Annual Report 1998

William Demant Holding A/S Mission 3

Board of Directors and Management 4

Principal and Key Figures 5

Business Units 6

Milestones 7

Board of Directors’ Report 8

Global Infrastructure 16

Striking the Balance between Audiology and Technology 18

Oticon 20

Bernafon 22

Diagnostic Instruments 24

Personal Communication 26

Sharing Resources 28

Shareholder Information 30

Auditors’ Report 31

Accounting Policies 32

Financial Statements - Parent Company and Group 35

Cash Flow Analysis 38

Notes 39

Company Structure 46

Companies and Addresses 47

The annual report shows staff at work in the Group’s factories and sales companies in Denmark, Germany, Italy, Switzerland and the US. Mission

The William Demant Holding Group of international companies develops, manufactures and sells innovative, highly advanced technological solutions. These solutions are characterised by their micro-electronic and micro-mechanical components, wireless technology, plus their software and acoustics. They are sold to professional customers in a global market.

The core business of the William Demant Holding Group is hearing aids. By combining its expertise in the fields of technology, software, and audiology, the Group is able to develop solutions which help people with hearing loss function optimally in their daily lives. Audiological expertise is crucial for developing high quality hearing aids, and this is why the Group invests considerable resources in audiological research and development.

The Group has two different companies in the hearing aid sector: Oticon and Bernafon. Over the past few years, in an effort to utilise its competence outside the core area of business, the Group has acquired a number of companies in related areas. Thus, in addition to the two hearing aid companies, the Group now also owns two companies in the diagnostic equipment sector: Maico Audiometer and RhinoMetrics; plus two companies in the personal communication sector: Phonic Ear and Logia.

The companies within the William Demant Holding Group work very closely together in the early links of the value chain (i.e. purchasing and production). In that part of the value chain which is focused on markets and customers (such as product development, marketing and sales), each business has its own organisation and identity.

In each of its business areas, the Group will strive through organic growth to attain a leading position and become the customers’ preferred supplier of advanced, quality solutions. The Group will participate in the general structural rationalisation of the industry by acquiring companies within the existing business areas. Outside the core area of business, the Group intends to acquire companies in related areas whose strengths can be utilised to enhance the existing business. This will be achieved by utilising our technological and audiological expertise; through management proficiency, and using financial resources. The Group will endeavour to increase the inherent value of the company through continued growth in turnover and profitability.

The companies within the Group subscribe to high standards of ethics, quality and fair business conduct. This involves accepting responsibility for the environment and society as a whole. A stimulating and varied working environment is cultivated through a flexible, knowledge-based organisational form. 4 William Demant Holding A/S Board ofDirectorsandManagement Directors ofFerrosanA/SandBRFHoldingA/S. and A'GramkowA/S.MemberoftheBoard Hannemann &HøjlundA/S,HedorfHoldingA/S Reson SystemA/S,H+HHoldingRambøll, Chairman oftheBoardDirectorsAkzoNobelA/S, Jørgen Mølvang,DeputyChairman Eleven DanesA/S. Forsikring, SkadesforsikringsselskabA/Sand Member oftheBoardDirectorsTryg-Baltica Sven FolmerThomsen,Chairman Board ofDirectors www.demant.com e-mail: [email protected] Reg. no.66.471 +4539277900 Telefax: Phone: +4539177100 58, Strandvejen,2900Hellerup,Denmark William DemantHoldingA/S The Company Elected bytheemployees. Hanne Stephensen Elected bytheemployees. Susanne Smith Board ofDirectorsDONGA/S. Board ofDirectorsInWear A/S.Memberofthe of DirectorsCarlBroas.DeputyChairmanthe President &CEOofFalckA/S.ChairmantheBoard Lars NørbyJohansen Berendsen A/S. MemberoftheBoard DirectorsofSophus A/S. Chairman oftheBoardDirectorsJyllands-Posten President &CEOofKøbenhavnsLufthavneA/S. Niels Boserup 7 Tuborg Havnevej,2900Hellerup,Denmark. Tuesday 11May1999attheExperimentarium, The AnnualGeneralMeetingwillbeheldon Annual GeneralMeeting aktieselskab andKPMGC.Jespersen. Deloitte &Touche, StatsautoriseretRevisions- Auditors Association A/S. and HearingInstrumentManufacturersSoftware Cheminova HoldingA/S,MicroMaticA/S Member oftheBoardDirectorsCarlBroas, Instrument ManufacturersPatentPartnershipA/S. Chairman oftheBoardDirectorsHearing Niels Jacobsen,President&CEO Management Principal and key figures

Profit and loss account, dkk million 1994 1995 1996 1997 1998 Net revenue 750.3 940.2 1,087.3 1,413.4 1,613.1 Gross profit 411.2 511.8 590.7 764.9 892.9 Profit on primary operations 133.9 116.8 139.3 195.6 248.3 Financial items, net 1.4 18.5 19.8 14.4 8.5 Ordinary profit before tax 134.5 136.5 160.3 211.4 259.3 Ordinary profit after tax 88.5 99.4 119.8 160.9 199.8 Extraordinary items, net - - - -13.5 - Net profit for the year 88.3 99.2 120.3 148.3 200.8 Balance sheet, dkk million

Interest bearing net assets 121.4 236.8 282.8 125.9 33.4 Total assets at year-end 555.3 835.6 889.7 1,002.4 1,019.5 Shareholders’ Equity at year-end 273.4 448.9 539.8 524.3 504.1 Other principal figures, dkk million

Research and development costs 49.4 78.2 99.0 118.0 146.4 Write-downs and depreciations 34.7 43.4 52.3 46.6 53.7 Investment in tangible fixed assets 31.8 54.3 39.7 76.1 71.3 Cash Flow From Operations (CFFO) 155.7 43.5 133.5 142.4 198.7 Cash Earnings (CE) 123.1 142.7 172.1 207.4 253.5 Number of employees (average) 1.192 1.485 1.443 1.760 1.925 Key figures

Gross profit ratio 54.8% 54.4% 54.3% 54.1% 55.4% Profit margin 17.9% 12.4% 12.8% 13.8% 15.4% Return on equity 37.9% 25.9% 24.3% 30.6% 35.7% Equity ratio 49.2% 53.7% 60.7% 52.3% 49.4% Earnings Per Share (EPS), DKK* 6.5 6.7 7.9 10.5 13.0 Cash Flow Per Share (CFPS), DKK* 11.5 3.0 8.7 9.3 12.9 Cash Earnings Per Share (CEPS), DKK* 9.1 9.7 11.3 13.5 16.4 Dividend Per Share, DKK* 0.75 1.00 1.50 1.80 2.35 Book value Per Share, DKK* 20.0 29.4 35.3 33.8 33.5 Price earnings (P/E) -22353030 Quoted price per share, DKK* - 150 273 316 394 Total market cap., DKK million - 2.287 4.162 4.896 5.931 5 Fully diluted No. of shares, millions 13.56 14.70 15.27 15.36 15.42

Notes: The Company was listed on the Copenhagen Stock Exchange in May 1995, the reason why stock-exchange related key figures are not mentioned for 1994. The key figures are calculated according to the “Anbefalinger & Nøgletal 1997” (Guidelines & Key Figures, 1997) from the Danish Society of Financial Analysts. Cash Earnings is calculated as ordinary profit or loss posttax added write-downs and deprecia- tions for the year.

*) per share of DKK 5 6 William Demant Holding A/S • PhonicEarandLogia-personalcommunicationcompaniesofferassistivelisten- • MaicoAudiometerandRhinoMetrics-diagnosticscompaniesdevelopequipment • Bernafon-ahearingaidcompanywithfoundationinadvanceddigitaltechno- • Oticon-ahearingaidcompanywhichfocusesonpsychoacousticresearchand Today theWilliam DemantHoldingGroupcomprisesfourbusinesses: Business units theatres andclassrooms. people’s abilitytocommunicatebothathome,work,inplacesofworship, ing systemsbasedonwirelesscommunicationtechnology. Thesesolutionsimprove diagnosed byaudiologistsandear-nose-and-throat specialists. for thefast,reliable,andaccuratemeasurementofhearingotherconditions market’s mostattractivecombinationsofperformance,sizeandprice. logy -offershearingaidswhich,beingeasyandquicktofit,representsoneofthe an activelifeinsociety. est possiblespeechintelligibility, andthusthebestpossibleconditions forliving advanced digitalsignalprocessing-createssolutionswhichgivetheuserhigh- Milestones

During an official visit to Australia, Foreign Minister Niels Helveg Petersen and Mrs. Kirsten Lee visit Oticon's Australian May: Niels Jacobsen becomes President and CEO of subsidiary on 23 November. Here pho- William Demant Holding A/S. tographed with Niels-Jørgen Toxværd, General Manager of Oticon Australia (left). June: At the 12th yearly 'Corporate Conscience Awards' in New York, Oticon receives an interna- tional award. The prize, known as 'The Employee Empowerment Pioneer Award', is presented by the public service research organisation known as The Council on Economic Priorities, in recognition of Oticon's personnel policies.

On 13 October, Hiroshi Koyama, General Manager July: Oticon's Australian sales subsidiary acquires of Oticon's Japanese subsidiary, is awarded the ten retail shops belonging to the National Hearing Diploma of the National Association for Danish Aids Pty. Ltd. retail chain. Enterprise, and Prince Henrik's Medal of Honour. Among those present are Svend Thomsen, July: William Demant Holding increases its holding Executive Vice President (left) and Denmark's Ambassador to Japan, Peter Brückner (right). in the Polish sales subsidiary, Oticon Polska, from 70% to 79%.

November: Refurbishment of the William Demant Holding and Oticon headquarters in Denmark is completed, and 1,200 sq. m of new floor space is put into use.

At the inauguration of new offices for Oticon's December: William Demant Holding acquires a fur- Germany subsidiary on 28 May Dörthe Heller (left) ther 26% of the shares in RhinoMetrics, bringing the from Wendtorf, is elected winner of a children's art total ownership up to 100%. competition. The DM 11,000 prize is immediately donated to the association 'Bundesgemeinschaft der Eltern und Freunde schwerhöriger Kinder e.V.' December: RhinoMetrics, in co-operation with a sleep clinic at a Danish hospital, begins clinical test- ing of a newly developed rhinometer.

Turn of Year: Oticon opens a sales subsidiary in China.

Turn of Year: Logia secures a two-year contract to supply assistive listening devices to the Copenhagen On 2 April, at the annual conference arranged by Borough. The American Association of Audiologists (AAA), Dr. John Duffy from New York receives the 'Oticon Focus on People Award' in the presence of Søren Holst, President of Oticon Inc. (left).

7 The first American Oticon Summer 50 young audiologists participate in the Camp is held from 2-6 August in annual international Eriksholm Summer Keystone, Colorado. 67 audiologists Camp held in Denmark from 5-9 August. from across the US participate. 8 William Demant Holding A/S Directors report in theGroup'sfourbusinessareas: is mainlytheresultoforganicgrowth The riseinrevenueofDKK200million Market conditionsandgroupsales August 1998: statements andtheinterimreportof than forecastedinthe1997financial Directors andturnedoutevenbetter matched expectationsoftheBoard the financialyearwassatisfactoryand to someextentaffectedthecompany, South-East AsiaandRussiawhichhas Demant Group.Despiteofthecrisisin 1998 wasagoodyearfortheWillam Goals achievedin1998 • In1997theconsolidatedrevenue • OrganicgrowthaccountedforDKK • Total assetsofDKK1billionismain- • Thereturnonequitywas36% • CashFlowFromOperationsamount- • EarningsPerSharewentupby25% • Ordinaryprofitbeforetaxroseby • RevenueincreasedbyDKK200mil- from 1January -16June1997was stituting Phonic Ear's1997revenue June 1997,i.e.DKK65million con- included PhonicEar'sresultfrom 17 instruments 28% communication 18%andDiagnostic average growthrateof10%,Personal hearing aidcompaniesgeneratingan four businessareaswiththetwo ment wasgeneratedbygrowthinall 160 million,or11%.Theimprove- tained atthesamelevelasfor1997 against 31%in1997 increase on1997 ed toDKK199million,ora40% from DKK10.5to13.0 201 million net profitaftertaxby35%toDKK almost 23%toDKK259millionand increase of14% lion toDKK1,613million,oran but graduallybeing availableinthe for themostexpensive instruments, technology nolongerbeingreserved entrants onthemarketandwith digital in linewiththenumberofnew the attentionvaluehasbeenweakened create attentionanddrivesales. But buzz worddigitalusedtobeenough fully digitalhearinginstrumentsthe technology withonlyfewprovidersof At thebeginningofnewdigital most advancedhearinginstruments. ment, whichofcourseincludesthe sify competitioninthehigh-endseg- ket in1999.Thisisexpectedtointen- there willbemoreentrantsonthemar- new digitalinstrumentsin1998,and Some ofthecompetitorsintroduced than thegrowthinunitsales. sale ofhearinginstrumentsishigher the growthinglobalrevenuefrom market. TheManagementbelievethat price ofinstrumentssoldontheworld resulted inaslightlyrisingaverage relatively expensiveinstruments,has growing saleofdigitalinstruments,i.e. Management isoftheopinionthat therefore somewhatuncertain.The on allmarkets,andtheestimateis Reliable unitstatisticsarenotavailable mated tohavebeenbetween4-6%. growth ofthismarketin1998isesti- trend frompreviousyears.Overall instruments asawholecontinuedthe In termsofunitsthemarketforhearing Hearing instruments • Exchangeratesaffectedrevenueneg- total revenuebyDKK30million tive impactofexchangeratesreduced against theDanishkrone.Thenega- yen andtheScandinaviancurrencies of theAustraliandollar, theJapanese atively in1998,particularlythefall DKK 5million revenue fromotheracquisitionswas Compared with1997thegrowthin Ear's revenueforthefullyear. ed accountsincorporatesPhonic not included.In1998theconsolidat- Compared with just five years ago, the distribution of the Group's revenue today is much more in line with the overall regional distribution in the hearing aid industry.

