The Board's proposal on remuneration

The Board's proposal for the decision on principles for the remuneration of senior executives is designed to ensure that Sandvik from a global perspective can offer remuneration at the market rate that will attract and retain qualified members of the Group Executive Management.

The remuneration package for Group Executive Management comprises fixed salary, annual variable salary and long term variable salary in cash and/or in shares in Sandvik AB. It is intended that the components will form a well-balanced remuneration and benefit program that reflects the individual's performance, responsibility and the Group's earnings trend.

The fixed salary, which is individual and differentiated considering responsibility and performance, is determined taking into account market conditions and is reviewed each year.

The annual component of variable salary is based on the achievement of goals that are determined each year. The goals are related to the financial results of the Company and to measurable goals within each individual's area of responsibility. The annual variable salary shall not exceed 75 per cent of the fixed annual salary.

A prerequisite for the long-term variable salary in cash is the achievement of measurable goals established by the Board, i.e. certain key ratios that create shareholder value linked to the Company's growth, profitability and capital efficiency over a three-year period. The long-term variable cash salary shall not exceed 50 per cent of the fixed annual salary.

Long-term variable compensation may also be paid in the form of shares in Sandvik AB through participation in a share related incentive programme including the right to acquire employee stock options and matching rights. Such programme shall have been approved by the general meeting of shareholders and its key terms shall include that participation for certain categories of top executives requires own investments in Sandvik stock, a three year performance period with continued employment required during such time and that allotment is related to performance criteria linked to the company's growth, profitability and capital efficiency – Sandvik Value Added (SVA).

Other benefits to members of Group Executive Management shall match what may be considered reasonable in relation to market practice. These benefits include pension, company car, residence, health insurance and termination benefits.

Pension benefits to members of Group Executive Management are based on the fixed salary or cash paid out and may be of either the defined benefit or the defined contribution kind. Normal pension age is 62. For the President, the pension age is 60.

Termination benefits are normally paid in the event that Sandvik terminates the employment. The severance pay equals 12–18 months' pay for persons aged less than 55 and 18–24 months' pay for persons aged 55 or more. Any other earned income is offset against the severance pay. No termination benefit is paid in the event the employee terminates the employment.

The Board may depart from the principles established by the annual meeting of shareholders if, in isolated cases, there are special reasons for a departure.

Those affected by these proposed principles are the President and the other members of Group Executive Management.

Sandviken in March 2011

Sandvik Aktiebolag (publ)
The Board of Directors