SAAB — Annual Report 2010

Jul 20, 2011

ANNUAL REPORT 2010

SECURITY IN A CHANGING WORLD

Changing conditions for the defence industry	2
Market dimensions	4
The CEO and Chairman in a conversation	6
Business concept, vision and mission	9
Driving forces and trends in the market	10
Long-term goals	12
Goal attainment in 2010	13
Saab's starting position	14
Employees	15
Profitable growth	16
More efficient operations	18
Focused portfolio	20
Product development	22
Saab's core competence	24
Market segments	26
Markets by region	28
Financial review 2010	32
Business areas	34
Sustainability at Saab	44
Risks and risk management	56
Financial statements	60
Notes	72
Corporate governance report	126
The Saab share	138
Financial information 2011 and contact details	144

While every care has been taken in the translation of this annual report, readers are reminded that the original annual report, signed by the Board of Directors, is in Swedish.

ORGANISATION

CONTENTS THIS IS SAAB

Saab serves the global market with world-leading solutions, products and services ranging from military defence to civil security. With operations and employees on every continent, Saab continuously develops, adapts and improves new technology to meet customers' changing needs. Its most important markets are Europe, South Africa, Australia and North America.

Saab has around 12,500 employees. Annual sales amount to around SEK 24 billion, of which about 20 per cent is related to research and development.

Saab's operations are divided into five business areas: Aeronautics, Dynamics, Electronic Defence Systems, Security and Defence Solutions, and Support and Services.

* Combitech is reported as part of Corporate.

A HISTORY OF ADVANCED TECHNOLOGY AND INNOVATION

	• 1937 Saab is founded	• 1990 Saab Automobile	independent company	• 2000 Saab acquires Celsius	• 2005 Saab acquires Grintek	• 2006 Saab acquires	Ericsson Mircowave Radar (EMW)
1646	1894	1948	1998		1950–	1970–	1980–	1990–
Bofors Järnbruk is founded	Alfred Nobel acquires Bofors	First order for Carl Gustaf	StriC in operation		Development of fighter radar	Development of GIRAFFE	Development of ARTHUR	Sea Giraffe AMB is launched

Sweden: 38% of sales (31) Number of employees: 10,372 (10,916)

Rest of Europe: 21% of sales (24) Number of employees: 432 (408)

Africa: 12% of sales (14) Number of employees: 1,141 (1,171)

Asia: 15% of sales (19) Number of employees: 31 (14)

Americas: 9% of sales (8) Number of employees: 211 (272)

Australia and other countries: 5% of sales (4) Number of employees: 349 (378)

SAAB 2010

IMPORTANT EVENTS IN 2010

• In March, Saab received an order from the Swedish Defence Materiel Administration (FMV) for the development of the existing Gripen fleet. The order value amounted to SEK 2 billion, split over four years.
• During the second quarter, the Board of Directors received requests from shareholders to convert 3,347,180 Series A shares in Saab AB to Series B shares. As a result of the conversion, the total number of votes in the company was reduced from 156,439,071 to 126,314,451. The total number of registered shares in Saab AB is 109,150,344, of which 1,907,123 are Series A shares and 107,243,221 are Series B shares.
• The contract between Saab and OKG Aktiebolag on the delivery of perimeter security for the Oskarshamn nuclear power plant was terminated during the first half-year. Saab's income was charged with MSEK 290 in costs related to the contract.
• In September, Håkan Buskhe took office as the new President and CEO of Saab. He was previously President of E.ON Sweden and CEO of E.ON Nordic. The previous President and CEO, Åke Svensson, remains a member of Saab's Board of Directors.
• In October, Saab received an order for an airborne surveillance system worth more than SEK 4.5 billion. The order comprises the delivery of the Saab 2000 AEW&C (Airborne Early Warning & Control) system, which comprises a Saab 2000 aircraft equipped with the advanced ERIEYE radar system. The order also includes ground equipment, logistics and support services.
• As a part of a long-term strategic adjustment to changing market conditions, Saab decided in November to reorganise the operations of the Dynamics business area. Notice was served to more than 200 employees. Moreover, efficiency improvements were launched in the Electronic Defence Systems business area and in Corporate functions. Costs of MSEK 519 related to these measures were charged against operating income in the fourth quarter 2010. The measures are expected to positively affect operating income by about MSEK 200 on an annual basis with a full effect from 2012.
• At the end of the year, Saab received an order from FMV for six Gripen aircraft intended for the Royal Thai Air Force. The order is worth about SEK 2.2 billion.

Key financial ratios (MSEK)	2010	2009
Sales	24,434	24,647
EBITDA	2,187	2,598
EBITDA margin, %	9.0	10.5
Operating income	975	1,374
Operating margin, %	4.0	5.6
Adjusted operating margin, %	6.5	5.4
Non-recurring items	-602	50
Income after financial items	776	976
Net income	454	699
Earnings per share, SEK (after dilution)	3.97	6.28
Dividend per share, SEK	3.501)	2.25
Return on equity, %	4.1	7.0
Equity/assets ratio, %	39.1	35.1
Order bookings	26,278	18,428
Order backlog at year-end	41,459	39,389
Total research and development (R&D)
expenditures	5,008	4,820
Internally financed R&D	1,203	1,194
No. of employees at year-end	12,536	13,159
Share of women, %	22.0	22.4
Academic degree, %	51.4	48.5
Sick leave2), %	2.1	2.3
1) Proposal by Board of Directors

2) Saab in Sweden

OUTLOOK 2011

In 2011, we estimate that sales will decline slightly compared to 2010. We expect the operating margin to increase slightly in 2011 compared to the adjusted operating margin in 2010.

EARNINGS AND DIVIDEND PER SHARE, SEK

CHANGING CONDITIONS FOR THE DEFENCE AND SECURITY INDUSTRY

The long-term geopolitical trend toward supranational structures where governments work together and a security doctrine based on common interests and responsibilities are fundamentally changing conditions for the defence industry. Financially strapped governments and growing civil security needs favour flexible, costeffective enterprises like Saab.

In the last 50 years, the world order and political system have incorporated greater diversity and larger network structures and seen a shift in power and initiative to new players. International alliances – political, economic and military – increasingly focus on protecting common interests and the functions in a global flow-based society, that we are all dependent on. Multilateral civil and military coalitions are becoming more common – within, outside and between the major political, economic and military blocs. To a growing degree, we live by a security doctrine where common interests outweigh individual interests and where we share responsibility for defending these interests. Globalisation and economic integration are generally leading to a shift in political power and economic resources from the national level upward to the supranational and downward to the local level. Far-reaching economic alliances between countries, major cities, NGOs and transnational companies today are considered important actors in the international political system.

Technological developments are also creating change, and not only in traditional armed conflicts where information and communication systems have long been of critical importance. To a growing extent, information and information systems are becoming weapons and targets. The digitalisation of our world is creating new conflict zones and patterns that go beyond traditional antagonists. Conflicts can arise between nations and companies, as was the case between China and Google in early 2010, or between nations and organisations, which happened at the end of the year between the US and WikiLeaks. In both cases, the conflict revolved around transparency and the extent to which it benefits common interests. Both cases also illustrate how technology is erasing traditional borders.

A world of alliances requires intergration

In terms of security policy, these changes have essentially made individual governments less autonomous and increasingly forced them to collaborate strategically and operationally. This has major implications for the defence industry in terms of both where development work is focused and how it is financed. Unique, solitary weapon systems are becoming less relevant in a world of alliances that demands integration and coordination.

Global defence contractors cannot expect to fund their development to the same extent with defence appropriations from individual governments and instead will have to finance more of the work on their own or through international collaborations. To participate in international projects, it is vital to have cutting-edge world-class technology, making this one of the defence industry's biggest challenges. This requires a well-focused portfolio and a large external network. No one can be the best at everything.

Need for cost-effective solutions

In the former Western world, financial struggles are forcing many countries to slash their defence spending and be more efficient in their purchases. This is reinforcing the current trend of buying fully developed, proven weapon systems with documented performance, which others also use and can be incorporated into larger co-ordinated efforts. For the defence industry, this makes it necessary that new programmes are commercially viable in multiple markets, which in turn requires open markets with fair competition. The defence market is the only one in the EU that has not fully adopted the Treaty of Rome's principle of free movement of goods, services, capital and people, although progress is steadily being made. Economic development is also driving this trend in the right direction.

Complex, advanced defence systems are also becoming more expensive to develop. Even the US, which has by far the world's largest defence budget, has recently announced that it may mothball a number of costly weapons projects and instead utilise existing technologies and systems to cut spending. It will buy more proven products and systems and may consider dealing more with international suppliers if they offer better value for money.

Today we have to be able to protect national borders as well as global and regional trade as well as securing functions in the society and flows of people, goods, services, information and capital.

A growing number of countries and international alliances simply want more bang for the buck. The demand for co-ordination and cost effectiveness favours flexible, cost-effective industrial companies like Saab. The same applies to the expanding security needs of civil society. The gray zone between civil and military security is also growing as "inside" threats in the form of terrorism and sabotage as well as overloaded critical systems become more apparent and more real than traditional "outside" threats.

International joint forces given a broad mandate

The shift toward net-centric defence and international joint forces is best achieved when emergency preparedness is co-ordinated through as broad an international mandate as possible. Preparedness applies to a variety of emergencies: threats to the economy and the hubs it is based on, but also threats to public health, the environment and our common values. Joint efforts require not only that the systems used can be co-ordinated, but also controlled centrally.

The UN currently has 17 peacekeeping missions around the world, including those led by regional players such as the EU (Chad, Congo, Bosnia, Herzegovina, and Macedonia), NATO (ISAF and

KFOR) and the African Union (Darfur and Somalia). The EU also maintains two battle groups, ready to deploy to crises anywhere in the world. During the first half of 2011, the Nordic Battle Group (NBG) is one of them. Under Swedish leadership, 2,000 troops from Sweden, Finland, Norway, Estonia and Ireland will be available to the EU on short notice for everything from humanitarian actions to military offenses. The Nordic defence forces also have a stated aim to collaborate more as part of the Nordic Defence Co-operation. In January 2011, the Swedish defence had a total of 673 troops (against 735 at year-end 2009) in international joint forces, of which KFOR (Kosovo) and ISAF (Afghanistan) were clearly the largest.

Defence and protection of joint forces – military, police and civil – has become an important new development area and market segment in the defence industry.

In the final analysis, it is a question of developing and supporting the ever-present and ever-important mission of protecting people and society from various threats and risks. This has been Saab's mission since it was founded nearly 75 years ago.

MARKET DIMENSIONS

Understanding the development of, and overlap between, the two main dimensions of security policy is essential to understanding the opportunities, breadth and potential in Saab's market.

The purpose of traditional security policy is to maintain national sovereignty by defending borders, a market Saab is well-positioned in. The purpose of the new dimension, which stresses the vulnerability of civil society, is to safeguard society's essential functions by protecting critical flows and infrastructure.

The two market dimensions face different conditions and work in different ways.

The first market is dominated by national governments and military organisations, while the second is dominated by cities, companies, organisations and individuals. Cities are the most flow-intensive locations on the planet, and it is there that key infrastructure

points such as ports, airports, train stations, banks, computer servers, distribution centres and loading terminals are centered.

Cities cannot be allowed to become too vulnerable to disruptions and breakdowns caused, for example, by insufficient capacity and maintenance of critical systems, natural disasters, criminality, sabotage or terror. Urban security, efficiency and sustainability are vital to society's functionality. The three operating areas unify and constitute the lowest common denominator between the two security dimensions.

The areas of training, command and control, and maintenance are shown as "links" between the circles in the schematic figure below. For Saab, the links originate in a traditional border-protecting military context, where Saab has proven its innovative capabilities. But they are just as relevant and applicable in an urban-centered flow-protecting context. Aeronautics and defence as well as urban development and security fit well together, and Saab's experience working with complex systems is a big advantage in both markets.

The new market structure – macro development leads to a broad security concept

DEFENDING TERRITORY

There are three lowest common denominators between the two security concepts. This creates momentum between markets and technology .

TRAINING C4I SUPPORT & SERVICES

SECURING FUNCTIONS IN THE SOCIETY

Conversation between Chairman Marcus Wallenberg (MW) and CEO Håkan Buskhe (HB).

ADVANTAGES UNDER NEW COMPETITIVE CONDITIONS

The conditions Saab faces in its operations continue to change, as they do for other defence companies. Fiscal challenges are forcing many governments to cut their defence spending. At the same time, international defence alliances and civil security needs are increasing. Chairman Marcus Wallenberg and CEO Håkan Buskhe discuss what this means for Saab.

MW: The global economy improved in many respects in 2010, but there are still major structural problems that directly and indirectly affect Saab's ability to conduct business. Many countries in the West, especially in Europe, have large debts and fiscal deficits, which is increasingly affecting how they think strategically about their defence investments. In an effort to get their budget deficits under control, it is inevitable that more nations will start to reassess their defence budgets.

HB: One current trend that is becoming more prevalent is the coordination of defence resources between countries and political alliances in order to maintain capabilities at the same level without increasing costs. In Europe, the extensive military alliance entered into by the UK and France in 2010 and the Nordic cooperation previously established through NORDEFCO are examples of collaborative initiatives.

MW: Shrinking investments are forcing countries to buy costeffective solutions that offer value for the money – in this case, defence capabilities.

HB: A growing number of customers in the defence market want to buy the best solutions available regardless of the country of origin. Smaller national budgets mean that more companies that previously relied on the defence authorities in their homelands now have to go out and compete in the international market. This requires, however, that their defence systems can be integrated into larger systems and work in international alliances. This is leading to tougher competition and changing the competitive landscape.

MW: At the same time that we are seeing greater competition, there is a risk of protectionism when governments have to explain to their citizens how their tax money is being spent. This is one of the big unresolved questions.

HB: The overarching, long-term change that is affecting Saab's opportunities internationally is the growing importance of emerging economies. Traditionally we have focused on the West, but defence spending there is shrinking. We are therefore turning to countries such as India and Brazil, where budgets are expected to increase.

MW: To a growing extent, the global economy is being driven by demand from emerging economies, which is leading to more competition for natural assets from a global perspective. This is creating new conflicts of interest and of course affects defence needs as well.

HB: The world's oceans are playing a greater strategic role in maintaining production, trade and demand from growing populations. This has changed threat scenarios and placed more emphasis on maritime security.

MW: Global security conditions have become more complex, especially considering developments in North Africa and the Middle

Marcus Wallenberg, Chairman of the Board, and Håkan Buskhe, President and CEO.

East. It is easy to forget that both are key regions not only to the world's energy supplies but also to global trade. The Suez Canal remains the world's most important trade route, carrying around ten per cent of seaborne trade. Developments in these regions are critical to the global economy going forward. High oil prices may drive inflation, which in turn is raising interest rates. Serious disruptions to energy supplies and global trade could lead to new crises.

HB: It is clear that we live in a globalized world. As security conditions change, our customers' needs change as well. Consequently, we have to strengthen our local and regional presence and continue the international expansion.

MW: We have a goal of five per cent organic growth per year from 2011, and this means that Saab will grow primarily outside Sweden. While we anticipate a larger share of our growth opportunities in developing regions such as India, Asia and South America, we also believe that we can gain market share in the West thanks to our competitive offerings.

HB: One of our main strategic priorities is to organise marketing and sales regionally and locally. We have been operating in the US for many years. Saab is currently one of the twenty-five largest defence and security companies in the world, and probably one of the three or four top in terms of international market coverage. We have sales in around 90 countries and our own presence in around 30.

" From an historical perspective, Saab has been an innovation powerhouse for advanced Swedish technology, and it is important that this capacity remains in place – for both Saab and Sweden."

MW: Our aim is to significantly strengthen our international market coverage during the next five-year period and gain a leading position in terms of how customers feel about our local connection and presence.

HB: Growth may be supported by acquisitions. Increased competition is leading to consolidation pressures, and we may take an active role in this process if the right opportunities arise. Our portfolio strategy and strong balance sheet give us enough room for selected acquisitions in the years ahead. They will strengthen our core offerings and international presence. We acquire basically sound units that can improve our market position and will eventually contribute to organic growth.

MW: To maintain such investments, Saab must increase its profitability.

HB: Saab's strategy has been carefully reviewed and lies firm. Since September we have defined the main features in order to concentrate on implementation. It is important to keep momentum going and drive and implement on our strategy. We will create profitable growth through a focused portfolio and by implementing efficien-

" We have lived with cost constraints for some time, and today it isn't only the performance of our products that is world class. Few, if any, our of competitors can beat us in terms of cost effectiveness."

cies at every level with committed, qualified employees. We have to create a culture of execution, where we trust each other. This requires a common vision of where we are going and an understanding of what we have to do.

MW: Focusing is critical, since it is so hard to get an overview of this complex industry.

HB: We are clearly focused on the regions and selected markets where we want to expand our local presence. In addition, we are working continuously to develop our portfolio in a way that strengthens areas where we have leading technology and invest in new areas that we feel can improve our offerings and core competencies. Our systems know-how is unique, and the ability of our employees to integrate solutions is our core competency. This can never be compromised. On the contrary, we have to keep our cutting edge, which we can do by always listening to and working with customers to create value for them and, by extension, for our shareholders and our own organisation.

MW: Saab is a pioneer in many respects. From an historical perspective, it has been an innovation powerhouse for advanced Swedish technology, and it is important that this capacity remains in place – for both Saab and Sweden. Many innovations generated here have later been further developed outside Saab and today employ tens of thousands of people. It is important to keep this in mind when looking at Saab from an overarching perspective.

HB: Innovation means not only coming up with new ideas but applying them in practice. Our strength is that we have both technical and social capabilities. Social systems and co-operation between different cultures are extremely important and contribute to improved efficiency. Personal relationships are an important part in succeed ing with complex development projects.

MW: This is especially true of international industrial alliances, which are critical in order to deliver on large, complex systems orders in the best way, and then get them to work on an operating level. To a large extent it involves co-operation and social engineering.

HB: We started going international many years ago, when we realized that our growth opportunities were outside Sweden, especially since the Berlin wall fell. Today many of our competitors find themselves in a situation where their countries are spending less on defence, and they have to compete internationally more than before. This gives us a head start in terms of both presence and efficiency. We have lived with cost constraints for some time, and today it isn't only the performance of our products that is world class. Few, if any, of our competitors can beat us in terms of cost effectiveness.

MW: Gripen is a good example of this. In addition to its operating capabilities, which are just as good as if not better than the competition, we are far more cost-effective throughout the supply chain: in development, production, delivery and operations. This is more obvious from a lifecycle perspective.

HB: The implementation of our efficiency programme – the Billion+ programme – has led to further improvements, and underlying profitability continued to rise in 2010. We will not lose our focus on continuous efficiency. This will be decisive to compete going forward. We must constantly increase efficiencies in our core business.

MW: This strong focus on efficiencies has improved our underlying profitability and generated very strong cash flow. As we look ahead, we have to keep our eye on market developments – at the same time that delivering on our financial objectives and Saab's strategic priorities is crucial in order to remain competitive.

HB: Our core competence is the ability to integrate our own and others' systems and components in complex, cost-effective solutions. This drives Saab's employees every day. I look forward to working together to improve our competitive strength in 2011 and deliver on the goals we have set.

Marcus Wallenberg Håkan Buskhe

Chairman President and CEO

OUR MISSION ESSENTIALLY IS TO PROVIDE SECURITY

The demand for security on the part of people, society and companies is the ultimate driving force in our business.

Security needs and threat scenarios have changed in significant respects as our global society develops new structures and trade patterns.

Our business concept

Saab constantly develops, adopts and improves new technology to meet changing customer needs. Saab serves the global market of governments, authorities and corporations with products, services and solutions ranging from military defence to civil security.

Our vision

It is a human right to feel safe.

Since Saab was started, we have strived to keep society and people safe. It is a basic human need to feel safe and, as we see it, a human right. Through systems and solutions that increase security, we can make this possible.

Our mission

To make people safe by pushing intellectual and technological boundaries.

Our mission describes how we work to achieve our vision. By improving and updating technological systems and solutions, we increase security in society, for its citizens and for those whose job it is to maintain security. We also contribute insight into how threats to our security change and develop innovative new solutions that make society secure.

DRIVING FORCES AND TRENDS IN THE MARKET

Threat scenarios and changing security needs, more than anything else, are driving development in Saab's markets. This applies to the defence sector and civil society, as well as the growing gray zone between them.

Macroeconomic factors and geopolitical developments ultimately create the framework for Saab's business. The defence market traditionally has little co-variation with the global economy. Instead, political developments are the decisive factor globally, regionally and locally. Fiscal constraints are obviously affecting defence spending, however.

A new economic world order is taking shape in which the BRIC countries (Brazil, Russia, India and China) in particular are gaining strength. This has not been reflected to a great extent in the distribution of defence spending in recent years. In 2009, total defence spending increased the most in Asia and the Pacific Rim. Nevertheless, the US still accounted for the largest share (43 per cent) of the global total defence spending in 2009. On the other hand, there is expected to be a shift going forward from traditional to emerging markets in terms of total global expenditures, although this will level off in the long term, according to SIPRI.

Growing imbalances in international trade are creating complex new dependencies and conflicts. At the same time, the long-term trend is toward stronger alliances for peacekeeping and economic development purposes, which is increasing security-oriented demand. Joint commitments to keep conflict zones under control are having a similar effect. Many of the world's conflicts have lasted for long periods. A large percentage of all armed activities is in these regions, as are preparations for armed conflict by both regional and international players.

The US has retained its role as a geopolitical leader and its impact on the global security arena. Ideologies have declined in importance as a driver of global conflict scenarios, while religious fundamentalism has grown.

As the world's population continues to grow along with demand for a higher standard of living, global competition for commodities and resources, especially fossil fuels, could become an increasingly important driver of conflicts (see, e.g., "A Strong Britain in an Age of Uncertainty: The National Security Strategy", October 2010). In the long run, access to food and fresh water could also potentially lead to conflicts.

The civil market is directly dependent on the economy. Fluctuations in the economy affect the size of trade volumes and the overall flow of goods, people, capital and data around the world – as well as the need for security. The civil aviation market is highly dependent on the economy, but also extremely sensitive to security threats.

DEFENCE SPENDING 2009

		Defence spending
Rank	Country	(USD billion)	Global share (%)
1	USA	661.0	43.2
2	China	100.0 1)	6.5 1)
3	France	63.9	4.2
4	UK	58.3	3.8
5	Russia	53.3 1)	3.5 1)
6	Japan	51.0	3.3
7	Germany	45.6	3.0
8	Saudi Arabia 2)	41.3	2.7
9	India	36.3	2.4
10	Italy	35.8	2.3
11	Brazil	26.1	1.7
12	South Korea	24.1	1.6
13	Canada	19.2	1.3
14	Australia	19.0	1.2
15	Spain	18.3	1.2
16	Others	277.8	18.1
Total		1,531.0	100.0

Defence spending at constant prices and exchange rates

Source: SIPRI Yearbook 2010

1) Estimates. 2) Figures for Saudi Arabia include costs for civil security..

Supranational initiatives by the UN, the EU and the African Union (AU), among others, and other political alliances steer and govern a large part of the defence and security-oriented civil market. Climate change is an area where the EU has taken important initiatives. The EUfinanced research project Clean Sky, which is designed to promote greener air transports, and SESAR, whose purpose is to modernise traffic in the European airspace and reduce its environmental impact, are two examples. A number of initiatives have also been launched at the nation state level within the EU. In November 2010, France and England signed an ambitious defence and security treaty, which entails a far-

reaching defence co-operation. Sweden and Germany have launched a joint initiative to distinguish between defence areas which should remain strictly national within the EU and areas where alliances and shared resources can increase the efficacy and cost-effectiveness of the European civil and military defence.

Nation state activity on a governmental level also has a major effect on the volume of defence business, especially for large strategic systems such as fighter jets. At the same time, the trend in the tactical area is toward increased commercialisation, including the further development of proven products and systems. In Saab's case, its

defence business is also limited by export restrictions in a number of markets.

Public opinion influences security policy in Sweden and many other countries. Sweden's participation in peacekeeping missions has received greater attention due to the deaths of a number of Swedish soldiers in 2010. Terrorist activities in Sweden have also raised awareness about civil security. Another aspect that has impacted security policy in recent years is that public acceptance of civil security measures has come into conflict with the need to protect personal privacy.

MEGATRENDS – A WORLD IN CHANGE

New security needs in a transaction society

The development of a global transaction society requires the protection of critical flows and hubs. The latter include major facilities and systems: airports, harbours, railways, highways and energy systems. The focus is on functionality, efficiency and security, which requires advanced monitoring of operations and external threats.

New forms of co-operation

Continued global integration and new international structures have led to more cross-border and supranational (UN, EU, etc.) co-operation with a shift toward net-centric defence and international joint forces. Civil and military alliances are becoming more common – within, outside and between the major political, economic and military blocs – and require open systems and coordination, where a larger share of development work is done collaboratively. At the same time, it is becoming more common that large development projects are conducted as part of public-private partnerships.

Higher percentage of self-financed R&D

The increase in international alliances and system coordination at the same time means that the defence industry can expect to finance less of its development work through national defence budgets. Defence authorities increasingly want access to the best the market has to offer regardless of

country of origin and want it delivered on short notice. As a result, a larger share of research and development must be self-financed by the defence industry. This is a worldwide trend.

Need for broad, deep, long-term solutions

Customers in both the military and civil markets increasingly want broadbased, integrated solutions with more service content. The trend is shifting toward full operational and functional commitments covering the entire lifecycle, where solutions are evaluated not only based on performance but also in terms of the cost to own and operate. Outsourcing of activities that had previously been performed internally is becoming increasingly common, in-cluding in the military field. This also increases demand for education, training, support and maintenance.

Local presence is decisive

Despite the trend toward international alliances, the need for a strong local presence is crucial to success in both the military and civil markets. Customers want integrated solutions from companies that understand local conditions. This significantly increases opportunities to be selected as a supplier and, no less importantly, have a portion of their development financed through defence appropriations or gain access to local product development.

LONG-TERM STRATEGIC AND FINANCIAL GOALS

Saab's strategy is focused on four areas: profitable growth, efficient operations, a focused portfolio and our people. We create long-term value by working to accomplish our strategic priorities, delivering sales growth and profitability, and maintaining a solid bal-

ance sheet. Our focus on capital efficiency and generating strong cash flow also contribute to this.

LONG-TERM STRATEGIC GOALS

In 2010, an analysis was made of Saab's long-term goals. In light of the strategic priorities, the long-term financial goals communicated externally were revised slightly.

The long-term financial goals now consist of goals for organic sales growth, operating margin after depreciation and amortisation (EBIT) and the equity/assets ratio.

The previous targets for the operating margin before depreciation/ amortisation (EBITDA) and return on equity will not be reported as of 2011.

Profitable growth

In order to achieve our long-term sales growth goal, we will stay focused in coming years on markets where we are already established: the Nordic region, many European countries, South Africa and Australia. In addition, we will establish a stronger local presence in selected markets such as North America, the UK, South America (Brazil) and Asia (Thailand and India).

Performance

Our efficiency improvement program was successfully finalised in 2010. We have now reduced Saab's cost base by SEK 1.5 billion over a three-year period. The market is constantly changing, which requires that we keep up with developments and in many cases that we stay on the forefront of change. This is why we continue to improve efficiencies in operations, focus on capital efficiency and generate strong cash flow.

Portfolio

To achieve our growth target, we have to invest partly in product innovation and partly in renewal and upgrades of existing products and systems. Investments in the portfolio will be prioritised in areas where we already have competitive technology and/or a competitive market position and our aim is to strengthen or retain our unique systems expertise.

People

Our employees are the foundation that enables us to implement our strategy and achieve our strategic and financial goals. Our market is changing, and successful changes require confidence in the future. We want to be an employer of choice for current and future employees who seek development opportunities and continuous change.

LONG-TERM FINANCIAL GOALS

Growth

Over a business cycle, our organic sales growth will average 5 per cent per year.

It is possible that growth will also be achieved through acquisitions if value-creating opportunities arise within our priority areas in the years ahead.

Operating margin

The operating margin after depreciation/amortisation (EBIT) will be at least 10 per cent.

Equity/asset ratio

The equity/assets ratio shall exceed 30 per cent.

Dividend policy

Saab's long-term dividend objective is to distribute 20–40 per cent of net income over a business cycle to shareholders.

ATTAINMENTOF LONG-TERM STRATEGIC AND FINANCIAL GOALS FOR 2010

Despite a continued challenging business environment, our order bookings increased in 2010 and the order backlog grew. Underlying profitability improved throughout the year, we improved the level of capital employed and generated strong cash flow. In addition, measures were taken to restructure operations and improve efficiencies as an element in a long-term strategic adjustment to changing market conditions.

STRATEGIC PRIORITIES

Profitable growth

In 2010, we received major orders for both the Gripen system and airborne surveillance systems, which consolidated our strong position in the area. We also took measures to strengthen our local presence in markets such as Thailand, Brazil and the US. In South Africa, we entered into a collaboration with Sekunjalo Investment Ltd – a step to further strengthen position in South Africa and in the sub-Saharan region.

Performance

Our efficiency improvement programme was successfully finalised in 2010. In addition to this programme, we took measures to improve efficiencies. We decided to reduce the number of operating locations and improve efficiencies in areas with high administrative costs. This means that the Dynamics business area's operations in Eskilstuna will be terminated in 2012 and that the underwater vehicles operations in Motala will be restructured. All employees in Motala were served notice. In addition, efficiencies were achieved in the Electronic Defence Systems business area and in Corporate functions.

Portfolio

In 2010, we continue to focus the portfolio through structural measures. We decided to integrate the Motala-based underwater vehicles operations with UK-based Saab Seaeye Ltd. The launch of SAFE (Situational Awareness for Enhanced Security) illustrates the progress we have made in civil security and product innovation. Based on a powerful command and control system and an advanced and integrated platform, SAFE serves as a core to monitor and oversee safety and security in daily operations.

People

In 2010, we worked on harmonising overarching HR processes in order to better address business-critical HR-related issues. We have also focused on our change process with the goal of strengthening the communicative leadership abilities of our managers. In 2010, 22 per cent (22) of employees in the organisation were women, and the share of female managers is 19 per cent (17). Saab was named Sweden's best workplace during the year by the business magazine Veckans Affärer, which made gender equality an important part of its evaluation.

LONG-TERM FINANCIAL GOAL PERFORMANCE IN 2010 Growth

Goal: This goal was previously the same as in the new long-term goal formulation. Our organic sales growth will average 5 per cent per year over a business cycle.

Result 2010: In 2010, organic sales growth was -1 per cent (4).

Operating margin

Goal: We had two margin goals in 2010, both formulated as an average over a business cycle.

The goal for operating margin after depreciation/amortisation was at least 10 per cent and it remains the same in the new long-term goal formulation. The goal for the operating margin before depreciation/amortisation is at least 15 per cent.

Result 2010: The operating margin after depreciation/amortisation (EBIT) in 2010 was 4.0 per cent (5.6). Adjusted for non-recurring items, the operating margin was 6.5 per cent (5.4).

The operating margin before depreciation/amortisation (EBITDA) was 9.0 per cent (10.5).

Return on equity

The ROI goal in 2010 was an average 15 per cent. In 2010, we reached a return of 4.1 per cent (7.0).

Equity/assets ratio

Our goal in 2010 was an equity/assets ratio exceeding 30 per cent, which still remains in the new goal formulation. At year-end 2010, the equity/assets ratio was 39.1 per cent (35.1).

SAAB'S STARTING POSITION

Saab's four strategic priorities PROFITABLE GROWTH PORTFOLIO PERFORMANCE PEOPLE

Saab operates in the global market for defence and security solutions and develops world-leading solutions and systems with broad-based military and civil applications. As one of Sweden's most R&D intensive companies, development co-operations are an important pillar of our future.

Core competence

Systems engineering – understanding and being able to integrate complex systems, our own and others' – is Saab's core competence.

At the same time that we have world-leading technology in a number of important areas, we work today with open systems as far as possible. Multiple applications and the ability to coordinate systems are the keys to our product development, making it possible to integrate products into larger military and civil operations.

Market position

We address traditional defence needs with a core offering consisting of products and systems to safeguard national borders. To a growing extent, we also address the functional and security needs of the global flow society, which includes the civil security market.

The large market segments where we have a strong position and good growth opportunities are fighter aircraft and command and control systems, reconnaissance and surveillance systems, including Airborne Early Warning (AEW) systems, tactical weapon and missile systems, and Command, Control, Computing Intelligence, Surveillance and Reconnaissance (C4ISR) systems. We also have a strong niche position in civil aeronautics as a supplier to Airbus and Boeing.

We have very strong positions in selected regions in the growth segments of civil security, support and service, training and underwater systems, as well as niche segments such as signals intelligence.

In the military field, we sell to defence authorities as well as other defence companies as a subcontractor. Geographically, we have a strong position in Sweden and good positions in South Africa and Australia. Our goal is to consolidate and strengthen our position in the other Nordic countries and selected countries in Europe, while building strong positions primarily in North America, Brazil, India and Southeast Asia.

Organisation and culture

As of 1 January 2010, Saab's operations are divided into five business areas: Aeronautics, Dynamics, Electronic Defence Systems, Security and Defence Solutions, and Support and Services. A large part of business operations are conducted by the Parent Company and the rest by the Group's wholly and partly owned companies.

Four strategic priorities

Looking ahead, our aim is to continue to work toward our strategic priorities: profitable growth, performance, the portfolio and our people. The following pages present our work in each of these four areas.

STRENGTHS, WEAKNESSES, OPPORTUNITIES AND CHALLENGES FOR SAAB

• Saab has a well-positioned product portfolio based on world-leading technology. We have unique systems expertise and the capability to supply complex systems.
• Our strong balance sheet gives us a solid platform to implement our strategy. Cash flow generation is good as well. Our management and control systems ensure a business focus and continuous efficiency improvements.
• Although we created cost efficiencies in 2010, further improving operating efficiency and productivity is critical.
• International competition is increasing, partly due to lower defence spending in Western democracies, where many leading defence companies are based.
• Our dependency on customer-financed R&D is a challenge. Around twothirds of customer financing currently comes from Sweden. Our growth opportunities are primarily in other countries, including selected markets where we are working to increase customer financing.
• The reliance on major orders such as Gripen, AEW and Bamse is a challenge. Saab's advantage is that our Swedish base makes us a neutral choice.
• Finding the right civil applications for our core technologies is both a challenge and an opportunity. We have the ability to supply systems that maintain various flows in society, in defence and civil security.
• One of our strengths is that we have about 80 per cent of our employees in Sweden at the same time that our growth potential is primarily outside the country, which enables us to create interesting job opportunities in other markets, create greater diversity and attract talent from markets outside Sweden.
• We have a unique industrial co-operation offering and a large network of contacts around the world. Our commitment to the community and focus on sustainable business (social engagement and business ethics) give us a stable platform to build on.

OUR EMPLOYEES ARE CONSTANTLY DEVELOPING

At Saab, our employees are the key to everything we do and a critical factor in order to implement the strategy and reach our strategic and financial goals. Technology is constantly changing, and we at Saab are naturally along for the exciting journey to the technology of the future.

Our core business is our unique technology and ability to integrate products and systems in advanced solutions. We have been one of the leading technology companies in Sweden for over 70 years. It is not so strange, therefore, that around 50 per cent of our employees has a college degree and that over 7,000 are engineers.

Staying on top of technological advancements requires that we have employees who are interested in, take responsibility for and lead this development.

This places tough demands on us as an employer. We look for top talents in the global market and cannot limit ourselves by intellectual and national borders.

Diversity creates value

At Saab, we regard differences as an asset and strategic resource. We encourage diversity and have challenging gender equality goals. Diversity and gender equality are critical to our profitability and how we are seen by the public. This requires management by objectives and continuous oversight to succeed.

At Saab, we have clearly defined values, which we believe make us a better employer for current and future employees. We are a company distinguished by openness, cooperation and mutual respect. Successful changes are the result of confidence in the future and are a vital element to succeed in business.

This is why we want to be a company of opportunities and take responsibility for offering personal development tied to our business challenges. We are the natural choice for talented people who are looking to grow and want to embrace change in a stimulating work environment.

Learn more about Saab's employees on pages 50–51.

PROFITABLE GROWTH

How we drive our growth is our fundamental strategic challenge. Our business must focus to a growing extent on markets with strong demand and areas where our technologies and solutions can meet existing security needs to a higher degree.

One of Saab's main strategies in the last decade has been to transition from a dominant home market and reliance on a single customer, the Swedish defence forces, to more international operations. Sales outside Sweden gradually increased during the latest ten years. Today we address not only traditional defense needs, but increasingly the security needs of society as a whole. This represents a shift in focus for our operations and further expansion in the civil security area, which increases business potential at the same time as it diversifies our risks.

While we have a high market share in Sweden, our future growth must come in large part outside the country, especially in markets where conditions are more favourable.

Clearer regional focus

We continuously evaluate our market potential and analyse how our technologies and solutions can meet demand in the around 90 markets, both traditional and emerging, where we sold our products in 2010.

In markets where we have a good position, we are working to consolidate it while at the same time investing in selected areas where we see good opportunities. Today Sweden and the rest of Europe

account for over slightly over 59 per cent of our sales. In addition to the Gripen system, we see other significant business opportunities and growth potential in these markets.

In the future, we will also focus our investments on selected markets with good growth opportunities in a number of regions.

A large share of our growth will have to be found in markets with significant, stable defence spending and otherwise favourable conditions. These especially attractive growth markets include North America, Brazil, India and a number of countries in Southeast Asia. Another example of a new and growing customer is the United Nations, to which we established ourselves in 2010 as a supplier with a local presence in East Africa. The UN is expected to procure products and services for a total of around USD 15 billion (approx. SEK 100 billion), with a focus on services central to our offering: camp, medical and security solutions, vehicle maintenance, training and 3D mapping.

Local presence is critical

At present, slightly over 83 per cent of our employees work in Sweden and about 12 per cent in South Africa and Australia.

Our goal is annual organic sales growth of 5 per cent. This will require that we establish a stronger position locally in the markets where we see growth potential in the future .

To succeed in a market requires that we establish ourselves locally in the best way possible. How we establish ourselves in various regions depends on an array of factors, including political, regulatory, competitive and industrial conditions, local business models

SALES BY REGION 2010 SALES BY MARKET SEGMENT 2010

and financial arrangements, and how our technologies meet local needs. The strategies in each market in turn include everything from an increased market presence and marketing to joint ventures and partnerships, industrial cooperations, technology transfers and reexports.

We may also strengthen our local presence through acquisitions in selected markets if opportunities arise within our prioritized areas.

HISTORIC PERSPECTIVE

STRATEGIC INVESTMENT IN THE U.S.

North America is becoming an increasingly important market for Saab.

The American continent represents half the global defence and civil security market. Saab has been represented here for many years through Saab Barracuda, which produces camouflage products. Moreover, Saab supplies training systems as well as support and services to the U.S. and command and control systems to the Canadian Navy through a partnership with Lockheed Martin. North America is also home to the large part of Saab Aircraft Leasing, a business that owns and manages the more than 100 Saab 340 and Saab 2000 aircraft.

With a goal to strengthen our presence in North America, we opened a new office in April 2010 in Washington, DC, where all our US and Canadian operations are now managed. In the near future, Saab's goal is that all five business areas will be represented on the continent.

Growth in North America will be achieved organically as well as through partnerships with the industry. We also anticipate acquisitions if they provide the opportunity to strengthen our offering within prioritized areas.

MORE EFFICIENT OPERATIONS

To be more competitive, we have to continuously develop, manage and realise the most effective ways of working. Increasing the degree of standardisation is one way of raising efficiency.

Higher efficiency to us primarily means working in a structured manner, so that the costs of reaching our goals in various areas are as low as possible. Initially, have to ensure that standardised and harmonised work methods are in place and to prioritise among our activities. The next step is to measure the results of our work and make the progress we have made visible in the organisation. For this to succeed, we have to promote a culture that puts our common good ahead of what might be best locally.

An efficient Saab

Saab has been working for some time to be a more integrated company in terms of goals, priorities and processes. The reorganisation into five distinct business areas at the start of 2010 was an important step. It makes it easier for us to capitalise on functional synergies and financial resources, develop new, standardised processes and develop a more focused product portfolio. In addition to the reorganisation, we have established a number of functions to support our collective efforts and internal efficiency, including centres of excellence in research and development. For more information, see next page.

At the end of 2010, we completed a SEK 1.5 billion cost-cutting programme on schedule. This work has now become an integral part of our day-to-day operations, where we continue to reduce our costs through improvements.

We are also reassessing our cost structure to better adapt it to our long-term strategy. This includes structural changes beyond those to improve efficiencies in internal processes. For example, we have taken measures to reduce our administrative costs.

Five priorities

In our efficiency improvements, we focus on five strategic areas to become a more cost-effective organisation. They can be summarised as follows:

• Standardise and harmonise operations in order to drive cost efficiencies through functional synergies.
• Optimise R&D efficiency through standardised product management and development processes.
• Focus on contract quality, project implementation and risk management to improve project results and forecasting abilities.
• Increase flexibility in our cost structure to adapt to variations in volume.
• Ensure we can maintain a stable cash flow to facilitate investments for growth in acquisitions, R&D and marketing.

In each of these areas, we are working on a number of activities. In terms of standardisation and harmonisation, this includes everything from maintaining efficient enterprise systems with the best industry standards and co-ordinating sourcing (higher volumes and fewer suppliers) to optimising our assets.

To improve R&D efficiency, we are trying to adopt a uniform lifecycle process for our products and to increase modularity. We also need to have clearly defined criteria in order to prioritise R&D investments. Learn more about our research and development on pages 22–23.

With the help of a well-defined business and management model, as well as a uniform project model, we can improve our earnings potential through contract formulations and effective project implementation in all our business areas.

We are increasing the flexibility of our cost structure by continuously evaluating the size of the organisation's workforce, buying expertise that falls outside our core competencies and conduct cost benchmarking.

We also have to maintain a stable cash flow to facilitate growthdriving investments. We achieve this by focusing on payment plans in tenders/contracts and resource-efficient project implementation, while reducing capital tied up in account receivables and inventories.

Cost reductions from efficiency programme 2008–2010 (MSEK)

The efficiency improvement programme launched in early 2008 was concluded in 2010. The programme accomplished its goal of reducing Saab's annual costs by a total of SEK 1.5 billion.

A large part of the cost reductions was achieved by adapting and standardising the development process within the company, increasing production efficiency and reducing the number of production locations as well as sourcing and travel costs.

Our efforts to create efficiencies will continue.

CENTRES OF EXCELLENCE CREATE SYNERGIES

Centres of excellence create operating efficiencies.

To increase efficiency and further raise the level of competence in technological and business-critical areas, as well as make important competence more accessible, we have established centres of excellence. Eventually, efficiency improvements will free up resources that instead can be invested in Saab's future.

"By working in this way, we increase the chances of successfully retaining competencies and experience within the company," said Göran Johansson, who is leading the effort to create Saab's centres of excellence. "Sometimes it's even a question of avoiding becoming undercritical. By working with others who have expertise in similar areas, our employees can sharpen their skills. In addition, there is great potential for savings."

The new centres of excellence work cross-functionally between business areas. This helps to erase any borders within Saab and further unify the company, which is important to stay competitive.

Four centres of excellence to date

In 2010, Saab created its first four centres of excellence, which are currently in different stages of development. The result is better co-ordination of specialised expertise from various parts of the Group. The centres have gotten off to a good start, and several are already fully operational. Around ten additional centres of excellence are currently being considered. The first four are:

– Optics Design Centre

Provides design solutions and supports all of Saab's business areas. The centre's staff and equipment are located in Huskvarna and it is part of the Security and Defence Solutions business area.

– Common Component Sourcing Centre

Provides electronic component specifications for all of Saab's business areas. The aim is to co-ordinate component operations in the Group. Located in Göteborg, the centre is part of the Security and Defence Solutions business area.

– Geo Data Centre

Collects geodata (digital maps) in a portal, a central geodata library where any employee can search and order data. Part of the Aeronautics business area.

– Power Electronics Design Centre

Provides design solutions, promotes reuse and reviews designs for all business areas. Located in Göteborg and part of the Electronic Defence Systems business area.

FOCUSED PORTFOLIO

Saab's four strategic priorities

Active management of Saab's portfolio is the fourth of our four overarching strategic challenges. This means improving existing products and solutions and developing advanced new ones in order to maintain a well-positioned core portfolio.

Saab's challenge is to balance its offering in order to ensure sustainable growth. This requires that our growth comes from both new products and solutions and the further development of our current products and solutions as well as certain niche products. We must have a strong portfolio of standardised products and solutions at the same time that we secure Gripen's position as a next-generation fighter jet in Sweden and abroad. We have to be able to sell standardised products individually or offer full-service solutions to serve the customer at every turn. For more information on our core competencies, see page 14.

Focus on our core areas

In trying to shape our product portfolio, we are focused on developing operations where we today have leading technological expertise, i.e., products that are – or potentially could be – market leaders. An important part of our product strategy is to have a clear plan which products and solutions to offer in each market.

Sustainable product innovation – by increasing our own investments and in collaboration with customers, universities and industrial partners – is a key if Saab is to maintain a focused portfolio. To further improve our position in areas where we are already a leader requires that R&D investment is clearly targeted on our core competencies.

In some cases, it is critical that product innovation is achieved through customer-ordered development projects, although we see that in the long term these projects are trending lower due to stagnating public defence spending. For more information on our core competencies, see page 14, and for more on our R&D, see pages 22–23.

Develop the right products

Despite lower defence spending, there are a number of product areas where we see great growth potential, especially for our principal niche products. One example is our electric unmanned underwater vehicles, which can be used at deep depths in both military and civil applications. Civil security solutions and training systems are other areas with large growth potential.

Another area where we anticipate major growth opportunities is Rapid 3D Mapping , a real-time system that create three-dimensional images from aerial photos. This is a new technology for the military market, and interest is very high for its various applications. The information generated can be used for precise location in specific areas. The technology is based on Saab's more than 40 years of experience in image processing for digital target seekers and expertise in navigation systems. For more information, see pages 23 and 31.

Going forward, we will strengthen product content based on Saab's core areas. We see opportunities to create new solutions based on existing platforms in order to expand them to other areas of application and to create greater openness in our systems, i.e., that they can operate together with those of other suppliers.

Developing product areas where we currently have critical cutting-edge technology may also mean various types of acquisitions to strengthen our core portfolio in key markets. In the same way, we may divest products or product areas that do not support our core operations.

To balance the product portfolio, we continuously work on:

• Active risk assessment and management
• Active portfolio management (acquisitions and divestments)
• An optimal capital structure and continuous operating efficiencies.

Our long-term goal is to achieve annual organic sales growth of 5 per cent. In addition, we may grow through acquisitions in prioritised areas.

Saab's offering

1) Command, Control, Computing, Communication, Intelligence, Surveillance and Reconnaissance

SECURITY BELOW THE SURFACE

Underwater security is an important emerging market.

Since the terrorist attack in 2001, interest in underwater security has grown around the world. It is now estimated that half of all global threats lie hidden below the surface. To ensure that port authorities in various countries take this threat scenario seriously, the International Ship and Port Security Code has been established.

Historically, port security has mainly been carried out on land, but with requirements now in place for security screening and reporting on threats at sea, there is good potential for both the military and civil segments of the underwater security market.

Saab has a strong offer in naval security for both defence and civil purposes. The operations are part of the Dynamics business area and are run by UK-based Saab Seaeye, which was integrated into Saab Underwater Systems in 2010. The combined operations now have a goal to become a world leader in underwater security in both the civil and military markets.

STRONGER PORTFOLIO THROUGH FOCUSED PRODUCT DEVELOPMENT

One of Saab's biggest strategic challenges is to ensure that we continue to develop products that customers want. By being clear and transparent about our research and development (R&D) investments and how the process works, we can optimise our future product portfolio.

Saab's product development has traditionally been driven through various business units and individual projects, largely based on orders from the Swedish defence. During 2010, an updated project management process for the entire lifecycle of each product was introduced, where we have clarified responsibility for product development between and across business areas. The aim is to ensure that potential products are technologically feasible and meet the needs of the international market. Before a product development decision is made, a detailed profit analysis is conducted taking product's entire lifecycle into consideration.

Changing customer behaviour

Our customers around the world are changing the way they act. In Sweden, for example, the state (through the Armed Forces and FMV) is increasingly focused on various types of international alliances. An invasion defence has largely been replaced by an operational defence, i.e., smaller but more specialised troops that can be called up for missions around the world on short notice – often in co-operation with other nations. As a result, the Armed Forces and FMV have altered their procurement processes and made it more important to quickly obtain new equipment, which makes buying finished products a priority.

For Saab, this change means that we will have to fund a larger share of our product development going forward. Naturally, there are still areas where product development largely remains customerfinanced, but it is becoming increasingly important that we can finance our own product innovation. This requires a clear focus on our part.

Investments in cutting-edge technology

A clearer strategic focus on product development, as well as the highest possible efficiency in this regard, is critical for us. As customer habits change in terms of purchasing and product applications, we have to develop solutions that meet the needs of many customers. This means that we have to be better at understanding the needs of not only the Swedish defence forces but also our most important international customers.

Project management work also involves reducing the number of product areas and prioritising those where we invest in R&D. The emphasis is on innovating and further developing products only in areas where we are currently a leader with cutting-edge technology and are internationally competitive, or where have excellent prospects. In this way, R&D investment will improve our positions in core areas. By also modularising whenever possible, we can reuse product solutions in our offerings.

Moreover, we are focused on raising efficiencies in development processes and utilising model-based development and various frameworks to effectively manage complex processes, such as the development of software and open source code. The trend toward open systems is especially evident, and the ability to integrate systems, our own and others', is one of Saab's biggest competitive advantages.

These measures help us to cut the cost to develop systems and customised solutions, while at the same time reducing our risk exposure. In addition, lead times are reduced, allowing us to better adapt to customers' desire to quickly access materiel.

Leader in many areas

Advanced technology and world-class engineering have been – and are – the foundation for Saab's success.

In terms of the complex systems we offer the market, the key technologies in the Gripen system and ERIEYE radar system – and their further development – are the two main examples. Also, we continuously update our time-critical and tactical command and control systems.

At the same time, we invest in other types of niche products that we sell individually or as part of less complex systems. Examples of our leading niche products are the Carl-Gustaf, AT4, NLAW, the RBS 70 ground based air defence system, the ARTHUR and GIRAFFE radar systems, and our unmanned underwater vehicles. They also include combat training, where we have a leading position.

Among our niche innovations, is the development of the unmanned helicopter Skeldar a good example. In electronic warfare, Land Electronic Defence Systems (LEDS), which provide active protection for combat vehicles, are an important investment area. For

our security systems, we are developing a common integration platform called Situation Awareness For Enhanced Security (SAFE). Aside from our investments in Remotely Operated Towers, we are also participating in a European programme, Single European Sky Air Traffic Management Research (SESAR), to improve efficiency and safety in the airspace over Europe.

Future choices

In line with our emphasis on technologies where we are a leader, or are strongly positioned to become one, we continuously evaluate existing products and new opportunities. Which products support our core operations and which don't? Which can help us to strengthen our cutting-edge technology and how will our continued product development be financed? These are never-ending questions, which lead to various choices for our five business areas.

We also create innovations and products that work in unexpected applications, but which fall outside Saab's core operations and strategies. In 2006, the Group created Saab Ventures, whose purpose is to create and initially run companies outside Saab with new products for new applications. This applies to military technology with applications outside Saab's core areas, spin-offs, and when Saab Ventures' goal is to develop the company before divesting it. Since 2001, Saab has spun off 13 companies. It also applies to technologies that could become a new Saab offering but that Saab Ventures manages initially. Rapid 3D Mapping is typical of such innovations. The venture is being developed together with the Dynamics business area.

