Einhell Germany : Business report for 2022,

2022

I COMBINED MANAGEMENT REPORT OF THE EINHELL GROUP

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2.2 Legal structure and management of the Group

1. Legal structure and changes to Group structure

Einhell Germany AG, Landau an der Isar, holds direct and indirect shareholdings in a total of 46 subsidiaries, which each form separate legal enti- ties. It holds 100% of the shares in subsidiaries with a centralised or special function such as ser- vices, product sourcing/product processing, pro- curement/purchasing and quality control/quality assurance. Moreover, Einhell Germany AG also generally holds 100% in the global distribution companies.

In all consolidated subsidiaries where Einhell Ger- many AG does not hold all the shares, Einhell Ger- many AG has a direct or indirect majority share- holding.

With regard to the responsibilities of the Einhell Group companies, all activities that can be centralised are carried out at just one location. Product processing, the search for factories, their auditing and certification, procurement, services, control- ling, financing, IT and other administrative activi- ties, for example, are carried out centrally by the Group companies in Germany and China. This organisational structure within the Group allows all distribution companies to focus on their core functions. Einhell is also in a position to press ahead with international expansion as each distribution company has a similar structure and the business model can be efficiently rolled out in additional countries. As organic growth offers great potential, the organisation and efficient development of the Einhell Group's business model are among the management's most important re- sponsibilities.

The Group structure changed as follows during financial year 2022:

In the 2022 financial year, the Einhell Group founded Einhell Canada Holding Ltd. in Vancou- ver, Canada and acquired Outillages King Canada Inc. in Dorval, Canada. The Group holds 100% of the shares in Einhell Canada Holding Ltd. and 66.7% in Outillages King Canada Inc. In November 2022, the Group acquired another company in Tampere, Finland. Einhell Germany AG holds

100% of the shares in Einhell Finland Oy, and Ein- hell Finland Oy holds 100% of the shares in Su- omen Finland Oy, a company that has no business operations of its own.

b) Management and control

Responsibility for the business activities of the Einhell Group lies with the Board of Directors of Einhell Germany AG. This comprised four members at the time of preparation of the annual financial statements, consolidated financial statements and management report. The Board of Directors manages, organises and monitors strategies and operational business processes for the whole Group. Responsibilities within the Board of Directors are allocated based on the departments assigned to the respective member.

The Chairman of the Board of Directors is responsible for sales, procurement, marketing, product management and corporate strategy.

The Chief Financial Officer is responsible for finance and accounting, tax, legal, internal audit, controlling, investor relations, human resources and maintenance.

The Chief Technical Officer is responsible for tech- nology, product development, quality control, supply chain management and production.

The Chief IT and Digitization Officer is responsible for IT, digitalisation and services.

The Board of Directors supervises the specialists and managers in the relevant departments and relies upon the corresponding hierarchy of divisional and departmental management at Einhell Germany AG, and on Managing Directors and their specialists and managers in the subsidiaries. The Board of Directors seeks to ensure flat hierarchies and makes sure to maintain direct contact with employees and specialist staff in all divisions. Regular meetings of the Board of Directors and of individual departments, as well as divisional and cross-departmental meetings when required, ensure efficient communication and information flow to all responsible parties.

The Supervisory Board of Einhell Germany AG, which consists of three members, monitors and advises the Board of Directors in accordance with

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legal requirements and the provisions of the German Corporate Governance Code.

At regular meetings of the Supervisory Board, the Board of Directors provides information to the Supervisory Board about the Group's current situa- tion, business transactions and corporate strategy.

The Supervisory Board also maintains ongoing lines of communication with the Board of Directors outside of regular meetings and ensures an adequate level of communication and informational flows between the Board of Directors and the Supervisory Board.

The composition of the Supervisory Board did not change in financial year 2022:

1. Principles of the remuneration system for the Board of Directors

Members of the Board of Directors receive fixed and performance-based variable remuneration with short-term and long-term components. The individual performance-based components depend on factors such as consolidated net profit, segment earnings in the previous financial year, the development of the Group's asset structure and personal targets. On 22 April 2021, the Supervisory Board adopted a new remuneration system for the Board of Directors that was approved by the Annual General Meeting on 18 June 2021. The evaluation system ensures transparent and sustainable accounting practices based on the Group's strategic priorities. A pre-defined cap limits the impact of extraordinary one-off effects on the variable remuneration component. Members of the Board of Directors privately hold shares in Einhell Germany AG. There are no share option programmes or similar schemes. An agreement is in place with one of the members of the Board of Directors stipulating that a proportion of the variable remuneration component must be used to purchase Einhell shares. If the employment contract is not extended after twelve years, members

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of the Board of Directors receive one year's salary plus the average management bonus paid over the last three years. If the employment contract is terminated before the twelve-year threshold, the proportional remuneration is calculated on a pro rata temporis basis. Commitments were made to pay a pension to the members of the Board of Directors in the form of annuity payments that can be paid out as soon as the respective Board member turns 60 or 62, respectively and the amount of which is based on the Board member's years of service. More information on the Board remuneration is provided in the notes to the annual financial statements and the remuneration report that is available at www.einhell.com.

