DELIVERING MAXIMUM PERFORMANCE

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2 DELIVERING MAXIMUM PERFORMANCE The STIHL Group is mastering the challenges of the economic crisis with continuous investment in its innovative strength and the expansion of its worldwide presence. The STIHL GS 461 concrete cutter stands for the success of this strategy: With its diamond cut-off chain, the new highperformance tool allows the wet cutting of construction materials such as concrete and stone.

3 Delivering Maximum Performance Ever since the founding company was established, STIHL has defined the market over and again with outstanding innovations. Anyone who works in forestry or agriculture, in landscape maintenance or construction or anyone who expects the highest standards as a private user knows STIHL and values its brand promise: first-class quality, customer orientation and innovation. With the inventive spirit that has always been present in the STIHL Group and the constant pursuit of perfection, we develop ground-breaking products that justify our claim to technological leadership. Delivering maximum performance is part of our corporate philosophy.

4 CONTENTS DELIVERING MAXIMUM PERFORMANCE Product innovations and advanced technology, first-class employees and strong partnerships form the basis for outstanding company performance. The Annual Report shows how STIHL constantly enhances the Group s strengths, maintains its technological leadership, and never ceases to satisfy its customers. 18 A PASSION FOR QUALITY FOCUS ON STIHL 4 Hans Peter Stihl is Awarded the Inventors Oscar 5 More Agility on Construction Sites 6 The Eva Mayr-Stihl Foundation 8 Changeover as Planned 20 Production 24 Quality, Occupational Safety and Environmental Protection 10 The Executive Board of STIHL AG 12 Report of the Executive Board 14 MANAGEMENT REPORT 14 Management Report The STIHL Group 16 Management Report The STIHL Founding Company

5 SPECIALIST DEALERS in PRINCIPLE Skilled employees of tomorrow ROOM FOR GROWTH 30 Markets 32 Purchasing 36 Our Employees 40 Development 44 Report of the Supervisory Board 46 FINANCIAL STATEMENTS 46 Balance Sheet 48 Supplement to the Financial Statements 49 Notes 50 Companies of STIHL Holding AG & Co. KG 51 Boards of the Companies 52 Contact Information

6 Prof. Dr. Alexander Wurzer, Chairman of the Diesel Board of Trustees, Hans Peter Stihl, Honorary Chairman of the Advisory Board and Supervisory Board of the STIHL Group, and Dr. h. c. Erwin Teufel, former Prime Minister of the federal state of Baden-Württemberg. HANS PETER STIHL IS AWARDED THE INVENTORS OSCAR The German Institute of Inventions awards Hans Peter Stihl the coveted Diesel Medal in the category of Most Successful Innovation Performance. In November 2012, Hans Peter Stihl was awarded the Diesel Medal in the category of Most Successful Innovation Performance. Germany s oldest innovation prize is also known as the Inventors Oscar in well-informed circles. In his laudation, former Prime Minister of the federal state of Baden-Württemberg, Dr. h. c. Erwin Teufel, praised the long-standing technological success story of entrepreneur Stihl. Hans Peter Stihl accepted the award on behalf of the entire engineering team. Since the founding company was established, STIHL has defined the market over and again with outstanding innovations. The STIHL innovation story began in 1926 with the mobile chain saw. In the company s history of more than 85 years, over 1,500 STIHL inventions have been registered for patents. More than 500 employees work on product development in the Development Center in Waiblingen.

7 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 5 MORE AGILITY ON CONSTRUCTION SITES 40,000 industrial diamonds and a strong 2-MIX engine: STIHL s innovative GS 461 concrete cutter achieves a breakthrough in terms of efficiency and cutting power. Two engineers discuss the new product: project manager Hannah Thölking and test coordinator Szabina Demeter. Test coordinator Szabina Demeter and project manager Hannah Thölking with the STIHL GS 461. How did it happen that two women had the main responsibility for this project? Hannah Thölking It probably had a lot to do with coincidence. My colleague was already involved in the project in the predevelopment stage and I was attracted by the challenge of being in charge of such an innovative, powerful project as the project manager and of supporting the main steps of development. We were backed up by a large team, of course, which also included men. What makes the project so special? Hannah Thölking We have penetrated a completely new market segment with the concrete cutter. It was a project in which know-how had to be collected from the two product-development departments for chain saws and power tools. The concrete cutter is several kilos lighter than comparable tools, and for its strength and type of application it is very agile and robust. All of that made the project interesting, demanding and special. Isn t this a typical man s tool? Szabina Demeter Some women do a lot of work with trimmers or hedge trimmers, but it s true that large chain saws and cut-off machines are not typically used by women. Working with the STIHL GS 461 is hard and dirty it s a challenge even for professionals. But we enjoyed it. Apropos robust how long did the test phase last? Szabina Demeter It s an innovative application for which not all of the challenges were anticipated in advance. The concrete cutter has therefore been tested intensively and under the toughest conditions on various materials all over the world, because we wanted to launch a fully mature product on the market.

8 6 THE EVA MAYR-STIHL FOUNDATION The Eva Mayr-Stihl Foundation has pursued solely charitable aims for more than 25 years. It is primarily active in the fields of science and research, public health care, and the arts and culture. The endowment capital has been continuously increased and meanwhile amounts to 100 million euros. 1.8 million euros for the Stuttgart Cancer Center and the Pneumology section of Klinikum Stuttgart With a total donation of 1.8 million euros, the Eva Mayr-Stihl Foundation is supporting the establishment of the Stuttgart Cancer Center and the Pneumology section of Klinikum Stuttgart. The Stuttgart Cancer Center (SCC) Eva Mayr-Stihl Tumor Center is being established at Klinikum Stuttgart as a comprehensive center for tumor illnesses. It performs diagnostics and therapy supplementary to that provided by the organ centers, combines the expertise of the various departments, and thus optimizes the quality and efficiency of treatment. Patient numbers in the area of pneumology (lung illnesses) have increased significantly in recent years. Klinikum Stuttgart has reacted to this development and with the support of the Eva Mayr-Stihl Foundation is establishing its own Pneumology section. The new section is integrated in the General Internal Medicine department and will cooper ate with various other areas of competence with an interdisciplinary approach. The Katharinenhospital part of Klinikum Stuttgart will accommodate the new Stuttgart Cancer Center (SCC) Eva Mayr-Stihl Tumor Center and the Pneumology section.

9 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 7 Eva Mayr-Stihl is awarded the honorary citizenship of the city of Waiblingen Eva Mayr-Stihl in the Gallery Stihl Waiblingen, which is supported by her foundation. Eva Mayr-Stihl, Deputy Chairwoman of the Advisory Board of STIHL Holding AG & Co. KG and member of the Supervisory Board of STIHL AG, was awarded the honorary citizenship of the city of Waiblingen in accordance with a resolution by the city council. The highest form of recognition that cities can award was given for her outstanding achievements for the STIHL companies, but also for the city of Waiblingen. During her STIHL Executive Board membership of many decades and also as a shareholder, the company has invested several hundred million euros in Waiblingen and has significantly expand - ed its workforce. Eva Mayr-Stihl has also made her mark with the work of her foundation in the city and beyond. German Forestry Science Prize 2012 is awarded to Dr. Dirk Schindler The German Forestry Science Prize sponsored by the Eva Mayr-Stihl Foundation with an amount of 15,000 euros was awarded for the seventh time last year. It is the most generously endowed research prize in the field of forestry science in the Germanspeaking countries. The award ceremony was held in the Bavarian Academy of Science during the Forestry Science Congress. The prize represents explicit recognition of scientific achievements. It focuses on young scientists who have contributed to the conservation, use and function of forest ecosystems with outstanding research work. Robert Mayr, Managing Director of the Eva Mayr-Stihl Foundation, with prizewinner Dr. Dirk Schindler.

10 Changeover as planned In June 2012, Hans Peter Stihl handed over the Chairmanship of the Advisory Board of STIHL Holding AG & Co. KG to his son Dr. Nikolas Stihl. Hans Peter Stihl, who has received multiple awards for his entrepreneurial and honorary commitment, will continue to be available to the Advisory Board in an advisory capacity as its Honorary Chairman.

11 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 9» all IMPORTANT DECISIONS ARE DISCUSSED mutually BY THE FAMILY, AND THE WHOLE FAMILY STANDS BY THEM. AS A FAMILY-OWNED COMPANY, THAT HAS BEEN ONE OF OUR OUTSTANDING FEATURES IN RECENT YEARS. «DR. NIKOLAS STIHL, CHAIRMAN OF THE ADVISORY BOARD AND THE SUPERVISORY BOARD Dr. Nikolas Stihl, grandson of company founder Andreas Stihl, took over the Chairmanship of the Advisory Board of STIHL Holding and the Supervisory Board of STIHL AG as of July 1, The previous chairman of both boards, Hans Peter Stihl, stepped down from those positions as of June 30, He continues to be a general partner in STIHL Holding and in recognition of his outstanding achievements for the company was made Honorary Chairman of the Advisory Board and the Supervisory Board. Eva Mayr-Stihl continues to be Deputy Chairwoman of the Advisory Board. These decisions secure the future of STIHL as an independent, medium-sized family-owned business. Each of the four family lines continues to hold a 25 percent interest in STIHL Holding. The operating management remains in the hands of the non-family Exec utive Board of STIHL AG under the Chairmanship of Dr. Bertram Kandziora. ADVISORY BOARD OF STIHL HOLDING AG & CO. KG Hans Peter Stihl (Honorary Chairman) Dr. Nikolas Stihl (Chairman) Eva Mayr-Stihl (Deputy Chairwoman) Prof. Dr. h. c. Ludwig Georg Braun Franz Fehrenbach Horst H. Geidel Prof. Dr. Michael Hoffmann-Becking Gerhild Schetter, née Stihl Dr. Rüdiger Stihl Together with the other STIHL partners, Dr. Nikolas Stihl ensures that the STIHL success story continues. Family ownership gives the company the required stability it needs to realize its long-term goals. This policy is based on tried-and-tested strategies: worldwide sustained and organic growth from the STIHL Group s own resources, a strong customer focus, first-class quality, technological leadership, process optimization and sales through authorized service-providing dealerships.

