareholder

rights via the independent proxy only. In addition, ABB

offered shareholders the opportunity

to address

questions on agenda items to

the Board

of Directors in writing ahead

of the meeting. Thanks to the improved

COVID-19 situation, ABB was able to

hold an Extraordinary General

Meeting in September 2022 with

shareholders present in person.

Shareholders’ dividend rights

The unconsolidated statutory financial

statements of ABB Ltd are prepared

in accordance with Swiss law.

Based on these financial statements,

dividends may be paid only

if ABB Ltd has sufficient distributable

profits

from previous years or sufficient free

reserves to allow the distribution

of a dividend. Swiss law requires

that

ABB Ltd retain at least 5 percent

of its annual net profits as legal

reserves until these reserves amount

to at

least 20 percent of ABB Ltd’s share

capital. Any net profits remaining

in excess of those reserves are

at the

disposal of the shareholders’

meeting.

Under Swiss law, ABB Ltd may only pay out a dividend

if it has been proposed by a shareholder

or the Board

of Directors and approved at a general

meeting of shareholders, and

the auditors confirm that the dividend

conforms to statutory law and ABB’s Articles

of Incorporation. In practice,

the shareholders’ meeting usually

approves dividends as proposed

by the Board of Directors.

Dividends are usually due

and payable no earlier than 2 trading

days after the shareholders’ resolution

and

the ex

‑

date for dividends is normally

2 trading days after the shareholders’

resolution approving the dividend.

Dividends are paid out to the holders

that are registered on the record

date. Euroclear administers

the

payment of those shares registered with

it. Under Swiss law, dividends not collected within

5 years after the

due date accrue to ABB Ltd and are

allocated to its other reserves.

As ABB Ltd pays cash dividends,

if any,

in Swiss francs (subject to the exception

for certain shareholders in

Sweden described below),

exchange rate

fluctuations will affect the U.S. dollar

amounts received by holders

of ADSs upon conversion of

those cash

dividends by Citibank, N.A., the

depositary, in accordance with the Amended and

Restated Deposit

Agreement dated May 7, 2001.

For shareholders who are residents

of Sweden, ABB has established

a dividend access facility (for up to

600,004,716 shares). With respect

to any annual dividend payment

for which this facility is made available,

shareholders who register with

Euroclear may elect to receive

the dividend from ABB Norden Holding

AB in

Swedish krona (in an amount equivalent

to the dividend paid in

Swiss francs) without deduction of

Swiss

withholding tax. For further information

on the dividend access facility, see ABB’s Articles of Incorporation.

Limitations on transferability of

shares and nominee registration

ABB may decline a registration with

voting rights if a shareholder

does not declare that it has acquired

the

shares in its own name and for its

own account. If the shareholder

refuses to make such declaration, it will

registered as a shareholder without

voting rights. A person failing

to expressly declare in its

registration/application that it holds

the shares for its own account

(a nominee), will be entered in

the share

that such nominee has

entered into an agreement with

ABB concerning

its status, and further provided that

the nominee is subject to recognized

bank or financial market supervision.

In special cases,

the Board may grant exemptions.

There were no exemptions granted in

2022. The limitation

on the transferability of shares

may be removed by an amendment

of ABB’s Articles of Incorporation by a

shareholders’ resolution

requiring two-thirds of the votes represented

at the meeting.

No restriction on trading of shares

No restrictions are imposed on the

transferability of ABB shares.

The registration of shareholders

in the ABB

share register, Euroclear and the ADS register kept

by Citibank does not affect transferability

of ABB shares

or ADSs. Registered ABB shareholders

or ADR holders may therefore

purchase or sell their ABB

shares or

ADRs at any time, including

before a General Meeting regardless

of the record date. The record date

serves

only to determine the right to vote at

a General Meeting.

Duty to make a public tender

offer

ABB’s Articles of Incorporation do not

contain any provisions raising

the threshold (opting up) or waiving

the

duty (opting out) to make a public

tender offer pursuant to Article 135

of the Swiss Act on Financial

Market

Infrastructures and Market Conduct in

Securities and Derivatives

Trading.

—

Other governance information

ABB Group organizational structure

ABB Ltd, Switzerland,

is the ultimate parent company

of the ABB Group. It is the sole shareholder

of ABB

Asea Brown Boveri Ltd which directly

or indirectly owns the other

companies in the ABB Group. "Item

Information on the Company—Organizational

structure" sets forth, as of December

31, 2022, the name, place

of incorporation and ownership

interest of the significant direct and indirect

subsidiaries of ABB Ltd. In

addition, ABB Ltd also owned 19.9

percent of Hitachi Energy Ltd until

December 28, 2022. ABB’s operational

group structure is described in ABB’s

Financial Report 2022.

Management contracts

There are no management contracts

between ABB and companies

or natural persons not belonging

to the

ABB Group.

Change of control clauses

Board members, Executive Committee

members, and other members of senior

management do not receive

any special benefits in the event

of a change of control. However, the conditional

grants under the Long-Term

Incentive Plan (LTIP) and the Management Incentive Plan

(MIP) may be subject to accelerated

vesting in the

event of a change of control. From 2021,

the rules for the LTIP have been amended to no longer

provide for

accelerated vesting upon a change

in control. No further grants are

made under the MIP.

Employee participation programs

In order to align its employees’

interests with the business

goals and financial results of

the Company, ABB

operates a number of incentive plans,

linked to ABB’s shares, such as

the Employee Share Acquisition

Plan,

the MIP and the LTIP.

For a more detailed description

of these incentive plans, please refer

to “Note 18 –

Share-based payment arrangements”

to ABB’s Consolidated Financial

Statements.

General blackout periods for trading ABB securities

During the 30 days prior to the day of

publication of the ABB Group’s quarterly

financial results, as well as on

such day, the members of the Board of Directors and

the Executive Committee as well

as certain employees

of ABB, as specified in ABB’s internal

policies,

are prohibited from trading in ABB Ltd

securities and any

related financial instruments.

Governance differences from NYSE Standards

According to the New York Stock Exchange’s corporate governance

standards (the Standards), ABB is

required to disclose significant

ways in which its corporate governance

practices differ from the Standards.

ABB has reviewed the Standards and

concluded that its corporate

governance practices are

generally

consistent with the Standards, with

the following significant exceptions:

•

Swiss law requires that the external auditors

be elected by the shareholders

at the Annual

General Meeting rather than by the audit

committee or the board of directors.

•

The Standards require that all equity

compensation plans and material

revisions thereto be

approved by the shareholders. Consistent

with Swiss law such matters

are decided by our Board.

However, the shareholders decide about the creation

of new share capital that can

be used in

connection with

equity compensation plans.

•

Swiss law requires that the members

of the compensation committee

are elected by the

shareholders rather than appointed

by our Board.

•

Swiss law requires shareholders

to approve the maximum aggregate

Board compensation and

the maximum aggregate Executive

Committee compensation.

—

Compensation

Compensation at a glance

Board compensation

Compensation for the 2022-2023

term of office

The aggregate Board compensation

for the 2022-2023

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

the

maximum amount (CHF 4,400,000)

approved at the 2022 Annual

General Meeting (AGM).

Compensation Exhibit 1: Board

compensation (in CHF)

for the 2022-2023 term

of office

Aggregate compensation

4,380,000

Approved compensation

amount

4,400,000

Shareholding of Board members

All Board members held ABB shares at

December 31, 2022,

worth at least 300 percent of their 2022

Board

compensation.

Compensation Exhibit 2: Board

members shareholding (at

December 31, 2022) in %

of 2022 total compensation

Based on share

price of

CHF 32.48,

the 2022

Long-Term

Incentive

Plan (LTIP

)

reference

price, and

held at December

31, 2022

100%

150%

Minimum

Target

Maximum

150%

300%

Minimum

Target

Maximum

CEO

Minimum

Target

Maximum

Other EC members*

150%

300%

80%

20%

Group financial results

Individual results

CEO and Corporate Officers

50%

30%

20%

Average EPS

Relative TSR

Sustainability*

All EC members

20%

60%

20%

Group financial results

Business Area financial results

Individual results

Business Area Presidents

EC compensation

Compensation structure as from

2022

Compensation Exhibit 3: EC

compensation structure as

from 2022

Fixed compensation -

base

salary and benefits

Variable compensation

short-term incentive (AIP)

Variable compensation

long-term incentive (LTIP)

Wealth at risk/

Share ownership

Purpose and

link to strategy

Facilitates attraction and

retention of talented EC

members; base salary

compensates for the role and

relevant experience; benefits

protect against risks

Rewards annual Company,

Business Area, functional

and individual performance.

Aligned with the Company’s

Annual Performance Plan

Rewards Company

performance over a three-

year period and encourages

creation of long-term,

sustainable value for

shareholders.

Aligned with

the Company’s Long-term

Performance Plan

Aligns individual’s personal

wealth at risk directly to the

ABB share price, and EC

members’ interests with

those of shareholders in

order to maintain focus on

ABB's long-term success

Operation

Salary in cash, benefits in

kind, and pension

contribution

Annual awards, payable in

cash after a one-year

performance period

Annual grants in shares

which may vest after three

years, and are subject to

performance conditions

Individuals are required to

hold ABB shares

Opportunity

level

(as % of base

salary)

Based on scope of

responsibilities, personal

experience and skillset

CEO

500% of annual salary (net of

taxes)

* EC members with legacy employment

contracts have a Target LTIP

grant of

100 percent, and Max LTIP opportunity

of 200 percent. The higher LTIP

opportunity for the newer EC members

is largely offset by lower fixed benefit

costs.

Other EC members

400% of annual salary (net of

taxes)

Performance

indicators

Changes to base salary

take into account individual

performance, future

potential, broadening of

responsibilities, and

external benchmarking

* New for 2022

Exposure to ABB share price

CHF 2,142,000

CHF 7,082,773

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

CEO

Other EC members*

Target AIP

award

Realized AIP award

Maximum AIP award

* individual outcomes range from 67 to 150 percent

120%

118%

150%

Target AIP

award corresponds to 100% of base salary.

Total EC compensation for 2022

The aggregate EC compensation for

2022 (CHF 36,035,073) was within

the maximum amount approved

the 2021 AGM (CHF 40,000,000).

Compensation Exhibit 4: EC

compensation (in CHF)

for 2022

Effective aggregate compensation

36,035,073

Approved aggregate compensation

40,000,000

The larger portion of the CEO’s 2022 total compensation

was delivered via variable

compensation

(56 percent represented by short-term

incentive and long-term incentive).

For the other EC members, on an

aggregate level, variable

compensation represented 51 percent of

their 2022 compensation.

The following

chart shows the composition of

the 2022 total compensation for the

EC members as of December 31,

2022.

Compensation Exhibit 5:

2022 total compensation mix for

the CEO and other EC

members on aggregate level

in CHF*

* Sum of percentage

figures may

differ from

100 percent

due to rounding

with one

decimal.

Realized variable compensation

in 2022

Realized variable compensation

considers the AIP award and the LTIP award at the end of

their respective

performance cycles, reflecting actual

AIP payment and LTIP vesting, based on achievement

of the respective

plan performance measures.

The outcome of the 2022 AIP was

above the target for most of the

current EC members (118.3 percent on

average), and the LTIP that vested in 2022 (2019 LTIP)

exceeded the target level, with a

final vesting level of

121.0 percent of target.

Compensation Exhibit 6:

2022 AIP outcome compared to

target

100

200%

121%

42%

200%

100%

25%

50%

75%

100%

125%

150%

175%

200%

LTIP vesting

(total)

Average EPS (50%

of total)

Relative TSR (50% of total)

Target achievement

level

Realized achievement level

Maximum achievement level

CHF 8,183,864

CHF 22,255,269

CHF 9,846,423

CHF 27,306,484

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

CEO

Other EC members

Target total

compensation

Realized total compensation

120%

123%

Compensation Exhibit 7:

2019 LTIP outcome

compared to target

Realized total compensation in 2022

Considering the stated variable

components above, the realized

total compensation in 2022 was above

the

target total compensation for all EC

members, driven by strong performance

in 2022.

Compensation Exhibit 8: Realized

total compensation in 2022

compared to target total compensation

Further details related to the realized

compensation of each EC member

and each compensation

component

are specified in Compensation

Exhibit 44.

Shareholding of EC members

EC members may not sell their shares

(except to meet tax and

social security costs) until they

achieve the

required shareholding level.

Four out of nine EC members have

already met and exceeded

their share ownership requirement.

Two other

members are close to achieving

their requirement, while three members

have been appointed to the EC

the last two years.

When considering the number of granted,

but unvested, ABB shares of current

EC members as per

December 31, 2022,

it is expected that most will

meet or exceed their share

ownership requirement in

2023,

after vesting of the 2020 LTIP grant.

101

January 2020

April 2017

January 2021

March 2022

October 2022

June 2016

October 2010

January 2017

April 2019

200%

400%

600%

800%

1000%

1200%

1400%

1600%

Björn Rosengren

Timo Ihamuotila

Carolina Granat

Andrea Antonelli

Karin Lepasoon

Sami Atiya

Tarak

Mehta

Peter Terwiesch

Morten Wierod

Held shares in % of net salary

Granted, but unvested shares

Share ownership requirement

EC appointment

Other EC members shareholding requirement (400%)

CEO shareholding requirement (500%)

Compensation Exhibit 9: EC

shareholding compared to

share ownership guideline

Based on share

price of

CHF 32.48,

the 2022

LTIP reference

price,

and share

held at December

31, 2022.

Future allo

cation of

granted,

but unvested

shares is

based on target

achievement

level and relevant

plan specific

settlement:

default settlement

of the final

2020 LTIP,

2021 LTIP

and 2022

LTIP

awards

is 100 percent

in shares.

Default settlement

of replacement

shares is

65 percent

in shares

(recipient

may

elect to receive

100 percent

of the vested

award in shares).

The value

of shares

is compared

against the

annual base

salary net

of taxes,

at December

31, 2022.

Compensation governance

The Compensation Report is prepared

in accordance with the

Ordinance against Excessive Remuneration

Listed Stock Corporations, the Directive

on Information relating

to Corporate Governance of the

SIX

Exchange Regulation, the rules

of the stock markets of

Sweden and the United States, where

ABB shares

are also listed, and the principles

of the Swiss Code of Best Practice

for Corporate Governance

economiesuisse.

ABB’s Articles of Incorporation

ABB’s Articles of Incorporation, approved

by its shareholders, contain

provisions on compensation

which

govern and outline the principles

of compensation relating to our Board of

Directors and Executive

Committee. They can be found on

ABB’s Corporate Governance

website

new.abb.com/about/corporate-

governance

and are summarized below:

●

Compensation Committee

(Articles 28 to 31): The Compensation

Committee (CC) is composed

of a minimum of three members of

the Board and are elected

individually by the shareholders

the Annual General Meeting for a

period of one year. It supports the Board in establishing

and

reviewing the compensation

strategy, principles and programs, in preparing the proposals

to the

AGM on compensation matters and

in determining the compensation

of the Board and of the EC.

The responsibilities of the CC are defined

in more detail in the Board Regulations

and Corporate

Governance guidelines, which

are also available on ABB’s Corporate Governance

website.

102

●

Compensation principles

(Article 33): Compensation

of the members of the Board consists

fixed compensation only, which is delivered in cash and

shares (with an option to elect

for shares

only). Compensation of the members

of the EC consists of fixed

and variable compensation.

Variable compensation may comprise short-term and long-term

elements. Compensation

may be

paid in cash, shares or other benefits.

●

“Say-on-pay” vote

(Article 34): Shareholders

approve the maximum aggregate amount

compensation of the Board for

the following Board term and

of the EC for the following

financial

year.

●

Supplementary amount for new

EC members

(Article 35): If the maximum approved

aggregate compensation amount

is not sufficient to also cover the compensation

of newly

promoted/hired EC members, up

to 30 percent of the last maximum approved

aggregate amount

shall be available as a supplementary

amount to cover the compensation

of such new EC

members.

●

Loans

(Article 37): Loans may not be granted

to members of the Board or of the

EC.

Authority levels in compensation matters

The CC acts in an advisory capacity

while the Board retains

the decision authority on compensation

matters,

except for the maximum aggregate

compensation amounts of

the Board and of the EC, which are

subject to

the approval of shareholders at the

AGM. The authority levels of the

different bodies on compensation

matters are detailed in Compensation

Exhibit 10. Shareholders also

have a consultative vote on the prior

year’s Compensation Report

at the AGM and a binding vote on

the maximum aggregate amount

compensation of the Board for

the following Board term and

of the EC for the following

financial year.

Compensation Exhibit 10: Authority

levels in compensation

matters

CEO

Board

AGM

Compensation policy

including incentive plans

●

Maximum aggregate compensation

amount for the EC

●

CEO compensation

●

Individual compensation

of other EC members

●

Performance target setting

and assessment of

the CEO

●

Performance target setting

and assessment of

other EC members

●

Shareholding requirements

for CEO and other EC

members

●

Maximum aggregate compensation

amount for the Board

●

Individual compensation

of Board members

●

Compensation Report

●

Consultative vote

●

Proposal

●

Recommendation

●

Approval

103

Activities of the CC in 2022

The CC meets as often as business

requires but at least four times

a year.

In 2022,

the CC held seven

meetings and performed the activities

described in Compensation

Exhibit 11. The CEO, the Chief Human

Resources Officer (CHRO) and the Head

of Performance and

Reward also attend all or part of

the CC

meetings in an advisory capacity. The Chairman of the

CC may decide to invite other executives

upon

consultation with the CEO, as appropriate.

Executives do not attend

the meetings or the parts of the meetings

in which their own compensation

and/or performance are being

discussed. Details on meeting attendance

the individual CC members (number

of meetings held during 2022,

their average duration, as well as the

attendance of the individual members)

are provided in the section “Board

of Directors – Meetings and

attendance” of "Item 6. Directors,

Senior Management and

Employees".

Compensation Exhibit 11:

CC activities during 2022

Strategy

Review of the Short-Term Incentive plan

(Annual Incentive Plan

/ AIP)

Continued monitoring of link

between sustainability

and compensation

EC Compensation

Review of compensation

benchmarking

for EC members (bi-annual

activity)

Review of recommendations

on individual compensation

for EC members

Review of the share ownership

of EC members

Review and approval

of compensation for new

and departing EC

members

Performance – relating

to past performance

cycle

Assessment of AIP awards

for 2022

Assessment of achievement

of performance targets

for LTIP awards vesting in 2022

Performance – relating

to forthcoming performance

cycle

Setting of AIP design,

measures and targets

for 2022

Consideration of forecast

AIP outcomes for 2022

Consideration of preliminary

AIP measures and targets

for 2023

Setting of performance

targets for LTIP grants in 2022

Consideration of forecast

achievement against

performance targets

for unvested LTIP grants

Compliance

Review of CC annual

plan

Review of feedback

from Stakeholder Engagement

meetings

Regulatory and market updates

Review of the Compensation

Report for publication

Preparation of maximum

aggregate compensation

for the Board to be submitted

for AGM vote

Preparation of maximum

aggregate compensation

for the EC to be submitted

for AGM vote

The Chairman of the CC reports

to the full Board after each

CC meeting. The minutes of the CC

meetings are

available to the members of the Board.

The CC retains independent, external

advisors for compensation

matters. In 2022 PricewaterhouseCoopers

(PwC) was mandated to provide

consulting services related

to executive compensation matters.

In addition to

its CC advisory role, PwC also provides

human resources, tax and

advisory services to ABB.

Sustainability related considerations

in ABB’s compensation

There are several sustainability

related considerations that play an

important role in our compensation

philosophy, of which one is to foster the link between the

sustainability performance measures

under our

sustainability strategy and the variable

compensation for our EC and senior

management.

104

Impact of sustainability performance on variable compensation

One of the main subjects of the CC’s recent

decisions was to reinforce the link

of ABB’s sustainability

strategy - and its associated ambitious

targets for 2030 - to ABB’s key variable

compensation programs AIP

and LTIP.

These decisions resulted in a

suite of changes which we believe

keep ABB in line with leading

compensation market practices and

reinforce our commitment

towards sustainability and long-term

value

creation.

With regard to the AIP, ABB recently enlarged the mandatory inclusion

of sustainability performance

measures in the individual

component of the relevant AIP for

its executives and further employees

in the

organization. All EC members have

two or three sustainability goals

(out of maximum of three) in the

individual component of their AIP. While all EC members had an environment

target in 2022, Business Area

Presidents had a safety target,

the CFO a governance target

and other Corporate Officers a social

target.

In regard to the LTIP granted to ABB’s

senior management,

including the EC, a sustainability

measure with a

weighting of 20 percent forms part

of the performance measures.

●

For the 2022 LTIP,

the sustainability measure is

the Company’s scope 1 and 2 greenhouse

gas

(GHG) emissions

reduction at the end of the

three-year performance period (2022-2024),

compared

to the 2019 baseline.

●

The 2022 sustainability measure

has also been applied to the 2023

LTIP,

namely scope 1 and 2

GHG emissions

reduction at the end of the

three-year performance period

(2023-2025), compared to

the 2019 baseline.

●

Details of the long-term GHG emissions

reduction targets can be

found in ABB’s Item 4. Information

on the Company—Sustainability

activities.

105

Employee remuneration

ABB applies a holistic total remuneration

approach, generally consisting

of fixed base salary, variable

performance-linked pay, pension contributions and benefits.

The key programs of ABB’s compensation

structure and their strategic links

to our employee value proposition

and sustainability strategy are

summarized in the Compensation

Exhibit 12 below.

Compensation Exhibit 12: Compensation

structure for employees

Program

Operation and purpose

Link to ABB’s employee value proposition

and sustainability strategy

Base Salary

Offered to all employees, compensating

for the

role and relevant experience of the employee

while changes to base salary take into

account

individual performance, future potential and

external benchmarking.

Facilitating attraction and retention of employees.

Short-Term Incentive

Offered to ca. 80

percent of ABB’s workforce,

rewarding annual performance.

Helping to establish strong alignment with

the

Company’s Annual Performance Plan,

which may

include financial and/or sustainability

targets.

Annual Incentive Plan

(AIP)

Offered to ca. 45 percent

of ABB’s workforce

(employees outside of the Sales & Marketing

functions and Production areas).

Rewarding participants, where appropriate,

for

the achievement of financial and sustainability

targets at Group and business level, and other

organizational and individual goals.

Production Plans

Offered to ca. 25 percent of ABB’s

workforce

(employees of Production areas).

Rewarding participants for the achievement

productivity and other operational targets

at local

business level.

Sales Incentive Plans

Offered to ca. 10 percent of ABB’s

workforce

(employees of the Sales & Marketing functions).

Rewarding participants for the achievement

financial targets at a local business

and individual

level.

Long-Term Incentive

Offered to ca. 800 executives and senior

leaders

of ABB.

Encouraging the creation of long-term,

sustainable value for shareholders, and delivery

of long-term strategic goals.

Long-Term

Incentive Plan

(LTIP) with performance

conditions

Offered to ca. 100 executives, who significantly

impact ABB’s performance and long-term

success of the business. After completion of

three-year plan period and subject to the

achievement of the plan specific

performance

measures, the award is earned and delivered.

Aligning with the Company’s Long-Term

Performance Plan, and facilitating retention

senior executives.

Restricted Shares without

performance conditions

Offered to ca. 700 senior leaders and

key talent

who influence ABB’s performance and

long-term

success of the business. After completion of

three-year plan period, the award is earned and

delivered.

Facilitating retention of senior managers.

Supports aligning employees’ interests

with the

interests of external shareholders and

maintaining focus on the long-term success

of the

Company.

Employee Share Acquisition

Plan

Offered to ca. 100,000 employees in

over 60

countries, providing the opportunity to

purchase

shares in ABB one year after the start

of a plan,

at a price which will be fixed at the beginning of

each annual plan cycle, and become ABB

shareholders.

Supports aligning employees’ interests

with the

interests of external shareholders and

maintaining focus on the long-term success

of the

Company.

Benefits (selection)

Offered to all employees by country,

subject to

the relevant local market practice.

Protecting against risks, and help facilitating

the

attraction and retention of employees.

Risk Benefits

These generally include retirement,

insurance

and healthcare plans.

Providing support for the employees and their

dependents in case of retirement, disability

death.

Parental Leave

A global and gender-neutral program,

offered to

all employees, on the birth or adoption of

a new

child, which sets out a minimum standard on

paid

parental leave that supports all family

types. The

primary caregivers receive 12 weeks

of paid

leave and the secondary caregivers 4

weeks.

Aligning with the ABB value of “Care”.

Employee Assistance

A global program, offered to all employees.

The

program supports the employee’s emotional,

practical and physical wellbeing by offering

paid

counseling on emotional health, family

concerns

and workplace concerns.

Aligning with the ABB value of “Care”.

Car or Transportation

Allowance

Offered to selected employees based on

business need or market practice, with

any car

provision being progressively migrated to e-

vehicles or transportation allowances which

can

be used to contribute to public transport,

cycle or

other transport needs.

Addressing changed needs related to mobility

providing greater flexibility to opt for more

environmentally friendly solutions.

106

Board compensation policy

The compensation policy for the members

of the Board is designed

to attract and retain experienced

people

to the Board of Directors. Compensation

takes into account the responsibilities,

time and effort required to

fulfill their roles on the Board and its

Committees, and it is generally

positioned at levels similar to other

Swiss

listed companies of comparable

size and complexity.

Compensation structure

A fixed fee is payable for the Chairman,

Vice-Chairman and members of the

Board, and additional fees are

payable for chairing or membership

of a Board Committee, except

for the Chairman and Vice-Chairman.

Board members are paid for their service

over an annual Board term that starts

with their election at the

AGM. Payment of fees is made in

semi-annual installments in arrears.

Each fee is delivered in cash and shares.

Board members are required

to take 50 percent of their

compensation in shares,

but they may elect to receive

all their fees in shares. The number of

delivered is calculated prior

to each semi-annual payment by dividing

the monetary amount to which

the

Board members are entitled by the average

closing price of the ABB

share over a predefined 30-day period.

The shares are subject to a three-year

restriction period during

which they cannot be sold, transferred

pledged. Any restricted shares are

unblocked when the Board member

leaves the Board.

Implementation of Board compensation

policy

Board fees by role

As mentioned above, the levels

and mix of Board members’

compensation are regularly

compared against

the compensation of non-executive Board

members from a cross-section

of publicly traded companies

Switzerland that are part of the Swiss

Market Index (i.e., Adecco,

Alcon, Geberit, Givaudan, Holcim,

Lonza,

Richemont, SGS, Sika, Swisscom,

Swiss Life, Zurich Insurance).

Such a review was last undertaken in

2020,

and there was no adjustment made

to Board fees for the term of office from the

2022 AGM to the 2023 AGM,

as set out in Compensation Exhibit

13. There has been no

change to the individual Board

fees since 2015.

Compensation Exhibit 13: Board

fees (in CHF) for the

current term of office

Chairman of the Board

(1)

1,200,000

Vice-Chairman of the Board

(1)

450,000

Member of the Board

290,000

Additional committee

fees:

Chairman of FACC

(2)

110,000

Chairman of CC or

GNC

(2)

60,000

Member of FACC

(2)

40,000

Member of CC or GNC

(2)

30,000

(1)

The Chairman and the Vice-Chairman do not receive any additional

committee fees.

(2)

CC: Compensation Committee,

FACC: Finance, Audit and Compliance Committee,

GNC: Governance and Nomination Committee.

107

Total

Board compensation

The compensation paid to the Board

members for the calendar

year 2022 and for the term of office from the

2022 AGM to the 2023 AGM are disclosed

in Compensation Exhibit 14 below

and in Compensation

Exhibits 35 and 36, respectively, in the section “Compensation

tables and share ownership

tables”.

At the 2022 AGM, the shareholders

approved a maximum aggregate

compensation amount of CHF 4.4

million for the 2022-2023 Board

term. This amount equals the approved

amount for the previous Board

term,

as the compensation per Board

member remained unchanged.

The Board compensation to be paid

for the

2022-2023 Board term is CHF 4.38 million

and is therefore within the amount

approved by the shareholders.

Compensation Exhibit

14: Board compensation

(in CHF)

Board term

Board of Directors

2022–2023

2021–2022

Number of members

Total

compensation

4,380,000

Maximum aggregate compensation

amount approved

at previous AGM

4,400,000

Compensation of former Board members

In 2022,

no payment was made to any

former Board member.

Compensation for services rendered

In 2022, ABB did not pay any fees or

compensation to the members

of the Board for services rendered

ABB other than those disclosed in

this report.

Shareholding of Board members

The members of the Board collectively

owned less than 1 percent of

ABB’s total shares outstanding

December 31, 2022.

Compensation Exhibit 37 in the section

“Compensation tables

and share ownership tables”

shows the

number of ABB shares held by each

Board member at December 31, 2022,

and 2021. Except as described

this Compensation Exhibit, no

member of the Board and no

person closely linked to a member

of the Board

held any shares of ABB or options

in ABB shares.

Shares delivered to Board members

as part of their compensation

are blocked for a period of three years.

Compensation Exhibit 2 in the section

“Compensation at a glance” shows the

wealth at risk for each Board

member, comparing the value of shares held at December

31, 2022,

with the total compensation

for the

2022-2023 term of office. At December 31,

2022, all Board members held

ABB shares worth at least 300

percent of their 2022 total ABB Board compensation.

Executive Committee compensation

policy

The EC compensation policy reflects

ABB’s commitment to attract, motivate and retain

people with the talent

necessary to strengthen its position

as a leading global technology

company.

108

25%

24%

15%

10%

25%

24%

25%

36%

Current Other EC

Members

New Other EC

Members

Base salary

Pension benefits

Other benefits

Short-term incentive

Long-term incentive

Compensation structure

The compensation structure is designed

to be competitive, based on

performance, and to encourage

executives to deliver outstanding

results and create sustainable

shareholder value without taking excessive

risks. The EC compensation framework

therefore balances fixed and variable

compensation. Variable

compensation is provided through

short-term and long-term incentives

based on strategic, financial

and

sustainability related targets, recognizing

Group, Business Area and Corporate

Function performance as well

as individual performance.

This structure is linked to our strategy

and is illustrated in

Compensation Exhibit 3 in the section

“Compensation at a glance”.

A significant portion of total compensation

depends on variable pay

components, which require the

achievement of challenging

performance targets, in alignment

with ABB Annual and Long-Term Performance

Plans.

The target AIP award is defined as a

percentage of base salary, currently 100 percent for

all EC members.

There is no award under the AIP

if performance is below threshold

on all financial and individual

performance

measures. When performance exceeds

targets, the maximum award is capped

at 150 percent of the targeted

amount.

The target LTIP grant size is defined as a percentage

of base salary, currently 150 percent for the CEO and

100 to 150 percent for all other EC

members. There will be no

award under the LTIP if performance is below

threshold for all applicable

measures. When performance exceeds

targets, the maximum award

is capped at

200 percent of the conditional

grant.

From 2022,

the policy for the mix of fixed and

variable target compensation

elements for new EC members

has been adjusted to provide a greater

emphasis on variable

pay. This is achieved by increasing the target

LTIP grant size from 100 percent to 150 percent of base

salary, while reducing the level of pension

contributions and other benefits.

The reduction of pension contributions

and other benefits substantially

offsets the increase of the LTIP component, and represents a shift

from guaranteed pay elements

to pay at

risk. Fixed compensation for new

EC members represents

40 percent of their target

total compensation, in

comparison to 50 percent for long-standing

EC members.

Compensation Exhibit 15 below

illustrates the

policy change for new EC entrants (excluding

the CEO), applying an entry level

salary of CHF 700,000 and

an incumbent age of 50 years to reflect

the pension benefits.

Compensation Exhibit 15: Policy

for mix of target compensation

for EC members (excluding

CEO) appointed prior to

and after 2022*

* Note that, by exception, the new mix of target compensation

has not been applied to the newly appointed Chief Communications

and Sustainability Officer.

Competitive positioning of compensation

The Board considers competitive

market data when setting the compensation

policy for the EC. It is also one

of several factors in positioning

the target compensation

for individual EC members which

include:

•

individual profile of the EC member in

terms of experience and

skills;

109

•

individual performance and potential;

•

market value of the role (compensation

benchmarking).

EC compensation benchmark reviews

are performed every other

year.

The CC conducted a comprehensive

compensation benchmarking review

in 2022,

based on the three peer groups,

similar to those which were

used in 2020.

While each of these peer groups

match the size, scope and

complexity of ABB, and exclude companies

from

the financial services sector, the use of a specific peer

group depends

on the nature of the role and the

source of relevance. For example,

a stronger emphasis is placed

on the Global Industry peer group

for

operational roles and in

compensation design, and on

the Pan-European Market peer group for

functional

roles.

In all cases,

the other two peer groups are

used to stress test the findings

of the primary peer group

(see the summary in Compensation

Exhibit 16 below).

Compensation Exhibit 16: Peer

groups for EC compensation

benchmarking

Peer Group

Composition

Companies

Rationale

Global Industry

A tailored group of 16 global

industry peer companies,

matching the scale and

complexity of ABB

AB SKF,

Alstom, Airbus, Atlas Copco,

Denso,

Eaton, Emerson Electric, Honeywell,

Mitsubishi

Electric, Mitsubishi Heavy Industries,

Schneider

Electric, Schindler, Siemens,

Thermo Fisher

Scientific, Toshiba,

Traton

Focus for Business

Area roles and

benchmarking

compensation design

Pan-European

Market

A panel of 50 cross-industry

European companies,

matching the scale and

complexity of ABB

See footnote (1)

Focus for Corporate

roles; continuity and

stability of data points

Swiss Market

A panel of 16 Swiss

headquartered companies,

matching the scale and

complexity of ABB

Adecco, Geberit, Givaudan, Glencore,

Kuehne &

Nagel, Holcim, Nestle, Novartis,

Richemont,

Roche, Schindler,

SGS, Sika, STMicroelectronics,

Swatch, Swisscom

Swiss location of

headquarters

(1) AB InBev, Adidas, Air Liquide, Associated

British Foods, AstraZeneca, BAE Systems, Bayer,

Bouygues, British American Tobacco,

Compass Group, Continental, CRH, Danone, Endesa, EssilorLuxottica,

Fresenius, Fresenius Medical Care, GlaxoSmithKline,

HeidelbergCement, Heineken, Henkel, Hennes & Mauritz, Holcim, Iberdrola,

Imperial Brands, Industria de Diseno Textil,

Jeronimo Martins

SGPS, Kuehne & Nagel, Linde, L’Oreal, Michelin,

National Grid, Naturgy Energy Group, Nokia, Novartis, Novo

Nordisk, OMV,

Philips, Rio

Tinto, Safran, Saint Gobain, Sanofi, SAP,

Schneider Electric, Telefonaktiebolaget

LM Ericsson, Thales, Umicore, Veolia

Environment, Vinci

and Vodafone.

It is the intention to position target

compensation for individual

EC members between the median and upper

quartile of the relevant peer group(s)

considering the other factors

referenced above (e.g., the EC

member’s

skills, experience, performance,

potential).

The comparison of ABB to its compensation

benchmarking peer

groups shown in Compensation

Exhibit 17

below is based on the latest review in 2022.

This data

shows that ABB is typically

positioned at the median

key comparator indicators (market

capitalization, revenues, and number

of employees) against the

Global

Industry and Pan-European Market

peer groups, and at the upper

quartile of the Swiss Market

peer group.

110

Compensation Exhibit 17: Comparison

of ABB to compensation

benchmarking peer groups

(1)

Market capitalization

(2)(3)(4)

Revenues

(2)(4)(5)

Number of employees

(5)(6)

ABB

58.8

27.5

104,400

Global Industry

Upper Quartile

78.5

36.3

133,924

Median

49.0

31.1

98,118

Lower Quartile

16.6

17.0

77,017

Pan-European Market

Upper Quartile

75.4

40.0

124,435

Median

32.6

27.9

89,012

Lower Quartile

20.2

22.7

62,660

Swiss Market

Upper Quartile

65.1

38.2

85,017

Median

32.0

16.4

58,635

Lower Quartile

20.1

9.1

30,348

(1) Data

for market

capitalization,

revenues

and number

of employees

are sourced

from Thomson

Reuters.

(2) Market

capitalization

and revenues

are in CHF

millions.

(3) Market

capitalization

is averaged

over a period

of three

months (June

20, 2022,

until September

20, 2022).

(4) All currencies

have been

converted

to CHF,

where needed,

applying full

-year average

currency

exchange

rates

based on

the period

from

July 1, 2021,

to June 30,

2022.

(5) Revenues

and number

of employees

as per last

financial

year prior

to October

2022.

(6) Number

of employees

in full-time

equivalent

(FTE) unless

FTE information

was not available,

then in total

number of

employees.

Compensation elements

Compensation Exhibit 3 in the section

“Compensation at a glance” sets out

the purpose and link to strategy,

the operation, the opportunity level and

the performance measures.

In addition,

this section provides further

details for each compensation element.

Fixed compensation - base salary

and benefits

Purpose and link to strategy

Facilitate the attraction and retention

of talented EC members; base salary

compensates for the role and

relevant experience; benefits protect

against risks.

Base salary is paid in cash. Benefits

consist primarily of retirement,

insurance and healthcare

plans that are

designed to provide a reasonable

level of support for the employees and

their dependents in case of

retirement, disability or death.

Opportunity levels

Base salary is set with reference

to the scope of responsibilities,

personal experience and

skills,

and

competitive market data.

Benefit plans are set in line with

the local competitive and legal

environment and are, at a minimum, in

accordance with the legal requirements

of the respective country.

Performance measures and

weighting

Base salary is adjusted considering

the factors set out under

opportunity levels above, the executive’s

performance as well as their future potential.

Variable compensation - Annual Incentive Plan

(AIP)

Purpose and link to strategy

The AIP is designed to reward

EC members for the Group’s

results, the results of their Business

Area or

Corporate Function and their individual

performance over a time horizon of one

year, and is aligned with the

Annual Performance Plan approved

by the Board.

111

Opportunity levels

The AIP opportunity levels for the

EC are 100 percent of base

salary at target with a maximum opportunity

150 percent.

Performance measures and

weighting

The AIP structure is designed

to incentivize operational delivery and

underpin our performance culture.

such, it is focused on key priorities, with

a maximum of five measures.

•

A common Group financial measure

with a 20 to 25 percent weighting.

•

Up to three Group or Business Area

financial measures, with a 55 to 60 percent

weighting.

•

An individual measure with

a 20 percent weighting. This individual

component is informed by two

or three goals which may include

a combination of quantitative and

qualitative goals.

From 2022,

at least two of these goals relate

to sustainability.

The final outcome against this individual

measure is a discretionary judgment

based on the

combined performance against

all individual goals.

summary of the composition and

total weighting of the measures

for all EC members is set out in

Compensation Exhibit 18.

Compensation Exhibit 18: Composition

and weighting of AIP measures

for EC members

CEO and Corporate Officers

(1)

Business Area Presidents

Common Group financial measure

25%

20%

Other Group financial measures

Up to three measures

n.a.

55%

Business Area financial measures

n.a.

Up to three measures

60%

Individual measure

Includes up to three goals (minimum

two sustainability related)

Includes up to three goals (minimum

two sustainability related)

20%

Total

100%

(1)

Corporate Officers include Chief Financial Officer, Chief Human Resources Officer,

General Counsel and Chief Communications and Sustainability

Officer.

Other design features

For each performance measure,

a target will be set corresponding

to the expected level of performance that

will generate a target (100 percent) award.

For each measure except the individual

measure, a minimum

level of performance, below which

there is no award (threshold)

and a maximum level of performance,

above

which the award is capped at 150 percent

of the target (maximum), will

also be defined.

The payment schedule for financial

AIP measures is calculated mathematically

as summarized in the

following Compensation

Exhibit 19. For Group and Business

Area financial measures, the award

percentage

achievements between threshold

and target, as well as between

target and maximum are determined

linear interpolations between

these award points.

112

Compensation Exhibit 19: Pay

ment schedule for the AIP

of EC members

Level of performance

Below threshold

Threshold

Target

Maximum

Award achievement per financial

measure

>0%

100%

150%

The outcomes of the financial

AIP measures are subject to

appropriate discretionary upward

or downward

adjustments by the CC for non-operational

items and other adjustment principles

agreed with the Board, if

and to the extent the CC considers

this appropriate.

In addition,

the CC/Board have discretionary

authority to adjust the results

and/or the AIP award. This

specifically includes a downwards

adjustment based on safety performance,

including fatalities.

Variable compensation - Long-Term Incentive Plan (LTIP)

Purpose and link to strategy

Rewards the achievement of predefined

performance targets over a

three-year period. Encourages the

creation of long-term, sustainable

shareholder value creation

and is aligned with the Company’s Long-Term

Performance Plan approved by

the Board.

Opportunity levels

For the CEO,

the LTIP opportunity levels are 150 percent of base

salary at target, with a maximum

opportunity of 300 percent of base salary.

As per the policy change announced

in last year’s report, the target and

maximum opportunity levels

for EC

members newly appointed from 2022

are 150 percent and

300 percent of base salary,

respectively. This is

designed to provide an increased

focus on variable, performance related compensation

and is mostly offset

by a reduction in costs related to pension

and other benefits.

The LTIP opportunity levels for EC members appointed

prior to 2022 are 100 percent of base

salary at target,

with a maximum opportunity of 200 percent

of base salary. This has also been applied, by exception,

to the

newly appointed Chief Communications

and Sustainability Officer in line with external

market data, reflecting

the scope of the role.

The previously existing discretionary

option to increase or decrease

individual target grants under

the LTIP

for EC members, except the CEO, has

been discontinued as from 2022,

except for the option to make

grants in certain circumstances.

Performance measures and

weighting

The LTIP has,

from 2022,

three performance measures:

Earnings Per Share (EPS)

•

Achievement against this measure

is determined by ABB’s average

EPS over a three-year

period. The average EPS result is

calculated from the sum of the EPS

for each of the three

relevant years, divided by three.

•

EPS is defined as “Diluted earnings

per share attributable to ABB shareholders,

calculated using

Income from continuing operations,

net of tax, unless the

Board elects to calculate using

Net

income for a particular year”.

•

Appropriate threshold (zero), target (100

percent) and maximum (200

percent) award points are

reviewed by the CC on an annual

basis.

•

Performance target and award points

are set using the Company’s Long-term

Performance Plan

and are calibrated with an independent

“outside-in” view, taking into account the growth

expectations, risk profile, investment

levels and profitability

levels that are typical for the industry.

113

•

Adjustments to the outcome of the EPS

achievement level may be

considered for items which

are not part of, or the result of, the

normal course of business operation

and/or which were not

considered, either by way of inclusion

or exclusion, for the target-setting

of a specific LTIP

launch. Only the net impact of such

adjustments over the vesting

period of the respective LTIP

grant will be considered.

Total

Shareholder Return (TSR)

•

Achievement against this measure

is determined by ABB’s relative TSR

performance against a

defined peer group.

•

The constituents of the peer group

and the appropriate threshold

(zero), target (100 percent) and

maximum (200 percent) award points

are reviewed by the

CC on an annual basis.

•

The TSR calculations are made for

the reference period beginning

in the year of the conditional

grant of the shares and ending

three years later. The evaluation is performed

by an independent

third party.

•

For grants from 2022,

the award curve for the TSR

measure has been adjusted to become

challenging. The threshold point for

awards, above which vesting

starts, has been moved from

the 25th percentile to the 50th percentile

(P50) of the TSR peer group,

i.e., there is no vesting for

performance below P50.

•

Vesting for P50 achievement remains at 100 percent

of target, and vesting for a 75th percentile

(P75) achievement level remains

at 200 percent of target (capped).

There is a linear vesting for

an achievement between P50 and

P75 (100 to 200 percent of target).

Sustainability

•

The Board determines

on an annual basis the LTIP specific sustainability

measure(s), as well as

related target(s) and award points,

to incentivize material

progress towards our 2030

sustainability strategy commitments.

•

Appropriate threshold (zero),

target (100 percent) and maximum

(200 percent) award points are

reviewed and approved

by the CC on an annual basis.

•

Adjustments to the outcome of the sustainability

achievement may be considered

for items which

are not part of, or the result of the normal

course of business operation

and/or which were not

considered, either by way of inclusion

or exclusion, for the target-setting

of a specific LTIP

launch. Only the net impact of such

adjustments over the vesting

period of the respective LTIP

grant will be considered.

The relative weighting of measures

for the LTIP is as follows:

•

EPS measure: 50 percent

•

TSR measure: 30 percent

•

Sustainability measure:

20 percent

Other design features

The number of shares to be granted

is determined by dividing

the grant value by the average share price

over the period of 20 trading days

prior, and 20 trading days after, the date of publication of ABB’s

full year

financial results. Settlement of the LTIP is three years after

grant, subject to achievement

of performance

conditions, defined prior to grant.

