CORPORATE
GOVERNANCE REPORT
Sandvik AB has its head office in Stockholm and is the Parent Company of the
Sandvik Group, with subsidiaries in more than 60 countries. The Sandvik Group
has about 46,000 employees and its operations are global with sales in more than150 countries. Sandvik AB is a public company with its shares listed on Nasdaq
Stockholm (the “Stock Exchange”).

Corporate governance at Sandvik comprises thesystem – encompassing the principles, guidelines,
structures and processes – through which the Groupis managed and controlled. The aim is to ensure efficient and value-creating decision-making by clearlyspecifying the division of roles and responsibilities
among the shareholders, the Board and the Group
Executive Management.
Corporate governance is based on the Swedish
Companies Act, the Stock Exchange’s Rule Book
for Issuers and the Swedish Code of Corporate
Governance (the "Code"), as well as other relevantlaws and regulations. The Code is available from
corporategovernanceboard.se. In 2015, Sandvik
applied the Code without deviating from any of its
regulations.
OWNERSHIP STRUCTURE
At 31 December 2015, Sandvik’s share capitalamounted to 1,505,263,107.60 SEK represented by

1,254,385,923 shares. Each share carries one vote atGeneral Meetings of Shareholders. According to theshare register, Sandvik had about 117,600 shareholders at 31 December 2015. AB Industrivärden was thelargest owner with about 11.7% of the share capital.
Of the total share capital at year-end, nearly 30% wasowned by investors outside Sweden.
GENERAL MEETING
Pursuant to the Swedish Companies Act, the General
Meeting of Shareholders is the highest decision-making
body. At the Annual General Meeting, the shareholders
are given the possibility to exercise their voting rights
in relation to, for example, the Annual Report, dividends, election of the Board and appointment ofauditor, and other matters stipulated in the Companies Act, the Articles of Association and, where applicable, the Code.
All shareholders who have been entered in theshare register and have informed the company of

CORPORATE GOVERNANCE MODELYEAR IN BRIEFNOMINATIONCOMMITTEE

GENERAL MEETING

EXTERNAL
AUDITORAUDITCOMMITTEEBOARD OF DIRECTORSREMUNERATIONCOMMITTEEINTERNAL
AUDITGROUP EXECUTIVE
MANAGEMENTGROUP
FUNCTIONSAs a component in the governance of the Sandvik Group, committees and other coordination and preparatory bodies have been established comprising representatives frombusiness areas and Group functions. Examples of such bodies include the Finance­M anagement Team, IT Board, R&D Board and Communication Management Team.

–– Björn Rosengren took office
as new President and CEO in
November 2015–– Lars Engström joined the Group
Executive Management as new
President of Sandvik Mining in
December 2015–– Jennifer Allerton, Claes Boustedt
and Johan Molin were elected
new members of the Board, with
Johan Molin as Chairman of theBoard in May 2015–– Annual election of the auditor
was introduced.
–– Launch of the revised Code of
Conduct

Sandvik Annual Report 2015

61

REPORT OF THE DIRECTORS

Well-attended Annual General Meeting on 7 May 2015 at the Göransson Arena in Sandviken, Sweden.

their attendance within the time limit stated in thenotice of the meeting are entitled to participate at
Sandvik’s General Meetings and vote according to thenumber of shares held. Shareholders are also entitledto be represented by a proxy at the Meeting.
2015 ANNUAL GENERAL MEETING
Shareholders representing 52.31% of the share capitaland votes attended the Annual General Meeting heldon 7 May 2015 in Sandviken, Sweden. Sven Unger,
attorney-at-law, was elected to chair the meeting.
Resolutions passed at the meeting included thefollowing:– Dividend of 3.50 SEK per share–	Election of Jennifer Allerton, Claes Boustedt andJohan Molin as new members of the Board andre-election of Board members Olof Faxander, Jürgen
Geissinger, Johan Karlström, Hanne de Mora and Lars
Westerberg. Election of Johan Molin as new Chairmanof the Board– Guidelines for remuneration of senior executives–	A long-term incentive program in the form of aperformance share program for about 350 senior
executives and key employees in the Group–	Adoption of revised articles of association,
resulting in annual election of the auditor– Re-election of KPMG AB as auditor

