Allegion plc

Directors' Report and Financial Statements Financial Year Ended 31 December 2021

Allegion plc TABLE OF CONTENTS

Page

Directors and Other Information

3

Directors' Report

4

Statement of Directors' Responsibilities

38

Independent Auditors' Report

39

Consolidated Profit and Loss Account

45

Consolidated Statement of Comprehensive Income

46

Consolidated Balance Sheet

47

Consolidated Statement of Changes in Equity

48

Consolidated Statement of Cash Flows

49

Notes to the Consolidated Financial Statements

50

Parent Company Balance Sheet

87

Parent Company Statement of Changes in Equity

88

Notes to the Parent Company Financial Statements

89

DIRECTORS AND OTHER INFORMATIONBoard of Directors at 7 April 2022

David D. Petratis Kirk S. Hachigian Martin E. Welch III Dean I. Schaffer Nicole Parent Haughey Charles L. Szews Steven C. Mizell Dev Vardhan Lauren B. Peters

Company Secretary

Hatsuki Miyata

Registered OfficeRegistered Number

Block D Iveagh Court Harcourt Road Dublin 2

D02 VH94 Ireland

527370

SolicitorIndependent AuditorsPrincipal Banker

Arthur Cox LLP Ten Earlsfort Terrace Dublin 2

D02 T380 Ireland

PricewaterhouseCoopers

Chartered Accountants and Registered Auditors One Spencer Dock

North Wall Quay Dublin 1

Ireland

JPMorgan Chase Bank, N.A. 79 Sir John Rogerson's Quay Grand Canal Dock

Dublin 2

D02 RK57 Ireland

Citibank Europe PLC Ireland Branch 1 North Wall Quay

North Dock Dublin 1

Ireland

DIRECTORS' REPORT

Directors' Report for the financial year ended 31 December 2021

The Board of Directors present their report and audited Financial Statements for the financial year ended 31 December 2021.

Principal Activities

Allegion plc (the "Parent Company"), through its subsidiaries (together with Allegion plc, referred as "Allegion," "we," "us," the "Group," or the "Company"), is a leading global provider of security products and solutions that keep people and assets safe and secure in the places they reside, work and thrive. We create peace of mind by pioneering safety and security with a vision of seamless access and a safer world. Seamless access allows authorised, automated and safe passage and movement through spaces and places in the most efficient and frictionless manner possible. Central to our vision is partnering and developing ecosystems to create a flawless experience and enable an uninterrupted and secure flow of people and assets. We offer an extensive and versatile portfolio of security and access control products and solutions across a range of market-leading brands. Our experts across the globe deliver high-quality security products, services and systems, and we use our deep expertise to serve as trusted partners to end-users who seek customised solutions to their security needs.

Allegion Principal Products

Door closers and controls Electronic security products Exit devices

Doors and door systems Software-enabled access control systems

Time, attendance and workforce productivity systems

Locks, locksets, portable locks, key systems and services Other accessories

Access control security products and solutions are critical elements in every building and home. Many door openings are configured to maximise a room's particular form and function while also meeting local and national building and safety code requirements and end-user security needs. Most buildings have multiple door openings, each serving its own purpose and requiring different specific access control solutions. Each door must fit exactly within its frame, be prepared precisely for its hinges, synchronise with its specific lockset and corresponding latch and align with a specific key to secure the door. Moreover, with the increasing adoption of the Internet of Things ("IoT"), security products - including keys - are increasingly linked electronically, integrated into software and popular consumer technology platforms and controlled with mobile applications, creating additional functionality and complexity. Seamless access capitalises on the ability for multiple products and brands to work in tandem, allowing people and assets to move efficiently and safely by adapting access rights for various settings or use cases. These solutions can also provide insights on usage and traffic patterns to improve hygiene of high-traffic areas, boost efficiency and improve visitor, staff and tenant experiences.

We believe our ability to deliver a wide range of solutions that can be custom configured to meet end-users' security needs is a key driver of our success. We accomplish this with:

  • Our extensive and versatile product portfolio, combined with our deep expertise, which enables us to deliver the right products and solutions to meet diverse security and functional specifications and to successfully and securely integrate into leading technology and systems;

  • Our consultative approach and expertise, which enables us to develop the most efficient and appropriate building security and access control specifications to fulfil the unique needs of our end-users and their partners, including architects, contractors, homebuilders and engineers;

  • Our access to and management of key channels in the market, which is critical to delivering our products in an efficient and consistent manner; and

  • Our enterprise excellence capabilities, including our global manufacturing operations and agile supply chain, which facilitate our ability to deliver specific product and system configurations to end-users and consumers worldwide, quickly and efficiently.