Breakdown of Group sales (DKK million) 1998* 1997* 1998** Hearing instruments 1,354 1,255 1,387 Diagnostic instruments 52 40 51 Personal communication 207 118 205 Total 1,613 1,413 1,643

* Computed at the rates of exchange for the period ** Translated at 1997 exchange rates lower-end segments as well. The Scandinavia and Australia whereas the Management therefore expect competi- Japanese market was stagnant and the tion parameters to move away from German even falling. technology content and towards user- benefits. In other words there will be The German market, which accounts increased focus on audiological advan- for about 10% of the world market, fell tages. Further details as to this aspect by 10-15% in terms of units. This in the section on audiology on page 18. decline had a negative impact on both Oticon's and Bernafon's sales in The mounting competition will Germany. undoubtedly contribute to further con- solidation of the industry, partly The Australian market, which is one of through acquisitions/mergers and part- the Group's most important markets, ly through technology agreements. underwent a considerable structural change in 1998 with the Australian The Group will participate in the government seeking to privatise parts structural reorganisation both through of its hearing aid services. Since 1991 acquiring other businesses in the hear- Bernafon has had a contract with the ing aid industry and through the con- AHS (Australian Hearing Services) for clusion of OEM (Original Equipment delivery of most of the hearing instru- Manufacturer) agreements with major ments required by the AHS. At the retail chains and other hearing aid start of 1998 privatisation was expect- manufacturers. ed to cause some decline in Bernafon's sale of inexpensive hearing instru- In 1998 the geographical distribution ments to AHS, but the decrease was of growth in the hearing aid market (in less than expected, and in the same terms of units) was fairly uneven. period Bernafon succeeded in boosting Growth rates were highest in the USA, sales to the private sector. 10 William Demant Holding A/S in June1997developed extremely acquired byWilliam DemantHolding Phonic EarHoldings,Inc.inCalifornia Personal communication on themarketinfirsthalf of 1999. testing, isscheduledforintroduction product, whichisp.t.undergoingfinal vals duringsleeping(sleepapnoea).The snoring andabnormalbreathinginter- method fordiagnosingandlocalisingof completing thedevelopmentofa instruments firmoftheGroup,not by RhinoMetrics,theotherDiagnostic anticipated. Growthwasalsoaffected ments hasthereforebeenlowerthan Growth in1998Diagnosticinstru- order willnotbedelivereduntil1999. means thatasubstantialpartofthe until thefourthquarterof1998,which Defence Forcesdidnotcommence the deliveryofamajorordertoUS Due todelaysbyanothersubsupplier, for thelargestpartofthisbusinessarea. and distributesaudiometers,accounts Maico Diagnostic,whichmanufactures Diagnostic instruments by growthonothermarkets. but thedeclinehaslargelybeenoffset had animpactintheautumnof1998, and inSouth-EastAsiahascertainly and thelossofsalesonthismarket important marketsinEasternEurope, many yearsbeenoneofOticon'smost vanished overnight.Russiahasfor ing system,salesinRussiamoreorless in Russiaandthecollapseofitsbank- With theeconomicandpoliticalcrisis sales droppedsharply. and onsomeoftheminormarkets market intheregion,salesstagnated from September. InJapan,thelargest negative impactonhearingaidsales The crisisinSouth-EastAsiahada units ontheAustralianmarketin1998. more thandoubleditssaleintermsof the expansionofprivatemarketand facturer, Oticon, alsobenefitedfrom The Group'sotherhearingaidmanu- lion in1998,or anincreaseof17%. from DKK765 million toDKK893mil- improvement. Overallgrossprofit rose Services alsocontributedtothis ing instrumentstotheBritish Hearing a declineinthesaleofdiscount hear- the AustralianHearingServices andby connection withtheprivatisationof low-margin productsinAustralia 54.1% to55.4%.Afallinthesaleof the Group'sgrossprofitratiofrom with ahigherprofitmargin,increased ments, i.e.moreexpensiveinstruments increased saleofdigitalhearinginstru- The shiftinproductmixwith Gross profit favourably. the nearmarketsalsodeveloped Revenue roseby10%andexportsto produced thebestresulteverin1998. assembly hallsandpublicbuildings systems foruseinplacesofworship, equipment, loudspeakersandteleloop Denmark sellingassistivelistening Logia whichhasitsmainmarketin hearing aidbusinesses. mutual benefitofPhonicEarandthe turned outtobeverysuccessfulforthe distribute PhonicEar'sproductshas half-year. Thecollaborativeeffortto favourably, especiallyinthesecond overseas marketsdevelopedvery by over20%in1998.Alsosaleson about 70%ofPhonicEar'ssales,grew the USmarket,whichaccountfor favourably throughout1998.Saleson Overhead costs the educationof audiologistsandhear- software fordigital instrumentsand lishing theprogrammingplatform and distribution. Thetotalcostof estab- focus onoverallefficiencyin sales and Throughout 1998therewasincreased Distribution costs egy overthenextfewyears. stronger positionedintheGroupstrat- nication, however, isexpectedtobe the sameR&Dtools.Wireless commu- Oticon, BernafonandPhonicEaruse gy, whichisinfactthe reasonwhy exchange knowledgeofbasictechnolo- strategy thattheR&Dfunctions It isanimportantaspectofGroup at asomewhatlowerrateofgrowth. increased intheyearstocome,albeit business areas.R&Dcostswillbe new productintroductionsinallfour 1999 willseearecordprogrammeof much onupscalingtheR&Deffort,and In 1998theGroupdeliberatelystaked Group revenueagainst8.3%in1997. million andnowaccountfor9.1%of R&D costsroseby24%toDKK146 Research &Developmentcosts marketing, salesanddistribution. activities andalowerpercentagefor higher percentageofcostsforR&D time asitwasplannedtoearmarka what lessthangrossprofitatthesame In relativetermstotalcostsrosesome- oriented resources on a short-term solution.

Throughout 1997 and 1998 all Group companies reviewed not only their administrative systems but their other systems and equipment as well. Based on this review an action plan was drawn up for the solution of any Millennium-related problems. With this analysis and action plan the Group is not expected to experience any major problems with operations in connection with the Millennium. The Millennium is not expected to create ing aid dispensers in the use of such problems for the existing customers software was substantial in 1996 and and users either. The Board expect fur- 1997. In 1998 the programming plat- thermore the Group to be able to main- form was exploited more effectively. tain the present insurance programme Moreover the effort in mass communi- without any Millennium exclusions. cation to end-users was toned down as it turned out that profitability was lim- Costs to counteract any such problems ited to a few areas only. compared with Group activities as a whole are insignificant. The increase of distribution costs in absolute terms was first and foremost the result of Phonic Ear being included Profit for the year and equity in the consolidated accounts for all of The Group's profit on primary opera- 1998. Moreover distribution rose in tions is DKK 248 million, which is a connection with the acquisition of ten 27% increase on 1997. The result con- retail outlets of hearing instruments in stitutes 15.4% of the year's revenue Australia on 1 July 1998. against 13.8% in 1997. The increase in profit margin reflects a stronger trend Compared with Group revenue overall in 1998 compared with profit margin distribution costs fell from 24% to growth over the past few years. 23% which contributed to an increase in profit margin for the Group as a With the fall in general interest levels, whole. the acquisition of Phonic Ear and the share buyback programme announced

Administrative expenses Total administrative expenses rose from DKK 116 million to DKK 124 mil- lion, i.e. they rose at a lower rate than revenue. Administrative expenses rose due to an extra effort to replace the administrative systems in several 11 Group companies that would other- wise face problems with the existing systems in connection with the Millennium. Consequestly the group chose to speed up the modernisation and updating of said systems in 1998 rather than spend fewer but not future- 12 William Demant Holding A/S a dividendratio of47%.Thetotal in 1997)bepaid outcorrespondingto dend ofDKK2.35pershare(DKK 1.8 that forthe1998financialyear, adivi- year's profitsatisfactoryandpropose The BoardofDirectorsconsider the DKK 13.0against10.5in1997. Earnings PerSharein1998totalled of DKK13.5million. included extraordinaryitemsaftertax or a35%increase.The1997resultalso lion againstDKK148millionin1997, and theyear'snetprofitDKK201mil- profit amountedtoDKK60million 23% onlastyear. Tax ontheyear's DKK 259million,oranincreaseof Ordinary profitbeforetaxamountedto for DKK3.5millionthereof. the saleofinvestmentbondsaccount million in1998.Securitiesgainsfrom DKK 14.4millionin1997to8.5 of August1998,netfinancialsfellfrom in connectionwiththeinterimreport lion, or49%of totalassets. year-end amountedtoDKK504mil- Consequently shareholders'equity at enced bythebelowessentialfigures: besides thedistributionofprofitsinflu- Shareholders' equityofthecompanyis profit fortheyearberetained. The Boardproposethattheremaining lion, or18%oftheyear'snetprofit. amount ofdividendisDKK35.4mil- • Exchangerateadjustmentsofforeign • Write downofgoodwillinconnec- • Buybackofownshareshasbeen lion ers' equitynegtivelybyDKK15 mil- subsidiaries influencethesharehold- activities amountstoDKK21million tion withpurchaseofnewcorporate million the shareholders'equitybyDKK151 directly writtenofdepreciatedon EUR 754. were inDKKUSD 634,JPY5.60and 1998 inrespectoftheabovecontracts Average forwardratesat31December manufacturers. between theGroupandUShearing aid term shiftthecompetitivepower and USDmayhoweveronthelong Any majorchangesintheratesofEUR uncovered financialrisks. opinion oftheManagementnomajor At thestartof1999therearein total valueofDKK397million. been madeinUSD,EURandJPYata end forwardexchangecontractshad cial foreignexchangeflows.Atyear- used forhedgingtheGroup'scommer- Financial instrumentsareexclusively forward exchangetransactions. exchange positions,primarilythrough The Groupcurrentlyseekstohedgeits rate ofinterest. loan ofDKK50millionatavariable of interest4.4%andaDanishkrone loan ofDKK102millionatafixedrate raised twoten-yearnoteloans,anEUR tion ofPhonicEar. In1998theGroup USD bankloanraisedontheacquisi- repayment ofasubstantialslice interest loansraisedin1992/93and through fullrepaymentoftwohigh- Group's long-termfinancein1998 The Managementreorganisedthe DKK 207millionin1997. to DKK254millionin1998against for write-downsanddepreciationrose direct cashflowfromprofitsadjusted Cash Earnings(CE),whichshows ous controloftheworkingcapital. as thatinagrowthcompanyiscontinu- The explanationforacashflowashigh tax, oralmost100%ofthenetprofit. the consolidatedordinaryprofitbefore DKK 199millionwhichequals77%of flow fromprimaryoperations(CFFO)of In 1998theGrouphadapositivecash Cash flows,financingandliquidity Risks Interest risks per 31 December 199, DKK million Nørby Johansen was elected as new Weighted member of the Board of Directors. Maturity <1year 1-5years >5years Totally interest On 12 May 1998, Executive Vice Financial fixed assets - - 5.6 5.6 President Niels Jacobsen was appoint- Securities and participating ed President & CEO. interestcurrent assets 19.0 - - 19.0 On 26 December 1998, Mr Bent Bahne Liquid funds 196.2 - - 196.2 Bahnson who had been elected by the Interest bearing assets 215.2 - 5.6 220.8 4.4% employees as staff representative of the Board passed away. He had been a val- ued member of the Board since 1995. Mortgages - - 5.0 5.0 Longterm creditors 10.3 41.0 98.8 150.1 In April 1999 three employees were elected as members of the Board to Current bank accounts 32.3 - - 32.3 represent Group staff. Ms Hanne Interest bearing liabilities 42.6 41.0 103.8 187.4 4.1% Stephensen was re-elected and Mr Jørgen Kornum and Mr Franck Fogh Net position 172.6 -41.0 -98.2 33.4 Andersen were elected. The members

