REPORT OF THE DIRECTORSCORPORATEGOVERNANCE 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 47,000 employees and its operations are global with sales in more than
130 countries. Sandvik AB is a public company with its shares listed on Nasdaq
Stockholm (the “Stock Exchange”).

Corporate governance at Sandvik
comprises the system, encompassing the principles, guidelines,
structures and processes, throughwhich the Group is managed andcontrolled. The aim is to ensure efficient and value-creating decision-making by clearly specifying
the division of roles and responsibilities among shareholders, theBoard and the Group Executive
Management.
Corporate governance is basedon the Swedish Companies Act, theStock Exchange’s Rule book for
issuers and the Swedish Code ofCorporate Governance (the"Code"), as well as other relevantlaws and regulations. The Code isavailable from www.corporategovernanceboard.se. In 2014, Sandvik
applied the Code without deviatingfrom any of its regulations.

had about 115,000 shareholders at
31 December 2014. AB Industri­värden was the largest owner with
about 11.7% of the share capital. Of
the total share capital at year-end,
nearly 31% was owned by investors
outside Sweden.

OWNERSHIP STRUCTURE
At 31 December 2014, Sandvik’s
share capital amounted to1,505,263,107.60 SEK represented
by 1,254,385,923 shares. Eachshare carries one vote at General
Meetings of shareholders. According to the share register, Sandvik

GENERAL MEETING
Pursuant to the Swedish Companies Act, the General Meeting ofshareholders 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

CORPORATE GOVERNANCE MODELYEAR IN BRIEFNOMINATIONCOMMITTEEAUDITCOMMITTEEINTERNAL
AUDIT

GENERAL MEETINGBOARD OF DIRECTORSGROUP EXECUTIVE
MANAGEMENT

EXTERNAL
AUDITOR–	Four new members added to theGroup Executive Management.

REMUNERATIONCOMMITTEE–	Re-election of all Board members (except Fredrik Lundberg,
who declined re-election) andthe Chairman of the Board.

GROUP
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.

–	New incentive program for­senior executives and key
employees adopted by the
Annual General Meeting.
–	Adoption of revised Code of
Conduct, which will be launchedduring 2015.

Sandvik Annual Report 2014

63

REPORT OF THE DIRECTORS

Well-attended Annual General Meeting on 13 May 2014 at the Göransson Arena in Sandviken, Sweden.

64

example, the Annual Report, dividends, election of the Board and,
where applicable, appointment ofauditor, and other matters stipulated in the Companies Act, theArticles of Association and, whereapplicable, the Code.
All shareholders who have beenentered in the share register andhave informed the company of theirattendance within the time limit
stated in the notice of the meetingare entitled to participate at Sandvik’s General Meetings and voteaccording to the number of shares
held. Shareholders are also entitledto be represented by a proxy at the
Meeting.

ing held on 13 May 2014 in Sandviken, Sweden. Sven Unger, attorney-at-law, was elected to chair the
meeting. Resolutions passed at themeeting included the following:2014 ANNUAL GENERAL MEETING
Shareholders representing 55.15%of the share capital and votes
attended the Annual General Meet-

For additional information about theAnnual General Meeting, including
the minutes, see sandvik.com.

Sandvik Annual Report 2014–	Dividend of 3.50 SEK per share.
–	Re-election of all Board members(with the exception of Fredrik Lundberg who had declined re-election)and the Chairman of the Board.
–	Guidelines for remuneration ofsenior executives.
–	A new long-term incentive program in the form of a performance
share program for about 350 senior executives and key employees
in the Group.

THE TEN LARGEST SHAREHOLDERGROUPS AT 31 DECEMBER 2014, %AB Industrivärden
Alecta Pension Insurance
SSB CL Omnibus*
Handelsbanken Pension
Swedbank Robur Funds
L E Lundbergföretagen AB
AMF – Insurance and Funds
Nordea Investment Funds
Göranssonska Foundations
Pensionskassan SHB,
försäkringsförening* S hares held in trust.

