STRYKER

2012 Annual Report on Form 10-K

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Components of Net Periodic Pension Cost 2012 Net periodic benefit cost: Service cost Interest cost Expected return on plan assets Amortization of prior service cost and transition amount Recognized actuarial loss Net periodic benefit cost Other changes in plan assets and benefit obligations, recognized in other comprehensive income: Net actuarial gain (loss) Recognized net actuarial loss Prior service cost and transition amount Total recognized in other comprehensive income Total recognized in net periodic benefit cost and other comprehensive income $ 2011 (21) (13) 9 1 (5) (29) (87) 5 ��� (82) (111) $ Assumptions Weighted-average rates used in the determination of net periodic benefit cost: Discount rate Expected return on plan assets Rate of compensation increase Weighted-average discount rate used in the determination of the projected benefit obligations $ 2010 (20) (13) 10 ��� (2) (25) $ (10) 2 12 4 (21) $ 4.2% 4.2% 3.0% 2.9% (16) (12) 9 ��� (1) (20) (37) 1 1 (35) (55) $ 4.2% 4.6% 1.5% 4.2% 4.9% 5.2% 2.8% 4.2% Discount rate The discount rates were selected using a hypothetical portfolio of high quality bonds at December 31 that would provide the necessary cash flows to match our projected benefit payments. Expected return on plan assets The expected return on plan assets is determined by applying the target allocation in each asset category of plan investments to the anticipated return for each asset category based on historical and projected returns. Investment strategy The investment strategy for our defined benefit pension plans is to meet the liabilities of the plans as they fall due and to maximize the return on invested assets within appropriate risk tolerances. The weighted-average target and actual allocation of plan assets by asset category is as follows: Target 2012 Equity securities Debt securities Other December 31 2012 31.8% 50.0 18.2 100.0% 2011 31.2% 47.9 20.9 100.0% 39.0% 48.0 13.0 100.0% Valuation of Our Pension Plan Assets by Pricing Categories Total 2012 Cash and cash equivalents United States companies equity securities International companies equity securities Corporate debt securities Other Total $ $ 5 77 23 93 56 254 $ (Level 1) 2011 5 71 10 102 22 210 2012 $ $ 5 $ 77 23 93 22 220 $ (Level 2) 2011 5 71 10 100 5 191 2012 $ $ (Level 3) 2011 ��� $ ��� ��� ��� 11 11 $ 2012 ��� ��� ��� 2 ��� 2 $ $ 2011 ��� $ ��� ��� ��� 23 23 $ ��� ��� ��� ��� 17 17 Our Level 3 pension plan assets (See Note 2 for an explanation of our fair value hierarchy) consist primarily of guaranteed investment contracts with insurance companies. The insurance contracts guarantee us principal repayment and a fixed rate of return. Our valuation of Level 3 assets is based on third-party actuarial valuations that are an estimation of the surrender value of the guaranteed investment contract between us and the insurance company. The surrender value equals the actuarial value of the notional investments underlying the guaranteed investment contract, using the actuarial assumptions as stated in the guaranteed investment contract. 39 Dollar amounts in millions except per share amounts or as otherwise specified

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