We believe the security products industry will benefit from several global macroeconomic trends, including:

  • Expected growth in global electronic products as end-users adopt newer technologies in their facilities and homes;

  • Heightened awareness of security and privacy requirements;

  • Increased focus on touchless solutions that help promote a healthy environment; and

  • The shift to a digital, interconnected environment.

We sell a wide range of security and access control solutions for end-users in commercial, institutional and residential facilities worldwide, including the education, healthcare, government, hospitality, commercial office and single and multi-family residential markets. Our leading brands include CISA®, Interflex®, LCN®, Schlage®, SimonsVoss® and Von Duprin®. We believe LCN, Schlage and Von Duprin hold the No. 1 or No. 2 position in their primary product categories in North America while CISA, Interflex and SimonsVoss hold the No. 1 or No. 2 position in their primary product categories in certain European markets.

DIRECTORS' REPORT (continued)

During the year ended 31 December 2021, we generated Turnover of $2,867.4 million and Operating profit of $527.5 million. During the year ended 31 December 2020, we generated Turnover of $2,719.9 million and Operating profit of $402.8 million.

History and Developments

We were incorporated in Ireland on 9 May 2013, to hold the commercial and residential security businesses of what was then Ingersoll Rand plc ("Ingersoll Rand"). On 1 December 2013, we became a stand-alone public company after Ingersoll Rand completed the separation of these businesses from the rest of Ingersoll Rand via the transfer of these businesses from Ingersoll Rand to us and the issuance by us of ordinary shares directly to Ingersoll Rand's shareholders (the "Spin-off"). Our security businesses have long and distinguished operating histories. Several of our brands were established more than 100 years ago, and many originally created their categories:

  • • Von Duprin, established in 1908, was awarded the first exit device patent;

  • • Schlage, established in 1920, was awarded the first patents granted for the cylindrical lock and the push button lock;

  • • LCN, established in 1926, created the first door closer;

  • • CISA, established in 1926, devised the first electronically controlled lock; and

  • • SimonsVoss, established in 1995, created the first keyless digital transponder.

We have built upon these founding legacies since our entry into the security products market through the acquisition of Schlage, Von Duprin and LCN in 1974. Today, we continue to develop and introduce innovative and market-leading products. For example, in 2018, we announced the formation of Allegion Ventures, a corporate venture fund with an initial allocation of $50 million to invest in and help accelerate the growth of companies that have innovative, digital-first technologies and products such as touchless access and workspace monitoring solutions that complement our core business solutions. Building on this success, in December 2021, Allegion Ventures announced a second fund with an additional allocation of $100 million to focus on investing in technologies like artificial intelligence, machine learning and cybersecurity.

Recent examples of successful product launches by Allegion are illustrated in the table below:

Product Brands

Year

Innovation

Residential Schlage, Locks, Gainsborough, Cylinders and CISA

2019/2020/ Schlage Primus® RP patented, restricted key systems, allowing the widely 2021 used, historic Schlage Obverse keyway family a path to Primus levels of security with patent coverage to 2029.

Levers

Next generation smart lock (Schlage Encode) is joined by one in Australia (Gainsborough Freestyle Trilock), which has passage, privacy or dead lock modes that can be operated using the built-in keypad, a key override or through the mobile app and offers integrations with Amazon Alexa and Google Assistant. The optional WiFi bridge can be used to program and operate the lock from anywhere in the world.

New flat key European cylinders for multiple entrance buildings (CISA Asix P8) and high security connected solutions (CISA Domo Connexa).

Commercial Locks, Cylinders, Levers and Electronic Access PlatformsSchlage, SimonsVoss, CISA

2019/2020/ Release of mobile-enabled versions of locks, readers and controllers

2021

(Schlage NDE, LE, MTB and CTE), mobile credentials, Bluetooth Low Energy ("BLE") and RFID technology and integrations between electronic locks and exit devices (Schlage, CISA). RC reader controller combines powerful ISONAS PureIP technology together with intelligent hardware (Schlage Mobile Access Solutions). New Digital Cylinder AX (SimonsVoss) supports active transponders, Mifare badges and BLE, a further step towards digitising the door through the keyhole.

Mortice self-locking system with a mono-point motorised lock variant (CISA) and new platformed, modular replacement of cylindrical locks (Schlage ALX). New multipoint exit mortice self-locking system for panic exit doors with narrow profile (CISA).

Enhanced access control solutions for low-to-medium complexity applications offers a complete portfolio of IP and mobile-enabled devices across a variety of popular applications and openings (Schlage, ISONAS, Locknetics, Von Duprin, and Falcon).

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Allegion plc published this content on 26 April 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 April 2022 10:50:11 UTC.