Annual Report 2005/06 THE WORLD OF SOUND - Sonova

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Highest total compensationThe highest total compensation paid to a member of theBoard of Directors in the financial year 2005/06 was to AndyRihs, Chairman. This compensation consisted of a fixed paymentof CHF 152,451 (previous year CHF 172,908) and 12,000 options(previous year 12,000 options). These options provide the rightto purchase one Phonak share at a strike price of CHF 63.25between February 1, 2007 and January 31, 2011.The highest total compensation paid to a member of theManagement Board in the financial year 2005/06 was toValentin Chapero Rueda, CEO. This compensation consisted of abasic salary (incl. employer’s contribution) of CHF 1,186,739(previous year CHF 1,158,792) as well as a performance-relatedbonus (incl. employer’s contribution) of CHF 736,755 (previousyear CHF 684,040). In the financial year 2005/06 no options weregranted to Valentin Chapero Rueda (previous year 400,000options in the course of the renewal of the long-term employmentcontract).Shareholders’ Participation RightsVoting rights restriction and representationTo be recognized as a shareholder with comprehensiverights, the acquirer of shares must place an application for entryin the share register. The registration in the share register asa shareholder with voting rights is limited to 5% of the sharecapital (Art. 6 par. 2 of the Articles of Association). Linkedparties are considered as one person. To abolish this regulation,the absolute majority of the votes represented at the AnnualGeneral Shareholders’ Meeting is sufficient.In exercising their voting rights, no shareholder may unite,by a combination of own and represented shares together, morethan 10% of the shares of the company (Art. 12 par. 2 of theArticles of Association).The restrictions on the voting and representation rights donot apply to the founding shareholders. The Board of Directorsmay approve further exceptions with good reason and no specialquorum is required for such decisions. During the reportingperiod, no exceptions to the above listed rules were granted.Right to request items on the Annual GeneralShareholders’ Meeting agendaShareholders entitled to vote who represent at least 5% ofthe share capital may request items to be added to the agendaby indicating the relevant proposals. Such requests must beaddressed in writing to the Chairman of the Board of Directorsno later than 60 days before the meeting.Registering deadlinesThe share register will be closed for about five days beforethe Annual General Shareholders’ Meeting for administrativereasons. During this period, an admission card, with correspondingvoting papers, will be sent to shareholders. In case of apartial sale within this time, the confirming documents must beexchanged on the day of the Annual General Shareholders’Meeting at the information desk. The shares can be traded atany time and are not blocked.Changes of Control and Defense MeasuresPublic purchase offerA purchaser of shares is obliged to make a public purchaseoffer when he has more than 49% of the voting rights at hisdisposal (“opting up”, as per Art. 8 of the Articles of Association).Clauses on changes of controlThere are no agreements in place that, in the event of achange of control, provide members of the Board of Directors orthe Management Board with abnormally high severance paymentsor other lucrative benefits.In 2005, a member of the Management Board, CEO ValentinChapero Rueda, signed a long-term employment contractrunning until 2010. Under a change of control provision, he isentitled to his full salary and part of the bonus payments incase the employment is terminated due to a change of control.Corporate Governance31
