Atlas Copco — Annual Report 2015

Mar 10, 2016

ATLAS COPCO ANNUAL REPORT 2015

Atlas Copco achieved record revenues, operating profit and operating cash flow in tough market conditions.

CONTENTS

ABOUT THE ANNUAL REPORT

Atlas Copco believes in delivering innovative products, reliable services and profitable growth while being a responsible corporate citizen. This annual report reflects Atlas Copco's mission of creating sustainable, profitable growth and it integrates financial, sustainability and governance information in order to describe Atlas Copco in a comprehensive and cohesive manner.

The audited annual accounts and consolidated accounts can be found on pages 14–47 and 56–122. The corporate governance report examined by the auditors can be found on pages 56–65.

Sustainability information that has been reviewed by the auditors can be found on pages 10–13, 40–53 and 125–131.

	Atlas Copco Group	Inside front cover
	President and CEO	2
	THIS IS ATLAS COPCO	6
	This section contains Atlas Copco's vision, mission, strategy, structure and governance, how we do business and create value.
	THE YEAR IN REVIEW Administration report
	This section describes Atlas Copco's annual performance and achievements.	14
	Compressor Technique	20
	Industrial Technique	24
	Mining and Rock Excavation Technique	28
	Construction Technique	32
	Risks, risk management and opportunities	36
	Innovation	40
	Employees	44
	Impacting society and the environment	48
	The Atlas Copco share	54
	Corporate governance	56
	OUR FINANCIAL RESULTS
	Financial statements (Group)	66
	Notes (Group)	71
	Financial statements (Parent)	108
	Notes (Parent)	110
	Signatures of the Board of Directors	122
	Audit report	123
	Financial definitions	124
	Sustainability notes (Group)	125
	Auditor's Limited Assurance Report on Atlas Copco AB's Sustainability Report	132
	Five years in summary	133

NOTE The amounts are presented in MSEK unless otherwise indicated and numbers in parentheses represent comparative figures for the preceding year.

FORWARD-LOOKING STATEMENTS Some statements in this report are forward-looking, and the actual outcomes could be materially different. In addition to the factors explicitly discussed, other factors could have a material effect on the actual outcomes. Such factors include, but are not limited to, general business conditions, fluctuations in exchange rates and interest rates, political developments, the impact of competing products and their pricing, product development, commercialization and technological difficulties, interruptions in supply, and major customer credit losses.

ATLAS COPCO AB and its subsidiaries are sometimes referred to as the Atlas Copco Group, the Group, or Atlas Copco. Atlas Copco AB is also sometimes referred to as Atlas Copco. Any mention of the Board of Directors or the Board refers to the Board of Directors of Atlas Copco AB.

CONTACTS

Investor Relations

Mattias Olsson, Vice President Investor Relations ir@se.atlascopco.com

Media

Ola Kinnander, Media Relations Manager media@se.atlascopco.com

Sustainability

Mala Chakraborti, Vice President Corporate Responsibility cr@se.atlascopco.com

WELCOME TO THE ATLAS COPCO GROUP

Atlas Copco is a world-leading provider of sustainable productivity solutions. The Group serves customers with innovative compressors, vacuum solutions and air treatment systems, construction and mining equipment, power tools and assembly systems. Atlas Copco develops products and service focused on productivity, energy efficiency, safety and ergonomics. The company was founded in 1873, is based in Stockholm, Sweden, and has a global reach spanning more than 180 countries. In 2015, Atlas Copco had revenues of BSEK 102 (BEUR 10.9) and more than 43 000 employees.

The Compressor Technique business area provides industrial compressors, vacuum solutions, gas and process compressors and expanders, air and gas treatment equipment and air management systems. The business area has a global service network and innovates for sustainable productivity in the manufacturing, oil and gas, and process industries. Principal product development and manufacturing units are located in Belgium, the United States, China, South Korea, Germany, Italy and the United Kingdom.

INDUSTRIAL TECHNIQUE

Revenues 2015: MSEK 14 578

The Industrial Technique business area provides industrial power tools and systems, industrial assembly solutions, quality assurance products, software and service through a global network. The business area innovates for sustainable productivity for customers in the automotive and general industries, maintenance and vehicle service. Principal product development and manufacturing units are located in Sweden, Germany, the United States, United Kingdom, France and Japan.

The Mining and Rock Excavation Technique business area provides equipment for drilling and rock excavation, a complete range of related consumables and service through a global network. The business area innovates for sustainable productivity in surface and underground mining, infrastructure, civil works, well drilling and geotechnical applications. Principal product development and manufacturing units are located in Sweden, the United States, Canada, China and India.

CONSTRUCTION TECHNIQUE

Revenues 2015: MSEK 15 300

The Construction Technique business area provides construction and demolition tools, portable compressors, pumps and generators, lighting towers, and compaction and paving equipment. The business area offers specialty rental and provides service through a global network. Construction Technique innovates for sustainable productivity in infrastructure, civil works, oil and gas, energy, drilling and road construction projects. Principal product development and manufacturing units are located in Belgium, Germany, Sweden, the United States, China, India and Brazil.

The business area achieved strong order growth in 2015. The growth was supported by the motor vehicle and general industries' investments as well as by the acquisition of Henrob, a pioneer and market leader in selfpierce riveting. The service business also had a strong development. Significant investments were made in market presence, product development and service.

The demand for mining and rock excavation equipment weakened further. The order volumes were lower than in 2014 with a significant decline for mining equipment. The service business achieved growth, while consumable orders were somewhat lower. The business area identified and implemented further efficiency measures to adapt the costs to the low demand.

The demand for construction equipment decreased and order volumes were lower in all regions except in Europe. The service business remained robust and the specialty rental business continued to grow. The business area continued to make selective investments in market presence and product development, but also consolidated manufacturing and took efficiency measures to adapt the organization to the lower equipment demand.

ATLAS COPCO IS EVERYWHERE – EVERY DAY

All over the world, people depend on Atlas Copco's innovations. Our products aren't always visible, but we see the result of them everywhere. Did you know …?

… our energy saving air compressors keep factories running day and night. Most factories around the world need compressed air to do their job.

… our equipment is used at construction sites for demolition, compaction, drilling and power supply.

… beverages all over the world are made with the help of Atlas Copco's oil-free air compressors.

… vacuum pumps are used to make all kinds of flat screens and we also make the tools to put them together.

… drill rigs are used to make the tunnels we drive through, and pavers and rollers are used to make the roads smooth.

… major aircraft manufacturers use industrial tools from Atlas Copco when they build their planes.

Thanks to more than 43 000 committed employees!

REVENUES, MSEK

19.3%

in 2015

R&D EXPENDITURES

+9%

to MSEK 3 253

PROPOSED DIVIDEND, SEK

per share

STANDING FIRM IN A TOUGH MARKET

Atlas Copco stands strong. We are focusing on boosting customers' productivity through our continuous drive for innovation. Staying efficient is also key, partly by being on top of the digital transformation. For the first time, the Group generated more than BSEK 100 in revenues. We also achieved record operating profit and cash flow, despite tough market conditions.

Atlas Copco reported solid results for 2015 in a challenging business climate. Sectors such as aerospace and automotive showed strong demand for our industrial tools and assembly systems, while mining, construction and oil and gas were weak. The market for large compressors was difficult for most of the year, and for small and medium-sized compressors it softened toward the second half of the year. The service business continued to grow. Europe finally started growing again in 2015, while China slowed and Brazil contracted dramatically. The United States, Atlas Copco's biggest market, remained solid though not as strong as in the previous year. We are focusing on creating customer value through our innovative products and services while staying agile by keeping a close eye on efficiency.

Growing our presence

Atlas Copco continued to strengthen its presence around the world and now sells into 183 countries and has local personnel in 92 countries. We are truly a global organization but always with local expertise. In order to keep growing we make sure we are present in all the right markets.

We expanded our presence in the product segments. Acqusitions play an important role here as they can provide a gateway to adjacent businesses in addition to offering synergies with our existing product offerings. We for example acquired a company in Germany, which provides laboratory and field calibration services to customers in the motor vehicle, manufacturing and aerospace industries. By joining forces we will create more value for customers by offering them expanded smart service packages.

The Group also took a step towards increasing its presence in the important vacuum solutions business. In 2014 we became a significant player in the vacuum industry with the acquisition of Edwards Group. Vacuum can among other things create a pure, particle-free manufacturing environment. In late 2015 we followed this up with the agreement to acquire the Leybold vacuum business. The deal, which is expected to be completed in mid-2016 after regulatory approval, will further strengthen our technology platform for superior vacuum solutions.

19 728 2014: 17 015

SUSTAINABLE PROFITABLE GROWTH

Goal: Annual revenue growth over a business cycle of 8%

Compounded annual 9.2% growth rate 2005–2015

Goal: High return on capital employed

27% Return on capital

employed in 2015 SEE PAGES 14–18

"Atlas Copco is all about the innovative spirit."

Innovation a top focus

Atlas Copco is all about the innovative spirit. Our more than 3 000 engineers working in R&D safeguard a steady output of absolutely top-notch products. But the breakthroughs that truly create customer value do not come automatically. They are the result of hard work, sound strategies, a well-run organization and strong interaction with all stakeholders, primarily our customers.

Our innovative efforts go hand in hand with broader global trends such as the legislative requirements to cut emissions. For example, we are cooperating with automotive manufacturers to reduce the weight of their vehicles, resulting in lower fuel consumption. Tougher emissions legislation is prompting the automakers to make vehicles with aluminum instead of steel to cut weight. Welding, the traditional assembly method for steel, does not work well with aluminum. That is where we come in – through our SCA and Henrob units, we are providing cutting-edge assembly technologies using adhesive dispensing and riveting systems. This is creating true value for our customers, for us, and for the world.

Atlas Copco won three prestigious Red Dot design awards in 2015 for high-precision screwdriver systems. The products improve ergonomics and enhance productivity for manufacturing customers especially in the electronics industry.

For the mining companies, which are tightening their belts as commodity prices have dropped, it is more important than ever to use machines that are productive, energy efficient and have a lower total cost of operations. Atlas Copco's mining equipment can be relied on in the most remote parts of the world, is best in class on operator safety and emissions, and offers the best long-term economic value for the customer. We achieve this by focusing not just on the products themselves but on the complete value chain, including suppliers.

A key trend for future mining equipment will be automation. This includes drilling machines that can be controlled remotely with the operator located anywhere in the

world, or drill rigs that run completely by themselves. The trend towards autonomous mining is an exciting area where we are very much on the forefront. This will create true customer value.

Innovation is of course key also for our compressors. These machines are silently working hard in the background in most corners of society. Most manufacturers, food processing plants, construction sites and hospitals, to name a few places, use compressed air. Industrial facilities can typically save up to 10% on their total energy bills by using our compressors, which are industry-leading in efficiency. Meanwhile, society benefits from lower emissions.

The VSD+ compressor with new breakthrough technology that we introduced in 2013 has been received by the market with great enthusiasm. Customers have realized the benefits of this machine, which uses only half the energy consumed by traditional compressors. Additional VSD+ features such as the compact size and low noise levels are nice bonuses. We started the VSD+ journey with the smaller models, and in 2016 we are rolling out bigger versions. This means that customers with greater compressed air needs will be able to take advantage of the powerful technology.

Our construction equipment is also the result of an innovative spirit. In 2015 we boosted sales of the LT rammer, a versatile compaction tool developed for example for repair and improvements to trenches and foundations. Customers embraced the rammer for its ergonomic, user-friendly design that really puts the operator in focus. The LT6005 rammer won two prestigious design awards in 2015; the iF Product Design Award in Germany and the Swedish Grand Award of Design in the Public's Favorite category.

Innovation goes beyond products and service. We are working on improving our IT solutions, logistics systems, production methods and sales approaches. Our mindset is: if we are not leading when it comes to all this, then why not and what can we do about it? There is always a better way.

TIME TO COMPETENCE

Speeding up the transformation of knowledge into performance is one of Atlas Copco's priorities when it comes to building competent teams.

SEE PAGE 47

–22%

Work related accidents decreased significantly compared to 2014.

"We continue to focus on enhancing customers' productivity"

Servicing the customer

In times like these when customers are more hesitant about investing, it is a big advantage to have a strong, smart service business. I am happy to say that we do. Our strategic decision a few years ago to focus more on service is paying off.

Providing service is important for several reasons. It keeps us close to customers, which strengthens our ties and allows us to learn about their needs. This is important when we go back and innovate new products.

Atlas Copco now has more than 12 500 service technicians, and the service business generates 44 % of our revenues.

We are constantly working to further improve our service offering, making it really smart and customer friendly. For example, more than 50 000 compressors are now connected to Smartlink, the data monitoring system that we introduced a couple of years ago. Smartlink lets us

remotely interact with the compressors and alerts us on when and what type of maintenance a compressor needs. This means that we can send service technicians at the right time and with the right tools because we know exactly what job needs to be done. The customer gets peace of mind and lower total cost of ownership. We get more sales and higher margins.

Our biggest service challenge is to convince more equipment owners that we should do the service job. We made the equipment and know it best, and by letting us maintain it they can focus on their core business. It is a real win-win for both of us. Thankfully, more and more smart customers are realizing this.

Always looking to improve

To stay successful we must have efficient operations. Take digitalization. The world is living through a digital revolution, and

Atlas Copco is very much part of this. To be on top of this global mega trend, we are developing new engineering competences, using more software in the factories, and automating products and services. More and more of our customer centers are leveraging the digital world to give customers the best experience. We are enabling full mobility for all employees, ensuring they can get online anywhere at any time. Digitalization comes with many challenges, but we are ready.

To remain competitive we must stay asset light and agile. In 2015 this unfortunately meant we had to trim resources in some areas, not the least in mining.

Operational excellence also entails a safe work environment for all our colleagues. We are constantly working towards reducing work-related accidents.

The UN Global Compact is a guiding light for us, and this is reflected in our Business Code of Practice. Working on

human rights, labor, environment and anticorruption is not only ethically the right thing to do but also creates the most longterm business value. We are proud to continue to be recognized as one of the world's most sustainable companies. The prestigious Global 100 list ranks us as the world's most sustainable company in the machinery industry, and we are included in the Dow Jones Sustainabiliy Indices. We ranked 11th in the world and highest in the industrial segment in the Newsweek Green Rankings, one of the world's main scorings on corporate sustainability.

The global community came together last year at the Paris Climate Conference and took a major step against climate change. The agreement, which aims to keep warming at "well below 2°C", is positive for Atlas Copco. Making energy-efficient products is a core part of our business model, and we can really help customers reduce their emissions in addition to boosting their productivity.

People make the difference

Our skillful people make all the difference, so investing in our colleagues' competence is crucial. Take Russia as a specific example, a country that is suffering through an unusually challenging business climate. Our managers in Russia are putting a big focus on people development and growing talents inside the organization. Almost all recruitments for manager positions in Russia are done internally. People feel motivated when they know they can develop their skills and grow within the company, especially amid tough external circumstances.

Our global internal job market makes it easier for all employees to grow and find new challenges. Our ambition is to have 85% of managers internally recruited, and in 2015 the outcome was 88%.

Diversity is another key to success, whether it is gender, age, nationalities or education. Our ratio of female managers in the Group is 17%, on par with the ratio of female employees. This will likely keep

growing as about a third of external recruitments of recent graduates are female. We are tapping into a vast global talent pool; the 409 most senior managers represent 51 nationalities.

Staying focused

Our five strategic pillars – presence, innovation, service, operational excellence and people – continue to be the foundation for our success. To complement them and ensure that our business stays strong long into the future, we have introduced focused priorities. The priorities are innovation, business ethics, safety and health, resource efficiency, and competent teams. By incorporating these, we safeguard that the strategy is truly sustainable.

Atlas Copco is staying strong even as the market conditions have worsened. The solid result achieved in 2015 in a tough environment is further proof of our agile and resilient business model. Long term, we will continue to benefit from several larger global trends; these include the industry's drive for emissions reductions and higher productivity, and the ongoing urbanization that requires significant infrastructure investments. We will also be able to capitalize on the opportunities offered by the digital transformation.

We continue to focus on enhancing customers' productivity by providing them with the most innovative, safe, energy-efficient and ergonomic products and services.

Let me extend a big thank you to our shareholders, customers, employees and other stakeholders who are contributing to Atlas Copco's sustainable productivity.

Ronnie Leten President and CEO Stockholm, January 28, 2016

Sick leave 1.9% 2014: 1.9%

Significant suppliers that confirmed compliance with the 10 Criteria Letter (based on Atlas Copco's Business Code of Practice):

88% 2014: 82%

"The world is living through a digital revolution, and Atlas Copco is very much part of this."

THIS IS ATLAS COPCO

Atlas Copco is a world-leading provider of sustainable productivity solutions. The Group serves customers with innovative compressors, vacuum solutions and air treatment systems, construction and mining equipment, power tools and assembly systems. Atlas Copco develops products and services focused on productivity, energy efficiency, safety and ergonomics.

For further information about governance, the Board of Directors and Group Management, see pages 56–65.

For further information about risk management, see pages 36–39.

For comprehensive information about the business areas, see pages 20–35.

VISION, MISSION AND STRATEGY

The Atlas Copco Group's vision is to become and remain First in Mind—First in Choice ® of its customers and other principal stakeholders.

The mission is to achieve sustainable, profitable growth. Sustainability plays an important role in Atlas Copco's vision and it is an integral aspect of the Group's mission.

An integrated sustainability strategy, backed by ambitious goals, helps the company deliver greater value to all its stakeholders in a way that is economically, environmentally and socially responsible. The Group has identified five strategic pillars critical for achieving its mission: presence, innovation, service, operational excellence, and people.

To safeguard that the strategic pillars are truly sustainable and that the Group is building an organization that will deliver results for many years to come, Atlas Copco introduced five priorities to complement the strategic pillars. The priorities – ethics, safety, innovation, competence, and resources – were identified following an extensive consultation with the Group's stakeholders. Key performance indicators to measure the performance have been identified and implemented in the organization and new Group goals will be presented during 2016. The financial goals, annual revenue growth of 8% over a business cycle and sustained high return on capital employed, will however remain unchanged. Results on all key performance indicators are presented throughout this annual report.

THIS IS OUR STRATEGY FOR SUSTAINABLE		PRESENCE	INNOVATION
PROFITABLE GROWTH
ETHICS		Increase market presence and penetration and	Invest in research and development and
SAFETY		expand the product and service offering in selected	continuously launch new products and services that
INNOVATION		market segments	increase customers' productivity
COMPETENCE
RESOURCES
VALUES AND BUSINESS CODE	INTERACTION	We interact with and develop close relation	INNOVATION Our innovative spirit is reflected in everything we

ships with customers, internally and externally, as well as with other stakeholders. While we interact in many different ways, we believe that personal contacts are always the most efficient. do. Customers expect the best from our Group and our objective is to consistently deliver highquality products and services that increase our customers' productivity and competitiveness.

Our core values reflect how we behave internally and in our relationships with external stakeholders.

OF PRACTICE

COMMITMENT

We operate worldwide with a long-term commitment to our customers in each country and market served. We keep our promises and always strive to exceed high expectations.

THE BUSINESS CODE OF PRACTICE

The internal policy documents related to business ethics and social and environmental performance are summarized in the Atlas Copco Business Code of Practice. All employees and managers in Group companies, as well as business partners, are expected to adhere to these policies.

ORGANIZATION

BOARD OF DIRECTORS

PRESIDENT AND CEO

GROUP MANAGEMENT

BUSINESS AREAS AND CORPORATE FUNCTIONS

Each business area has a service division with global responsibility for service of the business area's products and solutions. Common service providers – internal or external – provide services with higher quality and at a lower cost, thus allowing the divisions to focus on their core businesses.

STATEMENT OF MATERIALITY AND SIGNIFICANT AUDIENCES

Atlas Copco is registered in Sweden and is legally governed by the Swedish Companies Act (2005:551). This act requires that the Board of Directors governs the company to be profitable and create value for its shareholders. However, Atlas Copco recognizes going beyond this, extending it to integrating sustainability into its business creates long-term value for all stakeholders, which is ultimately in the best interest of the company, the shareholders and society. The significant stakeholder audience, as outlined in the Atlas Copco Business Code of Practice, includes representatives of society, employees, customers, business partners and shareholders.

The Business Code of Practice is the central guiding policy for Atlas Copco, and is owned by the Board of Directors. Its commitment goes beyond the requirements of legal compliance, to support voluntary international ethical guidelines. These include the United Nations International Bill of Human Rights, International Labour Organization Declaration on Fundamental Principles and Rights at Work, the ten principles of the United Nations Global Compact, and OECD's Guidelines for Multinational Enterprises.

Atlas Copco has employed a stakeholderdriven approach in order to identify the most material environmental, human rights, labor and ethical aspects for its business. These priorities guide how the Group develops and drives its business strategy, as well as its roadmap to support the UN Sustainable Development Goals.

The strategic pillars and priorities presented on pages 6—7 all aim at continuously delivering sustainable, profitable growth for the Group. This means an increased economic value creation and, simultaneously, a positive impact on society and the environment, thus creating shared value.

Atlas Copco monitors and voluntarily discloses the progress on these material financial and non-financial aspects, through an externally assured, integrated annual report. In addition to the Annual General Meeting, Atlas Copco also creates engagement opportunities so that nonshareholders can address the Group. For example at the annual stakeholder dialogue.

The Business Code of Practice is the central guiding policy for Atlas Copco and also includes:

The ten principles of the United Nations Global Compact

International Labour Organization Declaration on Fundamental Principles and Rights at Work

United Nations International Bill of Human Rights

OECD's Guidelines for Multinational Enterprises

Atlas Copco's organization is based on the principle of decentralized responsibilities and authorities.

STRUCTURE AND GOVERNANCE

Atlas Copco's organization is based on the principle of decentralized responsibilities and authorities. Atlas Copco's operations are organized in four business areas comprised of 23 divisions. The organization has both operating units and legal units. Each operating unit has a business board which reflects the operational structure of the Group. The duty of a business board is to serve in an advisory and decision-making capacity concerning strategic and operative issues. It also ensures the implementation of controls and assessments. Each legal company has a legal board focusing on compliance and reflecting the legal structure of the Group.

The Board of Directors is responsible for the organization and management of the Group, regularly assessing the Group's financial situation and financial, legal, social and environmental risks, and ensuring that the organization is designed for satisfactory control. The Board formally approves the Business Code of Practice.

The President and CEO is responsible for the ongoing management of the Group following the Board's guidelines and instructions. The President and CEO is responsible for ensuring that the organization works towards achieving the goals for sustainable, profitable growth.

The business areas are responsible for developing their respective operations by implementing and following up on strategies and objectives to achieve sustainable, profitable development.

The divisions are separate operational units, each responsible for delivering results in line with the strategies and objectives set by the business area. Each division has global responsibility for a specific product or service offering. A division can have one or more product companies (units responsible for product development, manufacturing and product marketing) and has several customer centers (units responsible for customer contacts, sales and service) dedicated or shared with other divisions.

PEOPLE

Atlas Copco's growth is closely related to how the Group succeeds in being a good employer, attracting and developing qualified and motivated people. With a global business conducted through numerous companies, Atlas Copco works with continuous competence development, knowledge sharing and implementing the core values: interaction, commitment, and innovation. All employees are expected to contribute by committing themselves to Group goals and to their individual performance targets. Atlas Copco's definition of good leadership is the ability to create lasting results.

PROCESSES

Group-wide strategies, processes, principles, guidelines, and shared best practices are collected in the database The Way We Do Things. It covers governance, safety, health, environment and quality, accounting and business control, treasury, tax, audit and internal control, information technology, people management, legal, communications and branding, risk, crisis management, administrative services, insurance, standardization, and acquisitions. The information is available to all employees. Although most of the processes are self-explanatory, training on how to implement the processes is provided to managers on a regular basis. Wherever they are located, Atlas Copco employees are expected to operate in accordance with the processes, principles, and guidelines provided.

THIS IS HOW WE DO BUSINESS

Atlas Copco is characterized by focused businesses, a global presence with direct sales and service, a strong, stable and growing service business, professional people, and an asset-light and flexible manufacturing setup. Atlas Copco is committed to sustainable productivity, which means that we do everything we can to create lasting results with responsible use of resources – human, natural and capital.

Sales and service

Customer focus is a guiding principle for Atlas Copco. The ambition is to have close relationships with end customers and to help them increase their productivity in a sustainable way. Sales and service are primarily direct, but complemented by alternative sales channels, e.g. through distributors, to maximize market presence. The Group has sales in more than 180 countries and about 80% of sales are made directly to the end user.

Sales of equipment is performed by engineers with strong application knowledge and the ambition to offer the best solution for the customer's specific application. Service and maintenance performed by skilled technicians is an integral part of the offer. Service is the responsibility of dedicated divisions in each business area. The responsibility includes development of service products, sales and marketing, technical support as well as service delivery and follow-up.

DIRECT SALES AND SERVICE

Atlas Copco wants to have close relationships with end customers. The Group has sales in more than 180 countries and about 80% of sales are made directly to the end user. Service represents more than 40% of revenues.

AGILE AND RESILIENT OPERATIONAL SETUP

Stable service business

More than 40% of revenues are generated from service (spare parts, maintenance, repairs, consumables, accessories, and rental). These revenues are more stable than equipment sales and provide a strong base for the business.

Increase customer loyalty

Customers who have sales and/or service interactions with Atlas Copco receive surveys where they are asked to give their opinion about the interaction and their experience. Customers are often engaged in discussions about their feedback in order to solve problems and to improve products and services. A number of key performance indicators have been established, such as the availability of spare parts, which are continuously followed up to ensure that customer satisfaction improves.

Manufacturing and logistics

The manufacturing philosophy is to manufacture in-house those components that are critical for the performance of the equipment. For non-critical components, Atlas Copco leverages the capacity and the competence of business partners and cooperates with them to continuously achieve product and process improvements. Approximately 75% of the production cost of equipment represents purchased components and about 25% are internally manufactured core components, assembly costs and overhead.

Equipment represents less than 60% of revenues and Atlas Copco has organized its manufacturing and logistics to be able to quickly adapt to changes in equipment demand. The manufacturing of equipment is primarily based on customer orders and only some standard, high volume equipment is manufactured based on projected demand.

AGILITY

Atlas Copco has organized its manufacturing and logistics to be able to quickly adapt to changes in equipment demand.

Approximately

75% of the production cost of equipment represents

purchased components.

The assembly of equipment is to a large degree carried out in own facilities. The assembly is typically lean and flow-oriented and the final product is normally shipped directly to the end user. The organization works continuously to use human, natural or capital resources more efficiently.

Innovation

Atlas Copco believes that there is always a better way of doing things. Innovation and product development are very important and all products are designed internally. A key activity is to design new or improved products that provide tangible benefits in terms of productivity, energy efficiency and/ or lower life cycle cost for the customer, and at the same time can be efficiently produced. Atlas Copco protects technical innovations with patents.

Innovation also includes better processes to improve the flow and utilization of assets and information. Innovation will improve customer satisfaction and contribute to strengthening customer relations, the

brand, as well as financial performance. Overcapacities and inefficiencies must always be challenged.

Investments in fixed assets and working capital

The need for investments in property, plant and equipment are moderate due to the manufacturing philosophy and can be adapted in the short and medium term to changes in demand. Most investments are related to machining equipment for core manufacturing activities and to production facilities, primarily for core component manufacturing and for assembly operations.

The working capital requirements of the Group are affected by the direct sales and service model, which affects the amount of inventory and receivables, as well as by the manufacturing philosophy. In an improving business climate with higher volumes, more working capital will be tied up. If the business climate deteriorates, working capital will be released.

DESIGN AND DEVELOPMENT

Atlas Copco believes that there is always a better way of doing things. Innovation and product development are very important and all products are designed internally.

Acquisitions

Acquisitions are primarily made in, or very close to, the already existing core businesses. All divisions are required to map and evaluate businesses that are adjacent and can offer tangible synergies with existing businesses. All acquired businesses are expected to make a positive contribution to economic value added.

Leadership and human capital

Atlas Copco believes that competent and committed leaders are crucial to achieving sustainable profitable growth and has developed a leadership model.

All managers are entitled to receive a mission statement from their manager, which outlines the long-term expectations and goals and is described in both quantitative as well as qualitative measures. Typically a mission has a timeframe of 3 to 5 years. Based on the mission statement, it is expected that the manager develops a vision, which clarifies how the mission will be achieved, as well as the strategies, the organization and the people required to make it happen.

Atlas Copco strives to be a good employer to attract and develop qualified and motivated people. All employees are responsible for their own professional career and supported by continuous competence development and an internal job market. Employees are encouraged to grow professionally and take up new positions. If the company needs to adapt capacity in a deteriorating business climate, the first action is to stop recruitment. Layoffs are the last resort.

CREATING VALUE FOR ALL STAKEHOLDERS

CREATING VALUE FOR ALL STAKEHOLDERS

Atlas Copco has a vision to become and remain First in Mind—First in Choice® for all of its stakeholders. The Group aims to continuously deliver sustainable, profitable growth. This means an increased economic value creation and, simultaneously, a positive impact on society and the environment, thus creating shared value.

On this spread, we illustrate how we with responsible use of resources – human, natural and capital – create value for customers, employees, business partners, shareholders, as well as for society and the environment.

THE YEAR IN REVIEW

MARKET REVIEW AND DEMAND DEVELOPMENT

The demand for Atlas Copco's equipment and services was mixed in 2015. The Group's order intake increased 7% to a record MSEK 100 241 (93 873). More favorable exchange rates contributed with 9% and acquisitions with 2%, while the organic order decline was 4%.

The service business continued to grow and achieved 3% organic growth. The specialty rental business also continued to grow and achieved 5% organic growth. Consumables for mining and civil engineering, however, declined about 5% organically.

The orders received for equipment decreased with approximately 6% organically. Customers were hesitant to make large investments and the order intake decreased significantly for large compressors for oil and gas and other process industries. Orders also decreased for mining and rock excavation equipment as well as for construction equipment for infrastructure and civil engineering work as a result of low demand from mining and construction customers. The order intake for small and medium-sized compressors and for vacuum equipment for applications in the manufacturing industry was affected by softer demand in some markets and segments, but remained robust overall. The sales of industrial tools, assembly systems and solutions increased, supported by strong demand from customers in the automotive, aerospace and electronics industries.

See also business area sections on pages 20–35.

North America

The order intake in local currencies in North America decreased 4%. Order volumes increased for industrial tools, assembly systems and solutions, but decreased for most other equipment, most significantly for large compressors and mining equipment. The service business grew in all business areas. In total, North America accounted for 24% (23) of orders received.

South America

The South American orders decreased 12% in local currencies, negatively affected by weak equipment demand in Brazil as well as from mining, construction and the oil and gas industries. In total, South America accounted for 7% (9) of orders received.

Europe

The orders received in local currencies in Europe increased 4%. The order volumes in southern and eastern Europe continued to grow, while the order volumes in northern and western Europe remained fairly stable. Service, small and medium sized compressors, industrial tools and assembly solutions, mining and construction equipment had a favorable development, but the orders received decreased for large compressors and vacuum equipment. In total, Europe accounted for 30% (30) of orders received.

Africa/Middle East

Orders received decreased 2% in local currencies in Africa/Middle East, which accounted for 10% (10) of the Group's orders received. The order intake for equipment decreased in nearly all markets, negatively influenced by weaker demand from the mining, construction and oil and gas industries. The service business grew in all business areas.

Asia/Australia

The orders received in local currencies in Asia/Australia decreased 4%. Increased order intake was achieved in India, South East Asia and Japan, but Australia and China had a negative development. The order intake for industrial tools and assembly systems as well as for vacuum equipment increased, while it decreased for most types of compressors and for mining equipment. Service and consumables had a positive development in most markets, but decreased in China and in Australia. In total, Asia/Australia accounted for 29% (28) of orders received.

SALES BRIDGE	Atlas Copco Group
	Orders received	Orders on hand, December 31	Revenues
2013	81 290	19 263	83 888
Structural change, %	+12		+12
Currency, %	+2		+2
Price, %	+1		+1
Volume, %	+0		–3
Total, %	+15		+12
2014	93 873	22 830	93 721
Structural change, %	+2		+2
Currency, %	+9		+9
Price, %	+0		+0
Volume, %	–4		–2
Total, %	+7		+9
2015	100 241	20 254	102 161

Orders received, MSEK Revenues, MSEK ORDERS RECEIVED, REVENUES AND OPERATING MARGIN

Market presence

The presence was further strengthened with the addition of sales and service engineers in many markets.

Atlas Copco had own customer centers in 92 (91) countries and production facilities in 28 (30) countries on five continents at the end of the year. Revenues were reported in 183 (185) countries.

IMPORTANT EVENTS

Acquisitions and divestments

The Group completed eight acquisitions during the year, which added net revenues of MSEK 121. Two minor divestments were also made. See also note 2 and business area sections on pages 20–35.

Investments in innovation

The amount invested in product development, including capitalized expenditures, increased 9% to MSEK 3 253 (2 991), primarily due to currency effects. This corresponds to 3.2% (3.2) of revenues. The number of employees in research and development was stable.

NEAR-TERM DEMAND OUTLOOK Published January 28, 2016 The overall demand for the Group is expected to remain at current level.

Investments in manufacturing and distribution

The Group's investments in property, plant and equipment increased to MSEK 1 705 (1 548), primarily due to more investments to support growth in recently acquired businesses, e.g. investments in new innovation centers for adhesive solutions and a manufacturing facility for vacuum solutions in China. It also included other investments, such as an investment to expand the global distribution center in Belgium.

Capacity adjustments and discontinued operations

Several actions to adjust capacity to the lower demand for mining and construction equipment were implemented including consolidation of some manufacturing facilities. During the year, the mobile crushing and screening business was discontinued.

European Commission's decision on Belgium's tax rulings

On January 11, 2016, the European Commission announced its decision that Belgian tax rulings granted to multinationals with regard to "Excess Profit" shall be considered as illegal state aid and that unpaid taxes should be returned to the Belgian state. Atlas Copco has such tax rulings since 2010. As a result of the decision, Atlas Copco has made a tax provision of MSEK 2 802. The amount fully covers the potential liability for the years 2010–2015. See also note 9.

Recognitions

Atlas Copco achieved the following recognitions: inclusion in Dow Jones Sustainability Index and FTSE4Good; the top industrial company on environment by the Newsweek Green Rankings; recognition by the United Nations for the Group's goals to cut carbon dioxide from its products and operations; and ranked 34 and the top machinery company among the world's top sustainable companies by Global 100.

SALES BRIDGE	Compressor Technique		Industrial Technique		Mining and Rock Excavation Technique		Construction Technique
	Orders received	Revenues	Orders received	Revenues	Orders received	Revenues	Orders received	Revenues
2013	31 765	31 782	9 594	9 501	26 092	29 013	14 260	13 967
Structural change, %	+28	+28	+6	+8	+1	+1	+1	+1
Currency, %	+4	+4	+5	+5	+0	+0	+2	+3
Price, %	+1	+1	+0	+1	+1	+1	+1	+1
Volume, %	+0	+0	+7	+7	–3	–13	+0	+1
Total, %	+33	+33	+18	+21	–1	–11	+4	+6
2014	42 249	42 165	11 335	11 450	25 752	25 718	14 847	14 739
Structural change, %	+0	+0	+9	+10	+0	+0	+0	+0
Currency, %	+11	+11	+11	+10	+6	+7	+8	+9
Price, %	+1	+1	+0	+0	+0	+0	+1	+1
Volume, %	–4	–2	+9	+7	–7	–3	–7	–6
Total, %	+8	+10	+29	+27	–1	+4	+2	+4
2015	45 458	46 237	14 612	14 578	25 587	26 665	15 166	15 300

FINANCIAL SUMMARY AND ANALYSIS

KEY FINANCIAL DATA, MSEK	2015	2014	CHANGE, %
Orders received	100 241	93 873	+7
Revenues	102 161	93 721	+9
EBITDA	24 075	20 724	+16
– in % of revenues	23.6	22.1
Operating profit	19 728	17 015	+16
– in % of revenues	19.3	18.2
Adjusted operating profit	20 087	17 744	+13
– in % of revenues	19.7	18.9
Profit before tax	18 823	16 091	+17
– in % of revenues	18.4	17.2
Profit for the year	11 723	12 175	–4
Profit for the year, adjusted for tax provision of MSEK 2 802	14 525	12 175	+19
Basic earnings per share, SEK	9.62	10.01	–4
Adjusted basic earnings per share, SEK	11.92	10.01	+19
Diluted earnings per share, SEK	9.58	9.99	–4

Revenues

The Group's revenues increased by 9% to a record MSEK 102 161 (93 721). The goal is to achieve annual revenue growth of 8% over a business cycle. In the past 10 years, the compounded annual growth rate has been 9.2%.

Revenue growth, average ANNUAL REVENUE GROWTH RATE

Operating profit

The operating profit was MSEK 19 728 (17 015), corresponding to a margin of 19.3% (18.2). Items affecting comparability were MSEK –359 (–729) and the adjusted operating margin was 19.7% (18.9). See also the bridge below.

The operating profit for the Compressor Technique business area increased 15% to MSEK 10 324 (8 974), corresponding to a margin of 22.3% (21.3). The profit included items affecting comparability of MSEK –55 (–180) and the adjusted margin increased to 22.4% (21.7). The margin was supported by currency and mix, but negatively impacted by lower equipment volumes.

The operating profit for the Industrial Technique business area increased 31% to MSEK 3 355 (2 557), with strong contribution from acquisitions. The margin increased to 23.0% (22.3) and was supported by higher volumes and currency, but was impacted negatively by dilution from acquisitions.

The operating profit for the Mining and Rock Excavation Technique business area increased 16% to MSEK 4 993 (4 307), corresponding to a margin of 18.7% (16.7). The profit included items affecting comparability of MSEK –65 (–415) and the adjusted margin increased to 19.0% (18.4). The margin was impacted negatively by lower equipment volumes, but supported by currency and mix.

The operating profit for the Construction Technique business area increased 4% to MSEK 1 839 (1 768), corresponding to a margin of 12.0% (12.0). The profit included items affecting comparability of MSEK –95 and the adjusted operating margin increased to 12.6% (12.0). The margin was supported by currency, but negatively impacted by lower volumes.

Costs for common Group functions and eliminations were MSEK –783 (–591), including the effect from the provision for sharerelated long-term incentive programs of MSEK –144 (–174) and an insurance reimbursement of MSEK 40 in 2014.

Depreciation and EBITDA

Depreciation and amortization increased to MSEK 4 347 (3 709), mainly due to currency and acquisitions. Earnings before depreciation and amortization, EBITDA, was MSEK 24 075 (20 724), corresponding to a margin of 23.6% (22.1).

Net financial items

The Group's net financial items totaled MSEK –905 (–924). The net interest expense increased to MSEK –758 (–699). Other financial items were MSEK –147 (–225). See note 8 and 27.

BRIDGE – REVENUES AND OPERATING PROFIT

MSEK	2015	Volume, price, mix and other	Currency	Acquisitions	Restructuring and capital gain	Share-based long-term incentive programs	2014
Revenues	102 161	–1 830	8 845	1 425	–	–	93 721
Operating profit	19 728	–957	3 070	230	340	30	17 015
Effect on margin, %	19.3	–0.6	+1.4	–0.0	+0.3	+0.0	18.2

The operating margin increased to 19.3% (18.2). It was positively affected by currency and items affecting comparability, but negatively affected by volume.

	Revenues		Operating profit		Operating margin, %		Return on capital employed, %		Investments in tangible fixed assets 1)
MSEK	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
Compressor Technique	46 237	42 165	10 324	8 974	22.3	21.3	38	40	586	639
Industrial Technique	14 578	11 450	3 355	2 557	23.0	22.3	31	36	532	270
Mining and Rock Excavation Technique	26 665	25 718	4 993	4 307	18.7	16.7	34	29	981	967
Construction Technique	15 300	14 739	1 839	1 768	12.0	12.0	12	12	555	939
Common Group functions/eliminations	–619	–351	–783	–591					314	452
Total Group	102 161	93 721	19 728	17 015	19.3	18.2	27	24	2 968	3 267

1) Excluding assets leased.

Profit before tax

Profit before tax was MSEK 18 823 (16 091), corresponding to a profit margin of 18.4% (17.2).

Taxes and tax provision in Belgium

Taxes for the year amounted to MSEK 7 100 (3 916) and includes a tax provision of MSEK 2 802 following the European Commission's decision on Belgium's tax rulings. The effective tax rate was 37.7% (24.3) and 22.8% excluding the tax provision. See note 9.

Profit and earnings per share

Profit for the year decreased 4% to MSEK 11 723 (12 175), whereof MSEK 11 717 (12 169) and MSEK 6 (6) attributable to owners of the parent and non-controlling interests, respectively. Basic and diluted earnings per share were SEK 9.62 (10.01) and SEK 9.58 (9.99), respectively. Excluding the tax provision in Belgium, profit for the year increased 19% to MSEK 14 525 (12 175) and basic earnings per share were SEK 11.92 (10.01).

BALANCE SHEET IN SUMMARY

MSEK	DEC 31, 2015		DEC 31, 2014
Intangible assets	33 520	33%	33 197	32%
Rental equipment	3 076	3%	3 177	3%
Other property, plant and equipment	8 947	9%	9 433	9%
Other fixed assets	4 128	4%	3 530	3%
Inventories	16 906	16%	18 364	17%
Receivables	25 985	25%	26 015	25%
Current financial assets	1 576	1%	2 150	2%
Cash and cash equivalents	8 861	9%	9 404	9%
Assets classified as held for sale	11	0%	11	0%
Total assets	103 010	100%	105 281	100%
Total equity	46 750	45%	50 753	48%
Interest-bearing liabilities	25 214	25%	26 997	26%
Non-interest-bearing liabilities	31 046	30%	27 531	26%
Total equity and liabilities	103 010	100%	105 281	100%

The Group's total assets decreased 2% to MSEK 103 010 (105 281). Acquisitions and divestments contributed only marginally and the currency translation effects were marginally negative. Cash, cash equivalents and other current financial assets increased less than 1%. Excluding these effects, the assets decreased by approximately 2% for comparable units, due to a net decrease in working capital and in property, plant and equipment.

EQUITY

MSEK	2015	2014
Opening balance	50 753	39 794
Profit for the year	11 723	12 175
Other comprehensive income for the year	–540	4 663
Shareholders' transactions	–15 186	–5 879
Closing balance	46 750	50 753
Equity attributable to
– owners of the parent	46 591	50 575
– non-controlling interests	159	178

Total comprehensive income for the year decreased to MSEK 11 183 (16 838), primarily due to translation differences on foreign operations, see page 67 and note 10. Shareholders' transactions include dividends and redemption of shares totaling MSEK –14 639 (–6 682), sales and repurchases of own shares of net MSEK –453 (890), and share-based payments of net MSEK –94 (–87).

At year end, Group equity including non-controlling interests was MSEK 46 750 (50 753), corresponding to 45% (48) of total assets. Equity per share was SEK 38 (42).

Atlas Copco's market capitalization at year end was MSEK 251 140 (261 719), or 537% (516) of net book value.

The information related to public takeover bids given for the Parent Company, on page 19, is also valid for the Group.

Interest-bearing debt and net indebtedness

Total interest-bearing debt was MSEK 25 214 (26 997), whereof postemployment benefits MSEK 2 225 (2 531). The Group has an average maturity of 4.1 years on interest-bearing liabilities. See notes 21 and 23 for additional information.

The Group's net indebtedness, adjusted with MSEK 28 (–15) for the fair value of related interest rate swaps, amounted to MSEK 14 805 (15 428) at year end. The net debt/EBITDA ratio was 0.6 (0.7) and the debt/equity ratio was 32% (30).

Return on equity and earnings per share RETURN ON EQUITY AND EARNINGS PER SHARE

DIVIDEND/EARNINGS PER SHARE, AVERAGE

Atlas Copco aims to have a strong and costefficient financing of the business. The priority for the use of capital is to develop and grow the business. The strong profitability and cash generation allow the Group to do that and at the same time have the ambition to distribute about 50% of earnings as dividends to shareholders.

Dividend policy history

–2003 30–40% of earnings 2003–2011 40–50% of earnings 2011– about 50% of earnings

Credit rating

Atlas Copco's long-term and short-term debt is rated by Standard & Poor's and Fitch with the long-/short-term rating A/A1 and A/F1, respectively.

Operating cash flow and investments

Operating cash surplus was MSEK 23 547 (20 426). Cash flows from financial items were MSEK –2 037 (–849). The main explanation is negative cash flows from currency hedges of loans of MSEK –1 322 (–47) where the offsetting cash flow occurs in the future.

The working capital decreased by MSEK 1 599 (2 056), mainly due to an inventory reduction of MSEK 1 342. Net investments in rental equipment decreased to MSEK 837 (1 303). Net cash from operating activities amounted to MSEK 18 112 (16 387).

Gross investments in property, plant and equipment increased to MSEK –1 705 (–1 548), 101% (103) of annual depreciation. The increase was primarily related to recently acquired businesses. Larger investments were made by Compressor Technique in China, in the United States and in the United Kingdom, by Industrial Technique in the United States and in the United Kingdom, and by Mining and Rock Excavation Technique in Sweden. Sale of property, plant and equipment increased to MSEK 600 (86). The increase was primarily a result of a sale and leaseback transaction of premises in Sweden.

Net investments in intangible fixed assets, mainly related to capitalization of development expenditures, were MSEK –1 151 (–1 177). Investments in other financial assets were MSEK +197 (+489), related to variations in the customer financing activities. Operating cash flow increased 22% and reached a record of MSEK 16 955 (13 916), equal to 17% (15) of Group revenues.

The net cash flow from acquisitions and divestments in subsidiaries amounted to MSEK –1 794 (–8 415) and includes deferred considerations from acquisitions made in 2014. See also note 2.

Cash flow from financing

Dividends paid amounted to MSEK –7 334 (–6 682) and the mandatory redemption was MSEK –7 305. Sales and repurchases of own shares equaled net MSEK –453 (+890). Change in interest-bearing liabilities was MSEK +595 (–8 566).

Working capital ratios

The ratio of inventories to revenues at year end decreased to 16.5% (19.6) and trade receivables decreased to 19.1% (21.2). The corresponding average ratios decreased to 21.7% (23.0) and increased to 23.5% (23.1), respectively. Average trade payables in relation to revenues were 8.0% (7.9).

Capital turnover

The capital turnover ratio was 0.97 (0.98) and the capital employed turnover ratio was 1.36 (1.32).

Return on capital employed and return on equity

Return on capital employed was 26.8% (24.3) and the return on equity 24.3% (28.1). The latter was affected by the tax provision in Belgium and the adjusted return on equity was 30.1%. The Group uses a weighted average cost of capital (WACC) of 8% (8) as an investment and overall performance benchmark.

Employees

In 2015, the average number of employees in the Atlas Copco Group decreased by 57 to 43 588. At year end, the number of employees was 43 114 (44 056) and the number of full-time consultants/external workforce was 2 835 (3 015). For comparable units the total workforce decreased by 1 230, while acquisitions and divestments, net, added 108 for a total decrease of 1 122. See also pages 44–47.

AVERAGE NUMBER OF EMPLOYEES	2015	2014
Atlas Copco Group	43 588	43 645
– Sweden	4 192	4 315
– Outside Sweden	39 396	39 330
Business areas
– Compressor Technique	19 118	18 950
– Industrial Technique	5 888	5 128
– Mining and Rock Excavation Technique	11 500	12 392
– Construction Technique	5 579	5 780
– Common Group functions	1 503	1 395

The Group's goal is 30 35 %

to deliver sustained high return on capital employed, by constantly striving for operational excellence and generating growth.

average RETURN ON CAPITAL EMPLOYED

24%

1996–2015 2006–2015 2011–2015

Operating margin, % Capital employed turnover, ratio

0.0 0.5 1.0 1.5 2.0

ratio

30% 30%

and return

CAPITAL EMPLOYED

STAPLARNA NEDAN ÄR

Operating cash flow Return on capital employed, OPERATING CASH FLOW

PARENT COMPANY

Atlas Copco AB is the ultimate Parent Company of the Atlas Copco Group and is headquartered in Nacka, Sweden. Its operations include administrative functions, holding company functions as well as part of Atlas Copco Financial Solutions.

Earnings

Profit before tax totaled MSEK 12 300 (4 589). Profit for the year amounted to MSEK 11 737 (3 792). The increased profit was due to an increase in internal dividends received.

Financing

The total assets of the Parent Company were MSEK 118 357 (102 778). At year end 2015, cash and cash equivalents amounted to MSEK 4 311 (5 153) and interest-bearing liabilities, excluding postemployment benefits, to MSEK 76 569 (57 688), whereof the main part is Group internal loans. Equity represented 34% (42) of total assets and the undistributed earnings totaled MSEK 34 468 (37 515).

Employees

The average number of employees in the Parent Company was 118 (117).

Remuneration

Principles for remuneration, fees and other remuneration paid to the Board of Directors, the President and CEO, and other members of Group Management, other statistics and the guidelines regarding remuneration and benefits to Group Management as approved by the Annual General Meeting are specified in note 5.

Financial risks, risks and factors of uncertainty

Atlas Copco is subject to currency risks, interest rate risks and other financial risks. Atlas Copco has adopted a policy to control the financial risks to which Atlas Copco AB and the Group are exposed. A financial risk management committee meets regularly to take decisions about how to manage these risks. See also Risks, risk management and opportunities on pages 36–39.

Appropriation of profit

The Board of Directors proposes to the Annual General Meeting that a dividend of SEK 6.30 (6.00) per share, equal to MSEK 7 661 (7 305), be paid for the 2015 fiscal year. The dividend is proposed to be paid in two equal installments, the first with record date April 28, 2016 and the second with record date October 31, 2016. The proposed payment periods facilitate a more efficient cash management. It is also proposed that the balance of retained earnings after the dividend be retained in the business as described below.

SEK

Retained earnings including reserve for fair value	22 731 381 158
Profit for the year	11 736 771 934
	34 468 153 092
The Board of Directors proposes that these earnings be appropriated as follows:
To the shareholders, a dividend of SEK 6.30 per share	7 661 405 569
To be retained in the business	26 806 747 523
Total	34 468 153 092

Shares and share capital

At year end, Atlas Copco's share capital totaled MSEK 786 (786) and a total number of 1 229 613 104 shares divided into 839 394 096 class A shares and 390 219 008 class B shares were issued. Net of 13 123 103 class A shares and 393 879 class B shares held by Atlas Copco, 1 216 096 122 shares were outstanding. Class A shares entitle the owner to one vote while class B shares entitle the owner to one tenth of a vote. Class A shares and class B shares carry equal rights to a part of the company's assets and profit.

Investor AB is the single largest shareholder in Atlas Copco AB. At year end 2015 Investor AB held a total of 206 895 611 shares, representing 22% of the votes and 17% of the capital.

There are no restrictions which prohibit the right to transfer shares of the Company nor is the Company aware of any such agreements. In addition, the Company is not party to any material agreement that enters into force or is changed or ceases to be valid if the control of the Company is changed as a result of a public takeover bid. There is no limitation on the number of votes that can be cast at a General Meeting of shareholders.

As prescribed by the Articles of Association, the General Meeting has sole authority for the election of Board members, and there are no other rules relating to election or dismissal of Board members or changes in the Articles of Association. Correspondingly, there are no agreements with Board members or employees regarding compensation in case of changes of current position reflecting a public takeover bid.

COMPRESSOR TECHNIQUE

The service business continued to grow in 2015, while the demand for equipment was lower. The order volumes decreased for stationary industrial compressors and air treatment equipment and decreased significantly for large gas and process compressors. The order intake was largely unchanged for vacuum solutions. The business area continued to invest in market presence, innovation and competence development, and signed an agreement to acquire Leybold Vacuum. ABOUT THE IMAGE:

THE YEAR IN REVIEW – COMPRESSOR TECHNIQUE

KEY FIGURES, MSEK	2015	2014	Change, %
Orders received	45 458	42 249	+8
Revenues	46 237	42 165	+10
Operating profit	10 324	8 974	+15
Operating margin, %	22.3	21.3
Return on capital employed, %	38	40
Investments	586	639
Average number of employees	19 118	18 950

An installation of oil-free compressors and air treatment equipment to supply high-quality compressed air in a chemical plant in Belgium.

The year in review

Business development

The demand for the business area's equipment and services was mixed during 2015. In total, the order intake decreased 3 % organically. The service business continued to grow in all major markets while the orders received for equipment decreased as customers were hesitant to make investments. The order volumes decreased for stationary industrial compressors and air treatment equipment and decreased significantly for large gas and process compressors. Geographically, orders for compressors decreased in all regions, most significantly in Asia. The demand from customers in the electronics and semiconductor industries remained robust and the order volumes were largely unchanged for vacuum solutions.

Market presence and organizational development

Despite challenging market conditions, the business area continued to invest in market presence and in innovation. During 2015, additional investments were made in the vacuum solutions business, where the number of employees in sales, marketing and research and development increased. In addition, a manufacturing facility for vacuum and abatement solutions was built in Qingdao, China. Atlas Copco has invested about MSEK 330 in the state-of-the-art facility.

Acquisitions and divestments

The business area made five acquisitions in 2015 and one in January 2016:

• Maes Compressoren N.V., a compressor distributor in Belgium, with about 30 employees.
• Air Repair Sales and Services, a distributor in Canada, with twelve employees.
• Applied Plasma Systems Co., Ltd. (Apsys), a manufacturer of abatement systems in Korea, with five employees.
• The U.S. vacuum pump service provider Innovative Vacuum Solutions Inc., with revenues of MSEK 32 and 19 employees.
• The U.S. compressor distributors Air Supply Systems and A1 with 37 employees.
• In January 2016, Capitol Research Equipment Inc., a U.S. parts and service provider for vacuum pumps, was acquired. The company had revenues of about MSEK 22 and 15 employees.