The other purpose of Saab Ventures is to invest in small, rapidly emerging companies that fit Saab's core operations. The goal is to help to develop and complement Saab's product portfolio through new key technologies.

Core portfolio

Company	Specialisation	Ownership interest, %
Coldcut Systems AB	Cutting fire extinguishers	29
Saab Perform IT AB	Mobile information systems	100
Opax AS	Intelligent video surveillance	100
Protaurius AB	Mobile ballistic protection	8
R3DM	Military 3D mapping	100 1)

1) The unit is managed by the Dynamics business area.

Spin-offs

Company	Specialisation	Ownership interest, %
Wrap International AB	Spectrum management software	22.6
C3 Technologies AB	3D mapping technology	63
Minesto AB	Tidal energy solution	13
Svenska Tracab AB	Digitizing sports	15
Image Systems	Motion analysis systems	36 2)

2) On 30 December 2010 Saab Ventures reahed an agreement to sell its holding in Image Systems to Digital Vision. The sale is expected to close during the first half of 2011.

Companies that originated from Saab:

• Saab Automobile AB
• Marine Electronics AB
• Airborne Hydrography AB
• MX Composites AB
• Efield AB
• Sanguistech AB
• SMM Medical AB
• HS Memory AB
• Linus AB
• Saab IRS AB
• Traffic Systems AB
• A2 Acoustics AB

R&D AS PERCENT OF SALES

Of which 24 per cent (MSEK 1,203) is financed internally

2009 2008

Of which 25 per cent (MSEK 1,194) is financed internally

Of which 35 per cent (MSEK 1,439) is financed internally

OUR CORE COMPETENCE IS THE ABILITY TO INTEGRATE OUR OWN AND OTHERS' SYSTEMS AND COMPONENTS

Existing Saab technologies

The illustration above depicts some of the technologies, components and systems that Saab integrates into the complex systems and solutions it supplies to customers around the world.

Many of the products have been developed to stand on their own or to be supplied as part of a larger solution.

Support and service as part of the system and solution

The advanced maintenance systems that Saab has developed and supplies to its customers are an important factor for Gripen customers, for example. As a result, support and service costs can be maintained at a highly compeitive level throughout the product lifecycle.

Spin-off technologies from Saab

Saab is constantly creating innovations and products that find applications not only in but also outside our core businesses. This is the reason for Saab Ventures, whose purpose is to create and initially run companies with new products for new applications. Saab has spun off 13 companies since 2001. For more information, see page 23.

Market segments

Saab operates in five different market segments, where needs differ even though the solutions are partly based on the same technologies.

	AIR	LAND
Trends	Growth in military aeronautics is driven by nations – with air forces of various size – that want to re place older generations of fighter aircraft with new ones offering better performance, more flexibility and better overall economic efficiency. A large number of procurements have been postponed due to economic turbulence in the world. Alli ances and political factors play a big role in this market, but requirements to keep defence costs down are likely to make performance and lifecycle costs more important. Military aeronautics is increasingly used in multi national operations on extended flights over long distances. This requires systems that use open architecture. They also have to work with older systems and be upgradeable. Sensors, commu nications and precision weaponry are important. Intelligence systems must be able to integrate large volumes of information from multiple sources and provide effective decision guidance. New types of military operations and technology are also driving demand for training and educa tion. A growing number of countries are procuring support and service for materiel through multi year, full-service commitments. Annual sales in the market segment for unmanned aerial vehicles are expected to grow from around SEK 270 billion to over SEK 340 billion in the next ten years. In the UAV market, sales growth is currently estimated at SEK 25–27 billion per year.	Land combat is a broad segment and one of the fastest growing area of the military market in re cent years. The total market is estimated at SEK 550–580 billion. Based on projected operational needs, we expect the market to grow at a slower rate in the next five-year period. Ongoing and new conflicts, complex conflict zones, the multina tional element and a growing need to operate in urban areas require new strategies, materiel sys tems and technology. We continue to see an increase in multinational mis sions in foreign territory. This requires co-operation between different types of forces and different countries' forces, which in turn increases the im portance of system integration, interoperability, and command and control capabilities. As security threats grow, the need for training does as well.
Saab's position	Saab offers fighter systems, air C4I solutions, un manned aerial vehicles, countermeasures and electronic warfare, avionics solutions, weapon systems, sensors, training solutions and aftermar ket services. Saab is one of very few companies in the world capable of developing advanced fighter systems. Gripen is a competitive single-engine fighter currently in service in five countries. Gripen contracts are highly complex and involve extended commitments, usually with multi-party industrial alliances. Saab's sales in the area amounted to MSEK 10,393 (10,940) in 2010.	Saab has leading positions in many segments of this market, where it offers tactical weapon systems and highly sophisticated surveillance and command and control systems (C4I) as well as solutions for troop protection. The offering includes sensors, signature management and countermeasures, reconnaissance and air defence systems, and training solutions. Saab's sales in the area amounted to MSEK 7,611 (7,239) in 2010.

NAVAL CIVIL SECURITY CIVIL AERONAUTICS

The naval market is generally stable with growing demand for expeditionary and coastal capabilities. More than 90 per cent of global trade is trans ported by sea, which has made the protection of trade flows a higher priority, including for naval units. For navies and coast guards, the trend is toward broader-based industrial commitments with greater demand for integration and lifecycle solutions. At the same time, the growing number of international alliances makes the ability to act far from home – e.g., with advanced am phibious assault ships – more important. Public private partnerships are also becoming more common. Moreover, there is growing interest in long-endurance ships with smaller crews, where sensors and combat management are the highest priority. The total naval market is estimated at SEK 300– 370 billion per year. An extensive naval build-up has begun in the Middle East and Southeast Asia, where China's growing fleet is a driving force.	Investments to protect people, critical facilities and large flows from terrorism and sabotage is on the rise worldwide, which makes civil security one of Saab's most dynamic market segments. The continued growth and increased complexity of large cities is placing tougher demands on sus tainability, flow efficiency and interoperability. Homeland security spending has skyrocketed in the last decade, and is estimated at SEK 360 billion in 2011 in the US alone. This is in addition to spending on surveillance and control as part of municipal and corporate security budgets. Pro tection of critical infrastructure mainly involves ports, airports and energy facilities. The market currently generates about SEK 225 billion a year and is anticipating annual growth of 10–11 per cent per year, divided equally between protection for borders, ports, energy systems and airports. Growth is driven by new laws and the realisation of how costly disruptions to society's various flows can be.	The civil aeronautics market is generating long term growth of about 5 per cent, although this fluctuates greatly with the economy. Commercial carriers have struggled through a very difficult pe riod, but are now in a recovery phase. This has somewhat delayed orders for aircraft manufactur ers. The total market for new commercial aircraft is estimated at SEK 600 billion a year. The industry is capital-intensive with long development cycles and has consolidated into oligopolistic structures. The market consists of four segments: business jets, regional aircraft, single aisle aircraft and wide bodies/large aircraft. The market for large single aisle and wide body aircraft is dominated by Boeing of the US and Europe's Airbus, although they are now being challenged by new players from China in particular. The major manufacturers are integra tors, i.e., they are responsible for specifying and supplying the aircraft. The aircraft themselves are developed and produced in large part by interna tional partners. The new aircraft models also contain larger modules than before, with systems content integrated into the structure. Aircraft capacity utilisation is again on the rise, and high fuel prices and new environmental requirements are strengthening demand for fuel efficient models. Delivery volumes are increasing significantly as new aircraft such as the B787 and A350 are introduced on the market.
Saab's offering includes sensors, command and control, weapon and communication systems, underwater and infrastructure security, counter measures and electronic warfare, and simulation and training. We have a strong position in radar and early warning, command, control and com munication systems (C4ISR), tactical weapons and underwater systems. Saab's sales in the area amounted to MSEK 2,278 (2,181) in 2010.	Saab's civil security offering is focused on moni toring and situational control as well as ensuring efficient flows, with an emphasis on airports and air travel, ports and shipping, and emergency re sponse planning. The offering is based on Saab's core competence as a systems integrator. Though still small in size, its positions are good in Sweden, Central Europe, South Africa and Australia. Saab's invoicing in the area totalled MSEK 1,427 (1,718) in 2010.	Saab is a supplier to the world's leading aircraft manufacturers, including Boeing and Airbus, mainly of durable, lightweight aerostructures, avionics, operating systems, structure and sys tem integration, and support solutions. With a track record of having built more than 4,000 air craft, Saab has experience with the entire devel opment cycle, from concept studies to certified products. Saab's sales in the area amounted to MSEK 1,348 (1,374) in 2010.

Markets by region

Saab has operations on every continent, but its scope and presence differ. In the same way, we prioritise various parts of our offering depending on political and market conditions.

	EUROPE	MIDDLE EAST AND AFRICA
Trends	Defence spending is expected to decrease or remain stable in the next five-year period. Most European governments are slashing spending to meet the EU's limits on budget deficits and debt levels, which is placing tight pressure on defence appropriations. Greece, Spain and Italy are ex amples of such countries. Even the UK, Germany and France, which together account for about 10 per cent of global military spending, are adapting their defence budgets in various ways to fiscal constraints. Another country that is reas sessing its defence budget is our largest market, Sweden. Civil security spending is expected to continue to rise at the same rate as in previous years, i.e., by more than 10 per cent per year.	The Middle East is among the regions with the biggest increases in military spending during the last decade, and this is expected to continue. Saudi Arabia is the region's biggest military power, with about 3 per cent of total global mili tary spending in 2009. Southern Africa is ex pected to have a slower growth rate than the rest of the continent. The civil security market in the Middle East in particular is growing, including in areas such as coastal and maritime security. There is also a large potential for 3D Mapping as a result of new found interest in mapping the region.
Saab's position	Sweden is Saab's largest and most important market, accounting for 38 per cent (31) of total sales in 2010. Saab's largest markets in Europe in the last five-year period are then the UK, Germany, Finland and France. Europe accounted for about 59 per cent (55) of total sales.	Saab has a solid market position in the Middle East as a supplier of naval command and control systems, among other things, to several south ern Gulf states. Saab is a world leader in automated 3-D map ping, and work is under way to market these products in the Middle East. The African continent accounted for about 12 per cent (14) of total sales in 2010.

THE UN – A NEW AND GROWING CUSTOMER

Within the framework of its Global Field Support Strategy, the United Nations (UN) is working to make its missions around the world more sustainable from an economic, ecological and security standpoint. This is being done with standardised modules for camps that can quickly be assembled. Saab is seeking a close co-operation with Swedish authorities and local partners to develop these modules and expand capacity primarily in East Africa. The key components in Saab's offering are preventive maintenance of equipment and training for engineering troops, which it provided in 2010.

"With growing procurement budgets and a clearer focus on sustainable solutions with detailed maintenance agreements, the UN and other multilateral organisations represent a growth niche for Saab," said, Marie Trogstam, who is responsible for developing Saab's UN relations.

ASIA AUSTRALIA NORTH AND SOUTH AMERICA

After China, Japan is the country in the region with the highest defence spending, followed by India and South Korea. The region is expected to increase its military spending in the next five-year period. This is partly due to the financial stability of a number of countries and partly to China's conspicuous efforts to become a military super power. Spending on civil security has also increased dramatically as the economies in the region and their infrastructure needs have grown. This trend is also expected to continue.	Australia ranked 14th in defence expenditure in 2009, or 1.2 per cent of the global total. The country is expected to remain at this level, or possibly decline slightly, in the next five-year period. The civil security market, on the other hand, is expected to grow.	The US accounts for nearly half of global defence spending, or about USD 661 billion. US defence spending is expected to continue to rise in the short term, but decrease overall in the next five years. This will depend on developments in Afghanistan and Iraq as well as the conse quences of the financial crisis, which continue to affect the US fiscal situation. Homeland security spending has increased sharply in the last dec ade today. With threats still looming against civil society, this market is expected to continue to grow at a rapid pace.
		In South America, Brazil spent the most on its defence in the region, accounting for 1.7 per cent of the global total in 2009. Canada accounted for 1.2 per cent of the global total in the same year.
India and Thailand are two of Saab's most impor tant markets in Asia. In 2010, Saab signed a co operation agreement with Mahindra Tech of India and a letter of intent to become a part owner and strategic partner of the Thai company Aviasat com, which develops and supplies products for the Thai Armed Forces. Through the agree ments, Saab has consolidated its position in these two markets. Asia accounted for about 15 per cent (19) of total sales in 2010.	Saab has had a strong local position in the Aus tralian market for many years with sales in several different segments. Australia and other countries accounted for 5 per cent (4) of total sales in 2010.	North America is one of Saab's key markets with high growth potential. During the last year, Saab has therefore invested in further strengthening its position and presence in the region. North Amer ica currently accounts for about 9 per cent (8) of Saab's sales. In South America, Brazil is Saab's most important growth market.

SOUTH AMERICA IS A FUTURE MARKET

Saab has good references in Brazil, including having sold five ERIEYE aircraft that are being used for surveillance and to fight the drug trade in Amazonas State. The economy is growing, and today Brazil is a strong, stable country leading the way for the entire Latin American region. This is underscored by the fact that it will play host to both the World Cup in 2014 and the Olympics in 2016. Mexico, Peru, Chile and Colombia are other countries with stable economies – and are potentially important future markets for Saab.

"Interest in various Saab systems is strong here, especially for various types of surveillance solutions such as the ERIEYE system that Brazil has today," said Bo Torrestedt, Vice President and Head of Region Latin America & Sub Saharan Africa.

NEW TECHNOLOGY CREATES GROWTH OPPORTUNITIES

Traffic control is more efficient with Remotely Operated Towers.

FIRST IN THE WORLD TO OFFER REMOTE AIR TRAFFIC CONTROL

Saab is the first company in the world to supply a remote air traffic control system, which will be installed at the Sundsvall and Örnsköldsvik airports in Sweden.

"This represents a paradigm shift for air traffic control. It is fantastic that we are the first in the world to offer this. It demonstrates our ability to bring the industry and users together to create change in a global operating environment," said Per Ahl, sales manager for Saab's air traffic control solutions.

Basically, remote air traffic control uses cameras and sensors installed around an airport. Everything they record is linked in real time to the air traffic control centre and projected onto a 360-degree view. The controller there monitors and guides air traffic just as he would if he were sitting in a normal air traffic control tower.

The system is scheduled to be installed and tested in 2011 before being placed in operation later in the year or in 2012. At that point, air traffic in Sundsvall and Örnsköldsvik will be controlled from a single control centre in Sundsvall.

SWEDISH DEFENCE FORCES USE SAAB'S THREE-DIMENSIONAL MAPS ON NATIONAL AND INTERNATIONAL MISSIONS

The technology in Rapid 3D Mapping is based on Saab's more than 40 years of experience in image processing for target seekers and expertise in navigation systems. Through its close co-operation with business area Dynamics involving other image processing companies, Saab Ventures created an early version of the technology and in 2008 formed C3 Technologies (C3). C3 is a subsidiary of Saab, which in turn licenses the capability to C3 for applications in the civil market.

C3 focuses on consumer markets and quickly proved successful with Internet yellow pages such as hitta.se, Eniro.se, Finns.no, Yell.com.

C3 has quickly transformed the technology based on actual customer requirements. In early 2010, a new business development team with a focus on military applications, R3DM, was established.

Mapping is done with a technology which generates detailed, realistic 3-D models from aerial photographs. Each pixel of every 3-D model contains geographically accurate information in terms of longitude, latitude and height. The models are then stored in a geographical database, which is easy to

access and use. All data are metrically correct, which means that the user receives immediate information and can, for example, measure distances directly in an updated map with the help of the graphic user interface.

The technology is disruptive compared with current options and has excellent market potential. Today's market for commercial 2-D maps is valued in the range of SEK 10 billion annually.

In autumn 2010, the Swedish Defence Materiel Administration (FMV) ordered 3-D maps, which demonstrates that Saab's Rapid 3D Mapping meets the operational needs of defence authorities today and in the future.

Today over 100 cities around the world and large military areas of interest have been mapped using the technology.

By year-end 2010, C3 and R3DM together had received orders of about MSEK 200.

For more information, see pages 20 and 23.

INTELLIGENT VIDEO SURVEILLANCE

Intelligent video monitoring is another area Saab Ventures is investing in, with an emphasis on the security and traffic monitoring markets. In spring 2010, Saab purchased the remaining shares in video analysis specialist Opax AS, whose employees and technology were transferred to the Dynamics business area last autumn. Opax is still a small company, but with a strong product portfolio and a world-class technical expertise. It is developing an intelligent video analysis system that secures critical infrastructure through reliable

perimeter surveillance. Opax's technology originated from military applications and is being used in demanding outdoor environments around the world. In 2009, Opax received the best CCTV product of the year award by the trade journal Detektor International in connection with the prestigious Detektor International Awards ceremony in Stockholm.

In 2011, the focus will remain on commercialising the technology.

FINANCIAL REVIEW 2010

Saab AB (publ.), corporate identity no. 556036-0793, with its registered address in Linköping, Sweden. The address of the company's head office is Kungsbron 1, Stockholm, with the mailing address Box 70 363, SE-107 24 Stockholm, Sweden, and the telephone number +46 8 463 00 00.

Saab has been listed on NASDAQ OMX Stockholm since 1998 and on the Large Cap list since October 2006. The principal owner is Investor AB, with 30 per cent of the shares, corresponding to 39.5 per cent of the votes.

The total number of shares in the company is 109,150,344, distributed between 1,907,123 Series A shares with ten votes each and 107,243,221 Series B shares with the one vote. At year-end, a total of 4,432,615 Series B shares had been repurchased to guarantee the Group's share matching plan. The repurchased shares are held as treasury shares.

In accordance with the Swedish Annual Accounts Act, Saab has prepared a corporate governance report separate from the annual report. It can be found in this document on pages 126–132. The corporate governance report contains the Board of Directors' report on internal control of financial reporting, which includes information for both the Parent Company and the Group. See pages 131–132 in this document.

OPERATIONS

One of the world's leading high technology companies, Saab offers products, solutions and services for military defence and civil security. In 2010, we had customers in over 90 countries, while research and development are principally carried out in Sweden. We are primarily active in Europe, South Africa, Australia and the US. Since 1 January 2010, we are organised in five business areas: Aeronautics, Dynamics, Electronic Defence Systems, Security and Defence Solutions, and Support and Services.

In addition to the business areas, Corporate comprises Group staff and departments and secondary operations. It also includes Combitech and the leasing fleet of Saab 340 and Saab 2000 aircraft.

LONG-TERM FINANCIAL OBJECTIVES

In 2010, an analysis was made of Saab's long-term goals. In light of the strategic priorities, the long-term financial goals communicated externally were revised slightly. The long-term financial goals now

consist of goals for organic sales growth, operating margin after depreciation and amortisation (EBIT) and the equity/assets ratio.

The previous goals for the operating margin before depreciation/ amortisation (EBITDA) and the return on equity will not be reported as of 2011.

LONG-TERM FINANCIAL GOAL PERFORMANCE IN 2010 Growth

Goal: This goal was previously the same as in the new long-term goal formulation. Our organic sales growth will average 5 per cent per year over a business cycle.

Result 2010: In 2010, organic sales growth was -1 per cent (4).

Operating margin

Goal: We had two margin goals in 2010, both formulated as an average over a business cycle. The goal for operating margin after depreciation/amortisation was at least 10 per cent and it remains the same in the new long-term goal formulation. The goal for the operating margin before depreciation/amortisation is at least 15 per cent.

Result 2010: The operating margin after depreciation/amortisation (EBIT) in 2010 was 4.0 per cent (5.6). Adjusted for non-recurring items, the operating margin was 6.5 per cent (5.4). The operating margin before depreciation/amortisation (EBITDA) was 9.0 per cent (10.5).

Return on equity

The ROI goal in 2010 was an average 15 per cent. In 2010, we reached a return of 4.1 per cent (7.0).

Equity/assets ratio

Our goal in 2010: was an equity/assets ratio exceeding 30 per cent, which still remains in the new goal formulation. At year-end 2010, the equity/assets ratio was 39.1 per cent (35.1).

Comment on the 2010 results

Saab's order bookings increased in 2010 by 43 per cent til MSEK 26,278 (18,428). The increase was due in large part to several orders for the further development of the Gripen system received from FMV and a major order for an airborne surveillance system. International customers accounted for 66 per cent (62)of order bookings.

The order backlog amounted to MSEK 41,459 (39,389). Sales fell by 1 per cent, amounting to MSEK 24,434 (24,647). Operating income amounted to MSEK 975 (1,374), corresponding to a margin of 4.0 per cent (5.6). Adjusted for non-recurring items of MSEK -602 (50), operating income amounted to MSEK 1,577 (1,324), corresponding to an adjusted operating margin of 6.5 per cent (5.4).

DIVIDEND AND DIVIDEND POLICY

Proposal for 2011 dividend and dividend policy

Saab's long-term dividend objective is to distribute 20–40 per cent of net income over a business cycle to shareholders. For 2010, the Board of Directors proposes a dividend of SEK 3.50 per share (2.25).

OUTLOOK 2011

In 2011, we estimate that sales will decline slightly compared to 2010. The operating margin is expected to increase slightly in 2011

compared to the adjusted operating margin in 2010.

LONG-TERM FINANCIAL GOALS AS OF 2011

Growth

• Over a business cycle, our organic sales growth will average 5 per cent per year.

Operating margin

• The operating margin after depreciation/amortisation (EBIT) will be at least 10 per cent.

Equity/assets ratio

• The equity/assets ratio will exceed 30 per cent.

IMPORTANT EVENTS IN 2010

• In March, Saab received an order from the Swedish Defence Materiel Administration (FMV) for the development of the existing Gripen fleet. The order value amounts to SEK 2 billion, split over four years.
• During the second quarter, the Board of Directors received requests from shareholders to convert 3,347,180 Series A shares in Saab AB to Series B shares. As a result of the conversion, the total number of votes in the company was reduced from 156,439,071 to 126,314,451. The total number of registered shares in Saab AB is 109,150,344, of which 1,907,123 are Series A shares and 107,243,221 are Series B shares.
• The contract between Saab and OKG Aktiebolag on the delivery of perimeter security for the Oskarshamn nuclear power plant was terminated. Saab's 2010 earnings were charged with expenses of MSEK 150 related to the terminated contract.
• In September, Håkan Bushke took office as the new President and CEO of Saab. He was previously President of E.ON Sweden and CEO of E.ON Nordic. The previous President and CEO, Åke Svensson, remains a member of Saab's Board of Directors.
• In October, Saab received an order for an airborne surveillance system worth more than SEK 4.5 billion. The order concerns the delivery of the Saab 2000 AEW&C (Airborne Early Warning & Control) system, which comprises a Saab 2000 aircraft equipped with the advanced ERIEYE radar system. The contract also includes ground equipment, logistics and support services.
• As a part of a long-term strategic adjustment to changing market conditions, Saab decided in November to reorganise the operations of the Dynamics business area. Notice was served to more than 200 employees. Moreover, efficiency improvements were launched in the Electronic Defence Systems business area and in Corporate functions. Costs of MSEK 519 related to these measures was charged against operating income in the fourth quarter 2010.
• At the end of the year, Saab received an order from FMV for six Gripen aircraft intended for the Royal Thai Air Force. The order is worth about SEK 2.2 billion.

BUSINESS AREAS

Since 2010, Saab's operations are divided into five business areas: Aeronautics, Dynamics, Electronic Defence Systems, Security and Defence Solutions, and Support and Services. The five business areas work together, so

that the Group's competencies are utilised as effectively as possible. In addition, the subsidiary Combitech provides consulting services.

Description of business area Key figures

Aeronautics

These operations include the development of civil and military aviation technology at a high level. The product portfolio includes the Gripen fighter and Unmanned Aerial Systems (UAS). Aeronautics also manufactures aircraft components for Saab's own aircraft as well as passenger aircraft produced by others.

Dynamics

These operations comprise a product portfolio of various types of advanced weapon systems such as support weapons, missiles, torpedoes, Remotely Operated Vehicles (ROVs) and signature management systems that make it more difficult for various types of sensors to detect and identify people or objects.

Electronic Defence Systems

The purpose of these operations, which are based on Saab's extensive expertise and expertise in radar, electronic warfare and avionics, is to provide solutions to detect, localise and protect against various types of threats. The product portfolio includes air, naval and land-based sensor and radar systems, self-protection systems for aircraft, helicopters, ships and vehicles, and defence electronics.

Security and Defence Solutions

These operations address both the military and civil security market with a product portfolio of C4ISR (computerized command, control, communications and intelligence) systems, airborne early warning systems, civil security solutions, training and simulation systems, and solutions for telecom operators.

Support and Services

These operations offer reliable, cost-effective service and support for all of Saab's markets. This primarily includes integrated support solutions, technical maintenance and logistics, and products, solutions and services for military and civil missions in locations with limited infrastructure.

Combitech*

Combitech is a wholly owned subsidiary of Saab and a leading technology and operations consultancy. By combining technology with environmental and security thinking, Combitech offers its customers unique and effective solutions.

*Combitech is reported as part of Corporate

MSEK	2010	2009
Sales	6,741	7,571
Operating income	191	6
Adjusted operating margin, %	4.3	1.4
Order bookings	6,901	3,417
Order backlog at year-end	15,636	15,476
Operating cash flow	30	-434
MSEK	2010	2009
Sales	4,741	4,580
Operating income	322	269
Adjusted operating margin, %	12.4	9.8
Order bookings	3,312	3,133
Order backlog at year-end	5,546	6,980
Operating cash flow	1,044	369
MSEK	2010	2009
Sales	4,354	4,670
Operating income	99	24
Adjusted operating margin, %	4.3	0.5
Order bookings	5,494	2,625
Order backlog at year-end	8,240	7,159
Operating cash flow	594	506
MSEK	2010	2009
Sales	6,210	5,800
Operating income	137	278
Adjusted operating margin, %	2.8	4.8
Order bookings	6,647	6,045
Order backlog at year-end	8,434	7,746
Operating cash flow	1,066	-217
MSEK	2010	2009
Sales Operating income	3,403 351	3,564 410
Adjusted operating margin, %	11.8	12.1
Order bookings	4,124	4,057
Order backlog at year-end	4,743	4,011
Operating cash flow	894	81

AERONAUTICS

Operations include the development of civil and military aviation technology at a high level. The product portfolio includes the Gripen fighter and Unmanned Aerial Systems (UAS). Aeronautics also manufactures aircraft components for Saab's own aircraft as well as passenger aircraft produced by others.

SALES, INCOME AND ORDERS

Orders received

Orders received in 2010 included an order from FMV for six Gripen aircraft intended for the Royal Thai Air Force and several orders concerning development of the Gripen system, including an order for the integration of the active radar-guided Beyond Visual Range (BVR) missile, Meteor. An order for a Tactical Unmanned Aerial Vehicle system (TUAV) was also received from FMV. Airbus received orders related to the A380 programme that resulted in an increase in order bookings of MSEK 480 for Aeronautics in 2010.

Orders received where the order sum was more than MSEK 100 represented 89 per cent (79) of total order bookings.

Sales

Sales decreased by 11 per cent compared to 2009. The decrease is mainly related to lower project activity levels in major contracts, such as the Gripen aircraft deliveries to Thailand and South Africa, compared to last year.

Markets outside Sweden accounted for 44 per cent (60) of sales in 2010.

Income and margin

Profitability in 2010 improved compared to 2009 due the effects of the reorganisation of Aeronautics, announced lay-offs and the Billion+ programme.

Total restructuring charges of MSEK 98 were taken in 2010.

Operating cash flow

Operating cash flow in 2010 improved mainly as a result of advances received in major projects.

Some projects entered the final stages of completion in 2010. When they are completed, it will lead to a reduction in customer advances and a lower cash flow generation.

DYNAMICS

Operations comprise a product portfolio of various types of advanced weapon systems such as support weapons, missiles, torpedoes, Remotely Operated Vehicles (ROVs) and signature management systems that make it more difficult for various types of sensors to detect and identify people or objects.

SALES, INCOME AND ORDERS

Orders received

Orders received in 2010 included an order for the air defence system RBS 70 from Finland. Contracts were signed for components to the Carl-Gustaf man-portable weapon system, and France placed an order for the anti-tank weapon AT4CS. Saab also received a significant order for multispectral camouflage products and services. An order was received from FMV for the generation and subsequent delivery of 3-dimensional (3D) maps to the Swedish Armed Forces for use in national as well as international operations.

Orders received where the order sum was more than MSEK 100 represented 61 per cent (20) of total order bookings.

Sales

Sales increased mainly as a result of a higher activity level within the weapons system area. Markets outside Sweden accounted for 81 per cent (86) of sales in 2010.

Income and margin

Profitability in 2010 increased mainly as a result of the effects from the Billion+ programme. Due to an increased level of deliveries at the end of the year, the adjusted profitability increased in the fourth quarter. In the fourth quarter, a restructuring charge of MSEK 278 was recorded related to the restructuring measures announced on 10 November 2010, where Dynamics will terminate its operations in Eskilstuna, Sweden, in 2012 and part of the remaining production will be moved to Karlskoga in 2011. At the same time it was announced that the underwater vehicles operations, based in Motala, Sweden, will be integrated with UK-based Saab Seaeye Ltd. Under the condition that the ongoing discussions with potential clients lead to a longterm agreement, remaining parts of the operations will be integrated with Dynamics in Linköping. As a consequence of this change all employees in Motala were served notice in December 2010.

A property holding company was divested in 2010 for MSEK 133, which impacted cash flow positively. The transaction generated a capital gain of MSEK 12.

Operating cash flow

Operating cash flow in 2010 was positive due to deliveries and major milestone payments.

OPERATING INCOME

ELECTRONIC DEFENCE SYSTEMS

The purpose of these operations, which are based on Saab's extensive expertise and experience in radar, electronic warfare and avionics, is to provide solutions to detect, localise and protect against various types of threats. The product portfolio includes air, naval and land-based sensor and radar systems, self-protection systems for aircraft, helicopters, ships and vehicles, and defence electronics.

SALES, INCOME AND ORDERS

Orders received

Orders received in 2010 increased strongly as a result of the orders from FMV for the development of the Gripen system and strong demand in the radar business, where several orders were received for the GIRAFFE system (e.g., from Lockheed Martin and the Australian Defence Material Organisation). Orders were also received for the weapon locating system ARTHUR, which has been delivered to Czech Republic, Denmark, Greece, Norway, Spain, Sweden and the UK. The increase was also due to an order received for an airborne surveillance system, including the advanced ERIEYE radar system.

Orders received where the order sum was more than MSEK 100 represented 58 per cent (49) of total order bookings.

Sales

Sales in 2010 decreased mainly as a result of delays in major projects compared to 2009. Markets outside Sweden accounted for 62 per cent (67) of sales in 2010.

Income and margin

Despite structural costs, profitability improved in 2010. A major part of the improvement resulted from a claim related to a finalised project where Saab has reduced its estimated risk share.

In the fourth quarter, a restructuring charge of MSEK 89 was recorded for restructuring measures announced on 10 November 2010. In connection with this, Electronic Defence Systems announced that its sites in Gothenburg will be consolidated in 2010 and 2011. Microwave and antenna construction in Järfälla will also be terminated, while component construction and production within the microwave area are consolidated in Gothenburg and Centurion, South Africa. In addition, all operations in the Stockholm area will be merged in Järfälla.

Operating cash flow

Operating cash flow improved in 2010 due to project milestone deliveries.

SECURITY AND DEFENCE SOLUTIONS

These operations address both the military and civil security market with a competitive product portfolio of C4ISR (computerized command, control, communications and intelligence) systems, airborne early warning systems, civil security solutions, training and simulation systems, and solutions for telecom operators.

SALES, INCOME AND ORDERS

Orders received

Orders received in 2010 included a billion-kronor order for delivery of the Saab 2000 AEW&C (Airborne Early Warning & Control) system, including the advanced ERIEYE radar system.

An order was received within the civil security area from the Prague Transport Company (PTC) for the upgrade of the security system in Prague's subway. Furthermore, Saab and the Swedish company LFV signed a contract for remote air traffic control.

Orders of about MSEK 220 were cancelled as a result of the terminated contract with OKG Aktiebolag.

Orders received where the order sum was more than MSEK 100 represented 40 per cent (41) of total order bookings.

Sales

Sales increased in 2010 as a result of higher project activity levels and a good order intake, especially in Training and Simulation. Lower revenue recognition for the terminated contract with OKG Aktiebolag reduced sales by about MSEK 100 in 2010 compared to 2009. Markets outside Sweden accounted for 77 per cent (74) of sales in 2010.

Income and margin

In 2010, profitability was negatively impacted by costs of about MSEK 310 mainly related to a terminated contract with OKG Aktiebolag. The charges included a write-down of capitalised development costs of MSEK 20.

The Maritime and Commercial Court in Copenhagen issued a judgment dismissing the Danish Defence Acquisition and Logistics Organization's (DALO) claim against Saab in September 2010. DALO was instead ordered to pay Saab damages plus interest and cover Saab's court costs. Income of approximately MSEK 50 was recorded as a result. DALO has filed an appeal against the judgment.

In the fourth quarter, a restructuring charge of MSEK 21 was recorded for the restructuring measures announced on 10 November 2010 related to initiatives aimed at lowering overhead costs.

Operating cash flow

Operating cash flow improved due to milestone payments received, mainly related to major airborne surveillance system orders.

SUPPORT AND SERVICES

These operations offer reliable, cost-effective service and support for all of Saab's markets. This primarily includes integrated support solutions, technical maintenance and logistics, and products, solutions and services for military and civil missions in locations with limited infrastructure.

SALES, INCOME AND ORDERS

Orders received

Orders received increased in 2010 driven by orders for the Gripen system and airborne surveillance systems within Saab and by smaller orders received mainly in Sweden.

An eight-year agreement was also signed with Scandinavian Air Ambulance Holding AB, where Saab will take over responsibility for for its helicopter and aircraft operations starting 2011.

Orders received where the order sum was more than MSEK 100 represented 32 per cent (25) of total order bookings.

Sales

Sales in 2010 decreased as a result of lower demand in the regional commercial aviation market and delays in some major projects compared to 2009.

Markets outside Sweden accounted for 26 per cent (28) of sales during 2010.

Income and margin

Profitability decreased in 2010 compared to 2009 mainly as a result of a restructuring charge of MSEK 50 recorded in the fourth quarter. This is related to initiatives aimed at lowering overhead costs as part of the restructuring measures announced on 10 November 2010.

Operating cash flow

Operating cash flow improved significantly due to milestone payments received from large projects and an improved level of working capital.

COMBITECH*

Combitech is a wholly owned subsidiary of Saab and a leading technology and operations consultancy. By combining technology with environmental and security thinking, Combitech offers its customers unique and effective solutions.

CORE COMPETENCIES AND OFFERING

Combitech's consultants have cutting-edge competence in information security, systems security, logistics, systems integration, systems development, communication and mechanics. By combining them, Combitech can offer knowledge and expertise in a number of hightech areas. In addition, Combitech provides a wide range of skillsbased courses for its customers.

CUSTOMERS

Combitech's customers are companies in need of complex security solutions, government agencies responsible for protecting society's flows and enterprises in aviation, defence, telecom and other industrial segments.

*Combitech is reported as part of Corporate.

HISTORY

Combitech AB was formed in 2006 through a merger of Combitech Systems and parts of AerotechTelub, both wholly owned by Saab since the early 2000's. In 2007, Saab acquired Caran Saab Engineering, which was incorporated into Combitech.

COMPANY FACTS

Combitech currently has around 800 employees, over 20 percent of whom are women. The company has grown strongly in recent years largely as a result of acquisitions and in 2010 had sales of about MSEK 900.

Combitech operates in around 20 locations in Sweden. It also has offices in Norway and Germany and is represented in Brussels.

SALES BY SEGMENT 2010, % THE HISTORY OF COMBITECH

OTHER INFORMATION

CORPORATE

Corporate reported operating income of MSEK -125 (387). In 2009, operating income was positively impacted by a revaluation of the remaining risks associated with the regional aircraft portfolio of MSEK 350.

Operating income includes restructuring costs of MSEK 65 related to efforts to lower the Group's administrative and overhead costs announced on 10 November 2010.

It also includes a capital loss of MSEK 22 from June 2010 when Saab divested 25 per cent of the votes, corresponding to five per cent of the capital, in Saab South Africa (Pty) Ltd to the South African holding company Sekunjalo Investment Ltd. Operating income also includes a capital gain of MSEK 24 from the divestment of 16 per cent of the capital in Hawker Pacific in December 2010.

THE BILLION+ PROGRAMME

At the start of 2008, Saab initiated a programme aimed at improving internal efficiency called the "Billion+ programme". This was expanded in 2009 to include a programme where additional costs cuts of MSEK 500 would be achieved through a reduction in the workforce of about 500 employees, mainly through attrition. These two measures were initiated to ensure that Saab will have the capability to make the necessary investments going forward to sustain its competitiveness. The target was to reduce the cost base by about SEK 1.5 billion over a three-year period, 2008–2010. To deliver on this target, Saab aimed at reducing its cost base by about MSEK 650 in 2010, which was achieved. In 2010, the cost reductions contributed about 3 percentage points to the reported operating margin.

About 70 per cent of the cost reduction over the three year 2008– 2010 has been generated by reducing the cost of goods sold.

A major part of the cost reductions have been achieved through an aligned and improved development process, increased production efficiency and reduction of sites as well as lower sourcing and travel costs.

GUIDELINES FOR REMUNERATION AND OTHER BENEFITS TO MEMBERS OF SENIOR MANAGEMENT

Senior management remuneration

By Swedish law, the Board of Directors must prepare guidelines prior to the Annual General Meeting for determining the salaries and other remuneration to the President and CEO and other members of the senior management of the company. The 2010 Annual General Meeting adopted the proposal presented by the Board containing guidelines for such remuneration to Group Management. This group comprises the President and CEO and other members of Group Management and is identified on Saab's website, www.saabgroup.com.

Saab offers market terms, enabling it to recruit and retain senior executives. To the extent possible, remuneration structures are characterised by predictability with respect to the cost for the company and the benefits of the employee and are based on factors such as position, competence, experience and performance. Benchmarking is used relative to comparable industries and markets.

The Board has the right to deviate from the guidelines, if there are reasonable rounds in an individual case.

The Board's proposal is based mainly on agreements in effect between Saab AB and each executive. No Board fees are paid for participation by members of Group Management on the boards of the business units.

The Remuneration Committee is responsible for development and review of remuneration and other employment terms for Group Management.

Remuneration

Cash remuneration consists of fixed and variable salary. Fixed salaries are reviewed annually as per 1 January for the entire Group Management, while the variable component is governed by an agreement reached annually with each executive.

The variable salary for the President is based on the extent to which pre-determined quantitative and qualitative goals are reached. Quantitative goals primarily apply to the rest of Group Management. The variable component is maximised at 50 per cent of the fixed salary of the President and between 25 per cent and 35 per cent of the fixed salary of the rest of Group Management.

All senior executives are entitled to participate in the Performance Share Plan approved by the 2010 Annual General Meeting. Participants in this program are not covered by the general Share Matching Plan approved by the 2010 Annual General Meeting.

All executives in Group Management have the right to a company car according to Saab's regulations.

Pension

For pension agreements entered into after 1 January 2005, the pension age is 62. In addition to the ITP agreement, the pension is part of a defined contribution plan where provisions are made annually. For the President, the provision is equivalent to 35 per cent of his fixed salary. For other executives, the percentage is based on the regulations of the so-called Saab plan. The percentage is dependent on the number of years remaining until retirement upon joining the plan.

Other terms

All executives in Group Management, including the President, may terminate their employment with six months' notice. If the employment ends at Saab's initiative, the notice period is also six months, after which severance is paid for one year. One additional annual salary may be payable if no new employment has been obtained in the first 18 months.

For employment agreements entered into after 1 January 2005, if employment terminates at Saab's initiative the maximum severance pay is 18 months, in addition to the six-month notice period.

In both cases, termination pay and severance pay will be deducted against income from other employment during the corresponding time.

Saab had no other incentive programs during 2010 for the Group Managment other than those described above.

THE BOARD OF DIRECTORS' PROPOSAL FOR GUIDELINES FOR REMUNERATION OF SENIOR EXECUTIVES TO APPLY AS OF THE NEXT ANNUAL GENERAL MEETING

Background and reasons

The Remuneration Committee has evaluated the application of the guidelines for remuneration for senior executives of Saab that were resolved at the Annual General Meeting in 2010 and the current remuneration structures and remuneration levels in the company.

The Remuneration Committee has thereby analyzed and evaluated the effectiveness and relevance of the short-term variable remuneration (Short Term Incentive, "STI") for senior executives. Saab's operations are mainly characterized by technically advanced products and systems. They are marketed, further developed, produced and maintained during long periods of time, in some cases three to four decades, and generally entail substantial investments and long-term customer relations all over the world. The Remuneration Committee's evaluation shows that short-term quantitative and qualitative targets in Saab's operations are difficult to evaluate and measure. Long-term projects can only to a very limited degree be affected by an individual in the short term. The Remuneration Committee considers that it is important that senior executives have a long-term view and a long-term commitment in the company's operations and profits, and that therefore a long-term incentive ("LTI") is especially well suited to Saab and its shareholders.

The evaluation of the Long-Term Performance Share Plan has shown that the level of enrollment has decreased in the most recent programs. The conclusion of the evaluation is that the Performance Share Plan should be amended in order to achieve its purpose and have a positive effect on business and thus counterbalance the costs of the program.

As a result of the evaluation of the total compensation package for senior executives, the Remuneration Committee proposes to discontinue with the STI and replace them with revised long-term incentive programs together with an adjusted fixed salary.

The suggested revision of the long-term incentive programs in principal means that the number of shares that can be earned in the Performance Share Plan is reduced by one share and is replaced with one matching share without performance requirement. The savings amount allowed in the Performance Share Plan is maximized to 7.5 per cent of the gross salary. However, of the 7.5 per cent, only an amount of maximum 5 per cent of the gross salary can be the basis for allocation of matching shares. Technically this revision is accomplished by participants in the Performance Share Plan also enrolling in the Share Matching Plan that is open to all employees. The total savings amount however can never exceed 7.5 per cent of the gross salary.

The Remuneration Committee further proposes that the fixed salary for senior executives is adjusted in such a way that the adjustment will constitute reasonable compensation for the future loss of remuneration from the STI considering the historical outcome of such remuneration.

Proposal for guidelines

In light of the above background and reasons, the Board of Directors therefore proposes that the guidelines for remuneration of senior executives are changed.

In respect of pensions, other benefits and miscellaneous terms, the guidelines are unchanged from 2010 except for minor linguistic adjustments.

The new guidelines are proposed to have the following wording regarding fixed and variable remuneration, remuneration to members of the Board of Directors and Long-Term Incentive Programs 2011. The guidelines are proposed to apply from the Annual General Meeting 2011. In terms of fixed salary, the guidelines shall apply from 1 January 2011.

Fixed remuneration

Cash remuneration shall consist of fixed salary. The fixed salary shall be reviewed annually as per 1 January for all members of the Group Management. The fixed salary shall be at market terms and based on factors such as position, competence, experience and performance.

Variable remuneration

It is important that senior executives have a long-term view and a long-term commitment in the company's operations and profits. Therefore a long-term incentives are especially well suited to Saab and its shareholders.

The President and CEO and senior executives are entitled to participate in the long-term incentive programs as resolved by the Annual General Meeting.

In extraordinary cases, agreements of a one-time nature for variable cash remuneration may be made provided that such agreements are made solely on an individual base for recruitment or retention purposes only, or as compensation for extraordinary efforts beyond the individual's ordinary assignment. Such remuneration shall never exceed the amount of the fixed annual salary and shall not be paid more than once a year per individual. Resolutions on such cash remuneration shall be made by the Board based on a proposal from the Remuneration Committee.

Variable cash remuneration shall not be paid in other cases.

Remuneration to Board Members

Board Members, elected by Saab's Shareholders' Meeting, may in special cases receive a fee for services performed within their respective areas of expertise, separately from their Board duties and for a limited period of time. Compensation for these services shall be paid at market terms.

Incentive programs proposed to the Annual General Meeting 2011

The Board of Directors proposes that the Annual General Meeting resolves on the implementation of a Share Matching Plan 2011 and a Performance Share Plan 2011.

The terms and estimated costs for the Share Matching Plan 2011 and the Performance Share Plan 2011 will be presented in the Board's complete proposal to the Annual General Meeting.

Deviation from the guidelines for remuneration for senior executives 2010

On one occasion, the Board of Directors resolved to pay an extra variable remuneration with a total amount of SEK 940,000 before tax to two members of the Group Management to show appreciation of their extraordinary efforts during 2010.

SHARE REPURCHASE

Share repurchase

In April 2007, Saab's Annual General Meeting resolved to offer employees the opportunity to participate in a voluntary share matching plan where they can purchase Series B shares in Saab during a 12-month period. Purchases are made through withdrawals of between 1 and 5 per cent of the employee's monthly salary. If the employee retains the purchased shares for three years after the investment date and is still employed by the Saab Group, the employee will be allotted a corresponding number of Series B shares.

The plan was introduced in autumn 2007 in Sweden and Norway. In 2008, it was expanded to include employees in Denmark, Germany, the UK, the U.S., Switzerland and Australia, and in 2009 it was expanded again to cover employees in South Africa. In April 2008, Saab's Annual General Meeting resolved to introduce a performancebased plan for senior executives and key employees entitling them to 2–5 matching shares depending on the category the employee belongs to. In addition to the requirement that the employee remain employed by Saab after three years, there is a requirement that earnings per share grow in the range of 5 to 15 per cent.

The Annual General Meetings in 2009 and 2010 resolved to renew the share matching plan and performance share plan.

In 2007, Saab repurchased 1 million shares and in 2008 and 2009 it repurchased 1,340,000 shares per year to hedge the plans.

The Annual General Meeting on 15 April 2010 resolved to renew the Board of Directors' mandate to decide to repurchase up to 10 per cent of the company's shares, of which 1,340,000 shares to hedge the year's share matching plan and performance share plan. The purpose of the authorisation was to provide the Board with greater scope in

working with the company's capital structure and enable acquisitions when considered appropriate, as well as to secure the Group's share matching plan. The mandate applied until the next Annual General Meeting.

Repurchases may be effected over the stock exchange or through offerings to shareholders. It was also proposed that the Board's mandate include the possibility to transfer repurchased shares as allowed by law. Repurchased shares can also be transferred in connection with the company's share matching plan and performance share plan.

Saab announced on 16 June 2010 that the Board has decided to utilise its authorisation for repurchases to hedge the company's share matching plan and performance share plan. Between 26 July and 28 August 2010, 838,131 shares were acquired on NASDAQ OMX Stockholm at a total cost of MSEK 80. On 31 December 2010, Saab held 4,432,615 shares as treasury stock, which was 793,395 more shares than at year-end 2009.

DIVIDEND

The Board of Directors proposes that shareholders receive a dividend of SEK 3.50 per share (2.25), or a total of MSEK 367 (237). 12 April has been proposed as the record day for the dividend, which is expected to be paid on 15 April 2011.

EVENTS AFTER THE BALANCE SHEET DATE

• An order was received from FMV regarding development of the existing materiel system in Gripen C/D 39 (edition 19). The order amount is MSEK 127. The work will be carried out in 2011 and 2012.
• An order was received for the weapon locating system ARTHUR from LIG Nex1 which is the prime contractor for the Defence Acquisition Program Administration, Republic of Korea. The order sum is MSEK 450.
• Saab announced that the Nomination Committee proposes Håkan Buskhe and Michael O'Callaghan for election to the Saab Board of Directors. Marcus Wallenberg, Johan Forssell, Sten Jakobsson, Per-Arne Sandström, Cecilia Stegö Chilò, Åke Svensson, Lena Treschow Torell and Joakim Westh are proposed for re-election. Marcus Wallenberg is proposed as Chairman of the Board. Erik Belfrage and George Rose have declined re-election. The Nomination Committee also proposes that the accounting firm PricewaterhouseCoopers AB is elected as new auditor for a term of four years.
• Saab announced it had signed an agreement to acquire assets from the Czech company E-COM, whose main operations are in the development and production of virtual simulators. The acquisition strengthens Saab's product portfolio in training and simulation with a number of new capabilities and services within the virtual domain. The acquisition of assets from E-COM is expected to have no material effect on Saab's consolidated financial statements in 2011.

No other significant events have occurred after the balance sheet date that affect Saab's results of operations and financial position.

SAFE AND SUSTAINABLE SOCIETIES

Saab's operations contribute to security and stability in the world. In accordance with our vision, we work every day to make people feel safe.

The United Nations Charter gives every nation the right to protect itself and its citizens. This right applies regardless of whether the nation has its own defence industry. Saab's vision is based on an effort to keep society and those of us who live here safe. By improving and upgrading technological systems and solutions, we increase security in society and for its citizens, including those whose job it is to maintain security. We also provide insight into how threats against security change and develop innovative solutions to keep society safe.

Saab's vision and core values – expertise, trust and ambition – are the guiding principles in our operations and how we take responsibility. They are fundamental to our existence.

Saab's values are:

EXPERTISE – We combine a strong history of knowledge with continuous learning.

TRUST – We are honest and reliable citizens of the world and we keep our promises.

AMBITION – We have a passion for innovation, we are open to change and are committed to being fast and flexible.

Success demands responsibility

To be as successful as possible – and help to make people feel safe – we have identified four areas that are, and must be, integral to our business operations:

• Business ethics There should be no question that we act ethically in our business operations.
• Society Our operations will contribute to society as a whole as well as specifically to the local communities where we operate.
• Employees We will take responsibility for our employees and their opportunities to develop and thrive in our organisation.
• Environmental We will minimise the environmental impact of our operations and contribute to ecological sustainability.

We are convinced that earning trust in our company and operations is largely based on acting responsibly in these areas. Without this trust, it is hard for us to continue to develop cutting-edge technology at the rate we do today. This in turn requires continuous dialogue, positive relationships with our stakeholders and responsible decisions.

SAAB'S CORE STAKEHOLDERS

Customers and business partners

Through research, development and production, Saab supplies products, solutions and services that meet the expectations customers place on quality, safety, economics and protection of the environment. We are committed to free trade, fair competition and legal compliance. We act fairly and impartially vis-à-vis our suppliers and other partners and do not tolerate corruption or other improper business practices.

Employees

Saab's aim is to provide shareholders with a consistently high return. We keep our shareholders continuously informed on our operations as well as our activities and results.

Shareholders

Saab's aim is to provide shareholders with a consistently high return. We keep our shareholders informed on our operations as well as our activities and results.

Society

Saab is a responsible member of society and acts in accordance with applicable laws. We are committed in various ways to supporting our local communities, protecting the environment and contributing to research and development that benefits the entire society. We do not take political sides.

TAKING RESPONSIBILITY

Management of sustainability work

Overall responsibility for sustainability work rests with Saab's Board of Directors, which, through the CEO and other members of Group Management, ensures that sustainable development is incorporated into dayto-day operations. Group Management has assigned individuals responsible for each of the four areas mentioned above.

ETHICAL BEHAVIOUR EXTENDS TO EVERY BUSINESS RELATIONSHIP

Saab works continuously with business ethics issues to ensure that we live by our values in our marketing and every business relationship. This requires an uncompromising commitment to compliance with rules and laws, and it contributes to sustainable development.

OVERALL OBJECTIVE

To be a trustworthy and reliable partner that promotes an open and transparent market.

PRIORITY AREAS

We at Saab are committed to maintaining high ethical standards in everything we do, in every contact and every collaboration. We are therefore constantly working with business ethics and ensuring that we live by our values.

Management

Saab's Code of Conduct governs our actions. While reinforcing our values, it establishes a general way of working and rules on individual and collective responsibilities.

The General Counsel has overarching responsibility for establishing a code of conduct and raising business ethics issues in the organisation. If an individual employee has issues or problems of any kind, they should be discussed with their immediate supervisor. If this is not possible, the employee can instead utilise a whistleblower function and contact a special helpdesk.

