2015 Annual Report (Pre-Print) by Institut Straumann AG

Extraordinary performers 2015 Annual Report

About Straumann Straumann is a global leader in tooth replacement solutions including dental implants, prosthetics and regenerative products. Headquartered in Basel, Switzerland, the Group is present in more than 100 countries through its broad network of distribution subsidiaries and partners.

FRONT COVER, FROM LEFT TO RIGHT

OLGA LAMUA OLIVAR Global Customer Solution Manager ALAIN KOUNGA Senior Research Manager URSINA SCHRENK Team Leader Payroll & Time Management MARK ZETTLER Head of Dental Lab CARMEN BRUMANN Accountant GAEL MISEREZ PC Support ANDREA BERTSCHI Legal Associate MARCEL DOSER Internal Sales

Extraordinary performers In 2015, our team of 3500 employees around the world helped to create more smiles and confidence than ever before. In addition, we… – Lifted our organic revenue growth from 6% to more than 9% – Overcame the currency shock and exceeded our original profitability targets – Completed our largest-ever acquisition and became a top-5 player in the value segment – Extended our global footprint and lead at the top of our industry – Launched a record number of new products and replenished our development pipeline with even more projects. More importantly, we began to instill the high-performance culture needed to sustain our success. At its heart are eight core behaviors that we defined during the year. They are illustrated in this report through photographs of our employees bringing an extraordinary dimension of performance to the workplace.

focus on customers

16 collaborate

46 t ake ownership 62 create

opportunities

150

communicate effectively

100 engage

2015 Annual Report Contents

Operational performance (highlights)

Share performance (highlights)

Letter to shareholders

Management commentary

22 Strategy

36 Innovation

40 Markets

Business performance – Group

Business performance – Regions

Business performance – Financials

Risk and sustainability report

72 build trust

Business model & objectives Products & services

102

Corporate governance

132

Compensation report

152

Information for investors

160 Appendix

173 Imprint

158 be agile

Throughout this Report, pages references preceded by a capital ‘F’ refer to our detailed Financial Report, which is published as a separate volume.

Operational performance

KEY FIGURES

More on p. 48 ff.

(in CHF million)

2015

2014

Change (%)

Revenue

799

710

Gross profit

615

559

Operating profit (EBIT)

1731

148

Net profit

722

158

(55)

Cash generated from operating activities

186

146

Capital expenditure

151

128

3 471

2 387

Free cash flow Employees (at year end) 1 2

CHF 186 m, excluding exceptionals (business combination) CHF 145 m, excluding exceptionals

REVENUE

More on p. 48 ff.

(in CHF million) 5 year CAGR: 2% (5% in I.c.)

REVENUE (ORGANIC)

GROUP

EUROPE, MIDDLE EAST & AFRICA

ASIA/PACIFIC

NORTH AMERICA

LATIN AMERICA

+6% +8%

800

600

27% 400

200 0 2011

2012

  Reported revenue

2013

2014

2015

 Currency effect (cumulative, indexed 2005)

+11% More on p. 48 ff.

15%

1000

+19%

REVENUES BY REGION ¢ Europe, Middle East & Africa ¢ North America ¢ Asia/Pacific ¢ Latin America

1200

+9%

11% 47%

Operational performance

OPERATING AND NET PROFIT

More on p. 48 ff.

(in CHF million)

GROSS MARGIN (EXCL. EXCEPTIONALS)

79%

180 160 140

Volume expansion, cost control & capacity optimization offset currency impact

120 100

EBIT MARGIN (EXCL. EXCEPTIONALS)

23%

80 60 40 20

Operational leverage & accretive income from Neodent drive EBIT

0 2011

2012

  Operating profit

2013

2014

2015

 Exceptionals and one-time effects

  Net profit

PROFITABILITY

More on p. 48 ff.

Returns on assets, equity and capital employed in %

NET PROFIT MARGIN (EXCL. EXCEPTIONALS)

18%

90 80 70

Bottom-line margin matches underlying 2014 level

60 50

EQUITY RATIO

40 30 20 10

58%

Solidly financed and able to pursue further investment/acquisition opportunities

0 2011

2012

2013

  Return on assets (ROA)   Return on equity (ROE)   Return on capital employed (ROCE)

2014

2015

Operational performance

CASH FLOW AND INVESTMENTS

More on p. 153 f.

(in %)

TOTAL SHAREHOLDER RETURN 50 40 30

23%

CHF 58 (pre-tax) Outperformed index for 3rd consecutive year; 3-year total shareholder return = 43%

20 10 0 -10 -20 -30 2011   Straumann

2012

2013

 SMIM Total Return Index

2014

2015

Letter to shareholdersâ&#x20AC;&#x201A;

Extraordinary performers…

focus

MARCEL DOSER Internal Sales

Letter to shareholders

Letter to shareholdersâ&#x20AC;&#x201A;

Letter to shareholders

Marco Gadola (Chief Executive Officer) and Gilbert Achermann (Chairman of the Board)

DEAR SHAREHOLDER, No year is ordinary; 2015 was more extraordinary than usual. Thanks to strong growth across our business, we increased our market share and strengthened our leadership position in the global tooth replacement market. In addition to driving our premium business, we became a leading contender in the fast-growing value segment, largely due to the full acquisition of the Brazilian implant company Neodent in April. Despite the setbacks caused by the sudden appreciation of the Swiss franc in January, we exceeded our profitability targets, turning the challenge into an opportunity to focus, increase productivity, improve supply contracts and reduce our exposure without cutting jobs or compromising growth initiatives. Our global footprint expanded as we secured a more direct access to China and established subsidiaries in Russia and Colombia. We brought more new

products and solutions to market than in any previous year. In addition to fully replenishing our development pipeline, we extended our technology platform, investing in partners and collaborations to provide cutting edge solutions and to access new segments. But the bottom line is this: in 2015, we helped to create smiles and restore confidence in more than one-and-a-half million patients around the world. These achievements are reflected in a marked improvement in our share price and are due to the ingenuity, commitment and hard work of our staff, who have been exemplary in contributing to the cultural transformation that is a key to sustaining high performance in the future.

FINANCIAL PERFORMANCE REVENUE AND PROFITABILITY EXCEED OUR EXPECTATIONS AGAIN Lifted by new products and improved sales execution, revenue increased across all our businesses and

Letter to shareholders

regions, driving organic1 growth up from 6% to 9% and lifting revenue from CHF 710 million in 2014 to CHF 799 million in 2015, of which CHF 63 million was contributed by Neodent. The acquisition of the latter prompted us to report Latin America as a separate region and to reallocate the other countries in our former ‘Rest of the World’ region to Europe, Middle East & Africa (EMEA). Europe built on the recovery achieved in 2014 and lifted growth in EMEA to 6%. The region contributed almost half our revenue and nearly a third of our growth. Asia/Pacific is considerably smaller (15% of Group revenue) but generated 30% of growth, as revenue climbed 19%, driven mainly by China and Japan. Latin America expanded 11%, as Neodent and Straumann both grew strongly despite the economic turbulence. North America kept momentum and continued to grow robustly above the market at 8%. The decision by the Swiss National Bank in January 2015 to stop supporting the Euro exchange rate at CHF 1.20 caused the Swiss franc to soar abruptly against all currencies in which we do business. We responded rapidly with measures to reduce our Swiss cost base, without compromising our ability to innovate and grow the business and without cutting jobs. Fortunately the exchange rates have subsequently picked up but currency headwind still reduced our full-year revenue by CHF 37 million and our operating profit by CHF 22 million. We were able to offset this thanks to increased sales momentum, continued cost discipline, and accretive income from Neodent. As a result, our underlying EBIT margin improved from 21% to 23% and met the target we set at the beginning of the year of more than 20%. Adjusted for exceptional, non-cash charges related to the consolidation of Neodent, our net profit reached CHF 145 million, bringing the respective margin to 18% and pre-exceptional basic earnings per share to CHF 9.19 (underlying CHF 8.42 in 2014). FLEXIBILITY TO INVEST IN GROWTH OPPORTUNITIES

We continued to generate a good level of cash, as free cash flow rose 18% to CHF 151 million, lifting the margin to 19%. With our strong free-cash-flow generation, an equity ratio of 58% and a net cash

position of CHF 117 million, the company is solidly financed, and we have the capability to pursue further strategic investments and acquisitions if they should arise. The fundamental performance and our strategic progress were reflected in a 22% increase in the share price (p. 153 f.) in 2015, making Straumann the eighth-best performing stock in the SMIM index and fourth best over the past three years, with our shares yielding a total shareholder return of 43%. The Board of Directors will propose an increase in the ordinary dividend to the shareholders for approval at the Annual General Meeting on 8 April 2016. Despite challenging times, Straumann has maintained its dividend at CHF 3.75 per share since 2008. Based on the results and positive developments in 2015, the Board proposes a dividend of CHF 4.00 per share, payable on 14 April 2016.

STRATEGY IMPLEMENTATION Our strategy centers on three key priorities, which also provided our strategic focus in 2015 as we pursued our goal of being the global provider of choice in tooth replacement: –– Drive a high-performance culture and organization –– Target unexploited growth markets –– Become a total solution provider in tooth replacement.

EXECUTING STRATEGY – A MATTER OF CULTURE Culture is the way to get things done in an organization and is the driver of sustainable results. Since embarking on our cultural journey in 2014, we have taken a global inventory of our current culture and determined our ideal culture, which fosters constructive behaviour, collaborative leadership and high performance. At the heart of our cultural change process is the player-learner mind-set, which drives the core behaviours (see p. 85 ff.) needed to attain the high-performance culture we desire. In addition to defining them, we also condensed our vision statement to provide focus and inspiration (see p. 19 f.). To drive change, the strategic management and selected staff across disciplines took part in an international

Letter to shareholders

program of workshops and training modules. These activities and our invigorated Straumann Academy significantly increased investments in staff training and development. Although transformation takes time, progress was already evident in 2015 and was confirmed in internal surveys and external specialist assessments (p. 85 ff. ). Our strong financial results are the best evidence of our growing high performance culture, and there are many other examples: the agility of our response to the currency shock, execution of aligned strategic priorities (p. 22 ff.), new collaborations and partnerships (p. 22 ff.), developing people (p. 88), the speed with which we have integrated Neodent, and strong perception among customers.

TARGETING UNEXPLOITED GROWTH OPPORTUNITIES INVESTING IN UNDERPENETRATED MARKETS AND SEGMENTS

With regard to the strategic goal of targeting unexploited growth markets, China continues to be exciting. Our key priorities there have been to address the fast-growing private practice sector more effectively and to broaden our geographic reach. In 2015, we completed building consultative sales, training and education teams as well as a network of 20 independent distributors across the nation. The world’s largest market for tooth replacement by revenue is the US but it is still comparatively underpenetrated (p. 41), which is why we have invested over-proportionally there in recent years. This strategy has made the region a key growth generator for Straumann. By 2020, nearly 40 million adults in the US will be in need of one or two complete dentures.2 The ClearChoice chain of dental centers is the country’s leading provider of full-arch dental restorations and performs more implant procedures than any other network in the country. Early in 2015, we replaced our main competitor as the preferred supplier of ClearChoice and thus gained a foothold in the dental-chain segment. Building on this, we have entered supply agreements with two other chains in Europe through our Instradent business platform). On the other hand, our plans to address the general dentist segment in the US in collaboration with

Patterson Dental were less successful. We discontinued our collaboration and began working separately on a novel ‘balanced’ education approach tailored to general dentists’ needs and combining online learning with hands-on experience and mentoring – which will benefit both customers and patients. In Russia, the third major underpenetrated market we focused on in 2015, we established our own subsidiary and were able to incorporate our local distributor. This gives us a firm basis for investment to build the business. Across the world we opened subsidiaries in Argentina and Colombia, which, together with Mexico, will act as hubs serving the surrounding markets with both Straumann and Neodent solutions.

AMONG THE TOP 5 IN THE FAST-GROWING VALUE SEGMENT The attractiveness of the implant business and the constrained economic environment have led to the growth of local value players, who offer implants and prosthetics at lower prices. Many are copycats. Few offer the high level of service, integrated digital workflow, support, innovation and long-term assurance. that are characteristic for Straumann. The premium segment remains our key focus and we are determined to extend our lead in it. Nevertheless, the value segment is growing faster and offers significant opportunities. Our strategy is to build a portfolio of value companies with growing footprints in key markets, with the goal of achieving global leadership in the segment. Our approach has been through partial ownership, allowing the companies to maintain their own character, flexibility and dynamism (see p. 23 f.). We then have the option of increasing or decreasing our investment, depending on the business development. NEODENT

In the case of Neodent, we decided to complete the full acquisition in 2015, investing CHF 225 million for the remaining 51%. This is Straumann’s largest acquisition to date and it significantly increases our size, spread, market-share and growth opportunities. We have gained 900 new colleagues and now employ more people in Brazil than in any other country.

Letter to shareholders

We have jumped into the top tier of the value segment without jeopardizing our premium business. Neodent complements our range and helps to increase business with dental practices and chains that use multiple systems to offer a range of prices and to enter segments which we have not been able to address with the Straumann portfolio. INSTRADENT – BRINGING AFFORDABLE HIGH QUALITY IMPLANT OPTIONS TO PATIENTS AROUND THE WORLD

Our intention is not to grow through acquisitions alone but also by driving the international expansion of the value brands in our portfolio and offering them as part of a full solution. This is the mission of our Instradent business platform (see p. 23 f.), which we strengthened considerably with an experienced leadership team. In Europe, we established Instradent subsidiaries in the Czech Republic and the UK in preparation to compete in the respective value segments, and we entered a joint venture with the aim of providing attractively priced implants in Turkey. In Asia, we increased our investment in Megagen (South Korea) and acquired 49% of T-Plus, an established manufacturer of attractively-priced implants in Taiwan, which is one of the region’s largest implant markets. Apart from this, we took steps to address the fast-growing value segment in China. In addition to unlocking markets where we have not been able to compete on price, Instradent is enabling us to provide reliable inexpensive high-quality options for patients around the world who would otherwise be unable to afford implant treatment.

A TOTAL SOLUTION PROVIDER The dental industry continued to consolidate in 2015, leaving Straumann as the only independent top-tier company focused on tooth replacement. This presents both challenges and opportunities for us: while we now compete against large conglomerates that cover the entire spectrum of dental products and services, we have the advantages of agility and focus. Furthermore, we have the flexibility and resources to make strategic acquisitions and are a preferred partner. Our strategy to compete in this environment is to be a total solution provider in tooth replacement

(see p. 25) by offering conventional, semi-digital and fully-digital solutions for all major indications to dentists, and a comprehensive portfolio for implantborne solutions to dental laboratories. One example of a total solution rolled out in 2015 is Pro Arch (p. 30) for complete fixed tooth-replacement solutions that function immediately – cutting treatment sessions and minimizing disruption. It includes all the components and digital workflow solutions from treatment planning and guided surgery to prosthetic design and manufacture. In addition, we are able to offer our customers a complete range of biomaterials through our partnership with botiss. SHORTENING TIME TO TEETH

Our new Bone Level Tapered (BLT) implant (see p. 28) is an important part of this solution and was a key growth driver in 2015. It enables us to compete in the tapered/conical implant segment, which makes up 60% of the global implant market. Tapered implants provide good immediate stability, making them popular for accelerated procedures, shortening time to teeth. In March, we began rolling the product out in North America, EMEA and parts of Asia. By year-end every fifth Straumann implant sold was a BLT. MORE COMPETITIVE PROSTHETIC SOLUTIONS

While implants provide the basis of modern tooth replacement systems, the ‘bite’ comes with prosthetics. To offer cost-effective and comprehensive solutions to our dental lab customers, we introduced a number of products and services, including an array of cost-efficient abutments, innovative ceramic materials, new CADCAM scanners, and increased connectivity to our CARES system for labs using scanners made by other companies (p. 30 f.). Our open CADCAM system and Scan & Shape Service now enable almost any dental lab to order custom prosthetics from Straumann. A GOLD STANDARD COMPLEMENTED BY AN UNPARALLELED RANGE OF BIOMATERIALS

2015 marked the 20th anniversary of Emdogain, our unique cornerstone product for regenerating tissues around the tooth. Over the years Emdogain has helped to restore the confidence of countless patients who would have lost teeth because of periodontitis. It still is the gold standard in periodontal

Letter to shareholders

tissue regeneration and one of the most extensively studied dental products. Recent findings have inspired further development, and the most exciting chapter of its history may be written in the future. Emdogain complements the broad range of biomaterials from our partner botiss, which we continue to roll out and which give us an unparalleled portfolio of regenerative solutions. NEW TECHNOLOGY PARTNERS

To expand our solutions, we added new partners to the common technology platform that serves both our premium and Instradent businesses (see p. 21). We acquired a 44% stake in Valoc (see p. 24 f.), a Swiss company specialized in innovative systems for securing over-dentures to implants, and we began a collaboration with the Austro-German company Amann Girrbach to develop a state-of-the-art in-lab milling machine for our CARES CADCAM system, which we piloted in preparation for launch in 2016. In June we increased our stake in Dental Wings Inc. to 55% with an option for a stepped increase to full ownership, which secures our access to leading-edge technology. Dental Wings is a leading provider of digital technologies, including dental scanning, implant planning, and the design and manufacture of prosthetics. Its exciting launch pipeline includes a new intraoral scanner and a milling machine that uses laser technology to mill ceramic prosthetic crowns – either in the lab or chairside in the dental practice.

A FUTURE OF ENHANCED CARE Our passion for innovation prompted further investment in research and development. Although we launched a record number of new products, we more than replenished our pipeline (see p. 37) with customer-driven projects and new leads that come from around the world through our web-based innovation platform. Rigorous scientific testing and clinical documentation continue to be engrained in the Straumann philosophy. At year end more than 85 studies were completed – all to provide customers and patients with the reliability, quality and confidence that are Straumann’s trademark. Together with our longstanding academic partner the ITI (see p. 84), we continued to invest in training and

education to expand the pool of dentists offering implant procedures, to enhance the standard of care, and to ensure long-lasting satisfaction. These aims are also reflected in initiatives like our Young Professionals Program (see p. 82) and Peer-to-Peer mentoring/training program (see p. 33), which were both expanded in 2015. We are committed to continuing our focus on sustainable development and value creation. This includes running our operations as efficiently as possible to achieve financial, material and energy savings. It also encompasses our charitable support for various dental health initiatives. Our efforts in 2015 won us new business, set us on course for sustained growth, and inspired shareholder confidence.

LOOKING FORWARD Continuing consolidation in our industry raises the question of whether the Straumann Group will have the critical mass to retain its leadership position in the field. Based on our good performance, strong global brand and broad portfolio of partnerships, we are confident that we will. We continue to evaluate new opportunities for potential acquisitions and partnerships. The steps we have taken and our strategic focus will enable us to succeed in our fastchanging environment, bringing us closer to our vision of being the partner of choice in tooth replacement. We are well positioned to further tap the potential of highly promising markets like China and North America, and expect to benefit from the continued improvement in most European markets and Japan. The economic outlook in Brazil remains highly uncertain, but market share gains and our regional expansion projects should help to compensate for this. Overall, we expect the global implant market to grow solidly in 2016. We are confident that we can continue to outpace this with organic revenue growth in the mid-single-digit range, as we roll out BLT, our range of biomaterials, new solutions for labs including the CARES in-lab mill, new materials, scanners and more. Further impetus will come from our entry into new markets in Russia and Latin America and the

Letter to shareholders

geographical expansion of our Instradent business. We foresee further investments in these and other strategic initiatives, while, thanks to the expected promising growth and our operational leverage, we expect to further improve on the 2015 underlying operating profit margin.3 On your behalf, we would like to thank all our extraordinary performers for their hard work, engagement and loyalty to Straumann. In particular, we would like to acknowledge our employees in Switzerland for their commitment in 2015 to help mitigate the severe currency impact. We would like to thank you, our shareholders, for your continued support and confidence in our company. Yours sincerely,

Gilbert Achermann Chairman of the Board of Directors 25 February 2016

Marco Gadola Chief Executive Officer

REFERENCES / FOOTNOTES 1T he term ‘organic’ used throughout this report means excluding the effects of currency fluctuations and acquired/divested business activities. 2 Douglass CW, Shih A, Ostry L. Will there be a need for complete dentures in the United States in 2020? J Prosthet Dent. 2002 Jan;87(1):5-8. 3 EBIT margin before acquisition-related one-time effects of CHF 13 million (H1 2015).

Extraordinary performers… 16

Management commentary

collaborate

FRONT TO BACK

ADRIAN HAUPT Senior Event Manager MARC ZETTLER Head of Dental Lab THOMAS KONRAD Senior Manager Corporate Communications PHILIPP HUETHER SAP Specialist

Management commentaryâ&#x20AC;&#x201A;

Management commentary

Business model & objectives

22 Strategy

36 Innovation

Products & services

40 Markets

Business performance – Group

Business performance – Regions

Business performance – Financials

Risk and sustainability report

Management commentary Business model & objectives

Business model & objectives Vision, strategy and core behaviors STRAUMANN IN BRIEF WHO WE ARE AND WHERE WE COME FROM Headquartered in Basel, Switzerland, the Straumann Group is a global leader in tooth replacement. The company was founded in 1954 as a research institute specialized in alloys. In the 1960s, it became a pioneering force in dental implantology, which had become its sole focus by 1990. In 2003, it expanded into oral tissue regeneration and, four years later, entered the field of CADCAM tooth restoration in order to provide full tooth replacement solutions. Institute Straumann remained a family-owned business until 1998, when it became a public company, traded on the SIX Swiss exchange. Today Straumann develops, manufactures and supplies dental implants, instruments, CADCAM prosthetics and biomaterials for use in tooth replacement and restoration solutions or to prevent tooth loss (see p. 26 ff.). Implant components and instruments are produced in Switzerland, the US, and Brazil (Neodent), while CADCAM prosthetics are milled centrally in Germany, the US, Japan and Brazil. The production facility for Straumann biomaterials is located in Sweden. The Group offers a wide range of services to dental practitioners, clinics and laboratories all over the world. It is recognized as a leading innovator in its field, working in collaboration with leading universities, clinics, and research institutes to further increase the standard of patient care. Through a unique collaboration with its academic partner the International Team for Implantology (ITI), Straumann supports research and offers training and education to dental professionals. The Group currently employs 3471 people worldwide. Its products, solutions and services are available in more than 70 countries through a broad network of distribution subsidiaries and partners (see chart on p. 162 f. for overview of subsidiary and distributor locations). More

OUR BUSINESS Oral tissue regeneratives

CADCAM prosthetics

Implants & abutments, etc.

Regenerative dentistry

Restorative dentistry

Implant dentistry

STRAUMANN OPEN DIGITAL WORKFLOW

Intra-oral scanning

CADCAM

Guided surgery

than 90% of the business is conducted directly through fully-owned subsidiaries.

OUR VISION In 2015, we sharpened and condensed our vision, mission and purpose into a single vision statement: MORE THAN CREATING SMILES, RESTORING CONFIDENCE – WE WANT TO BE THE PARTNER OF CHOICE IN TOOTH REPLACEMENT.

Confidence relates to all our activities; it is built on trust, integrity, respect, communication, transparency, collaboration and delivering what we promise. For our customers, it means peace of mind, because our solutions are predictable and durable. For our employees, confidence means secure, rewarding jobs. For our shareholders, it means sustainable returns from a

Management commentary Business model & objectives

OUR COMPANY HOME

What we want to achieve

How we will achieve it

VISION More than creating smiles, restoring confidence – we want to be the partner of choice for tooth replacement solutions.

STRATEGY

highly ethical business. For the communities in which we operate, confidence means that we care for the world around us as a responsible corporate citizen. For all our stakeholders it means that Straumann is a reliable partner. This was confirmed in 2015, when Forbes Magazine ranked Straumann among the top 50 most trustworthy companies in Western Europe. We want to be the first place that people come to do business, to find genuine solutions, to turn ideas into reality, to learn, master, succeed and improve lives. This is what being the partner of choice means for us. We are committed to being the premium partner of choice in tooth replacement, offering education, innovation, quality, support, expertise, clinically proven long-term success, and peace of mind. At the same time we are making high quality implant solutions more affordable to a broader population through Neodent and our Instradent platform. MAKING VISION A REALITY

The way to a sustainable future is mapped out in our three ‘Strategic Priorities’ (see p. 22 ff.) which form the backbone of our strategy and are constantly monitored and adapted. Making it happen is a matter

CORE BEHAVIORS

of culture and behavior. Thus vision, strategy and behavior form the figurative building of ‘our company home’ (see above). CORE BEHAVIORS BUILT ON LONG-HELD VALUES

Behavior is the key to the culture that we believe will drive and sustain our success in the future. Building on the values that have made Straumann what it is today, we now focus on the following eight core behaviors that apply for all employees in the Straumann Group: –– Focus on customers –– Collaborate –– Take ownership –– Create opportunities –– Build trust –– Engage –– Communicate effectively –– Be agile. MINDSET

Having the right mindset is essential for behavioral and cultural change. We need everyone at Straumann to have a player-learner mindset rather than a victim-knower attitude. Player-learners inspire trust; they are energized and embrace change; they listen, find out, share, collaborate, take risks, find solutions, learn by doing, encourage and

Management commentary Business model & objectives

OUR BUSINESS MODEL STRAUMANN GROUP PREMIUM OFFERING

VALUE OFFERING COMMON TECHNOLOGY PLATFORM

Innovation / R & D

botiss biomaterials

Biodenta

Education

Createch Medical

MegaGen

Documentation

Dental Wings

Medentika

Network

etkon

Neodent

Global reach

Rodo Medical

T-Plus

Quality

Valoc

Zinedent

Service

PRODUCTS & SOLUTIONS

CUSTOMERS

Biomaterials/Implants

Specialists

Prosthetics

General dentists

Labs

Patients

The Straumann Group is a global leader in tooth replacement. Our core premium business is built on the Straumann Dental Implant system supported by CADCAM prosthetics, digital workflows and oral tissue regeneration products, which together make up a comprehensive solution. Innovation (p. 36), research, development, global reach, guaranteed quality, and service excellence are all inherent to the Straumann brand. So too are clinical evidence, high standards of education and a global network. In these areas, we collaborate with leading institutes, universities and the ITI (p. 84). We produce most of our products in house (p. 93) and sell them to dental professionals either directly or through distribution partners. Our customers (p. 81 ff.) are specialists, general dentists, and dental labs, which prepare the prosthetic restorations for the dentists. Patients are addressed by general dentists, who often decide on the type of treatment and system, and specialists. We address the value segment of implant dentistry mainly through the Instradent platform of international brands (p. 23) in which we hold investments. To provide complete solutions, we have entered a number of partnerships/agreements that, together with fully and partially-owned companies, form a shared technology platform that can serve both our premium and Instradent businesses (p. 24).

celebrate. In contrast, victim-knowers feel they have no choice; they are skeptical, defensive, reluctant to change, averse to risk, slow to listen and quick to blame; they think they know better but rarely share knowledge.

SIMPLY DOING MORE

The Straumann tradition of ‘simply doing more’ is an integral part of our brand; it is at the heart of these behaviours, and is the overriding principle for everything we do.

Management commentary Strategy

Strategy Growing through culture and comprehensive solutions At the heart of Straumann’s strategy are three key priorities, which provided the strategic focus in 2015 as we pursued our goal of being the provider of choice in tooth replacement: –– Drive a high-performance culture and organization –– Target unexploited growth markets –– Become a total solution provider in tooth replacement. Each of them translates into a number of clearly defined initiatives and deliverables, which are continuously tracked and adjusted if necessary. They also serve as a basis for individual target-setting and performance assessments. For competitive reasons, details of the various initiatives cannot be disclosed, although most of them are reflected in the major activities, investments, product launches and other achievements featured in this report.

EXECUTING STRATEGY – A MATTER OF CULTURE

To drive cultural change across all levels, we formed a cross-departmental group of champions at headquarters, who meet regularly with the Executive Management team. In addition, a Community of Practice will support the cultural journey as role models and as a communication bridge across the organization. Although cultural transformation takes several years, regular internal surveys at HQ have shown clear signs of progress. This is confirmed by an external specialist, who was commissioned to validate our approach, and through a Silver ‘Investors in People’ Award in the UK, not to mention positive anecdotal observations made by various stakeholders including customers. The most significant evidence of this strategy in action is found in our 2015 operational performance, including our agile, pragmatic and effective reaction to the currency shock, our full innovation pipeline, the execution of our strategic priorities, and our track record in forging partnerships and in building talent.

High performance organizations consistently outperform, continually innovate and steadily improve. They unlock the potential of employees and use resources and energies effectively without waste. They communicate and collaborate as an aligned team with a shared goal. These are the main characteristics of the culture we are striving to build at Straumann. Culture is the way to get things done, and it drives results, which is why cultural change is our first strategic priority.

One key strategic initiative was to gain further access to the Chinese market, which is expected to quadruple in five years. We completed our country organization by building sales, training and education teams, and we appointed a network of 20 independent distributors nationwide.

Having gained a clear picture of our current, and of our ideal culture (see p.85 ff.) in 2014, we identified the mindset and behavioral levers for cultural transformation and implemented a series of workshops and training modules in 11 countries in 2015. These events focused on self-reflection and role-modelling.

In North America, which is also underpenetrated, we continued to invest in marketing and sales initiatives. We entered the dental chain segment as a preferred supplier of the ClearChoice network of clinics. Our strategy to address the general dentist segment through a collaboration with Patterson Dental and Spear Education was less successful. Having gained useful insights into

PURSUING GROWTH OPPORTUNITIES IN UNDERPENETRATED MARKETS AND SEGMENTS

Management commentary Strategy

PORTFOLIO OF INVESTMENTS TO TARGET THE VALUE SEGMENT Company

Specialty

Reach

Key facts

Straumann’s stake

Biodenta (Taiwan, Switzerland)

Offers comprehensive solutions for dentists and dental laboratories.

Sold mainly in emerg- Founded 2007 CHF 7 million convertible ing markets. More than 200 employees bond acquired in 2014. Options to convert to shares over 5 years.

Medentika (Germany)

Offers broad range of implant prosthetics for multiple implant systems. Recently established own implant business.

Products sold directly in Germany and through distributors in Europe and the rest of the world.

Founded 2005 Offers multi-platform prosthetic systems. 34 employees

51% acquired in 2013.

MegaGen (South Korea)

Offers broad range of implant systems, digital solutions, regenerative tools and products to support implant procedures.

Sold mainly in South Korea; distributors in Europe, North America and emerging markets.

Fast-growing dental implant company. Fills the need for a strong partner based in Asia. More than 200 employees.

USD 20 million convertible bond acquired in 2014, extended by USD 10 million in 2015. Option to convert to shares in 2016.

Neodent (Brazil)

Offers full dental implant system Market leader in and service. Brazil. Present in major implant markets through Instradent or distributors.

Founded 1993; nearly 1000 employees

100% (51% purchased in 2015).

T-Plus (Taiwan)

Offers dental implants and related prosthetic components.

Sold mainly in Taiwan. Regulatory approvals in China, Europe & the US.

Founded 2009. Offers 49% acquired in 2015; with opportunity to tap into options to increase to 90% the lower end of the value by 2020. segment and into the Chinese value market. 20 employees

Zinedent (Turkey)

Distributes dental implants and related prosthetic components with a view to potential manufacture.

Implants for Turkey & Joint venture other markets

50%

KEY BRANDS BY CATEGORY AND GEOGRAPHY

Implant systems

Prosthetics for 3rd party implants

Biomaterials

1 In

selected countries

EMEA 1

NAM

LATAM1

APAC1

Implants

Straumann Biodenta Medentika MegaGen Neodent Zinedent

Straumann MegaGen Neodent

Straumann Neodent

Straumann Biodenta MegaGen T-Plus

Prosthetics

Straumann Createch Medentika Neodent Zinedent

Straumann Neodent

Straumann Biodenta MegaGen T-Plus

Abutments

etkon Medentika Zinedent

etkon Medentika

Precision bars/bridges

Createch etkon Straumann botiss

Straumann

Biodenta

Straumann

Management commentary Strategy

TECHNOLOGY PLATFORM OF OWN COMPANIES AND PARTNERS Company

Activities

botiss biomaterials Oral tissue regeneratives (Germany)

Reach

Key facts

Straumann’s stake

International

Europe’s second largest supplier.

Secured loan of CHF 3.6 million; option to obtain up to 30% in 2017

Createch Medical (Spain)

Specializes in high-end CADCAM Sold mainly in Spain, Established 2006; bridges, bars and abutments for Germany and other 30 employees multiple implant systems. markets in Europe.

30% acquired in 2013 with options to increase to 100% by 2019.

Dental Wings (Canada)

Dental prosthetics design (CAD), Distributed by open software and scanners Straumann and leading dental companies in over 45 countries.

Established 2007; >100 employees. Platform to develop lab & chairside hard- & software solutions

55% (30% acquired in 2011; 14% added in 2012; 11% added in 2015)

etkon (Germany)

Centrally milled CADCAM prosthetics.

Established 2000; acquired 2007

Fully-owned

Global through Straumann

Rodo Medical (USA) Prosthetic fixture devices

Start-up company

Established 2009

13% acquired 2014

Valoc (Switzerland) Overdenture attachment systems

Global through Straumann

Established 2011

44% acquired 2015

this segment, we are now working on another approach, which focuses on education.

and we need to gain a leading position to secure our overall leadership.

Russia was the third major underpenetrated market on which we focused. We established our own subsidiary in Moscow and were able to incorporate our local distributor and his team. We can now provide the investment needed to build our business in this attractive market.

Our strategy has been to build a portfolio of value companies with growing footprints in key markets, making them valuable strategic assets for Straumann. Our initial approach is through partial ownership, ensuring entrepreneurial flexibility and enabling the companies to maintain their own character and dynamism (see table above). It also enables us to treat our interest as a ‘strategic’ or an ‘entrepreneurial’ investment, depending on the development of the company and the market.

A LEADING POSITION IN THE FAST-GROWING VALUE SEGMENT The premium segment remains our key focus and we are determined to extend our lead in it – through innovation, documented clinical research, differentiated comprehensive solutions, service excellence, high standards of training/education, a global network, and a (lifetime) guarantee on original products. Our activities and achievements in each of these respects are discussed in subsequent chapters. In recent years, there has been a marked increase in local and regional value players who offer implant and prosthetic products at lower prices. Many are copycats. Few offer the high level of service, support, innovation and long-term assurance that are inherent to the Straumann brand. Nevertheless, the value segment is growing faster than premium and accounts for more than a third of the global implant market. It offers a significant business opportunity

In 2015, we completed the acquisition of Neodent (see p. 60) and became a top-five company in the global value segment. However, our intention is not to grow simply through acquisitions but by driving the international expansion of the brands in our portfolio and offering them as part of a full solution with multiple value propositions. This is why we concentrated early in the year on building an experienced leadership team to run and develop our Instradent business platform. In Europe we established further Instradent entities in the Czech Republic and the UK in preparation for market entries in 2016. We also entered a joint venture in Turkey to manufacture and sell value implants.

Management commentary Strategy

In Latin America, we established distribution hubs in Argentina, Colombia and Mexico to serve surrounding markets with both value and premium lines. In Asia, we acquired a 49% stake in T-Plus, an established producer and supplier of attractively priced implants in Taiwan, which is one of the largest implant markets in the region. We also increased our investment in Megagen (convertible bond) in Korea. We aim to expand our value platform to enter attractive growth markets like Russia, China and elsewhere in Asia. With regard to the portfolio, we launched a CADCAM service for Neodent in Brazil and took an important strategic decision to provide multi-platform prosthetic solutions through our etkon brand. This service will offer attractively-priced, high-quality prosthetics for competitor implant systems. It will launch in 2016 and be sold through the Straumann lab sales force.

A TOTAL SOLUTION PROVIDER Continuing consolidation in our industry presents both challenges and opportunities for Straumann. While we now have to compete with heavy-weight conglomerates that cover the entire dental spectrum, we have the advantages of agility and focus. We also have the capability to make strategic acquisitions ourselves. To compete in this environment our strategy is to be a total solution provider in tooth replacement by offering: –– conventional, semi-digital and fully-digital solutions for all major indications to dentists –– a comprehensive portfolio for implant-borne solutions to dental laboratories. One example of a total solution that we rolled out in 2015 is Pro Arch for treating fully edentulous patients. It combines our new Bone Level Tapered implant range with angulated abutments, bars, bridges, frameworks and full arch bridges. The workflow can be fully supported by our digital solutions – from treatment planning and guided surgery to prosthetic design and manufacture. To offer a comprehensive portfolio for dental labs we launched a large number of products and services in 2015, including: –– a range of simple, cost-efficient Variobase abutments –– pre-milled blanks with original Straumann connections

–– bar and bridge solutions through the convenient CARES Xstream workflow –– innovative ceramic materials –– our CARES 3- and 7series CADCAM scanners –– increased connectivity to our CARES system for scanners made by other companies. In order to fill portfolio gaps and to bring in new technologies we entered several partnerships and agreements, adding to the common technology that serves our premium and Instradent businesses. For instance, we invested in Valoc, a manufacturer of innovative systems for securing over-dentures to implants, and we began a collaboration with Amann Girrbach to offer dental laboratories a state-of-the-art milling machine developed for our CARES CADCAM system. Beyond technology and products, total solutions encompass support, training and education. Two examples of our strategic progress in this respect are the Straumann Young Professionals Program (see p.82) and the Peer-to-Peer mentoring/training program (see p. 33), which were both expanded in 2015.

OUTLOOK Continuing consolidation in our industry raises the question of whether the Straumann Group will have the critical mass to retain its leadership position in the field. Based on our good performance, strong global brand and broad portfolio of partnerships, we are confident that we will. We continue to evaluate new opportunities for potential acquisitions and partnerships. We also continue to watch our changing market and environment carefully and may adapt our strategy accordingly.

Management commentary Products & services

Products & services Solutions are our business

STRAUMANN PRODUCTS CADCAM prosthetics

Emdogain

Sectional overview of Straumann’s products.

Membranes

Bone augmentation materials

Soft Tissue and Bone Level Implants (Roxolid, Titanium, Ceramic)

Restorative components

SLA/SLActive surface

Management commentary Products & services

THE STRAUMANN DENTAL IMPLANT SYSTEM Standard Ti cementable

Standard

Custom ceramic

Standard Ti screw-retained angled

Standard Plus Tapered Effect

Variobase abutment

Angulated abutment

Bone Level

Bone Level Tapered (BLT)

Soft Tissue Level

For more than six decades, Straumann has been innovating, developing, testing and refining products that address patient needs and contribute to their quality of life. We have also been combining products, technologies, procedures and services into solutions that add convenience, save time, reduce cost and add value. Our products and solutions are used by oral surgeons, specialists and general practitioners as well as dental laboratories in procedures that range from saving compromised teeth, to individual tooth restoration right up to complete dental replacement. We strive to broaden treatment options, increase precision and longevity, minimize discomfort, add value and provide security – in line with our vision of ‘more than creating smiles – restoring confidence’.

Designed for maximum flexibility with a minimum number of components, the highly versatile Straumann Dental Implant System covers all indications and preferences – from standard applications to highly esthetic individualized CADCAM solutions.

PURE Ceramic Implant

TOOTH REPLACEMENT The Straumann Dental Implant System covers all tooth replacement indications from single tooth to fully edentulous. It comprises Soft Tissue Level and Bone Level implants (with parallel wall and tapered designs) in a variety of lengths, diameters and materials. It also includes a wide range of standard and individualized prosthetic components, and all the necessary surgical instruments.

HERITAGE AND BENCHMARK: THE STRAUMANN SOFT TISSUE LEVEL IMPLANT Straumann pioneered the Soft Tissue Level implant, which simplifies soft tissue management and prosthetic restoration, saving time, discomfort and cost. Lasting reliability may be its greatest benefit: the Straumann

IMPLANT TREATMENT: SAVING COSTS AND IMPROVING THE QUALITY OF LIFE

Soft Tissue Level SLA implant has been on the market

Published research shows that – compared with traditional treatments – dental implants are generally costsaving or cost-effective for single-tooth replacement. For the replacement of multiple teeth, implants represent a cost-effective option over the long term and lead to better improvements in oral-health-related quality of life and decreased healthcare costs1. The research also shows that patient acceptance, satisfaction, and willingness to pay for dental implants is high, particularly in elderly edentulous patients.

year clinical results2, showing survival and success rates

for almost two decades and is backed by published tenof 99% and 97% respectively, with zero implant fractures. High survival rates after nine years were also reported in a landmark retrospective study3 published in 2014. A follow-up study published in 2016 looking at peri-implantitis (which can lead to implant loss) showed excellent results for Straumann.4

BONE LEVEL IMPLANTS – USER PREFERENCES COVERED In contrast to soft tissue level designs, bone level implants have prosthetic connections that are below the gums, at or close to the crest of the jaw bone. While advantages

Management commentary Products & services

BLT entered its full market release in 2015 and is now available in all our main markets, except China where registration is still pending. Bone Control Design allows optimized crestal bone preservation and soft tissue stability Roxolid is a unique material with excellent mechanical properties Apically tapered implant body design allows underpreparation and supports a high primary stability in soft bone

ROXOLID IMPLANTS – HIGHER STRENGTH AND EXCELLENT OSSEOINTEGRATION CrossFit connection makes handling easier and provides confidence for component positioning

SLActive surface allows fast and predictable osseointegration

Straumann’s new Bone Level Tapered implant fitted with a ceramic CADCAM custom abutment.

are claimed for each design, market research shows that the choice of implant type is driven mainly by user preference. Today, more than a third of the implants we sell are Bone Level.

BONE LEVEL TAPERED IMPLANT (BLT) – SHORTENING TIME TO TEETH Implants with tapered or conical designs make up roughly 60% of the global implant market, and their popularity is expected to increase. One reason for this is that they provide improved immediate stability, which makes them popular for accelerated tooth replacement procedures with minimal disruption for the patient. In addition, tapered designs are suitable for placement in tooth extraction sockets – reducing the need for bone augmentation – and in situations where it is difficult to achieve primary stability, e.g. in low density bone. Our BLT implant is designed for enhanced primary and secondary stability, convenience and a shortened time to teeth. It is suitable for single and multiple tooth replacements and can be used to address the challenging needs of edentulous patients who want fast, reliable and esthetic full dentures that are fixed, rather than removable. We offer a choice of materials and surfaces.

Biocompatibility, resistance to corrosion, and strength have made titanium the most widely-used dental implant material. However, its strength has limitations. Roxolid is a high performance alloy, specifically designed by Straumann to offer higher strength than pure titanium and excellent osseointegration capabilities. Its strength enables us to make smaller diameter implants for narrow spaces and to avoid bone augmentation, thus reducing invasiveness5,6,7 and opening doors to treating patients with insufficient bone. Our full range of implants has been available in Roxolid since 2014 and the majority of customers have upgraded to it from titanium. Roxolid is being studied in one of the largest clinical research programs to be undertaken with a dental implant. In 2015, 3- and 5-year results were published from randomized controlled clinical trials reporting implant survival rates of 100%8 and 98.9%9 respectively.

SLACTIVE – MORE THAN A GOLD STANDARD When Straumann introduced the SLA (sandblasted, largegrit, acid-etched) implant surface in 1997, it became the gold standard, cutting healing times from 12 to 6 weeks and offering improved safety and predictability. As implant dentistry became more common, increasingly difficult cases were treated and practitioners wanted even higher predictability and shorter times to restoration. In 2005, we responded to this with our SLActive surface, which further reduced healing times, resulting in earlier secondary stability and reduced risk of failure.10,11,12 Both SLA and SLActive have been extensively investigated and are among the most documented and clinically validated surfaces.

STRAUMANN PURE CERAMIC IMPLANT – MORE THAN ESTHETIC ADVANTAGES Ceramics offer a distinct esthetic advantage to metals in dental applications and provide a good biocompatible alternative for patients asking for metal-free solutions. Our pure ceramic implant (p. 27) is remarkable in both respects; it is translucent and has an ivory color, just like natural tooth roots, and it has an SLA-like surface to

Management commentary Products & services

Drive CM

Alvim CM

Titamax CM

Facility

Zygomatic Neodent’s system covers a wide range of clinical needs and features a variety of implant designs and sizes – even a 2.9 mm small diameter, as well as a choice of connections.

advance the healing process and promote highly predictable bone integration. Another key feature is its mechanical reliability – achieved through an innovative manufacturing process and testing procedure in which every PURE implant undergoes a 360° strength test – a level of quality checking that is exceptional in the dental implant industry. This reliability is demonstrated in an early study published in 2015, which reported 98% success and survival rates with zero breakages.13 Although the requirement for metal-free alternatives is not a major driver of today’s market, the availability of ceramic implants with similar performance, flexibility and predictability to their metal cousins will change implant dentistry. Straumann PURE is a step in this direction. Germany is the most advanced market for ceramic implants. Launches are now under way in the US and Brazil, which are also very promising markets.

Neodent offers excellent alternatives to products sold by our competitors and appeals to dentists and patients who want high quality, state-of-the-art solutions at an attractive competitive price.

RESTORATIVE SOLUTIONS (PROSTHETICS) The implant provides the foundation, but the bite comes with the prosthetics, which are equally important. We make a broad range of standard and customized abutments which connect the implant to the prosthetic tooth or denture. Recently we added abutments for steepangled implants, which have to withstand very high mechanical forces. During development testing, the abutments were subjected to more than 5000 hours of rigorous hydropulser tests, representing no fewer than 280 million human biting cycles.

NEODENT’S IMPLANT SYSTEM Neodent has specialized in the design, development, and manufacture of dental implants and related prosthetic components for more than 20 years and has sold over eight million implants worldwide. Its success has been achieved through a philosophy of making tested implant solutions more affordable to a broader population. Neodent’s implant system offers a wide range of products designed to address all clinical needs and bone types. It features a variety of implant designs, two connection types (morse taper and external hex) and two surfaces – NeoPoros, the conventional option, and Acqua, a hydrophilic surface designed to enhance success rates and treatment outcomes. The implants are complemented by a broad range of standard abutments.

Our investment in Valoc in 2015 (see p. 25) gives us access to an innovative retention system for attaching removable dentures to implant.

Management commentary Products & services

the acceleration of treatment times, so that patients increasingly expect replacement solutions that function immediately and cause minimal disruption to their daily lives. We cover these requirements.

STRAUMANN PRO ARCH

Straumann Pro Arch – providing immediate function and causing minimal disruption to patients' daily lives.

VARIOBASE BECOMES A FAMILY In recent years, there has been a marked increase in the popularity of simple titanium-bonding-base abutments (TiBases). We responded to this trend in 2013 with our CARES Variobase abutment to offer a cost-effective hybrid solution consisting of a titanium bonding base and a ceramic coping. This complements our range of custom abutments and offers labs the combined benefit of an implant-abutment interface with an original Straumann connection and a variety of esthetic shades. The popularity of this solution prompted several additions in 2015: a design to support larger crowns and a new Variobase for bridge and bar restorations, offering highly flexible and cost-effective solutions for multitooth restorations. We also developed a Variobase for Sirona’s CEREC system, offering a chairside option with an original Straumann connection.

COMPLETE SOLUTIONS FOR EDENTULOUS PATIENTS Until fairly recently, people suffering from the debilitating handicap of severely damaged dentition had little alternative than to have their remaining compromised teeth removed and to wear plastic dentures held in place by suction or adhesive. The functional limitations, and losses of self-confidence and wellbeing associated with unanchored dentures are well known and well documented.14,15,16 The introduction of dental implants to anchor removable dentures has made a tremendous difference both in terms of health and quality of life. While removable prostheses are proven and popular, many patients prefer fixed solutions. Another development is

In 2015, we rolled out Straumann Pro Arch – a comprehensive solution comprising a broad range of implants, abutments, CADCAM frameworks, bars, bridges and other components and educational support that enable clinicians and dental technicians to provide accelerated fixed full-arch tooth replacements. Furthermore, with Straumann CARES, the complete workflow is supported digitally from treatment planning to guided surgery and computer designed prosthetics. This truly is a complete and flexible solution from a single supplier.

DIGITAL DENTISTRY While implant dentistry has always been a key area for innovation, many advances are being made in prosthetics and in digital dentistry. Substitution of standard implant prosthetics with digitally individualized components is an important trend. Customers appreciate the advantages of high-precision CADCAM solutions, since they can offer efficiency gains for clinicians as well as time/cost savings, greater comfort and lasting satisfaction for patients.

RESTORATIVE SOLUTIONS WITH CADCAM CADCAM is used to design and fabricate tooth- and implant-borne prosthetics (onlays, inlays, crowns and bridges) more efficiently than traditional methods. The cornerstones of our system are the software (CARES Visual) for scanning, designing and ordering, and our milling centers in Germany, the US and Japan, which manufacture the prosthetic elements. Our partnership with Dental Wings is the key to the software and scanning technology. The new state-ofthe-art CARES 3- and 7series in-lab scanner was developed by Dental Wings. Thanks to their open software platform (DWOS), users of third-party scanners can connect to our system and produce prosthetics through our validated CARES workflow (covered by our guarantee) or through alternative milling processes.17

Management commentary Products & services

One significant feature added in 2015 was the functionality to produce custom-milled bar options and designs to carry the final restoration.

The five-axis in-lab milling machine developed with Amann Girrbach to operate with our CARES CADCAM system entered a controlled market release at the end of 2015.

CARES X-STREAM FOR BRIDGES AND BARS The X-Stream functionality in CARES Visual enables customers to design abutments and the corresponding prosthetic elements simultaneously from only one scan and one design procedure. Milled for excellent fit and consistent quality in a controlled environment at our etkon facilities, prosthetic parts are delivered together, significantly reducing turnaround time and shipping costs. After the initial launch of CARES X-Stream two years ago, the digital functionality has been developed further and now includes the processing steps for bridges/bars on the new Variobase.

NEW CADCAM MATERIALS FOR CARES RESTORATIONS

selection of materials. We began testing it with customers in the fourth quarter in preparation for launch in 2016. It provides an all-round solution for labs, which is complemented by our high-volume, high-precision centralized milling service, offering a unique range of CADCAM prosthetic solutions.

We offer prosthetics in a range of high performance ceramic materials supplied by third parties. In recent years, we have been developing our own innovative glass ceramic called N!CE. Its key advantages include high translucency and flexural strength, short milling times and easy finishing. It comes in two stages of crystallization. The partially crystallized version is easy to mill and can be stained and glazed, making it attractive to labs. The fully crystallized form requires no firing and can be milled, finished and seated directly, making it an ideal chairside solution. At the end of the year, we obtained the CE mark in Europe and look forward to initial launches in 2016.

Benefitting from our common technology platform, Neodent has also partnered with Dental Wings and launched its own CADCAM service, offering in-lab scanners as well as custom abutments and prosthetics. In Brazil, it has also become the national distributor for Amann Girrbach products and services, including the Ceramill range of in-lab milling equipment, which Neodent began marketing and selling at the beginning of 2016. These additions bring it closer to becoming a full service provider for labs and dentists in Brazil.

BECOMING THE PARTNER OF CHOICE FOR DENTAL LABORATORIES In 2015 we strengthened our efforts to become the partner of choice for dental laboratories. In addition to introducing new Variobases, scanners, and connectivity, we began to offer titanium blanks with pre-fabricated implant connections. The blanks are compatible with a wide range of milling machines and allow labs to fabricate their own customized titanium abutments with original Straumann connections. Another important initiative addressing labs is our collaboration with Amann Girrbach, a leader in CAD/CAM in-house milling solutions. This concerns the development of a five-axis in-lab milling machine to operate with our CARES CADCAM system. The new machine can produce a wide range of prosthetics from a very broad

NEODENT DIGITAL

BIOMATERIALS (REGENERATIVES) A high proportion of implant procedures require guided bone regeneration, which is why it has been a key strategic initiative for us to offer a full range of effective biomaterials. Through our partnership with botiss, we gained 45 new products and are able to offer customers around the world a truly complete portfolio of innovative and scientifically proven regenerative solutions. Their portfolio of clinically proven, high quality solutions includes membranes for guided tissue and bone regeneration, a full range of bovine, allogenic and synthetic bone graft materials, as well as soft-tissue-graft products. We began selling botiss products in initial European markets in October 2014. At the end of 2015 we had launched throughout the region and were working on regulatory approvals elsewhere.

Management commentary Products & services

20 years of Emdogain®. It's just the beginning. Various bone graft materials in the botiss range to support implant procedures.

Emdogain still remains the gold standard in periodontal tissue regeneration.

To meet customer needs in North America, where registrations are still pending, we introduced Straumann Membrane Plus and Membrane Flex (collagen membranes) as well as Straumann Xenograft (bovine bone augmentation material), which are both sold under license.

THE GOLD STANDARD IN PERIODONTAL REGENERATION FOR 20 YEARS

A WIDE COMBINATION OF SOLUTIONS FROM A CONVENIENT ONE-STOP SHOP Straumann

botiss

Bone allografts

Bone xenografts

Synthetic bone grafts Bone blocks

Custom bone blocks

Collagen cones

Fleeces & sponges Membranes

Soft-tissue grafts Biologics 1 Sold under license

Periodontal disease is the most common cause of adult tooth loss18 and is an important health issue. Treatment involves controlling the inflammation and bacteria that cause it and then restoring the tissues that support the tooth. Straumann Emdogain promotes the regeneration of those tissues and thus helps to preserve endangered teeth. In 2015, together with many key opinion leaders and representatives of the dental community, we celebrated the 20th anniversary of Emdogain and the fact that it still remains the gold standard in periodontal tissue regeneration. Backed by almost a thousand peer-reviewed publications and 500 human studies, Emdogain is one of the most extensively investigated products in dentistry. Based on total volumes sold, more than two million patients around the world have been treated with Emdogain.

OUTLOOK (PRODUCTS) Following the busy launch program in 2015, we have a large number of exciting products to roll out globally. We also have a well-stocked development pipeline going forward (p. 37). We will continue to place significant emphasis on channeling customer feedback into enhancing our products, technologies and workflows. Together with our partners we will continue to develop solutions to improve productivity, treatment options and clinical outcomes. In order to provide clinicians with a comprehensive range of treatment options for their patients, we aim to bring meaningful innovations to the market and to make them

Management commentary Products & services

widely available. At the same time, we are working on solutions that help labs to grow their business and improve their efficiency.

SERVICES – A BROAD SPECTRUM To complement our products and solutions, and to support their effective implementation, we offer a broad spectrum of services. For instance, we assist with networking and arrange experienced mentoring, if requested. Service of this kind requires staff with a very high standard of professional knowledge, able to provide the necessary information and instruction on products. Extensive training is therefore an important aspect. We also offer initiatives to help clinicians develop practical skills, such as practice management and business expansion.

ADDING TO CUSTOMER CONVENIENCE AND CONFIDENCE We serve and support customers directly through a highly trained sales team, enabling us to provide a personalized service with a high level of expertise. Each Straumann sales subsidiary operates a call center for customers in need of assistance. Callers are quickly linked to a specialist for product support. We made further improvements to our e-commerce platform in 2015, adding convenience and value for customers. Although most customers still prefer the traditional personal service for ordering, traffic on our e-shop is steadily rising and it accounts for a substantial part of our business.

