Leading innovation, leading growth.

Transcription

1 Leading innovation, leading growth. SPECIAL PRINT FOR INVESTORS, ANALYSTS AND MEDIA CONFERENCE FEBRUARY 18, 2014 ANNUAL REPORT 2013

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3 Contents. Annual review 2 Nobel Biocare at a glance 2 Key figures and Highlights Letter from the Chairman of the Board 8 Letter from the CEO 11 The dental market 14 Our strategy 15 Sustainability 20 Corporate governance 26 Corporate governance report 28 Board of Directors 34 Executive Committee 43 Remuneration report 51 Letter from the Chairman of the Nomination and Compensation Committee 52 Remuneration report 53 Share information 64 The Nobel Biocare share 65 Financial reporting 67 Key figures 68 Financial review 69 Risk management 74 Consolidated financial statements 78 Parent company accounts 132

4 2 Nobel Biocare Annual Report 2013 Nobel Biocare at a glance An innovative implant-based dental restoration company Nobel Biocare is a world leader in the field of innovative implant-based dental restorations from single tooth to fully edentulous indications. We offer dental implant systems, high-precision individualized prosthetics and CAD/CAM systems, diagnostics, treatment planning, guided surgery solutions and biomaterials. We support customers throughout their professional and practice development. Our headquarters is in Zurich, Switzerland, and our shares are listed on the SIX Swiss Exchange. Mahwah, USA Québec, Canada Zurich, Switzerland Global & EMEA headquarters Gothenburg, Sweden Karlskoga, Sweden Stockholm, Sweden Tel Aviv, Israel Yorba Linda, USA North America headquarters Belfeld, Netherlands Mechelen, Belgium Tokyo, Japan Hong Kong, China Asia/Pacific headquarters

5 Nobel Biocare Annual Report 2013 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 2,000 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 implant-supported restorations. A solution is available whatever the 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. Biomaterials Nobel Biocare offers biomaterials for soft tissue and bone regeneration under the brand name creos. 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 2013 Nobel Biocare at a glance Unique heritage of scientific and innovation leadership Replace Select TC featuring a 3 mm machined tissue-level collar. NobelProcera System revolutionizes dental CAD/ CAM with new products like implant bars. An implant like no other, NobelActive is released following an extensive prelaunch period. Procera Implant Br Zirconia available in fu NobelReplace implant system receives two new additions: Conical Connection and Platform Shift. NobelClinician Software is the first diagnostics and treatment planning software available on both Mac OS X and Windows platforms. NobelActive 3.0 provides solutions for areas with limited space. OsseoCare Pro the first drill unit operated by an ipad. NobelClinician Communicator app helps patients better understand their treatments. Nobel Biocare endows the Foundation for Oral Rehabilitation (FOR). First titanium Procera Abutment. New NobelProcera 2G System launched. Launch of Brånemark System Zygoma (machined) Open access available for NobelProcera Abutments. Replace launched, goes on to be the world s most used implant system. Regenerative product line beginning with creos xeno.protect announced. Dr. Paulo Maló treats first patient using the All-on-4 Treatment Concept. New proprietary cold-worked Grade 4 Titanium surpasses yield strength standards. TiUnite implant surface launched to increase the predictability and speed of osseointegration. Dr. Matts Andersson pioneers industrially machined dental prosthetic production. Prototype worksh established. (Predecessor to the Custom-mad device service.) Professor Per-Ingvar Brånemark first observes osseointegration. Professor Brånemark treats first patient with titanium dental implants. Launch of the Brånemark System, the world s first successful system of dental implants. Toronto conference hosted Zarb validates dental implan

7 Nobel Biocare Annual Report 2013 Nobel Biocare at a glance 5 For every patient need Nobel Biocare focuses on treatment concepts that enhance diagnostics and treatment planning, primary implant stability, improving hard and soft tissue interaction, guided implant insertion for less invasive surgical protocols and highly precise prosthetic solutions that provide unmatched restorative flexibility. NobelClinician Software Accurate diagnostics and treatment planning is the key to success. Reliable clinical evidence Built on a long heritage of scientific leadership. Our products and solutions have proven themselves in all types of clinical studies many of them following the more demanding one-stage protocol with immediate loading. idge ll-arch. Procera Bridge Alumina. Procera Implant Bridge Zirconia. CerAdapt densely sintered alumina abutment is introduced. Fully integrated digital treatment workflow steered by the NobelConnect online network announced. Launch of 3.3 Brånemark System MK III adds to narrow implant development expertise. The first Mod 10 Procera Scanner. Zirconia abutments now available. Procera Forte Scanner capable of single units to full-arch bridges. Snappy Abutment offers an efficient and predictable prosthetic solution. First Procera Implant Bridge provides enhanced esthetic solutions for multiple missing teeth. First angled abutment simplifies prosthetic access for diverging implant angles. Procera Bridge Zirconia. First ceramic CeraOne Coping. Immediate Function receives FDA clearance, unique only to Nobel Biocare. Groovy implants further enhance osseointegration with added grooves. NobelGuide is the first comprehensive system for 3D diagnostics, treatment planning and guided surgery. Launch of All-on-4 Treatment Concept for efficient and effective edentulous treatment. Time-efficient NobelSpeedy launches, offering bicortical anchorage and high initial stability also in soft bone. Introduction of costeffective overdenture solution on two implants. Launch of Brånemark System Zygoma TiUnite. Image Schüpbach Ltd. The moderately rough implant surface TiUnite has been documented in more than 220 publications with up to 11 years follow-up. op e First sterile implant packaging in the industry. by Professor George ts & osseointegration. Procera launched with fullyautomated industrial manufacturing. Brånemark introduces machined zygomatic implants designed to rehabilitate the upper maxilla. High quality and safety standards All Nobel Biocare implants and final Nobel Biocare restorative components are covered by a lifetime warranty. As a leading medical device company, we strive to manufacture and distribute all products with maximum efficiency while meeting the highest standards of quality. All-on-4 treatment concept giving patients their quality of life back.

8 6 Nobel Biocare Annual Report 2013 Key figures Key figures. Overview of key financials Revenue 2013 (EUR millions, % of total revenues) in EUR millions FY 2013 FY restated Revenue Gross profit Operating expenses Operating profit (EBIT) Profit attributable to owners of Nobel Biocare Cash and cash equivalents Basic earnings per share (EUR) Dividend per share (CHF) Share price at year-end (CHF) Figures for 2012 have been restated due to changes in the presentation of the income statement and the adoption of IAS 19R. For more information, refer to note 2 in the notes to the consolidated financial statements. 2 Including bank overdraft 3 Proposed dividend for 2013 APAC 18% 3 Americas 41% 2 1 EUR million EUR million EUR million EMEA 41% 1 Revenue growth at CER (%) 2013 revenue growth by region (% at CER) Return on average equity (%) EMEA Americas Asia/Pacific Gross margin (%) Operating (EBIT) margin (%) Cash flow from operations (EUR millions) Employees worldwide Personnel costs per employee (EUR thousands) Net debt/(cash) , , , , ,000 2,

9 Nobel Biocare Annual Report highlights highlights. First year with growth (CER) since 2007 Outperforming peers, regaining market share Underlying EBIT improved to 13.4% * Progress in all strategic pillars: Designing for Life Launch of various solutions to improve treatment Launch of NobelReplace Partially Machined Collar (PMC) Launch of NobelProcera 2G Scanner and open access Opening of NobelProcera Scan and Design Centers Launch of new NobelClinician TM with volume rendering and communicator app Launch of regeneratives product line creos TM Introduction of NobelConnect TM to facilitate treatment workflow Seven years of double-digit growth with NobelActive Partnering for Life Expansion of customer partnering activities Expansion of online store to all major markets Strengthened distributor partnerships in Eastern Europe Reduced sales force turnover, largest sales force in the field Higher revenue per customer Learning for Life New Global Course Catalog Very well attended corporate forums at major dental conferences Sold-out Global Symposium in NYC, participants up 50% from 2010 Endowment of a new Foundation for Oral Rehabilitation (FOR) Organizational efficiency and effectiveness Continued shift of resources to growth drivers Corporate function realignment to be completed in 2014 Redesigned order-to-cash process New quality and efficiency program NobelQuality 3 introduced * Excluding realignment costs and currency impact

10 8 Nobel Biocare Annual Report 2013 Letter from the Chairman Letter from the Chairman. Dear Shareholder, 2013 was a year of significant progress for Nobel Biocare, and we are pleased to report solid results. In a market environment that remains challenging, we managed to close the year 2013 with positive revenue development at constant exchange rates. We achieved an improvement in underlying operating margins, which was in line with our expectations, and we observed a substantial increase in the share price of the company. We are gaining market share from our peers in key markets. This is the result of our continuous efforts to rebuild and reshape Nobel Biocare. As expected, the overall market conditions and trends in 2013 were very similar to the year before. Many economies continued to be depressed, primarily in Europe, and this held back patients demand for discretionary out-of-pocket dental treatments. The US market was more promising, showing accelerated growth rates compared with the year before. Overall, the implant market worldwide is estimated to have grown by about 2%, with the premium companies generally showing little to no growth. In this continually challenging market environment we were able to further improve and strengthen our competitive market position. As you remember, in 2011, when Richard Laube joined us as CEO and started to form a new team, the priority was stopping market share losses while starting to build an organization that can perform in line, and eventually ahead of, competition. This would, in turn, generate sustainable and profitable market share gains. We also indicated that this would require some initial investments. By year-end 2013, I can say we are on track to reach these objectives. After we had closed the relative performance gap to our peers in 2012, we started to gain market share in Further, we are recognized as the innovation leader in the industry once more. This is shown by, among other signs, the high participation at our company events at industry conferences and by the sold-out New York Global Symposium, attended by over 2,000 dental professionals in June. We are deeply convinced that innovation leadership leads to growth. The dental profession has noticed our efforts and our customers appreciate our focus on helping them to treat more patients better. This is the foundation from which we can now build to further improve the financial performance of our company. This has so far only been visible in the underlying performance, less in the reported numbers. You will read in more detail about the execution and the performance of the company in the letter from the CEO. All in all, management and their teams have fully lived up to our expectations and the confidence we as the Board place in them. As in every company, there is still room for improvement but we are well on track with our efforts to rebuild Nobel Biocare and to deliver sustainable results on all levels. Over the last few years, the Board of Directors has constantly been strengthened with expertise and skills to provide advice and guidance, but also to fulfill its supervisory duty towards management in their day-to-day tasks. The setup with the various committees has proven to be a very efficient and effective way to drive progress. We initially started with the Audit and the Nomination and Compensation Committees, and over the last two years added three more committees in

11 Nobel Biocare Annual Report 2013 Letter from the Chairman 9 the areas of strategy, innovation and operational excellence. These additional committees allow for very productive collaboration with management and are each aimed at supporting one or more pillars of our strategy Designing for Life. Our strategy is driven by four clearly defined pillars: Designing for Life, Partnering for Life, Learning for Life, and organizational efficiency and effectiveness. The strategy is designed to build market share and improve operating efficiency in a continuous improvement process and in a sustainable manner. The Innovation and Technology Committee (ITC) has closely supported management in setting up a systematic and structured R&D approach. This has supported the development of what we believe is an industry-leading pipeline of products and solutions focused on simplifying the overall treatment process and enabling dental professionals to treat a broader range of indications better. Unlike in other industries, innovation in our sector needs about 5-7 years to establish itself in the market, not least as dental professionals request multi-year follow-up data on the performance of new products. The impact of our recently launched innovations will become increasingly evident as many are currently in the early phase of their life cycle. Customer experience is crucial for the success of our company. This starts at the first customer interaction, be it digital or personal, then continues with the reliable delivery of the products and their exceptional quality. It eventually ends with the payment for the products and services. This all has to be designed and executed in the most efficient and effective way possible. The Operations and Process Excellence Committee (OPC) is involved in a number of programs that have shown good first results, evident by the gross margin and savings in the general administrative area. As mentioned already, patients continue to be cautious with their spending. The challenge for us is to improve patient flow to the customer s practice, optimize the treatment process, and eventually lower the cost of treatment. At the same time, we are experiencing a very dynamic market environment with many entrants and departures in the low-price implant segment, as well as new companies and technology ideas emerging in the digital dentistry field. It is challenging to keep a clear focus while at the same time looking at all that is happening and maintaining a good overview of the relevant developments. Some ideas that might look promising at the beginning will never make it to market or fail to provide a sustainable business model. It is therefore of utmost importance that our specialist teams evaluate new technologies and that we review a potential fit into our strategy to help more customers treat more patients better. Here, the Strategy Committee (STC) is constantly challenging management about opportunities and potential risks in our sector. This includes a constant review of our approach to market with our two brands, Nobel Biocare and Alpha-BioTec. The latter plays an important role by allowing us to serve customers and specific markets with reduced and more affordable componentry, primarily for treating single-tooth indications. With Alpha-Bio Tec we are very well represented in the lower price solutions sector and gain very detailed insight about the market dynamics in this segment. This approach of using separately managed brands in selected markets has delivered good results so far. This brings me to the Nomination and Compensation Committee (NCC). After the implementation of a new performance management system to better align the participants interest with those of the shareholders, while at the same time helping to attract, reward and retain key talent in 2013, the NCC was primarily responsible for the preparation and implementation of the new ordinance against excessive pay. As you know, in March 2013 Swiss voters approved a constitutional amendment (generally referred to as Minder Initiative ) against excessive compensation, which came into effect as of January 1, Under the new rules a variety of amendments to the Articles of Incorporation and the Organizational Regulations will become necessary, all of which have to be implemented by the end of At Nobel Biocare we plan, in line with many other Swiss companies, to implement these amendments already in spring In the upcoming Annual General Meeting, you will also have to vote on a few matters that come into force right away, such as the obligation to elect the Chairman of the Board of Directors, the members of the compensation committee and the independent proxy. If the Shareholder Meeting approves the proposed changes to the Articles of Incorporation in 2014, we will have a solid basis for the binding say-on-pay vote in 2015 which will cover the 2016 compensation. Note that we will maintain, in line with international practice, a consultative vote on each past year s compensation report as we have already done for a numbers of years.

12 10 Nobel Biocare Annual Report 2013 Letter from the Chairman To further support the company in its progress and to ensure continuity, all Members of the Board of Directors will be standing for re-election at the Annual General Meeting on March 26, The Board of Directors will also propose to the AGM 2014 an unchanged distribution of CHF 0.20 per share as dividend. The payment will again be done in a way that will not incur withholding tax. To further enhance the expertise and skills of the Executive Committee, the Board of Directors has appointed the company s Chief Information Officer (CIO) Dietmar Bettio as Executive Vice President to the Nobel Biocare Executive Committee, effective January 1, Dietmar joined our company in 2012 and has significantly strengthened and optimized IT processes and business alignment over the past two years. He will help effectively and efficiently build on our existing accomplishments to further increase the value of our services for our customers. For financial year 2014, we have set clear strategic and operational priorities to build upon the results achieved in Our strategy going forward remains unchanged: We continue to focus on profitable growth, further strengthening the company s market position in order to gain additional market share: leading Innovation, leading growth. On behalf of the Board of Directors, I would like to thank you, our valued shareholders, for the trust and confidence that you have placed in us the Board, the Management and all employees of Nobel Biocare. We would also like to thank the employees of the company for their commitment and perseverance in returning Nobel Biocare to a leading position. Last, but not least, all these efforts are to help our customers, whom I would like to thank for their loyalty and support. Sincerely, Rolf Watter Chairman of the Board of Directors

13 Nobel Biocare Annual Report 2013 Letter from the CEO 11 Letter from the CEO. Dear Shareholder, Our achievements in 2013 give us confidence that your company, Nobel Biocare, has strengthened its competitiveness and is positioned for a period of sustainable revenue and profit growth. By continuing to work in the right way with our customers and consistently execute our strategy, Designing for Life, to its full potential, we believe we have a long and rewarding period of sustainable growth ahead of us. In 2012, our customers said Nobel is back now they say Nobel is ahead. This is a bold statement and carries with it all the usual caveats of market development and unforeseen events. Nevertheless, assuming markets behave in a way that is similar to 2013, we firmly believe we can continue to grow because we understand how to build sustainable market share, one customer at a time and one patient at a time. We better understand how to help and support our customers by consistently providing them with a positive experience, enabling them to treat more patients better with our superior products and solutions. In 2013, market conditions were far from ideal. While the US market was solid, markets in Europe were still challenged due to the weak economic environment, and the Japanese market showed first signs of a recovery only toward the end of In this overall market environment we grew our total revenue by 2.2 percent at constant exchange rates. The major sign of progress for us in 2013 was regaining market share with our core business, Nobel Biocare Implant Systems, which represents 85 percent of our total revenue. We estimate the total market for dental implants grew by about 2 percent in value in Nobel Biocare Implant Systems have grown by 3.3 percent in the same period. Both brands, Nobel Biocare and Alpha-Bio Tec, which serve the value segment, are growing market share and we are back on track and performing better than the underlying market. In line with our expectations, the performance of our CAD/ CAM individualized business was mixed in 2013, as the tooth-based prosthetic components continued to decline. The implant-based restorations, which are the focus of our strategy, grew, with the primary driver being the strong growth of overdenture bars in the US. Operating profit (EBIT) was impacted by realignment costs and adverse currency effects. Excluding these two effects, EBIT margin would have increased to 13.4 percent in 2013, which was at the upper end of our outlook of a 100 to 150 basis points increase over prior year. We are becoming a more predictable company. Our strategy, initiated in 2012, is first and foremost customer focused to help them treat their patients better. This customer- centric strategy is dynamic and we adopted and adjusted to market realities and opportunities. Our strategy builds from a number of competitive advantages for Nobel

14 12 Nobel Biocare Annual Report 2013 Letter from the CEO Biocare. In this regard, we have competitive advantage with the best global footprint in the industry and a material presence in every important country for implant-based dentistry. This allows us to execute our strategy more effectively and efficiently. It also allows us to capture, over time, the value inherent in the similarities of implant restorations. It allows us to capture learnings and best practices from one market and quickly and effectively reapply them to others. A second and important area of competitive advantage is the vast and deep knowledge of our Nobel Biocare team in all areas of the business, but especially in R&D, where we benefit from over 30 years of experience in basic research, development and scientific application. Our recent challenge has been to align and activate this deep and unique knowledge. Our customers increasingly understand and appreciate our strategy because our total value proposition truly enables them to treat more patients better. This in turn allows their practice and laboratories to be more efficient, effective and profitable. Subsequently, they grow market share and order more products from us. We succeed when our customers succeed in treating their patients. Designing for Life is a growth strategy for both Nobel Biocare and our customers worldwide. All three growth pillars, innovation, customer partnering activities and training and education - are working in a mutually reinforcing and integrated way to create a superior customer experience. It enables a unique collaboration and a long-term relationship which is mutually productive, sustainable and profitable for both parties. To execute this strategy requires the right people and excellent teamwork, superior products and solutions, and a deep commitment to our customers success in treating their patients. We are confident this effort is well on the way and is a more distinctive, sustainable and profitable approach in the long run. Designing for Life (Innovation): From planning to final restoration our innovations enable our customers to deliver a superior solution for their patients, whether for a single tooth or a full arch restoration and even for the most comprised patients. We continue to see great opportunities to improve treatment outcomes and treatment efficiencies; therefore we increased our spending in Research & Development by over ten percent at CER in 2013 versus These investments in R&D are still at an early stage of productivity and customer acceptance, but our integrated treatment workflow approach clearly strengthens Nobel Biocare s innovation leadership as well as its competitive position. Partnering for Life (Customer partnering activities): We focus on three simple objectives in designing partnering activities with our customers: 1) We want our customers to deliver a superior treatment outcome and patient satisfaction. 2) We want our customers to have high treatment acceptance from patients and, 3) We help our customers increase patient traffic to their practice, including patient referrals to laboratories or surgical clinicians. In 2013, we saw our implant fixture growth increase by over 5 percent (CER) as our customers treated more patients. Learning for Life (Training and Education): We have fundamentally re-engineered our approach to training and education in the past two years by placing more resources on hands-on, skill-based training. An example of this was our New York Global Symposium, where over a four-day period, we held over 26 master courses and hands-on sessions involving over 100 trainers and over 2000 participants. Another good example is our Global Course Catalog with over 90 of the world s top clinicians and technicians giving over 100 hands-on training courses. To treat patients better is a skill requiring physical practice. In 2013, we also established the Foundation for Oral Rehabilitation (FOR) in 2013 to help dental professionals stay at the forefront of patient treatment understanding. FOR s primary education tool is web-based learning, reaching thousands of dental professionals efficiently and globally at the pace they wish to learn at. As a new generation of digitally literate dental professionals begin to treat patients, their learning patterns are significantly different to those of the first generation of implant- restoring dental professionals. FOR is designed to meet this learning need and is rapidly proving to be an exciting platform for cutting-edge learning among a new generation of dental professionals. The three growth drivers are supported by a fourth strategic pillar: A more Effective and Efficient Nobel Biocare. We have begun to reshape Nobel Biocare by reallocating operating expenses. Expenditure has been moved away from internal transaction costs toward more customer-focused efforts and growth drivers such as R&D or our sales representatives in growing markets such as the USA, China and India. Our employee number has slightly decreased since 2011, to 2,487 at the end of 2013 from 2,496 a year ago, but this understates the significant reshaping of Nobel Biocare for future growth. We have significantly more people in R&D, sales, and training and significantly less in administration. Our employee turnover has also decreased significantly from above 20% in

15 Nobel Biocare Annual Report 2013 Letter from the CEO to 12% in 2013 (about in line with industry peers) and to mid-single digits in our sales organizations where continuity of the customer relationship is key to revenue growth. We have initiated a series of very specific company-wide programs to reduce waste and to improve quality. We also initiated a program to reduce manufacturing costs and improve upon our high quality standards. I would like to express our gratitude to our shareholders for their trust, loyalty and interest in Nobel Biocare. I would like to also thank our customers and business partners for the fruitful relationship and, I would particularly like to thank our team across the globe for their daily efforts in creating an excellent customer experience. Sincerely, Richard Laube CEO

16 14 Nobel Biocare Annual Report 2013 The dental market The dental market. Facts, trends and dynamics. Facts About 1.7 million licensed dentists worldwide, of which only just over 10% place implants About 10 million patients treated per year with over 12 million implants placed Still very little penetration with implant treatments, in particular for fully edentulous patients (only 1% of missing teeth are treated with implants) due to lack of education of dental professionals at dental college as well as high out-of-pocket treatment cost An estimated 50% of all implants placed are single-tooth restorations, with slightly more in the posterior then in the anterior An estimated 42% of placements are multi-tooth restorations primarily 3-unit bridges and only 8% of all implants placed are involved in full-arch restorations, treating the edentulous patient Trends Increasing awareness of implant treatment especially for edentulous patients (internet, practice advertising) leading this to be the fastest growing segment in the industry Higher demands by dental professional and patients on treatment efficiency and effectiveness (number of visits, graftless solutions, esthetics, function and durability) More proactive direct doctor-to-patient communication Continued increase of implants as a treatment option by dental professionals Increased focus on practice profitability Increasing number of integrated dental clinics where all treatment teams are at one location Dynamics Stable number of about 200 companies offering dental implants, mostly offering components for simple indications Most companies differentiating over price, less and less focus on product innovation Dynamic and growing segment of Digital Dentistry (Treatment planning, Computer Aided Design linked with Computer Aided Manufacturing for prosthetics) with about 100 suppliers and different delivery methods (chair side, in-laboratory or central milling) Increasing share of women in dentistry Rapid growth of total solution providing clinics and corporate dentistry Patient indications Single tooth posterior 3.2 mio (27%) Single tooth anterior 2.8 mio (23%) Edentulous / compromised 1.0 mio (8%) Multiple teeth 5.0 mio (42%) 12 million implants placed in 2012

17 Nobel Biocare Annual Report 2013 Our strategy 15 Our strategy Designing for Life from underperformance to leading growth in 24 months marks the second year of our Designing for Life strategy and significant improvements are visible across all areas of the company and relative to our peer set. While Nobel Biocare was the innovator and pioneer of modern implant-based dentistry since 1965 when Professor P-I Brånemark treated his first edentulous patient, we unfortunately encountered a number of years of business underperformance and loss of market share between 2008 and To rebuild Nobel Biocare and our leadership we activated our strategy in The theme for the first year was titled Brilliant at the basics as we had to re-establish some fundamental activities, processes and business practices to work more effectively with customers. Our priorities in 2012 were: 1) to re-establish innovation as our primary growth driver by creating a valuable innovation pipeline, 2) to redesign our customer efforts from selling transactions to supporting our customers and helping them grow their practice or laboratory, 3) to redesign organizational processes and work patterns that led to inefficiencies. Our results in 2012 brought us more or less in line with our peers was our second year of Designing for Life. Not only did we close the gap, but we opened a modest lead in revenue growth relative to peers. To our first three strategic pillars from 2012, we added a fourth pillar: Learning for Life. As we observed customer growth we realized those clinicians and laboratories who received more skill based training to perform better restorations for their patients were treating more patients and growing their revenue will be our third year of Designing for Life and we are continually improving, learning and becoming more effective and efficient in helping our customers to grow. Nobel Biocare s mission Passionate and proud about making a real and lasting improvement in patient s quality of life Nobel Biocare s contribution Help more customers treat more patients better with our superior products and solutions Our performance objective Grow market share profitably Four strategically integrated pillars Designing for Life Superior innovation... beyond products Partnering for Life Customer-tailored business-building activities Learning for Life Exciting training, education & activation (TEA) programs Organizational efficiency and effectiveness Continual improvement

18 16 Nobel Biocare Annual Report 2013 Our strategy The strategic pillars for 2014 build on what works Designing for Life: Superior innovation beyond products Our aspiration is to improve quality of life for patients through excellence in implant-based dental restorations, designing and creating products, components or software, integrated in an efficient workflow of such superior design and quality that the treatment lasts for the life of the patient.in short, to give patients fully functional and natural-looking dental restorations that aspire to last a lifetime with a safe, affordable treatment process that is kept as short as possible. Our range of products and solutions is all designed to fulfill various requirements that help customers treat more patients better: Our portfolio is superior in many respects and, from a single-tooth posterior restoration to the most complex total oral rehabilitations, there is virtually no patient we cannot help our customers to treat. We have competitive advantage in full-jaw graftless restorations, anterior esthetic restorations, and in treatment productivity. The integration of the fully integrated and more efficient 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 are also constantly working to improve the efficiency of the entire treatment workflow and to make the treatment team more effective and efficient. Our digital tools enable more efficient treatment. NobelClinician is emerging as the premier implant and restorative planning software and is available also on Mac, the preferred computer platform for many dentists. We have distributed over 6,000 licenses to enable customers to place our implants more accurately and in optimum positions for superior restorations. NobelConnect enables superior teamwork among the surgical clinician, the restorative clinician and the laboratory producing the teeth by sharing the same patient treatment plan. The new NobelCommunicator app allows the patient to review their treatment plan for greater understanding and treatment acceptance. We have also extended our conical connection implant portfolio. The implants lines with this more advanced connection are growing faster than the other implant lines in the portfolio and will soon represent the majority of our implant sales. On our Computer Aided Design (CAD)/Computer Aided Manufacturing (CAM) individualized business, we have continued to open our system to receive CAD files to produce superior restorative components from more sources. We opened our second Scan and Design center focusing initially on components for full-arch restorations such as overdenture bars. We can now receive CAD files from 3Shape scanners producing NobelProcera customized abutments. This will effectively triple the number of scanners able to send CAD files to our milling centers. We have introduced our new NobelProcera 2G Scanner which can dramatically improve laboratory production efficiency as it cuts scan time in half and requires significantly One integrated treatment workflow, countless benefits One integrated treatment workflow*, countless benefits. NobelConnect Clinical diagnostics and treatment acceptance Digitizing prosthetic information Treatment planning Communicate treatment plan Production of surgical template Implant surgery Prosthetic design Prosthetic delivery Restoration placement The first step to treatment success: A (CB)CT scan Take a scan of the complete dental Clinical arch. Just a standard (CB)CT scan is fine. Clinical pictures can be viewed in NobelClinician. Obtain treatment acceptance before diagnostics making further investments. and treatment acceptance Create a model surface scan Take a detailed look at the soft tissue with the NobelProcera 2G System s Digitizing precise model scan. Want to see the esthetics? There s also option to scan diagnostic tooth setup. prosthetic information Implant planning based on the facts Visualize the patient s (CB)CT data together with the intra-oral situation thanks to NobelClinician s smart Treatment fusion technology. Immediately see what a patientplanning look like. specific surgical template would Effectively explain the treatment plan Collaborate and communicate with your treatment partners through Communicate treat- the NobelClinician Viewer, via the ipad app. ment plan NobelClinician Communicator app or by sending the treatment plan report. Help your patient understand with 3D images and clinical pictures, all shown via the the NobelClinician Communicator Experience enhanced precision of fit Place implants precisely with a custommanufactured surgical template that is Production unique to your treatment plan. of surgical template Benefit from top quality, high accuracy, and prompt delivery every time thanks to our centralized production process. More predictable implant placement Predictable restorative outcome Every smile is different. Get the optimal Choose between guided pilot drilling result with individualized prosthetics. only or fully guided implant insertion. Prosthetic Enjoy maximum design flexibility and Record and document final implant save time with easy-to-use CAD tools. torque values or whatever surgical information you need with OsseoCare Pro. your treatment outcome by using Further increase the predictability of design prosthetic data that is aligned to your treatment plan. Go straight to the source of optimal restorations. Integrate directly with NobelProcera production facilities. with NobelGuide Implant surgery Consistent precision of fit Centralized production in state-of-theart manufacturing sites which comply with medical device standards. Optimum material and manufacturing processes for maximum predictability Prosthetic in quality and precision of fit. delivery Achieve optimal esthetics and function Choose the best possible restoration from a comprehensive range of pros- Restoration thetic solutions. placement Give your patients a natural-looking restoration that s designed to last a lifetime. Our superior products and solutions are designed to give patients a treatment result that s both functionally and esthetically excellent. *For partially edentulous patients only.

19 Nobel Biocare Annual Report 2013 Our strategy 17 less handling and training to operate. Today over 25 percent of Nobel Biocare implants placed have a screw-retained Nobel- Procera CAD/CAM component as part of the restoration as we increasingly offer an integrated and superior treatment solution. The digitization of our world has also changed the way dental professionals, can, and should work, Digital dentistry opens many opportunities to innovate and improve the treatment workflow for a successful outcome for every patient treated. It allows dental professionals to treat patients that they could not think of treating only a few years ago. Given the low penetration of treatments with implants compared with traditional cement-retained crowns and bridges, we are convinced there is still significant innovation and improvement potential with regards to treatments with dental implants. This is why we drive innovation beyond actual products to many areas of the treatment process. A more predictable outcome and the optimization of the treatment flow are the ultimate value-add and consequently lead to higher profitability for our customers. We identified over 400 steps in the process, starting with the initial patient consultation, diagnosis, treatment planning, treatment modality, individualized CAD/CAM restorative components, interdisciplinary treatment cooperation, handling and follow up. There are even more if we include proper patient education to raise treatment acceptance. As an example, some years ago the treatment modality for an edentulous patient would have included bone augmentation and would have required months from consultation to a final prosthetic restoration. Today, with Nobel Biocare s All-on-4 treatment concept the complete procedure time can be accomplished within 4-8 weeks and with higher success rates and patient satisfaction. To drive our competitive advantage in innovating the treatment workflow, we have significantly increased our R&D efforts in 2013 and increased investments by over ten percent compared to the year before. To remain focused, we apply three principles before we initiate any innovation project and it must address at least one of nine relevant clinical areas: Partnering for Life: Customer-tailored business-building activities We want to support dental professionals in increasing the patient flow and developing their practice. When our customers increase market share of patients, we increase our market share of components. We offer them a toolbox of initiatives and activities to make the workflows more efficient and to increase the number of referrals. We also show them how to use networking platforms, study clubs and esthetic alliances. Design principles for increased efficiency and efficacy Innovation themes 1 Minimally invasive Patient focused Innovation 2 Immediate function 3 Prosthetics / esthetics & function 4 Treatment of the fully edentulous 5 Osseointegration & bone preservation Clinically relevant Evidence based 6 Soft tissue health 7 Ease of use 8 Affordability through efficiency 9 Biologics

20 18 Nobel Biocare Annual Report 2013 Our strategy Our customers desire a partner to grow their practice with, a partner that can help them develop their practice and laboratories over many years, even decades. With this in mind, we have been re-engineering our country commercial organizations for the past two years, moving from a more transactionand price-driven organization to one where our teams can now partner with customers to help build the customer s practice. We have focused on three simple objectives in designing partnering activities with our customers: we want our customers to deliver superior patient treatment satisfaction, we want our customers to have high treatment acceptance from their patients and we help our customers increase patient flow to their practice, including patient referrals to laboratories or surgical clinicians. In short, we help our customers treat more patients better and they pay a premium, not only because of our superior products, but also because of our superior support. This support goes well beyond the day-to-day service levels expected by customers and is very valuable to them. It has been difficult to train the organization to this standard of performance, and there is still much work to be done, but this partnering is now a true competitive advantage for Nobel Biocare. Learning for Life: Exciting customers with skills- and knowledge-buidling programs Our comprehensive training program supports dental professionals along every step of the treatment workflow and also at every stage of their professional development. We have also fundamentally changed our approach to training and education in the past two years by placing more resources and holding more courses on hands-on, skills-based training and away from podium- and lecture-based education. We believe in peer-to-peer training through renowned expert professionals worldwide. An example of this was our New York Global Symposium, where over a four-day period, we held over 26 master courses and hands-on sessions involving over 100 trainers and over 2,000 participants. While we did hold lecture sessions, the heart of the program was smaller hands-on training and discussions. Another good example is our Global Course Catalog with over 90 of the world s top clinicians and technicians giving over 100 hands-on training courses. We have four areas where this training is supported: Diagnosis and treatment planning Initial surgical procedures Advanced surgical procedures and, CAD/CAM techniques and prosthetics. This focus on hands-on training is well integrated with our first two growth drivers and again helps our customers learn new skills and techniques to treat more patients better. We have also established the Foundation for Oral Rehabilitation (FOR) in 2013 to help dental professionals stay at the forefront of patient treatment understanding. FOR s primary education tool is web-based learning, reaching thousands of dental professionals efficiently and globally at a pace they wish to learn at. As a new generation of increasingly digitally literate dental professionals begin to treat patients, their learning patterns are significantly different than the first generation of implant restoring dental professionals. FOR is designed to meet this learning need and is rapidly proving to be an exciting platform for cutting-edge learning among a new generation of dental professionals so they too can treat patients better. Total quality execution AND improved organization efficiency Our ultimate performance objective is to rebuild market share profitably and create shareholder value. Subsequently, we are constantly reviewing and improving our processes as well as the allocation of our resources. We are also constantly reducing the complexity of our organization and streamlining processes while adjusting our resources to the changing market environment. The required changes and business improvements are done in such a way so as not to disrupt the efforts made with our growth drivers. All in all, over 300 positions, or over 10 percent, of Nobel Biocare positions, have been reassigned in the past 24 months. Efficiency gains can only be materially and sustainably executed and realized when the growth pillars are in place and are beginning to work. We achieved this in 2013 with accelerating revenue growth. The first benefits from the process improvements resulted in an improvement of the underlying cost/ revenue ratio enabling the acceleration of our growth driver initiatives.