11.7
4.8
4.0
3.8
3.2
2.4
2.0
1.9
1.9
1.5

2015 ANNUAL GENERAL MEETINGThe next Annual General Meeting
will be held on 7 May 2015 in Sandviken, Sweden. More information isavailable at ­sandvik.com.
NOMINATION COMMITTEEThe Nomination Committee is apreparatory body that prepares
proposals for, among other things,
election of the Board of Directors
and the Chairman of the Board,election of auditors (where necessary) and fees for adoption at theGeneral Meeting. The Annual General Meeting has adopted an
instruction for the Nomination
Committee, which includes a procedure for appointing the Nomination Committee, valid until a General Meeting resolves on a change.
In accordance with this instruction,
the Nomination Committee should
comprise representatives of thefour largest shareholders, in termsof the number of votes, on the final
business day in August plus the
Chairman of the Board (convener).
NOMINATION COMMITTEE
FOR 2015 AGM
For the 2015 Annual General Meeting, the Nomination Committee

consists of Anders Nyberg, Chairman (Industrivärden), Håkan Sandberg (Handelsbanken AB, Handelsbanken’s Pension Foundation and
Handelsbanken’s Pension Fund),
Kaj Thorén (Alecta), Tomas Hedberg (Swedbank Robur Funds) andAnders Nyrén (Sandvik’s Chairmanof the Board). Up to the date of theAnnual General Meeting, the Nomination Committee will have met on
at least four occasions. ThroughSandvik’s Chairman of the Board,
the Nomination Committee hasreceived information concerning
the Board’s own evaluation and thecompany’s operations, stage ofdevelopment and overall status.
The Nomination Committee has
discussed the general criteria that
Board members should fulfill,including the independence
requirement, and has reviewed thenumber of Board assignments thateach Board member has in othercompanies. Furthermore, the Nomination Committee has paid special
attention to the requirements relating to diversity and breadth as wellas the requirement to strive foreven gender distribution.

NOMINATION COMMITTEE'STASKS AHEAD OF THE 2015
ANNUAL GENERAL MEETING–	Proposal concerning the­Chairman 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 to the auditor.
–	If deemed necessary, proposal
for changes in the Nomination
Committee's instruction concerning the procedure forappointment of the Nomination
Committee for the forthcoming
Annual General Meeting and its
assignment.

BOARD OF DIRECTORSThe Board of Directors is responsible
for the company’s organization andthe management of the company’sbusiness. The Board is required tocontinuously monitor the company’s
and the Group’s financial position.
The Board is to ensure that thecompany’s organization is designed
in a way that ensures that the finan-

COMPOSITION OF THE BOARD SINCE 2014 ANNUAL GENERAL MEETINGNAME

FUNCTION

Thomas Andersson
Alicia Espinosa
Olof Faxander
Jürgen M Geissinger
Johan Karlström
Jan Kjellgren
Tomas Kärnström
Hanne de Mora
Anders Nyrén
Simon Thompson
Lars Westerberg

Deputy*Deputy*MemberMemberMemberMember*Member*MemberChairmanMemberMemberINDEPENDENTIN ACC. WITH
THE CODE

No1)
Yes
Yes

Yes
No2)
Yes
Yes

SHAREHOLDING,NUMBER 3)
31 DEC 2014

ELECTED

612
7,848
81,874
0
5,000
570
2,889
16,00010,0000
12,000

2012
2010
2011
2012
2011
2008
2006
2006
2002
2008
2010

AUDIT
COMMITTEEREMUNERATIONCOMMITTEE

MemberChairmanMemberMemberChairmanMember* E mployee representatives (both members and deputy members participate in Board meetings). Jan Kjellgren (member) and Alicia Espinosa (deputy) represent
Unionen/Ledarna/ Swedish Association of Graduate Engineers. Tomas Kärnström (member) and Thomas Andersson (deputy) represent IF Metall.
1) Not independent in relation to the company and its executive management.
2) Not independent in relation to major shareholders in the company
3) Pertains to own and closely related persons' shareholdings.

Sandvik Annual Report 2014

65

REPORT OF THE DIRECTORS

cial statements, the managementof assets and the company’s financial condition in general are controlled in a reassuring 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 thePresident, as well as for financial
reporting, are reviewed andadopted each year. The review isbased on such aspects as theBoard’s evaluation of the individualand collective work that the Board
performs.
In addition to financial reporting
and the monitoring and follow-up ofdaily operations and profit trend,
Board meetings address the goals
and strategies for the 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.

