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COCHLEAR ANNUAL REPORT 2014 A hearing life - + –

Investor Previous Next Contents Centre

Pg Contents

2 2014 Performance Overview 10 Board of Directors

3 Key Highlights 11 Senior Executive Team

4 Letter to Shareholders 13 Corporate Governance Report

6 Environment, Social and Governance 109 Glossary, Company ASX Announcement Record and Company Information 8 Our People Page numbers correspond with those in the printed annual report. 9 Driving Innovation

A hearing life Everyone is different. And everyone experiences their lives in different ways. For people with hearing loss, it often means living without all the weird and wonderful sounds the rest of us take for granted. For Cochlear’s recipients, many of these sounds can be heard. They can have a hearing life. They can wake up to the alarm clock, get the kids ready for school and listen to the radio in the morning traffic. They can chat with work colleagues, play sport, watch a movie or get on the phone to plan a night out. - + –

Investor AR Investor Centre 14 1 Previous Next Contents Centre My hearing life is full of sounds I want to hear. And full of sounds I need to hear. I love it! Jane Goodfellow Recipient since 2011

Jane Goodfellow A hearing life

Senior Lecturer in Education Two jobs and postgraduate study Kindergarten teacher Recognised lecturer at local and state level B. ED., Cert IV TAE, Grad. Cert ECE Netball, running, cycling, gym Bilateral cochlear implant recipient Travel and adventure Wife and mother to great (and noisy) family - + –

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2014 Performance Overview

Sales revenue up 15% New products launched supporting H2 sales momentum $820.9m • Nucleus® 6 Sound Processor • Nucleus Profile Implant Series H2 up 18% on H1 • Hybrid™ System • Baha® 4 and Baha Attract Systems • Aqua+ Accessory • Codacs™ System Free cash flow up 294% H2 net profit after tax $79.5m (NPAT) of $72.7 million • Delivery on guidance H2 free cash flow • Delivery on new product launches was $65.1m • H2 margin improvement • Delivery of final dividend of 127.0 cents per share in line with AGM commitment • Full year NPAT was $93.7 million

Key Highlights

2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

Cochlear implant system sales (units) 25,997 26,674 23,087 24,661 21,023 18,553 18,228 15,947 12,901 10,802 Total revenue ($million) 804.9 752.7 779.0 809.6 734.8 694.7 601.7 559.4 452.3 349.0 R&D expenses ($million) 127.6 124.7 119.3 108.9 94.9 96.7 80.0 65.9 56.7 44.6 Net profit after tax (NPAT) ($million) 93.7 132.6 56.8 180.1 155.2 130.5 115.2 100.1 80.0 59.6 EBITDA ($million)* 176.5 201.9 239.4 270.1 243.6 205.5 193.3 170.9 130.2 96.8 EBIT ($million)* 149.6 178.9 215.3 242.7 220.5 183.3 167.3 150.2 111.5 82.5 NPAT ($million)* 109.5 132.6 158.1 180.1 155.2 130.5 115.2 100.1 80.0 59.6 Basic EPS (cents) 164.6 233.0 100.0 318.2 275.7 233.7 208.1 182.9 146.8 110.1 Dividends per share (cents) 254.0 252.0 245.0 225.0 200.0 175.0 150.0 125.0 100.0 80.0 Closing share price ($) 61.70 61.71 65.84 72.00 74.32 57.70 43.65 61.00 54.63 39.20 Market capitalisation as at 30 June ($million) 3,513 3,512 3,744 4,081 4,198 3,230 2,423 3,341 2,985 2,123 Number of permanent employees 2,536 2,531 2,390 2,319 2,006 1,888 1,789 1,655 1,100 982

* Excludes product recall costs of $138.8 million before tax and $101.3 million after tax in 2012 and excludes patent dispute provision of $22.5 million before tax and $15.8 million after tax in 2014. The following non-IFRS financial measures are included in this document: • excluding patent dispute provision; • excluding recall costs; • constant currency; and • free cash flow. Refer to page 109 for a discussion of these items. - + –

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10 year total revenue performance

F14 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 349.0 452.3 559.4 601.7 694.7 734.8 809.6 779.0 752.7 804.9 7

10 year dividends per share performance F14 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1 80.0 100.0 125.0 150.0 175.0 200.0 225.0 245.0 252.0 254.0

Regional Split of Sales

39 44 17 AMERICAS EMEA ASIA PACIFIC

• H2 F14 sales revenue up • H2 F14 sales revenue up • H2 F14 sales revenue up 14% on H1 F14 12% on H1 F14 45% on H1 F14 • H2 F14 sales revenue • H2 F14 sales revenue • H2 F14 sales revenue up 16% on H2 F13 in up 17% on H2 F13 in up 13% on H2 F13 in constant currency constant currency constant currency • F14 sales revenue up 2% on • F14 sales revenue up 10% on • F14 sales revenue down 9% F13 in constant currency F13 in constant currency on F13 in constant currency - + –

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Letter to Shareholders

Hearing loss is a major At the end of F14, additional These products have been well This complex environment public health issue. It product launches included the received by professionals and requires modern systems and impacts on our society, Aqua+ waterproof accessory for recipients, as have a range of processes capable of operating economy and productivity. Nucleus 6 Sound Processors, accessories and other features on a global basis. In F14, For individuals, it can lead Hybrid Hearing and the Nucleus that will be released during their further work was conducted on to social isolation and Profile Implant Series. life cycle. In addition, various documenting and streamlining other health and well-being clinical tools and software our processes to assist with It was a challenging year but complications. As the global upgrades have been released improved global alignment Cochlear delivered a sound F14 leader in implantable hearing to support our professional and simplification. This is an financial result with the sales solutions, Cochlear is helping healthcare partners and ongoing priority. momentum achieved in H2 F14 address this. improve the long-term hearing providing confidence for F15. performance of our recipients. Dividends New innovative products The final dividend of $1.27 Strategic growth initiatives in all categories per share brought the full year Cochlear began the roll out dividend to $2.54 per share, Products launched in of several strategic growth up 1%. This is in line with Our mission is to empower F14 include: people to live full lives, initiatives in F14 to improve guidance provided at the last transform society’s Nucleus 6 Sound Processor the end-to-end customer Annual General Meeting, held in understanding of hearing • the industry’s smallest experience we provide. October 2013. sound processor offering loss and deliver innovative These included: As announced in August 2014, improvements in hearing hearing solutions. the Board anticipates that the performance and cosmetics, • a ‘direct to customer’ F15 dividend will return to a For Cochlear, financial year 2014 wireless connectivity, data candidate engagement more historic payout ratio of (F14) was an important year logging and waterproofing strategy using a range of approximately 70% of NPAT. with new products launched with the Aqua+ Accessory; online and digital tools to in all product categories. At the help candidates navigate the Nucleus Profile Implant Series Remuneration end of F14, sales revenue was referral path and to support • the thinnest implant body The Board’s approach to up 15% on F13 to a record our recipients; $820.9 million. available, offering significant executive remuneration surgical advantages, which • strengthening of the continues to be structured Understanding the full year was released in Europe in June relationship with referring around fair, market competitive results requires an appreciation and in several countries in Asia professionals such as hearing remuneration packages of the regulatory approval and Pacific in May; aid audiologists, creating including base remuneration launch timing of major products opportunities for them to be for skills and expertise, together Baha 4 Sound Processor in the first half (H1), and their involved in the customer’s care with a risk and reward incentive • the new processor on the impact on sales momentum in after their cochlear implant framework that supports the Ardium™ platform – three the second half (H2). surgery; and longer-term growth of Cochlear times faster and with eight as a global business. Cochlear started F14 awaiting times the on-board memory • new clinical models and tools many final regulatory approvals power of previous devices, developed with our clinical With these principles in mind, for new products in key markets. which improves performance. professional partners, including a comprehensive review of By the end of H1, the Nucleus 6 Its true wireless connectivity Cochlear clinics such as the executives’ remuneration Sound Processor, Baha 4 Sound enhances independence and Cochlear Care Centre in occurred in F13 and was Processor and Baha 4 Attract connectivity in the real world; Melbourne and a new office in implemented in F14 after System had been launched in Dubai Healthcare City. shareholders approved the Baha 4 Attract System major markets. This helped drive Remuneration Report at • the new transcutaneous We will build on these initiatives sales momentum in H2. the October 2013 Annual system with magnetic to help grow the market. They General Meeting. H2 results: connection for improved help add value for our customers • H2 sales revenue of $443.9 cosmetics, fully compatible and professional partners The F14 Remuneration Report million was up 18% on H1 F14 with the Baha 4 Sound and they give meaning to contained in the Directors’ and up 28% on H2 F13 Processor; and Cochlear’s promise of ‘Hear Report on pages 31 to 53 details now. And always’. the changes made and the Hybrid Hearing • H2 cochlear implant unit sales consequences of those changes • an integrated electro-acoustic of 14,285 was up 22% on H1 Systems and processes to key management personnel stimulation solution enabling F14 and up 10% on H2 F13 Cochlear has over 300,000 remuneration for the year. recipients to take advantage recipients worldwide; we • H2 Baha/acoustic implant of their residual hearing. This Feedback from shareholders produce a suite of products sales of $54.2 million was up system was launched in the and executives is that the new with hundreds of individual 18% on H1 F14 and up 35% on United States of America in remuneration framework has components and sell into H2 F13 April after the FDA granted been well received. differently regulated countries. regulatory approval. - + –

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Different people Bob Ross Clinical Associate Professor experience our hearing Nucleus 6 recipient Robert J S Briggs solutions in different “I’m often in different noisy Head of Otology and Medical ways and we are proud environments and I don’t have Director, Cochlear Implant Clinic, of how well our recently to adjust my sound processor Royal Victoria Eye & Ear Hospital launched products have – it does it automatically. “The thinness of the Nucleus been received across Sounds are now more normal Profile implant provides a very the market. than they have ever been!” significant advantage to both patients and implanting surgeons. It represents a real improvement.”