Balance sheet Through out the autumn of 1998, the It is very satisfactory that the total bal- company thus currently bought back ance of DKK 1 billion has been retai- own shares. When there is a suitable ned at the same level in 1998 as in acquisition opportunity, these shares 1997 despite growth and expansion of may be used as full or part payment. activities. The rate of turnover in the In 1998, 440,850 shares were bought Group's inventories and trade debtors back corresponding to 3% of the remains unchanged which means that share capital. trade debtors and inventories rose in line with revenue and production costs. It will also currently be considered whether cash flows including own Group investments excluding acquisi- shares exceed the estimated capital re- tions amounted to DKK 71 million quirements with a view to cancelling against DKK 76 million in 1997. The part of the holding of own shares. This fall marks the conclusion of two real policy is designed to ensure and sustain property investments in Ballerup superior shareholder value creation. (Denmark) and Hamburg. In 1999 fixed asset investments for 1999 are expect- The shares that were bought at a total ed to match the depreciation charge. sum of DKK 151 million were treated for accounting purposes as had they already been anulled. This means that Own shares their cost was written off directly via The Annual General Meeting in May the free reserves of the shareholders' 1998 authorised a buyback of own equity. Share-related key figures and shares of up to 10% of the share capital. ratios have been adjusted accordingly. 13

In August 1998 it was decided to use this authorisation as part of the acqui- Management and employees sition strategy thus the Board of Direc- At the ordinary Annual General tors considered the Company to be Meeting in 1998, President & CEO overcapitalised compared with the Anders Knutsen was not eligible for business volume. reelection, and President & CEO Lars 14 William Demant Holding A/S Danish legislation. accordance withtheprovisionsof company ofanyshareholdingsin No othershareholderhasnotifiedthe own sharesat17March1999. The companyitselfholds3.4%ofits shares inthecompany. company thatitholds65.7%ofthe Gentofte (Denmark)hasnotifiedthe Fond (theOticonFoundation), William DemantogHustruIdaEmilies Capital structure and excellentperformancein1998. ment andstafffortheircommitment express thewarmestthankstoManage- The BoardodDirectorswishesto on 11May1999. tion withtheAnnualGeneralMeeting join theBoardofDirectorsinconnec- were electedforfouryearsandwill key elements: The growthstrategybuildsonthree to come. growth bothin1999andtheyears Management anticipatescontinued with itsgrowthstrategyandthe The William DemantGroupproceeds Strategy andexpectationsfor1999 • TheWilliam DemantHoldingGroup • Organicgrowthgeneratedbyacon- pated structural reorganisationofthe wishes toparticipate intheantici- the year2000 Growth isexpectedtoextend into tribute tobothrevenueandearnings. ly inthesecondhalf-year, tocon- expects theintroductions,particular- products, andtheManagement launch arecordhighnumberofnew In 1999allfourbusinessareaswill ticated andinnovativenewproducts. rently tointroducethemostsophis- enabling thefourbusinessareascur- tinuous andhighinnovationlevel hearing aid and diagnostic instru- increased efficiency in the sales and ments industry. The Management is distribution links. therefore currently looking for opportunities to acquire companies Since 1994 and up to and including in these business areas that can con- the 1998 financial year, Earnings Per tribute to Group growth. The timing Share has risen considerably. With the of such acquisitions is more unpre- above profit scenario and the ongoing dictable, but acquisitions in the share buyback programme, the existing lines of business are expect- Company expect to be able to retain a ed to contribute to long-term growth high growth rate in Earnings Per Share in the Group in 1999 and in the years to come. For 1999 Earnings Per Share are expected • Through a very high degree of inno- to grow by 15%. vation and earmarking of more than 9% of Group revenue for R&D, the The Group holds 3.4% of the share Group gathers knowledge and devel- capital of own shares on 17 March ops technologies that may also be 1999 and the plan is to continue to relevant to associated business buy back own shares. At the Annual areas. In the opinion of the Manage- General Meeting on 11 May 1999 a ment the Group's knowledge of proposal for annulment of these shares wireless communication, speech is to be submitted. It is expected that intelligibility and miniaturisation 4-6% of the share capital will be can- can also be applied in related busi- celled. The Board of Directors will also ness areas. Consequently, the overall ask the Annual General Meeting for growth strategy is to be open to authority to issue up to 1.4 million acquisition opportunities in related new shares, or nominally DKK 7 mil- fields of businesses enabling the lion, without pre-emption rights for company to capitalise on the existing shareholders. The new shares Group's core competencies are to be used in connection with the financing of any new acquisitions. At the end of 1998 and in early 1999 the competition on the market for digi- tal hearing instruments has been inten- sified even further. Today several of the competitors also offer digital hear- ing instruments, and further entrants are expected on the market in 1999.

The many new product introductions as well as the new generations of digi- tal instruments to be launched by Oticon and Bernafon are expected to generate two-figured organic growth rates for 1999 as a whole - probably at a slightly lower or stagnating rate in the first half and a somewhat stronger rate in the second half-year. We also 15 expect the strength of the many prod- uct introductions to extend beyond the year 2000 and thus generate further growth.

The entire organisation focuses on bet- ter utilisation of capacity and 16 William Demant Holding A/S Global infrastructure joint infrastructure withtheresulting Today, theyareallconnectedviathis Group's 36companies. mation onaglobalbasisbetween the enable theeffectiveexchange of infor- lished anadvancedITinfrastructure to The William DemantGrouphasestab- Information technology across thevariousprofessionalareas. sion tousethesametoolsgloballyand efit resultingfromthestrategicdeci- development toolsisnottheonlyben- Access tothesameknowledgeand design centre. businesses alsoeachhavetheirownIC ment functionsinthetwohearingaid within relatedbranches.Thedevelop- within theircorebusinessareasand use thesamedevelopmenttoolsboth strategic importance.Today theseunits gies elsewherewithintheGroupisof apply knowledgeandbasictechnolo- the businessunitsexchangeandre- audiological knowledgeplatform.That the Group'sglobaltechnologicaland individual businessunitbenefitsfrom The developmentfunctionofeach keting activities. individual unitswhenitcomestomar- organisational divisionbetweenthe value chain.Thereis,however, aclear co-operating intheearlylinksof opportunity. So,theunitsworkclosely, that theyshareknowledgeatevery benefits oflarge-scaleoperationsand vidual businessunitscapitaliseonthe Demant Groupstrategyisthattheindi- An importantpartoftheWilliam documentation. Thegreatestadvantage sidiaries, together withtherelevant centre inThistedtothesales sub- and theshipmentofgoodsfrom the ments sentfromthesalessubsidiaries ports boththeexchangeoforder docu- (Denmark). TheITinfrastructure sup- Distribution CentreinThisted and distributorsfromtheGlobal are distributedtothesalessubsidiaries The majorityoftheGroup'sproducts Business system Group's companies. been installedinone-thirdofthe encing equipment,whichhasalready IT infrastructureisthevideoconfer- An importantsupplementtothebasic shared, dynamicinformationdatabase. exchange documentsithasbecomeone to thissystem,andnowthattheycan ing system.Allemployeeshaveaccess calendar, e-mailandanelectronicfil- age, withaccesstoasharedelectronic has apcwithstandardofficepack- information exchange.Eachemployee housing, accesstoinformation,and The ITinfrastructuresupportsware- and theapplications. established forboththeinfrastructure quarters inDenmarkhasnowbeen support functionattheGroup'shead- reduced operationalcosts,asacentral and thirdly, thejointinfrastructurehas regardless oftheirphysicallocation; sible toallemployeesintheGroup, ondly, theinfrastructureisnowacces- now identicalforallemployees;sec- mation processingapplicationsare advantages. Firstly, thestandardinfor- large numberofsalessubsidiaries. areas, hasnowspreadtoalsoincludea functions intheGroup'scorebusiness first introducedinthedevelopment This formoforganisation,whichwas in practice. freedom andresponsibility, tofunction values, withtheirfocusonflexibility, necessary toenabletheGroup'shuman also createssomeofthepre-requisites isation isstructuredphysically. This greater flexibilityinthewayorgan- its chosenapplicationsdoesallow of formality, theITinfrastructurewith ment, andamongstothers,alowlevel Together withanopenofficeenviron- ous disciplineswhereverpossible. be sharedwithinandacrossthevari- tion technologyallowsknowledgeto organisational concept.Theinforma- Flexibility isanintegralpartofthe organisation tofunctioninpractise. the Group'sknowledge-basedproject only. Theinfrastructureisessentialfor infrastructure isnotlimitedtosystems Within theGroup,roleofIT A flexibleworkingenvironment based onNavision. the Group'sadministrativesystemsare Today, inalmostallsalessubsidiaries, more quickly. ments reachtheirtargetdestination of usingtheinfrastructureisthatship- Human values Ongoing development and variety in the working environment is a funda- mental part of the Group's business mission for its employees. There are a number of clearly formulated written assumptions about how employees function optimally and develop within their roles. These assumptions range from employees wishing to accept responsibility and take on challenging tasks, to them desiring as much free- dom as possible and wanting to be treated as partners in the company. The group has styled the entire organi- sation according to these assumptions, and both the efforts and decisions made by the management team are based upon these values. Ultimately, it is the contribution of the employees on a daily basis that creates results and develops the workplace.

Social responsibility also extends to the community. The Group believes that companies should be sufficiently accommodating to employ people with a reduced ability to work. In 1998 the Group employed an increasing number of people under various schemes such as job training, flex-jobs and other arrangements.

KiteNet The Intranet, or 'KiteNet', will become one of the most important means of accessing the shared information databases within the William Demant Group. The KiteNet will enable employees to access and process documents on a global basis, including for example, service documentation. It will feature complete information about prod- ucts, including the different models and spare parts etc. It will also enable knowledge exchange between the various development functions. This fast and easy access to important information will enhance the sales companies ability to improve their customer service. 18 William Demant Holding A/S al processes,including localisationand cy andtemporal resolutionandbinaur- ing threshold,dynamicrange, frequen- tant auditorydimensionssuch ashear- Demant Grouphasfocusedon impor- ing impairmentwithintheWilliam For manyyears,theresearchon hear- the William DemantGroup? What aretheaudiologicalinitiativesin Demant Group. ing aidsolutionsbytheWilliam ment andintroductionofnovelhear- as acorecompetenceforthedevelop- important now, and must beregarded knowledge hasbecomeevenmore ment ofaudiologicalinformationand This isthereasonwhydevelop- could becreated. than newaudiologicalknowledge technology begantodevelopfaster opened upnewopportunities,andthe ing aids.Thisdigitaltechnology agement ofdigitaltechnologyforhear- change wastheintroductionandman- audiology. Themainreasonforthis technology begantogaintheleadover mid 1990s,thesituationchangedand new hearingaids.However, aroundthe both thedesignanddevelopmentof technology wasalimitingfactorfor to bedeveloped,andconsequently, the functionality aspecifictechnologyhad readily implemented.Foreachnew tionality couldbedescribedbutnot cal possibilities,i.e.advancedfunc- cal knowledgeledoverthetechnologi- In thefirsthalfof1990saudiologi- emerges -showninthefigurebelow. knowledge aninterestingpicture aid technologyandaudiological If onelooksattheevolutionofhearing referred toasaudiologicalknowledge. individuals. Thesecharacteristicsare characteristics ofhearingimpaired advances withtherelevantauditory the abilitytocombinetechnological erations ofhearingaidswilldependon The commercialsuccessoffuturegen- William DemantGroup? Why isaudiologyimportantforthe Striking thebalancebetweenaudiology andtechnology successful fitting.Together thetwosets novel hearingaidsolutionsandtheir equally importantinthedesignof sical audiologicalfieldwhichare addition tothosebelongingtheclas- there areotherindividualfactorsin son forthisistherecognitionthat sonality andcognitiveskills*.Therea- instance thoserelatedtolifestyle,per- involve othercharacteristics-for als hasbroadeneditsscopetoalso research onhearing-impairedindividu- Within thelastcoupleofyears in the1990s. duced bytheWilliam DemantGroup advanced hearingaidsolutionsintro- field, wasapre-requisiteforthe belongs tothe'classical'audiological knowledge withintheseareas,which externalisation. Developmentof hardware for exploitation for hardware Development of new new of Development of existing knowledge existing of dependency Hardware 1990s Mid Mid in 1998 dependency Hardware physiological factors suchascortical and cognitiveabilities) butalsoon mentioned above(lifestyle,personality the non-audiologicalcharacteristics issues appeartoberelatednot onlyto new hearingaid.To someextent,these tance andspeedofacclimatisation toa realism ofexpectation,levelaccep- dent alsoon'softer'issuessuchas: that successfulrehabilitationisdepen- listening comfort.Today itisrealised dimensions: speechintelligibility, and ing aidshasbeenevaluatedintwo Traditionally, rehabilitationwithhear- future hearingaids. may affectthedesignandfittingof action canbeobtainedandhowthis research onhowincreaseduserinter- Group thishasresultedinfocused warranted. Within theWilliam Demant etc., increasedindividualisationseems cognitive ability, listeningpreference has anindividuallifestyle,personality, However, sinceeachhearingaiduser in thesubsequentfine-tuningprocess. combined withsomeuserinteraction tionally beenbasedonprescription The fittingofhearingaidshastradi- individual. holistic viewofthehearingimpaired of characteristicsconstituteamore knowledge for exploitation for knowledge Development of new of Development of existing technology existing of Technological possiblities Audiological knowledge Year plasticity**, for example. Thus, hear- ing aid research has become increas- ingly more complex, requiring access to knowledge and experience outside the traditional audiological and psy- cho-acoustical fields. Therefore, col- laborations have been established with several international groups of hearing aid researchers, psychologists and physiologists, amongst others.