AuditorsDuration and term of mandateDuring the ordinary Annual General Shareholders’ Meeting ofJuly 5, 2001 PricewaterhouseCoopers was elected as auditorsof Phonak Holding AG and the Phonak Group. The head auditorresponsible for the existing auditing mandate, Mr. StephenW. Williams, took office as of July 5, 2001. At the Annual GeneralShareholders’ Meeting on July 7, 2005, PricewaterhouseCooperswas re-elected for another term of one year.FeesPricewaterhouseCoopers charged CHF 624,000 for auditingservices and CHF 265,000 for non-audit services during the yearunder review.Supervisory and control instrumentsThe external auditors report their findings semiannuallydirectly to the Audit Committee of the Board of Directors. In2005/06, the external auditors attended two out of four AuditCommittee meetings.The Audit Committee of the Board of Directors reviews theperformance, compensation, and independence of the externalauditors on a regular basis. The Audit Committee reports quarterlyits treated issues to the Board of Directors.Information PolicyAs a publicly listed company, the Phonak Group pursues anopen and active information policy. A governing principle ofthis policy is to treat all stakeholders alike and to inform themat the same time. It is one of our top priorities to inform ourshareholders, employees, and business partners in the most direct,open, and transparent way about our strategy, our globalactivities, and the current state of the company.Important information available on Phonak’s investorswebsiteCapital structure and shareholder rights:Articles of Association of Phonak Holding AGCapital structureRestrictions on shareholder rightsShareholder structurewww.phonak.com/company/investors/governance.htmInternal organization:Organizational regulationsPhonak Group code of conductwww.phonak.com/company/investors/governance.htmFinancial information:Corporate & ad hoc newsAnnual reportsSemi-annual reportsIR presentationswww.phonak.com/company/investors/financial.htmInformation on the AGM:Request to put an item on the AGM agendaInvitation/agendaAGM presentationsAGM minuteswww.phonak.com/company/investors/governance/agm.htmIR online news service:IR News Servicewww.phonak.com/company/investors/ir_news.htmContact and order form:IR Contact FormOrder form for annual reportswww.phonak.com/company/investors/ir_contact.htm32 Corporate Governance
Page 1 and 2: Annual Report 2005/06Annual Report
Page 3 and 4: FIVE-YEAR KEY FIGURES(Consolidated)
Page 5 and 6: CHAIRMAN’S FOREWORDIn 2005/06, th
Page 7: Move with the melody
Page 10 and 11: digital entry-level product line, w
Page 12 and 13: MARKETSGeneral market developmentTh
Page 15 and 16: NEW TECHNOLOGIES AND PRODUCTSPlatfo
Page 17 and 18: OPERATIONS AND STAFFOperationsWithi
Page 19: Listen to life
Page 22 and 23: This report describes the principle
Page 24 and 25: Capital StructureChanges in capital
Page 26 and 27: Left to right: Robert F. Spoerry, D
Page 28 and 29: Andy Rihs (born in 1942) has been C
Page 30 and 31: Dr. Valentin Chapero Rueda (born in
Page 32 and 33: Share and option ownership of membe
Page 36 and 37: Investor Relations CalendarJuly 6,
Page 39 and 40: SUSTAINABILITYPhonak’s management
Page 41 and 42: Our customers buy a better quality
Page 43 and 44: Corporate GovernancePhonak’s Boar
Page 45: Push your performance
Page 49 and 50: Consolidated Income Statement1,000
Page 51 and 52: Consolidated Statement of Cash Flow
Page 53 and 54: Notes to the ConsolidatedFinancial
Page 55 and 56: equity method, the investment in an
Page 57 and 58: Short-term debtsShort-term debts co
Page 59 and 60: Employee benefit plansPhonak has va
Page 61 and 62: 5. Segment informationProfit or los
Page 63 and 64: 6. Consolidated Income Statement by
Page 65 and 66: 9. Financial income/(expenses), net
Page 67 and 68: 11. Earnings per shareBasic earning
Page 69 and 70: 17. Inventories1,000 CHFRaw materia
Page 71 and 72: 19. Investments in associates and j
Page 73 and 74: GoodwillSoftwareIntangiblesrelating
Page 75 and 76: Among various other items, other pr
Page 77 and 78: 27. Other long-term liabilities1,00
Page 79 and 80: 29. Acquisition of subsidiariesDuri
Page 81 and 82: 30. Related-party transactionsManag
Page 83 and 84: The amount recognized in the consol
Page 85 and 86:
Summary of outstanding and exercisa
Page 87 and 88:
35. Number of employeesAt March 31,
Page 89 and 90:
38. List of significant consolidate
Page 91:
Cherish the cheers
Page 95 and 96:
Income Statement1,000 CHFIncomeMana
Page 97 and 98:
Notes to the Financial Statements1.
Page 99 and 100:
3.4 List of significant investments
Page 101 and 102:
Appropriation of Available Earnings
Page 103:
Launch a laugh
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Phonak ABHornsbruksgatan 28SE-117 3
Page 108 and 109:
ImpressumConceptLithographyPrinting
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Annual Report 2005/06 THE WORLD OF SOUND - Sonova

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