An agreement to acquire Leybold Vacuum, for a total enterprise value of MEUR 486 (MSEK 4 520) was signed in November. The business is headquartered in Cologne, Germany, has about 1 600 employees, and had revenues in 2014 of about MSEK 3 335. The acquisition is estimated to be completed in the first half of 2016.

In January 2016, Atlas Copco agreed to acquire FIAC, a manufacturer of piston compressors and related equipment, with a global sales network. The company had revenues in 2014 of about MSEK 640 and about 400 employees. The acquisition is expected to be completed during the first quarter of 2016.

Two businesses based in the United States were divested. JC Carter, which produces cryogenic submerged motor pumps, and Ortman Fluid Power, which manufactures hydraulic and pneumatic cylinders and valve actuators. The businesses had 30 and 19 employees, respectively.

Revenues, profits and returns

Revenues increased 10 % to a record of MSEK 46 237 (42 165) with a strong contribution from currency. The revenues decreased 1% organically. Operating profit increased 15% to a record of MSEK 10 324 (8 974), corresponding to a margin of 22.3% (21.3). The operating profit was affected positively by currency, but negatively by items affecting comparability of MSEK –55 (–180). These relate primarily to reduction of capacity in Cologne, Germany, due to weak demand for large compressors.

The adjusted operating margin was 22.4 % (21.7) supported by currency and a positive mix, but negatively impacted by lower equipment volumes. The return on capital employed was 38 % (40).

ORDERS RECEIVED BY CUSTOMER CATEGORY

REVENUES BY REGION

SHARE OF REVENUES

ORDERS RECEIVED, REVENUES AND OPERATING MARGIN

INNOVATION

40 000 10 Several new products and solutions were introduced, including the following examples:

• A range of oil-injected screw compressors. The range has an enhanced design that improves the performance up to 5% compared to the previous generation.
• The range of nitrogen generators was extended and upgraded. The range has top-end energy efficiency that ensures low cost of ownership and quick payback.
• A variable speed drive vacuum pump for general industrial applications. The pump, called GHS VSD+, delivers significant energy savings of around 50%.
• 0 20 000 2010 2011 2012 2013 2014 0 5 • An upgraded range of industrial vacuum pumps. The range has a unique screw technology and high efficiency drives, enabling advanced temperature control and long service intervals, and delivering best-inclass pumping speeds and low running costs.
• A range of compressed air filters, which combine two filtration processes in one product. The filters reduce pressure drops with 40% compared to traditional filter packages.

The Compressor Technique business area provides industrial compressors, vacuum solutions, gas and process compressors and expanders, air and gas treatment equipment and air management systems. The business area has a global service network and innovates for sustainable productivity in the manufacturing, oil and gas, and process industries. Principal product development and manufacturing units are located in Belgium, the United States, China, South Korea, Germany, Italy and the United Kingdom.

The market

The global market for compressed air equipment, air and gas treatment equipment, vacuum solutions and related services is characterized by a diversified customer base. The customers demand solutions that are reliable, productive and efficient and suited to specific applications.

Compressors are used in a wide spectrum of applications. In industrial processes, clean, dry and oil-free air is needed in e.g. food, pharmaceutical, electronics, and textile industries. Compressed air is also used to power industrial tools and in applications as diversified as snow making, fish farming, on high-speed trains, and in hospitals. Blowers are used in applications with a demand for a consistent flow of lowpressure air, for example wastewater treatment and conveying.

Gas and process compressors and expanders are supplied to various process industries, such as air separation plants, power utilities, chemical and petrochemical plants, and liquefied natural gas applications.

Vacuum solutions are required in a number of industrial applications where the pressure is required to be below atmospheric pressure and/or the environment needs to be clean. Applications include manufacturing of semiconductors, flat panel displays, chemicals and pharmaceuticals as well as packaging, pick-up and conveying.

Stationary industrial air compressors and associated air-treatment products, spare parts and service represent about 70 % of sales. Large gas and process compressors, including service, represent approximately 5–10 % and vacuum solutions, including service, approximately 20–25 %.

Market trends

• Continued focus on energy efficiency/ savings, energy recovery and reduction of CO2 emissions
• Increased demand for service and monitoring of compressed air installations
• Focus on total solution and total lifecycle cost
• New applications for compressed air, compressed gas and vacuum

Demand drivers

• Investments in machinery
• Industrial production
• Energy costs

Vision and strategy

The vision is to be First in Mind—First in Choice ® as a supplier of compressed air and gas and vacuum solutions, by being interactive, committed and innovative, and offering customers the best value.

The strategy is to further develop Atlas Copco's leading position in the selected niches and grow the business in a way that is economically, environmentally and socially responsible. This should be done by capitalizing on the strong market presence worldwide, improving market penetration in mature and developing markets, and continuously developing improved products and solutions to satisfy demands from customers. The presence is enhanced by utilizing several commercial brands. Key strategies include growing the service business as well as developing businesses within focused areas such as air treatment equipment, blowers, vacuum solutions, and compressor solutions for trains, ships, and hospitals. The business area is actively looking at acquiring complementary businesses.

Strategic activities

• Increase market coverage and improve presence in targeted markets/segments
• Develop new sustainable products and solutions offering better value and improved energy efficiency to customers
• Extend the product and service offering
• Perform more service on a higher share of the installed base of equipment
• Increase operational efficiency
• Invest in employees and competence development
• Acquire complementary businesses and integrate them successfully

Competition

Compressor Technique's principal competitors in the market for industrial compressors and air treatment equipment are Ingersoll-Rand, Kaeser, Hitachi, Gardner Denver, Cameron, Sullair and Parker Hannifin. There are also numerous regional and local competitors, including many in China. In the market for gas and process compressors and expanders, the main competitors are Siemens and MAN Turbo. In the market for vacuum solutions, the main competitors are Busch, Gardner Denver, Ebara and Pfeiffer Vacuum.

MARKET POSITION

Compressor Technique has a leading market position globally in most of its operations.

Products and applications

Atlas Copco offers all major air compression technologies as well as air and gas treatment equipment, air management systems and vacuum solutions, and is able to offer customers the best solution for every application.

Piston compressors

Piston compressors are available as oil-injected and oil-free. They are used in general industrial applications as well as specialized applications.

Oil-free tooth and scroll compressors

Oil-free tooth and scroll compressors are used in industrial and medical applications with a demand for high-quality oil-free air. Some models are available as a WorkPlace AirSystem with integrated dryers as well as with energy-efficient variable speed drive (VSD).

Rotary screw compressors

Rotary screw compressors are available as oilinjected and oil-free. They are used in numerous industrial applications and can feature the WorkPlace AirSystem with integrated dryers, as well as the energy-efficient VSD technology and energy recovery kits.

Oil-free blowers

Oil-free blowers are available with different technologies: rotary lobe blowers, rotary screw blowers and centrifugal blowers. Blowers are used in process industry applications with a demand for a consistent flow of low-pressure air, for example wastewater treatment and conveying.

Oil-free centrifugal compressors

Oil-free centrifugal compressors are used in industrial applications that demand constant, large volumes of oil-free air. They are also called turbo compressors.

Gas and process compressors

Gas and process compressors supply large amounts of compressed air to various process

Gas and process compressors are supplied primarily to the oil and gas, chemical/petrochemical process and power industries. The main product category is multi-stage centrifugal, or turbo, compressors which are complemented by turbo expanders.

Vacuum solutions

Vacuum products and abatement solutions are integral to manufacturing processes requiring clean vacuum environments, such as for semiconductors and flat panel displays, and are also used within an increasingly diverse range of industrial applications.

Air and gas treatment equipment and medical air solutions

Dryers, coolers, gas purifiers and filters are supplied to produce the right quality of compressed air or gas. In addition, solutions for medical air, oxygen and nitrogen generation as well as systems for biogas upgrading are offered.

Compressed air filter that efficiently reduces contamination in the compressed air

BUSINESS AREA PRESIDENT NICO DELVAUX

• 1. Compressor Technique Service President Vagner Rego
• 2. Industrial Air President Joeri Ooms Oil-free Air
• Acting president Nico Delvaux 3. Vacuum Solutions
• President Geert Follens 4. Gas and Process
• President Robert Radimeczky 5. Medical Air Solutions President Horst Wasel
• 6. Airtec
• President Philippe Ernens

INDUSTRIAL TECHNIQUE

The business area achieved strong order growth in 2015. The growth was supported by the motor vehicle and general industries' investments as well as by the acquisition of Henrob, a pioneer and market leader in self-pierce riveting. The service business also had a strong development. Significant investments were made in market presence, product development and service.

THE YEAR IN REVIEW – INDUSTRIAL TECHNIQUE

KEY FIGURES, MSEK	2015	2014	Change, %
Orders received	14 612	11 335	+29
Revenues	14 578	11 450	+27
Operating profit	3 355	2 557	+31
Operating margin, %	23.0	22.3
Return on capital employed, %	31	36
Investments	532	270
Average number of employees	5 888	5 128

ABOUT THE IMAGE:

Dispensing equipment for adhesives and sealants is increasingly used in the motor vehicle industry.

The year in review

Business development

The demand for advanced industrial tools, assembly systems and solutions, continued to be strong and was supported by investments from the motor vehicle industry and by customers in general industry, e.g. electronics and aerospace. Orders received increased 9% organically.

The orders received for advanced industrial tools, assembly systems and solutions from the motor vehicle industry increased as manufacturers continued to invest in new and upgraded production lines. The order volumes were solid for the industrial tools and assembly systems business, but they were particularly strong for the adhesive equipment business SCA and for the selfpierce-riveting business Henrob. The latter was acquired in September 2014. The order volumes increased in most major markets with the strongest development in the United States and in China.

Order volumes for industrial power tools from the general manufacturing industries were largely unchanged. They increased in Europe, but decreased in North America and in Asia. The sales to the electronics and aerospace industries grew as did the sales of high-torque assembly tools, but the sales to the off-road segment and many other general industrial applications decreased.

The orders received decreased for the vehicle service business, which provides large fleet operators and specialized repair shops with tools and other equipment.

The service business had a strong development. Customers increasingly demand service and maintenance support, ranging from ad-hoc maintenance to management of all tool maintenance at the customer site. Double-digit order growth was achieved, with strong growth both in Europe and in North America.

Market presence and organizational development

The business area made significant investments in the organization by adding employees in marketing and sales, in research and development and in service.

Investments were also made in innovation centers, including an expansion of the facility in Bretten, Germany, to meet growing customer demand for its innovative assembly solutions. The expansion will double the capacity to test customer projects and will be completed in 2016.

Acquisitions

The business area made two acquisitions in 2015:

• Kalibriercentrum Bayern, a German company which specializes in calibration and related services to customers in such industries as motor vehicle manufacturing and aerospace. The company had revenues of MSEK 28 and 27 employees.
• NJS Technologies Ltd., an engineering and sales company in the United Kingdom that specializes in process control systems for assembly operations. The business had revenues of MSEK 9 and seven employees.

Revenues, profits and returns

Revenues increased 27% to a record MSEK 14 578 (11 450), up 7% organically. Operating profit was also the highest ever at MSEK 3 355 (2 557) with strong contribution from acquisitions. The margin increased to 23.0% (22.3) and was supported by higher volumes and currency, but was impacted negatively by dilution from acquisitions. The acquisitions also affected the return on capital employed, which was 31% (36).

ORDERS RECEIVED BY CUSTOMER CATEGORY

REVENUES BY REGION

SHARE OF REVENUES

ORDERS RECEIVED, REVENUES AND OPERATING MARGIN

INNOVATION

Several industrial tools and assembly systems were introduced, including the following examples:

• A high torque assembly tool, which is significantly faster than competing tools in the market.
• A range of versatile and general purpose bolt tensioning tools. These tools feature integrated springs, a feature that greatly speeds up the tensioning operation and reduces the physical effort needed by the user.
• 0 20 000 2011 2012 2013 2014 2015 • An advanced electric drilling unit for demanding aerospace applications. The new solution reduces the cycle time and increases the quality. At the same time it is compact and user-friendly.
• Atlas Copco also won three prestigious Red Dot design awards for high-precision screwdriver systems. The products improve ergonomics and enhance productivity for manufacturing customers especially in the electronics industry.

The Industrial Technique business area provides industrial power tools and systems, industrial assembly solutions, quality assurance products, software and service through a global network. The business area innovates for sustainable productivity for customers in the automotive and general industries, maintenance and vehicle service. Principal product development and manufacturing units are located in Sweden, Germany, the United States, United Kingdom, France and Japan.

The market

The motor vehicle industry, including subsuppliers, is a key customer segment representing more than half of Industrial Technique's revenues, and the application served is primarily assembly operations. The motor vehicle industry has been at the forefront of demanding more accurate fastening tools that minimize errors in production and enable recording and traceability of operations. The business area has successfully developed advanced electric industrial tools and assembly systems that assist customers in achieving fastening according to their specifications and minimizing errors and interruptions in production. This also includes a wide offering of quality assurance and quality improvement solutions. With the increasing requirement of lower fuel consumption and the use of lighter materials, the motor vehicle industry is looking to alternative assembly solutions. The business area offers dispensing equipment for adhesives and sealants as well as self-pierce riveting equipment and rivets to cater to these needs.

In general industry, industrial tools are used in a number of applications, such as assembly, drilling and material removal. Customers are found in assembly operations, e.g. electronics, aerospace, appliances and off-road vehicles, in general industrial manufacturing, shipyards, foundries, and among machine tool builders. The equipment supplied includes assembly tools for a wide torque range, drills, percussive tools, grinders, hoists and trolleys, and accessories. Air motors are supplied separately for different applications in production facilities.

For vehicle service, car and truck service and tire and body shops, the equipment supplied includes impact wrenches, percussive tools, drills, sanders, and grinders.

There is a growing demand for service, e.g. maintenance contracts and calibration services that improve customers' productivity.

Market trends

• Higher requirements for quality, productivity, flexibility, ergonomics and decreased environmental impact
• More advanced tools and systems and increased importance of service, know-how and training
• Power tools with electric motors, partly replacing pneumatic tools
• Demand for lower fuel consumption drives demand for alternative assembly methods, e.g. adhesives and self-pierce riveting

Demand drivers

• Investments in industrial tools and systems, e.g. assembly line investments
• Changes in manufacturing methods and higher requirements, e.g. quality assurance and traceability
• Industrial production

Vision and strategy

The vision is to be First in Mind—First in Choice ® as a supplier of industrial power tools, assembly systems, quality assurance products, software, and services to customers in the motor vehicle industry, in targeted areas in the general manufacturing industry and in vehicle service.

The strategy is to continue to grow the business profitably by building on the technological leadership and continuously offering products and services that improve customers' productivity. Important activities are to extend the product offering, particularly with the motor vehicle industry and to provide additional services, know-how and training. The business area is also increasing its presence in general industrial manufacturing, vehicle service and geographically in targeted markets. The presence is enhanced by utilizing a brand portfolio strategy. The business area is actively looking at acquiring complementary businesses. Growth should be achieved in a way that is economically, environmentally and socially responsible.

Strategic activities

• Increase market coverage and improve presence in targeted markets/segments
• Develop new sustainable products and solutions, offering increased quality and productivity, improved ergonomics and reduced environmental impact
• Extend the product and service offering
• Perform more service on a higher share of the installed equipment base
• Increase operational efficiency
• Invest in employees and competence development
• Acquire complementary businesses and integrate them successfully

Competition

Industrial Technique's competitors in the industrial tools business include Apex Tool Group, Ingersoll-Rand, Stanley Black & Decker, Uryu, Bosch and several local and regional competitors. In the area of adhesive and sealant equipment, the primary competitors are Nordson and Graco. For self-pierce riveting, the main competitors are Emhart and Böllhoff.

MARKET POSITION Industrial Technique has a leading market position globally in most of its operations.

Products and applications

The Industrial Technique business area offers the most extensive range of industrial power tools and assembly systems on the market.

Motor vehicle industry

The motor vehicle industry primarily demands advanced assembly tools and assembly systems and is offered a broad range of electric assembly tools, control systems and associated software packages for safety-critical tightening. Specialized application centers around the world configure suitable assembly systems. The systems make it possible to view, collect and record the assembly data. The motor vehicle industry, like any industrial manufacturing operation, also demands basic industrial power tools. With the increasing requirement of lower fuel consumption and the use of lighter materials, the motor vehicle industry is increasingly investing in assembly solutions for these requirements, e.g. dispensing equipment for adhesives and sealants and equipment for self-pierce riveting.

General industrial manufacturing

The business area provides a complete range of products, services and production solutions for general industrial manufacturing. Products range from basic fastening tools, drills and abrasive tools to the most advanced assembly systems available. It also includes a large range of accessories. Adhesive and sealant equipment is also offered to general industrial manufacturing businesses. A large team of specialists is available to support customers in improving production efficiency.

Vehicle service

The business area offers powerful and reliable tools to meet the demands of the vehicle service professional. The offering includes impact wrenches, percussive tools, drills, sanders and grinders.

Advanced electric drilling unit for demanding aerospace

Pneumatic drill of the highest quality, built to provide consistent reliability and performance in a wide range of applications

BUSINESS AREA PRESIDENT MATS RAHMSTRÖM

THE DIVISIONS January 28, 2016

• 1. Industrial Technique Service President Henrik Elmin
• 2. MVI Tools and Assembly Systems President Lars Eklöf
• 3. General Industry Tools and Assembly Systems President James McAllister
• 4. Chicago Pneumatic Tools President Philippe Artzet
• 5. Industrial Assembly Solutions President Tobias Hahn

MINING AND ROCK EXCAVATION TECHNIQUE

The demand for mining and rock excavation equipment weakened further. The order volumes were lower than in 2014 with a significant decline for mining equipment. The service business achieved growth, while consumable orders were somewhat lower. The business area identified and implemented further efficiency measures to adapt the costs to the low demand.

KEY FIGURES, MSEK	2015	2014	Change, %
Orders received	25 587	25 752	–1
Revenues	26 665	25 718	+4
Operating profit	4 993	4 307	+16
Operating margin, %	18.7	16.7
Return on capital employed, %	34	29
Investments	981	967
Average number of employees	11 500	12 392

ABOUT THE IMAGE:

A flexible and versatile surface drill rig, developed and designed for high performance in demanding construction applications.

The year in review

Business development

The demand for equipment from customers in the mining industry remained weak as customers made low investments in capital equipment. The order volumes decreased for all types of underground and surface equipment both compared to the previous year and during the year. Geographically, the order intake increased in Europe with a positive development in Russia and Sweden, but decreased in all other regions, most significantly in Australia and South America.

The order intake for equipment for infrastructure projects also decreased, which affected both underground and surface drilling rigs. The order volumes were somewhat better in Europe, but were negative in all other regions.

The sales of consumables decreased and volumes were lower in all regions except Europe and Africa/Middle East. The sales were negatively impacted by lower activity in mine development and civil engineering.

Demand for service and spare parts remained robust despite the tough market conditions. Order volumes increased in Europe, South America and Africa/Middle East, they were stable in North America, while they had a negative development in Asia and Australia.

In total, the order intake decreased by 7% organically.

Organizational development

The business area continued to identify and implement further efficiency measures in order to strengthen the operations for the future, including consolidation of some manufacturing facilities and further rationalization measures. The workforce was further reduced, mostly in manufacturing, but also in other functions such as sales, service and administration.

The mobile crushing and screening business, with manufacturing in Austria, was discontinued during the year. The business had about 70 employees and revenues in 2014 of about MSEK 255.

Revenues, profits and returns

Revenues increased 4% to MSEK 26 665 (25 718) with strong support from currency. This corresponds to 3% organic decline. Operating profit increased 16% to MSEK 4 993 (4 307), corresponding to a margin of 18.7% (16.7). The profit included restructuring and other items affecting comparability of MSEK –65 (–415) and the adjusted operating margin increased to 19.0% (18.4). The margin was supported by currency and revenue mix, but impacted negatively by lower volumes. Return on capital employed was 34% (29).

ORDERS RECEIVED BY CUSTOMER CATEGORY

REVENUES BY REGION

SHARE OF REVENUES

ORDERS RECEIVED, REVENUES AND OPERATING MARGIN

INNOVATION

Several new products and solutions were introduced, including the following examples:

• A unique remote operator station that enables operators to do their job from a safe distance. The station can handle up to three surface drill rigs in parallel, which multiplies the operator efficiency.
• A range of drill bits with greatly increased service life. Depending on rock type, service life is up to 75% better than the competition.
• A surface drill rig for construction applications and small quarries. The rig meets the demands for speed and efficiency in drilling small and medium-sized holes and is equipped with a Tier 4 low emissions engine and a system that eliminates oil leakages.
• 0 2011 2012 2013 2014 2015 0 • A low pressure rock drill for surface drilling applications. It is intended for customers whose top priority is to operate a reliable rock drill with consistent performance.
• An exploration drilling rig with an advanced control system that enables automatic functions such as drilling and rod handling. The automatic functions are not only increasing the safety for the operator, it also improves the working environment and increases the productivity.

The Mining and Rock Excavation Technique business area provides equipment for drilling and rock excavation, a complete range of related consumables and service through a global network. The business area innovates for sustainable productivity in surface and underground mining, infrastructure, civil works, well drilling and geotechnical applications. Principal product development and manufacturing units are located in Sweden, the United States, Canada, China and India.

The market

The total market for equipment for mining and civil engineering applications is very large with numerous companies supplying products to different applications. The Mining and Rock Excavation Technique business area, however, offers products and services only for selected applications.

Customers from the mining industry represent about two thirds of business area revenues. The applications include production and development work for both underground and open-pit mines as well as mineral exploration. The customers demand rock drilling equipment, rock drilling tools, loading and haulage equipment, utility vehicles, ventilation systems, and exploration drilling equipment.

Contractors involved in civil engineering and infrastructure construction represent one third of revenues. The applications include blasthole drilling for tunneling, e.g. for road, railway and dam construction, aggregate production and drilling for water, energy, oil and gas as well as for ground engineering. The customers demand rock drilling equipment, rock drilling tools, utility vehicles, ventilation systems, and ground engineering equipment.

The equipment is primarily sold directly to the end user and the business area has a large organization offering service, spare parts and consumables. Mining companies and contractors demand service, spare parts and consumables, often in the form of contracts where availability and productivity are key performance criteria.

Market trends

• More productive and safe equipment, including solutions for autonomous operations and remote control
• Increased focus on environment
• Customer and supplier consolidation
• Performance contracts for service and consumables
• Focus on total cost of operations and optimization of the value chain

Demand drivers

Mining

• Investments in equipment
• Ore production

Civil engineering

• Infrastructure and public investments
• Non-building construction activity

Vision and strategy

The vision is to be First in Mind—First in Choice ® as a supplier of equipment and service for rock excavation for mining and civil engineering applications.

The strategy is to grow by maintaining and reinforcing Atlas Copco's leading market position as a global supplier for rock excavation equipment and services; by developing its positions in drilling and loading equipment, exploration drilling, and related businesses; and by increasing revenues by offering more services to customers. Growth should be achieved in a way that is economically, environmentally and socially responsible.

Strategic activities

• Increase market coverage and improve presence in targeted markets/segments
• Develop new sustainable products and solutions offering improved productivity and safety in line with customer demand, e.g. computerized control systems, remote control and solutions for autonomous operations
• Invest in design, development and production capacity in growth markets
• Extend the product and service offering
• Perform more service on a higher share of the installed base of machines
• Develop the service business
• Improve agility in cost and working capital
• Invest in employees and competence development
• Acquire complementary businesses and integrate them successfully

Competition

Mining and Rock Excavation Technique's principal competitor in most product areas is Sandvik. Other competitors include Furukawa in the market for underground and surface drilling equipment; Boart Longyear for underground drilling equipment for mining, exploration drilling equipment and rock drilling tools; Joy Global for open-pit mining equipment and Caterpillar for underground and open-pit mining equipment. In addition, there are several competitors operating locally, regionally and in certain niche areas.

MARKET POSITION

Mining and Rock Excavation Technique has a leading market position globally in most of its operations.

Products and applications

The Mining and Rock Excavation Technique business area offers an extensive range of productivity-enhancing equipment for rock excavation and civil engineering applications.

Underground rock drilling equipment

Underground drill rigs are used to drill blast holes in hard rock to excavate ore in mines or to excavate rock for road, railway or hydropower tunnels, or underground storage facilities. Holes are also drilled for rock reinforcement with rock bolts. The business area offers drill rigs with hydraulic and pneumatic rock drills, as well as handheld rock drills. Raise boring machines are used to drill large diameter holes, which can be used for ventilation, ore and personnel transportation.

Underground loading and haulage equipment

Underground vehicles are used mainly in mining applications, to load and transport ore and/or waste rock.

Surface drill rig developed and designed for high performance

Underground utility vehicles

Utility vehicles are used for scaling, bolting, charging, lifting and shotcreting.

Surface drilling equipment

Surface drill rigs are primarily used for blast hole drilling in hard rock in open pit mining, quarries, and civil engineering projects, but also to drill for water, shallow oil and gas. The business area offers drill rigs with hydraulic and pneumatic rock drills as well as rotary drill rigs.

efficiency and reliability in hard rock

3

Rock drilling tools

Rock drilling tools include drill bits and drill rods for blast hole drilling in both underground and surface drilling applications, as well as consumables for raise boring and rotary drilling.

Exploration drilling and ground engineering equipment

The business area supplies a wide range of equipment for underground and surface exploration applications. An extensive range of equipment for ground engineering, including systems for overburden drilling, is also offered. Applications include anchoring, geotechnical surveying, ground reinforcement and water well drilling.

Ventilation systems

High pressure fans designed especially for delivering air through ducts in mining and tunneling.

Underground production drill rig equipped with smart automation functions for higher equipment availability and enhanced overall productivity

BUSINESS AREA PRESIDENT JOHAN HALLING

THE DIVISIONS

January 28, 2016

• 1. Mining and Rock Excavation Service President Markku Teräsvasara
• 2. Underground Rock Excavation President Scott Barker
• 3. Surface and Exploration Drilling President Victor Tapia
• 4. Drilling Solutions President José Manuel Sanchez 5. Rock Drilling Tools
• President Helena Hedblom 6. Rocktec
• President Andreas Nordbrandt

CONSTRUCTION TECHNIQUE

The demand for construction equipment decreased and order volumes were lower in all regions except in Europe. The service business remained robust and the specialty rental business continued to grow. The business area continued to make selective investments in market presence and product development, but also consolidated manufacturing and took efficiency measures to adapt the organization to the lower equipment demand. ABOUT THE IMAGE:

KEY FIGURES, MSEK	2015	2014	Change, %
Orders received	15 166	14 847	+2
Revenues	15 300	14 739	+4
Operating profit	1 839	1 768	+4
Operating margin, %	12.0	12.0
Return on capital employed, %	12	12
Investments	555	939
Average number of employees	5 579	5 780

Atlas Copco's pioneering HardHat® celebrated 10 years. HardHat is a portable compressor with a canopy made in polyethylene (plastic). The canopy is resistant to corrosion, lightweight and crack-resistant and is ideal for construction and rental.

The year in review

Business development

The demand for construction equipment decreased in all regions except in Europe, with lower demand both compared to the previous year and during the year. Geographically, the orders increased in Europe, but decreased in all other regions with a weak development in Australia, South America and North America.

Orders received for construction tools, such as breakers and silenced demolition tools, was largely unchanged, supported by growth in North America and Europe.

The sales of road construction equipment also increased in North America and in Europe, and was somewhat higher in Asia. This, however, did not compensate for the weak development in other regions and the order intake decreased.

Orders for portable energy products, such as portable compressors, generators, pumps and lighting towers, decreased, and was affected by lower investments by rental companies. The order intake increased in Europe, but decreased in all other regions.

The service business remained robust with an unchanged volume. Growth was achieved in North America and in Europe. In Asia/Australia, however, the demand was softer, particularly in China, and orders received decreased.

The specialty rental business continued to develop well and orders received increased in nearly all markets.

Total orders received increased by 2%, but was supported by currency. Organically, order intake decreased 6% in total.

Market presence and organizational development

The business area continued to make selective investments in market presence and product development, but also took efficiency measures to adapt the organization to the lower equipment demand. It was also decided to create dedicated competence centers for the product portfolio, which resulted in the closure of two small manufacturing locations in the United States and Germany. These efficiency measures were implemented to strengthen the operations for the future.

Acquisitions

The business area made one acquisition in 2015 and one in January 2016:

• Mustang Services, a U.S. specialty dryer rental business with revenues of MSEK 45.
• In January 2016, Varisco, an Italian pump manufacturer, was acquired. The company had revenues of about MSEK 270 and 135 employees in 2014.

Revenues, profits and returns

Revenues increased 4% to MSEK 15 300 (14 739), supported by currency. Revenues declined 5% organically. Operating profit increased 4% to MSEK 1 839 (1 768), corresponding to a margin of 12.0% (12.0). The profit included items affecting comparability of MSEK –95 and the adjusted operating margin increased to 12.6%. The margin was supported by currency, but negatively impacted by lower volumes. Return on capital employed was 12% (12).

ORDERS RECEIVED BY CUSTOMER CATEGORY

REVENUES BY REGION

SHARE OF REVENUES

ORDERS RECEIVED, REVENUES AND OPERATING MARGIN

INNOVATION

Several new products and solutions were introduced, including the following examples:

• A redesigned range of petrol breakers with high impact energy. The breakers are shorter and lighter and have up to 10% less vibrations than earlier models. They can also run on cleaner alkylate petrol.
• An intelligent telematics system for road construction equipment. The system monitors the machine fleet and offers many possibilities to optimize fleet usage, reduces maintenance cost and saves time and money for the customers.
• 0 2011 2012 2013 2014 2015 • A high pressure portable compressor for geothermal drilling applications. The new compressor offers faster drilling and improved fuel efficiency, it meets all the latest environmental standards, and is a low noise machine making it suitable for construction projects in urban and residential areas.
• The specialty rental fleet of portable 100% oil-free compressors was complemented with a new compressor. The engine conforms to the latest emission standards, which guarantees optimal fuel efficiency and offers full regulation compliance.

The Construction Technique business area provides construction and demolition tools, portable compressors, pumps and generators, lighting towers, and compaction and paving equipment. The business area offers specialty rental and provides service through a global network. Construction Technique innovates for sustainable productivity in infrastructure, civil works, oil and gas, energy, drilling and road construction projects. Principal product development and manufacturing units are located in Belgium, Germany, Sweden, the United States, China, India and Brazil.

The market

The total market for construction equipment is very large. It has a large number of participants offering a wide range of products for different applications. The Construction Technique business area, however, focuses on a select number of applications.

A key customer segment is, of course, construction, accounting for about half of revenues, but several other segments are served by the business area's offering. General and civil engineering contractors, often involved in infrastructure projects like road building, other non-building activity and/or demolition work, demand compaction and paving equipment and light construction tools, such as breakers and cutters. Dieseldriven portable compressors and generators are reliable power sources for machines and tools in the construction sector as well as for mining and numerous industrial applications.

Contractors as well as rental companies are important customers for service, including spare parts, maintenance contracts, and repairs.

Market trends

• Higher requirements for productivity, flexibility and ergonomics
• Increased focus on environment and safety
• Customer and supplier consolidation
• Increased demand for service support/contracts

Demand drivers

• Infrastructure and public investments
• Demolition and recycling
• Investments in portable energy equipment

Vision and strategy

The vision is to be First in Mind—First in Choice ® as a supplier of equipment and services for portable energy, road development, and demolition applications to the construction industries.

The strategy is to grow by developing Atlas Copco's market position and presence as a global supplier within the selected niches: in construction and demolition tools, portable compressors, pumps and generators, lighting towers, and compaction and paving equipment. The presence is enhanced by utilizing a brand portfolio strategy. The strategy also includes further development of specialty rental services as well as development of the service business; increasing revenues by offering more customers more services. Growth should be achieved in a way that is economically, environmentally and socially responsible.

Strategic activities

• Increase market coverage and improve presence in targeted markets/segments

REVENUES, MSEK 15 300

IN 2015

• Capture sales and service synergies between the construction businesses
• Develop new sustainable products and solutions offering enhanced productivity, safety and reduced environmental impact
• Invest in design, development and production capacity in growth markets
• Develop more competitive offerings with different value propositions
• Perform more service on a higher share of the installed base of machines
• Develop the service business
• Increase operational efficiency
• Invest in employees and competence development
• Acquire complementary businesses and integrate them successfully

Competition

Construction Technique's principal competitors in the market for portable compressors are Doosan Infracore, Kaeser and Sullair. Volvo, Caterpillar and Wirtgen are the principal competitors for road construction equipment and Sandvik, Furukawa and Wacker Neuson for construction tools. In addition, there is a large number of competitors operating locally, regionally and in certain niche areas. Sany and XCMG are examples of Chinese competitors in the area of road construction equipment.

MARKET POSITION The Construction Technique business area has leading or strong market positions globally in most of its operations.

Products and applications

The Construction Technique business area offers a range of products for selected applications in civil engineering, demolition and road building.

Portable compressors

Portable oil-injected compressors are primarily used in construction applications where the compressed air is used as a power source for equipment, such as pneumatic breakers and rock drills. Portable oilfree compressors are rented by customers to meet a temporary need for oil-free air, primarily in industrial applications.

Boosters

When extra high pressure is needed, boosters are used to boost the air fed by portable compressors. This high-pressure air is mainly used in the drilling industry and in oil and gas applications.

Generators

Portable generators fulfill a temporary need for electricity, primarily in construction applications. Other common generator applications are power supply for events, emergency power and power in remote locations.

Lighting towers

Light for safe operations 24/7.

Pumps

Portable diesel-driven pumps and submersible electric pumps, primarily for water.

Compaction and paving equipment

The business area offers a range of compaction and paving equipment to the road construction market. Rollers are used to compact all types of soil or newly laid asphalt. Planers are used for removing asphalt and pavers for laying out new asphalt. The product range also includes smaller handheld compaction and concrete equipment.

Construction and demolition tools

Hydraulic, pneumatic and gasoline-powered breakers, cutters and drills are offered to construction, demolition and mining businesses.

Handheld pneumatic breaker with ergonomic features for high efficiency demolition work

Portable air compressor that is easy to operate and has low cost of ownership delivers power to pneumatic tools and/or compressed air to other applications, such as sandblasting.

BUSINESS AREA PRESIDENT ANDREW WALKER

THE DIVISIONS

January 28, 2016

1. Construction Technique Service President Adrian Ridge

Roller equipped with compaction analyzer and fuel savings features for efficient operations

• 2. Specialty Rental President Ray Löfgren
• 3. Portable Energy President Peter Lauwers
• 4. Road Construction Equipment President Paul Hense
• 5. Construction Tools President Vladimir Kozlovskiy

All business activities involve risks. Atlas Copco has a structured and proactive approach to manage the company's risks. Well-managed risks can lead to opportunities and add value to the business. Risks that are not well managed can lead to incidents and losses.

Atlas Copco's global and diversified business towards many customer segments results in a variety of risks and opportunities geographically and operationally. However, the ability to prevent, detect and manage the risks is crucial for effective governance and control of the business. The aim is to achieve Group goals with well-managed risk taking in line with the strategy and within the frame of the company manual The Way We Do Things. Atlas Copco sees opportunities in an efficient risk management both from risk reduction and business opportunity perspectives, which can lead to good business growth.

The decentralized structure in Atlas Copco also regards risk management. The local companies are responsible for their own risk management, which is monitored and followed-up regularly at local business board meetings. This has created a strong risk management culture. Group functions for legal, insurance, treasury, tax, controlling and accounting provide policies, guidelines and instructions to support entities establish risk management. The implementation is regularly audited by internal and external audits.

Risks in the reporting cover for example errors in the internal reporting to the Group or in the external reporting to authorities. Read more on Internal control over financial reporting in the Corporate governance report, pages 64–65.

The crisis management process is managed by the Insurance & Risk Management department and Corporate Communications. It is rolled out to all Atlas Copco entities.

Atlas Copco has developed its own enterprise risk management methodology to map Group risks. The methodology is applied on divisions, which is the highest operational level in the Group. Hereby risks are identified based on each divisional management team's knowledge of their own core business and area of responsibility. This hands-on approach is also in line with Atlas Copco's decentralized structure. The ownership of managing the risks raised in the risk mappings lies with each division, while the Insurance & Risk Management department manages the overall process and consolidates the results on Group level.

Presented on pages 37–39 are risks, risk mitigating factors and potential opportunities for each category of risk.

RISK	CONTEXT	MITIGATING FACTORS	OPPORTUNITIES
MARKET RISKS	A widespread financial crisis and economic downturn would not only affect the Group nega tively but it could also impact customers' ability to finance their investments. Changes in cus tomers' production levels also have an effect on the Group's sales of spare parts, service and consumables. In developing markets, new small er competitors continuously appear which may affect Atlas Copco negatively.	P Well-diversified sales to customers in multiple countries and industries. Sales of spare parts and service are relatively stable in comparison to equipment sales. P Monthly follow up of market and sales develop ment enables quick actions. P Flexible manufacturing setup makes it possible to quickly adapt to changes in equipment demand. P Leading position in most market segments provides economies of scale.	➔ A significant competitive advantage as a result of a strong global presence, including growth markets. ➔ Opportunities to positively impact both the soci ety and environment, through the Group's high quality sustainable products and high ethical standards. ➔ Continue to develop close, long-term and strategic relationships with customers and suppliers.
PRODUCT DEVELOPMENT RISKS	One of the challenges for Atlas Copco's long-term growth and profitability will be to continuously develop innovative, sustainable products that con sume fewer resources over the entire life cycle. Atlas Copco's product offering is also affected by national and regional legislation, on issues such as emissions, noise, vibrations, and recycling. How ever, there may be increased risk of competition in emerging markets where low-cost products are not affected by such rules.	P Continuous investments in research and develop ment to develop products in line with customer demand and expectations, even during economic downturns. P Designing products with a life-cycle perspective and measurable efficiency targets for the main product categories for each Division. P Designing products with reduced emissions, vibrations or noise and increased recycling potential to meet legislative requirements.	➔ Substantial opportunities to strengthen the competitive edge by innovating high quality, sustainable products and creating an integrated value proposition for customers.
PRODUCTION RISKS	Core component manufacturing is concentrated in a few locations and if there are interruptions or lack of capacity in these locations, this may have an effect on deliveries or on the quality of products. Production facilities could also have a risk of damaging the environment through operations, e.g. through hazardous waste and emissions. Atlas Copco is directly and indirectly exposed to raw material prices.	P Manufacturing units continuously monitor the production process, test the safety and quality of the products, make risk assessments, and train employees. P Manufacturing units invest in modern equipment that can perform multiple operations. P Production units are subject to continuous risk management surveys to safeguard that they comply with the Atlas Copco loss prevention standard. P Ambition to certify all manufacturing units in accordance with the ISO 14001 standard.	➔ Continued opportunities to extensively promote operational excellence to streamline production, minimize inefficiencies and maintain a high flexi bility in the production process. ➔ Cost increases for raw materials and compo nents often coincide with strong end-customer demand and can partly be compensated by increased sales to mining customers and by increased market prices.
SUPPLY CHAIN RISKS	Atlas Copco and its business partners such as suppliers, sub-contractors and joint venture part ners, must share the same values as expressed in Atlas Copco's Business Code of Practice, other wise there is a risk of compromising the Group's reputation and brand. The availability of many components is dependent on suppliers and if they have interruptions or lack capacity, this may have an undesirable effect on deliveries. The use of many suppliers gives rise to the risk that products contain components which are not sustainably produced, e.g. that electronic com ponents contain conflict minerals (whose trade or taxation fund armed groups in conflict areas such as the Democratic Republic of Congo).	P Select and evaluate business partners on the basis of objective factors including quality, deliv ery, price, and reliability, as well as commitment to environmental and social performance. P Continue the process to investigate and eradi cate the presence of conflict minerals in its value chain. P Establishment of a global network of sub suppliers, to prevent supplier dependency. P Business partners sign a compliance letter to the Business Code of Practice. P E-learning for business partners developed to raise awareness of the Business Code of Practice.	➔ Further increase business agility and reduce costs by improving supplier inventory manage ment in response to changes in demand. ➔ Continue to be a preferred business partner and promote efficiency, sustainability and safety. Good supplier relations help to improve Atlas Copco's competitive position. ➔ Opportunity to strengthen customer relation ships by being ready to support customers who are impacted by the Dodd Frank legislation on conflict minerals. ➔ Promote human rights and work towards improv ing labor conditions, reducing corruption and conflicts.
DISTRIBUTION RISKS	Atlas Copco primarily distributes products and services directly to the end customer. If the dis tribution is not efficient, it may impact customer satisfaction, sales and profits. Damages and losses during the course of distribution can be costly. Some sales are made indirect through distribu tors and rental companies and their performance can have a negative effect on sales. The distribution of products can result in increased CO2 emissions from transport.	P Physical distribution of products is concentrated to a number of distribution centers and the delivery efficiency of these is continuously monitored. P Resources are allocated to training and develop ment of the service organization. P As indirect sales are local/regional, the negative impact of poor performance is limited. P Increased focus on safer and more effective transports to reduce losses, costs and the total emissions per transport.	➔ Continue to strengthen the relationship with customers through timely deliveries of products and services. ➔ Transport efficiencies and safe transports can save the customer time and cost while reducing the environmental impact of their own opera tions. ➔ Reduce fuel costs and resource requirements which improves business agility for the Group.
RISKS WITH ACQUISITIONS AND DIVESTMENTS	The integration of acquired businesses is a cumbersome process and it is not certain that it will be successful. Synergies can take longer than foreseen to materialize. Annual impairment tests are made on acquired goodwill. If goodwill is not deemed justified in such tests it can result in a write-down, affecting the Group's result. Acquisitions and divestments can impact local communities and/or the environment, directly or indirectly.	P The Group has established an Acquisitions Process Council which provides training and supports all business units prior to, during and post an acquisition. P Atlas Copco guidelines and policies are applied to assess and manage the environmental and social impact of operations in the affected communities after an acquisition is complete. P Human rights and environmental considerations are integrated when acquisitions and divest ments are made.	➔ Acquisitions give possibility to enter new markets, market segments, new technologies, new clients, increase in revenues, etc. ➔ Identifying the obstacles to integration can allow Atlas Copco to improve the process through methods such as job rotation, training or team building exercises. This would not only result in a smoother integration process but also lower operational costs by decreasing downtime and allowing newly acquired companies to become productive and efficient more rapidly.

RISK	CONTEXT	MITIGATING FACTORS	OPPORTUNITIES
FINANCIAL RISKS	Changes in exchange rates can adversely affect Group earnings when revenues from sales and costs for production and sourcing are denomi nated in different currencies (transaction risks). An adverse effect on Group earnings can also occur when earnings of foreign subsidiaries are translated into SEK and on the value of the Group equity when the net assets of foreign subsidiaries are translated into SEK (translation risks). Atlas Copco's net interest cost is affected by changes in market interest rates. Atlas Copco is exposed to the risk of non payment by any of its extensive number of end customers to whom sales are made on credit.	P A Financial Risk Management Committee meets regularly to manage financial risks. P Atlas Copco Financial Solutions is responsible for these risks and also supports Group companies to implement financial policies and guidelines. P The Group's operations continuously monitor and adjust sales prices and costs to limit the transac tion risk. These measures can be complemented with hedging. P Translation risks are partially hedged by borrow ings in foreign currency and financial derivatives. P Stringent credit policies are applied and there is no major concentration of credit risk. The provi sion for bad debt is based on historical loss lev els and is deemed sufficient. In the case of Atlas Copco Financial Solutions, an in-house financing operations, risks are mitigated by retaining secu rity in the equipment until full payment is re ceived, by purchasing credit risk insurance and/or by transferring the risk to a third party.	➔ Working proactively with financial risks improves the profit margin and also creates possibilities for more stable cash flow. Overall, financial risk mitigation has the ability to improve business resilience for Atlas Copco. ➔ Atlas Copco Financial Solutions can improve customer relations and attract more customers.
RISKS TO REPUTATION	The Group's reputation is a valuable asset which can be affected in part through the operation or actions of the Group and in part through the actions of external stakeholders. Products must deliver the brand promise and be of high quality, safe and have a low negative impact on the environment when used by the customer. There is potential for reputational risk from non-compliance to product labeling standards or if there are cases of false advertising. Unsatisfied employees may also potentially detract the Atlas Copco brand.	P All Atlas Copco products are tested and also quality assured. Monitoring of product labeling and regular communications training. P The Group actively engages in stakeholder dialogue. P Training in the Business Code of Practice in cludes the yearly signing of a Compliance Statement. P Clear well-known brand promise. P A comprehensive employee survey is carried out every two years and followed up actively.	➔ Brand positioning. ➔ Stakeholder engagement cannot only mitigate reputational risks in certain cases but it also presents opportunities to increase the awareness and credibility of Atlas Copco's brand through improvements and innovations. ➔ Delivering tested and quality assured products improve customer satisfaction and promote repeat business. ➔ Attract and develop employees that adhere to the Business Code of Practice.
REPORTING RISKS, TAX	The risk related to the communication of finan cial information to the capital market is that the reports do not give a fair view of the Group's true financial position and results of operations. Taxes is an area with increased focus, especially transfer price risks but also new tax rules and regulations. Estimations often form a large portion of the sustainability data which is reported, and thus by its nature the numbers presented may not be precise representations of the Group's impact.	P Atlas Copco subsidiaries report their financial statements regularly in accordance with Interna tional Financial Reporting Standards (IFRS). The Group's consolidated financial statements, based on those reports, are prepared in accordance with IFRS and applicable parts of the Annual Accounts Act as stated in RFR 1 "Supplementary Rules for Groups". P The Group has procedures in place to ensure compliance with Group instructions, standards, laws and regulations, for example internal and external audits. P Group Tax is present globally to monitor and comply with local tax rules. Transfer price policy and agreements are implemented in operations and regularly reviewed. P Tax is regularly monitored and reported to the Board and Group Management. P Atlas Copco reports sustainability information according to G4 and works with training to improve reporting practices.	➔ Integrated reporting identifies and encourages opportunities for business synergies. ➔ Addressing reporting risks increases transparency and improves the potential to represent the busi ness fairly and accurately. ➔ Improved reporting also directly results in improved risk management, especially when the data has been integrated to highlight interdependencies. ➔ Increased reporting requirements on taxes will increase transparency on taxes, which is of stakeholder interest.
RISKS OF CORRUPTION AND FRAUD	Corruption and bribery exist in many markets where Atlas Copco conducts business. Fraud is wrongful or criminal deception intended to result in financial or personal gain, which is always present where there are persons with bad intentions.	P Zero tolerance policy on bribery and corruption, including facilitation payments. P Internal control routines in place aimed at prevent ing and detecting deviations. The Internal Audit function is established to ensure compliance with the Group's corporate governance, internal control and risk management policies. P Control Self Assessment tool to analyze internal control processes. P Training in the Business Code of Practice, includ ing fraud awareness and workshops. P The global Group hotline to report violations con fidentially and with no penalties for reporting. P The Group supports fair competition and forbids discussions or agreements with competitors concerning pricing or market sharing.	➔ By fighting against corruption and fraud, Atlas Copco has the opportunity to work with its industry peers to reshape international market practices. Refusing to pay bribes may cause temporary delays and setbacks; however it reduces costs in both the long and short run, builds opportunities to improve operational effi ciencies and creates more stability in the society and in markets where the Group operates. ➔ Working against corruption and fraud improves Atlas Copco's credibility and transparency and creates even more avenues to improve stake holder relations.
LEGAL RISKS AND COMPLIANCE	Atlas Copco's business operations are affected by numerous laws and regulations as well as commercial and financial agreements with customers, suppliers, and other counterparties, and by licenses, patents and other intangible property rights.	P In-house lawyers present on five continents supporting entities to comply with laws and regulations. P A yearly legal-risk survey of all companies within the Group is performed in addition to a continuous follow-up of the legal risk exposure. The result of the legal-risk survey is compiled, analyzed, and reported to the Board and the auditors. P A dedicated compliance function.	➔ Complying with legal norms and laws minimizes costs and increases opportunities to strengthen Atlas Copco's reputation. It also creates the chance to develop reliable partnerships and improve business stability.

RISK	CONTEXT	MITIGATING FACTORS	OPPORTUNITIES
INSURABLE RISKS	Insurable risks involve the Group's assets and interests e.g. property damage, business inter ruption, transport insurance, general and product liability and travel insurance.	P The Group Insurance Program is provided by the in-house insurance company Industria Insurance Company Ltd. which retains part of the risk exposure. P Insurance capacity is also purchased from leading insurers and reinsurers by way of using international insurance brokers. P Claims management services are purchased on a global basis from leading providers. P Insurance policies are issued on a local basis to ensure compliance with local insurance laws whereas required. P As part of the insurance program, numerous risk surveys based on Atlas Copco loss prevention standard are performed on an annual basis.	➔ By way of control and conformity in terms of risk management, the probability of events that can cause material damage and severely impact the business operation of the Atlas Copco Group is reduced and business can proceed without disruption. ➔ The use of an insurance company owned by Atlas Copco enables a strict control over all insurable interests and liabilities. It also enables a close follow up of each individual insurance claim impacting the Group, which can help to eliminate or reduce future claims. ➔ Tailor-made insurance solutions.
SAFETY AND HEALTH RISKS	Issues with wellness and sick leave can impact the productivity and efficiency of the operations. Accidents or incidents at the workplace due to lack of proper safety measures can negatively affect productivity and the Atlas Copco employer brand. Atlas Copco recognizes the risk that serious diseases and pandemics can interrupt business operations and harm employees.	P The Group regularly assesses and manages safety and health risks in operations. P The ambition is to certify all major units in accor dance with the OHSAS 18001 standard. P Workplace wellness programs to reduce the impact of pandemic HIV/AIDS are in place in Sub-Saharan Africa. P Atlas Copco's business partners are trained in the Group's policies including the approach to health and safety.	➔ Improved safety and health in operations in creases both employee productivity and morale. ➔ The Atlas Copco is strengthened through safe products. The Group continues to be seen as industry leader. ➔ Improving working conditions for customers and suppliers can create long lasting relationships and repeat orders.
ENVIRON MENTAL RISKS (EXTERNAL)	The primary drivers for external environmental risk are from physical changes in climate and natural resources, changes in regulations, taxes and resource prices. Increased fuel/energy taxes can increase operational costs. Regulations and requirements related to carbon dioxide emissions from products and industrial processes are gradually increasing. Changes in mean precipitation can affect all of Atlas Copco's operations and negatively affect operations either directly or by disrupting the supply chain.	P Atlas Copco consistently develops products with improved energy efficiency and reduced emissions. P In its own operations, Atlas Copco has several key performance indicators (KPIs) that address resource and energy usage in order to minimize the costs and impact on the environment. P All cooling agents used in Atlas Copco products have a zero ozone-depleting impact during the product's lifecycle, and the aim is to continue to introduce cooling agents with lower Global Warming Potential (GWP).	➔ Working proactively with environmental risks can provide significant opportunities to drive innovation at Atlas Copco. ➔ Given that many customers are operating in areas of extreme water stress or scarcity, water efficient or water recycling products can have a strong customer appeal. Thus, this presents a strong business opportunity to extend Atlas Copco's innovations to the focused area of water consumption. ➔ Climate change impacts and predictions can in duce changes in consumer's habits and behavior. As a result of climate events Atlas Copco's customers can become more risk averse and demand sustainable products from the Group.
HUMAN RIGHTS RISKS (ESG note 8)	Atlas Copco operates in countries where the risk according to Amnesty International is high of human rights abuse, including child labor, forced or compulsory labor. Atlas Copco encounters customers, for instance in the mining industry, who are exposed to problems concerning environmental and human rights issues. Risks to the Group's reputation may also arise from the relationship with suppliers not comply ing with internationally accepted ethical, social, and environmental standards.	P Guidance and regular interaction to identify risks with well-established non-governmental organizations. P Policies and procedures to match the standards in the UN Guiding Principles for Business and Human rights, which Atlas Copco has committed to since 2011. P Due diligence process and the integration of internal controls for human rights violations in all processes. P The Group customer sustainability assessment tool is used. P Supplier evaluations are regularly conducted in accordance with the UN Global Compact.	➔ Following the UN Guiding Principles for Business and Human Rights to "do no harm" significantly reduces risks and costs; however a business' ability to "do good" according to these guide lines also creates business opportunities. For example: continuing to develop a diverse work force can significantly increase Atlas Copco's competitive edge and also increase the knowl edge and capacity to tailor products to the customer's needs. ➔ Working with human rights positively impacts both the employer brand and investor relations. ➔ Strong business ethics promote internal stability while also creating a more stable market place.
EMPLOYEE RISKS	Atlas Copco must have access to skilled and motivated employees and safeguard the availability of competent managers to achieve established strategic and operational objectives.	P The Competence mapping and plan secures access to people with the right expertise at the right time. Recruitment can take place both externally and internally, Internal recruitment and job rotation are facilitated by the "Internal job market". P Salaries and other conditions are adapted to the market and linked to business priorities. Atlas Copco strives to maintain good relation ships with unions.	➔ Motivated and skilled employees and managers are crucial to achieve or exceed business goals and objectives.
INFORMATION TECHNOLOGY (IT) RISKS	The Group relies on IT systems in its day-to-day operations. Disruptions or faults in critical sys tems have a direct impact on production. Errors in the handling of financial systems can affect the company's reporting of results. Cyber security risks are increasing in importance and can have a major impact on Atlas Copco operations.	P Atlas Copco has a global IT security policy, in cluding quality assurance procedures that govern IT operations. Information security is monitored through continuous reviews, IT Security audits. Standardized processes are in place for the implementation of new systems, changes to existing systems and daily operations. P The system landscape is based on well-proven products. P Cyber security is regularly discussed and ad dressed by the IT Security function. Awareness of cyber security risks increases the readiness to quickly address any attacks.	➔ Stable IT systems, secure IT environment and standardized processes increase efficiencies and reduce costs. ➔ Quick action to address a cyber attack gives opportunity to stable work environment and business continuity.

