Designing for Life ANNUAL REPORT _Nobel_AR2012_Umschlag_oSticker.indd :33

Transcription

1 Designing for Life ANNUAL REPORT _Nobel_AR2012_Umschlag_oSticker.indd :33

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3 Contents. Annual review 02 Nobel Biocare at aglance 02 Our strategy 04 Letter from the Chairman of the Board 12 Letter from the CEO 16 Key figures 20 Sustainability 21 Corporate Governance 27 Corporate Governance report 28 Board of Directors 35 Executive Committee 51 Remuneration report 53 Share information 61 Financial reporting 66 Key figures 67 Financial review 68 Risk management &ICS 73 Consolidated financial statements 78 Parent company accounts 126

4 2 Nobel Biocare Annual Report 2012 Nobel Biocare at aglance Nobel Biocare at a glance. Nobel Biocare is afocused and specialized leader in implant-based dental restorations including implant systems, high-precision individualized prosthetics, CAD/CAM systems, diagnostics, treatment planning and guided surgery. We support customers throughout their professional and practice development. Nobel Biocare is headquartered in Zurich, Switzerland, and listed at the SIX Swiss Exchange. Our brand The Nobel Biocare brand builds on a heritage going back to Alfred Nobel s legacy. It represents a pioneering spirit, and is synonymous with scientific leadership and innovation. The dental market Today, millions of people suffer from missing teeth. The penetration of implant-based tooth restorations is still very low, and such treatments offer sustainable growth potential. Furthermore, global market trends, such as changing demographics and patient demands, present attractive opportunities. Our heritage We draw on the industry s longest heritage 40 years of original scientific research and innovation in restorative dentistry, starting with P.-I. Brånemark s discovery of osseointegration. We produced the first dental implant and were the first to industrialize the commercial manufacture of dental implants and CAD/CAM-based prosthetics. Since then, we have introduced numerous advanced solutions to the market, many of which have become industry standards. Our customers We serve dental healthcare professionals around the world, including oral surgeons, general practitioners, specialists, and laboratories. Our products, solutions and services enable them to treat and educate patients with any type of tooth loss. Our commitment to our customers is underpinned by a unique range of training, education and support programs to help them grow their business. Innovation As the pioneer in our industry, we have along tradition of innovation and clinical excellence. We provide a leading portfolio of products and solutions to help our customers treat their patients needs in the best possible way. Our wide range of top-quality products can restore missing or damaged teeth from crown to root. Organizational excellence Nobel Biocare has the widest global spread in the industry. In manufacturing, we maintain two innovation centers, three implant and CAD/CAM prosthetics manufacturing sites, and two logistic distribution centers. We have sales, marketing and customer service centers in 34 markets. We employ more than dedicated and skilled people from diverse professional and ethnic backgrounds across the globe. In many markets established and emerging we hold leading positions.

5 Nobel Biocare Annual Report 2012 Nobel Biocare at a glance 3 Dental implant systems Extensive assortment of dental implants for all indications, bone types and surgical protocols, to fulfill all surgical needs and selected treatment concepts. NobelProcera individualized solutions NobelProcera provides a variety of individualized CAD/CAM dental prosthetics for every indication from a single tooth to edentulous jaws, on natural teeth and implants. Scientific evidence Nobel Biocare products and solutions are well-documented. To date, there are more than publications covering our products and solutions. Machined implants have been followed in publications for more than 25 years and TiUnite implants for up to 9 years. Restorations for the edentulous For edentulous patients, we offer a broad range of removable and fixed solutions, supported by implants, for any kind of indication and financial situation of the patient. Abutments A full range of individualized CAD/ CAM abutments and a comprehensive portfolio of prefabricated temporary and final abutments. Digital diagnostics, treatment planning and guided surgery NobelClinician Software is for enhanced diagnostics and treatment planning. NobelGuide is a complete treatment concept for diagnostics, prosthetic-driven treatment planning and guided implant surgery.

6 4 Nobel Biocare Annual Report 2012 Our strategy Our strategy: Designing for Life. The team of Nobel Biocare was mandated by the Board of Directors to conceive and execute a strategy capable of fi rst performing again in line with peers and then growing revenue ahead of the market, sustainably and with continuing effi ciency for improved profitability. In short, we needed to rebuild market share, after years of market share losses and poor fi nancial performance. In 2012, the fi rst year of execution, we have held market share and competed broadly in line with our peers. We are off to a good start We began this strategic rebuilding in fall of 2011 after a deep analysis of patients, customers, the market, our history, the facts of the industry, our competitive advantages and gaps and a thorough discussion with our Board of Directors and customers. We assembled the worldwide leadership of Nobel Biocare for a special meeting in Zurich to build understanding and begin the work and implementation is yielding the fi rst fruits of our efforts. We are clearly aware we have much more work to do. We are essentially rebuilding Nobel Biocare from its foundation. The competitive landscape is intense, changing continually and the customer demands are complex. There are no quick fixes. We are rebuilding market share patient by patient, customer by customer, country by country and day by day. Our strategy is titled Designing for Life to reflect our mission of improving the quality of life of each patient treated and to provide our innovation program with the ambition to design products of such a superior quality they are capable of lasting for the lifetime of the patient. These are the two core values which made Nobel Biocare the pioneer, innovator and leader of the industry. They are also the values which again underline the rebuilding of Nobel Biocare. Within Nobel Biocare, we have given our strategy a subtitle Brilliant at the Basics. This name has been chosen because it alerts our Nobel Biocare team of the need to execute basic customer activities in the area of innovation, customer partnering and customer training and education with excellence and determination. Only in this manner will we rebuild customer trust and get them to treat more patients with our products and solutions. In short, our strategy is not words, concepts or visions, but actions our customers and their patients experience. Our loss of market share since 2007 has been serious, and now is not the time for an expansive or visionary strategy. We must again execute brilliantly at the basics, meaning that we provide our customers tangible improvements today. Nobel Biocare s strategy is grounded in the facts of the market, permitting us to make informed choices we act on and execute brilliantly. The market facts Less than 1% of missing teeth are treated with implant restorations and less than 0.1% of edentulous jaws are treated with implants. The potential for growth is obvious and enormous. The number of implants placed in patients since 2003 has about tripled, to an estimated 12 million units per year. Again it is obvious that the dental profession is only scratching the surface of this treatment option, already now considered the golden standard of patient care. The number of implant manufacturers has also tripled since 2003 to about 200, with most new competitors entering in the overcrowded discount segment of the market. The number of clinicians placing implants has more than doubled to over worldwide since 2003, representing about 10% of all licensed dentists worldwide. Computer-Aided Design linked with Computer-Aided Manufacturing (CAD/CAM) has experienced dramatic growth and changes not only in the number of suppliers, estimated at over 100, but in the location of the production, which has moved into the dental practice or laboratory primarily for tooth-borne cemented ceramic components. We estimate there are about chairside and in-lab milling units currently installed. Planning software is now also widely available, but less than 10% of implants are placed using this tool. Of the treatment modalities, an estimated 80% of all implants placed are single-tooth restorations, and the vast majority are placed in the posterior region. 12% of placements are multitooth restorations, primarily 3-unit bridges, and only 4% of all implants placed are involved in full-arch restoration, treating the edentulous patient. While still a small percentage of implants placed are in full-arch edentulous patients, this is the fastest-growing treatment modality and one where Nobel

7 Nobel Biocare Annual Report 2012 Our strategy 5 Biocare is a strong leader and will increasingly focus upon. Already today, approximately 15% of Nobel Biocare implant sales are part of an edentulous patient treatment, and it is growing faster than the market. We estimate we helped treat edentulous patients in 2012, a tiny fraction of the estimated 200 million edentulous patients worldwide. The market dynamics Change in implant dentistry has continued at a rapid pace in areas of materials and software technology, patient behavior, surgical and restorative protocols and the competitive landscape. Yet, the number of implants placed in 2012 remains virtually unchanged versus The enormous market potential remains locked for the moment. Given this potential, it is therefore astonishing to hear some of our competitors and their customers argue that the major inventions in implant dentistry such as implant designs or that the body adopts titanium oxide as if it were its own substance, i.e. osseointegration, are behind us, meaning that future innovations will only be refinements of existing products. While astonished, we are actually pleased to hear this because for these competitors, price of products will ultimately become their only selling point. At Nobel Biocare, we believe absolutely the opposite is happening and that the pace of innovation in many areas including how we partner with customers and what is important for customers to choose their implant system is accelerating. We believe the future and sustainable success in this industry will only go to the innovators who understand not only the customer needs, but ultimately the patient s needs and satisfaction. Innovation is again at the heart of our strategy. When we review the patient s journey and the clinical workfl ow required for a successful treatment, starting with the initial patient consultation, diagnosis, treatment planning, treatment modality, individualized CAD/CAM restorative components, interdisciplinary treatment cooperation, patient education, handling and follow up, we are still at the very early stages of this discipline and in the development of our industry.there are more opportunities to innovate and improve the treatment workflow for a successful outcome for every patient treated than we could ever have imagined.10 years ago, the standard treatment modality for an edentulous patient would have included bone augmentation and would have required months from consultation to a fi nal prosthetic restoration.today, with Nobel Biocare s All-on-4 TM treatment modality, the complete procedure time can be accomplished within 4 8 weeks and with higher success rates and patient satisfaction. As innovations emerge, there will obviously be many changes within the industry. But, there will remain one constant: Ultimately, all efforts must lead to an improved quality of life for the benefit of patients. It is this constant that our strategy is founded on. It defines our mission Designing for Life. It shapes our innovation program, our commercial partnership activities, and our learning, training and education curriculum. It is the purpose of Nobel Biocare, why we were created and why we exist as a publicly traded corporation. Improving a patient s quality of life is the very best valuecreating idea for shareholders. When a patient recognizes the benefits of implant-based treatments for quality of life, they talk about it to their friends, their family and anyone who will listen. And, the more people who need treatment and hear about the benefits, the more they will look for information on it. This is still a word of mouth business. This is especially the case if the patient was edentulous, wearing dentures or soon to lose all their teeth. Their reaction to the treatment is amazing. These patients have their lives transformed and are enormously grateful to their clinician for this treatment. We welcome shareholders to view the patient stories on our Internet site to better understand what happens to these patients: Our mission: Designing for Life We have called our mission Designing for Life because we are passionate about improving the quality of life of each and every patient, helping them eat foods normally again, smile with pride and regain self-confidence and self-esteem. We are designing and rebuilding Nobel Biocare in all areas with one clear purpose: to help our customers treat more patients better with our superior products and solutions. Our mission is to provide customers with the tools, components and solutions they need to perform superior treatments to the highest standards for superior patient satisfaction. It is that simple: A satisfied patient leads to a satisfied customer and a better business partnership with Nobel Biocare. The objective: rebuild market share The primary objective of our strategy is to rebuild market share sustainably and profitably to create shareholder value. Our market share in value terms of implants sold has declined significantly from 2007 to The good news is we have broadly held overall market share in 2012 globally when accounting for geography and product mix, and even increased market share in certain core areas. We have also increased the number of Nobel Biocare implants in unit terms. The global market was essentially flat, at best, in 2012 with

8 6 Nobel Biocare Annual Report 2012 Our strategy Edentulous Fixed removable Fixed 12 million implants placed. We have set the goal in our strategy of outgrowing the market and regaining market share of about 1 percentage point per annum starting in The business focus: implant-based oral rehabilitation The scope of the business is again tightly defined. Nobel Biocare is focused exclusively on implant-based oral rehabilitations. All our efforts are to help customers treat more patients better with our superior products and solutions. Some competitors are creating new business units, and we historically understood our CAD/CAM business as aseparate entity accessing more customers, especially the general practitioner. Today, all our product lines from digital planning with Nobel- Clinician, implants such as NobelSpeedy and NobelActive to CAD/CAM restorative components from NobelProcera are tightly integrated to serve acommon customer for amore effective and efficient implant treatment of the patient. All-on-4 Zygoma Customer priority We analyzed our market share decline, and the greatest losses were among existing and large customers targeted by premium competitors. We were no longer adding sufficient and unique value to them, their patients or their practice development.we had unfortunately slipped into the price promotion discussion and became less relevant for many of these once fiercely loyal customers. We did not lose business materially to discount/volume competitors. Our priority in 2012 was to rebuild our relationship and add value to our existing customers again. For 2013 and beyond and in addition to rebuilding our existing customer relationships, we will seek to convert competitive customers, especially those who are interested in treating the edentulous patient more effectively and with greater frequency. Here, our superior solutions are very convincing, and our conversion success rate is high. Dental Laboratories are a specific and, for Nobel Biocare, very important customer segment. New programs have been initiated to work closely with these customers in order to further support and strengthen the business relationship. Resources, including training of the sales force, have been earmarked to increase Nobel Biocare s ability tobecome the partner of choice for our Dental Laboratory customers. Designing for business performance Our strategy consists of four value pillars: three revenue growth drivers, and a fourth pillar focusing on increasing and accelerating operating efficiency. Our strategy is not difficult to explain, but it does take great determination, persistence, attention to details and constancy of purpose to implement.

9 Nobel Biocare Annual Report 2012 Our strategy 7 The growth drivers 1) Innovation Designing for Life Patients want treatments that are safe, painless and affordable, with short healing times. They also want restorations that look, function and feel like real, healthy teeth that last their lifetime. Our aspiration is to design and produce products and offer solutions that are of such ahigh and superior quality they can in fact last for the lifetime of the patient. Our components are still functioning 40 years after placement in anumber of the earliest patients treated by P. -I. Brånemark. Patients must be satisfied with implant-based treatments over many years for us to succeed. Our wide range of products and solutions are all designed to help customers treat more patients better: Our portfolio is superior in many respects, and there is virtually no patient we cannot help our customers to treat, from a single-tooth posterior restoration to the most complex total oral rehabilitations. We have competitive advantage in full-jaw graftless restorations, anterior esthetic restorations, and in treatment productivity. To extend our superiority, we apply three principles before we initiate any innovation project: Patient-centered: It needs to provide aclear benefit for patients, to make treatments better Clinically relevant: It needs to be clinically relevant, to address the treatment needs of patients, making the treatment workflow more efficient Evidence-based: It needs to be safe, reliable and effective based on clear evidence, gathered through clinical testing and scientific documentation. Treatment workflow The integration of the digital workflow is the key to achieving our mission. We develop solutions that support the core steps of the entire treatment workflow from the initial consultation to post-treatment care. We also work constantly to improve the efficiency of the entire treatment workflow and to make the treatment team more effective and efficient. Creating an efficient treatment workflow We look at the treatment workflow in its entirety always finding ways to improve certain steps to make itmore efficient and effective. Diagnostics and treatment planning Our diagnostics and treatment planning software allows customers to make precise diagnostics and treatment plans, so treatments are safer, predictable and more efficient. Surgery We provide the broadest range of superior implant systems for all indications. Thoughtfully designed, carefully manufactured and thoroughly tested, they are underpinned by the most clinical evidence in the industry. Prosthetic restoration We provide customers acomprehensive range of prosthetic solutions for all indications, for longlasting, functional and natural-looking results. Post-treatment care We offer various services to both customers and their patients to help them care for their restorations.

