1997 financial statements and reports
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21
1997 Financial Statements and Reports
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
Contents
Directors’ report 22
Profit and loss accounts 26
Balance sheets 27
Statements of cash flows 28
Notes to the financial statements 29
Statement by Directors 54
Independent auditors’ report 55
Stock Exchange information 56
22
Directors’ report
The Directors present their report, together with the financial statements of CochlearLimited (the Company) and the consolidated financial statements of the Economic Entity,being the Company and its controlled entities, for the year ended 30 June 1997, and theAuditors’ Report thereon.
DirectorsThe Directors of the Company in office at the date of this report and particulars of their ages,
qualifications and experience are set out on page 18 of the Annual Report.
Directors’ meetingsThe number of Directors’ meetings (including meetings of Committees of Directors) and number of
meetings attended by each of the Directors of the Company during the financial year are:
Directors’ Remuneration AuditMeetings Committee Committee
Meetings Meetings Meetings Meetings Meetings Meetingsheld (1) attended held (1) attended held (1) attended
Prof DG Penington, AC 10 10 1 1 4 4
Ms CB Livingstone (2) 10 10
Prof BDO Anderson, AO 10 9 1 0
Mr JA Calvert-Jones 10 9 1 1
Ms EC Holley 10 10 4 4
Mr JH Veeneklaas 4 4 1 1
Mr PJ North 4 4 1 1
1. Reflects the number of meetings held during the time the Director was a member of the Board
and/or Committee.
2. Although not a member of the Remuneration and Audit Committees, Ms Livingstone attended four
Audit Committee meetings and one Remuneration Committee meeting by invitation.
Principal activities and review of operations and resultsThe principal activities and a review of the operations of the Economic Entity during the year ended
30 June 1997, and the results of those operations are set out on pages 2 to 20 of the Annual Report.
Other than as discussed in this report, there were no significant changes in the nature of those activities
during the year ended 30 June 1997 and the results of those operations are set out on pages 6 to 7.
23
Consolidated resultsThe consolidated results for the year attributable to the members of the Company are:
Sales revenue 71,913 72,275
Operating profit before tax 14,845 13,676
Operating profit after tax 10,809 10,863
Earnings per share (cents) 21.6c 21.7c
DividendsDividends paid or declared by the Company since listing on the Australian Stock Exchange were:
As proposed and provided for in last year’s report:
A final ordinary dividend of 7.5 cents per share, unfranked, amounting to $3,750,000, in respect of the
year ended 30 June 1996, paid on 22 October 1996
In respect of the current year:
Interim ordinary dividend of 5 cents per share, franked to 100% withClass C (36%) franking credits, paid on 24 April 1997 2,500
Final ordinary dividend recommended by the Directors of the Companyof 7.5 cents per share, franked to 38% with Class C (36%) franking credits,to be paid on 21 October 1997 3,750
Total dividends provided for and paid in respect of the year ended30 June 1997 6,250
Changes in state of affairsThere were no significant changes in the state of affairs of the Economic Entity during the year ended
30 June 1997.
There has not arisen in the interval between the end of the financial year and the date of this report,
any item or transaction or event of a material and unusual nature likely, in the opinion of the Directors
of the Company, to affect significantly the operations of the Economic Entity, the results of those
operations or the state of affairs of the Economic Entity in subsequent financial years.
Directors’ report
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
1997 1996$000 $000
$000
24
Likely developmentsFurther information as to likely developments in the operations of the Economic Entity and the
expected results of those operations in subsequent financial years has not been included in this report
because the Directors believe, on reasonable grounds, that to include such information would be likely
to result in unreasonable prejudice to the Economic Entity.
OptionsOn 20 February 1997, the Company granted options over 35,000 unissued ordinary shares to one
employee under an Executive Share Option Plan. The options are exercisable in two approximately
equal tranches in the month following lodgement with the Australian Stock Exchange of the
Company’s preliminary financial statements for the financial years ending in June 1999 and 2000. The
number of options which will be exercisable by the executive will depend upon the compound annual
growth rate of the earnings per share achieved by the Economic Entity since 1 July 1995. Three
different levels of growth rates have been set which will determine the number of options which will
be exercisable by the executive in any particular year.
The names of the persons who currently hold options in the above plan are entered in the Register of
Options kept by the Company pursuant to Section 216C of the Corporations Law. The Register may
be inspected free of charge. Pursuant to Australian Securities Commission Class Order 97/1011 dated
9 July 1997, the Directors have taken advantage of relief available from the requirements to disclose
the names of the person, not being a Director, to whom options were issued during the year.
Directors’ interestsThe relevant interest of each Director in the share capital of the Company, as notified by the Directors
to the securities exchange in accordance with Section 235(1)(a) of the Corporations Law at the date of
this report, is as follows:
Prof DG Penington, AC 25,000
Ms CB Livingstone 20,000
Prof BDO Anderson, AO 4,000
Mr JA Calvert-Jones (1) 180,000
Ms EC Holley 8,000
Mr PJ North -
1. Mr JA Calvert-Jones is Chairman of the Bionic Ear Institute which also owns 400,000 ordinary shares.
Cochlear Limited$0.10 ordinary shares
Directors’ report
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
25
Directors’ benefitsSince the end of the previous financial year, no Director of the Company has received or become
entitled to receive any benefit (other than a benefit included in the aggregate amount of remuneration
received or due and receivable by Directors shown in the consolidated accounts), because of a contract
made by the Company, its controlled entities or a related body corporate with the Director, or with a firm
of which the Director is a member, or with an entity with which the Director has a substantial interest.
Indemnification of officersUnder the terms of Article 35 of the Company’s Articles of Association, and to the extent permitted by
law, the Company has indemnified the Directors of the Company, named in this report, the Company
Secretary (Mr NJ Mitchell) and other persons concerned in or taking part in the management of the Company.
The indemnity applies when persons are acting in their capacity as officers of the Company in respect of:
• liability to third parties (other than the Company or related bodies corporate), if the relevant officer
has acted in good faith; and
• the cost and expenses of successfully defending legal proceedings in which relief under the
Corporations Law is granted to the relevant officer.
Insurance of Directors and officersDuring the year, the Company has paid a premium for a Directors’ and Officers’ Liability Insurance
contract. The insurance provides cover for the Directors named in this report, the Company Secretary
(Mr NJ Mitchell), officers and former directors and officers of the Company. The policy also provides
cover for present and former Directors and officers of the Economic Entity. The Directors have not
included details of the nature of the liabilities covered and the amount of the premium paid in respect
of the Directors’ and Officers’ Liability Insurance contract, as such disclosure is prohitibed under the
terms of the contract.