21 Nobel Biocare Annual Report 2013 Our strategy 19 Over the last two years we have initiated several projects that will yield significant benefits in the near future: the alignment of the center (HQ) functions, NobelQuality 3, and the order-tocash project will ultimately lead to simpler and more reliable business processes with our customers. A new procure-to-pay program has been initiated to tackle the indirect purchase cost block which currently is over 150 million euro. In all of this, and the ongoing transformation of the company, our people and continuity play an important role. The turnover rate in our organization has come down dramatically and is currently below our industry average. Designing for Life is not a short-term strategy. It is about rebuilding a great company for sustainable performance. It is designed to help our customers treat more patient better and consequently, bring Nobel Biocare back to the leading position in the industry. Based on the results of the first two years we are confident that this strategy and its execution by our 2,487 employees has put us on the right track again. We are confident that we are well positioned to deliver on our performance objective to gain market share profitably. CER revenue growth in percent Designing for Life Underperformance Closing the gap Beginning to lead * * Nobel Biocare Straumann Biomet Zimmer Dentsply *Q3 year-to-date for Straumann and Dentsply

22 20 Nobel Biocare Annual Report 2013 Sustainability 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 beyond our products, solutions and services to our actions as a responsible corporate citizen. XX 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 Nobel Biocare Annual Report 2012 XXXXXXXXXXXXXXXXXXX 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: very high Human Resources Training & Education Research & Development Innovation Products 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

23 medium Public funding Operations Standards for Suppliers and Monitoring Occupational Health & Safety Diversity & Equal Opportunities Nobel Biocare Annual Report 2013 Sustainability 21 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 2013, we focused our HR strategy to further improve our ability to attract, develop, and hold on to skilled people. 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. 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 expert 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 completed a talent pipeline and succession planning program to ensure that we have the right skills in place and a successor if a key employee leaves the organization. The current skill level of each position holder and potential successor has been assessed, and we tailored development plans for each one. For all employees a training program on project management was launched in A joint project management methodology helps to increase the efficiency and effectiveness of our work, as it requires the prioritization of tasks, capacity management, ensures alignment with our strategy and enhances the quality of all projects in term of work deliverables. 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. The next survey will be done in 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, science and development activities on core areas where we can have the greatest medical and commercial impact best meeting our customers and their patients needs. Recognizing the importance of innovation for Nobel Biocare, we have shifted considerable focus from other business areas to these areas in line with our strategy.

24 22 Nobel Biocare Annual Report 2013 Sustainability Selected publications on clinical trials 2013 Products/Concepts Researchers Follow-up Number Cumulative Publication of implants/ survival rate frameworks (CSR) TiUnite implants NobelActive Kolinski ML, Cherry JE, et al. 3 years % J Periodontol Jun 27. [Epub ahead of print] NobelActive (NA) Gultekin P, et al. 15 months 43 NA 100% NA Int J Oral Maxillofac Implants May-Jun;28(3): NobelReplace Tapered Groovy (NR) 50 NR 100% NR Replace Select Tapered Pettersson P, Sennerby L. 5 years % Clin Implant Dent Relat Res Jul 2. [Epub ahead of print] Brånemark System Mk III & Mk IV TiUnite Mozzati M, Gallesio G, et al. 11 years % J Oral Implantol Oct 31. [Epub ahead of print] NobelDirect Baer RA, Shanaman R, et al. 3 years % Implant Dent Aug;22(4): Long-term TiUnite superiority over machined surface Brånemark System TiUnite Polizzi G, Gualini F, et al. 9 years 243 TiUnite 96.6% TiUnite Int J Prosthodont Jul-Aug; 26(4): Machined 247 Machined 90.3% Machined Brånemark System TiUnite Rocci A, Rocci M, et al. 9 years 65 TiUnite 95.5% TiUnite Int J Oral Maxillofac Implants May-Jun;28(3): Machined 55 Machined 85.5% Machined NobelProcera NobelProcera CAD/CAM zirconia Pozzi A, Holst S, et al. 5 years 26 ZiB 100% ZiB Clin Implant Dent Relat Res Aug 5. cross-arch implant bridges (ZiB) [Epub ahead of print] TiUnite implants 170 implants 100% implants NobelProcera CAD/CAM Mandibular Katsoulis J, Wälchli J, et al. 4 years 101 (Ti ODB) 95.4% TiODB Clin Implant Dent Relat Res Aug 5. Titanium Over Denture Bars (Ti ODB) [Epub ahead of print] Replace Select Tapered 98.5% implants NobelGuide TiUnite implants Polizzi G, Cantoni T. 5 years % Clin Implant Dent Relat Res Jun 23. [Epub ahead of print] All-on-4 treatment concept Zygoma Maló P, de Araújo Nobre M,et al. Up to 7 years 747 Zy 97.3% Zyg Clin Implant Dent Relat Res Sep 4. [Epub ahead of print] NobelSpeedy 975 NS 97.9% NS NobelProcera titanium framework 352 TiFDP 99.7% TiFDP fixed dental prosthesis (TiFDP) Branemark System Balshi TJ, Wolfinger GJ, et al. Up to 5 years % implants J Prosthodont Jul 25. [Epub ahead of print] Various screw retained fixed dental 99.0% FDP prosthesis (FDP) (milled Titanium, all-acrylic resin) 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 superior implant and tooth-based treatments more safely and effectively. For this we have established collaborations with a global network of scientists, universities, and industry partners. As technologies and treatment solutions advance rapidly, these collaborations with academic institutions and other leading companies allow us to share risk and gain access to new knowledge and advanced technologies. We are also involved in numerous clinical research collaborations with hospitals, private clinics and physicians. We are driving our R&D strategy with the goal of delivering the next generation of products, solutions and treatment concepts that will support our customers in treating patients more predictably and efficiently with dental implants. 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. We protect the results of our R&D with patents. As we substantially invest in R&D, we also devote the necessary resources to protect our innovations and ultimately our investors. 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.

25 Nobel Biocare Annual Report 2013 Sustainability 23 We produce products responsibly, and the safety and efficacy of our products is paramount. We are committed to research at every level: basic, pre-clinical and clinical. We also apply high clinical and regulatory standards to all new products, which means that before we launch a new product, we conduct high-quality clinical trials and in-vitro testing to monitor its performance and safety. A significant emphasis is on 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 and implant borne restorations, new surface technologies, soft and hard tissue characteristics and new surgical treatment procedures. To document the longevity, safety and efficacy of our products and solutions, we conduct comprehensive long-term clinical research studies. Wherever and whenever we conduct them, we do so in accordance with the highest ethical and patient safety standards that are independently reviewed and approved. Complementary to our comprehensive pre-clinical studies plus clinical research, we perform long-term post-market surveillance. Clinical trials are at the heart of our R&D effort. Our studies run for several years with results published in international peer-reviewed scientific journal or as extended abstracts or posters at major international scientific congresses. Most of our studies are conducted using demanding treatment protocols to measure how our products perform under the most rigorous conditions. Operations - NobelQuality 3, a concerted approach to quality excellence 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. Over the last couple of years, Nobel Biocare has been steadily focusing on advancing and optimizing its high precision production technology and its state of the art Supply Chain network. In all this, becoming an even more reliable partner in creating value for our customer was always the guiding objective. In the first quarter of 2013, the NobelQuality 3 program was constituted. Tying to a solid history of operational excellence, we believe that this program will take us to the next level in terms of customer orientation and best-in-industry product quality. This is a unique quality excellence program which has been custom-designed within our organization to achieve maximum impact in terms of awareness, employee involvement and value generation. We see the program as a well-directed investment in our organization which will result in a competitive edge and a solid foundation for sustainable growth. It is of importance to us not to roll-out an instant recipe for short-term performance improvements, but instead to design a program compatible with our needs and with our staff in the driving seat. We have chosen to work with the proven process improvement methodology Lean Six Sigma as an underlying concept for our three program cubes : people quality, process quality and product quality. The first cube people quality is of fundamental importance in the program. Key ingredients are a strong and positive leadership style, an intensified learning and collaboration experience and a broad level of program involvement that will ultimately drive customer-centered quality thinking. With the second cube process quality we tackle non-value adding activities and output variability in processes throughout our entire Supply Chain. The combination of Lean and Six Sigma is a powerful vehicle that addresses the key dimensions of customers expectations: Predictable and reliable delivery service and superior product quality. At the same time the elimination of non value-adding activities and the increase in the capability of our processes deliver significant efficiency gains. The third cube product quality is a consequential result of successful implementation of the two previous elements. With a workforce being passionately committed to creating value for the customer and processes which are being rigorously measured and updated against quality critical parameters, the program will be fulfilling its paramount objective: superior product quality. Initial results: Throughout our entire supply chain we have identified the processes that are most critical for reliable delivery against customer requirements. To those prioritized areas we have dedicated employees trained in professional, data-driven problem solving and lean manufacturing. Initial results include service performance improvements such as reduction of process throughput times. Other achievements include substantial improvements in our supply chain planning processes and continuous advancement of our quality system that will sustain our high-quality operations in the long term.

26 24 Nobel Biocare Annual Report 2013 Sustainability Next steps: One of the key themes in 2014 will be the global roll-out of improvements and best-practices that have been developed during the first year of the program. With the mutual exchange of achievements we will see a multiplication of the benefits realized to date and our processes will be harmonized on a new level of performance. With a tailored change management approach we will continue to equip our leaders with skills and techniques to gain broad acceptance and participation for this important program. Fulfilling regulatory standards As a healthcare company, we operate in a regulated industry. We cooperate with regulators in making certain that our products are manufactured to the highest standards. We not only meet, but also constantly aim at exceeding regulatory standards. We continually invest in upgrading and improving our manufacturing facilities and business processes. We comply with the requirements of all relevant authorities and regulatory bodies, such as the Food and Drug Administration (FDA) in the US, or the BSI (British Standards Institute). In 2013, like in previous years, our facilities went through successful audits and inspections from the BSI and the FDA. Quality Policy When Professor P-I Brånemark treated his first edentulous patient in 1965, our commitment to the highest possible quality standards became a cornerstone and guiding principle for all of Nobel Biocare s efforts. At Nobel Biocare quality is all-encompassing and we are on a continual quality improvement journey: Continually improving the quality of life of patients treated with our superior products and solutions. Continually improving the quality of our products and solutions through our Designing for Life innovations. Continually improving the quality of customer experience through our Partnering for Life activities. Continually improving the knowledge and skills of our customers through our Learning for Life efforts. Continually improving our employees skills, knowledge, teamwork and productivity. Continually improving the efficiency and effectiveness of our organization to ensure a total quality customer experience. Our Quality Management System allows us to review the progress of our quality journey on a regular basis to assess its effectiveness and suitability. The system ensures that we not only fully comply with regulatory requirements, more importantly, that we attain the highest standard of quality in the industry to the benefit of our customers and their patients. We have been committed to quality since It has been the foundation of our success in the past, is our focus at improving quality is something we will remain committed to in future. 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 2013, we can report that no major complaints were lodged in any audits or reviews. We consider lack of access to treatment 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 non-profit 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 1,800 procedures the institute currently carries out annually. In November 2010,

27 Nobel Biocare Annual Report 2013 Sustainability 25 Nobel 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, re-inforce 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 eco-friendly transport options. Because we have manufacturing plants on three continents, we keep product shipping distances to a minimum. Furthermore, we are implementing a new packaging and logistics program where order bundling will minimize the total number of packages sent.

28 Corporate Governance report. Ordinance against excessive compensation (VegüV) 27 Corporate Governance report Group structure and shareholders Capital structure Board of Directors Executive Committee Compensations, shareholdings and loans Shareholders participation rights Change of control and defensive measures Auditors Information policy 50

29 Nobel Biocare Annual Report 2013 Corporate Governance report 27 Ordinance against excessive compensation (VegüV) In March 2013, Swiss constituents approved an initiative against excessive compensation, which led to an ordinance by the Swiss Federal Council on the basis of Article 95 paragraph 3 and Article 197 no. 10 of the Swiss Federal Constitution. The ordinance against excessive compensation (VegüV) entered into force on January 1, Under this new ordinance a variety of amendments of the articles of incorporation and the organizational regulations will be necessary. All new provisions of the ordinance have to be implemented by January 1, Nobel Biocare already fulfills a substantial part of the provisions and has opted for an early adoption of the remaining provisions. Please find below a detailed table listing the new provisions and each effective date, and an overview of Nobel Biocare s timeline for the implementation of these provisions. Provisions of the Ordinance Applicability of the Implementation of new provisions the new provisions by Nobel Biocare Business Consultative Compensation report year 2014 vote since 2010 Prohibition of severance payments and upfront payments Jan 1, 2014 Implemented Management may only be delegated to private individuals Jan 1, 2014 Implemented Corporate proxies and representation of shareholders by depository banks are prohibited Jan 1, 2014 Jan 1, 2014 Implemented Individual and annual election of the members of the Board AGM 2014 since 2004 Annual election of the Chairman of the Board by AGM AGM 2014 AGM 2014 Individual and annual election of the members of the compensation committee by AGM AGM 2014 AGM 2014 Annual election of the independent proxy by AGM AGM 2014 AGM 2014 Agreements with Members of the Board of Directors (BoD) and Executive Committee (EC) have to be adapted to the Ordinance Dec, Amendments to the articles of incorporation AGM 2015 AGM 2014 Amendments of Compensation Committee Charter AGM AGM makes binding vote on compensation of members of the BoD and of the EC AGM 2015 AGM 2015 Implemented Voting instructions to the independent proxy must be possible also by electronic means AGM 2015 since 2012

30 28 Nobel Biocare Annual Report 2013 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 October 29, 2008). All information in this report is per December 31, All the comments regarding Articles of Incorporation and/or Organizational Regulations refer to the versions dated April 6, 2009 and March 28, 2013, respectively. 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 December 31, 2013 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 Global Operations Frank Mengis Global Human Resources Walter Ritter Corporate Development, T&E & Special Channels Petra Rumpf Effective January 1, 2014, Dietmar Bettio (formerly Böhm), Chief Information Officer, was appointed member of the Executive Committee. Please refer to section 4.1 Members of the Executive Committee on page 43 for further information on the Executive Committee as of December 31, 2013.

31 Nobel Biocare Annual Report 2013 Corporate Governance report 29 Subsidiaries as of December 31, 2013 City and country Nature of Share capital Percentage held Percentage held of incorporation business in thousands directly by the by the Group parent company Nobel Biocare Australia Pty Ltd. Macquarie Park, Australia Sales AUD Nobel Biocare (Österreich) GmbH Vienna, Austria Sales EUR Nobel Biocare Belgium NV Groot-Bijgaarden, Belgium Sales EUR Medicim, NV Mechelen, Belgium Innovation EUR Nobel Biocare Brasil Ltda São Paulo, Brazil Sales BRL Nobel Biocare Canada Inc. Richmond Hill, Canada Sales CAD Nobel Biocare Procera Services Inc. Québec, Canada Administration CAD Innovation and BioCad Medical Inc. Québec, Canada production CAD Nobel Biocare Asia Ltd. Hong Kong, People s Republic of China Sales HKD Nobel Biocare Commercial (Shanghai) Co. Ltd Shanghai, People s Republic of China Sales USD Nobel Biocare Trading (Shanghai) Co. Ltd. Shanghai, People s Republic of China Sales USD Nobel Biocare Danmark A/S Hilleröd, Denmark Sales DKK Nobel Biocare Suomi Oy Helsinki, Finland Sales EUR Nobel Biocare France S.A.S. Bagnolet, France Sales EUR Nobel Biocare Deutschland GmbH Cologne, Germany Sales EUR Nobel Biocare UK Ltd. Uxbridge, Great Britain Sales GBP Nobel Biocare Magyarország Kft Budapest, Hungary Sales HUF Nobel Biocare India Pvt. Ltd. Mumbai, India Sales INR Alpha-Bio Tec Ltd. Petach Tikva, Israel Production and sales ILS Nobel Biocare Italiana S.r.l. Milan, Italy Sales EUR Nobel Biocare Japan K.K. Tokyo, Japan Sales JPY Nobel Biocare Procera K.K. Narashino-Shi, Japan Production JPY Nobel Biocare Lithuania Pty. Ltd. Vilnius, Lithuania Sales LTL Nobel Biocare México, S.A. de C.V. Mexico City, Mexico Sales MXN Nobel Biocare Nederland BV Houten, the Netherlands Sales EUR Nobel Biocare Distribution Center BV Belfeld, the Netherlands Distribution EUR Nobel Biocare New Zealand Ltd. Auckland, New Zealand Sales NZD Nobel Biocare Norge AS Son, Norway Sales NOK Nobel Biocare Polska Sp.z o.o. Warsaw, Poland Sales PLN Nobel Biocare Portugal S.A. Vila Nova de Gaia, Portugal Sales EUR Nobel Biocare Russia LLC Moscow, Russia Sales RUB Nobel Biocare Singapore Pte Ltd. Singapore Sales SGD Nobel Biocare South Africa (Pty) Ltd. Woodmead, South Africa Sales ZAR AlphaBio Tec Dental Implants SA Woodmead, South Africa Sales ZAR Nobel Biocare Iberica S.A. Barcelona, Spain Sales EUR Nobel Biocare AB 1 Gothenburg, Sweden Production and sales SEK Nobel Biocare Dental Products AB Gothenburg, Sweden Dormant SEK Nobel Biocare i Göteborg AB Gothenburg, Sweden Dormant SEK Nobel Orthopedics AB Gothenburg, Sweden Dormant SEK Nobel Biocare AG Kloten, Switzerland Sales CHF Nobel Biocare Finance AG Kloten, Switzerland Financing CHF Nobel Biocare Management AG Kloten, Switzerland Administration CHF Innovation and Nobel Biocare Services AG Kloten, Switzerland administration CHF Nobel Biocare Asia-Africa Holding AG Kloten, Switzerland Administration CHF Nobel Biocare Taiwan Co. Ltd. Taipei, Taiwan Sales TWD Nobel Biocare (Thailand) Ltd. Bangkok, Thailand Sales THB Production, sales Nobel Biocare USA, LLC Dover, USA and administration USD Nobel Biocare Procera, LLC Dover, USA Production USD Nobel Biocare Holding USA Inc. Wilmington, USA Administration USD During 2013, Nobel Biocare AB absorbed Nobel Biocare Holding AB through merger. The company held 1,157,130 treasury shares as of December 31, 2013.

32 30 Nobel Biocare Annual Report 2013 Corporate Governance report Listed company Name Nobel Biocare Holding AG Domicile 8302 Kloten, Switzerland Listed at SIX Swiss Exchange Market capitalization CHF 1,721 million (as of December 31, 2013) Security number ISIN number CH Reuters NOBN.S Bloomberg NOBN SW Nobel Biocare Holding AG is the only listed company of the Group. 1.2 Significant shareholders As of December 31, 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) Number of shares held Percent Date of disclosure Silchester International Investors LLP (UK) 12,605, % August 24, 2012 Franklin Templeton (USA) 12,346, % November 5, 2013 Government of Singapore (Singapore) 9,820, % July 22, 2013 Invesco Limited (USA) 6,220, % November 18, 2013 Norges Bank (NO) 3,768, % February 5, 2013 Published notifications (January 1, 2013 to December 31, 2013) Publication date Shareholder Reason for notification New holding in percent January 8, 2013 Franklin Templeton Change of group composition 4.09% January 15, 2013 Franklin Templeton Acquisition, surpassing notification threshold 5.33% January 16, 2013 Franklin Templeton Change of group composition 5.91% January 18, 2013 Franklin Templeton Change of group composition 5.97% February 11, 2013 Norges Bank (the Central Bank of Norway) Acquisition, surpassing notification threshold 3.04% February 26, 2013 Franklin Templeton Acquisition, surpassing notification threshold 10.12% Disclosure in accordance with Art. 14 (Securities lending and comparable transactions) of the Stock Exchange March 26, 2013 Morgan Stanley Ordinance FINMA, SESTO-FINMA 5.57% April 3, 2013 Morgan Stanley Sale, crossing notification threshold <3.0% September 16, 2013 Government of Singapore Change of name 7.93% September 16, 2013 Invesco Limited Sale, crossing notification threshold 4.94% October 17, 2013 Invesco Limited Acquisition, surpassing notification threshold 5.13% October 24, 2013 Invesco Limited Sale, crossing notification threshold 4.99% November 8, 2013 Franklin Templeton Sale, crossing notification threshold 9.97% November 18, 2013 Governance for Owners LLP Sale, crossing notification threshold <3.0% November 25, 2013 Invesco Limited Acquisition, surpassing notification threshold 5.03% All holdings stated as of registered share capital at that time. The changes above were disclosed from January 1, 2013 to December 31, 2013 and duly published on the website of SIX Swiss Exchange. Detailed information on these disclosures can be accessed on

33 Nobel Biocare Annual Report 2013 Corporate Governance report 31 The disclosures made by the company can also be found on Nobel Biocare s website: As of December 31, 2013, Nobel Biocare Holding AG is not aware of any other shareholder directly or indirectly holding more than 3 percent of its share capital. 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, neither in capital shareholdings nor in voting rights. 2. Capital structure 2.1 Capital As of December 31, 2013, the share capital registered with the Commercial Register amounted to CHF 49,513,812 divided into 123,784,530 registered shares at a nominal value of CHF 0.40 each. As of December 31, 2013, Nobel Biocare Holding AG had no authorized share capital and had issued neither participation certificates nor profit-sharing certificates. 2.2 Authorized and conditional capital As of December 31, 2013, Nobel Biocare had a conditional share capital of CHF 99,048 for the issuance of 247,620 fully paid up registered shares (nominal value CHF 0.40 each) to be used for exercise of option rights granted to employees and officers of the Company and/or of Group companies. 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 10,000,000 by issuing up to 25,000,000 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. The Company has no authorized capital per December 31, For further details, please refer to the Articles of Incorporation which are available on the Company website Changes in capital Changes in share capital in CHF Issued share capital Authorized share capital Conditional share capital (in shares) December 31, ,513,812 10,000, ,099,048 1 (123,784,530) (25,000,000) 1 (25,247,620) 1 Expiration of authorized capital ( ) ( ) 1 December 31, ,513,812 10,099,048 (123,784,530) ( ) (25,247,620) No changes in 2012 ( ) ( ) ( ) December 31, ,513,812 10,099,048 (123,784,530) ( ) (25,247,620) No changes in 2013 ( ) ( ) ( ) December 31, ,513,812 10,099,048 (123,784,530) ( ) (25,247,620) 1 The amount of CHF 10,000,000 could only be used alternatively either as authorized or conditional capital or a combination of both up to the total amount until April 6, Since that date, an increase of up to 10,000,000 is only allowed as conditional capital, on top of the CHF 99,048 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: 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 15 to the consolidated financial statements on page 105, as well as notes 4 and 5 of the parent company accounts on pages 135 and 136..

34 32 Nobel Biocare Annual Report 2013 Corporate Governance report 2.4 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 printing and delivery of certificates (security papers) representing shares. Nobel Biocare Holding AG has not issued any participation 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 December 31, 2013, neither Nobel Biocare Holding AG nor any of its subsidiaries had outstanding convertible bonds. Employee stock options As of December 31, 2013, there were no employee stock options outstanding. Performance share unit program (PSUP) This long-term incentive program covers the members of the Executive Committee, key position holders within the Group and selected employees throughout the organization as identified by the EC. 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 For the grants 2010 until 2012 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. For the grant 2013 the performance condition is the relative performance of the Nobel Biocare share, measured as total shareholder return (TSR) compared to that of a selected group of peer companies consisting of Align, Danaher, Dentsply, Henry Schein, Sirona, Straumann and Zimmer. If

35 Nobel Biocare Annual Report 2013 Corporate Governance report 33 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. Restricted Share Unit Plan (RSUP) Since 2013 the Company provides also a long-term Restricted Share Unit Plan (RSUP). This plan covers the members of the Executive Committee, key position holders within the Group and selected employees throughout the organization as identified by the EC. Under the RSUP, participants receive a grant of RSU which are subject to continuous employment over the same vesting period of three years, with one-third vesting in each year. The RSU are converted into shares seven days after the respective vesting date subject to ongoing employment with the company on the vesting date. The reference price of the grants in the PSUP and the RSUP 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, 2013: CHF 9.21). Movements of performance share unit tranches Number of performance share unit tranches Grant 2013 Grant 2012 Grant 2011 Grant 2010 Grant 2009 Total Outstanding as of January 1, , , , ,082 Granted 581, ,847 Forfeited 13,973 35,455 13,917 63,345 Expired 116,678 54, , ,616 Outstanding as of December 31, , ,682 41, ,968 Outstanding as of January 1, , ,682 41, ,968 Granted 336, ,708 Forfeited 15,486 74,425 19, ,062 Exercised 1,552 1,552 Expired 172,758 91,029 41, ,199 Outstanding as of December 31, , ,139 88, ,863 The total amount of all outstanding performance share units corresponds to 0.6 percent of the total registered share capital as of December 31, Number of performance share unit tranches Grant 2013 Outstanding as of January 1, 2013 Granted 378,840 Forfeited 20,117 Expired Outstanding as of December 31, ,723 The total amount of all outstanding restricted share units corresponds to 0.3 percent of the total registered share capital as of December 31, For further information on the long-term incentive programs, please refer to note 17 of the consolidated financial statements on page 107 and/or the remuneration report on page 51.

36 34 Nobel Biocare Annual Report 2013 Corporate Governance report 3. Board of Directors 3.1 Members of the Board of Directors (as of December 31, 2013) 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 and the Strategy 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 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 Chairman of PostFinance AG (financial services), a fully owned subsidiary of Post AG since 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: 122,943*. * Thereof 2,000 restricted shares granted by the Company, vesting on June 30, 2015; 11,832 restricted shares, vesting on June 30, 2016; 25,302 restricted shares, vesting on June 30, 2017 and 20,309 restricted shares, vesting on June 30, 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: 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 (until the end of 2013). Previous assignments: No previous board memberships or relevant assignments. Shares: 91,158*. * Thereof 2,000 restricted shares granted by the Company, vesting on June 30, 2015; 4,562 restricted shares, vesting on June 30, 2016; 8,097 restricted shares, vesting on June 30, 2017 and 6,499 restricted shares, vesting on June 30, 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) and since 2010 board member of RepRisk, Switzerland (environmental and social risks data provider). Previous assignments: board member of Prothor Holding SA/Manufacture La-Joux Perret, Switzerland (high-tech mechanical clockworks). Shares: 21,158*. * Thereof 2,000 restricted shares granted by the Company, vesting on June 30, 2015; 4,562 restricted shares, vesting on June 30, 2016; 8,097 restricted shares, vesting on June 30, 2017 and 6,499 restricted shares, vesting on June 30, 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 joined the firm in 1977 and became a partner in Edgar Fluri was a part-time lecturer in public accounting and auditing at the University of Basel ( ) and was appointed titular professor

37 Nobel Biocare Annual Report 2013 Corporate Governance report 35 Rolf Watter Raymund Breu Daniela Bosshardt-Hengartner Edgar Fluri Franz Maier Michel Orsinger Juha Räisänen Oern Stuge Georg Watzek

38 36 Nobel Biocare Annual Report 2013 Corporate Governance report 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. Previous assignments: Member of the Swiss accounting standards body (Swiss GAAP FER, ), Member of the Board of the Chamber of Commerce of Basel ( ), Member of the Board of the Swiss Institute of Certified Public Accountants ( ). Shares: 37,658* * Thereof 2,000 restricted shares granted by the Company, vesting on June 30, 2015; 4,562 restricted shares, vesting on June 30, 2016; 8,097 restricted shares, vesting on June 30, 2017 and 6,499 restricted shares, vesting on June 30, Franz Maier Non-executive Member, German, born Franz Maier has been a member of the Board since He is a member of the Operations and Process Excellence Committee and of the Strategy Committee. Franz Maier has a successful track record of over 20 years in both functional and general management positions. In 2012, he founded Summit Sherpas, a Board, CEO and private equity advisory firm of which he is also the Principal. From July 2007 until the end of 2011 he held the post of Executive Vice President Sales and Member of the Executive Board at Swiss med-tech company Straumann. During this time, he made a significant contribution to developing the group to its current leading position in implant, regenerative and restorative dentistry. From 2007 until the end of 2012 he also served as a core committee member of the International Team for Implantology (ITI). Prior to Straumann, he worked for the Wella Group (since 2003 part of Procter & Gamble) for 14 years where he held various managerial positions of increasing responsibility in Product Management, Strategic Management and Sales. Education: Master of Science in Business Administration from Passau University in Germany, further business education at Harvard Business School (USA) and IMD (Switzerland). No previous board memberships or relevant assignments. Shares: 6,499*. * Thereof 6,499 restricted shares, vesting on June 30, 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: 18,017*. * Thereof 3,421 restricted shares granted by the Company, vesting on June 30, 2016; 8,097 restricted shares granted by the Company, vesting on June 30, 2017 and 6,499 restricted shares, vesting on June 30, 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: 14,596*. * Thereof 8,097 restricted shares granted by the Company, vesting on June 30, 2017 and 6,499 restricted shares, vesting on June 30, Michel Orsinger Non-executive Member, Swiss, born Michel Orsinger has been a member of the Board since He is Chairman of the Strategy 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 Oern Stuge Non-executive Member, Norwegian, born Oern Stuge has been a member of the Board since He is Chairman of the Innovation and Technology Committee and a member of the Strategy Committee. He is currently Owner 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 Bonesupport AS (bone substitutes) and of PulmonX Inter-

39 Nobel Biocare Annual Report 2013 Corporate Governance report 37 national SA (endoscopic lung volume reduction); Chairman of Acarix AS (cardiac screening), of Dacadoo AG (previously Quentiq AG, digital health) and of Phagenesis Ltd. (neurological device technology); Senior Advisor for HealthCap AB (venture capital fund), Advisor for Xeltis AG (regeneratory medicine) and Uptake Medical Inc. (respiratory 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: 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) until 2013, 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: 21,158*. * Thereof 2,000 restricted shares granted by the Company, vesting on June 30, 2015; 4,562 restricted shares, vesting on June30, 2016; 8,097 restricted shares, vesting on June 30, 2017 and 6,499 restricted shares, vesting on June 30, 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 co-editor 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: 14,596* * Thereof 8,097 restricted shares granted by the Company, vesting on June 30, 2017 and 6,499 restricted shares, vesting on June 30, All share holdings are reported as per December 31, For further information on related parties, please refer to note 31 of the consolidated financial statements on page 127. 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 March 28, 2013 the Nomination and Compensation Committee (NCC) will regularly monitor the composition of the Board with the aim to ensure its optimal composition regarding the skills, know-how and experience required to fulfill its responsibilities. After a board member s initial election to the Board, the NCC will recommend him/her for re-election subject to a positive assessment of his/her performance and of the optimal composition of the Board. In case of tangible shortcomings of a Board member, the NCC will not recommend him/her for re-election, and the Board, in its proposal to shareholders, will endorse the decision of the NCC. After a total of 6 years of Board membership, Board members will be proposed for further re-elections if there has been a history of previous

40 38 Nobel Biocare Annual Report 2013 Corporate Governance report positive assessments of his/her performance. Re-election after 6 years should only be recommended by the NCC if a particular Board member can make significant contributions, bring exceptional skills, or fulfill a specific need. 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 70, unless the NCC requests the Board to make an exception from this rule in view of the Board member s contribution and if his/her specific skills, know-how and experience have been particularly valuable to the Board s work Time of first election and remaining term of office for each board member The Annual General Meeting on March 28, 2013 elected the following Members of the Board: Members of the Board (elected at Annual General Meeting 2013) Name Position First elected Elected until Rolf Watter Chairman Raymund Breu Vice-Chairman Daniela Bosshardt-Hengartner Member Edgar Fluri Member Franz Maier Member Michel Orsinger Member Juha Räisänen Member Oern Stuge Member Georg Watzek Member 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 March 28, The Board also performs a self-assessment on a regular basis. Board Committees In accordance with the Organizational Regulations, the Board has appointed a Nomination and Compensation Committee (according to the new ordinance) the members will be elected by the Annual General Meeting in the future, please see page 27), an Audit Committee, an Innovation and Technology Committee, an Operations and Process Excellence Committee and a Strategy 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 Board 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. 3.4 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 (Under the new ordinance against excessive compensation at public companies (in the following called new ordinance) the Annual General Meeting will elect the Chairman in the future, please see page 27). During 2013, the Group General Counsel served as Secretary of the Board. The Board of Directors meets at least five times a year. From January 1, 2013 to December 31, 2013, the Board convened eleven times, including three telephone conferences. The Board meetings usually lasted around 6 hours each, telephone conferences around 1 hour each. Each Board member participated in all meetings and calls during their term of office. 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

41 Nobel Biocare Annual Report 2013 Corporate Governance report 39 Committee memberships Name Audit Committee Nomination and Innovation and Operations and Strategy Committee Compensation Technology Process Excellence Committee Committee Committee Rolf Watter M C M Raymund Breu, F M M Daniela Bosshardt-Hengartner M M Edgar Fluri, F C Franz Maier M M Michel Orsinger C 1 C Juha Räisänen C Oern Stuge C 2 M Georg Watzek M C Chairman M Member F Financial expert 1 Member and Chairman until March 28, Chairman from March 28, 2014 Nomination and Compensation Committee (NCC) In accordance with the Organizational Regulations (according to the new ordinance the responsibilities of the Compensation Committee will be defined in the Articles of Incorporation, please see page 27), the NCC 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 2013, the Executive Vice President Global Human Resources served in that role. The Committee meets 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 reports, through its Chairman, back to the Board and submits 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 January 1, 2013 to December 31, 2013, the NCC convened five times. The Committee meetings usually lasted around 2 hours each. All members participated in all meetings. Audit Committee (AC) The AC is composed of at least three members of the Board of Directors, at least one of which should be a financial expert. The AC meets at least four times per year and its primary task is to support the Board of Directors in the performance of its supervisory duties. The Head of Group Internal Audit served as the Committee s secretary throughout 2013 (in two meetings and three conference calls the Interim Head of Group Internal Audit acted in this role). The specific tasks delegated to the AC include: financial reporting; external audit; internal audit; risk management; internal controls; compliance with organizational regulations and corporate governance; securing compliance; 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 January 1, 2013 to December 31, 2013, the AC convened eleven times, thereof six times via telephone conference. The Committee meetings usually lasted around 3 hours each, telephone conferences around 1 hour each. All members participated in all meetings and calls.

42 40 Nobel Biocare Annual Report 2013 Corporate Governance report 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 of Group Internal Audit 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 policy 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 entire AC and/or defined members of the AC meet the CFO, the Group General Counsel and the Head of Group Internal Audit for private sessions. The Chairman of the AC also runs meetings with KPMG AG without management attendance. Innovation and Technology Committee (ITC) The ITC 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 2013, 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 reports through its Chairman back to the Board and submits for and request Board approval should this be needed under the Organizational Regulations. From January 1, 2013 to December 31, 2013 the committee convened five times. The Committee meetings usually lasted around 3 hours each. Apart from Daniela Bosshardt-Hengartner and Richard Laube, who did not participate in the meeting of February 14, 2013 all members attended all meetings. Operations and Process Excellence Committee (OPC) The OPC 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, of whom two are the CEO and CFO. The OPC nominates a Member of Management to serve as a Secretary. In 2013, 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 reports through its Chairman back to the Board and submits for and request Board approval should this be needed under the Organizational Regulations. In 2013, the committee convened five times. The Committee meetings usually lasted around 3 hours each. All members attended all meetings during their term of office. Strategy Committee (STC) The STC is composed of at least two and maximum four members of the Board of Directors, of whom one also takes the chair of the committee and members of Management, one of them being the CEO. The Committee nominates a Member of Management to serve as Secretary. In 2013, the Head of Business Development and Mergers and Acquisitions served in that role. The committee has the following authorities, responsibilities and scope of work: selection, discussion and preparation for board decision and review of relevant matters regarding either specific strategic issues or the implementation of the corporate strategy. To that extent the scope of the STC may overlap with the scope of the ITC (e.g. concerning key technologies of product categories) the two committees will run joint meetings;

43 Nobel Biocare Annual Report 2013 Corporate Governance report 41 selection, alignment and review of certain strategic issues as well as preparation of strategic decisions to be taken by the Board of Directors (including the annual corporate strategy review); review of implementation of the corporate strategy by Management; review of regional and key country strategies; review of organizational implications. The STC reports through its Chairman back to the Board and submits for and request Board approval should this be needed under the Organizational Regulations. The STC was established on March 28, In 2013, the STC convened four times. The Committee meetings usually lasted around 3 hours each. All members attended all meetings during their term of office. Board members and attendances 2013 Name Full Board AC NCC ITC OPC STC Number of meetings Rolf Watter Raymund Breu Daniela Bosshardt-Hengartner Edgar Fluri Franz Maier Michel Orsinger Juha Räisänen 11 5 Oern Stuge Georg Watzek Member of the Board since March 28, 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; 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 re-election 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 1,000,000; 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.

44 42 Nobel Biocare Annual Report 2013 Corporate Governance report 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 The Executive Committee (EC) reports in a regular and structured fashion to the Board of Directors. The primary means of information are comprehensive monthly financial reports, additional regular 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 Board meeting, the CEO informs the members of 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 reports at each Board meeting on the financial performance of the company. 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 EC 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. Internal Audit Internal Audit is an independent monitoring and advisory body that reports to the AC, administrative wise to the CFO. The Head of Group Internal Audit 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 the 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 of Group Internal Audit is in charge of: Assurance activities (assessment of the implemented strategies, processes, procedures, systems and governance), Enterprise Risk Management (ERM), Whistleblower Management (co-management with the Group General Counsel). Internal Audit organizes periodic meetings with the external auditors to ensure cooperation between internal and external audit. Management is responsible for maintaining an adequate Internal Control System (ICS) to manage risks to the organization. Internal Audit will provide assurance services to management, the Board of Directors and the Audit Committee in terms of reviewing the adequacy of and compliance with the documented controls and processes. 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 2013, Internal Audit performed five business audits of subsidiaries, two audits of group functions and one business review.