PEACE OF MIND Straumann implants are covered by a lifetime guarantee (void if our implants are combined with other manufacturers’ components), while our abutments and restorations have a limited guarantee. In 2016, we plan to extend the guarantee on our Roxolid implants in certain countries to include a monetary contribution to the treatment costs in addition to replacing the product if it breaks. We believe that this sets a new benchmark in our industry.

CARES SCAN & SHAPE Scan & Shape is one of several services to broaden the reach and accessibility of our CADCAM franchise. It addresses laboratories that wish to order original Straumann custom abutments but do not have the requisite scanning capabilities. They simply send us a model or wax-up and we do the scanning, design and manufacturing

The ‘Peer-to-peer partnership’ program helps us to win key customers and to attract young professionals through mentoring.

for them. In addition to quality, precision and convenience, they get original parts and our guarantee – without having to invest in scanning equipment or software.

EXPANDING TRAINING, EDUCATION AND COMMUNICATION Long-term success and patient satisfaction also depend on the education and experience of the dental professional. Straumann offers a broad educational program, including classic implant dentistry, tissue regeneration and state-of-the-art digital solutions, covering all proficiency levels and relevant specialties. The program is based on the clinical guidance of the International Team for Implantology with most of the teaching provided by ITI specialists and renowned experts, in collaboration with leading universities. Courses are offered around the world, with the highest concentration in North America and the most rapid increase in China, where Straumann has invested significantly in a consultative sales force as well as a local training and education organization. We expanded the peer-to-peer partnership program that was conceived and successfully piloted in 2014. It helps us to win key customers from competitors and to attract young professionals through mentoring. It extends from personal coaching to surgical activities where highly experienced implantologists share surgical techniques and experience with their peers in the operating room. MORE THAN 100 000 FANS ON SOCIAL MEDIA

Social media is an increasingly important channel for reaching customers and addressing their needs for information. More than 100 000 fans have joined our

Management commentary Products & services

KEY LAUNCHES IN 2015 Product/Solution

Description

Added value/benefit for customer

Bone Level Tapered implant

New generation BLT launched in nearly all key markets

–H igh primary stability, shorter time to teeth –B road range of lengths and diameters –2 materials and 2 surfaces

Single-use instruments

Full range of sterilized drills

–C onvenience and time savings –P atient and practice staff safety

Comprehensive portfolio for tissue and bone regeneration, roll-out in Europe

–E xtensive choice of proven regenerative solutions –A voids use of patient’s own bone/tissue – I nnovative solutions including bone rings, cones, CADCAM bone grafts, tissue graft matrix, etc.

Pro Arch

Complete fixed solution for edentulous patients

– F ast, flexible, reliable solutions – Attractive, natural-looking teeth – I mproved quality of life

etkon & Createch screwretained bars & bridges

High-end prosthetics

– Centralized milling – Very high precision, quality and reliability

Variobase family

Additional Variobase family

– Multi-unit restorations (bridges, bars and over-dentures) – Variobase for CEREC chairside workflow – Unique offering

Pre-milled abutment blanks

Semi-finished titanium abutment blanks with pre-fabricated Straumann connections

– L abs can make own one-piece custom abutments with original connection –S uitable for a wide range of milling machines

3M ESPE Lava Plus zirconia

High performance prosthetic material

–E xcellent esthetics, wide range of shades – Uncompromising strength

CARES 3- & 7series

State-of-the-art in-lab CADCAM scanners

– I mproved scanning performance, ease of use, and robustness

CARES Visual 9.5

New CADCAM software major release

– Further streamlines prosthetic workflow – I ncludes all newly launched CADCAM products – I ncreased functionality

CARES X-Stream

Inclusion of bridge and bar solutions

–U p to full-arch full-contour bridges on new Variobase –S treamlines workflow, saves time and costs –O nly one scan and one design procedure –C overs all prosthetic components

CARES Synergy

Dynamic interface between guided surgery & prosthetic design

–P rosthetically driven implant placement –P rovisional restoration made ahead of surgery – I mmediate tooth replacement

CARES connectivity

For exocad scanners

– Access to CARES & Straumann milling for exocad users

CARES Scan & Shape

Service to design CADCAM prosthetics for labs & clinics

– ClearChoice clinics can use this service for all their prosthetics

Young Professional Pro 2

Program for young dentists in 10 countries

– Support along career path

Patient Pro

Patient information portal

– Supports dentists in patient education, online and social media marketing – I ncrease implant treatment rate – L everage patients as advocates

SURGICAL

BIOMATERIALS

botiss biomaterials

RESTORATIVE

DIGITAL

SUPPORT

Management commentary Products & services

community on Facebook, and our content was accessed more than 260 000 times in 2015. Our campaign to promote the reliability of our implant system by suspending the CEO upside down on four tiny implant abutment connections (pictured on p. 36) was a huge success, generating more than 75 000 video views.19 In the UK, Straumann received two FMC Dental Industry awards for 'Best use of social media' and 'Marketing campaign of the year'. In addition, our customer magazine Starget went digital and became accessible on desktop and mobile devices.20 This is a popular channel for keeping customers up to date on innovation, clinical results, product news, expert opinions and our presence at trade events. Information on our education programs is also featured as well as video tutorials and other multimedia content. STRAUMANN PATIENT PRO – A NEW INFORMATION TOOL

Research tells us that one in two patients consults the internet before, after and sometimes even during consultation with their dentist. Their choice of treatment and the professional who provides it is based on the information found. Straumann Patient Pro is a platform we launched in 2015 to provide dental professionals with digital information for educating patients and promoting their practices. It supports them with materials and tools for the internet and social media as well as for use in their dental practices.

OUTLOOK (SERVICES) We strive to extend service solutions that enhance convenience, leverage efficiency and add value for customers and patients – for instance by helping dentists build their businesses. Education is the key to driving implant dentistry – both in established and new markets. It is also essential for sustaining high treatment standards and success rates. This is why we will continue to be its strong advocate, together with the ITI and dental faculties all over the world. To broaden access to education and information, we will make even greater use of new media channels and platforms.

REFERENCES / FOOTNOTES 1V ogel R, Smith-Palmer J, Valentine W. Evaluating the health economic implications and cost-effectiveness of dental implants: a literature review. Int J Oral Maxillofac Implants 2013;28:343–356. doi: 10.11607/ jomi.2921. 2B user D et al.: 10-year survival and success rates of 511 titanium implants with a sand-blasted and acid-etched surface: a retrospective study in 303 partially edentulous patients. Clin Implant Dent Relat Res 2012;14:839–851. 3D erks J et al.: Effectiveness of implant therapy analyzed in a swedish population: early and late implant loss. J Dent Res 2015; 94(3) 445-515. 4D erks J et al.: Effectiveness of Implant Therapy Analyzed in a Swedish Population: Prevalence of Peri-implantitis: J Dent Res 2016, 95(1) 43–49. 5H ämmerle C. Short implants often provide a completely different strategy for implant placement (Interview) Starget 2014; 1:42-43. 6C ochran D. Evolution of dental implants due to technology innovations. (Presentation) EAO 2013; Dublin. www.straumann.com/en/eao2013. html. Accessed 16 February 2016. 7A l-Nawas B. Is the dogma of using the largest diameter still valid? Straumann Roxolid implants. (Presentation) ITI World Symposium 2014; Geneva. www.straumann.com/en/iti-ws-2014.html. Accessed 16 February 2016. 8 I oannidis A, et al. Titanium-zirconium narrow-diameter versus titanium regular-diameter implants for anterior and premolar single crowns: 3y results of a randomized controlled clinical study. J Clin Periodontol. 2015 Nov;42(11):1060-70. doi: 10.1111/jcpe.12468. 9M üller F, et al. Small-diameter titanium grade IV and titanium-zirconium implants in edentulous mandibles: 5y results from a doubleblind, randomized controlled trial. BMC Oral Health. 2015 Oct 12;15(1) 123. doi: 10.1186/s12903-015-0107-6. 10 B user D, et al. Enhanced bone apposition to a chemically modified SLA titanium sur face. J Dent Res 2004;83:529-533. 11 O ates TW, et al. Enhanced implant stability with a chemically modified SLA surface: a randomized pilot study. Int J Oral Maxillofac Implants 2007;22:755-760. 12 Schätzle M, et al. Stability change of chemically modified sandblasted/acid-etched titanium palatal implants. A randomized controlled clinical trial. Clin Oral Implants Res 2009;20:489-495. doi: 10.1111/j.1600-0501.2008.01694.x. 13 Gahlert M, et al. A prospective clinical study to evaluate the performance of zirconium dioxide dental implants in single tooth gaps. Clin. Oral Impl. Res. 2015 April 1. doi: 10.1111/clr.12598. 14 A wad MA, et al. Overdenture Effectiveness Study Team Consortium. The effect of mandibular 2-implant overdentures on oral healthrelated quality of life: an international multicentre study. Clin Oral Implants Res. 2014 Jan;25(1):46-51. doi: 10.1111/clr.12205. 15 Jabbour Z, et al. Is oral health-related quality of life stable following rehabilitation with mandibular two-implant overdentures? Clin Oral Implants Res. 2012 Oct;23(10):1205-9. doi: 10.1111/j.1600-0501.2011.02289.x. 16 B oven GC, et al. Improving masticatory performance, bite force, nutritional state and patient's satisfaction with implant overdentures: a systematic review of the literature. J Oral Rehabil. 2015 Mar;42(3):22033. doi: 10.1111/joor.12241. 17 Except in the US, where milling has to be performed by a Straumann milling center. 18 N ational Health and Nutrition Examination Survey (NHANES) 1999– 2004. The National Institute of Dental and Craniofacial Research, Bethesda (USA). www.nidcr.nih.gov/DataStatistics/FindDataByTopic/ GumDisease. Accessed 16 February 2016. 19 w ww.straumann.com/original 20 http://starget.straumann.com

Management commentary Innovation

Innovation Focused on customer needs and commercial success

The innovative in-lab milling machine using laser technology developed by Dental Wings attracted great interest at the IDS.

Innovation goes beyond product discovery to commercialization. In 2015, we created and ran a highly successful marketing campaign on the importance of original Straumann prosthetic components, in which the CEO was suspended upside down from just four tiny implant connections.

Straumann’s history is full of successful inventions that have set industry standards, created smiles and restored not only teeth but also confidence for patients worldwide. The company was a pioneering force in implant dentistry and is still a leading innovator in the field. In 2015, we continued to invest in R&D, boosting the number and quality of our pipeline projects.

INNOVATION – DRIVEN BY AND TAILORED FOR CUSTOMERS

Our passion to bring innovation to customers and patients was illustrated in 2015 by the very successful introduction of our Bone Level Tapered (BLT) implant. Its innovative design together with the proven high strength of Roxolid and fast-healing SLActive surface differentiate it as a new generation of conical implant. BLT is also an example of how our innovative creativity extends beyond products to include powerful launch and marketing campaigns.

We want to be the global partner of choice for tooth replacement solutions and the first point of contact for people with new ideas in our field. The Straumann Innovation Board meets once a month to review and prioritize incoming ideas and suggestions from customers, employees and the academic world. For us, innovation goes beyond creating and developing new ideas. We want to make them commercial successes, which means that our innovation process has to be customer- and market-driven.

FROM IDEAS TO COMMERCIAL PRODUCTS/SOLUTIONS To collect as many leads as possible, we rely on our webbased innovation platform, which enables customers, researchers, clinicians, employees and other stakeholders

Management commentaryâ&#x20AC;&#x201A; Innovation

A STOCKED INNOVATION PIPELINE Project

Key benefit target

Introduction/rollout

Advanced implant materials Superior mechanical performance & esthetic properties

2017+

Smaller implants

2017

Less invasive procedures

Hygiene cassette

Simplifies and improves instrument cleaning

2016

Single-use instruments

Complete portfolio of instruments for single use

2017 2016

Straumann Novaloc

Overdenture retention system with improved reliability

Variobase prosthetics

Straumann original solution for implant-borne chairside restorations

2016

Pro Arch

Extended solutions for fixed full-arch restorations

2016

Abutment blanks

Original Straumann connection for in-lab mills

2016

New material (N!CE)

Proprietary glass ceramic for restorations with improved handling

2016

Integrated workflow

Digital workflow support for immediate tooth replacement

2016 2016

Intra-oral scanner

Integrated digital impression system

CARES milling system

Integrated in-house milling options

2016

Emdogain

New indications

2016/2017

Osteogain

Bone enhancement

2018

Highlights from Straumannâ&#x20AC;&#x2122;s development pipeline. Introduction/rollout dates may be subject to positive clinical results and regulatory clearances, and barring unforeseen circumstances.

to submit ideas in a framework that assures confidentiality and respects intellectual property. The review process ensures that we focus on ideas that have a high probability of commercial success and address customer needs, which vary by market and region. In 2015, more than 100 ideas were submitted from various sources; approximately a tenth of them have been followed up as potential leads. Our comprehensive development program focuses on projects that will contribute directly to revenue and profit. Interdisciplinary teams including Marketing and R&D work together to expedite the process and to ensure the validity of the concepts. Although we launched a large number of products in 2015, our pipeline is currently stocked with more projects than in previous years, several of which are highlighted in the table above.

PRECLINICAL AND CLINICAL RESEARCH THE SCIENTIFIC FOUNDATION It is essential that all products destined for patients are appropriately tested for biocompatibility, stability, strength, and to ensure that the properties developed in the laboratory can be reproduced on a commercial scale. Technologies, materials and designs that maintain the necessary characteristics are studied in vivo, which often includes evaluating the surgical technique. Straumann products and technologies are thoroughly evaluated within a defined global clinical study program. This may comprise single- and multi-center studies, as well as investigator-initiated studies. Proposals for the latter are carefully screened and may be supported in various ways. Clinical investigation can further include large post-market surveillance and

Management commentary Innovation

HIGHLIGHTS OF SELECTED KEY PUBLICATIONS ON STRAUMANN'S PRODUCTS IN 2015 Authors

Study Title

Product

Journal

Derks J, Schaller D, Håkansson J, Wennström JL, Tomasi C, Berglundh T

Effectiveness of implant therapy analyzed in a Swedish population: Prevalence of peri-implantitis.

Tissue Level Implants

J Dent Res. 2016 The probability of being diagnosed Jan;95(1):43-9. with peri-implantitis 9y after implant therapy was lowest with Straumann TL SLA implants.

Wallkamm B, Ciocco M, 3y outcomes of Straumann Ettlin D, Syfrig B, Abbott W, BL SLActive dental implants in daily Listrom R, Levin BP, Rosen PS dental practice: a prospective noninterventional study.

Bone Level Quintessence Implant Int. 2015 Jul-Aug; 46(7):591-602.

Conclusion

97.5% survival rate after 3y.

Stavropoulos A, Cochran D, Obrecht M, Pippenger BE, Dard M

Effect of osteotomy preparation Bone Level Advances in Increased primary stability of on osseointegration of immediately Tapered Dental Research bone level tapered implant (BLT) in loaded, tapered dental implants. Implant (accepted). underprepared osteotomies.

Cochran D, Stavropoulos A, Obrecht M, Pippenger BE, Dard M

Bone Level International A comparison of tapered and BLT SLActive showed comparable non-tapered implants in the minipig. Tapered Journal of Oral & clinical and histological outcomes Implant Maxillofacial to BL SLActive. Implants (accepted).

Müller F, Al-Nawas B, Storelli S, Quirynen M, Hicklin S, Castro-Laza J, Bassetti R, Schimmel M; Roxolid Study Group

Small-diameter titanium grade IV and titanium-zirconium implants in edentulous mandibles: 5y results from a double-blind, randomized controlled trial.

Ioannidis A, Gallucci GO, Jung RE, Borzangy S, Hämmerle CH, Benic GI

Titanium-zirconium narrow-diame- Roxolid ter versus titanium regular-diameter implants for anterior and premolar single crowns: 3y results of a randomized controlled clinical study.

J Clin Periodontol. 2015 Oct 6. Epub ahead of print.

100% survival rate after 3y.

Calvo-Guirado JL, López Torres JA, Dard M, Javed F, Pérez-Albacete, Martínez C, Maté Sánchez de Val JE

Evaluation of extra-short 4-mm 4mm implants in mandibular edentulous Implants patients with reduced bone height in comparison with standard implants: 12m results.

Clin Oral Implants Res. 2015 Oct 3. Epub ahead of print.

97.5% survival rate of the 4mm short implants.

Gahlert M, Kniha H, Weingart D, Schild S, Gellrich NC, Bormann KH

A prospective clinical study to evaluate the performance of zirconium dioxide dental implants in single-tooth gaps.

Stramann PURE

Clin Oral 97.6% implant survival Implants Res. rate after 1y. 2015 Apr 1. Epub ahead of print.

Puisys A, Linkevicius T

The influence of mucosal tissue thickening on crestal bone stability around bone level implants.

Mucoderm Clin Oral Implants Res. 2015 Feb;26(2):123-9.

Guimarães GF, de Araújo VC, Nery JC, Peruzzo DC, Soares AB

Microvessel density evaluation of the effect of enamel matrix derivative on soft tissue after implant placement: a preliminary study.

Emdogain

Roxolid

BMC Oral Health. 98.9% survival rate 2015 Oct 12; after 60 months. 15(1):123.

Augmentation of thin soft tissues with Mucoderm during implant placement can reduce crestal bone loss.

Int J Periodontics Emdogain may play a beneficial Restorative role in wound healing in implant Dent. 2015 Sep- therapy. Oct; 35(5):733-8.

Management commentary Innovation

non-interventional studies (NIS), with a range of patients and indications treated in daily practice conditions. Very few implant companies perform clinical studies on this scale. The compelling results provide clear reasons why customers should trust in Straumann products rather than undocumented alternatives.

IMPRESSIVE BODY OF EVIDENCE PUBLISHED IN 2015 In 2015, an impressive body of scientific evidence on Straumann products was published in peer-reviewed journals. There were at least 85 publications, including results from our own research, research funded by the ITI (p. 84) or fully independent research. An overview of selected key studies published in 2015 is shown in the table opposite. More details on these and other relevant publications on our products can be found at http://www.straumann.com/en/home/science Perhaps the most compelling publication came from independent investigators (Derks et al. – see table opposite), without support from Straumann. It was a large retrospective study that evaluated various dental implant systems nine years after placement with regard to periimplantitis, an inflammation that leads to implant loss if not treated. The results revealed differences between implant systems and were favourable for Straumann.

OUTLOOK The driving forces of Straumann’s innovation process are customer needs and commercial success. Rigorous scientific testing provides customers and patients with reliability, quality and peace of mind. With this in mind we will continue to invest significantly in research and development.

New Economy Magazine selected Straumann as the Most Innovative Implant Dentistry Provider in its 2015 Awards, highlighting our strategic marketing and record number of new products.

Management commentary Markets

Markets Increased share of a CHF 7 billion market

THE GLOBAL DENTAL IMPLANT MARKET BY REGION 1

THE GLOBAL DENTAL IMPLANT MARKET BY SHARE OF SALES 1

¢ Europe, Middle East, Africa ¢ North America 20 – 25% ¢ Asia/Pacific ¢ Latin America

¢ Straumann ¢ Danaher ¢ Dentsply ¢ Zimmer Biomet ¢ Henry Schein ¢ Others

5 – 10% 35 – 40%

22%

31%

19% 5% 30 – 35% 11%

12%

Consolidated figures for Straumann (incl. Neodent), Danaher (incl. Nobel Biocare, Implant Direct & Sybron) and Henry Schein (incl. Camlog & BioHorizons)

THE MARKET FOR IMPLANT DENTISTRY The market for implant dentistry comprises dental implants and abutments2 along with supporting tools/instruments, which make up only a small portion. Based on our internal estimates as well as reports by other companies and independent research, we believe that the market grew in the mid-single-digit percent range in 2015 and is valued at approximately CHF 3.2 billion1. Growth was higher in volume than in monetary terms, reflecting strong growth in emerging markets (where average prices are lower), the increased share of value products and modest price deflation in general. The key regional growth drivers were Asia/Pacific and North America. Europe, the world’s largest market, returned to solid growth having suffered from decline in recent years due to economic recession. Latin America grew

modestly – which was slower than in previous years, mainly due to the contracting economy in Brazil, the region’s largest market.

MARKET STRUCTURE The market is divided into three segments: premium, value, and discount. Premium companies are distinguished by their clinical documentation, innovative products and solutions, broad product ranges, training, education and superior customer service. Straumann leads the global premium segment and offers a wide range of implants priced at multiple levels. According to global market research3, dentists choose implants based on quality, ease of use, familiarity, and long-term scientific evidence – areas in which Straumann consistently receives best-in-class ratings. Although price

Management commentary Markets

DENTAL IMPLANT MARKET BY SEGMENT

DENTAL IMPLANT PENETRATION Implants sold per 10 000 population in 2015 1 500

PREMIUM

¢ Europe, Middle East, Africa ¢ North America ¢ Asia/Pacific ¢ Latin America

Premium offering, based on innovative, clinically-proven products and comprehensive services at premium price

250

India

China

Russia

Japan

France

Australia

Canada

Portugal

Sweden

Netherlands

Switzerland

Brazil

Germany

Italy

Straumann competes in the premium and – with its SLA titanium range – the upper value segments. In the value segment, the Group competes through its Instradent platform.

0 Austria

Look-alike products, very limited R&D, training, education, and service

Spain

DISCOUNT

Standard products, often only regional presence, value price

Korea

VALUE

In South Korea, reimbursement was introduced for senior citizens in 2014 and will be extended to a broader age group in 2016/2017. This explains the increased penetration rate.

is not a key driver in the choice of implant brand, it has gained importance, driving faster growth in the value and discount segments. In response to this trend, Straumann has expanded into the non-premium segment by investing in fastgrowing brands like Neodent in 2012/2015, Medentika in 2013, MegaGen in 2014 and T-Plus in 2015. The Group’s strategy is to penetrate this segment through segregated brands, without compromising its premium leadership. Consolidation in recent years has left approximately 60% of the global market in the hands of the four leading multinational manufacturers which make up the premium implant segment. The remainder of the market is highly fragmented and comprises several hundred competitors, most of whom have only a local or regional focus. Some pursue a low price strategy while others offer advanced customer services and education at mid-price points. Based on available market data and industry sources, we believe that the premium players lost approximately 1% of

their collective market share to the non-premium segment in 2015. Successful product launches and marketing initiatives helped Straumann to grow strongly in 2015, outperforming its premium competitors and extending its lead in the overall implant market. Currency fluctuations, in particular the strenghtening of the Swiss franc and the devaluation of the Brazilian real, heavily impacted our market figures which are reported in Swiss francs. This complicates comparison with prior data. Based on the latest available data, the Straumann Group’s share of the global market in 2015 was estimated to be around 22%1.

THE MARKET FOR RESTORATIVE DENTISTRY Tooth restorations (e.g. crowns and bridges) are made increasingly by automated processes rather than by hand. Digitalization now makes it possible to design and make prosthetic elements by CADCAM (Computer-Aided Design; Computer-Aided Manufacturing), saving time and increasing accuracy. Further advances have come through improved high-performance translucent ceramic materials,

Management commentary Markets

THE CROWN AND BRIDGE MARKET

THE BIOMATERIALS MARKET

(In value terms)

(in value terms)

Manual production

75 80%

35-40% CADCAM production

10 15% In-lab milling

5 10% Centralized milling

~ 5%

55-60%

>60%

Chairside milling <5%

In value terms ¢ Tissue regeneration ¢ Membranes ¢ Bone graft materials

¢ Straumann‘s share

In value terms

which reduce working time and offer excellent esthetics and function. The market for CADCAM dentistry comprises prosthetic elements (crowns, inlays, onlays, bridges) and equipment (scanners, milling units etc.). According to the latest data, these products collectively generated global revenues of more than CHF 4 billion in 20154.

CADCAM PROSTHETIC ELEMENTS CADCAM prosthetics can be produced in any of the following sites: –– A dental practice (chairside milling) –– A dental laboratory by a dental technician (in-lab milling), –– An industrial milling center. In 2015, 30% or more4 of all prosthetic elements (toothborne and implant-borne) were produced using CADCAM technology. This is expected to increase as more dental professionals adopt this technology. Straumann CADCAM prosthetics are designed with our CARES Visual software (either by labs or through our CARES Scan & Shape service) and manufactured at our etkon milling centers. Market research5 indicates that general dentists (GPs) usually obtain CADCAM manufactured crowns and bridges from a local lab. About two thirds use models or impressions to order the restorations. In the next few years,

general practitioners anticipate that most CADCAM restorations will continue to be outsourced and that digital impressions will increasingly replace physical models.

CADCAM EQUIPMENT CADCAM equipment can be categorized as: –– Chairside systems, in which scanning, design and milling are all performed in the dental practice –– Full in-lab systems, where scanning, design and milling are performed by the lab –– Central milling, where in-lab scanners are connected to an offsite milling center. According to our estimates, more than two thirds of all CADCAM systems sold are for the latter two categories. In-lab scanning with centralized milling is an attractive solution because it offers laboratories access to the latest technology without investing in expensive, highmaintenance milling equipment. Straumann is active in the in-lab scanner (and software) segment. We also offer a ‘Scan & Shape’ service to labs that do not have the requisite scanning capability. This also provides access to our milling centers. Through our collaboration with Amann Girrbach, we entered the in-lab milling segment at the end of 2015 with the introduction of a 5-axis milling machine to operate with our CARES CADCAM system.

Management commentary Markets

PROPORTION OF ADULTS IN THE US MISSING ONE TOOTH OR MORE (in % by age group; excluding wisdom teeth) 8

20%

33%

40%

18 – 24 years

25 – 34 years

35 – 44 years

59%

45 – 54 years

Lack of reliable market data makes it difficult to quantify market shares in restorative dentistry. We estimate that in 2015 our share of the centrally-milled-element segment was less than 5%.

THE MARKET FOR BIOMATERIALS (REGENERATIVE PRODUCTS) The 2015 market for oral tissue regeneration products was estimated to be worth between CHF 400 and 500 million6. As biomaterials are frequently used to support implant procedures, the market exhibited similar growth to the implant and prosthetic market. The biomaterials market can be divided into the following segments –– Bone-graft materials –– Membranes –– Tissue-regeneration products. Straumann is active in all three. Through our partnership with botiss, we now offer an unparalleled range of regenerative solutions across all market segments (see p. 31 f.).

55 – 64 years

84%

74%

68%

51%

65 – 74 years

75 + years

Average

substitute market. The synthetic and allograft segments make up 15 – 20% and 35 – 40% of the market, respectively, and the Group has been present in both for more than five years. Allografts are more commonly used in North America, where they account for half of the market.

MEMBRANES Oral membranes are used in up to 60% of bone augmentation procedures9 and act as barriers to prevent the growth of soft tissue in the space required for bone formation. Straumann has competed in this segment since 2010.

SOFT TISSUE REGENERATION Between 10 and 15% of the general population in developed countries suffer from severe periodontitis10, the most common cause of tooth loss. Straumann Emdogain is used to regenerate tissues that anchor the tooth when they have been damaged by periodontal disease. Straumann leads this segment and our share is more than two-thirds of the global market.

BONE GRAFT MATERIALS It is currently estimated that up to one in four implants requires bone augmentation/graft procedures7. Four types of bone graft material are commonly used: –– Autografts (patient’s own bone) –– Allografts (human donor bone, e.g. Straumann Allograft, botiss maxgraft) –– Xenografts (bone sourced from animals, e.g. Straumann Xenograft, botiss cerabone) –– Synthetic bone (e.g. Straumann BoneCeramic). In 2014, Straumann entered the xenograft segment, which accounts for 45 – 50% of the bone graft

OUTLOOK FUNDAMENTAL DRIVERS In the absence of reimbursement, our markets – especially the premium segment – are subject to the economic environment. A continuation of the economic recovery in Europe should drive further positive developments in that market in the near future. North America and Asia Pacific are expected to be the biggest growth contributors in the coming years. In contrast, Latin America is expected to be muted in 2016 and improvement will depend on a pick-up in the Brazilian economy.

Management commentary Markets

TOOTH LOSS AND TREATMENT (USA)

ADULT POPULATION

PEOPLE AFFECTED BY TOOTH LOSS (45 – 55%)

ANNUAL TOOTH LOSS CASES SEEKING TREATMENT (5 – 10%)

PEOPLE ACTUALLY TREATED (45 – 55%)

IMPLANT TREATMENT (15 – 20%)

CONVENTIONAL TREATMENT (80 – 85%)

The population in the US is aging, resulting in more patients with tooth loss. Patients who have been treated are likely to require maintenance work (probably more so with conventional treatment). Most people lose more than one tooth in life and thus re-enter the treatment path.

The unfavorable economic environment in recent years has offered an opportunity for non-premium manufacturers to gain market share. It is likely that momentum in the non-premium segment will continue, endorsing our strategy to expand globally in the value segment.

the purchasing power of seniors in developed countries is growing12. There is also significant growth potential in markets like China, where incomes are increasing and implant rates are low.

We expect the improvement seen in the premium segment over the past three years to continue in 2016. Based on demographics, statistics for tooth loss, and the increasing substitution with implants, the overall market has the potential to achieve high-single digit growth in the mid-to-long term.

Prevalence of tooth loss is defined as the proportion of a population currently suffering from the condition, which is an indicator of the potential for implant dentistry. A study conducted in 2012 in the US8 illustrates how significant that potential is. It revealed that: –– 50 – 60% of the adult population had lost at least one tooth in or prior to 2012 –– Of those, 45% were fully treated –– Of the untreated portion, 31% or approximately 20 million US adults were planning to receive treatment in the next three years –– More than a million people needed a replacement for an existing restoration (e.g. a tooth-borne bridge).

PREVALENCE OF TOOTH LOSS

DEMOGRAPHIC TRENDS Although caries prophylaxis has reduced tooth loss, in the developed world aging and affluence drive implant business growth. Tooth loss is a function of age8 and today, more than 18% of the US population is over the age of 60. This will rise to 22% by 202011. Furthermore,

Management commentary Markets

SUBSTITUTION OF CONVENTIONAL CROWNS AND BRIDGES As the penetration of dental implants is still very low (see chart on p. 41), the substitution of conventional tooth replacement treatment (tooth-borne bridges) is the most important growth driver for implant dentistry because: –– Only 15 – 20% of adults treated for tooth loss receive implants8 –– Implants are increasingly regarded as the state-ofthe-art treatment –– Competence in implant techniques is growing among dental professionals, especially general dentists –– Market studies foresee increased use of implants in the next 2 – 3 years based on positive responses from general dentists5 –– Training and education activities provided by companies like Straumann successfully convert dentists to implants –– Rising awareness among patients is expected to drive demand for dental implants.

CADCAM DENTISTRY UNCHANGED According to US market research, less than one in five dental laboratories are large-sized13. Most large labs own at least one scanner and one milling unit, and a significant proportion intend to invest in additional CADCAM equipment. Notwithstanding, the CADCAM elements business is the main driver in this market. While small labs are eager to adopt automated workflows, the high cost means that only few have their own CADCAM and milling equipment. We see significant potential in outsourced milling in combination with scanand-design services (e.g. CARES Scan & Shape) for lab customers without scanning capabilities. Advanced high performance materials, such as Zerion HT, will also contribute to growth in CADCAM dentistry.

REFERENCES / FOOTNOTES 1A ccording to 2015 FX rates. Straumann estimates, based on MRG, iData and industry sources; including: Australia, Austria, Belgium, Brazil, Canada, China, Czech Republic, Denmark, France, Germany, Hungary, India, Israel, Italy, Japan, Luxembourg, Mexico, Netherlands, Poland, Romania, Russia, South Korea, Spain, Sweden, Switzerland, Taiwan, Turkey, UK and US. 2 See Glossary. 3 MRG Perception Pulse, 2012; in Canada, China, France, Germany, Italy, Japan, Netherlands, South Korea, Spain, Sweden, Switzerland, UK and US. 4 According to 2015 FX rates. Straumann estimates, based on MRG, iData, Industry Sources and Straumann proprietary study in 2012 conducted by KeyStone Research; including: France, Germany, Italy, Japan, UK and US. CADCAM elements include crowns and bridges only. 5 Exevia, 2014, based on market research data in Germany, Italy, Spain and the US. 6 According to 2015 FX rates. Straumann estimates based on MRG and iData; including: Australia, France, Germany, Italy, Japan, South Korea, Spain, Sweden, Switzerland, UK and US. 7 Straumann estimates based on MRG and iData. 8 Straumann proprietary study based on 5000 US respondents, conducted by AFG Research in 2012. 9 iConsult, 2014, based on market research data in Germany and the US. 10 E rik Petersen and Hiroshi Ogawa; Strengthening the prevention of periodontal disease: the WHO approach, J. Periodontol 2005;76:2187-2193. 11 U S Census Bureau, National Population Projections, 2008. 12 US Census Bureau, Population Division, 2012. 13 The Key Group and Straumann estimates, based on US research data, 2015.

Extraordinary performers… 46

Management commentary 2014 Business performance – Group

take ownership

GAEL MISEREZ PC Support

Management commentaryâ&#x20AC;&#x201A; 2014 Business performance â&#x20AC;&#x201C; Group

Management commentary 2015 Business performance – Group

2015 Business performance Group NET REVENUE In 2015, the Straumann Group achieved strong organic1 growth of 9%, driven by all business segments and regions. Revenue climbed to CHF 799 million, of which CHF 63 million was contributed by Neodent. Lifted by the acquisition, growth in local currencies amounted to 19%, but was constrained to 12% in Swiss francs, reflecting the appreciation of the Swiss franc – mainly against the Euro and the Brazilian real. The performance was driven by sustained recovery in Europe, strong growth in Asia/Pacific and Latin America, and a continued robust performance in North America (see p. 56 f. for regional details). Revenue growth was led by the implant business, driven by strong volume expansion across all regions. Straumann’s high-performance implant material Roxolid was the key driver, with additional impetus from the

Bone Level Tapered (BLT) implant in North America, EMEA and parts of Asia. The Restorative business, including CADCAM prosthetics and digital equipment, posted solid full-year and fourth-quarter growth. Demand was especially strong for simple cost-effective Variobase abutment solutions. The new CARES 7series in-lab scanner was well received and sales of prosthetic elements rose as the base of installed scanners expanded. The CADCAM business also benefitted from increased connectivity, drawing in users of third-party scanners. Revenue from Biomaterials grew vigorously throughout the year, as Straumann continued to roll out the botiss range in Europe and its bone graft and membrane products in North America. Demand for bone regeneration solutions was particularly strong in Q4.

OPERATIONS AND FINANCES Straumann responded quickly to the abrupt appreciation of the Swiss franc in January with strict cost discipline measures. To protect the business and jobs, the staff in Switzerland agreed in February 2015 to new employment contracts with significant bonus-relevant compensation reductions. Thanks to stronger-than-expected revenue growth, efficiency gains and the level of profitability achieved, it has been possible to maintain the staff and to pay a 2015 discretionary bonus, which fully compensates for the voluntary forfeits in the great majority of case. Although the exchange rates improved subsequently, the currency headwind still reduced full-year revenue by CHF 37 million and operating profit by CHF 22 million. The Group was able to offset this, thanks to increased sales momentum and accretive income from Neodent.

REVENUE

(in CHF million) 5 year CAGR: 2% (5% in I.c.)

1200

1000

800

600

400

200 0 2011

2012

  Reported revenue

2013

2014

2015

 Currency effect (cumulative, indexed 2005)

The Group’s initial 49% stake in Neodent was reported as ‘Share of results of associates’ up to the end of February 2015. After consolidation, it contributed to the Group’s financial statements at all levels. The business combination resulted in several non-cash-relevant effects to various

Management commentary 2015 Business performance – Group

KEY PERFORMANCE FIGURES 2015

2014 Reported

Revenue (CHF m)

Excluding exceptionals1

Reported

798.6

Gross profit margin (%)

710.3

77.0

78.6

78.7 24.8

EBITDA margin (%)

26.0

27.6

EBIT margin (%)

21.6

23.3

20.9

9.0

18.1

22.2

Net profit margin (%) Free cash flow margin (%) 1

Excluding one-time effect 2

18.9

18.4

18.1

I n 2015, the term ‘exceptionals’ refers to charges related to the Neodent business combination, which amounted to CHF 77m (CHF 73m after tax), including inventory revaluation expenses of CHF 13m (which affected EBITDA and EBIT) and a CHF 64m net loss below the EBIT line. All the exceptionals are non-cash-relevant and apply to H1 2016. I n 2014, net profit was lifted by a one-time effect of CHF 27 million (or CHF 1.75 per share) related to the capitalization of deferred tax assets in Neodent.

OPERATING AND NET PROFIT

positions in the Group’s income statement. These collectively amounted to CHF 73 million after tax.

(in CHF million)

GROSS PROFIT MARGIN MAINTAINED AT 79% DESPITE ADVERSE CURRENCY IMPACT

180

Excluding an exceptional inventory-adjustment charge of CHF 13 million related to Neodent, pre-exceptional gross profit increased 12% to CHF 628 million. Strong volume expansion, tight cost control and capacity optimization fully compensated for the negative currency impact of 110 basis points and the underlying gross-profit margin remained stable at nearly 79%.

160

PRE-EXCEPTIONAL OPERATING MARGIN CLIMBS TO 23%

The Group succeeded in mitigating the currency impact through various initiatives including hiring and travel restrictions as well as renegotiated supply agreements.

140 120 100 80 60

20 0 2011   Operating profit

Distribution costs, which comprise salesforce and directly-related sales activities, amounted to CHF 173 million. Relative to revenue, distribution costs decreased by two percentage points to 22%. Administrative expenses, which include Marketing, Research & Development, General Management and Support functions, increased to CHF 271 million. As a percentage of revenue, they decreased 40 base points to 34%. Thanks to the improvements in gross-profit and the abovementioned items, earnings before interest, tax,

2012

2013

2014

2015

 Exceptionals and one-time effects

  Net profit

depreciation, amortization (EBITDA) and exceptionals increased by 25% to CHF 221 million, lifting the underlying margin by 280 base points to 28%. After total amortization and depreciation charges of CHF 35 million, operating profit before exceptionals amounted to CHF 186 million and the underlying EBIT margin expanded 240 basis points to 23%.

Management commentary 2015 Business performance – Group

BOTTOM LINE NEGATIVELY AFFECTED BY NEODENT BUSINESS COMBINATION EFFECTS The net financial result was a negative CHF 16 million compared with a negative CHF 7 million in 2014. This is primarily related to foreign-exchange losses subsequent to the sudden appreciation of the Swiss franc, and fair-value adjustments of various financial instruments. Straumann’s share of results from its associate partners (Dental Wings, Medentika, Createch, T-Plus, Valoc, and Neodent up to 28 February), which are accounted for under the equity method, came to a negative CHF 12 million in contrast to a positive CHF 36 million in the comparative period of 2014. The difference is mainly due to the aforementioned Neodent provisions and the fact that the company contributed over 12 months in 2014 but only two in 2015. Furthermore, the 2014 result benefitted from the capitalization of deferred tax assets amounting to CHF 27 million related to the acquisition of the initial 49% of Neodent. Income taxes amounted to CHF 9 million and were CHF 11 million lower than in the prior year. The effective income tax rate remained at 11% as the Group benefitted from a tax refund in Germany and a tax

credit related to carrying forward of tax losses (book value adjustments at the holding level). The normalized tax rate going forward is expected to be approximately 15%. Excluding exceptionals, net profit reached CHF 145 million, bringing the respective margin to 18% and basic earnings per share to CHF 9.19. This compares with an underlying CHF 8.42 in 2014.

FREE CASH FLOW INCREASES 18% Net cash from operating activities increased 27% to CHF 186 million, thanks to the inclusion of Neodent, improvements in profitability, and working capital management. Capital expenditures (CAPEX) increased CHF 16 million reflecting the inclusion of Neodent and additional investments of CHF 8 million in Straumann’s CADCAM milling facilities in the US and Japan. The Group continued to generate a good level of cash, and free cash flow rose CHF 23 million to CHF 151 million lifting the margin to 19%.

FURTHER INVESTMENTS IN VALUE SEGMENT AND TECHNOLOGY PLATFORM Cash used for investing activities amounted to CHF 48 million, including the aforementioned capital expenditures as well as investments totalling CHF 24 million in companies to advance its value strategy and technology platform (see opposite). In 2015, dividends from the Group’s strategic investments in associate companies amounted to CHF 3 million.

CASH FLOW AND INVESTMENTS

(in CHF million)

270 240

The purchase of the remaining 51% stake in Neodent was accounted for as an equity transaction. Including the respective purchase consideration of CHF 225 million as well as the payment of the regular annual dividend in the amount of CHF 59 million, net cash used in financing activities totalled CHF 275 million.

210 180 150 120 90 60 30 0 2011

2012

  Operating cash flow   Capital expenditure

2013

2014

 Acquisitions & participations

2015

Consequently, cash and cash equivalents at year-end amounted to CHF 318 million, down from CHF 459 million at the end of 2014. With an equity ratio of 58% and a net cash position of CHF 117 million, the Group is solidly financed and has the capability to pursue further strategic investments and acquisition opportunities if they should arise.

Management commentary 2015 Business performance – Group

OUTLOOK 2016 (barring unforeseen circumstances) Straumann expects the global implant market to grow solidly in 2016 and is confident that it can continue to outperform by achieving organic growth in the mid-single-digit range. Despite further investments into strategic growth initiatives, the expected revenue growth and operational leverage should lead to further improvements in the underlying operating profit margin2.

SUMMARY OF MAIN INVESTMENTS INVESTMENTS IN HIGH-GROWTH SEGMENTS AND REGIONS Straumann is building a portfolio of value companies with the goal of global leadership in the fast-growing value segment. In addition to the full acquisition of Neodent in Brazil, Straumann invested further in Megagen (S. Korea) and acquired a stake in T-Plus in Taiwan. To address the premium and value segments in various markets we established several subsidiaries and a joint venture. All of the these investments totalled approximately CHF 240 million.

INVESTMENTS IN PRODUCTION To meet demands of increased volume and new products we invested in our manufacturing facilities in various countries. CHF 8 million was used to expand our CADCAM milling facility in the US and to establish a new milling center in Japan, which became operational in 2015.

INVESTMENTS IN R&D To maintain our innovation pipeline and to support our products with documented evidence we invested approximately 5% of net revenue in R&D. Being a value brand, Neodent invests less in clinical trials, documentation etc, than Straumann and will therefore dilute the Group’s overall investment in R&D as a proportion of revenue going forward.

INVESTMENTS IN TECHNOLOGY In pursuit of our strategy to provide total solutions, we invested a further CHF 8 million in our technology platform, increasing our stake in Dental Wings (CADCAM technologies) to 55% and acquiring a 44% stake in Valoc (prosthetic attachment systems).

OTHER INVESTMENTS Our investments in people (training and development) are covered in the Employees section of this report. Information on investments in distribution, including selling activities as well as intangible and tangible assets, are presented in our financial report. REFERENCES / FOOTNOTES 1T he term ‘organic’ means ‘excluding the effects of currency fluctuations and acquired business activities’: as of March 2015, the Neodent business was fully consolidated and led to an acquisition effect in the Latin American region. 2 Comparison base is the 23% EBIT margin before acquisition-related exceptionals.

Management commentary 2015 Business performance – Regions

Business performance Regions The acquisition of Neodent, which was consolidated as of 1 March 2015, prompted us to re-allocate markets from the ‘Rest of the World’ region to ‘Latin America’ (LATAM) and ‘Europe/Middle East/Africa’ (EMEA), offering additional transparency and reflecting the increased importance of Latin America, which now makes up more than a third of our volumes.

All our regions grew well, driven by healthy demand in all our businesses. The sustained recovery in Europe was particularly pleasing in view of the large proportion of our revenues generated there, and the fact that the market is comparatively mature. Results were also pleasing in Latin America, which achieved double-digit organic growth despite the difficult economic conditions in parts of the region. Asia continued to expand dynamically, while North America posted another robust performance. Based on available research, we strengthened our competitive position in each region.

REGIONAL SALES PERFORMANCE BY QUARTER (in CHF million)

Europe, Middle East & Africa Change in CHF % Growth (organic) in %

Total 2015

Total 2014 (reallocated)

98.6

94.4

82.8

99.2

375.0

389.2

-8.4

-3.9

-1.0

-0.5

-3.6

2.2

0.3

8.3

8.5

8.3

6.1

3.2

As a % of Group revenue North America

52.0

57.9

216.9

193.1

53.7

53.4

Change in CHF %

18.1

14.1

9.0

8.9

12.3

6.3

Growth (organic) in %

11.6

9.3

6.1

6.6

8.3

7.8

28.9

31.5

29.0

33.6

122.9

106.7

As a % of Group revenue Asia/Pacific Change in CHF %

30.4

9.2

6.7

17.7

15.2

8.4

Growth (organic) in %

34.5

12.8

13.2

20.0

19.4

14.0

12.0

26.1

23.1

22.6

83.7

21.3

163.1

368.3

303.3

313.6

292.9

12.1

11.7

15.6

1.3

16.8

11.0

21.4

193.2

205.3

186.9

213.3

798.6

710.3

Change in CHF %

7.4

14.5

13.8

14.1

12.4

4.5

Growth (organic) in %

8.2

10.1

7.6

10.3

9.1

6.4

As a % of Group revenue Latin America Change in CHF % Growth (organic) in % As a % of Group revenue TOTAL

Management commentary 2015 Business performance – Regions

FIVE-YEAR REVENUE GROWTH

(in %) 9 8 7 6 5 4 3 2 1 0 -1 -2

2012

2011

Straumann organic revenue growth

2013

2014

2015

Organic growth main competitors (Nobel Biocare, Dentsply, Zimmer Biomet)

REGIONAL SALES PERFORMANCE BY YEAR

(in CHF million)

798.6

800 710.3

83.7

693.6

686.3

32.9

679.9

30.5

31.4

600

100.7

103.9

98.4

500

155.6

173.7

181.7

193.1

216.9

404.4

378.1

368.4

389.2

375.0

2011

2012

2013

2014

2015

700

21.3

106.7

122.9

400

300

200

100

2011–2013  Europe  North America 2014–2015  Europe, Middle East & Africa

 Asia/Pacific

 Rest of the World

 North America

 Asia/Pacific

 Latin America

Management commentary 2015 Business performance – Regions

Europe, Middle East & Africa (EMEA)

Building further on the recovery achieved in 2014, our main European markets lifted revenue growth in the region to 6%. All business segments reported growth, with strong performances by BLT implants, our costeffective and versatile Variobase abutments, and biomaterials for guided bone regeneration. Strong currency headwind due to the marked depreciation of the Euro squeezed revenue in Swiss francs by 10% to CHF 375 million or 47% of the Group total. In addition to the increase in dental procedures – reflecting the general pick-up in the economy – we benefitted from a stream of product launches, most of which were presented at the International Dental Show in March in Cologne. These included BLT and an array of new prosthetic components, as well as innovative CADCAM solutions and biomaterials offered in collaboration with partner companies. Our new 7series in-lab scanner was well received and enabled us to expand our base of installed scanners and sales of prosthetic elements. Demand for biomaterials was strong and contributed to regional growth. By country, Germany was the main growth contributor, with Spain, France, the UK, and Sweden all performing well. Despite stiff competition from local value and discount players, Italy achieved an encouraging turnaround from the negative trend in past years. Volumes expanded in distributor markets, driven by patient demand and public healthcare tenders, but this was offset by unavoidable price reductions for distributors to compensate for the sharp appreciation of the Swiss franc. In Q4, we took a significant strategic step forward in Russia by opening our own subsidiary and incorporating our local distributor. This gives us greater control of the business and enables us to provide the necessary investment to boost our currently modest share of this attractive underpenetrated market.

OUTLOOK In recent years, dental laboratories have invested increasingly in CADCAM equipment to produce their own prosthetics in-house. We took an initial step into the inlab milling segment through a collaboration with Amann Girrbach and initiated the limited market release of our Straumann CARES M Series in-lab mill (p. 31) at the end of the year. We will roll this out in Europe in 2016 as part of a complete solution including scanners, materials and pre-milled abutment blanks. We will expand our Instradent business in 2016 by entering the value segment in the UK. To serve this and our other Instradent subsidiaries in Europe we are investing in a dedicated European logistics and service hub in Germany, sharing facilities with the Straumann country organization to keep costs and overheads low. It will become operational in 2016 and will support further expansion in Europe.

Management commentary 2015 Business performance – Regions

ORGANIC GROWTH

GROWTH IN CHF

CONTRIBUTION TO GROUP

+6% − 4% 47% of total revenue

CONTRIBUTION TO GROWTH

32%

REVENUE

375m

CHF HIGHLIGHTS

– Main European markets build on recovery – All businesses contribute to positive trend – Stiff currency headwind cuts growth in CHF by 10%

CONTRIBUTION COMPARISON  % of Group growth  % of Group revenue

Management commentary 2015 Business performance – Regions

North America

North America is the world’s largest regional market for tooth replacement and still offers significant growth potential due to its comparatively low penetration. Our investments in the region have resulted in organic revenue growth of 8% averaged over the past four years, bringing us closer to regional market leadership. In 2015, we achieved further organic growth of 8%, led by strong implant sales and our expanding biomaterials business. The appreciation of the US dollar lifted growth in Swiss francs to 12%, bringing revenue to CHF 217 million or 27% of the Group. BLT boosted implant sales and enabled us to address the conical implant segment, which makes up 70% of all implants sold in the region. Available in titanium and Roxolid with two different surfaces, it differentiates Straumann from the competition. We also launched our Pro Arch edentulous solution, which includes advanced CADCAM prosthetic frameworks and full-arch screwretained bars/bridges, in conjunction with a training program for experienced dentists. The combination of the aforementioned products sets a new standard in immediate fixed edentulous solutions and, together with our attractively-priced Neodent range, were important factors in securing a ‘preferred supplier’ contract with the ClearChoice network of clinics. ClearChoice performs more implant procedures than any other network in the US, and this is our largest partnership with a dental clinic chain to date. To cater for their requirements and other demand for prosthetics, we expanded capacity at our US CADCAM center in Arlington. Early in 2016, we received regulatory clearance from the FDA for our PURE ceramic implant, which was launched in Europe in 2015. Straumann will be the first premium player to launch this kind of implant in the US, where demand for esthetic solutions is high and

where the number of patients seeking metal-free alternatives is growing.

OUTLOOK By year-end, BLT had already gained a 30% share of our implant sales after only a year on the market. With further potential to be exploited, it will be a key growth driver for the region. BLT will be supported by our ‘Roxolid Lifetime Plus Guarantee’ which will be launched in 2016 and covers part of the treatment costs in addition to product replacement. Together with new 5-year clinical data on Roxolid, this guarantee distinguishes Straumann from the competition. It will support our efforts to drive the use of original abutments on our implants. Guillaume Daniellot was appointed Head of North America at the end of 2015, having successfully steered Straumann through economic recession and back to solid growth in Western Europe. His drive, leadership skills, experience and industry knowledge will help us to capture further growth opportunities in the region.

Management commentary 2015 Business performance – Regions

ORGANIC GROWTH

GROWTH IN CHF

+8% +12%

CONTRIBUTION TO GROUP

27% of total revenue

CONTRIBUTION TO GROWTH

25%

REVENUE

217m

CHF HIGHLIGHTS

– Continued investment leads to share gains – Closer to market leadership – BLT, Roxolid and new biomaterials drive growth

CONTRIBUTION COMPARISON  % of Group growth  % of Group revenue

Management commentary 2015 Business performance – Regions

Asia / Pacific

The majority of the Group’s revenues in Asia/Pacific are generated in China and Japan, which together powered double-digit increases throughout 2015, driving organic growth in the region to 19%. The depreciation of the Yen and other currencies cut growth to 15% in Swiss francs as revenue reached CHF 123 million. Although APAC contributed only 15% of Group revenue, it was the fastest growing region and contributed 30% of our overall growth. We continued to benefit from the dynamic market in China and the successful transition to our new hybrid distribution model which enables us to address the fastgrowing private-practice sector more effectively and broaden our direct access to customers. Although Straumann achieved market leadership through a single distributor in the past, the business has focused on the public hospital segment and we needed a broader approach to address the fast-growing private-practice segment and the rapid geographic expansion. Having established our own subsidiary, we invested further in 2015 by tripling our team, most of whom are in consultative sales, training and marketing. In addition, we created a sales network of more than 20 regional distributors to cover all the provinces. This set-up brings us closer to customers, expands our reach, and will enable us to penetrate emerging segments. In the second largest regional market, Japan, we gained further market-share thanks to the successful roll-out of SLActive and the introduction of our Bone Level Tapered implant. Towards the end of 2015, we gained registration for Roxolid and can now offer customers our unique combination of fast-healing, high-strength Tissue and Bone Level implants. The most penetrated implant market in the world (p. 41), South Korea, expanded in 2015 due to the introduction of reimbursement for edentulous patients age 70 and above. The age limit will be lowered to 65 in 2016, which will further stimulate implant volumes and

penetration. However, as the price cap for reimbursement is low, only the domestic value players stand to benefit, emphasizing the challenges this market poses to foreign companies. Nevertheless, Straumann continued to grow as a highly reputed premium brand and is now the only sizeable non-domestic company left in the Korean market. Our strategic goal of becoming a total solution provider led us to invest in a CADCAM milling center near Tokyo – our first in the region, which went into operation in 2015, offering custom abutments and complex prosthetic frameworks for Pro Arch and other solutions. It is also our first center in the world to offer drill templates produced by 3D-printing technology. Elsewhere in the region, Straumann Australia celebrated its tenth anniversary and we gained further control of our business in Thailand through a new agreement with our agent.

OUTLOOK The addition of our key premium technologies and our CADCAM service offering will help to maintain our momentum and win customers. These and other differentiating solutions will be showcased in May at the ITI congress in Tokyo where some 400 participants are expected. In China, our new organization and distribution model will strengthen our competitive edge. We have taken steps to enter the value segment there and to roll out our Instradent platform in other Asian markets. In addition we are looking forward to making our portfolio of biomaterials more widely available in the region in 2016 and beyond.

Management commentary 2015 Business performance – Regions

ORGANIC GROWTH

GROWTH IN CHF

+19% +15%

CONTRIBUTION TO GROUP

15% of total revenue

CONTRIBUTION TO GROWTH

30%

REVENUE

123m

CHF HIGHLIGHTS

– Dynamic growth in China & Japan – New Chinese organization complete – CADCAM milling center opens

CONTRIBUTION COMPARISON  % of Group growth  % of Group revenue

Management commentary 2015 Business performance – Regions

Latin America

The Latin American dental markets have been constrained by difficult economic conditions, especially in Argentina and Brazil, which together with Mexico is a main market for the Group. In spite of continued economic decline in Brazil and the turbulent environment, both Neodent and Straumann achieved double-digit increases. This and a dynamic performance in Mexico lifted the Group’s organic revenue growth in the region to 11% and enabled us increase our market share. A pronounced depreciation of the Brazilian Real led to a negative currency impact of 21%, bringing reported regional revenue to CHF 84 million or 11% of the Group.