The actual settlement of shares awarded

will vary between zero and

200 percent of the shares conditionally

granted, according to achievement against

the performance measures stated

above.

114

The vesting schedule for the LTIP is shown in the following

Compensation Exhibit 20. The award

percentage

achievements between threshold

and target,

as well as between target and

maximum,

are determined by

linear interpolations between

these award points.

Compensation Exhibit 20: Vesting

schedule for the LTIP

of EC members*

Level of performance

Below threshold

Threshold

Target

Maximum

Award achievement per measure

>0%

100%

200%

* For the TSR measure, the threshold point equals the target

point.

The CC has the discretion to adjust

the formulaic LTIP vesting outcome, to reflect the overall

performance of

ABB over the performance period.

Default settlement of the final LTIP award is 100 percent

in shares,

and beginning with grants

made

conditionally in 2020, an automatic

sell-to-cover is in place

for employees who are subject

to withholding

taxes.

LTIP shares are subject to malus and clawback rules,

which include illegal activities, any

financial

misstatement and reputational

damage that have a material

impact on ABB Ltd or one of its subsidiaries.

This

means that the Board may decide

not to award any unsettled

or unvested incentive compensation

(malus), or

may seek to recover long-term incentive

compensation that has been

settled in the past (clawback).

Clawback applies for a period

of up to five years following

the originally scheduled

plan specific vesting date.

The CC also has the ability to suspend

the delivery of awards if it is likely that

the Board will determine that

the malus or clawback provisions may

potentially apply (e.g., if

the employee is subject to an external

investigation).

For LTIP grants from 2021, there is no automatic accelerated

vesting of awards in the event

of a change of

control.

For LTIP grants from 2022,

participants are entitled to

receive a cash amount (a

“dividend equivalent

payment”) on each vested award

share that is equal to the total dividends

per share paid by the Company on

the ABB Ltd share between the grant

date and the delivery date of

the vested award. This is offset by

reducing other benefits

by a similar level over the life of

the share grant.

Total wealth at risk / Share ownership

Purpose and link to strategy

align EC members’

personal wealth directly with

the interests of shareholders

in order to maintain focus

on the long-term success of the Company.

Share ownership program

EC members are required to retain

all shares vested from the Company’s LTIP and any other share-based

compensation until their share ownership

requirement is met. In circumstances

where there is a withholding

tax obligation, the number of shares

received will be considered

to be the number of shares vested minus

the

shares sold under the default sell-to-cover

facility.

The share ownership requirement

is equivalent to a multiple

of the EC member’s annual base

salary, net of

taxes (see Compensation Exhibit 3

in the section “Compensation

at a glance”). These share ownership

requirements are aligned with

market practice and result in a wealth

at risk for each EC member which

aligned with shareholder interests.

Only vested shares owned by an EC

member and their spouse count for

the comparison of the actual

ownership against the share ownership

requirement.

115

The CC reviews the status of EC share

ownership on an annual

basis. It also reviews the required

shareholding amounts annually, based on salary and

expected share price developments.

Notice period, severance provisions

and non-competition clauses

Employment contracts for EC members

include a notice period

of 12 months, during which they are entitled

to their annual base salary, short-term incentive and benefits.

In accordance with Swiss law and

ABB’s

Articles of Incorporation, the contracts

for the EC members do not allow

for any severance payment.

Non-compete agreements have been

entered into with the CEO and

all other EC members for a period

12 months after their employment. Compensation

for such agreements, if any, may not exceed the EC

member’s last total annual

cash remuneration (comprising

of base salary, short-term incentive and benefits).

Implementation of EC compensation

policy

Overview

EC members received total compensation

of CHF 36.0 million

in 2022,

compared with CHF 39.2 million in

2021, as summarized in Compensation

Exhibit 21 below and presented

in detail in Compensation

Exhibits 38

and 39.

At the 2021 AGM, the shareholders

approved a maximum aggregate

compensation amount of CHF 40

million

for the EC for the year 2022.

The EC total compensation

for 2022 amounted to CHF 36.0 million

and is

therefore within the approved amount (see

Compensation Exhibit 21).

Compensation Exhibit 21: Total

compensation of EC members

(monetary values in CHF)

(1)

Calendar year

2022

2021

Number of active EC

members

Base salaries

8,341,720

8,713,406

Pension benefits

4,334,281

4,795,259

Other benefits

4,894,480

4,819,803

Total fixed compensation

17,570,481

18,328,468

Short-term incentives

9,879,882

12,144,280

Long-term incentives

(fair value at grant)

8,584,710

8,684,298

Total variable compensation

18,464,592

20,828,578

Total compensation

36,035,073

39,157,046

Maximum aggregate compensation

approved at AGM

40,000,000

39,500,000

(1)

For an overview

of compensation

by individual

and component,

please refer

to Compensation

Exhibits

38 and 39

in the section

“Compensation

tables and

share ownership

tables” below.

An overview

of 2022 re

alized compensation

by individual

is provided

Compensation

Exhibit 44

in the same

section.

The total compensation for the EC in 2022

decreased by 8.0 percent

compared to 2021. This mainly

reflects

the impact of the lower 2022 AIP awards

compared to 2021. The overall

lower pension benefits for 2022

compared to 2021 are informed by

the application of our new

compensation structure for new

EC members

where pension benefits and

other benefits have been lowered

and replaced by an increased

LTIP grant size

level, to provide higher emphasis

on performance instead of guaranteed

compensation.

116

Compensation mix

The ratio of fixed to variable components

in any given year depends

on the performance of the Company and

individual EC members against predefined

performance targets.

Compensation Exhibit 5 in the section

“Compensation at a glance” shows the

composition of the 2022 total

annual compensation for the CEO

and for other current EC members

on an aggregate level, specifying

the

split of its five compensation components.

In 2022,

the variable compensation

of the CEO was 56 percent of his

total annual compensation (previous

year: 61 percent). For the other EC

members, the variable

compensation was 51 percent on average

(previous year: 54 percent). The reductions

in 2022 from the prior year reflect

the lower variable pay awards.

Note that compensation paid

in 2022 for former EC members is not

included in Compensation

Exhibit 5. This

can be found in Compensation

Exhibit 38.

Compensation elements - 2022 highlights

Base salary

The salaries of the EC members have

been reviewed as part of the

regular compensation review. As a result,

the Board and the CC decided to

increase the salaries of five of the nine

EC members in place in

March

2022.

The base salary of Björn Rosengren

was increased by 5.0 percent

to CHF 1,785,000, Timo Ihamuotila

by 2.1 percent to CHF 990,000, Carolina

Granat by 3.6 percent to CHF 725,000,

Peter Terwiesch by 3.8

percent to CHF 830,000 and Morten

Wierod by 12.5 percent to CHF 900,000.

These salary changes were

made to reward exceptional performance

of these EC members, ensure

their total compensation opportunity

does not fall behind their relevant

target market position, and in the case

of Morten Wierod, to reflect

broadening of responsibilities.

Considering that the other four EC

members in place in March 2022 had

no salary adjustments, this

corresponded to a 3.25 percent increase

on annual base salaries

for the EC members post March 2022.

Annual Incentive Plan (AIP) -

design

Under the AIP,

all members of the EC had a

common Group measure, with

a 20 to 25 percent weighting.

2022,

this was Group Operational EBITA margin, applied

to create a greater focus on profitability.

In addition to the common Group

measure, the CEO and the Corporate

Officers shared

the same Group

measures,

including Revenues, Free Cash

Flow and Productivity growth,

with a total weighting of 55 percent.

For Business Area Presidents, up

to three measures were tailored

to business imperatives, with a

total

weighting of 60 percent. While

all Business Area Presidents

shared one measure (Operational

EBITA margin,

with 25 to 30 percent), the second

and third measure varied,

including Productivity growth, Revenues,

Operational Free Cash Flow, Order Gross Margin and

Operational revenues

gross profit productivity growth,

for the remaining 25 to 30 percent.

Compensation Exhibit 22 below

shows the composition and weighting

of the financial measures applied

2022 for all EC members under

their AIP, specified by their roles.

Definitions of the financial

measures

applied for all EC members are set

out in the Compensation

Exhibit 23.

117

Compensation Exhibit 22: Composition

and weighting of 2022 AIP

measures for EC members

Focus of measure

CEO and

Corporate

Officers

(1)

President

Electrification

President Motion

President Process

Automation

President

Robotics &

Discrete

Automation

Common Group

financial

measure

Bottom line earnings

Op EBITA margin

25%

Op EBITA margin

20%

Op EBITA margin

20%

Op EBITA margin

20%

Op EBITA margin

20%

Other Group

financial

measures

Top line output

Revenues

25%

Cash generation

Free Cash Flow

20%

Bottom line output

Productivity growth

10%

Business Area

financial

measures

Bottom line earnings

Op EBITA margin

30%

Op EBITA margin

25%

Op EBITA margin

30%

Op EBITA margin

30%

Cash generation

Op Free Cash Flow

20%

Top line input

Revenues

25%

Revenues

20%

Bottom line profit

Order Gross Margin

20%

Bottom line output

Operational revenues

gross profit

productivity growth

10%

Bottom line output

Productivity growth

10%

Productivity growth

10%

Productivity growth

10%

Individual

measure

emissions, Female leaders,

Cost discipline, Safety, Strategy

implementation, Internal controls

Function-specific

20%

emissions, Safety, Female

graduate recruitment, M&A,

Digital revenue growth, Strategy

implementation

Business-specific

20%

Business-specific

20%

Business-specific

20%

Business-specific

20%

Total

100%

(1)

Corporate Officers include Chief Financial Officer, Chief Human Resources Officer,

General Counsel and Chief Communications and Sustainability Officer.

118

Compensation Exhibit 23: Definition

of quantitative measures,

applied in 2022

Measure

Description

Operational EBITA

margin (%)

Operational EBITA, which is Operational

earnings before interest,

tax and

acquisition-related amortization,

as a percentage of

Operational revenues,

which is total revenues adjusted

for foreign exchange/commodity

timing

differences in total revenues

Revenues

Amount of consolidated

revenues recognized

during the year

accordance with USGAAP

Free Cash Flow (FCF)

Free Cash Flow is calculated

as net cash provided

by operating activities

adjusted for: (i) purchases

of property, plant and equipment

and intangible

assets, and (ii) proceeds

from sales of property, plant and equipment

Productivity growth (%)

Productivity is calculated

as 12-month rolling

revenues over the average

number of total workforce

in the last three

months. Growth is the change

of productivity over the

same period a year earlier, represented

as a

percentage change

Operational Free Cash

Flow (OFCF)

Cash flows from operating

activities excluding

cash paid for interest

and

taxes and including (i)

purchases of property, plant and

equipment and

intangible assets, and (ii)

proceeds from sales

of property, plant and

equipment

Order Gross Margin

(%)

Gross profit on orders

(calculated by deducting

total costs to complete

the

order from the total revenue

value of the order) divided

by the total

revenue values of the order

as calculated in

the final contract

offering to

the customer

Operational revenues

gross profit productivity

growth (%)

Operational revenues

gross profit productivity

is calculated as

the 12-

month rolling operational

revenues

gross profit divided

by the average

number of total workforce

in the last three

months. Where operational

revenues

gross profit is calculated

as gross profit (as defined

under

USGAAP) adjusted for

the following non-operational

items to the extent

that they are included within

the USGAAP gross

profit amount: (i) foreign

exchange/commodity

timing differences, (ii) acquisition-related

amortization, (iii) restructuring,

related and implementation

costs, (iv)

changes in obligations

related to divested businesses,

(v) changes in pre-

acquisition estimates,

(vi) acquisition-

and divestment-related

expenses

and integration costs,

(vii) other income/expense

relating to the Power

Grids joint venture and

(viii) certain other non-operational

items. Growth is

the change in productivity

over the same period

a year earlier,

represented as a percentage

change

All EC members also had an individual

measure with a 20 percent weighting.

This individual component

was

informed by up to three goals,

which included a combination

of quantitative and qualitative goals.

From 2022,

at least two of these goals relate to

sustainability,

e.g., GHG emissions, safety or

female leader targets. The

final outcome against the individual

measure was based on a discretionary

judgment of the combined

performance against all three goals.

•

In 2022,

all EC members had a common

environmental goal – namely

the reduction of GHG

emissions.

For the CEO and the Corporate

Officers, this related to Group level

and for Business

Area Presidents to their respective

Business Areas.

•

For the CEO and Corporate Officers, the

other goals were linked

to the level of Female leaders,

Cost discipline, Safety, Strategy implementation, or Internal

controls.

•

Business Area Presidents continued

to have a safety goal.

Their other goals related to Female

graduate recruitment, M&A, Digital

revenue growth, or Strategy implementation.

119

Outcomes were subject to appropriate

adjustments for some non-operational

items and other adjustment

principles agreed with the Board.

2022 Annual Incentive Plan - achievements

The average award for the current

EC members under the AIP for

2022 was 118.3 percent (out of a

maximum 150 percent), compared to

143.4 percent in 2021. The 2022 AIP

outcomes were net of the

application of adjustments for some

non-operational items, aligned

with adjustment principles agreed

with the

Board. These led to adjustments

of awards for three EC members,

ranging from a five percent decrease

to a

15 percent increase of awards.

Common Group measure

Achievement against the 2022

Group Operational EBITA margin measure, which applied

to all EC members,

with a weighting of 20 percent for the

Business Areas Presidents

and 25 percent for the CEO and Corporate

Officers, was 150 percent (2021: 150 percent).

Therefore the weighted achievement

related to the common

Group measure was 30.0 percent

for the Business Area Presidents, and

37.5 percent for the CEO and

the

Corporate Officers.

Other Group measures

The outcome related to the other three

Group measures, applied to the CEO

and Corporate Officers, was at

95.5 percent. Achievement against

the Group Revenue target, with

a 25 percent weighting, was 150

percent

(2021: n.a.). Achievement against of

the Free Cash Flow target, with

a weighting of 20 percent, was

zero

percent (2021: 150 percent). Achievement

against the Productivity growth

target, with a weighting of 10

percent, was 150 percent (2021: 150

percent).Therefore the compound

achievement related to these

three

Group measures was 52.5 percent.

Business Area measures

Up to three quantitative business

measures were applied to the Business

Area Presidents, with weightings

from 10 to 30 percent, and the outcomes

ranged from zero to 150 percent

of target (2021: 119 to 150

percent).

Achievement against the Operational

EBITA margin measure ranged from zero to 150 percent

for all

Business Areas (2021: 119 to 150 percent), Revenues

49.1 to 150 percent for the two

Business Areas

applicable (2021: n.a.), Operational

Free Cash Flow 40.5 percent (2021:

150 percent), Order Gross

Margin

150 percent (2021:

n.a.), Productivity growth zero to

150 percent for three Business

Areas applicable (2021:

150 percent)

and Operational revenues

gross profit productivity growth

150 percent (2021: n.a.).

Therefore

the compound weighted achievement

related to these Business

Area measures ranged from 12.4

to 90.0

percent (2021: 80.8 to 90.0 percent).

Individual measure

The assessed achievement of the goals

informing the outcome

of the individual component

for EC members,

with a weighting of 20 percent, inclusive

of the achievement of the sustainability

goals (Safety, Female leader

and emissions targets), ranged from

100 to 150 percent (2021: 100 to

150 percent).

These outcomes are summarized in Compensation

Exhibit 24.

120

Compensation Exhibit 24: 2022

AIP outcomes for the CEO

and the Corporate Officers

(rounded)

2022 AIP outcomes for the Business

Area Presidents (rounded)

Overall outcomes

The overall average award under

the 2022 AIP for the entire current EC

was 118.3 percent of target (2021:

143.4 percent) with a range from 67.4

percent (lowest achievement)

to 150 percent of target (highest

achievement). This compared to a

range of 140.0 to 145.0 percent in 2021.

Compensation Exhibit 25 below

provides information related to the overall

actual 2022 AIP outcomes,

comparison to the target 2022 AIP

for all current EC members.

121

Compensation Exhibit 25: Overview

of targeted and realized

2022 AIP values

Common Group

measure

Other Group

measures

Business Area

measures

Individual measure

Total AIP outcome

percentage

(in % of target)

Targe

t AIP award

(in CHF)

Actual AIP award

(in CHF)

(3)

Achievement

Weighting

Outcome

Achievement

Weighting

Outcome

Achievement

Weighting

Outcome

Achievement

Weighting

Outcome

Björn Rosengren

150.0%

25.0%

37.5%

95.5%

55.0%

52.5%

n.a.

150.0%

20.0%

30.0%

120.0%

1,785,000

2,142,000

Timo Ihamuotila

150.0%

25.0%

37.5%

95.5%

55.0%

52.5%

n.a.

150.0%

20.0%

30.0%

120.0%

990,000

1,188,000

Carolina Granat

150.0%

25.0%

37.5%

95.5%

55.0%

52.5%

n.a.

150.0%

20.0%

30.0%

120.0%

725,000

870,000

Andrea Antonelli

(1)

150.0%

25.0%

37.5%

95.5%

55.0%

52.5%

n.a.

125.0%

20.0%

25.0%

115.0%

583,334

670,833

Karin Lepasoon

(2)

150.0%

25.0%

37.5%

95.5%

55.0%

52.5%

n.a.

100.0%

20.0%

110.0%

150,000

165,000

Sami Atiya

150.0%

20.0%

30.0%

n.a.

20.6%

60.0%

12.4%

125.0%

20.0%

25.0%

67.4%

800,000

539,200

Tarak Mehta

150.0%

20.0%

30.0%

n.a.

139.7%

60.0%

83.8%

150.0%

20.0%

30.0%

143.8%

930,000

1,337,340

Peter Terwiesch

150.0%

20.0%

30.0%

n.a.

150.0%

60.0%

90.0%

150.0%

20.0%

30.0%

150.0%

830,000

1,245,000

Morten Wierod

150.0%

20.0%

30.0%

n.a.

106.0%

60.0%

63.6%

125.0%

20.0%

25.0%

118.6%

900,000

1,067,400

Total

7,693,334

9,224,773

(1)

EC member as of March 1, 2022. Target and Actual AIP awarded are prorated for the time employed in year 2022.

(2)

EC member as of October 1, 2022. Target and Actual AIP awarded are prorated for the time employed in year 2022.

(3)

Represents accrued AIP award for the year 2022, which will be paid in 2023, after the publication of ABB's financial results.

Long-Term Incentive (LTIP)

2022 LTIP grants

The estimated value at grant of

the share-based grants to EC members

under the 2022 LTIP was CHF 8.6

million, compared with CHF 8.7 million

in 2021.

The reference price for the 2022

LTIP grant which was used to determine the number of shares

granted to

participants was CHF 32.48.

The 2022 LTIP is based on three performance measures:

ABB’s EPS, ABB’s TSR and a sustainability

measure.

Targets

and award points under

the EPS measure are considered

as commercially sensitive information and

will only be disclosed retrospectively

after the end of the relevant

LTIP performance period.

As in the previous year, ABB

made the achievement of

the EPS threshold point more challenging

by further

decreasing the range between

the EPS target and award points

(range reduced from plus/minus

14 percent

of target for 2021 LTIP to plus/minus 11 percent of target for the 2022 LTIP) to reflect the perceived EPS

volatility during the performance period.

The peer companies approved

by the Board to determine ABB’s relative

TSR performance for the 2022 LTIP

were:

3M, Danaher, Eaton, Emerson Electric, General

Electric, Honeywell Intl., Holcim, Legrand,

Mitsubishi

Electric, Raytheon Technologies, Rockwell, Rolls Royce, Schneider

Electric, Siemens and Yokogawa.

These

were selected as they are comparable

in their size, scope and

complexity to ABB and compete in markets

that are key to ABB. They also provide

an appropriate and very challenging

set of peers, and influenced the

vesting point setting accordingly.

For 2022, the sustainability measure

was the Company’s scope 1 and 2

GHG emissions

reduction at the end

of the three-year performance period

(2022-2024), compared

to the 2019 baseline, which was defined

without the divested Power Grids business.

The approved sustainability

target and award points for the 2022

LTIP are illustrated in Compensation Exhibit 26 below.

122

Compensation Exhibit 26: Sustainability

target and award points for the

2022 LTIP

Measure

Weighting

Threshold

Target

Maximum

ABB scope 1&2 CO

equivalent

emissions

reduction compared

2019 baseline

20%

60%

70%

80%

Below threshold

point: no

award;

At target

point: 100

percent

award;

At or above

maximum

point: capped

at 200 percent

award;

Linear interpolations

between award

points.

The 2022 LTIP target and award points are illustrated in

Compensation Exhibit 27.

Compensation Exhibit 27: 2022

LTIP target

and award points

Measure

Weighting

Threshold

Target

Maximum

Average EPS

50%

Target point

-11%

Disclosed after

performance period

Target point

+11%

Relative TSR

30%

50th percentile

75th percentile

Reduction of scope 1&2 CO

equivalent

emissions

compared to 2019 baseline

20%

60.0%

70.0%

80.0%

Below threshold

point: no

award;

At target

point:

100 percent

award;

At or above

maximum

point:

capped

at 200 percent

award;

Linear interpolations

between award

points;

The average

EPS target

is not prospectively

disclosed

for reasons

of commercial

sensitivity.

2023 LTIP grants

The sustainability measure applied

to the 2022 LTIP will also be applied in 2023,

namely the scope 1 and 2

GHG emissions

reduction at the end of the

three-year performance period

(2023-2025), compared to the

2019 baseline.

Details of the long-term GHG emissions

reduction targets can be found in

ABB’s Item 4.

Information on the Company—Sustainability

activities.

The targets and award points have

been structured to reflect

ABB’s progress to date, its long-term

ambitions,

and that as the targets get higher, the overall stretch

to achieve them is even more

challenging.

•

The threshold value of 75.0 percent

emissions

reduction versus the 2019 baseline

is significantly

above the mid-term target of 70 percent

proposed at the 2023 AGM.

•

The target value of 77.5 percent is in

line with ABB’s long-term forecast

for 2025.

•

The maximum value of 80.0 percent

is in line with our 2030

Sustainability Strategy target. If it is

achieved in 2025, it would mean

we have delivered our target

five years ahead of our

commitment.

Compensation Exhibit 28: Sustainability

target and award points for

the 2023 LTIP

Measure

Weighting

Threshold

Target

Maximum

ABB scope 1&2 CO

equivalent

emissions reduction compared

2019 baseline

20%

75.0%

77.5%

80.0%

Below threshold

point: no

award;

At target

point: 100

percent

award;

At or above

maximum

point: capped

at 200 percent

award;

Linear interpolations

between award

points.

123

2019

LTIP - achievements

The final number of shares vesting under

the 2019

LTIP grant in 2022 was determined based on the

achievement level against the predefined

TSR and EPS targets.

The relative ranking of ABB’s TSR measure

against the predefined

peer group of companies for the 2019

LTIP sat on the 86

percentile, which led to a vesting

level of 200.0 percent (previous

year: 114.8 percent)

out of a potential of 200 percent.

The three-year average EPS amounted

to USD 0.86,

which led to a vesting level

of 42.0 percent (previous

year: zero percent) out of a potential

200 percent, net of adjustments

for items considered outside

the normal

course of business operation and/or

which were not considered

in the target setting of the 2019

LTIP.

On this

occasion, adjustments were made

for the impact of divestments, M&A

related integration

costs and

restructuring costs.

In line with our commitment to retrospectively

disclose the EPS performance

targets for vested LTIP awards,

the three target and award points (threshold,

target and maximum) and

the actual achievement for the

adjusted 2019

EPS performance measure

are shown in Compensation

Exhibit 29 below.

The average weighted achievement

level of the two performance

measures under the 2019

LTIP was 121.0

percent (out of a maximum 200 percent),

as specified in Compensation

Exhibit 29.

Compensation Exhibit 29: Target

and award points and achievement

levels

of 2019 LTIP

performance measures

Measure

Weighting

Threshold

Target

Maximum

Actual

Relative TSR

50%

percentile

Achievement level

100%

200%

200.0%

Average EPS (USD)

50%

0.75

1.00

1.25

0.86

Achievement level

100%

200%

42.0%

Award as percentage of

target (capped at 200%)

121.0%

Overview of disclosed and realized

2019

LTIP value

The following table compares the previously

disclosed “fair value”

of the grant to each EC member

and the

actual value of the grant at the time

of vesting. The following

Compensation Exhibit 30 shows such

comparison for the 2019

LTIP,

that vested in 2022.

124

Compensation Exhibit 30: Realized

value of 2019 LTIP

grant for current EC members

Grant date

Number of

granted

related to

the TSR

measure

(1)

granted

related to

the EPS

measure

(2)

Total

number

of shares

granted

Disclosed

grant fair

value

(CHF)

(3)

Vesting date

Vesting

percentage

Number

of vested

Realized

value

(CHF)

(4)

Björn Rosengren

n.a.

Timo Ihamuotila

May 16, 2019

24,536

24,535

49,071

836,661

May 16, 2022

121.0%

59,377

1,680,963

Carolina Granat

n.a.

Andrea Antonelli

n.a.

Karin Lepasoon

n.a.

Sami Atiya

May 16, 2019

24,794

24,793

49,587

845,459

May 16, 2022

121.0%

60,002

1,698,657

Tarak

Mehta

May 16, 2019

22,211

44,422

757,396

May 16, 2022

121.0%

53,751

1,521,691

Peter Terwiesch

May 16, 2019

20,662

20,661

41,323

704,559

May 16, 2022

121.0%

50,002

1,415,557

Morten Wierod

May 16, 2019

18,079

36,158

616,494

May 16, 2022

121.0%

43,752

1,238,619

Total

3,760,569

7,555,487

(1)

Actual achievement level of the TSR measure was 200.0 percent.

(2)

Actual achievement level of the EPS measure was 42.0 percent.

(3)

Valued at CHF 17.05, the grant fair value of the ABB share on the day of grant.

(4)

Valued at CHF 28.31, the closing price of the ABB share on the day of vesting.

The values presented are gross

and before payment of any

applicable taxes owing

by the recipient. This

indicates the average gross realized

LTIP value was 200.9 percent of the disclosed grant

fair value.

LTIP

vesting outcomes in the last

five years

The historical LTIP vesting outcomes for the prior five

years are shown in Compensation

Exhibit 31 below.

Over the last five years vesting has

averaged at 84.9 percent

of target and 49.3 percent of

the maximum

award.

Compensation Exhibit 31: LTIP

historical actual vesting percentages

(1)

(1) According

to plan-specific

relative

weighting

of relevant

performance

measures.

Realized total compensation - 2022

We disclose the realized total compensation

for each EC member. Realized compensation

relates to the AIP

award and the LTIP award at the end of their respective

performance cycles, reflecting actual

payment and

settlement, based on achievements

of the plan specific performance

measures.

125

120%

126%

107%

106%

104%

116%

132%

134%

124%

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

Björn Rosengren

Timo Ihamuotila

Carolina Granat

Andrea Antonelli

Karin Lepasoon

Sami Atiya

Tarak

Mehta

Peter Terwiesch

Morten Wierod

Target total

compensation

Realized total compensation

Such transparency on realized compensation

is designed to aid stakeholder’s

understanding of ABB's link

between pay and performance.

The following Compensation

Exhibit 32 sets out a high-level comparison

of realized and target total

compensation for each EC member. A detailed summary

table is given in Compensation

Exhibit 44 in the

section “Compensation tables and

share ownership tables“.

Compensation Exhibit 32: Realized

2022 total compensation (in

CHF) compared to target total

compensation

Other compensation - 2022

Members of the EC are eligible

to participate in the Employee Share

Acquisition Plan (ESAP), a savings plan

based on stock options, which is open

to employees around the world.

Five members of the EC participated

in the 19th annual ESAP launch of

the plan in 2022.

EC members who participated

will, upon vesting, each

be entitled to acquire up to 360

ABB shares at CHF 27.99 per share,

the market share price at

the start of the

2022 launch.

For a more detailed description

of the ESAP,

please refer to “Note 18 – Share

‑

based payment arrangements”

in our Consolidated Financial

Statements.

In 2022,

ABB did not pay any fees or

compensation to the members

of the EC for services rendered

to ABB

other than those disclosed in this

report. Except as disclosed

in the section “Executive Committee – Business

relationships between ABB and

its EC members” in "Item 6. Directors,

Senior Management and Employees",

the Company did not pay any additional

fees or compensation

in 2022 to persons closely linked

to a member

of the EC for services rendered to

ABB.

Shareholding of EC members

Four out of nine EC members have

exceeded their share ownership

requirement. Two further members

are

close to achieving their requirement,

while three members have

been newly appointed

to the EC in the last

two years. The individual shareholding

in comparison to the relevant ownership

requirement is shown in

Compensation Exhibit 9 in the section

“Compensation at a glance”.

126

The EC members collectively owned

less than 1 percent of ABB’s total shares outstanding

at December 31,

2022.

At December 31, 2022,

EC members held ABB shares

and conditional rights to receive

shares, as shown in

Compensation Exhibit 42 in the section

“Compensation tables and

share ownership tables” below. Their

holdings at December 31, 2021, are

shown in Compensation

Exhibit 43 in the same section.

As previously communicated, as from

2020, grants under the Management

Incentive Plan (MIP), a stock

option plan without performance

conditions, have been discontinued,

and no further grants were made.

Any

MIP instruments held by EC members

were awarded prior

to their appointment as EC members.

For a more

detailed description of MIP, please refer to “Note 18 – Share-based

payment arrangements” in our

Consolidated Financial

Statements.

Except as described in Compensation

Exhibits 42 and 43, no member of

the EC and no person closely

linked

to a member of the EC held any shares

of ABB or options on ABB shares at

December 31, 2022,

and 2021.

Accelleron equity restoration

In October 2022, ABB shareholders

received a dividend in kind

in Accelleron shares at the spin-off date.

Granted but unvested,

Performance Share Units

(PSU) and Restricted Share Units

(RSU) held by ABB

employees at the time of the spin-off date,

including members and former

members of the EC, were not

entitled to receive the dividend in

kind distribution.

As contemplated by the terms of the

LTIP rules,

to ensure equal treatment of PSU

and RSU holders relative

to ABB shareholders, ABB increased

the previously granted number

of shares by 3.7 percent to reflect

the

impact of the Accelleron spin-off, to ensure

that ABB employees

including EC members are not

disadvantaged by the spin-off relative

to ABB shareholders.

The total value related to the additional

shares granted for the EC was CHF

0.9 million. The amount was

equivalent to the estimated reduction

in value of the ABB share as a

result of the dividend in kind

related to

the spin-off and as such are not considered

by the CC to be additional

compensation.

Changes applicable to EC members

Terms of

appointment for new EC members

The new General Counsel & Company

Secretary,

Andrea Antonelli, was appointed

to the EC effective from

March 1, 2022,

with an annual base salary of CHF

700,000, a target short-term

incentive of 100 percent of

annual base salary and a target long-term

incentive of 150 percent

of annual base salary. Andrea Antonelli is

eligible for standard EC benefits as per

the policy announced in last year’s report.

The new Chief Communications &

Sustainability Officer (CCSO), Karin Lepasoon,

was appointed to the EC

effective from October 1, 2022,

with an annual base

salary of CHF 600,000, a target

short-term and target

long-term incentive of 100 percent

of annual base salary respectively. Karin Lepasoon

is eligible for standard

EC benefits as per the policy announced

in last year’s report and received standard

relocation benefits.

Terms of

departure for EC members

The previous General Counsel

& Company Secretary, Maria Varsellona, resigned from ABB and departed

March 31, 2022.

She received

compensation and benefits up

to the point of her departure.

This includes a

contractually agreed pro-rata short-term

incentive payment

of CHF 181,985 for the period

January 1 to March

31, 2022.

All her unvested LTIP share grants and the unvested

second tranche of her replacement

grant were forfeited.

127

The previous CCSO, Theodor

Swedjemark, resigned from ABB

and stepped down from the EC

as per

October 31, 2022.

He will depart from ABB on

February 28, 2023. He is entitled

to receive compensation and

benefits up to the point of his departure.

This includes a contractually

agreed short-term incentive

payment of

CHF 473,124 for 2022 and a pro-rata

short-term incentive payment

of CHF 78,854 for the period

January 1 to

February 28, 2023. All his unvested

LTIP share grants were forfeited.

Compensation of former EC members

In 2022, certain former EC members

received contractual compensation

for the period after leaving the EC,

as shown in Compensation Exhibit

38, footnote (5).

Votes

on compensation at the 2023

AGM

As illustrated in Compensation Exhibit

33, the Board’s proposals

to shareholders at the 2023

AGM will relate

to Board compensation for the 2023–2024

term of office and EC compensation

for the calendar year 2024.

There will also be a non-binding

consultative vote on the Compensation

Report 2022.

Compensation Exhibit 33: Shareholders

will have three separate

votes on compensation at

the 2023 AGM

The voting results at ABB’s past AGM in 2022

were as follows:

●

Maximum aggregate Board compensation

for the 2022–2023

term of office – 99.08 percent

●

Maximum aggregate EC compensation

for 2023

– 92.32 percent

●

Consultative vote on the Compensation

Report 2021 – 91.32

percent

128

In determining the proposed maximum

aggregate EC compensation

for 2024, the Board takes into

consideration the criteria illustrated

in Compensation Exhibit

34. Given the variable nature of a

major portion

of the compensation components,

the proposed maximum aggregate

EC compensation will almost normally

be higher than the actual compensation

paid or awarded, as it must cover

the potential maximum value

each component of compensation.

The decrease in maximum aggregate

EC compensation for 2024

compared to 2023 is mainly influenced

the potential vesting related costs

from the 2021 LTIP award, as well as the lower compensation

levels

applied to new EC members compared

to plan.

Compensation Exhibit 34: Overview

of key factors affecting

the determination of maximum

aggregate EC compensation

129

Compensation tables and share

ownership tables

Compensation Exhibit 35: Board

compensation in 2022 and

2021

Paid in 2022

Paid in 2021

November

Board term

2022-2023

May

Board term

2021-2022

Total compensation

paid in 2022

(3)

November

Board term

2021-2022

May

Board term

2020-2021

Total compensation

paid in 2021

(3)

Name

Settled in

cash

(1)

Settled in

shares -

number

of shares

received

(2)

Settled in

cash

(1)

Settled in

shares -

number

of shares

received

(2)

Settled in

cash

(1)

Settled in

shares -

number

of shares

received

(2)

Settled in

cash

(1)

Settled in

shares -

number

of shares

received

(2)

CHF

Peter Voser, Chairman

(4)

—

21,565

—

18,296

1,200,000

—

17,209

—

20,089

1,200,000

Jacob Wallenberg

(5)

112,500

3,257

112,500

2,763

450,000

112,500

2,599

112,500

3,033

450,000

Matti Alahuhta

(6)

—

3,615

160,000

Gunnar Brock

(7)

82,500

2,388

82,500

2,026

330,000

82,500

1,906

—

4,542

330,000

David Constable

(8)

80,000

2,316

80,000

1,964

320,000

80,000

1,848

87,500

2,359

335,000

Frederico Curado

(9)

—

4,799

—

4,075

350,000

—

3,829

—

4,090

335,000

Lars Förberg

(10)

—

5,736

—

4,870

320,000

—

4,577

—

5,347

320,000

Jennifer Xin-Zhe Li

(11)

87,500

2,338

87,500

1,986

350,000

87,500

1,866

80,000

1,993

335,000

Geraldine Matchett

(12)

82,500

3,121

82,500

2,647

330,000

82,500

2,490

82,500

2,906

330,000

David Meline

(13)

100,000

2,895

100,000

2,456

400,000

100,000

2,310

100,000

2,696

400,000

Satish Pai

(14)

—

4,523

82,500

1,872

330,000

82,500

1,759

82,500

2,055

330,000

Total

545,000

52,938

627,500

42,955

4,380,000

627,500

40,393

545,000

52,725

4,525,000

(1)

Represents gross amounts paid, prior to deductions for social security, withholding tax etc.

(2)

Number of shares per Board member is calculated based on net amount due after deductions for social security, withholding tax etc.

(3)

In addition to the Board remuneration stated in the above table, in 2022 and 2021 the Company paid CHF 248,489 and CHF 231,287, respectively, in related mandatory social

security payments.

(4)

Chairman of the ABB Ltd Board for the 2020-2021, 2021-2022 and 2022-2023 board terms and Chairman of the Governance and Nomination Committee for the 2021-2022

and 2022-2023 board terms; is receiving 100 percent of his compensation in the form of ABB shares.

(5)

Vice-Chairman of the ABB Ltd Board for the 2020-2021, 2021-2022 and 2022-2023 board terms; Chairman of the Governance and Nomination Committee for the 2020-2021

board term and member of that committee for the 2021-2022 and 2022-2023 board terms; is receiving 50 percent of his compensation in the form of ABB shares.

(6)

Member of the Governance and Nomination Committee for the 2020-2021 board term; received 100 percent of his compensation in the form of ABB shares for the 2020-2021

board term. Did not stand for election in 2021.

(7)

Member of the Finance, Audit and Compliance Committee for the 2020-2021, 2021-2022 and 2022-2023 board terms; received 100 percent of his compensation in the form of

ABB shares for the 2020-2021 board term and is receiving 50 percent of his compensation in the form of ABB shares for the 2021-2022 and 2022-2023 board terms.

(8)

Chairman of the Compensation Committee for the 2020-2021 board term and member of that committee for the 2021-2022 and 2022-2023 board terms; is receiving 50 percent

of his compensation in the form of ABB shares.

(9)

Member of the Compensation Committee for the 2020-2021 board term and Chairman of that committee for the 2021-2022 and 2022-2023 board terms; is receiving 100

percent of his compensation in the form of ABB shares.

(10)

Member of the Governance and Nomination Committee for the 2020-2021, 2021-2022 and 2022-2023 board terms; is receiving 100 percent of his compensation in the form of

ABB shares.

(11)

Member of the Compensation Committee for the 2020-2021, 2021-2022 and 2022-2023 board terms and member of the Governance and Nomination Committee for the 2021-

2022 and 2022-2023 board terms; is receiving 50 percent of her compensation in the form of ABB shares.

(12)

Member of the Finance, Audit and Compliance Committee for the 2020-2021, 2021-2022 and 2022-2023 board terms; is receiving 50 percent of her compensation in the form

of ABB shares.

(13)

Chairman of the Finance, Audit and Compliance Committee for the 2020-2021, 2021-2022 and 2022-2023 board terms; is receiving 50 percent of his compensation in the form

of ABB shares.

(14)

Member of the Finance, Audit and Compliance Committee for the 2020-2021, 2021-2022 and 2022-2023 board terms; received 50 percent of his compensation in the form of

ABB shares for the 2020-2021 and 2021-2022 board terms and is receiving 100 percent of his compensation in the form of ABB shares for the 2022-2023 board term.

130

Compensation Exhibit 36: Board

compensation for the Board

terms 2022-2023 and 2021

-2022

Name

Specific Board roles

Board term

2022-2023

Board term

2021-2022

CHF

Peter Voser

Chairman of the Board and Chairman

GNC for 2021-2022

and 2022-2023

terms

1,200,000

Jacob Wallenberg

Vice-Chairman of the Board

and Member GNC for 2021-2022

and 2022-2023

terms

450,000

Gunnar Brock

Member FACC for 2021

-2022 and 2022-2023 terms

330,000

David Constable

Member CC for 2021-2022 and

2022-2023 terms

320,000

Frederico Curado

Chairman CC for 2021-2022 and

2022-2023 terms

350,000

Lars Förberg

Member GNC for 2021-2022

and 2022-2023 terms

320,000

Jennifer Xin-Zhe Li

Member CC and Member GNC

for 2021-2022 and 2022-2023

terms

350,000

Geraldine Matchett

Member FACC for 2021

-2022 and 2022-2023 terms

330,000

David Meline

Chairman FACC for

2021-2022 and 2022

-2023 terms

400,000

Satish Pai

Member FACC for 2021

-2022 and 2022-2023 terms

330,000

Total

4,380,000

Key:

CC: Compensation Committee

FACC: Finance, Audit and Compliance Committee

GNC: Governance and Nomination Committee

Compensation Exhibit 37: Board

ownership of ABB

Total number

of shares held

Name

December 31, 2022

December 31, 2021

Peter Voser

(1)

231,807

191,946

Jacob Wallenberg

245,898

239,878

Gunnar Brock

37,813

33,399

David Constable

42,465

38,185

Frederico Curado

49,175

40,301

Lars Förberg

70,522

59,916

Jennifer Xin-Zhe Li

41,904

37,580

Geraldine Matchett

30,964

25,196

David Meline

(2)

43,131

37,780

Satish Pai

34,827

28,432

Total

828,506

732,613

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

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

131

Compensation Exhibit 38: EC

compensation in 2022

Cash Compensation

Estimated

value of

share-based

grants under

the LTIP in

2022

(4)

2022 Total

compensation

(incl.

conditional

share-based

grants)

(5)

Name

Base salary

Short-term

incentive

(1)

Pension

benefits

Other

benefits

(2)

2022 Total

cash-based

compensation

(3)

CHF

Björn Rosengren

1,770,840

2,142,000

762,478

988,084

5,663,402

2,411,254

8,074,656

Timo Ihamuotila

986,672

1,188,000

527,648

720,953

3,423,273

891,570

4,314,843

Carolina Granat

720,843

870,000

427,903

352,848

2,371,594

652,920

3,024,514

Andrea Antonelli (EC

member as of March 1,

2022)

583,334

670,833

198,164

245,754

1,698,085

945,595

2,643,680

Karin Lepasoon (EC member

as of October 1, 2022)

150,000

165,000

62,360

38,987

416,347

540,336

956,683

Sami Atiya

800,009

539,200

487,247

599,994

2,426,450

747,485

3,173,935

Tarak Mehta

930,009

1,337,340

513,481

604,563

3,385,393

837,546

4,222,939

Peter Terwiesch

825,001

1,245,000

485,152

536,952

3,092,105

747,485

3,839,590

Morten Wierod

875,006

1,067,400

471,432

523,912

2,937,750

810,519

3,748,269

Total Executive Committee

members at December 31,

2022

7,641,714

9,224,773

3,935,865

4,612,047

25,414,399

8,584,710

33,999,109

Maria Varsellona (EC

member until March 31,

2022)

200,002

181,985

114,896

79,223

576,106

—

576,106

Theodor Swedjemark (EC

member until October 31,

2022)

500,004

473,124

283,520

203,210

1,459,858

—

1,459,858

Total departing Executive

Committee members

700,006

655,109

398,416

282,433

2,035,964

—

2,035,964

Total

8,341,720

9,879,882

4,334,281

4,894,480

27,450,363

8,584,710

36,035,073

(1)

Represents accrued short-term variable compensation for the year 2022, which will be paid in 2023, after the publication of ABB's financial results.

Short-term variable compensation is linked to the targets and goals defined in each EC member's Annual Incentive Plan. Upon full achievement of

these targets and goals, the short-term variable compensation of the EC members represents 100 percent of their respective base salary. Maria

Varsellona received a short-term variable compensation payment in March 2022 related to her termination period, in accordance with the contractual

obligations of ABB.

(2)

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

compensation for foregone dividends on replacement share grants and certain other items.

(3)

Prepared on an accrual basis.

(4)

The estimated value of the share-based LTIP grants is based on the price of ABB shares on the grant date. On the day of vesting (April 25, 2025), the

value of the share-based awards granted under the LTIP may vary from the above amounts due to changes in ABB's share price and the outcome of

the performance factors.

(5)

Payments totaling CHF 1,324,301 were made in 2022 on behalf of certain other former EC members, representing social security premium payments

due on the 2019 LTIP vesting and tax advisory services for the period when they have been active EC members.