62

Sandvik Annual Report 2015

For additional information about the Annual General
Meeting, including the minutes, refer to sandvik.com.
2016 ANNUAL GENERAL MEETINGThe next Annual General Meeting will be held on 28 April
2016 in Sandviken, Sweden. More information is available at sandvik.com.
NOMINATION COMMITTEEThe Nomination Committee is a preparatory body that
prepares proposals for, among other things, the election of the Board of Directors, the Chairman of theBoard and auditors as well as fees for adoption at theGeneral Meeting. The Annual General Meeting has
adopted an instruction for the Nomination Committee,
THE TEN LARGEST SHAREHOLDER GROUPSAT 31 DECEMBER 2015, %AB Industrivärden
Alecta Pension Insurance
Handelsbanken Pension
AMF – Insurance and Funds
Swedbank Robur Funds
SSB CL Omnibus*
JPM Chase NA*
L E Lundbergföretagen AB
Nordea Investment Funds
Göranssonska Foundations* S hares held in trust.

11.7
4.9
3.8
3.5
3.4
3.4
2.5
2.4
2.0
1.8

which includes a procedure for appointing theNomination Committee, valid until a General Meeting
resolves on a change. In accordance with this instruction, the Nomination Committee should comprise representatives of the four largest shareholders, in termsof the number of votes, on the final business day inAugust plus the Chairman of the Board (convener).
NOMINATION COMMITTEE FOR 2016 AGM
For the 2016 Annual General Meeting, the Nomination
Committee consists of Fredrik Lundberg, Chairman(Industrivärden), Kaj Thorén (Alecta), Pär Boman (Handelsbanken AB, Handelsbanken’s Pension Foundationand Handelsbanken’s Pension Fund), Tomas Hedberg(Swedbank Robur Funds) and Johan Molin (Sandvik’s
Chairman of the Board). Up to the date of the Annual
General Meeting, the Nomination Committee met on
at least three occasions. Through Sandvik’s Chairmanof the Board, the Nomination Committee has been
informed of the results of the Board’s own evaluationand the company’s operations, stage of development
and overall status. The Nomination Committee has
discussed the general criteria that Board members
should fulfill, including the independence requirement, and has reviewed the number of Board assignments that each Board member has in other companies. Furthermore, the Nomination Committee has
paid special attention to the requirements relating todiversity and breadth as well as the requirement tostrive for even gender distribution.
BOARD OF DIRECTORSThe Board of Directors is responsible for the company’sorganization and the management of the company’sbusiness. The Board is required to continuously monitor
the company’s and the Group’s financial position.
The Board is to ensure that the company’s organization is designed in a way that ensures that the financial
COMPOSITION OF THE BOARD AT 31 DECEMBER 2015
INDEPENDENTIN ACC. WITHNAME
FUNCTION
THE CODE
Jennifer Allerton
MemberYes
Thomas Andersson
Deputy*Claes Boustedt
MemberYes
Jürgen M Geissinger
MemberYes
Johan Karlström
MemberYes
Jan Kjellgren
Member*Tomas Kärnström
Member*Mats W Lundberg
Deputy*Johan Molin
Chairman
Yes
Hanne de Mora
MemberYes
Lars Westerberg
MemberYes

NOMINATION COMMITTEE'S TASKS AHEAD
OF THE 2016 ANNUAL GENERAL MEETING–– Proposal concerning the Chairman of the Meeting–– Proposal concerning the number of Board members–– Proposal concerning remuneration of each Board
member–– Proposal concerning the Board and Chairman of
the Board–– Proposal concerning auditor and remuneration of
the auditor–– If deemed necessary, proposal for changes to theNomination Committee's instruction concerning
the procedure for appointment of the Nomination
Committee for the forthcoming Annual General
Meeting and its assignment

statements, the management of assets and the company’s financial condition in general are controlled in areassuring manner.
The President is appointed by the Board and is
responsible for the daily operations pursuant to guidelines and instructions issued by the Board. The distribution of responsibilities between the Board and thePresident is laid down in written instructions.
The Board’s Procedural Guidelines and instruction
for work delegation between the Board and the President, as well as for financial reporting, are reviewed
and adopted each year. The review is based on suchaspects as the Board’s evaluation of the individual andcollective work that the Board performs.
In addition to financial reporting and the monitoring
and follow-up of daily operations and profit trend,
Board meetings address the goals and strategies forthe operations, acquisitions and significant investments, as well as matters relating to the capital structure. Senior executives report business plans andstrategic issues to the Board on an ongoing basis.