A POWERFUL COMBINATION The full acquisition of Neodent has allowed us to capture synergies and to combine certain back-office operations in Brazil without diluting brands, portfolios and philosophies. For example, we transferred the Straumann country organization to Neodent’s facilities in Curitiba, where we now share back-office functions. We will also benefit from Neodent’s local distribution system as Straumann products will be available through 22 points of distribution in Brazil (including 16 Neodent retail stores), increasing customer proximity and significantly reducing delivery times. In addition, we have worked hard and fast to integrate systems, processes and documentation, without losing focus on the business. Regulatory Affairs is a good example of how we have combined capabilities to increase efficiency and shorten time to market. In the fourth quarter, Straumann’s BLT implant was launched in Brazil and, based on the very positive reception so far, it should make a significant contribution to the Straumann business in the region.

INVESTING IN NEW MARKETS Following the acquisition, we took some important steps to enter new markets in the region with a cost-efficient business model that supports both brands without

diminishing the clear distinction between them. To do this, we adapted our set-up in Mexico and opened subsidiaries in Colombia and Argentina. All three will serve as distribution hubs for Neodent and Straumann in their domestic and surrounding markets.

FORGING PARTNERSHIPS TO OFFER FULL SOLUTIONS In line with the Group’s strategy to provide complete solutions, Neodent signed an agreement to distribute Amann Girrbach’s range of products in Brazil, which covers the full workflow to produce CADCAM prosthetics in dental laboratories. Neodent started to sell the products at the outset of 2016. As a result, we now offer customers in Brazil a unique combination of options including the Neodent/Straumann centralized-milling service, the powerful scanning capabilities of Dental Wings and the convenience of Amann Girrbach’s in-lab milling solutions.

OUTLOOK The business extensions, combined resources, expansion into underpenetrated dental markets and the launch of BLT should all support robust growth in 2016 despite the difficult economic environment in the region, especially the uncertainty in Brazil. At the same time, the reduction of duplication is expected to yield cost synergies in the single-digit million Swissfranc range, which will help to mitigate the effects of high labor, bureaucracy and general inflation.

Management commentary 2015 Business performance – Regions

ORGANIC GROWTH

GROWTH IN CHF

+11% +293%

CONTRIBUTION TO GROUP

11% of total revenue

CONTRIBUTION TO GROWTH

13%

REVENUE

84m

CHF HIGHLIGHTS

– Neodent acquired and integrated – Brazil & Mexico dynamic despite turbulent economy – New hub subsidiaries in Argentia & Colombia

CONTRIBUTION COMPARISON  % of Group growth  % of Group revenue

Management commentaryâ&#x20AC;&#x201A; 2014 Business performance â&#x20AC;&#x201C; Financials

Extraordinary performers…

Management commentary 2014 Business performance – Financials

create opportunities

OLGA LAMUA OLIVAR Global Customer Solution Manager

Business performance Financials 65

Consolidated income statement

Consolidated statement of financial positiony

Consolidated cash flow statement

Five-year overview

Management commentary 2015 Business performance – Financials

Consolidated income statement (The notes referred to in this and subsequent tables are the notes to the consolidated financial statements on pp. F 10 ff.)

(in CHF 1 000)

Revenue

Notes

2015

2014

798 600

710 270

(183 662)

(151 618)

614 938

558 652

Cost of goods sold Gross profit

Other income

2 161

2 236

Distribution costs

(173 439)

(168 459)

Administrative expenses

(271 092)

(244 112)

172 568

148 317

Operating profit

Finance income

44 115

17 016

Finance expense

(60 326)

(24 192)

Loss on consolidation of Neodent

(63 891)

(12 268)

36 281

80 198

177 422

(8 687)

(19 597)

71 511

157 825

70 679

157 825

832

Share of results of associates Profit before income tax

Income tax expense

NET PROFIT Attributable to: Shareholders of the parent company Non-controlling interests

Basic earnings per share attributable to ordinary shareholders of the parent company (in CHF)

4.52

10.15

Diluted earnings per share attributable to ordinary shareholders of the parent company (in CHF)

4.47

10.03

Management commentary 2015 Business performance – Financials

Consolidated statement of financial position

ASSETS (in CHF 1 000)

Notes

31 Dec 2015

31 Dec 2014

Property, plant and equipment

103 841

78 545

Investment properties

1 637

4 001

Intangible assets

246 500

68 987

Investments in associates

48 232

266 589

Financial assets

54 396

48 676

Other receivables Deferred income tax assets

Total non-current assets

2 751

834

43 730

29 948

501 087

497 580

Inventories

76 113

69 193

Trade and other receivables

140 598

128 482

1 059

2 995

Financial assets

Income tax receivables Cash and cash equivalents Total current assets

TOTAL ASSETS

9 142

3 110

318 297

459 421

545 209

663 201

1 046 296

1 160 781

Management commentary 2015 Business performance – Financials

EQUITY AND LIABILITIES (in CHF 1 000)

Notes

Share capital

31 Dec 2015

31 Dec 2014

1 572

1 568

Retained earnings and reserves

603 398

735 268

Total equity attributable to the shareholders of the parent company

604 970

736 836

Straight bond

199 520

199 410

Other liabilities

6 975

6 954

Financial liabilities

618

3 587

Provisions

28 832

29 913

Retirement benefit obligations

44 496

37 492

Deferred income tax liabilities

Total non-current liabilities

1 503

9 353

281 944

286 709

105 264

Trade and other payables

124 173

Financial liabilities

925

1 326

15 572

18 697

Income tax payable Provisions

18 712

11 949

Total current liabilities

159 382

137 236

Total liabilities

441 326

423 945

1 046 296

1 160 781

TOTAL EQUITY AND LIABILITIES

Management commentary 2015 Business performance – Financials

Consolidated cash flow statement

(in CHF 1 000)

Notes

Net profit

2015

2014

71 511

157 825

Adjustments for: Taxes charged

8 687

19 597

Interest and other financial result

3 181

3 425

Foreign exchange result

(259)

1 275

Fair value adjustments

5 356

(397)

Loss on consolidation of Neodent Share of results of associates

63 891

12 268

(36 281)

22 801

Depreciation and amortization of: Property, plant and equipment

5, 23

23 215

Investment properties

6, 23

288

346

Intangible assets

7, 23

9 455

4 738

Impairment of investment properties

6, 23

Change in provisions, retirement benefit obligations and other liabilities Share-based payments expense Gains on disposal of property, plant and equipment

20, 24

2 076

(10 482)

8 264

3 599

4 865

109

218

Working capital adjustments: Change in inventories

(740)

(5 942)

Change in trade and other receivables

6 383

(15 463)

Change in trade and other payables Interest paid Interest received

14 310

4 242

(4 461)

(4 339)

3 373

1 008

Income tax paid

(26 162)

(20 022)

Net cash from operating activities

185 598

146 160

Management commentary 2015 Business performance – Financials

(in CHF 1 000)

Notes

Purchase of financial assets Proceeds from sale of financial assets Purchase of property, plant and equipment Purchase of intangible assets Purchase of investments in associates Deemed acquisition of a subsidiary, net of cash acquired Contingent consideration paid Proceeds from loans Disbursement of loans Dividends received from associates Net proceeds from sale of non-current assets Net cash used in investing activities

Purchase of shares of non-controlling interests Transaction costs paid Dividends paid to the equity holders of the parent

Dividends paid to non-controlling interests Proceeds from finance lease Proceeds from exercise of options Sale of treasury shares Net cash used in financing activities

Exchange rate differences on cash held Net change in cash and cash equivalents

2015

2014

(9 479)

(31 652)

20 834

(32 063)

(16 876)

(3 114)

(1 964)

(14 206)

8 083

(3 153)

(3 961)

3 149

(1 401)

(9 828)

3 388

16 444

700

1 075

(48 096)

(25 928)

(224 532)

(813)

(58 564)

(58 264)

(5 016)

158

13 321

11 533

912

1 582

(274 674)

(44 991)

(3 952)

385

(141 124)

75 626

Cash and cash equivalents at 1 January

459 421

383 795

CASH AND CASH EQUIVALENTS AT 31 DECEMBER

318 297

459 421

Management commentary 2015 Business performance – Financials

Five-year overview

OPERATING PERFORMANCE (in CHF million)

2011

2012

2013

2014

2015

798.6

Restated

Net revenue Growth in % Gross profit Margin in % Operating result before depreciation and amortization (EBITDA)

693.6

686.3

679.9

710.3

(6.0)

(1.1)

(0.9)

4.5

12.4

528.5

531.5

535.9

558.7

614.9

76.2

77.5

78.8

78.7

77.0

157.4

119.5

148.4

176.2

207.6 26.0

Margin in %

22.7

17.4

21.8

24.8

Growth in %

(25.7)

(24.1)

24.3

18.7

17.8

131.9

91.5

122.6

153.1

182.0 22.8

Operating result before amortization (EBITA) Margin in %

19.0

13.3

18.0

21.5

Growth in %

(28.7)

(30.6)

33.9

24.9

18.9

79.9

63.1

115.8

148.3

172.6 21.6

Operating profit (EBIT) Margin in %

11.5

9.2

17.0

20.9

Growth in %

(51.4)

(21.1)

83.6

28.1

16.4

71.0

37.5

101.2

157.8

71.5

Net profit Margin in %

10.2

5.5

14.9

22.2

9.0

Growth in %

(45.9)

(47.1)

169.8

56.0

(54.7)

Basic earnings per share (in CHF)

4.54

2.43

6.55

10.15

4.52

Value added / economic profit

29.7

(7.7)

52.7

113.7

27.1

Change in value added

(58.7)

(37.4)

60.4

59.3

(86.6)

Change in value added in %

(66.4)

(125.9)

785.3

109.2

(76.2)

4.3

(1.1)

7.8

16.0

3.4

Number of employees (year-end)

2 452

2 517

2 217

2 387

3 471

Number of employees (average)

2 415

2 530

2 308

2 302

3 232

287

271

295

309

247

as a % of net revenue

Sales per employee (average) in CHF 1 000

Management commentary 2015 Business performance – Financials

FINANCIAL PERFORMANCE (in CHF million)

2011

2012

2013

2014

2015

Restated

Cash and cash equivalents Net working capital (net of cash) as a % of revenue Inventories Days of supplies Trade receivables Days of sales outstanding Balance sheet total Return on assets in % (ROA)

140.5

383.8

459.4

318.3

68.8

63.0

57.3

6 4.9

63.3

9.9

9.2

8.4

9.1

7.9

67.0

63.6

62.3

69.2

76.1

123

152

161

149

155

94.1

91.8

93.2

106.8

125.2

4 8

811.3

776.9

1 019.7

1 160.8

1 046.3

8.5

4.7

11.4

14.5

6.8

671.1

601.7

631.4

736.8

605.0

Equity ratio in %

82.7

77.4

61.9

63.5

57.8

Return on equity in % (ROE)

10.4

5.9

16.4

23.1

11.8

273.1

187.7

162.3

142.9

341.8

26.2

27.4

66.2

97.2

50.5

140.2

114.6

151.5

146.2

185.6

Equity

Capital employed Return on capital employed in % (ROCE) Cash generated from operating activities as a % of revenue Investments as a % of revenue thereof capital expenditures

20.2

16.7

22.3

20.6

23.2

(25.9)

(286.1)

(50.6)

(22.8)

(44.5)

3.7

41.7

7.4

3.2

5.6

(19.4)

(12.6)

(18.8)

(35.2)

thereof business combinations related

(0.4)

(0.7)

(4.0)

4.9

thereof investments in associates

(6.1)

(266.0)

(38.0)

(14.2)

121.1

95.2

139.2

128.4

151.1

17.5

13.9

20.5

18.1

18.9

58.0

57.9

58.2

58.6

62.9 1

Dividend per share (in CHF)

3.75

4.00 1

Pay-out ratio in % (excluding exceptionals)

59.4

75.7

53.3

37.1

43.4

Free cash flow as a % of revenue Dividend

377.1

To be proposed to the shareholder's AGM in 2016

Management commentaryâ&#x20AC;&#x201A; Risk and sustainability report

Extraordinary performers…

Management commentary Risk and sustainability report

build trust

LEFT TO RIGHT

RAHEL SCHAFROTH Assistant to CFO ANDREA BERTSCHI Legal Associate SANDRA SCHUERMANN Event Coordinator

Risk and sustainability report 75

Risk management

81 Customers

85 Employees

90 Communities

95 Environment

Straumann and the ITI

Global productionâ&#x20AC;&#x2030;&â&#x20AC;&#x2030;logistics

Management commentary Risk and sustainability report

Risk Management A holistic approach The management of opportunities and risks is an integral part of corporate governance and sustainability. An important contribution to safeguarding our long-term success is our commitment to implementing appropriate controls, processes and strategies to identify, assess and manage risks and opportunities associated with our activities in order to prevent or minimize the impact of unexpected events on our business or on our ability to create value and to capture meaningful opportunities. The objective is to apply – at an early stage and with foresight – a globally standardized process for identifying and managing possible risks to the achievement of the company’s objectives. Risks are identified as possible developments within or outside the company that could jeopardize its sustained growth and profitability. Risk-relevant information is compiled once a year and ad hoc if necessary. The documentation contains a description, an assessment of possible damage, the probability of occurrence, and a list of measures to monitor and counteract the risk. This approach generally takes into account all relevant types of risk, such as operational, strategic, compliance-related and market risks, as well as internal and external factors.

RESPONSIBILITIES AND ORGANIZATION At Straumann, the Chief Financial Officer is also the Chief Risk Officer (CRO) and is thus responsible for risk management. We believe that risk assessment and management must be embedded in a comprehensive internal control framework, and we address it through a holistic, disciplined and deliberate approach. For more information see Group Note 30 (p. F 56 ff.). Risk monitoring and control are management objectives. The assessment process analyzes the implications and

potential impact of external and internal factors on the achievement of the Group’s objectives, and provides a basis for managing them. This matches the approach of the COSO (Committee of Sponsoring Organizations of the Treadway Commission), whose integrated internal control framework is one of the most widely used. For identified risks that arise from accounting and financial reporting, relevant control measures are defined throughout Straumann’s Internal Control System (ICS) framework (128 f.). Various tools and aids are used to assess and manage risks. For instance, foreign exchange risks are managed with an SAP Treasury tool, while external consultants are used on a regular basis to assess insurance coverage risks.

RISK REPORTING A comprehensive corporate risk assessment report is produced annually and serves as a working document for the coming year. It includes key risks that are critical for Straumann’s business. A specific scenario is developed for each risk topic, including existing and new measures and controls. The risks are ranked and prioritized. Action plans are defined and the implementation of measures to reduce risk is monitored. The significance of a risk scenario is estimated in terms of EBIT cumulated over three years. Certain risks are assessed according to qualitative criteria, e.g. risks to the Group’s reputation. The reporting of key risks is based on fixed value limits. The report is prepared by Internal Audit and the CRO, and is discussed with the Executive Management Board. The Audit Committee assesses and discusses risks on the basis of the report in consultation with the CRO and / or relevant members of Senior Management regularly. Key findings are presented to the Board.

Management commentary Risk and sustainability report

Pressing risks that emerge very rapidly are discussed by the Board at short notice.

RISK ASSESSMENT STRATEGIC RISK

MANUFACTURING AND SUPPLIER RISK

Straumann has spread its manufacturing risk by establishing production centers for key products on both sides of the Atlantic. The addition of Neodent’s production facilities in South America further spreads this risk.

MARKET ENVIRONMENT

Straumann is active in specialty segments of the dental industry. Based on the aging population, the increasing number of professionals trained, and increasing awareness, there are no discernible reasons why these segments should not continue to offer attractive growth prospects in the long term (p. 40 ff.). However, the current economic uncertainties and consolidation trend might continue for some time and dampen the prospects of market growth. Straumann’s strategic priorities for 2016 are to drive a high performance culture and organization, to target unexploited growth markets, and to become a total solution provider for tooth replacement (p. 22 ff.). Our future revenues depend on market reach and expansion as well as on our ability to defend and increase our business with existing customers, to enlarge our customer base, to develop innovative solutions that meet customers’ needs and bring them to market in a timely manner. New market entrants and price pressure from discounters pose a threat to established companies like ours. We conduct analyses of competitors based on our own and external market intelligence to counteract such risks and to evaluate our opportunities. A key strategy in this respect is our expansion into other segments through alliances, partnerships and acquisitions.

With regard to suppliers, we pursue a second source strategy, which offers a high degree of independence from single suppliers. Straumann and Neodent production facilities keep about a year’s stock of titanium, the key material for our implant systems, to avoid any bottleneck in the supply / demand chain. PRODUCT RISK AND TREATMENT OUTCOME

We seek to minimize product risks by going well beyond the minimum statutory requirements and conducting large-scale trials under real-life conditions, followed by controlled, selective introductions and long-term product surveillance, wherever appropriate. We also offer a comprehensive range of education courses at all levels in all countries where our products are sold.

FINANCIAL RISK (SEE ALSO P. F 30 FF.) EXCHANGE RATE RISK

As the majority of our business is international and because we prepare our financial statements in Swiss francs, fluctuations in exchange rates affect both the Group’s operating results and the reported values of its assets, liabilities, revenue and expenses. Straumann’s Corporate Treasury is responsible for managing the risks created by currency fluctuations within the Group, following the scope of the policy approved by the Executive Management Board and the Audit Committee of the Board of Directors.

OPERATIONAL RISK LEGAL AND INTELLECTUAL PROPERTY RISKS

We operate in a competitive market, in which intellectual property rights are of significant importance. We therefore actively pursue a strategy of protecting our intellectual property, patents and trademarks. At the time of writing, Straumann was involved in an administrative investigation, which was initiated by Nobel Biocare at the International Trade Commission in the US against Neodent in Brasil and Instradent USA. The investigation was related to intellectual property-related questions of a specific Neodent product.

The Group is exposed to transactional and translation risks. Hedging decisions are taken by Corporate Treasury with subsidiaries being co-responsible for identifying currency exposures and informing headquarters. The key objective is to limit the foreign currency transactional exposure of the Group. Transactional risk arises when the currency structure of Straumann’s costs and liabilities deviates to some extent from the currency structure of the sales proceeds and assets, as well as from imbalances in the payment streams between the various currencies. Straumann hedges these risks on a

Management commentary Risk and sustainability report

REVENUE (LEFT) AND COST (RIGHT) BREAKDOWN (MAJOR CURRENCIES) ¢ CHF ¢ EUR ¢ USD / CAD / AUD / NZD ¢ BRL ¢ CNY / KRW / JPY ¢ Other

13% 33%

¢ CHF ¢ EUR ¢ USD / CAD / AUD / NZD ¢ BRL ¢ CNY / KRW / JPY ¢ Other

37%

10%

24% 29%

19% The charts above show the allocation of net revenues (left) and cost of goods sold, distribution and administrative expenses (right) across the various currencies. All numbers are rounded approximations.

selective basis by means of options, spot transactions and forward transactions. The limitation and management of the translation exposure is a secondary priority. The major foreign currencies in Straumann’s business are the euro, the US dollar, the Brazilian real, the Chinese renminbi and the Japanese yen. Straumann invoices its subsidiaries in local currencies and its distributors mainly in euro and US dollars. Exchange rate fluctuations have an impact on the company’s assets and earnings, which are reported in Swiss francs. At year end, the Group’s gross transactional booked exposure (TBE) to the euro was 23%. The euro accounted for 33% of the sales and 19% of costs, making it the Group's most important currency. The US dollar, Canadian dollar, Australian dollar and New Zealand dollar collectively make up 29% of sales, 24% of costs and 53% of TBE. Our major Asian currencies (Japanese yen, Chinese renminbi and Korean won) collectively make up 13% of sales, 6% of costs and 20% of TBE. The Brazilan real makes up 10% of sales and costs, but no transactional booked exposure. The charts above illustrate our sales and cost base in the different currencies. In general, the target is to concentrate the currency risk mainly in Switzerland at the Swiss Group companies. Subsidiaries abroad are usually invoiced by the Swiss companies in the local currency of the subsidiaries. Each subsidiary invoices its local third-party customers in the local currency.

Credit risks arise from the possibility that customers may not be able to settle obligations as agreed. There are no significant concentrations of credit risk within the Group. Counterparty risk encompasses issuer risk on marketable securities, settlement risk on derivative and money-market contracts, and credit risk on cash and time deposits. Exposure to these is closely monitored and kept within predetermined parameters. Further information on financial risk management is provided in Note 30 on financial risk management objectives and policies (see p. F 56 ff.), in Note 31 on financial instruments, p. F 59 ff. of consolidated financial statements. INSURANCE POLICIES

Straumann covers its inherent key business risks in the same way that it covers product or employer liability risks and property loss, i.e. through corresponding insurance policies held with reputable companies. PENSION LIABILITY RISKS

The Group offers its staff competitive pensions. The pension funds are managed locally and invested by independent financial institutions. The investment strategy is determined by the Group’s Pension Fund Commission and is executed by the financial institution. Neither Straumann nor the trustees are allowed to influence the

Management commentary Risk and sustainability report

CURRENCY CHART (DOLLAR, EURO, YEN, REAL)

100

40 2011 ¢ EUR / CHF

¢ USD / CHF

2012 ¢ JPY / CHF

2013

2014

2015

¢ BRL / CHF

specific investment decisions. The pension funds publish regular reports for all members. The Swiss pension fund represents the largest pen sion plan of the Group. Based on the recommenda tions of the Pension Fund Trustees, the Straumann Pension Fund was transferred completely to the independent GEMINI Collective Foundation on 1 January 2016. The transfer has no impact on the pension scheme participants. FINANCIAL REPORTING RISK

Straumann’s Internal Audit acts as an independent and objective assurance and consulting body, which reports directly to the CFO and the Audit Committee. Internal Audit does not confine itself to financial audits, but also monitors compliance with external and internal policies and guidelines. Acting in a consulting role, its main tasks are to assess internal processes and controls, propose improvements, and assist in their implementation. The objective is to safeguard the Group’s tangible and intangible assets and to evaluate the effectiveness of its risk management and governance processes.

All employees are invited to report any breach of this internal policy to the Compliance Officer by e-mail or telephone. Infringements of the Code are tracked and appropriate measures taken against non-compliance. We monitor laws and revisions and adapt our internal processes to cover new legal requirements. We fully comply with the ‘Sunshine’ legislation in the United States and France, not least through implementing a data collection system and corresponding policies and guidelines. Like other leading manufacturers, Straumann is exposed to the risk of damaged public perception of dental implants by third parties, which might be the result of poor implant placement, competitor’s inferior implant quality, or unethical business practices. Many Straumann country organizations are members of associations of manufacturers of medical / dental products, such as FASMED in Switzerland, Comident in France, Fenin in Spain and ABIMO in Brazil (Neodent). These associations are dedicated to the advancement of medical technology and its safe and effective use. REGULATORY COMPLIANCE

COMPLIANCE RISK LEGAL COMPLIANCE

It is essential for Straumann to ensure that the company in general and the individual employees conduct business in a legal, ethical and responsible manner. To this end, we implemented a Code of Conduct in 2006.

Companies in the medical device industry face growing scrutiny from regulators around the world and increasing requirements for documentation. In Europe, the Medical Device Directive is under review. The anticipated outcomes include greater surveillance, involvement of competent authorities for

Management commentary Risk and sustainability report

ISO CERTIFICATION AND AUDITS PERFORMED IN 2015 Standard

ISO 9001 Quality management system

ISO 13485 Medical device quality management system

ISO 14001 Environmental management system

Institut Straumann AG (Basel, Gräfelfing)

Yes

Straumann Villeret SA (Villeret)

Yes

Straumann Manufacturing Inc (Andover)

Yes

J.J.G.C Indústria e Comércio de Materiais Dentários S.A [Neodent] (Curitiba)

Yes

Etkon GmbH (Markkleeberg)

Yes

Biora AB (Malmö)

Yes

higher-class products, longer approval times, access to technical documentation, tests on products, and unannounced audits. We have noticed a reduction in the number of Notified Bodies and an increase in their control. To ensure the readiness of all our certified sites, we have taken the initiative to conduct unannounced internal audits. In 2015, Straumann subsidiaries in Madrid (Spain), Paris (France), Freiburg (Germany) and Burlington (Canada) were inspected by the local authority. No major observation was identified. Several regulatory authorities continue to inspect manufacturers in foreign countries. We are prepared for this and have built up experienced teams of regulatory and compliance specialists in Basel, the US, China and Japan. As a consequence, the successful registration of our Roxolid portfolio in Japan was based on excellent collaboration of our experts in Basel with our Japanese colleagues. Stricter requirements and regulations are also expected in smaller markets, which will increase the need for enhanced compliance and safe and efficient products. QUALITY COMPLIANCE

To avoid the risks associated with regulatory compliance for Medical Devices, we have a qualified team of specialists in regulatory and quality issues.

Focused quality objectives, supported by key performance indicators, and comprehensive internal as well as supplier-related quality audit programs, assured our status of substantial compliance and helped to identify opportunities for improvement. To streamline processes we run a continuing education program. Our internal auditors successfully completed an external four-day course – with examination – on Good manufacturing practices and regulations. We completed a project to streamline our Quality Management system from Corporate to sites and from sites to Corporate. The new set-up was confirmed in a 44-day audit by our Notified Body involving 10 auditors, after which we obtained recertification. In 2015, we passed all Notified Body audits, which are required to maintain the certification status of the Quality and Environmental Management Systems at our manufacturing and design / development sites. Overall, there were no critical issues with any authorities related to the status of the Quality and Environmental Management Systems at any of our manufacturing sites. Straumann collaborates with Neodent in the area of quality compliance and regulatory affairs. Neodent products have received approvals in various markets outside Brazil, including the US and Europe, with Canada soon to follow.

Management commentary Risk and sustainability report

SUSTAINABILITY MATERIALITY MAP MONITOR

RELEVANCE FOR STAKEHOLDERS

High

• Charitable programs • Fair competition • Emissions

MAINTAIN

MONITOR

• Operational health and safety • Materials use • Energy use • Water use • Waste

Low

Middle

• Customer Privacy • Public policy • Supplier human rights and environmental assessment

FOCUS

• Patient health and safety • Economic performance • Customer satisfaction • Provision of approved products and services • Traceability and labelling • Training and education • Staff fluctuation • Diversity, equal opportunity, non-discrimination • Compliance, responsible marketing, anti-corruption

Low

Middle

High

RELEVANCE OF POTENTIAL IMPACTS ON BUSINESS

SUSTAINABILTY – MATERIAL TOPICS We believe a key contribution to our long-term success is to identify and address relevant (or ‘material’) sustainability topics – economic, ecological and social issues that present significant risks or business opportunities. Risk and opportunity management and sustainability are therefore closely linked in our business processes and our communications with all stakeholder groups, which is why we pursue open communication and interactive dialogue with all relevant stakeholder groups. To identify, support and address relevant and material sustainability topics we conducted interviews with senior managers across the company that were aligned with the provisions of Global Reporting Initiative (GRI) Principles for Defining Report Content to determine the most pertinent sustainability issues for Straumann and

our stakeholders. The chart above gives an overview of the sustainability topics found to be most relevant for our business success (horizontal axis) and the interests expressed by our stakeholders such as clients, investors or community representatives (vertical axis). The material sustainability topics are discussed in various parts of this report especially in the following sections on customers, employees, communities, and environment.

This page includes information on the Global Reporting Initiative (GRI) indicators G4-18 and G4-19 (see also page 170-171).

Management commentary Risk and sustainability report

Customers Learning to serve an evolving customer base STRAUMANN’S CUSTOMERS BY SEGMENT

STRAUMANN’S CUSTOMERS BY REGION

¢ General practitioner ¢ Laboratory/ Dental technician ¢ Specialist ¢ Other

¢ Europe, Middle East & Africa ¢ North America ¢ Asia/Pacific 33% ¢ Latin America

16% 49%

35%

24%

7% 11%

25%

With the acquisition of Neodent, the proportion of the Group's specialist customers increased, while the proportion of labs/technicians decreased, reflecting the two companies’ different portfolios. The geographical picture reflects the concentration of Neodent's customers in Latin America. The chart on the left includes a new segment labelled ‘other’, which includes hospitals, university clinics, dental chains and distributors, reflecting a growing trend in corporate customers.

SERVING CUSTOMERS DIRECTLY In 2015, our global customer base expanded to more than 150 000 and includes general dentists, specialists (oral surgeons, periodontists, prosthodontists) and dental technicians/laboratories spread across more than 100 countries. A large part of the increase was due to the integration of Neodent and its Brazilian customer base. We serve customers directly through more than 1 300 sales and marketing professionals, most of whom are highly trained sales representatives or service staff. Our direct sales approach adds value for customers and helps us to identify, manage and learn from their needs. In 2015, we continued the global training

program to enhance the effectiveness of our sales representatives and to help our customers improve their businesses. The success of this program is reflected in our revenue growth.

CUSTOMER TRENDS CONTINUE Over the past years we have seen several shifts in our global customer base, due partly to changes in the market and partly to strategic initiatives we have driven.

PRICE SENSITIVITY While our premium business continues to grow, the premium implant segment in general has been outpaced by the value segment, pointing to the increasing number of dentists whose choice of implant is driven by price.

Management commentary Risk and sustainability report

To win their business we have been building the Instradent platform with multiple value brands and now have a topfive position in the global value segment.

PARTNERING WITH CHAINS Another important development has been the expansion of dental chains and networks, particularly in North America and Europe. We entered this segment in 2015 as the preferred supplier of ClearChoice, the leading network of clinics in the US. In the meantime, we have learned from working with them and have been able to use our experience to establish agreements with leading chains in Europe.

A RESPONSIBLE APPROACH TO GROWTH Market research1 indicates that, in the near future, more implants will be placed collectively by GPs than by specialists. We stepped up our efforts to address this growing customer group in North America by collaborating with Patterson Dental to reach GPs beyond our network and to offer them a tailored product package. This effort was not successful. Having gained useful insights into the needs of this customer group, we are working on another approach focused on education.

The Straumann-botiss Young Pro Award is one of several new initiatives to attract and encourage talented young dentists in the field of regenerative dentistry. It invites dental professionals under the age of 35 to submit original work that contributes to the advancement of oral tissue treatment/care. The 2015 prize of 10 000 euros was awarded to Dr Andreas Papst for his research into the use of tissue-graft products for regenerating gum tissues.

ENCOURAGING YOUNG DENTISTS

THE SHIFT IN GENDER

The sustainability of our business in the mid-to-long term depends on our ability to attract young professionals to implant dentistry. Perception-pulse studies in the past revealed that their most common expectation from companies like ours is for help in building up their business and establishing a reputation as a specialist.

According to the American Dental Association, new dentists in the US are far more likely to be women than men.2 This trend is also evident in other countries, where higher numbers of women are going through dental school. In the US, 60% of dentists aged 44 or below are women, and in many other countries male dentists are a minority.3

We continued to take a structured approach to this group through dedicated programs, including our Young Professional Program (YPP) which has now been running for more than three years and supports budding professionals on their career paths from studying, through residencies and clinic employment, to setting up their own practices. The program was expanded in 2015, is currently offered in 10 countries and has enrolled more than 5 000 participants.

For family and lifestyle reasons, women tend not to pursue postgraduate training in implantology and are more likely to practice part time as associates or employees rather than as practice owners. Research published in 2014 concluded that early integration of implant dentistry in the dental curriculum as well as career planning, coaching and female mentoring programs are of utmost importance to meeting future needs for implantologists.4 Straumann is well positioned to be the partner of choice for women dentists in tooth replacement because: –– Our tissue level implant solution was designed to support the referral model, in which specialists perform the surgery and generalists do the restoration. –– Our system is comprehensive and designed for simplicity, flexibility and predictable outcomes.

Management commentary Risk and sustainability report

–– We are a leader in education together with our academic partner the ITI. –– We are working together with dental schools to support the inclusion of implant dentistry in their curricula. –– We reach out early to young dentists, e.g. through the YPP, which now also addresses the needs and preferences of women.

CONTINUING CONSOLIDATION IN THE LAB INDUSTRY Surveys we conducted in 2015 in Europe and the US confirm the continuing trend of consolidation in the dental laboratory industry. Large labs are the strongest growing and are also the most digitally advanced. They mill prosthetics for 15 or more implant systems in house and outsource complex cases to milling centers like ours. The use of non-original abutments is widespread. Their business focus implies that they will enlarge their portfolios, reduce costs and gain customers. The picture is similar for lab chains, which are growing both organically and by acquiring smaller labs. They are also able to achieve cost advantages, e.g. by producing in low-cost countries. Growth is slower among mid-size and smaller labs. The latter tend to be less cost efficient, cover fewer systems, work conventionally, outsource milling and are less willing/able to go digital. Together, these developments explain the increasing dominance of a small number of very large labs. To address these trends among lab customers, we offer a broad portfolio of solutions from simple abutments and blanks for in-house production to complex restorations milled centrally. We also offer training. For labs without CADCAM scanning capabilities, we offer our Scan & Shape service, while others benefit from our extended digital workflows and connectivity. Our response to the trend in abutment copies is threefold: we conducted our own original-on-original campaign, we introduced Variobase and pre-milled blanks with Straumann connections, and through etkon we will offer labs the possibility of ordering high-quality CADCAM abutments for competitor implant systems.

SAFEGUARDING COMPLIANCE IN THE INTEREST OF PATIENTS Our Global Sales Compliance Program has been in place since 2009 and is one of several safeguards to ensure compliance with regulations relating to the sale of our products and services. Further supporting our commitment to the patients’ interest, much of the scientific information used to endorse our products is peer-reviewed.

OUTLOOK In 2016, our customer base will broaden as we expand into new geographical markets in Latin America, Russia and Asia. While we continue to develop customer-driven solutions and services for premium customers, our Instradent platform will expand internationally to address price-sensitive customers with a different value proposition. To optimize this approach we will continue to segment and target customers specifically. REFERENCES / FOOTNOTES 1E xevia, 2014, based on market research data in Germany, Italy, Spain and the US. 2D istribution of dentists in the US, by region and state, 2009. American Dental Association. 2011 Apr. 3 F DI Oral Health Atlas p. 61 4B oll A, Gehrke P: Gender aspects of implant dentistry: opportunities and career paths. Z Zahnärtzl Implantol 2014;30:267–287

Management commentary Risk and sustainability report

Straumann and the ITI A forward-looking partnership with 35 years of close collaboration Straumann enjoys a unique relationship with the International Team for Implantology (ITI), which dates back to 1980. Both organizations share the goal of developing optimal treatment solutions to the benefit of patients. The ITI is dedicated to advancing and promoting clinical expertise in implant dentistry through measures focused on education and research, while Straumann’s core competency is the development and marketing of commercial products. With more than 15 000 Fellows and Members around the world, the ITI is the largest international academic organization in the field and has an important role in the further development of implant dentistry and related tissue regeneration.

ITI Treatment Guide book series, which is published annually and now comprises nine volumes.

ONLINE ACADEMY HIGHLY SUCCESSFUL Just over a year ago, the ITI launched its Online Academy, an e-learning platform for practitioners at all levels of experience. This project has flourished with over 200 000 visits and more than 3 million page views in its first 12 months. New content was added throughout 2015 and a new campus dimension was introduced. This is a virtual learning space, which allows external institutions and the ITI’s 27 regional and country sections to create tailored educational content in local languages in campus classrooms for selected groups. By the end of 2015, each of the 650 ITI Study Clubs had been allocated its own classroom.

COMMITMENT TO RESEARCH AND EDUCATION The ITI commits more than CHF 2 million each year to supporting implant-related projects led by both ITIaffiliated and non-affiliated researchers worldwide. In 2015, the ITI received 73 applications and awarded 29 research grants. It also awarded 22 scholarship grants to young practitioners, enabling them to spend a year at one of its 22 Scholarship Centers around the world. The ITI develops and supports educational activities on a local, regional and international basis through events and meetings such as ITI Study Clubs, Education Weeks, and national congresses. In 2015, eleven ITI congresses were held around the world, the largest of which were in Japan and Germany, attracting more than 1400 and 1000 participants, respectively. Preparations began for the triennial ITI World Symposium, which attracts well over 4000 participants and will be held next in 2017, in Basel. The ITI also holds regular Consensus Conferences to review the latest literature and establish evidence-based guidelines. These are integrated into each volume of the

OUTLOOK Straumann is fully committed to supporting and leveraging the ITI relationship and to unlocking its great potential going forward. The ITI is committed to supporting its membership in working to the highest standards and using the latest methods and technologies optimally. To capture opportunities and master challenges in a constantly changing environment, the ITI is working on an organizational approach that increases flexibility, reaction speed and efficiency. At the same time it is broadening the horizon of its Vision 2017 to 2020.

Management commentary Risk and sustainability report

Employees Creating a high performance organization The strength and spread of our global team increased significantly in 2015, due largely to the acquisition of Neodent, the expansion of our organization in China, and the creation of a subsidiary in Russia. These accounted for nearly all of our 1 084 staff additions, reflecting our strategy to unlock growth opportunities in emerging markets, and bringing total headcount to 3471 at year end. In Switzerland, our numbers remained constant at 769, which is remarkable because the euro-exchange rate crisis forced many Swiss companies to downsize. We were able to avoid job losses mainly because our staff agreed to compensation reductions (p. 136). Their flexibility, pragmatism and spirit of ‘simply doing more’ dispelled uncertainty and allowed us to focus on important growth initiatives. When momentum

accelerated, we adhered to a restrictive hiring policy and managed to absorb increases in demand, as well as portfolio expansion and pipeline additions without taking on additional staff.

OUR CULTURAL JOURNEY Having gained a clear picture of our organizational culture through structured anonymous surveys, we defined an ideal culture1 in 2014, which fosters constructive behavior, collaborative leadership and high performance. For Straumann, this means enabling everyone to do their best, focusing our efforts and resources optimally on aligned priorities, being agile to seize opportunities, constantly challenging what we do in order to improve and innovate, sharing openly, collaborating efficiently, avoiding waste, and continually delivering what we promise.

EMPLOYEE SENTIMENT 2.6% 2.6%

¢ Very happy ¢ Happy ¢ Unhappy ¢ Very unhappy

2.0%

9.1%

20.5%

44.7%

50.0%

Least happy (4 Feb)

68.2%

Happiest (23 Oct)

Management commentary Risk and sustainability report

EMPLOYEES BY REGION ¢ Switzerland ¢ Rest of EMEA ¢ Latin America ¢ North America ¢ Asia/Pacific

EMPLOYMENT ¢ Full time ¢ Part time

8% (9%) 15% (21%)

22% (32%)

94% 30% (4%)

25% (33%) Numbers in brackets refer to 2014.

EMPLOYEES

LEADERSHIP

2011

2452 2012

2517 2013

2217 2014

2387

19%

2015

3471

GENDER

MANAGERS

81%

GENERAL STAFF

AGE

67%

46% 54%

18% <30

15% 30–50

>50

Cultural change is a strategic priority which we believe has to start at the top.

Management commentary Risk and sustainability report

HUMAN RESOURCES KEY FIGURES Parameter

Staff size

Employees

Employment type

Part-time employees

Gender diversity

Women in general staff (excl. Mgmt)

Training and education

Unit

20151

2014

2013

Total headcounts Full-time equivalents

3 471 3 235

2 387 2 330

2 217 2 164

% of headcount

Women in SMD pool2

Women in management

CHF million

2.6

1.7

1.5

Days/employee

Investment in staff learning3 Average annual training & learning

Fluctuation and absence

Employee protection

Absence rate due to sickness5

Absence rate due to workplace accidents5

Work-related fatalities

Number

Reported cases of discrimination

Number

Staff fluctuation

Including Neodent Strategic Management Development group. Only direct expenses for internal and external training activities are counted here. Salaries paid to employees while in training are additional and are not included. 4 Includes resignations, terminations and retirements. 5 Switzerland only. Proportion of absence time compared to target working hours. 1 2 3

STAFF STRUCTURE BY CATEGORY AND AGE GROUP (%) 1 Age

General staff (excl. Management) Management2 TOTAL 1 2

<30

30–50

>50

Unit

2015

17.42

53.00

11.00 % of headcount

81.42

0.19

14.11

4.28 % of headcount

18.58

17.61

67.11

15.28

100

Including Neodent Job position "Manager" and all levels above

In 2015, we defined the mindset and core behaviors (p. 20 f.) to achieve this culture and launched a number of initiatives to stimulate their adoption. We conducted a global cultural inventory by surveying 1200 people across the organization and followed up with high performance team workshops in all regions. To gain critical mass, the entire strategic management took part in an international program of workshops and training modules, which is being extended to areas of middle management.

35 Cultural Change Champions (CCCs) as role models and as a communication bridge across the organization. The latter now work as a Community of Practice, which will include new Champions from other geographies. In addition, we redefined and simplified Straumann’s global competency model to reflect our vision, core behaviors and ideal culture. This will be reflected in performance management, promotions, recruiting, development and succession planning.

To drive cultural change across levels, we focused initially on top management and an interdisciplinary group of

An array of externally provided assessment tools are used to measure organizational culture and effectiveness as

Management commentary Risk and sustainability report

well as group and leadership styles. It usually takes 3 – 4 years to see a distinct change in an organization’s culture, which is why we do not foresee an organizational cultural inventory re-assessment until 2018. However, surveys at Group headquarters in 2015 show clear signs of progress (see chart p. 85), which an external validation of our overall approach and a Silver Award from Investors in People in the UK have confirmed.

portion to the cultural change programs. As a result, the number of training days at Straumann increased, but this was offset by the lower number of training days at Neodent. One aspect of our cultural journey is to encourage and enable our staff to make Straumann ‘a better place to work’, which resulted in a number of employee-initiated activities. Resources were also injected into the Straumann Academy, which is devoted to personal development, and includes the following:

ENGAGEMENT The Executive Management Board regularly meets with the CCCs and with a newly appointed group of staff representatives at headquarters, who act as a sounding board. These and various other focus groups provide open and constructive dialogue as well as direct feedback on staff engagement. During the year, 16 general staff meetings were held with the CEO in five countries in addition to 13 informal small group sessions in Basel. In February, we began to track mood and engagement in our headquarters population on a monthly basis by using a simple anonymous survey in a consistent and representative group of approximately 50 employees. The responses showed that staff sentiment was lowest when the currency crisis hit but improved significantly by year end, when more than 80% agreed that staff motivation was high and that ‘Straumann is a great place to work’. This partly reflects the strong business results and communicated expectation of a discretionary bonus – competitive salaries, benefits and incentives are significant engagement drivers and are discussed in our Compensation Report (p. 132 ff.).

DEVELOPING SKILLS AND ENHANCING LEADERSHIP Training and development are essential to meet the requirements for an international company in the Medical Device Industry and to attract and retain staff. In addition to introductory product and technical training, we offered updates to staff who have been with the company for some time. Feedback from leavers in 2014 pointed to development and work/life balance as areas for improvement. We continued to work on this in 2015 from several angles. We increased our overall investment in staff training and education significantly, devoting a considerable

STRATEGIC MANAGEMENT DEVELOPMENT (SMD)

The SMD process involves senior management, staff in key positions, and future leaders; it reviews leadership, performance, behavior, and career potential as a basis for development, deployment, and succession planning. GLOBAL DEVELOPMENT PROGRAM (GDP)

Now entering its third year, this program identifies and develops future leaders with a view to filling our succession pipeline. The 18-month program is for members of general staff to middle management who have leadership aspirations and potential. It includes international assignments, assessments and mentoring by top management. The program included nine participants in 2015. PROFESSIONAL CAREER PATH (PCP)

The PCP is designed to provide career opportunities outside line-management by enabling individuals to progress through four clearly defined, benchmarked stages to the level of ‘Expert’. Following the successful pilot program in 2014, we expanded the model to R&D, Information Technology and Operations in 2015. In addition to the above, we maintained our apprenticeship, internship and Corporate Graduate Programs.

DIVERSITY AND EMPLOYEE PROTECTION The integration of Neodent has broadened our diversity significantly. The Straumann Group now employs more people in Brazil than in any other country. A diverse team adds value and supports our ability to serve an increasingly diverse customer base. We monitor diversity with regard to age, gender, origin and educational background. Following the combination with Neodent, the average age of our workforce has gone down. So too has the proportion of women in our staff. Nevertheless, with 45% female employees, gender diversity is still generally strong and has been strengthened

Management commentary Risk and sustainability report

by the addition of a female Executive Vice President to the leadership team. Our onboarding training for new employees focuses on corporate alignment including our Code of Conduct, which protects employees from discrimination (unequal treatment based on gender, race, religion, or sexual orientation). No cases of discrimination were reported in 2015. Health/safety training and awareness are given due importance throughout the Group, and no workplace fatalities or serious accidents were reported in 2015.

RESPONSIBILITY AND ETHICAL BEHAVIOR Straumann’s Code of Conduct defines our expectations for ethical behavior in all our business activities. Being an integral part of the company’s employment contracts, it prohibits any form of human rights violation, bribery, corruption, unfair competition, misleading marketing, etc. Neodent has a good record as a responsible, ethical company and its Code of Conduct is very similar to Straumann’s, which will facilitate the integration of the Group’s ethical principles in 2016. Employees are obligated to report any violation, suspected violation or misconduct. In 2015, two Code of Conduct violations were reported, one of which led to dismissal. We also expect ethical practices in our supply chain, as presented in our ‘Code of Conduct for Suppliers’ which refers to working conditions, human rights protection, business ethics, legal compliance, and environmental protection.

OUTLOOK Excluding acquisitions, we expect our workforce to grow in 2016 as we pursue our strategy to exploit growth opportunities in emerging markets and attractive segments. We will continue to refine and expand our staff development programs, but the key priority in 2016 will be driving behavioral and mindset changes to produce a high performance culture. REFERENCES / FOOTNOTES 1 Straumann 2014 Annual Report, p. 88

Management commentary Risk and sustainability report

Communities Enhancing well-being and quality of life

RECOGNITION FOR SERVING THE COMMUNITY In 2015, Straumann was honored with the prestigious Pierre Fauchard Academy (PFA) ‘Dental Trade and Industry Recognition Award’ for ‘outstanding service and merit to the profession and community’. In addition to commending our ‘commitment to clinical research and the highest standards of patient care’, the PFA highlighted our ‘ongoing contribution to communities through outreach to developing regions by providing public service, education and leadership development in oral healthcare worldwide’. We take pride in the fact that our solutions help more than one-and-a-half million people every year. Our biggest contribution to the community is through providing safe, effective, lasting solutions that enhance well-being and quality of life – creating smiles and restoring confidence. At the same time, we acknowledge that millions of people around the world do not have access to even basic dental care. This motivates our support for charitable initiatives that make dental treatment and education about oral hygiene available to the underprivileged. Like most of our sponsoring activities, these are connected to our field of business – since this is where we can make a meaningful difference.

Straumann support funded building renovations and a vehicle for school visits at the Albert Schweitzer Clinic in Lambaréné, Gabun in central Africa.

STRAUMANN AID Straumann AID (Access to Implant Dentistry), which was set up in 2007, is another global initiative to help underprivileged patients who are in need of implant treatment but cannot afford it. It relies on collaboration with dentists from the ITI network, who provide the treatment without charge, while Straumann makes the respective product donations. As foreseen in our 2014 report, we donated the final restorations for the patients treated in the One Day a Smile event.

SUPPORT FOR THE UNDERPRIVILEGED

OUTREACH IN DEVELOPING REGIONS

2015 was similar to previous years in terms of sponsoring activities. We evaluated some 50 requests, of which we supported 15. In each case, clear goals were set. We look for continuity and sustainability in the charitable projects we support, which is reflected in our long-standing relationships and commitments. An overview of our supported projects is presented opposite. Our donations to these and other projects in 2015 totaled approximately CHF 100 000.

Elsewhere, we continued to support basic dental care initiatives, mostly in developing regions. We are grateful to our dental partners – many of whom are volunteers – for their devotion and for ensuring that the funds are used efficiently.

Management commentary Risk and sustainability report

MAIN INITIATIVES AND PROJECTS SPONSORED BY STRAUMANN IN 2015 REGION

LEAD PARTNER

OBJECTIVE1

STATUS/RESULTS

Alaska

Academy of Prosthodontics Foundation / University of Connecticut team

Dental outreach project to elderly patients, supported since 2005

2015 project completed; dentures and implants provided

Bali

Bali Children Foundation

Dental care for children, supported since 2012

Ongoing dental treatment for children in Straumann Dental Clinic

Cambodia

‘Hope for All’ Clinic

Dental student scholarships and clinic support since 2007

Ongoing; three dental students fully supported

Basel University student team

Dental outreach project

2015 project completed

Cameroon

Geneva University student team

Dental outreach project

2015 project completed

Chile

University of Connecticut team

Dental outreach project, supported since 2008

2015 project completed

Dominican Republic Zurich University student team

Dental care at SOS Children's Village

2015 project completed

France

Afopi Dental Campus

‘One-day-a-smile’ dental charity for treatment of 14 needy patients

Donation of final restorations for patients treated in 2014

Gabun

Secours Dentaire International

Support for Albert-SchweitzerHospital dental clinic in Lambaréné

Ongoing

Kenya

Bonn University students team

Dental outreach project

2015 project completed

Kos Island (Greece)

Employee initiative

Emergency aid for refugees

>CHF 10 000 donated for hands-on assistance on location

Madagascar

New York Columbia University team Dental outreach project

2015 project completed

Nicaragua

Sonrisa foundation

Free dental care for orphaned children; dental student scholarship

Ongoing project

Tonga

Freiburg University student team

Dental outreach project

2015 project completed

United States

National Foundation for Ectodermal Dysplasia

Financial, treatment and PR, supported since 2004

Ongoing project

Other

Straumann AID

Free products for underprivileged individuals

Ongoing

In each case clear prerequisites and goals were set.

A CARING TRADITION FOR ECTODERMAL DYSPLASIA PATIENTS We continued our longstanding commitment to helping people affected by ectodermal dysplasia (ED). Sufferers typically have severely malformed or missing teeth from infancy, and their dental treatment is rarely covered by insurance. Straumann provides free implants and prosthetics as well as financial support to the National Foundation for Ectodermal Dysplasia (NFED), a US-based non-profit organization that helps patients and their families around the world.

All the abovementioned projects focus on dentistry and thus promote Straumann’s reputation among relevant stakeholders as a caring, responsible corporate citizen. This supports our business and thus adds value for our shareholders.

EMPLOYEES REACH OUT TO REFUGEES Our staff in Basel responded generously to the refugee crisis in Southern Europe by supporting an employee initiative to provide hands-on assistance in Greece. Staff donations were matched by the company resulting in an overall donation of more than CHF 10 000.

SUPPORT FOR YOUNG DENTISTS We continued to sponsor four young dental students in Cambodia and Nicaragua, who are connected with charitable projects that we support in underprivileged areas. Our hope is that these students will help address the huge local need and sustain the respective projects.

CLEAR PRINCIPLES Straumann is politically neutral in all its sponsoring activities. We refrain from making statements on public policy and from political lobbying, and we do not sponsor politicians or political parties. Sponsoring requests and initiatives are evaluated according to

Management commentaryâ&#x20AC;&#x201A; Risk and sustainability report

clearly defined principles and policies by our Corporate Sponsoring Committee, which reports periodically to the Executive Management.

OUTLOOK In 2016, we plan to continue our support for charitable activities in the dental field, focusing on dental education programs and on initiatives and projects that provide access to dental treatment for needy people. We plan further sponsored events, for example to treat edentulous patients who are unable to afford tooth replacement treatment. These kinds of involvement are in the interest of multiple stakeholder groups. The Pierre Fauchard Academy honored Straumann with it's prestigiousâ&#x20AC;¨'Dental Trade and Industry Recognition Award' forâ&#x20AC;¨outstanding service and merit to the profession and the community.

Management commentary Risk and sustainability report

Global production & logistics Innovation and efficiency overcome economic pressure The sudden appreciation of the Swiss franc early in 2015 challenged our production and logistics teams to exceed their existing cost reduction programs in order to prevent the gross margin from sagging. This was important as the currency situation gave us no pricing manoeuvrability. The challenge unleashed a surge of creativity, leading to a productivity increase of more than 9% in implant production.

SAVING THROUGH INNOVATION AND ‘DOING IT OURSELVES’ Our plants in Villeret (Switzerland) and Andover (USA), which produce the implant and standard prosthetic portfolio, both made important contributions. Significant savings were generated with automated packaging systems, camera-based product inspection, the elimination of paper through increased use of electronic instructions for product use, and standard package designs-innovations that justify having a centre of production excellence in Switzerland. Besides improving automation, the two factories coordinated to optimize capacity utilization which averaged approximately 98% throughout the year. We continued to transfer technology from Villeret to Andover, building the flexibility to transfer production volumes quickly in response to market changes. With the capability for instrument manufacture installed, Andover now has all the manufacturing technologies found in Villeret.

GROWING DEMAND MET WITH EXISTING CAPACITY Both plants had to cater for the roll-out of multiple new products. With regard to volumes, the most challenging was the new bone level (BLT) implant range, which includes corresponding new instruments and accounted for more than 18% of the entire implant portfolio at year-end. Demand for new products increased production volume

More than 1m implants were manufactured in 2015 at the Neodent Factory in Curitiba, Brazil.

by 15%, which we managed to absorb with practically no staff increases, thanks to greater efficiency. Our biomaterials plant in Sweden reduced costs by insourcing the packaging process, which also shortened the overall lead time significantly.

HIGH-QUALITY, ATTRACTIVELY PRICED PROSTHETICS FOR COMPETITOR SYSTEMS Having taken the strategic decision to supply CADCAM prosthetics for third-party implants through our etkon brand, we equipped our milling centres to accommodate various competitor implant systems. Our strategy is to offer dental laboratories a single source for highquality CADCAM prosthetics and Ti-base abutments for all leading implant systems as well as the materials for producing final crowns in-house manufacture – from a single source.

CONSISTENT APPROACH AS MILLING CAPABILITIES EXPAND We opened our first Asian milling centre in Japan in October and significantly increased the size of our facility in Arlington, USA, to meet demand for screwretained bars and bridges from the ClearChoice chain

Management commentary Risk and sustainability report

STRAUMANN’S PRODUCTION SITES LOCATION

PRODUCTS

STAFF

MARKETS

CERTIFICATION

Villeret, Switzerland

Implant systems

360

Global

ISO, FDA, Anvisa, MHLW

Curitiba, Brazil (Neodent)

Implant systems

418

Latin America, US, Iberia, Italy

Anvisa, ISO, FDA

Andover, USA

Implant systems

109

Global

ISO, FDA, Anvisa, MHLW

Markkleeberg, Germany

CADCAM prosthetics 66

Europe

ISO

Arlington, USA

CADCAM prosthetics 25

USA

FDA

Narita, Japan

CADCAM prosthetics 8

Japan (Asia)

n/a

Malmö, Sweden

Biomaterials

Global

ISO, FDA, Anvisa, MHLW

of clinics. All our CADCAM facilities will operate under the etkon brand and use the same machinery, materials, and milling strategies, making it easy to establish new centres with the same high quality standards in other geographies.