132

Compensation Exhibit 39: EC

compensation in 2021

Cash Compensation

Estimated

value of share-

based grants

under the LTIP

in 2021

(4)

Estimated

value of

replacement

share-based

grant in 2021

2021 Total

compensation

(incl.

conditional

share-based

grants)

(5)

Name

Base salary

Short-term

incentive

(1)

Pension

benefits

Other

benefits

(2)

2021 Total

cash-based

compensation

(3)

CHF

Björn Rosengren

1,700,012

2,465,000

744,770

807,000

5,716,782

2,530,828

—

8,247,610

Timo Ihamuotila

966,675

1,358,000

518,063

570,546

3,413,284

962,708

—

4,375,992

Carolina Granat (EC

member as of January 1,

2021)

700,000

980,000

417,382

399,334

2,496,716

694,744

—

3,191,460

Maria Varsellona

800,009

1,160,000

455,000

511,824

2,926,833

793,997

—

3,720,830

Theodor Swedjemark

500,004

725,000

274,535

263,567

1,763,106

397,012

—

2,160,118

Sami Atiya

800,009

1,160,000

482,662

481,598

2,924,269

793,997

—

3,718,266

Tarak Mehta

925,008

1,348,500

507,646

476,481

3,257,635

923,018

—

4,180,653

Peter Terwiesch

800,009

1,160,000

473,441

422,542

2,855,992

793,997

—

3,649,989

Morten Wierod

791,676

1,126,400

443,506

362,112

2,723,694

793,997

—

3,517,691

Total current Executive

Committee members at

December 31, 2021

7,983,402

11,482,900

4,317,005

4,295,004

28,078,311

8,684,298

—

36,762,609

Sylvia Hill (EC member

until December 31, 2020)

730,004

661,380

478,254

524,799

2,394,437

—

2,394,437

Total departing Executive

Committee members

(6)

730,004

661,380

478,254

524,799

2,394,437

—

2,394,437

Total

8,713,406

12,144,280

4,795,259

4,819,803

30,472,748

8,684,298

—

39,157,046

(1)

Represents accrued short-term variable compensation for the year 2021, which was paid in 2022, after the publication of ABB's financial results. Short-term variable

compensation is linked to the targets and goals defined in each EC member's Annual Incentive Plan. Upon full achievement of these targets and goals, the short-term

variable compensation of the EC members represents 100 percent of their respective base salary. Sylvia Hill received a short-term variable compensation payment in

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

(2)

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

dividends on replacement share grants and certain other items.

(3)

Prepared on an accrual basis.

(4)

The estimated value of the share-based LTIP grants was based on the price of ABB shares on the grant date, adjusted for expected foregone dividends during the vesting

period. On the day of vesting (April 26, 2024), the value of the share-based awards granted under the LTIP may vary from the above amounts due to changes in ABB's share

price and the outcome of the performance factors.

(5)

Payments totaling CHF 296,004 were made in 2021 on behalf of certain other former EC members, representing social security premium payments due on the 2018 LTIP

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

(6)

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

with related social security payments,

totaling to CHF 1,726,896.

133

Compensation Exhibit 40: LTIP

grants in 2022

Name

Reference

number of

shares under

the EPS

performance

factor of the

2022 launch

of the

LTIP

(1),(4)

Total

estimated

value of

share-based

grants under

the EPS

performance

factor of the

2022 launch

of the

LTIP

(2),(3)

Reference

number of

shares under

the TSR

performance

factor of the

2022 launch

of the

LTIP

(1),(4)

Total

estimated

value of

share-based

grants under

the TSR

performance

factor of the

2022 launch

of the

LTIP

(2),(3)

Reference

number of

shares under

the

sustainability

performance

factor of the

2022 launch

of the

LTIP

(1),(4)

Total

estimated

value of

share-based

grants under

the

sustainability

performance

factor of the

2022 launch

of the

LTIP

(2),(3)

Total number

of shares

granted

under the

2022 launch

of the

LTIP

(1),(2),(4)

Total

estimated

value of

share-based

grants under

the LTIP in

2022

(2),(3)

CHF

Björn Rosengren

(5)

42,743

1,205,627

25,646

723,353

17,098

482,274

85,487

2,411,254

Timo Ihamuotila

15,804

445,770

9,482

267,462

6,323

178,338

31,609

891,570

Carolina Granat

11,574

326,460

6,944

195,858

4,630

130,602

23,148

652,920

Andrea Antonelli (EC member as of

March 1, 2022)

16,762

472,797

10,057

283,667

6,706

189,131

33,525

945,595

Karin Lepasoon (EC member as of

October 1, 2022)

'(5)

9,578

270,153

5,747

162,075

3,832

108,108

19,157

540,336

Sami Atiya

13,250

373,728

7,950

224,231

5,301

149,526

26,501

747,485

Tarak Mehta

'(5)

14,847

418,773

8,908

251,258

5,939

167,515

29,694

837,546

Peter Terwiesch

'(5)

13,250

373,728

7,950

224,231

5,301

149,526

26,501

747,485

Morten Wierod

'(5)

14,368

405,259

8,620

243,156

5,748

162,104

28,736

810,519

Total Executive Committee

members at December 31, 2022

152,176

4,292,295

91,304

2,575,291

60,878

1,717,124

304,358

8,584,710

(1)

Vesting date April 25, 2025.

(2)

The reference number of shares of the EPS, TSR and sustainability performance factors are valued using the fair value of the ABB shares on the grant date.

(3)

Default settlement of the final LTIP award is 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to withholding taxes. The plan

foresees a maximum award of 200 percent of the number of reference shares granted based on the achievement against the predefined average EPS, relative TSR and

sustainability performance targets. Participants are also entitled to receive a dividend equivalent payment at the time of vesting for each awarded share.

(4)

The initial granted number of shares has been increased by 3.7 percent to reflect the impact of the Accelleron spin-off.

(5)

In addition to the above awards, five members of the EC participated in the 19th launch of the ESAP in 2022, which will allow them to save over a 12-month period and, in

November 2023, use their savings to acquire ABB shares under the ESAP. Each EC member who participated in ESAP will, upon vesting, be entitled to acquire up to 360

ABB shares at an exercise price of CHF 27.99 per share.

Compensation Exhibit 41: LTIP

grants in 2021

Name

Reference

number of shares

under the EPS

performance

factor of the 2021

launch

of the LTIP

(1)

Total estimated

value of share-

based grants

under the EPS

performance

factor of the 2021

launch of the

LTIP

(2),(3)

Reference

number of shares

under the TSR

performance

factor of the 2021

launch

of the LTIP

(1)

Total estimated

value of share-

based grants

under the TSR

performance

factor of the 2021

launch of the

LTIP

(2),(3)

Total number of

shares granted

under the 2021

launch

of the LTIP

(1),(2)

Total estimated

value of share-

based grants

under the LTIP in

2021

(2),(3)

CHF

Björn Rosengren

47,950

1,265,401

47,951

1,265,427

95,901

2,530,828

Timo Ihamuotila

(4)

18,240

481,354

18,240

481,354

36,480

962,708

Carolina Granat (EC member as of

January 1, 2021)

13,163

347,372

13,163

347,372

26,326

694,744

Maria Varsellona

15,043

396,985

15,044

397,012

30,087

793,997

Theodor Swedjemark

(4)

7,522

198,506

7,522

198,506

15,044

397,012

Sami Atiya

15,043

396,985

15,044

397,012

30,087

793,997

Tarak Mehta

(4)

17,488

461,509

17,488

461,509

34,976

923,018

Peter Terwiesch

(4)

15,043

396,985

15,044

397,012

30,087

793,997

Morten Wierod

(4)

15,043

396,985

15,044

397,012

30,087

793,997

Total Executive Committee

members at December 31, 2021

164,535

4,342,082

164,540

4,342,216

329,075

8,684,298

(1)

Vesting date April 26, 2024.

(2)

The reference number of shares of the EPS and TSR performance factors are valued using the fair value of the ABB shares on the grant date adjusted for expected

foregone dividends during the vesting period.

(3)

Default settlement of the final LTIP award is 100 percent in shares, with an automatic sell-to-cover in place for employees who are subject to withholding taxes. The

plan foresees a maximum award of 200 percent of the number of reference shares granted based on the achievement against the predefined average EPS and

relative TSR targets.

(4)

In addition to the above awards, five members of the EC participated in the 18th launch of the ESAP in 2021, which allowed them to save over a 12-month period and,

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

shares at an exercise price of CHF 30.32 per share.

134

Compensation Exhibit 42: EC

shareholding overview at December

31, 2022

Total number

of shares

held at

December 31,

2022

Unvested at December 31, 2022

Reference

number of

deliverable

under the

2020

performance

factors (EPS

and TSR) of

the LTIP

(1)(2)

Reference

number of

deliverable

under the

2021

performance

factors (EPS

and TSR) of

the LTIP

(1)(2)

Reference

number of

deliverable

under the

2022

performance

factors (EPS,

TSR,

Sustainabilit

y) of the

LTIP

(1)(2)

Replacement

share grant

for foregone

benefits

from former

employer

(2)(3)

Name

(vesting

2023)

(vesting

2024)

(vesting

2025)

(vesting

2023)

Björn Rosengren

94,597

136,589

99,450

85,487

19,604

Timo Ihamuotila

189,034

50,887

37,830

31,609

—

Carolina Granat

(4)

5,200

—

27,301

23,148

—

Andrea Antonelli (EC

member as of March 1,

2022)

—

7,021

33,525

—

Karin Lepasoon (EC

member as of October 1,

2022)

—

19,157

—

Sami Atiya

90,473

42,852

31,201

26,501

—

Tarak Mehta

152,993

48,209

36,271

29,694

—

Peter Terwiesch

132,940

42,852

31,201

26,501

—

Morten Wierod

64,777

40,174

31,201

28,736

—

Total Executive

Committee members at

December 31, 2022

730,014

361,563

301,476

304,358

19,604

(1)

The final 2020 LTIP, 2021 LTIP

and 2022 LTIP awards will be settled 100 percent in shares, with an automatic sell-to-cover

in place for employees who are subject to withholding taxes.

(2)

Initial number of shares granted have been increased by 3.7 percent to reflect the impact of the spin-off of the Accelleron

business.

(3)

It is expected that the replacement share grants will be settled 65 percent in shares and 35 percent in cash. However, the

participant has the possibility to elect to receive 100 percent of the vested award in shares.

(4)

This includes 1,200 shares held by the spouse.

135

Compensation Exhibit 43: EC

shareholding overview at December

31, 2021

Total number

of shares

held at

December 31,

2021

Vested at

December 31,

2021

Unvested at December 31, 2021

Number of

vested

options held

under the

MIP

Number of

unvested

options held

under the

MIP

Reference

number of

deliverable

under the

2019

performance

factors (EPS

and TSR) of

the LTIP

(1)

Reference

number of

deliverable

under the

2020

performance

factors (EPS

and TSR) of

the LTIP

(1)

Reference

number of

deliverable

under the

2021

performance

factors (EPS

and TSR) of

the LTIP

(1)

Replacement

share grant

for foregone

benefits from

former

employer

(2)

Replacement

share grant

for foregone

benefits from

former

employer

(2)

Name

(vesting

2022)

(vesting

2022)

(vesting

2023)

(vesting

2024)

(vesting

2022)

(vesting

2023)

Björn Rosengren

10,000

—

131,715

95,901

130,150

18,904

Timo Ihamuotila

150,440

—

49,071

36,480

—

Carolina Granat (EC

member as of January

1, 2021)

(3)

1,200

—

26,326

—

Maria Varsellona

(4)

26,006

—

Theodor

Swedjemark

(3)(5)

1,360

—

148,750

—

6,209

15,044

—

Sami Atiya

51,472

—

49,587

41,323

30,087

—

Tarak Mehta

118,056

—

44,422

46,488

34,976

—

Peter Terwiesch

100,440

—

41,323

30,087

—

Morten Wierod

(6)

21,025

—

36,158

38,740

30,087

—

Total Executive

Committee members

at December 31, 2021

479,999

—

148,750

220,561

354,869

298,988

130,150

18,904

(1)

The final 2019 LTIP award will be settled 65 percent in shares and 35 percent in cash. This applies to both performance factors (EPS and TSR). However, the

participants have the possibility to elect to receive 100 percent of the vested award in shares. The final 2020 LTIP and 2021 LTIP awards will be settled 100 percent in

shares, with an automatic sell-to-cover in place for employees who are subject to withholding taxes.

(2)

It is expected that the replacement share grant will be settled 65 percent in shares and 35 percent in cash. However, the participant has the possibility to elect to receive

100 percent of the vested award in shares.

(3)

This includes shares held by the spouse.

(4)

Unvested share grants were forfeited as a result of the resignation provided and removed from the shareholding overview.

(5)

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

(6)

The disclosed total number of shares held at December 31, 2021, was adjusted to reflect the correct year-end 2021 balance.

136

Compensation Exhibit 44: Targeted

and realized EC total compensation

in 2022

Target compensation (in

CHF)

Base salary

Pension

benefits

Other

benefits

(1)

Target

short-term

incentive

(2)

Grant fair

value of

2019 LTIP

(3)

Grant fair

value of 2020

replacement

share grant

(4)

Target total

variable

compensation

Target total

compensation

Björn Rosengren

1,770,840

762,478

963,201

1,785,000

n.a.

2,902,345

1,785,000

8,183,864

Timo Ihamuotila

986,672

527,648

707,152

990,000

836,661

n.a.

1,826,661

4,048,133

Carolina Granat

720,843

427,903

342,742

725,000

n.a.

725,000

2,216,488

Andrea Antonelli (EC member as of

March 1, 2022)

583,334

198,164

239,655

583,334

n.a.

583,334

1,604,487

Karin Lepasoon (EC member as of

October 1, 2022)

150,000

62,360

37,942

150,000

n.a.

150,000

400,302

Sami Atiya

800,009

487,247

618,172

800,000

845,459

n.a.

1,645,459

3,550,887

Tarak Mehta

930,009

513,481

576,171

930,000

757,396

n.a.

1,687,396

3,707,057

Peter Terwiesch

825,001

485,152

508,027

830,000

704,559

n.a.

1,534,559

3,352,739

Morten Wierod

875,006

471,432

512,244

900,000

616,494

n.a.

1,516,494

3,375,176

Total

7,641,714

3,935,865

4,505,306

7,693,334

3,760,569

2,902,345

11,453,903

30,439,133

Realized compensation (in CHF)

Base salary

Pension

benefits

Other

benefits

(1)(5)

Short-term

incentive

2022

(6)

Realized

value of

2019 LTIP

(7)

Realized

value of 2020

replacement

share grant

(8)

Total variable

compensation

Total

compensation

Björn Rosengren

1,770,840

762,478

988,084

2,142,000

n.a.

4,183,021

2,142,000

9,846,423

Timo Ihamuotila

986,672

527,648

720,953

1,188,000

1,680,963

n.a.

2,868,963

5,104,236

Carolina Granat

720,843

427,903

352,848

870,000

n.a.

870,000

2,371,594

Andrea Antonelli (EC member as of

March 1, 2022)

583,334

198,164

245,754

670,833

n.a.

670,833

1,698,085

Karin Lepasoon (EC member as of

October 1, 2022)

150,000

62,360

38,987

165,000

n.a.

165,000

416,347

Sami Atiya

800,009

487,247

599,994

539,200

1,698,657

n.a.

2,237,857

4,125,107

Tarak Mehta

930,009

513,481

604,563

1,337,340

1,521,691

n.a.

2,859,031

4,907,084

Peter Terwiesch

825,001

485,152

536,952

1,245,000

1,415,557

n.a.

2,660,557

4,507,662

Morten Wierod

875,006

471,432

523,912

1,067,400

1,238,619

n.a.

2,306,019

4,176,369

Total

7,641,714

3,935,865

4,612,047

9,224,773

7,555,487

4,183,021

16,780,260

37,152,907

Realized achievement level

Base salary

Pension

benefits

Other

benefits

(1)

Short-term

incentive

(6)

Realized

value of

2019 LTIP

in %

(7)

Realized

value of 2020

replacement

share grant

in %

(8)

Total variable

compensation

Total

compensation

Björn Rosengren

100.0%

102.6%

120.0%

n.a.

144.1%

120.0%

120.3%

Timo Ihamuotila

100.0%

102.0%

120.0%

200.9%

n.a.

157.1%

126.1%

Carolina Granat

100.0%

102.9%

120.0%

n.a.

120.0%

107.0%

Andrea Antonelli (EC member as of

March 1, 2022)

100.0%

102.5%

115.0%

n.a.

115.0%

105.8%

Karin Lepasoon (EC member as of

October 1, 2022)

100.0%

102.8%

110.0%

n.a.

110.0%

104.0%

Sami Atiya

100.0%

97.1%

67.4%

200.9%

n.a.

136.0%

116.2%

Tarak Mehta

100.0%

104.9%

143.8%

200.9%

n.a.

169.4%

132.4%

Peter Terwiesch

100.0%

105.7%

150.0%

200.9%

n.a.

173.4%

134.4%

Morten Wierod

100.0%

102.3%

118.6%

200.9%

n.a.

152.1%

123.7%

Average

100.0%

102.5%

118.3%

200.9%

144.1%

139.2%

118.9%

______________________

(1)

Other benefits comprise payments related to social security, health insurance, children's education, transportation, tax advice and certain other items.

(2)

Target short-term incentive corresponds to 100 percent of the latest applicable annual base salary

(3)

Represents the 2019 LTIP grant date fair value as per May 16, 2019, as disclosed in our 2019 Annual Report.

(4)

Represents the 2020 grant fair value related to the first tranche (out of two tranches) of the replacement share grant, as disclosed in our 2020 Annual Report.

(5)

Differences between realized and target values due to higher social security payments related to AIP awards above target values.

(6)

Represents accrued STI for the year 2022, which will be paid in 2023, after the publication of ABB's financial results. STI is linked to the targets and goals defined in each EC member's

Annual Incentive Plan.

(7)

Valued at CHF 28.31, the closing price of the ABB share on the day of vesting.

(8)

Valued at CHF 32.14, the closing price of the ABB share on the day of vesting.

137

—

Employees

A breakdown of our employees by

geographic region is as follows:

December 31,

2022

2021

2020

Europe

49,700

50,000

49,200

The Americas

26,400

25,600

27,600

Asia, Middle East and Africa

29,000

28,800

Total

105,100

104,400

105,600

The proportion of our employees

that are represented by labor

unions or are subject to collective bargaining

agreements varies based on the labor

practices of each country in which

we operate.

Item 7.

Major Shareholders and Related

Party Transactions

—

Major shareholders

At December 31, 2022, we had approximately

639,000 shareholders.

Approximately 404,000 were U.S.

holders, of which approximately 430

were record holders. Based on

the share register, U.S. holders

(including holders of ADSs) held

approximately 11 percent of the total share capital and

voting rights as

registered in the Commercial Register

on that date.

For information on major shareholders

see “Item 6. Directors, Senior Management

and Employees—

Shareholders—Significant

shareholders”.

—

Related party transactions

Affiliates and associates

In the normal course of our business,

we purchase products from,

sell products to and engage

in other

transactions with entities in which

we hold an equity interest.

The amounts involved in these

transactions are

not material to ABB Ltd. Prior to its

sale in December 2022 our most significant

equity method investment

was in Hitachi Energy Ltd (see “Note 4

- Acquisitions, divestments and equity-accounted

companies”

for

details). Also, in the normal course of

our business, we engage

in transactions with businesses that

we have

divested. We believe that the terms of

the transactions we conduct

with these companies are negotiated

an arm’s length basis.

Key management personnel

For information on important business

relationships between

ABB and its Board and EC members,

companies and organizations

represented by them, see “Item 6. Directors,

Senior Management and

Employees”

sections entitled “Board of Directors—Business

Relationships between

ABB and its Board

members” and “Executive Committee—Business

Relationships between

ABB and its EC members”.

138

Item 8.

Financial Information

—

Consolidated Statements and

other financial information

See “Item 18. Financial Statements”.

—

Legal proceedings

Regulatory

As a result of an internal investigation,

ABB self-reported to the

Securities and Exchange Commission

(SEC)

and the Department of Justice (DoJ) in

the United States as well as to

the Serious Fraud Office (SFO) in the

United Kingdom concerning

certain of our past dealings with Unaoil

and its subsidiaries, including

alleged

improper payments made by these

entities to third parties. In May 2020,

the SFO closed its investigation,

which it originally announced

in February 2017, as the case

did not meet the relevant test

for prosecution and

in December 2022 this matter was closed

without action by the DOJ

as part of the Kusile settlement.

Based on findings during an

internal investigation, ABB self-reported

to the SEC and the DoJ, in

the United

States, to the Special Investigating

Unit (SIU) and the National

Prosecuting Authority (NPA) in South Africa

as well as to various authorities

in other countries potential

suspect payments and other compliance

concerns

in connection with some of our dealings

with Eskom and related persons. Many

of those parties have

expressed an interest in, or commenced

an investigation into, these matters

and we are cooperating fully with

them. ABB paid $104 million

to Eskom in December 2020

as part of a full and final settlement with

Eskom

and the SIU relating to improper payments

and other compliance

issues associated with the Controls and

Instrumentation Contract, and its

Variation Orders for Units 1 and 2 at Kusile. We made a provision

approximately $325 million,

which was recorded in Other income

(expense), net, during the

third quarter of

2022. In December 2022, ABB settled

with the SEC and DoJ as well

as the authorities in South

Africa and

Switzerland. The matter is still pending

with the authorities in Germany, but we do not believe that we will

need to record any additional

provisions for this matter.

General

In addition, we are aware of proceedings,

or the threat of proceedings, against

us and others in respect of

private claims by customers and other

third parties with regard

to certain actual or alleged

anticompetitive

practices. Also, we are subject to other

claims and legal proceedings,

as well as investigations carried

out by

various law enforcement authorities.

With respect to the above-mentioned

claims, regulatory matters, and

any related proceedings, we will

bear the related costs including

costs necessary to resolve them.

Liabilities recognized

At December 31, 2022 and 2021,

we had aggregate liabilities

of $86 million and $104 million, respectively,

included in “Other provisions” and

“Other non-current liabilities”,

for the above regulatory, compliance and

legal contingencies, and none

of the individual liabilities recognized

was significant. As it is not possible

make an informed judgment on,

or reasonably predict, the

outcome of certain matters and as

it is not

possible, based on information

currently available to management,

to estimate the maximum potential

liability

on other matters, there could be adverse

outcomes beyond

the amounts accrued.

—

Dividends and dividend policy

Payment of dividends is subject to

general business conditions,

ABB’s current and expected financial

condition and performance and

other relevant factors including

growth opportunities. ABB’s current dividend

policy is to pay a rising, sustainable

annual dividend per share over

time.

139

The unconsolidated statutory financial

statements of ABB Ltd are prepared

in accordance with the Swiss

Code of Obligations.

Based on these financial

statements, dividends may be paid

only if ABB Ltd has

sufficient distributable profits from previous

years or sufficient free reserves to

allow the distribution of a

dividend. As a holding company, ABB Ltd’s main sources of income

are dividend and interest payments

from

its subsidiaries.

At December 31, 2022, the total unconsolidated

stockholders’ equity of ABB Ltd was

CHF 6,219 million,

including CHF 236 million

representing share capital, CHF 8,852 million

representing reserves and

CHF 2,869 million representing

a reduction of equity for treasury

shares. Of the reserves, CHF 2,869

million

relating to treasury shares and CHF

47 million representing 20

percent of share capital, at December

31,

2022, are restricted by law and not available

for distribution.

With respect to the years

ended December 31, 2018, 2019,

2020 and 2021, ABB Ltd paid

a dividend of

CHF 0.80 (USD 0.79) per share,

CHF 0.80 (USD 0.82) per

share, CHF 0.80 (USD 0.86) per share

and

CHF 0.82 (USD 0.88) per share,

respectively.

The USD amounts for each of

the foregoing dividend

payments

made in CHF have been translated using

the average rates of the months

in which the dividends were

paid.

With respect to the year ended December

31, 2022, ABB Ltd’s Board of Directors

has proposed to pay a

dividend of CHF 0.84 per share

to shareholders. The distribution

is subject to approval by shareholders

ABB Ltd’s 2023 Annual General Meeting

(AGM).

For further information on dividends

and dividend policy see “Item 6. Directors,

Senior Management and

Employees—Shareholders—Shareholders’

rights—Shareholders’

dividend rights”.

—

Significant changes

Except as otherwise described

in this Annual Report, there

has been no significant change

in our financial

position since December 31, 2022.

Item 9.

The Offer and Listing

—

Markets

The shares of ABB Ltd. are principally

traded on the SIX Swiss Exchange

(under the symbol “ABBN”) and on

the NASDAQ OMX Stockholm

Exchange (under the symbol “ABB”). ADSs

of ABB Ltd. have been traded

the New York Stock Exchange under the symbol “ABB” since April

6, 2001. ABB Ltd.’s ADSs are issued

under the Amended and Restated Deposit

Agreement, dated May 7, 2001,

as amended from time to time,

with Citibank, N.A. as depositary. Each ADS represents

one share.

There were no suspensions in the

trading of our shares in 2022, 2021

and 2020.

140

Item 10.

Additional Information

—

Description of share capital

and articles of incorporation

This section summarizes the material

provisions of ABB Ltd’s Articles of

Incorporation and the Swiss Code

Obligations relating to the shares of

ABB Ltd. The description

is only a summary and is qualified

in its entirety

by ABB Ltd’s Articles of Incorporation, a

copy of which has been filed

as Exhibit 1.1 to this Annual Report,

ABB Ltd’s filings with the commercial register

of the Canton of Zurich (Switzerland)

and Swiss statutory law.

Other than as disclosed below, the information called

for by this Item is set forth in Exhibit 2.4

to this Annual

Report and is incorporated by reference

into this Annual Report.

Registration and Business Purpose

ABB Ltd was registered as a corporation

(

Aktiengesellschaft

) in the commercial register of

the Canton of

Zurich (Switzerland) on March 5, 1999,

under the name of “New ABB Ltd”

and its name was subsequently

changed to “ABB Ltd”. Its commercial

ABB Ltd’s purpose, as set forth in Article

2 of its Articles of Incorporation,

is to hold interests in business

enterprises, particularly in enterprises

active in the areas of industry, trade and services.

It may acquire,

encumber, exploit or sell real estate and intellectual

property rights in Switzerland

and abroad and may also

finance other companies. It may engage

in all types of transactions and

may take all measures that appear

appropriate to promote, or that are

related to, its purpose. Finally, in pursuing its purpose,

ABB Ltd shall strive

for long-term sustainable value

creation.

Capital Structure

For a description of ABB Ltd’s capital structure

(including issued shares, contingent

share capital and

authorized share capital) and

its dividend policy, see “Item 6. Directors, Senior Management

and

Employees—Shares” and “Item 8.

Financial Information—Dividends

and Dividend Policy”.

Shareholders’ Meetings

Under Swiss law, the annual general meeting of shareholders

must be held within 6 months after the end

ABB Ltd’s fiscal year. Annual general meetings of shareholders

are convened by the board of directors,

liquidators or representatives of bondholders

or, if necessary,

by the statutory auditors.

The board of directors

is further required to convene an

extraordinary general meeting

of shareholders if so resolved

by the

shareholders in a general

meeting of shareholders or if so requested

by one or more shareholders

holding in

aggregate at least 10 percent of ABB Ltd’s

share capital. A general meeting

of shareholders is convened

publishing a notice in the Swiss

Official Gazette of Commerce (

Schweizerisches Handelsamtsblatt

) at least

20 days prior to the meeting date.

In addition, ABB publishes

notices for its general meetings in

certain

newspapers as well as on its website.

Such notices contain

information as to procedures to be

followed by

shareholders in order to participate

and exercise voting rights at

the shareholders’

meetings.

One or more shareholders whose

combined holdings represent an

aggregate par value of at least

CHF 48,000 may require, in the

form of a written request,

40 calendar days prior

to a general meeting of

shareholders that specific items and

proposals be included

on the agenda and voted on at the next general

meeting of shareholders.

141

The following powers are vested exclusively

in the general meeting

of the shareholders:

•

adoption and amendment of the Articles

of Incorporation,

•

election of members of the Board

of Directors, the Chairman of

the Board, the members of the

Compensation Committee, the auditors

and the independent proxy,

•

approval of the annual management

report and the consolidated

financial statements,

•

approval of the annual financial

statements and decision on the allocation

of profits shown on the

balance sheet, in particular with regard

to dividends,

•

approval of the compensation of

the Board of Directors

and of the Executive Committee pursuant

to ABB Ltd’s Articles of Incorporation,

•

granting discharge to the members

of the Board of Directors and the

persons entrusted with

management, and

•

passing resolutions as to all matters

reserved to the authority

of the shareholders’

meeting by law

or under ABB Ltd’s Articles of Incorporation

or that are submitted to the shareholders’

meeting by

the Board of Directors to the extent permitted

by law.

There is no provision in ABB Ltd’s Articles

of Incorporation requiring

a quorum for the holding of

shareholders’

meetings.

Resolutions and elections

usually require the approval of an “absolute

majority”

of the shares represented at

a shareholders’

meeting (i.e. a majority of the shares represented

at the shareholders’

meeting with

abstentions having the effect of votes

against the resolution). If the

first ballot fails to result in an election

and

more than one candidate is standing

for election, the presiding

officer will order a second ballot in which

relative majority (i.e. a majority of

the votes) shall be decisive.

A resolution passed with a qualified

majority (at least two-thirds) of

the shares represented at a shareholders’

meeting is required for:

•

a modification of the purpose of ABB

Ltd,

•

the creation of shares with increased

voting powers,

•

restrictions on the transfer of registered

shares and the removal of

those restrictions,

•

restrictions on the exercise of the right

to vote and the removal of those restrictions,

•

an authorized or conditional

increase in share capital,

•

an increase in share capital through

the conversion of capital

surplus, through an in-kind

contribution or in exchange for an acquisition

of property, and the grant of special benefits,

•

the restriction or denial of pre-emptive

rights,

•

a transfer of ABB Ltd’s place of incorporation,

and

•

ABB Ltd’s dissolution.

In addition, the introduction of any provision

in ABB Ltd’s Articles of Incorporation

providing for a qualified

majority must be resolved in accordance

with such qualified majority

voting requirements.

Pursuant to the Swiss Federal Merger

Act, special quorum rules apply

by law to a merger (

Fusion

) (including

a possible squeeze-out merger), de-merger

(

Spaltung

), or conversion (

Umwandlung

) of ABB Ltd.

142

At shareholders’

meetings, shareholders can be represented

by their legal representative, another

shareholder with the right to vote, or

the independent proxy elected

by the shareholders (

unabhängiger

Stimmrechtsvertreter

). All shares held by one shareholder

may be represented by only one

representative.

Votes are taken on a show of hands unless a secret

ballot is required by the general

meeting of shareholders

or the presiding officer. The presiding officer may arrange

for resolutions and elections to be

carried out by

electronic means. As a result, resolutions

and elections carried out by electronic

means will be deemed to

have the same effect as secret ballots.

The presiding officer may at any

time order that a resolution

election decided by a show of hands

be repeated through a secret ballot

if, in his view, the results of the vote

are in doubt. In this case, the preceding

decision by a show of hands

shall be deemed to have not

occurred.

Only shareholders registered in

ABB Ltd’s share register with the right

to vote are entitled to participate

shareholders’

meetings. For practical reasons, shareholders

must be registered in the share register

with the

right to vote no later than 6 business

days prior to a shareholders’

meeting in order to be entitled to

participate and vote at such shareholders’

meeting.

Holders of Euroclear Sweden AB-registered

shares are provided with

financial and other information on

ABB Ltd in the Swedish language

in accordance with regulatory

requirements and market practice.

For

shares that are registered in the system

of Euroclear Sweden

AB in the name of a nominee, such

information

is to be provided by the nominee.

Borrowing Power

Neither Swiss law nor ABB Ltd’s Articles of

Incorporation restrict in any

way ABB Ltd’s power to borrow and

raise funds. The decision to borrow

funds is taken by or under

the direction of the Board of Directors

or the

Executive Committee, and no shareholders’

resolution is required.

Directors and Officers

For further information regarding

the material provisions of ABB Ltd’s Articles

of Incorporation and the Swiss

Code of Obligations regarding

directors and officers, see “Item 6. Directors,

Senior Management and

Employees—Board of Directors—Board

governance”.

Auditors

The auditors are elected by the shareholders

at the Annual General

Meeting. Pursuant to ABB Ltd’s Articles

of Incorporation, their term of office is

one year.

KPMG AG,

Zurich, Switzerland, assumed

the sole auditing mandate

of the consolidated financial statements

of the ABB Group beginning

in the year ended December 31, 2018.

The auditor in charge and responsible

for

the mandate, Hans-Dieter Krauss,

began serving in this capacity in respect

of the financial year ended

December 31, 2018.

See “Item 16C. Principal Accountant

Fees and Services”

for information regarding

the fees paid to

KPMG AG.

Revision of Swiss Corporate Law

Swiss corporate law has been revised,

effective as of January 1, 2023. The

main objectives of the revision

are to strengthen shareholder

rights, improve corporate governance

and modernize corporate law

in general.

Swiss corporations are required

to amend their articles of incorporation

for compliance with the new law

the end of 2024 at the latest. ABB will

propose the necessary changes

to its Articles of Incorporation for

approval by shareholders

at its Annual General Meeting in

March 2023. These changes will

impact certain of

the above referred provisions

143

—

Material contracts

The following descriptions of the

material provisions of the

referenced agreements do not purport

to be

complete and are subject to, and qualified

in their entirety by reference

to, the agreements which have

been

filed as exhibits to this Annual Report.

Sale and Purchase agreement relating to the divestment of the Power Grids

business

On December 17, 2018,

ABB Ltd (the Seller) entered into

a Sale and Purchase Agreement

with Hitachi Ltd

(the Purchaser) for the sale and

purchase of 80.1% of the

shares of ABB Management Holding

AG (or such

other entity as agreed between

the Seller and the Purchaser).

See Exhibit 4.6

to this Annual Report.

Revolving Credit Facilities

On December 16, 2019, ABB entered

into a syndicated $2 billion

five-year revolving credit facility with

the

right to extend for up to two additional

years in accordance with its terms. ABB amended

and restated its

facility on February 16, 2023,

for the purpose of addressing

the discontinuation of LIBOR. For a

description of

the facility, see “Item 5. Operating and Financial Review

and Prospects—Liquidity and Capital

Resources—

Credit Facility” and “Note 12 - Debt”

to our Consolidated Financial

Statements. See Exhibits

4.1 and 4.7 to

this Annual Report.

2012 Notes Indenture

On May 8, 2012, ABB’s subsidiary, ABB Finance (USA) Inc.,

issued $500,000,000 aggregate

principal

amount of 1.625% notes due 2017,

$1,250,000,000 aggregate

principal amount of 2.875% notes due

2022

and $750,000,000 aggregate

principal amount of 4.375% notes due 2042

under an Indenture and a First

Supplemental Indenture,

dated as of May 8, 2012, among

ABB Finance (USA) Inc., ABB and Deutsche

Bank

Trust Company Americas (the “2012 Indenture”).

The notes due in 2017 and

2022 were repaid at maturity. In

2020, the notes due 2042 were subject

to a cash tender offer by the issuer and

redeemed in part. Pursuant

the terms of the 2012 Indenture,

ABB has fully and unconditionally

guaranteed payment of principal,

premium, if any, and interest in respect of the outstanding

notes. See Exhibits

4.2 and 4.3 to this Annual

Report.

2018 Notes Indenture

On April 3, 2018, ABB’s subsidiary, ABB Finance (USA) Inc., issued

(i) $300,000,000 aggregate

principal

amount of 2.8% notes due 2020 (ii)

$450,000,000 aggregate

principal amount of 3.375% notes,

due 2023,

and (iii)

$750,000,000 aggregate

principal amount of 3.8% notes due 2028

under an Indenture and a First

Supplemental Indenture dated,

dated as of April 3, 2018,

among ABB Finance (USA) Inc.,

ABB and Deutsche

Bank Trust Company Americas (the “2018 Indenture”).

The notes due in 2020 were repaid

at maturity. The

notes due 2023 were redeemed

in full in 2020 following the exercise of

ABB’s early redemption option.

The

notes due 2028 were subject to a

cash tender offer in 2020 by the issuer and

redeemed in part. Pursuant

the terms of the 2018 Indenture,

ABB has fully and unconditionally

guaranteed payment of principal,

premium, if any, and interest in respect of the outstanding

notes.

See Exhibits

4.4 and 4.5 to this Annual

Report.

144

—

Exchange controls

Other than in connection with Swiss government

sanctions imposed on Belarus,

Burundi,

the Central African

Republic, the Democratic Republic

of the Congo, Guinea, the Republic

of Guinea-Bissau, Haiti, the Islamic

Republic of Iran, the Republic

of Iraq, Lebanon, Libya, the

Republic of Mali, Myanmar (Burma),

Nicaragua,

the Democratic People's Republic

of Korea (North Korea), Somalia,

the Republic of South Sudan, Sudan,

Syria, Venezuela, Yemen, Zimbabwe, persons and organizations with connection

to the late Osama bin

Laden, the “al Qaeda” group or

the Taliban,

certain persons connected

with the assassination of Rafik

Hariri

and sanctions in connection with

the situation in the Ukraine,

there are currently no laws, decrees

regulations in Switzerland

that restrict the export or import of capital,

including, but not limited

to, Swiss

foreign exchange controls on payment

of dividends, interest or liquidation

proceeds, if any, to non-Swiss

resident holders of shares. In addition,

there are no limitations imposed by Swiss

law or ABB Ltd’s Articles of

Incorporation on the rights of non-Swiss

residents or non-Swiss citizens

as shareholders to hold

shares or to

vote.

—

Taxation

Swiss Taxation

Withholding Tax on Dividends and Other Distributions

Dividends paid and similar

cash or in-kind distributions that we make

to a holder of shares or ADSs

(including

dividends on liquidation

proceeds and stock dividends and

taxable income resulting from partial

liquidation)

are subject to a Swiss federal

withholding tax at a rate

of 35 percent unless such distribution

qualifies as a

tax-free reorganization under applicable

Swiss legislation. A repurchase of shares by

us for the purpose of a

capital reduction is defined as a partial

liquidation of the Company. In this case, the difference

between the

nominal value of the shares and their

repurchase price is qualified

as taxable income. The same would

true upon a repurchase of shares

if we were not to dispose of the

repurchased shares within six years

after

the repurchase, or if 10 percent of outstanding

shares were exceeded. We must withhold

the tax from the

gross distribution and pay it to the

Swiss Federal Tax Administration.

Obtaining a Refund of Swiss Withholding

Tax for U.S. Residents

The Convention between the Swiss Confederation

and the United States of

America for the Avoidance of

Double Taxation with Respect to Taxes on Income, which was signed on October 2, 1996 (including

any

amendments thereto) and which we will

refer to in the following

discussion as the Treaty, allows U.S. resident

individuals or U.S. corporations to

seek a refund of the Swiss withholding

tax paid in respect of our shares or

ADSs if they qualify for benefits

under the Treaty. U.S. resident individuals and U.S. corporations

holding less

than 10 percent of the voting rights

in respect of our shares

or ADSs are entitled to seek a refund

withholding tax to the extent the

tax withheld exceeds 15 percent

of the gross dividend or other

distribution.

U.S. corporations holding

10 percent or more of the voting

rights of our shares or ADSs are entitled

to seek a

refund of withholding tax to the extent

the tax withheld exceeds

5 percent of the gross dividend

or other

distribution. Qualifying U.S. pension

or other retirement arrangements

and – as from January 1, 2020 –

also

individual retirement saving plans

that do not control the Company

are entitled to seek a full refund

withholding tax.

145

Claims for refunds must be filed

with the Swiss Federal Tax Administration, Eigerstrasse 65,

3003 Bern,

Switzerland, no later than December

31 of the third year following

the calendar year in which the dividend

similar distribution became payable.

The form used for obtaining

a refund is Swiss Tax Form 82 (82C for

companies; 82E for other entities;

82I for individuals; 82R for regulated

investment companies (RICs)).

This

form may be obtained from any Swiss

Consulate

General in the United States,

from the Swiss Federal Tax

Administration at the address above

or under

www.estv.admin.ch

. The form must be filled out in

triplicate with

each copy duly completed and signed

before a notary public

in the United States. The form must

accompanied by evidence

of the deduction of withholding tax withheld

at the source (including tax voucher

issued by the custodian bank).

Stamp Duties upon Transfer of Securities

The sale of shares or ADSs, whether

by Swiss resident or non-resident

holders, may be subject

to a Swiss

securities transfer stamp duty of up

to 0.15 percent calculated on the sale

proceeds if it occurs through

with a Swiss bank or other Swiss

securities dealer as defined

in the Swiss Federal Stamp Tax Act. In addition

to the stamp duty, the sale of shares or ADSs by or through

a member of the SIX Swiss Exchange

may be

subject to a stock exchange levy.

United States Taxes

The following is a summary of

the material U.S. federal

income tax consequences of the ownership

by U.S.

holders (defined below)

of shares or ADSs. This summary does

not purport to address all of the

tax

considerations that may be relevant

to a decision to purchase, own

or dispose of shares or ADSs.

This

summary assumes that U.S. holders

hold shares or ADSs as capital

assets for U.S. federal

income tax

purposes. This summary does not

address tax considerations

applicable to holders that may be subject

special tax rules, such as U.S. expatriates,

dealers or traders in

securities or currencies, partnerships

owning

shares or ADSs, tax-exempt entities, banks

and other financial institutions,

regulated investment companies,

traders in securities that elect to apply

a mark-to-market method of

accounting, insurance companies,

holders

that own (or are deemed to own) at

least 10 percent or more (by voting

power or value) of the stock

of ABB,

investors whose functional currency is

not the U.S. dollar, persons subject to the alternative

minimum tax,

persons subject to special tax accounting

rules as a result of any item

of gross income with respect

to the

shares or ADSs being taken into account

in an applicable

financial statement, persons that will

hold shares or

ADSs as part of a position in a straddle

or as part of a hedging

or conversion transaction for U.S. tax

purposes and persons who are

not U.S. holders. This discussion

does not address aspects of U.S.

taxation

other than U.S. federal income

taxation, nor does it address state,

local or foreign tax consequences

of an

investment in shares or ADSs.

This summary is based (i) on the

Internal Revenue Code of 1986, as

amended, U.S. Treasury Regulations

and judicial and administrative

interpretations thereof, in

each case as in effect and available

on the date of

this registration statement and (ii)

in part, on representations

of the depositary and the assumption

that each

obligation in the deposit agreement

and any related agreement will

be performed in accordance with its

terms. The U.S. tax laws and regulations

and the interpretation thereof are

subject to change, which change

could apply retroactively and could

affect the tax consequences described

below.

For purposes of this summary, a U.S. holder is a beneficial

owner of shares or ADSs that, for U.S.

federal

income tax purposes, is:

•

a citizen or individual resident

of the United States,

•

a corporation (or other entity

treated as a corporation for U.S.

federal income tax purposes)

created or organized in or under

the laws of the United States or

any state, including the District

of Columbia,

•

an estate if its income is subject

to U.S. federal income

taxation regardless of its source, or

•

a trust if such trust validly has elected

to be treated as a U.S. person for

U.S. federal income tax

purposes or if (i) a U.S. court can exercise

primary

supervision over its administration

and (ii) one

or more U.S. persons have the authority

to control all of its substantial

decisions.

146

If a partnership (including

any entity or arrangement treated

as a partnership for U.S. federal

income tax

purposes) is a beneficial owner

of shares or ADSs, the treatment of a partner

in the partnership will

generally

depend on the status of the partner

and the activities of the partnership.

If you are a partner in a partnership

that holds shares or ADSs you should

consult your tax advisor.

Each prospective purchaser should

consult the purchaser’s

tax advisor with respect to

the U.S. federal, state,

local and foreign tax consequences

of acquiring, owning or disposing

of shares or ADSs.

Ownership of ADSs in General,

and Exchange of ADSs

for Shares

For U.S. federal income tax purposes,

a holder of ADSs generally

will be treated as the owner of the

represented by the ADSs, and

the following discussion assumes

that such treatment will be respected.

If so,

no gain or loss will be recognized

upon an exchange of shares for

ADSs or an exchange of ADSs

for shares.

The U.S. Treasury has expressed concerns that

intermediaries in the chain

of ownership between the holder

of an ADS and the issuer of the

security underlying the ADS may be

taking actions that are inconsistent

with

the beneficial ownership

of the underlying shares. Accordingly, the creditability of

foreign taxes and the

availability of the reduced tax rate

for dividends

received by certain non-corporate U.S.

holders, if any, as

described below, could be affected by actions taken by

intermediaries in the chain of ownership

between the

holder of an ADS and ABB.

Distributions

In general, for U.S. federal income

tax purposes, the gross

amount of distributions (other

than certain

distributions, if any, of shares distributed to all shareholders

of ABB, including holders

of ADSs) made to you

with respect to shares or ADSs, including

the amount of any Swiss taxes

withheld from the distribution, will

constitute dividends and be includible

in gross income in the year received

to the extent of ABB’s current and

accumulated earnings and

profits (as determined under U.S.

federal income tax principles).

Non-corporate U.S. holders generally

will be taxed on such distributions at the

lower rates applicable to

long-term capital gains (i.e., gains from

the sale of capital assets held

for more than one year) with respect

distributions during 2022, provided

that the U.S. holder meets certain

holding period and

other requirements

and provided that such distributions

constitute “qualified dividends”

for U.S. federal income tax purposes.

