DEAR SHAREHOLDERS

Results

With close customer relationships, a deeply rooted culture of ethics, and a bias for action, we continued our legacy of delivering solid financial results. Despite the challenging marketplace, we grew revenue to $8.7 billion in 2012, an increase of four percent, and our adjusted diluted net earnings per share increased nine percent. Our robust balance sheet was further strengthened by 2012 operating cash flow of $1.7 billion, demonstrating our consistent ability to generate strong cash flow.

Most of our U.S. businesses accelerated in 2012, with particular strength in reconstructive, instruments and sustainability solutions. Internationally, we achieved strong double-digit growth in emerging markets and are pleased with our neurovascular business, which also had double-digit growth.

Within our three segments – Reconstructive, MedSurg and Neurotechnology & Spine – we have a very diversified sales footprint with no single business in any segment representing more than 16 percent of total Stryker revenue. This diversity provides good balance for steady growth and enables us to pursue market opportunities in many promising areas.

Europe and capital equipment markets were challenging in 2012, and we had our own operational issues in Europe, which are being addressed by a significant transformation initiative. We expect this program to return our European business to market growth rates towards the end of 2013. In capital equipment, we are focused on driving innovation to capture market share, which will further benefit us as market conditions improve.

As a strong and diversified medical technology company, we hold leading positions in the majority of our markets. Our efforts to drive innovation, globalization and cost optimization will ensure that we are well positioned to continue this leadership in the years ahead, and our balanced approach to capital allocation will fuel shareholder returns.

Innovation

Our relentless focus on innovation remains a cornerstone of our success, driven by our enduring collaboration with hospitals and healthcare providers, which ensures that we fully understand their practice environment, treatment protocols and unmet needs. This enables us to continue to consistently develop and market a range of life-enhancing and life-saving products that drive improved outcomes as well as cost savings and efficiencies.

Very few companies can match our product breadth and depth, which allows us to bring value to three key hospital service lines: orthopaedics, neurosciences and general surgery. We are also building upon our traditional product development strength by expanding our definition of innovation to include procedures and marketing techniques that improve the patient and customer experience. One example is our successful direct-to-consumer campaign for our GetAroundKnee System, which has helped to educate consumers about the advantages of our technology and generate above-market growth.

GLOBALIZATION

Globalization remains a significant opportunity, as U.S. sales represent about 65 percent of our total revenue. This percentage has remained fairly consistent over the last 10 years, and currently, only six percent of total company sales are in emerging markets. We are focused on accelerating international growth by:

• Leveraging our excellent existing product portfolio in the markets we serve
• Capturing market share in developed markets
• Building scale in emerging markets such as China and India, where Stryker has historically grown
          well over 20 percent per year

We are pleased with the benefits of our acquisitions, including our neurovascular business, which performed well globally in 2012, successfully integrated Concentric Medical and completed the acquisition of Surpass Medical. We are now positioned to be the Complete Stroke Care leader in a growing and dynamic market.

We are also poised for improved growth in emerging markets with our recently announced acquisition of Trauson Holdings, a leading player in the trauma and spine value segments in China. Trauson will not only broaden our presence in China, but provide a platform for serving the value segment across other emerging market countries.

COST OPTIMIZATION

Meanwhile, our global quality and operations organization continues to drive improvements in our cost structure and asset utilization. We are in year one of an initiative to achieve $500 million in cumulative cost savings over five years by optimizing our network and supply chain.

This sweeping initiative started with an organizational change that centralized functions once directly managed by our divisions. This has progressed very well, and we are on track to meet our savings goals, which include an annual three to five percent reduction in our cost of goods sold. We are also expecting a working capital improvement of over $250 million, including a roughly 30-day improvement in our days of inventory on hand. In addition, we began implementing shared services initiatives to drive improved earnings leverage.

CAPITAL ALLOCATION

We are committed to a balanced capital allocation approach with acquisitions, dividends and share repurchases – in that order of priority. Acquisitions are first in line because our growth strategy continues to identify promising acquisition opportunities to improve shareholder value.

In 2012 we focused on integrating the companies we acquired in the previous two years, and continued to pursue many other acquisition opportunities. We will continue to follow a disciplined approach to acquisitions, with a focus on our core and adjacent markets.

We have also been consistently increasing our dividend. With the announced 25 percent increase for 2013, our dividends paid per share will have increased at a compound annual growth rate of 38 percent since 2006.

Finally, following a relatively lighter year of share repurchases in 2012, we have significant flexibility going forward with a repurchase authorization from our Board of Directors of $1 billion.

LOOKING AHEAD

In 2013 we expect sales growth of 3.0 to 5.5 percent, excluding acquisitions and foreign exchange, and an adjusted diluted net earnings per share increase of between 8 and 12 percent, excluding the new Medical Device Excise Tax (between four and eight percent, including the tax). In short, we expect another year of solid financial performance.

We are well positioned to continue to:

• Strengthen our presence and leadership in our markets around the world
• Grow through innovation, globalization and acquisitions
• Leverage our breadth and depth
• Deploy balanced capital allocation

These are exciting times for Stryker and the medical technology industry. It is an honor to be the President and CEO of this great Company, and I offer my sincerest thanks and appreciation to our Board of Directors, our leadership team and all of our employees around the world for their support, hard work and commitment. I am proud of their extraordinary efforts to keep our Company growing as we face the future with optimism.