Rounding offThe Company is of a kind referred to in Regulation 3.6.05(6) of the Corporations Regulations and
the amounts in this report and the accompanying financial statements have been rounded off to the
nearest one thousand dollars, in accordance with Section 311 of the Corporations Law, unless
otherwise indicated.
Dated at Sydney this 26th day of August 1997
Signed in accordance with a resolution of the Directors:
Director Director
Directors’ report
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
Consolidated Company
1997 1996 1997 1996Note $000 $000 $000 $000
Operating profit before income tax 14,845 13,676 11,102 17,448
Income tax expense attributable to operating profit 4 4,036 2,813 3,055 524
Operating profit after income tax 10,809 10,863 8,047 16,924
Retained profits at the beginning of the financial year 14,213 42,401 7,597 30,465
Aggregate of amounts transferredfrom reserves 21 34 741 - -
Total available for appropriation 25,056 54,005 15,644 47,389
Dividends provided for or paid 5 6,250 38,878 6,250 38,878
Bonus share issue 20 - 914 - 914
Retained profits at the end of the financial year 18,806 14,213 9,394 7,597
Basic earnings per share (cents) 7 21.6 c 21.7c
The profit and loss accounts are to be read in conjunction with the notes to and forming part of the
financial statements set out on pages 29 to 53.
26
Profit and loss accounts
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
Consolidated Company
1997 1996 1997 1996Note $000 $000 $000 $000
Current assets
Cash 22 12,958 16,079 8,246 9,374Receivables 8 15,482 11,786 4,707 3,657Inventories 9 8,089 5,800 5,810 3,847Other 10 1,662 1,558 349 547
Total current assets 38,191 35,223 19,112 17,425
Non current assets
Receivables 8 326 267 - -Investments 11 - - 3,944 3,944Plant and equipment 12 6,291 6,204 4,920 4,919Other 13 6,479 6,548 3,865 4,095
Total non current assets 13,096 13,019 12,729 12,958
Total assets 51,287 48,242 31,841 30,383
Current liabilities
Creditors and borrowings 14 14,445 15,762 7,488 8,900Provisions 18 13,170 13,649 9,594 8,575
Total current liabilities 27,615 29,411 17,082 17,475
Non current liabilities
Creditors and borrowings 14 - 93 - 29Provisions 18 365 282 365 282
Total non current liabilities 365 375 365 311
Total liabilities 27,980 29,786 17,447 17,786
Net assets 23,307 18,456 14,394 12,597
Shareholders’ equity
Share capital 20 5,000 5,000 5,000 5,000Reserves 21 (499) (757) - -Retained profits 18,806 14,213 9,394 7,597
Total shareholders’ equity 23,307 18,456 14,394 12,597
The balance sheets are to be read in conjunction with the notes to and forming part of the financial
statements set out on pages 29 to 53.
Balance sheets
Cochlear Limited and its controlled entitiesas at 30 June 1997
Cut off
Consolidated Company
1997 1996 1997 1996Note $000 $000 $000 $000
Cash flows from operating activitiesCash receipts in the course of operations 67,757 74,674 45,152 39,366Cash payments in the course of operations (58,309) (52,518) (36,829) (31,966)Dividends received - - - 10,416Grants received 470 601 470 601Interest received 733 367 596 289Interest paid (119) (77) - (22)Income taxes paid (4,299) (3,569) (1,800) (905)
Net cash provided by operating activities 22(ii) 6,233 19,478 7,589 17,779
Cash flows from investing activities
Payment for plant and equipment (2,029) (1,574) (1,469) (1,210)Proceeds from sale of non current assets 2(a) 23 139 18 70Investment in controlled entities 22(iv) - (3,123) - (3,250)
Net cash used in investing activities (2,006) (4,558) (1,451) (4,390)
Cash flows from financing activities
Proceeds from borrowings - 2,788 - -Repayment of borrowings (257) - - -Lease payments (35) (164) (35) (158)Dividends paid (6,250) (4,141) (6,250) (4,141)
Net cash used in financing activities (6,542) (1,517) (6,285) (4,299)
Net (decrease)/increase in cash held (2,315) 13,403 (147) 9,090
Cash at the beginning of the financial year 22(i) 15,098 2,393 8,393 (697)Foreign exchange adjustment to beginning cash 175 (698) - -
Cash at the end of the financial year 22(i) 12,958 15,098 8,246 8,393
The statements of cash flows are to be read in conjunction with the notes to and forming part of the
financial statements set out on pages 29 to 53.
Statements of cash flows
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
Cut off
Notes to the accounts
Note Page
1. Statement of significant accounting policies 29
2. Operating profit 34
3. Auditors’ remuneration 35
4. Taxation 36
5. Dividends 37
6. Geographical segments 38
7. Earnings per share 38
8. Receivables 39
9. Inventories 39
10. Other current assets 39
11. Investments 39
12. Plant and equipment 40
13. Other non current assets 40
14. Creditors and borrowings 40
15. Commitments 41
16. Financial arrangements 42
17. Amount payable/receivable in foreign currencies 43
18. Provisions 43
19. Contingent liabilities 44
20. Share capital 44
21. Reserves 45
22. Notes to the statements of cash flows 46
23. Particulars in relation to controlled entities 48
24. Directors’ remuneration 49
25. Executives’ remuneration 50
26. Employee entitlements 51
27. Related parties 52
29
1. Statement of significant accounting policiesThe significant policies which have been adopted in the preparation of these financial statements are:
a. Basis of preparation
The financial statements are a general purpose financial report which has been prepared in accordance
with Accounting Standards, Urgent Issues Group Consensus Views, and the Corporations Law. They
have been prepared on the basis of historical costs and do not take into account changing money values
or, except where stated, current valuations of non current assets.
These accounting policies have been consistently applied by each entity in the Economic Entity and,
except where there is a note of change in accounting policy, are consistent with those of the previous
year. Unless otherwise stated, these accounts have been prepared in Australian dollars.
b. Principles of consolidation
The consolidated accounts of the Economic Entity include the financial statements of the Company,
being the chief entity, and its controlled entities.
Where an entity either began or ceased to be controlled during the year, the results are included only
from the date control commenced or up to the date control ceased.
The balances, and effects of transactions, between entities in the Economic Entity included in the
consolidated accounts have been eliminated.
c. Revenue recognition
Sales revenue
Sales revenue comprises revenue earned (net of returns, discounts and allowances) from the provision
of products or services to entities outside the Economic Entity. Sales revenue is recognised when the
goods are provided, or when the fee in respect of services provided is receivable.