INFRASTRUCTURE IMPROVED We continue to improve and invest in infrastructure, and are piloting a ‘paperless’ shop-floor management system in Villeret, where electronic certification files have helped to minimize hardcopy documentation. Apart from this, we streamlined and standardized our global quality management system, adding efficiency and transparency. Our Six Sigma program is becoming a standard process for problem-solving and quality improvement and has led to a 1.5 percentage point reduction of scrap in implant production.

OUTLOOK Our focus for Production and Logistics in 2016 will include the roll-out of BLT to other countries, our collaboration with ClearChoice in the US, and the launch of new CADCAM and standard prosthetic products. We plan to invest in a new milling centre for China and a CADCAM service for Russia. We will continue working on processes to produce new ceramic and smalldiameter implant solutions and on developing novel manufacturing processes with new technologies such as 3D printing.

External audits have reconfirmed the high standard of our quality management system (p. 79).

LOGISTICS MASTERS HUGE INCREASE IN UNITS STOCKED The main challenge for our Logistics function was to manage the stream of new products and to balance supplies of the various product families (e.g. Roxolid versus titanium implants, SLA versus SLActive surfaces, Bone Level versus Tissue Level, etc.). At the same time, the Neodent, Medentika and botiss portfolios had to be stocked and handled at our central warehouse in Basel, which was possible thanks to investments made in 2014.

Three-dimensional printing technology used to produce surgical templates at Straumann's new CADCAM center in Japan.

Management commentary Risk and sustainability report

Environment Using resources and energies effectively and without waste

One characteristic of the high performance culture we want to create at Straumann is the use of resources and energies effectively and without waste (p. 22). We conduct our business in an environmentally responsible manner, exceeding basic legal requirements, and reflecting our ISO 14001 certification. Our managers are committed to improving processes with due regard for the environment, and our employees are encouraged to consider environmental protection in their daily business – as expressed in our Code of Conduct. Our attention to global environmental responsibility is exemplified by the inclusion of the Neodent site in our monitoring within a year of its acquisition. As a medical device manufacturer, we are subject to stringent regulations. Adherence to strict quality-control protocols for identity and purity as well as analysis of raw materials ensure that manufactured products are safe and effective. Full documentation of all manufacturing processes provides traceability.

ENVIRONMENTAL PERFORMANCE Our product portfolio ranges from titanium and ceramic dental implants to prosthetic elements made of ceramic, metal, or polymer, and to biomaterials for tissue regeneration. Environmental impact occurs mainly in the production process as well as in research and development. Our principal product is dental implants, which are produced from rods of titanium or titanium-zirconium alloy on computerized CNC lathes. In the manufacturing process, cutting oil is used as a cooling agent, followed by sand-blasting, acid etching, cleaning, packaging, and sterilization.

Apart from production and research activities, our environmental impacts are low compared with most manufacturing companies. We do not produce dental filling materials or surgical equipment, and so do not use significant amounts of metals such as mercury, lead, or manganese that are often found in production processes of manufacturers serving the dental industry. In 2015, volumes increased at our implant and prosthetics production facilities in general. This accounts for the main differences in our environmental reporting and performance compared with 2014. This environmental performance report is based on available data for our group headquarters in Basel (Switzerland) and all production sites in operation during the entire reporting year: Villeret (Switzerland), Markkleeberg (Germany), Malmö (Sweden), Andover (USA), and Arlington (USA). We have also included full-year data for Neodent’s production site in Curitiba (Brazil), which Straumann acquired in Spring 2015. With Neodent, our headcount has increased by more than 900, which affects various data points, especially per-capita measurements. Owing to different reporting practices, certain datapoints have not been tracked uniformly. We hope to include them and data from our new milling center in Narita, Japan, in 2016.

TITANIUM AND OTHER RAW MATERIALS While volumes of implants and abutments sold expanded, the reported amount of titanium used remained roughly stable. This is mainly due to the use of semi-finished goods from previous build-to-stock production

Management commentary Risk and sustainability report

TITANIUM RECYCLING

(tons)

Increase in production reflected in higher consumption, waste and emissions. HEATING ENERGY

CO2 EMISSIONS PER CAPITA

(GWh)

(tons)

2014

10.6

4.6

2015

2014

2015

2014

4.2

4.6

2015

11.9

4.3

0 %

+12 % REFUSE

PAPER CONSUMPTION PER CAPITA

(tons)

+2 % WATER

(m3)

(1000 sheets) 2014

151 2014

2015

3 979

159

2014

29 975

+5 % 2015

Continuing progress towards paper-free processes All figures in this chart exclude Neodent (data not yet available).

2015

3 623

-9 %

34 894

+16 %

Management commentary Risk and sustainability report

carried over from 2014. In addition, the trend towards bone-level implants, which require less titanium than tissue level implants, continued in 2015. The rise in titanium recycling was mostly due to waste that was accumulated in 2014 and sent for recycling in 2015. Yttrium stabilized zirconium oxide is used for ceramic implants and prosthetic components. Consumption increased due to the rollout of our PURE ceramic implant, a change to new prosthetic materials (requiring process development and testing), and the increase in more sophisticated prosthetic designs (which require larger amounts of material to be cut away). The latter also led to an increase in consumption of cobalt-chrome, which – like polymethylmethacrylate (PMMA) – is used in crown and bridge solutions.

OPERATING MATERIALS The use of cleaning solvents and acids increased along with implant production. Our production team in Andover succeeded in prolonging the useful life of acids enabling more implants to be etched per batch. The sharp increase in recycled oils was due to replacement, which is conducted every two to three years in Villeret. We are pleased to report progress toward our goal of achieving paperless workflow processes. This is reflected in a further reduction of paper consumption overall and per-capita for the fourth consecutive year. Apart from the paper consumed in house, we purchase printed products, a significant portion of which are the instructions for use (IFU) of our products. In 2015, we moved from conventional paper-based IFUs to online instructions, greatly reducing external paper use and reducing packaging.

ENERGY USE AND GREENHOUSE GAS EMISSIONS Energy use increased due to production growth. While electricity consumption developed roughly in line with production activities, heating energy use remained constant. Climatic conditions were generally favorable with regard to heat consumption. However, insulation measures in Arlington meant that heating energy remained stable despite the facility expansion. Including Neodent, heating per capita went down because the site in Brazil does not require heating.

Increased energy consumption led to higher emissions. We monitor CO2 emissions that are generated by electricity and heating, and distinguish between direct (Scope 1) and indirect (Scope 2) emissions. While Scope 1 encompasses emissions from sources such as burning natural gas, Scope 2 comprises emissions from sources such as electricity and district heat. Business activities with minimal impact, or for which meaningful data are not available, are not included in our carbon reporting. Among these are emissions resulting from the transportation of products (which are small and light) and employee travel.

WATER AND WASTE Water consumption generally rose as a result of production growth. Furthermore, our facility in Arlington switched from purchasing treated water to using an in-house water treatment system, which led to an increase in reported water consumption. The amount of hydroxide sludge – a by-product of waste-water treatment, which depends on the quantity and composition of the water treated – increased in line with production growth. While solvent waste remained constant, diverse contaminated materials (including cleaning rags, filters, and other debris) as well as electronic scrap, increased. With the inclusion of Neodent, contaminated waste increased significantly, mainly because of site construction waste and the regulated classification of waste in Brazil. Overall, the increase in refuse corresponded to production growth.

OUTLOOK While the quality of our products and the safety of patients is our main priority, we strive for continuous improvement of our environmental performance. For example, at our production site in Andover, we evaluated the feasibility of replacing existing 400-watt metal halide lamps with equivalent LED units, potentially saving up to 200 MWh annually. Furthermore, we are analyzing the installation of photovoltaic panels at the Neodent production site in Curitiba. Generally, we are expecting considerable changes in our overall environmental performance reporting in 2016 due to the full integration of the performance data of Neodent.

Management commentary Risk and sustainability report

ENVIRONMENTAL KEY PERFORMANCE FIGURES Performance indicator

Unit

2015

incl. Neodent

Product raw materials

Titanium

tons

22.36

14.76

14.66

tons

n/a1

11.90

10.63

Consumption

tons

3.16

3.04

2.59

Recycled

tons

n/a1

1.96

2.10

Zirconia

Consumption

tons

2.28

2.20

1.73

Polymethyl methacrylate

Consumption

Various oils

Consumption

tons

77.45

48.14

46.63

Recycled

tons

n/a1

41.84

31.69

Consumption

tons

n/a

36.60

34.66

Recycled

tons

n/a1

21.50

19.50

Consumption

tons

52.93

42.05

38.55

Consumption

m sheet

5.85

4.25

4.49

Consumption per capita3 sheet/employee

3 529

3 623

3 979

MWh

32 395

17 610

16 691

Consumption per capita3 MWh/employee

19.55

15.00

14.80

Acids2 Paper

Electricity

Heating

Emissions

Water

Waste

excl. Neodent

Consumption

Cleaning solvents

Energy

excl. Neodent

Recycled (consumption minus product) Cobalt chrome

Operating materials

2014

CO2 emissions5

Water

Diverse waste

Refuse

Consumption

Total heating energy

MWh

4 604

4 6234

– Fossil fuel

MWh

3 801

3 816 4

– District heat

MWh

803

807

Total heating energy MWh/employee per capita3

2.78

3.92

4.14

Total emissions

tons

6 015

4 991

4 7214,6

– Direct (Scope 1, excluding vehicle fuel)

tons

779

7824

– Indirect (Scope 2)

tons

5 236

4 212

3 9396

Total emissions per capita3

tons/employee

3.6

4.3

4.24,6

Consumption

49 734

34 894

29 975

Consumption per capita3

m /employee

30.0

29.7

26.6

Hydroxide sludge

tons

n/a1

17.1

13.5

Contaminated material

tons

130.6

15.6

13.8

Solvents

tons

n/a1

3.3

3.2

Total

tons

229.6

158.5

151.4

Per capita3

kg/employee

139

135

134

n/a = data not available 1 Neodent was acquired in 2015 and this datapoint will be reported when the data collection process has been refined. 2 As ‘consumed amounts’ are more relevant than ‘recycled amounts’, this data point has been revised and 2014 data restated. 3 Per capita figures refer to employees at our environmental reporting sites only. 4 Natural gas consumption: data quality was retroactively optimized for the Arlington site. 5 Scope 1 covers CO2 emitted by sources owned/controlled by the Group (e.g. heating boilers). Scope 2 covers emissions generated externally to produce the electricity, heat, or steam we consume. 6 CO2 emissions recalculated (‘location-based’ approach) in order to comply with the new Greenhouse Gas Protocol Scope 2 Guidance. This page includes information on the Global Reporting Initiative (GRI) indicator G4-22 (see also page 170-171).

Extraordinary performers… 100

engage FACES (FRONT TO BACK)

OTHER BODIES FEATURED

ALAIN KOUNGA Senior Research Manager

ANDREAS AUGAT Graduate Program Participant

HOLGER HERWEG Customer Experience Center

THOMAS JENSEN Head Portfolio Management & Pricing

HENRI CRUYPENYNCK Responsible Quality Control

SANDRO KLOTER Head Corporate Network & Telecom Services

ABEL FERRANDEZ Senior Project Leader SDIS

FABIAN WIDMER Facilities Crew Member

YANIK SEGGINGER Associate Regional Marketing Manager

FRANCK MARTIN Head of Strategic Procurement

THOMAS WAGNER Head of Marketing Switzerland DANIEL TSCHOPP Head Global IT Servicedesk PHILIPPE WEBER Export Coordinator

Corporate governanceâ&#x20AC;&#x201A; 101

Corporate governance

103 Principles

103

Group structure

107

Capital structure

107 Shareholders

111

Board of Directors

121

Executive Management Board

128

Compensation, shareholdings and loans

128

Changes of control and defence measures

128 Information and control mechanisms for the Board of Directors and the Executive Management

129

External auditors

129

Information policy

Corporate governance 103

PRINCIPLES The principles and rules of Straumann’s corporate governance are laid down in the Articles of Association, the organizational regulations, the code of conduct, and the charters of the Board Committees. These principles and rules are the basis of our corporate governance disclosures, which comply with the Directive on Information relating to corporate governance published by the SIX Swiss Exchange, where Straumann’s shares have been traded since the company’s initial public offering in 1998.

–– Sales North America –– Sales Latin America and regional Distributor Management –– Sales Asia/Pacific and regional Distributor Management.

LEGAL STRUCTURE LISTED COMPANIES

Straumann Holding AG is listed in the main segment of the Swiss stock exchange. No other company controlled by Straumann Holding AG is listed on a stock exchange.

GROUP STRUCTURE Straumann Holding AG is a listed stock corporation incorporated under the laws of Switzerland and domiciled and registered in Basel. Information about the company’s shares, which are traded on the main segment of the SIX Swiss Exchange under the symbol STMN, is provided on p. 153 f. Straumann Holding AG is the ultimate parent company of the Straumann Group (referred to collectively as ‘the Group’), which is headquartered in Basel and includes a total of 41 wholly owned subsidiaries (see chart p. 104 f.), and nine companies in which non-controlling interests are held (see table on p. 106).

OPERATIONAL STRUCTURE In 2015, the operational structure of the Straumann group comprised the following groups/departments and sales regions (in alphabetical order): –– Corporate Services, comprising: Corporate Communications, Human Resources, Legal Compliance & Intellectual Property and Strategic Planning & Business Development –– Customer Solutions & Education, comprising: Customer Marketing, Marketing Communications and Product Management –– Finance, comprising: Treasury, Controlling and all other finance-related functions, Corporate IT, Corporate Procurement, Facility Management, Internal Audit and Investor Relations –– Instradent Management & Strategic Alliances –– Research, Development & Operations, comprising: Project Management, Research & Development, Technical Services, Quality Management & Regulatory Affairs, Production, Corporate Logistics –– Sales Central Europe and worldwide Distributor Management (excluding APAC and LATAM) –– Sales Western Europe

Name

Straumann Holding AG

Domicile

Peter Merian-Weg 12, 4052 Basel, Switzerland

Listed on

SIX Swiss Exchange

Security ID

0 01228 007

ISIN

CH 0012 280 076

Ticker symbol

STMN

NON-LISTED GROUP COMPANIES

The Straumann Group is managed through its Headquarters in Basel. As laid down in the organizational regulations, the respective Regional Sales Head, the CFO and the General Counsel represent Straumann Holding AG on the boards of these subsidiaries. The major subsidiaries of Straumann Holding AG are presented overleaf and in Note 34 to the Financial Statements on p. F 64 of the Financial Report. Straumann’s premium products and services are sold through Institut Straumann AG, various distribution subsidiaries, and third-party distributors (see chart on p. 162 f. for overview of subsidiary and distributor locations). In 2015, the Group expanded the Instradent business platform, which was created in 2014 to drive and manage the distribution and internationalization of specific value brands through its own growing network of country organizations and third-party distributors. In certain countries, Straumann has established fullyowned subsidiaries under the name of ‘Manohay’ with the purpose of distributing both premium and value brands from a single point but keeping the brands separate (see overleaf for overview of subsidiary and distributor locations and p. 162 f. for details including

104 Corporate governance

Principal Group Companies Ownership & share capital STRAUMANN HOLDING AG Basel, Switzerland CHF 1 572 294

INSTITUT STRAUMANN AG Basel, Switzerland

STRAUMANN LTD Crawley, UK

STRAUMANN SA / NV Zaventem, Belgium

CHF 100 000

GBP 300 000

EUR 2 081 620

STRAUMANN ITALIA SRL Milan, Italy

STRAUMANN AB Mölndal, Sweden

STRAUMANN BV Ijsselstein, Netherlands

EUR 270 000

SEK 100 000

EUR 18 151

INSTRADENT ITALIA SRL Milan, Italy

BIORA AB Malmö, Sweden

STRAUMANN BRASIL LTDA* São Paulo, Brazil

EUR 10 000

SEK 950 152

BRL 689 405 612

STRAUMANN VILLERET SA Villeret, Switzerland

STRAUMANN AS Oslo, Norway

CHF 9 000 000

NOK 1 000 000

JJGC INDÚSTRIA E COMÉRCIO DE MATERIAIS DENTÁRIOS S.A (NEODENT) Curitiba, Brazil

STRAUMANN HOLDING DEUTSCHLAND GMBH Freiburg, Germany

STRAUMANN DANMARK APS Brøndby, Denmark

EUR 25 000

STRAUMANN GMBH Freiburg, Germany

DKK 125 000

STRAUMANN OY Helsinki, Finland EUR 32 000

EUR 200 000

ETKON GMBH Gräfelfing, Germany

STRAUMANN SARL Marne-la-Vallée, France EUR 192 000

EUR 326 000

STRAUMANN GMBH Vienna, Austria EUR 40 000

MANOHAY DENTAL SA Madrid, Spain EUR 60 101

BRL 598 327 957

STRAUMANN SRO Prague, Czech Republic CZK 200 000

STRAUMANN LLC Moscow, Russia RUB 21 000 000

Corporate governance 105

STRAUMANN M ANUFACTURING, INC Andover, USA

STRAUMANN SINGAPORE PTE LTD Singapore, Singapore

INSTRADENT AG Basel, Switzerland

SGD 1

CHF 100 000

STRAUMANN PTY LTD Victoria, Australia

INSTRADENT IBERIA SL Madrid, Spain

AUD 100

EUR 3 000

USD 1

STRAUMANN USA, LLC Andover, USA USD 1

STRAUMANN CANADA LTD Burlington, Canada

STRAUMANN NEW ZEALAND LTD Napier, New Zealand

CAD 100 000

NZD 0

MANOHAY MEXICO SA DE CV Mexico DF, Mexico

STRAUMANN JAPAN KK Tokyo, Japan

MXN 9 392 615

JPY 10 000 000

MANOHAY COLOMBIA SAS Bogota, Colombia

ETKON JAPAN KK Shibayama, Japan

COP 2 800 000 000

JPY 10 000 000

MANOHAY ARGENTINA SA Buenos Aires, Argentina ARS 3 700 000

INSTRADENT LTD Crawley, UK GBP 1 000

INSTRADENT S.R.O. Prague, Czech Republic CZK 100 000

INSTRADENT USA, INC Andover, USA USD 2 000 001

STRAUMANN (BEIJING) MEDICAL DEVICE TRADING CO LTD Beijing, China RMB 40 000 000

STRAUMANN DENTAL KOREA INC Seoul, Republic of Korea KRW 2 300 000 000

STRAUMANN DENTAL INDIA PVT LTD Gurgaon, India INR 6 000 000

At 31 December 2015 Values indicate share capital * Merged into Neodent as of January 1, 2016

106 Corporate governance

STRAUMANN’S PARTICIPATION AND REPRESENTATION IN OTHER COMPANIES On 31 December 2015, Straumann held the following non-controlling stakes: Non-consolidated company

Location

Activities

Capital rights held

Straumann representation

Createch Medical SL

Mendaro (Spain)

CADCAM prosthetics for multiple implant systems

30%

Dental Wings Inc

Montreal (Canada)

Dental prosthetics design (CAD), software and scanners

55%

1 Board seat (Guillaume Daniellot until 12 Jan. 2016, thereafter Jens Dexheimer) 2 Board seats (Marco Gadola, Frank Hemm)

Instradent Deutschland GmbH

Hügelsheim (Germany)

Distribution of implant & prosthetic value brands

51%

At general meeting, but not controlling interest

Medentika GmbH

Hügelsheim (Germany)

Implant prosthetics & dental implants

51%

At general meeting, but not controlling interest

Open Digital Dentistry AG (in liquidation)

Zug (Assets and activities transferred (Switzerland) to Dental Wings GmbH)

44%

n/a

RODO Medical, Inc.

San Jose (USA)

13%

At general meeting

T-Plus

New Taipei Dental implant systems City (Taiwan)

49%

1 Board seat (May Yin Wong)

Valoc AG

Prosthetics (implant based Möhlin (Switzerland) denture-attachment systems)

44%

1 Board seat (Vincenzo Grande)

Zinedent Implant Üretim AS

Ankara (Turkey)

50%

1 Board seat (Raffaele Peraro)

Prosthetics

Joint venture, supply of dental implants and prosthetics

The Straumann Group has no other significant shareholdings of more than 10%.

Straumann’s investments in companies outside the premium segment). On 31 December 2015, Straumann Holding AG directly or indirectly held 100% of the capital and voting rights in all consolidated Group companies. In addition, Straumann Holding AG directly or indirectly held capital rights in the companies listed in the table above. CHANGES IN 2015 AND EARLY 2016

In April 2015, Straumann increased its ownership of Neodent, Latin America’s leading dental implant company, from 49% (acquired in 2012) to 100%, strengthening its position in the global value segment. In September 2015, the Group sold 49% of its fully-owned subsidiary Instradent Deutschland GmbH to the shareholders of Medentika GmbH. As a result, Straumann now holds non-controlling stakes of 51% in Instradent Deutschland GmbH and Medentika GmbH. The former Medentika Implant GmbH was merged into Medentika GmbH in early 2015. The following Group companies were established in 2015: Straumann LLC in Russia, Straumann New Zealand

Limited, Manohay Colombia SAS, etkon Japan K.K., Instradent s.r.o. in the Czech Republic, and Instradent Ltd. in the United Kingdom. Straumann Mexico SA de CV was renamed Manohay Mexico SA de CV. In early 2016, Instradent Canada Limited was established and Straumann Brasil Ltda was merged into Neodent, which is now responsible for the promotion and sale of premium and value products in Brazil in addition to the design, development, and manufacture of Neodent dental implants and related prosthetic components. PARTICIPATIONS IN OTHER COMPANIES

In 2015, Straumann invested further in the value segment and in its common technology platform (p. 24), acquiring: –– an additional convertible bond from the Korean implant company MegaGen, –– a 49% stake in T-Plus, the Taiwan-based implant supplier, –– an additional 11% stake in Straumann's digital technology partner Dental Wings, and –– a 44% stake in Valoc – a Swiss supplier of implant based denture-attachment systems.

Corporate governance 107

The Group also entered a joint venture with its distributor in Turkey, creating the Zinedent company to distribute and potentially manufacture implants for Turkey and other markets.

CROSS SHAREHOLDINGS Straumann does not have, and has not entered into, any cross-shareholdings with other companies relating to equity or voting rights.

CAPITAL STRUCTURE In April 2015, 46 390 conditional shares were converted into ordinary shares. There have been no further changes in Straumann’s share capital in the past three years. On 31 December 2015, the share capital was composed of 15 722 939 registered shares – fully paid in, each with a nominal value of CHF 0.10 – and conditional capital of CHF 27 706.10, divided into 277 061 registered shares each with a nominal value of CHF 0.10. Straumann Holding AG did not have any authorized share capital. The conditional share capital was approved for an unlimited period at an extraordinary General Meeting in 1998 for use in equity participation plans for employees and management (see Compensation Report for details). Straumann has no other categories of shares than registered shares. There are no restrictions on the transferability of Straumann Holding’s shares. Purchasers of shares are entered in the share register as shareholders with voting rights if they expressly declare that they have acquired the registered shares in their own name and for their own account. If a purchaser is not willing to make such a declaration, he/she is registered as a shareholder without voting rights. Proof of acquisition of title in the shares is a prerequisite for entry in the share register. Nominees approved by the Board of Directors are recorded in the share register as shareholders with voting rights. Nominees who have not been approved by the Board of Directors may be refused recognition as shareholders if they do not disclose the beneficiary. In such cases, the nominees will be recorded in the share register as shareholders without voting rights. At 31 December 2015, no nominee had applied/asked for registration and voting rights. Straumann has not issued any financial instruments (participation certificates, dividend-right certificates,

warrants, options or other securities granting rights to Straumann shares) other than the options/warrants and Performance Share Units granted to certain employees as a component of compensation (see Compensation report p. 141 f.) and the CHF-200-million domestic straight bond launched in 2013 and due on 30 April 2020 (see Financial Report Note 14, p. F 40 for details).

SHAREHOLDERS SIGNIFICANT SHAREHOLDERS In 2015, the Group reported a significant shareholder restructuring and was notified of five transactions according to Art. 20 of the Federal Act on Stock Exchanges and Securities Trading (Stock Exchange Act, SESTA): –– In January, Straumann reported an internal restructuring of Parvus, which took effect on 30 December 2014 and resulted in Parvus Asset Management (UK) LLP transferring its entire investment management business – including its stake in Straumann – to Parvus Asset Management Europe Limited. The latter reported two sales in 2015, one in July and one in September, reducing its holding to less than 3%. –– In April and twice in September, Straumann reported purchases of shares and ‘contracts for difference’ by companies of the BlackRock Group (parent company BlackRock Inc., New York, USA) amounting to a shareholding at year-end of more than 5%. Details of the transactions are published on the SIX Swiss Exchange online reporting platform.

ENTRIES IN THE SHARE REGISTER Straumann’s share register, in which the owners and usufructuaries of registered shares, including names and addresses, are recorded, is maintained and administered on behalf of the Company by Nimbus AG, Ziegelbrückstrasse 82, 8866 Ziegelbrücke, Switzerland. Only persons recorded in the share register as shareholders or usufructuaries are acknowledged as such by the Company. The transfer of registered shares requires the authorization of the Board of Directors, which delegated this power to Nimbus AG. Authorizations will be granted after purchasers have provided their name, nationality, and address and declared that the shares were acquired in their own name and for their own account. Persons who have voting rights but no title to shares as a consequence of legal provisions (e.g. legal representatives of minors) will be referenced in the share register upon request.

108 Corporate governance

SHAREHOLDINGS ON 31 DECEMBER 2015

(By segment)

(By geography)

¢ Major shareholders (private) 19.1% ¢ Major shareholder (institutional) ¢ Institutional shareholders ¢ Private individuals ¢ Non-registered & undisclosed 8.3%

37.2%

 Switzerland  Asia 19.1%  Europe  USA  Non-registered & undisclosed 1.3%

55.1%

10.5%

16.7% 14.0% 18.7%

Registered shareholders must inform the company of any change of address. If they fail to do so, all notices will be deemed to be legally valid if sent to the address recorded in the share register. The Company may, after hearing the parties concerned, delete entries in the register if these are based on false information. There are no statutory rules concerning deadlines for entry in the share register. However, for organizational reasons, the share register is closed several days before the General Meeting. Participation and voting at the 2016 General Meeting is reserved for shareholders registered in the share register with voting rights on March 30, 2016. Shareholders who sell their shares prior to the Meeting are no longer entitled to vote.

SHAREHOLDERS’ PARTICIPATION RIGHTS VOTING RIGHTS AND REPRESENTATION RESTRICTIONS

Each share duly entered in Straumann’s share register as being held in the shareholder’s own name and for the shareholder’s own account entitles the shareholder to one vote. On 31 December 2015, 81% of the issued capital was registered in the share register. All shares have the same entitlements to dividends. There are no preferential rights granted to any shareholders or shares. All shareholders may be represented at the General Meeting by a proxy. Proxies and directives issued to the independent voting representative may either be given in writing or online via the Nimbus Shareholder Application ShApp (https://shapp.ch). Other voting

representatives must have a proxy signed by hand by the shareholder. The Board of Directors decides whether proxies will be recognized. The independent voting representative is elected by the General Meeting for a term of office until the end of the next annual general meeting. The independent voting representative may be reelected. In case of vacancy, the Board of Directors shall designate one for the next General Meeting. QUORUMS

The General Meeting adopts its resolutions and holds its ballots by a majority of votes cast. Abstentions and invalid ballots are not taken into account. The legal provisions (in particular section 704 of the Swiss Code of Obligations) that stipulate a different majority are reserved. Votes on resolutions and elections are held electronically. In case of technical difficulties, the chairman may order an open or written ballot. Likewise, the chairman may repeat a ballot if he considers that the outcome is doubtful. In such a case, the preceding ballot is not considered. The General Meeting may only approve the annual financial statements and resolve on the appropriation of the balance sheet profit if the Auditors’ report is available and the Auditors are present. CONVOCATION OF GENERAL MEETINGS, AGENDA PROPOSALS

The Shareholders’ General Meeting is convened by the Board of Directors within six months of the end of the

Corporate governance 109

SHAREHOLDERS BY VOLUME OF SHARES HELD (absolute number)

31 Dec 2015

31 Dec 2014

1 – 100 shares

4 893

5 097

101 – 1000

2 219

2 428

249

238

1 001 – 10 000 10 001 – 100 000 100 001 – 1 000 000

1 000 001 and more

7 428

7 828

31 Dec 20151

31 Dec 20141

TOTAL

MAJOR SHAREHOLDERS (in %)

Dr h.c. Thomas Straumann (Vice Chairman of the Board)

17.3

GIC Private Ltd

13.6

Dr h.c. Rudolf Maag

12.2

BlackRock Group2

5.0

n/a

Simone Maag de Moura Cunha

4.4

Gabriella Straumann

3.3

Parvus Asset Management (UK) LLP

2,3

TOTAL 1 2 3

n/a

8.5

55.8

59.3

31 Dec 2015

31 Dec 2014

Or at last reported date if shareholdings are not registered in the share register Not registered in Straumann’s share register Dropped below the 3% threshold in September 2015

CAPITAL STRUCTURE (in CHF 1 000)

Equity

604 970

736 836

(126 910)

(122 132)

731 880

857 400

1 572

1 568

Conditional share capital

Authorized share capital

15 722 939

15 676 549

<0.05%

0.4%

Reserves Retained earnings Ordinary share capital (fully paid in)

Number of registered shares Treasury shares (% of total) Nominal value per share (in CHF)

0.10

Registration restrictions

None

Voting restrictions or privileges

None

Opting-out, opting-up

None

110 Corporate governance

business year. In 2016, the Shareholders’ General Meeting will take place on 8 April at the Basel Congress Center. Shareholders individually or jointly representing at least 10% of the share capital may request an extraordinary General Meeting. The request must be made to the Board of Directors in writing, stating the agenda items and motions. Invitations to the General Meeting are issued in writing and are delivered via ordinary mail to the address recorded in the share register at least 20 days before the date of the General Meeting and are published on the company’s website (www.straumann.com). If shareholders agree to electronic delivery of notices, the invitation will also be sent by e-mail. All agenda items and proposals by the Board of Directors and by shareholders who have requested the General Meeting must be announced in the notice convening the General Meeting. Shareholders who individually or jointly represent shares with a par value of at least CHF 15 000 may request that an item be included in the agenda. The request shall be in writing at least 45 days before the General Meeting and must set forth the agenda items and the proposals of the shareholder(s).

2015 GENERAL MEETING The 2015 annual general meeting took place on 10 April 2015 and was attended by 407 shareholders, who together with proxies, represented 80.1% of the total share capital. Shareholders were also able to provide voting instructions online to the independent proxy. The meeting approved the Management Report, Financial Statements and Consolidated Financial Statements for the 2014 business year, the appropriation of the available earnings in 2014, and the discharge of the Board of Directors for the 2014 business year. The meeting also approved the compensation of the Board of Directors and the Executive Management (see p. 145 ff. of the Compensation Report). The Chairman, Members of the Board, and Members of the Compensation Committee were all re-elected. Neovius Schlager & Partner was appointed as the independent voting representative and Ernst & Young AG as auditors. The minutes of the meeting (including the voting results) are published in the Investors section of the company's website (www.straumann.com > Investors > Corporate Governance > Annual General Meeting).

Corporate governance 111

BOARD OF DIRECTORS

DR H.C. THOMAS STRAUMANN

The Board of Directors of Straumann Holding AG comprised seven non-executive members. No Director has been a member of the company’s Executive Management during the past three years except for Gilbert Achermann, who took over the additional role of CEO for an interim period of four months in 2013.

Swiss (born 1963) Vice Chairman of the Board

The Directors are all Swiss citizens. The average age of the Members of the Board at year-end was 56. GILBERT ACHERMANN

Swiss (born 1964) Chairman of the Board of Directors Gilbert Achermann holds various mandates in privately-owned and publicly-listed companies across a range of industries, including banking, consumer goods, medical devices, pharma services and retail. In addition to his role as Chairman of Straumann, his activities in 2015 included Board membership at the private bank Julius Baer Group, and Chairman & CoCEO of the Vitra/Vitrashop Group, a family-owned furniture and retail company. In previous years, he served as Chairman of the Siegfried Group, a listed pharma service company, and Vice Chairman of the Moser Group, a privately owned luxury watchmaking company. From 2002 to 2010, he was CEO at Straumann, which he joined as CFO in 1998. Gilbert Achermann started his professional life at UBS in Investment Banking in 1988, working in Switzerland, New York, London and Frankfurt. He holds an Executive MBA from IMD in Lausanne and a bachelor’s degree from the University of St. Gallen. He has been a Member of Straumann’s Board of Directors since 2009 and was appointed Chairman in 2010. Gilbert Achermann has been a major contributor to the Company’s past success. He represents continuity, stability and credibility among the various stakeholders. The Board benefits from his extensive knowledge of the dental industry, his broad functional, regional and managerial expertise, and the extensive experience and insight he gains from directorships in other industries.

Thomas Straumann’s skills in precision engineering were complemented by his studies at the Basel Management School and the Management and Commercial School of Baselland. In 1990, he was responsible for restructuring Institut Straumann AG and was CEO and Chairman of the Board of Directors until 1994. He was Chairman of the Board of Straumann Holding AG until 2002. In 2004, he was awarded an honorary doctorate by the University of Basel, Switzerland. Thomas Straumann is the principal shareholder of Straumann Holding AG; he has been a Member of its Board of Directors since 1990. He complements the Board with his understanding of the dental and medical device industries through personal management experience and various shareholdings. Having built up several companies, in which he is still involved, he is a true entrepreneur and has a diverse portfolio of interests, including not-for-profit activities. DR SEBASTIAN BURCKHARDT

Swiss (born 1954) Member of the Audit Committee; Secretary of the Board Sebastian Burckhardt began his studies in the fields of economics and law and obtained his doctorate law degree at the University of Basel. He is a lawyer admitted to the Bar of Switzerland and a civil law notary in Basel. He was admitted to the New York Bar following studies at New York University School of Law. He is a partner at Vischer AG law firm in Basel. Sebastian Burckhardt has been a member of the Board of Directors of Straumann since 2002. Straumann’s Board of Directors benefits from Dr Burckhardt’s expertise as an independent lawyer. He is a specialist in corporate and commercial law and in mergers, acquisitions, joint ventures, licensing, distribution and technology agreements. His knowledge extends well beyond legal matters and includes many years’ experience on corporate boards.

FROM LEFT TO RIGHT

DR BEAT LÜTHI ULRICH LOOSER GILBERT ACHERMANN STEFAN MEISTER DR SEBASTIAN BURCKHARDT DR H.C. THOMAS STRAUMANN ROLAND HESS

114 Corporate governance

ROLAND HESS

Swiss (born 1951) Chairman of the Audit Committee From 2008 until 2012, Roland Hess served as senior advisor to the Executive Committee of the Board of Schindler Holding AG, Ebikon, and held positions on several Boards of Directors for companies within the Schindler Group. He joined Schindler in 1984 and rose through positions of increasing responsibility in controlling, finance and regional management to become President of the Elevator and Escalator Division. From 1971 to 1984, he worked for Nestlé, initially in accounting, then as an international auditor, and finally as Chief Financial Officer of a Group company. His career includes several years in North and Latin America, in addition to assignments in Europe. He holds a degree in business administration from Lucerne Business School and studied at Harvard Business School near Boston. Roland Hess has been a member of the Board of Directors of Straumann since 2010. He has a long and distinguished track record in larger companies in more mature industries, combined with in-depth regional and functional experience. In addition, he complements the Board with expertise in compliance, risk management and standardized global procedures. ULRICH LOOSER

Swiss (born 1957) Member of the Audit Committee; Member of the Compensation Committee Ulrich Looser is a partner of BLR & Partners AG. From 2001 to 2009, he was with Accenture Ltd, where he became Chairman of its Swiss affiliate (2005) and Managing Director of the Products Business in Austria, Switzerland and Germany. Earlier, he spent six years as a partner at McKinsey & Company Ltd. Mr Looser graduated in physics at the Swiss Federal Institute of Technology (ETH), Zurich, and in economics at the University of St. Gallen. Ulrich Looser has been a member of the Board of Directors of Straumann since 2010.

His expertise in strategy, project and human capital management is of great value to the Straumann Board. He also adds in-depth consultancy and business development experience. DR BEAT LÜTHI

Swiss (born 1962) Member of the Compensation Committee Beat Lüthi is CEO and co-owner of CTC Analytics AG, Zwingen, a globally active medium-sized Swiss company in the field of chromatography automation. After obtaining his PhD in Engineering from the Swiss Federal Institute of Technology (ETH), Zurich, he began his career with Zellweger Uster AG, a leading manufacturer of quality control equipment in textile production. In 1990, he moved to Mettler-Toledo International Inc and rose to the position of General Manager of the Swiss affiliate. In 1994, he completed an executive program at INSEAD and subsequently joined the Feintool Group in 1998. During his four-year tenure as CEO, the company went public and doubled in size. In 2003, he returned to Mettler-Toledo as CEO of the Laboratory Division. At the end of 2007, he joined CTC Analytics to lead and further develop the company as an entrepreneur. Under his lead, the company more than tripled its number of employees. Beat Lüthi has been a member of the Board of Directors of Straumann since 2010. Beat Lüthi combines entrepreneurship and corporate experience in different industries, which make him a valuable contributor to strategic and operational matters. His scientific background together with his experience as acting CEO and Board member in various industrial businesses are of further benefit to the Straumann Board. STEFAN MEISTER

Swiss (born 1965) Chairman of the Compensation Committee Stefan Meister started his career at Sandoz Pharma in 1991. From 1995 to 2009, he worked for Celesio AG, a leading pharmaceutical distribution and services company. From 1999, he was a member of the Celesio Management Board, where his responsibilities included finance and controlling, IT, human resources, and the

Corporate governance 115

pharmacy business. In 2010, he joined the Management Board of Franz Haniel & Cie GmbH, a family-owned, international group of companies which held – amongst others – a major stake in Metro AG and a majority stake in Celesio. At Haniel, he was responsible for the operating businesses CWS-boco and ELG as well as Group Finance, IT and Corporate Responsibility. In 2011, he took office as Group Chief Operating Officer and member of the Board of Waypoint Capital, the Geneva-based holding company for the investments of the Bertarelli family, working closely with the Board and its Chairman. Stefan Meister holds a degree in economics from Basel University. He has been a member of the Board of Directors of Straumann since 2010.

OTHER ACTIVITIES AND VESTED INTEREST None of the Directors had any significant business connections with Straumann Holding AG or any of its subsidiaries in 2015. Unless stated in the CVs (see above) or in the table “Material Memberships” (p. 116), none of the Directors: –– Performed any activities in governing or supervisory bodies of significant foreign or domestic organizations, institutions or foundations under private or public law –– Held any permanent management or consultancy position for significant domestic or foreign interest groups –– Held any official function or political post. PERMITTED MANDATES OUTSIDE STRAUMANN

He complements the Board with in-depth knowledge in the Life Sciences sector and from industries with comparable business models/challenges to those of Straumann. He also has a wealth of experience in corporate governance, mergers and acquisitions, finance and human resources management.

ELECTIONS AND TERM OF OFFICE The members of the Board of Directors, the Chairman of the Board and the members of the Compensation Committee (which shall at least be 3) are all elected individually by the Shareholders’ General Meeting for a term of one year. Re-election is permitted until the age of 70. If the position of Chairman of the Board or a position in the Compensation Committee falls vacant, the Board of Directors appoints a replacement from among its own members for the remaining term of office. At the Annual General Meeting in April 2015, Gilbert Achermann, Dr h.c. Thomas Straumann, Dr Sebastian Burckhardt, Roland Hess, Ulrich Looser, Dr Beat Lüthi and Stefan Meister were all re-elected to the Board for a further one-year term. Gilbert Achermann was elected as Chairman of the Board; Stefan Meister, Beat Lüthi and Ulrich Looser were re-elected to the Compensation Committee. The Board appointed Dr h.c. Thomas Straumann as its Vice Chairman and Roland Hess, Sebastian Burckhardt and Ulrich Looser as members of the Audit Committee.

(PURSUENT TO ART. 12 OAEC)

Art. 4.4 of Straumann’s Articles of Association states that no member of the Board of Directors may perform more than 15 additional mandates (i.e. mandates in the highest-level governing body of a legal entity required to be registered in the Commercial Register or in a corresponding foreign register) in commercial enterprises, of which no more than five may be in listed companies. The following are exempt from the foregoing restrictions: –– Mandates in enterprises that are controlled by the Company –– Mandates in enterprises that are performed at the instruction of the Company –– Mandates in associations, organizations and legal entities with a public or charitable purpose, and in foundations, trusts, and employee pension funds; no member of the Board of Directors may perform more than ten such mandates. Mandates in several legal entities under common control or under the same economic authority shall be deemed as one mandate.

116 Corporate governance

STRAUMANN BOARD OF DIRECTORS – MATERIAL MEMBERSHIPS IN OTHER BOARDS Member

Commercial enterprise

Gilbert Achermann

Charity/other

Location

Function

Julius Bär Gruppe AG/ Bank Julius Bär & Co. AG

Board member

Vitra Holding AG and group companies (until 31 December 2015)

Chairman

Board member

International Team for Implantology (ITI) Thomas Straumann

Sebastian Burckhardt

Centervision AG

Chairman

CSI-BHE AG

Chairman

Grand Hotel Les Trois Rois

Board member

Medartis Holding AG and Medartis group companies

Chairman

FDR Foundation for Dental Research and Education

Board member

International Bone Research Association

Board member

Amsler Tex AG

Board member

Applied Chemicals International AG and ACI Group companies

Board member

Dolder AG

Chairman

Le Grand Bellevue SA

Board member

Grether AG

Board member

Immobiliengesellschaft zum Rheinfels AG

Chairman

persona service AG and persona service group companies

Board member

Member, Board of trustees

Gehörlosen- und Sprachheilschule CH Riehen / GSR Wieland Stiftung / Stiftung Autismuszentrum

Vice Chairman, Board of trustees

Misrock-Stiftung

Member of the Board of trustees

Board member

Qgel SA Fondation Bénina

Roland Hess

Societé Civile Immobilière Solivie

Corporate governance 117

Member

Ulrich Looser

Beat Lüthi

Commercial enterprise

Charity/other

Function

Bachofen Holding AG

Chairman

BLR & Partners AG & BLR group companies

Chairman

Econis AG

Chairman

Kardex AG

Board member

LEM Holding SA

Board member

Spross Entsorgungs Holding AG & Spross group companies

Board member

Economiesuisse

Board member

Schweizerische Studienstiftung

Board member

Swiss-American Chamber of Commerce: ‘Doing Business in the US’

Board member

Swiss National Fund

Member, Board of trustees

University Hospital Balgrist, Zürich CH

Member, Board of trustees

University of Zürich

Board member

APACO AG

Board member

CTC Analytics AG

CEO & Board member

INFICON Holding AG

Stefan Meister

Location

Chairman

American Chamber of Commerce

Panel member

Industrieverband LaufenThierstein-Dorneck-Birseck

Board member

Stiftung Behindertenwerk St. Jakob

Member, Board of trustees

Affidea B.V.

Supervisory director

Ares Allergy Holdings Inc & Ares group companies

USA

Board member

Campus Biotech Sarl & associated group companies

Board member

Esaote SpA

Board member

Northill Capital Holdings Limited

GBJ

Chairman

Stallergenes Greer PLC

Board member

Waypoint Group Holdings Limited & Waypoint group companies

GBJ

Board member

American Chamber of Commerce

Panel member

Center for Leadership & Values in Society, University of St. Gallen

Council member

118 Corporate governance

OPERATING PRINCIPLES OF THE BOARD OF DIRECTORS The Board of Directors meets for one-day meetings at least four times a year and as often as business requires. In 2015, the full Board held six meetings and three telephone conferences, while the Audit Committee and the Compensation Committee both met five times (see the table 120 for details). The CEO and CFO generally participate in Board meetings and are occasionally supported by other EMB members. Dr Andreas Meier, General Counsel of the Group, is responsible for the minutes. The Board of Directors consults external experts on specific topics where necessary. The Board of Directors is responsible for the strategic management of the company, the supervision of the EMB and the financial control. It reviews the company’s objectives and identifies opportunities and risks. In addition, it decides on the appointment and/or dismissal of members of the EMB. The Board of Directors also provides a mentoring service to the Executive Management. This aims to provide executives with an experienced sparring partner/coach and a sounding board for testing ideas and seeking qualified independent opinions. The Board of Directors has the following specific tasks and duties: –– To approve the Group’s vision, behaviors and strategy –– To determine the principal organization and processes of the Group –– To approve the Group’s strategic plan, financial medium-term plan and annual budget –– To approve the semi-annual financial statements –– To approve the annual report, the compensation report and the annual financial statements and submit these to the annual general meeting –– To prepare and approve the agenda of the annual general meeting and to implement its resolutions –– To appoint and dismiss the CEO and the members of the EMB –– To decide on the proposal of the Compensation Committee regarding the compensation payable to Board members, the CEO and the EMB –– To supervise the EMB and approve important transactions.

The Board of Directors has a quorum if a majority of members is present. This does not apply to resolutions that require public notarization, which do not require a quorum. Valid resolutions require a majority of the votes cast. In the event of a tie, the chairman of the meeting has the decisive vote.

COMMITTEES OF THE BOARD OF DIRECTORS The Board of Directors has an Audit Committee and a Compensation Committee, each consisting of no fewer than three Board members with relevant background and experience. The members of the Compensation Committee are elected by the General Meeting for a term of one year. In the event of a vacancy in the Compensation Committee, the Board of Directors appoints the replacement from among its own members for the remaining term of office. The members of the Audit Committee are appointed by the Board of Directors. Both Committees constitute themselves and appoint their chairman from among their members. The Board of Directors may establish further committees or appoint individual members for specific tasks. AUDIT COMMITTEE

Members: Roland Hess (Chair), Sebastian Burckhardt and Ulrich Looser The Committee’s main tasks are to: –– Assess the management of financial and other risks and the compliance with risk-related procedures and other relevant standards –– Oversee the performance of the external auditors, assess the fees paid, and assure their independence –– Oversee the activities of the internal audit function –– Review and discuss the financial statements with the CFO and with the external auditors and approve the quarterly statements for the first and third quarter of each financial year –– Review and assess processes and assumptions used for the financial planning and forecast cycles –– Review the funding, investing and management of liquid assets and propose profit distribution to the Board of Directors.

Corporate governance 119

Board of Directors

GILBERT ACHERMANN CHAIRMAN Swiss, 1964 Board member since 2009

DR H.C. THOMAS STRAUMANN VICE CHAIRMAN Swiss, 1963 Board member since 1990

AUDIT COMMITTEE

COMPENSATION COMMITTEE

DR SEBASTIAN BURCKHARDT Swiss, 1954 Board member since 2002

ROLAND HESS Swiss, 1951 Board member since 2010

Chair

ULRICH LOOSER Swiss, 1957 Board member since 2010

DR BEAT LÜTHI Swiss, 1962 Board member since 2010

STEFAN MEISTER Swiss, 1965 Board member since 2010

Chair

120 Corporate governance

TIME (DAYS) SPENT BY DIRECTORS AT BOARD/COMMITTEE MEETINGS AND ON COMPANY RELATED MATTERS 2015 MEETINGS

Achermann

Straumann

Burckhardt

Hess

Looser

Lüthi

Meister

Board1

Audit Committee

Other2

TOTAL DAYS 2015

Compensation Committee

1 2

incl. 3 telephone conferences Meeting preparation, travel

COMPENSATION COMMITTEE

Members: Stefan Meister (Chair), Ulrich Looser, Dr Beat Lüthi The Committee’s main tasks are to: –– Prepare the compensation report and submit it to the Board of Directors for approval and submission to the annual general meeting –– Review the compensation principles for any compensation paid to the Board of Directors, the CEO and the EMB and submit them to the Board of Directors for approval –– Prepare proposals concerning the compensation of the Board of Directors, the CEO and the EMB and submit them to the Board of Directors for approval and submission to the annual general meeting –– Establish the targets and target amounts of the short- and long-term performance-based compensation components and determine the amount payable under the scheme –– Discuss the CEO’s proposals for appointments to the EMB with the CEO and submit them to the Board of Directors for approval –– Assess candidates for the CEO role and submit a proposal to the Board of Directors for approval –– Prepare agreements concerning payments to a new CEO or EMB member according to Article 4.3 in the Articles of Association and submit them to the Board of Directors for approval –– Review the composition of the Board of Directors and make proposals in the context of a regular renewal, taking into consideration the representation of major shareholders, balanced skills, experience and diversity.

ASSIGNMENT OF RESPONSIBILITIES TO THE EXECUTIVE MANAGEMENT BOARD The Board of Directors has delegated responsibility for the operational management and sustainable development of the company to the CEO and the EMB. For details on the specific responsibilities see the operational structure on page 126. The Board of Directors has not delegated any management tasks to companies or persons outside the Group.

Corporate governance 121

EXECUTIVE MANAGEMENT BOARD The Board has delegated the executive management of the Group to the Chief Executive Officer (CEO) and the other members of the Executive Management Board (EMB). The CEO and, under his direction, the other EMB members are responsible for the Group’s overall business, affairs and day-to-day management. The EMB is also responsible for implementation of strategic decisions and stakeholder management. The CEO reports to the Board regularly and whenever extraordinary circumstances so require. Each member of the EMB is appointed and discharged by the Board. On 31 December 2015, the EMB comprised nine members under the leadership of the CEO, Marco Gadola. On 30 March 2015, Petra Rumpf joined Straumann as Head of Instradent & Strategic Alliances. She succeeded Dr Sandro Matter, who left Straumann in December 2014. On 1 January 2016, the Head of Straumann’s LATAM region, Matthias Schupp, was appointed to the EMB, reflecting the increasing importance of Latin America, which now generates more than 10% of the Group’s revenue and employs a quarter of its workforce. At the same time, Andy Molnar relinquished his responsibilities as Head Sales North America and stepped down from the EMB. He was succeeded by Guillaume Daniellot, whose role as Head Sales Western Europe transferred to Jens Dexheimer, who joined the EMB. Thus, on 1 January 2016, the EMB comprised ten members. MARCO GADOLA

Swiss (born 1963) CEO Marco Gadola has a strong executive track record in a broad range of global businesses. He rejoined Straumann in 2013 as CEO, having previously served as Chief Financial Officer and Executive Vice President Operations from 2006 to 2008, when he left to pursue a career development opportunity at Panalpina, a world leader in supply chain management. Having started as Panalpina’s Chief Financial Officer, he became Regional CEO Asia/ Pacific in 2012, with overall responsibility for the regional business. Prior to his first term at Straumann, he spent five years at Hero, the Swiss-based international food group, where he was also CFO and responsible for IT and operations.

Previously, he spent nine years at the international construction tool manufacturer Hilti, where he held a number of senior commercial/sales and finance-related positions in various countries. Before that, he worked for Sandoz International Ltd, as Audit Manager, and for Swiss Bank Corporation, Basel, in Corporate Finance. Mr Gadola graduated from Basel University in business administration and economics. He also completed various programs at the London School of Economics and at IMD in Lausanne. DR PETER HACKEL

Swiss (born 1969) Chief Financial Officer Peter Hackel rejoined Straumann in 2014, after three years at Oerlikon Industrial Group, where he was CFO of the global segment Oerlikon Drive Systems. He first joined Straumann in 2004 in a Project Management and Business Development role and rose to become Head of Group Controlling and Member of the Corporate Management Group. Prior to Straumann, he spent three years at Geistlich Biomaterials, as Director of Marketing & Sales Orthopaedics, and two years at McKinsey & Company as a Consultant. Peter Hackel offers a valuable combination of financial and business expertise together with an analytical scientific background. He obtained both his Master’s degree and PhD in Biochemistry and Molecular Biology from the Swiss Federal Institute of Technology (ETH) in Zurich and complemented his education with studies in Business Administration at the University of Hagen in Germany. DR GERHARD BAUER

German (born 1956) Head Research, Development & Operations Gerhard Bauer is a seasoned executive with a broad international background in Global Operations. He has spent more than 30 years in the pharmaceutical and medical device industry in various leadership positions. Prior to joining Straumann in 2010, Dr Bauer held managerial positions at Nextpharma, a specialist company in the biotech industry, and Bausch & Lomb, a global leader in eye-care products. From 1992 to 2008, his

122 Corporate governance

career at Bausch & Lomb was distinguished by increasing responsibility and, in 2006, he was appointed Head of Global Operations & Engineering and Member of the Executive Team. From 1984 to 1992, he worked for Ciba Vision, a subsidiary of Novartis. He began his career in production at GlaxoSmithKline in 1983. Dr Bauer received his PhD from the Institute of Pharmaceutics at the Ludwig-Maximilians-University in Munich where he also obtained his MSc in Pharmaceutics. Additionally, he received an advanced degree in Pharmaceutical Technology from the Bavarian Chamber of Pharmacists. WOLFGANG BECKER

German (born 1966) Head Sales Central Europe & Distributors EMEA Wolfgang Becker holds a number of business school diplomas including that of the St. Gallen Management Center. He began his professional career at Straumann in 1986 and held a series of managerial positions of increasing responsibility in the company’s German subsidiary, becoming Head of Human Resources in 1991, Head of Marketing in 2000, and General Manager of Straumann Germany in 2001. He served on Straumann’s Executive Committee as Head of Sales Europe from 2005 to 2006. Since then, he has been responsible for Straumann’s business in Central and Eastern Europe, and headed the Group’s distributor business from 2007 to 2008. Wolfgang Becker rejoined the Group’s Executive Management Board in his current role in 2013. GUILLAUME DANIELLOT

French (born 1970) Head Sales North America Appointed to new position in 2015, effective 1 January 2016 Having obtained a Bachelor’s degree in Physics from the University of Dijon and a Masters in Marketing from FGE in Tours, Guillaume Daniellot completed his studies with a Masters in Business Administration at the ESC European School of Management in Paris.

His professional career began in hospital product management – initially at Coloplast and then at B. Braun, as an international business unit manager. He switched to the dental industry in 2001, joining Dentsply France, where he became Sales & Marketing Director. Mr Daniellot joined Straumann in 2007 as Managing Director of Straumann France. Two years later, he transferred to Group Headquarters to become Head of Global Sales Digital Dentistry. Shortly afterwards he took over responsibility for Straumann’s Prosthetic Laboratory Business Group, including global management of sales, marketing, product development, training and education. In both these roles he was a member of the Corporate Management Group. He joined Straumann’s Executive Management Board as Head Sales Western Europe in 2013. JENS DEXHEIMER

German (born 1966) Head Sales Western Europe Appointed to new position in 2015, effective 1 January 2016 Jens Dexheimer is responsible for Straumann’s Western European region, which includes Benelux, France, Iberia, Italy, the UK and Scandinavia. In his previous positions, he successfully managed the business in Germany, the Group’s largest European market, and Iberia. He moved to Straumann in 2010 from Wella/Procter & Gamble, which he joined in 1996 and where he rose through various international roles of increasing responsibility from regional Human Resources management to country, divisional and regional leadership. He began his career in consumer goods industry with Benckiser in Germany. Mr Dexheimer obtained a degree in Economics at the State Vocational Academy in Mannheim and a Masters’ Degree from Mainz University. He also completed an Executive Development Program at Kellogg University in Chicago.