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13 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 11 THE EXECUTIVE BOARD OF STIHL AG (from left to right) NORBERT PICK, DIPL. - ING. (FH) Member of the Executive Board Marketing and Sales WOLFGANG ZAHN, DIPL. - ING. Member of the Executive Board Development Dr. Bertram Kandziora Chairman of the Executive Board Production and Materials KARL ANGLER, DIPL. - BW. (FH) Member of the Executive Board Finance, Controlling, Information Systems and Service Dr. Michael Prochaska Member of the Executive Board Human Resources and Legal Affairs

14 12 DEAR BUSINESS PARTNERS, DEAR STAFF, DEAR FRIENDS OF THE STIHL GROUP! With almost 2.8 billion euros, the STIHL Group once again achieved a new record for revenue in Compared with the prior year, this represents growth of 6.0 percent, 2.7 percent of which was accounted for by favorable exchange-rate effects, however. Growth in unit sales was again higher particularly in the emerging markets, enabling us to further strengthen our excellent market position also in The founding company, comprising the seven production plants in Germany, increased its revenue only slightly by 2.1 percent to 887 million euros. The founding company profited rather less than last year from the STIHL Group s general growth trend. The reason was that unit sales increased more in the entry segment and farmers segment, while the founding company concentrates on the production of professional tools due to the Group s cost structure. The number of people employed by the STIHL Group increased to 12,338 as of December 31, 2012, equivalent to workforce growth of 7.5 percent. At the founding company in Germany, in total 40 persons with temporary employment contracts were taken over into permanent employment last year. As of December 31, 2012, 3,964 people were employed at the founding company. As in previous years, investment was at a high level and was primarily focused on the development of new products and the expansion of our manufacturing and sales network. Total investment reached the amount of 227 million euros. The focus of our development activities in 2012 was on the range of battery-powered tools and the segment of professional chain saws. The cordless products were supplemented with the market launch of the STIHL HLA 65 hedge trimmer, the STIHL KGA 770 sweeper and the STIHL SPA 65 olive harvester. Among the gasoline-powered tools, the new STIHL GS 461 concrete cutter was one of the highlights of STIHL s innovations in It can be seen on

15 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 13 the front cover of this Annual Report and is discussed in an interview with the two main development engineers on page 5. Its chain too is a novelty, as explained in more detail on page 22. STIHL s standards with regard to quality, occupational safety and environmental protection were once again confirmed by an independent certification organization in Quality made by STIHL is a brand promise that we are able to keep as a result of precise manufacturing methods and uniform testing technology throughout the Group irrespective of which STIHL plant manufactured the product concerned. There were some changes in the Group s boards last year. As of July 1, 2012, Dr. Nikolas Stihl, grandson of company founder Andreas Stihl, took over as Chairman of the Advisory Board of STIHL Holding and the Supervisory Board of STIHL AG. A new member of both boards is Franz Fehrenbach, who succeeds to Professor Dr. Dr. h. c. Walther Zügel as a representative of the shareholders. And Gerhard Wick became a member of the Supervisory Board representing the employees after Dieter Knauß stepped down. There were some personnel changes also in the Executive Board of STIHL AG in 2012: Since January 1, 2012, Dr. Michael Prochaska has been responsible for Human Resources and Legal Affairs. On May 1, 2012, Karl Angler assumed responsibility for Finance, Controlling, Information Systems and Service. And Norbert Pick has been in charge of Marketing and Sales since July 1, Dr. Klaus Detlefsen (Finance and Controlling) and Jürgen Steinhauser (Marketing and Sales) retired from the Executive Board of STIHL AG for reasons of age on April 30, 2012 and June 30, 2012, respectively. On behalf of the entire Executive Board, I would like to thank the members of the workforce for their flexibility, commitment and great motivation and the owners for the trust they place in the Executive Board. I would also like to thank the employee representatives for their constructive cooperation. Dr. Bertram Kandziora Chairman of the Executive Board

16 14 MANAGEMENT REPORT THE STIHL GROUP The revenue of the STIHL Group reached a record level for the third time in succession. At 2,775.7 million euros, it was 6.0 percent higher than in the prior year. The equity ratio also increased once again and reached 68.5 percent. Total investment of million euros was significantly higher than in REVENUE OF NEARLY 2.8 BILLION EUROS In 2012, the STIHL Group s revenue increased by another 6.0 percent and reached a new record level of 2,775.7 million euros. Revenue had grown by 10.8 percent in the prior year. The proportion of revenue generated outside Germany was 90.1 percent, compared with 89.4 percent in percent of total revenue was generated in the euro zone and 36.3 percent in the European Union. Changes in currency exchange rates had a positive effect of 2.7 percent on revenue (2011: minus 0.9 percent). At an average for the year of 1.29 US dollar to the euro, the US dollar was 7.8 percent stronger than in the prior year. Calculated at the average exchange rates of 2011, without considering changes in currency parities, the revenue growth of the STIHL Group would have amounted to 3.3 percent. INVESTMENT IN GERMANY AND ABROAD In 2012 too, the STIHL Group s investment in property, plant and equipment and intangible assets remained at a high level reaching million euros (2011: million euros). The investment proportion of the German founding company was 21.6 percent percent of the investment was accounted for by the other companies of the Group in Germany and abroad. The manufacturing companies of the STIHL Group particularly increased their investment in the development of technologies for the future. Their proportion

17 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 15 DISTRIBUTION OF REVENUE IN 2012 THE STIHL GROUP REVENUE GROWTH IN 2012 THE STIHL GROUP 9.9 % Germany , % Other countries ,775.7 million euros +6.0 % of total investment was 89.3 percent. As a result, the manufacturing and logistics equipment of the production companies was expanded. An additional factor was that our sales company in Austria put a new building into operation. At the founding company in Germany, a start was made with planning the extension of the development center and the new construction of a production warehouse. SATISFACTORY EARNINGS AND HIGH LIQUIDITY Liquidity increased again compared with the prior year. Nearly all of the Group s capital expenditure so far has been funded out of our own resources. STRONG FINANCIAL STRUCTURE The Group s capital structure continued to feature a high level of equity, representing 68.5 percent of the balance sheet total. Equity therefore covered all non-current assets and inventories as well as most receivables and other assets. The earnings situation of the STIHL Group was once again satisfactory in the year This was partially due to measures taken to increase unit sales as well as the permanent worldwide cost-reducing program.

18 16 MANAGEMENT REPORT THE STIHL FOUNDING COMPANY The STIHL founding company, comprised of the seven manufacturing plants in Germany, achieved revenue of million euros in A large proportion of the investment volume flowed into expanding the product range. The equity ratio and liquidity remained at high levels. REVENUE POSTED BY FOUNDING COMPANY SLIGHTLY ABOVE PRIOR-YEAR LEVEL In the year 2012, the founding company increased its revenue by 2.1 percent to million euros (revenue growth in 2011: plus 8.5 percent). The export ratio also increased in 2012 to a level of 88.4 percent. The percentages of total revenue increased above all in North America, Australia and Asia (especially China, Japan and Malaysia). On the contrary the proportions of sales to the European Union and the other countries of Europe decreased. INVESTMENTS AT THE FOUNDING COMPANY The investment volume in 2012 amounted to 49.1 million euros and thus reached the level of the prior years. (There was a special effect in 2011 due to the acquisition of Plant 7 in Ludwigsburg.) Substantial funds were invested in research and development activities, which are concentrated in Waiblingen, for the expansion of the product range. Large amounts were also invested in new production equipment and the IT infrastructure. The entire investment was financed without any borrowing. As in previous years, total investment exceeded depreciation and amortization once again in 2012.

19 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 17 DISTRIBUTION OF REVENUE IN 2012 THE STIHL FOUNDING COMPANY REVENUE GROWTH IN 2012 THE STIHL FOUNDING COMPANY 11.6 % Germany % Other countries million euros % INCREASED EQUITY RATIO AND ONGOING HIGH LIQUIDITY Equity was equivalent to 45.1 percent of total assets at December 31, 2012, representing an increase of 2.1 percentage points compared with a year earlier. Equity therefore covered all non-current assets and a large proportion of inventories. Total liquidity including securities held as non-current assets accounted for 36.6 percent of total assets. It is necessary to take into account, however, that liquid assets are offset to a large extent by high long-term obligations from occupational retirement pensions. INCREASE IN SELF-FINANCED PENSION OBLIGATIONS Actuarial expertises led to an increase in provisions for retirement pensions and other liabilities related to outstanding capital benefits of 5.8 percent compared with 2011 (prior year: 3.7 percent). The calculations are based on the new Heubeck 2005G mortality tables, which were published in August The difference resulting from remeasurement in accordance with the German Accounting Law Modernization Act (BilMoG), which has been in force since January 1, 2010), is distributed over 15 years, making use of an option.

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21 A PASSION FOR QUALITY In order to manufacture mature products in first-class technical quality, we are constantly working on optimizing our components and processes. With the STIHL Group s unique thoroughness and pursuit of perfection, we set standards in the industry over and again.

22 20 PRODUCTION The STIHL Group has consistently invested in its worldwide manufacturing network in recent years, despite unfavorable conditions and a weakening world economy. As a result, the production volume increased once again in The Group s construction activities were also at a record level last year. GERMANY ANDREAS STIHL AG & CO. KG The founding company profited rather less in 2012 than in the prior year from the positive growth trend of the STIHL Group. In addition to the uncertainty caused by the euro debt crisis, this was due in particular to the fact that growth took place in the consumer segment more than in the professional segment, which is the focus of the founding company s business. STRENGTHENING THE SITES IN GERMANY A large amount of highly automated machinery was put into operation in all of the founding company s production areas in 2012 with the goal of increasing productivity. For example, additional hot-chamber pressure-die-casting cells were installed at the magnesium die-casting plant in Prüm, 5-axle processing centers with automatic pallet changers went into operation in the area of tool and mold making, the assembly structures in Waiblingen were expanded for the new GS 461 concrete cutter, and a new group working structure was set up for the MS 461 compact professional chain saw. Furthermore, the company invested in a number of new and promis - ing products, including the FR 410 and FR 460 backpack trimmers. WELL-THOUGHT-OUT EFFICIENCY For the purpose of increasing efficiency and optimizing processes, product design at STIHL gives full consideration to the needs of manufacturing and assembly. Intensive development consultations and feasibility studies are carried out already in the design and engineering phase of components. The STIHL Production System (SPS) is applied to improve existing process schedules. The objective of a typical SPS project is to improve the flexibility of assembly while reducing inventories in the production process by means of small lots and short throughput times. IMPROVED PRODUCT QUALITY The poka yoke system originated in Japan and can be roughly translated as avoiding mistakes. The principle comprises several elements and is used in the STIHL Group to discover and eliminate the causes of mistakes as quickly as possible. The long-term objective of this and similar efforts is to further develop all relevant stages of production with the help of integrated quality technology in line with the zero defect strategy.