Distributions treated as dividends

will not be treated as “qualified

dividends” if we were to be treated as

“passive foreign investment company”

(PFIC) for U.S. federal

income tax purposes in the year that

the

dividend is paid or in the year prior

to the year that the dividend

is paid. Based on certain estimates of its

gross income and gross assets and

the nature of its business, ABB believes

that it will not be classified as

PFIC for the taxable year ended December

31, 2022, and does

not expect to be classified as a PFIC

for the

taxable year ending December

31, 2023. ABB’s status in the current

year and in future years will depend

its assets and activities in those years.

ABB has no reason to believe

that its assets or activities will

change in

a manner that would cause it to be

classified as a PFIC. However, as PFIC status

is a factual matter that

depends on, among other things,

the composition of the income

and assets, and the market value

of the

assets as reflected in market capitalization,

of ABB and its subsidiaries

that must be determined annually

the close of each taxable year, there can be no certainty

regarding ABB’s PFIC status in any particular

year

until the end of that year. Furthermore, because

the value of our gross assets

is likely to be determined in

large part by reference to our market

capitalization, a decline

in the value of our shares or ADSs

may result in

our becoming a PFIC. Accordingly, there can be no assurance

with respect to our status as a PFIC

for our

current taxable year or any future

taxable year. The remainder of this discussion assumes

that ABB will not

be classified as a PFIC. U.S. holders

are urged to consult their own

tax advisors regarding the availability

them of the reduced dividend

rate in light of their own particular

circumstances and the consequences

them if ABB were to be treated as

a PFIC with respect to any

taxable year.

Dividends paid to U.S. corporate

holders will not be eligible

for the dividends received deduction

generally

allowed to corporate U.S. holders.

147

If you are a U.S. holder and distributions

with respect to shares

or ADSs exceed ABB’s current and

accumulated earnings and

profits as determined under U.S.

federal income tax principles,

then the excess

generally would be treated first as a

tax-free return of capital to the extent

of your adjusted tax basis in

the

shares or ADSs. Any amount in excess

of the amount of the dividend

and the return of capital generally

would be treated as capital gain. ABB

does not maintain calculations

of its earnings and profits under U.S.

federal income tax principles, so a

U.S. holder should expect all

cash distributions to be reported

dividends for U.S. federal income

tax purposes.

If you are a U.S. holder, then dividends paid

in Swiss francs, including the amount

of any Swiss taxes

withheld from the dividends, will

be included in your gross income

in an amount equal to the U.S.

dollar value

of the Swiss francs calculated by reference

to the spot exchange rate in effect on the

day the dividends are

includible in income. In the case of

ADSs, dividends generally

are includible in income on the date

they are

received by the depositary, regardless of whether the payment

is in fact converted into U.S. dollars

at that

time. If dividends paid in Swiss

francs are converted into U.S.

dollars on the day they are includible

income, then you generally should

not be required to recognize

foreign currency gain or loss with respect

the conversion. However, any gains or losses resulting

from the conversion of Swiss francs

between the time

of the receipt of dividends paid

in Swiss francs and the time the Swiss

francs are converted into U.S.

dollars

will be treated as ordinary income

or loss to you. The amount of any

distribution of property other

than cash

will be the fair market value of

the property on the date of distribution.

If you are a U.S. holder, then dividends received

by you with respect to shares or

ADSs will be treated as

foreign source income, which may

be relevant in calculating your

foreign tax credit limitation.

Subject to

certain conditions and limitations,

Swiss tax withheld on

dividends may be deducted from

your taxable

income or credited against your U.S.

federal income tax liability. However, to the extent that you would

entitled to a refund of Swiss withholding

taxes pursuant to the U.S.-Switzerland

tax treaty, you may not be

eligible for a U.S. foreign tax credit

with respect to the amount

of such withholding taxes which

may be

refunded, even if you fail to claim

the refund. See “��Swiss Taxation—Obtaining a Refund of Swiss

Withholding Tax for U.S. Residents”. The limitation on foreign

taxes eligible for credit is calculated separately

with respect to specific classes of

income. For this purpose, dividends

distributed by ABB generally

will

constitute passive income. The

rules relating to the determination

of the U.S. foreign tax credit are complex,

and you should consult your tax advisor

to determine whether and to what extent

you would be entitled

to this

credit.

Sale, Exchange or other Taxable Disposition of Shares

or ADSs

If you are a U.S. holder that holds

shares or ADSs as capital

assets, then you generally will

recognize capital

gain or loss for U.S. federal income

tax purposes upon a sale, exchange

or other taxable disposition

of your

shares or ADSs in an amount equal

to the difference between your adjusted

tax basis in the shares or ADSs

and the amount realized on their disposition.

If you are a non-corporate

U.S. holder, the maximum marginal

U.S. federal income tax rate applicable

to the gain is generally lower

than the maximum marginal U.S.

federal

income tax rate applicable

to ordinary income (other than certain

dividends) if your holding

period for the

shares or ADSs exceeds one year (i.e.,

long term capital gains). If you are

a U.S. holder, then the gain or

loss, if any, recognized by you generally will be treated

as U.S. source income or loss,

for U.S. foreign tax

credit purposes.

If you are a U.S. holder and you receive

any foreign currency

on the disposition of shares or ADSs,

the

amount realized will be the U.S.

dollar value of the payment received,

translated at the spot rate of exchange

on the date of taxable disposition.

If the shares are treated as traded

on an established securities

market, a

cash basis U.S. holder and an accrual

basis U.S. holder who has made

a special election (which must

applied consistently from year

to year and cannot be changed

without the consent of the U.S. Internal

Revenue Service) will determine

the U.S. dollar value of the amount

realized in foreign currency by

translating the amount received at

the spot rate of exchange

on the settlement date of the disposition.

accrual basis U.S. holder that does not

make the special election

will recognize U.S. source ordinary

income

or loss as a result of currency

fluctuations between the trade date

and the settlement date of

the disposition

of the shares or ADSs.

148

Medicare Tax

For taxable years beginning

after December 31, 2012, certain U.S. holders

who are individuals, estates or

trusts must pay a 3.8 percent tax on

the lesser of (i) the U.S. holder’s

“net investment income” for the

relevant

taxable year and (ii) the excess of

the U.S. holder’s modified

adjusted gross income for the taxable

year over

a certain threshold (which in the case

of individuals will be between

$125,000 and $250,000, depending

the individual’s circumstances). A U.S.

holder’s net investment

income will generally

include its dividend

income and its net gains from

the disposition of shares or ADSs,

unless such income or net gains are

derived

in the ordinary course of the conduct

of a trade or business (other

than a trade or business that consists

certain passive or trading activities).

If you are a U.S. holder that is an individual,

estate or trust, you are

urged to consult your tax advisor regarding

the applicability of the Medicare

tax to your income and gains in

respect of your investment in shares

or ADSs.

Information with Respect to Foreign

Financial Assets

Certain U.S. holders who are individuals

(and certain entities) that hold an

interest in “specified foreign

financial assets” (which may include

the shares) are required

to report information relating to such assets,

subject to certain exceptions (including

an exception for shares held in accounts

maintained by certain

financial institutions). Penalties can

apply if U.S. holders fail to

satisfy such reporting requirements.

U.S.

holders should consult their tax advisors

regarding the effect, if any, of this requirement on their ownership

and disposition of the shares.

Backup Withholding and Information Reporting

U.S. backup withholding

tax and information reporting requirements

generally apply to certain payments

certain non-corporate holders of stock.

Information reporting generally

will apply to payments of dividends

on,

and to proceeds from the sale or

redemption of, shares or ADSs

made within the United States

to a holder of

shares or ADSs (other than an exempt

recipient, including a corporation,

a payee that is not a U.S. holder

that provides an appropriate certification,

and certain other persons).

A payor will be required to withhold

backup withholding tax from any

payments of dividends on, or the

proceeds from the sale or redemption

of, shares or ADSs within

the United States to you, unless

you are an

exempt recipient, if you fail to furnish

your correct taxpayer identification

number or otherwise fail to establish

an exception from backup withholding

tax requirements. U.S. holders who

are required to establish

their

exempt status may be required

to provide such certification

on U.S. Internal Revenue Service

Form W-9.

Backup withholding is not an additional

tax. The amount of any backup withholding

from a payment to you

may be allowed as a credit against your

U.S. federal income tax liability

and may entitle you to a refund,

provided that the required information

is furnished timely to the U.S.

Internal Revenue Service.

THE ABOVE SUMMARIES ARE

NOT INTENDED TO CONSTITUTE A

COMPLETE ANALYSIS OF ALL

TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF SHARES OR

ADSs. PROSPECTIVE

PURCHASERS OF SHARES

OR ADSs SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE

TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.

—

Documents on display

We are subject to the informational requirements

of the Exchange Act. In accordance

with these

requirements, we file reports and

other information with the SEC.

The SEC maintains a website at

www.sec.gov

that contains reports,

including this Annual

Report and the exhibits thereto, and other

information regarding registrants

that file electronically with the SEC.

Our Annual Reports on Form 20-F,

reports on Form 6-K and other information

we submit to the SEC may be

accessed through this website.

addition, material that we file can

be inspected at the offices of the New

York Stock Exchange at

11 Wall Street, New York,

New York 10005.

149

Item 11.

Quantitative and Qualitative Disclosures

about Market Risk

Market Risk Disclosure

The continuously evolving financial

markets and the dynamic business

environment expose us to changes

foreign exchange, interest rate and

other market price risks. We have developed

and implemented

comprehensive policies, procedures,

and controls to identify, mitigate, and monitor financial

risk on a

company-wide basis. To efficiently aggregate and manage financial

risks that could impact our financial

performance, we operate a Corporate

Treasury Operations function. Our Corporate

Treasury Operations

provides an efficient source of liquidity, financing, risk

management and other global

financial services to the

ABB Group companies. Our policies

do not allow our Corporate

Treasury Operations or ABB Group

companies to perform speculative

trading. Market risk management

activities are focused on mitigating

material financial risks resulting

from our global operating

and financing activities.

Corporate Treasury Operations maintains risk

management control systems

to monitor foreign exchange

and

interest rate risks and exposures arising

from our underlying business,

as well as the associated hedge

positions. Our written policies govern

how such exposures are managed.

Financial risks are monitored

using

a number of analytical techniques

including market value

and sensitivity analysis. The following

quantitative

analyses are based on sensitivity analysis

tests, which assume parallel

shifts of interest rate yield curves, and

foreign exchange rates and equity

prices.

Currency Fluctuations and Foreign Exchange Risk

It is our policy to identify and manage

all transactional foreign

exchange exposures to minimize

risk. With the

exception of certain financing

subsidiaries and to the extent certain

operating subsidiaries

are domiciled in

high inflation environments, the functional

currency of each of our companies

is considered to be its local

currency. Our policies require our subsidiaries to hedge

all contracted foreign exchange

exposures, as well

as a portion of their forecast exposures,

against their local currency. These transactions are

undertaken

mainly with our Corporate Treasury Operations.

We have foreign exchange transaction

exposures related to our global

operating and financing

activities in

currencies other than the functional

currency in which our entities

operate. Specifically, we are exposed to

foreign exchange risk related to

future earnings, assets or liabilities

denominated in foreign currencies.

The

most significant currency exposures relate

to operations in the Eurozone area,

Sweden and Switzerland. In

addition, we are exposed to currency

risk associated with translating

our functional currency financial

statements into our reporting currency, which is the U.S.

dollar.

Our operating companies are responsible

for identifying their foreign currency

exposures and entering

into

intercompany derivative contracts

with Corporate Treasury Operations,

where legally possible, to hedge

their

exposures. Where local laws restrict

our operating companies

from entering into intercompany derivatives

with Corporate Treasury Operations, derivative

contracts are entered into locally

with third-party financial

institutions. The intercompany transactions

have the effect of transferring

the operating companies’ currency

risk to Corporate Treasury Operations, but create

no additional market risks on

a consolidated basis.

Corporate Treasury Operations then manages

this risk by entering into offsetting transactions

with third-party

financial institutions. According to our

policy, material net currency exposures are required

to be hedged and

are primarily hedged with forward

foreign exchange contracts. The

majority of the foreign exchange

hedge

instruments have, on average, a

maturity of less than twelve

months. Corporate Treasury Operations also

hedges currency risks arising from

monetary intercompany

balances, primarily loans receivable

from other

ABB companies.

150

At December 31, 2022 and 2021,

the net fair value of financial

instruments with exposure to foreign

currency

rate movements was an asset of

$1,355 million and $2,048

million, respectively. The potential loss in fair

value of such financial instruments

from a hypothetical 10 percent

move in foreign exchange

rates against

our position would be approximately

$511 million and $367 million for December 31, 2022 and

2021,

respectively. The analysis reflects the aggregate adverse

foreign exchange impact associated

with

transaction exposures, as well

as translation exposures where

appropriate. Our sensitivity analysis

assumes

a simultaneous shift in exchange rates

against our positions exposed

to foreign exchange risk and as

such

assumes an unlikely adverse case

scenario. Exchange rates rarely

move in the same direction.

Therefore,

the assumption of a simultaneous

shift may overstate the

impact of changing rates on assets

and liabilities

denominated in foreign currencies.

The underlying trade-related transaction

exposures of the industrial

companies are not included

in the quantitative analysis. If these

underlying transaction exposures

were

included, they would tend to have an

offsetting effect on the potential loss

in fair value detailed

above.

Interest Rate Risk

We are exposed to interest rate risk due

to our financing, investing, and

liquidity management activities.

Our

operating companies primarily

invest excess cash with, and receive

funding from, our Corporate

Treasury

Operations on an arm’s length basis. It is

our policy that the primary third-party

funding and investing

activities, as well as the monitoring

and management of the resulting

interest rate risk, are the

responsibility

of Corporate Treasury Operations. Corporate

Treasury Operations adjusts the duration

of the overall funding

portfolio through derivative instruments

in order to better match underlying

assets and liabilities, as well as

minimize the cost of capital.

At December 31, 2022 and 2021,

the net fair value of instruments

subject to Interest Rate Risk was

an asset

of $1,617 million and $2,320

million, respectively. The potential loss in fair value for

such instruments from a

hypothetical 100 basis points parallel

shift in interest rates against our position

(or a multiple of 100 basis

points where 100 basis points is less

than 10 percent of the interest rate)

would be approximately

$163 million and $270 million,

for December 31, 2022 and 2021,

respectively.

Equity Risk

Certain of our entities have equity

investments that expose

us to equity price risk. At December 31,

2022 and

2021, the net fair value of equity

risk sensitive instruments was an

asset of $15 million and

$29 million,

respectively. The potential loss in fair value of such

financial instruments from a hypothetical

10 percent move

in the underlying equity prices

against our position would

be approximately $4 million and

$13 million, for

December 31, 2022 and 2021, respectively.

Commodity Risk

We enter into commodity derivatives to

hedge certain of our raw material

exposures. At December 31, 2022

and 2021, the net fair value of commodity

derivatives was an asset of $1 million

and $1 million, respectively.

The potential loss in fair value

for such commodity hedging

derivatives from a hypothetical adverse

10 percent move against our position

in the underlying commodity

prices would be approximately

$10 million

and $11 million for December 31, 2022 and 2021, respectively. A portion

of our commodity derivatives

are

denominated in euro. The foreign

exchange risk arising on such contracts

has been excluded

from the

calculation of the potential loss in fair

value from a hypothetical

10 percent move in the underlying

commodity

prices as discussed above.

151

Item 12.

Description of Securities

Other Than Equity Securities

American Depositary Shares

Depositary fees payable upon

the issuance and cancellation

of ADSs are typically paid

to the depositary bank

by the brokers (on behalf of their

clients) receiving the newly-issued

ADSs from the depositary bank and by

the brokers (on behalf of their clients)

delivering the ADSs to the depositary

bank for cancellation. The

brokers in turn may charge these

transaction fees to their

clients.

Depositary fees payable in connection

with distributions of cash or securities

to ADS holders and the

depositary services fee are charged

by the depositary bank

to the holders of record of ADSs

as of the

applicable ADS record date. The depositary

fees payable for cash distributions

are generally deducted from

the cash being distributed. In the case

of distributions other than cash

(i.e., stock dividends, rights offerings),

the depositary bank charges the

applicable fee to the ADS record

date holders concurrent with the

distribution. In the case of ADSs

registered in the name of

the investor (whether certificated or

un-certificated

in direct registration), the depositary

bank sends invoices to

the applicable record date ADS holders.

In the

case of ADSs held in brokerage and

custodian accounts via the central

clearing and settlement system,

The

Depository Trust Company (DTC), the depositary

bank, generally collects

its fees through the systems

provided by DTC (whose nominee

is the registered holder of the

ADSs held in DTC) from the brokers

and

custodians holding ADSs in their

DTC accounts. The brokers

and custodians who hold their

clients’

ADSs in

DTC accounts in turn charge

their clients’

accounts the amount of

the fees paid to the depositary banks.

In the event of refusal to pay the depositary

fees, the depositary bank may, under the terms of the deposit

agreement, refuse the requested service

until payment is received

or may set-off the amount of the

depositary fees from any distribution

to be made to the ADS holder.

Depositary fees are as follows:

Depositary Service

Fee

Issuance of ADSs

Up to $5.00 per 100 ADSs (or fraction

thereof) issued.

Cancellation of ADSs

Up to $5.00 per 100 ADSs (or fraction

thereof) cancelled.

Distribution of cash dividends or other

cash

distribution

Up to $5.00 per 100 ADSs (or fraction

thereof) held.

Distribution of ADSs pursuant to

(i) stock

dividends or other free stock distributions,

(ii) an exercise of rights to purchase

additional ADSs

Up to $5.00 per 100 ADSs (or fraction

thereof) held.

Distribution of securities other than

ADSs or

rights to purchase additional ADSs

Up to $5.00 per 100 ADSs (or fraction

thereof) held.

Depositary service fee

Up to $5.00 per 100 ADSs (or fraction

thereof) held on the

applicable record date(s) established

by the Depositary.

Registration of ADS transfers

Up to $5.00 per 100 ADSs (or fraction

thereof) transferred.

Conversion of ADSs of one series

for ADSs of

another series

Up to $5.00 per 100 ADSs (or fraction

thereof) converted.

Depositary Payments

In 2022, we received reimbursements

from Citibank N.A., the Depositary

Bank of our ADS program, of

approximately $7 million to help

cover costs related to our ADS program.

Those costs, in addition to costs

associated with compliance with

U.S. securities laws, include

expenses such as listing fees, proxy expenses,

printing and distribution of reports,

and other investor relations-related

activities.

152

PART

Item 13.

Defaults, Dividend Arrearages

and Delinquencies

None

Item 14.

Material Modifications to the

Rights of Security Holders and

Use of Proceeds

None

Item 15.

Controls and Procedures

Disclosure controls and procedures

In designing and evaluating

our disclosure controls and procedures, management

recognizes that any

controls and procedures, no matter how

well designed and operated,

can provide only reasonable,

not

absolute, assurance of achieving

the desired control objectives.

In addition, the design of disclosure

controls

and procedures must reflect the

fact that there are resource constraints

and that management

is required to

apply judgment in evaluating the benefits

of possible controls

and procedures relative to

their costs.

Our Chief Executive Officer, Björn Rosengren, and Chief

Financial Officer, Timo Ihamuotila, with the

participation of key corporate senior

management and management

of key corporate functions, performed

evaluation of our disclosure controls

and procedures (as defined

in Rule 13a-15(e) of the Exchange

Act) as of

December 31, 2022. Based on that evaluation,

management, including

the Chief Executive Officer and Chief

Financial Officer, has concluded that, as of December

31, 2022, our disclosure controls and procedures

were

effective.

Management’s annual report on internal control over financial reporting

The Board of Directors and management

of the ABB Group are responsible

for establishing and maintaining

adequate internal control over

financial reporting as defined

in Rule 13a-15(f) of the Exchange

Act.

Because of its inherent limitations, internal

control over financial

reporting may not prevent or detect

misstatements. Also, projections of

any evaluation of effectiveness to future

periods are subject to the risk

that controls may become inadequate

because of changes in conditions,

or that the degree of compliance

with the policies and procedures

may deteriorate.

Management conducted an assessment

of the effectiveness of internal control

over financial reporting

as of

December 31, 2022. In making this assessment,

management used the criteria

established in Internal

Control—Integrated Framework issued

by the Committee of Sponsoring

Organizations of the Treadway

Commission (2013 framework). Based

on this assessment, management

has concluded that internal

control

over financial reporting was effective

as of December 31, 2022.

Report of the independent registered public accounting firm

KPMG’s opinion on the effectiveness of

the ABB Group’s internal control over

financial reporting as of

December 31, 2022, is included

in “Item 18. Financial Statements”.

Changes in internal control over financial reporting

There have been no changes in

our internal control over financial

reporting that occurred during the

period

covered by this annual report

that have materially affected, or are

reasonably likely to materially

affect, our

internal control over financial

reporting.

153

Item 16.

[Reserved]

Item 16A.

Audit Committee Financial

Expert

Our Board of Directors has determined

that David Meline, Gunnar Brock,

Geraldine Matchett and Satish

Pai,

who serve on our Finance, Audit and

Compliance Committee (FACC),

are independent for purposes

serving on the audit committee under

Rule 10A-3 of the Exchange

Act and the listing standards promulgated

by the New York Stock Exchange, and are audit committee financial

experts.

Item 16B.

Code of Ethics

Our Board of Directors as well as our

Chief Executive Officer, Chief Financial Officer, principal accounting

officer and persons performing similar

functions are bound to adhere

to our Code of Conduct, which applies

to all employees of all companies

in the ABB Group. Our Code

of Conduct is available on our website

in the

section “Corporate governance”

https://global.abb/group/en/about

. ABB intends to satisfy any applicable

disclosure requirement regarding

amendment to, or waiver from, a provision

of our Code of Conduct by

posting such information on our website

at the address and

location specified above.

Item 16C.

Principal Accountant Fees and

Services

The aggregate fees for services

rendered by

KPMG AG

Zurich, Switzerland

(PCAOB ID

3240

), along with

their respective affiliates for professional

services were as follows:

KPMG

($ in millions)

2022

2021

Audit Fees

36.6

34.5

Audit-Related Fees

8.6

13.0

Tax

Fees

0.4

0.5

Other Fees

0.1

Total

45.7

48.1

Audit Fees

Audit fees include the standard

audit work performed each fiscal

year necessary to allow the auditor

to issue

an opinion on our Consolidated

Financial Statements (including

the integrated audit of internal controls over

financial reporting) and to issue

an opinion on the local statutory

financial statements of ABB Ltd and

its

subsidiaries. Audit fees also include

services that can be provided

only by the ABB Group auditor such

pre-issuance reviews of quarterly

financial results (no such reviews

have been performed) and comfort letters

delivered to underwriters in connection

with debt and equity offerings. Included

in the 2022

audit fees were

approximately $2.8 million related

to audits

from 2021 and earlier,

which were not agreed until after we had

filed our annual report on Form 20-F with

the SEC on February 25, 2022. Included

in the 2021 audit fees

were approximately $4.7 million

related to audits from 2020

and earlier, which were not agreed until after we

had filed our annual report on

Form 20-F with the SEC on

February 26, 2021.

Audit-Related Fees

These services consisting primarily

of carve-out financial statement audits

in relation to transactional

activities, service organization

attestation procedures,

agreed-upon procedure

reports, accounting

consultations, audits of pension

and benefit plans, accounting

advisory services and other attest

services

related to financial reporting that are not

required by statute or regulation.

Tax Fees

Fees for tax services represent

primarily income tax and indirect

tax compliance services as well

as tax

advisory services.

154

All Other Fees

Fees for other services not included

in the above three categories.

Pre-Approval Procedures and

Policies

In accordance with the requirements

of the U.S. Sarbanes-Oxley Act

of 2002 and rules issued

by the SEC,

we utilize a procedure for the review

and pre-approval of any services

performed by KPMG. The procedure

requires

that all proposed engagements of KPMG

for audit and permitted non-audit

services are submitted to

the FACC for approval prior to the beginning

of any such services. In accordance

with this policy, all services

performed by and fees paid to KPMG

in 2022 and 2021 were approved

by the FACC.

Item 16D.

Exemptions from the

Listing Standards for Audit Committees

None

Item 16E.

Purchase of Equity Securities

by Issuer and Affiliated Purchasers

The following table sets out certain

information about purchases

of our own shares made by us

or on our

behalf or by affiliated purchasers:

Maximum approximate

Total number

value of shares that

Total number

Average price

of shares purchased

may yet be purchased

of shares

paid per share

as part of publicly

under the programs

2022

purchased

(1)

(in $)

announced programs

(2)(3)

($ in millions)

January 1-31

13,861,000

36.51

9,761,000

1,922

February 1-28

18,895,000

34.35

12,895,000

1,479

March 1-31

12,282,500

32.93

8,782,500

—

April 1-30

16,927,000

31.66

15,177,000

2,520

May 1-31

9,676,000

29.49

8,626,000

2,265

June 1-30

11,099,000

28.02

10,049,000

1,984

July 1-31

9,564,000

27.06

8,514,000

1,754

August 1-31

4,706,000

29.51

3,606,000

1,648

September 1-30

4,064,000

27.23

3,664,000

1,548

October 1-31

3,526,000

26.16

3,526,000

1,456

November 1-30

3,603,000

30.25

3,603,000

1,347

December 1-31

3,191,000

30.87

3,191,000

1,248

Total

111,394,500

91,394,500

(1)

In 2022,

20 million

shares were

bought outside

of the publicly

announced

programs.

These share

purchases

were made

through open-

market transactions.

(2)

In March

2021, ABB

announced

a follow-up

share buyback

program of

up to $4.3

billion. This

buyback program,

which was

launched

in April

2021, was

executed

on a second

trading

line on the

SIX Swiss

Exchange

and ran

until ABB’s

Annual General

Meeting (AGM)

in March

2022. At the

2022 AGM,

shareholders

approved

the cancellation

of 88 million

shares which

had been purchased

under the

share buyback

programs

launched

in July 2020

and April

2021. The

cancellation

was completed

in the second

quarter of

2022.

(3)

In March

2022, ABB

announced

a new share

buyback program

of up to

$3 billion.

This program,

which was

launched

in April 2022,

is being

executed

on a second

trading

line on the

SIX Swiss

Exchange and

is planned

to run until

the March

2023 AGM.

At the 2023

AGM, ABB

intends to

request

shareholder

approval to

cancel

the shares

purchased

through this

new program

as well

as those shares

purchased

under

the program

launched

in April

2021 that

were not

proposed for

cancellation

at the 2022

AGM.

Item 16F.

Change in Registrant’s Certifying Accountant

Not applicable.

155

Item 16G.

Corporate Governance

See “Item 6. Directors, Senior Management

and Employees—Other

governance information—Governance

differences from NYSE Standards”

for significant ways in which

ABB’s corporate governance practices differ

from the New York

Stock Exchange’s standards.

Item 16H.

Mine Safety Disclosure

Not applicable.

Item 16I.

Disclosure Regarding

Foreign Jurisdictions that

Prevent Inspections

Not applicable.

156

PART

III

Item 17.

Financial Statements

We have elected to provide financial

statements and the related information

pursuant to Item 18.

Item 18.

Financial Statements

See pages F-1 to F-85, which are incorporated

herein by reference. All

schedules are omitted as the required

information is inapplicable

or the information is presented in

the Consolidated Financial

Statements or notes

thereto.

157

Item 19.

Exhibits

1.1

Articles of Incorporation of ABB Ltd

as amended to date.

(1)

2.1

Form of Amendment No. 1 to the Amended and Restated Deposit Agreement, by and among ABB

Ltd, Citibank, N.A., as Depositary, and the holders and beneficial owners from time to time of the

American Depositary Shares issued thereunder (including as an exhibit the form of American

Depositary Receipt). Included as Exhibit (a)(i) to Form F-6 (File No. 333-253576) filed by ABB Ltd

on February 26, 2021.

2.2

Form of Amended and Restated Deposit Agreement, by and among ABB Ltd, Citibank, N.A., as

Depositary, and the holders and beneficial owners from time to time of the American Depositary

Shares issued thereunder (including as an exhibit the form of American Depositary Receipt).

Incorporated by reference to Exhibit (a) to Form F-6EF (File No. 333-147488) filed by ABB Ltd on

November 19, 2007.

2.3

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

2.4

Description of Securities

(1)

4.1

$2,000,000,000 Multicurrency Revolving Credit Agreement, dated December 16, 2019

, entered

into between ABB Ltd, certain subsidiaries

of ABB Ltd as borrowers, 19 banks as

mandated lead

arrangers, Citibank Europe PLC, UK

Branch, as facility agent

and euro swingline agent

and

Citibank N.A. as dollar swingline

agent. Incorporated by reference to Exhibit 4.1

to the Annual

Report on Form 20-F filed by ABB

Ltd on February 26,

2020.

4.2

Indenture dated as of May 8, 2012, among ABB Finance (USA) Inc., ABB and Deutsche Bank

Trust Company Americas, pursuant to which ABB has fully and unconditionally guaranteed

payment of principal, premium, if any, and interest in respect of any notes issued thereunder. On

May 8, 2012, ABB’s subsidiary, ABB Finance (USA) Inc., issued $500,000,000 aggregate principal

amount of 1.625% notes due 2017, $1,250,000,000 aggregate principal amount of 2.875% notes

due 2022 and $750,000,000 aggregate principal amount of 4.375% notes due 2042 under the

Indenture. Incorporated by reference to Exhibit 1 to the Form 6-K filed by ABB Ltd on March 9,

2018.

4.3

First Supplemental Indenture, dated as of May 8, 2012, among ABB Finance (USA) Inc., as Issuer,

ABB Ltd, as Guarantor, and Deutsche Bank Trust Company Americas, as Trustee. Incorporated by

reference to Exhibit 2 to the Form 6-K filed by ABB Ltd on March 9, 2018.

4.4

Indenture dated as of April 3, 2018, among ABB Finance (USA) Inc., ABB Ltd. and Deutsche Bank

Trust Company Americas, pursuant to which ABB has fully and unconditionally guaranteed

payment of principal, premium, if any, and interest in respect of any notes issued thereunder. On

March 26, 2018, ABB’s subsidiary, ABB Finance (USA) Inc., issued $300,000,000 aggregate

principal amount of 2.8% notes due 2020, $450,000,000 aggregate principal amount of

3.375% notes due 2023 and $750,000,000 aggregate principal amount of 3.8% notes due 2028

under the Indenture. Incorporated by reference to Exhibit 4.1 to the Form 6-K filed by ABB Ltd on

April 3, 2018.

4.5

First Supplemental Indenture dated April 3, 2018, among ABB Finance (USA) Inc., ABB Ltd and

Deutsche Bank Trust Company Americas, as Trustee (including the form of the 2.800% Notes due

2020, the form of the 3.375% Notes due 2023 and the form of the 3.800% Notes due 2028).

Incorporated by reference to Exhibit 4.2 to the Form 6-K filed by ABB Ltd on April 3, 2018.

4.6

Sale and Purchase Agreement dated December 17, 2018, between ABB Ltd (the Seller) and

Hitachi Ltd (the Purchaser) for the sale and purchase of 80.1% of the shares in ABB Management

Holding AG (or such other entity as agreed between the Seller and the Purchaser)

. Incorporated by

reference to Exhibit 4.6

to the Form 20-F filed by ABB

Ltd on March 28, 2019.

4.7

Amendment and restatement agreement dated February 16, 2023

, between ABB Ltd, certain

subsidiaries of ABB Ltd as original

borrowers, the mandated lead

arrangers,

the original lenders,

Citibank Europe PLC, UK Branch, as

facility agent and euro swingline

agent and Citibank, N.A. as

dollar swingline agent,

relating to the $2,000,000,000

Multicurrency Revolving Credit agreement

dated December 16, 2019 (incorporated

by reference to Exhibit 4.1 above).

(1)

8.1

Subsidiaries of ABB Ltd

as of December 31, 2022.

(1)

12.1

Certification of the chief executive officer pursuant to Section 302 of the Sarbanes Oxley Act of

2002.

(1)

158

12.2

Certification of the chief financial officer pursuant to Section 302 of the Sarbanes Oxley Act of

2002.

(1)

13.1

Certification by the chief executive officer of ABB Ltd pursuant to 18 U.S.C. Section 1350, as

adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

13.2

Certification by the chief financial officer of ABB Ltd pursuant to 18 U.S.C. Section 1350, as

adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

15.1

Consent of KPMG AG.

(1)

17.1

List of Subsidiary Issuers and Guarantors of Registered Securities

(1)

101.INS

XBRL Instance Document - the instance

document does not appear

in the Interactive Data

File

because its XBRL tags are embedded

within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data

File (formatted as inline XBRL

and contained in Exhibit 101)

(1)

This document is being furnished

in accordance with SEC Release

Nos. 33-8212 and

34-74551.

(1)

Filed herewith

159

SIGNATURES

The registrant hereby certifies

that it meets all of the requirements

for filing on Form 20-F and that it

has duly caused and authorized

the undersigned to sign this Annual

Report

on its behalf.

ABB LTD

By:

/s/ T

IMO

HAMUOTILA

Date: February 23, 2023

Name:

Timo Ihamuotila

Title:

Executive Vice President and

Chief Financial Officer

By:

/s/ R

ICHARD

ROWN

Date: February 23, 2023

Name:

Richard A. Brown

Title:

Group Senior Vice President and

Chief Counsel Corporate & Finance

F-1

—

Index to Consolidated Financial Statements

and Schedules

Consolidated Financial Statements:

Report of management on internal control

over financial reporting

F-2

Reports of Independent Registered

Public Accounting Firm

F-3

Consolidated Income Statements

for the years ended December

31, 2022, 2021 and 2020

F-6

Consolidated Statements of Comprehensive

Income for the years ended December

31, 2022,

2021 and 2020

F-7

Consolidated Balance

Sheets as of December 31, 2022 and 2021

F-8

Consolidated Statements of Cash

Flows for the years ended

December 31, 2022, 2021 and 2020

F-9

Consolidated Statements of Changes

in Stockholders’

Equity for the years ended December

31,

2022, 2021 and 2020

F-10

Notes to the Consolidated Financial

Statements

F-11

F-2

Report of management on internal control over financial reporting

The Board of Directors and Management

of ABB Ltd and its consolidated

subsidiaries (“ABB”) are

responsible for establishing

and maintaining adequate internal

control over financial reporting. ABB’s internal

control over financial reporting

is designed to provide reasonable

assurance regarding the reliability

financial reporting and the preparation

and fair presentation of the published

Consolidated Financial

Statements in accordance with U.S. generally

accepted accounting principles.

Because of its inherent limitations, internal

control over financial

reporting may not prevent or detect

misstatements. Also, projections of

any evaluation of effectiveness to future

periods are subject to the risk

that controls may become inadequate

because of changes in conditions,

or that the degree of compliance

with ABB’s policies and procedures may deteriorate.

Management conducted an assessment

of the effectiveness of internal control

over financial reporting based

on the criteria established in Internal

Control—Integrated Framework

issued by the Committee of

Sponsoring

Organizations of the Treadway Commission

(2013 framework). Based on

this assessment, management

has

concluded that ABB’s internal control

over financial reporting was effective

as of December 31, 2022.

KPMG AG,

the independent registered

public accounting firm who audited

the Company’s consolidated

financial statements included in

this Form 20-F, has issued an opinion on the effectiveness of ABB’s internal

control over financial reporting

as of December 31, 2022,

which is included on page

F-5 of this Annual

Report.

/s/ B

JÖRN

OSENGREN

Chief Executive Officer

/s/ T

IMO

HAMUOTILA

Chief Financial Officer

Zurich, February 23, 2023

F-3

Report of Independent Registered

Public Accounting Firm

the Board of Directors and Stockholders of ABB Ltd

Opinion on the Consolidated

Financial Statements

We have audited the accompanying

consolidated balance sheets of

ABB Ltd and its subsidiaries

(the

Company) as of December 31, 2022

and 2021, the related consolidated

income statements, statements of

comprehensive income, cash flows and

changes in stockholders’

equity for each of the years in the

three-year period ended December

31, 2022, and the related notes (collectively, the consolidated

financial

statements). In our opinion, the consolidated

financial statements present fairly, in all material respects,

the

financial position of the Company

as of December 31,

2022 and 2021, and the results of

its operations and its

cash flows for each of the years

in the three-year period ended

December 31, 2022, in conformity with

U.S.

generally accepted accounting

principles.

We also have audited, in accordance with

the standards of the Public Company

Accounting Oversight Board

(United States) (PCAOB), the Company’s

internal control over

financial reporting as of December 31,

2022,

based on criteria established

in Internal Control – Integrated Framework

(2013) issued by the Committee

Sponsoring Organizations of the

Treadway Commission, and our report dated

February 23, 2023, expressed

an unqualified opinion

on the effectiveness of the Company’s internal

control over financial reporting.

Basis for Opinion

These consolidated financial

statements are the responsibility

of the Company’s Board of Directors and

management. Our responsibility

is to express an opinion on

these consolidated financial

statements based on

our audits. We are a public accounting

firm registered with the PCAOB

and are required to be independent

with respect to the Company in accordance

with the U.S. federal securities

laws and the applicable

rules and

regulations of the Securities and Exchange

Commission and the PCAOB.

We conducted our audits in accordance

with the standards of the

PCAOB. Those standards require

that we

plan and perform the audit to obtain

reasonable assurance about

whether the consolidated financial

statements are free of material

misstatement, whether due

to error or fraud. Our audits included

performing

procedures to assess the risks of

material misstatement of the

consolidated financial

statements, whether

due to error or fraud, and performing

procedures that respond

to those risks. Such procedures included

examining, on a test basis, evidence

regarding the amounts and

disclosures in the consolidated

financial

statements. Our audits also included

evaluating the accounting

principles used and significant

estimates

made by management, as well as evaluating

the overall presentation of the consolidated

financial

statements. We believe that our audits

provide a reasonable

basis for our opinion.

Critical Audit Matters

The critical audit matters communicated

below are matters arising

from the current period audit

of the

consolidated financial

statements that were communicated

or required to be communicated

to the audit

committee and that: (1) relate to accounts

or disclosures that are material to

the consolidated financial

statements and (2) involved our especially

challenging, subjective, or complex

judgments. The

communication of critical audit

matters does not alter in any way our

opinion on the consolidated

financial

statements, taken as a whole, and we

are not, by communicating

the critical audit matters below, providing

separate opinions on the critical audit

matters or on the accounts or disclosures

to which they relate.

Revenue recognition for certain

long-term fixed price contracts

using the percentage-of-completion

method

As discussed in Note 2 to the consolidated

financial statements, revenues from

the sale of customized

products, including long-term fixed price

contracts for integrated

automation and electrification systems

and

solutions are generally recognized

on an over time basis using the percentage

of completion method of

accounting. For the year ended December

31, 2022, the Company

reported $24,471 million of revenue

from

sales of products, a portion of which

related to long-term fixed price contracts.

F-4

We identified the evaluation of estimated

costs to complete related

to revenue recognition of certain

long-

term fixed price contracts using the percentage

of-completion method

of accounting as a critical audit matter.

In particular, a high degree of subjective auditor

judgment was required to evaluate

the Company’s estimates

regarding the amount of future direct

materials, labor and subcontract

costs, and indirect costs to

complete

the contracts.

The following are the primary procedures

we performed to address

this critical audit matter. We evaluated the

design and tested the operating effectiveness

of certain internal controls

related to the Company’s revenue

process including controls over

the development of estimates regarding

the amount of future direct materials,

labor and subcontract costs, and indirect

costs. We assessed the Company’s historical

ability to accurately

estimate costs to complete by comparing

historical estimates to actual

results for a selection of contracts.

evaluated the estimate of remaining

costs to be incurred for a selection

of contracts by assessing

progress to

date and the nature and complexity

of work to be performed

through interviewing project

managers and

inspecting correspondence,

if any, between the Company and the customer and/or subcontractors.

Valuation of unrecognized tax benefits related

to transfer pricing

As discussed in Note 2 to the consolidated

financial statements, the Company operates

across multiple tax

jurisdictions, is exposed to numerous

tax laws and is regularly subject

to tax audits by local tax authorities.

discussed in Note 16, the Company

reported total unrecognized

tax benefits of $1,350 million, a portion

which related to transfer pricing.

We identified the valuation of unrecognized

tax benefits related to transfer pricing

as a critical audit matter. A

high degree of subjective auditor

judgment and specialized skills

and knowledge was required

in assessing

the Company’s interpretation of international

tax practice and developments

in relation to intragroup charges

and intragroup sales of goods and

services and the Company’s ability

to estimate the resolution of the

tax

positions.

The following are the primary procedures

we performed to address

this critical audit matter. We evaluated the

design and tested the operating effectiveness

of certain internal controls

related to the Company’s tax

process including controls related

to the Company’s interpretation of international

tax practice and

developments in relation to intragroup

charges and intragroup

sale of goods and services and the estimate

the related unrecognized tax benefits.

We tested the identified costs

that have a higher likelihood

of being

challenged by tax authorities associated

with intragroup arrangements

and potential price adjustments

for

intragroup sales of goods and services.

We involved tax professionals with specialized

skills and knowledge,

who assisted in evaluating (1) the Company’s

historical ability to accurately

estimate the unrecognized

tax

benefits related to transfer pricing by

comparing historical

tax positions to subsequent settlements

(2) the

Company’s transfer pricing documentation

and methodology for compliance

with applicable laws and

regulations by assessing the documentation

and relevant agreements, (3) the

impact of new information or

changes in international

tax practice and developments on historical

tax positions, and (4) developing

independent expectation of the unrecognized

tax benefits estimate relating to current

year tax positions in

connection with the Company’s intragroup

charges and intragroup sales

of goods and services and

comparing the results to the Company’s assessment.

/s/ KPMG AG

We have served as the Company’s auditor

since 2018.

Zurich, Switzerland

February 23, 2023

F-5

Report of Independent Registered

Public Accounting Firm

the Board of Directors and Stockholders of ABB Ltd

Opinion on Internal Control Over

Financial Reporting

We have audited ABB Ltd and its subsidiaries’

(the Company) internal control

over financial reporting as of

December 31, 2022, based on criteria

established in Internal

Control – Integrated Framework (2013)

issued

by the Committee of Sponsoring

Organizations of the Treadway Commission

(COSO). In our opinion, the

Company maintained, in all

material respects, effective internal

control over financial reporting

as of

December 31, 2022, based on criteria

established in Internal

Control – Integrated Framework (2013)

issued

by COSO.

We also have audited, in accordance with

the standards of the Public Company

Accounting Oversight Board

(United States) (PCAOB), the

consolidated balance

sheets of the Company as of December 31,

2022 and

2021, the related consolidated

income statements, statements of

comprehensive income, cash

flows and

changes in stockholders’ equity

for each of the years in the three-year

period ended December

31, 2022, and

the related notes (collectively, the consolidated financial

statements), and our report dated

February 23,

2023, expressed an unqualified

opinion on those consolidated financial

statements.

Basis for Opinion

The Company’s Board of Directors and

management is responsible for maintaining

effective internal control

over financial reporting and

for its assessment of the effectiveness of

internal control over financial

reporting,

included in the accompanying

Report of management on internal

control over financial reporting. Our

responsibility is to express an opinion

on the Company’s internal control over

financial reporting based

on our

audit. We are a public accounting firm

registered with the PCAOB and

are required to be independent

with

respect to the Company in accordance

with the U.S. federal

securities laws and the applicable

rules and

regulations of the Securities and Exchange

Commission and the PCAOB.

We conducted our audit in accordance

with the standards of the PCAOB.

Those standards require that we

plan and perform the audit to obtain

reasonable assurance about

whether effective internal control over

financial reporting was maintained

in all material respects. Our audit of internal

control over financial reporting

included obtaining an understanding

of internal control over financial reporting,

assessing the risk that a

material weakness exists, and testing

and evaluating the design

and operating effectiveness of internal

control based on the assessed risk.

Our audit also included

performing such other procedures as

considered necessary in the circumstances.

We believe that our audit provides a reasonable

basis for our

opinion.

Definition and Limitations

of Internal Control Over Financial

Reporting

A company’s internal control over financial

reporting is a process designed

to provide reasonable assurance

regarding the reliability of financial

reporting and the preparation

of financial statements for external

purposes

in accordance with generally

accepted accounting principles.

A company’s internal control over financial

reporting includes those policies

and procedures that (1) pertain

to the maintenance of records

that, in

reasonable detail, accurately

and fairly reflect the transactions

and dispositions of the assets of

the company;

(2) provide reasonable assurance

that transactions are recorded

as necessary to permit preparation

financial statements in accordance with

generally accepted accounting

principles, and that receipts and

expenditures of the company are

being made only in accordance

with authorizations of management

and

directors of the company; and (3) provide

reasonable assurance regarding

prevention or timely detection of

unauthorized acquisition,

use, or disposition of the company’s

assets that could have a material

effect on the

financial statements.