Interest income
Interest income is recognised as it accrues.
Other revenue
Other revenue, including government grants, is recognised as it accrues.
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
30
d. Foreign currency
Transactions
Foreign currency transactions are translated to Australian dollars at the rates of exchange ruling at the
dates of the transactions. Amounts payable and receivable in foreign currencies at balance date are
translated at the rates of exchange ruling on that date.
Exchange differences relating to amounts payable and receivable in foreign currencies are brought to
account as exchange gains or losses in the profit and loss account in the financial year in which the
exchange rates change.
Where a specific hedge is in place, the foreign currency transactions are translated to Australian dollars
at the specific hedge rate.
Hedges
All non specific hedge transactions are initially recorded at the spot rate at the date of the transaction.
Hedges outstanding at balance date are translated at the rates of exchange ruling on that date and any
exchange differences are brought to account in the profit and loss account. Costs or gains arising at the
time of entering into the hedge are deferred and amortised over the life of the hedge.
Where hedge transactions are designed to hedge the purchase or sale of goods or services, exchange
differences arising up to the date of purchase or sale, together with any costs or gains arising at the time
of entering into the hedge, are deferred and included in the measurement of the purchase or sale. Any
exchange differences on the hedge transaction after that date are included in the profit and loss account.
Translation of controlled foreign entities
The balance sheets of overseas controlled entities that are self sustaining foreign operations are
translated at the rates of exchange ruling at balance date. The profit and loss accounts are translated at
a weighted average rate for the year. Exchange differences arising on translation are taken directly to
the foreign currency translation reserve.
Derivatives
The Economic Entity is exposed to changes in foreign exchange rates from its activities. It is the
Economic Entity’s policy to use derivative financial instruments to hedge these risks. The Economic
Entity does not enter, hold or issue derivative financial instruments for trading purposes.
e. Provision for warranties
Provision is made for the estimated liability on all products still under warranty and includes claims
already received. The amount provided each year for warranty is calculated as a percentage of sales
revenue. Warranty claims, when paid, are charged against this provision. In addition, any specific
warranty concerns are assessed and provided for if considered appropriate.
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
31
f. Classification of assets and liabilities
Assets and liabilities have been classified in the balance sheets of the Economic Entity and the
Company as either current or non current. Current assets are cash and other assets that would in the
ordinary course of business be consumed or converted to cash within 12 months. Current liabilities
are liabilities that would in the ordinary course of business be due and payable within 12 months.
g. Research and development expenditure
Research and development expenditure is expensed as incurred.
h. Non current assets
The carrying amounts of non current assets are reviewed to determine whether they are in excess of
their recoverable amount at balance date. If the carrying amount of a non current asset exceeds the
recoverable amount, the asset is written down to the lower amount. In assessing recoverable amounts
of non current assets, the relevant cash flows have not been discounted to their present value.
i. Plant and equipment
Acquisition
Items of plant and equipment are recorded at cost and depreciated as outlined below.
The cost of plant and equipment constructed by the Economic Entity includes the cost of material and
direct labour and an appropriate proportion of fixed and variable overheads.
Carrying value
All items of plant and equipment are carried at the lower of cost, less accumulated depreciation, and
their recoverable amount.
Depreciation and amortisation
Items of plant and equipment, including leasehold assets are depreciated or amortised over their
estimated useful lives ranging from three to ten years. The straight line method is used.
Assets are depreciated or amortised from the date of acquisition or, in respect of internally constructed
assets, from the time an asset is completed and held ready for use.
Leased plant and equipment
Leases of plant and equipment under which the Economic Entity assumes substantially all the risks and
benefits of ownership are classified as finance leases. Other leases are classified as operating leases.
Finance leases are capitalised. A lease asset and a liability equal to the present value of the minimum
lease payments are recorded at the inception of the lease. Contingent rentals are written off as an
expense of the financial year in which they are incurred. Capitalised lease assets are amortised on a
straight line basis over the term of the relevant lease, or where it is likely the Economic Entity will
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
32
obtain ownership of the asset, the life of the asset. Lease liabilities are reduced by repayments of
principal. The interest components of the lease payments are charged to the profit and loss account.
Payments made under operating leases are charged against profits in equal instalments over the financial
years covered by the lease term, except where an alternative basis is more representative of the pattern
of benefits to be derived from the leased property.
j. Inventories
Inventories are carried at the lower of cost and net realisable value.
Manufacturing activities
Cost is based on the first-in-first-out principle and includes expenditure incurred in acquiring the
inventories and bringing them to their existing condition and location. In the case of manufactured
inventories and work in progress, cost includes an appropriate share of both variable and fixed costs.
Fixed costs are allocated on the basis of normal operating capacity.
Net realisable value
Net realisable value is determined on the basis of each entity’s normal selling pattern. Expenses of
marketing, selling and distribution to customers are estimated and are deducted to establish net
realisable value.
k. Investments
Investments in controlled entities are carried at the lower of cost and recoverable amount. Dividends
and distributions are brought to account in the profit and loss account when they are proposed by the
controlled entities. All intra group transactions are eliminated on consolidation.
l. Employee entitlements
Wages, salaries and annual leave
The provisions for employee entitlements to wages, salaries and annual leave represent the amount
which the Economic Entity has a present obligation to pay resulting from employees’ services provided
up to the balance date. The provisions have been calculated at nominal amounts based on current wage
and salary rates and include related on costs.
Long service leave
The provision for employee entitlements to long service leave represents the present value of the
estimated future cash outflows to be made by the Economic Entity resulting from employees’ services
provided up to the balance date.
Provisions for employee entitlements which are not expected to be settled within 12 months are
discounted using the rates attaching to national government securities at balance date, which most
closely match the terms of maturity of the related liabilities.
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
33
In determining the liability for employee entitlements, consideration has been given to future increases
in wage and salary rates, and having regard to the probability that employees will remain in the entity’s
employ for the period of time necessary to qualify for long service leave. Related on costs have also
been included in the provision.
Share options
The Company has granted options to certain employees under an Executive Share Option Plan.
Further information is set out in the Directors’ Report to the financial statements. Other than the
costs incurred in administering the Plan, which are expensed as incurred, the Plan does not result in
any expense to the Economic Entity.