INNOVATION

In an increasingly resource-restricted world, Atlas Copco's research and development initiatives create value for the Group's customers by continuously innovating sustainable products and services.

ABOUT THE IMAGE:

THE YEAR IN REVIEW

An advanced, light and compact electric screwdriver with controller for high quality and high productivity assembly in the electronics industry.

Optimizing customers' productivity

Atlas Copco delivers cutting-edge technology in the form of safe, reliable and energyefficient products designed to optimize customers' productivity and competitive advantage. The Group's high quality service offerings ensure that the customers get the most out of every investment, keeping Atlas Copco First in Mind—First in Choice ®.

Atlas Copco has strong relationships with customers that have leading positions in their industries. Our challenge is to continue to meet the customers' need for equipment and service that increase their productivity and, at the same time, are sustainable, that is energy efficient, safe and ergonomic.

Enhancing productivity has always been a key priority. These days, however, energy is top of mind amid concerns about its price, the impact of its emissions and the geopolitical tensions involved in producing it. Energy efficiency is one of the four focus areas of Atlas Copco's product and service development, along with productivity, safety and ergonomics. Other trends such as increased digitalization and technology development can also be harnessed to transform the efficiency of industrial processes. In 2015, Atlas Copco divisions began the work to design key performance indicators (KPIs) for innovation to tackle all of the productivity challenges faced by our global customer base.

Products designed for energy efficiency

Atlas Copco supports the United Nations' Sustainable Development Goals to ensure sustainable industrialization to build resilient infrastructure by fostering innovation with a lifecycle approach.

A significant portion of Atlas Copco's environmental footprint concerns the usephase of its products, with energy consumption making the most significant impact. Therefore, Atlas Copco's product development projects have ambitious targets to reduce energy consumption.

Strong service offerings and smart product design can minimize waste and maximize the value of the customer's investments. Products such as stationary compressors, drill rigs, hydraulic breakers and industrial tools are designed so that they can be returned, refurbished and resold as used equipment. Used equipment meets the same high standards as when it was new in terms of quality, performance and energy efficiency.

Collaborating for digital innovations

Advanced technologies are required to meet our customers' rising demands, and society requires environmentally sound and laborfriendly solutions. The number of people employed in research and development represented 7.2% (7.1) of Atlas Copco's total workforce in 2015. Atlas Copco continued to invest in product development, particularly in areas related to productivity and energy efficiency. The amount invested, including capitalized expenditures, increased by 9% to MSEK 3 253 (2 991) corresponding to 3.2% (3.2) of revenues and 3.9% (3.9) of operating expenses.

Collaborations in research and development are more important than ever. In 2015, Atlas Copco, together with key mining customers, and the European Institute of Innovation and Technology (EIT), an agency of the European Union, helped build a consortium now consisting of 116 partners. In a parallel European collaboration, Atlas Copco's President and CEO Ronnie Leten is a member of the European Innovation Partnership on Raw Materials, together with other company executives, governmental ministers and EU commissioners. Topics discussed include how to improve the research and innovation climate in Europe, extract raw materials in new innovative ways, and how to best recycle raw materials from products, buildings and infrastructure.

Software developments are a high priority for the Group. Atlas Copco Smartlink is a compressor-monitoring program that offers customers complete oversight of their compressed air production. With the spread of the Industrial Internet, these compressors are able to self-diagnose and report problems, even in remote or deep underground operations.

The Mining and Rock Excavation business area focuses on the functions of the machine, the operator environment and the collection and integration of data. Innovations include a new remote operator station designed for bench drilling. The system can be used for three rigs in parallel by an

operator at a safe distance of 100 meters from the drilling area and 30 meters above the rig.

The Industrial Technique business area uses software to provide remote diagnostics services, and overall assembly systems will include a number of virtual stations in the future. In 2015, a system was launched that applies adhesive/sealant on a surface while the system camera takes photos, allowing vehicle manufacturers to meet the strictest quality standards, without sacrificing productivity.

Construction Technique introduced a digital generator management solution in order to simplify the service and operation of large generators. This enables Atlas Copco to provide the same capacity with a fleet of smaller, cheaper and lighter machines that offer customers additional benefits, including improved fuel efficiency and a longer equipment lifetime.

RESEARCH AND DEVELOPMENT EXPENDITURES

3 125 NUMBER OF EMPLOYEES IN R&D

INNOVATING FOR SUSTAINABLE PRODUCTIVITY LETS OUR BUSINESS STAND THE TEST OF TIME

Developing innovative products and services with a lifecycle perspective were mapped as the highest priority by all of Atlas Copco's stakeholders. In 2015, all of Atlas Copco's divisions formulated key performance indicators that would help them innovate across the value chain. The indicators capture the opportunities and meet the challenges of the future. Here are some examples of how the business aims to capture the biggest trends to keep the Group growing sustainably and profitably.

SERVICE INNOVATION	• Decrease the percentage of travel hours/working hours, to promote operational excellence while minimizing environmental impact • Growth of Atlas Copco's software business • Increase on-time delivery
RE-ENGINEERING THE VALUE CHAIN	• Transition to lower emission (CO2 and NOX) units by changing purchasing • Innovate logistics to reduce the percentage of transport by air, by shifting mode to sea transport
EMPOWERING INNOVATION IN THE WORKPLACE	• Incentivizing innovation and collaboration in the organization • Reducing the lead time from ideas to innovation in the market • Increase workforce diversity
SUSTAINABLE PRODUCT INNOVATIONS	• Vitality index of energy-efficient products • Increase the share of electric units in the total rental fleet • Increase patent filings for advanced Atlas Copco technology • Special energy requirements
DIGITALIZATION AND CONNECTIVITY	• Increased satellite monitoring to optimize machine performance • Automate and digitalize workflows entirely, moving into paperless operations
CUSTOMER PRODUCTIVITY	• Lower the total cost of ownership for customers • Increase market share and organic growth • Incentivize the growth of energy-efficient products

THE DRIVING FORCES FOR NEW PRODUCT DEVELOPMENTS

NEW TECHNOLOGY e.g. Internet of things, machine connectivity and disruptive innovations

SUSTAINABLE DEVELOPMENT GOALS for economic growth, sustainable industrialization and shift to modern energy

CUSTOMERS' DEMANDS AND REQUESTS e.g. for productivity, energy efficiency, quality, safety and ergonomics

LAWS AND POLICIES on emissions, energy efficiency, raw materials, safety, taxes, hazardous chemicals, conflict minerals etc.

CLIMATE PLEDGES and governmental action plans post COP 21, to decouple economic growth from emissions

INNOVATIONS WITH A LIFECYCLE PERSPECTIVE

1. SUPPLY CHAIN INNOVATIONS

In Atlas Copco products, 75% of the total product cost comes from purchased parts and materials. Therefore, actions taken by Atlas Copco's procurement department can have a significant impact on both business and society.

The Oil-Free Air division has a large customer base in the United States who need high-purity, compressed air for their manufacturing processes. A change in certification standards in the United States triggered the division to rethink its supply chain and innovate its installed coating processes. Using a method that is widely spread in the automotive industry, Atlas Copco went from a previously manual process that took fourteen days, to a high-precision, automated process that has

a lead time of just eight hours. Lab tests showed that this electrophoretic painting process (E-Coating), can be applied to standardize the approach for 90% of the casted parts in our oil-free air compressors, ensuring the highest levels of quality for all types of applications.

Without this innovative approach, the division would have to either face a business interruption or risk cost increases of up to 5%. Reducing eleven coating processes to just three, amounts to a cost saving of about MSEK 5 (MEUR 0.5) with a return of investment that is less than one year. The process also uses 70% less paint, which significantly reduces the usage of hazardous chemicals and waste.

2. ECO DESIGN FOR OUR MANUFACTURING

Atlas Copco's design engineers integrate environmental reviews in the development process of all products. Eco design focuses on the environmental impact across the entire product life cycle. For Industrial Technique, the focus areas include: eliminating hazardous substances, choosing the right mix of materials and modular design for durable, recyclable materials that reduce the product's weight and delivering energy-efficiency during the use phase.

The MVI Tools and Assembly Systems division has integrated the eco design approach into its research and development KPIs for 2016. Training and workshops have been rolled out in customer centers and product

3. RETHINKING THE LOGISTICS

Atlas Copco's service divisions account for more than 35% of the total CO2 emissions from transport. They play a very important role in strengthening customer relations and improving Atlas Copco's resilience. Mining and Rock Excavation Technique products experience extreme wear and tear along while working on hard rock. Atlas Copco parts such as the smarter, long-lasting Ground Engaging Tool (GET) bucket for scooptrams extended service life by 30–40% in tests. Logistics planning and operational excellence is essential to ensure that high quality parts and services can reach all customers, around the clock. Keeping the environmental impact low from transport at the same time requires innovative thinking and effective planning. companies in Europe and China. The division has started working with eco design achievement templates, which can be integrated into marketing material and raise environmental awareness for customers. For example, the Power Focus 6000 controller for electric assembly tools complies fully with REACH and RoHS and is designed in a modular way so that it can be easily dismantled for recycling. Atlas Copco also includes recycling instructions in the product information to the customer. The controller is also 6% more energy efficient than its predecessor in standby mode (ESG note 9). Multiple battery tools can be connected to the controller which also reduces energy consumption.

The Mining and Rock Excavation Technique Service division has taken on this challenge and designed an innovation KPI to minimize CO2 emissions from logistics and transport across distribution centers located in China, Sweden and the United States. The KPI tracks transport modes, with the ambition to reduce air transport while increasing sea transport in 2016. The division will need to innovate logistics solutions that will keep the environmental footprint small while still meeting customers' expectations for timely deliveries or emergency repairs.

4. INNOVATING FOR OUR CUSTOMERS

The Construction Tools division introduced two groundbreaking innovations that doubled their sales to the market in 2015. The new rammers LT 5005 and LT 6005, which make life easier for construction companies, doubled Atlas Copco rammer sales in the months directly after introduction. In 2015, the rammer sales in North America grew by 41%. This innovative rammer, which won the 2015 iF Product Design Award and the Grand Award of Design in the Public's Favorite category, is lighter, more compact and has a perfect balance. This makes it easier to handle in narrow places such as close to walls and in trenches. It is also 25% more energy efficient than the previous model.

The Construction Tools division also introduced the HRD100, the industry's first-ever electro hydraulic hand-held rock drill developed in collaborations with customers in South Africa. It will boost productivity especially for gold mining companies, where the gold vein that runs through the rock typically is pretty narrow. Its great advantage over competing products is its productivity, especially compared to pneumatic drills. The drill was developed for ultra-deep mining, and in this environment the drill is up to ten times more efficient than other fixed installations (ESG note 9).

EMPLOYEES

Atlas Copco's success is built on strong values and the talented employees who carry them. The Group believes in providing its people a working environment that sets a high standard for leadership and provides opportunities for each individual to develop professionally. Offering a diverse workplace with good health, safety and labor practices is an important part of Atlas Copco's brand as an employer, and thereby a key success factor for the Group.

Attract and develop employees

Atlas Copco's people management strategy is to attract and develop qualified and motivated employees. The managers are expected to take responsibility for developing their employees, their organizations and themselves.

Sales, 13% Marketing, 8%

GEOGRAPHICAL SPREAD OF EMPLOYEES

A wide range of efforts to recruit diversity are in place globally, such as ensuring job ads are not subject to gender specifications. The Underground Rock Excavation division has included diversity targets as a part of their innovation KPIs, in order to build the most competent teams to address the full range of business needs.

Local activities were planned to support divisional targets on diversity. Atlas Copco Turkey held events and workshops in collaboration with the Professional Women's Network, in order to encourage and guide women into leadership roles. Atlas Copco companies establish local diversity policies and guidelines in alignment with Group policy, local laws and regulations, and local ambitions.

When it comes to leadership, Atlas Copco strives to strike a balance between developing the local workforce while also offering international opportunities through internal mobility. Therefore, managers whose nationality differ from the country where they are stationed, focus on developing local leaders while gaining international professional experience which

equips them for even more challenging positions within the Group. Overall, Atlas Copco has managers on international assignments coming from 54 countries and working in 58. In 2015, a total of 63% (62) of all senior managers were locally employed. 51 nationalities are represented among the 409 most senior managers worldwide. The share of Swedish managers on international assignments has decreased from 23% in 2001 to 10% in 2015.

Growing and mobilizing talent globally

Atlas Copco strives to encourage mobility, across geographical, organizational and cultural boundaries. This is important for developing competence, but also for successful integration of newly acquired companies. Experienced senior managers lead the integration process and make it possible to establish the Group's Business Code of Practice, values and vision in an efficient and pragmatic manner. In 2015, the average number of training hours per employee was 39 (41) hours and 84% (82) of employees had an appraisal. In 2015, 55% (53) of the whitecollar employees had a university degree.

A fair and diverse workplace

Atlas Copco's priorities for sustainable, profitable growth include the ambition to recruit a workforce that reflects the diversity found in society. In 2015, many of Atlas Copco's employer branding activities focused on empowering talent acquisition while strengthening the labor standards in society. For example, Atlas Copco United Kingdom participated in Career Transition Partnership fairs, which focus on finding suitable occupations for ex-military personnel, a demographic that often struggles with employment after coming out of the forces. Atlas Copco also launched an e-library with free student literature on engineering, IT and business. In 2015, the materials were downloaded by more than 20 000 students worldwide, and helped Atlas Copco strengthen its global employer brand while supporting the right to education.

The Group is committed to promoting equal opportunity in its hiring and promotion processes. The proportion of female recent graduates recruited during the year among white-collar workers rose to 39% (31).

17.5% In 2015, women represented 17.5% (17.1) of Atlas Copco's workforce. The share of women in managerial positions was 17.0% (16.6).

In 2015, Atlas Copco Tanzania partnered with the non-profit organization Help-to-Help, to carry out an IT boot camp for female students and fresh graduates. The focus of the workshops was to provide these young women with the computer skills and training that would increase their employability and prepare them for the job market.

MAKING DIVERSITY HAPPEN

Equality, fairness, and diversity are fundamental pillars of Atlas Copco's people management process. Sharing best practices, workshops, awareness training and other activities will continue to spread the awareness of the importance of diversity within the Group.

A diversified workforce is the cornerstone of any good business, and diverse perspectives and experiences help build the competence of a team.

The Group has a long-term ambition to develop local leaders, and mainly recruits managers and employees from local communities where it operates. The internal job market encourages internal mobility of international talent. Atlas Copco's leadership training focuses on building skills and business networks, while sharing knowledge across the Group. As a decentralized company, the divisions take the lead by establishing local diversity policies and guidelines aligned with local laws and regulations.

To have a successful dynamic workplace with high competence, the Group must reach out and attract the full talent pool. Atlas Copco's network for professional women, the Pleiades, offers successful, skilled, committed and highly motivated women access to interaction across functional, divisional and geographic boundaries.

Developing a leadership pipeline

In order to retain the competence, the Group has an ambition to recruit 85% of managers internally, and the outcome in 2015 was 88%. One of the key success factors to retaining talent while still growing competence and encouraging mobility, is the internal job market, which was created in 1992. In 2015, 3 991 positions were advertised, of which 357 were international. In 2015, the total internal mobility among employees reduced slightly to 6.7% (7.2), primarily due to a dip in numbers from the blue-collar workers. Overall external recruitment decreased somewhat to 8.6% (9.9), excluding acquisitions.

Safety and health enhance productivity

Atlas Copco has a global Safety, Health and Environmental (SHE) policy to ensure that workplaces have robust standards for safety, health and ergonomics. In terms of the workforce profile, 42% of Atlas Copco's employees were dedicated to manufacturing world-class products for its customers or delivering high-quality service and sales offerings. The major focus has been to promote the behavioral changes that are necessary to create a safety culture in the workplace. There were no fatalities reported in 2015. New safety concepts that emphasize road safety and defensive driving behavior were rolled out in 2015. The number of accidents per million working hours for Atlas Copco employees reduced to 3.7 (4.7) (ESG note 4). Atlas Copco has begun to report on accidents and incidents in the additional workforce as well. Compared to the previous year, this group showed a significant reduction to 3.3 (6.5) accidents per million working hours. The number of incidents per million working hours reduced for Atlas Copco employees, but it increased in the additional workforce. This will be an area for improvement in the coming year.

In 2015, sick leave stayed at 1.9% (1.9) which is below the accepted level of 2.5%.

WE INVEST IN SAFETY AND WELL-BEING

3.7 ACCIDENTS PER MILLION WORKING HOURS 2014: 4.7

1.9% SICK LEAVE

2014: 1.9%

THE ATLAS COPCO SAFETY DAY

The safety and well-being of Atlas Copco's workforce and customers is an absolute priority. The Atlas Copco Safety Day was held on April 28 to emphasize work safety and reinforce the Group's safety culture.

The programs are based on local situations and specific business needs. Road safety is a priority to the Group which many countries included in their program as well as first aid, ergonomics and fire safety.

SPEEDING UP TIME TO COMPETENCE

Speeding up the transformation of training and knowledge into performance is one of Atlas Copco's priorities when it comes to building competent teams. The Group's concept Time to Competence drives the rapid and efficient uptake of core, functional and product specific competencies and skills.

In 2015, the Compressor Technique Service division geared up their efforts and launched the Compressor Technique Service Academy – a central system managing all the division's learning activities for all its employees. The Compressor Technique Service Academy provides the division's service technicians with the knowledge and skills to execute service activities on equipment in an efficient way. It also provides learning resources that develop the skills of service sales people to sell the value of the division's service products to customers.

The employees' knowledge is measured objectively by the system and learning activities are matched with individual knowledge and needs. The organization benefits from a tool that better matches the right service technician with specific service jobs and improves the division's capacity planning.

Committed to high labor standards

As a voluntary member of the UN Global Compact since 2008, Atlas Copco ensures that advised labor practices such as the right to collective bargaining are included in the Business Code of Practice, which is updated regularly. The Group views trade unions and employee representatives as a necessary and valuable support system for its people, and fosters relationships based on mutual respect and constructive dialogue. In 2015, 38% of all employees were covered by collective bargaining agreements, and it is estimated that several hundred local consultations/negotiations took place with unions

regarding working conditions and organizational changes. As a decentralized organization, this engagement and constructive dialogue with labor unions takes place at a local level. In countries where no independent labor union may exist, Atlas Copco has taken measures to establish forums for employer/employee relations, for example in China, through environment and safety committees. A non-discrimination policy covers all employees and the Business Code of Practice also covers employee rights. For full disclosure on wages and employee benefits, see Note 5.

EMPOWERING INNOVATION IN THE WORKPLACE

Atlas Copco's innovative technology, products and expertise deliver value for our business and society, and people are an important pillar for the Group's strategy. Guided by the priorities for sustainable profitable growth, Atlas Copco developed key performance indicators to link our talent pool's competence to maximizing our potential to innovate.

The Rocktec division develops and manufactures rock drills and components, and provides services exclusively for the Mining and Rock Excavation business area. One of the innovation KPIs focuses on incentivizing innovative thinking and empowering the organization to create continuous improvement. Rocktec achieves this by providing employees the best tools and freedom to use them, and collaborating within the Group to align and enable rapid creation of high-performing products and solutions. This supports Rocktec's ambition to be industry leaders and provide advancing technology to customers, and provide technical support and application expertise for the products they create.

2014: 10.7%

This KPI is embedded in the division's incentive model, along with KPIs for profitability, and Safety, Health, Environment and Quality (SHEQ).

In another example, the Gas and Process division's innovation KPIs include a target to reduce the lead time to transform innovative ideas into actual sales. This will require strong coordination, competence development and processes to align various functions from research and development, to sales.

IMPACTING SOCIETY AND THE ENVIRONMENT

Given its global reach Atlas Copco has an influence on the economic and social development of the countries in which it operates. The Group is expected to demonstrate that influence in a positive way and strives to be a good and reliable corporate citizen by creating shared value.

ABOUT THE IMAGE

Atlas Copco is a global leader in medical air systems, which supply pure and dry air to hospitals around the world.

Living by the highest ethical standards

Ensuring that the business grows with a clear stance against corruption and a strong commitment to respecting human rights is the right way to expand Atlas Copco's global presence. The Group works continuously with its entire value chain, to protect the business from risks and to promote better standards in society.

Atlas Copco's business model is agile because of strategic partnerships with business partners such as suppliers, subcontractors and joint venture partners. Purchased components represent about 75% of the product cost. Therefore, nurturing longterm relationships with business partners is mutually beneficial, securing the Group's competitive edge and development potential in a responsible and sustainable way. Working with business partners who share the Group's high standards of quality, business ethics and resource efficiency is necessary to effectively manage risks, and to enhance productivity in the value chain.

Responsible sourcing practices

Atlas Copco's purchasing strategies are decentralized to give the organization higher flexibility. The Group has a very large international supplier base, which presents significant challenges in maintaining supply chain standards. Purchasing councils oversee supply chain management at a divisional level, but come together as a part of the Group purchasing council to develop central policies and tools that impact all operations.

Atlas Copco prioritizes follow-up activities with suppliers who represent the bulk of the annual purchase value as well as the highest risk from markets with corruption or human rights risk.

In 2015, 4 601 suppliers were within the scope of this risk-based approach, and 95% of these significant suppliers were requested to confirm compliance to Atlas Copco's 10 criteria letter. 88% confirmed compliance, and 19% were audited for safety, health and environment issues. 27% were audited for quality.

The 10-point checklist is based on the UN Global Compact and the International Labour Organization's Declaration on Fundamental Principles and Rights at Work, as well as through on-site visits (ESG note 5). All business partners are impartially evaluated on parameters including price, quality, reliability as well as key environmental, social and ethical concerns.

Compliance with the environmental, social and business ethics clauses in the checklist is required for 100 % of new agreements. However, for non-red-flag issues (such as having environmental management systems), Atlas Copco tries to work with business partners to set up an action plan to help them meet the criteria within 6–12 months' time.

In 2015, 1 221 (1 369) significant suppliers were audited for quality and 891 (1 192) for safety, health, environmental and ethical standards. Of those, 16 (17) were rejected due to quality issues and another 13 (14) for safety, health, environmental and ethical standards.

Local purchasing (non-core) is encouraged to generate societal value in the communities where Atlas Copco operates, by creating job opportunities as well as generating direct and indirect income. This is mostly carried out by individual companies, and also decreases the environmental impact from transport.

Applying the Business Code to distributors and agents

Approximately 20% of Atlas Copco's revenues are generated through sales via distributors, agents and contractors. In 2015, Atlas Copco established a KPI to develop and roll out sustainability risk assessments for agents and distributors. The first phase of the roll out will focus on select high risk markets, and be expanded to other markets after the pilot phase.

Sales compliance process

The Group began using the customer sustainability tool in 2013 in order to investigate potential risks based on environmental, labor, human rights and corruption in markets and industries where Atlas Copco is present (ESG note 7). In 2015, Atlas Copco shared the tool with industry peers in order to promote a standard approach to sales compliance among capital goods providers.

Atlas Copco's Compliance board oversees and guides the operations, to ensure that the Group is not complicit in human rights violations in accordance to its commitment to the Guiding Principles on Business and Human Rights. The lack of enforcement of legal and political infrastructure in some complex markets represents a challenge. Atlas Copco engaged in a dialogue with the Swedish Government during the drafting of Sweden's National Action Plan. Bilateral engagements with civil society and investors are crucial for the Group to successfully escalate issues in challenging markets. The Group engaged on the topic also in its 5th annual stakeholder dialogue, which was publicly broadcasted online.

In 2015, Atlas Copco conducted a human rights due diligence in Myanmar. The Group has a limited direct presence in the market and local business development will proceed cautiously to address the risks that have been identified.

GEOGRAPHICAL SPREAD OF SUPPLIERS

88%

Significant suppliers that confirmed compliance with the Business Code of Practice. 2014: 82%

In 2016,

sustainability risk assessments will be carried out for distributors, agents and contractors in select high risk countries.

Zero tolerance against corruption

Corruption has very negative global consequences and is both a cause of poverty and a barrier to overcoming it. The fight against corruption is also central to working with human rights and environmental impacts, since corruption can cripple the governmental bodies and processes needed to address the issues. The Atlas Copco Group has a zero tolerance policy, which applies to all employees as well as the Board of Directors. The Board has explicitly communicated that corruption is never an acceptable excuse for securing a sale, and this applies also to facilitation payments. This basic rule strengthens the brand and contributes to fair market competition.

Whistleblowing

The ambition of no corruption or bribes is supported by a policy, procedures, training and monitoring process. When incidents are reported, firm action is taken on a case-bycase basis (ESG note 6). There are no negative consequences, such as demotion, penalty or other reprisals, for employees refusing to receive or pay bribes or for reporting violations. Atlas Copco will begin to measure employee awareness of the ethical hotline, through its biennial employee survey, Insight. Internal control procedures are set up to minimize the risk of corruption and bribes, e.g. segregation of duty. Internal audits include compliance to the Business Code of Practice. Awareness of, and compliance with, principles of integrity in all business dealings is a priority for Atlas Copco.

The Group hotline can be used by

employees to report behavior or actions that are, or may be perceived as, violations of laws or of the Business Code of Practice. It serves as a complement to similar processes on country level. The Group Legal department is responsible for managing the hotline and ensures that reports are treated confidentially. The person reporting is guaranteed anonymity.

Updated training for employees worldwide

The Business Code of Practice is given to all new employees and training is provided globally. Managers also receive in-depth classroom training with dilemma cases. During 2015, the Business Code of Practice training was updated and the work was started to translate it to 37 languages. The new version has a strengthened focus on human rights, fraud awareness and integrating sustainability into business. A Business Code of Practice training for blue collar workers is also currently under development, and will be launched in 2016.

Human rights

Human rights are integrated into the Group processes and are driven in the organization by the Business Code of Practice (ESG note 7). In 2015, business and human rights training was rolled out in Atlas Copco's Latin American operations. The training is case based, and tailored to help decision makers understand human rights impacts and how to work proactively to manage risks and opportunities.

Taxes

On January 11, 2016, the European Commission announced its decision that Belgian tax rulings granted to multinationals with regard to "excess profit" shall be considered as illegal state aid and that unpaid taxes should be returned to the Belgian state. Atlas Copco has such tax rulings since 2010. As a result of the decision, Atlas Copco has made a provision of MSEK 2 802. The amount fully covers the potential liability for the years 2010–2015, (note 9, ESG note 8).

HOW ATLAS COPCO WORKS WITH HUMAN RIGHTS IN THE VALUE CHAIN

Atlas Copco's Business Code of Practice supports the UN International Bill of Human Rights and is a central policy to guide the business in working with all issues, including human rights.

SUPPLIERS 101010	THE GROUP'S OWN OPERATIONS	CUSTOMERS	COMMUNITY
Atlas Copco has integrated the UN Global Compact principles into supplier evaluation and management. Read more on page 49.	The Group's operational goals strive to create safe, healthy and fair working environments. Read more in the Employees section on page 45.	The Group is strengthening its approach using the UN Guiding Principles on Business and Human Rights. Read more in ESG note 7.	Atlas Copco pays the fair, and legal amount of taxes to support the communities the Group operates in. Read more in ESG note 8.
Prohibition of child labor and forced labor, responsible sourcing from high risk or conflict affected regions.	Ensuring that employees have fair labor and working conditions, diversity in the workplace and the right to join trade unions.	Product safety, protecting standard of life by minimizing environmental impact through usage of products, issues related to community relocation and security concerns.	Community engagement activities promote the access to health, education and safe development of children and vulnerable groups, as well as disaster relief.

DEVELOPMENT AND DISTRIBUTION OF ECONOMIC VALUE

MSEK
Operating costs 59 065
Employee wages 23 841
Interests and dividends 8 676	In 2015 Atlas Copco created direct economic value
Taxes 7 477	of MSEK 103 071. It was distributed to suppliers and business partners, employees, providers of capital ,
Economic value retained 4 012	and to governments, and has a positive impact on society. See also page 125.

Atlas Copco creates employment and financial stability through subcontracting manufacturing and other activities. Operating costs including costs to suppliers for goods and services, functional costs deducted for employee wages and benefits amounted to MSEK 59 065 (56 460). Employee wages and benefits increased by 14% to MSEK 23 841 (20 826). The increase was primarily due to acquisitions.

The Group's providers of capital, for example shareholders and creditors, provide funds to finance the asset base that is used to create economic value. In return, these stakeholders receive annual dividend and interest. The costs for providers of capital including dividend, increased to MSEK 8 676 (7 919), due to an increased ordinary dividend.

Atlas Copco contributes to economic development within the regions where it operates, through payments to pension funds and social security, and payments of taxes, social costs and other duties. In 2015, the cost for direct taxes to governments increased 79% to MSEK 7 477 (4 169), primarily due to a tax provision in Belgium, see previous page. The Group has been in dialogue with stakeholders regarding disclosure of taxes by country, (note 9 and ESG note 8). Community investments amounted to MSEK 25 (17).

The economic value retained amounted to MSEK 4 012 (5 240).

MYANMAR

In 2015, Atlas Copco conducted a human rights due diligence for its potential presence in Myanmar, based on the recommendations of the UN Guiding Principles to assess the impact as early in the business relationship as possible.

SALES	• Atlas Copco's products are sold via distributors in Myanmar, and the Group has a limited direct presence through its service offerings from 2015. The Group has no manufacturing or other operational sites in the country.
EMPLOYEES	• Two employees to fulfill marketing and service functions.
HUMAN RIGHTS IMPACT ASSESSMENT	• The Compliance board made the decision to conduct a human rights impact assessment in April 2015. The process involved the regional management teams and external stakeholders' consultation with customers, business partners and civil society. All findings were presented to the Compliance board and to Group Management.
SALIENT ISSUES INVESTIGATED	• Conflict development in the north-eastern regions, such as the Kaichin district. • Land rights issues and the rights of indigenous groups. • Labor issues, such as safety, health and availability of a skilled workforce. • Efficacy of the ethical hotline for reporting and access to remedy. • Corruption-related risks.
ACTION PLAN AND NEXT STEPS	• Learning points have been raised internally as well as in business networks to promote awareness and knowledge sharing among Swedish industrial goods companies and how the companies can act in the country.

Efficient and responsible use of resources

Atlas Copco strives to reduce its environmental footprint across the value chain and delivers energy-efficient products designed with a life cycle approach.

Enhanced risk management

Atlas Copco faces risks driven by changes in environmental regulations, availability of resources and other developments. In 2015, Atlas Copco sharpened the environmental KPIs to integrate these risks.

Energy security

Diversifying sources of energy to include renewable sources not only has a positive environmental impact but can also benefit the business by protecting it from price fluctuations and the lack of availability of traditional energy sources.

While the Group prioritizes switching to renewable energy sources in many growth markets, renewable energy is not readily available or is a minor component in the country's energy mix. The targets that will be set for water and energy consumption take into account the expected business growth in such regions.

Water risk management

Atlas Copco's overall water consumption is relatively low. This is due to its asset light business model, and the focus on assembly rather than steel manufacturing or other resource intensive activities.

With some of its own operations in several countries facing water scarcity, Atlas Copco has started to use water indices to identify operations located in water-risk areas, from physical, legislative or cost perspectives. Group companies in these areas should implement a water-risk management plan. Innovative product design also aims to reduce water use when drilling to explore for minerals, for example. Business areas analyze reported data to identify the highest consuming entities in order to focus the efforts to reduce the impact.

Environmental risks in the supply chain The Group recognizes the risk and responsibility to manage water and other environmental risks in its value chain, (Risks, page 39). Smelters and other resource-intensive activities are often tier 2 suppliers, or further down the value chain. The Group works with suppliers using its 10 criteria letter and action plans that are developed with business partners (page 49). Atlas Copco's business partners must commit to conducting their business with environmental preservation in mind, including water use and waste water treatment.

Ideally, Atlas Copco's suppliers should have an environmental management system or, as a minimum, be committed to developing an environmental policy or system, to ensure continuous improvement of their environmental performance. Commitment to Atlas Copco's 10 criteria means that suppliers should take responsibility to minimize the environmental impact that products and services may have while being manufactured, distributed and used, as well as during their disposal.

WATER RISK AREAS EXPOSURE TO WATER RISK

CHINA

of total water consumption in water stressed regions

WATER BASINS: Hai ho, Liao, GHAASBasin1435

INDIA

5 entities representing

15%

of total water consumption in water stressed regions

WATER BASIN: Krishna

17% of total water consumption

in water stressed regions WATER BASIN: Trinity

5.9 Water consumption in water risk areas ('000 m3 )/COS

345 160 TONNES OF CO2

FROM OPERATIONS AND TRANSPORT WOULD FILL A CUBE ALMOST AT THE HEIGHT OF THE TALLEST BUILDING IN THE WORLD, BURJ KHALIFA

Impacts from acquisitions and organic growth

Atlas Copco's strategy for growth relies partly on acquisitions, which can have an influence on the Group's environmental performance. In 2015, the acquisition of Henrob, a self-pierce riveting company, resulted in increased energy consumption. However, the effects from decreased volume and weather fluctuations causing warmer winters meant that the Group's energy consumption from operations decreased 1.1%. In relation to cost of sales, the decrease was 6.1% compared to the previous year.

CO2 from operations also increased slightly even though energy consumption in MWh decreased. This is partially due to the acquisition of Henrob and partly due to entities that began reporting for the first time. These entities have reported almost only electricity or district heating non-renewable and they have a higher CO2 /MWh ratio than the rest of the Group. This is a focus area for improvement in the coming year.

In 2015, transport increased 6.4% in absolute values and increased in relation to cost of sales by 1%. Increased business in China and customer deliveries that needed to be rush delivered resulted in increased transport by air.

Atlas Copco's full environmental performance can be found in ESG note 3.

PROPORTION OF ENERGY CONSUMPTION

CO2 from energy increased slightly, partly due to acquisitions and partly due to new reporting entities.

CO2 EMISSIONS FROM ENERGY

THE ATLAS COPCO SHARE

Share price development and returns

During 2015, the price of the A share decreased 4.6% to SEK 208.40 (218.40) and the price of the B share decreased 2.8% to SEK 195.30 (200.90). The annual total return on the Atlas Copco A share, equal to dividend, redemption and the appreciation of the share price, was on average 14.7% for the past ten years and 8.4% for the past five years. The corresponding total return for Nasdaq Stockholm was 9.2% and 10.5%, respectively.

Trading and market capitalization

The Atlas Copco shares are listed on Nasdaq Stockholm, which represented 34% of the total trading of the A share (40% of the B share) in 2015. Other markets, so called Multilateral Trading Facilities (MTF), e.g. BATS Chi-X, Turquoise and Burgundy accounted for some 33% (30% of the B share), and the remaining 33% (29% of the B share) were traded outside public markets, for example through over-the-counter trading.

The market capitalization at year end 2015 was MSEK 251 140 (261 719 at year end 2014) and the company represented 4.4% (4.9 ) of the total market value of Nasdaq Stockholm. Atlas Copco was the sixth (fifth) most traded name in 2015 by total turnover.

A program for American Depositary Receipts (ADRs) was established in the United States in 1990. One ADR corresponds to one share. The depositary bank is Citibank N.A. At year end 2015, there were 9 575 162 ADRs outstanding, of which 8 135 271 represented A shares and 1 439 891 B shares.

SHARE INFORMATION 2015-12-31	A SHARE	B SHARE
Nasdaq Stockholm	ATCO A	ATCO B
ISIN code	SE0006886750	SE0006886768
ADR	ATLKY.OTC	ATLCY.OTC
Total number of shares	839 394 096	390 219 008
% of votes	95.6	4.4
% of capital	68.3	31.7
Whereof shares held by Atlas Copco	13 123 103	393 879
% of votes	1.5	0.0
% of capital	1.1	0.0

Personnel stock option program and repurchase of own shares

The Board of Directors will propose to the Annual General Meeting 2016 a similar performance-based long-term incentive program as in previous years. The intention is to cover the plan through the repurchase of the company's own shares. The company's holding of own shares on December 31, 2015 appears in the table below.

Dividend and dividend policy

The Board of Directors proposes to the Annual General Meeting that a dividend of SEK 6.30 (6.00) per share be paid for the 2015 fiscal year. The dividend is proposed to be paid in two equal installments. If approved, the annual dividend growth for the five-year period 2010–2015 will equal 9.5%. During the same period, the dividend has averaged 55% of basic earnings per share. The ambition is to distribute about 50% of earnings as dividends to shareholders.

The dividend is subject to approval at the Annual General Meeting 2016. See more information on page 19.

EARNINGS AND DISTRIBUTION PER SHARE

SHARE PRICE

Ownership structure

At year end 2015, Atlas Copco had 79 926 shareholders (70 914 at year end 2014). The ten largest shareholders registered directly or as a group with Euroclear Sweden, the Swedish Central Securities Depository, by voting rights, accounted for 36% (35) of the voting rights and 32% (33) of the number of shares. Swedish investors held 52% (52) of the shares and represented 50% (50) of the voting rights.

TEN LARGEST SHAREHOLDERS*

December 31, 2015	% of votes	% of capital
Investor AB	22.3	16.8
Swedbank Robur fonder	4.0	5.0
Alecta Pensionsförsäkring	3.4	3.9
SEB Investment Management	1.6	1.2
Handelsbanken	1.1	1.2
Fjärde AP-fonden	0.8	1.2
Första AP-fonden	0.8	0.9
Folksam	0.7	0.8
Nordea Investment Funds	0.6	0.7
Tredje AP-fonden	0.6	0.7
Others	64.1	67.6
Total	100.0	100.0
– of which shares held by Atlas Copco	1.5	1.1

* Shareholders registered directly or as a group with Euroclear Sweden, the Swedish Central Securities Depository

OWNERSHIP STRUCTURE, DECEMBER 31, 2015

Number of shares	% of shareholders	% of capital
1–500	62.9	0.7
501–2 000	24.2	1.7
2 001–10 000	9.9	2.7
10 001–50 000	1.9	2.6
50 001–100 000	0.3	1.5
>100 000	0.8	90.8
Total	100.0	100.0

OWNERSHIP CATEGORY, DECEMBER 31, 2015	% of capital
Shareholders domiciled abroad (legal entities and individuals)	47.9
Swedish financial companies	38.1
Swedish individuals	5.5
Other Swedish legal entities	4.9
Swedish social insurance funds	1.9
Swedish trade organizations	1.3
Swedish government & municipals	0.4
Total	100.0

	SHARE ISSUES 1)		Change of share capital, MSEK	Amount distributed, MSEK
2007	Split	3:1
	Share redemption 2)	628 806 552 shares at SEK 40	–262.0	–24 415.7
	Bonus issue	No new shares issued	262.0
	Cancellation of shares held by Atlas Copco	28 000 000 shares	–17.5
	Bonus issue	No new shares issued	17.5
2011	Split	2:1
	Share redemption 3)	1 229 613 104 shares at SEK 5	–393.0	–6 067.0
	Bonus issue	No new shares issued	393.0
2015	Split	2:1
	Share redemption 4)	1 229 613 104 shares at SEK 6	–393.0	–7 304.7
	Bonus issue	No new shares issued	393.0

1) For more information please visit www.atlascopco.com/ir 2) 610 392 352 shares net of shares held by Atlas Copco 3) 1 213 493 751 shares net of shares held by Atlas Copco 4) 1 217 444 513 shares net of shares held by Atlas Copco

IMPORTANT DATES

2016	April 26	Annual General Meeting
		First quarter results
	April 27*	Shares trade excluding right to dividend of SEK 3.15
	May 3*	First dividend payment date (preliminary)
	July 15	Second quarter results
	October 20	Third quarter results
	October 28*	Shares trade excluding right to dividend of SEK 3.15
	November 3*	Second dividend payment date (preliminary)
	November 15	Capital Markets Day
2017	January 27	Preliminary fourth quarter results 2016

* Board of Directors proposal to the Annual General Meeting. The record date is the first trading day after shares trade excluding the right to dividend.

MORE INFORMATION

• ➔ More data per share can be found on page 133 in the five-year summary.
• ➔ For more information on distribution of shares, option programs and repurchase of own shares, see notes 5, 20 and 23.
• ➔ Detailed information on the share and debt can be found on www.atlascopco.com/ir

INVESTOR RELATIONS CONTACT

• ➔ www.atlascopco.com/ir
• ➔ E-mail: ir@se.atlascopco.com / phone: +46 8 743 81 15

CORPORATE GOVERNANCE

In the corporate governance report Atlas Copco presents how applicable rules are implemented in efficient control systems to achieve long-term growth. Good corporate governance is not only about following applicable rules, it is also about doing what is right. The challenge is to find the right balance between risk and control in a decentralized management model. The goal is sustainability in productivity and profitability as well as in governance.

Atlas Copco is incorporated under the laws of Sweden with a public listing at Nasdaq Stockholm AB (Nasdaq Stockholm). Atlas Copco is governed by Swedish legislation and regulations, primarily the Swedish Companies Act, but also the rules of Nasdaq Stockholm, the Swedish Corporate Governance Code, the Articles of Association and other relevant rules.

Atlas Copco does not report any deviations from the Swedish Corporate Governance Code for the financial year 2015.

The corporate governance report has been examined by the auditors, see page 123.

THE FOLLOWING INFORMATION IS AVAILABLE AT WWW.ATLASCOPCOGROUP.COM

• ➔ Atlas Copco's Articles of Association
• ➔ Business Code of Practice
• ➔ Corporate governance reports since 2004 (as a part of the annual report)
• ➔ Information on Atlas Copco's Annual General Meeting
• ➔ Proxy form for the Annual General Meeting

THE BOARD'S WORK DURING 2015 IN SUMMARY

COMMENT FROM THE CHAIR

Atlas Copco is a truly global company. As such, we are continually faced with the challenge of upholding the same standards of ethics and conduct wherever we do business, regardless of the market development. Laws, environmental standards and social conditions vary greatly in the countries where we operate. The Business Code of Practice is designed to overcome these challenges and make sure that we always act with the highest ethical standards and integrity. In cases where the Business Code of Practice is stronger than local laws and regulations, we insist on following our own policies. And we expect our business partners to do the same. We do our best to safeguard our reputation as a reliable and trustworthy company, and believe in creating value for all our stakeholders.

Hans Stråberg, Chair since 2014

GOVERNANCE STRUCTURE

1. SHAREHOLDERS

At the end of 2015, Atlas Copco had 79 926 shareholders (70 914 at year end 2014). The ten largest shareholders registered directly or as a group with Euroclear Sweden, the Swedish Central Securities Depository, by voting rights, accounted for 36% (35) of the voting rights and 32% (33) of the number of shares. Swedish investors held 52% (52) of the shares and represented 50% (50) of the voting rights.

The largest shareholder is Investor AB, holding 17% of capital and 22% of votes. More information on Atlas Copco's shareholders can be found on pages 54–55.

2. ANNUAL GENERAL MEETING

The Annual General Meeting (AGM) is Atlas Copco's supreme decision-making body in which all shareholders are entitled to take part. The shareholders may exercise their voting rights in a number of important issues, such as the election of Board members and auditors, approval of financial statements, discharge of liability for the President and CEO, and the Board, and the adoption of the proposed distribution of profits. All shareholders registered in the shareholders' register who have given due notification to the company of their intention to attend, may join the meeting and vote for their total shareholdings. Atlas Copco encourages all shareholders to attend the AGM and shareholders who cannot participate personally may be

represented by proxy holders. A shareholder or a proxy holder may be accompanied by two assistants and a proxy form can be found prior to the AGM at www.atlascopcogroup.com/agm.

The AGM 2015 was held on April 28, 2015 in Stockholm, Sweden and 63% of the total number of votes in the company and 61% of the shares were represented.

Decisions at the AGM 2015 included:

• adoption of the income statements and balance sheets of the company and the Group for 2014
• discharge of liability of the company's affairs during the 2014 financial year for the President and CEO, and the Board of Directors
• adoption of the Board's proposal for profit distribution with a dividend of SEK 6 per share to be paid in two equal installments of SEK 3 each
• a resolution on a share split with automatic redemption resulting in an extra distribution to the shareholders of SEK 6 per share
• that the number of directors elected by the AGM for a term ending at the next AGM would be nine directors and no alternates
• a resolution of the Board of Directors' fee
• approval of the guidelines for remuneration to management
• approval of the reported scope and principals for a performance based employee stock option plan for 2015
• election of Jan Berntsson as principal auditor and Deloitte AB as auditing company until the AGM 2016
• changing the articles of association to allow for additional possible locations to hold general shareholders' meetings

Shareholders who wish to contact the Nomination Committee or have a matter addressed by the Board of Directors at

the AGM may submit their proposals by ordinary mail or e-mail to:

Atlas Copco AB, Att: General Counsel SE-105 23 Stockholm, Sweden, nominations@atlascopco.com or board@atlascopco.com

Proposals have to be received by the Board of Directors and the Nomination Committee respectively, no later than seven weeks prior to the AGM to be included in the notice to the AGM and the agenda.

ANNUAL GENERAL MEETING 2016 The Annual General Meeting will be held on April 26, 2016 at Aula Medica, Nobels väg 6, Solna, Sweden.

ANNUAL GENERAL MEETING ATTENDANCE

GOVERNANCE STRUCTURE, CONTINUED

3. NOMINATION COMMITTEE

The Nomination Committee has the responsibility to ensure that the Board of Directors of Atlas Copco AB represents the knowledge, experience and diversity most suitable to achieve a sustainable and profitable development of the Atlas Copco Group.

Based on the findings of the Chair of the Board, the Nomination Committee annually evaluates the work of the Board. Further to that, the Nomination Committee proposes the Chair for the Annual General Meeting, prepares a proposal regarding number and names of Board members, including Chair and a proposal for remuneration to the Chair and other Board members not employed by the company, as well as a proposal for remuneration for Board committee work. Finally the Nomination Committee proposes an audit company including remuneration for the audit.

The proposals and the Nomination Committee's statement will be published at the latest with the notice to the AGM 2016. In the Nomination Committee's strive to reach gender balance the principle is that in case of equal competence the candidate that will lead to improved gender balance should be proposed.

In compliance with the Swedish Corporate Governance Code and the procedures adopted by the AGM 2012, the representatives of the four largest shareholders, listed in the shareholders' register as of September 30, 2015, together with the Chair of the Board shall form the Nomination Committee. The members of the Nomination Committee for the AGM 2016 were announced on October 20, 2015, and they represented approximately 31% of all votes in the Company. The Nomination Committee had several meetings during the year. The members of the Nomination Committee receive no compensation for their work in the Nomination Committee.

Nomination Committee members for the AGM 2016

Petra Hedengran, Investor AB, Chair Jan Andersson, Swedbank Robur Fonder Ramsay Brufer, Alecta Hans Ek, SEB Fonder Hans Stråberg, Atlas Copco AB

4. BOARD OF DIRECTORS

The Board of Directors is overall responsible for the organization, administration and management of Atlas Copco in the best interest of the Company and of the shareholders. The Board is responsible for following applicable rules and implementing efficient control systems in the decentralized organization. An efficient control system offers the correct balance between risk and control. The long-term growth incentive is regularly evaluated by the Board based on the Group's financial situation and financial, legal, social and environmental risk. The mission is to achieve a sustainable and profitable development of the Group.

Board of Directors' members

The Board of Directors consists of nine elected members, including the President and CEO. The Board also has two union members, each with one personal deputy. Atlas Copco fulfilled the 2015 requirements of Nasdaq Stockholm and the rules of the Swedish Corporate Governance Code regarding independency of board members. All board members have participated in training sessions arranged by Nasdaq Stockholm.

The Board of Directors' work

The Board continuously addresses the strategic direction, the financial performance, and the methods to maintain sustainable profitability of the Group. Further, the Board regularly ensures that efficient control systems are in place. The Board also follows up on the compliance of the Business Code of Practice as well as the whistleblowing system. Besides the general distribution of responsibilities that apply in accordance with the Swedish Companies Act, the Board and its committees (Audit Committee, Remuneration Committee and others) annually review and adopt "The Rules of Procedure" and "The Written Instructions", which are documents that govern the Boards' work and distribution of tasks between the Board, the committees and the President as well as the Company's reporting processes.

The Board had six meetings in 2015: four at Atlas Copco AB in Nacka, Sweden, one in Örebro, Sweden, and one per capsulam. The attendance of Board members is presented on pages 60–61. In addition, the Board made a study trip to South Africa.

The trip included a customer visit to a mine and a Water for All project. The Board met with the Swedish Ambassador and two independent economists presenting opportunities for Sub-Saharan Africa. A visit to Atlas Copco's operations outside of Johannesburg, where local management presented the operations in Sub-Saharan Africa was also included. Part of this visit was a presentation of B-BBEE (Broad-Based Black Economic Empowerment) from a specialist who talked about related possibilities and threats.

The Board continuously evaluates the performance of the CEO, Ronnie Leten. For the Annual Audit, the company's principal auditor, Jan Berntsson, Deloitte, reported his observations and the Board also had a separate session with the auditor where members of Group Management were not present.

Evaluation of the Board of Directors' work

The annual evaluation of the Board of Directors' work, including the Board's committees (Audit Committee, Remuneration Committee and others) was conducted by the Chair of the Board, Hans Stråberg. He evaluated the Boards' working procedures, competence and composition, including the background, experience, and diversity of the Board members. His findings were presented to the Nomination Committee.

Remuneration to the Board of Directors

Remuneration and fees are based on the work performed by the Board. The AGM 2015 decided to adopt the Nomination Committee's proposal for remuneration to the Chair and other Board members not employed by the Company, and the proposed remuneration for committee work. See also note 5.

• The Chair received SEK 1 900 000
• Each of the other Board members not employed by the Company SEK 600 000
• An amount of SEK 225 000 was granted to the Chair of the Audit Committee and SEK 150 000 to each of the other members of this committee
• An amount of SEK 60 000 was granted to each one of the members of the Remuneration Committee
• An amount of SEK 60 000 to each non-executive director who, in addition, participates in committee work decided upon by the Board
• The meeting further resolved that 50% of the director's Board fee could be received in the form of synthetic shares.

5. AUDIT COMMITTEE

The Audit Committee's primary task is to support the Board of Directors in fulfilling its responsibilities in the areas of audit and internal control, accounting, financial reporting and risk management as well as to supervise the financial structure and operations of the Group and approve financial guarantees, delegated by the Board. The Audit Committee work further includes reviewing internal audit procedures. The work of the Audit Committee is directed by the Audit Committee Charter, which is reviewed and approved annually by the Board. The Chair of the committee has the accounting competence required by the Swedish Companies Act and two of the members are independent from the Company and its main shareholder.

During the year, the committee convened five times. All members were present at these meetings. All meetings of the Audit Committee have been reported to the Board of Directors and the corresponding Minutes have been distributed to the Board.

Audit Committee 2015–2016

Ulla Litzén, Chair Hans Stråberg Staffan Bohman Johan Forssell

6. REMUNERATION COMMITTEE

The Remuneration Committee's primary task is to propose to the Board the remuneration to the President and CEO and a longterm incentive plan for key employees. The goal with a long-term incentive plan is to align the interests of key personnel with those of the shareholders. The Remuneration Policy for Group Management aims to establish principles for a fair and consistent remuneration with respect to compensation, benefits, and termination. The base salary is determined by position and performance and the variable compensation is for the achievement of individual goals. The Remuneration Policy is reviewed annually and the AGM 2015 approved the guidelines for remuneration. See also note 5.

The Remuneration Committee had three meetings in 2015. All members were present. During the year, the Remuneration Committee also supported the President and CEO in determining remuneration to the other members of Group Management. All meetings of the Remuneration Committee have been reported to the Board and the corresponding Minutes have been distributed.

Remuneration Committee 2015–2016

Hans Stråberg, Chair Peter Wallenberg Jr Anders Ullberg

The Board continuously addresses the strategic direction, the financial performance, and the methods to maintain sustainable profitability of the Group.

7. EXTERNAL AUDITOR

The task of the external auditor is to examine Atlas Copco's annual accounts and accounting practices, as well as to review the Board and the CEO's management of the Company. At the AGM 2015 the audit firm Deloitte AB, Sweden, was elected external auditor until the AGM 2016 in compliance with a proposal from the Nomination Committee. The principal auditor is Jan Berntsson, Authorized Public Accountant at Deloitte AB.

At the AGM 2015, Jan Berntsson referred to the auditor's report for the Company and the Group in the annual report and explained the process applied when performing the audit. He also recommended adoption of the presented income statements and balance sheets, discharge of liability for the President and CEO and the Board of Directors, and adoption of the proposed distribution of profits.

8. INTERNAL AUDIT AND ASSURANCE

The Board of Directors is responsible for that Atlas Copco has adequate internal control systems in place for financial reporting. Read more on pages 64–65.

9. GROUP MANAGEMENT

Besides the President and CEO, the Group Management consists of four business area executives and executives responsible for the main Group functions; Corporate Communications and Governmental Affairs, Organizational Development, Controlling and Finance, and Legal. The President and CEO is responsible for the ongoing management of the Group following the Board's guidelines and instructions.

Remuneration to Group Management

The Remuneration Policy is reviewed and presented to the AGM by the Board of Directors for approval every year. In 2015, the AGM decided to adopt the Board's proposal.