The F14 incentive outcomes Senior management from our Conclusion reflected a year that saw a overseas offices presented Cochlear looks forward to F15 difficult H1 followed by a strong regularly to the Board at with confidence including H2. Individual performance scheduled Board meetings further regulatory approvals related incentives were mostly and the Board travelled to the for its new products including near target but those related Middle East and Europe in F14 wireless accessories on the to the various financial metrics to further expand its knowledge Nucleus 6 Sound Processor were well below target, and understanding of these and electrodes on the Nucleus reflecting the financial results, important regions. In addition, Profile Series Implant. These and varied widely by individual the Chairman made separate features will continue to build and location. visits overseas during the year to out the product platform and the Company’s operations and give further impetus to the sales Rick Holliday-Smith Chairman Cochlear employees to engage with shareholders. momentum evident at the We are proud of the quality and The Board determined, for the end of F14. diversity of our global workforce. third consecutive year, that We have approximately 2,700 Cochlear is a global business Director base fee levels should employees based in more operating in an increasingly remain unchanged in F15. It is than 20 offices around the competitive environment and expected there will be a market world and we distribute into with continuing volatility in based review next year. more than 100 countries. Our many important markets. We employees are committed to Mr Paul Bell has indicated he observe important trends such our mission and are passionate will retire following this year’s as the shifting of economic about helping people with AGM. Paul has been an active power from west to east, the hearing loss. The Board and participant on the Board since new world of wireless and senior management thank them he joined in 2005 and has digitisation, and the evasiveness for their tireless efforts to help chaired the Human Resources of sustained economic growth make a difference to the lives Committee. We thank him for in the developed world. These Dr Chris Roberts CEO/President of hundreds of thousands of his wise counsel and wish him and other challenges require people worldwide. well for his retirement. continual attention but overall there continues to be positive The Board The search for additional opportunity into the future. directors is well advanced and The Board continued to work as foreshadowed in 2013, it is The Cochlear Board and senior cohesively in F14 as it again likely Board numbers would management continue to be dealt with a range of complex ultimately increase by one. focused on delivering long- global issues including These renewal activities follow term growth, to optimising new product launches and the Board’s established internal long-term sustainable value additional investment in process and involve external for shareholders, and to medium-term focused strategic consultants. It is an opportunity positively supporting our growth initiatives. to add further talent and many stakeholders. strength to the Board. - + –

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Environment, Social and Governance (ESG)

At Cochlear, our mission is to help people hear and be heard. We empower people to connect with others and live a full life. We help transform the way people understand and treat hearing loss. We innovate and bring to market a range of Supporting environment Engaging with universities Encouraging participation implantable hearing solutions awareness activities and research groups in national debate that deliver a lifetime of hearing outcomes.

Our approach to ESG issues Cochlear supports a group through a high efficiency • fluorescent tube recycling, follows our corporate mission. It of employees called façade design, energy efficient collecting approximately 280 is part of our culture and values. “greenFEVER” whose goals lighting and an innovative air kilograms of waste a year; and Everything we do to deliver are to raise awareness of conditioning system. • 240 litre capacity security quality, innovative products environmental issues, Water efficient fittings and paper destruction bins, and services relates to many of promote sustainable living fixtures have been used collecting approximately 180 the ESG issues reflected in this at work and at home, and throughout the building. The bins a year. Annual Report. identify possible activities to building reuses rainwater that further reduce the Company’s Some 160 bicycle parking Strict legal compliance and high is collected from the roof and environmental impact. spaces as well as showers performance on environmental, is stored in underground reuse and lockers are provided to privacy and safety issues are Cochlear’s “greenFEVER” group tanks. The tanks have a capacity encourage cycling to work also integral to our culture. voluntarily works with like- of 350 cubic metres. The and reduce the use of cars. minded groups at Macquarie water is filtered and then used We know that our performance This investment in alternative University. Shared projects are to supply all the toilets and and products are reflective transport solutions for identified to actively reduce the the cooling towers within the of the quality of our people. employees has attracted impact on the environment of building and used to irrigate the We seek the best people and widespread interest among the campus, its people and landscape outside. support them to be successful local business groups and its activities. in their work. The waste recycling systems government agencies, which Modern global headquarters in place at the Sydney frequently visit Cochlear to view We are proud of our headquarters include: the facilities. environmental and Cochlear’s global headquarters, governance record as well which it moved into in October • commingle recycle waste Manufacturing 2010, is situated at Macquarie as our social contribution. collection in all breakout Cochlear holds an EPA licence² University campus in Sydney. and kitchen areas, collecting governing usage and control of It was awarded a 4 Star Green Environmental awareness approximately 20 tonnes waste and pollution in Australia. Star rating by the Green Cochlear is committed to a year; Cochlear retains or recycles Building Council of Australia, improving the lives of its nearly all of its waste product confirming good practice in • paper recycling collection at recipients, driving technologic material from manufacturing environmentally sustainable workstations and utility areas; innovation within the medical in Australia. device industry, and in doing design/construction of • cardboard compactus; so, promoting best practice the building. Social support • battery recycle collection, business principles. The building achieved a rating collecting approximately 225 Supporting the tertiary sector equivalent to a 5 star NABERS kilograms of waste a year; Cochlear is a knowledge based rating¹ (carbon emissions organisation and strongly associated with electricity • e-waste recycle collection, supports and engages with the and gas consumption are collecting approximately 600 tertiary sector. 270% better than an “average kilograms of waste a year; performance” building). This high rating was achieved - + –

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Cochlear’s headquarters is Supporting the community Cochlear strongly supports American Medical adjacent to the Australian The Cochlear Foundation was efforts to raise awareness of Devices and Diagnostics Hearing Hub building. The established in 2007 to promote science and technology in Manufacturers’ Association. Hub brings together over the awareness of, and research the community. Cochlear is a strong advocate 2,000 people, across a range into, treatments for significant Industry and advocacy for university and industry of disciplines, dedicated to hearing impairment. Support Many of our professional engagement. Executives have promoting hearing health. has been provided for many staff are also involved in presented guest lectures in projects including a paediatric Cochlear has opened the helping relevant research various university postgraduate hearing and education program Cochlear Clinical Skills Institute, and community programs business programs and in Vietnam managed by The a world-class surgical training in their regions, partnering undergraduate engineering Global Foundation for Children centre, in the Australian with academic, industry and courses and hosted a visit from with Hearing Loss. The Cochlear Hearing Hub and has moved health professionals to assist business graduates from The Foundation also supports more its Australian and New Zealand Cochlear recipients and the University of Texas. There is also general educational activities head office there to be close to institutions that support them. representation on the CSIRO and has funded the promotion key customers. This is particularly relevant Manufacturing Sector Advisory of science and engineering to in developing countries. Council, and several university Cochlear engages with high school students through Employees who are engaged industry advisory boards. Macquarie University across the National Youth Science in eligible community service a range of other activities, Forum and Robogals. To date, No political contributions were activities are granted time off to including staff lecturing at nearly $2 million has been made in F14. the University and the perform their required duties. donated by Cochlear to the Access to healthcare provision of internship Cochlear Foundation. To have input into the national Cochlear sells its products in opportunities for students. debate, Cochlear encourages Cochlear supports its over 100 countries including executives to participate in Cochlear has research employees’ participation in emerging markets. Cochlear forums and bodies that advance agreements and arrangements community fundraising and provides, particularly in the Australia’s competitiveness and with over 100 universities corporate sporting activities emerging markets, support to the promotion of innovation around the world. Cochlear’s through sponsoring its professionals in the healthcare and technology. During the support is focused on increasing employees in a number of area. We facilitate partnering year, Cochlear CEO/President the understanding and activities. In Europe, community of surgeons and supporting Chris Roberts participated in treatment of hearing loss. activities have been supported education of local professionals. the Australian Prime Minister’s in several countries in F14 Part of enabling access to our Cochlear is a core member business delegation to North through team involvement and products in developing markets of the HEARing Cooperative Asia to promote Australian financial help. is our ability to provide tiered Research Centre (CRC) based business in the region. Cochlear products to suit the needs and in Australia, which combines In the United States, Cochlear continued its support of the financial ability of customers. academic, business and supports several non-profit Sydney Engineering Excellence government interests to hearing loss organisations Awards and Cochlear executives Governance further understanding and including the Hearing Loss were represented on a number Cochlear’s key governance development of technologies Association of America, AG of committees including the principles and practices are for diagnosis and remediation Bell, Ear Community, Songs NSW Innovation Council, NSW outlined in the Corporate of hearing loss. Since 2005, for Sound and the American Medical Devices Fund Expert Governance Report included 40 students have engaged in Cochlear Implant Alliance. Panel, Business Council of within this Annual Report. postgraduate doctoral studies During F14, scholarships were Australia and Warren Centre in hearing related topics under awarded to eight gifted students for Advanced Engineering. this scheme. With Cochlear’s in the US who have overcome Cochlear has also hosted an support, the HEARing CRC has hearing loss and achieved innovation seminar for the been extended for a further academic and personal success. Hargraves Institute. five years. Since 2002, Cochlear has Global representation in the awarded more than $440,000 medical devices industry in scholarships to 64 college includes membership of the students in the US. Japan Association of Medical Device Industries and the

1 NABERS (National Australian Built Environment Rating System) is a national rating scheme managed by the NSW Government in Australia. 2 EPA (Environmental Protection Agency) is an agency of the Australian Government. - + –

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Our People

Cochlear delivers industry leading products and services through a highly skilled, passionate workforce of approximately 2,700 people across 20 countries.