Another initiative has been the estab- lishment of the 'Eriksholm Workshops' - a series of scientific workshops fully sponsored by the Oticon Foundation. Each workshop deals with a specific topic, which is highly relevant for the field of hearing aid research. It is con- vened by an internationally acclaimed researcher and held by a small group of about 15 international researchers - each active within the field of the cho- sen topic. In 1995 the first workshop was held, with the topic: 'Auditory deprivation and acclimatisation'. The second workshop will be held in 1999 on the topic of: 'Self-reported outcome measures for hearing rehabilitation'.

* A person's ability to understand through thought, experience or the senses.

**The ability of the brain to adapt over a long period of time, so a changed flow of information from a sense organ (e.g. the ear) will be used optimally.

5 20 William Demant Holding A/S marketing andbuildingtheirown cus- ments; theyareconductingtheir own the existingmarketfordigital instru- new playersarenotencroachingon players. Thisisduetothefactthat degree dependentonthenumberof at whichitisdevelopingtosome ing aidsisgrowingrapidly. Thespeed At present,themarketfordigitalhear- scale. ucts thatencompassbothendsofthe Oticon isfocusingondevelopingprod- retain marketshare(measuredbyunit) standard-to-low pricesegment.To for boththetop-endsegmentand sary todevelopdedicatedinstruments Oticon acknowledgesthatitisneces- effect onretailsales. on selectedproductshavehadany the industryindicatesthatpricecuts ducing highvolumesales.Nothingin price thattheybecome'standard',pro- ments willdropsoconsiderablyin over time,today'sadvancedinstru- Oticon doesnotsharetheopinionthat, sales. price segmentgeneratinghighvolume and ontheother, byastandard-to-low tems (atcorrespondinglyhighprices), processing andadvancedfittingsys- instruments utilisingadvancedsignal on theonehandbyhighperformance this marketisemerging.Itpolarised, even further. Today aclearerpictureof spring of1996spurredexpectations of thefirstdigitalhearingaidsin been growingrapidly. Theintroduction market thatOticonhelpedtocreatehas MultiFocus in1991,thehigh-price Since Oticon'sintroductionof from theDanishheadquarters. distributors world-wideareserved Danish marketandthe80independent plus 18foreignsalessubsidiaries.The A/S, withheadquartersinDenmark, The Oticonbusinessconsistsof Oticon ing theseriesevenfurther. This DigiFocus SKI introduced thefullydigitalhearingaid At thestartofthirdquarter, Oticon the highpricesegment. number ofnewdigitalinstrumentsin During theyear, Oticonintroduceda New digitalinstruments duced But attheturnofyearOticon intro- ing aidsinitiallyintroducedin1996. to theDigiFocusseriesofdigitalhear- DigiFocus SKIwasthenewestaddition (presbyacusis). loss differstoage-relatedhearing excessive noise.Thistypeofhearing term exposuretonoiseorsudden and istypicallycausedbyeitherlong- approximately 15%ofthetotalmarket, High frequencyhearinglossconstitutes hearing isnormal. tion inthefrequencyareaswheretheir patients avoidhavingtouseamplifica- and poorhearing.With DigiFocusSKI, that markthetransitionbetweengood amplification inthosefrequencyareas hearing losses.Ittargetsandincreases compensate forthesedifficult-to-fit hearing aidespeciallydevelopedto is themarket'sfirstandonlydigital frequency hearingloss.DigiFocusSKI suffering fromsteeplysloping,high- ket fordigitalhearingaids. tomer bases,thusdevelopingthemar- DigiFocus DuoMic , whichtargetspeople , supplement- ing aids, two newprogrammableanaloguehear- In thethirdquarter, Oticonintroduced cope inchangingsoundenvironments. which makesiteasierforthewearerto is anomni-directionalmicrophone, ments, suchasarestaurant.Theother focus onspeechinnoisyenviron- phones available,makingitpossibleto most advanceddirectionalmicro- The firstmicrophoneisoneofthe can switchatwill. microphones, betweenwhichtheuser Speech Alignment)withtwoadvanced cessing technology, ASA combines Oticon'sdigitalsignal-pro- advanced, fullydigitalhearingaid Present, Commercialaffairs. and SteenBindslev, ExecutiveVice Executive Vice President,Operations, agement team:SvendThomsen, comed twonewmemberstoitsman- Holding A/S.In1998Oticonwel- Oticon A/SandWilliam Demant Kolind asPresidentandCEOforboth In May, NielsJacobsen succeededLars sales subsidiaryinChina. 1998/1999, Oticonopeneditsown And overtheNewYear period chain NationalHearingAidsPty. Ltd. sidiary tookoverthetenshopsinretail to 79%.Oticon'sAustraliansalessub- ship inOticonPolskarosefrom70% its distributionnetwork.Shareowner- In 1998Oticoncontinuedtodevelop aids, andverysmallinstruments. ments, includingnewdigitalhearing invested indevelopingfutureinstru- Considerable effortisnowbeing ly easyfordispenserstofit. distinguishes itselfbybeingparticular- PRO2 offerstwooperatingmodes,and can beplacedtotallyintheearcanal. canal) isaverysmallinstrumentthat PrimoFocus CIC PrimoFocus CIC (completely-in-the- 2 and (Adaptive PRO2 . DigiFocus DuoMic optimises speech intelligibility. In a restaurant a person with impaired hearing may have difficulty following a con- 21 versation even if the background noise is moderate. Using DigiFocus DuoMic with an advanced direction- al microphone and digital signal processing, the user can filter out background noise and concentrate on the conversation. 22 William Demant Holding A/S an importantelementinBernafon's distribution, productdevelopmentis In additiontoadvancedmarketingand market. turnover inanacceleratingprivate welfare system,butalsotoincrease maintain deliveriestotheAustralian tem, thecompanymanagednotonlyto plier tothepublichearingwelfaresys- was previouslythede-factosolesup- eralisation inamarketwhereBernafon market. In1998,despiteincreasedlib- for hearinginstrumentsontheprivate impaired peopletoclaimfinancialaid ing welfaresystem,enablinghearing- dies madeavailablebythepublichear- government decidedtoalterthesubsi- In theautumnof1997Australian instruments. canal (CIC)instrumentsand sales ofverysmallcompletely-in-the- Progress hasprimarilybeenmadeon increased Bernafon'smarketshare. Manufacturer) customershave plus salestoOEM(OriginalEquipment sidiaries andindependentdistributors, through thecompany'sownsalessub- turer ofopticalequipment.Sales tion agreementwithalargemanufac- In Spain,Bernafonenteredadistribu- network fordistributinghearingaids. In 1998Bernafonfurtherexpandedits tributors world-wide. market plussome40independentdis- The headquartersservesthedomestic Bern, plusnineforeignsubsidiaries. Bernafon AG,withheadquartersin The Bernafonbusinessincludes Bernafon less developedmarketselsewherein the high-techmarketsinEuropeand the Bernafon'scompetitivenessinboth complete productfamiliesincreases 1998. Thepossibilitytoofferthree and arethemainreasonforprogressin been verywellreceivedonthemarket, Audioflex, DualineandOpus2have very attractiveprice. tions foralltypesofhearinglossata also introduced,offeringgoodsolu- 310+/300 analogue instruments( Dualine 200 two digitalproducts( Demant Groupin1995.Thisincludes since becomingpartoftheWilliam largest numberofnewhearingaids In 1998Bernafonintroducedthe in termsoftechnologyandprice. ments, complementingeachotherboth small completely-in-the-canalinstru- range frombehind-the-eartovery completed. Allthreefamiliesnow Dualine and theprogrammable lies -theconventional In 1998,Bernafon'sthreeproductfami- development projects. lio, plusanumberoffuture-oriented expanding thecurrentproductportfo- focuses bothonmodernisingand this strategy. Thedevelopmentstrategy the companywillcontinuetofollow sums ofmoneyondevelopment,and Bernafon hasinvestedconsiderable gramme. Overthepastfewyears Innovative HearingSolutionspro- series -wereextendedand ). AnentireOpus2serieswas ) andseveraladvanced Dualine 100 Dualine Opus2 Audioflex series, and and duced. digital productserieswillbeintro- fruit in1999,whenanewadvanced lenges. Thisco-operationwillbear an idealpositiontomeetfuturechal- logical expertise,putsthecompanyin Sidney, whichcontributeswithaudio- National AcousticsLaboratoryin Bernafon's closeco-operationwiththe hearing aidindustry. industry hasnowbeenappliedtothe ics gainedinthecountry'shorological knowledge ofhighprecisionmechan- exists inSwitzerland,wherethe fit fromthehightechnologylevelthat oriented developmentactivitiesbene- product portfolioandthemorefuture- Both theextensionofexisting ologist tothehearingaiditself. vidual adjustmentsmadebytheaudi- both thefittingsoftwareandindi- customer satisfactionisdependenton provides asystemwherethedegreeof fit Bernafonhearingaids.OASISnow makes iteveneasierforaudiologiststo include ahelpprogram(Wizard) that tem, originallyintroducedin1996,to further enhanceditsOASISfittingsys- pc fittingprograms.In1998,Bernafon requires knowledge-basedWindows Fitting advanceddigitalhearingaids est, digitallyprogrammableCICs. egory. Thisisoneoftheworld'ssmall- the Dualine400CICfallsintothiscat- attractive instruments.Inparticular, has focusedonproducingcosmetically the threeproductfamilies,Bernafon the world.Inadditiontocompleting Dualine 400 CIC is one of the tiniest digitally programmable CIC aids in the world. It is 23 the result of Bernafon's efforts to develop sophisti- cated and cosmetically attractive aids. It is placed in the ear canal and removed by means of a small nylon thread. 24 William Demant Holding A/S Diagnostic instruments has beeninvestedinextractingthe Demant Groupin1995,mucheffort Since becomingpartoftheWilliam local measurementrequirements. be moreeasilycustomisedtofulfil advanced software,theequipmentcan developed. Now, withtheaidof and throatspecialists,wasfurther which isprimarilyusedbyear, nose In 1998the industry. heavy industry, includingtheUScar ing salestogovernmentauthoritiesand developed, hascontributedtoincreas- cial audiometer-the the USArmedForcesforwhichaspe- employees' hearing.Alargeorderfor regularly documentthestatusoftheir other customergroupswiththeneedto in theindustry, thearmedforces,and advanced screeningaudiometryforuse has beenexpandedtoinclude Audiometer's broadproductportfolio Over thelastfewyears,Maico ders intheairpassages(RhinoMetrics). hearing disorders(Maico)anddisor- ced instrumentsfortheinvestigationof they develop,produceandselladvan- Common tobothcompaniesisthat RhinoMetrics inDenmark. Germany andtheUS, Audiometer -withcompaniesin Group, andcomprisesMaico business areaintheWilliam Demant Diagnostic instrumentsisthesmallest MA53 clinical audiometer, MA1000 - was hensive testisrequired. whether amore compre- audiologist todecide hearing. Ithelpsthe testing ofaperson's for easyandquickinitial Maico-Hearman MH10 Maico distributeanaid the airpassage.Thispressureremoves maintain positiveairwaypressurein which viaamask,helpsthepatient ous PositiveAirwayPressure)system, treated nightlyusingaCPAP (Continu- Today, inmostcases,sleepapnoeais system, andanumberofotherorgans. on boththeheartandcirculatory oxygen levelswhichinturnputsstrain seconds, resultinginloweredblood tion typicallylastbetween30and90 breathing thatoccurwiththiscondi- collapsing. Theabnormalpausesin wards, andbythewallsofthroat caused bythetonguefallingback- through thethroat.Theblockageis blockages thatpreventairfrompassing sleep. Thisconditionisduetointernal acterised byabnormalbreathingduring and sleepapnoea.Sleepapnoeaischar- diagnosis andlocalisationofsnoring invest indevelopingamethodforthe In 1998,RhinoMetricscontinuedto 750 million. ket, whosetotalisestimatedatDKK approximately 7%oftheworldmar- Maico Audiometer'ssalescover products. reduction inproductioncostsonmost er) hasresultedinaconsiderable ously wasoutsourcedtoasub-suppli- Acquiring thiscapability(whichprevi- board assemblyfunctionatDancoTech. ly beingexploitedistheprintedcircuit in theGroup.Oneofareascurrent- most benefitfromtheotherfunctions under thename of 1999.Theproductwillbemarketed lead tocommercialisationinthespring expected resultsareachievedtheywill verifying thisnewmethod.Ifthe hospital, beganaseriesofclinicaltests together withasleepclinicatDanish In theautumnof1998,RhinoMetrics, sleepapnoea patients. set newstandardsforthetreatmentof ing sleep.Themethodisexpectedto locate wherethethroatcollapsesdur- enabling theoperatortoprecisely into thethroatvianasalpassage, ble catheter. Thecatheterisinserted acoustic rhinometryandahighlyflexi- method utilisesthecombinationof RhinoMetrics' patenteddiagnostics available today. seat oftheproblemthanarecurrently more precisemethodoflocatingthe advanced diagnosticswhichoffera result. Thus,thereisaneedformore removed), operationsoftenyieldlittle and howmuchtissueshouldbe very precise(regardingexactlywhere current surgicalproceduresarenot palate (UPPP-operation).Butbecause intervention inthethroatandsoft Some patientsbenefitfromsurgical from drynessinthenoseandthroat. uncomfortable, andpatientscansuffer tem isnoisy, themasksometimes cause inconvenience,inthatthesys- CPAP treatmentiscontinuous,andcan the blockagethatcausescondition. RhinoSleep . The environment in heavy- industry factories is often extremely noisy and many firms have chosen to check regularly 25 whether the noise affects the hearing of their employees. Maico's screening audiometer, MA1000, is designed for firms in the public and private sectors wishing to carry out such exami- nations on the job. 26 William Demant Holding A/S applications. Ear foruseintelecommunications which hasbeenpatentedbyPhonic TeleMagnetix (TMX) technology aids. Thesystemisbasedon systems tobehind-the-earhearing makes iteasiertoconnectSolaris FM including the introduced awholeseriesofproducts, intensified. Asaresult,PhonicEar In 1998thedevelopmenteffortwas in allpublichalls. Disability Act,requiringaudiosystems introduction oftheAmerican erable growthintheUSsince the businesshasexperiencedconsid- cinemas andinstitutions.Thispartof tems foruseinplacesmofworship, Phonic Earalsosuppliesaudiosys- schools. students tointegrateintomainstream making iteasierforhearingimpaired alone, ortogetherwithhearingaids, These systemscaneitherbeused systems foruseinteachingsituations. Phonic Eariswirelesscommunication The mostimportantbusinessareafor Phonic Ear mary operations. able growthbothinrevenueandpri- very satisfactoryyearwithconsider- Phonic EarandLogiahaveenjoyeda ship, theatresandintheclassroom. home, incompanies,placesofwor- listening situations,suchasinthe improve communicationindifficult hearing. Bothcompanies'products certain degree,forpeoplewithnormal the hearingimpaired,andalso,toa gy, thesedevicesimprovedailylifefor on wirelesscommunicationtechnolo- sell assistivelisteningdevices.Based Both companiesdevelop,produceand A/S inDenmark. nies intheUSandCanada,Logia Inc. inCalifornia-withsalescompa- area comprisesPhonicEarHoldings, The Personalcommunicationbusiness Personal communication Telepin system, which , called bined FMandhearingaidsystem In 1998PhonicEarintroducedacom- 9001 certification. In 1998PhonicEarearnedtheISO aid companies. fiting bothPhonicEarandthehearing has provedtobeadvantageous,bene- in distributingPhonicEar'sproducts between companieswithintheGroup the secondhalfof1998.Co-operation oped extremelywell,especiallyduring than 20%.Overseassalesalsodevel- Phonic Ear'ssales,increasedbymore which accountsformorethan70%of In 1998,salesontheAmericanmarket, tion equipment. PE 300-seriesofwirelesscommunica- to usetogetherwiththeEasyListener impaired children,thesystemiseasy Designed inco-operationwithhearing Field System loudspeaker system,' The companyalsointroducedamini- 1997. equipment thatwasintroducedin Solaris, awirelesscommunication supplements thenewgenerationof Binaural Solaris ', foruseinclassrooms. Toteable Sound . Thesystem the loudspeaker. down sensorsautomaticallyactivate crafted inoak. When apersonsits with built-inloudspeakers,hand- an audiosystemincluding144pews In RibeCathedral Logia hasinstalled the international chainsthatwillmarket In 1998Logiabegancollaboratingwith Demant Group. both withinandoutsidetheWilliam to overseasmarketsviacompanies Logia suppliescommunicationsystems reinforcing itsalreadystrongposition. devices totheCopenhagenBorough, tract tosupplyassistivelistening the yearLogiasecuredatwo-yearcon- public addresssystems.Attheendof listening devices,telecoilsystemsand country's leadingsupplierofassistive Logia isbasedinDenmark,andthe Logia development. markets showedanequallypositive mately 10%andexporttonearby In 1998revenueincreasedbyapproxi- develop evenfurtherin1999. Logia expectsthisco-operationto tion systemsforitsticketcounters. Railways (DSB),installingcommunica- co-operation withtheDanishState tems. Thecompanyalsoincreasedits ing user-friendly, efficientaudiosys- showed considerableinterestinacquir- year anumberofnursinghomes design andsoundquality. Duringthe requirements intermsofaesthetics, tion fulfilledanumberofchallenging system inRibeCathedral.Theinstalla- sive publicaddresssystemandtelecoil In 1998Logiainstalledacomprehen- pendent ofOticon'ssalescompanies. a distributionnetworkthatwasinde- name toLogiain1997,orderform why OticonSoundSystemchangedits systems. Infact,thiswasthereason MultiWake and Beocom 1600HAC Parents with hearing-impaired children may find it very useful to install FM systems in the home. The system enables the child to hear and under- 27 stand what is said despite background noise, for instance, in the kitchen. In 1998 Phonic Ear introduced a com- bined FM and hearing aid system Binaural Solaris and Telepin system, which makes it easier to link Solaris FM systems to in-the-ear hearing aids. 28 William Demant Holding A/S Sharing resources tion. support, andfinanceadministra- control systems,serviceandtechnical tion facilities,ITinfrastructure,quality same resources.Thisincludesproduc- closely, whereverpossiblesharingthe Demant Groupworktogethervery The fourbusinessareasintheWilliam company handlesawiderangeoftech- interconnection technologies.The DancoTech's secondareaofexpertiseis ing maximumprecision. fine line,high-densitycircuitsrequir- the companyspecialisesincomplex, these iselectronicsassembly, where two areasofexpertise.Thefirst four businessareas.DancoTech has tions asasub-suppliertotheGroup's ry, DancoTech. Thiscurrentlyfunc- established amoderncomponentfacto- In Ballerup(Denmark),theGrouphas sector ishandledinternally. process intheDiagnosticinstrument At presentonlypartoftheproduction communication solutionsinCalifornia. Ear manufacturesitsownwireless in DenmarkandSwitzerland.Phonic hearing aidsthathavebeendeveloped both OticonandBernafonmanufacture In Denmark,ScotlandandAustralia, duction facilitiesinseveralcountries. The William DemantGrouphaspro- Production earned theISO9001/EN46001certifi- In 1998,RhinoMetricsandPhonicEar Device Directive. products coveredbytheMedical ing production,salesandserviceof to theGroup'scentralpoliciesgovern- dled bychannelsapprovedaccording fittings oftheGroup'sproductsishan- In Europe,distributionandcustomer independent distributors. Group's ownsalescompaniesorby whether distributionishandledbythe the enduser. Thisisregardlessof distribution network,culminatingat ity requirementsthroughouttheentire Group's hearingaidsfulfilthesetqual- met; ithasbeenensuredthatthe Medical DeviceDirectivenowbeen Not onlyhavetherequirementsof sales andservicefacilitiesinEurope. goals andpoliciesforitsproduction, tive, systematicallydefiningquality Group reactedpositivelytothisdirec- of hearingaidswithinEurope.The the development,productionandsale considerably elevatingstandardsfor Directive (93/42/EØF)cameintoforce, On June141998theMedicalDevice Quality management plex circuitry. to offeranoptimalarmamentofcom- nologies, andisthereforealwaysable of receipt. European customerswithin24hours to bedelivereddirectlytheir enable orderssentbysalessubsidiaries tem isbeingdeveloped,whichwill imise deliverytimesanewordersys- to justafewyearsago.To furthermin- ery timesconsiderablyincomparison Using theinfrastructurehascutdeliv- individual salescompany. are thenreturnedelectronicallytothe accompanying thephysicalproduct Thisted. Thenecessarydocuments ly tothecentraldistributioncentrein the Grouparetransmittedelectronical- from morethan30companieswithin expanded ITinfrastructure.Orders matically, viatheGroup'srecently Denmark ismanagedvirtuallyauto- from itscentraldistributioncentrein Distribution oftheGroup'sproducts delivery ontime. Central logistics,managementand ISO 9003/EN46003certification. gained similar, albeitlessextensive, In 1996MaicoDiagnosticGmbH tion andmarketingfunctions. throughout itsdevelopment,produc- operates withtotalqualityassurance currently assmallRhinoMetrics It isarareoccurrencethatcompany in 1996,followedbyBernafon1997. cate. Oticonearnedthesamecertificate Service and technical sales support Sales of in-the-ear (ITE) hearing aids within the Group are increasing. The Group's ITE laboratories, where hear- ing aids are customised to fit the anatomy of the each individual ear, are therefore being expanded. This final assembly is relatively time-consuming and very demanding. Electronic com- ponents produced at one of the Group's three hearing aid factories are mounted in an acrylic shell that fits the ear impression of the individual user exactly.