Superannuation funds
The Economic Entity contributes to various employee superannuation funds. The liabilities of these
superannuation funds are covered by the assets in the funds. The Economic Entity is obliged to
contribute to the superannuation funds as a consequence of legislation or trust deeds; legal
enforceability is dependent on the terms of the legislation and the trust deeds. Contributions are
charged against profit as they are made. Further information is set out in Note 26.
m. Doubtful debts
The charge to the provision for doubtful debts is calculated using a percentage of the sales revenue
derived in the Economic Entity’s sales and marketing regions. Where specific material doubtful debts
are identified, an additional amount is provided.
n. Taxation
The Economic Entity adopts the liability method of tax effect accounting. Income tax expense is
calculated on operating profit adjusted for permanent differences between taxable and accounting
income. The tax effect of timing differences which arise from items being brought to account in
different years for income tax and accounting purposes, is carried forward in the balance sheet as a
future income tax benefit or a provision for deferred income tax.
Future income tax benefits are not brought to account unless realisation of the asset is assured beyond
reasonable doubt. Future income tax benefits relating to tax losses are only brought to account when
their realisation is virtually certain.
o. Accounts payable
Liabilities are recognised for amounts to be paid in the future for goods and services received, whether
or not billed to the Company or Economic Entity. Trade accounts are normally settled within 60 days.
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
34
p. Comparatives
Where necessary, comparative information has been reclassified to achieve consistency in disclosure
with current financial year amounts and other disclosures.
q. Rounding off
Amounts have been rounded to the nearest one thousand dollars unless otherwise indicated.
2. Operating profit
(a) Operating revenue and expenses
Operating profit has been arrived at
after including:
Operating revenue:
Sales revenue 71,913 72,275 46,658 39,206
Other revenueInterest received or due and receivable from:
Related bodies corporate - - - 25Other persons 680 455 544 352
Dividends received from related bodies corporate - - - 10,416
Proceeds from sale of non current assets 23 139 18 70
Government grant received or due and receivable 203 798 203 798
Net foreign exchange gain 6 58 6 107
Other income 98 160 1 1,035
72,923 73,885 47,430 52,009
Operating expenses:
Interest paid or due and payable to other parties 119 55 - -
Finance charges on capitalised leases - 22 - 22
119 77 - 22
Bad trade debts written off to profit and loss account 52 27 4 2
Consolidated Company
1997 1996 1997 1996$000 $000 $000 $000
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
35
Consolidated Company
1997 1996 1997 1996$000 $000 $000 $000
Operating profit – continued
(a) Operating revenue and expenses (continued)
Amortisation of capitalised leased assets 10 111 10 109
Depreciation of property, plant and equipment 1,587 1,439 1,118 992
Total amount charged for depreciation and amortisation of assets 1,597 1,550 1,128 1,101
Amounts set aside to provision for:Warranties 1,800 2,013 1,800 2,013Doubtful trade debts 189 237 185 144Employee entitlements 2,843 3,045 1,320 1,811Other 160 272 160 272
Total amount set aside to provisions 4,992 5,567 3,465 4,240
Operating lease rental expense 1,764 1,540 580 715
Research and development expenditure expensed as incurred 10,633 11,015 10,283 10,650
(b) Disposals of non current assets
Loss/(profit) on disposal of property, plant and equipment 216 3 216 (53)
3. Auditors’ remuneration
Amounts received or due and receivablefor audit services by:
Auditors of the Company 65 63 65 63Other KPMG member firms 86 65 - -
151 128 65 63
Amounts received or due and receivablefor other services by:
Auditors of the Company 106 32 106 24Other KPMG member firms 17 - - -Other auditors - 96 - 60
123 128 106 84
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
36
Consolidated Company
1997 1996 1997 1996Note $000 $000 $000 $000
4. Taxation
(a) Income tax expensePrima facie income tax expensecalculated at 36% on the operating profit 5,344 4,923 3,997 6,281
Increase in income tax expense due to non tax deductible items:
Non allowable permanent differences 486 144 18 25Net higher overseas tax rate 82 155 - -
Decrease in income tax expense due to:Exempt dividends - - - (3,750)Research and development allowance (987) (1,698) (987) (1,698)Other allowable permanent differences (667) (711) - (360)
Income tax expense on operating profit 4,258 2,813 3,028 498
Income tax (over)/under provided in prior years (222) - 27 26
Total income tax expense 4,036 2,813 3,055 524
Total income tax expense is made up of:Current income tax provision 3,994 3,266 2,798 1,431Future income tax benefit 264 (453) 230 (933)(Over)/under provision in prior years (222) - 27 26
4,036 2,813 3,055 524
(b) Provision for current income tax
Balance at the end of the year 18 2,615 2,992 2,429 1,405
(c) Prepaid income tax
Balance at the end of the year 10 371 - - -
(c) Future income tax benefit
Future income tax benefit comprises the estimated future benefit at current income tax rates of:
Provisions and other timing differences not currently deductible 13 6,479 6,548 3,865 4,095
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
37
Consolidated Company
1997 1996 1997 1996Note $000 $000 $000 $000
5. Dividends
Dividends provided for or paid by the Company are:
Ordinary dividends
• An interim ordinary dividend of 5 cents per share, franked to100% (1996: nil%) with Class C (36%) franking credits, was paid on 24 April 1997 2,500 2,500 2,500 2,500
• A final ordinary dividend of 7.5 cents per share, franked to 38% (1996: nil%) with Class C (36%) franking credits, is recommended by the Directors of the Company 18 3,750 3,750 3,750 3,750
6,250 6,250 6,250 6,250
Capital restructuring dividendAs part of the reconstruction prior to listing on 4 December 1995, the Company declared a dividend of $32,628,000 by way of:
• elimination of net recoverable from its parent entity as at 1 July 1995 - 30,987 - 30,987
• payment of a cash dividend - 1,641 - 1,641
- 32,628 - 32,628
6,250 38,878 6,250 38,878
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
6. Geographical segments
7. Earnings per share
Basic earnings per share (cents) 21.6c 21.7c
Weighted average number of ordinary shares used in the calculation of basic earnings per share 50,000,000 50,000,000
There is no difference between basic earnings per share and diluted earnings per share.
38
Consolidated1997 1996
Asia-Pacific Europe Americas Unallocated Eliminations Consolidated1997 1996 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996$000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
Revenue
Revenue outside the Economic Entity 15,021 12,045 26,037 31,476 30,855 28,754 - - - - 71,913 72,275
Inter segment revenue 38,238 33,370 - - - - - - (38,238) (33,370) - -
Profit
Operating profit/(loss) before interest and tax 3,927 3,374 4,566 9,149 6,991 4,535 (1,200) (3,760) - - 14,284 13,298
Net interest revenue 561 378
Operating profit before tax 14,845 13,676
Income tax expense attributable to operating profit 4,036 2,813
Operating profit after tax 10,809 10,863
Total assets 6,400 5,615 11,749 12,637 14,168 10,569 12,191 12,922 6,779 6,499 51,287 48,242
Industry segment
The economic entity operates in the cochlear implant industry.