45 Nobel Biocare Annual Report 2013 Corporate Governance report 43 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 are sent to local and regional management. An executive 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 executive summary. A reporting process 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 2013 no exception report has been issued. All reports are presented and discussed in the AC meetings. A quarterly follow-up with the audited units is made to track the implementation of the agreed action points. This follow-up status report is also presented to the AC. In 2013 the Head of Group Internal Audit participated in two meetings with the Board (for risk management related topics) and in all eleven AC meetings or conference calls in the function as the Committee s secretary. In September 2013, a new Head of Group Internal Audit joined the company, continuing the Internal Audit activities agreed for the year. For further details on the Company s risk management, please refer to pages 74 to 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. 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 of 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;

46 44 Nobel Biocare Annual Report 2013 Corporate Governance report 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 effective in 2013 and changes announced in 2013 as per January 1, 2014 Effective January 1, 2013, Frank Mengis was appointed Executive Vice President Global Operations. He and Walter Ritter, Executive Vice President Global Human Resources, were also appointed members of the EC as of that date. Effective January 1, 2014, Dietmar Bettio (formerly Böhm) was appointed Executive Vice President Chief Information Officer and member of the EC. Executive Committee Members (as of December 31, 2013) 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 Frank Mengis 1964 German / Swiss Executive Vice President Global Operations 2013 Rolf Melker Nilsson 1960 Swedish Executive Vice President Global Sales and Customer Development 2011 Walter Ritter 1955 Swiss Executive Vice President Global Human Resources 2013 Petra Rumpf 1967 German Executive Vice President Corporate Development, T&E and Special Channels 2007 Jörg von Manger-Koenig 1960 German Executive Vice President Legal & Compliance 2011 Please see page 45 for changes in the EC effective January 1, 2014 Richard T. Laube Chief Executive Officer (CEO), dual Swiss-US citizen, born Richard T. Laube was appointed Chief Executive Officer as of April Prior to joining Nobel Biocare, Richard Laube held the position of CEO of Nestlé Nutrition, Nestlé SA and was a member of the Nestlé Executive Board ( ). He had joined Nestlé as Deputy Executive Vice President, Corporate Business Development in From he was President of Roche Consumer Health and from also Member of the Roche Corporate Executive Committee. He also held the positions as Managing Director, Procter & Gamble, Brazil ( ), General Manager, Procter & Gamble Pharmaceuticals, Germany ( ) and various marketing and brand management positions with Procter & Gamble in Japan, the US, and Switzerland ( ). Education: Master and Bachelor degrees in Organizational Development and Evaluation Research, Boston University. Current other assignments: Since 2010 he is Executive Advisor of Roark Capital Group. Previous assignments: Independent Director of Logitech SA and member of its Compensation Committee ( ). Chairman of the Board of Gerber Life Insurance Company ( ). Shares: 110,000 / Performance share units: 104,937 / Restricted share units: 43,431*. Oliver Walker Executive Vice President Chief Financial Officer (CFO), Swiss, born Oliver Walker was appointed Chief Financial Officer of Nobel Biocare and member of the Executive Committee as of August He brings extensive financial and operational expertise including retail management, restructuring as well as mergers and acquisitions from the functions as CFO of Sonova (hearing healthcare solutions, ) and CFO of Stratec Medical (medical devices, ). Prior to Stratec, Oliver Walker worked for seven years at Von Roll (diversified industrial company). In his last position at Von Roll he served as Vice President Finance and Controlling for the Von Roll Infratec division. Education: Master of Science in Business Administration and Economics from the University of Berne, Switzerland. Current other assignments: Since January 2011, Oliver Walker has been serving as a member of the board of CFO Forum Switzerland, an independent professional platform for CFOs in Switzerland. Shares: 0 / Performance share units: 17,101 / Restricted share units: 17,101*. * Thereof 5,701 restricted shares granted by the Company, vesting on February 28, 2014; 5,700 restricted shares, vesting on February 28, 2015 and 5,700 restricted shares, vesting on February 28, * Thereof 14,477 restricted shares granted by the Company, vesting on February 28, 2014; 14,477 restricted shares, vesting on February 28, 2015 and 14,477 restricted shares, vesting on February 28, 2016.

47 Nobel Biocare Annual Report 2013 Corporate Governance report 45 Richard T. Laube Oliver Walker Hans Geiselhöringer Frank Mengis Melker Nilsson Walter Ritter Petra Rumpf Jörg von Manger-Koenig

48 46 Nobel Biocare Annual Report 2013 Corporate Governance report Hans Geiselhöringer Executive Vice President Global Research Products & Development, German, born Hans Geiselhöringer was appointed Executive Vice President (EVP) Global Research Products & Development and member of the Executive Committee in 2011*. Prior to that he was EVP Global Marketing & Products since 2010 and Head of NobelProcera & Guided Surgery ( ). He joined Nobel Biocare as Head of NobelProcera in Hans Geiselhöringer is trained as a dental technician (SZI Süddeutsche Zahntechnikerinnung). In 1998, he founded DentalX GmbH, a dental laboratory specializing in implantology, anaplastology, functional and esthetic reconstructions and imaging technologies. In 2009, he founded Medtech Strategic Services AG, a professional service firm, specialized in medical design and production technology. Hans Geiselhöringer is a renowned expert on dental technologies and material, and has published/co-published various clinical and research articles. From 2004 to 2009, Hans Geiselhöringer acted as a Global Speaker for Nobel Biocare. He is a member of numerous international dental associations and a recognized lecturer at dental conventions throughout the world. Current other assignments: No other relevant current assignments. Shares: 0 / Performance share units: 60,730 / Restricted share units: 23,751**. * Under management service contract until December 31, 2011 / ** Thereof 7,917 restricted shares granted by the Company, vesting on February 28, 2014; 7,917 restricted shares, vesting on February 28, 2015 and 7,917 restricted shares, vesting on February 28, Frank Mengis Executive Vice President Global Operations, dual Swiss- German citizen, born Frank Mengis was appointed Senior Vice President (SVP) Global Operations and member of the Executive Committee in January Previously he held various management positions with Institut Straumann AG in Switzerland and USA ( ), which include Vice President Project Management & Development ( ), Senior Vice President Global Manufacturing ( ) and Member of Executive Management Group ( ), Senior Vice President Operations, President of Straumann Manufacturing Inc., USA ( ), Head of Corporate Quality Management, Environmental Health & Safety ( ). From he was Head of Pharma Engineering, Steiner AG, Basel/Zurich (real estate, project management). Prior to that, Frank Mengis held various project and group engineering positions with F. Hoffmann-La Roche, Basel ( ). Education: Harvard Business School, Advanced Management Program and Master,s degree in Mechanical Engineering from University of Karlsruhe, DE. Current other assignments: No other relevant current assignments. Shares: 145 / Performance share units: 12,161 / Restricted share units: 12,161*. Melker Nilsson Executive Vice President Head of Global Sales and Customer Development, Swedish, born Melker Nilsson was appointed Executive Vice President Head of Global Sales and Customer Development in August Previously he held the position as President and General Manager North America and member of the Executive Committee (January August 2011) and Chief Operating Officer North America for Nobel Biocare (2010). From he was President of Neoss US (dental implants). Prior to that, Melker Nilsson held various management assignments at Nobel Biocare in Europe and North America from and various management positions in sales and marketing in Luxembourg, Germany and Sweden for Nordea (banking, ). Education: Master,s degree in law from Lund University in Sweden. Current other assignments: No other relevant current assignments. Shares: 0 / Performance share units: 28,391 / Restricted share units: 11,676*. * Thereof 3,892 restricted shares granted by the Company, vesting on February 28, 2014; 3,892 restricted shares, vesting on February 28, 2015 and 3,892 restricted shares, vesting on February 28, Walter Ritter Executive Vice President Global Human Resources, Swiss, born Walter Ritter was appointed Senior Vice President (SVP) Global HR and member of the Executive Committee in January Previously he held the position of Global Head HR of Nobel Biocare ( ). Prior to that, he was Global Head HR Operations ( ), Head of HR Switzerland and Global HR Process Co-ordination ( ) of Syngenta Crop Protection, Switzerland (agribusiness). From he was Global Head of HR Seeds at Syngenta Seeds, Switzerland. Earlier career stages: Global Head of Pharma Training & Development ( ) and Head of HR Basel and Global Technical Operations ( ), Novartis, Switzerland. Various HR development positions at Sandoz, Switzerland ( ). Education: Master,s degree in Chemistry from University of Basel, Ph.D. from University Hospital Basel, Bachelor s degree in Business Administration from Graduate School of Business Administration (GSBA) Zurich, HR Management degree from Swiss Human Resource Education (SKP) Zurich. Current other assignments: Vice President of the Employer Association Basel (since 2005), Advisory Council for Training for Applied Psychology FHNW (since 2011), Member of Board of Trustees of Supplementary Insurance at AXA Winterthur (as of 2013). Shares: 0 / Performance share units: 24,210 / Restricted share units: 14,441*. * Thereof 4,813 restricted shares granted by the Company, vesting on February 28, 2014; 4,813 restricted shares, vesting on February 28, 2015 and 4,815 restricted shares, vesting on February 28, * Thereof 4,053 restricted shares granted by the Company, vesting on February 28, 2014; 4,054 restricted shares, vesting on February 28, 2015 and 4,054 restricted shares, vesting on February 28, 2016.

49 Nobel Biocare Annual Report 2013 Corporate Governance report 47 Petra Rumpf Executive Vice President, Corporate Development, T&E and Special Channels, German, born Petra Rumpf was appointed Executive Vice President (SVP) Corporate Development, T&E and Special Channels in Prior to that she was SVP Corporate Development and Special Channels (since 2011) and SVP Corporate Development and M&A ( ). She joined Nobel Biocare in December 2007 as Vice President Business Development and Strategic Planning and member of the Executive Committee. Previously, she spent 16 years with Capgemini Transformation Consulting gaining experience in strategy development, business transformation, and mergers and acquisitions working with leading corporations in life sciences, manufacturing and high-tech industries. From 2002 until 2007, she was Vice President and member of the Central European Management Team of Transformation. Prior to that, she was Head of Strategy Consulting in Central Europe and Global Head of Mergers and Acquisitions ( ). She had joined Capgemini in Education: BA in economics, University of Trier (Germany). MBA, specialization in finance and investment, Clark University, Massachusetts, USA. Current other assignments: Non-voting Member of the Board of Trustees of the Foundation for Oral Rehabilitation (since 2013). Shares: 7,900 / Performance share units: 48,918 / Restricted share units: 19,571*. * Thereof 6,523 restricted shares granted by the Company, vesting on February 28, 2014; 6,524 restricted shares, vesting on February 28, 2015 and 6,524 restricted shares, vesting on February 28, Jörg von Manger-Koenig Executive Vice President Legal & Compliance, German, born Jörg von Manger-Koenig was appointed Senior Vice President Legal & Compliance and member of the Executive Committee in January Since 2007 he also has been serving as the Group General Counsel and Secretary of the Board of Directors of Nobel Biocare. Before joining Nobel Biocare in 2007, he held the position of Executive Vice President Legal/Regulatory Affairs and Intellectual Property Rights of Berna Biotech AG (biologics, vaccines), Bern, Switzerland ( ). From , Jörg von Manger-Koenig was with F. Hoffmann-La Roche in Basel, Switzerland (pharmaceuticals, chemicals), first in corporate legal services, then from 1995 as Head Global Regulatory Affairs of the Vitamins and Fine Chemicals Division. Education: Law studies at the Universities of Bonn, Germany, and Geneva, Switzerland; graduated in 1987, bar exam in 1990; practical legal education in Bonn, Cologne and Düsseldorf, Germany, and with the Ciba-Geigy Pharma Division. Current other assignments: No other relevant current assignments. Shares: 0 / Performance share units: 34,956 / Restricted share units: 14,897*. * Thereof 4,965 restricted shares granted by the Company, vesting on February 28, 2014; 4,966 restricted shares, vesting on February 28, 2015 and 4,966 restricted shares, vesting on February 28, All share holdings are reported as per December 31, For further information on related parties, please refer to note 31 of the consolidated financial statements on page Other activities and functions Apart from what is specifically mentioned in section 4.1, none of the EC 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. 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 13 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, or can be ordered via the contact addresses found on page 50 of this Annual Report. The Articles of Incorporation discussed in this Corporate Governance report are as per December 31, No changes related to the new ordinance are reflected yet, please refer to page 127 for the implementation of those. 6.1 Voting rights restrictions and representation The Articles of Incorporation of Nobel Biocare Holding AG do not contain voting rights restrictions other than those already mentioned under Section 2.6 on page 32 of this Corporate Governance report. The Articles of Incorporation and the Board of Directors provide for the rules regarding participation and representation at the Shareholders Meeting. Following the new ordinance, a shareholder may only be represented by his legal representative or by another shareholder with the right to vote or by proxies designated in an agreement with the nominee or by the independent

50 48 Nobel Biocare Annual Report 2013 Corporate Governance report proxy ( unabhängiger Stimmrechtsvertreter ). 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 documents to them is 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 December 31, 2013, 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. All unvested shares granted in the Performance Share Unit Plan (PSUP) through 2012 will immediately vest in the case of a change of control. For the Performance Share Unit Plan (PSUP) 2013 and the Restricted Share Unit Plant (RSUP) 2013 the Board of Directors may declare that all unvested shares shall vest in case of a change of control.

51 Nobel Biocare Annual Report 2013 Corporate Governance report 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 March 28, 2013 (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 December 31: Fees in EUR thousands Audit services Non-audit services Tax advice 10 5 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 vis-à-vis the external auditors through the Audit Committee (AC), which meets at least four times a year. The primary objective of the AC is to support the Board of Directors in monitoring the Company s internal control, accounting principles, risk management, compliance, financial reporting and auditing. Please also refer to section 3.4 of this Corporate Governance report on page 38. 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 AC monitors implementation of findings of external and internal auditors by management. The AC meets regularly with the statutory external auditors as well as with internal audit. Furthermore, the AC 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 AC 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 AC and to the Board of Directors, in line with the respective legal requirements in Switzerland. In 2013, the external auditors participated in four meetings with the AC 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. The Board of Directors follows the regulations of the Swiss Code of Obligations with regards to the rotation intervals of the lead auditor, i.e. the lead auditor will be rotated every seven years. Non-audit services: Non-audit services up to EUR 25,000 are at the discretion of the executive management. Any assignment above EUR 25,000 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.

52 50 Nobel Biocare Annual Report 2013 Corporate Governance report 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 February 8, 2012, which is compliance with Swiss law as well as 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 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: All press releases are available on: The Articles of Incorporation are available on: Official notices are published in the Swiss Official Gazette of Commerce (Schweizerisches Handelsamtsblatt). Publications in conjunction with the listing of the registered shares on SIX Swiss Exchange are made in accordance with the listing rules of SIX Swiss Exchange Financial calendar Annual General Meeting March 26, 2014 Ex-dividend date March 28, 2014 Record date April 1, 2014 Payment of dividend April 2, 2014 Interim Report 1, January March April 29, 2014 Interim Report 2, January June August 21, 2014 Interim Report 3, January September November 6, 2014 Contact information Company address Investor and Corporate Relations Nobel Biocare Holding AG P.O. Box, 8058 Zurich-Flughafen, Switzerland Phone , Fax or [email protected] Süha Demokan, Head of Investor and Corporate Relations Phone or [email protected]

53 Nobel Biocare Annual Report 2013 Remuneration report 51 Remuneration report. Letter from the Chairman of the Nomination and Compensation Committee 52 Remuneration report Compensation and benefits philosophy 53 Governance and method of determination of compensation 53 Architecture of remuneration for the Executive Committee 55 Remuneration and shareholdings of the Executive Committee 60 Architecture of remuneration for the Board of Directors 62 Remuneration and shareholdings of the Board of Directors 62

54 52 Nobel Biocare Annual Report 2013 Remuneration report Letter from the Chairman of the Nomination and Compensation Committee Dear Shareholders, The Remuneration Report 2013 gives an in-depth explanation of our approach to compensation and benefits for the members of our Board of Directors and our Executive Committee. The compensation system and the level of compensation for the Board of Directors have not been changed since The remuneration system for our Executive Committee was adjusted for 2013 to better promote the long-term engagement of our key talents while strengthening the link between individual pay, company performance and the creation of shareholder value. Our system aims to hire and retain the talented individuals who contribute to the sustainable success of our Company and who create not only value for the business, our customers, employees and other stakeholders, but also for you as our shareholders. No further changes are intended for the business year You will see in this report that our former system (which we largely maintained despite the aforementioned adjustments) already guaranteed an alignment between company performance and payout, meaning that the payout was clearly below target in our more difficult years, but above target in 2013 when we performed well with, among other things an increase in our share price of 79% over the year. You will also see that our long-term incentive plan did not pay out in the years prior to The change made in this plan for 2013 relates to strengthening the retention element. It introduces a restricted share unit plan and a new peer group of competitors for the performance share unit plan. This new group allows for monitoring (and rewarding) our performance against that of listed peers. payout will depend on the degree by which the pre-defined targets are reached and, of course, the real payout can be lower than the maximum amount you approved. Please also refer to the illustration on page 58 of this report explaining the potential and actual amounts of compensation for the CEO in the last 2 years. You will also be given the opportunity to issue, in a consultative vote in the following year, a view on whether you agree with the Compensation Committee s use of the compensation budget that you had agreed to the year before (e.g. in 2017 for the bonus awarded in 2016). The Nobel Biocare Board of Director believes that this system will give you, dear Shareholders, a far-reaching say-on-pay for each business year. Sincerely Rolf Watter Chairman of the Nomination and Compensation Committee We will ask you in our upcoming annual general meeting on March 26, 2014 to agree to a change in our Articles of Incorporation which will under the new Swiss ordinance against excessive compensation (VegüV) effective January 1, 2014 allow us to continue to incentivize our Management as we have done in If these changes to the Articles of Incorporation are approved by you and come into force, you will be asked to approve in a binding vote the prospective compensation for the first time at the annual general shareholder meeting For the compensation of the Board of Directors, the relevant period for which the payout has to be approved is from the annual general meeting to the one of the following year. For the compensation of the Executive Committee the relevant period will be the business year following the annual general meeting (i.e for the vote in 2015). For this vote, we will disclose to you the adjustments (if any) that we will propose for the base salary and you will be asked to approve this amount and to agree to the maximum payout under our short and long-term incentive plans, should the following business year be highly successful. The exact

55 Nobel Biocare Annual Report 2013 Remuneration report 53 Remuneration report This remuneration report provides an overview of Nobel Biocare s compensation principles and programs, as well as information about the process of determination of compensation. It also includes details on the compensation of the Board of Directors and of the Executive Committee related to This report is written in accordance with the Articles 663b bis and 663c of the Swiss Code of Obligations, the standards related to information on Corporate Governance issued by the SIX Swiss Exchange and the principles of the Swiss Code of Best Practice for Corporate Governance of economiesuisse. It also takes into consideration the provisions of the Ordinance against excessive pay in listed companies (VegüV). Compensation and benefits philosophy Nobel Biocare aspires to attract, motivate and retain best-inclass employees who are internationally oriented, successful and who have high personal standards. The remuneration programs are designed to provide appropriate reward in a highly competitive employment market and in a technologically complex industry. They are aligned to the business strategy and to the company s pay-for-performance philosophy. The remuneration system aims to strengthen Nobel Biocare s global industry position for the benefit of its customers and their patients, while delivering the expected returns to its shareholders. Key remuneration principles Pay-for-performance The compensation of the members of the Executive Committee and of the other senior managers is strongly linked to the financial and the share performance of the Group, as well as to their individual performance. Exceptional results are recognized and rewarded. Balance between short-term success and long-term value creation The remuneration programs reward short-term success as well as long-term performance and sustainable value creation for customers, patients and shareholders. The long-term portion of remuneration is awarded in shares of the company in order to reinforce the alignment with shareholders interests. Competitiveness Regular benchmarking of the compensation levels ensures that Nobel Biocare is able to attract and retain world-class talents. Generally, the objective is to offer compensation at median level of the relevant market, with opportunities to earn at the upper quartile for superior performers. Governance and method of determination of compensation Nomination and Compensation Committee (NCC) In accordance with the organizational regulations, the Committee is composed of three members of the Board of Directors and regularly invites members of Management to participate in the meetings. The CEO is a permanent attendee of the NCC meetings in an advisory capacity. The NCC is responsible for reviewing the overall Human Resources strategy, for the nomination, development and succession planning of the members of the Executive Committee and the Board of Directors and for the remuneration decisions related to the members of the Executive Committee and of the Board of Directors. Further details about the composition of the Committee and its responsibilities are provided in the Corporate Governance section of the Annual Report and on the Corporate website ( With regards to remuneration matters, the NCC has the following authority, responsibility and scope of work: Review of the compensation systems and compensation policies Review and approval of compensation for management members Review and approval of the long-term incentive (LTI) programs Determination of compensation of the Board members. These duties will change should the annual shareholders meeting of March 26, 2014 approve the proposed Articles of Incorporation. Global framework The compensation principles are globally applicable through a clear and transparent corporate framework.

56 54 Nobel Biocare Annual Report 2013 Remuneration report Levels of authority Chairman Vice-Chairman CEO NCC Board Chairman s compensation Proposes Approves Board of Directors compensation Proposes Approves Remuneration of CEO including performance goals, remuneration at target and incentive (short-term and long-term) payouts Proposes Approves Is informed Remuneration of Executive Committee members including performance goals, remuneration at target and incentive (short-term and long-term) payouts Proposes Approves Is informed The NCC holds its ordinary meetings at least five times a year according to the following schedule: Meetings February May August October December Content CEO & EC performance assessment of previous year Board remuneration LTI grant endorsement for the current year Corporate governance (follow up of previous AGM) Board composition HR Policies Remuneration report (analysis and next steps) Leadership development Impact of new regulations Remuneration report draft NCC agenda for the following year CEO/EC compensation 2014 (benchmark and proposal) CEO and EC goals 2014 (proposal) Remuneration report sign-off The Chairman of the NCC informs the full Board of Directors on the activities of the Committee after each meeting. The minutes of the Committee meetings are available to all members of the Board of Directors. When the remuneration of individual members of the Board is under discussion, the affected member abstains from voting and may be asked to leave the room. The CEO attends all the Committee meetings, except those that deal with his own compensation or with Board only topics. as Mercer and AON Hewitt, as well as selected local providers. None of these providers has any non-hr related mandate with Nobel Biocare. Based on this external benchmark information, the mix of short-term and long-term compensation, the mix of cash versus equity-based compensation and the compensation levels are reviewed. This review, together with internal peer comparisons, serves as basis for the NCC to define and approve the remuneration at target for the CEO and the Executive Committee members. The actual compensation effectively paid out in a given year depends on the company and individual performance. Individual performance is assessed through the formal annual Performance Management process, which aims to identify individual contributions to the company s overall success and to support personal development. Company and individual performance objectives for the CEO and Executive Committee members are approved by the NCC at the beginning of the business year and achievements against those objectives is assessed after year-end. In assessing performance, the NCC focuses on results-oriented measures as well as on how results were achieved. The performance appraisal is the basis for the determination of the actual compensation. Objectives setting Performance evaluation Determination of compensation In 2013, the NCC met five times. All members participated in all meetings. Method of determination of compensation: competitiveness and performance evaluation In order to be able to attract and retain talented employees, it is critical to offer competitive compensation. The NCC reviews the compensation of the CEO and the members of the Executive Committee annually and compares them to the compensation levels of similar positions at relevant companies. Relevant companies are defined as multinational companies which are comparable in scope, geography and business complexity, i.e. companies with which Nobel Biocare competes for talents. For this purpose, Nobel Biocare uses benchmark data from well-known global providers such The compensation of the Board of Directors is reviewed regularly against prevalent market practice of other multinational industrial companies listed in Switzerland. The last review took place in 2013 on the basis of the compensation data published by Ethos. Nobel Biocare compares itself against the companies of the Swiss Market Index Expanded (SMIM), excluding SMI companies and financial institutions.

57 Nobel Biocare Annual Report 2013 Remuneration report 55 Architecture of remuneration for the Executive Committee Effective 2013, the remuneration system of Nobel Biocare has been reviewed and modified in order to be aligned with the evolving business context in which the company operates, and to reflect a true total rewards approach. Short-term and long-term incentive programs are now integrated in order to reward performance, promote loyalty of key talents and their long term engagement towards the interests of Nobel Biocare, while being competitive within the global industry. The Board of Directors, upon proposal of the NCC, approved in particular the following changes to the variable compensation elements: Short-term incentive: same split between company financial objectives and individual objectives for all Executive Committee members; Long-term incentive: introduction of a Restricted Share Unit Plan (RSUP), combined with a Performance Share Unit Plan (PSUP). The elements of the remuneration system at Nobel Biocare include base salary, short-term incentive, long-term incentive and benefits. Overview of Remuneration System for the Executive Committee Benefits Long-term incentive Short-term incentive Annual base salary To protect against hazards of life Driven by market practice Delivered as pension, insurances and perquisites To focus on long-term performance and to align to shareholders interests Driven by share performance and continuous employment Delivered as Performance Share Units and Restricted Share Units To pay for performance Driven by the achievement of business/individual objectives in a one-year period Delivered in cash To attract & retain Driven by market competitiveness and individual competencies & experience Delivered in cash Annual base salary The annual base salary is the fixed compensation reflecting the scope and key areas of responsibilities of the role, the skills required to perform the role and the individual experience and competencies of the jobholder. The base salary is determined according to the typical market practice (external benchmark mentioned above) and the internal pay structure. A base salary at median is considered competitive for a job holder satisfying the expected level of skills and competencies. The base salary is typically reviewed annually based on market salary trends, the company s ability to pay based on financial performance and the evolving experience of the individual in the role. The annual base salary is paid out in cash on a monthly basis. Short-term incentive (STI) The short-term incentive (STI) plan has been redesigned for 2013 in order to further build a one-team philosophy: it rewards the achievement of the company s financial results and recognizes individual contributions to the company s overall performance over a plan period of one year. The members of the Executive Committee, as well as managers and key contributors, are eligible to participate in the short-term incentive plan. The target incentive is expressed as a percentage of the annual base salary and varies depending on the level of the role in the organization and on the impact of the role on the overall business results. For the CEO, the target incentive amounts to 100% of annual base salary, while it is between 50% and 70% for the other members of the Executive Committee and between 8% and 50% for other participants. The target incentive corresponds to the incentive award at 100% achievement of the pre-defined objectives. The effective payout is based on the performance achieved during the plan period as described below.

58 56 Nobel Biocare Annual Report 2013 Remuneration report For all participants, 70% of the short-term incentive is based on the achievement of financial objectives, and 30% is based on the achievement of individual objectives. For the CEO and the members of the Executive Committee, the financial objectives include Group Revenue growth and Group Profit from Operations (EBIT) growth compared to the previous financial year at constant exchange rates (CER). For the other participants, financial objectives include additional financial goals defined at regional, sub-regional and country levels. All financial objectives are agreed by the Executive Committee and those related to the Group are approved by the NCC for the plan performance period. For each financial objective, a target, a threshold and a payout curve are pre-defined. At the end of the performance period, the results are assessed against the pre-defined objectives and their respective payout curve, which translates into an overall achievement of between 0% and 200%. Individual objectives are determined as part of the annual Performance Management process and are based on the two dimensions of the Nobel Biocare Leadership Principles: Build the Business: for the CEO and the members of the Executive Committee this includes strategic projects and programs as defined within the business strategy, and Grow our People and our Organization, which includes leadership and behavioral objectives. Individual objectives for the CEO and Executive Committee members are approved by the NCC. At the end of the year, individual performance against those objectives is assessed, resulting in a performance achievement between 0% and 200% of the target incentive. Performance objectives for the short term incentive CEO and EC Other participants Corporate functions Other participants Region/Sub-Region/Country Objectives weighting Group net sales growth 35% 35% 5% Financial performance Group EBIT growth Region/Sub-Region/ Country financial objectives 35% 35% 5% 60% Individual performance Build the business (strategic projects) Grow our people and our organization 30% 30% 30% Total weight 100% 100% 100% The sum of the achievement of the financial objectives with 70% weight and of the achievement of the individual objectives with 30% weight provides the overall achievement for the short-term incentive. The overall achievement applied to the target incentive (defined as a percentage of the annual base salary amount) results in the incentive amount paid out. Method of calculation for the short-term incentive Base salary amount EUR Financial achievement Weighting = 70% Overall achievement % x + x Target incentive % Individual achievement Weighting = 30% Target incentive amount EUR = = = Target incentive amount EUR Overall achievement % Incentive amount EUR For the members of the Executive Committee, the payout under the short-term incentive was below target in 2011 and 2012 and amounted to 34% and 26% respectively. In 2013, the payout is above target and is estimated at 148% on average. Long-term incentive (LTI) The long-term incentive program has been redesigned for 2013 and intends to: Focus on the performance and long-term growth of the Group Align the interests of the participants with those of the shareholders Allow participants to share in the long-term success of the company Focus on sustainable value creation for patients, customers and shareholders Promote loyalty of the participants.

59 Nobel Biocare Annual Report 2013 Remuneration report 57 The long-term incentive program covers the members of the Executive Committee, key position holders within the Group and selected employees throughout the organization as identified by the EC. All grants made under the long-term incentive program require the approval of the NCC. The long-term incentive program includes two plans: a Performance Share Unit Plan (PSUP) designed to align the participants interests with those of the shareholders, while recognizing and developing a strong performance spirit and a Restricted Share Unit Plan (RSUP) aiming to motivate Nobel Biocare s key talents to stay with the company. The initial value of the grant amounts to 100% of the annual base salary for the CEO and 70% of annual base salary for the members of the Executive Committee and is equally split between PSUP and RSUP. For the other participants, the initial value of the grant amounts to between 10% and 40% of the annual base salary; it is equally split between PSUP and RSUP except for the 10% grant that is allocated solely to the RSUP. The reference price to convert the initial grant value into a number of Performance Share Units (PSU) and Restricted Share Units (RSU) is the average closing share price during a period of five days starting with the release of the respective full year results (2013: CHF 9.21; 2012: CHF 10.53; 2011: CHF 18.42, 2010: CHF 28.00). Performance Share Unit Plan (PSUP) Under the PSUP, participants receive a grant of PSU, which are subject to a performance condition defined by the NCC. For the PSUP 2013, the performance condition is the relative performance of the Nobel Biocare share, measured as Total Shareholder Return (TSR) compared to that of a selected group of peer companies consisting of Align, Danaher, Dentsply, Henry Schein, Sirona, Straumann and Zimmer. The PSU are granted after the release of the annual results of the previous year (February) and vest over a period of three years, with one-third vesting in each year, based on the relative performance as measured at the end of the respective vesting period: 0% of the PSU vest into shares if the TSR is below the median of the peer group (threshold level) 100% of the PSU vest into shares if the TSR is at the median of the peer group (target level) 150% of the PSU vest into shares if the TSR is at or above the upper quartile of the peer group (cap level) A linear interpolation is used between the threshold and cap achievement levels. The PSU are converted into shares seven days after the respective vesting date if the performance condition is achieved and subject to ongoing employment with the company on the vesting date. Restricted Share Unit Plan (RSUP) Under the RSUP, participants receive a grant of RSU which are subject to continuous employment over the same vesting period of three years, with one-third vesting in each year. The RSU are converted into shares seven days after the respective vesting date subject to ongoing employment with the company on the vesting date. Long-term incentive plan period Grant date Feb 2013 LTI performance period Year 1 Year 2 Year 3 PSU Tranche 1 (1/3) Vesting date Feb 2014 Payout factor 0% 150% RSU Tranche 1 (1/3) Payout factor 100% PSU Tranche 2 (1/3) Vesting date Feb 2015 Payout factor 0% 150% RSU Tranche 2 (1/3) Payout factor 100% Vesting date Feb 2016 PSU Tranche 3 (1/3) Payout factor 0% 150% RSU Tranche 3 (1/3) Payout factor 100%

60 58 Nobel Biocare Annual Report 2013 Remuneration report In case of termination of employment due to retirement, disability or termination without cause, the unvested PSU and RSU at the termination date are subject to a pro-rated early vesting and are converted into shares at the regular vesting dates. PSU are subject to the regular performance condition. In case of termination of employment due to death, the unvested PSU and RSU at the termination date are subject to a pro-rated and immediate vesting and conversion into shares. For the PSU, if the actual performance factor is unknown, a performance factor of 100% applies. In case of termination for any other cause, such as resignation or termination for cause, the unvested PSU and RSU forfeit. In case of change of control or liquidation, all unvested RSU will vest immediately and all unvested PSU will vest proportionally to the time elapsed between the grant date and the date of change of control. Those unvested RSU and PSU shall not immediately vest should the new control holder maintain the plan or provide the participant with a comparable program. Outstanding grants: terms of awards granted in 2010, 2011 and 2012 The vesting of awards granted in 2010, 2011 and 2012 is subject to a service period and to the performance of the Nobel Biocare (NOBN) share price relative to the Swiss Leader Index (SLI) during a three-year vesting period with three tranches of one third each, vesting after one, two and three years respectively. If the performance objective is achieved, each share unit will be converted into a predefined number of Nobel Biocare shares at the vesting date. Should the share price underperform the SLI at the end of the respective vesting period, the share units forfeit. Should the share outperform the SLI by 20% or more at the end of the respective vesting period, each share unit may be converted into two shares at vesting date. Between 0% relative performance and 20% outperformance, the number of shares allocated for each share unit at the vesting date will be between 1 and 2 and is calculated as a linear function of the outperformance against the SLI. Awards vesting overview (for all members of the Executive Committee including CEO, as of December 31, 2013) Grant Tranche 1 Tranche 2 Tranche 3 Vesting date Feb 28, 2011 Feb 28, 2012 Feb 28, Unit granted PSU PSU PSU Vesting Forfeited Forfeited Forfeited Vesting date Feb 28, 2012 Feb 28, 2013 Feb 28, 2014 Unit granted PSU PSU PSU Vesting Forfeited Forfeited Assumed: forfeiture * Vesting date Feb 28, 2013 Feb 28, 2014 Feb 28, 2015 Unit granted PSU PSU PSU Vesting Forfeited Assumed: forfeiture * to be assessed Vesting date Feb 28, 2014 Feb 28, 2015 Feb 28, 2016 Unit granted PSU and RSU PSU and RSU PSU and RSU Vesting Assumed: 150% (PSU) and 100% (RSU) * to be assessed to be assessed * Based on the performance as of December 31, 2013 Realized remuneration for the CEO in 2013 and 2012 EUR ,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , CEO 2013 EUR CEO , , ,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , Target Potential Realized Reported Target Potential Realized Reported Long-Term Incentive Long-Term Incentive Short-Term Incentive 1 LTI as vested Short-Term Incentive 1 LTI as vested Annual Base Salary 2 LTI at grant Annual Base Salary 2 LTI at grant

61 Nobel Biocare Annual Report 2013 Remuneration report 59 The charts above illustrate the realized remuneration versus target and maximum potential, and compare with the amounts disclosed in the remuneration table on page 60. The elements included are: Annual base salary for 2013 and 2012, respectively Short-term incentive on target, maximum potential and realized payout for 2013 and 2012, respectively. The 2013 realized payout and the amount reported in the remuneration table represent the best estimate. Long-term incentive 2013: for the target and maximum potential, the fair market value of the share units at the grant date was used. The realized amount represents the value of the estimated vested PSU in February 2014 (third tranche of the 2011 grant, second tranche of the 2012 grant and first tranche of the 2013 grant) calculated as of December 31, 2013 in accordance with the respective performance measures of the plans. For the RSU, the realized amount represents the market value of the NOBN share (closing price as of December 2013 on the SIX Swiss Exchange). The value reported in the remuneration table represents the fair value of the 2013 grant (which is 620k, and thus higher then the 409k received). Long-term incentive 2012: for the target and maximum potential, the fair market value of the share units at the grant date was used. The realized amount represents the value of the vested PSU in February 2013 (second tranche of the 2011 grant and first tranche of the 2012 grant) calculated as at December 31, 2012 in accordance with the respective performance measure of the PSU plans. The value reported in the remuneration table represents the fair value of the 2012 grant. Biocare exceeds the legal requirements of the Swiss Federal Law on Occupational Retirement, Survivors and Disability Pension Plans (BVG) and is in line with what is being offered in other companies of the SMI Mid (30 largest mid-cap stocks in the Swiss equity market that are not included in the blue chip SMI index). Except for the expense allowance and the allowances related to international assignment, the Members of the Executive Committee do not receive any particular executive benefits. The monetary value of the allowances is disclosed at fair value in the remuneration tables. Employment contracts The Executive Committee members are employed under employment contracts of unlimited duration and are all, including the CEO, subject to a notice period of a maximum of six months. Members of the Executive Committee are not contractually entitled to any termination payments or changeof-control payments. This illustration demonstrates the link between pay and performance. For the business year 2013, the performance was above expected levels and there will be a vesting under the long-term incentive plan for the first time in February Therefore, cash compensation was above target levels, while the realized long-term incentive is expected to be slightly below the target. Benefits Employee benefits consist mainly of retirement, insurance and healthcare plans that are designed to protect the employees against hazards of life. Employee benefits are country-specific and are structured in accordance with local legal requirements and with local competitive market practice. Nobel Biocare regularly reviews its benefit coverage globally. Executives participate in the benefits plans available in their country of contract. Except for one EC member seconded from the USA to Switzerland on a home-based approach, the members of the Executive Committee, including the CEO, are covered by the pension scheme applicable to all employees in Switzerland. The Swiss pension plan of Nobel

62 60 Nobel Biocare Annual Report 2013 Remuneration report Remuneration and shareholdings of the Executive Committee Members of the Executive Committee as of December 31, 2013 Name Position Appointed Richard Laube Chief Executive Officer 2011 Oliver Walker Chief Financial Officer 2012 Hans Geiselhöringer Executive Vice President Global Research, Products and Development 2010 Frank Mengis Executive Vice President Global Operations 2013 Rolf Melker Nilsson Executive Vice President Global Sales and Customer Development 2011 Walter Ritter Executive Vice President Global Human Resources 2013 Petra Rumpf Executive Vice President Corporate Development, T&E and Special Channels 2007 Jörg von Manger-Koenig Executive Vice President Legal & Compliance 2011 Effective January 1, 2013, Frank Mengis, Executive Vice President Global Operations, and Walter Ritter, Executive Vice President Global Human Resources were appointed as members of the Executive Committee. Remuneration of the Executive Committee members for the years ended December 31 in EUR thousands Richard Laube, 1 Other Executive 9 Total CEO Committee Members Fixed compensation ,423 2,264 3,074 2,928 Variable compensation , , Fair value of share units ,623 1,756 2,243 2,521 Pension and social security costs , Other benefits Costs related to international assignment Total 2,667 2,059 7,446 5,663 10,113 7,722 1 Highest total compensation 2 Fixed compensation has been adjusted: the housing benefit is now included under other benefits for the CEO and under costs related to international assignment for one other member of the Executive Committee (2012 restated) 3 Variable compensation is the estimated payout for the reporting year (2012 restated to reflect actual payout) 4 Based on the fair value of the grant for the respective year 5 Includes employer contributions to social security and pension (2012 restated due to change in variable compensation disclosure) 6 Refers to expense allowances, housing benefit for the CEO (2012 restated) 7 Includes seniority awards and an exceptional payment of EUR 25k to an EC member in As of December 31, 2013 EUR 15k remained outstanding on a loan extended to an EC member (December 31, 2012: 25k) 8 Includes costs of relocation, housing and international school fees and tax allowances (2012 restated due to change in variable compensation disclosure) 9 Pro-rata according to the service period in the Executive Committee (2013: 8 members during full year, 2012: 9 members, out of which 7 during full year) Considering that the composition of the Executive Committee has changed between 2012 and 2013, a one-to-one comparison of compensation levels cannot be drawn from the table. However, following comments can be made on the evolution of remuneration between both years: Annual Base Salaries: four members of the Executive Committee, including the CEO, received no salary increase in The other salary increases reflect one promotion and market adjustments; Short-Term Incentive: the level of short-term incentive paid out in 2012 was well below the target reflecting that the financial performance objectives were missed. In 2013, performance was above expectation, which resulted in a much higher payout level compared to 2012; Long-Term Incentive: the fair value of the long-term incentive is based on the Monte-Carlo evaluation model and decreased compared to 2012 due to the volatility of the share; Pension and social security costs evolved in line with the insured remuneration; Other benefits remained constant; International assignment costs (tax equalization) increase result of change to actual variable compensation disclosure.