The remuneration covers an annual base salary, variable compensation, possible long-term incentive (personnel options), pension premium and other benefits. The variable compensation is limited to a maximum percentage of the base salary. No fees are paid for Board memberships in Group companies or for other duties performed.

BOARD OF DIRECTORS

Name Born Function	Hans Stråberg 1957 Chair since 2014	Ronnie Leten 1956 Board member President and CEO	Ulla Litzén 1956 Board member	Anders Ullberg 1946 Board member	Staffan Bohman 1949 Board member
Education	M.Sc. in Mechanical Engineering, Chalmers University of Technology, Gothenburg	M.Sc. in Applied Economics, University of Hasselt, Belgium	B.Sc. in Economics and Business Administration, Stockholm School of Economics, and MBA, Massachusetts Institute of Technology, the U.S.	B.Sc. in Economics and Business Administration, Stockholm School of Economics	B.Sc. in Economics and Business Administration, Stockholm School of Economics and Stanford Executive Program, the U.S.
Nationality / Elected	Swedish / 2013	Belgian / 2009	Swedish / 1999	Swedish / 2003	Swedish / 2003
Board memberships	Member of the Board of Investor AB, Stora Enso Oyj, Finland, N Holding AB, Mellby Gård AB, Hedson AB and Chair of Roxtec AB, CTEK AB, Nikkarit Holding AB and Orchid Orthopedics Inc.	Chair of Electrolux AB	Board member of SKF AB, Boliden AB, Alfa Laval AB, NCC AB and Husqvarna AB.	Chair of Boliden AB, Natur & Kultur and Studsvik AB. Board member of Beijer Alma, Valedo Partners, and Åkers AB. Chair of the Swedish Financial Reporting Board.	Chair of Höganäs AB and Cibes Lift Group AB, Vice Chair of Rezidor Hotel Group AB, the Swedish Corporate Governance Board, and the Board of trustees of SNS, Board member of Ratos AB, Boliden AB and Upplands Motor Holding AB.
Principal work experience and other information	Chief Executive Officer and President for Electrolux AB. Various executive positions in the Electrolux Group based in Sweden and the U.S. EU Co-Chair TABD, Trans-Atlantic Business Dialogue.	President and CEO of Atlas Copco AB.* Business Area President for Atlas Copco Compressor Technique. Division president for the divisions Airtec and Industrial Air as well as several management posi tions within IT, logistics, business development and manufacturing in the Compressor Technique business area in Belgium.	President of W Capital Management AB (wholly owned by the Wallenberg Foundations) and Director and member of the management group of Investor AB.	Vice President Corporate Control Swedyards (Celsius Group), Executive Vice President and CFO, SSAB,Swedish Steel, and President and CEO of SSAB Swedish Steel.	CEO of Sapa AB, Gränges AB and DeLaval AB.
Total fees 2015, KSEK 1)	2 444	–	1 153	713	856
Board meeting attendance	6 of 6	6 of 6	6 of 6	6 of 6	6 of 6
Remuneration Committee attendance	3 of 3 Chair	–	–	3 of 3	–
Audit Committee attendance	5 of 5	–	5 of 5 Chair	–	5 of 5
Holdings in Atlas Copco AB 2)	21 500 class B shares 7 584 synthetic shares	19 166 class A shares 32 000 class B shares 334 021 synthetic shares/ employee stock options	75 800 class A shares 3 000 class B shares	14 000 class A shares 10 000 class B shares	10 000 class A shares 30 000 class B shares 1 973 synthetic shares
Independence to Atlas Copco and its management	Yes	No 3)	Yes	Yes	Yes
Independence to major shareholders	No 4)	Yes	Yes	Yes	Yes
Annual Meeting attendance	Yes	Yes	Yes	Yes	Yes

Board members appointed by the unions

Bengt Lindgren Board member Born 1957 Chair of IF Metall, Atlas Copco, Fagersta Elected 1990 Board meeting attendance 6 of 6

Mikael Bergstedt Board member Born 1960 Chair of PTK, Atlas Copco, Tierp Works Elected 2004 Board meeting attendance 6 of 6

596		746	596	656
6 of 6		6 of 6	6 of 6	6 of 6
–		–	–	3 of 3
–		5 of 5	–	–
	8 308 synthetic shares	5 000 class B shares 8 308 synthetic shares	6 335 synthetic shares	166 667 class A shares 6 500 synthetic shares
Yes		Yes	Yes	Yes
Yes		No 5)	Yes	No 4)
Yes		Yes	Yes	Yes

All positions in Norway.

Ulf Ström Deputy Born 1961 Chair of IF Metall, Atlas Copco Rock Drills AB,

Örebro Elected 2008 Board meeting attendance 6 of 6

Kristina Kanestad

Deputy Born 1966 Chair of Unionen, Atlas Copco Rock Drills AB, Örebro Elected 2007 Board meeting attendance 6 of 6

REFERENCES:

All educational institutions and companies are based in Sweden, unless otherwise indicated.

• 1) See more information on the calculation of fees in note 5.
• 2) Holdings as per end of 2015, including those of close relatives or legal entities and grant for 2015.
• 3) President and CEO of Atlas Copco.
• 4) Board member in a company which is a larger owner (Investor AB).
• 5) Employed by a company which is a larger owner (Investor AB).
• * Current position.

GROUP MANAGEMENT

	1. RONNIE LETEN	2. NICO DELVAUX	3. MATS RAHMSTRÖM	4. JOHAN HALLING
Position	President and CEO	Senior Executive Vice President and Business Area President Compressor Technique	Senior Executive Vice President and Business Area President Industrial Technique	Senior Executive Vice President and Business Area President Mining and Rock Excavation Technique
In current position since	2009	2014	2008	2013
Nationality / Employed	Belgian / 1997	Belgian / 1991	Swedish / 1988	Swedish / 1998
Born	1956	1966	1965	1952
Education	M.Sc. in Applied Economics, University of Hasselt, Belgium	M.Sc. in Electromechanics from the University of Brussels and an MBA from the Handelshogeschool in Antwerp, Belgium	MBA from the Henley Management College, the United Kingdom	M.Sc. in Mechanical Engineering from the University of Lund
Principal work experience and other information	Ronnie Leten was first employed by Atlas Copco in 1985. Since then he has been Business Area President for Atlas Copco Compressor Technique and President for the divi sions Airtec and Industrial Air. He has also held man agement positions within IT, logistics, business de velopment and manufac turing in the Compressor Technique business area. All positions in Belgium.	Nico Delvaux started his career with Atlas Copco in 1991 and has had positions in sales, marketing, service, acquisition-integration management and general management, in markets including Benelux, Italy, Canada and the United States. Before his current position, he was Business Area President for Construction Technique.	Mats Rahmström has held positions in sales, service, marketing and general management within the Industrial Technique business area. Between 1998 and 2006 he held the position as General Manager for customer centers in Sweden, Canada and the United Kingdom. Between 2006 and 2008 he was President of the Atlas Copco Tools and Assembly Systems General Industry division within Industrial Technique.	Johan Halling joined Atlas Copco in 1998 as President of one of the electric tool divisions within Industrial Technique that Atlas Copco owned at the time. Between 2002 and 2013 he was Presi dent of Atlas Copco's Rock Drilling Tools division.
External directorships	Chair of Electrolux AB		Board member of Permobil Holding AB
Holdings in Atlas Copco AB Holdings as per December 31, 2015, including those held by related natural or legal persons. See note 23 for more information on the option programs and matching shares.	19 166 class A shares 32 000 class B shares 334 021 synthetic shares/ employee stock options. The President and CEO, Ronnie Leten, has no major shareholdings or part ownership in enterprises with which Atlas Copco has significant business relations.	5 843 class A shares 2 000 class B shares 109 668 synthetic shares/ employee stock options	6 780 class A shares 88 018 synthetic shares/ employee stock options	11 308 class A shares 96 114 synthetic shares/ employee stock options 8.
All educational institutions and companies are based in Sweden, unless otherwise indicated. 6.	3.	9.		2.
62 Atlas Copco 2015	Administration report

5. ANDREW WALKER 6. ANNIKA BERGLUND 7. JEANETTE LIVIJN 8. HANS OLA MEYER 9. HÅKAN OSVALD Senior Executive Vice Senior Vice President Senior Vice President Senior Vice President Senior Vice President President and Corporate Communications Organizational Controlling and Finance General Counsel Business Area President and Governmental Affairs Development Construction Technique 2014 1997 2007 1999 2012 Irish / 1986 Swedish / 1979 Swedish / 1987 Swedish / 1991 Swedish / 1985 1961 1954 1963 1955 1954 M. Sc. in Industrial Engineering B.Sc. in Economics and M.Sc. in Business B.Sc. in Economics and Master of Law from and an MBA from University Business Administration Administration from Business Administration Uppsala University College Dublin, Ireland from Stockholm School of Växjö högskola from Stockholm School of Economics and an MBA from Economics the University of Antwerp, Belgium Andrew Walker started his Annika Berglund began her Jeanette Livijn started to Hans Ola Meyer was em Håkan Osvald joined Atlas career with Atlas Copco in career in marketing analysis work for Atlas Copco in the ployed in 1978 to work with Copco in 1985 as Legal Ireland 1986 and has since and market research with field of financial and business Group accounting and con Counsel. From 1989 he was then had several different Atlas Copco in 1979. Since controlling in 1987 and held trolling. Later he moved to General Counsel for Atlas management positions in then, she has held a number various positions in this Ecuador as Financial Manag Copco North America Inc. markets including United of positions in the Group function. Since 1997 she has er. Between 1984 and 1991, and Chicago Pneumatic Tool Kingdom, Ireland, Belgium related to marketing, sales, held managerial positions he held various positions Company, the United States. and the United States. Before and business controlling in within human resource at the broker Penning In 1991 he was appointed
his current position, Andrew Europe. Prior to her current management. Before she marknadsmäklarna. He Vice President Deputy Walker was President of the position, she was Marketing took up her present position returned to Atlas Copco in General Counsel Atlas Copco Service division within Manager for the electronic she was Vice President 1991 as Financial Manager in Group, with a special Compressor Technique. company Atlas Copco Human Resources for the Spain and in 1993 he became responsibility for acquisitions. Controls (Danaher Motion). Industrial Technique Senior Vice President Prior to his current position, business area. Finance, for Atlas Copco AB he was General Counsel and a member of Group Operations. Since 2012 he is Management. Secretary of the Board of Directors for Atlas Copco AB.
Member of The Swedish Chair of ICC Sweden, Financial Reporting Board reference group and member of the Board Competition of Upplands Motor Holding AB and PRI Pensionsgaranti (Mutual)
3 998 class A shares, 10 467 class A shares 3 414 class A shares 7 286 class A shares 4 821 class A shares 28 855 synthetic shares/ 7 900 class B shares 57 320 synthetic shares/ 22 021 class B shares 2 600 class B shares employee stock options 80 575 synthetic shares/ employee stock options 84 247 synthetic shares/ 58 019 synthetic shares/ employee stock options employee stock options employee stock options

INTERNAL CONTROL OVER FINANCIAL REPORTING

This section includes a description of Atlas Copco's system of internal controls over financial reporting in accordance with the requirements set forth in the Swedish Code of Corporate Governance and as stipulated by the Swedish Companies Act.

The internal control process is based on a control framework that creates structure for the other four components of the process – risk assessment, control activities, information and communication as well as monitoring. The starting point for the process is the regulatory framework for internal control issued by the Committee of Sponsoring

Organizations of the Treadway Commission (COSO), www.coso.org.

The basis for the internal control is defined by the overall control environment. The Board of Directors is responsible for establishing an efficient system for internal control and governs the work through the CEO. Group Management sets the tone

for the organization, influencing the control consciousness of the employees. One key success factor for a strong control environment lies in ensuring that the organizational structure, decision hierarchy, corporate values in terms of ethics and integrity as well as authority to act, are clearly defined and communicated through guiding documents such as internal policies, guidelines, manuals, and codes. All employees must follow these policies and guidelines.

The company applies different processes to assess and identify the main risks relating to financial reporting misstatements. The risk assessments are regularly performed to identify new risks and follow up that internal control is improved over previously identified risks.

Identified risks are managed through the control activities in the company, which are documented in processes and internal control descriptions on the company,

PROCESSES AND TOOLS

PROKURA

Prokura is the delegation of the authority to act both with respect to a third party and internally. It defines how responsibility is allocated to positions and, reflecting this, to individuals.

FREQUENCY: When a person is recruited to a new position and continuously

BUSINESS BOARD

The internal board structure, organized according to operational responsibilities (i.e. parallel to the legal company board structure), and Company Review Meetings between local management and responsible division management are essential tools to follow up the adherence to internal policies, guidelines, instructions and codes as well as the efficiency in the control activities over financial reporting.

FREQUENCY: 3–4 times per year

REPORTING

Monthly operative reports are prepared to measure and analyze profitability per product category, company, business line, division, and business area. Each division consolidates its units and reports adjustments and eliminations. Quarterly, these reports are completed with additional information and specifications. The reports constitute the basis for the Group's quarterly and annual consolidated reports. Reporting is also prepared to measure progress in fields related to environmental and social performance.

The Group uses a common system for consolidation of the reports, which also provides certain system-based validation reports. It includes a series of standardized scorecards used to analyze and follow up key indicators and trends in relation to the set targets.

Quarterly reports are reviewed by Group Management and by the Audit Committee before they are published externally and approved by the Board.

FREQUENCY: Monthly, quarterly, annually

BUSINESS CONTROL

Each unit has a business controller responsible for ensuring adequate internal control processes over financial reporting, implementing Group control processes. The controller is also responsible for ensuring the application of The Way We Do Things and that reporting is correct, complete, and delivered on time. There are also controllers at the division, business area, and group levels with corresponding responsibilities for these aggregated levels.

FREQUENCY: Continuously

division, business area, and group levels. These aim to prevent, detect and correct errors and non-compliances and include for example instructions for attests and authority to pay, controls in business systems as well as accounting and business reporting processes.

The company has information and communication channels designed to ensure that information is identified, captured and communicated in a form and timeframe that enable employees and managers to carry out their responsibilities. Reporting instructions and accounting guidelines are communicated to personnel concerned in the internal database The Way We Do Things, supported by, for example, training programs for different categories of employees.

The company continuously monitors the adherence to internal policies, guidelines, manuals, and codes as well as efficiency in the control activities. Internal control is continuously evaluated and followed up on

in the operations, including regular management reviews and supervisory activities as well as through internal audits, and control self assessments. The Audit Committee has an important role in supporting the Board of Directors to monitor whether the internal control processes facilitate adequate internal control over financial reporting.

Activities in 2015

In 2015, the Group internal audit function conducted internal audits in 106 (113) units out of 489 (488). The audits were conducted in 39 countries. A risk-based internal audit plan was executed. Internal audits were conducted under leadership of Group internal audit staff with audit team members having diverse functional competences but always with expertise in accounting and controlling. Internal audits covered units' relevant processes, with additional focus on human resources and IT security. IT security audits

were carried out by the Group IT Security function and covered 53 (53) units.

During 2015, 319 (321) legal entity managers were invited to respond to the control self assessment survey whereof 313 (317) completed the survey.

Focus in 2016

In 2016, the Group internal audit function will continue its work to review processes and tools with focus on risks, controls and governance as well as recommending leading practices. However, developing the use of data analytics will be in focus during the year.

INTERNAL CONTROL STATISTICS	2015	2014
Operative units in the Group	489	488
Internal audits conducted	106	113
Control self assessments
completed	313	317

PROCESSES AND TOOLS

INTERNAL AUDITS

The Internal Audit process is intended to add value to each operational unit by providing independent and objective assurance and on internal control. Further, the process aims to serve as a tool for employee professional development and to identify and recommend leading practices within the Group.

Internal audits are annually planned or initiated by the Group internal audit function with a risk-based approach. This includes for example when there is a change of General Manager in a company, after major negative events or structural changes, or if a long time has passed since the last audit. Internal audits are normally performed by an inter-disciplinary team of people appointed from the organization. The Accounting to Reporting process is reviewed in all internal audits.

Atlas Copco has operations in several complex markets, where the risk of human rights abuses and corruption is high. Therefore, the adherence to the Business Code of Practice is evaluated in the internal audit process, including environmental aspects and business partner relationships.

FREQUENCY: All units at least once every five years

CONTROL SELF ASSESSMENT

The objective of this process is primarily to support local unit managers evaluating the status of their control routines and to address weak areas. One of the areas is internal control, which includes internal control over financial reporting. Other areas include legal issues, communication and branding, and the Business Code of Practice. On Group level the aggregated assessments of the control routines give a base for improvement of Group processes, instructions, etc.

FREQUENCY: Annually

HOTLINE

The Group has a process where employees and other stakeholders can report on behavior or actions that are possible violations of laws or of Group policies, including violation of accounting and financial reporting guidelines and policies. This also includes perceived cases of human rights violation, discrimination or corruption. This process serves as a complement to similar procedures that exist on country level in certain countries. The reports are treated confidentially and the person who is reporting is guaranteed anonymity. There have been efforts to increase awareness of this process among all employees and managers, e.g. through training in the Business Code of Practice including fraud awareness.

FREQUENCY: As required

COMPLIANCE STATEMENT

In the compliance process Group Management, divisional managements and all managers responsible for an operational or holding unit and certain other key positions are requested to sign a statement confirming compliance to financial policies, the Business Code of Practice and applicable laws and regulations.

FREQUENCY: Annually

FINANCIAL STATEMENTS AND NOTES

MSEK unless otherwise stated

ATLAS COPCO GROUP Page

Consolidated income statement	67
Consolidated statement of comprehensive income	67
Consolidated balance sheet	68
Consolidated statement of changes in equity	69
Consolidated statement of cash flows	70

Note

1	Significant accounting principles, accounting estimates and judgments	71
	2 Acquisitions	77
	3 Divestments and assets held for sale	79
	4 Segment information	80
	5 Employees and personnel expenses	83
	6 Remuneration to auditors	85
	7 Other operating income and expenses	85
	8 Financial income and expenses	86
	9 Taxes	86
	10 Other comprehensive income	87
	11 Earnings per share	88
	12 Intangible assets	88
	13 Property, plant and equipment	90
	Investments in associated companies
14	and joint ventures	91
	15 Other financial assets	91
	16 Inventories	91
	17 Trade receivables	92
	18 Other receivables	92
	19 Cash and cash equivalents	92
	20 Equity	93
	21 Borrowings	94
	22 Leases	95
	23 Employee benefits	96
	24 Other liabilities	100
	25 Provisions	101
	26 Assets pledged and contingent liabilities	101
27	Financial exposure and principles for control of financial risks	101
	28 Related parties	107
	29 Subsequent events	107

	Income statement	108
	Statement of comprehensive income	108
	Balance sheet	108
	Statement of changes in equity	109
	Statement of cash flows	109
Note
	A1 Significant accounting principles	110
	Employees and personnel expenses and
A2	remunerations to auditors	111
	A3 Other operating income and expenses	111
	A4 Financial income and expenses	111
	A5 Appropriations	111
	A6 Income tax	112
	A7 Intangible assets	112
	A8 Property, plant and equipment	112
	A9 Deferred tax assets and liabilities	113
	A10 Shares in Group companies	113
	A11 Other financial assets	113
	A12 Other receivables	113
	A13 Cash and cash equivalents	113
	A14 Equity	113
	A15 Post-employment benefits	114
	A16 Other provisions	115
	A17 Borrowings	116
	A18 Other liabilities	116
A19	Financial exposure and principles for control of financial risks	117

A20 Assets pledged and contingent liabilities 117 A21 Directly owned subsidiaries 117 A22 Related parties 119

PARENT COMPANY Page

Consolidated income statement

For the year ended December 31, Amounts in MSEK	Note	2015	2014
Revenues	4	102 161	93 721
Cost of sales		–62 031	–58 669
Gross profit		40 130	35 052
Marketing expenses		–10 998	–9 825
Administrative expenses		–6 354	–5 668
Research and development expenses		–3 287	–2 933
Other operating income	7	466	573
Other operating expenses	7	–236	– 191
Share of profit in associated companies and joint ventures	14	7	7
Operating profit	4, 5, 6, 16	19 728	17 015
Financial income	8	437	313
Financial expenses	8	–1 342	–1 237
Net financial items		–905	–924
Profit before tax		18 823	16 091
Income tax expense	9	–7 100	–3 916
Profit for the year		11 723	12 175
Profit attributable to:
– owners of the parent		11 717	12 169
– non-controlling interests		6	6
Basic earnings per share, SEK	11	9.62	10.01
Diluted earnings per share, SEK	11	9.58	9.99

Consolidated statement of comprehensive income

For the year ended December 31, Amounts in MSEK	Note	2015	2014
Profit for the year		11 723	12 175
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit plans		662	–759
Income tax relating to items that will not be reclassified		–124	194
		538	–565
Items that may be reclassified subsequently to profit or loss
Translation differences on foreign operations		–1 370	5 687
Hedge of net investments in foreign operations		681	–1 052
Cash flow hedges		68	–199
– adjustment for amounts transferred to the initial carrying amounts of acquired operations		–	81
Income tax relating to items that may be reclassified		–457	711
		–1 078	5 228
Other comprehensive income for the year, net of tax	10	–540	4 663
Total comprehensive income for the year		11 183	16 838
Total comprehensive income attributable to:
– owners of the parent		11 173	16 806
– non-controlling interests		10	32

Consolidated balance sheet

Amounts in MSEK	Note	Dec. 31, 2015	Dec. 31, 2014
ASSETS
Non-current assets
Intangible assets	12	33 520	33 197
Rental equipment	13	3 076	3 177
Other property, plant and equipment	13	8 947	9 433
Investments in associated companies and joint ventures	14	125	115
Other financial assets	15	2 129	1 810
Other receivables		51	56
Deferred tax assets	9	1 823	1 549
Total non-current assets		49 671	49 337
Current assets
Inventories	16	16 906	18 364
Trade receivables	17	19 552	19 903
Income tax receivables		649	480
Other receivables	18	5 784	5 632
Other financial assets	15	1 576	2 150
Cash and cash equivalents	19	8 861	9 404
Assets classified as held for sale	3	11	11
Total current assets		53 339	55 944
TOTAL ASSETS		103 010	105 281
EQUITY	Page 69
Share capital		786	786
Other paid-in capital		6 405	6 037
Reserves		3 157	4 239
Retained earnings		36 243	39 513
Total equity attributable to owners of the parent		46 591	50 575
Non-controlling interests		159	178
TOTAL EQUITY		46 750	50 753
LIABILITIES
Non-current liabilities
Borrowings	21	21 888	22 182
Post-employment benefits	23	2 225	2 531
Other liabilities		854	1 070
Provisions	25	741	888
Deferred tax liabilities	9	1 497	1 127
Total non-current liabilities		27 205	27 798
Current liabilities
Borrowings	21	1 101	2 284
Trade payables		7 873	7 876
Income tax liabilities	9	5 109	1 602
Other liabilities	24	13 499	13 475
Provisions	25	1 473	1 493
Total current liabilities		29 055	26 730
TOTAL EQUITY AND LIABILITIES		103 010	105 281

Information concerning pledged assets and contingent liabilities is disclosed in note 26.

Consolidated statement of changes in equity

2015		Equity attributable to owners of the parent
Amounts in MSEK	Share capital	Other paid-in capital	Hedging reserve	Translation reserve	Retained earnings	Total	Non controlling interests	Total equity
Opening balance, Jan. 1	786	6 037	–152	4 391	39 513	50 575	178	50 753
Profit for the year					11 717	11 717	6	11 723
Other comprehensive income for the year			56	–1 138	538	–544	4	–540
Total comprehensive income for the year			56	–1 138	12 255	11 173	10	11 183
Dividends					–7 305	–7 305	–29	–7 334
Redemption of shares	–393				–6 912	–7 305		–7 305
Increase of share capital through bonus issue	393				–393
Acquisition of series A shares					–1 380	–1 380		–1 380
Divestment of series A shares		351			552	903		903
Divestment of series B shares		17			7	24		24
Share-based payment, equity settled
– expense during the year					73	73		73
– exercise option					–167	–167		–167
Closing balance, Dec. 31	786	6 405	–96	3 253	36 243	46 591	159	46 750

2014	Equity attributable to owners of the parent
Amounts in MSEK	Share capital	Other paid-in capital	Hedging reserve	Translation reserve	Retained earnings	Total	Non controlling interests	Total equity
Opening balance, Jan. 1	786	5 743	–65	–898	34 081	39 647	147	39 794
Profit for the year					12 169	12 169	6	12 175
Other comprehensive income for the year			–87	5 289	–565	4 637	26	4 663
Total comprehensive income for the year			–87	5 289	11 604	16 806	32	16 838
Dividends					–6 681	–6 681	–1	–6 682
Divestment of series A shares held by Atlas Copco AB		277			586	863		863
Divestment of series B shares held by Atlas Copco AB		17			10	27		27
Share-based payment, equity settled
– expense during the year					32	32		32
– exercise of options					–119	–119		–119
Closing balance, Dec. 31	786	6 037	–152	4 391	39 513	50 575	178	50 753

See note 10 and 20 for additional information.

Consolidated statement of cash flows

For the year ended December 31, Amounts in MSEK	Note	2015	2014
Cash flows from operating activities
Operating profit		19 728	17 015
Adjustments for:
Depreciation, amortization and impairment	12, 13	4 347	3 709
Capital gain/loss and other non-cash items		–528	–298
Operating cash surplus		23 547	20 426
Net financial items received/paid		–2 037	–849
Taxes paid		–4 238	–3 828
Pension funding and payment of pension to employees		78	–115
Cash flow before change in working capital		17 350	15 634
Change in:
Inventories		1 342	1 924
Operating receivables		35	–280
Operating liabilities		222	412
Change in working capital		1 599	2 056
Increase in rental equipment		–1 263	–1 719
Sale of rental equipment		426	416
Net cash from operating activities		18 112	16 387
Cash flows from investing activities
Investments in other property, plant and equipment		–1 705	–1 548
Sale of other property, plant and equipment		600	86
Investments in intangible assets	12	–1 168	–1 187
Sale of intangible assets		17	10
Acquisition of subsidiaries	2	–1 852 1)	–8 415
Divestment of subsidiaries	3	58	–
Investment in other financial assets, net		197	489
Net cash from investing activities		–3 853	–10 565
Cash flows from financing activities
Dividends paid		–7 305	–6 681
Dividend paid to non-controlling interest		–29	–1
Redemption of shares		–7 305	–
Repurchase and divestment of own shares		–453	890
Borrowings		845	2 935
Repayment of borrowings		–593	–11 151
Settlement of CSA 2)		429	–290
Payment of finance lease liabilities		–86	–60
Net cash from financing activities		–14 497	–14 358
Net cash flow for the year		–238	–8 536
Cash and cash equivalents, Jan. 1		9 404	17 633
Net cash flow for the year		–238	–8 536
Exchange-rate difference in cash and cash equivalents		–305	307
Cash and cash equivalents, Dec. 31	19	8 861	9 404

1) Includes deferred consideration for acquisitions made in 2014

2) Credit Support Annex, see note 27

SIGNIFICANT ACCOUNTING PRINCIPLES

The consolidated financial statements comprise Atlas Copco AB, the Parent Company ("the Company"), and its subsidiaries (together "the Group" or Atlas Copco) and the Group's interest in associated companies and joint ventures. Atlas Copco AB is headquartered in Nacka, Sweden.

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the EU. The statements are also prepared in accordance with the Swedish recommendation RFR 1 "Supplementary Accounting Rules for Groups" and applicable statements issued by the Swedish Financial Reporting Board. These require certain additional disclosure requirements for Swedish consolidated financial statements prepared in accordance with IFRS.

The accounting principles set out below have been consistently applied to all periods presented, unless otherwise stated, and for all entities included in the consolidated financial statements. The Annual Report for the Group and for Atlas Copco AB, including financial statements, was approved for issuance on March 4, 2016, The balance sheets and income statements are subject to approval by the Annual General Meeting of the shareholders on April 26, 2016.

Basis of consolidation

The consolidated financial statements have been prepared in accordance with the acquisition method. Accordingly, business combinations are seen as if the Group directly acquires the assets and assumes the liabilities of the entity acquired. The consolidated income statements and balance sheets of the Group include all entities in which the Company, directly or indirectly, has control. Control exists when the Company has power over the entity, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to use its power to affect its returns. Generally, control and hence consolidation is based on ownership. In a few exceptions, consolidation is based on agreements that give the Group control over an entity. See note A22 for information on the Group's subsidiaries.

Intra-group balances and internal income and expense arising from intra-group transactions are fully eliminated in preparing the consolidated financial statements. Gains and losses arising from intra-group transactions that are recognized in assets, such as inventory and fixed assets, are eliminated in full, but losses only to the extent that there is no evidence of impairment.

Business combinations

At the acquisition date, the date on which control is obtained, each identifiable asset acquired and liability assumed is recognized at its acquisitiondate fair value. The consideration transferred, measured at fair value, includes assets transferred by the Group, liabilities to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Any subsequent change in such fair value is recognized in profit or loss, unless the contingent consideration is classified as equity. Transactions costs that the Group incur in connection with a business combination are expensed as incurred.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the Group's previously held equity interest in the acquiree (if any) over the net of acquisition-date fair value amounts of the identifiable assets acquired and liabilities assumed.

Non-controlling interest is initially measured either

• at fair value, or
• at the non-controlling interest's proportionate share of the fair value of identifiable net assets.

Subsequent profit or loss attributable to the non-controlling interest is allocated to the non-controlling interest, even if it puts the non-controlling interest in a deficit position. Acquisitions of non-controlling interests are recognized as a transaction between equity attributable to owners of the parent and non-controlling interests. The difference between consideration paid and the proportionate share of net assets acquired is recognized in equity. For details on the acquisitions made during the year, see note 2.

Associated companies and joint ventures

An associate is an entity in which the Group has significant influence, but not control, over financial and operating policies. When the Group holds 20–50% of the voting power, it is presumed that significant influence exists, unless otherwise demonstrated. A joint venture is an entity over which the Group has joint control, through contractual agreements with one of more parties. Investments in associated companies and joint ventures are reported according to the equity method. This means that the carrying value of interests in an associate or joint venture corresponds to the Group's share of reported equity of the associate or joint venture, any goodwill, and any other remaining fair value adjustments recognized at acquisition date.

"Shares of profit in associated companies and joint ventures", included in the income statements, comprises the Group's share of the associate's and joint venture's income after tax adjusted for any amortization and depreciation, impairment losses, and other adjustments arising from any remaining fair value adjustments recognized at acquisition date. Dividends received from an associated company or joint venture reduce the carrying value of the investment.

Unrealized gains and losses arising from transactions with an associate or a joint venture are eliminated to the extent of the Group's interest, but losses only to the extent that there is no evidence of impairment of the asset. When the Group's share of losses in an associate or a joint venture equals or exceeds its interest in the associate or joint venture, the Group does not recognize further losses unless the Group has incurred obligations or made payments on behalf of the associate.

Functional currency and foreign currency translation

The consolidated financial statements are presented in Swedish krona (SEK), which is the functional currency for Atlas Copco AB and also the presentation currency for the Group's financial reporting. Unless otherwise stated, the amounts presented are in millions Swedish krona (MSEK).

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Non-monetary items carried at historical cost are reported using the exchange rate at the date of the transaction and non-monetary items carried at fair value are reported at the rate that existed when the fair values were determined. Tangible and intangible assets, inventory and advanced payments are examples of non-monetary items.

Receivables and liabilities and other monetary items denominated in foreign currencies are translated using the foreign exchange rate at the balance sheet date. The exchange gains and losses related to receivables and payables and other operating receivables and liabilities are included in "Other operating income and expenses" and foreign exchange gains and losses attributable to other financial assets and liabilities are included in "Financial income and expenses". Exchange rate differences on translation to functional currency are reported in "Other comprehensive income" in the following cases:

• translation of a financial liability designated as a hedge of the net investment in a foreign operation,
• translation of intra-group receivables from, or liabilities to, a foreign operation that in substance is part of the net investment in the foreign operation,
• cash flow hedges of foreign currency to the extent that the hedge is effective.

In the consolidation, the balance sheets of foreign subsidiaries are translated to SEK using exchanges rates at the end of the reporting period and the income statements are translated at the average rates for the reporting period. Foreign exchange differences arising on such translation are recognized in "Other comprehensive income" and are accumulated in the currency translation reserve in equity. Exchange rates for major currencies that have been used for the consolidated financial statements are shown in note 27.

Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses, and for which discrete financial information is available. The operating results of all operating segments are reviewed regularly by the Group's President

and CEO, the chief operating decision maker, to make decisions about allocation of resources to the segments and also to assess their performance. See note 4 for additional information.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and reduced for value added tax, estimated customer returns, discounts and other similar deductions. See note 4 for further information on revenue by segment and by geographical area.

Goods sold

Revenue from goods sold is recognized when the significant risks and rewards of ownership have been transferred to the buyer, i.e. when the Group retains neither continuing right to dispose of the goods nor hold effective control of the goods sold, recovery of the consideration is probable and the amount of the revenue and associated costs can be measured reliably. When the product requires installation and this constitutes a significant part of the contract, revenue is recognized when the installation is completed. Revenue is not recorded for buy-back commitments if the substance of the agreement is that the risks and rewards of ownership have not been transferred to the buyer. No revenue is recognized if there is significant uncertainty regarding the possible return of goods.

Services rendered

Revenue from services is recognized by reference to the stage of completion of the contract. The stage of completion is determined by the proportion of costs incurred to date compared to the estimated total costs of the transaction. Where the outcome of a service contract cannot be estimated reliably, revenue is recognized to the extent of costs incurred that are expected to be recoverable. When it is probable that total contract costs will exceed total revenue, the expected loss is recognized as an expense immediately. When services are performed by an indeterminate number of activities over the service contract period, revenue is recognized linearly over that period.

Rental operations

Rental income from rental equipment is recognized on a straight-line basis over the rental period. Sale of rental equipment is recognized as revenue when the significant risks and rewards of ownership have been transferred to the buyer. The carrying value of the rental equipment sold is recognized as cost of sales. Investments in and sales of rental equipment are included in cash flows from operating activities.

Other operating income and expenses

Commissions and royalties are recognized on an accrual basis in accordance with the financial substance of the agreement. Gains and losses on disposals of an item of non-current tangible and intangible assets are determined by comparing the proceeds from disposal with the carrying amount. Such gains and losses are recognized within "Other operating income" and "Other operating expenses". See note 7 for additional information.

Government grants

A government grant is recognized when there is a reasonable assurance that it will be received and that the Group will comply with the conditions attached to it. Government grants that compensate the Group for expenses incurred are recognized in profit or loss on a systematic basis in the same periods in which expenses are incurred and are presented net of the related expense.

Financial income and expenses

Interest income and interest expenses are recognized in profit or loss using the effective interest method. Dividend income is recognized in profit or loss on the date that the Group's right to receive payment is established. See note 8 for additional information.

Income taxes

Income taxes include both current and deferred taxes. Income taxes are reported in profit or loss unless the underlying transaction is reported in "Other comprehensive income" or in equity, in which case the corresponding tax is reported according to the same principle.

A current tax liability or asset is recognized for the estimated taxes payable or refundable for the current year or prior years.

Deferred tax is recognized using the balance sheet liability method. The calculation of deferred taxes is based on differences between the values reported in the balance sheet and their valuation for taxation, which are referred to as temporary differences, and the carry forward of unused tax losses and tax credits. Temporary differences attributable to the following assets and liabilities are not provided for: the initial recognition of goodwill, the initial recognition (other than in business combinations) of assets or liabilities that affect neither accounting nor taxable profit, and differences related to investments in subsidiaries, associated companies and joint ventures to the extent that they will probably not reverse in the foreseeable future, and for which the company is able to control the timing of the reversal of the temporary differences.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. In the calculation of deferred taxes, enacted or substantively enacted tax rates are used for the individual tax jurisdictions.

Current and deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. For details regarding taxes, see note 9.

Earnings per share

Basic earnings per share are calculated based on the profit for the year attributable to owners of the parent and the basic weighted average number of shares outstanding. Diluted earnings per share are calculated based on the profit for the year attributable to owners of the parent and the diluted weighted average number of shares outstanding. Dilutive effects arise from stock options that are settled in shares, or that at the employees' choice can be settled in shares or cash in the share based incentive programs.

Stock options have a dilutive effect when the average share price during the period exceeds the exercise price of the options. When calculating the dilutive effect, the exercise price is adjusted by the value of future services related to the options. If options for which employees can choose settlement in shares or cash are dilutive, the profit for the year is adjusted for the difference between cash-settled and equity-settled treatment of options and the more dilutive of cash settlement and share settlement is used in calculating earnings per share. See note 11 for more details.

Intangible assets

Goodwill

Goodwill is recognized at cost, as established at the date of acquisition of a business (see "Business combinations"), less accumulated impairment losses, if any. Goodwill is allocated to the cash-generating units (CGU) that are expected to benefit from the synergies of the business combination. Impairment testing is made at least annually or whenever the need is indicated. The impairment test is performed at the level on which goodwill is monitored for internal management purposes. The four business areas of Atlas Copco's operations have been identified as CGUs. Goodwill is reported as an indefinite useful life intangible asset.

Technology-based intangible assets

Expenditure on research activities is expensed as incurred. Research projects acquired as part of business combinations are initially recognized at their fair value at the acquisition date. Subsequent to initial recognition, these research projects are carried at cost less amortization and impairment losses. Expenditure on development activities are expensed as incurred unless the activities meet the criteria for being capitalized i.e.:

• the product or process being developed is estimated to be technically and commercially feasible, and
• the Group has the intent and ability to complete and sell or use the product or process.

The expenditure capitalized includes the cost of materials, direct labor, and other costs directly attributable to the project. Capitalized development expenditure is carried at cost less accumulated amortization and impairment losses. Amortization related to research and development costs for 2015 amounted to 915 (686). This has been reported as part of research and development costs in the income statement since the Group follows up on the research and development function as a whole.

Trademarks

Trademarks acquired by the Group are capitalized based on their fair value at the time of acquisition. Certain trademarks are estimated to have an indefinite useful life and are carried at cost less accumulated impairment losses. They are tested at least annually for impairment. Other trademarks, which have finite useful lives, are carried at cost less accumulated amortization and impairment losses.

Marketing and customer related intangible assets

Acquired marketing and customer related intangibles are capitalized based on their fair value at the time of acquisition and are carried at cost less accumulated amortization and impairment losses.

Other intangible assets

Acquired intangible assets relating to contract-based rights, such as licenses or franchise agreements, are capitalized based on their fair value at the time of acquisition and carried at cost less accumulated amortization and impairment losses. Expenditure on internally generated goodwill, trademarks and similar items is expensed as incurred. Changes in the Group's intangible assets during the year are described in note 12.

Property, plant and equipment

Items of property, plant and equipment are carried at cost less accumulated depreciation and impairment losses. Cost of an item of property, plant and equipment comprises purchase price, import duties, and any cost directly attributable to bringing the asset to the location and condition for use. The cost also includes dismantlement and removal of the asset in the future if applicable. Borrowing cost for assets that need a substantial period of time to get ready for their intended use are included in the cost value until the assets are substantially ready for their use or sale and are thereafter depreciated. The Group capitalizes costs on initial recognition and on replacement of significant parts of property, plant and equipment if it is probable that the future economic benefits embodied will flow to the Group and the cost can be measured reliably. All other costs are recognized as an expense in profit or loss when incurred.

Rental equipment

The rental fleet is comprised of diesel and electric powered air compressors, generators, air dryers, and to a lesser extent general construction equipment. Rental equipment is initially recognized at cost and is depreciated over the estimated useful lives of the equipment. Rental equipment is depreciated to a residual value estimated at 0–10% of cost.

Depreciation and amortization

Depreciation and amortization is calculated based on cost using the straight-line method over the estimated useful life of the asset. Parts of property, plant and equipment with a cost that is significant in relation to the total cost of the item are depreciated separately when the useful lives of the parts do not coincide with the useful lives of other parts of the item. The following useful lives are used for depreciation and amortization:

Technology-based intangible assets	3–15 years
Trademarks with finite lives	5–15 years
Marketing and customer related intangible assets	5–10 years
Buildings	25–50 years
Machinery and equipment	3–10 years
Vehicles	4–5 years
Computer hardware and software	3–10 years
Rental equipment	3–8 years

The useful lives and residual values are reassessed annually. Land, assets under construction, goodwill, and trademarks with indefinite lives are not depreciated or amortized. For changes in the Group's property, plant and equipment see note 13.

Leasing

The Group acts both as lessor and lessee. Leases are classified as either finance leases or operating leases. A finance lease entails the transfer to the lessee of substantially all of the economic risks and benefits associated with ownership. If this is not the case, the lease is accounted for as an operating lease.

Group as lessee

For the lessee, a financial lease implies that the fixed asset leased is recognized as an asset in the balance sheet. Initially, a corresponding liability is recorded. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the future minimum lease payments. Fixed assets under finance leases are depreciated over their estimated useful lives, while the lease payments are reported as interest and amortization of the lease liability. For operating leases, the lessee does not account for the leased asset in its balance sheet. The costs of operating leases are recorded in the income statement on a straight-line basis over the term of the lease.

Group as lessor

In cases where the Group acts as the lessor under an operating lease, the asset is classified as rental equipment and is subject to the Group's depreciation policies. The lease payments are included in profit or loss on a straight-line basis over the term of the lease. Under finance leases where the Group acts as lessor, the transaction is recorded as a sale and a lease receivable, comprising the future minimum lease payments and any residual value guaranteed to the lessor, is recorded. Lease payments are recognized as interest income and repayment of the lease receivable. See note 22 for more details on leases.

Impairment of non-financial assets

The carrying values of the Group's non-financial assets are reviewed at least at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the Group estimates the recoverable amount of the asset. An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit (CGU) exceeds its recoverable amount (i.e. the greater of fair value less costs to sell and value in use). In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of assessing impairment, assets are grouped in CGUs, which are the smallest identifiable groups of assets that generate cash inflows that are largely independent of the cash inflows from other assets or group of assets. Impairment losses are recognized in profit or loss. An impairment loss related to goodwill is not reversed. In respect of other assets, impairment losses in prior periods are reviewed for possible reversal of the impairment at each reporting date.

Inventories

Inventories are valued at the lower of cost and net realizable value. Net realizable value is the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recognized according to the first-in-first-out principle and includes the cost of acquiring inventories and bringing them to their existing location and condition. Inventories manufactured by the Group and work in progress include an appropriate share of production overheads based on normal operating capacity. Inventories are reported net of deductions for obsolescence and internal profits arising in connection with deliveries from the production companies to the customer centers. See note 16 for more details.

Equity

Shares issued by the company are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognized as a deduction from equity, net of any tax effect.

When share capital recognized as equity is repurchased, the amount of the consideration paid is recognized as a deduction from equity net of any tax effect. Repurchased shares are classified as treasury shares and

are presented as a deduction from total equity. When treasury shares are sold or subsequently reissued, the amount received is recognized as an increase in equity and the resulting surplus or deficit on the transaction is transferred to or from other paid-in capital.

Provisions

Provisions are recognized:

• when the Group has a legal or constructive obligation (as a result of a past event),
• it is probable that the Group will have to settle the obligation, and
• the amount of the obligation can be estimated reliably.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date.

If the effect of the time value of money is material, the provision is determined by discounting the expected future cash flows of estimated expenditures.

Provisions for product warranties are recognized as cost of sales at the time the products are sold based on the estimated cost using historical data for level of repairs and replacements.

A restructuring provision is recognized when the Group has approved a detailed and formal restructuring plan and the restructuring has either commenced or been announced publicly.

Present obligations arising under onerous contracts are recognized as provisions. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract. Before a provision is established, the Group recognizes any impairment loss on the asset associated with the contract. For details on provisions see note 25.

Post-employment benefits

Post-employment benefit plans are classified either as defined contribution or defined benefit plans. Under a defined contribution plan, the Group pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts if the fund does not hold sufficient assets to pay all employee benefits. Contributions to defined contributions plans are expensed when employees provide services entitling them to the contribution.

Other post-employment benefit plans are defined benefit plans and it is the Group's obligation to provide agreed benefits to current and former employees. The net obligation of defined benefit plans is calculated by estimating the amount of future benefits that employees have earned in return for their services in current and prior periods. The amount is discounted to determine its present value and the fair values of any plan assets are deducted. Funded plans with net assets, i.e. plans with assets exceeding the commitments, are reported as financial non-current assets.

The cost for defined benefit plans is calculated using the Projected Unit Credit Method, which distributes the cost over the employee's service period. The calculation is performed annually by independent actuaries using actuarial assumptions such as employee turnover, mortality, future increase in salaries and medical cost. Changes in actuarial assumptions, experience adjustments of obligations and changes in fair value of plan assets result in remeasurements and are recognized in other comprehensive income. Each quarter a remeasurement is performed to adjust the present value of pension liabilities and the fair value of pension assets against "Other comprehensive income". Net interest on defined benefit obligations and plan assets is reported as interest income or interest expenses. See note 23 for additional information.

Share-based compensation

The Group has share-based incentive programs, consisting of share options and share appreciation rights, which have been offered to certain employees based on position and performance. Additionally, the Board is offered synthetic shares.

The fair value of share options that can only be settled in shares (equity-settled) is recognized as an employee expense with a corresponding increase in equity. The fair value, measured at grant date using the Black-Scholes formula, is recognized as an expense over the vesting period. The amount recognized as an expense is adjusted to reflect the actual number of share options that vest.

The fair value of the share appreciation rights, synthetic shares, and options with a choice for employees to settle in shares or cash is recognized in accordance with principles for cash-settled share-based payments. The value is recognized as an employee expense with a corresponding increase in liabilities. The fair value, measured at grant date and remeasured at each reporting date using the Black-Scholes formula, is accrued and recognized as an expense over the vesting period. Changes in fair value are, during the vesting period and after the vesting period until settlement, recognized in profit or loss as an employee expense. The accumulated expense recognized equals the cash amount paid at settlement.

Social security charges are paid in cash and are accounted for in consistence with the principles for cash-settled share-based payments, regardless of whether they are related to equity- or cash-settled share-based payments. See note 23 for details.

Financial assets and liabilities – financial instruments Recognition and derecognition

Financial assets and liabilities are recognized when the Group becomes a party to the contractual provision of the instrument. Transactions of financial assets are accounted for at trade date, which is the day when the Group contractually commits to acquire or dispose of the assets. Trade receivables are recognized on issuance of invoices. Liabilities are recognized when the other party has performed and there is a contractual obligation to pay. Derecognition, fully or partially, of a financial asset occurs when the rights in the contract have been realized or mature, or when the Group no longer has control over it. A financial liability is derecognized, fully or partially, when the obligation specified in the contract is discharged or otherwise expires.

A financial asset and a financial liability are offset and the net amount presented in the balance sheet when there is a legal right to offset the recognized amounts and there is an intention to either settle on a net basis or to realize the asset and settle the liability simultaneously.

Measurement of financial instruments

Financial instruments are measured, classified and recognized according to IAS 39 in the following categories:

The Group classifies its financial assets in the following categories:

• Financial assets at fair value through profit or loss
• Loans and receivables
• Held-to-maturity investments
• Assets available for sale

The Group classifies its financial liabilities in the following categories:

• Financial liabilities at fair value through profit or loss
• Other financial liabilities measured at amortized cost using the effective interest method

Financial assets and liabilities at fair value through profit or loss: This category includes financial assets and liabilities held for trading or are designated as such upon initial recognition. A financial asset or liability is held for trading if the Group manages such investments and makes purchase and sale decisions based on their fair value. A derivative that is not designated or effective as hedging instrument is also categorized as held for trading. Financial instruments in this category are measured at fair value and changes therein are recognized in profit or loss. Fair value is determined in the manner described in note 27.

Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not listed in an active market, such as trade and other receivables and cash and cash equivalents. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses.

Held-to-maturity investments: Held-to-maturity investments are nonderivative financial assets with fixed or determinable payments and fixed maturity dates that the Group has the positive intention and ability to hold to maturity. Held-to-maturity-investments are measured at amortized cost using the effective interest rate method, less any impairment losses.

Available-for-sale financial assets: This category consists of nonderivatives that are either designated as available-for-sale or are not classified as any of above categories. These assets are measured at fair value. Changes therein are recognized in "Other comprehensive income", except for impairment losses and foreign exchange gains and losses on availablefor-sale monetary items which are recognized in profit or loss. When an investment is derecognized, the cumulative gain or loss in other comprehensive income is transferred to profit or loss. Fair value is determined in the manner described in note 27.

Other financial liabilities: Other financial liabilities are measured at amortized cost using the effective interest method. Trade payables and loan liabilities are recognized in this category.

Impairment of financial assets

Financial assets, except those classified as fair value through profit and loss, are assessed for indicators of impairment at the end of each reporting period. A financial asset is considered to be impaired if objective evidence indicates that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flow of the investment has been affected negatively. The impairment is made on an individual basis for significant financial assets and in some cases collectively in groups with similar credit risks. Impairment losses are recognized in profit or loss. An impairment loss is reversed if the reversal can be objectively related to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognized in other comprehensive income.

Derivatives and hedge accounting

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently measured at fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item hedged. Changes in fair value for derivatives that do not fulfill the criteria for hedge accounting are recognized as operating or financial transactions based on the purpose of the use of the derivative. Interest payments for interest swaps are recognized as interest income or expense, whereas changes in fair value of future payments are presented as gains or losses from financial instruments.

In order to qualify for hedge accounting the hedging relationship must be

• formally designated,
• expected to be highly effective, and
• documented.

The Group assesses, evaluates, and documents effectiveness both at hedge inception and on an on-going basis.

Fair value hedges: Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in profit or loss together with any changes in the fair value of the hedged asset or liability. The Group applies fair value hedge accounting for interest rate swaps used for hedging fixed interest risk on borrowings.

Cash flow hedges: Changes in the fair value of the hedging instrument are recognized in Other comprehensive income to the extent that the hedge is effective and the accumulated changes in fair value are recognized as a separate component in equity. Gains or losses relating to the ineffective part of hedges are recognized immediately in profit or loss.

The amount recognized in equity through Other comprehensive income is reversed to profit or loss in the same period in which the hedged item affects profit or loss. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the amount previously recognized in Other comprehensive income and accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or liability. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss. The Group uses foreign currency forwards to hedge part of the future cash flows from forecasted transactions in foreign currencies. Interest rate swaps are also used as cash flow hedges for hedging interest on borrowings with variable interest.

Hedge of net investments in foreign operations: The Group hedges a substantial part of net investments in foreign operations. Changes in the value of the hedge instrument relating to the effective portion of the hedge are recognized in Other comprehensive income and accumulated in equity. Gains or losses relating to the ineffective portion are recognized immediately in profit or loss. On divestment of foreign operations, the gain or loss accumulated in equity is recycled through profit or loss, increasing or decreasing the profit or loss on the divestment. The Group uses loans and forward contracts as hedging instruments.

Accounting for discontinuation of hedges: Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting.

For fair value hedges ,the fair value adjustment to the carrying amount of the hedged asset or liability arising from the hedged risk is amortized to profit or loss from the date the hedge was discontinued.

For cash flow hedges any gain or loss recognized in other comprehensive income and accumulated in equity at that time of hedge discontinuation remains in equity and is recognized when the forecast transaction is ultimately recognized in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss.

Asset held for sale

Assets are classified as held for sale if their value, within one year, will be recovered through a sale and not through continued use in the operations. On the reclassification date, assets and liabilities are measured at the lower of fair value less selling expenses and the carrying amount. Following reclassification, the assets are no longer depreciated or amortized. Gains and losses recognized on remeasurements and disposals are reported in profit or loss.

Contingent liabilities

A contingent liability is a possible obligation or a present obligation that arises from past events that is not reported as a liability or provision, due either to that it is not probable that an outflow of resources will be required to settle the obligation or that a sufficiently reliable calculation of the amount cannot be made.

New or amended accounting standards in 2015

The following revised and amended IFRS standards have been applied by the Group from 2015 but had none or no material impact on the Group.

Annual improvements to IFRSs 2010–2012 issued in December 2013. Applied in advance.

Annual improvements to IFRSs 2011–2013 issued in December 2013. Amendments to IAS 19 (2011) Defined Benefit Plans Employee Contributions issued in November 2013.

The amendments permit contributions from employees or third parties that are independent of the number of years of service to be recognized as a reduction in the service cost in the period in which the service is rendered. Applied in advance.

IFRIC 21 Levies.

The interpretation addresses when a liability to pay a levy to a government should be recognized.

New or amended accounting standards effective after 2015

The following standards, interpretations, and amendments have been issued but were not effective as of December 31, 2015 and have not been applied by the Group.

IFRS 9 Financial Instruments*

The standard is intended to replace IAS 39 Financial instruments: Recognition and Measurement, and addresses the classification and measurement of financial instruments and hedge accounting. It is likely to affect the Group's accounting of financial assets and financial liabilities. The effective date is January 1, 2018 and the Group is yet to assess the full impact of IFRS 9.

IFRS 15 Revenue from Contracts with Customers*

This new standard that replaces existing revenue recognition standards specifies how and when the Group will recognize revenue as well as requiring the Group to provide users of financial statements with more informative, relevant disclosures. The effective date is January 1, 2018. The assessment of the effect on the revenue recognition is under investigation.

IFRS 16 Leases*

The standard defines the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract. The changes relate to the accounting treatment by the lessee. IFRS 16 introduces a single accounting model and requires the recognition of substantially all leases in the balances sheet and the separation of depreciation of lease assets from interest on lease liabilities in the income statement. IFRS 16 is effective from 1 January 2019. The assessment of the effect from this standard is under investigation.