The ear is an aggressive environment, with heat, sweat and ear wax all poten- tially causing damage to hearing aids. Thus, a service department has now been attached to the Group's ITE labo- ratories, where the service and repair of defective instruments is performed.

Financial and administrative systems All the companies within the Group share the same administrative system. This system streamlines daily opera- tions, and is supported by a central team. Due to this, any future changes in operating conditions will be rela- tively easy to implement simultaneous- ly in all companies, at a fraction of the time and cost invested in previous sys- tems. 30 William Demant Holding A/S aotRto1.%1.%1.%18.0% 2.35 17.1% 11.8 16.4 13.0 1.80 19.0% 30.3 9.4 14.8% 13.5 10.5 1.50 30.1 7.7 Payout Ratio 11.3 7.9 1.00 34.6 Dividend pershare 9.7 5.1 22.4 6.7 Book, equityratio Price Earnings CEPS EPS DKK Share relatedkeyfigures are annulled. own shares(3.4%)togetherwithpossiblefurtherbuyings 30.9% At theGeneralMeetingitisproposedthatportfolioof 4,788,490 Free flowasper17March1999 Holdings oftheOticonFoundation 440,850 83,876 Own sharespurchasedin1999 100.0% on 31December1998 Own sharesincustody 15,495,156 Shared issuedandoutstanding Liquidity oftheshare Shareholder information 9519 971998 1997 1996 1995 4904096.6% 14,970,430 0119065.7% 10,181,940 n-er102336394 306 316 15.05 5,931 15.42 15.50 422 15.36 15.27 245 4,896 273 15.27 15.27 end-year, millions. 4,162 No. ofshares 344 144 2,287 150 14.70 of shares,millions Average No. 313 105 million DKK Total marketCap., 158 end-year Price pershare per share Lowest price per share Highest price DKK Stock exchangeinformation including notestotheCopenhagenStockExchange. find furtherrelevantinformationregardingtheCompany, On theCompany’s Homepage,www.demant.com, youmay Internet Bloomberg: WDHDC Datastream: N:WDH Reuters: WIDE.CO e-mail: [email protected] Tel.: +4539177100 Vice President, Finance Kenneth AabySachse, e-mail: [email protected] Tel.: +4539177100 Niels Jacobsen,President&CEO Investor relations 9519 971998 19961997 1995 Auditors report

Management’s and Board of Directors’ Report Copenhagen, March 17, 1999

Management:

Niels Jacobsen

Board of Directors:

Sven F. Thomsen Jørgen Mølvang Niels Boserup Chairman Deputy Chairman

Lars Nørby Johansen Susanne Smith Hanne Stephensen

Auditors’ report

We have audited the financial statements of the Parent Company and the Group of William Demant Holding A/S for the year 1998 presented by the Board of Directors and the Management.

Basis of Opinion We have planned and conducted our audit in accordance with generally accepted auditing standards to obtain reasonable assurance that the financial statements are free of material misstatements. Based on an evaluation of materiality and risk, we have, during the audit, tested the basis and documentation for the amounts and disclosures in the financial statements. Our audit includes an assessment of the accounting policies applied and estimates made. In addition, we have evaluated the overall adequacy of the presentation in the financial statements. Our audit has not resulted in any qualifications.