23 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 21 EMPLOYMENT SITUATION AND UTILIZATION OF PRODUCTION FACILITIES The production program required to supply the professional market made it possible to take over 20 direct employees from temporary into permanent employment contracts. In total, 40 temporary employees were taken into permanent employment at the founding company in Numerous program changes required increased personnel flexibility between the various production and assembly centers. Capacity utilization for the production equipment fluctuated considerably depending on the season of the year, and in some cases had to be offset by means of overtime work and special shifts. use of a geothermal method, which has excellent energy efficiency. BRAZIL STIHL FERRAMENTAS MOTORIZADAS LTDA. Strong domestic demand and the growing need for cylinders at the STIHL Group meant that production capacities at the site in Brazil were well utilized in The focus last year was also on quality improvements and cost-reducing actions, to put STIHL into a good position for the intensifying competition in the Brazilian market. EXTENSIVE MEASURES TAKEN USA STIHL INCORPORATED There were several changes and new products at STIHL Incorporated last year. On the one hand, even more injection-molding tools were produced by STIHL itself in 2012, in order to cut costs and create new jobs. On the other hand, some new models successfully went into production and were launched on the market in early 2013: They include the MS 241 and MS 251 chain saws and a new family of brushcutters, including the FS 23/24/25/26 and FS 94 models. SIGNIFICANT COST SAVINGS The STIHL Purchasing Department in Virginia Beach cooperated with the Purchasing Department at the founding company on material procurement in 2012, which not only saved more than 7 million US dollars, but also improved supplier quality. In addition, STIHL Incorporated identified systematic improvement potential on the assembly lines and in the individual production areas. As a result, some automation projects were implemented, which also achieved significant cost savings. ENVIRONMENTALLY AWARE CONSTRUCTION Last year, STIHL Incorporated celebrated the opening of its 5,000 square-meter building for accessories. The new building was opened after a construction period of just five months. It has an environmentally friendly roof garden and an ultra-modern data center cooled with the Last year featured numerous improvements in assembly and the various areas of production: Plastics production for example was expanded with the addition of four injection-molding machines in order to reduce the costs associated with outside purchasing and to increase capacities in the long term. In the production of guide bars, as a result of various automation projects, productivity was significantly increased while improving quality at the same time. And to reduce energy costs, a 138 kv substation was put into operation in the second half of the year. INCREASE IN CYLINDER PRODUCTION The cylinder production of STIHL FERRAMENTAS MOTORIZADAS LTDA. was increased by 20 percent in 2012 while maintaining the usual high quality standards. At the same time, eight new cylinder models went into series production. Since cylinder production was started in Brazil, a total of 42 million cylinders have been manufactured there. EXTENSION OF WAREHOUSE FOR FINISHED GOODS STIHL Brazil invested approximately 27 million euros in the extension of buildings last year. In the first half of 2012, for example, the extension by 2,800 square meters of the warehouse for finished goods was completed and, due to increasing needs, the construction of a completely new spare-parts warehouse was started; this will have floor space of 13,000 square meters and should be ready for use in the first half of 2013.

24 22 DIAMOND Cut-OFF CHAIN 36 GBM The special feature of the new 36 GBM diamond cut-off chain for the GS 461 concrete cutter is that instead of cutting teeth, it consists of segments with embedded diamonds. Each chain contains a total of more than 40,000 diamonds. The high-precision components of the chain chassis are manufactured and assembled at the STIHL plant in Switzerland. 500 microns SWITZERLAND STIHL KETTENWERK GMBH & CO. KG The STIHL chain plant in Switzerland was once again faced with increased demand for saw chains in And with the series production of the concrete cutter chain, an impressive new development has been launched featuring very good performance for cutting concrete and stone. SUBSTANTIAL INVESTMENT Growing unit sales of STIHL chain saws over recent years resulted in substantial investment in 2012: New machinery and equipment was purchased in the areas of pressing, hardening, chroming and assembly. Combined with measures taken to improve existing processes, the chain plant was able to successfully increase its capacities and productivity last year. NEW LOGISTICS BUILDING In addition to new machinery and equipment, the chain plant also invested in a logistics building in 2012, which not only expanded warehouse capacities, but also created the right conditions for improving the logistics pro- cesses. The construction project was completed on schedule and has been used by the Logistics Department since the beginning of SKILLED EMPLOYEES IN PRODUCTION In order to have a larger number of skilled employees available in production in the future, the number of apprenticeships was increased last year. In addition to poly-mechanics, automation specialists and practical mechanics, production mechanics will also be trained to meet future requirements in the technical departments. In parallel, suitable production employees can also participate in targeted further training. CHINA ANDREAS STIHL POWER TOOLS (QINGDAO) CO., LTD. For STIHL Qingdao, the year 2012 featured several first times : More than one million power tools were produced in one calendar year for the first time. Two more assembly lines were put into operation, one for the STIHL MS 170/180 chain saws and one for all STIHL

25 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 23 FS 120 and FS 250 brushcutters. And for the first time, parallel to our traditional testing, some of the outdoor testing was carried out in China. LOCAL PURCHASING Some components were purchased locally also in Once again, cooperating with suppliers in a spirit of partnership proved its worth. Processes were jointly worked out and optimized, and quality assurance was adapted to STIHL s high standards. ENERGY-EFFICIENT NEW CONSTRUCTION Since July 2012, several construction projects with a total investment volume of approximately 13.7 million euros were realized at STIHL Qingdao: a building to accommodate offices, production and a warehouse; a new supply and disposal center; and a canteen extension. The new construction will also help to improve energy efficiency by minimizing energy losses with geothermal heating and cooling, the use of heat exchangers and improved insulation. The focus is firmly on energy savings at STIHL Qingdao: With two new adjustment cabins, the energy consumed in production per tool has been reduced significantly. PREVENTIVE SAFETY AT WORK As the often chaotic and increasingly dense road traffic in China presents a considerable accident risk, one focus of safety at work in 2012 was on preventive measures to reduce traffic accidents. an olive-harvesting tool (SPA 65) and a new hedge trimmer (HLA 65). In addition, the range of chain saws was expanded with the powerful MSA 200 cordless saw, and the range of tools for which VIKING carries out the logistics within the STIHL Group was expanded with a series of cordless and battery-powered tools. FAR-REACHING PROGRAM EXPANSION VIKING presented numerous new products in 2012: For example, the Series 2 lawnmower was supplemented with two more models (driven and non-driven). The Series 4 was completely renewed; with a total of nine models, it offers two cutting widths and various drive systems. There is also a completely new product, the Series 4 R mulching mower for semi-professional and professional use, which has received the renowned Scandinavian Nordic Ecolabel Svanen environmental award. The wide range of new products was rounded off in 2012 with a more powerful HB 685 tiller and a series of T 4 side-discharge tractors. BUILDING AND PLANNING The extension of the VIKING building was completed in October 2012 on schedule and on budget. Two new assembly lines and all of the logistics equipment have already been installed in the approximately 16,000 square meters of floor space. New offices, workshops, test rooms and storage space are available as well. For the further growth of VIKING, the plant area has also been expanded with the purchase of approximately 27,000 square meters of land. AUSTRIA VIKING GMBH 2012 was a year of growth at VIKING. On the one hand, the site in Austria gained approximately 16,000 square meters more floor space since fall. On the other hand, various new machines for the assembly of STIHL and VIKING products were installed in the production plant. VIKING The STIHL cordless and corded power tools that roll off the assembly line at VIKING were supplemented with

26 24 QUALITY, OCCUPATIONAL SAFETY AND ENVIRONMENTAL PROTECTION Made by STIHL is more than a quality promise. Made by STIHL also means that the entire Group deals with people, nature and resources in a respectful and trusting way. As a result, the STIHL companies not only comply with applicable law, but always strive to achieve innovative methods that consistently set new standards in national and international markets. SUCCESSFUL MANAGEMENT SYSTEMS By means of random matrix sampling, the management systems of ISO 9001 for quality, ISO for environmental protection and BS OHSAS for occupational safety were confirmed at all STIHL production sites, as in the prior year. The audit was carried out by the certification organization DQS (Deutsche Gesellschaft zur Zertifizierung von Managementsystemen = German Society for the Certification of Management Systems). And the optimization of management systems continues: As of 2014, energy management certified to ISO will help the German founding company to use energy even more efficiently, to better conserve resources, and to reduce emissions even further. TOP QUALITY WORLDWIDE In order to continue supplying customers with the STIHL top quality they are used to, all products run through a precise and innovative manufacturing process as well as extremely strict external and internal tests. The tests are supported by a modern and Group-wide uniform test technology. In addition to exhaust emissions, the safe ty of products in use is also tested, for example; because quality made by STIHL is a brand promise for all products, irrespective of where they are produced. SAFETY FIRST Along with the products, top priority is placed on the safety of STIHL employees at each of the Group s sites. A number that makes the success of internal safety measures visible and which confirms that success from year to year is the low accident rate. But as safety is not achieved by chance, and has to be worked for every day anew, all of our production sites fulfill strict safety requirements. In addition, our employees are regularly trained to act with an awareness of safety and to watch out for potential sources of danger. HIGH LEVEL OF ENVIRONMENTAL PROTECTION Environmental protection doesn t only mean complying with laws, regulations and instructions; the right awareness must also be anchored in each employee s day-today working routine, and must thus become subject to efforts for continuous improvements. This means that environmental protection does not end at the factory gates, but involves customers, suppliers and neighbors. Environmental protection in the STIHL Group is fed from all channels: The companies themselves place value on energy-efficient products which are produced with resource-conserving methods and which conserve resources when they are used. That s why it is important

27 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 25 that STIHL suppliers also comply with the Group s high environmental standards. Furthermore, the STIHL Group would like to encourage the direct neighbors of the various STIHL companies as well as interested groups in society to play a more active part in environmental protection. species. Upon the initiative of the Stuttgart Regional Administration, the STIHL Environmental Committee has therefore started to cooperate with the vocational training center. Twice each year, STIHL employees use the company s own products to clear the steep wine terraces of blackberry bushes. GERMANY ANDREAS STIHL AG & CO. KG In order to secure occupational safety, environmental protection, energy efficiency and ergonomics also in the future, STIHL s machine inventory was thoroughly inspected in As a result, some equipment has been modernized while some has been completely replaced. In this context, STIHL s purchasing guidelines play a major role, as they are constantly updated and help to guarantee the high standards of STIHL s machinery. In 2012, the STIHL development center in Waiblingen was occupied with the topics of energy, the environment and occupational safety in connection with the design of workplaces for the planned plant expansion. INTRODUCTION OF ENERGY MANAGEMENT In terms of energy, the course has been set: In addition to comprehensive preparations for the introduction of an energy management system, the STIHL magnesium die-casting plant introduced an environmentally aware and energy-saving lighting system. The project resulted from energy-saving potential identified in 2011 and promises annual electricity savings of 41.7 percent, equivalent to an annual CO 2 reduction of more than 273 tons. WILDLIFE CONSERVATION IN THE LOWER REMS VALLEY Many parts of the lower Rems valley in which the oldest site of the STIHL founding company is located in Waiblingen are protected flora-fauna-habitat areas, embedded in landscape reserves and bird sanctuaries. Many species of flora and fauna worthy of protection are to be found there. And in the direct vicinity of STIHL s Plant 1, there is the Haufler vineyard, which is tended by the Waiblingen vocational training center. Many types of fauna choose the sunny sloping vineyard and its drystone walling as a habitat, so stopping this area from becoming overgrown helps to preserve the diversity of USA STIHL INCORPORATED Since 2012, STIHL Incorporated has had an ultramodern data center with geothermal cooling and with worldwide unparalleled energy efficiency. The new data center uses the earth to dissipate excess heat by passing spring water through a heat exchanger and back into the ground. For the eventuality that there should be any problems with this geothermal method, a pond has been created whose water can also be fed into the cooling circuit and thus used as an alternative coolant. Another aspect is that the entire data center is no longer cooled; instead, cooling spirals are installed on the rear of the server racks, with the result that energy consumption could be reduced by 90 percent. HYDROGEN DRIVE Since October 2012, STIHL Incorporated has been using hydrogen-powered forklift trucks the units powered by propane and batteries are being gradually replaced. The ecological advantages of this changeover are among others that greenhouse-gas emissions are reduced compared with conventional fuel by up to 90 percent, that the new hydrogen-powered forklift trucks do not produce any emissions except steam, and that the fuel cells can be completely recycled. In connection with these new purchases, another aspect of occupational safety was taken into consideration: In order to improve safety, simple mirrors were replaced with ones that give an automatic warning to indicate that another vehicle is approaching and from which direction.