COMPOSITION
Sandvik’s Board comprises sevenmembers elected by the Annual
General Meeting. Pursuant toSwedish 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, Olof
Faxander, Jürgen Geissinger, Johan
Karlström, Hanne de Mora, Anders
Nyrén, Simon Thompson and Lars
Westerberg were re-elected at the2014 Annual General Meeting.
Anders Nyrén was re-elected
Chairman of the Board. Fredrik
Lundberg had declined re-election.
The trade unions appointed Tomas
Kärnström and Jan Kjellgren as
Board members and Alicia Espinosa and Thomas Andersson as
deputies. Sandvik’s General Counsel (Bo Severin up until 30 September 2014 and thereafter Åsa Thunman) served as secretary of theBoard, and the Remuneration and
Audit Committees.
The Board members are­presented in more detail on pages
126–127.

ATTENDANCE AT BOARD AND COMMITTEE MEETINGS IN 2014
MEMBER

BOARD

Total number of meetings
Thomas Andersson
Alicia Espinosa
Olof Faxander
Jürgen M Geissinger
Johan Karlström
Jan Kjellgren
Tomas Kärnström
Fredrik Lundberg1)
Hanne de Mora
Anders Nyrén
Simon Thompson
Lars Westerberg

10
10
8
10
9
10
10
10
3
10
10
10
9

AUDIT
COMMITTEEREMUNERATIONCOMMITTEE

5

4

4

5
5
5

1) Resigned as Board member at the Annual General Meeting on 13 May 2014.

66

Sandvik Annual Report 2014

4
4

INDEPENDENCE
Anders Nyrén is not regarded as
independent in relation to major
shareholders in the company andOlof Faxander is not regarded as
independent in relation to the company and its executive management. The other five members
elected by the General Meeting are
all independent in relation to Sandvik and its executive management,
as well as the company's major
shareholders. Accordingly, thecomposition of the Board complies
with the requirements of the Codethat the majority of the members
elected by the General Meeting be
independent in relation to the company and its executive management and that a minimum of two of
those members that are independent in relation to the company andits executive management are also
to be independent in relation to thecompany's major shareholders.
BOARD PROCEEDINGSDURING 2014
During the year, the Board held ten
meetings. The Board addressedstrategic issues. The executive
managements of all five businessareas presented their goals andstrategies. The Board also
addressed matters related tohuman resources, such as incentive programs, succession planningand environment, health and safety,
and issues concerning investments
and the review of previously madeinvestments, as well as acquisitions, such as the acquisition of
Varel International Energy Services,
Inc., and divestments. The Remuneration and Audit Committees
submitted reports from theirrespective meetings. In the autumn
of 2014, the Board traveled to theUS, which included visits to severalof Sandvik's production facilities
and the Aerospace Application

THE PRINCIPAL TASKS OF THE BOARD–	Establish the overall objectives
and strategy for the operations.
–	Appoint, evaluate and, if necessary, discharge the President andotherwise ensure that the company’s executive management­f unctions efficiently and is suitably
remunerated.
–	Ensure that the provision of­information by the company istransparent, correct, relevant
and reliable.

Center in the new Sandvik facility in
Fair Lawn, as well as a visit to RollsRoyce's Crosspointe facility.
REMUNERATION OF THE BOARD
As resolved at the 2014 Annual
General Meeting, the Chairman’s
fee is 1,700,000 SEK and the fee toeach of the non-executive Board
members elected by the General
Meeting is 600,000 SEK.
In addition, 175,000 SEK was paid
to the Chairman of the Audit Committee and 150,000 SEK to each of
the other Committee members, intotal 475,000 SEK. The Chairman of
the Remuneration Committee waspaid 125,000 SEK and each of theother Committee members
100,000 SEK, in total 325,000 SEK.
For more detailed information on
remuneration of the Board members, see Note 3.5.
EVALUATION OF THE WORKOF 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. The evaluations, which are led by the Chairman of the Board, are performed–	Ensure that there are effective
systems for the monitoring andcontrol of the company’s
operations.
–	Monitor and evaluate the company’s development and advise andsupport the President in taking
necessary measures.
–	Ensure that there is adequate­control of compliance with laws
and regulations governing thecompany’s operations.