Opinion In our opinion, the financial statements have been prepared in accordance with the accounting provisions of Danish legisla- tion and give a true and fair view of the Parent Company’s and the Group’s assets and liabilities, financial position and result for the year. Copenhagen, March 17, 1999

Deloitte & Touche KPMG C.Jespersen Statsautoriseret Revisionsaktieselskab 31 Henning Møller Lone Møller Olsen Arne Nielsen Carsten Kjær State Authorised State Authorised State Authorised State Authorised Public Accountant Public Accountant Public Accountant Public Accountant (Denmark) (Denmark) (Denmark) (Denmark) 32 William Demant Holding A/S cant. since theeffectshereofareinsignifi- the changesinaccountingpolicies years havenotbeenadjustedto match The comparativefiguresforprior million. reserves weredecreasedbyDKK151 acquisition cost.Consequentlyfree equity atthevalueequivalentto write-off ofownsharesdirectlytothe It hasbeendecidedtochargethe ing reserveundershareholders’equity. at acquisitioncostwithacorrespond- prior yearsownshareswererecorded buyback programmeofownshares.In In theautumnof1998welauncheda million at1January1998. the equitywasincreasedbyDKK1.8 affect thenetprofitforyear, and sheet. Thechangeinpoliciesdidnot basis isnotrecordedinthebalance December 1998whichonaprudent results inadeferredtaxassetat31 the basisofcurrentassets.Thechange deferred taxwascalculatedsolelyon on thebasisofallassets.Previously Provision fordeferredtaxiscalculated 1998. affect theprofitandlossaccountfor balance sheetdate.Thechangedidnot lower ofcostormarketpriceonthe day ratherthanasinprioryearsatthe market valuesonthebalancesheet as currentassetsarerecordedattheir Securities andparticipatinginterests changed asfollows: accounting policieshavebeen Compared withprioryearsthe Danish accountingstandards. tions forlistedcompaniesandthe Copenhagen StockExchangeregula- Danish CompanyAccountsAct,the prepared inaccordancewiththe pany’s financial statementshavebeen The consolidatedandtheparentcom- General Accounting policies sistent withthoseappliedlastyear. All otheraccountingpoliciesarecon- divestment orclosedown. down areincludeduntilthedateof tion. Companieseithersoldorclosed from thetimeofacquisitionorforma- included intheprofitandlossaccount sidiary andassociatedcompaniesare Newly acquiredorestablishedsub- method. cial statementsbasedontheequity tionately intotheconsolidatedfinan- and havebeenincorporatedpropor- rights areconsideredtobeassociated between 20%and50%ofthevoting Companies inwhichtheGroupholds profits oninventories. well asnon-realisedintercompany company accountsanddividendsas and expenditure,shareholdings,inter- and eliminatingintercompanyincome sidiaries byaggregatinguniformitems for theparentcompanyanditssub- basis ofauditedfinancialstatements statements havebeenpreparedonthe rights. Theconsolidatedfinancial holds morethan50%ofthevoting nies inwhichtheparentcompany A/S (parentcompany)andthecompa- comprise William DemantHolding The consolidatedfinancialstatements 46. include thecompaniesshownonpage The consolidatedfinancialstatements Consolidation made foranyrestructuringcosts. Demant HoldingA/S,provisions being assets andliabilitiesforWilliam such valuationtoreflectthevalue of basis ofouraccountingpoliciesfor the netassetofsuchacompanyon in anassociatedcompany, wevalue On acquiringasubsidiaryorinvesting ed companies. in regardstonewlyacquiredordivest- key figures and ratiosarenotcorrected Comparative sions. (badwill), areenteredunderprovi- attributable tofutureoperatinglosses goodwill. Anynegativedifferences year ofacquisitionasconsolidated difference ischargedtoequityinthe poses atthetimeofacquisition,such exceeds networthforaccountingpur- In caseswhereacquisitioncost entered separately. ascribable tominorityinterestsare portionate sharesofprofitsandequity ings andequity, thesubsidiariespro- At computationofconsolidatedearn- Minority interests pose ofhedgingfutureincome or on forwardcontractsmadefor thepur- Unrealised exchangegainsor losses shares insubsidiaries. ments relatingtheretoareincludedin investment. Anyexchangeadjust- subsidiaries areconsideredpartofthis ancing foreigncurrencyamountsin currency madeforthepurposeofbal- equity. Loansorinvestments inforeign ance sheetdayarealsochargedtothe at averagerateortheratesonbal- Any differencesbetweennetearnings subsidiaries arechargedtotheequity. cial yearandlong-termaccountswith of subsidiariesatthestartfinan- Exchange adjustmentsofthenetassets sheet day. translated attherateonbalance whereas thebalancesheettotalis exchange onthetransactionday lated intoDanishkronerattherateof The profitandlossaccountistrans- tioned below. loss accountwiththeexceptionsmen- ments areenteredintheprofitand and non-realisedexchangeadjust- day orattheirforwardrates.Realised ner attheirratesonthebalancesheet rency aretranslatedintoDanishkro- Receivables anddebtsinforeigncur- Foreign currency Accounting policies

expenditure are entered on invoicing assessed with a number of sub- improvements are depreciated on a of the hedged sale. sidiaries. Corporation tax is distrib- straight-line basis over the term of the uted among the jointly assessed lease. Other intangible fixed assets are Other exchange gains or losses are companies according to their propor- depreciated on a straight-line basis reported in the profit and loss account. tionate share of the jointly income. For over their estimated useful lives. the Danish jointly assessed companies, Profit and loss account the tax rate for current tax is 34% and Tangible fixed assets All major incomes or costs are entered the rate for deferred taxes 32%. Tangible fixed assets are entered at on an accruals basis. In the profit and cost with the addition of any revalua- loss account, all costs including Tax on the year’s profit includes cur- tion and the deduction of accumulated depreciation expenses are broken rent tax on the year’s income and any depreciation expenses or amounts down by production, distribution, changes in deferred taxes. Any addi- written down. Tangible fixed assets R&D costs or administrative expenses, tions, deductions or allowances in are depreciated on a straight-line basis regardless of the objectives of the par- respect of the Danish prepaid tax over their expected useful lives. ticular company. scheme are included in current tax. Tax on the year’s profit is referred to Buildings 33-50 years Net revenue ordinary and extraordinary items, Technical plant and The invoicing principle is applied as respectively. Current tax includes tax machinery 3-5 years income criterion. Net revenue repre- payable computed on the basis of the Fixtures, tools and sents the year’s sales with the deduc- estimated taxable income for the year equipment 3-5 years tion of commissions, discounts and and any prior-year tax adjustments. IT hardware and software 3 years returns. A provision is made for deferred tax Assets acquired at less than DKK Production costs as a balance sheet liability in respect 50,000 are fully charged to the profit These include direct and indirect method of any temporary differences and loss account in the year of acqui- manufacturing costs. between the valuations for tax and sition. accounting purposes apart from any Research & Development costs differences originating from shares in Financial fixed assets These include all costs relating to subsidiaries. Deferred taxes are based The parent company’s shares in sub- research, development and prototype on the current tax rules and tax rates sidiaries are entered based on the construction as well as the develop- in the particular countries. Any effect equity method, i.e. shares are entered ment of new business concepts. R&D of deferred tax due to change in tax in the balance sheet at their propor- costs are charged directly to the profit rate is reported in the profit and loss tionate value of net worth. The parent and loss account. account. The tax value of a loss that company’s loans or investments made may be set off against any future tax- for the purpose of balancing foreign Distribution costs able income will be carried forward currency amounts in subsidiaries are Distribution costs include costs rela- and set off against deferred tax in the included in the value of shares in sub- ting to staff training, customer sup- same legal tax unit and jurisdiction. sidiaries. The parent company’s pro- port, sales, marketing and distribution. Any deferred tax assets (net) are con- portionate share of its subsidiaries servatively estimated and recorded in pretax profits are included in the Administrative expenses the balance sheet. profit and loss account after a propor- Administrative expenses include tionate deduction of the shift in non- administrative staff costs, office and IT Any tax payable on the sale of shares realised intercompany profits on costs. in a subsidiary is not recorded in the inventories. balance sheet if the shares are not Extraordinary items likely to be sold within a short period Investments in associated companies These include substantial income or of time. are entered on the same basis as sub- 33 expenses related to events or circum- sidiaries. stances that clearly are different from Balance sheet the Group’s ordinary activities. Intangible fixed assets Other securities include bonds and Intangible fixed assets are entered at shares valued at cost, but subject to Taxation cost with the deduction of accumulat- depreciation as a result of any perma- The parent company is jointly ed depreciation expenses. Leasehold nent decrease in value. 34 William Demant Holding A/S debts, bankdebts anddividends. adjusted forrepaymentoflong-term liquid assetsandshort-termdebts includes currentassetsexcluding working capital.Working capital operating itemsandmovements in tions, adjustedfornon-cashconsuming include incomefromtheyear’s opera- Cash flowsfromoperatingactivities tions, investmentsandfinancing. Group’s netcashpositionbyopera- The cashflowanalysisreflectsthe Cash flow analysis value. Debts areenteredattheirnominal Debts balance sheetday. valued attheirmarketpricesonthe Securities enteredascurrentassetsare Other securitiesandparticipatinginterests particular risk. on thebasisofanassessment with aprovisionforlossescomputed Trade debtorsreceivableareentered Trade debtors have beenwrittendown. ketable goodsorslow-movingitems goods aredisposedoffirst.Non-mar- FIFO method,meaningthattheoldest Inventories arevaluedonthebasisof goods inprocess. directly relatedtofinishedgoodsor portionate shareofoverheadcosts production overheadsincludethepro- indirect productionoverheads.Indirect ables aswellproportionateshareof direct cost,payrollandconsum- goods orinprocessarevaluedat cost ornetmarketprice.Finished chandise areenteredatthelowerof Raw materials,componentsandmer- Inventories shareholders’ equity. entered directlytofreereservesunder acquisition costordivestmentsumis On buybackorsaleofownshares,the Accounting policies the publishedaccountingmaterial. compiled exclusivelyonthebasisof The cash-flowstatementcannotbe rities withthedeductionofbankdebts. Liquid assetsarecashfundsandsecu- included intheworkingcapital. long-term orshort-termdebtsnot holders andtheraisingorrepaymentof include paymentstoorfromshare- Cash flowsfromfinancingactivities purchase andsaleoffixedassets. include cashflowsgeneratedbythe Cash flowsfrominvestingactivities Profit and loss account 1998

PARENT COMPANY Note (Amounts in DKK ‘000) GROUP 1997 1998 1998 1997 0 0 4 Net revenue 1,613,099 1,413,398 0 0 9 Production costs -720,211 -648,501 0 0 Gross Profit 892,888 764,897

0 0 9 Research and development costs -146,370 -117,980 0 0 9 Distribution costs -373,770 -335,658 -14,824 -12,893 9 Administrative expenses -124,402 -115,646 7,524 9,252 Income from subsidiaries - - -7,300 -3,641 Profit on primary operations 248,346 195,613

201,129 252,370 8 Share of profits before tax, subsidiaries - - Share of profits before tax, associated 339 577 companies 2,517 1,419 18,214 11,070 5 Financial items, net 8,485 14,374 Ordinary profit before tax and minority 212,382 260,376 interests 259,348 211,406

-50,556 -59,550 6 Corporate tax on ordinary profit -59,550 -50,556

161,826 200,826 Ordinary profit after tax 199,798 160,850

-20,478 0 7 Extraordinary expenses 0 -20,478 6,963 0 6 Corporate tax on extraordinary expenses 0 6,963 -13,515 0 Extraordinary expenses after tax 0 -13,515

- - Minority interests 1,028 976

148,311 200,826 Net profit for the year 200,826 148,311

Proposed distribution of net profit:

27,833 35,378 Dividend 120,478 165,448 Transferred to reserves

35 36 William Demant Holding A/S AETCOMPANY PARENT Balance sheetat December 31,1998 250,247 615,632 275,766 128,009 147,757 339,866 320,870 76,574 63,760 18,332 32,103 38,127 18,996 5,198 2,225 1997 393 664 0 0 0 0 0 0 0 0 0 0 0 0 0 341,488 434,907 406,425 723,386 288,479 269,519 178,391 90,882 27,568 60,480 18,960 28,482 4,268 981998 1998 246 914 189 0 0 0 0 0 0 0 0 0 0 0 0 0 0 oeAssets Note 8,9 8,9 0Ownshares 10 Corporatetax 6 9 Total assets Total currentassets Liquid funds Securities andparticipatinginterest Debtors Prepayments andaccruedexpenses Other debtors Dividends receivable Accounts receivable,associatedcompanies Accounts receivable,subsidiaries Trade debtors Inventory Finished goods Goods inprogress Raw materialsandpurchasedcomponents Total fixedassets Financial fixedassets Deposits andloans Securities andparticipatinginterest Loans tosubsidiaries Shares inassociatedcompanies Shares insubsidiaries Tangible fixedassets Fixtures, toolsandequipment Technical plantandmachinery Land andbuildings Intangible fixedassets Leasehold improvements (Amounts inDKK‘000) 1,019,483 156,529 827,225 196,208 310,883 275,052 301,174 158,413 124,863 192,258 47,285 39,464 69,780 20,706 20,706 18,960 16,401 15,023 14,652 17,898 9,186 5,594 4,778 243 0 0 - - - - 1,002,412 135,194 802,359 111,059 128,009 284,757 244,284 278,534 145,330 113,368 200,053 GROUP 25,291 49,483 47,826 40,513 46,855 15,376 15,376 15,213 32,206 19,836 9,685 2,064 5,497 1997 0 0 - - - - Balance sheet at December 31,1998