10 8 Nobel Biocare Annual Report 2012 Our strategy In 2012, weestablished asystematic pipeline following clinical focus areas that guide our innovation and can create meaningful improvements in the treatment workflow: Clinical themes guide our innovation Minimally invasive Innovative concepts that minimize damage to the inside of the mouth while treating a clinical condition. The benefit for the patient is less trauma and scarring, which means faster recovery and return to normal activities. Immediate function Science-based treatment solutions where a ready-made restoration is placed after dental implants are inserted. The benefits for the patient are fewer visits to the dentist and new teeth that look good and work straight away.the benefit for the clinician is reduced chair time, leading to higher productivity. Prosthetic esthetics and function Implant or tooth-based dental restorations that integrate high-quality precision components and materials. The benefits for patients are safe, natural-looking teeth that feel right, work right and last along time. Treatment of the edentulous Portfolio of treatment solutions that restore speech, chewing and looks for patients with no teeth. The concept includes solutions for fixed or fixed-removable restorations customized to the patient s expectations and budget. Soft and hard tissue health Solutions that support healthy gums around implant restorations and the secure anchoring of implants in bone. Biocompatible, high-precision and high-quality materials support the patient in maintaining their long-term oral health. Ease of use All our treatment solutions must be easy to use. They are scientifically proven, intuitive, reliable, and they use products and materials manufactured to unrivalled quality standards. The result: efficiency, predictability, and safety in everyday use for the benefit of our customers and their patients.

11 Nobel Biocare Annual Report 2012 Our strategy 9 2) Customer Value Add Partnering for Life As a premium provider of implants, components and solutions, our customers expect more from Nobel Biocare than a price discount or customer service. Our customers desire a partner to help grow their practices with increased patient flow, higher implant treatment acceptance, more advanced treatment modalities, more effi cient workflows and, ultimately, more satisfied patients. In short, they seek a partner that can help them develop their practice and laboratories over many years, even decades. Throughout 2012, we have been restructuring and retraining our 800+ strong sales organization to grow beyond transactive sales into this new partnership role. We have analyzed our most successful field representatives and countries and have expanded these best practices globally through our Sales Academy training, use of the latest mobile technology for effective calls and training, as well as a renewed commitment to each individual s training and development needs. Nobel Biocare field representatives have started to introduce a comprehensive variety of commercial partnering programs. With these, we support the dental practices and laboratories in developing their business through more implant treatments, better edentulous solutions, increased referrals as well as direct patient flow. The partnership activities consist of a toolbox of initiatives that includes networking platforms such as study clubs educational initiatives alliances. The key to superior treatment is forming the treatment team to work effectively together. In addition to these programs, we have added a new online store, which was fi rst rolled out in the US and is now being gradually rolled out to other markets in Europe and Asia.This makes the buying process easier and more transparent. 3) Training and education Learning for Life Part of our role as a trusted treatment partner is to offer training to our dental professionals to use our products and solutions properly, extracting the greatest value from them. We recognize that dental professionals have different education and training needs.therefore, we offer customers and potential customers comprehensive education programs to support them along their professional development, and help them to become more effi cient and effective in their work so they can treat more patients better. We provide the knowledge they need to perform optimal treatments along every step of the treatment workflow from diagnostics and planning to prosthetic restoration. The majority of our training is peer-to-peer, and we enlist expert clinicians and lab technicians around the world to help us train our customers. They are supported by our own specialized training team, who have thorough knowledge of the dental industry, and provide customized dental education programs for every stage of professional development. We have published our Global Course Catalog for 2013 featuring 97 of the world s leading clinical and laboratory practitioners. These are supplemented by country-specific courses, all designed to help our customers treat more patients better. Our training is focused on four customer needs and clearly associated with treatment and subsequently business success: Diagnostics and planning Initial surgical procedures Advanced surgical procedures, such as demanding esthetic situations or treating the edentulous patient with graftless solutions Prosthetic excellence and laboratory partnerships. The three growth drivers innovation, customer partnering and training and education have been fundamentally redesigned, restructured and rebuilt. We are only at the beginning of our efforts, but: They are working, and we have entered into a continous improvement phase where we are learning what works best, and adjusting to accelerate growth. We have invested significantly in 2012 to initiate these efforts. However, we are now entering the second phase of the strategy of continual improvements also leading to efficiency gains. Our approach does not make for big headlines, but it will lead to sustainable revenue and profit improvements. 4) Operating efficiency and effectiveness Our ultimate performance objective is to rebuild market share efficiently, meaning profitably. As mentioned before, the overarching objective in 2012 was to stop the market share losses of the past few years. Having significantly closed the gap to our peers by allocating resources towards our growth drivers such as R&D, customer partnership programs and training and education in the fi rst half of 2012, we have now set into gear our fourth pillar.

12 10 Nobel Biocare Annual Report 2012 Our strategy Specifically, weare continuously improving our operational expenses in relation to revenue, in order to boost profitability. We are also constantly reducing the complexity of our organization and streamlining processes while adjusting our resources to the changing market environment. We have become aflexible organization in managing budgets while not losing sight of the value drivers for the business. One important sign of the reshaping of Nobel Biocare is the reduction of our workforce by 60 from its peak in mid We have added people to R&D, selling efforts in markets where we grow such aschina, Brazil and the US, toname afew. Atthe same time, we have reduced headcounts in group and back-office functions, as well as markets where we have been declining.we have added people in production sites such asalpha-bio Tecwhere volumes are increasing, and reduced correspondingly where volumes declined, such as at certain NobelProcera production units. Not only are we a more flexible organization, we have created ahigh level of accountability with a pipeline of efficiency gains. And we will see a further reduction and reshaping of the workforce in 2013 and beyond. As much aswewould desire, it is not possible to rebuild Nobel Biocare in all areas immediately.the greatest risk to the strategy is in fact the risk of execution. We had to phase our execution and ensure it works. It is the fourth pillar of efficiency gains which can only be materially and sustainably executed and realized when the growth pillars are in place and are beginning to work. Customers and patients do not experience integral efficiency gains. Having said that, as quickly as possible we have set into motion abroad and meaningful efficiency program. Our approach toefficiency is continuous improvement. Our customers and organization have not responded well to abrupt changes at Nobel Biocare. We operate in a highly skilled field of dentistry where customer partnerships endure for decades, and we review every step with a view to customer experience. Our people In 2009, Nobel Biocare experienced employee turnover of greater than 20%. We lost significant dental experience and continuity with customers. Our strategy has a critical dimension of rebuilding our workforce. From the Executive Committee to the manufacturing floor,we have recommitted ourselves to training and coaching, one-on-one and skill-based courses. We seek to become predominantly a company that promotes its people to open positions before recruiting externally, tobuild continuity with customers and drive long-term programs. We have put in place critical Human Resources tools in our compensation systems and our training and development efforts. Our recent employee survey shows significant improvements in communication and leadership. Our turnover is significantly reduced toindustry average. These improvements are being felt by our customers in a positive way, and 2012 was just the beginning. Designing for Life is not a short-term strategy or slogan. It touches every one of our employees every day. Nobel Biocare has been in business in one form or another for over three decades, and we have been associated with virtually every important innovation in the industry. We helped shape it. We recognize the business has faltered, and has experienced its most difficult period. However, we knowtodaywith great certainty that our Designing for Life strategy has put us on the right trackagain with the right programs in the right way. Asmanyofour customers tell us: Nobel Biocare is back.

13 Nobel Biocare Annual Report 2012 Our strategy 11 Closing the gap to peers (%) * * * Nobel Biocare Straumann Biomet Zimmer Dentsply *Q1 Q3 average for Straumann and Dentsply

14 12 Nobel Biocare Annual Report 2012 Letter from the Chairman of the Board Letter from the Chairman. Dear Shareholder, We began 2012 with the expectation that the implant market would continue to grow at mid-single digits as it had in Our strategic and budget planning to continue the rebuilding of Nobel Biocare was based on this assumption. As we soon recognized, events turned quickly as the year started with continued economic challenges in European markets, a slowing of growth in the US and an unusual and isolated issue in Japan (which contributes 12 percent to our group revenue), involving negative reports in the press and television of dental implant safety. Overall the implant market was flat, at best, in 2012 as economically stressed patients delayed treatment or accepted more traditional tooth-borne alternatives. While these macro-economic issues have continued to dampen implant market growth, Nobel Biocare s efforts to rebuild and transform itself into the innovative leader in the field again have begun to take shape and we have started the turnaround. We all recognize results are not fully meeting the original planning objectives. However, significant progress relative to our premium competitive peers has been made. To work with the management of Nobel Biocare in this rebuilding journey, the Board of Directors set a number of key priorities. First and foremost, we needed to form an Executive Committee able to lead the company back to sustainable growth and value creation. In the past 21 months, since the appointment of Richard Laube as our CEO, every member of the Executive Committee has assumed a new role. In 2012, we made the Executive Committee leaner, more business- and customer-focused while adding critical industry and sector expertise. The current members of the Executive Committee who were with us before are Melker Nilsson, Hans Geiselhöringer, Petra Rumpf, Jörg von Manger-Koenig and Walter Ritter, our Global Head of Human Resources, who became a member of the Executive Committee as per the beginning of this year. The team was strengthened by our new CFO, Oliver Walker, who was formerly with Sonova, and by Frank Mengis, our new Global Head of Operations, who formerly was with Straumann and started to work with us on 1 January The Board of Directors is convinced that this new leadership team has the right structure and competencies to accelerate the implementation of Nobel Biocare s strategy which will again lead to growth and increased profitability. We are aware shareholders are impatient for results. The task to perform and fix both a number of internal issues and also facing external headwinds is a significant challenge for anybody, especially a newly formed management team. Nevertheless, the Board of Directors is convinced that the management team is on the right track and needs continuity of purpose now to rebuild our business successfully. To support the Executive Committee, the Board of Directors has established and redefined several committees and more importantly has brought onto the Board new members with expertise to provide advice, act as sparring partners to executive management and supervise progress of the key areas of our business. While the Board of Directors is not an operating body, given the challenges Nobel Biocare faces, we believe we have struck the right balance between supervision and safeguarding shareholders interests, while working pro-

15 Nobel Biocare Annual Report 2012 Letter from the Chairman of the Board 13 Dr. Rolf Watter Chairman of the Board of Directors ductively with the management to drive core programs forward in the areas of innovation, operations and key business processes to help improve results. As such, in 2012, the Board of Directors focused its efforts on the following: Strategy. Nobel Biocare s Board and management defined the key challenges our company faces. Growth opportunities remain, with an estimated 350 million people in Western Europe and North America alone missing one or more teeth, and many more in the densely populated emerging markets. But we also face new market realities that have curtailed growth: in tough economic times, patients are less likely to spend money on implant-based dental restorations, slowing patient flow to our customers practices. And the dental implant market has become more competitive, with low-price competitors applying price pressure and premium players increasingly copying each other s strategies. We already reshaped our strategy in the second half of 2011 as a result of these new market realities. A more detailed understanding of the core elements of that strategy is provided in the opening of this report. In short, the Board of Directors and management refocused on our core competence implant-based tooth replacement with the aim of helping customers treat more patients better. Our strategy is driven by the following pillars: Innovation, customer value, training and education, and organizational effectiveness and efficiency. The strategy is designed to rebuild lost market share and improve operating efficiencies in a continuous improvement process and in a sustainable manner. Nobel Biocare s product quality and portfolio remain undisputed by specialists, our core custo-

16 14 Nobel Biocare Annual Report 2012 Letter from the Chairman of the Board mers, and this is reflected by our leading market share in this customer segment. I believe it is important to point out for newer shareholders that in 2009, Nobel Biocare executed a major cost reduction program. While about 20 million Euros in cost saving were achieved and about 300 employees were reduced, the result was not sustainable in the subsequent year, The company lost major specific dental know-how, suffered significant loss of market share and customer confidence, saw the widest gap in revenue performance of over 10 percentage points to our major competitor and experienced a quick rebound in costs and headcount, leading to a sharp margin contraction and further loss of market capitalization. We will not repeat this. The business s challenge is to execute both a growth program and at the same time reduce a number of inefficiencies in the business to rebuild profitability and to do this in a very difficult market environment. But it is progressing well. We are rolling out programs that help customers attract and educate patients, increasing the number of patients treated. We offer leading innovative products and solutions as well as efficient and effective treatment concepts. The digital workflow is an area where we still see a major innovation potential. The more efficient and effective the entire treatment workflow becomes, the more patients can be successfully treated. We offer training and education programs that help clinicians build their skills, so they can better meet patient needs. And while it is essential that we drive these initiatives to improve our relative performance to peers, we must also become more effective and efficient. We have implemented various measures that will improve our operating margins. All these initiatives are outlined in more detail in our CEO s letter. Leadership. In order to effectively implement our strategy, we strengthened Nobel Biocare s leadership team. We started this process when we hired our CEO, Richard Laube, in 2011 and have continued this process until the beginning of this year as outlined above. In 2012, we also reviewed and changed our performance management system and starting 2013 a new performance share unit plan and a restricted share unit plan will better align the participants interests with those of the shareholders while at the same time helping to attract, reward and retain key talent. Workforce. Low turnover rates tend to contribute to continuity and, consequently, to internal efficiency and effectiveness. Our industry is one where employee turnover is usually fairly high and Nobel Biocare has an above average turnover rate. A key focus has therefore been the stabilization of our workforce. To achieve this, we set up a strong, global human resources function. A key initiative over the last year was people and leadership development and improving teamwork. This included identification of a global talent pool, leadership courses for talents and managers and enhanced perspectives for talents. These initiatives are aimed at increasingly retaining the company s management and identified talents and ensuring smooth succession when an employee in a key position leaves the company. Board of Directors. The Board of Directors uses its competencies and expertise to provide strategic and operational guidance to management. In 2012, we added three new members to the Board, to expand its areas of competency. With Michel Orsinger, Juha Räisänen and Georg Watzek, the Board of Directors gained strong medical technology, industrial and clinical expertise that meets central business needs. We also created two new Board Committees the Innovation and Technology Committee, chaired by Michel Orsinger, and the Operations and Process Excellence Committee, chaired by Juha Räisänen to additionally support executive management in these key areas. Through these changes, the Board has become a more authoritative sounding board for Nobel Biocare s management.