SHAREHOLDING,NUMBER1)
31 DEC 2015
10,000612
10,000
0
5,000
570
2,889
0
260,0002)
16,00012,000ELECTED
2015
2012
2015
2012
2011
2008
2006
2015
2015
2006
2010

AUDIT
COMMITTEEREMUNERATIONCOMMITTEE

MemberMemberMemberChairman

ChairmanMember* E mployee representatives (both members and deputy members participate in Board meetings). Jan Kjellgren (member) and Mats W Lundberg (deputy) represent
Unionen/Ledarna/Swedish Association of Graduate Engineers. Tomas Kärnström (member) and Thomas Andersson (deputy) represent IF Metall.
1) Pertains to own and closely related persons' shareholdings.
2) The shares are held through capital redemption policy. Johan Molin also holds 1,000,000 call options in Sandvik AB.

Sandvik Annual Report 2015

63

REPORT OF THE DIRECTORSCOMPOSITIONAs per 31 December 2015, Sandvik’s Board comprised seven members elected by the Annual General
Meeting. Pursuant to Swedish legislation, trade unions
are entitled to representation on the Board and they
have appointed two members and two deputies.
In accordance with the Nomination Committee’s
proposal, Jennifer Allerton, Claes Boustedt and Johan
Molin were elected new members of the Board, andOlof Faxander, Jürgen Geissinger, Johan Karlström,
Hanne de Mora and Lars Westerberg were re-elected
members of the Board at the 2015 Annual General
Meeting. Johan Molin was elected new Chairman of
the Board. Anders Nyrén and Simon Thompson had
declined re-election. The trade unions appointed
Tomas Kärnström and Jan Kjellgren as Board members, and Thomas Andersson and Mats W Lundberg
as deputies. Sandvik’s General Counsel Åsa Thunman
served as secretary of the Board, and the Remuneration and Audit Committees. Olof Faxander subsequently resigned from the Board in August 2015 inconnection with the termination of his employment as
President and CEO.
The Board members are presented in more detail on
pages 124–125.

­ eneral Meeting be independent in relation to theGcompany and its executive management and that aminimum of two of those members that are independent
in relation to the company and its executive management are also to be independent in relation to thecompany's major shareholders.
BOARD PROCEEDINGS DURING 2015
During the year, the Board held 13 meetings. The
Board addressed strategic issues. The executive
managements of all five business areas presented
their goals and strategies. The Board also addressed
matters related to human resources, such as incentive programs, environment, health and safety, andissues concerning investments and the review of previously made investments, as well as acquisitions anddivestments. The Remuneration and Audit Committees submitted reports from their respective meetings. In autumn 2015, the Board traveled around
Sweden and Finland, which included visits to the
Sandvik sites in Gimo (Sandvik Coromant), Fagersta(Seco Tools) and Tampere (Sandvik Mining andSandvik Construction).
REMUNERATION OF THE BOARD
As resolved at the 2015 Annual General Meeting, theChairman’s fee is 1,700,000 SEK and the fee to eachof the non-executive Board members elected by theGeneral Meeting is 600,000 SEK.
In addition, 175,000 SEK was paid to the Chairmanof the Audit Committee and 150,000 SEK to each of
the other Committee members, in total 475,000 SEK.

INDEPENDENCE
All seven Board members elected by the General
Meeting are independent in relation to Sandvik and its
executive management, as well as the company's
major shareholders. Accordingly, the composition of
the Board complies with the requirements of the Codethat the majority of the members elected by the

ATTENDANCE AT BOARD AND COMMITTEE MEETINGS IN 2015
MEMBER
Total number of meetings
Jennifer Allerton 1)
Thomas Andersson
Claes Boustedt 1)
Alicia Espinosa 2)
Olof Faxander 3)
Jürgen M Geissinger
Johan Karlström
Jan Kjellgren
Tomas Kärnström
Mats W Lundberg 4)
Johan Molin 1)
Hanne de Mora
Anders Nyrén 5)
Simon Thompson 5)
Lars Westerberg

BOARD
13
9
12
9
4
7
11
12
13
12
9
9
12
4
4
13

AUDIT
COMMITTEE
5REMUNERATIONCOMMITTEE
3

3

3

3
5
2
2

2
1
3

1) Elected new Board member at the Annual General Meeting on 7 May 2015.
2) Left the Board in capacity of deputy employee representative in conjunction with the Annual General Meeting on 7 May 2015.
3) Left the Board in August 20154) Joined the Board in capacity of deputy employee representative in conjunction with the Annual General Meeting on 7 May 2015.
5) Left the Board in conjunction with the Annual General Meeting on 7 May 2015.