PARENT COMPANY Note Liabilities (Amounts in DKK ‘000) GROUP 1997 1998 1998 1997 77,476 77,476 Share capital 77,476 77,476 251,218 0 Share premium 0 251,218 195,638 426,658 Other reserves 426,658 195,638 524,332 504,134 11 Shareholders’ equity 504,134 524,332

- - Minority interests 449 491

0 3,664 Provisions for deferred taxes 0 11,445 0 0 12 Other provisions 43,693 48,325 0 3,664 Provisions 43,693 59,770

0 0 Mortgages 5,032 709 26,250 139,817 Other long-term creditors 139,817 26,250 26,250 139,817 13 Long-term creditors 144,849 26,959

6,250 10,265 Short-term part of long-term creditors 10,265 6,540 29,424 21,040 Current bank accounts 32,286 111,836 0 0 Customer prepayments 0 600 0 0 Trade creditors 70,807 65,646 0 7,321 6 Corporate tax 16,517 6,657 1,543 1,767 Other creditors 135,028 147,678 0 0 Prepayments and accrued income 26,077 24,070 27,833 35,378 Dividend payable for the year 35,378 27,833 65,050 75,771 Short-term creditors 326,358 390,860

91,300 215,588 Total creditors 471,207 417,819

615,632 723,386 Total liabilities 1,019,483 1,002,412

14 Contingent liabilities 15 Employees 16 Audit fees

37 38 William Demant Holding A/S * Notincludingadditionsfrom acquiredcompanies. Current bankaccounts Securities andparticipatinginterest Liquid funds Breakdown ofcashpositionnetatDecember31: Cash positionnetatDecember31 Cash positionnetatJanuary1 Cash flowpositionfortheyear, net Cash flowfromfinancingactivities Dividend paid Buyback ofownshares Net proceedsfromincreaseinsharecapital Changes inlong-termcreditors Cash flowfrominvestingactivities Investments infinancialfixedassets* Investments intangiblefixedassets* Investments inintangiblefixedassets* Expensed investmentsbelow50,000DKK* Acquisition ofcompanies Cash flowfromoperatingactivities Paid corporatetax Provisions forextraordinaryexpenses Cash flowfromprimaryoperatingactivities Interest expensedetc. Interest earnedetc. Cash flowfromprimaryoperatingactivitiesbeforefinancialitems Shift inworkingcapital* Adjustments* Net profitfortheyear (Amounts inDKK‘000) Cash flowanalysisforCash 1998 Note 3 2 1 -151,287 196,208 182,882 127,232 200,826 198,734 248,424 239,780 182,882 102,543 -13,369 -20,632 -57,964 -49,690 -14,337 -49,830 -32,286 -76,577 -27,833 -66,507 18,960 55,650 88,784 34,460 22,981 -9,002 1998 - - -111,836 -322,705 -156,539 -242,923 127,232 128,009 111,059 127,232 283,771 142,374 148,311 235,994 217,477 GROUP -73,142 -20,478 -10,308 -18,548 -22,906 -65,691 -10,443 23,792 87,714 28,825 52,364 -1,510 -5,666 -2,138 1997 - Notes

Note 1 - Adjustments (Amounts in DKK ‘000) GROUP 1998 1997

Depreciaitons 40,301 36,162 Expensed investments below 50,000 DKK 13,369 10,443 Shift in provisions -15,951 -8,588 Financial items, net -8,485 -14,374 Extraordinary expenses - 20,478 Corporate tax 59,550 43,593 Total adjustments 88,784 87,714

Note 2 - Shift in working capital (Amounts in DKK ‘000) GROUP 1998 1997

Changes in debtors -25,044 -32,693 Changes in inventory -22,430 -25,389 Changes in trade creditors etc. -2,356 39,534 Total shift in working capital -49,830 -18,548

Note 3 - Acquisition of companies (Amounts in DKK ‘000) GROUP 1998 1997

Fixed assets 0 13,293 Inventory 210 27,858 Debtors 1,023 39,980 Provisions -1,701 -4,234 Short- and long-term creditors 0 -28,992 Liquid funds, net 218 6,332 Net assets -250 54,237 Goodwill charged to equity 20,882 188,686 Acquisition price 20,632 242,923

Note 4 - Net revenue (Amounts in DKK ‘000) GROUP 1998 1997

Scandinavia 189,855 149,978 Rest of Western Europe 484,534 460,072 North America 551,470 426,935 Asia 105,562 118,741 Pacific Rim 184,198 175,698 39 Other countries 97,480 81,974 Total 1,613,099 1,413,398 40 William Demant Holding A/S Notes Amount of20,478DKKthousandpertainssettlementinsubsidiary. Therearenoextraordinaryexpenses in 1998. COMPANY PARENT COMPANY PARENT Corporate Expensed -59,550 -17,899 -46,521 1,699 3,243 -283 211 17,776 18,214 tax -8,350 3,965 4,901 - - - - 1997 -78 0 Deferred 3,592 3,664 -211 283 tax 0 - - - - - Corporate -37,500 -29,533 35,000 46,521 12,579 13,819 11,070 -1,699 -3,243 -2,225 -6,912 -8,911 -1,915 7,321 2,410 981998 1998 tax - - - - is notrecordedinthebalancesheet. December 31,1998.Onaprudentbasisthetaxassets The deferredtaxfortheGroupisanassetasper As perDecember31,1998 Tax inothersubsidiariesandassociatedcompanies companies Tax onordinaryprofit,jointlyassessed Tax onordinaryprofit,parentcompany Tax prepaidin1998 Tax prepaidin1997 Tax paidin1997 Adjustment oftaxfrompreviousyear Shift indeferredtax Adjustment ofdeferredtaxfrom34%to32% Change inaccountingpolicies As perJanuary1,1998 Total Non-realised exchangeadjustments Realised exchangeadjustments Interest expenses Interest income Interest expensesfromsubsidiaries Interest incomefromsubsidiaries Note 6- Tax Note 5-Financialitems,net Note 7 - Extraordinary expenses Note 7-Extraordinary (Amounts inDKK‘000) (Amounts inDKK‘000) Corporate -59,550 -27,589 -46,521 Expensed -12,867 20,857 -1,915 1,699 3,243 8,705 2,410 8,485 913 tax ------11,445 Deferred -8,705 -1,827 -913 tax 0 ------GROUP GROUP -12,063 22,550 14,374 Corporate 3,965 -37,500 -29,533 35,000 16,517 46,521 1997 -1,699 -3,243 6,657 -78 314 - - tax - - - Notes

Note 8 - Fixed assets Shares in Securities and Land and Fixtures, tools Shares in associated participating PARENT COMPANY buildings and equipment subsidiaries companies interest (Amounts in DKK '000) Acquisition value at 1.1.98 18,332 1,985 434,596 2,819 32,235 Additions in 1998 9,712 792 5,319 0 4,464 Disposals in 1998 0 -1,557 0 0 -31,975 Acquisition value at 31.12.98 28,044 1,220 439,915 2,819 4,724

Appreciation and write-down at 1.1.98 0 0 -184,349 -2,426 -132 Exchange adjustments of shares in subsidiaries 0 0 -15,304 0 0 Profits before tax in subsidiaries 0 0 281,197 0 0 Losses before tax in subsidiaries 0 0 -28,827 0 0 Tax in subsidiaries 0 0 -64,420 0 0 Shift in internal profit on inventories 0 0 -4,988 0 0 Dividends 0 0 -96,174 0 0 Write-down of goodwill charged to equity 0 0 -20,882 0 0 Other appreciations and write-downs 0 0 35,320 -204 -324 Appreciation and write -down at 31.12.98 0 0 -98,427 -2,630 -456

Depreciations at 1.1.98 0 -1,321 0 0 0 Depreciations for the year* -476 -244000 Disposals in 1998 0 1,259000 Depreciations at 31.12.98 -476 -306000

Book value at 31.12.98 27,568 914 341,488 189 4,268

Book value at 31.12.97 18,332 664 250,247 393 32,103

Investments in land and buildings pertain completion of building in Hamburg.

*Depreciation for the year of DKK 720 thousand is included in administrative expenses. Gain on disposals of fixed assets of DKK 328 thousand are also included in the administrative expenses.

The Group comprises the companies shown on page 46.

Loans to subsidiaries during the year amount to DKK 29,608 thousand and installments DKK 7,255 thousand.

41 42 William Demant Holding A/S write-downs Reversal ofprevious eerhaddvlpetcss12,459 Distribution costs Research anddevelopmentcosts osgi ndsoaso ie ses-686 1998 0 32,206 5,594 0 2,064 Other debtorsconcerndeposits andloansatacquisitionvalue. 243 47,826 Total -9,389 0 11,797 Loss/gain ondisposalsoffixed assets 47,285 0 40,513 0 Administrative expenses -2,676 1,413 39,464 46,855 0 0 Production costs -111,718 0 0 0 69,780 *Depreciation fortheyearbyfunction 15,376 -120,423 -10,463 buildings pertaintocompletionofinHamburgand Copenhagen. 2,109 20,706 1,571 amounts toDKK43,847thousandagainstabookvalueof 32,789thousand.Investmentsduringtheyearinlandand -32,150 -19,555 0 -2,426 55 The cash-basedvalueoflandandbuildingsinDenmarkaccording totheofficialpublicvaluationasperJanuary1,1998 0 -20,334 2,607 0 -19,575 0 4,464 Book valueat31.12.97 -105,290 -13,473 0 Book valueat31.12.98 0 624 -110,970 0 0 -2,822 -11,855 0 14,983 depreciations at31.12.98 -17,357 Write-downs and -3,672 368 2,732 -3,152 Disposals in1998 12 2,919 -16,326 0 20,693 2,732 42,669 0 0 Write-downs fortheyear 159,003 15,008 Depreciations fortheyear* 380 2,919 0 Exchange rateadjustments -2,963 159,887 depreciations at1.1.98 26,287 -55 Write-downs and 153,116 0 -3,832 86,603 9,286 Appreciations at31.12.98 151,483 appreciations 40,281 -1,164 Reversal ofprevious 11 Appreciations at1.1.98 61,480 -663 Acquisition valueat31.12.98 31,702 Disposals in1998 Additions in1998 Additions duetoacquisition Exchange rateadjustments Acquisition valueat1.1.98 (Amounts inDKK'000) GROUP Notes Note 9-Fixedassets improvements Leasehold 00000 0000 0000 buildings Land and Technical plant and machinery and equipment Fixtures, tools companies associated Shares in 39,615 12,050 40,301 1510 -1,571 8,980 6,812 20-335 -250 Securities and participating 10,755 37,776 36,162 interest 1,409 9,981 1,614 9,618 5,808 1997 Notes

Note 10 - Own shares (Amounts in DKK ‘000) Acquisition Number of Nominal % of share value, PARENTCOMPANY&GROUP shares DKK million capital DKK ‘000

Own shares at 1.1.1998 0 0 0,0% 0 Additions in 1998 440,850 2,204 2,8% 151,287 Own shares at 31.12.1998 440,850 2,204 2,8% 151,287

Acquired own shares are written off at acquisition value charged directly to the equity. By the end of 1998 outstanding shares amount to 15.05 million shares. When calculating shares related key figures own shares are reduced in the period of ownership. The number of shares used for calculation of key figures for 1998 is 15.42 million shares.

Note 11 - Shareholders’ equity (Amounts in DKK ‘000) Share Share Free PARENT COMPANY capital premium reserves Total

Shareholders' equity at 1.1.1998 77,476 251,218 195,638 524,332 Change in accounting policies, deferred tax 1,827 1,827 Transfer of premium to free reserves -251,218 251,218 0 Exchange rate adjustments of subsidiaries -15,304 -15,304 Write-down of goodwill -20,882 -20,882 Write-down of own shares -151,287 -151,287 Retained earnings 165,448 165,448 Shareholders' equity at 31.12.1998 77,476 0 426,658 504,134

The share capital of nominal DKK 77,475,780 is distributed to 15,495,156 shares of DKK 5 each or multiple hereof.

