Letter to Shareholders

The first chapter in the story of Stanley Black & Decker has been a great one and we expect that this is just the beginning of a long and fulfilling journey to create exceptional shareholder value.”

Where Do We Go From Here?

The strategy remains the same. We will continue to strengthen our core franchises through strong brand support, robust product and business model innovation and the relentless implementation of SFS. We will continue to pursue consolidating acquisitions in tools when the economic and strategic rationales are strong; however, the bulk of our acquisition capital in coming years will be directed towards expanding our high margin growth platforms in Security and Engineered Fastening and continuing to build upon early successes in Healthcare and Infrastructure. Significant emphasis will be placed on growth in the emerging markets, both organically and through acquisition.

We view one of our most important roles as being stewards of capital. Since 2004, we have been pursuing a strategy of reinvesting two-thirds of our free cash flow into accretive acquisitions and returning the other third to shareholders in the form of dividends and share repurchases. We reinvested 52% and returned 48% to shareholders during this period while still achieving our growth objectives. Our intent is to reinvest enough cash to fund above-average growth while returning enough cash to be responsive to investors. The goal is to create an attractive hybrid value proposition: a growth company that returns a large percentage of cash to its shareholders. This approach does not appeal to everyone inasmuch as we don't fit into a neat box; however, it has resulted in above-average returns for investors and we are quite comfortable with it.It does require an intense focus on operating returns and cash flow, which we have achieved through management rigor and process improvement, especially as it relates to SFS.

Stanley Fulfillment System

SFS has evolved over the past decade and really began to gain traction across the Company in 2007. At that time, our working capital turns were 4.5. Through the implementation of SFS principles over the succeeding three years, including operational lean, complexity reduction, sales and operations planning, global supply management and order-to-cash excellence, we were able to improve overall turns for legacy Stanley to 8.6 in 2010.

This was achieved during a time of general economic weakness and volume contraction. The process excellence required for this type of performance resulted in significant customer service level and cycle time improvements for our customers. hundreds of millions of dollars of cash were freed up for capital allocation and our balance sheet strength was maintained in the face of very difficult economic conditions.

As we go forward, SFS represents one of the biggest opportunities to create additional value from the Stanley Black & Decker merger, with the potential to unlock over half a billion dollars if we are able to return to the 8 turns level within three to four years, which we believe is feasible.

Summary

2010 was a year of successes for Stanley Black & Decker with the closing of the merger, a strong start to the integration, solid financial results and strategic progress across the Company. We are proud of our accomplishments but remain firmly grounded and focused on execution and constantly and methodically moving the Company forward. Our strategy is aligned with our long-term financial goals which, in turn, are intended to drive stock price outperformance. however, the most important part of our success derives from our people, whose passion for this Company, its customers and its future is palpable. With that as a foundation, we are confident in our continued success and a bright future.

New Britain, CT
February 18, 2011

CEO and COO signatures