63 Nobel Biocare Annual Report 2013 Remuneration report 61 Number of performance shares units, shares and stock options as of December 31, Number Number Number 2 Restricted Per- thereof Per- thereof Per- thereof Per- thereof of shares of of per- share units formance forfeited formance forfeited formance forfeited formance forfeited held restricted formance granted share units share units share units share units share units share units 2013 granted granted grant grant held held Richard Laube 110,000 43, ,937 43,431 43,431 75,973 25,324 32,573 21,716 Oliver Walker 17,101 17,101 17,101 17,101 Hans Geiselhöringer 3 23,751 60,730 23,751 23,751 41,216 13,738 28,502 19,001 Frank Mengis ,161 12,161 12,161 12,161 Rolf Melker Nilsson 11,676 28,391 11,676 11,676 19,768 6,589 10,608 7,072 2,856 2,856 Walter Ritter 14,441 24,210 14,441 14,441 11,396 3,798 6,515 4,344 Petra Rumpf 7,900 19,571 48,918 19,571 19,571 34,236 11,412 19,571 13,048 12,875 12,875 Jörg von Manger-Koenig 14,897 34,956 14,897 14,897 23,400 7,800 13,377 8,918 5,610 5,610 Total 118, , , , , ,989 68, ,146 74,099 21,341 21,341 1 Includes shares acquired in the market 2 Excluding performance share units which forfeited 3 Under management service contract until Dec 31, 2011 Number of performance shares units, shares and stock options as of December 31, Number 2 Number Per- thereof Per- thereof Per- thereof Per- thereof Stock of shares of per- formance forfeited formance forfeited formance forfeited formance forfeited option held formance share units share units share units share units grant 2007 share units granted grant grant grant held Richard Laube 110,000 97,688 75,973 32,573 10,858 Oliver Walker 9,500 Hans Geiselhöringer 3 60,216 41,216 28,502 9,502 Rolf Melker Nilsson 27,792 19,768 10,608 3,536 2,856 1,904 Petra Rumpf 7,900 51,574 34,236 19,571 6,524 12,875 8,584 20,390 20,390 35,000 Jörg von Manger-Koenig 34,188 23,400 13,377 4,459 5,610 3,740 8,884 8,884 10,000 Total 127, , , ,631 34,879 21,341 14,228 29,274 29,274 45,000 Dirk W. Kirsten 4 2,600 49,622 33,105 18,925 6,308 11,700 7,800 18,529 18,529 Nicolas Weidmann 5 33,923 22,602 12,921 4,307 8,125 5,418 12,868 12,868 25,000 Ernst Zängerle 6 4,200 14,308 16,151 5,384 10,625 7,084 1 Includes shares acquired in the market 2 Excluding performance share units which forfeited 3 Under management service contract until Dec 31, As of July 6, As of June 5, As of March 31, 2012

64 62 Nobel Biocare Annual Report 2013 Remuneration report Architecture of remuneration for the Board of Directors The Board compensation is regularly being benchmarked against that of Board members of the other SMIM companies (excluding the financial services sector) based on data published by Ethos. Considering that the remuneration of the Board relative to the company s size in terms of market capitalization and headcount is aligned to market, no adjustment was made in The members of the Board of Directors receive an annual fixed fee and a fee for assignments to committees of the Board. The annual fixed fee is delivered partially in cash, payable in equal installments in April and October of each year for the previous compensation period, and in shares, granted in July of each year and restricted during a blocking period of five years. The members of the Board of Directors do not participate in the Employee benefit plans, therefore the fees are not pensionable. Overview of Compensation of the Board of Directors in EUR Committee Fee Board Fee Audit Committee Other Committees Board Board Committee Committee Committee Committee Chairman Member Chairman Member Chairman Member Cash 162,785 56,975 28,487 16,278 17,906 13,023 Shares 203,481 65,114 When the Chairman of the Board chairs a committee, he receives the regular committee member fee only. In 2013, each Board member received the equivalent of EUR 65,114 in shares, i.e. 6,499 shares (conversion based on the five-day average closing share price from June 3, 2013 to June 7, 2013). Rolf Watter, as the Chairman of the Board, received EUR 203,481 in shares, i.e. 20,309 shares. Remuneration and shareholdings of the Board of Directors Members of the Board (all non-executives) elected by the Annual General Meeting on March 28, 2013 Name First elected Elected until Board Audit Numeration and Operational Strategy Innovation and Committee Compensation Excellence Committee Technology Committee Committee Committee Rolf Watter C M C M Raymund Breu VC M M Daniela Bosshardt-Hengartner M M M Edgar Fluri M C Franz Maier M M M Michel Orsinger M C Juha Räisänen M C Oern Stuge M M C Georg Watzek M M C Chairman VC Vice-Chairman M Member

65 Nobel Biocare Annual Report 2013 Remuneration report 63 Remuneration of the Board of Directors for the year ended December 31 in EUR thousands Cash 1 Fair value of 2 Total Cash 1 Fair value of 2 Total restricted restricted shares shares Rolf Watter Raymund Breu Daniela Bosshardt-Hengartner Edgar Fluri Franz Maier Michel Orsinger Juha Raisänen Oern Stuge Georg Watzek Stig G. Eriksson Robert Lilja Total , ,493 1 Cash compensation is based on actual payments, including social security contributions. 2 Based on the closing share price average of the first five trading days in June (2012 restated) 3 Compensation based on period of service starting March 28, Compensation based on period of service starting March 29, Compensation based on period of service ending March 29, 2012 Number of shares held as of December 31, 2013 Name Total number Number of 1 Number of Restricted shares Restricted shares Restricted shares Restricted shares of shares unrestricted restricted grant 2013 grant 2012 grant 2011 grant 2010 shares held shares held Rolf Watter 122,943 63,500 59,443 20,309 25,302 11,832 2,000 Raymund Breu 91,158 70,000 21,158 6,499 8,097 4,562 2,000 Daniela Bosshardt-Hengartner 21,158 21,158 6,499 8,097 4,562 2,000 Edgar Fluri 37,658 16,500 21,158 6,499 8,097 4,562 2,000 Franz Maier 6,499 6,499 6,499 Michel Orsinger 18,017 18,017 6,499 8,097 3,421 2 Juha Räisänen 14,596 14,596 6,499 8,097 Oern Stuge 21,158 21,158 6,499 8,097 4,562 2,000 Georg Watzek 14,596 14,596 6,499 8,097 Total 347, , ,783 72,301 81,981 33,501 10,000 1 Includes shares acquired in the market 2 Grant for his services as a guest to the Board of Directors from July 4, March 29, 2012 Number of shares held as of December 31, 2012 Name Total number Number of 1 Number of Restricted shares Restricted shares Restricted shares of shares unrestricted restricted grant 2012 grant 2011 grant 2010 shares held shares held Rolf Watter 102,634 63,500 39,134 25,302 11,832 2,000 Raymund Breu 84,659 70,000 14,659 8,097 4,562 2,000 Daniela Bosshardt-Hengartner 14,659 14,659 8,097 4,562 2,000 Edgar Fluri 31,159 16,500 14,659 8,097 4,562 2,000 Michel Orsinger 11,518 11,518 8,097 3,421 2 Juha Räisänen 8,097 8,097 8,097 Oern Stuge 14,659 14,659 8,097 4,562 2,000 Georg Watzek 8,097 8,097 8,097 Total 275, , ,482 81,981 33,501 10,000 Stig G. Eriksson 3 10,812 4,250 6,562 4,562 4,562 2,000 Robert Lilja 3 24,937 18,375 6,562 4,562 4,562 2,000 1 Includes shares acquired in the market 2 Grant for his services as a guest to the Board of Directors from July 4, March 29, Number of shares held as of March 29, 2012 (including grants 2011, 2010 and 2009)

66 Share information.

67 Nobel Biocare Annual Report 2013 Share information The Nobel Biocare share 65 The Nobel Biocare share. Share information Listing SIX Swiss Exchange Security number ISIN number CH Reuters NOBN.S Bloomberg NOBN SW Further capital and share-related information may be found in the Corporate Governance section. Dividend policy and proposal Nobel Biocare s dividend policy is based on the capital management principles as outlined on page 127 and should reflect the Group s long-term financial development, taking into account the need for investments and the expected economic fluctuations in particular years. It is designed to maintain attractive dividend yields for investors and an affordable payout ratio of between 35 percent and 45 percent (calculated as dividend in percentage of available profit for the year) as a general target. For 2013, the Board of Directors proposes a dividend of CHF 0.20 (2012: CHF 0.20). The proposed dividend for the 2013 financial year is equivalent to 47 percent of profit after tax (2012: 44 percent). Financial calendar Annual General Meeting March 26, 2014 Ex-dividend date March 28, 2014 Record date April 1, 2014 Payment of dividend April 2, 2014 Interim Report 1, January March April 29, 2014 Interim Report 2, January June August 21, 2014 Interim Report 3, January September November 6, 2014 Nobel Biocare vs. Swiss Market Index 2013 (in percent) Jan 13 Apr 13 Jul 13 Oct 13 Dec 13 Nobel Biocare Swiss Market Index Nobel Biocare vs. Swiss Market Index since 5 years (in percent) Share trends and turnover Share price at year-end CHF CHF 7.76 Market value CHF 1,721 mn CHF 961 mn Variance +79.1% 28.9% All-year high CHF CHF Date Oct 22, 2013 Feb 3, 2012 All-year low CHF 7.91 CHF 7.09 Date Jan 3, 2013 Nov 21, 2012 Trading volume (shares) mn mn Average per day 576, , Nobel Biocare Swiss Market Index The analysts listed on page 66 of this report follow the Nobel Biocare share. Please note that any opinions, estimates or forecasts regarding Nobel Biocare s performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of Nobel Biocare or its management. Nobel Biocare does not by its reference above imply its endorsement of or concurrence with such information, conclusions or recommendations. Nobel Biocare vs. Swiss Market Index since listing (in percent) Nobel Biocare Swiss Market Index

68 66 Nobel Biocare Annual Report 2013 Share information The Nobel Biocare share Share data Shares on 31 December (number) 123,784, ,784, ,784, ,784, ,784, ,316,530 Average number of shares (number) 122,807, ,054, ,775, ,035, ,276, ,269,517 Share price 31 December (CHF) Market value 31 December (CHF mn) 1, ,352 2,182 4,305 2,663 Dividend per share 1 (CHF) Yield 1 (%) Dividend percentage 1 (%) Basic earnings per share (EUR) Diluted earnings per share (EUR) Equity per share (EUR) Cash flow from operations per share (EUR) P/E ratio Proposed dividend for 2013 Analyst coverage Firm Analyst Bank am Bellevue Christiian Koch [email protected] Bank of America Merrill Lynch Ed Ridley-Day [email protected] Carla Bänziger carla.bä[email protected] Bank Vontobel Daniel Jelovcan [email protected] Barclays Alexander Kleban [email protected] Berenberg Bank Tom Jones [email protected] Citigroup Jonathan Beake [email protected] Commerzbank Oliver Metzger [email protected] Credit Suisse Christoph Gretler [email protected] Deutsche Bank Yi-Dan Wang [email protected] Exane BNP Paribas Julien Dormois [email protected] Goldman Sachs Veronika Dubajova [email protected] HSBC Hendrik Lofruthe [email protected] J.P. Morgan Cazenove David Adlington [email protected] Jefferies International Ingeborg Oie [email protected] Kepler Capital Markets Maja Pataki [email protected] MainFirst Bank Dr. Marcus Wieprecht [email protected] Morgan Stanley Michael Jüngling [email protected] Northcoast Research Ed Snyder [email protected] Sanford C. Bernstein Lisa Clive [email protected] Standard & Poor s Jacob Thrane [email protected] UBS Martin Wales [email protected] Zürcher Kantonalbank Sibylle Bischofberger [email protected] Contact information Company address Investor and Corporate Relations Nobel Biocare Holding AG P.O. Box, 8058 Zurich-Flughafen, Switzerland Phone , Fax or [email protected] Süha Demokan, Head of Investor and Corporate Relations Phone or [email protected]

69 Nobel Biocare Annual Report 2013 Financial reporting Financial reporting 67 Financial reporting. Key figures 68 Financial review 69 Risk management 74 Consolidated income statement 78 Consolidated statement of comprehensive income 78 Consolidated balance sheet 79 Consolidated statement of changes in equity 80 Consolidated cash flow statement 82 Notes to the consolidated financial statements 83 1 General information 83 2 Significant accounting policies 83 3 Critical accounting estimates and judgments 94 4 Operating segments 95 5 Personnel expenses 97 6 Net financial result 98 7 Income tax expense 98 8 Property, plant and equipment Intangible assets Non-current financial assets Inventories Trade and other receivables Prepaid expenses and accrued income Cash and cash equivalents Equity Earnings per share Share-based payment transactions Deferred tax assets and liabilities Provisions Employee benefits Loans and borrowings Trade payables Other liabilities Accrued expenses and deferred income Commitments Contingent liabilities and pledged assets Financial instruments Risks related to financial instruments Capital management Risk assessment Related parties Subsidiaries Subsequent events 130 Report of the statutory auditor 131 Parent company accounts 132 Income statement 132 Balance sheet 132 Notes to the parent company accounts Basis for preparation Property, plant and equipment Details of investments Shareholders equity Treasury shares Financial income Dividend income Financial expenses Tax expenses Securities, sureties, guarantees and pledges in favor of third parties Straight bond Pension liabilities Remuneration of the Board of Directors (BoD) and Executive Committee (EC) Major shareholders Risk assessment Subsequent events 141 Appropriation of available earnings 142 Report of the statutory auditor 143

70 68 Nobel Biocare Annual Report 2013 Financial reporting Key figures Key figures. in EUR millions restated Income statement Revenue Gross profit Operating expenses Operating profit (EBIT) Profit before tax Income tax expense Profit attributable to owners of Nobel Biocare Balance sheet Non-current assets Current assets Total equity Non-current liabilities Current liabilities Cash and cash equivalents including bank overdraft Miscellaneous Net cash from operating activities Depreciation, amortization and impairment losses Investments in property, plant, equipment and intangible assets Research and development expenses Employees as of the end of the period (number) 2,487 2,496 2,472 2,433 2,242 Ratios Revenue growth (in percent) Revenue growth at constant exchange rates (in percent) Gross margin (in percent) Operating expenses/revenue ratio (in percent) EBITDA margin (in percent) Operating (EBIT) margin (in percent) Net profit margin (in percent) Return on average equity (in percent) Equity/assets ratio (in percent) Cash/total assets (in percent) Net (cash)/debt Net debt/equity ratio (in percent) Net debt/ebitda (in percent) Interest coverage ratio (times) Figures for 2012 have been restated due to the adoption of IAS 19R and the classification change of certain income statement items. For more information, refer to note 2. 2 Includes net profit for the last four quarters over average equity for the last four quarters 3 Calculated as profit before tax divided by interest and other financial expenses

71 Nobel Biocare Annual Report 2013 Financial reporting Financial review 69 Financial review. Nobel Biocare is a world leader in the field of innovative implant-based dental restorations from single tooth to fully edentulous indications. The portfolio includes dental implant systems, high-precision individualized prosthetics and CAD/CAM systems, diagnostics, treatment planning, guided surgery solutions and biomaterials. Nobel Biocare supports its customers throughout their professional development by offering training and education along with practice support and patient information materials. Nobel Biocare is headquartered in Zurich, Switzerland, and the shares are listed on the SIX Swiss Exchange. Production takes place at seven sites in Canada, Israel, Japan, Sweden and the US. Products and services are available in over 80 countries around the world through subsidiaries and distributors. In 2012, Nobel Biocare introduced a new strategy, Designing for Life, centered on customers and patients. The rebuilding of the organization is driven by fulfilling one clear value proposition: to help customers treat more patients better with Nobel Biocare s superior products and solutions. The company provides customers with the tools, components and solutions they need to perform superior implant-based treatments to the highest standards for patient satisfaction. Nobel Biocare s mission Passionate and proud about making a real and lasting improvement in patient s quality of life Four strategically integrated pillars Designing for Life Superior innovation...beyond products Nobel Biocare s contribution Help more customers treat more patients better with our superior products and solutions Our performance objective Grow market share profitably Partnering for Life Customer-tailored business-building activities Learning for Life Exciting training, education & activation (TEA) Programs Organizational efficiency and effectiveness Continual improvement In 2013, progress was achieved in all areas, including: Designing for Life Launch of various solutions to improve treatment workflow to treat more patients better: Launch of NobelReplace Partially Machined Collar (PMC) Launch of NobelProcera 2G scanner and Openaccess Opening of NobelProcera Scan and Design Centers Launch of New NobelClinician TM with volume rendering and communicator app Launch of regeneration product line creos TM Introduction of fully integrated digital treatment workflow NobelConnect TM Seven years of double-digit growth with NobelActive Partnering for Life Expansion of customer partnering activities such as practice resource center, esthetic alliance program, study clubs, NobelVision and patient education Expansion of online store to cover all major markets Strengthened distributor partnerships in Eastern Europe Reduced sales force turnover, largest sales force in the field Higher revenue per customer Learning for Life New Global Course Catalog Very well attended corporate forums at major dental conferences Sold out Global Symposium in NYC, participants up 50 percent from 2010 Endowment of the new Foundation for Oral Rehabilitation (FOR)

72 70 Nobel Biocare Annual Report 2013 Financial reporting Financial review Organizational efficiency and effectiveness: Continued shift of resources from administration to growth drivers, more than 300 positions reassigned Corporate functions realignment to be completed by the end of 2014 Redesigned order-to-cash process New quality and efficiency program NobelQuality 3 introduced Procure-to-pay program initiated Please see the Chairman letter, the CEO letter and the strategy overview to learn more about these initiatives and the progress in more detail. Business Performance Regaining market share and improving underlying business performance Please note that the figures for 2012 have been restated due to changes in the presentation of the income statement and the adoption of IAS 19R. Again in 2013, global market conditions were very mixed. The US experienced solid growth accelerating to the high single-digit percentage range in the course of the year. Markets in Europe continued to suffer from ongoing economic difficulties and were flat at best. Japan still felt the impact from the adverse media campaign about dental implant treatment and was again negative for the full year and only started to slowly recover toward the end of the year. In this environment Nobel Biocare continued to drive the execution of its aforementioned strategy and the related initiatives. These were labeled Brilliant at the basics in the first two years. A result and indication of the success of the strategy implementation was the development of the implant fixtures revenue: growth of 5.6 percent at constant exchange rates (CER), which is above the market growth that is estimated to be in the low-single digit range. Implants with the advanced conical connections are the drivers of the growth. The NobelActive product family has achieved seven years of double-digit percent growth. The newer versions of NobelReplace such as CC (conical connection) and PMC (partially machined collar) have revitalized demand for this implant system, which is estimated to be the most used implant system in the world. In addition, Alpha-Bio Tec (ABT), which serves customer segments and specific markets with reduced and lower-price components, primarily to treat posterior single tooth indications, continued to show solid growth rates. ABT forms an ideal complement to the Nobel Biocare brand, which leads the market in treating more complex indications and often compromised patients. Consistent with prior year, Individualized business performance was mixed as expected. While the tooth-based components continued to decline strongly, the focus of our strategy, implant-based restorations, grew primarily due to the strong pick-up of overdenture bars in the US. The gross profit margin was broadly unchanged from the year before despite an adverse currency impact. Operating expenses developed in line with the strategic direction, including the realignment of corporate functions. This realignment, which is scheduled to be finalized by the end of 2014, resulted in the recognition of EUR 0.8 million in cost of goods sold and EUR 4.0 million in operational expenses. Spending in research and development further increased by 11.6 percent at constant exchange rates (and excluding realignment expenses) to facilitate efficient innovation processes and increased impact. Resources in selling and marketing were shifted to growing country organizations, resulting in an overall decline of 0.8 percent at constant exchange rates (CER). In addition, excluding the realignment costs, general and administrative expenses were down 1.7 percent at CER this despite important investments in business support systems. Overall, total operating expenses excluding the realignment cost and the adverse currency impact were up 0.9 percent thereby slightly reducing the underlying operating expenses to revenue ratio to 63.0 percent (from 63.8 percent a year ago). EBIT was up 14.8 percent excluding the realignment cost and currency effects. Currency impact was significantly negative for the year on all operating levels: 4.6pp on revenue, 0.4pp on the gross margin and 1.3pp on the EBIT margin. Net financial result was slightly better than in the year before (EUR 6.9 million versus EUR 8.0 million) thanks to a positive hedging result, while net interest expenses were consistent with the prior year. The tax rate for the year slightly increased to 25.4 percent, while underlying net profit (excluding realignment and currency effects) was up by 14.3 percent for the full year.

73 Nobel Biocare Annual Report 2013 Financial reporting Financial review 71 Revenue development outperforming peers Revenue by region in EUR millions FY 2013 FY 2012 Variance Variance (CER) Europe, Middle East and Africa (EMEA) % 1.7% Share of total revenue 41% 40% Americas % 4.5% Share of total revenue 41% 39% Asia/Pacific % 1.3% Share of total revenue 18% 21% Total % 2.2% In 2013, Nobel Biocare generated revenue of EUR million, a decrease of 2.4 percent compared with the year before, driven by negative currency translation effects due to the weak US dollar and Japanese yen against the euro. Year-onyear CER growth was 2.2 percent. This marks the first year of CER revenue growth since 2007 and is estimated to be ahead of peers (see graph on page 19). Market conditions in Japan continued to adversely affect the overall performance. The impact for Nobel Biocare was higher than for competitors as the company is the market leader in Japan and consequently has a higher contribution from this market. Excluding Japan, revenue for the full year was up 3.4 percent at CER. In EMEA, revenue in 2013 was up 1.7 percent (CER) compared with While overall market conditions remained weak in many countries, Nobel Biocare achieved its first CER revenue growth since 2007 in this region. Markets in Germany, France, Spain and Italy were sluggish. Growth was consistently achieved in markets where the strategy execution is more advanced such as Russia and Belgium. It is worth noting that after many years of decline, Nobel Biocare achieved growth in Spain. The Company also strengthened distributor partnerships in Eastern Europe, and the Alpha-Bio Tec brand supported growth in this region. In the Americas, revenue grew 4.5 percent (CER) versus The US market, which is the main market in the region and contributes over 80 percent of the revenue, was very solid throughout the year. It is in this market where Nobel Biocare s strategy execution with a focus on treatment workflow optimization is the most advanced. The company achieved mid-single digit percentage revenue growth at CER with accelerating momentum in the second half due to solid growth in Implant Systems and double-digit growth in Individualized. While Brazil and Canada remained below prior year s level, Mexico achieved a high-teens percentage (CER) revenue increase compared with the prior year. In APAC, revenue declined by 1.3 percent (CER) in the reporting year. The Japanese market continued to decline modestly after the impact of adverse media coverage in Consequently, Nobel Biocare remained below the prior year s revenue (-6.9 percent) in this market. However, growth in Japan was positive in the fourth quarter (+2.9 percent). Excluding Japan, revenue in the region was up by 6.6% percent (CER) compared with Revenue in Australia remained flat, while China and India continued to grow at double-digit rates. From a portfolio perspective, Implant Systems generated revenue of EUR million in 2013, contributing 85 percent of the total revenue. Revenue for Individualized was EUR 86.2 million and contributed 15 percent of the Group s revenue in The Implant Systems business increased by 3.3 percent (CER) overall (4.5 percent excluding Japan). Implant fixtures isolated grew 5.6 percent (CER) confirming the strategic focus on implant-based restorations. The performance was primarily driven by our implant portfolio with the more advanced conical connections such as NobelActive and the recently launched NobelReplace CC and PMC, which support the company s largest implant line, NobelReplace. NobelActive saw high-teens percentage growth, marking the seventh year of double-digit growth since its introduction. Customer segments and specific markets with demand for reduced and lower priced components, primarily to treat posterior, single tooth indications, are served through the separate Alpha-Bio Tec (ABT) brand and organization. This brand continued its solid growth in 2013 and entered the Chinese market in the second half of the year. The Individualized business declined 3.5 percent (CER) in 2013 (-2.5 percent excluding Japan). Revenue developed in line with the focus on implant-based restorations. Toothbased restorations continued to decline strongly, still contributing a fifth of the Individualized revenue. Implant-based restorations continued to grow driven by overdenture bars, which were up 21 percent, and CAD/CAM abutments, which which saw a mid-single digit percentage growth rate, primarily driven by demand in the US thanks to the NobelProcera Scan and Design Center. NobelClinician TM, which enables

74 72 Nobel Biocare Annual Report 2013 Financial reporting Financial review customers to place implants more accurately and in optimum positions for superior restorations, is emerging as the premier implant and restorative planning software and is also available on Mac, the preferred computer platform for many dentists. To date, over 6,000 licenses for the program have been sold. The recently launched NobelConnect TM enables superior teamwork between the surgical clinician, the restorative clinician and the laboratory producing the teeth by sharing a single patient treatment plan, and the new NobelCommunicator app allows the patient to review his/her treatment plan for greater understanding and treatment acceptance. Gross margin Underlying margin stable In 2013, gross profit was EUR million, down 2.1 percent from the previous year all due to an adverse currency impact. The gross profit margin increased to 75.9 percent, compared with 75.7 percent in 2012, despite the negative currency impact (-0.4pp) and realignment costs. The underlying margin improvement is due to lower depreciation cost for the full year. Gross margins for Implant Systems and Individualized remained broadly consistent with the year before. Operating expenses Allocating resources along the strategy pillars Shift of resources to growth drivers in EUR million Variance Variance (CER) Revenue % 2.2% Research and development expenses % 16.1% in % of revenue 12.0% 10.2% Selling and marketing expenses % 0.8% in % of revenue 38.3% 39.2% Administrative expenses % 0.4% in % of revenue 14.4% 14.4% Total operating expenses % 2.0% in % of revenue 64.6% 63.8% Operating expenses for the full year were EUR million compared with EUR million in 2012, down 1.1 percent. Excluding the currency impact this reflects an increase of 2.0 percent. However, the 2013 expenses include EUR 4.0 million non-recurring costs for the realignment of the Gothenburg corporate functions, which is part of transforming Nobel Biocare into a leaner, more flexible, more competitive, and customer-centric organization. Excluding these realignment costs and currency impact, overall expenses were up 0.9%. Research and development expenses for the full year increased to EUR 68.0 million. Excluding the realignment costs and the currency impact, this is an 11.6 percent increase from the year before and reflects an industry-leading 12.0 percent of revenue. Resources in selling and marketing were shifted to growing country organizations, and despite increasing the number of partnering activities and conducting a global symposium in New York, overall selling and marketing expenses decreased to EUR million or by 1.1 percent excluding currency effects and the realignment costs. Various programs to improve efficiency in the administrative area were compensated by important investments into business support systems resulting in general and administrative expenses of EUR 81.5 million, down by 1.7 percent, excluding realignment and currency impact. Overall operating expenses in relation to revenue went up to 64.6 percent. Excluding the realignment costs it remained similar to last year s level at 63.9 percent. Operating profit (EBIT) In line with company outlook, adversely impacted by currency and realignment cost Operating profit (EBIT) for 2013 was EUR 64.0 million, 7.6 percent lower than in 2012, reflecting an EBIT margin of 11.3 percent compared with 11.9 percent in the previous year. The adverse currency impact and total realignment costs of total EUR 4.8 million were the reasons for the decrease. Excluding these effects, EBIT was up 14.8 percent, reflecting a margin of 13.4 percent fully in line with the Group s outlook of a 100 to 150 bps increase from the prior year at CER and excluding realignment cost. The EBIT margin excluding the realignment costs was 12.1 percent. Financial result Slightly better thanks to positive hedging result The financial result in the reporting year was minus EUR 6.9 million versus minus EUR 8.0 million in While interest expenses remained broadly unchanged, the improvement is primarily due to a positive hedging result compared with the year before. Tax rate Unfavorable country mix In 2013, tax expenses were EUR 14.5 million versus EUR 15.2 million in 2012, slightly increasing the underlying tax rate to 25.4 percent compared with 24.8 percent in the prior year.

75 Nobel Biocare Annual Report 2013 Financial reporting Financial review 73 Net profit Underlying net profit up by 14 percent In 2013, net profit was EUR 42.6 million (2012: EUR 46.1 million), down 7.6 percent compared with the year before. The net margin was 7.5 percent versus 7.9 percent in Excluding currency effects and the realignment costs, net profit was up by 14.3 percent for the year. Earnings per share (EPS) were EUR 0.35 (2012: EUR 0.37). Cash flow Strengthening the net cash position In 2013, Nobel Biocare generated operating cash flow of EUR 77.8 million (2012: EUR million). The lower cash flow is primarily a result of increased safety levels of inventories and strong revenue development at the end of the period. At the end of 2013, Nobel Biocare reported a cash position of EUR million versus EUR million in The net cash position was EUR 66.5 million compared with EUR 36.1 million at the end of This cash level is further supported by the syndicated credit facility, which gives the company sufficient financial flexibility from a strategic perspective FX impact on P&L (in EURm) Revenue CoGS OPEX EBIT Fx result Net FX impact % % % Based on the 2013 results, the Board of Directors will propose to the next Annual General Meeting on March 26, 2014 the payment of a dividend of CHF 0.20 on each CHF 0.40 par value registered share. This is unchanged from the year before and corresponds to a payout ratio of 47 percent of net profit. Excluding the realignment cost, this corresponds to a payout ratio of 43 percent, in line with the company s dividend policy. As in the year before, the intention is to pay this dividend to shareholders in a tax-advantaged form through a reduction of additional paid-in capital. Outlook Nobel Biocare expects continued slow recovery of the global economy and growth in the global dental implant market at a low single-digit rate. In this market environment, Nobel Biocare aims to continue outpacing peer competitors and increasing its market share in dental implants. Nobel Biocare will continue with its measures to adjust the level of spending, shift resources to growth drivers and allocate resources to growing markets. Based on these market assumptions and the ongoing cost saving initiatives, Nobel Biocare expects for the full year 2014 revenue to grow around 3% to 4% (CER) and to improve the EBIT margin excluding realignment costs by about 100bps (CER) from 12.1% in Net debt/(cash) Adverse currency impact on margins In 2013, the currency translation impact was 4.6pp on revenue, 0.4pp on the gross profit margin and 1.3pp on the EBIT margin. The US dollar and Japanese yen weakening against the euro drove this negative currency translation impact. Share price performance Information about Nobel Biocare shares and related development can be found on page 65 of this report. Unchanged dividend proposed for 2013 A dividend of CHF 0.20 per share or EUR 20.2 million was paid on April 8, 2013 reflecting a payout ratio of 44 percent in line with the dividend policy.