In addition to the above, other new or revised accounting standards have been published, but are not yet effective. They are not considered to have a material impact on the financial statements of Atlas Copco.

* Indicates that the standard has not yet been endorsed by the EU.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS The preparation of financial reports requires management's judgment and the use of estimates and assumptions that affects the amounts reported in the consolidated financial statements. These estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the prevailing circumstances. Actual result may differ from those estimates. The estimates and assumptions are reviewed on an on-going basis. Changes in accounting estimates are recognized in the period which they are revised and in

any future periods affected. The estimates and the judgments which, in the opinion of management, are significant to the underlying amounts included in the financial reports and for which there is a significant risk that future events or new information could entail a change in those estimates or judgments are as follows:

Impairment of goodwill, other intangible assets and other long-lived assets

Key sources of estimation uncertainty

Goodwill and certain trademarks are not amortized but are subject to annual tests for impairment. Other intangible assets and other long-lived assets are amortized or depreciated based on management's estimates of the period that the assets will generate revenue but are also reviewed regularly for indications of impairment. The impairment tests are based on a review of the recoverable amount, which is estimated based on management's projections of future cash flows using internal business plans and forecasts.

Accounting judgment

Asset impairment requires management's judgment, particularly in assessing:

• whether an event has occurred that may affect asset values,
• whether the carrying value of an asset can be supported by the net present value of future cash flows, which are estimated based upon the continued use of the asset in the business,
• the appropriate assumptions to be applied in preparing cash flow projections, and
• the discounting of these cash flows.

Changing the assumptions selected by management to determine the level, if any, of impairment could affect the financial position and results of operation. See note 12.

Pension and other post-employment benefit valuation assumptions

Key sources of estimation uncertainty

Pensions and other post-employment obligations are dependent on the assumptions established by management and used by actuaries in calculating such amounts. The key assumptions include discount rates, inflation, future salary increases, mortality rates, and health care cost trend rates. The actuarial assumptions are reviewed on an annual basis and are changed when it is deemed appropriate.

See note 23 for additional information regarding assumptions used in the calculation of pension and post-employment obligations.

Trade and financial receivable

Key sources of estimation uncertainty

The Group estimates the risk that receivables will not be paid and provides for doubtful accounts based on specific provisions for known cases and collective provisions for losses based on historical loss levels.

Accounting judgment

Management's judgment considers rapidly changing market conditions which may be particularly sensitive in customer financing operations. Additional information is included in section "Credit risk" in note 27.

Inventory

Accounting judgment

The Group values inventory at the lower of historical cost, based on the first-in, first-out basis, and net realizable value. The calculation of net realizable value involves management's judgment as to the estimated sales prices, over-stock articles, out-dated articles, damaged goods, and selling costs. If the estimated net realizable value is lower than cost, a valuation allowance is established for inventory obsolescence. See note 16 for additional information.

Legal proceedings and tax claims Accounting judgment

Atlas Copco recognizes a liability when the Group has an obligation from a past event involving the transfer of economic benefits and when a reasonable estimate can be made of what the transfer might be. The Group reviews outstanding legal cases regularly in order to assess the need for provisions in the financial statements. These reviews consider the factors of the specific case by internal legal counsel and through the use of outside legal counsel and advisors when necessary. The financial statements may be affected to the extent that management's assessments of the factors considered are not consistent with the actual outcome.

Additionally, the legal entities of the Group are frequently subject to audits by tax authorities in accordance with standard practice in the countries where the Group operates. In instances where the tax authorities have a different view on how to interpret the tax legislation, the Group makes estimates as to the likelihood of the outcome of the dispute, as well as estimates of potential claims. The actual results may differ from these estimates.

Deferred taxes

Key sources of estimation uncertainty

Deferred tax assets are recognized for temporary differences between the carrying amounts for financial reporting purposes of assets and liabilities and the amounts used for taxation purposes and for tax loss carry-forwards. The Group records deferred tax assets based upon management's estimates of future taxable profit in different tax jurisdictions. The actual results may differ from these estimates, due to change in the business climate and change in tax legislation. See note 9.

Revenue recognition

Key sources of estimation uncertainty

Revenue from services is recognized in profit or loss by reference to the stage of completion of the transaction at the balance sheet date. The stage of completion is determined based on the proportion that costs incurred to date bear to the estimated total costs of the transaction.

Accounting judgment

• Management's judgment is used, for instance, when assessing:
• if the risks and rewards have been transferred to the buyer, to determine if revenue and cost should be recognized in the current period,
• the degree of completion of service contracts and the estimated total costs for such contracts, to determine the revenue and cost to be recognized in the current period and whether any losses need to be recognized, and
• the customer credit risk (i.e. the risk that the customer will not meet the payment obligation), to determine and justify the revenue recognized in the current period.

Warranty provisions

Key sources of estimation uncertainty

Provisions for product warranties should cover future commitments for the sales volumes already realized. Warranty provision is a complex accounting estimate due to the variety of variables which are included in the calculations. The calculation methods are based on the type of products sold and historical data for level of repairs and replacements. The underlying estimates for calculating the provision is reviewed at least quarterly as well as when new products are being introduced or when other changes occur which may affect the calculation. See note 25.

2. Acquisitions

	The following summarizes the significant acquisitions during 2015 and 2014:
Closing date		Country	Business area	Revenues 1)	Number of employees 1)
2015 Dec. 15	Air Supply Systems and A-1 Air Compressor Corp.	U.S.A.	Compressor Technique	2)	37
2015 Dec. 4	Innovative Vacuum Solutions Inc.	U.S.A.	Compressor Technique	32	19
2015 Oct. 5	NJS Technologies	United Kingdom	Industrial Technique	9	7
2015 Sep. 9	Air Repair Sales and Service Ltd.	Canada	Compressor Technique	2)	12
2015 Aug. 7	Applied Plasma Systems Co.	South Korea	Compressor Technique	9	5
2015 July 2	Mustang Services	U.S.A	Construction Technique	45	2
2015 Mar. 3	Kalibriercentrum Bayern	Germany	Industrial Technique	28	27
2015 Jan. 8	Maes Compressoren NV	Belgium	Compressor Technique	65	30
2014 Dec. 31	Titan Technologies International Inc.	U.S.A.	Industrial Technique	35	14
2014 Sep. 10	Henrob	U.S.A. and United Kingdom	Industrial Technique	1 063	400
2014 Sep. 3	Ash Air (NZ) Ltd. and Fox Air NZ Ltd.	New Zealand	Compressor Technique	162	120
2014 May 27	Cavaletti Equipamentos e Servicos Ltda	Brazil	Compressor Technique	26	34
2014 May 5	National Pump & Compressor Ltd. & McKenzie Compressed Air Inc.	U.S.A.	Compressor Technique	2)	120
2014 Feb. 3	Geawelltech	Sweden	Mining and Rock Excavation Technique	2)	19
2014 Jan. 9	Edwards Group	Global	Compressor Technique	6 950	3 400

1) Annual revenues and number of employees at the time of acquisition.

2) Former distributor of Atlas Copco products. No revenues are disclosed for former Atlas Copco distributors.

All acquisitions above were made through the purchase of 100% of shares and voting rights or through the purchase of the net assets of the acquired operations. The Group received control over the operations upon the date of acquisition. No equity instruments have been issued in connection with the acquisitions. All acquisitions have been accounted for using the acquisition method.

The amounts presented in the following tables detail the recognized amounts aggregated by business area, as the relative amounts of the individual acquisitions are not considered significant. The fair values related to intangible assets are amortized over 5–15 years. For those acquisitions that include a contingent consideration clause, the fair value of the contingent consideration has been calculated based on a discount rate of 10.5 %. For more information about the valuation of contingent consideration, see note 27. The Group is in the process of reviewing the final values for the acquired businesses. No adjustments are expected to be material. Adjustments related to the acquisitions made in 2015 are included in the following tables.

2. Acquisitions, continued

Compressor Technique		Recognized values
	2015	2014
Intangible assets	45	4 256
Property, plant and equipment	12	1 280
Other assets	70	2 547
Cash and cash equivalents	11	917
Interest-bearing loans and borrowings	–4	–3 305
Other liabilities and provisions	–18	–2 681
Net identifiable assets	116	3 014
Goodwill	24	5 257
Total consideration	140	8 271
Deferred consideration	2	13
Cash and cash equivalents acquired	–11	–917
Net cash outflow	131	7 367

In January, the Compressor Technique business area acquired Belgian distributor Maes Compressoren NV. The acquisition increases Atlas Copco's presence distributing and servicing compressors in Belgium. Intangible assets of 39 were recorded on the purchase.

In August, the assets of Applied Plasma Systems Co., Ltd. (Apsys), a Korean manufacturer of abatement systems used by the semiconductor and flat panel industries, were acquired. The acquisition is considered to fit Atlas Copco well as Apsys has developed a leading technology that will help expand Atlas Copco's vacuum solutions business. Intangible assets of 10 were recorded on the purchase.

Canadian Air Repair Sales and Services Limited was acquired in September. The company is an authorized Atlas Copco distributor that sells and services industrial air compressors and air treatment systems and the acquisition enhances Atlas Copco's access to the market in eastern Canada. Intangible assets of 1 were recorded on the purchase.

Innovative Vacuum Solutions Inc., based in Tampa, Florida, U.S.A., was acquired in December. The company specializes in the repair and maintenance of industrial and high vacuum pumps and related equipment, mainly on the U.S. East Coast. The acquisition is considered to fit well into Atlas Copco's strategy of increasing its presence in the U.S. vacuum market by providing high-quality service to its customers. Intangible assets of 22 were recorded on the purchase.

Also in December, distributors Air Supply Systems Inc. and A-1 Air Compressor Corp. were acquired. The acquisitions increase Atlas Copco's direct presence in the Midwestern U.S.A. Intangible assets of 17 and goodwill of 10 were recorded on the acquisitions. The goodwill is not deductible for tax.

Industrial Technique	Recognized values
	2015	2014
Intangible assets	–116	1 348
Property, plant and equipment	1	529
Other assets	–2	418
Cash and cash equivalents	–	40
Interest-bearing loans and borrowings	–	–302
Other liabilities and provisions	44	–670
Net identifiable assets	–73	1 363
Goodwill	52	1 807
Total consideration	–21	3 170
Deferred consideration	1 644	–2 135
Cash and cash equivalents acquired	–	–40
Net cash outflow	1 623	995

In March, the Industrial Technique business area acquired German calibration specialist Kalibriercentrum Bayern, which provides laboratory and field calibration and related services to customers in such industries as motor vehicle manufacturing and aerospace. The acquisition will expand the service offering to industrial customers, initially in Germany and later in other markets. Intangible assets of 14 and goodwill of 1 were recorded on the purchase. The goodwill is deductible for tax.

The assets of NJS Technologies Ltd., an engineering and sales company that specializes in process control systems for assembly operations were acquired in October. NJS Technologies (commonly known as Pivotware) is based in Burton, United Kingdom, and the acquisition is considered a strategic fit as it will expand the product and service offering to manufacturing customers globally. Intangible assets of 14 were recorded on the purchase.

Some adjustments related to the 2014 acquisition of Henrob were made in 2015. These include a reduction of 62 in the fair value of deferred contingent consideration, a reduction of intangible assets of 143 and deferred tax liability of 38. Goodwill increased with 51.

Net cash outflow includes deferred consideration related to Henrob that was paid in January.

Mining and Rock Excavation Technique	Recognized values
	2015	2014
Intangible assets	–	8
Property, plant and equipment	–	–6
Other assets	–	23
Cash and cash equivalents	–	33
Other liabilities and provisions	–	–15
Net identifiable assets	–	43
Goodwill	–	13
Total consideration	–	56
Deferred consideration	20	30
Cash and cash equivalents acquired	–	–33
Net cash outflow	20	53

The Mining and Rock Excavation Technique business area made no acquisitions in 2015. Net cash outflow includes deferred consideration related to acquisitions in prior years.

Construction Technique	Recognized values
	2015	2014
Intangible assets	4	–
Property, plant and equipment	74	–
Other liabilities and provisions	–	–1
Net identifiable assets	78	–1
Goodwill	–	1
Total consideration	78	–
Net cash outflow	78	–

In July, the Construction Technique business area acquired the operating assets of Mustang Services, a U.S. specialty dryer rental business that serves industries such as refineries, petrochemical plants and general manufacturing. The acquisition is considered to fit well with Atlas Copco's strategy as it expands its offering in North America, the biggest market for rental of dryers. Intangible assets of 4 were recorded on the purchase.

2. Acquisitions, continued

Total fair value of acquired assets and		Group recognized values
liabilities	2015	2014	of which Edwards
Intangible assets	–67	5 612	3 933
Property, plant and equipment	87	1 803	1 252
Other non-current assets	–	74	74
Inventories	36	1 333	1 013
Receivables*	36	1 426	1 254
Other current assets	–4	155	148
Cash and cash equivalents	11	990	917
Interest-bearing loans and borrowings	–4	–3 607	–3 300
Other liabilities and provisions	–16	–2 546	–2 177
Deferred tax assets/liabilities, net	42	–821	–454
Net identifiable assets	121	4 419	2 660
Goodwill	76	7 078	5 118
Total consideration	197	11 497	7 778
Deferred consideration	1 666	–2 092	–
Cash and cash equivalents acquired	–11	–990	–917
Net cash outflow	1 852	8 415	6 861

* The gross amount is 37 (1 459) of which 1 (33) is expected to be uncollectible.

The goodwill recognized on acquisitions is primarily related to the synergies expected to be achieved from integrating these companies into the Group's existing structure.

The total consideration for all acquisitions was 197. Deferred consideration includes both deferred consideration not yet paid for acquisitions made in 2015 and settlement of deferred consideration for acquisitions made in prior years. For all acquisitions, the net cash outflow totaled 1 852 after deducting cash and cash equivalents acquired of 11.

Acquisition-related costs amounted to 28 (20) and were included mainly in "Administrative expenses" in the income statement for 2015. These include costs for announced acquisitions that will be completed in 2016.

Contribution from businesses acquired in 2015 and 2014 by business area		Compressor Industrial Mining and Rock Excavation Technique Technique Technique						Construction Technique		Group
	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
Contribution from date of control
Revenues	75	8 763	17	506	–	53	29	–	121	9 322
Operating profit	–10	1 577	–2	81	–	4	14	–	2	1 662
Profit for the year									–	1 282
Contribution if the acquisition had occurred on Jan. 1
Revenues	213	8 972	32	1 144	–	58	58	–	303	10 174
Operating profit	–6	1 598	–2	98	–	5	25	–	17	1 701
Profit for the year									8	1 327

Edwards had revenues in 2014 of 8 535 and operating profit of 1 555.

3. Divestments and assets held for sale

Divestments

In February, Atlas Copco sold its JC Carter business, based in California, USA, which produces cryogenic submerged motor pumps, to Nikkiso Cryo Inc. of Las Vegas, Nevada, USA. Nikkiso Cryo is a subsidiary to Japan based Nikkiso Ltd. Atlas Copco JC Carter had around 35 employees. The business was part of Atlas Copco's Gas and Process division within the Compressor Technique business area.

In addition, some minor divestments, including Compressor Technique's Ortman Fluid Power business, were made.

The result from these divestments is reported under "Other operating income". See note 7.

No material business divestment of assets and liabilities was done in 2014.

Assets held for sale

Two buildings located in US, amounting to 53 were reclassified to assets held for sale in 2015. Both buildings were sold during 2015.

In 2014, two buildings located in France and Sweden, amounting to 10, were reclassified to assets held for sale. Assets held for sale from previous years, amounting to 1, was sold during 2014.

2015	2014
30	–
2	–
14	–
46	–
10	–
2	–
58	–

4. Segment information

2015	Compressor Technique	Industrial Technique	Mining and Rock Excavation Technique	Construction Technique	Common group functions	Eliminations	Group
Revenues from external customers	45 928	14 528	26 558	14 940	207	–	102 161
Inter-segment revenues	309	50	107	360	134	–960	–
Total revenues	46 237	14 578	26 665	15 300	341	–960	102 161
Operating profit	10 324	3 355	4 993	1 839	–779	–4	19 728
– of which share of profit in associated companies and joint ventures	–	5	2	–	–	–	7
Net financial items							–905
Income tax expense							–7 100
Profit for the year							11 723
Non-cash expenses
Depreciation/amortization	1 373	616	1 097	920	285	–91	4 200
Impairment	10	2	134	1	–	–	147
Other non-cash expenses	–144	–33	9	18	–11	–	–161
Segment assets	37 647	13 132	18 631	16 238	3 273	–1 233	87 688
– of which goodwill	9 815	4 135	1 483	5 089	–	–	20 522
Investments in associated companies and joint ventures	1	108	16	–	–	–	125
Unallocated assets							15 197
Total assets							103 010
Segment liabilities	11 746	2 734	4 928	2 411	3 678	–1 400	24 097
Unallocated liabilities							32 163
Total liabilities							56 260
Capital expenditures
Property, plant and equipment	594	535	1 051	557	472	–158	3 051
– of which assets leased	8	3	70	2	–	–	83
Intangible assets	355	156	305	272	80	–	1 168
Total capital expenditures	949	691	1 356	829	552	–158	4 219
Goodwill acquired	24	52	–	–	–	–	76

2014	Compressor Technique	Industrial Technique	Mining and Rock Excavation Technique	Construction Technique	Common group functions	Eliminations	Group
Revenues from external customers	42 002	11 399	25 626	14 422	272	–	93 721
Inter-segment revenues	163	51	92	317	124	–747	–
Total revenues	42 165	11 450	25 718	14 739	396	–747	93 721
Operating profit	8 974	2 557	4 307	1 768	–550	–41	17 015
– of which share of profit in associated companies and joint ventures	–	6	1	–	–	–	7
Net financial items							–924
Income tax expense							–3 916
Profit for the year							12 175
Non-cash expenses
Depreciation/amortization	1 215	389	952	771	364	–91	3 600
Impairment	–7	–	116	–	–	–	109
Other non-cash expenses	–141	58	7	–49	22	–	–103
Segment assets	37 837	13 207	19 848	17 623	4 245	–2 697	90 063
– of which goodwill	9 343	3 989	1 481	5 107	–	–	19 920
Investments in associated companies and joint ventures	1	100	14	–	–	–	115
Unallocated assets							15 103
Total assets							105 281
Segment liabilities	11 695	3 104	4 938	2 751	3 858	–2 366	23 980
Unallocated liabilities							30 548
Total liabilities							54 528
Capital expenditures
Property, plant and equipment	647	272	1 000	942	578	–126	3 313
– of which assets leased	8	2	33	3	–	–	46
Intangible assets	296	163	416	182	130	–	1 187
Total capital expenditures	943	435	1 416	1 124	708	–126	4 500
Goodwill acquired	5 257	1 807	13	1	–	–	7 078

4. Segment information, continued

The Group is organized in separate and focused but still integrated business areas, each operating through divisions. The business areas offer different products and services to different customer groups. They are also the basis for management and internal reporting and are regularly reviewed by the Group's President and CEO, the chief operating decision maker. All business areas are managed on a worldwide basis and their role is to develop, implement and follow up the objectives and strategies within their respective business. For a description of the business areas, see pages 20–35.

Common group functions, i.e. functions which serve all business areas or the Group as a whole, is not considered a segment.

The accounting principles for the segments are the same as those described in note 1. Atlas Copco's inter-segment pricing is determined on a commercial basis.

Segment assets are comprised of property, plant and equipment, intangible assets, other non-current receivables, inventories, and current receivables.

Segment liabilities include the sum of non-interest-bearing liabilities such as operating liabilities, other provisions, and other non-current liabilities. Capital expenditure includes property, plant and equipment, and intangible assets, but excludes the effect of goodwill, intangible assets and property, plant and equipment through acquisitions.

Geographical information

The revenues presented are based on the location of the customers while noncurrent assets are based on the geographical location of the assets. These assets include non-current assets other than financial instruments, investments in associated companies and joint ventures, deferred tax assets, and postemployment benefit assets.

By geographic	Revenues		Non-current assets
area/country	2015	2014	2015	2014
North America
Canada	3 654	3 282	308	331
U.S.A.	18 510	15 778	7 844	7 567
Other countries	2 590	2 143	160	129
	24 754	21 203	8 312	8 027
South America
Brazil	2 883	3 727	337	392
Chile	2 254	1 821	135	121
Other countries	2 712	2 552	97	69
	7 849	8 100	569	582
Europe
Belgium	944	811	1 928	1 948
France	2 819	2 625	232	244
Germany	4 565	4 673	2 876	3 172
Italy	2 126	1 728	912	996
Russia	2 393	2 783	63	96
Sweden	1 951	1 939	9 537	9 815
United Kingdom	3 427	2 886	14 327	13 691
Other countries	11 881	11 434	1 249	1 398
	30 106	28 879	31 124	31 360
Africa/Middle East
South Africa	2 191	2 425	139	213
Other countries	7 820	6 812	323	362
	10 011	9 237	462	575
Asia/Australia
Australia	3 643	3 851	390	433
China	12 542	11 536	2 792	2 827
India	3 470	2 750	594	573
Other countries	9 786	8 165	1 300	1 430
	29 441	26 302	5 076	5 263
Total	102 161	93 721	45 543	45 807

4. Segment information, continued

Quarterly data

Revenues by business area		2015			2014
MSEK	1	2	3	4	1	2	3	4
Compressor Technique	11 049	11 462	11 875	11 851	9 409	10 353	10 718	11 685
– of which external	10 951	11 378	11 806	11 793	9 361	10 307	10 682	11 653
– of which internal	98	84	69	58	48	46	36	32
Industrial Technique	3 394	3 697	3 668	3 819	2 505	2 650	2 827	3 468
– of which external	3 382	3 684	3 656	3 806	2 493	2 636	2 816	3 454
– of which internal	12	13	12	13	12	14	11	14
Mining and Rock Excavation Technique	6 756	6 870	6 481	6 558	6 251	6 396	6 449	6 622
– of which external	6 724	6 856	6 451	6 527	6 237	6 373	6 398	6 618
– of which internal	32	14	30	31	14	23	51	4
Construction Technique	3 698	4 256	3 855	3 491	3 354	4 068	3 692	3 625
– of which external	3 634	4 136	3 762	3 408	3 272	3 971	3 621	3 558
– of which internal	64	120	93	83	82	97	71	67
Common Group functions/eliminations	–152	–174	–156	–137	–96	–119	–96	–40
Total	24 745	26 111	25 723	25 582	21 423	23 348	23 590	25 360

Operating profit by business area		2015				2014
MSEK	1	2	3	4	1	2	3	4
Compressor Technique	2 392	2 603	2 709	2 620	1 915	2 219	2 369	2 471
in % of revenues	21.6	22.7	22.8	22.1	20.4	21.4	22.1	21.1
Industrial Technique	770	865	866	854	543	595	636	783
in % of revenues	22.7	23.4	23.6	22.4	21.7	22.5	22.5	22.6
Mining and Rock Excavation Technique	1 276	1 258	1 296	1 163	1 071	1 155	856	1 225
in % of revenues	18.9	18.3	20.0	17.7	17.1	18.1	13.3	18.5
Construction Technique	450	457	538	394	406	545	422	395
in % of revenues	12.2	10.7	14.0	11.3	12.1	13.4	11.4	10.9
Common Group functions/eliminations	–369	–111	–96	–207	–175	–175	–138	–103
Operating profit	4 519	5 072	5 313	4 824	3 760	4 339	4 145	4 771
in % of revenues	18.3	19.4	20.7	18.9	17.6	18.6	17.6	18.8
Net financial items	–232	–222	–271	–180	–158	–165	–266	–335
Profit before tax	4 287	4 850	5 042	4 644	3 602	4 174	3 879	4 436
in % of revenues	17.3	18.6	19.6	18.2	16.8	17.9	16.4	17.5

5. Employees and personnel expenses

Average number	2015			2014
of employees	Women	Men	Total	Women	Men	Total
Parent Company
Sweden	65	53	118	61	56	117
Subsidiaries
North America	1 089	5 335	6 424	1 005	5 303	6 308
South America	500	2 685	3 185	515	2 749	3 264
Europe	3 322	15 331	18 653	3 122	15 233	18 355
– of which Sweden	727	3 347	4 074	734	3 464	4 198
Africa/Middle East	442	2 166	2 608	404	2 285	2 689
Asia/Australia	2 229	10 371	12 600	2 374	10 538	12 912
Total in subsidiaries	7 582	35 888	43 470	7 420	36 108	43 528
Total	7 647	35 941	43 588	7 481	36 164	43 645

Females in the Board of Directors and Group Management, %	Dec. 31, 2015	Dec. 31, 2014
Parent Company
Board of Directors 1)	33	33
Group Management	22	22

1) The calculation is done according to the EU calculation model where CEO is excluded but the union representatives are included.

Remuneration and other benefits		Group
MSEK	2015	2014
Salaries and other remuneration	19 140	16 679
Contractual pension benefits	1 198	941
Other social costs	3 517	3 206
Total	23 855	20 826
Pension obligations to Board members and Group Management 1)	5	15

1) Refers to former members of Group Management.

Remuneration and other benefits to the Board KSEK	Fee	Value of synthetic shares at grant date	Number of shares at grant date	Other fees 1)	Total fees incl. value of synthetic shares at grant date 2015	Adj. due to vesting and change in stock price 2)	Total expense recognized 2015 3)	Total expense recognized 2014
Chairman:
Hans Stråberg 4)	2 110	–	–	334	2 444	275	2 719	2 053
Other members of the Board:
Ulla Litzén 4)	779	–	–	374	1 153	94	1 247	1 275
Anders Ullberg	593	–	–	120	713	94	807	851
Staffan Bohman 4)	683	–	–	173	856	95	951	1 183
Margareth Øvrum	296	300	1 172	–	596	68	664	1 001
Johan Forssell	296	300	1 172	150	746	68	814	1 145
Gunilla Nordström	296	300	1 172	–	596	67	663	856
Peter Wallenberg Jr	296	300	1 172	60	656	–26	630	819
Other members of the Board previous year	–	–	–	–	–	315	315	1 272
Union representatives (4 pers)	48	–	–	–	48	–	48	44
Total 2015	5 397	1 200	4 688	1 211	7 808	1 050	8 858
Total 2014	4 499	2 090	10 943	1 113	7 702	2 797		10 499

1) Refers to fees for membership in board committees.

2) Refers to synthetic shares received in 2010–2015.

3) Provision for synthetic shares as at December 31, 2015 amounted to MSEK 9 (13).

4) Ulla Litzén, Hans Stråberg and Staffan Bohman invoiced their fees. The fees received include compensation for social costs.

Remuneration and other benefits to Group Management KSEK	Base salary	Variable compensation 1)	Other benefits 2)	Pension fees	Total, excl. recognized costs for share based payments	Recognized costs for share based payments 3)	Total expense recognized 2015	Total expense recognized 2014
President and CEO
Ronnie Leten	14 000	11 200	2 017	4 900	32 117	–1 039	31 078	30 194
Other members of Group Management (8 positions)	25 268	11 496	2 901	8 346	48 011	–95	47 916	69 647
Total 2015	39 268	22 696	4 918	13 246	80 128	–1 134	78 994
Total 2014	34 760	16 129	20 6314)	11 474	82 994	16 847		99 841
Total remuneration and other benefits to the Board and Group Management							87 852	110 340

1) Refers to variable compensation earned in 2015 to be paid in 2016.

2) Refers to vacation pay, company car, medical insurance, and other benefits.

3) Refers to stock options and SARs received in 2010–2015 and includes recognized costs due to change in stock price and vesting period, see also note 23.

4) Includes one-time cost due to changes in Group Management.

Remuneration and other fees for members of the Board, the President and CEO, and other members of Group Management

Principles for remuneration to the Board and Group Management The principles for remuneration to the Board and Group Management are approved at the Annual General Meeting of the shareholders. The principles approved by the 2015 meeting are described in the following paragraphs.

Board members

Remuneration and fees are based on the work performed by the Board. The remuneration and fees approved for 2015 are detailed in the table on the previous page. The remuneration to the President and CEO, who is a member of Group Management, is described in the following sections.

The Annual General Meeting decided that each board member can elect to receive 50% of the 2015 gross fee before tax, excluding other committee fees, in the form of synthetic shares and the remaining part in cash. The number of synthetic shares is based upon an average end price of series A shares during ten trading days following the release of the first quarterly interim report for 2015. The share rights are earned 25% per quarter as long as the member remains on the Board. After five years, the synthetic shares give the right to receive a cash payment per synthetic share based upon an average price for series A shares during 10 trading days following the release of the first quarterly interim report of the year of payment. The board members will receive dividends on series A shares until payment date in the form of new synthetic shares. If a board member resigns his or her position before the stipulated payment date as stated above, the board member has the right to request a prepayment. The prepayment will be made twelve months after the date from when the board member resigned or otherwise the original payment date is valid.

Four board members accepted the right to receive synthetic shares. The number and costs at grant date and at the end of the financial year are disclosed by board member in the table on the previous page.

Group Management

Group Management consists of the Group President and eight other members of the Executive Committee. The compensation to Group Management shall consist of base salary, variable compensation, possible long-term incentive (personnel options), pension premium, and other benefits.

The following describes the various guidelines in determining the amount of remuneration:

• Base salary is determined by position, qualification, and individual performance.
• Variable compensation is dependent upon how certain quantitative and qualitative goals set in advance are achieved. The variable compensation is maximized to 80% of the base salary for the Group President, 60% for Business Area Presidents, and 50% for other members of Group Management.
• Performance related personnel option program for 2015, see note 23.
• Pension premiums are paid in accordance with a defined contribution plan with premiums ranging between 25 and 35% of base salary depending on age.
• Other benefits consist of company car and private health insurance.
• For the expatriates, certain benefits are paid in compliance with the Atlas Copco terms and conditions for expatriate employment.
• A mutual notice of termination of employment of six months shall apply.

The Board has the right to deviate from the principles stated above if special circumstances exist in a certain case. No fees are paid to Group Management for board memberships in Group companies nor do they receive compensation for other duties that they may perform outside the immediate scope of their duties.

President and CEO

The variable compensation can give a maximum of 80% of the base salary. The variable compensation is not included in the basis for pension benefits. According to an agreement, the President and CEO has the option to receive variable compensation in the form of cash payment or as a pension contribution.

The President and CEO is a member of the Atlas Copco Airpower N.V. pension plan and the contributions follow the Atlas Copco pension policy for Swedish executives, which is a defined contribution plan. The President and CEO is entitled to retire at the age of 60. The contribution is age related and is 35% of the base salary and includes provisions for a survivors' pension. These pension plans are vested.

Other members of Group Management

Members of Group Management employed in Sweden have a defined contribution pension plan, with contribution ranging from 25% to 35% of the base salary according to age. The variable compensation is not included in the basis for pension benefits. Members of Group Management not based in Sweden also have a defined contribution pension plan. These pension plans are vested. The retirement age is 65.

Option/share appreciation rights, holdings for Group Management The stock options/share appreciation rights holdings as at December 31 are detailed below:

Stock Options/share appreciations rights holdings as at Dec. 31, 2015

Total	501 121	788 353
2015 1)	167 100	185 537
2014	121 015	260 493
2013	5 601	12 187
2012	112 001	231 773
2011	95 404	98 363
Grant Year	President and CEO	Other members of Group Management

1) Estimated grants for the 2015 stock option program including matching shares. See note 23 for additional information.

Termination of employment

The CEO is entitled to a severance pay of twelve months if the Company terminates the employment and a further twelve months if other employment is not available.

Other members of Group Management are entitled to severance pay if the Company terminates their employment. The amount of severance pay is dependent on the length of employment with the Company and the age of the executive, but is never less than 12 months and never more than 24 months' salary.

Any income that the executive receives from employment or other business activity, whilst severance pay is being paid, will reduce the amount of severance pay accordingly.

Severance pay for the CEO and other members of Group Management is calculated only on the base salary and does not include variable compensation. Severance pay cannot be elected by the employee, but will only be paid if employment is terminated by the Company.

Remuneration and other committees

In 2015, Hans Stråberg, Chair, Peter Wallenberg Jr and Anders Ullberg were members of the remuneration committee. The committee proposed compensation to the President and CEO for approval by the Board. The committee also supported the President and CEO in determining the compensation to the other members of Group Management.

Ulla Litzén, Chair, Staffan Bohman, Johan Forssell and Hans Stråberg formed the Audit Committee.

In addition, Anders Ullberg, Chair, Ulla Litzén and Hans Stråberg participated in a committee regarding repurchase and sale of Atlas Copco shares.

5. Employees and personnel expenses, continued

Workforce profile

Atlas Copco strives to grow local leaders where it operates. The geographical spread of employees and senior managers is in continuous development. As a customer-focused company, 50% of all employees work in marketing, sales or service.

Geographical spread of employees, %	Employees	Nationality of senior managers
North America	15	8
South America	7	4
Europe	43	70
Africa/Middle East	6	5
Asia/Australia	29	13
Total	100	100

Employees by professional category, %	2015	2014
Production	26	27
Marketing	8	8
Sales and support	13	13
Service	29	29
Administration	17	16
Research & development	7	7
Total	100	100

6. Remuneration to auditors

Audit fees and other services	2015	2014
Deloitte
Audit fee	69	58
Audit activities other than the audit assignment	1	1
Other services, tax	9	6
Other services, other	4	4
Other audit firms
Audit fee	5	6
Total	88	75

Audit fee refers to audit of the financial statements and the accounting records. For the Parent Company this also includes the administration of the business by the Board of Directors, the President and CEO.

Audit activities other than the audit assignment refer for example to comfort letters and the limited assurance report on Atlas Copco's sustainability report.

Tax services include both tax consultancy services and tax compliance services.

Other services essentially comprise consultancy services, such as due-diligence services in connection with acquisitions.

At the Annual General Meeting 2015, Deloitte was elected as auditor for the Group until the Annual General Meeting 2016.

7. Other operating income and expenses

Other operating income	2015	2014
Commissions received	19	15
Income from insurance operations	162	151
Capital gain on sale of fixed assets	199	23
Capital gain on divestment of business	10	–
Exchange-rate differences, net	–	213
Other operating income	76	171
Total	466	573
Other operating expenses	2015	2014
Capital loss on sale of fixed assets	–79	–27
Exchange-rate differences, net	–66	–
Other operating expenses	–91	–164

The capital gain and loss on sale of fixed assets includes the sale and leaseback of premises in Sweden amounting to a capital gain of 127 and a capital loss of –26. See note 28 for further information.

Total –236 –191

Additional information on costs by nature

Cost of goods sold includes expenses for inventories, see note 16, warranty costs, environmental fees, and transportation costs.

Salaries, remunerations and employer contributions amounted to 23 855 (20 826) whereof expenses for post employment benefits amounted to 1 198 (941). See note 5 for further details.

Government grants relating to expenses have been deducted in the related expenses by 60 (49). Government grants related to assets have been recognized as deferred income in the balance sheet and will be recognized as income over the useful life of the assets. The remaining value of these grants, at the end of 2015, amounted to 25 (38).

Included in the operating profit are exchange rate changes on payables and receivables, and the effects from currency hedging. The operating profit also includes 36 (62) of realized foreign exchange hedging result, which were previously recognized in equity. Amortization, depreciation and impairment charge for the year amounted to 4 347 (3 709). See note 12 and 13 for further details. Costs for research and development amounted to 3 287 (2 933).

8. Financial income and expenses

Financial income and expenses	2015	2014
Interest income
– cash and cash equivalents	249	142
– finance lease receivables	166	169
– other	5	2
Capital gain
– other assets	17	–
Financial income	437	313
Interest expenses
– borrowings	–959	–855
– derivatives for fair value hedges	–58	–69
– pension provisions, net	–69	–46
– deferred considerations	–92	–42
Capital loss
– other assets	–	–16
Change in fair value – other liabilities and borrowings	–9	–42
Foreign exchange loss, net	–134	–161
Impairment loss	–21	–6
Financial expenses	–1 342	–1 237
Financial expenses, net	–905	–924

"Foreign exchange loss, net" includes foreign exchange gains of 987 (98) on financial assets at fair value through profit and loss and foreign exchange losses of 1 121 (259) on other liabilities.

Interest from cash and cash equivalents is higher due to larger cash balances in foreign currency.

See note 27 for additional information.

9. Taxes

Income tax expense	2015	2014
Current taxes	–7 477	–4 169
Deferred taxes	377	253
Total	–7 100	–3 916

The following is a reconciliation of the companies' weighted average tax based on the national tax for the country as compared to the actual tax charge:

	2015	2014
Profit before tax	18 823	16 091
Weighted average tax based on national rates	–5 439	–4 624
– in %	28.9	28.7
Tax effect of:
Non–deductible expenses	–368	–430
Withholding tax on dividends	–251	–49
Tax–exempt income	891	1 420
Adjustments from prior years:
– current taxes	–2 132	–100
– deferred taxes	190	–89
Effects of tax losses/credits utilized	18	15
Change in tax rate, deferred tax	40	–6
Tax losses not valued	–46	–47
Other items	–3	–6
Income tax expense	–7 100	–3 916
Effective tax in %	37.7	24.3

The effective tax rate was 37.7% (24.3). Withholding tax on dividends of –251 (–49) relates to provisions on profits in countries where Atlas Copco incurs withholding taxes on repatriation of income. Tax-exempt income of 891 (1 420) refers to income that is not subject to taxation or subject to reduced taxation under local law in various countries. The net from tax issues and disputes in different countries amounted to –2 132 (–100).

Previously unrecognized tax losses/credits and deductible temporary differences, which have been recognized against current tax expense, amounted to 18 (15). No material unrecognized tax losses/credits or temporary difference have been used to reduce deferred tax expense.

European Commission's decision on Belgium's tax rulings

On January 11, 2016, the European Commission announced its decision that Belgian tax rulings granted to multinationals with regard to "Excess Profit" shall be considered as illegal state aid and that unpaid taxes shall be reclaimed by the Belgian state. Atlas Copco has such tax ruling since 2010.

Following the European Commission decision Atlas Copco has made a provision of 2 802 in 2015. The amount fully covers the potential tax liability for the years 2010–2015. The tax provision for the years 2010–2014 is included in the net amount from tax issues and disputes, –2 132 (–100). The tax provision for year 2015 has increased current year's income tax expense.

The following table reconciles the net liability balance of deferred taxes at the beginning of the year to the net liability at the end of the year:

Change in deferred taxes	2015	2014
Opening Net balance, Jan. 1	422	–66
Business acquisitions	42	–821
Charges to profit for the year	377	253
Tax on amounts recorded to equity	–494	1 011
Reclassifications	107	–
Translation differences	–128	45
Net balance, Dec. 31	326	422

9. Taxes, continued

The deferred tax assets and liabilities recognized in the balance sheet are attributable to the following:

Deferred tax assets and liabilities		2015			2014
	Assets	Liabilities	Net balance	Assets	Liabilities	Net balance
Intangible assets	155	2 243	–2 088	119	2 360	–2 241
Property, plant and equipment	295	659	–364	361	755	–394
Other financial assets	12	29	–17	23	26	–3
Inventories	1 594	40	1 554	1 618	43	1 575
Current receivables	257	237	20	256	224	32
Operating liabilities	778	93	685	736	53	683
Provisions	418	5	413	457	5	452
Post–employment benefits	604	30	574	645	6	639
Borrowings	87	104	–17	265	–	265
Loss/credit carry-forwards	224	–	224	220	–	220
Other items 1)	10	668	–658	13	819	–806
Deferred tax assets/liabilities	4 434	4 108	326	4 713	4 291	422
Netting of assets/liabilities	–2 611	–2 611	–	–3 164	–3 164	–
Net deferred tax balances	1 823	1 497	326	1 549	1 127	422

1) Other items primarily include tax deductions which are not related to specific balance sheet items.

Deferred tax assets regarding tax loss carry-forwards are reported to the extent that realization of the related tax benefit through future taxable results is probable. To the extent that it is not probable that taxable results will be available against which the unused tax losses can be utilized, a deferred tax asset is not recognized. At December 31, the Group had total tax loss carry-forwards of 4 715 (4 079), of which deferred tax assets were recognized for 1 074 (861). The tax value of reported tax loss carry-forwards totals 224 (220). There is no expiration date for utilization of the major part of the tax losses carry-forwards for which deferred tax assets have been recognized.

Tax losses carry-forwards for which no deferred tax have been recognized expires in accordance with below table:

	2015	2014
Expires after 1–2 years	24	19
Expires after 3–4 years	1 030	522
Expires after 5–6 years	50	549
No expiry date	2 537	2 128
Total	3 641	3 218

Changes in temporary differences during the year that are recognized in the income statement are attributable to the following:

	2015	2014
Intangible assets	203	–21
Property, plant and equipment	29	23
Other financial assets	16	–13
Inventories	9	–153
Current receivables	–9	64
Operating liabilities	32	159
Provisions	58	11
Post-employment benefits	–43	46
Borrowings	–25	86
Other items	98	55
Changes due to temporary differences	368	257
Loss/credit carry-forwards	9	–4
Charges to profit for the year	377	253

10. Other comprehensive income

Other comprehensive income for the year		2015		2014
	Before tax	Tax	After tax	Before tax	Tax	After tax
Attributable to owners of the parent
Items that will not be reclassified to profit or loss
Remeasurments of defined benefit plans	662	–124	538	–759	194	–565
Items that may be reclassified subsequently to profit or loss
Translation differences on foreign operations	–1 374	–295	–1 669	5 661	449	6 110
Hedge of net investments in foreign operations	681	–150	531	–1 052	231	–821
Cash flow hedges	68	–12	56	–199	31	–168
Adjustment for amounts transferred to the initial carrying amounts of acquired operations	–	–	–	81	–	81
Total other comprehensive income	37	–581	–544	3 732	905	4 637
Attributable to non-controlling interests
Translation differences on foreign operations	4	–	4	26	–	26
Total other comprehensive income	41	–581	–540	3 758	905	4 663

11. Earnings per share

Amounts in SEK	Basic earnings per share			Diluted earnings per share
	2015	2014	2015	2014
Earnings per share	9.62	10.01	9.58	9.99

The calculation of earnings per share presented above is based on profits and number of shares as detailed below.

Profit for the year attributable to owners of the parent	2015	2014
Profit for the year	11 717	12 169
Average number of shares outstanding	2015	2014
Basic weighted average number of shares outstanding	1 217 420 945	1 215 605 904
Effect of employee stock options	1 286 968	988 378
Diluted weighted average number of shares outstanding	1 218 707 913	1 216 594 282

Potentially dilutive instruments

As of December 31, 2015, Atlas Copco had six outstanding employee stock option programs, of which the exercise price, including adjustment for remaining vesting costs for the 2014 and 2015 programs, exceeded the average share price for series A shares, SEK 238.7 per share. These programs are, therefore, considered anti-dilutive and are not included in the calculation of diluted earnings per share. If the average share price, adjusted in accordance with above, exceeds the strike price in the future, these options will be dilutive. The redemption procedure approved by the 2015 AGM, whereby every share was split into one ordinary share and one redemption share which was then automatically redeemed, did not have any impact on the weighted average number of shares.

12. Intangible assets

Impairment tests for cash-generating units with goodwill and for intangible assets with indefinite useful lives

Impairment tests (including sensitivity analyses) are performed as per September 30 each year.

Current goodwill is monitored for internal management purposes at business area level. The goodwill has therefore been tested for impairment at business area level except as stated below.

Businesses acquired in 2015 as well as those in previous years, and their related cash flows, have in most cases been integrated with other Atlas Copco operations soon after the acquisition. In instances where the acquired business is not yet integrated and hence is monitored separately, the associated goodwill is tested for impairment separately. Atlas Copco acquired Edwards Group January 9, 2014. Goodwill and intangible assets have been included in the Compressor Technique values, and this year, as well as previous year, their values have also been tested separately.

The recoverable amounts of the cash generating units have been calculated as value in use based on management's five-year forecast for net cash flows where the most significant assumptions are revenues, operating profits, working capital, and capital expenditures.

All assumptions for the five-year forecast are estimated individually for each of the business areas based on their particular market position and the characteristics and development of their end markets. The forecasts represent management's assessment and are based on both external and internal sources. The perpetual growth for the period after five years is estimated at 3%. The Group's average weighted cost of capital in 2015 was 8% (8) after tax (approximately 10.5% (10.5) before tax) and has been used in discounting the cash flows to determine the recoverable amounts. All business areas are expected to generate a return well above the values to be tested, including sensitivity analyses/worst-case scenarios.

The following table presents the carrying value of goodwill and trademarks with indefinite useful lives allocated by business area.

Carrying value of goodwill and intangible assets with indefinite useful lives by cash generating unit:

	2015		2014
	Trademarks	Goodwill	Trademarks	Goodwill
Compressor Technique	1 169	9 815	1 098	9 343
Industrial Technique	–	4 135	–	3 989
Mining and Rock Excavation Technique	–	1 483	–	1 481
Construction Technique	1 225	5 089	1 225	5 107
Total	2 394	20 522	2 323	19 920

The trade names of Edwards in the Vacuum Solutions division and Dynapac in the Road Construction Equipment division represent strong trade names that have been used for a long time in their industries. Management's intention is that these trade names will be used for an indefinite period of time. Apart from the assessment of future customer demand and the profitability of the business, future marketing strategy decisions involving the trade names, can affect the carrying value of these intangible assets.

Amortization and impairment of intangible assets are recognized in the following line items in the income statement:

	2015		2014
	Internally generated	Acquired	Internally generated	Acquired
Cost of sales	18	33	16	32
Marketing expenses	17	548	16	458
Administrative expenses	58	58	53	43
Research and development expenses	616	299	420	266
Other operating expenses	–	–	–	7
Total	709	938	505	806

Impairment charges on intangible assets totaled 142 (106) of which 130 (76) were classified as research and development expenses in the income statement, and 3 (23) were classified as marketing expenses. Of the impairment charges, 127 (57) were due to capitalized development costs relating to projects discontinued.

12. Intangible assets, continued

		Internally generated intangible assets			Acquired intangible assets			Total
2015	Product development	Other technology and contract based	Product development	Trademark	Marketing and customer related	Other technology and contract based	Goodwill
Cost
Opening balance, Jan. 1	5 485	1 278	96	3 742	5 157	4 658	19 957	40 373
Investments	875	148	–	–	–	145	–	1 168
Business acquisitions	–	–	–	3	–118	48	76	9
Divestments of business	–	–	–	–16	–11	–14	–20	–61
Disposals	–264	–62	–	–	–47	–37	–	–410
Reclassifications	15	1	–27	–	–	–9	–	–20
Translation differences	–66	–26	–	85	153	114	545	805
Closing balance, Dec. 31	6 045	1 339	69	3 814	5 134	4 905	20 558	41 864
Amortization and impairment losses
Opening balance, Jan. 1	3 094	537	59	631	1 626	1 192	37	7 176
Amortization for the period	487	94	–	120	428	376	–	1 505
Impairment charge for the period	128	–	–	–	3	11	–	142
Divestments of business	–	–	–	–13	–11	–6	–	–30
Disposals	–263	–62	–	–	–47	–28	–	–400
Reclassifications	37	–3	–30	–	–	–7	–	–3
Translation differences	–49	–4	–2	–3	20	–7	–1	–46
Closing balance, Dec. 31	3 434	562	27	735	2 019	1 531	36	8 344
Carrying amounts
At Jan. 1	2 391	741	37	3 111	3 531	3 466	19 920	33 197
At Dec. 31	2 611	777	42	3 079	3 115	3 374	20 522	33 520

		Internally generated intangible assets	Acquired intangible assets
2014	Product development	Other technology and contract based	Product development	Trademark	Marketing and customer related	Other technology and contract based	Goodwill	Total
Cost
Opening balance, Jan. 1	4 604	972	67	2 421	2 202	1 705	10 865	22 836
Investments	769	250	30	–	–	138	–	1 187
Business acquisitions	–	–	–	1 010	2 291	2 311	7 078	12 690
Disposals	–132	–10	–	–29	–1	–46	–	–218
Reclassifications	–	–4	–	1	–1	2	–	–2
Translation differences	244	70	–1	339	666	548	2 014	3 880
Closing balance, Dec. 31	5 485	1 278	96	3 742	5 157	4 658	19 957	40 373
Amortization and impairment losses
Opening balance, Jan. 1	2 634	441	61	471	1 111	812	27	5 557
Amortization for the period	383	65	6	107	339	305	–	1 205
Impairment charge for the period	57	–	–3	20	4	21	7	106
Disposals	–119	–9	–	–29	–1	–45	–	–203
Reclassifications	4	13	–4	–	–1	–10	–	2
Translation differences	135	27	–1	62	174	109	3	509
Closing balance, Dec. 31	3 094	537	59	631	1 626	1 192	37	7 176
Carrying amounts
At Jan. 1	1 970	531	6	1 950	1 091	893	10 838	17 279
At Dec. 31	2 391	741	37	3 111	3 531	3 466	19 920	33 197

Other technology and contract based intangible assets include computer software, patents, and contract based rights such as licenses and franchise agreements. All intangible assets other than goodwill and trademarks with indefinite useful lives are amortized.

For information regarding amortization and impairment principles, see note 1.

See note 2 for information on business acquisitions.

13. Property, plant and equipment

	Buildings	Machinery and	Construction in progress		Rental
2015	and land	equipment	and advances	Total	equipment
Cost
Opening balance, Jan. 1	6 173	13 739	674	20 586	6 013
Investments	117	837	797	1 751	1 300
Business acquisitions	–5	18	–	13	74
Divestments of business	–	–21	–	–21	–
Disposals	–513	–1 054	–	–1 567	–757
Reclassifications	91	515	–707	–101	–463
Translation differences	–41	–227	6	–262	–81
Closing balance, Dec. 31	5 822	13 807	770	20 399	6 086
Depreciation and impairment losses
Opening balance, Jan. 1	2 376	8 777	–	11 153	2 836
Depreciation for the period	253	1 438	–	1 691	1 004
Impairment charge for the period	3	–	–	3	2
Divestments	–	–19	–	–19	–
Disposals	–243	–891	–	–1 134	–498
Reclassifications	–32	–5	–	–37	–286
Translation differences	–38	–167	–	–205	–48
Closing balance, Dec. 31	2 319	9 133	–	11 452	3 010
Carrying amounts
At Jan. 1	3 797	4 962	674	9 433	3 177
At Dec. 31	3 503	4 674	770	8 947	3 076

			Construction
2014	Buildings and land	Machinery and equipment	in progress and advances	Total	Rental equipment
Cost
Opening balance, Jan. 1	4 538	11 772	449	16 759	4 707
Investments	185	831	573	1 589	1 724
Business acquisitions	779	770	251	1 800	3
Divestments of business	–7	–	–12	–19	–
Disposals	–48	–1 012	–	–1 060	–651
Reclassifications	187	399	–642	–56	–341
Translation differences	539	979	55	1 573	571
Closing balance, Dec. 31	6 173	13 739	674	20 586	6 013
Depreciation and impairment losses
Opening balance, Jan. 1	1 936	7 916	–	9 852	2 287
Depreciation for the period	226	1 277	–	1 503	892
Impairment charge for the period	–	3	–	3	–
Disposals	–36	–940	–	–976	–390
Reclassifications	58	–70	–	–12	–224
Translation differences	192	591	–	783	271
Closing balance, Dec. 31	2 376	8 777	–	11 153	2 836
Carrying amounts
At Jan. 1	2 602	3 856	449	6 907	2 420
At Dec. 31	3 797	4 962	674	9 433	3 177

For information regarding depreciation, see note 1.

1) The Atlas Copco percentage share of each holding represents both ownership interest and voting power.

14. Investments in associated companies and joint ventures

Accumulated capital participation	2015	2014
Opening balance, Jan. 1	115	101
Dividends	–2	–3
Profit for the year after income tax	7	7
Translation differences	5	10
Closing balance, Dec. 31	125	115

Summary of financial information for associated companies and joint ventures	Country	Assets	Liabilities	Equity	Revenues	Profit for the year	Group's share, % 1)
2015
Associated companies
Qingdao Qianshao Pneumatic Tool Manufacturing Tech Ltd.	China	69	17	52	53	–	25
Shenzen Nectar Engineering & Equipment Co. Ltd.	China	135	66	69	131	8	25
Yanggu Wuyue Special Steel Co.Ltd.	China	1 064	1 303	–239	134	–97	25
Reintube S.L.	Spain	6	4	2	12	–	47
Joint ventures
Toku-Hanbai Group	Japan	349	159	190	631	10	50
2014
Associated companies
Qingdao Qianshao Pneumatic Tool Manufacturing Tech Ltd.	China	65	14	51	45	–1	25
Shenzen Nectar Engineering & Equipment Co. Ltd.	China	90	30	60	89	3	25
Yanggu Wuyue Special Steel Co.Ltd.	China	827	970	–143	109	–80	25
Reintube S.L.	Spain	8	6	2	14	–	47
Joint ventures
Toku-Hanbai Group	Japan	327	151	176	631	13	50

The above table is based on the most recent financial reporting available from associated companies and joint ventures. The Group has stopped recognizing its share of losses in Yanggu Wuyue Special Steel Co. Ltd. The unrecognized share of losses for 2015 is –24 (–20). Accumulated unrecognized losses amount to –63, calculated at end of period rate for December.

15. Other financial assets

Fair value of financial instruments under other financial assets, except held-to-maturity investments, corresponds to their carrying value.