17 Nobel Biocare Annual Report 2012 Letter from the Chairman of the Board 15 With the Board focusing on our priorities and management driving the three strategic growth pillars of innovation, customer value and training and education, we were able to achieve market share gains in core areas of our business in Following these first results, we are now further emphasizing the fourth strategic pillar, building an efficient and effective organization. While our initiatives are already showing first effects in terms of costs, we recognize that our financial results do not yet reflect what we have achieved in our organization over the last year and a half. We expect that the full financial impact will be seen increasingly in the next two to three years. At the Annual General Meeting on 28 March 2013, the Board of Directors proposes to elect Franz Maier to further deepen Nobel Biocare s dental implant industry expertise. Franz Maier has a strong track record of over 20 years in both functional and general management positions, especially also in the medical devices and biotechnology industries. He was Executive Vice President Sales and a member of the Executive Board of Straumann, and will complement the Board with his profound experience of leading and developing high performing organizations. We are also pleased to propose, after years of declining dividends, an increased dividend distribution of CHF 0.20 per share. The payment will again be done in a way that will not incur withholding tax. For this year s Annual General Meeting, you will again be able to quickly and easily cast your votes online beforehand. If you have not yet signed up for online voting, you will find the details in your shareholder meeting invitation package and on our website. I would like to finish by emphasizing that Nobel Biocare is an excellent company with a strong, unparalleled product and services portfolio. All the measures and changes we have put in place, and the first encouraging signs of improved performance in line with our peers, allow us to believe that we have set the parameters and framework for Nobel Biocare s continued turnaround and future success. That being said, we are by no means satisfied with our performance we know that we can and have to do better. This is also reflected in our share price. We acknowledge that there is still much to be done, and we know that the market conditions will continue to challenge us in the near future. Therefore, our focus will remain on improving relative performance to peers and continuing to improve our profitability. On behalf of the Board of Directors and the Executive Committee, I would like to thank you, our shareholders, for the continued patience and trust you have placed in Nobel Biocare. Our thanks also go out to our employees for the extraordinary work and commitment they show every day and to our partners and loyal customers for their continuous support. Sincerely, Rolf Watter Chairman of the Board of Directors

18 16 Nobel Biocare Annual Report 2012 Letter from the CEO Letter from the CEO. Dear Shareholder, 2012 was the first year in our plan to rebuild Nobel Biocare and we have achieved a number of important milestones in that regard. At the beginning of 2012 we alerted you that the operational challenges facing Nobel Biocare are significant and that there are no quick fixes. We also alerted you that it would require some important investments in Research and Development, Selling and into our IT systems throughout 2012 to rebuild Nobel Biocare for future growth. I trust as you read this report that you will agree, our actions have begun to put us on the right track. I am confident we will succeed in rebuilding Nobel Biocare after many years of market share decline and our ambition is no less than create the leader of the industry and reverse the poor financial performance we have experienced in the last few years. I invite you to read our strategy document Designing for Life to put our achievements in 2012 in greater context and give you a deeper understanding of how we are creating long-term and sustainable value revenue of EUR 580 million was an increase of 2% versus 2011 and represents the first reported revenue increase since Currencies were favorable and this tail wind offset severe industry challenges, most notably declines in patient flow in Europe due to economic reasons and sharp declines in patient flow in Japan for adverse industry media reports. We are by no means satisfied with our performance. Our revenue in constant currencies was -2.7% versus 2011, but broadly in line with our competitive peer set for the first time in four years. We remain market leader in individualized abutments and have widened our leadership in complex restorative components such as overdenture bars and implant bridges. We have also achieved a strong #2 position with NobelClinician in planning software with now over subscriptions. Further, in the toughest market conditions the industry has faced since the financial crisis in 2009 we have made significant relative progress and held or grew market share in the majority of our 34 direct countries, a significant improvement versus our position in 2010 when we had lost market share in a vast majority of countries. We are confident that improvements we see stem from our actions to improve our selling capabilities in line with our strategy. We are off to a good start already in 2013 and we believe we are at the beginning of a sustainable, modest growth phase in all conditions. When judging our operating profit (EBIT) performance, it is important to note that we have increased our R&D investments by 16% CER and increased IT spending by 7% CER, for a total investment of EUR 6.1 million versus These are critical investments to rebuild Nobel Biocare but we were able to offset some of these investments through an accelerating cost efficiency program designed to eliminate work duplication, harmonize systems, processes and data, thus reducing manual and inefficient work within Nobel Biocare. Our administrative costs were reduced materially by EUR 6.7 million, or 9% CER, versus 2011 (included here is the EUR 1.5 million investment in IT). Underlining these efficiency

19 Nobel Biocare Annual Report 2012 Letter from the CEO 17 Richard Laube Chief Executive Officer gains was a clear headcount reduction in the last quarter of the year as our efficiency effort took hold. The modest headcount increase versus the end of 2011 is part of our R&D, selling and IT investments. The resulting EBIT of EUR 68.7 million was EUR 3.4 million, or 4.8%, below the previous year. We are fully aware that we have chosen to invest at the short-term expense of EBIT progress, but it helped us to stop the vicious cycle of market share decline and the subsequent deterioration of operating performance. Nevertheless, there are some very positive profit and balance sheet improvements. We delivered a material net profit improvement of 15% to EUR 45.8 million with a corresponding earnings per share increase of 16%. Cash flow has improved and we finally have a meaningful net cash position of EUR 43 million after having been in a net debt position. This now gives us some financial flexibility. The rebuilding of Nobel Biocare is being led by a very experienced team in the industry. With the addition of Frank Mengis who joined the Executive Committee in January 2013 to lead our Global Operations, we have transformed the Executive Committee to focus on our strategic pillars and growth drivers: Innovation Designing for Life Partnering for growth with customers Partnering for Life

20 18 Nobel Biocare Annual Report 2012 Letter from the CEO Professional Education Learning for Life Organizational effectiveness and efficiency The team has a combined expertise in the dental industry or medical technology sector of over 100 years. The team is smart, determined and functioning extremely effectively also together with our Board of Directors. We need to hold the course and execute the strategy to continue rebuilding Nobel Biocare. To support customers to extract most value of the offered solutions we have intensified the engagement level of our key opinion leaders in all relevant areas from product development, to clinical studies to professional education. This is also reflected in our recently published, upgraded course catalogue which features about 100 of the world s most known specialists. Beyond the core business, let me also address our digital dentistry initiatives. Our strategy on digital dentistry is straightforward and increasingly integrated to accelerate growth of our core implant lines. We focus on projects which help our customers to place and to restore implants better, more safely, more efficiently and with a better functional and esthetic outcome for patients. This is an important redirection of our digital dentistry efforts which previously saw the product lines as separate revenue streams. We have studied and analyzed the patients treatment journey and the treatment workflow in great detail and gained insights into how certain technologies such as implant treatment planning software, Nobel- Clinician, can meaningfully improve the treatment outcome and lead to more implants placed. Today, NobelClinician users purchase over 2.5 times more implants from Nobel Biocare than non-users. The same principle holds for NobelProcera where our core implant customers are increasingly using superior individual solutions to treat their patients. The future of implant dentistry will be shaped by a tightly integrated team approach with the patient at the center, and effective treatments being executed collaboratively by the restorative dentists, surgeons, dental laboratories, supported by Nobel Biocare delivering superior products and solutions. Much of this innovation has now moved from an analog to a digital workflow and we are again at the forefront of shaping the industry. We have also received many questions on our strategy in the value segment. In 2008, we acquired Alpha-Bio Tec, a company with a much simpler product portfolio targeting customers with simpler feature requirements, at a lower price. Through this unit we learned and now understand how to effectively run a multi-brand business model. Today we are in a good position to create value with a multi-brand strategy serving different customer needs and requirements. Alpha-Bio Tec will continue to target a different customer segment and offer implant components different from Nobel Biocare. Alpha-Bio Tec has its own R&D, product management, manufacturing and distribution chain through third-party distributors and has been developing well with 20% revenue growth per annum over the last two years. Throughout 2013 we will continue to expand the number of countries where Alpha-Bio Tec operates, such as China. While our priority for value creation must remain on the innovative Nobel Biocare brand, we are uniquely positioned today to complement the Nobel Biocare brand through targeted and adjacent efforts from Alpha-Bio Tec. This letter has touched on the past. But let me close with what we believe is truly exciting: the emergences of our innovation program. We will launch in 2013:

21 Nobel Biocare Annual Report 2012 Letter from the CEO 19 A new implant in our largest-selling line, NobelReplace, adding a partially machined collar to our fast-growing conical connection portfolio. This implant has been requested by many users of competitive systems and fills an important gap in our portfolio A significant upgrade of NobelClinician, with new imaging features improving planning of implant placement and prosthetic restorations New NobelProcera restorative components for competitive implant systems, further opening our system A new second-generation NobelProcera scanner, significantly increasing laboratory productivity and fully backward compatible by upgrade An initial milestone step in opening our NobelProcera milling system to a third-party scanner in our new Openaccess program. This is just the beginning, but these launches are tangible signs of progress to grow the business with our innovation. These launches will be supported with new customer training and education courses, also at our global symposium in New York in June has been a very challenging year, but one where we have finally broken the cycle of market share loss. This has been achieved by an extremely dedicated and capable team of employees. Our employee continuity is growing, our employee turnover is down, our motivation is up, our team work is improving and our customers are responding positively. I thank the team. You, our shareholders, have permitted a year of much-needed investment. As a shareholder among you, we share the same goals and I am confident these investments will be rewarded with improved business performance and share appreciation. Thank you for the continued support. Sincerely, Richard Laube CEO

22 20 Nobel Biocare Annual Report 2012 Key figures Key figures Key fi nancials overview in EUR million Revenues 2012 (EUR million, % of total revenues) Revenue EMEA 40% 1 Gross profit Operating expenses APAC 21% 3 Profit from operations (EBIT) Americas 39% 2 Profit attributable to owners of Nobel Biocare Cash and cash equivalents Basic earnings per share (EUR) EUR million EUR million EUR million Dividend per share 2 (CHF) Share price at year-end (CHF) Including bank overdraft 2. Proposed dividend for 2012 Revenue growth at CER (%) Revenue growth by region (2012 at CER) Return on average equity (%) Asia/Pacific Americas EMEA Gross margin (%) Operating (EBIT) margin (%) Cash flow from operations (EUR mn) Employees worldwide Personnel costs per employee (EUR 000) Net debt / Net cash

23 Nobel Biocare Annual Report 2012 Sustainability 21 Sustainability At Nobel Biocare, we aim to create value for patients and customers through the benefits of the products and solutions we provide. But we believe that advancing implant-based tooth restorations extends from our products, solutions and services to our actions as a responsible corporate citizen. Materiality According to the Global Reporting Initiative (GRI), the sustainability topics that are most material are those that have a direct or indirect impact on an organization s ability to create, preserve or erode economic, environmental and social value for itself, its stakeholders and society at large. To assess Nobel Biocare s material topics, we defined, in the context of a materiality workshop with key internal stakeholders, those issues and activities that are most important to us, all our stakeholders, the economy, environment, and society, and therefore merit particular focus in our sustainability report. The materiality topics were defined and rated as follows: Human Resources Training & Education Research & Development Innovation very high Human Resources Product Responsibility Product Design Operations Supplier relations Quality management Environment Environmental certification Society Lobbying & Public Policy Research & Development Patents Human Resources Employer reputation high Environment Energy consumption Water consumption Emissions Waste Transport & Travel Society Access to products & Affordability Philanthropy Environment Materials used Research & Development R&D Ethics Clinical Studies Products Responsible Marketing and Communication Practices Society Stakeholder Dialogue medium Research & Development Public funding Operations Standards for Suppliers and Monitoring Human Recources Occupational Health & Safety Diversity & Equal Opportunities low Society Dental health care literacy low medium high very high Relevance for Stakeholders Relevance for Nobel Biocare Human resources At Nobel Biocare, we place a great strategic focus on building and nurturing a strong, efficient and effective workforce and being the industry s best employer. We invest constantly in improving our company as an employer and developing our people. In 2012, we redesigned our HR strategy to improve our ability to attract, develop, and hold on to skilled people.