Internal career movement – 70% understand the 20 countries, 2,700 people – 25% of positions filled by connection between their the largest global footprint internal candidates work and our strategy in the industry

Our people represent a diverse retention levels with global This includes a focus on The Company’s global range of disciplines, dedicated voluntary turnover at 7.5% building the skills of people workforce is 49% female and to transforming the way the and for Cochlear in Australia at managers to better support women make up 34% of our world understands and treats 6.0% in F14. their teams. managers globally (31% in hearing loss. Australia). In our professional Over the year, Cochlear The Company also introduced workforce (including Principals, Results from Cochlear’s 2014 constrained headcount a new global approach to Senior Professionals and Employee Engagement Survey growth across the business by executive learning with a pilot Professionals), 48% are show that the Company’s promoting from within and program of Cochlear executives women. Of the new permanent workforce has a high level using internal career movement completing the Leading employees recruited around the of commitment. Cochlear to increase the capabilities Innovative Change Program world in F14, 51% were women. exceeds the global benchmark of our workforce to meet at the University of of high performing companies business needs. In F14, 25% of California, Berkeley. During F14, Cochlear in terms of trust in our positions were filled by internal maintained programs to Cochlear Academy, the organisation, belief in our candidates. Cochlear maintained promote diversity in its Company’s learning values, pride in our products its commitment to developing workforce, including support management system, and services, and continuously a strong talent pipeline, for the Women in Leadership continued to provide employees improving the quality of the employing 14 engineering initiative, aimed at developing with a range of learning work we do. We also have a summer students as well as five the pipeline of female leaders programs through different strong capability for strategy exceptional graduates. at Cochlear. media. A specific platform is execution, with 70% of people Our manufacturing available for the Company’s reporting that they understand Health and safety department retains a highly manufacturing function. the connection between their Cochlear is committed to skilled and flexible workforce work and our business strategy. In the past year, Cochlear providing a healthy and safe by investing in continuous invested in a catalogue workplace for all workers. improvement and regular Talent strategy of over 2,500 online courses Risk management initiatives, employee communication Cochlear strives to attract to further enhance combined with increased focus and consultation. Our and retain the best people. development opportunities on incident learnings and early well established Employee We achieve this through for employees globally. injury intervention, enable Consultative Committee now interesting and challenging us to successfully reduce the operates across two sites work, and the opportunity Diversity occurrence of serious injuries, with monthly representation for development within a As a global business, Cochlear with a 40% reduction in our from across Cochlear’s growing business. This high strongly encourages all forms Lost Time Injury Frequency manufacturing operations. level of engagement improves of diversity to support our Rate for F14. the customer experience we leadership and innovation Ongoing learning Cochlear works to ensure provide to our recipients. strategies. In our Sydney Cochlear continues to invest we have a robust workplace offices, employees come from In F14, Cochlear continued in employee development health and safety management 77 different countries and 71% to be an employer of choice, programs to help individuals system in line with industry of our workforce was born attracting over 13,000 and enhance organisational best practice and is introducing outside Australia. applications for just over 300 capabilities. This year, new improvements to our systems permanent positions. The programs and resources were to support improved safety Company maintains high staff offered to empower and performance reporting. encourage employees to drive their own career development. - + –

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Driving Innovation

Investing in advanced technology is a strategic priority for Cochlear. Over the past five years, the Company has invested more than $500 million in global research and development Nucleus 6 Sound (R&D) activities. In F14, Processor and Codacs Cochlear’s total R&D System – finalists, Codacs System – Bronze Cochlear collaborates with investment was $127.6 2014 Good Design winner, Medical Device over 100 external research million, which was 15.9% Australia Awards Excellence Award partners based in 20 countries of revenue.

Cochlear’s design and Cochlear Nucleus Hybrid L24 Manufacturing and supply Non-military use development department Cochlear Implant System; chain operations Other than where our products comprises more than 350 • the market introduction of the With sales in over 100 countries, are used by military personnel, specialists from a range of Cochlear Nucleus Aqua+, the Cochlear operates a global Cochlear produces or technical disciplines. These world’s first behind-the-ear supply chain. Components are contributes to no products highly specialised teams are waterproof accessory; sourced across Europe, Asia and or services designed or used based in Australia, Belgium, the Americas. Manufacturing for military purposes. Sweden and the United States. • the market introduction of the operations are primarily located The Company also collaborates Baha Attract System and Baha in Australia and Sweden, with Quality assurance with over 100 external research Connect System; smaller sites in Belgium and Cochlear has a worldwide quality partners based in 20 countries. • the market release of the Baha the US. Suppliers and the assurance system in place to Work to enhance our solutions 4 Sound Processor and Baha manufacturing sites are aligned ensure the quality of its products continues among our technology Fitting Software 4.0; to enable the Company to and services. groups with the goal of providing deliver products of the highest • the market introduction Device approvals better hearing performance quality and reliability. The of Cochlear Baha outcomes for Cochlear’s structure and operation of the Medical devices must be DermaLock™ Abutment; recipients. Research spans supply chain play an important approved by relevant regulatory basic scientific research, new • the market release of the part in our productivity drive authorities. At present, Cochlear technology developments and Cochlear Wireless Accessories as well as for the introduction has the necessary licences new product developments. including the Mini Microphone, of new products. Employees and approvals to enable the This includes work on Cochlear’s Phone Clip and TV Streamer throughout the supply chain marketing of our products in sound processing algorithms, with the Baha Remote Control; are engaged in driving the jurisdictions in which we electrode technology, totally productivity improvement. operate. Ongoing approvals • the market introduction of implantable cochlear implants, are regularly being sought for MET® and Carina® middle The Company’s manufacturing wireless connectivity and new products in a variety ear implants following the strategy is to make sure that expansion of Cochlear’s portfolio of jurisdictions. acquisition of Otologics production methods and of implantable hearing solutions. LLC’s assets; capacity ensure the highest Intellectual property Cochlear also continues to quality products to be produced The creation and protection of expand its offering of clinical • the regulatory approval of the to meet demand while our intellectual property remain care tools that support Cochlear Codacs implant; and improving efficiency. Cochlear a key strategic imperative for professionals with a growing runs an operations improvement • the regulatory approval of the business. Cochlear currently set of options to manage their program, which incorporates the Cochlear Nucleus Profile holds over 1,000 patents and customers, including cloud- ® lean manufacturing principles implant with Contour Advance patent applications globally, based connection technologies. and ongoing investment in new (CI512) in Europe. and filed many new patent Highlights during the manufacturing technologies. During the year, the Cochlear applications in F14. year included: These enable flexibility and Nucleus 6 Sound Processor productivity improvements. • the market introduction of the and Cochlear Codacs System Over 800 people are currently innovative Cochlear Nucleus 6 were both finalists in the Good employed in Cochlear’s Sound Processor; Design Australia Awards, and the manufacturing facilities. latter also won a Medical Device • the FDA approval and US Excellence Award. market introduction of the - + –

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Board of Directors

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1. Mr Rick Holliday-Smith Member of the Medical Science pharmaceutical company, 6. Mr Andrew Denver Committee and Technology Merck & Co Inc (Managing Age 64. BA (Hons), FAICD, CA Age 65. BSc (Hons), MBA, and Innovation Committee. Director – Australia, 1988 – FAICD Appointed 1 March 2005 1997; President of the Asia 3. Mrs Yasmin Allen Appointed 1 February 2007 Director of Servcorp Limited Pacific Human Health Division, since 1999. Director of ASX Age 50. BCom, FAICD 1997 – 2002). Chairman of Universal Limited since 2006 and Appointed 2 August 2010 Chairman of the Human Biosensor Pty Limited since Chairman since March 2012. Resources Committee. 2005 (director since 2002) and Director of Insurance Australia Former Chairman of Snowy Member of the SpeeDx Pty Limited since 2009. Group Limited (IAG) since Hydro Limited (not publicly Nomination Committee. Director of Vaxxas Pty Limited listed) 2006 – 2012 and SFE 2004, member of IAG since 2012. Former director Corporation Limited since Audit Committee and Risk 5. Prof Edward Byrne, AC of Principals Cornerstone Committee and Chair of IAG 1999 until it merged with Age 62. DSc, MD, MBA, FRCP, Management Pty Limited. People and Remuneration ASX Limited in 2006. Former FRACP, FTSE Former Managing Director of director of St George Bank Committee. Chair of Memtec Limited and President Limited (2007 – 2008), Exco Macquarie Specialised Asset Appointed 1 July 2002 Asia for Pall Corporation. Management (not publicly Resources NL (1999 – 2006), President and Principal of listed) since 2003. National Chairman of the Technology DCA Group Limited (2004 – King’s College London since director of the Australian and Innovation Committee. 2006) and MIA Group Limited 1 September 2014. Former Institute of Company Directors Member of the Audit (2000 – 2004). Former Deputy Chairman of Group since 2010 and director of Committee, Nomination President of NationsBank- of Eight Vice Chancellors, National Portrait Gallery since Committee and Medical CRT, Chicago and Managing Australia, and Chairman of 2013. Member of The Salvation Science Committee. Director of Hong Kong Bank Global Foundation. Former Army Advisory Board. Former Limited, London. director of Bupa Group 7. Mr Donal P O’Dwyer Vice President of Deutsche Board, London and Bupa Chairman of the Board of Bank AG, Director of ANZ Age 61. BE Civil, MBA Australia Pty Limited. Former Directors and Nomination Investment Bank and Associate Vice Chancellor of Monash Appointed 1 August 2005 Committee. Member of the Director, HSBC London. University (June 2009 – August Audit Committee and Human Chairman of Atcor Medical Chairman of the Audit 2014). Former executive Dean Resources Committee. since 2004 and a director of Committee. Member of the of the Faculty of Biomedical Mesoblast Limited since 2004 2. Dr Chris G Roberts Human Resources Committee Sciences, Vice Provost and and Fisher & Paykel Healthcare CEO/President and Nomination Committee. Head of the Medical School Limited since 2012. Former at University College London. Age 60. BE (Hons), MBA, PhD, director of Sunshine Heart 4. Mr Paul R Bell Former Dean of Faculty of Hon DSc (Macq), Hon DSc Inc (2004 – 2013). Former Medicine, Nursing and Health (UNSW), FAICD, FTSE, FIEAust Age 68. BA, MA (Hons) President of Cordis Cardiology Sciences at Monash University, (Johnson & Johnson medical Appointed 1 February 2004 Appointed 1 August 2005 Melbourne (2003 – 2006). device business unit) between Director of Westmead Chief Executive Officer/ Chairman of the Medical 2000 and 2004. Millennium Institute for President of Cochlear Limited. Science Committee. Member Medical Research. Former Member of the Audit Director of ResMed Inc since of the Nomination Committee director of Biota Holdings Committee, Nomination 1992. Dr Roberts has worked and Technology and Limited (2006 – 2013) and Committee, Medical Science in the medical device industry Innovation Committee. Bio-Link Partners Limited Committee and Technology for more than 37 years in (2005 – 2009). Extensive and Innovation Committee. a number of senior executive career spanning management positions. 30 years with the international

Note: Membership of Board Committees is as at 30 June 2014. - + –

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Senior Executive Team

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5 6 7 8

9 10 11

1. Dr Chris Roberts 3. Dig Howitt 4. Jan Janssen 5. Amanda Lampe CEO/President Senior Vice President, Senior Vice President, Design Senior Vice President, See “Board of Directors” Manufacturing and Development, Clinical Corporate and Public Affairs and Logistics and Regulatory on page 10. BPE, MAICD BE (Hons), MBA MScEE 2. Richard Brook Amanda joined Cochlear in President, Dig is responsible for the Jan leads a team of over 300 2014 and has responsibility for European Region development and execution of highly qualified engineers and developing and coordinating the strategic direction for the scientists who implement the Cochlear’s global corporate BSc Management, MBA Cochlear supply chain. He and R&D strategy. This includes affairs strategy and public Richard is responsible for the his team are responsible for the responsibility for identifying affairs position on hearing loss development and execution manufacture of all Cochlear and developing cutting-edge and the impact on individuals of the strategic direction for products and all aspects of the technologies and and society. commercial products. all our operations in Europe, supply chain, together with Amanda has extensive Middle East, Africa (EMEA) and the introduction of new Jan joined Cochlear in 2000 experience in the government Latin America. This includes products from R&D into as head of the Cochlear and corporate sectors, working sales in over 60 countries. commercial production. Technology Centre based in in senior leadership and Operations in EMEA and Prior to joining Cochlear in Belgium, having previously management positions. Before Latin America include sales, 2000, Dig had gained general worked with Philips Electronics joining Cochlear, Amanda was marketing, distribution, management experience at where he was involved in R&D Group Executive for Corporate service, finance, regulatory and Boral and Sunstate Cement, as in the fields of high technology Affairs and Government administration across these well as being a consultant for electronics and cochlear Relations for ASX Limited. She complex and diverse regions. Boston Consulting Group. implants. Jan was promoted to previously worked for a former Before joining Cochlear in Senior Vice President, Design Prime Minister of Australia and 2003, Richard held senior roles and Development in 2005. former Premier of NSW. in Guidant Corporation and Since August 2013, Jan has also Alaris Medical Systems. He has had responsibility for Clinical over 20 years’ experience in and Regulatory. the medical device industry.