Because of its inherent limitations, internal

control over financial

reporting may not prevent or detect

misstatements. Also, projections of

any evaluation of effectiveness to future

periods are subject to the risk

that controls may become inadequate

because of changes in conditions,

or that the degree of compliance

with the policies or procedures may deteriorate.

/s/ KPMG AG

Zurich, Switzerland

February 23, 2023

F-6

―

ABB Ltd Consolidated Income Statements

Year ended December

31 ($ in millions, except per

share data in $)

2022

2021

2020

Sales of products

24,471

23,745

21,214

Sales of services and other

4,975

5,200

4,920

Total revenues

29,446

28,945

26,134

Cost of sales of products

(16,804)

(16,364)

(15,229)

Cost of services and other

(2,932)

(3,114)

(3,027)

Total cost of sales

(19,736)

(19,478)

(18,256)

Gross profit

9,710

9,467

7,878

Selling, general and administrative

expenses

(5,132)

(5,162)

(4,895)

Non-order related research

and development expenses

(1,166)

(1,219)

(1,127)

Impairment of goodwill

—

(311)

Other income (expense),

net

(75)

2,632

Income from operations

3,337

5,718

1,593

Interest and dividend income

Interest and other finance

expense

(130)

(148)

(240)

Losses from extinguishment

of debt

—

(162)

Non-operational pension

(cost) credit

115

166

(401)

Income from continuing

operations before

taxes

3,394

5,787

841

Income tax expense

(757)

(1,057)

(496)

Income from continuing

operations, net of

tax

2,637

4,730

345

Income (loss) from discontinued

operations, net of

tax

(43)

(80)

4,860

Net income

2,594

4,650

5,205

Net income attributable

to noncontrolling

interests and redeemable

noncontrolling interests

(119)

(104)

(59)

Net income attributable

to ABB

2,475

4,546

5,146

Amounts attributable

to ABB shareholders:

Income from continuing

operations, net of

tax

2,517

4,625

294

Income (loss) from discontinued

operations, net of

tax

(42)

(79)

4,852

Net income

2,475

4,546

5,146

Basic earnings per share

attributable to ABB

shareholders:

Income from continuing

operations, net of

tax

1.33

2.31

0.14

Income (loss) from discontinued

operations, net of

tax

(0.02)

(0.04)

2.30

Net income

1.30

2.27

2.44

Diluted earnings per share

attributable to ABB

shareholders:

Income from continuing

operations, net of

tax

1.32

2.29

0.14

Income (loss) from discontinued

operations, net of

tax

(0.02)

(0.04)

2.29

Net income

1.30

2.25

2.43

Weighted-average number

of shares outstanding

(in millions) used to

compute:

Basic earnings per share

attributable to ABB

shareholders

1,899

2,001

2,111

Diluted earnings per share

attributable to ABB

shareholders

1,910

2,019

2,119

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

provided.

See accompanying Notes to the

Consolidated Financial Statements

F-7

―

ABB Ltd Consolidated Statements of Comprehensive Income

Year ended December

31 ($ in millions)

2022

2021

2020

Net income

2,594

4,650

5,205

Other comprehensive

income (loss), net of

tax:

Foreign currency translation

adjustments:

Foreign currency translation

adjustments

(685)

(521)

498

Net loss on complete

or substantially complete

liquidations of foreign subsidiaries

—

Changes attributable

to divestments

(9)

519

Foreign currency translation

adjustments

(639)

(530)

1,017

Available-for-sale securities:

Net unrealized gains (losses)

arising during the year

(23)

(10)

Reclassification adjustments

for net (gains) losses

included in net income

(5)

(14)

Changes attributable

to divestments

—

(3)

Unrealized gains (losses)

on available-for-sale

securities

(21)

(15)

Pension and other postretirement

plans:

Prior service credits

arising during the year

—

Net actuarial gains

(losses) arising during

the year

226

411

(200)

Amortization of prior service

credit included in net

income

(16)

(14)

(11)

Amortization of net actuarial

loss included in net

income

Net losses from settlements

and curtailments included

in net income

518

Changes attributable

to divestments

(8)

(6)

151

Pension and other postretirement

plan adjustments

255

467

589

Derivative instruments

and hedges:

Net unrealized gains (losses)

arising during the year

(12)

Reclassification adjustments

for net (gains) losses

included in net income

(13)

—

Changes in derivative

instruments and hedges

—

(5)

Total other comprehensive income

(loss), net of tax

(405)

(83)

1,615

Total comprehensive income, net

of tax

2,189

4,567

6,820

Total

comprehensive

(income) loss attributable

to noncontrolling interests

and

redeemable noncontrolling

interests, net of

tax

(87)

(108)

(86)

Total comprehensive income attributable

to ABB, net of tax

2,102

4,459

6,734

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

provided.

See accompanying Notes to the

Consolidated Financial Statements

F-8

―

ABB Ltd Consolidated Balance Sheets

December 31 ($ in millions,

except share data)

2022

2021

Cash and equivalents

4,156

4,159

Restricted cash

Marketable securities and

short-term investments

725

1,170

Receivables, net

6,858

6,551

Contract assets

954

990

Inventories, net

6,028

4,880

Prepaid expenses

230

206

Other current assets

505

573

Current assets held for

sale and in discontinued

operations

136

Total current assets

19,570

18,695

Restricted cash, non-current

—

300

Property, plant and equipment, net

3,911

4,045

Operating lease right-of-use

assets

841

895

Investments in equity-accounted

companies

130

1,670

Prepaid pension and other

employee benefits

916

892

Intangible assets, net

1,406

1,561

Goodwill

10,511

10,482

Deferred taxes

1,396

1,177

Other non-current assets

467

543

Total assets

39,148

40,260

Accounts payable, trade

4,904

4,921

Contract liabilities

2,216

1,894

Short-term debt and current

maturities of long-term

debt

2,535

1,384

Current operating leases

220

230

Provisions for warranties

1,028

1,005

Other provisions

1,171

1,386

Other current liabilities

4,323

4,367

Current liabilities held

for sale and in discontinued

operations

132

381

Total current liabilities

16,529

15,568

Long-term debt

5,143

4,177

Non-current operating leases

651

689

Pension and other employee

benefits

719

1,025

Deferred taxes

729

685

Other non-current liabilities

2,085

2,116

Non-current liabilities

held for sale and in discontinued

operations

Total liabilities

25,876

24,303

Commitments and contingencies

nil

Redeemable noncontrolling

interest

—

Stockholders’ equity:

Common stock, CHF

0.12

par value

(

1,965

million and

2,053

million shares issued

at December 31, 2022

and 2021, respectively)

171

178

Additional paid-in capital

141

Retained earnings

20,082

22,477

Accumulated other comprehensive

loss

(4,556)

(4,088)

Treasury stock, at cost

(

100

million and

million shares at December

31, 2022 and

2021, respectively)

(3,061)

(3,010)

Total ABB stockholders’ equity

12,777

15,579

Noncontrolling interests

410

378

Total stockholders’ equity

13,187

15,957

Total liabilities and stockholders’

equity

39,148

40,260

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

provided.

See accompanying Notes to the

Consolidated Financial Statements

F-9

―

ABB Ltd Consolidated Statements of Cash Flows

Year ended December

31 ($ in millions)

2022

2021

2020

Operating activities:

Net income

2,594

4,650

5,205

Loss (income) from discontinued operations, net of tax

(4,860)

Adjustments to reconcile net income to net cash provided by operating

activities:

Depreciation and amortization

814

893

915

Impairment of goodwill

—

311

Changes in fair values of investments

(33)

(123)

(99)

Pension and other employee benefits

(125)

(216)

Deferred taxes

(344)

(289)

(280)

Losses from extinguishment of debt

—

162

Loss from equity-accounted companies

102

100

Net loss (gain) from derivatives and foreign exchange

(23)

(2)

Net gain from sale of property,

plant and equipment

(84)

(38)

(37)

Net loss (gain) from sale of businesses

(2,193)

Other

117

Changes in operating assets and liabilities:

Trade receivables, net

(831)

(142)

(100)

Contract assets and liabilities

416

186

Inventories, net

(1,599)

(771)

196

Accounts payable, trade

395

659

(13)

Accrued liabilities

136

454

(92)

Provisions, net

(70)

(48)

243

Income taxes payable and receivable

(94)

117

(76)

Other assets and liabilities, net

(36)

Net cash provided by operating activities — continuing

operations

1,334

3,338

1,875

Net cash used in operating activities — discontinued operations

(47)

(8)

(182)

Net cash provided by operating activities

1,287

3,330

1,693

Investing activities:

Purchases of investments

(321)

(1,528)

(5,933)

Purchases of property, plant and

equipment and intangible assets

(762)

(820)

(694)

Acquisition of businesses (net of cash acquired) and increases

in cost-

and equity-accounted companies

(288)

(241)

(121)

Proceeds from sales of investments

697

2,272

4,341

Proceeds from maturity of investments

Proceeds from sales of property,

plant and equipment

127

114

Proceeds from sales of businesses (net of transaction costs

and cash disposed) and

cost-

and equity-accounted companies

1,541

2,958

(136)

Net cash from settlement of foreign currency derivatives

(166)

(121)

138

Changes in loans receivable, net

320

(19)

(3)

Other investing activities

(14)

(4)

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

operations

1,207

2,671

(2,272)

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

operations

(226)

(364)

9,032

Net cash provided by investing activities

981

2,307

6,760

Financing activities:

Net changes in debt with maturities of 90 days or less

1,366

(83)

(587)

Increase in debt

3,849

1,400

343

Repayment of debt

(2,703)

(1,538)

(3,459)

Delivery of shares

394

826

412

Purchase of treasury stock

(3,553)

(3,708)

(3,048)

Dividends paid

(1,698)

(1,726)

(1,736)

Cash associated with the spin-off of the Turbocharging

Division

(172)

—

Dividends paid to noncontrolling shareholders

(99)

(98)

(82)

Proceeds from issuance of subsidiary shares

216

—

Other financing activities

(41)

(49)

Net cash used in financing activities — continuing

operations

(2,394)

(4,968)

(8,206)

Net cash provided by financing activities — discontinued

operations

—

Net cash used in financing activities

(2,394)

(4,968)

(8,175)

Effects of exchange rate changes on cash and equivalents

and restricted cash

(189)

(81)

Net change in cash and equivalents and restricted cash

(315)

588

357

Cash and equivalents and restricted cash, beginning of period

4,489

3,901

3,544

Cash and equivalents and restricted cash, end of period

4,174

4,489

3,901

Supplementary disclosure of cash flow information:

Interest paid

132

189

Income taxes paid

1,188

1,292

905

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

See accompanying Notes to the

Consolidated Financial Statements

F-10

―

ABB Ltd Consolidated Statements of Changes in Stockholders’ Equity

Accumulated

Additional

other

Total ABB

Non-

Total

Years ended December 31, 2022, 2021 and 2020

Common

paid-in

Retained

comprehensive

Treasury

stockholders’

controlling

stockholders’

($ in millions)

stock

capital

earnings

loss

stock

equity

interests

equity

Balance at January 1, 2020

188

19,640

(5,590)

(785)

13,526

454

13,980

Adoption of accounting standard update

(82)

(9)

(91)

Net income

5,146

5,205

Foreign currency translation

adjustments, net of tax

990

1,017

Effect of change in fair value of

available-for-sale securities, net of tax

Unrecognized income (expense)

related to pensions and other

postretirement plans, net of tax

589

Change in derivative instruments

and hedges, net of tax

Changes in noncontrolling interests

(16)

Changes in noncontrolling interests

in connection with divestments

—

(138)

Dividends to noncontrolling shareholders

—

(98)

Dividends to shareholders

(1,758)

Share-based payment arrangements

Purchase of treasury stock

(3,181)

Delivery of shares

(24)

436

412

Call options

(3)

Balance at December 31, 2020

188

22,946

(4,002)

(3,530)

15,685

314

15,999

Net income

4,546

104

4,650

Foreign currency translation

adjustments, net of tax

(534)

(530)

Effect of change in fair value of

available-for-sale securities, net of tax

(15)

Unrecognized income (expense)

related to pensions and other

postretirement plans, net of tax

467

Change in derivative instruments

and hedges, net of tax

(5)

Changes in noncontrolling interests

(37)

(20)

(57)

(2)

Dividends to noncontrolling shareholders

—

(98)

Dividends to shareholders

(1,730)

Cancellation of treasury shares

(10)

(17)

(3,130)

3,157

—

Share-based payment arrangements

Purchase of treasury stock

(3,682)

Delivery of shares

(84)

(136)

1,046

826

Other

Balance at December 31, 2021

178

22,477

(4,088)

(3,010)

15,579

378

15,957

Net income

(1)

2,475

124

2,599

Foreign currency translation

adjustments, net of tax

(608)

(31)

(639)

Effect of change in fair value of

available-for-sale securities, net of tax

(21)

Unrecognized income (expense)

related to pensions and other

postretirement plans, net of tax

256

(1)

255

Change in derivative instruments

and hedges, net of tax

—

Issuance of subsidiary shares

120

206

Other changes in noncontrolling interests

(34)

(24)

Dividends to noncontrolling shareholders

—

(100)

Dividends to shareholders

(1,700)

Spin-off of the Turbocharging Division

(177)

(95)

(272)

(12)

(284)

Cancellation of treasury shares

(8)

(4)

(2,864)

2,876

—

Share-based payment arrangements

Purchase of treasury stock

(3,502)

Delivery of shares

(51)

(130)

575

394

Other

Balance at December 31, 2022

171

141

20,082

(4,556)

(3,061)

12,777

410

13,187

(1) Amounts attributable to noncontrolling interests in 2022 exclude net losses of $

million related to redeemable noncontrolling interests, which are reported in the mezzanine

equity section on

the Consolidated Balance Sheets. See Note 4 for details.

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

See accompanying Notes to the Consolidated Financial Statements

F-11

—

Note 1

The Company

ABB Ltd and its subsidiaries (collectively, the Company) together

form a technology leader in

electrification

and automation, enabling a more

sustainable and resource-efficient future.

The Company’s solutions connect

engineering know-how and

software to optimize how things

are manufactured, moved, powered

and

operated.

—

Note 2

Significant accounting policies

The following is a summary of

significant accounting policies

followed in the preparation

of these

Consolidated Financial

Statements.

Basis of presentation

The Consolidated Financial

Statements are prepared in accordance

with United States of America

(United

States or U.S.) generally accepted

accounting principles (U.S.

GAAP) and are presented in United

States

dollars ($ or USD) unless otherwise stated.

Due to rounding, numbers

presented may not add to the totals

provided. The par value of capital

stock is denominated in Swiss francs

Scope of consolidation

The Consolidated Financial

Statements include the accounts of ABB Ltd

and companies which are directly

indirectly controlled by ABB Ltd. Additionally, the Company

consolidates variable interest

entities if it has

determined that it is the primary beneficiary. Intercompany

accounts and transactions are eliminated.

Investments in joint ventures and affiliated

companies in which the Company

has the ability to exercise

significant influence over operating

and financial policies (generally

through direct or indirect ownership

percent to

percent of the voting rights),

are recorded in the Consolidated

Financial Statements using

the equity method of accounting.

Translation of foreign currencies and foreign

exchange transactions

The functional currency for most of

the Company’s subsidiaries

is the applicable local currency. The

translation from the applicable

functional currencies into the Company’s

reporting currency is performed

for

balance sheet accounts using exchange

rates in effect at the balance sheet date

and for income statement

accounts using average exchange

rates prevailing during the year. The resulting translation

adjustments are

excluded from the determination

of earnings and are recognized

in “Accumulated other comprehensive

loss”

until the subsidiary is sold, substantially

liquidated or evaluated

for impairment in anticipation of disposal.

Foreign currency exchange gains

and losses, such as those resulting

from foreign currency denominated

receivables or payables, are included

in the determination of earnings, except as

they relate to intercompany

loans that are equity

‑

like in nature with no reasonable

expectation of repayment, which are

recognized in

“Accumulated other comprehensive

loss”. Exchange gains

and losses are recognized in earnings

and

classified in the line item consistent

with the underlying transaction

or item.

Discontinued operations

The Company reports a disposal,

or planned disposal, of a component

or a group of components

as a

discontinued operation

if the disposal represents a strategic

shift that has or will have a major

effect on the

Company’s operations and financial

results.

A strategic shift could include

a disposal of a major geographical

area, a major line of business or

other major parts of the Company. A component may be

a reportable

segment or an operating segment,

a reporting unit, a subsidiary, or an asset group.

F-12

The assets and liabilities

of a component reported as a

discontinued operation

are presented separately as

held for sale and in discontinued

operations in the Company’s Consolidated

Balance Sheets.

Interest expense that is not directly

attributable to or related

to the Company’s continuing business

discontinued business is allocated

to discontinued operations based on

the ratio of net assets to be sold less

debt that is required to be paid as a result

of the planned disposal

transaction to the sum of total net assets

the Company plus consolidated

debt. General corporate overhead

is not allocated to discontinued operations

(see Note 3).

Operating cycle

A portion of the Company’s activities

(primarily long

‑

term system integration activities)

has an operating cycle

that exceeds

one year

. For classification of current

assets and liabilities related

to such activities, the

Company elected to use the duration

of the individual contracts as

its operating cycle. Accordingly, there are

accounts receivable, inventories

and provisions related to

these contracts which will not be realized

within

one year

that have been classified as current.

Use of estimates

The preparation of financial statements

in conformity with U.S. GAAP

requires management to make

assumptions and estimates that

directly affect the amounts reported in

the Consolidated Financial

Statements and the accompanying

Notes. These accounting

assumptions and estimates include:

•

estimates to determine valuation

allowances for deferred

tax assets and amounts recorded

for

unrecognized tax benefits,

•

estimates related to credit losses

expected to occur over the remaining

life of financial assets

such as trade and other receivables,

loans and other instruments,

•

estimates used to record expected

costs for employee severance

in connection with restructuring

programs,

•

estimates of loss contingencies associated

with litigation or threatened

litigation and other claims

and inquiries, environmental

damages, product warranties, self

‑

insurance reserves, regulatory

and other proceedings,

•

assumptions and projections, principally

related to future material, labor and

project

‑

overhead costs, used in determining

the percentage

‑

completion on projects where revenue

recognized over time, as well as

the amount of variable consideration

the Company expects to

be entitled to,

•

assumptions used in the calculation

of pension and postretirement

benefits and the fair value

pension plan assets,

•

assumptions used in determining

inventory obsolescence and

net realizable value,

•

growth rates, discount rates and

other assumptions used

to determine impairment of long

‑

lived

assets and in testing goodwill

for impairment,

•

estimates and assumptions used

in determining the fair values

of assets and liabilities assumed

in business combinations, and

•

estimates and assumptions used

in determining the initial

fair value of retained noncontrolling

interests and certain obligations

in connection with divestments.

The actual results and outcomes

may differ from the Company’s estimates and assumptions.

F-13

Cash and equivalents

Cash and equivalents include

highly liquid investments with maturities of

three months or less at the date

acquisition.

Currency and other local regulatory

limitations related to the transfer

of funds exist in a number of countries

where the Company operates.

Funds, other than regular

dividends, fees or loan repayments,

cannot be

readily transferred abroad from

these countries and are therefore

deposited and used for working

capital

needs locally. These funds are included

in cash and equivalents

as they are not considered restricted.

Cash and equivalents that are subject

to contractual restrictions or other

legal obligations and are

not readily

available are classified

as “Restricted cash”.

Marketable securities and short

‑

term investments

Management determines the appropriate

classification of held

‑

maturity and available

‑

for

‑

sale debt

securities at the time of purchase.

Debt securities are classified

as held

‑

maturity when the Company has

the positive intent and ability to hold

the securities to maturity. Held

‑

maturity debt securities are carried

amortized cost, adjusted for accretion

of discounts or amortization

of premiums to maturity computed

under

the effective interest method. Such accretion

or amortization is included

in “Interest and dividend income”.

Marketable debt securities not classified

as held

‑

maturity are classified as available

‑

for

‑

sale and reported

at fair value.

Unrealized gains and losses

on available

‑

for

‑

sale debt securities are excluded

from the determination of

earnings and are instead recognized

in the “Accumulated other comprehensive

loss” component of

stockholders’ equity, net of tax, until realized. Realized

gains and losses on available

‑

for

‑

sale debt securities

are computed based upon the historical

cost of these securities, using

the specific identification method.

Marketable debt securities are

classified as either “Cash and

equivalents” or “Marketable securities

and

short

‑

term investments” according

to their maturity at the time of

acquisition.

Marketable equity securities are generally

classified as “Marketable securities

and short

‑

term investments”,

however,

any marketable securities held as

a long

‑

term investment rather than as

an investment of excess

liquidity are classified as “Other

non

‑

current assets”. Marketable

equity securities are measured at

fair value

with fair value changes reported in

net income. Fair value changes

for marketable equity securities are

generally reported in “Interest and other

finance expense”,

however,

fair value changes for certain marketable

equity securities classified as long-term

investments are reported in

“Other income (expense),

net”.

For debt securities classified as available-for-sale

where fair value has declined

below amortized cost due to

credit losses, the Company records an

allowance for expected

credit losses and adjusts the allowance

subsequent periods in “Interest and other

finance expense”.

All fair value changes other

than those related to

credit risk are reported in “Accumulated

other comprehensive

loss”

until the security is sold.

In addition, equity securities without

readily determinable fair values

are remeasured if there is an

observable

price change in an orderly transaction

for the same investment, or if

a qualitative assessment indicates

that

the investment is impaired and

the fair value of the investment is

less than its carrying amount.

Similar to

other fair value changes as described

above, depending on the nature

of the investment, this

fair value

change is either recorded in “Other

income (expense), net” or “Interest

and other finance expense”.

F-14

Accounts receivable and allowance

for expected credit losses

Accounts receivable are recorded

at the invoiced amount. The Company

has a group

‑

wide policy on the

management of credit risk. The policy

includes a credit assessment methodology

to assess the

creditworthiness of customers and assign

to those customers a risk category. Third

‑

party agencies’ ratings

are considered, if available. For customers

where agency ratings are

not available, the customer’s

most

recent financial statements, payment

history and other relevant

information are considered in

the assignment

to a risk category. Customers are assessed at least annually

or more frequently when information on

significant changes in the customer’s

financial position becomes known.

In addition to the assignment

to a

risk category, a credit limit per customer is set.

The Company recognizes an allowance

for credit losses to present the net amount

of receivables expected to

be collected at the balance sheet date.

The allowance is based on the credit

losses expected to arise over

the asset’s contractual term taking into

account historical loss experience,

customer-specific data as well as

forward looking estimates. The Company’s

accounts receivable

are first grouped by the individual

legal entity

which generally has a geographic

concentration of receivables,

resulting in different risk levels for different

entities. Receivables are then further

subdivided within the entity into

pools based on similar risk

characteristics to estimate expected

credit losses. Expected

credit losses are estimated

individually when

the

related assets do not share similar

risk characteristics.

Accounts receivable are written

off when deemed uncollectible

and are recognized as a deduction

from the

allowance for credit losses. Expected

recoveries, which are not

to exceed the amount previously

written off,

are considered in determining

the allowance balance at the balance

sheet date.

The Company, in its normal course of business, transfers

receivables to third parties, generally

without

recourse. The transfer is accounted

for as a sale when the Company has

surrendered control over

the

receivables. Control is deemed

to have been surrendered

when (i) the transferred receivables

have been put

presumptively beyond the reach of

the Company and its creditors,

even in bankruptcy or other receivership,

(ii) the third

‑

party transferees have the right

to pledge or exchange the transferred

receivables, and (iii) the

Company has relinquished

effective control over the transferred receivables

and does not retain the ability or

obligation to repurchase or redeem

the transferred receivables.

At the time of sale, the sold receivables

are

removed from the Consolidated

Balance Sheets and the related

cash inflows are classified as

operating

activities in the Consolidated Statements

of Cash Flows. Costs associated

with the sale of receivables,

including the related gains

and losses from the sales, are included

in “Interest and other finance expense”.

Transfers of receivables that do not meet

the requirements for treatment as

sales are accounted for as

secured borrowings and the related

cash flows are classified as financing

activities in the Consolidated

Statements of Cash Flows.

Concentrations of credit risk

The Company sells a broad range

of products, systems, services

and software to a wide range

of industrial,

commercial and utility customers as

well as various government

agencies and quasi

‑

governmental agencies

throughout the world. Concentrations

of credit risk with respect to accounts

receivable are limited, as

the

Company’s customer base is comprised

of a large number of individual

customers. Ongoing credit

evaluations of customers’ financial

positions are performed to determine whether

the use of credit support

instruments such as guarantees, letters

of credit or credit insurance

are necessary; collateral is not generally

required. The Company maintains an

allowance for credit losses as discussed

above in “Accounts receivable

and allowance for expected credit

losses”. Such losses, in the aggregate,

are in line with the Company’s

expectations.

It is the Company’s policy to invest

cash in deposits with banks throughout

the world with certain minimum

credit ratings and in high quality, low risk, liquid investments.

The Company actively manages

its credit risk

by routinely reviewing the creditworthiness

of the banks and the investments

held. The Company has not

incurred significant credit losses related

to such investments.

F-15

The Company’s exposure to credit risk

on derivative financial

instruments is the risk that the counterparty will

fail to meet its obligations. To reduce this risk, the Company

has credit policies that require the

establishment

and periodic review of credit limits

for individual counterparties. In addition,

the Company has entered into

‑

out netting agreements with most

derivative counterparties. Close

‑

out netting agreements provide

for

the termination, valuation and net

settlement of some or all

outstanding transactions between

two

counterparties on the occurrence of

one or more pre

‑

defined trigger events. Derivative

instruments are

presented on a gross basis in the

Consolidated Financial

Statements.

Revenue recognition

A customer contract exists if collectability

under the contract is considered

probable, the contract has

commercial substance, contains

payment terms, as well as

the rights and commitments of

both parties, and

has been approved.

The Company offers arrangements with

multiple performance obligations

to meet its customers’ needs.

These arrangements may involve

the delivery of multiple products and/or

performance of services (such

installation and training)

and the delivery and/or performance

may occur at different points in time or

over

different periods of time. Goods and services

under such arrangements

are evaluated to determine

whether

they form distinct performance obligations

and should be accounted for as

separate revenue transactions.

The Company allocates the sales price

to each distinct performance

obligation based on the price

of each

item sold in separate transactions

at the inception of the

arrangement.

The Company generally recognizes

revenues for the sale of non

‑

customized products including

circuit

breakers, modular substation packages,

control products, motors, generators,

drives, robots, turbochargers,

measurement and analytical instrumentation,

and other goods which

are manufactured on a standardized

basis at a point in time. Revenues are

recognized at the point in time that

the customer obtains control

of the

goods, which is when it has taken title

to the products and assumed

the risks and rewards of ownership

of the

products specified in the purchase order

or sales agreement. Generally, the transfer of

title and risks and

rewards of ownership are governed

by the contractually defined shipping

terms. The Company uses various

International Commercial Terms (as promulgated by the International

Chamber of Commerce) in its sales

products to third party customers, such

as Ex Works (EXW), Free Carrier

(FCA) and Delivered Duty Paid

(DDP).

Billing terms for these point in time

contracts vary but generally

coincide with delivery to the customer.

Payment is generally due upon

receipt of the invoice, payable

within 90 days or less.

The Company generally recognizes

revenues for the sale of customized

products,

including integrated

automation and electrification systems

and solutions, on an over time basis

using the

percentage

‑

completion method of accounting.

These systems are generally

accounted for as a single

performance obligation as the Company

is required to integrate equipment

and services into one deliverable

for the customer. Revenues are recognized as the

systems are customized during

the manufacturing or

integration process and as control is

transferred to the customer as

evidenced by the Company’s right

payment for work performed or by

the customer’s ownership

of the work in process. The Company

principally

uses the cost

‑

cost method to measure

progress towards completion

on contracts. Under this method,

progress of contracts is measured

by actual costs incurred

in relation to the Company’s best estimate

of total

costs based on the Company’s history of

manufacturing or constructing

similar assets for customers.

Estimated costs are reviewed

and updated routinely for contracts

in progress to reflect changes

in quantity or

pricing of the inputs. The cumulative

effect of any change in estimate is

recorded in the period when

the

change in estimate is determined. Contract

costs include all direct materials,

labor and subcontract costs

and

indirect costs related to contract performance,

such as indirect labor, supplies, tools and

depreciation costs.

F-16

The nature of the Company’s contracts

for the sale of customized products

gives rise to several types of

variable consideration, including

claims, unpriced change orders, liquidated

damages and penalties. These

amounts are estimated based upon

the most likely amount of consideration

to which the customer or

the

Company will be entitled. The estimated

amounts are included

in the sales price to the extent it is probable

that a significant reversal of cumulative

revenues recognized will

not occur when the uncertainty associated

with the variable consideration

is resolved. All estimates of variable consideration

are reassessed

periodically. Back charges to suppliers or subcontractors

are recognized as a reduction of

cost when it is

determined that recovery of such

cost is probable and the

amounts can be reliably estimated.

Billing terms for these over

‑

time contracts vary but are

generally based on achieving

specified milestones.

The differences between the timing of

revenues recognized and

customer billings result in changes

contract assets and contract liabilities.

Payment is generally

due upon receipt of the invoice, payable

within

90 days or less. Contractual retention

amounts billed to customers are generally

due upon expiration of the

contractual warranty period.

Service revenues reflect revenues

earned from the Company’s activities

in providing services to customers

primarily subsequent to the sale and

delivery of a product or complete

system. Such revenues consist

maintenance type contracts, repair

services, equipment upgrades,

field service activities that include

personnel and accompanying

spare parts, training, and installation and

commissioning of products as a

stand-alone service or as part of a

service contract. The Company

generally recognizes revenues

from

service transactions as services are

performed or at the point in time that

the customer obtains control

of the

spare parts. For long-term service contracts

including monitoring

and maintenance services, revenues

are

recognized on a straight-line

basis over the term of the contract consistent

with the nature, timing and

extent

of the services or, if the performance pattern is other

than straight line, as the services are

provided based on

costs incurred relative to total expected

costs.

In limited circumstances the Company

sells extended warranties

that extend the warranty coverage

beyond

the standard coverage offered on specific

products. Revenues

for these warranties are recorded

over the

length of the warranty period based

on their stand

‑

alone selling price.

Billing terms for service contracts vary

but are generally based

on the occurrence of a service

event.

Payment is generally due upon

receipt of the invoice, payable

within 90 days or less.

Revenues are reported net of customer

rebates, early settlement discounts,

and similar incentives. Rebates

are estimated based on sales

terms, historical experience and

trend analysis. The most common

incentives

relate to amounts paid or credited

to customers for achieving

defined volume levels.

Taxes

assessed by a governmental

authority that are directly

imposed on revenue-producing

transactions

between the Company and its customers,

such as sales, use, value added

and some excise taxes, are

excluded from revenues.

The Company does not adjust the contract

price for the effects of a financing

component if the Company

expects, at contract inception,

that the time between control transfer

and cash receipt is less than 12

months.

Sales commissions are expensed immediately

when the amortization period

for the costs to obtain the

contract is less than a year.

Contract loss provisions

Losses on contracts are recognized

in the period when they are identified

and are based upon the anticipated

excess of contract costs over

the related contract revenues.

Shipping and handling costs

Shipping and handling

costs are recorded as a component of cost

of sales.

F-17

Inventories

Inventories are stated at the lower

of cost or net realizable

value. Cost is determined using

the first

‑

in,

first

‑

out method, the weighted

‑

average cost method, or

the specific identification method.

Inventoried costs

are stated at acquisition cost or actual

production cost, including

direct material and labor and applicable

manufacturing overheads. Adjustments

to reduce the cost of inventory

to its net realizable value

are made, if

required, for decreases in sales prices,

obsolescence or similar reductions

in value.

Impairment of long

‑

lived assets

Long

‑

lived assets that are held and used are evaluated

for impairment for each of

the Company’s asset

groups when events or circumstances

indicate that the carrying

amount of the long-lived asset or asset

group

may not be recoverable. If the asset

group’s net carrying value exceeds

the asset group’s net undiscounted

cash flows expected to be generated

over its remaining useful life

including net proceeds expected

from

disposition of the asset group,

if any, the carrying amount of the asset group is reduced

to its estimated fair

value. The estimated fair value is determined

using a market, income and/or

cost approach.

Property, plant and equipment

Property, plant and equipment is stated at cost, less accumulated

depreciation and is depreciated

using the

straight

‑

line

method. The estimated useful lives

of the assets are generally

as follows:

•

factories and office buildings:

years,

•

other facilities:

years,

•

machinery and equipment:

years,

•

furniture and office equipment:

years, and

•

leasehold improvements are

depreciated over their estimated

useful life or, for operating leases,

over the lease term, if shorter.

Goodwill and intangible assets

Goodwill is reviewed for impairment

annually as of October 1, or more

frequently if events or circumstances

indicate that the carrying value

may not be recoverable.

Goodwill is evaluated for impairment

at the reporting unit level. A

reporting unit is an operating segment

one level below an operating

segment. For the annual impairment reviews

performed in 2022

the reporting

units were determined to be one level

below the operating

segments.

When evaluating goodwill

for impairment, the Company uses either

a qualitative or quantitative

assessment

method for each reporting unit.

The qualitative assessment involves

determining, based on an evaluation

qualitative factors, if it is more likely

than not that the fair value

of a reporting unit is less than

its carrying

value. If, based on this qualitative

assessment, it is determined

to be more likely than not that the reporting

unit’s fair value is less than its carrying

value, a quantitative impairment

test is performed, otherwise

further analysis is required. If the Company

elects not to perform

the qualitative assessment for a reporting

unit, then a quantitative impairment

test is performed.

When performing a quantitative

impairment test,

the Company calculates the fair

value of a reporting unit

using an income approach

based on the present value

of future cash flows, applying a discount

rate that

represents the reporting

unit’s weighted-average cost

of capital, and compares it to the

reporting unit’s

carrying value. If the carrying value

of the net assets of a reporting

unit exceeds the fair value of

the reporting

unit then the Company records an

impairment charge equal

to the difference, provided that the loss

recognized does not exceed the total

amount of goodwill allocated

to that reporting unit.

F-18

The cost of acquired intangible

assets with a finite life is amortized

using a method of amortization

that

reflects the pattern of intangible

assets’ expected contributions

to future cash flows. If that pattern cannot

reliably determined, the straight

‑

line method is used. The

amortization periods range from

years for

software and from

years for customer

‑

, technology

‑

and marketing

‑

related intangibles. Intangible

assets with a finite life are tested

for impairment upon the

occurrence of certain triggering

events.

Derivative financial instruments

and hedging activities

The Company uses derivative

financial instruments to

manage currency, commodity, interest rate and equity

exposures, arising from its global

operating, financing and investing

activities (see Note 6).

The Company recognizes all derivatives,

other than certain derivatives

indexed to the Company’s own stock,

at fair value in the Consolidated

Balance Sheets. Derivatives that

are not designated as hedging

instruments

are reported at fair value with derivative

gains and losses reported

through earnings and classified

consistent

with the nature of the underlying

transaction.

If the derivatives are designated as a

hedge, depending on the nature

of the hedge, changes

in the fair value

of the derivatives will either be offset against

the change in fair value of

the hedged item attributable

to the

risk being hedged through

earnings (in the case of a fair value

hedge) or recognized in “Accumulated

other

comprehensive loss” until the hedged

item is recognized in earnings

(in the case of a cash flow hedge).

Where derivative financial instruments

have been designated as cash

flow hedges of forecasted

transactions

and such forecasted transactions are

no longer probable of occurring,

hedge accounting is discontinued

and

any derivative gain or loss previously

included in “Accumulated other

comprehensive loss” is reclassified

into

earnings consistent with the nature

of the original forecasted transaction.

Gains or losses from derivatives

designated as hedging

instruments in a fair value hedge are reported

through earnings and classified

consistent with the nature of the underlying

hedged transaction.

Certain commercial contracts may

grant rights to the Company

or the counterparties, or contain

other

provisions that are considered to be derivatives.

Such embedded

derivatives are assessed at inception

of the

contract and depending on their

characteristics, accounted

for as separate derivative instruments

and shown

at their fair value in the Consolidated

Balance Sheets

with changes in their fair value

reported in earnings

consistent with the nature of the commercial

contract to which they relate.

Derivatives are classified in the Consolidated

Statements of Cash Flows in

the same section as the

underlying item. Cash flows from

the settlement of undesignated

derivatives used to manage the risks of

different underlying items on a net basis

are classified within “Net cash

provided by operating activities”,

the underlying items are primarily

operational in nature. Other cash

flows on the settlement of derivatives

are

recorded within “Net cash provided

by (used in) investing activities”.

Leases

The Company leases primarily real

estate, vehicles,

machinery and equipment.

The Company evaluates if a contract

contains a lease at inception

of the contract. A contract is or contains

lease if it conveys the right to control

the use of identified property, plant, or equipment

(an identified asset)

for a period of time in exchange for

consideration. To determine this, the Company assesses whether,

throughout the period of use, it has

both the right to obtain

substantially all of the economic benefits

from the

use of the identified asset and the

right to direct the use of the identified

asset. Leases are classified

as either

finance or operating, with the classification

determining the pattern of expense

recognition in the

Consolidated Income Statements.

Lease expense for operating

leases is recorded on a straight-line

basis

over the lease term. Lease expense

for finance leases is separated

between amortization of right-of-use

assets and lease interest expense.

F-19

In many cases, the Company’s leases include

one or more options to renew, with renewal terms

that can

extend up to

5 years

. The exercise of lease renewal

options is at the Company’s discretion.

Renewal periods

are included in the expected lease

term if they are reasonably

certain of being exercised by the Company.

Certain leases also include

options to purchase the leased property. None of the Company’s lease

agreements contain material residual

value guarantees or material restrictions

or covenants.

Long-term leases (leases with terms

greater than

12 months

) are recorded in the Consolidated

Balance

Sheets

at the commencement date of

the lease based on the present

value of the minimum lease

payments.

The present value of the lease payments

is determined by using the interest

rate implicit in the lease if

available.

As most of the Company’s leases do not provide

an implicit rate, the Company’s incremental

borrowing rate is used for most

leases and is determined

for portfolios of leases based on

the remaining

lease term, currency of the lease, and

the internal credit rating of the subsidiary

which entered into the lease.

Short-term leases (leases with an initial

lease term of

12 months

or less and where it is reasonably

certain

that the identified asset will not be leased

for a term greater than

12 months

) are not recorded in the

Consolidated Balance Sheets

and are expensed on a straight-line

basis over the lease term. The majority

short-term leases relate to real

estate and machinery.

Assets under operating lease are included

in “Operating lease right-of-use

assets”. Operating lease liabilities

are reported both as current and

non-current operating lease

liabilities. Right-of-use assets represent

the

Company’s right to use an underlying

asset for the lease term and lease

liabilities represent its obligation

make lease payments arising from

the lease.

Assets under finance lease are

included in “Property,

plant and equipment,

net” while finance lease liabilities

are included in “Long-term debt”

(including “Current maturities of long-term

debt”

as applicable).

Lease and non-lease components

for leases other than real estate are

not accounted for separately.

Income taxes

The Company uses the asset and

liability method to account for deferred

taxes. Under this method, deferred

tax assets and liabilities are determined

based on temporary differences between the

financial reporting and

the tax bases of assets and liabilities.

Deferred tax assets and liabilities

are measured using enacted tax

rates and laws that are expected

to be in effect when the differences are expected

to reverse. The Company

records a deferred tax asset when

it determines that it is more likely

than not that the deduction will

sustained based upon the deduction’s

technical merit. Deferred tax assets and

liabilities that can be offset

against each other are reported on a net

basis. A valuation allowance

is recorded to reduce deferred tax

assets to the amount that is more likely

than not to be realized.

Deferred taxes are provided on unredeemed

retained earnings of the Company’s subsidiaries.

However,

deferred taxes are not provided

on such unredeemed retained

earnings to the extent it is expected

that the

earnings are permanently reinvested.

Such earnings may become taxable

upon the sale or liquidation

these subsidiaries or upon the remittance

of dividends.

The Company operates in numerous

tax jurisdictions and, as a result,

is regularly subject to audit by

tax

authorities. The Company provides

for tax contingencies whenever

it is deemed more likely than not

that a

tax asset has been impaired or a tax

liability has been incurred.

Contingency provisions are

recorded based

on the technical merits of the Company’s

filing position, considering

the applicable tax laws and Organisation

for Economic Co

‑

operation and Development

(OECD) guidelines and

are based on its evaluations of the

facts and circumstances as of the end

of each reporting period.

The Company applies a two

‑

step approach to recognize

and measure uncertainty in income

taxes. The first

step is to evaluate the tax position

for recognition by determining

if the weight of available evidence

indicates

that it is more likely than not that the

position will be sustained

on audit, including resolution

of related

appeals or litigation processes,

if any. The second step is to measure the tax benefit as

the largest amount

which is more than

percent likely of being realized

upon ultimate settlement. Uncertain

tax positions that

could be settled against existing loss

carryforwards or income tax credits

are reported net.

F-20

Expenses

related to tax penalties are classified

in the Consolidated

Income Statements as “Income tax

expense”

while interest thereon is classified

as “Interest and other finance

expense”. Current income tax

relating to certain items is recognized

directly in “Accumulated

other comprehensive loss” and not in

earnings. In general, the Company applies

the individual items approach

when releasing income

tax effects

from “Accumulated other comprehensive

loss”.

Research and development

costs not related to specific customer

orders are generally expensed

as incurred.

Earnings per share

Basic earnings per share is calculated

by dividing income by the weighted

‑

average number of shares

outstanding during the year. Diluted earnings

per share is calculated by dividing

income by the

weighted

‑

average number of shares outstanding

during the year, assuming that all potentially

dilutive

securities were exercised, if dilutive.

Potentially dilutive securities

comprise outstanding written call

options,

outstanding options and shares

granted subject to certain

conditions under the Company’s share

‑

based

payment arrangements. See further

discussion related to earnings

per share in Note 20 and of potentially

dilutive securities in Note 18.

‑

based payment arrangements

The Company has various share

‑

based payment arrangements

for its employees, which are

described more

fully in Note 18. Such arrangements

are accounted for under

the fair value method. For awards

that are

equity

‑

settled, total compensation is measured

at grant date, based on

the fair value of the award at that

date, and recorded in earnings

over the period the employees

are required to render service.

For awards that

are cash

‑

settled, compensation is initially

measured at grant date and subsequently

remeasured at each

reporting period, based on the fair value

and vesting percentage of the award

at each of those dates, with

changes in the liability recorded

in earnings.

Fair value measures

The Company uses fair value measurement

principles to record certain

financial assets and liabilities

on a

recurring basis and, when necessary, to record certain

non

‑

financial assets at fair value on a non

‑

recurring

basis, as well as to determine fair

value disclosures for certain

financial instruments carried at

amortized cost

in the financial statements. Financial

assets and liabilities recorded at fair value

on a recurring basis include

foreign currency, commodity and interest rate derivatives,

as well as cash

‑

settled call options and

available

‑

for

‑

sale securities. Non

‑

financial assets recorded

at fair value on a non

‑

recurring basis include

long

‑

lived assets that are reduced to their estimated

fair value due to impairments.

Fair value is the price that would be

received when selling

an asset or paid to transfer a liability

in an orderly

transaction between market participants

at the measurement date.

In determining fair value, the Company

uses various valuation techniques

including the market approach

(using observable market data for

identical

or similar assets and liabilities), the income

approach (discounted cash flow method)

and the cost approach

(using costs a market participant

would incur to develop a comparable

asset). Inputs used to determine

the

fair value of assets and liabilities

are defined by a three

‑

level hierarchy, depending on the nature of those

inputs. The Company has categorized

its financial assets and liabilities

and non

‑

financial assets measured at

fair value within this hierarchy based

on whether the inputs to the valuation

technique are observable or

unobservable. An observable

input is based on market data obtained

from independent sources, while

unobservable input reflects the Company’s

assumptions about market

data.

F-21

The levels of the fair value hierarchy

are as follows:

Level 1:

Valuation inputs consist of quoted prices in an active

market for identical assets or

liabilities (observable quoted

prices). Assets and liabilities valued

using Level 1 inputs

include exchange

‑

traded equity securities, listed derivatives

which are actively traded

such as commodity futures, interest

rate futures and certain

actively traded debt

securities.