64

Sandvik Annual Report 2015

THE PRINCIPAL TASKS OF THE BOARD–– Establish the overall objectives and strategy for theoperations–– Appoint, evaluate and, if necessary, discharge thePresident and otherwise ensure that the company’s
executive management functions efficiently and issuitably remunerated–– Ensure that the provision of information by the company
is transparent, correct, relevant and reliable–– Ensure that there are effective systems for the monitoring
and control of the company’s operations–– Monitor and evaluate the company’s development andadvise and support the President in taking necessary
measures

The Chairman of the Remuneration Committee waspaid 125,000 SEK and each of the other Committee
members 100,000 SEK, in total 325,000 SEK. For
more detailed information on remuneration of theBoard members, see Note 3.5.
EVALUATION OF THE WORK OF THE BOARD
To ensure the quality of the work of the Board and to
identify the possible need for further expertise andexperience, a systematic and structured process is
implemented annually to evaluate the work of theBoard and its members. In 2015, the evaluations,which were led by the Chairman of the Board, werecarried out by way of each Board member responding
to an online questionnaire. The compiled results were
distributed in writing to the Board members, who thendiscussed the results at the final Board meeting of theyear. The Chairman of the Board also presented theresults of the evaluations at a meeting with the Nomination Committee.
BOARD COMMITTEES
The tasks of the Committees and their work procedures are stipulated in written instructions issued by
the Board. The Committees’ primary task is to prepare
issues and present them to the Board for resolution.
REMUNERATION COMMITTEE
Since the 2015 Annual General Meeting, the membersof the Remuneration Committee are the Chairman of
the Board Johan Molin (Chairman of the Committee),
Johan Karlström and Lars Westerberg. The tasks of
the Remuneration Committee are, among others, thoseprescribed by the Code, which include preparing
proposals regarding guidelines for remuneration ofsenior executives and long-term incentive programsfor senior executives.
Based on the recommendations of the Remuneration Committee, the Board decides the remunerationand terms of employment for Sandvik AB’s President.

–– Ensure that there is adequate control of compliancewith laws and regulations governing the company’s
operations–– Define appropriate guidelines to govern the company’s
conduct in society, with the aim of ensuring its long-termvalue creation capability–– Ensure that there is an appropriate system for follow-up
and control of the company’s operations and the risks tothe company that are associated with its operations–– Ensure that necessary ethical guidelines are established
for the company’s conduct–– Decide on acquisitions, divestments and investments–– Propose the dividend to the Annual General Meeting

The President decides on the remuneration to be paid
to the Group Executive Management in consultation
with the Remuneration Committee. For additional
information, see Note 3.5.
During 2015, the Remuneration Committee held
three meetings.
AUDIT COMMITTEE
Since the 2015 Annual General Meeting, the membersof the Audit Committee are Hanne de Mora (Chairmanof the Committee), Claes Boustedt and Johan Molin.
Areas addressed by the Audit Committee mainly
related to:–	Financial reporting.
–	Effectiveness of the system of internal control.
–	Planning, scope and follow-up of the internal andexternal audit for the year.
–	The Group’s systematic processes for risk management, including legal disputes, accounting procedures, taxation, finance operations and pension
issues.
–	The development and effectiveness of compliance
processes and Speak-up, Sandvik's global whistleblowing system.
In 2015, the Audit Committee held five meetings at
which Sandvik’s external auditor and representativesof the company’s management were present.
EXTERNAL AUDITORAt the 2015 Annual General Meeting, the audit firm
KPMG AB was re-elected auditor of Sandvik AB for theperiod until the 2016 Annual General Meeting, with
George Pettersson as the auditor-in-charge.
The progress of the audit is reported regularly during the year to the management teams of individualcompanies and the business areas, to the Group
Executive Management, the Audit Committee and to
the Board of Sandvik AB. The auditor meets with theBoard at least once a year without the President or