Corporate governance 123

FRANK HEMM

Swiss (born 1970) Head Customer Solutions & Education Appointed to current position in 2013 Frank Hemm holds a Master’s degree in Economics from the University of St. Gallen and a Master’s in Business Administration from Kellogg Graduate School of Management in Chicago. His business career began in management consulting with Andersen Consulting and McKinsey, focusing on business process re-engineering and strategic management consulting. He joined Straumann in 2004 and was initially responsible for Corporate Business Development & Licensing. He was appointed Head of Sales, Western Europe in 2007 and became a member of the Corporate Management Group. A year later, he was given responsibility for the Asia/Pacific Region as Head of Sales based in Singapore, where he established and built up Straumann’s regional headquarters. In addition to leading the integration and turnaround of the acquired distributors in Japan and Korea, he also expanded Straumann’s presence in China. In 2012, Mr Hemm was appointed to the Executive Management Board as Head of EMEA and LATAM, and he moved into his current role in 2013. DR ALEXANDER OCHSNER

Swiss (born 1964) Head Sales APAC Alexander Ochsner is a seasoned executive with extensive international experience in the medical device industry, having spent more than a decade in senior managerial roles at the top of the dental implant industry in regional leadership positions. Before moving to the dental industry, he held managerial positions in marketing/sales at Medtronic and Medela, where he gained experience of the medical device market in the Far East as Area Sales Manager & Executive Director of the Japanese subsidiary. From 2002 to 2008, he worked for Zimmer Dental, where he was Vice President Europe & Asia/ Pacific and a member of the Divisional Executive Team.

Alexander Ochsner joined Straumann in September 2012 from Nobel Biocare, where he was Senior Vice President & General Manager EMEA and member of the Executive Committee. Dr Ochsner gained his PhD at the Swiss Federal Institute of Technology (ETH) in Zurich, where he also attained an MSc in natural sciences. He has held his current position since 2012. PETRA RUMPF

German (born 1967) Head of Instradent & Strategic Alliances Petra Rumpf has a strong executive track record in the dental implant industry and 20 years’ experience in growth management, e-commerce, operational turnaround, strategy and Mergers & Acquisitions (M&A). She worked for Nobel Biocare from 2007 to 2014, where she was Member of the Executive Committee and responsible for Corporate Development and M&A, global e-commerce, clinical training & education, and the successful development of the distributor business. She also managed the successful initiation of the Foundation for Oral Rehabilitation (FOR), a global foundation that is active in the area of science, education and humanity. During her last three years with the company, Petra Rumpf was also responsible for AlphaBio Tec – which is active in more than 50 countries, guiding its successful expansion into China and emerging markets. Before joining Nobel Biocare, she spent 16 years at Capgemini Consulting, where she rose through various managerial roles to become Vice President Strategy & Transformation Consulting. Her work covered a spectrum of countries and industries with a focus on life sciences and high-tech. Petra Rumpf holds an MBA from the Clark University in Worcester (USA) and a BA in economics from the Trier University in Germany.

FROM LEFT TO RIGHT

MARCO GADOLA DR PETER HACKEL DR GERHARD BAUER WOLFGANG BECKER DR ALEXANDER OCHSNER GUILLAUME DANIELLOT ANDY MOLNAR PETRA RUMPF FRANK HEMM

AS OF 1 JANUARY 2016

JENS DEXHEIMER

MATTHIAS SCHUPP

126 Corporate governance

Executive Management Board

CHIEF EXECUTIVE OFFICER Marco Gadola Swiss (born 1963) EMB member since 2013

SALES CENTRAL EUROPE

CHIEF FINANCIAL OFFICER

Wolfgang Becker German (born 1966) EMB member since 2013

Dr Peter Hackel Swiss (born 1969) EMB member since 2014

SALES WESTERN EUROPE

CUSTOMER SOLUTIONS & EDUCATION Frank Hemm Swiss (born 1970) EMB member since 2012

Jens Dexheimer German (born 1966) EMB member since 2016 1

SALES NORTH AMERICA Guillaume Daniellot 2 French (born 1970) EMB member since 2013

SALES LATIN AMERICA CEO OF NEODENT Matthias Schupp German (born 1964) EMB member since 2016

RESEARCH, DEVELOPMENT & OPERATIONS Dr Gerhard Bauer German (born 1956) EMB member since 2013

INSTRADENT & STRATEGIC ALLIANCES Petra Rumpf German (born 1967) EMB member since 2015

SALES ASIA / PACIFIC Dr Alexander Ochsner Swiss (born 1964) EMB member since 2012

osition held by Guillaume Daniellot until 31.12.2015. P Position held by Andy Molnar until 31.12.2015.

Corporate governance 127

MATTHIAS SCHUPP

German (born 1964) Head Sales Latin America, CEO of Neodent Appointed to current position in 2015, effective 1 January 2016 Matthias Schupp joined Straumann from Procter & Gamble in 2007 as Regional Manager, Western Europe. In 2013, he was appointed Head of Sales for the LATAM region and joined the management of Neodent, of which he became CEO early in 2015. He joined Straumann’s Executive Management Board at the beginning of 2016. Mr Schupp has a strong track record in country/regional management in various industries. He began his career in marketing and customer service with Merck KGaA, the German Pharmaceuticals, Fine Chemicals and Diagnostics company, and rose through country management to the position of regional Manager Latin America and US. He moved to Wella in 2000 as Managing Director of the business in Russia and became Managing Director Professional Care Portugal in 2004, following the acquisition of Wella by P&G. Having graduated at the German/Brasilian High School in Rio de Janeiro, he gained most of his training in Business Administration and Management on the job through managerial and professional development programs at Merck and P&G. ANDY MOLNAR

British (born 1962) Head Sales North America (until 31 December 2015) Andy Molnar has a proven track record in the dental and healthcare industries, having held senior managerial roles in global business sales and country management. Under his leadership as General Manager of Straumann UK from 2006 – 2009, the company rose to national market leadership in implant dentistry. In 2009, Mr Molnar moved to Group headquarters as Senior Vice President Global Regenerative Sales and member of the Corporate Management Group. He joined Straumann in 2005 from SIDHIL, a UK medical equipment company, where he was Sales and Marketing Director. However, the bulk of his career –

11 years – was spent in sales and management roles at GlaxoSmithKline Pharmaceuticals. Andy Molnar holds a Bachelor of Science degree in Physiology and Biochemistry from Reading University and an MBA from Bradford University. He has held the position of Head Sales North America from 2012 to 2015. For changes in the EMB in 2015 and early 2016 please see p. 121.

OTHER ACTIVITIES AND VESTED INTEREST Marco Gadola is Vice President of the Board of Directors of Calida Holding AG, Switzerland, and Head of its Audit Committee. In 2015, he was a member of the Board of Directors and Board of trustees of the independent academic network International Team for Implantology (ITI). Under a collaboration agreement, Straumann supports the ITI with payments (see Note 29 of the Audited Consolidated Financial Statements on p. F 54). In early 2016, he was replaced on this Board by Frank Hemm. Alexander Ochsner is an advisor of the Essence & DM Dental Industry Investment Partnership, a private-equity fund addressing the dental sector in China. Other than these, no member of the EMB: –– Performed any activities in governing or supervisory bodies of significant foreign or domestic organizations, institutions or foundations under private or public law –– Held any permanent management or consultancy function for significant domestic or foreign interest groups –– Held any official function or political post. PERMITTED MANDATES OUTSIDE STRAUMANN (PURSUENT TO ART. 12 OAEC)

Art. 4.4 of Straumann’s Articles of Association states that no member of the EMB may perform more than five mandates (i.e. mandates in the highest level governing body of a legal entity required to be registered in the Commercial Register or in a corresponding foreign register) in commercial enterprises, of which no more than one may be in a listed company. The following are exempt from the foregoing restrictions: –– Mandates in enterprises that control the Company or are controlled by the same –– Mandates in enterprises that are performed at the instruction of the Company

128 Corporate governance

–– Mandates in associations, organizations, and legal entities with a public or charitable purpose, and in foundations, trusts, and employee pension funds. No member of the Executive Management may perform more than three such mandates. Mandates in several legal entities under common control or under the same economic authority shall be deemed as one mandate. At the general meeting in 2016, the Board of Directors will propose to the shareholders that the maximum number of mandates in listed companies exercised by individual EMB members should be increased from one to two, which reflects the practice in 55% of SPI companies according to a study published in 2015 by Ethos, the Swiss Foundation for Sustainable Development.

MANAGEMENT CONTRACTS The Board of Directors and the EMB have not delegated any managerial powers to persons or companies outside the Group.

INTERNAL MANAGEMENT DEVELOPMENT Straumann continued the Strategic Management Development System (SMD) program initiated in 2008 to attract, develop and deploy key talent. The Group’s goal is to fill at least 50% of key management positions with internal candidates and this goal was again met in 2015.

COMPENSATION, SHAREHOLDINGS AND LOANS The compensation and equity holdings as well as the basic principles and elements of the programs determining them for the members of the Board of Directors and the EMB and their related parties are disclosed in the Compensation Report on p. 146 f. and also in the audited financial statements in Note 4 on p. F 77 f.

CHANGES OF CONTROL AND DEFENCE MEASURES The Articles of Association of Straumann Holding AG do not contain provisions for opting out or opting up. There are no change-of-control clauses included in agreements and schemes benefiting members of the Board of Directors or the Executive Management Board or other management staff.

INFORMATION AND CONTROL MECHANISMS FOR THE BOARD OF DIRECTORS AND THE EMB MANAGEMENT INFORMATION SYSTEM The Group’s Management Information System encompasses management, business and financial reporting. The information is provided to the Executive Management Board once a month and to the Board of Directors as a monthly summary and in detail on a quarterly basis. Straumann has built up a state-of-the-art SAP enterprise resource planning system, which covers 90% of all business transactions of the Group's fully consolidated entities. With the exception of the newly acquired Brazilian company Neodent, the system links all other major subsidiary companies and production sites directly with Group headquarters. This greatly reduces the potential for error or fraud, and it enables the Executive and Senior Management to monitor local processes and related figures directly, in detail and in real time. Neodent is integrated in the Group’s reporting system but not in SAP.

INTERNAL CONTROL SYSTEM The Group’s Internal Control System (ICS) is a key instrument for designing business processes, measuring progress towards financial goals and addressing potential financial issues before they occur. It also supports the design of business processes in order to achieve the desired level of control in terms of efficiency and effectiveness. The company’s approach is to ensure that internal controls are accurate, timely, robust, and receive appropriate management attention in each respect. To achieve this, dedicated control templates are used for each business process to address major risks. The templates are continuously improved. In addition, each entity (sales affiliate, production site or global function) has a designated, trained person or team that is ultimately accountable for the assessment undertaken and the decisions arising from it. Clear benefits of the Internal Control System include enhanced segregation of duties, increased control consciousness and higher awareness of potential risks and their consequences. The ICS program is coordinated by Corporate Internal Audit, which meets with the external auditors on a regular basis to discuss the status of internal control

Corporate governance 129

issues and the status of remediation of control deficiencies. Internal controls are evaluated annually by the external auditors and by Internal Audit according to an agreed program.

2015. The external auditors participated in two of these meetings, discussing the reports on the 2014 Audit Plan and the half-year review. Details of the instruments that assist the Board in obtaining information on the activities of the external auditors can be found opposite.

INTERNAL AUDIT Corporate Internal Audit at Straumann is an independent and objective assurance and consulting body, reporting directly to the CFO and to the Audit Committee of the Board of Directors. The main task of Corporate Internal Audit is to evaluate the effectiveness of the Group’s governance and risk management processes, to review and assess internal controls, to monitor compliance with external and internal policies and procedures, and to ensure the economical and efficient use of the company’s resources. In this role, Corporate Internal Audit promotes the exchange of best practices within the Straumann Group, proposes improvements, and monitors their implementation. In addition, Corporate Internal Audit pursues the development of the Group’s Internal Control System. In 2015, Corporate Internal Audit performed four audits at global and local levels, according to the audit program approved by the Audit Committee of the Board of Directors. This was fewer than originally planned owing to personnel changes in the Audit team.

CORPORATE RISK MANAGEMENT The Board of Directors is responsible for the overall supervision of risk management and uses the Internal Audit function to this end. The Board has delegated the task of risk management to the Chief Risk Officer (CRO), who is also the CFO. Through its Audit Committee, the Board assesses and discusses risks on a regular basis in consultation with the CRO and/or the relevant members of senior management (see ‘Risk Management’ on p. 74 ff.).

EXTERNAL AUDITORS The Shareholders’ General Meeting elects and appoints the Group’s external auditors on an annual basis. In April 2015, Ernst & Young AG, Basel, was re-elected as auditor of Straumann Holding AG for a second term of one year. The auditor in charge is Daniel Zaugg, Swiss Certified Public Accountant, who took over the mandate in 2014. The Board of Directors supervises the external auditors through the Audit Committee, which met five times in

The worldwide fees paid to the auditors were as follows:

(in CHF 1 000)

31 Dec 2015

31 Dec 2014

Total audit fees

828

839

Tax consultancy

Legal Transaction services Other services

135

336

Total non-audit fees

135

336

TOTAL

963

1 175

INFORMATION POLICY Straumann is committed to a policy of open, transparent and continuous information. In accordance with the rules of the SIX Swiss Exchange, Straumann publishes detailed sales figures on a quarterly basis as well as annual and half-yearly reports. Detailed information is provided at the Shareholders’ General Meeting, and the minutes are published on the company’s website. Where necessary or appropriate, the company also publishes additional information on significant events. The CEO, CFO, the Head of Investor Relations and the Head of Corporate Communication & Public Affairs are responsible for communication with investors and representatives of the financial community, media and other stakeholders. In addition to personal contacts, discussions, and presentations in Europe, North America, and Latin America, Straumann held four quarterly financial results conferences for the media and analysts in 2015, two of which were teleconferences. The average participation at each event was more than 60 attendants on-site or remote by conference call. The conferences were transmitted live via audio webcast and/or traditional conference call. In addition, Straumann’s top management attended two sector-specific and four general equity conferences. Research analysts from 19 banks/national institutions cover developments at the Straumann Group and are listed on p. 156 of this report as well as on the ‘Investors’ section of the Straumann corporate website.

130 Corporate governance

Apart from this, Straumann frequently publishes media releases, briefing documents, and videos, which are archived and available from the company’s website (www.straumann.com). The company offers a media release subscription service via its website and takes care to ensure that investor-relevant media releases are circulated broadly and in a timely manner according to the rules of the SIX Swiss Exchange and with due regard for the principles of fair disclosure. The company does not update its releases, reports and presentations, which means that the information they contain is only valid at the time of publication. Straumann advises against relying on past publications for current information.

MEDIA USED FOR REPORTING PURPOSES The company’s website is www.straumann.com. The company’s journal of record is the ‘Schweizerisches Handelsamtsblatt’ (‘SHAB’ – Swiss Official Gazette of Commerce). Further information requests should be addressed to: Head of Investor Relations: investor.relations@straumann.com Tel. +41 61 965 11 11 Head of Corporate Communication: corporate.communication@straumann.com Tel. +41 61 965 11 11

ANNUAL REPORT & COMPENSATION REPORT Straumann’s Annual Report is a key instrument for communicating with various stakeholder groups. It is published in English (with a summary in German) in hard copy (with the Financial Report as separate print) and electronically on the company’s website, where it can also be downloaded. The Compensation Report is issued as part of the Annual Report and can be downloaded from the company’s website in the Investors section under www.straumann.com > Investors > Corporate Governance > Compensation.

CALENDAR Straumann’s calendar of planned reporting dates and investor relations events in 2016 can be found on p. 155 and a also published and updated on the company’s website.

Printed versions of the Compensation Report and full Annual Report can be ordered from: investor.relations@straumann.com.

In 2015, Straumann’s 2014 Annual Report received a prestigious Swiss HarbourClub/BILANZ award for value reporting (best in class for print and third overall) – outranking many of the world’s largest companies. The same report also received the Silver Award of the League of American Communications Professionals in their 2014 Vision Awards. Our Annual Report has consistently featured among the Top-10 in the BILANZ/HarbourClub ratings for the past ten years.

131

Compensation report

133 Foreword

134 Introduction

134

Responsibility for compensation

135

Compensation principles

136 Total compensation and compensation elements

136

Summary of overall compensation

142

Regulations relating to compensation

146

Approval of compensation

148

Report of the statutory auditor

Compensation report 133

FOREWORD

ACHIEVEMENT OF OBJECTIVES

In 2015, the Compensation Committee met five times and covered the topics on p. 135. Our main focus was on the impact of the strong Swiss franc and to review the aptness of fundamental compensation elements.

The company delivered its 2015 EBIT-margin target of more than 20% despite the currency impact. This was achieved through organic top-line growth of 9%, efficiency gains and successful cost management. At the same time, the company made good progress with all of its strategic priorities. In recognition of this remarkable performance, the Board has decided to award a discretionary bonus to the staff in Switzerland for the 2015 business year, which fully compensates for the voluntary forfeits in the great majority of cases.

MITIGATING THE STRONG CURRENCY IMPACT In response to the sharp appreciation of the franc against most currencies in January, the company took several measures to manage costs in order to protect its business and jobs. In Switzerland, our management and staff agreed in February to new employment contracts with significant compensation reductions depending on seniority. The Board of Directors also agreed to reduce their compensation significantly. Due to the currency volatility and the resulting uncertainty, the Board considered it necessary to use operating profit (EBIT) rather than economic profit (EP) as the main performance indicator for the short-term incentive – as a temporary measure. The Compensation Committee was closely involved in compiling these measures, which reflect Straumann’s principle of addressing challenges in an entrepreneurial and forward-looking manner. We have committed to review them annually and can revoke them should there be a sustained recovery of the exchange rates.

CONTINUED REVIEW It is essential that our compensation system effectively supports the company’s efforts to build and foster a high-performance culture and to attract the best talent in our industry. It therefore seeks to promote sustainable performance, entrepreneurship and loyalty – thus combining the interests of shareholders, management and employees. To ensure that we remain competitive as an employer, we periodically make comparisons with peer companies. In 2015, we commissioned an independent benchmark analysis of the overall remuneration of our executives, senior managers, and sales teams around the world. This showed that our compensation schemes compare well with the benchmarks. Thus, apart from the aforementioned changes to the remuneration in Switzerland, there were no significant changes to the compensation system in 2015.

The 3-year objective (total shareholder return of 10% per year) for the 2012 tranche of the long-term incentive program for senior management was exceeded, yielding the capped maximum payout of 200%.

LOOKING AHEAD In 2016, the main focus of the Committee will be the continuous assessment of Straumann’s compensation system to maintain its competitive edge. In this context we will extend the benchmark analysis across further functions of the Group in addition to addressing any significant deviations identified in 2015. The Board foresees only basic compensation increases that are linked to structural adjustments. In high inflation countries, local management may grant general merit increases. This approach will be implemented carefully and with due regard to local developments as well as our aim to remain a competitive employer. Although exchange rates remained adverse, they stabilized in 2015. Hence the Board has decided to revert to economic profit as the major performance indicator for the short-term incentive in 2016 and beyond. On behalf of the Board and our shareholders, I would like to thank our staff for their commitment and achievement. I would also like to thank the shareholders and the Board for their confidence in the Compensation Committee, and the management team for their constructive approach to the dialog in 2015.

Stefan Meister Chairman of the Compensation Committee

134 Compensation report

INTRODUCTION This report provides an overview of Straumann’s compensation principles and practices and is in line with the Swiss Code of Best Practice for Corporate Governance and Swiss law. It provides information on the compensation of the general staff, management, Executive Management Board (EMB) and the Board of Directors (BoD). It also explains the equity participation programs, including disclosure on the equity participation of the EMB and the Board of Directors. The compensation paid to these two groups is presented in the audited table on p. 146 f. Straumann’s present compensation system has been in place since 2011, when the Compensation Committee conducted a comprehensive review of the company’s overall approach to rewarding employees and compensating the Board. The system was published in our Compensation Reports, which were approved through consultative votes in 2011 – 13 and formally approved for 2014 by the respective Shareholder’s Annual General Meetings (AGM). The compensation system is built on principles designed to: –– Align the interests of the leadership team and employees with those of our shareholders –– Support our attractiveness as a global employer, helping us to recruit and retain an engaged workforce –– Reward individuals according to clear targets –– Encourage entrepreneurism, above-market performance, accountability and value creation –– Bring out the best in each of our colleagues in line with our cultural journey objectives.

Compensation Committee can be found on p. 120 in the section on Corporate Governance.

COMPENSATION RECOMMENDATIONS & DECISIONS Recipient

Compensation recommended by

Compensation decided by

Chairman of the Board

Compensation Committee/Board of Directors

AGM

Board Members CEO

Chairman of the Board/Compensation Committee/Board of Directors

Executive Management

CEO

Senior Management

EMB

CEO

Management and staff

Line Management

EMB

At the 2016 AGM, the shareholders will be asked to approve: –– The short-term incentive (STI) of the EMB for the 2015 business year –– The total fixed compensation of the EMB for the period 1 April 2016 – 31 March 2017 –– The total long-term incentive (LTI) for the 2016 grant for the EMB (pending final approval by the Board of Directors based on 2016 results) –– The total compensation of the Board of Directors for the period between the 2016 and 2017 AGMs.

RESPONSIBILITY FOR COMPENSATION The Board of Directors nominates the members of the Compensation Committee for election by the AGM. The Committee is entrusted with the design of the compensation system, which applies to the Board of Directors and EMB. It reviews the compensation principles and programs annually and benchmarks remuneration against relevant benchmarks and other related criteria. The Committee reports to the Board of Directors on its views regarding compensation practices as well as on the compensation of the EMB at least once a year and proposes changes when necessary. Further information on the duties of the

In 2015, the Compensation Committee met five times with all its members present. The Chairman of the Board and the CEO participated in all of the meetings except during discussions concerning the evaluation and determination of their own compensation. The calendar and general agenda of the Committee are presented in the table opposite.

Compensation report 135

TOPICS AND SCHEDULE OF THE COMPENSATION COMMITTEE MEETINGS 2015 FEBRUARY Reviewed – CEO & EMB performance – Compensation measures addressing currency impact incl. Company target change from EP to EBIT Approved – 2014 compensation report – Compensation of new EMB member

APRIL Reviewed – HR policies – Compensation Committee charter – Impact of new regulations Followed up – Currency impact measures – AGM feedback on Corporate Governance, Improvements, miscellaneous

Determined 2015 target framework

AUGUST

OCTOBER

Reviewed – Proposal for CH pension fund transfer – F undamental compensation elements – Refined LTI concept – L eadership development programs – Cultural Journey progress

Reviewed – BoD composition & compensation – Straumann total remuneration system (including 2015/16 STI &LTI )

DECEMBER Reviewed – 2015 Compensation Report topics – C ompensation benchmarks for CEO & EMB – 2 016 salary development plan

Update on global benchmarking, incentive compensation & management projects

COMPENSATION PRINCIPLES The compensation principles outlined below are valid for all Straumann employees, including the EMB, but not the Board of Directors, uncless expressly stated.

VALUE CREATION DRIVES COMPENSATION We believe that a compensation system driven by value creation encourages sustainable performance, loyalty and entrepreneurship and is thus in the interests of management, employees and shareholders alike. We are committed to compensating our staff, management and Board of Directors in a way that is competitive and rewards sustainable long-term performance as well as current success. It is Straumann’s view that the company’s success depends largely on the quality and engagement of its employees. A modern compensation system is an important instrument for attracting, retaining and motivating talented people. Straumann’s compensation system takes these factors into account in that it –– Offers competitive compensation packages –– Fosters a high-performance culture that differentiates and rewards above-average individual performance, both in the short and long term –– Links variable long-term compensation to value generated by the company over the long term based on shareholder expectations

–– Is benchmarked with comparable companies in the industry –– Provides employees with benefits based on good practices and regulations in local markets, and –– Is periodically reviewed by the Compensation Committee.

COMPREHENSIVE BENCHMARKING Straumann’s policy is to pay employees, the EMB and the Board of Directors a base compensation that is close to the median of comparable medical device companies in the respective local market. In addition, the variable compensation elements are set to enable the overall compensation to be be moved toward the upper quartile for outstanding performance. Benchmark reviews for the EMB are conducted externally and include market analyses by industry specialists. Bespoke benchmarks include a peer group of comparable companies in various industries selected according to the following criteria: –– Comparable scope and business complexity –– Comparable geographic footprint –– Companies with whom we compete for talent. In 2015, we commissioned benchmarks from wellknown global providers for our Strategic Management and our sales teams around the world. The analysis

136 Compensation report

and comparison revealed that our compensation was generally in line with or above the benchmark in most countries with few exceptions. Any significant deviations from the benchmarks will be addressed in the 2016 compensation reviews.

However, in response to the exceptional currency developments in 2015, the Executive Management and the Senior Management in Switzerland agreed to waive their right to a long-term incentive. Notwithstanding, they do not forego their long-term incentive payout for 2012 – 2014.

ETHICAL, FAIR STANDARDS We are committed to fair and equal treatment of all our employees and seek to be in full compliance with International Labor Standards. Compensation is not influenced by gender. Local minimum wage regulations have no bearing on our compensation policy, as our compensation clearly surpasses them.

TOTAL COMPENSATION AND COMPENSATION ELEMENTS Overall, Straumann spent CHF 316 million on compensation, benefits and social costs in 2015, corresponding to an average of CHF 91 000 per employee (2014: CHF 120 000). In 2015, the average compensation per employee (total compensation divided by the average number of employees) went down significantly for the following reasons: –– The consolidation of Neodent and the build-up of our team in China collectively added almost 1000 new employees in regions where the cost of living and personnel costs are considerably lower than in Europe, North America and Japan, where more than two-thirds of our staff were located in 2014. –– Our staff in Switzerland, including the Board of Directors, agreed to compensation reductions to help mitigate the impact of the sharp appreciation of the Swiss franc against most currencies. Specifically, the reductions are in the form of waived bonus/incentive rights as presented in the table on the right and required new contracts for all employees. –– We restricted pay increases to structural changes only, to support our cost reduction initiatives. As in the past, the compensation of employees and managers in 2015 comprised fixed as well as short- and longterm variable components, the mix of which was defined by role, profile, location and strategic impact. For the Executive and Senior Management, greater emphasis has generally been placed on the long-term variable component, in line with our strategic objective of promoting entrepreneurism. Their compensation mix has included a long-term variable compensation element, emphasizing long-term, sustainable decision-making and staff retention.

DETAILS OF COMPENSATION REDUCTION INITIATIVE IN SWITZERLAND Proportion of total compensation

Level

Voluntary reduction through

General staff

Reduced short-term 5% incentive (bonus)

Lower and Reduced short-term 6% middle management incentive (bonus) Senior and executive Forfeit of 10 – 35% management long-term incentive Board of Directors

Reduced fixed compensation

17%

The EMB and the Compensation Committee have committed to review the aptness of these measures annually.

SUMMARY OF OVERALL COMPENSATION FIXED COMPONENTS In 2015, the fixed compensation elements included the following: –– Base salary –– Pension plans (depending on local practices and regulations) –– Other benefits (depending on local practices and regulations). BASE SALARY

Straumann employees receive a fixed salary based on: –– Job profile –– Experience and skills –– External comparisons –– Place of work and local regulations –– Strategic importance of the position. SALARY PROGRESSION 2015 – W2016

As mentioned previously, there were no general salary increases in 2015. Where necessary, structural adjustments were made to adjust salaries to benchmarks and for staff who took on new roles and/or increased responsibilities. For 2016, the Board of Directors foresees only basic compensation increases that are linked to structural adjustments. In countries with

Compensation report 137

COMPENSATION MIX

Short term

Long term

Executive management FIXED

Senior management

VARIABLE

Strategic impact Responsibility Skills Role

Management

Location General staff Cash PSUs bonus

Base salary Pension Benefits DRIVERS

Local practices & regulations

Company function, individual performances

Share price performance

Competitiveness

Performance

Value creation, talent retention

PAY MIX CORRIDOR (AT-TARGET ACHIEVEMENT) 35–45%

30–35%

135000

30–35%

Executive Management 1 60–75%

120000 15–25%

10–15%

Senior Management 75–90%

105000 90000 75000 60000

10–25%

45000

Other Management

30000

90–100%

0–10%

15000 0

General Staff ¢ Base salary

TOTAL COMPENSATION AVERAGE PER EMPLOYEE

¢ Short-term incentive

2012

¢ Long-term incentive

At target, the variable compensation (incl. STI and LTI) for the CEO will amount to 190% of base salary and in average to 104% of base salary for the remaining EMB members.

2013

2014

20152

Including Neodent

high inflation, the local management teams may grant general merit increases. These approaches will be implemented carefully and with due regard to local developments as well as our ambition to remain a competitive employer.

Internal analyses carried out in recent years showed that Straumann and its subsidiaries fulfill and, in some respects, exceed local legal requirements. In most cases, pension obligations are fully funded. Where this is not

PENSION PLANS

138 Compensation report

SUMMARY OF OVERALL COMPENSATION ELEMENTS OF TOTAL REMUNERATION Element

Type

Description

Base salary

Fixed cash

- Fixed compensation, determined by scope and complexity of the role - Generally within an 80-120% range of relevant market median

Short-term incentives (STI – one year)

Performance, cash

- For EMB, Senior Management and a broad group of employees, paid annually - Payout range: 0-200% of target - Performance measured against business results and accomplishment of individual and financial targets

Long-term incentives (LTI – three years)

Performance Share Units (PSUs)

- For the EMB and a defined Senior Management group - Payout range: 0-200% of target - The grants made prior to 31.12.2011 vest in three installments (after 1, 2 and 3 years) and are determined according to the Group’s total shareholder return (TSR) and return on shareholders’ equity (ROE) over three calendar years - Since 01.01.2012, PSUs with a 3-year vesting period have been granted and shares are allocated based on a TSR of 10% p.a. over a 3-year period; see p. xxx. (for 2015 the LTI for eligible employees in Switzerland and the EMB was forfeited)

Fixed benefits

- Employee benefits are provided in line with local market practices - Pension plans are being de-risked in line with Group guidelines - Benefits are positioned towards relevant market medians.

Variable pay

Employee benefits

the case, liabilities are reported in the Annual Report following actuarial rules. Further information on pension plans is provided in Note 21 to the audited consolidated financial statements on p. F 48 ff. Information on pension fund risks is also provided in the Risk Analysis on p. 78.

complexity, a higher level of professional expertise is required to manage them. Based on the recommendations of the Pension Fund Trustees, the EMB decided in August to transfer the Straumann Pension Fund completely to the independent GEMINI Collective Foundation with effect of 1 January 2016. The transfer has no impact on the pension scheme participants.

SWITZERLAND

EUROPE

There are two defined contribution pension plans in Switzerland, which together make up the occupational benefits at Straumann. The basic insurance plan offers protection against the financial consequences of old age, death and disability to all employees of Institut Straumann AG and Straumann Villeret SA. There is additional supplementary insurance for selected management whose proportion of variable compensation is high. Straumann employees in Switzerland and the Chairman of the Board of Directors are eligible for this pension scheme.

In other European countries, Straumann offers retirement insurance according to local practices. According to IFRS accounting standards, the majority of European pension plans are considered funded or unfunded defined contribution plans.

The pension plans were run semi-autonomously until the end of 2015. Due to the increase in regulations and

USA

A 401k retirement plan is provided to all Straumann employees in the USA over 21 years of age to enable them to save for retirement. The 401k plan is a defined contribution plan whereby (a) the employee has the option of making deferral elections from his/her pay on a pre-tax basis and (b) Straumann USA may

Compensation report 139

make matching contributions should the employee elect to make deferral elections. The plan is a tax-qualified plan under the Employee Retirement Income Security Act (ERISA). In addition to the 401k plan, Straumann USA has a Supplemental Executive Retirement Plan (SERP) for a select management group. The purpose of this plan is to provide eligible employees with defined employer contributions and the opportunity to elect to defer receipt of certain compensation that would otherwise be payable to them in cash. The plan is intended to be a non-qualified, unfunded, deferred compensation arrangement for purposes of Title I of ERISA and is intended to comply with Section 409A of the Internal Revenue Code. According to IFRS, SERP is treated as a defined contribution plan. OTHER BENEFITS

Straumann’s benefit programs are an integral part of total compensation and are designed to enable the company to compete for and retain employees and managers. Benefits are structured to support our overall business strategy and are aligned with local practices and legislation. Examples of benefits include public transportion passes, lunch vouchers, the use of company cars, mobile phones, and concessions on Straumann products. EMPLOYEE SHARE PARTICIPATION PLAN

Employees in Switzerland have the opportunity to purchase Straumann shares for 75% of the average share price over a period of seven trading days beginning on the ex-dividend day (see table obove right). The shares are subject to a two-year blocking period and are dividend-bearing from the day of purchase. In 2015, the plan was continued at a reduced level as one of the cost-reduction measures to mitigate the strong currency impact. While all employees in Switzerland were able to participate, the number of shares they could purchase was reduced by 50% and ranged from a minimum of 10 to a maximum of 500, depending on their level in the organization. It is planned to reinstate the plan fully in 2016. The shares required for this plan were held by the Group as Treasury shares. The Board of Directors is not eligible for this program.

EMPLOYEE SHARE PLANS Employees participating

Shares issued

Discount share price at issue

End of lock-up period

2015

4 653

CHF 196

April 2017

2014

107

11 495

CHF 138

April 2016

2013

2 405

CHF 88

April 2015

VARIABLE COMPONENTS In 2015, the variable compensation components included one or more of the following: –– Performance-related short-term incentive –– Long-term incentive (Performance Share Plan) SHORT-TERM INCENTIVE (STI)

The STI scheme (table overleaf) is tied directly to profit generated by the Group. For some areas, additional specific financial and/or individual performance criteria apply. Hence, the payout is based on a combination of the following: –– Company performance –– Achievement of specific financial target –– Individual performance COMPANY PERFORMANCE

In general economic profit (EP) is the key performance indicator in Straumann’s STI scheme. The Board of Directors – in consultation with the EMB – sets the absolute target for EP generation in Swiss francs annually, prior to the respective performance cycle, based on medium-term business plans and the defined budget for the year of performance. The pay-out ranges from 0 to 200% of the target. EP is calculated by deducting a capital charge from the net operating profit after tax (NOPAT). The Board of Directors may exclude extraordinary elements from the calculation of the EP. The capital charge represents the cost of capital calculated on the basis of an average equity return expected by investors. This scheme builds the basis for our general bonus calculation model. The main advantage of EP as a performance objective is that it goes beyond revenue growth and profitability increase and takes into account the resources used to achieve these increases and the resulting additional capital costs.

140 Compensation report

Based on its business development and growth projections at the outset of 2015, the Group’s objective was to continue investing in growth initiatives and, at the same time, to increase profitability in order to achieve a sustainable EBIT margin of more than 20%. When the Swiss National Bank discontinued its policy to maintain a minimum exchange rate of the Euro of CHF 1.20 in January, the Swiss franc appreciated dramatically against most major currencies in which the Group does business – especially the Euro. Straumann calculated that a continuation of the foreign exchange rate impact would reduce its full-year EBIT forecast by up to CHF 40 million given the mid-January exchange rate, cutting the corresponding margin expectation to less than 16%. The Group promptly initiated a cost reduction program to protect margins without compromising key investments. To drive the implementtion and success of these initiatives, the Board of Directors considered it necessary – as a temporary measure – to use operating profit (EBIT) rather than economic profit (EP) as the main performance indicator for the shortterm incentive. For the bonus calculation, the original EBIT target including the currency impact was set as the lower threshold. The upper threshold was based on the achievement of the cost-saving initiatives, which would yield an EBIT margin of 20% in spite of the currency impact. The lower threshold would yield 0% bonus achievement, the midpoint 100% and the upper threshold 200%. The target relates to organic EBIT, i.e. excluding the effect of acquisitions and currencies. Thanks to good topline growth, efficiency gains and successful cost management the Group actually achieved an organic EBIT margin of 23.3% and exceeded the upper threshold, resulting in a maximum bonus achievement of 200%. In the meantime the currency situation is more stable and predictable, which has enabled the Board to revert to EP as the major performance indicator for the shortterm incentive in 2016 and beyond.

member of the EMB responsible for the respective organizational unit. In 2015, for example, improvements to contribution margin and to strategic key sales initiatives were set as specific financial targets for the Sales Regions whilst improvement to cost of goods sold was defined as a specific financial target for Research, Development & Operations. INDIVIDUAL PERFORMANCE

Individual performance is measured by the achievement of targets established with the respective line manager at the beginning of the year in the performance management process. These may involve a combination of specific project targets, the development of competences or skills, and specific contributions to team or organizational unit targets. A global performance management system supervised by Human Resources ensures that the objectives are defined in line with the company’s strategic goals and that their achievement is assessed continuously during the year. WEIGHTING OF PERFORMANCE CRITERIA

The weighting of the performance criteria depends on the role and responsibilities of the individual (see table on left). Overall, there is a stronger focus on individual targets as determined by management, in order to encourage and reward above-average individual performance appropriately.

SHORT-TERM INCENTIVE PERFORMANCE CRITERIA WEIGHTING Management Level

Chief Executive Officer

Company

Financial

Individual

80%

20%

Executive Vice President

40–80%

0–40%

20–50%

Senior Vice President

20–40%

0–60%

20–60%

Vice President

20–40%

0–60%

20–60%

Management (Director, Senior Manager, Manager)

20–30%

0–60%

20–70%

0–20%

80–100%

Staff

SPECIFIC FINANCIAL TARGETS

This table shows the weighting of the different types of performance measures according to the level of the employee and depending on the organizational unit the employee is working in

Specific financial targets are used for the following organizational units: Sales Regions, Customer Solutions & Education, Instradent Management, and Research, Development & Operations. The targets are derived from annual budgets and are set by the CEO together with the

The measurement scale for the achievement of company performance and financial targets ranges from 0% to a

MEASUREMENT OF ACHIEVEMENT

Compensation report 141

SHORT-TERM INCENTIVE TARGET ACHIEVEMENT (STI)

SHARE ALLOCATION BASED ON PERFORMANCE SHARE UNITS AND TOTAL SHAREHOLDER RETURN B

200

250

100

MIDPOINT

Achievement (%)

200

150

100

0 -10

-5

Total shareholder return p.a. (%)

Target (for example in CHF)

ln the short-term incentive model, the scale for financial target achievement extends from 0% to a maximum of 200% and is based on a line joining three points: 0% (point A), 100% (midpoint) and 200% (point B). The difference on the horizontal axis between the midpoint and point B must be equal to, or greater than, the difference between the midpoint and point A. The actual target achievement is measured by way of linear interpolation.

The compensation model awards shares according to the number of PSUs allocated and the total shareholder return achieved per annum over a three-year vesting period. At the end of the performance period, no shares will be allocated for a TSR of 0% p.a. or less; one share will be granted per vested PSU if the TSR is +10% p.a. and two shares per vested PSU for a TSR of +20% p.a. or more (capped at 200%). For a TSR between 0% and 10% p.a. or between 10% and 20% p.a., the number of shares allocated per vested PSU is calculated on a linear basis.

maximum of 200% of target and is based on a line joining three points as explained in the illustration above.

for 2015 as part of the measures to mitigate the currency impact.

For individual target achievement, the assessment scale ranges from 0% to 150% of target. It is based on descriptors with corresponding percentage ranges: –– Exceeds expectations –– Meets expectations –– Partially meets expectations.

PERFORMANCE SHARE PLAN

This plan was introduced in 2012 and is designed to: –– Offer an attractive variable compensation element related to TSR –– Increase shareholdings of key employees, and –– Align participants’ interests with those of the shareholders.

LONG-TERM INCENTIVES (LTI)

The LTI program is designed for the EMB, Senior Management and other key employees depending on role, responsibility, location, strategic impact, and market practice. Participation is determined by the Board of Directors, who themselves are not eligible. As noted previously, the Executive and Senior Management team in Switzerland agreed in their new contracts to forgo their long-term incentive plan

GRANT

Participants in the plan are granted Performance Share Units (PSUs) entitling them to receive shares after a three-year vesting period. PSUs are granted once a year after the AGM. No cash investment is required from the participants. The number of PSUs granted is equal to the participant’s LTI value divided by the fair value of one PSU at the grant date. The LTI target value is a percentage of the total target compensation, and is

142 Compensation report

determined in accordance with the participant’s role in the organization. ALLOCATION OF SHARES

The PSUs vest at the end of the performance period and are converted into shares. They are forfeited if the individual leaves the company before the vesting date. The number of shares allocated per PSU depends on the achievement of an absolute Total-Shareholder-Return target, which is determined by the Board of Directors and is currently set at 10% per annum for the 3-year performance period. Performance against the TSR target is calculated using the average of the closing share prices over the period of seven trading days starting on the exdividend date in the year of grant and in the year of vesting. The achievement factor is capped at 200%. Current participants are entitled to Performance Share Units that were awarded in 2012 – 2014 and vest in 2015 – 2017. The three-year TSR target for the PSUs that were awarded in 2012 and vested in 2015 was clearly exceeded and resulted in a maximum achievement factor of 200%. TOTAL SHAREHOLDER RETURN

TSR is the profit (or loss) realized by an investment at the end of a year or specific period. It includes capital gains or losses from changes in the share price as well as gross dividends.

period. The fair value of the options granted was determined using the Black-Scholes valuation model. The calculation of the option value was performed by independent specialists. Since 2012, no further option allocations have been made.

REGULATIONS RELATING TO COMPENSATION The Swiss Ordinance against Excessive Compensation (OaEC) is fully reflected in Straumann’s compensation schemes for the EMB and Board of Directors and in the Articles of Association (AoA), which are available on our website: www.straumann.com/articles.

AGREEMENTS WITH BOARD OF DIRECTORS AND EMB Agreements with members of the Board of Directors regarding their compensation, and with members of the EMB regarding their employment may be temporary or permanent. Temporary agreements have a maximum term of one year, with the possibility of renewal, while permanent agreements have a notice period of no more than 12 months. Non-compete clauses are permissible. Compensation may be paid as indemnity for non-compete clauses. In such cases, the compensation must not exceed the last annual total compensation paid to the individual and may not be paid for more than one year (see Art. 4.5 AoA). In 2015 no compensation was paid to related parties of members of the EMB and members of the Board of Directors.

PSU FAIR VALUE

The fair value of the PSUs granted has been determined using a Monte Carlo simulation algorithm. The valuation was performed by independent specialists applying the following significant inputs into the model: grant date, vesting date, average reference price, performance target including ‘cap’ and ‘floor’, share price at issue, risk-free interest rate, volatility, and expected dividend rate. OPTION PLAN (UP TO AND INCLUDING 2011)

Up to the end of 2011, tradable options (non-tradable for participants outside Switzerland) with a term of six years and a two-year vesting period were allocated. The exercise price was equal to the share price on 31 December/1 January. The value of the options was determined at grant date and is expensed as a personnel expense from service commencement to the end of the vesting

COMPENSATION OF THE EMB The principles for the compensation of the EMB specify both a fixed cash component, which includes base salary and other fixed compensation items, and a variable component (see Art. 4.2 AoA). The latter includes: –– An STI based on the achievement of corporate performance targets, and/or financial targets, and/or individual targets, and –– A variable share-based LTI based on the achievement of performance targets over a period of three years (not granted in 2015). The compensation of each member of the EMB is determined according to role and responsibilities and is based on external benchmarks. Each member receives a base salary and is included in the STI plan, as described earlier. The compensation packages of the existing

Compensation report 143

members of the EMB remained more or less unchanged in 2015 with regard to the fixed cash component and STI. If there are changes in the EMB subsequent to the AGM, the following apply: –– The total compensation (at target) of a new CEO shall not exceed 140% of the compensation paid to the departing CEO. –– The compensation of any other incoming member of the EMB shall not exceed 140% of the average compensation paid to EMB members (excluding the CEO). –– In addition, and as defined in the AoA, incoming EMB members may receive compensation to offset any losses of valuable rights associated with giving up their prior activities. The amount of this compensation may not exceed CHF 1 000 000 for a CEO or CHF 500 000 for other members (see Art. 4.3 AoA).

PERFORMANCE SHARE UNIT FAIR VALUE 2015

2014

Grant date

22.04.2015

25.04.2014

Vesting date1

22.04.2018

25.04.2017

Share price at grant

262.50

184.00

Risk-free interest rate

-0.63% p.a.

0.14% p.a.

Expected volatility

31.75% p.a.

31.81% p.a.

CHF 208.06

CHF 152.33

Expected dividend yield2 Estimated fair value

1 Seven trading days after the ex-dividend date. 2 Assuming immediate reinvestment of dividend

OUTSTANDING PERFORMANCE SHARE UNITS

As of 1 January Granted PSUs

At the 2015 AGM, the shareholders prospectively approved a fixed compensation of CHF 5.0 million for the collective EMB (as composed in April 2015) for the period between 1 April 2015 and 31 March 2016. The variable STI for the business year ending 31 December 2015 will be submitted for approval by the shareholders at the AGM in 2016. The table on page 146 shows the compensation paid to the EMB in 2015 in accordance with the OaEC.

payment.

Exercised Forfeited PSUs1 Expired PSUs AS OF 31 DECEMBER

2015

2014

99 810

79 138

7 586

30 063

(23 559)

(7 038)

(9 391)

76 799

99 810

1 Eligible

participants who left Straumann voluntarily or as part of the 2013 reorganization forfeited their PSU allocations for 2012 and 2013.

COMPENSATION PAID TO FORMER MEMBERS OF THE EMB

NUMBER OF OPTIONS OUTSTANDING UNDER THE STOCK OPTION PLAN

In 2015, Dr Sandro Matter and Thomas Dressendörfer received compensation based on their employment contracts. Neither was a member of the EMB in 2015.

As of 1 January Granted options

2015

2014

2013

131 702

199 470

260 676

LOANS TO EMB

Exercised options

(47 447)

(62 796)

The AoA do not allow for loans, advances or credits to any member of the EMB or related parties.

Forfeited options

(12 497) (48 709)

SHAREHOLDINGS OF THE EMB

The shareholdings in Straumann shares and stock options of the members of the EMB who held office at the end of 2015 are shown in the table on p. F 77.

Expired options

(7 055)

(4 972)

As of 31 December

77 200

131 702

199 470

Options available for exercise

84 255

136 647

156 057

Options available for exercise

Options expiring at year-end

2015

7 055

77 200

2016

44 783

77 200

2017

32 417

TOTAL

84 255

144 Compensation report

SUMMARY OF ALL VALID WARRANTS ISSUED IN THE STRAUMANN STOCK OPTION PLAN Year

Security ID number

Market maker

Type/ratio

Number

Strike price

Expiry

STMNCC1 Wt 12.16 (STMN16)

2010

12217893

Credit Suisse Derivatives

American 50:1

2 278 450

214.00

12.2016

STRAUM16 OPT1 ESOP (USA)

2010

4000211

Not traded

American 1:1

5 812

214.00

12.2016

STRAUM16 OPT1 ESOP (other countries)

2010

4000211

Not traded

American 1:1

1 750

214.00

12.2016

STMCS1 Wt 12.17 (STMN17)

2011

14630069

Credit Suisse Derivatives

American 50:1

2 226 400

162.10

12.2017

STRAUM17 OPT1 ESOP (USA)

2011

4000212

Not traded

American 1:1

2 105

162.10

12.2017

STRAUM17 OPT1 ESOP (other countries)

2011

4000212

Not traded

American 1:1

750

162.10

12.2017

Name/symbol

TOTAL VALID WARRANTS ISSUED 1

4 515 267

Traded on the SIX Swiss Exchange.

VALUE DEVELOPMENT OF OPTIONS Name/symbol

Grant

Vesting

Value at grant

Value at vesting

Value 31.12.2015

STMNCC1 Wt 12.16 (STMN16)

2010

2012

53.50

3.00

92.00

STMCS1 Wt 12.17 (STMN17)

2011

2013

38.00

32.00

143.00

Traded on the SIX Swiss Exchange.

COMPENSATION OF THE BOARD OF DIRECTORS According to the AoA, the compensation of the Board of Directors must be approved by the AGM and consists of a fixed compensation component only, which is paid in cash and shares (Art. 4.1 AoA). The Board of Directors establishes the compensation payable to its members within the limits approved by the AGM. The 2015 AGM approved a maximum total compensation for the Board of Directors for the term of office ending at the 2016 AGM of CHF 2.25 million. It consists of a fixed compensation paid in cash and shares. The proposed total amount includes social security charges and the fringe benefits disclosed in the Compensation Report. Approximately 40% of the compensation is paid in shares which are blocked for 2 years. In addition to shares allocated as part of their compensation, each member of the Board of Directors is required to hold at least a further 2 000 Straumann shares, demonstrating

engagement with the company. This approach is in line with best practice. Irrespective of role, all members of the Board of Directors are entitled to reimbursement from the company for their reasonable expenses for travel to and from Board meetings, or on behalf of the Board, and other related incidental expenses, in accordance with the expense regulations for Members of the Board of Directors of Straumann Holding AG. As part of the cost-saving measures introduced in February 2015 to mitigate the impact of the Swiss franc appreciation, the Board of Directors proposed a maximum collective compensation to the AGM that was CHF 650 000 below the compensation in 2014. The compensation of the Board of Directors is laid out in the tables on p. 146 f. in accordance with Swiss law and is in line with current market practices.

Compensation report 145

COMPENSATION APPROVED 1 AND DISPENSED ( in CHF million )

2014

2015

2016

BOARD OF DIRECTORS 1 FIXED AGM

Term of office

AGM

Approved max: 2.900

Dispensed: 2.836

Term of office

AGM

Approved max: 2.250

Approved max: 2.413 Dispensed: 2.295

EMB 1 FIXED AGM

AGM Approved max: 4.700

Dispensed: 4.495 Other: 0.428 2

AGM Approved max: 5.000

Approved: 4.925 Dispensed: 4.620 Other: 0.5002

EMB 1 VARIABLE

1 2

STI approved & dispensed: 4.282

STI to be dispensed after approval by 2016 AGM: 5.277

LTI ( grant 2014 ) Approved max: 2.500 Dispensed: 1.923

LTI ( grant 2015 ): forfeited Dispensed: CHF 0

As composed at time of respective AGM and including social costs. 'Other compensation’ according to Art. 4.3 of Articles of Association includes compensation of Peter Hackel in2014 and Petra Rumpf in 2015 for remuneration forfeited due to resignation from previous employment.

In April, the AGM approves the maximum fixed compensation of the Board of Directors for their new term of office, which runs between AGMs. At the same time, the AGM approves the fixed compensation of the Executive Management Board for the period starting on 1 April and ending on 31 March, as well as their short-term incentive for the completed business year, and their long-term incentive grant for the current year. In each case the approvals relate to the Board and EMB configurations at the time of the respective AGM. This chart shows the amounts approved by the AGM, the respective portions thereof calculated for the calendar year, and the amounts dispensed in the calendar year to the active members of the Board and EMB.

146 Compensation report

2015 (AUDITED TABLE) Fixed compensation

Other compensation

Gilbert Achermann (Chairman)

624

119

743

Dr h.c. Thomas Straumann (Vice Chairman)

312

329

Dr Sebastian Burckhardt

212

223

(in CHF 1 000)

Total compensation

BOARD OF DIRECTORS

Roland Hess (Chairman Audit Committee)

262

276

Ulrich Looser

212

223

Dr Beat Lüthi

212

223

Stefan Meister (Chairman HR Committee)

262

276

2 096

197

2 293

Other compensation

Total compensation

Total

(in CHF 1 000)

Performance bonus

Performance share units

750

1 535

306

2 591

2 831

2 910

2 113

7 854

Fixed compensation

EXECUTIVE MANAGEMENT BOARD Marco Gadola (CEO) Other members (7 until 31 Mar 2015, thereafter 8)1

4 84

367

4 49

1 300

Total

Former member

4 065

4 812

2 868

11 745

TOTAL

6 161

4 812

3 065

14 038

Includes compensation of remuneration components forfeited by Petra Rumpf due to resignation from previous employment.

None of the Board members received any compensation from the Straumann Group other than that disclosed in this report.  COMPENSATION PAID TO FORMER MEMBERS OF

prospectively for the period commencing on 1 April and ending on 31 March of the next calendar year. The variable short-term components of the EMB’s compensation are approved retroactively for the business year preceding the AGM (see art. 3.1.9 AoA and table on p. 145).

THE BOARD OF DIRECTORS

In 2015, no payments to former members of the Board or related parties were made. LOANS TO MEMBERS OF THE BOARD OF DIRECTORS

The AoA do not allow for loans, advances or credits to any member of the Board of Directors or related parties. Thus, no such payments were made in 2015.

APPROVAL OF COMPENSATION The AGM prospectively approves the maximum compensation payable to the Board of Directors for the term of office ending at the next AGM. Likewise, the AGM approves the maximum fixed compensation of the EMB

The compensation of the individual members of the Board and the EMB is decided by the Board of Directors on recommendation of the Compensation Committee and within the limits set by the AGM. The relevant criteria are explained on p. 142 ff., and the compensation awarded to the Board of Directors and the EMB is disclosed on the tables above and opposite. For 2016, a maximum collective STI of CHF 6.0 million (including social costs and other compensation) is budgeted for the EMB if all relevant targets are achieved to the defined maximum (subject to approval at the 2017 AGM). In addition, the Board of Directors will submit a

Compensation report 147

2014 (AUDITED TABLE) Fixed compensation

Other compensation

Total compensation

Gilbert Achermann (Chairman)

721

179

900

Dr h.c. Thomas Straumann (Vice Chairman)

360

387

Dr Sebastian Burckhardt

251

271

(in CHF 1 000)

BOARD OF DIRECTORS

Roland Hess (Chairman Audit Committee)

305

328

Ulrich Looser (Chairman Strategy Committee1)

264

285

Dr Beat Lüthi

251

271

Stefan Meister (Chairman HR Committee)

305

328

Former member Dominik Ellenrieder1 Total

(in CHF 1 000)

2 510

326

2 836

Other compensation

Total compensation

Fixed compensation

Performance bonus

Performance share units

EXECUTIVE MANAGEMENT BOARD Marco Gadola (CEO)

750

1 209

780

260

2 999

2 415

2 224

1 046

1 431

7 116

4 40

305

172

1 014

Total

3 605

3 738

1 923

1 863

11 129

TOTAL

6 115

3 738

1 923

2 189

13 965

Other members (8 until 30 Nov 2014, thereafter 9)2 Former member

1 2

Until 31 March 2014 Includes compensation of remuneration components forfeited by Peter Hackel due to resignation from previous employment.

maximum fixed compensation for the EMB of CHF 5.8 million to the AGM. In each case, these figures apply to the EMB as composed on 1 January 2016. As noted, the EMB agreed to forgo its LTI and hence waived its right to the 2015 PSU allocation under the Long Term Incentive Plan with a value of CHF 2 500 000. Consequently, the AGM did not vote on long-term compensation components. Going forward, the Board of Directors is keen to reinstate the Long Term Incentive scheme for the EMB as soon as the exchange-rate environment in Switzerland makes this appropriate. As a preparatory step, it will propose that the AGM approves a maximum LTI component of CHF 2.8 million for the EMB in 2016, which the Board may or may not award, depending on the performance and situation at the end of the 2016 business year.