76 74 Nobel Biocare Annual Report 2013 Financial reporting Risk management Risk management. As an innovative medical technology company, Nobel Biocare is exposed to various risks. Therefore, the Group introduced a systematic risk management process in Leveraging the experience gained during the first years of actively managing risks, Nobel Biocare established a comprehensive Enterprise Risk Management (ERM). In 2013, the ERM was redesigned by Internal Audit (IA) and the Executive Committee (EC). The EC, as well as the Board of Directors (BoD) periodically review the key risks, which are presented by the respective risk owner. Thirteen risk categories have been divided between strategic and functional risks. The risk categories are covered and monitored by the ERM: Strategic risks: Human resources risks Commercial strategy risks Commoditization risks Quality risks Innovation risks Product design risks Strategic alliances risks Functional risks: Corporate governance risks Operations risks Sales risks Finance risks Regulatory and compliance risks Information technology risks Within these 13 risk categories, the risk map contains more than 60 different scenarios, which were identified by analyzing the value chain, the business ecosystem, the product life cycle and the assessment of emerging internal and external events that impacted the ERM last year. In addition, all risks were assessed in terms of likelihood and impact of risk. Risk mitigation goals and strategies, as well as operational action plans, were defined and put in place for all risks material to the Group. Key performance and key risk indicators have been maintained by risk owners in order to underpin the risk assessment and the quality of related controls. The risk owner is accountable for a drill-down of the risk management activities on a more operational level. This obligation includes, for example, initiation or management of action plans, definition of operational risk standards, collection of data (indicators), management or monitoring of controls and tracking of incidents. In addition to this Group-wide approach, numerous strategic and functional risk management initiatives were significantly strengthened or newly implemented during the reporting year. In addition, Nobel Biocare has undertaken to further integrate and strengthen its overall governance, risk and compliance (GRC) activities, in part by focusing Internal Audit s activities on this topic. The Audit Committee receives a periodic update on the Group compliance roadmap. The Head of Group Internal Audit coordinates all ERM and GRC activities. In this role, she reports directly to the Audit Committee and for administrative purposes to the Chief Financial Officer (CFO). At least once a year the risk map data are reported to the Executive Committee and the Board of Directors. The risk categories are defined as follows, including further explanation of those risks that are presently material in terms of likelihood and impact: Human resources risks: This category includes the risk of not attracting and retaining key managers and experts or not developing them adequately. Human resources (HR) risks also include the corporate culture, especially Nobel Biocare s attractiveness as an employer of choice and the risk of losing key team members. The Group depends on the continued service of key members of senior management and key experts. The loss of any of these individuals could disrupt the Group s operations. Moreover, the Group s future success will depend on, among other things, its ability to continue to hire and retain the necessary qualified scientific, technical and managerial personnel. The Group competes for such personnel with numerous other companies, academic institutions and other organizations. In 2013, all policies were standardized and rolled out across the organization to ensure consistent processes and the availability of information. Group HR presented to the EC and the BoD a formalized succession plan and career development plans for key resources that would reduce the risk of being dependent on specific individuals. Moreover, Nobel Biocare further professionalized the Group-level and regional HR functions and will pursue additional key initiatives to gain, retain and develop the best people. Commercial strategy risks: This category includes risks related to establishing an effective commercial and market growth / penetration strategy. Management monitors closely the market behavior as Nobel Biocare has designed a clear strategy to become the leader in the growing premium market sector. In addition, emerging markets are carefully evaluated to ensure Nobel Biocare takes advantage of the opportunities to penetrate these markets. On the other hand, countries in crisis or recession

77 Nobel Biocare Annual Report 2013 Financial reporting Risk management 75 where Nobel Biocare products are commercialized are also monitored to mitigate the risk of lower margin contribution. Commoditization risks: This category comprises risks related to the understanding of the market and potential emerging market opportunities. Nobel Biocare undertakes market research activities on an ongoing basis in order to understand developments and trends in the industry and to be able to mitigate related risks. Quality risks: This category comprises risks of a major quality incident that could result in human harm and financial / reputational losses to the organization. Failure to obtain product and manufacturing process approvals by authorities, as well as product liability due to production errors are regarded as significant risks in any medical technology company such as Nobel Biocare. To reduce exposure to these risks, Nobel Biocare adheres to and is in compliance with the US Food and Drug Administration s Quality System Regulations, Medical Device Directive 93/42/ EEC, ISO Quality Management System for Medical Devices, as well as other applicable laws, regulations and standards. During 2013, Nobel Biocare strengthened the Quality Management team across the organization, which has a permanent quality assurance process with clearly defined change management procedures. The Group has not faced any negative consequences in this respect for more than ten years. Nevertheless, if the Group fails to comply with the aforementioned requirements, access of products to the market may be delayed, jeopardized or even suspended. Innovation risks: This category comprises risks related to the innovation pipeline from initial assessment to commercialization (the idea-to-market process), including understanding new technology trends and competition over concepts or products in the innovation pipeline. The dental implant industry is characterized by rapid product development, with a significant competitive advantage being gained by companies that are first-to-market with their products. Therefore, market participants are in constant pursuit of innovative products and techniques and frequently introduce new products. The Group s ability to compete successfully also depends on its ability to be a best-in-class service provider. The Group s product management strategy aligns research and development (R&D) activities quickly and effectively with customer needs. The broad network of key opinion leaders, the university program and scientific input from innovative customers provide timely input of new technology trends and product specifications. Product design risks: This category comprises risks related to our existing product design ( life cycle management process). Design and technology errors are regarded as significant risks in any medical technology company such as Nobel Biocare. Only clinically tested products are launched. A sound design change process with defined stage gates (decision points) and a dedicated risk management process with corresponding governance structures are in place. Areas of importance include the product approval and registration processes. All products, packages, applications and technologies are continuously and systematically monitored, tested and improved. Additionally, close contact with a network of clinician allows the Group to monitor the use of its products and to make immediate improvements based on user experience and feedback. Strategic alliance risks: This category comprises risks related to strategic alliances. In the past Nobel Biocare acquired several companies and entered into various strategic partnerships. There is a risk of not generating the expected financial return on these transactions. Nobel Biocare has successfully integrated these acquisitions. Corporate governance risks: This category comprises risks related to good governance in the organization or tone at the top. Nobel Biocare corporate governance mainly comprises formalized Board of Directors, Committees of the Board, a group-wide code of conduct and group policies and procedures. Operations risks: This category comprises risks related to the operations of our production processes including supply chain, procurement and cost management. One of the other primary risks in this category is the dependence on specific suppliers for purchased key products, services or materials. There is also a risk that production or supply chain disturbances can occur for a variety of reasons such as technological problems, strikes, fire, earthquakes, interruption of transportation channels, water damage or financial issues of the supplier. To mitigate these risks, all of our factories have developed contingency plans and the Group is insured for any losses due to operational interruption. Furthermore, the Group minimizes this risk by having multiple production facilities for its entire product range. Nobel Biocare s facilities in Karlskoga (Sweden) and Yorba Linda (USA) manage the Group s implant production using globally standardized processes with standardized manufacturing technology. The factories are compatible with each other and are able to transfer

78 76 Nobel Biocare Annual Report 2013 Financial reporting Risk management production at short notice if necessary. Our four factories for individualized production in Stockholm (Sweden), Mahwah (USA), Quebec (Canada) and Chiba (Japan), utilize a common system-sharing technology. This not only ensures compatibility, but also allows orders to be immediately transferred from one production facility to another. Nobel Biocare s capacity for production is secured through long-term leased facilities. Alpha-Bio Tec (Israel) also meets the same high quality requirements as the rest of the Group. Procurement strives to focus on suppliers that provide industry-standard technology, thus allowing a shift of purchases from one supplier to another and thereby, not being dependent on any specific single supplier. For strategic products, materials or services, key suppliers are contractually bound to maintain a minimum level of stock on hand. Sales risks: This category comprises risks related to the ability of marketing activities, new product launches and the sales force to meet the organization s sales targets and deliver superior customer satisfaction. The Group primarily markets its products to general practitioners, but it also markets its products to specialized dentists who perform dental implant procedures and to dental laboratories that create dental prosthetics. Dental professionals play a significant role in determining which brand of dental implant or prosthetic a patient receives. Hence, a successful product launch has to consider different customer and patient needs. Nobel Biocare has defined clear market segments with differentiated requirements and specific product and service offerings. Finance risks: This category covers potential financial reporting shortcomings, as well as tax, treasury, foreign exchange, interest rate and counterparty risks. It also includes all operational risks related to internal and external reporting, the execution of significant transactions and larger tax cases to which the Group s consolidated tax rate may be sensitive. Non-compliance with International Financial Reporting Standards (IFRS), local accounting rules or the Group s internal accounting and treasury policies can lead to qualified auditors opinions and/or the restatement of prior years financial disclosures. Employees have taken part in training to further strengthen their knowledge. Additionally, Nobel Biocare is in constant contact with its auditors and other third-party experts in an effort to analyze the impact of any planned changes to IFRS in advance and to apply them prior to or at the effective date. External auditors regularly audit the Group s consolidated financial statements, and audit or review the financial statements of its subsidiaries. In 2013, Nobel Biocare continued to strengthen the Group s Internal Control System (ICS) and compliance know-how. Preparing financial statements in accordance with IFRS requires that management make estimates, judgments and assumptions with regard to the application of policies and reported amounts of balance sheet positions, income statement items and the disclosure of contingent liabilities. Key areas of estimation uncertainty include the impairment of goodwill, income taxes, share-based payments, provisions and employee benefits. For further details, please refer to note 3. The Group is exposed to risks related to financial instruments. For further details and a policy explanation, please refer to note 28 of the consolidated financial statements. Credit risk represents the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. This risk arises principally from the Group s trade receivables from customers and its financial investments. In 2013, the Group implemented a standardized credit and cash collection management policy under which each new customer is analyzed individually. Credit risk related to financial investments is assessed and managed centrally. Liquidity risk is the risk that the Group will not be able to meet its financial obligations when they become due. To avoid this, the Group secures financial flexibility either through physical cash holdings or committed bank facilities. In 2010, Nobel Biocare extended a committed syndicated banking facility of EUR 330 million for five years (through 2015). In 2011, a CHF 120 million bond with a maturity of five years was issued. Market risk comprises mainly currency risk and interest rate risk, whereby changes in foreign exchange rates or interest rates, may adversely affect the Group s income, cash flows or the value of its balance sheet holdings. This risk is centrally managed in compliance with the Group Treasury Policy, and risks are mitigated by hedging corresponding exposures partially or in full. The Group is exposed to currency risk with respect to the income statement (transaction risks) and equity (currency translation risks). Nobel Biocare systematically hedges almost all committed transaction risks and partially hedges uncommitted transaction risks, whereas currency translation risk is selectively hedged at present. The Group faces interest rate risk with regard to its cash and cash equivalent holdings. Changes in interest rates could adversely affect interest income. The tax laws and regulations in the respective jurisdictions where the Group may have a liability to pay taxes, as well as their interpretation by tax authorities may change. Such

79 Nobel Biocare Annual Report 2013 Financial reporting Risk management 77 changes may have a material impact on the Group s future earnings. In addition, a significant degree of estimation is involved in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax burden remains uncertain. Nobel Biocare monitors all these risks on an ongoing basis and builds or releases tax provisions based on a judgment of the probability of any additionally required tax payments. Further details are provided in note 3. Regulatory and compliance risks: This category comprises potential risks related to non-compliance with international and local laws and regulations. The Group faces the legal risks attendant to a business operation where products for human use are researched, developed, manufactured, marketed and sold. This includes product liability and risks related to warranties, as well as unfavorable changes in legislation or regulations, e.g. marketing and advertising, or legal and regulatory repercussions in case of non-compliance with product regulations. The Group also faces general legal risks such as contract-related claims, employment issues, unauthorized commitments and fraud. Furthermore, Nobel Biocare Holding AG, as a listed company, is highly influenced by changes in the area of financial market regulation and corporate governance, as well as by the legal, regulatory and reputational risks associated with non-compliance in this field. As a globally active enterprise, the Group aims to preempt such issues by maintaining a strong legal and compliance organization, which is closely involved with the business, and by strengthening internal processes, standards and governance. Information technology risks: This category comprises risks related to the operation of IT systems, infrastructure and associated projects, which could result in core systems failure, business disruption and losing key data or records. The Group is highly dependent on its IT systems. All such systems are potentially vulnerable to damage or interruption from a variety of sources, including, but not limited to, computer viruses, security breaches, natural disasters, design, programming or handling errors and telecommunication failures. Most of the systems are outsourced to specialized providers, an approach that ensures that the Group has continuous access to its systems. During 2013, Nobel Biocare further aligned its software landscape, migrating proprietary software to standard software packages and harmonizing, standardizing, optimizing and integrating the business processes and functions and the respective software design. Another IT-related risk is a potential flaw in fully automated business processes. Nobel Biocare has partially outsourced the IT monitoring of business critical automated processes, programs and transactions to specialized service providers. Whistleblower Hotline During 2013, the global whistleblower hotline was used as intended and managed as designed. All staff and managers have access to independent and neutral communication channels to report potential non-compliance with laws, regulations and internal and external business standards. No major cases were reported during The number of reported cases decreased and was below the average of previous years. Whistleblower Hotline results were reported to the BoD and to the Audit Committee. Internal Control System (ICS) Since 2013, Group Accounting has been responsible for maintaining an adequate Internal Control System (ICS) to manage risks to the organization. To further improve the quality of the ICS an Internal Control System Manager was hired in Internal Audit provides assurance services to management, the BoD and the Audit Committee in terms of reviewing the adequacy of and compliance with the documented controls and processes. The ICS meets Swiss legal requirements and addresses the needs of a company that operates on a global scale. The ICS concept is based on the COSO framework. The controls are designed to mitigate financial reporting, fraud and compliance risks across all companies of the Group, and they cover a broad range of business support and core processes. On an annual basis, a risk-based management testing of all relevant controls is performed by the subsidiaries in order to verify the operational effectiveness of this system. Special focus is given to further improving the segregation of duties concept in SAP and in finance-related processes. The ICS is also used as a means of standardizing business processes, controls and guidelines globally. The applied methodology provides high quality controls, and reduces financial reporting, fraud, and compliance risks. All subsidiary managers and their controllers have signed a Letter of Representation that covers all relevant aspects of corporate governance and financial information compliance, risks and controls.

80 78 Nobel Biocare Annual Report 2013Financial reporting. 78 Financial Reporting Consolidated income statement Consolidated income statement. in EUR thousands Note restated Revenue 4 566, ,485 Cost of goods sold 136, ,938 Gross profit 430, ,547 Research and development expenses ,015 58,961 Selling and marketing expenses , ,520 General and administrative expenses ,436 83,800 Operating profit (EBIT) 64,022 69,266 Financial income ,207 Finance cost 6 9,505 9,381 Net foreign exchange result 6 1, Profit before tax 57,061 61,270 Income tax expenses 7 14,482 15,167 Profit attributable to owners of Nobel Biocare 42,579 46,103 Basic earnings per share (EUR) Diluted earnings per share (EUR) Prior periods have been restated due to the adoption of IAS 19R and the classification change of certain income statement items. For more information, refer to note 2. 2 The sequence of income statement line items has been changed. For more information, refer to note 2. Consolidated statement of comprehensive income. in EUR thousands Note restated Profit attributable to owners of Nobel Biocare 42,579 46,103 Other comprehensive income: Items that will not be reclassified to profit or loss: Remeasurements of the defined benefit liability, net of tax 7 1, Total items that will not be reclassified to profit or loss 1, Items that are or may be reclassified subsequently to profit or loss: Foreign currency translation differences 7 7, Effective portion of changes in fair value of net investment hedges 7 1, Effective portion of changes in fair value of cash flow hedges, net of tax 7 1,744 3,474 Net change in fair value of cash flow hedges reclassified to income statement, net of tax 7 2, Net change in fair value of interest rate swaps (cash flow hedges) reclassified to income statement 6, Total items that are or may be reclassified subsequently to profit or loss 9,729 4,626 Total other comprehensive income/(expenses), net of tax 8,478 4,251 Total comprehensive income attributable to owners of Nobel Biocare 34,101 50,354 1 Prior periods have been restated due to the adoption of IAS 19R. For more information, refer to note 2.

81 Nobel Biocare Annual Report 2013 Financial reporting Consolidated balance sheet 79 Consolidated balance sheet. in EUR thousands Note December 31, 2013 December 31, January 1, restated restated Assets. Property, plant and equipment 8 57,938 70,950 86,331 Intangible assets 9 196, , ,558 Non-current financial assets 10 3,282 3,940 3,420 Deferred tax assets 18 13,870 17,729 22,675 Total non-current assets 271, , ,984 Inventories 11 26,009 20,433 23,946 Trade and other receivables 12, ,875 96, ,362 Current income tax assets 15,929 17,411 5,799 Prepaid expenses and accrued income 13 11,879 13,743 13,754 Derivative financial instruments 27 3,233 8,369 7,389 Cash and cash equivalents 14, , , ,456 Total current assets 338, , ,706 Total assets 609, , ,690 Equity and liabilities Share capital 15 31,861 31,861 31,861 Share premium 108, , ,023 Treasury shares 15 17,707 16,185 21,498 Retained earnings 212, , ,231 Total equity attributable to owners of Nobel Biocare , , ,617 Provisions 19 2,731 3,134 3,172 Pension liabilities 20 16,570 16,869 14,970 Loans and borrowings 21, 27 98,222 99,505 98,400 Deferred tax liabilities 18 19,437 27,324 26,269 Other non-current liabilities 23, Total non-current liabilities 137, , ,168 Loans and borrowings 21 36,928 Trade payables 22, 27 15,155 19,191 15,378 Current provisions 19 10,890 8,763 5,935 Current income tax liabilities 37,508 38,941 36,763 Other current liabilities 23, 27 6,704 6,877 7,448 Derivative financial instruments 27 4,409 4,566 9,300 Accrued expenses and deferred income 24 63,122 56,636 62,153 Total current liabilities 137, , ,905 Total liabilities 274, , ,073 Total equity and liabilities 609, , ,690 1 Prior periods have been restated due to the adoption of IAS 19R. For more information, refer to note 2.

82 80 Nobel Biocare Annual Report 2013 Financial reporting Consolidated statement of changes in equity Consolidated statement of changes in equity. in EUR thousands Note Share Share capital premium Balance as of January 1, 2012, as previously reported 31, ,023 Effect of changes in accounting policies 2 Balance as of January 1, 2012, restated 31, ,023 Comprehensive income: Profit for the period 1 Other comprehensive income: Items that will not be reclassified to profit or loss: Remeasurements of the defined benefit liability, net of tax 7, 20 Items that may be reclassified to profit and loss: Foreign currency translation differences Effective portion of changes in fair value of net investment hedges Effective portion of changes in fair value of cash flow hedges, net of tax Net change in fair value of cash flow hedges reclassified to income statement, net of tax Net change in fair value of interest rate swaps (cash flow hedges) reclassified to income statement Total items that may be reclassified to profit and loss Other comprehensive income, net of tax 1 Total comprehensive income 1 Transactions with owners of Nobel Biocare: Sale of treasury shares 15 1,792 Allocation of shares to share plan participants Share-based payment expenses 17 Dividends to owners of Nobel Biocare relating to Total transactions with owners of Nobel Biocare 2,476 Balance as of December 31, 2012, restated 31, ,547 Balance as of January 1, 2013, restated 31, ,547 Comprehensive income: Profit for the period Other comprehensive income: Items that will not be reclassified to profit and loss: Remeasurements of the defined benefit liability, net of tax 7, 20 Items that may be reclassified to profit and loss: Foreign currency translation differences Effective portion of changes in fair value of net investment hedges Effective portion of changes in fair value of cash flow hedges, net of tax Net change in fair value of cash flow hedges reclassified to income statement, net of tax Net change in fair value of interest rate swaps (cash flow hedges) reclassified to income statement Total items that may be reclassified to profit and loss Other comprehensive income, net of tax Total comprehensive income/(expenses) Transactions with owners of Nobel Biocare: Acquisition of treasury shares 15 Allocation of shares to share plan participants Share-based payment expenses, net of tax 17 Dividends to owners of Nobel Biocare relating to Total transactions with owners of Nobel Biocare 536 Balance as of December 31, , ,011 1 Prior periods have been restated due to the adoption of IAS 19R. For more information, refer to note 2.

83 Nobel Biocare Annual Report 2013 Financial reporting Consolidated statement of changes in equity 81 Treasury Trans- Hedging Other Total Total equity shares lation reserve retained retained attributable reserve earnings earnings to owners of Nobel Biocare 21, ,340 6, , , ,504 5,887 5,887 5,887 21, ,340 6, , , ,617 46,103 46,103 46, ,474 3,474 3, ,789 4,626 4, , ,251 4, ,789 45,728 50,354 50,354 3,960 2,168 1, ,117 6,117 6,117 15,269 15,269 15,269 5,313 9,821 9,821 6,984 16, ,503 1, , , ,987 16, ,503 1, , , ,987 42,579 42,579 42,579 1,251 1,251 1,251 7,789 7,789 7,789 1,718 1,718 1,718 1,744 1,744 1,744 2,870 2,870 2, , ,729 9,729 9, ,251 8,478 8,478 9, ,830 34,101 34,101 2,742 2,742 1, ,914 4,914 4,914 20,152 20,152 20,152 1,522 15,922 15,922 17,980 17, ,010 1, , , ,108

84 82 Nobel Biocare Annual Report 2013 Financial reporting Consolidated cash flow statement Consolidated cash flow statement. in EUR thousands Note restated Profit before tax 57,061 61,270 Adjusted for: Depreciation, amortization and impairment losses 8, 9 27,286 32,033 Net financial result 6 6,961 7,996 Share-based payment expenses 17 4,939 6,117 Other non-cash (income)/expenses 7, Changes in working capital and provisions: (Increase)/decrease in trade and other current receivables 9,890 11,607 (Increase)/decrease in inventories 7,765 2,966 Increase/(decrease) in trade and other current liabilities 3,619 3,240 Increase/(decrease) in provisions, accrued expenses and deferred income 12,509 2,859 Income taxes paid 17,266 19,285 Net cash from operating activities 77, ,958 Purchases of property, plant and equipment 9,098 7,576 Purchases of intangible assets 3,466 2,834 Interest received 591 1,196 Other investing and hedging activities 1,199 2,911 Net cash used in investing activities 10,774 6,303 Acquisition of treasury shares 15 2,742 Proceeds from sale of treasury shares 15 2,168 Proceeds from current interest-bearing loans and borrowings 6, 21 30,000 Repayment of current interest-bearing loans and borrowings 6, 21 66,928 Interest paid 6,954 7,053 Dividends paid 15 20,152 15,269 Net cash used in financing activities 29,848 57,082 Increase in cash and cash equivalents 37,208 39,573 Cash and cash equivalents as of January 1 146, ,456 Effect of exchange rate differences on cash held 2, Cash and cash equivalents as of December , ,571 1 Prior periods have been restated due to the adoption of IAS 19R. For more information, refer to note 2.

85 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 83 Notes to the consolidated financial statements. 1 General information Nobel Biocare Holding AG (the Company) is a limited liability company incorporated and domiciled in Switzerland. The consolidated financial statements of Nobel Biocare (NOBN, SIX Swiss Exchange) for the year ended December 31, 2013 comprise the Company and its subsidiaries (the Group). Nobel Biocare is a highly focused and specialized leader in the market of implant-based dental restorations. The Group s broad portfolio includes dental implant systems for all indications, a comprehensive range of high-precision individualized prosthetics, CAD/CAM systems, diagnostics, treatment planning and guided surgery solutions. Nobel Biocare supports its customers through all phases of professional development, offering world-class training and education as well as a range of practice support and patient information materials. Nobel Biocare is headquartered in Zurich, Switzerland. The consolidated financial statements of Nobel Biocare Group were authorized for issue by the Board of Directors of Nobel Biocare Holding AG on February 17, A resolution to approve the consolidated financial statements will be proposed at the Annual General Meeting on March 26, Significant accounting policies 2.1. Basis of preparation The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law. The consolidated financial statements are presented in euro (EUR), rounded to the nearest thousand. Although the parent company is domiciled in Switzerland, the consolidated financial statements are presented in euro since the Group s cash inflow to a large extent is in euro. The subsidiaries prepare their individual financial statements using the functional currency in the respective country. The consolidated financial statements are prepared on a historical cost basis except for financial instruments (including derivative instruments) at fair value through profit or loss and available-for-sale financial assets. The accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements, unless otherwise stated Changes in accounting policy and disclosures Presentation of consolidated income statement Following a review of the income statement, the Group decided as of January 1, 2013 to change the sequence of line items in the income statement to research and development expenses, selling and marketing expenses and general and administrative expenses to better align the sequence of the income statement to the business model. As of January 1, 2013, the Group also decided to change its accounting policy with respect to the presentation of the income statement. Expenses related to the business units Implant Systems and Individualized have been reclassified from selling and marketing expenses to research and development expenses. Expenses related to royalties have been reclassified from the cost of goods sold to research and development expenses. Finally, certain expenses from sales subsidiaries not directly attributable to the sales process have been reclassified from selling and marketing expenses to general and administrative expenses. The Group believes the new presentation provides reliable and more relevant information, in addition to reflecting recent organizational changes. This change in accounting policy has been applied retrospectively, and the comparatives in the income statement were reclassified accordingly. Earnings per share and operating profit were not affected by this accounting policy change Effect of adopting new standards, amendments and interpretations The following standards and amendments have been adopted by the Group for the first time for the financial year beginning on January 1, 2013, and are applicable to the Group:

86 84 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements IAS 1 (amended) Financial statement presentation The main change resulting from the amendments is the requirement to disclose separate subtotals in other comprehensive income for items which may be reclassified to profit or loss and for those which may not. The amendment affected the presentation of other comprehensive income only and had no impact on the Group s balance sheet or income statement. IAS 19 (revised 2011) - Employee benefits (IAS 19R) Under the revised standard the corridor approach has been eliminated, and all actuarial gains and losses are recognized in other comprehensive income as they occur. All current and past service costs have to be immediately recognized in the income statement. The expected return on plan assets and interest costs have been replaced with a net interest amount that is calculated by applying the discount rate to the net defined liability/(asset). IAS 19R has been applied retrospectively as of January 1, Consequently, as of December 31, 2012, pension liabilities increased by EUR 6,516k, deferred tax assets increased by EUR 455k, and retained earnings decreased by EUR 6,061k. Amendments to IAS 19 Defined benefit plans: Employee contributions These narrow scope amendments apply to defined benefit plan contributions from employees or third parties. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. Amendments to IAS 36 Impairment of assets The Group early adopted the amendments to IAS 36 under which disclosures of the recoverable amount of cash-generating units with significant allocated goodwill and the basis used to measure fair value less costs of disposal are no longer required. Disclosures Offsetting financial assets and financial liabilities (Amendments to IFRS 7) As a result of the amendments to IFRS 7, the Group expanded its disclosures about the offsetting of financial assets and financial liabilities. The Group included the required disclosures in note 27. IFRS 10 (revised 2011) Consolidated financial statements The key principle under the new standard is that control exists, and therefore, consolidation is required when the investor has power over the investee, exposure to variable returns and the ability to use that power to affect its returns from the investee. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. In accordance with the transitional provisions of IFRS 10, the Group reassessed the control conclusion for its investees as of January 1, However, the adoption of IFRS 10 had no impact on the consolidation of investments held by the Group as of January 1, IFRS 12 (revised 2011) Disclosures of interest in other entities The new standard provides disclosure requirements on interest in subsidiaries, associates, joint ventures and unconsolidated structured entities. IFRS 13 Fair value measurement IFRS 13 establishes a single source for measuring fair value and making disclosures about fair value measurements. The standard unifies the definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively and has not provided any comparative information for new disclosures. The required disclosures are included in note Summary of quantitative impacts The impact on the restated 2012 results was an increase in profit attributable to owner of Nobel Biocare of EUR 254k for the year ended December 31, The ongoing impact for 2013 and beyond is expected to be of a similar magnitude. The following tables summarize the impact of the adoption of IAS 19R and the presentation changes in the income statement:

87 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 85 Income statement line items in EUR thousands FY 2012 IAS 19R Reclassified FY 2012 reported adjust- expenses restated ment Cost of goods sold 143,003 2, ,938 Gross profit 437,482 2, ,547 Research and development expenses 35, ,003 58,961 Selling and marketing expenses 259, , ,520 General and administrative expenses 74, ,047 83,800 Operating profit (EBIT) 68, ,266 Finance cost 9, ,381 Profit before tax 60, ,270 Income tax expenses 15, ,167 Profit attributable to owners of Nobel Biocare 45, ,103 Basic earnings per share (EUR) Diluted earnings per share (EUR) Statement of comprehensive income line items in EUR thousands FY 2012 IAS 19R FY 2012 reported adjust- restated ment Profit attributable to owners of Nobel Biocare 45, ,103 Remeasurements of the defined benefit liability, net of tax Total items that will not be reclassified to profit or loss Foreign currency translation differences Total items that are or may be reclassified subsequently to profit or loss 4, ,626 Total other comprehensive income/(expenses) for the period, net of tax 4, ,251 Total comprehensive income for the period attributable to owners of Nobel Biocare 50, ,354 Balance sheet line items in EUR thousands January 1, 2012 IAS 19R January 1, 2012 reported adjust- restated ment Deferred tax assets 22, ,675 Total non-current assets 324, ,984 Total assets 592, ,690 Retained earnings 160,118 5, ,231 Total equity attributable to owners of Nobel Biocare 281,504 5, ,617 Pension liabilities 8,643 6,327 14,970 Total non-current liabilities 136,841 6, ,168 Total liabilities 310,746 6, ,073 Total equity and liabilities 592, ,690

88 86 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements in EUR thousands December 31, 2012 IAS 19R December 31, 2012 reported adjust- restated ment Deferred tax assets 17, ,729 Total non-current assets 297, ,293 Total assets 600, ,037 Retained earnings 200,825 6, ,764 Total equity attributable to owners of Nobel Biocare 325,048 6, ,987 Pension liabilities 10,353 6,516 16,869 Total non-current liabilities 140,560 6, ,076 Total liabilities 275,534 6, ,050 Total equity and liabilities 600, ,037 Statement of changes in equity line items in EUR thousands 2012 IAS 19R 2012 reported adjust- restated ment Total equity attributable to owners of Nobel Biocare as of January 1 281,504 5, ,617 Profit for the period 45, ,103 Other comprehensive income, net of tax 4, ,251 Total comprehensive income 50, ,354 Total equity attributable to owners of Nobel Biocare as of December ,048 6, ,987 Cash flow statement line items in EUR thousands FY 2012 IAS 19R FY 2012 reported adjust- restated ment Profit before tax 60, ,270 Net financial result 7, ,996 Other non-cash (income)/expenses Net cash from operating activities 102, , New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after January 1, 2013, but have not yet been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the Group, except the following: IFRS 9 Financial instruments (effective from January 1, 2017) The standard sets out new requirements for the measurement and classification of financial assets as well as hedge accounting. Classification depends on an entity s business model and the contractual cash flow characteristics of the financial asset. The two measurement categories for financial assets are amortized cost and fair value. Based on an assessment of the full impact of IFRS 9 on the Group s financial assets, the carrying amount of the respective assets would not change. Since the Group currently does not have any financial liabilities designated at fair value through profit or loss, the adoption of IFRS 9 would not affect the Group s accounting policy for financial liabilities. The Group will likely apply the new standard as of January 1, Basis of consolidation Subsidiaries Subsidiaries are companies controlled by the Group. The Group controls an entity when it is exposed to, or has rights to variable returns from its involvement with the entity, and when the Group has the ability to affect those returns through its power over the entity. Subsidiaries are included in the consolidated financial statements from the date control effectively commences until the date control ceases.

89 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 87 According to the full consolidation method, all assets and liabilities as well as income and expenses of the subsidiaries are included in the consolidated financial statements. The share of non-controlling interests in the net assets and results is presented separately as non-controlling interests in the consolidated balance sheet and income statement, respectively. Associates Associates are companies where the Group is able to exercise significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group s share of the total recognized gains and losses of associates on an equity accounting basis, from the date significant influence commences until the date it ceases. When the Group s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to zero and recognition of further losses is discontinued except to the extent that the Group has incurred obligations with respect to the associate. Transactions eliminated on consolidation Intragroup balances and transactions, as well as any unrealized gains and losses or income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements Foreign currency Functional and presentation currency The consolidated financial statements are presented in euro (EUR), which is the Group s presentation currency. Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The functional currency of Nobel Biocare Holding AG is the Swiss franc (CHF). Foreign currency transactions and balances Transactions in foreign currencies are translated into the functional currency of Group companies at the foreign exchange rate at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated into the functional currency at the foreign exchange rate at the balance sheet date. Non-monetary assets and liabilities in foreign currencies that are stated at historical cost are translated at the foreign exchange rate at the date of the transaction. Non-monetary assets and liabilities in foreign currencies that are stated at fair value are translated at the foreign exchange rate at the date the values were determined. All foreign exchange differences arising on translation of transactions and balances, including the result of hedging transactions related to operations, are recognized in the net financial result in the income statement. Financial statements of Group companies Assets and liabilities of Group companies, including goodwill and fair value adjustments arising on consolidation, are translated from the functional currency to the presentation currency at the foreign exchange rate at the balance sheet date. The income statement is translated at exchange rates at the dates of the transactions or at the average rate if that approximates the actual rates. All resulting exchange differences are recognized directly in other comprehensive income and presented in equity as a translation reserve. If a loan is made to a Group company, and the loan in substance forms part of the Group s investment in the Group company, translation differences arising from the loan are recognized directly in other comprehensive income as foreign currency translation differences. When the Group company is sold or partially disposed of, and control no longer exists, gains and losses accumulated in equity are reclassified to the income statement as part of the gain or loss on disposal Segment reporting Operating segments are determined based on internal reporting provided to the chief operating decision maker (CODM). The CODM is responsible for making strategic decisions and for allocating resources to the segments. The Board of Directors has been identified as the CODM of the Group Revenue recognition Revenue is reported net of sales taxes, discounts, rebates and return of goods. Revenue is recognized when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group, the associated costs can be reliably estimated and other specific criteria, the descriptions of which follow, have been met.

90 88 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements Sale of goods Revenue from the sale of goods is recognized in the income statement when the significant risks and rewards of ownership have been transferred to the buyer, which is usually on delivery to third parties. Training and education Revenue from training and education is generally recognized in the period in which the services are provided. Loyalty programs The Group offers loyalty programs in different countries. Customers can earn partner points depending on their sales volumes. The fair value of the partner points earned is deferred and only recognized as revenue when the customer redeems the points or when it is no longer probable that the points under the program will be redeemed Financial income, finance cost and net foreign exchange result Financial income comprises interest receivable on funds invested and dividends. Interest income is recognized in the income statement as it accrues, using the effective interest method. Dividends are recognized in the income statement on the date the entity s right to receive payments is established. Finance cost comprises interest payable on borrowings calculated using the effective interest method. Also included are fees related to banking facility arrangements and net changes in the fair value of derivative instruments put in place to hedge against interest rate risks. The net foreign exchange result comprises foreign currency gains and losses on financial assets and financial liabilities, including net changes in the fair value of derivative instruments put in place to hedge against foreign currency risks Income tax The income tax expense for the year comprises current and deferred tax. Income tax is recognized in the income statement except to the extent that it relates to items recognized directly in other comprehensive income or equity, in which case income tax is recognized in other comprehensive income or equity, respectively. The current tax charge is calculated based on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and includes any adjustment to taxes payable with respect to previous years. Interest payments in relation to uncertain tax positions are included within income tax expenses in the income statement and the asset or liability is included within current income tax assets or liabilities on the balance sheet. Deferred tax is recognized based on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. No temporary differences are recognized on the initial recognition of goodwill, on the initial recognition of assets or liabilities that affect neither the accounting nor taxable profit, or on differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to apply to the year when the tax asset is realized or the tax liability is settled, and have been enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities, and the deferred income taxes relate to the same taxable entity and the same taxation authority Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Where an item of property, plant and equipment comprises major components having different useful lives, the components are accounted for as separate items of property, plant and equipment.

91 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 89 Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of property, plant and equipment. Leasehold improvements are depreciated over the shorter of the lease term and the useful life of the asset. Land is not depreciated. The estimated useful lives are usually as follows: in years Buildings 25 Leasehold improvements 3 8 Machinery 5 8 Equipment Intangible assets Goodwill All business combinations are accounted for by applying the acquisition method. Goodwill arising on acquisition of a subsidiary or associate represents the excess of the cost of the acquisition over the fair value of the net identifiable assets acquired. With respect to associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate. Goodwill is stated at cost less accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the business combination from which the goodwill arose. Each unit or group of units represents the lowest level at which Nobel Biocare management monitors goodwill. Negative goodwill arising on acquisition is recognized directly in the income statement. Intangible assets acquired in business combinations Intangible assets acquired in a business combination (including patents, licenses and in-process research and development) are recognized separately from goodwill if they are subject to contractual or legal rights or are separately transferable and their fair value can be reliably estimated. Patents and licenses Patents and licenses (intellectual property rights) acquired by the Group from third parties or in a business combination are stated at cost less accumulated amortization and impairment losses. Research and development costs Expenditures on research and development activities include the cost of materials, direct labor and an appropriate proportion of overhead relating to research and development. Expenditures on research activities are expensed as incurred. Expenditures on development activities are capitalized if the product or process is technically and commercially feasible, future economic benefits are probable, the costs can be reliably measured, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Capitalized development expenditures are stated at cost less accumulated amortization and impairment losses. Amortization starts when the developed assets are available for use. Capitalized development expenditures are tested for impairment every year. Other development expenditures for which the aforementioned criteria are not met are expensed as incurred. Computer programs Computer programs comprise expenditures for computer software acquired by the Group from third parties or in a business combination. Computer programs are stated at cost less accumulated amortization and impairment losses. Other intangible assets Other intangible assets comprise expenditures for customer relationships, technology, brands and non-competition agreements acquired by the Group from third parties or in a business combination. Other intangible assets are stated at cost less accumulated amortization and impairment losses.