Sandvik Annual Report 2015

65

REPORT OF THE DIRECTORS

any other member of the Group Executive Management attending.
The independence of the external auditor is governed by a special instruction decided by the Audit
Committee setting out the non-audit services that theexternal auditors may provide to Sandvik.
Audit fees are paid continuously over the period in
office on an approved current account basis. For moredetailed information on fees paid to the auditor, seeNote 3.6.
OPERATIONAL MANAGEMENT
The five business areas – Sandvik Machining
Solutions, Sandvik Mining, Sandvik Materials
Technology, Sandvik Construction and Sandvik
Venture – comprise Sandvik’s operational structure.
The presidents of the business areas report directly
to the President of Sandvik AB and are responsible
for the business activities of their respective areas.
In turn, the business areas are organized into various
product areas or customer segments.
Visit sandvik.com for more detailed information
relating to the Group’s operational organization andbusiness activities.
PRESIDENT AND GROUP EXECUTIVE MANAGEMENT
In 2015, the Group Executive Management comprised
Olof Faxander (until 10 August 2015), President andCEO; Björn Rosengren (from 1 November 2015), President and CEO; Mats Backman, Executive Vice President and CFO, and acting President and CEO (10August–31 October 2015); Jonas Gustavsson, President of Sandvik Machining Solutions; Scot Smith(until 14 December 2015), President of Sandvik Mining;
Lars Engström (from 15 December 2015), President of
Sandvik Mining; Petra Einarsson, President of Sandvik
Materials Technology; Dinggui Gao, President of
Sandvik Construction; Jim Nixon, President of Sandvik
Venture; Åsa Thunman, Executive Vice President andGeneral Counsel; Anna Vikström Persson, Executive
Vice President and Head of Human Resources;
Jessica Alm, Executive Vice President and Head ofGroup Communications; Zhiqiang (ZZ) Zhang, Executive Vice President and Head of Emerging Markets,
and Olle Wijk (until 31 December 2015), Executive
Vice President and Head of Group R&D. The President
and other members of the Group Executive Management are presented on pages 126-127.
The Group Executive Management meet eachmonth and deal with the Group’s financial development, Group-wide development projects, leadershipand competence sourcing, and other strategic issues.

66

Sandvik Annual Report 2015

Sandvik has established Group functions responsible for Group-wide activities such as legal affairs,
communication, finance and HR. In addition to theGroup Executive Management, business areas andGroup functions, a number of committees and othercoordination and preparatory bodies are commissioned to coordinate Group-wide strategic areas, suchas environment, health and safety, research and development, purchasing, IT, finance and HR.
In all countries where Sandvik has registered sales, aGroup Management Representative (GMR) has been
appointed by the President and CEO to ensure that
Sandvik, in the country or region to which the GMR is
assigned, has an adequate country or regional organization to drive synergies and safeguard complianceand efficient coordination and performance of support
activities in the country. The GMR should act as chairman in the country boards of his/her assignment or­delegate this to a Deputy GMR and, if so, lead theregional country management team.
Each country in which Sandvik has a subsidiary has aCountry Manager who acts as the representative of theGroup Executive Management for a country/region,
with an overall responsibility for Sandvik ownership-­related matters and overall business activities. The
Country Manager acts as a counterpart to the GMR or
Deputy GMR and is responsible for promoting thewider Sandvik Group interest and initiating activities
that should increase the efficiency of business operations and leverage the synergy opportunities within theGroup.
REMUNERATION OF SENIOR EXECUTIVES
For guidelines, remuneration and other benefits
payable to the Group Executive Management, refer
to Proposal regarding guidelines for the remunerationof senior executives on page 45 and Note 3.5.
INTERNAL CONTROL AND RISK MANAGEMENT
The Board has the overall responsibility to ensure that
the Group’s system for risk management and internal
control is effective. The Group applies a comprehensive risk management program, Enterprise Risk Management (ERM). ERM is an integral part of Sandvik's
operational and strategic management and assists
the company in taking action when change occurs,
whether triggered by internal or external factors.
The guidelines for Sandvik’s operations are assembled in Power of Sandvik, which is the governanceframework incorporating the Group’s strategy, Codeof Conduct and policies that regulate the governanceof the Sandvik Group.