28 26 WIND TURBINES PRODUCE ELECTRICITY As in 2011, STIHL Incorporated installed additional wind turbines in In addition to the two turbines on the roof of the guide-bar factory, four more were installed on the roof of the materials warehouse. Each turbine is nearly two meters high and weighs 110 kilograms, and can produce up to 2.25 kilowatts of electricity, which is used directly for the company s own requirements. transport boxes reduced the need for cartons for example, and the waste system was revised and made more environmentally friendly. In addition, various green technologies were implemented including an energy-saving lighting system, an innovative heat recovery system, and a geothermal method of heating and cooling the building, which replaced the existing air-conditioning system. BRAZIL STIHL FERRAMENTAS MOTORIZADAS LTDA. Starting last year and following discussions with the city of São Leopoldo, the plant in Brazil donates its paper and plastic waste to five cooperative societies that specialize in recycling. STIHL decided on this change because many needy people in São Leopoldo depend on the recycling cooperatives to augment their low income. As a result of processing the STIHL waste materials, the five cooperatives have significantly increased their revenues to the benefit of the approximately 100 participating families. AUSTRIA VIKING gmbh With the market release of the VIKING MB 4R series, the development project of a new generation of mulching lawn mowers was brought to a successful conclusion at VIKING in late Although this is not a new product group, it constitutes an unprecedented success for VIKING: For the first time, a VIKING product has been awarded the Nordic Ecolabel seal of approval, also known as the Svanen Certificate and highly coveted, particularly in the Scandinavian countries. This seal of approval is awarded to products that have a very low impact on the environment as well as proven negligible levels of hazardous substances. ENVIRONMENTAL ACTION BY THE WORKFORCE Employees of the Brazilian STIHL plant and their families are regularly involved in environmental projects as voluntary assistants. In 2012, they participated in a treeplanting project organized by the VerdeSinos initiative. VerdeSinos aims to reforest and replant approximately 130 hectares on the banks of the River Sinos to restore the natural vegetation. At present, 21 municipalities and more than 2,800 people are involved in this initiative. STIHL Brazil worked on the issue of quality across all departments in For example, various processes were optimized, audits were introduced in close cooperation with the founding company, and training courses were established for new employees. CHINA ANDREAS STIHL POWER TOOLS (QINGDAO) CO., LTD. The STIHL branch in Qingdao carried out several environmental projects of various magnitudes in Reusable REGENERATIVE ENERGY FOR COOLING The VIKING plant in Langkampfen was expanded with an investment volume of 13.7 million euros. Usable floor space of 16,000 square meters was created in a construction time of just one year. The use of regenerative energy is possible in the new building, which is cooled naturally with the groundwater of the Tyrol region. After being slightly warmed by this process, the groundwater is returned to the earth where it soon cools down to its original temperature. SWITZERLAND STIHL KETTENWERK GMBH & CO. KG The STIHL chain plant produces millions of chain parts each day with modern equipment. One main focus is on the top quality of our products for the customers. Importance is also placed on the well-being of the employees and on environmental protection.

29 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 27 NEW LOGISTICS BUILDING FOR THE STIHL CHAIN PLANT IN SWITZERLAND OF HEATING POWER ARE GAINED FROM 350KILOWATTS GEOTHERMAL SOURCES. 100 PERCENT OF THE ENERGY FOR HEATING AND COOLING THE BUILDING IS PRODUCED FROM REGENERATIVE GEO- THERMAL SOURCES. PUMPS AT A DEPTH OF 200 METERS SUPPLY THE BUILD- 30HEAT ING WITH GEOTHERMAL HEAT. SAFETY DAYS 2012 The Swiss chain plant therefore organized safety days for its workforce for the first time last year. On three days, all of the employees passed through a safety course covering the subjects of stumbles and falls, hearing protection, lifting and carrying and eye protection. In addition, the employees were able to have a health check, hearing and eye tests, and training on using a defibrillator. The participants response and feedback were very positive. The existing logistics space of the Swiss chain plant reached their limits last year as a result of continuous increases in production. The decision was therefore made to construct a new logistics building. For that purpose, 4,200 cubic meters of concrete were used, 550 tons of steel reinforcement was applied, 90 kilometers of high- and low-current cable was laid, seven kilometers of sprinkler pipes and more than 2,500 sprinklers were installed. We were able to create 3,000 pallet spaces in usable floor space of 5,700 square meters. With this new building, STIHL has taken a new approach to environmental protection and has applied a geothermal heating system. No fossil fuels are used for heating or cooling. The heat required is taken from the ground. In summer, the heat pump is switched over to cooling and the waste heat can be stored in the ground to regenerate the geothermal probes. This makes it possible to reduce energy consumption and protect the environment. WAREHOUSE WITH GEOTHERMAL HEAT

30 Specialist Dealers in principle STIHL s policy has been to work with specialist dealers and their qualified personnel, to provide not only product servicing, but also technical and personal advice. Through long-term partnerships, we have enhanced our knowledge of our customers and have been able to improve our own performance.

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32 30 MARKETS The STIHL Group continued along its global growth path also under more difficult conditions. In nearly all important product categories, STIHL achieved new records for unit sales last year. STIHL REMAINS ON ITS GROWTH PATH Despite the worsened global economic situation, which caused some of our key markets to enter recession, STIHL succeeded also in increasing its unit sales of engine units in most of its product categories and in strengthening its market position in Once again, overall growth in the emerging market countries was higher than in the industrialized countries. VARYING DEVELOPMENTS ON THE WORLD MARKET Worldwide demand for gasoline-powered chain saws had continuously increased in the previous years, benefiting from the constantly growing number of consumers, rising energy prices and sales to new target groups in the emerging markets. While it had mainly been the Asian low-price suppliers that profited from developments in the price-conscious emerging market countries, those imports and the demand for them in those countries generally fell last year for the first time. The global market volume for gasoline-powered trimmers continued to grow, however, as the two biggest markets, the United States and Russia, posted strong growth rates. Gasoline-powered cut-off machines also had a positive year 2012 after a long lean spell: This product group was the hardest hit by the world economic crisis in UNEVEN MARKET DEVELOPMENTS IN EUROPE The measures taken to consolidate state budgets in the context of the euro debt crisis had a dampening effect on demand for STIHL products, especially in southern Europe. Also in Russia, by far the biggest market for gasoline-powered chain saws in Europe, the market development for this product group was distinctly negative in But in Central and North America, the markets stabilized at their prior-year levels or actually even grew due to weather conditions. The STIHL branches in Norway and Sweden together celebrated their 25th anniversaries in September GOOD DEVELOPMENTS IN NORTH AMERICA Product markets in North America were generally stable and positive in As Hurricane Sandy caused immense damage in the northeast of the United States in late October 2012, demand for chain saws increased

33 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 31 GROWTH IN NORTH AMERICA DESPITE AN EXCEPTIONAL DROUGHT In the summer of 2012, the United States experienced the worst period of drought in more than 50 years. Nearly 1,700 counties in a total of 36 federal states had to declare temporary states of emergency. US Drought Monitor As of September 25, 2012 Intensity D0 Abnormally dry D1 Drought moderate D2 Drought severe D3 Drought extreme D4 Drought exceptional Source: as a result of the clearing-up work. There was a surprising change in the market for gasoline-powered trimmers: After this product group had suffered in the prior year from unusually cold and wet weather conditions in many regions, demand for trimmers grew sharply in 2012 due to an early start to the season, and despite an exceptional drought that affected many parts of the United States in the summer months. Our gasolinepowered cut-off machines were also very successful, after their unit sales had been depressed for a long time following the crisis year of LOWER UNIT SALES IN LATIN AMERICA The import restrictions imposed by the Argentinian government to stabilize the balance-of-trade deficit had a negative impact on the country s economic development. The resulting reluctance to buy on the part of users was noticeable also in our sector and diminished our growth in the whole of Latin America. parts of Southeast Asia, decreased considerably last year. As a result, total market demand was frequently lower than the prior-year level. In Japan, the continuation of difficult market conditions prevented the market recovery in 2012 that had been hoped for in the year after the earthquake and reactor disaster in Fukushima. SATISFACTORY LEVEL IN OCEANIA After strong economic growth and favorable weather conditions in Oceania had brought the sector record sales in 2011, demand returned to a satisfactory but rather lower level last year. The STIHL branch in Australia celebrated its 40th anniversary in March FEWER LOW-PRICE OFFERS FROM ASIA Demand for low-price power tools, mainly from Chinese producers, which had previously risen sharply in many