92 90 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements Amortization is charged to the income statement on a straight-line basis over the estimated useful life of the intangible asset. The estimated useful lives are usually as follows: in years Patents and licenses 3 5 Development costs 3 5 Software 3 Customer relationships 10 Technology Impairment of non-financial assets The carrying amounts of the Group s non-financial assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated. Goodwill, intangible assets with an indefinite useful life and capitalized development expenditures are tested for impairment at least once a year. An impairment loss is recognized in the income statement whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The recoverable amount of an asset is the greater of the fair value less costs to sell and value in use. An impairment loss is reversed if there is an indication that the impairment loss may no longer exist, and there has been a change in the estimates used to determine the recoverable amount. However, impairment losses on goodwill are not reversed Leases Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. However, the Group has no material finance lease contracts. Leases where the lessor effectively retains all the risks and rewards of ownership are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease Inventories Purchased raw materials, finished products and goods for resale are stated at the lower of cost and net realizable value. Inventory provisions are made for obsolete, slow-moving and phased-out items. Raw materials and finished products The cost of raw materials and finished products is based on the standard cost method, which approximates historical cost, according to the first-in first-out principle. Production costs include manufacturing costs and an appropriate share of overhead based on normal operating capacity. Standard costs are regularly reviewed and, if necessary, adjusted to reflect current conditions. Net realizable value is the estimated selling price in the ordinary course of business less estimated selling costs. Goods for resale The cost includes expenditures incurred in acquiring the inventories and is based on the weighted-average principle Non-derivative financial assets Loans, trade and other receivables Loans, trade and other receivables are initially recognized at fair value and are subsequently measured at amortized cost, less any provision for impairment. A provision for impairment is recognized on an individual basis or on a portfolio basis where there is objective evidence that impairment losses have been incurred. Cash and cash equivalents Cash includes cash on hand, in postal accounts and at banks. Cash equivalents comprise fixed-term deposits and commercial papers with an original maturity of 90 days or less.

93 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 91 Available-for-sale financial assets Available-for-sale financial assets are initially recognized at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and any changes therein, other than impairment losses and foreign exchange gains and losses on available-for-sale monetary items, are recognized in the statement of comprehensive income and presented within equity in other retained earnings. When an investment is derecognized, the cumulative gain or loss in the statement of comprehensive income is reclassified to the income statement within financial income or finance cost. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets that are held for trading. A financial asset is classified in this category if it has been acquired principally for the purpose of selling in the short term. These financial assets are initially and subsequently measured at fair value. Gains or losses arising from changes in fair value are presented in the income statement within financial income or finance cost. In 2013, the Group did not have any financial assets at fair value through profit or loss Non-derivative financial liabilities Loans and borrowings Loans and borrowings are initially recognized at fair value, which is the proceeds received, less attributable transaction costs. Subsequent to initial recognition, they are stated at amortized cost using the effective interest method. Loans and borrowings are removed from the balance sheet when the contractual obligation is discharged, cancelled or expired. Fees paid in relation to the establishment of loan facilities are capitalized as prepayments and amortized over the period of the facility to which they relate. Bank overdrafts Bank overdrafts that are repayable upon demand and form an integral part of the Group s cash management are shown within loans and borrowings in current liabilities in the consolidated balance sheet. Within the cash flow statement, bank overdrafts are included as a component of cash and cash equivalents Share capital Registered shares with discretionary dividends are classified as equity. Dividends on these shares are recognized in equity in the period in which they are declared. Treasury shares When the Company or its subsidiaries purchase the Company s own shares, the consideration paid, including any attributable transaction costs, is presented as treasury shares and deducted from equity. Where such shares are subsequently sold or reissued, any resulting gain or loss is included in share premium within equity Derivative financial instruments and hedging activities The Group uses derivative financial instruments to protect itself from foreign currency and interest rate risk exposures. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. Interest rate risk is the risk of the result and/or cash flows being negatively affected by changes in interest rates. There are established policies and procedures for risk assessment and approval, reporting and monitoring of derivative financial instruments. Derivative financial instruments are initially and subsequently recognized at fair value. Any resultant gain or loss on revaluation of derivative financial instruments that does not qualify for hedge accounting is recognized immediately in the income statement. All derivatives with a remaining maturity period of 12 months or less are disclosed in the balance sheet within derivative financial instruments. When the remaining maturity period is more than 12 months, the fair value of the derivative financial instrument is classified as a non-current asset or liability.

94 92 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements Cash flow hedges The Group applies hedge accounting for material future cash flows in all foreign currencies and for particular risks associated with a recognized asset or liability. Where a derivative financial instrument is designated as a highly probable forecasted transaction, the effective portion of any gain or loss on the derivative financial instrument is recognized directly in the statement of comprehensive income and is presented in the hedging reserve in equity. The gain or loss relating to the ineffective portion is recognized immediately in the income statement. The cumulative gain or loss is reclassified from equity to the income statement at the same time as the hedged transaction occurs. When a hedging instrument is sold, terminated or exercised, but the hedged transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognized in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer probable, the cumulative unrealized gain or loss recognized in equity is reclassified immediately to the income statement. Hedge of monetary assets and liabilities Where a derivative financial instrument is used to economically hedge the foreign exchange exposure of a recognized monetary asset or liability, hedge accounting is generally not applied. Any gain or loss on the hedging instrument is recognized as a net foreign exchange gain or loss in the income statement. Related foreign exchange gains and losses are also recognized as a net foreign exchange gain or loss. Net investment hedges The Group applies hedge accounting to hedge some of its net investments in foreign operations. Those investments are exposed to foreign currency risk, which occurs when translating the net assets of foreign investments from their functional currency to Swiss francs, which is the functional currency of Nobel Biocare Holding AG. The Group mitigates this risk by entering into forward foreign currency contracts and cross-currency interest rate swaps denominated in the relevant currency of the investment and Swiss francs. Effectiveness is measured by reference to changes in forward exchange rates. On remeasurement of the hedging instrument, the gain or loss related to the effective portion of the hedge is recognized in other comprehensive income and is presented as a translation reserve in equity. The gain or loss related to the ineffective portion is immediately recognized in the income statement within the net foreign exchange result. When the foreign operation is sold or partially disposed of and control no longer exists, cumulative gains and losses in equity are reclassified to the income statement as part of the gain or loss on disposal Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts, and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously Non-current assets held for sale and discontinued operations Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than from continuing use. The asset (or disposal group) must be available for immediate sale in its present condition, and the sale must be highly probable. On initial classification as held for sale, non-current assets and disposal groups are recognized at the lower of carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale are included in the income statement. A discontinued operation is a component of the Group s business that represents a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resell. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier Employee benefits The Group operates or participates in both defined contribution and defined benefit plans throughout the world according to national laws and regulations of the countries in which it operates.

95 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 93 Defined contribution plans Except for Sweden, which has a defined benefit plan that is treated like a defined contribution plan (see note 20), the majority of the Group s pension commitments are defined contribution plans in which regular payments are made to independent authorities or bodies that administer pension plans. Contributions to defined contribution plans are recognized as an expense in the income statement as the related service is provided. Defined benefit plans Typically, defined benefit plans define an amount of pension benefit that an employee will receive upon retirement, usually dependent on one or more factors such as age, years of service or compensation. Where the Group has personnel pension funds with defined benefit components, the net obligation is determined in accordance with the projected unit credit method. The amount of future benefits that employees have earned in return for their service in current and prior periods is estimated. These benefits are discounted to determine the present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have maturity dates approximating the terms of the related pension liability. The calculation is performed by a qualified actuary on an annual basis. The net obligation is calculated separately for each defined benefit plan. Remeasurements of the net defined benefit liability, which arise from experience adjustments and changes in actuarial assumptions, are recognized immediately in other comprehensive income in the period in which they arise. The Group determines the net interest expense/(income) on the net defined benefit liability/(asset) for the period by applying the discount rate that was used to measure the defined benefit obligation at the beginning of the period, taking into account any changes to the net defined benefit liability/(asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss. When the benefits of a plan are changed or when a plan is curtailed, the portion of the changed benefits relating to past service by employees or the gain or loss on curtailment is recognized immediately in profit or loss. When the calculation results in an asset for the Group, the recognition of the asset is limited to the present value of economic benefits that are available in the form of future refunds from the plan or reductions in future contributions to the plan Share-based payment transactions The Group operates several equity-settled share-based payment programs. A performance share unit plan (PSUP) and a restricted share unit plan (RSUP) cover the members of the Executive Committee, key position holders and selected employees throughout the Group, and a separate share plan covers members of the Board of Directors. Performance share unit plan (PSUP) The fair value of the employee services received in exchange for the grant of the share units is recognized as a personnel expense with a corresponding increase in equity. The total amount expensed is recognized over the vesting period, which is the period over which all of the specified vesting conditions, such as service period and market conditions, are to be satisfied. The fair value of performance share units granted is measured by external valuation specialists based on a Monte Carlo simulation. The Group accrues for the expected cost of social charges in connection with the allotment of shares under the PSUP. The dilution effect of the share-based awards is considered when calculating diluted earnings per share. Restricted share unit plan (RSUP) The fair value of the employee services rendered in exchange for the grant of the share units is recognized as a personnel expense with a corresponding increase in equity. The total amount expensed is recognized over the vesting period, which is the period over which the specified service conditions are expected to be met.

96 94 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements The fair value of the restricted share units granted for services rendered is measured at the Nobel Biocare grant date closing share price, and discounted over the vesting period using a discount rate that is based on the yield of Swiss government bonds with maturities matching the duration of the vesting period. Participants are not entitled to dividends declared during the vesting period. The grant date fair value of the restricted share units is consequently reduced by the present value of dividends expected to be paid during the vesting period. The Group accrues for the expected cost of social charges in connection with the allotment of shares under the RSUP. The dilutive effect of the share-based awards is considered when calculating diluted earnings per share. Share plan The fair value of the services received in exchange for the grant of the restricted shares is recognized as a personnel expense with a corresponding increase in equity. The fair value of the shares is measured at the Nobel Biocare (NOBN) grant date closing share price, discounted for transfer restrictions. The share plan does not involve vesting conditions Provisions A provision is recognized in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. The amounts recognized as provisions represent management s best estimate of the expenditures that will be required to settle obligations as of the balance sheet date. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Returns and warranties Provisions for returns and warranties are recognized when the underlying products are sold. The provisions are based on historical return rates and historical warranty data and a weighting of all possible outcomes against their associated probabilities. Disputes and litigation Provisions for tax disputes and litigation regarding patents, trademarks and product responsibilities are only recognized when the Group believes that it is probable that it will have to pay to settle the disputes. The costs provided for correspond to the estimated amount required to settle the dispute or litigation. Restructuring A provision for restructuring is recognized when the Group has approved a detailed and formal restructuring plan, and once the restructuring has started or has been publically announced Contingent liabilities Contingent liabilities are possible obligations arising from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. They may also be present obligations that are unrecognized because the future outflow of resources is not probable or the amount cannot be reasonably determined. Contingent liabilities are not recognized in the balance sheet but are disclosed in the notes to the consolidated financial statements. 3 Critical accounting estimates and judgments The preparation of financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses, as well as the disclosure of contingent liabilities. These judgments, estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis and revised if necessary. Revisions are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Critical judgments made by management in the application of IFRS that might have a significant effect on the consolidated financial statements and key sources of estimation uncertainties are discussed below.

97 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 95 Impairment of goodwill Goodwill is tested annually for impairment in accordance with the accounting policy described in note The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates. Further details are disclosed in note 9. Income taxes The Group is subject to taxes in numerous jurisdictions. Significant judgment is required in determining a worldwide provision for taxes. There are many transactions and calculations during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Management believes that the estimates are reasonable, and that the recognized liabilities for income tax-related uncertainties are adequate. Further details are disclosed in notes 7 and 18. Share-based payments The Group operates several equity-settled share-based payment programs. A performance share unit plan (PSUP) and a restricted share unit plan (RSUP) cover the members of the Executive Committee, key position holders and selected employees throughout the Group, and a separate share plan covers members of the Board of Directors. Estimating fair value requires determining the most appropriate valuation model as well as the most appropriate inputs to the valuation model. Market performance conditions are included in the calculation of the share unit fair value at grant date. Non-market performance and service conditions are included in assumptions about the number of share units that are expected to vest. Further details are provided in note 17. Provisions Provisions are made, among other reasons, for returns, warranties, disputes, litigation and restructuring. A provision is recognized in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. The nature of these costs is such that judgment has to be applied to estimate the timing and amount of cash outflows. Depending on the outcome of the respective transactions, actual payments may differ from these estimates. Further details are disclosed in note 19. Employee benefits Actuarial assumptions and valuation methods are required to measure the balance sheet obligation and the income statement expense. Assumptions used in determining the net cost/(income) for pensions include the discount rate, future salary and pension increases and mortality rates. Changes in these assumptions will impact pension costs and the carrying amount of pension obligations. The appropriate discount rates are determined at the end of each year by reference to market yields at the balance sheet date on high-quality corporate bonds of equivalent currency and term to the benefit obligations. Other key assumptions for pension obligations are based in part on current market conditions. Further details are provided in note Operating segments Operating segments are determined based on the reports reviewed by the Board of Directors that are used to track performance, make strategic decisions and allocate resources to the segments. They are identified geographically as the business is managed on a global basis and is run in three geographical areas. Revenue arises from two integrated product groups, Implant system products and Individualized products. These products are sold in all operating segments, often with both Implant system and Individualized products forming part of a combined offer as Nobel Biocare is a full-solution provider. Revenue from external customers reported to the Board of Directors is measured in a manner consistent with that in the income statement. There are no significant sales between the segments. No individual customer represents a significant portion of the Group s revenue.

98 96 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements Business contribution is derived from sales, the cost of goods purchased from manufacturing sites and expenses related to the sale of products in the respective regions. Certain administrative expenses directly attributable to the sale of products are also allocated to the three geographic regions. The Board of Directors reviews and assesses the business (i.e. sales and business expenses) on this basis. in EUR thousands Europe, Middle East Americas Asia/Pacific Total Group and Africa (EMEA) External revenue 232, , , , , , , ,485 Share of total revenue 41% 40% 41% 39% 18% 21% 100% 100% Business expenses 142, , , ,805 57,089 65, , ,634 Business contribution 90,097 88, , ,636 46,986 55, , ,851 Certain expenses are not attributable to a particular segment and are reviewed as a whole across the Group irrespective of geographic origin. These expenses are presented in the reconciliation table that follows. Unallocated business expenses include certain production costs remaining with the manufacturing sites. Functional costs comprise headquarter and plant functions, which include global marketing, global symposia events, quality, logistics, IT, research and development, NobelProcera development, legal and finance, as well as costs associated with the realignment of headquarter functions. Also included are reconciling and other items, e.g., adjustments and eliminations made in preparing the financial statements. The business contribution also excludes the effects of Group-wide equity-settled share-based expenses and depreciation, amortization and impairment expenses. Reconciliation in EUR thousands restated Business contribution 242, ,851 Unallocated business expenses 6,438 18,150 Functional costs 139, ,317 Depreciation, amortization and impairment losses 27,286 32,033 Share-based payment expenses 4,939 6,117 Reconciling and other items 32 Operating profit (EBIT) 64,022 69,266 Net financial result 6,961 7,996 Profit before tax 57,061 61,270 Geographical information Revenue is based on the geographical location of the customer and is as follows: Revenue in EUR thousands United States 188, ,497 Japan 52,594 71,223 Switzerland 5,417 5,886 Other countries 320, ,879 Total revenue 566, ,485

99 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 97 The allocation of assets is based on their geographical location and is as follows: Non-current assets in EUR thousands restated United States 78,421 85,630 Israel 68,289 66,357 Sweden 34,159 39,159 Switzerland 38,169 37,782 Other countries 35,025 47,696 Total 254, ,624 Non-current financial assets 3,282 3,940 Deferred tax assets 13,870 17,729 Total non-current assets 271, ,293 5 Personnel expenses Personnel expenses are split as follows: in EUR thousands restated Wages and salaries 178, ,667 Social security costs 30,266 30,241 Defined contribution plan expenses 6,577 6,518 Defined benefit plan expenses 5,373 5,033 Cost for share-based payment transactions 4,939 6,117 Total personnel expenses 225, ,576 Personnel expenses are recognized in the following line items in the income statement: in EUR thousands restated Cost of goods sold 42,373 38,732 Research and development expenses 33,547 26,869 Selling and marketing expenses 114, ,673 General and administrative expenses 34,527 29,937 Finance cost Total personnel expenses 225, ,576 At the end of 2013, Nobel Biocare had 2,487 employees worldwide (2012: 2,496). Headcount decreased by 9 while the Group allocated more resources to R&D and realized efficiency gains in non-customer facing functions. The increase in personnel expenses from 2012 is mainly due to higher expenses related to bonus accruals and expenses for restructuring in conjunction with the functional realignment program, which primarily affects corporate functions in Gothenburg, Sweden. In 2013, the Group built restructuring provisions of EUR 4,320k for personnel expenses in relation to this program. The functional split is as follows: EUR 896k within the cost of goods sold, EUR 2,327k within research and development, EUR 184k within sales and marketing, and EUR 913k within general and administrative expenses.

100 98 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 6 Net financial result in EUR thousands restated Interest income 596 1,207 Financial income 596 1,207 Interest expenses 5,255 5,389 Net change in fair value of interest rate swaps (cash flow hedges) reclassified from other comprehensive income Other financial expenses Finance cost 3,346 3,088 9,505 9,381 Net foreign exchange losses 3,829 5,148 Net derivative instruments at fair value through profit or loss 2,680 5,769 Net change in fair value of cash flow hedges reclassified from other comprehensive income 3, Net foreign exchange result 1, Net financial result 6,961 7,996 Interest expenses relate mainly to the CHF 120,000k straight bond issued on October 10, In 2012, interest expenses also related to amounts drawn on the EUR 330,000k syndicated banking facility. In conjunction with the redemption of the convertible bond, the Group had drawn EUR 36,928k in 2011, and repaid that amount on February 6, On the same day, the Group drew a further EUR 30,000k and later repaid the full amount on May 8, As of December 31, 2013, there were no drawings outstanding on the syndicated banking facility. A forward-starting interest rate swap was put in place to protect against interest rate changes prior to the issuance of the CHF 120,000k straight bond in The net change in the fair value of that hedge is being reclassified from other comprehensive income over the term of the bond and is shown under finance cost. During 2013, EUR 904k was reclassified (2012: EUR 904k). Other financial expenses mainly comprise fees for the EUR 330,000k syndicated banking facility. Net foreign exchange gains and losses arise from operating in multiple currencies, while gains and losses on derivative instruments result from hedging such exposures. 7 Income tax expense The following amounts are recognized in the income statement: in EUR thousands restated Income taxes relating to the current period, net 17,732 9,229 Income taxes relating to past periods, net Current income tax expense 18,574 9,520 Deferred tax income/(expense) due to temporary difference 6,028 6,138 Increase/(decrease) of recognition of tax loss carryforwards 1, Deferred tax income/(expense) 4,092 5,647 Total income tax expense in the income statement 14,482 15,167 In one of the Groups subsidiaries, the tax rate is different for distributed and undistributed profit. The potential payment of future dividends from retained earnings would trigger additional income tax expenses of EUR 1,355k.

101 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 99 Should the actual final outcome on the judgment areas differ by ten percent from management s estimates, the Group would need to: Increase the total income tax liability by EUR 1,357k if unfavorable; or Decrease the total income tax liability by EUR 2,180k if favorable. In both cases, the deferred tax liability would remain unchanged. Tax effects on other comprehensive income are as follows: in EUR thousands restated Before tax Tax Net of tax Before tax Tax Net of tax charge/(benefit) charge/(benefit) Remeasurements of the defined benefit liability 1, , Foreign currency translation differences 7,789 7, Effective portion of changes in fair value of net investment hedges 1,718 1, Effective portion of changes in fair value of cash flow hedges 1, ,744 3, ,474 Net change in fair value of cash flow hedges reclassified to income statement 3, , Net change in fair value of interest rate swaps (cash flow hedges) reclassified to income statement Total other comprehensive income/ (expenses) 8, ,478 4, ,251 The Group s tax rate is calculated as follows: in percent Statutory income tax rate Effect of different tax rates in other jurisdictions Non-tax deductible expenses Current tax losses not recognized and recognitions of tax loss carryforwards of prior years Tax rate changes and other effects Tax adjustments of prior years and reassessment of tax exposure Total income tax rate The effect of different tax rates in other jurisdictions increased from 11.6 percent in 2012 to 12.7 percent in 2013 mainly due to the change in profitability of the Group s entities in the respective countries. No tax assets resulting from recognized tax loss carryforwards were written off in 2013.

102 100 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 8 Property, plant and equipment in EUR thousands Land, buildings Machinery Equipment Total and leasehold improvements Cost Balance as of January 1, , ,347 47, ,207 Additions for the year 2,171 2,914 2,600 7,685 Disposals 321 1,838 4,250 6,409 Effect of changes in exchange rates ,015 Balance as of December 31, , ,112 45, ,468 Accumulated depreciation Balance as of January 1, ,216 62,177 37, ,876 Depreciation charge for the year 4,505 13,955 3,969 22,429 Disposals 312 1,803 4,156 6,271 Effect of changes in exchange rates Balance as of December 31, ,316 74,385 36, ,518 Carrying amount Balance as of January 1, ,848 57,170 10,313 86,331 Balance as of December 31, ,391 45,727 8,832 70,950 in EUR thousands Land, buildings Machinery Equipment Total and leasehold improvements Cost Balance as of January 1, , ,112 45, ,468 Additions for the year 2,382 3,151 3,443 8,976 Disposals 745 2,374 2,353 5,472 Effect of changes in exchange rates 2,403 6,687 2,689 11,779 Balance as of December 31, , ,202 44, ,193 Accumulated depreciation Balance as of January 1, ,316 74,385 36, ,518 Depreciation charge for the year 3,507 10,751 3,855 18,113 Disposals 742 2,374 2,333 5,449 Effect of changes in exchange rates 1,438 4,196 2,293 7,927 Balance as of December 31, ,643 78,566 36, ,255 Carrying amount Balance as of January 1, ,391 45,727 8,832 70,950 Balance as of December 31, ,298 35,636 8,004 57,938 As of December 31, 2013, the fire insurance value of property, plant and equipment amounted to EUR 223,881k (December 31, 2012: EUR 210,778k). In 2013, fixed assets with a book value of EUR 23k were sold for EUR 41k, resulting in a profit of EUR 18k.

103 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 101 The depreciation charge related to property, plant and equipment is recognized in the following line items in the income statement: in EUR thousands restated Cost of goods sold 13,589 17,532 Research and development expenses Selling and marketing expenses 2,728 2,878 General and administrative expenses 822 1,053 Total depreciation charge 18,113 22,429 As of December 31, 2013, the Group had capital commitments of EUR 577k (December 31, 2012: EUR 1,617k). 9 Intangible assets in EUR thousands Goodwill Patents and Development Software Other intangible Total licences costs assets Cost Balance as of January 1, ,450 17,296 7,625 23,499 51, ,157 Additions for the year 2,943 2,943 Disposals Effect of changes in exchange rates Other effects Balance as of December 31, ,959 17,126 7,625 26,334 51, ,653 Accumulated amortization Balance as of January 1, ,691 6,588 15,270 15,050 53,599 Amortization charge for the year ,697 4,791 9,604 Disposals Effect of changes in exchange rates Balance as of December 31, ,122 7,103 18,832 19,922 62,979 Carrying amount Balance as of January 1, , ,037 8,229 36, ,558 Balance as of December 31, , ,502 31, ,674

104 102 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements in EUR thousands Goodwill Patents and Development Software Other intangible Total licences costs assets Cost Balance as of January 1, ,959 17,126 7,625 26,334 51, ,653 Additions for the year 3, ,466 Disposals 312 1,158 1,470 Effect of changes in exchange rates 2, ,536 5,644 Balance as of December 31, ,307 17,126 7,625 28,989 47, ,005 Accumulated amortization Balance as of January 1, ,122 7,103 18,832 19,922 62,979 Amortization charge for the year ,365 4,291 9,173 Disposals 312 1,158 1,470 Effect of changes in exchange rates 401 1,401 1,802 Balance as of December 31, ,124 7,618 22,484 21,654 68,880 Carrying amount Balance as of January 1, , ,502 31, ,674 Balance as of December 31, , ,505 26, ,125 The amortization charge related to intangible assets is recognized in the following line items in the income statement: in EUR thousands restated Cost of goods sold 754 1,380 Research and development expenses 4,778 5,321 Selling and marketing expenses 3,049 2,755 General and administrative expenses Total amortization charge 9,173 9,604 In 2012, a new estimate of the contingent purchase price of the 50 percent share in the Nobel Biocare Procera AB (previously Procera Sandvik AB) resulted in a reduction of EUR 109k for the respective purchase price provision (see note 19). The goodwill reduction is shown as other effects. During 2013, the last payment on the contingent purchase price was made and the obligation was no longer outstanding as of December 31, Goodwill impairment tests Goodwill has been allocated to the Group s cash-generating units. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination from which the goodwill arose. The following cash-generating units have carrying amounts of goodwill: in EUR thousands Europe, Middle East and Africa 61,798 61,613 Americas 76,101 79,082 Asia/Pacific 25,408 25,264 Total goodwill as of December , ,959 The impairment test for goodwill is based on calculations of value in use. Cash flow projections based on actual operating results and business plans have been used as input in the calculations. Cash flows after 2016 are extrapolated using a 1.8 percent growth rate. Key assumptions used in the calculation of the recoverable amount are the discount rate and the operating (EBIT) margin. The impairment test comprises scenarios including higher pre-tax discount rates and lower EBIT margins. In all scenarios the recoverable amount of the units significantly exceeds its carrying amount.

105 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 103 The pre-tax discount rates used for the value-in-use calculations are as follows: in percent Europe, Middle East and Africa Americas Asia/Pacific Non-current financial assets in EUR thousands Non-current receivables 1,493 1,558 Rent deposits 1,688 2,382 Available-for-sale financial assets 101 Total non-current financial assets as of December 31 3,282 3,940 Non-current receivables and rent deposits represent prepayments to suppliers and deposits with lessors that will be used or returned after 12 months. On October 30, 2013, Nobel Biocare acquired a minority participation in a start-up company that develops and manufactures products for dentistry and maxillofacial surgery. The fair value of the available-for-sale investment was EUR 101k. 11 Inventories in EUR thousands Raw materials 4,227 4,409 Work in progress 917 1,042 Finished products and goods for resale 20,865 14,982 Total inventories as of December 31 26,009 20,433 Inventories in the amount of EUR 1k (2012: EUR 24k) were carried at their fair values less cost to sell in relation to phase-out programs. Inventories in the amount of EUR 102,686k (2012: EUR 107,103k) were consumed in the production process during the year and recognized as an expense within the cost of goods sold. Obsolescence The recoverability of all inventory items is regularly tested, and provisions are made for obsolete or slow-moving items. The cost for obsolescence is included in the cost of goods sold and amounted to EUR 276k (2012: EUR 2,147k).

106 104 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 12 Trade and other receivables in EUR thousands Trade receivables 100, ,073 Allowance for bad debts 10,461 13,653 Trade receivables as of December 31 90,433 88,420 Non-trade receivables 10,442 7,797 Total current receivables as of December ,875 96,217 With respect to trade receivables, the Group has established an allowance for impairment that represents its estimate of losses that may be incurred. The allowance is determined based on historical data of payment statistics and regional circumstances. Non-trade receivables include cash collateral of EUR 2,301k related to hedging instruments. Trade receivables by currency in percent of total Euro US dollar Japanese yen 7 9 Canadian dollar 5 6 Australian dollar 3 3 Other currencies Total as of December Reconciliation of changes in the allowance for bad debts in EUR thousands Balance as of January 1 13,653 15,680 Additions 2,484 2,543 Reversals 3,687 3,367 Receivables written off during the year as uncollectible 1, Effect of changes in exchange rates Balance as of December 31 10,461 13,653 During 2013, a total of EUR 1,255k was recognized as income in the income statement and consisted of net reversals in the allowance for bad debts of EUR 1,203k and a reversal of receivables that had been written off in previous years of EUR 52k. During 2012, a total of EUR 872k was recognized as income in the income statement and consisted of net reversals in the allowance for bad debts of EUR 824k and a reversal of receivables that had been written off in previous years of EUR 48k. Ageing of trade receivables in EUR thousands Gross Allowance Gross Allowance Not past due 69, , Past due 0 30 days 11, , Past due days 6, , Past due days 2, , Past due days 1, ,076 1,455 Past due > 360 days 9,243 8,855 11,487 10,978 Balance as of December ,894 10, ,073 13,653 As of December 31, 2013, trade receivables of EUR 31,584k were past due. The allowance on this past due amount was EUR 9,703k.

107 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements Prepaid expenses and accrued income in EUR thousands Accrued income Selling expenses Rent, leases and insurance expenses 3,202 2,686 Marketing expenses 2,225 4,365 Royalty and R&D expenses Other items 5,782 6,313 Total prepaid expenses and accrued income as of December 31 11,879 13,743 Marketing expenses include prepayments to universities of EUR 748k (2012: EUR 1,548k), which are related to services for future periods (see note 25). Other items mainly include prepayments for IT and other services, as well as fees in relation to the syndicated bank facility. 14 Cash and cash equivalents The Group s cash and cash equivalents comprise cash, fixed-term deposits and commercial papers, each with a maturity of 90 days or less. in EUR thousands Cash 172, ,565 Fixed-term deposits and commerical papers < three months 8,302 7,006 Total cash and cash equivalents as of December , ,571 Cash and cash equivalents by currency in percent of total Euro Swiss franc 23 3 US dollar 6 10 Swedish krona 5 11 Japanese yen 2 5 Other currencies Total as of December As of December 31, 2013 and 2012, the Group held no restricted cash. Cash collateral of EUR 2,301k related to hedging instruments is classified as non-trade receivables. 15 Equity in EUR thousands Issued as of January 1 fully paid 31,861 31,861 Issued as of December 31 fully paid 31,861 31,861 The share capital of Nobel Biocare Holding AG is held in Swiss franc (CHF). The number of issued shares by Nobel Biocare Holding AG on December 31, 2013 totaled 123,784,530 (December 31, 2012: 123,784,530) with a par value of CHF 0.40 per share, fully paid up.

108 106 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements The share capital may be increased by issuing no more than 247,620 shares (2012: 247,620), each with a par value of CHF 0.40, to be fully paid up, equaling an amount of no more than CHF 99,048 (2012: CHF 99,048) by virtue of the exercise of options granted to employees and officers of the Group. In addition, the share capital may be increased by an amount of up to CHF 10 million by issuing up to 25 million fully paid-up registered shares with a nominal value of CHF 0.40 following the exercise of conversion and/or option rights which are granted in connection with the issuance of bonds or similar debt instruments by the Company or one of its Group companies in capital markets or in connection with a transaction. The holders of registered shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company s residual assets. Treasury shares The table below summarizes the changes in the number of treasury shares: Number of treasury shares Share buyback Other Total treasury program 1 shares Balance as of January 1, ,556 1,064,564 1,303,120 Sale 238,556 1, ,000 Share-based payment transactions 81,981 81,981 Balance as of December 31, , ,139 Balance as of January 1, , ,139 Purchase 250, ,000 Share-based payment transactions 74,009 74,009 Balance as of December 31, ,157,130 1,157,130 On March 14, 2012, the Group sold 240,000 treasury shares for consideration of EUR 2,168k that had been held to cover its exposure from the performance share unit plan. On July 2, 2012, 81,981 treasury shares were granted to share plan participants as described in note 17. In 2013, the Group acquired in total 250,000 treasury shares to cover its existing exposure from share-based payment programs for consideration of EUR 2,742k. In 2013, 72,301 treasury shares were granted to share plan participants, and 1,708 treasury shares were granted to participants of the performance share unit plan as described in note 17. In total the Group granted 74,009 treasury shares in conjunction with share-based payment programs. Translation and hedging reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments where the hedged transaction has not yet occurred. Dividends On March 28, 2013, the AGM approved a dividend of CHF 0.20 per registered share to be paid out of reserves without deduction of withholding tax. The dividend, totaling CHF 24.6 million (EUR 20.2 million), was paid to shareholders on April 8, On February 17, 2014, the Company s Board of Directors decided to propose to the AGM a dividend to shareholders of CHF 0.20 per registered share to be paid out of reserves without deduction of withholding tax. The total amount of the proposed dividend is CHF 24.5 million or approximately EUR 20 million depending on exchange rates at the pay-out date.