24 22 Nobel Biocare Annual Report 2012 Sustainability Hire Staffing policy Develop Talent management Succession planning Salesforce development Leadership development Retain Performance management Engaging employees Compensation and benefits scheme Retire Staffing policy To attract the best people, we continue to leverage our strong brand. We carefully and diligently search for and recruit candidates, and hire the best fit. In 2012, we expanded our internal recruiting capabilities and activities by training all line managers in all countries on our new staffing policy and hiring practices. We see each open position as a key business decision, so our recruitment processes are geared to identifying the key skills, knowledge, motivation and attitudes required in the successful candidate. We actively consider all applicants regardless of their gender, ethnic origin, disability, sexual orientation, creed, or age. In the long term, our success will largely be determined by our ability to develop skills to meet the needs of the business. We help employees grow through internal and external education programs to enhance employee knowledge as well as through performance monitoring, succession planning, and talent and leadership training. All our employee development activities are outlined and supported by a comprehensive set of policies, guidelines and stringent HR governance. Our leaders are critical pillars for our success. To ensure their leadership competence, we continued to roll out the leadership development program launched in 2011 that includes learning programs for first-line and middle management levels as well as for senior and executive leaders. Finally, we initiated a talent pipeline and succession planning program to ensure that we have the right skills in place if a key employee leaves the organization. The current skill level of each potential successor has been assessed, and we tailor development plans for each one to ensure that they acquire the necessary skills and experience. We want to offer our employees a great place to work by giving them the opportunity to grow, be heard and be recognized for their effort and achievements. Our performance management process provides a framework for employees to continually challenge and develop themselves and to achieve higher goals and levels of performance. Goals are linked to overall company strategy. We see it as a leadership responsibility to create an environment in which every employee is given the opportunity to maximize their potential and contribute to our company s long- and short-term objectives. Listening and acting on our employees needs and opinions is part of our dialog with our employees. We regularly conduct global surveys where employees can share their views of the strategy, culture and working environment at Nobel Biocare. Based on this feedback, we take specific action in areas where employees responses to the survey reveals scope for improvement. The results of the 2012 employee survey showed a clear improvement in all areas, especially those highlighted by employees in the previous survey. As a leader in our industry, we constantly review our compensation and benefit plans to ensure that they are competitive. Compensation at Nobel Biocare is based on a globally standardized system that ensures transparent and performance-oriented remuneration and incentives for all employees. Regular benchmarking against competitors and the industry helps to set base salaries in line with the demands and responsibilities of each position. Our bonus schemes reward outstanding results that support our strategic objectives. Bonuses reflect both individual and overall business performance as of 2013, bonuses will more directly reflect the needs of the business by awarding 70% according to company performance and 30% according to individual performance. Research and development, product responsibility As the pioneer in our industry, we have a record of unmatched scientific and innovation capability. We focus our research and development (R&D) areas where we can have the greatest medical and commercial impact best meeting our customers and patients needs. We recognize the importance of R&D for Nobel Biocare and are shifting considerable focus from other business areas to R&D as part of our strategy. Nobel Biocare s R&D effort has created a stream of innovative products, solutions and treatment concepts that improve patient quality of life and allow dental professionals to perform

25 Nobel Biocare Annual Report 2012 Sustainability 23 superior tooth restoration treatments more safely and effectively. We collaborate with a global network of scientists, universities, and industry partners. With dentistry advancing on all fronts, we are working collaboratively with academic institutions and other leading companies in ways that allow us to share risk and gain access to new knowledge and technologies. We are involved in numerous clinical research collaborations with hospitals, private clinics and physicians. We are driving an R&D strategy with the goal of delivering the next generation of products, solutions and treatment concepts that will provide better treatments for people with missing teeth. In this effort, we are concentrating on core research areas where we can deliver the greatest medical and commercial impact for the benefit of our customers and their patients. We manage a pipeline of innovations: short- and long-term development projects designed to meet the future needs of patients and customers, and to provide growth opportunities for the business. Nobel Biocare s pipeline is backed by regular proofs of concept. Regulatory requirements are a key factor in determining whether products can be developed into marketable solutions. Nobel Biocare products and solutions are all cleared by the major regulatory agencies in the world, of which the Food and Drug Administration (FDA) in the US, the Ministry of Health in Japan and the state Food and Drug Administration in China are the most important. new surface technologies, soft and hard tissue characteristics and new surgical treatment procedures. To document the safety and efficacy of our products and solutions, we conduct comprehensive clinical research, preferably long-term follow-up studies to document the success rate of our products. Clinical trials are at the heart of our R&D effort. Wherever and whenever we conduct them, we do so in accordance with consistently applied, constantly reviewed ethical and patient safety standards. We run comprehensive preclinical studies plus clinical research and long-term in-market surveillance. Most studies run for several years with results published as extended abstracts, or as posters, at major international scientific congresses. Study results are published in international scientific, peer-reviewed journals. Most of our studies are conducted using demanding treatment protocols to measure how our products perform under the most rigorous conditions. We can report that, in these circumstances, we achieve similar results with our products as competitors who tend to use more conservative treatment protocols such as two-stage protocols. We protect the results of our R&D with patents. As we substantially invest in R&D, we also devote considerable resources to protecting our innovations so that we, and our investors, ultimately benefit. We manage a portfolio of several hundred patent families and are continuously filing new patents and weeding out non-productive ones. Our intellectual property portfolio comprises patents, designs, copyrights and trademarks. We vigorously defend them against infringements by third parties. We produce products responsibly, and as such the safety and efficacy of our products is paramount. We are committed to research at every level: basic, preclinical and clinical. We also apply high clinical standards for new products, which means that before we launch a new product, we conduct high-standard clinical and technical studies to test and monitor its performance and safety. We also conduct thorough technical testing based on the ISO standards applied in the industry. In basic research, we evaluate new materials for implants and prosthetics, biomechanical functionality of tooth restorations,

26 24 Nobel Biocare Annual Report 2012 Sustainability Selected publications on clinical trials Products/concepts Researchers Follow-up Number of implants/ Cumulative Publication frameworks survival rate (CSR) TiUnite Glauser 11 years 66 implants 97.1% 20th Anniversary Meeting of the European Association for Osseointegration. Copenhagen, Denmark, October 10th 13th Nicu et al. 3 years 39 implants 100.0% J Clin Periodontol Dec; 39(12): Brånemark implants Östman et al. 10 years 121 implants 99.2% Clin Implant Dent Relat Res Dec; 14(6): All-on-4 Cavalli et al months (mean 38.5) 136 implants 100.0% International Journal of Dentistry. 2012; 2012: Replace Select Francetti et al. 6 years 22 implants 98.0% Clin Implant Dent Relat Res Jun 1, Epub ahead of print Hartlev et al months (mean 33) 68 implants 98.0% Clin Oral Implants Res Mar 12. Epub ahead of print NobelActive Arnhart C et al. 3 years 117 implants 95.7% Eur J Oral Implantol Summer; 5(2): McAllister et al. 2 years 60 implants 98.3% Int J Oral Maxillofac Implants May Jun; 27(3): NobelReplace Meloni et al. 1 year 40 implants 100.0% Eur J Oral Implantol Winter; 5(4): NobelProcera Pozzi et al months (mean 43.3) 37 FDPs 100.0% J Prosthet Dent Nov; 108(5): NobelGuide Vasak et al. 1 year 163 implants 98.8% Clin Oral Implants Res Sep 18. Epub ahead of print Operations Our aim is to deliver operational excellence and quality, to ensure a positive customer experience from order to delivery. This is only possible if we implement smooth processes along the entire operations value chain. Operations are geared to supporting customers in their practices through quality, efficiency and reliability. When customers are prescribing and planning a treatment, they want products of the highest quality delivered to the right place at the right time, every time. That calls for efficient manufacturing and logistics from the moment the customer places their order to the moment we deliver it to their lab or dental practice. We are committed to producing our products to the highest standards, in compliance with applicable regulations, and to ensuring that they are available when needed. Our global manufacturing, logistics and supply network is complex and covers six core activities: process development, procurement, implant systems production, individualized production, supply chain and IT. In the last couple of years, we have steadily embedded improvements throughout our operational value chain. The initiatives ranged from lean manufacturing to centralized procurement, from quality improvements to standardized IT systems. For operations, we apply four key performance indicators (KPIs) that guide our decision-making and operational practice: customer service level, cost efficiency, capacity use and inventory turn. Customer service level is a combined measure of product, warehouse and transport quality. Cost efficiency looks at the sum of all costs in relation to the sum of all sales at standard transfer price. Capacity use measures used capacity in relation to available capacity. And inventory turn measures the sum of all sales at standard transfer price in relation to total inventory at standard transfer price. Throughout our supply chain, we are looking at ways to improve the quality of our processes, drive out cost and drive up value for customers. Areas we are working on include reliability of order taking, on-time shipping, and delivery tracking. We are also working on new initiatives that will simplify the ways our customers manage and replenish their inventory. All these initiatives require significant investment and resources, as well as training of our people and partners. We ensure that there are both standard operating procedures and redundant systems in place to guarantee effective and high-quality output.

27 Nobel Biocare Annual Report 2012 Sustainability 25 To complement our own manufacturing, we work with a network of external partners who help us provide materials and goods needed to provide the best products in the industry. We hold all internal and external manufacturing and supply contributors to our high standards of excellence, and we invest heavily in the people, processes and technology to guarantee the quality our customers expect from a Nobel Biocare product. We select our partners using a number of factors, including their ability to provide the quality we need at a competitive price. We work to make our manufacturing fast, flexible and innovative and in accordance with demanding standards for quality, safety and environmental protection. We are committed to using partners that demonstrate strong performance in the management of environmental, health and safety risks. By presenting a single face to the supplier market, we have greatly strengthened our negotiating and buying power. By enabling us to engage in more coordinated and strategic purchasing, this initiative has lowered costs, reduced risks and improved our ability to service and support our customers. As part of this strategy, we also implemented our General Supply Agreement with key suppliers, and simplified material flows from suppliers to both our central warehouses. Fulfilling regulatory standards As a healthcare company, we operate in a regulated industry. We fully understand and support the roles of regulators in making certain that our products are manufactured to the highest standards. We not only meet, but exceed, regulatory standards, and we continually invest in upgrading and improving our manufacturing facilities and business processes. We comply with all relevant regional authorities, such as the Food and Drug Administration (FDA) in the US, or the BSI (British Standards Institution) in the UK, to secure the appropriate official approvals we need to sell our products in their jurisdictions. In 2012, our facilities went through audits and inspections from FDA and BSI with no critical findings. We also maintain a dedicated quality assurance unit, which is staffed by experienced quality professionals. Our internal control of quality extends to the evaluation of manufacturing processes and onsite audits and reviews of our manufacturing sites. These ensure that we rigorously maintain standards, including manufacturing, quality control, product packaging, logistics, employee health and safety, as well as standards for environmental protection. Other operational standards we have implemented or attained include our own General Supply Agreement and ISO certification in all our manufacturing facilities. We have now incorporated all our quality assurance processes into our operational management system (OMS). This system allows us to connect quality processes and activities across the company. Society A focus on patient well-being and being a responsible corporate citizen go hand-in-hand with conducting business ethically. We strive to work in the best possible way to produce products of the highest possible quality. We have a long-standing commitment to conducting our business in compliance with applicable laws and regulations and in accordance with the highest ethical principles. We closely monitor our actions to ensure compliance. And we foster a culture of ethical behavior in everything we do. We believe in fair treatment of everyone that comes in contact with our business employees, customers, patients, suppliers, all other stakeholders and society at large. As a company, we foster openness, honesty, tolerance, fairness and responsibility in all matters. We do not discriminate, we do not tolerate any form of harassment, we do not engage in any form of forced or child labor. Our Code of Conduct is one of many tools we provide employees to assist them in meeting our legal and ethical obligations all must abide by the Code. In 2012, we can report that no major complaints were lodged in any audits or reviews. We consider lack of access to treatments and lack of awareness about the consequences of untreated tooth loss as key challenges for the global community. We have an important role to play in addressing these challenges. As a responsible corporate citizen, we also believe we should give back to our communities and to people in need. We are proud to be part of various community engagement activities. We see it as part of our responsibility to support philanthropic projects, some globally, some locally. Our donation programs aim to give back to communities in areas where we can provide expertise in addition to financial support. We support the P-I Brånemark Institute in Bauru, Brazil, a nonprofit organization that treats patients with missing teeth and often severe maxillofacial defects, in most cases free of charge. The institute was founded by Professor Per-Ingvar Brånemark, the Swedish orthopedic surgeon whose pioneering work on osseointegration laid the scientific roots for Nobel Biocare. Through our financial backing, the institute is able to restore quality of life for several hundred people a year a substantial contribution to the procedures the institute currently carries out annually. In November 2010, Nobel

28 26 Nobel Biocare Annual Report 2012 Sustainability Biocare announced a new five-year agreement, worth about 2.5 million euros, that will enable continued clinical treatment, follow-up teaching and training. We support leading dental societies in their efforts to promote dental education, enforce professional and business best practices and encourage involvement in science and innovation. We partner with dental universities worldwide by sharing product knowledge and treatment expertise. We also cultivate an active dialog with dental organizations and other dental stakeholders and support them where appropriate. And in some cases, where patients suffer from an exceptional problem and cannot afford treatment, we support pro bono treatments by providing products free of cost. Environment As a globally operating company, we respect the resources we need to conduct business. Although we have a relatively modest environmental footprint in our manufacturing, we commit to being responsible in how we bring our products and services to market, how we use natural resources, and how we conserve energy and eliminate waste. We work with a global network of transportation partners that have a strong environmental focus and provide more ecofriendly transport options. Because we have manufacturing plants in 3 continents, we keep the distances travelled by our products to a minimum. And we are implementing a new packaging program where orders are bundled and will reduce the number of packages sent to a minimum. We train our employees on environmental issues. Our Environmental Management System (EMS) helps us achieve our goals for the environment while delivering continual feedback on environmental impact and other parameters. As part of our ISO certification, all production sites undergo regular third-party environmental audits.

29 Corporate Governance. Corporate Governance report 28 Board of Directors 35 Executive Committee 51 Remuneration report 53

30 28 Nobel Biocare Annual Report 2012 Corporate Governance Report Corporate Governance report. Corporate Governance at Nobel Biocare follows the Swiss Code of Best Practice for Corporate Governance (economiesuisse, revised version 2008). The information published in this report follows the SIX Swiss Exchange Directive on Information Relating to Corporate Governance (DCG, SIX Swiss Exchange Corporate Governance Directive, revised version 29 October 2008). All information in this report is per 31 December 2012, unless stated otherwise. 1. Group structure and shareholders 1.1 Group structure Group structure Shareholders meeting Internal Audit Board of Directors Executive Committee Executive Committee structure as of 31 December 2012 Chief Executive Officer Richard T. Laube Chief Financial Officer Oliver Walker Global Research, Products & Development Hans Geiselhöringer Legal & Compliance Jörg von Manger-Koenig Global Customer & Sales Development Rolf Melker Nilsson Business Corporate Development, T&E & Special Channels Petra Rumpf Effective 1 January 2013, Frank Mengis was appointed Executive Vice President Global Operations. He and Walter Ritter, Senior Vice President Global Human Resources, were also appointed members of the Executive Committee as of that date. Please refer to section 4.1 Members of the Executive Committee on page 71 for further information.