34 32 PURCHASING Close and trusting cooperation between the Purchasing Department and its suppliers is essential so that STIHL can continue to succeed against the international competition. Only through a shared strategy within the STIHL Group can long-term supply relationships be established, making it possible to operate successfully also in economically difficult periods. EFFECTIVE RISK MANAGEMENT Ensuring smooth supplies to the worldwide STIHL production network was a great challenge for the Purchasing Department once again last year, especially as some STIHL suppliers had to cope with a very difficult financial situation. As a result of effective risk management and close cooperation between the STIHL departments of Purchasing, Quality and Planning and the suppliers, the production facilities throughout the Group were reliably supplied with parts and materials despite all adversity. PLANNING SECURITY ENCOURAGES INVESTMENT In retrospect, the events of last year once again confirmed that long-term agreements between STIHL and its suppliers are advantageous for both sides: On the one hand, a sound partnership provides security in planning and in business operations, which results in competitive advantages. On the other hand, it increases the willingness to invest in a successful, shared future. SUCCESSFUL WORLDWIDE TEAMWORK Worldwide coordination in the area of purchasing was a particularly successful form of teamwork in 2012: Significant savings potential was achieved last year due to technical simplifications, intelligent manufacturing concepts and flexible currency management in the purchasing network. However, it was only possible to implement these measures because our employees in the purchasing process acted with great foresight and a group orientation. INVOLVEMENT OF DEVELOPMENT SUPPLIERS AT AN EARLY STAGE Each year, STIHL presents new outstanding innovations whose first-class quality strengthens customers confidence in STIHL over and again. This success is partly due to our close cooperation with development suppliers who were consulted at an early stage in the development and improvement of STIHL products once again in 2012 with optimal results as usual. Also in the future, therefore, it will remain a prime objective to

35 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 33 PURCHASING VOLUMES WORLDWIDE 44 % 87 % OF THE STIHL GROUP S TOTAL PURCHASING VOLUME IS SOURCED IN GERMANY, THE UNITED STATES, JAPAN, BRAZIL, ITALY AND CHINA. 18 % 8 % 8 % 5 % 4 % 13 % Germany United States Japan Brazil Italy China Other countries utilize the know-how of external specialists at an early stage and to integrate it into internal considerations. This helps us to meet the increasing demands of our customers as well as the requirements of applicable law. TRANSPARENT PROCESS LANDSCAPE In the same way as the close networking with the suppliers of the STIHL Group, transparent material management will always be elementary for the success of a globally active group such as STIHL. The experience from last year shows that working efficiency is significantly increased by standardized processes that function across all departments and sites. This also releases capacities that can be profitably applied elsewhere within the company. wide-ranging manufacturing network, this has also negative effects on all the other production sites in the STIHL Group. The introduction of the new offshore levy and increases in other levies, in particular in connection with the German Renewable Energy Act (EEG), constitute a considerable additional burden for the plants in Germany. This trend is exacerbated by increases in the network usage fee to finance the required network expansion. The tendency of slight decreases in electricity prices has no significant effect on overall energy costs and can by no means compensate for the enormous cost increases. VALUE CHAIN IMPACTED BY RISING ENERGY PRICES The energy changeover in Germany is leading to higher energy costs also at the founding company. Due to our

36 Skilled employees of tomorrow With our farsighted human resources management, we foster and inspire our employees at all levels. Our training concepts allow us to provide excellent specialist qualifications and give our employees the opportunity to develop their ideas and their personality.

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38 36 OUR EMPLOYEES One focus in the area of human resources in 2012 was on the development of possibilities for further training; another was on implementing the results of the employee surveys carried out at several STIHL sites. In addition, special attention was paid to the development of innovative recruitment methods. GERMANY ANDREAS STIHL AG & CO. KG In the context of several workshops, the responsible human resources managers at the founding company prepared the HR Agenda 2020 last year. It contains the challenges, the future areas for action and possible consequences for human resources work in the future. One of the results is that cross-border knowledge transfer and cooperation between the human resources departments should be intensified, with more focus on topics of importance for the entire Group such as human resources development, successor planning and process optimization. In this way, STIHL intends to enhance its attractiveness amongst internal and external applicants. SATISFACTION AMONGST MANAGEMENT STAFF A survey carried out at the German founding company in late 2012 came to the conclusion that 98 percent of the participating managerial staff members are proud to work at STIHL. Furthermore, they gave very positive assessments of working conditions, freedom to make decisions and the company s willingness to innovate. STIHL world. The advertisements with which STIHL recruits apprentices and students have actually been twice nominated for a human resources excellence award as outstanding innovations in the field of personnel management. CREATING ENTHUSIASM FOR TECHNOLOGY STIHL s efforts to create enthusiasm among women for technical professions are slowly bearing fruit: In 2012, the number of women in technical jobs increased to 18 percent. One element of this success is the Day of Occupational Training, which at STIHL is largely organized and executed by apprentices and students from the Baden-Württemberg Cooperative State University and was utilized last year by approximately 1,000 school students and their parents to gain information on job training at the founding company. In addition, Andreas STIHL AG & Co. KG regularly hosts a Girls Day, is involved in the MuT project (Mädchen und Technik = Girls and Technology), and in the Girls INNOVATIVE RECRUITMENT METHODS Since last year, these STIHL strengths as a coworkeroriented employer have also been reflected in a new personal marketing concept: Current advertisements for positions vacant as well as image advertisements are enriched offline for example by QR codes and online by videos and other media features, in order to give applicants a comprehensive and realistic insight into the JOB TRAINING beyond our needs The STIHL founding company has always been aware of its socio-political responsibility and generally trains more apprentices than it needs itself. However, all suitable apprentices and students of the Cooperative State University who completed their training last year were offered permanent jobs at STIHL.

39 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 37 STIHL RECEIVES INNOVATION AWARD In 2012, the founding company s vocational training was recognized by the Chamber of Industry and Commerce of the Stuttgart region as Qualifying as a Junior Safety Partner. This concept was created in cooperation with the Employers Insurance Association and aims to sensitize young people for safety-relevant behavior already during their apprenticeships. Whoever qualifies as a Junior Safety Partner should function as a connecting link between apprentices and trainers and / or superiors, and should watch out for any failings with regard to occupational safety. SUCCESSFUL IDEA MANAGEMENT Idea management at Andreas STIHL AG & Co. KG primarily consists of the two areas of Continuous Improvement Process (CIP) and Ideas Plus. 69 percent of the employees were involved in Ideas Plus in 2012, and the suggestions for improvements they submitted resulted in annual savings for STIHL of approximately 2.5 million euros. A total of more than 500,000 euros was paid out in prizes to the persons who submitted the ideas. Furthermore, the more than 200 CIP groups that were involved in exchanging ideas and experiences in 2012 found solutions for everyday problems, investigated improved processes and routines on production machines and equipment, and worked to enhance efficiency in the administrative areas. 62 percent more applications were received than a year before. A second element of recruiting relates to an innovative personnel concept that, among others, focuses on developing the company s presence on the Internet and in social networks. COMPREHENSIVE FURTHER TRAINING When employees have the desire to learn something new or to add to their skills, they are provided with full support at STIHL Incorporated. For example, the site at Virginia Beach offers not only courses in the employees actual area of work, but also more broadly based further courses which strengthen mutual understanding, promote ready cooperation, and in some cases facilitate a change of department. BENEFITS FOR FAMILY MEMBERS Approximately 2,000 times, employees of STIHL Incorporated used the Health & Wellness Center for routine medical examinations, minor emergencies and illness visits. The feedback on the Center, which opened in November 2011, is always extremely positive; the technical equipment and experienced personnel are particularly praised. Although the Health & Wellness Center was originally intended solely for STIHL employees, members of employees families have also had access to the Center since October USA STIHL INCORPORATED Also at STIHL Incorporated, there is a focus on having well-trained staff members who are happy at the company and feel both challenged and encouraged. Usually, satisfied employees not only work better, they also function as advertisements for the company; in times of shortages of skilled workers, that is a factor for business success that should not be underestimated. BRAZIL STIHL FERRAMENTAS MOTORIZADAS LTDA. From interns to trainees to executives STIHL Brazil consistently expanded its further-training program at all levels in The Technical Training Center initiated in 2011 was supplemented with additional areas and contents. The recruitment of skilled workers also played an important role last year. MARKETING THROUGH RECOMMENDATIONS In 2012, STIHL Incorporated supported the STIHL Employee Referral Award Program, which rewards employees who have successfully recommended the company. The result was that in the last period measured, GOOD PROSPECTS In order to encourage in particular students of technical subjects such as mechatronics and mechanical engineering to seek a career at STIHL, STIHL Brazil developed a visitors program for the local universities. As a result,

40 38 approximately 190 students looked around the production facility in 2012, and initial contacts were made between the students and STIHL human resources managers. COMPREHENSIVE EMPLOYEE DEVELOPMENT Both the further training program for executives and the trainee program for career starters were expanded in terms of content and completed last year. The exercises for executives are intended above all to train their capabilities for personal development, but also to improve their skills in everyday communication as well as in crisis situations. Furthermore, in 2012, approximately 300 production employees were trained in the subjects of corporate culture, quality, productivity and safety. That one-week course included a presentation of the STIHL regulations and the attitude required to guarantee our high quality standards. PRACTICAL INTERNSHIPS For the first time in 2012, university students and persons starting a technical training who spent their compulsory internship at STIHL Brazil presented their final assignments to STIHL managerial staff, representatives of their colleges, and their relatives. In order to maximize the practical relevance of the exercise, all of the assignments concentrated on solving problems at work that each student had previously discussed with his or her mentor. ANALYSIS OF EMPLOYEE SURVEY Following a comprehensive employee survey, an executive team discussed its results and worked out the main areas for action in Various assessment methods were developed to simplify processes in both production and administrative areas and to make them more transparent for other departments. The executives were given appropriate training so that they could apply the new methods as quickly as possible. SWITZERLAND STIHL KETTENWERK GMBH & CO. KG The number of persons employed at our site in Switzerland increased again in the year under review. At the end of 2012, approximately 50 more people were employed at the STIHL chain plant than a year before. This growth constitutes a 6-percent increase in employment, which can be regarded as an achievement, since the Swiss labor market is virtually empty with an official unemployment rate of less than 3 percent. There are shortages above all of engineers, IT specialists and skilled technical workers such as toolmakers. FINE TUNING ACTIVITIES In the course of last year, the results of a previous employee survey were implemented in appropriate activities and introduced in everyday working routines. In order to receive up-to-date employee feedback on the resulting changes, a further anonymous survey was carried out in November Its results will once again flow into the overall process with further fine tuning as a consequence. NEW ASSESSMENT SYSTEM FOR APPRENTICES In order to assess apprentices on the basis of measurable criteria in a uniform and complete manner from the first year onwards, the STIHL chain plant in Switzerland put a new system into practice in 2012 that serves to thoroughly document apprentice performances. AUSTRIA VIKING GMBH In order to continue to gain good personnel, the STIHL Group must present itself as an attractive employer. In Austria, VIKING analyzed and revised its complete procedure last year: from the career brochure to the online application form. GOAL: GAINING NEW PERSONNEL In order to increase the number of applicants, in addition to new applicant management software, various personnel marketing documents such as career brochures, information folders for occupations requiring training, and career banners were newly designed and produced. The program also included participation in regional career fairs and career advisory days in schools and universities.