Dr Chris Roberts reports to the Board of directors and all other members of the senior executive team report to Dr Chris Roberts. - + –

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Senior Executive Team — continued

6. Anne-Marie Leslie He joined the Company in 9. Prof Jim Patrick He joined Cochlear in 2004, Senior Vice President, 1990 and has been Chief Senior Vice President, after more than 20 years’ Human Resources Financial Officer since listing Chief Scientist experience in the medical in 1995. Director of Osprey industry, most recently as BA (Hons), EMHRL DEng, MSc, FTSE, FIEAust, CPE Medical Inc. and HEARing President and CEO of Asia Anne-Marie joined Cochlear Cooperative Research Centre Jim is responsible for a global Growth Markets and Australia, in February 2007 and is and member of NSW Medical research portfolio of projects New Zealand and South East responsible for global human Devices Fund Expert Panel. that feed into the commercial Asia for GE Medical Systems. resources management. Her development stream. One focus is on building people 8. David Morris of the original researchers 11. Chris Smith strategies to meet the Chief Strategy Officer involved with the cochlear President, Americas Region demands of a fast growing BBus, BAppSc implant program in Melbourne BSc global company. from 1975, Jim has worked in David is responsible for the Chris is responsible for the She has over 25 years’ a number of senior managerial development and execution of development and execution of experience in local, regional positions at Cochlear since the global business strategy. the strategic direction for our and global human resources its inception in 1981. Jim is David was appointed as Chief operations in North America. management roles, working an Associate Professor at the Strategy Officer in 2011, Operations include sales, with Bristol-Myers Squibb and Department of Otolaryngology having served as President, marketing, distribution, Kodak in the US and Asia. Her at The University of Melbourne Cochlear Bone Anchored service, finance, regulatory background includes expertise and Adjunct Professor at Solutions since 2005. He and administration. in Quality Management at La Trobe University and joined the Company in 2002 Kodak where she led efforts Macquarie University. Chris is also responsible for as Senior Vice President, Cochlear Bone Anchored to win the Australian Quality 10. Mark Salmon Business Development. Solutions and Global Prize and she has worked as President, Asia Pacific Region a Business Excellence Awards Prior to joining Cochlear, Support Operations. he worked with Accenture MBA (Executive) Evaluator in Australia and He joined Cochlear in 2004, in strategy and operational the US. Mark is responsible for the after more than 25 years’ consulting, and has extensive development and execution experience in the medical 7. Neville Mitchell international and Australian of the strategic direction for device industry specifically Chief Financial Officer experience in the healthcare, all our operations in Australia, and healthcare in general in and Company Secretary consumer products, Asia and the South Pacific. the US including Warburg utilities and financial BComm, CA (SA), CA This high potential region Pincus, and as Group President services industries. has complex regulatory for Gyrus Group (ENT and Neville is responsible for sales and marketing drivers Surgical divisions). accounting, corporate finance, which require coordination treasury and audit, together of sales, marketing, third with investor relations, party distribution, regulatory company secretarial and the and clinical infrastructure corporate legal functions development activities. at Cochlear. Mark also has global responsibility for Cochlear’s information technology strategy and systems. - + –

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Corporate Governance Report

Cochlear is committed to ensuring that its policies and practices matters that are sensitive, extraordinary or of a strategic nature. reflect good corporate governance and that there is compliance The CEO/President must bring all material matters to the Board’s with all corporate governance requirements applicable to attention. The senior executive team briefs the Board regularly so Australian listed companies. as to keep the Board up to date and to assist the directors with monitoring the results of operations. Each month, directors receive In this Corporate Governance Report, Cochlear sets out the key operating reports prepared by senior management, covering each governance principles and practices of Cochlear and reports against region and function. Directors also regularly visit and inspect the ASX Corporate Governance Council’s Corporate Governance operations in Australia and overseas. Principles and Recommendations with 2010 Amendments 2nd Edition (August 2007) (Guidelines). A checklist of the The performance of senior executives is evaluated in accordance recommendations made in the Guidelines is set out at the end of with the Performance Evaluation Process Overview. The Performance this report. References to recommendations in the Guidelines are Evaluation Process Overview is published in the Corporate made throughout this report in order to indicate how Cochlear Governance section of the Cochlear website (Rec 1.2). All employees, complies with the recommendations. All policies and terms of including senior executives, participate in biannual performance reference referred to in this report are published on the Company’s reviews, where achievement of key goals is discussed and assessed website www.cochlear.com in the Corporate Governance section, and future goals are agreed upon. A performance evaluation for unless stated otherwise. The Corporate Governance section senior executives took place in the reporting period and was carried is located under the Investors link on the Company’s website. out in accordance with the process disclosed (Rec 1.3). Cochlear’s corporate governance policies and procedures are reviewed on a regular basis and updated where appropriate. Principle 2: Structure the Board to add value Composition of the Board Principle 1: Lay solid foundations for management and oversight As at 30 June 2014, the Board comprised six non-executive The Board of directors is responsible to Cochlear’s shareholders and directors (including the Chairman) and one executive director, other stakeholders for the Company’s overall business performance. the CEO/President. The Board is looking for directors to bring The Board operates under a Board Charter that details its functions to the Board a mix of scientific, medical, technical and financial and the matters specifically reserved to it for decision (Rec 1.1). The expertise as well as international business experience. The directors charter is published in the Corporate Governance section of the consider that, between them, they possess the necessary skills, Cochlear website (Rec 1.3). The Board is responsible for adopting knowledge and experience to allow the Board to perform its duties Cochlear’s business strategies and for monitoring management’s appropriately. Summaries of the relevant skills, experience and implementation of those strategies. The Board considers and expertise of each director are set out on page 10 (Rec 2.6). sets the Company’s goals and performance targets, appoints and removes the CEO/President, oversees succession plans and The policy for appointment of directors and the selection process approves the accounts, budgets, Risk Management Policy (including are outlined in the Nomination Committee Terms of Reference, internal control and compliance), Code of Business Conduct and which is published in the Corporate Governance section of the major capital management and expenditure decisions. Cochlear website (Rec 2.6). The Nomination Committee assesses the necessary and desirable competencies of candidates for There is a clear distinction between the role and responsibilities of directorship. The selection process includes obtaining advice from the Board and the role and responsibilities of the CEO/President an external consultant to assist in identifying suitable candidates (Rec 1.1). The balance of responsibilities between the Board and who meet the required specifications. Upon appointment of a the CEO/President is reviewed on a regular basis so as to ensure new director, the key terms and conditions and the Company’s that the division of functions remains appropriate to the needs of expectations of the appointee are set out in a letter to the new the Company. director. The Nomination Committee actively considers gender The Chairman is responsible for leading the Board in the diversity in carrying out its role. For further information on performance of its duties. The Board’s prime objectives are to Cochlear’s Diversity Policy, please see Principle 3: Promote ethical improve shareholder returns and to achieve disciplined and and responsible decision-making, below. sustainable growth. The full Board meets for at least eight New non-executive directors are provided with an induction scheduled meetings each year. Other meetings are called program specifically tailored to the needs of individual appointees. as and when necessary. A summary of meeting attendance That program includes product training, one-on-one meetings (including committee meeting attendance) for F14 is set out in with members of the senior executive team and visits to key the Directors’ Report at page 23 (Recs 2.6, 4.4 and 8.4). At each functional areas. Directors participate in continuous improvement Board meeting, the non-executive directors meet for a period and education programs from time to time, as considered without management or any executive directors present (Rec 2.1). appropriate. The Company’s Constitution requires one third Throughout the year, the Board has regular scheduled discussions of the directors to retire from office at the AGM each year. on various aspects of the Company’s strategy. Retiring directors are eligible for re-election. The CEO/President The CEO/President is responsible for the efficient and effective is excluded from this requirement. Mr Rick Holliday-Smith and operation of Cochlear on a day-to-day basis. The CEO/President Mr Andrew Denver will retire at the 2014 AGM and will stand oversees the implementation of the strategies approved by the for re-election at that meeting. A review of the performance of Board and is accountable to the Board for all authority delegated the Board, its committees and individual directors is performed to the senior executive team. Notwithstanding these delegations at least every two years, with the most recent being undertaken by the Board, the CEO/President must consult the Chairman on in July 2014. The Chairman Mr Rick Holliday-Smith undertook - + –

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individual interviews and questionnaires, and subsequently held authority is delegated to it from the Board. The terms of reference evaluations with each individual director as to their performance for each committee can be viewed in the Corporate Governance over the past year. The key findings of these reviews were then section of the Cochlear website. discussed at the Nomination Committee meeting held in July Committee meeting agendas, papers and minutes are made 2014. The Performance Evaluation Process Overview gives details available to all members of the Board. The Chair of each committee of performance evaluation for the Board, its committees and is free to use whatever resources they consider necessary to individual directors (Rec 2.5). The Performance Evaluation Process discharge the committee’s responsibilities. The number of Overview is published in the Corporate Governance section of the committee meetings held during the year and the attendance at Cochlear website. these meetings by members is set out in the Directors’ Report The Chairman Mr Rick Holliday-Smith is an independent non- at page 23 (Recs 2.6, 4.4 and 8.4). With the exception of the executive director (Rec 2.2). Mr Rick Holliday-Smith is not and has Medical Science Committee and the Technology and Innovation not previously been the CEO of the Company (Rec 2.3). Details of Committee, all members of the committees are independent the division of responsibility between the Chairman and the CEO/ non-executive directors. Executive director Dr Chris Roberts is a President are set out above under Principle 1: Lay solid foundations member of the Medical Science Committee and the Technology for management and oversight (Rec 2.6). and Innovation Committee.