31 Nobel Biocare Annual Report 2012 Corporate Governance Report 29 Listed company Name Nobel Biocare Holding AG Domicile 8302 Kloten, Switzerland Listed at SIX Swiss Exchange Market capitalization CHF million (as of 31 January 2013) Security number ISIN number CH Reuters NOBN.S Bloomberg NOBN SW Nobel Biocare Holding AG is the only listed company of the Group. Subsidiaries as of 31 December 2012 City and country Share capital Ownership Ownership of incorporation in 000 interest interest 2012 in % 2011 in % Nobel Biocare Australia Pty Ltd. Macquarie Park, Australia AUD Nobel Biocare (Österreich) GmbH Vienna, Austria EUR Nobel Biocare Belgium NV Groot-Bijgaarden, Belgium EUR Medicim, NV Mechelen, Belgium EUR Nobel Biocare Brasil Ltda São Paulo, Brazil BRL Nobel Biocare Canada Inc. Richmond Hill, Canada CAD Nobel Biocare Procera Services Inc. Québec, Canada CAD BioCad Medical Inc. Québec, Canada CAD Nobel Biocare Asia Ltd. Hong Kong, People s Republic of China HKD Nobel Biocare Commercial (Shanghai) Co. Ltd Shanghai, People s Republic of China USD Nobel Biocare Trading (Shanghai) Co. Ltd. Shanghai, People s Republic of China USD Nobel Biocare Danmark A/S Hilleröd, Denmark DKK Nobel Biocare Suomi Oy Helsinki, Finland EUR Nobel Biocare France S.A.S. Bagnolet, France EUR Nobel Biocare Deutschland GmbH Cologne, Germany EUR Nobel Biocare UK Ltd. Uxbridge, Great Britain GBP Nobel Biocare Magyarország Kft Budapest, Hungary HUF Nobel Biocare India Pvt. Ltd. Mumbai, India INR Alpha-Bio Tec Ltd. Petach Tikva, Israel ILS Nobel Biocare Italiana S.r.l. Agrate Brianza, Italy EUR Nobel Biocare Japan K.K. Tokyo, Japan JPY Nobel Biocare Procera K.K. Narashino-Shi, Japan JPY Nobel Biocare Korea Ltd. Seoul, South Korea KRW Nobel Biocare Lithuania Pty. Ltd. Vilnius, Lithuania LTL Nobel Biocare México, S.A. de C.V. Mexico City, Mexico MXN Nobel Biocare Investments N.V. 1 Willemstad, Curaçao, the Netherlands Antilles CHF Nobel Biocare Nederland BV Houten, the Netherlands EUR Nobel Biocare Distribution Center BV Belfeld, the Netherlands EUR Nobel Biocare New Zealand Ltd. Auckland, New Zealand NZD Nobel Biocare Norge AS Son, Norway NOK Nobel Biocare Polska Sp.z o.o. Warsaw, Poland PLN Nobel Biocare Portugal S.A. Vila Nova de Gaia, Portugal EUR Nobel Biocare Russia LLC Moscow, Russia RUB Nobel Biocare Singapore Pte Ltd. Singapore SGD Nobel Biocare South Africa (Pty) Ltd. Woodmead, South Africa ZAR

32 30 Nobel Biocare Annual Report 2012 Corporate Governance Report AlphaBio Tec Dental Implants SA Woodmead, South Africa ZAR Nobel Biocare Iberica S.A. Barcelona, Spain EUR Nobel Biocare AB Gothenburg, Sweden SEK Nobel Biocare Dental Products AB 2 Gothenburg, Sweden SEK Nobel Biocare i Göteborg AB 2 Gothenburg, Sweden SEK Nobel Biocare Holding AB Gothenburg, Sweden SEK Nobel Orthopedics AB 2 Gothenburg, Sweden SEK Nobel Biocare AG Kloten, Switzerland CHF Nobel Biocare Finance AG Kloten, Switzerland CHF Nobel Biocare Management AG Kloten, Switzerland CHF Nobel Biocare Services AG Kloten, Switzerland CHF Nobel Biocare Asia-Africa Holding AG Kloten, Switzerland CHF Nobel Biocare Latin America Holding AG 3 Kloten, Switzerland CHF Nobel Biocare Taiwan Co. Ltd. Taipei, Taiwan TWD Nobel Biocare (Thailand) Ltd. Bangkok, Thailand THB Nobel Biocare USA, LLC Dover, USA USD Nobel Biocare Procera, LLC Dover, USA USD Nobel Biocare Holding USA Inc. Wilmington, USA USD Nobel Biocare Investments N.V. was absorbed by Nobel Biocare Finance AG through merger as of 9 February Dormant/not operating 3 Nobel Biocare Latin America Holding AG was absorbed by the parent company, Nobel Biocare Holding AG, through merger as of 28 August Significant shareholders As of 31 January 2013, the largest shareholders in Nobel Biocare Holding AG known to the Company based on the published notifications to the SIX Swiss Exchange are: Voting rights held (directly or indirectly; shares, purchasing and selling rights) 2012 % Date of disclosure Silchester International Investors LLP (UK) August 2012 Franklin Templeton (US) January 2013 Government of Singapore (Singapore) August 2011 Invesco Limited (USA) April 2012 Governance for Owners LLP (UK) August 2011

33 Nobel Biocare Annual Report 2012 Corporate Governance Report 31 Published notifications (1 January 2012 to 31 January 2013) Publication date Shareholder Reason for notification New holding 06 March 2012 Silchester International Investors LLP Acquisition, surpassing notification threshold 5.03% 13 April 2012 Invesco Limited Acquisition, surpassing notification threshold 5.02% 28 August 2012 Silchester International Investors LLP Acquisition, surpassing notification threshold 10.18% 19 December 2012 Franklin Templeton Acquisition, surpassing notification threshold 3.10% 08 January 2013 Franklin Templeton Change of group composition 4.09% 15 January 2013 Franklin Templeton Acquisition, surpassing notification threshold 5.33% 16 January 2013 Franklin Templeton Change of group composition 5.91% 18 January 2013 Franklin Templeton Change of group composition 5.97% All holdings stated as of registered share capital at that time. The changes above were disclosed from 1 January 2012 to 31 January 2013 and duly published on the website of SIX Swiss Exchange. Detailed information on these disclosures can be accessed on major_shareholders_en.html The disclosures made by the company can also be found on Nobel Biocare s website: Nobel Biocare Holding AG does not know of any material shareholders agreements or any other significant understandings reached between shareholders regarding the registered shares of Nobel Biocare Holding AG they own, or the execution of their ensuing shareholders rights. 1.3 Cross-shareholdings Nobel Biocare Holding AG has no cross-shareholdings with other companies, either in capital shareholdings or in voting rights. As of 31 January 2013, Nobel Biocare Holding AG is not aware of any other shareholder directly or indirectly holding more than 3 percent of its share capital.

34 32 Nobel Biocare Annual Report 2012 Corporate Governance Report 2. Capital structure 2.1 Capital As of 31 December 2012, the share capital registered with the Commercial Register amounted to CHF divided into registered shares at a nominal value of CHF 0.40 each. As of 31 December 2012, Nobel Biocare Holding AG had no authorized share capital and had issued neither participation certificates nor bonus certificates. 2.2 Authorized and conditional capital In June 2002 Nobel Biocare created conditional share capital of CHF for the issuance of shares, each with a par value of CHF 2, to be used for exercise of option rights granted to employees and officers of the Company and/or of Group companies (for details pertaining to warrants and staff options, see section 2.7 Convertible bonds and warrants/options on page 33. As of 31 December 2012, the remaining conditional share capital thereof was CHF (for the issuance of fully paid up registered shares with nominal value CHF 0.40 each, after 1:5 share split in 2008). The rights of shareholders to subscribe shares in priority are excluded. In addition, since 2009, the share capital may be increased by an amount of up to CHF by issuing up to fully paid up registered shares with a nominal value of CHF 0.40 each by exercising conversion and/or option rights which are granted in connection with the issuance of bonds or similar debt instruments by the Company or in connection with a transaction. At the same time the Company created an authorized share capital by the same amount until 6 April This amount of CHF could only be used alternatively either as authorized or conditional capital or a combination of both up to the total amount until that date. The authorized share capital expired on 6 April 2011 unused and the amount of CHF can only be used as conditional capital since then. For further details, please refer to the Articles of Incorporation which are available on the Company website governance/documents 2.3 Changes in capital Changes in share capital in CHF Issued share capital Authorized share capital Cond. share capital (in shares) 31 December ( ) ( ) 1 ( ) 1 No changes in 2010 ( ) ( ) ( ) 31 December ( ) ( ) ( ) Expiration of authorized capital ( ) ( ) 1 31 December ( ) ( ) ( ) No changes in 2012 ( ) ( ) ( ) 31 December ( ) ( ) ( ) 1 The amount of CHF could only be used alternatively either as authorized or conditional capital or a combination of both up to the total amount until 6 April Since that date, an increase of up to is only allowed as conditional capital, on top of the CHF conditional capital for employee related options. For further details, please refer to section 2.2 of this report or to the Articles of Incorporation which are available on the Company website:

35 Nobel Biocare Annual Report 2012 Corporate Governance Report 33 A table with additional information on the development of the share capital structure of Nobel Biocare Holding AG and treasury shares over the last two years can also be found in note 16 to the consolidated financial statements on page 103, as well as notes 4 and 5 of the parent company accounts on page Shares and participation certificates All Nobel Biocare Holding AG shares are registered shares with a nominal value of CHF 0.40 each. All shares are fully paid in, have equal voting rights (one vote per share) and entitle the owners to the same share in the Company s assets and profits. All registered shares are only issued as uncertified securities and are registered as book-entry securities according to the Swiss Book-Entry Securities Act. Shareholders are not entitled to demand the printing and delivery of certificates (security papers) re-presenting shares. As of 31 December 2012, Nobel Biocare Holding AG had issued neither participation certificates nor bonus certificates. 2.5 Profit-sharing certificates Nobel Biocare Holding AG has not issued any profit-sharing certificates (Genussscheine). 2.6 Limitations on transferability and nominee registrations The Company maintains a shareholders register showing the names, first names, domicile, address and nationality (in the case of legal entities the registered office) of the holders or usufructuaries of registered shares. The right to vote and other rights associated with the shares may only be exercised by a shareholder who is registered in the shareholders register as a shareholder with the right to vote. Every registration in the shareholders register requires a certification in due form regarding the transfer of the share. The Company may deny recognition as a shareholder with the right to vote, if the formal acquirer of the shares to be registered does not confirm, by declaring to have acquired and to hold the shares in his own name and for his own account, that he is the beneficial owner of the shares to be registered and that he bears their economic risk. Upon request, formal acquirers of registered shares may also be registered in the shareholders register with the right to vote, if they comply with the requirements as nominee according to the Articles of Incorporation. In case of denial of recognition as a shareholder with the right to vote, the formal acquirer or the applicant respectively shall be entered in the shareholders register as shareholder without voting rights. Registrations of shareholders in the shareholders register are effected based on information given in the registration request provided to the Company by the depository banks. If the information provided to the Company in the registration application changes, the shareholder has to inform the Company immediately about the changes. The Company accepts only one representative per share. The Board of Directors may register applicants holding shares that belong economically to another person ( nominees ) with the right to vote in the share register to the extent of up to 3 percent of the registered share capital as set forth in the commercial register. Registered shares held by a nominee that exceed this limit may be entered in the shareholders register provided the nominee discloses the names, addresses and numbers of shares of the persons for whose account it holds 1 percent or more of the registered share capital as set forth in the commercial register, or confirms that none of the persons it represents, as individuals or as a group, holds directly or indirectly 1 percent or more of the share capital as set forth in the commercial register and provided that the nominee has entered into a nominee agreement with the Board of Directors. Corporate bodies and partnerships or other groups of persons or joint owners who are mutually interrelated through capital ownership, voting rights, uniform management or otherwise linked, as well as individuals or corporate bodies and partnerships who act in concert to circumvent the regulations concerning limitations placed on nominees, shall be treated as one nominee within the meaning of the Articles of Incorporation. After hearing the registered shareholder or nominee, the Board of Directors may cancel, with retroactive effect as of the date of registration, the registration of shareholders if the registration was effected on the basis of false information. The respective shareholder or nominee shall be informed immediately of the cancellation of the registration. The Board of Directors shall specify the details and issue the necessary orders concerning adherence to these regulations. In particular, it can put into force regulations concerning the registration of registered shares. It may delegate its duties. 2.7 Convertible bonds and options Convertible bonds As of 31 December 2012, neither Nobel Biocare Holding AG nor any of its subsidiaries had outstanding convertible bonds.

36 34 Nobel Biocare Annual Report 2012 Corporate Governance Report Employee stock options On 9 February 2005, the Board of Directors of Nobel Biocare decided on an Employee Stock Option program for the Board of Directors, officers and key employees of the Group. This staff option program comprises a total of options (number adjusted for 1:5 share split in 2008), that could be granted over three years. The options vested approximately 27 months after the grant date and could be exercised during the one-year period starting on the vesting date (exception granted to the third year grant, see below). In the first two years of the program (2005 and 2006), a total of options were allotted. Since the exercise period has expired, there remained no options from these two allotments as per 31 December During 2007, the third and final year of the program, options (number adjusted for 1:5 share split in 2008) were allotted. The strike price for these options is CHF 84.70, the average share price during five trading days following the publication of the full-year report for Options granted in 2007 vested on 1 July 2009 and can be exercised during the period 1 July 2009 up to and including 30 June 2013 (extension of exercise period by 3 years based on a decision of the Board of Directors on 1 February 2008; the extension was not applicable to board members). Options allotment 2007 Exercised Expired 1 Remaining Grant Dec Dec Dec Dec Dec Dec For further information on the employee stock option plan, please refer to note 18 of the consolidated financial statements on page 105. The total amount of all options corresponds to 1.2 percent of the total registered share capital as of 31 December Performance share unit program (PSUP) This long-term incentive plan covers executives of operating units and the headquarters with a single, global program. Participants are granted performance-based share units (PSUs). Vesting of these share units is subject to specific performance achievements over the vesting period. Terms of awards grant 2012, 2011 and 2010 Vesting is subject to a service period and the outperformance of the Nobel Biocare (NOBN) share price relative to the Swiss Leader Index for the vesting period. If this relative outperformance is achieved, each share unit will be converted into a predetermined amount of Nobel Biocare shares at vesting date. One-third (tranche 1) of the allocated share units vests after one year, one-third (tranche 2) after two years and the remaining third (tranche 3) after three years. The performance share units cannot be settled in cash. Terms of awards grant 2009 Vesting was subject to a three-year service period lasting until 30 April 2012, and to the outperformance of the Nobel Biocare (NOBN) share price relative to the Swiss Market Index for the period. Since the performance conditions were not met as of 30 April 2012, the PSUs were forfeited. The reference price of the grants is linked to the average share price during the five days following the release of the respective full year results (2010: CHF 28.00, 2011: CHF 18.42, 2012: CHF 10.53). 1 Options expired as a result of the holder leaving the Company.