41 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 39 EMPLOYEE NUMBERS AS OF DECEMBER 31, 2012 THE STIHL GROUP 263 STIHL Vertriebszentrale AG & Co. KG, Dieburg 1,290 Sales companies Founding company 3,964 Waiblingen 2,967 Prüm 596 Ludwigsburg 344 Wiechs am Randen 57 4,227 Germany 12,338 TOTAL WORKFORCE 8,111 Other countries 6,821 Production companies (including VIKING) thereof ZAMA 1,173 INTERNAL INFORMATION EVENTS In order to improve internal communication, the so-called Executive Days were held once again in At last year s event, all levels of management were able to gain information on all other departments. A revised upward feedback also took place again, focusing on improved communication and cooperation between management and staff. CHINA ANDREAS STIHL POWER TOOLS (QINGDAO) CO., LTD. The main areas at STIHL Qingdao in 2012 were the targeted recruitment of skilled workers from universities as well as reducing staff fluctuation in assembly and improving resource planning throughout the company. SAP PERSONNEL MANAGEMENT SYSTEM The ERP (enterprise resource planning) system is designed to help a company to use existing resources such as materials or personnel as efficiently as possible, and thus to optimize the control of business processes. In view of these objectives, since late 2012, STIHL Qingdao has applied a human resources management system from SAP that includes modules for organization, personnel data, salary and timekeeping. Further modules are to be added in the coming years. SUCCESSFUL CAMPUS OFFENSIVE In order to make STIHL more interesting and well known for the target group of qualified and talented career starters, STIHL Qingdao organized a competition between five first-class universities in the Qingdao region. The prize was a one-week summer camp at STIHL, which the students obviously found convincing. Many students and graduates expressed a strong interest in STIHL during the job fair in the fall of 2012; as a result, not only were vacant positions filled, but a talent pool was also established to make STIHL even more appealing for students. LOWER STAFF FLUCTUATION Increased fluctuation of staff on assembly lines was apparent in the entire Chinese labor market in 2011 and also at STIHL. In order to counteract this trend, STIHL Qingdao improved its working conditions and introduced both paid breaks and relaxing zones in In addition, the direct working environment was upgraded and further training possibilities were established to facilitate internal promotion. Thanks to changes like these, the fluctuation rate has been reduced by more than 30 percent so far.

42 40 DEVELOPMENT 2012 was another successful year for the STIHL Group, featuring numerous further and new developments. In addition to expanding the cordless elec tric range and the segment of professional chain saws, one of the main highlights of STIHL s innovations in 2012 was the new concrete cutter. STIHL GS 461 CONCRETE CUTTER FOR PROFESSIONALS The new product class of concrete cutters has been developed on the basis of the STIHL MS 461 chain saw. The STIHL GS 461 is the world s lightest tool of its kind and can execute not only very deep cuts, but also exact cuts in concrete and similar materials. This is possible due to the 36 GBM, an innovative diamond cut-off chain: Each of its links includes a laser-welded diamond segment which allows maximum performance already from the first cut and improves overall cutting power by up to 30 percent. The chain runs on a guide bar specially developed for the STIHL GS 461 concrete cutter a Rollomatic G with a cutting length of 40 centimeters. It is fitted with an internal chain flusher to bind the dust while cooling and lubricating the tool. Another advantage of the STIHL GS 461 is its long-term air-filter system with an HD2 filter and an additional filter that traps the finest particles and protects the machine from dust. THE WORLD S LIGHTEST CHAIN SAW The new STIHL MS 150 is the world s lightest standard gasoline-powered chain saw, and is available also as a top-handle version (STIHL MS 150 T). This superlight weight was achieved through the consistent application of lightweight materials in combination with topology optimizations on the components. Despite its low weight, the STIHL MS 150 operates at the cutting level of the next-higher class of tool due to its ¼ Picco cutting components. Both models of chain saw fulfill the emission requirements of the EU II legislation. EXPANSION AND IMPROVED PERFORMANCE OF Battery-powered tools Last year, the STIHL Development Department expanded the range of battery-powered tools with the STIHL SPA 65 olive harvester, the STIHL HLA 65 hedge trimmer and the STIHL KGA 770 sweeper. The sweeper operates on lithium-ion rechargeable batteries and can work for up to 160 minutes on one charge; the STIHL development engineers have equipped it with an integrated motor-protection system, and it can operate for even longer non-stop using spare batteries. The olive harvester

43 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 41 features low vibrations and great durability. The hedge trimmer is light, has a very good cutting performance and is particularly suitable for high and broad hedges. In addition to the new developments, the STIHL Development Department was once again occupied with the further development and supplementation of existing products in One of the focuses here was on increasing the performance of the cordless tools. The results: The STIHL MSA 200 C is now the most powerful of the STIHL battery-powered saws with 20 percent more torque than the STIHL MSA 160; the STIHL AP 180 battery pack was specially developed for high-power tools; and the high-capacity STIHL AR 900 backpack battery facilitates long periods of uninterrupted work with good carrying comfort due to its adjustable belt system. The STIHL HSA 66 and HSA 86 cordless hedge trimmers were also improved. They have both been fitted with a new-generation motor, a low-wear, brushless STIHL EC motor, allowing longer operating times than with the predecessor. Furthermore, the STIHL HSA 66 and 86 have been fitted with a new cutting system with even longer operating times. ONGOING OPTIMIZATIONS In addition to the optimizations in the STIHL cordless range, the STIHL MS 460 model range of chain saws was also improved last year. The STIHL MS 461 professional chain saw for example was given a more mod - ern design as well as improved starting and partial-load behavior, and its operating reliability was enhanced as a result of 10 percent more cooling performance. Furthermore, the machine now also fulfills the emission requirements of the EU II legislation in Europe and of EPA III in the United States. The STIHL BG 56 / 66 / 86 blowers and the STIHL SH 56 / 66 / 86 vacuum shredders were also improved: The blow tubes and suction tubes are now easier to attach, and the 86 models now have a filter with a compensator, so that the tools can also be used in very dusty conditions. low-emission and fuel-efficient 2-MIX engine that reduces fuel consumption by up to 20 percent and emissions by up to 50 percent compared with the STIHL 2-stroke engine with the same power output and without 2-MIX technology. The integrated, newly developed and highly efficient anti-vibration system is also new. With the userfriendly starting system Ergostart, the tools can now be easily started even when carried on the user s back. The carrying systems for the brushcutters have also been revised and adapted to users needs: With ADVANCE PLUS, professionals can now easily attach each of their STIHL brushcutters to the harness and quickly release it if required. The STIHL FSE 52 electric trimmer was given an increased power of 500 watts last year, allowing a 25-percent increase in total performance. The STIHL FSE 52 is the lightest electric trimmer in the power range above 400 watts. An additional improvement is enhanced motor lifetime due to optimized motor cooling. ADDITIONAL ADD-ON FOR THE KOMBI-ENGINE The range of add-on devices for the Kombi-Engine was extended with the STIHL FBD-KM. It is ideal for finishing work on flower-bed edges, and utilizes sophisticated blade geometry and the first edger transmission developed by STIHL. Its wear-proof protection is made of a 2-component plastic material. NEW TECHNOLOGY FOR PLASTIC HANDLE TUBES An innovation that can be applied on several chain saws is the new plastic handle tube manufactured with an innovative projectile injection method. This gives the handle tube optimal toughness combined with minimal material use and is also even lighter than before: With the handle tubes of the STIHL MS 311 / 391 / 362 models, this results in a weight reduction of 23 percent. The STIHL Development Department supplemented the STIHL FR 410 and FR 460 backpack brushcutters with a

44

45 Room for growth Growth needs capacities. In order to create more space for research and development, the STIHL founding company is investing in expanding its infrastructure and is optimizing its logistics processes. A new development center and a new production warehouse are to be built at Plant 2.

46 44 REPORT OF THE SUPERVISORY BOARD MEETINGS OF THE SUPERVISORY BOARD The Supervisory Board of STIHL AG held five meetings at its headquarters in Waiblingen in 2012 four regular meetings and a constitutive meeting after the Annual Shareholders Meeting. The Supervisory Board received detailed information from the Executive Board on the business situation of the STIHL Group and the German founding company in the form of written and verbal reports. The deliberations of the Supervisory Board were based on the statements made by the Chairman of the Executive Board on unit sales, revenue and earnings, as well as on employment, investment and financial situations of the family-owned enterprise. A special focus of the Supervisory Board s discussions was on the sharp increase in investment projects, which were financed out of the company s own resources, and their strategic orientation. In the Supervisory Board meeting held in the spring, the Executive Board member for Human Resources submitted the personnel report dealing with employee development, workforce structure, personnel planning and employee participation in the company s capital. FINANCIAL STATEMENTS The financial statements of STIHL AG for the year ended December 31, 2012, prepared by the Executive Board, have been audited by Ernst & Young GmbH, Wirtschaftsprüfungsgesellschaft, Stuttgart, the company of auditors elected by the Annual Shareholders Meeting and commissioned by the Supervisory Board, and have been issued with an unqualified audit opinion. The members of the Supervisory Board thoroughly reviewed the financial statements. Furthermore, in the meeting on April 10, 2013, in which the financial statements were dealt with, the auditors elucidated the main results of the audit and discussed them with the members of the Supervisory Board. All the members of the Supervisory Board are in agreement with the results of the audit. The Supervisory Board has reviewed and approved the financial statements of STIHL AG for the year ended December 31, The financial statements are thus adopted. PERSONNEL CHANGES IN THE SUPERVISORY BOARD AND THE EXECUTIVE BOARD With effect as of the end of June 2012, Supervisory Board Chairman Mr. Hans Peter Stihl and Supervisory Board Member Professor Dr. Walther Zügel stepped down from their positions on the Supervisory Board. In the constitutive meeting of the Supervisory Board immediately after the Annual Shareholders Meeting on June 27, 2012, the members of the Supervisory Board elected Dr. Nikolas Stihl and Mr. Franz Fehrenbach, who had previously been elected to the Supervisory Board by the Annual Shareholders Meeting for the remaining period of office as of July 1, 2012, as the Chairman and Additional Deputy Chairman respectively. In recognition of his achievements for the company, the Supervisory Board appointed Mr. Hans Peter Stihl Honorary Chairman of the Supervisory Board. The Supervisory Board thanks Prof. Dr. Zügel for his committed efforts during his 26-year membership on the STIHL Supervisory Board. Mr. Dieter Knauß stepped down from his position as a member of the Supervisory Board by letter of June 27, By resolution of July 31, 2012, the Stuttgart District Court accepted the application for a court appointment and appointed Mr. Gerhard Wick, union officer Regional Office IG Metall Baden-Württemberg as a member of the Supervisory Board of STIHL AG representing the employees.