39
Consolidated Company
1997 1996 1997 1996Note $000 $000 $000 $000
8. Receivables
Current
Trade debtors 16,286 12,177 1,812 1,328Provision for doubtful trade debts 929 783 829 644
15,357 11,394 983 684
Amount receivable from controlled entities 27 - - 3,599 2,581
Other amounts receivable 125 392 125 392
15,482 11,786 4,707 3,657
Non currentOther amounts receivable 326 267 - -
9. Inventories
Current
Raw materials and stores, at net realisable value 2,356 1,009 2,356 1,009Work in progress, at net realisable value 2,725 2,601 2,725 2,601Finished goods, at net realisable value 3,008 2,190 729 237
8,089 5,800 5,810 3,847
10. Other current assets
Prepayments and other debts 1,291 1,558 349 547Prepaid income tax 371 - - -
1,662 1,558 349 547
11. Investments
Non current
Shares in controlled entities,unquoted at cost 23 - - 3,944 3,944
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
40
Consolidated Company
1997 1996 1997 1996Note $000 $000 $000 $000
12. Plant and equipment
Plant and equipmentAt cost 12,941 11,101 9,321 8,002Accumulated depreciation 6,650 5,165 4,401 3,351
6,291 5,936 4,920 4,651
Leased plant and equipment At capitalised cost - 811 - 662Accumulated amortisation - 543 - 394
- 268 - 268
Total plant and equipment, at net book value 6,291 6,204 4,920 4,919
13. Other non current assets
Future income tax benefit 6,479 6,548 3,865 4,095
14. Creditors and borrowings
Current
Trade creditors and other creditors 12,129 11,923 7,161 7,459Amounts owing to controlled entities 27 - - 327 327Bank loans, secured 16 2,316 2,725 - -Bank overdraft, unsecured 16, 22(i) - 981 - 981Lease liabilities 15,16 - 133 - 133
14,445 15,762 7,488 8,900
Non current
Other creditors - 21 - 21Bank loans, unsecured 16 - 64 - -Lease liabilities 15,16 - 8 - 8
- 93 - 29
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
41
Consolidated Company
1997 1996 1997 1996$000 $000 $000 $000
15. Commitments
Operating lease commitments
Future non cancellable operating lease rentals not provided for in the financial statements are payable as follows:
not later than one year 1,773 1,363 590 646later than one year but not later than two years 1,537 1,066 589 646later than two years but not later than five years 1,801 870 100 108
5,111 3,299 1,279 1,400
Finance lease commitments
Finance lease rentals are payable as follows:
not later than one year - 137 - 137later than one year but not laterthan two years - 8 - 8
- 145 - 145
Future lease finance charges - (4) - (4)
- 141 - 141
Lease liabilities provided for in the financial statements:
current - 133 - 133non current - 8 - 8
Total lease liability - 141 - 141
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
42
Consolidated Company
1997 1996 1997 1996$000 $000 $000 $000
16. Financing arrangements
The Economic Entity has access to the following lines of credit:
Bank overdraft 3,158 3,266 2,000 2,000Bank loans 2,316 4,322 - -Bill acceptance facility 3,000 3,000 3,000 3,000Leasing facility - 1,000 - 1,000Standby letters of credit 732 500 500 500
9,206 12,088 5,500 6,500
Facilities utilised at balance date:Bank overdraft - 981 - 981Bank loans - current 2,316 2,725 - -
- non current - 64 - -Bill acceptance facility - - - -Leasing facility - 141 - 141Standby letters of credit 232 - - -
2,548 3,911 - 1,122
Facilities not utilised at balance date:Bank overdraft 3,158 2,285 2,000 1,019Bank loans - 1,533 - -Bill acceptance facility 3,000 3,000 3,000 3,000Lease facility - 859 - 859Standby letters of credit 500 500 500 500
6,658 8,177 5,500 5,378
Bank overdrafts
The bank overdrafts are payable on demand and are subject to annual review.
Bank loans
The bank loans are secured by a letter of credit with a charge over an offsetting term deposit.
Bill acceptance facility
The bill aceptance facility is reviewed on an annual basis with the renewal due on 30 November 1997.
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
43
Consolidated Company
1997 1996 1997 1996$000 $000 $000 $000
17. Amounts payable/receivable in foreign currencies
The Australian dollar equivalent of unhedged amounts payable/receivable in foreign currencies, calculated at year end exchange rates, is as follows:
CurrentAmounts payableJapanese Yen 31 - - -German Deutschmark 36 - - -
Amounts receivableHong Kong Dollars - 350 - 350
18. Provisions
Current
Income tax 2,615 2,992 2,429 1,405Dividends 3,750 3,750 3,750 3,750Employee entitlements * 3,516 3,351 1,710 1,595Warranties 1,345 1,625 1,345 1,625Other 1,944 1,931 360 200
13,170 13,649 9,594 8,575
Non current
Employee entitlements * 365 282 365 282
* Employee entitlements include entitlements measured at present values of future amounts expected
to be paid based on a 4% per annum projected weighted averaged increase in wage and salary rates
over an average period of 8 years. Present values are calculated using a weighted average rate of 6%
per annum based on government guaranteed securities with similar maturity terms.
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
Consolidated Company
1997 1996 1997 1996$000 $000 $000 $000
44
19. Contingent liabilitiesA third party has made allegations, originally raised in 1992, that the Economic Entity has infringed
that party’s patent rights. The Company believes, based on legal advice provided to it, that it has valid
defences to the allegations raised, including the defence of non infringement.
There are no contingent liabilities for termination benefits under service agreements with Directors or
persons who take part in the management of the Company.
20. Share capital
Authorised capital
100,000,000 (1996: 100,000,000) ordinary shares of $0.10 each 10,000 10,000 10,000 10,000
Issued and paid-up capital
50,000,000 (1996: 50,000,000) ordinary shares of $0.10 each, fully paid 5,000 5,000 5,000 5,000
Restructuring prior to public listing
On 1 July 1995, the issued capital of 1,497,600 ordinary shares of $1.00 each was divided into
14,976,000 ordinary shares of $0.10 each. The authorised capital of 7,250,000 ordinary shares of $1.00
each and 2,750,000 non cumulative preference shares of $1.00 each was changed to 100,000,000
ordinary shares of $0.10 each.