109 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements Earnings per share Weighted average number of ordinary shares outstanding in thousands Number of ordinary shares outstanding as of December , ,082 Effect of changes in the number of treasury shares Weighted average number of ordinary shares outstanding as of December , ,055 Basic earnings per share The calculation for basic earnings per share is based on the profit attributable to owners of Nobel Biocare and the weighted average number of ordinary shares outstanding during the year restated Profit attributable to owners of Nobel Biocare (in EUR thousands) 42,579 46,103 Weighted average number of ordinary shares as of December 31 (in thousands) 122, ,055 Basic earnings per share (in EUR) Diluted earnings per share The calculation for diluted earnings per share is based on the profit attributable to owners of Nobel Biocare and the weighted average number of ordinary shares outstanding during the year, including those performance share units that may be exercised and that have a dilutive effect. Anti-dilutive performance share units are not included in the calculation restated Profit attributable to owners of Nobel Biocare (in EUR thousands) 42,579 46,103 Weighted average number of ordinary shares as of December 31 (in thousands) 122, ,055 Effect of share-based payment programs (in thousands) 627 Weighted average number of ordinary (diluted) shares as of December 31 (in thousands) 123, ,055 Diluted earnings per share (in EUR) Share-based payment transactions Summary of share-based payment transactions charged to personnel expenses in EUR thousands Plan Performance share unit plan 3,018 5,448 Restricted share unit plan 1,254 Share plan Total 4,939 6,117

110 108 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements Performance share unit plan (PSUP) This long-term incentive plan covers the members of the Executive Committee, key position holders within the Group and selected employees. Participants are granted performance-based share units (PSU). Terms of awards grant 2013 Vesting is subject to continuous employment of the employee and the relative performance of the Nobel Biocare (NOBN) share price, measured as Total Shareholder Return (TSR), compared to a selected group of peer companies consisting of Align Technology, Inc., Danaher Corp., DENTSPLY International, Henri Schein, Inc., Sirona Dental Systems, Inc., Straumann Holding AG and Zimmer Holdings Inc. The TSR includes the net change in share price plus any dividends paid over the vesting period. If the relative outperformance is achieved, each share unit will be converted into a predetermined amount of Nobel Biocare shares at vesting date. The plan features graded vesting over a three-year period where one-third of each share unit vests after one year (tranche 1), one-third after two years (tranche 2) and one-third after three years (tranche 3). The performance share units cannot be settled in cash. The fair value of the PSU granted during the period, which was determined using a Monte Carlo valuation model, was EUR 6.50 for tranche 1, EUR 6.97 for tranche 2 and EUR 7.22 for tranche 3. The significant inputs to the model were the share prices of Nobel Biocare and the peer companies at the average daily closing price for the period from February 19, 2013 to February 25, The expected volatility of the shares of Nobel Biocare and its peer group was determined by the historical volatility. The TSR calculation takes into account that all dividend payments are reinvested immediately, and consequently, the dividend yield for the calculation was zero percent. The Swiss and the US zero yield curves were used as the relevant risk-free rates with maturities matching the duration of the vesting period. Historical data was used to arrive at an estimate for the correlation matrix between Nobel Biocare and the members of the peer group. Terms of awards grant 2012 Vesting is subject to continuous employment of the employee and the outperformance of the Nobel Biocare (NOBN) share price relative to the Swiss Leader Index (SLI) 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. The plan features graded vesting over a three-year period where one-third of each share unit vests after one year (tranche 1), one-third after two years (tranche 2) and one-third after three years (tranche 3). The performance share units cannot be settled in cash. The fair value of the performance share units granted during the period, which was determined using a Monte Carlo valuation model, was EUR 9.73 for tranche 1, EUR for tranche 2 and EUR for tranche 3. The significant inputs to the model were the share price of Nobel Biocare and the average daily closing price of the SLI for the period from February 10, 2012 to February 16, The expected volatility of the Nobel Biocare share and the SLI was determined by the historical volatility. The Swiss zero yield curve was used as the relevant risk-free rate with maturity matching the duration of the vesting period. Historical data was used to arrive at an estimate for the correlation between Nobel Biocare and the SLI. Performance share units terms of awards Grant 2013 Grant 2013 Grant 2013 Grant 2012 Grant 2012 Grant 2012 Tranche Number of share unit tranches granted 112, , , , , ,949 Fair value per tranche (EUR) Grant date Feb 28, 2013 Feb 28, 2013 Feb 28, 2013 Feb 28, 2012 Feb 28, 2012 Feb 28, 2012 Vesting date Feb 28, 2014 Feb 28, 2015 Feb 28, 2016 Feb 28, 2013 Feb 28, 2014 Feb 28, 2015

111 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 109 The movements of performance share unit tranches are as follows: Number of performance share unit tranches Grant 2013 Grant 2012 Grant 2011 Grant 2010 Grant 2009 Total Outstanding as of January 1, , , , ,082 Granted 581, ,847 Forfeited 13,973 35,455 13,917 63,345 Expired 116,678 54, , ,616 Outstanding as of December 31, , ,682 41, ,968 Outstanding as of January 1, , ,682 41, ,968 Granted 336, ,708 Forfeited 15,486 74,425 19, ,062 Exercised 1,552 1,552 Expired 172,758 91,029 41, ,199 Outstanding as of December 31, , ,139 88, ,863 Restricted share unit plan (RSUP) This long-term incentive plan covers the members of the Executive Committee, key position holders within the Group and selected employees. Participants are granted restricted share units (RSU). Terms of awards grant 2013 Under the RSUP, which was introduced in 2013, participants are granted restricted share units (RSU). Vesting of the RSU is subject to continuous employment over the vesting period. The plan features graded vesting over a three-year period where one-third of each share unit vests after one year (tranche 1), one-third after two years (tranche 2) and one-third after three years (tranche 3). Each RSU will be converted into one NOBN share at the end of the vesting period. The RSUP is accounted for as an equity-settled share-based payment plan under IFRS 2. The restricted share units cannot be settled in cash. The fair value of the RSU granted during the period was EUR 7.57 for tranche 1, EUR 7.39 for tranche 2 and EUR 7.20 for tranche 3. The fair value of the restricted share units granted is measured at the grant date closing share price, and discounted over the vesting period using a discount rate that is based on the yield of Swiss government bonds for the duration of the vesting period. Participants are not entitled to dividends declared during the vesting period. Consequently, the grant date fair value of the restricted share units is reduced by the present value of dividends expected to be paid during the vesting period. Restricted share units terms of awards Grant 2013 Grant 2013 Grant 2013 Tranche Number of share unit tranches granted 126, , ,280 Fair value per tranche (EUR) Grant date Feb 28, 2013 Feb 28, 2013 Feb 28, 2013 Vesting date Feb 28, 2014 Feb 28, 2015 Feb 28, 2016 The movements of restricted share unit tranches are as follows: Number of performance share unit tranches Grant 2013 Outstanding as of January 1, 2013 Granted 378,840 Forfeited 20,117 Expired Outstanding as of December 31, ,723

112 110 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements Share plan A separate share-based payment plan was established for members of the Board of Directors and selected individuals as they do not participate in any other long-term incentive plan. In July 2013, share plan participants were granted 72,301 shares (2012: 81,981 shares) of Nobel Biocare Holding AG for no consideration. A transfer restriction applies for the share plan 2013 until July 1, 2018, and for the share plan 2012 until July 2, The fair value of the shares was measured at the closing share price on July 1, 2013, and discounted over the transfer restriction period using a discount rate of 0.3 percent. The discount rate is based on the yield of Swiss government bonds for the duration of the restriction period. Grant 2013 Grant 2012 Number of shares 72,301 81,981 Fair value per share (EUR) Grant date Jul 1, 2013 Jul 2, 2012 Transfer restriction date Jul 1, 2018 Jul 2, 2017 Risk-free interest rate (in percent) Staff option program With the introduction of the performance share unit plan in 2008, no new options were granted under the stock option plan after No options from the 2007 grant were ever exercised, and on June 30, 2013, all outstanding options expired. The options granted in 2007 had the following terms: Grant year 2007 Vesting date Expiry date Exercise price Number of options CHF Options outstanding as of December 31 Jul 1, 2009 Jun 30, ,449, Deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following items: in EUR thousands Assets Liabilities Net restated restated Property, plant and equipment 1,174 1,795 7,076 9,151 5,902 7,356 Intangible assets 3,738 6,376 16,719 20,802 12,981 14,426 Inventories 5,402 5, ,398 5,420 Provisions and accruals 5,447 7, ,021 5,296 6,366 Loans and borrowings , ,634 Recognized tax losses carried forward 52 1, ,987 Employee benefits 1,895 2,048 1,895 2,048 Share-based payment transactions Tax assets/liabilities 18,383 25,023 23,950 34,618 5,567 9,595 Offset 4,513 7,294 4,513 7,294 Total tax assets/liabilities as of December 31 13,870 17,729 19,437 27,324 5,567 9,595 The Group did not recognize deferred tax assets in respect of the following items: in EUR thousands Tax losses carried forward 36,450 43,968 Total unrecognized deferred tax assets as of December 31 36,450 43,968

113 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 111 The unrecognized deferred tax assets concerning the tax losses carried forward will begin to expire in one year. The movement in deferred tax assets and liabilities is as follows: in EUR thousands Balance as of Recognized Recognized in Exchange Balance as of January 1, 2012 in profit other differences December 31, 2012 restated or loss comprehensive restated income Property, plant and equipment 3,673 3, ,356 Intangible assets 12,612 1, ,426 Inventories 6,720 1, ,420 Provisions and accruals 6, ,366 Loans and borrowings 3, ,634 Recognized tax losses carried forward 1, ,987 Employee benefits 1, ,048 Total 3,594 5, ,595 in EUR thousands Balance as of Recognized Recognized in Recognized Exchange Balance as of January 1, 2013 in profit other directly in differences December 31, 2013 or loss comprehensive equity income Property, plant and equipment 7,356 1, ,902 Intangible assets 14,426 1, ,981 Inventories 5, ,398 Provisions and accruals 6, ,296 Loans and borrowings 3,634 3, Recognized tax losses carried forward 1,987 1, Employee benefits 2, ,895 Share-based payment transactions Total 9,595 4, , Provisions in EUR thousands Warranty Returns Contingent Restructuring Other Total purchase price Balance as of January 1, , ,304 6,659 11,897 Provisions made ,564 1,666 9,658 Provisions used , ,811 Provisions reversed , ,544 Effect of changes in exchange rates Balance as of December 31, ,044 1,547 4,434 6,596 13,621 Non-current provisions 222 2,509 2,731 Current provisions 822 1,547 4,434 4,087 10,890 Balance as of December 31, ,044 1,547 4,434 6,596 13,621 Provisions for returns and warranties are recognized when the underlying products are sold. The provisions are based on historical warranty data and historical return rates and a weighting of all possible outcomes against their associated probabilities. As of January 1, 2013, the present value of the remaining contingent purchase price related to the acquisition of Nobel Biocare Procera AB (previously Procera Sandvik AB) amounted to EUR 242k, all of which was paid as of December 31, 2013.

114 112 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements In 2013, the Group built restructuring provisions of EUR 6,177k in conjunction with the functional realignment program, which primarily affects corporate functions in Gothenburg, Sweden. The functional split of the total restructuring provisions made is as follows: EUR 1,074k within the cost of goods sold, EUR 3,427k within research and development, EUR 444k within sales and marketing, and EUR 1,619k within general and administrative expenses. Of the EUR 6,177k restructuring provisions built, EUR 1,449k was reversed during the year. The functional split of the provisions that were reversed is as follows: EUR 298k within the cost of goods sold, EUR 730k within research and development, and EUR 421k within general and administrative expenses. In 2013, other provisions mainly included provisions relating to value-added taxation and other expected cash outflows occurring in the normal course of business. 20 Employee benefits The Group operates defined benefit plans in Switzerland, Japan and Sweden. The majority of the plans are funded. The defined benefit obligation of the pension plans is the present value of accrued pension obligations at the balance sheet date considering future salary and pension increases, as well as turnover rates (using the projected unit credit method). Switzerland The Swiss pension plans are treated as defined benefit plans in accordance with IAS 19. All employees with an annual income of at least EUR 17,200 are required to be a member of a pension scheme. The objective of a pension fund is to protect insured employees and their surviving dependants from the economic consequences of loss of earnings due to old age, disability or death. The Group s defined benefit plans are administered by a single pension fund that is legally independent from the Group, and the plans cover more than the legally required minimum benefits. They are funded pension plans financed by both employees and employers, and Nobel Biocare contributes higher share than the 50 percent required by Swiss law. Minimum annual contribution obligations are determined with reference to an employee s age and current salary. Old age provisions are based on accrued individual savings, which generally begin when the insured person reaches the age of 25, and end at retirement age. The retirement assets accumulated in the insured person s individual savings account serve to finance the retirement pension, which is either converted to an annual retirement pension, paid out as a lump sum or a combination of the two options. In the event of disability, the pension fund pays the insured party a disability pension and, if applicable, a children s pension, both of which are replaced with a retirement pension at the age of retirement. A surviving spouse who has met certain conditions is entitled to a surviving spouse s pension unless the surviving spouse remarries. Surviving spouses not meeting the required conditions are paid a lump sum amounting to three annual pension payments. The Group faces the risk that its equity ratio is affected by poor performance of the pension fund assets or by a change in assumptions. Therefore, sensitivities to the main assumptions (i.e., discount rate and salary growth rate) have been calculated and disclosed. Japan The Group maintains employee retirement allowance plans that provide both retirement and pre-retirement benefits for all regular employees with benefits based on final monthly base salary, years of credited service at termination and mode of exit. Actuarial valuations for the defined benefit plans were performed for the Japanese pension plans, which are treated as defined benefit plans in accordance with IAS 19. Sweden The Group has a Swedish multi-employer pension plan that should be accounted for as a defined benefit plan. The Swedish plan primarily covers the following benefits:

115 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 113 Retirement pension; ITPK (complementary occupational pension); Disability pension; Group family pension. Virtually every clerical employee in the private sector in Sweden is covered by such a plan. The plan is financed by employers, who determine whether the pension insurance is with Alecta (Alecta Pensionsförsäkring, Ömsesidigt), or alternatively, as regards retirement pension and ITPK, whether a provision is to be made in-house by companies within the framework of the FPG/PRI system. The Group has elected to take out pension insurance with Alecta. Irrespective of how the plan is financed via pension insurance with Alecta or through in-house provisions by companies the plan is a defined benefit scheme with respect to retirement pensions and group family pensions. Paid pensions are related to the employee s final salary and the total employment period covered by the plan. This means that the Group should report its proportional share of the defined benefit commitments, the assets under management, expenses associated with the plan and other required information in the same manner as for any other defined benefit plan. Alecta, however, is unable to provide sufficient information to report the Group s proportional share of the defined benefit commitments, the assets under management or expenses associated with the plan. Additionally, there is no agreement on how any surplus or deficit should be distributed to the participants in the pension plan. As a result, and in line with the Swedish Financial Accounting Standards Council s Emerging Issues Task Force, the scheme is reported as a defined contribution plan. Accordingly, the Group cannot provide the disclosure requirements with respect to the defined benefit plan in Sweden. The following tables summarize the Group s defined contribution and defined benefit plans. Defined contribution plans The amounts recognized in the income statement are as follows: in EUR thousands restated Cost of goods sold 1,162 1,078 Research and development expenses 1, Selling and marketing expenses 3,415 3,435 General and administrative expenses 977 1,166 Expense recognized in the income statement 6,577 6,518 Defined benefit plans The amounts recognized in the balance sheet are as follows: in EUR thousands restated Present value of funded obligation 52,118 45,822 Present value of unfunded obligation 3,608 4,087 Total present value of obligations 55,726 49,909 Fair value of plan assets 39,156 33,040 Net liability in the balance sheet as of December 31 16,570 16,869

116 114 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements The amounts recognized in the income statement are as follows: in EUR thousands restated Current service cost 4,963 4,544 Administration cost Total current service cost 5,083 4,668 Net interest on the net defined benefit liability Expense recognized in the income statement 5,373 5,033 in EUR thousands restated Cost of goods sold Research and development expenses Selling and marketing expenses General and administrative expenses 3,622 3,430 Finance cost Expense recognized in the income statement 5,373 5,033 The remeasurements recognized in the other comprehensive income are as follows: in EUR thousands restated Balance as of January 1 6,789 6,389 Actuarial gains from change in demographic assumptions 1,155 Actuarial gains from change in financial assumptions 984 1,317 Experience losses on defined benefit obligation 367 2,241 Return on plan assets excluding interest income Remeasurements of the net defined benefit liability 1, Balance as of December 31 5,184 6,789 The movement in the present value of the defined benefit obligation is as follows: in EUR thousands restated Balance as of January 1 49,909 46,060 Current service cost 5,083 4,668 Interest cost Contribution by plan participants 1,539 1,368 Curtailments 197 Benefits (received)/paid 1,478 4,107 Actuarial gains from change in demographic assumptions 1,155 Actuarial gains from change in financial assumptions 984 1,317 Experience losses on defined benefit obligation 367 2,241 Effect of changes in exchange rates Balance as of December 31 55,726 49,909 Swiss pension plan Since the defined benefit obligation recognized for the Swiss pension plan represents 93.5 percent of the total obligation of the Group, the following disclosures apply exclusively to the Swiss pension scheme.

117 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 115 The movement in the fair value of plan assets is as follows: in EUR thousands restated Balance as of January 1 33,040 31,090 Interest income Return on plan assets excluding interest income Employer s contributions 2,902 2,735 Contributions by plan participants 1,539 1,368 Curtailments 124 Benefits received/(paid) 1,775 3,554 Administration cost Effect of changes in exchange rates Balance as of December 31 39,156 33,040 The plan assets are allocated as follows: in percent of total Quoted bonds Equity securities Property Other Total The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is: Impact on defined benefit obligation Change in Increase in Decrease in assumption assumption assumption Discount rate (in percent) Effect on defined benefit obligation (in EUR thousands) 3,038 3,438 Effect on service cost (in EUR thousands) Salary growth rate (in percent) Effect on defined benefit obligation (in EUR thousands) Effect on service cost (in EUR thousands) The above sensitivity analyses are based on a change in one assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) is applied as when calculating the pension liability recognized within the balance sheet. The nature and characteristics of the present value of the defined benefit obligation are as follows: Active members Pensioners Total Number of plan members Present value of defined benefit obligation (in EUR thousands) 48,102 45,990 4, ,118 46,028 Share of defined benefit obligation 92.3% 99.9% 7.7% 0.1% 100.0% 100.0% Duration (in years) NA NA NA NA The duration in years corresponds to the average weighted period.

118 116 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements The significant actuarial assumptions were as follows: in percent Switzerland Discount rate Average future salary increases Credit rate Average retirement age (in years) 64/63 64/63 Inflation rate Mortality tables used BVG 2010 GT BVG 2010 PT Turnover medium medium Capital option Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience. The employer s contributions that are expected to be paid in 2014 amount to EUR 2,939k. 21 Loans and borrowings On October 10, 2011, Nobel Biocare Holding AG, Kloten, Switzerland, issued a CHF 120,000k (EUR 97,924k) straight bond with a coupon of 4 percent and a maturity date of October 10, Fees related to the bond total EUR 968k, which is amortized over the duration of the bond. The following table shows the change in the carrying amount of the straight bond. in EUR thousands Carrying amount of liability as of January 1 99,505 98,400 Accrued interest 4,106 4,178 Interest paid 3,917 3,993 Effect of changes in exchange rates 1, Carrying amount of liability as of December 31 98,222 99,505 The Group has a EUR 330,000k committed syndicated credit facility in place until November In conjunction with the redemption of the convertible bond, the Group had drawn EUR 36,928k in 2011, and repaid that amount on February 6, On the same day, the Group drew a further EUR 30,000k and later repaid the full amount on May 8, As of December 31, 2013, there were no drawings outstanding on the syndicated banking facility. As of December 31, 2013, undrawn credit lines amounted to EUR 333,117k (December 31, 2012: EUR 333,851k). The principal part of existing credit lines is with Nobel Biocare Holding AG. Existing credit line agreements include covenants covering the net debt/ebitda ratio of the Group. The covenants were met as of December 31, 2013, and December 31, 2012.

119 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements Trade payables in EUR thousands Trade payables as of December 31 15,155 19,191 Trade payables by currency in percent of total Euro Swiss franc US dollar Swedish krona Other currencies Total trade payables as of December Other liabilities in EUR thousands Other non-current liabilities Other current liabilities 6,704 6,877 Total other liabilities as of December 31 6,773 7,121 Other liabilities comprise mainly value-added and other tax payables. 24 Accrued expenses and deferred income in EUR thousands Personnel-related expenses 40,451 33,928 Accrued selling expenses 3,277 4,462 Accrued marketing expenses 3,406 3,704 Accrued legal and tax expenses 1,862 2,598 Accrued royalty and R&D expenses 5,258 4,146 Other accrued expenses 6,713 6,406 Deferred income 2,155 1,392 Total accrued expenses and deferred income as of December 31 63,122 56,636 Accruals for personnel-related expenses comprise accruals for salaries, bonuses, overtime, vacation, social security and other personnel-related expenses.

120 118 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 25 Commitments Operating leases in EUR thousands Buildings and leasehold improvements 37,740 46,682 Cars 5,333 6,066 Other 1,738 1,985 Total operating lease commitments as of December 31 44,811 54,733 In 2013, EUR 15,961k (2012: EUR 17,767k) was expensed in the income statement with respect to operating leases. Non-cancelable operating leases are payable as follows: in EUR thousands Less than one year 14,952 16,587 Between one and five years 24,956 30,992 More than five years 4,903 7,154 Total operating lease commitments as of December 31 44,811 54,733 Universities, R&D and clinical research contracts The Group supports various universities in integrating dental implant therapy into the overall pre-doctoral education of the general dentist, as well as supporting various research projects. The Group also has various contracts with regard to R&D and clinical research with other institutions. The following table shows the Group s commitments with respect to non-cancelable support contracts with universities, as well as commitments with regard to R&D and clinical studies. in EUR thousands Less than one year 3,898 5,184 Between one and five years 2,956 5,027 More than five years Total non-cancelable contracts as of December 31 7,303 10,800 The charges with respect to universities, R&D and clinical research contracts were recognized in the following line items in the income statement: in EUR thousands Research and development expenses 2,199 2,474 Selling and marketing expenses 3,198 3,247 General and administrative expenses Total charge 5,484 5, Contingent liabilities and pledged assets As of December 31, 2013, the Group had contingent liabilities of EUR 50k (December 31, 2012: EUR 59k), and no pledged assets in either 2013 or 2012.

121 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 119 Ongoing disputes Litigation/Legal proceedings In July 2010, a Californian dentist filed a class action suit in the Federal Court of Los Angeles (USA) against Nobel Biocare USA LLC, Nobel Biocare AB and Nobel Biocare Holding AG alleging product defects of NobelDirect implants and claiming damages. In August 2011, the United States District Court for the Central District of California in Los Angeles granted the dentist s motion, holding that the requirements for a class certification had been met. The certified class includes all individuals in the United States who have purchased any NobelDirect dental implants other than NobelDirect Groovy. Nobel Biocare filed for motions for summary judgment and for reconsideration. In August 2012, the Federal Court narrowed down the class certification to claims under California Unfair Competition Law, thus considerably reducing the value of the claims at stake and limiting the remedy to restitution (i.e., either replacement or refund of the implant). In December 2012, the parties concluded a settlement agreement while the amount of compensation of attorney s costs on the plaintiff s side is currently being determined by the court. In February 2014, the Federal Court determined the attorney s costs in the case of the Californian dentist. The costs awarded are in no relation to the potential damages accrued in this case as the damages represent less than one percent of this award. Therefore, Nobel Biocare disagrees with the court s ruling and is evaluating its options including that of an appeal. There are other minor disputes pending regarding contractual obligations, including warranty- and labor-related disputes, arising from the ordinary business of Nobel Biocare and its subsidiaries. 27 Financial instruments The Group s financial assets and liabilities are presented in the tables below: in EUR thousands Financial assets Non-current receivables 1,493 1,558 Rent deposits 1,688 2,382 Available-for-sale financial assets 101 Trade and other receivables (current) 100,875 96,217 Accrued income Cash and cash equivalents 180, ,571 Total non-derivative financial assets as of December , ,747 Derivative instruments at fair value through profit or loss 1,022 5,997 Hedging instruments (cash flow hedges) 2,211 2,372 Total derivative financial assets as of December 31 3,233 8,369 Total financial assets as of December , ,116 in EUR thousands Financial liabilities Straight bond 98,222 99,505 Other non-current liabilities Trade payables 15,155 19,191 Other current liabilities 6,704 6,877 Accrued expenses 20,516 21,316 Total non-derivative financial liabilities as of December , ,133 Derivative instruments at fair value through profit or loss 630 2,658 Hedging instruments (cash flow hedges) Hedging instruments (net investment hedges) 2,875 1,832 Total derivative financial liabilities as of December 31 4,409 4,566 Total financial liabilities as of December , ,699

122 120 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements Fair value of financial assets and liabilities For loans, receivables and current non-derivative financial liabilities with a remaining life of less than one year, the carrying amount is deemed to be a reasonable approximation of the fair value. As of December 31, 2013 and 2012, the Group did not have any material non-current financial assets. On the liability side, the fair value of the bond was EUR 105,210k as of December 31, 2013 (December 31, 2012: EUR 106,403k). Financial instruments held by Nobel Biocare comprise derivative financial instruments that are stated at fair value and are presented on the balance sheet within derivative financial instruments under current assets and current liabilities. As of December 31, 2013, these consisted of foreign exchange forwards, swaps, options and cross-currency swaps. The level in a fair value hierarchy under which a financial instrument is classified is determined based on the significance of the data used to calculate the fair value. The first level comprises quoted prices in active markets where arm s-length transactions for identical items are conducted regularly. The second level comprises externally observable data. Such data may include the use of recent arm s-length transactions, reference to other instruments that are substantially the same, and discounted cash flow analysis and option-pricing models, while at the same time making maximum use of market inputs and relying as little as possible on entity-specific inputs. The third level comprises all other inputs not externally observable. The fair value of derivative instruments is determined based on the no-arbitrage principle. The following table shows the valuation techniques applied and input parameters used to determine the fair value of derivative instruments: Derivative instruments Valuation techniques Input parameters Mark to market, discounted cash flow Observable market quotes including foreign exchange spot rates, forward Foreign exchange forwards analysis rates and interest rates Mark to market, discounted cash flow Observable market quotes including foreign exchange spot rates, forward Foreign exchange swaps analysis rates and interest rates Observable market quotes including foreign exchange spot rates, forward Foreign exchange options Black-Scholes formula rates, interest rates and foreign exchange volatilities Standard valuation technique of discounted Observable market quotes including foreign exchange spot rates, forward Cross-currency swaps cash flow analysis rates, and interest rates The Group Treasury Policy requires that Nobel Biocare only enter into derivative transactions with large international banks that have a minimum credit rating of A. As of December 31, 2013, total derivative financial assets amounted to EUR 3,233k and total derivative financial liabilities amounted to EUR 4,409k. Net liabilities from derivative financial instruments amounted to EUR 1,176k, where the main part related to the negative mark-to-market value of the cross-currency swaps. The Group s credit risk on the cross-currency swaps was reflected in the valuation technique by applying the unsecured yield curve in the fair value computation where no cash collateral is required for either party. As of December 31, 2013, the fair value measurements of all derivative financial instruments held by Nobel Biocare correspond to level two. On October 30, 2013, Nobel Biocare acquired a minority participation in a start-up company that develops and manufactures products for dentistry and maxillofacial surgery. The fair value of the available-for-sale investment was EUR 101k and corresponds to level three due to the lack of externally observable inputs for its valuation. Based on a materiality assessment, the Group retained the initial valuation for year-end reporting. For the same reason, no further disclosure is provided. All other financial instruments are measured at amortized cost, which approximates fair value.

123 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 121 Offsetting financial assets and liabilities The following financial assets are subject to offsetting, enforceable master netting arrangements or similar agreements: in EUR thousands Amounts set off in the balance sheet Related amounts Net amount that are not set off Gross amount Gross amount Net amount of Financial of recognized of recognized financial assets instruments financial assets financial presented in the assets balance sheet set off in the balance sheet Trade and other receivables 101,966 1, , ,875 Derivative financial assets 3,233 3,233 3, Total as of December 31, ,199 1, ,108 3, ,957 Trade and other receivables 97,972 1,755 96,217 96,217 Derivative financial assets 8,369 8,369 8, Total as of December 31, ,341 1, ,586 8,108 96,478 The following financial liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements: in EUR thousands Amounts set off in the balance sheet Related amounts that are not set off Net amount Gross amount Gross amount Net amount of Financial Cash collateral of recognized of recognized financial liabilities instruments given financial financial liabilities presented in the liabilities set off in the balance sheet balance sheet Accrued expenses 21,607 1,091 20,516 20,516 Derivative financial liabilities 4,409 4,409 3,018 1, Total as of December 31, ,016 1,091 24,925 3,018 1,089 20,818 Accrued expenses 23,071 1,755 21,316 21,316 Derivative financial liabilities 4,566 4,566 4,566 Total as of December 31, ,637 1,755 25,882 4,566 21,316 As of December 31, 2013, the Group offset trade receivables of EUR 1,091k (December 31, 2012: EUR 1,755k) from a single customer against accruals related to a royalty agreement with that same party. The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting agreements. In general, under such agreements the amounts owed by each counterparty on a single day in respect of all transactions outstanding in the same currency are aggregated into a single net amount that is payable. The ISDA agreements do not meet the criteria for offsetting in the balance sheet since Nobel Biocare does not have the legally enforceable right or the intention to offset recognized amounts. In most cases, the right to offset is enforceable only on the occurrence of future events such as default. 28 Risks related to financial instruments Risk management Group Treasury is responsible for evaluating, monitoring and managing financial exposures within the parameters outlined in the Group Treasury Policy. The Audit Committee, on behalf of the Board of Directors, approved the annual update of the Group Treasury Policy in December It is binding on a Group-wide basis including all subsidiaries. The Group Treasury Policy provides written principles for overall risk management, as well as detailed written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, the use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. The Group Treasury Policy also defines the maximum risk tolerance with regard to earnings at risk (EaR) for committed and uncommitted exposures, as well as the value at risk (VaR) for translation risks.

124 122 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements Basic financial exposure management principles Management has to ensure that the number and experience of personnel, as well as infrastructure capacity, meet the requirements with respect to business volume and complexity, and that an adequate internal control system is in place. The Group evaluates the following financial exposures: Credit risk Liquidity risk Market risk Currency risk Interest rate risk Other price risk Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial asset fails to meet contractual obligations. The Group s credit exposure with respect to financial instruments consists of cash and cash equivalents, derivative financial instruments and surplus liquidity invested in marketable securities, as well as placements with banks. In addition, credit risk arises from credit exposure to customers, including outstanding receivables and committed transactions. In order to minimize credit risk related to financial instruments, Nobel Biocare requires a strong credit rating for counterparties and ensures that the commitment terms of funds usually do not exceed 12 months. The minimum short-term rating for major financial counterparties is A1, and the minimum long-term rating is single A. During 2013, Nobel Biocare continued to closely monitor the credit quality of its financial counterparties. Trade receivables Nobel Biocare s customer base mainly consists of dentists, dental clinics and dental laboratories. Under the Group s credit policy, each customer is analyzed individually, and for each customer an individual credit limit is established. Such limits are reviewed periodically. The demographics of the Group s customer base have a low degree of influence on credit risk due to the low default risk of the industry. On a global basis, the largest individual customer accounted for EUR 3,573k or 3.5 percent of total gross trade receivables as of December 31, 2013 (December 31, 2012: EUR 3,363k or 3.3 percent). The exposure to credit risk for trade receivables by geographical region is presented in the following table. For more information on trade receivables, refer to note 12. Net trade receivables by region in EUR thousands Americas 30,711 28,606 Europe, Middle East and Africa (EMEA) 43,642 42,246 Asia/Pacific 16,080 17,568 Total as of December 31 90,433 88,420 Concentration of credit risk Of the total Group cash and cash equivalents, EUR 137,473k, representing 76 percent of total cash and cash equivalents as of December 31, 2013 (December 31, 2012: EUR 91,142k or 62 percent), was placed at major relationship banks, which are large international banks with a minimum credit rating of A as specified by Standard & Poor s. As of December 31, 2013, the highest cash amount deposited at a single bank was EUR 48,938k (December 31, 2012: EUR 29,905k). As of December 31, 2013, the positive value of derivative instruments amounted to EUR 3,233k (December 31, 2012: EUR 8,369k). The carrying amount of financial assets as disclosed in note 27 represents the maximum credit exposure.

125 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 123 Liquidity risk Liquidity risk is the risk that the Group would not be able to meet its financial obligations when they fall due. Such a shortage of liquidity could arise from weak operational performance, insufficient cash holdings or limited access to external debt and equity financing, either through banks or capital markets. During 2013, the Group continued to maintain a strong focus on minimizing any liquidity risk by centralizing cash at the Group s core banks. As of December 31, 2013, the Group held EUR 180,785k (December 31, 2012: EUR 146,571k) liquidity on its balance sheet, thereof EUR 121,311k (December 31, 2012: EUR 90,329k) centrally. In addition to its on-balance sheet liquidity, the Group had the following committed and uncommitted credit lines with various banks as of December 31, 2013: Credit lines in EUR thousands Committed syndicated facility (six banks) 330, ,000 Other committed credit lines Uncommitted credit lines 2,989 3,033 Total as of December , ,851 As of December 31, 2013, undrawn credit lines amounted to EUR 333,117k (December 31, 2012: EUR 333,851k). The principal part of existing committed credit lines is the EUR 330,000k syndicated facility with Group core banks that will continue to serve as a back-up facility until November As of December 31, 2013 and 2012, no amount was drawn on the facility. Other committed credit lines totaled EUR 128k, none of which was drawn as of December 31, 2013, nor were there any outstanding amounts drawn on uncommitted credit lines as of December 31, Existing credit line agreements include covenants covering the net debt/ebitda ratio of the Group. The covenants were met as of December 31, 2013, and In line with its liquidity planning and monitoring, the Group analyzes the entire liquidity/maturity profile of all existing financial assets and liabilities on a continuous basis, including derivatives, which are needed for foreign exchange and interest rate hedging. The table below gives an overview of all contractual cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. Maturity analysis of financial liabilities and derivative financial instruments in EUR thousands Carrying Total Within 6 months Within In the second In the third to amount contractual 6-12 year the fifth years cash flow months amount as of December 31, 2013 Straight bond 98, ,714 3,927 3, ,860 Other non-current liabilities Trade payables 15,155 15,155 15,155 Non-trade payables and other liabilities 6,704 6,704 6,704 Accrued expenses 20,516 20,516 20, Total non-derivative financial liabilities 140, ,158 42,321 4,050 3, ,860 Outflow (at fair value through profit or loss) 252, ,854 Inflow (at fair value through profit or loss) 253, ,208 Outflow (cash flow hedges) 104,222 39,696 53,348 11,178 Inflow (cash flow hedges) 106,058 40,068 54,542 11,448 Outflow (net investment hedge) 82, ,845 Inflow (net investment hedge) 78, ,437 Total gross-settled derivatives 1,219 1, ,408 Total net-settled derivatives

126 124 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements in EUR thousands Carrying Total 6 months 6 12 months In the second In the third to amount contractual or less year the fifth years cash flow amount as of December 31, 2012 Straight bond 99, ,349 3,986 3, ,377 Other non-current liabilities Trade payables 19,191 19,191 19,191 Non-trade payables and other liabilities 6,877 6,877 6,877 Accrued expenses 21,316 21,316 21, Total non-derivative financial liabilities 147, ,978 47,583 4,020 3, ,377 Outflow (at fair value through profit or loss) 359, ,613 Inflow (at fair value through profit or loss) 362, ,591 Outflow (cash flow hedges) 54,399 28,176 26,223 Inflow (cash flow hedges) 56,854 29,285 27,569 Outflow (net investment hedge) 103,379 20, ,689 Inflow (net investment hedge) 99,551 19, ,667 Total gross-settled derivatives 4,028 1,605 4, ,022 Total net-settled derivatives As of December 31, 2013, non-current financial liabilities mainly included the straight bond, with a carrying amount of EUR 98,222k. Other non-current financial liabilities were EUR 69k. Current financial liabilities amounted to EUR 46,786k and included trade payables, accrued expenses and other liabilities (including derivative financial instruments). For more information, refer to note 27. For off-balance sheet commitments to universities and other institutions and for non-cancelable operating lease commitments, refer to note 25. Market risk Currency risk Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. Within Nobel Biocare, the foreign currency exposures of individual subsidiaries are managed and optimized centrally against the functional currency of the respective entity. The Treasury Policy contains a list of approved hedging instruments. Hedging of existing exposures on the balance sheet and of future (uncommitted) exposures is executed with foreign exchange forward, swap and option contracts. The Treasury Policy also allows combinations of plain vanilla options, but only on a neutral or netlong basis. The fair value of various derivative instruments used for hedging purposes is disclosed in note 27. Movements in the hedging reserve are shown in the consolidated statement of changes in equity. The Group Treasury Policy mandates that a minimum of 85 percent of committed balance sheet exposures be hedged as soon as they arise. In addition to this, Nobel Biocare continued to reduce future EBITDA volatility by hedging parts of highly probable forecasted transactions for up to two years on a rolling basis (cash flow hedge). At the end of 2013, the average hedge horizon of all future cash flows had a maturity of less than one year. While the effective hedge ratio is also affected by the availability of transactional exposures that qualify for hedge accounting, near-term cash flows are hedged to a higher degree than more future cash flows. The Group has certain investments in foreign operations whose net assets are exposed to foreign currency translation risk. In 2013, Group Treasury continued to focus on monitoring and reducing foreign currency translation risk, which is reported to the CFO and to senior management on a regular basis. The Group also continued to selectively hedge a portion of its net investment risk with EUR/CHF cross-currency swaps. For foreign exchange risk management purposes, hedge accounting is applied within Nobel Biocare whenever possible and feasible. At the inception of each hedge, the Group documents the relationship between the designated hedging instruments and the identified hedged items, as well as the risk management objectives and strategy of the hedge. The hedge effectiveness is documented at inception and tested on a quarterly basis. During 2013, there was no ineffectiveness from cash flow hedges or from net investment hedges.

127 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 125 Foreign currency risk analysis During 2013, Group Treasury continued to focus on its risk and compliance function by using quantitative risk analysis models to monitor and control the Group s currency risks on a regular basis. A regular treasury and risk management report is compiled by an independent treasury controller and is distributed to the CFO and senior management. The report contains quantitative risk management monitoring, as well as qualitative comments. Statistical models of value at risk (VaR) and earnings at risk (EaR) form the quantitative basis of analysis for currency transaction and translation risks. Analysis of currency economic risk is performed on an ad hoc basis. Both VaR and EaR are similar techniques used to quantify the expected loss from an adverse market movement with a specified probability over a particular period of time. They reflect the interdependencies between risk variables and provide management with a more comprehensive understanding of the Group s risk profile. While the VaR measures the potential currency impact on the Group s consolidated equity, the EaR measures such impacts on the Group s consolidated profit or loss. By assuming that past changes in risk factors reflect future movements of market rates, and by taking into account the current risk portfolio, the Group has chosen the historical simulation method to assess currency risks. Other major assumptions underlying the analysis include the following: The calculation uses a 95 percent confidence level as defined in the Group Treasury Policy. Thus, on average, there is a 5 percent probability of market fluctuations affecting the Group s net income or equity by more than the simulated net EaR or VaR during the holding period. A holding period of 12 months has been applied as per Group Treasury Policy. The portfolio, consisting of underlying currency exposures and hedges, is assumed to remain the same at the end of each holding period. Historical market data for various risk factors (foreign exchange rates and interest rates) from the past three and ten years is used. However, as the results of the analysis largely rely on the chosen historical data, the model does not cover any event not occurring within the time period chosen. By choosing a longer or shorter time horizon of applied historical rates for risk factors, the output of the analysis may vary. Therefore, in the concrete risk management process, this method is always used based on a thorough understanding of underlying exposures. For the year 2013, the aforementioned risk analyses presented the following results. The gross impact implies the potential adverse movement from the exposures only, whereas the net impact also includes the movement of the hedges in place. The diversification effect considers the correlations between different risk factors and the nature of underlying exposures in the portfolio, such as long and/or short positions. Earnings at risk for a 12-month holding period (currency transaction risk) committed in EUR thousands currency, as of December 31 Gross impact Net impact Risk reduction Gross impact Net impact Risk reduction Swiss franc 12, % 1, % Euro % Japanese yen % 1, % Swedish krona % 1, % US dollar 4,649 3, % 9,982 1, % Other core currencies 1, % % Remaining currencies 1,656 1, % 2,093 1, % Total undiversified 21,697 5, % 17,117 3, % Diversification 10,749 2,978 10,877 2,214 Earnings at risk committed 10,948 2, % 6,240 1, % As of December 31, 2013, the potential adverse net impact in value (after hedging) on all committed cash flows, was EUR 2,677k (December 31, 2012: EUR 1,157k) for one year ahead.