37 Nobel Biocare Annual Report 2012 Corporate Governance Report 35 Movements of performance share unit tranches Number of performance share unit tranches Grant 2012 Grant 2011 Grant 2010 Grant 2009 Total Outstanding as of 1 January Granted Forfeited Expired Outstanding as of 31 December Outstanding as of 1 January Granted Forfeited Expired Outstanding as of 31 December The total amount of all outstanding performance share units corresponds to 0.7 percent of the total registered share capital as of 31 December For further information on the performance share unit program, please refer to note 18 of the consolidated financial statements on page 105 and/or the remuneration report on page Board of Directors 3.1 Members of the Board of Directors (as of 31 December 2012) Rolf Watter Chairman of the Board (non-executive), Swiss, born Rolf Watter has been a member of the Board since 2007 and became Chairman in He is Chairman of the Nomination and Compensation Committee and a member of the Audit Committee. He has been a partner at the law firm Bär & Karrer AG in Zurich since Until September 2009, he was member of its executive board (from 2000) and an executive board member upon the incorporation of the firm in He also teaches as a part-time professor at the University of Zurich s law school. Education: Doctorate in law from the University of Zurich, Master of Law degree from Georgetown University, Professor of Law at the University of Zurich. Current other assignments: Member of the Board of Directors of Zurich Financial Services (insurance) and its subsidiary Zurich Insurance Company (since 2002, office will end at the latest in spring 2014), of UBS Alternative Portfolio AG (fund of hedge funds and private equity) since 2000 as well as of A.W. Faber- Castell (Holding) AG (writing, coloring, and creative design products) since Presumably in July 2013, Rolf Watter will become the Chairman of PostFinance AG (financial services), a by then fully owned subsidiary of Post AG. He is also Member of the SIX Regulatory Board and member of the Disclosure Commission of Experts of the SIX Swiss Exchange (since 2003 and 2002 respectively). Chairman of two charitable institutions. Previous assignments: Chairman of Cablecom Holding (telecommunications, ); non-executive Director of Feldschlösschen Getränke AG (beverages, ), of Centerpulse AG (medical devices, ), of Forbo Holding AG (flooring systems, ) and of Syngenta AG (agribusiness, ). Shares: * / Staff options: 0. * Thereof restricted shares granted by the Company, vesting on 30 June 2015, restricted shares, vesting on 30 June 2016 and restricted shares, vesting on 30 June Raymund Breu Vice Chairman of the Board (non-executive), Swiss, born Raymund Breu has been a member of the Board since 2010 and became Vice Chairman in He is a member of the Audit Committee and of the Nomination and Compensation Committee. Raymund Breu was CFO of Novartis AG (pharmaceuticals) and a member of its Executive Committee from 1996 until He joined the Treasury Department of the Sandoz Group (pharmaceuticals) in In 1982, he became Head of Finance for Sandoz affiliates in the United Kingdom. In 1985, he was appointed Chief Financial Officer of Sandoz Corporation in the United States where he was responsible for all of Sandoz finance activities in that country. In 1990, Raymund Breu became Group Treasurer of Sandoz Ltd., Basel, Switzerland, and, in 1993, Head of Group Finance and a member of the Sandoz Executive Board. Education:

38 36 Nobel Biocare Annual Report 2012 Corporate Governance Report Rolf Watter Raymund Breu Daniela Bosshardt-Hengartner Edgar Fluri Michel Orsinger Juha Räisänen Oern Stuge Georg Watzek

39 Nobel Biocare Annual Report 2012 Corporate Governance Report 37 PhD in mathematics, Swiss Federal Institute of Technology (ETH), Zurich, Switzerland. Current other assignments: Member of the Board of Directors of Swiss Re (since 2003) and Member and Vice Chairman of the Swiss Takeover Board (since 2002 and as of 2012, respectively). Previous assignments: No previous board memberships or relevant assignments. Shares: * / Staff options: 0. * Thereof restricted shares granted by the Company, vesting on 30 June 2015, restricted shares, vesting on 30 June 2016 and restritced shares, vesting on 30 June Daniela Bosshardt-Hengartner Non-executive Member, Swiss, born Daniela Bosshardt-Hengartner has been a member of the Board since She is a member of the Nomination and Compensation Committee and the Innovation and Technology Committee. Ms Bosshardt-Hengartner has been a management consultant in the healthcare sector since From 2003, she was a financial analyst at M2 Capital Management AG (private equity); prior to that she was a financial analyst at Bank am Bellevue, where she covered the fields of medical technology, pharma and biotechnology from 1998 until Daniela Bosshardt-Hengartner started her career as a pharmacist. Education: MSc in Pharmaceutical Sciences from the Swiss Federal Institute of Technology (ETH) in Zurich, Switzerland. Current other assignments: Since 2006 board member of Vifor Pharma, Switzerland, since 2008 board member of Galenica, Switzerland (pharma), since 2009 board member of Prothor Holding SA/Manufacture La-Joux Perret, Switzerland (high-tech mechanical clockworks) and since 2010 board member of RepRisk, Switzerland (environmental and social risks data provider). Previous assignments: No previous board memberships or relevant assignments. Shares: * / Staff options: 0. * Thereof restricted shares granted by the Company, vesting on 30 June 2015 and restricted shares, vesting on 30 June 2016 and restricted shares, vesting on 30 June Edgar Fluri Non-executive Member, Swiss, born Edgar Fluri has been a member of the Board since He is Chairman of the Audit Committee. He has spent his professional career with PricewaterhouseCoopers (assurance, tax, legal and advisory services) and has extensive experience serving multinational and national companies in a variety of industries. He was Chairman of PricewaterhouseCoopers Switzerland ( ), head of Assurance and Business Advisory Services EMEA ( ) and a member of the Global Board of PricewaterhouseCoopers ( ). Before the merger of PricewaterhouseCoopers, he was Chairman of the Management Committee of STG-Coopers & Lybrand, a member of Coopers & Lybrand International and European Boards ( ) and Deputy Chairman of the Management Committee ( ). He first joined the firm in 1977 and became a partner in Edgar Fluri has been a part-time lecturer in public accounting and auditing at the University of Basel since 1987 and was appointed titular professor in Education: Doctorate in Economics and Business Administration from the University of Basel, Swiss Certified Public Accountant (CPA). Current other assignments: Member of the Board of Directors of Orior AG, Zurich (premium convenience food) and Member of the Supervisory Board of Brenntag AG, Mülheim an der Ruhr, Germany (chemical distribution), Member of the Board of Trustees of Beyeler Foundation, Basel, Member of the Board of Beyeler Museum AG and of the Board of Galerie Beyeler AG, Basel, Member of the Swiss accounting standards body (Swiss GAAP FER). Previous assignments: Member of the Board of the Chamber of Commerce of Basel ( ), Member of the Board of the Swiss Institute of Certified Public Accountants ( ). Shares: * / Staff options: 0. * Thereof restricted shares granted by the Company, vesting on 30 June 2015, restricted shares, vesting on 30 June 2016 and restricted shares, vesting on 30 June Michel Orsinger Non-executive Member, Swiss, born Michel Orsinger has been a member of the Board since He is Chairman of the Innovation and Technology Committee. He is Worldwide Chairman, Global Orthopaedics Group of Johnson & Johnson since Previously, he was President and CEO of Synthes (medical devices), Inc. from Michel Orsinger joined Synthes in 2004 as COO. Prior to joining Synthes he held various executive management positions with Novartis (pharmaceuticals; ), including President and CEO of OTC Worldwide, management positions with Procter & Gamble (consumer goods) and Mars (nutrition) from 1983 to Education: Degree in Business Administration from the University of St. Gallen (Switzerland). Advanced Management Program, Harvard Business School (USA). Advanced Management Program, INSEAD (France). Previous assignments: Member of the Nobel Biocare Board of Directors from ( ). Shares: * / Staff options:0. * Thereof restrictred shares granted by the Company, vesting on 30 June 2016 and restricted shares granted by the Company, vesting on 30 June 2017.

40 38 Nobel Biocare Annual Report 2012 Corporate Governance Report Juha Räisänen Non-executive Member, Finnish, born Juha Räisänen has been a member of the Board since He is Chairman of the Operations and Process Excellence Committee. He is Senior Vice President Delivery Chain and Sourcing of KONE Corporation (elevators, escalators, automatic doors and integrated access control solutions), based in Hong Kong (since 2008). Before joining KONE, he was Senior Vice President of Worldwide Operations and Supply Chain at SanDisk Corporation (semiconductors and electronic devices; ). Prior to joining SanDisk Corp. he served as Vice President of Nokia Corporation (electronic devices and telecommunications, ), where he was in charge of the supply chain and operations, as well as systems solutions development for the entire corporation. Previously, he was in charge of various operations, logistics and sourcing organizations on a regional or business division level in both Asia and Europe. Prior to Nokia, he worked in various sales, consultant and executive roles, including enterprise systems projects and systems integration at ICL Fujitsu (IT). In addition, he was an Editor and Co-editor for a variety of industry publications. Education: Master s degree in Industrial Engineering, Information Technology and Mechanical Engineering from Helsinki University of Technology, Finland. Current other assignments: Member of the Board of Finnair Cargo Oy since No previous board memberships or relevant assignments. Shares: 8 097* / Staff options: 0. * Thereof restricted shares granted by the Company, vesting on 30 June Oern Stuge Non-executive Member, Norwegian, born Oern Stuge has been a member of the Board since He is a member of the Innovation and Technology Committee. He is currently Chairman of Orsco Lifesciences AG. Through this company, he holds several Executive & Non-Executive board memberships and advisory roles; Executive Chairman of Aleva Neurosciences SA, of Bonesupprt AS (bone substitutes), Chairman of Acarix AS (cardiac screening), of Quentig AG (digital health), non-executive Board member of Systagenix Ltd. (wound care), of Mediq NV (pharmaceuticals and medical supplies distribution), of Advanced Cardiac therapeutics Inc., of Impulse Dynamics NV (heart failure); Senior Advisor for HealthCap AB (venture capital fund), Advisor for Xeltis AG (regeneratory medicine) and Uptake Medical Inc. (respiratory device technology). Chairman elect and Advisor for Phagenesis Ltd. (neurological device technology). Prior to his current role at Orsco Lifesciences AG, Oern Stuge worked for 12 years at Medtronic Inc. (medical technology) in different roles including Senior Vice President (SVP) and President Europe & Central Asia, and SVP and President Cardiac Surgery. Oern Stuge was Member of the Medtronic Executive Committee and Operating Committee, and he has been credited for successfully transforming its global Cardiac Surgery business and accelerating growth in its neurological and cardiovascular businesses in Europe, Middle East and Africa. Prior to Medtronic, he worked 6 years in senior management positions at Abbott Laboratories Inc. (diagnostics, pharmaceuticals, nutritional products and medical devices), 6 years in Medinor A/S (medical technology) in different positions including CEO, and 6 years as a practicing physician. Education: Graduated summa cum laude in Medicine from the University of Oslo, Norway; MBA from IMD, Switzerland. Previous assignments: Member of the Board of Directors of Eucomed (European industry association for medical devices) , member of the Board of Directors of Medicult A/S (In vitro fertilization) Shares: * / Staff options:0. * Thereof restricted shares granted by the Company, vesting on 30 June 2015, restricted shares, vesting on 30 June 2016 and restricted shares, vesting on 30 June Georg Watzek Non-executive Member, Austrian, born Georg Watzek has been a member of the Board since He is a member of the Innovation and Technology Committee. He was Chairman of the Department of Oral Surgery at the School of Dentistry of the Medical University of Vienna from and Chairman of the School of Dentistry from He is a renowned expert and lecturer on Oral Surgery, especially on implantology. Georg Watzek was President of the European Academy of Osseointegration (EAO; ), He is member of numerous international dental associations, winner of national and international research awards, a recognized lecturer at dental conventions throughout the world and coeditor of the International Journal of Oral & Maxillofacial Implants, the publication organ of the American Academy of Osseointegration. He published nine dental textbooks and more than 300 dental clinical and research articles. George Watzek is a Visiting Professor at the University of Pennsylvania (USA). Education: Professor of Oral Surgery, Specialty board examination in Oral and Maxillofacial Surgery: Doctor of dental surgery (D.D.S.), and a medical doctor (M.D.), from the medical school of the University of Vienna. No previous board memberships or relevant assignments. Shares: 8 097* / Staff options:0. * Thereof restricted shares granted by the Company, vesting on 30 June All share and staff option holdings are reported as per 31 January For further information on related parties,

41 Nobel Biocare Annual Report 2012 Corporate Governance Report 39 please refer to note 30 of the consolidated financial statements on page 122. None of the board members was a member of the Executive Committee of Nobel Biocare Holding AG or any of its direct/indirect subsidiaries in the three financial years preceding the period under review. None of the board members has significant business connections with Nobel Biocare Holding AG or any of its direct/indirect subsidiaries. 3.2 Other activities and vested interests Apart from what has specifically been mentioned under 3.1, none of the board members holds any positions of relevance under the aspect of corporate governance in any governing or supervisory bodies of any important organization, institution or foundation under private or public law; permanent management or consultancy function for important interest groups; official function or political post. 3.3 Elections and terms of office Principles of election and limits on terms of office The Board of Directors consists of at least four and a maximum of nine members. The members of the Board of Directors are elected individually by the Annual General Meeting in each case for a one-year term of office. The term of office of a member of the Board of Directors expires, subject to prior resignation and removal, on the day of the next Annual General Meeting. Newly appointed members shall complete the term of office of their predecessors. According to the Organizational Regulations, dated 10 October 2012, after a board member s initial election to the Board, the Nomination and Compensation Committee (NCC) will recommend him/her for reelection for two consecutive years, resulting in an initial term of three years on the Board, unless there are specific reasons for the NCC not to do so. After the first three years of board membership, each board member is subject to a performance assessment. In case of a positive review, the NCC may propose the member for another three reelections. There are no limits established by the Articles of Incorporation regarding how many times a member can be re-elected or any upper age limit for election. However, according to the Organizational Regulations, a board membership is limited to a maximum of ten years and an upper age is defined the year the board member reaches the age of Time of first election and remaining term of office for each board member The Annual General Meeting on 29 March 2012 elected the following Members of the Board: Members of the Board (elected at Annual General Meeting 2012) Name Position First elected Elected until Rolf Watter Chairman Raymund Breu Vice-Chairman Daniela Bosshardt-Hengartner Member Edgar Fluri Member Michel Orsinger Member Juha Räisänen Member Oern Stuge Member Georg Watzek Member Internal organizational structure Based on the Articles of Incorporation, the Board constitutes itself (usually at its first meeting after the Annual General Meeting). It appoints its Chairman, Vice Chairman as well as a Secretary who is not necessarily a member of the Board. During 2012, the Group General Counsel served as Secretary of the Board. The Board of Directors meets at least five times a year. From 1 January 2012 to 31 December 2012, the Board convened eleven times, including five telephone conferences. The Board meetings usually lasted around 6 hours, telephone conferences around 1 hour. Each board member participated in all meetings, except Georg Watzek, who did not participate in the telephone conference of 26 April Michel Orsinger, who was proposed to the Board nine months prior to the Annual General Meeting, attended the four board meetings and calls prior to the Annual General Meeting as a guest. See paragraphe 3.6 for information regarding management participation in Board meetings. The Board has issued Organizational Regulations that inter alia include the essential roles and responsibilities of the Board, its Chairman, the CEO and the Executive Committee, as well as the related procedures and processes. The revised version of the Organizational Regulations also clarifies the role of the Board regarding Internal Controls and Executive Risk Management. The last revision took place as of 10 October The Board also performs a self-assessment on a regular basis.