individually and the results are­discussed in a plenary meeting.
The Chairman of the Board presents the results of the evaluations
at a meeting with the Nomination
Committee.
BOARD COMMITTEES
The tasks of the Committees andtheir work procedures are stipulated in written instructions issued
by the Board. The Committees’ primary task is to prepare issues andpresent them to the Board for
resolution.
REMUNERATION COMMITTEE
During 2014, the members of theRemuneration Committee were the
Chairman of the Board Anders
Nyrén (Chairman of the Committee),
Johan Karlström and Lars Westerberg. According to the instructions
for the Remuneration Committee,
the Committee is to undertake thetasks prescribed by the Code,which include preparing proposals
regarding guidelines for remuneration of senior executives and longterm incentive programs for senior
executives.
Based on the recommendationsof the Remuneration Committee, theBoard decides the remuneration ofand terms of employment for Sand-–	Ensure that necessary ethicalguidelines are established for thecompany’s conduct.
–	Decide on acquisitions, divestments and investments.
–	Propose the dividend to the Annual
General Meeting.

vik AB’s President. The President
decides on the remuneration to be
paid to the other senior executives
following consultation with theRemuneration Committee. For additional information, see Note 3.5.
During 2014, the Remuneration
Committee held four meetings.
AUDIT COMMITTEE
During 2014, the members of the
Audit Committee were Hanne deMora (Chairman of the Committee),Anders Nyrén and Simon Thompson. Areas addressed by the Audit
Committee mainly related to:–	Financial reporting.
–	Effectiveness of the system ofinternal control.
–	Planning, scope and follow-up of
the internal and external 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.
In 2014, the Audit Committee held
five meetings at which Sandvik’s
external auditor and representatives of the company’s management were present.

Sandvik Annual Report 2014

67

REPORT OF THE DIRECTORSEXTERNAL AUDITORAt the 2011 Annual General Meeting, the audit firm KPMG AB was
re-elected auditor of Sandvik AB for
the period until the 2015 Annual
General Meeting, with George Pettersson as the auditor-in-charge.
The progress of the audit isreported regularly during the year
to the management teams of individual companies and the businessareas, to the Group Executive Management, the Audit Committee andto the Board of Sandvik AB. The
auditor meets with the Board atleast once a year without the President or any other member of theGroup 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 the external auditors may provide to Sandvik.
Audit fees are paid continuously
over the period in office on an
approved current account basis.
For more detailed information on
fees paid to the auditor, seeNote 3.6.
OPERATIONAL MANAGEMENT
The five business areas – Sandvik
Machining Solutions, Sandvik M­ ining,
Sandvik Materials Technology,
Sandvik Construction and Sandvik
Venture – comprise Sandvik’s operational structure. The presidents ofthe business areas report directly
to the President of Sandvik AB andare responsible for the businessactivities of their respective areas.
In turn, the business areas areorganized into various productareas or customer segments.
Visit sandvik.com for moredetailed information relating to theGroup’s operational organization
and business activities.

68

Sandvik Annual Report 2014PRESIDENT AND GROUPEXECUTIVE MANAGEMENT
In 2014, the Group Executive Management comprised Olof Faxander,
President and CEO; Mats Backman,
Executive Vice President and CFO;
Gary Hughes (until 18 May 2014),
President of Sandvik Mining;
Scot Smith (from 19 May 2014),
President of Sandvik Mining;­Jonas ­Gustavsson, Presidentof Sandvik Machining Solutions;
Petra E­ inarsson, President of
Sandvik Materials Technology;
Dinggui Gao, President of Sandvik
Construction; Tomas Nordahl (until
31 December 2014), Executive
Vice President and Head of IT,
sourcing and strategy and­President of Sandvik Venture; Bo
Severin (until 30 September 2014),
Executive Vice President and­General Counsel; Åsa Thunman(from 1 October 2014), Executive
Vice President and General Counsel; Anna Vikström Persson, Executive Vice President and Head of
Human Resources; and Jessica
Alm, Executive Vice PresidentGroup Communications. In April
2014, Zhiqiang (ZZ) Zhang, Executive Vice President and Head ofEmerging Markets, and Olle Wijk,
Executive Vice President and Headof Group R&D (previously membersof the Extended Group Executive
Management) were made membersof the Group Executive Management. Jim Nixon was appointed
President of Sandvik Venture, andthereby also a member of theGroup Executive Management, asof 1 January 2015. The President
and other members of the Group
Executive Management are presented on pages 128–129.
The Group Executive Management meet each month and deal
with the Group’s financial devel­
opment, Group-wide development