	2015	2014
Non-current
Pension and other similar benefit assets (note 23)	396	100
Derivatives
– held for trading	1	–
– designated for hedge accounting	102	160
Available-for-sale investments	3	2
Held-to-maturity investments	167	190
Financial asset at fair value through profit and loss	124	–
Financial assets classified as loans and receivables
– finance lease receivables	423	397
– other financial receivables	913	961
Closing balance, Dec. 31	2 129	1 810
Current
Held-to-maturity investments	25	172
Financial assets classified as loans and receivables
– finance lease receivables	460	502
– other financial receivables	1 091	1 476
Closing balance, Dec. 31	1 576	2 150

See note 22 on finance leases and note 27 for information on derivatives and credit risk.

16. Inventories

	2015	2014
Raw materials	984	1 108
Work in progress	2 600	2 622
Semi-finished goods	3 936	4 567
Finished goods	9 386	10 067
Closing balance, Dec. 31	16 906	18 364

Provisions for obsolescence and other write-downs of inventories recorded as cost of sales amounted to 1 128 (861). Reversals of write-downs which were recognized in earnings totaled 381 (294). Previous write-downs have been reversed as a result of improved market conditions in certain markets.

Inventories recognized as expense amounted to 47 244 (44 890). Inventories pledged as security for liabilities amounted to – (60), see note 26 for additional information.

17. Trade receivables

Fair value for trade receivables corresponds to their carrying value. Trade receivables are categorized as loans and receivables.

Provisions for bad debts, trade	2015	2014
Provisions at Jan. 1	939	759
Business acquisitions and divestments	1	33
Provisions recognized for potential losses	616	393
Amounts used for established losses	–267	–176
Release of unnecessary provisions	–213	–160
Change in discounted amounts	2	–1
Translation differences	–25	91
Closing balance, Dec. 31	1 053	939

Trade receivables of 19 552 (19 903) are reported net of provisions for doubtful accounts and other impairments amounting to 1 053 (939).

Provisions for doubtful accounts and impairment losses recognized in the income statement totaled 616 (394).

For credit risk information, see note 27.

18. Other receivables

Fair value for other receivables corresponds to their carrying value.

	2015	2014
Derivatives
– held for trading	252	134
– designated for hedge accounting	71	32
Financial assets classified as loans and receivables
– other receivables	2 511	2 789
– accrued income	2 210	1 869
Prepaid expenses	740	808
Closing balance, Dec. 31	5 784	5 632

Other receivables consist primarily of VAT claims and advances to suppliers. Accrued income relates mainly to service and construction projects. Prepaid expenses include items such as rent, insurance, interest, IT and employee costs.

See note 27 for information on the Group's derivatives.

19. Cash and cash equivalents

Fair value for cash and cash equivalents corresponds to their carrying value. Cash and cash equivalents are classified as loans and receivables.

	2015	2014
Cash	4 468	6 184
Cash equivalents	4 393	3 220
Closing balance, Dec. 31	8 861	9 404

During 2015, cash and cash equivalents had an estimated average effective interest rate of 1.47% (0.69). Estimated average effective interest rate has increased due to larger deposits in currencies with higher interest rates. The committed, but unutilized, credit lines are MEUR 1 740 (1 460), which equals to MSEK 15 892 (13 932).

See note 27 for additional information.

20. Equity

		2015			2014
Shares outstanding	A shares	B shares	Total	A shares	B shares	Total
Opening balance, Jan. 1	839 394 096	390 219 008	1 229 613 104	839 394 096	390 219 008	1 229 613 104
Split of shares 2:1	839 394 096	390 219 008	1 229 613 104	–	–	–
	1 678 788 192	780 438 016	2 459 226 208	839 394 096	390 219 008	1 229 613 104
Redemption of shares	–827 726 884	–389 717 629	–1 217 444 513	–	–	–
Redemption of shares held by Atlas Copco	–11 667 212	–501 379	–12 168 591	–	–	–
Total number of shares, Dec. 31	839 394 096	390 219 008	1 229 613 104	839 394 096	390 219 008	1 229 613 104
– of which held by Atlas Copco	–13 123 103	–393 879	–13 516 982	–11 111 707	–501 379	–11 613 086
Total shares outstanding, Dec. 31	826 270 993	389 825 129	1 216 096 122	828 282 389	389 717 629	1 218 000 018

At December 31, 2015, Atlas Copco AB's share capital amounted to SEK 786 008 190 distributed among 1 229 613 104 shares, each with a quota value of approximately SEK 0.64 (0.64). Series A shares entitle the holder to one voting right and series B shares entitle the holder to one-tenth of a voting right per share.

Number of shares
Repurchases/ Divestment of shares	2015	AGM mandate 2015 Apr.–Dec.	AGM mandate 2014 Jan.–Mar.	2014	AGM mandate 2014 Apr.–Dec.	AGM mandate 2013 Jan.–Mar.	Cost value affecting equity 2015	2014
Opening balance, Jan. 1	11 613 086			16 060 191			1 556	2 152
Repurchase of A shares	5 500 000	1 900 000	3 600 000	–	–	–	1 380	–
Divestment of A shares	–3 488 604	–820 902	–2 667 702	–4 303 105	–3 162 080	–1 141 025	–552	–586
Divestment of B shares	–107 500	–107 500	–	–144 000	–144 000	–	–7	–10
Closing balance, Dec. 31	13 516 982			11 613 086			2 377	1 556
Percentage of shares outstanding	1.1%			1.0%

Atlas Copco has generated significant cash flows in recent years, resulting in a strong financial position. To adjust the Group's capital structure without jeopardizing the capacity to finance further growth, the 2015 Annual General Meeting approved a redemption procedure and the following transactions were performed in 2015:

• Split of each series A and series B shares into one ordinary share and one redemption share.
• Reduction of the share capital for repayment to the shareholders by way of redemption of 1 229 613 104 redemption shares at SEK 6.00 per share. This corresponds to a total distribution of SEK 7 304 667 078 to the shareholders, taking into account that 12 168 591 shares were held by Atlas Copco and thus not eligible for repayment.
• Increase of share capital by MSEK 393 by way of a bonus issue whereby the Company´s non-restricted equity was used.

The 2015 AGM approved a mandate for the Board of Directors to repurchase and sell series A shares and series B shares on Nasdaq Stockholm in order to fulfill the obligations under the performance stock option plan. The mandate is valid until the next AGM and allows:

• The purchase of not more than 3 800 000 series A shares, whereof a maximum 3 500 000 may be transferred to personnel stock option holders under the performance stock option plan 2015.
• The purchase of not more than 70 000 series A shares, later to be sold on the market in connection with payment to board members who have opted to receive synthetic shares as part of their board fee.
• The sale of not more than 30 000 series A shares to cover costs related to previously issued synthetic shares to board members.
• The sale of maximum 8 100 000 series A and B shares in order to cover the obligations under the performance stock option plans 2010, 2011 and 2012.

The 2014 AGM approved a mandate for the Board of Directors to repurchase and sell series A shares and series B shares on Nasdaq Stockholm in order to fulfill the obligations under the performance stock option plan. The mandate is valid until the next AGM and allows:

• The purchase of not more than 4 800 000 series A shares, whereof a maximum 3 500 000 may be transferred to personnel stock option holders under the performance stock option plan 2014.
• The purchase of not more than 70 000 series A shares, later to be sold on the market in connection with payment to board members who have opted to receive synthetic shares as part of their board fee.
• The sale of not more than 55 000 series A shares to cover costs related to previously issued synthetic shares to board members.

• The sale of maximum 8 800 000 series A and B shares in order to cover the obligations under the performance stock option plans 2009, 2010 and 2011.

Repurchases and sales are subject to market conditions, regulatory restrictions, and the capital structure at any given time. During 2015, 5 500 000 series A shares were repurchased while 3 488 604 series A shares and 107 500 series B shares were divested in accordance with mandates granted by the 2014 and 2015 AGM. Further information regarding repurchases and sales in accordance with AGM mandates is presented in the table above. The series A shares are held for possible delivery under the 2011–2015 personnel stock option programs. The series B shares held can be divested over time to cover costs related to the personnel stock option programs, including social insurance charges, cash settlements or performance of alternative incentive solutions in countries where allotment of employee stock options is unsuitable. The total number of shares of series A and series B held by Atlas Copco is presented in the table above.

Reserves

Consolidated equity includes certain reserves which are described below:

Hedging reserve

The hedging reserve comprises the effective portion of net changes in fair value for certain cash flow hedging instruments.

Translation reserve

The translation reserve comprises all exchange differences arising from the translation of the financial statements of foreign operations, the translation of intra-group receivables from or liabilities to foreign operations that in substance are part of the net investment in the foreign operations, as well as from the translation of liabilities that hedge the company's net investments in foreign operations.

Non-controlling interest

Non-controlling interests amount to 159 (178). Five subsidiaries, including Shandong Rock Drilling Tools Co. Ltd and Atlas Copco (India) Ltd., have non-controlling interests. None of these are material to the Group.

Appropriation of profit

The Board of Directors proposes a dividend of SEK 6.30 (6.00) per share, totaling SEK 7 661 405 569 if shares held by the company on December 31, 2015 are excluded. For further information, see appropriation of profit on page 19.

The proposed dividend for 2014 of SEK 6.00 per share, as approved by the AGM on April 28, 2015, was accordingly paid by Atlas Copco AB. Total dividend paid amounted to SEK 7 304 781 228.

21. Borrowings

			2015		2014
	Maturity	Repurchased nominal amount	Carrying amount	Fair value	Carrying amount	Fair value
Non-current
Medium Term Note Program MEUR 500	2019		4 567	4 823	4 771	5 076
Medium Term Note Program MEUR 500	2023		4 545	4 937	4 746	5 191
Capital market borrowings MUSD 800	2017		6 897	7 173	6 635	7 088
Capital market borrowings MUSD 150	2019	MUSD 7.5	1 190	1 475	1 117	1 446
Bilateral borrowings EIB MEUR 275	2019		2 512	2 561	2 624	2 693
Bilateral borrowings NIB MEUR 200	2024		1 827	1 908	1 718	1 803
Other bank loans			304	304	405	405
Less current portion of long-term borrowings			–127	–127	–52	–52
Total non-current bonds and loans			21 715	23 054	21 964	23 650
Financial lease liabilities			108	108	109	109
Other financial liabilities			65	65	109	109
Total non-current borrowings			21 888	23 227	22 182	23 868
Current
Current portion of long-term borrowings			127	127	52	52
Short term loans			909	909	2 163	2 163
Financial lease liabilities			65	65	69	69
Total current borrowings			1 101	1 101	2 284	2 284
Closing balance, Dec. 31			22 989	24 328	24 466	26 152

The difference between carrying value and fair value relates to the measurement method as certain liabilities are reported at amortized cost and not at fair value. Changes in interest rates and credit margins create the difference between fair value and amortized cost. See additional information about the Group's exposure to interest rate risk and foreign currency risk in note 27.

During 2015 Atlas Copco increased the bilateral loan from Nordic Investment Bank of MEUR 180 to MEUR 200. In January 2015 Atlas Copco AB entered into a loan agreement with European Investment Bank amounting to MEUR 300. Currently, the facility is undrawn. The availability period for drawings under the facility has been extended until July 2016. If no drawings are made by then, the facility will be cancelled.

The credit lines of MEUR 640 and MEUR 800 have been extended during 2015 and matures 2020 and 2021, respectively.

Atlas Copco has a long-term debt rating of A (A) from Standard & Poor's Corporation and A (A) from Fitch Ratings. Other than standard undertakings such as negative pledge and pari passu, the interest-bearing loans, borrowings and committed credit lines are not subject to any financial covenants.

Equivalent in SEK	MSEK 58 948		MSEK 14 614
Committed undrawn amount, EIB	MEUR 300	2016	–
Credit-line	MEUR 800	2021	–
Credit-line	MEUR 640	2020	–
Commercial papers 1, 2)	MSEK 18 004	–	–
Medium Term Note Program 1, 3)	MUSD 3 000	–	MUSD 1 750
Back-up facilities	Nominal amount	Maturity	Utilized

The Group's back-up facilities are specified in the table below.

The Group's short-term and long-term borrowings are distributed among the currencies detailed in the table below.

	2015			2014
Currency	Local currency (millions)	MSEK	%	Local currency (millions)	MSEK	%
EUR	1 512	13 811	60	1 464	13 970	58
SEK	27	27	–	29	29	–
USD	983	8 208	36	1 197	9 384	38
Other	–	943	4	–	1 083	4
Total		22 989	100		24 466	100

1) Capital market program. Interest is based on market conditions at the time when the facility is utilized. Maturity date is set when the facility is utilized.

2) The maximum amounts available under these programs total MUSD 1 000,

MEUR 400 and MSEK 6 000 corresponding to a total of MSEK 18 004 (17 656).

3) Utilized nominal amounts MEUR 1 600 (1 600), which corresponds to MUSD 1 750 (1 948).

The following table shows the maturity structure of the Group's borrowings and includes the effect of interest rate swaps.

Total	17 987	5 002	22 989	24 328
2024	–	1 827	1 827	1 908
2023	4 545	1	4 546	4 938
2022	–	1	1	1
2021	–	2	2	2
2020	–	5	5	5
2019	8 269	11	8 280	8 870
2018	–	33	33	33
2017	5 173	2 021	7 194	7 470
2016	–	1 101	1 101	1 101
Maturity	Fixed	Floating 1)	Carrying amount	Fair value

1) Floating interest in the table is borrowings with fixings shorter or equal to six months.

22. Leases

Operating leases – lessee

The leasing costs of assets under operating leases amounted to 974 (925), and are derived primarily from rented premises, machinery, and computer and office equipment. Operating leasing contracts for office and factory facilities typically run for a period of 10 to 15 years. For a limited number of operating leasing contracts, purchase and renewal options exist for machinery and renewal options exist for premises. The total leasing cost includes minimum lease payments of 921 (865), contingent rent of 71 (72), and sublease payments received of 19 (12). Future payments for non-cancelable operating leasing contracts fall due as follows:

	2015	2014
Less than one year	749	731
Between one and five years	1 478	1 348
More than five years	649	550
Total	2 876	2 629

The total of future minimum sublease payments expected to be received was 16 (27).

Operating leases – lessor

Atlas Copco has equipment which is leased to customers under operating leases. Long-term operating lease contracts are financed and administrated by Atlas Copco Customer Finance and certain other subsidiaries. Future payments for non-cancelable operating leasing contracts fall due as follows:

	2015	2014
Less than one year	449	370
Between one and five years	260	310
More than five years	52	95
Total	761	775

Contingent rent recognized as income amounted to 78 (44).

Finance leases – lessee

Assets utilized under finance leases
	Machinery and equipment	Rental equipment
Carrying amounts, Jan. 1, 2015	151	14

Assets utilized under finance leases are comprised primarily of vehicles. For a limited number of finance leasing contracts, both purchase and renewal options exist.

Future payments for assets held under finance leases as lessee will fall due as follows:

Carrying amounts, Dec. 31, 2015 136 42 Carrying amounts, Jan. 1, 2014 112 8 Carrying amounts, Dec. 31, 2014 151 14

		2015			2014
	Minimum lease payments	Interest	Principal	Minimum lease payments	Interest	Principal
Less than one year	74	9	65	75	6	69
Between one and five years	114	8	106	116	10	106
More than five years	2	–	2	3	–	3
Total	190	17	173	194	16	178

Rental equipment

Finance leases – lessor

The Group offers lease financing to customers via Atlas Copco Customer Finance and certain other subsidiaries. See note 27 for information on financial exposure and principles for control of financial risks. Future lease payments to be received fall due as follows:

	2015		2014
	Gross investment	Present value of minimum lease payments	Gross investment	Present value of minimum lease payments
Less than one year	483	460	539	502
Between one and five years	446	422	395	385
More than five years	2	1	13	12
	931	883	947	899
Unearned finance income	–	48	–	48
Total	931	931	947	947

23. Employee benefits

Post-employment benefits

Atlas Copco provides post-employment defined benefits pensions and other long-term employee benefits in most of its major locations. The most significant countries in terms of size of plans are Belgium, Canada, Germany, Sweden, the United Kingdom and the United States. Some plans are funded in advance with certain assets or funds held separately from the Group for future benefit payment obligations. Other plans are unfunded and the benefits from those plans are paid by the Group as they fall due.

The plans in Belgium cover early retirement, jubilee, and termination indemnity, which are all unfunded. Defined contribution plans have been added to the defined benefit plans in 2015 due to a change in local regulations, these plans are all funded.

In Canada, Atlas Copco provides a pension plan and a supplemental retirement pension benefit plan for executives. Both plans are funded. There are also two unfunded plans, a post-retirement benefit plan and a postemployment plan.

The German plans include those for pensions, early retirements and jubilee. The plans are funded. The Group is leasing property in Finland and Sweden from the Group's German pension trust. See note 28 for further information.

There are three defined benefit pension plans in Sweden. The ITP plan is a final salary pension plan covering the majority of white-collar employees in Sweden. Atlas Copco finances the benefits through a pension foundation. The second plan relates to a group of employees earning more than ten income base amounts that has opted out from the ITP plan. This plan is insured. The third defined benefit pension plan relates to former senior employees now retired. In Sweden, in addition to benefits relating to retirement pensions, Atlas Copco has obligations for family pensions for many of the Swedish employees, which are funded through a third party insurer, Alecta. This plan is accounted for as a defined contribution plan as sufficient information is not available for calculating the net pension obligation.

In the United Kingdom, there is a final salary pension plan. This plan is funded. In 2010, the plan was converted to a defined contribution plan for future services.

In the United States, Atlas Copco provides a pension plan, a post-retirement medical plan, and a number of supplemental retirement pension benefits for executives. The pension plan is funded while the other plans are unfunded.

The Group identifies a number of risks in investments of pension plan assets. The main risks are interest rate risk, market risk, counterparty risk, liquidity and inflation risk, and currency risk. The Group is working on a regular basis to handle the risks and has a long-term investment horizon. The investment portfolio should be diversified, which means that multiple assets classes, markets and issuers should be utilized. An asset liability management assessment should be conducted periodically. The study should include a number of elements. The most important elements are, the duration of the assets and the timing of liabilities, the expected return of the assets, the expected development of liabilities, the forecasted cash flows and the impact of a shift in interest rates on the obligation.

The net obligations for post-employment benefits and other long-term employee benefits have been recorded in the balance sheet as follows:

	2015	2014
Financial assets (note 15)	–396	–100
Post-employment benefits	2 225	2 531
Other provisions (note 25)	175	206
Closing Balance, net	2 004	2 637

The tables below show the Group's obligations for post-employment benefits and other long-term employee benefits, the assumptions used to determine these obligations and the assets relating to these obligations for employee benefits, as well as the amounts recognized in the income statement and the balance sheet. The net amount recognized in balance sheet amounted to 2 004 (2 637). The weighted average duration of the obligation is 14.4 (15.8) in years.

Post-employment benefits		Unfunded		Other
2015	Funded pension plans	pension plan	Other funded plans	unfunded plans	Total
Present value of defined benefit obligations	8 313	1 220	94	301	9 928
Fair value of plan assets	–7 889	–	–83	–	–7 972
Present value of net obligations	424	1 220	11	301	1 956
Effect of asset ceiling	–	–	–	–	–
Other long-term service obligations	–	–	48	–	48
Net amount recognized in balance sheet	424	1 220	59	301	2 004

2014
Present value of defined benefit obligations	8 757	1 493	93	198	10 541
Fair value of plan assets	–7 866	–	–88	–	–7 954
Present value of net obligations	891	1 493	5	198	2 587
Effect of asset ceiling	29	–	–	–	29
Other long-term service obligations	–	–	21	–	21
Net amount recognized in balance sheet	920	1 493	26	198	2 637

Plan assets consist	2015
of the following:	Quoted market price	Unquoted market price	Total	2014
Debt instruments	3 960	334	4 294	5 136
Equity instruments	1 041	203	1 244	1 396
Property	287	632	919	471
Assets held by insurance companies	103	760	863	452
Cash	271	195	466	308
Others	178	8	186	191
Closing balance, Dec 31	5 840	2 132	7 972	7 954

Movement in plan assets	2015	2014
Fair value of plan assets at Jan 1	7 954	6 523
Business acquisitions	–	67
Interest income	246	276
Remeasurement – return on plan assets	568	477
Settlements	–667	–33
Employer contributions	147	176
Plan members contributions	20	18
Administrative expenses	–7	–5
Benefit paid by the plan	–289	–247
Reclassifications	–	16
Translation differences	–	686
Fair value of plan assets at Dec 31	7 972	7 954

The plan assets are allocated among the following geographic areas:	2015	2014
Europe	6 599	5 902
North America	1 150	1 863
Rest of the world	223	189
Total	7 972	7 954

Asset ceiling	2015	2014
Asset ceiling at Jan. 1	29	45
Interests	–	1
Remeasurements – asset ceiling	–28	–20
Translation difference	–1	3
Asset ceiling, Dec. 31	–	29

Movement in present value of the obligations for defined benefits	2015	2014
Defined benefit obligations at Jan. 1	10 541	7 781
Current service cost	319	248
Past service cost	–2	–6
Gain/loss on settlement	–24	5
Interest expense (+)	315	325
Actuarial gains (–)/ losses (+) arising from experience adjustments	313	49
Actuarial gains (–)/ losses (+) arising from financial assumptions	–394	1 225
Actuarial gains (–)/ losses (+) arising from demographic assumptions	44	–6
Business Acquisitions	–	488
Settlements	–667	–33
Benefits paid from plan or company assets	–499	–473
Reclassifications	1	55
Translation differences	–19	883
Defined benefit obligations, Dec. 31	9 928	10 541

Remeasurements recognized in other comprehensive income amounts to –662 (759) and 29 (13) in profit and loss. The Group expects to pay 326 (331) in contributions to defined benefit plans in 2016.

Expenses recognized in the income statement	North America 2015	2014
Current service cost	Rest of the world 319	248
Past service cost	–2	–6
Gain loss on settlements	–24	5
Net interest cost	69	49
Employee contribution/ Participant contribution	–20	–18
Remeasurement of other long-term benefits	29	13
Administrative expenses	6	5
Total	377	296

The total benefit expense for defined benefit plans amounted to 377 (296), whereof 308 (247) has been charged to operating expenses and 69 (49) to financial expenses. Expenses related to defined contribution plans amounted to 861 (689).

Principal actuarial assumptions at the balance sheet date (expressed as weighted averages, in %)	2015	2014
Discount rate
Europe	2.77	2.67
North America	4.04	3.72
Future salary increases
Europe	1.67	1.63
North America	3.51	3.51
Medical cost trend rate
North America	7.80	8.19

The Group has identified discount rate, future salary increases, and mortality as the primary actuarial assumptions for determining defined benefit obligations. Changes in those actuarial assumptions affect the present value of the net obligation. The discount rate is determined by reference to market yields at the balance sheet date using, if available, high quality corporate bonds (AAA or AA) matching the duration of the pension obligations. In countries where corporate bonds are not available, government bonds are used to determine the discount rate. In Sweden in line with prior years, mortgage bonds are used for determining the discount rate.

Atlas Copco's mortality assumptions are set by country, based on the most recent mortality studies that are available. Where possible, generational mortality assumptions are used, meaning that they include expected improvements in life expectancy over time.

The table below shows the sensitivity analysis for discount rate and increase in life expectancy and describes the potential effect on the present value of the defined pension obligation.

Sensitivity analysis	Europe	North America
Change in discount rate + 0.50%	–558	–96
Change in discount rate – 0.50%	635	111
Increase in life expectancy, +1 year	174	47

Share value based incentive programs

In 2011–2014, the Annual General Meeting decided on performance-based personnel stock option programs based on a proposal from the Board on an option program for the respective years. In 2015, the Annual General Meeting decided on a performance based personnel stock option program for 2015 similar to the 2011–2014 programs.

Option programs 2011–2015

At the Annual General Meeting 2011–2015 respectively, it was decided to implement performance related personnel stock option programs. The decision to grant options was made in April each year and the options were issued in March the following year (issue date). The number of options issued each program year depended on the value creation in the Group, measured as Economic Value Added (EVA), for the respective program year. For the 2015 option program, the number of options varies on a linear basis within a preset EVA interval. The size of the plan and the limits of the interval have been established by the Board and have been approved by the Annual General Meeting and are compatible with the long term business plan of the Group.

In connection to the issue, the exercise price was calculated as 110% of the average trading price for series A shares during a ten day period following the date of the publishing of the fourth quarter report. The options were issued without compensation paid by the employee and the options remain the property of the employee only to the extent that they are exercisable at the time employment is terminated. The 2011–2015 programs have a term of five years from the grant date and the options are not transferable. The options in the 2011–2015 programs become exercisable at 100% three years after grant.

The 2011–2015 programs include a requirement for senior executives (32 in total) to purchase Atlas Copco A shares for 10% of their gross base salary in order to be granted options. A lower amount of investment will reduce the number of options proportionately. Further, senior executives who have invested in Atlas Copco A shares will have the option to purchase one matching share per each share purchased at a price equal to 75% of the average trading price for series A shares during a ten day period following the date of the publishing of the fourth quarter report. This right applies from three years after grant until the expiration of the stock option program.

The Board had the right to decide to implement an alternative incentive solution (SARs) for key persons in such countries where the grant of personnel options was not feasible.

In the 2011–2015 programs, the options may, on request by an optionee in Sweden, be settled by the Company paying cash equal to the excess of the closing price of the shares over the exercise price on the exercise day, less any administrative fees. Due to this choice of settlement by the Swedish employees, these options are classified for accounting purposes as cash-settled in accordance with IFRS 2.

The Black-Scholes model is used to calculate the fair value of the options/ SARs in the programs at issue date. For the programs in 2014 and 2015, the fair value of the options/SARs was based on the following assumptions:

Key assumptions	2015 Program (Dec. 31, 2015)	2014 Program (at issue date)
Expected exercise price	SEK 229/156 1)	SEK 278/190 1) 2)
Expected volatility	30%	30%
Expected options life (years)	3.05	3.10
Expected share price	SEK 208.40	SEK 292.20
Expected dividend (growth)	SEK 6.60 (10%)	SEK 6.05 (10%)
Risk free interest rate	–0.20%	–0.20%
Expected average grant value	SEK 24.20/51.40 1)	SEK 52.90/96.30 1) 2)
Maximum number of options	3 651 055	4 622 729
– of which forfeited	469 424	230 468
Number of matching shares	40 203	38 292

1) Matching shares for senior executives. 2) Actual.

The expected volatility has been determined by analyzing the historic development of the Atlas Copco A share price as well as other shares on the stock market.

When determining the expected option life, assumptions have been made regarding the expected exercising behavior of different categories of optionees.

For the stock options in 2011–2015 programs, the fair value is recognized as an expense over the following vesting periods:

Program	Vesting period		Exercise period
Stock options	From	To	From	To
2011	June 2011	April 2014	May 2014	April 2016
2012	June 2012	April 2015	May 2015	April 2017
2013	June 2013	April 2016	May 2016	April 2018
2014	May 2014	April 2017	May 2017	April 2019
2015	May 2015	April 2018	May 2018	April 2020

For the 2015 program, a new valuation of the fair value has been made and will be made at each reporting date until the issue date.

Timeline 2015 option plan

Annual General Meeting	Information of grant	Senior executives' own investments	Exercise price set	Issue of options		Plan expires
			Vesting period			Options and matching shares exercisable
Apr. 2015	May 2015	Nov. 2015	Feb. 2016	Mar. 2016	May 1, 2018	April 30, 2020

For SARs and the options classified as cash-settled, the fair value is recognized as an expense over the same vesting period; the fair value is, however, remeasured at each reporting date and changes in the fair value after the end of the vesting period continue to be recognized as a personnel expense.

In accordance with IFRS 2, the expense in 2015 for all share-based incentive programs amounted to 135 (141) excluding social costs of which 73 (32) refers to equity-settled options. The related costs for social security contributions are accounted for in accordance with the statement from the Swedish

Financial Reporting Board (UFR 7) and are classified as personnel expenses. In the balance sheet, the provision for share appreciation rights and stock options classified as cash-settled as of December 31 amounted to 85 (157). Atlas Copco shares are held by the Parent Company in order to cover commitments under the programs 2011–2015, see also note 20.

Summary of share value based incentive programs
Program *	Initial number of employees	Initial number of options	Additional number of options, redemption 2015	Expiration date	Exercise price, SEK	Type of share	Fair value on grant date	Intrinsic value for vested SARs
Stock options
2008	198	3 570 079	–	Mar. 20, 14	68.93	A	22.32	–
2009	222	3 902 878	–	Mar. 20, 15	104.86	A	28.59	–
2010	221	3 796 922	–	Apr. 30, 15	166.99	A	28.32	–
2011	224	2 735 804	65 445	Apr. 30, 16	179.70	A	22.47	–
2012	248	3 440 015	82 129	Apr. 30, 17	195.32	A	28.30	–
2013	250	–	–	N/a	N/a	N/a	N/a	–
2014	263	3 663 809	87 593	Apr. 30, 19	271.50	A	52.90	–
Matching shares
2010	21	38 334	–	Apr. 30, 15	113.59	A	53.40	–
2011	20	39 495	943	Apr. 30, 16	122.08	A	41.23	–
2012	28	42 289	997	Apr. 30, 17	132.82	A	52.30	–
2013	28	43 675	1 029	Apr. 30, 18	128.91	A	58.00	–
2014	28	38 292	899	Apr. 30, 19	185.56	A	96.30	–
Share appreciation rights
2008	41	635 348	–	Mar. 20, 14	68.93	A	–	139.47
2009	47	741 240	–	Mar. 20, 15	104.86	A	–	103.54
2010	49	756 351	–	Apr. 30, 15	166.99	A	–	41.41
2011	48	530 524	12 691	Apr. 30, 16	179.70	A	–	28.70
2012	56	704 004	16 802	Apr. 30, 17	195.32	A	–	13.08
2013	58	–	–	N/a	N/a	N/a	N/a	–
2014	59	728 452	17 414	Apr. 30, 19	271.50	A	52.90	–

Number of options/rights 2015

Program	Outstanding Jan.1	Redemption	Exercised	Expired/ forfeited	Outstanding Dec. 31	–of which exercisable	Time to expiration, in months	Average stock price for exercised options, SEK
Stock options
2009	241 998	–	241 991	7	–	–	–	263
2010	1 343 216	–	1 342 216	1 000	–	–	–	262
2011 1)	2 164 142	33 548	883 871	–	1 313 819	1 313 819	4	256
2012 2)	3 230 755	70 618	443 734	39 300	2 818 339	2 818 339	16	250
2014 3)	3 663 809	87 593	–	77 438	3 673 964	–	40	–
Matching shares
2010	8 966	–	8 966	–	–	–	–	267
2011	22 846	515	1 158	–	22 203	22 203	4	247
2012	37 859	859	7 997	1 460	29 261	29 261	16	225
2013	38 877	916	–	3 085	36 708	–	28	–
2014	38 292	899	–	2 722	36 469	–	40	–
Share appreciation rights
2009	39 704	–	39 704	–	–	–	–	260
2010	224 534	–	214 405	10 129	–	–	–	263
2011	324 810	3 831	200 023	10 827	117 791	117 791	4	255
2012	628 623	12 993	78 539	36 081	526 996	526 996	16	249
2014	728 452	17 414	–	–	745 866	–	40	–

All numbers have been adjusted for the effect of the redemption in 2011 in line with the method used by Nasdaq Stockholm (Stockholm Stock Exchange) to adjust exchange-traded options contracts.

* For information about Program 2015, with issue of options in March 2016, see Key assumptions on page 98.

¹⁾ Of which 553 738 have been accounted for as cash settled.

²⁾ Of which 1 049 309 have been accounted for as cash settled.

³⁾ Of which 1 316 101 have been accounted for as cash settled.

Number of options/rights 2014
Program	Outstanding Jan.1	Granted	Exercised	Expired/ forfeited	Outstanding Dec. 31	–of which exercisable	Time to expiration, in months	Average stock price for exercised options, SEK
Stock options
2008	688 171	–	687 129	1 042	–	–	–	180
2009	882 920	–	640 922	–	241 998	241 998	3	202
2010	3 170 166	–	1 811 823	15 127	1 343 216	1 343 216	4	208
2011	2 595 051	–	409 255	21 654	2 164 142	2 164 142	16	208
2012	3 367 853	–	–	137 098	3 230 755	–	28	–
2014	–	3 663 809	–	–	3 663 809	–	52	–
Matching shares
2010	25 315	–	16 349	–	8 966	8 966	4	205
2011	36 522	–	13 676	–	22 846	22 846	16	204
2012	42 289	–	–	4 430	37 859	–	28	–
2013	43 675	–	–	4 798	38 877	–	40	–
2014	–	38 292	–	–	38 292	–	52	–
Share appreciation rights
2008	74 388	–	73 861	527	–	–	–	182
2009	158 950	–	119 246	–	39 704	39 704	3	203
2010	579 826	–	355 292	–	224 534	224 534	4	201
2011	487 216	–	140 752	21 654	324 810	324 810	16	202
2012	691 977	–	–	63 354	628 623	–	28	–
2014	–	728 452	–	–	728 452	–	52	–

All numbers have been adjusted for the effect of the redemptions in 2011 in line with the method used by Nasdaq Stockholm (Stockholm Stock Exchange) to adjust exchange-traded options contracts.

24. Other liabilities

Fair value of other liabilities corresponds to carrying value.

Other current liabilities	2015	2014
Derivatives
– held for trading	158	337
– designated for hedge accounting	32	159
Other financial liabilities
– other liabilities	3 030	3 061
– accrued expenses	6 763	6 537
Advances from customers	2 160	2 268
Deferred revenues construction contracts	233	190
Deferred revenues service contracts	1 123	923
Closing balance, Dec 31	13 499	13 475

Accrued expenses include items such as social costs, vacation pay liability, accrued interest, and accrued operational expenses.

See note 27 for information on the Group's derivatives.

25. Provisions

2015	Product warranty	Restructuring	Other	Total
Opening balance, Jan. 1	1 173	206	1 002	2 381
During the year
– provisions made	932	200	387	1 519
– provisions used	–833	–149	–347	–1 329
– provisions reversed	–120	–19	–216	–355
Discounting effect	3	–	6	9
Business acquisitions	1	–	–	1
Translation differences	9	–6	–15	–12
Closing balance, Dec. 31	1 165	232	817	2 214
Non-current	157	95	489	741
Current	1 008	137	328	1 473
Total	1 165	232	817	2 214

2014	Product warranty	Restructuring	Other	Total
Opening balance, Jan. 1	868	108	771	1 747
During the year
– provisions made	1 136	156	504	1 796
– provisions used	–1 046	–86	–476	–1 608
– provisions reversed	–173	–8	–102	–283
Business acquisitions	255	27	218	500
Translation differences	133	9	87	229
Closing balance, Dec. 31	1 173	206	1 002	2 381
Non-current	186	74	628	888
Current	987	132	374	1 493
Total	1 173	206	1 002	2 381
2015, Maturity	Product warranty	Restructuring	Other	Total
Less than one year	1 008	137	328	1 473
Between one and five years	153	53	475	681
More than five years	4	42	14	60

Other provisions consist primarily of amounts related to share-based payments including social fees, other long-term employee benefits (see note 23), and environmental remediation obligations.

Total 1 165 232 817 2 214

26. Assets pledged and contingent liabilities

2015	2014
60	61
126	111
152	392
338	564
2015	2014
17	17
300	270
317	287

Sureties and other contingent liabilities relate primarily to pension commitments and commitments related to customer claims and various legal matters.

27. Financial exposure and principles for control of financial risks

Capital management

Atlas Copco defines capital as borrowings and equity, which at December 31 totaled MSEK 69 739 (75 219). The Group's policy is to have a capital structure to maintain investor, creditor and market confidence and to support future development of the business. The Board's opinion is that the dividend over a business cycle should correspond to about 50% of earnings per share. In recent years the Board has also proposed, and the Annual General Meeting has approved, distributions of "excess" equity to the shareholders through share redemptions and share repurchases.

There are no external capital requirements imposed on the Group.

Financial risks

The Group is exposed to various financial risks in its operations. These financial risks include:

• Funding and liquidity risk Interest rate risk
• Currency risk Credit risk
• Other market and price risks

The Board of Directors establishes the overall financial policies and monitors compliance to the policies. The Group's Financial Risk Management Committee (FRMC) manages the Group's financial risks within the mandate given by the Board of Directors. The members of the FRMC are the CEO, CFO, Group Treasurer, and Head of Business Control, Financial Solutions. The FRMC meets on a quarterly basis or more often if circumstances require.

Financial Solutions has the operational responsibility for financial risk management in the Group. Financial Solutions manages and controls financial risk exposures, ensures that appropriate financing is in place through loans and committed credit facilities, and manages the Group's liquidity.

Funding and liquidity risk

Funding risk is the risk that the Group does not have access to adequate financing on acceptable terms at any given point in time. Liquidity risk is the risk that the Group does not have access to its funds, when needed, due to poor market liquidity.

Group funding risk policy

The Group's funding risk policy refers to Atlas Copco AB and Atlas Copco Airpower n.v. as external borrowings mainly are held in these entities.

• The Group should maintain minimum MSEK 8 000 committed credit facilities to meet operational, strategic and rating objectives. Actual amount at year-end was MEUR 1 740 (1 460) which corresponds to MSEK 15 892 (13 932).
• The average tenor (i.e. time until maturity) of the Group's external debt shall be at least 3 years. Actual average tenor at year-end was 4.1 years (5.1).
• No more than MSEK 8 000 of the Group's external debt may mature within the next 12 months. In 2016 no debt is maturing (0).
• Adequate funding at subsidiary level shall at all times be in place.

Status at year-end

As per December 31, there were no deviations from the Group funding risk policy. Cash and cash equivalents totaled MSEK 8 861 (9 404). The overall liquidity of the Group is strong considering the maturity profile of the external borrowings, the balance of cash and cash equivalent as of year-end, and available back-up credit facilities from banks. Please refer to note 21 for information on utilized borrowings, maturity, and back-up facilities.

The following table shows maturity structure of the Group's financial assets and liabilities. The figures shown are contractual undiscounted cash flows based on contracted date, when the Group is liable to pay or eligible to receive, including both interest and nominal amounts.

Financial instruments	Up to 1 year	1–3 years	3–5 years	Over 5 years
Assets
Financial assets	2	1 238	602	51
Other receivables	–	45	–	6
Derivatives	76	39	–	–
Non-current financial assets	78	1 322	602	57
Trade receivables	19 552	–	–	–
Financial assets	1 613	–	–	–
Other receivables	2 194	–	–	–
Derivatives	323	–	–	–
Other accrued income	2 210	–	–	–
Cash and cash equivalents	8 861	–	–	–
Current financial assets	34 753	–	–	–
Financial assets	34 831	1 322	602	57
Liabilities
Liabilities to credit institutions	748	8 110	8 793	6 787
Other financial liabilities	–	32	32	–
Derivatives	36	74	36	–
Other liabilities	–	467	31	–
Non-current financial liabilities	784	8 683	8 892	6 787
Liabilities to credit institutions	984			–
Current portion of interest-bearing liabilities	127	–	–	–
Derivatives	190	–	–	–
Other accrued expenses	6 763	–	–	–
Trade payables	7 873	–	–	–
Other liabilities	3 030	–	–	–
Current financial liabilities	18 967	–	–	–
Financial liabilities	19 751	8 683	8 892	6 787

Derivatives classified as assets designated for hedge accounting amount to MSEK 173 (192) and derivatives classified as liabilities designated for hedge accounting amount to MSEK 165 (309). Other derivatives are classified as held for trading.

Interest rate risk

Interest rate risk is the risk that the Group is negatively affected by changes in the interest rate levels.

Group interest rate risk policy

The interest rate risk policy states that the average duration (i.e. period for which interest rates are fixed) should be a minimum of 6 months (6) and a maximum of 48 months (48).

Status at year-end

To manage interest rate risk, the Group uses interest rate swap agreements to convert interest on loans. The Group has entered into interest rate swaps to convert fixed interest rates to variable interest rates. These swaps are designated as fair value hedging instruments, with a nominal amount of MUSD 200 (200). The Group has also interest rate swaps to convert variable interest rates to fixed interest rates on the loan of MEUR 275 (275). These swaps are designated as cash flow hedging instruments and the hedged item is the floating interest rate of the loan. The forecasted cash flows have due dates every six months until September 2019. For more information about the Group's borrowings, see note 21.

Including the effect of derivatives, the effective interest rate and interest duration of the Group's borrowings at year-end was 3.3% (3.0) and 36 months (46) respectively. Excluding derivatives, the Group's effective interest rate was 3.5% (3.5) and the average interest duration was 33 months (42).

Outstanding derivative	2015		2014
instruments related to interest rate risk	Fair value	Nominal amount	Fair value	Nominal amount
Interest rate swaps, fair value hedge
Assets	MSEK 102	MUSD 200	MSEK 160	MUSD 200
Liabilities	–	–	–	–
Interest rate swaps, cash flow hedge
Assets	–	–	–	–
Liabilities	MSEK 133	MEUR 275	MSEK 148	MEUR 275

The following tables show the estimated effect, in MSEK, of a parallel upward and downward shift of one percentage point (100 basis points) in all interest rates on external loans and on interest rate swaps hedging the loans.

The first table shows the estimated effect on the profit and loss before taxes. The second table shows the fair value effect on loans and interest rate swaps reported at fair value. Certain loans are reported at amortized cost and are therefore not affected by changes in interest rate levels. For the main part of the interest rate swaps, fair value hedge accounting or cash flow hedge accounting is applied, therefore the impact on earnings is small.

Interest sensitivity, earnings		2015			2014
			Earnings impact		Earnings impact
Market interest rate +1%			–33		–32
Market interest rate –1%			33		32
Interest sensitivity, fair value		2015		2014
	Earnings impact		OCI impact	Earnings impact	OCI impact
Market interest rate +1%		6	89	5	118

Market interest rate –1% –6 –94 –5 –126

Currency risk

The Group is present in various geographical markets and undertakes transactions denominated in foreign currencies and is consequently exposed to exchange rate fluctuations. This affects both transaction exposure (cash flow) and translation exposure (balance sheet). These two exposures are explained separately below.

Transaction exposure

Group currency risk policy

Transaction exposure risk is the risk that profitability is negatively affected by changes in exchange rates, affecting cash flows in foreign currencies in the operations. Due to the Group's presence in various markets, there are inflows and outflows in different currencies. As a normal part of business, net surpluses or deficits in specific currencies merge. The values of these net positions fluctuate subject to changes in currency rates and, thus, render transaction exposure. The following describes the Group's general policies for managing transaction exposure:

• Exposures shall be reduced by matching in and outflows of the same currencies.
• Business area and divisional management are responsible for maintaining readiness to adjust their operations (price and cost) to compensate for adverse currency movements.
• Based on the assumption that hedging does not have any significant effect on the Group's long-term result, the policy recommends to leave transaction exposures unhedged on an ongoing basis. In general, business areas and divisions shall not hedge currency risks. Hedging can, however, be motivated in case of long-term contracts where there is no possibility to adjust the contract price or the associated costs.
• The FRMC decides if parts of the transaction exposure shall be hedged. Transactions shall qualify for hedge accounting in accordance with IFRS and hedging beyond 18 months is not allowed.

Status at year end

The Group has continued to manage transaction exposures primarily by matching in- and outflows in the same currencies. Derivative instruments have only been used to hedge operational flows. The net nominal amounts are shown in the table below.

Outstanding derivative instruments related to transaction exposure	2015 Nominal amount, net	2014 Nominal amount, net
Foreign exchange forwards
AUD	MAUD –33	MAUD –106
CZK	MCZK 324	MCZK 1 222
EUR	MEUR 31	MEUR 39
GBP	MGBP 34	MGBP 150
JPY	MJPY 150	MJPY 85
KRW	MKRW 64 919	MKRW 230 342
NOK	MNOK –42	MNOK –18
SEK	MSEK 184	MSEK 570
USD	MUSD –154	MUSD –537

Out of the net nominal amounts in the table the largest crosses are USD/KRW and GBP/USD with nominal amounts of MUSD –58/MKRW 64 919 respectively MGBP 36/MUSD –56. Out of the outstanding amounts, 97% is maturing within one year and 3% beyond one year. No hedging beyond 18 months is in place.

In the table below, fair value for all outstanding derivative instruments related to transaction exposure is shown.

Outstanding derivative instruments related to transaction exposure	2015 Fair value	2014 Fair value
Foreign exchange forwards
Assets	18	41
Liabilities	66	128

The largest operational surplus and deficit currencies are shown in Graph 1. The amounts presented in Graph 1 represent estimates of the Group's net exchangeable amounts in different currencies. Estimates are based on the Group's intercompany payments and on payment flows from customers and to suppliers in the most significant currencies. The operational transaction exposure in MSEK is 9 708 (10 401) and is calculated as the net operational cash flow exposure.

The following table illustrates the effect from one percentage point weakening or strengthening of the SEK against all other currencies based on the transaction exposure.

Transaction exposure sensitivity	2015	2014
SEK exchange rate +1%	–95	–96
SEK exchange rate –1%	95	96

Graph 2 (next page) illustrates the effect on the Group's pre-tax earnings of one-sided fluctuations in USD and EUR exchange rates if no hedging transactions have been undertaken, and before any impact of offsetting price adjustments or similar measures. The graph indicates for example that the Group's pre-tax earnings of estimated net USD flows would decrease by approximately MSEK 531 (459) from a 5% USD weakening.

Translation exposure

Group currency risk policy

4 000 8 000 12 000 MSEK 2015 Transaction exposure Translation exposure risk is the risk that the value of the Group's net investments in foreign currencies is negatively affected by changes in exchange rates. The Group's worldwide presence creates a currency effect since the financial statements of entities with functional currencies other than SEK are translated to SEK when preparing the consolidated financial statements. The net exposure in each currency represents the net of assets and liabilities denominated in that currency. The effect of currency rate fluctuations on these net positions is the translation effect.

0 The following describes the Group's general policies for managing translation exposure:

• –4 000 • Translation exposure should be reduced by matching assets and liabilities in the same currencies.
• –12 000 –8 000 AUD BRL CAD CNY EUR GBP KRW NOK PLN RUB SEK USD ZAR Other • The FRMC may decide to hedge part or all of the remaining translation exposure. Any hedge of translation exposure shall qualify for hedge accounting in accordance with IFRS.

Status at year end

The Group uses loans and derivatives to reduce the translation exposure on net investments in EUR in the consolidated financial statements and to reduce the exchange rate risk related to net assets in subsidiaries. These instruments are designated as net investment hedges in the consolidated financial statements. Hedges in USD have been closed during the year since the hedging relation no longer exists.

The financial instruments shown in the table below are used to hedge EUR-denominated net assets.

	2015		2014
Outstanding financial instruments related to translation exposure	Fair value	Nominal amount	Fair value	Nominal amount
Derivatives
Assets	MSEK 58	–	–	–
Liabilities	–	MEUR 310	MSEK –99	MEUR 330
External loans
Loans in EUR 1)		MSEK –1 914 MEUR 1 472 MSEK –2 073 MEUR 1 452
Loans in USD 1)	–	–	MSEK –108	MUSD 58

1) In the balance sheet, loans designated as net investment hedges are reported at amortized cost and not at fair value.

The Group's loan portfolio is also exposed to movement in currency rates. However, the impact on the net income would be very limited as substantially all of the Group's loans are designated as hedges of net investments and the effect is accounted for in other comprehensive income. The impact of a 1% movement in the EUR/SEK rate would effect other comprehensive income with MSEK 35 (see also note 1, Accounting principles, Financial assets and liabilities).

Graph 3 indicates the Group's sensitivity to currency translation effects when earnings of foreign subsidiaries are translated. The graph indicates for example that the translation effect on the Group's pretax earnings would be –158 (–135) if SEK is strengthen by 1%. A 1% SEK weakening would affect the Group's pretax earnings by 158 (135).

Credit risk

Credit risk can be divided into operational and financial credit risk. These risks are described further in the following sections. The table below shows the total credit risk exposure related to assets classified as financial instruments as per December 31.

Credit risk	2015	2014
Loans and receivables
– trade receivables	19 603	19 959
– finance lease receivables	883	899
– other financial receivables	2 004	2 437
– other receivables	2 194	2 393
– accrued income	2 210	1 869
– cash and cash equivalents	8 861	9 404
Held-to-maturity investments	192	362
Available-for-sale investments	127	2
Derivatives	426	326
Total	36 500	37 651

Operational credit risk

Group credit risk policy

Operational credit risk is the risk that the Group's customers do not meet their payment obligations. The Group's operational credit risk policy is that business areas, divisions and individual business units are responsible for the commercial risks arising from their operations. The operational credit risk is measured as the net aggregate value of receivables on a customer.

Status at year end

Since the Group's sales are dispersed among many customers, of whom no single customer represents a significant share of the Group's commercial risk, the monitoring of commercial credit risks is primarily done at the business area, divisional or business unit level. Each business unit is required to have an approved commercial risk policy.

The Group has an in-house customer finance operation (part of Financial Solutions) as a means of supporting equipment sales. At December 31, the credit portfolio of the customer finance operations totaled approximately 2 607 (2 809) consisting of 91 (92) reported as trade receivables, 844 (836) reported as finance lease receivables, and 1 672 (1 881) reported as other financial receivables. In addition, Financial Solutions also has non-cancelable operating lease contracts of 747 (751). There were no significant concentrations of customer risks in these operations. No customer represented more than 5% of the total outstanding receivables. For further information, see note 22.

Atlas Copco Financial Solutions maintains collateral for its credit portfolio primarily through repossession rights in equipment. Business units may also partly transfer the commercial risk insurance to external entities (normally to an export credit agency).

Provision for credit risks

The business units establish provisions for their estimate of incurred losses in respect of trade and other receivables. The main components of this provision are specific loss provisions corresponding to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that have not yet been identified. The collective loss provision is determined based on historical default statistics for similar financial assets. At year-end 2015, the provision for bad debt amounted to 5.1% (4.5) of gross total customer receivables. The following table presents the gross value of trade receivables, both current and non-current, by maturity together with the related impairment provisions.

	2015			2014
Trade receivables	Gross	Impairment	Gross	Impairment
Not past due	13 154	10	13 824	18
Past due but not impaired
0–30 days	3 436	–	3 452	–
31–60 days	1 072	–	984	–
61–90 days	542	–	480	–
More than 90 days	2 007	–	1 695	–
Past due and individually impaired
0–30 days	97	1	76	5
31–60 days	20	2	40	5
61–90 days	21	8	37	14
More than 90 days	307	239	310	232
Collective impairment	–	793	–	665
Total	20 656	1 053	20 898	939

The total estimated fair value of collateral for trade receivables amounted to 469 (598). The collateral mainly consisted of repossession rights and export credit insurance. Based on historical default statistics and the diversified customer base, the credit risk is assessed to be limited.

The gross amount of finance lease receivables amounted to 908 (919), of which 26 (20) have been impaired, and the gross amount of other financial receivables amounted to 2 054 (2 489), of which 49 (52) have been impaired. There are no significant amounts past due that have not been impaired. The total estimated fair value of collateral to finance lease receivables and other finance receivables was 559 (640) and 1 523 (1 900) respectively, consisting primarily of repossession rights.

Financial credit risk

Group credit risk policy

Credit risk on financial transactions is the risk that the Group incurs losses as a result of non-payment by counterparts related to the Group's investments, bank deposits or derivative transactions. The financial credit risk is measured differently depending on transaction type.

Investment transactions

Efficient cash management systems should be maintained in order to minimize excess cash in operations where it cannot be invested or used to reduce interest-bearing debt. Cash may only be invested if at least one of the credit ratings (as rated by Standard & Poor's, Fitch Ratings or Moody's) of the approved counterpart or underlying investment is at least: A-/A3in case of financial counterparties and funds, BBB-/Baa3 in case of non-financial counterparties. Investments in structured financial products are not allowed, unless approved by the FRMC. Furthermore, counterparty exposure, tenor and liquidity of the Investment are considered before any investment is made. A list of each approved counterpart and its maximum exposure limit is maintained and monitored.

Derivative transactions

As part of the Group's management of financial risks, the Group enters into derivative transactions with financial counterparts. Such transactions may only be undertaken with approved counterparts for which credit limits are established and with which ISDA (International Swaps and Derivatives Association) master agreements and CSA (Credit Support Annex) agreements are in force. Derivative transactions may only be entered into by Atlas Copco Financial Solutions or in rare cases by another entity, but only with approval from the Group Treasurer. Atlas Copco primarily uses derivatives as hedging instruments and the policy allows only standardized (as opposed to structured) derivatives.

Status at year-end

At year-end 2015, the measured credit risk on derivatives, taking into account the market-to-market value and collaterals, amounted to MSEK 180 (182). The table below presents the reported value of the Group's derivatives.

Outstanding derivative instruments related to financial exposures	2015	2014
Interest rate swaps
Assets	102	160
Liabilities	133	153
Foreign exchange forwards
Assets	306	125
Liabilities	125	374
Outstanding derivative instruments

related to operational exposures	2015	2014
Assets	18	41
Liabilities	66	128

No financial assets or liabilities are offset in the balance sheet. Derivative instruments are subject to master netting agreements and the fair values of derivatives that are not offset in the balance sheet are 426 (326) for assets and 324 (655) for liabilities. The table below shows derivatives covered by master netting agreements.

Outstanding net position for derivative instruments
	Gross	Offset in BS	Net in BS	Master netting agreement	Cash collateral	Net position
Assets
Derivatives	426	–	426	–195	–213	18
Liabilities
Derivatives	324	–	324	–195	–152	–23

The negative net position in liabilities is due to that exchange of security is done on a weekly basis.

Other market and price risks

Commodity-price risk is the risk that the cost of direct and indirect materials could increase as underlying commodity prices rise in global markets. The Group is directly and indirectly exposed to raw material price fluctuations. Cost increases for raw materials and components often coincide with strong end-customer demand and are offset by increased sales to mining customers and compensated for by increased market prices. Therefore, the Group does not hedge commodity-price risks.