GOVERNANCE OF SUSTAINABLE BUSINESSWith Sandvik’s Sustainable Business strategy and
Code of Conduct as the basis, risks and opportunities
are analyzed. Objectives and targets are set toaddress the risks identified by the Group and to efficiently leverage the opportunities available.
The Board adopts the Group’s Code of Conduct and
the Group Executive Management establishes objectives and performance indicators for sustainability
operations. At the end of 2014, the Board of Directors
adopted a revised Code of Conduct, which waslaunched in 2015. Each business area assumes
responsibility for ensuring compliance with the Codeand that the goals are cascaded down in the organization. The business areas are also responsible forthe assessment of sustainability risks (for example,
environment, health, safety, corruption, human rights,
working conditions and supplier responsibility) in theiroperations, and specific teams are appointed in eachbusiness area to coordinate issues and support the
local management.
Sandvik conducts a materiality analysis on a regularbasis. In 2013, and confirmed in 2014 and 2015, thefollowing aspects were identified as material:

ENERGY, EMISSIONS AND CLIMATE CHANGE
Climate change affects Sandvik and we need tomitigate this risk. In addition, a high degree of energy
efficiency increases the value of the energy source,
resulting in lower costs and emissions, both for
Sandvik and its customers.

COMPLIANCE
Compliance includes four areas: anticorruption
compliance, competition law, trade compliance anddata protection. The main purpose is to ensure awell-functioning structure with control over Sandvik's
international business and to manage compliance risks.

TALENT ATTRACTION, DEVELOPMENT
AND RETENTION
Sandvik must ensure that it has the right people in
the right positions. In order to retain the Group's
market-leading position in a challenging market,
a high-performing culture is important.

HEALTH AND SAFETY
Maintaining a safe work environment will always be
a top priority, out of respect for both Sandvik's
employees and customers. The Group's performanceis meeting growing expectations from its customers
and other stakeholders. Health and safety is asignificant competitive advantage to Sandvik.
DIVERSITY AND INCLUSION
Sandvik's view is that diverse teams are more
effective, more likely to think and act outside the box
and contribute to greater creativity and innovation.
Diversity and inclusion are integral parts of a modern
society and, for Sandvik, a strong competitive advantage.
Having the right mix of people, reflecting Sandvik's
markets, will support the business and our ambition
to meet the needs of global and local customers.

SUSTAINABLE SUPPLIER MANAGEMENT
A sustainable supply chain and strong supplier
relationships are central to Sandvik’s commitment
to provide customers with the best and mostinnovative offerings.
USE, REUSE AND RECYCLING OF MATERIALSAND NATURAL RESOURCES
Comprehensive recycling programs areunderway in all parts of the Group.
The global raw material shortage is
an impediment for a successful business. Recycling results in less virgin
raw material used, lower energy
consumption and reduced
emissions, acidifying substances and waste water
discharge, in addition toless waste. Factors
important to Sandvik,
the Group's customers
and society at large.

Sandvik Annual Report 2015

67

REPORT OF THE DIRECTORSINTERNAL CONTROLOF FINANCIAL REPORTING
The financial statements are established in accordance with prevailing legislation,
International Financial Reporting Standards (IFRS) as adopted by EU and the listing
agreement with Nasdaq Stockholm. This description of internal control over financial
reporting has been prepared in accordance with the Annual Accounts Act and­constitutes an integrated part of the Corporate Governance Report.

Sandvik’s finance organization manages a well-established financial reporting process aimed at ensuring ahigh level of internal control.
The internal control system aligns with the conceptual framework of COSO, which is based on five key
components that jointly facilitate good internal control. The five components are Control Environment,
Risk Assessment, Control Activities, Information andCommunication and Monitoring and Follow-up. Theinternal control procedures cover all stages of thefinancial reporting process, from the initial recordingof transactions in each subsidiary and reporting
entity, the validation and analysis of each businessarea through to the consolidation, quality assurance,
analysis and reporting at Group level. The applicationof the COSO framework is described below.
CONTROL ENVIRONMENTThe Power of Sandvik regulates the governance of
the Sandvik Group. It includes the Sandvik Code of
Conduct, delegation of responsibilities, including
signatory and authorization principles for decision
making and cost approvals, and request and approval
procedures in respect of investments and acquisitions, among other items.
The Sandvik Financial Reporting Policies andProcedures govern control over financial reporting.
These documents contain detailed instructions
regarding accounting policies and financial reporting
procedures to be applied by all Sandvik reporting
entities. In the 20 major countries where Sandvik
operates, Country Finance Managers are appointed
to support local management and finance organizations and to provide a link between reporting entities
and Group finance. At Group level, Group Financial
Control manages the reporting process to ensure the68