None of the EMB received any compensation from the Straumann Group other than that disclosed in this report.

148 Compensation report

Report of the statutory auditor on the remuneration report of Straumann Holding AG, Basel TO THE GENERAL MEETING OF STRAUMANN HOLDING AG, BASEL Basel, 9 February 2016

REPORT OF THE STATUTORY AUDITOR ON THE REMUNERATION REPORT We have audited the remuneration report of Straumann Holding AG for the year ended 31 December 2015. The audit was limited to the information according to articles 14 – 16 of the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance) contained in the tables labeled “audited” on page 146 and page 147 of the remuneration report.

RESPONSIBILITY OF THE BOARD OF DIRECTORS The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration report in accordance with Swiss law and the Ordinance. The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages.

AUDITOR'S RESPONSIBILITY Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the remuneration report complies with Swiss law and articles 14 – 16 of the Ordinance. An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration report with regard to compensation, loans and credits in accordance with articles 14 – 16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the remuneration report, whether due to fraud or error. This audit also includes evaluating the

reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of the remuneration report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

OPINION In our opinion, the remuneration report for the year ended 31 December of Straumann Holding AG complies with Swiss law and articles 14 – 16 of the Ordinance. Ernst & Young Ltd

Daniel Zaugg Licensed audit expert (Auditor in charge)

Daniel Maiwald Licensed audit expert

Compensation reportâ&#x20AC;&#x201A; 149

Extraordinary performers…

communicate effectively

LEFT TO RIGHT

CARMEN BRUMANN Accountant

ANOIR BELMKADERN Complaint Handling Specialist

LAETITIA STEINER Team Assistant

LUKAS WYDER HR Projects & Analytics

TONE BAUER SAP Basis Experte

DOMINIK SCHNEIDER Head Digital & Content Marketing

Information for investors

153

Share performance

155 Calendar

156

156 Contacts

157 Publications

Research coverage

Information for investors Share performance 153

Share performance Outstanding in the SMIM index 2015 was a challenging year for investors, with global equity markets growing at an average 3%. Clearly this was more than most fixed-income investments returned but only slightly higher than high-risk, highgrade corporate bonds. Japan and the top-performing markets in Europe rose around 10%, while emerging markets lost 6% on average. The Swiss stock market suffered from the Swiss National Bank’s decision in mid-January to stop underpinning the CHF-Euro exchange rate, which had offered exporting companies in Switzerland a free currency hedge over the previous four years. Within just two trading days, Swiss stocks lost an average 15% of their market values. Straumann’s enterprise value was disproportionately affected and dropped 28%. Although most of the losses were subsequently recovered, the Swiss main index SMI closed the year 2% lower than it began. By comparison, the STOXX Europe 600® index gained 8% in Euro but lost 3% in Swiss franc terms. The mid-cap stocks represented in the SMIM index performed better and increased 9% on average, driven by rising earnings, healthy balance sheets, less exposure to

battered emerging markets, and continued stimuli from central banks. With its share price climbing 22%, Straumann was the eighth best performing stock in this national index. Over the past three years, the stock has yielded a total shareholder return of 43% – ranking it the fourth best performing stock in the SMIM. This outstanding performance reflects strong fundamental margin improvements, increased sales momentum across all regions, and successful strategic reorientation, which have inspired investors. In a perception poll of 75 investment professionals conducted in December, three out of four investors expressed their confidence in the company's strategy and its executive management. Total pre-tax shareholder return amounted to 23% or CHF 58. The average daily closing price of the share ranged between CHF 199 and CHF 307, with the yearend closing price at CHF 305. On average, 40 225 shares were traded daily, which was 22% above the prior year and good in view of the free-float adjusted market capitalization of CHF 2.9 billion (at 31 December 2015).

SHARE PRICE DATA (in CHF)

2015

2014 Value

Date

Value

Date

First trading day

249.90

05.01.15

165.60

03.01.14

Lowest

199.20

28.01.15

165.60

03.01.14

307.00

02.12.15

255.00

08.12.14

Last trading day

305.00

30.12.15

250.75

30.12.14

Average

268.00

207.54

Tax value

305.00

250.75

Highest1

Total shareholder return, gross of tax

23.1%

52.6%

Share price performance

21.6%

50.3%

Market capitalization at year end (CHF million)

4 779

3 915

Value reflects closing price

154 Information for investors Share performance

SHARE PRICE DEVELOPMENT Price in CHF

11 12

Shares (thousands)

320

360

300

320

280

260

240

200

220

160

200

120

180

160

40 0

140 J

¢ STMN share price

M ¢ SMIM index

¢ Volumes traded

1 15 Jan SNB discontinues minimum

exchange rate of CHF 1.20 per euro.

2 3 Feb Cost-saving measures

announced to mitigate effect of CHF-strength.

3 19 Feb Employees agree to proposed

compensation reductions to mitigate FX impact.

9 28 Oct Sirona adds Straumann's Vari-

5 11 Mar Multiple new solutions

presented at IDS congress.

6 7 Apr Straumann acquires 100%

of Neodent.

obase to its CEREC offering

10 29 Oct Straumann on track with organic

growth of 8% in Q3.

7 30 Apr Q1 2015: Promising start into

11 16 Nov Neodent becomes distributor

8 20 Aug H1 2015: Strong organic growth

12 2 Dec Straumann hosts Investor Vis-

the year.

of 9% and underlying EBIT margin of 24%.

4 27 Feb FY 2014 shows significant

for Amann Girrbach in Brazil.

tior Day in Curitiba, Brazil.

profitability improvements.

HIGHEST/LOWEST VALUES

STOCK EXCHANGE INFORMATION

(in CHF)

Volatility

Share price

350

300

250

200

150

100

0 2011

2012

At last day of trading (left scale)

2013

2014

2015

Annualized volatility in % (right scale)

Listing

SIX Swiss Exchange (STMN)

Bloomberg

STMN SW

Reuters

STMN.S

Investdata

STMN

Ex date

12 April 2016

Payment date

14 April 2016

Security ID

001 228 007

ISIN

CH 0012 280 076

Information for investors Calendar 155

Calendar Reporting dates & key events KEY DATES IN 2016

CORPORATE GOVERNANCE ROADSHOWS

25 February

2015 full-year results

26 February

Investor Meetings, London

8 April

Annual General Meeting

22 March

Investor Meetings, Singapore

12 April

Dividend ex-date

28 April

Investor Meetings, Chicago

3 May

Q1 sales

31 October

Investor Meetings, Zurich

23 August

Q2 sales and H1 results

27 October

Q3 and 9M sales

PLANNED INVESTOR RELATIONS EVENTS AND CONFERENCES IN 2016 Members of Straumann’s Executive Management and/ or Investor Relations team plan to take part in the following events (subject to availability):

SELECTED DENTAL MEETINGS 12–14 February

International Congress of Oral Implantologists [ICOI] Winter Implant Symposium (Miami, USA)

18–20 February

Academy of Osseointegration AO 31th Annual Meeting (San Diego, USA)

25–27 February

Chicago Dental Society 151st Midwinter Meeting (Chicago, USA)

26–27 February

LMT Lab Day (Chicago, USA)

ROADSHOWS & CONFERENCES

10–12 March

Expodental (Madrid, Spain)

15 January

7–9 April

Dental Forum (Paris, France)

21–23 April

International Osteology Symposium (Monaco)

Helvea Baader Swiss Equities Conference, Bad Ragaz (CH)

26 February

Investor Meetings, London

18 March

Investor Meetings, Paris

26–29 April

ITI Annual General Meeting (Chicago, USA)

22 March

Carbon Free Roadshow, Video Conference

28–30 April

ITI Congress North America (Chicago, USA)

23 March

Kepler Cheuvreux Swiss Seminar, Zurich

9–11 June

Dental Bern (Berne, Switzerland)

28 April

Investor Meetings, Chicago

9–12 June

Sino-Dental (Beijing, China)

29 April

Investor Meetings, New York

16–17 June

Neodent Congress (Curitiba, Brazil)

11 May

Investor Meetings, Benelux

9–10 September

Bone & Tissue Days (Berlin, Germany)

6 June

Investor Meetings, Geneva

7 - 8 June

Vontobel Swiss Equities Conference, Interlaken (CH)

29 September – 1 October

25th Annual Scientific Meeting of the European Association for Osseointegration [EAO] (Paris, France)

6 July

Investor Meetings, Montreal

22–26 August

26th ITI Education Week (Berne, Switzerland)

7 July

Investor Meetings, Boston

25–27 August

8 July

Investor Meetings, New York

International Congress of Oral Implantologists [ICOI] Summer Implant Symposium (San Diego, USA)

6 September

Investor Meetings, London

7 September

Goldman Sachs EU / Medtech Conference, London

15 September

UBS Best of Switzerland Conference, Ermatingen (CH)

29 September

Investor Meetings, Paris

31 October

Investor Meetings, Zurich

If you are interested in meeting Straumann’s top management at one of the meetings, please contact investor.relations@straumann.com.

10–13 September 102nd Annual Meeting of the American Academy of Periodontology [AAP] (San Diego, USA) 24–26 November

30. Kongress der Deutschen Gesellschaft für Implantologie [DGI] (Hamburg, Germany)

25–30 November

Greater New YorkDental Meeting (New York, USA)

8–10 December

17th American Dental Congress (Phoenix, USA)

156 Information for investors Research coverage | Contacts

Research coverage BANK AM BELLEVUE Daniel Jelovcan Tel. +41 44 267 72 30

Contacts

HSBC TRINKHAUS & BURKHARDT

GROUP HEADQUARTERS STRAUMANN HOLDING AG

Richard Latz Tel. +49 211 910 1074

Peter Merian-Weg 12, 4002 Basel Tel. +41 61 965 11 11 Fax +41 61 965 11 01

BANK OF AMERICA MERRILL LYNCH

JEFFERIES

Ines Duarte Da Silva Tel. +44 207 996 7049

Chris Cooper Tel. +44 207 029 8675

BANK VONTOBEL

J.P. MORGAN

Carla Bänziger Tel. +41 58 283 70 21

Anasuya Sarma & David Adlington Tel. +44 207 742 6264

BARCLAYS CAPITAL Alex Kleban Tel. +44 203 555 21 55

KEPLER CHEVREUX Maja Pataki Tel. +41 43 333 66 23

BERENBERG BANK Thomas Jones Tel. +44 203 207 7877

COMMERZBANK AG

MAINFIRST BANK Markus Wieprecht & Markus Gola Tel. +49 69 788 08 221

Oliver Metzger Tel. +49 69 136 81573

MORGAN STANLEY

CREDIT SUISSE

Michael Jüngling Tel. +44 207 425 5975

Christoph Gretler Tel. +41 44 333 79 44

DEUTSCHE BANK Yi-Dan Wang Tel. +44 207 545 9999

SANFORD C. BERNSTEIN Lisa Clive Tel. +44 207 170 5052

UBS EXANE BNP PARIBAS Julien Dormois Tel. +33 1 44 95 69 49

Ian Douglas-Pennant Tel. +44 207 568 77 63

ZKB GOLDMAN SACHS Veronika Dubajova Tel. +44 207 774 1901

Sibylle Bischofberger Tel. +41 44 292 37 34

INVESTOR RELATIONS Fabian Hildbrand Tel. +41 61 965 13 27 Rahel Schafroth Tel. +41 61 965 16 78 investor.relations@straumann.com

MEDIA RELATIONS Mark Hill Tel. +41 61 965 13 21 Thomas Konrad Tel. +41 61 965 15 46 corporate.communication@straumann.com

GENERAL INQUIRIES Corporate Communication Tel. +41 61 965 11 11 Fax +41 61 965 11 03

Information for investors Publications 157

Publications Media releases The Straumann Annual Report is published in February and presented at the analysts’ and media conferences. It is also available online at www.straumann.com. The half-year interim report is published in the form of a media release in August. Other media releases include the quarterly sales reports published in April for the first quarter and in October for the third quarter. Where necessary or appropriate, Straumann also publishes additional information on significant events. Press releases and presentations can be downloaded from the Straumann homepage at www.straumann. com. Please see Information Policy on p. 129 f.

2015 MEDIA RELEASES

4 June

Dental community celebrates 20th anniversary of successful periodontal tissue regeneration with Straumann Emdogain

15 June

Straumann secures access to leading-edge digital technology by increasing stake in Dental Wings to 55%

29 June

nt-trading acknowledges Straumann patent and removes copied implant components from US market

20 August

Straumann reports organic growth of 9% in first half of 2015 with further profitability improvements

28 October

Straumann and Sirona collaborate to offer dental practices and labs a broader range of CAD/CAM prosthetic options

29 October

Straumann on track with organic growth of 9% in first 9 months

16 November

Neodent becomes distributor for Amann Girrbach in Brazil

25 November

Straumann receives prestigious Pierre Fauchard Academy Dental Trade and Industry Recognition Award

3 February

Straumann announces cost-saving measures to mitigate currency impact

19 February

Straumann’s staff agrees to proposed compensation reductions to mitigate currency impact

3 December

Straumann announces leadership changes to strengthen momentum in Europe and North America

27 February

Straumann’s operating profit margin reaches 21% in 2014

7 December

Straumann-botiss YoungProAward goes to Andreas Pabst

5 March

Straumann suspends CEO on four dental implants

9 March

Straumann invests in Valoc AG, a Swiss supplier of innovative overdenture attachment systems

9 March

Straumann partners with Amann Girrbach to enter in-lab milling segment

11 March

Multiple new solutions presented at IDS 2015 bring Straumann closer to being a total solution provider of choice

27 March

Petra Rumpf joins Executive Management Board as Head of Instradent & Strategic Alliances

1 April

2015 IADR/Straumann Award in Regenerative Periodontal Medicine presented to Mariano Sanz

7 April

Straumann increases ownership of Neodent to 100%

10 April

Straumann shareholders approve all proposals at 2015 AGM

30 April

Good organic growth (+8%) and Neodent strengthen global leadership

2016 MEDIA RELEASES 20 January

Excellent results for Straumann in independent peri-implantitis study

8 February

Rising stars sought in 2016 YoungPro Award

25 February

Straumann posts organic revenue growth of 9% with 25% rise in underlying operating profit in 2015

25 February

Straumann and Anthogyr announce partnership

Extraordinary performers are…

agile

VERONICA OSSIPOWSKI ( L EFT ) Recruiting Specialist URSINA SCHRENK ( RIGHT ) Team Leader Payroll & Time Mgmt

Appendix

161

Global presence

166 Glossary

170

Global Reporting Initiative

172

Points to note

173 Imprint

Appendix Global presence 161

Global presence Straumann around the world ARGENTINA

BRAZIL

Manohay Argentina S.A. Av Juana Manso 555, "7E" AR-C1107CBK Buenos Aires Tel: +54 11 2150 6540 info.ar@straumann.com

AUSTRALIA & NEW ZEALAND

J.J.G.C Indústria e Comércio de Materiais Dentários S.A. Visconde de Guarapuava Avenue, 3832 80250-220 Curitiba (PR) Tel.: +55 2169-1000 sac@neodent.com.br (Neodent) info.br@straumann.com (Straumann)

Straumann Australia P/L 7 Gateway Court Port Melbourne, Victoria 3207 Tel.+61 800 660 330 Tel.+61 3 9261 1300 Fax.+61 3 9646 7232 info.au@straumann.com

Straumann Canada Ltd 3375 North Service Road, Unit B12-14 Burlington, Ontario L7N 3N8 Tel. +1 905 319 2900 Fax +1 905 319 2902 info.can@straumann.com

CANADA

AUSTRIA

CHINA

Straumann GmbH Florido Tower Floridsdorfer Hauptstrasse 1 1210 Vienna Tel. +43 1 29 40 660 Fax +43 1 29 40 666 info.at@straumann.com

Straumann (Beijing) Medical Device Trading Co., Ltd. B303, 3/F, Tower B, Jia Ming Centre No.27 Dong San Huan Bei Lu Chaoyang District Beijing 100020, Tel. +86 (10) 5775 6555 Fax:+86 (10) 5775 6556 info.cn@straumann.com

BELGIUM Straumann SA/NV Belgicastraat 3, box 3 1930 Zaventem Tel. +32 2 790 10 00 Fax +32 2 790 10 20 info.be@straumann.com

COLOMBIA Manohay Colombia SAS Carrera 9 #115-06, 18th floor Room 1806 Edificio Tierra Firme Bogota Tel: +57 1 756 2962 Fax: +57 1 756 3002 E-mail: info.co@straumann.com

162 Appendix Global presence

Straumann’s products and services are available in more than 70 countries through our subsidiaries and a broad network of distributors.

 Straumann locations  Production facilities  Distributors  Instradent

CZECH REPUBLIC

FRANCE

Straumann sro Na Žertvách 2196/34 18000 Prague 8 Tel. +420 284 09 4650 info.cz@straumann.com

Straumann SARL 3, rue de la Galmy-Chessy 77701 Marne-la-Vallée Cedex 4 Tel. +33 1 64 17 30 00 Fax +33 1 64 17 30 10 info.fr@straumann.com

DENMARK Straumann Danmark ApS Nygårds Plads 21, 1 2605 Brøndby Tel. +45 46 16 06 66 Fax +45 43 61 25 81 info.dk@straumann.com

FINLAND Straumann Oy Äyritie 12 A, 4.krs 01510 Vantaa Tel. +358-9-565 8260 Fax +358 9 694 06 95 info.fi@straumann.com

GERMANY Straumann GmbH Jechtinger Strasse 9 79111 Freiburg Tel. +49 761 450 10 Fax +49 761 450 11 49 info.de@straumann.com Etkon GmbH Koburger Strasse 45 04416 Markkleeberg Tel. +49 341 350 354 0 Fax +49 341 350 354 59 info.cadcam@straumann.com

Appendix Global presence 163

Etkon GmbH Lochhamer Schlag 6 82166 Gräfelfing Tel. +49 89 309 07 50 Fax +49 89 309 07 51 19 info.cadcam@straumann.com Instradent Deutschland GmbH Hammweg 8 76549 Hügelsheim Tel. +49 7229 69912-0 Fax +49 7229 69912-20 info.de@instradent.com

HUNGARY (BRANCH) Straumann GmbH Magyarországi Fióktelepe M3 Business Center Hungária körút 179-187. 1146 Budapest Tel. +36 1 787 10 95 Fax +36 1 787 10 96 info.hu@straumann.com

ITALY Straumann Italia srl Viale Luigi Bodio 37a-Palazzo 4 20158 Milan Tel. +39 02 3932 831 Fax +39 02 84 20 23 60 info.it@straumann.com Instradent Italia srl. Bodio Center Viale Luigi Bodio, 37/A - Palazzo 4 20158 Milan Tel. +39 800 975 895 FAX +39 02 84 20 23 60 info.it@instradent.com

JAPAN Straumann Japan KK Mita Bellju Building, 6F 5-36-7, Shiba Minato-ku, Tokyo 108-9914 Tel. +81 3 6858 1188 Fax +81 3 6858 4945 info.jp@straumann.com

164 Appendix Global presence

MEXICO

RUSSIA

Manohay México SA de CV Rubén Darío #281 int. 1702 Piso 17 Col. Bosque de Chapultepec 11580 México DF. Tel. +52 55 5282 6262 Fax +52 55 5282 6289 info.mx@straumann.com

LLC “Straumann” 119A Leninskiy prospect 119571 Moscow Tel. +7 495 139 7474 Fax +7 495 139 7475 info.ru@straumann.com

NETHERLANDS Straumann BV Einsteinweg 15 3404 LE IJsselstein Tel. +31 30 604 66 11 Fax +31 30 604 67 28 informatie@straumann.com

NORWAY Straumann AS Nils Hansens vei 7 0667 Oslo Tel. +47 23 35 44 88 Fax +47 23 35 44 80 info.no@straumann.com

SINGAPORE Straumann Singapore Pte Ltd 1 Maritime Square #09-04 Harbour Front Centre Singapore 099253 Tel. +65 6376 2023 Fax +65 6376 2339

SOUTH KOREA Straumann Dental Korea Inc. 1005 Korea Trade Tower Samseong 1-dong Gangnam-gu Seoul 135-729 Tel. +822 2149 3800~4 Fax +822 2149 3810 info.kr@straumann.com

PORTUGAL (BRANCH) Manohay Dental SA Lagoas Park, Edificio 11 Piso 3 2740-244 Porto Salvo Tel. +351 214 229 170 Fax +351 214 212 144 info.pt@straumann.com Instradent Iberia S.L., Sucursal em Portugal Lagoas Park, Edificio 11, Piso 3 2740-244 Porto Salvo Tel. +351 210 134 400 Fax +351 214 212 144 info.pt@instradent.com

SPAIN Manohay Dental SA Edificio Arroyo - A Avda. de Bruselas, 38 - Planta 1 28108 Alcobendas-Madrid Tel. +34 916 308 214 Fax +34 916 301 819 info.es@straumann.com Instradent Iberia S.L. Avda. de Bruselas, 38 - Planta 1 Edificio Arroyo - A 28108 Alcobendas-Madrid Tel. +34 91 662 3435 Fax +34 91 662 4869 info.es@instradent.com

Appendix Global presence 165

SWEDEN Straumann AB Krokslätts Fabriker 45 431 37 Mölndal Tel. +46 31 708 75 00 Fax +46 31 708 75 29 info.se@straumann.com Biora AB Per Albin Hanssons vaeg 41 Medeon Science Park 20512 Malmö Tel. +46 40 32 13 33 Fax +46 40 32 13 55

SWITZERLAND Institut Straumann AG Peter Merian-Weg 12 4002 Basel Tel. +41 61 965 11 11 Fax +41 61 965 11 01 info@straumann.com Straumann Villeret SA Champs du Clos 2 2613 Villeret BE Tel. +41 32 942 87 87 Fax +41 32 942 87 88

UNITED KINGDOM Straumann Ltd 3 Pegasus Place Gatwick Road Crawley RH10 9AY West Sussex Tel. +44 1293 651230 Fax +44 1293 651239 info.uk@straumann.com

USA Straumann USA, LLC & Straumann Manufacturing, Inc. 60 Minuteman Road Andover, MA 01810 Tel. +1 978 747 2500 Fax +1 978 747 2490 info.usa@straumann.com

Straumann Manufacturing, Inc. 113th Street 916A Arlington, TX 76011 Tel. +1 817 701 11 81 Fax +1 817 701 12 36 Instradent USA, Inc. 60 Minuteman Road Andover, MA 01810 Tel. +1 855 412 8883 Fax +1 855 412 8884 info.us@instradent.com

166 Appendix Glossary

Glossary

DENTAL/MEDICAL TERMS

CROWN

ABUTMENT

A tooth-shaped cap attached to a tooth stump or implant abutment.

A component that protrudes into the oral cavity and connects the implant to the prosthesis. ASTM

ASTM International is an international standards organization that develops and publishes voluntary consensus technical standards for a wide range of materials, products, systems, and services. BONECERAMIC

Straumann’s fully synthetic bone substitute used in bone augmentation procedures.

DENTAL TECHNICIAN

Dental professional who manufactures crowns, bridges, dentures and other dental prosthetics according to the dentist’s specifications. DWOS

Dental Wings Open Software is an open software platform that allows prosthetics to be designed using data from multiple sources. EDENTULOUS

Having no teeth (can refer to upper and/or lower jaw). BONE LEVEL IMPLANT

Implant which connects with the abutment at bone crest level. BONE LEVEL TAPERED (BLT) IMPLANT

EMDOGAIN

An extract of enamel matrix proteins which are involved in the development of cementum, periodontal ligament and bone.

Bone level implant with tapered profile which provides excellent primary stability.

GUIDED SURGERY

BRIDGE

Surgery in which 3D imaging technologies are used to plan the position, depth and angle of an implant.

An appliance used to bridge the gap left by missing teeth by using one or more false teeth fixed to crowns anchored on tooth stumps or implants.

HYDROPHILIC

Readily absorbing or attracting water, or having chemical groups that interact with water.

CADCAM

Computer-aided design/computer-aided manufacturing: A computer system is used both for designing a product and for controlling manufacturing processes.

INTRA-ORAL SCANNING

Digital scanning to create a 3D image of the patient’s teeth that replaces the conventional process of impression-taking followed by model casting.

CARES

CARES is a brand that Staumann uses for its digital prosthetic services, including CADCAM, software, functionality, scanning technology, etc.

ITI

International Team for Implantology.

Appendix Glossary 167

LOXIM

PERIODONTITIS

A transfer piece temporarily attached to the implant during placement which then detaches quickly and easily without disturbing the implant position.

Progressive disease of the periodontal tissues, resulting in the gradual loss of the tooth and supporting structures.

MEMBRANE

PRE-MILLED ABUTMENT BLANKS

A barrier used in guided bone regeneration to pre-

Titanium blanks with pre-fabricated implant connections, compatible with a wide range of milling machines and enabling labs to fabricate onepiece customized titanium abutments with original Straumann connections in house.

vent tissue from occupying space into which new bone should form, and to stabilize bone augmentation materials. NARROW NECK IMPLANT

Small diameter implant for limited interdental spaces or narrow bone ridges.

PRO ARCH

NIS

A comprehensive restoration system for the entire jaw comprised of implants, abutments, and prosthetic components.

Non-interventional study, designed to evaluate products in everyday clinical settings, where the clinician can use the product as deemed suitable, within treatment guidelines, and results are tracked.

A dental professional who carries out prosthetic restorations on natural teeth and implants.

PROSTHODONTIST

ONE-STAGE PROCEDURE

RCT

Surgical procedure whereby the implant is placed but not covered by the gum tissue during healing, eliminating the necessity of a second surgical procedure to expose the implant.

Randomized controlled trial.

OSSEOINTEGRATION

The biological process of bone integrating with the implant.

REFERRAL MARKET

A market characterized by a relatively large number of specialists and in which general dentists tend to refer patients to specialists for procedures like implant placement. RESTORATIVE DENTISTRY

PERI-IMPLANTITIS

Inflammatory tissue pathology and/or progressive bone loss at implant site, resulting from plaque accumulation and bacterial infiltration around dental implants. If not treated successfully, peri-implantitis can lead to implant loss.

Branch of dentistry concerned with the replacement or reconstruction of teeth. ROXOLID

Straumann’s proprietary alloy of titanium and zirconium, which combines high tensile and fatigue strengths with excellent osseointegration.

PERIODONTICS

Branch of dentistry concerned with the care and treatment of the supporting tissues of the teeth from the gingiva to the adjacent alveolar bone and ligament.

SCAN & SHAPE

A Straumann CARES brand service, by which dental technicians generate CADCAM-based, customized abutments from a model or wax-up.

PERIODONTIST

Dental professional specialized in the tissue and bone surrounding the teeth and in treating the diseases that affect them.

SCREW-RETAINED BARS AND BRIDGES

Bridges are devices used to ‘bridge’ a toothless gap and are fixed with screws to two or more dental implants; bars are commonly used to support partial or full dentures.

168 Appendix Glossary

SLA

ZLA

SLA refers to a second-generation implant surface technology introduced by Straumann in 1997. SLACTIVE

The ZLA surface of Straumann’s ceramic implant features a topography characterized by macro- and micro-roughness, similar to the SLA surface, to enhance cell attachment and osseointegration.

Straumann’s third-generation implant surface technology. By virtue of its hydrophilic properties, healing time is cut in half.

FINANCIAL & LEGAL TERMS

SOFT TISSUE LEVEL IMPLANT

AMORTIZATION

Implant where the connection between the implant and the abutment is placed at the level of the gums, so that the soft tissue surrounds the polished collar of the implant.

Systematic allocation of the depreciable amount of an intangible asset over its useful life. AGM

Annual general meeting of the shareholders. TITANIUM

Metallic element isolated from minerals as an iron-gray powder; used in many dental and orthopedic applications.

Articles of Association.

TWO-STAGE PROCEDURE

Compound annual growth rate.

AOA

CAGR

Surgical procedure whereby the implant is inserted and a healing cap placed, which is then covered by the gum tissue during healing phase. A second surgical procedure is performed later, in which the healing cap is removed and an abutment and provisional prosthesis is placed.

DEPRECIATION

Systematic allocation of the depreciable amount of a tangible asset. DOS-DAYS OF SUPPLIES

VARIOBASE

Straumann hybrid abutment with a titanium bonding base and a zirconium dioxide coping. Cost-effective metal-to-metal implant abutment with an original Straumann connection and a variety of esthetic shades.

Inventory level at the end of a quarter divided by cost of goods sold for a given quarter, times 90. An indicator that helps to determine how long it takes to turn the inventory into actual sales. DSO-DAYS OF SALES OUTSTANDING

X-STREAM

Solution-driven function within the CARES Visual software, providing a one-step, single-tooth implantbased prosthetic restoration process which significantly reduces turnaround time and shipment cost.

Trade receivables divided by revenue for a given quarter, times 90. A measure of the average number of days that it takes to collect revenue after a sale has been made. EARNINGS PER SHARE (EPS)

Net profit divided by the number of shares. ZIRCONIA

ZrO2 – the white oxide of zirconium used for its infusibility and luminosity in dental implants, prosthetics, enamels and glazes.

EBIT

Earnings before interest and taxes; also referred to here as operating profit.

ZIRCONIUM

EBITDA

A grayish-white ductile metallic element obtained from zircon and used in ceramic and refractory compounds as an alloying agent.

Earnings before interest, taxes, depreciation and amortization.

Appendix Glossary 169

EQUITY RATIO

REVENUES

Shareholder equity divided by total assets in %.

Sales, see p. F 20

ERP

ROA

Enterprise resource planning.

Return on assets; net profit divided by average assets in %.

FREE CASH FLOW

Net cash from operating activities, less capital expenditures, plus net proceeds from property, plant and equipment.

ROCE

Return on capital employed; earnings before interest and taxes divided by average capital employed in %.

FREE CASH FLOW MARGIN

ROE

Free cash flow divided by Group net revenue in %.

Return on equity; net profit divided by average equity in %.

FREE CASH FLOW YIELD

Free cash flow per share divided by the stock price of the company.

SALES

See ‘sale of goods’ on p. F 20

GOODWILL

TOTAL SHAREHOLDER RETURN (TSR)

Future economic benefits arising from assets that are not capable of being individually identified and separately recognized.

Profit or loss realized by an investment. TSR includes capital gains/losses from increases/decreases in stock price as well as received gross dividends.

IFRS

WACC

International Financial Reporting Standards.

Weighted average cost of capital.

IMPAIRMENT LOSS

WRITE-DOWN

The amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable value.

See ‘impairment loss’.

NET PROFIT MARGIN

Net profit divided by Group net revenue in %. OPEX

Operating expenses, also called non-manufacturing expenses, including distribution costs, marketing, research & development, as well as general administrative expenses. ORGANIC GROWTH

Growth excluding the effect from business combination and currency effects. PAY-OUT RATIO

Dividend paid divided by net profit over the same period in %.

170 Appendix Global Reporting Initiative

Global Reporting Initiative Tenth year of GRI reporting Sustainability is an integral part of business success and an important part of the context of our achievements and progress. This is why we have consistently integrated sustainability topics in our annual report since 2004. To provide transparency for stakeholders who determine or are affected significantly by our business/ activities (including customers, shareholders, employees, and members of the communities in which we operate) we have based our sustainability reporting on the guidelines of the Global Reporting Initiative (GRI). GRI is a nonprofit, multi-stakeholder organization that provides companies with a systematic basis for informing stakeholders on corporate responsibility in a clear and comparable manner. Our 2015 Annual Report applies the GRI sustainability reporting guidelines for the tenth consecutive year. It is also our first report developed in accordance with the latest GRI G4 Guidelines – Core option. The report has undergone and successfully completed the GRI Materiality Disclosures Service on 24 February 2016. The GRI G4 sustainability reporting guidelines require us to determine which sustainability topics are most relevant or material for our company and stakeholders. Our corresponding assessment and the topics determined to be material are discussed on page 80. The material topics listed are relevant for Straumann’s operations, shareholders, and employees, as they can influence cost, brand reputation, and ultimately business success. Economic and environmental topics found to be material are also relevant for the local communities where we operate. In addition, environmental topics are of interest for environmental organizations. Product-related topics are relevant for our customers and the patients they serve, and human resources topics influence the competence of our team and ultimately the peace of mind we provide to our customers.

GRI G4 CONTENT INDEX GENERAL STANDARD DISCLOSURES Reference

Location

STRATEGY AND ANALYSIS G4-1

p. 10, 14-15

ORGANIZATIONAL PROFILE G4-3

Straumann Holding AG

G4-4

p. 19

G4-5

Basel, Switzerland

G4-6

p. 162-163

G4-7

p. 103, 108-109

G4-8

p. 19, 40

G4-9

p. 4-7, 26, 153

G4-10

p. 85-86

G4-11

p. A9

G4-12

p. A9

G4-13

p. 106

G4-14

p. A10

G4-15

p. 89, 136

G4-16

p. 78, 84

IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES G4-17

p. A11

G4-18

p. 80

G4-19

p. 80, 170-171

G4-20

p. 170

G4-21

p. 170

G4-22

p. 98

G4-23

No significant changes

STAKEHOLDER ENGAGEMENT G4-24

p. 170

G4-25

p. 170

G4-26

p. A13

G4-27

p. A13

This page includes information on the GRI indicators G4-19, G4-20, G4-21, G4-24 and G4-25.

Appendix Global Reporting Initiative 171

REPORT PROFILE

OCCUPATIONAL HEALTH AND SAFETY

G4-28

January 1 to December 31, 2015

G4-DMA

p. A25

G4-29

February 2015

G4-LA6

p. 89

G4-30

Annual

TRAINING AND EDUCATION

G4-31

p. 156

G4-DMA

p. A25

G4-32

This index

G4-LA9

p. 88

G4-33

p. A15

DIVERSITY AND EQUAL OPPORTUNITY

GOVERNANCE

G4-DMA

p. A25

G4-34

G4-LA12

p. 88-89

p. 115, 118, 120

ETHICS AND INTEGRITY

NON-DISCRIMINATION

G4-56

G4-DMA

p. A28

G4-HR3

p. 89

SPECIFIC STANDARD DISCLOSURES Reference

Location

SUPPLIER HUMAN RIGHTS ASSESSMENT Reason for omissions

ECONOMIC PERFORMANCE G4-DMA

p. A16

G4-EC1

p. 4, 11, 90, 136

G4-EC3

p. F48

G4-EC4

p. F41 p. A16

G4-EC7

p. 90-91 p. A20

G4-EN1

p. 95, 97-98 p. A20

G4-EN3

p. 97-98 p. A20

G4-EN8

p. 97-98 p. A20

G4-EN15

p. 97-98

G4-EN16

p. 97-98 p. A20

G4-EN23

p. 97-98 p. A20

G4-EN32

p. 89

EMPLOYMENT G4-DMA

p. A25

G4-LA1

p. 87

This page includes information on GRI G4-19.

p. 89

G4-SO4

p. 89

G4-SO5

p. 89

p. A29

G4-DMA

p. A29

G4-SO6

p. 91

G4-DMA

p. A29

G4-SO7

p. 89

G4-DMA

p. A29

G4-SO8

p. 78

G4-DMA

p. A31

G4-PR2

p. 79

G4-DMA

p. A31

G4-PR4

p. 79

G4-PR5

P. 82-83

MARKETING COMMUNICATIONS

SUPPLIER ENVIRONMENTAL ASSESSMENT G4-DMA

p. A29

G4-SO3

PRODUCT AND SERVICE LABELING

EFFLUENTS AND WASTE G4-DMA

G4-DMA

CUSTOMER HEALTH AND SAFETY

EMISSIONS G4-DMA

p. A28

COMPLIANCE

WATER G4-DMA

p. 89

ANTI-COMPETITIVE BEHAVIOR

ENERGY G4-DMA

p. A28

G4-HR11

PUBLIC POLICY

MATERIALS G4-DMA

G4-DMA

ANTI-CORRUPTION

INDIRECT ECONOMIC IMPACTS G4-DMA

p. A26

G4-DMA

p. A31

G4-PR7

p. 83, 89

CUSTOMER PRIVACY p. A24

G4-DMA

p. A31

G4-PR8

p. A33

COMPLIANCE IN PROVISION OF PRODUCTS AND SERVICES G4-DMA

p. A31

G4-PR9

p. A33

Page numbers prefaced with "A" refer to our Addendum GRI Sustainability Reporting, published on www.straumann.com under Media, Publications and Reports, Annual Reports.

172 Appendix Points to note

Points to note

FINANCIAL REPORT

STRAUMANN TRADEMARKS & BRANDS

Straumann’s detailed financial report is published in English as a separate volume. It can be viewed or downloaded through our website: http://annualreport.straumann.com

The following trademarks or brands are registered trademarks and/or used by Straumann Holding AG and/or its affiliated companies: Biora®, BoneCeramic™, Bone Control Design™, CARES®, coron®, conaviX™, Consistent Emergence Profiles™, CrossFit®, Eliminate the Dip®, Emdogain®, etkon®, Instradent™, ITI®, MembraGel®, More than implants™, Naturally attractive™, n!ce™, Novaloc®, Straumann®Osteogain™, polycon®, PrefGel®, Roxolid®, SLA®, SLActive®, SLBioActive™, Straumann®, synOcta®, templiX™, The surface with success built in®, TiBrush®, ticon®, Variobase®, VivOss™, X-Stream™, Young Professionals™, Zerion®, ZLA®, ZLActive®.

Printed copies can be ordered from: Corporate Communication or Investor Relations Institut Straumann AG Peter Merian-Weg 12 CH - 4002 Basel Tel. + 41 61 965 11 11 E-mail:corporate.communication@straumann.com or investor.relations @ straumann.com

OTHER TRADEMARKS FORWARD-LOOKING STATEMENTS This report contains forward-looking statements that reflect the current views of management. Such statements are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Straumann Group to differ materially from those expressed or implied in this release. Straumann is providing the information in this report as of this date and does not undertake any obligation to update any statements contained in it as a result of new information, future events or otherwise.

PRODUCT AVAILABILITY The availability and indications of the products mentioned and/or illustrated in this report may vary according to country.

3M™, ESPE™ and Lava™ are registered trademarks of 3M Company, USA, or 3M Deutschland GmbH (used under license in Canada). Botiss®, botiss Bone Builder®, mucoderm®, collafleece®, CollaCone®, Grafter®, MaxGraft® and MaxResorb® are registered trademarks of botiss medical AG, Germany, or its affiliates. CEREC® is a registered trademark of Sirona Dental Systems. DWOS® is a registered trademark of Dental Wings Inc., Canada. Exocad® is a registered trademark of exocad GmbH, Germany. Swiss Performance Index (SPI)®, Swiss Market Index (SMI)® and SMI Mid (SMIM)® are registered trademarks of SIX Swiss Exchange AG, Switzerland.

IMPRINT Published by: Institut Straumann AG, Basel Concept and realization: PETRANIX Corporate and Financial Communications AG, Adliswil/Zurich Photography: AMX Studio, Alex Stiebritz, Karlsruhe Consultant on sustainability: sustainserv, Zurich and Boston Print: Neidhart + Schön AG, Zurich Basel, 25 February 2016 ©2016, Straumann Holding AG

Straumann Holding AG Peter Merian-Weg 12 4002 Basel Switzerland www.straumann.com

2015 Financial Report

4 1

7 5

Rebecca Hesse

SAP Coordinator

Susan-Ann Welzbacher

Corporate Safety Officer

Julia Hirtle

Spend Coordinator

Roland Scacchi

Administrator

Alessandro Annicchiarico

IT Support

Heather Stanton

Web Editor

Dave Koster

Lab Business Development

Raul Perez

Talent Management

Sandra Sch端rmann

Events Coordinator

Financial Report Straumann Group

Straumann Group Contents

This detailed Financial Report is a separate volume of the Straumann Annual Report. The full version is available online and can be ordered at www.straumann.com.

Consolidated statement of financial position

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated cash flow statement

Consolidated statement of changes in equity

Notes to the consolidated financial statements

Audit Report â&#x20AC;&#x201C; Consolidated financial statements

Financial Reportâ&#x20AC;&#x201A; Straumann Group

Consolidated statement of financial position ASSETS (in CHF 1 000)

Notes

31 Dec 2015

31 Dec 2014

Property, plant and equipment

103 841

78 545

Investment properties

1 637

4 001

Intangible assets

246 500

68 987

Investments in associates

48 232

266 589

Financial assets

54 396

48 676

Other receivables Deferred income tax assets

Total non-current assets

2 751

Â834

43 730

29 948

501 087

497 580

Inventories

76 113

69 193

Trade and other receivables

140 598

128 482

1 059

2 995

Financial assets

Income tax receivables Cash and cash equivalents Total current assets

TOTAL ASSETS

9 142

3 110

318 297

459 421

545 209

663 201

1 046 296

1 160 781

Financial Report Straumann Group

EQUITY AND LIABILITIES (in CHF 1 000)

Notes

Share capital

31 Dec 2015

31 Dec 2014

1 572

1 568

Retained earnings and reserves

603 398

735 268

Total equity attributable to the shareholders of the parent company

604 970

736 836

Straight bond

199 520

199 410

Other liabilities

6 975

6 954

Financial liabilities

618

3 587

Provisions

28 832

29 913

Retirement benefit obligations

44 496

37 492

Deferred income tax liabilities

1 503

9 353

281 944

286 709

105 264

Total non-current liabilities

Trade and other payables

124 173

Financial liabilities

925

1 326

15 572

18 697

Income tax payable Provisions

18 712

11 949

Total current liabilities

159 382

137 236

Total liabilities

441 326

423 945

1 046 296

1 160 781

TOTAL EQUITY AND LIABILITIES

The notes on pages 10 – 65 are an integral part of these consolidated financial statements.

Financial Report Straumann Group

Consolidated income statement (in CHF 1 000)

Revenue

Notes

2015

2014

798 600

710 270

(183 662)

(151 618)

614 938

558 652

Cost of goods sold Gross profit

Other income

2 161

2 236

Distribution costs

(173 439)

(168 459)

Administrative expenses

(271 092)

(244 112)

172 568

148 317

Operating profit

Finance income

44 115

17 016

Finance expense

(60 326)

(24 192)

Loss on consolidation of Neodent

(63 891)

(12 268)

36 281

80 198

177 422

(8 687)

(19 597)

71 511

157 825

70 679

157 825

832

Share of results of associates Profit before income tax

Income tax expense

NET PROFIT Attributable to: Shareholders of the parent company Non-controlling interests

Basic earnings per share attributable to ordinary shareholders of the parent company (in CHF)

4.52

10.15

Diluted earnings per share attributable to ordinary shareholders of the parent company (in CHF)

4.47

10.03

The notes on pages 10 – 65 are an integral part of these consolidated financial statements.

Financial Report Straumann Group

Consolidated statement of comprehensive income (in CHF 1 000)

Net profit

2015

2014

71 511

157 825

Other comprehensive income to be reclassified to profit or loss in subsequent periods: Net foreign exchange gain on net investment loans Net movement on cash flow hedges Income tax effect

(1 859)

806

227

(227)

141

(13)

Exchange differences on translation of foreign operations

(20 057)

(8 232)

Other comprehensive income to be reclassified to profit or loss in subsequent periods

(21 548)

(7 666)

Items not to be reclassified to profit or loss in subsequent periods: Change in fair value of financial instruments designated through other comprehensive income Remeasurements of retirement benefit obligations Income tax effect

4 056

12 302

(11 884)

(18 365)

1 265

1 644

(6 563)

(4 419)

(28 111)

(12 085)

43 400

145 740

Shareholders of the parent company

49 811

145 740

Non-controlling interests

(6 411)

Items not to be reclassified to profit or loss in subsequent periods

Other comprehensive income, net of tax

TOTAL COMPREHENSIVE INCOME, NET OF TAX Attributable to:

The notes on pages 10 – 65 are an integral part of these consolidated financial statements.

Financial Report Straumann Group

Consolidated cash flow statement (in CHF 1 000)

Notes

Net profit

2015

2014

71 511

157 825

Adjustments for: Taxes charged

8 687

19 597

Interest and other financial result

3 181

3 425

Foreign exchange result

(259)

1 275

Fair value adjustments

5 356

(397)

Loss on consolidation of Neodent Share of results of associates

63 891

12 268

(36 281)

22 801

Depreciation and amortization of: Property, plant and equipment

5, 23

23 215

Investment properties

6, 23

288

346

Intangible assets

7, 23

9 455

4 738

Impairment of investment properties

6, 23

Change in provisions, retirement benefit obligations and other liabilities Share-based payments expense Gains on disposal of property, plant and equipment

20, 24

2 076

(10 482)

8 264

3 599

4 865

109

218

Working capital adjustments: Change in inventories

(740)

(5 942)

Change in trade and other receivables

6 383

(15 463)

Change in trade and other payables Interest paid Interest received

14 310

4 242

(4 461)

(4 339)

3 373

1 008

Income tax paid

(26 162)

(20 022)

Net cash from operating activities

185 598

146 160

Financial Report Straumann Group

(in CHF 1 000)

Notes

Purchase of shares of non-controlling interests Transaction costs paid Dividends paid to the equity holders of the parent

Dividends paid to non-controlling interests Proceeds from finance lease Proceeds from exercise of options Sale of treasury shares Net cash used in financing activities

Exchange rate differences on cash held Net change in cash and cash equivalents

2015

2014

(9 479)

(31 652)

20 834

(32 063)

(16 876)

(3 114)

(1 964)

(14 206)

8 083

(3 153)

(3 961)

3 149

(1 401)

(9 828)

3 388

16 444

700

1 075

(48 096)

(25 928)

(224 532)

(813)

(58 564)

(58 264)

(5 016)

158

13 321

11 533

912

1 582

(274 674)

(44 991)

(3 952)

385

(141 124)

75 626

Cash and cash equivalents at 1 January

459 421

383 795

CASH AND CASH EQUIVALENTS AT 31 DECEMBER

318 297

459 421

The notes on pages 10 – 65 are an integral part of these consolidated financial statements.

Financial Reportâ&#x20AC;&#x201A; Straumann Group

Consolidated statement of changes in equity 2015 (in CHF 1 000)

At 1 January 2015 Net profit Other comprehensive income Total comprehensive income

Issue of share capital Dividends to equity holders of the parent Dividends to non-controlling interests Share-based payment transactions Sale of treasury shares Changes in consolidation group Purchase of non-controlling interests AT 31 DECEMBER 2015

2014 (in CHF 1 000)

At 1 January 2014 Net profit Other comprehensive income Total comprehensive income

Dividends paid Share-based payment transactions Sale of treasury shares AT 31 DECEMBER 2014

The notes on pages 10 â&#x20AC;&#x201C; 65 are an integral part of these consolidated financial statements.

Financial Report Straumann Group

Attributable to the shareholders of the parent company Notes

Share capital

Share premium

Treasury shares

Cash flow hedge reserve

Translation reserves

Retained earnings

Total Non-controlling interests

1 568

18 280

(8 877)

(197)

(131 338)

857 400

736 836

70 679

832

71 511

Total equity

736 836

197

(14 501)

(6 564)

(20 868)

(7 243)

(28 111)

197

(14 501)

64 115

49 811

(6 411)

43 400

(58 564)

20, 24

5 828

6 278

14 232

92 782

(143 177)

(81 355)

(224 532)

731 880

604 970

Total Non-controlequity ling interests

Total equity

7 954 3 3 1 572

18 280

(923)

(145 839)

(5 016)

Attributable to the shareholders of the parent company Notes

Share capital

Share premium

Treasury shares

Cash flow hedge reserve

Translation reserves

Retained earnings

1 568

18 280

(20 725)

(123 869)

756 126

631 380

157 825

631 380

(197)

(7 469)

(4 419)

(12 085)

(197)

(7 469)

153 406

145 740

(58 264)

0 27 20, 24 11 848 1 568

18 280

(8 877)

(197)

(131 338)

4 865

1 267

13 115

857 400

736 836

Financial Report Straumann Group

Notes to the consolidated financial statements 1 CORPORATE INFORMATION Headquartered in Basel, Switzerland, the Straumann Group (SIX: STMN) is a global leader in implant and restorative dentistry and oral tissue regeneration. In collaboration with leading clinics, research institutes and universities, Straumann researches, develops and manufactures dental implants, instruments, prosthetics and tissue regeneration products for use in tooth replacement and restoration solutions or to prevent tooth loss. Straumann employs approximately 3 500 people worldwide, and its products and services are available in more than 70 countries through its broad network of distribution subsidiaries and partners. The consolidated financial statements of the Straumann Group for the year ended 31 December 2015 were authorized for issue in accordance with a resolution of the Board of Directors on 10 February 2016 and are subject to approval by the Annual General Meeting on 8 April 2016.

2..1 BASIS OF PREPARATION STATEMENT OF COMPLIANCE

The consolidated financial statements of the Straumann Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). They have been prepared on a historical cost basis except financial assets and financial liabilities (including derivative financial instruments), which have been measured at fair value. The consolidated financial statements are presented in Swiss francs (CHF) and all values are rounded to the nearest thousand except where otherwise indicated. BASIS OF CONSOLIDATION

The consolidated financial statements comprise the financial statements of Straumann Holding AG and its subsidiaries as at 31 December 2015. SUBSIDIARIES

Subsidiaries are entities 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 has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as for the parent company, using c onsistent accounting policies. All intra-Group balances, income and expenses and unrealized gains and losses resulting from intra-Group transactions are eliminated in full. Changes in equity interests in Group subsidiaries that reduce or increase Straumann’s percentage ownership without loss of control are accounted for as an equity transaction between owners. ASSOCIATES

Associates are those entities over which the Group has significant influence, but neither control nor joint control. Significant influence is the power to participate in the financial and operating policy decisions. Invest-

Financial Report Straumann Group

ments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of changes in equity of the investee after the date of acquisition. The Group’s share of results of operations is recognized in profit or loss, while any change in other comprehensive income of the associates is presented as part of the Group’s other comprehensive income. For entities over which the Group has joint control together with one or more partners (joint arrangements), the Group assesses whether a joint operation or a joint venture exists. In a joint venture, the parties that have joint control of the arrangement have rights to the net assets of the arrangement. For joint ventures, the equity method is applied.

2.2 CHANGES IN ACCOUNTING POLICIES NEW STANDARDS AND AMENDMENTS EFFECTIVE IN 2015 The accounting policies adopted are consistent with those of the previous financial year. The following amendments to existing standards, issued by the IASB, are mandatory for the Group’s accounting periods beginning on or after 1 January 2015: Amendments to IAS 19 (‘Defined Benefit Plans: Employee Contributions’): –– The amendment to IAS 19 “Employee Benefits” clarifies the accounting recognition of contributions to defined benefit plans paid by employees or third parties. In certain circumstances, these amounts can reduce the service cost during the period when the service was rendered. This amendment has no impact on the Group’s financial statements. Annual Improvements (2011–2013 Cycle / 2010–2012 Cycle) (effective 1 July 2014): –– The annual improvements for the 2011–2013 cycle and 2010-2012 cycle are either not relevant for the Group or are clarifications that are consistent with the Group's financial statements or accounting policies and thus those improvements have no impact for the Group.

STANDARDS, AMENDMENTS AND INTERPRETATIONS THAT ARE NOT YET EFFECTIVE AND HAVE NOT BEEN ADOPTED EARLY BY THE GROUP The following standards, amendments and interpretations to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2016 or later periods, and the Group has not adopted them early: –– IFRS 9 (2014) Financial Instruments (effective 1 January 2018) –– IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018) –– IFRS 16 Leases (effective 1 January 2019) –– IFRS 10, IFRS 12 and IAS 28 (Amendments) Investment Entities: Applying the Consolidation Exception (effective 1 January 2016) –– IFRS 10 and IAS 28 (Amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective 1 January 2016) –– IFRS 11 (Amendments) Accounting for Acquisitions of Interests in Joint Operations (effective 1 January 2016) –– IAS 1 (Amendments) Disclosure Initiative (effective 1 January 2016) –– IAS 12 (Amendments) Recognition of Deferred Tax Assets for Unrealised Losses (effective 1 January 2017) –– IAS 16 and IAS 38 (Amendments) Clarification of Acceptable Methods of Depreciation and Amortisation (effective 1 January 2016) –– IAS 27 (Amendments) Equity Method in Separate Financial Statements (effective 1 January 2016) –– Annual Improvements (2012-2014 Cycle) (effective 1 January 2016)

Financial Report Straumann Group

2.3 CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGMENTS The preparation of Straumann’s financial statements requires Management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that may require a material adjustment to the carrying amount of the asset or liability affected in the future. The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are stated below.

INVESTMENT IN ASSOCIATES On the date of acquisition, a positive difference between cost of acquisition and Straumann’s share of the fair values of the identifiable assets and liabilities of the associated company or joint venture are determined and recognized as investor level goodwill. The goodwill is included in the carrying amount of the equity-method investment. If an equity interest in an existing associated company is increased without any resulting change in significant influence, goodwill and fair values are determined for the additionally acquired interest; the previous investment is not remeasured at fair value. Management has assessed the level of influence that the Group has on Medentika GmbH, Instradent Deutschland GmbH and Dental Wings Inc. and determined that it only has significant influence and not control even though the share holding for these companies is above 50% because of the board representation and contractual terms. Consequently, those investments have been classified as associates. Further details are provided in Note 8.

FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS When the fair values of financial assets and financial liabilities cannot be measured based on quoted prices in active markets, they are measured using valuation techniques like discounted cash flow or the binominal model. Data for the models are taken from observable markets when possible. If this is not available, management judgment is required for inputs such as interest and credit risk. The sensitivity of the fair values to those risks are disclosed in Note 31.

IMPAIRMENT OF NON-FINANCIAL ASSETS Non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable or when an annual impairment test is required. When value-in-use calculations are undertaken, Management has to estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

DEFERRED INCOME TAX ASSETS Deferred income tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available, against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred income tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The amount of recognized tax losses at 31 December 2015 was CHF 149.5 million (2014: CHF 21.8 million) and the unrecognized tax losses at 31 December 2015 were CHF 61.0 million (2014: CHF 15.4 million). Further details are provided in Note 19.

INCOME TAXES Straumann is subject to income taxes in numerous jurisdictions. Management judgment is required in determining the worldwide liabilities for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for

Financial Report Straumann Group

anticipated tax audit issues based on estimates of whether additional taxes will be due. When the final tax outcome differs from the amounts that were initially recognized, the difference impacts current earnings. Details on taxrelated provisions are disclosed in Note 19.

PENSION AND OTHER EMPLOYMENT BENEFITS The cost of defined benefit pension plans and other post-employment medical benefits is determined using actuarial valuations, which involve making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. The net employee retirement benefit obligation at 31 December 2015 was CHF 44.5 million (2014: CHF 37.5 million). Further details are given in Note 21.