42 40 Nobel Biocare Annual Report 2012 Corporate Governance Report Board Committees In accordance with the Organizational Regulations, the Board has appointed a Nomination and Compensation Committee, an Audit Committee, an Innovation and Technology Committee and an Operations and Process Excellence Committee. Each Board Committee has a written charter approved by the Board of Directors outlining its objectives and duties (the Committee s charters are published on the Nobel Biocare website: The members of the Committees and their chairpersons are appointed each year at the first Board meeting after the Annual General Meeting for a period of one year. Each committee consists of between one and four members of the Board. Members of the Board can attend meetings of Committees of which they are not member of as guests. The Board may, both on a permanent and interim basis, appoint additional committees for any other matters or specific areas. The Committees report regularly to the Board on their activities and findings. Overall responsibility for duties delegated to the Committees remains with the Board. Committee memberships Name Audit Committee Nomination and Innovation and Operations and Compensation Technology Process Excellence Committee Committee Committee Rolf Watter M C Raymund Breu, F M M Daniela Bosshardt-Hengartner M M Edgar Fluri, F Michel Orsinger Juha Räisänen Oern Stuge Georg Watzek C Chairman M Member F Financial expert C C M M C Nomination and Compensation Committee (NCC) In accordance with the organizational regulations, the Committee is composed of three members of the Board of Directors and invited guests from Management. The Board nominates the Chairman of the NCC. The NCC nominates a member of Management to serve as a Secretary. In 2012, the Senior Vice President Global Human Resources served in that role. The Committee shall meet a minimum of five times a year and has the following authority, responsibilities and scope of work: discussion and review of all relevant matters regarding Human Resources strategy and implementation as well as regarding key management, including nomination and compensation; management development and succession planning, to ensure availability of best possible leadership and management; review of proposals for appointment and replacement of EC members and related motion for endorsement by the Board; review of compensation systems and compensation policies; review and approval of compensation for management members; review and approval of long-term incentive (LTI) programs; composition of the Board and identification of candidates with the required skills and expertise; compensation of Board members. The NCC will, through its Chairman, report back to the Board and submit for and request Board approval should this be needed under the Organizational Regulations. The CEO attends the meetings of the Nomination and Compensation Committee, with the exception of meetings that deal with his own compensation or Board only topics. From 1 January 2012 to 31 December 2012, the NCC met nine times thereof two times via telephone conference. All members participated in all meetings. Michel Orsinger attended two meetings prior to the Annual General meeting as a guest.

43 Nobel Biocare Annual Report 2012 Corporate Governance Report 41 Audit Committee (AC) The Committee is composed of at least three non-executive members of the Board of Directors, at least one of which should be a financial expert. The Committee meets at least four times per year and its primary objective is to support the Board of Directors in the performance of its supervisory duties. The Head of Internal Audit, Compliance and Risk Management served as the Committee s secretary throughout 2012 (in four meetings and conference calls he was deputized in his function as a secretary to the AC by the Group General Counsel and the Head Group Accounting). The Audit Committee focuses on the following major responsibilities and duties: review of financial reporting; supervision of external audit; supervision of internal audit; supervision of risk management; supervision of internal controls; supervision of compliance with organizational regulations and corporate governance; supervision of fraud prevention; review of legal cases. The Chairman of the AC presents a report on the outcome of the discussions and findings of the AC meetings to the Board of Directors in the subsequent Board meeting. The report also includes recommendations to the Board and decisions made by the AC where the authority has been delegated by the Board to the AC. From 1 January 2012 to 31 December 2012, the Audit Committee met eleven times, thereof six times via telephone conference. All members participated in all meetings. Michel Orsinger attended one meeting prior to the AGM as a guest. The CFO and the Group General Counsel participated in the Committee s meetings on a regular basis, whereas the CEO participated on relevant agenda topics. There is a standard agenda for all AC meetings, added by special topics, based on the annual agenda and upcoming priorities. In all meetings, the CFO, the Group General Counsel and the Head Internal Audit, Compliance and Risk Management give an update on their activities. Furthermore, at the end of each meeting, there is a private session of the AC. At the AC meetings, the following key topics are presented and discussed on a regular basis: special accounting and reporting topics, cash status and forecast, key financing decisions, tax, status of litigation cases, compliance status and issues, audit reports and project updates. Additionally, financial statements, media releases and the Annual Report are presented, reviewed and approved. The treasury manual and the charters of the AC and the Internal Audit function are reviewed once a year. The risk management process and the Internal Controls System (ICS) status are reviewed at least annually. The compliance roadmap is reviewed periodically. On a regular basis Nobel Biocare s auditor, KPMG AG, is invited for an audit update. Once per year, KPMG AG s performance is assessed, the audit scope defined and their budget approved. Upon request, the AC also approves key finance, risk and compliance standards and guidelines. The AC also approves the annual work program of the Internal Audit function and assesses its performance. The AC respectively defined members of the AC meet the CFO, the Group General Counsel and the Head Internal Audit, Compliance and Risk Management for private sessions. The Chairman of the AC also runs meetings with KPMG AG without management attendance. Innovation and Technology Committee (ITC) The Committee is composed of at least three and maximum four members of the Board of Directors and members of Management, one of them being the CEO. The Board establishes the ITC. The ITC nominates a Member of Management to serve as a Secretary. In 2012, the Head of Business Development and Mergers and Acquisitions served in that role. The Committee has the following authority, responsibilities and scope of work: discussion and review of all relevant matters regarding innovation, products, solutions and key technologies within all fields of the corporate strategy; review of major launch plans; review of innovation and technology roadmaps for relevant functions; discussion of options for portfolio enlargement; review of the key product development process; review of patent strategy. The ITC will through its Chairman report back to the Board and submit for and request Board approval should this be needed under the Organizational Regulations. From 1

44 42 Nobel Biocare Annual Report 2012 Corporate Governance Report January 2012 to 31 December 2012 the committee met five times. Apart from Rolf Watter, who did not participate in the meeting of 7 February 2012 and Michel Orsinger, who did not participate in the meeting of 9 October 2012, all members attended all meetings. Michel Orsinger attended one meeting prior to the Annual General Meeting as a guest. Operations and Process Excellence Committee (OPC) The Committee is composed of between one and four members of the Board of Directors, of whom one also takes the chair of the committee, and members of Management. In 2012, the latter were the CEO, the Head of Global Operations, the CFO, the Head of Global Research, Products and Development, the Head of Legal and Compliance, the Head of Quality Management and the Head of IT. The Board establishes the OPC. The OPC nominates a Member of Management to serve as a Secretary. In 2012, the Project Manager Global Operations served in that role. The Committee has the following authority, responsibilities and scope of work: discussion and review of all relevant matters regarding quality and efficiency improvements of all operational processes, including the creation of a total quality and service mindset; guidance to create supply chain and operations strategy as well as the roadmap of strategic initiatives; review of organizational processes and design with a view to further enhance quality of products and services; review of KPI s for operational processes; guidance on operational projects; review of the site specific initiatives; review of quality KPI s and initiatives; any other topic that is proposed and agreed by the Board of Directors or Management. The OPC will through its Chairman report back to the Board and submit for and request Board approval should this be needed under the Organizational Regulations. The OPC was established on 10 October In 2012, the committee met three times. All members attended all meetings. Board members and attendances 2012 Name Full Board AC NCC ITC OPC Number of meetings Rolf Watter Raymund Breu Daniela Bosshardt-Hengartner Stig G. Eriksson Edgar Fluri Robert Lilja Michel Orsinger (prior to Annual General Meeting as a guest) Juha Räisänen Oern Stuge 11 5 Georg Watzek Member of the Board until 29 March Member of the Board since 29 March Definition of areas of responsibility The Board of Directors is entrusted with the ultimate direction of the Company as well as the supervision of management. The Board decides on all matters that have not been reserved for or conferred upon another governing body of the Company by law, by the Articles of Incorporation, or by the Company s organizational regulations. The Board s duties and responsibilities, inter alia, are to: select, appoint, dismiss, supervise, rate the performance of and approve the remuneration of (i) the CEO (upon proposal by the NCC) and (ii) the other members of the EC (upon proposal by the CEO and motion of the NCC); appropriately instruct and diligently supervise the CEO;

45 Nobel Biocare Annual Report 2012 Corporate Governance Report 43 nominate the officers representing Nobel Biocare and determine their signatory power for registration in the commercial registry; take appropriate actions and pass resolutions on all matters to be submitted to, or required for the preparation of the shareholders meeting, pursuant to the Articles of Incorporation, such as (i) annual reports to the shareholders, (ii) payment of dividends, (iii) election or reelection of board members and the statutory auditors of Nobel Biocare and of the Group and (iv) amendments of the Articles; review and approve the overall strategy, the business strategies, basic organization and the relevant Group policies and general guidelines; approve the annual Group budget, the Group s consolidated quarterly and annual financial statements, Nobel Biocare s annual financial statements and the annual report to the shareholders; approve and regularly review the implementation of the Group s overall accounting principles, its financial control and planning procedures, and its compliance program; assess the risks associated with conducting the Group s business, based on reports provided by the management; approve the Group s overall guidelines on lending and borrowing limits, and on new investments; ensure and review the design, implementation and operation of a system of internal controls ( IC ) by management in line with legal obligations and industry practices; review the Group information systems ( IS ) strategy; review and approve acquisitions, divestitures, liquidations and other transactions that are financially or strategically material to the business activities of the entire Group, the materiality being defined as exceeding a value of CHF ; designate a Secretary to the Board of Directors. The Board of Directors assumes the ultimate responsibility for the Company s and Group s business and affairs. Within the framework of the legal requirements of the Company, the Board delegates the overall business, affairs and day-to-day management to the CEO and the EC, with the exception of any Board or Shareholders meeting duties and authorities that cannot be delegated. The Chairman of the Board In addition to his legal and statutory duties, the Chairman carries out those tasks delegated to him by the Board. The Chairman, specifically, has the authority, respectively the duty, to: ensure supervision of the CEO; maintain close cooperation with the CEO and the EC; inform the board on important matters; represent the board vis-à-vis the CEO and the EC; represent Nobel Biocare vis-à-vis shareholders and, in special cases, maintain relations with shareholders and investors, complementing the regular activities of the CEO and the EC; represent, in special cases, Nobel Biocare and the Group vis-à-vis the general public and the media, complementing the regular activities of the CEO and the EC; prepare and chair the Shareholders meetings; prepare and chair the meetings of the Board of Directors; supervise the Board Committee s work; supervise the EC s measures to ensure compliance with all legal provisions and financial market regulations; supervise the implementation of the resolutions of the Board and the Board Committees; attend management meetings, such as EC meetings, in consultation with the CEO; inspect all relevant books and files. 3.6 Information and control instruments vis-à-vis the Executive Committee Group executive management reports in a regular and structured fashion to the Board of Directors. The primary means of information are regular systematic reporting by the CEO to the Board, regular participation, including presentations, by members of the Executive Committee in Board meetings and regular information on relevant developments via electronic means. In every meeting, the CEO informs the Board on the current course of business and important business transactions of Nobel Biocare and the Group. The information must be of a quality that enables the Board to effectively review and supervise the routines, guidelines and organizations of Nobel Biocare and the Group. The CFO and the Group General Counsel regularly report on financial key figures and parameters and relevant legal matters, respectively. The Chairman of the Board and the CEO meet on a regular basis to address all relevant business issues and to define appropriate follow-up activities. Furthermore, the Chairman holds meetings with individual members of the Executive Management as deemed necessary and appropriate. Each board member is entitled to request information on all matters relating to Nobel Biocare and to the Group as a whole. Board members are expected to attend Company events and visit operations and subsidiaries from time to time. The Chairman of the Audit Committee has the right to request relevant information directly from respective departments of Nobel Biocare.

46 44 Nobel Biocare Annual Report 2012 Corporate Governance Report Internal Audit Internal Audit is an independent monitoring and advisory body that reports to the AC, administrative wise to the CEO. The Head Internal Audit, Compliance and Risk Management has full access to all required corporate information and can contact all members of the senior management and the AC anytime. The Internal Audit function complies with Institute of Internal Auditors (IIA) standards. The scope of activities, the accountability and responsibility as well as the reporting line are well defined in the Internal Audit Charter. The Head Internal Audit, Compliance and Risk Management is in charge of: Assurance activities, including the Letter of Assurance program: Enterprise Risk Management (ERM) Whistleblower Management (co-management with the Group General Counsel) Internal Controls System Management. Internal Audit focuses its activities on governance, risk, compliance, financial accounting and reporting. The function provides risk-led analyses and evaluates business processes by: examining the reliability and completeness of financial and compliance relevant information; examining the adherence to the controls system related to compliance with internal and external directives, process and controls standards, laws, regulations and industry standards; examining whether the Group s assets are secured; assessing the business risks and the adequacy of mitigating strategies and action plans. In 2012, Internal Audit performed five business audits of subsidiaries, two audits of group functions and one business review. The selection of subsidiaries, plants or group functions is based on materiality, country and company respectively function risks and rotation. The AC approves the audit scope once a year. The scope comprises all audit-relevant business cycles. The findings are assessed (level 1 to 5, materiality increasing with number) based on a detailed criteria catalogue, which has been approved by the AC. Internal Audit provides in-depth recommendations per finding. Local and group management have to comment the findings and recommendations and have to define remediation programs with deadlines and accountabilities. Copies of the full report (levels 1 to 5) are sent to local and regional management. A management summary, including the details of medium to high rated findings (levels 3 to 5) are disseminated to the CEO, the Group General Counsel, the CFO, the Chairman of the Board and the members of the Audit Committee. The external auditors also receive a copy of the management summary. A reporting cycle has been defined and established, ensuring timely and structured information of all stakeholders and decision makers. In case of very material findings (level 5) like fraud or material breaches of compliance standards, an exception report is immediately issued and sent to the Chairman of the Board, the Chairman of the AC and the CEO. In 2012 no exception report has been issued, All reports are presented and discussed in the AC meeting. A quarterly follow-up with the audited units is made to track the implementation of the agreed action points. This followup status report is presented to the AC. In 2012 the Head of Internal Audit, Compliance and Risk Management participated in three meetings with the Board (for risk management related topics). For further details on the Company s risk management, please refer to page Executive Committee The Board delegates day-to-day management of the Company to the CEO and the Executive Committee (EC). The CEO is responsible for Nobel Biocare s and the Group s overall business and affairs and has the final authority in all matters of management that are not within the duties and authorities of the Board of Directors or the Shareholders meeting pursuant to the provisions of law, the Articles of Incorporation or the Organizational Regulations. The CEO is responsible for the implementation of all Board resolutions and the supervision of all management levels in the Group.