Fair value of financial instruments

In Atlas Copco's balance sheet, financial instruments are carried at fair value or at amortized cost. The fair value is established according to a fair value hierarchy. The hierarchy levels should reflect the extent to which fair value is based on observable market data or own assumptions. Below is a description of each level and valuation methods used for each financial instrument.

Level 1

In the Level 1 method, fair value is based on quoted (unadjusted) prices in active markets for identical assets or liabilities. A market is considered as active if quoted prices from an exchange, broker, industry group, pricing service, or supervisory body are readily and regularly available and those prices represent actual and regularly occurring market transactions at arm's length.

Level 2

In the Level 2 method, fair value is based on models that utilize observable data for the asset or liability other than the quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Such observable data may be market interest rates and yield curves.

Level 3

In the Level 3 method, fair value is based on a valuation model, whereby significant input is based on unobservable market data.

Valuation methods

Derivatives

Fair values of forward exchange contracts are calculated based on prevailing markets. Interest rate swaps are valued based on market rates and present value of future cash flows.

Interest-bearing liabilities

Fair values are calculated based on market rates and present value of future cash flows.

Finance leases and other financial receivables

Fair values are calculated based on market rates for similar contracts and present value of future cash flows.

In other liabilities, MSEK 1 078 relates to contingent considerations for acquisitions. The largest part relates to Henrob, a self-pierce riveting specialist with main facilities in the U.S. and the U.K, which was acquired in September 2014. For Henrob, the payment of the contingent consideration is dependent on

achieving future milestones as targets for revenue and growth within three

The Group's financial instruments by category

The carrying value for the Group's financial instruments corresponds to fair value in all categories except for borrowings and held-to-maturity investments. See note 21 for additional information about the Group's borrowings. The following table includes financial instruments at their fair value and

by category. Financial instruments by fair value hierarchy Fair value Level 1 Level 2 Level 3 Financial assets 294 124 170 – Other receivables 1 387 – 1 387 – Derivatives 103 – 103 – Non-current financial assets 1784 124 1 660 –

Financial liabilities	42 989	18 671	23 240	1 078
Current financial liabilities	18 957	263	18 052	642
Other liabilities	3 030	–	2 388	642
Trade payables	7 873	–	7 873	–
Other accrued expenses	6 763	263	6 500	–
Derivatives	190	–	190	–
Borrowings	1 101	–	1 101	–
financial liabilities	24 032	18 408	5 188	436
Non-current
Other liabilities	498	–	62	436
Derivatives	134	–	134	–
Other financial liabilities	173	–	173	–
Borrowings	23 227	18 408	4 819	–
Financial assets	27 639	134	27 505	–
Current financial assets	25 855	10	25 845	–
Other accrued income	2 210	10	2 200	–
Derivatives	323	–	323	–
Other receivables	2 194	–	2 194	–
Financial assets	1 576	–	1 576	–
Trade receivables	19 552	–	19 552	–

years of the acquisition, in total a maximum of MUSD 119 (MSEK 994). The liability related to the first milestone will be settled in the beginning of 2016. The fair value for the remaining milestones assumes that the maximum amount will be paid out given a discount rate of 10.5%.

Reconciliation of financial liabilities in Level 3 (MSEK)	Opening balance	Business acquisitions	Settlement	Interest	Remeasurement	Translation	Closing balance	liabilities included in closing	Profit/loss related to balance
Deferred considerations 2015	1 074	–62	–54	90	–20	50	1 078		–70
Currency rates used in the financial statements					Year-end rate			Average rate
		Value	Code		2015	2014		2015	2014
Australia		1	AUD		6.09	6.41		6.30	6.19
Canada		1	CAD		6.02	6.74		6.56	6.24
China		1	CNY		1.29	1.26		1.34	1.12
EU		1	EUR		9.13	9.54		9.34	9.13
Hong Kong		100	HKD		107.74	101.07		108.27	89.03
United Kingdom		1	GBP		12.38	12.18		12.82	11.34
U.S.A.		1	USD		8.35	7.84		8.39	6.91

Relationships

The Group has related party relationships with the Company's largest shareholder, its associates, joint ventures and with its Board members and Group Management. The Company's largest shareholder, Investor AB, controls approximately 22% of the voting rights in Atlas Copco.

The subsidiaries that are directly owned by the Parent Company are presented in note A21 to the financial statements of the Parent Company. Holding companies and operating subsidiaries are listed in note A22. Information about associated companies and joint ventures is found in note 14. Information about Board members and Group Management is presented on pages 60–63.

In 2015 premises in Sweden have been sold to and leased back from the Group's German pension trust for a consideration of 420 resulting in a net gain of 101. The lease term for the premises varies between 6 and 15 years. The consideration and the lease payments are on market terms.

Transactions and outstanding balances

The Group has not had any transactions with Investor AB during the year, other than dividends declared and redemption of shares and has no outstanding balances with Investor AB.

Investor AB has controlling or significant influence in companies with which Atlas Copco may have transactions within the normal course of business. Any such transactions are made on commercial terms.

Transactions with associated companies and joint ventures

The Group sold various products and purchased goods through certain associated companies and joint ventures on terms generally similar to those prevailing with unrelated parties.

The following table summarizes the Group's related party transactions with its associates and joint ventures:

	2015	2014
Revenues	22	46
Goods purchased	164	104
Service purchased	35	29
At Dec, 31:
Trade receivables	3	1
Trade payables	18	4
Other liabilities	1	–
Other interest-bearing liabilities	16	17
Guarantees	–	10

Compensation to key management personnel

Compensation to the Board and to Group Management is disclosed in note 5.

28. Related parties 29. Subsequent events

On January 12 Atlas Copco, completed the acquisition of Varisco, an Italian pump manufacturer with a global sales network. Varisco had revenues in 2014 of MEUR 30 (MSEK 270) and employs about 135 people. Founded in 1932, Varisco is known around the world for the design and manufacture of highquality pumps used by a wide range of customers. The pumps are typically used to remove unwanted water or other liquids in the construction, mining, and oil and gas industries; they are also used in industrial process plants and for emergency services in case of floods.

On March 2, Atlas Copco completed the acquisition of FIAC, an Italian manufacturer of piston compressors and related equipment with a global sales network. FIAC has about 400 employees and offers a broad range of piston compressors, air treatment products, and spare parts. Founded in 1977, FIAC has production sites in Italy, China and Brazil, and sells into more than 110 countries. It had revenues in 2014 of about MEUR 70 (MSEK 640).

FINANCIAL STATEMENTS, PARENT COMPANY

Income statement

For the year ended December 31, Amounts in MSEK	Note	2015	2014
Administrative expenses	A2	–566	–464
Other operating income	A3	142	193
Other operating expenses	A3	–	–7
Operating loss		–424	–278
Financial income	A4	9 606	2 910
Financial expenses	A4	–1 405	–1 903
Profit after financial items		7 777	729
Appropriations	A5	4 523	3 860
Profit before tax		12 300	4 589
Income tax	A6	–563	–797
Profit for the year		11 737	3 792

Statement of comprehensive income

For the year ended December 31, Amounts in MSEK	Note	2015	2014
Profit for the year		11 737	3 792
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Translation of net investment		461	1 911
Cash flow hedges		16	130
Income tax relating to items that may be reclassified		–104	–449
Other comprehensive income of the year, net of tax		373	–1 592
Total comprehensive income for the year		12 110	2 200

Balance sheet
As at December 31, Amounts in MSEK	Note	2015	2014
ASSETS
Non-current assets
Intangible assets	A7	15	10
Tangible assets	A8	32	33
Financial assets
Deferred tax asset	A9	86	–
Shares in Group companies	A10, A21	110 635	93 907
Other financial assets	A11	258	366
Total non-current assets		111 026	94 316
Current assets
Income tax receivable		–	20
Other receivables	A12	3 020	3 289
Cash and cash equivalents	A13	4 311	5 153
Total current assets		7 331	8 462
TOTAL ASSETS		118 357	102 778
EQUITY
Restricted equity
Share capital		786	786
Legal reserve		4 999	4 999
Total restricted equity		5 785	5 785
Non-restricted equity
Reserve for fair value		647	274
Retained earnings		22 084	33 449
Profit for the year		11 737	3 792
Total non-restricted equity		34 468	37 515
TOTAL EQUITY		40 253	43 300
PROVISIONS
Post-employment benefits	A15	135	127
Other provisions	A16	132	222
Deferred tax liabilities	A9	–	4
Total provisions		267	353
LIABILITIES
Non-current liabilities
Borrowings	A17	49 063	48 353
Other liabilities		135	157
Total non-current liabilities		49 198	48 510
Current liabilities
Borrowings	A17	27 506	9 335
Tax liabilities		90	–
Other liabilities	A18	1 043	1 280
Total current liabilities		28 639	10 615
TOTAL EQUITY AND LIABILITIES		118 357	102 778
Assets pledged	A20	279	502
Contingent liabilities	A20	7 846	9 579

Statement of changes in equity

	Number			Reserve for fair value
	of shares	Share	Legal	– translation	Retained
MSEK unless otherwise stated	outstanding	capital	reserve	reserve	earnings	Total
Opening balance, Jan. 1, 2015	1 218 000 018	786	4 999	274	37 241	43 300
Total comprehensive income for the year				373	11 737	12 110
Dividends					–7 305	–7 305
Redemption of shares		–393			–6 912	–7 305
Increase of share capital through bonus issue		393			–393	–
Acquisition series A shares	–5 500 000				–1 380	–1 380
Divestment series A shares	3 488 604				903	903
Divestment series B shares	107 500				24	24
Share-based payment, equity settled
– expense during the year					73	73
– exercise of options					–167	–167
Closing balance, Dec. 31, 2015	1 216 096 122	786	4 999	647	33 821	40 253
Opening balance, Jan. 1, 2014	1 213 552 913	786	4 999	1 866	39 328	46 979
Total comprehensive income for the year				–1 592	3 792	2 200
Dividends					–6 681	–6 681
Divestment series A shares	4 303 105				863	863
Divestment series B shares	144 000				27	27
Share-based payment, equity settled
– expense during the year					32	32
– exercise of options					–119	–119
Closing balance, Dec. 31, 2014	1 218 000 018	786	4 999	274	37 241	43 300

See note A14 for additional information.

Statement of cash flows

For the year ended December 31, Amounts in MSEK	2015	2014
Cash flows from operating activities
Operating loss	–424	–278
Adjustments for:
Depreciation	11	14
Capital loss and other non-cash items	–777	–236
Operating cash deficit	–1 190	–500
Net financial items received	9 514	1 498
Group contributions received	3 860	3 815
Taxes paid	–642	–725
Cash flow before change in working capital	11 542	4 088
Change in
Operating receivables	1 010	3 457
Operating liabilities	–445	–5 127
Change in working capital	565	–1 670
Net cash from operating activities	12 107	2 418

For the year ended December 31, Amounts in MSEK	2015	2014
Cash flow from investing activities
Investments in tangible assets	–3	–12
Investments in intangible assets	–12	–12
Investments in subsidiaries	–76	–1 266
Repayments/investments in financial assets	2	331
Net cash from investing activities	–89	–947
Cash flow from financing activities
Dividends paid	–7 305	–6 681
Redemption of shares	–7 305	–
Repurchase and divestment of own shares	–453	890
Change in interest-bearing liabilities	2 203	–3 829
Net cash from financing activities	–12 860	–9 620
Net cash flow for the year	–842	–8 149
Cash and cash equivalents, Jan. 1	5 153	13 302
Net cash flow for the year	–842	–8 149
Cash and cash equivalents, Dec. 31	4 311	5 153

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

MSEK unless otherwise stated

A1. Significant accounting principles

Atlas Copco AB is the ultimate Parent Company of the Atlas Copco Group and is headquartered in Nacka, Sweden. Its operations include administrative functions, holding company functions as well as part of Financial Solutions.

The financial statements of Atlas Copco AB have been prepared in accordance with the Swedish Annual Accounts Act and the recommendation RFR 2, "Accounting for Legal Entities", hereafter referred to as "RFR 2", issued by the Swedish Financial Reporting Board. In accordance with RFR 2, parent companies that issue consolidated financial statements according to International Financial Reporting Standards (IFRS), as endorsed by the European Union, shall present their financial statements in accordance with IFRS, to the extent these accounting principles comply with the Swedish Annual Accounts Act and may use exemptions from IFRS provided by RFR 2 due to Swedish accounting or tax legislation.

The financial statements are presented in Swedish kronor (SEK), rounded to the nearest million. The parent company's accounting principles have been consistently applied to all periods presented unless otherwise stated. The financial statements are prepared using the same accounting principles as described in note 1 to the Group's consolidated financial statements, except for those disclosed in the following sections.

For discussion regarding accounting estimates and judgments, see page 76.

Subsidiaries

Participations in subsidiaries are accounted for by the Parent Company at historical cost. The carrying amounts of participations in subsidiaries are reviewed for impairment in accordance with IAS 36, Impairment of Assets. See the Group's accounting policies, Impairment of financial assets, for further details.

Transaction costs incurred in connection with a business combination are accounted for by the Parent Company as part of the acquisition costs and are not expensed.

Lease contracts

All lease contracts entered into by the Parent Company are accounted for as operating leases.

Employee benefits

Defined benefit plans

Defined benefit plans are not accounted for in accordance with IAS 19. In the Parent Company defined benefit plans are accounted for according to the Swedish law regarding pensions, "Tryggandelagen" and regulations issued by the Swedish Financial Supervisory Board. The primary differences as compared to IAS 19 are the way discount rates are fixed, that the calculation of defined benefit obligations is based on current salary levels, without consideration of future salary increases and that all actuarial gains and losses are included in profit or loss as they occur.

Share-based payments

The share-based payments that the Parent Company has granted to employees in the Parent Company are accounted for using the same principle as described in note 1 in the Group's consolidated financial statements.

The share-based payments that the Parent Company has granted to employees in subsidiaries are not accounted for as an employee expense in the Parent Company, but are recognized against Shares in Group companies. This vesting cost is accrued over the same period as in the Group and with a corresponding increase in equity for equity-settled programs and as a change in liabilities for cash-settled programs.

Financial guarantees

Financial guarantees issued by the Parent Company for the benefit of subsidiaries are not valued at fair value. They are reported as contingent liabilities, unless it becomes probable that the guarantees will lead to payments. In such case, provisions will be recorded.

Hedge accounting

Interest-bearing liabilities denominated in other currencies than SEK, used to hedge currency exposure from investments in shares of foreign subsidiaries are not translated using the foreign exchange rates on the balance sheet date, but measured based on the exchange rate the day that the hedging relation was established.

Derivatives used to hedge investments in shares in foreign subsidiaries are recognized at fair value and changes therein are recognized in profit or loss. The corresponding fair value change on shares in subsidiaries is recognized in profit or loss.

Group and shareholders' contributions

In Sweden, Group contributions are deductible for tax purposes but shareholders' contributions are not. Group contributions are recognized as appropriations in the income statement. Shareholders' contributions are recognized as an increase of Shares in Group companies and tested for impairment.

A2. Employees and personnel expenses and remunerations to auditors

	Average number of employees
		2015			2014
	Women	Men	Total	Women	Men	Total
Sweden	65	53	118	61	56	117
Women in Atlas Copco Board and Management, % Dec. 31, 2015 Dec. 31, 2014

Board of Directors excl. union representatives	33	33
Group Management	22	22

Salaries and other remuneration

	2015		2014
	Board members and Group Management 1)	Other employees	Board members and Group Management 1)	Other employees
Sweden	61	118	69	106
of which variable compensation	20		14

1) Includes 8 (8) Board members who receive fees from Atlas Copco AB as well as the President and CEO and 7 (7) members of Group Management who are employed by and receive salary and other remuneration from the Company.

For information regarding remuneration and other fees for members of the Board, the President and CEO, and other members of Group Management, see note 5 of the consolidated financial statements.

Pension benefits and other social costs	2015	2014
Contractual pension benefits for Board members and Group Management	11	10
Contractual pension benefits for other employees	15	22
Other social costs	61	73
Total	87	105
Pension obligations to former members of Group Management	5	15

Remunerations to auditors

Audit fees and consultancy fees for advice or assistance other than audit, were as follows:

	2015	2014
Deloitte
– audit fee	6	6
– audit activities other than audit assignment	1	1
– other services, tax	–	2
Total	7	9

Audit fee refers to audit of the financial statements and the accounting records. For the Parent Company the audit also includes the administration of the business by the Board of Directors, the President and CEO.

Audit activities other than the audit assignment refer for example to comfort letters and the limited assurance report on Atlas Copco's sustainability report.

Tax services include both tax consultancy services and tax compliance services.

At the Annual General Meeting 2015, Deloitte was elected as auditor for the Group until the Annual General Meeting 2016.

A3. Other operating income and expenses

	2015	2014
Commissions received	135	151
Other operating income 1)	–	42
Exchange-rate differences, net	7	–
Total other operating income	142	193
Exchange-rate differences, net	–	–7
Total other operating expenses	–	–7

1) Other operating income refers to insurance reimbursements.

A4. Financial income and expenses

Financial income and expenses	2015	2014
Interest income
– cash and cash equivalents	104	26
– receivables from Group companies	208	298
Dividend income from Group companies	9 276	2 525
Capital gain	4	8
Foreign exchange gain, net	14	53
Financial income	9 606	2 910
Interest expense
– borrowings	–704	–644
– derivatives for fair value hedges	–58	–69
– liabilities to Group companies	–642	–817
– pension provisions, net	–1	–1
– other	–	–1
Impairment loss
– writedown of shares in Group Companies	–	–371
Financial expenses	–1 405	–1 903
Financial income, net	8 201	1 007

The following table presents the net gain or loss by category of financial instruments.

	2015	2014
Net gain/loss on
– loans and receivables, incl. bank deposits	326	377
– other liabilities	–1 347	–1 463
– derivatives for fair value hedges	–58	–69
Profit from shares in Group companies	9 280	2 162
Total	8 201	1 007

For further information about the hedges, see note 27 of the consolidated financial statements.

A5. Appropriations

Appropriations	2015	2014
Group contributions paid	–170	–328
Group contributions received	4 693	4 188
Total	4 523	3 860

A6. Income tax

	2015	2014
Current tax	–549	–796
Deferred tax	–14	–1
Total	–563	–797
Profit before taxes	12 300	4 589
The Swedish corporate tax rate, %	22.0	22.0
National tax based on profit before taxes	–2 706	–1 010
Tax effects of:
Non-deductible expenses	–163	–249
Tax exempt income	2 088	557
Deductible expenses, not recognized in Income statement	81	19
Taxable income, not recognized in Income statement	–	–97
Controlled foreign company taxation	–29	–12
Adjustments from prior years	166	–5
Total	–563	–797
Effective tax in %	4.6	17.4

The Parent Company's effective tax rate of 4.6% (17.4) is primarily affected by non-taxable income such as dividends from Group companies.

A7. Intangible assets

	Capitalized expenditures for computer programs
	2015	2014
Accumulated cost
Opening balance, Jan. 1	36	36
Investments	12	–
Closing balance, Dec. 31	48	36
Accumulated depreciation
Opening balance, Jan. 1	26	21
Depreciation for the year	7	5
Closing balance, Dec. 31	33	26
Carrying amount
Opening balance, Jan. 1	10	15
Closing balance, Dec. 31	15	10

A8. Property, plant and equipment

		2015			2014
	Buildings and land	Machinery and equipment	Total	Buildings and land	Machinery and equipment	Total
Accumulated cost
Opening balance, Jan. 1	27	46	73	23	39	62
Investments	–	3	3	4	8	12
Disposals	–	–3	–3	–	–1	–1
Closing balance, Dec. 31	27	46	73	27	46	73
Accumulated depreciation
Opening balance, Jan. 1	8	32	40	5	27	32
Depreciation for the year	–2	6	4	3	6	9
Disposals	–	–3	–3	–	–1	–1
Closing balance, Dec. 31	6	35	41	8	32	40
Carrying amount
Opening balance, Jan. 1	19	14	33	18	12	30
Closing balance, Dec. 31	21	11	32	19	14	33

The asset Buildings and land relates to improvements in leased properties. Depreciation is accounted for under administrative expenses in the Income Statement.

The leasing costs for assets under operating leases, such as rented premises, cars and office equipment are reported among administrative expenses and amounted to 68 (38). Future payments for non-cancelable leasing contracts amounted to 476 (452) and fall due as follows:

	2015	2014
Less than one year	69	57
Between one and five years	243	212
More than five years	164	183
Total	476	452

A9. Deferred tax assets and liabilities

		2015			2014
	Assets	Liabi lities	Net balance	Assets	Liabi lities	Net balance
Fixed assets	1	–	1	1	–	1
Post-employment benefits	32	–	32	29	–	29
Other provisions	6	–	6	10	–	10
Non-current liabilities	47	–	47	–	–44	–44
Total	86	–	86	40	–44	–4

The following reconciles the net balance of deferred taxes at the beginning of the year to that at the end of the year:

	2015	2014
Net balance, Jan. 1	–4	–452
Charges to other comprehensive income	–3	449
Reclassification	107	–
Charges to profit for the year	–14	–1
Net balance, Dec. 31	86	–4

A10. Shares in Group companies

	2015	2014
Accumulated cost
Opening balance, Jan. 1	95 046	93 772
Investments	–	79
Net investment hedge	129	–121
Shareholders' contribution	16 819	1 338
Divestments	–220	–22
Closing balance, Dec. 31	111 774	95 046
Accumulated write-up
Opening balance, Jan. 1	600	600
Closing balance, Dec. 31	600	600
Accumulated write-down
Opening balance, Jan. 1	–1 739	–1 368
Write-down	–	–371
Closing balance, Dec. 31	–1 739	–1 739
Total	110 635	93 907

For further information about Group companies, see note A21.

A11. Other financial assets

	2015	2014
Receivables from Group companies	1	6
Derivatives
– held for trading	1	–
– designated for hedge accounting	102	160
Endowment insurances	126	110
Financial assets classified as loans and receivables
– other financial receivables	28	90
Closing balance, Dec. 31	258	366

Endowment insurances relate to defined contribution pension plans and are pledged to the pension beneficiary (see note A15 and A20).

A12. Other receivables

	2015	2014
Receivables from Group companies	2 411	2 664
Derivatives
– held for trading	252	134
– designated for hedge accounting	71	17
Financial assets classified as loans and receivables
– other receivables	225	400
Prepaid expenses and accrued income	61	74
Closing balance, Dec. 31	3 020	3 289

Other receivables of 225 (400) mainly refers to CSA agreements used to limit the credit risk on derivative transactions.

A13. Cash and cash equivalents

2015	2014
745	2 706
3 566	2 447
4 311	5 153

The Parent Company's guaranteed, but unutilized, credit lines equaled to 8 585 (6 298).

A14. Equity

For information on share transactions and mandates approved by the Annual General Meeting, see note 20 in the consolidated financial statements.

Reserves

The Parent Company's equity includes certain reserves which are described as follows:

Legal reserve

The legal reserve is a part of the restricted equity and is not available for distribution.

Reserve for fair value – Translation reserve

The reserve comprises translation of intragroup receivables from or liabilities to foreign operations that in substance are part of the net investment in the foreign operations, as well as cash flow hedges to convert variable interest rates to fixed interest rates.

A15. Post-employment benefits

		2015			2014
	Defined contribution pension plan	Defined benefit pension plan	Total	Defined contribution pension plan	Defined benefit pension plan	Total
Opening balance, Jan. 1	110	17	127	78	18	96
Provision made	17	–	17	38	–	38
Provision used	–1	–8	–9	–6	–1	–7
Closing balance, Dec. 31	126	9	135	110	17	127

The Parent Company has endowment insurances of 126 (110) relating to defined contribution pension plans. The insurances are recognized as other financial assets, and pledged to the pension beneficiary.

Description of defined benefit pension plans

The Parent Company has three defined benefit pension plans. The ITP plan is a final salary pension plan covering the majority of salaried employees in Atlas Copco AB which benefits are secured through the Atlas Copco pension trust. The second plan relates to a group of employees earning more than 10 income base amounts who have opted out from the ITP plan. This plan is insured. The third plan relates to retired former senior employees. These pension arrangements are provided for.

	2015				2014
	Funded pension	Unfunded pension	Total	Funded pension	Unfunded pension	Total
Defined benefit obligations	134	9	143	133	17	150
Fair value of plan assets	–296	–	–296	–262	–	–262
Present value of net obligations	–162	9	–153	–129	17	–112
Not recognized surplus	162	–	162	129	–	129
Net amount recognized in balance sheet	–	9	9	–	17	17

Reconciliation of defined benefit obligations	Funded pension	Unfunded pension	Total	Funded pension	Unfunded pension	Total
Defined benefit obligations at Jan. 1	133	17	150	130	18	148
Service cost	6	1	7	5	2	7
Interest expense	4	–	4	4	–	4
Other changes in obligations	–	–8	–8	4	–	4
Benefits paid from plan	–9	–1	–10	–10	–3	–13
Defined benefit obligations at Dec. 31	134	9	143	133	17	150

Fair value of plan assets at Dec. 31	296	–	296	262	–	262
Return on plan assets	34	–	34	26	–	26
Fair value of plan assets at Jan. 1	262	–	262	236	–	236
Reconciliation of plan assets	Funded pension	Unfunded pension	Total	Funded pension	Unfunded pension	Total

A15. Post-employment benefits, continued

	2015	2014
Pension commitments provided for in the balance sheet
Costs excluding interest	6	15
Interest expense	–	1
Total	6	16
Pension commitments provided for through insurance contracts
Service cost	20	19
Total	20	19
Net cost for pensions, excluding taxes	26	35
Special employer's contribution	10	16
Total	36	51

Pension expenses excluding taxes for the year, included within administrative expenses amounted to 26 (35) of which the Board members and Group Management 11 (10) and others 15 (25).

The Parent Company's share in plan assets fair value in the Atlas Copco pension trust amounts to 296 (262) and is allocated as follows:

	2015	2014
Equity securities	35	28
Bonds	188	184
Real estate	70	50
Cash and cash equivalents	3	–
Total	296	262

The plan assets of the Atlas Copco pension trust are not included in the financial assets of the Parent Company.

The return on plan assets in the Atlas Copco pension trust amounted to 11.9 % (11.3).

The Parent Company adheres to the actuarial assumptions used by The Swedish Pension Registration Institute (PRI) i.e. discount rate 3.7 % (3.8).

The Parent Company estimates 9 will be paid to defined benefit pension plans during 2016.

A16. Other provisions

	2015	2014
Opening balance, Jan. 1	222	249
During the year
– provisions made	78	145
– provisions used	–168	–168
– provisions reversed	–	–4
Closing balance, Dec. 31	132	222

Other provisions include primarily provisions for costs related to employee option programs accounted for in accordance with IFRS 2 and UFR 7.

A17. Borrowings

			2015		2014
	Maturity	Repurchased nominal amount	Carrying amount	Fair value	Carrying amount	Fair value
Non-current
Medium Term Note Program MEUR 500	2019		4 458	4 823	4 458	5 076
Medium Term Note Program MEUR 500	2023		4 531	4 937	4 528	5 191
Capital market borrowings MUSD 800	2017		6 897	7 173	6 635	7 088
Capital market borrowings MUSD 150	2019	MUSD 7.5	1 190	1 475	973	1 446
Bilateral borrowings EIB MEUR 275	2019		2 329	2 561	2 329	2 693
Bilateral borrowings NIB MEUR 200	2024		1 886	1 908	1 696	1 803
Non-current borrowings from Group companies			27 772	28 878	27 734	29 130
Total non-current borrowings			49 063	51 755	48 353	52 427
Current
Current borrowings from Group companies			27 506	27 529	9 335	9 382
Total current borrowings			27 506	27 529	9 335	9 382
Closing balance, Dec. 31			76 569	79 284	57 688	61 809
Whereof external borrowings			21 291	22 877	20 619	23 297

The difference between carrying value and fair value relates to the measurement method as certain liabilities are reported at amortized cost and not at fair value. Changes in interest rates and credit margins create the difference between fair value and amortized cost.

During 2015 Atlas Copco has increased the bilateral loan from Nordic Investment Bank of MEUR 180 to MEUR 200. In January 2015 Atlas Copco AB entered into a loan agreement with European Investment Bank amounting to MEUR 300. Currently, the facility is undrawn. The availability period for drawings under the facility is extended until July 2016. If no drawings are made by then, the facility will be cancelled.

The credit line of MEUR 640 has been extended during 2015 and matures in 2020.

A17. Borrowings, continued

The following table shows the maturity structure of the Parent Company's external borrowings and includes the effect of interest rate swaps.

Maturity	Fixed	Floating 1)	Carrying amount	Fair value
2017	5 173	1 724	6 897	7 173
2019	7 977	–	7 977	8 859
2023	4 531	–	4 531	4 937
2024	–	1 886	1 886	1 908
Total	17 681	3 610	21 291	22 877

1) Floating interest in the table is borrowings with fixings shorter or equal to six months.

A18. Other liabilities

	2015	2014
Accounts payable	26	40
Liabilities to Group companies	246	383
Derivatives
– held for trading	158	337
– designated for hedge accounting	–	99
Other financial liabilities
– other liabilities	218	35
Accrued expenses and prepaid income	395	386
Closing balance, Dec. 31	1 043	1 280

Accrued expenses include items such as social costs, vacation pay liability, and accrued interest.

Parent Company borrowings

Atlas Copco AB had MSEK 21 291 (20 619) of external borrowings and MSEK 55 278 (37 069) of internal borrowings at December 31, 2015. Derivative instruments are used to manage the currency and interest rate risk in line with policies set by the Financial Risk Management Committee, see note 27 in the consolidated financial statements.

Hedge accounting

The Parent Company hedges shares in subsidiaries through loans of MEUR 4 739 (4 719) and derivatives of MEUR 310 (330). The deferral hedge accounting of the loans is based on a RFR 2 exemption. The derivatives are accounted as fair value hedges.

The interest rate risk is managed with interest rate swaps, designated as fair value hedges and cash flow hedges. Note 27 of the consolidated financial statements include fair value of these swaps and further details.

Financial credit risk

Credit risk on financial transactions is the risk that the Parent Company incurs losses as a result of non-payment by counterparts related to the Parent Company's investments, bank deposits or derivative transactions. For further information regarding investment and derivative transactions, see note 27 of the consolidated financial statements.

The table below shows the actual exposure of financial instruments as per December 31.

Financial credit risk	2015	2014
Cash and cash equivalents	4 311	5 153
Receivables from Group companies	2 412	2 670
Derivatives	426	311
Other	315	564
Total	7 464	8 698

Fair value hierarchy

Fair values are based on observable market prices or, in the case that such prices are not available, on observable inputs or other valuation techniques. Amounts shown in other notes are unrealized and will not necessarily be realized.

For more information about fair value hierarchy, see note 27 of the consolidated financial statements. There are no level 3 instruments in the Parent Company.

Valuation methods

Derivatives

Fair values of forward exchange contracts are calculated based on prevailing markets. Interest rate swaps are valued based on market rates and present value of future cash flows.

Interest-bearing liabilities

Fair values are calculated based on market rates and present value of future cash flows.

The Parent Company's financial instruments by category

The carrying value for the Parent Company's financial instruments corresponds to fair value in all categories except for borrowings. See A17 for additional information.

A20. Assets pledged and contingent liabilities

	2015	2014
Assets pledged for derivative contracts
Other receivables	152	392
Assets pledged for pension commitments
Endowment insurances	126	110
Total	279	502
Contingent liabilities
Sureties and other contingent liabilities
– for external parties	3	3
– for Group companies	7 843	9 576
Total	7 846	9 579

Sureties and other contingent liabilities include bank and commercial guarantees, CSA-agreements, (Credit Support Annex) and performance bonds. Sureties and other contingent liabilities for Group companies has decreased since Atlas Copco UK Holding Ltd (99,5 MUSD) and Atlas Copco North America LLC (99,0 MUSD) financial guarantees have matured in 2015.

A21. Directly owned subsidiaries

	2015				2014
	Number of shares	Percent held	Carrying value	Number of shares	Percent held	Carrying value
Directly owned product companies
Atlas Copco Airpower n.v., Wilrijk	76 415	100	46 028	76 415	100	45 988
Atlas Copco Construction Technique Brasil Ltda, São Paulo	25 777 505	100	619	25 777 505	100	619
Atlas Copco Craelius AB, 556041-2149, Märsta	200 000	100	56	200 000	100	53
Atlas Copco GIA AB, 556040-0870, Grängesberg	50 000	100	153	50 000	100	152
Atlas Copco MAI GmbH, Feistritz an der Drau	–	–	–	1	100	34
Atlas Copco Meyco AG, Zurich	9 000	100	64	9 000	100	64
Atlas Copco Rock Drills AB, 556077-9018, Örebro	1 000 000	100	467	1 000 000	100	452
Atlas Copco Secoroc AB, 556001-9019, Fagersta	2 325 000	100	179	2 325 000	100	178
Atlas Copco Welltech AB, 556577-2240, Jonsered	20 000	100	78	20 000	100	78
Construction Tools AB, 556069-7228, Kalmar	60 000	100	2 050	60 000	100	2 047
Dynapac Compaction Equipment AB, 556068-6577, Karlskrona	80 000	100	887	80 000	100	1 105
Gazcon A/S, Lynge	500	100	23	500	100	23

A21. Directly owned subsidiaries, continued

Number of Percent Carrying Number of Percent Carrying shares held value shares held value Directly owned customer centers Atlas Copco (Cyprus) Ltd., Nicosia 99 998 100 – 99 998 100 – Atlas Copco Argentina S.A.C.I., Buenos Aires 5 120 025 93/1001) 62 525 000 75/1001) 12 Atlas Copco (India) Ltd., Mumbai 21 731 582 96 1 818 21 731 582 96 1 815 Atlas Copco (Ireland) Ltd., Dublin 250 000 100 28 250 000 100 28 Atlas Copco (Malaysia), Sdn. Bhd., Kuala Lumpur 1 000 000 100 14 1 000 000 100 14 Atlas Copco (Philippines) Inc., Paranaque 121 995 100 6 121 995 100 6 Atlas Copco (Switzerland) AG., Studen/Biel 8 000 100 52 8 000 100 52 Atlas Copco (South East Asia) Pte.Ltd., Singapore 1 500 000 100 6 1 500 000 100 6 Atlas Copco Brasil Ltda., São Paulo 70 358 841 100 239 70 358 841 100 238 Atlas Copco Chilena S.A.C., Santiago 24 998 100 11 24 988 100 9 Atlas Copco CMT Sweden AB, 556100-1453, Nacka 103 000 100 99 103 000 100 98 Atlas Copco Compressor AB, 556155-2794, Nacka 60 000 100 12 60 000 100 12 0/1001) 0/1001) Atlas Copco Equipment Egypt S.A.E., Cairo 5 2 5 2 Atlas Copco Ges.m.b.H., Vienna 1 100 43 1 100 8 Atlas Copco Indoeuropeiska AB, 556155-2760, Nacka 3 500 100 25 3 500 100 25 Atlas Copco Eastern Africa Ltd., Nairobi 482 999 100 31 482 999 100 6 Atlas Copco KK, Tokyo 375 001 100 31 375 001 100 30 Atlas Copco Kompressorteknik A/S, Copenhagen 4 000 100 4 4 000 100 3 Atlas Copco Maroc SA., Casablanca 3 888 97 3 3 854 96 2 Atlas Copco Services Middle East OMC, Bahrain 500 100 6 500 100 5 Atlas Copco Venezuela S.A., Caracas 25 812 000 100 42 25 812 000 100 42 Chicago Pneumatic Construction Equipment AB, 556197-5375, Stockholm – – – 30 000 100 29 Servatechnik AG., Oftringen 3 500 100 28 3 500 100 28 Soc. Atlas Copco de Portugal Lda., Lisbon 1 100 26 1 100 25 AGRE Kompressoren GmbH, Garsten-St. Ulrich 200 000 100 7 200 000 100 7 Directly owned holding companies and others Atlas Copco A/S, Langhus 2 500 100 40 2 500 100 40 Atlas Copco Beheer b.v., Zwijndrecht 15 712 100 2 459 15 712 100 2 429 0/1001) 0/1001) Atlas Copco Customer Finance Chile Ltd., Santiago 6 317 500 – 6 317 500 – Atlas Copco Deutschland GmbH , Essen 1 100 3 1 100 – Atlas Copco Dynapac AB, 556655-0413, Nacka – – – 86 993 823 100 3 Atlas Copco Finance Belgium bvba, Wilrijk 1 0/1001) – 1 0/1001) – Atlas Copco Finance Europe n.v., Wilrijk 1 0/1001) 1 1 0/1001) 1 Atlas Copco France Holding S.A., St. Ouen l'Áumône 278 255 100 259 278 255 100 257 Atlas Copco Holding GmbH, Essen 2 100 1 056 2 100 1 049 Atlas Copco Järla Holding AB, 556062-0212, Nacka 95 000 100 20 570 95 000 100 20 570 Atlas Copco Lugnet Treasury AB, 556277-9537, Nacka 700 500 100 724 700 500 100 723 Atlas Copco Sickla Holding AB, 556309-5255, Nacka 1 000 100 27 285 1 000 100 10 630 Atlas Copco UK Holdings Ltd., Hemel Hempstead 150 623 666 100 1 470 150 623 666 100 1 468 Atlas Copco USA Holdings Inc., Parsippany NJ 100 100 3 429 100 100 3 429 Dynapac AB, 556655-0421, Karlskrona 75 000 100 – 75 000 100 – Econus S A, Montevideo 21 582 605 100 17 21 582 605 100 17 Industria Försäkrings AB, 516401-7930, Nacka 300 000 100 30 300 000 100 30 Oy Atlas Copco AB, Vantaa 150 100 30 150 100 32 0/1001) 0/1001) Power Tools Distribution n.v., Hoeselt 1 2 1 1 2 (2) dormant companies 100 12 100 12 Net investment hedge 50 –79 Carrying amount, Dec. 31 110 635 93 907		2015			2014

1) First figure; percentage held by Parent Company, second figure; percentage held by Atlas Copco Group.

A22. Related parties

Relationships

The Parent Company has related party relationships with its largest shareholder, its subsidiaries, its associates, its joint ventures and with its Board members and Group Management.

The Parent Company's largest shareholder, Investor AB, controls approximately 22 % of the voting rights in Atlas Copco AB.

The subsidiaries that are directly owned by the Parent Company are presented in note A21 and all directly and indirectly owned operating subsidiaries are listed on the following pages.

Information about Board members and Group Management is presented on pages 60–63.

Transactions and outstanding balances

The Group has not had any transactions with Investor AB during the year other than dividends declared and redemption of shares and has no outstanding balances with Investor AB.

Investor AB has controlling or significant influence in companies which Atlas Copco AB may have transactions with in the normal course of business. Any such transactions are made on commercial terms.

The following table summarizes the Parent Company's transactions with Group companies:

	2015	2014
Revenues
Dividends	9 276	2 525
Group contribution	4 693	4 188
Interest income	208	298
Expenses
Group contribution	–170	–328
Interest expenses	–642	–817
Receivables	2 412	2 669
Liabilities	55 524	37 454
Guarantees	7 843	9 576

The following details directly and indirectly owned holding and operational subsidiaries (excluding branches), presented by country of incorporation.

Country	Company	Location (City)	Country	Company	Location (City)
Algeria	SPA Atlas Copco Algérie	Algiers	Chile	Atlas Copco Chilena S.A.C.	Santiago
Angola	Atlas Copco Angola Lda	Luanda		Atlas Copco Customer Finance Chile Ltda	Santiago
Argentina	Atlas Copco Argentina S.A.C.I	Buenos Aires	China	Atlas Copco (China) Investment Co., Ltd.	Shanghai
	Atlas Copco Servicios Mineros S.A.	Buenos Aires		Atlas Copco (China) Mining and
Australia	Atlas Copco Australia Pty Limited	Blacktown		Construction Equipment Trading Co Ltd	Nanjing
	Atlas Copco Customer Finance Australia			Atlas Copco (Nanjing) Construction and
	Pty Limited	Blacktown		Mining Equipment Ltd.	Nanjing
	Atlas Copco South Pacific Holdings Pty Ltd. Blacktown			Atlas Copco (Shanghai) Equipment Rental Co., Ltd.	Shanghai
	Henrob (UK) Pty Ltd	Brisbane		Atlas Copco (Shanghai) Process
Austria	AGRE Kompressoren GmbH	Garsten-st. Ulrich		Equipment Co., Ltd.	Shanghai
	Atlas Copco Ges.m.b.H.	Vienna		Atlas Copco (Shanghai) Trading Co., Ltd.	Shanghai
	Atlas Copco Powercrusher GmbH	St. Valentin		Atlas Copco (Shenyang) Construction
Bahrain	Atlas Copco Services Middle East OMC	Bahrain		and Mining Equipment Ltd.	Shenyang
Bangladesh	Atlas Copco Bangladesh Ltd.	Dhaka		Atlas Copco (Wuxi) Compressor Co., Ltd.	Wuxi
Belgium	Atlas Copco Airpower n.v.	Wilrijk		Atlas Copco (Wuxi) Exploration
	Atlas Copco Belgium n.v.	Overijse		Equipment Ltd.	Wuxi
	Atlas Copco Business Services n.v.	Wilrijk		Atlas Copco (Wuxi) Energy Conservation Engineering Co., Ltd.	Wuxi
	Atlas Copco Finance Belgium BVBA	Wilrijk		Atlas Copco (Wuxi) Research and
	Atlas Copco Finance Europe n.v.	Wilrijk		Development Center	Wuxi
	Atlas Copco Rental Europe n.v.	Wilrijk		Atlas Copco (Zhangjiakou) Construction
	EDMAC Europe n.v.	Wilrijk		& Mining Equipment Ltd.	Zhangjiakou
	International Compressor Distribution NV	Wilrijk		Atlas Copco Financial Leasing Co., Ltd.	Shanghai
	Power Tools Distribution n.v.	Hoeselt		Bolaite (Shanghai) Compressor Co., Ltd.	Shanghai
	SA Edwards Vacuum NV	Estaimpuis		Bolaite (Shanghai) Compressor Trading Co. Ltd	Shanghai
	Maes Compressoren NV	Ghent		Dynapac (China) Compaction &
Bolivia	Atlas Copco Boliviana SA	La Paz		Paving Eq Co., Ltd.	Tianjin
Bosnia and	Herzegovina Atlas Copco BH d.o.o.	Sarajevo		Edmac (Shanghai) Trading Co., Ltd.	Shanghai
Botswana	Atlas Copco (Botswana) (Pty) Ltd.	Gaborone		Edwards Technologies Trading
Brazil	Atlas Copco Brasil Ltda	Barueri		(Shanghai) Company Ltd	Shanghai
	Atlas Copco Construction Technique			Edwards Technologies Vacuum Engineering (Qingdao) Company Ltd.	Qingdao
	Brasil Ltda	São Paulo		Edwards Technologies Vacuum
	Cavaletti Equipamentos e Servicos Ltda	Valinhos		Engineering (Shanghai) Company Ltd.	Shanghai
	Chicago Pneumatic Brasil Ltda	Barueri		Edwards Technologies Vacuum
	Edwards Vacuo Ltda	São Paulo		Engineering (Xian) Company Ltd	Xian
	Schucker do Brazil Ltda	São José dos Pinais		Guangzhou Linghein Compressor Co., Ltd.	Guangzhou
	Synatec Group of South America Inc.	São Paulo		Kunshan Q-Tech Air System Technologies Ltd. Kunshan
Bulgaria	Atlas Copco Bulgaria EOOD	Sofia		Liutech (Liuzhou) Compressor Trading Co. Ltd	Liuzhou
	Construction Tools EOOD	Roseau		Liuzhou Tech Machinery Co., Ltd.	Liuzhou
	Burkina Faso Atlas Copco Burkina Faso SARL	Ouagadougou		SCA Schucker Automation Equipment
Cameroon	Atlas Copco Afrique Centrale SA	Douala		(Shanghai) Co., Ltd.	Shanghai
Canada	Atlas Copco Canada Inc.	Dorval		Shanghai Beacon Medaes Medical Gas
	Chicago Pneumatic Tool Co. Canada Ltd.	Toronto		Engineering Consulting Co., Ltd.	Shanghai
	Air Repair Sales & Services Limited	Moncton		Shanghai Tooltec Industrial Tool Co., Ltd.	Shanghai

A22. Related parties, continued

Country	Company	Location (City)	Country	Company	Location (City)
	Shandong Rock Drilling Tools Co Ltd.	Yanggu	Germany	SCA Schucker Verwaltungs-GmbH	Bretten
	Wuxi Pneumatech Air/Gas Purity Equipment Co., Ltd.	Wuxi		Synatec GmbH	Leinfelden Echterdingen
	Wuxi Shengda Air/Gas Punty		Ghana	Atlas Copco Ghana Ltd.	Accra
	Equipment Co., Ltd	Wuxi	Greece	Atlas Copco Hellas AE	Koropi
Colombia	Atlas Copco Colombia Ltda	Bogotá	Hong Kong	Atlas Copco China/Hong Kong Ltd	Kowloon
Croatia	Atlas Copco d.o.o.	Zagreb		CP China/Hong Kong Ltd.	Kowloon
Cyprus	Atlas Copco (Cyprus) Ltd.	Nicosia		Edwards Vacuum Hong Kong Ltd	Hongkong
Czech	ALUP CZ spol. S.r.o	Breclav	Hungary	Atlas Copco Kft.	Budapest
	Atlas Copco s.r.o.	Prague		Industrial Technique Hungary Kft.	Budapest
	Edwards s.r.o.	Lutin	India	Atlas Copco (India) Ltd.	Pune
	Edwards Services s.r.o.	Lutin		Edwards India Private Ltd	Pune
	Industrial Technique Service s.r.o.	Prague	Indonesia	PT Atlas Copco Indonesia	Jakarta
				PT Atlas Copco Nusantara	Jakarta
the Congo	Atlas Copco DRC sprl	Lubumbashi	Iraq	Atlas Copco Iraq LLC	Erbil
Denmark	Atlas Copco Kompressorteknik A/S	Copenhagen		Atlas East LLC for General Trading and
	Gazcon A/S	Lynge		Industrial equipment	Baghdad
Egypt	Atlas Copco Equipment Egypt S.A.E.	Cairo	Ireland	Atlas Copco (Ireland) Ltd.	Dublin
Finland	Oy Atlas Copco Ab	Vantaa		Edwards Vacuum Technology Ireland Ltd	Dublin
	Oy Atlas Copco Kompressorit Ab	Vantaa	Israel	Edwards Israel Vacuum Ltd	Kiryat Gat
	Oy Atlas Copco Louhintatekniikka Ab	Vantaa	Italy	ABAC Aria Compressa S.p.A	Robassomero
	Oy Atlas Copco Rotex Ab	Tampere		Atlas Copco BLM S.r.l.	Milan
	Oy Atlas Copco Tools Ab	Vantaa		Atlas Copco Italia S.p.A.	Milan
China Republic Democratic Republic of France Germany	ABAC France S.A.S.	Valence		Atlas Copco Stonetec S.r.L	Bagnolo Piemonte
	Atlas Copco Applications Industrielles S.A.S. Cergy Pontoise			Ceccato Aria Compressa S.r.L	Vicenza
	Atlas Copco Compresseurs S.A.S	Cergy Pontoise		Edwards S.p.A.	Milan
	Atlas Copco Crépelle S.A.S.	Lille		MultiAir Italia S.r.l	Cinisello Balsamo
	Atlas Copco Forage et Construction S.A.S.	Cergy Pontoise	Japan	Atlas Copco KK	Tokyo
	Atlas Copco France Holding S.A.	Cergy Pontoise		Edwards Japan Ltd	Chiba
	Compresseurs Mauguière S.A.S.	Cergy Pontoise		Fuji Industrial Technique Co., Ltd.	Osaka
	Compresseurs Worthington		Kazakhstan	Atlas Copco Central Asia LLP	Almaty
	Creyssensac S.A.S.	Chambly	Kenya	Atlas Copco Eastern Africa Limited	Nairobi
	Edwards SAS	Gennevilliers	Latvia	Atlas Copco Baltic SIA	Riga
	ETS Georges Renault S.A.S.	Nantes	Lebanon	Atlas Copco Levant S.A.L. Luxembourg Atlas Copco Finance S.á.r.l.	Beirut Luxembourg
	Exlair S.A.S.	Cergy Pontoise	Malaysia	Atlas Copco (Malaysia) Sdn. Bhd.	Shah Alam
	Hibon International SA	Gennevilliers		Edwards Technologies Malaysia Sdn. Bhd.	Kuala Lumpur
	Hibon SA	Gennevilliers	Mali	Atlas Copco Mali Sarl	Bamako
	Seti-Tec S.A.S.	Lognes	Mexico	Atlas Copco Mexicana S.A. de C.V.	Tlalnepantla
	ALUP Kompressoren GmbH	Köngen		Atlas Copco Rental Mexico	Monterrey
	Atlas Copco ACE GmbH	Essen		Desarrollos Técnologicos ACMSA
	Atlas Copco Beteiligungs GmbH Atlas Copco Berg-und Tunnelbautechnik	Essen		S.A. de C.V.	Tlalnepantla
	GmbH	Essen		SCA Schucker de Mexico S.A. de C.V.	Puebla
	Atlas Copco Road Construction GmbH	Wardenburg		Desoutter Tools Mexico SA de CV	Tlalnepantla
	Atlas Copco Deutschland GmbH	Essen	Mongolia	Atlas Copco Mongolia LLC	Ulaanbaatar
	Atlas Copco Energas GmbH	Cologne	Morocco	Atlas Copco Maroc SA	Casablanca
	Atlas Copco Holding GmbH	Essen		Mozambique Atlas Copco Mozambique	Maputo
	Atlas Copco Kompressoren und		Myanmar	Atlas Copco Services Myanmar Co., Ltd.	Yangon
	Drucklufttechnik GmbH	Essen	Namibia	Atlas Copco Namibia (Pty) Ltd.	Windhoek
	Atlas Copco MCT GmbH	Essen		Netherlands Alup Grass-air Kompressoren B.V.	Oss
	Atlas Copco Tools Central Europe GmbH	Essen		Atlas Copco Beheer B.V.	Zwijndrecht
	Construction Tools GmbH	Essen		Atlas Copco Internationaal B.V.	Zwijndrecht
	Desoutter GmbH	Maintal		Atlas Copco Nederland B.V.	Zwijndrecht
	Dynapac GmbH	Wardenburg		Creemers Compressors B.V.	Eindhoven
	Edwards GmbH	Kirchheim		New Zealand Atlas Copco (N.Z.) Ltd.	Auckland
	Ekomak Kompressoren GmbH	Moers		Exlair (NZ) Limited	Auckland
	Gefahard Industrie Electronic GmbH	Essen	Nigeria	Atlas Copco Nigeria Ltd.	Lagos
	Henrob GmbH	Herford	Norway	Atlas Copco Anlegg- og Gruveteknikk A/S	Langhus
	IRMER + ELZE Kompressoren Gmbh	Bad Oyenhausen		Atlas Copco A/S	Langhus
	Saltus Industrial Technique GmbH	Wuppertal		Atlas Copco Kompressorteknikk A/S	Langhus
	SCA Schucker GmbH & Co KG	Bretten

Germany	SCA Schucker Verwaltungs-GmbH	Bretten
	Synatec GmbH	Leinfelden
		Echterdingen
Ghana	Atlas Copco Ghana Ltd.	Accra
Greece	Atlas Copco Hellas AE	Koropi
Hong Kong	Atlas Copco China/Hong Kong Ltd	Kowloon
	CP China/Hong Kong Ltd.	Kowloon
	Edwards Vacuum Hong Kong Ltd	Hongkong
Hungary	Atlas Copco Kft.	Budapest
India	Industrial Technique Hungary Kft. Atlas Copco (India) Ltd.	Budapest Pune
	Edwards India Private Ltd	Pune
Indonesia	PT Atlas Copco Indonesia	Jakarta
	PT Atlas Copco Nusantara	Jakarta
Iraq	Atlas Copco Iraq LLC	Erbil
	Atlas East LLC for General Trading and
	Industrial equipment	Baghdad
Ireland	Atlas Copco (Ireland) Ltd.	Dublin
	Edwards Vacuum Technology Ireland Ltd	Dublin
Israel	Edwards Israel Vacuum Ltd	Kiryat Gat
Italy	ABAC Aria Compressa S.p.A	Robassomero
	Atlas Copco BLM S.r.l.	Milan
	Atlas Copco Italia S.p.A.	Milan
	Atlas Copco Stonetec S.r.L	Bagnolo Piemonte
	Ceccato Aria Compressa S.r.L	Vicenza
	Edwards S.p.A.	Milan
Japan	MultiAir Italia S.r.l Atlas Copco KK	Cinisello Balsamo Tokyo
	Edwards Japan Ltd	Chiba
	Fuji Industrial Technique Co., Ltd.	Osaka
Kazakhstan	Atlas Copco Central Asia LLP	Almaty
Kenya	Atlas Copco Eastern Africa Limited	Nairobi
Latvia	Atlas Copco Baltic SIA	Riga
Lebanon	Atlas Copco Levant S.A.L.	Beirut
	Luxembourg Atlas Copco Finance S.á.r.l.	Luxembourg
Malaysia	Atlas Copco (Malaysia) Sdn. Bhd.	Shah Alam
	Edwards Technologies Malaysia Sdn. Bhd.	Kuala Lumpur
Mali	Atlas Copco Mali Sarl	Bamako
Mexico	Atlas Copco Mexicana S.A. de C.V.	Tlalnepantla
	Atlas Copco Rental Mexico	Monterrey
	Desarrollos Técnologicos ACMSA
	S.A. de C.V.	Tlalnepantla
	SCA Schucker de Mexico S.A. de C.V. Desoutter Tools Mexico SA de CV	Puebla Tlalnepantla
Mongolia	Atlas Copco Mongolia LLC	Ulaanbaatar
Morocco	Atlas Copco Maroc SA	Casablanca
	Mozambique Atlas Copco Mozambique	Maputo
Myanmar	Atlas Copco Services Myanmar Co., Ltd.	Yangon
Namibia	Atlas Copco Namibia (Pty) Ltd.	Windhoek
	Netherlands Alup Grass-air Kompressoren B.V.	Oss
	Atlas Copco Beheer B.V.	Zwijndrecht
	Atlas Copco Internationaal B.V.	Zwijndrecht
	Atlas Copco Nederland B.V.	Zwijndrecht
	Creemers Compressors B.V.	Eindhoven
	New Zealand Atlas Copco (N.Z.) Ltd.	Auckland
	Exlair (NZ) Limited	Auckland
Nigeria	Atlas Copco Nigeria Ltd.	Lagos
Norway	Atlas Copco Anlegg- og Gruveteknikk A/S	Langhus
	Atlas Copco A/S	Langhus
	Atlas Copco Kompressorteknikk A/S	Langhus
	Atlas Copco Tools A/S	Langhus
	Berema A/S	Langhus