128 126 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements Earnings at risk for a 12-month holding period (currency transaction risk) uncommitted in EUR thousands currency, as of December 31 Gross impact Net impact Risk reduction Gross impact Net impact Risk reduction Swiss franc 3,888 2, % 5,415 4, % Japanese yen 4,258 2, % 6,149 5, % Swedish krona 5,443 2, % 6,218 3, % US dollar 7,507 3, % 8,178 6, % Other core currencies 3,108 3,108 4,192 4,192 Remaining currencies 5,396 5,396 4,302 4,302 Total undiversified 29,600 19, % 34,454 28, % Diversification 14,114 9,464 16,482 13,903 Earnings at risk uncommitted 15,486 10, % 17,972 14, % As of December 31, 2013, the potential adverse net impact in value (after hedging) on all anticipated cash flows was EUR 12,958k (December 31, 2012: EUR 14,272k) for one year ahead. Value at risk for a 12-month holding period (currency translation risk) in EUR thousands currency, as of December 31 Gross impact Gross impact Swiss franc 10,464 6,169 Swedish krona 206 3,655 US dollar 16,468 18,508 Other core currencies 3,008 3,612 Remaining currencies 13,691 15,049 Total undiversified 43,837 46,993 Diversification 24,173 22,853 Value at risk 19,664 24,140 As of December 31, 2013, the potential adverse impact on Group equity of all currency translation risk exposures was EUR 19,664k (December 31, 2012: EUR 24,140k) for one year ahead. Interest rate risk Interest rate risk is the risk of the result and/or cash flows being negatively affected by changes in interest rates. At Nobel Biocare, borrowing and investment horizons have to be compatible with the needs and requirements of operational activities. Thus, duration gaps between assets and liabilities can occur. As of December 31, 2013, the only material interest-bearing financial liability was the straight bond, which is measured at amortized cost. Interest rate risks are presented by way of a sensitivity analysis based on the following assumptions: Fair value interest rate risk: Fixed-rate borrowings (including bond issuances) are excluded from the sensitivity analysis as they are not measured at fair value and, therefore, are not subject to fair value interest rate risk. As of December 31, 2013 and 2012, the Group did not hold any fixed-rate financial instruments that were measured at fair value. Cash flow interest rate risk: The Group has no variable-rate investments or borrowings. Cash flow interest rate risk is, therefore, limited to fluctuations in the interest rate on cash and cash equivalents held. The sensitivity analysis assumes the same interest rate shift for all currencies. With all other variables held constant, an increase/(decrease) in interest rates of 25 basis points would have resulted in an annualized increase/(decrease) in profit for 2013 of EUR 337k (2012: EUR 276k) mainly due to increased/(decreased) interest income on cash and cash equivalents. Equity would not have been affected.

129 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 127 Other price risk Other price risk mainly comprises security price risk or commodity price risk. Since the Group has very limited commodity price risk exposure due to the nature of the business, it is not actively managed. With respect to security price risk, management has decided not to invest in any financial securities other than highly rated commercial paper and short-term bonds. This decision, backed by the Group Treasury Policy and approved by the Audit Committee on behalf of the Board of Directors, was strictly followed in Capital management The Group s strategy, reflected through its financial policies, is to maintain a strong equity base and hold at any point in time a minimum credit quality equivalent to BBB or better as defined by Standard & Poor s. Investments, i.e. capital expenditures and acquisitions, are done based on a thorough analysis of future cash flow generation, as well as their potential risk for the Group balance sheet. The Board, represented by the Audit Committee, monitors capital structure development on an ongoing basis and decides on the appropriate level of risk limits on a regular basis. Throughout 2013, equity in relation to total assets remained stable. The dividend policy is based on the above balance sheet management principles and is designed to maintain attractive dividend yields for investors and an affordable pay-out ratio of between 35 percent and 45 percent (calculated as the dividend as a percent of available profit for the year) as a general target. Additionally, share repurchases can make sense in the case of significant surplus cash that cannot be reinvested into the business at a minimum level of capital returns. Financial flexibility must not be reduced through shareholder returns and has to be guaranteed at any point in time through sufficient cash holdings and/or committed credit lines. By doing so, the Group seeks to balance the interest of shareholders and debt holders. During 2013, the Group bought 250,000 treasury shares to cover its exposure from the share unit plans and granted 74,009 treasury shares to plan participants as described in note Risk assessment As part of the Enterprise Risk Management (ERM) system, the Group has systematically analyzed, updated and documented its risk assessment with regard to risks that could have a material effect on the financial statements. Risks are reported to the Executive Committee and the Board of Directors at least once a year. Key risks and significant incidents are discussed in all Executive Committee and Board meetings, as well as in local management team meetings. The Board of Directors of Nobel Biocare last approved the redesigned risk assessment annual report in the Board meeting held on December 11, The Group has also implemented an Internal Controls System (ICS) for all subsidiaries and relevant Group functions based on the Committee of Sponsoring Organizations (COSO) framework. Nobel Biocare complies with the Swiss Code of Obligations. The controls and processes are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with International Financial Reporting Standards (IFRS) and Swiss law. 31 Related parties Transactions with related parties are conducted on an arm s-length basis. Transactions with members of the Executive Committee and the Board of Directors As of December 31, 2013, members of the Executive Committee and the Board of Directors controlled 0.4 percent of the voting shares of the Company (December 31, 2012: 0.3 percent).

130 128 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements As of December 31, 2013, EUR 15k remained outstanding on a loan extended to an Executive Committee member (December 31, 2012: EUR 25k). Otherwise, there are no material loans, securities, advances, credits granted or payables due to any related party as of December 31, During 2013, a company in which a member of the Executive Committee has an economic interest provided laboratory services amounting to EUR 294k, and Nobel Biocare sold products to this company amounting to EUR 70k. Another company in which this Executive Committee member has an economic interest provided consultancy services amounting to EUR 131k. Nobel Biocare also reimbursed incidental expenses (EUR 19k) relating to the consultancy services. None of the Board members holds or has held any operational positions within the Group during the last five years. Compensation of the Executive Committee and the Board of Directors Executive Committee in EUR thousands Short-term benefits (including fixed salaries and variable compensation) 6,787 4,449 1 Post-employment benefits 1, Share-based payments 2,243 2,521 Total compensation 10,113 7,722 1 Figures for 2012 have been restated due to a change in the method of calculating variable compensation. Board of Directors in EUR thousands Cash compensation Share-based payments Total compensation 1,626 1,493

131 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements Subsidiaries As of December 31, 2013, the Group had the following subsidiaries: City and country Nature of Share capital Percentage held Percentage held of incorporation business in thousands directly by the by the Group parent company Nobel Biocare Australia Pty Ltd. Macquarie Park, Australia Sales AUD Nobel Biocare (Österreich) GmbH Vienna, Austria Sales EUR Nobel Biocare Belgium NV Groot-Bijgaarden, Belgium Sales EUR Medicim, NV Mechelen, Belgium Innovation EUR Nobel Biocare Brasil Ltda São Paulo, Brazil Sales BRL Nobel Biocare Canada Inc. Richmond Hill, Canada Sales CAD Nobel Biocare Procera Services Inc. Québec, Canada Administration CAD Innovation and BioCad Medical Inc. Québec, Canada production CAD Nobel Biocare Asia Ltd. Hong Kong, People s Republic of China Sales HKD Nobel Biocare Commercial (Shanghai) Co. Ltd Shanghai, People s Republic of China Sales USD Nobel Biocare Trading (Shanghai) Co. Ltd. Shanghai, People s Republic of China Sales USD Nobel Biocare Danmark A/S Hilleröd, Denmark Sales DKK Nobel Biocare Suomi Oy Helsinki, Finland Sales EUR Nobel Biocare France S.A.S. Bagnolet, France Sales EUR Nobel Biocare Deutschland GmbH Cologne, Germany Sales EUR Nobel Biocare UK Ltd. Uxbridge, Great Britain Sales GBP Nobel Biocare Magyarország Kft Budapest, Hungary Sales HUF Nobel Biocare India Pvt. Ltd. Mumbai, India Sales INR Alpha-Bio Tec Ltd. Petach Tikva, Israel Production and sales ILS Nobel Biocare Italiana S.r.l. Milan, Italy Sales EUR Nobel Biocare Japan K.K. Tokyo, Japan Sales JPY Nobel Biocare Procera K.K. Narashino-Shi, Japan Production JPY Nobel Biocare Lithuania Pty. Ltd. Vilnius, Lithuania Sales LTL Nobel Biocare México, S.A. de C.V. Mexico City, Mexico Sales MXN Nobel Biocare Nederland BV Houten, the Netherlands Sales EUR Nobel Biocare Distribution Center BV Belfeld, the Netherlands Distribution EUR Nobel Biocare New Zealand Ltd. Auckland, New Zealand Sales NZD Nobel Biocare Norge AS Son, Norway Sales NOK Nobel Biocare Polska Sp.z o.o. Warsaw, Poland Sales PLN Nobel Biocare Portugal S.A. Vila Nova de Gaia, Portugal Sales EUR Nobel Biocare Russia LLC Moscow, Russia Sales RUB Nobel Biocare Singapore Pte Ltd. Singapore Sales SGD Nobel Biocare South Africa (Pty) Ltd. Woodmead, South Africa Sales ZAR AlphaBio Tec Dental Implants SA Woodmead, South Africa Sales ZAR Nobel Biocare Iberica S.A. Barcelona, Spain Sales EUR Nobel Biocare AB 1 Gothenburg, Sweden Production and sales SEK Nobel Biocare Dental Products AB Gothenburg, Sweden Dormant SEK Nobel Biocare i Göteborg AB Gothenburg, Sweden Dormant SEK Nobel Orthopedics AB Gothenburg, Sweden Dormant SEK Nobel Biocare AG Kloten, Switzerland Sales CHF Nobel Biocare Finance AG Kloten, Switzerland Financing CHF Nobel Biocare Management AG Kloten, Switzerland Administration CHF Innovation and Nobel Biocare Services AG Kloten, Switzerland administration CHF Nobel Biocare Asia-Africa Holding AG Kloten, Switzerland Administration CHF Nobel Biocare Taiwan Co. Ltd. Taipei, Taiwan Sales TWD Nobel Biocare (Thailand) Ltd. Bangkok, Thailand Sales THB Production, sales Nobel Biocare USA, LLC Dover, USA and administration USD Nobel Biocare Procera, LLC Dover, USA Production USD Nobel Biocare Holding USA Inc. Wilmington, USA Administration USD During 2013, Nobel Biocare AB absorbed Nobel Biocare Holding AB through merger.

132 130 Nobel Biocare Annual Report 2013 Financial reporting Notes to the consolidated financial statements 33 Subsequent events There have been no material events between December 31, 2013 and the date of authorization that would require adjustments to the consolidated financial statements or disclosures.

133 Nobel Biocare Annual Report 2013 Financial reporting Report of the statutory auditor 131 Report of the statutory auditor. Report of the Statutory Auditor to the General Meeting of Shareholders of Nobel Biocare Holding AG, Kloten Report of the Statutory Auditor on the Consolidated Financial Statements As statutory auditor, we have audited the accompanying consolidated financial statements of Nobel Biocare Holding AG, which comprise the income statement, statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes on pages 78 to 130 for the year ended December 31, Board of Directors Responsibility The board of directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The board of directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards as well as International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements for the year ended December 31, 2013 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law. Report on Other Legal Requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the board of directors. We recommend that the consolidated financial statements submitted to you be approved. KPMG AG Rolf Hauenstein Licensed Audit Expert Auditor in Charge Regula Tobler Licensed Audit Expert Zürich, February 17, 2014

134 132 Nobel Biocare Annual Report 2013 Financial reporting Parent company accounts Parent company accounts. Income statement in CHF thousands Note Financial income 6 12,850 3,868 Dividend income 7 222,120 25,500 Surplus from merger with Group companies Total income 234,970 29,502 Personnel expenses Administrative expenses 12,407 11,899 Depreciation Financial expenses 8 7,542 11,155 Net foreign exchange losses 3,464 3,955 Depreciation investments 3 548,884 Total expenses 24, ,239 Profit/(loss) before tax 210, ,737 Tax expenses Net result 210, ,052 Balance sheet in CHF thousands Note December 31, 2013 December 31, 2012 Assets Equipment and leasehold improvements Property, plant and equipment Investments 3 1,191,118 1,191,118 Loans due from Group companies 294, ,004 Financial assets 1,486,028 1,351,122 Total non-current assets 1,486,120 1,351,420 Other receivables due from Group companies Other receivables Tax asset Treasury shares 5 16,084 7,614 Prepaid expenses and accrued income 965 1,098 Cash and cash equivalents 48,824 7,421 Total current assets 66,556 16,436 Total assets 1,552,676 1,367,856 Shareholders equity and liabilities Share capital 49,514 49,514 Share premium 1,298,241 1,322,801 thereof: reserves from capital contribution 1,291,814 1,316,374 thereof: reserves from treasury shares 29,643 28,406 Retained earnings/(accumulated deficit) 73, ,297 Shareholders equity 4 1,420,841 1,235,018 Loans due to Group companies 8,700 8,740 Straight bond , ,000 Total non-current liabilities 128, ,740 Other payables due to Group companies 1,346 2,620 Other payables 33 Accrued expenses and deferred income 1,789 1,445 Total current liabilities 3,135 4,098 Total liabilities 131, ,838 Total shareholders equity and liabilities 1,552,676 1,367,856

135 Notes to the parent company accounts. Nobel Biocare Annual Report 2013 Financial reporting Notes to the parent company accounts Basis for preparation These financial statements have been prepared on a historical cost basis and are in accordance with Swiss law. 2 Property, plant and equipment Equipment and leasehold improvements in CHF thousands Cost Balance as of January 1 3,754 3,754 Balance as of December 31 3,754 3,754 Accumulated depreciation Balance as of January 1 3,456 3,065 Depreciation charge for the year Balance as of December 31 3,662 3,456 Carrying amount as of December Property, plant and equipment is included in a group fire insurance policy. The overall fire insurance value for the group is CHF 8,590k as of December 31, 2013 (December 31, 2012: CHF 6,904k).

136 134 Nobel Biocare Annual Report 2013 Financial reporting Notes to the parent company accounts 3 Details of investments Nobel Biocare Holding AG is the parent company of the Nobel Biocare Group. Investments held directly by Nobel Biocare Holding AG are: Company, domicile, purpose December 31, 2013 December 31, 2012 Percentage Share capital Percentage Share capital held (in thousands) held (in thousands) Nobel Biocare Services AG, Kloten, Switzerland Acquisition, divestment and administration, including marketing and granting of licenses for intellectual property rights of any kind in favor of the Nobel Biocare Group, as well as the rendering of other services in favor of the Nobel Biocare Group in the fields of management and marketing 100 CHF CHF 250 Nobel Biocare AG, Kloten, Switzerland Sale of dental implants and industrialized dental prosthetics 100 CHF CHF 54 Nobel Biocare Asia-Africa Holding AG, Kloten, Switzerland Acquisition, divestment and administration of direct and indirect investments in Asia and Africa 100 CHF CHF Nobel Biocare Finance AG, Kloten, Switzerland Financing, investments and trading 100 CHF CHF 100 Nobel Biocare AB, Gothenburg, Sweden 1 Development, manufacturing and sale of pharmaceuticals and medical technical products 100 SEK Nobel Biocare Holding AB, Gothenburg, Sweden 1 Acquisition, sales and administration, including marketing and granting of licenses for intellectual property rights of any kind 100 SEK Nobel Biocare Holding USA Inc., Wilmington, New Castle County Delaware, USA Acquisition, sales and administration, including marketing and granting of licenses for intellectual property rights of any kind 100 USD USD 0.01 Nobel Biocare Management AG, Kloten, Switzerland Rendering of services in favor of the Nobel Biocare Group including but not limited to the fields of management and administration, marketing, research and development and IT services 100 CHF CHF 100 AlphaBio - Tec Dental Implants SA, Woodmead, South Africa Sale of dental implants and dental devices and related activities 100 ZAR ZAR During 2013, Nobel Biocare AB absorbed Nobel Biocare Holding AB through merger. During 2012, Nobel Biocare Latin America Holding AG was merged with Nobel Biocare Holding AG, resulting in a surplus from the merger of CHF 134k. During 2012, Nobel Biocare Investments N.V., a financing company, was merged with Nobel Biocare Finance AG. Investments are valued at acquisition cost less adjustments for impairment. In 2012, the Company recognized an impairment of CHF 548,884k to adjust the value in use of its investments. No impairments were recognized in 2013.

137 Nobel Biocare Annual Report 2013 Financial reporting Notes to the parent company accounts Shareholders equity As of December 31, 2013, the issued share capital of the Company consisted of 123,784,530 shares with a par value of CHF 0.40 each (December 31, 2012: 123,784,530). The shares of the Company are listed on the SIX Swiss Exchange. There are no voting restrictions. On February 15, 2013, the Board of Directors decided to transfer free reserves amounting to CHF 224,682,930 and reserves for treasury shares amounting to CHF 28,406,271 into share premium to comply with the fiscal requirements for reserves from capital contributions. This transfer was approved at the Annual General Meeting on March 28, On March 28, 2013, the AGM approved a dividend of CHF 0.20 per registered share to be paid out of reserves without deduction of withholding tax. This dividend, totaling CHF 24.6 million, was paid to shareholders on April 8, On February 17, 2014, the Company s Board of Directors decided to propose to the AGM a dividend to shareholders of CHF 0.20 per registered share to be paid out of reserves without deduction of withholding tax. The total amount of the proposed dividend is CHF 24.5 million. Equity reconciliation in CHF thousands Number Share Share Reserve for Free Retained Total of shares capital premium treasury reserves earnings shares Balance as of January 1, ,784,530 49,514 1,088,121 37, , ,755 1,801,478 Dividend payment 18,408 18,408 Allocation of shares to share plan participants 2,373 2,373 Disposal of treasury shares 6,949 6,949 Allocation of reserves to share premium 253,088 28, ,682 Net result 548, ,052 Balance as of December 31, ,784,530 49,514 1,322, ,297 1,235,018 Balance as of January 1, ,784,530 49,514 1,322, ,297 1,235,018 Dividend payment 24,560 24,560 Allocation from capital contribution to free reserves 24,560 24,560 Net result 210, ,383 Balance as of December 31, ,784,530 49,514 1,298,241 73,086 1,420,841 Conditional share capital The share capital may be increased by issuing no more than 247,620 shares (2012: 247,620), each with a par value of CHF 0.40, to be fully paid up, equaling an amount of no more than CHF 99,048 (2012: CHF 99,048) by virtue of the exercise of options granted to employees and officers of the Company and its subsidiaries. In addition, the share capital may be increased by an amount of up to CHF 10 million by issuing up to 25 million fully paid-up registered shares with a nominal value of CHF 0.40 following the exercise of conversion and/or option rights which are granted in connection with the issuance of bonds or similar debt instruments by the Company or one of its Group companies in capital markets or in connection with a transaction.

138 136 Nobel Biocare Annual Report 2013 Financial reporting Notes to the parent company accounts 5 Treasury shares Number of treasury shares Share buyback Other Total treasury program 1 shares Balance as of January 1, ,556 1,064,564 1,303,120 Sale 238,556 1, ,000 Share-based payment transactions 81,981 81,981 Balance as of December 31, , ,139 Balance as of January 1, , ,139 Purchase 250, ,000 Share-based payment transactions 74,009 74,009 Balance as of December 31, ,157,130 1,157,130 Treasury shares held by Nobel Biocare Holding AG are carried at the lower of cost or market value. On March 14, 2012, the Company sold 240,000 treasury shares that had been held to cover its exposure from the performance share unit plan for consideration of CHF 2,619k. On July 2, 2012, 81,981 treasury shares were granted to share plan participants. In 2013, the Company acquired in total 250,000 treasury shares to cover its existing exposure from the share-based payment programs for consideration of CHF 3,380k. In 2013, 72,301 treasury shares were granted to share plan participants, and 1,708 treasury shares were granted to participants of the performance share unit plan. In total, the Company granted 74,009 treasury shares in conjunction with share-based payment programs. 6 Financial income In 2013, financial income included interest income of CHF 7,185k (2012: CHF 3,868k) as well as a CHF 5,665k write-up of treasury shares to their market value as of December 31, Dividend income In 2013, dividend income of CHF 222,120k (2012: CHF 25,500k) related to dividends received from subsidiaries. 8 Financial expenses in CHF thousands Interest expenses Other financial expenses Total financial expenses 5,087 4,964 2,455 6,191 7,542 11,155 In 2013, other financial expenses included CHF 2,434k for the amortization of the arrangement fee on and the payment of commitment fees for a credit facility (2012: CHF 2,305k). In 2012, other financial expenses included a CHF 3,103k write-down of treasury shares to their market value as of December 31, 2012.

139 Nobel Biocare Annual Report 2013 Financial reporting Notes to the parent company accounts Tax expenses As a holding company, Nobel Biocare Holding AG is only subject to direct federal tax at an effective tax rate of 7.83 percent. Dividend income from subsidiaries or from other qualifying participations, as well as gains on disposal of qualified participations, are basically exempt from tax due to participation relief. In 2013, tax expenses of CHF 266k mainly related to capital tax of CHF 470k, and tax income of CHF 204k related to reversals of tax provisions for previous years. In 2012, tax expenses of CHF 315k comprised capital tax of CHF 570k, and tax income of CHF 255k related to reversals of tax provisions for previous years. 10 Securities, sureties, guarantees and pledges in favor of third parties in CHF thousands Guarantees to Group companies 8,114 9,035 Third-party guarantees 13,664 20,941 Total contingent liabilities as of December 31 21,778 29,976 Third-party guarantees include a guarantee to a service provider. Existing credit lines include a negative pledge clause. Covenants covering key ratios such as the net debt/ebitda ratio are included in these agreements. All covenants were met as of December 31, 2013 and December 31, The Company is part of a value-added tax (VAT) group and is, therefore, jointly liable to the Swiss federal tax authorities for the VAT liability of the other members. 11 Straight bond in CHF thousands Interest rate Maturity Currency Straight bond 120, , % 10 Oct 2016 CHF Carrying amount of straight bond as of December , ,000 On 10 October 2011, Nobel Biocare Holding AG issued a four percent straight bond in the amount of CHF 120,000k due in The straight bond is initially and subsequently recognized at the redemption value, which is the proceeds received, before transaction costs. Related transaction costs were recognized in the income statement as other financial expenses. Interest expenses are accrued on a monthly basis. 12 Pension liabilities No liabilities were due to the pension plan as of December 31, 2013 or December 31, 2012.

140 138 Nobel Biocare Annual Report 2013 Financial reporting Notes to the parent company accounts 13 Remuneration of the Board of Directors and Executive Committee (EC) Remuneration and Shareholdings of the Executive Committee Members of the Executive Committee as of December 31, 2013 Name Position Appointed Richard Laube Chief Executive Officer 2011 Oliver Walker Chief Financial Officer 2012 Hans Geiselhöringer Executive Vice President Global Research, Products and Development 2010 Frank Mengis Executive Vice President Global Operations 2013 Rolf Melker Nilsson Executive Vice President Global Sales and Customer Development 2011 Walter Ritter Executive Vice President Global Human Resources 2013 Petra Rumpf Executive Vice President Corporate Development, T&E and Special Channels 2007 Jörg von Manger-Koenig Executive Vice President Legal & Compliance 2011 Effective January 1, 2013, Frank Mengis, Executive Vice President Global Operations, and Walter Ritter, Executive Vice President Global Human Resources were appointed as members of the Executive Committee. Remuneration of the Executive Committee members for the years ended December 31 in CHF thousands Richard Laube, CEO Other 1 Executive Committee Members 9 Total Fixed compensation ,977 2,728 3,777 3,528 Variable compensation 3 1, , , Fair value of share units ,994 2,116 2,756 3,038 Pension and social security costs , Other benefits Costs related to international assignment Total 3,277 2,481 9,148 6,825 12,425 9,306 1 Highest total compensation 2 Fixed compensation has been adjusted: the housing benefit is now included under other benefits for the CEO and under costs related to international assignment for one other member of the Executive Committee (2012 restated) 3 Variable compensation is the estimated payout for the reporting year (2012 restated to reflect actual payout) 4 Based on the fair value of the grant for the respective year 5 Includes employer contributions to social security and pension (2012 restated due to change in variable compensation disclosure) 6 Refers to expense allowances, housing benefit for the CEO (2012 restated) 7 Includes seniority awards and an exceptional payment of CHF 30k to an EC member in As of December 31, 2013 CHF 18k remained outstanding on a loan extended to an EC member (December 31, 2012: 31k) 8 Includes costs of relocation, housing and international school fees and tax allowances (2012 restated due to change in variable compensation disclosure) 9 Pro-rata according to the service period in the Executive Committee (2013: 8 members during full year, 2012: 9 members, out of which 7 during full year) Considering that the composition of the Executive Committee has changed between 2012 and 2013, a one-to-one comparison of compensation levels cannot be drawn from the table. However, following comments can be made on the evolution of remuneration between both years: Annual Base Salaries: four members of the Executive Committee, including the CEO, received no salary increase in The other salary increases reflect one promotion and market adjustments; Short-Term Incentive: the level of short-term incentive paid out in 2012 was well below the target considering that the financial performance objectives have been missed. In 2013, performance was above expectation, which resulted in a much higher payout level compared to 2012; Long-Term Incentive: the fair value of the long-term incentive is based on the Monte-Carlo evaluation model and decreased compared to 2012 due to the volatility of the share; Pension and social security cost evolved in line with the insured remuneration; Other benefits remained constant; International assignment cost (tax equalization) increase result of change to actual variable compensation disclosure.

141 Nobel Biocare Annual Report 2013 Financial reporting Notes to the parent company accounts 139 Number of performance shares units, shares and stock options as of December 31, 2013 Number 1 Number Number 2 Restricted Per- thereof Per- thereof Per- thereof Per- thereof of shares of of per- share units formance forfeited formance forfeited formance forfeited formance forfeited held restricted formance granted share units share units share units share units share units share units 2013 granted granted grant grant held held Richard Laube 110,000 43, ,937 43,431 43,431 75,973 25,324 32,573 21,716 Oliver Walker 17,101 17,101 17,101 17,101 Hans Geiselhöringer 3 23,751 60,730 23,751 23,751 41,216 13,738 28,502 19,001 Frank Mengis ,161 12,161 12,161 12,161 Rolf Melker Nilsson 11,676 28,391 11,676 11,676 19,768 6,589 10,608 7,072 2,856 2,856 Walter Ritter 14,441 24,210 14,441 14,441 11,396 3,798 6,515 4,344 Petra Rumpf 7,900 19,571 48,918 19,571 19,571 34,236 11,412 19,571 13,048 12,875 12,875 Jörg von Manger-Koenig 14,897 34,956 14,897 14,897 23,400 7,800 13,377 8,918 5,610 5,610 Total 118, , , , , ,989 68, ,146 74,099 21,341 21,341 1 Includes shares acquired in the market 2 Excluding performance share units which forfeited 3 Under management service contract until Dec 31, 2011 Number of performance shares units, shares and stock options as of December 31, 2012 Number 1 Number 2 Per- thereof Per- thereof Per- thereof Per- thereof Stock of shares of per- formance forfeited formance forfeited formance forfeited formance forfeited option held formance share units share units share units share units grant 2007 share units granted grant grant grant held Richard Laube 110,000 97,688 75,973 32,573 10,858 Oliver Walker 9,500 Hans Geiselhöringer 3 60,216 41,216 28,502 9,502 Rolf Melker Nilsson 27,792 19,768 10,608 3,536 2,856 1,904 Petra Rumpf 7,900 51,574 34,236 19,571 6,524 12,875 8,584 20,390 20,390 35,000 Jörg von Manger-Koenig 34,188 23,400 13,377 4,459 5,610 3,740 8,884 8,884 10,000 Total 127, , , ,631 34,879 21,341 14,228 29,274 29,274 45,000 Dirk W. Kirsten 4 2,600 49,622 33,105 18,925 6,308 11,700 7,800 18,529 18,529 Nicolas Weidmann 5 33,923 22,602 12,921 4,307 8,125 5,418 12,868 12,868 25,000 Ernst Zängerle 6 4,200 14,308 16,151 5,384 10,625 7,084 1 Includes shares acquired in the market 2 Excluding performance share units which forfeited 3 Under management service contract until Dec 31, As of July 6, As of June 5, As of March 31, 2012 Overview of Compensation of the Board of Directors in CHF Committee Fee Board Fee Audit Committee Other Committees Board Board Committee Committee Committee Committee Chairman Member Chairman Member Chairman Member Cash 200,000 70,000 35,000 20,000 22,000 16,000 Shares 250,000 80,000 When the Chairman of the Board chairs a committee, he receives the regular committee member fee only. In 2013, each Board member received the equivalent of CHF in shares, i.e shares (conversion based on the five-day average closing share price from June 3, 2013 to June 7, 2013). Rolf Watter, as the Chairman of the Board, received CHF in shares, i.e shares.

142 140 Nobel Biocare Annual Report 2013 Financial reporting Notes to the parent company accounts Remuneration and Shareholdings of the Board of Directors Members of the Board (all non-executives) elected by the Annual General Meeting on March 28, 2013 Name First elected Elected until Board Audit Numeration and Operational Strategy Innovation and Committee Compensation Excellence Committee Technology Committee Committee Committee Rolf Watter C M C M Raymund Breu VC M M Daniela Bosshardt-Hengartner M M M Edgar Fluri M C Franz Maier M M M Michel Orsinger M C Juha Räisänen M C Oern Stuge M M C Georg Watzek M M C Chairman VC Vice-Chairman M Member Remuneration of the Board of Directors for the year ended December 31 in CHF thousands Cash 1 Fair value of 2 Total Cash 1 Fair value of 2 Total restricted shares restricted shares Rolf Watter Raymund Breu Daniela Bosshardt-Hengartner Edgar Fluri Franz Maier Michel Orsinger Juha Raisänen Oern Stuge Georg Watzek Stig G. Eriksson Robert Lilja Total 1, , ,803 1 Cash compensation is based on actual payments, including social security contributions. 2 Based on the closing share price average of the first five trading days in June (2012 restated) 3 Compensation based on period of service starting March 28, Compensation based on period of service starting March 29, Compensation based on period of service ending March 29, 2012 Number of shares held as of December 31, 2013 Name Total number Number of 1 Number of Restricted shares Restricted shares Restricted shares Restricted shares of shares unrestricted restricted grant 2013 grant 2012 grant 2011 grant 2010 shares held shares held Rolf Watter 122,943 63,500 59,443 20,309 25,302 11,832 2,000 Raymund Breu 91,158 70,000 21,158 6,499 8,097 4,562 2,000 Daniela Bosshardt-Hengartner 21,158 21,158 6,499 8,097 4,562 2,000 Edgar Fluri 37,658 16,500 21,158 6,499 8,097 4,562 2,000 Franz Maier 6,499 6,499 6,499 Michel Orsinger 18,017 18,017 6,499 8,097 3,421 2 Juha Räisänen 14,596 14,596 6,499 8,097 Oern Stuge 21,158 21,158 6,499 8,097 4,562 2,000 Georg Watzek 14,596 14,596 6,499 8,097 Total 347, , ,783 72,301 81,981 33,501 10,000 1 Includes shares acquired in the market 2 Grant for his services as a guest to the Board of Directors from July 4, March 29, 2012

143 Nobel Biocare Annual Report 2013 Financial reporting Notes to the parent company accounts 141 Number of shares held as of December 31, 2012 Name Total number Number of 1 Number of Restricted shares Restricted shares Restricted shares of shares unrestricted restricted grant 2012 grant 2011 grant 2010 shares held shares held Rolf Watter 102,634 63,500 39,134 25,302 11,832 2,000 Raymund Breu 84,659 70,000 14,659 8,097 4,562 2,000 Daniela Bosshardt-Hengartner 14,659 14,659 8,097 4,562 2,000 Edgar Fluri 31,159 16,500 14,659 8,097 4,562 2,000 Michel Orsinger 11,518 11,518 8,097 3,421 2 Juha Räisänen 8,097 8,097 8,097 Oern Stuge 14,659 14,659 8,097 4,562 2,000 Georg Watzek 8,097 8,097 8,097 Total 275, , ,482 81,981 33,501 10,000 Stig G. Eriksson 3 10,812 4,250 6,562 4,562 4,562 2,000 Robert Lilja 3 24,937 18,375 6,562 4,562 4,562 2,000 1 Includes shares acquired in the market 2 Grant for his services as a guest to the Board of Directors from July 4, March 29, Number of shares held as of March 29, 2012 (including grants 2011, 2010 and 2009) 14 Major shareholders As of December 31, the largest shareholders of Nobel Biocare Holding AG known to the Company were: 2013 Date of disclosure 2012 Date of disclosure (in %) (in%) Silchester International Investors LLP (UK) 10.2 August 24, August 24, 2012 Franklin Templeton (USA) 10.0 November 5, December 19, 2012 Government of Singapore (SG) 7.9 July 22, August 2, 2011 Invesco Limited (USA) 5.0 November 18, April 12, 2012 Norges Bank (NO) 3.0 February 5, 2013 <3 not disclosed Governance for Owners LLP (UK) <3 not disclosed 3.2 August 25, Risk assessment As part of the Enterprise Risk Management (ERM) system, the Group has systematically analyzed, updated and documented its risk assessment with regard to risks that could have a material effect on the financial statements. Risks are reported to the Executive Committee and the Board of Directors at least once a year. Key risks and significant incidents are discussed in all Executive Committee and Board meetings, as well as in local management team meetings. The Board of Directors of Nobel Biocare last approved the redesigned risk assessment annual report in the Board meeting held on December 11, The Company has also implemented an Internal Controls System (ICS) based on the Committee of Sponsoring Organizations (COSO) framework. Nobel Biocare complies with the Swiss Code of Obligations. The controls and processes are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with Swiss law. 16 Subsequent events There have been no material events between December 31, 2013 and the date of authorization that would require adjustments to the financial statements or disclosures.

144 142 Nobel Biocare Annual Report 2013 Financial reporting Appropriation of available earnings Appropriation of available earnings. Appropriation of available earnings in CHF Proposal of the Resolution of the Board of Directors Annual General Meeting Available retained earnings /(accumulated deficit) at the disposal of the Annual General Meeting 73,085, ,296,449 Carryforward 73,085, ,296,449 Allocation from capital contribution to free reserves 24,525,480 24,560,678 Withholding tax free distribution as dividend of CHF 0.20 (2013) per registered share out of free reserves 24,525,480 24,560,678 If the Annual General Meeting approves the above proposal from the Board of Directors, a dividend of CHF 0.20 per registered share will be paid out of reserves without deduction of withholding tax on April 2, The Company will not pay a dividend on treasury shares held by Nobel Biocare Holding AG or one of its subsidiaries.

145 Nobel Biocare Annual Report 2013 Financial reporting Report of the statutory auditor 143 Report of the statutory auditor. Report of the Statutory Auditor to the General Meeting of Shareholders of Nobel Biocare Holding AG, Kloten Report of the Statutory Auditor on the Financial Statements As statutory auditor, we have audited the accompanying financial statements of Nobel Biocare Holding AG, which comprise the balance sheet, income statement and notes on pages 132 to 142 for the year ended December 31, Board of Directors Responsibility The board of directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The board of directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements for the year ended December 31, 2013 comply with Swiss law and the company s articles of incorporation. Report on Other Legal Requirements We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the board of directors. We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company s articles of incorporation. We recommend that the financial statements submitted to you be approved. KPMG AG Rolf Hauenstein Licensed Audit Expert Auditor in Charge Regula Tobler Licensed Audit Expert Zürich, February 17, 2014