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Remuneration of the Executive Team
Remuneration of the Executive Team consists of fixed salary, variable salary, other benefits, and pensions.
For the CEO, variable salary is based partly on improvement in earnings per share compared with the previous year (75 percent) and partly on organic growth (25 percent). The variable salary is capped at a maximum of three-quarters of fixed salary. For other members of the Executive Team, variable salary is based primarily on improvement in operating income (for their own area of responsibility) compared with the previous year (50 percent), and also on organic growth (25 percent) and a personal target (25 percent). In this case variable salary is capped at two-thirds of fixed salary.
The members of the Executive Team other than the CEO also have the opportunity to receive variable salary based on improvement in earnings per share (67 percent) and organic growth (33 percent). The maximum payment of SEK 2 M per person applies if earnings per share increase by 15 percent compared with the previous year and organic growth reaches 9 percent. One-third of such variable salary is paid the following year, while the other two-thirds is retained for two years and grows at the same rate as the Group's return on capital employed. This residual two-thirds is paid only if, at the end of the period, the person concerned has neither left his job on his own initiative nor been dismissed for breach of contract.
Basic pension arrangements for the CEO and other members of the Executive Team are through participation in the ITP plan or equivalent. In addition, the CEO and certain other senior executives have the right to retire with a pension at the earliest on reaching the age of 60. ASSA ABLOY pays pension contributions amounting to 35 percent of fixed salary to the CEO and pension contributions amounting to about 60 percent of fixed salary to certain other members of the Executive Team. Provided that certain assumptions about the return on pension capital are met, this means that pensions will amount to about 65 percent of fixed salary at the time of retiring for those between the ages of 60 and 65, and about 50 percent of this salary after the age of 65 for the remainder of life.
The CEO has a severance payment agreement providing 100 percent of his fixed salary for 24 months. The payment is made only where the company terminates the contract. Others in the Executive Team are entitled to six months' notice and receive a severance payment of 100 percent of their fixed salary for a maximum of 12 months, which is reduced by any income from employment that may arise.
Bo Dankis ceased to be employed as President and CEO during the year. Under his contract he receives severance pay amounting to 100 percent of his fixed salary for 24 months. During this period the company will also pay pension contributions equal to about 60 percent of his fixed salary.
External audit
The 2002 Annual General Meeting appointed PricewaterhouseCoopers as the company's external auditors for a four-year period up to the 2006 Annual General Meeting. The auditor in charge during this period was Authorized Public Accountant Anders Lundin.
PricewaterhouseCoopers have been the Group's chief auditors since the Group was formed in 1994, and Anders Lundin has been the auditor or the auditor in charge since 1999. As well as ASSA ABLOY, Anders Lundin (born in 1956) is responsible for auditing the following companies: Electrolux, Axis, Bong Ljungdahl, Industrivärden, AarhusKarlshamn and SäkI.
PricewaterhouseCoopers undertake the audit of ASSA ABLOY AB, the Group and a substantial majority of its subsidiaries round the world. The audit of ASSA ABLOY AB also covers the administration by the Board of Directors and the CEO.
The company's auditor attends all meetings of the Audit Committee and also the Board meeting in February, at which he submits his observations and recommendations concerning the Group's annual accounts.
The external audit is carried out in accordance with good auditing practice in Sweden. The auditing of annual financial statements for legal entities outside Sweden is in accordance with legal requirements and other applicable regulations in the countries concerned and with good auditing practice as defined by the International Federation of Accountants (IFAC) for the issue of audit reports for the legal entities. For information about fees paid to auditors in 2005, see Note 3.
Remuneration and other benefits paid to the Executive Team in 2005

SEK thousands Fixed salary Variable salary Pension costs Other benefits Social costs Total
Bo Dankis 6,250 2,195 3,950 80 3,500 15,975
Johan Molin 583 187* 15 230 1,015
Other members of the Executive Team (6) 21,000 11,000 7,700 1,500 5,500 46,700
Total 27,833 13,195 11,837 1,595 9,230 63,690
* As part of his employment contract, Johan Molin has received a one-off pension payment of SEK 5 M from the company.

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The Swedish Code of Corporate Governance
ASSA ABLOY has adopted the Swedish Code of Corporate Governance, which has formed part of the rules of the Stockholm Stock Exchange since 1 July 2005.
The Code, which is based on self-regulation using the 'comply or explain' principle, deals mainly with the organization and methods of working of a company's Annual General Meeting, Board of Directors and management, and the interaction between the three. The subjects covered include rules for the appointment of the Board and the auditor, the Board's responsibility for internal control, processes for setting the remuneration of the company management, and information about corporate governance.
Deviations from the Code
ASSA ABLOY has chosen to deviate from the following Clauses of the Code:
Clause 2.1.2
A majority of the members of the Nomination Committee should not be members of the Board. Neither the Chairman of the Board nor any other Board member should be Chairman of the Nomination Committee.
Explanation of the deviation: the shareholders currently represented on the Nomination Committee consider that it is important, in the interests of an efficient, ongoing nomination process, that the membership of the Nomination Committee should be limited in number. At the same time the two main shareholders must be represented. This results in an equal number of Board members and external members on the Nomination Committee. A majority of the external members had called for five members, which was adjudged to be too many. The shareholders mentioned above also consider it natural for the representative of the shareholder with the largest number of votes to be Chairman of the Nomination Committee.
Clause 3.6.2
Immediately before signing off the Annual Report, the Board and the CEO should issue a declaration that, to the best of their knowledge, the Annual Report has been prepared in accordance with good accounting practice for quoted companies, that the information presented reflects the facts and that nothing of significant importance is omitted that could affect the picture of the company created by the Annual Report.
Explanation of the deviation: the Board considers that issues of responsibility are comprehensively regulated by the Swedish Companies Act, and that a special statement as proposed by the Code would be superfluous.
Clause 3.7.2
The Board should issue a report annually about how that part of internal control that relates to financial reporting is organized and how well it has functioned during the last financial year. The report should be checked by the company's auditor.
Explanation of the deviation: the Board considers that internal control is an integrated part of corporate governance. No separate statement from the Board about how well internal control has functioned during the financial year need be issued.1 Nor is any separate audit needed, which means that, overall, there is no reason to issue a separate report about internal control. Instead, ASSA ABLOY has included its report on internal control in this corporate governance report.
Clause 4.2.2
At the Annual General Meeting the Board should present a proposal about the principles of remuneration for the company management and other conditions of employment for approval by the Meeting. The proposal should be placed on the company's website in conjunction with the formal notification of the Annual General Meeting.
Explanation of the deviation: The principles applied in ASSA ABLOY concerning the principles of remuneration and other conditions of employment for the company management are presented at the Annual General Meeting and on the website. According to the Swedish Companies Act it is the Board's duty to make regular decisions on such issues. The Board does not consider that this responsibility should be removed from the Board.
Other requirements of the Code
In all other respects ASSA ABLOY believes that it is meeting the requirements of the Code at the end of 2005, while noting that some of the requirements will apply for the first time at the 2006 Annual General Meeting.
1 According to the statement of the Swedish Council for Corporate Governance
published on 15 December 2005.