projects, leadership and competence sourcing, and other strategic
issues.
Sandvik has established Groupfunctions responsible for Groupwide activities such as legal affairs,
communication, finance, HR and IT,
strategy and sourcing. In addition to
the Group Executive Management,
business areas and Group functions, a number of committees andother coordination and preparatory
bodies are commissioned to coordinate Group-wide strategic areas,such as environment, health andsafety, research and development,purchasing, IT, finance and HR.
In all countries where Sandvik hasregistered sales, a Group Management Representative (GMR) has
been appointed by the President
and CEO to ensure that Sandvik, inthe country or region to which the
GMR is assigned, has an adequate
country or regional organization todrive synergies and safeguard compliance and efficient coordinationand 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 the regional country
management team.
Each country in which Sandvik
has a subsidiary has a Country Manager who acts as the representativeof the Group Executive Management for a country/region, with an
overall responsibility for Sandvik
ownership-related matters andoverall business activities. The
Country Manager acts as a counterpart to the GMR or Deputy GMR andis responsible for promoting thewider Sandvik Group interest andinitiating activities that should
increase the efficiency of business
operations and leverage the synergy opportunities within the Group.

REMUNERATION OFSENIOR EXECUTIVES
For guidelines, remuneration andother benefits payable to the Group
Executive Management, refer to
Proposal regarding guidelines forthe remuneration of senior executives and Note 3.5.
INTERNAL CONTROLAND RISK MANAGEMENT
The Board has the overall responsibility to ensure that the Group’ssystem for risk management andinternal 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 orexternal factors.
The guidelines for Sandvik’s
operations are assembled in Powerof Sandvik, which is the governanceframework incorporating theGroup’s strategy, Code of Conduct
and policies that regulate the governance of the Sandvik Group.

GOVERNANCE OF SUSTAIN­
ABILITY ACTIVITIESWith Sandvik’s Sustainable Business strategy and Code of Conduct
as the basis, risks and opportunities are analyzed. Objectives andtargets are set to address 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 activities. At
the end of 2014, the Board adopted
a revised Code of Conduct, which
will be launched at the beginning of
2015. Each business area assumes
responsibility for ensuring compliance with the Code and that thegoals are cascaded down in theorganization. The business areas
are also responsible for the assessment of sustainability risks (forexample, environment, health andsafety, corruption, human rights,
working conditions and supplier
responsibility) in its operations, andspecific organizations areappointed in each business area tocoordinate issues and support the
local management teams.
At Group level, the Head of Sustainable Business leads a sustainability coordination team comprising
representatives from various functions and business areas. The teamholds regular meetings during
which such activities as coordination, development of synergies, anddrafting of policy documents andaction programs are carried out.
Equivalent coordination teams are
established in India, China, Mexico,South Africa and Brazil.
The various functions, such aspurchasing, risk management, HR
and EHS (environment, health andsafety), are responsible for theirrespective areas, preparing policies
and standards that are to be introduced in the organization. There
are also a number of councils, committees and boards at Group level
whose job is to coordinate the workof the business areas and draft joint
policies, targets and key performance indicators for presentation
to the Group Executive
Management.

Sandvik Annual Report 2014

69

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 atensuring a high 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 and Communication and Monitoring and follow-up.
The internal control procedures
cover all stages of the financial
reporting process, from the initialrecording of transactions in eachsubsidiary and reporting entity, thevalidation and analysis of eachbusiness area through to the consolidation, quality assurance, analysis and reporting at Group level.
The application of the COSO framework is described below.
CONTROL ENVIRONMENTThe Power of Sandvik regulates thegovernance 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

70

Sandvik Annual Report 2014

and approval procedures in respectof investments and acquisitions,among other items.
The Sandvik Financial Reporting
Policies and Procedures 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 majorcountries where Sandvik operates,
Country Finance Managers areappointed to support local management and finance organizations
and to provide a link between
reporting entities and Groupfinance. At Group level, Group
Financial Control manages thereporting process to ensure thecompleteness and accuracy offinancial reporting and compliancewith IFRS requirements. Group
Business Control performs business analysis and compiles reports
on operational performance. Bothstatutory 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 theincome statement, balance sheet,
equity and cash flow.