On 1 July 1995, 25,880,000 ordinary shares of $0.10 each were issued to Nucleus Limited from the
share premium reserve.
On 1 July 1995, 9,144,000 ordinary shares of $0.10 each were issued to Nucleus Limited from
retained profits.
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
Consolidated Company
1997 1996 1997 1996$000 $000 $000 $000
45
21. Reserves
General 70 73 - -Foreign currency translation (569) (830) - -
(499) (757) - -
Movements during the year
Share premium
Balance at beginning of year - 2,588 - 2,588Conversion to ordinary shares - (2,588) - (2,588)
Balance at end of year - - - -
General
Balance at beginning of year 73 25 -Translation adjustment (3) - - -Transfers from retained profits - 48 - -
Balance at end of year 70 73 - -
Foreign currency translation
Balance at beginning of year (830) 2,150 - -Translation adjustment on controlled foreign entity’s financial statements 295 (2,191) - -Crystallisation of reserve following dividend paid by controlled entities (34) (789) - -
Balance at end of year (569) (830) - -
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
Consolidated Company
1997 1996 1997 1996$000 $000 $000 $000
46
22. Notes to the statements of cash flows
i. Reconciliation of cash
For the purposes of the statements of cash flows, cash includes cash on hand and at bank and deposits at
call, net of outstanding bank overdraft. Cash as at the end of the financial year as shown in the
statements of cash flows is reconciled to the related items in the balance sheets as follows:
Cash 12,958 16,079 8,246 9,374Bank overdraft - (981) - (981)
12,958 15,098 8,246 8,393
ii. Reconciliation of operating profit after tax to net cash provided by operating activities
Operating profit after income tax 10,809 10,863 8,047 16,924
Add/(less) items classified as investing/financial activities:
Loss/(profit) on disposal of non current assets 216 3 216 (53)
Add non cash items:
Amounts set aside to provisions 4,992 5,567 3,465 4,240Depreciation and amortisation 1,597 1,550 1,128 1,101Bad trade debts written-off 52 27 4 2
Net cash provided by operating activities before changes in assets and liabilites 17,666 18,010 12,860 22,214
Change in assets and liabilities:
(Increase)/decrease in inventories (2,289) 2,308 (1,963) 272
(Increase)/ decrease in prepayments and other debtors (104) (731) 198 (523)
(Increase)/decrease in trade debtors and other amounts receivable (3,996) 2,366 (1,235) (603)
(Decrease) in loans from related entities - - - (4,005)
Increase/(decrease) in trade and other creditors 185 1,015 (320) (633)
(Decrease)/increase in provisions (4,822) (609) (3,205) 1,446
(Decrease)/increase in income taxes payable (377) (302) 1,024 526
Increase/(decrease) in deferred taxes payable 69 (1,086) 230 (915)
Exchange rate adjustment (99) (1,493) - -
Net cash provided by operating activities 6,233 19,478 7,589 17,779
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
47
22. Notes to the statements of cash flows – continued
iii. Financing facilities
Refer Note 16
iv. Acquisition of controlled entity
Effective 1 July 1995, the Economic Entity acquired 100% of the ordinary shares of Cochlear
Corporation. Details of the acquisition are as follows:
Consideration 3,250Cash acquired (127)
Outflow of cash (3,123)
Fair value of net assets of entity acquired
Cash 127Receivables 4,038Inventories 1,251Other debtors 163Plant and equipment 519Future income tax benefit 137Trade creditors (845)Income tax provision (6)Lease liabilities (4)Other creditors and accruals (2,130)
Consideration 3,250
1996$000
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
23. Particulars in relation to controlled entities
The Company
Cochlear Limited 8,047 16,924 Australia
Controlled Entities
Cochlear Corporation b Ord 100 100 3,250 3,250 3,284 3,097 United States of America
Cochlear AG b Ord 100 100 124 124 (868) 702 Switzerland
Cochlear (UK) Ltd b Ord 100 100 25 25 181 182 United Kingdom
Cochlear GmbH b Ord 100 100 45 45 64 83 Germany
Cochlear Australia Pty Ltd a Ord 100 100 - - - - Australia
Cochlear (HK) Limited b Ord 100 100 27 27 - - Hong Kong
Nihon Cochlear Co Ltd b Ord 100 100 543 543 380 765 Japan
Elimination of inter company transactions (70) (70) (279) (10,890)
3,944 3,944 10,809 10,863
Notes
a. Cochlear Australia Pty Ltd has an investment book value of $2 (1996: $2).b. These entities are audited by other member firms of KPMG.
48
Name Note Class Interest held Book value of Contribution to Country ofof each parent consolidated profit incorporation
share entity’s investment
1997 1996 1997 1996 1997 1996% % $000 $000 $000 $000
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
49
Consolidated Company
1997 1996 1997 1996No. No.
24. Directors’ remuneration
Directors’ income
The number of directors of the Company whose income from the Company or related bodies corporate falls within the following bands:
$ 10,000 - $ 19,999 2 3$ 20,000 - $ 29,999 2 1$ 30,000 - $ 39,999 1 -$ 60,000 - $ 69,999 - 1$ 70,000 - $ 79,999 1 -$380,000 - $389,999 - 1$400,000 - $409,999 1 -
7 6
Total income paid or payable or otherwise made available to all Directors of the Company from the Company or any related party 593 519
Total income paid or payable or otherwise made available to all directors of each entity in the Economic Entity from the Company, or any related party 593 519
Directors’ income does not include insurance premiums paid by the Company or related parties in
respect of Directors’ and Officers’ Liabilities Insurance contract, as the insurance policies do not specify
premiums paid in respect of individual directors.
$000 $000 $000 $000
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
Executive officers of Executive officersentities in the of the Company
Economic Entity
1997 1996 1997 1996No. No. No. No.
50
25. Executives’ remuneration
Executives’ remuneration
The income of executives who work wholly or mainly outside Australia is not included in this disclosure. The number of executive officers of the Company whose income from the Company or related bodies corporate falls within the following bands:
$100,000 - $109,999 2 - 2 -$110,000 - $119,999 3 2 3 2$120,000 - $129,999 1 1 1 1$130,000 - $139,999 - 4 - 4$140,000 - $149,999 2 - 2 -$150,000 - $159,999 3 2 3 2$170,000 - $179,999 1 - 1 -$180,000 - $189,999 - 1 - 1$210,000 - $219,999 1 1 1 1$230,000 - $239,999 1 1 1 1$280,000 - $289,999 - 1 - 1$380,000 - $389,999 - 1 - 1$400,000 - $409,999 1 - 1 -
15 14 15 14
Total remuneration received or due and receivable by Australian based executive officers whose income is $100,000 or more:
• from the Company or related parties 2,470 2,516
• from entities in the Economic Entity or related parties 2,470 2,516
Executives’ remuneration does not include insurance premiums paid by the Company and related
parties in respect of Directors’ and Officers’ Liabilities Insurance contract, as the insurance policies do
not specify premiums paid in respect of individual executives.