With regard to marketing consultants, we have established a rule that senior management must approve arrangements that are entered into with consultants on large contracts. Every relationship with a marketing consultant must be approved by the business area manager and marketing manager. Moreover, a special Ethics and Compliance unit has been established in the legal department to ensure that rules on marketing consultants are effective and to provide regular updates.

Activities 2010

There should be no question that we will win and deliver on contracts according to the highest possible ethical standards and that it should benefit the industry and society as a whole. To reinforce this, in 2010 we continued the development of the existing group-wide training on Saab's Code of Conduct.

During the year, we also centralised the process and the organisation for handling marketing consultants. In connection with this we revised the directive that describes how marketing consultants are handled, and we also continued the training for all employees who work with marketing consultants.

Joint efforts to fight corruption

Saab has played an active role in establishing a code of conduct for the Aerospace and Defence Industry Association. The code is designed to fight corruption and contains a toolbox to facilitate the introduction of, and compliance with, the rules. A majority of European defence exporters has committed to the code.

Saab has also continued to work internationally to fight corruption by participating in the establishment of the Global Principles of Business Ethics for the Aerospace and Defence Industry together with other European and US defence contractors. These principles establish zero tolerance of corruption and treat the use of marketing consultants, conflicts of interest and confidential information. Saab has pledged to implement them in its operations.

The co-operation between the US and European defence industry has led to the creation of the International Forum on Business Ethical Conduct (IFBEC), which provides information on the global principles and encourages companies to share best practices. Saab participates actively in IFBEC's operations.

Ethical commitments over and above the law

General rules and guidelines are naturally in place in our industry to regulate contracts. In Sweden, for example, the production and export of materiel are governed by laws, ordinances and guidelines adopted by parliament. In the same way, we abide by the laws and the regulations in every country where we operate and sign business agreements. In addition, we are committed to maintaining high standards in everything we do. That is how we earn the trust of our stakeholders.

SAAB'S CODE OF CONDUCT

Saab's Code of Conduct provides clearly defined rules and routines to ensure that accepted business practices are applied in day-to-day operations. The code is based on the OECD's guidelines for multinational companies and the ten principles of the UN's Global Compact.

Our business ethics guide us in everything we do.

TRAINING IS IMPORTANT TO US AND SOCIETY

For 73 years, Saab has created job opportunities and economic growth in Sweden. We are still doing so today, but in far more countries. The biggest facilitator is our employees' knowledge, especially with regard to technology. Today we invest heavily in educational activities to the benefit of our operations and society as a whole.

OVERALL OBJECTIVE

To contribute to knowledge and society as a whole.

PRIORITY AREAS

In carrying out our corporate responsibility, we give priority to educational activities, especially for young people. This includes everything from getting Swedish students interested in engineering to ensuring that young people in countries like South Africa get an education. Our competence and products also make it possible for us to help provide humanitarian aid to crisis areas.

Management

Our efforts are guided by our values and our sponsorship policy. Each business area is responsible for implementing and following up its activities, which are co-ordinated at the group level through specific project steering groups.

Benefitting society

Our investments in technology have been important to Sweden's industrial development. As one of the country's most researchintensive companies, we have contributed to society's technological development, often in collaboration with leading universities and institutes of technology. This has generated job opportunities in and outside our company and substantial export revenues for Sweden.

Last year, Gunnar Eliasson, Professor of Industrial Economics at the Royal Institute of Technology, conducted a study on the spillover effects from advanced technological development. Using Gripen as a case study, he showed that the original R&D investment in the project has been repaid to Swedish society at least 2.6 times over. So instead of costing society money, it has given far more back. Other companies have also been able to benefit, at the same time that Gripen has contributed to Sweden's standing position as a high-tech industrial

nation. Saab's technology has also produced a number of new companies over the years. Since 2001, 13 companies have been spun off.

As we become more international, we take on a similar role in the countries where we operate such as South Africa and Australia.

Every time we sign a major international contract, industrial cooperations are generally involved. For example, we may agree with the customer to outsource some production or development work to the country or enter into industrial, commercial or research-related alliances. This often helps Saab to build a strong local presence in the buying country, at the same time that the local economy benefits and skilled jobs are created.

Education is essential

Saab works with a number of institutes of technology and universities on various types of research and development. But to ensure our future technological development, we also try to get young people interested in the natural sciences and engineering and encourage them to choose these subjects in school.

One example of our educational investments is Saab Technical High School, which we started in Arboga in 2009. The curriculum includes aeronautics, radar technology and logistics. We also offer students a summer course abroad in English as well as summer jobs.

Saab also sponsors the Order of the Teaspoon, founded in 2006 in Sweden by the magazine Vi. It is striving to resist fanaticism and promote increased tolerance among people. Israeli author Amos Oz and his book "How to Cure a Fanatic" were the inspiration for the foundation.

Our global corporate responsibility is based on a conviction that education provides the foundation for social progress. In South Africa, we participate in a number of educational projects where we donate educational material and other equipment, assist in teaching and take our own educational initiatives. We work most closely with schools in impoverished areas and help children in need to receive an education. As part of the iLab Classroom project, for example, we sponsor mobile computer labs that can easily be transported to children in schools that currently do not have access to computers and IT. For years, we have also offered educational grants to promising engineering students from impoverished areas.

In fall 2010, Saab delivered a water treatment system to Pakistan with the capacity to supply water to 20,000 people a day.

Sponsoring education

Our sponsorship-related activities are largely focused on education and technology. Examples include Venture Cup, the Royal Swedish Academy of Science's "Natural Science and Technology for All" programme, Kunskapsskolan and Saab's annual Women in Technology award. We also support the Swedish Championship in Technology and "Technology Days" events, which are designed to draw attention to the importance of technology and engineering in Sweden. When our previous CEO, Åke Svensson, stepped down in August 2010, we established a research grant in his honour to be awarded to a prominent researcher at Linköping University in the areas of civil security, aeronautics and defence. The goal is to draw attention to the importance of technology and engineering to Sweden's growth and economic development.

Supporting people in need

In addition to supporting educational projects, we provide humanitarian aid to people and communities in need, especially to relieve human suffering due to natural disasters. With the help of our product portfolio, local presence and technology, we can quickly supply flexible, customised solutions to alleviate crises.

Saab's water treatment plant in Pakistan

One example of an action in fall 2010 was in Pakistan in connection with the huge floods last fall. Saab supplied a water treatment system to the city of Jamshoro, in Sindh province. The system has the capacity to provide water to around 20,000 people a day. In addition to delivering and installing the equipment, our employees trained local staff how to maintain and support the plant.

EMPLOYEES ACCOMPLISH OUR GOALS

Our work with human resource issues supports the Saab Group's goals and strategies. With the right employees in the right places at the right time, we can be an efficient, unified and competitive company.

OVERALL OBJECTIVE

To be an employer of choice for current and future employees in our home markets.

Management

Overarching responsibility for Saab's HR work rests with the Senior Vice President and Head of Group Human Resources, who is a member of Group Management. Co-operation and joint development take place through the function areas by representatives of the business areas under the leadership of the HR staff. Together with function managers on the HR staff and HR managers in the business areas, they form HR council, which meet four to six times a year to decide on key HR issues.

Activities 2010

The basis assumption in our HR work is that Saab, as a company of opportunities, is constantly developing. We take responsibility for offering continuous development opportunities tied to our business challenges. Our employees should be active and committed and take responsibility for their own competence and continued employability.

In 2010, we worked on harmonising HR processes, further developing our culture and actions, and long-term talent management.

Right place – Harmonising HR work

During the last year, we have continued to co-ordinate and introduce uniform routines and processes within the Group. Everything from training and leadership development programmes to administrative routines, system support and branding is now managed from a holistic perspective. The goal is even better quality in our mission-critical HR issues.

We have developed an HR strategy with priority areas, a uniform process of working and Group-wide system solutions, for example, for recruiting and HR data. All Group processes and policy documents are drafted and currently managed by the HR staff in close cooperation with the business areas.

Harmonisation work in 2010 also included areas such as employment conditions and principles, the launch of a uniform introductory programme for all new employees, the level of service we offer and a review of wage-setting and wage analysis.

In addition to co-ordination, we have also focused on savings and efficiency improvements as well as organisational changes, layoffs and resource adjustments.

Right things – Supportive culture and behaviours

Measures to strengthen the communicative leadership of our managers have been successful. The impact is evident in the 2010 employee survey. Our employees are satisfied with their managers' leadership, and there was an increase in all areas related to leadership. This work is important in that it shows our employees often have more confidence in their manager than those higher in the organisation. This makes front-line managers the most important ambassadors for future efforts to change our culture.

HR goals	Results 2010	Goal 2015
Employer of choice – internally (total satisfaction)	69	75
Employer of choice – externally (Universum)	10th	5th place or better
Communicative leadership – Index	67	73
Employee reviews , %	83	100
Development plans, %	71	100
Wellness ratio, %	79	80
Percentage of female wage-setting managers	19	30

Lennart Sindahl has held several positions within missiles and military and commercial aeronautics since he began his employment at Saab AB in 1986. His current position is Executive Vice President and Head of Business Area Aeronautics. Outside Saab, Lennart Sindahl is chairman of the Aircraft Sectorial Group within the AeroSpace and Defence Industries Association of Europe (ASD) and a board member of Vingtech Saab A/S.

Based on the results of the employee survey, every business area has drafted action plans, although they handle their improvement needs differently depending on where they are at this point. Clear, measurable goals are set at both an overarching and more detailed level.

Based on the results of the 2010 survey, Saab will focus primarily on three areas: an open, trusting climate, openness to change, and pride and confidence in the future. It is also important employees understand their role in the big picture. The response rate to the survey was 86 per cent.

Right employees – Attractive employer

Saab wants to be an employer of choice for current and future employees. We want to attract current and future employees in the global talent market. In addition, we have to retain our employees and help them to develop.

During the year, we continued to improve long-term talent management, especially in terms of diversity. By treating differences as an asset, we create opportunities for better business. The 30/70 project, whose goal is to increase the number of female managers, continued with a number of activities. In 2010, women accounted for 22 per cent of managers in the organisation. Among wage-setting managers, they represent 19 per cent (17). The goal is that 30 per cent of our wage-setting managers will be female by the end of 2015. The reason for this goal is that we understand that diversity among employees can benefit the company's profitability.

At the same time, we were named Sweden's best workplace during the year by the business weekly "Veckans Affärer," where gender equality was the decisive factor. In the 2010 Corporate Barometer, where nearly 15,000 engineers, economists and computer science/IT students ranked Sweden's most popular employer's, Saab finished in tenth place. Although we consider this a good ranking, our goal is to place among the top five.

ENVIRONMENTAL WORK IS A NATURAL PART OF OUR BUSINESS

Saab supports environmental sustainability. We work with continuous improvements to reduce our own and our customers' environmental impacts, and ensure that we comply with requirements stipulated by law and from our customers. Environmental issues are an integral part of our operations and a strategic area in our core business.

OVERALL OBJECTIVE

To contribute to and promote environmental sustainability.

PRIORITY AREAS

Our environmental priority issues are climate change, aviation's environmental impact, hazardous substances, demands on suppliers and environmental risks.

Management

Saab's environmental work is organised at the Group level, where Group Quality & Environment, which reports to our COO, is responsible for strategic development and overseeing environmental work, and at the business area level, where environmental issues are addressed in operations. Business area managers are responsible for compliance with environmental requirements and are supported by environmental managers or coordinators. Co-operation between the Group and the business areas is facilitated by the Council on the Environment.

ISO 14001 certified environmental management systems are used by Aeronautics (with few exceptions), Combitech, Corporate, Dynamics, Electronic Defence Systems, Security and Defence Solutions and Support and Services.

Saab's environmental policy

Through well-structured environmental work and continuous improvements, we reduce the impact of our plants, products and services as far as technically possible and economically reasonable. To achieve this we:

• Implement environmental management systems that fulfil ISO 14001 requirements

• Identify and minimise the environmental risks associated with our products, systems and operations

• Reduce use and emissions of hazardous substances/materials and efficiently consume energy and natural resources

• Comply with applicable regulations and other requirements in the environmental field
• Affirm an attitude of openness in communicating our environmental work.

Environmental goals

Saab has established Group-level goals for greenhouse gas emissions and hazardous substances.

Climate goal

Greenhouse gas emissions will be reduced by 20 per cent by 2020, compared to 2007. The measurement will be normalised to Saab's total annual turn over in MSEK. On an annual basis, the goal is a two per cent reduction.

Chemical management goal

To clarify the environmental policy in the area of hazardous chemicals, we will work actively with needs analyses, knowledge and communication.

Saab's business areas have around 50 environmental targets and action plans that involve handling chemicals, replacing hazardous chemicals and substances, waste sorting and recycling, energy and water savings, reducing the need for personnel transports, and reducing air and water emissions.

Activities 2010

The priority during the year was developing a common global management system, which will be in place in 2011 and help us to improve co-ordination and efficiency at the operating level. The integration of environmental requirements in the product development process and the development of various forms of support for environmental issues have been an important concern in the new system. The work also provides us with the opportunity to review our environmental management procedures and improve efficiencies.

The Group-level goals we established in 2010 are an extension of Saab's environmental policy and climate work. With uniform goals, we can provide better feedback to the business areas in their efforts

to reduce Saab's environmental impact and simplify communication with outside stakeholders.

When environmental requirements are introduced in operations, training is an important element. We therefore developed a webbased environmental training programme in 2010 that all Group employees will attend. During the year, we also revised the training for employees with legal liability and other key decision-makers.

Climate change

Saab impacts the climate through use of energy for electricity and heating and fuel for business travel, goods transports, and test and target flights. We work actively to report CO2 emissions and improve energy efficiency in our operations and products. Saab's goal is to reduce greenhouse gas emissions. This includes emissions from the use of electricity, heating and cooling, freight, flights, motor vehicles and business travel.

Saab's total CO2 emissions in 2009 from various sectors are indicated in the following diagram:

CO2 EMISSIONS BY SOURCE WITHIN SAAB IN 2009*, %

* Figures for 2010 were not available at the time this annual report was produced.

The diagram below shows CO2 emissions relative to our climate targets:

Total CO2 emissions from Saab's operations increased from 47,500 tonnes in 2008 to 54,500 tonnes in 2009. This was mainly due to corrections in reported consumption figures in certain areas. Excluding these adjustments, emissions have remained fairly constant, although the percentages have changed slightly. Aviation operations increased in 2009, at the same time that emissions from business travel have declined. Measured in tonnes per MSEK in turnover, emissions have decreased.

In 2010, we reduced energy and fuel consumption in a number of ways. For example:

• Emissions from business travel have been reduced, primarily due to increased use of videoconferencing
• Electricity consumption has been reduced by 3,000 MWh
• The share of green rental cars increased from 41 per cent in 2009 to 63 per cent in 2010.

Our fleet of company cars in Sweden includes only vehicles that meet Folksam's safety and environmental requirements.

Saab has an extensive co-operation with municipalities and other stakeholders in Sweden to reduce the use of electricity, heating energy and water. We are analysing all the buildings in our main production locations to find sources of wasted energy. These areas are in Tannefors and Malmslätt in Linköping municipality. During the year, we launched similar energy savings projects in Järfälla and Göteborg. The analysis measures ventilation, water and electricity consumption, and how well the systems are adapted to our operations.

The diagram below shows the total consumption of electricity and heat energy.

Carbon Disclosure Project

Since 2006, Saab participates in the international Carbon Disclosure Project (CDP), whose goal is to encourage private and public sector organisations to measure, manage and reduce global climate change impacts.

CDP's Carbon Disclosure Leadership Index (CDLI) lists the 20 companies that have most professionally managed climate issues. For the fourth consecutive year, Saab received a very high rating for its climate

work and awareness of how climate change affects the company and its business. Saab's long-term climate change work and investments in new environmental technology are the reason for the high ranking. For more information on CDP, visit www.cdproject.net.

Aviation's climate impact

Launched in 2008, the Clean Sky Joint Technology Initiative is scheduled to continue until 2014. Clear Sky is a new form of alliance within the EU, where organisations, government authorities and companies share responsibility for large, strategically important projects. Clean Sky is the industry's response to the Advisory Council for Aeronautical Research in Europe's (ACARE) 2020 goals to reduce European aviation's carbon dioxide emissions by 50 per cent (measured per passenger km), nitrogen oxide by 80 per cent and cut noise levels in half. Other emissions such as carbon monoxide, hydrocarbons and particles will be substantially reduced as well. If these targets are reached, the European aeronautics industry will be well-prepared for a future market with tougher environmental requirements.

Saab is one of the main suppliers to Clean Sky and is investing around MEUR 14 in the programme. We develop innovative technology based on our expertise in military and civil aeronautics as well as the entire air transport system. At present, it is mainly the Aeronautics and Electronic Defence Systems business areas that are participating in Clean Sky. For their part, this includes developing a new smart wing with innovative, fuel-saving technology for the next generation of large commercial aircraft and a system for "green approaches" for the future air transportation system. Eventually, other business areas will become involved as well. For more information, visit www.cleansky.eu and www.asd-europe.org.

Since June 2009, Saab also participates in the Single European Sky ATM Research Programme (SESAR), whose aim is to bring efficiency to the air space over Europe while improving safety and reducing environmental impacts.

Hazardous substances

To meet security and technical performance requirements, Saab and other companies in the aerospace and defence field still use certain substances that are classified as hazardous to humans and the environment. Saab has initiated several national and international development projects to replace hazardous substances.

In the efforts to replace hazardous substances, priority has been given to volatile organic solvents (VOC), trichloroethylene, ozonedepleting refrigerants, brominated flame retardants, chromates, lead, cadmium and their compounds. During the last ten years, we have substantially reduced our use of hazardous substances. To meet surface treatment requirements for its components, Saab has received an exemption from the Swedish National Chemicals Inspectorate to use trichloroethylene at the facilities in Tannefors and Järfälla. In 2010, measures were taken to greatly reduce trichloroethylene consumption. We have replaced three older facilities that used trichloroethylene to degrease metals with a modern plant that is essentially self-contained.

The types of products developed and marketed by Saab are not governed by the EU's RoHS directive (Restriction of the use of certain Hazardous Substances in electrical and electronic equipment). Since RoHS is creating market pressure to replace lead, cadmium, hexavalent chromium and bromated flame retardants in electronic products, Saab is working actively to reduce its use of these substances.

To monitor and control chemical products, we use a Group-wise chemical data system.

Saab also works actively to interpret and meet the requirements of the EU's chemicals law, REACH (Registration, Evaluation and Authorisation of Chemicals). This is being done through participation in the trade groups Teknikföretagen i Sverige and the AeroSpace and Defence Industries Association of Europe (ASD) at a European level. For more information on ASD's work with REACH, visit www. asd-europe.org. Management systems have been updated against the backdrop of the new requirement. Compliance with REACH is greatly facilitated because Saab systematised its work with chemical products early on.

In 2010, preparations were made to acquire a computer system to manage environmental data for products. The system will be introduced beginning in 2011.

EMISSIONS OF VOLATILE ORGANIC SOLVENTS (VOCs), TONNES

The reduction in VOC emissions from 2009 to 2010 is due to the coordination of painting processes and variations in production volume. From a long-term perspective (>10 years), VOC emissions have been reduced substantially. Aeronautics and Saab Barracuda AB account for the larg-

CONSUMPTION OF CHLORINATED VOLATILE ORGANIC SOLVENTS, TONNES

Chlorinated VOCs consist of trichloroethylene, which is used almost exclusively within Aeronautics. The substantial reduction in consumption is due to Aeronautics' investment in late 2009 in a new enclosed system to clean aircraft parts,

Demands on suppliers

The majority of the high-tech components and equipment in Saab's products are purchased from subcontractors around the world. To reduce the environmental impact of our products and solutions, we set environmental requirements for our suppliers, e.g., which substances may be used. REACH's requirements are an important part of the communication with suppliers.

Our suppliers' environmental work is critical to the environmental performance of our products. In 2010, we continued to introduce the Group-wide environmental supplier requirements that were established in 2008. The Group's environmental management system, which centralises the procurement process, will make it easier to set requirements on suppliers.

Saab and the green market

Environmental aspects are increasingly part of the product development process at Saab. Several current and potential customer-countries face major challenges in terms of energy and the environment and must meet stringent requirements to quickly adapt.

Energy efficiency is a key issue with regard to climate change and costs. Regardless of the energy source used as fuel or for energy production, it will become increasing important to use it as efficiently as possible. As part of its business development, Saab continuously identifies how its expertise, products and systems can be used to improve energy efficiency in the production, distribution and consumption of energy and fuels. We can also offer a growing number of products and solutions that reduce CO2 emissions, ranging from solutions that improve efficiency in transport flows at sea and on land to our work in the EU's previously mentioned Clean Sky programme to reduce aircraft emissions.

As Saab increasingly helps to protect various flows in society and improve their efficiency, including energy and supply chains, we are also doing more to reduce environmental impacts. Together with our partners, we offer technologies and support that contribute to sustainable cities. Listed below are several areas where our solutions reduce environmental impacts or improve decision guidance for important environmental issues:

• Intelligent transport solutions for air, land and sea
• Solutions that improving logistical and maintenance efficiency
• Communication and decision-making systems
• Surveillance systems for land and sea
• Data processing and visualisation for better decision guidance
• Waste and energy

For information on legal environmental issues, see note 49 on page 121–122.

RISKS AND RISK MANAGEMENT

RISKS AND RISK MANAGEMENT

All businesses entail risk. A risk can be specific to the company or related to a certain industry or market. Certain risks can be fully managed by the company, while others are out of its control.

Saab's operations primarily involve the development, production and supply of technologically advanced hardware and software to customers around the world. The international part of the business is growing.

Projects generally entail significant investments, long periods of time and product development or refinement. In addition to customer and supplier relations, international operations involve joint ventures and other collaborations as well as the establishment of operations abroad. Operations entail significant risk-taking in various respects.

The key risk areas are political, operating and financial risks.

MANAGING RISKS

Significant risks that are identified are managed continuously at all levels of the organisation and in strategic planning.

Various policies and instruments govern the management of significant risks. In addition, Saab has an independent audit unit that serves as a dedicated resource to independently audit the effectiveness of internal control processes.

Risks are also managed by procuring insurance. Saab has a Group-wide programme where insurance is obtained on the market or through the Group's own insurer, Lansen Försäkrings AB.

Risk analysis and activities 2010

In 2010, extensive work was done in the business areas and the Group to analyse and evalute major business risks. The objective was to assess all major strategic, operating and financial risks in each area and at the group level. This has resulted in a clearer picture of Saab's major risks.

We worked at the same time to analyse various aspects of the risk processes used by the business areas and divisions. The goal is to introduce a uniform risk reporting process in 2011 in line with selected international standards.

We also conducted a review of financial controls within Saab in 2010. For more information, see the corporate governance report, page 131.

Focus 2011

Beginning in 2011, each business area will submit monthly reports to Group Management on the risks it has identified based on their impact and likely outcome.

In addition, work has begun to further improve the risk management process for the group in general and specifically for long-term customer projects, which will result in updated processes in 2011.

The assessment of all of the company's financial controls in 2010 has resulted in changes in the reporting process for financial controls. Beginning in 2011, the business areas will report them on a monthly basis to Group Management. For more information related to financial controls, see the corporate governance report, page 131.

The following provides a general description of risk areas with references to relevant notes to the financial statements.

POLITICAL RISKS

Saab provides systems and equipment that are classified as strategic products. Sales are regulated by national laws and ordinances that include international agreements. Access to vital components and systems may also be subject to export restrictions and regulations of various kinds.

Amendments to these rules are made periodically and affect Saab's business opportunities. The ability to create and maintain long-term customer relations is a critical issue for Saab, since some projects stretch over decades. Sweden's defence policy strongly affects Saab's operations, since the Swedish state, through the Armed Forces and FMV, has historically accounted for a large share of our product innovation.

Another type of political risk entails the customer's ability to fulfil current contracts due to economic, political or other circumstances such as natural disasters, an economic crisis, a shift in power or an embargo.

Managing political risks

Saab manages political risks through various types of export guarantees, insurance solutions and other instruments. It is impossible, however, to avoid losing business opportunities or incurring damage if political risks are realised.

OPERATING RISKS

A number of significant areas have been identified with respect to operating risks, which are important in assessing the Group's results and financial position.

Develop and introduce new systems and products

The Group invests heavily in the research and development of its own products and systems as well as acquisitions of technology. Its biggest systems are the export version of Gripen, missile systems and electronic warfare systems. One example of acquired technology is the world-leading radar technology obtained through the acquisition of Ericsson Microwave Systems AB in 2006. Investments in new systems and products are made after a strategic and financial analysis and assessment of future business opportunities.

The risk in developing and introducing new systems is that Saab could be unsuccessful in its product launches and not achieve the levels of business required to make these products profitable.

Managing development and introduction of new systems and products The Group takes an active approach to product management. A high degree of modularisation in project management allows Saab to reuse product solutions in its offerings. In 2010, the introduction of a new product management process was completed and various measures were launched to further improve efficiencies in development processes, e.g., centres of excellence were established for various aspects of Saab's development work. As a result, all development in the same area is being consolidated in a single location.

Certain development costs are capitalised in accordance with established accounting principles. Amortisation of capitalised development costs is scheduled over the estimated production volume or an estimated period of use, though not more than five to ten years. If the estimated period of use is shorter than five years, the costs are amortised over the shorter period. Future business opportunities are periodically reassessed, which can lead to impairment losses. Capitalised development costs are shown in Note 16.

Long-term customer projects

As one of the world's leading high-technology companies, Saab's operations entail complex development projects on the leading edge of technology. The competitive situation is complex, and success depends on the ability to offer cost-effective high technology solutions, though also in some cases on participation in the customercountry's economy through various forms of industrial co-operation.

Managing long-term customer projects

A majority of all long-term customer projects contains significant development work, which is associated with risks. Before a contract is entered into with a customer to supply a product, solution or service, a thorough analysis is always done of the conditions and risks associated with the delivery using an established project management process. Periodic reviews are subsequently made of the project during its implementation stage using the same process. An important aspect is to identify and assess risks, then take the measures needed to mitigate them with the help of a risk assessment method.

The Group applies the percentage-of-completion method to recognise revenue from long-term customer projects. An estimation of total costs is critical to revenue recognition and provisions for loss contracts as well as valuating inventories. The outcome of technical and commercial risks may affect income.

Work was begun in 2010 to further improve the risk management process for long-term customer projects, which will be updated in 2011.

Environmental risks and liabilities

The most important environmental risks involve hazardous chemicals, building and plant fires, and soil contamination.

Managing environmental risks and liabilities

A number of different chemical products used in Saab's operations are classified as harmful to humans and the environment. The operations in Tannefors and Malmslätt, in Linköping, and the operations in Karlskoga are subject to Sweden's so-called Seveso law, which is designed to reduce risks in connection with the large-scale use of chemicals and includes measures to prevent and limit the consequences of serious chemical accidents. The Malmslätt plant was shut down at mid-year 2010.

Against this backdrop, we have introduced strict routines for risk assessment, supervision and control of chemicals. Strict routines are also applied to purchases of chemical products. Health and environmental information on chemical products is available in the Group's chemical data system.

Saab works actively to assess and minimise fire risks in its operations. Since a fire in a production facility can cause extensive environmental damage to the local area, effective fire prevention is an important part of the efforts to reduce environmental risks.

We analyse our operations and properties to assess Saab's risk exposure resulting from soil contamination. When a contaminated area is identified, liability is determined and an overall risk assessment is made. Information on contaminated areas is documented as it is received. An insurance solution was created in 2009 to manage soil contamination cases. In 2010, costs for remediation measures were less than MSEK 1.

Overall risk assessments are made to determine how operations are affected by climate change.

Liquidation of leasing operations

Saab decided in 1997 to discontinue the manufacture of turboprop aircraft.

Like other manufacturers, Saab had a business model that included lease financing in connection with aircraft sales on the market. The risk in the portfolio is that Saab is unable to lease out the aircraft. The impact on Saab's profitability could be negative if the aircraft are not being used.

Managing risks in connection with the leasing operations

Saab's direct risk-taking in the leasing fleet has been managed primarily through various types of insurance. The leasing fleet is expected to be liquidated by 2015. Until then, Saab will carry out these operations in accordance with the terms and conditions of its insurance.

As of 31 December 2010, Saab's leasing portfolio consisted of 106 turboprop Saab 340 and Saab 2000 aircraft. Of the fleet, 42 are financed through US leverage leases. Rents from these leases are insured through the Export Credits Guarantee Board (EKN) in Sweden. Sixty-four aircraft are financed internally and recognized as assets in the balance sheet.

Provisions on the balance sheet related to the leasing portfolio are deemed as sufficient for the remaining risks.

FINANCIAL RISKS

In its operations, Saab is exposed to various financial risks such as foreign currency, interest rate, refinancing, credit and commodity risks. Management of financial risks is governed by the Group Treasury Policy established by the Board of Directors. Moreover, detailed directives and processes are in place for operating management of each area. Overarching responsibility for managing financial risks lies with Group Treasury.

The risks that are actively managed are:

• Foreign currency
• Interest rate
• Refinancing
• Credit and counterparties
• Commodities

Financial risk management is described in more detail in Note 41.

Pension obligations

The Group's pension obligations are substantial, as indicated in Note 37. In the calculation of pension obligations, future pension obligations are discounted to present value. The size of the liability is dependent on the choice of discount rate: a low interest rate produces a high liability, and vice versa. To manage the pension liability, the Saab Pension Fund was established in 2006 and capitalised with the corresponding PRI liability. The Group's obligations are calculated on an actuarial basis each year, after which a comparison is drawn with the fund's assets. Deficits according to such calculations may require Saab to contribute additional funds. The Saab Pension Fund's objective is a real annual return of at least 4 per cent on invested capital. The fund invests in interest-bearing securities, equities and hedge funds.

CONSOLIDATED INCOME STATEMENT

	1 January – 31 December
MSEK	Note	2010	2009
Sales	3, 4	24,434	24,647
Cost of goods sold		-18,843	-18,510
Gross income		5,591	6,137
Other operating income	5	222	149
Marketing expenses		-1,727	-1,776
Administrative expenses		-1,235	-1,198
Research and development costs		-1,820	-1,813
Other operating expenses	6	-70	-82
Share in income of associated companies	21	14	-43
Operating income	10, 11 ,12	975	1,374
Share in income of associated companies	21	26	2
Financial income		116	50
Financial expenses		-341	-450
Net financial items	13	-199	-398
Income before taxes		776	976
Taxes	15	-322	-277
Net income for the year		454	699
Attributable to:
Parent Company's shareholders		433	686
Non-controlling interest		21	13
Earnings per share before dilution, (SEK)	34	4.12	6.45
Earnings per share after dilution, (SEK)	34	3.97	6.28

ORDERS

Order bookings for 2010 increased by 43 per cent compared to 2009 to MSEK 26,278 (18,428). The order backlog at the end of the year amounted to MSEK 41,459 (39,389).
During 2010 index and price changes had a positive effect on order bookings of MSEK 377 (621).
In all, 86 per cent (76) of order bookings were attributable to defence-related operations and 66 per cent (62) of order book ings are from customers outside Sweden.
Orders received where the order sum was larger than MSEK 100 represented 58 per cent (43) of total order bookings.
Order backlog duration :
2011: SEK 16.8 billion
2012: SEK 10.4 billion
2013: SEK 6.3 billion
2014: SEK 3.7 billion
After 2014: SEK 4.3 billion
The order backlog primarily includes :
• Gripen to Sweden and on export • Structures and subsystems for the aircraft producers Airbus and Boeing
• Airborne early warning systems • Active and passive countermeasure systems
• Missile systems for air, sea and land • Anti-tank systems • Command and control, avionics and fire control systems • Radar systems
• Training systems

SALES BY REGION

SALES BY MARKET SEGMENTS

MSEK	Jan-Dec 2010	Jan-Dec 2009	MSEK	Jan-Dec 2010	Jan-Dec 2009
Sweden	9,223	7,714	Air	10,393	10,940
EU excluding			Land	7,611	7,239
Sweden	4,737	5,675	Naval	2,278	2,181
Rest of Europe	368	280	Civil Security	1,427	1,718
Americas	2,199	1,918	Commercial
Asia	3,937	4,568	Aeronautics	1,348	1,374
Africa	2,833	3,477	Other	1,377	1,195
Rest of the World	1,137	1,015	Total	24,434	24,647
Total	24,434	24,647

SALES

• Civil security solutions

Sales decreased by one per cent to MSEK 24,434 (24,647). Exchange rate effects were marginal during 2010.

Sales decreased by approximately MSEK 100 in 2010 compared to 2009 as an effect of lower revenue recognition for a terminated contract in Security and Defence Solutions.

Sales in markets outside Sweden amounted to MSEK 15,211 (16,933), or 62 per cent (69) of total sales. Of sales, 83 per cent (83) was related to the defence market.

As of 1 January 2010, Joint Operations are no longer reported as a separate market area.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		1 January – 31 December
MSEK	2010	2009
Net income for the year	454	699
Other comprehensive income:
Translation differences for the year	16	215
Net gain/loss on cash flow hedges
Change in value	658	799
Reversed through profit and/or loss	108	145
Tax attributable to net gain/loss on cash flow hedges	-201	-247
Share of other comprehensive income in associated companies	2	31
Other comprehensive income	583	943
Net comprehensive income for the year	1,037	1,642
of which Parent Company's shareholders' interest	1,006	1,583
of which non-controlling interest	31	59

INCOME, MARGIN AND PROFITABILITY

The gross margin amounted to 22.9 per cent (24.9). Adjusted for non-recurring items, the gross margin was 25.0 per cent (24.6). Non-recurring items included restructuring costs of MSEK 616 with the majority, MSEK 512, impacting cost of goods sold.

Total depreciation and amortisation amounted to MSEK 1,358 (1,400). Depreciation and write-down of tangible fixed assets amounted to MSEK 382 (351), while depreciation of the leasing fleet amounted to MSEK 146 (176). Amortization and write-down of intangible fixed assets amounted to MSEK 830 (873), of which amortization and write-down of capitalised development costs amounted to MSEK 664 (686).

Operating income amounted to MSEK 975 (1,374), corre spon ding to an operating margin of 4.0 per cent (5.6). Adjusted for non-recurring items, the operating margin was 6.5 per cent (5.4).

Operating income included expenses of MSEK 290 that were not reported as a non-recurring item related to projects in Security and Defence Solutions which impacted profitability negatively in the year.

Within Electronic Defence Systems a claim related to a finalized project where Saab reduced its estimated risk share impacted profitability positively.

On September 10, the Maritime and Commercial Court in Copenhagen informed that it in a judgement dismissed the Danish Defence Acquisition and Logistics Organization's (DALO) claim against Saab. DALO therefore should pay Saab damages plus interest on damages and cover Saab's court costs. An income of approximately MSEK 50 was recorded during the third quarter as a result of this. DALO has filed an appeal against the judgement.

Total expenditure for research and development amounted to MSEK 5,008 (4,820). The expenditures in research and development that are internally funded amounted to MSEK 1,203 (1,194), of which a total of MSEK 47 (67) has been capitalised.

The Billion+ programme progressed according to plan during 2010 and was finalized at the end of the year. The cost reductions contributed about 3 percentage points to the reported operating margin in 2010.

The share of income in associated companies, MSEK 14 (-43), primarily relates to net income in Taurus GmbH and Hawker Pacific.

Net financial income and expenses amounted to MSEK -199 (-398), of which project interest from unutilised advance payments reduced financial income by MSEK -17 (-36), while also reducing the cost of goods sold correspondingly. Net interest items for the Group amounted to MSEK -40 (-80). Currency gains of MSEK 57 (-85) related to the tender portfolio where the hedged part of the portfolio was valued at market value that was relatively higher due to an appreciation of SEK. Other net interest items amounted to MSEK -199 (-197) and mainly consisted of amortisation of actuarial losses for pensions of MSEK -168 (-136), other exchange rate effects and share in income of associated companies.

Current and deferred taxes during the year amounted to MSEK -322 (-277), or an effective tax rate of 41 per cent (28). The effective tax rate was affected by revaluation of deferred tax receivables relating to the leasing operations, differences between tax rate in Sweden and the US and tax related to previous years.

The pre-tax return on capital employed was 7.9 per cent (10.3) and the after-tax return on equity was 4.1 per cent (7.0).

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

			as of 31 December
MSEK	Note	2010	2009
Assets
Intangible fixed assets	16	6,413	7,108
Tangible fixed assets	17	3,052	3,174
Lease assets	18	1,154	1,464
Biological assets	19	299	256
Investment properties	20	236	25
Shares in associated companies	21	251	356
Financial investments	25	203	116
Long-term receivables	27	856	1,327
Deferred tax assets	15	-	284
Total fixed assets		12,464	14,110
Inventories	28	4,100	4,698
Derivatives	41	1,105	1,002
Tax assets		46	43
Accounts receivable	29	3,052	2,837
Other receivables	27	3,630	4,696
Prepaid expenses and accrued income	30	680	705
Short-term investments	25	1,544	551
Liquid assets	31	2,544	1,463
Total current assets		16,701	15,995
Assets held for sale	32	113	325
TOTAL ASSETS		29,278	30,430

STATEMENT OF FINANCIAL POSITION

Since the start of 2010, the net cash position has increased by MSEK 3,925 to MSEK 3,291 at the end of 2010. The increase is mainly related to major milestone payments received and increased level of sold trade receivables.

Intangible assets have decreased due to amortisation of capitalised product development. As of 1 January, 2009, Saab changed its view on the application of the accounting principles for development costs. As a result of this more conservative view, development costs are capitalised at a later stage in all projects and all capitalised development costs are amortised over maximum ten years.

Inventories decreased due to deliveries in major projects during the fourth quarter. Inventories are recognised after deducting utilised advances. Other receivables decreased due to the reduction of accrued revenues (after deducting utilised advances) and other receivables.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

			as of 31 December
MSEK	Note	2010	2009
Equity	33
Capital stock		1,746	1,746
Other capital contributions and other reserves		1,230	657
Retained earnings		8,298	8,139
Equity attributable to Parent Company's shareholders		11,274	10,542
Non-controlling interest		170	140
Total equity		11,444	10,682
Liabilities
Long-term interest-bearing liabilities	35	1,117	1,126
Other liabilities	39	294	287
Provisions for pensions	37	5	4
Other provisions	38	2,207	2,146
Deferred tax liabilities Total long-term liabilities	15	803 4,426	905 4,468
Short-term interest-bearing liabilities	35	589	2,519
Advance payments from customers		643	442
Accounts payable		1,799	1,730
Derivatives	41	750	1,181
Tax liabilities		265	212
Other liabilities	39	819	746
Accrued expenses and deferred income	40	7,751	7,668
Provisions	38	792	753
Total current liabilities		13,408	15,251
Liabilities attributable to assets held for sale	32	-	29
Total liabilities		17,834	19,748
TOTAL EQUITY AND LIABILITIES		29,278	30,430

For information on the Group's assets pledged and contingent liabilities, see Note 42.

Short-term interest-bearing liabilities decreased by MSEK 1,930 from the beginning of the year to MSEK 589 at 31 December.

Provisions for pensions amounted to MSEK 5 (4). During 2010, the Saab Pension Fund was capitalised with a total of MSEK 108 (157). The fund was set up in 2006 with the overall objective to secure the Group's defined-benefit pension plans and at the same time hedge the interest rate volatility of the pension liability and reduce the overall cost of pensions.

Saab decided in 1997 to discontinue the manufacture of turboprop aircraft. As with other manufacturers, Saab had a business model that included lease financing in connection with aircraft sales on the market. Saab's lease assets at 31 December 2010 consisted of 106 turboprop Saab 340 and Saab 2000 aircraft.

Of the fleet, 42 are financed through US leverage leases. Rents from these leases are insured through The Swedish Export Credits Guarantee Board (EKN). 64 aircraft are financed internally and recognised as assets in the statement of financial position.

Provisions related to the leasing portfolio and provisions for commitments with respect to regional aircraft on the statement of financial position are deemed sufficient for the remaining risks.

Saab estimates that the leasing portfolio will be phased out by 2015.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Other reserves
MSEK	Capital stock	Other capital contributions	Net result of cash flow hedges	Translation reserve	Revaluation reserve	Retained earnings	Total equity attributable to Parent Company's shareholders	Non controlling interest	Total equity
Opening balance, 1 January 2009	1,746	543	-612	-222	51	7,734	9,240	90	9,330
Net comprehensive income for the year	-	-	696	201	-	686	1,583	59	1,642
Transactions with shareholders:
Repurchase of shares	-	-	-	-	-	-110	-110	-	-110
Share matching plan	-	-	-	-	-	35	35	-	35
Dividend	-	-	-	-	-	-187	-187	-	-187
Acquisition and sale of non-controlling interest	-	-	-	-	-	-19	-19	-9	-28
Closing balance, 31 December 2009	1,746	543	84	-21	51	8,139	10,542	140	10,682
Opening balance, 1 January 2010	1,746	543	84	-21	51	8,139	10,542	140	10,682
Net comprehensive income for the year	-	-	564	9	-	433	1,006	31	1,037
Transactions with shareholders:
Repurchase of shares	-	-	-	-	-	-80	-80	-	-80
Share matching plan	-	-	-	-	-	43	43	-	43
Dividend	-	-	-	-	-	-237	-237	-	-237
Acquisition and sale of non-controlling interest	-	-	-	-	-	-	-	-1	-1
Closing balance, 31 December 2010	1,746	543	648	-12	51	8,298	11,274	170	11,444

For a definition of other reserves, see Note 33.

CONSOLIDATED STATEMENT OF CASH FLOWS

		1 January – 31 December
MSEK	Note	2010	2009
Operating activities
Income after financial items		776	976
Transferred to pension fund		-147	-190
Adjustments for items not affecting cash flow	47	2,317	1,835
Income tax paid		-196	-183
Cash flow from operating activities before changes in working capital		2,750	2,438
Cash flow from changes in working capital
Increase(–)/Decrease(+) in inventories		586	-401
Increase(–)/Decrease(+) in current receivables		855	1,927
Increase(+)/Decrease(–) in advance payments from customers		194	-485
Increase(+)/Decrease(–) in other current liabilities		399	-1,522
Increase(+)/Decrease(–) in provisions		-297	-261
Cash flow from operating activities		4,487	1,696
Investing activities
Investments in intangible fixed assets		-70	-14
Capitalised development costs		-47	-67
Investments in tangible fixed assets		-262	-197
Investments in lease assets		-2	-3
Sale of tangible fixed assets		11	9
Sale of lease assets		65	130
Investments in and sale of short-term investments		-993	-551
Investments in and sale of other financial assets		-6	224
Investments in subsidiaries, net effect on liquidity	8, 47	-	-68
Sale of subsidiaries and associated companies, net effect on liquidity	8, 47	161	11
Cash flow from investing activities		-1,143	-526
Financing activities
Repayment of loans		-1,950	-279
Repurchase of shares		-80	-110
Dividend paid to Parent Company's shareholders		-237	-187
Contributions from non-controlling interest		-	6
Cash flow from financing activities		-2,267	-570
CASH FLOW FOR THE YEAR	47	1,077	600
Liquid assets at beginning of year		1,463	822
Exchange rate difference in liquid assets		4	41
Liquid assets at year-end	47	2,544	1,463

For Saab's operating cash flow, see Note 47 and page 66.

CAPITAL EXPENDITURES

Gross capital expenditures in property, plant and equipment, excluding lease assets, amounted to MSEK 262 (197).

Investments in intangible assets amounted to MSEK 117 (81) of which MSEK 47 (67) are related to capitalised product development and MSEK 70 (14) to other intangible assets.

CASH FLOW

Operating cash flow amounted to MSEK 4,349 (1,447) in 2010. The increase was driven by significant improvements in working capital, larger milestone payments and increased amount of accounts receivable sold. It was distributed between cash flow from core operating activities of MSEK 4,043 (1,088), acquisitions and divestments of subsidiaries and associated companies of MSEK 161 (-57) and the leasing aircraft business of MSEK 145 (416).

In 2009, Saab launched an accounts receivable sales programme to strengthen its financial position and increase financial flexibility. The accounts receivable sold are in most cases related to customers with high credit worthiness and one hundred per cent of the value of the receivables is sold at attractive funding levels. As per 31 December, receivables of MSEK 1,409 were sold, compared to MSEK 789 at 31 December 2009.

In Aeronautics, some projects entered into final stages of completion in 2010. This will lead to a reduction in customer advances and a lower cash flow generation as these projects are finalised.

Specification of operating cash flow 2010

	Saab excl acquisi tions /divest	Acquisitions and	Saab Aircraft	Total Group	Total Group
MSEK	ments and SAL	divestments	Leasing	2010	2009
Cash flow from operating activities before changes in working capital	2,676	-	74	2,750	2,438
CASH FLOW FROM CHANGES IN WORKING CAPITAL
Inventories	541	-	45	586	-401
Current receivables	838	-	17	855	1,927
Advance payments from customers	194	-	-	194	-485
Other current liabilities	548	-	-149	399	-1,522
Provisions	-391	-	94	-297	-261
Change in working capital	1,730	-	7	1,737	-742
Cash flow from operating activities	4,406	-	81	4,487	1,696
INVESTING ACTIVITIES
Investments in intangible fixed assets	-117	-	-	-117	-81
Investments in tangible fixed assets	-262	-	-	-262	-197
Investments in lease assets	-2	-	-	-2	-3
Sale of tangible fixed assets	11	-	-	11	9
Sale of lease assets	-	-	65	65	130
Sale of and investment in financial assets, etc.	7	-	-1	6	-50
Investments in subsidiaries, net effect on liquidity	-	-	-	-	-68
Sale of subsidiaries and associated companies, net ef fect on liquidity	-	161	-	161	11
Cash flow from investing activities excluding change in short-term investments and other interest-bearing
financial assets	-363	161	64	-138	-249
OPERATING CASH FLOW	4,043	161	145	4,349	1,447

PARENT COMPANY INCOME STATEMENT

1 January – 31 December

MSEK	Note	2010	2009
Sales	3, 4	14,745	15,385
Cost of goods sold		-11,523	-11,276
Gross income		3,222	4,109
Marketing expenses		-1,114	-1,138
Administrative expenses		-727	-675
Research and development costs		-824	-811
Other operating income	5	82	68
Other operating expenses	6	-16	-68
Operating income		623	1,485
Result from financial items:	13
Result from shares in Group companies		1,199	1,178
Result from shares in associated companies/joint ventures		32	7
Result from other securities and receivables held as fixed assets		107	-238
Other interest income and similar items		114	109
Interest expenses and similar items		-173	-309
Income after financial items		1,902	2,232
Appropriations	14	-83	3
Income before taxes		1,819	2,235
Taxes	15	-430	-560
Net income for the year		1,389	1,675

SALES AND INCOME

The Parent Company's sales in 2010 amounted to MSEK 14,745 (15,385). Operating income was MSEK 623 (1,485) and included provisions of MSEK 290 related to projects in Security and Defence Solutions that impacted profitability negatively. A total of MSEK 338 in restructuring costs impacted operating income negatively.

Net financial income and expenses amounted to MSEK 1,279 (747). The deviation between the result for 2010 and 2009 is explained by currency gains in the tender portfolio, positive currency differences, increased net interest and internal dividends. After appropriations of MSEK -83 (3) and taxes of MSEK -430 (-560), net income for the year amounted to MSEK 1,389 (1,675).

PARENT COMPANY COMPREHENSIVE INCOME

MSEK	Note	2010	2009
Net income for the year		1,389	1,675
Other comprehensive income		-	-
Net comprehensive income for the year		1,389	1,675

1 January – 31 December

PARENT COMPANY BALANCE SHEET

		as of 31 December
MSEK	Note	2010	2009
ASSETS
Fixed assets
Intangible fixed assets	16	127	96
Tangible fixed assets	17	2,205	2,280
Financial fixed assets
Shares in Group companies	45	9,405	9,520
Receivables from Group companies	24	557	760
Shares in associated companies and joint ventures	23	491	430
Receivables from associated companies and joint ventures	24	32	116
Other long-term securities holdings	26	1,457	1,495
Other long-term receivables	27	10	44
Deferred tax assets	15	417	689
Total financial fixed assets		12,369	13,054
Total fixed assets		14,701	15,430
Current assets
Inventories, etc.	28	2,782	3,310
Current receivables
Accounts receivable	29	1,338	990
Receivables from Group companies		2,107	2,828
Receivables from associated companies and joint ventures		26	100
Tax assets		-	2
Other receivables	27	1,991	6,403
Prepaid expenses and accrued income	30	512	558
Total current receivables		5,974	10,881
Short-term investments		1,544	551
Cash and bank balances		1,935	788
Total current assets		12,235	15,530
TOTAL ASSETS		26,936	30,960

LIQUIDITY, FINANCE, CAPITAL EXPENDITURE

AND NUMBER OF EMPLOYEES

The Parent Company's net debt amounted to MSEK 2,395 (6,369).

Gross capital expenditures in property, plant and equipment amounted to MSEK 150 (126).

At the end of 2010, the Parent Company had 7,915 employees, compared to 8,337 at the beginning of the year.