Level 2:

Valuation inputs consist of observable inputs (other than

Level 1 inputs) such as actively

quoted prices for similar assets,

quoted prices in inactive

markets and inputs other than

quoted prices such as interest rate

yield curves, credit spreads,

or inputs derived from

other observable data by interpolation,

correlation, regression

or other means. The

adjustments applied to quoted prices

or the inputs used in valuation

models may be both

observable and unobservable.

In these cases, the fair value

measurement is classified as

Level 2 unless the unobservable

portion of the adjustment or the unobservable

input to

the valuation model is significant, in

which case the fair value

measurement would be

classified as Level 3. Assets and liabilities

valued or disclosed using

Level 2 inputs include

investments in certain funds, certain

debt securities that are not

actively traded, interest

rate swaps, cross-currency interest

rate swaps, commodity swaps,

cash

‑

settled call

options, forward foreign exchange

contracts, foreign exchange

swaps and forward rate

agreements, time deposits, as well

as financing receivables and

debt.

Level 3:

Valuation inputs are based on the Company’s assumptions

of relevant market data

(unobservable input).

Investments in private equity, real estate and collective

funds held within the Company’s pension

plans are

generally valued using the net asset

value (NAV) per share as a practical expedient for

fair value provided

certain criteria are met. The NAVs are determined

based on the fair values of

the underlying investments in

the funds. These assets are not classified

in the fair value hierarchy

but are separately disclosed.

Whenever quoted prices involve

bid

‑

ask spreads, the Company

ordinarily determines fair values

based on

mid

‑

market quotes. However, for the purpose of determining

the fair value of cash

‑

settled call options serving

as hedges of the Company’s management

incentive plan (MIP), bid prices are

used.

When determining fair values based

on quoted prices in an active

market, the Company considers

if the level

of transaction activity for the financial

instrument has significantly decreased,

or would not be considered

orderly. In such cases, the resulting changes in valuation

techniques would be disclosed.

If the market is

considered disorderly or if quoted

prices are not available, the Company

is required to use another valuation

technique, such as an income approach.

Disclosures about the Company’s fair

value measurements of assets and liabilities

are included in Note 7.

Contingencies

The Company is subject to proceedings,

litigation or threatened

litigation and other claims and

inquiries,

related to environmental, labor, product, regulatory, tax (other than income

tax) and other matters, and is

required to assess the likelihood

of any adverse judgments or outcomes to

these matters, as well as potential

ranges of probable losses. A determination

of the provision required, if any, for these contingencies

is made

after analysis of each individual

issue, often with assistance from both

internal and external legal

counsel and

technical experts. The required

amount of a provision for a contingency

of any type may change in the

future

due to new developments in the particular

matter, including changes in the approach

to its resolution.

F-22

The Company records a provision

for its contingent obligations

when it is probable that a loss will

be incurred

and the amount can be reasonably

estimated. Any such provision

is generally recognized on an

undiscounted basis using

the Company’s best estimate of the amount of

loss incurred or at the lower

end of

an estimated range when a single

best estimate is not determinable.

In some cases, the Company may

able to recover a portion of the costs

relating to these obligations

from insurers or other third parties;

however, the Company records such amounts only

when it is probable that they will

be collected.

The Company generally provides

for anticipated costs for warranties

when it delivers the related products.

Warranty costs include calculated costs arising

from imperfections in design,

material and workmanship in

the Company’s products. The Company

makes individual assessments on

contracts with risks resulting from

order

‑

specific conditions or guarantees

and assessments on an overall,

statistical basis for similar

products

sold in larger quantities.

The Company may have legal

obligations to perform environmental

clean

‑

up activities related to land and

buildings as a result of the normal operations

of its business. In some cases,

the timing or the method of

settlement, or both, are conditional

upon a future event that may

or may not be within the control

of the

Company, but the underlying obligation itself is unconditional

and certain. The Company recognizes a

provision for these obligations

when it is probable that a liability

for the clean

‑

up activity has been incurred

and a reasonable estimate of its fair

value can be made. In some

cases, a portion of the costs

expected to be

incurred to settle these matters

may be recoverable. An

asset is recorded when it is probable

that such

amounts are recoverable. Provisions

for environmental obligations

are not discounted to their present value

when the timing of payments cannot be

reasonably estimated.

Pensions and other postretirement

benefits

The Company has a number of defined

benefit pension plans, defined

contribution pension plans

and

termination indemnity plans.

For plans accounted for as a defined

benefit pension plan, the Company

recognizes an asset for such a plan’s overfunded

status or a liability for such

a plan’s underfunded status in

its Consolidated Balance Sheets. Additionally, the Company

measures such a plan’s assets and obligations

that determine its funded status as

of the end of the year and

recognizes the changes in the

funded status in

the year in which the changes occur. Those changes

are reported in “Accumulated

other comprehensive

loss”.

The Company uses actuarial

valuations to determine its pension

and postretirement benefit costs

and credits.

The amounts calculated depend

on a variety of key assumptions,

including discount rates and expected

return on plan assets. Current

market conditions are considered

in selecting these assumptions.

The Company’s various pension plan

assets are assigned to their respective

levels in the fair value hierarchy

in accordance with the valuation

principles described in the “Fair

value measures” section above.

See Note 17 for further discussion

of the Company’s employee

benefit plans.

Business combinations

The Company accounts for assets acquired

and liabilities assumed in business

combinations using the

acquisition method and records

these at their respective fair values.

Contingent consideration

is recorded at

fair value as an element of purchase

price with subsequent adjustments

recognized in income.

Identifiable intangibles

consist of intellectual property such

as trademarks and trade names,

customer

relationships, patented and unpatented

technology, in

‑

process research and development,

order backlog and

capitalized software; these are amortized

over their estimated useful

lives. Such intangibles

are subsequently

subject to evaluation for potential

impairment if events or circumstances

indicate the carrying amount may not

be recoverable. See “Goodwill

and intangible assets” above. Acquisition

‑

related costs are recognized

separately from the acquisition

and expensed as incurred. Upon

gaining control of an entity in which

equity method or cost basis investment

was held by the Company, the carrying value

of that investment is

adjusted to fair value with the related

gain or loss recorded in

income.

F-23

Deferred tax assets and liabilities

based on temporary differences between

the financial reporting and the

tax

base of assets and liabilities,

as well as uncertain tax positions

and valuation allowances on

acquired

deferred tax assets assumed in

connection with a business

combination,

are initially estimated as of

the

acquisition date based on facts and circumstances

that existed at the acquisition

date. Changes in deferred

taxes, uncertain tax positions and valuation

allowances on acquired

deferred tax assets that occur after

the

measurement period are recognized

in income.

Estimated fair values of acquired assets

and liabilities are subject to

change within the measurement period

(a period of up to 12 months after

the acquisition date during

which the acquirer may adjust the provisional

acquisition amounts) with any adjustments

to the preliminary estimates

being recorded to goodwill.

New accounting pronouncements

Applicable for current period

Business Combinations — Accounting

for contract assets and contract liabilities

from contracts with

customers

In January 2022, the Company early

adopted a new accounting

standard update, which provides

guidance

on the accounting for revenue contracts

acquired in a business combination.

The update requires contract

assets and liabilities acquired

in a business combination to be recognized

and measured at the date of

acquisition in accordance

with the principles for recognizing

revenues from contracts with customers.

The

Company has applied this accounting

standard update prospectively starting

with acquisitions closing after

January 1, 2022.

Disclosures about

government assistance

In January 2022, the Company adopted

a new accounting standard

update, which requires entities

disclose certain types of government

assistance. Under the update,

the Company is required to annually

disclose (i) the type of the assistance

received, including any significant

terms and conditions, (ii) its related

accounting policy, and (iii) the effect such transactions have

on its financial statements. The Company

has

applied this accounting standard

update prospectively. This update does not have a

significant impact on the

Company’s Consolidated Financial

Statements.

Applicable for future periods

Facilitation of the effects of reference rate

reform on financial reporting

In March 2020, an accounting standard

update was issued which

provides temporary optional expedients

and

exceptions to the current guidance

on contract modifications

and hedge accounting to ease

the financial

reporting burdens related to the expected

market transition from the London

Interbank Offered Rate (LIBOR)

and other interbank offered rates to alternative

reference rates. This update, along

with clarifications outlined

in subsequent updates issued

during January 2021 and December

2022, can be adopted and applied

later than December 31, 2024, with early

adoption permitted. The Company

expects to adopt this update

during the second half of 2023 and

does not expect this update

to have a significant impact on

its

Consolidated Financial

Statements.

Disclosure about supplier

finance program obligations

In September 2022, an accounting

standard update was issued

which requires entities to disclose

information

related to supplier finance programs.

Under the update, the Company

is required to annually

disclose (i) the

key terms of the program, (ii) the amount

of the supplier finance obligations

outstanding and where those

obligations are presented

in the balance sheet at the reporting

date, and (iii) a rollforward of the supplier

finance obligation program

within the reporting period. This update

is effective for the Company

retrospectively for all in-scope transactions

for annual periods beginning

January 1, 2023, with the exception

of the rollforward disclosures, which

are effective prospectively for annual

periods beginning

January 1, 2024,

with early adoption permitted.

The Company does not

expect this update to have a significant

impact on its

Consolidated Financial

Statements. The total outstanding supplier

finance obligation included

in “Accounts

payable, trade” in the Consolidated

Balance Sheet at December 31, 2022

amounted to $

477

million

F-24

—

Note 3

Discontinued operations

Divestment of the Power Grids business

On July 1, 2020, the Company completed

the sale of

80.1

percent of its Power Grids business

to Hitachi Ltd

(Hitachi). The transaction was executed

through the sale of

80.1

percent of the shares of Hitachi

Energy Ltd,

formerly Hitachi ABB Power Grids Ltd

(Hitachi Energy). Cash consideration

received at the closing date was

9,241

million net of cash disposed.

Further, for accounting purposes, the

19.9

percent ownership interest

retained by the Company was deemed

to have been both divested and

reacquired at its fair value on July

2020. The Company also obtained

a put option,

exercisable with three-months’

notice commencing in April

2023.

The combined fair value of the retained

investment and the related put option

amounted to

1,779

million and was recorded as

both an equity-method investment and

as part of the proceeds

for the

sale of the entire Power Grids business

(see Note 4).

In connection with the divestment,

the Company recorded liabilities

in discontinued operations

for estimated

future costs and other cash payments

of $

487

million for various contractual

items relating to the sale of

the

business,

including required

future cost reimbursements payable to Hitachi

Energy,

costs to be incurred by

the Company for the direct benefit

of Hitachi Energy and an

amount due to Hitachi in connection

with the

expected purchase price finalization

of the closing debt and working

capital balances. In October 2021,

the

Company and Hitachi concluded

an agreement to settle the various amounts

owed by the Company. The net

difference between the agreed amounts

and the amounts

initially estimated by the Company

was recorded in

2021 in discontinued operations

as an adjustment to “Net gain recognized

on sale of the Power Grids

business”

in the table below.

During 2022, 2021 and 2020,

total cash payments (including

the amounts paid

under the settlement agreement) of

102

million, $

364

million and $

million, respectively, were made in

connection with these liabilities.

At December 31, 2022, the remaining

amount recorded was $

million.

As a result of the Power Grids sale,

the Company recognized

an initial net gain of $

5,141

million, net of

transaction costs, for the sale of

the entire Power Grids business

in Income from discontinued operations,

net

of tax, in 2020. Included in the calculation

of the net gain was a cumulative

translation loss relating to the

Power Grids business of $

420

million which was reclassified

from Accumulated other comprehensive

loss

(see Note 21). Certain amounts included

in the net gain were estimated or

otherwise subject to change

value and in 2021 the Company

recorded adjustments,

including the agreed settlement

amount referred to

above, reducing the total net gain

by $

million and in 2022 such

adjustments reduced the gain by a

further

million. Certain remaining

minor obligations relating to the divestment

continue to be subject to

uncertainty and will be adjusted in

future periods but these adjustments

are not expected to have a material

impact on the Consolidated Financial

Statements.

In 2020, the Company recorded

262

million in Income tax expense within

discontinued operations

connection with the reorganization

of the legal entity structure of the Power

Grids business required to

facilitate the sale.

In connection with the divestment, the

Company recognized

liabilities in discontinued

operations for certain

indemnities (see Note 15 for additional

information) and also recorded

an initial liability of $

258

million

representing the fair value of the right

granted to Hitachi Energy

for the use of the ABB brand

for up to

years.

F-25

Upon closing of the sale, the Company

entered into various transition

services agreements (TSAs). Pursuant

to these TSAs, the Company and

Hitachi Energy provide

to each other, on an interim, transitional basis,

various services. The services provided

by the Company primarily

include finance, information technology,

human resources and certain other administrative

services. Under the current

terms, the TSAs will continue

for up to

years, and can only be extended

on an exceptional basis

for business-critical services for an

additional period which is reasonably

necessary to avoid a material adverse impact

on the business. In 2022,

2021

and 2020, the Company recognized

within its continuing operations,

general and administrative

expenses incurred to perform the

TSAs, offset by $

162

million, $

173

million and $

million, respectively, in

TSA-related income for such services

that is reported in Other income (expense),

net.

Discontinued operations

As a result of the sale of the Power

Grids business, substantially

all Power Grids-related assets and

liabilities

have been sold. As this divestment

represented a strategic

shift that would have a major effect on

the

Company’s operations and financial

results, the results of operations for

this business have been presented

as discontinued operations

and the assets and liabilities are

presented as held for sale and

in discontinued

operations for all periods presented.

Certain of the business

contracts in the Power Grids

business continue

to be executed by subsidiaries

of the Company for the benefit/risk

of Hitachi Energy.

Assets and liabilities

relating to, as well as the net financial

results of, these contracts will continue

to be included in discontinued

operations until they have been

completed or otherwise transferred

to Hitachi Energy.

Prior to the divestment, interest expense

that was not directly attributable to

or related to the Company’s

continuing business or discontinued

business was allocated to discontinued

operations based on the ratio of

net assets to be sold less debt that

was required to be

paid as a result of the planned

disposal transaction to

the sum of total net assets of the Company

plus consolidated

debt. General corporate overhead

was not

allocated to discontinued operations.

Operating results of the discontinued

operations are summarized

as follows:

($ in millions)

2022

2021

2020

Total revenues

—

4,008

Total

cost of sales

—

(3,058)

Gross profit

—

950

Expenses

(38)

(18)

(808)

Change to net gain recognized

on sale of the Power

Grids business

(10)

(65)

5,141

Income (loss) from operations

(48)

(83)

5,282

Net interest income (expense)

and other finance expense

—

(5)

Non-operational pension

(cost) credit

—

(94)

Income (loss) from discontinued

operations before

taxes

(48)

(81)

5,182

Income tax

(322)

Income (loss) from discontinued

operations, net of

tax

(43)

(80)

4,860

Of the total Income (loss) from discontinued

operations before taxes in

the table above, $

(47)

million,

(80)

million and $

5,170

million in 2022, 2021 and 2020, respectively, are attributable

to the Company, while

the remainder is attributable

to noncontrolling interests.

Until the date of the divestment,

Income (loss) from discontinued

operations before taxes excluded

stranded

costs which were previously able

to be allocated to the Power

Grids operating segment. As a result,

million in 2020 of allocated

overhead and other management

costs which were previously included

in the

measure of segment profit for

the Power Grids operating segment

are now reported as part of Corporate

and

Other. In the table above, Net interest income (expense)

and other finance expense in 2020

includes

million of interest expense which

has been recorded on an allocated

basis in accordance with the

Company’s accounting policy election

until the divestment date.

F-26

Included in the reported Total revenues of the Company for 2020 are revenues

for sales from the Company’s

operating segments to the Power

Grids business of $

108

million which represent intercompany

transactions

that, prior to Power Grids being classified

as a discontinued operation,

were eliminated in the Company’s

Consolidated Financial

Statements (see Note 23). Subsequent

to the divestment, sales to Hitachi

Energy are

reported as third-party revenues.

In addition, the Company also has

retained obligations (primarily

for environmental and taxes) related

to other

businesses disposed or otherwise

exited that qualified as discontinued

operations. Changes to these retained

obligations are also included

in Income (loss) from discontinued

operations, net of tax, above.

The major components of assets and

liabilities held for sale and

in discontinued operations

in the Company’s

Consolidated Balance

Sheets are summarized as follows:

December 31, 2022 ($ in millions)

2022

(1)

2021

(1)

Receivables, net

131

Other current assets

Current assets held

for sale and in discontinued

operations

136

Accounts payable, trade

Other liabilities

310

Current liabilities held

for sale and in discontinued

operations

132

381

Other non-current liabilities

Non-current liabilities held

for sale and in discontinued

operations

(1)

At December

31, 2022

and 2021,

the balances

reported

as held for

sale and

in discontinued

operations

pertain to

Power Grids

activities

and

other obligations

which will

remain with

the Company

until such

time as the

obligation

is settled

or the activities

are fully

wound down

—

Note 4

Acquisitions, divestments and equity-accounted companies

Acquisitions

of controlling interests

Acquisitions of controlling interests were

as follows:

($ in millions, except number

of acquired businesses)

2022

2021

2020

Purchase price for acquisitions

(net of cash acquired)

(1)

195

212

Aggregate excess of purchase

price over fair value

of net assets acquired

(2)

229

161

Number of acquired businesses

(1)

Excluding

changes

in cost-

and equity-accounted

companies.

(2)

Recorded

as goodwill

(see Note

11).

In the table above, the “Purchase

price for acquisitions” and

“Aggregate excess of purchase price

over fair

value of net assets acquired” amounts

for 2022, relate primarily

to the acquisition of InCharge Energy, Inc.

(In-Charge) and in 2021, relate primarily

to the acquisition of ASTI Mobile

Robotics Group SL (ASTI).

In 2020,

there were no significant acquisitions.

Acquisitions of controlling interests have

been accounted for under

the acquisition method and have

been

included in the Company’s Consolidated

Financial Statements since the date of

acquisition.

F-27

On January 26, 2022, the Company increased

its ownership in In-Charge

to a

percent controlling interest

through a stock purchase agreement.

In-Charge is headquartered in

Santa Monica, USA, and is a provider

turn-key commercial electric vehicle

charging hardware and

software solutions. The resulting

cash outflows

for the Company amounted to $

134

million (net of cash acquired

of $

million). The acquisition expands

the

market presence of the E-mobility Division

of its Electrification operating

segment, particularly in the North

American market. In connection

with the acquisition, the

Company’s pre-existing

13.2

percent ownership of

In-Charge was revalued to fair

value and a gain of $

million was recorded in Other income

(expense), net.

The Company entered into an agreement

with the remaining

noncontrolling shareholders allowing

either party

to put or call the remaining

percent of the shares until

2027. The amount for which either party

can

exercise their option is dependent

on a formula based on revenues

and thus, the amount is subject to

change. As a result of this agreement,

the noncontrolling interest is

classified as Redeemable

noncontrolling

interest (i.e. mezzanine equity) in

the Consolidated Balance

Sheets and was initially recognized

at fair value.

On August 2, 2021, the Company acquired

the shares of ASTI. ASTI

is headquartered in Burgos,

Spain, and

is a global autonomous mobile

robot (AMR) manufacturer. The resulting cash outflows

for the Company

amounted to $

186

million (net of cash acquired).

The acquisition expands

the Company’s robotics and

automation offering in its Robotics &

Discrete Automation operating

segment.

While the Company uses its best

estimates and assumptions

as part of the purchase price allocation

process

to value assets acquired and

liabilities assumed at the acquisition

date, the purchase price allocation

for

acquisitions is preliminary

for up to 12 months after the

acquisition date and is subject to refinement

as more

detailed analyses are completed

and additional information about

the fair values of the acquired assets and

liabilities becomes available.

Business divestments and spin-offs

On September 7, 2022, the shareholders

approved the spin-off of the Company’s

Turbocharging Division into

an independent, publicly traded

company, Accelleron Industries AG (Accelleron), which

was completed

through the distribution of common

stock of Accelleron to the stockholders

of ABB on October 3, 2022. As a

result of the spin-off of this Division, the Company

distributed net assets

of $

272

million, net of amounts

attributable to noncontrolling

interests of $

million, which was reflected as a

reduction in Retained earnings.

In addition, total accumulated comprehensive

income of $

million, including the cumulative

translation

adjustment,

was reclassified to Retained

earnings. Cash and cash

equivalents distributed with Accelleron

was $

172

million.

The results of operations of the

Turbocharging Division,

are included in the continuing

operations of the

Process Automation operating

segment for all periods presented

through to the spin-off date. In 2022, 2021

and 2020 Income continuing

operations before taxes, included

income of $

134

million, $

186

million and

139

million, respectively, from this Division. In anticipation of the

spin-off, the Company granted to a

subsidiary of Accelleron access

to funds in the form of a short-term

intercompany loan. At the spin-off

date,

this loan, having a principal

amount of

300

million Swiss francs ($

306

million at the date of spin-off), was due

to the Company and subsequently collected

in October 2022.

In 2021, the Company received

proceeds (net of transaction

costs and cash disposed) of $

2,958

million,

relating to divestments of consolidated

businesses and recorded

gains of $

2,193

million in Other income

(expense), net on the sales of such

businesses. These are primarily

due to the divestment of the Company’s

Mechanical Power Transmission Division

(Dodge) to RBC Bearings Inc. Certain

amounts included in

the net

gain for the sale of the Dodge business

are estimated or otherwise

subject to change in value

and, as a

result, the Company may record

additional adjustments to the gain

in future periods which are not

expected

to have a material impact on

the Consolidated Financial Statements.

In 2021

and 2020 Income from

continuing operations before

taxes, included net income of $

115

million and $

million, respectively, from

the Dodge business which, prior

to its sale was part of the Company’s

Motion operating segment.

In 2020, the Company completed

the sale of its Power Grids business

(see Note 3 for details) and its

solar

inverters business.

F-28

Divestment of the solar inverters

business

In February 2020, the Company completed

the sale of its solar inverters business

for

consideration. Under

the agreement, which was reached

in July 2019, the Company was

required to transfer $

143

million of cash

to the buyer on the closing date.

In addition, payments totaling

EUR

132

million ($

145

million) are required to

be transferred to the buyer from

2020 through 2025. In 2019, the Company

recorded a loss of $

421

million, in

Other income (expense), net,

representing the excess

of the carrying value,

which includes a loss of

million arising from the cumulative translation

adjustment, over the estimated

fair value of this business.

In 2020, a further loss of $

million was recorded in Other

income (expense), net for changes in

fair value of

this business. The loss in 2020 includes

the $

million reclassification from

other comprehensive income

the currency translation adjustment

related to the business.

The fair value was based on the estimated

current market values using

Level 3 inputs, considering

the

agreed-upon sale terms with the buyer. The solar inverters

business, which includes the solar

inverter

business acquired as part of the Power-One

acquisition in 2013, was part

of the Company’s Electrification

operating segment.

As this divestment does not qualify

as a discontinued operation,

the results of operations for this business

prior to its disposal are included

in the Company’s continuing operations

for all periods presented.

Including the above loss of $

million in 2020, Income from

continuing operations before

taxes includes net

losses of $

million, from the solar inverters

business.

Investments in equity-accounted companies

In connection with the divestment of

its Power Grids business

to Hitachi in 2020 (see Note 3), the Company

retained a

19.9

percent interest in the business.

For accounting purposes

the

19.9

percent interest was

deemed to have been both divested

and reacquired, with a fair

value at the transaction date of $

1,661

million.

The fair value was based on a discounted

cash flow model considering

the expected results of the future

business operations of Hitachi Energy

and using relevant market inputs

including a risk-adjusted weighted-

average cost of capital.

The Company also obtained an

option, exercisable with

three-months’

notice commencing April

2023,

granting it the right to require Hitachi

to purchase this investment at

fair value, subject to a minimum floor

price equivalent to a

percent discount compared

to the price paid for the initial

80.1

percent. This option

was initially valued at $

118

million using a standard option

pricing model with inputs considering

the nature of

the investment and the expected period

until option exercise. As

this option is not separable

from the

investment the value has been

combined with the value

of the underlying investment and

is accounted for

together. Hitachi also received a call option requiring

the Company to sell the remaining

19.9

percent interest

in Hitachi Energy at any time at a price

consistent with what was paid

by Hitachi to acquire the initial

80.1

percent or at fair value, if higher.

In September 2022, the Company and

Hitachi agreed terms to sell

the Company’s remaining investment in

Hitachi Energy to Hitachi and simultaneously

settle certain outstanding

contractual obligations relating

to the

initial sale of the Power Grids business,

including certain indemnification

guarantees (see Note 15).

The sale

of the remaining investment was completed

in December 2022, resulting

in cash proceeds of $

1,552

million

and a gain of $

million which was recorded

in “Other income (expense), net”.

In July 2020, the Company concluded

that based on its continuing

involvement with the Power Grids

business, including the membership

in its governing board of directors,

it had significant influence

over

Hitachi Energy. As a result, the investment (including

the value of the option) was accounted

for using the

equity method through the date of its

sale in December 2022.

F-29

The difference between the initial

carrying value of the Company's

investment in Hitachi Energy at

fair value

and its proportionate share of the underlying

net assets created basis differences of $

8,570

million

1,705

million for the Company’s

19.9

percent ownership), which

were allocated as follows:

Weighted-average

($ in millions)

Allocated amounts

useful life

Inventories

169

5 months

Order backlog

727

2 years

Property, plant and equipment

(1)

1,016

Intangible assets

(2)

1,731

9 years

Other contractual rights

251

2 years

Other assets

Deferred tax liabilities

(942)

Goodwill

6,026

Less: Amount attributed

to noncontrolling interest

(451)

Basis difference

8,570

(1)

Property,

plant and

equipment

includes

assets subject

to amortization

having an

initial fair

value difference

of $

686

million and

weighted-average

useful life

14 years

(2)

Intangible

assets include

brand license

agreement,

technology

and customer

relationships

For assets subject to depreciation

or amortization, the Company

amortizes these basis differences over

the

estimated remaining useful lives

of the assets that gave

rise to this difference, recording the amortization,

net

of related deferred tax benefit, as a reduction

of income from equity-accounted

companies. Certain other

assets are recorded as an expense

as the benefits from the assets

are realized. At December

31, 2022, the

Company determined that

impairment of its equity-accounted

investments existed.

The carrying value of the Company’s investments

in equity-accounted companies

and respective percentage

of ownership is as follows:

Ownership as of

Carrying value at December

31,

($ in millions, except ownership

share in %)

December 31, 2021

2022

2021

Hitachi Energy Ltd

19.9%

—

1,609

Others

130

Total

130

1,670

In 2022, 2021 and 2020,

the Company recorded its share

of the earnings of investees accounted

for under

the equity method of accounting in

Other income (expense), net,

as follows:

($ in millions)

2022

2021

2020

Income (loss) from equity-accounted

companies, net

of taxes

(22)

Basis difference amortization

(net of deferred income

tax benefit)

(80)

(138)

(95)

Loss from equity-accounted

companies

(102)

(100)

(66)

F-30

—

Note 5

Cash and equivalents, marketable securities and short-term investments

Cash and equivalents and

marketable securities and short

‑

term investments consisted of

the following:

Marketable

securities

Gross

and

unrealized

Cash and

short-term

December 31, 2022 ($ in millions)

Cost basis

gains

losses

Fair value

equivalents

investments

Changes in fair value

recorded in

net income

Cash

1,715

Time deposits

2,459

Equity securities

345

355

4,519

—

4,529

4,174

355

Changes in fair value

recorded in

other comprehensive

income

Debt securities available-for-sale:

—U.S. government obligations

269

(15)

255

—Other government obligations

—Corporate

(7)

391

(22)

370

—

370

Total

4,910

(22)

4,899

4,174

725

Of which:

—Restricted cash, current

Marketable

securities

Gross

and

unrealized

Cash and

short-term

December 31, 2021 ($ in millions)

Cost basis

gains

losses

Fair value

equivalents

investments

Changes in fair value

recorded in

net income

Cash

2,752

Time deposits

2,037

1,737

300

Equity securities

569

587

5,358

—

5,376

4,489

887

Changes in fair value

recorded in

other comprehensive

income

Debt securities available-for-sale:

—U.S. government obligations

203

(1)

209

—Corporate

(1)

277

(2)

283

—

283

Total

5,635

(2)

5,659

4,489

1,170

Of which:

—Restricted cash, current

—Restricted cash, non-current

300

F-31

Contractual maturities

Contractual maturities of debt securities

consisted of the following:

Available-for-sale

December 31, 2022 ($ in millions)

Cost basis

Fair value

Less than one year

139

138

One to five years

157

148

Six to ten years

Due after ten years

Total

390

370

At December 31, 2022 and 2021,

the Company pledged $

million and $

million, respectively, of

available

‑

for

‑

sale marketable securities as collateral

for issued letters of credit and

other security

arrangements.

—

Note 6

Derivative financial instruments

The Company is exposed to certain

currency, commodity, interest rate and equity risks arising from its global

operating, financing and investing

activities. The Company uses derivative

instruments to reduce and

manage the economic impact of these

exposures.

Currency risk

Due to the global nature of the Company’s

operations, many of its subsidiaries

are exposed to currency risk

in their operating activities from entering

into transactions in currencies

other than their functional currency.

manage such currency risks,

the Company’s policies require its subsidiaries

to hedge their foreign

currency exposures from binding

sales and purchase contracts denominated

in foreign currencies. For

forecasted foreign currency denominated

sales of standard products and the related

foreign currency

denominated purchases, the Company’s

policy is to hedge up to a maximum

100

percent of the forecasted

foreign currency denominated

exposures, depending on

the length of the forecasted exposures.

Forecasted

exposures greater than

months are not hedged.

Forward foreign exchange

contracts are the main

instrument used to protect the Company

against the volatility

of future cash flows (caused by

changes in

exchange rates) of contracted and

forecasted sales and purchases

denominated in foreign currencies.

addition, within its treasury operations,

the Company primarily uses

foreign exchange swaps and forward

foreign exchange contracts to manage

the currency and timing

mismatches arising in its liquidity

management activities.

Commodity risk

Various commodity products are used in the Company’s manufacturing

activities. Consequently it is

exposed

to volatility in future cash flows arising

from changes in commodity prices.

To manage the price risk of

commodities, the Company’s policies

require that its subsidiaries

hedge the commodity price risk exposures

from binding contracts, as well as

at least

percent (up to a maximum of

100

percent) of the forecasted

commodity exposure over the next

months or longer (up to a maximum

months). Primarily swap

contracts are used to manage

the associated price risks of commodities.

F-32

Interest rate risk

The Company has issued bonds at

fixed rates. Interest rate swaps and

cross-currency interest rate swaps

are used to manage the interest rate

and foreign currency risk associated

with certain debt and generally

such swaps are designated as fair

value hedges. In addition,

from time to time, the Company

uses

instruments such as interest rate

swaps, interest rate futures, bond

futures or forward rate agreements

manage interest rate risk arising

from the Company’s balance

sheet structure but does not designate

such

instruments as hedges.

Equity risk

The Company is exposed to fluctuations

in the fair value of its warrant

appreciation rights (WARs) issued

under its Management Incentive

Plan (MIP)

(see Note 18).

A WAR gives its holder the right to receive

cash

equal to the market price of an equivalent

listed warrant on the date of exercise.

eliminate such risk, the

Company has purchased cash

‑

settled call options,

indexed to

the shares

of the Company,

which entitle the

Company to receive amounts equivalent

to its obligations under the outstanding

WARs.

Volume of derivative activity

In general, while the Company’s primary

objective in its use of derivatives

is to minimize exposures arising

from its business, certain derivatives

are designated and qualify

for hedge accounting treatment while

others

either are not designated or do not

qualify for hedge accounting.

Foreign exchange and interest rate derivatives

The gross notional amounts of outstanding

foreign exchange and interest rate derivatives

(whether

designated as hedges or not) were

as follows:

Type of derivative

Total notional

amounts at December

31,

($ in millions)

2022

2021

2020

Foreign exchange contracts

13,509

11,276

12,610

Embedded foreign exchange

derivatives

933

815

1,134

Cross-currency interest

rate swaps

855

906

—

Interest rate contracts

2,830

3,541

3,227

Derivative commodity contracts

The Company uses derivatives

to hedge its direct or indirect

exposure to the movement in

the prices of

commodities which are primarily copper, silver and aluminum.

The following table shows

the notional

amounts of outstanding derivatives

(whether designated as hedges

or not), on a net basis, to reflect

the

Company’s requirements for these commodities:

Total notional

amounts at December

31,

Type of derivative

Unit

2022

2021

2020

Copper

swaps

metric tonnes

29,281

36,017

39,390

Silver swaps

ounces

2,012,213

2,842,533

1,966,677

Aluminum swaps

metric tonnes

6,825

7,125

8,112

Equity derivatives

At December 31, 2022, 2021 and

2020, the Company held

million,

million and

million cash

‑

settled call

options indexed to ABB Ltd shares (conversion

ratio

5:1

) with a total fair value of $

million, $

million and

million, respectively.

F-33

Cash flow hedges

As noted above, the Company mainly

uses forward foreign

exchange contracts to manage the foreign

exchange risk of its operations, commodity

swaps to manage its commodity

risks and cash

‑

settled call

options to hedge its WAR liabilities. The Company

applies cash flow hedge accounting

in only limited cases.

In these cases, the effective portion of the

changes in their

fair value is recorded in “Accumulated other

comprehensive loss” and subsequently

reclassified into earnings in

the same line item and in the same

period as the underlying hedged

transaction affects earnings. In 2022, 2021 and

2020, there were

significant amounts recorded for

cash flow hedge accounting

activities.

Fair value hedges

reduce its interest rate exposure

arising primarily from its debt

issuance activities, the Company

uses

interest rate swaps and cross-currency

interest rate swaps.

Where such instruments are designated

as fair

value hedges, the changes in the fair

value of these instruments, as well

as the changes in the fair value

the risk component of the underlying

debt being hedged, are recorded as

offsetting gains and losses in

“Interest and other finance expense”.

The effect of derivative instruments, designated

and qualifying as fair value hedges,

on the Consolidated

Income Statements was as follows:

($ in millions)

2022

2021

2020

Gains (losses) recognized

in Interest and other

finance expense:

Interest rate contracts

Designated as fair value

hedges

(91)

(55)

Hedged item

(11)

Cross-currency

Designated as fair value

hedges

(134)

(37)

—

interest rate swaps

Hedged item

135

—

Derivatives not designated in hedge

relationships

Derivative instruments that are not

designated as hedges or do not qualify

as either cash flow or

fair value

hedges are economic hedges

used for risk management purposes.

Gains and losses from changes in

the fair

values of such derivatives are recognized

in the same line in the income

statement as the economically

hedged transaction.

Furthermore, under certain circumstances,

the Company is required

to split and account separately

for

foreign currency derivatives that are

embedded within certain

binding sales or purchase

contracts

denominated in a currency other than

the functional currency of the subsidiary

and the counterparty.

F-34

The gains (losses) recognized in

the Consolidated Income

Statements on derivatives not designated

hedging relationships were

as follows:

($ in millions)

Gains (losses) recognized

in income

Type of derivative

not designated as a hedge

Location

2022

2021

2020

Foreign exchange contracts

Total revenues

(56)

Total

cost of sales

(53)

—

SG&A expenses

(1)

(11)

Non-order related research

and

development

—

(2)

Interest and other finance

expense

(128)

(173)

207

Embedded foreign exchange

contracts

Total revenues

(3)

(7)

(34)

Total

cost of sales

(11)

(2)

(1)

Commodity contracts

Total

cost of sales

(47)

Other

Interest and other finance

expense

—

Total

(193)

(145)

310

(1)

SG&A expenses

represent

“Selling,

general and

administrative

expenses”.

The fair values of derivatives included

in the Consolidated Balance

Sheets were as follows:

Derivative assets

Derivative liabilities

Current in

Non-current

Current in

Non-current

“Other

in “Other

“Other

in “Other

current

non-current

current

non-current

December 31, 2022 ($ in millions)

assets”

liabilities”

Derivatives designated as

hedging instruments:

Foreign exchange contracts

—

Interest rate contracts

—

Cross-currency interest

rate swaps

—

288

Cash-settled call options

—

Total

—

349

Derivatives not designated

as hedging instruments:

Foreign exchange contracts

140

Commodity contracts

—

Interest rate contracts

—

Embedded foreign exchange

derivatives

Total

169

112

Total fair value

184

121

367

F-35

Derivative assets

Derivative liabilities

Current in

Non-current

Current in

Non-current

“Other

in “Other

“Other

in “Other

current

non-current

current

non-current

December 31, 2021 ($ in millions)

assets”

liabilities”

Derivatives designated as

hedging instruments:

Foreign exchange contracts

—

Interest rate contracts

—

Cross-currency interest

rate swaps

—

109

Cash-settled call options

—

Total

114

Derivatives not designated

as hedging instruments:

Foreign exchange contracts

108

107

Commodity contracts

—

Interest rate contracts

—

Embedded foreign exchange

derivatives

Total

138

130

Total fair value

176

133

131

‑

out netting agreements provide for

the termination, valuation and

net settlement of some or all

outstanding transactions between

two counterparties on the occurrence

of one or more pre

‑

defined trigger

events.

Although the Company is party to

‑

out netting agreements with most

derivative counterparties,

the fair

values in the tables above and in

the Consolidated Balance

Sheets at December 31, 2022 and 2021,

have

been presented on a gross basis.

The Company’s netting agreements and other

similar arrangements allow

net settlements under certain

conditions. At December 31, 2022

and 2021, information related

to these offsetting arrangements was

follows:

December 31, 2022 ($ in millions)

Gross amount of

Derivative liabilities

Cash

Non-cash

Type of agreement

recognized

eligible for set-off in

collateral

Net asset

similar arrangement

assets

case of default

received

exposure

Derivatives

194

(96)

—

Total

194

(96)

—

December 31, 2022 ($ in millions)

Gross amount of

Derivative liabilities

Cash

Non-cash

Type of agreement

recognized

eligible for set-off in

collateral

Net liability

similar arrangement

liabilities

case of default

pledged

exposure

Derivatives

458

(96)

—

362

Total

458

(96)

—

362

F-36

December 31, 2021 ($ in millions)

Gross amount of

Derivative liabilities

Cash

Non-cash

Type of agreement

recognized

eligible for set-off in

collateral

Net asset

similar arrangement

assets

case of default

received

exposure

Derivatives

200

(104)

—

Total

200

(104)

—

December 31, 2021 ($ in millions)

Gross amount of

Derivative liabilities

Cash

Non-cash

Type of agreement

recognized

eligible for set-off in

collateral

Net liability

similar arrangement

liabilities

case of default

pledged

exposure

Derivatives

238

(104)

—

134

Total

238

(104)

—

134

—

Note 7

Fair values

Recurring fair value measures

The fair values of financial assets and

liabilities measured at fair value

on a recurring basis were as

follows:

Total

December 31, 2022 ($ in millions)

Level 1

Level 2

Level 3

fair value

Assets

Securities in “Marketable

securities and short-term

investments”:

Equity securities

355

Debt securities—U.S. government

obligations

255

Debt securities—Other government

obligations

Debt securities—Corporate

Derivative assets—current

in “Other current

assets”

184

Derivative assets—non-current

in “Other non-current

assets”

Total

255

681

—

936

Liabilities

Derivative liabilities—current

in “Other current liabilities”

121

Derivative liabilities—non-current

in “Other non-current liabilities”

367

Total

—

488

—

488

F-37

Total

December 31, 2021 ($ in millions)

Level 1

Level 2

Level 3

fair value

Assets

Securities in “Marketable

securities and short-term

investments”:

Equity securities

587

Debt securities—U.S. government

obligations

209

Debt securities—Corporate

Derivative assets—current

in “Other current

assets”

176

Derivative assets—non-current

in “Other non-current

assets”

Total

209

878

—

1,087

Liabilities

Derivative liabilities—current

in “Other current liabilities”

133

Derivative liabilities—non-current

in “Other non-current liabilities”

131

Total

—

264

—

264

During 2022, 2021 and 2020

there have been

reclassifications for any financial

assets or liabilities

between Level 1 and Level

The Company uses the following

methods and assumptions in

estimating fair values of financial

assets and

liabilities measured at fair value

on a recurring basis:

•

Securities in “Marketable securities and

short

‑

term investments”:

If quoted market prices in active

markets for identical assets are available,

these are considered Level

1 inputs; however, when

markets are not active, these inputs

are considered Level 2. If such

quoted market prices are not

available, fair value is determined

using market prices for similar

assets or present value

techniques, applying an appropriate

risk

‑

free interest rate adjusted for non

‑

performance risk. The

inputs used in present value techniques

are observable and fall into the Level

2 category.

•

Derivatives:

The fair values of derivative

instruments are determined

using quoted prices of

identical instruments from an active

market, if available (Level

1 inputs). If quoted prices are not

available, price quotes for similar

instruments, appropriately adjusted,

or present value

techniques, based on available

market data, or option pricing

models are used. Cash

‑

settled call

options hedging the Company’s

WAR liability are valued based on bid prices

of the equivalent

listed warrant. The fair values obtained

using price quotes for similar instruments

or valuation

techniques represent a Level 2 input

unless significant unobservable

inputs are used.

Non

‑

recurring fair value measures

The Company elects to record private

equity investments without

readily determinable fair values

at cost, less

impairment, adjusted for observable

price changes. The Company

reassesses at each reporting period

whether these investments continue

to qualify for this treatment.

In 2022 and 2021, the Company recognized,

in Other income (expense), net, net

fair value gains of $

million and $

108

million, respectively, related to

certain of its private equity investments

based on observable market price

changes for an identical or similar

investment of the same issuer. The fair values were

determined using Level

2 inputs. The carrying values of

these investments at December 31, 2022

and 2021, totaled $

106

million and $

169

million, respectively.

Based on valuations at July 1, 2020,

the Company recorded goodwill

impairment charges of $

311

million in

the third quarter of 2020. The fair

value measurements used in

the analyses were calculated using

the

income approach (discounted

cash flow method). The discounted

cash flow models were calculated

using

unobservable inputs, which

classified the fair value measurement

as Level 3 (see Note 11 for additional

information including further detailed

information related to these charges

and significant unobservable

inputs).

Apart from the transactions above,

there were

additional significant

non

‑

recurring fair value measurements

during 2022 and 2021.

F-38

Disclosure about financial instruments

carried on a cost basis

The fair values of financial instruments

carried on a cost basis were as

follows:

Carrying

Total

December 31, 2022 ($ in millions)

value

Level 1

Level 2

Level 3

fair value

Assets

Cash and equivalents (excluding

securities

with original maturities

up to 3 months):

Cash

1,697

Time deposits

2,459

Restricted cash

Liabilities

Short-term debt and current

maturities of long-term

debt

(excluding finance lease obligations)

2,500

1,068

1,432

2,500

Long-term debt (excluding

finance lease obligations)

4,976

4,813

4,843

Carrying

Total

December 31, 2021 ($ in millions)

value

Level 1

Level 2

Level 3

fair value

Assets

Cash and equivalents (excluding

securities

with original maturities

up to 3 months):

Cash

2,422

Time deposits

1,737

Restricted cash

Marketable securities and

short-term investments

(excluding

securities):

Time deposits

300

Restricted cash, non-current

300

Liabilities

Short-term debt and current

maturities of long-term

debt

(excluding finance lease obligations)

1,357

1,288

1,357

Long-term debt (excluding

finance lease obligations)

4,043

4,234

4,292

The Company uses the following

methods and assumptions in

estimating fair values of financial

instruments

carried on a cost basis:

•

Cash and equivalents (excluding

securities with original maturities up

to 3 months), Restricted

cash, current and non-current, and

Marketable securities and

short

‑

term investments (excluding

securities):

The carrying amounts approximate

the fair values as the items

are short

‑

term in

nature or, for cash held in banks, are equal to

the deposit amount.

•

Short

‑

term debt and current maturities

of long

‑

term debt (excluding finance

lease obligations):

Short

‑

term debt includes commercial paper, bank borrowings

and overdrafts. The carrying

amounts of short

‑

term debt and current maturities

of long

‑

term debt, excluding finance lease

obligations, approximate their

fair values.

•

Long

‑

term debt (excluding finance lease

obligations):

Fair values of bonds are determined

using

quoted market prices (Level 1 inputs), if

available. For bonds without

available quoted market

prices and other long

‑

term debt, the fair values are determined

using a discounted cash flow

methodology based upon

borrowing rates of similar debt instruments

and reflecting appropriate

adjustments for non

‑

performance risk (Level 2 inputs).