$000 $000 $000 $000
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
51
26. Employee entitlements
Superannuation plans
In the Economic Entity, there are a number of superannuation plan including one defined benefit fund
(the “Plan”) to which the Company contributes. Employer contributions are based on the advice of
the Plan’s actuary. Contributions in excess of those specified in Superannuation Guarantee legislation
are not legally enforceable. Employee contributions are based on various percentages of their gross
salaries. After serving a qualifying period, eligible employees are entitled to benefits on retirement,
disability or death.
The Plan provides defined benefits based on years of service and final average salary. In accordance
with the trust deed, the Company is under no legal obligation to make up any shortfall in the Plan’s
assets to meet payments due to eligible employees.
An actuarial assessment of the Plan as at 1 December 1995 was carried out by Mr D O’Keefe, FIAA in
February 1996. The actuary concluded that the assets of the Plan were sufficient to meet all benefits
payable in the event of the Plan’s termination, or the voluntary or compulsory termination of
employment of each employee of the Company who is covered by the Plan.
The amounts included in the table below are the total net assets, accrued benefits and vested benefits of
the Plan. Accrued benefits are benefits which the Plan is presently obliged to pay at some future date,
as a result of membership of the Plan. Vested benefits are benefits which are not conditional upon the
continued membership of the Plan or any factor, other than resignation from the Plan.
The Directors, based on the advice of the trustees of the Plan, are not aware of any changes in
circumstances since the actuarial assessment of the Plan as at 1 December 1995, which have a material
impact on the overall financial position of the Plan.
(i) Plan assets at net market value and vested benefits and accrued benefits have been calculated at 30
June 1996, being the date of the most recent financial statements of the Plan.
(ii) Plan assets at net market value, vested benefits and accrued benefits were obtained from the
actuarial assessment of the Plan as at 1 December 1995, being the date of the establishment of the Plan.
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
Plan assets at Total accrued Excess Total vestednet market value benefits benefits
(i) (ii) (i) (ii) (i) (ii)
1997 1996 1997 1996 1997 1996 1997 1996$000 $000 $000 $000 $000 $000 $000 $000
Cochlear Defined Benefit 3,947 2,158 3,811 2,158 136 - 3,647 2,098Superannuation Plan
52
Consolidated Company
1997 1996 1997 1996$000 $000 $000 $000
Details of contributions to the Plan during
the year ended 30 June 1997 are as follows:
Employer contributions to the Plan 363 659 363 659
27. Related parties
Directors
The names of each person holding the position of Director of Cochlear Limited during the financial
year are Prof DG Penington, AC, Ms CB Livingstone, Prof BDO Anderson, AO, Mr JA Calvert-
Jones, Ms EC Holley and Mr PJ North. Mr JH Veeneklaas resigned as a Director during the year.
Details of Directors’ remuneration are set out in Note 24.
Apart from the details disclosed in this Note, no Director has entered into a material contract with the
Company or the Economic Entity since the end of the previous financial year and there were no
material contracts involving Directors’ interests existing at year end.
Directors’ holdings of shares and share options
The relevant interests of Directors of the reporting entity in shares and share options of Cochlear
Limited are set out below:
Cochlear Limited
10c ordinary shares 237,000 253,000Options over 10c ordinary shares 240,000 240,000
Other transactions with the Company or its controlled entities
Dr ML Lehnhardt is a Director of Cochlear (UK) Ltd. Prof Dr Dr E Lehnhardt, a related party,
provided advisory and consulting services to the Company.
Other transactions
The Company engages in purchases and sales with its controlled entities. These transactions are in the
ordinary course of business and normal terms and conditions apply.
Consolidated number held
1997 1996
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
53
Balances with entities within the wholly owned group
The aggregate dividends received and amounts receivable from, and payable to, wholly owned
controlled entities by the Company:
Dividends
Dividends received by the Company from wholly owned controlled entities - 10,416
Current receivables
Amounts receivable from controlled entities 3,599 2,581
Current creditors and borrowings
Amounts owing to controlled entities 327 327
1997 1996$000 $000
Notes to and forming part of the financial statements
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
54
Statement by Directors1. In the opinion of the Directors of Cochlear Limited:
(a) the financial statements as set out on pages 26 to 53 are drawn up so as to give a true and fair view
of the results and cash flows for the financial year ended 30 June 1997, and the state of affairs as at
30 June 1997, of the Company and the Economic Entity;
(b) the consolidated accounts have been made out in accordance with Divisions 4A and 4B of Part 3.6
of the Corporations Law; and
(c) at the date of this statement, there are reasonable grounds to believe that the Company will be able
to pay its debts as and when they fall due.
2. The financial statements have been made out in accordance with applicable Accounting Standards
and Urgent Issues Group Consensus Views.
Dated at Sydney this 26th day of August 1997
Signed in accordance with a resolution of the Directors:
Director Director
Statement by directors
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
55
Independent auditors’ report to members
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
Independent Auditors’ Report to the Members of Cochlear Limited
Scope
We have audited the financial statements of Cochlear Limited for the financial year ended 30 June
1997, consisting of the profit and loss accounts, balance sheets, statements of cash flows, accompanying
notes, and statement by Directors set out on pages 26 to 53. The financial statements comprise the
accounts of the Company and the consolidated accounts of the Economic Entity, being the Company
and its controlled entities. The Company’s Directors are responsible for the financial statements. We
have conducted an independent audit of these financial statements in order to express an opinion on
them to the members of the Company.
Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable
assurance whether the financial statements are free of material misstatement. Our procedures included
examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial
statements, and the evaluation of accounting policies and significant accounting estimates. These
procedures have been undertaken to form an opinion whether, in all material respects, the financial
statements are presented fairly in accordance with Accounting Standards and other mandatory
professional reporting requirements (Urgent Issues Group Consensus Views) and statutory
requirements so as to present a view which is consistent with our understanding of the Company’s and
the Economic Entity’s financial position, the results of their operations and their cash flows.
The audit opinion expressed in this report has been formed on the above basis.