47 Nobel Biocare Annual Report 2012 Corporate Governance Report 45 Without limiting the generality of the aforementioned, the CEO has the specific duties and powers to develop the strategy of the Group and to obtain approval for it by the Board; be the main contact person of the Board; direct the EC, specifically by supervising and coordinating the activities of the EC, whose members are appointed based on his proposal and approval by the Board; determine the agenda items of the meetings of the EC in coordination with its members, conduct those meetings and ensure that the EC s resolutions are implemented; represent Nobel Biocare vis-à-vis the shareholders and, together with the other members of the EC and in coordination with the Chairman, maintain relations with shareholders and investors; represent Nobel Biocare and the Group towards the public and media, together with the EC and in coordination with the Chairman, who will, in special cases, complement such activities; inform the Chairman on an ongoing basis and the Board regularly on the course of business, compliance with the budget, and exceptional occurrences that exceed the normal course of business. Within the scope of the Organizational Regulations and other related internal rules, the members of the EC (excluding the CEO) take over individual tasks and are individually responsible to the CEO for the performance of these tasks. The members of the EC may, with the agreement of the CEO, delegate the tasks relating to their areas of responsibility. Without limiting the generality above, the EC has the specific duties to organize and execute the management of Nobel Biocare within the scope of the delegation so such responsibilities by the Board; prepare decisions to be taken within the scope of responsibilities of the Board and implement the related resolutions of the Board under the supervision of the CEO; further develop and implement the business strategy; prepare the consolidated Group budget for the review by the Board; manage the risks associated with conducting the Group s business; design, implement and operate a system of Internal Controls in line with legal obligations and industry practices; appoint, supervise and dismiss the management of the Group s companies; appoint members or representatives to the supervisory boards of subsidiaries; appoint, supervise and dismiss the managers reporting to the individual members; manage the staff and the divisional functions of the Group. 4.1 Members of the Executive Committee Members of the Executive Committee are appointed by the Board of Directors upon proposal of the CEO and respective motion of the NCC. Changes announced in 2012 and as per 1 January 2013 Effective 31 March 2012 Ernst Zaengerle retired as Executive Vice President Global Operations and as member of the EC. His role was resumed ad interim until the end of the year by Walter Ritter, Senior Vice President Global Human Resources. Effective 5 June 2012, Nicolas Weidmann, Senior Vice President Global Communications assumed also responsibilities as Head of Global Marketing. To dedicate his full attention on the new responsibilities Nicolas Weidmann stepped down from the EC. Effective 6 July 2012, Dirk Kirsten, CFO, resigned from his function and the EC. Effective 1 August 2012, Oliver Walker was appointed CFO and member of the EC. Effective 1 January 2013, Frank Mengis was appointed Executive Vice President Global Operations. He and Walter Ritter, Senior Vice President Global Human Resources, were also appointed members of the EC as of that date. A table with the composition of the Executive Committee as of 31 December 2012 can be found on page 49. Additional information about the Executive Management is disclosed on pages 44 to Other activities and functions Apart from what is specifically mentioned in the Executive Committee section, none of the Executive Committee members has any positions of relevance under the aspect of corporate governance in any governing or supervisory bodies of any important organization, institution or foundation under private or public law; permanent management or consultancy function for important interest groups; official function or political post.

48 46 Nobel Biocare Annual Report 2012 Corporate Governance Report 4.3 Management contracts The Board of Directors has not delegated any management tasks to firms outside the Company. 5. Compensations, shareholdings and loans 5.1 Content and method of determining the compensation and the shareholding programs For additional information regarding compensation, shareholdings and loans of the Board of Directors and the Executive Committee, please refer to the remuneration report on page 53 as well as in note 12 to the financials of the parent company on page Shareholders participation rights Shareholders participation rights are described in detail in the Articles of Incorporation of Nobel Biocare Holding AG. These Articles of Incorporation can be downloaded from the Company s website, documents, or can be ordered via the contact addresses found on the website. 6.1 Voting rights restrictions and representation Please see section 2.6 of this Corporate Governance report on page 33 about the voting rights restrictions. The Articles of Incorporation and the Board of Directors provide for the rules regarding participation and representation at the Shareholders Meeting. A shareholder may only be represented by his legal representative, another shareholder with the right to vote, proxies designated in an agreement with the nominee, corporate bodies ( Organvertreter ), the independent proxy ( unabhängiger Stimmrechtsvertreter ) or by a bank or a broker ( Depotvertreter ). The Chairman of the Shareholders Meeting decides whether a proxy will be accepted. Each share entitles to one vote. 6.2 Statutory quorums The Shareholders Meeting passes its resolutions and carries out its elections with an absolute majority of the share votes represented, to the extent that neither the law nor the Articles of Incorporation provide otherwise. Decisions at the General Meeting calling for a quorum of at least two thirds of the votes represented and the absolute majority of the represented shares par values are required for: the cases listed in art. 704 para. 1 CO; the conversion of the global share certificate into individual share certificates; the removal of restrictions on the transfer of registered shares; the conversion of registered shares into bearer shares; any change to the aforementioned provisions. If an election cannot be completed upon the first ballot, there will be a second ballot at which the relative majority decides. The Chairman has no casting vote. Elections and votes take place openly, provided that neither the Chairman nor a simple majority of the votes requests a secret ballot. 6.3 Shareholder meetings The Articles of Incorporation of Nobel Biocare Holding AG do not contain any provisions deviating from the law as far as calling of the shareholders meeting is concerned. The Annual General Meeting is held within six months after the close of the financial year. Extraordinary General Meetings can be called as often as necessary, in particular, in all cases required by law. Extraordinary General Meetings are convened by the Board of Directors within two months if shareholders representing at least ten percent of the share capital request such a meeting in writing, setting forth the items to be discussed and the proposals to be decided upon. General Meetings are convened by the Board of Directors and, if need be, by the Auditors. The convening of a General Meeting takes place by a publication in the Swiss Official Gazette of Commerce at least 20 days prior to the day of the meeting. Registered shareholders may also be informed by mail. The convening text states the date, time and place of the meeting, the agenda, the proposals of the Board of Directors and the proposal of the shareholders who have requested the General Meeting or that an item be included on the agenda. No resolutions can be passed regarding matters that have not been announced in this manner, except regarding the proposals to convene an extraordinary Shareholders Meeting or to carry out a special audit. The annual report and the Auditors report are submitted for examination by the shareholders at the registered office of the Company at least 20 days prior to the date of the ordinary Shareholders Meeting. Reference to such submission and to the shareholders rights to request the conveying of these

49 Nobel Biocare Annual Report 2012 Corporate Governance Report 47 documents to them are included in the invitation to the Shareholders Meeting. 6.4 Agenda One or more shareholders whose combined holdings represent an aggregate nominal amount of at least 0.1 percent of the Company s share capital may demand that an item be included on the agenda of a General Meeting; such a demand must be made in writing to the Board of Directors at the latest 45 days before the General Meeting and include evidence of the required shareholding and shall specify the proposals. 6.5 Registration in the share register The Company maintains a shareholders register showing the names, first names, domicile, address and nationality (in the case of legal entities the registered office) of the holders or usufructuaries of registered shares. 7. Change of control and defensive measures 7.1 Duty to make an offer Under the Swiss Federal Act on Stock Exchanges and Securities Trading, shareholders and groups of shareholders acting in concert who acquire more than 33.3 percent of the voting rights of a company incorporated in Switzerland of which at least one class of equity securities is listed on the Swiss Stock Exchange must submit a takeover bid to all remaining shareholders. The Articles of Incorporation of Nobel Biocare do not contain any provisions on opting-out or opting-up (article 22 of the Swiss Federal Act on Stock Exchanges and Securities Trading). 7.2 Clauses on changes of control As of 31 December 2012, neither a member of the Board of Directors nor a member of the Executive Committee or management had a contract that provides for benefits upon termination of employment due to changes of control. However, all restricted shares granted in the Performance Share Unit Plan (PSUP) will immediately vest in the case of a change of control. 8. Auditors 8.1 Duration of the engagement and term of office of the lead auditor KPMG AG, Zurich, assumed the existing auditing engagement for the Nobel Biocare Holding Group on 29 March 2012 (first time elected in 2002). The Annual General Meeting elects the auditors for a term of one year, renewable annually. The auditor in charge is Mr Rolf Hauenstein. He assumed his responsibility in Auditing fees The following fees were charged for professional services rendered by KPMG AG, for the 12-month period ending 31 December: Fees in EUR Audit services Non-audit services Tax advice 5 43 Legal advice Transaction consulting Other non-audit services Total non-audit services Total Audit services consist of standard audit work that needs to be performed each year in order to issue an opinion on the consolidated financial statements of the Group and to issue reports on the local statutory financial statements. It also includes services that can only be provided by the Group auditor and includes audit of prospectuses, implementation of new or revised accounting policies, and internal control review of systems. Non-audit services include other services provided by auditors but not restricted to those that can only be provided by the auditor signing the audit report. 8.3 Additional fees See figures in the table in section 8.2 above. 8.4 Supervisory instruments vis-à-vis the auditors The Board of Directors performs its supervisory functions visà-vis the external auditors through the Audit Committee, which meets at least four times a year. The primary objective of the Audit Committee is to support the Board of Directors in monitoring the Company s internal control, accounting principles, risk management, financial reporting and auditing.

50 48 Nobel Biocare Annual Report 2012 Corporate Governance Report Please also refer to section 3.4 of this Corporate Governance report on page 39. The Audit Committee, on behalf of the Board of Directors, is also responsible for monitoring performance of the external auditors, checking their independence and coordinating their work with the internal audit. In addition, the Audit Committee monitors implementation of findings of external and internal auditors by management. The Audit Committee meets regularly with the statutory external auditors as well as with internal audit. Furthermore, the Audit Committee prepares proposals for the appointment or removal of the external auditors for submission to the Board, which then nominates the external auditor for election by the General Meeting. The Audit Committee reports to the Board of Directors about its discussions with the external auditors. At least once a year, the lead partner takes part in a meeting of the Board of Directors. The external auditors report their findings (from the mid-year limited review and from the full-year audit) at least twice a year to the Audit Committee and to the Board of Directors, in line with the respective legal requirements in Switzerland (OR728b Abs. 1). In 2012, the external auditors participated in four meetings with the Audit Committee and attended one Board meeting for a yearly presentation. Selection procedure: Selection of the external auditor last took place in Due to the independency criteria, only two worldwide operating audit companies were invited to submit proposals and at the end of this process KPMG was proposed based on regular business evaluation criteria such as service level, global presence and rate. The review of the performance of the external auditors and their compensation was performed based on answers of corporate functions and audited local organizations to a set of questions. The questions focused mainly on the efficiency of the audit process, professionalism of audit staff, technical proficiency/understanding of accounting policies, adequacy of audit fees and fairness of audit approach. Independence of the auditors is assessed and confirmed yearly. Non-audit services: Non-audit services up to EUR are at the discretion of the executive management. Any assignment above EUR requires approval from the Audit Committee. For each additional task, it is mandatory for the external auditors to confirm that it does not interfere with independency of their work as external auditors. 9. Information policy Nobel Biocare pursues an open and active information policy for the benefit of both the financial markets and the general public. All stakeholders should be given the same opportunity to follow Group developments. Publications are made available to all stakeholders at the same time. Nobel Biocare s reporting and transparency surpasses legal requirements. Investor and Corporate Relations (I&CR) is a staff function at Nobel Biocare and reports to the CFO, while the CEO holds ultimate responsibility for all external information to the financial community. The I&CR Department has the task of continuously providing factual, relevant information to shareholders and the stock market. The Board of Directors has issued guidelines to ensure that investors will be informed in a timely and appropriate fashion in compliance with the rules specified in registration contracts with the SIX Swiss Exchange. Insider trading policy In order to prevent insiders from benefiting from confidential information, the Board of Directors issued guidelines on how to deter both corporate insiders and external consultants from making use of confidential information. The Board of Directors has established so-called blocking periods to prevent insiders from trading during sensitive periods. The Board of Directors approved and implemented an amended Insider Directive with effect 8 February 2012, which is in compliance with the EU directive on Market Abuse. Financial reporting and contact information Nobel Biocare publishes the Group s financial accounts, together with interim reports, every quarter. These reports are published in English. A shorter media release of those is published in German. In each case, results are published before the start of stock market trading by way of the media, distribution to the subscribers on the website (see below) and a posting on the Company s website, A conference for investors and analysts takes place at least once a year. Telephone conferences for analysts and investors take place at least once every quarter with the publication of the interim results. At the Company offers access to its current share price, annual

51 Nobel Biocare Annual Report 2012 Corporate Governance Report 49 reports, interim reports, media releases and presentations made at investors and analysts conferences. The website also presents a financial calendar listing all relevant dates for investors. An subscription service provides updates and alerts: Executive Committee Members Name Born Nationality Position Appointed Richard Laube 1956 Swiss / USA Chief Executive Officer 2011 Oliver Walker 1969 Swiss Chief Financial Officer 2012 Hans Geiselhöringer 1968 German Executive Vice President Global Research, Products and Development 2010 Rolf Melker Nilsson 1960 Swedish Senior Vice President Global Sales and Customer Development 2011 Petra Rumpf 1967 German Senior Vice President Corporate Development, T&E and Special Channels 2007 Jörg von Manger-Koenig 1960 German Senior Vice President Legal & Compliance 2011 Please see page 45 for changes in the EC effective 1 January Financial calendar Annual General Meeting 28 March 2013 Ex-dividend date 3 April 2013 Record date 5 April 2013 Payment of dividend 8 April 2013 Interim Report 1, January March 25 April 2013 Interim Report 2, January June 22 August 2013 Interim Report 3, January September 7 November 2013 Full Year Report 18 February 2014 Contact information Company address Investor and Corporate Relations Nobel Biocare Holding AG P.O. Box, 8058 Zurich-Flughafen, Switzerland Phone , Fax or investor.relations@nobelbiocare.com Süha Demokan, Head of Investor and Corporate Relations Phone or suha.demokan@nobelbiocare.com

52 50 Nobel Biocare Annual Report 2012 Corporate Governance Report Richard T. Laube Oliver Walker Hans Geiselhöringer Jörg von Manger-Koenig Melker Nilsson Petra Rumpf