Sandvik Annual Report 2015

completeness and accuracy of financial reporting andcompliance with IFRS requirements. Group BusinessControl performs business analysis and compiles
reports on operational performance. Both statutory
and management reporting is conducted in close
cooperation with business areas and specialist functions such as tax, financial services and legal toensure the correct reporting of the income statement,balance sheet, equity and cash flow.
RISK ASSESSMENT AND RISK MANAGEMENTThe Enterprise Risk Management (ERM) process at
Sandvik, which is described in the Integrated Risk
Management Report on pages 54–55, encompasses
the area of financial reporting. Risk management is anormal component of the daily work on financial
reporting. Specific activities have been establishedwith the purpose of identifying risks, weaknesses andany changes needed to the financial reporting process to minimize risks. The amalgamation of roles andresponsibilities, work descriptions, IT systems, skills
and expertise creates an environment that is monitored continuously to identify and manage potential
risks.
CONTROL ACTIVITIESInternal Control activities have been effected in allareas that impact upon financial reporting. The internal control activities follow the logic of the reporting
process and the finance organization. In each reporting entity, the finance staff is responsible for accurate
accounting and the closing of books. Finance staff
adheres to the Sandvik Financial Reporting Policies
and Procedures and validate and reconcile local
accounts before submitting them to business area
management and Group finance for consolidation.

Controllers in the product and business areas perform analytical reviews and investigations, conductbusiness trend analyses and update forecasts andbudgets. They investigate certain issues related to
the financial information as and when needed. All
business areas present their financial performance in
written reports to the Group Executive Management
on a monthly and quarterly basis.
Group Financial Control and Group Business Control all have key responsibilities for control activities
regarding financial reporting.
INFORMATION AND COMMUNICATION
Financial reports setting out the Group’s financial
position and the earnings trend of operations are submitted regularly to Sandvik's Board. The Board deals
with all quarterly interim reports as well as the Annual
Report prior to publishing and monitors the audit ofinternal control and financial statements conductedby Internal Audit and the external auditors.
The business areas and major countries also have asystem of internal Board meetings with a formal
agenda, including financial information, monitoringand decisions related to financial and accounting
matters.
Steering documents, such as policies and procedures, as well as instructions, are updated regularlyon the company’s intranet and are available to all of
Sandvik’s employees. Reporting requirements arealso updated on the company’s intranet and are communicated through formal and informal channels, aswell as at regular meetings and conferences.
Information to external parties is communicatedregularly on Sandvik’s website, which contains news
and press releases. Quarterly interim reports are published externally and are supplemented by investor
meetings attended by the Group Executive Management. In addition, there is an established agenda forcommunicating information on shareholder meetingsand other information to investors. The Annual Reportis made available to shareholders and the generalpublic, both as a printed version and on Sandvik’s
website.

and other requirements for listed companies. The
Audit Committee prepares issues and presents themto the Board for resolution.
The quality of the financial reporting process andinternal controls is assessed by Group Finance every
month as part of the quality assurance of reporting.
The Sandvik internal audit function independently
reviews the internal control system of financial reporting as part of its audit plan.
The external auditors continuously examine the levelof internal control over financial reporting. They review
the third-quarter interim report and study the financial
reports prepared for the other quarters. In conjunction
with the close of the third quarter, the external auditors
perform a more detailed examination of the operations,as part of a hard-close audit, which includes an assessment of the Parent Company’s reporting and internal
control over financial reporting in the business areas,
subsidiaries and Group functions. Finally, the external
auditors perform an examination of the annual
accounts and the Annual Report.
INTERNAL AUDITThe Internal Audit function audits the corporate
governance, internal control and risk-management
procedures.
Internal Audit is subordinated to the Board’s Audit
Committee and the head of the unit reports to the
Audit Committee.
Internal audits include, as a basis, the Group’s
guidelines and policies for corporate governance, risk
management and internal control with regard to areas
such as financial reporting, compliance with the Codeof Conduct and IT. The outputs of the audits include
action plans and programs for improvement. Findings
are reported to the Group Executive Management andthe business area management and to the Board’s
Audit Committee.