1. Personnel changes to the Board of Direc- tors

There were no personnel changes to the Board of Directors in financial year 2022. The distribution of responsibilities among the Board members did not change significantly.

2.3 Corporate strategy and management

The Board of Directors embarked on a structured strategy development process together with the heads of divisions and departments to define and communicate the objectives and values of the Ein- hell Group.

The Einhell Group's primary objective is to generate sustainable and profitable revenue and profit growth. Profitability takes priority over pure growth targets.

a) Strategy

One of the Group's main strategic priorities was and is the further development of the EINHELL brand. The cooperation entered into with the Mercedes-AMG PETRONAS F1 team in 2022 is another important milestone in this regard. Two strong international brands that represent the best of technological finesse are united in this partnership, making it the next strategic step towards the goal of becoming the global market and technology leader in battery-powered garden and DIY tools.3 With our previous partners, we already conducted TV campaigns in 13 different countries in 2022, and we are planning to roll out our TV campaigns to a total of 18 countries in 2023. This

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will further enhance the awareness and positive perception of the Einhell brand at an international level. The TV campaigns will be backed by marketing measures, such as the modernisation and re- launch of the Einhell packaging.

Our aim in the online business is to attract customers by offering the best possible content and achieving high visibility. Our websites therefore offer useful customer services, such as the Einhell battery advisor, the spare parts shop, chat, FAQ, store locator, etc.

Another focal point of our corporate strategy over the next few years is product policy. Here, our Power X-Change platform will remain on the top of our list. We intend to expand the revenue share of the Power X-Change platform to more than 51% in financial year 2023. At the end of 2022, the Power X-Change family comprised approx. 250 products. This is to be expanded to approx. 450 products by 2027. We will continue to use our battery and charger expertise to further develop our technology in this field and to constantly design new and innovative solutions for end consumers.

Digital organisation will also remain a major task for the Einhell Group. The Chinese subsidiaries started to implement a new ERP software (SAP) in the past financial year. In the next few years, SAP will also be rolled out to other Asian companies, followed by further companies in other countries. In addition, we are working intensively on a large array of further topics that go hand in hand with the increasing digitalisation.

We are also paying a lot of attention to sustainability issues. In the course of our strategy pro- cess, we will describe the path we intend to take in more detail and will define our sustainability strategy as well as the associated objectives. At present, our CSR report that forms part of our non-financial reporting already gives a good overview of our responsible and conscientious approach to numerous sustainability issues.4

We plan to further develop the international distribution network in the upcoming years to enable us to meet our medium-term revenue targets. In order to reach this goal, we need to further exploit the potential in our existing markets while

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gaining a foothold in new DIY markets where the Einhell Group is not yet represented. The newly acquired companies in Canada and Finland are to be further integrated into the existing organisation in 2023. We also aim to integrate additional distribution subsidiaries into our existing organisation over the next few years. And the US business is also still on the agenda in 2023. We intend to finalise the identification of potential candidates in the USA in the current financial year and to then acquire a suitable company in this market.

Another corporate goal is the establishment of our own battery production. The first production tests for batteries are to be launched in Asia in the current financial year. From 2024 onwards, battery production is to be expanded to Eastern Europe.

We will also intensify our sourcing activities in terms of regions and product ranges, and acquire an established sourcing company in Vietnam. At first, this company will support the accessories procurement and sourcing activities of our subsidiary kwb Germany GmbH. In a second step, we will also implement sourcing activities for power tools and garden tools here that are independent of the previous procurement markets.

b) Management system

Management of the business activities of the Ein- hell Group is mainly based on the financial performance indicators revenue and earnings before tax. These two key figures are the most significant performance indicators of the Einhell Group.

In addition to the financial performance indica- tors, Einhell Germany AG and the Group companies use other key figures such as gross profit margin and the main drivers of working capital, inventories and trade receivables for local management purposes. However, these key figures are subject to strong country-specific variations and are therefore interpreted within the context of the individual company. Inventories are analysed on an ongoing basis and monitored on the basis of stock turnover and inventory range with regard to possible impairment losses. Moreover, a sanity check is carried out on the order process for new goods, involving checking and managing product

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