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOREIGN CURRENCY TRANSLATION The consolidated financial statements are presented in Swiss francs (CHF), which is Straumann Holding AG’s functional and presentation currency. Each entity in the Group determines its own functional currency, and items included in the financial statements of each entity are measured using this functional currency. Transactions in foreign currencies are initially recorded at the functional currency rate at the date of the transaction. Monetary assets and liabilities d enominated in foreign currencies are retranslated at the functional currency exchange rate at the balance sheet date. All differences are taken to profit or loss with the exception of differences arising on monetary items that in substance form part of an entity’s net investment in a foreign operation. Non-monetary items that are measured in terms of historical costs in a foreign currency are translated using the exchange rates on the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Any goodwill arising from the acquisition of a foreign operation and any fair value adjustments to the c arrying amounts of assets and liabilities arising from the acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate. The assets and liabilities of foreign operations are translated into Swiss francs at the exchange rate on the balance sheet date, and their income statements are translated at the average exchange rates for the year. The exchange differences arising from the translation are taken directly to a separate component of other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognized in other comprehensive income relating to that particular foreign operation is recognized in profit or loss.

PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Such costs include the cost of replacing part of the plant and equipment when that cost is incurred. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred. A straight-line method of depreciation is applied over the estimated useful life. Estimated useful lives of major classes of depreciable assets are: –– Buildings: 20 – 30 years –– Plant, machinery and other equipment: 3 – 10 years Land is not depreciated as it is deemed to have an indefinite life. Leasehold improvements are depreciated over the lease term including optional extension of the lease period but not exceeding its economic life. An item of property, plant and equipment is derecognized when it is abandoned, removed or classified as ‘held for sale’. For assets that are abandoned or removed, any remaining net carrying value is charged to profit or loss.

Financial Report Straumann Group

The residual values, useful lives and methods of depreciation of assets are reviewed, and adjusted if appropriate, at the end of each financial year.

INVESTMENT PROPERTIES Investment properties are held for long-term rental yields and are not occupied by the Group. Investment properties are stated at cost, less accumulated depreciation and accumulated impairment losses. Depreciation is recognized on a straight-line basis over the estimated useful life of 20 – 30 years. Land is not depreciated as it is deemed to have an indefinite life. The carrying value of investment properties is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If this occurs, the market value is determined by internal or external appraisers. If the market value is less than the carrying amount of the asset, an impairment loss is recognized in the amount by which the asset’s book value exceeds its fair value.

BUSINESS COMBINATIONS AND GOODWILL Business combinations are accounted for using the acquistion method. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the acquisition date, irrespective of any non-controlling interests. The excess of the costs of the acquisition above the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. Goodwill is initially measured at cost. If the costs of the acquisition are less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is allocated from the acquisition date to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

INTANGIBLE ASSETS Intangible assets acquired separately are measured on initial recognition at cost. Acquired software licenses are capitalized on the basis of the costs incurred to acquire and bring the specific software into use. Intangible assets acquired in a business combination are identified separately and recognized at fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost, less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets, excluding development costs, are not capitalized and expenditure is reflected in profit or loss in the year in which the expenditure is incurred. Intangible assets with finite lives are amortized over their useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an i ntangible asset with a finite useful life is reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in profit or loss in the expense category consistent with the function of the intangible asset. Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable.

Financial Report Straumann Group

The amortization methods applied to the Group’s intangible assets are summarized as follows: Customer relationships

Technology

Brands & trademarks

Development costs

Software

Useful life

Finite

Finite / infinite

Finite

Amortization method

Straight-line basis

Straight-line basis / none

Straight-line basis

Time period

Usually 7 – 10 years

Usually 10 years

Usually 20 years / not applicable

Over period of expected sales from the related project but not exceeding 3 years

Over estimated useful life but not exceeding 3 years

Internally generated or acquired

Acquired

Internally generated

Acquired

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss when the asset is derecognized. RESEARCH AND DEVELOPMENT COSTS

Development expenditure on an individual project is recognized as an intangible asset if the Group can demonstrate: –– the technical feasibility of completing the intangible asset so that it will be available for use or sale –– its intention to complete the asset –– its ability to use or sell the asset –– how the asset will generate future economic profit –– the availability of resources to complete the asset –– the ability to measure reliably the expenditure during development. Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost, less any accumulated amortization and accumulated impairment losses. The asset is amortized on a straight-line basis over the period of its expected benefit, starting from the date of full commercial use of the product in key markets. During the period of development, the asset is tested for impairment annually.

IMPAIRMENT OF NON-FINANCIAL ASSETS At each reporting date, the Group assesses whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries, or other available fair value indicators. Impairment losses of continuing operations are recognized in profit or loss in the expense categories consistent with the function of the impaired asset. For assets excluding goodwill, an assessment is made at each reporting

Financial Report Straumann Group

date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If there is such an indication, the Group makes an estimate of the recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the estimate used to determine the asset’s recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset is increased to its recoverable amount. The increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Goodwill is tested annually for impairment or whenever there are impairment indicators. Impairment for goodwill is determined by assessing the recoverable amount of the cash-generating units to which the goodwill relates. Where the recoverable amount of the cash-generating units is less than their carrying amount an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods. The Group performs its annual impairment test of goodwill on 30 November.

FINANCIAL ASSETS For the classification of financial assets the Group applies IFRS 9 (2010). The Group recognizes financial assets on the trade date at which it becomes a party to the contractual obligations of the instrument. Financial assets are initially measured at fair value. Acquisition-related costs are to be included, unless the financial asset is measured at fair value in subsequent periods. The Group subsequently measures financial assets at either amortized cost or fair value. FINANCIAL ASSETS MEASURED AT AMORTIZED COST

A financial asset is subsequently measured at amortized cost, using the effective interest method and net of any impairment loss, if: –– the asset is held within a business model with an objective to hold assets in order to collect contractual cash flows; and –– the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest. FINANCIAL ASSETS MEASURED AT FAIR VALUE

Financial assets other than those classified as measured at amortized cost are subsequently measured at fair value with all changes in fair value recognized in profit or loss. However, for investments in equity instruments that are not held for trading, the Group may elect at initial recognition to present gains and losses in other comprehensive income. For such investments measured at fair value through other comprehensive income, gains and losses are never reclassified to profit or loss and no impairments are recognized in profit or loss. Dividends earned from such investments are recognized in profit or loss unless the dividend clearly represents a repayment of part of the cost of the investment. FAIR VALUE

Fair value is 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. The fair value of financial instruments that are actively traded in organized financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. In the case of financial instruments for which there is no active market, fair value is determined using valuation techniques such as recent arm’s length market transactions, the current market value of another instrument that is substantially the same, discounted cash flow analysis or other valuation models.

Financial Report Straumann Group

TRADE AND OTHER RECEIVABLES Trade and other receivables are measured at amortised cost using the effective interest method less any impairment losses. Non-interest receivables are discounted by applying rates that match their maturity upon first-time recognition.

IMPAIRMENT OF FINANCIAL ASSETS At each balance sheet date, the Group assesses whether a financial asset or group of financial assets is impaired. If there is objective evidence that an impairment loss on assets measured at amortized cost has been incurred, the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (taking the future expected credit losses into consideration) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account. The loss is recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date. Any subsequent reversal of an impairment loss is recognized in profit or loss. In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired receivables are derecognized when they are assessed as uncollectible.

INVENTORIES Inventories are valued at the lower of cost or net realizable value. Raw material costs are determined by using the weighted average cost method. The cost of finished goods and work in progress comprises direct materials and labor and a proportion of manufacturing overhead, valued at standard cost. Standard costs are regularly reviewed and, if necessary, revised to reflect current conditions. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Work in progress and finished goods are valued at manufacturing cost, including the cost of materials, labor and production overheads. Inventory write-downs are recorded in the case of slow-moving or obsolete stock.

CASH AND CASH EQUIVALENTS Cash and cash equivalents in the statement of financial position comprise cash at banks, cash on hand, and short-term deposits with an o riginal maturity of three months or less. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of shortterm bank overdrafts.

SHARE CAPITAL The share capital of Straumann Holding AG consists of one class of registered shares with a par value of CHF 0.10 per share.

TREASURY SHARES Equity instruments which are re-acquired by the Group (treasury shares) are deducted from equity and disclosed separately. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

Financial Report Straumann Group

TRADE PAYABLES Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

FINANCIAL LIABILITIES For the classification of financial liabilities the Group applies IFRS 9 (2010). INTEREST-BEARING LOANS AND BORROWINGS

All loans and borrowings are initially recognized at fair value less directly attributable transaction costs, and have not been designated as ‘at fair value through profit or loss’. After initial recognition, interestbearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the amortization process. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities d esignated upon initial recognition as at fair value through profit or loss.

PROVISIONS Provisions are recognized when the Group has a present obligation (legal or constructive) resulting from a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in profit or loss, net of any reimbursement. If the effect of the time-value of money is material, provisions are discounted. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

EMPLOYEE BENEFITS PENSION OBLIGATIONS

The Group operates various post-employment schemes, including both defined benefit and defined contribution pension plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used.

Financial Report Straumann Group

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognized immediately in the income statement. For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expenses when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.  SHORT-TERM EMPLOYEE BENEFITS – BONUSES

As part of the annual compensation, most employees receive a bonus which depends on the course of business. The individual bonus is calculated by multiplying an individual base amount with a mix of financial, functional and individual target achievements which varies by hierarchical level and function. The bonus is usually settled in cash during the first quarter of the subsequent year. The Group recognizes a liability and an expense for these bonuses based on calculations which adequately consider all these parameters.

SHARE-BASED COMPENSATION The Board of Directors, Executive Management and Senior Management receive part of their remuneration in the form of share-based payment transactions, whereby these individuals render services as consideration for equity instruments (‘equity-settled transactions’). The cost of equity-settled transactions is measured with reference to the fair value at the date on which they are granted. The fair value is determined either based on observable market prices or by external valuation experts using an appropriate pricing model, further details of which are given in Note 20. The cost of equity-settled transactions is recognized, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the Board of Directors and the relevant employees become fully entitled to the award (‘the vesting date’). The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognized at the beginning and end of that period. No expense is recognized for awards that do not ultimately vest. Where the terms of an equity-settled award are modified, the minimum expense recognized is the expense if the terms had not been modified. An additional expense is recognized for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognized for the award is recognized immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date of grant, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect of outstanding performance share units (PSUs) and options is reflected as additional share dilution in the computation of earnings per share (Note 26).

Financial Report Straumann Group

Selected employees have the right to buy Straumann shares. The employees are offered a discount of 25% based on the average share price over the seven trading day period following the ex-dividend day. The difference between the fair value at grant and the cash consideration paid by the employees is immediately recognized as personnel expense. The shares are subject to a two-year blocking period. Conditional share capital was approved for an unlimited period at an extraordinary Shareholders’ General Meeting in 1998 for share-based compensation. Non-employee shareholders are excluded from subscribing for these shares.

REVENUE RECOGNITION Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the remuneration received, excluding discounts, rebates, and other sales taxes or duty. The following specific recognition criteria must also be met before revenue is recognized: SALE OF GOODS

Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. REVENUE FROM CUSTOMER TRAINING AND EDUCATION

Revenue from customer training and education is recognized once the related services are performed. INTEREST INCOME

Income is recognized as interest accrued (using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset). DIVIDENDS

Income is recognized when the Group’s right to receive the payment is established. RENTAL INCOME

Income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms.

RELATED PARTIES A party is related to an entity if: the party directly or indirectly controls, is controlled by or is under common control with the entity; or if it has an interest in the entity that gives it significant influence over the entity; or if it has joint control over the entity or is an associate or a joint venture of the entity. In addition, members and dependents of the Key Management Personnel of the entity (Board of Directors and Executive Management Board) are also considered related parties.

TAXES CURRENT INCOME TAX

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Current income tax relating to items recognized directly in equity is recognized in equity and not in profit or loss.

Financial Report Straumann Group

DEFERRED INCOME TAX

Deferred income tax is determined using the liability method on temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognized for all taxable temporary differences, except: –– where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or a liability in a t ransaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss –– in respect to taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not be reversed in the foreseeable future. Deferred income tax assets are recognized for all deductible temporary differences and carry forwards of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carry forwards of unused tax credits and unused tax losses can be utilized, except: –– where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss –– in respect to deductible temporary differences associated with investments in subsidiaries and associates. Deferred income tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilized. Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply for the year in which the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in profit or loss. Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right exists to set current income tax assets off against current income tax liabilities, and the deferred income taxes relate to the same taxable entity and the same taxation authority. SALES TAXES

Revenues, expenses and assets are recognized net of the amount of sales tax, except: –– where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item –– in the case of receivables and payables that are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

Financial Report Straumann Group

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its risks associated with fluctuations in interest rates and foreign currencies. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognized immediately in profit or loss. For the purpose of hedge accounting, hedges are classified as: –– fair value hedges – when hedging the exposure to changes in the fair value of a recognized asset, or liability, or an unrecognized firm commitment (except for foreign currency risk) –– cash flow hedges – when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment –– hedges of a net investment in a foreign operation. At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. Hedges which meet the strict criteria for hedge accounting are accounted for as follows: CASH FLOW HEDGES

The effective portion of the gain or loss on the hedging instrument is recognized directly in other comprehensive income, while any ineffective portion is recognized immediately in profit or loss. Amounts taken to other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognized or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts taken to other comprehensive income are transferred to the initial carrying amount of the nonfinancial asset or liability. If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognized in other comprehensive income are transferred to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognized in other comprehensive income remain in other comprehensive income until the forecast transaction or firm commitment occurs.

DIVIDEND DISTRIBUTION Dividend distribution to the company’s shareholders is recognized in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

Financial Report Straumann Group

3 BUSINESS COMBINATION NEODENT: CONSOLIDATION WITH 49% VOTING RIGHTS In 2012, the Group purchased 49% of the shares of JJGC Indústria e Comércio de Materiais Dentários S.A. (‘Neodent’), Latin America’s leading dental implant company. Neodent was accounted for using the ‘equity method’ and therefore the Group’s share of its results was reported as ‘share of results of associates’ in the Group’s income statement until 28 February 2015. The majority shareholders granted the Group three call options to purchase all remaining shares in Neodent exercisable at various times. On 1 March 2015, the first of these options to obtain a majority stake in Neodent became exercisable and was considered to be substantive. As a result, the Group considered that it had obtained control over Neodent and started to consolidate Neodent in its financial statements based on its ownership interests of 49% on 1 March 2015 with 51% noncontrolling interests. The fair values of the identifiable assets and liabilities of Neodent on 1 March 2015 were: (in CHF 1 000)

Fair Value

Assets Property, plant and equipment

24 514

Brand

61 266

Customer relationships

48 224

Other intangible assets Deferred tax assets

799 52 081

Inventories

15 746

Trade receivables

31 584

Other receivables

8 286

Cash and cash equivalents Total assets

8 083 250 583

Liabilities Deferred tax liabilities

(41 712)

Provisions

(20 006)

Trade payables Other liabilities

(5 297) (5 674)

Total liabilities

(72 689)

TOTAL IDENTIFIABLE NET ASSETS AT FAIR VALUE

177 894

Deemed consideration: Fair value 49 % stake after revaluation

212 673

Non-controlling interests

92 782 305 455

GOODWILL

127 561

Cash flow Net cash from subsidiary Cash paid NET CASH INFLOW

8 083 0 8 083

Financial Report Straumann Group

At the date of the business combination the fair value of the trade receivables was CHF 31.6 million. The gross contractual amount for trade receivables is CHF 35.1 million, of which CHF 3.5 million is expected to be uncollectable. Goodwill, which is not deductible for tax purposes, comprises intangible assets that are not separable such as expected synergy effects and employee know-how. The goodwill has been provisionally allocated to ‘Sales LATAM’. The 51% non-controlling interest of CHF 92.8 million was measured on the basis of the proportionate fair value of the identifiable net assets. The Group recognized an overall loss of CHF 63.9 million as a result of derecognizing its 49% equity interest in Neodent held before the business combination. The fair value of the 49% stake in Neodent was CHF 212.7 million and the associate carrying amount was CHF 191.2 million on 1 March 2015. The revaluation gain resulting from the revaluation to fair value of the 49% equity instrument in Neodent immediately before the deemed acquisition amounted to CHF 21.5 million. The related portion of translation differences of CHF 85.4 million loss resulting from the devaluation of the Brazilian Real against the Swiss franc since 2012 has been reclassified from comprehensive income to the income statement. Both effects are shown in a separate line in the income statement under ‘Loss on consolidation of Neodent’.

NEODENT: ACQUISITION OF 51% NON-CONTROLLING INTERESTS Negotiations between the existing shareholders Geninho Thomé and Clemilda Thomé and the Group started in April 2015 and led to a new agreement on the acquisition of the remaining 51% interest in Neodent. The purchase price for the outstanding 51% was BRL 680 million (CHF 225 million) paid in cash to the company’s founding shareholders on 24 April 2015. The acquisition extends the Group’s overall leadership in implant dentistry and makes it a substantial contender in the global value segment. The purchase of this non-controlling interest has been accounted for as an equity transaction. The difference of CHF 143 million between the consideration paid and the carrying amount of the non-controlling interest acquired has been recorded in equity and attributed to the shareholders of the parent company. In the period from 1 March to 31 December 2015, Neodent contributed revenues of CHF 63.0 million and a net income of CHF 6.9 million to the Group. If Neodent had been included as of 1 January 2015, management estimates the impact on consolidated revenues and consolidated net result for the 12 months ended 31 December 2015 would have been CHF 73.8 million and CHF -3.2 million.

4 OPERATING SEGMENTS Operating segments requiring to be reported are determined on the basis of the management approach. Accordingly, external segment reporting reflects the internal organizational and management structure used within the Group as well as the internal financial reporting to the Chief Operating Decision Maker (CODM), which has been identified as the Executive Management Board (EMB). The EMB is responsible for the operational management of the Group, in line with the instructions issued by the Board of Directors. It is also responsible for global strategy and stakeholder management. The reporting segments are presented in a manner consistent with the internal reporting to the CODM. The centralized headquarter support functions (e.g. finance, internal audit, information technology, human resources) as well as the functions ‘Customer Solutions & Education’ and ‘Research & Development’ are not operating segments as they do not earn separate revenues. These functions are grouped in the column ‘Not allocated items’.

Financial Report Straumann Group

In 2014, the Group created the Instradent business platform to drive and manage the distribution and internationalization of its value brands through its own network. The Instradent businesses in LATAM and Central Europe are directly and independently steered by the CODM of the regions. The reporting structure was implemented as of 1 March 2015 when Neodent was consolidated for the first time. Comparative information was adapted to the structure prevailing at the balance sheet date. The disclosed operating segments are defined as follows: Sales CE: ‘Sales CE’ comprises the Group’s premium distribution businesses in Germany, Switzerland, Austria, Hungary, the Czech Republic and Russia, as well as the premium business with European, African and Middle Eastern distributors. It also acts as the principal (excluding the premium distribution businesses performed by ‘Operations’) towards all Instradent businesses of the Group and incorporates the Instradent distribution business in the Czech Republic. It includes segment-related management functions located inside and outside Switzerland. Sales WE: ‘Sales WE’ comprises the Group’s premium distribution businesses in Scandinavia, the UK, France, the Benelux countries, Iberia and Italy, as well as the Instradent businesses in Italy and Iberia. It includes segmentrelated management functions located inside and outside Switzerland. Sales NAM: ‘Sales NAM’ comprises the Group’s premium distribution businesses in the United States and Canada, as well as the Instradent business in the United States. It includes segment related management functions located inside and outside Switzerland. Sales APAC: ‘Sales APAC’ comprises the Group’s premium distribution businesses in Japan, China, Korea, Australia and New Zealand, as well as the business with Asian distributors. It includes segment-related management functions located inside and outside Switzerland. Sales LATAM: ‘Sales LATAM’ comprises the Group’s premium distribution businesses in Brazil, Argentina, Colombia and Mexico as well as the business with Latin American distributors. It also includes Neodent’s distribution business in Brazil, as well as Neodent’s business with Latin American distributors. It contains Neodent’s manufacturing plant in Brazil (which produces implants, regeneratives and CADCAM products), as well as the Instradent businesses in Argentina, Colombia and Mexico. It includes segment-related management functions located inside and outside Switzerland. Operations: ‘Operations’ acts as the principal towards all premium distribution businesses of the Group; it does not include the Instradent distribution activities of fully-controlled Group companies. It includes the global manufacturing network (i.e. the manufacturing plants, production of implants, regenerative and CADCAM products) as well as all Corporate logistics functions. It does not include Neodent’s manufacturing site in Brazil.

Financial Report Straumann Group

INFORMATION ABOUT PROFIT OR LOSS, ASSETS AND LIABILITIES 2015 (in CHF 1 000)

Revenue third party Revenue inter-segment Total revenue

Depreciation & amortization Other expenses / income Operating profit

Sales CE

Sales WE

Sales NAM

Sales APAC

Sales LATAM

201 992

172 882

216 894

123 089

83 743

4 413

5 376

206 405

172 888

216 894

123 089

89 119

(743)

(903)

(960)

(694)

(8 063)

(192 588)

(171 763)

(215 374)

(115 101)

(74 860)

13 074

222

560

7 294

6 196

42 828

53 077

59 108

35 488

258 862

(20 232)

(33 466)

(40 823)

(19 600)

(32 667)

1 522

971

1 114

1 137

5 789

Financial result Loss on consolidation of Neodent Share of profit of associates Income tax expenses NET PROFIT

Segment assets Unallocated assets, thereof: Cash and cash equivalents Deferred income tax assets Financial assets Investments in associates GROUP

Segment liabilities Unallocated liabilities, thereof: Deferred income tax liabilities Straight bond Financial liabilities GROUP Addition in non-current assets

Transactions between the segments are eliminated in the course of consolidation and the eliminated amounts are shown in ‘Eliminations’. The remaining operating profit under ‘Eliminations’ represents the net change in inter-segment elimination of unrealized profits from the transfer of goods between Group companies. ‘Addition in non-current assets’ consists of additions of property, plant and equipment and intangible assets.

Financial Report Straumann Group

Operations

Not allocated items

Eliminations

Group

798 600

391 357

(401 152)

391 357

(401 152)

798 600

(14 858)

(8 813)

(35 034)

(111 439)

(107 711)

397 838

(590 998)

265 060

(116 524)

(3 314)

172 568

(16 211) (63 891) (12 268) (8 687) 71 511

237 053

11 885

(117 719)

580 582

318 297 43 730 55 455 48 232 1 046 296

(93 277)

(65 521)

66 826

(238 760)

(1 503) (199 520) (1 543) (441 326) 19 577

30 110

Financial Report Straumann Group

2014 (in CHF 1 000)

Revenue third party Revenue inter-segment Total revenue

Depreciation & amortization Other expenses / income Operating profit

Sales CE

Sales WE

Sales NAM

Sales APAC

Sales LATAM

213 306

175 284

193 130

106 761

21 789

3 608

216 914

175 285

193 130

106 761

21 789

(673)

(967)

(1 395)

(446)

(332)

(184 562)

(174 007)

(193 600)

(113 525)

(26 854)

31 679

311

(1 865)

(7 210)

(5 397)

37 325

52 941

49 243

45 321

11 717

(21 045)

(26 458)

(30 477)

(19 084)

(10 614)

795

695

1 136

1 683

6 46

Financial result Share of profit of associates Income tax expenses NET PROFIT

Segment assets Unallocated assets, thereof: Cash and cash equivalents Deferred income tax assets Financial assets Investments in associates GROUP

Segment liabilities Unallocated liabilities, thereof: Deferred income tax liabilities Straight bond Financial liabilities GROUP Addition in non-current assets

Financial Report Straumann Group

Operations

Not allocated items

Eliminations

Group

710 270

369 067

(372 676)

369 067

(372 676)

710 270

(14 996)

(9 076)

(27 885)

(98 249)

(107 233)

363 962

(534 068)

255 822

(116 309)

(8 714)

148 317

(7 176) 36 281 (19 597) 157 825

239 378

15 164

(97 937)

353 152

459 421 29 948 51 671 266 589 1 160 781

(89 788)

(69 356)

56 553

(210 269)

(9 353) (199 410) (4 913) (423 945) 10 248

15 203

Financial Report Straumann Group

NON-CURRENT ASSETS PER LOCATION (in CHF 1 000)

Switzerland Brazil

2015

2014

57 530

58 129

204 323

221 842

Germany

45 756

50 195

United States of America

23 347

18 735

Other

69 254

69 221

400 210

418 122

GROUP

Non-current assets include property, plant and equipment; investment property; investments in associates; and intangible assets.

REVENUES WITH EXTERNAL PARTIES (in CHF 1 000)

2015

2014

Implant Solutions

499 286

444 222

Restorative Solutions

242 710

219 113

PER BUSINESS FRANCHISE

Other GROUP

56 604

46 935

798 600

710 270

PER LOCATION OF CUSTOMER Switzerland

30 335

30 999

United States

195 222

169 964

Germany

125 762

134 293

Brazil

83 369

16 540

Other

363 912

358 474

GROUP

798 600

710 270

–– The Business Franchise ‘Implant Solutions’ comprises primarily implants and related instruments –– The Business Franchise ‘Restorative Solutions’ comprises abutments and related parts as well as milling elements –– ‘Other’ comprises scanner hardware, software licenses, regenerative products, customer training and other miscellaneous products. Revenues are allocated to countries based on the location of customers. The Group has a diverse and geographically widely spread customer base. No single customer accounts for 10% or more of total Group revenues.

Financial Report Straumann Group

5 PROPERTY, PLANT AND EQUIPMENT 2015 (in CHF 1 000)

Land

Buildings

Plant and machinery

Other equipment

Total

799

103 059

152 980

84 039

340 877

7 422

4 605

10 090

2 397

24 514

6 929

16 176

8 958

32 063

COST At 1 January Change in consolidation scope (Note 3) Additions Disposals Currency translation adjustments At 31 December

(348)

(2 841)

(5 123)

(8 312)

(1 054)

(3 521)

(2 093)

(4 902)

(11 570)

7 167

110 724

174 312

85 369

377 572

(75 019)

(115 253)

(72 060)

(262 332) (23 215)

ACCUMULATED DEPRECIATION At 1 January

(4 036)

(12 945)

(6 234)

Disposals

Depreciation charge (Note 23)

279

2 540

4 634

7 453

Currency translation adjustments

429

1 453

2 481

4 363

(78 347)

(124 205)

(71 179)

(273 731)

7 167

32 377

50 107

14 190

103 841

Land

Buildings

Plant and machinery

Other equipment

Total

799

100 472

144 688

86 284

332 243

Additions

2 487

8 878

5 511

16 876

Disposals

(832)

(2 787)

(8 644)

(12 263)

At 31 December

NET BOOK VALUE

2014 (in CHF 1 000)

COST At 1 January

Currency translation adjustments

932

2 201

888

4 021

799

103 059

152 980

84 039

340 877

At 1 January

(69 774)

(105 076)

(73 486)

(248 336)

Depreciation charge (Note 23)

(5 118)

(11 350)

(6 333)

(22 801)

At 31 December

ACCUMULATED DEPRECIATION

Disposals

456

2 623

8 563

11 642

Currency translation adjustments

(583)

(1 450)

(804)

(2 837)

At 31 December

(75 019)

(115 253)

(72 060)

(262 332)

799

28 040

37 727

11 979

78 545

NET BOOK VALUE

As in the prior year the Group has no assets under finance lease. Repair and maintenance expenses for property, plant and equipment for the business year 2015 amounted to CHF 5.2 million (2014: CHF 5.0 million).

Financial Report Straumann Group

6 INVESTMENT PROPERTIES (in CHF 1 000)

2015

2014

13 943

13 931

COST At 1 January Additions At 31 December

13 943

(9 942)

(9 596)

(288)

(346)

ACCUMULATED DEPRECIATION At 1 January Depreciation charge (Note 23) Impairment

(2 076)

(12 306)

(9 942)

Net book value

1 637

4 001

FAIR VALUE

1 637

4 335

At 31 December

Investment properties refer to the former headquarters in Waldenburg. They are treated as non-current investments and are carried at cost, less accumulated depreciation and any impairment in value. The fair value which falls within ‘Level 3’ of fair value measurement hierarchy is determined by discounting future cash flows and comparisons with current market values for similar properties. After termination of leasing contracts with the existing tenants no new rental agreement could be signed. Owing to the difficult market situation future cash flows are expected to be very low and consequently, an impairment charge of CHF 2.1 million was recognized. The remaining net book value mainly represents the value of land. AMOUNTS RECOGNIZED IN PROFIT OR LOSS FROM INVESTMENT PROPERTIES (in CHF 1 000)

2015

2014

Rental income

216

528

Direct operating expenses arising from investment properties that generated rental income

(27)

(35)

(2 631)

(405)

Direct operating expenses that did not generate rental income

Financial Report Straumann Group

7 INTANGIBLE ASSETS 2015 Goodwill

Brands

Customer Relationships

Other intangibles

Total

At 1 January

188 717

1 216

82 054

105 685

377 672

Change in consolidation scope

239 635

(in CHF 1 000)

COST

129 346

61 266

48 224

799

Additions

326

2 998

3 324

Disposals

(2 084)

Currency translation adjustments

(42 049)

(13 042)

(13 180)

(1 279)

(69 550)

At 31 December

276 014

49 440

117 424

106 119

548 997

(126 736)

(1 216)

(82 054)

(98 679)

(308 685) (9 455)

ACCUMULATED AMORTIZATION AND IMPAIRMENT At 1 January Amortization charge (Note 23)

(5 247)

(4 208)

Disposals

1 956

9 004

3 597

1 086

13 687

(117 732)

(1 216)

(83 704)

(99 845)

(302 497)

158 282

48 224

33 720

6 274

246 500

Goodwill

Brands 1

Customer Relationships1

Other intangibles1

Total

385 062

Currency translation adjustments At 31 December

NET BOOK VALUE

2014 (in CHF 1 000)

COST At 1 January

192 755

1 216

83 408

107 683

Additions

2 546

Disposals

(4 359)

Currency translation adjustments At 31 December

(4 038)

(1 354)

(185)

(5 577)

188 717

1 216

82 054

105 685

377 672

ACCUMULATED AMORTIZATION AND IMPAIRMENT At 1 January

(129 624)

(1 216)

(83 408)

(98 536)

(312 784)

Amortization charge (Note 23)

(4 738)

Disposals

4 359

2 888

1 354

236

4 478

(126 736)

(1 216)

(82 054)

(98 679)

(308 685)

61 981

7 006

68 987

Currency translation adjustments At 31 December

NET BOOK VALUE 1

Prior year figures have been adjusted to the current presentation format.

While the customer relationships from Neodent are amortized over a period of seven years, management assessed that the Neodent brand has an indefinite useful life. The Group supports the brand’s value through the internationalization of its commercial usage. ‘Other intangibles’ include mainly software and development costs.

Financial Report Straumann Group

DEVELOPMENT COSTS (in CHF 1 000)

2015

2014

Development projects

210

582

Projects in commercial use

792

1 028

At cost Accumulated amortization NET BOOK VALUE AT 31 DECEMBER

29 741

30 950

(28 949)

(29 922)

1 002

1 610

In 2015, CHF 0.2 million of additional development costs were capitalized (2014: CHF 0.6 million). Existing development costs include costs relating to the design and testing of new product lines.

IMPAIRMENT TEST FOR GOODWILL AND INDEFINITE LIFE INTANGIBLE ASSETS Goodwill and indefinite life intangible assets are allocated to cash-generating units (CGU) for the purpose of impairment testing. A summary of the goodwill allocation per CGU is presented below: (in CHF 1 000)

Neodent Business Global Premium Implant Business Other TOTAL GOODWILL

2015

2014

100 407

55 119

59 579

2 757

2 402

158 283

61 981

NEODENT BUSINESS:

The CGU ‘Neodent Business’ (which is part of the operating segment ‘Sales LATAM’) contains the manufacturing plant for Neodent products, the related sales activities in the Brazilian market as well as the export business towards the Group’s value distribution principal and third party distributors. Both the goodwill and the Neodent brand have been recognized as part of the acquisition of Neodent. The acquistion is disclosed in Note 3. GLOBAL PREMIUM IMPLANT BUSINESS:

The CGU ‘Global Permium Implant Business’ (which is part of the operating segment ‘Operations’) is the principal towards all distribution businesses of the Group for premium implant and restorative solutions and contains the goodwill allocated to the principal recognized as part of the following acquisitions: –– Straumann Italia srl, Italy –– Straumann Japan KK, Japan –– Manohay Dental SA, Spain –– Straumann Danmark ApS, Denmark –– Straumann LLC, Russia. Goodwill has been tested for impairment. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by Management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the dental implant, restoration and tissue regeneration sector.

Financial Report Straumann Group

Key assumptions for the most material goodwill positions include: (in %)

2015

2014

NEODENT BUSINESS 74.7

Gross profit margin of the CGU1

4.6

Terminal growth rate2

16.7

Weighted average cost of capital (WACC)3

GLOBAL PREMIUM IMPLANT BUSINESS 67.9

69.0

Terminal growth rate2

1.5

Weighted average cost of capital (WACC)3

9.0

9.1

Gross profit margin of the CGU1

1 2 3

Budgeted gross profit margin. Used for calculating the terminal value. Pre-tax discount rate applied to the cash flow projections.

Gross profit margin was determined by Management based on past performance and its expectations for market development. The growth rates used for the CGU ‘Global Implant Business’ are consistent with the forecasts included in industry reports. The WACCs used are pre-tax and reflect specific risks relating to the relevant CGUs. Based on the impairment tests conducted, no impairments were recognized during the periods under review.

IMPAIRMENT TEST FOR FINITE LIFE INTANGIBLE ASSETS No impairment has been recognized in the periods under review.

8 INVESTMENTS IN ASSOCIATES The Group has investments which are accounted for as associated companies. In 2015 the Group invested in some immaterial associated companies for strategic purposes. Neodent is not included any more as the Group had obtained control over Neodent in 2015 and started to consolidate Neodent in its financial statements. The two associates Medentika Implant GmbH and Medentika GmbH have been merged in 2015. By the sale of 49% of the shares of the formerly non-operating subsidiary Instradent Deutschland GmbH the group lost control of the entity and is now including this entity in its financial statements using the equity method. From a Group perspective, the associates Medentika GmbH, Hügelsheim, Germany and Instradent Deutschland GmbH, Hügelsheim (together referred to as German associates) are material at the reporting date. (in CHF 1 000)

Neodent, Brazil (until February 2015)

2015

2014

Balance sheet value

Net income statement effect

Balance sheet value

Net income statement effect

(6 090)

220 939

37 086

25 870

2 423

38 057

2 004

8 421

(530)

Others

13 941

(8 071)

7 593

(2 809)

TOTAL

48 232

(12 268)

266 589

36 281

Medentika GmbH, Germany Instradent Deutschland GmbH, Germany

Financial Report Straumann Group

GERMAN ASSOCIATES:

Medentika GmbH, is a provider of implant prosthetics that are used with leading implant and CADCAM systems. It is a private entity that is not listed on any public exchange. Instradent Deutschland GmbH is the distributing entity for Medentika products in Germany. The Group has interests of 51% in each entity. Management has assessed the level of influence that the Group has on the German associates and determined that it only has significant influence and not control because of the board representation and the contractual terms. The tables below provide summarized financial information for the German associates. The information disclosed reflects the amounts presented in the financial statements of the German associates, and not the Group’s share of those amounts. They have been amended to reflect adjustments made by the Group when using the equity method, including fair value adjustments and modifications for differences in accounting policies. (in CHF 1 000)

2015 Medentika GmbH

2014 Instradent Deutschland GmbH

Medentika GmbH

Current assets

10 788

1 824

11 926

Non-current assets

12 937

22 112

40 438

Current liabilities

(1 897)

(1 263)

(3 503)

Non-current liabilities

(3 939)

(6 162)

(10 670)

Net assets

17 889

16 511

38 191

RECONCILIATION TO CARRYING AMOUNT: Opening net assets

38 191

38 758

Profit for the period

2 870

(1 038)

2 047

(1 901)

(1 864)

(4 078)

324

(750)

(17 193)

17 193

Other comprehensive income Dividends declared Currency translation adjustments Transfer German distribution business Change in consolidation scope Closing net assets as of 31 December Group share's in %

17 889

16 511

38 191

51.0

9 123

8 421

19 477

Goodwill

18 962

Currency translation adjustments on goodwill

(2 215)

(382)

CARRYING AMOUNT

25 870

8 421

38 057

Group share's in CHF

Instradent Deutschland GmbH is consolidated at equity since March 2015. The change in net assets in Medentika GmbH results from the spin-off of the German distribution business of Medentika GmbH to Instradent Deutschland GmbH.

Financial Report Straumann Group

Summarized comprehensive income statement of the German associates: (in CHF 1 000)

2015 Medentika GmbH

Revenue

2014 Instradent Deutschland GmbH

Medentika GmbH

17 222

7 272

16 803

Profit from continuing operations

2 870

(1 038)

2 047

PROFIT FOR THE PERIOD

2 870

(1 038)

2 047

2 870

(1 038)

2 047

Other comprehensive income TOTAL COMPREHENSIVE INCOME

The information in the table above reflects the amounts presented in the financial statements of the German associates (and not the Group’s share of those amounts) adjusted for fair value adjustments and differences in accounting policies between the Group and the associates. OTHER INVESTMENTS:

In addition to the interests in the German associates disclosed above, the Group also has interests in a other associates that are accounted for using the equity method. Considered individually they are immaterial for the presentation of the Group’s financial statemtens. The following table shows aggregated financial information about these other investments in associates: (in CHF 1 000)

Aggregate carrying amount of individually immaterial associates

2015

2014

13 941

7 593

(2 128)

(1 849)

AGGREGATE AMOUNT OF GROUP'S SHARE OF: Loss from continuing activities Dividends Impairment charges

(4 983)

TOTAL COMPREHENSIVE INCOME

(7 111)

(1 849)

The investment in T-Plus (Taiwan) has been partially impaired and an expense of CHF 5.0 million has been recognized within ‘share of results of associates’. The impairment is caused by a reduction of the associate’s value in use, mainly related to a reduced sales growth rate forecast. The pre-tax rate applied to discount future cashflows amounts to 12.0%.

Financial Report Straumann Group

9 FINANCIAL ASSETS (in CHF 1 000)

2015

2014

Financial assets at fair value through profit or loss

29 867

27 035

Financial assets at fair value through other comprehensive income

15 322

11 265

Loans and other receivables

9 207

10 376

54 396

48 676

1 059

1 655

Loans and other receivables

1 320

Finance lease receivables

1 059

2 995

TOTAL NON-CURRENT FINANCIAL ASSETS

Financial assets at fair value through profit or loss

TOTAL CURRENT FINANCIAL ASSETS

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

The non-current position consists of convertible bonds from Biodenta Corp. and MegaGen Implant Co. Ltd. Biodenta is specialized in comprehensive solutions for dentists and dental laboratories, with a main focus on emerging markets. MegaGen Implant Co. Ltd. is a Korean implant company with its own subsidiaries and distributors offering implant systems, supplemented by digital and regenerative tools and products to support implant procedures. In March 2015 the Group purchased a second secured, convertible bond from MegaGen Implant Co. Ltd, for a total of CHF 9.5 million. Current financial assets classified as ‘Fair value through profit or loss’ contain mainly derivative financial instruments used by the Group to hedge its foreign currency risk. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Financial assets measured at fair value through other comprehensive income represent non-derivative equity instruments in the medical device sector and an investment in a fund. The Group did not recognize any dividend income relating to these instruments during the periods under review. LOANS AND OTHER RECEIVABLES

This position includes various non-derivative financial assets carried at amortized cost which generate a fixed or variable interest income for the Group. The carrying value may be affected by changes in the credit risk of the counterparties.

10 INVENTORIES (in CHF 1 000)

2015

2014

Raw materials and supplies

15 248

13 071

Work in progress

22 096

20 048

Finished goods

38 769

36 074

TOTAL INVENTORIES Inventories recognized as an expense in ‘Cost of goods sold’ Obsolete inventories written down and recognized as an expense

76 113

69 193

(151 618)

(125 900)

(437)

(2 564)

The Group performed an analysis of its product lines to investigate whether the average price at which they were sold was below the current consolidated stock value. In both periods under review, no write-down to the net realizable value had to be conducted. No reversal of the net realizable value write-down emerged in 2015 (2014: 1.3 million).

Financial Report Straumann Group

11 TRADE AND OTHER RECEIVABLES (in CHF 1 000)

Trade receivables, net Other receivables, thereof:

2015

2014

125 207

106 767

15 391

21 715

Sales related

6 115

5 233

VAT and other non-income taxes

5 398

8 723

Salary and social security prepayments

1 038

1 483

900

1 220

Prepaid rent Cash deposits Other TOTAL TRADE AND OTHER RECEIVABLES thereof: financial assets as defined by IFRS 7

578

506

1 362

4 550

140 598

128 482

1 478

4 805

thereof: CHF

13 043

28 414

EUR

39 567

30 408

USD

36 891

26 004

Other

51 097

43 656

Trade receivables are non-interest bearing. There is no concentration of credit risk with respect to trade receivables, as Straumann has a large number of customers who are dispersed internationally. Movements in the provision for impairment of trade receivables were as follows: (in CHF 1 000)

2015

2014

At 1 January

(5 250)

(5 087)

Charge for the year

(5 649)

(1 339)

Utilized

4 02

740

Unused amounts reversed

360

476

Currency translation adjustments

391

(40)

(9 746)

(5 250)

AT 31 DECEMBER

There is no provision on other receivables. The analysis of overdue trade receivables is as follows: (in CHF 1 000)

Not past due Past due, thereof: < 30 days

2015

2014

Gross

Allowance

Gross

Allowance

101 406

(512)

84 653

(442)

33 547

(9 234)

27 364

(4 808)

10 752

(132)

9 475

(76)

31 – 60 days

5 473

(85)

6 406

(42)

61 – 90 days

3 742

(68)

2 300

(238)

91 – 120 days > 120 days TOTAL

2 342

(341)

2 110

(496)

11 238

(8 608)

7 073

(3 956)

134 953

(9 746)

112 017

(5 250)

Financial Report Straumann Group

12 CASH AND CASH EQUIVALENTS (in CHF 1 000)

2015

2014

312 477

458 925

CHF

281 470

414 500

EUR

10 955

28 492

CNY

7 617

6 502

12 435

9 431

5 820

496

Cash at banks and on hand, thereof:

Other Short-term bank deposits, thereof: BRL Other TOTAL CASH AND CASH EQUIVALENTS

5 292

528

496

318 297

459 421

Cash at banks earns interest at floating rates based on daily bank deposit rates in the respective currency.

13 SHARE CAPITAL The share capital is represented by 15 722 939 issued shares (2014: 15 676 549) of CHF 0.10 par value, fully paid in. On 23 April 2015 the authorized share capital was increased by CHF 4 639 by the issue of 46 390 shares of CHF 0.10 each. The additional share capital was created from conditional share capital and was used for the Performance share plan for Executive and Senior Management. The conditional share capital was approved for an unlimited period at an extraordinary General Meeting in 1998 for use in equity participation plans for employees and management. At 31 December 2015 the conditional share capital amounted to CHF 27’706.10 (2014: CHF 32’345.10) and the number of conditional shares was 277 061 (2014: 323 451). Treasury shares are valued at weighted average cost and have been deducted from equity. The fair value of the treasury shares at 31 December 2015 amounted to CHF 2.3 million (2014: CHF 15.7 million). At 31 December 2015 the number of outstanding shares amounted to 15 715 403 (2014: 15 613 849) and the number of treasury shares to 7 536 (2014: 62 700). The number of shares outstanding developed as follows:

At 1 January

2015

2014

15 613 849

15 533 158

4 6 390

Issuance of new shares Compensation plan - PSU Treasury shares Used AT 31 DECEMBER

55 164

80 691

15 715 403

15 613 849

14 STRAIGHT BOND The Group launched and fully placed an inaugural CHF-denominated domestic straight bond issue for an aggregate amount of CHF 200 million with issue date 30 April 2013 and interest rate of 1.625% p.a, payable annually in arrears on 30 April. The maturity date of the bond is 30 April 2020 with redemption at par. Denominations of the bond are CHF 5 000 nominal and multiples thereof.

Financial Report Straumann Group

The bond has been admitted to trading on the SIX Swiss Exchange with effect from 26 April 2013 until 27 April 2020 and listed in accordance with the Standard for Bonds on the SIX Swiss Exchange. The interest-bearing borrowings recognized in the financial position are calculated as follows: (in CHF 1 000)

Straight bond at 1 January Interest expense Redemption

2015

2014

199 410

199 301

3 380

3 379

(3 270)

thereof: Recognized in trade and other payables (Note 18)

(2 180)

Disbursement

(1 090)

199 520

199 410

STRAIGHT BOND AT 31 DECEMBER

15 FINANCIAL LIABILITIES (in CHF 1 000)

Unpaid purchase price consideration Finance lease payables

2015

2014

568

3 557

TOTAL NON-CURRENT FINANCIAL LIABILITIES

618

3 587

Unpaid purchase price consideration

782

Financial liabilities at fair value through profit or loss (Note 31)

143

1 326

TOTAL CURRENT FINANCIAL LIABILITIES

925

1 326

2015

2014

Other long-term employee benefits

4 271

3 942

Government grants

1 375

1 667

16 OTHER LIABILITIES (NON-CURRENT) (in CHF 1 000)

Rent payable

857

927

Other

472

418

6 975

6 954

857

927

TOTAL OTHER LIABILITIES thereof: financial liabilities as defined by IFRS 7

Government grants relate to grants recognized in Germany in connection with investments in the manufacturing facilities of Etkon GmbH.

Financial Report Straumann Group

17 PROVISIONS (in CHF 1 000)

At 1 January Change in consolidation scope (Note 3) Utilization

Sales-related

Tax-related

24 515

15 350

415

936

(9 550)

(14)

Total 2015

Total 2014

1 997

41 862

38 291

18 655

20 006

(5 852)

(15 416)

(11 951)

Other

Reversal

(563)

(570)

(529)

(1 662)

(3 999)

Additions

1 236

1 098

4 884

7 218

17 232

(66)

(862)

(225)

(3 377)

(4 464)

2 355

15 191

16 575

15 778

47 544

41 862

Non-current 2015

7 595

16 090

5 147

28 832

Current 2015

7 596

4 85

10 631

18 712

15 191

16 575

15 778

47 544

Non-current 2014

13 053

14 863

1 997

29 913

Current 2014

11 462

4 87

11 949

24 515

15 350

1 997

41 862

Reclassification Currency translation adjustment At 31 December

TOTAL PROVISIONS 2015

TOTAL PROVISIONS 2014

The position ‘Sales-related’ contains provisions for product warranties and similar items. In connection with the Group’s go-to-market approach in the People’s Republic of China, a provision in the amount of CHF 26.5 million was recorded in previous years. Several installments in the amount of CHF 9.5 million were paid out to the former Chinese distributor in 2015. It is expected that the last payments will be completed in 2017. The position ‘Tax-related’ contains provisions to income taxes as well as VAT and other non-income tax cases in a number of jurisdictions. The Group reassessed its provision for tax risks to reflect recent developments in a number of jurisdictions including all ongoing disputes with tax authorities. As a result of this reassessment the Group increased non-current provisions by CHF 1.1 million. The non-current provisions for VAT risks remained unchanged in relation to the previous year. As of 1 March 2015, the Group obtained control over Neodent and recorded a provision in the amount of CHF 18.7 million under the position ‘Other’. The provision is mainly related to the separation of a distributor in Brazil and litigations in the United States. The Group utilized CHF 5.9 million in 2015. The additional increase in the amount of CHF 4.9 million consists of a number of separate legal matters, including claims arising from trade, in various Group companies. By their nature the amounts and timings of any outflows are difficult to predict.

Financial Report Straumann Group

18 TRADE AND OTHER PAYABLES (in CHF 1 000)

Trade payables Other payables, thereof:

2015

2014

23 390

24 538

100 783

80 726

Salary and social security

57 522

49 235

Sales related

30 777

22 704

VAT and other non-income taxes

5 584

4 369

Interest accrued on straight bond (Note 14)

2 180

Rent payable Other TOTAL TRADE AND OTHER PAYABLES thereof: financial liabilities as defined by IFRS 7

476

416

4 244

1 822

124 173

105 264

2 656

2 596

19 INCOME TAX INCOME TAX EXPENSE (in CHF 1 000)

Income taxes from current period Income taxes from other periods

2015

2014

(21 276)

(21 802)

2 336

(499)

Deferred

10 253

2 704

Total income tax expense

(8 687)

(19 597)

10.8

11.1

EFFECTIVE INCOME TAX RATE (IN %)

For 2015, the applicable Group tax rate is 11.3% (2014: 18.1%), which represents the weighted tax rate, calculated by multiplying the accounting profits (or losses) of each Group company by the respective statutory tax rate over the total pre-tax profit of the Group. The following elements explain the difference between the income tax expense at the applicable Group tax rate and the effective income tax expense: (in CHF 1 000)

2015

2014

Profit before tax

80 198

177 422

Applicable Group tax rate

11.3 %

18.1 %

Income tax at the applicable Group tax rate

(9 057)

(32 019)

Non-taxable / non-tax-deductible positions

1 981

12 985

Changes in recognition of tax assets from losses or tax credits (and their expiry)

279

506

Utilization of previously unrecognized tax losses or tax credits to offset current taxes

147

(4 053)

(613)

Tax losses or tax credits from current year that are not recognized Effect of changes in tax rates or imposition of new taxes

(110)

(11)

Current taxes from other periods

2 336

(499)

Other EFFECTIVE INCOME TAX EXPENSE

(210)

(8 687)

(19 597)

Financial Report Straumann Group

AVAILABLE TAX LOSS CARRY-FORWARDS AND TAX CREDITS (in CHF 1 000)

2015

2014

At 1 January

37 195

42 936

Change in consolidation scope

124 868

Currency translation adjustments

(25 879)

(773)

Adjustments of tax loss carry-forwards on opening balance

1 129

87 405

(93)

Tax losses and credits utilized against current year profits

(14 292)

(4 899)

AT 31 DECEMBER

210 426

37 195

Tax losses and credits arising from current year

Deferred income tax assets of CHF 40.0 million (2014: 7.7 million) were recorded in respect of available tax loss carry-forwards and tax credits of CHF 149.5 million (2014: CHF 21.8 million). Deferred income tax assets for unused tax losses and tax credits are recognized to the extent that it is probable that future taxable profits will be available, against which the unused tax losses and tax credits can be utilized in the respective countries, or to the extent that the individual companies have sufficient taxable temporary differences. In 2012, the Group acquired 49% of Neodent through a fully owned acquisition vehicle and subsequently conducted a downstream merger into Neodent. This transaction has led to recognition of tax deductible goodwill and a capitalization of a deferred tax asset in Neodent’s financial statements. In 2015, the Group obtained control over Neodent and started to consolidate Neodent in its financial statements. At 1 March 2015, the tax deductible goodwill amounted to CHF 124.9 million and the carrying amount of the respective deferred tax assets amounted to CHF 42.5 million. Further details to the Neodent consolidation are provided in Note 3. Unused tax loss carry-forwards for which no deferred tax has been recognized will expire as follows: (in CHF 1 000)

Expiry in next business year (current year +1)

2015

2014

1 236

Expiry current year +3

548

Expiry current year +4

8 268

Expiry current year +5 and later

50 906

15 366

UNUSED TAX LOSS CARRY-FORWARDS AT 31 DECEMBER

60 958

15 366

Expiry current year +2

Financial Report Straumann Group

DEFERRED INCOME TAXES The movement in deferred income tax assets and liabilities is as follows: 2015 (in CHF 1 000)

Deferred tax assets at 1 January

Property, plant and equipment

Intangible assets

Inventory Tax loss valuation carry-forwards, tax credits

Other

Total

279

108

11 032

7 693

10 836

29 948

Deferred tax liabilities at 1 January

(2 492)

(332)

(2 837)

(3 692)

(9 353)

Net deferred tax balance at 1 January

(2 213)

(224)

8 195

7 693

7 144

20 595

853

(56)

8 981

(842)

1 317

10 253

Charged to statement of comprehensive income

1 406

(Charged) / credited to statement of changes in equity

2 229

(2 041)

(37 227)

426

42 455

6 756

10 369

414

7 920

(91)

(9 254)

(1 614)

(2 625)

(2 987)

(29 587)

17 511

4 0 052

17 238

42 227

(Charged) / credited to income statement

Change in consolidation scope Currency translation adjustments NET DEFERRED TAX BALANCE AT 31 DECEMBER Deferred tax assets at 31 December Deferred tax liabilities at 31 December

214

20 272

4 0 052

20 712

81 328

(3 201)

(29 665)

(2 761)

(3 474)

(39 101)

Property, plant and equipment

Intangible assets

Inventory Tax loss valuation carry-forwards, tax credits

Other

Total

2014 (in CHF 1 000)

Deferred tax assets at 1 January

358

198

9 574

8 149

8 113

26 392

Deferred tax liabilities at 1 January

(3 461)

(443)

(2 581)

(3 303)

(9 788)

Net deferred tax balance at 1 January

(3 103)

(245)

6 993

8 149

4 810

16 604

1 236

1 193

(284)

534

2 704

1 631

(346)

(4)

133

(136)

(344)

(2 213)

(224)

8 195

7 693

7 144

20 595

(Charged) / credited to income statement Charged to statement of comprehensive income Currency translation adjustments NET DEFERRED TAX BALANCE AT 31 DECEMBER Deferred tax assets at 31 December Deferred tax liabilities at 31 December

279

108

11 032

7 693

10 836

29 948

(2 492)

(332)

(2 837)

(3 692)

(9 353)

At 31 December 2015, deferred tax assets and deferred tax liabilities of CHF 37.6 million (2014: nil) have been offset. At 31 December 2015, there was no recognized deferred tax liability (2014: CHF nil) for taxes that would be payable on the unremitted earnings of certain of the Group’s subsidiaries. The Group does not expect significant income tax liabilities from the distribution of retained earnings to the parent company.

20 SHARE-BASED PAYMENTS The Group uses four different compensation plans involving share-based payment components: –– Option plan –– Performance share plan –– Board of Directors remuneration –– Employee share plan

Financial Report Straumann Group

OPTION PLAN Up to 2011, tradable options (non-tradable for participants outside Switzerland) with a term of six years and a two-year vesting period were allocated to members of the Executive Management and Senior Management as part of their compensation. The exercise price was equal to the share price on 31 December. The value of the options was determined at grant date and has been expensed as a personnel expense from service commencement to the end of the vesting period. The fair value of the options granted was determined using the BlackScholes valuation model. The calculation of the option value was performed by independent specialists. Unvested options are forfeited when an employee leaves the company. The options are structured as a private placement. The options, which were issued in the form of warrants (one option = 50 warrants), can be exercised 1:1 into shares. A Swiss bank functions as market maker for the quoted and private placement warrants. Since 2012, no further option allocations have been made.