MONITORING AND FOLLOW-UP
Each business entity manager and their respective
finance organization is ultimately responsible for continuously monitoring the financial information of thevarious entities. The information is also monitored at abusiness area level, by Group staff functions, theGroup Executive Management and by the Board. The
Audit Committee at Sandvik is to ensure that thecompany's financial reports are produced in accordance with legislation, applicable accounting standards

Sandvik Annual Report 201569

AUDITOR’S REPORT

AUDITOR’S REPORTTO THE ANNUAL MEETING OF THE SHAREHOLDERS
OF SANDVIK AB (PUBL), CORP. ID. 556000-3468

REPORT ON THE ANNUAL ACCOUNTS
AND ­CONSOLIDATED ACCOUNTS

Act and present fairly, in all material respects, the financial position of
the group as of 31 December 2015 and of their financial performanceand cash flows for the year then ended in accordance with International
Financial Reporting Standards, as adopted by the EU, and the Annual
Accounts Act. A corporate governance statement has been prepared.
The statutory administration report and the corporate governancestatement are consistent with the other parts of the annual accounts
and consolidated accounts.
We therefore recommend that the annual meeting of shareholders
adopt the income statement and balance sheet for the parent company
and the group.

We have audited the annual accounts and consolidated accounts of
Sandvik AB (publ) for the year 2015. The annual accounts and consolidated accounts of the company are included in the printed version ofthis document on pages 41–122.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND
THE PRESIDENT AND CEO FOR THE ANNUAL ACCOUNTSAND CONSOLIDATED ACCOUNTSThe Board of Directors and the President and CEO are responsible forthe preparation and fair presentation of these annual accounts inaccordance with the Annual Accounts Act and of the consolidated
accounts in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act, and for suchinternal control as the Board of Directors and the President and CEO
determine is necessary to enable the preparation of annual accounts
and consolidated accounts that are free from material misstatement,
whether due to fraud or error.

REPORT ON OTHER LEGAL AND REGULATORYREQUIREMENTS
In addition to our audit of the annual accounts and consolidated
accounts, we have also audited the proposed appropriations of thecompany’s profit or loss and the administration of the Board of Directors
and the President and CEO of Sandvik AB (publ) for the year 2015.

RESPONSIBILITIES OF THE BOARD OF DIRECTORSAND THE PRESIDENT AND CEO

AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on these annual accounts
and consolidated accounts based on our audit. We conducted our audit
in accordance with International Standards on Auditing and generally
accepted auditing standards in Sweden. Those standards require that
we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether the annual accounts andconsolidated accounts are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the annual accounts and consolidated accounts. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of
the annual accounts and consolidated accounts, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation and fair presentationof the annual accounts and consolidated accounts in order to design
audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by the Board of Directors and the President
and CEO, as well as evaluating the overall presentation of the annual
accounts and consolidated accounts.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinions.

OPINIONS
In our opinion, the annual accounts have been prepared in accordancewith the Annual Accounts Act and present fairly, in all material respects,
the financial position of the parent company as of 31 December 2015
and of its financial performance and its cash flows for the year thenended in accordance with the Annual Accounts Act. The consolidated
accounts have been prepared in accordance with the Annual Accounts

The Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss, and the Board of Directors andthe President and CEO are responsible for administration under theCompanies Act.

AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion with reasonable assurance
on the proposed appropriations of the company’s profit or loss and on
the administration based on our audit. We conducted the audit inaccordance with generally accepted auditing standards in Sweden.
As basis for our opinion on the Board of Directors’ proposed appropriations of the company’s profit or loss, we examined the Board of
Directors’ reasoned statement and a selection of supporting evidence
in order to be able to assess whether the proposal is in accordance with
the Companies Act.
As basis for our opinion concerning discharge from liability, in addition to our audit of the annual accounts and consolidated accounts, we
examined significant decisions, actions taken and circumstances of thecompany in order to determine whether any member of the Board of
Directors or the President and CEO is liable to the company. We also
examined whether any member of the Board of Directors or the President and CEO has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinions.

OPINIONS
We recommend to the annual meeting of shareholders that the profit beappropriated in accordance with the proposal in the statutory admini­
stration report and that the members of the Board of Directors and thePresident and CEO be discharged from liability for the financial year.

Stockholm 1 March 2016
KPMG AB
George Pettersson
Authorized Public Accountant

Sandvik Annual Report 2015

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