RISK ASSESSMENT AND RISKMANAGEMENTThe Enterprise Risk Management(ERM) process at Sandvik, which is
described in the Integrated Risk
Management Report on pages
54–55, encompasses the area offinancial reporting. Risk management is a normal component of thedaily work on financial reporting.
Specific activities have been established with the purpose of identifying risks, weaknesses and anychanges 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 andmanage potential risks.
CONTROL ACTIVITIESInternal Control activities havebeen effected in all areas 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 financestaff is responsible for accurate
accounting and the closing ofbooks. Finance staff adheres to the
Sandvik Financial Reporting Poli-cies and Procedures and validate
and reconcile local accounts before
submitting them to business area
management and Group finance forconsolidation.
Controllers in the product andbusiness areas perform analyticalreviews and investigations, conduct business trend analyses andupdate forecasts and budgets.
They investigate certain issues
related to the financial information
as and when needed. All businessareas present their financial performance in written reports to theGroup Executive Management on amonthly and quarterly basis.
Group Financial Control andGroup Business Control all have key
responsibilities for control activities
regarding financial reporting.
INFORMATION AND
COMMUNICATION
Financial reports setting out theGroup’s financial position and theearnings trend of operations are
submitted regularly to Sandvik's
Board. The Board deals with allquarterly interim reports as well as
the Annual Report prior to publishing and monitors the audit of internal control and financial statements
conducted by Internal Audit and theexternal auditors.
The business areas and majorcountries also have a system ofinternal Board meetings with a formal agenda, including financial
information, monitoring and decisions related to financial andaccounting matters.
Steering documents, such as policies and procedures and instructions, are updated regularly on thecompany’s intranet and are available to all of Sandvik’s employees.
Reporting requirements are also
updated on the company’s intranet
and are communicated through formal and informal channels, as well
as at regular meetings andconferences.

Information to external parties iscommunicated regularly on Sandvik’s website, which contains news
and press releases. Quarterlyinterim reports are published externally and are supplemented byinvestor meetings attended by theGroup Executive Management. In
addition, there is an establishedagenda for communicating information on shareholder meetingsand other information to investors.
The Annual Report is made available to shareholders and the generalpublic, both as a printed version
and on Sandvik’s website.
MONITORING AND FOLLOW-UP
Each business entity manager andtheir respective finance organization is ultimately responsible forcontinuously monitoring the financial information of the various entities. The information is also monitored at a business area level, byGroup staff functions, the Group
Executive Management and by the
Board. The Audit Committee at
Sandvik is a key body in the monitoring of financial reporting and­various aspects thereof.
The quality of the financial
reporting process and internal controls is assessed by Group Financeevery month as part of the quality
assurance of reporting. The Sandvik internal audit function independently reviews the internal control system of financial reporting aspart of its audit plan.
The external auditors continuously examine the level of 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 ahard-close audit, which includes anassessment of the Parent Company’s reporting and internal control

over financial reporting in the business areas, subsidiaries and Groupfunctions. Finally, the external auditors perform a standard examinationof the annual accounts and theAnnual Report.
INTERNAL AUDITThe Internal Audit staff function
audits the corporate governance,internal control and risk-management procedures.
Internal Audit is subordinated to
the Board’s Audit Committee andthe head of the unit reports to the
Audit Committee. In functionalterms, the head of Internal Audit
reports to Sandvik’s CFO.
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 theCode of Conduct and IT. The outputs of the audits include actionplans and programs for improvement. Findings are reported to theGroup Executive Management andthe business area management andto the Board’s Audit Committee.

Sandvik Annual Report 201471

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 2014 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 2014. The annual accounts and consolidated accounts of the company are included in the printed version ofthis document on pages 37–124.

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 2014.

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 2014
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, 6 March 2015
KPMG AB
George Pettersson
Authorized Public Accountant

Sandvik Annual Report 2014125