PERFORMANCE SHARE PLAN Under the Performance share plan introduced in 2012, Executive Management and Senior Management are granted ‘Performance Share Units’ (PSUs), which are convertible into shares after a three-year vesting period. The conversion factor is a linear function of the Group’s total shareholder return (TSR) and can vary between 0 and a cap of 2.0. An annual TSR of 10% results in a conversion factor of 1.0, a TSR of 0% or below leads to a conversion factor of zero. Employees must remain in service for a period of three years from the date of grant. The fair value of PSUs granted is estimated at the date of grant using a Monte Carlo simulation model, taking into account the terms and conditions upon which the PSUs were granted.

BOARD OF DIRECTORS REMUNERATION The Board of Directors is entitled to a fixed compensation, which is paid out in cash and shares. Approximately 40% of the compensation is paid out in shares; the shares allocated to the members of the Board of Directors are blocked for 2 years. The value of shares allocated is calculated using the average closing price of the shares over the seven trading days following the ex-dividend day.

EMPLOYEE SHARE PLAN Selected employees in Switzerland had the right to buy between 10 and 500 shares (depending on the hierarchical level) in 2015. The employees were offered a discount of 25% based on the average share price over the seven trading day period following the ex-dividend day. The difference between the fair value at grant and the cash consideration paid by the employees was immediately recognized as personnel expense. The shares are subject to a two-year blocking period. During the reporting period, employees subscribed to 4 653 (2014: 11 495) of those shares. The expense recognized for share-based payments during the year is shown in the following table: (in CHF 1 000)

2015

2014

2 601

3 495

Board of directors remuneration

828

1 173

Employee share plan

170

197

3 599

4 865

Performance share plan

TOTAL SHARE-BASED PAYMENTS (NOTE 24)

There were no cancellations or modifications to the awards in 2015 or 2014.

Financial Report Straumann Group

Movements in the number of performance share units are as follows: RECONCILIATION OF OUTSTANDING PERFORMANCE SHARE UNITS At 1 January Granted

2015

2014

99 810

79 138

7 586

30 063

Exercised

(23 559)

Forfeited

(7 038)

(9 391)

TOTAL AT 31 DECEMBER

76 799

99 810

Exercisable at 31 December

The option program developed as follows: RECONCILIATION OF OUTSTANDING OPTIONS 2015

2014

Weighted Number of Average options excercise price (CHF)

Number of options

Weighted Average excercise price (CHF)

At 1 January

131 702

229.48

199 470

213.95

Exercised

(47 447)

280.75

(62 796)

183.62

Expired

(7 055)

292.50

(4 972)

185.50

TOTAL AT 31 DECEMBER

77 200

192.21

131 702

229.48

The exercise prices, the exercise period and the expiry date of the outstanding options are as follows: Strike price

Options expiring at year-end

Total options available for exercise

2015

292.50

7 055

77 200

2016

214.00

44 783

77 200

2017

162.10

32 417

The following table lists the inputs to the models used for the performance share plan (PSU) and the option plan for the years ended 31 December 2015 and 2014, respectively: INPUTS TO THE MODELS 2015

2014

PSU

0.00

Expected volatility (in %)

31.75

31.81

Risk-free interest rate (in %)

(0.63)

0.14

Dividend yield (in %)

Expected life of PSUs / options Share price (in CHF) at grant date in April Fair value (in CHF) Model used

262.50

184.00

208.06

152.33

Monte Carlo

The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the instruments is indicative of future trends, which may not necessarily be the actual outcome.

Financial Report Straumann Group

21 RETIREMENT BENEFIT OBLIGATIONS Apart from the legally required social security schemes, the Group has several independent pension plans. In most cases these plans are externally funded in vehicles which are legally separate from the Group. For certain Group companies, however, no independent plan assets exist for the pension plan of subsidiaries. In these cases the related unfunded liability is included in the statement of financial position. The defined benefit obligations and related plan assets are reappraised annually by independent actuaries. The Swiss pension plan represents the most significant portion of the Group’s total defined benefit obligation and plan assets. Current pension arrangements for employees in Switzerland are made through plans governed by the Swiss Federal Occupational Old Age, Survivors and Disability Pension Act (BVG). The Group’s pension plans are administered by separate legal foundations, and are funded by regular employer and employee contributions. The final benefit is contribution-based with certain minimum guarantees. Due to these minimum guarantees, the Swiss plan is treated as a defined benefit plan for the purposes of these IFRS financial statements, although the plan has many of the characteristics of a defined contribution plan. The amounts for the Group’s pension plans recognized in the statement of financial position are as follows:

MOVEMENTS OF NET LIABILITIES RECOGNIZED IN STATEMENT OF FINANCIAL POSITION (in CHF 1 000)

Net liabilities at 1 January Currency translation adjustments

2015

2014

(37 492)

(18 482)

128

(3 440)

(8 473)

8 192

7 817

Remeasurements

(11 884)

(18 365)

NET LIABILITIES AT 31 DECEMBER

(44 496)

(37 492)

Expense recognized in consolidated income statement (Note 24) Employer contributions Benefits paid

BALANCE SHEET (in CHF 1 000)

Fair value of plan assets Present value of funded benefit obligations Deficit in the plan

Present value of unfunded benefit obligations TOTAL RETIREMENT BENEFIT OBLIGATIONS

2015

2014

144 578

135 487

(186 457)

(170 108)

(41 879)

(34 621)

(2 617)

(2 871)

(44 496)

(37 492)

Financial Report Straumann Group

The net periodic benefit costs recorded in the income statement consist of the following components: (in CHF 1 000)

2015

2014

Current service cost

(9 491)

(7 977)

Interest expense on defined benefit obligation

(2 081)

(2 970)

Interest income on plan assets

1 605

2 546

Administration costs

(263)

(248)

Gains on curtailments, settlements and plan amendments

6 790

176

(3 440)

(8 473)

EXPENSE RECOGNIZED IN THE CONSOLIDATED INCOME STATEMENT

Plan amendment gains in 2015 are recorded mainly in respect of changes to the Swiss pension plan. The change represents the adoption of a lower conversion rate, which determines the annuity at the normal retirement age. The most significant pension plan for the Group is the Swiss pension plan. The defined benefit obligation of the Swiss pension plan amounts to CHF 185.7 million (2014: CHF 169.3 million) , the plan assets to CHF 144.0 million (2014: CHF 135.0 million) and current service costs to CHF 9.1 million (2014: CHF 7.5 million). The movement in the Group’s defined benefit obligation over the year is as follows: (in CHF 1 000)

2015

2014

(172 979)

(142 945)

Current service cost

(9 491)

(7 977)

Interest expense on defined benefit obligation

(2 081)

(2 970)

Present value of benefit obligation at 1 January

Curtailments, settlements and plan amendments

6 790

596

Employee contributions

(4 619)

(4 340)

Experience losses on defined benefit obligation

(2 735)

(4 878)

Benefits paid Actuarial losses arising from change in financial assumptions Actuarial gains arising from change in demographic assumptions Currency translation adjustments PRESENT VALUE OF BENEFIT OBLIGATION AT 31 DECEMBER whereof due to active members whereof due to pensioners

5 896

7 647

(10 064)

(18 156)

4 6

163

(19)

(189 074)

(172 979)

(159 459)

(145 388)

(29 615)

(27 591)

At 31 December 2015, the weighted-average duration of the defined benefit obligation was 13 years (2014: 14 years). The calculation of defined benefit obligation is based on actuarial assumptions. The principal actuarial assumptions for the plans, which are determined with respect to local conditions, were as follows: 2015 Switzerland

2014 Other

Switzerland

Other

Discount rate

0.65 % 1.80 % - 2.58 %

Future salary increases

1.00 % 1.00 % - 2.75 %

1.50 % 1.50 % - 2.75 %

Future pension increases

0.00 %

Generational mortality tables are used where this data is available.

0.00 %

1.15 % 1.70 % - 1.78 %

0.00 %

Financial Report Straumann Group

The defined benefit pension obligation is significantly impacted by assumptions regarding the discount rate. Furthermore, the rate of future salary increases significantly affects the value of the plans. A quantitative sensitivity analyses for significant assumptions is shown below : (in CHF 1 000)

2015

2014

Defined benefit obligation

Increase

Discount rate (0.25 % movement) Future salary growth (0.25 % movement)

Decrease

Increase

Decrease

5 930

(6 308)

5 715

(6 102)

(1 027)

998

(840)

793

The sensitivity analyses above have been determined based on a method that extrapolates the impact on net defined obligation as a result of reasonable changes in key assumptions occuring at the end of the reporting period. The movement in the fair value of plan assets over the year is as follows: (in CHF 1 000)

Fair value of plan assets at 1 January

2015

2014

135 487

124 463 2 546

Interest income

1 605

Employer contributions

8 192

7 817

Employee contributions

4 619

4 340

Curtailments, settlements and plan amendments

(420)

(5 896)

(7 645)

Return on plan assets

869

4 606

Administration costs

(263)

(248)

Benefits paid

Currency translation adjustments FAIR VALUE OF PLAN ASSETS AT 31 DECEMBER

(35)

144 578

135 487

Plan assets are comprised as follows: (in CHF 1 000)

Cash and cash equivalents

2015

2014

9 215

6.4 %

11 606

8.6 %

Debt instruments

29 086

20.1 %

34 144

25.2 %

Equity instruments

34 846

24.1 %

30 095

22.2 %

Real estate

41 901

29.0 %

36 168

26.7 %

Other

29 530

20.4 %

23 474

17.3 %

144 578

100.0 %

135 487

100.0 %

TOTAL PLAN ASSETS

Cash and cash equivalents, as well as most of the debt and equity instruments and ‘Other’ (mainly consisting of commodities and insurance-linked securities) have a quoted market price in an active market. Half of the plan assets shown under ‘Real estate’ also have a quoted market price. The strategic allocation of assets is determined with the objective of achieving an investment return which, together with the employer and employee contributions, is sufficient to maintain reasonable control over the various funding risks of the plan. The aim is to ensure that plan assets and liabilities are aligned in the medium and long term.

Financial Report Straumann Group

The funding of the Group’s defined benefit plans is in the responsibility of an independent foundation. The Board of Trustees, which is constituted by an equal number of representatives of the employer and employees, is responsible for the management of the foundation. The Board of Trustees determines the investment strategy within the framework of the legal provisions taking into consideration the foundations risk objectives, benefit obligations and risk capacity. The foundation uses external actuarial reports to estimate the risk capacity. Each year, the Board of Trustees reviews the level of funding as required by legislation. The duties of the Board of Trustees are laid down in the BVG and the pension fund regulations. In accordance with BVG, a temporary shortfall is permitted. The Board of Trustees must take appropriate measures in order to solve the shortfall within a reasonable time. Pursuant to BVG, additional employer and employee contributions may be incurred whenever a significant shortfall in accordance with BVG arises. At 31 December 2015, the funding ratio as defined by BVG was 113% (2014: 111%). The expected amount of contribution to post-employment benefit plans for 2016 is CHF 8.2 million.

22 OTHER INCOME (in CHF 1 000)

Rental income Gain on disposal of property, plant and equipment Other TOTAL OTHER INCOME

2015

2014

1 792

1 696

366

455

2 161

2 236

2015

2014

(23 215)

(22 801)

23 DEPRECIATION AND AMORTIZATION (in CHF 1 000)

Depreciation of property, plant and equipment Depreciation of investment properties Amortization of intangible assets Impairment of investment properties TOTAL DEPRECIATION AND AMORTIZATION

(288)

(346)

(9 455)

(4 738)

(2 076)

(35 034)

(27 885)

Financial Report Straumann Group

24 EMPLOYEE BENEFITS EXPENSE (in CHF 1 000)

Wages and salaries Share-based payments (Note 20) Social security cost

2015

2014

(257 798)

(229 167)

(3 599)

(4 865)

(34 731)

(30 668)

Pension costs – defined benefit plan (Note 21)

(3 440)

(8 473)

Pension costs – defined contribution plan

(9 191)

(2 351)

Other personnel expense

(7 324)

(11 407)

(316 083)

(286 931)

TOTAL EMPLOYEE BENEFIT EXPENSE

25 FINANCE INCOME AND EXPENSE (in CHF 1 000)

FINANCE INCOME Interest income from financial instruments at amortized cost from financial instruments at fair value Fair value and other financial income Foreign exchange gains FINANCE EXPENSE Interest expense from financial instruments at amortized cost on defined benefit obliagtion (net)

2015

2014

44 115

17 016

3 330

1 056

2 530

638

800

418

1 748

3 677

39 037

12 283

(60 326)

(24 192)

(4 461)

(4 339)

(3 985)

(3 915)

(476)

(424)

(8 342)

(3 422)

Foreign exchange losses

(47 523)

(16 431)

LOSS ON CONSOLIDATION OF NEODENT

(63 891)

21 487

Fair value and other financial expense

Fair value income Foreign exchange loss

(85 378)

TOTAL FINANCE EXPENSE NET

(80 102)

(7 176)

26 EARNINGS PER SHARE BASIC EARNINGS PER SHARE Basic earnings per share are calculated by dividing the net profit for the year attributable to ordinary shareholders of S traumann Holding AG by the weighted average number of ordinary shares outstanding during the year, excluding ordinary shares purchased by the Group and held as treasury shares.

Net profit attributable to shareholders (in CHF 1 000) Weighted average number of ordinary shares BASIC EARNINGS PER SHARE (IN CHF)

2015

2014

70 679

157 825

15 653 490

15 550 496

4.52

10.15

Financial Report Straumann Group

DILUTED EARNINGS PER SHARE Diluted earnings per share are calculated by dividing the net profit for the year attributable to ordinary shareholders of Straumann Holding AG by the weighted average number of ordinary shares outstanding during the year, plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential of outstanding equity instruments into ordinary shares. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. 2015

Net profit used to determine diluted earnings per share (in CHF 1 000) Weighted average number of ordinary shares outstanding Adjustments for instruments issued Weighted average number of ordinary shares for diluted earnings per share DILUTED EARNINGS PER SHARE (IN CHF)

2014

70 679

157 825

15 653 490

15 550 496

171 314

186 810

15 824 804

15 737 306

4.47

10.03

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements. The dilutive effect on earnings per share is caused by outstanding options at the balance sheet date and the outstanding issues of Performance Share Units programs, which are ‘in-the-money’ at the balance sheet date.

27 DIVIDENDS PER SHARE The dividend paid in 2015 and 2014 was CHF 3.75 per share, resulting in a total payout of CHF 58.6 million in 2015 and CHF 58.3 million in 2014. A dividend for the year ended 31 December 2015 of CHF 4.00 per share, amounting to a total dividend of CHF 62.9 million, will be proposed at the Shareholders’ General Meeting on 8 April 2016. These financial statements do not reflect this payable dividend.

28 CONTINGENCIES AND COMMITMENTS OPERATING LEASE COMMITMENTS (in CHF 1 000)

2015

2014

MATURITY: Within 1 year

17 001

17 207

After 1 year but not more than 5 years

33 938

43 484

More than 5 years

3 002

4 891

TOTAL OPERATING LEASE COMMITMENTS

53 941

65 582

TOTAL RENTAL AND OPERATING LEASE EXPENSES

21 098

21 121

The majority of the operating lease commitments are in connection with non-cancellable operating lease agreements for o ffice buildings in Switzerland, the US and the UK as well as for a office building and a manufacturing site in Germany. The non-cancellable leases mainly have remaining terms of between four and nine years. In addition, the Group entered into various cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. In 2015 there are no material finance lease contracts.

Financial Report Straumann Group

CONTINGENT ASSETS AND LIABILITIES The Group has guarantee obligations with a maximum of CHF 3.2 million (2014: CHF 5.9 million). Some Group companies are involved in litigations arising from the normal course of their business and might be liable to pay compensations. The costs relating to these lawsuits may not be partially or fully covered by insurance. However, it is the view of the Group’s management that the outcome of such litigations will not significantly affect the Group’s financial position over and above the provisions already recognized in the statement of financial position. CONTINGENT LIABILITIES (in CHF 1 000)

2015

2014

Letter of credit facilities

3 159

5 946

Purchase commitments

439

4 642

Others

300

497

TOTAL

3 898

11 085

2015

2014

29 RELATED-PARTY DISCLOSURE The Group has identified the following related parties: Associates: –– JJGC Indústria e Comércio Materiais Dentários S.A. (‘Neodent’) until February 28, 2015 –– Medentika GmbH (‘Medentika’) –– Instradent Deutschland GmbH –– Dental Wings Inc and Dental Wings GmbH (‘Dental Wings’) –– Open Digital Dentistry AG –– Medartis AG –– Createch Medical, SL –– Valoc AG –– T-Plus Implant Tech. Co., Ltd. Key Management Personnel: –– Straumann Board of Directors –– Straumann Executive Management Board Others: –– The International Team for Implantology (ITI) Foundation –– Straumann Pension Fund In the period under review, the following related-party transactions were made: (in CHF 1 000)

RELATED PARTY

NATURE

The International Team for Implantology (ITI) Foundation

Collaboration agreement

(11 350)

(13 519)

Straumann Pension Fund

Employer´s contribution

(7 612)

(7 186)

Neodent

Purchase of goods

(2 152)

(7 242)

Dental Wings

Purchase of goods and services

(7 745)

(3 114)

Medentika

Purchase of goods

(318)

(830)

Instradent

Service level agreement

490

Createch Medical

Commission fees

554

263

(28 133)

(31 628)

TOTAL

Financial Report Straumann Group

The following open balances due to related parties are recognized in the statement of financial position: (in CHF 1 000)

The International Team for Implantology (ITI) Foundation

2015

2014

(2 523)

(2 832)

Straumann Pension Fund

(149)

(85)

Associates

(281)

(3 696)

(2 953)

(6 613)

TOTAL

Payments to the ITI Foundation are based on a collaboration agreement between Straumann and the ITI. The Group purchased –– dental design software, software licences and scanners from Dental Wings –– dental implants & prosthetic elements from Neodent –– dental implants & prosthetic elements from Medentika. The Group received –– commission fees from Createch Medical for the sale of Createch products through the Group’s sales channel. The commission fees received from Createch Medical and the purchases of goods and services from Neodent, Medentika and Dental Wings are carried out under normal commercial terms and conditions. At December 31, 2015 loans granted to associates amounted to CHF 2.8 million.

KEY MANAGEMENT PERSONNEL COMPENSATION Key Management Personnel comprises of the Board of Directors and the Executive Management Board (EMB). The Board of Directors is entitled to a fixed compensation, which is paid out in cash and shares. Approximately 40% of the compensation is paid out in shares; the shares allocated to the members of the Board of Directors are blocked for 2 years. The compensation of the Executive Management Board consists of a fixed portion and variable portion, which depends on the course of business and individual performance. In addition, Executive Management Board members participate in the Straumann Performance Share Plan.

COMPENSATION The following table shows the compensation of Key Management Personnel recognized in profit or loss in line with the Group’s accounting policies. (in CHF 1 000)

2015

2014

10 099

8 686

Post-employment benefits

1 745

1 240

Share-based payments

1 970

2 650

1 097

13 814

13 673

Salaries and other short-term employee benefits

Termination benefits1 TOTAL KEY MANAGEMENT PERSONNEL COMPENSATION RECOGNIZED IN PROFIT OR LOSS 1

Salary until end of notice period as the employee renders no further service that provides economic benefits to the entity.

Financial Report Straumann Group

30 FINANCIAL RISK MANAGEMENT The Group’s principal financial liabilities, other than derivatives, comprise bank loans, a straight bond issued in the Swiss bond market, short-term overdrafts, finance leases, trade payables and hire-purchase contracts. The main purpose of these financial liabilities is to raise financing for the Group’s operations. The Group has various financial assets such as trade receivables which arise directly from its operations and cash, cash equivalents and short-term deposits, which form part of the liquidity management managed by Corporate Treasury. The Group also enters into derivative transactions, primarily into forward currency contracts, options and nondeliverable foreign exchange forwards (NDF). The purpose of these contracts is to manage the currency risks arising from the Group’s operations conducted in foreign currencies. It is, and has been throughout 2015 and 2014, the Group’s policy not to use derivatives without an underlying operational transaction, nor for trading (i.e. speculative) purposes. The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The Audit Committee agrees and reviews policies for managing each of these risks, which are summarized below. All derivative activities for risk management purposes are carried out by a specialist team that has the appropriate skills, experience and supervision.

MARKET RISK Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity risk. Financial instruments affected by market risk include deposits, investments and derivative financial instruments. The sensitivity analysis in the following sections relates to the position at 31 December 2015 and 2014. The sensitivity analysis has been prepared on the basis that the amount of net cash and the proportion of financial instruments in foreign currencies are all constant and on the basis of the hedge designations in place at 31 December 2015. The analysis excludes the impact of movements in market variables on the carrying value of pension and other post-retirement obligations, as well as on provisions and on nonfinancial assets and liabilities of foreign operations. The following assumptions have been made in calculating the sensitivity analysis: –– The statement of financial position sensitivity relates to derivatives. –– The sensitivity of the relevant income statement item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31 December 2015 and 2014 including the effect of hedge accounting in 2015 and 2014.

INTEREST RATE RISK Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s short-term interest-bearing assets and short-term debt obligations with floating interest rates. No material hedging activities (such as interest rate swaps) were conducted during the period under review. The Group is not exposed to cash flow interest risk by non-current borrowings. The Group’s policy is to manage its interest cost using variable and fixed rates. INTEREST RATE RISK SENSITIVITY

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s profit before tax (through the impact of floating rates on interest-bearing assets and borrowings). There is no material impact on the Group’s equity.

Financial Report Straumann Group

(in CHF 1 000)

2015

2014

Increase / decrease (in base points)

Effect on profit before tax

CHF

BRL

100

CHF BRL

CURRENCY

Increase / decrease (in base points)

Effect on profit before tax

845

1 244

6 4

100

(30)

(845)

(30)

(1 244)

(100)

(64)

(100)

(8)

FOREIGN CURRENCY RISK Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the euro, Chinese renminbi, Brazilian real, Canadian dollar, Japanese yen and USD. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency. To manage their foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, entities of the Group use forward currency contracts transacted with or agreed with Corporate Treasury. Corporate Treasury is responsible for managing the net positioning of each foreign currency by using external forward currency contracts, options and NDF. Corporate Treasury decides what to hedge based on information about the currency exposure provided by each subsidiary. External foreign exchange contracts are designated at Group level as hedges of foreign exchange risk on specific assets, liabilities or future transactions on a gross basis. Straumann’s risk management policy is to hedge recognized and anticipated transactions (mainly export sales) in each major currency for a maximum of 12 months based on actual exposures, budget assumptions and currency expectations. The forward currency contracts, NDF or options must be in the same currency as the hedged item. It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximize hedge effectiveness. At 31 December 2015, the Group had hedged foreign currency sales, mainly relating to sales in euros, USD, Japanese yen and Chinese renminbi, for which firm commitments existed at the balance sheet date, and also for anticipated transactions and short- and long-term loans, mainly in Japanese yen, USD and British pounds. At 31 December 2015 the Group had hedged 94% of its foreign currency exposure (2014: 86%) for which firm commitments existed at the reporting date. Straumann has investments in foreign operations whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of Straumann’s investments in foreign operations is not hedged. FOREIGN CURRENCY RISK SENSITIVITY

The following table demonstrates the sensitivity of the net booked exposure to a reasonably possible change in the exchange rate of the Chinese renminbi and the euro against the Swiss franc, with all other variables held constant, in relation to the Group’s profit before tax (due to changes in the fair value of monetary assets and liabilities including non-designated foreign currency derivatives) and the Group’s equity (due to changes in the fair value of forward exchange contracts designated as cash flow hedges). The Group’s exposure to foreign currency changes for all other currencies is not material.

Financial Report Straumann Group

(in CHF 1 000) CURRENCY

2015 Increase / decrease (in %)

2014

Effect on profit before tax

Effect on equity

Increase / decrease (in %)

Effect on profit before tax

Effect on equity

EUR / CHF

(174)

(390)

CNY / CHF

(141)

(82)

EUR / CHF

(20)

695

(20)

1 561

CNY / CHF

(20)

563

(20)

329

CREDIT RISK Credit risk is the risk that counterparties will not meet their obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables and loan notes) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. The Group trades only with recognized, creditworthy third parties. TRADE RECEIVABLES

It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances, their overall maturity profile and their overdue profile are monitored on an ongoing basis. The Group reviews its provision for impairment on an ongoing basis. Overall the Group’s exposure to bad debts is not significant. The maximum exposure is the carrying amount as disclosed in Note 11. 95% of the transactions occur in the country of the relevant operating unit (2014: 94%). There are no significant concentrations of customer credit risk within the Group. FINANCIAL INSTRUMENTS AND CASH DEPOSITS

Credit risk from balances with banks and financial institutions is managed by Corporate Treasury in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties. The Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these assets. The table below shows the balance of the major counterparties at the balance sheet date. (in CHF 1 000) BANK

Bank A

2015

2014

Rating

Balance

Rating

Balance

AAA

19 915

AAA

181 488

Bank B

9 999

43 113

Bank C

AA+

4 990

AA+

84 577

Bank D

158 088

82 515

Bank E

BBB+

32 448

5 424

Bank F

69 847

34 451

TOTAL

295 287

431 568

LIQUIDITY RISK The Group monitors its liquidity risk to avoid shortage of funds through prudent liquidity management using a recurring liquidity planning tool. This tool considers the maturity of its financial investments and financial assets (e.g. accounts receivable and other financial assets) as well as projected cash flows from operations.

Financial Report Straumann Group

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, bonds and finance leases. Corporate Treasury maintains flexibility in funding by maintaining availability under uncommitted credit lines. Management monitors rolling forecasts of the Group’s liquidity reserve (which comprises undrawn borrowing facility and cash and cash equivalents on the basis of expected cash flow). The Group’s policy follows the principle of maintaining liquidity reserves higher than the daily and monthly demand of operating cash and the target of maintaining a minimum cash on hand of CHF 60 million and available liquidity including credit lines of more than CHF 100 million. The following table reflects all undiscounted contractually agreed payments for repayments and interest resulting from recognized financial liabilities at 31 December 2015 and 31 December 2014.

(in CHF 1 000)

Straight bond

2015

2014

< 1 year

1 – 5 years

> 5 years

< 1 year

1 – 5 years

> 5 years

1 090

210 920

1 090

13 080

201 110

Derivative financial liabilities

143

1 326

Other financial liabilities

782

618

3 587

Trade payables

23 390

24 538

Other payables

2 656

857

2 596

927

28 061

212 395

29 550

17 594

201 110

TOTAL

CAPITAL MANAGEMENT The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and secure shareholder investments. The Group manages its capital structure and makes adjustments if required. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders by the means of share buy-backs, or issue new shares. No changes were made in the objectives, policies or processes during 2015 and 2014. As the Group operates in a fast-moving industry, its policy is to maintain a high degree of flexibility in its capital structure by maintaining a high availability of liquid funds. The Group monitors its capital base using the equity ratio, which is equity divided by total assets. The Group’s current policy is to maintain an equity ratio of 50% or higher.

EQUITY RATIO (in CHF 1 000)

Total assets Equity EQUITY RATIO

2015

2014

1 046 296

1 160 781

604 970

736 836

57.8 %

63.5 %

31 FINANCIAL INSTRUMENTS FAIR VALUES The carrying amount of cash and cash equivalents, trade and other receivables and trade and other payables with a remaining term of up to twelve months, as well as other current financial assets and liabilities represent a reasonable approximation of their fair values, due to the short-term maturities of these instruments. The fair value of equity instruments quoted in an active market is based on price quotations at the period-end date. The inaugural CHF 200 Mio. domestic straight bond is listed on the SIX Swiss Exchange and the fair value is derived from quoted market prices.

Financial Report Straumann Group

The fair value of derivatives is determined on the basis of input factors observed directly or indirectly on the market. The fair value of foreign exchange forward contracts and non-deliverable forwards are based on forward exchange rates. Currency options are valued based on option pricing models using observable input data. The unquoted equity instruments allocated to ‘Level 3’ hierarchy relate to an investment in the medical device sector in the US and a fund that is dedicated exclusively to investments in dental-related opportunities in China. As the market for those investments is not active or no market is available, fair values are determined using other valuation techniques. The US investment is valued by discounting future cash flows. For the fund, the Group receives quarterly valuation statements which state the net asset value (NAV) based on the valuation techniques used by the fund. The convertible bonds allocated to ‘Level 3’ hierarchy are valued using a model that calculates the fair value on observable and unobservable parameters including credit spreads, expected volatility and expected dividend yield. The model is calibrated on a regular basis. The underlying instruments are valued by discounting future cash flows. The associated American call options are determined using a modified binomial model. The fair value of investments in ‘Level 3’ is reviewed regularly for a possible diminution in value.

FAIR VALUE HIERARCHY The Group uses the following hierarchy for disclosure of the fair values of financial instruments by valuation technique: –– Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities; –– Level 2: Techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; –– Level 3: Techniques which predominantly use unobservable input data and which are not based on observable market data. At 31 December 2015 and 2014, the Group held the following financial instruments: AT 31 DECEMBER 2015 (in CHF 1 000)

Carrying amount (by measurement basis) Amortized cost

Level 1

Level 2

Level 3

Fair Value Total carrying amount

FINANCIAL ASSETS

Derivative financial assets

1 059

Equity instruments

9 572

Convertible bonds

1 059 5 750

15 322

29 867

Loans and other financial receivables

9 207

Other receivables

1 478

9 207 1 478

Trade receivables

125 207

Cash and cash equivalents

318 297

FINANCIAL LIABILITIES

Straight bond

199 520

Derivative financial liabilities Other financial liabilities

199 520 143

143

1 400

Trade payables

23 390

Other payables

3 513

210 400

Financial Report Straumann Group

AT 31 DECEMBER 2014 (in CHF 1 000)

Carrying amount (by measurement basis) Amortized cost

Level 1

Level 2

Level 3

Fair Value Total carrying amount

Financial Assets

Derivative financial assets

1 655

Equity instruments

4 491

Convertible bonds Loans and other financial receivables

1 655 6 774 27 035

11 716

11 265 27 035 11 716

Other receivables

4 805

Trade receivables

106 767

Cash and cash equivalents

459 421

Financial Liabilities

Straight bond

199 410

Derivative financial liabilities Other financial liabilities

199 410 1 326

208 440

1 326

3 587

Trade payables

24 538

Other payables

3 523

In March 2015 the Group purchased a second secured, convertible bond from MegaGen Implant Co. Ltd, for a total of CHF 9.5 million and allocated it to ‘Level 3’. In April 2014, the Group initially invested an amount of CHF 17.7 million in a first secured, convertible bond of MegaGen. Both bonds bear 3% interest p.a. and mature in five years. The Group has options to convert the bonds into MegaGen shares in 2016 and to purchase further shares to obtain a majority stake in the company. MegaGen is a Korean implant company with its own subsidiaries and distributors offering implant systems, supplemented by digital and regenerative tools and products to support implant procedures. The change in carrying values associated with ‘Level 3’ financial instruments during the year ended 31 December 2015 are set forth below: (in CHF 1 000)

2015

At 1 January

33 809

9 479

31 652

Purchases

2014

Remeasurement recognized in OCI

(1 024)

224

Remeasurement recognized in profit or loss

(6 647)

1 933

AT 31 DECEMBER

35 617

33 809

The remeasurement amount recognized in profit or loss in 2015 largely belongs to the convertible bond of Biodenta Corp. The Group incorporated its current knowledge into the valuation of the bond component of the instrument and estimates its risk-adjusted discounted fair value.

Financial Report Straumann Group

The significant unobservable inputs for the convertible bonds and the fund used in the fair value measurement categorized within ‘Level 3’ of the fair value hierarchy together with a quantitative sensitivity analysis at 31 December 2015 are as shown below: Instrument

Valuation technique

Significant unobservable input

Range

Sensitivity of the input to fair value

Convertible bonds

DCF method Binomial model

Interest rates

0.29% / 2.06%

50 basis points increase (decrease) in the interest rates would result in an decrease (increase) in fair value of kCHF - 6, resp. kCHF 80

Credit spreads

4.00% / 5.16%

50 basis points increase (decrease) in the credit spreads would result in a decrease (increase) in fair value of kCHF - 42, resp. kCHF 42.

Fund

Net asset valuation

Fair value of the financial assets of the fund

500 basis points increase (decrease) in the financial assets of the fund would result in an increase (decrease) in fair value of kCHF 224, resp. kCHF - 224

The fair value of the fund is equal to its pro rata share of net asset value (NAV). The Group receives on a quarterly basis valuation statements from the fund which state the NAV based on valuation techniques used by the fund. Consequently, the Group does not determine the fair value of the fund itself. However, based on the information obtained in the quarterly valuation statements, the valuation performed by the fund deems to be representative for the fair value of the fund. The most significant unobservable input used to determine the fair value of the investment in the medical device sector in the US is the cash flow forecast, which is mainly based on the future sales growth. As the investment amount for the Group is not material, any changes to the cash flow forecasts have no significant effects on the ‘Other comprehensive income’ of the Group.

HEDGES At 31 December 2015, the Group had open option contracts in the amount of CHF 18.3 million (2014: CHF 28.5 million), forward exchange contracts for CHF 26.6 million (2014: 8.6 million) and NDF of CHF 0.3 million (2014: 15.8 million). Forward exchange contracts, NDF and options were used during 2015 and 2014 to hedge the Group’s foreign currency risk of firm and not-firm commitments. The cash flow hedges of the expected future sales during 2015 and 2014 were assessed to be highly effective. C A SH FLOW HEDGES

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in other comprehensive income (and accumulated in the hedging reserve within equity). The gain or loss relating to the ineffective portion is recognized immediately in profit or loss. Amounts recognized in other comprehensive income are transferred to profit or loss in the periods when the hedged item affects profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss recognized in other comprehensive income is transferred to profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss previously recognized in other comprehensive income is immediately transferred to profit or loss.

Financial Report Straumann Group

The terms of the foreign currency forward contracts have been negotiated to match the terms of the commitments. There were no highly probable transactions for which hedge accounting has been claimed that have not occurred and no significant element of hedge ineffectiveness requiring recognition in profit or loss. At the end of December 2015, there were no cash flow hedges for expected future sales in 2016 (2014 for sales in 2015: CHF 13.4 million.). As per 31 December 2015, the amount of unrealized losses resulting from cash flow hedges was CHF 0 million (2014: CHF 0.2 million).

32 PRINCIPAL CURRENCY TRANSLATION RATES CURRENCY

Unit

31 Dec 2015

Average 2015

31 Dec 2014

Average 2014

ARS

100

7.62

10.39

AUD

0.72

0.81

0.82

BRL

100

25.62

29.47

36.52

38.95

CAD

0.72

0.75

0.85

0.83

CNY

100

15.26

15.34

15.92

14.86

COP

100

0.03

0.04

CZK

100

4.01

3.93

4.34

4.41

DKK

100

14.47

14.36

16.11

16.25

EUR

1.08

1.07

1.20

1.21

GBP

1.47

1.54

1.51

HUF

100

0.35

0.38

0.39

INR

100

1.49

1.50

1.56

1.50

JPY

100

0.82

0.80

0.83

0.86 0.09

KRW

100

0.08

0.09

MXN

100

5.73

6.09

6.69

6.87

NOK

100

11.36

11.96

13.28

14.45

NZD

0.68

0.77

0.76

RUB

100

1.36

1.58

SEK

100

11.81

11.46

12.56

13.27

SGD

0.70

0.75

0.72

TRY

0.34

0.36

TWD

0.03

USD

0.99

0.96

0.99

0.92

33 EVENTS AFTER THE BALANCE SHEET DATE There were no significant events after the balance sheet date.

Financial Report Straumann Group

34 SUBSIDIARIES The consolidated financial statements of the Group include: NAME

Principal activities

Country of incorporation

Interest and voting rights 2015 (in %)

Interest and voting rights 2014 (in %)

SUBSIDIARIES: Institut Straumann AG

Sales / Principal

Switzerland

100.00

Straumann Villeret SA

Manufacturing

Switzerland

100.00

Straumann GmbH

Sales

Germany

100.00

Straumann USA, LLC

Sales

USA

100.00

Straumann Ltd.

Sales

100.00

Straumann B.V.

Sales

Netherlands

100.00

Straumann S.á.r.l.

Sales

France

100.00

Straumann AB

Sales

Sweden

100.00

Straumann AS

Sales

Norway

100.00

Straumann OY

Sales

Finland

100.00

Manohay Dental S.A.

Sales

Spain

100.00

Straumann Canada Ltd

Sales

Canada

100.00

Straumann GmbH

Sales

Austria

100.00

Straumann Brasil Ltda

Sales

Brazil

100.00

Straumann SA / NV

Sales

Belgium

100.00

Straumann Italia s.r.l.

Sales

Italy

100.00

Manufacturing

USA

100.00

Straumann Pty Ltd

Sales

Australia

100.00

Manohay México S.A. de C.V.

Sales

Mexico

100.00

Sales

Denmark

100.00

Manufacturing

Sweden

100.00

Straumann Manufacturing, Inc.

Straumann Danmark ApS Biora AB Straumann Holding Deutschland GmbH Etkon GmbH

Sub-Holding

Germany

100.00

Production

Germany

100.00

Straumann Japan K.K.

Sales

Japan

100.00

Straumann Dental Korea Inc.

Sales

Republic of Korea

100.00

Straumann Singapore Pte Ltd.

Management

Singapore

100.00

Sales

Czech Republic

100.00

Straumann (Beijing) Medical Device Trading Co., Ltd.

Sales

China

100.00

Straumann Dental India Pvt. Ltd.

Sales

India

100.00

Sub-Holding

Switzerland

100.00

Straumann s.r.o.

Instradent AG Instradent USA, Inc

Sales

USA

100.00

Instradent Italia s.r.l.

Sales

Italy

100.00

Instradent Iberia S.L.

Sales

Spain

100.00

Manohay Argentina S.A.

Sales

Argentina

100.00

Manufacturing / Sales

Brazil

100.00

49.00

JJGC Indústria e Comércio de Materiais Dentários S.A. ('Neodent') Manohay Colombia S.A.S.

Sales

Colombia

100.00

0.00

Manufacturing

Japan

100.00

0.00

Instradent s.r.o.

Sales

Czech Republic

100.00

0.00

Instradent Limited

Sales

100.00

0.00

Straumann LLC

Sales

Russia

100.00

0.00

Straumann New Zealand Ltd.

Sales

New Zealand

100.00

0.00

etkon Japan K. K.

Financial Report Straumann Group

Principal activities

Country of incorporation

Interest and voting rights 2015 (in %)

Interest and voting rights 2014 (in %)

Manufacturing / Sales

Canada

55.00

44.42

Sales

Switzerland

44.39

Manufacturing / Sales

Spain

30.00

Medentika GmbH

Sales

Germany

51.00

Instradent Deutschland GmbH

Sales

Germany

51.00

100.00

T-Plus

Manufacturing / Sales

Taiwan

48.60

0.00

Valoc

Manufacturing / Sales

Switzerland

44.00

0.00

Manufacturing / Sales

Turkey

50.00

0.00

NAME

ASSOCIATES: Dental Wings Inc. Open Digital Dentistry AG (in liquidation) Createch Medical, SL

JOINT VENTURE: Zinedent

The next senior and ultimate holding company of the Straumann Group is Straumann Holding AG which is based and listed in Switzerland.

Financial Report Straumann Group

Audit Report – Consolidated finacial statements Report of the statutory auditor to the general meeting of Straumann Holding AG, Basel

REPORT OF THE STATUTORY AUDITOR ON THE CONSOLIDATED FINANCIAL STATEMENTS As statutory auditor, we have audited the consolidated financial statements of Straumann Holding AG, which comprise the statement of financial position, income statement, statement of comprehensive income, cash flow statement, statement of changes in equity and notes (pages 2 to 67), for the year ended 31 December 2015.

BOARD OF DIRECTORS’ RESPONSIBILITY The Board of Directors is responsible for the preparation of these 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 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. 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 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 31 December 2015 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with 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)

Financial Report Straumann Group

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. Ernst & Young Ltd

Daniel Zaugg Licensed audit expert (Auditor in charge) Basel, 10 February 2016

Daniel Maiwald Licensed audit expert

Financial Reportâ&#x20AC;&#x201A; Straumann Holding

Straumann Holdingâ&#x20AC;&#x201A; Financial Report

Straumann Holding Contents

Balance sheet

Income statement

Notes to the financial statements

Proposal of the Board of Directors for the appropriation of the available earnings

Audit Report â&#x20AC;&#x201C; Financial statements Straumann Holding AG

Financial Report Straumann Holding

Balance sheet ASSETS (in CHF 1 000)

Notes

Cash and cash equivalents Other short-term receivables

31 Dec 2015

31 Dec 2014

219 284

412 075

380

7 324

from third parties

145

4 867

from investments

235

2 457

Prepaid expenses Total current assets

Financial assets Investments Intercompany receivables Total non-current assets

TOTAL ASSETS

2.1

491

610

220 155

420 009

506 050

222 810

327 439

533 724

747

475

834 236

757 009

1 054 391

1 177 018

Straumann Holding Financial Report

EQUITY AND LIABILITIES (in CHF 1 000)

Notes

Trade payables Other short-term liabilities to investments Short-term provisions Deferred income Total current liabilities

Long-term interest-bearing liabilities

2.4

to third parties Long-term provisions

31 Dec 2015

31 Dec 2014

1 125

682

14 956

5 626

801

5 274

2 442

2 436

19 324

14 018

200 568

200 000

200 568

200 000

3 000

Total non-current liabilities

203 568

203 000

Total liabilities

222 892

217 018

Share capital

2.5

Reserves from capital contributions1

1 572

1 568

23 206

14 331

Share premium

6 311

Legal retained earnings

4 071

12 581

Reserves for treasury shares

531

9 041

Statutory reserves

1 540

Extraordinary reserves

2 000

796 894

931 767

- Retained earnings

881 712

816 395

- Net result

(84 818)

115 372

Voluntary retained earnings Available earnings

Treasury shares Total equity

TOTAL EQUITY AND LIABILITIES 1

thereof CHF 10 450 526 not accepted by the Swiss Federal Tax Administration

2.8

(555)

(247)

831 499

960 000

1 054 391

1 177 018

Financial Reportâ&#x20AC;&#x201A; Straumann Holding

Income statement (in CHF 1 000)

Income from investments

Notes

2015

2014

2.9

96 004

75 559

Other financial income

2.10

33 462

28 312

Other operating income

2.11

46 887

46 766

176 353

150 637

(30 357)

(20 062)

(1 736)

(2 497)

Total income

Financial expense

2.12

Personnel expense Other operating expense

2.13

(7 089)

(7 391)

Impairment losses on investments

2.14

(221 859)

(1 244)

Depreciation of property, plant and equipment Total expenses Result before income tax

(227)

(271)

(261 268)

(31 465)

(84 915)

119 172

Direct taxes

Â97

(3 800)

NET RESULT

(84 818)

115 372

Straumann Holding Financial Report

Notes to the financial statements

1 PRINCIPLES 1.1 GENERAL Straumann Holding AG is a public company whose shares are traded on the Swiss Exchange (SIX). As the parent company of the Straumann Group, the purpose of Straumann Holding AG is to acquire, dispose of and manage investments in the field of dental and medical technology. These financial statements have been prepared in accordance with the Swiss Law on Accounting and Financial Reporting (32nd title of the Swiss Code of Obligations). Where not prescribed by law, the significant accounting and valuation principles applied are described below. The first-time adoption of the new Swiss Law on Accounting and Financial Reporting is fulfilled with these financial statements. The structure of previous years’ figures has been adjusted accordingly. However comparability with the previous year is limited. As Straumann Holding AG has prepared consolidated financial statements in compliance with accepted international accounting standards (IFRS), it has decided to forego presenting a cash flow statement in accordance with the law.

1.2 FINANCIAL ASSETS Financial assets include long-term loans. Loans granted in foreign currencies are translated at the exchange rate at the balance sheet date, whereby unrealized losses are recorded but unrealized gains are not recognized.

1.3 TREASURY SHARES Treasury shares are recognized at acquisition cost and deducted from shareholders‘ equity at the time of acquisition. In case of a resale, the gain or loss is recognized through the income statement as financial income or financial expense.

1.4 SHARE-BASED PAYMENTS Should treasury shares be used for share-based payments for the Board Members’ compensation, the difference between the acquisition costs and any consideration paid is recognized as personnel expenses.

1.5 INTEREST-BEARING LIABILITIES Interest-bearing liabilites are recognized at nominal value. Discounts and issuing costs are recognized as prepaid expenses and amortized on a straight line basis over the term of the liability.

2 INFORMATION ON BALANCE SHEET AND INCOME STATEMENT ITEMS 2.1 FINANCIAL ASSETS (in CHF 1'000)

31 Dec 2015

31 Dec 2014

Loans to subsidiaries

457 676

187 051

Loans to third parties

4 404

6 614

43 970

29 145

506 050

222 810

Financial assets TOTAL

Financial Report Straumann Holding

2.2 INVESTMENTS The major direct and indirect investments of the company are listed in Note 34 to the Straumann Group Fincancial Statements. Ownership interests equal voting rights.

2.3 SHORT-TERM PROVISIONS Short-term provisions include provisions for income taxes for the current and for the prior year.

2.4 LONG-TERM INTEREST-BEARING LIABILITIES (in CHF)

31 Dec 2015

31 Dec 2014

200 000

Bond

200 000

Other

568

TOTAL

200 568

200 000

1.625

BOND CONDITIONS Nominal value Interest rate in % Maturity / Term in years Due date / Maturity

4/30/2020

2.5 SHARE CAPITAL The share capital is CHF 1 572 293.90 and is represented by 15 722 939 registered shares of CHF 0.10 par value. On 10 April, 2015 an option agreement between Institut Straumann AG and Straumann Holding AG was signed, which resulted in a capital increase of CHF 4 639. The new shares were created from conditional share capital.

2.6 RESERVES FROM CAPITAL CONTRIBUTION The reserves for capital contribution contains the paid-in share premium of the increase of the share capital in 2015. From a fiscal point of view, any distributions made from reserves from capital contributions are treated the same as a repayment of share capital. The Swiss Federal Tax Administration (ESTV) acknowledged the reported reserves for capital contribution as a capital contribution in accordance to Article 5 Paragraph 1 bis VStG.

2.7 RESERVES FOR TREASURY SHARES The shares of Straumann Holding AG on stock of Institut Straumann AG amount to 3 686 shares with an average value of CHF 144.19.

Straumann Holdingâ&#x20AC;&#x201A; Financial Report

2.8 TREASURY SHARES Straumann Holding AG holds 3 850 of its own shares with an average value of CHF 144.19. Number of Transactions

Lowest share price in CHF

Highest share price in CHF

Exercise of options of CS

235.61

Allocation of US options

181.00

112.00

292.50

Average share Amount of treasury shares price in CHF

Balance as of 1. January 2014

Transfer of Institut Straumann

50 000 235.61

(42 227)

250.50

215.75

(20 569)

112.00

15 000

292.50

(37 279) 37 279

Balance as of 31. December 2014 Exercise of options of CS

2 204

Transfer of Institut Straumann

144.19

Transfer of Institut Straumann

144.19

6 814

Transfer of Institut Straumann

112.00

5 000

235.61

306.00

270.81

(10 168)

Allocation of US options Balance as of 31. December 2015

3 850

At the balance sheet date the acquisition costs of the directly held treasury shares amount to CHF 0.555 million (2014: CHF 0.247 million).

2.9 INCOME FROM INVESTMENTS In the reporting period the dividend income amounted to CHF 96.0 million (2014: CHF 75.6 million).

2.10 OTHER FINANCIAL INCOME Other financial income amounts to CHF 33.5 million (2014: CHF 28.3 million) and contains mainly interest income from loans to subsidaries and realized foreign exchange gains.

2.11 OTHER OPERATING INCOME Other operating income amounts to CHF 46.9 million (2014: CHF 46.8 million) and consists of income from licences.

2.12 FINANCIAL EXPENSE (in CHF 1'000)

Interest on Bond Foreign exchange losses Impairment on financial assets TOTAL

31 Dec 2015

31 Dec 2014

3 458

3 607

26 681

8 550

218

7 905

30 357

20 062

31 Dec 2015

31 Dec 2014

2.13 OTHER OPERATING EXPENSE (in CHF 1'000)

Administrative expense Consulting expense Sundry expense TOTAL

456

880

5 990

5 934

643

577

7 089

7 391

Financial Report Straumann Holding

2.14 IMPAIRMENT LOSSES ON INVESTMENTS Based on the concept of individual valuation of assets and liabilities contained in the new Swiss Law on Accounting and Financial Reporting, Straumann Holding AG has recognized impairment losses on investments in the total amount of CHF 221.9 million. The most material impairment is caused by the sharp depreciation of the Brazilian real in 2015. As a consequence, the indirect investment in the Brazilian subsidiary Neodent had to be impaired by CHF 190.0 million. Another material impairment charge of CHF 30.0 million relates to the investment in the Swedish manufacturing site Biora AB.

3 OTHER INFORMATION 3.1 FULL TIME EQUIVALENTS Straumann Holding AG does not have any empoyees.

3.2 MAJOR SHAREHOLDERS The following shareholders owned more than 5 percent of voting rights as at 31 December, 2015: (in %)

31 Dec 20151

31 Dec 2014

MAJOR SHAREHOLDERS Dr h.c. Thomas Straumann (Vice Chairman of the Board)

17.3

GIC Private Ltd

13.6

Dr h.c. Rudolf Maag

12.2

5.0

n/a

Black Rock Group2 1 2

Or at last reported date if shareholdings are not registered in the share register Not registered in Straumann’s share register

3.3 ALLOCATION OF EQUITY INSTRUMENTS TO THE BOARD OF DIRECTORS According to the compensation plan, Board members’ fees are paid in a fixed remuneration and shares. The number of shares is calculated based on the average price over the last seven days prior to the allocation. The allocation was as follows: 2015

Allocated to the Board of Directors

2014

Number

Value in 1000 CHF

Number

Value in 1000 CHF

3 064

713

6 400

1 174

31 Dec 2015

31 Dec 2014

3.4 AUDIT FEES (in CHF 1'000)

Audit services

220

Other services

303

273

384

TOTAL

3.5 EVENTS AFTER THE BALANCE SHEET DATE There are no significant events after the balance sheet date which could impact the book value of the assets or liabilities or which should be disclosed in these financial statements.

Straumann Holding Financial Report

4 EQUITY INSTRUMENTS OF THE BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT The following tables disclose the number of vested and non-vested equity instruments (shares, options and Performance Share Units) held on 31 December 2015 and 2014 by the members of the Board of Directors, the Executive Management Board and individuals related to them. 2015 Shares

Options

Performance Share Units

Vested

16 Apr 2016

24 Apr 2017

22 Apr 2018

BOARD OF DIRECTORS Gilbert Achermann Dr h.c. Thomas Straumann

19 166

2 723 197

Dr Sebastian Burckhardt

5 717

Roland Hess

4 004

Ulrich Looser

3 904

Dr Beat Lüthi

3 971

Stefan Meister

3 954

2 763 913

Marco Gadola

900

9 577

5 121

Dr Peter Hackel

273

0 0

Total

EXECUTIVE MANAGEMENT BOARD

Wolfgang Becker Guillaume Daniellot Andy Molnar Dr Alexander Ochsner

254

1 578

1 056

1 252

782

810

161

1 000

1 858

967

3 141

1 149

Frank Hemm

1 022

1 984

1 149

Dr Gerhard Bauer

1 034

1 134

1 231

4 896

1 000

20 054

11 483

2 768 809

1 000

20 054

11 483

Petra Rumpf Total

TOTAL

Financial Report Straumann Holding

2014 Shares

Options

Performance Share Units

Vested

17 Apr 2015

16 Apr 2016

24 Apr 2017

BOARD OF DIRECTORS Gilbert Achermann Dr h.c. Thomas Straumann

18 400

2 722 814

Dr Sebastian Burckhardt

5 334

Roland Hess

3 621

Ulrich Looser

3 521

Dr Beat Lüthi

3 588

Stefan Meister Total

3 571

2 760 849

EXECUTIVE MANAGEMENT BOARD Marco Gadola

590

9 577

5 121

Dr Peter Hackel

273

Wolfgang Becker

254

1 295

1 578

1 056

2 000

626

782

810

161

1 000

750

1 858

967

Guillaume Daniellot Andy Molnar Dr Alexander Ochsner

3 141

1 149

1 022

1 588

1 984

1 149

774

1 834

908

1 134

1 231

Thomas Dressendörfer

1 250

2 740

2 798

960

Total

4 324

4 834

7 907

22 852

12 443

2 765 173

4 834

7 907

22 852

12 443

Frank Hemm Dr Gerhard Bauer

TOTAL

Straumann Holding Financial Report

Proposal of the Board of Directors for the appropriation of the available earnings (in CHF 1 000)

2015

2014

Net result

(84 818)

115 372

Carried forward from previous year

873 202

804 547

Change in reserves from treasury shares Profit available to the Annual General Meeting

8 510

11 848

796 894

931 767

Dividend paid out of the available earnings (CHF 3.75 per share)

(58 565)

BALANCE CARRIED FORWARD

873 202

The Board of Directors proposes to the Shareholders’ General Meeting that a total dividend of CHF 4.00 per share be distributed, payable as of 14 April 2016. Calculated based on the total number of outstanding shares of 15 715 403, this corresponds to a total amount of CHF 62.9 million. In deciding on the appropriation of dividends, the Shareholders’ General Meeting shall take into account that the Company will not pay a dividend on treasury shares held by the Company. Until the time of the Shareholders’ General Meeting, 77 200 free options could be exercised and converted into shares. The maximum dividends related to such options if exercised would be CHF 0.3 million. The remaining amount of the available earnings is to be carried forward.

Financial Report Straumann Holding

Audit Report – Financial statements Straumann Holding AG Report of the statutory auditor to the General Meeting of Straumann Holding AG, Basel

REPORT OF THE STATUTORY AUDITOR ON THE FINANCIAL STATEMENTS As statutory auditor, we have audited the financial statements of Straumann Holding AG, which comprise the balance sheet, income statement and notes (pages 70 to 78), for the year ended 31 December 2015.

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.

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

AUDITOR’S RESPONSIBILITY

In our opinion, the financial statements for the year ended 31 December 2015 comply with Swiss law and the company’s articles of incorporation.

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.

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.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected

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

REPORT ON OTHER LEGAL REQUIREMENTS

Straumann Holdingâ&#x20AC;&#x201A; Financial Report

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 companyâ&#x20AC;&#x2122;s articles of incorporation. We recommend that the financial statements submitted to you be approved. Ernst & Young Ltd

Daniel Zaugg Licensed audit expert (Auditor in charge) Basel, 10 February 2016

Daniel Maiwald Licensed audit expert

IMPRINT Published by: Institut Straumann AG, Basel Concept and realization: PETRANIX Corporate and Financial Communications AG, Adliswil – Zurich Print: Neidhart + Schön AG, Zurich Basel, 25 February 2016 ©2016, Straumann Holding AG

Straumann Holding AG Peter Merian-Weg 12 4002 Basel Switzerland www.straumann.com