F-39

—

Note 8

Receivables, net and Contract assets and liabilities

“Receivables, net” consisted of the

following:

December 31, ($ in millions)

2022

2021

Trade receivables

6,478

6,206

Other receivables

688

684

Allowance

(308)

(339)

Total

6,858

6,551

“Trade receivables”

in the table above includes contractual

retention amounts billed to customers

100

million and $

119

million at December 31, 2022 and

2021, respectively. Management expects that the

substantial majority of related contracts

will be completed and

the substantial majority of the billed

amounts

retained by the customer will be

collected. Of the retention

amounts outstanding at December 31, 2022,

percent and

percent are expected to be

collected in 2023 and 2024, respectively.

“Other receivables”

in the table above consists

of value added tax, claims, rental

deposits and other

non

‑

trade receivables.

The reconciliation of changes in

the allowance for doubtful accounts

is as follows:

($ in millions)

2022

2021

2020

Balance at January 1,

339

357

228

Transition adjustment

—

Current-period provision

for expected credit

losses

115

Write-offs charged against

the allowance

(48)

(37)

(42)

Exchange rate differences

(20)

(14)

—

Balance at December 31,

308

339

357

The following table provides

information about Contract assets and

Contract liabilities:

December 31, ($ in millions)

2022

2021

2020

Contract assets

954

990

985

Contract liabilities

2,216

1,894

1,903

Contract assets primarily relate

to the Company’s right to receive consideration

for work completed but for

which no invoice has been

issued at the reporting date. Contract assets

are transferred to receivables

when

rights to receive payment become unconditional.

Management expects that the majority

of the amounts will

be collected within

one year

of the respective balance sheet

date.

Contract liabilities primarily relate

to up-front advances received

on orders from customers as well

amounts invoiced to customers in excess

of revenues recognized

predominantly on long-term projects.

Contract liabilities are reduced

as work is performed and as revenues

are recognized. In addition to the

amounts presented as Contract liabilities

in the table above, $

million are non-current and

are included in

Other non-current liabilities

in the Balance Sheet.

F-40

The significant changes in the Contract

assets and Contract liabilities

balances were as follows:

2022

2021

Contract

($ in millions)

assets

liabilities

assets

liabilities

Revenue recognized, which

was included in

the Contract liabilities

balance at January 1, 2022/2021

(1,043)

(1,086)

Additions to Contract

liabilities - excluding

amounts recognized

revenue during the period

1,481

1,136

Receivables recognized

that were included in

the Contract assets

balance at January 1, 2022/2021

(591)

(566)

The Company considers its order

backlog to represent its unsatisfied

performance obligations. At

December 31, 2022, the Company

had unsatisfied performance

obligations totaling $

19,867

million and, of

this amount, the Company expects

to fulfill approximately

percent of the obligations in

2023

approximately

percent of the obligations in

2024

and the balance thereafter.

—

Note 9

Inventories, net

“Inventories, net” consisted of the

following:

December 31, ($ in millions)

2022

2021

Raw materials

2,626

2,136

Work in process

1,189

995

Finished goods

2,036

1,594

Advances to suppliers

177

155

Total

6,028

4,880

—

Note 10

Property, plant and equipment, net

“Property, plant and equipment, net” consisted of the

following:

December 31, ($ in millions)

2022

2021

Land and buildings

3,622

3,925

Machinery and equipment

5,495

5,785

Construction in progress

586

522

9,703

10,232

Accumulated depreciation

(5,792)

(6,187)

Total

3,911

4,045

F-41

Assets under finance leases included

in “Property, plant and equipment, net” were as follows:

December 31, ($ in millions)

2022

2021

Land and buildings

178

164

Machinery and equipment

135

313

256

Accumulated depreciation

(135)

(123)

Total

178

133

In 2022, 2021 and 2020 depreciation,

including depreciation of assets under

finance leases, was

531

million, $

575

million and $

586

million, respectively. In 2022, 2021 and 2020 there were no significant

impairments of property, plant or equipment.

—

Note 11

Goodwill and intangible assets

The changes in “Goodwill” were as follows:

Robotics &

Process

Discrete

($ in millions)

Electrification

Motion

Automation

Total

Balance at January 1, 2021

4,527

2,456

1,639

2,228

10,850

Goodwill acquired during

the year

—

150

161

Goodwill allocated to disposals

—

(338)

(7)

—

(345)

Exchange rate differences

and other

(66)

(1)

(19)

(98)

(184)

Balance at December 31,

2021

(1)

4,472

2,117

1,613

2,280

10,482

Goodwill acquired during

the year

220

—

229

Goodwill allocated to

disposals

(2)

—

(6)

—

(8)

Exchange rate differences

and other

(92)

(8)

(20)

(72)

(192)

Balance at December 31,

2022

(1)

4,598

2,118

1,587

2,208

10,511

(1)

At December

31, 2022

and 2021,

the gross

goodwill amounted

to $

10,774

million and

10,760

million, respectively.

The accumulated

impairment

charges

amounted to

263

million and

278

million, respectively,

and related

to the Robotics

& Discrete

Automation

segment.

(2)

Includes goodwill

of $

million relating

to the Turbocharging

Division

which, prior

to its spin-off,

was included

in the Process

Automation

operating segment.

The Company adopted a new operating

model on July 1, 2020, which resulted

in a change to the goodwill

reporting units

being identified at the Division

level. As a result of the new allocation

of goodwill, an interim

quantitative impairment test was

conducted both before and after

the changes

which were effective July 1,

2020.

The interim quantitative impairment

test indicated that the estimated

fair values of the reporting units

were substantially in excess of their

carrying value for all

reporting units except for the Machine

Automation

reporting unit within the Robotics &

Discrete Automation operating

segment. With the fair value of the

reporting unit lower due to the economic

conditions, the existing book

value of the intangible assets combined

with the newly allocated reporting

unit goodwill led to the carrying

value of the Machine Automation

reporting

unit exceeding its fair value. During

2020, a goodwill impairment

charge of $

290

million was recorded to

reduce the carrying value of this reporting

unit to its implied

fair value.

During 2022 and 2021, certain

reporting units were split into separate

reporting units. For each change, an

interim quantitative impairment

test was conducted before and

after the change and in all cases, it

was

concluded that the fair value of the

relevant reporting units exceeded

the carrying value by a significant

amount.

F-42

At October 1, 2022 and 2021, respectively, the Company

performed qualitative assessments

and determined

that it was not more likely than not

that the fair value for each

of the reporting units was below the

carrying

value. As a result, the Company concluded

that it was not necessary to perform

the quantitative impairment

test.

Intangible assets, net consisted of

the following:

2022

2021

Gross

Accumu-

Net

Gross

Accumu-

Net

carrying

lated amort-

carrying

lated amort-

carrying

December 31, ($ in millions)

amount

ization

amount

ization

amount

Capitalized software

for internal use

830

(720)

110

835

(732)

103

Capitalized software

for sale

(26)

—

(29)

Intangibles other than software:

Customer-related

1,743

(808)

935

1,716

(707)

1,009

Technology-related

997

(812)

185

1,122

(868)

254

Marketing-related

498

(347)

151

493

(327)

166

Other

(30)

(29)

Total

4,149

(2,743)

1,406

4,253

(2,692)

1,561

Additions to intangible assets other

than goodwill consisted of the following:

($ in millions)

2022

2021

Capitalized software

for internal use

Capitalized software

for sale

—

Intangibles other than software:

Customer-related

Technology-related

Marketing-related

Other

Total

175

There were no significant intangible

assets acquired in business

combinations in 2021. Included

in the

additions of $

175

million in 2022 are intangible

assets of $

116

million acquired in business

combinations,

primarily consisting of customer-related

and marketing-related intangibles.

Amortization expense of intangible

assets consisted of the following:

($ in millions)

2022

2021

2020

Capitalized software

for internal use

Intangibles other than software

230

252

268

Total

282

318

329

In 2022, 2021 and 2020 impairment

charges on intangible assets were

not significant.

F-43

At December 31, 2022, future amortization

expense of intangible

assets is estimated to be:

($ in millions)

2023

296

2024

221

2025

174

2026

153

2027

145

Thereafter

417

Total

1,406

—

Note 12

Debt

The Company’s total debt at December

31, 2022 and 2021, amounted

to $

7,678

million and $

5,561

million,

respectively.

Short

‑

term debt and current maturities

of long-term debt

“Short

‑

term debt and current maturities

of long

‑

term debt” consisted of the

following:

December 31, ($ in millions)

2022

2021

Short-term debt (weighted-average

interest rate of

1.9

% and

3.2

%, respectively)

1,448

Current maturities of long-term

debt

(weighted-average nominal

interest rate of

0.5

% and

2.8

%, respectively)

1,087

1,306

Total

2,535

1,384

Short

‑

term debt primarily represents

short

‑

term loans from various banks

and issued commercial

paper.

At December 31, 2022, the Company

had

two

commercial paper

programs in place: a $

billion

Euro

‑

commercial paper program for

the issuance of commercial

paper in a variety of currencies,

and a

billion commercial paper

program for the private placement of U.S.

dollar denominated commercial

paper

in the United States. At December

31, 2022, $

1,383

million was outstanding under

the $

billion

Euro-commercial paper program and

amount was outstanding under

the $

billion program in the United

States. At December 31, 2021,

amount was outstanding

under either program.

In December 2019, the Company replaced

its previous multicurrency revolving

credit facility with a new

billion multicurrency revolving

credit facility maturing in 2024. In 2021,

the Company exercised its option

extend the maturity of this facility

to 2026.

The facility is for general corporate purposes.

Interest costs on

drawings under the facility are LIBOR

(for drawings in currencies

for which LIBOR is still published)

and

EURIBOR for EURO drawings, plus

a margin of

0.175

percent, while commitment fees

(payable on the

unused portion of the facility) amount

percent of the margin,

which represents commitment

fees of

0.06125

percent per annum. Utilization fees,

payable on drawings, amount

0.075

percent per annum on

drawings up to one

‑

third of the facility,

0.15

percent per annum on drawings

in excess of one

‑

third but less

than or equal to two

‑

thirds of the facility, or

0.30

percent per annum on drawings

over two

‑

thirds of the facility.

The facility

contains cross

‑

default clauses whereby

an event of default would

occur if the Company were to

default on indebtedness as defined

in the facility, at or above a specified threshold.

amount was drawn at

December 31, 2022 and 2021, under

this facility.

F-44

The Company amended and restated

its facility in February 2023

for the purpose of addressing the

discontinuation of LIBOR. Under the amended

and restated credit facility, the margin is unchanged,

but

advances in USD are referenced to

CME Term SOFR, whilst advances in CHF and GBP are referenced

overnight SARON and SONIA respectively, subject

to applicable credit adjustment spreads.

Long

‑

term debt

The Company raises long-term debt

in various currencies, maturities

and on various interest rate

terms. For

certain of its debt obligations, the Company

utilizes derivative instruments

to modify its interest rate exposure.

In particular, the Company uses interest rate swaps

to effectively convert certain

fixed

‑

rate long

‑

term debt

into floating rate obligations.

For certain non-U.S. dollar denominated

debt, the Company utilizes cross-

currency interest rate swaps to effectively

convert the debt into a U.S. dollar obligation.

The carrying value of

debt, designated as being hedged

by fair value hedges, is adjusted

for changes in the fair value of

the risk

component of the debt being hedged.

The following table summarizes the Company’s

long

‑

term debt considering the effect

of interest rate and

cross-currency interest rate swaps. Consequently, a fixed

‑

rate debt subject to a fixed

‑

floating interest rate

swap is included as a floating rate debt

in the table below:

2022

2021

December 31,

Nominal

Effective

Nominal

Effective

($ in millions, except % data)

Balance

rate

Balance

rate

Floating rate

3,459

0.4

2.8

3,598

1.2

0.3

Fixed rate

2,771

2.2

1,885

3.0

3.1

6,230

5,483

Current portion of long-term

debt

(1,087)

0.5

1.5

(1,306)

2.8

1.0

Total

5,143

4,177

At December 31, 2022, the principal

amounts of long

‑

term debt repayable (excluding

finance lease

obligations) at maturity were as follows:

($ in millions)

2023

1,058

2024

2,387

2025

193

2026

—

2027

461

Thereafter

2,194

Total

6,293

F-45

Details of outstanding bonds were

as follows:

2022

2021

December 31, (in millions)

Nominal

Carrying

Nominal

Carrying

outstanding

value

(1)

outstanding

value

(1)

Bonds:

2.875

% USD Notes, due 2022

—

USD

1,250

1,258

0.625

% EUR Instruments, due

2023

EUR

700

742

EUR

700

800

% CHF Bonds, due 2023

CHF

275

298

—

0.625

% EUR Instruments, due

2024

EUR

700

720

—

Floating Rate EUR

Instruments, due 2024

EUR

500

536

—

0.75

% EUR Instruments, due

2024

EUR

750

769

EUR

750

860

0.3

% CHF Bonds, due 2024

CHF

280

303

CHF

280

306

2.1

% CHF Bonds, due 2025

CHF

150

162

—

0.75

% CHF Bonds, due 2027

CHF

425

460

—

3.8

% USD Notes, due 2028

(2)

USD

383

381

USD

383

381

1.0

% CHF Bonds, due 2029

CHF

170

184

CHF

170

186

% EUR Instruments, due

2030

EUR

800

677

EUR

800

862

2.375

% CHF Bonds, due 2030

CHF

150

162

—

4.375

% USD Notes, due 2042

(2)

USD

609

590

USD

609

589

Total

5,984

5,242

(1)

USD carrying

values include

unamortized

debt issuance

costs, bond

discounts

or premiums,

as well

as adjustments

for fair value

hedge

accounting,

where appropriate.

(2)

Prior to completing

a cash tender

offer in

2020, the

original

principal

amount outstanding,

on each of

the

3.8

% USD Notes,

due 2028,

and

the

4.375

% USD Notes,

due 2042, was

750

million.

During 2022, the Company repaid

at maturity its

2.875

% USD Notes, which paid interest semi

‑

annually in

arrears.

The Company had entered

into interest rate swaps

for an aggregate nominal amount

1,050

million to partially hedge

its interest obligations on these Notes and after

considering the impact of

such swaps, $

1,050

million of the outstanding principal

at December 31, 2021, is shown as

floating rate debt,

in the table of long

‑

term debt above.

During 2020, in connection

with exercising certain early redemption

options on the $

250

million

5.625

USD Notes, due 2021, and $

450

million

3.375

% USD Notes, due 2023, and the partial

redemption through a

cash tender offer of the

3.8

% USD Notes, due 2028, and

4.375

% USD Notes, due 2042, the Company

recognized losses on extinguishment

of debt of $

162

million, representing

the premium associated with the

early redemption, as well as the

recognition of the relevant remaining

unamortized issuance premium or

discounts and issuance costs.

The

0.625

% EUR Instruments, due 2023,

pay interest annually

in arrears at a fixed rate of

0.625

percent per

annum. The Company may redeem

these notes up to three months prior to

maturity (Par call date), in whole

or in part, at the greater of (i)

100

percent of the principal

amount of the notes to be redeemed

and (ii) the

sum of the present values of remaining

scheduled payments of principal

and interest (excluding interest

accrued to the redemption date) discounted

to the redemption date at a

rate defined in the note terms,

plus

interest accrued at the redemption date.

The Company may redeem these instruments

in whole or in part,

after the Par call date at

100

percent of the principal

amount of the notes to be redeemed.

The Company

entered into interest rate swaps

to modify the characteristics of these bonds.

After considering the impact of

such swaps, these notes effectively became

floating rate euro obligations

and consequently have been

shown as floating rate debt, in the

table of long

‑

term debt above.

The

0.75

% EUR Instruments, due 2024,

pay interest annually

in arrears at a fixed rate of

0.75

percent per

annum and have the same early redemption

terms as the

0.625

% EUR Instruments above. The Company

entered into interest rate swaps

to modify the characteristics of these bonds.

After considering the impact of

such swaps, these bonds effectively became

floating rate euro obligations

and consequently have been

shown as floating rate debt in the table

of long

‑

term debt above.

F-46

The

0.3

% CHF Bonds, due 2024, and

1.0

% CHF Bonds, due 2029, each

pay interest annually in

arrears.

The Company may redeem these bonds,

one month

prior to maturity in the case of

the 2024 Bonds and

three

months prior to maturity in the case

of the 2029 Bonds, in whole

but not in part, at par plus accrued interest.

Further, the Company has the option to redeem these

instruments prior to maturity, in whole but not in part,

at par plus accrued interest, if

percent or more of the aggregate

principal amount of the relevant bond

issue have been redeemed

or purchased and cancelled at the

time of the option exercise notice.

The

3.8

% USD Notes, due 2028, were

issued in April 2018, along

with $

300

million of

2.8

% USD Notes, due

2020, and $

450

million of

3.375

% USD Notes, due 2023, each paying

interest semi

‑

annually in arrears. The

2020 Notes were repaid at maturity in

October 2020 and the 2023 Notes

were redeemed early in

full in

December 2020.

The Company may redeem

the remaining principal outstanding

of the 2028 Notes up to

three months

prior to their maturity date, in

whole or in part, at the greater

of (i)

100

percent of the principal

amount of the notes to be redeemed

and (ii) the sum of the present

values of remaining scheduled

payments

of principal and interest (excluding

interest accrued to the redemption

date) discounted to the redemption

date at a rate defined in the Notes

terms, plus interest accrued

at the redemption date. On or after

January 3,

2028 (

three months

prior to their maturity date),

the Company may also redeem

the 2028 Notes, in whole or

in part, at any time at a redemption

price equal to

100

percent of the principal

amount of the notes to be

redeemed plus unpaid

accrued interest to, but excluding, the redemption

date. During 2020 by way of

a cash

tender offer, the Company redeemed $

367

million of the original $

750

million

3.8

% USD Notes, due 2028,

issued.

These notes, registered with

the U.S. Securities and Exchange

Commission, were issued by

ABB

Finance (USA) Inc., a

100

percent owned finance

subsidiary, and are fully and unconditionally guaranteed

ABB Ltd. There are no significant restrictions

on the ability of the parent company

to obtain funds from its

subsidiaries by dividend

or loan. In reliance on Rule 13-01 of Regulation

‑

X, the separate financial

statements of ABB Finance (USA)

Inc. are not provided.

The

% EUR Instruments, due 2030,

do not pay interest and have the

same early redemption terms as

the

0.625

% EUR Instruments above. Cross-currency

interest rate swaps have been

used to modify the

characteristics of these instruments.

After considering the impact

of these cross-currency interest

rate swaps,

the Company effectively has a floating

rate U.S. dollar obligation.

The

4.375

% USD Notes, due 2042, pay

interest semi

‑

annually in arrears at a fixed annual

rate of

4.375

percent. The Company may redeem

these notes prior to maturity, in whole or in part, at

the greater of

(i)

100

percent of the principal amount

of the notes to be redeemed

and (ii) the sum of the present values

remaining scheduled

payments of principal and interest (excluding

interest accrued to the redemption date)

discounted to the redemption date at

a rate defined in the note

terms, plus interest accrued at

the redemption

date. These notes, registered with

the U.S. Securities and

Exchange Commission, were issued by

ABB

Finance (USA) Inc., a

100

percent owned finance

subsidiary, and are fully and unconditionally guaranteed

ABB Ltd. There are no significant restrictions

on the ability of the parent company

to obtain funds from its

subsidiaries by dividend

or loan. In reliance on Rule

‑

01 of Regulation S

‑

X, the separate financial

statements of ABB Finance (USA)

Inc. are not provided. During

2020, by way of a cash tender offer, the

Company redeemed $

141

million of the original $

750

million

4.375

% USD Notes, due 2042, issued.

In March 2022, the Company issued

the following CHF bonds: (i) CHF

275

million

zero

interest Bonds, due

2023, and (ii) CHF

425

million Bonds, due 2027, with

a coupon of

0.75

percent payable annually

in arrears.

The Company may redeem the CHF

425

million Bonds,

one month

prior to maturity, in whole but not in part,

at par plus accrued interest. Further, the Company

has the option to redeem

these instruments prior to

maturity, in whole but not in part, at par plus accrued

interest, if

percent or more of the aggregate

principal

amount have been redeemed

or purchased and cancelled

at the time of the option exercise notice.

The

aggregate net proceeds of these

CHF bond issues, after

discount and fees, amounted to CHF

699

million

(equivalent to approximately $

751

million on date of issuance).

F-47

Also in March 2022, the Company

issued the following EUR

Instruments,

both due in 2024:

(i) EUR

700

million, paying interest annually

in arrears at a fixed rate of

0.625

percent per annum, and

(ii) EUR

500

million floating rate notes, paying

interest quarterly in arrears at a

variable rate of

0.7

percentage

points above the 3-month EURIBOR, subject

to a minimum rate of interest of

zero

percent. The Company

may redeem the EUR

700

million Instruments prior to

maturity at the greater of (i)

100

percent of the principal

amount of the notes to be redeemed

and (ii) the sum of the present

values of remaining scheduled

payments

of principal and interest (excluding

interest accrued to the redemption

date) discounted to the redemption

date at a rate defined in the note

terms, plus interest accrued

at the redemption date. In relation to

these EUR

Instruments, the Company recorded

net proceeds (after the respective

discount and premium, as well as

fees) of EUR

1,203

million (equivalent to $

1,335

million on the date of issuance).

Interest rate swaps have

been used to modify the characteristics

of the EUR

700

million Instruments, due 2024. After

considering the

impact of these interest rate swaps,

the EUR

700

million Instruments, effectively become

floating rate

obligations.

In October 2022, the Company issued

the following CHF bonds: (i) CHF

150

million

2.1

percent Bonds, due

2025, and (ii) CHF

150

million

2.375

percent Bonds, due 2030. Each of

the respective bonds pays interest

annually in arrears. The Company

may redeem these bonds, three

months prior to maturity, in whole but not

in part, at par plus accrued interest.

Further, the Company has the option to redeem

these instruments prior

to maturity, in whole but not in part, at par plus accrued

interest, if

percent or more of the aggregate

principal amount of the relevant bond

issue has been redeemed

or purchased and cancelled

at the time of

the option exercise notice. The aggregate

net proceeds of these CHF bond

issues, after underwriting

discount and other fees, amounted

to CHF

299

million (equivalent to approximately

304

million on date of

issuance).

The Company’s various debt instruments

contain cross

‑

default clauses which would

allow the bondholders

demand repayment if the Company

were to default on any borrowing

at or above a specified threshold.

Furthermore, all such bonds constitute

unsecured obligations

of the Company and rank pari passu

with other

debt obligations.

In addition to the bonds described above,

included in long

‑

term debt at December 31, 2022 and

2021, are

finance lease obligations,

bank borrowings of subsidiaries and

other long

‑

term debt, none of which is

individually significant.

—

Note 13

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

“Other provisions” consisted of the

following:

December 31, ($ in millions)

2022

2021

Contract-related provisions

615

762

Provision for insurance-related

reserves

171

174

Restructuring and restructuring-related

provisions

145

188

Provisions for contractual

penalties and compliance

and litigation matters

Other

191

199

Total

1,171

1,386

F-48

“Other current liabilities” consisted

of the following:

December 31, ($ in millions)

2022

2021

Employee-related liabilities

1,490

1,547

Accrued expenses

872

768

Non-trade payables

681

644

Accrued customer rebates

315

322

Income taxes payable

312

378

Other tax liabilities

285

298

Derivative liabilities (see Note

121

133

Deferred income

102

Pension and other employee

benefits

Accrued interest

Other

113

Total

4,323

4,367

“Other non

‑

current liabilities” consisted

of the following:

December 31, ($ in millions)

2022

2021

Income tax related liabilities

1,287

1,458

Derivative liabilities (see Note

367

130

Provisions for contractual

penalties and compliance

and litigation matters

129

Contract liabilities (see Note

—

Employee-related liabilities

Environmental provisions

Deferred income

Other

185

227

Total

2,085

2,116

—

Note 14

Leases

The Company’s lease obligations

primarily relate to real estate, machinery

and equipment. The components

of lease expense were as follows:

Machinery

Land and buildings

and equipment

Total

($ in millions)

2022

2021

2020

2022

2021

2020

2022

2021

2020

Operating lease cost

217

240

287

288

313

376

Finance lease cost

Short-term lease cost

Sub-lease income

(18)

(24)

(20)

(1)

(19)

(25)

(21)

Total lease expense

234

259

297

110

106

135

344

365

432

F-49

The following table presents supplemental

cash flow information related

to leases:

Machinery

Land and buildings

and equipment

Total

($ in millions)

2022

2021

2020

2022

2021

2020

2022

2021

2020

Operating leases:

Cash paid under operating

cash flows

200

223

263

266

291

346

Right-of-use assets

obtained

in exchange for new liabilities

285

267

266

335

353

323

In 2022, 2021 and 2020 the cash

flow amounts under finance leases

were not significant.

At December 31, 2022,

the future net minimum lease

payments for operating and

finance leases and the

related present value of the net minimum

lease payments consisted of the

following:

Operating Leases

Finance Leases

Land and

Machinery

Land and

Machinery

($ in millions)

buildings

and equipment

buildings

and equipment

2023

203

2024

168

2025

138

2026

104

2027

Thereafter

151

—

Total minimum lease payments

834

114

165

Difference between undiscounted

cash flows

and discounted cash flows

(74)

(3)

(27)

(3)

Present value of minimum

lease payments

760

111

138

The following table presents certain

information related to lease

terms and discount rates:

Land and buildings

Machinery and equipment

2022

2021

2020

2022

2021

2020

Operating leases:

Weighted-average remaining

term (months)

Weighted-average discount

rate

3.3%

2.6%

3.0%

1.9%

2.0%

Finance leases:

Weighted-average remaining

term (months)

135

100

107

Weighted-average discount

rate

5.5%

7.7%

2.3%

1.8%

2.3%

The present value of minimum

finance lease payments included

in Short

‑

term debt and current maturities of

long

‑

term debt and Long

‑

term debt in the Consolidated

Balance Sheets at December 31, 2022,

amounts to

million and $

167

million, respectively, and at December 31, 2021, amounts to

million and

134

million, respectively.

F-50

—

Note 15

Commitments and contingencies

Contingencies—Regulatory, Compliance and Legal

Regulatory

As a result of an internal investigation,

the Company self-reported

to the Securities and Exchange

Commission (SEC) and the Department

of Justice (DoJ) in the United

States as well as to the Serious

Fraud

Office (SFO) in the United Kingdom concerning

certain of its past dealings

with Unaoil and its subsidiaries,

including alleged improper

payments made by these entities to

third parties. In May 2020,

the SFO closed its

investigation, which it originally

announced in February 2017,

as the case did not meet the relevant

test for

prosecution and in December

2022 this matter was closed

without action by the DOJ as part

of the Kusile

settlement.

Based on findings during an

internal investigation, the Company

self-reported to the SEC and

the DoJ, in the

United States, to the Special Investigating

Unit (SIU) and the National

Prosecuting Authority (NPA) in South

Africa as well as to various authorities

in other countries potential

suspect payments and other

compliance

concerns in connection with some of

the Company’s dealings

with Eskom and related persons. Many of

those

parties have expressed an interest

in, or commenced an investigation

into, these matters and the Company

cooperating fully with them. The Company

paid $

104

million to Eskom in December

2020 as part of a full and

final settlement with Eskom and the SIU

relating to improper

payments and other compliance

issues

associated with the Controls and

Instrumentation Contract, and its

Variation Orders for Units 1 and 2 at

Kusile. The Company made a provision

of approximately $

325

million, which was recorded in

Other income

(expense), net, during the third quarter

of 2022. In December

2022, the Company settled with

the SEC and

DoJ as well as the authorities in South

Africa and Switzerland.

The matter is still pending

with the authorities

in Germany, but the Company does not believe that it

will need to record any additional

provisions for this

matter.

General

The Company is aware of proceedings,

or the threat of proceedings,

against it and others in respect of

private claims by customers and other

third parties with regard

to certain actual or alleged

anticompetitive

practices. Also, the Company is subject

to other claims and legal

proceedings, as well as investigations

carried out by various law enforcement

authorities. With respect to the above-mentioned

claims, regulatory

matters, and any related proceedings,

the Company will bear

the related costs, including costs

necessary to

resolve them.

Liabilities recognized

At December 31, 2022 and 2021,

the Company had aggregate

liabilities of $

million and $

104

million,

respectively, included in “Other provisions”

and “Other non

‑

current liabilities”, for the above regulatory,

compliance and legal

contingencies, and none of the individual

liabilities recognized was significant. As it is

not possible to make an informed

judgment on, or reasonably

predict, the outcome of certain matters

and as

it is not possible, based on information

currently available to management,

to estimate the maximum potential

liability on other matters, there

could be adverse outcomes

beyond the amounts accrued.

F-51

Guarantees

General

The following table provides quantitative

data regarding the Company’s third

‑

party guarantees. The maximum

potential payments represent a “worst

‑

case scenario”, and do

not reflect management’s expected outcomes.

Maximum potential payments

(1)

December 31, ($ in millions)

2022

2021

Performance guarantees

4,300

4,540

Financial guarantees

Indemnification guarantees

(2)

—

136

Total

4,396

4,728

(1)

Maximum potential

payments

include amounts

in both continuing

and discontinued

operations.

(2)

Certain indemnifications

provided

to Hitachi

in connection

with the divestment

of Power Grids

are without

limit.

The carrying amount of liabilities

recorded in the Consolidated

Balance Sheets reflects the Company’s best

estimate of future payments, which

it may incur as part of fulfilling

its guarantee obligations. In respect

of the

above guarantees, the carrying amounts

of liabilities at December 31, 2022

and 2021, amounted to $

million

and $

156

million, respectively, the majority of which in 2021 is included

in discontinued operations.

The Company is party to various

guarantees providing financial

or performance assurances to certain

third

parties. These guarantees, which

have various maturities up to 2035,

mainly consist of performance

guarantees whereby (i) the Company

guarantees the performance

of a third party’s product or service

according to the terms of a contract and

(ii) as member of a consortium/joint

venture that includes third

parties, the Company guarantees not

only its own performance

but also the work of third parties.

Such

guarantees may include guarantees

that a project will be completed within

a specified time. If the third party

does not fulfill the obligation, the Company

will compensate the guaranteed

party in cash or in kind. The

original maturity dates for the

majority of these performance

guarantees range from

one

ten years

In conjunction with the divestment of

the high

‑

voltage cable and cables

accessories businesses, the

Company has entered into various

performance guarantees

with other parties with respect

to certain liabilities

of the divested business. At December

31, 2022 and 2021, the maximum

potential payable under

these

guarantees amounts to $

843

million and $

911

million, respectively, and these guarantees have various

maturities ranging from

five

ten years

The Company retained obligations

for financial, performance and

indemnification guarantees

related to the

sale of the Power Grids business

(see Note 3 for details). The performance

and financial guarantees

have

been indemnified by Hitachi

at the same proportion of its ownership

in Hitachi Energy Ltd, (increasing

from

80.1

percent at December 31, 2021,

100

percent at December 31, 2022).

These guarantees, which have

various maturities up to 2035, primarily

consist of bank guarantees,

standby letters of credit, business

performance guarantees and other

trade-related guarantees, the

majority of which have original

maturity

dates ranging from

one

ten years

. The maximum amount payable

under these guarantees at

December 31, 2022 and 2021, is approximately

3.0

billion and $

3.2

billion, respectively. On completing the

sale of the Company’s remaining

19.9

percent interest in Hitachi

Energy to Hitachi, the Company

also settled

certain existing indemnification

guarantees that were due to be settled

concurrent with such transaction.

As a

result, in 2022, the Company recorded

136

million of cash outflows for the settlement

of these liabilities

(recorded in discontinued

operations).

F-52

Commercial commitments

In addition, in the normal course

of bidding for and executing

certain projects, the Company has

entered into

standby letters of credit, bid/performance

bonds and surety bonds (collectively

“performance bonds”) with

various financial institutions. Customers

can draw on such performance

bonds in the event that the Company

does not fulfill its contractual obligations.

The Company would then

have an obligation to reimburse

the

financial institution for amounts paid

under the performance

bonds. At December 31, 2022 and 2021,

the total

outstanding performance bonds

aggregated to $

2.9

billion and $

3.6

billion, respectively; of each of these

amounts, $

0.1

billion relates to discontinued

operations. There have been

no significant amounts reimbursed

to financial institutions under these

types of arrangements in 2022 and

2021.

Product and order

‑

related contingencies

The Company calculates its provision

for product warranties based

on historical claims experience

and

specific review of certain contracts.

The reconciliation of the “Provisions

for warranties”, including

guarantees of product performance,

was as

follows:

($ in millions)

2022

2021

2020

Balance at January 1,

1,005

1,035

816

Net change in warranties

due to acquisitions,

divestments, spin-offs

and

liabilities held for sale

(1)

(24)

Claims paid in cash or

in kind

(157)

(222)

(209)

Net increase in provision

for changes in

estimates, warranties issued

and warranties expired

252

226

369

Exchange rate differences

(48)

(35)

Balance at December 31,

1,028

1,005

1,035

(1)

Includes adjustments

to the

initial purchase

price allocation

recorded

during the

measurement

period.

In 2020, the Company determined

that the provision for a product warranty

related to a divested business

was no longer sufficient to cover expected

warranty costs in the remaining

warranty period. Due to an

unexpected level of product failure,

the previously estimated product

warranty provision was increased

143

million during 2020. The corresponding

increase was included in “Cost of sales

of products”. As these

costs relate to a divested business, in

accordance with the definition

of the Company’s primary measure of

segment performance, Operational

EBITA (see Note 23),

the costs have been excluded

from this measure.

The warranty liability has been recorded

based on the information currently

available and is subject to change

in the future.

Related party transactions

The Company conducts business with

certain companies where

members of the Company’s Board

Directors or Executive Committee

act, or in recent years have

acted, as directors or senior executives.

The

Company’s Board of Directors has determined

that the Company’s business

relationships with those

companies do not constitute material

business relationships. This determination

was made in accordance

with the Company’s related party transaction

policy which was prepared

based on the Swiss Code of Best

Practice and the independence

criteria set forth in the corporate

governance rules of the New

York Stock

Exchange.

F-53

—

Note 16

Income taxes

“Income tax expense” consisted of the

following:

($ in millions)

2022

2021

2020

Current taxes

1,101

1,346

776

Deferred taxes

(344)

(289)

(280)

Income tax expense allocated

to continuing operations

757

1,057

496

Income tax expense

(benefit) allocated to discontinued

operations

(5)

(1)

322

Income tax expense from continuing

operations is reconciled below

from the Company’s weighted

‑

average

global tax rate (rather than from the

Swiss domestic statutory tax rate)

as the parent company of

the ABB

Group, ABB Ltd, is domiciled in Switzerland

and income generated

in jurisdictions outside of Switzerland

(hereafter “foreign jurisdictions”) which

has already been subject to

corporate income tax in those

foreign

jurisdictions is, to a large extent,

tax exempt in Switzerland. There

is no requirement in Switzerland

for any

parent company of a group to

file a tax return of the consolidated

group determining domestic and

foreign

pre

‑

tax income. As the Company’s consolidated

income from continuing operations

is predominantly earned

outside of Switzerland, the weighted

‑

average global tax rate of the Company

results from enacted corporate

income tax rates in foreign jurisdictions.

The reconciliation of “Income tax expense

from continuing operations”

at the weighted

‑

average tax rate to the

effective tax rate is as follows:

($ in millions, except % data)

2022

2021

2020

Income from continuing

operations before

income taxes

3,394

5,787

841

Weighted-average global

tax rate

23.6%

23.7%

22.9%

Income taxes at weighted-average

tax rate

800

1,371

193

Items taxed at rates other

than the weighted-average

tax rate

127

176

Unrecognized tax benefits

(83)

151

(38)

Changes in valuation

allowance, net

(195)

(95)

Effects of changes in tax laws

and enacted tax rates

(19)

Non-deductible / non-taxable

items

(542)

232

Other, net

(5)

Income tax expense

from continuing operations

757

1,057

496

Effective tax rate for

the year

22.3%

18.3%

59.0%

The allocation of consolidated

income from continuing operations,

which is predominantly earned

outside of

Switzerland, impacts the “weighted-average

global tax rate”. In 2021, gains on sales

of businesses increased

the weighted-average global

tax rate by approximately

percent.

In 2022, “Items taxed at rates other than

the weighted-average tax rate” included

million for dividends

received in holding entities

which could not fully benefit from the participation

exemption. In 2021, this

included $

107

million for certain amounts related to the

divestment of the Dodge business,

while in 2020 the

amount was not significant.

F-54

In 2022, “Changes in valuation

allowance, net” included

positive impacts from changes

in certain outlooks in

Asia of $

million, Europe of $

million and the Americas of $

208

million, offset by negative impacts

from

changes in certain outlooks in Europe

of $

million. In 2021, the amount included

positive impacts from

changes in certain outlooks in Europe

of $

million. In 2020, the amount predominantly

reflects increases in

the valuation allowance

resulting from changes in the expectations

at that time of future economic

conditions

due to impacts at that time on the Company’s

business from the COVID-19 pandemic.

In 2022,

“Effects of changes in tax laws

and enacted tax rates” primarily

reflect the impact of changes

to tax

rates in Europe for $

million. In 2021, the amount was

not significant. In 2020, the amount

primarily reflects

the impact of changes to tax rates in

certain countries in Asia for $

million.

In 2022, “Non-deductible / non-taxable

items” includes the tax impact

of $

million for the non-deductible

regulatory penalties in connection

with the Kusile project offset partially by the impact

of the non-taxable gain

from the sale of the remaining

investment in Hitachi Energy. In 2021, this includes $

567

million in reported

income tax benefits primarily due

to impacts of divestments and

internal reorganizations

where the reported

net gain from sale of businesses exceeded

the related taxable

gain as well as the impact of a recognition

previously unrecognized

outside basis differences.

In 2020, the negative impact from

these items was

232

million and included $

million for the impairment of non-deductible

goodwill. The amount in 2020 also

includes $

million relating to non-operational

pension costs resulting from the settlement of

certain defined

benefit plans which were principally

not deductible.

In all periods, the amounts reported also

include other

items that were deducted for financial

accounting purposes but are

typically not tax deductible, such as

certain interest expense costs, local

taxes on productive activities, disallowed

amounts for meals and

entertainment expenses and other similar

items.

In 2022 and 2021, “Unrecognized

tax benefits” in the table above

included a net benefit of $

million and

150

million, respectively, related to the interpretation for tax law and

double tax treaty agreements

competent tax authorities. The amount

in 2020 included a benefit

of $

million.

In 2020 “Other, net” included an expense of $

million, related to the

finalization of tax audits in Europe.

F-55

Deferred tax assets and liabilities

(excluding amounts held for sale

and in discontinued operations)

consisted

of the following:

December 31, ($ in millions)

2022

2021

Deferred tax assets:

Unused tax losses and

credits

462

551

Provisions and other accrued

liabilities

756

757

Other current assets including

receivables

100

104

Pension

283

338

Inventories

304

266

Intangible assets

1,154

1,135

Other

Total gross deferred tax asset

3,125

3,208

Valuation allowance

(1,000)

(1,263)

Total gross deferred tax asset, net

of valuation allowance

2,125

1,945

Deferred tax liabilities:

Property, plant and equipment

(232)

(245)

Intangible assets

(237)

(281)

Other assets

(91)

(107)

Pension

(318)

(302)

Other liabilities

(200)

(175)

Inventories

(44)

(35)

Unremitted earnings of

subsidiaries

(336)

(308)

Total gross deferred tax liability

(1,458)

(1,453)

Net deferred tax asset

(liability

)

667

492

Included in:

“Deferred taxes”—non-current

assets

1,396

1,177

“Deferred taxes”—non-current

liabilities

(729)

(685)

Net deferred tax asset

(liability)

667

492

Certain entities have deferred tax

assets related to net operating

loss carry

‑

forwards and other items. As

recognition of these assets in certain

entities did not meet the more

likely than not criterion, valuation

allowances have been

recorded.

“Unused tax losses and credits” at

December 31, 2022 and 2021, in

the

table above, included $

million and $

million, respectively, for which the Company has established

valuation allowance as, due to limitations

imposed by the relevant

tax law, the Company determined that,

more likely than not, such deferred

tax assets would not be realized.

The valuation allowance

at December 31, 2022, 2021 and

2020, was $

1,000

million, $

1,263

million and

1,518

million, respectively.

Certain amounts included in

deferred tax assets for intangible

assets result from intercompany transactions

occurring at fair market value

for which no corresponding accounting

basis exists.

At December 31, 2022 and 2021,

deferred tax liabilities totaling $

336

million and $

308

million, respectively,

have been provided for withholding

taxes, dividend distribution taxes or additional

corporate income taxes

(hereafter “withholding taxes”) on unremitted

earnings which will be

payable in foreign jurisdictions in the

event of repatriation of the foreign

earnings to Switzerland. Income

which has been generated

outside of

Switzerland and has already

been subject to corporate income

tax in such foreign jurisdictions is,

to a large

extent, tax exempt in Switzerland and

therefore, generally

no or only limited Swiss income

tax has to be

provided for on the repatriated earnings

of foreign subsidiaries.

F-56

Certain countries levy withholding

taxes on dividend distributions and

these taxes cannot always be

fully

reclaimed by the Company’s relevant subsidiary

receiving the dividend

although the taxes have to be

withheld and paid by the relevant

subsidiary distributing such dividend.

In 2022 and 2021, certain taxes arose

in certain foreign jurisdictions

for which the technical merits do

not allow utilization of benefits.

December 31, 2022 and 2021,

foreign subsidiary retained earnings

which would be subject to withholding

taxes upon distribution were approximately

100

million and $

100

million, respectively. These earnings were

considered as indefinitely

reinvested, as these funds are

used for financing current operations

as well as

business growth through working

capital and capital expenditure

in those countries and, consequently, no

deferred tax liability was recorded.

At December 31, 2022, net operating

loss carry

‑

forwards of $

1,806

million and tax credits of

million were

available to reduce future income

taxes of certain subsidiaries.

Of these amounts, $

809

million of operating

loss carry-forwards and $

million of tax credits will expire

in varying amounts through 2046, while

the

remainder are available

for carryforward indefinitely. The largest amount of these carry

‑

forwards related to

the Company’s Europe operations.

Unrecognized tax benefits consisted

of the following:

Penalties and

interest

related to

Unrecognized

unrecognized

($ in millions)

tax benefits

Total

Classification as unrecognized

tax items on January

1, 2020

1,106

233

1,339

Net change due to acquisitions

and divestments

—

Increase relating to prior

year tax positions

298

394

Decrease relating to prior

year tax positions

(161)

(57)

(218)

Increase relating to current

year tax positions

390

395

Decrease due to settlements

with tax authorities

(340)

(75)

(415)

Decrease as a result of

the applicable statute of

limitations

(59)

(16)

(75)

Exchange rate differences

Balance at December 31,

2020, which would,

if recognized, affect

the effective tax rate

1,298

192

1,490

Net change due to acquisitions

and divestments

(6)

Increase relating to prior

year tax positions

240

298

Decrease relating to prior

year tax positions

(42)

(3)

(45)

Increase relating to current

year tax positions

105

Decrease due to settlements

with tax authorities

(175)

(20)

(195)

Decrease as a result of

the applicable statute of

limitations

(72)

(22)

(94)

Exchange rate differences

(41)

(7)

(48)

Balance at December 31,

2021, which would,

if recognized, affect

the effective tax rate

1,322

199

1,521

Increase relating to prior

year tax positions

Decrease relating to prior

year tax positions

(98)

(12)

(110)

Increase relating to current

year tax positions

Decrease due to settlements

with tax authorities

(31)

(14)

(45)

Decrease as a result of

the applicable statute of

limitations

(71)

(23)

(94)

Exchange rate differences

(58)

(10)

(68)

Balance at December 31,

2022, which would,

if recognized, affect

the effective tax rate

1,170

180

1,350

In 2022 and 2021, “Increase relating

to current year tax positions” included

a total of $

million and

million, respectively, in taxes related to the interpretation of

tax law and double tax treaty agreements

competent tax authorities.

F-57

In 2020, “Increase relating to current

year tax positions”, included

a total of $

381

million in taxes related to the

interpretation of tax law and double

tax treaty agreements by competent

tax authorities. In 2020, $

301

million

of the $

381

million is reported as Income

tax expense in discontinued

operations.

In 2022, “Increase relating to prior year

tax positions” included $

million, predominantly from Asia and

Europe.

In 2021 “Increase relating to prior

year tax positions” included

a total of $

240

million related to the

interpretation of tax law and double

tax treaty agreements by competent

tax authorities in Europe.

In 2020, “Increase relating to prior year

tax positions” is predominantly

related to the interpretation of

tax law

and double tax treaty agreements

by competent tax authorities

in Europe, of which $

million is reported as

Income tax expense in discontinued

operations.