Independence The composition and role of each committee are set out below: The Board has assessed the independence of the non-executive Audit Committee (Rec 4.1) directors in light of their interests and relationships and considers The Audit Committee meets at least four times a year. The Audit that all of the non-executive directors are independent (Rec 2.1). Committee consists entirely of independent non-executive With the exception of the CEO/President, all directors on the Board directors (Rec 4.2). As at 30 June 2014, Mrs Yasmin Allen chaired are independent directors (Rec 2.1). An independent director is the Committee with the other members being the Chairman of the a non-executive director who is not a member of management Board Mr Rick Holliday-Smith, Mr Andrew Denver and Mr Donal and who is free of any business or other relationship that could O’Dwyer (Recs 4.2 and 4.4). The Board considers that the Audit materially interfere with, or could reasonably be perceived Committee is of a sufficient size and independence and possesses to materially interfere with, the independent exercise of their sufficient technical expertise to discharge its mandate effectively. An judgement. The Nomination Committee Terms of Reference outline assessment of the technical expertise of the Committee’s members criteria used to determine the independence of the directors (Rec occurs on an annual basis. The external and internal auditors, the 2.6). The criteria used follow the criteria set out in the Guidelines. CEO/President and the Chief Financial Officer (CFO) and other Each year, the Board assesses the independence of the non- executives are invited to the meetings at the discretion of the executive directors in light of the interests and circumstances Committee. At each Committee meeting they attend, the external disclosed by them. Independence is reassessed in the event of auditor reports on the outcome of their audit and other work. any material change of interests and circumstances. Any loss of The Committee meets with the external auditor in the absence of independence by a non-executive director will immediately be members of management at every meeting that the external auditor disclosed to the market. attends. Summaries of the Committee members’ technical expertise are set out at page 10 (Rec 4.4). The Audit Committee Terms None of the non-executive directors has any business relationship of Reference set out the Committee’s role and responsibilities, with Cochlear. The total number of shares in the Company owned composition, structure and membership requirements. by non-executive directors is 28,450. This is considered immaterial. The Audit Committee Terms of Reference can be viewed in the The Board believes arbitrary limits on tenure may cause loss of Corporate Governance section of the Cochlear website (Recs 4.3 experience and expertise that are important contributors to the and 4.4). efficient working of the Board. The Board does not currently believe that any non-executive directors have served on the Board for a The principal role of the Audit Committee is to advise and assist period that could materially interfere with, or could reasonably be the Board in relation to the reporting of financial information and perceived to materially interfere with, the independent exercise management of risk and to assist the Board in: of the relevant director’s judgement. The period of office of each • ensuring the Company adopts, maintains and applies appropriate director is disclosed at page 10 (Rec 2.6). Currently, no director accounting and reporting processes and procedures; has served longer than 12 years on the Board. The longest serving director is Prof Edward Byrne, AC, who was appointed in 2002. • facilitating the independence of the external audit process and addressing issues arising from the audit process; and With the consent of the Chairman, individual directors may seek independent professional advice, at the expense of Cochlear, on any • ensuring the Company maintains effective risk management and matter connected with their responsibilities (Rec 2.6). No individual internal control systems. directors exercised this right during the year. Cochlear’s processes relating to financial reporting are outlined below Board committees at Principle 4: Safeguard integrity in financial reporting. Cochlear’s The Board has established five permanent committees to assist in processes relating to risk management and internal control are the execution of its responsibilities. Each committee reports to the outlined below at Principle 7: Recognise and manage risk. Board. Each committee has terms of reference under which - + –

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Human Resources Committee (Rec 8.1) The Medical Science Committee considers any matters relating to The Human Resources Committee meets at least three times a medical aspects of Cochlear’s businesses and related technologies. year. As at 30 June 2014, Mr Paul Bell chaired the Committee This includes a watching brief on medical developments in these with the other members being the Chairman of the Board Mr Rick fields and the findings of independent medical experts. The Holliday-Smith and Mrs Yasmin Allen. All members of the Human Medical Science Committee has provided oversight and guidance Resources Committee are independent non-executive directors in relation to the recall of the unimplanted Nucleus CI500 Series (Rec 8.2 and 8.4). As the need arises, the CEO/President, CFO, implants. The Committee has met on a number of occasions since Senior Vice President, Human Resources and other executives are the recall and has closely monitored developments for quality and invited to meetings at the discretion of the Committee. regulatory implications.

The Human Resources Committee Terms of Reference set out the Nomination Committee (Rec 2.4) Committee’s role and responsibilities, composition, structure and The Nomination Committee is chaired by the Chairman of the membership requirements. The Human Resources Committee Board Mr Rick Holliday-Smith and, as at 30 June 2014, the other Terms of Reference can be viewed in the Corporate Governance members of the Committee were Mrs Yasmin Allen, Mr Paul Bell, section of the Cochlear website (Rec 8.4). Prof Edward Byrne, AC, Mr Andrew Denver and Mr Donal O’Dwyer The Human Resources Committee’s responsibilities include making (Rec 2.6). The Nomination Committee is comprised entirely of recommendations to the Board in relation to the Remuneration independent non-executive directors. Policy and the amounts and composition of remuneration for the The Nomination Committee was established in July 2003. The CEO/President and other members of the senior executive team. Committee’s role is to assist the directors in ensuring that the This includes long-term performance requirements and incentives. Board is comprised of individuals who are best able to discharge Remuneration levels are set at competitive levels to attract and the responsibilities of a director. The Nomination Committee’s retain qualified and experienced staff. Independent advice is taken role includes: on the appropriateness of remuneration packages. • annually assessing the skills, knowledge, experience, The Committee’s role includes responsibility for the remuneration independence and diversity required on the Board and the extent and incentive policies (including the Performance Appraisal Policy) to which each is represented and making recommendations to for the Chairman and other non-executive directors as well as for the Board; Cochlear generally. The Committee also approves the recruitment, retention and termination policies and practices as well as • establishing processes for the review of the performance of superannuation arrangements and makes recommendations to individual directors and the Board as a whole; the Board in accordance with the Cochlear Executive Long Term • establishing processes for the identification of suitable candidates Incentive Plan (CELTIP) and the Cochlear Executive Incentive Plan for appointment to the Board; (CEIP). The Human Resources Committee’s role encompasses responsibility for the Cochlear Diversity Policy including the • reviewing skills required to be maintained by existing directors implementation and monitoring of the Policy. Further information and recommending ways in which the skills of directors can be on Cochlear’s Diversity Policy can be found below at Principle 3: enhanced; and Promote ethical and responsible decision-making. • overseeing succession planning for the Board and the The Human Resources Committee is authorised to seek any CEO/President. information it requires from internal resources and to take The Nomination Committee Terms of Reference set out the independent professional advice as it considers necessary. Committee’s role and responsibilities, composition, structure and Further details on Cochlear’s remuneration policies and the membership requirements. The Nomination Committee Terms principles upon which they are based are set out below at Principle of Reference can be viewed in the Corporate Governance section 8: Remunerate fairly and responsibly and in the Remuneration of the Cochlear website (Rec 2.6). The Nomination Committee Report at pages 31 to 53 (Rec 8.4). Terms of Reference include a description of the procedure for the selection and appointment of new directors and the criteria used to Medical Science Committee determine director independence (Rec 2.6). The Medical Science Committee was established during the 2003 As a part of the appointment process, prospective directors must financial year. As at 30 June 2014, Prof Edward Byrne, AC, chaired disclose existing and proposed directorships as well as any other the Committee with the other members being Mr Andrew Denver, commitments they have. These commitments are assessed to Mr Donal O’Dwyer and Dr Chris Roberts. The Committee may determine whether the prospective director has adequate time invite any Cochlear executive to attend its meetings at to perform their duties. The Nomination Committee assesses the its discretion. time commitments of the Chairman and all other non-executive The Medical Science Committee Terms of Reference set out the directors on an ongoing basis so as to ensure that adequate time Committee’s role and responsibilities, composition, structure and is available to discharge Board duties. The current members of the membership requirements. The Terms of Reference provide for the Board are all considered to have sufficient time available to them in Committee to meet on an “as needs” basis, but at least biannually. order to discharge their responsibilities to Cochlear. The Medical Science Committee Terms of Reference can be viewed in the Corporate Governance section of the Cochlear website. - + –