PARENT COMPANY BALANCE SHEET

			as of 31 December
MSEK	Note	2010	2009
EQUITY AND LIABILITIES
Equity	33
Restricted equity
Capital stock		1,746	1,746
Revaluation reserve		718	724
Statutory reserve		543	543
Unrestricted equity
Retained earnings		2,814	1,428
Net income for the year		1,389	1,675
Total equity		7,210	6,116
Untaxed reserves	46	502	419
Provisions
Provisions for pensions and similar commitments	37	192	379
Other provisions	38	1,465	1,513
Total provisions		1,657	1,892
Liabilities
Liabilities to credit institutions	36	2,223	4,112
Liabilities to Group companies		7,084	7,913
Advance payments from customers		98	3,182
Accounts payable		1,034	1,131
Liabilities to associated companies and joint ventures		69	139
Tax liabilities		83	-
Other liabilities	39	671	371
Accrued expenses and deferred income	40	6,305	5,685
Total liabilities		17,567	22,533
TOTAL EQUITY AND LIABILITIES		26,936	30,960
Assets pledged	42	110	210
Contingent liabilities	42	5,918	4,970

STATEMENT OF CHANGES IN EQUITY FOR THE PARENT COMPANY

		Restricted equity	Unrestricted equity
MSEK	Capital stock	Revaluation reserve	Statutory reserve	Retained earnings	Net compre hensive income	Total equity
Opening balance, 1 January 2009	1,746	731	543	1,804	-	4,824
Items reported directly in equity:
Group contributions	-	-	-	-164	-	-164
Tax attributable to Group contributions	-	-	-	43	-	43
Change in revaluation reserve	-	-7	-	7	-	-
Net comprehensive income for the year	-	-	-	-	1,675	1,675
Transactions with shareholders:
Dividend to shareholders	-	-	-	-187	-	-187
Repurchase of shares	-	-	-	-110	-	-110
Share matching plan	-	-	-	35	-	35
Closing balance, 31 December 2009	1,746	724	543	1,428	1,675	6,116
Opening balance, 1 January 2010	1,746	724	543	3,103	-	6,116
Items reported directly in equity:
Group contributions	-	-	-	-28	-	-28
Tax attributable to Group contributions	-	-	-	7	-	7
Change in revaluation reserve	-	-6	-	6	-	-
Net comprehensive income for the year	-	-	-	-	1,389	1,389
Transactions with shareholders:
Dividend to shareholders	-	-	-	-237	-	-237
Repurchase of shares	-	-	-	-80	-	-80
Share matching plan	-	-	-	43	-	43
Closing balance, 31 December 2010	1,746	718	543	2,814	1,389	7,210

PARENT COMPANY STATEMENT OF CASH FLOWS

			1 January – 31 December
MSEK	Note	2010	2009
Operating activities
Income after financial items		1,902	2,232
Adjustments for items not affecting cash flow	47	-651	-1,203
Income tax received		-	1
Cash flow from operating activities before changes in working capital		1,251	1,030
Cash flow from changes in working capital
Increase(–)/Decrease(+) in inventories		441	-865
Increase(–)/Decrease(+) in current receivables		1,149	2,023
Increase(+)/Decrease(–) in advance payments from customers		-93	-128
Increase(+)/Decrease(–) in other current liabilities		553	-1,187
Increase(+)/Decrease(–) in provisions		-324	-239
Cash flow from operating activities		2,977	634
Investing activities
Shareholders' contributions paid		-25	-37
Investments in intangible fixed assets		-68	-11
Investments in tangible fixed assets		-151	-126
Sale of tangible fixed assets		2	8
Investments in and sale of short-term investments		-993	-551
Investments in and sale of financial assets		223	-650
Investments in subsidiaries		-2	-
Sale of subsidiaries		-	570
Cash flow from investing activities		-1,014	-797
Financing activities
Change in receivables/liabilities, Group companies		857	2,176
Repurchase of shares		-80	-110
Repaymnet of loans		-2,415	-42
Dividend paid to shareholders		-237	-187
Group contributions received		1,223	378
Group contributions paid		-164	-1,501
Cash flow from financing activities		-816	714
CASH FLOW FOR THE YEAR		1,147	551
Liquid assets at beginning of year		788	237
Liquid assets at year-end	47	1,935	788

1 Accounting principles 73
2 Assumptions in the application of the accounting principles 81
3 Revenue distribution 81
4 Segment reporting 82
5 Other operating income 84
6 Other operating expenses 84
7 Leasing operations 84
8 Acquisitions and divestments of operations 85
9 Employees and staff costs 85
10 Auditors' fees and compensation 87
11 Operating expenses 87
12 Depreciation/amortisation and impairments 87
13 Financial income and expenses 88
14 Appropriations 88
15 Taxes 89
16 Intangible fixed assets 92
17 Tangible fixed assets 94
18 Lease assets and lease agreements 95
19 Biological assets 96
20 Investment properties 97
21 Shares in associated companies consolidated according to the equity method 97
22 Shares in joint ventures consolidated according to the proportional method 99
23 Parent Company's shares in associated companies and joint ventures 99
24 Receivables from Group companies, associated companies and joint ventures 100
25 Financial investments 100

26 Other long-term securities holdings 100
27 Long-term receivables and other receivables 100
28 Inventories 101
29 Accounts receivable 102
30 Prepaid expenses and accrued income 102
31 Liquid assets 102
32 Assets held for sale 102
33 Shareholders' equity 102
34 Earnings per share 103
35 Interest-bearing liabilities 103
36 Liabilities to credit institutions 104
37 Employee benefits 104
38 Provisions 108
39 Other liabilities 109
40 Accrued expenses and deferred income 110
41 Financial risk management and financial instruments 110
42 Assets pledged and contingent liabilities 117
43 Government grants 118
44 Transactions with related parties 118
45 Group companies 118
46 Untaxed reserves 119
47 Statement of cash flows, supplemental information 120
48 Information on Parent Company 121
49 Environmental report 121
50 Exchange rates used in financial statements 122
51 Definitions of key ratios 122

NOTE 1

ACCOUNTING PRINCIPLES

Operations

Saab AB is a Swedish limited company with its registered address in Linköping. The company's shares are listed on the nasdaq omx Stockholm's large cap list. The operations of Saab AB with its subsidiaries, joint ventures and associated companies (jointly referred to as Saab or the Group) have been divided since 1 January 2010 into five business areas: Aeronautics, Dynamics, Electronic Defence Systems, Security and Defence Solutions, and Support and Services. The operations in each business area are described in Note 4. Segment information for 2009 has been restated for comparability in accordance with the new distribution.

Saab has a strong position in Sweden and the large part of its sales are generated in Europe, in addition to which Saab has a local presence in South Africa, Australia, the U.S. and other selected countries.

On 16 February 2011, the Board of Directors and the President approved this annual report and consolidated accounts for publication, and they will be presented to the Annual General Meeting on 7 April 2011 for adoption.

Conformity to standards and laws

The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (ifrs) issued by the International Accounting Standards Board (iasb) and the interpretations of the International Financial Reporting Interpretations Committee (ifric) as approved by the eu. The consolidated accounts have also been prepared in accordance with the Swedish Financial Reporting Board's recommendation rfr 1 (December 2010) Supplementary Accounting Rules for Groups, which contains certain additional disclosure requirements for Swedish consolidated accounts prepared in accordance with ifrs.

The annual report for Saab AB has been prepared according to the Annual Accounts Act, the Swedish Financial Reporting Board's recommendation rfr 2 (December 2010) Reporting by Legal Entities and the pronouncements of the Swedish Financial Reporting Board. Differences between the accounting principles applied by Saab AB and the Group are the result of limitations on opportunities to apply ifrs by the Parent Company owing to the Annual Accounts Act, the Act on Safeguarding Pension Commitments and in certain cases current tax rules. Significant differences are described below under "Significant differences between the Group's and the Parent Company's accounting principles."

Assumptions in the preparation of the financial reports

The Parent Company's functional currency is Swedish kronor (sek), which is also the reporting currency for the Parent Company and for the Group. The financial reports are presented in sek. All amounts, unless indicated otherwise, are rounded off to the nearest million.

Assets and liabilities are carried at historical cost, with the exception of certain financial assets and liabilities, investment properties and biological assets, which are carried at fair value or amortised cost. Derivatives are carried at fair value.

Non-current assets and disposal groups held for sale are carried at the lower of their carrying amount and fair value less selling expenses at the time they were classified as held for sale.

The preparation of the financial reports in accordance with ifrs requires the Board of Directors and Management to make estimates and assumptions that affect the application of the accounting principles and the carrying amounts of assets, liabilities, revenue and expenses. Estimates and assumptions are based on historical experience and knowledge of the industry that Saab operates in, and under current circumstances seem reasonable. The result of these estimates and assumptions is then used to determine the carrying amounts of assets and liabilities that otherwise are not clearly indicated by other sources. Actual outcomes may deviate from these estimates and assumptions.

Estimates and assumptions are reviewed regularly, and the effect of changed estimates is recognised in profit or loss.

Estimates made by the Board of Directors and Management in applying the accounting principles in compliance with ifrs that may have a significant impact on the financial reports as well as estimates that may necessitate

significant adjustments in financial reports in subsequent years are described in more detail in Note 2.

The accounting principles described below for the Group have been applied consistently for all periods presented in the Group's financial reports, unless otherwise indicated below.

Application of new and revised accounting rules

The International Accounting Standards Board (iasb) and the International Financial Reporting Interpretations Committee (IFRIC) have issued and the eu has adopted the following new and revised standards, which apply as of the financial year 2010:

• Revised IFRS 1 First-time Adoption of IFRS is applied
• Amendment to IFRS 2 Share-based Payment (Cash-settled share-based payment transactions that can be settled by other group companies)
• Revised IFRS 3 Business Combinations
• Amendment to IAS 27 Consolidated and Separate Financial Statements
• Amendments to IAS 39 Financial Instruments: Recognition and Measurement (Clarification what can be considered hedged items)
• Improvements to IFRS 2009
• IFRIC 15 Agreements for the Construction of Real Estate
• IFRIC 17 Distributions of Non-cash Assets to Owners
• IFRIC 18 Transfers of Assets from Customers.

Of these, only the revised IFRS 3 Business Combinations and the amended IAS 27 Consolidated and Separate Financial Statements are expected to have a material effect on the consolidated financial statements, though not in 2010.

IFRS 3 and IAS 27 apply to business combinations and divestments. The new rules can be summarised as follows:

• Transaction costs are not included in cost and instead are treated as overhead and recognised in profit or loss when they arise.
• Contingent consideration is measured at fair value on the acquisition date and effects of revaluations are recognised in profit or loss.
• An acquisition analysis according to IFRS 3 is done only when decisive influence is obtained. In the case of step acquisitions, previously owned interests are revalued at fair value once decisive influence is obtained. Any gain or loss on the previously owned interest is recognised in profit or loss.
• Transactions that result in a change in ownership interest after decisive influence has been obtained are recognised as transactions affecting the owners' equity.
• Non-controlling interests are recognised on the acquisition date either at fair value or their proportionate share of the fair value of the acquired operations' identified assets and liabilities.
• The definition of operations has changed.

The amendments are applied prospectively as of 1 January 2010.

Other new and amended standards and interpretations have not had an effect on the Group's 2010 financial reports.

New and amended standards and interpretations that have not yet entered into force

The International Accounting Standards Board (iasb) has issued the following new and amended standards that have not yet entered into force and the International Financial Reporting Interpretations Committee (ifric) has published the following new and amended interpretations that have not yet entered into force:

Standards	Will apply to financial years beginning:
Improvements to ifrs 2010*	Varies, earliest 1 July 2010
Amendment to ifrs 1 First-time Adoption of IFRS applies (Restructured version)	on or after 1 July 2010
Amendment to ifrs 7 Disclosures: Transfers of Financial Assets*	on or after 1 July 2011
ifrs 9 Financial Instruments (new standard)*	1 January 2013
Amendment to ias 24 Related Party Disclosures	on or after 1 January 2011
Amendment to ias 32 Financial Instruments: Presentation (Presentation of subscription rights)	on or after 1 February 2010
Interpretations from IFRIC
Amendment to ifric 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction	1 January 2011
ifric 19 Extinguishing Financial Liabilities with Equity Instruments	on or after 1 July 2010
*) Not yet approved for application within the EU.

The effect on Saab of the application of IFRS 9 has not yet been determined. Other standards and interpretations are not expected to have a material effect on the Group's financial reports.

Operating segments

Segment information is presented based on management's view, and operating segments are identified based on internal reporting to the company's chief operating decision maker. Saab has identified the Chief Executive Officer as its chief operating decision maker, while the internal reports used by the ceo to oversee operations and make decisions on allocating resources serve as the basis of the information presented. The accounting principles for reportable segments conform to the principles applied by the Group as a whole.

The Group had five reportable segments in 2010:

• Aeronautics
• Dynamics
• Electronic Defence Systems
• Security and Defence Solutions
• Support and Services

Sales of goods and services between segments are made on market terms. A detailed description of the segments, together with the factors used to identify segments, can be found in note 4 and on pages 36–39.

Classification of assets and liabilities

Current assets and current liabilities generally consist of amounts that can be recovered or paid within twelve months of the closing day. Other assets and liabilities are recognised as fixed assets or long-term liabilities.

Consolidation principles

Group companies

Group companies are companies in which Saab AB has a decisive influence through a direct or indirect shareholding amounting to more than 50 per cent of the votes, other than in exceptional circumstances where it can be clearly demonstrated that such ownership does not constitute a decisive influence. Decisive influence also exists when the parent owns not more than half of the voting power of an entity but otherwise has a decisive influence over more than half the voting rights or the power to govern the financial and operating policies of the entity under a statute or agreement. When determining whether a decisive influence exists, potential voting shares that can be exercised or converted without delay are taken into account.

Subsidiaries and acquired operations (business combinations) are recognised according to the purchase accounting method. This means that a business combination is treated as a transaction whereby the Group indirectly acquires the business's assets and takes over its liabilities and contingent liabilities. The Group's cost is determined through an acquisition analysis with regard to the acquisition of operating entities. Cost is comprised of the sum of the fair value of what of is paid in cash on the acquisition date through the assumption of liabilities or shares issued. Contingent consideration is included in cost and recognised at its fair value on the acquisition date. The subsequent effects of revaluations of contingent consideration are recognised in profit or loss. Acquired identifiable assets and assumed liabilities are initially recognised at their acquisition-date fair value. The exceptions to this principle are acquired tax assets/liabilities, employee benefits, share-based payment and assets held for sale, which are valued in accordance with the principles described in the sections below for each item. Exceptions are also made for indemnification assets and repurchased rights. Indemnification assets are valued according to the same principle as the indemnified item. Repurchased rights are valued based on the remaining contractual period regardless of whether other market players might consider opportunities for contract extensions in connection with valuations. Recognised goodwill consists of the difference between, on the one hand, the cost of Group company's interests, the value of non-controlling interests in the acquired company and the fair value of the previously owned interest and, on the other, the carrying amount of the acquired assets and assumed liabilities in the acquisition analysis. Goodwill is recognised according to the section on intangible fixed assets. Non-controlling interests are recognised on the acquisition date either at fair value or their proportionate share of the carrying amount of the acquired company's identified assets and liabilities. Acquisitions of non-controlling interests are recognised as transactions affecting the owners' equity.

The financial reports of Group companies are included in the consolidated accounts from the point in time when a decisive influence arises (acquisition date) until this influence ceases. When decisive influence over the Group company ceases but the Group retains an interest in the company, the remaining shares are initially recognised at fair value. The gain or loss that arises is recognised in profit or loss.

Associated companies

Associated companies are companies over which the Group has a significant (but not decisive) influence over operating and financial controls, usually through a shareholding of between 20 and 50 per cent of the votes. From the point in time when the significant influence arises, the shares in the associated company are recognised according to the equity method in the consolidated accounts. The equity method is applied until the point in time when the significant influence ceases. The equity method means that the carrying amount of the shares in the associated company corresponds to the Group's share of the company's equity based on an application of the Group's accounting principles as well as Group goodwill and any remaining Group surplus or deficit values. "Share in income of associated companies" in the income statement comprises the Group's share of the net income after tax and the noncontrolling interest in associated companies adjusted for any depreciation, impairment loss or dissolution of acquired surplus and deficit values determined in the same way as for operating acquisitions. Dividends received from the associated company reduce the carrying amount of the investment.

If the Group's share of the accumulated deficit in an associated company exceeds the carrying amount of the shares in the Group, the value of the shares is reduced to nil. Losses are also offset against long-term uncollateralised financial balances that in their economic significance represent part of the ownercompany's net investment in the associated company. Subsequent losses are not recognised as a liability in the consolidated accounts as long as the Group has not issued any guarantees to cover losses arising in the associated company.

When decisive inflluence over the associated company ceases but the Group retains an interest in the company, the remaining shares are initially recognised at fair value. The gain or loss that arises is recognised in profit or loss.

Joint ventures

Companies in which the Group, through a cooperative agreement with one of more parties, shares a decisive influence over operating and financial controls are recognised in the consolidated accounts according to the proportional method. For joint ventures, this means that the Group's share of the companies' revenue and expenses and their assets and liabilities is recognised in the consolidated income statement and statement of financial position based on application of the Group's accounting principles. This is done by combining Saab's share of revenue and expenses and assets and liabilities in the joint venture with the corresponding items in the consolidated accounts. When a joint venture is terminated but the Group retains an interest in the company, the remaining shares are initially recognised at fair value. The gain or loss that arises is recognised in profit or loss.

Eliminated transactions

Intra-Group receivables and liabilities, revenue or expenses, and gains or losses that arise from transactions between Group companies are eliminated in their entirety in the preparation of the consolidated accounts.

Gains that arise from transactions with associated companies and joint ventures are eliminated to an extent corresponding to the Group's ownership interest in the company. Losses are eliminated in the same way as gains, but only to the extent there that is no impairment loss.

Foreign currency

Functional currencies are the currencies in each primary economic environment where units of the Group conduct their operations.

Transactions and assets and liabilities in foreign currency

Transactions in foreign currency are recognised in the functional currency at the exchange rate on the transaction day. Monetary assets and liabilities are translated to the functional currency on the closing day at the exchange rate then in effect. Exchange rate differences that arise through these translations are recognised in profit and loss. Non-monetary assets and liabilities recognised at fair value are translated to the functional currency at the rate in effect at the time of valuation at fair value. Changes in exchange rates are then recognised in the same way as other changes in value of the asset or liability.

Translation of financial reports of foreign operations to sek

Assets and liabilities in operations with a functional currency other than sek are translated to sek at the closing day exchange rate. Revenue and expenses in foreign operations are translated to sek at the average rate. Translation differences that arise through currency translations are recognised directly in the comprehensive income. The amount is recognised separately as a translation reserve in equity.

Revenue

Revenue is measured at the fair value of what is received or will be received after deducting sales tax, returns, discounts or other similar deductions.

Sales of goods

Revenue from the sale of goods is recognised in profit or loss when the significant risks and benefits associated with ownership have transferred to the buyer, when it is considered likely that payment will be received and the revenue and related expenses can be calculated reliably.

Service assignments

Revenue from service assignments is recognised when the services are rendered. Revenue from services rendered as part of fixed-price contracts is recognised in accordance with the principles that apply to long-term customer agreements; see below. Revenue is recognised only if it is likely that the economic benefits will accrue to the Group.

Long-term customer agreements

A large part of the Group's operations comprises long-term customer agreements. When such agreements concern development and hardware that can be reliably calculated, revenue and expenditures attributable to the assignment are recognised in the consolidated income statement in relation to the assignment's stage of completion, i.e., according to the percentage of completion method.

The stage of completion is based on a determination of the relationship between expenditures incurred for services rendered as of the closing day and estimated total expenditures. Of the estimated total revenue for an

assignment, including interest on advance payments, the portion corresponding to the stage of completion is recognised in each period. The stage of completion can also be determined in certain cases based on milestones or deliveries. With regard to orders that are financed to a significant extent with advance payment from customers, the effect on interest of advance financing is recognised in gross income. The interest amount that affected gross income is indicated in Note 13.

An anticipated loss is recognised in profit or loss as soon as it is identified. Recognised subcontracting revenue for which the customer has not yet been invoiced is recognised as a receivable from that customer.

Operating expenses

The income statement is classified according to function as follows:

• Cost of goods sold comprises costs for material handling and manufacturing costs, including salary and material costs, purchased services, premises, and the depreciation/amortisation and impairment of intangible and tangible fixed assets.
• Administrative expenses relate to expenses for the Board of Directors, Group Management and staff functions.
• Marketing expenses comprise expenses for the in-house marketing and sales organisation.
• Research and development costs are recognised separately and comprise the cost of new and continued product development as well as amortisation of capitalised development costs; see below.
• Other operating revenue and expenses relate to secondary activities, exchange rate differences on items of an operating nature, changes in the value of derivatives of an operating nature and capital gains/losses on the sale of tangible fixed assets. Also included at the Group level are capital gains/losses on the sale of subsidiaries and associated companies.

Government grants

Government grants are recognised in the statement of financial position as prepaid or accrued income when there is reasonable certainty that the grant will be received and that the Group will meet the conditions associated with the grant. Grants are systematically recognised in the income statement in the same way and over the same periods as the expenses for which the grants are intended to compensate. Government grants related to assets are recognised in the statement of financial position as a reduction in the asset's carrying amount.

Financial revenue and expenses

Financial revenue and expenses consist of interest income on bank balances, receivables and marketable securities, interest expenses on loans, dividends, exchange rate differences, unrealised and realised gains on financial investments and derivatives used in financial operations.

Intangible fixed assets

Goodwill

Goodwill is distributed among cash-generating units and tested annually for impairment. Goodwill arising through the acquisition of associated companies is included in the carrying amount of the shares in the associated company.

In acquisitions where the cost is less than, on the one hand, the net of the cost of the Group company's shares, the value of non-controlling interests in the acquired company and the fair value of the previously owned interest and, on the other, the carrying amount of the acquired assets and assumed liabilities in the acquisition analysis, the difference is recognised directly through profit or loss.

Research and development

Expenditures for research undertaken in an effort to gain new scientific or technological knowledge are expensed when incurred.

Expenditures for development, where the research results or other knowledge is applied to new or improved products or processes, are recognised as an asset in the statement of financial position from the time when the product or process in the future is expected to be technically and commercially usable, the company has sufficient resources to complete development and subsequently use or sell the intangible asset, and the product or process is likely to generate future economic benefits. The carrying amount includes

expenditures for material, direct expenditures for salaries and, if applicable, other expenditures that are considered directly attributable to the asset. Other expenditures for development are recognised in profit for loss as an expense when they arise. Development expenditures are recognised in the statement of financial position at cost less accumulated amortisation and any impairment losses.

Other intangible fixed assets

Other acquired intangible fixed assets are recognised at cost less accumulated amortisation and any impairment losses.

Amortisation

Amortisation is recognised in profit or loss over the intangible fixed assets' estimated periods of use, provided such periods can be determined. Intangible fixed assets, excluding goodwill and other intangible fixed assets with indeterminate periods of use, are amortised from the day they are available for use. Estimated periods of use and amortisation methods are as follows:

• technical rights: 5–10 years, on a straight line basis
• capitalised development expenditures: Amortised in connection with production based on estimated production volume, for a maximum of 10 years or on a straight-line basis over the estimated period of use of 5–10 years.

Periods of use are tested annually and unfinished development work is tested for impairment at least once a year regardless of any indications of diminished value.

Tangible fixed assets

Tangible fixed assets are recognised as an asset in the statement of financial position if it is likely that the future economic benefits will accrue to the Group and the cost of the asset can be reliably estimated.

Tangible fixed assets are recognised at cost after deducting accumulated depreciation and any impairment. Cost includes the purchase price and costs directly attributable to putting the asset into place and condition to be utilised in accordance with the purpose of the purchase. Examples of directly attributable expenditures included in cost are delivery and handling, installation, title and consulting services.

The cost of fixed assets produced by Saab includes expenditures for material, expenditures for employee benefits and, where applicable, other production costs considered directly attributable to the fixed asset.

The cost of tangible fixed assets includes estimated costs for disassembly and removal of the assets as well as restoration of the location or area where these assets are found.

The carrying amount of a tangible fixed asset is excluded from the statement of financial position when the asset is sold or disposed of or when no future economic benefits are expected from its use. The gain or loss that arises on the sale or disposal is comprised of the difference between the sales price and the asset's carrying amount less direct selling expenses. Such gains and losses are recognised as other operating income/expenses.

Incremental expenditures

Incremental expenditures are added to cost only if it is likely that the future economic benefits tied to the incremental expenditures will accrue to the Group and the expenditures can be reliably estimated. All other incremental expenditures are recognised as costs in the period they arise.

The determining factor whether an incremental expenditure is added to cost is whether it relates to the replacement of identifiable components, or parts thereof. If so, the cost is capitalised. Even in cases where a new component is created, the expenditure is added to cost. Any undepreciated carrying amount of replaced components, or parts of components, is disposed of and expensed in connection with the replacement. Repairs are expensed as incurred.

Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset and takes a substantial period of time to prepare for its intended use or sale is capitalised as part of the asset's cost when it is likely that they will lead to future economic benefits for the Group and the expenditures can be measured reliably. Other borrowing costs are expensed in the period in which they arise.

Depreciation

Depreciation is booked on a straight-line basis based on the asset's cost less estimated residual value at the end of the period of use, over the asset's estimated period of use. Land is not depreciated. Component depreciation is applied, which means that fixed assets consisting of various components or where significant parts have different periods of use are depreciated as separate assets based on their periods of use.

Estimated periods of use:

• Operating properties: 20–90 years
• Property, plant and equipment: 5–10 years
• Equipment, tools, installations and computers: 3–10 years
• Aircraft: 20–25 years

Each asset's residual value and period of use are estimated annually. Periods of use are unchanged compared with the previous year.

Lease assets

Lease assets mainly refer to 64 aircraft owned by legal entities within Saab Aircraft Leasing and leased out via operating leases. Saab Aircraft Leasing's fleet consists of 106 Saab 340 and Saab 2000, of which 42 aircraft are leased in through operating leases and leased out through operating leases.

Leasing is classified in the consolidated accounts as either finance or operating leasing. Finance leasing exists when the economic risks and benefits tied to ownership are essentially transferred to the lessee; otherwise it is operating leasing.

For anticipated or established deficits according to current leases with respect to aircraft financing in Saab Aircraft Leasing, provisions are allocated at an amount corresponding to the obligation. See also Note 7.

Saab as lessor

At year-end 2010, Saab only had operating leases. Leasing revenue is recognised on a straight-line basis over the leasing period. Direct expenditures that arise by entering into an operating lease are expensed on a straight-line basis over the leasing period.

Saab as lessee

At year-end 2010, Saab only had operating leases. Leasing fees for operating leases are expensed on a straight-line basis over the leasing period.

Biological assets

Biological assets in the form of forests are carried at fair value after deducting estimated selling expenses. Fair value is based on the valuation of an independent appraiser.

Investment properties

Investment properties are properties held to earn rental income, for capital appreciation or a combination of both. Investment properties are carried in the statement of financial position at fair value. Fair value is based on the valuation of an independent appraiser with recognised qualifications and adequate experience with properties in the location and category in question. As an alternative, the valuation is made by calculating net rental income, which then serves as the basis of a determination of fair value.

Assets held for sale

When an asset is classified as held for sale, it means that its carrying amount will be recovered primarily through a sale rather than through use.

Immediately before classification as held for sale, the recognised value of the assets is determined according to the Group's accounting principles. Upon initial classification as held for sale, assets are recognised at the lower of their carrying amount and fair value less selling expenses.

Assets are not depreciated/amortised after they are classified as held for sale.

Impairment

The carrying amount of fixed assets, with the exception of assets stated at fair value, is tested on each closing day for any indication of impairment. If an indication exists, the asset's recoverable amount is calculated. A description of impairment principles for available-for-sale financial assets is provided below.

For goodwill and other intangible fixed assets with an indeterminate period of use and intangible fixed assets not yet ready for use, recoverable values are calculated at least annually.

The recoverable amount of an asset is the higher of its fair value less selling expenses and value in use. Value in use is measured by discounting future cash flows using a discounting factor that takes into account the risk-free rate of interest plus supplemental interest corresponding to the risk associated with the specific asset.

If essentially independent cash flows cannot be isolated for individual assets, the assets are grouped at the lowest levels where essentially independent cash flows can be identified (cash-generating units). An impairment loss is recognised when the carrying amount of an asset or cash-generating unit exceeds its recoverable value. Impairment losses are charged against the income statement.

Impairment losses attributable to a cash-generating unit (pool of units) are mainly allocated to goodwill, after which they are divided proportionately among other assets in the unit (pool of units).

Impairment of goodwill is not reversed.

Impairment losses from other assets are reversed if a change has occurred in the assumptions that served as the basis for determining recoverable value. Impairment is reversed only to the extent the carrying amount of the assets following the reversal does not exceed the carrying amount that the asset would have had if the impairment had not been recognised, taking into account the depreciation or amortisation that would have been recognised.

Financial assets and liabilities and other financial instruments

Financial instruments recognised in the statement of financial position include, on the asset side, liquid assets, accounts receivable, shares, loans receivable, bonds receivable, derivatives and part of accrued income and other receivables. Liabilities include trade accounts payable, loans payable, derivatives and part of accrued expenses and other liabilities.

Financial instruments are initially recognised at cost, corresponding to the instrument's fair value plus transaction expenses for all financial instruments with the exception of those in the category financial assets at fair value through profit or loss. The instruments are subsequently recognised at fair value or amortised cost, depending on how they have been classified as follows. The fair value of listed financial assets and liabilities is determined using market prices. Saab also applies various valuation methods to determine the fair value of financial assets and liabilities traded on an inactive market. These valuation methods are based on the valuation of similar instruments, discounted cash flows or accepted valuation models such as Black and Scholes. Amortised cost is determined based on the effective interest rate calculated on the acquisition date.

A financial asset or financial liability is recognised in the statement of financial position when the company becomes party to the instrument's contractual terms. Accounts receivable are recognised in the statement of financial position when an invoice has been sent. Liabilities are recognised when the counterparty has performed and there is a contractual obligation to pay, even if an invoice has not yet been received. Accounts payable are recognised when an invoice is received.

A financial asset is removed from the statement of financial position when the rights in the agreement are realised, expire or the company loses control over them. The same applies to part of a financial asset. A financial liability is removed from the statement of financial position when the obligation in the agreement has been discharged or otherwise extinguished. The same applies to part of a financial liability.

On each reporting date, Saab evaluates whether there are objective indications that a financial asset or pool of financial assets is in need of impairment. Financial assets and liabilities are offset and recognised as a net amount in the statement of financial position when the there is a legal right to a set-off and when the intent is to settle the items with a net amount or to realise the asset and settle the liability at the same time.

Financial assets and liabilities are classified in one of the following categories:

Financial assets and liabilities at fair value through profit or loss

Assets and liabilities in this category are carried at fair value with changes in value recognised in profit or loss. This category consists of two subgroups: financial assets and liabilities held for trading and other financial assets and liabilities that the company initially chose to recognise at fair value through profit or loss. A financial asset is classified as held for trading if it is acquired for the purpose of selling in the near term. Derivatives are always recognised at fair value through profit or loss, unless hedge accounting is applied.

Held-to-maturity investments

Financial assets in this category relate to non-derivative assets with predetermined or determinable payments and scheduled maturities that the company intends and has the ability to hold to maturity. They are valued at amortised cost.

Loans receivable and accounts receivable

Loans receivable and accounts receivable are non-derivative financial assets with fixed payments which are not listed on an active market. Receivables arise when the company provides money, goods or services directly to the debtor without the intent to trade its claim. The category also includes acquired receivables. Assets in this category are recognised after acquisition at amortised cost.

Accounts receivable are recognised at the amount expected to be received based on an individual valuation. Accounts receivable have a short maturity, due to which they are recognised at their nominal amount without discounting. Impairment losses on accounts receivable are recognised in operating expenses.

Other receivables are receivables that arise when the company provides money without the intent to trade its claim.

Other financial liabilities

Liabilities classified as other financial liabilities are initially recognised at the amount received after deducting transaction expenses. After acquisition, the loans are carried at amortised cost, according to the effective rate method.

Trade accounts payable are classified in the category other financial liabilities. Trade accounts payable have a short expected maturity and are carried without discounting at their nominal amount.

Calculation of recoverable value

The recoverable value of financial assets in the categories held-to-maturity investments, loans receivable and accounts receivable measured at amortised cost is calculated using the present value of future cash flows discounted by the effective interest rate in effect when the asset was initially recognised. Assets with a maturity of less than one year are not discounted.

Impairment of held-to-maturity investments and loans receivable and accounts receivable recognised at amortised cost is reversed if a subsequent increase in recoverable value can objectively be attributed to an event occurring after the impairment

Liquid assets

Liquid assets consist of cash and cash equivalents, immediately accessible balances with banks and similar institutions, and short-term liquid investments with a maturity from acquisition date of less than three months, which are exposed to no more than an insignificant risk of fluctuation in value.

Financial investments

Financial investments comprise either financial fixed assets or short-term investments, depending on the intent of the holding. If the maturity or the anticipated holding period is longer than one year, they are considered financial fixed assets, and if it is shorter than one year they are short-term investments.

With recognition at fair value through profit or loss, changes in value are stated in financial revenue and expenses.

Derivatives and hedge accounting

Derivatives include forward exchange contracts, options and swaps utilised to cover risks associated with changes in exchange rates and exposure to interest rate risks. Derivatives are recognised at fair value upon acquisition and subsequently.

Derivatives with positive values are recognised as assets and derivatives with negative values are recognised as liabilities under the heading derivatives in the statement of financial position. Gains and losses on a derivative arising due to a change in fair value are recognised in profit or loss if the derivative is classified among financial assets and liabilities at fair value through profit or loss.

In hedge accounting, derivatives are classified as fair value hedges or cash flow hedges. The recognition of these hedging transactions is described below.

Cash flow hedges

Certain forward exchange contracts and currency swaps (hedge instruments) entered into to hedge future receipts and disbursements against currency risks are accounted for according to the rules for cash flow hedging. Derivatives that protect future receipts and disbursements are recognised in the statement of financial position at fair value. Changes in value are recognised in other comprehensive income and separately recognised in the hedge reserve in equity until the hedged cash flow meets the operating profit or loss, at which point the cumulative changes in value of the hedging instrument are transferred to profit or loss to meet and match the effects on earnings of the hedged transaction.

Interest rate exposure from future variable-rate liabilities is hedged with interest rate swaps. In its reporting, Saab applies cash flow hedging, which means that the change in value of the interest rate swap is recognised in other comprehensive income and separately recognised in the hedge reserve in equity. The change in value is recognised in financial revenue and expenses when transferred to profit or loss.

When the hedged future cash flow refers to a transaction that will be capitalised in the statement of financial position, the net gain or loss on cash flow hedges in equity is dissolved when the hedged item is recognised in the statement of financial position. If the hedged item is a non-financial asset or a nonfinancial liability, the reversal from the net gain or loss on cash flow hedges in equity is included in the original cost of the asset or liability. If the hedged item is a financial asset or financial liability, the net gain or loss on cash flow hedges in equity is gradually reversed through profit or loss at the same rate that the hedged item affects earnings.

When a hedging instrument expires, is sold or is exercised, or the company revokes the designation as a hedging relationship before the hedged transaction occurs and the projected transaction is still expected to occur, the recognised cumulative gain or loss remains in the net gain or loss on cash flow hedges in equity and is recognised in the same way as above when the transaction occurs.

If the hedged transaction is no longer expected to occur, the hedging instrument's cumulative gains and losses are immediately recognised in profit or loss in accordance with principles described above for derivatives.

Fair value hedges

Certain forward exchange contracts and currency swaps (hedge instruments) entered into to hedge future receipts and disbursements for currency and interest rate risk are accounted for according to the rules for fair value hedging. These hedges are recognised at fair value in the statement of financial position with regard both to the derivative itself and the future receipt or disbursement (hedge item) for the risk being hedged. The change in fair value of the derivative is recognised in the profit and loss together with the change in value of the hedged item.

Hedge of currency exposure in assets and liabilities

Currency exposure from an asset or liability is hedged with forward exchange contracts. No hedge accounting is applied, due to which both the hedged item and hedging instrument are recognised with respect to currency risk at fair value with changes in value through profit or loss. Changes in the value of operations-related receivables and liabilities are recognised in operating income, while changes in the value of financial receivables and liabilities are recognised in financial revenue and expenses.

Valuation principles

The fair value of listed financial assets is determined using market prices. Furthermore, Saab applies various valuation methods to determine the fair value of financial assets that are traded on an inactive market. These methods are based on the valuation of similar instruments, discounted cash flows or customary valuation methods such as Black and Scholes. See Note 41.

Inventories

Inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in continuing operations after deducting estimated expenses for completion and expenses incurred in selling.

Cost is calculated by applying the first-in first-out method (fifo) and includes expenses to acquire inventory assets and bring them to their present location and condition. For finished and semifinished goods, cost consists of direct manufacturing expenses and a reasonable share of indirect manufacturing expenses as well as expenses to customise products for individual customers. Calculations take into account normal capacity utilisation.

Dividends

The dividend proposed by the Board of Directors reduces earnings available for distribution and is recognised as a liability when the Annual General Meeting has approved the dividend.

Employee benefits

The Group has two types of pension plans: defined-contribution and definedbenefit pension plans.

Defined-contribution plans

In defined-contribution plans, pensions are based on the premiums paid. Obligations with regard to defined-contribution plans are expensed in the income statement.

Defined-benefit plans

In defined-benefit plans, pensions are based on a percentage of the recipient's salary. Saab has around ten different types of defined-benefit plans. The predominant plan is the itp plan, which accounts for approximately 5/6 of the total obligation. The second largest plan refers to the state-funded retirement pension and vested pensions in Affärsverket ffv when it was incorporated on 1 January 1991.

The Group's net obligation for defined-benefit plans is calculated separately for each plan by estimating the future compensation that employees have earned through employment in present and previous periods. This compensation is discounted to present value. Saab has secured main part of the obligation through provisions to a pension fund, and the fair value of the fund's assets is offset against the provision for the pension obligation at present value in the statement of financial position. The discount rate to calculate the commitment at present value has been determined based on the interest rate on the closing day for a first-class corporate bond with a maturity corresponding to the pension obligation. When there is no active market for such corporate bonds, the market interest rate on government bonds with a similar maturity is used instead. The calculation is made by a qualified actuary using the projected unit credit method.

When the compensation terms in a plan improve, the portion of the increased compensation attributable to the employees' services in previous periods is expensed through the income statement on a straight-line basis over the average period until the compensation is fully vested. If the compensation is fully vested, an expense is recognised directly through profit or loss.

The obligation is estimated on the closing day, and if the calculated amount deviates from the estimated commitment an actuarial gain or loss arises. All actuarial gains and losses as of 1 January 2004, the date of transition to ifrs, are recognised in equity and other items in the statement of financial position. For actuarial gains and losses that arise from the calculation of the Group's obligation for different plans after 1 January 2004, the socalled corridor rule is applied. This means that the portion of the cumulative actuarial gains and losses exceeding 10 per cent of the higher of the commitments' present value and the fair value of assets under management is recognised over the expected average remaining period of employment of the

employees covered by the plan. Actuarial gains and losses otherwise are not taken into account.

If pension obligations are lower than assets under management and actuarial losses, this amount is recognised as an asset.

When there is a difference in how the pension cost is determined for a legal entity and the Group, a liability or receivable for the special employer's contribution arises based on this difference.

Severance

A provision is recognised in connection with termination of personnel only if the company is obligated to terminate an employment before the customary time, e.g., when compensation is paid in connection with a voluntary termination offer. In cases where the company terminates personnel, a detailed plan is drafted containing at the minimum the workplaces, positions and approximate number of individuals affected as well as compensation for each personnel category or position and a schedule for the plan's implementation.

Share-based payment

Share-based payment refers solely to remuneration to employees, including senior executives. Share-based payment settled with the company's shares or other equity instruments is comprised of the difference between the fair value at the time these plans were issued and the consideration received. This remuneration is recognised as staff costs during the vesting period. To the extent the vesting conditions in the plan are tied to market factors (such as the price of the company's shares), they are taken into consideration in determining the fair value of the plan. Other conditions (such as earnings per share) affect staff costs during the vesting period by changing the number of shares or share-related instruments that are expected to be paid.

Share matching plan for employees

Saab has a Global Share Matching Plan where all employees are entitled to participate. The payroll expenses for matching shares in the plan are recognised during the vesting period based on the fair value of the shares. The employees pay a price for the share that corresponds to the share price on the investment date. Three years after the investment date, employees are allotted as many shares as they purchased three years earlier provided that they are still employees of the Saab Group and that the shares have not been sold. In certain countries, social security expenses are paid on the value of the employee's benefit when matching takes place. During the vesting period, provisions are allocated for these estimated social security expenses. Share repurchases to fulfil the commitments of Saab's share matching plans are recognised in equity.

In addition, a plan was introduced for senior executives entitling them to 2–5 matching shares depending on the category the employee belongs to. In addition to the requirement that the employee remain employed by Saab after three years, there is also a requirement that earnings per share grow in the range of 5 to 15 per cent. See also, Note 37.

Provisions

A provision is recognised in the statement of financial position when the Group has a legal or informal obligation owing to an event that has occurred and it is likely that an outflow of economic resources will be required to settle the obligation and a reliable estimate of the amount can be made. Where it is important when in time payment will be made, provisions are estimated by discounting projected cash flow at a pre-tax interest rate that reflects current market estimates of the time value of money and, where appropriate, the risks associated with the liability.

Regional aircraft

A provision for an aircraft lease is recognised when future lease receipts are less than unavoidable lease disbursements.

Restructuring

A provision for restructuring is recognised when a detailed, formal restructuring plan has been established and the restructuring has either begun or been publicly announced. No provision is made for future operating losses.

Loss contracts

A provision for a loss contract is recognised when anticipated benefits are lessthan the unavoidable costs to fulfil the obligations as set out in the contract.

Guarantees

A provision for guarantees is normally recognised when the underlying products or services are sold if a reliable calculation of the provision can be made. The provision is based on historical data on guarantees for the products or similar products and an overall appraisal of possible outcomes in relation to the likelihood associated with these outcomes.

Soil remediation

In accordance with the Group's publicly announced environmental policy and applicable legal requirements, periodic estimates are made of Saab's obligations to restore contaminated soil. Anticipated future payments are discounted to present value and recognised as a provision.

Contingent liabilities

A contingent liability exists if there is a possible commitment stemming from events whose occurrence is dependent on one or more uncertain future events and there is a commitment that is not recognised as a liability or provision because it is unlikely that an outflow of resources will be required or the size of the obligation cannot be estimated with sufficient reliability. Information is provided as long as the likelihood of an outflow of resources is not extremely small.

Taxes

Income taxes consist of current tax and deferred tax. Income taxes are recognised in profit or loss unless the underlying transaction is recognised in net comprehensive income or loss, in which case the related tax effect is also recognised in net comprehensive income or loss.

Current tax is the tax paid or received for the current year, applying the tax rates that have been set or essentially set as of the closing day to taxable income and adjusting for current tax attributable to previous periods.

Deferred tax is calculated according to the balance sheet method based on temporary differences that constitute the difference between the carrying amount of assets and liabilities and their value for tax purposes. Deductible temporary differences are not taken into account in the initial reporting of assets and liabilities in a transaction other than a business combination and which, at the time of the transaction, do not affect either the recognised or taxable result. Moreover, temporary differences are not taken into account if they are attributable to shares in subsidiaries and associated companies that are not expected to be reversed within the foreseeable future. The valuation of deferred tax is based on how the carrying amounts of assets or liabilities are expected to be realised or settled. Deferred tax is calculated by applying the tax rates and tax rules that have been set or essentially are set as of the closing day.

Deferred tax assets from deductible temporary differences and tax loss carry forwards are only recognised to the extent it is likely that they will be utilised. The value of deferred tax assets is reduced when it is no longer considered likely that they can be utilised.

Significant differences between the Group's and the Parent Company's accounting principles

The Parent Company follows the same accounting principles as the Group with the following exceptions.

Business combinations

Transaction costs are included in the cost of business combinations.

Associated companies and joint ventures

Shares in associated companies and joint ventures are recognised by the Parent Company according to the acquisition value method. Revenue includes dividends received.

Intangible fixed assets

All development costs are recognised in profit or loss.

Tangible fixed assets

Tangible fixed assets are recognised after revaluation, if necessary. All leases are recognised according to the rules for operating leasing.

Borrowing costs

The Parent Company recognises borrowing costs as an expense in the period in which they arise.

Investment properties

Investment properties are recognised according to acquisition cost method.

Financial assets and liabilities and other financial instruments

The Parent Company carries financial fixed assets at cost less impairment and financial current assets according to the lowest value principle. If the reason for impairment has ceased, it is reversed.

The Parent Company does not apply the rules for setting off financial assets and liabilities.

Derivatives and hedge accounting

Derivatives that are not used for hedging are carried by the Parent Company according to the lowest value principle. For derivatives used for hedging, recognition is determined by the hedged item. This means that the derivative is treated as an off balance sheet item as long as the hedged item is recognised at cost or is not included on the balance sheet. Receivables and liabilities in foreign currency hedged with forward contracts are valued at the forward rate.

Employee benefits

The Parent Company complies with the provisions of the Law on Safeguarding of Pension Commitments and the regulations of the Swedish Financial Supervisory Authority, since this is a condition for tax deductibility.

Untaxed reserves

The amounts allocated to untaxed reserves constitute taxable temporary differences. Due to the connection between reporting and taxation, the deferred tax liability is recognised in the Parent Company as part of untaxed reserves.

Group contributions and shareholders' contributions for legal entities Shareholders' contributions are recognised directly in the equity of the recipient and capitalised in the shares and participating interests of the contributor, to the extent impairment is not required.

Group contributions are recognised based on their economic intent. This means that Group contributions paid in order to minimise the Group's total taxes are recognised directly against retained earnings after deducting the current tax effect. Group contributions equated with dividends are recognised as a dividend. This means that Group contributions received and the effect on current tax are recognised in profit or loss. Group contributions paid and effect on current tax are recognised directly in retained earnings.

Group contributions equated with shareholders' contributions are recognised by the recipient directly in retained earnings taking into account the effect on current tax. The contributor recognises Group contributions and the effect on current tax as an investment in shares in Group companies with subsequent impairment testing.

NOTE 2

ASSUMPTIONS IN THE APPLICATION OF THE ACCOUNTING PRINCIPLES

The Board of Directors and Group Management together have identified the following areas where estimates and assumptions in the application of the accounting principles may have a siginificant impact on the accounting of the Group's results of operations and financial position and may result in significant adjustments in subsequent financial reports. Developments in these areas are monitored continuously by Group Management and the Board of Directors' audit committee.

UNCERTAINTIES IN ESTIMATES AND ASSUMPTIONS

Long-term customer projects

A majority of all long-term customer projects contain significant development aspects, which are associated with risks. Before a contract is signed with a customer on delivery of a product, solution or service, a thorough analysis is always made of the prerequisites and risks of the delivery through a project management process established within Saab. In the execution stage, continuous reviews are then made of the work in the project according to the same process. An important aspect is to identify risks and assess them and the measures that are taken to mitigate the risks with the help of a risk assessment method.

The Group applies the percentage of completion method to recognise revenue from long-term customer projects. An estimation of total costs is critical in revenue recognition and provisions for loss contracts as well as inventory valuations, and the outcome of technical and commercial risks may affect income.

Recovery of value of development costs

The Group has invested significant amounts in research and development. The reported amounts in the statement of financial position are primarily due to development projects relating to exports of Gripen, electronic warfare systems, missile systems, radar and sensors. Capitalised development costs amount to msek 2,428 (3,038). The recognition of development expenditures as an asset on the statement of financial position requires an assumption that the product is expected to be technically and comercially usable in the future and that future economic benefits are likely. Capitalised development costs are amortised over the estimated production volume or period of use, up to a maximum of 5 years, with the exception of acquired development costs, where the maximum period of use is 10 years. Projected production volumes and periods of use may later be reassessed, which could necessitate impairment.

Impairment testing of goodwill

In the calculation of cash-generating units to determine whether there has been an impairment of goodwill, assumptions have been made with regard to the calculation of value in use, which is based on discounted cash flow projections. A significant deviation in the conditions will affect the value of goodwill. The carrying amount for goodwill amounts to msek 3,470 (3,457).

Leasing fleet

The portfolio consists of 106 aircraft, of which 64 are recognised as lease assets. Of the 106 aircraft, 42 are covered by insurance from the Swedish Export Credits Guarantee Board. As of year-end, there were 25 unleased aircraft, of which 9 aircraft are allocated to customers for delivery during 2011. Provisions for obligations have been made based on estimates and assumptions of future lease levels and a discount rate corresponding to a market-rate return, including risk-free interest. Changes in conditions may necessitate an impairment or a higher provision. The extent of leasing operations is indicated in Notes 7 and 18.

NOTE 3

REVENUE DISTRIBUTION

Revenue by significant source

		Group		Parent Company
MSEK	2010	2009	2010	2009
Sale of goods	4,359	4,959	1,670	1,930
Long-term customer contracts	13,826	14,217	8,836	9,724
Service assignments	6,246	5,462	4,237	3,725
Royalties	3	9	2	6
Total	24,434	24,647	14,745	15,385

Sale of goods

The sale of goods includes sales of goods manufactured by Saab and goods purchased for resale, e.g., spare parts and other equipment which is sold separately.

Long-term customer contracts

Long-term customer contracts relate to the development and manufacture of complex systems that stretch across several accounting periods.

For long-term customer contracts on development and hardware that can be calculated reliably, revenue and expenditures attributable to the assignment are recognised as income and expenses in the consolidated income statement in relation to the assignment's stage of completion, i.e., according to the percentage of completion method.

Service assignments

Service assignments refer to the performance of a service on behalf of a customer during a contractual period, e.g., consulting and support services.

Royalties

Royalties include revenue from outside parties for the use of Saab's assets such as patents, trademarks and software.

NOTE 4

SEGMENT REPORTING

Saab is one of the world's leading high technology companies, operating principally in the areas of defence, aeronautics and civil security. Operations primarily comprise well-defined areas in defence electronics and missile systems as well as military and civil aeronautics. Saab is also active in technical services and maintenance. Saab has a strong position in Sweden and the large part of sales is generated in Europe. In addition, Saab has a local presence in South Africa, Australia, the us and other selected countries. As a result of a reorganisation as of 1 January 2010, Saab is divided into five business areas, which also represent operating segments, Aeronautics, Dynamics, Electronic Defence Systems, Security and Defence Solutions, and Support and Services. The business areas are described below.

Aeronautics

These operations include the development of civil and military aviation technology at a high level. The product portfolio includes the Gripen fighter and Unmanned Aerial Systems (uas). Aeronautics also manufactures aircraft components for Saab's own aircraft as well as passenger aircraft produced by others.

Dynamics

The product portfolio comprises advanced weapon systems such as support weapons, missiles, torpedoes, Remotely Operated Vehicles (rovs) and signature management systems that are used to make it more difficult for various types of sensors to detect and identify people or objects.

Electronic Defence Systems

These operations, which are based on Saab's extensive expertise in radar and electronic warfare, develop sophisticated solutions for detection, localisation and protection. The product portfolio includes air and land-based sensor and radar systems, systems for electronic warfare, defence electronics and aeronautics.

Security and Defence Solutions

These operations comprise both the military and civil security market with a competitive product portfolio consisting of c4isr (computerized command, control, communications and intelligence) systems, airborne early warning systems, solutions for civil security, training and simulation systems, and solutions for telecom operators.

Support and Services

These operations offer reliable, cost-effective service and support in all markets where Saab is active. This primarily includes integrated support solutions, technical maintenance and logistics, and products, solutions and services for military and civil missions in locations with limited infrastructure.

Significant items not affecting cash flow

Significant items that do not affect cash flow relate in 2010 to restructuring expenses of msek 477 (300), which are divided by operating segment as follows: Aeronautics msek 31 (100) , Dynamics msek 240 (180), Electronic Defence Systems msek 55 (0), Security and Defence Solutions msek 36 (0), Support and Services msek 50 (20) and Corporate msek 65 (0).

In 2009, a revaluation of remaining risks in the regional aircraft portfolio affected income positively by msek 350 without affecting cash flow and was reported within Corporate.

Information on major customers

Saab has one customer, the Swedish Defence Materiel Administration (fmv), which accounts for 10 per cent or more of the Group's revenue. fmv is a customer of every business area, generating total revenue of msek 6,404 (5,499) in 2010.

Information on geographical areas

External sales are distributed to the market where the customer is domiciled, while fixed assets are distributed to the market where the asset is geographically located.

Group		Aeronautics		Dynamics		Electronic Defence Systems		Security and Defence Solutions		Support and Services		Corporate		Eliminations		Group
MSEK	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009
External revenue	6,482	7,297	4,648	4,460	3,366	3,725	6,086	5,621	3,084	2,903	768	641	-	-	24,434	24,647
Internal revenue	259	274	93	120	988	945	124	179	319	661	317	363	-2,100	-2,542	-	-
Total revenue	6,741	7,571	4,741	4,580	4,354	4,670	6,210	5,800	3,403	3,564	1,085	1,004	-2,100	-2,542	24,434	24,647
Operating income before share in income of associated companies	191	66	300	246	90	18	137	278	351	410	-108	399	-	-	961	1,417
Share in income of associated companies	-	-60	22	23	9	6	-	-	-	-	-17	-12	-	-	14	-43
Operating income	191	6	322	269	99	24	137	278	351	410	-125	387	-	-	975	1,374
Share in income of associated companies	-	-	3	3	-	-	-	-1	-	-	23	-	-	-	26	2
Financial income	18	56	7	7	-	8	28	16	3	3	200	196	-140	-236	116	50
Financial expenses	-111	-165	-43	-50	-40	-53	-72	-80	-31	-31	-184	-307	140	236	-341	-450
Income before taxes	98	-103	289	229	59	-21	93	213	323	382	-86	276	-	-	776	976
Taxes	-67	-90	-72	-62	72	108	-107	-41	-3	-12	-145	-180	-	-	-322	-277
Net income for the year	31	-193	217	167	131	87	-14	172	320	370	-231	96	-	-	454	699
Assets	7,303	7,286	4,117	4,337	7,970	9,474	5,131	6,456	2,250		2,573 16,134		18,538 -13,627	-18,234	29,278	30,430
Of which shares in associated companies	-	-	53	27	124	113	-	2	-	-	74	214	-	-	251	356
Liabilities	7,214	7,354	2,575	2,786	3,852	4,922	4,064	5,207	1,541	1,830	8,009	10,935	-9,421	-13,286	17,834	19,748
Operating cash flow	30	-434	1,044	369	594	506	1,066	-217	894	81	721	1,142	-	-	4,349	1,447
Capital employed	2,118	2,146	2,496	2,880	4,584	5,621	2,282	3,159	1,248	1,807	5,083	3,508	-4,656	-4,790	13,155	14,331
Investments	63	62	53	58	70	59	33	47	15	7	147	48	-	-	381	281
Depreciation and amortisation	247	249	156	189	490	527	108	104	15	16	279	292	-	-	1,295	1,377
Impairments	-	-	38	8	-	-	20	15	-	-	5	-	-	-	63	23

Geographical areas

Group		Sweden		Rest of EU		Rest of Europe		North America		Latin America
MSEK	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009
External revenue 1)	9,223	7,714	4,737	5,675	368	280	2,083	1,764	116	154
as % of revenue	38	31	19	23	2	1	9	7	-	1
Fixed assets	10,066	11,490	139	167	34	37	1,088	1,287	5	-

Group		Asia		Africa		Australia, etc.		Total
MSEK	2010	2009	2010	2009	2010	2009	2010	2009
External revenue 1)	3,937	4,568	2,833	3,477	1,137	1,015	24,434	24,647
as % of revenue	15	19	12	14	5	4	100	100
Fixed assets	17	14	825	828	290	287	12,464	14,110

1) External sales are distributed according to the market where the customer is domiciled.