In 2022, “Decrease relating to prior

year tax positions” included

million for a decrease in tax risk

assessments

in Europe.

In 2021, “Decrease relating to prior

year tax positions” of $

million included $

million related to tax risk

assessments in Europe.

In 2020, “Decrease relating to prior

year tax positions” included

a total of $

million related to a change

interpretation of tax law in Asia and

changed tax risk assessments

in Europe of $

million.

In 2022, “Decrease due to settlements

with tax authorities” is predominantly

related to tax assessments

received in Asia and Europe.

In 2021,

“Decrease due to settlements

with tax authorities” is predominantly

related to tax assessments

received in Europe.

In 2020, “Decrease due to settlements

with tax authorities” is predominantly

related to closed tax audits in

Europe.

At December 31, 2022,

the Company expected the

resolution, within the next

twelve months, of unrecognized

tax benefits related to pending

court cases amounting to $

million for income taxes, penalties

and interest.

Otherwise, the Company had not identified

any other significant

changes which were considered

reasonably

possible to occur within the next twelve

months.

At December 31, 2022, the earliest

significant open tax years that

remained subject to examination

were the

following:

Region

Year

Europe

2015

United States

2019

Rest of Americas

2018

China

2013

Rest of Asia, Middle East

and Africa

2017

F-58

—

Note 17

Employee benefits

The Company operates defined benefit

pension plans, defined

contribution pension plans,

and termination

indemnity plans, in accordance

with local regulations and

practices. At December 31, 2022,

the Company’s

most significant defined benefit pension

plans are in Switzerland

as well as in Germany, the United Kingdom,

and the United States. These plans

cover a large portion of the Company’s

employees and provide

benefits

to employees in the event of death,

disability, retirement, or termination of employment.

Certain of these

plans are multi

‑

employer plans. The Company also

operates other postretirement

benefit plans including

postretirement health care benefits

and other employee

‑

related benefits for active employees

including

long

‑

service award plans. The measurement date

used for the Company’s employee

benefit plans is

December 31. The funding policies

of the Company’s plans are consistent with

local government and

tax

requirements.

During 2020, the Company took steps

to transfer the defined

benefit pension risks in

three

International

countries to external financial

institutions.

Two

of these plans were settled

entirely for accounting purposes

while the third plan involved

the settlement of specific obligations

for certain former employees. In connection

with these transactions, the Company

made net payments of $

309

million and recorded non-operational

pension charges of $

520

million which were included

in net periodic benefit cost as curtailments,

settlements

and special termination benefits. The

Company also made cash

payments of $

143

million and recorded non-

operational pension charges

of $

101

million in 2020 for the settlement

of pension obligations

in discontinued

operations.

The Company recognizes in its Consolidated

Balance Sheets the funded

status of its defined benefit pension

plans, postretirement plans and other

employee

‑

related benefits measured as

the difference between the fair

value of the plan assets and the benefit

obligation.

Unless otherwise indicated, the following

tables include amounts relating to

both continuing and discontinued

operations.

F-59

Obligations and funded status

of the plans

The change in benefit obligation,

change in fair value of plan

assets, and funded status recognized

in the

Consolidated Balance

Sheets were as follows:

Other

Defined pension

postretirement

benefits

Switzerland

International

($ in millions)

2022

2021

2022

2021

2022

2021

Benefit obligation at January

3,434

3,870

5,115

5,527

Service cost

—

Interest cost

(5)

Contributions by plan participants

—

Benefit payments

(96)

(130)

(234)

(207)

(7)

(9)

Settlements

(92)

(124)

(36)

(84)

—

Benefit obligations of

businesses acquired

(divested)

(328)

—

(2)

(46)

—

(11)

Actuarial (gain) loss

(478)

(140)

(1,075)

(15)

(14)

(8)

Plan amendments and

other

—

(3)

—

(2)

Exchange rate differences

(80)

(134)

(328)

(200)

(1)

—

Benefit obligation at December

31,

2,457

3,434

3,572

5,115

Fair value of plan assets

at January 1,

4,113

4,133

4,463

4,608

—

Actual return on plan

assets

(310)

279

(789)

197

—

Contributions by employer

124

Contributions by plan participants

—

Benefit payments

(96)

(130)

(234)

(207)

(7)

(9)

Settlements

(92)

(124)

(36)

(84)

—

Plan assets of businesses

acquired (divested)

(414)

—

(1)

(50)

—

Plan amendments and

other

—

Exchange rate differences

(89)

(144)

(299)

(147)

—

Fair value of plan assets

at December 31,

3,183

4,113

3,172

4,463

—

Funded status — overfunded

(underfunded)

726

679

(400)

(652)

(50)

(71)

The amounts recognized in "Accumulated

other comprehensive loss" and

"Noncontrolling interests" were:

Defined pension

Other postretirement

benefits

December 31, ($ in millions)

2022

2021

2020

2022

2021

2020

Net actuarial (loss) gain

(1,183)

(1,540)

(2,038)

Prior service credit

Amount recognized

in OCI

(1)

and NCI

(2)

(1,127)

(1,468)

(1,963)

Taxes associated with amount recognized

in OCI and NCI

266

352

374

—

Amount recognized

in OCI and NCI, net

of tax

(3)

(861)

(1,116)

(1,589)

(1)

OCI represents

“Accumulated

other comprehensive

loss”.

(2)

NCI represents

“Noncontrolling

interests”.

(3)

NCI, net of

tax, amounted

to $

(1)

million, $

million and

(1)

million at

December

31, 2022,

2021 and

2020.

F-60

In addition, the following

amounts were recognized in the Company's

Consolidated Balance

Sheets:

Defined pension

Other postretirement

benefits

Switzerland

International

December 31, ($ in millions)

2022

2021

2022

2021

2022

2021

Overfunded plans

726

683

189

208

—

Underfunded plans — current

—

(22)

(23)

(6)

(7)

Underfunded plans — non-current

—

(4)

(567)

(837)

(44)

(64)

Funded status - overfunded

(underfunded)

726

679

(400)

(652)

(50)

(71)

December 31, ($ in millions)

2022

2021

Non-current assets

Overfunded pension plans

915

891

Other employee-related benefits

Pension and other employee

benefits

916

892

December 31, ($ in millions)

2022

2021

Current liabilities

Underfunded pension plans

(22)

(23)

Underfunded other postretirement

benefit plans

(6)

(10)

Other employee-related benefits

(10)

(8)

Pension and other employee

benefits

(38)

(41)

December 31, ($ in millions)

2022

2021

Non-current liabilities

Underfunded pension plans

(567)

(841)

Underfunded other postretirement

benefit plans

(44)

(62)

Other employee-related benefits

(108)

(122)

Pension and other employee

benefits

(719)

(1,025)

The accumulated benefit obligation

(ABO) for all defined benefit pension

plans was $

5,953

million and

8,452

million at December 31, 2022 and

2021, respectively. The projected benefit obligation

(PBO), ABO

and fair value of plan assets,

for pension plans with a PBO in excess

of fair value of plan assets or

ABO in

excess of fair value of plan assets,

was:

PBO exceeds fair value of plan

assets

ABO exceeds fair value of

plan assets

December 31,

Switzerland

International

Switzerland

International

($ in millions)

2022

2021

2022

2021

2022

2021

2022

2021

PBO

2,274

2,994

2,274

2,979

ABO

2,222

2,917

2,222

2,905

Fair value of plan assets

1,689

2,133

1,689

2,119

All of the Company's other postretirement

benefit plans are unfunded.

F-61

Components of net periodic

benefit cost

Net periodic benefit cost consisted

of the following:

Defined pension

Other postretirement

benefits

Switzerland

International

($ in millions)

2022

2021

2020

2022

2021

2020

2022

2021

2020

Operational pension cost:

Service cost

—

Operational pension cost

—

Non-operational pension

cost (credit):

Interest cost

(5)

111

Expected return on plan

assets

(117)

(116)

(123)

(153)

(178)

(253)

—

Amortization of prior service

cost (credit)

(9)

(11)

(2)

(3)

(2)

Amortization of net actuarial

loss

—

109

(3)

(2)

(3)

Curtailments, settlements

and special

termination benefits

644

—

Non-operational pension

cost (credit)

(109)

(129)

(115)

(3)

(34)

613

(4)

(3)

(2)

Net periodic benefit

cost

(59)

(68)

(41)

705

(4)

(2)

(1)

The components of net periodic benefit

cost other than the service

cost component are included

Non-operational pension (cost) credit in

the Consolidated Income Statements. Net

periodic benefit cost

includes $

121

million in 2020, related to discontinued

operations.

Assumptions

The following weighted-average

assumptions were used to determine benefit

obligations:

Defined pension

Other postretirement

benefits

Switzerland

International

December 31, (in %)

2022

2021

2022

2021

2022

2021

Discount rate

2.2

0.2

4.8

2.1

5.3

2.6

Rate of compensation

increase

—

1.8

1.5

0.3

Rate of pension increase

—

1.8

1.7

—

Cash balance interest credit

rate

2.0

1.0

2.7

2.1

—

For the Company’s significant benefit plans,

the discount rate used at each measurement

date is set based

on a high-quality corporate bond

yield curve (derived based on

bond universe information sourced

from

reputable third-party index and

data providers and rating

agencies) reflecting the timing,

amount and currency

of the future expected benefit payments

for the respective plan. Consistent

discount rates are used across

all

plans in each currency zone, based

on the duration of the

applicable plan(s) in that zone.

For plans in the

other countries, the discount rate

is based on high quality corporate

or government bond yields applicable

the respective currency, as appropriate at each measurement

date with a duration broadly

consistent with the

respective plan’s obligations.

F-62

The following weighted-average

assumptions were used to determine

the “Net periodic benefit cost”:

Defined pension

Other postretirement

benefits

Switzerland

International

(in %)

2022

2021

2020

2022

2021

2020

2022

2021

2020

Discount rate

0.7

—

0.3

2.1

1.6

1.9

2.0

2.1

2.8

Expected long-term rate of

return on plan

assets

3.3

3.0

3.7

4.0

4.3

—

Rate of compensation increase

—

1.5

1.0

2.2

0.1

0.2

Cash balance interest credit

rate

1.3

1.0

2.1

1.6

—

The “Expected long-term rate of return

on plan assets” is derived

for each benefit plan by considering

the

expected future long-term return assumption

for each individual

asset class. A single long-term return

assumption is then derived for each

plan based upon the plan’s

target asset allocation.

The Company maintains other postretirement

benefit plans, which are generally

contributory with participants’

contributions adjusted annually. The assumptions used

were:

December 31,

2022

2021

Health care cost trend

rate assumed for next

year

5.6%

5.1%

Rate to which the trend

rate is assumed to decline

(the ultimate trend rate)

4.5%

Year that the rate reaches the ultimate

trend rate

2029

2026

Plan assets

The Company has pension plans

in various countries with the majority

of the Company’s pension liabilities

deriving from a limited number of

these countries.

The pension plans are typically funded

by regular contributions

from employees and the Company. These

plans are typically administered

by boards of trustees (which

include Company representatives)

whose

primary responsibilities include

ensuring that the plans meet their liabilities

through contributions and

investment returns. The boards of

trustees have the responsibility

for making key investment strategy

decisions within a risk-controlled

framework.

The pension plan assets are invested

in diversified portfolios

that are managed by third-party asset

managers, in accordance with local

statutory regulations, pension

plan rules and the respective plans’

investment guidelines, as approved

by the boards of trustees.

Plan assets are generally segregated

from those of the Company

and invested with the aim of

meeting the

respective plans’ projected future pension

liabilities. Plan assets are

measured at fair value at the balance

sheet date.

The boards of trustees manage

the assets of the pension

plans in a risk-controlled manner and

assess the

risks embedded in the pension plans

through asset/liability management

studies. Asset/liability management

studies typically take place every

three years

. However, the risks of the plans are monitored

on an ongoing

basis.

The boards of trustees’ investment goal

is to maximize the long-term

returns of plan assets within specified

risk parameters, while considering

the future liabilities and liquidity

needs of the individual plans.

Risk

measures taken into account include

the funding ratio of the plan,

the likelihood of extraordinary

cash

contributions being required,

the risk embedded in each individual

asset class, and the plan asset portfolio as

a whole.

F-63

The Company’s global pension

asset allocation is the result of

the asset allocations of the individual

plans,

which are set by the respective boards

of trustees. The target asset allocation

of the Company’s plans on a

weighted-average basis is as

follows:

Target

(in %)

Switzerland

International

Asset class

Equity

Fixed income

Real estate

Other

Total

100

The actual asset allocations of the

plans are in line with the target

asset allocations.

Equity securities primarily include

investments in large-cap and

mid-cap publicly traded companies.

Fixed

income assets primarily include

corporate bonds of companies

from diverse industries and government

bonds. Both fixed income and equity

assets are invested either

via funds or directly in segregated

investment

mandates, and include an allocation

to emerging markets. Real estate consists

primarily of investments in

real estate in Switzerland held in

the Swiss plans. The “Other” asset

class includes investments in

private

equity, hedge funds, commodities, and cash, and reflects

a variety of investment

strategies.

Based on the above global asset allocation

and the fair values of the plan

assets, the expected long-term

return on assets at December 31, 2022,

4.5

percent. The Company and

the local boards of trustees

regularly review the investment performance

of the asset classes and individual

asset managers. Due to the

diversified nature of the investments,

the Company is of the opinion

that no significant concentration

of risks

exists in its pension fund assets.

At December 31, 2022 and 2021,

plan assets include ABB Ltd’s shares

(as well as an insignificant amount

the Company’s debt instruments) with a

total value of $

million and $

million, respectively.

The fair values of the Company’s pension

plan assets by asset class

are presented below. For further

information on the fair value hierarchy

and an overview of the Company’s

valuation techniques applied,

see

the “Fair value measures” section of

Note 2.

Not subject

Total

December 31, 2022 ($ in millions)

Level 1

Level 2

to leveling

(1)

fair value

Asset class

Equity

Equity securities

Mutual funds/commingled

funds

748

Emerging market mutual

funds/commingled funds

Fixed income

Government and corporate

securities

121

1,036

1,157

Government and corporate—mutual

funds/commingled funds

2,189

Emerging market bonds—mutual

funds/commingled funds

315

Real estate

1,172

Insurance contracts

Cash and short-term

investments

124

129

253

Private equity

237

291

Total

322

4,624

1,409

6,355

F-64

Not subject

Total

December 31, 2021 ($ in millions)

Level 1

Level 2

to leveling

(1)

fair value

Asset class

Equity

Equity securities

124

125

Mutual funds/commingled

funds

1,049

Emerging market mutual

funds/commingled funds

218

Fixed income

Government and corporate

securities

314

1,366

1,680

Government and corporate—mutual

funds/commingled funds

3,121

Emerging market bonds—mutual

funds/commingled funds

428

Real estate

1,326

Insurance contracts

Cash and short-term

investments

158

233

Private equity

257

322

Total

513

6,480

1,583

8,576

(1)

Amounts relate

to assets

measured

using the

NAV

practical

expedient

which are

not subject

to leveling

The Company applies accounting

guidance related to the presentation

of certain investments using the net

asset value (NAV) practical expedient. This accounting

guidance exempts investments using

this practical

expedient from categorization within

the fair value hierarchy. Investments measured at

NAV are primarily non

exchange-traded commingled

or collective funds in private equity and

real estate where the fair value

of the

underlying assets is determined

by the investment manager. Investments in private

equity can never be

redeemed, but instead the funds will

make distributions through

liquidation of the underlying

assets. Total

unfunded commitments for the private

equity funds were approximately

114

million and $

125

million at

December 31, 2022 and 2021, respectively.

The real estate funds are typically

subject to a lock-in period of

up to

three years

after subscribing. After this period,

the real estate funds typically

offer a redemption notice

of three to twelve months.

Contributions

Employer contributions were as

follows:

Defined pension

Other postretirement

benefits

Switzerland

International

($ in millions)

2022

2021

2022

2021

2022

2021

Total

contributions to

defined benefit pension

and other postretirement

benefit plans

124

Of which, discretionary

contributions to

defined benefit pension

plans

—

The total contributions included

non-cash contributions totaling $

million and $

million, respectively, for

2022 and 2021, of available-for-sale

debt securities to certain of the Company’s

pension plans.

The Company expects to contribute

approximately $

million to its defined benefit pension

plans in 2023. Of

these contributions, $

million are expected to be non-cash

contributions. The Company expects

to contribute

approximately $

million to its other postretirement

benefit plans in 2023.

The Company also contributes

to a number of defined contribution

plans. The aggregate expense for

these

plans in continuing operations

was $

269

million, $

278

million and $

205

million in 2022, 2021 and 2020,

respectively. Contributions to multi-employer plans were

not significant in 2022, 2021 and

2020.

F-65

Estimated future benefit payments

The expected future cash flows to be

paid by the Company’s plans

in respect of pension and other

postretirement benefit plans at December

31, 2022, are as follows:

Defined pension

Other postretirement

benefits

($ in millions)

Switzerland

International

2023

212

245

2024

211

251

2025

195

248

2026

195

251

2027

186

258

Years 2028 - 2032

870

1,254

—

Note 18

Share-based payment arrangements

The Company has granted share-based

instruments to its employees

under

three

principal share

‑

based

payment plans, as more fully described

in the respective sections

below. Compensation cost for

equity

‑

settled awards is recorded in

Total

cost of sales and in

Selling, general and administrative

expenses

and totaled $

million, $

million and $

million in 2022, 2021 and 2020, respectively, while compensation

cost for cash

‑

settled awards, recorded in Selling,

general and administrative

expenses, was not significant,

as mentioned in the WARs, LTIP and Other share

‑

based payments sections

of this note. The total tax benefit

recognized in 2022, 2021

and 2020 was not significant.

At December 31, 2022, the Company

had the ability to issue

up to

million new shares out of contingent

capital in connection with share

‑

based payment arrangements.

In addition,

million of the

100

million

shares held by the Company as

treasury stock at December 31, 2022,

could be used to settle share

‑

based

payment arrangements.

As the primary trading market for

the shares of ABB Ltd is the SIX

Swiss Exchange (on which

the shares are

traded in Swiss francs) and substantially

all the share

‑

based payment arrangements with employees

are

based on the Swiss franc share or

have strike prices set in Swiss

francs, certain data disclosed

below related

to the instruments granted under share

‑

based payment arrangements

are presented in Swiss francs.

Management Incentive Plan

Up to 2019, the Company offered, under

the MIP,

options and cash

‑

settled WARs to key employees for

consideration. Starting in 2020, the

employee group previously

eligible to receive grants under the

MIP were

granted shares under the LTIP (see LTIP section below) and consequently

no grants were made in 2022,

2021 and 2020 under the MIP.

The options granted under the

MIP allow participants to purchase

shares of ABB Ltd at predetermined

prices.

Participants may sell the options rather

than exercise the right to purchase

shares. Equivalent warrants

are

listed by a third

‑

party bank on the SIX Swiss

Exchange, which facilitates pricing

and transferability of options

granted under this plan. The options entitle

the holder to request that the

third

‑

party bank purchase such

options at the market price of equivalent

listed warrants related to

that MIP launch. If the participant

elects to

sell the options, the options will

thereafter be held by a third party and,

consequently, the Company’s

obligation to deliver shares

will be toward this third party.

F-66

Each WAR gives the participant the right to receive,

in cash, the market price of an equivalent

listed warrant

on the date of exercise of the

WAR. Participants may exercise or sell options

and exercise WARs after the

vesting period, which is

three years

from the date of grant. All options

and WARs expire

six years

from the

date of grant.

In connection with the spin-off of the Turbocharging

Division in October 2022, the strike

prices of the options

outstanding under the MIP program

were reduced to neutralize

the effect of the spin-off on the Company’s

share price.

The amount of the reduction in

the strike price was determined

to result in an equivalent fair

value before and after the spin-off. New equivalent

warrants, with the reduced strike

prices, were listed by the

third-party bank, allowing continued

pricing and transferability. For the options held by the third-party

bank, to

effect the reduction in the exercise price,

the Company settled, for cash, the options

held by the bank that

were outstanding at September 30,

2022, immediately prior

to the spin-off, and simultaneously issued

equivalent number of new options

for cash to the bank with lower

strike prices.

Options

The fair value of each option was estimated

on the date of grant using a lattice

model. As mentioned

previously,

options were granted in 2022, 2021

and 2020. In 2022,

million options were exercised,

representing

million shares, with the shares delivered

out of treasury stock. Cash received

upon exercise

amounted to approximately $

330

million. In 2022, 2021 and

2020, the aggregate intrinsic value

(on the date

of exercise) of options exercised was

approximately $

143

million, $

313

million and $

million, respectively.

In 2022, there were no significant

forfeitures, and at December

31, 2022, all options granted under

the MIP

were vested and exercisable. The aggregate

intrinsic value at December

31, 2022, of options outstanding

was approximately $

166

million.

Presented below is a summary, by launch, related to options

outstanding at December 31, 2022:

Weighted-

average

Number of

remaining

options

contractual

Exercise price (in Swiss francs)

(1)

(in millions)

(2)

term (in years)

21.23

6.6

1.3

0.6

22.05

61.5

12.3

1.7

17.63

33.8

6.8

2.7

Total number of options and shares

101.9

20.4

1.9

(1)

Information

presented reflects

the exercise

price per

share of

ABB Ltd.

(2)

Information

presented reflects

the number

of shares

of ABB Ltd

that can

be received

upon exercise.

WARs

As each WAR gives the holder the right to receive

cash equal to the market price

of the equivalent listed

warrant on date of exercise, the Company

records a liability based

upon the fair value of outstanding

WARs

at each period end, accreted on a

straight-line basis over the

three-year

vesting period. In Selling, general

and administrative expenses, the Company

records the changes in both the

fair value and vested portion of

the outstanding WARs. To hedge its exposure to fluctuations in the fair value

of outstanding WARs, the

Company purchased cash-settled call

options, which entitle the Company

to receive amounts equivalent

to its

obligations under the outstanding

WARs. The cash-settled call options are recorded

as derivatives measured

at fair value (see Note 6), with subsequent

changes in fair value recorded

in Selling, general and

administrative expenses to the extent

that they offset the change in

fair value of the liability for the WARs.

The total impact in Selling, general

and administrative expenses

in 2022, 2021 and 2020 was

not significant.

At December 31, 2022,

million WARs were outstanding, all vested and

exercisable. In 2022, there were no

significant forfeitures. The aggregate

fair value of outstanding

WARs was $

million and $

million at

December 31, 2022 and 2021, respectively. The fair value

of WARs was determined based upon the

trading

price of equivalent warrants listed on

the SIX Swiss Exchange.

F-67

As mentioned previously,

WARs were granted in 2022, 2021 and 2020.

In 2021, share-based liabilities

million were paid upon exercise

of WARs by participants. The amount in 2022 was not

significant.

Employee Share Acquisition Plan

The employee share acquisition

plan (ESAP) is an employee

stock

‑

option plan with a savings

feature.

Employees save over a

twelve‑month

period, by way of regular

payroll deductions. At the end of

the savings

period, employees choose whether

to exercise their stock options using

their savings plus interest, if any, to

buy ABB Ltd shares (American Depositary

Shares (ADS) in the case

of employees in the United States

and

Canada—each ADS representing

one

registered share of the Company)

at the exercise price set at the

grant

date, or have their savings returned

with any interest. The savings

are accumulated in bank accounts held

a third

‑

party trustee on behalf of the participants

and earn interest, where applicable.

Employees can

withdraw from the ESAP at any time

during the savings period and

will be entitled to a refund of their

accumulated savings.

The fair value of each option is estimated

on the date of grant using

the same option valuation model

described under the MIP, using the assumptions noted in the table below. The expected

term of the option

granted has been determined

to be the contractual

one‑year

life of each option, at the end of

which the

options vest and the participants are

required to decide whether

to exercise their options or have

their

savings returned with interest.

The risk

‑

free rate is based on

one‑year

Swiss franc interest rates, reflecting

the

one‑year

contractual life of the options. In

estimating forfeitures, the Company

has used the data from

previous ESAP launches.

2022

2021

2020

Expected volatility

25%

20%

24%

Dividend yield

3.0%

2.9%

3.8%

Expected term

1 year

Risk-free interest rate

1.1%

-0.6%

-0.7%

Presented below is a summary of

activity under the ESAP:

Weighted-

Aggregate

average

intrinsic

exercise

remaining

value

Number of

price

contractual

(in millions

(in Swiss

term

of Swiss

(in millions)

(1)

francs)

(2)

(in years)

francs)

(2)(3)

Outstanding at January

1, 2022

1.8

30.32

Granted

1.8

27.99

Forfeited

(0.2)

30.28

Exercised

(4)

(0.1)

29.16

Not exercised (savings

returned plus interest)

(1.5)

29.16

Outstanding at December

31, 2022

1.8

27.99

0.8

0.1

Vested and expected to vest at

December 31, 2022

1.8

27.99

0.8

0.1

Exercisable at December

31, 2022

—

(1)

Includes shares

represented

by ADS.

(2)

Information

presented for

ADS is based

on equivalent

Swiss franc

denominated

awards.

(3)

Computed using

the closing

price, in

Swiss francs,

of ABB Ltd

on the SIX

Swiss Exchange

and the exercise

price of each

option in

Swiss francs.

(4)

The cash received

in 2022 from

exercises

was not significant.

The shares

were delivered

out of treasury

stock.

F-68

The exercise prices per ABB Ltd share

and per ADS of

27.99

Swiss francs and $

28.09

, respectively, for the

2022 grant,

30.32

Swiss francs and $

33.35

, respectively, for the 2021 grant, and

22.87

Swiss francs and

24.93

, respectively, for the 2020 grant were determined using

the closing price of the ABB Ltd share on

the

SIX Swiss Exchange and ADS on

the New York Stock Exchange on the respective grant dates.

In connection

with the spin-off of the Turbocharging Division in

October 2022, the strike prices of

the ESAP options

outstanding at the time of spin-off were

reduced,

as per the terms and conditions

of the original grant, to

neutralize the effect of the spin-off on the Company’s

share price, resulting in an

equivalent fair value before

and after the spin-off. Consequently, the exercise prices per ABB

Ltd share and per ADS for

the 2021 grant,

were adjusted to

29.16

Swiss francs and $

32.10

, respectively.

At December 31, 2022, the total unrecognized

compensation cost related to non

‑

vested options granted

under the ESAP was not significant.

The weighted

‑

average grant

‑

date fair value (per option) of options

granted during 2022, 2021

and 2020 was

2.47

Swiss francs,

1.96

Swiss francs and

1.67

Swiss francs,

respectively. The total intrinsic value (on the date of exercise)

of options exercised in 2021 was approximately

million, while in 2022

and 2020 it was not significant.

Long-Term Incentive Plan

The long

‑

term incentive plan (LTIP) involves annual grants of

the Company’s stock subject to certain

conditions (Performance Shares)

to members of the Company’s Executive

Committee and selected other

senior executives, as defined in

the terms of the LTIP.

Starting with 2020, certain of the employee

group

previously eligible to receive grants

under the MIP have been

included in the LTIP.

The ultimate amount

delivered under the LTIP’s Performance Shares grant is based

on achieving certain results against

targets,

as set out below, over a

three-year

period from grant and the final

amount is delivered to the participants

the end of this period. In addition,

for certain awards to vest, the participant

has to fulfill a

three-year

service

condition as defined in the terms

and conditions of the

LTIP.

The Performance Shares under the 2022

LTIP launch include a component based on

the Company’s

earnings per share performance

(weighted

percent), a component based on

the Company’s relative total

shareholder return (weighted

percent) and an environmental, social

and governance (ESG) component

based on the Company’s CO

e emissions reductions (weighted

percent). The Performance Shares

under

the 2021 and 2020 LTIP launches comprise of a component

based on the Company’s earnings

per share

performance and a component based

on the Company’s relative total

shareholder return, both with equal

weighting.

For the relative total shareholder

return component of the

Performance Shares, the actual

number of shares

that will be delivered at a future date

is based on the Company’s

total shareholder return performance

relative

to a peer group of companies over

three-year

period starting with the year of

grant. The actual number of

shares that will ultimately be delivered

will vary depending on

the relative total shareholder

return outcome

achieved between a lower

threshold (no shares delivered)

and an upper threshold (the number

of shares

delivered is capped at

200

percent of the conditional grant).

For the earnings per share performance

component of the Performance

Shares,

the actual number of shares

that will be delivered at a future date

is based on the Company’s

average earnings per share over

three

financial years, beginning

with the year of launch.

The actual number of shares

that will ultimately be

delivered will vary depending

on the earnings per share outcome as

computed under each LTIP launch,

interpolated between a lower

threshold (no shares delivered)

and an upper threshold (the number

of shares

delivered is capped at

200

percent of the conditional grant).

For the ESG component of the

Performance Shares, the actual

number of shares that will

be delivered at a

future date is based on the Company’s scope

1 and 2 CO

e emissions reduction over

three

financial years,

beginning with the year of launch,

compared to the 2019

baseline emissions. The actual number

of shares

that will ultimately be delivered

will vary depending on

the ESG outcome as computed under the LTIP launch,

interpolated between a lower

threshold (no shares delivered)

and an upper threshold (the number

of shares

delivered is capped at

200

percent of the conditional grant).

F-69

Starting in 2020, key employees

which were previously eligible

to participate in the MIP and which were

not

included in the employee

group granted the Performance

Shares described above, were granted

Restricted

Shares of the Company under the LTIP. The Restricted Shares do not have performance conditions

and vest

over a

three-year

period from the grant date.

Under the 2022, 2021 and 2020

LTIP launches, participants generally do not have the ability

to receive any of

the award in cash, subject to legal

restrictions in certain jurisdictions.

In connection with the spin-off of the Turbocharging

Division in October 2022, the number

of shares granted

to employees under the LTIP launches was adjusted,

as per the terms and conditions

of the original grant, to

neutralize the effect of the spin-off, resulting in an

equivalent fair value

before

and after the spin-off.

Presented below is a summary of

activity under the Performance Shares

of the LTIP:

Weighted-average

Number of

grant-date

Performance Shares

fair value per share

(in millions)

(Swiss francs)

Nonvested at January

1, 2022

1.5

23.23

Granted

0.7

33.33

Turbocharging Division spin-off

0.1

Vested

(0.3)

23.12

Forfeited

(0.1)

26.96

Nonvested at December

31, 2022

1.9

27.01

The aggregate fair value, at the dates

of grant, of Performance

Shares granted in 2022 and 2021

was

million and $

million, respectively, while in 2020 it was not significant. The total

grant-date fair value of

shares that vested during 2022, 2021

and 2020 was not significant.

The weighted-average grant-date

fair

value (per share) of shares granted

during 2022, 2021 and 2020

was

33.33

Swiss francs,

38.92

Swiss francs

and

10.50

Swiss francs, respectively.

Presented below is a summary of

activity under the Restricted Shares

of the LTIP:

Weighted-average

Number of

grant-date

Restricted Shares

fair value per share

(in millions)

(Swiss francs)

Nonvested at January

1, 2022

2.0

20.61

Granted

0.8

30.52

Turbocharging Division spin-off

0.1

Vested

(0.1)

19.60

Forfeited

(0.2)

23.72

Nonvested at December

31, 2022

2.6

23.65

The aggregate fair value, at the dates

of grant, of Restricted

Shares granted in 2022,

2021 and 2020 was

million, $

million and $

million, respectively. The total grant-date fair value of shares

that vested

during 2022, 2021 and 2020

was not significant.

The weighted-average

grant-date fair value (per share) of

shares granted during 2022

and 2021 was

30.52

Swiss francs,

26.39

Swiss francs and

15.76

Swiss francs,

respectively.

Equity-settled awards are recorded in

the Additional paid-in capital

component of Stockholders’ equity, with

compensation cost recorded in Selling,

general and administrative expenses

over the vesting period (which

from grant date to the end of the vesting

period) based on the grant-date

fair value of the shares.

Cash-settled awards are recorded as a

liability, remeasured at fair value at each reporting date

for the

percentage vested, with changes

in the liability recorded in Selling,

general and administrative

expenses.

F-70

At December 31, 2022, total unrecognized

compensation cost related to equity-settled

awards under the LTIP

was $

million and is expected to be recognized

over a weighted-average

period of

1.8

years. The

compensation cost recorded in 2022,

2021 and 2020 for cash-settled

awards was not significant.

For the relative total shareholder

return component of the

LTIP launches, the fair value of granted shares at

grant date, for equity-settled awards,

and at each reporting

date, for cash-settled awards, is

determined using

a Monte Carlo simulation model.

The main inputs to this model

are the Company’s share price and dividend

yield, the volatility of the Company’s and

the peer group’s share price as well as the

correlation between the

peer companies. For the earnings

per share component of the LTIP launches, the fair value

of granted

shares is based on the market price of

the ABB Ltd share at grant date for

equity-settled awards and at each

reporting date for cash-settled awards,

as well as the probable

outcome of the earnings per share

achievement, as computed using

a Monte Carlo simulation

model. The main inputs to this model

are the

Company’s and external financial

analysts’ revenue growth rates and

Operational EBITA margin

expectations. For the ESG component

of the LTIP launch, the fair value of granted shares

is based on the

market price of the ABB Ltd share at

grant date for equity-settled

awards and at each reporting date

for

cash-settled awards, as well as the probable

outcome of the ESG component achievement,

as determined by

internal modelling based on

the Company’s CO

e emissions.

Other share-based payments

The Company has other minor share-based

payment arrangements with certain

employees. The

compensation cost related to these arrangements

in 2022, 2021 and 2020 was

not significant.

—

Note 19

Stockholders' equity

Capital

At December 31, 2022, the Company

had

2,469

million authorized shares, of

which

1,965

million were

registered and issued. At December

31, 2021, the Company

had

2,557

million authorized shares, of which

2,053

million were registered and

issued.

Dividends

At the Annual General Meeting of

Shareholders (AGM) in March 2022,

the shareholders approved

the

proposal of the Board of Directors

to distribute a total of

0.82

Swiss francs per share. The

approved dividend

distribution amounted to $

1,700

million, with the Company disbursing

a portion in March 2022 and the

remaining amounts in April 2022.

At the AGM in March 2021, the shareholders

approved the proposal of the

Board of Directors to distribute a total

0.80

Swiss francs per share. The

approved dividend distribution

amounted to $

1,730

million, with the Company disbursing

a portion in March 2021 and the remaining

amounts in April 2021. At the AGM

in March 2020, the shareholders

approved the proposal of the Board of

Directors to distribute a total of

0.80

Swiss francs per share. The approved

dividend distribution amounted

1,758

million and was paid in April

2020.

Amounts available to be distributed

as dividends to the stockholders

of ABB Ltd are based on the

requirements of Swiss law and

ABB Ltd’s Articles of Incorporation,

and are determined based on

amounts

presented in the unconsolidated

financial statements of ABB Ltd, prepared

in accordance with Swiss law. At

December 31, 2022, the total unconsolidated

stockholders’ equity of ABB Ltd was

6,219

million Swiss francs

6,742

million), including

236

million Swiss francs ($

256

million) representing share

capital,

8,852

million

Swiss francs ($

9,597

million) representing reserves

and

2,869

million Swiss francs ($

3,111

million)

representing a reduction of equity for

treasury shares. Of the reserves,

2,869

million Swiss francs

3,111

million) relating to treasury shares and

million Swiss francs ($

million) representing

percent

of share capital, at December 31, 2022,

are restricted by law and not

available for distribution.

F-71

Treasury stock transactions

In July 2020, the Company announced

it intended to initially buy

percent of its share capital (which

at the

time represented a maximum of

180

million shares, in addition

to those already held in treasury)

through the

share buyback program that started

in July 2020. The initial

share buyback program was executed

on a

second trading line on the SIX Swiss

Exchange and was completed

in March 2021. Through this

buyback

program, the Company purchased a

total of

129

million shares for approximately

3.5

billion. At the March

2021 AGM, shareholders approved

the cancellation of

115

million of the shares purchased under

this

buyback program and the cancellation

was completed in the second

quarter of 2021, resulting in a decrease

in Treasury stock of $

3,157

million and a corresponding

total decrease in Capital stock,

Additional paid-in

capital and Retained earnings.

In March 2021, the Company announced

a follow-up share buyback

program of up to $

4.3

billion. This

buyback program, which was launched

in April 2021, was executed on

a second trading line

on the SIX

Swiss Exchange and was completed in

March 2022. Through

this follow-up buyback program, the Company

purchased a total of

million shares for approximately

3.1

billion. At the March 2022 AGM,

shareholders

approved the cancellation of

million shares which had been

purchased under the share buyback

programs

launched in July 2020 and

April 2021. The cancellation was

completed in the second quarter

of 2022,

resulting in a decrease in Treasury stock of $

2,876

million and a corresponding

total decrease in Capital

stock, Additional paid-in capital

and Retained earnings.

In March 2022, the Company announced

a new share buyback program

of up to $

billion. This program,

which was launched in April

2022, is being executed on a second

trading line on the SIX Swiss

Exchange

and is planned to run until the Company’s

2023 AGM.

Under these buyback programs,

in 2022, 2021 and 2020, the Company

purchased

million,

million and

109

million, respectively, of its own shares, resulting in

an increase in Treasury stock of $

2,842

million,

2,651

million and $

2,835

million, respectively.

In addition to the share buyback programs,

in 2022, 2021 and 2020, the Company

purchased a combined

total of

million,

million and

million, respectively, of its own shares on the open market,

mainly for use

in connection with its employee share

plans, resulting in an increase

in Treasury stock of $

660

million,

1,032

million and $

346

million, respectively.

Obligations to issue shares relating

to employee incentive

programs

At December 31, 2022,

the Company had outstanding

obligations to deliver:

•

up to

million shares relating to

the options granted under

the 2017 launch of the MIP, with a

strike price of

21.23

Swiss francs, vested in August 2020

and expiring in August 2023,

•

up to

million shares relating to the

options granted under

the 2018 launch of the MIP, with a

strike price of

22.05

Swiss francs, vested in August 2021

and expiring in August 2024,

•

up to

million shares relating to

the options granted under

the 2019 launch of the MIP, with a

strike price of

17.63

Swiss francs, vested in August

2022 and expiring

in August 2025,

•

up to

million shares relating to

the ESAP, vesting and expiring in October 2023,

•

up to

million shares to Eligible

Participants under the 2022, 2021

and 2020 launches of the

LTIP,

vesting and expiring in April 2025,

April 2024

and April 2023, respectively, and

•

less than

million shares in connection

with certain other share-based

payment arrangements

with employees.

F-72

In addition to the above obligations,

the Company had

sold,

upon and in connection with

each launch of the

MIP,

call options to a bank at fair value,

giving the bank the right

to acquire shares equivalent to

the number

of shares represented by the MIP

WAR awards to participants. Under the terms

of the agreement with the

bank, the call options can only be exercised

by the bank to the extent that

MIP participants have exercised

their WARs. In connection with the spin-off of the Turbocharging

Division in October 2022, the Company

settled, for cash, the options outstanding

at September 30, 2022, immediately

prior to the spin-off, and

simultaneously issued to the bank

for cash an equivalent number of

new options with lower strike prices.

The

strike price of these new options was

determined so as to neutralize

the effect of the spin-off on the

Company’s share price. At December 31,

2022, such call options representing

3.3

million shares and with

strike prices ranging from

17.63

22.05

Swiss francs (weighted-average

strike price of

20.58

Swiss francs)

were held by the bank. The call options

expire in periods ranging

from August 2023 to August 2025.

See Note 18 for a description of

the above share

‑

based payment arrangements.

In 2022, 2021 and 2020, the Company

delivered

million,

million and

million shares, respectively, out

of treasury stock, for options exercised

in relation to the MIP. In addition, in 2021

and 2020, the Company

delivered

1.7

million and

1.4

million shares, respectively, out of treasury stock under

the ESAP. The number

of shares delivered in 2022 under

the ESAP was not significant.

Issuance of subsidiary shares

In November 2022, the Company received

gross proceeds of

203

million Swiss francs ($

216

million) through

a private placement of shares in its

ABB E-Mobility subsidiary, ABB E-mobility Holding

Ltd (ABB E-Mobility),

reducing the Company's beneficial

ownership in the subsidiary

from

100

percent to

percent. This resulted

in an increase in Additional

paid-in capital of $

120

million.

—

Note 20

Earnings per share

Basic earnings per share is calculated

by dividing income by the weighted

‑

average number of shares

outstanding during the year. Diluted earnings

per share is calculated by dividing

income by the

weighted

‑

average number of shares outstanding

during the year, assuming that all potentially

dilutive

securities were exercised, if dilutive.

Potentially dilutive securities

comprise outstanding written

call options

and outstanding options and

shares granted subject to

certain conditions under the Company’s

‑

based

payment arrangements. In 2022 and

2020, outstanding securities

representing a maximum of

million and

million shares, respectively, were excluded from the

calculation of diluted earnings

per share as their

inclusion would have been

antidilutive.

ne were excluded in 2021.

Basic earnings per share:

($ in millions, except per

share data in $)

2022

2021

2020

Amounts attributable to

ABB shareholders:

Income from continuing

operations, net of

tax

2,517

4,625

294

Income (loss) from discontinued

operations, net of

tax

(42)

(79)

4,852

Net income

2,475

4,546

5,146

Weighted-average number

of shares outstanding

(in millions)

1,899

2,001

2,111

Basic earnings per share

attributable to ABB

shareholders:

Income from continuing

operations, net of

tax

1.33

2.31

0.14

Income (loss) from discontinued

operations, net of

tax

(0.02)

(0.04)

2.30

Net income

1.30

2.27

2.44

F-73

Diluted earnings per share:

($ in millions, except per

share data in $)

2022

2021

2020

Amounts attributable to

ABB shareholders:

Income from continuing

operations, net of

tax

2,517

4,625

294

Income (loss) from discontinued

operations, net of

tax

(42)

(79)

4,852

Net income

2,475

4,546

5,146

Weighted-average number

of shares outstanding

(in millions)

1,899

2,001

2,111

Effect of dilutive securities:

Call options and shares

Adjusted weighted-average

number of shares

outstanding (in millions)

1,910

2,019

2,119

Diluted earnings per share

attributable to ABB

shareholders:

Income from continuing

operations, net of

tax

1.32

2.29

0.14

Income (loss) from discontinued

operations, net of

tax

(0.02)

(0.04)

2.29

Net income

1.30

2.25

2.43

F-74

—

Note 21

Other comprehensive income

The following table includes

amounts recorded within “Total other comprehensive income (loss)”

including the

related income tax effects:

2022

2021

2020

Before

Tax

Net of

Before

Tax

Net of

Before

Tax

Net of

($ in millions)

tax

effect

tax

effect

tax

effect

tax

Foreign currency translation

adjustments:

Foreign currency translation

adjustments

(685)

—

(685)

(521)

—

(521)

500

(2)

498

Net loss on complete

or substantially

complete liquidations

of foreign

subsidiaries

—

Changes attributable

to divestments

—

(9)

—

(9)

519

—

519

Net change during the

year

(639)

—

(639)

(530)

—

(530)

1,019

(2)

1,017

Available-for-sale securities:

Net unrealized gains (losses)

arising

during the year

(28)

(23)

(13)

(10)

(7)

Reclassification adjustments

for net

(gains) losses included in

net income

—

(6)

(5)

(18)

(14)

Changes attributable

to divestments

—

(3)

—

(3)

Net change during the

year

(26)

(21)

(19)

(15)

(3)

Pension and other postretirement

plans:

Prior service (costs)

credits arising

during the year

(2)

—

(2)

—

(12)

Net actuarial gains

(losses) arising

during the year

298

(72)

226

437

(26)

411

(243)

(200)

Amortization of prior service

cost (credit)

included in net income

(13)

(3)

(16)

(14)

—

(14)

(11)

—

(11)

Amortization of net actuarial

loss included

in net income

(11)

113

(25)

Net losses from settlements

and curtailments

included in net income

(2)

—

650

(132)

518

Changes attributable

to divestments

(8)

—

(8)

(6)

186

(35)

151

Net change during the

year

341

(86)

255

489

(22)

467

750

(161)

589

Derivative instruments

and hedges:

Net gains (losses) arising

during the year

(10)

(2)

(12)

—

Reclassification adjustments

for net (gains)

losses included in net income

—

(13)

—

(13)

(2)

—

Net change during the

year

(2)

—

(6)

(5)

—

Total other comprehensive income

(loss)

(322)

(83)

(405)

(66)

(17)

(83)

1,779

(164)

1,615

F-75

The following table shows changes

in “Accumulated other comprehensive

loss”

(OCI) attributable to ABB, by

component, net of tax:

Unrealized

Pension and

Foreign

gains (losses)

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	6th grade Good

ABB (ABBNY) 20-F2022 FY Annual report (foreign)

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