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Technology and Innovation Committee The Code of Business Conduct and Cochlear’s Anti-Bribery Policy The Technology and Innovation Committee was established during can be viewed in the Corporate Governance section of the Cochlear the 2003 financial year. As at 30 June 2014, the Committee was website (Rec 3.5). chaired by Mr Andrew Denver with the other members being With the introduction of the Physician Payments Sunshine Prof Edward Byrne, AC, Mr Donal O’Dwyer and Dr Chris Roberts. Act (Sunshine Act) in the United States, medical device and Executives of the Company are invited to meetings at the discretion pharmaceutical companies operating in the United States are of the Committee. required to track and publicly report payments and transfers of The Technology and Innovation Committee Terms of Reference value provided to physicians and teaching hospitals in the United set out the Committee’s role and responsibilities, composition, States. Steps have been taken for the purpose of compliance with structure and membership requirements. The Technology and the requirements of the Sunshine Act when reporting requirements Innovation Committee Terms of Reference can be viewed in commenced in March 2014, and the first report due on 30 June the Corporate Governance section of the Cochlear website. The 2014 has been submitted to the relevant authority. Committee oversees the strategic direction of the Company’s The Company has documented policies on equal opportunity, technology research and product development programs with occupational health and safety and standards of workplace an emphasis on priority and resource allocation in line with the behaviour, which are communicated to employees at the time Company’s agreed corporate strategy. of employment. These policies are reinforced by continuous Principle 3: Promote ethical and responsible decision-making performance management and employee training programs. These policies are internal documents and are not available on the Conduct Cochlear website. All Cochlear personnel, including the directors and the senior executive team, are expected to act with the utmost integrity Directors and the senior executive team are subject to the Non- and objectivity, striving at all times to enhance the reputation Executive Directors and Executives Share Ownership Policy. This and performance of Cochlear. Cochlear’s values are enunciated Policy specifies minimum levels of shareholdings for directors in the Code of Business Conduct and are reflected in Cochlear’s and the senior executive team. The Non-Executive Directors and mission statement and strategic plan (Rec 3.1). The Code guides the Executives Share Ownership Policy is an internal document and is directors, the senior executive team and all employees as to: not available on the Cochlear website. • the practices necessary to maintain confidence in the All directors, senior executives and employees are subject to Company’s integrity; Cochlear’s Trading Policy, Consistent with the Corporations Act 2001, directors, senior executives and employees are prohibited by • the practices necessary to take into account their legal obligations the Trading Policy from dealing in the Company’s securities whilst and the reasonable expectations of their stakeholders; and in possession of “inside information”. Subject to certain limited • the responsibility and accountability of individuals for reporting exceptions, the Trading Policy prohibits “Designated Persons” and investigating reports of unethical practice. (which includes the Company’s key management personnel and certain other persons) from dealing in Cochlear securities outside The Code requires strict compliance with high standards of of set trading windows. During the trading windows, Designated honesty, integrity and fairness in all conduct relating to Cochlear Persons must still seek “no objection” from the Company prior to and its products. The Code outlines requirements relating to anti- trading in Cochlear securities. Employees who are not Designated corruption, confidentiality/privacy, trade practices, documentation Persons are not restricted to dealing within the trading windows. management, workplace and other compliance issues for the However, in order to mitigate the risk of inadvertently trading purpose of ensuring that the Company meets best practice in whilst in possession of inside information, the Policy advises these areas. employees to trade in the Company’s securities only during the Cochlear is committed to conducting operations in every country trading windows. Employees are encouraged to seek advice from where the Company does business, in full compliance with each the Company Secretary prior to trading if they are in any doubt as country’s laws (including the laws against bribery and corruption). to whether they are in possession of inside information. Any form of bribery or corruption in relation to a public official Compliance with the Trading Policy is monitored. The Audit or facilitation payments (given to public officials to expedite a Committee receives a report at each of its meetings regarding process or administrative action where the payment is not listed trading in the Company’s securities by the CEO/President and other as a public fee) is expressly prohibited under Cochlear’s Internal members of the senior executive team. Share dealings by directors Code of Conduct. are promptly notified to the ASX in accordance with the ASX The Code of Business Conduct also provides for clear and Listing Rules. confidential reporting mechanisms concerning any potential Executives who are granted shares under the CELTIP and CEIP are breach. The Company has a Whistleblower Policy to ensure that provided with details of the Trading Policy and the trading windows the confidentiality, investigation and reporting of any allegations as well as guidelines on what constitutes insider trading. The relating to improper conduct are properly maintained. The Trading Policy can be viewed in the Corporate Governance section Whistleblower Policy is an internal document and is not available of the Cochlear website. on the Cochlear website. - + –

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Diversity • growing the diversity of Cochlear’s workforce to reflect the As a global business, Cochlear is committed to providing an Company’s business needs and the global community it serves; inclusive workplace that attracts the best employees to support • implementing programs that prepare women to take on senior the Company’s growing business. The Company needs people roles within the business, both in operational and specialist with a diverse range of skills, expertise and diversity in terms of support areas; gender, age and ethnicity. To this end, the focus of the Company’s workforce demographics objectives is to continuously build • implementing programs to attract a diverse workforce; and organisational capabilities to achieve Cochlear’s business vision • investing in initiatives to enable Cochlear’s People Managers to and mission. provide an inclusive working environment to retain staff. Cochlear’s policy is to recruit and manage on the basis of These Workforce Objectives are supported through annual competence and performance regardless of age, nationality, initiatives which are approved and monitored by the Board’s race, gender or cultural background. As a business founded on Human Resources Committee. These annual initiatives include technology leadership, the Company places a particular focus initiatives with measurable objectives for achieving gender diversity on attracting and retaining staff with science, technology, (Rec 3.2). The outcomes of all annual initiatives are assessed as engineering and mathematical skills to drive long-term value part of the annual workforce demographics review by the Board’s creation in the business. Human Resources Committee (Rec 3.2). A summary of the F14 To ensure the Company meets its ongoing commitment to annual initiatives to implement Cochlear’s Workforce Objectives, diversity, Cochlear has established a Diversity Policy (Rec 3.2). The together with the progress achieved for each initiative, is set out Diversity Policy can be viewed in the Corporate Governance section below in Table 1 (Rec 3.3). Cochlear’s workforce gender profile, of the Cochlear website (Rec 3.5). The Diversity Policy sets out the including the percentage of women employees in the whole following Workforce Objectives: organisation, women in senior executive positions and women on the Board, is set out in Table 2 (Rec 3.4).

Table 1: F14 Annual initiatives and progress Workforce Objectives Annual Initiative and Progress Growing the diversity of Science, Technology, Engineering and Mathematics (STEM) the workforce to meet As a technology company, Cochlear needs to attract and maintain key skills for innovation in STEM areas. In F14, Cochlear’s business needs we implemented a new talent profile system so all employees can provide details on their qualifications. in a global community Increase the representation of women in the workforce 48% of Cochlear’s total permanent full-time workforce is female. 34% of senior executive roles (Bands 1-3) are filled by females. In F14: • in our professional workforce (including Principals, Senior Professionals and Professionals), 48% were women; • of the new permanent employees, 51% were female; and • women were more than twice as likely to be successful in their applications as men. In F14, the Company continued to monitor gender in the Company’s workforce demographics and remuneration reviews and in Cochlear’s employee engagement monitoring. The Company Employee Engagement Survey found female participants rated Cochlear higher than their male counterparts on all 18 dimensions of the survey, with statistically significant positive results on 12 of the dimensions up from four dimensions. Global diversity As a global business, Cochlear’s workforce is ethnically diverse with staff from 71 nationalities working in the Company’s headquarters. In the past year, we have recruited from around the globe. The Company also recruits people with hearing impairment to ensure we understand Cochlear customers’ needs. This diversity enriches Cochlear’s business and helps the Company create an inclusive culture that attracts and retains the best talent. Cochlear’s global annualised voluntary turnover is 7.5%, and 6.0% in Australia. These rates are very competitive for a medical device business.

Implementing programs that Human capital planning for recruitment and development for executive roles prepare women for senior roles During F14, two females were appointed to head of function roles. Cochlear also ensures we have females being developed across all strategic capability talent pools so they are prepared for key roles for the Company’s business. Development programs Cochlear continued to provide the very successful Leadership Presence Program for high performing women during F14 which was recognised by the Corporate Executive Board as a global best practice for development talent pipelines. Women in Leadership Initiative Support and sponsorship through the Women in Leadership initiative continued in F14 with external presenters and mentoring events with approximately 30 people attending each of the five events. - + –

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Table 1: F14 Annual initiatives and progress — continued Workforce Objectives Annual Initiative and Progress Attracting diverse talent to Promotion of science and engineering careers meet Cochlear’s business needs During F14, Cochlear promoted science and engineering careers through its support of Engineers Australia, support and sponsorship for Robogals (an organisation committed to fostering female participation in science and engineering programs in schools) and participation in career programs for the University of Wollongong and Macquarie University. Building Cochlear’s graduate pipeline Cochlear has continuously invested in graduate recruitment. Since 2006, Cochlear has operated a formal graduate development program to ensure the Company attracts the top talent from Australian universities so as to build a pipeline of people for product development, manufacturing and quality roles within the business. The Summer Internship Program during F14 attracted over 300 applicants. Four females and 10 males were accepted into the Program. The F14 Graduate Engineering Program attracted 14 applicants for places. Two of these places were filled by female applicants.

Investing in People Leadership development Manager development Cochlear continues to invest in building our People Management capability with 220 Managers in our headquarters participating in self-directed learning pathways: • Manager of Managers pathway – 60 participating in Strategy Workshops and Communication forums; and • People Manager pathway – average of 11 people attending 18 Management skills workshops, 55 people attending Process Leadership skills training and over 80 people attending Communications forums.

Table 2: Cochlear’s workforce gender profile Workforce Gender Profile Cochlear Limited - 30 June 2014 Permanent % Permanent % Contract/ % Total % Full-Time Part-Time Casual Employees Occupational Category Female Male Female Female Male Female Female Male Female Female Male Female Board (including CEO/President) 1 6 14% 0 0 0% 0 0 0% 1 6 14% Senior Executive Positions 69 143 33% 7 4 64% 1 1 50% 77 148 34% Whole Organisation 1,167 1,254 48% 86 29 75% 75 75 50% 1,328 1,358 49%

Principle 4: Safeguard integrity in financial reporting Additional detail relating to the Audit Committee and the Audit The directors are committed to the preparation of financial Committee Terms of Reference can be found above at Principle 2: statements that present a balanced and clear assessment of the Structure the Board to add value (Rec 4.4). Company’s financial performance, position and prospects. Cochlear is committed to auditor independence. The Cochlear Accounting and financial control policies and procedures have audit engagement partner must rotate at least every five years, been established and are monitored by the Audit Committee with the last rotation occurring in August 2013. The Audit (Rec 4.1). The Committee approves any new material accounting Committee reviews the independence of the external auditor policies. Compliance with these policies and procedures is subject at each of its meetings. All non-audit services provided by the to review by the external and internal auditors. The Committee Company’s external audit firm must be approved or ratified by provides a link between the external auditor and the Board and the Audit Committee. monitors compliance with statutory responsibilities. The Audit Cochlear has a highly structured six monthly reporting process, Committee is responsible for making recommendations on the culminating in Board sign-off and release of financial results to appointment, evaluation and dismissal of the external auditor, the market. In accordance with section 295A of the Corporations setting fees and ensuring that the external auditor reports to the Act 2001, the CEO/President and the CFO provide a written Committee and the Board (Rec 4.4). The Audit Committee reviews statement to the Board that the Company’s published financial the performance, independence and objectives of the external reports present a true and fair view, in all material respects, of the auditor on an annual basis. Details relating to the selection and Company’s financial condition and that the operational results are appointment of the Company’s external auditor are included in the in accordance with relevant accounting standards. Audit Committee Terms of Reference (Rec 4.4). - + –