Shareholders' equity GROUP 1998 1997

Shareholders' equity at 1.1.1998 524,332 539,793 Change in accounting policies, deferred tax 1,827 0 Premium - 52,364 Exchange rate adjustments of subsidiaries -15,304 383 Write-down of goodwill -20,882 -188,686 Write-down of own shares -151,287 0 Retained earnings 165,448 120,478 Shareholders' equity at 31.12.1998 504,134 524,332

43 44 William Demant Holding A/S AETCOMPANY PARENT COMPANY PARENT Notes AETCOMPANY PARENT 18,106 5,625 1,250 1997 1997 1997 0 0 0 0 - - 11,180 18,259 878Long-termcreditors,payableafter5years 98,758 981998 1998 1998 1998 981998 1998 0 0 0 0 - - Total Other provisions Guarantee provisions Retirement andpensioncommitments DKK 397million. covered byforwardcontractsattheequivalentof The Group'sexchangeriskperDecember31,1998is able income. and severallyliablefortaxoftheconsolidatedtax- The jointlyassessedDanishcompaniesare Leasing commitments Leasehold liabilities Utilised creditlines Guarantee commitmentsforsubsidiaries Note 14-Contingentliabilities Note 12-Otherprovisions Note 13-Long-term creditors (Amounts inDKK‘000) (Amounts inDKK‘000) (Amounts inDKK‘000) 103,790 38,784 72,686 43,693 4,909 4,694 0 - - GROUP GROUP GROUP 68,377 39,206 48,325 4,109 8,470 1,269 1997 1997 649 1997 - - Notes

PARENT COMPANY Note 15 - Employees (Amounts in DKK '000) GROUP 1997 1998 1998 1997 7 6 Number of full-time employees 1,925 1,760

Breakdown of employee costs: 8,486 6,652 Salaries and wages 467,858 416,879 59 25 Pensions 7,488 8,890 36 36 Social security costs 26,858 24,038 8,581 6,713 Total 502,204 449,807

Out of which remuneration of managers and directors: 5,000 3,694 Management 3,694 5,000 850 850 Board of Directors 988 988

PARENT COMPANY Note 16 - Audit fees (Amounts in DKK '000) 1997 1998 Deloitte & Touche, Statsautoriseret Revisionsaktieselskab 230 230 Audit fees 109 62 Other fees

KPMG C.Jespersen 230 230 Audit fees 40 91 Other fees

45 46 William Demant Holding A/S . . . . . hnMtisASDnak19 100% 50% 100% 1996 1995 100% Denmark 1995 Australia 25% 1997 Germany 100% 100% 100% 1993 USA 100% 1995 1995 Denmark 100% 1996 100% USA 1995 Australia 100% Denmark 1995 GreatBritain 1995 100% 79% National HearingAidSystems Pty. Ltd. Switzerland 1995 100% Hearing InstrumentManufacturers SoftwareAssociationA/S 60% Germany Otwidan ApS 100% 1997 Associated Companies Australia 100% DancoTech A/S 1994 1994 100% WDH Nr. 1A/S 1998 Belgium RhinoMetrics A/S 100% 1985 Poland Maico AudiometerGmbH Brazil 1985 Logia A/S SouthAfrica 1973 Phonic EarLtd. Spain Phonic Ear, Inc. 1998 Australia Phonic EarHoldings,Inc. GreatBritain Australian HearingAidsPty. Ltd. New 100% Bernafon S.r.l. China Bernafon K.K. Bernafon AB Bernafon DenmarkA/S 1964 Bernafon-Maico Inc. Bernafon U.K.Ltd. Maico S.r.l. Holland Bernafon HörgeräteGmbH ParentCompany Bernafon AustraliaPty. Ltd. Bernafon AG Prodition S.A. Oticon SouthAfrica(Pty.) Ltd. Oticon NanjingAudiologicalTechnology Co.,Ltd. Denmark Oticon BelgiumN.V. Oticon PolskaSp.z.o.o. Oticon doBrasilLtda. Oticon AustraliaPty. Ltd. Oticon NewZealandLtd. Oticon EspañaS.A. Oticon Limited Oticon K.K. Oticon ItaliaS.r.l. Oticon GmbH Oticon Inc. Oticon S.A. Oticon A/S Oticon NederlandB.V. Oticon AB Oticon A/S Subsidiaries William DemantHoldingA/S opne fteWlimDmn ru ucinDmcl curdParticipation Acquired Domicile function Companies ofthe William DemantGroup Company structure ae n evc Pouto Fnne Research andDevelopment Finance Production Sales andService wteln 98100% 1968 Switzerland emr 9333% 100% 100% 1963 1996 100% Denmark 1998 Denmark Denmark 1972 Denmark 100% 1969 100% Germany 1904 Denmark wdn19 100% 1996 Sweden 100% 1944 Sweden owy16 100% 1968 Norway eln 1974 Zealand aaa19 100% 1997 Canada rne17 100% 1974 France aa 96100% 1996 Japan 100% 1973 Japan S 97100% 1997 USA 100% 1965 USA tl 98100% 1998 100% Italy 1995 Italy 100% 1973 Italy Established/ 100% Environmental paper 900 19 610 07/04.99 Printed By Quickly Tryk A/S

William Demant Holding A/S Prodition S.A. Oticon Polska Sp. z o.o Bernafon William Demant Holding A/S 37-39, rue J.-B. Charcot 4/6, Plac Trzech Krzyzy Management Peter Finnerup 58, Strandvejen F-92402 Courbevoie Cedex 01-499 Warsaw DK-2900 Hellerup France Poland Bernafon AG Denmark Phone +33 1 418 80 080 Phone +48 22 625 3794 131, Morgenstrasse Phone +45 39 17 71 00 Telefax +33 1 418 80 086 Telefax +48 22 625 4512 CH-3018 Berne Telefax +45 39 27 79 00 Management Jens Kofoed Management Andrzej Konopka Switzerland President & CEO Niels Jacobsen E-mail: [email protected] Pawel Rajchert Phone +41 31 998 1515 E-mail: [email protected] Telefax +41 31 998 1590 www.demant.com Oticon GmbH Oticon Limited Management Peter Finnerup 101, Hellgrundweg Cadzow Industrial Estate www.bernafon.ch Oticon D-22525 Hamburg Low Waters Road Management Germany P O Box 20 Bernafon Australia Pty. Ltd. Niels Jacobsen Phone +49 40 84 88 84-0 Hamilton AHA House Steen Bindslev Telefax +49 40 84 88 84-44 Lanarkshire ML3 7QE 512, Wickham Street Svend Thomsen Management Torben Lindø Hansen United Kingdom Fortitude Valley, QLD. 4006 Phone +44 1698 283 363 Australia Oticon A/S Oticon Nederland B.V. Telefax +44 1698 284 308 Phone +61 7 3250 0300 58, Strandvejen 9, Weverij Management Roy S. Mathieson Telefax +61 7 3252 2048 DK-2900 Hellerup P O Box 640 Management Lars Kirk Denmark NL-1180 AP Amstelveen Oticon South Africa (Pty) Ltd. Phone +45 39 17 71 00 The Netherlands No. 1 Beatrice Street, Cnr. Bernafon Denmark A/S Telefax +45 39 27 79 00 Phone +31 20 643 8866 Beatrice St. & Judges Avenue 9, Industrivej Management Telefax +31 20 643 2054 Windsor East DK-3450 Lynge Niels Jacobsen Management Gerard J J van der Wel 2194 Denmark Steen Bindslev South Africa Phone +45 48 19 29 50 Svend Thomsen Oticon Italia S.r.l. Phone +27 11 478 2456 Telefax +45 48 19 29 51 E-mail: [email protected] 7, Lungarno Guicciardini Telefax +27 11 478 2048 Management John Raaschou www.oticon.dk I-50125 Florence Management Malcolm Davies www.bernafon.dk Italy E-mail: [email protected] Oticon Australia Pty. Ltd. Phone +39 055 21 58 86 Bernafon U.K. Ltd. Level 5, 34 Charles Street Telefax +39 055 26 83 43 Oticon España S.A. Unit 6, Westerham Trade Centre Parramatta, N.S.W. 2150 Management Umberto Cotrona 138, Carretera de Canillas The Flyers Way Australia www.oticon.it E-28043 Madrid Westerham Phone +61 2 9635 8188 Spain Kent TN16 1DE Telefax +61 2 9633 4021 Oticon K.K. Phone +34 91 759 4499 United Kingdom Management Niels-Jørgen Toxværd No. 1 Hanei Bldg., 1-10-3 Telefax +34 91 300 1508 Phone +44 1 959 56 1942 Shinjuku, Shinjuku-ku Management Anders C. Jeffert Telefax +44 1 959 56 1943 Oticon Belgium NV Tokyo 160-0022 www.oticon.es Management Irene Gilbert 14, Collegelaan Japan Bus 2 Phone +81 3 3354 5131 Oticon AB Prodition S.A. B-3600 Genk Telefax +81 3 3354 5137 1, 6 tr. Norra Riddarholmshamnen 37-39, rue J.-B. Charcot Belgium Management Hiroshi Koyama P O Box 2108 F-92402 Courbevoie Cedex Phone +32 8 930 7293 S-103 13 Stockholm France Telefax +32 8 930 7294 Oticon New Zealand Ltd. Sweden Phone +33 1 418 80 080 Management Rob Houben 142, Lambton Quay Phone +46 8 791 8130 Telefax +33 1 418 80 086 P O Box 9128 Telefax +46 8 796 4780 Management Jens Kofoed Oticon Canada, Te Aro Management Susanne Nyberg E-mail: [email protected] c/o Phonic Ear Ltd. Wellington 7475, Kimbel St., Unit 10 New Zealand Oticon S.A. Bernafon Hörgeräte GmbH Mississauga Phone +64 4 473 3330 18, Niklaus Konrad-Strasse 14, Nunsdorfer Ring Ontario, Canada L5S 1E7 Telefax +64 4 473 4440 CH-4500 Solothurn D-12277 Berlin Canada Management Karen Pullar Switzerland Germany Phone +1 905 677 3231 E-mail: [email protected] Phone +41 32 623 7161 Phone +49 30 723 9370 Telefax +1 905 677 7760 Telefax +41 32 622 4704 Telefax +49 30 723 9371 9 Management Janice Cockburn Oticon A/S Management Markus Kurth Management Thomas Geiser www.phonicear.com 6, 6 Fred. Olsensgate E-mail: [email protected] E-mail: [email protected] P O Box 404 Oticon Nanjing Audiological N-0103 Oslo Oticon, Inc. Bernafon S.r.l. Technology Co., Ltd. Norway 29, Schoolhouse Road 16B, Piazza delle Crociate 3rd Floor of the You You Hotel Phone +47 23 35 59 00 P O Box 6724 I-00162 Rome 128 Yudao Street Telefax +47 23 35 59 10 N.J. 08875-6724 Somerset Italy Nanjing, Jiangsu 210007 Management Ole Bøgeskov-Jensen USA Phone +39 06 4424 6852 China Phone +1 732 560 1220 Telefax +39 06 4424 6853 Phone +86 25 461 0053 Telefax +1 732 560 0029 Management Primo Tenedini Telefax +86 461 0217 Management Søren Holst Management Patrick Shen www.oticonus.com E-mail: [email protected] Maico S.r.l. RhinoMetrics A/S 2, Piazza delle Crociate 9, Industrivej I-00162 Rome DK-3540 Lynge Italy Denmark Phone +39 064 40 42 86 Phone +45 48 18 87 00 Telefax +39 064 42 32 795 Telefax +45 48 18 84 55 Management Primo Tenedini Management Arne Boye Nielsen Steen Rasmussen Bernafon K.K. www.rhinometrics.dk No. 2F Nishiki-cho Tsukasa Bldg., 1-17-4 Personal Kanda-Nishikicho, Chiyoda-ku Communication Tokyo 101-0054 Management James C. Mulford Japan Phone +81 3 3295 8908 Phonic Ear Holdings, Inc. Telefax +81 3 3295 8905 3880, Cypress Drive Management Kazuhide Omura Petaluma CA 94954-7600 Bernafon AB USA 8, Starrbäcksgatan Phone +1 707 769 1110 S-172 34 Sundbyberg Telefax +1 707 769 9624 Sweden Management James C. Mulford Phone +46 8 280 590 www.phonicear.com Telefax +46 8 280 555 Management Svend-Åke Rosenquist Phonic Ear Ltd. 7475, Kimbel St., Unit 10 Bernafon-Maico Inc. Mississauga 9675, West 76th Street Ontario, Canada L5S 1E7 Eden Prairie, MN 55344 Canada USA Phone +1 905 677 3231 Phone +1 612 941 4200 Telefax +1 905 677 7760 Telefax +1 612 903 4200 Management Janice Cockburn Management Henrik M. Nielsen www.phonicear.com

Diagnostic Logia A/S Instruments 8, Mejeribakken Management Arne Boye Nielsen DK-3540 Lynge Denmark Bernafon-Maico Inc. Phone +45 48 18 80 06 Diagnostics Division Telefax +45 48 18 93 30 9675, West 76th Street Management Tommy Horn Eden Prairie, MN 55344 www.logia.dk USA Phone +1 612 941 4200 Operations Telefax +1 612 903 4200 Management Arne Boye Nielsen DancoTech A/S Ron Perlt 15, Tempovej DK-2750 Ballerup Maico Diagnostic GmbH Denmark 7, Rohrdamm Phone +45 44 83 01 30 Siemensstadt Telefax +45 44 83 01 55 D-13629 Berlin Management Torben Frantzolet Germany www.dancotech.dk Phone +49 30 386 29441 Telefax +49 30 386 29490 Management Arne Boye Nielsen Wolfgang Köpke www.maico-diagnostics.com Companies and addresses William Demant Holding

William Demant Holding A/S 58, Strandvejen 2900 Hellerup Denmark

Phone +45 39 1 7 71 00 Telefax +45 39 27 79 00

www.demant.com [email protected]