47 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 45 The Supervisory Board thanks Mr. Knauß for his good and always constructive work in the Supervisory Board. On January 1, 2012, Dr. Michael Prochaska was appointed Executive Board Member for Human Resources and Legal Affairs. In the spring meeting of the Supervisory Board, Dr. Prochaska was appointed Labor Relations Director. On May 1, 2012, Mr. Karl Angler was appointed Executive Board Member for Finance, Controlling, Information Systems and Service, and on July 1, 2012, Mr. Norbert Pick was appointed Executive Board Member for Marketing and Sales. For age reasons, Dr. Klaus Detlefsen (Finance and Controlling) and Mr. Jürgen Steinhauser (Marketing and Sales) stepped down from the Executive Board of STIHL AG as of April 30, 2012, and June 30, 2012, respectively. The Supervisory Board expresses its gratitude and recognition to the Executive Board, the Employee Council and all the employees of the STIHL Group for their commitment and successful work in the year Dr. Nikolas Stihl Chairman of the Supervisory Board

48 46 BALANCE SHEET STRUCTURE OF STIHL HOLDING AG & Co. KG (CONSOLIDATED GROUP) in millions of euros Non-current assets Inventories Other assets Assets 1, ,630 3,697 Equity & liabilities 2, ,697 Equity Provisions Other liabilities BALANCE SHEET AS OF DECEMBER 31, 2012 (Condensed Version) ASSETS CONSOLIDATED GROUP OF STIHL HOLDING AG & CO. KG ANDREAS STIHL AG & CO. KG in thousands of euros Notes Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2011 Non-current assets Intangible assets 16,708 14,238 8,164 5,246 Property, plant and equipment 876, , , ,730 Financial assets (1) 430, ,442 84,324 64,386 1,324,104 1,101, , ,362 Current assets Inventories 743, , , ,868 Receivables and other assets Trade receivables 371, ,472 51,076 51,965 Receivables from related companies 34,000 35, , ,085 Other assets 80,197 70,254 13,255 12, , , , ,169 Securities (2) 155, ,523 Cash on hand, cash at banks and checks 944, , , ,748 2,328,784 2,270, , ,785 Deferred expenses and accrued income 6,297 7,271 1,400 1,361 Deferred tax assets 37,422 31,733 3,330 1,912 Total 3,696,607 3,410, , ,420

49 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 47 BALANCE SHEET STRUCTURE OF Andreas stihl Ag & co. KG in millions of euros Non-current assets Inventories Other assets Assets Equity & liabilities Equity Provisions Other liabilities EQUITY AND LIABILITIES CONSOLIDATED GROUP OF STIHL HOLDING AG & CO. KG ANDREAS STIHL AG & CO. KG in thousands of euros Notes Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2011 Equity (3) 2,532,635 2,327, , ,000 Difference from capital consolidation 1, Provisions (4) Provisions for pensions and similar obligations 295, , , ,775 Provisions for taxes 13,330 21,603 1,766 9,396 Other provisions 158, ,253 41,686 36, , , , ,677 Liabilities Liabilities to banks 45,482 28,917 Loan from Eva Mayr-Stihl Foundation (5) 100, , , ,000 Participating capital (6) 25,723 24,497 25,723 24,497 Advance payments received Trade payables 131, ,723 27,862 33,086 Liabilities from bills accepted and drawn Liabilities to related companies 3 1 1,363 1,220 Liabilities to shareholders/partners 319, ,271 31,425 47,063 Other liabilities 67,381 63,945 24,069 22, , , , ,634 Deferred income and accrued expenses 1, ,792 2,031 Deferred tax liabilities 2,914 6, ,078 Total 3,696,607 3,410, , ,420

50 48 SUPPLEMENT TO THE FINANCIAL STATEMENTS CONSOLIDATED GROUP OF STIHL HOLDING AG & CO. KG Information required by Section 13 Subsection 3 in conjunction with Section 5 Subsection 5 Sentence 3 of the German Company Disclosure Act ( Gesetz über die Rechnungslegung von bestimmten Unternehmen und Konzernen ): ANDREAS STIHL AG & Co. KG Information required by Section 5 Subsection 5 Sentence 3 of the German Company Disclosure Act ( Gesetz über die Rechnungslegung von bestimmten Unternehmen und Konzernen ): 1. Revenue in thousands of euros 2,775, Income from subsidiaries in thousands of euros 1 3. Wages, salaries, social-security contributions, expenses for pensions and other employee benefits in thousands of euros 629, Number of employees as of December 31, , Revenue in thousands of euros 886, Income from subsidiaries in thousands of euros 3. Wages, salaries, social-security contributions, expenses for pensions and other employee benefits in thousands of euros 268, Number of employees as of December 31, ,964 Waiblingen, March 2013 Waiblingen, March 2013 STIHL Holding AG & Co. KG Die persönlich haftenden Gesellschafter (The general partners) Dipl.-Ing. Hans Peter Stihl STIHL AG ANDREAS STIHL AG & Co. KG Die persönlich haftenden Gesellschafter (The general partners) Dipl.-Ing. Hans Peter Stihl STIHL AG The complete financial statements of the consolidated group of STIHL Holding AG & Co. KG and ANDREAS STIHL AG & Co. KG are published in the electronic version of the German Federal Gazette (Bundesanzeiger).

51 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 49 NOTES NOTES TO THE BALANCE SHEET ACCOUNTING AND VALUATION METHODS Non-current assets are measured at cost of acquisition or production. Cost of production includes direct material, direct labor and an appropriate proportion of material and production overheads. Assets with a limited useful life are subject to systematic depreciation. Wherever deemed necessary, impairments have been recognized to reflect assets lower fair values. of the consolidated group of STIHL Holding AG & Co. KG and of ANDREAS STIHL AG & Co. KG Inventories are measured at cost of acquisition or production or at fair value if this is lower. General sales risks are reflected by range deductions. Receivables and other assets are measured at their nominal values. Allowances are made for recognizable individual risks and general default risk. Provisions for pensions are measured in accordance with the projected unit credit method on the basis of the Heubeck 2005G mortality tables. In the measurement of other provisions, all recognizable risks and contingent liabilities are taken into account. Liabilities are recognized at the amounts payable. ASSETS 1. Financial assets The financial assets presented in the consolidated financial statements comprise securities held as long-term investments and miscellaneous loans. 2. Securities Most of these are miscellaneous securities held as short-term investments. CONSOLIDATED GROUP The consolidated financial statements include STIHL Holding AG & Co. KG as well as all related companies (see list). Due to their minor importance, the consolidated financial statements do not include Carl Benz Center Objekt GmbH & Co. KG, Stuttgart, and Carl Benz Center Neckarpark GmbH, Stuttgart. The companies Guang Dong Zama Precision Industry Co., Ltd., Shenzhen, China; USA Zama, Inc., Franklin, Tennessee, USA, and STIHL Holding Verwaltungs-GmbH, Waiblingen, were consolidated for the first time in CONSOLIDATION OF CAPITAL Capital consolidation takes place in accordance with Section 301 Subsections 1 to 3 of the German Commercial Code (HGB). Differences arising from first-time consolidation before January 1, 2010 were offset against retained earnings. Any goodwill subsequently recognized is presented in a separate item of the balance sheet. OTHER CONSOLIDATION METHODS The Group s internal receivables, payables, revenue, expenses and profits are eliminated. Intercompany profits are eliminated pursuant to Section 304 Subsection 1 of the German Commercial Code (HGB). Deferred taxes have been recognized on intercompany profits as well as on debt consolidation affecting profit or loss. EQUITY AND LIABILITIES 3. Equity In both balance sheets, equity is presented as a single amount in accordance with Section 9 Subsection 3 of the German Company Disclosure Act (PublG). 4. Provisions Provisions for pensions cover current pension rights as well as earned future benefits. Other provisions relate to outstanding employee benefits, employee jubilees and other contingencies. 5. Loan from Eva Mayr-Stihl Stiftung The loan is at the disposal of ANDREAS STIHL AG & Co. KG. 6. Participating capital In the 2012 financial year, employees of ANDREAS STIHL AG & Co. KG made great use of the possibility to participate in the company s capital in the form of profit-participation rights. 7. Average number of employees of the STIHL Group Europe 6,231 America 4,040 Asia / Oceania / Africa 2,041 Total 12,312

52 50 COMPANIES OF STIHL HOLDING AG & CO. KG NAME OF THE COMPANY EQUITY INTEREST IN % NAME OF THE COMPANY EQUITY INTEREST IN % Consolidated companies Germany STIHL Holding AG & Co. KG, Waiblingen STIHL Aktiengesellschaft, Waiblingen ANDREAS STIHL AG & Co. KG, Waiblingen STIHL International GmbH, Waiblingen STIHL Vertriebszentrale AG & Co. KG, Dieburg ANDREAS STIHL Verwaltungs-GmbH, Waiblingen STIHL-Verwaltungsgesellschaft mbh, Waiblingen STIHL Kettenwerk Verwaltungs-GmbH, Waiblingen STIHL Beteiligungsgesellschaft GmbH & Co. KG, Waiblingen STIHL Kettenwerk GmbH & Co. KG, Waiblingen Zama Holding GmbH, Waiblingen STIHL Holding Verwaltungs-GmbH, Waiblingen Other countries STIHL Incorporated, Virginia Beach, Virginia, United States STIHL Ferramentas Motorizadas Ltda., São Leopoldo, Rio Grande do Sul, Brazil ANDREAS STIHL Power Tools (Qingdao) Co., Ltd., Qingdao, China VIKING GmbH, Langkampfen, Austria STIHL Ges.m.b.H., Vösendorf, Austria STIHL Vertriebs AG, Mönchaltorf, Switzerland ANDREAS STIHL Ltd., Camberley, Surrey, United Kingdom ANDREAS STIHL N.V., Puurs, Belgium ANDREAS STIHL SAS, Torcy, Marne-la-Vallée, France ANDREAS STIHL S.A., Torres de la Alameda, Spain ANDREAS STIHL S.A., Sintra, Portugal ANDREAS STIHL S.p.A., Cambiago, Italy ANDREAS STIHL S.A., Acharnes, Attika, Greece ANDREAS STIHL A / S, Sandefjord, Norway ANDREAS STIHL Norden AB, Stenkullen, Sweden ANDREAS STIHL Sp. z o.o., Tarnowo Podgórne, Poland ANDREAS STIHL spol. s r.o., Modrice, Czech Republic ANDREAS STIHL Kereskedelmi Kft., Biatorbágy-Budapark, Hungary ANDREAS STIHL Motounelte S.R.L., Otopeni, Romania Other countries (continued) TOV ANDREAS STIHL, Kiev, Ukraine TOV ANDREAS STIHL Zemelna Kompanija, Kiev, Ukraine ANDREAS STIHL EOOD, Sofia, Bulgaria OOO ANDREAS STIHL Marketing, St. Petersburg, Russia STIHL Limited, London, Ontario, Canada ANDREAS STIHL S.A. de C.V., Cuautlancingo, Puebla, Mexico ANDREAS STIHL (PTY.) Ltd., Pietermaritzburg, South Africa Kabushiki Kaisha STIHL, Kaminokawa-machi, Tochigi, Japan Taicang ANDREAS STIHL Powertools Co., Ltd., Taicang City, Jiangsu, China ANDREAS STIHL Ltd., Chai Wan, Hong Kong ANDREAS STIHL Pvt. Ltd., Kuruli, Tal-Khed, Pune District, India Zama Corporation Ltd., Tai Po, NT, Hong Kong Zama Japan Kabushiki Kaisha, Hachimantai-shi, Iwate-Ken, Japan Guang Dong Zama Precision Industry Co., Ltd., Shenzhen, China USA Zama, Inc., Franklin, Tennessee, United States STIHL PTY. Ltd., Knoxfield, Victoria, Australia STIHL Limited, Auckland, New Zealand STIHL Motoimplementos S.A., El Talar, Buenos Aires, Argentina Non-consolidated companies Carl Benz Center Objekt GmbH & Co. KG, Stuttgart, Germany 76.1 Carl Benz Center Neckarpark GmbH, Stuttgart, Germany 76.1