A22. Related parties, continued

Country	Company	Location (City)	Country	Company	Location (City)
Pakistan	Atlas Copco Pakistan (Pvt) Ltd.	Lahore	Ukraine	LLC Atlas Copco Ukraine	Kiev
Panama	Atlas Copco Central América SA	Panama	United Arab
	Atlas Copco Panama SA	Panama	Emirates	Atlas Copco Middle East FZE	Dubai
Peru	Atlas Copco Peruana SA	Lima		Atlas Copco Services Middle East SPC	Abu Dhabi
Philippines	Atlas Copco (Philippines) Inc.	Binan	United	Air Compressors and Tools Limited	Hemel Hempstead
Poland	ALUP Kompressoren Polska sp. z.o.o.	Warsaw	Kingdom	Atlas Copco Ltd.	Hemel Hempstead
	Atlas Copco Polska Sp. z o.o.	Warsaw		Atlas Copco (NI) Ltd.	Lisburn
Portugal	Sociedade Atlas Copco de Portugal Lda	Lisbon		Atlas Copco Medical Ltd	Staveley
Romania	Atlas Copco Romania S.R.L.	Bucharest		Atlas Copco UK Holdings Ltd.	Hemel Hempstead
Russia	CJSC Atlas Copco	Moscow		Edwards High Vacuum International Ltd	Crawley
	Ekomak Industrial	Moscow		Edwards Ltd	Crawley
Senegal	Atlas Copco Senegal SARL	Dakar		Henrob Ltd	Flintshire
Serbia	Atlas Copco A.D.	Belgrade		SCA Schucker UK Ltd.	Didcot
Singapore	Atlas Copco (South East Asia) Pte. Ltd.	Singapore		Tentec Ltd.	Birmingham
	Edwards Technologies Singapore PTE Ltd	Singapore	Uruguay	Econus S A	Montevideo
Slovakia	Atlas Copco s.r.o	Bratislava	USA	Atlas Copco Assembly Systems LLC	Auburn Hills, MI
Slovenia	Atlas Copco d.o.o.	Trzin		Atlas Copco Compressors LLC	Rock Hill, SC
South Africa	Atlas Copco Holdings South Africa (Pty) Ltd. Boksburg			Atlas Copco Comptec LLC	Voorheesville, NY
	Atlas Copco Investment Company (Pty) Ltd. Boksburg			Atlas Copco Customer Finance USA LLC	Parsippany, NJ
	Atlas Copco South Africa (Pty) Ltd.	Boksburg		Atlas Copco Drilling Solutions LLC	Garland, TX
	South Korea Atlas Copco Korea Co., Ltd.	Seongnam		Atlas Copco Hurricane LLC	Franklin, IN
	CP Tools Korea Co., Ltd.	Anyang		Atlas Copco Mafi-Trench Company LLC	Santa Maria, CA
	Edwards Korea Ltd	Seongnam		Atlas Copco North America LLC	Parsippany, NJ
Spain	Aire Comprimido Industrial Iberia, S.L.	Madrid		Atlas Copco Rental LLC	Laporte, TX
	Atlas Copco S.A.E.	Madrid		Atlas Copco Secoroc LLC	Grand Prairie, TX
	Grupos Electrógenos Europa, S.A	Zaragoza		Atlas Copco Specialty Rental LLC	Houston, TX
Sweden	Atlas Copco CMT Sweden AB	Nacka		Atlas Copco Tools & Assembly Systems LLC Auburn Hills, MI
	Atlas Copco Compressor AB	Nacka		Atlas Copco USA Holdings Inc.	Parsippany, NJ
	Atlas Copco Craelius AB	Märsta		BeaconMedaes LLC	Rock Hill, SC
	Atlas Copco Customer Finance AB	Nacka		Chicago Pneumatic International Inc.	Rock Hill, SC
	Atlas Copco GIA AB	Grängesberg		Chicago Pneumatic Tool Company LLC	Rock Hill, SC
	Atlas Copco Industrial Technique AB	Nacka		Edwards Vacuum, LLC	Sanborn, NY
	Atlas Copco Järla Holding AB	Nacka		Goldenrod Inc	Rock Hill, SC
	Atlas Copco Lugnet Treasury AB	Nacka		Henrob Corporation	New Hudson, MI
	Atlas Copco Rock Drills AB	Örebro		Houston Service Industries, Inc	Houston, TX
	Atlas Copco Secoroc AB	Fagersta		Innovative Vacuum Solutions, Inc	Thonotosassa, FL
	Atlas Copco Sickla Holding AB	Nacka		MeadesUSCo Inc	Rock Hill, SC
	Atlas Copco Welltech AB	Jonsered		Mining, Rock Excavation and
	Construction Tools PC AB	Kalmar		Construction LLC	Commerce City, CO
	Dynapac AB	Stockholm		Quincy Compressor LLC	Bay Minette, AL
	Dynapac Compaction Equipment AB	Karlskrona		SCA Schucker LLC	Auburn Hills, MI
	Dynapac International AB	Malmö	Uzbekistan	Atlas Copco Compressors and Mining Technique LLC	Tashkent
	Industria Insurance Company Ltd		Venezuela	Atlas Copco Venezuela SA	Caracas
	Industria Försäkringsaktiebolag	Nacka	Vietnam	Atlas Copco Vietnam Company Ltd.	Ho Chi Minh City
	SFR STG 1626 KB	Karlskrona	Zambia	Atlas Copco (Zambia) Ltd.	Chingola
Switzerland	Atlas Copco (Schweiz) AG	Studen	Zimbabwe	Atlas Copco Zimbabwe (Private) Ltd.	Harare
	Atlas Copco Meyco AG	Zurich
	Servatechnik AG	Oftringen
Taiwan	Atlas Copco Taiwan Ltd.	Taipei
	Edwards Technologies Ltd	Jhunan
Tanzania	Atlas Copco Tanzania Limited	Geita
Thailand	Atlas Copco (Thailand) Limited	Bangkok
Turkey	Atlas Copco Makinalari Imalat AS	Istanbul
	Dost Kompresör End Mak Imal
	akım ve Tic A.S	Istanbul
	Ekomak Endüstriyel	Istanbul
	Ekoser Endüstriyel	Istanbul
	Chicago Pneumatic Endüstriyel Ürünler Ticaret A.S.	Istanbul

Ukraine	LLC Atlas Copco Ukraine	Kiev
United Arab Emirates	Atlas Copco Middle East FZE	Jebel Ali free zone, Dubai
	Atlas Copco Services Middle East SPC	Abu Dhabi
United	Air Compressors and Tools Limited	Hemel Hempstead
Kingdom	Atlas Copco Ltd.	Hemel Hempstead
	Atlas Copco (NI) Ltd.	Lisburn
	Atlas Copco Medical Ltd	Staveley
	Atlas Copco UK Holdings Ltd.	Hemel Hempstead
	Edwards High Vacuum International Ltd	Crawley
	Edwards Ltd	Crawley
	Henrob Ltd	Flintshire
	SCA Schucker UK Ltd.	Didcot
	Tentec Ltd.	Birmingham
Uruguay	Econus S A	Montevideo
USA	Atlas Copco Assembly Systems LLC	Auburn Hills, MI
	Atlas Copco Compressors LLC	Rock Hill, SC
	Atlas Copco Comptec LLC	Voorheesville, NY
	Atlas Copco Customer Finance USA LLC	Parsippany, NJ
	Atlas Copco Drilling Solutions LLC	Garland, TX
	Atlas Copco Hurricane LLC	Franklin, IN
	Atlas Copco Mafi-Trench Company LLC	Santa Maria, CA
	Atlas Copco North America LLC	Parsippany, NJ
	Atlas Copco Rental LLC	Laporte, TX
	Atlas Copco Secoroc LLC	Grand Prairie, TX
	Atlas Copco Specialty Rental LLC	Houston, TX
	Atlas Copco Tools & Assembly Systems LLC Auburn Hills, MI
	Atlas Copco USA Holdings Inc.	Parsippany, NJ
	BeaconMedaes LLC	Rock Hill, SC
	Chicago Pneumatic International Inc.	Rock Hill, SC
	Chicago Pneumatic Tool Company LLC	Rock Hill, SC
	Edwards Vacuum, LLC	Sanborn, NY
	Goldenrod Inc	Rock Hill, SC
	Henrob Corporation	New Hudson, MI
	Houston Service Industries, Inc	Houston, TX
	Innovative Vacuum Solutions, Inc	Thonotosassa, FL
	MeadesUSCo Inc	Rock Hill, SC
	Mining, Rock Excavation and Construction LLC	Commerce City, CO
	Quincy Compressor LLC	Bay Minette, AL
	SCA Schucker LLC	Auburn Hills, MI
Uzbekistan	Atlas Copco Compressors and Mining Technique LLC	Tashkent
Venezuela	Atlas Copco Venezuela SA	Caracas
Vietnam	Atlas Copco Vietnam Company Ltd.	Ho Chi Minh City
Zambia	Atlas Copco (Zambia) Ltd.	Chingola
Zimbabwe	Atlas Copco Zimbabwe (Private) Ltd.	Harare

SIGNATURES OF THE BOARD OF DIRECTORS

The Parent Company financial statements have been prepared in accordance with generally accepted accounting principles in Sweden and the consolidated financial statements have been prepared in accordance with International Accounting Standards as prescribed by the European Parliament and the Regulation (EC) No 1606/2002 dated July 19, 2002 on the application of International Accounting Standards. The Parent Company financial statements and the consolidated financial statements give a true and fair view of the Parent Company's and the Group's financial position and results of operations.

The administration report for the Group and Parent Company provides a true and fair overview of the development of the Group's and Parent Company's business activities, financial position and results of operations as well as the significant risks and uncertainties which the Parent Company and its subsidiaries are exposed to.

Nacka, March 4, 2016

Hans Stråberg Ronnie Leten Chair President and CEO

Board member Board member Board member

Ulla Litzén Anders Ullberg Staffan Bohman

Board member Board member Board member Board member

Margareth Øvrum Johan Forssell Gunilla Nordström Peter Wallenberg Jr

Bengt Lindgren Mikael Bergstedt Union representative Union representative

Our audit report was submitted on March 4, 2016 Deloitte AB

Jan Berntsson Authorized Public Accountant

Atlas Copco AB is required to publish information included in this annual report in accordance with the Swedish Securities Market Act. The information was made public on March 10, 2016.

AUDIT REPORT

To the annual meeting of the shareholders of Atlas Copco AB Corporate identity number 556014-2720

Report on the annual accounts and consolidated accounts

We have audited the annual accounts and consolidated accounts of Atlas Copco AB for the financial year 2015, except for the corporate governance report on pages 56-65. The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 14–47 and 56–122.

Responsibilities of the Board of Directors and the President for the annual accounts and consolidated accounts

The Board of Directors and the President are responsible for the preparation and fair presentation of these annual accounts in accordance 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 such internal control as the Board of Directors and the President 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.

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 to obtain reasonable assurance about whether the annual accounts and consolidated 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 presentation of the annual accounts and consolidated accounts in order to design audit procedures that are appropriate in the circumstances, but not for the 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 of accounting estimates made by the Board of Directors and the President, 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 and appropriate to provide a basis for our audit opinions.

Opinions

In our opinion, the annual accounts have been prepared in accordance with 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 then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2015 and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the EU, and

the Annual Accounts Act. Our opinions do not cover the corporate governance report on pages 56–65. The statutory administration report is 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.

Report on other legal and regulatory requirements

In addition to our audit of the annual accounts and consolidated accounts, we have also audited the proposed appropriations of the company's profit or loss and the administration of the Board of Directors and the President of Atlas Copco AB for the financial year 2015. We have also conducted a statutory examination of the corporate governance report.

Responsibilities of the Board of Directors and the President

The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss, and the Board of Directors and the President are responsible for administration under the Companies Act and that the corporate governance report has been prepared in accordance with the Annual Accounts 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 in accordance with generally accepted auditing standards in Sweden.

As a 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 a 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 the company in order to determine whether any member of the Board of Directors or the President is liable to the company. We also examined whether any member of the Board of Directors or the President 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 and appropriate to provide a basis for our opinions.

Furthermore, we have read the corporate governance report and based on that reading and our knowledge of the company and the group we believe that we have a sufficient basis for our opinions. This means that our statutory examination of the corporate governance report is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden.

Opinions

We recommend to the annual meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the President be discharged from liability for the financial year.

A corporate governance report has been prepared, and its statutory content is consistent with the other parts of the annual accounts and consolidated accounts.

Nacka, March 4, 2016

Deloitte AB

Jan Berntsson Authorized Public Accountant

FINANCIAL DEFINITIONS

Average number of shares outstanding

The weighted average number of shares outstanding before or after dilution. Shares held by Atlas Copco are not included in the number of shares outstanding. The dilutive effects arise from the stock options that are settled in shares or that at the employees' choice can be settled in shares or cash in the share based incentive programs. The stock options have a dilutive effect when the average share price during the period exceeds the exercise price of the options.

Capital employed

Average total assets less non-interest-bearing liabilities/provisions. Capital employed for the business areas excludes cash, tax liabilities and tax receivables.

Capital employed turnover ratio

Revenues divided by average capital employed.

Capital turnover ratio

Revenues divided by average total assets.

Debt/equity ratio

Net indebtedness in relation to equity, including non-controlling interests.

Dividend yield

Dividend divided by the average share price quoted.

Earnings per share

Profit for the period attributable to owners of the parent divided by the average number of shares outstanding.

EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization

Operating profit plus depreciation, impairment and amortization.

EBITDA margin

EBITDA as a percentage of revenues.

Equity/assets ratio

Equity including non-controlling interests, as a percentage of total assets.

Equity per share

Equity including non-controlling interests divided by the average number of shares outstanding.

Interest coverage ratio

Profit before tax plus interest paid and foreign exchange differences divided by interest paid and foreign exchange differences.

Net cash flow

Change in cash and cash equivalents excluding currency exchange rate effects.

Net debt/EBITDA ratio

Net indebtedness in relation to EBITDA.

Net indebtedness/net cash position

Borrowings plus post-employment benefits minus cash and cash equivalents and other current financial assets, adjusted for the fair value of interest rate swaps.

Net interest expense

Interest expense less interest income.

Operating cash flow

Cash flow from operations and cash flow from investments, excluding company acquisitions/ divestments.

Operating profit

Revenues less all costs related to operations, but excluding net financial items and income tax expense.

Operating profit margin

Operating profit as a percentage of revenues.

Profit margin

Profit before tax as a percentage of revenues.

Return on capital employed (ROCE)

Profit before tax plus interest paid and foreign exchange differences (for business areas: operating profit) as a percentage of capital employed.

Return on equity

Profit for the period, attributable to owners of the parent as a percentage of average equity, excluding non-controlling interests.

Weighted average cost of capital (WACC)

interest-bearing liabilities x i

• • market capitalization x r
• interest-bearing liabilities
• • market capitalization
• i: An estimated average risk-free interest rate of 4% plus a premium of 0.5%. An estimated standard tax rate has been applied.
• r: An estimated average risk-free interest rate of 4% plus an equity risk premium of 5%.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) PERFORMANCE 1)

The environmental, social and governance key performance indicators (KPIs) below are based on a materiality mapping following an extensive consultation with the Group's stakeholders in 2015. The Group's consolidated goals on selected key performance indicators will be presented in 2016. See ESG note 2.

ECONOMIC VALUE	Note	2011	2012	2013	2014	2015	Change, %*
Direct economic value
Revenues 2)		82 274	91 417	84 803	94 614	103 071	9
Economic value distributed
Operating costs 3)		48 032	53 635	49 079	56 460	59 065	5
Employee wages and benefits, including other social costs		15 910	18 108	18 274	20 826	23 841	14
Costs for providers of capital 4)		5 913	7 182	7 853	7 919	8 676	10
Costs for direct taxes to governments		3 902	4 377	4 286	4 169	7 477	79
Economic value retained		8 517	8 115	5 311	5 240	4 012	–23
– Redemption of shares		6 067	–	–	–	7 305
WE USE RESOURCES EFFICIENTLY AND RESPONSIBLY	Note	2011	2012	2013	2014	2015	Change, %*
Renewable energy for operations, % of total energy					34	34	0
Direct energy use in GWh	3	132	140	136	130	120	–8
Indirect energy use in GWh	3	305	301	304	347	352	1
Total energy use in GWh	3	437	441	440	477	472	–1
Total energy use in MWh/COS					9.0	8.5	–6
Water consumption in water risk areas ('000 m3) 5, 6)					–	330
Water consumption in water risk areas (in '000 m3)/COS 5, 6)					–	5.9
CO2 emissions '000 tonnes (direct energy) – scope 1 7)		28	29	29	27	25	–7
CO2 emissions '000 tonnes (indirect energy) – scope 2 7)		98	76	80	97	101	4
CO2 emissions '000 tonnes (total energy) – scope 1+2 7)		126	105	109	124	126	2
CO2 emissions '000 tonnes (transports) – scope 3 7)		214	227	200	206	219	6
CO2 emissions '000 tonnes (transports)/COS					3.9	3.9	0
Proportion of reused or recycled waste, %		95	92	93	93	94	1
WE BUILD THE MOST COMPETENT TEAMS	Note	2011	2012	2013	2014	2015	Change, %*
White-collar employees, %		62	62	63	63	64
Blue-collar employees, %		38	38	37	37	36
Employee turnover white-collar employees, %		7.4	7.4	7.4	6.6	6.2	–6
Employee turnover blue-collar employees, %		7.7	9.2	9.5	5.8	5.3	–9
Total turnover, voluntary leave %					6.3	5.8	–8
Appraisal, %		84	83	82	82	84	2
Proportion of women employees, %		16.8	16.9	16.8	17.1	17.5	2
Proportion of women managers, %		14.6	15.1	16.2	16.6	17.0	2
Nationalities among senior managers, number		44	49	52	54	51	–6
WE INVEST IN SAFETY AND HEALTH	Note	2011	2012	2013	2014	2015	Change, %*
Work-related accidents, number	4	370	391	415	389	304	–22
Work-related accidents, number per one million working hours	4	5.5	5.2	5.4	4.7	3.7	–21
Lost days due to accidents, number per one million working hours	4	98	101	140	128	113	–12
Work-related incidents, number					1 713	1 421	–17
Work-related incidents, number per one million working hours	4	22.1	22.7	21.0	20.8	17.1	–18
Fatalities	4	1	3	0	1	0	–100
Sick leave due to diseases, %		1.9	2.1	2.0	1.9	1.9	0
Sick leave due to diseases and accidents, %		2.0	2.1	2.1	2.0	2.0	0
WE LIVE BY THE HIGHEST ETHICAL STANDARDS	Note	2011	2012	2013	2014	2015	Change, %*
% Global Managers with signed compliance to Business Code of Practice 5)						99
% of employees aware of the Group ethical hotline or local helpline 5, 8)						N/a
% Significant suppliers committed to the Business Code of Practice	5	N/a	N/a	72	82	88	7
% Significant agents and distributors that have confirmed compliance with
the Atlas Copco Business Code of Practice 5, 9)						N/a

* Change in 2015 vs. 2014. The green, yellow and red marks are highlighting the direction of change 2015 vs. 2014. Neutral is –5% to 5%.

Positive Neutral Negative

See footnotes on next page

NOTES TO THE ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) PERFORMANCE

1. Reporting principles of the environmental, social and governance performance

Since 2001, the report has been prepared yearly in accordance with the Global Reporting Initiative (GRI) guidelines. This is the first report that follows the G4 Core guidelines. The most recent sustainability report was published in March 2015 as part of the annual report 2014.

This report is also Atlas Copco's Communication on Progress (COP), a report on performance in relation to the UN Global Compact's ten principles. It can be found at www.atlascopcogroup.com/investor-relations and on UN Global Compact's website at unglobalcompact.org/cop.

Atlas Copco adheres to the following internationally recognized voluntary standards and principles:

• UN Global Compact. As a signatory to the UN Global Compact since 2008, a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment and anti-corruption.
• Global Reporting Initiative's (GRI) Sustainability Reporting Guidelines. The guidelines (G4) include an internationally recognized set of indicators for economic, environmental and social aspects of business performance that enables stakeholders to compare companies' performance. Atlas Copco's reporting according to the reporting principles and guidance, including required disclosures, can be found at www.atlascopcogroup.com/ investor-relations.

Data collection and reporting

The sustainability report and the corporate governance report are integrated in the 2015 annual report. Sustainability information in the annual report is primarily presented on pages 10–13, 40–53 and 125–131, and in the GRI Compliance Index. Reported facts and figures have been verified in accordance with Atlas Copco's procedures for internal control. Data collection is integrated into the Group reporting consolidation systems and collected on a quarterly basis. Reported values are normally not corrected retroactively, but when a restatement of historically reported numbers is done this can be due to a change of calculation method or scope. Environmental data covers production units and distribution centers. Business partner data covers production units and employee data covers all operations. Responsibility for reporting rests with the General Manager of each company. Data is reported at local operating unit level, aggregated to division/business area and Group level. Data verification is performed at each level before submitting to external auditors for verification.

The reporting of greenhouse gas emissions is done in accordance with the GHG Protocol (ghgprotocol.org) and the International Energy Agency (iea.org). The Group is a member of the Swedish Network for Transport and Environment (NTM) and closely follows its recommendations, which may impact the reporting guideline of CO2 emissions from transport.

Scope

The annual report includes information regarding all three aspects of the Group's strategy i.e. where Atlas Copco has a significant economic, environmental and social impact. The report covers Atlas Copco's operations for the fiscal year 2015, unless otherwise stated. Operations divested during the year are excluded; units that were acquired are included. This may at times cause major changes in reported performance. Limitations and reporting principles are explained in the relevant section of the report. For the reporting period

of 2015 all publicly disclosed sustainability information can be found in the publication Atlas Copco's annual report 2015, except for the GRI Compliance Index, which is available on the Atlas Copco website, www.atlascopcogroup.com/investor-relations.

Atlas Copco's annual report 2015 includes a general overview of the Group's environmental situation in accordance with the requirements of Swedish legislation regarding environmental information in the Administration Report. In addition, environmental and social information has been integrated into the annual report where appropriate in order to provide a more complete picture of the Group. In addition, Atlas Copco reports with reference to the content elements and guiding principles of the Inaugural Integrated Reporting Framework developed by the International Integrated Reporting Council.

The reason for integrating the sustainability information in the annual report is to provide investors and stakeholders with a relatively complete and easily accessible overview of the Atlas Copco Group's most important activities contributing to sustainable development and increasing shareholder value.

Materiality impact on reporting

The GRI core indicators reported and analyzed are those that are understood to be material to the Atlas Copco Group and its stakeholders, and which facilitate benchmarking with other companies in a broader sense. The contents of Atlas Copco's Annual Report 2015 are based on the GRI G4's Principles for Defining Report Content, and are guided by stakeholder inclusiveness, the Group's sustainability context, materiality and completeness. Key issues are identified through extensive consultation with the Group's stakeholders. The material aspects identified in this report include, but are not limited to, the GRI G4 indicators and aspects. The Group's materiality process also guides the disclosure for the Group's UN Global Compact Communication on Progress and Atlas Copco's work with the UN Sustainable Development Goals. A GRI G4 and UNGC COP compliance index accompanies this Annual Report and can be found online. For more information about how the materiality analysis was conducted, visit www.atlascopcogroup.com/sustainability.

Stakeholder dialogue

As a global Group, it's vital for Atlas Copco to ensure accountability for its actual and potential impact on its stakeholders. In discussions with for example NGO's, GO's and other influencers, it takes advice and/or learns from listening to their views. In 2015, one formal stakeholder dialogue was conducted with major shareholders, with the participation of members of Group management. The focus of the meeting was to review Atlas Copco's sustainability performance and discuss its approach to business in complex markets. The presentation is available at www.atlascopcogroup.com/sustainability. Other stakeholder dialogues are conducted at different levels in the Group. Major issues are collected and form the basis for development of strategic responses to challenges.

Review/audit

Atlas Copco has self-declared the report to be in accordance to GRI G4 Core, The report covers Standard Disclosures, all Disclosures on Management Approach and at least one indicator per material aspect, in accordance to the GRI G4 guidelines. The annual report has been reviewed and approved by

Footnotes to page 125

• 1) Calculations according to GRI G4 Guidelines, www.globalreporting.org. The environmental, social and governance information has been subject to external assurance in 2012, 2013, 2014 and 2015. This can to some extent influence comparisons between these years´ and previous years´ performance.
• 2) Revenues include revenues, other operating income, financial income, profit from divested companies and share of profit in associated companies.
• 3) Operating costs include cost of sales, marketing expenses, administration expenses, research and development expenses, other operating expenses,
• deducted for employee wages and benefits. COS when presented in relation to sustainability information refers to cost of sales at standard cost.
• 4) Costs for providers of capital include financial costs and dividend, but exclude redemption of shares and repurchase of own shares.
• 5) Materiality mapping has resulted in changes in the Group's KPIs. See ESG note 2 for further details.
• 6) Water risk mapping was carried out using the WBCSD water risk tool and water risk maps generated by Verisk Maplecroft.
• 7) Standardized conversion factors published by the Greenhouse Gas Protocol Initiative and International Energy Agency are used to calculate CO2 emissions, see www.ghgprotocol.org and www.iea.org.
• 8) To be collected biennially, starting 2016, with a new question the Group's employee survey Insight.
• 9) To begin with implementation in select high risk markets in first phase.

1. Reporting principles of the environmental, social and governance performance, continued

Atlas Copco's Group Management and the Atlas Copco Board. The sustainability information in the annual report 2015 has been subject to limited assurance by Deloitte.

Additional ESG Disclosure

From 2016, Atlas Copco will no longer apply for inclusion in the RobecoSAM Dow Jones Sustainability Index. Instead, the Group will use a materiality driven approach and the GRI G4 guidelines to disclose environmental, social and governance information to investors.

The CDP is an international non-profit organization that provides selfreported climate change, water and forest risk data to investors representing USD 87 trillion in assets. The scoring is out of a maximum of 100 with 'A' being the highest grade for disclosure, the top scoring companies are included in the Carbon Disclosure Leadership Index (CDLI).

Index/Ranking/List	Atlas Copco Score	Remarks
CDP Investor	98 B	N/a
DJSI	Score: percentile: 89	Included in DJSI Europe
Newsweek Green Rankings	Rank 11	Top Industrial goods company
Global 100	Rank 34	Leader in machinery sector

Atlas Copco has never paid for inclusion in rankings or lists, irrespective of the size of the fee requested, and has no ambition to change its position in the future. For this reason, Atlas Copco has not submitted an application for inclusion in the Ethisphere WME from 2014 onwards.

2. Materiality

In 2015, Atlas Copco completed consultation with 200 institutional stakeholders, which was conducted over an eight-month period to identify the key sustainability priorities that impact, and are impacted by the Group's business.

Selection criteria for aspects to be mapped

The selection of the aspects to be mapped was partly defined by the GRI G4 guidelines, but it also included topics outside of the reporting framework that were raised by stakeholders. More information can be found at www.atlascopcogroup.com/sustainability. Economic value creation and Atlas Copco's financial targets were excluded from the scope in the consultation in order to keep the mapping and dialogue focused on the long-term environmental, social and governance aspects below.

Selection of stakeholders for consultation

Atlas Copco's Business Code of practice defines its five key stakeholders, and each group was consulted for the materiality mapping process. Internal stakeholders included multiple functions such as research and development, logistics, purchasing and divisional management teams for the Group's strategy. For external stakeholders' input, Atlas Copco directly and indirectly engaged with international NGOs, unions, key investors, civil society and business advocacy groups, customers and business partners. This stakeholder-driven approach takes inspiration from the GRI G4 guidance for materiality and the full materiality process is summarized online and in the GRI appendix which can be found online at www.atlascopcogroup.com. The materiality results, below, overlap partially with the GRI G4 indicators.

2.			Materiality, continued
----	--	--	------------------------	--

Impact on Atlas Copco's goals

The materiality process identified the priorities for the success of Atlas Copco's long-term strategy to create value for all stakeholders. As a result, the Group has adapted its KPIs to reflect these priorities. The Group strives to align the KPIs and goals to support the Sustainable Development Goals and outcomes of the UN Climate Conference in Paris (COP 21). KPIs will address and manage the risks, opportunities and impacts of the Group's business in parts of the value chain where they have been found to be material during the consultation with stakeholders. The formulation of these KPIs have been guided by the GRI G4 aspects, but not limited to the definitions as proposed in the guidelines. The Group consolidated goals on selected key performance indicators are being finalized and will be presented in 2016.

3. Environmental impact

Environmental performance

In 2015, Atlas Copco integrated its most material environmental KPIs into its planning process, and developed KPIs to drive improvements and efficiency, while reducing the environmental impact for the Group. They will be followed up with action plans. Group consolidated goals are being finalized and will be presented in 2016. Any decline in the business will affect the cost of goods sold, however the target setting takes into account expectancies for this fluctuation.

Energy consumption*, %	2015
Direct energy, renewable	0
Direct energy, non-renewable	25
Indirect energy, renewable	34
Indirect energy, non-renewable	41

* Direct energy is defined as purchased and consumed fuel for own production; this includes oil, coal, natural gas, gasoline and diesel. Indirect energy is defined as energy from external sources, for example energy required to produce and deliver purchased electricity and district heating.

Environmental compliance

Atlas Copco follows applicable environmental laws in all countries where the Group operates. Incidents or fines are reported for non-compliance with environmental legislation, as well as incidents involving chemical, oil or fuel spillages. In 2015, there were no major incidents reported concerning these aspects.

Five Swedish companies require permits based on Swedish environmental regulations. These operations account for approximately 20% of the Group's manufacturing and mostly involve machining and assembly of components. The permits relate to areas such as emissions to water and air, as well as noise pollution. The Group has been granted all permits needed to conduct its business and none were under revision in 2015. There were 20 (11) accidents resulting in adverse environmental effects according to reporting. All accidents were addressed fully and comprehensively and clean-up costs amounted to KSEK 4 840 (4 752). There were no cases of non-compliance and hence no fines were paid in 2015.

A decrease in energy consumption primarily due to weather fluctuations causing warm winters, and decreased volume.

ENERGY CONSUMPTION

Environmental management systems

To help minimize the environmental impact and to secure that the precautionary approach is applied, Atlas Copco has the ambition to implement environmental management systems (EMS) in all operations. All product companies should be certified according to ISO 14001 in order to manage and reduce their environmental impact. Acquired product companies are normally certified within a two-year period. In 2015, 97% of employees worked in an ISO 14001 certified site, which corresponds to 98% of cost of sales.

Product responsibility

As a minimum, all products comply with laws and regulations regarding their environmental impact and they are tested for safety prior to delivery. Further, all Atlas Copco products and services come with relevant product, service and safety information. The product and service information required by the Group's procedures for product and service information and labeling covers aspects such as sourcing of components, content such as substances of concern, safe use and disposal of the product. Customer training is included when relevant, to secure safe handling of the products.

In general, a limited proportion of Atlas Copco products fall under the EU Waste Electrical and Electronic Equipment (WEEE) Directive. For example, handheld electric tools and monitoring control instruments qualify but not large mining and other capital equipment. Atlas Copco has a responsibility for the disposal of products that fall under the directive. Atlas Copco strives to follow laws and regulations regarding safety, health and environmental aspects, product information and labeling. No new cases have been filed in 2015 for non-compliance with laws and regulations concerning the provision and use of products and services.

Environmental data visualizations

Atlas Copco's annual report 2015 utilizes data visualization to facilitate the understanding of complex environmental data. Volumetric assumptions for CO2, from transport and operations as illustrated on page 53, are based on the density of CO2 at standard pressure and 15°C: 1.87 kg/m3. At this temperature and pressure, the volume of this gas would occupy a cube with a side length of 560.91 m. The relative height of the Burj Khalifa (829 m) was visualized for reference and size context. The image was designed using a visualization tool developed for Atlas Copco by Carbon Visuals.

CO2 EMISSIONS FROM TRANSPORT

4. Safety and health

Safety is a key priority area for Atlas Copco, and all divisions have included this aspect to set targets and make action plans. Group consolidated goals are being finalized and will be presented in 2016.

In 2015, the number of accidents decreased to 304 (389). The largest decrease was from the number of accidents reported from operations in Europe, Latin America and Asia. The previous year the majority of the accidents reported were in Europe, so the investments and activities in safety have shown results. Other regions reported figures remained stable. The relative number of accidents decreased to 3.7 (4.7) per one million working hours.

The number of incidents decreased to 1 421 (1 713) and the relative number decreased to 17.1 (20.8) incidents per one million working hours. Improvements were most significant in North America and Asia. In 2015, 94% of all employees worked in ISO 18001 certified sites, representing 95% of cost of sales.

Geographical spread of incidents and accidents, %	Work-related incidents	Work-related accidents
North America	10	13
South America	4	9
Europe	78	58
Africa/Middle East	2	4
Asia/Australia	6	16
Total	100	100

NO. OF ACCIDENTS PER

5. Business partners

Business partner	Role in the value chain	Primary responsible for risk management and compliance
Suppliers, subcontractors	Provide key parts as well as manufacturing services	Purchasing councils
Joint ventures	Partly owned companies that provide complementary products and services	Legal department and local managers
Agents, distributors	Sell and distribute products to customers on the Group's behalf	Marketing councils

Supply chain management process: Suppliers are evaluated during and after selection by product companies, primarily by personnel in the purchasing function. Internal training on how to carry out supplier evaluations is published in the Group database The Way We Do Things.

The supplier evaluation process examines:

• Business partners' record of governance, ethics and stance against corruption
• Labor issues: Rejection of forced, compulsory or child labor, elimination of discrimination, safeguarding employee health and safety, collective bargaining rights
• Environmental performance: Managing waste, minimizing emissions, and reducing consumption of natural resources
• Human rights issues: Responsible sourcing and respect for human rights in operations

At times self-assessment checklists are sent to suppliers and on-site evaluations are conducted either at regular intervals or when deemed necessary. These result in a report with concrete suggestions in the form of an action plan or improvement to be followed up on at an agreed time. Atlas Copco can provide experience and know-how to suppliers who require support in order to comply with the minimum standards set forth in the 10-criteria checklist; however suppliers who fail to meet red-flag criteria (such as zero-tolerance of corruption) or do not show a willingness to improve are rejected. Supplier evaluations regarding safety, health, social and environment aspects including objective factors such as quality and financial data are performed throughout the Group.

Definition of significant supplier for reporting: All external suppliers of goods and services, direct and indirect, with a purchasing value above a set threshold, based on 12 month values from October prior year to September current year. For suppliers in high-risk countries listed below, suppliers are determined to be significant based on a significantly lower purchasing threshold (approximately 13% of set value) and are reported.

High-risk countries: Angola, Bolivia, China, Colombia, Democratic Republic of Congo, Indonesia, Iran, Nigeria, Russia, Saudi Arabia, Uzbekistan, Zimbabwe. These countries are identified as having a heightened risk of human rights violations or corruption based on risk mapping provided by Amnesty International and Transparency International in 2011. The adaptation of the definition had resulted in a lower number of significant suppliers as from 2013 onward. In 2015, the number of significant suppliers decreased, primarily due to business decline.

Supplier's commitment	2015	2014
Significant suppliers, number	4 601	4 915
Safety, health and social (SHS) and environment evaluated suppliers 1), %	19	24
Approved suppliers (no need to follow up), %	91	89
Conditionally approved suppliers (monitored), %	7	10
Rejected suppliers (relationship ended) 2), %	1	1
Suppliers asked on commitment to the Business Code of Practice, number	4 370	4 466
Significant suppliers that have confirmed their commitment to the Code, %	88	82

1) Evaluations or audits are conducted by Atlas Copco teams directly at the suppliers' sites. 2) Reasons for rejection include for example safety in the workplace, personal protection for workers and no fulfillment of environmental laws. Suppliers are rejected if they do not meet Atlas Copco requirements and are not willing to improve. The Group does not keep any black lists of its business partners.

Prohibited or restricted substances

Atlas Copco maintains lists of substances which are either prohibited or restricted (and must be declared) due to their potential negative impact on health or the environment. Prohibited substances are not allowed in the Group's products or processes. Restricted substances are not yet legally excluded for use but should be replaced according to a plan that takes into account technical and financial aspects. Suppliers' use of such substances is regularly checked, and if prohibited substances should be found, they must immediately be replaced with approved alternatives. The lists are continuously revised according to applicable legislation, including REACH. The lists on prohibited and restricted substances are published on the Atlas Copco website.

6. Governance

Atlas Copco's hotline is the Group's whistleblower function of the Business Code of Practice. The Group is positive to receiving reports through the hotline since it provides the possibility to act on potential misconduct to the Business Code of Practice. During the year the hotline has been promoted globally among employees and business partners.

Reported potential violations, number	2015
Fraud	3
Labor relations	25
Corruption	9
Discrimination	2
Other (personal, organizational issues)	8
Total	47

Eleven cases are still under investigation, of which five are related to corruption, and six to labor relations or other concerns. Cases of fraud and corruption were substantiated in two cases and led to personal consequences such as dismissal or changes in procedures to prevent future occurrences.

The alleged cases of discrimination was not substantiated and closed after investigation. There have been no other instances of anti-competitive behavior brought to the attention of Group Management. No fines related to the hotline have been paid during the year.

7. Human rights

Commitment to human rights

Atlas Copco's central guiding policy is the Business Code of Practice which was updated in 2012 to support the United Nations International Bill of Human Rights. Atlas Copco is also a signatory of the UN Global Compact and is committed to working with the ten universally accepted principles in the areas of human rights, labor, environment and anti-corruption. The Atlas Copco Business Code of Practice also supports the International Labour Organization Declaration on Fundamental Principles and Rights at Work, as well as the OECD's Guidelines for Multinational Enterprises. In 2011, Atlas Copco took on the commitment to protect, respect and provide access to remedy with regards to human rights as proposed in the UN Guiding Principles on Business and Human Rights. In accordance with requirements of the framework, Atlas Copco has:

• Human rights due diligence: An ongoing process to identify, prevent, mitigate and account for the human rights impacts related to Atlas Copco's business or business relations.

Atlas Copco's human rights approach

Working with human rights is a continuous process of learning, development and implementation. Atlas Copco strives to work with issues within its scope across the value chain. Atlas Copco does not view human rights as an isolated issue, but rather a cross-connected issue which can be impacted by working with corruption and environmental issues according to the Business Code of Practice. Human rights related issues are monitored by the Compliance board, which contains two members of Group Management. The Compliance board addresses issues such as training needs, impact assessment and the action points related to the implementation of the UN Guiding Principles. The Group strives to work with its commitment to the UN Guiding Principles across the value chain, covering procurement, human resources, sales, marketing and other business processes. Atlas Copco has started to report according to the UN Guiding Principles Reporting Framework. Further details can be found in the society and employee sections of the report and the supplementary content of this report.

Atlas Copco's human rights statement

The Business Code of Practice is the central policy document, based on which Atlas Copco has a public human rights statement. Atlas Copco's human rights statement is available publicly on the Group website, and has been approved by Group Management after internal and external consultation. The draft was reviewed by external, independent human rights experts for comments and feedback, which were incorporated into the final draft of the statement. Atlas Copco's commitment covers all individuals and groups who may be impacted by its activities or through its business relationships. It is available to all employees through the Group's intranet, and also through business and human rights trainings. Business partners are referred to the human rights statement during business negotiations and also during trainings. Human rights issues are raised in the Annual Stakeholder Dialogue, which is open to all external stakeholders such as workers in the company's value chain, trade unions, communities, customers, NGOs and governmental authorities.

According to the human rights statement, the Atlas Copco hotline can be used to report perceived human rights violations and in cases where the stakeholder(s) or employee(s) are not satisfied with the solution provided by the ethical hotline, Atlas Copco will provide for mediation at the Stockholm Chamber of Commerce Arbitration Institute. There were no changes to the Group's human rights policy during 2015.

Integrating the rights of children, women and special vulnerable groups

Atlas Copco strives to be inclusive in its human rights work to ensure that the rights of vulnerable groups such as children or minorities are covered by policies and processes. The Group works to integrate this into the broader human rights approach, and assesses the direct and indirect impacts the business can have on relevant groups.

ISSUES	ACTIVITIES IN 2015	PLANNED FOR 2016
Potential distribution (indirect sales) of Atlas Copco products in conflict-affected regions: specifically Myanmar*	Human rights focused due diligence was carried out, by internal experts, together with the regional management team. Stakeholders representing Atlas Copco's distributor network, customers, independent experts, NGOs advocating for civil rights, ILO, and Swedish governmental authorities were consulted during the process.	Compliance board and regional managers to continue to monitor sales and service process.

*Status regarding Sudan remains unchanged from 2013

7. Human rights, continued

Review of action points from previous year

In the previous annual report, Atlas Copco set forth several action points that were addressed throughout 2015. Group Management approved the guidelines focused on conflict-affected regions, and this was spread to the organization via the Group's central information database, The Way We Do Things. The Group has taken measures to ensure that no future sales go to projects which may make it complicit in the violation of international law, with a special attention to occupied or non-self governing territories.

Atlas Copco explored public-private partnerships on a local and Group level, in order to support the implementation of the UN Guiding Principles and to increase leverage to respect human rights. In 2014, Atlas Copco joined the Swedish Leadership for Sustainable Development, a business network run by the Swedish International Development Cooperation, to strengthen its approach on environment, human rights and anti-corruption. The Group also participated in cross-industry dialogues in order to share best practices and tools from the implementation process, as well as learning points from the roll out of the Group's Business & Human Rights approach.

8. Taxes

Atlas Copco strives to be a good and reliable corporate citizen, observing the spirit as well as the letter of the laws of the countries in which the Group operates. The Group recognizes the key role that tax plays in the area of advancing economic development and also considers it vital to combat corruption and support environmentally sound business practices in order to create the most value for society. Atlas Copco acts in accordance with all applicable laws and are at all times guided by relevant international standards, chiefly the OECD and UN guidelines. Atlas Copco believes in good corporate practice in the area of tax management, balancing the interests of various stakeholders, including customers, investors and the governments and communities in the countries in which the Group operates. Key stakeholders have identified taxes as a rising priority during 2015. See note 9 of the consolidated financial statements for the details of taxes paid, reported according to the international financial reporting standards.

Opinion on disclosing tax by country

Atlas Copco has been in dialogue with investors, NGOs and peers regarding the disclosure of tax paid per country. At present there is no international standard for reporting taxes paid by country and therefore the resulting data is not comparable between different companies. Atlas Copco is not opposed to reporting tax paid by country if guidelines are broadened to apply to all companies in the industry so that the data is comparable and can be analyzed fairly.

Presence in countries classified as tax havens

Atlas Copco has companies in over 90 countries. Sometimes these companies are in countries that can be classified as tax havens, such as Panama. However, the reason for Atlas Copco's presence in these markets is that the Group has customers with ongoing projects, such as expanding the Panama Canal.

Atlas Copco continues to be in dialogue with the EIRIS Conflict Risk Network, with regards to indirect sales to Sudan and is classified as "Substantial Action". This means investors following the targeted Sudan legislative model do not need to take divestment measures. The Group will continue its humanitarian efforts is Sudan through Water for All projects.

Conflict minerals

Atlas Copco is a supplier to customers required to report on the Dodd Frank Act, section 1502 in the United States. In 2015, all business areas continued working with the standard template developed in joint collaboration by the Electronic Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI) to map the minerals and sourcing processes used by tier 1 suppliers. In order to safeguard the quality of the supplier engagement and the due diligence, Atlas Copco did not add additional supplier tiers into the scope of the investigation in 2015.

9. Product energy efficiency

The energy efficiency calculations for the products detailed in the report were based on estimates provided by Atlas Copco's research and development departments.

Power Focus 6000: Energy measurments for the previous model, Power Focus 4000 indicated that the controller used 20.6 W in standby mode and 22.2 W in active mode. In the same test conditions, the Power Focus 6000 was found to consume 19.4 W in standby mode, which shows an increase in energy efficiency by 6% when the controller is in this mode.

LT5005/LT6005 Rammer: The previous model of the construction tool consumed fuel at the rate of 1.2 L/hour under test conditions. Under the same conditions and the same application, the new model consumes fuel at 0.9 L/hour, making it 25% more energy efficient.

HRD100 Rock Drill: This equipment was initially developed for narrow reef mining in general, and for ultra-deep mining in particular, through a collaboration with a South African customer. The test installation is TuaTona, which is one of the deepest mines in the world. The primary customer installations are gold and platinum mines in South Africa. As a comparision, a conventional drill like the BBC 34 would be connected to a compressor (XAMS 287) to provide it with the necessary compressed air. The XAMS 287 can accommodate three BBC 34 drills and provide each drill with an average of 43 kW of energy input. The HRD100 runs on 9kW due to systemic efficiency and under these conditions it is 35 % more efficient. However, in the ultra deep mining where pressure drops and leakages are common for the comparative fixed installation, the HRD100 is ten times as efficient or more.

AUDITOR'S LIMITED ASSURANCE REPORT ON ATLAS COPCO AB'S SUSTAINABILITY REPORT

This is the translation of the auditor's report in Swedish.

To Atlas Copco AB

Introduction

We have been engaged by the Board of Directors of the President of Atlas Copco AB to undertake a limited assurance engagement of the Atlas Copco AB´s Sustainability Report for the year 2015. The Company has defined the scope of the Sustainability Report on page 126.

Responsibilities of the Board of Directors and the Executive Management for the Sustainability Report

The Board of Directors and the Executive Management are responsible for the preparation of the Sustainability Report in accordance with the applicable criteria, as explained on page 126 in the Sustainability Report, and are the parts of the Sustainability Reporting Guidelines (published by The Global Reporting Initiative (GRI)) which are applicable to the Sustainability Report, as well as the accounting and calculation principles that the Company has developed. This responsibility also includes the internal control relevant to the preparation of a Sustainability Report that is free from material misstatements, whether due to fraud or error.

Responsibilities of the auditor

Our responsibility is to express a conclusion on the Sustainability Report based on the limited assurance procedures we have performed.

We conducted our limited assurance engagement in accordance with RevR 6 Assurance of Sustainability Reports issued by FAR. A limited assurance engagement consists of making inquiries, primarily of persons responsible for the preparation of the Sustainability Report, and applying analytical and other limited assurance procedures. The procedures performed in a limited assurance engagement vary in nature from, and are less in extent than for, a reasonable assurance engagement conducted in accordance with IAASB's Standards on Auditing and other generally accepted auditing standards in Sweden. The firm applies ISQC 1 (International Standard on Quality Control) and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. The procedures performed consequently do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement. Accordingly, we do not express a reasonable assurance conclusion.

Our procedures are based on the criteria defined by the Board of Directors and the Executive Management as described above. We consider these criteria suitable for the preparation of the Sustainability Report.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion below.

Conclusion

Based on the limited assurance procedures we have performed, nothing has come to our attention that causes us to believe that the Sustainability Report, is not prepared, in all material respects, in accordance with the criteria defined by the Board of Directors and Executive Management.

Nacka, March 4, 2016 Deloitte AB

Jan Berntsson Didrik Roos Authorized Public Accountant Authorized Public Accountant

FIVE YEARS IN SUMMARY

ORDERS, REVENUES AND PROFIT Orders 86 955 90 570 81 290 93 873 100 241 5.9% Revenues 81 203 90 533 83 888 93 721 102 161 7.9% 8% average Change, organic from volume and price, % 22 9 –4 –2 –2 EBITDA 20 082 21 930 19 759 20 724 24 075 8.0% EBITDA margin, % 24.7 24.2 23.6 22.1 23.6 Operating profit 17 560 19 266 17 056 17 015 19 728 7.2% Operating profit margin, % 21.6 21.3 20.3 18.2 19.3 Net interest expense –506 –658 –730 –699 –758 Profit before tax 17 276 18 562 16 266 16 091 18 823 6.9% Profit margin, % 21.3 20.5 19.4 17.2 18.4 Profit for the year 12 988 13 933 12 082 12 175 11 723 3.3% EMPLOYEES Average number of employees 35 131 39 113 40 159 43 645 43 588 Revenues per employee, SEK thousands 2 311 2 315 2 089 2 147 2 344 CASH FLOW Operating cash surplus 19 906 21 583 19 205 20 426 23 547 Cash flow before change in working capital 14 536 15 819 13 426 15 634 17 350 Change in working capital –6 115 –1 366 –538 2 056 1 599 Cash flow from investing activities –4 335 –2 732 –4 472 –10 565 –3 853 Gross investments in other property, plant and equipment –1 728 –1 672 –1 255 –1 548 –1 705 Gross investments in rental equipment –1 332 –1 299 –1 456 –1 719 –1 263 Net investments in rental equipment –788 –749 –1 021 –1 303 –837 Cash flow from financing activities –12 735 –4 204 –2 535 –14 358 –14 497 of which dividends paid 1) –10 920 –6 070 –6 669 –6 682 –14 610 Operating cash flow 6 292 12 817 8 532 13 916 16 955 FINANCIAL POSITION AND RETURN Total assets 75 109 80 794 87 891 105 281 103 010 Capital turnover ratio 1.14 1.15 0.98 0.98 0.97 Capital employed 49 086 54 354 62 683 70 953 75 246 Capital employed turnover ratio 1.65 1.67 1.34 1.32 1.36 Return on capital employed, % 37.2 35.9 27.8 24.3 26.8 Sustained high Net indebtedness 14 194 9 262 7 504 15 428 14 805 Net debt/EBITDA 0.71 0.42 0.38 0.74 0.61 Interest coverage ratio 18.9 20.3 14.9 14.7 15.3 Equity 28 839 34 185 39 794 50 753 46 750 Debt/equity ratio, % 49.2 27.1 18.9 30.4 31.7 Equity/assets ratio, % 38.4 42.3 45.3 48.2 45.4 Return on equity, % 47.6 45.5 33.6 28.1 24.3 KEY FIGURES PER SHARE Basic earnings / Diluted earnings, SEK 10.68 / 10.62 11.47 / 11.44 9.95 / 9.92 10.01 / 9.99 9.62 / 9.58 3.3% Dividend, SEK 5.00 5.50 5.50 6.00 6.30 2) 9.5% Dividend as % of basic earnings 46.8% 48.0% 55.3% 59.9% 65.5% About 50% Dividend yield % 3.4% 3.1% 3.1% 2.7% 3.0% Redemption of shares, SEK – – – 6.00 – Operating cash flow, SEK 5.18 10.56 7.03 11.45 13.93 Equity, SEK 24 28 33 42 38 Share price, December 31, A share / B share, SEK 148.0 / 130.8 178.3 / 158.2 178.3 / 163.2 218.4 / 200.9 208.4 / 195.3 4.2% / 5.1% Highest price quoted, A share / B share, SEK 178.5 / 161.2 180.9 / 160.3 194.1 / 176.4 222.6 / 204.3 303.1 / 270.0 Lowest price quoted, A share / B share, SEK 112.3 / 99.2 134.4 / 118.6 154.3 / 136.2 169.6 / 155.9 186.9 / 173.70 Average closing price, A share / B share, SEK 150.4 / 134.7 158.6 / 141.1 179.0 / 160.6 196.4 / 181.1 238.7 / 217.5 Average number of shares, millions 1 214.3 1 213.8 1 212.8 1 215.6 1 217.4 Diluted average number of shares, millions 1 217.3 1 215.6 1 214.4 1 216.6 1 218.7 Number of shareholders, December 31 71 379 69 272 72 738 70 914 79 926 Market capitalization, December 31, MSEK 175 271 211 397 213 348 261 719 251 140 4.7%	MSEK	2011	2012	2013	2014	2015	Average growth, five years	Goal

For definitions, see page 124. Key financial data is published also on www.atlascopcogroup.com/ir.

1) Includes share redemption in 2011 and 2015. 2) Proposed by the Board of Directors.

Positive trend/goal achieved Neutral trend Negative trend/goal not achieved

COMMITTED TO SUSTAINABLE PRODUCTIVITY

We stand by our responsibilities towards our customers, towards the environment and the people around us. We make performance stand the test of time. This is what we call – Sustainable Productivity.

Atlas Copco AB (publ) SE-105 23 Stockholm, Sweden Phone: +46 8 743 80 00 Reg.no: 556014-2720 www.atlascopcogroup.com