Audit opinion
In our opinion, the financial statements of Cochlear Limited are properly drawn up:
(a) so as to give a true and fair view of:
(i) the state of affairs of the Company and the Economic Entity at 30 June 1997, and the results and
cash flows of the Company and the Economic Entity for the financial year ended on that date; and
(ii) the other matters required by Divisions 4, 4A and 4B of Part 3.6 of the Corporations Law to
be dealt with in the financial statements;
(b) in accordance with the provisions of the Corporations Law; and(c) in accordance with applicable Accounting Standards and other mandatory professional
reporting requirements.
KPMG Roger M Amos
Chartered Accountants Partner
Sydney 26 August 1997
56
Stock Exchange information
Cochlear Limited and its controlled entitiesfor the year ended 30 June 1997
Australian Stock Exchange additional informationAdditional information required by the Australian Stock Exchange Listing Rules and not disclosed
elsewhere in this Annual Report. The information presented is as at 29 August 1997.
Shareholdings
Substantial Shareholders
Bankers Trust Australia Limited 9,199,668 18.4National Mutual Holdings Limited 5,074,735 10.1Deutsche Australia Ltd 4,607,489 9.2Australian Mutual Provident Society 2,858,528 5.7
Total 21,740,420 43.4
Distribution of Shareholders
1-1,000 4311,001-5,000 2,9975,001-10,000 24210,001-over 160
Total 3,830
Non marketable parcels – two shareholders held less than a marketable parcel.
Twenty largest shareholders
Permanent Trustee Company Limited 6,043,607Westpac Custodian Nominees Limited 4,703,222SAS Trustee Corporation 3,737,617The National Mutual Life Association of Australasia Limited 3,030,438Pendal Nominees Pty Limited 2,720,480National Nominees Limited 2,666,962Chase Manhattan Nominees Limited 2,478,742Perpetual Trustees Victoria Limited 1,700,397Australian Mutual Provident Society 1,151,235ANZ Nominees Limited 821,300Westpac Life Insurance Services Limited 749,717Suncorp Life and Superannuation Limited 487,500Caledonia Investments Limited 472,000AMP Custodian Services Pty Limited 444,960LGSS Pty Limited 440,494Suncorp General Insurance Limited 423,854BT Custodians Limited 415,482The Bionic Ear Institute 400,000FSS Trustee Corporation 312,224The Australian National University 300,000
The twenty largest shareholders held 67% of the ordinary shares of the Company.
Number of ordinary %shares held
Category Number of shareholders
Name Number of ordinaryshares held
COCHLEAR LIMITED
ACN 002 618 073
Stock Exchange Listing
Australian Stock Exchange Limited
ASX code COH
Share Register
Corporate Registry
Services Pty Limited
Level 4
55 Hunter Street
Sydney NSW 2000
AUSTRALIA
Telephone: 61 2 9232 4211
Auditors
KPMG
Chartered Accountants
Bankers
Australia
Westpac Banking Corporation
United States of America
Norwest Bank
Switzerland
Union Bank of Switzerland
Japan
The Bank of Tokyo
Mitsubishi Limited
Solicitors
Clayton Utz
ACE
(Advanced Combination Encoders)
The new generation of speech coding strategies
using features of both SPEAK and CIS.
BTE
A Behind-The-Ear speech processor. BTE is
also used to refer to hearing aids which are
placed behind the ear.
channel
Pairs of electrodes available to convey
information to the cochlea (inner ear).
CIS
(Continuous Interleaved Sampling)
Speech coding strategy.
ENT
Ear, nose and throat.
ESPrit
The Ear level Speech Processor for Nucleus 24.
FDA
(Food and Drug Administration)
The principal regulatory body for medical
devices in the United States.
NRT
(Neural Response Telemetry)
The measurement (via telemetry) of the neural
response to electrical stimulation.
PHI
(Profoundly Hearing Impaired)
Hearing loss of more than 90 decibels (dB),
ie. no useful hearing.
SHI
(Severely Hearing Impaired)
Hearing loss of 70dB to 90dB,
ie. some residual hearing.
SPEAK
The speech coding strategy used in the
Nucleus 22 and Nucleus 24.
speech coding strategy
The algorithm used in the speech processor to
convert the sound information from the
microphone to stimulation information which
is sent to the implant.
Spectra
The body worn speech processor for Nucleus 22.
SPrint
The body worn speech processor for Nucleus 24.
Glossary Company information
Des
ign:
Blu
e Sk
y D
esig
n Pt
y Lt
d
Edi
tori
al A
dvis
ors:
Gav
in A
nder
son
& K
ortla
ng
The Annual General Meeting of shareholders of
Cochlear Limited will be held on Level B1, ASX
Auditorium, at the Australian Stock Exchange,
20 Bond Street, Sydney on Tuesday 21 October
1997 at 2.00pm. A formal notice of meeting is
enclosed with this Annual Report setting out the
business of the meeting.
Financial Calendar
21 October 1997 Annual General Meeting
21 October 1997 Final dividend payable
10 February 1998 Interim profit announcement
14 April 1998 Interim dividend payable
19 August 1998 Final profit announcement
Nucleus® is a registered trademark of Cochlear Limited.SPrint, ESPrit, ACE, Smart Speed, custom sound, NRT and BEAMformer are trademarks of Cochlear Limited.Audallion® is a registered trademark of AudioLogic, Inc. in the United States.
Annual Report 1997
Co
chlear A
nn
ual R
epo
rt 1997
Cochlear Corporation61 Inverness Drive EastSuite 200Englewood Colorado 80112USATelephone: 1 303 790 9010Facsimile: 1 303 792 9025
Cochlear AGMargarethenstrasse 47CH-4053 BaselSWITZERLAND
Telephone: 41 61 205 0404Facsimile: 41 61 205 0405
Cochlear(UK) LimitedMill House8 Mill StreetLondon SE1 2BAUNITED KINGDOMTelephone: 44 171 231 6323Facsimile: 44 171 231 3371
Cochlear GmbHKarl-Wiechert-Allee 76 AD-30625 HannoverGERMANY
Telephone: 49 511 5 42 77 0Facsimile: 49 511 5 42 77 70
Nihon Cochlear Co LimitedKizu Building, 8th Floor3-12 Hongo, 3 chomeBunkyo-ku Tokyo 113JAPANTelephone: 81 3 3817 0241Facsimile: 81 3 3817 0245
Cochlear(HK) Limited12B Shun Ho Tower24-30 Ice House StreetCentral HONG KONGTelephone: 852 2530 5773Facsimile: 852 2530 5183
Cochlear Limited14 Mars Road(PO Box 629)Lane Cove NSW 2066AUSTRALIATelephone: 61 2 9428 6555Facsimile: 61 2 9428 6352