Revenue by operating segment

Parent Company

MSEK	2010	2009
Aeronautics	6,401	7,179
Electronic Defense Systems	2,534	3,006
Security and Defence Solutions	2,846	2,434
Support and Services	2,964	2,766
Total	14,745	15,385

Revenue by geographical market

Parent Company

MSEK	2010	2009
Sweden	7,623	6,938
Rest of EU	1,997	2,402
Rest of Europe	54	190
North America	832	538
Latin America	51	15
Asia	2,490	2,829
Africa	1,380	2,225
Australia, etc.	318	248
Total	14,745	15,385

NOTE 5

OTHER OPERATING INCOME

		Group		Parent Company
MSEK	2010	2009	2010	2009
Change in fair value of biological assets	43	13	-	-
Trading result	35	43	35	43
Gain from other operating activities	29	46	2	-
Exchange rate gains on operating receivables/ liabilities and change in value of derivatives	27	3	11	-
Government grants	26	25	26	25
Gain on sale of associated companies	24	-	-	-
Gain on sale of Group companies	13	4	-	-
Other	25	15	8	-
Total	222	149	82	68

Other operating activities consist of results from subsidiaries that fall outside core operations and net rental income from property rentals.

NOTE 6

OTHER OPERATING EXPENSES

		Group		Parent Company
MSEK	2010	2009	2010	2009
Loss from other operating activities	-33	-8	-8	-7
Loss on sale of Group companies	-22	-	-	-
Loss on sale of tangible fixed assets	-7	-1	-7	-1
Impairment of buildings	-	-8	-	-
Exchange rate losses on operating receivables/ liabilities	-	-56	-	-55
Other	-8	-9	-1	-5
Subtotal	-70	-82	-16	-68
Change in value of deriva tives	50	-18	-	-
Change in value of contracted flows	-50	18	-	-
Subtotal	-	-	-	-
Total	-70	-82	-16	-68

Other operating activities consist of results from subsidiaries that fall outside core operations.

NOTE 7

LEASING OPERATIONS

As the former manufacturer of the regional aircraft Saab 340 and Saab 2000, Saab has a major interest in ensuring that these aircraft maintain high capacity utilisation. Over 500 aircraft have been delivered and 106 are included in Saab's leasing fleet. Income from leasing operations (Saab Aircraft Leasing) is recognised net through profit and loss on the lines other operating income or other operating expenses after offsetting the loss risk reserve. Saab Aircraft Leasing's income statement and balance sheet are largely usd-related, since its agreements on the sale and lease of aircraft are in usd, which is its functional currency. The exchange rates used for translation of the financial statements are indicated in Note 50.

Income statement Saab Aircraft Leasing

MSEK	2010	2009
Leasing revenue	328	363
Interest income	40	64
Other revenue	216	331
Total revenue	584	758
Leasing expenses	-239	-258
Interest expenses	-31	-63
Depreciation	-146	-176
Other expenses	-227	-372
Total expenses	-643	-869
Utilisation of loss risk reserve	84	139
Operating income	25	28

NOTE 7, CONT.

Financial position Saab Aircraft Leasing

MSEK	31-12-2010	31-12-2009
Assets
Lease assets	1,150	1,460
Receivables from Group companies	1,575	1,597
External receivables	297	277
Inventories	16	12
Liquid assets	11	16
Total assets	3,049	3,362
Equity and liabilities
Equity	1,414	1,588
Provisions	851	797
Other liabilities	784	977
Total equity and liabilities	3,049	3,362

Security pledged for lease obligations amounted to msek 0 (0).

NOTE 8

ACQUISITIONS AND DIVESTMENTS OF OPERATIONS

In May 2010, Saab divested a property holding company, Saab Bofors Industrier ab, to the associated company Kontorsbolaget i Karlskoga ab. The sales price was msek 133. The transaction generated a capital gain of msek 12. The divestment has a marginal effect on future sales and income.

In May 2010, Saab acquired the remaining 66.7 per cent of the shares in the associated company Opax as in Norway. The purchase price was mnok 0.1. The purchase agreement contains a supplemental purchase price estimated at mnok 15. The surplus value of mnok 15 is allocated to goodwill. The acquisition has a marginal effect on future sales and income.

In June 2010, Saab divested 25 per cent of the votes, corresponding to five per cent of the capital, in Saab South Africa (Pty) Ltd to the South African holding company Sekunjalo Investment Ltd. Based on the company's performance, the buyer will over time be entitled to increase its share of the capital up to maximum 25 per cent. The transaction generated a loss of msek 22.

In June 2010, Saab divested all the shares in the associated company Eurenco S.A. (19.9 per cent) to the majority owner. The transaction generated no capital gain or loss and had no effect on net liquidity.

On 14 December 2010, Saab announced the signing of an eight-year agreement with Scandinavian Air Ambulance Holding ab. Starting in 2011, Saab will take over responsibility for the group's technical and maintenance personnel and operations for their helicopter and aircraft.

On 15 December 2010, Saab reduced its ownership share in the associated company Hawker Pacific Ltd from 49 per cent to 33 per cent when seacor Capital (Asia) Limited acquired a shareholder position by investing musd 25 in cash in Hawker Pacific Ltd in exchange for newly issued common stock. The transaction increased the book value of the shares in the associated company through a capital gain of msek 24. On 23 December 2010, Hawker Pacific also partially redeemed msek 28 in Saab AB's preference shares for msek 28 in cash.

No other significant acquisitions or divestments were made during the year.

NOTE 9

EMPLOYEES AND STAFF COSTS

Average number of employees

		of whom		of whom
	2010	men	2009	men
Parent Company
Sweden	7,656	80%	8,238	79%
United Arab Emirates	14	93%	2	100%
South Africa	6	100%	21	100%
USA	5	100%	2	100%
India	3	67%	2	100%
Belgium	2	50%	2	50%
Canada	2	100%	-	-
Thailand	1	100%	1	100%
Chile	1	100%	1	100%
South Korea	1	100%	1	100%
Poland	1	100%	-	-
Australia	1	100%	-	-
Saudi Arabia	1	100%	-	-
Czech Republic	1	100%	-	-
France	1	100%	-	-
Brazil	1	100%	-	-
Parent Company, total	7,697	80%	8,270	79%
Group companies
Sweden	2,498	78%	2,533	78%
South Africa	1,115	71%	1,159	71%
Australia	354	78%	334	75%
USA	233	55%	251	51%
UK	115	79%	122	81%
Denmark	76	86%	92	86%
Finland	74	76%	72	75%
Norway	50	88%	44	86%
Switzerland	49	100%	34	94%
Germany	33	91%	34	88%
Kenya	31	100%	-	-
Nigeria	24	71%	32	81%
Czech Republic	14	64%	6	50%
Canada	11	91%	8	88%
India	6	83%	6	83%
South Korea	4	75%	4	75%
Netherlands	4	100%	2	100%
France	3	100%	5	100%
Hungary	2	50%	3	67%
Chile	2	50%	2	50%
Slovenia	2	100%	1	100%
United Arab Emirates	1	-	1	-
Japan	1	100%	1	100%
Singapore	1	-	1	-
Greece	1	100%	-	-
Algeria	-	-	1	100%
Group companies, total	4,704	76%	4,748	75%
Joint ventures
Sweden	25	88%	27	85%
Joint ventures, total	25	88%	27	85%
Group total	12,426	79%	13,045	78%

NOTE 9, CONT.

The average number of employees has been calculated as the average of the number of full-time equivalents. The term full-time equivalents excludes long-term absentees and consultants. Part-time employees and probationers are included in the calculation, however.

Gender distribution of corporate management

Share of women, per cent	2010	2009
Parent Company
Board of Directors	20	15
Other senior executives	23	30

Salaries, other remuneration and social security expenses

		2010	2009
MSEK	Salaries and other remu neration	Social security expenses	Salaries and other remu neration	Social security expenses
Parent Company	3,861	1,689	3,817	1,599
of which pension costs	-	509 1)	-	3811)
Group companies	2,355	885	2,254	901
of which pension costs3)	-	503	-	528
Joint ventures	11	4	22	13
of which pension costs	-	2	-	4
Group, total	6,227	2,578	6,093	2,513
of which pension costs	-	1,0142)	-	9132)

1) Of the Parent Company's pension costs, MSEK 6 (11) refers to the Board and President, including deputies and Executive Vice Presidents. The company's outstanding pension obligations for these individuals amount to MSEK 47 (49), of which MSEK 47 (47) refers to former Board members and Presidents, including deputies and Executive Vice Presidents.

2) Of the Group's pension costs, MSEK 15 (20) refers to the Group's boards and Presidents, including Group companies. The Group's outstanding pension obligations for these individuals amount to MSEK 49 (51), of which MSEK 47 (47) refers to former board members and Presidents.

3) Adjustment according to different accounting principles regarding defined-benefit plans between Parent Company and Group. See also note 1 on pages 78 and 80.

Salaries and other remuneration by country and between Board members, President and Vice Presidents and other employees

	2010		2009
	Board, President and Vice	Other	Board, President and Vice	Other
MSEK	Presidents	employees	Presidents	employees
Parent Company
Sweden	27	3,802	28	3,773
of which variable compensation	2	-	1	-
South Africa	-	7	-	10
United Arab Emirates	-	6	-	2
USA	-	6	-	-
Belgien	-	4	-	2
India	-	2	-	1
Canada	-	2	-	-
Saudi Arabia	-	2	-	-
Thailand	-	1	-	1
Czech Republic	-	1	-	-
Poland	-	1	-	-
Parent Company, total	27	3,834	28	3,789
of which variable compensation	2	-	1	-
Group companies
Sweden	14	1,148	18	1,179
of which variable compensation	2	-	2	-
South Africa	3	484	4	404
of which variable compensation	1	-	1	-
Australia	18	247	12	209
of which variable compensation	2	-	1	-
USA	6	157	7	136
of which variable compensation	1	-	2	-
UK	3	48	1	43
Denmark	3	47	3	68
Finland	2	44	1	39
Norway	4	38	4	42
Switzerland	-	27	-	23
Germany	-	26	-	31
Nigeria	-	6	-	5
Czech Republic	1	5	1	3
Canada	-	5	-	3
France	-	3	-	5
South Korea	-	3	-	2
Japan	-	2	-	2
Slovenia	-	2	-	2
Kenya	-	2	-	-
Hungary	1	1	1	1
Singapore	-	1	1	-
Chile	2	-	1	-
India	1	-	1	-
Netherlands	-	1	-	2
Group companies, total	58	2,297	55	2,199
of which variable compensation	6	-	6	-
Joint ventures
Sweden	1	10	-	22
Joint ventures, total	1	10	-	22
Group total	86	6,141	83	6,010
of which variable compensation	8	-	7	-

NOTE 9, CONT.

Of the salaries and remuneration paid to other employees in the Group, msek 38 (27) refers to senior executives other than Board members and the President.

For information on post-employment compensation and share-related compensation, see Note 37.

Sick leave in Parent Company

Per cent	2010	2009
Total sick leave as a percentage of normal working hours	2	2
Percentage of total sick leave related to extended absences of 60 days or more	33	39

Sick leave absences by gender as a percentage of normal working hours:

Men	2	2
Women	3	3

Sick leave absences by age as a percentage of normal working hours:

29 years or younger	1	2
30-49 years	2	2
50 years or older	2	3

Saab has an ambitious occupational health and rehabilitation programme. Management's responsibility for rehabilitation is underscored in a directive. Occupational health reviews and inspections are conducted on a regular basis, and a systematic programme with current plans is in place at all levels of the organisation. Sick leave is monitored carefully, and areas with high absenteeism are given special attention. All Saab employees have access to professional occupational health services, including technical, medical and psychosocial expertise. Rehabilitation is conducted internally and obtained from outside providers. All Saab employees have access to wellness programmes that include individual or group exercise options.

NOTE 10

AUDITORS' FEES AND COMPENSATION

		Group	Parent Company
MSEK	2010	2009	2010	2009
Ernst & Young
Audit assignments	10	13	4	8
Audit work in excess of the audit assignment	1	1	1	1
Tax advice	2	1	1	-
Other services	2	1	1	-
Deloitte
Audit assignments	3	4	-	1
Audit work in excess of the audit assignment	1	1	1	-
Tax advice	-	1	-	1
Other services	1	-	1	-
Other
Audit assignments	2	3	-	-
Total	22	25	9	11

Audit assignments involve examination of the annual report and financial accounting as well as the administration by the Board and the President, other tasks related to the duties of the company's auditors and consultation or other services that may result from observations noted during such examinations or implementation of such other tasks.

Audit work in excess of the audit assignment relates to expenses for quality controls. Other services relate to expenses that are not classified as audit assignments, audit work in excess of the audit assignment and tax advice.

NOTE 11

OPERATING EXPENSES

Group
MSEK	2010	2009
Raw materials and consumables	6,390	6,508
Subsystems and equipment	2,305	2,254
Purchased services	2,691	3,305
Change in inventory of finished goods and work in progress, excluding write down	-21	-226
Personnel costs	8,805	8,606
Depreciation and amortisation	1,149	1,201
Impairments	193	130
Other expenses	2,113	1,519
Total	23,625	23,297

Operating expenses refer to cost of goods sold, marketing expenses, administrative expenses and research and development costs. Leasing operations (Saab Aircraft Leasing) are recognised through profit or loss on the lines other operating income or other operating expenses, due to which depreciation of lease assets is not included in depreciation and amortisation above.

NOTE 12

DEPRECIATION/AMORTISATION AND IMPAIRMENTS

Group
MSEK	2010	2009
Depreciation/amortisation
Capitalised development costs	-644	-671
Other intangible fixed assets	-161	-187
Operating properties	-83	-86
Property, plant and equipment	-145	-152
Equipment, tools and installations	-114	-103
Leasing aircraft (see Note 7)	-146	-176
Other lease assets	-2	-2
Total	-1,295	-1,377
Impairments
Goodwill	-5	-
Capitalised development costs	-20	-15
Operating properties	-33	-8
Property, plant and equipment	-2	-
Equipment, tools and installations	-3	-
Total	-63	-23

In 2010, impairments of msek 38 were recognised on buildings, machinery and equipment in connection with the restructuring of the underwater operations in Dynamics. Impairments of capitalised development costs of msek 20 were recognised for projects in Security and Defence Solutions, while goodwill impairments amounted to msek 5 for companies in the venture portfolio. In 2009, impairments of msek 15 were recognised for a project in Security and Defence Solutions and msek 8 for buildings.

Parent Company

MSEK	2010	2009
Depreciation/amortisation
Other intangible fixed assets	-37	-33
Buildings	-60	-58
Property, plant and equipment	-110	-121
Equipment, tools and installations	-48	-50
Total	-255	-262

Parent Company		Result from shares in Group companies		Result from shares in associated compa nies/joint ventures
MSEK	2010	2009	2010	2009
Dividends	419	1,776	5	9
Group contributions received	1,039	987	-	-
Capital gain on sale of shares	1	134	20	-1
Impairments	-283	-1,743	-	-19
Other	23	24	7	18
Total	1,199	1,178	32	7

Last year's dividend and impairments relate to liquidated dormant group companies and amounts to msek 941 and msek -941, respectively.

NOTE 13

FINANCIAL INCOME AND EXPENSES

Group
MSEK	2010	2009
Interest income on loans receivable	61	80
Financial income from revaluation of financial assets and liabilities measured at fair value through profit or loss	65	-
Dividends	6	2
Other financial income	1	4
Less project interest applied to gross income	-17	-36
Financial income	116	50
Financial expenses related to pensions	-169	-136
Interest expenses on loans and financial liabilities	-104	-148
Financial expenses from revaluation and disposal of financial assets and liabilities measured at fair value
through profit or loss	-52	-150
Other financial expenses	-16	-16
Financial expenses	-341	-450
Share in income of associated companies	26	2
Net financial income and expenses	-199	-398

Parent Company		Result from other securities and receivables held as fixed assets	Other interest income and similar profit/loss items
MSEK	2010	2009	2010	2009
Interest income, Group companies	-	-	114	125
Other interest income	-	-	16	16
Impairment	-23	-14	-	-
Dividends	27	18	-	-
Translation differences	113	-176	-	-
Net change in value from revaluation of financial assets/liabilities	15	-44	-	-
Less project interest applied to gross income	-	-	-16	-32
Other	-25	-22	-	-
Total	107	-238	114	109

Parent Company		Interest expenses and similar profit/loss items
MSEK	2010	2009
Interest expenses, Group companies	-53	-77
Other interest expenses	-120	-232
Total	-173	-309

NOTE 14

APPROPRIATIONS

Difference between book depreciation and depreciation according to plan

Parent Company

MSEK	2010	2009
Buildings and land	19	21
Property, plant and equipment as well as tools and installations	-102	-18
Total	-83	3

NOTE 15

TAXES Tax recognised through profit or loss

Group
MSEK	2010	2009
Current tax expense (-)/tax income (+)
Taxes for the year	-350	-185
Adjustment for taxes related to previous years	2	2
Total	-348	-183
Deferred tax expense (-)/tax income (+)
Deferred tax related to temporary differences	312	411
Deferred tax related to value of tax loss carry forwards capitalised during the year	9	5
Deferred tax expense due to utilisation of previously capitalised tax value in tax loss carry forwards	-276	-515
Deferred tax related to previous years	-19	5
Total	26	-94
Total recognised tax in Group	-322	-277

Of the deferred tax related to previous years, msek -26 relates to deferred tax expenses from tax loss carry forwards and msek 7 to deferred tax income from temporary differences.

The Group's table, "Change in deferred tax in temporary differences and tax loss carry forwards", on page 91 specifies how deferred tax affects income. The net change in the tax loss carry forwards for the year amounts to msek -293, which is the sum of the deferred tax on the capitalised tax value of tax loss carry forwards, msek 9, and the deferred tax expense resulting from the utilisation of the previously capitalised value of tax loss carry forwards, msek -302. The remaining amount in the table's column, "Recognised through profit or loss", amounts to msek 319, which is the sum of deferred tax related to temporary differences. In total, the Group's deferred tax amounts to msek 26 (-94) and current tax expense for the year to msek -348 (-183) which produce a total reported tax of msek -322 (-277) in the consolidated income statement.

Parent Company

MSEK	2010	2009
Current tax expense (-)/tax income (+)
Taxes for the year	-175	-43
Adjustment for taxes related to previous years	17	1
Total	-158	-42
Deferred tax expense (-)/tax income (+)
Deferred tax related to temporary differences	8	-161
Deferred tax expense due to utilisation of previously capitalised tax value in tax loss carry forwards	-274	-361
Deferred tax related to previous years	-6	4
Total	-272	-518
Total recognised tax expense in Parent Company	-430	-560

Of the deferred tax attributable to previous years, msek -26 relates to deferred tax expenses from tax loss carry forwards and msek 20 deferred tax related to temporary differences. The net change in tax loss carry forwards amounts to msek -300 (-359) and is specified in the Parent Company's table on page 91, "Change in deferred tax in temporary differences and tax loss carry forwards".

Reconciliation of effective tax

Group
MSEK	2010 (%)	2010	2009 (%)	2009
Income before taxes	-	776	-	976
Tax according to current tax rate for Parent Company	-26.3	-204	-26.3	-257
Effect of other tax rates for foreign Group companies	-2.7	-21	-4.3	-42
Non-deductible expenses	-8.4	-65	-3.9	-38
Tax-exempt income	5.8	45	8.2	80
Revaluation of deferred tax assets from the leasing portfolio	-5.0	-39	-	-
Tax on additional, uncapital ised tax loss carry forwards	-2.3	-18	-0.8	-7
Tax on reduced tax loss carry forwards due to tax audit	-	-	-2.8	-28
Tax related to previous years	-2.1	-16	0.8	8
Other	-0.5	-4	0.7	7
Reported effective tax rate	-41.5	-322	-28.4	-277

Parent Company

MSEK	2010 (%)	2010	2009 (%)	2009
Income before taxes	-	1,819	-	2,235
Tax according to current tax rate for Parent Company	-26.3	-478	-26.3	-588
Tax related to previous years	0.6	11	0.2	4
Non-deductible expenses	-5.0	-92	-22.1	-486
Tax-exempt income	7.1	129	23.3	511
Other	-	-	-0.1	-1
Reported effective tax rate	-23.6	-430	-25.0	-560

Operations divested during the year have generated tax-exempt capital gains totaling msek 13 (4). In connection with distributions from Group companies in certain non-European countries, taxation may exceed normal company tax. The dividend paid to shareholders has no tax consequences.

Deferred tax assets and liabilities

	Deferred	Deferred tax
Group	tax assets	liabilities	Net
MSEK	31-12-2010	31-12-2010
Intangible fixed assets	11	-745	-734
Tangible fixed assets	23	-465	-442
Lease assets	19	-189	-170
Biological assets	-	-51	-51
Long-term receivables	22	-52	-30
Inventories	193	-16	177
Accounts receivable	5	-	5
Prepaid expenses and accrued income	15	-2	13
Long-term liabilities	82	-22	60
Provisions for pensions	152	-279	-127
Other provisions	800	-19	781
Tax allocation reserves	-	-2	-2
Contingency reserve	-	-357	-357
Accrued expenses and deferred income	229	-12	217
Other	67	-243	-176
Tax loss carry forwards	33	-	33
Tax assets/liabilities	1,651	-2,454	-803
Set-off	-1,651	1,651	-
Tax assets /liabilities, net	-	-803	-803

Group	Deferred tax assets	Deferred tax liabilities	Net
MSEK	31-12-2009	31-12-2009
Intangible fixed assets	36	-965	-929
Tangible fixed assets	44	-461	-417
Lease assets	20	-260	-240
Biological assets	-	-39	-39
Long-term receivables	-	-10	-10
Inventories	153	-30	123
Accounts receivable	9	-	9
Prepaid expenses and accrued income	6	-5	1
Long-term liabilities	94	-11	83
Provisions for pensions	149	-348	-199
Other provisions	765	-8	757
Accrued expenses and deferred income	-	-7	-7
Tax allocation reserves	-	-357	-357
Contingency reserve	267	-	267
Other	56	-45	11
Tax loss carry forwards	326	-	326
Tax assets/liabilities	1,925	-2,546	-621
Set-off	-1,641	1,641	-
Tax assets /liabilities, net	284	-905	-621

Parent Company	Deferred tax assets	Deferred tax liabilities	Net
MSEK	31-12-2010	31-12-2010
Tangible fixed assets	-	-242	-242
Inventories	77	-	77
Accounts receivable	2	-	2
Long-term receivables	22	-	22
Prepaid expenses and accrued income	13	-	13
Provisions for pensions	92	-	92
Other provisions	383	-	383
Accrued expenses and deferred income	70	-	70
Tax assets/liabilities	659	-242	417
Set-off	-242	242	-
Tax assets/liabilities, net	417	-	417

Parent Company	Deferred tax assets	Deferred tax liabilities	Net
MSEK	31-12-2009	31-12-2009
Tangible fixed assets	-	-245	-245
Inventories	55	-	55
Accounts receivable	4	-	4
Prepaid expenses and accrued income	6	-	6
Provisions for pensions	92	-	92
Other provisions	411	-	411
Accrued expenses and deferred income	65	-	65
Tax loss carry forwards	300	-	300
Other	1	-	1
Tax assets/liabilities	934	-245	689
Set-off	-245	245	-
Tax assets/liabilities, net	689	-	689

The company expects the tax value of future taxable earnings to exceed recognised deferred tax assets.

Tax deficits in foreign subsidiaries for which tax assets have not been recognised through profit or loss or in the balance sheet amount to msek 68 (76) and relate to operations in the us.

Deferred tax assets have not been recognised on these items since it is uncertain whether the Group will utilise them against future taxable gains.

Maturity dates of recognised deferred tax assets

MSEK	Group	Parent Company
Deferred tax assets expected to be recovered within one year	46	12
Deferred tax assets expected to be recovered after one year	1,605	647

Maturity dates of recognised deferred tax liabilities

MSEK	Group	Parent Company
Deferred tax liabilities due for payment within one year	30	6
Deferred tax liabilities due for payment after one year	2,424	236

Tax loss carry forwards attributable to us operations can be utilised through 2029, but partly expire as of 2021.

Change in deferred tax in temporary differences and tax loss carry forwards

Group MSEK	Opening balance 1 Jan. 2010	Recog nised in profit or loss	Recog nised in the com prehen sive income	Acquisi tion/di vestment of opera tions	Closing balance 31 Dec. 2010
Intangible fixed assets	-929	195	-	-	-734
Tangible fixed assets	-417	-25	-	-	-442
Lease assets	-240	70	-	-	-170
Biological assets	-39	-12	-	-	-51
Long-term receivables	-10	-20	-	-	-30
Inventories	123	54	-	-	177
Accounts receivable	9	-4	-	-	5
Prepaid expenses and accrued income	1	12	-	-	13
Long-term liabilities	83	-23	-	-	60
Provisions for pensions	-199	72	-	-	-127
Other provisions	757	24	-	-	781
Tax allocation reserves	-7	5	-	-	-2
Contingency reserve	-357	-	-	-	-357
Accrued expenses and deferred income	267	-50	-	-	217
Other	11	21	-208	-	-176
Tax loss carry forwards	326	-293	-	-	33
Total	-621	26	-208	-	-803

The Group's total deferred tax income in 2010 amounted to msek 26 in the income statement and msek -208 in the statement of comprehensive income. The closing balance on 31 December 2010, msek -803, consisted of deferred tax assets of msek 0 and tax liabilities of msek -803; see table on page 90.

Group MSEK	Opening balance 1 Jan. 2009	Recog nised in profit or loss	Recog nised in the com prehen sive income	Acquisi tion/di vestment of opera tions	Closing balance 31 Dec. 2009
Intangible fixed assets	-1,096	188	-	-21	-929
Tangible fixed assets	-427	-15	-	25	-417
Lease assets	-386	157	-11	-	-240
Biological assets	-36	-3	-	-	-39
Long-term receivables	-15	5	-	-	-10
Inventories	108	15	-	-	123
Accounts receivable	7	2	-	-	9
Prepaid expenses and accrued income	-2	3	-	-	1
Long-term liabilities	138	-55	-	-	83
Provisions for pensions	-301	102	-	-	-199
Other provisions	896	-139	-	-	757
Tax allocation reserves	-8	1	-	-	-7
Contingency reserve	-357	-	-	-	-357
Accrued expenses and deferred income	131	136	-	-	267
Other	248	19	-256	-	11
Tax loss carry forwards	836	-510	-	-	326
Total	-264	-94	-267	4	-621

The Group's total deferred tax expense in 2009 amounted to msek -94 in the income statement and msek -267 in the statement of comprehensive income. The closing balance on 31 December 2009, msek -621, consisted of deferred tax assets of msek 284 and tax liabilities of msek -905; see table on page 90.

Tax items recognised directly against other comprehensive income Group

MSEK	2010	2009
Net gain/loss on cash flow hedges	-201	-247
Translation differences	-7	-20
Total	-208	-267

Change in deferred tax in temporary differences and tax loss carry forwards

Parent Company MSEK	Opening balance 1 Jan. 2010	Recog nised in profit or loss	Closing balance 31 Dec. 2010
Tangible fixed assets	-245	3	-242
Inventories	55	22	77
Accounts receivable	4	-2	2
Long-term receivables	-	22	22
Prepaid expenses and accrued income	6	7	13
Provisions for pensions	92	-	92
Other provisions	411	-28	383
Accrued expenses and deferred income	65	5	70
Tax loss carry forwards	300	-300	-
Other	1	-1	-
Total	689	-272	417

Parent Company MSEK	Opening balance 1 Jan. 2009	Recog nised in profit or loss	Closing balance 31 Dec. 2009
Tangible fixed assets	-235	-10	-245
Inventories	29	26	55
Accounts receivable	5	-1	4
Prepaid expenses and accrued income	7	-1	6
Provisions for pensions	95	-3	92
Other provisions	535	-124	411
Accrued expenses and deferred income	99	-34	65
Tax loss carry forwards	659	-359	300
Other	13	-12	1
Total	1,207	-518	689

NOTE 16

INTANGIBLE FIXED ASSETS

	Group		Parent Company
MSEK	31-12-2010	31-12-2009	31-12-2010	31-12-2009
Goodwill	3,470	3,457	-	-
Capitalised development costs	2,428	3,038	-	-
Other intangible assets	515	613	127	96
Total	6,413	7,108	127	96

Goodwill

		Group		Parent Company
MSEK	2010	2009	2010	2009
Acquisition value
Opening balance, 1 January	4,128	4,111	-	-
Acquired through business acquisitions	19	-	-	-
Reclassification	8	-	-	-
Translation differences	-9	17	-	-
Closing balance, 31 December	4,146	4,128	-	-

Amortisation and impairments

Opening balance, 1 January	-671	-673	-	-
Impairments for the year	-5	-	-	-
Translation differences	-	2	-	-
Closing balance, 31 December	-676	-671	-	-

Carrying amount,
31 December	3,470	3,457	-	-

Goodwill impairments of msek 5 in 2010 related to companies in the venture portfolio.

Capitalised development costs

	Group		Parent Company
MSEK	2010	2009	2010	2009
Acquisition value
Opening balance, 1 January	5,406	5,342	-	-
Internally developed assets	47	67	-	-
Disposals and reclassifications	-3	-41	-	-
Translation differences	7	38	-	-
Closing balance, 31 December	5,457	5,406	-	-

Capitalised development costs, continued

	Group			Parent Company
MSEK	2010	2009	2010	2009
Amortisation and impairments
Opening balance, 1 January	-2,368	-1,714	-	-
Amortisation for the year	-644	-671	-	-
Impairments for the year	-20	-15	-	-
Disposals and reclassifications	3	41	-	-
Translation differences	-	-9	-	-
Closing balance, 31 December	-3,029	-2,368	-	-
Carrying amount, 31 December	2,428	3,038	-	-

Capitalised development costs of msek 20(15) in 2010 related to a project in Security and Defense Solutions.

Other intangible assets

	Group			Parent Company
MSEK	2010	2009	2010	2009
Acquisition value
Opening balance, 1 January	1,500	1,463	458	359
Acquired through business acquisitions	1	79	-	-
Investments	70	14	68	11
Disposals and reclassifications	-9	-63	-2	88
Translation differences	-11	7	-	-
Closing balance, 31 December	1,551	1,500	524	458
Amortisation and impairments
Opening balance, 1 January	-887	-839	-362	-308
Amortisation for the year	-161	-187	-37	-33
Disposals and reclassifications	9	139	2	-21
Translation differences	3	-	-	-
Closing balance, 31 December	-1,036	-887	-397	-362
Carrying amount, 31 December	515	613	127	96

Amortisation is included in the following lines in income statement

	Group			Parent Company
MSEK	2010	2009	2010	2009
Cost of goods sold	161	187	37	33
Research and developmentcosts	644	671	-	-

Impairments are included in the following lines in income statement

MSEK	Group		Parent Company
	2010	2009	2010	2009
Other operating expenses	5	-	-	-
Research and developmentcosts	20	15	-	-

Development costs

Capitalised development costs are amortised over the estimated production volume or period of use, up to a maximum of 5 years, with the exception of acquired development costs, where the maximum period of use is 10 years. The production volume or period of use is set using projected future sales according to a business plan based on identified business opportunities. The significant items in total capitalisation are development costs for radar and sensors, electronic warfare systems, the export version of Gripen and the anti-ship missile rbs15 mk3.

Development costs are capitalised only in the consolidated accounts. In legal units, all costs for development work are expensed, which means that the Parent Company does not report any capitalised costs for development work.

Other intangible fixed assets

Amortisation is recognised through profit or loss over the estimated periods of use for intangible fixed assets, i.e., 5 to 10 years.

Significant items in the carrying amount are attributable to the acquisition of Ericsson Microwave Systems and relate to expenses incurred for customer relations and values in the order backlog. Of the carrying amount, msek 515, msek 379 is attributable to acquired values and msek 136 to licenses for operating systems etc.

Impairment tests for goodwill

Goodwill attributable to cash-generating units is tested for impairment annually or when there is an indication of an impairment loss. Goodwill is not amortised.

In connection with business combinations, goodwill is allocated to the cash-generating units that are expected to obtain future economic benefits in the form, for example, of synergies from the acquisition. Saab's business areas, Combitech and companies in the venture portfolio have been identified as separate cash-generating units. The following cash-generating units have significant recognised goodwill values in relation to the Group's total recognised goodwill value. Goodwill in every cash-generating unit has been tested for impairment.

MSEK	31-12-2010	31-12-2009
Dynamics	571	577
Electronic Defence Systems	1,988	1,980
Security and Defence Solutions	491	501
Support and Services	240	240
Combitech	159	159
Units without significant goodwill values, aggregate	21	-
Total goodwill	3,470	3,457

Impairment testing for cash-generating units is based on the calculation of value in use. This value is based on discounted cash flow forecasts according to the units' business plans.

VARIABLES USED TO CALCULATE VALUE IN USE

Volume/growth

Growth in the cash-generating units' business plans is based on Saab's expectations with regard to development in each market area and previous experience. The first five years are based on the five-year business plan formulated by Group Management and approved by the Board. For cash flows after five years, the annual growth rate has been assumed to be 0 per cent.

Operating margin

The operating margin is comprised of the units' operating income after depreciation and amortisation. The units' operating margin is calculated against the backdrop of historical results and Saab's expectations with regard to the future development of markets where the units are active. The business areas Dynamics, Electronic Defence Systems and Security and Defence Solutions have a substantial order backlog of projects that stretches over a number of years. The risks and opportunities affecting the operating margin are managed through continuous cost forecasts for all significant projects.

Capitalised development costs

In the five-year business plans, consideration is given to additional investments in development considered necessary for certain units to reach the growth targets in their respective markets.

Discount rate

Discount rates are based on the weighted average cost of capital (wacc). The wacc rate that is used is based on a risk-free rate of interest in five years adjusted for operational and market risks. The discount rate is in line with the external requirements placed on Saab and similar companies in the market.

All units have sales of defence materiel, unique systems, products and support solutions in the international market as their primary activity, and their business risk in this respect is considered equivalent. However, units with a significant share of the business plan's invoicing in the order backlog have been discounted at an interest rate that is slightly lower units with a short order backlog. The following discount rates have been used (pre-tax):

Pretax discount rate (WACC)
2010	2009
11	11
11	11
11	11
13	13
13	13

Sensitivity analysis

Group Management believes that reasonable possible changes in the above variables would not have such a large impact that any individually would reduce the recoverable amount to less than the carrying amount.

NOTE 17

TANGIBLE FIXED ASSETS

	Group		Parent Company
MSEK	31-12-2010	31-12-2009	31-12-2010	31-12-2009
Operating properties/ buildings and land1)	2,033	2,105	1,464	1,496
Property, plant and equipment	636	693	531	579
Equipment, tools and installations	315	308	158	156
Construction in progress	68	68	52	49
Total	3,052	3,174	2,205	2,280

1) In the Group, the reported amount refers to operating properties. In the Parent Company, the reported amount refers to buildings and land.

Operating properties/buildings and land 1)

	Group		Parent Company
MSEK	2010	2009	2010	2009
Acquisition value
Opening balance, 1 January	4,824	4,913	1,853	1,841
Investments	35	19	28	15
Reclassification to assets held for sale	-	-29	-	-
Other reclassifications	-46	-100	-	-
Sales	-	-3	-	-3
Translation differences	9	24	-	-
Closing balance, 31 December	4,822	4,824	1,881	1,853
Depreciation and impairments
Opening balance, 1 January	-2,719	-2,726	-1,254	-1,196
Depreciation for the year	-83	-86	-60	-58
Impairments for the year	-33	-8	-	-
Reclassifications	46	101	-	-
Closing balance, 31 December	-2,789	-2,719	-1,314	-1,254
Revaluations
Opening balance, 1 January	-	-	897	897
Closing balance, 31 December	-	-	897	897
Carrying amount, 31 December	2,033	2,105	1,464	1,496

1) In the Group, the reported amount refers to operating properties. In the Parent Company, the reported amount refers to buildings and land.

During 2010 impairments of msek 33 related to buildings were recognised in the Group as a consequense of the reorganisation of the underwater operations in Dynamics. The impairment of msek 8 during 2009 related to buildings.

Tax assessment values

	Group			Parent Company
MSEK	31-12-2010	31-12-2009	31-12-2010	31-12-2009
Tax assessment value, buildings (in Sweden)	839	976	610	610
Tax assessment value, land (in Sweden)	268	287	232	232

Tax assessment values exclude tax assessment values for investment properties and biological assets, which are reported in notes 19 and 20.

Property, plant and equipment

		Group		Parent Company
MSEK	2010	2009	2010	2009
Acquisition value
Opening balance, 1 January	2,465	2,223	1,897	1,693
Investments	77	92	61	69
Other reclassifications	35	180	23	174
Sales	-78	-47	-72	-39
Translation differences	5	17	-	-
Closing balance, 31 December	2,504	2,465	1,909	1,897
Depreciation and impairments
Opening balance, 1 January	-1,772	-1,600	-1,318	-1,184
Depreciation for the year	-145	-152	-110	-121
Impairments for the year	-2	-	-	-
Other reclassifications	-13	-50	-13	-47
Sales	66	41	63	34
Translation differences	-2	-11	-	-
Closing balance, 31 December	-1,868	-1,772	-1,378	-1,318
Carrying amount, 31 December	636	693	531	579

Equipment impairments of msek 2 were recognised in 2010 in connection with the restructuring of the underwater operations in Dynamics.

Equipment, tools and installations

		Group		Parent Company
MSEK	2010	2009	2010	2009
Acquisition value
Opening balance, 1 January	2,092	2,277	1,271	1,442
Investments	125	83	46	30
Acquisitions from compa nies within the Group	-	-	8	-
Other reclassifications	-11	-168	-11	-136
Sales	-72	-128	-24	-65
Translation differences	-	28	-	-
Closing balance, 31 December	2,134	2,092	1,290	1,271

Depreciation and impairments

Opening balance, 1 January	-1,784	-1,866	-1,115	-1,200
Depreciation for the year	-114	-103	-48	-50
Impairments for the year	-3	-	-	-
Acquisitions from compa nies within the Group	-	-	-7	-
Other reclassifications	14	80	14	70
Sales	68	128	24	65
Translation differences	-	-23	-	-
Closing balance, 31 December	-1,819	-1,784	-1,132	-1,115
Carrying amount,

31 December	315	308	158	156

Impairments

Equipment impairments amounted to msek 3 in connection with the restructuring of the underwater operations in Dynamics.

Construction in progress

		Group		Parent Company
MSEK	2010	2009	2010	2009
Acquisition value
Opening balance, 1 January	68	186	49	185
Investments	25	3	15	12
Reclassifications	-25	-123	-12	-148
Translation differences	-	2	-	-
Carrying amount, 31 December	68	68	52	49

Collateral

On 31 December 2010, property with a carrying amount of msek 0 (0) was pledged as collateral for bank loans.

NOTE 18

LEASE ASSETS AND LEASE AGREEMENTS

As the former manufacturer of the regional aircraft Saab 340 and Saab 2000, Saab has a great interest in ensuring that these aircraft maintain high capacity utilisation. Over 500 aircraft have been delivered and 106 are included in Saab's leasing fleet, of which 64 aircraft are owned by Saab. Leasing operations are carried out in the global market. Operating lease terms conform to customary terms in the international aircraft leasing market, which may entail the right to early termination, purchases and extensions, as well as security, geographical and tax-related limitations on the allocation of the aircraft in question. No aircraft are held via finance leases, nor is Saab the lessor in any finance leases. The operations are carried out in usd.

Owned aircraft are depreciated on a straight-line basis over 20–25 years. The result from leasing operations including depreciation is reported in the income statement on the lines other operating income and other operating expenses.

The leasing fleet is expected to be divested around 2015.

Leasing aircraft obtained for leasing purposes

MSEK	2010	2009
Acquisition value
Opening balance, 1 January	4,224	4,712
Sales	-158	-299
Reclassifications	-145	-
Translation differences	-129	-189
Closing balance, 31 December	3,792	4,224
Depreciation
Opening balance, 1 January	-2,337	-2,413
Sales	93	169
Reclassifications	89	-
Depreciation for the year	-146	-176
Translation differences	63	83
Closing balance, 31 December	-2,238	-2,337
Impairments
Opening balance, 1 January	-427	-465
Sales and revaluations	22	36
Translation differences	1	2
Closing balance, 31 December	-404	-427
Total	1,150	1,460
Other lease assets
Opening balance, 1 January	4	1
Acquisitions	2	3
Depreciation for the year	-2	-2
Reclassifications	-	2
Closing balance, 31 December	4	4
Carrying amount, 31 December	1,154	1,464

Leasing fees for aircraft obtained/leased via operating leases

MSEK	Payments to lessors	Payments from air lines1)	Payments from air lines2)
Outcome
2009	287	93	247
2010	264	59	199
Contracted
2011	249	54	118
2012	249	56	52
2013	245	49	34
2014	98	11	19
2015	-	-	9
2016 and forward	-	-	-
Total contracted	841	170	232

1) Receipts from airlines for aircraft held via operating leases and leased out via operating leases. 2) Receipts from airlines for owned aircraft leased out via operating leases.

The leasing fleet is periodically valuated in terms of the present value of the future payments it is expected to generate. The inflow is represented by projected receipts from customers and the Export Credits Guarantee Board (ekn) in Sweden. Disbursements consist of fees to the lessee and for technical, legal and administrative activities directly related to management of the fleet.

Insurance protection limits Saab's risk. However, the internal distribution between expected receipts from customers and those from ekn will be affected in each instance by current projections.

Leasing fees for other assets obtained via operating leases

Other leasing fees refer to premises, computers and cars.

Group	Premises and	Machinery and equip
MSEK	buildings	ment
Outcome
2009	238	57
2010	239	83
Contracted
2011	219	74
2012	194	59
2013	168	15
2014	153	28
2015	153	6
2016 and forward	499	2
Total contracted	1,386	184

Parent Company	Premises and	Machinery and equip
MSEK	buildings	ment
Outcome
2009	176	52
2010	172	62
Contracted
2011	155	58
2012	143	46
2013	130	7
2014	127	23
2015	127	3
2016 and forward	481	-
Total contracted	1,163	137

NOTE 19

BIOLOGICAL ASSETS

MSEK	2010	2009
Living forest
Carrying amount, 1 January	256	243
Change in fair value less selling expenses	43	13
Carrying amount, 31 December	299	256
Of which fixed assets	299	256

Group
MSEK	31-12-2010	31-12-2009
Tax assessment value, forest assets (in Sweden)	265	163

On 31 December 2010, biological assets consisted of approximately 398,000 m³ of spruce, 624,000 m³ of pine and 69,000 m³ of hardwood. Forest growth is estimated at 35,000–40,000 m³ timber per year. During the year, approximately 24,300 m³ of timber was felled, which had a fair value in the Group, after deducting selling expenses, of msek 10 on the felling date.

The valuation of forests has been done with the help of independent appraisers. The property has been valued according to the market comparison method. In the valuation according to the market comparison method, the environmental impact on the firing range has not been taken into account. An adjustment for the environmental impact has been made by reducing fair value by an amount corresponding to the market value of the size of the firing range (4,457 hectares) less the value of the timber.

NOTE 20

INVESTMENT PROPERTIES

Information on fair value of investment properties in the Group In the Group, investment properties are reported according to the fair value method.

Group
MSEK	2010	2009
Carrying amount, 1 January	25	239
Reclassification from/to asset held for sale	211	-214
Carrying amount, 31 December	236	25

Investment properties are recognised in the statement of financial position at fair value, while changes in the value of these properties are recognised in the income statement; see also Note 1.

Investment properties comprise a number of rental properties leased to outside tenants. Leases on offices and production space are normally signed for an initial period of 2–6 years. Prior to expiration, renegotiations are held with the tenant on the rent level and other terms of the agreement, provided the lease has not been terminated.

Fair values have been determined by analysing rental income and expenses for each property, thereby producing a net rental income figure. Net rental income has then served as the basis of a valuation of fair value with a yield of 8 per cent. The yield requirements corresponds to the risk in net rental income. Fair value is not based on the valuation of an independent appraiser.

Group

MSEK	2010	2009
Effect on net income/net rental income
Rental income	4	4
Direct costs for investment properties that generated rental income during the year	-2	-2
Effect on net income /net rental income	2	2

Information on fair value of investment properties in Parent Company

In the Parent Company, investment properties are recognised as buildings according to the acquisition cost method. Investment properties in the Parent Company are leased out to other companies in the Group and are therefore classified as operating properties in the Group.

Parent Company

MSEK	2010	2009
Accumulated fair value
Opening fair value, 1 January	159	159
Closing fair value, 31 December	159	159

Parent Company

MSEK	2010	2009
Effect on net income/net rental income
Rental income	24	24
Direct costs for investment properties that generated rental income during the year	-11	-24
Effect on net income /net rental income	13	-

Information on carrying amount of investment properties in Parent Company

Parent Company

MSEK	2010	2009
Accumulated acquisition value
Opening balance, 1 January	127	127
Closing balance, 31 December	127	127
Accumulated depreciation according to plan
Opening balance, 1 January	-83	-78
Depreciation according to plan for the year	-4	-5
Closing balance, 31 December	-87	-83
Accumulated revaluations
Opening balance, 1 January	73	73
Closing balance, 31 December	73	73
Carrying amount, 31 December	113	117

Tax assessment value

		Group		Parent Company
MSEK	31-12-2010	31-12-2009	31-12-2010	31-12-2009
Tax assessment value of buildings	66	8	48	48
Tax assessment value of land	7	-	-	-

NOTE 21

SHARES IN ASSOCIATED COMPANIES CONSOLIDATED ACCORDING TO THE EQUITY METHOD

Group

MSEK	2010	2009
Carrying amount, 1 January	356	334
Acquisition of associated companies	-	19
Sale of associated companies	-25	-1
Share in associated companies' income 1)	40	-41
Hedge reserve	2	31
Reclassifications to assets held for sale	-113	-
Other reclassifications	-4	-17
Translation differences and internal gains	1	44
Dividends	-6	-13
Carrying amount, 31 December	251	356

1) Share in associated companies' income after tax and non-controlling interests.

Results from Eurenco sa, Wah Nobel (Pvt) Ltd. and Sörman Intressenter ab are recognised as financial income and expenses through profit or loss. Other associated companies are held for operating purposes, i.e., they are related to operations of the business units or in the venture portfolio and are therefore recognised in operating income.

During the first half of 2010, Saab sold all its shares in the associated company Eurenco sa (19.9 per cent) to the company's majority shareholder. The hedge reserve relates to cash flow hedges in Grintek Ewation (Pty) Ltd.

Shares in associated companies as of 31 December 2010 include goodwill of msek 0 (0).

The reclassification from associated company to asset held for sale refers to Grintek Ewation (Pty) Ltd within Electronic Defence Systems.

The Group's share of sales, income, assets, liabilities and the carrying amount of shares in associated companies is as follows.

2010 MSEK	Country	Sales	Share in associated companies income
Associated companies
Hawker Pacific Airservices Ltd	Australia	638	-16
Wah Nobel (Pvt) Ltd	Pakistan	17	3
Taurus Systems GmbH	Germany	163	12
S.N. Technologies SA	Switzerland	19	8
Industrikompetens i Östergötland AB	Sweden	44	1
Omnigo (Pty) Ltd	South Africa	21	-2
Kontorsbolaget i Karlskoga AB	Sweden	15	2
Sörman Intressenter AB	Sweden	36	-
Grintek Ewation (Pty) Ltd	South Africa	247	9
Denel Saab Aerostructures (Pty) Ltd 1)	South Africa	49	-
Other associated companies in the venture portfolio		25	-
Reversal provision related to Eurenco SA		-	23
Total		1,274	40
1) Our share of the company's result amounted to MSEK -61.

			Booked value, shares in
31-12-2010 MSEK	Assets	Liabilities	associated companies	Ownership interest, %
Associated companies
Hawker Pacific Airservices Ltd	310	152	158	33.0
Wah Nobel (Pvt) Ltd	28	6	22	27.2
Taurus Systems GmbH	91	76	15	33.0
S.N. Technologies SA	20	9	11	50.0
Industrikompetens i Östergötland AB	21	11	10	33.0
Omnigo (Pty) Ltd	15	6	9	40.0
Kontorsbolaget i Karlskoga AB	124	119	5	50.0
Sörman Intressenter AB	16	14	2	25.3
Denel Saab Aerostructures (Pty) Ltd 2)	88	172	-	20.0
Other associated companies in the venture portfolio	24	5	19	-
Total	737	570	251	-

2) Saab is confident that the negative equity will not affect its results and liquidity.

2009			Share in associated companies
MSEK	Country	Sales	income
Associated companies
Hawker Pacific Airservices Ltd	Australia	1,215	8
Wah Nobel (Pvt) Ltd	Pakistan	19	3
Taurus Systems GmbH	Germany	391	20
S.N. Technologies SA	Switzerland	19	3
Industrikompetens i Östergötland AB	Sweden	33	2
Omnigo (Pty) Ltd	South Africa	28	-
Sörman Intressenter AB	Sweden	41	-1
Grintek Ewation (Pty) Ltd	South Africa	189	4
Denel Saab Aerostructures (Pty) Ltd	South Africa	68	-60
Eurenco SA	France	334	-
Other associated companies in the venture portfolio		28	-20
Total		2,365	-41

31-12-2009 MSEK	Assets	Liabilities	Booked value, shares in associated companies	Ownership interest, %
Associated companies
Hawker Pacific Airservices Ltd	514	337	177	49.0
Wah Nobel (Pvt) Ltd	28	7	21	27.2
Taurus Systems GmbH	179	176	3	33.0
S.N. Technologies SA	11	8	3	50.0
Industrikompetens i Östergöt land AB	20	11	9	33.0
Omnigo (Pty) Ltd	15	5	10	40.0
Sörman Intressenter AB	21	19	2	26.6
Grintek Ewation (Pty) Ltd	216	114	102	42.4
Denel Saab Aerostructures (Pty) Ltd	131	131	-	20.0
Eurenco SA	311	311	-	19.9
Other associated companies in the venture portfolio	42	13	29	-
Total	1,488	1,132	356	-

NOTE 22

SHARES IN JOINT VENTURES CONSOLIDATED ACCORDING TO PROPORTIONAL METHOD

The Group has a 50 per cent holding in the joint venture Gripen International KB, whose principal activity is to offer, market and provide services for aircraft, military materiel and related equipment. The Group's remaining holdings in joint ventures are of an insignificant amount.