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Corporate Governance Report

Principle 5: Make timely and balanced disclosure In addition, shareholders may at any time direct questions or Cochlear is committed to effective communication with its requests for information to the Company Secretary, the CEO/ investors so as to give them equal and timely access to accurate, President or the Chairman. Shareholders can also gain access to balanced and understandable information. information about Cochlear, including annual reports, key policies and the Terms of Reference of its Board committees through the Cochlear’s Continuous Disclosure Policy and Procedures set Cochlear website. out the Company’s policies and procedures in relation to the disclosure of information (Rec 5.1). The Continuous Disclosure Principle 7: Recognise and manage risk Policy and Procedures aim to ensure full and timely disclosure Cochlear views risk management as integral to its objectives of to the market of all material issues relating to Cochlear and to effective management of Company assets and the creation and provide all stakeholders with an equal opportunity to access that maintenance of shareholder value. The Board has established information. The Policy and Procedures are designed to ensure a Risk Management Policy. This Policy provides a framework that the disclosure requirements set out in the ASX Listing Rules for the oversight and management on a continuing basis of the and the Corporations Act 2001 are complied with and to ensure material business risks associated with Cochlear’s activities (Rec accountability at a senior management level for that compliance. 7.1). Cochlear assesses its risk management framework against The Policy and Procedures are reviewed on a regular basis. the International Standard for Risk Management ISO 31000. The The Continuous Disclosure Policy and Procedures can be viewed Risk Register puts the Risk Management Policy into effect. The in the Corporate Governance section of the Company website Risk Register was designed and is implemented so as to provide a (Rec 5.2). comprehensive risk management system which identifies, assesses and appropriately manages Cochlear’s material business risks Principle 6: Respect the rights of shareholders (Rec 7.2). Cochlear focuses on effective management of material The Board and senior executive team are committed to business, operational, financial, human resources and legal risks. formulating and implementing Company strategy. The Within these categories, specific identified risks arise from matters shareholders of the Company play a key role in the governance such as actions by competitors, technological developments, of the Company. The directors recognise that shareholders must government policy changes and exchange rate movements. receive timely information about the Company in order to play The Board, Audit Committee and senior executive team are their role effectively. The directors appreciate that information together accountable for monitoring risk and implementing the communicated to shareholders needs to be of high quality, Risk Management Policy. The Board oversees implementation relevant, balanced and understandable. The Company’s Shareholder of the Risk Management Policy and the Risk Register. The Board Communications Policy is published in the Corporate governance ensures that investors are informed of material changes to the section of the Cochlear website (Recs 6.1 and 6.2). The Policy is Company’s risk profile. designed to promote effective communications with shareholders and to encourage shareholders to participate in general meetings The Audit Committee advises the Board and reports on the of the Company. status of major risks to the Company through the integrated risk management programs. Day-to-day management of the Risk The principal channels of communication with the Company’s Register is delegated to the Risk Management Committee. The Risk shareholders are the provision of the half yearly and annual Management Committee is made up of senior executives. reports, periodic analyst and media briefings, the distribution of specific material covering major transactions and events, Company The Risk Management Committee reports on the effectiveness announcements and the AGM. Cochlear offers its shareholders the of the Company’s management of its material business risks ability to receive distributed materials in either electronic or hard at each Audit Committee meeting, including minutes of all copy format. Risk Management Committee meetings (Rec 7.2). The Risk Management Committee is responsible for identification of areas The Board’s philosophy is to encourage full participation of of risk, prioritisation of these risks and adoption of cost effective shareholders at the AGM to ensure a high level of accountability strategies, where appropriate, to manage Cochlear’s exposure. and identification with Cochlear’s strategy and goals. The Company Senior executives charged with the responsibility for identifying provides a forum to address individual shareholders’ questions and managing these risks are required to sign-off on them on a at each AGM. The external auditor attends the AGM and is quarterly basis. The Risk Management Committee has reported to available to answer questions about the conduct of the audit and the Board on the effectiveness of the Company’s management of the preparation and content of the Audit Report. In addition to business risks (Recs 7.2 and 7.4). attending the AGM in person, shareholders may view a webcast of the AGM online. Advance notice of the timing of half year and full year results announcements is provided on the Cochlear website. Copies of results presentations are made available via the Cochlear and ASX websites. - + –

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Corporate Governance Report

The Audit Committee advises the Board on risk management • executive and relevant employee remuneration be an appropriate and is responsible for reviewing the effectiveness of Cochlear’s balance of fixed and variable reward; approach to risk management and the establishment and • variable remuneration for senior management be comprised of maintenance of internal compliance and control systems within short- and long-term components; and the risk management framework. This includes the scope of the Internal Audit function. The Audit Committee is responsible for the • a significant proportion of executive and employee reward be appointment and removal of the internal auditor and for ensuring dependent upon performance assessed against key business that the internal auditor is independent from the external auditor. measures, both financial and non-financial. Whilst particular internal audit programs may be outsourced, the Details of F14 remuneration (including retirement benefits) of the internal and external audit functions are separate and independent directors and specified executives are included in the Remuneration of each other. The Audit Committee approves the internal audit Report on pages 31 to 53. Further disclosure in relation to the program for each year and the effectiveness of the function is kept remuneration philosophy is included in the Remuneration Report. under review. All reports issued by the internal auditor are tabled at Audit Committee meetings. Non-executive directors’ remuneration policy Fees for non-executive directors are based on the nature of The Board has received assurance from the CEO/President and the their work and their responsibilities. In determining levels of CFO that the declarations provided by each of the CEO/President fees, survey data on comparable companies is considered. Non- and CFO in accordance with section 295A of the Corporations executive directors’ fees are recommended by the Committee and Act 2001, regarding the integrity of the financial statements, are determined by the Board within the aggregate amount approved founded on a sound system of risk management and internal by shareholders at the 2011 AGM of $2,000,000 a year. control and that the system is operating effectively in all material respects in relation to financial reporting risks (Rec 7.3). The Risk The structure of non-executive directors’ remuneration is clearly Management Policy can be viewed at the Corporate Governance distinguished from that of executive directors and senior executives section of the Cochlear website (Rec 7.4). (Rec 8.3). Non-executive directors do not receive any options, performance shares or other performance related remuneration. Principle 8: Remunerate fairly and responsibly All non-executive directors receive the statutory superannuation The Board has established the Human Resources Committee to awards only. Any amounts due under the closed directors’ focus on appropriate remuneration policies which are designed retirement scheme have been frozen and are indexed by reference to enhance corporate and individual performance (Rec 8.1). The to the bank bill rate (Rec 8.4). Human Resources Committee Terms of Reference are published in Senior executives’ remuneration policy the Corporate Governance section of the Cochlear website. These Remuneration for Cochlear executives includes both fixed and Terms of Reference set out the Human Resources Committee’s variable incentive components. Up to and including F13, equity role and responsibilities, composition, structure and membership based executive remuneration was made in accordance with the requirements (Rec 8.4). Further detail relating to the Human CELTIP. The CELTIP was approved by shareholders at the 2003 Resources Committee, including a signpost to the record of AGM. From F14 onwards, equity based executive remuneration is attendance at its meetings, can be found above at Principle 2: made in accordance with the new Cochlear Executive Incentive Structure the board to add value (Rec 8.4). Plan (CEIP). The exercise periods for the CELTIP and CEIP are timed Cochlear’s Remuneration Policy and practices are designed to to coincide with the trading windows provided in the Company’s attract, motivate and retain high quality people. Trading Policy. In line with the Corporations Act 2001, the Trading Policy prohibits executives from hedging unvested CELTIP and CEIP The Remuneration Policy is built around principles that: awards (Rec 8.4). • remuneration be linked to Cochlear’s performance and the creation of shareholder value; • directors’ remuneration be competitive and reflect good corporate governance; • executive and employee rewards be competitive in the markets in which Cochlear operates; - + –

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Corporate Governance Report

ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations checklist

Number Requirement Compliant Rec 4.3 The audit committee should have a formal charter. 3 Pr 1 Lay solid foundations for management Rec 4.4 Companies should provide the information indicated 3 and oversight in the Guide to reporting on Principle 4. Rec 1.1 Companies should establish the functions reserved 3 Pr 5 Make timely and balanced disclosure to the board and those delegated to senior 3 executives and disclose those functions. Rec 5.1 Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure Rec 1.2 Companies should disclose the process for 3 requirements and to ensure accountability at a senior evaluating the performance of senior executives. executive level for that compliance and disclose those policies or a summary of those policies. Rec 1.3 Companies should provide the information indicated 3 in the Guide to reporting on Principle 1. Rec 5.2 Companies should provide the information indicated 3 in the Guide to reporting on Principle 5. Pr 2 Structure the board to add value Pr 6 Respect the rights of shareholders Rec 2.1 A majority of the board should be 3 independent directors. Rec 6.1 Companies should design a communications 3 3 policy for promoting effective communication with Rec 2.2 The chairman should be an independent director. shareholders and encouraging their participation Rec 2.3 The roles of chairman and chief executive officer 3 at general meetings and disclose their policy or a should not be exercised by the same individual. summary of that policy. Rec 2.4 The board should establish a nomination committee. 3 Rec 6.2 Companies should provide the information indicated 3 in the Guide to reporting on Principle 6. Rec 2.5 Companies should disclose the process for 3 evaluating the performance of the board, its Pr 7 Recognise and manage risk committees and individual directors. Rec 7.1 Companies should establish policies for the 3 Rec 2.6 Companies should provide the information indicated 3 oversight and management of material business in the Guide to reporting on Principle 2. risks and disclose a summary of those policies. Pr 3 Promote ethical and responsible decision-making Rec 7.2 The board should require management to design 3 and implement the risk management and internal 3 Rec 3.1 Companies should establish a code of conduct and control system to manage the company’s material disclose the code or a summary of the code as to: business risks and report to it on whether those risks • the practices necessary to maintain confidence in are being managed effectively. The board should the company’s integrity; disclose that management has reported to it as to the effectiveness of the company’s management of • the practices necessary to take account of their legal its material business risks. obligations and the reasonable expectations of their stakeholders; and Rec 7.3 The board should disclose whether it has received 3 • the responsibility and accountability of assurance from the chief executive officer (or individuals for reporting and investigating reports equivalent) and the chief financial officer (or of unethical practices. equivalent) that the declaration provided in accordance with section 295A of the Corporations Rec 3.2 Companies should establish a policy concerning 3 Act is founded on a sound system of risk diversity and disclose the policy or a summary of management and internal control and that the that policy. The policy should include requirements system is operating effectively in all material for the board to establish measurable objectives respects in relation to financial reporting risks. for achieving gender diversity for the board to 3 assess annually both the objectives and progress in Rec 7.4 Companies should provide the information indicated achieving them. in the Guide to reporting on Principle 7. Rec 3.3 Companies should disclose in each annual report the 3 Pr 8 Remunerate fairly and responsibly measurable objectives for achieving gender diversity Rec 8.1 The board should establish a remuneration committee. 3 set by the board in accordance with the diversity policy and progress towards achieving them. Rec 8.2 The remuneration committee should be structured 3 so that it: Rec 3.4 Companies should disclose in each annual report 3 • consists of a majority of independent directors; the proportion of women employees in the whole organisation, women in senior executive positions • is chaired by an independent chair; and and women on the board. • has at least three members. Rec 3.5 Companies should provide the information indicated 3 Rec 8.3 Companies should clearly distinguish the structure of 3 in the Guide to reporting on Principle 3. non-executive directors’ remuneration from that of Pr 4 Safeguard integrity in financial reporting executive directors and senior executives. 3 Rec 4.1 The board should establish an audit committee. 3 Rec 8.4 Companies should provide the information indicated in the Guide to reporting on Principle 8. Rec 4.2 The audit committee should be structured so that it: 3 • consists only of non-executive directors; • consists of a majority of independent directors; • is chaired by an independent chair, who is not chair of the board; and • has at least three members. - + –