53 FOCUS ON STIHL Report of the Executive Board MANAGEMENT REPORt Report of the Supervisory Board FINANCIAL STATEMENTS 51 BOARDS OF THE COMPANIES MEMBERS OF THE SUPERVISORY BOARD OF STIHL AG Representing the shareholders Hans Peter Stihl, Dipl.-Ing. ¹, Remseck Honorary Chairman of the Supervisory Board (since July 1, 2012) Chairman of the Supervisory Board (until June 30, 2012) Dr. Nikolas Stihl ¹, Oberaudorf Chairman of the Supervisory Board (since July 1, 2012) Prof. Dr. Dr. h. c. Walther Zügel ¹, Stuttgart Additional Deputy Chairman of the Supervisory Board (until June 30, 2012) Franz Fehrenbach, Dipl.-Wirt.-Ing. ¹, Stuttgart Additional Deputy Chairman of the Supervisory Board (since July 1, 2012) Chairman of the Supervisory Board of Robert Bosch GmbH and Managing Partner of Robert Bosch Industrietreuhand KG Prof. Dr. h. c. Ludwig Georg Braun, Melsungen Chairman of the Supervisory Board of B. Braun Melsungen AG Horst H. Geidel, Dipl.-Kfm., Stuttgart Chairman of the Supervisory Board of Behr GmbH & Co. KG MEMBERS OF THE EXECUTIVE BOARD OF STIHL AG Dr. Bertram Kandziora Chairman of the Executive Board Production and Materials Karl Angler, Dipl.-Bw. (FH) Finance, Controlling, Information Systems and Service (since May 1, 2012) (Member of the Executive Board since April 1, 2012) Dr. Klaus Detlefsen Finance and Controlling (until April 30, 2012) Norbert Pick, Dipl.-Ing. (FH) Marketing and Sales (since July 1, 2012) Dr. Michael Prochaska Human Resources and Legal Affairs Jürgen Steinhauser, Dipl.-Wirt.-Ing. (FH) Marketing and Sales (until June 30, 2012) Wolfgang Zahn, Dipl.-Ing. Development Eva Mayr-Stihl, Remseck Dr. Rüdiger Stihl, Remseck Representing the employees Luigi Colosi ¹, Kernen Deputy Chairman of the Supervisory Board, Chairman of the General Employee Council of ANDREAS STIHL AG & Co. KG and Chairman of the Employee Council of the Waiblingen and Ludwigsburg plants of ANDREAS STIHL AG & Co. KG Matthias Fuchs, Ludwigsburg First authorized representative of the Waiblingen office of the IG Metall trade union (since March 1, 2012) Claudia Klenk ¹, Leutenbach Deputy Chairwoman of the General Works Council of ANDREAS STIHL AG & Co. KG, Deputy Chairwoman of the Works Council of the Waiblingen and Ludwigsburg plants Dieter Knauß, Waiblingen (Member of the Supervisory Board until July 11, 2012) Head of the Waiblingen office of the IG Metall trade union (until February 29, 2012) Peter Linsbauer, Dipl.-Ing. (FH), Herrenberg Senior Manager Power Tool Design, Cut-off Machines, ANDREAS STIHL AG & Co. KG Thomas Bamesberger, Dipl.-Kfm., Stuttgart Director Production and Logistics, ANDREAS STIHL AG & Co. KG Gerhard Wick, Geislingen an der Steige (Member of the Supervisory Board since July 31, 2012) Secretary of the Baden-Württemberg regional office of the IG Metall trade union MEMBERS OF THE ADVISORY BOARD OF STIHL HOLDING AG & CO. KG Hans Peter Stihl, Dipl.-Ing., Remseck Honorary Chairman of the Advisory Board (since July 1, 2012) Chairman of the Advisory Board (until June 30, 2012) Dr. Nikolas Stihl, Oberaudorf Chairman of the Advisory Board (since July 1, 2012) Eva Mayr-Stihl, Remseck Deputy Chairwoman of the Advisory Board Prof. Dr. h. c. Ludwig Georg Braun, Melsungen Franz Fehrenbach, Dipl.-Wirt.-Ing., Stuttgart (Member of the Advisory Board since July 1, 2012) Horst H. Geidel, Dipl.-Kfm., Stuttgart Prof. Dr. Michael Hoffmann-Becking, Düsseldorf Gerhild Schetter (née Stihl), Kernen Dr. Rüdiger Stihl, Remseck Prof. Dr. Dr. h. c. Walther Zügel, Stuttgart (Member of the Advisory Board until June 30, 2012) ¹ Also a member of the committee formed in accordance with Section 27 Subsection 3 of the German Codetermination Act (MitbestG)

54 52 CONTACT INFORMATION Published by STIHL Holding AG & Co. KG Badstrasse Waiblingen Germany Concept and design 3st kommunikation, Mainz Printing raff GmbH, Riederich Paper PhoeniXmotion XENON Papierfabrik Scheufelen, Lenningen Photography Claudia Kempf, Wuppertal [ Title, pages 5, 7, 8, 10-11, 18-19, 28-29, 34-35, 42-43, 45 ] Marc Müller [ page 4 ] Klinikum Stuttgart [ page 6 ] Astrid Eckert, Technical University of Munich [ page 7 below ] This Annual Report is a convenience translation of the original German version.

55 KEY FIGURES CONSOLIDATED GROUP OF STIHL HOLDING AG & CO. KG Revenue million euros 2, , ,363.0 Share of revenue outside Germany percent Wages, salaries, social security, pension contributions million euros Number of employees December 31 12,338 12,026 11,310 Capital expenditure million euros Total assets million euros 3, , ,052.3 Equity ratio percent ANDREAS STIHL AG & CO. KG Revenue million euros Share of revenue outside Germany percent Wages, salaries, social security, pension contributions million euros Number of employees December 31 3,964 3,960 3,874 Capital expenditure million euros Total assets million euros Equity ratio percent OWNERSHIP structure OF STIHL HOLDING AG & CO. KG Family line Family line Family line Family line Hans Peter Stihl Eva Mayr-Stihl Gerhild Schetter Dr. Rüdiger Stihl (née Stihl) 25 % 25 % 25 % 25 %

56 STIHL WORLDWIDE The STIHL Group develops, manufactures and distributes power tools for forestry, landscape maintenance and the construction industry. The products are sold exclusively by specialist dealers that also provide servicing. The STIHL sales organization consists of 32 STIHL-owned sales and marketing companies, more than 120 import ers and approximately 40,000 specialist dealers in more than 160 countries. STIHL has been the world s best-selling chain-saw brand since Globally positioned on five continents and represented in more than 160 COUNTRIES KEY FIGURES THE STIHL GROUP STIHL HOLDING AG & CO. KG (THE GENERAL PARTNERS: HANS PETER STIHL AND STIHL AG) STIHL AG ANDREAS STIHL AG & Co. KG STIHL Vertriebszentrale STIHL Kettenwerk Founding Company Waiblingen AG & Co. KG Dieburg GmbH & Co. KG Waiblingen Wil branch STIHL International GmbH Waiblingen Subsidiaries of STIHL International GmbH EUROPE Austria ¹ Belgium Bulgaria Czech Republic Denmark France Greece Hungary Italy Netherlands Norway Poland Portugal Romania Russia Spain Sweden Switzerland ¹ Ukraine United Kingdom THE AMERICAS Argentina Brazil ¹ Canada Mexico United States of America ¹ ASIA China ¹ Hong Kong India Japan OCEANIA Australia New Zealand AFRICA South Africa ZAMA subsidiaries of STIHL International GmbH ASIA Hong Kong Japan China THE AMERICAS United States of America ¹ STIHL manufacturing and sales companies

57 2012 THE YEAR IN REVIEW MARCH The jubilee is celebrated of 50 years of cooperation with the Israeli sales partner Salomon Venezia & Sons Ltd. JANUARY Dr. Michael Prochaska becomes the new Executive Board Member for Human Resources and Legal Affairs. MARCH Ground is broken for the new logistics building at the STIHL chain plant in Wil (Switzerland) with an investment volume of 18 million Swiss francs. JANUARY The decision is made in favor of a new warehouse for production logistics for more than 40 million euros at the site in Waiblingen-Neustadt. JULY The Chamber of Industry and Commerce of the Stuttgart region awards STIHL the Education Innovation Prize. JULY Norbert Pick becomes the new Executive Board Member for Marketing and Sales. OCTOBER Dr. Nikolas Stihl is awarded the Tyrol Eagle Medal in gold. OCTOBER VIKING opens its plant extension with an investment volume of 13.7 million euros, this is the biggest single investment in the company history of VIKING.

58 MARCH The STIHL sales company in Australia celebrates its 40-year jubilee. MARCH More than 100,000 visitors come to the nationwide STIHL and VIKING Test Day. MaY Karl Angler becomes the new Executive Board Member for Finance, Controlling, Information Systems and Service. JULY Dr. Nikolas Stihl takes over as Chairman of the Advisory Board and the Supervisory Board of STIHL Holding AG & Co. KG; Hans Peter Stihl becomes Honorary Chairman. SEPTEMBER The new STIHL GS 461 concrete cutter with a diamond cut-off chain is presented. OCTOBER The City of Waiblingen awards honorary citizenship to Eva Mayr-Stihl. OCTOBER STIHL USA reaches the mark of 50,000,000 engine units. November Hans Peter Stihl is awarded the Diesel Medal ( Inventors Oscar ) in the category Most Successful Innovation Performance. 2013

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60 STIHL Holding AG & Co. KG Badstrasse Waiblingen Germany