The Group's financial reports include the following items that constitute the Group's ownership interest in the joint venture's assets and liabilities.

Gripen International KB

MSEK	31-12-2010	31-12-2009
Fixed assets	6	16
Current assets	793	1,286
Total assets	799	1,302
Current liabilities	435	1,048
Total liabilities	435	1,048
Net assets	364	254

NOTE 23

PARENT COMPANY'S SHARES IN ASSOCIATED COMPANIES AND JOINT VENTURES

Parent Company

MSEK	2010	2009
Accumulated acquisition value
Opening balance, 1 January	528	415
Acquisitions	7	21
Divestments	-56	-19
Reclassifications	-	16
Share of net income for the year in limited partnerships	110	95
Closing balance, 31 December	589	528
Accumulated impairments
Opening balance, 1 January	-98	-98
Closing balance, 31 December	-98	-98
Carrying amount, 31 December	491	430

Specification of Parent Company's (co-owner's) directly owned holdings of shares in associated companies and joint ventures.

2010 MSEK	% of votes and capital	Carrying amount
Associated companies
Hawker Pacific Airservices Ltd, Australia	33.0	22
Industrikompetens i Östergötland AB, 556060-5478, Linköping	33.0	2
Sörman Intressenter AB, 556741-2233, Stockholm	25.3	3
Denel Saab Aerostructures (Pty) Ltd, South Africa	20.0	64
Vingtec Saab AS, Norway	49.0	-
Image Systems AB, 556550-5400, Linköping	35.8	4
Joint ventures
Saab Natech AB, 556627-5003, Jönköping	51.0	7
Gripen International KB, 969679-8231, Linköping	50.0	365
Gripen Venture Capital AB, 556298-6629, Linköping	50.0	12
SAAB-BAE SYSTEMS Gripen AB, 556527-6721, Linköping	50.0	-
Saab Ericsson NBD Innovation AB, 556628-6406, Stockholm	60.0	-
Industrigruppen JAS AB, 556147-5921, Stockholm	80.0	3
Avia Saab Technologies Co. Ltd., Thailand	40.0	9
Total		491

2009 MSEK	% of votes and capital	Carrying amount
Associated companies
Hawker Pacific Airservices Ltd, Australia	49.0	22
Industrikompetens i Östergötland AB, 556060-5478, Linköping	33.0	2
Eurenco SA, France	19.9	-
Sörman Intressenter AB, 556741-2233, Stockholm	26.6	3
Cold Cut Systems Svenska AB, 556351-4081, Kungsbacka	37.3	18
Denel Saab Aerostructures (Pty) Ltd, South Africa	20.0	64
Wrap International AB, 556627-6217, Linköping	22.6	-
Vingtec Saab AS, Norway	49.0	-
Opax AS, Norway	32.7	13
Image Systems AB, 556550-5400, Linköping	35.8	6
Usitall AB, 556506-6734, Linköping	30.0	5
Joint ventures
C3 Technologies AB, 556628-6414, Linköping	59.0	18
Saab Natech AB, 556627-5003, Jönköping	51.0	7
Gripen International KB, 969679-8231, Linköping	50.0	254
Gripen Venture Capital AB, 556298-6629, Linköping	50.0	12
SAAB-BAE SYSTEMS Gripen AB, 556527-6721, Linköping	50.0	1
Saab Ericsson NBD Innovation AB, 556628-6406, Stockholm	60.0	-
Industrigruppen JAS AB, 556147-5921, Stockholm	80.0	3
Avia Saab Technologies Co. Ltd., Thailand	40.0	2
Total		430

NOTE 24

RECEIVABLES FROM GROUP COMPANIES, ASSOCIATED COMPANIES AND JOINT VENTURES

Parent Company	Receivables from Group companies		associated companies	Receivables from and joint ventures
MSEK	2010	2009	2010	2009
Accumulated acquisition value
Opening balance, 1 January	760	140	116	31
Acquisitions	2	620	-	85
Sales	-205	-	-84	-
Closing balance, 31 December	557	760	32	116

NOTE 25

FINANCIAL INVESTMENTS

Group
MSEK	31-12-2010	31-12-2009
Financial investments held as fixed assets
Financial assets measured at fair value through profit or loss:
Shares and participations	56	84
Investments held to maturity:
Interest-bearing securities	147	32
Total	203	116

Short-term investments classified as current assets

Financial assets measured at fair value through profit or loss:

Interest-bearing securities	1,544	551
Total	1,544	551

Investments in interest-bearing securities consist of government, mortgage and corporate bonds and commercial paper as well as Floating Rate Notes. The fair value of interest-bearing securities held to maturity amounts to msek 147 (32).

NOTE 26

OTHER LONG-TERM SECURITIES HOLDINGS

MSEK	2010	2009
Accumulated acquisition value
Opening balance, 1 January	1,529	1,546
Acquisitions	2	4
Sales	-22	-21
Closing balance, 31 December	1,509	1,529
Accumulated impairments
Opening balance, 1 January	-34	-34
Impairments for the year	-18	-
Closing balance, 31 December	-52	-34
	1,457	1,495

Other long-term security holdings primarily relate to the investment in Aker Holding as of mnok 1,205, corresponding to msek 1,431, of which approximately 80 per cent has been financed with loans whose risk has been reduced through agreements that hedge this part of the invested capital, due to which the transactions are recognised net as a receivable in the Group's statement of financial position; see Note 27.

NOTE 27

LONG-TERM RECEIVABLES AND OTHER RECEIVABLES

Group
MSEK	31-12-2010	31-12-2009
Long-term receivables held as fixed assets
Receivables from associated companies, interest-bearing	130	85
Receivables from associated companies, non interest bearing	2	76
Receivables from joint ventures, interest-bearing	8	8
Other interest-bearing receivables	12	301
Other non interest-bearing receivables	704	857
Total	856	1,327

Other non interest-bearing receivables primarily consist of unrecognised actuarial losses on pensions according to ias 19.

Saab does not consider there to be a significant difference between book and fair value.

NOTE 27, CONT.

Group

MSEK	31-12-2010	31-12-2009
Other receivables held as current assets
Receivables from associated companies, non interest bearing	43	110
Receivables from joint ventures, non interest-bearing	3	47
Advance payments to suppliers	80	154
Other interest-bearing receivables	617	575
Other non interest-bearing receivables	415	799
Subtotal	1,158	1,685
Receivables from customers
Assignment revenue	4,153	7,453
Less utilised advance payments	-1,681	-4,442

Total	3,630	4,696
Subtotal	2,472	3,011
Less utilised advance payments	-1,681	-4,442

Other receivables include receivables related to the acquisition of Aker Holding as.

Assignment revenue refer to assignment costs incurred plus reported gross income less any losses attributable to the work performed. Unutilised advance payments amount to msek 643 (442).

Costs attributable to assignment revenue amounted to msek 3,150 (5,529). Reported gross income amounted to msek 1,003 (1,924).

Parent Company

MSEK	31-12-2010	31-12-2009
Other long-term receivables
Interest-bearing receivables	1	35
Non interest-bearing receivables	9	9
Total	10	44

Parent Company

MSEK	31-12-2010	31-12-2009
Other receivables held as current assets
Interest-bearing receivables	-	13
Non interest-bearing receivables	126	558
Subtotal	126	571
Receivables from customers
Assignment revenue	2,741	6,484
Less utilised advance payments	-876	-652
Subtotal	1,865	5,832
Total 1)	1,991	6,403

1) The previous year is reported gross. The comparable amount is MSEK 3,412.

Assignment revenue refer to assignment costs incurred plus reported gross income less any losses attributable to the work performed. Unutilised advance payments amount to msek 98 (3,182).

Costs attributable to assignment revenue amounted to msek 2,100 (4,805). Reported gross income amounted to msek 641 (1,679).

Parent Company

MSEK	2010	2009
Long-term receivables
Accumulated acquisition value
Opening balance, 1 January	44	44
Incremental receivables	1	8
Deductible receivables	-35	-8
Closing balance, 31 December	10	44

NOTE 28

INVENTORIES

Group
MSEK	31-12-2010	31-12-2009
Raw materials and consumables	1,780	2,379
Work in progress	1,534	1,711
Finished goods and goods for resale	885	822
Less utilised advances from customers1)	-99	-214
Total	4,100	4,698

1) Expenses incurred on contracts with a legal right of set-off.

Saab and the swedish Ministry of Enterprise, Energy and Communications have reached agreement with the National Debt Office to co-finance Saab's participation in the Airbus A380 project. The co-financing is in the form of a royalty loan maximised at msek 350. Repayment will take the form of a royalty on each delivery to Airbus. Through 2010, the National Debt Office has paid out a net of msek 263 (263), which reduces inventory in the financial statements.

The Group's cost of goods sold includes inventory impairments of msek 145 (154). The reversal of previous impairments amounts to msek 0 (47). The value of inventories measured at fair value less selling expenses amounts to msek 59 (69). Of inventories, msek 434 is expected to be realised more than twelve months after the closing day.

Parent Company

MSEK	31-12-2010	31-12-2009
Raw materials and consumables	1,323	1,543
Work in progress	948	1,199
Finished goods and goods for resale	540	513
Advance payments to suppliers	124	381
Less utilised advances from customers1)	-153	-326
Total	2,782	3,310

1) Expenses incurred on contracts with a legal right of set-off.

Cost of goods sold for the Parent Company includes inventory impairments of msek 66 (121) after the reversal of previous impairments of msek 0 (9). The value of inventories measured at fair value less selling expenses amounts to msek 59 (69). Of the Parent Company's inventories, msek 334 is expected to be realised more than twelve months after the closing day.

NOTE 29

ACCOUNTS RECEIVABLE

Accounts receivable in the Group amount to msek 3,052 (2,837). In 2010, Saab sold receivables as part of the sales programme arranged in the third quarter of 2009 to strengthen its financial position and increase financial flexibility. Customers in most cases are nations with high credit worthiness.

The receivables were sold in their entirety at an attractive funding level. This reduced accounts receivable at year-end by msek 1,409 (789) and also has a positive effect on cash flow of msek 620 (789). During the year, accounts receivable were written down by msek 12 (19). Reversals of previous writedowns amounted to msek 15 (12).

Accounts receivable in the Parent Company amount to msek 1,338 (990). During the year, receivables were written down by msek 3 (6). Reversals of previous write-downs amounted to msek 8 (8). See also Note 41.

NOTE 30

PREPAID EXPENSES AND ACCRUED INCOME

	Group			Parent Company
MSEK	31-12-2010	31-12-2009	31-12-2010	31-12-2009
Prepaid expenses	399	430	347	398
Accrued leasing fees Saab Aircraft Leasing	7	11	-	-
Accrued service income	148	114	87	62
Other accrued income	126	150	78	98
Total	680	705	512	558

Prepaid expenses relate to pension premiums, rents, licenses and insurance, among other things.

NOTE 31

LIQUID ASSETS

Group

MSEK	31-12-2010	31-12-2009
Cash and bank balances	703	747
Bank deposits	1,830	700
Deposits held on behalf of customers	11	16
Total according to statement of financial position	2,544	1,463
Total according to statement of cash flows	2,544	1,463

Bank deposits refer to short-term investments with a maturity of up to one month. The Group's unutilised account overdraft facility amounted to msek 131 (124) at year end. With regard to the Group's other loan facilities, refer to Notes 36 and 41.

NOTE 32

ASSETS HELD FOR SALE

Assets held for sale comprise an associated company within Electronic Defence Systems. The sale is expected to take place during the first half of 2011. Assets held for sale in 2009 consisted of investment and operating properties in the Dynamics business area and a real estate company in Corporate. The investment and operating properties were sold in the second quarter of 2010; see Note 8. In addition, a decision was made not to sell the real estate company that was previously for sale due to a change in financial circumstances. The assets of the real estate company have now been classified as investment properties, and the reclassification has not necessitated a change in financial reporting.

Group

MSEK	31-12-2010	31-12-2009
Assets classified as held for sale
Tangible fixed assets	-	33
Investment properties	-	287
Shares in associated companies	113	-
Accounts receivable	-	5
Total	113	325
Liabilities classified as held for sale
Deferred tax liabilities	-	24
Other liabilities	-	1
Accrued expenses and deferred income	-	4
Total	-	29

NOTE 33

SHAREHOLDERS' EQUITY

The shares in the Parent Company are divided into two series, a and b. Both classes of shares carry equal rights, with the exception that each Series a share is entitled to ten votes and each Series b share one vote. The shares have a quota value of sek 16.

Outstanding shares as of 31 December 2010	Number of shares	Per cent of shares	Per cent of votes
Series A	1,907,123	1.8	15.6
Series B	102,810,606	98.2	84.4
Total	104,717,729	100.0	100.0

Outstanding shares as of 31 December 2009	Number of shares	Per cent of shares	Per cent of votes
Series A	5,254,303	5.0	34.4
Series B	100,256,821	95.0	65.6
Total	105,511,124	100.0	100.0

Change in number of outstand ing shares 2010	Series A	Series B	Total
Number of outstanding shares as of 1 January 2010	5,254,303	100,256,821	105,511,124
Conversion of A shares to B shares	-3,347,180	3,347,180	-
Repurchase of shares	-	-838,131	-838,131
Early share matching	-	44,736	44,736
Number of outstanding shares as of 31 December 2010	1,907,123	102,810,606	104,717,729

NOTE 33, CONT.

In 2010, 838,131 Series b shares were repurchased on the market to secure Saab's Share Matching Plan and Performance Share Plan. Following the year's repurchase, 4,432,615 shares are held in treasury.

The Board of Directors of Saab have received requests from shareholders to convert 3,347,180 Series a shares in Saab ab to Series b shares. As a result of these conversions, the total number of votes in the company decreased from 156,439,071 to 126,314,451. The total number of registered shares in Saab ab is 109,150,344, of which 1,907,123 are Series a shares and 107,243,221 are Series b shares.

The dividend to shareholders amounted to msek 237 (187), or sek 2.25 (1.75) per share.

Management of the Group's capital

The Group's capital under management consists of equity. The Group's capital management goal is to facilitate continued operating growth and to remain prepared to capitalise on business opportunities. The long-term equity/asset goal is at least 30 per cent.

Net result of cash flow hedges

The net result of cash flow hedges comprises the effective share of the cumulative net change in fair value of a cash flow hedging instrument attributable to hedge transactions that have not yet taken place.

Translation reserve

The translation reserve comprises exchange rate differences that arise from the translation of financial reports from operations that have prepared their reports in a currency other than the currency that the Group's financial reports are presented in. The Parent Company and the Group present their financial reports in sek. The translation reserve at year-end amounts to msek -12 (-21). Of the translation reserve msek 2 (2) has been reclassified to earnings.

Revaluation reserve

The revaluation reserve comprises the difference between the fair value and carrying amount of operating properties reclassified as investment properties.

PARENT COMPANY

Restricted reserves

Restricted reserves may not be reduced through profit distributions.

Revaluation reserve

When a tangible or financial fixed asset is revaluated, the revaluation amount is allocated to a revaluation reserve.

Legal reserve

Provisions to the legal reserve has previously amounted to at least 10 per cent of net income for the year, until the legal reserve corresponded to 20 per cent of the Parent Company's capital stock. From 2006, provisions are voluntary and the Parent Company makes no provisions to the statutory reserve.

Unrestricted equity

Retained earnings

Consists of previous year's unrestricted equity after profit distribution and Group contributions paid. Retained earnings together with net income for the year comprise unrestricted equity, i.e. the amount available for distribution to the shareholders.

NOTE 34

EARNINGS PER SHARE

	2010	2009
Net income for the year attributable to Parent Company's shareholders (MSEK)	433	686
Weighted average number of common shares outstanding :
before dilution (thousands)	105,218	106,336
after dilution (thousands)	109,150	109,150
Earnings per share, before dilution (SEK)	4.12	6.45
Earnings per share, after dilution (SEK)	3.97	6.28

The weighted average number of shares outstanding before dilution refers to the total number of shares in issue less the average number of repurchased treasury shares. The weighted average number of shares outstanding after dilution refers to the total number of shares in issue.

NOTE 35

INTEREST-BEARING LIABILITIES

Group
MSEK	31-12-2010	31-12-2009
Long-term liabilities
Liabilities to credit institutions	1,103	1,101
Other interest-bearing liabilities	14	25
Total	1,117	1,126
Current liabilities
Liabilities to credit institutions	78	1,869
Liabilities to joint ventures	428	632
Other interest-bearing liabilities	83	18
Total	589	2,519
Total interest-bearing liabilities	1,706	3,645

Terms and repayment schedules

Collateral for bank loans amounts to msek 0 (0) for the company's land and buildings (see Note 42). Of the long-term liabilities, msek 1,110 (1,118) falls due between one and five years of the closing day and msek 7 (8) later than five years of the closing day.

Liabilities to credit institutions largely consist of Medium Term Notes (mtn), and in the previous year of commercial paper as well. For more information on financial risk management, refer to Note 41.

The fair value of mtns and commercial paper exceeds book value by msek 8 (21). Saab otherwise does not consider there to be a significant difference between book and fair value.

NOTE 36

LIABILITIES TO CREDIT INSTITUTIONS

Parent Company
MSEK	31-12-2010	31-12-2009
Current liabilities
Overdraft facilities: Available credit/limit	1,254	2,222
Short-term portion of bank loans: Unutilised portion	-131	-2,222
Utilised credit amount	1,123	-
Short-term borrowing from credit institutions	-	1,800
Total	1,123	1,800
Long-term liabilities
Overdraft facilities: Available credit/limit	4,000	5,212
Long-term portion of bank loans: Unutilised portion	-4,000	-4,000
Utilised credit amount	-	1,212
Long-term borrowing from credit institutions	1,100	1,100
Total	1,100	2,312
Total liabilities to credit institutions	2,223	4,112

In December 2009, Saab established a mtn programme of sek 3 billion in order to enable the issuance of long-term loans on the capital market. Under the terms of this programme, Saab has issued bonds and Floating Rate Notes for msek 1,100.

The Parent Company has mnok 975 in financing arranged in connection with the acquisition of 7.5 per cent of the shares in Aker Holding as in 2007. The loan amounts to msek 1,123. Saab's investment amounted to approximately nok 1.2 billion, of which about 80 per cent was financed through the above mentioned loans. The risk associated with the loans has been reduced through agreements that secure this part of the invested amount, because of which the transactions in the financial position for the Group are netted as a receivable.

The current liability in the previous year also included a commercial paper programme of msek 1,800. The liabilities are valued at amortised cost.

NOTE 37

EMPLOYEE BENEFITS

Saab has two types of pension plans: defined-benefit and defined-contribution. In defined-benefit plans, post-employment compensation is based on a percentage of the recipient's salary. Saab has around ten types of defined-benefit plans. The predominant plan is the itp plan, and the second largest plan refers to state-funded retirement pension. Saab's defined-benefit plans are secured in three ways: as a liability in the balance sheet, in pension funds or funded through insurance with Alecta. The Saab Pension Fund, that secured part of the itp plan, had assets of msek 3,969 (3,609) as of 31 December 2010, compared to an obligation of msek 4,675 (5,002) according to ias 19, or a solvency margin of 85 per cent (72).

The portion secured through insurance with Alecta refers to a definedbenefit plan that comprises several employers and is reported according to a pronouncement by the Swedish Financial Reporting Board, ufr 3. For fiscal year 2010, the Group did not have access to the information that would make it possible to report this plan as a defined-benefit plan. The itp pension plan, which is secured through insurance with Alecta, is therefore reported as a defined-contribution plan. Alecta's surplus can be distributed to policyholders and/or insureds. At year-end 2010, Alecta's surplus in the form of the collective funding ratio amounted to 146 per cent (141). The collective funding ratio is the market value of Alecta's assets as a percentage of the insurance obligations calculated according to Alecta's actuarial assumptions, which does not conform to ias 19.

In defined-contribution plans, pensions are based on the premiums paid.

Group

MSEK	31-12-2010	31-12-2009
Wholly or partially funded obligations
Present value of defined-benefit obligations	4,969	5,372
Fair value of assets under management	-4,298	-3,907
Net wholly or partially funded obligations	671	1,465
Present value of unfunded defined-benefit obligations	264	205
Present value of net obligation	935	1,670
Unreported actuarial losses	-1,404	-2,145
Net obligation employee benefits	-469	-475

The net amount is reported in the following items in the statement of financial position

Provisions for pensions	5	4
Long-term receivables	474	479
The net amount is divided among plans in the followingcountries
Sweden	-413	-435
USA	-61	-44
Germany	5	4

Net amount in the statement of financial position -469 -475

Unreported actuarial losses amount to msek 1,404 (2,145). Actuarial losses are calculated as the difference between pension obligations and the liability according to the statement of financial position. If the actuarial losses are more than 10 per cent of the pension obligation, the portion exceeding 10 per cent is amortised over the remaining period of employment for employees covered by defined-benefit plans. According to the above table, the actuarial losses exceed the pension obligation for 2010 by more than 10 per cent. This means that the difference between msek 523 and msek 1,404 will be distributed over anticipated remaining years in service.

During 2011, amortisation will be msek 68.

Unreported actuarial losses

Group	31 December
MSEK	2010	2009	2008	2007	2006
Present value of defined-benefit obligations	-5,233	-5,577	-5,004	-4,679	-4,449
Fair value of assets under man agement	4,298	3,907	3,356	3,565	3,481
Net obligation in the statement of financial position	-469	-475	-424	101	412
Losses	-1,404	-2,145	-2,072	-1,013	-556

The decrease in the unreported actuarial loss of msek 597 in 2010 was primarily the result of two positive factors. The return on assets under management was higher than expected, 6.6 per cent compared to an anticipated 5.0 per cent, which produced an actuarial gain of msek 68. The actuarial gain on pension commitments amounted to msek 523, which was due to a 80 bp higher discount rate. The actuarial loss was amortised by msek 144 during the year, as a result of which the loss decreased by a net of msek 741.

NOTE 37, CONT.

Changes in net obligation for defined-benefit plans reported in the statement of financial position

Group

MSEK	2010	2009
Net obligation for defined-benefit plans, 1 January	-475	-424
Compensation paid	-189	-159
Deposits to pension fund and other funding	-170	-190
Cost reported in income statement	339	291
Settlement/Translation difference	3	7
Withdrawals from pension fund	23	-
Net obligation for defined-benefit plans, 31 December	-469	-475

Change in pension obligation

Group

MSEK	2010	2009
Opening fair value, 1 January	5,577	5,004
Benefits vested during the year	170	155
Interest expense	226	213
Pension disbursements	-189	-159
Settlement	-14	-18
Actuarial gain/loss	-523	395
Translation differences	-14	-13
Closing fair value, 31 December	5,233	5,577

Change in assets under management

Group

MSEK	2010	2009
Opening fair value, 1 January	3,907	3,356
Assumed return	201	173
Withdrawals	-23	-4
Settlement	-14	-18
Contributions	170	190
Actuarial gain/loss	68	219
Translation differences	-11	-9
Closing fair value, 31 December	4,298	3,907

Cost reported in income statement

Group MSEK 2010 2009 Costs for employment during current year 170 155 Interest expense for obligation 226 213 Assumed return on assets under management -201 -173 Amortised actuarial losses 144 96 Cost of defined-benefit plans in income statement 339 291 Cost of defined-contribution plans 490 453 Payroll tax 185 169 Total cost of post-employment compensation 1,014 913

The cost is reported on the following lines in the income statement: Group

MSEK	2010	2009
Cost of goods sold	685	641
Marketing expenses	59	45
Administrative expenses	56	48
Research and development costs	45	43
Financial expenses	169	136
Total cost of post-employment compensation	1,014	913

Interest expense and amortisation of actuarial losses less the assumed return on assets under management is classified as financial expense. Other pension costs are divided by function in the income statement in relation to how payroll expenses are charged to the various functions.

Return on assets under management

2010	2009
269	392
-201	-173
	219
	68

Assumptions for defined-benefit obligations

Group
Per cent	2010	2009	2008	2007	2006
Significant actuarial assumptions as of closing day (expressed as weighted averages)
Discount rate, 31 December	4.80	4.00	4.25	4.50	4.00
Assumed return on assets under management, 31 December	6.00	5.00	5.00	5.00	5.00
Future salary increase	3.00	3.00	3.00	3.00	3.00
Future increase in pensions	2.00	2.00	2.00	2.00	2.00
Employee turnover	3.00	5.00	5.00	5.00	5.00
Anticipated remaining years in service	13.0	11.2	11.2	11.3	11.3

The following assumptions serve as the basis of the valuation of Saab's pension liability:

Discount rate: The valuation is based on covered Swedish mortgage bonds (aaa). Each assumed cash flow is discounted using an interest rate for the corresponding maturity.

Assumed return on investment assets: Of the assets managed by the Saab Pension Fund, 50 per cent is invested in interest-bearing bonds and 50 per cent in equities and hedge funds. The risk premium above current interest rate levels, which has historical support and is used by many companies for shares, is approximately 3-6 per cent above interest rates. For bonds, the interest rate used is the same as the discount rate less a risk premium for mortgage bonds. The assumed rate of return is 4 per cent (3) on the interest-bearing bonds and 8 per cent (7) on equities and hedge funds. Saab's pension fund does not own any Saab shares.

Long-term salary increase assumption: Assumed to be as high as the increase in the basic income amount. This means that Saab expects the same salary increases as the national average.

Long-term increase in basic income: Data from Statistics Sweden on current wage increases in the private sector provide an historical average during the period 1974–2000 of approximately 1 per cent above inflation.

Long-term rate of inflation: Based on the Riksbank's inflation target of 2 per cent, which mirrors the market's implicit expectations as measured by the difference between nominal and real bonds. It should be stressed that the sensitivity of the valuation to inflation assumptions is limited, since the discount rate is based on the real interest rate curve.

NOTE 37, CONT.

Mortality: Mortality is the same assumption recommended by the Financial Supervisory Authority (fffs 2007:31), based on Makeham formulas for men and women.

Marriage: Marriage is the same assumption recommended by the Financial Supervisory Authority (fffs 2001:13).

Employee turnover: The likelihood that an individual ends his/her employment is assumed to be 3 per cent per year.

Parent Company's pension obligations

Funds allocated for pensions according to the balance sheet correspond to the net present value of existing pension obligations less funds that are secured by Saab's pension fund.

Parent Company

MSEK			31-12-2010	31-12-2009
FPG/PRI pensions			75	257
Other pensions			44	62
Other provisions for pensions			73	60
Total			192	379
Of which credit guarantees via FPG/PRI			107	287
	Group			Parent Company
MSEK	2010	2009	2010	2009
Amount of provision expected to be settled after

more than 12 months 5 4 67 263

Share Matching Plan

In April 2007, Saab's Annual General Meeting resolved to offer employees the opportunity to participate in a Global Share Matching Plan. The Board considers it important that Saab's employees share a long-term interest in the appreciation of the company's shares. Employees who participate in the plan can have up to 5 per cent of their gross base salary withheld to purchase shares on the nasdaq omx Stockholm during a twelve-month period. If the employee retains the purchased shares for three years after the investment date and is still employed by the Saab Group, the employee will be allotted a corresponding number of Series b shares.

In April 2008, Saab's Annual General Meeting resolved to introduce a performance-based plan for senior executives and key employees entitling them to 2–5 matching shares depending on the category the employee belongs to. In addition to the requirement that the employee remain employed by Saab after three years, there is a requirement that earnings per share grow in the range of 5 to 15 per cent.

2007 Share Matching Plan

In 2008, employees purchased 673,235 Series b shares, corresponding to the total number of matching shares. The number of participants from the start was 5,104. Matching shares will be allotted four times in 2011, beginning in January.

2008 Share Matching Plan

In April 2008, Saab's Annual General Meeting resolved to offer employees a new Share Matching Plan with similar terms as the 2007 plan. In 2009, employees purchased 680,267 Series b shares, corresponding to the maximum number of matching shares. The number of participants from the start was 3,194.

2009 Share Matching Plan

In April 2009 Saab's Annual General Meeting resolved to offer a third Share Matching Plan with similar terms as the previous years' plans. In 2009, participants purchased 462,877 Series b shares, corresponding to the total number of matching shares. The number of participants from the start was 2,841.

2008 Performance Share Plan

In the first Performance Share Plan, around 280 senior executives and key employees were invited to participate. The number of participants from the start was 193. Participants in the plan purchased 123,590 shares, corresponding to about 275,000 matching shares.

2009 Performance Share Plan

In the second Performance Share Plan, the 138 participating employees purchased 62,633 shares in 2010. The maximum number of matching shares is about 140,000.

2010 Share Matching Plan and Performance Share Plan

In April 2010, Saab's Annual General Meeting resolved to offer employees a new Share Matching Plan and a new Performance Share Plan with similar terms as the previous years' plans. The plans start in January 2011 and continue through the calender year 2011. The maximum number of matching shares in these two plans is 1,040,000.

Share Matching Plan			2007 plan 2008 plan 2009 plan 2010 plan		Total
Number of matching shares at beginning of the year	628,148	667,142	-		- 1,295,290
Allotted during the year (treasury shares)	-		- 462,877	-	462,877
Less early matching	-22,228	-17,650	-4,858	-	-44,736
Forfeited matching shares	-23,539	-20,579	-1,963	-	-46,081
Number of matching shares eligible at year-end	582,381		628,913 456,056		- 1,667,350
Number of participants, 31 Dec. 2010	4,353	3,218	2,717	2,066	-
% of total number of employees	35	26	22	16	-
Average remaining maturity, years	0.4	1.4	2.7	3.7	-
Performance Share Plan			2008 plan 2009 plan 2010 plan		Total
Number of matching shares at beginning of the year		116,140	-	-	116,140
Allotted during the year (treasury shares)		-	62,663	-	62,663
Less early matching		-	-	-	-
Forfeited matching shares		-7,376	-1,640	-	-9,016
Number of matching shares eligible at year-end		108,764	61,023	-	169,787
Number of participants, 31 Dec. 2010		187	126	99	-
Average remaining maturity, years		1.4	2.7	3.7	-
Recognised expense for above-mentioned plan,
including social security expenses				2010	2009

Share Matching Plan 2007	33	32
Share Matching Plan 2008	23	12
Share Matching Plan 2009	8	-
Performance Share Plan 2008	-4	4
Performance Share Plan 2009	2	-
Total	62	48

The fair value of the services rendered is based on the share price of the matching shares that are expected to be allotted. The share price is determined at the time of the participants' investment adjusted by the dividend that does not accrue to the employee during the vesting period.

The company's expense is recognised in the balance sheet as equity and accrued expenses (social security fees). Administrative expenses for the share matching plans amounted to msek 4 (3) in 2010.

SENIOR EXECUTIVES' BENEFITS

Remuneration to Board members

In accordance with the resolution of the Annual General Meeting, the fees paid to the members of the Board amount to sek 4,075,000 (3,650,000), consisting of sek 1,100,000 (1,100,000) to the Chairman and sek 425,000 (425,000) to each of the other members elected by the Annual General Meeting, with the exception of the President. The member nominated by bae Systems, George Rose, is an employee of bae Systems and has declined his fees with reference to bae Systems' policy.

For audit committee work, committee chairman Per-Arne Sandström also received fees of sek 150,000 (150,000) and committee members Johan Forssell and Joakim Westh sek 100,000 (100,000) each.

NOTE 37, CONT.

For compensation committee work, committee chairman Lena Treschow Torell also received fees of sek 135,000 (135,000) and committee member Marcus Wallenberg sek 80,000 (80,000). George Rose has declined his fees with reference to bae Systems' policy.

In his capacity as a consultant, Board member Per-Arne Sandström received sek 125,000 from Saab ab through 31 March 2010 for consulting services related to organisational development, and hence the assignment has been completed.

Remuneration to the President

The salary paid to President and ceo consists of a fixed portion and a variable portion. The variable portion is based on predetermined quantitative and qualitative objectives each year. The variable compensation can amount to a maximum of 50 per cent of the President's fixed salary. The preparation process for compensation issues regarding the President is handled by the Board's Remuneration Committee according to the principles laid down by the Annual General Meeting and then voted on by the Board.

On 31 August 2010, President and ceo Åke Svensson decided to leave the company.

During the period November 2007 through October 2008, Åke Svensson participated in the Saab Share Matching Plan approved by the 2007 Annual General Meeting for all company employees. From November 2008, Åke Svensson participated in the Saab Global Performance Share Plan approved by the 2008 and 2009 Annual General Meetings. Since Åke Svensson stepped down from his position with the company on his own initiative, he has relinguished his right to matching shares as part of the plans.

During the period 1 January through 31 August 2010, Åke Svensson received salary, variable compensation and other benefits totalling sek 7,071,915 (6,293,894), of which the variable compensation for 2009 accounted for sek 1,123,200 (588,600) and paid outstanding holiday sek 1,557,900 and other benefits, including a car allowance, for sek 15,178 (19,024). During a transition period from 1 September 2010 through 1 April 2011, after his employment as President and ceo concluded, Åke Svensson has undertaken to assist the new ceo and Group Management for a total fee of sek 248,000. During the period 1 September through 31 December 2010, Åke Svensson received consulting fees from Saab ab of sek 141,666 for these services. The assignment will be completed in April 2011.

On 1 September 2010, Håkan Buskhe took over as President and ceo. He receives a salary and pension benefits as of 1 August 2010.

The President participates as of 1 September 2010 in the Saab Global Performance Share Plan approved by the 2009 Annual General Meeting. Outstanding matching rights in the Saab Global Performance Share Plan 2009 amount as of 31 December 2010 to sek 14,237.

During the period 1 August through 31 December 2010, the President received salary and other benefits totalling sek 2,958,466, of which other benefits, including a car allowance, amounted to sek 31,326.

Pension terms

The retirement age for the President is 62. The President has a defined-contribution pension plan. He may decide himself on the payment term, though within the provisions of Swedish income tax law. The pension cost for Saab consists of pension premiums amounting to 30 per cent of fixed salary as long as the President remains an employee of the company. To this is added the cost of pension premiums according to the itp plan. The pension commitment is vested.

For 2010, the cost of Åke Svensson's pension, including itp, was sek 1,626,631 (2,444,434).

For 2010, the cost of President Håkan Buskhe's pension, including itp, was sek 1,391,089.

Severance terms

If terminated by the company, the President will receive a salary and pension benefits for a period of six months (period of notice). Thereafter he will receive severance pay equivalent to one year of salary, based on his current fixed salary. If the President does not obtain new employment, he will receive an additional six months of severance pay. The salary during the period of notice and severance will be deducted from income received from other employment during the same period. If the President resigns voluntarily, there is a sixmonth period of notice with salary and pension benefits, but no severance pay.

Remuneration to other senior executives

The group of other senior executives included 13 individuals (11) in 2010, consisting of the Executive Vice Presidents, heads of the business areas and heads of Group staffs. Cecilia Schön-Jansson stepped down from Group Management on 26 November. Marketing officer Jonas Hjelm was appointed acting Head of Communications. At the turn of 2010/2011, Group Management therefore consisted of 13 persons, including the ceo.

The salaries paid to other senior executives consist of a fixed portion and a variable portion. The variable portion is based on the Group's order bookings, operating income and cash flow. The variable compensation normally amounts to a maximum of 25 per cent of each executive's fixed salary, and in some cases to 35 per cent of fixed salary. A variable compensation agreement is drafted annually and signed by the President. The rules for variable compensation are stipulated in a document issued by the President. Compensation issues regarding the other senior executives are prepared by the head of human resources and presented to the President, who makes a decision pending the approval of the Compensation Committee and the Board. During the period November 2007 through October 2008, other senior executives participated in the Saab Share Matching Plan approved by the 2007 Annual General Meeting for all company employees. From November 2008, all eligible executives participate in the Saab Global Performance Share Plan approved by the 2008 Annual General Meeting. Accumulated outstanding matching rights in Saab Share Matching Plan 2007 amount to sek 622,213 (381,211) as of 31 December 2010. The Saab Global Performance Share Plan 2008 amounts to sek 0 (971,099) as of 31 December 2010, while the Saab Global Performance Share Plan 2009 amounts to sek 587,843 in the event of a maximum outcome.

In 2010, the other senior executives received salaries, variable compensation and other benefits totalling sek 37,880,302 (31,407,483), of which variable compensation for 2009 accounted for sek 2,661,160 (1,619,100) and other benefits, including housing and car allowances, for sek 684,594 (785,780).

Pension terms

As of 1 January 2005, a pension age of 62 years applies to new executives. Among other senior executives, three individuals have a pension age of 60 years.

In addition to itp or its equivalent, 13 members of the group (11) are affiliated with the Saab plan, which is defined-contribution and vested. The Saab plan provides pensions benefits over and above itp or its equivalent on salary levels between 20 and 30 basic amounts as well as on salary segments over 30 basic amounts. The individuals themselves can decide on the payment term, though within the provisions of Swedish income tax law. Moreover, an insurance policy finances the period between the ages of 60 or 62 years and 65 years.

The pension cost for Saab consists of pension premiums, which are based on a percentage of qualifying salaries. The percentage rate is determined by each executive's time remaining until the pension age, 60 or 62 years, when joining the plan. The aggregate insurance balance should cover a targeted pension from 65 years of approximately 32.5 per cent of salary levels between 20 and 30 basic amounts and approximately 50 per cent of segments over 30 basic amounts of qualifying salaries. Premium payments continue as long as the individuals remain in their positions or as employees of the company.

Pension obligations are vested. In 2010, pension costs for other senior executives, including itp and its equivalent, amounted to sek 14,076,215 (10,511,594). Other senior executives are entitled, or obliged if the company so requests, to retire on pension as of the age of 60 or 62 years.

Severance terms

If terminated by the company, the group of other senior executives will receive a salary and pension benefits for six months (period of notice). Thereafter they will receive severance pay equivalent to 18 months of salary, based on their fixed salary. Severance is paid monthly with the first payment in the month after employment has ended. Severance is not paid for the period that falls after the contractual pension age. Employees hired before 1 January 2005 who have reached the age of 55 are entitled to another six months of severance.

The salary during the period of notice and severance will be deducted from income received from other employment during the same period. If they resign voluntarily, there is a six-month period of notice with salary and pension benefits, but no severance pay.

NOTE 37 CONT.

Summary of compensation and other benefits during 2010

SEK	Base salary/Board fee	Variable compen sation	Other benefits	Pension cost	Total	Provisions 2010 for long-term variable compensation at estimated outcome
Chairman of the Board	1,100,000	-	80,000	-	1,180,000	-
Other Board members	2,975,000	-	485,0001)	-	3,460,000	-
President and CEO Åke Svensson	5,933,537	1,123,200	15,178	1,626,631	8,698,546	-
President and CEO Håkan Buskhe	2,927,140	-	31,326	1,391,089	4,349,555	14,237
Other senior executives	34,534,548	2,661,160	684,594	14,076,215	51,956,517	1,210,056
Total	47,470,225	3,784,360	1,296,098	17,093,935	69,644,618	1,224,293

1) Excluding consultant's fee payed to member of the Board.

Guidelines for remuneration and other benefits for senior executives are described in the financial review.

Summary of compensation and other benefits during 2009

SEK	Base salary/Board fee	Variable compen sation	Other benefits	Pension cost	Total	Provisions 2009 for long-term variable compensation at estimated outcome
Chairman of the Board	1,100,000	-	80,000	-	1,180,000	-
Other Board members	2,550,000	-	485,0001)	-	3,035,000	-
President and CEO Åke Svensson	5,686,270	588,600	19,024	2,444,434	8,738,328	380,324
Other senior executives	29,002,603	1,619,100	785,780	10,511,594	41,919,077	1,225,455
Total	38,338,873	2,207,700	1,369,804	12,956,028	54,872,405	1,605,779

1) Excluding consultant's fee paid to Board member.

NOTE 38

PROVISIONS

Group
MSEK	31-12-2010	31-12-2009
Provisions that are long-term liabilities
Obligations related to regional aircraft	1,199	1,169
Expenditures for restructuring measures	290	141
Loss contracts	401	541
Other	317	295
Total	2,207	2,146
Provisions that are current liabilities

Obligations related to regional aircraft	102	108
Expenditures for restructuring measures	254	158
Loss contracts	97	176
Other	339	311
Total	792	753

Parent Company

MSEK	31-12-2010	31-12-2009
Obligations related to regional aircraft	451	480
Expenditures for restructuring measures	248	69
Loss contracts	490	680
Other	276	284
Total	1,465	1,513

Obligations related to regional aircraft

MSEK	Group	Parent Company
Opening balance, 1 January 2010	1,277	480
Amount utilised during the year	-29	-29
Translation differences and other	53	-
Closing balance, 31 December 2010	1,301	451

Expenditures for restructuring measures

MSEK	Group	Parent Company
Opening balance, 1 January 2010	299	69
Provisions during the year	432	244
Amount utilised during the year	-254	-149
Reversal of unutilised amount	-14	-1
Reclassification	81	85
Closing balance, 31 December 2010	544	248

Loss contracts

MSEK	Group	Parent Company
Opening balance, 1 January 2010	717	680
Provisions allocated during the year	111	121
Amount utilised during the year	-313	-293
Reversal of unutilised amount	-13	-13
Reclassification	-6	-5
Translation differences and other	2	-
Closing balance, 31 December 2010	498	490

NOTE 38, CONT.

Other provisions

MSEK	Group	Parent Company
Opening balance, 1 January 2010	606	284
Provisions allocated during the year	216	66
Amount utilised during the year	-156	-74
Reversal of unutilised amount	-33	-
Reclassification	15	-
Translation differences and other	8	-
Closing balance, 31 December 2010	656	276

Total provisions

MSEK	Group	Parent Company
Opening balance, 1 January 2010	2,899	1,513
Provisions allocated during the year	759	431
Amount utilised during the year	-752	-545
Reversal of unutilised amount	-60	-14
Reclassification	90	80
Translation differences and other	63	-
Closing balance, 31 December 2010	2,999	1,465

Regional aircraft

Commitments regarding regional aircraft refer to anticipated deficits related to lease agreements. Saab expects the leasing portfolio to be divested around 2015.

Restructuring

Structural costs primarily relate to the costs to adapt resources and changeover costs. About half of the expenditure is expected to fall in 2011 and the rest in 2012-2015.

Project losses

Provisions for project losses primarily relate to Helicopter 14 and civilian aircraft programmes. The provisions are utilised in pace with the project's completion.

Other provisions

Other provisions relate to provisions for guarantees and remaining costs in projects as well as for environmental commitments.

NOTE 39

OTHER LIABILITIES

Group
MSEK	31-12-2010	31-12-2009
Other long-term liabilities
Long-term prepaid revenue	82	114
Other	212	173
Total	294	287
Other current liabilities
Liabilities to associated companies	21	100
Liabilities to joint ventures	-	6
Value-added tax	358	206
Withholding tax	163	157
Deposits in leasing operations	17	23
Other	260	254
Total	819	746

Liabilities due for payment more than five years
after closing day	133	121

Parent Company

MSEK	31-12-2010	31-12-2009
Value-added tax	297	120
Withholding tax	110	96
Other	264	155
Total	671	371

Liabilities due for payment more than five years after closing day - -

Other liabilities in the Parent Company include both interest-bearing and non-interest-bearing liabilities. For a comparison with the Group, see also Note 35.

Saab does not consider there to be a significant difference between book and fair value.

NOTE 40

ACCRUED EXPENSES AND DEFERRED INCOME

		Group		Parent Company
MSEK	31-12-2010	31-12-2009	31-12-2010	31-12-2009
Accrued expenses
Vacation pay liability	807	847	607	634
Accrued project costs	782	989	451	548
Social security expenses	475	447	357	337
Expected invoices	382	468	296	354
Personnel liabilities	239	211	186	163
Accrued leasing costs	135	174	-	-
Cost of customer commit ments in regional aircraft	108	142	108	142
Claims reserve	67	75	4	1
Accrued interest	37	119	56	119
Royalties and commissions	28	23	16	13
Early retirement and redundancies	7	107	-	103
Other	228	133	111	34
Total accrued expenses	3,295	3,735	2,192	2,448
Deferred income
Advance invoicing	3,883	3,064	3,437	2,513
Prepaid insurance compensation1)	486	565	-	-
Capitalised project interest	27	43	27	43
Capitalised changes in value related to forward contract rollovers	-	232	598	618
Other	60	29	51	63
Total deferred income	4,456	3,933	4,113	3,237
Total	7,751	7,668	6,305	5,685

1) Insurance consideration from insurance companies for aircraft leasing operations.

Saab does not consider there to be a significant difference between book and fair value.

NOTE 41

FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

Saab's financial assets and liabilities and contractual obligations give rise to financial risks. These risks are managed to a large extent with various financial instruments.

Financial risk management

The Board of Directors of Saab has approved a Group Treasury Policy, which provides an overall description of the management of financial risks and treasury operations. The goal is to identify and actively manage financial risks in order to reduce the negative impact on the Group's results, competitive strength and financial flexibility.

The financial risks are defined as follows:

• Foreign currency risk
• Interest rate risk
• Liquidity and financing risk
• Commodity risk
• Credit and counterparty risk

Saab uses derivatives primarily to:

• Convert anticipated commercial cash flows in foreign currency to sek
• Convert borrowings in sek, or surpluses in sek, to the currencies in which assets are denominated (primarily relates to aircraft that Saab owns in its leasing fleet)
• Convert the fixed interest periods in leases to coincide with leasing revenue and the desired fixed interest rates for financing of other assets and liabilities

Responsibility for managing the Group's financial risks and developing methods and principles to manage financial risks is centralised in Group Treasury. The operating business areas have directives and processes that describe how financial risks are managed. Furthermore, Group Management has issued detailed directives and guidelines for Group Treasury's operations.

Management of insurance is centralised in the Group's insurance company, Lansen Försäkrings ab, where external transactions are handled as well. Customer finance, guaranty and finance issues are also managed by Group Treasury.

The Group's internal bank, Saab Treasury, is responsible for the Group's cash management, financing, management of interest rate and currency risks and also electricity risks. Saab has an agreement with an external party to manage the Group's electricity risks through discretionary management. Other commodity risk is managed primarily through contractual clauses.

To a limited extent the Group Treasury Policy allows proprietary trading in currency and money market instruments. The main purpose of this trading is to gain access to qualitative market information and maintain a high level of market expertise. Saab Treasury has a risk mandate expressed as VaR (Value at Risk) of msek 50 (50), which is divided between trading and management of economic risks, expressed primarily in the Tender to Contract portfolio. During the year, msek 10 was allocated to the trading portfolio and msek 40 to the Tender to Contract portfolio.VaR is a probability-based method based on historical price fluctuations and correlations and is considered a standard in the financial industry. The method provides a measure of the probability of the maximum loss over a specific number of days. Saab uses three days and a 99-per cent probability. The Treasury Risk Analysis unit reports each portfolio's risk defined according to established risk measures to Group Management on a daily basis.

Financial instruments

Financial assets in the Group mainly comprise accounts receivable, accrued income, interest-bearing receivables, liquid assets, fixed income investments and derivatives with positive market values. Saab's financial liabilities mainly comprise interest-bearing liabilities, accounts payable, accrued expenses and derivatives with negative market values. The following tables show a subdivided statement of financial position categorised and classified according to ias 39. A more detailed description of the categories can be found in note 1, Accounting principles.

Classification and categorisation of financial assets and liabilities	Fair value through profit and loss for trading	Fair value through profit and loss for other	Held-to maturity invest ments	Loans receivable and accounts receivable	Financial liabilities	Derivatives identified as cash flow hedges	Derivatives identified as fair value hedges	Total financial assets and liabilities	Measured at fair value
2010
Financial assets
Financial investments	-	56	147	-	-	-	-	203	203
Long-term receivables	-	-	-	856	-	-	-	856	856
Derivatives
Forward exchange contracts	88	-	-	-	-	801	21	910	910
Currency options	24	-	-	-	-	-	-	24	24
Interest rate swaps	80	-	-	-	-	-	-	80	80
Electricity derivatives	-	-	-	-	-	74	-	74	74
Other derivatives	17	-	-	-	-	-	-	17	17
Total derivatives	209	-	-	-	-	875	21	1,105	1,105
Accounts receivable and other receivables	-	-	-	6,883	-	-	-	6,883	6,883
Short-term investments	-	1,544	-	-	-	-	-	1,544	1,544
Liquid assets	-	-	-	2,544	-	-	-	2,544	2,544
Total financial assets	209	1,600	147	10,283	-	875	21	13,135	13,135
Financial liabilities
Interest-bearing liabilities	-	-	-	-	1,706	-	-	1,706	1,714
Derivatives
Forward exchange contracts	57	-	-	-	-	504	14	575	575
Currency options	8	-	-	-	-	-	-	8	8
Interest rate swaps	84	-	-	-	-	39	-	123	123
Electricity derivatives	-	-	-	-	-	44	-	44	44
Total derivatives	149	-	-	-	-	587	14	750	750
Other liabilities	-	-	-	-	5,078	-	-	5,078	5,078
Total financial liabilities	149	-	-	-	6,784	587	14	7,534	7,542
2009
Financial assets
Financial investments	-	84	32	-	-	-	-	116	116
Long-term receivables	-	-	-	1,327	-	-	-	1,327	1,327
Derivatives
Forward exchange contracts	141	-	-	-	-	683	51	875	875
Currency options	6	-	-	-	-	-	-	6	6
Interest rate swaps	105	-	-	-	-	-	-	105	105
Electricity derivatives	16	-	-	-	-	-	-	16	16
Total derivatives	268	-	-	-	-	683	51	1,002	1,002
Accounts receivable and other receivables	-	-	-	7,654	-	-	-	7,654	7,654
Short-term investments	-	551	-	-	-	-	-	551	551
Liquid assets	-	-	-	1,463	-	-	-	1,463	1,463
Total financial assets	268	635	32	10,444	-	683	51	12,113	12,113
Financial liabilities
Interest-bearing liabilities	-	-	-	-	3,645	-	-	3,645	3,666
Derivatives
Forward exchange contracts	135	-	-	-	-	801	94	1,030	1,030
Currency options	10	-	-	-	-	-	-	10	10
Interest rate swaps	73	-	-	-	-	44	-	117	117
Electricity derivatives	20	-	-	-	-	-	-	20	20
Other derivatives	4	-	-	-	-	-	-	4	4
Total derivatives	242	-	-	-	-	845	94	1,181	1,181
Other liabilities	-	-	-	-	5,574	-	-	5,574	5,574
Total financial liabilities	242	-	-	-	9,219	845	94	10,400	10,421

Outstanding derivatives

Currency derivatives				Fair value 2010			Fair value 2009
Million	Cur rency	Nominal currency	Asset SEK	Liability SEK	Net	Nominal currency	Asset SEK	Liability SEK	Net
Maturity up to one year	EUR	-255	224	87	137	-520	117	154	-37
	USD	-310	202	126	76	-158	307	218	89
	Other	-	166	80	86	-	108	67	41
Outstanding currency derivatives with maturities up to one year, total			592	293	299		532	439	93
Maturity one to three years	EUR	-160	149	37	112	-118	51	84	-33
	USD	-142	59	125	-66	-105	152	248	-96
	Other	-	57	45	12	-	59	53	6
Outstanding currency derivatives with maturities of one to three years, total			265	207	58		262	385	-123
Maturity three to five years	EUR	-36	28	17	11	-19	28	51	-23
	USD	-143	27	48	-21	-122	42	95	-53
	Other	-	-	-	-	-	4	7	-3
Outstanding currency derivatives with maturities of three to five years, total			55	65	-10		74	153	-79
Maturity over five years	EUR	-19	18	3	15	-27	7	21	-14
	USD	-139	24	21	3	-124	13	44	-31
Outstanding currency derivatives with maturities over five years, total			42	24	18		20	65	-45
Currency derivatives, total1)			954	589	365		888	1,042	-154

1) Retained premiums on open contracts amount to MSEK 13 (5).