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Glossary, Company ASX Announcement Record and Company Information

Glossary Company Information

AGM Annual General Meeting. FDA United States Food and Drug Administration. Stock exchange listing ASIC Australian Securities and Investments Commission. FX Foreign exchange. Australian Securities Exchange ASX Australian Securities Exchange. IFRS International Financial Reporting Standards. EBIT Earnings before interest and tax. KMP Key management personnel. ASX code COH EBITDA Earnings before interest, tax, depreciation NPAT Net profit after tax. and amortisation. Previous GAAP Previous Australian Generally Accepted Solicitors EMEA Europe, Middle East and Africa. Accounting Principles. Clayton Utz EPS Earnings per share. Processor/sound processor The externally worn part of the cochlear implant. F12 Financial year 2012: 1 July 2011 to 30 June 2012. Share registrar F13 Financial year 2013: 1 July 2012 to 30 June 2013. R&D Research and development. F14 Financial year 2014: 1 July 2013 to 30 June 2014. TSR Total shareholder return. Computershare Investor Services Pty Limited F15 Financial year 2015: 1 July 2014 to 30 June 2015. Level 4, 60 Carrington Street Sydney NSW 2000, Australia Tel: 61 3 9415 4000

Company ASX Announcement Record Auditor KPMG 2 June 2014 11 February 2014 Cochlear to launch Nucleus Profile Half year results announced Bankers Implant Series Cochlear Limited announced revenue down Australia Westpac Banking Corporation Cochlear Limited announced it would be 5% to $371.1 million, with cochlear implant and HSBC Bank Australia Limited launching the Cochlear Nucleus Profile Series sales down by 14% for the six months ended Japan The Bank of Tokyo-Mitsubishi UFJ, Limited across Europe in June 2014. The first implant 31 December 2013. The interim dividend of Sweden Skandinaviska Enskilda Banken AB (publ) in the series, the Cochlear Nucleus Profile $1.27 per share was up 2%. implant with Contour Advance electrode, has United Kingdom HSBC Bank plc 24 January 2014 the thinnest implant body on the market. United States Wells Fargo Bank West, NA Jury trial verdict on USA Patent 27 March 2014 Infringement Case Annual General Meeting Half year report 2014 Cochlear Limited announced that a jury The Annual General Meeting will be held at 10am Cochlear Limited provided an F14 half verdict in the patent infringement lawsuit on Tuesday 14 October 2014 at the Australian year report to shareholders listing half year by the Alfred E. Mann Foundation for Securities Exchange, Exchange Square Auditorium, revenues and sales. Scientific Research and Advanced Bionics 20 Bridge Street, Sydney. A Notice of Annual 21 March 2014 had been reached. General Meeting and Proxy Form are enclosed FDA approves Cochlear Nucleus Hybrid with this Annual Report. for sale in USA Financial calendar Cochlear Limited announced that the US FDA had approved the Cochlear Nucleus 2014 Hybrid L24 Cochlear Implant System for Dividend record date 4 September commercial release. Payment of final dividend 25 September Annual General Meeting 14 October

2015 Non-IFRS financial measures Interim profit announcement 10 February* Interim dividend record date 5 March* Given the significance of the patent dispute, product recall and FX movements the directors believe Payment of interim dividend 26 March* the presentation of non-IFRS financial measures is useful for the users of this document as they Final profit announcement 11 August* reflect the underlying financial performance of the business. Annual General Meeting 20 October* The non-IFRS financial measures included in this document have been calculated on the following basis: * Indicative dates only. • excluding patent dispute provision: IFRS measures adjusted for the expense of the patent dispute provision; ACE, Advance Off-Stylet, AOS, AutoNRT, Autosensitivity, Beam, • excluding recall costs: IFRS measures adjusted for the costs of the product recall; Button, Carina, Cochlear, コクレア, Codacs, Contour, Contour • constant currency: restatement of IFRS financial measures in comparative years using F14 FX Advance, Custom Sound, ESPrit, Freedom, Hear now. And always, Hybrid, inHear, Invisible Hearing, MET, MP3000, myCochlear, rates; and NRT, Nucleus, Nucleus in Chinese characters, Off-Stylet, • free cash flow: IFRS cash flow from operating and investing activities excluding interest and tax SmartSound, Softip, SPrint, the elliptical logo and Whisper are paid related to non-operating activities. either trademarks or registered trademarks of Cochlear Limited. Ardium, Baha, Baha Divino, Baha Intenso, Baha PureSound, The above non-IFRS financial measures have not been subject to review or audit. However, KPMG Baha SoftWear, DermaLock, Vistafix and WindShield are either has separately undertaken a set of procedures to agree the non-IFRS financial measures disclosed trademarks or registered trademarks of Cochlear Bone Anchored to the books and records of the Consolidated Entity. Solutions AB.

Design Cross Media Communications Pty Ltd - + –

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Cochlear Ltd (ABN 96 002 618 073) 1 University Avenue, Macquarie University, NSW 2109, Australia Tel: +61 2 9428 6555 Fax: +61 2 9428 6352 Cochlear Ltd (ABN 96 002 618 073) 14 Mars Road, Lane Cove, NSW 2066, Australia Tel: +61 2 9428 6555 Fax: +61 2 9428 6352 Cochlear Bone Anchored Solutions AB Konstruktionsvägen 14, SE - 435 33 Mölnlycke, Sweden Tel: 46 31 792 44 00 Fax: 46 31 792 46 95 Cochlear Americas 13059 E Peakview Avenue, Centennial, CO 80111, USA Tel: +1 303 790 9010 Fax: +1 303 792 9025 Cochlear Canada Inc 2500-120 Adelaide Street West, Toronto, ON M5H 1T1, Canada Tel: +1 416 972 5082 Fax: +1 416 972 5083 Cochlear AG EMEA Headquarters, Peter Merian-Weg 4, 4052 Basel, Switzerland Tel: +41 61 205 0404 Fax: +41 61 205 0405 Cochlear Deutschland GmbH & Co. KG Karl-Wiechert-Allee 76A, 30625 Hannover, Germany Tel: +49 511 542 770 Fax: +49 511 542 7770 Cochlear Europe Ltd 6 Dashwood Lang Road, Bourne Business Park, Addlestone, Surrey KT15 2HJ, United Kingdom Tel: +44 1932 26 3400 Fax: +44 1932 26 3426 Cochlear Benelux NV Schaliënhoevedreef 20 i, B-2800 Mechelen, Belgium Tel: +32 15 79 55 11 Fax: +32 15 79 55 70 Cochlear France S.A.S. Route de l’Orme aux Merisiers, Z.I. Les Algorithmes – Bât. Homère, 91190 Saint-Aubin, France Tel: +33 805 200 016 Fax: +33 160 196 499 Cochlear Italia S.r.l. Via Larga 33, 40138 Bologna, Italy Tel: +39 051 601 53 11 Fax: +39 051 39 20 62 Cochlear Nordic AB Konstruktionsvägen 14, 435 33 Mölnlycke, Sweden Tel +46 31 335 14 61 Fax +46 31 335 14 60 Cochlear Tıbbi Cihazlar ve Sağlık Hizmetleri Ltd. Şti. Çubuklu Mah. Boğaziçi Cad., Boğaziçi Plaza No: 6/1, Kavacık, TR-34805 Beykoz-Istanbul, Turkey Tel: +90 216 538 5900 Fax: +90 216 538 5919 Cochlear (HK) Limited Room 1204, 12/F, CRE Building, No 303 Hennessy Road, Wanchai, Hong Kong SAR Tel: +852 2530 5773 Fax: +852 2530 5183 Cochlear Korea Ltd 1st floor, Cheongwon building, 828-5, Yuksam dong, Kangnam gu, Seoul, Korea Tel: +82 2 533 4663 Fax: +82 2 533 8408 Cochlear Limited (Singapore Branch) 6 Sin Ming Road, #01-16 Sin Ming Plaza Tower 2, Singapore 575585 Tel: +65 6553 3814 Fax: +65 6451 4105 Cochlear Medical Device (Beijing) Co., Ltd Unit 2208 Gemdale Tower B, 91 Jianguo Road, Chaoyang District, Beijing 100022, P.R. China Tel: +86 10 5909 7800 Fax: +86 10 5909 7900 Cochlear Medical Device Company India Pvt. Ltd. Ground Floor, Platina Building, Plot No C-59, G-Block, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051, India Tel: +91 22 6112 1111 Fax: +91 22 6112 1100 株式会社日本コクレア （Nihon Cochlear Co Ltd）〒 113-0033 東京都文京区本郷2-3-7 お茶の水元町ビル Tel: +81 3 3817 0241 Fax: +81 3 3817 0245 Cochlear Middle East FZ-LLC Dubai Healthcare City, Al Razi Building 64, Block A, Ground Floor, Offices IR1 and IR2, Dubai, United Arab Emirates Tel: +971 4 818 4400 Fax: +971 4 361 8925 Cochlear Latinoamérica S.A. International Business Park, Building 3835, Office 103, Panama Pacifico, Panama Tel: +507 830 6220 Fax: +507 830 6218 Cochlear NZ Limited Level 4, Takapuna Towers, 19-21 Como St, Takapuna, Auckland 0622, New Zealand Tel: + 64 9 914 1983 Fax: +61 2 8002 2800 www.cochlear.com

© Cochlear Limited 2014 557296 ISS1 SEPT14