Interest derivatives				Fair value 2010			Fair value 2009
Million	Cur rency	Nominal currency	Asset SEK	Liability SEK	Net	Nominal currency	Asset SEK	Liability SEK	Net
Maturity up to one year	SEK	200	-	3	-3	300	1	11	-10
Outstanding interest derivatives with maturities up to one year, total			-	3	-3		1	11	-10
Maturity one to three years	SEK	1,256	2	5	-3	750	1	13	-12
	NOK	500	104	111	-7
	USD	10	-	9	-9	29	-	22	-22
Outstanding interest derivatives with maturities of one to three years, total			106	125	-19		1	35	-34
Maturity three to five years	SEK	150	1	1	-	756	-	6	-6
	NOK	-	-	-	-	500	162	145	17
	USD	25	-	24	-24	-	-	-	-
Outstanding interest derivatives with maturities of three to five years, total			1	25	-24		162	151	11
Maturity over five years	SEK	30	1	-	1	-	-	-	-
	USD	-	-	-	-	26	-	29	-29
Outstanding interest derivatives with maturities over five years, total			1	-	1		-	29	-29
Interest derivatives, total2)			108	153	-45		164	226	-62

2) Market value includes accrued interest of MSEK -17 (-46) and retained premiums on open contracts MSEK -1 (0).

Electricity derivatives			Fair value 2010			Fair value 2009
Million	Mega watt	Asset SEK	Liability SEK	Net	Mega watt	Asset SEK	Liability SEK	Net
Maturity up to one year	17	66	42	24	17	13	17	-4
Outstanding electricity derivatives with maturities up to one year, total		66	42	24		13	17	-4
Maturity one to three years	16	8	2	6	17	3	3	-
Outstanding electricity derivatives with maturities of one to three years, total		8	2	6		3	3	-
Electricity derivatives, total		74	44	30		16	20	-4
DERIVATIVES, TOTAL		1,136	786	350		1,068	1,288	-220
(of which derivatives used for cash flow hedges)		-	-	288		-	-	-162
Accrued interest and retained premiums, see Notes 1 and 2 above		-	-5	5		-	-41	41
Netting accrued interest and premiums		-31	-31	-		-66	-66	-
DERIVATIVES ACCORDING TO GROUP'S FINANCIAL POSITION		1,105	750	355		1,002	1,181	-179

Foreign currency risk

The Group hedges the entire order backlog with the help of currency derivatives. As a result, changes in exchange rates do not affect the Group's future results with respect to the current order backlog. Future order bookings are exposed to fluctuations in exchange rates in terms of competitive strength. This is managed partly by Group Treasury, which hedges the economic exposure in fixed price tenders. Other future order bookings are not hedged.

Definitions

Foreign currency risk refers to the risk that fluctuations in exchange rates will negatively affect income. Exchange rate fluctuations affect Saab's income and equity in various ways:

• Income is affected when sales revenue and the cost of goods and services sold are in different currencies (economic and transaction exposure)
• Income is affected when the income of foreign Group companies is translated to sek (translation exposure)
• Income or equity is affected when the assets and liabilities of foreign Group companies are translated to sek (translation exposure)
• Income can be affected by impairment tests of non-hedged future cash flows in foreign currency in unprofitable contracts (impairment testing)

Saab distinguishes between the above-mentioned types of exposure. Policy descriptions are provided under each exposure.

Framework agreements, which contain both transaction and economic exposures, are in place mainly for various civil aeronautics programmes.

Economic exposure

Fixed-price tenders in foreign currency entail a foreign currency risk that consitutes an economic exposure. The risk is limited primarily through contract formulations (foreign currency clauses) or by bidding in the same currency as the Group unit's expenses.

In cases where fixed-price tenders are issued in foreign currency, the net exposure is hedged with financial instruments. The foreign currency risk that arises for tenders are managed by Saab Treasury within the framework of the Tender to Contract portfolio. The purpose of the portfolio is to minimise the Group's foreign currency risk during the tender period and reduce hedging costs. The following table shows outstanding nominal net hedges by currency as of year-end.

				Total hedge
2010	2009	2010	2009	2010	2009
-79	-33	-63	-35	-142	-68
-43	-216	-49	-90	-92	-306
-20	-1	-29	-	-49	-1
-	14	-	14	-	28
-1,060	-	-500	-	-1,560	-
		Forward contracts1)		Options2)

1) Also contains sold call and put options. 2) Refers to the net of purchased call and put options.

The Tender to Contract portfolio is managed by a risk measure based on a probability-weighted VaR comprised of two parts. One is VaR for the internal hedges multiplied by the estimated weighted probability of being awarded the tenders. The other part is VaR for the external hedges. Risk neutrality here means that the above two VaR measures add up to zero, i.e., the probability-weighted amount is hedged externally.

The VaR for tender hedges amounted to msek 23 (14) at year-end. Hedge accounting is not applied to the portfolio's hedges, due to which the Group's results are affected by the outcome of the tenders and the exchange rate for the underlying currency pair. The portfolio's effect on the Group's result in 2010 was msek 57 (-85).

Transaction exposure

Future cash flows in foreign currency from the order backlog and framework agreements are hedged to safeguard gross margins. In 2010, countries outside Sweden accounted for 62 per cent (69) of Saab's sales. Since a large part of production takes place in Sweden with expenses denominated in sek, Saab has large net flows in foreign currency.

The order backlog contains contracted flows and therefore constitutes a

transaction exposure. The predominant contract currencies in the order backlog of sek 41.5 billion (39.4) are sek, usd, eur and gbp. Of the total order backlog, 70 per cent (74) is in fixed prices with or without indexing, while the remaining 30 per cent (26) contains variable prices with index and/or currency clauses.

Netting is applied at the Group level to minimise the transaction exposure in foreign currencies, i.e., incoming currency is utilised to pay for purchases in the same currency. Currency clauses or transactions in the currency market with forward exchange contracts as hedging instruments are used as well. Hedges are normally arranged for each specific contract. The average forward rate is then used as the contract's rate of revenue recognition.

An analysis has been made of the currency sensitivity of the market value of outstanding external hedges for the order backlog and framework agreements. The effect of a change in exchange rates where the sek depreciates (making foreign currency more expensive) or appreciates is shown in the following table.

	Market value 31-12-2010	SEK depreciation of 10%	SEK appreciation of 10%
Market value in MSEK	323	-531	1,177
Change		-854	+854

The currency sensitivity in the order backlog is shown in the table below, i.e., the effects of a changes in exchange rates when the krona depreciates or appreciates in value.

	Order backlog 31-12-2010	SEK depreciation of 10%	SEK appreciation of 10%
Order backlog, MSEK	41,459	41,783	41,135
Change		+324	-324

Hedge accounting according to ias 39 is applied to derivatives intended to hedge the transaction exposure.

Hedge accounting to fair value is applied to foreign exchange contracts and currency swaps, primarily for derivatives entered into before 31 December 2006. The market value of currency derivatives accounted for as fair value hedges and the market value of hedged items are indicated in the table below. For information on the impact on net income for the year of gains and losses on derivatives accounted for as fair value hedges, see Note 6 Other operating expenses.

Hedge accouting to fair value, MSEK	2010	2009
Foreign currency risk in order backlog (hedged item)	-7	43
Currency derivatives (hedging instrument)	7	-43

Cash flow hedges are applied to forward exchange contracts and currency swaps entered into after 31 December 2006.

Cash flows hedges are expected to affect profit and loss in the period hedged cash flows occur, with the exception of those related to the manufacturing of inventory, which affect profit and loss on the day delivery is made to the customer. The hedge reserve before tax amounted to msek 872 (113), of which the value of derivatives is msek 288 (-162) and the effects arising from rollovers of derivatives and items removed from hedge accounting were msek 584 (275).

Of the amount recognised in the hedge reserve in 2009, msek 108 was reversed through profit or loss. The current year's change in the value of existing derivatives was msek 212 and the market value of hedges entered into in 2010 was msek 142. For information on the amount recognised in other comprehensive income, see consolidated net comprehensive income.

The inefficiency in cash flow hedges that affected net income for the year amounted to msek 4 (2).

The table below shows the cash flows corresponding to the derivatives recognised as cash flow hedges in 2010 and 2009 expressed in millions in local currency.

Cash flow hedges by currency

		CZK			EUR			GBP			NOK			THB			USD			ZAR
Million	Out flow	In flow	Net	Out flow	In flow	Net	Out flow	In flow	Net	Out flow	In flow	Net	Out flow	In flow	Net	Out flow	In flow	Net	Out flow	In flow	Net
< 90 days	-12	35	23	-83	116	33	-35	48	13	-2	1	-1	-	-	-	-99	235	136	-43	32	-11
91-180 days	-26	25	-1	-18	90	72	-18	38	20	-	2	2	-	-	-	-45	82	37	-80	38	-42
181-210 days	-4	12	8	-13	41	28	-7	19	12	-7	-	-7	-	-	-	-50	85	35	-1	-	-1
211-360 days	-4	27	23	-15	59	44	-24	50	26	-	1	1	-	-	-	-57	95	38	-27	-	-27
2012	-15	45	30	-50	154	104	-26	61	35	-6	2	-4	-	-	-	-117	197	80	-3	-	-3
2013	-	8	8	-22	63	41	-4	14	10	-	-	-	-	-	-	-56	122	66	-	-	-
2014	-	6	6	-18	36	18	-	2	2	-	-	-	-	-	-	-13	86	73	-	-	-
2015	-	3	3	-7	14	7	-	-	-	-	-	-	-	-	-	-2	76	74	-	-	-
2016 and forward	-	-	-	-4	12	8	-	-	-	-	-	-	-	-	-	-	142	142	-	-	-
Total flows 2010	-61	161	100	-230	585	355	-114	232	118	-15	6	-9	-	-	-	-439	1,120	681	-154	70	-84
Total flows 2009	-	57	57	-38	206	168	-41	95	54	-2	8	6	-	87	87	-194	639	445	-119	-	-119

Translation exposure

The translation exposure in the Group relates to the operations of foreign subsidiaries. Saab Aircraft Leasing's operations in Sweden have their economic environments in usd (functional currency) and are translated from the functional currency to sek. The translation exposure comprises net assets in foreign currency and arises in connection with acquisitions and divestments. The value of equity subject to translation exposure amounted to msek 2,247 (2,179) at year-end; see the table below:

Net assets translated to SEK

MSEK	31-12-2010	31-12-2009
USD	727	607
EUR	56	82
AUD	465	422
ZAR	664	653
Other currencies	335	415
Total	2,247	2,179

The effect on net assets of a change in exchange rates where the krona depreciates or appreciates is shown in the table below.

Sensitivity analysis of net assets

MSEK	Net assets 31-12-2010	SEK appreciation of 10%	SEK depreciation of 10%
USD	727	655	800
EUR	56	50	61
AUD	465	419	512
ZAR	664	598	730
Other currencies	335	301	369
Total	2,247	2,023	2,472

The foreign currency risk to the Group's income and equity from translation effects – the translation exposure – is not hedged according to the Group Treasury Policy.

Impairment tests

Long-term contracts in commercial aircraft programs consist of an order backlog and estimated future orders (business case) with cash flows primarily in usd. Cash flows from the latter are normally hedged when they become confirmed orders. In connection with impairment tests of loss contracts, income is affected by the revaluation of future cash flows at spot rates. Larger changes in exchange rates, primarily in usd against sek, have a significant impact on income. This exposure is not hedged.

Interest rate risks

Interest rate risk refers to the risk that Saab will be negatively affected by changes in interest rate levels.

Interest rate risk has been identified in the following areas:

• Saab is exposed to interest rate risk when the market value of certain items in the statement of financial position is affected by changes in underlying interest rates. Large such items refer to pension obligations and leasing operations.
• Saab's net financial items are affected by changes in market rates. Interest rate effects on advance financing affect gross income.

Interest rate risks in the Group's financial investments are managed based on a short duration and high liquidity. Interest rate risks in the Group's funding are managed based on a benchmark with an 18-month duration, with the option of deviating by +/–18 months. As of year-end, the duration for financing was 18 months (15).

Interest rate futures and swaps are used for interest risk management to achieve the desired duration in the financing. For a sensitivity analysis, see also under liquidity and financing risk. Lending to subsidiaries in foreign currency is normally financed in sek, which is converted to the subsidiary's currency through swaps. Interest rate swaps in usd are used mainly for interest risk management in the leasing portfolio, where the interest rate risk is fully matched.

The pension liability, the present value of future pension obligations, is the largest interest rate risk due to the liability's long duration; see also the Saab Pension Fund.

Liquidity and financing risks

Liquidity and financing risk refers to the risk that the company will not be able to meet its payment obligations due to insufficient liquidity or difficulty raising external loans on acceptable terms.

According to the Group Treasury Policy, Saab must always maintain unutilised credit facilities or liquid assets corresponding to the higher of (but not less than msek 3,000):

• 10 per cent of sales
• 50 per cent of outstanding on-demand guarantees for the three largest commitments

Liquidity and financing risks are minimised by diversifying financing sources and maturities.

Saab's policy is to insure on-demand guarantees for major projects against unauthorised use. This applies to contracts where the counterparty is classified as a developing country according to the definition of the Export Credits Guarantee Board (ekn). Insurance can be obtained from state guarantee institutions or the private insurance market.

Saab has access to the following credit facilities:

Loan facilities

MSEK	Facility	Utilised	Available
Club loan (matures 2012)	4,000	-	4,000
Total confirmed credit facilities	4,000	-	4,000
Commercial paper	5,000	-	5,000
Medium Term Notes (MTN)	3,000	1,100	1,900
Receivables financing	1,475	1,409	66
Total loan programmes	9,475	2,509	6,966
Total loan facilities	13,475	2,509	10,966

The club loan is a credit facility with an equivalent value of msek 4,000 from seven banks that expires in 2012. No financial covenants are attached to the club loan or the other credit facilities.

A commercial paper programme with a limit of msek 5,000 is available as well. Neither the commercial paper programme nor the club loan were used in 2010.

In 2009, Saab established a Medium Term Note programme (mtn) with a limit of msek 3,000 or an equivalent value in eur. The mtn programme provides access to financing for up to 15 years, which is an element in diversifying loan maturities.

The Parent Company also has mnok 975 in financing arranged in connection with the acquisition of 7.5 per cent of the shares inAker Holding as in 2007. Saab's investment amounted to approximately nok 1.2 billion, of which about 80 per cent was financed through the above-mentioned loans. The risk associated with the loans has been reduced through agreements that secure this part of the invested amount, because of which the transactions in the consolidated statement of financial position are netted as a receivable according to Note 27. The interest on part of the above-mentioned loans is hedged with an interest rate swap that has been identified as a hedging instrument and is therefore recognised according to hedge accounting. No inefficiency has arisen in connection with this hedge.

Net liquidity/debt

Net liquidity excluding interest-bearing receivables and provisions for pensions amounted to msek 2,382 (-1,631) on 31 December 2010. Liquidity varied during the year, and surplus liquidity was placed as per the Group Treasury Policy. At year-end, placements in interest-bearing securities and bank deposits amounted to msek 3,374 (1,251).

Net liquidity

MSEK	Note	31-12-2010	31-12-2009
Assets
Liquid assets	31	2,544	1,463
Short-term investments	25	1,544	551
Total liquid investments		4,088	2,014
Short-term interest-bearing receivables	27	617	575
Long-term interest-bearing receivables	27	150	394
Long-term interest-bearing financial investments	25	147	32
Total interest-bearing assets		5,002	3,015
Liabilities
Short-term interest-bearing liabilities	35	589	2,519
Long-term interest-bearing liabilities	35	1,117	1,126
Provisions for pensions	37	5	4
Total interest-bearing liabilities		1,711	3,649
NET LIQUIDITY/DEBT (-)		3,291	-634

As of 31 December 2010, net liquidity amounted to msek 3,291 (-634) with an average during the year of msek 890 (-1,721). The net of interest expenses paid and interest income received amounted to msek -43 (-68). Of the liquid investments of msek 4,088 (2,014), msek 10 (10) was pledged as trading security to omx. The sensitivity analysis below shows the effect on income of an increase in market interest rates and the credit margin of 1 basis point for Saab's investments.

Placements in interest-bearing securities and bank deposits Sensitivity analysis of financial risk

MSEK Maturities	Fixed interest	Effect of market in terest rate, 1%	Tied-up capital	Effect of credit spread, 1%	Effect on financial costs
1 year	2,745	27	2,745	27	54
2 years	600	6	600	6	12
Total	3,345	33	3,345	33	66
Adjustments
Adjustment of book value compared to nominal value	29	-	29	-	-
Total	3,374	-	3,374	-	-

Current interest-bearing liabilities mainly consist of liabilities to joint ventures of msek 428 (632). Long-term interest-bearing liabilities amount to msek 1,117 (1,126) and mainly consist of mtns in issue. Of the long-term interest-bearing liabilities, msek 1,100 (1,118) matures within 1-5 years and msek 7 (8) in more than 5 years.

The maturity structure of liabilities to credit institutions is indicated in the tied-up capital column of the "Sensitivity analysis of financial risk" table. The volume of tied-up capital includes interest rate swaps. The interest rate risk in the loans given a 1 basis point parallel shift in the yield curve was msek 25 (13) as of 31 December 2010. The sensitivity analysis below shows the impact on results of an increase in market interest rates and an equally large increase in the credit margin of 1 basis point for Saab's refinancing of credits.

Financing (refers to utilised credit facilities) Sensitivity analysis of financial risk

MSEK Maturities	Fixed interest	Effect of market in terest rate, 1%	Tied-up capital	Effect of credit spread, 1%	Effect on financial costs
1 year	-1,709	-17	-1,409	-14	-31
2 years	-400	-4	-	-	-4
3 years	-250	-3	-1,100	-11	-14
4 years	-100	-1	-	-	-1
5 years and for ward	-50	-	-	-	-1
Total	-2,509	-25	-2,509	-25	-51

Commodity risks

Price risks are divided into two parts:

• Commodity price risk refers to the risk that purchasing costs for material will rise.
• Electricity price risk refers to the risk that Saab could be negatively affected by changes in electricity prices .

According to the Group's policy, commodity risk is minimised and managed primarily through contract clauses with customers/suppliers. To minimise the risk to Saab's operating margin, future electricity consumption is hedged. This is done by hedging projected consumption according to a model where 100 per cent of the next quarter's consumption is hedged. The hedging level then drops on a straight-line basis to 0 per cent in quarter 13. Swedish units consume around 150 GWh per year with a spot price risk of msek 1.5 per every time the price of electricity changes by sek 0.01. Electricity directives are managed through a discretionary management mandate, where the manager has the mandate to accept risks in relation to benchmarks (hedging strategy) at the equivalent of msek 1 (1) expressed in VaR. The market value of electricity derivatives as of year-end was msek 30 (-4). Since 1 January 2010, electricity derivatives are used as cash flow hedges for the Stockholm price area. The ineffectiveness that affected net income for the year amounted to msek -1.

Credit and counterparty risks

Credit risk is the risk that the counterparty in a transaction will not be able to fulfill the financial obligations of a contract. In the course of its day-to-day operations, Saab is exposed to credit risks related to counterparties in the form of customers, suppliers and financial players. The Group's aggregate credit risks consist of commercial credit risks and financial credit risks.

Commercial credit risks

According to the Group's policy, commercial credit risks are identified and actively managed on a case-by-case basis. Credit risks that arise in customer contracts with lengthy terms are managed by utilising available banking, insurance or export credit institutions. According to the policy, credit risks that arise through advances paid to suppliers are managed by always maintaining bank-guaranteed security for any advances. Commercial credit risks consist of outstanding accounts receivable and advances paid to suppliers.

Accounts receivable

On 31 December 2010, the Group's outstanding accounts receivable amounted to msek 3,052 (2,837). The Receivables Financing Programme reduced accounts receivable at year-end by approximately msek 1,409 (789). Defencerelated sales accounted for 83 per cent (83) of total sales, where the counterparties in most accounts receivable are nations with high creditworthiness. The Group's receivables are mainly in the EU, which accounted for 51 per cent (55) of the total. Where counterparties' creditworthiness is deemed unsatisfactory, bank and/or insurance guarantees or guarantees from ekn are secured.

In connection with cash transactions, Saab generally requires that a letter of credit is opened in its name to ensure that payment is received.

Write-downs of accounts receivable amounted to msek 22 (32), corresponding to 0.5 per cent (0.9) of total accounts receivable. Write-downs of accounts receivable have changed as follows.

MSEK	2010	2009
Write-downs, 1 January	-32	-27
Write-downs for calculated losses	-12	-19
Reversal of previous write-downs	15	12
Actual credit losses	7	2
Write-downs, 31 December	-22	-32

The following table shows an age analysis of the Group's overdue receivables:

MSEK	31-12-2010	31-12-2009
<30 days	265	466
30 to 90 days	225	194
91 to 180 days	52	87
>181 days	102	147
Accounts receivable overdue	644	894
Accounts receivable not overdue	2,408	1,943
Total accounts receivable	3,052	2,837

Since accounts receivable are either secured via bank and/or insurance company guarantees or receivables from states, the commercial credit risk is low despite overdue receivables.

Advances paid to suppliers

Advances paid to suppliers constitute a credit risk, since the counterparty's services have not been fully rendered. As of 31 December 2010, the Group had paid its suppliers advances of msek 282 (546). As the Group's policy is to maintain bank-guaranteed security for any advances it pays, the commercial supplier credit risk is considered low.

Financial credit risks

Financial credit risk consists of exposures to banks through deposits, securities investments and/ or the market value of outstanding derivatives.

The Group's policy for managing financial credit risks is to:

• Ensure that all financial counterparties have a long-term credit rating of no lower than A from Standard and Poor's or A3 from Moody's
• Assign each financial counterparty a credit limit based on its longterm credit rating
• Enter into isda master agreements with financial counterparties to net the positive and negative market values of outstanding derivatives

Credit risk is calculated on established and anticipated risks according to the recommendations of the Bank of International Settlements (bis I). On 31 December 2010, counterparty risks amounted to msek 4,100 (1,500), of which deposits with banks, mortgage institutions, companies and the Swedish state totalled msek 3,300 (1,200).

Trading

The Board has given Saab Treasury a risk mandate for trading in currency and money market instruments. During the year, msek 10 was allocated to trading expressed according to VaR. If the cumulative result for the year is negative, the mandate is reduced correspondingly. In 2010, trading income was msek 35 (43), which is reported as other operating income. The average utilised risk mandate (VaR) during the year was msek 1 (1).

Valuation methods for financial assets and liabilities

The fair value of listed financial assets is determined using market prices. Furthermore, Saab applies various valuation methods to determine the fair value of financial assets that are managed on an inactive market. These valuation methods are based on the valuation of similar instruments, discounted cash flows or customary valuation methods such as Black-Scholes.

The following instruments were valued at fair value (unadjusted) on an active market on the closing date (Level 1):

• Bonds
• Electricity derivatives
• Interest derivatives

The following instruments are valued at fair value according to accepted valuation models based on observable market data (Level 2):

• Forward exchange contracts: Future payment flows in each currency are discounted by current market rates to the valuation day and valued to sek at year-end exchange rates
• Options: The Black-Scholes option pricing model is used in the market valuation of all options
• Interest swaps: Future variable interest rates are calculated with the help of current forward rates. These implicit interest payments are discounted on the valuation date using current market rates. The market value of interest rate swaps is obtained by contrasting the discounted variable interest payments with the discounted present value of fixed interest payments

Unlisted shares and participations: Valued according to accepted principles, e.g., for venture capital firms (Level 3).

As of 31 December 2010, the Group had the following financial assets and liabilities at fair value:

Assets at fair value

MSEK	2010	Level 1	Level 2	Level 3
Bonds and interest-bearing securities	1,544	1,544	-	-
Forward exchange contracts	910	-	910	-
Currency options	24	-	24	-
Interest rate swaps	80	-	80	-
Electricity derivatives	74	74	-	-
Other derivatives	17	-	17	-
Shares and participations	56	-	-	56
Total	2,705	1,618	1,031	56

Liabilities at fair value

MSEK	2010	Level 1	Level 2	Level 3
Forward exchange contracts	575	-	575	-
Currency options	8	-	8	-
Interest rate swaps	123	-	123	-
Electricity derivatives	44	44	-	-
Total	750	44	706	-

Pension fund

The Saab Pension Fund was established in 2006 to secure the main part of the Group's pension obligation and is not consolidated in the Group.

The fund has a long-term real yield requirement of 4 per cent per year. The investment policy requires an asset distribution of a maximum of 50 per cent equities/alternative investments (hedge funds) and 50-100 per cent interest-bearing instruments. Investments are made in interest-bearing securities from issuers with a credit rating of no lower than bbb(Baa) according to Standard & Poor's and Moody's. Of the fund's capital at year-end, 50 per cent (61) was invested in interest-bearing assets and the remaining 50 per cent (39) in equity and alternative investments. The market value of the fund's assets as of 31 December 2010 was msek 3,969 (3,609) and the annual return was 7 per cent (12). In 2010, the fund was capitalised by msek 124 (157) and msek 16 (2) in refunds were paid. The table below shows the solvency margin for the pension fund.

MSEK	31-12-2010	31-12-2009	31-12-2008	31-12-2007
Fair value of assets under management	3,969	3,609	3,082	3,304
Present value of defined benefit obligations1)	4,675	5,002	4,432	3,923
Solvency margin	85%	72%	70%	84%
Pension obligation accord ing to PRI	4,042	3,844	3,678	3,427
Solvency margin	98%	94%	84%	96%

1) Refers to the pension obligation that the assets under management are designed to cover.

NOTE 42

ASSETS PLEDGED AND CONTINGENT LIABILITIES

		Group	Parent Company
MSEK	31-12-2010	31-12-2009	31-12-2010	31-12-2009
Assets pledged for own liabilities and provisions
Chattel mortgages	100	200	100	200
Bonds and other securities	10	10	10	10
Total	110	210	110	210
Contingent liabilities
Guarantees to insurance company, FPG/PRI	81	77	81	77
Guarantees for Group companies' commitments to customers	-	-	5,164	4,470
Contingent liabilities related to legal dispute1)	302	-	302	-
Sureties for joint ventures	6	511	-	-
Sureties for associated companies	2	76	371	423
Total	391	664	5,918	4,970

1) Saab has an ongoing legal dispute in Denmark with the Danish Defence Acquisition and Logistics Organization (DALO). The Maritime and Commercial Court in Copenhagen issued a judgment dismissing DALO's claim against Saab. DALO has filed an appeal against the judgment. DALO's counterclaim amounts to approximately MDKK 250.

The table below shows the total sum of guarantees that do not represent contingent liabilities and a distribution by category and issuer.

MSEK	31-12-2010	% of total	31-12-2009	% of total
Parent Company guarantees	2,275	21	2,011	19
Bank guarantees	8,407	79	8,507	81
Total guarantees	10,682	100	10,518	100
Bank guarantees:
On demand	5,700	68	5,013	59
Proprietary	2,707	32	3,494	41
Total bank guarantees	8,407	100	8,507	100
Type of guarantee:
Advances	4,127	39	4,046	38
Completion	3,666	34	2,866	27
Milestone payments	2,558	24	2,697	26
Tenders, credits and other	331	3	909	9
Total guarantees	10,682	100	10,518	100

With regard to the Group's so-called fulfilment guarantees for commitments to customers, the likelihood of an outflow of resources is extremely small and, as a result, no value is recognised.

NOTE 43

GOVERNMENT GRANTS

Saab receives government grants, mainly various grants from the eu related to research and development projects. For 2010, msek 112 has been received. msek 91 has been recognised through profit or loss by reducing research and development expenditures and as operating income. In the statement of financial position at year-end, msek 64 (43) is recognised as prepaid income.

Saab and the Ministry of Enterprise, Energy and Communications have reached agreement with the National Debt Office to co-finance Saab's participation in the Airbus A380 project. The co-financing is in the form of a royalty loan maximised at msek 351. Repayment will take the form of a royalty on each delivery to Airbus. Through 2010, the National Debt Office has paid out a net of msek 263 (263), which reduces inventory in the financial statements.

No contingent liabilities or contingent assets are reported.

NOTE 44

TRANSACTIONS WITH RELATED PARTIES

Related parties with which the Group has transactions mainly consist of bae Systems, which holds 10 per cent of the capital and 9 per cent of the votes in Saab, and half of the jointly owned company Gripen International kb. Sales to and purchases from bae Systems amounted to msek 162 and msek 59, respectively. Interest-bearing liabilities include a loan from bae Systems of msek 7.

The Group's financial agreements conform to market principles. Saab does not have any transactions of importance with Investor. Neither does Saab have any significant transactions with Board members or members of Group Management. For information on remuneration, see Note 37.

Transactions with bae Systems, Gripen International and other related parties are conducted in accordance with commercial principles.

Of the Parent Company's sales, 3 per cent referred to sales to Group companies, while 14 per cent of the Parent Company's purchases were from Group companies.

Sales to and purchases from the Group's associated companies amounted to approximately msek 26 and msek 127, respectively.

NOTE 45

GROUP COMPANIES

Significant Group company holdings

	Group company's		Ownership share, per cent
Group company	registered office, country	2010	2009
Combitech AB	Växjö, Sweden	100	100
Saab Barracuda AB	Västervik, Sweden	100	100
Saab Barracuda LLC	USA	100	100
Saab Dynamics AB	Karlskoga, Sweden	100	100
Saab Danmark A/S	Denmark	100	100
Saab Grintek Defence (Pty) Ltd	South Africa	75	75
Saab Seaeye Ltd	UK	100	100
Saab Systems Oy	Finland	100	100
Saab Systems Pty Ltd	Australia	100	100
Saab Training Systems AB	Jönköping, Sweden	100	100
Saab Underwater Systems AB	Motala, Sweden	100	100

Parent Company

MSEK	2010	2009
Accumulated acquisition value
Opening balance, 1 January	19,997	21,344
New issues/shareholders' contributions	20	42
Acquisitions	14	-
Sales and liquidations	-3	-1,382
Reduction of purchase price	-72	-
Reclassifications	-	-7
Closing balance, 31 December	19,956	19,997
Accumulated impairments
Opening balance, 1 January	-10,477	-9,682
Impairments for the year	-74	-795
Closing balance, 31 December	-10,551	-10,477
Carrying amount, 31 December	9,405	9,520

Impairment reversals and impairments for the year are reported in the income statement on the line "Result from shares in Group companies."

Specification of Parent Company's holdings of shares in Group companies

Group company/Corp. ID no./Reg. office	No. of shares	Share, per cent	Carrying amount, MSEK
Celsius AB, 556194-4652, Linköping	5,000	100.0%	144
Celsius Invest AB, 556164-6588, Stockholm	1,720,000	100.0%	155
Combitech AB, 556218-6790, Växjö	100,000	100.0%	964
EMC Services Elmiljöteknik AB, 556315-6636, Mölndal	2,000	100.0%	3
Fastighets AB Linköping Malmen 27, 556354-6349, Linköping	20,000	100.0%	4
Fastighets AB Odengatan Jönköping, 556378-6226, Järfälla	2,000	100.0%	-
Fastighets AB Solhusgatan, 556230-7404, Göteborg	1,000	100.0%	67
FFV Ordnance AB, 556414-8194, Eskilstuna	100,000	100.0%	10
Gripen International AB, 556628-6380, Linköping	1,000	100.0%	5
Kockums Holdings AB, 556036-4100, Linköping	48,000	100.0%	5
Lansen Försäkrings AB, 516401-8656, Linköping	500,000	100.0%	51
Linköping City Airport AB, 556366-8333, Linköping	5,000	100.0%	3
Saab d.o.o., Slovenia	-	100.0%	-
Saab Aerospace Overseas AB, 556628-6448, Linköping	1,000	100.0%	3
Saab Aircraft Leasing Holdings AB, 556124-3170, Stockholm	30,000	100.0%	1,500
Saab Barracuda AB, 556045-7391, Västervik	200,000	100.0%	77
Saab Danmark A/S, Denmark	-	100.0%	103
Saab Dynamics AB, 556264-6074, Karlskoga	500,000	100.0%	357
Saab Czech s.r.o, Czech Republic	-	100.0%	15
Saab Facilities Stockholm AB, 556244-5683, Järfälla	170,000	100.0%	17
Saab International AB, 556267-8994, Stockholm	50,000	100.0%	11
Saab Microwave Systems AB, 556028-1627, Mölndal	300,000	100.0%	3,685
Saab North America, Inc., USA	-	100.0%	623
Saab PerformIT AB, 556569-2919, Karlstad	2,250	100.0%	23
Saab Security Systems AB, 556627-4998, Järfälla	200,000	100.0%	100
Saab South Africa (Pty) Ltd, South Africa	-	95.0%	443
Saab Systems Oy, Finland	-	100.0%	103
Saab Supporter Ett AB, 556121-2597, Linköping	1,000	100.0%	95
Saab Surveillance Systems AB, 556577-4600, Stockholm	1 000	100,0%	-
SaabTech AB, 556460-1655, Järfälla	3,000,000	100.0%	363
Saab Training Systems AB, 556030-2746, Jönköping	150,000	100.0%	42
Saab Training Systems B.V., Netherlands	-	100.0%	6
Saab Underwater Systems AB, 556439-6884, Motala	250,000	100.0%	30
Dormand companies etc.	-	-	398
Carrying amount at year-end			9,405

NOTE 46

31-12-2010

UNTAXED RESERVES

Parent Company
MSEK	2010	2009
Accumulated accelerated depreciation
Buildings and land:
Opening balance, 1 January	84	105
Under depreciation for the year	-19	-21
Closing balance, 31 December	65	84
Machinery and equipment:
Opening balance, 1 January	335	317
Accelerated depreciation for the year	102	18
Closing balance, 31 December	437	335
Total untaxed reserves, 31 December	502	419

NOTE 47

STATEMENT OF CASH FLOWS, SUPPLEMENTAL INFORMATION

The Group's operating cash flow and a reconciliation between operating cash flow and cash flow for the year are shown below. Operating cash flow differs in the following respect from the statement of cash flows on page 65:

• Investments in or sales of short-term investments and other interestbearing financial investments as well as interest-bearing receivables are not included in investing activities

OPERATING CASH FLOW

Group

MSEK	2010	2009
Cash flow from operating activities
Income after financial items	776	976
Transferred to pension fund	-147	-190
Adjustments for items not affecting cash flow	2,317	1,835
Income tax paid	-196	-183
Cash flow from operating activities before changes in working capital	2,750	2,438
Working capital
Inventories	586	-401

Current receivables	855	1,927
Advance payments from customers	194	-485
Other current liabilities	399	-1,522
Provisions	-297	-261
Change in working capital	1,737	-742

Cash flow from operating activities 4,487 1,696

Investing activities
Investments in intangible fixed assets	-117	-81
Investments in tangible fixed assets	-262	-197
Investments in lease assets	-2	-3
Sale of tangible fixed assets	11	9
Sale of lease assets	65	130
Investments in subsidiaries, net effect on liquidity	-	-68
Sale of subsidiaries and associated companies, net effect on liquidity	161	11
Sale of and investments in financial assets	6	-50
Cash flow from investing activities excluding change in short-term investments and other interest-bearing financial assets	-138	-249
Operating cash flow	4,349	1,447

OPERATING CASH FLOW VS. CASH FLOW FOR THE YEAR IN STATEMENT OF CASH FLOWS

MSEK	2010	2009
Operating cash flow	4,349	1,447
Investing activities – interest-bearing:
Short-term investments	-993	-551
Other financial investments and receivables	-12	274
Financing activities:
Repayment of loans	-1,950	-279
Repurchase of shares	-80	-110
Dividend paid to the Parent Company's shareholders	-237	-187
Contribution from non-controlling interest	-	6
Cash flow for the year	1,077	600

SUPPLEMENTAL INFORMATION ON STATEMENT OF CASH FLOWS

Liquid assets

Group
MSEK	31-12-2010	31-12-2009
The following components are included in liquid assets:
Cash and bank	703	747
Bank deposits	1,830	700
Deposits on behalf of customers	11	16
Total according to the statement of financial position	2,544	1,463
Total according to statement of cash flows	2,544	1,463

Parent Company

MSEK	31-12-2010	31-12-2009
The following components are included in liquid assets:
Cash and bank balances	105	88
Bank deposits	1,830	700
Total according to balance sheet	1,935	788
Total according to statement of cash flows	1,935	788

Interest paid and dividends received

		Group		Parent Company
MSEK	2010	2009	2010	2009
Dividends received	12	15	236	61
Interest received	49	80	130	141
Interest paid	-87	-142	-165	-293
Total	-26	-47	201	-91

Adjustments for items not affecting in cash flow

	Group			Parent Company
MSEK	2010	2009	2010	2009
Depreciation and amortisation	1,295	1,377	255	262
Impairments	63	23	-	-
Changes in the value of biological assets	-43	-13	-	-
Profit shares in associated companies	-40	41	-	-
Dividends from associated companies	6	13	-	-
Dividends and Group contributions from Group companies	-	-	-1,485	-2,763
Capital gains/losses from sales of Group companies and assossiated companies	-15	-4	-9	-134
Capital gains/losses on sales of tangible assets	7	1	7	1
Inventory impairment	60	-	-	-
Impairment of shares and receivables	26	47	290	1,776
Provisions	717	108	541	-73
Provisions for pensions	213	140	-187	-227
Other	28	102	-63	-45
Total	2,317	1,835	-651	-1,203

Investments in subsidiaries

Group
MSEK	2010	2009
Acquired assets and liabilities
Intangible assets	1	-
Current receivables	1	14
Liquid assets	-	7
Total assets	2	21
Current liabilities	2	8
Total liabilities	2	8
Purchase price paid	-	75
Less: Liquid assets in acquired operations	-	-7
Effect on the Groups net liquidity	-	68
where of liquid assets	-	68

The acquisition in 2010 relates to the remaining 66.7 per cent of the shares in the associated company Opax as in Norway. The acquisition in 2009 relates to the remaining 60 per cent of the joint venture TietoSaab Systems in Finland.

Sale of subsidiaries and associated companies

Group
MSEK	2010	2009
Divested assets and liabilities
Inventories	-	3
Current receivables	6	3
Assets held for sale	107	-
Total assets	113	6
Current liabilities	12	1
Total liabilities	12	1
Sales price	161	11
Purchase price received	161	11
Less: Liquid assets in divested operations	-	-
Effect on the Groups net liquidity	161	11
where of Interest-bearing receivables	130	-
where of liquid assets	31	11

The divestment in 2010 relates to Saab Bofors Industrier ab and 16 per cent of the associated company Hawker Pacific Ltd. See also Note 8.

NOTE 48

INFORMATION ON PARENT COMPANY

Saab ab (publ) is a limited company registered in Sweden, with its registered office in Linköping. The Parent Company's shares are registered on the nasdaq omx Stockholm. The address of the head office is Saab ab, Box 70363, se-107 24 Stockholm, Sweden.

The consolidated accounts for 2010 comprise the Parent Company and its Group companies, together referred to as the Group. The Group also includes the holdings in associated companies and joint ventures.

NOTE 49

ENVIRONMENTAL REPORT

Legal environmental issues

Operations subject to permit requirements in the Parent Company Production of aircraft and aircraft components by the Parent Company, Saab ab, in the Tannefors industrial zone in the municipality of Linköping is subject to licensing according to the Swedish Environment Code due to aeronautics operations, surface treatment processes, manufacturing of composite materials, handling of chemical substances and the size of the manufacturing facilities. The environmental impact of these operations primarily arises from emissions of volatile organic compounds (vocs) and aircraft emissions into the atmosphere and of metals into waterways, the generation of industrial wastes and noise disturbing local surroundings. The operations subject to licensing predominantly entail manufacturing. The National Licensing Board for Environmental Protection granted the license for aircraft manufacture in 1990. The supervisory authorities have decided on additional terms for these operations against the backdrop of the eu's ippc directive.

In Järfälla, Saab ab has operations involving the manufacture of advanced command and control systems, among other things, which are also subject to licensing according to the Environment Code. The licensing requirement is due to surface treatment processes and the size of the manufacturing facilities. The environmental impact of these operations primarily arises from voc emissions into the atmosphere and of metals into waterways. The National Licensing Board for Environmental Protection granted the license in 1990.

In Malmslätt, Saab had surface treatment operations which were subject to licensing until the summer of 2010, when the operations were terminated. A review of the future classification of operations according to the Environment Code is under way. With the exception of a few exceeded limits, Saab ab did not exceed any conditions in its permits or injunctions in 2010.

Operations subject to permit requirements in subsidiaries

The operations carried on by Linköping City Airport ab are subject to licensing according to the Environment Code and are covered by the permit issued by the National Licensing Board for Environmental Protection in 1990 for Saab ab's collective operations in the Tannefors industrial zone in the municipality of Linköping. This permit also covers the operations of Saab Dynamics ab in the area, despite that they are not subject to licensing and notification requirements according to the Environment Code.

Saab Dynamics ab and Saab Bofors Test Center ab carry on operations in Karlskoga which are subject to licensing according to the Environment Code. Saab Dynamics ab carries on similar operations in Eskilstuna. In addition, Saab Barracuda ab carries on operations subject to licensing in Gamleby.

The environmental impact from subsidiaries subject to licensing primarily consists of emissions of vocs and emissions from aircraft into the atmosphere, emissions of metals and deicing solvents into waterways, generation of industrial wastes and noise disturbing local surroundings. In 2010, none of Saab's subsidiaries exceeded any conditions of their permits or injunctions.

Operations subject to notification requirements

Saab ab has operations in Arboga, Gothenburg, Ljungbyhed, Nyköping and Östersund which are subject to notification requirements in accordance with the Swedish Environment Code. The Group also has operations subject to notification requirements in the subsidiaries Saab Underwater Systems ab in Motala, Saab Training Systems ab in Huskvarna and Saab Natech ab in Jönköping. The environmental impact of these operations is very limited.

For further information related to Saab's environmental report, see the Administration report, pages 52–55.

NOTE 50

EXCHANGE RATES USED IN FINANCIAL STATEMENTS

				Year-end rate	Average rate
Country			2010	2009	2010	2009
Australia	AUD	1	6.92	6.43	6.61	6.01
Denmark	DKK	100	120.75	139.15	128.13	142.64
Euro	EUR	1	9.00	10.35	9.54	10.62
Japan	JPY	100	8.34	7.84	8.22	8.18
Canada	CAD	1	6.81	6.89	6.99	6.70
Norway	NOK	100	115.20	124.30	119.16	121.62
UK	GBP	1	10.55	11.49	11.13	11.93
South Africa	ZAR	100	103.00	97.00	98.41	91.20
USA	USD	1	6.80	7.21	7.20	7.65

NOTE 51

DEFINITIONS OF KEY RATIOS

Gross margin

Gross income as a percentage of sales.

Adjusted gross margin

Gross income adjusted for the result from divestments and nonrecurring income/expenses as a percentage of sales.

Operating margin

Operating income as a percentage of sales.

Adjusted operating margin

Operating income adjusted for the result from divestments and nonrecurring income/expenses as a percentage of sales.

EBITDA margin

Operating income before depreciation, amortisation and impairments less depreciation and impairments of lease aircrafts as a percentage of sales.

Capital employed

Total capital less non-interest-bearing liabilities.

Return on capital employed

Operating income plus financial income as a percentage of average capital employed.

Return on equity

Net income for the year as a percentage of average equity.

Profit margin

Operating income plus financial income as a percentage of sales.

Capital turnover

Sales divided by average capital employed.

Net liquidity/net debt

Liquid assets, short-term investments and interest-bearing receivables less interest-bearing liabilities and provisions for pensions.

Equity/assets ratio

Equity in relation to total assets.

Interest coverage ratio

Operating income plus financial income divided by financial expenses.

Earnings per share

Net income for the year attributable to Parent Company shareholders' interest , divided by the average number of shares before and after full dilution. There is no dilution impact if the result is negative.

Equity per share

Equity attributable to the Parent Company's shareholders divided by the number of shares, excluding treasury shares, at the end of the year.

Operating cash flow per share

Operating cash flow divided by the average number of shares after dilution.

DIVIDEND MOTIVATION

The Board of Directors' statement according to chapter 18, § 4 of the Companies Act with regard to the proposed dividend – Saab AB

Saab is one of the world's leading high-technology companies, because of which its operations are distinguished by complex development assignments on the cutting edge of technology. Over the years, Saab has conducted significant development projects and managed the associated risks with great success. See also risks and uncertainties in the annual report.

The Board of Directors' proposed dividend amounts to sek 3.50 per share, corresponding to a total dividend of msek 367. Unrestricted equity amounts to msek 4,203 in Saab ab and profit carried forward in the Group before the dividend paid amounts to msek 8,298.

Net income for the year attributable to Parent Company's shareholders amounted to msek 433 for the Group and msek 1,389 for the Parent Company.

After paying the dividend to the shareholders, the Group's equity/assets ratio amounts to 38.3 per cent, compared to the longterm objective of 30 per cent. Since the ipo in 1998, the equity/assets ratio has risen from 22 per cent to 38 per cent in 2010.

Saab's gross capital expenditure in 2010 amounted to msek 262, which is considered a good approximation of annual future investments in tangible fixed assets. Investments are also made in research and development, which in 2010 amounted to msek 1,203, of which msek 47 was capitalised in the balance sheet.

At year-end, Saab had a net cash position, which, together with liquid assets, short-term investments and interest-bearing recei vables less interest-bearing liabilities, including provisions for pensions, amounted to msek 3,291. Saab's ability to carry out its commitments is not affected by the proposed dividend either on a short- or a long-term basis.

The proposed dividend is considered justifiable with regard to what is stated in chapter 17, § 3, paragraphs two and three of the Companies Act (2005:551):

• 1. The demands that the company's nature, scope and risks place on the size of its equity, and
• 1. The company's consolidation needs, liquidity or financial position in other respects.

The Board of Directors of Saab ab

PROPOSED DISPOSITION OF EARNINGS

The Board of Directors and the President propose that the unappropriated earnings in the Parent Company at disposal of the Annual General Meeting, amounting to:

After the proposed disposition, equity in the Parent Company will be as follows:

SEK
Retained earnings	2,813,836,892
Net income for the year	1,388,787,916
Total	4,202,624,808
Be disposed as follows:
To the shareholders, a dividend of SEK 3.50 per share	366,512,052
Funds to be carried forward	3,836,112,756
Total	4,202,624,808

SEK Capital stock 1,746,405,504 Statutory reserve 542,471,135 Revaluation reserve 718,175,600 Retained earnings 3,836,112,756 Total 6,843,164,995

The company's policy is to issue a dividend of 20–40 per cent of net income over a business cycle. The Board of Directors and the President propose that msek 367 (237), or sek 3.50 per share (2.25) be issued as a dividend. Saab's equity/assets ratio is currently 39.1 per cent (35.1) and after the proposed disposition of earnings will be 38.3 per cent (34.6).

The undersigned certify that the consolidated accounts and the annual report have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted for use in the European Union, and generally accepted accounting principles, and give a true and fair view of the financial positions and results of the Group and the Parent Company, and that the management report gives a fair review of the development of the operations, financial positions and results of the Group and the Parent Company and describes substantial risks and uncertainties that the Group companies faces.

Linköping, 16 February 2011

Marcus Wallenberg Chairman

Board member Board member Board member Board member

Erik Belfrage Johan Forssell Sten Jakobsson George Rose Board member Board member Board member Board member

Joakim Westh Catarina Carlqvist Stefan Andersson Conny Holm Board member Board member Board member Board member

Per-Arne Sandström Cecilia Stegö Chilò Åke Svensson Lena Treschow Torell

Håkan Buskhe

President and Chief Executive Officer (CEO)

Our audit report was submitted on 16 February 2011

Erik Åström Tommy Mårtensson

Authorised Public Accountant Authorised Public Accountant

AUDIT REPORT

To the Annual General Meeting of the shareholders of Saab AB (publ) Corporate identity number 556036-0793

We have audited the annual accounts, the consolidated accounts, the accountiv ng records and the administration of the board of directors and the managing director of Saab ab (publ) for the year 2010. The annual accounts and the consolidated accounts are included on pages 32–124 in this document. The board of directors and the managing director are responsible for these accounts and the administration of the company as well as for the application of the Annual Accounts Act when preparing the annual accounts and the application of international financial reporting standards ifrss as adopted by the eu and the Annual Accounts Act when preparing the consolidated accounts. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the board of directors and the managing director and significant estimates made by the board of directors and the managing director when preparing the annual accounts and consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for

our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the managing director. We also examined whether any board member or the managing director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below.

The annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the company's financial position and results of operations in accordance with generally accepted accounting principles in Sweden. The consolidated accounts have been prepared in accordance with the international financial reporting standards ifrss as adopted by the eu and the Annual Accounts Act and give a true and fair view of the group's financial position and results of operations. The statutory administration report is consistent with the other parts of the annual accounts and the consolidated accounts.

We recommend to the annual meeting of shareholders that the income statements and balance sheets of the parent company and the income statement and the statement of financial position for the group be adopted, that the profit loss of the parent company be dealt with in accordance with the proposal in the administration report and that the members of the board of directors and the managing director be discharged from liability for the financial year.

Linköping,16 February 2011

Ernst & Young AB

Erik Åström Authorised Public Accountant Deloitte AB

Tommy Mårtensson Authorised Public Accountant

CORPORATE GOVERNANCE REPORT

Introduction

Saab ab is a Swedish public limited liability company listed on nasdaq omx Stockholm.

Saab's corporate governance is based on Swedish legislation, primarily the Swedish Companies Act, the Swedish Annual Accounts Act, nasdaq omx Stockholm Rules – which also includes the Swedish Code of Corporate Governance – and other relevant Swedish and foreign laws and guidelines.

Swedish Code of Corporate Governance

The Saab shares are admitted to trading at nasdaq omx Stockholm and Saab must therefore follow good practices in the securities market, which includes an obligation to comply with the Swedish Code

of Corporate Governance ("the Code"). The Code is available at www.bolagsstyrning.se

Saab applies the Code and strives to maintain a high standard in its corporate governance. This corporate governance report is in accordance with the Annual Accounts Act and the Code, and describes how Saab applied the Code during the financial year 2010. Moreover, the Annual General Meeting 2010 was carried out in accordance with the Code and the Annual General Meeting 2011 will also be planned and carried out pursuant to the provisions of the Code. Saab's website has a special area for corporate governance issues, which is updated in accordance with the Code.

The Board annually issues a report on how the internal control of financial reporting is organised, which can be found at the end of this report.

* The internal boards handle and resolve issues within their respective areas on a Group level. They also prepare certain issues to be resolved by the Group Management.

Organisation 2010

This corporate governance report has been reviewed by the company's auditors pursuant to the Annual Accounts Act; see the auditors' report attached to the corporate governance report.

Saab has not deviated from the provisions of the Code during 2010 and hence does not report any deviations from the Code.

Ownership structure and number of shares

Saab's share capital amounted to sek 1,746,405,504 on 31 December 2010 and consisted of 1,907,123 series a shares and 107,243,221 series b shares. Series a shares have ten votes each, while series b shares have one vote each. One series a share may, on demand of the owner, be converted into one series b share. The Saab shares are registered with Euroclear Sweden ab. The quota value per share is sek 16. The series b shares are listed on nasdaq omx Stockholm on the large cap list. The series a shares are not listed. A round lot consists of 100 shares. All series a shares are owned by Investor ab.

Largest shareholders, 31 December 2010

According to SIX Ägarservice	Share of capital, %	Share of votes, %
Investor AB, Sweden	30.0	39.5
BAE Systems, UK	10.2	8.8
Wallenberg Foundations, Sweden	8.7	7.5
Nordea funds, Sweden	5.4	4.7
Swedbank Robur funds, Sweden	4.3	3.7
Fourth AP Fund, Sweden	1.9	1.6
Länsförsäkringar funds, Sweden	1.8	1.6
SEB Funds, Sweden	1.7	1.5
Orkla ASA, Norway	1.5	1.3
SHB funds, Sweden	1.4	1.2
Total	66.9	71.4

At the end of December 2010, Saab held 4,432,615 series b shares, corresponding to 4.1 per cent of the capital as treasury shares. For additional information about the ownership structure, see page 139 and 141. The Board of Directors has an authorisation from the Annual General Meeting to repurchase shares; see page 43 for further information.

Nomination Committee

The Annual General Meeting in April 2010 resolved that Saab shall have a Nomination Committee consisting of one representative of each of the four shareholders or groups of shareholders with the greatest number of votes, along with the Chairman of the Board. The names of the four owners' representatives and the shareholders they represent shall be announced at least six months prior to the Annual General Meeting 2011 based on known voting rights as per 31 August 2010. The resolution includes procedures, where necessary, to replace a member who leaves the committee before its work has been completed.

According to a resolution by the Annual General Meeting 2010, the Nomination Committee shall provide proposals regarding the following issues, to be presented to the Annual General Meeting 2011 for resolution:

• (a) the Chairman of the meeting,
• (b) the Board of Directors,
• (c) the Chairman of the Board,
• (d) the remuneration to the members of the Board, allocated between the Chairman and other members of the Board, and remuneration for committee work,
• (e) election of the auditors
• (f) audit fees, and
• (g) appointment of a new Nomination Committee for the Annual General Meeting 2012.

Before the Annual General Meeting of Saab ab on 7 April 2011, it was announced through a press release on 4 October 2010 that, in addition to Chairman of the Board Marcus Wallenberg, the following shareholder representatives had been appointed to Saab's Nomination Committee (shareholder's name in parentheses): Petra Hedengran (Investor ab), Peter Wallenberg Jr (Knut and Alice Wallenberg Foundation), Erik Feldt (Nordea Funds), and Thomas Eriksson (Swedbank Robur Funds). Petra Hedengran is the Chairman of the Nomination Committee.

These persons represent in the aggregate approximately 50 per cent of the votes in Saab based on the ownership structure as of 31 August 2010. bae Systems has waived the right to representation on the Nomination Committee.

The proposals of the Nomination Committee will be presented not later than in connection with the notice of the Annual General Meeting 2011.

Members of the Nomination Committee for Annual General Meeting 2011

Member	Representing	% of votes 31-8-2010	% of capital 31-8-2010
Petra Hedengran	Investor AB	39.5	30.0
Peter Wallenberg Jr	Knut and Alice Wallenberg Foundation	7.5	8.7
Erik Feldt	Nordea Funds	3.8	4.4
Thomas Eriksson	Swedbank Robur Funds	2.5	2.9
Marcus Wallenberg	Chairman of the Board, Saab AB	-	-

Board of Directors

Composition of the Board

According to Saab's articles of association, the Board of Directors shall, in addition to the employee representatives, consist of at least six and not more than twelve members. Members of the Board shall be elected each year by the Shareholders' Meeting. Saab's Board of Directors consists of ten members elected by the Shareholders'

The Board of Directors, the Secretary of the Board of Directors and the President and CEO.

Meeting, with no deputies, and three members, with an equal number of deputies, appointed by the employee organisations.

At the Annual General Meeting on 15 April 2010, Erik Belfrage, Sten Jakobsson, George Rose, Per-Arne Sandström, Lena Treschow Torell, Marcus Wallenberg and Åke Svensson were re-elected. Johan Forssell, Cecilia Stegö Chilò and Joakim Westh were elected as new board members at the Annual General Meeting.

Marcus Wallenberg was elected Chairman of the Board of Directors. Åke Svensson was President and ceo of Saab, and employed by the company until 31 August 2010.

Information on the remuneration to the members of the Board resolved by the Annual General Meeting 2010 is set forth in the annual report, note 37.

Members of the Board elected by the Shareholders' Meeting

Marcus Wallenberg	George Rose
Åke Svensson	Per-Arne Sandström
Erik Belfrage	Cecilia Stegö Chilò
Johan Forssell	Lena Treschow Torell
Sten Jakobsson	Joakim Westh

Other significant professional commitments, work experience, etc. are set forth in the presentation of the Board of Directors; see pages 134 and 135.

Employee representatives

Regulars Deputies Stefan Andersson Göran Gustavsson Catarina Carlqvist Jan Kovacs Conny Holm Nils Lindskog

Independence requirement

The following table sets forth the members of the Board elected by the Shareholders' Meeting who, according to the provisions of the Code, are considered independent in relation to the company and the management, as well as in relation to the company's major shareholders.

Composition and independence of the Board in 2010

Board member	Elected	Independent of the company/ management	Independent of major share holders
Marcus Wallenberg	1992	Yes	No 1)
Åke Svensson	2003	No2)	Yes
Erik Belfrage	1991	Yes	No3)
Johan Forssell	2010	Yes	No4)
Sten Jakobsson	2008	Yes	Yes
George Rose	1998	Yes	No 5)
Per-Arne Sandström	2005	Yes	Yes
Cecilia Stegö Chilò	2010	Yes	Yes
Lena Treschow Torell	2005	Yes	No 6)
Joakim Westh	2010	Yes	Yes

1) Former President and CEO of Investor AB

2) President and CEO of Saab until 31 August 2010

3) Former member of Investor AB's board

4) Employed by Investor AB 5) Employed by BAE Systems

6) Member of Investor AB's board

Accordingly, the company fulfils the requirements of the Code that a majority of the Board members appointed by the Shareholders' Meeting are independent of the company and the management, and that at least two of them are independent of the major shareholders.

Work of the Board

According to the Board's rules of procedure, five ordinary meetings shall normally be held each year, in addition to the statutory meeting. The Board may also meet whenever the circumstances demand. During 2010, the Board held one statutory meeting, five ordinary meetings and six extraordinary meetings, totalling twelve meetings.

The Board annually adopts rules of procedure and an instruction on the allocation of work between the Board and the ceo, as well as an instruction on financial reporting to the Board.

The rules of procedure contain, i.a., provisions on the number of board meetings to be held, a list of matters to be considered at the meetings, reporting from the auditors and special decisions to be taken at the statutory meeting. The rules of procedure and special instruction for the ceo set forth the delegation of responsibilities between the Board and its two committees, the Remuneration Committee and the Audit Committee, as well as between the Board and the ceo. The instruction for the ceo sets out the ceo's duties and authority. The instruction also includes policies on investments, financing and reporting.

During the course of the year, the Board was assisted by the Secretary of the Board of Directors, General Counsel Anne Gynnerstedt, who is not a member of the Board.

In 2010, the Board of Directors worked with the establishment of a budget and business plan. Financial reports are prepared monthly and submitted to the Board. The reports are presented at each Board meeting and before the quarterly reports and year-end report. During the year, the Board has followed up on the reorganisation decided on in 2009 and the company's strategy. The Board has also had several extra meetings in order to appoint a new President and ceo. The former President and ceo Åke Svensson left the company to become Director General of the Association of Swedish Engineering Industries. He was replaced by the new President and ceo Håkan Buskhe as from 1 Sep-

ATTENDANCE AND BOARD REMUNERATION IN 2010

tember 2010. The Board has also followed up on significant export opportunities and related marketing investments. The efficiency of the cost-savings programme is continuously monitored at every board meeting.

Committee work represents an important part of the Board's work. After meetings of the Audit and Remuneration Committees, the issues that have been handled are reported to the Board, and resolutions are adopted on issues where the committees have made recommendations.

Board of Directors' committee work

Audit Committee

The Board of Directors has in accordance with principles set out in the Swedish Companies Act and the Code appointed an Audit Committee consisting of three members. The work of the Audit Committee is mainly of a preparatory nature, i.e., it prepares matters for the ultimate resolution by the Board. However, the Audit Committee has decision-making power on some issues in limited areas. The Audit Committee has e.g. established guidelines for the services other than auditing that the company may procure from the auditors.

Since the Annual General Meeting in April 2010, the Audit Committee has consisted of the following members: Per-Arne Sandström (Chairman), Johan Forssell and Joakim Westh, of whom Per-Arne Sandström and Joakim Westh are independent of the company and the management as well as of the major shareholders. All members of the committee have accounting- and auditing competence. The General Counsel, Anne Gynnerstedt, is secretary to the Audit Committee.

The Audit Committee's assignment is set forth in the Board's rules of procedure. Among other things, the Audit Committee shall monitor the company's financial reporting, monitor the efficiency of the company's internal control, internal audit and risk control in respect of the financial reporting, keep the committee informed about the audit of the annual report and the group accounts, review

Name	Audit Committee	Remu neration Committee	Attendance Board meetings1)	Attendance Committee meetings 2)	Board fees, kSEK 3)	Audit Com mittee fees, kSEK	Remuneration Committee fees, kSEK	Total remu neration, kSEK
Marcus Wallenberg		x	12	3	1,100		80	1,180
Åke Svensson4)			10		-			-
Erik Belfrage			12		425			425
Johan Forssell5)	x		9	5	425	100		525
Sten Jakobsson			12		425			425
George Rose		x	9	2	-			-
Per-Arne Sandström	x		12	6	425	150		575
Cecilia Stegö Chilò5)			9		425			425
Lena Treschow Torell		x	12	3	425		135	560
Joakim Westh5)	x		8	4	425	100		525

1) Of a total of 12 meetings

2) Of a total of 6 meetings for Audit Committee and 3 meetings for Remuneration Committee

3) BAE Systems' board member does not receive a fee, nor former President and CEO Åke Svensson

4) Did not participate during appointment of the new President and CEO (2 meetings)

5) Elected April 2010, after which 9 Board meetings and 5 meetings of the Audit Committee were held

and monitor the auditor's neutrality and independence, and assist the Nomination Committee in preparing proposal for the Shareholders' Meeting's decision on election of auditors. The company's internal and external auditors are both co-opted to the meetings of the Audit Committee. During 2010, the Audit Committee focused particularly on the financial reporting, Saab's cost-savings programme and the proposal for election of new auditors.

The Audit Committee keeps minutes of its meetings, which are promptly distributed to the other members of the Board.

In 2010, the Committee held six meetings.

Remuneration Committee

The Board of Directors has in accordance with principles set out in the Code appointed a Remuneration Committee consisting of three members: Marcus Wallenberg, George Rose and Lena Treschow Torell. Lena Treschow Torell is Chairman of the committee. All of the members are independent of the company and the management. The General Counsel, Anne Gynnerstedt, is secretary to the committee.

The Remuneration Committee is responsible for preparing matters concerning remuneration principles, including programmes for variable compensation and pension terms for Group Management, and preparing the design and proposal of Saab's share matching plans. As of 2006, all decisions regarding such principles shall be made by the Annual General Meeting in accordance with the recommendation by the Board.

Matters concerning employment terms, compensation and other benefits for the ceo are prepared by the Remuneration Committee and adopted by the Board, which is responsible for interpretation and application of the principles. The Remuneration Committee has no decision-making powers of its own. During the year, the Remuneration Committee was particularly involved in a review of fixed and variable salaries and the creation of a performance share plan for senior executives and strategic key employees.

The Remuneration Committee keeps minutes of its meetings, which are promptly distributed to the other members of the Board. In 2010, the Committee held three meetings.

Evaluation

The Chairman of the Board annually performs an evaluation of the quality of the Board's work and possible improvements to the forms and efficiency of its work. This is done by having members fill out a questionnaire on their opinions of how well the Board is functioning. The results are then compared to previous years. The questionnaire consists of five parts covering the breadth of competence represented in the Board, the manner in which its work is performed, the Chairman, the Board's composition and the co-operative atmosphere. The purpose of the evaluation is to understand how members feel about the Board's work. The results are then discussed by the Board. No external consultants are involved in the evaluation.

The Nomination Committee is also informed of the results of the evaluation in connection with its analysis, evaluation and appointment of Board members.

The Board continuously evaluates the ceo's work by monitoring business results in relation to established objectives.

President and CEO

Åke Svensson, who also is a member of the Board of Directors, was President and ceo of Saab until 31 August 2010. He was succeeded by Håkan Buskhe. Their significant professional commitments outside the company, work experience, etc. are set forth in the presentation of the Board and the Group Management; see pages 135 and 136. Håkan Buskhe does not own shares in any company with which Saab has material business ties.

Auditors

On behalf of the shareholders and in accordance with current laws and regulations, the external auditors examine the financial statements, group accounts, annual report, administration and management of the company by the Board of Directors and the ceo and also the corporate governance report. In addition, the half-year report has been reviewed by the auditors. The auditor in charge also presents an auditors' report to the Annual General Meeting.

The Shareholders' Meeting elects the auditors. The auditors elected by the Shareholders' Meeting are the registered accounting firms Ernst & Young and Deloitte.

Ernst & Young ab

• Re-elected in 2007 for the term 2007–2010
• Member of Ernst & Young's global organisation with operations in around 140 countries
• Auditor in charge since 2007, Erik Åström
• Other audit engagements: Apoteket, Hakon Invest, Hennes & Mauritz, Modern Times Group and Svenska Handelsbanken

Deloitte ab

• Elected in 2009 for a term not exceeding three years
• Member of Deloitte's global organisation with operations in around 140 countries
• Auditor in charge since 2005, Tommy Mårtensson
• Other audit engagements: Björn Borg, FastPartner, Fortum, Industrifonden and Svevia. Also experience as auditor for SJ and Tele2

Ernst & Young and Deloitte both have competence and experience in areas important to Saab: auditing of large and listed companies, accounting issues, industry experience and experience in international businesses.

The Audit Committee is responsible for ensuring that the independent position of the auditors is maintained, i.a., by staying informed of ongoing consulting assignments. The Audit Committee has also established guidelines for the services other than auditing that the company may procure from its auditors.

Guidelines for remuneration and other benefits to members of the senior management

Details about the guidelines can be found in the administration report.

Audit fees

Saab's auditors receive a fee according to approved invoices as resolved by the Shareholders' Meeting.

Ernst & Young and Deloitte have in the past four years carried out services on behalf of the company in addition to their audit assignment, including auditing activities over and above the audit assignment, consultations closely associated with the audit involving accounting and tax issues in connection with acquisitions and restructurings, and with regard to the structure and implementation of Saab's share matching plans for the employees.

Auditors' fees 2008–2010, the Group

MSEK	2010	2009	2008
Audit assignments:
Ernst & Young AB	10	13	14
Deloitte AB	3	4	4
Other assignments:
Ernst & Young AB	5	3	2
Deloitte AB	2	2	3

Financial reporting

The Board documents the manner in which it ensures the quality of the financial reports and how it communicates with the company's auditors.

The Board ensures the quality of financial accounting through its Audit Committee, according to the report submitted above. The Audit Committee considers not only critical accounting questions and the financial reports presented by the company, but also matters of internal control, regulatory compliance, potential material uncertainty in reported values, post-statement events, changes in assessments and evaluations and other circumstances that may affect the quality of the financial statements. The auditors have participated in three regular meetings of the Audit Committee. They have not participated in meetings when the election of external auditors is discussed.

The entire Board reviews the interim reports before they are published.

The company's auditors attend the Board meeting when the annual accounts are approved.

The Board has met with the auditors to discuss their review of the company for the financial year 2010. The Board has also met on one occasion with the auditors without the presence of the ceo or any other members of Group Management.

The Board's report on internal control of financial reporting

According to the Swedish Companies Act and the Code, the Board is responsible for internal control. This report on internal control of the financial reporting has been drafted on the basis of the Swedish Annual Accounts Act.

Internal control over financial reporting

Saab's system of internal control is designed to assist the business achieve its goals and manage the associated risks. Internal control over financial reporting is a part of all internal control processes within Saab, the framework for which is developed by the Committee of Sponsoring Organizations of the Treadway Commission (coso).

Internal control over financial reporting aims to provide reasonable assurance of the reliability of external financial reporting and to ensure that it is prepared in accordance with legislation, applicable accounting standards and other requirements on listed companies.

Control environment

The delegation of responsibilities is based on the Board's rules of procedure and an instruction, which sets forth the roles, responsibilities and activities of the Board and the ceo.

Internal control is based on Saab's organisation, where operating responsibilities and powers are delegated to business areas and support units, which also receive support and are supervised by Group functions with specific competencies. These Group functions issue Group guidelines that clarify responsibilities and powers and constitute part of the internal control in specific areas such as finance, accounting, investments and tenders.

Risk assessment

Saab's operations are mainly characterised by the development, production and supply of technologically advanced hardware and software for customers around the world. The major part of the production, business assets and employees are based in Sweden, whereas the majority of sales are generated from countries outside of Sweden. As a rule, projects entail considerable sums of money, stretch over long periods of time and involve technological development or refinement of products.

Based on Saab's operations, the material risk areas in financial reporting are project accounting, acquisitions and goodwill, development costs, hedging and other financial transactions, leasing operations, taxes and accounting for pensions. In addition to business risks, the processes are also assessed on the basis of the risk of exposure to any improprieties.

Group Finance continuously co-ordinates an overall risk assessment of the financial reporting. This process involves self-assessments by the Group functions and business areas. The current risk assessment is reviewed with Saab's Internal Audit, which adjusts its annual audit plan accordingly. Information on developments in essential risk areas as well as a report on planned and executed activities in these areas are communicated regularly to Saab's Audit Committee. Saab's risk assessment is also communicated regularly to Saab's external auditors.

Information, communication and control activities

Internal control within Saab is based on clearly defined areas of responsibility and authority, issued Group guidelines, processes and controls.

Uniform handling of financial reporting is assured by adopting and issuing Group guidelines approved by the ceo or by function managers appointed by the ceo. All Group directives are updated on an ongoing basis, are clearly communicated and are available on the internal website.

Each business area designs its risk management routines and structure for internal control based on overall routines and Group guidelines.

The most significant risks identified as regards financial reporting are managed through control structures within the business areas and Group functions and are based on Saab's minimum requirements for good internal control in significant processes.

Monitoring and evaluation

All operating units report monthly and quarterly according to a standardised routine. Quarterly reports serve as the basis of Saab's external financial reporting. In operating reports, each business area's measures of profitablity and financial position are consolidated to measure the Group's total profitablity and financial position.

Accounting managers and controllers are continuously in contact with Group Finance concerning any questions related to finance and accounting.

To assist in evaluating internal control in each business area, Saab uses an annual self assessment. In addition to the processes that serve as a basis for the financial reporting, these assessments cover operating risks, reputational risks and compliance with laws, regulations and internal rules. This is also reported to the Audit Committee.

The Internal Audit department, which is part of the internal control structure, is a dedicated resource for independent review of the efficiency of internal control processes. At the same time, Internal Audit supports locally applied internal controls and the central controller staff. Together they serve as a resource to monitor financial reporting routines. Internal Audit's assignments are initiated by the Audit Committee, Group Management and its members, and on its own initiative.

Activities in 2010

During 2010 an extensive review was made of Saab's internal financial control system. The goal was to analyse and identify existing controls and to identify areas of improvement and strengthen the reporting and evaluation of the internal control over financial reporting. The process started with an assessment on the group level that cascaded down to the business areas. Based on the risk assessment, controls mitigating identified risks where identified and evaluated.

An independent assessment of all identified controls was initiated at the end of 2010 and will be finalised in 2011.

Focus in 2011

The review of the internal control over financial reporting has resulted in changes in the reporting process. As of 2011, the status of all financial controls by business area will be reported on a monthly basis to Group Management compared to once per year previously.

The annual assessment process of internal financial controls as of 2011

AUDITORS' REPORT ON THE CORPORATE GOVERNANCE REPORT

To the Annual General Meeting of the shareholders of Saab AB Corporate identity number 556036-0793

It is the board of directors who is responsible for the corporate governance report and that it has been prepared in accordance with the Annual Accounts Act.

As a basis for our opinion that the corporate governance report has been prepared and is consistent with the annual report and the consolidated accounts, we have read the corporate governance

report and assessed its statutory content based on our knowledge of the company.

A corporate governance report has been prepared and its statutory content is consistent with the annual report and the consolidated accounts.

Linköping, 16 February 2011

Ernst & Young ab Deloitte ab

Erik Åström Tommy Mårtensson

Authorised Public Accountant Authorised Public Accountant

BOARD OF DIRECTORS

MARCUS WALLENBERG

Chairman of the Board since 2006. Deputy Chairman of the Board 1993- 2006 and Member of the Board since 1992. Member of Saab's Remuneration Committee Born 1956

Bachelor of Science of Foreign Service, Lieutenant in Royal Swedish Naval Academy Shares in Saab: 85,150

Other board commitments:

Chairman of SEB and Electrolux AB Deputy Chairman of Telefonaktiebolaget L M Ericsson, Board member of AstraZeneca PLC, Stora Enso Oyj, the Knut and Alice Wallenberg Foundation and Temasek Holding Ltd.

Former employment and positions:

President and CEO, Investor AB Director, Stora Feldmühle AG, Düsseldorf, Skandinaviska Enskilda Banken, Stockholm and London Citicorp (Hong Kong) Citibank N.A. (New York)

ERIK BELFRAGE Member of the Board since 1991 Director of SEB Born 1946 MBA

Shares in Saab: 3,900

Other board commitments:

Chairman of the Sigtuna School (SSHL) and The International Council of Swedish Industry (NIR), Chairman International Chamber of Commerce (ICC) Corporate Responsibility & Anti Corruption Commission, Vice Chairman International Chamber of Commerce (ICC) Finance Committee, Board member of Eramet Steel and the Centre for European Policy Studies (CEPS) , Member of the Trilateral Commission and Associate Member European Roundtable (ERT)

Former employment and positions:

Board member of Investor AB Swedish Embassy in Geneva, Washington, Paris, Bucharest Foreign Ministry, Stockholm

JOHAN FORSSELL

Member of the Board since 2010 Member of Saab's Audit Committee Managing Director Investor AB, Head of Core Investments Born 1971 MBA

Shares in Saab: 5,000

Other board commitments:

Board member of Atlas Copco Board member of SSE MBA Research Foundation

Former employment and positions:

Head of Research, Head of Capital Goods and Healthcare sector, Head of Capital Goods sector and Analyst Core Holdings at Investor AB

STEN JAKOBSSON

Member of the Board since 2008 and Deputy Chairman since 2010 President and CEO, ABB Sweden Born 1949 M.Sc. Shares in Saab: 3,490

Other board commitments:

Board member of Teknikföretagen, Stena Metall AB and World Childhood Foundation

Former employment and positions:

Executive Vice President, Asea Brown Boveri AB, Sweden, Business Area Manager, Business Area Cables, President, ABB Cables AB, President, Asea Cylinda, Production Manager, Asea Low Voltage Division, Asea central staff - Production, Asea trainee

GEORGE ROSE

Member of the Board since 1998 Member of Saab's Remuneration Committee; Finance Director, BAE Systems PLC; Non-Executive Director of National Grid plc Born 1952 B.A. Shares in Saab: –

Other board commitments:

Board member of National Grid plc Chairman of National Grid plc Audit Committee, Member of National Grid plc Remuneration Committee and National Grid plc Nomination Committee, Member of the Industrial Development Advisory Board

Former employment and positions:

Finance Director of Leyland DAF UK, Director Group Control of DAF NV, Netherlands, Company Controller, Rover Group, Non Executive Director, Orange PLC

PER-ARNE SANDSTRÖM

Member of the Board since 2005 Chairman of Saab's Audit Committee Born 1947

Upper secondary engineering school Shares in Saab: 3,000

Other board commitments:

Chairman of Infocare AS and board member of Cellmax Technologies AB and TeliaSonera AB

Former employment and positions:

Deputy CEO and COO of Telefonaktiebolaget L M Ericsson, President and CEO, Ericsson Inc., USA, Vice President and General Manager, GSM business unit, Ericsson Radio Systems AB, Executive Vice President and Managing Director, Cellular Systems, Ericsson Ltd, UK, Vice President and General Manager, GSM Western Europe, Ericsson Radio Systems AB, Vice President and General Manager, Airborne Radar Division, Ericsson Microwave Systems AB, Department Manager, Naval Command and Control Systems, Ericsson Microwave Systems AB

CECILIA STEGÖ CHILÒ

Member of the Board since 2010 Adviser to managements of corporations and organizations Born 1959 Studies in political science and economics

Shares in Saab: 600

Other board commitments: Board member of Spendrups Bryggerier, the Commercial Council of Linköping University and the Expo Foundation.

Former employment and positions:

Board member of AMF Fonder and Länsförsäkringar Liv, Managing Director of the foundation Fritt Näringsliv, Head of the think tank Timbro, Cabinet member and Head of the Ministry of Culture, editorial writer and foreign policy commentator at Svenska Dagbladet, commentator at Sveriges Radio, Swedish Employers' Confederation and Moderate Party

ÅKE SVENSSON

Member of the Board since 2003 Director General of the Association of Swedish Engineering Industries Born 1952 M.Sc. Shares in Saab: 9,425

Other board commitments:

Board member of Parker Hannifin Corporation, Board member of Micronic Mydata AB, Board member of the Royal Swedish Academy of Engineering Sciences, Member of the Royal Swedish Academy of War Sciences and Member of IVA's Business Executives Council

Former employment and positions:

President and Chief Executive Officer (CEO) of Saab, General Manager, business area Saab Aerospace, Saab AB

General Manager, business unit Future Products and Technology, Saab AB, Project Manager for RBS15, Saab Dynamics AB, Other positions in the Saab Group

LENA TRESCHOW TORELL

Member of the Board since 2005 Chairman of Saab's Remuneration Committee Professor in Physics Born 1946 B.Sc. and Ph.D. in Physics Shares in Saab: 5,400

Other board commitments:

Vice Chairman of ÅF AB and Micronic Mydata AB, Board member of Investor AB, SKF AB, Dagens Industri AB and the Chalmers University of Technology Foundation, Chairman of European Council of Applied Sciences and Engineering (Euro-CASE), the Foundation for Strategic Environmental Research (MISTRA) and the Royal Swedish Academy of Engineering Sciences (IVA)

Former employment and positions:

President of the Royal Swedish Academy of Engineering Sciences (IVA), Board member of Getinge AB, Telefonaktiebolaget L M Ericsson and Gambro AB, Director, Joint Research Centre, European Commission (Brussels), Vice President, Chalmers,Gothenburg, Professor of Material Physics, Chalmers, Professor of Solid State Physics, Uppsala University

JOAKIM WESTH

Member of the Board since 2010 Member of Saab's Audit Committee Born 1961 M.S.c. Shares in Saab: 8,000

Other board commitments:

Chairman of the Board in EMA Technology AB, Board member of Rörvik Timber AB and Absolent AB

Former employment and positions:

Chairman of the Board of Absolent AB, Board member of Telelogic AB and VKR Holding A/S, Deputy board member of Sony Ericsson Mobile Communications AB, Senior Vice President, Group Function Strategy & Operational Excellence and member of Group Management Team, Ericsson, J. Westh Företagsutveckling AB, Group Vice President and member of the Executive Management Group, Assa Abloy AB and Partner, McKinsey & Co. Inc

CATARINA CARLQVIST Member of the Board since 2007

Member of the Swedish Association of Graduate Engineers' local, Saab Bofors Dynamics, Karlskoga Born 1964 Luleå University of Technology Shares in Saab: –

STEFAN ANDERSSON

Member of the Board since 2008 Chairman of the Industrial Salaried Employees' Association local at Saab Underwater Systems, Motala Born 1974 B.Sc Shares in Saab: 668

CONNY HOLM

Member of the Board since 2008 and deputy Board member since 1995 Chairman of the Engineering Workers' Union local at Electronic Defence Systems, Jönköping Born 1947 Upper secondary engineering education Shares in Saab: 467

DEPUTIES, EMPLOYEE REPRESENTATIVES

GÖRAN GUSTAVSSON

Deputy Board member since 2008 Chairman of the Engineering Workers' Union local at Saab AB, Linköping Born 1953 Shares in Saab: 477

NILS LINDSKOG

Deputy Board member since 2007 Member of the Swedish Association of Graduate Engineers' local at Saab AB, Göteborg Born 1955 M.S.E.E. from Chalmers University of Technology Shares in Saab: 255

JAN KOVACS

Deputy Board member since 2008 Chairman of the Industrial Salaried Employees' Association local at Saab AB, Linköping Born 1960 Upper secondary technical school Shares in Saab: 530

AUDITORS

ERNST YOUNG AB ERIK ÅSTRÖM DELOITTE AB

TOMMY MÅRTENSSON

GROUP MANAGEMENT

HÅKAN BUSHKE President and Chief Executive Officer (CEO) as of 1 September 2010 Born 1963, M.Sc., Licentiate of Engineering Employed 2010 Shares in Saab: 5,723

Other board commitments: Chairman of Green Cargo, AB, Board member of Teknikföretagen

Former employment and positions:

President och CEO of E.ON Nordic AB and E.ON Sverige AB, Executive Vice President of E.ON Sverige AB, Senior Vice President of E.ON Sverige AB, CEO of Schenker North and member of Schenker Ag's Executive Management , Production Manager Falcon Brewery

LENA OLVING Deputy Chief Executive Officer, Executive Vice President and Chief Operating Officer (COO) Born 1956, M. Sc., Mechanical Engineering Employed November 2008 Shares in Saab: 4,352

GUNILLA FRANSSON Senior Vice President and Head of Business Area Security and Defence Solutions Born 1960, M.Sc. and PhD (Tec. Lic) Employed 2008 Shares in Saab: 1,185

LENNART SINDAHL Executive Vice President and Head of Business Area Aeronautics Born 1956, M.Sc. Employed 1986 Shares in Saab: 2,896

THOMAS SAMUELSSON Senior Vice President and Head of Business Area Dynamics Born 1953, M.Sc. Employed 2000 Shares in Saab: 1,920

MICAEL JOHANSSON Senior Vice President and Head of Business Area Electronic Defence Systems Born 1960, B.Sc. Employed 1985 Shares in Saab: 933

LARS-ERIK WIGE Senior Vice President and Head of Business Area Support and Services Born 1954 Employed 2001 Shares in Saab: 1,045

LARS GRANLÖF

Senior Vice President and Chief Financial Officer (CFO), Head of Group Finance Born 1962, MBA Employed 2007 Shares in Saab: 7,632

ANNE GYNNERSTEDT

Senior Vice President and Head of Group Legal Affairs. Secretary of the Board of Directors Born 1957, LLB Employed 2004 Shares in Saab: 3,865

MIKAEL GRODZINSKY Senior Vice President and Head of Group Human Resources Born 1958, M.Sc. Employed 1985 Shares in Saab: 3,942

JONAS HJELM Senior Vice President and Chief Marketing Officer (CMO), Head of Group Marketing & Business Development, Acting Interim Head of Corporate Communications Born 1971 Employed 2006 Shares in Saab: 1,772

DAN JANGBLAD Senior Vice President and Chief Strategy Officer (CSO), Head of Group Strategy Born 1958, M.Sc. Employed 2000 Shares in Saab: 5,225

PETER SANDEHED Senior Vice President and Head of Group Corporate Investments Born 1952, MBA Employed 1981 Shares in Saab: 10,386

In 2010, Group Management also included Åke Svensson, President and CEO, and Cecilia Schön Jansson, Senior Vice President and Head of Group Communications.

INFORMATION TO SHAREHOLDERS

Annual General Meeting

The Annual General Meeting will be held at 3:00 pm (cet) on Thursday, 7 April 2011 at Annexet, Stockholm Globe Arenas, Globentorget 2, Stockholm.

Notification

Shareholders must notify the company of their intention to participate in the meeting not later than Friday, 1 April 2011:

• by telephone: +46 13 18 20 55
• by mail with separate invitation
• by mail: Saab Annual General Meeting, Box 7839, 103 98 Stockholm, Sw eden
• online: www.saabgroup.com/arsstamma

Please indicate your name, personalnumber (Swedish citizens), address and telephone number. If you are attending by power of proxy, registration certificate or other authorisation, please submit your documentation well in advance of the meeting. The information you provide will be used only for the Annual General Meeting.

Shareholders or their proxies may be accompanied at the Annual General Meeting by a maximum of two people. They may only attend, however, if the shareholder has notified Saab ab as indicated above.

Right to participate

Only shareholders recorded in the share register maintained by Euroclear Sweden ab (formerly vpc ab) on Friday, 1 April 2011 are entitled to participate in the meeting.

Shareholders registered in the names of nominees through the trust department of a bank or a brokerage firm must temporarily reregister their shares in their own names to participate in the meeting. To ensure that this re-registration is recorded in the share register by Friday, 1 April 2011, they must request re-registration with their nominees several business days in advance.

Dividend

The Board of Directors is proposing a dividend of sek 3.50 per share and Tuesday, 12 April 2011 as the record day for the dividend. With this record day, Euroclear Sweden ab is expected to distribute the dividend on Friday, 15 April 2011.

THE SAAB SHARE

Capital stock and number of shares

Saab's capital stock amounted to sek 1,746,405,504 on 31 December 2010 and consisted of 1,907,123 unlisted Series a shares and 107,243,221 listed Series b shares. Series a shares have ten votes each, while Series b shares have one vote each. The quota value per share is sek 16. The Series b share is listed on nasdaq omx Stockholm's Large Cap list. A round lot consists of 100 shares.

In 2010, 3,347,180 Series a shares in Saab were converted at the request of shareholders to Series b shares, which reduced the total number of votes in the company from 156,439,071 to 126,314,451. Saab's Series a shares are owned by Investor ab.

Saab's market capitalisation was sek 13.4 billion at year-end 2010. The price of the Series b share rose during the year by 4 per cent, compared to an increase of 23 per cent for the omx index. The total return on Saab's Series b share – i.e., the dividend plus the change in the share price – has been -18 per cent over the last five years.

Trading volume and statistics

A total of 48,704,378 Series b shares were traded in 2010, nearly all of which was through nasdaq omx Stockholm. The marketplaces nasdaq omx Europe, bats Europe, boat, Burgundy, Chi- X, Germany and Turqouise accounted in total for less than 1 per cent of turnover in the Saab share. The share's closing price reached a high of sek 128.75 on 21 January and a low of sek 84.10 on 5 July.

Beta shows how much a share fluctuates in relation to the market as a whole. A low beta (<1) indicates a low risk in relation to other stocks in the market. A high beta (>1) means a higher risk. According to SIX's calculations the beta for Saab's Series B share was 1.12, indicating that it fluctuated in line with the market average, measured according to SIX General Index over a 48-month period. Saab's stock covariance was 0.257, which means that 25.7 per cent of the share's price performance is due to the market's development as a whole.

Ownership structure

Saab had 31,125 shareholders as of year-end 2010. Swedish investors accounted for 73.3 per cent of the capital stock and 76.1 per cent of the votes. Swedish equity funds owned approximately 16 per cent of the

capital stock and 14 per cent of the votes. Individual Swedish investors held approximately 7 per cent of the capital stock and 6 per cent of the votes.

Dividend and dividend policy

Saab's long-term dividend policy is to distribute 20–40 per cent of income after tax over a business cycle. For 2010, the Board of Directors is proposing a dividend of sek 3.50 (2.25) per share.

Saab's Share Matching Plan

In April 2007, Saab's Annual General Meeting resolved to offer employees the opportunity to participate in a voluntary share matching plan where they can purchase Series b shares in Saab during a 12-month period. Purchases are made through withdrawals of between 1 and 5 per cent of the employee's monthly salary. If the employee retains the purchased shares for three years after the investment date and is still employed by the Saab Group, the employee will be allotted a corresponding number of Series B shares.

The plan was introduced in autumn 2007 in Sweden and Norway. In 2008, it was expanded to include employees in Denmark, Germany, the uk, the U.S., Switzerland and Australia, and in 2009 it was expanded again to cover employees in South Africa. In April 2008, Saab's Annual General Meeting resolved to introduce a performancebased plan for senior executives and key employees entitling them to 2–5 matching shares depending on the category the employee belongs to. In addition to the requirement that the employee remain employed by Saab after three years, there is a requirement that earnings per share grow in the range of 5 to 15 per cent.

The Annual General Meetings in 2009 and 2010 resolved to renew the share matching plan and performance share plan.

In 2007, Saab repurchased 1 million shares and in 2008 and 2009 it repurchased 1,340,000 shares per year to hedge the plans.

The Annual General Meeting on 15 April 2010 resolved to renew the Board of Directors' mandate to decide to repurchase up to 10 per cent of the company's shares, of which 1,340,000 shares to hedge the year's share matching plan and performance share plan. The purpose of the authorisation was to provide the Board with greater scope in working with the company's capital structure and enable acquisitions when considered appropriate, as well as to secure the Group's share matching plan. The mandate applied until the next Annual General Meeting.

Repurchases may be effected over the stock exchange or through offerings to shareholders. It was also proposed that the Board's mandate include the possibility to transfer repurchased shares as allowed by law. Repurchased shares can also be transferred in connection with the company's share matching plan and performance share plan. Saab announced on 16 June 2010 that the Board has decided to utilise its authorisation for repurchases to hedge the company's share matching plan and performance share plan. Between 26 July and 28 August 2010, 838,131 shares were acquired on nasdaq omx Stockholm at a total cost of msek 80. On 31 December 2010, Saab held 4,432,615 shares as treasury stock, which was 793,395 more shares than at year-end 2009.

SAAB B, 1 JANUARY 2006–31 DECEMBER 2010 EQUITY PER SHARE, SEK

SHARE OF CAPITAL, %

EARNINGS AND DIVIDEND PER SHARE, SEK

Data per share 2005–2010

	2010	2009	2008	2007	2006	2005
Closing prices 1)
at year-end, SEK	123.00	118.00	71.50	129.50	210.00	170.00
high for the year, SEK	128.75	118.00	180.00	216.50	218.00	170.00
low for the year, SEK	84.10	50.50	51.00	116.50	154.50	113.00
Market capitalisation, MSEK 2)	13,425	12,879	7,804	14,135	22,921	18,556
Average daily turnover, no. of shares1)	192,507	234,069	255,782	240,390	148,965	229,007
Yield, %	2.8	1.9	2.4	3.5	2.0	2.4
Price/equity, %	114	118	83	128	234	202
P/E ratio	31.0	18.8	-32.2	7.4	17.6	15.5
P/EBIT, multiple	13.8	9.4	47.0	5.4	13.1	11.2
Sales
before dilution, SEK	232.2	231.8	221.33	211.85	192.97	176.95
after full dilution, SEK	223.9	225.8	218.01	210.91	192.97	176.95
Net income for the year (attributable to Parent Company's shareholders)
before dilution, SEK	4.12	6.45	-2.31	17.68	11.91	10.89
after full dilution, SEK	3.97	6.28	-2.313)	17.60	11.91	10.89
Equity per share, SEK	107.66	99.91	86.49	101.53	89.80	84.10
Cash flow from operating activities
before dilution, SEK	42.65	15.95	8.87	-12.40	8.88	22.32
after full dilution, SEK	41.11	15.54	8.74	-12.34	8.88	22.32
Dividend (2010 proposal), SEK	3.50	2.25	1.75	4.50	4.25	4.00
Dividend /net income, %	81	35	-	25	36	37
Total dividend, MSEK	367	237	187	491	464	437
Dividend growth, %	55	27	-	6	6	7
Number of shareholders	31,125	32,555	32,164	28,181	29,413	33,809
Share of foreign ownership, capital, %	27	40	40	39	38	36
Share of foreign ownership, votes, %	24	35	34	34	32	31
Average number of shares before dilution	105,217,786	106,335,553	107,515,049	108,668,700	109,150,344	109,150,344
Number of shares, excluding Treasury shares, at year-end	104,717,729	105,511,124	106,829,893	108,150,344	109,150,344	109,150,344
Number of shares after full dilution	109,150,344	109,150,344	109,150,344	109,150,344	109,150,344	109,150,344

1) Saab B on NASDAQ OMX Stockholm.

2) At full dilution

3) No dilution effect if net income is negative.

Shareholders

As of 31 December 2010 according to SIX Ägarservice	Thousands of shares	Per cent of share capital	Per cent of votes
Investor AB, Sweden	32,778	30.0	39.5
BAE Systems, UK	11,166	10.2	8.8
Wallenberg foundations, Sweden	9,469	8.7	7.5
Nordea funds, Sweden	5,916	5.4	4.7
Swedbank Robur funds, Sweden	4,668	4.3	3.7
Fourth AP-fund, Sweden	2,038	1.9	1.6
Länsförsäkringar funds, Sweden	2,011	1.8	1.6
SEB funds, Sweden	1,832	1.7	1.5
Orkla ASA, Norway	1,661	1.5	1.3
SHB funds, Sweden	1,561	1.4	1.2
AMF Insurance & Funds, Sweden	801	0.7	0.6
Norwegian state	752	0.7	0.6
AFA Insurance, Sweden	746	0.7	0.6
Foundation Asset Management AB, Sweden	722	0.7	0.6
Eikos fund, Sweden	665	0.6	0.5
Skandia Life, Sweden	574	0.5	0.5
RAM One fund, Sweden	504	0.5	0.4
Odin funds, Norway	468	0.4	0.4
DFA funds, US	457	0.4	0.4
Subtotal, 20 largest shareholders	78,789	72.1	76.0
Other Swedish shareholders	11,290	10.4	11.6
Other international shareholders	14,638	13.4	12.4
Repurchased shares	4,433	4.1	-
Total	109,150	100.0	100.0

Distribution of shareholders

Number of shares	Number of share holders	Per cent of share holders	Number of shares	Per cent of share capital
1–500	27,443	88.2	3,108,307	2.9
501–1,000	2,318	7.4	1,750,391	1.6
1,001–5,000	1,012	3.2	2,016,969	1.8
5,001–10,000	110	0.4	826,762	0.8
10,001–15,000	38	0.1	479,841	0.4
15,001–20,000	19	0.1	342,263	0.3
20,001–	185	0.6	100,625,811	92.2
Total1)	31,125	100.0	109,150,344	100.0

1) Including 4,432,615 repurchased B shares

Shares and votes, 31 December 2010

Share class	Number of shares	Per cent of total shares	Number of votes	Per cent of votes
Series A	1,907,123	1.7	19,071,230	15.6
Series B	107,243,221	98.3	102,810,606	84.4
Total1)	109,150,344	100.0	121,881,836	100.0

1) The number of votes excludes 4,432,615 B shares which were repurchased to secure the Group's Share Matching Plan. The repurchased shares are kept as Treasury stock.

Share issues, etc.

		Increase in share capital, MSEK	Paid-in amount MSEK
2002, Conversion1)	50,699 shares	0.8	4.6
2003, Conversion1)	7,189 shares	0.1	0.7
2004, Conversion1)	2,632,781 shares	42.1	239.6

1) 1998 convertible debenture loan

ANALYSTS WHO COVER SAAB

ABG SUNDAL COLLIER, STOCKHOLM CARNEGIE, STOCKHOLM DANSKE MARKETS EQUITIES, STOCKHOLM ENSKILDA SECURITIES, STOCKHOLM GOLDMAN SACHS, LONDON ROYAL BANK OF SCOTLAND, LONDON SWEDBANK, STOCKHOLM ÅLANDSBANKEN, STOCKHOLM ÖHMAN FONDK., STOCKHOLM ERIK PETTERSSON, erik.pettersson@abgsc.se CECILIA KELLNER, cecilia.kellner@carnegie.se CARL GUSTAFSSON, cagu@danskebank.se STEFAN CEDERBERG, stefan.cederberg@enskilda.se DAVID H. PERRY, david.perry@gs.com SANDY MORRIS, sandy.morris@rbs.com MATS LISS, mats.liss@swedbank.se MIKAEL LASÉEN, mikael.laseen@alandsbanken.se BJÖRN ENARSON, bjorn.enarson@ohman.se

QUARTERLY INFORMATION

		January–March				April–June
MSEK		2010 Operating margin		2009 Operating margin		2010 Operating margin		2009 Operating margin
Sales
Aeronautics	1,703		1,843		1,698		2,113
Dynamics	986		1,005		1,167		1,150
Electronic Defence Systems	940		988		1,159		1,099
Security and Defence Solutions	1,200		1,060		1,427		1,339
Support and Services	743		814		834		966
Corporate	219		226		233		304
Internal sales	-407		-524		-525		-688
Total	5,384		5,412		5,993		6,283
Operating income
Aeronautics	53	3.1%	3	0.2%	18	1.1%	-44	-2.1%
Dynamics	85	8.6%	75	7.5%	174	14.9%	94	8.2%
Electronic Defence Systems	37	3.9%	27	2.7%	114	9.8%	48	4.4%
Security and Defence Solutions	-96	-8.0%	11	1.0%	-106	-7.4%	94	7.0%
Support and Services	56	7.5%	103	12.7%	119	14.3%	112	11.6%
Corporate	-9	-	-69	-	-43	-	168	-
Total	126	2.3%	150	2.8%	276	4.6%	472	7.5%
Net financial items	-27		-187		-65		-72
Income before taxes	99		-37		211		400
Net income for the period	72		-27		174		292
Attributable to Parent Company's
shareholders	69		-26		177		294
Earnings per share after dilution	0.63		-0.24		1.62		2.69
No. of shares after dilution, thousands	109,150		106,831		109,150		109,150
		July-September				October–December
MSEK		2010 Operating margin		2009 Operating margin		2010 Operating margin		2009 Operating margin
Sales
Aeronautics	1,278		1,482		2,062		2,133
Dynamics	1,023		944		1,565		1,481
Electronic Defence Systems	905		1,180		1,350		1,403
Security and Defence Solutions	1,382		1,161		2,201		2,240
Support and Services	756		752		1,070		1,032
Corporate	224		223		313		249
Internal sales	-564		-558		-508		-770
Total	5,004		5,184		8,053		7,768
Operating income
Aeronautics	57	4.5%	-26	-1.8%	63	3.1%	73	3.4%
Dynamics	31	3.0%	83	8.8%	32	2.0%	17	1.1%
Electronic Defence Systems	6	0.7%	18	1.5%	-58	-4.3%	-69	-4.9%
Security and Defence Solutions	130	9.4%	52	4.5%	209	9.5%	121	5.4%
Support and Services	69	9.1%	47	6.3%	107	10.0%	148	14.3%
Corporate	29	-	75	-	-102	-	213	-
Total	322	6.4%	249	4.8%	251	3.1%	503	6.5%
Net financial items	-48		-97		-59		-42
Income before taxes	274		152		192		461
Net income for the period	188		111		20		323
Attributable to Parent Company's
shareholders	179		105		8		313

Earnings per share after dilution 1.64 0.96 0.08 2.87 No. of shares after dilution, thousands 109,150 109,150 109,150 109,150

MULTI-YEAR OVERVIEW

MSEK, unless otherwise indicated	2010	2009	2008	2007	2006	2005	2004 4)	2003	2002
Order bookings	26,278	18,428	23,212	20,846	27,575	17,512	16,444	19,606	19,521
Order backlog at year-end	41,459	39,389	45,324	47,316	50,445	42,198	43,162	45,636	43,082
Sales	24,434	24,647	23,796	23,021	21,063	19,314	17,848	17,250	16,538
Foreign market sales, %	62	69	68	65	65	56	48	46	41
Defence sales, %	83	83	83	81	79	82	80	80	76
Operating income (EBIT)	975	1,374	166	2,607	1,745	1,652	1,853	1,293	1,220
Operating margin, %	4.0	5.6	0.7	11.3	8.3	8.6	10.4	7.5	7.4
Operating margin before depreciation/am ortisation and write-downs excluding leasing (EBITDA), %	9.0	10.5	6.4	16.0	12.0	11.3	13.1	11.1	11.2
Income after financial items	776	976	-406	2,449	1,693	1,551	1,712	1,073	993
Net income for the year	454	699	-242	1,941	1,347	1,199	1,310	746	732
Total assets	29,278	30,430	32,890	33,801	32,771	30,594	27,509	28,704	28,109
of which Saab Aircraft Leasing	3,049	3,362	3,226	3,415	3,397	4,887	5,314	6,181	4,869
of which advance payments, net	643	442	897	2,558	3,642	3,528	2,860	3,990	3,775
of which shareholders' equity	11,444	10,682	9,330	11,008	10,025	9,493	8,221	7,003	6,833
equity per share, SEK 1)	107.66	99.91	86.49	101.53	89.80	84.10	74.89	65.75	64.17
Net liquidity/Net debt excluding interest bearing receivables and after deduction of
provisions for pensions	2,382	-1,631	-3,061	-2,802	-261	5,144	3,211	3,149	2,655
Net liquidity/ debt	3,291	-634	-1,693	-1,627	605	2,856	781	495	352
Cash flow from operating activities	4,487	1,696	954	-1,304	969	2,541	865	1,348	1,060
Operating cash flow	4,349	1,447	659	-1,603	-1,900	2,645	325	545	-92
Average capital employed	13,743	13,775	13,994	13,430	12,789	12,925	12,386	11,629	11,926
Return on capital employed, %	7.9	10.3	1.4	19.4	14.5	14.6	17.3	12.7	11.6
Return on equity, %	4.1	7.0	-2.4	18.5	13.8	13.5	16.7	10.8	10.8
Profit margin, %	4.47	5.78	0.82	11.4	8.83	9.73	11.74	8.5	8.4
Capital turnover rate, multiple	1.78	1.79	1.70	1.71	1.65	1.49	1.47	1.48	1.39
Equity/assets ratio, %	39.1	35.1	28.4	32.6	30.6	31.0	29.9	24.4	24.3
Interest coverage ratio, times	3.20	3.16	0.35	21.4	13.47	6.08	6.08	3.70	3.55
Earnings per share before dilution, SEK 2)	4.12	6.45	-2.31	17.68	11.91	10.89	11.78	7.00	6.87
Earnings per share after dilution, SEK 3)	3.97	6.28	-2.31	17.60	11.91	10.89	11.78	6.91	6.78
Dividend, SEK	3.50 5)	2.25	1.75	4.50	4.25	4.00	3.75	3.50	3.50
Gross capital expenditures for tangible fixed assets	262	197	386	395	433	296	348	472	623
Research and development costs	5,008	4,820	4,141	4,523	3,537	3,546	3,929	3,690	4,138
Number of employees at year-end	12,536	13,159	13,294	13,757	13,577	12,830	11,936	13,414	14,036

1) Number of shares, excluding treasury shares, as of 31 December 2010: 104,717,729; 2009: 105,511,124; 2008: 106,829,893; 2007: 108,150,344; 2006/2005/2004: 109,150,344; 2003: 106,517,563; and 2002: 106,510,374.

2) Average number of shares 2010: 105,217,786; 2009: 106,335,553; 2008: 107,515,049; 2007: 108,668,700, 2006/2005: 109,150,344; 2004: 108,234,126; 2003: 106,513,969; and 2002: 106,487,407.

3) Average number of shares 2010/2009: 109,150,344; 2008: 107,515,049; 2007/2006/2005: 109,150,344; 2004: 108,234,126; 2003/2002: 109,247,175. Conversion of debenture loan concluded 15 July 2004.

4) Restated according to IFRS, previously not restated.

FINANCIAL INFORMATION 2011

ANNUAL GENERAL MEETING 2011 7 APRIL INTERIM REPORT JANUARY–MARCH 29 APRIL INTERIM REPORT JANUARY–JUNE 19 JULY INTERIM REPORT JANUARY–SEPTEMBER 21 OCTOBER

Financial information can be ordered by Telephone +46 13 16 92 08 or accessed online at www.saabgroup.com

Contact

Ann-Sofi Jönsson, Investor Relations, Telephone +46 8 463 02 14, ann-sofi.jonsson@saabgroup.com

CONTACT DETAILS

Headquarters

p.o Box 703 63 se-107 24 Stockholm, Sweden Phone: +46 8 463 00 00 Fax: +46 8 463 01 52 www.saabgroup.com

For contact details to all offices, visit www.saabgroup.com

Linköping

se-581 88 Linköping, Sweden Visiting address: Bröderna Ugglas gata Phone: +46 13 18 00 00 Fax: +46 13 18 00 11

Production: Intellecta Corporate Printing: Larsson Offsettryck AB 2011 Photo: Peter Karlsson, Shutterstock, Getty Images and Saab's image bank